PUBLIC LAW 115–97—DEC. 22, 2017 

NOTE: Public Law 115–97 is re-printed to remove the editorial description contained on the 

original half title page of the printed Slip law. 

★ (Star Print) 


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131 STAT. 2054 PUBLIC LAW 115–97—DEC. 22, 2017 

Public Law 115–97 

115th Congress 

An Act 

To provide for reconciliation pursuant to titles II and V of the concurrent resolution 

on the budget for fiscal year 2018. 

Be it enacted by the Senate and House of Representatives of 

the United States of America in Congress assembled, 

TITLE I 

SECTION 11000. SHORT TITLE, ETC. 

(a) AMENDMENT OF 1986 CODE.—Except as otherwise expressly 

provided, whenever in this title an amendment or repeal is 

expressed in terms of an amendment to, or repeal of, a section 

or other provision, the reference shall be considered to be made 

to a section or other provision of the Internal Revenue Code of 

1986. 

Subtitle A—Individual Tax Reform 

PART I—TAX RATE REFORM 

SEC. 11001. MODIFICATION OF RATES. 

(a) IN GENERAL.—Section 1 is amended by adding at the end 

the following new subsection: 

‘‘(j) MODIFICATIONS FOR TAXABLE YEARS 2018 THROUGH 2025.— 

‘‘(1) IN GENERAL.—In the case of a taxable year beginning 

after December 31, 2017, and before January 1, 2026— 

‘‘(A) subsection (i) shall not apply, and 

‘‘(B) this section (other than subsection (i)) shall be 

applied as provided in paragraphs (2) through (6). 

‘‘(2) RATE TABLES.— 

‘‘(A) MARRIED INDIVIDUALS FILING JOINT RETURNS AND

SURVIVING SPOUSES.—The following table shall be applied 

in lieu of the table contained in subsection (a): 

‘‘If taxable income is: The tax is: 

Not over $19,050 ............................................. 10% of taxable income. 

Over $19,050 but not over $77,400 ................ $1,905, plus 12% of the excess over 

$19,050. 

Over $77,400 but not over $165,000 .............. $8,907, plus 22% of the excess over 

$77,400. 

Over $165,000 but not over $315,000 ............ $28,179, plus 24% of the excess over 

$165,000. 

Over $315,000 but not over $400,000 ............ $64,179, plus 32% of the excess over 

$315,000. 

26 USC 1. 

Dec. 22, 2017 

[H.R. 1] 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2055 

‘‘If taxable income is: The tax is: 

Over $400,000 but not over $600,000 ............ $91,379, plus 35% of the excess over 

$400,000. 

Over $600,000 ................................................. $161,379, plus 37% of the excess over 

$600,000. 

‘‘(B) HEADS OF HOUSEHOLDS.—The following table shall 

be applied in lieu of the table contained in subsection 

(b): 

‘‘If taxable income is: The tax is: 

Not over $13,600 ............................................. 10% of taxable income. 

Over $13,600 but not over $51,800 ................ $1,360, plus 12% of the excess over 

$13,600. 

Over $51,800 but not over $82,500 ................ $5,944, plus 22% of the excess over 

$51,800. 

Over $82,500 but not over $157,500 .............. $12,698, plus 24% of the excess over 

$82,500. 

Over $157,500 but not over $200,000 ............ $30,698, plus 32% of the excess over 

$157,500. 

Over $200,000 but not over $500,000 ............ $44,298, plus 35% of the excess over 

$200,000. 

Over $500,000 ................................................. $149,298, plus 37% of the excess over 

$500,000. 

‘‘(C) UNMARRIED INDIVIDUALS OTHER THAN SURVIVING

SPOUSES AND HEADS OF HOUSEHOLDS.—The following table 

shall be applied in lieu of the table contained in subsection 

(c): 

‘‘If taxable income is: The tax is: 

Not over $9,525 ............................................... 10% of taxable income. 

Over $9,525 but not over $38,700 .................. $952.50, plus 12% of the excess over 

$9,525. 

Over $38,700 but not over $82,500 ................ $4,453.50, plus 22% of the excess 

over $38,700. 

Over $82,500 but not over $157,500 .............. $14,089.50, plus 24% of the excess 

over $82,500. 

Over $157,500 but not over $200,000 ............ $32,089.50, plus 32% of the excess 

over $157,500. 

Over $200,000 but not over $500,000 ............ $45,689.50, plus 35% of the excess 

over $200,000. 

Over $500,000 ................................................. $150,689.50, plus 37% of the excess 

over $500,000. 

‘‘(D) MARRIED INDIVIDUALS FILING SEPARATE

RETURNS.—The following table shall be applied in lieu of 

the table contained in subsection (d): 

‘‘If taxable income is: The tax is: 

Not over $9,525 ............................................... 10% of taxable income. 

Over $9,525 but not over $38,700 .................. $952.50, plus 12% of the excess over 

$9,525. 

Over $38,700 but not over $82,500 ................ $4,453.50, plus 22% of the excess 

over $38,700. 

Over $82,500 but not over $157,500 .............. $14,089.50, plus 24% of the excess 

over $82,500. 

Over $157,500 but not over $200,000 ............ $32,089.50, plus 32% of the excess 

over $157,500. 

Over $200,000 but not over $300,000 ............ $45,689.50, plus 35% of the excess 

over $200,000. 


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131 STAT. 2056 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘If taxable income is: The tax is: 

Over $300,000 ................................................. $80,689.50, plus 37% of the excess 

over $300,000. 

‘‘(E) ESTATES AND TRUSTS.—The following table shall 

be applied in lieu of the table contained in subsection 

(e): 

‘‘If taxable income is: The tax is: 

Not over $2,550 ............................................... 10% of taxable income. 

Over $2,550 but not over $9,150 .................... $255, plus 24% of the excess over 

$2,550. 

Over $9,150 but not over $12,500 .................. $1,839, plus 35% of the excess over 

$9,150. 

Over $12,500 ................................................... $3,011.50, plus 37% of the excess 

over $12,500. 

‘‘(F) REFERENCES TO RATE TABLES.—Any reference in 

this title to a rate of tax under subsection (c) shall be 

treated as a reference to the corresponding rate bracket 

under subparagraph (C) of this paragraph, except that 

the reference in section 3402(q)(1) to the third lowest rate 

of tax applicable under subsection (c) shall be treated as 

a reference to the fourth lowest rate of tax under subparagraph (C). 

‘‘(3) ADJUSTMENTS.— 

‘‘(A) NO ADJUSTMENT IN 2018.—The tables contained 

in paragraph (2) shall apply without adjustment for taxable 

years beginning after December 31, 2017, and before 

January 1, 2019. 

‘‘(B) SUBSEQUENT YEARS.—For taxable years beginning 

after December 31, 2018, the Secretary shall prescribe 

tables which shall apply in lieu of the tables contained 

in paragraph (2) in the same manner as under paragraphs 

(1) and (2) of subsection (f) (applied without regard to 

clauses (i) and (ii) of subsection (f)(2)(A)), except that in 

prescribing such tables— 

‘‘(i) subsection (f)(3) shall be applied by substituting ‘calendar year 2017’ for ‘calendar year 2016’ 

in subparagraph (A)(ii) thereof, 

‘‘(ii) subsection (f)(7)(B) shall apply to any 

unmarried individual other than a surviving spouse 

or head of household, and 

‘‘(iii) subsection (f)(8) shall not apply. 

‘‘(4) SPECIAL RULES FOR CERTAIN CHILDREN WITH UNEARNED

INCOME.— 

‘‘(A) IN GENERAL.—In the case of a child to whom 

subsection (g) applies for the taxable year, the rules of 

subparagraphs (B) and (C) shall apply in lieu of the rule 

under subsection (g)(1). 

‘‘(B) MODIFICATIONS TO APPLICABLE RATE BRACKETS.— 

In determining the amount of tax imposed by this section 

for the taxable year on a child described in subparagraph 

(A), the income tax table otherwise applicable under this 

subsection to the child shall be applied with the following 

modifications: 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2057 

‘‘(i) 24-PERCENT BRACKET.—The maximum taxable 

income which is taxed at a rate below 24 percent 

shall not be more than the sum of— 

‘‘(I) the earned taxable income of such child, 

plus 

‘‘(II) the minimum taxable income for the 24- 

percent bracket in the table under paragraph 

(2)(E) (as adjusted under paragraph (3)) for the 

taxable year. 

‘‘(ii) 35-PERCENT BRACKET.—The maximum taxable 

income which is taxed at a rate below 35 percent 

shall not be more than the sum of— 

‘‘(I) the earned taxable income of such child, 

plus 

‘‘(II) the minimum taxable income for the 35- 

percent bracket in the table under paragraph 

(2)(E) (as adjusted under paragraph (3)) for the 

taxable year. 

‘‘(iii) 37-PERCENT BRACKET.—The maximum taxable 

income which is taxed at a rate below 37 percent 

shall not be more than the sum of— 

‘‘(I) the earned taxable income of such child, 

plus 

‘‘(II) the minimum taxable income for the 37- 

percent bracket in the table under paragraph 

(2)(E) (as adjusted under paragraph (3)) for the 

taxable year. 

‘‘(C) COORDINATION WITH CAPITAL GAINS RATES.—For 

purposes of applying section 1(h) (after the modifications 

under paragraph (5)(A))— 

‘‘(i) the maximum zero rate amount shall not be 

more than the sum of— 

‘‘(I) the earned taxable income of such child, 

plus 

‘‘(II) the amount in effect under paragraph 

(5)(B)(i)(IV) for the taxable year, and 

‘‘(ii) the maximum 15-percent rate amount shall 

not be more than the sum of— 

‘‘(I) the earned taxable income of such child, 

plus 

‘‘(II) the amount in effect under paragraph 

(5)(B)(ii)(IV) for the taxable year. 

‘‘(D) EARNED TAXABLE INCOME.—For purposes of this 

paragraph, the term ‘earned taxable income’ means, with 

respect to any child for any taxable year, the taxable income 

of such child reduced (but not below zero) by the net 

unearned income (as defined in subsection (g)(4)) of such 

child. 

‘‘(5) APPLICATION OF CURRENT INCOME TAX BRACKETS TO

CAPITAL GAINS BRACKETS.— 

‘‘(A) IN GENERAL.—Section 1(h)(1) shall be applied— 

‘‘(i) by substituting ‘below the maximum zero rate 

amount’ for ‘which would (without regard to this paragraph) be taxed at a rate below 25 percent’ in subparagraph (B)(i), and 

‘‘(ii) by substituting ‘below the maximum 15-percent rate amount’ for ‘which would (without regard 


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131 STAT. 2058 PUBLIC LAW 115–97—DEC. 22, 2017 

to this paragraph) be taxed at a rate below 39.6 percent’ in subparagraph (C)(ii)(I). 

‘‘(B) MAXIMUM AMOUNTS DEFINED.—For purposes of 

applying section 1(h) with the modifications described in 

subparagraph (A)— 

‘‘(i) MAXIMUM ZERO RATE AMOUNT.—The maximum 

zero rate amount shall be— 

‘‘(I) in the case of a joint return or surviving 

spouse, $77,200, 

‘‘(II) in the case of an individual who is a 

head of household (as defined in section 2(b)), 

$51,700, 

‘‘(III) in the case of any other individual (other 

than an estate or trust), an amount equal to 1⁄2

of the amount in effect for the taxable year under 

subclause (I), and 

‘‘(IV) in the case of an estate or trust, $2,600. 

‘‘(ii) MAXIMUM 15-PERCENT RATE AMOUNT.—The 

maximum 15-percent rate amount shall be— 

‘‘(I) in the case of a joint return or surviving 

spouse, $479,000 (1⁄2 such amount in the case of 

a married individual filing a separate return), 

‘‘(II) in the case of an individual who is the 

head of a household (as defined in section 2(b)), 

$452,400, 

‘‘(III) in the case of any other individual (other 

than an estate or trust), $425,800, and 

‘‘(IV) in the case of an estate or trust, $12,700. 

‘‘(C) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 2018, each of the dollar amounts 

in clauses (i) and (ii) of subparagraph (B) shall be increased 

by an amount equal to— 

‘‘(i) such dollar amount, multiplied by 

‘‘(ii) the cost-of-living adjustment determined 

under subsection (f)(3) for the calendar year in which 

the taxable year begins, determined by substituting 

‘calendar year 2017’ for ‘calendar year 2016’ in 

subparagraph (A)(ii) thereof. 

If any increase under this subparagraph is not a multiple 

of $50, such increase shall be rounded to the next lowest 

multiple of $50. 

‘‘(6) SECTION 15 NOT TO APPLY.—Section 15 shall not apply 

to any change in a rate of tax by reason of this subsection.’’. 

(b) DUE DILIGENCE TAX PREPARER REQUIREMENT WITH RESPECT

TO HEAD OF HOUSEHOLD FILING STATUS.—Subsection (g) of section 

6695 is amended to read as follows: 

‘‘(g) FAILURE TO BE DILIGENT IN DETERMINING ELIGIBILITY FOR

CERTAIN TAX BENEFITS.—Any person who is a tax return preparer 

with respect to any return or claim for refund who fails to comply 

with due diligence requirements imposed by the Secretary by regulations with respect to determining— 

‘‘(1) eligibility to file as a head of household (as defined 

in section 2(b)) on the return, or 

‘‘(2) eligibility for, or the amount of, the credit allowable 

by section 24, 25A(a)(1), or 32, 

shall pay a penalty of $500 for each such failure.’’. 

26 USC 6695. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2059 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED CPI. 

(a) IN GENERAL.—Subsection (f) of section 1 is amended by 

striking paragraph (3) and by inserting after paragraph (2) the 

following new paragraph: 

‘‘(3) 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 CPI for calendar year 2016, multiplied 

by the amount determined under subparagraph (B). 

‘‘(B) AMOUNT DETERMINED.—The amount determined 

under this clause is the amount obtained by dividing— 

‘‘(i) the C-CPI-U for calendar year 2016, by 

‘‘(ii) the CPI for calendar year 2016. 

‘‘(C) SPECIAL RULE FOR ADJUSTMENTS WITH A BASE YEAR

AFTER 2016.—For purposes of any provision of this title 

which provides for the substitution of a year after 2016 

for ‘2016’ in subparagraph (A)(ii), subparagraph (A) shall 

be applied by substituting ‘the C-CPI-U for calendar year 

2016’ for ‘the CPI for calendar year 2016’ and all that 

follows in clause (ii) thereof.’’. 

(b) C-CPI-U.—Subsection (f) of section 1 is amended by striking 

paragraph (7), by redesignating paragraph (6) as paragraph (7), 

and by inserting after paragraph (5) the following new paragraph: 

‘‘(6) 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-CPIU for any calendar year is the average of the C-CPIU as of the close of the 12-month period ending on August 

31 of such calendar year.’’. 

(c) APPLICATION TO PERMANENT TAX TABLES.— 

(1) IN GENERAL.—Section 1(f)(2)(A) is amended to read as 

follows: 

‘‘(A) except as provided in paragraph (8), by increasing 

the minimum and maximum dollar amounts for each 

bracket for which a tax is imposed under such table by 

the cost-of-living adjustment for such calendar year, determined— 

‘‘(i) except as provided in clause (ii), by substituting 

‘1992’ for ‘2016’ in paragraph (3)(A)(ii), and 

‘‘(ii) in the case of adjustments to the dollar 

amounts at which the 36 percent rate bracket begins 

26 USC 1. 

26 USC 1 note. 


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131 STAT. 2060 PUBLIC LAW 115–97—DEC. 22, 2017 

or at which the 39.6 percent rate bracket begins, by 

substituting ‘1993’ for ‘2016’ in paragraph (3)(A)(ii),’’. 

(2) CONFORMING AMENDMENTS.—Section 1(i) is amended— 

(A) by striking ‘‘for ‘1992’ in subparagraph (B)’’ in 

paragraph (1)(C) and inserting ‘‘for ‘2016’ in subparagraph 

(A)(ii)’’, and 

(B) by striking ‘‘subsection (f)(3)(B) shall be applied 

by substituting ‘2012’ for ‘1992’ ’’ in paragraph (3)(C) and 

inserting ‘‘subsection (f)(3)(A)(ii) shall be applied by substituting ‘2012’ for ‘2016’ ’’. 

(d) APPLICATION TO OTHER INTERNAL REVENUE CODE OF 1986 

PROVISIONS.— (1) The following sections are each amended by striking 

‘‘for ‘calendar year 1992’ in subparagraph (B)’’ and inserting 

‘‘for ‘calendar year 2016’ in subparagraph (A)(ii)’’: 

(A) Section 23(h)(2). 

(B) Paragraphs (1)(A)(ii) and (2)(A)(ii) of section 25A(h). 

(C) Section 25B(b)(3)(B). 

(D) Subsection (b)(2)(B)(ii)(II), and clauses (i) and (ii) 

of subsection (j)(1)(B), of section 32. 

(E) Section 36B(f)(2)(B)(ii)(II). 

(F) Section 41(e)(5)(C)(i). 

(G) Subsections (e)(3)(D)(ii) and (h)(3)(H)(i)(II) of section 42. 

(H) Section 45R(d)(3)(B)(ii). 

(I) Section 55(d)(4)(A)(ii). 

(J) Section 62(d)(3)(B). 

(K) Section 63(c)(4)(B). 

(L) Section 125(i)(2)(B). 

(M) Section 135(b)(2)(B)(ii). 

(N) Section 137(f)(2). 

(O) Section 146(d)(2)(B). 

(P) Section 147(c)(2)(H)(ii). 

(Q) Section 151(d)(4)(B). 

(R) Section 179(b)(6)(A)(ii). 

(S) Subsections (b)(5)(C)(i)(II) and (g)(8)(B) of section 

219. 

(T) Section 220(g)(2). 

(U) Section 221(f)(1)(B). 

(V) Section 223(g)(1)(B). 

(W) Section 408A(c)(3)(D)(ii). 

(X) Section 430(c)(7)(D)(vii)(II). 

(Y) Section 512(d)(2)(B). 

(Z) Section 513(h)(2)(C)(ii). 

(AA) Section 831(b)(2)(D)(ii). 

(BB) Section 877A(a)(3)(B)(i)(II). 

(CC) Section 2010(c)(3)(B)(ii). 

(DD) Section 2032A(a)(3)(B). 

(EE) Section 2503(b)(2)(B). 

(FF) Section 4261(e)(4)(A)(ii). 

(GG) Section 5000A(c)(3)(D)(ii). 

(HH) Section 6323(i)(4)(B). 

(II) Section 6334(g)(1)(B). 

(JJ) Section 6601(j)(3)(B). 

(KK) Section 6651(i)(1). 

(LL) Section 6652(c)(7)(A). 

(MM) Section 6695(h)(1). 

26 USC 1. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2061 

(NN) Section 6698(e)(1). 

(OO) Section 6699(e)(1). 

(PP) Section 6721(f)(1). 

(QQ) Section 6722(f)(1). 

(RR) Section 7345(f)(2). 

(SS) Section 7430(c)(1). 

(TT) Section 9831(d)(2)(D)(ii)(II). 

(2) Sections 41(e)(5)(C)(ii) and 68(b)(2)(B) are each 

amended— 

(A) by striking ‘‘1(f)(3)(B)’’ and inserting ‘‘1(f)(3)(A)(ii)’’, 

and 

(B) by striking ‘‘1992’’ and inserting ‘‘2016’’. 

(3) Section 42(h)(6)(G) is amended— 

(A) by striking ‘‘for ‘calendar year 1987’ ’’ in clause 

(i)(II) and inserting ‘‘for ‘calendar year 2016’ in subparagraph (A)(ii) thereof’’, and 

(B) by striking ‘‘if the CPI for any calendar year’’ 

and all that follows in clause (ii) and inserting ‘‘if the 

C-CPI-U for any calendar year (as defined in section 1(f)(6)) 

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). In the case of 

a base calendar year before 2017, the C-CPI-U for such 

year shall be determined by multiplying the CPI for such 

year by the amount determined under section 1(f)(3)(B).’’. 

(4) Section 59(j)(2)(B) is amended by striking ‘‘for ‘1992’ 

in subparagraph (B)’’ and inserting ‘‘for ‘2016’ in subparagraph 

(A)(ii)’’. 

(5) Section 132(f)(6)(A)(ii) is amended by striking ‘‘for ‘calendar year 1992’ ’’ and inserting ‘‘for ‘calendar year 2016’ in 

subparagraph (A)(ii) thereof’’. 

(6) Section 162(o)(3) is amended by striking ‘‘adjusted for 

changes in the Consumer Price Index (as defined in section 

1(f)(5)) since 1991’’ and inserting ‘‘adjusted by increasing any 

such amount under the 1991 agreement by an amount equal 

to— 

‘‘(A) such amount, multiplied by 

‘‘(B) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year in which the taxable 

year begins, by substituting ‘calendar year 1990’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof’’. 

(7) So much of clause (ii) of section 213(d)(10)(B) as precedes the last sentence is amended to read as follows: 

‘‘(ii) MEDICAL CARE COST ADJUSTMENT.—For purposes of clause (i), the medical care cost adjustment 

for any calendar year is the percentage (if any) by 

which— 

‘‘(I) the medical care component of the C-CPIU (as defined in section 1(f)(6)) for August of the 

preceding calendar year, exceeds 

‘‘(II) such component of the CPI (as defined 

in section 1(f)(4)) for August of 1996, multiplied 

by the amount determined under section 

1(f)(3)(B).’’. 

(8) Subparagraph (B) of section 280F(d)(7) is amended to 

read as follows: 

26 USC 41, 68. 


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131 STAT. 2062 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(B) AUTOMOBILE PRICE INFLATION ADJUSTMENT.—For 

purposes of this paragraph— 

‘‘(i) IN GENERAL.—The automobile price inflation 

adjustment for any calendar year is the percentage 

(if any) by which— 

‘‘(I) the C-CPI-U automobile component for 

October of the preceding calendar year, exceeds 

‘‘(II) the automobile component of the CPI (as 

defined in section 1(f)(4)) for October of 1987, 

multiplied by the amount determined under 

1(f)(3)(B). 

‘‘(ii) C-CPI-U AUTOMOBILE COMPONENT.—The term 

‘C-CPI-U automobile component’ means the automobile 

component of the Chained Consumer Price Index for 

All Urban Consumers (as described in section 1(f)(6)).’’. 

(9) Section 911(b)(2)(D)(ii)(II) is amended by striking ‘‘for 

‘1992’ in subparagraph (B)’’ and inserting ‘‘for ‘2016’ in subparagraph (A)(ii)’’. 

(10) Paragraph (2) of section 1274A(d) is amended to read 

as follows: 

‘‘(2) ADJUSTMENT FOR INFLATION.—In the case of any debt 

instrument arising out of a sale or exchange during any calendar year after 1989, each dollar amount contained in the 

preceding provisions of this section shall be increased by an 

amount equal to— 

‘‘(A) such amount, multiplied by 

‘‘(B) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year in which the taxable 

year begins, by substituting ‘calendar year 1988’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof. 

Any increase under the preceding sentence shall be rounded 

to the nearest multiple of $100 (or, if such increase is a multiple 

of $50, such increase shall be increased to the nearest multiple 

of $100).’’. 

(11) Section 4161(b)(2)(C)(i)(II) is amended by striking ‘‘for 

‘1992’ in subparagraph (B)’’ and inserting ‘‘for ‘2016’ in subparagraph (A)(ii)’’. 

(12) Section 4980I(b)(3)(C)(v)(II) is amended by striking 

‘‘for ‘1992’ in subparagraph (B)’’ and inserting ‘‘for ‘2016’ in 

subparagraph (A)(ii)’’. 

(13) Section 6039F(d) is amended by striking ‘‘subparagraph (B) thereof shall be applied by substituting ‘1995’ for 

‘1992’ ’’ and inserting ‘‘subparagraph (A)(ii) thereof shall be 

applied by substituting ‘1995’ for ‘2016’ ’’. 

(14) Section 7872(g)(5) is amended to read as follows: 

‘‘(5) ADJUSTMENT OF LIMIT FOR INFLATION.—In the case 

of any loan made during any calendar year after 1986, the 

dollar amount in paragraph (2) shall be increased by an amount 

equal to— 

‘‘(A) such amount, multiplied by 

‘‘(B) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year in which the taxable 

year begins, by substituting ‘calendar year 1985’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof. 

Any increase under the preceding sentence shall be rounded 

to the nearest multiple of $100 (or, if such increase is a multiple 

26 USC 911. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2063 

of $50, such increase shall be increased to the nearest multiple 

of $100).’’. 

(e) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

PART II—DEDUCTION FOR QUALIFIED 

BUSINESS INCOME OF PASS-THRU ENTITIES 

SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS INCOME. 

(a) IN GENERAL.—Part VI of subchapter B of chapter 1 is 

amended by adding at the end the following new section: 

‘‘SEC. 199A. QUALIFIED BUSINESS INCOME. 

‘‘(a) IN GENERAL.—In the case of a taxpayer other than a 

corporation, there shall be allowed as a deduction for any taxable 

year an amount equal to the sum of— 

‘‘(1) the lesser of— 

‘‘(A) the combined qualified business income amount 

of the taxpayer, or 

‘‘(B) an amount equal to 20 percent of the excess (if 

any) of— 

‘‘(i) the taxable income of the taxpayer for the 

taxable year, over 

‘‘(ii) the sum of any net capital gain (as defined 

in section 1(h)), plus the aggregate amount of the qualified cooperative dividends, of the taxpayer for the taxable year, plus 

‘‘(2) the lesser of— 

‘‘(A) 20 percent of the aggregate amount of the qualified 

cooperative dividends of the taxpayer for the taxable year, 

or 

‘‘(B) taxable income (reduced by the net capital gain 

(as so defined)) of the taxpayer for the taxable year. 

The amount determined under the preceding sentence shall not 

exceed the taxable income (reduced by the net capital gain (as 

so defined)) of the taxpayer for the taxable year. 

‘‘(b) COMBINED QUALIFIED BUSINESS INCOME AMOUNT.—For 

purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘combined qualified business 

income amount’ means, with respect to any taxable year, an 

amount equal to— 

‘‘(A) the sum of the amounts determined under paragraph (2) for each qualified trade or business carried on 

by the taxpayer, plus 

‘‘(B) 20 percent of the aggregate amount of the qualified 

REIT dividends and qualified publicly traded partnership 

income of the taxpayer for the taxable year. 

‘‘(2) DETERMINATION OF DEDUCTIBLE AMOUNT FOR EACH

TRADE OR BUSINESS.—The amount determined under this paragraph with respect to any qualified trade or business is the 

lesser of— 

‘‘(A) 20 percent of the taxpayer’s qualified business 

income with respect to the qualified trade or business, 

or 

‘‘(B) the greater of— 

‘‘(i) 50 percent of the W–2 wages with respect 

to the qualified trade or business, or 

26 USC 199A. 

26 USC 1 note. 


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131 STAT. 2064 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(ii) the sum of 25 percent of the W–2 wages with 

respect to the qualified trade or business, plus 2.5 

percent of the unadjusted basis immediately after 

acquisition of all qualified property. 

‘‘(3) MODIFICATIONS TO LIMIT BASED ON TAXABLE INCOME.— ‘‘(A) EXCEPTION FROM LIMIT.—In the case of any taxpayer whose taxable income for the taxable year does not 

exceed the threshold amount, paragraph (2) shall be applied 

without regard to subparagraph (B). 

‘‘(B) PHASE-IN OF LIMIT FOR CERTAIN TAXPAYERS.— ‘‘(i) IN GENERAL.—If— 

‘‘(I) the taxable income of a taxpayer for any 

taxable year exceeds the threshold amount, but 

does not exceed the sum of the threshold amount 

plus $50,000 ($100,000 in the case of a joint 

return), and 

‘‘(II) the amount determined under paragraph 

(2)(B) (determined without regard to this subparagraph) with respect to any qualified trade or business carried on by the taxpayer is less than the 

amount determined under paragraph (2)(A) with 

respect such trade or business, 

then paragraph (2) shall be applied with respect to 

such trade or business without regard to subparagraph 

(B) thereof and by reducing the amount determined 

under subparagraph (A) thereof by the amount determined under clause (ii). 

‘‘(ii) AMOUNT OF REDUCTION.—The amount determined under this subparagraph is the amount which 

bears the same ratio to the excess amount as— 

‘‘(I) the amount by which the taxpayer’s taxable income for the taxable year exceeds the 

threshold amount, bears to 

‘‘(II) $50,000 ($100,000 in the case of a joint 

return). 

‘‘(iii) EXCESS AMOUNT.—For purposes of clause (ii), 

the excess amount is the excess of— 

‘‘(I) the amount determined under paragraph 

(2)(A) (determined without regard to this paragraph), over 

‘‘(II) the amount determined under paragraph 

(2)(B) (determined without regard to this paragraph). 

‘‘(4) WAGES, ETC.— 

‘‘(A) IN GENERAL.—The term ‘W–2 wages’ means, with 

respect to any person for any taxable year of such person, 

the amounts described in paragraphs (3) and (8) of section 

6051(a) paid by such person with respect to employment 

of employees by such person during the calendar year 

ending during such taxable year. 

‘‘(B) LIMITATION TO WAGES ATTRIBUTABLE TO QUALIFIED

BUSINESS INCOME.—Such term shall not include any 

amount which is not properly allocable to qualified business 

income for purposes of subsection (c)(1). 

‘‘(C) RETURN REQUIREMENT.—Such term shall not 

include any amount which is not properly included in a 

return filed with the Social Security Administration on 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2065 

or before the 60th day after the due date (including extensions) for such return. 

‘‘(5) ACQUISITIONS, DISPOSITIONS, AND SHORT TAXABLE

YEARS.—The Secretary shall provide for the application of this 

subsection in cases of a short taxable year or where the taxpayer acquires, or disposes of, the major portion of a trade 

or business or the major portion of a separate unit of a trade 

or business during the taxable year. 

‘‘(6) QUALIFIED PROPERTY.—For purposes of this section: 

‘‘(A) IN GENERAL.—The term ‘qualified property’ means, 

with respect to any qualified trade or business for a taxable 

year, tangible property of a character subject to the allowance for depreciation under section 167— 

‘‘(i) which is held by, and available for use in, 

the qualified trade or business at the close of the 

taxable year, 

‘‘(ii) which is used at any point during the taxable 

year in the production of qualified business income, 

and 

‘‘(iii) the depreciable period for which has not 

ended before the close of the taxable year. 

‘‘(B) DEPRECIABLE PERIOD.—The term ‘depreciable 

period’ means, with respect to qualified property of a taxpayer, the period beginning on the date the property was 

first placed in service by the taxpayer and ending on the 

later of— 

‘‘(i) the date that is 10 years after such date, 

or 

‘‘(ii) the last day of the last full year in the 

applicable recovery period that would apply to the 

property under section 168 (determined without regard 

to subsection (g) thereof). 

‘‘(c) QUALIFIED BUSINESS INCOME.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘qualified business income’ 

means, for any taxable year, the net amount of qualified items 

of income, gain, deduction, and loss with respect to any qualified 

trade or business of the taxpayer. Such term shall not include 

any qualified REIT dividends, qualified cooperative dividends, 

or qualified publicly traded partnership income. 

‘‘(2) CARRYOVER OF LOSSES.—If the net amount of qualified 

income, gain, deduction, and loss with respect to qualified 

trades or businesses of the taxpayer for any taxable year is 

less than zero, such amount shall be treated as a loss from 

a qualified trade or business in the succeeding taxable year. 

‘‘(3) QUALIFIED ITEMS OF INCOME, GAIN, DEDUCTION, AND

LOSS.—For purposes of this subsection— 

‘‘(A) IN GENERAL.—The term ‘qualified items of income, 

gain, deduction, and loss’ means items of income, gain, 

deduction, and loss to the extent such items are— 

‘‘(i) effectively connected with the conduct of a 

trade or business within the United States (within 

the meaning of section 864(c), determined by substituting ‘qualified trade or business (within the 

meaning of section 199A)’ for ‘nonresident alien individual or a foreign corporation’ or for ‘a foreign corporation’ each place it appears), and 


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131 STAT. 2066 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(ii) included or allowed in determining taxable 

income for the taxable year. 

‘‘(B) EXCEPTIONS.—The following investment items 

shall not be taken into account as a qualified item of 

income, gain, deduction, or loss: 

‘‘(i) Any item of short-term capital gain, shortterm capital loss, long-term capital gain, or long-term 

capital loss. 

‘‘(ii) Any dividend, income equivalent to a dividend, 

or payment in lieu of dividends described in section 

954(c)(1)(G). 

‘‘(iii) Any interest income other than interest 

income which is properly allocable to a trade or business. 

‘‘(iv) Any item of gain or loss described in subparagraph (C) or (D) of section 954(c)(1) (applied by substituting ‘qualified trade or business’ for ‘controlled 

foreign corporation’). 

‘‘(v) Any item of income, gain, deduction, or loss 

taken into account under section 954(c)(1)(F) (determined without regard to clause (ii) thereof and other 

than items attributable to notional principal contracts 

entered into in transactions qualifying under section 

1221(a)(7)). 

‘‘(vi) Any amount received from an annuity which 

is not received in connection with the trade or business. 

‘‘(vii) Any item of deduction or loss properly allocable to an amount described in any of the preceding 

clauses. 

‘‘(4) TREATMENT OF REASONABLE COMPENSATION AND

GUARANTEED PAYMENTS.—Qualified business income shall not 

include— 

‘‘(A) reasonable compensation paid to the taxpayer by 

any qualified trade or business of the taxpayer for services 

rendered with respect to the trade or business, 

‘‘(B) any guaranteed payment described in section 

707(c) paid to a partner for services rendered with respect 

to the trade or business, and 

‘‘(C) to the extent provided in regulations, any payment 

described in section 707(a) to a partner for services rendered with respect to the trade or business. 

‘‘(d) QUALIFIED TRADE OR BUSINESS.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘qualified trade or business’ 

means any trade or business other than— 

‘‘(A) a specified service trade or business, or 

‘‘(B) the trade or business of performing services as 

an employee. 

‘‘(2) SPECIFIED SERVICE TRADE OR BUSINESS.—The term 

‘specified service trade or business’ means any trade or business— 

‘‘(A) which is described in section 1202(e)(3)(A) (applied 

without regard to the words ‘engineering, architecture,’) 

or which would be so described if the term ‘employees 

or owners’ were substituted for ‘employees’ therein, or 

‘‘(B) which involves the performance of services that 

consist of investing and investment management, trading, 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2067 

or dealing in securities (as defined in section 475(c)(2)), 

partnership interests, or commodities (as defined in section 

475(e)(2)). 

‘‘(3) EXCEPTION FOR SPECIFIED SERVICE BUSINESSES BASED

ON TAXPAYER’S INCOME.— 

‘‘(A) IN GENERAL.—If, for any taxable year, the taxable 

income of any taxpayer is less than the sum of the threshold 

amount plus $50,000 ($100,000 in the case of a joint 

return), then— 

‘‘(i) any specified service trade or business of the 

taxpayer shall not fail to be treated as a qualified 

trade or business due to paragraph (1)(A), but 

‘‘(ii) only the applicable percentage of qualified 

items of income, gain, deduction, or loss, and the W– 

2 wages and the unadjusted basis immediately after 

acquisition of qualified property, of the taxpayer allocable to such specified service trade or business shall 

be taken into account in computing the qualified business income, W–2 wages, and the unadjusted basis 

immediately after acquisition of qualified property of 

the taxpayer for the taxable year for purposes of 

applying this section. 

‘‘(B) APPLICABLE PERCENTAGE.—For purposes of 

subparagraph (A), the term ‘applicable percentage’ means, 

with respect to any taxable year, 100 percent reduced (not 

below zero) by the percentage equal to the ratio of— 

‘‘(i) the taxable income of the taxpayer for the 

taxable year in excess of the threshold amount, bears 

to 

‘‘(ii) $50,000 ($100,000 in the case of a joint return). 

‘‘(e) OTHER DEFINITIONS.—For purposes of this section— 

‘‘(1) TAXABLE INCOME.—Taxable income shall be computed 

without regard to the deduction allowable under this section. 

‘‘(2) THRESHOLD AMOUNT.— 

‘‘(A) IN GENERAL.—The term ‘threshold amount’ means 

$157,500 (200 percent of such amount in the case of a 

joint return). 

‘‘(B) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after 2018, the dollar amount in 

subparagraph (A) shall be increased by an amount equal 

to— 

‘‘(i) such dollar amount, multiplied by 

‘‘(ii) the cost-of-living adjustment determined 

under section 1(f)(3) for the calendar year in which 

the taxable year begins, determined by substituting 

‘calendar year 2017’ for ‘calendar year 2016’ in 

subparagraph (A)(ii) thereof. 

The amount of any increase under the preceding sentence 

shall be rounded as provided in section 1(f)(7). 

‘‘(3) QUALIFIED REIT DIVIDEND.—The term ‘qualified REIT 

dividend’ means any dividend from a real estate investment 

trust received during the taxable year which— 

‘‘(A) is not a capital gain dividend, as defined in section 

857(b)(3), and 

‘‘(B) is not qualified dividend income, as defined in 

section 1(h)(11). 


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131 STAT. 2068 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(4) QUALIFIED COOPERATIVE DIVIDEND.—The term ‘qualified cooperative dividend’ means any patronage dividend (as 

defined in section 1388(a)), any per-unit retain allocation (as 

defined in section 1388(f)), and any qualified written notice 

of allocation (as defined in section 1388(c)), or any similar 

amount received from an organization described in subparagraph (B)(ii), which— 

‘‘(A) is includible in gross income, and 

‘‘(B) is received from— 

‘‘(i) an organization or corporation described in 

section 501(c)(12) or 1381(a), or 

‘‘(ii) an organization which is governed under this 

title by the rules applicable to cooperatives under this 

title before the enactment of subchapter T. 

‘‘(5) QUALIFIED PUBLICLY TRADED PARTNERSHIP INCOME.— 

The term ‘qualified publicly traded partnership income’ means, 

with respect to any qualified trade or business of a taxpayer, 

the sum of— 

‘‘(A) the net amount of such taxpayer’s allocable share 

of each qualified item of income, gain, deduction, and loss 

(as defined in subsection (c)(3) and determined after the 

application of subsection (c)(4)) from a publicly traded partnership (as defined in section 7704(a)) which is not treated 

as a corporation under section 7704(c), plus 

‘‘(B) any gain recognized by such taxpayer upon disposition of its interest in such partnership to the extent such 

gain is treated as an amount realized from the sale or 

exchange of property other than a capital asset under section 751(a). 

‘‘(f) SPECIAL RULES.— 

‘‘(1) APPLICATION TO PARTNERSHIPS AND S CORPORATIONS.— 

‘‘(A) IN GENERAL.—In the case of a partnership or 

S corporation— 

‘‘(i) this section shall be applied at the partner 

or shareholder level, 

‘‘(ii) each partner or shareholder shall take into 

account such person’s allocable share of each qualified 

item of income, gain, deduction, and loss, and 

‘‘(iii) each partner or shareholder shall be treated 

for purposes of subsection (b) as having W–2 wages 

and unadjusted basis immediately after acquisition of 

qualified property for the taxable year in an amount 

equal to such person’s allocable share of the W–2 wages 

and the unadjusted basis immediately after acquisition 

of qualified property of the partnership or S corporation 

for the taxable year (as determined under regulations 

prescribed by the Secretary). 

For purposes of clause (iii), a partner’s or shareholder’s 

allocable share of W–2 wages shall be determined in the 

same manner as the partner’s or shareholder’s allocable 

share of wage expenses. For purposes of such clause, partner’s or shareholder’s allocable share of the unadjusted 

basis immediately after acquisition of qualified property 

shall be determined in the same manner as the partner’s 

or shareholder’s allocable share of depreciation. For purposes of this subparagraph, in the case of an S corporation, 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2069 

an allocable share shall be the shareholder’s pro rata share 

of an item. 

‘‘(B) APPLICATION TO TRUSTS AND ESTATES.—Rules 

similar to the rules under section 199(d)(1)(B)(i) (as in 

effect on December 1, 2017) for the apportionment of W– 

2 wages shall apply to the apportionment of W–2 wages 

and the apportionment of unadjusted basis immediately 

after acquisition of qualified property under this section. 

‘‘(C) TREATMENT OF TRADES OR BUSINESS IN PUERTO

RICO.— ‘‘(i) IN GENERAL.—In the case of any taxpayer with 

qualified business income from sources within the 

commonwealth of Puerto Rico, if all such income is 

taxable under section 1 for such taxable year, then 

for purposes of determining the qualified business 

income of such taxpayer for such taxable year, the 

term ‘United States’ shall include the Commonwealth 

of Puerto Rico. 

‘‘(ii) SPECIAL RULE FOR APPLYING LIMIT.—In the 

case of any taxpayer described in clause (i), the determination of W–2 wages of such taxpayer with respect 

to any qualified trade or business conducted in Puerto 

Rico shall be made without regard to any exclusion 

under section 3401(a)(8) for remuneration paid for services in Puerto Rico. 

‘‘(2) COORDINATION WITH MINIMUM TAX.—For purposes of 

determining alternative minimum taxable income under section 

55, qualified business income shall be determined without 

regard to any adjustments under sections 56 through 59. 

‘‘(3) DEDUCTION LIMITED TO INCOME TAXES.—The deduction 

under subsection (a) shall only be allowed for purposes of 

this chapter. 

‘‘(4) REGULATIONS.—The Secretary shall prescribe such 

regulations as are necessary to carry out the purposes of this 

section, including regulations— 

‘‘(A) for requiring or restricting the allocation of items 

and wages under this section and such reporting requirements as the Secretary determines appropriate, and 

‘‘(B) for the application of this section in the case 

of tiered entities. 

‘‘(g) DEDUCTION ALLOWED TO SPECIFIED AGRICULTURAL OR

HORTICULTURAL COOPERATIVES.— 

‘‘(1) IN GENERAL.—In the case of any taxable year of a 

specified agricultural or horticultural cooperative beginning 

after December 31, 2017, there shall be allowed a deduction 

in an amount equal to the lesser of— 

‘‘(A) 20 percent of the excess (if any) of— 

‘‘(i) the gross income of a specified agricultural 

or horticultural cooperative, over 

‘‘(ii) the qualified cooperative dividends (as defined 

in subsection (e)(4)) paid during the taxable year for 

the taxable year, or 

‘‘(B) the greater of— 

‘‘(i) 50 percent of the W–2 wages of the cooperative 

with respect to its trade or business, or 

‘‘(ii) the sum of 25 percent of the W–2 wages of 

the cooperative with respect to its trade or business, 


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131 STAT. 2070 PUBLIC LAW 115–97—DEC. 22, 2017 

plus 2.5 percent of the unadjusted basis immediately 

after acquisition of all qualified property of the cooperative. 

‘‘(2) LIMITATION.—The amount determined under paragraph (1) shall not exceed the taxable income of the specified 

agricultural or horticultural for the taxable year. 

‘‘(3) SPECIFIED AGRICULTURAL OR HORTICULTURAL COOPERA- TIVE.—For purposes of this subsection, the term ‘specified agricultural or horticultural cooperative’ means an organization 

to which part I of subchapter T applies which is engaged 

in— 

‘‘(A) the manufacturing, production, growth, or extraction in whole or significant part of any agricultural or 

horticultural product, 

‘‘(B) the marketing of agricultural or horticultural products which its patrons have so manufactured, produced, 

grown, or extracted, or 

‘‘(C) the provision of supplies, equipment, or services 

to farmers or to organizations described in subparagraph 

(A) or (B). 

‘‘(h) ANTI-ABUSE RULES.—The Secretary shall— 

‘‘(1) apply rules similar to the rules under section 179(d)(2) 

in order to prevent the manipulation of the depreciable period 

of qualified property using transactions between related parties, 

and 

‘‘(2) prescribe rules for determining the unadjusted basis 

immediately after acquisition of qualified property acquired 

in like-kind exchanges or involuntary conversions. 

‘‘(i) TERMINATION.—This section shall not apply to taxable years 

beginning after December 31, 2025.’’. 

(b) TREATMENT OF DEDUCTION IN COMPUTING ADJUSTED GROSS

AND TAXABLE INCOME.— 

(1) DEDUCTION NOT ALLOWED IN COMPUTING ADJUSTED

GROSS INCOME.—Section 62(a) is amended by adding at the 

end the following new sentence: ‘‘The deduction allowed by 

section 199A shall not be treated as a deduction described 

in any of the preceding paragraphs of this subsection.’’. 

(2) DEDUCTION ALLOWED TO NONITEMIZERS.—Section 63(b) 

is amended by striking ‘‘and’’ at the end of paragraph (1), 

by striking the period at the end of paragraph (2) and inserting 

‘‘, and’’, and by adding at the end the following new paragraph: 

‘‘(3) the deduction provided in section 199A.’’. 

(3) DEDUCTION ALLOWED TO ITEMIZERS WITHOUT LIMITS ON

ITEMIZED DEDUCTIONS.—Section 63(d) is amended by striking 

‘‘and’’ at the end of paragraph (1), by striking the period at 

the end of paragraph (2) and inserting ‘‘, and’’, and by adding 

at the end the following new paragraph: 

‘‘(3) the deduction provided in section 199A.’’. 

(4) CONFORMING AMENDMENT.—Section 3402(m)(1) is 

amended by inserting ‘‘and the estimated deduction allowed 

under section 199A’’ after ‘‘chapter 1’’. 

(c) ACCURACY-RELATED PENALTY ON DETERMINATION OF

APPLICABLE PERCENTAGE.—Section 6662(d)(1) is amended by 

inserting at the end the following new subparagraph: 

‘‘(C) SPECIAL RULE FOR TAXPAYERS CLAIMING SECTION

199A DEDUCTION.—In the case of any taxpayer who claims 

the deduction allowed under section 199A for the taxable 

26 USC 62. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2071 

year, subparagraph (A) shall be applied by substituting 

‘5 percent’ for ‘10 percent’.’’. 

(d) CONFORMING AMENDMENTS.— 

(1) Section 172(d) is amended by adding at the end the 

following new paragraph: 

‘‘(8) QUALIFIED BUSINESS INCOME DEDUCTION.—The deduction under section 199A shall not be allowed.’’. 

(2) Section 246(b)(1) is amended by inserting ‘‘199A,’’ before 

‘‘243(a)(1)’’. 

(3) Section 613(a) is amended by inserting ‘‘and without 

the deduction under section 199A’’ after ‘‘and without the deduction under section 199’’. 

(4) Section 613A(d)(1) is amended by redesignating subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and 

(F), respectively, and by inserting after subparagraph (B), the 

following new subparagraph: 

‘‘(C) any deduction allowable under section 199A,’’. 

(5) Section 170(b)(2)(D) is amended by striking ‘‘and’’ in 

clause (iv), by striking the period at the end of clause (v), 

and by adding at the end the following new clause: 

‘‘(vi) section 199A(g).’’. 

(6) The table of sections for part VI of subchapter B of 

chapter 1 is amended by inserting at the end the following 

new item: 

‘‘Sec. 199A. Qualified business income.’’. 

(e) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS OTHER THAN 

CORPORATIONS. 

(a) IN GENERAL.—Section 461 is amended by adding at the 

end the following new subsection: 

‘‘(l) LIMITATION ON EXCESS BUSINESS LOSSES OF NONCORPORATE

TAXPAYERS.— 

‘‘(1) LIMITATION.—In the case of taxable year of a taxpayer 

other than a corporation beginning after December 31, 2017, 

and before January 1, 2026— 

‘‘(A) subsection (j) (relating to limitation on excess farm 

losses of certain taxpayers) shall not apply, and 

‘‘(B) any excess business loss of the taxpayer for the 

taxable year shall not be allowed. 

‘‘(2) DISALLOWED LOSS CARRYOVER.—Any loss which is disallowed under paragraph (1) shall be treated as a net operating 

loss carryover to the following taxable year under section 172. 

‘‘(3) EXCESS BUSINESS LOSS.—For purposes of this subsection— 

‘‘(A) IN GENERAL.—The term ‘excess business loss’ 

means the excess (if any) of— 

‘‘(i) the aggregate deductions of the taxpayer for 

the taxable year which are attributable to trades or 

businesses of such taxpayer (determined without 

regard to whether or not such deductions are disallowed for such taxable year under paragraph (1)), 

over 

‘‘(ii) the sum of— 

26 USC 62 note. 

26 USC 161 prec. 

26 USC 172. 


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131 STAT. 2072 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(I) the aggregate gross income or gain of such 

taxpayer for the taxable year which is attributable 

to such trades or businesses, plus ‘‘(II) $250,000 (200 percent of such amount 

in the case of a joint return). 

‘‘(B) ADJUSTMENT FOR INFLATION.—In the case of any 

taxable year beginning after December 31, 2018, the 

$250,000 amount in subparagraph (A)(ii)(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(f)(3) for the calendar year in which 

the taxable year begins, determined by substituting 

‘2017’ for ‘2016’ in subparagraph (A)(ii) thereof. 

If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall 

be rounded to the nearest multiple of $1,000. 

‘‘(4) APPLICATION OF SUBSECTION IN CASE OF PARTNERSHIPS

AND S CORPORATIONS.—In the case of a partnership or S corporation— 

‘‘(A) this subsection shall be applied at the partner 

or shareholder level, and 

‘‘(B) each partner’s or shareholder’s allocable share 

of the items of income, gain, deduction, or loss of the 

partnership or S corporation for any taxable year from 

trades or businesses attributable to the partnership or 

S corporation shall be taken into account by the partner 

or shareholder in applying this subsection to the taxable 

year of such partner or shareholder with or within which 

the taxable year of the partnership or S corporation ends. 

For purposes of this paragraph, in the case of an S corporation, 

an allocable share shall be the shareholder’s pro rata share 

of an item. 

‘‘(5) ADDITIONAL REPORTING.—The Secretary shall prescribe 

such additional reporting requirements as the Secretary determines necessary to carry out the purposes of this subsection. 

‘‘(6) COORDINATION WITH SECTION 469.—This subsection 

shall be applied after the application of section 469.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

PART III—TAX BENEFITS FOR FAMILIES AND 

INDIVIDUALS 

SEC. 11021. INCREASE IN STANDARD DEDUCTION. 

(a) IN GENERAL.—Subsection (c) of section 63 is amended by 

adding at the end the following new paragraph: 

‘‘(7) SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH

2025.—In the case of a taxable year beginning after December 

31, 2017, and before January 1, 2026— 

‘‘(A) INCREASE IN STANDARD DEDUCTION.—Paragraph 

(2) shall be applied— 

‘‘(i) by substituting ‘$18,000’ for ‘$4,400’ in 

subparagraph (B), and 

‘‘(ii) by substituting ‘$12,000’ for ‘$3,000’ in 

subparagraph (C). 

‘‘(B) ADJUSTMENT FOR INFLATION.— 

26 USC 63. 

26 USC 461 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2073 

‘‘(i) IN GENERAL.—Paragraph (4) shall not apply 

to the dollar amounts contained in paragraphs (2)(B) 

and (2)(C). 

‘‘(ii) ADJUSTMENT OF INCREASED AMOUNTS.—In the 

case of a taxable year beginning after 2018, the $18,000 

and $12,000 amounts in subparagraph (A) 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(f)(3) for the calendar year in which 

the taxable year begins, determined by substituting ‘2017’ for ‘2016’ in subparagraph (A)(ii) 

thereof. 

If any increase under this clause is not a multiple 

of $50, such increase shall be rounded to the next 

lowest multiple of $50.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD TAX CREDIT. 

(a) IN GENERAL.—Section 24 is amended by adding at the 

end the following new subsection: 

‘‘(h) SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH 2025.— 

‘‘(1) IN GENERAL.—In the case of a taxable year beginning 

after December 31, 2017, and before January 1, 2026, this 

section shall be applied as provided in paragraphs (2) through 

(7). 

‘‘(2) CREDIT AMOUNT.—Subsection (a) shall be applied by 

substituting ‘$2,000’ for ‘$1,000’. 

‘‘(3) LIMITATION.—In lieu of the amount determined under 

subsection (b)(2), the threshold amount shall be $400,000 in 

the case of a joint return ($200,000 in any other case). 

‘‘(4) PARTIAL CREDIT ALLOWED FOR CERTAIN OTHER DEPENDENTS.— 

‘‘(A) IN GENERAL.—The credit determined under subsection (a) (after the application of paragraph (2)) shall 

be increased by $500 for each dependent of the taxpayer 

(as defined in section 152) other than a qualifying child 

described in subsection (c). 

‘‘(B) EXCEPTION FOR CERTAIN NONCITIZENS.—Subparagraph (A) shall not apply with respect to any individual 

who would not be a dependent if subparagraph (A) of 

section 152(b)(3) were applied without regard to all that 

follows ‘resident of the United States’. 

‘‘(C) CERTAIN QUALIFYING CHILDREN.—In the case of 

any qualifying child with respect to whom a credit is not 

allowed under this section by reason of paragraph (7), 

such child shall be treated as a dependent to whom 

subparagraph (A) applies. 

‘‘(5) MAXIMUM AMOUNT OF REFUNDABLE CREDIT.— 

‘‘(A) IN GENERAL.—The amount determined under subsection (d)(1)(A) with respect to any qualifying child shall 

not exceed $1,400, and such subsection shall be applied 

without regard to paragraph (4) of this subsection. 

‘‘(B) ADJUSTMENT FOR INFLATION.—In the case of a 

taxable year beginning after 2018, the $1,400 amount in 

26 USC 24. 

26 USC 63 note. 


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131 STAT. 2074 PUBLIC LAW 115–97—DEC. 22, 2017 

subparagraph (A) shall be increased by an amount equal 

to— 

‘‘(i) such dollar amount, multiplied by 

‘‘(ii) the cost-of-living adjustment determined 

under section 1(f)(3) for the calendar year in which 

the taxable year begins, determined by substituting 

‘2017’ for ‘2016’ in subparagraph (A)(ii) thereof. 

If any increase under this clause is not a multiple of 

$100, such increase shall be rounded to the next lowest 

multiple of $100. 

‘‘(6) EARNED INCOME THRESHOLD FOR REFUNDABLE

CREDIT.—Subsection (d)(1)(B)(i) shall be applied by substituting 

‘$2,500’ for ‘$3,000’. 

‘‘(7) SOCIAL SECURITY NUMBER REQUIRED.—No credit shall 

be allowed under this section to a taxpayer with respect to 

any qualifying child unless the taxpayer includes the social 

security number of such child on the return of tax for the 

taxable year. For purposes of the preceding sentence, the term 

‘social security number’ means a social security number issued 

to an individual by the Social Security Administration, but 

only if the social security number is issued— 

‘‘(A) to a citizen of the United States or pursuant 

to subclause (I) (or that portion of subclause (III) that 

relates to subclause (I)) of section 205(c)(2)(B)(i) of the 

Social Security Act, and 

‘‘(B) before the due date for such return.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARITABLE CONTRIBUTIONS. 

(a) IN GENERAL.—Section 170(b)(1) is amended by redesignating 

subparagraph (G) as subparagraph (H) and by inserting after 

subparagraph (F) the following new subparagraph: 

‘‘(G) INCREASED LIMITATION FOR CASH CONTRIBUTIONS.— 

‘‘(i) IN GENERAL.—In the case of any contribution 

of cash to an organization described in subparagraph 

(A), the total amount of such contributions which may 

be taken into account under subsection (a) for any 

taxable year beginning after December 31, 2017, and 

before January 1, 2026, shall not exceed 60 percent 

of the taxpayer’s contribution base for such year. 

‘‘(ii) CARRYOVER.—If the aggregate amount of contributions described in clause (i) exceeds the applicable 

limitation under clause (i) for any taxable year 

described in such clause, such excess shall be treated 

(in a manner consistent with the rules of subsection 

(d)(1)) as a charitable contribution to which clause 

(i) applies in each of the 5 succeeding years in order 

of time. 

‘‘(iii) COORDINATION WITH SUBPARAGRAPHS (A) AND

(B).— 

‘‘(I) IN GENERAL.—Contributions taken into 

account under this subparagraph shall not be 

taken into account under subparagraph (A). 

26 USC 170. 

26 USC 24 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2075 

‘‘(II) LIMITATION REDUCTION.—For each taxable year described in clause (i), and each taxable 

year to which any contribution under this subparagraph is carried over under clause (ii), subparagraph (A) shall be applied by reducing (but not 

below zero) the contribution limitation allowed for 

the taxable year under such subparagraph by the 

aggregate contributions allowed under this 

subparagraph for such taxable year, and subparagraph (B) shall be applied by treating any reference to subparagraph (A) as a reference to both 

subparagraph (A) and this subparagraph.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to contributions in taxable years beginning after 

December 31, 2017. 

SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE ACCOUNTS. 

(a) INCREASE IN LIMITATION FOR CONTRIBUTIONS FROM COMPENSATION OF INDIVIDUALS WITH DISABILITIES.— 

(1) IN GENERAL.—Section 529A(b)(2)(B) is amended to read 

as follows: 

‘‘(B) except in the case of contributions under subsection (c)(1)(C), if such contribution to an ABLE account 

would result in aggregate contributions from all contributors to the ABLE account for the taxable year exceeding 

the sum of— 

‘‘(i) the amount in effect under section 2503(b) 

for the calendar year in which the taxable year begins, 

plus 

‘‘(ii) in the case of any contribution by a designated 

beneficiary described in paragraph (7) before January 

1, 2026, the lesser of— 

‘‘(I) compensation (as defined by section 

219(f)(1)) includible in the designated beneficiary’s 

gross income for the taxable year, or 

‘‘(II) an amount equal to the poverty line for 

a one-person household, as determined for the calendar year preceding the calendar year in which 

the taxable year begins.’’. 

(2) RESPONSIBILITY FOR CONTRIBUTION LIMITATION.—Paragraph (2) of section 529A(b) is amended by adding at the 

end the following: ‘‘A designated beneficiary (or a person acting 

on behalf of such beneficiary) shall maintain adequate records 

for purposes of ensuring, and shall be responsible for ensuring, 

that the requirements of subparagraph (B)(ii) are met.’’ 

(3) ELIGIBLE DESIGNATED BENEFICIARY.—Section 529A(b) 

is amended by adding at the end the following: 

‘‘(7) SPECIAL RULES RELATED TO CONTRIBUTION LIMIT.—For 

purposes of paragraph (2)(B)(ii)— 

‘‘(A) DESIGNATED BENEFICIARY.—A designated beneficiary described in this paragraph is an employee 

(including an employee within the meaning of section 

401(c)) with respect to whom— 

‘‘(i) no contribution is made for the taxable year 

to a defined contribution plan (within the meaning 

of section 414(i)) with respect to which the requirements of section 401(a) or 403(a) are met, 

26 USC 529A. 

26 USC 170 note. 


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131 STAT. 2076 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(ii) no contribution is made for the taxable year 

to an annuity contract described in section 403(b), and 

‘‘(iii) no contribution is made for the taxable year 

to an eligible deferred compensation plan described 

in section 457(b). 

‘‘(B) POVERTY LINE.—The term ‘poverty line’ has the 

meaning given such term by section 673 of the Community 

Services Block Grant Act (42 U.S.C. 9902).’’. 

(b) ALLOWANCE OF SAVER’S CREDIT FOR ABLE CONTRIBUTIONS

BY ACCOUNT HOLDER.—Section 25B(d)(1) is amended by striking 

‘‘and’’ at the end of subparagraph (B)(ii), by striking the period 

at the end of subparagraph (C) and inserting ‘‘, and’’, and by 

inserting at the end the following: 

‘‘(D) the amount of contributions made before January 

1, 2026, by such individual to the ABLE account (within 

the meaning of section 529A) of which such individual 

is the designated beneficiary.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after the date of the enactment of this Act. 

SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 PROGRAMS. 

(a) IN GENERAL.—Clause (i) of section 529(c)(3)(C) is amended 

by striking ‘‘or’’ at the end of subclause (I), by striking the period 

at the end of subclause (II) and inserting ‘‘, or’’, and by adding 

at the end the following: 

‘‘(III) before January 1, 2026, to an ABLE 

account (as defined in section 529A(e)(6)) of the 

designated beneficiary or a member of the family 

of the designated beneficiary. 

Subclause (III) shall not apply to so much of a distribution which, when added to all other contributions made 

to the ABLE account for the taxable year, exceeds 

the limitation under section 529A(b)(2)(B)(i).’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions after the date of the enactment of 

this Act. 

SEC. 11026. TREATMENT OF CERTAIN INDIVIDUALS PERFORMING 

SERVICES IN THE SINAI PENINSULA OF EGYPT. 

(a) IN GENERAL.—For purposes of the following provisions of 

the Internal Revenue Code of 1986, with respect to the applicable 

period, a qualified hazardous duty area shall be treated in the 

same manner as if it were a combat zone (as determined under 

section 112 of such Code): 

(1) Section 2(a)(3) (relating to special rule where deceased 

spouse was in missing status). 

(2) Section 112 (relating to the exclusion of certain combat 

pay of members of the Armed Forces). 

(3) Section 692 (relating to income taxes of members of 

Armed Forces on death). 

(4) Section 2201 (relating to members of the Armed Forces 

dying in combat zone or by reason of combat-zone-incurred 

wounds, etc.). 

(5) Section 3401(a)(1) (defining wages relating to combat 

pay for members of the Armed Forces). 

26 USC 112 note. 

26 USC 529 note. 

26 USC 529. 

26 USC 25B note. 

26 USC 25B. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2077 

(6) Section 4253(d) (relating to the taxation of phone service 

originating from a combat zone from members of the Armed 

Forces). 

(7) Section 6013(f)(1) (relating to joint return where individual is in missing status). 

(8) Section 7508 (relating to time for performing certain 

acts postponed by reason of service in combat zone). 

(b) QUALIFIED HAZARDOUS DUTY AREA.—For purposes of this 

section, the term ‘‘qualified hazardous duty area’’ means the Sinai 

Peninsula of Egypt, if as of the date of the enactment of this 

section any member of the Armed Forces of the United States 

is entitled to special pay under section 310 of title 37, United 

States Code (relating to special pay; duty subject to hostile fire 

or imminent danger), for services performed in such location. Such 

term includes such location only during the period such entitlement 

is in effect. 

(c) APPLICABLE PERIOD.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

applicable period is— 

(A) the portion of the first taxable year ending after 

June 9, 2015, which begins on such date, and 

(B) any subsequent taxable year beginning before 

January 1, 2026. 

(2) WITHHOLDING.—In the case of subsection (a)(5), the 

applicable period is— 

(A) the portion of the first taxable year ending after 

the date of the enactment of this Act which begins on 

such date, and 

(B) any subsequent taxable year beginning before 

January 1, 2026. 

(d) EFFECTIVE DATE.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

provisions of this section shall take effect on June 9, 2015. 

(2) WITHHOLDING.—Subsection (a)(5) shall apply to remuneration paid after the date of the enactment of this Act. 

SEC. 11027. TEMPORARY REDUCTION IN MEDICAL EXPENSE DEDUCTION FLOOR. 

(a) IN GENERAL.—Subsection (f) of section 213 is amended 

to read as follows: 

‘‘(f) SPECIAL RULES FOR 2013 THROUGH 2018.—In the case 

of any taxable year— 

‘‘(1) beginning after December 31, 2012, and ending before 

January 1, 2017, in the case of a taxpayer if such taxpayer 

or such taxpayer’s spouse has attained age 65 before the close 

of such taxable year, and 

‘‘(2) beginning after December 31, 2016, and ending before 

January 1, 2019, in the case of any taxpayer, 

subsection (a) shall be applied with respect to a taxpayer by substituting ‘7.5 percent’ for ‘10 percent’.’’. 

(b) MINIMUM TAX PREFERENCE NOT TO APPLY.—Section 

56(b)(1)(B) is amended by adding at the end the following new 

sentence: ‘‘This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019’’. 

(c) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2016. 

26 USC 56 note. 

26 USC 213. 


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131 STAT. 2078 PUBLIC LAW 115–97—DEC. 22, 2017 

SEC. 11028. RELIEF FOR 2016 DISASTER AREAS. 

(a) IN GENERAL.—For purposes of this section, the term ‘‘2016 

disaster area’’ means any area with respect to which a major 

disaster has been declared by the President under section 401 

of the Robert T. Stafford Disaster Relief and Emergency Assistance 

Act during calendar year 2016. 

(b) SPECIAL RULES FOR USE OF RETIREMENT FUNDS WITH

RESPECT TO AREAS DAMAGED BY 2016 DISASTERS.— (1) TAX-FAVORED WITHDRAWALS FROM RETIREMENT PLANS.— (A) IN GENERAL.—Section 72(t) of the Internal Revenue 

Code of 1986 shall not apply to any qualified 2016 disaster 

distribution. 

(B) AGGREGATE DOLLAR LIMITATION.— (i) IN GENERAL.—For purposes of this subsection, 

the aggregate amount of distributions received by an 

individual which may be treated as qualified 2016 

disaster distributions for any taxable year shall not 

exceed the excess (if any) of— (I) $100,000, over 

(II) the aggregate amounts treated as qualified 

2016 disaster distributions received by such individual for all prior taxable years. 

(ii) TREATMENT OF PLAN DISTRIBUTIONS.—If a distribution to an individual would (without regard to 

clause (i)) be a qualified 2016 disaster distribution, 

a plan shall not be treated as violating any requirement 

of this title merely because the plan treats such distribution as a qualified 2016 disaster distribution, 

unless the aggregate amount of such distributions from 

all plans maintained by the employer (and any member 

of any controlled group which includes the employer) 

to such individual exceeds $100,000. 

(iii) CONTROLLED GROUP.—For purposes of clause 

(ii), the term ‘‘controlled group’’ means any group 

treated as a single employer under subsection (b), (c), 

(m), or (o) of section 414 of the Internal Revenue Code 

of 1986. 

(C) AMOUNT DISTRIBUTED MAY BE REPAID.— 

(i) IN GENERAL.—Any individual who receives a 

qualified 2016 disaster distribution may, at any time 

during the 3-year period beginning on the day after 

the date on which such distribution was received, make 

one or more contributions in an aggregate amount 

not to exceed the amount of such distribution to an 

eligible retirement plan of which such individual is 

a beneficiary and to which a rollover contribution of 

such distribution could be made under section 402(c), 

403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16) of the 

Internal Revenue Code of 1986, as the case may be. 

(ii) TREATMENT OF REPAYMENTS OF DISTRIBUTIONS

FROM ELIGIBLE RETIREMENT PLANS OTHER THAN IRAS.— 

For purposes of the Internal Revenue Code of 1986, 

if a contribution is made pursuant to clause (i) with 

respect to a qualified 2016 disaster distribution from 

an eligible retirement plan other than an individual 

retirement plan, then the taxpayer shall, to the extent 

of the amount of the contribution, be treated as having 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2079 

received the qualified 2016 disaster distribution in an 

eligible rollover distribution (as defined in section 

402(c)(4) of the Internal Revenue Code of 1986) and 

as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 

60 days of the distribution. 

(iii) TREATMENT OF REPAYMENTS FOR DISTRIBU- TIONS FROM IRAS.—For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant 

to clause (i) with respect to a qualified 2016 disaster 

distribution from an individual retirement plan (as 

defined by section 7701(a)(37) of the Internal Revenue 

Code of 1986), then, to the extent of the amount of 

the contribution, the qualified 2016 disaster distribution shall be treated as a distribution described in 

section 408(d)(3) of such Code and as having been 

transferred to the eligible retirement plan in a direct 

trustee to trustee transfer within 60 days of the distribution. 

(D) DEFINITIONS.—For purposes of this paragraph— 

(i) QUALIFIED 2016 DISASTER DISTRIBUTION.—Except 

as provided in subparagraph (B), the term ‘‘qualified 

2016 disaster distribution’’ means any distribution 

from an eligible retirement plan made on or after 

January 1, 2016, and before January 1, 2018, to an 

individual whose principal place of abode at any time 

during calendar year 2016 was located in a disaster 

area described in subsection (a) and who has sustained 

an economic loss by reason of the events giving rise 

to the Presidential declaration described in subsection 

(a) which was applicable to such area. 

(ii) ELIGIBLE RETIREMENT PLAN.—The term 

‘‘eligible retirement plan’’ shall have the meaning given 

such term by section 402(c)(8)(B) of the Internal Revenue Code of 1986. 

(E) INCOME INCLUSION SPREAD OVER 3-YEAR PERIOD.— 

(i) IN GENERAL.—In the case of any qualified 2016 

disaster distribution, unless the taxpayer elects not 

to have this subparagraph apply for any taxable year, 

any amount required to be included in gross income 

for such taxable year shall be so included ratably over 

the 3-taxable-year period beginning with such taxable 

year. 

(ii) SPECIAL RULE.—For purposes of clause (i), rules 

similar to the rules of subparagraph (E) of section 

408A(d)(3) of the Internal Revenue Code of 1986 shall 

apply. 

(F) SPECIAL RULES.— 

(i) EXEMPTION OF DISTRIBUTIONS FROM TRUSTEE

TO TRUSTEE TRANSFER AND WITHHOLDING RULES.—For 

purposes of sections 401(a)(31), 402(f), and 3405 of 

the Internal Revenue Code of 1986, qualified 2016 

disaster distribution shall not be treated as eligible 

rollover distributions. 

(ii) QUALIFIED 2016 DISASTER DISTRIBUTIONS

TREATED AS MEETING PLAN DISTRIBUTION REQUIRE- MENTS.—For purposes of the Internal Revenue Code 


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131 STAT. 2080 PUBLIC LAW 115–97—DEC. 22, 2017 

of 1986, a qualified 2016 disaster distribution shall 

be treated as meeting the requirements of sections 

401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 

457(d)(1)(A) of the Internal Revenue Code of 1986. 

(2) PROVISIONS RELATING TO PLAN AMENDMENTS.— 

(A) IN GENERAL.—If this paragraph applies to any 

amendment to any plan or annuity contract, such plan 

or contract shall be treated as being operated in accordance 

with the terms of the plan during the period described 

in subparagraph (B)(ii)(I). 

(B) AMENDMENTS TO WHICH SUBSECTION APPLIES.— 

(i) IN GENERAL.—This paragraph shall apply to 

any amendment to any plan or annuity contract which 

is made— 

(I) pursuant to any provision of this section, 

or pursuant to any regulation under any provision 

of this section, and 

(II) on or before the last day of the first plan 

year beginning on or after January 1, 2018, or 

such later date as the Secretary prescribes. 

In the case of a governmental plan (as defined in 

section 414(d) of the Internal Revenue Code of 1986), 

subclause (II) shall be applied by substituting the date 

which is 2 years after the date otherwise applied under 

subclause (II). 

(ii) CONDITIONS.—This paragraph shall not apply 

to any amendment to a plan or contract unless such 

amendment applies retroactively for such period, and 

shall not apply to any such amendment unless the 

plan or contract is operated as if such amendment 

were in effect during the period— 

(I) beginning on the date that this section 

or the regulation described in clause (i)(I) takes 

effect (or in the case of a plan or contract amendment not required by this section or such regulation, the effective date specified by the plan), and 

(II) ending on the date described in clause 

(i)(II) (or, if earlier, the date the plan or contract 

amendment is adopted). 

(c) SPECIAL RULES FOR PERSONAL CASUALTY LOSSES RELATED

TO 2016 MAJOR DISASTER.— 

(1) IN GENERAL.—If an individual has a net disaster loss 

for any taxable year beginning after December 31, 2015, and 

before January 1, 2018— 

(A) the amount determined under section 

165(h)(2)(A)(ii) of the Internal Revenue Code of 1986 shall 

be equal to the sum of— 

(i) such net disaster loss, and 

(ii) so much of the excess referred to in the matter 

preceding clause (i) of section 165(h)(2)(A) of such Code 

(reduced by the amount in clause (i) of this subparagraph) as exceeds 10 percent of the adjusted gross 

income of the individual, 

(B) section 165(h)(1) of such Code shall be applied 

by substituting ‘‘$500’’ for ‘‘$500 ($100 for taxable years 

beginning after December 31, 2009)’’, 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2081 

(C) the standard deduction determined under section 

63(c) of such Code shall be increased by the net disaster 

loss, and 

(D) section 56(b)(1)(E) of such Code shall not apply 

to so much of the standard deduction as is attributable 

to the increase under subparagraph (C) of this paragraph. 

(2) NET DISASTER LOSS.—For purposes of this subsection, 

the term ‘‘net disaster loss’’ means the excess of qualified disaster-related personal casualty losses over personal casualty 

gains (as defined in section 165(h)(3)(A) of the Internal Revenue 

Code of 1986). 

(3) QUALIFIED DISASTER-RELATED PERSONAL CASUALTY

LOSSES.—For purposes of this paragraph, the term ‘‘qualified 

disaster-related personal casualty losses’’ means losses 

described in section 165(c)(3) of the Internal Revenue Code 

of 1986 which arise in a disaster area described in subsection 

(a) on or after January 1, 2016, and which are attributable 

to the events giving rise to the Presidential declaration 

described in subsection (a) which was applicable to such area. 

PART IV—EDUCATION 

SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED ON 

ACCOUNT OF DEATH OR DISABILITY. 

(a) IN GENERAL.—Section 108(f) is amended by adding at the 

end the following new paragraph: 

‘‘(5) DISCHARGES ON ACCOUNT OF DEATH OR DISABILITY.— 

‘‘(A) IN GENERAL.—In the case of an individual, gross 

income does not include any amount which (but for this 

subsection) would be includible in gross income for such 

taxable year by reasons of the discharge (in whole or in 

part) of any loan described in subparagraph (B) after 

December 31, 2017, and before January 1, 2026, if such 

discharge was— 

‘‘(i) pursuant to subsection (a) or (d) of section 

437 of the Higher Education Act of 1965 or the parallel 

benefit under part D of title IV of such Act (relating 

to the repayment of loan liability), 

‘‘(ii) pursuant to section 464(c)(1)(F) of such Act, 

or 

‘‘(iii) otherwise discharged on account of the death 

or total and permanent disability of the student. 

‘‘(B) LOANS DESCRIBED.—A loan is described in this 

subparagraph if such loan is— 

‘‘(i) a student loan (as defined in paragraph (2)), 

or 

‘‘(ii) a private education loan (as defined in section 

140(7) of the Consumer Credit Protection Act (15 

U.S.C. 1650(7))).’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to discharges of indebtedness after December 31, 2017. 

SEC. 11032. 529 ACCOUNT FUNDING FOR ELEMENTARY AND SECONDARY EDUCATION. 

(a) IN GENERAL.— (1) IN GENERAL.—Section 529(c) is amended by adding at 

the end the following new paragraph: 

26 USC 108 note. 

26 USC 108. 


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131 STAT. 2082 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(7) TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified 

higher education expense’ shall include a reference to expenses 

for tuition in connection with enrollment or attendance at an 

elementary or secondary public, private, or religious school.’’. 

(2) LIMITATION.—Section 529(e)(3)(A) is amended by adding 

at the end the following: ‘‘The amount of cash distributions 

from all qualified tuition programs described in subsection 

(b)(1)(A)(ii) with respect to a beneficiary during any taxable 

year shall, in the aggregate, include not more than $10,000 

in expenses described in subsection (c)(7) incurred during the 

taxable year.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions made after December 31, 2017. 

PART V—DEDUCTIONS AND EXCLUSIONS 

SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL EXEMPTIONS. 

(a) IN GENERAL.—Subsection (d) of section 151 is amended— 

(1) by striking ‘‘In the case of’’ in paragraph (4) and 

inserting ‘‘Except as provided in paragraph (5), in the case 

of’’, and 

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

‘‘(5) SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH

2025.—In the case of a taxable year beginning after December 

31, 2017, and before January 1, 2026— 

‘‘(A) EXEMPTION AMOUNT.—The term ‘exemption 

amount’ means zero. 

‘‘(B) REFERENCES.—For purposes of any other provision 

of this title, the reduction of the exemption amount to 

zero under subparagraph (A) shall not be taken into 

account in determining whether a deduction is allowed 

or allowable, or whether a taxpayer is entitled to a deduction, under this section.’’. 

(b) APPLICATION TO ESTATES AND TRUSTS.—Section 642(b)(2)(C) 

is amended by adding at the end the following new clause: 

‘‘(iii) YEARS WHEN PERSONAL EXEMPTION AMOUNT

IS ZERO.— 

‘‘(I) IN GENERAL.—In the case of any taxable 

year in which the exemption amount under section 

151(d) is zero, clause (i) shall be applied by substituting ‘$4,150’ for ‘the exemption amount under 

section 151(d)’. 

‘‘(II) INFLATION ADJUSTMENT.—In the case of 

any taxable year beginning in a calendar year 

after 2018, the $4,150 amount in subparagraph 

(A) shall be increased in the same manner as 

provided in section 6334(d)(4)(C).’’. 

(c) MODIFICATION OF WAGE WITHHOLDING RULES.— 

(1) IN GENERAL.—Section 3402(a)(2) is amended by striking 

‘‘means the amount’’ and all that follows and inserting ‘‘means 

the amount by which the wages exceed the taxpayer’s withholding allowance, prorated to the payroll period.’’. 

(2) CONFORMING AMENDMENTS.— 

(A) Section 3401 is amended by striking subsection 

(e). 

26 USC 529 note. 

26 USC 529. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2083 

(B) Paragraphs (1) and (2) of section 3402(f) are 

amended to read as follows: 

‘‘(1) IN GENERAL.—Under rules determined by the Secretary, an employee receiving wages shall on any day be entitled 

to a withholding allowance determined based on— 

‘‘(A) whether the employee is an individual for whom 

a deduction is allowable with respect to another taxpayer 

under section 151; 

‘‘(B) if the employee is married, whether the employee’s 

spouse is entitled to an allowance, or would be so entitled 

if such spouse were an employee receiving wages, under 

subparagraph (A) or (D), but only if such spouse does 

not have in effect a withholding allowance certificate 

claiming such allowance; 

‘‘(C) the number of individuals with respect to whom, 

on the basis of facts existing at the beginning of such 

day, there may reasonably be expected to be allowable 

a credit under section 24(a) for the taxable year under 

subtitle A in respect of which amounts deducted and withheld under this chapter in the calendar year in which 

such day falls are allowed as a credit; 

‘‘(D) any additional amounts to which the employee 

elects to take into account under subsection (m), but only 

if the employee’s spouse does not have in effect a withholding allowance certificate making such an election; 

‘‘(E) the standard deduction allowable to such employee 

(one-half of such standard deduction in the case of an 

employee who is married (as determined under section 

7703) and whose spouse is an employee receiving wages 

subject to withholding); and 

‘‘(F) whether the employee has withholding allowance 

certificates in effect with respect to more than 1 employer. 

‘‘(2) ALLOWANCE CERTIFICATES.— 

‘‘(A) ON COMMENCEMENT OF EMPLOYMENT.—On or 

before the date of the commencement of employment with 

an employer, the employee shall furnish the employer with 

a signed withholding allowance certificate relating to the 

withholding allowance claimed by the employee, which 

shall in no event exceed the amount to which the employee 

is entitled. 

‘‘(B) CHANGE OF STATUS.—If, on any day during the 

calendar year, an employee’s withholding allowance is in 

excess of the withholding allowance to which the employee 

would be entitled had the employee submitted a true and 

accurate withholding allowance certificate to the employer 

on that day, the employee shall within 10 days thereafter 

furnish the employer with a new withholding allowance 

certificate. If, on any day during the calendar year, an 

employee’s withholding allowance is greater than the withholding allowance claimed, the employee may furnish the 

employer with a new withholding allowance certificate 

relating to the withholding allowance to which the 

employee is so entitled, which shall in no event exceed 

the amount to which the employee is entitled on such 

day. 

‘‘(C) CHANGE OF STATUS WHICH AFFECTS NEXT CAL- ENDAR YEAR.—If on any day during the calendar year the 

26 USC 3402. 


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131 STAT. 2084 PUBLIC LAW 115–97—DEC. 22, 2017 

withholding allowance to which the employee will be, or 

may reasonably be expected to be, entitled at the beginning 

of the employee’s next taxable year under subtitle A is 

different from the allowance to which the employee is entitled on such day, the employee shall, in such cases and 

at such times as the Secretary shall by regulations prescribe, furnish the employer with a withholding allowance 

certificate relating to the withholding allowance which the 

employee claims with respect to such next taxable year, 

which shall in no event exceed the withholding allowance 

to which the employee will be, or may reasonably be 

expected to be, so entitled.’’. 

(C) Subsections (b)(1), (b)(2), (f)(3), (f)(4), (f)(5), (f)(7) 

(including the heading thereof), (g)(4), (l)(1), (l)(2), and (n) 

of section 3402 are each amended by striking ‘‘exemption’’ 

each place it appears and inserting ‘‘allowance’’. 

(D) The heading of section 3402(f) is amended by 

striking ‘‘EXEMPTIONS’’ and inserting ‘‘ALLOWANCE’’. 

(E) Section 3402(m) is amended by striking ‘‘additional 

withholding allowances or additional reductions in withholding under this subsection. In determining the number 

of additional withholding allowances’’ and inserting ‘‘an 

additional withholding allowance or additional reductions 

in withholding under this subsection. In determining the 

additional withholding allowance’’. 

(F) Paragraphs (3) and (4) of section 3405(a) (and the 

heading for such paragraph (4)) are each amended by 

striking ‘‘exemption’’ each place it appears and inserting 

‘‘allowance’’. 

(G) Section 3405(a)(4) is amended by striking ‘‘shall 

be determined’’ and all that follows through ‘‘3 withholding 

exemptions’’ and inserting ‘‘shall be determined under rules 

prescribed by the Secretary’’. 

(d) EXCEPTION FOR DETERMINING PROPERTY EXEMPT FROM

LEVY.—Section 6334(d) is amended by adding at the end the following new paragraph: 

‘‘(4) YEARS WHEN PERSONAL EXEMPTION AMOUNT IS ZERO.— 

‘‘(A) IN GENERAL.—In the case of any taxable year 

in which the exemption amount under section 151(d) is 

zero, paragraph (2) shall not apply and for purposes of 

paragraph (1) the term ‘exempt amount’ means an amount 

equal to— 

‘‘(i) the sum of the amount determined under 

subparagraph (B) and the standard deduction, divided 

by 

‘‘(ii) 52. 

‘‘(B) AMOUNT DETERMINED.—For purposes of subparagraph (A), the amount determined under this subparagraph 

is $4,150 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 in a calendar year after 2018, the 

$4,150 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(f)(3) for the calendar year in which 

26 USC 3405. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2085 

the taxable year begins, determined by substituting 

‘2017’ for ‘2016’ in subparagraph (A)(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. 

‘‘(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.’’. 

(e) PERSONS REQUIRED TO MAKE RETURNS OF INCOME.—Section 

6012 is amended by adding at the end the following new subsection: 

‘‘(f) SPECIAL RULE FOR TAXABLE YEARS 2018 THROUGH 2025.— 

In the case of a taxable year beginning after December 31, 2017, 

and before January 1, 2026, subsection (a)(1) shall not apply, and 

every individual who has gross income for the taxable year shall 

be required to make returns with respect to income taxes under 

subtitle A, except that a return shall not be required of— 

‘‘(1) 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 

‘‘(2) an individual entitled to make a joint return if— 

‘‘(A) 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, 

‘‘(B) such individual and such individual’s spouse have 

the same household as their home at the close of the 

taxable year, 

‘‘(C) such individual’s spouse does not make a separate 

return, and 

‘‘(D) neither such individual nor such individual’s 

spouse is an individual described in section 63(c)(5) who 

has income (other than earned income) in excess of the 

amount in effect under section 63(c)(5)(A).’’. 

(f) EFFECTIVE DATE.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to taxable years 

beginning after December 31, 2017. 

(2) WAGE WITHHOLDING.—The Secretary of the Treasury 

may administer section 3402 for taxable years beginning before 

January 1, 2019, without regard to the amendments made 

by subsections (a) and (c). 

SEC. 11042. LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC. 

TAXES. 

(a) IN GENERAL.—Subsection (b) of section 164 is amended 

by adding at the end the following new paragraph: 

‘‘(6) LIMITATION ON INDIVIDUAL DEDUCTIONS FOR TAXABLE

YEARS 2018 THROUGH 2025.—In the case of an individual and 

a taxable year beginning after December 31, 2017, and before 

January 1, 2026— 

26 USC 151 note. 

26 USC 6012. 


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131 STAT. 2086 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(A) foreign real property taxes shall not be taken 

into account under subsection (a)(1), and 

‘‘(B) the aggregate amount of taxes taken into account 

under paragraphs (1), (2), and (3) of subsection (a) and 

paragraph (5) of this subsection for any taxable year shall 

not exceed $10,000 ($5,000 in the case of a married individual filing a separate return). 

The preceding sentence shall not apply to any foreign taxes 

described in subsection (a)(3) or to any taxes described in 

paragraph (1) and (2) of subsection (a) which are paid or accrued 

in carrying on a trade or business or an activity described 

in section 212. For purposes of subparagraph (B), an amount 

paid in a taxable year beginning before January 1, 2018, with 

respect to a State or local income tax imposed for a taxable 

year beginning after December 31, 2017, shall be treated as 

paid on the last day of the taxable year for which such tax 

is so imposed.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2016. 

SEC. 11043. LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENCE 

INTEREST. 

(a) IN GENERAL.—Section 163(h)(3) is amended by adding at 

the end the following new subparagraph: 

‘‘(F) SPECIAL RULES FOR TAXABLE YEARS 2018 THROUGH

2025.— 

‘‘(i) IN GENERAL.—In the case of taxable years 

beginning after December 31, 2017, and before January 

1, 2026— 

‘‘(I) DISALLOWANCE OF HOME EQUITY INDEBTEDNESS INTEREST.—Subparagraph (A)(ii) shall not 

apply. 

‘‘(II) LIMITATION ON ACQUISITION INDEBTEDNESS.—Subparagraph (B)(ii) shall be applied by 

substituting ‘$750,000 ($375,000’ for ‘$1,000,000 

($500,000’. 

‘‘(III) TREATMENT OF INDEBTEDNESS INCURRED

ON OR BEFORE DECEMBER 15, 2017.—Subclause (II) 

shall not apply to any indebtedness incurred on 

or before December 15, 2017, and, in applying 

such subclause to any indebtedness incurred after 

such date, the limitation under such subclause 

shall be reduced (but not below zero) by the 

amount of any indebtedness incurred on or before 

December 15, 2017, which is treated as acquisition 

indebtedness for purposes of this subsection for 

the taxable year. 

‘‘(IV) BINDING CONTRACT EXCEPTION.—In the 

case of a taxpayer who enters into a written 

binding contract before December 15, 2017, to close 

on the purchase of a principal residence before 

January 1, 2018, and who purchases such residence before April 1, 2018, subclause (III) shall 

be applied by substituting ‘April 1, 2018’ for 

‘December 15, 2017’. 

‘‘(ii) TREATMENT OF LIMITATION IN TAXABLE YEARS

AFTER DECEMBER 31, 2025.—In the case of taxable years 

26 USC 163. 

26 USC 164 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2087 

beginning after December 31, 2025, the limitation 

under subparagraph (B)(ii) shall be applied to the 

aggregate amount of indebtedness of the taxpayer 

described in subparagraph (B)(i) without regard to the 

taxable year in which the indebtedness was incurred. 

‘‘(iii) TREATMENT OF REFINANCINGS OF INDEBTEDNESS.— 

‘‘(I) IN GENERAL.—In the case of any indebtedness which is incurred to refinance indebtedness, 

such refinanced indebtedness shall be treated for 

purposes of clause (i)(III) 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. 

‘‘(II) LIMITATION ON PERIOD OF REFINANCING.— 

Subclause (I) shall not apply to any indebtedness 

after the expiration of the term of the original 

indebtedness or, 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). 

‘‘(iv) COORDINATION WITH EXCLUSION OF INCOME

FROM DISCHARGE OF INDEBTEDNESS.—Section 108(h)(2) 

shall be applied without regard to this subparagraph.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL CASUALTY 

LOSSES. 

(a) IN GENERAL.—Subsection (h) of section 165 is amended 

by adding at the end the following new paragraph: 

‘‘(5) LIMITATION FOR TAXABLE YEARS 2018 THROUGH 2025.— 

‘‘(A) IN GENERAL.—In the case of an individual, except 

as provided in subparagraph (B), any personal casualty 

loss which (but for this paragraph) would be deductible 

in a taxable year beginning after December 31, 2017, and 

before January 1, 2026, shall be allowed as a deduction 

under subsection (a) only to the extent it is attributable 

to a Federally declared disaster (as defined in subsection 

(i)(5)). 

‘‘(B) EXCEPTION RELATED TO PERSONAL CASUALTY

GAINS.—If a taxpayer has personal casualty gains for any 

taxable year to which subparagraph (A) applies— 

‘‘(i) subparagraph (A) shall not apply to the portion 

of the personal casualty loss not attributable to a Federally declared disaster (as so defined) to the extent 

such loss does not exceed such gains, and 

‘‘(ii) in applying paragraph (2) for purposes of 

subparagraph (A) to the portion of personal casualty 

loss which is so attributable to such a disaster, the 

amount of personal casualty gains taken into account 

under paragraph (2)(A) shall be reduced by the portion 

of such gains taken into account under clause (i).’’. 

26 USC 165. 

26 USC 163 note. 


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131 STAT. 2088 PUBLIC LAW 115–97—DEC. 22, 2017 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to losses incurred in taxable years beginning after 

December 31, 2017. 

SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS. 

(a) IN GENERAL.—Section 67 is amended by adding at the 

end the following new subsection: 

‘‘(g) SUSPENSION FOR TAXABLE YEARS 2018 THROUGH 2025.— 

Notwithstanding subsection (a), no miscellaneous itemized deduction shall be allowed for any taxable year beginning after December 

31, 2017, and before January 1, 2026.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON ITEMIZED 

DEDUCTIONS. 

(a) IN GENERAL.—Section 68 is amended by adding at the 

end the following new subsection: 

‘‘(f) SECTION NOT TO APPLY.—This section shall not apply to 

any taxable year beginning after December 31, 2017, and before 

January 1, 2026.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11047. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE 

COMMUTING REIMBURSEMENT. 

(a) IN GENERAL.—Section 132(f) is amended by adding at the 

end the following new paragraph: 

‘‘(8) SUSPENSION OF QUALIFIED BICYCLE COMMUTING

REIMBURSEMENT EXCLUSION.—Paragraph (1)(D) shall not apply 

to any taxable year beginning after December 31, 2017, and 

before January 1, 2026.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED MOVING 

EXPENSE REIMBURSEMENT. 

(a) IN GENERAL.—Section 132(g) is amended— 

(1) by striking ‘‘For purposes of this section, the term’’ 

and inserting ‘‘For purposes of this section— 

‘‘(1) IN GENERAL.—The term’’, and 

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

‘‘(2) SUSPENSION FOR TAXABLE YEARS 2018 THROUGH 2025.— 

Except in the case of a member of the Armed Forces of the 

United States on active duty who moves pursuant to a military 

order and incident to a permanent change of station, subsection 

(a)(6) shall not apply to any taxable year beginning after 

December 31, 2017, and before January 1, 2026.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11049. SUSPENSION OF DEDUCTION FOR MOVING EXPENSES. 

(a) IN GENERAL.—Section 217 is amended by adding at the 

end the following new subsection: 

‘‘(k) SUSPENSION OF DEDUCTION FOR TAXABLE YEARS 2018 

THROUGH 2025.—Except in the case of an individual to whom 

subsection (g) applies, this section shall not apply to any taxable 

26 USC 132 note. 

26 USC 132 note. 

26 USC 68 note. 

26 USC 67 note. 

26 USC 67. 

26 USC 165 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2089 

year beginning after December 31, 2017, and before January 1, 

2026.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11050. 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, in 

the case of taxable years beginning after December 31, 2017, and 

before January 1, 2026, 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 amendment made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 11051. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS. 

(a) IN GENERAL.—Part VII of subchapter B is amended by 

striking section 215 (and by striking the item relating to such 

section in the table of sections for such subpart). 

(b) CONFORMING AMENDMENTS.— (1) CORRESPONDING REPEAL OF PROVISIONS PROVIDING FOR

INCLUSION OF ALIMONY IN GROSS INCOME.— (A) Subsection (a) of section 61 is amended by striking 

paragraph (8) and by redesignating paragraphs (9) through 

(15) as paragraphs (8) through (14), respectively. 

(B) 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). 

(C) 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). 

(2) 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)’’. 

(C) Section 6724(d)(3) is amended by striking subparagraph (C) and by redesignating subparagraph (D) as 

subparagraph (C). 

(3) 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 152(d)(5) is amended to read as follows: 

‘‘(5) SPECIAL RULES FOR SUPPORT.— 

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

26 USC 681 prec. 

26 USC 71 prec. 

26 USC 211 prec. 

26 USC 165 note. 

26 USC 165. 

26 USC 217 note. 


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131 STAT. 2090 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(i) payments to a spouse of alimony or separate 

maintenance payments shall not be treated as a payment by the payor spouse for the support of any 

dependent, and 

‘‘(ii) in the case of the remarriage of a parent, 

support of a child received from the parent’s spouse 

shall be treated as received from the parent. 

‘‘(B) ALIMONY OR SEPARATE MAINTENANCE PAYMENT.— 

For purposes of subparagraph (A), the term ‘alimony or 

separate maintenance payment’ means any payment in 

cash if— 

‘‘(i) such payment is received by (or on behalf of) 

a spouse under a divorce or separation instrument 

(as defined in section 121(d)(3)(C)), 

‘‘(ii) in the case of an individual legally separated 

from the individual’s spouse under a decree of divorce 

or of separate maintenance, the payee spouse and the 

payor spouse are not members of the same household 

at the time such payment is made, and 

‘‘(iii) there is no liability to make any such payment 

for any period after the death of the payee spouse 

and there is no liability to make any payment (in 

cash or property) as a substitute for such payments 

after the death of the payee spouse.’’. 

(C) Section 219(f)(1) is amended by striking the third 

sentence. 

(D) 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)’’. 

(E) 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)’’. 

(F) Section 382(l)(3)(B)(iii) is amended by striking ‘‘section 71(b)(2)’’ and inserting ‘‘section 121(d)(3)(C)’’. 

(G) 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)’’. 

(4) ADDITIONAL CONFORMING AMENDMENTS.—Section 

7701(a)(17) is amended— 

(A) by striking ‘‘sections 682 and 2516’’ and inserting 

‘‘section 2516’’, and 

(B) by striking ‘‘such sections’’ each place it appears 

and inserting ‘‘such section’’. 

(c) 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, 2018, 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. 

26 USC 61 note. 

26 USC 219. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2091 

PART VI—INCREASE IN ESTATE AND GIFT TAX 

EXEMPTION 

SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMPTION. 

(a) IN GENERAL.—Section 2010(c)(3) is amended by adding at 

the end the following new subparagraph: 

‘‘(C) INCREASE IN BASIC EXCLUSION AMOUNT.—In the 

case of estates of decedents dying or gifts made after 

December 31, 2017, and before January 1, 2026, subparagraph (A) shall be applied by substituting ‘$10,000,000’ 

for ‘$5,000,000’.’’. 

(b) CONFORMING AMENDMENT.—Subsection (g) of section 2001 

is amended to read as follows: 

‘‘(g) MODIFICATIONS TO TAX PAYABLE.— 

‘‘(1) MODIFICATIONS TO GIFT TAX PAYABLE TO REFLECT DIFFERENT TAX RATES.—For purposes of applying subsection (b)(2) 

with respect to 1 or more gifts, the rates of tax under subsection 

(c) in effect at the decedent’s death shall, in lieu of the rates 

of tax in effect at the time of such gifts, be used both to 

compute— 

‘‘(A) the tax imposed by chapter 12 with respect to 

such gifts, and 

‘‘(B) the credit allowed against such tax under section 

2505, including in computing— 

‘‘(i) the applicable credit amount under section 

2505(a)(1), and 

‘‘(ii) the sum of the amounts allowed as a credit 

for all preceding periods under section 2505(a)(2). 

‘‘(2) MODIFICATIONS TO ESTATE TAX PAYABLE TO REFLECT

DIFFERENT BASIC EXCLUSION AMOUNTS.—The Secretary shall 

prescribe such regulations as may be necessary or appropriate 

to carry out this section with respect to any difference 

between— 

‘‘(A) the basic exclusion amount under section 

2010(c)(3) applicable at the time of the decedent’s death, 

and 

‘‘(B) the basic exclusion amount under such section 

applicable with respect to any gifts made by the decedent.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to estates of decedents dying and gifts made after 

December 31, 2017. 

PART VII—EXTENSION OF TIME LIMIT FOR 

CONTESTING IRS LEVY 

SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY. 

(a) EXTENSION OF TIME FOR RETURN OF PROPERTY SUBJECT

TO LEVY.—Subsection (b) of section 6343 is amended by striking 

‘‘9 months’’ and inserting ‘‘2 years’’. 

(b) PERIOD OF LIMITATION ON SUITS.—Subsection (c) of section 

6532 is amended— 

(1) by striking ‘‘9 months’’ in paragraph (1) and inserting 

‘‘2 years’’, and 

(2) by striking ‘‘9-month’’ in paragraph (2) and inserting 

‘‘2-year’’. 

26 USC 2001 

note. 

26 USC 2010. 


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131 STAT. 2092 PUBLIC LAW 115–97—DEC. 22, 2017 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to— 

(1) levies made after the date of the enactment of this 

Act, and 

(2) levies made on or before such date if the 9-month 

period has not expired under section 6343(b) of the Internal 

Revenue Code of 1986 (without regard to this section) as of 

such date. 

PART VIII—INDIVIDUAL MANDATE 

SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR 

INDIVIDUALS FAILING TO MAINTAIN MINIMUM ESSENTIAL COVERAGE. 

(a) IN GENERAL.—Section 5000A(c) is amended— 

(1) in paragraph (2)(B)(iii), by striking ‘‘2.5 percent’’ and 

inserting ‘‘Zero percent’’, and 

(2) in paragraph (3)— (A) by striking ‘‘$695’’ in subparagraph (A) and inserting ‘‘$0’’, and 

(B) by striking subparagraph (D). 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to months beginning after December 31, 2018. 

Subtitle B—Alternative Minimum Tax 

SEC. 12001. REPEAL OF TAX FOR CORPORATIONS. 

(a) IN GENERAL.—Section 55(a) is amended by striking ‘‘There’’ 

and inserting ‘‘In the case of a taxpayer other than a corporation, 

there’’. 

(b) CONFORMING AMENDMENTS.— 

(1) Section 38(c)(6) is amended by adding at the end the 

following new subparagraph: 

‘‘(E) CORPORATIONS.—In the case of a corporation, this 

subsection shall be applied by treating the corporation 

as having a tentative minimum tax of zero.’’. 

(2) Section 53(d)(2) is amended by inserting ‘‘, except that 

in the case of a corporation, the tentative minimum tax shall 

be treated as zero’’ before the period at the end. 

(3)(A) Section 55(b)(1) is amended to read as follows: 

‘‘(1) AMOUNT OF TENTATIVE TAX.— 

‘‘(A) IN GENERAL.—The tentative minimum tax for the 

taxable year is the sum of— 

‘‘(i) 26 percent of so much of the taxable excess 

as does not exceed $175,000, plus 

‘‘(ii) 28 percent of so much of the taxable excess 

as exceeds $175,000. 

The amount determined under the preceding sentence shall 

be reduced by the alternative minimum tax foreign tax 

credit for the taxable year. 

‘‘(B) TAXABLE EXCESS.—For purposes of this subsection, 

the term ‘taxable excess’ means so much of the alternative 

minimum taxable income for the taxable year as exceeds 

the exemption amount. 

‘‘(C) MARRIED INDIVIDUAL FILING SEPARATE RETURN.— In the case of a married individual filing a separate return, 

26 USC 5000A 

note. 

26 USC 5000A. 

26 USC 6343 

note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2093 

subparagraph (A) shall be applied by substituting 50 percent of the dollar amount otherwise applicable under clause 

(i) and clause (ii) thereof. For purposes of the preceding 

sentence, marital status shall be determined under section 

7703.’’. 

(B) Section 55(b)(3) is amended by striking ‘‘paragraph 

(1)(A)(i)’’ and inserting ‘‘paragraph (1)(A)’’. 

(C) Section 59(a) is amended— 

(i) by striking ‘‘subparagraph (A)(i) or (B)(i) of section 

55(b)(1) (whichever applies) in lieu of the highest rate 

of tax specified in section 1 or 11 (whichever applies)’’ 

in paragraph (1)(C) and inserting ‘‘section 55(b)(1) in lieu 

of the highest rate of tax specified in section 1’’, and 

(ii) in paragraph (2), by striking ‘‘means’’ and all that 

follows and inserting ‘‘means the amount determined under 

the first sentence of section 55(b)(1)(A).’’. 

(D) Section 897(a)(2)(A) is amended by striking ‘‘section 

55(b)(1)(A)’’ and inserting ‘‘section 55(b)(1)’’. 

(E) Section 911(f) is amended— 

(i) in paragraph (1)(B)— 

(I) by striking ‘‘section 55(b)(1)(A)(ii)’’ and inserting 

‘‘section 55(b)(1)(B)’’, and 

(II) by striking ‘‘section 55(b)(1)(A)(i)’’ and inserting 

‘‘section 55(b)(1)(A)’’, and 

(ii) in paragraph (2)(B), by striking ‘‘section 

55(b)(1)(A)(ii)’’ each place it appears and inserting ‘‘section 

55(b)(1)(B)’’. 

(4) Section 55(c)(1) is amended by striking ‘‘, the section 

936 credit allowable under section 27(b), and the Puerto Rico 

economic activity credit under section 30A’’. 

(5) Section 55(d), as amended by section 11002, is 

amended— 

(A) by striking paragraph (2) and redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively, 

(B) in paragraph (2) (as so redesignated), by inserting 

‘‘and’’ at the end of subparagraph (B), by striking ‘‘, and’’ 

at the end of subparagraph (C) and inserting a period, 

and by striking subparagraph (D), and 

(C) in paragraph (3) (as so redesignated)— 

(i) by striking ‘‘(b)(1)(A)(i)’’ in subparagraph (B)(i) 

and inserting ‘‘(b)(1)(A)’’, and 

(ii) by striking ‘‘paragraph (3)’’ in subparagraph 

(B)(iii) and inserting ‘‘paragraph (2)’’. 

(6) Section 55 is amended by striking subsection (e). 

(7) Section 56(b)(2) is amended by striking subparagraph 

(C) and by redesignating subparagraph (D) as subparagraph 

(C). 

(8)(A) Section 56 is amended by striking subsections (c) 

and (g). 

(B) Section 847 is amended by striking the last sentence 

of paragraph (9). 

(C) Section 848 is amended by striking subsection (i). 

(9) Section 58(a) is amended by striking paragraph (3) 

and redesignating paragraph (4) as paragraph (3). 

(10) Section 59 is amended by striking subsections (b) 

and (f). 

26 USC 55. 


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131 STAT. 2094 PUBLIC LAW 115–97—DEC. 22, 2017 

(11) Section 11(d) is amended by striking ‘‘the taxes 

imposed by subsection (a) and section 55’’ and inserting ‘‘the 

tax imposed by subsection (a)’’. 

(12) Section 12 is amended by striking paragraph (7). 

(13) Section 168(k) is amended by striking paragraph (4). 

(14) Section 882(a)(1) is amended by striking ‘‘, 55,’’. 

(15) Section 962(a)(1) is amended by striking ‘‘sections 11 

and 55’’ and inserting ‘‘section 11’’. 

(16) Section 1561(a) is amended— 

(A) 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), and 

(B) by striking the last sentence. 

(17) Section 6425(c)(1)(A) 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’’. 

(18) Section 6655(e)(2) is amended by striking ‘‘and alternative minimum taxable income’’ each place it appears in subparagraphs (A) and (B)(i). 

(19) Section 6655(g)(1)(A) is amended by inserting ‘‘plus’’ 

at the end of clause (i), by striking clause (ii), and by redesignating clause (iii) as clause (ii). 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 12002. CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY OF 

CORPORATIONS. 

(a) CREDITS TREATED AS REFUNDABLE.—Section 53 is amended 

by adding at the end the following new subsection: 

‘‘(e) PORTION OF CREDIT TREATED AS REFUNDABLE.— 

‘‘(1) IN GENERAL.—In the case of any taxable year of a 

corporation beginning in 2018, 2019, 2020, or 2021, 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 2021) 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.’’. 

(b) TREATMENT OF REFERENCES.—Section 53(d) is amended by 

adding at the end the following new paragraph: 

‘‘(3) AMT TERM REFERENCES.—In the case of a corporation, 

any references in this subsection to section 55, 56, or 57 shall 

26 USC 11 note. 

26 USC 11. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2095 

be treated as a reference to such section as in effect before 

the amendments made by Tax Cuts and Jobs Act.’’. 

(c) CONFORMING AMENDMENT.—Section 1374(b)(3)(B) is 

amended by striking the last sentence thereof. 

(d) EFFECTIVE DATE.— (1) IN GENERAL.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

(2) CONFORMING AMENDMENT.—The amendment made by 

subsection (c) shall apply to taxable years beginning after 

December 31, 2021. 

SEC. 12003. INCREASED EXEMPTION FOR INDIVIDUALS. 

(a) IN GENERAL.—Section 55(d), as amended by the preceding 

provisions of this Act, is amended by adding at the end the following 

new paragraph: 

‘‘(4) SPECIAL RULE FOR TAXABLE YEARS BEGINNING AFTER

2017 AND BEFORE 2026.— 

‘‘(A) IN GENERAL.—In the case of any taxable year 

beginning after December 31, 2017, and before January 

1, 2026— 

‘‘(i) paragraph (1) shall be applied— 

‘‘(I) by substituting ‘$109,400’ for ‘$78,750’ in 

subparagraph (A), and 

‘‘(II) by substituting ‘$70,300’ for ‘$50,600’ in 

subparagraph (B), and 

‘‘(ii) paragraph (2) shall be applied— 

‘‘(I) by substituting ‘$1,000,000’ for ‘$150,000’ 

in subparagraph (A), 

‘‘(II) by substituting ‘50 percent of the dollar 

amount applicable under subparagraph (A)’ for 

‘$112,500’ in subparagraph (B), and 

‘‘(III) in the case of a taxpayer described in 

paragraph (1)(D), without regard to the substitution under subclause (I). 

‘‘(B) INFLATION ADJUSTMENT.— ‘‘(i) IN GENERAL.—In the case of any taxable year 

beginning in a calendar year after 2018, the amounts 

described in clause (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(f)(3) for the calendar year in which 

the taxable year begins, determined by substituting ‘calendar year 2017’ for ‘calendar year 

2016’ in subparagraph (A)(ii) thereof. 

‘‘(ii) AMOUNTS DESCRIBED.—The amounts described 

in this clause are the $109,400 amount in subparagraph (A)(i)(I), the $70,300 amount in subparagraph 

(A)(i)(II), and the $1,000,000 amount in subparagraph 

(A)(ii)(I). 

‘‘(iii) ROUNDING.—Any increased amount determined under clause (i) shall be rounded to the nearest 

multiple of $100. 

‘‘(iv) COORDINATION WITH CURRENT ADJUSTMENTS.—In the case of any taxable year to which 

subparagraph (A) applies, no adjustment shall be made 

under paragraph (3) to any of the numbers which 

26 USC 53 note. 

26 USC 1374. 


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131 STAT. 2096 PUBLIC LAW 115–97—DEC. 22, 2017 

are substituted under subparagraph (A) and adjusted 

under this subparagraph.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

Subtitle C—Business-related Provisions 

PART I—CORPORATE PROVISIONS 

SEC. 13001. 21-PERCENT CORPORATE TAX RATE. 

(a) IN GENERAL.—Subsection (b) of section 11 is amended to 

read as follows: 

‘‘(b) AMOUNT OF TAX.—The amount of the tax imposed by 

subsection (a) shall be 21 percent of taxable income.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) The following sections are each amended by striking 

‘‘section 11(b)(1)’’ and inserting ‘‘section 11(b)’’: 

(A) Section 280C(c)(3)(B)(ii)(II). 

(B) Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e). 

(C) Section 7874(e)(1)(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 12 is amended by striking paragraphs (4) and 

(6), and by redesignating paragraph (5) as paragraph (4). 

(C) Section 453A(c)(3) is amended by striking ‘‘or 1201 

(whichever is appropriate)’’. 

(D) 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’’. 

(E) Sections 594(a) is amended by striking ‘‘taxes imposed 

by section 11 or 1201(a)’’ and inserting ‘‘tax imposed by section 

11’’. 

(F) Section 691(c)(4) is amended by striking ‘‘1201,’’. 

(G) 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’’. 

(H) Section 831(e) is amended by striking paragraph (1) 

and by redesignating paragraphs (2) and (3) as paragraphs 

(1) and (2), respectively. 

(I) Sections 832(c)(5) and 834(b)(1)(D) are each amended 

by striking ‘‘sec. 1201 and following,’’. 

(J) Section 852(b)(3)(A) is amended by striking ‘‘section 

1201(a)’’ and inserting ‘‘section 11(b)’’. 

(K) 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)’’, 

26 USC 1201 

prec. 

26 USC 11. 

26 USC 55 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2097 

(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.’’. 

(L) Section 882(a)(1), as amended by section 12001, is further amended by striking ‘‘or 1201(a)’’. 

(M) Section 904(b) is amended— 

(i) by striking ‘‘or 1201(a)’’ in paragraph (2)(C), 

(ii) by striking paragraph (3)(D) and inserting the following: 

‘‘(D) CAPITAL GAIN RATE DIFFERENTIAL.—There is a capital gain rate differential for any year if subsection (h) 

of section 1 applies to such taxable year.’’, and 

(iii) by striking paragraph (3)(E) and inserting the 

following: 

‘‘(E) RATE DIFFERENTIAL PORTION.—The rate differential portion of foreign source net capital gain, net capital 

gain, or the excess of net capital gain from sources within 

the United States over net capital gain, as the case may 

be, is the same proportion of such amount as— 

‘‘(i) the excess of— 

‘‘(I) the highest rate of tax set forth in subsection (a), (b), (c), (d), or (e) of section 1 (whichever 

applies), over 

‘‘(II) the alternative rate of tax determined 

under section 1(h), bears to 

‘‘(ii) that rate referred to in subclause (I).’’. 

(N) Section 1374(b) is amended by striking paragraph (4). 

(O) Section 1381(b) is amended by striking ‘‘taxes imposed 

by section 11 or 1201’’ and inserting ‘‘tax imposed by section 

11’’. 

(P) Sections 6425(c)(1)(A), as amended by section 12001, 

and 6655(g)(1)(A)(i) are each amended by striking ‘‘or 1201(a),’’. 

(Q) Section 7518(g)(6)(A) is 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— 

26 USC 882. 


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131 STAT. 2098 PUBLIC LAW 115–97—DEC. 22, 2017 

(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 section 12001, 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 7518(g)(6)(A) is amended— 

(A) by striking ‘‘With respect to the portion’’ and 

inserting ‘‘In the case of a taxpayer other than a corporation, with respect to the portion’’, and 

(B) by striking ‘‘(34 percent in the case of a corporation)’’. 

28 USC 11 note. (c) EFFECTIVE DATE.— 

26 USC 1561 

prec. 

26 USC 1551 

prec. 

26 USC 1446. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2099 

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by subsections (a) and (b) shall 

apply to taxable years beginning after December 31, 2017. 

(2) WITHHOLDING.—The amendments made by subsection 

(b)(3) shall apply to distributions made after December 31, 

2017. 

(3) CERTAIN TRANSFERS.—The amendments made by subsection (b)(6) shall apply to transfers made after December 

31, 2017. 

(d) 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 of the day before the corporate rate reductions provided in the amendments made by this section 

take effect, 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, during the time period in which 

the 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 

26 USC 168 note. 


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131 STAT. 2100 PUBLIC LAW 115–97—DEC. 22, 2017 

(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 for the corporate rate reductions provided in 

the amendments made by this section— 

(A) 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, and 

(B) such taxpayer shall not be treated as using a 

normalization method of accounting for purposes of subsections (f)(2) and (i)(9)(C) of section 168 of the Internal 

Revenue Code of 1986. 

SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO 

REFLECT LOWER CORPORATE INCOME TAX RATES. 

(a) DIVIDENDS RECEIVED BY CORPORATIONS.— 

(1) IN GENERAL.—Section 243(a)(1) is amended by striking 

‘‘70 percent’’ and inserting ‘‘50 percent’’. 

(2) DIVIDENDS FROM 20-PERCENT OWNED CORPORATIONS.— 

Section 243(c)(1) is amended— 

(A) by striking ‘‘80 percent’’ and inserting ‘‘65 percent’’, 

and 

(B) by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’. 

(3) CONFORMING AMENDMENT.—The heading for section 

243(c) is amended by striking ‘‘RETENTION OF 80-PERCENT DIVIDEND RECEIVED DEDUCTION’’ and inserting ‘‘INCREASED

PERCENTAGE’’. 

(b) DIVIDENDS RECEIVED FROM FSC.—Section 245(c)(1)(B) is 

amended— 

(1) by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’, 

and 

(2) by striking ‘‘80 percent’’ and inserting ‘‘65 percent’’. 

(c) LIMITATION ON AGGREGATE AMOUNT OF DEDUCTIONS.—Section 246(b)(3) is amended— 

(1) by striking ‘‘80 percent’’ in subparagraph (A) and 

inserting ‘‘65 percent’’, and 

(2) by striking ‘‘70 percent’’ in subparagraph (B) and 

inserting ‘‘50 percent’’. 

(d) REDUCTION IN DEDUCTION WHERE PORTFOLIO STOCK IS

DEBT-FINANCED.—Section 246A(a)(1) is amended— 

(1) by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’, 

and 

(2) by striking ‘‘80 percent’’ and inserting ‘‘65 percent’’. 

(e) INCOME FROM SOURCES WITHIN THE UNITED STATES.—Section 861(a)(2) is amended— 

26 USC 243. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2101 

(1) by striking ‘‘100/70th’’ and inserting ‘‘100/50th’’ in 

subparagraph (B), and 

(2) in the flush sentence at the end— 

(A) by striking ‘‘100/80th’’ and inserting ‘‘100/65th’’, 

and 

(B) by striking ‘‘100/70th’’ and inserting ‘‘100/50th’’. 

(f) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

PART II—SMALL BUSINESS REFORMS 

SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DEPRECIABLE 

BUSINESS ASSETS. 

(a) INCREASE IN LIMITATION.— 

(1) DOLLAR LIMITATION.—Section 179(b)(1) is amended by 

striking ‘‘$500,000’’ and inserting ‘‘$1,000,000’’. 

(2) REDUCTION IN LIMITATION.—Section 179(b)(2) is 

amended by striking ‘‘$2,000,000’’ and inserting ‘‘$2,500,000’’. 

(3) INFLATION ADJUSTMENTS.— 

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

179(b)(6), as amended by section 11002(d), is amended— 

(i) by striking ‘‘2015’’ and inserting ‘‘2018’’, and 

(ii) in clause (ii), by striking ‘‘calendar year 2014’’ 

and inserting ‘‘calendar year 2017’’. 

(B) SPORT UTILITY VEHICLES.—Section 179(b)(6) is 

amended— 

(i) in subparagraph (A), by striking ‘‘paragraphs 

(1) and (2)’’ and inserting ‘‘paragraphs (1), (2), and 

(5)(A)’’, and 

(ii) in subparagraph (B), by inserting ‘‘($100 in 

the case of any increase in the amount under paragraph (5)(A))’’ after ‘‘$10,000’’. 

(b) SECTION 179 PROPERTY TO INCLUDE QUALIFIED REAL PROPERTY.— 

(1) IN GENERAL.—Subparagraph (B) of section 179(d)(1) 

is amended to read as follows: 

‘‘(B) which is— 

‘‘(i) section 1245 property (as defined in section 

1245(a)(3)), or 

‘‘(ii) at the election of the taxpayer, qualified real 

property (as defined in subsection (f)), and’’. 

(2) QUALIFIED REAL PROPERTY DEFINED.—Subsection (f) of 

section 179 is amended to read as follows: 

‘‘(f) QUALIFIED REAL PROPERTY.—For purposes of this section, 

the term ‘qualified real property’ means— 

‘‘(1) any qualified improvement property described in section 168(e)(6), and 

‘‘(2) any of the following improvements to nonresidential 

real property placed in service after the date such property 

was first placed in service: 

‘‘(A) Roofs. 

‘‘(B) Heating, ventilation, and air-conditioning property. 

‘‘(C) Fire protection and alarm systems. 

‘‘(D) Security systems.’’. 

26 USC 179. 

26 USC 243 note. 


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131 STAT. 2102 PUBLIC LAW 115–97—DEC. 22, 2017 

(c) REPEAL OF EXCLUSION FOR CERTAIN PROPERTY.—The last 

sentence of section 179(d)(1) is amended by inserting ‘‘(other than 

paragraph (2) thereof)’’ after ‘‘section 50(b)’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to property placed in service in taxable years beginning 

after December 31, 2017. 

SEC. 13102. SMALL BUSINESS ACCOUNTING METHOD REFORM AND SIMPLIFICATION. 

(a) MODIFICATION OF LIMITATION ON CASH METHOD OF

ACCOUNTING.— 

(1) INCREASED LIMITATION.—So much of section 448(c) as 

precedes paragraph (2) is amended to read as follows: 

‘‘(c) GROSS RECEIPTS TEST.—For purposes of this section— 

‘‘(1) IN GENERAL.—A corporation or partnership 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 $25,000,000.’’. 

(2) APPLICATION OF EXCEPTION ON ANNUAL BASIS.—Section 

448(b)(3) is amended to read as follows: 

‘‘(3) ENTITIES WHICH MEET GROSS RECEIPTS TEST.—Paragraphs (1) and (2) of subsection (a) shall not apply to any 

corporation or partnership for any taxable year if such entity 

(or any predecessor) meets the gross receipts test of subsection 

(c) for such taxable year.’’. 

(3) INFLATION ADJUSTMENT.—Section 448(c) is amended by 

adding at the end the following new paragraph: 

‘‘(4) ADJUSTMENT FOR INFLATION.—In the case of any taxable year beginning after December 31, 2018, the dollar amount 

in paragraph (1) shall be increased by an amount equal to— 

‘‘(A) such dollar amount, multiplied by 

‘‘(B) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year in which the taxable 

year begins, by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof. 

If any amount as increased under the preceding sentence is 

not a multiple of $1,000,000, such amount shall be rounded 

to the nearest multiple of $1,000,000.’’. 

(4) COORDINATION WITH SECTION 481.—Section 448(d)(7) is 

amended to read as follows: 

‘‘(7) COORDINATION WITH SECTION 481.—Any change in 

method of accounting made pursuant to this section shall be 

treated for purposes of section 481 as initiated by the taxpayer 

and made with the consent of the Secretary.’’. 

(5) APPLICATION OF EXCEPTION TO CORPORATIONS ENGAGED

IN FARMING.— 

(A) IN GENERAL.—Section 447(c) is amended— 

(i) by inserting ‘‘for any taxable year’’ after ‘‘not 

being a corporation’’ in the matter preceding paragraph 

(1), and 

(ii) by amending paragraph (2) to read as follows: 

‘‘(2) a corporation which meets the gross receipts test of 

section 448(c) for such taxable year.’’. 

(B) COORDINATION WITH SECTION 481.—Section 447(f) 

is amended to read as follows: 

26 USC 179 note. 

26 USC 179. 


dkrause on DSKBC28HB2PROD with PUBLAWS
PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2103 

‘‘(f) COORDINATION WITH SECTION 481.—Any change in method 

of accounting made pursuant to this section shall be treated for 

purposes of section 481 as initiated by the taxpayer and made 

with the consent of the Secretary.’’. 

(C) CONFORMING AMENDMENTS.—Section 447 is 

amended— 

(i) by striking subsections (d), (e), (h), and (i), 

and 

(ii) by redesignating subsections (f) and (g) (as 

amended by subparagraph (B)) as subsections (d) and 

(e), respectively. 

(b) EXEMPTION FROM UNICAP REQUIREMENTS.— (1) IN GENERAL.—Section 263A is amended by redesignating 

subsection (i) as subsection (j) and by inserting after subsection 

(h) the following new subsection: 

‘‘(i) EXEMPTION FOR CERTAIN SMALL BUSINESSES.— ‘‘(1) IN GENERAL.—In the case of any taxpayer (other than 

a tax shelter prohibited from using the cash receipts and 

disbursements method of accounting under section 448(a)(3)) 

which meets the gross receipts test of section 448(c) for any 

taxable year, this section shall not apply with respect to such 

taxpayer for such taxable year. 

‘‘(2) APPLICATION OF GROSS RECEIPTS TEST TO INDIVIDUALS, 

ETC.— In the case of any taxpayer which is not a corporation 

or a partnership, the gross receipts test of section 448(c) shall 

be applied in the same manner as if each trade or business 

of such taxpayer were a corporation or partnership. 

‘‘(3) COORDINATION WITH SECTION 481.—Any change in 

method of accounting made pursuant to this subsection shall 

be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.’’. 

(2) CONFORMING AMENDMENT.—Section 263A(b)(2) is 

amended to read as follows: 

‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real or personal 

property described in section 1221(a)(1) which is acquired by 

the taxpayer for resale.’’. 

(c) EXEMPTION FROM INVENTORIES.—Section 471 is amended 

by redesignating subsection (c) as subsection (d) and by inserting 

after subsection (b) the following new subsection: 

‘‘(c) EXEMPTION FOR CERTAIN SMALL BUSINESSES.— 

‘‘(1) IN GENERAL.—In the case of any taxpayer (other than 

a tax shelter prohibited from using the cash receipts and 

disbursements method of accounting under section 448(a)(3)) 

which meets the gross receipts test of section 448(c) for any 

taxable year— 

‘‘(A) subsection (a) shall not apply with respect to such 

taxpayer for such taxable year, and 

‘‘(B) the taxpayer’s method of accounting for inventory 

for such taxable year shall not be treated as failing to 

clearly reflect income if such method either— 

‘‘(i) treats inventory as non-incidental materials 

and supplies, or 

‘‘(ii) conforms to such taxpayer’s method of 

accounting reflected in an applicable financial statement of the taxpayer with respect to such taxable 

year or, if the taxpayer does not have any applicable 

financial statement with respect to such taxable year, 

26 USC 447. 


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131 STAT. 2104 PUBLIC LAW 115–97—DEC. 22, 2017 

the books and records of the taxpayer prepared in 

accordance with the taxpayer’s accounting procedures. 

‘‘(2) APPLICABLE FINANCIAL STATEMENT.—For purposes of 

this subsection, the term ‘applicable financial statement’ has 

the meaning given the term in section 451(b)(3). 

‘‘(3) APPLICATION OF GROSS RECEIPTS TEST TO INDIVIDUALS, ETC.—In the case of any taxpayer which is not a corporation 

or a partnership, the gross receipts test of section 448(c) shall 

be applied in the same manner as if each trade or business 

of such taxpayer were a corporation or partnership. 

‘‘(4) COORDINATION WITH SECTION 481.—Any change in 

method of accounting made pursuant to this subsection shall 

be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.’’. 

(d) EXEMPTION FROM PERCENTAGE COMPLETION FOR LONG-TERM

CONTRACTS.— (1) IN GENERAL.—Section 460(e)(1)(B) is amended— 

(A) by inserting ‘‘(other than a tax shelter prohibited 

from using the cash receipts and disbursements method 

of accounting under section 448(a)(3))’’ after ‘‘taxpayer’’ in 

the matter preceding clause (i), and 

(B) by amending clause (ii) to read as follows: 

‘‘(ii) who meets the gross receipts test of section 

448(c) for the taxable year in which such contract 

is entered into.’’. 

(2) CONFORMING AMENDMENTS.—Section 460(e) is amended 

by striking paragraphs (2) and (3), by redesignating paragraphs 

(4), (5), and (6) as paragraphs (3), (4), and (5), respectively, 

and by inserting after paragraph (1) the following new paragraph: 

‘‘(2) RULES RELATED TO GROSS RECEIPTS TEST.— 

‘‘(A) APPLICATION OF GROSS RECEIPTS TEST TO INDIVIDUALS, ETC.— For purposes of paragraph (1)(B)(ii), in the 

case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be 

applied in the same manner as if each trade or business 

of such taxpayer were a corporation or partnership. 

‘‘(B) COORDINATION WITH SECTION 481.—Any change in 

method of accounting made pursuant to paragraph (1)(B)(ii) 

shall be treated as initiated by the taxpayer and made 

with the consent of the Secretary. Such change shall be 

effected on a cut-off basis for all similarly classified contracts entered into on or after the year of change.’’. 

(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, 2017. 

(2) PRESERVATION OF SUSPENSE ACCOUNT RULES WITH

RESPECT TO ANY EXISTING SUSPENSE ACCOUNTS.—So much of 

the amendments made by subsection (a)(5)(C) as relate to section 447(i) of the Internal Revenue Code of 1986 shall not 

apply with respect to any suspense account established under 

such section before the date of the enactment of this Act. 

(3) EXEMPTION FROM PERCENTAGE COMPLETION FOR LONGTERM CONTRACTS.—The amendments made by subsection (d) 

shall apply to contracts entered into after December 31, 2017, 

in taxable years ending after such date. 

26 USC 263A 

note. 

26 USC 460. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2105 

PART III—COST RECOVERY AND ACCOUNTING 

METHODS 

Subpart A—Cost Recovery 

SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR CERTAIN BUSINESS ASSETS. 

(a) INCREASED EXPENSING.— 

(1) IN GENERAL.—Section 168(k) is amended— 

(A) in paragraph (1)(A), by striking ‘‘50 percent’’ and 

inserting ‘‘the applicable percentage’’, and 

(B) in paragraph (5)(A)(i), by striking ‘‘50 percent’’ 

and inserting ‘‘the applicable percentage’’. 

(2) APPLICABLE PERCENTAGE.—Paragraph (6) of section 

168(k) is amended to read as follows: 

‘‘(6) APPLICABLE PERCENTAGE.—For purposes of this subsection— 

‘‘(A) IN GENERAL.—Except as otherwise provided in 

this paragraph, the term ‘applicable percentage’ means— 

‘‘(i) in the case of property placed in service after 

September 27, 2017, and before January 1, 2023, 100 

percent, 

‘‘(ii) in the case of property placed in service after 

December 31, 2022, and before January 1, 2024, 80 

percent, 

‘‘(iii) in the case of property placed in service after 

December 31, 2023, and before January 1, 2025, 60 

percent, 

‘‘(iv) in the case of property placed in service after 

December 31, 2024, and before January 1, 2026, 40 

percent, and 

‘‘(v) in the case of property placed in service after 

December 31, 2025, and before January 1, 2027, 20 

percent. 

‘‘(B) RULE FOR PROPERTY WITH LONGER PRODUCTION

PERIODS.—In the case of property described in subparagraph (B) or (C) of paragraph (2), the term ‘applicable 

percentage’ means— 

‘‘(i) in the case of property placed in service after 

September 27, 2017, and before January 1, 2024, 100 

percent, 

‘‘(ii) in the case of property placed in service after 

December 31, 2023, and before January 1, 2025, 80 

percent, 

‘‘(iii) in the case of property placed in service after 

December 31, 2024, and before January 1, 2026, 60 

percent, 

‘‘(iv) in the case of property placed in service after 

December 31, 2025, and before January 1, 2027, 40 

percent, and 

‘‘(v) in the case of property placed in service after 

December 31, 2026, and before January 1, 2028, 20 

percent. 

‘‘(C) RULE FOR PLANTS BEARING FRUITS AND NUTS.— 

In the case of a specified plant described in paragraph 

(5), the term ‘applicable percentage’ means— 

26 USC 168. 


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131 STAT. 2106 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(i) in the case of a plant which is planted or 

grafted after September 27, 2017, and before January 

1, 2023, 100 percent, 

‘‘(ii) in the case of a plant which is planted or 

grafted after December 31, 2022, and before January 

1, 2024, 80 percent, 

‘‘(iii) in the case of a plant which is planted or 

grafted after December 31, 2023, and before January 

1, 2025, 60 percent, 

‘‘(iv) in the case of a plant which is planted or 

grafted after December 31, 2024, and before January 

1, 2026, 40 percent, and 

‘‘(v) in the case of a plant which is planted or 

grafted after December 31, 2025, and before January 

1, 2027, 20 percent.’’. 

(3) CONFORMING AMENDMENT.— (A) Paragraph (5) of section 168(k) is amended by 

striking subparagraph (F). 

(B) Section 168(k) is amended by adding at the end 

the following new paragraph: 

‘‘(8) PHASE DOWN.—In the case of qualified property 

acquired by the taxpayer before September 28, 2017, and placed 

in service by the taxpayer after September 27, 2017, paragraph 

(6) shall be applied by substituting for each percentage 

therein— 

‘‘(A) ‘50 percent’ in the case of— 

‘‘(i) property placed in service before January 1, 

2018, and 

‘‘(ii) property described in subparagraph (B) or (C) 

of paragraph (2) which is placed in service in 2018, 

‘‘(B) ‘40 percent’ in the case of— 

‘‘(i) property placed in service in 2018 (other than 

property described in subparagraph (B) or (C) of paragraph (2)), and 

‘‘(ii) property described in subparagraph (B) or (C) 

of paragraph (2) which is placed in service in 2019, 

‘‘(C) ‘30 percent’ in the case of— 

‘‘(i) property placed in service in 2019 (other than 

property described in subparagraph (B) or (C) of paragraph (2)), and 

‘‘(ii) property described in subparagraph (B) or (C) 

of paragraph (2) which is placed in service in 2020, 

and 

‘‘(D) ‘0 percent’ in the case of— 

‘‘(i) property placed in service after 2019 (other 

than property described in subparagraph (B) or (C) 

of paragraph (2)), and 

‘‘(ii) property described in subparagraph (B) or (C) 

of paragraph (2) which is placed in service after 2020.’’. 

(b) EXTENSION.— 

(1) IN GENERAL.—Section 168(k) is amended— 

(A) in paragraph (2)— 

(i) in subparagraph (A)(iii), clauses (i)(III) and (ii) 

of subparagraph (B), and subparagraph (E)(i), by 

striking ‘‘January 1, 2020’’ each place it appears and 

inserting ‘‘January 1, 2027’’, and 

(ii) in subparagraph (B)— 

26 USC 168. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2107 

(I) in clause (i)(II), by striking ‘‘January 1, 

2021’’ and inserting ‘‘January 1, 2028’’, and 

(II) in the heading of clause (ii), by striking 

‘‘PRE-JANUARY 1, 2020’’ and inserting ‘‘PRE-JANUARY

1, 2027’’, and 

(B) in paragraph (5)(A), by striking ‘‘January 1, 2020’’ 

and inserting ‘‘January 1, 2027’’. 

(2) CONFORMING AMENDMENTS.— 

(A) Clause (ii) of section 460(c)(6)(B) is amended by 

striking ‘‘January 1, 2020 (January 1, 2021’’ and inserting 

‘‘January 1, 2027 (January 1, 2028’’. 

(B) The heading of section 168(k) is amended by 

striking ‘‘ACQUIRED AFTER DECEMBER 31, 2007, AND

BEFORE JANUARY 1, 2020’’. 

(c) APPLICATION TO USED PROPERTY.— 

(1) IN GENERAL.—Section 168(k)(2)(A)(ii) is amended to read 

as follows: 

‘‘(ii) the original use of which begins with the 

taxpayer or the acquisition of which by the taxpayer 

meets the requirements of clause (ii) of subparagraph 

(E), and’’. 

(2) ACQUISITION REQUIREMENTS.—Section 168(k)(2)(E)(ii) is 

amended to read as follows: 

‘‘(ii) ACQUISITION REQUIREMENTS.—An acquisition 

of property meets the requirements of this clause if— 

‘‘(I) such property was not used by the taxpayer at any time prior to such acquisition, and 

‘‘(II) the acquisition of such property meets 

the requirements of paragraphs (2)(A), (2)(B), 

(2)(C), and (3) of section 179(d).’’, 

(3) ANTI-ABUSE RULES.—Section 168(k)(2)(E) is further 

amended by amending clause (iii)(I) to read as follows: 

‘‘(I) property is used by a lessor of such property and such use is the lessor’s first use of such 

property,’’. 

(d) EXCEPTION FOR CERTAIN PROPERTY.—Section 168(k), as 

amended by this section, is amended by adding at the end the 

following new paragraph: 

‘‘(9) EXCEPTION FOR CERTAIN PROPERTY.—The term ‘qualified property’ shall not include— 

‘‘(A) any property which is primarily used in a trade 

or business described in clause (iv) of section 163(j)(7)(A), 

or 

‘‘(B) any property used in a trade or business that 

has had floor plan financing indebtedness (as defined in 

paragraph (9) of section 163(j)), if the floor plan financing 

interest related to such indebtedness was taken into 

account under paragraph (1)(C) of such section.’’. 

(e) SPECIAL RULE.—Section 168(k), as amended by this section, 

is amended by adding at the end the following new paragraph: 

‘‘(10) SPECIAL RULE FOR PROPERTY PLACED IN SERVICE

DURING CERTAIN PERIODS.— 

‘‘(A) IN GENERAL.—In the case of qualified property 

placed in service by the taxpayer during the first taxable 

year ending after September 27, 2017, if the taxpayer 

elects to have this paragraph apply for such taxable year, 

26 USC 460. 


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131 STAT. 2108 PUBLIC LAW 115–97—DEC. 22, 2017 

paragraphs (1)(A) and (5)(A)(i) shall be applied by substituting ‘50 percent’ for ‘the applicable percentage’. 

‘‘(B) FORM OF ELECTION.—Any election under this paragraph shall be made at such time and in such form and 

manner as the Secretary may prescribe.’’. 

(f) COORDINATION WITH SECTION 280F.—Clause (iii) of section 

168(k)(2)(F) is amended by striking ‘‘placed in service by the taxpayer after December 31, 2017’’ and inserting ‘‘acquired by the 

taxpayer before September 28, 2017, and placed in service by the 

taxpayer after September 27, 2017’’. 

(g) QUALIFIED FILM AND TELEVISION AND LIVE THEATRICAL

PRODUCTIONS.— (1) IN GENERAL.—Clause (i) of section 168(k)(2)(A), as 

amended by section 13204, is amended— 

(A) in subclause (II), by striking ‘‘or’’, 

(B) in subclause (III), by adding ‘‘or’’ after the comma, 

and 

(C) by adding at the end the following: 

‘‘(IV) which is a qualified film or television production (as defined in subsection (d) of section 181) for 

which a deduction would have been allowable under 

section 181 without regard to subsections (a)(2) and 

(g) of such section or this subsection, or 

‘‘(V) which is a qualified live theatrical production 

(as defined in subsection (e) of section 181) for which 

a deduction would have been allowable under section 

181 without regard to subsections (a)(2) and (g) of 

such section or this subsection,’’. 

(2) PRODUCTION PLACED IN SERVICE.—Paragraph (2) of section 168(k) is amended by adding at the end the following: 

‘‘(H) PRODUCTION PLACED IN SERVICE.—For purposes 

of subparagraph (A)— 

‘‘(i) a qualified film or television production shall 

be considered to be placed in service at the time of 

initial release or broadcast, and 

‘‘(ii) a qualified live theatrical production shall be 

considered to be placed in service at the time of the 

initial live staged performance.’’. 

(h) EFFECTIVE DATE.— 

(1) IN GENERAL.—Except as provided by paragraph (2), 

the amendments made by this section shall apply to property 

which— 

(A) is acquired after September 27, 2017, and 

(B) is placed in service after such date. 

For purposes of the preceding sentence, property shall not 

be treated as acquired after the date on which a written binding 

contract is entered into for such acquisition. 

(2) SPECIFIED PLANTS.—The amendments made by this section shall apply to specified plants planted or grafted after 

September 27, 2017. 

SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITATIONS ON 

LUXURY AUTOMOBILES AND PERSONAL USE PROPERTY. 

(a) LUXURY AUTOMOBILES.— 

(1) IN GENERAL.—280F(a)(1)(A) is amended— 

(A) in clause (i), by striking ‘‘$2,560’’ and inserting 

‘‘$10,000’’, 

26 USC 168 note. 

26 USC 168. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2109 

(B) in clause (ii), by striking ‘‘$4,100’’ and inserting 

‘‘$16,000’’, 

(C) in clause (iii), by striking ‘‘$2,450’’ and inserting 

‘‘$9,600’’, and 

(D) in clause (iv), by striking ‘‘$1,475’’ and inserting 

‘‘$5,760’’. 

(2) CONFORMING AMENDMENTS.— 

(A) Clause (ii) of section 280F(a)(1)(B) is amended by 

striking ‘‘$1,475’’ in the text and heading and inserting 

‘‘$5,760’’. 

(B) Paragraph (7) of section 280F(d) is amended— 

(i) in subparagraph (A), by striking ‘‘1988’’ and 

inserting ‘‘2018’’, and 

(ii) in subparagraph (B)(i)(II), by striking ‘‘1987’’ 

and inserting ‘‘2017’’. 

(b) REMOVAL OF COMPUTER EQUIPMENT FROM LISTED PROPERTY.— 

(1) IN GENERAL.—Section 280F(d)(4)(A) is amended— 

(A) by inserting ‘‘and’’ at the end of clause (iii), 

(B) by striking clause (iv), and 

(C) by redesignating clause (v) as clause (iv). 

(2) CONFORMING AMENDMENT.—Section 280F(d)(4) is 

amended by striking subparagraph (B) and by redesignating 

subparagraph (C) as subparagraph (B). 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to property placed in service after December 31, 2017, 

in taxable years ending after such date. 

SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN FARM PROPERTY. 

(a) TREATMENT OF CERTAIN FARM PROPERTY AS 5-YEAR PROPERTY.—Clause (vii) of section 168(e)(3)(B) is amended by striking 

‘‘after December 31, 2008, and which is placed in service before 

January 1, 2010’’ and inserting ‘‘after December 31, 2017’’. 

(b) REPEAL OF REQUIRED USE OF 150-PERCENT DECLINING BALANCE METHOD.—Section 168(b)(2) is amended by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to property placed in service after December 31, 2017, 

in taxable years ending after such date. 

SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY. 

(a) IMPROVEMENTS TO REAL PROPERTY.— 

(1) ELIMINATION OF QUALIFIED LEASEHOLD IMPROVEMENT, 

QUALIFIED RESTAURANT, AND QUALIFIED RETAIL IMPROVEMENT

PROPERTY.—Subsection (e) of section 168 is amended— 

(A) in subparagraph (E) of paragraph (3)— 

(i) by striking clauses (iv), (v), and (ix), 

(ii) in clause (vii), by inserting ‘‘and’’ at the end, 

(iii) in clause (viii), by striking ‘‘, and’’ and 

inserting a period, and 

(iv) by redesignating clauses (vi), (vii), and (viii), 

as so amended, as clauses (iv), (v), and (vi), respectively, and 

(B) by striking paragraphs (6), (7), and (8). 

26 USC 168 note. 

26 USC 280F 

note. 

26 USC 280F. 


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131 STAT. 2110 PUBLIC LAW 115–97—DEC. 22, 2017 

(2) APPLICATION OF STRAIGHT LINE METHOD TO QUALIFIED

IMPROVEMENT PROPERTY.—Paragraph (3) of section 168(b) is 

amended— 

(A) by striking subparagraphs (G), (H), and (I), and 

(B) by inserting after subparagraph (F) the following 

new subparagraph: 

‘‘(G) Qualified improvement property described in subsection (e)(6).’’. 

(3) ALTERNATIVE DEPRECIATION SYSTEM.— 

(A) ELECTING REAL PROPERTY TRADE OR BUSINESS.— 

Subsection (g) of section 168 is amended— 

(i) in paragraph (1)— 

(I) in subparagraph (D), by striking ‘‘and’’ at 

the end, 

(II) in subparagraph (E), by inserting ‘‘and’’ 

at the end, and 

(III) by inserting after subparagraph (E) the 

following new subparagraph: 

‘‘(F) any property described in paragraph (8),’’, and 

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

‘‘(8) ELECTING REAL PROPERTY TRADE OR BUSINESS.—The 

property described in this paragraph shall consist of any nonresidential real property, residential rental property, and qualified improvement property held by an electing real property 

trade or business (as defined in 163(j)(7)(B)).’’. 

(B) QUALIFIED IMPROVEMENT PROPERTY.—The table 

contained in subparagraph (B) of section 168(g)(3) is 

amended— 

(i) by inserting after the item relating to subparagraph (D)(ii) the following new item: 

‘‘(D)(v) ........................................................................................................ 20’’ 

, and 

(ii) by striking the item relating to subparagraph 

(E)(iv) and all that follows through the item relating 

to subparagraph (E)(ix) and inserting the following: 

‘‘(E)(iv) ....................................................................................................... 20

(E)(v) .......................................................................................................... 30

(E)(vi) ......................................................................................................... 35’’. 

(C) APPLICABLE RECOVERY PERIOD FOR RESIDENTIAL

RENTAL PROPERTY.—The table contained in subparagraph 

(C) of section 168(g)(2) is amended by striking clauses 

(iii) and (iv) and inserting the following: 

‘‘(iii) Residential rental property ............................................................. 30 years

(iv) Nonresidential real property ............................................................. 40 years

(v) Any railroad grading or tunnel bore or water utility property ....... 50 years’’. 

(4) CONFORMING AMENDMENTS.— 

(A) Clause (i) of section 168(k)(2)(A) is amended— 

(i) in subclause (II), by inserting ‘‘or’’ after the 

comma, 

(ii) in subclause (III), by striking ‘‘or’’ at the end, 

and 

(iii) by striking subclause (IV). 

(B) Section 168 is amended— 

(i) in subsection (e), as amended by paragraph 

(1)(B), by adding at the end the following: 

‘‘(6) QUALIFIED IMPROVEMENT PROPERTY.— 

26 USC 168. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2111 

‘‘(A) IN GENERAL.—The term ‘qualified improvement 

property’ means any improvement to an interior portion 

of a building which is nonresidential real property if such 

improvement is placed in service after the date such 

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, or 

‘‘(iii) the internal structural framework of the 

building.’’, and 

(ii) in subsection (k), by striking paragraph (3). 

(b) EFFECTIVE DATE.— (1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to property placed 

in service after December 31, 2017. 

(2) AMENDMENTS RELATED TO ELECTING REAL PROPERTY

TRADE OR BUSINESS.—The amendments made by subsection 

(a)(3)(A) shall apply to taxable years beginning after December 

31, 2017. 

SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR 

ELECTING FARMING BUSINESSES. 

(a) IN GENERAL.—Section 168(g)(1), as amended by section 

13204, is amended by striking ‘‘and’’ at the end of subparagraph 

(E), by inserting ‘‘and’’ at the end of subparagraph (F), and by 

inserting after subparagraph (F) the following new subparagraph: 

‘‘(G) any property with a recovery period of 10 years 

or more which is held by an electing farming business 

(as defined in section 163(j)(7)(C)),’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13206. 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 

26 USC 168 note. 

26 USC 168. 

26 USC 168 note. 


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131 STAT. 2112 PUBLIC LAW 115–97—DEC. 22, 2017 

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.’’. 

(b) CHANGE IN METHOD OF ACCOUNTING.—The amendments 

made by subsection (a) shall be treated as a change in method 

of accounting for purposes of section 481 of the Internal Revenue 

Code of 1986 and— 

(1) such change shall be treated as initiated by the taxpayer, 

(2) such change shall be treated as made with the consent 

of the Secretary, and 

(3) such change shall be applied only on a cut-off basis 

for any research or experimental expenditures paid or incurred 

in taxable years beginning after December 31, 2021, and no 

adjustments under section 481(a) shall be made. 

(c) 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.’’. 

(d) CONFORMING AMENDMENTS.— 

(1) Section 41(d)(1)(A) is amended by striking ‘‘expenses 

under section 174’’ and inserting ‘‘specified research or experimental expenditures under section 174’’. 

(2) Subsection (c) of section 280C is amended— 

(A) by striking paragraph (1) and inserting the following: 

‘‘(1) IN GENERAL.—If— 

‘‘(A) the amount of the credit determined for the taxable 

year under section 41(a)(1), exceeds 

26 USC 

prec. 161. 

26 USC 174 note. 


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‘‘(B) the amount allowable as a deduction for such 

taxable year for qualified research expenses or basic 

research expenses, 

the amount chargeable to capital account for the taxable year 

for such expenses shall be reduced by the amount of such 

excess.’’, 

(B) by striking paragraph (2), 

(C) by redesignating paragraphs (3) (as amended by 

this Act) and (4) as paragraphs (2) and (3), respectively, 

and 

(D) in paragraph (2), as redesignated by subparagraph 

(C), by striking ‘‘paragraphs (1) and (2)’’ and inserting 

‘‘paragraph (1)’’. 

(e) EFFECTIVE DATE.—The amendments made by this section 

shall apply to amounts paid or incurred in taxable years beginning 

after December 31, 2021. 

SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS 

PLANTS LOST BY REASON OF CASUALTY. 

(a) IN GENERAL.—Section 263A(d)(2) is amended by adding 

at the end the following new subparagraph: 

‘‘(C) SPECIAL TEMPORARY RULE FOR CITRUS PLANTS LOST

BY REASON OF CASUALTY.— 

‘‘(i) IN GENERAL.—In the case of the replanting 

of citrus plants, subparagraph (A) shall apply to 

amounts paid or incurred by a person (other than 

the taxpayer described in subparagraph (A)) if— 

‘‘(I) the taxpayer described in subparagraph 

(A) has an equity interest of not less than 50 

percent in the replanted citrus plants at all times 

during the taxable year in which such amounts 

were paid or incurred and such other person holds 

any part of the remaining equity interest, or 

‘‘(II) such other person acquired the entirety 

of such taxpayer’s equity interest in the land on 

which the lost or damaged citrus plants were 

located at the time of such loss or damage, and 

the replanting is on such land. 

‘‘(ii) TERMINATION.—Clause (i) shall not apply to 

any cost paid or incurred after the date which is 10 

years after the date of the enactment of the Tax Cuts 

and Jobs Act.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to costs paid or incurred after the date of the enactment 

of this Act. 

Subpart B—Accounting Methods 

SEC. 13221. 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 (i) as subsections (c) through (j), respectively, and by 

inserting after subsection (a) the following new subsection: 

‘‘(b) INCLUSION NOT LATER THAN FOR FINANCIAL ACCOUNTING

PURPOSES.— 

26 USC 263A 

note. 

26 USC 263A. 

26 USC 41 note. 


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131 STAT. 2114 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(1) INCOME TAKEN INTO ACCOUNT IN FINANCIAL STATE- MENT.— ‘‘(A) IN GENERAL.—In the case of a taxpayer the taxable 

income of which is computed under an accrual method 

of accounting, the all events test with respect to any item 

of gross income (or portion thereof) shall not be treated 

as met any later than when such item (or portion thereof) 

is taken into account as revenue in— 

‘‘(i) an applicable financial statement of the taxpayer, or 

‘‘(ii) such other financial statement as the Secretary may specify for purposes of this subsection. 

‘‘(B) EXCEPTION.—This paragraph shall not apply to— 

‘‘(i) a taxpayer which does not have a financial 

statement described in clause (i) or (ii) of subparagraph 

(A) for a taxable year, or 

‘‘(ii) any item of gross income in connection with 

a mortgage servicing contract. 

‘‘(C) ALL EVENTS TEST.—For purposes of this section, 

the all events test is met with respect to any item of 

gross income if all the events have occurred which fix 

the right to receive such income and the amount of such 

income can be determined with reasonable accuracy. 

‘‘(2) COORDINATION WITH SPECIAL METHODS OF

ACCOUNTING.—Paragraph (1) shall not apply with respect to 

any item of gross income for which the taxpayer uses a special 

method of accounting provided under any other provision of 

this chapter, other than any provision of part V of subchapter 

P (except as provided in clause (ii) of paragraph (1)(B)). 

‘‘(3) APPLICABLE FINANCIAL STATEMENT.—For purposes of 

this subsection, the term ‘applicable financial statement’ 

means— 

‘‘(A) a financial statement which is certified as being 

prepared in accordance with generally accepted accounting 

principles and which is— 

‘‘(i) a 10–K (or successor form), or annual statement to shareholders, required to be filed by the taxpayer with the United States Securities and Exchange 

Commission, 

‘‘(ii) an audited financial statement of the taxpayer 

which is used for— 

‘‘(I) credit purposes, 

‘‘(II) reporting to shareholders, partners, or 

other proprietors, or to beneficiaries, or 

‘‘(III) any other substantial nontax purpose, 

but only if there is no statement of the taxpayer 

described in clause (i), or 

‘‘(iii) filed by the taxpayer with any other Federal 

agency for purposes other than Federal tax purposes, 

but only if there is no statement of the taxpayer 

described in clause (i) or (ii), 

‘‘(B) a financial statement which is made on the basis 

of international financial reporting standards and is filed 

by the taxpayer with an agency of a foreign government 

which is equivalent to the United States Securities and 

Exchange Commission and which has reporting standards 

not less stringent than the standards required by such 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2115 

Commission, but only if there is no statement of the taxpayer described in subparagraph (A), or 

‘‘(C) a financial statement filed by the taxpayer with 

any other regulatory or governmental body specified by 

the Secretary, but only if there is no statement of the 

taxpayer described in subparagraph (A) or (B). 

‘‘(4) ALLOCATION OF TRANSACTION PRICE.—For purposes of 

this subsection, in the case of a contract which contains multiple 

performance obligations, the allocation of the transaction price 

to each performance obligation shall be equal to the amount 

allocated to each performance obligation for purposes of 

including such item in revenue in the applicable financial statement of the taxpayer. 

‘‘(5) GROUP OF ENTITIES.—For purposes of paragraph (1), 

if the financial results of a taxpayer are reported on the 

applicable financial statement (as defined in paragraph (3)) 

for a group of entities, such statement shall be treated as 

the applicable financial statement of the taxpayer.’’. 

(b) TREATMENT OF ADVANCE PAYMENTS.—Section 451, as 

amended by subsection (a), is amended by redesignating subsections 

(c) through (j) as subsections (d) through (k), 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) TAXPAYERS CEASING TO EXIST.—Except as otherwise 

provided by the Secretary, the election under paragraph (1)(B) 

shall not apply with respect to advance payments received 

26 USC 451. 


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131 STAT. 2116 PUBLIC LAW 115–97—DEC. 22, 2017 

by the taxpayer during a taxable year if such taxpayer ceases 

to exist during (or with the close of) such taxable year. 

‘‘(4) 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), 

‘‘(ii) any portion of which is included in revenue 

by the taxpayer in a financial statement described 

in clause (i) or (ii) of subsection (b)(1)(A) for a subsequent taxable year, and 

‘‘(iii) 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 governed by subchapter 

L, 

‘‘(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) RECEIPT.—For purposes of this subsection, an item 

of gross income is received by the taxpayer if it is actually 

or constructively received, or if it is due and payable to 

the taxpayer. 

‘‘(D) ALLOCATION OF TRANSACTION PRICE.—For purposes of this subsection, rules similar to subsection (b)(4) 

shall apply.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

(d) COORDINATION WITH SECTION 481.— 

(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, 2017— 

(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. 

(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 

26 USC 451 note. 

26 USC 451 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2117 

(B) was prohibited under the Internal Revenue Code 

of 1986 prior to such amendments and is permitted under 

such Code after such amendments. 

(e) SPECIAL RULES FOR ORIGINAL ISSUE DISCOUNT.—Notwithstanding subsection (c), in the case of income from a debt instrument 

having original issue discount— 

(1) the amendments made by this section shall apply to 

taxable years beginning after December 31, 2018, and 

(2) the period for taking into account any adjustments 

under section 481 by reason of a qualified change in method 

of accounting (as defined in subsection (d)) shall be 6 years. 

PART IV—BUSINESS-RELATED EXCLUSIONS 

AND DEDUCTIONS 

SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST. 

(a) IN GENERAL.—Section 163(j) is amended to read as follows: 

‘‘(j) LIMITATION ON BUSINESS INTEREST.— 

‘‘(1) IN GENERAL.—The amount allowed as a deduction 

under this chapter for any taxable year for business interest 

shall not exceed the sum of— 

‘‘(A) the business interest income of such taxpayer 

for such taxable year, 

‘‘(B) 30 percent of the adjusted taxable income of such 

taxpayer for such taxable year, plus 

‘‘(C) the floor plan financing interest of such taxpayer 

for such taxable year. 

The amount determined under subparagraph (B) shall not be 

less than zero. 

‘‘(2) CARRYFORWARD OF DISALLOWED BUSINESS INTEREST.— 

The amount of any business interest not allowed as a deduction 

for any taxable year by reason of paragraph (1) shall be treated 

as business interest paid or accrued in the succeeding taxable 

year. 

‘‘(3) EXEMPTION FOR CERTAIN SMALL BUSINESSES.—In the 

case of any taxpayer (other than a tax shelter prohibited from 

using the cash receipts and disbursements method of accounting 

under section 448(a)(3)) which meets the gross receipts test 

of section 448(c) for any taxable year, paragraph (1) shall 

not apply to such taxpayer for such taxable year. In the case 

of any taxpayer which is not a corporation or a partnership, 

the gross receipts test of section 448(c) shall be applied in 

the same manner as if such taxpayer were a corporation or 

partnership. 

‘‘(4) APPLICATION TO PARTNERSHIPS, ETC.— 

‘‘(A) IN GENERAL.—In the case of any partnership— 

‘‘(i) this subsection shall be applied at the partnership level and any deduction for business interest shall 

be taken into account in determining the non-separately stated taxable income or loss of the partnership, 

and 

‘‘(ii) the adjusted taxable income of each partner 

of such partnership— 

‘‘(I) shall be determined without regard to such 

partner’s distributive share of any items of income, 

gain, deduction, or loss of such partnership, and 

26 USC 163. 

26 USC 451 note. 


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131 STAT. 2118 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(II) shall be increased by such partner’s 

distributive share of such partnership’s excess taxable income. 

For purposes of clause (ii)(II), a partner’s distributive 

share of partnership excess taxable income shall be 

determined in the same manner as the partner’s 

distributive share of nonseparately stated taxable 

income or loss of the partnership. 

‘‘(B) SPECIAL RULES FOR CARRYFORWARDS.— ‘‘(i) IN GENERAL.—The amount of any business 

interest not allowed as a deduction to a partnership 

for any taxable year by reason of paragraph (1) for 

any taxable year— 

‘‘(I) shall not be treated under paragraph (2) 

as business interest paid or accrued by the partnership in the succeeding taxable year, and 

‘‘(II) shall, subject to clause (ii), be treated 

as excess business interest which is allocated to 

each partner in the same manner as the nonseparately stated taxable income or loss of the 

partnership. 

‘‘(ii) TREATMENT OF EXCESS BUSINESS INTEREST

ALLOCATED TO PARTNERS.—If a partner is allocated 

any excess business interest from a partnership under 

clause (i) for any taxable year— 

‘‘(I) such excess business interest shall be 

treated as business interest paid or accrued by 

the partner in the next succeeding taxable year 

in which the partner is allocated excess taxable 

income from such partnership, but only to the 

extent of such excess taxable income, and 

‘‘(II) any portion of such excess business 

interest remaining after the application of subclause (I) shall, subject to the limitations of subclause (I), be treated as business interest paid 

or accrued in succeeding taxable years. 

For purposes of applying this paragraph, excess taxable 

income allocated to a partner from a partnership for 

any taxable year shall not be taken into account under 

paragraph (1)(A) with respect to any business interest 

other than excess business interest from the partnership until all such excess business interest for such 

taxable year and all preceding taxable years has been 

treated as paid or accrued under clause (ii). 

‘‘(iii) BASIS ADJUSTMENTS.— 

‘‘(I) IN GENERAL.—The adjusted basis of a 

partner in a partnership interest shall be reduced 

(but not below zero) by the amount of excess business interest allocated to the partner under clause 

(i)(II). 

‘‘(II) SPECIAL RULE FOR DISPOSITIONS.—If a 

partner disposes of a partnership interest, the 

adjusted basis of the partner in the partnership 

interest shall be increased immediately before the 

disposition by the amount of the excess (if any) 

of the amount of the basis reduction under subclause (I) over the portion of any excess business 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2119 

interest allocated to the partner under clause (i)(II) 

which has previously been treated under clause 

(ii) as business interest paid or accrued by the 

partner. The preceding sentence shall also apply 

to transfers of the partnership interest (including 

by reason of death) in a transaction in which gain 

is not recognized in whole or in part. No deduction 

shall be allowed to the transferor or transferee 

under this chapter for any excess business interest 

resulting in a basis increase under this subclause. 

‘‘(C) EXCESS TAXABLE INCOME.—The term ‘excess taxable income’ means, with respect to any partnership, the 

amount which bears the same ratio to the partnership’s 

adjusted taxable income as— 

‘‘(i) the excess (if any) of— 

‘‘(I) the amount determined for the partnership 

under paragraph (1)(B), over 

‘‘(II) the amount (if any) by which the business 

interest of the partnership, reduced by the floor 

plan financing interest, exceeds the business 

interest income of the partnership, bears to 

‘‘(ii) the amount determined for the partnership 

under paragraph (1)(B). 

‘‘(D) APPLICATION TO S CORPORATIONS.—Rules similar 

to the rules of subparagraphs (A) and (C) shall apply with 

respect to any S corporation and its shareholders. 

‘‘(5) BUSINESS INTEREST.—For purposes of this subsection, 

the term ‘business interest’ means any interest paid or accrued 

on indebtedness properly allocable to a trade or business. Such 

term shall not include investment interest (within the meaning 

of subsection (d)). 

‘‘(6) BUSINESS INTEREST INCOME.—For purposes of this subsection, the term ‘business interest income’ means the amount 

of interest includible in the gross income of the taxpayer for 

the taxable year which is properly allocable to a trade or 

business. Such term shall not include investment income 

(within the meaning of subsection (d)). 

‘‘(7) TRADE OR BUSINESS.—For purposes of this subsection— 

‘‘(A) IN GENERAL.—The term ‘trade or business’ shall 

not include— 

‘‘(i) the trade or business of performing services 

as an employee, 

‘‘(ii) any electing real property trade or business, 

‘‘(iii) any electing farming business, or 

‘‘(iv) the trade or business of the furnishing or 

sale of— 

‘‘(I) electrical energy, water, or sewage disposal 

services, 

‘‘(II) gas or steam through a local distribution 

system, or 

‘‘(III) transportation of gas or steam by pipeline, 

if the rates for such furnishing or sale, as the case 

may be, have been established or approved by a State 

or political subdivision thereof, by any agency or 

instrumentality of the United States, by a public 

service or public utility commission or other similar 


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131 STAT. 2120 PUBLIC LAW 115–97—DEC. 22, 2017 

body of any State or political subdivision thereof, or 

by the governing or ratemaking body of an electric 

cooperative. 

‘‘(B) ELECTING REAL PROPERTY TRADE OR BUSINESS.— For purposes of this paragraph, the term ‘electing real 

property trade or business’ means any trade or business 

which is described in section 469(c)(7)(C) and which makes 

an election under this subparagraph. Any such election 

shall be made at such time and in such manner as the 

Secretary shall prescribe, and, once made, shall be irrevocable. 

‘‘(C) ELECTING FARMING BUSINESS.—For purposes of 

this paragraph, the term ‘electing farming business’ 

means— 

‘‘(i) a farming business (as defined in section 

263A(e)(4)) which makes an election under this 

subparagraph, or 

‘‘(ii) any trade or business of a specified agricultural or horticultural cooperative (as defined in section 

199A(g)(2)) with respect to which the cooperative 

makes an election under this subparagraph. 

Any such election shall be made at such time and in 

such manner as the Secretary shall prescribe, and, once 

made, shall be irrevocable. 

‘‘(8) ADJUSTED TAXABLE INCOME.—For purposes of this subsection, the term ‘adjusted taxable income’ means the taxable 

income of the taxpayer— 

‘‘(A) computed without regard to— 

‘‘(i) any item of income, gain, deduction, or loss 

which is not properly allocable to a trade or business, 

‘‘(ii) any business interest or business interest 

income, 

‘‘(iii) the amount of any net operating loss deduction under section 172, 

‘‘(iv) the amount of any deduction allowed under 

section 199A, and 

‘‘(v) in the case of taxable years beginning before 

January 1, 2022, any deduction allowable for depreciation, amortization, or depletion, and 

‘‘(B) computed with such other adjustments as provided 

by the Secretary. 

‘‘(9) FLOOR PLAN FINANCING INTEREST DEFINED.—For purposes of this subsection— 

‘‘(A) IN GENERAL.—The term ‘floor plan financing 

interest’ means interest paid or accrued on floor plan 

financing indebtedness. 

‘‘(B) FLOOR PLAN FINANCING INDEBTEDNESS.—The term 

‘floor plan financing indebtedness’ means indebtedness— 

‘‘(i) used to finance the acquisition of motor vehicles 

held for sale or lease, and 

‘‘(ii) secured by the inventory so acquired. 

‘‘(C) MOTOR VEHICLE.—The term ‘motor vehicle’ means 

a motor vehicle that is any of the following: 

‘‘(i) Any self-propelled vehicle designed for transporting persons or property on a public street, highway, 

or road. 

‘‘(ii) A boat. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2121 

‘‘(iii) Farm machinery or equipment. 

‘‘(10) CROSS REFERENCES.— ‘‘(A) For requirement that an electing real property 

trade or business use the alternative depreciation system, 

see section 168(g)(1)(F). 

‘‘(B) For requirement that an electing farming business 

use the alternative depreciation system, see section 

168(g)(1)(G).’’. 

(b) TREATMENT OF CARRYFORWARD OF DISALLOWED BUSINESS

INTEREST IN CERTAIN CORPORATE ACQUISITIONS.— (1) IN GENERAL.—Section 381(c) is amended by inserting 

after paragraph (19) the following new paragraph: 

‘‘(20) CARRYFORWARD OF DISALLOWED BUSINESS INTEREST.— The carryover of disallowed business interest described in section 163(j)(2) to taxable years ending after the date of distribution or transfer.’’. 

(2) APPLICATION OF LIMITATION.—Section 382(d) is amended 

by adding at the end the following new paragraph: 

‘‘(3) APPLICATION TO CARRYFORWARD OF DISALLOWED

INTEREST.—The term ‘pre-change loss’ shall include any carryover of disallowed interest described in section 163(j)(2) under 

rules similar to the rules of paragraph (1).’’. 

(3) CONFORMING AMENDMENT.—Section 382(k)(1) is 

amended by inserting after the first sentence the following: 

‘‘Such term shall include any corporation entitled to use a 

carryforward of disallowed interest described in section 

381(c)(20).’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13302. MODIFICATION OF NET OPERATING LOSS DEDUCTION. 

(a) LIMITATION ON DEDUCTION.— 

(1) IN GENERAL.—Section 172(a) is amended to read as 

follows: 

‘‘(a) DEDUCTION ALLOWED.—There shall be allowed as a deduction for the taxable year an amount equal to the lesser of— 

‘‘(1) the aggregate of the net operating loss carryovers 

to such year, plus the net operating loss carrybacks to such 

year, or 

‘‘(2) 80 percent of taxable income computed without regard 

to the deduction allowable under this section. 

For purposes of this subtitle, the term ‘net operating loss deduction’ 

means the deduction allowed by this subsection.’’. 

(2) COORDINATION OF LIMITATION WITH CARRYBACKS AND

CARRYOVERS.—Section 172(b)(2) is amended by striking ‘‘shall 

be computed—’’ and all that follows and inserting ‘‘shall— 

‘‘(A) be computed with the modifications specified in 

subsection (d) other than paragraphs (1), (4), and (5) 

thereof, and by determining the amount of the net operating loss deduction without regard to the net operating 

loss for the loss year or for any taxable year thereafter, 

‘‘(B) not be considered to be less than zero, and 

‘‘(C) not exceed the amount determined under subsection (a)(2) for such prior taxable year.’’. 

(3) CONFORMING AMENDMENT.—Section 172(d)(6) is 

amended by striking ‘‘and’’ at the end of subparagraph (A), 

by striking the period at the end of subparagraph (B) and 

26 USC 163 note. 

26 USC 381. 


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131 STAT. 2122 PUBLIC LAW 115–97—DEC. 22, 2017 

inserting ‘‘; and’’, and by adding at the end the following new 

subparagraph: 

‘‘(C) subsection (a)(2) shall be applied by substituting 

‘real estate investment trust taxable income (as defined 

in section 857(b)(2) but without regard to the deduction 

for dividends paid (as defined in section 561))’ for ‘taxable 

income’.’’. 

(b) REPEAL OF NET OPERATING LOSS CARRYBACK; INDEFINITE

CARRYFORWARD.— 

(1) IN GENERAL.—Section 172(b)(1)(A) is amended— 

(A) by striking ‘‘shall be a net operating loss carryback 

to each of the 2 taxable years’’ in clause (i) and inserting 

‘‘except as otherwise provided in this paragraph, shall not 

be a net operating loss carryback to any taxable year’’, 

and 

(B) by striking ‘‘to each of the 20 taxable years’’ in 

clause (ii) and inserting ‘‘to each taxable year’’. 

(2) CONFORMING AMENDMENT.—Section 172(b)(1) is 

amended by striking subparagraphs (B) through (F). 

(c) TREATMENT OF FARMING LOSSES.— 

(1) ALLOWANCE OF CARRYBACKS.—Section 172(b)(1), as 

amended by subsection (b)(2), is amended by adding at the 

end the following new subparagraph: 

‘‘(B) FARMING LOSSES.— 

‘‘(i) IN GENERAL.—In the case of any portion of 

a net operating loss for the taxable year which is 

a farming loss with respect to the taxpayer, such loss 

shall be a net operating loss carryback to each of 

the 2 taxable years preceding the taxable year of such 

loss. 

‘‘(ii) FARMING LOSS.—For purposes of this section, 

the term ‘farming loss’ means the lesser of— 

‘‘(I) the amount which would be the net operating loss for the taxable year if only income and 

deductions attributable to farming businesses (as 

defined in section 263A(e)(4)) are taken into 

account, or 

‘‘(II) the amount of the net operating loss for 

such taxable year. 

‘‘(iii) COORDINATION WITH PARAGRAPH (2).—For purposes of applying paragraph (2), a farming loss for 

any taxable year shall be treated 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. 

‘‘(iv) ELECTION.—Any taxpayer entitled to a 2-year 

carryback under clause (i) from any loss year may 

elect not to have such clause apply to such loss year. 

Such election shall be made in such manner as prescribed by the Secretary and shall be made by the 

due date (including extensions of time) for filing the 

taxpayer’s return for the taxable year of the net operating loss. Such election, once made for any taxable 

year, shall be irrevocable for such taxable year.’’. 

(2) CONFORMING AMENDMENTS.— 

26 USC 172. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2123 

(A) Section 172 is amended by striking subsections 

(f), (g), and (h), and by redesignating subsection (i) as 

subsection (f). 

(B) Section 537(b)(4) is amended by inserting ‘‘(as in 

effect before the date of enactment of the Tax Cuts and 

Jobs Act)’’ after ‘‘as defined in section 172(f)’’. 

(d) TREATMENT OF CERTAIN INSURANCE LOSSES.— (1) TREATMENT OF CARRYFORWARDS AND CARRYBACKS.—Section 172(b)(1), as amended by subsections (b)(2) and (c)(1), 

is amended by adding at the end the following new subparagraph: 

‘‘(C) INSURANCE COMPANIES.—In the case of an insurance company (as defined in section 816(a)) other than 

a life insurance company, the net operating loss for any 

taxable year— 

‘‘(i) shall be a net operating loss carryback to each 

of the 2 taxable years preceding the taxable year of 

such loss, and 

‘‘(ii) shall be a net operating loss carryover to 

each of the 20 taxable years following the taxable 

year of the loss.’’. 

(2) EXEMPTION FROM LIMITATION.—Section 172, as amended 

by subsection (c)(2)(A), is amended by redesignating subsection 

(f) as subsection (g) and inserting after subsection (e) the following new subsection: 

‘‘(f) SPECIAL RULE FOR INSURANCE COMPANIES.—In the case 

of an insurance company (as defined in section 816(a)) other than 

a life insurance company— 

‘‘(1) the amount of the deduction allowed under subsection 

(a) shall be the aggregate of the net operating loss carryovers 

to such year, plus the net operating loss carrybacks to such 

year, and 

‘‘(2) subparagraph (C) of subsection (b)(2) shall not apply.’’. 

(e) EFFECTIVE DATE.— 

(1) NET OPERATING LOSS LIMITATION.—The amendments 

made by subsections (a) and (d)(2) shall apply to losses arising 

in taxable years beginning after December 31, 2017. 

(2) CARRYFORWARDS AND CARRYBACKS.—The amendments 

made by subsections (b), (c), and (d)(1) shall apply to net 

operating losses arising in taxable years ending after December 

31, 2017. 

SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY. 

(a) IN GENERAL.—Section 1031(a)(1) is amended by striking 

‘‘property’’ each place it appears and inserting ‘‘real property’’. 

(b) CONFORMING AMENDMENTS.— 

(1)(A) Paragraph (2) of section 1031(a) is amended to read 

as follows: 

‘‘(2) EXCEPTION FOR REAL PROPERTY HELD FOR SALE.—This 

subsection shall not apply to any exchange of real property 

held primarily for sale.’’. 

(B) Section 1031 is amended by striking subsection (i). 

(2) Section 1031 is amended by striking subsection (e). 

(3) Section 1031, as amended by paragraph (2), is amended 

by inserting after subsection (d) the following new subsection: 

‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.—For purposes of 

this section, an interest in a partnership which has in effect a 

26 USC 172 note. 

26 USC 172. 


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131 STAT. 2124 PUBLIC LAW 115–97—DEC. 22, 2017 

valid election under section 761(a) to be excluded from the application of all of subchapter K shall be treated as an interest in 

each of the assets of such partnership and not as an interest 

in a partnership.’’. 

(4) Section 1031(h) is amended to read as follows: 

‘‘(h) SPECIAL RULES FOR FOREIGN REAL PROPERTY.—Real property located in the United States and real property located outside 

the United States are not property of a like kind.’’. 

(5) The heading of section 1031 is amended by striking ‘‘PROPERTY’’ and inserting ‘‘REAL PROPERTY’’. 

(6) The table of sections for part III of subchapter O of 

chapter 1 is amended by striking the item relating to section 

1031 and inserting the following new item: 

‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’. 

(c) EFFECTIVE DATE.— (1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to 

exchanges completed after December 31, 2017. 

(2) TRANSITION RULE.—The amendments made by this section shall not apply to any exchange if— 

(A) the property disposed of by the taxpayer in the 

exchange is disposed of on or before December 31, 2017, 

or 

(B) the property received by the taxpayer in the 

exchange is received on or before December 31, 2017. 

SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES 

FOR FRINGE BENEFITS. 

(a) NO DEDUCTION ALLOWED FOR ENTERTAINMENT EXPENSES.— 

(1) IN GENERAL.—Section 274(a) is amended— 

(A) in paragraph (1)(A), by striking ‘‘unless’’ and all 

that follows through ‘‘trade or business,’’, 

(B) by striking the flush sentence at the end of paragraph (1), and 

(C) by striking paragraph (2)(C). 

(2) CONFORMING AMENDMENTS.— 

(A) Section 274(d) is amended— 

(i) by striking paragraph (2) and redesignating 

paragraphs (3) and (4) as paragraphs (2) and (3), 

respectively, and 

(ii) in the flush text following paragraph (3) (as 

so redesignated)— 

(I) by striking ‘‘, entertainment, amusement, 

recreation, or use of the facility or property,’’ 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’’, 

(B) Section 274 is amended by striking subsection (l). 

(C) Section 274(n) is amended by striking ‘‘AND ENTERTAINMENT’’ in the heading. 

(D) Section 274(n)(1) is amended to read as follows: 

‘‘(1) IN GENERAL.—The amount allowable as a deduction 

under this chapter for any expense for food or beverages shall 

26 USC 1031 

note. 

26 USC 

prec. 1031. 

26 USC 1031. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2125 

not exceed 50 percent of the amount of such expense which 

would (but for this paragraph) be allowable as a deduction 

under this chapter.’’. 

(E) Section 274(n)(2) is amended— 

(i) in subparagraph (B), by striking ‘‘in the case 

of an expense for food or beverages,’’, 

(ii) by striking subparagraph (C) and redesignating 

subparagraphs (D) and (E) as subparagraphs (C) and 

(D), respectively, 

(iii) by striking ‘‘of subparagraph (E)’’ the last sentence and inserting ‘‘of subparagraph (D)’’, and 

(iv) by striking ‘‘in subparagraph (D)’’ in the last 

sentence and inserting ‘‘in subparagraph (C)’’. 

(F) Clause (iv) of section 7701(b)(5)(A) is amended to 

read as follows: 

‘‘(iv) a professional athlete who is temporarily in 

the United States to compete in a sports event— 

‘‘(I) which is organized for the primary purpose 

of benefiting an organization which is described 

in section 501(c)(3) and exempt from tax under 

section 501(a), 

‘‘(II) all of the net proceeds of which are 

contributed to such organization, and, 

‘‘(III) which utilizes volunteers for substantially all of the work performed in carrying out 

such event.’’. 

(b) ONLY 50 PERCENT OF EXPENSES FOR MEALS PROVIDED ON

OR NEAR BUSINESS PREMISES ALLOWED AS DEDUCTION.—Paragraph 

(2) of section 274(n), as amended by subsection (a), is amended— 

(1) by striking subparagraph (B), 

(2) by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively, 

(3) by striking ‘‘of subparagraph (D)’’ in the last sentence 

and inserting ‘‘of subparagraph (C)’’, and 

(4) by striking ‘‘in subparagraph (C)’’ in the last sentence 

and inserting ‘‘in subparagraph (B)’’. 

(c) TREATMENT OF TRANSPORTATION BENEFITS.—Section 274, 

as amended by subsection (a), is amended— 

(1) in subsection (a)— 

(A) in the heading, by striking ‘‘OR RECREATION’’ and 

inserting ‘‘RECREATION, OR QUALIFIED TRANSPORTATION

FRINGES’’, and 

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

‘‘(4) QUALIFIED TRANSPORTATION FRINGES.—No deduction 

shall be allowed under this chapter for the expense of any 

qualified transportation fringe (as defined in section 132(f)) 

provided to an employee of the taxpayer.’’, and 

(2) by inserting after subsection (k) the following new subsection: 

‘‘(l) TRANSPORTATION AND COMMUTING BENEFITS.— 

‘‘(1) IN GENERAL.—No deduction shall be allowed under 

this chapter for any expense incurred for providing any 

transportation, or any payment or reimbursement, to an 

employee of the taxpayer in connection with travel between 

the employee’s residence and place of employment, except as 

necessary for ensuring the safety of the employee. 

26 USC 274. 


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131 STAT. 2126 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(2) EXCEPTION.—In the case of any qualified bicycle commuting reimbursement (as described in section 132(f)(5)(F)), 

this subsection shall not apply for any amounts paid or incurred 

after December 31, 2017, and before January 1, 2026.’’. 

(d) ELIMINATION OF DEDUCTION FOR MEALS PROVIDED AT CON- VENIENCE OF EMPLOYER.—Section 274, as amended by subsection 

(c), is amended— 

(1) by redesignating subsection (o) as subsection (p), and 

(2) by inserting after subsection (n) the following new subsection: 

‘‘(o) MEALS PROVIDED AT CONVENIENCE OF EMPLOYER.—No 

deduction shall be allowed under this chapter for— 

‘‘(1) any expense for the operation of a facility described 

in section 132(e)(2), and any expense for food or beverages, 

including under section 132(e)(1), associated with such facility, 

or 

‘‘(2) any expense for meals described in section 119(a).’’. 

(e) EFFECTIVE DATE.— (1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to amounts 

incurred or paid after December 31, 2017. 

(2) EFFECTIVE DATE FOR ELIMINATION OF DEDUCTION FOR

MEALS PROVIDED AT CONVENIENCE OF EMPLOYER.—The amendments made by subsection (d) shall apply to amounts incurred 

or paid after December 31, 2025. 

SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO 

DOMESTIC PRODUCTION ACTIVITIES. 

(a) 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). 

(b) CONFORMING AMENDMENTS.— (1) Sections 74(d)(2)(B), 86(b)(2)(A), 135(c)(4)(A), 

137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C), 

246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking 

‘‘199,’’. 

(2) Section 170(b)(2)(D), as amended by subtitle A, is 

amended by striking clause (iv), and by redesignating clauses 

(v) and (vi) as clauses (iv) and (v). 

(3) Section 172(d) is amended by striking paragraph (7). 

(4) Section 613(a), as amended by section 11011, is 

amended by striking ‘‘and without the deduction under section 

199’’. 

(5) Section 613A(d)(1), as amended by section 11011, is 

amended by striking subparagraph (B) and by redesignating 

subparagraphs (C), (D), (E), and (F) as subparagraphs (B), 

(C), (D), and (E), respectively. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, 

AND OTHER AMOUNTS. 

(a) DENIAL OF DEDUCTION.— 

(1) IN GENERAL.—Subsection (f) of section 162 is amended 

to read as follows: 

‘‘(f) FINES, PENALTIES, AND OTHER AMOUNTS.— 

‘‘(1) IN GENERAL.—Except as provided in the following paragraphs of this subsection, no deduction otherwise allowable 

26 USC 74 note. 

26 USC 

prec. 161. 

26 USC 274 note. 

26 USC 274. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2127 

shall be allowed under this chapter for any amount paid or 

incurred (whether by suit, agreement, or otherwise) to, or at 

the direction of, a government or governmental entity in relation to the violation of any law or the investigation or inquiry 

by such government or entity into the potential violation of 

any law. 

‘‘(2) EXCEPTION FOR AMOUNTS CONSTITUTING RESTITUTION

OR PAID TO COME INTO COMPLIANCE WITH LAW.— 

‘‘(A) IN GENERAL.—Paragraph (1) shall not apply to 

any amount that— 

‘‘(i) the taxpayer establishes— 

‘‘(I) constitutes restitution (including remediation of property) for damage or harm which was 

or may be caused by the violation of any law 

or the potential violation of any law, or 

‘‘(II) is paid to come into compliance with any 

law which was violated or otherwise involved in 

the investigation or inquiry described in paragraph 

(1), 

‘‘(ii) is identified as restitution or as an amount 

paid to come into compliance with such law, as the 

case may be, in the court order or settlement agreement, and 

‘‘(iii) in the case of any amount of restitution for 

failure to pay any tax imposed under this title in 

the same manner as if such amount were such tax, 

would have been allowed as a deduction under this 

chapter if it had been timely paid. 

The identification under clause (ii) alone shall not be sufficient to make the establishment required under clause 

(i). 

‘‘(B) LIMITATION.—Subparagraph (A) shall not apply 

to any amount paid or incurred as reimbursement to the 

government or entity for the costs of any investigation 

or litigation. 

‘‘(3) EXCEPTION FOR AMOUNTS PAID OR INCURRED AS THE

RESULT OF CERTAIN COURT ORDERS.—Paragraph (1) shall not 

apply to any amount paid or incurred by reason of any order 

of a court in a suit in which no government or governmental 

entity is a party. 

‘‘(4) EXCEPTION FOR TAXES DUE.—Paragraph (1) shall not 

apply to any amount paid or incurred as taxes due. 

‘‘(5) TREATMENT OF CERTAIN NONGOVERNMENTAL REGULATORY ENTITIES.—For purposes of this subsection, the following nongovernmental entities shall be treated as governmental entities: 

‘‘(A) Any nongovernmental entity which exercises selfregulatory powers (including imposing sanctions) in connection with a qualified board or exchange (as defined in 

section 1256(g)(7)). 

‘‘(B) To the extent provided in regulations, any nongovernmental entity which exercises self-regulatory powers 

(including imposing sanctions) as part of performing an 

essential governmental function.’’. 

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to amounts paid or incurred on or after 

26 USC 162 note. 


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131 STAT. 2128 PUBLIC LAW 115–97—DEC. 22, 2017 

the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any 

binding order or agreement entered into before such date. Such 

exception shall not apply to an order or agreement requiring 

court approval unless the approval was obtained before such 

date. 

(b) REPORTING OF DEDUCTIBLE AMOUNTS.— 

(1) IN GENERAL.—Subpart B of part III of subchapter A 

of chapter 61 is amended by inserting after section 6050W 

the following new section: 

‘‘SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN FINES, PENALTIES, AND OTHER AMOUNTS. 

‘‘(a) REQUIREMENT OF REPORTING.— 

‘‘(1) IN GENERAL.—The appropriate official of any government or any entity described in section 162(f)(5) which is 

involved in a suit or agreement described in paragraph (2) 

shall make a return in such form as determined by the Secretary setting forth— 

‘‘(A) the amount required to be paid as a result of 

the suit or agreement to which paragraph (1) of section 

162(f) applies, 

‘‘(B) any amount required to be paid as a result of 

the suit or agreement which constitutes restitution or 

remediation of property, and 

‘‘(C) any amount required to be paid as a result of 

the suit or agreement for the purpose of coming into compliance with any law which was violated or involved in the 

investigation or inquiry. 

‘‘(2) SUIT OR AGREEMENT DESCRIBED.— 

‘‘(A) IN GENERAL.—A suit or agreement is described 

in this paragraph if— 

‘‘(i) it is— 

‘‘(I) a suit with respect to a violation of any 

law over which the government or entity has 

authority and with respect to which there has 

been a court order, or 

‘‘(II) an agreement which is entered into with 

respect to a violation of any law over which the 

government or entity has authority, or with respect 

to an investigation or inquiry by the government 

or entity into the potential violation of any law 

over which such government or entity has 

authority, and 

‘‘(ii) the aggregate amount involved in all court 

orders and agreements with respect to the violation, 

investigation, or inquiry is $600 or more. 

‘‘(B) ADJUSTMENT OF REPORTING THRESHOLD.—The Secretary shall adjust the $600 amount in subparagraph (A)(ii) 

as necessary in order to ensure the efficient administration 

of the internal revenue laws. 

‘‘(3) TIME OF FILING.—The return required under this subsection shall be filed at the time the agreement is entered 

into, as determined by the Secretary. 

‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVIDUALS INVOLVED

IN THE SETTLEMENT.—Every person required to make a return 

26 USC 6050X. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2129 

under subsection (a) shall furnish to each person who is a party 

to the suit or agreement a written statement showing— 

‘‘(1) the name of the government or entity, and 

‘‘(2) the information supplied to the Secretary under subsection (a)(1). 

The written statement required under the preceding sentence shall 

be furnished to the person at the same time the government or 

entity provides the Secretary with the information required under 

subsection (a). 

‘‘(c) APPROPRIATE OFFICIAL DEFINED.—For purposes of this section, the term ‘appropriate official’ means the officer or employee 

having control of the suit, investigation, or inquiry or the person 

appropriately designated for purposes of this section.’’. 

(2) CONFORMING 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. Information with respect to certain fines, penalties, and other 

amounts.’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to amounts paid or incurred on or after 

the date of the enactment of this Act, except that such amendments shall not apply to amounts paid or incurred under any 

binding order or agreement entered into before such date. Such 

exception shall not apply to an order or agreement requiring 

court approval unless the approval was obtained before such 

date. 

SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO 

NONDISCLOSURE AGREEMENTS PAID IN CONNECTION 

WITH SEXUAL HARASSMENT OR SEXUAL ABUSE. 

(a) DENIAL OF DEDUCTION.—Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection: 

‘‘(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL

ABUSE.—No deduction shall be allowed under this chapter for— 

‘‘(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject 

to a nondisclosure agreement, or 

‘‘(2) attorney’s fees related to such a settlement or payment.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to amounts paid or incurred after the date of the 

enactment of this Act. 

SEC. 13308. 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 on or after the date of 

the enactment of this Act. 

26 USC 162 note. 

26 USC 162 note. 

26 USC 6050X 

note. 

26 USC 

prec. 6041. 


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131 STAT. 2130 PUBLIC LAW 115–97—DEC. 22, 2017 

SEC. 13309. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE 

OF PARTNERSHIP PROFITS INTERESTS HELD IN 

CONNECTION WITH PERFORMANCE OF INVESTMENT 

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, the excess (if any) of— 

‘‘(1) the taxpayer’s net long-term capital gain with respect 

to such interests for such taxable year, over 

‘‘(2) the taxpayer’s net long-term capital gain with respect 

to such interests for such taxable year computed by applying 

paragraphs (3) and (4) of sections 1222 by substituting ‘3 years’ 

for ‘1 year’, 

shall be treated as short-term capital gain, notwithstanding section 

83 or any election in effect under section 83(b). 

‘‘(b) SPECIAL RULE.—To the extent provided by the Secretary, 

subsection (a) shall not apply to income or gain attributable to 

any asset not held for portfolio investment on behalf of third party 

investors. 

‘‘(c) APPLICABLE PARTNERSHIP INTEREST.—For purposes of this 

section— 

‘‘(1) IN GENERAL.—Except as provided in this paragraph 

or paragraph (4), 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 substantial services by the 

taxpayer, or any other related person, in any applicable trade 

or business. The previous sentence shall not apply to an interest 

held by a person who is employed by another entity that is 

conducting a trade or business (other than an applicable trade 

or business) and only provides services to such other entity. 

‘‘(2) APPLICABLE TRADE OR BUSINESS.—The term ‘applicable 

trade or business’ means any activity conducted on a regular, 

continuous, and substantial basis which, regardless of whether 

the activity is conducted in one or more entities, consists, 

in whole or in part, of— 

‘‘(A) raising or returning capital, and 

‘‘(B) either— 

‘‘(i) investing in (or disposing of) specified assets 

(or identifying specified assets for such investing or 

disposition), or 

‘‘(ii) developing specified assets. 

‘‘(3) SPECIFIED ASSET.—The term ‘specified asset’ means 

securities (as defined in section 475(c)(2) without regard to 

the last sentence thereof), commodities (as defined in section 

475(e)(2)), real estate held for rental or investment, cash or 

cash equivalents, options or derivative contracts with respect 

to any of the foregoing, and an interest in a partnership to 

the extent of the partnership’s proportionate interest in any 

of the foregoing. 

26 USC 1061. 

26 USC 1061, 

1062. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2131 

‘‘(4) EXCEPTIONS.—The term ‘applicable partnership 

interest’ shall not include— 

‘‘(A) any interest in a partnership directly or indirectly 

held by a corporation, or 

‘‘(B) any capital interest in the partnership which provides the taxpayer with a right to share in partnership 

capital commensurate with— 

‘‘(i) the amount of capital contributed (determined 

at the time of receipt of such partnership interest), 

or 

‘‘(ii) the value of such interest subject to tax under 

section 83 upon the receipt or vesting of such interest. 

‘‘(5) THIRD PARTY INVESTOR.—The term ‘third party 

investor’ means a person who— 

‘‘(A) holds an interest in the partnership which does 

not constitute property held in connection with an 

applicable trade or business; and 

‘‘(B) is not (and has not been) actively engaged, and 

is (and was) not related to a person so engaged, in (directly 

or indirectly) providing substantial services described in 

paragraph (1) for such partnership or any applicable trade 

or business. 

‘‘(d) 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 short term capital gain) the excess (if any) of— 

‘‘(A) so much of the taxpayer’s long-term capital gains 

with respect to such interest for such taxable year attributable to the sale or exchange of any asset held for not 

more than 3 years as is allocable to such interest, over 

‘‘(B) any amount treated as short term capital gain 

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. 

‘‘(e) REPORTING.—The Secretary shall require such reporting 

(at the time and in the manner prescribed by the Secretary) as 

is necessary to carry out the purposes of this section. 

‘‘(f) REGULATIONS.—The Secretary shall issue such regulations 

or other guidance as is necessary or appropriate to carry out the 

purposes of this section’’. 

(b) 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.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

26 USC 1061 

note. 

16 USC 

prec. 1051. 


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131 STAT. 2132 PUBLIC LAW 115–97—DEC. 22, 2017 

SEC. 13310. PROHIBITION ON CASH, GIFT CARDS, AND OTHER NONTANGIBLE PERSONAL PROPERTY AS EMPLOYEE 

ACHIEVEMENT AWARDS. 

(a) IN GENERAL.—Subparagraph (A) of section 274(j)(3) is 

amended— 

(1) by striking ‘‘The term’’ and inserting the following: 

‘‘(i) IN GENERAL.—The term’’. 

(2) by redesignating clauses (i), (ii), and (iii) as subclauses 

(I), (II), and (III), respectively, and conforming the margins 

accordingly, and 

(3) by adding at the end the following new clause: 

‘‘(ii) TANGIBLE PERSONAL PROPERTY.—For purposes 

of clause (i), the term ‘tangible personal property’ shall 

not include— 

‘‘(I) cash, cash equivalents, gift cards, gift coupons, or gift certificates (other than arrangements 

conferring only the right to select and receive tangible personal property from a limited array of 

such items pre-selected or pre-approved by the 

employer), or 

‘‘(II) vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, other securities, and other similar items.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to amounts paid or incurred after December 31, 2017. 

SEC. 13311. ELIMINATION OF DEDUCTION FOR LIVING EXPENSES 

INCURRED BY MEMBERS OF CONGRESS. 

(a) IN GENERAL.—Subsection (a) of section 162 is amended 

in the matter following paragraph (3) by striking ‘‘in excess of 

$3,000’’. 

(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. 13312. CERTAIN CONTRIBUTIONS BY GOVERNMENTAL ENTITIES 

NOT TREATED AS CONTRIBUTIONS TO CAPITAL. 

(a) IN GENERAL.—Section 118 is amended— 

(1) by striking subsections (b), (c), and (d), 

(2) by redesignating subsection (e) as subsection (d), and 

(3) by inserting after subsection (a) the following new subsections: 

‘‘(b) EXCEPTIONS.—For purposes of subsection (a), the term ‘contribution to the capital of the taxpayer’ does not include— 

‘‘(1) any contribution in aid of construction or any other 

contribution as a customer or potential customer, and 

‘‘(2) any contribution by any governmental entity or civic 

group (other than a contribution made by a shareholder as 

such). 

‘‘(c) REGULATIONS.—The Secretary shall issue such regulations 

or other guidance as may be necessary or appropriate to carry 

out this section, including regulations or other guidance for determining whether any contribution constitutes a contribution in aid 

of construction.’’. 

26 USC 118 note. (b) EFFECTIVE DATE.— 

26 USC 162 note. 

26 USC 274 note. 

26 USC 274. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2133 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to contributions 

made after the date of enactment of this Act. 

(2) EXCEPTION.—The amendments made by this section 

shall not apply to any contribution, made after the date of 

enactment of this Act by a governmental entity, which is made 

pursuant to a master development plan that has been approved 

prior to such date by a governmental entity. 

SEC. 13313. 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.—Section 1016(a)(23) is 

amended— 

(1) by striking ‘‘1044,’’, and 

(2) by striking ‘‘1044(d),’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to sales after December 31, 2017. 

SEC. 13314. 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) CONFORMING AMENDMENT.—Section 1231(b)(1)(C) is 

amended by inserting ‘‘a patent, invention, model or design (whether 

or not patented), a secret formula or process,’’ before ‘‘a copyright’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to dispositions after December 31, 2017. 

PART V—BUSINESS CREDITS 

SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT. 

(a) CREDIT RATE.—Subsection (a) of section 45C is amended 

by striking ‘‘50 percent’’ and inserting ‘‘25 percent’’. 

(b) ELECTION OF REDUCED CREDIT.—Subsection (b) of section 

280C is amended by redesignating paragraph (3) as paragraph 

(4) and by inserting after paragraph (2) the following new paragraph: 

‘‘(3) ELECTION OF REDUCED CREDIT.— ‘‘(A) IN GENERAL.—In the case of any taxable year 

for which an election is made under this paragraph— 

‘‘(i) paragraphs (1) and (2) shall not apply, and 

‘‘(ii) the amount of the credit under section 45C(a) 

shall be the amount determined under subparagraph 

(B). 

‘‘(B) AMOUNT OF REDUCED CREDIT.—The amount of 

credit determined under this subparagraph for any taxable 

year shall be the amount equal to the excess of— 

‘‘(i) the amount of credit determined under section 

45C(a) without regard to this paragraph, over 

‘‘(ii) the product of— 

‘‘(I) the amount described in clause (i), and 

‘‘(II) the maximum rate of tax under section 

11(b). 

26 USC 1221 

note. 

26 USC 1016 

note. 

26 USC 

prec. 1031. 


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131 STAT. 2134 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(C) ELECTION.—An election under this paragraph for 

any taxable year shall be made not later than the time 

for filing the return of tax for such year (including extensions), shall be made on such return, and shall be made 

in such manner as the Secretary shall prescribe. Such 

an election, once made, shall be irrevocable.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13402. REHABILITATION CREDIT LIMITED TO CERTIFIED HISTORIC STRUCTURES. 

(a) IN GENERAL.—Subsection (a) of section 47 is amended to 

read as follows: 

‘‘(a) GENERAL RULE.— ‘‘(1) IN GENERAL.—For purposes of section 46, for any taxable year during the 5-year period beginning in the taxable 

year in which a qualified rehabilitated building is placed in 

service, the rehabilitation credit for such year is an amount 

equal to the ratable share for such year. 

‘‘(2) RATABLE SHARE.—For purposes of paragraph (1), the 

ratable share for any taxable year during the period described 

in such paragraph is the amount equal to 20 percent of the 

qualified rehabilitation expenditures with respect to the qualified rehabilitated building, as allocated ratably to each year 

during such period.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) Section 47(c) is amended— 

(A) in paragraph (1)— 

(i) in subparagraph (A), by amending clause (iii) 

to read as follows: 

‘‘(iii) such building is a certified historic structure, 

and’’, 

(ii) by striking subparagraph (B), and 

(iii) by redesignating subparagraphs (C) and (D) 

as subparagraphs (B) and (C), respectively, and 

(B) in paragraph (2)(B), by amending clause (iv) to 

read as follows: 

‘‘(iv) CERTIFIED HISTORIC STRUCTURE.—Any 

expenditure attributable to the rehabilitation of a 

qualified rehabilitated building unless the rehabilitation is a certified rehabilitation (within the meaning 

of subparagraph (C)).’’. 

(2) Paragraph (4) of section 145(d) is amended— 

(A) by striking ‘‘of section 47(c)(1)(C)’’ each place it 

appears and inserting ‘‘of section 47(c)(1)(B)’’, and 

(B) by striking ‘‘section 47(c)(1)(C)(i)’’ and inserting 

‘‘section 47(c)(1)(B)(i)’’. 

(c) EFFECTIVE DATE.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to amounts paid 

or incurred after December 31, 2017. 

(2) TRANSITION RULE.—In the case of qualified rehabilitation expenditures with respect to any building— 

(A) owned or leased by the taxpayer during the entirety 

of the period after December 31, 2017, and 

(B) with respect to which the 24-month period selected 

by the taxpayer under clause (i) of section 47(c)(1)(B) of 

26 USC 47 note. 

26 USC 47. 

26 USC 45C note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2135 

the Internal Revenue Code (as amended by subsection (b)), 

or the 60-month period applicable under clause (ii) of such 

section, begins not later than 180 days after the date 

of the enactment of this Act, 

the amendments made by this section shall apply to such 

expenditures paid or incurred after the end of the taxable 

year in which the 24-month period, or the 60-month period, 

referred to in subparagraph (B) ends. 

SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL 

LEAVE. 

(a) IN GENERAL.— (1) ALLOWANCE OF CREDIT.—Subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the 

following new section: 

‘‘SEC. 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE. 

‘‘(a) ESTABLISHMENT OF CREDIT.— ‘‘(1) IN GENERAL.—For purposes of section 38, in the case 

of an eligible employer, the paid family and medical leave 

credit is an amount equal to the applicable percentage of the 

amount of wages paid to qualifying employees during any period 

in which such employees are on family and medical leave. 

‘‘(2) APPLICABLE PERCENTAGE.—For purposes of paragraph 

(1), the term ‘applicable percentage’ means 12.5 percent 

increased (but not above 25 percent) by 0.25 percentage points 

for each percentage point by which the rate of payment (as 

described under subsection (c)(1)(B)) exceeds 50 percent. 

‘‘(b) LIMITATION.— ‘‘(1) IN GENERAL.—The credit allowed under subsection (a) 

with respect to any employee for any taxable year shall not 

exceed an amount equal to the product of the normal hourly 

wage rate of such employee for each hour (or fraction thereof) 

of actual services performed for the employer and the number 

of hours (or fraction thereof) for which family and medical 

leave is taken. 

‘‘(2) NON-HOURLY WAGE RATE.—For purposes of paragraph 

(1), in the case of any employee who is not paid on an hourly 

wage rate, the wages of such employee shall be prorated to 

an hourly wage rate under regulations established by the Secretary. 

‘‘(3) MAXIMUM AMOUNT OF LEAVE SUBJECT TO CREDIT.— The amount of family and medical leave that may be taken 

into account with respect to any employee under subsection 

(a) for any taxable year shall not exceed 12 weeks. 

‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘eligible employer’ means any 

employer who has in place a written policy that meets the 

following requirements: 

‘‘(A) The policy provides— 

‘‘(i) in the case of a qualifying employee who is 

not a part-time employee (as defined in section 

4980E(d)(4)(B)), not less than 2 weeks of annual paid 

family and medical leave, and 

‘‘(ii) in the case of a qualifying employee who is 

a part-time employee, an amount of annual paid family 

and medical leave that is not less than an amount 

which bears the same ratio to the amount of annual 

26 USC 45S. 


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131 STAT. 2136 PUBLIC LAW 115–97—DEC. 22, 2017 

paid family and medical leave that is provided to a 

qualifying employee described in clause (i) as— 

‘‘(I) the number of hours the employee is 

expected to work during any week, bears to 

‘‘(II) the number of hours an equivalent qualifying employee described in clause (i) is expected 

to work during the week. 

‘‘(B) The policy requires that the rate of payment under 

the program is not less than 50 percent of the wages 

normally paid to such employee for services performed 

for the employer. 

‘‘(2) SPECIAL RULE FOR CERTAIN EMPLOYERS.— ‘‘(A) IN GENERAL.—An added employer shall not be 

treated as an eligible employer unless such employer provides paid family and medical leave in compliance with 

a written policy which ensures that the employer— 

‘‘(i) will not interfere with, restrain, or deny the 

exercise of or the attempt to exercise, any right provided under the policy, and 

‘‘(ii) will not discharge or in any other manner 

discriminate against any individual for opposing any 

practice prohibited by the policy. 

‘‘(B) ADDED EMPLOYER; ADDED EMPLOYEE.—For purposes of this paragraph— 

‘‘(i) ADDED EMPLOYEE.—The term ‘added employee’ 

means a qualifying employee who is not covered by 

title I of the Family and Medical Leave Act of 1993, 

as amended. 

‘‘(ii) ADDED EMPLOYER.—The term ‘added employer’ 

means an eligible employer (determined without regard 

to this paragraph), whether or not covered by that 

title I, who offers paid family and medical leave to 

added employees. 

‘‘(3) AGGREGATION RULE.—All persons which are treated 

as a single employer under subsections (a) and (b) of section 

52 shall be treated as a single taxpayer. 

‘‘(4) TREATMENT OF BENEFITS MANDATED OR PAID FOR BY

STATE OR LOCAL GOVERNMENTS.—For purposes of this section, 

any leave which is paid by a State or local government or 

required by State or local law shall not be taken into account 

in determining the amount of paid family and medical leave 

provided by the employer. 

‘‘(5) NO INFERENCE.—Nothing in this subsection shall be 

construed as subjecting an employer to any penalty, liability, 

or other consequence (other than ineligibility for the credit 

allowed by reason of subsection (a) or recapturing the benefit 

of such credit) for failure to comply with the requirements 

of this subsection. 

‘‘(d) QUALIFYING EMPLOYEES.—For purposes of this section, the 

term ‘qualifying employee’ means any employee (as defined in section 3(e) of the Fair Labor Standards Act of 1938, as amended) 

who— 

‘‘(1) has been employed by the employer for 1 year or 

more, and 

‘‘(2) for the preceding year, had compensation not in excess 

of an amount equal to 60 percent of the amount applicable 

for such year under clause (i) of section 414(q)(1)(B). 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2137 

‘‘(e) FAMILY AND MEDICAL LEAVE.— 

‘‘(1) IN GENERAL.—Except as provided in paragraph (2), 

for purposes of this section, the term ‘family and medical leave’ 

means leave for any 1 or more of the purposes described under 

subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or 

paragraph (3), of section 102(a) of the Family and Medical 

Leave Act of 1993, as amended, whether the leave is provided 

under that Act or by a policy of the employer. 

‘‘(2) EXCLUSION.—If an employer provides paid leave as 

vacation leave, personal leave, or medical or sick leave (other 

than leave specifically for 1 or more of the purposes referred 

to in paragraph (1)), that paid leave shall not be considered 

to be family and medical leave under paragraph (1). 

‘‘(3) DEFINITIONS.—In this subsection, the terms ‘vacation 

leave’, ‘personal leave’, and ‘medical or sick leave’ mean those 

3 types of leave, within the meaning of section 102(d)(2) of 

that Act. 

‘‘(f) DETERMINATIONS MADE BY SECRETARY OF TREASURY.—For 

purposes of this section, any determination as to whether an 

employer or an employee satisfies the applicable requirements for 

an eligible employer (as described in subsection (c)) or qualifying 

employee (as described in subsection (d)), respectively, shall be 

made by the Secretary based on such information, to be provided 

by the employer, as the Secretary determines to be necessary or 

appropriate. 

‘‘(g) WAGES.—For purposes of this section, the term ‘wages’ 

has the meaning given such term by subsection (b) of section 

3306 (determined without regard to any dollar limitation contained 

in such section). Such term shall not include any amount taken 

into account for purposes of determining any other credit allowed 

under this subpart. 

‘‘(h) ELECTION TO HAVE CREDIT NOT APPLY.— 

‘‘(1) IN GENERAL.—A taxpayer may elect to have this section 

not apply for any taxable year. 

‘‘(2) OTHER RULES.—Rules similar to the rules of paragraphs (2) and (3) of section 51(j) shall apply for purposes 

of this subsection. 

‘‘(i) TERMINATION.—This section shall not apply to wages paid 

in taxable years beginning after December 31, 2019.’’. 

(b) CREDIT PART OF GENERAL BUSINESS CREDIT.—Section 38(b) 

is amended by striking ‘‘plus’’ at the end of paragraph (35), by 

striking the period at the end of paragraph (36) and inserting 

‘‘, plus’’, and by adding at the end the following new paragraph: 

‘‘(37) in the case of an eligible employer (as defined in 

section 45S(c)), the paid family and medical leave credit determined under section 45S(a).’’. 

(c) CREDIT ALLOWED AGAINST AMT.—Subparagraph (B) of section 38(c)(4) is amended by redesignating clauses (ix) through (xi) 

as clauses (x) through (xii), respectively, and by inserting after 

clause (viii) the following new clause: 

‘‘(ix) the credit determined under section 45S,’’. 

(d) CONFORMING AMENDMENTS.— 

(1) DENIAL OF DOUBLE BENEFIT.—Section 280C(a) is 

amended by inserting ‘‘45S(a),’’ after ‘‘45P(a),’’. 

(2) ELECTION TO HAVE CREDIT NOT APPLY.—Section 6501(m) 

is amended by inserting ‘‘45S(h),’’ after ‘‘45H(g),’’. 

26 USC 38. 


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131 STAT. 2138 PUBLIC LAW 115–97—DEC. 22, 2017 

(3) CLERICAL AMENDMENT.—The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended 

by adding at the end the following new item: 

‘‘Sec. 45S. Employer credit for paid family and medical leave.’’. 

(e) EFFECTIVE DATE.—The amendments made by this section 

shall apply to wages paid in taxable years beginning after December 

31, 2017. 

SEC. 13404. REPEAL OF TAX CREDIT BONDS. 

(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) Part IV of subchapter U of chapter 1 is amended by 

striking section 1397E (and by striking the item relating to 

such section in the table of sections for such part). 

(2) Section 54(l)(3)(B) is amended by inserting ‘‘(as in effect 

before its repeal by the Tax Cuts and Jobs Act)’’ after ‘‘section 

1397E(I)’’. 

(3) Section 6211(b)(4)(A) is amended by striking ‘‘, and 

6431’’ and inserting ‘‘and’’ before ‘‘36B’’. 

(4) 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 December 31, 2017. 

PART VI—PROVISIONS RELATED TO SPECIFIC 

ENTITIES AND INDUSTRIES 

Subpart A—Partnership Provisions 

SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN PERSONS 

FROM SALE OR EXCHANGE OF INTERESTS IN PARTNERSHIPS ENGAGED IN TRADE OR BUSINESS WITHIN THE 

UNITED STATES. 

(a) AMOUNT TREATED AS EFFECTIVELY CONNECTED.— 

(1) IN GENERAL.—Section 864(c) is amended by adding at 

the end the following: 

‘‘(8) GAIN OR LOSS OF FOREIGN PERSONS FROM SALE OR

EXCHANGE OF CERTAIN PARTNERSHIP INTERESTS.— 

‘‘(A) IN GENERAL.—Notwithstanding any other provision of this subtitle, if a nonresident alien individual or 

foreign corporation owns, directly or indirectly, an interest 

in a partnership which is engaged in any trade or business 

within the United States, gain or loss on the sale or 

exchange of all (or any portion of) such interest shall be 

treated as effectively connected with the conduct of such 

trade or business to the extent such gain or loss does 

not exceed the amount determined under subparagraph 

(B). 

26 USC 54 note. 

26 USC 

prec. 1397E. 

26 USC 

prec. 6411. 

26 USC prec. 21, 

prec. 54, 54, 

prec. 54A, 

54A–54F, 

prec. 54AA, 

54AA. 

26 USC 38 note. 

26 USC prec. 38. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2139 

‘‘(B) AMOUNT TREATED AS EFFECTIVELY CONNECTED.— The amount determined under this subparagraph with 

respect to any partnership interest sold or exchanged— 

‘‘(i) in the case of any gain on the sale or exchange 

of the partnership interest, is— 

‘‘(I) the portion of the partner’s distributive 

share of the amount of gain which would have 

been effectively connected with the conduct of a 

trade or business within the United States if the 

partnership had sold all of its assets at their fair 

market value as of the date of the sale or exchange 

of such interest, or 

‘‘(II) zero if no gain on such deemed sale would 

have been so effectively connected, and 

‘‘(ii) in the case of any loss on the sale or exchange 

of the partnership interest, is— 

‘‘(I) the portion of the partner’s distributive 

share of the amount of loss on the deemed sale 

described in clause (i)(I) which would have been 

so effectively connected, or 

‘‘(II) zero if no loss on such deemed sale would 

be have been so effectively connected. 

For purposes of this subparagraph, a partner’s distributive share of gain or loss on the deemed sale shall 

be determined in the same manner as such partner’s 

distributive share of the non-separately stated taxable 

income or loss of such partnership. 

‘‘(C) COORDINATION WITH UNITED STATES REAL PROPERTY INTERESTS.—If a partnership described in subparagraph (A) holds any United States real property interest 

(as defined in section 897(c)) at the time of the sale or 

exchange of the partnership interest, then the gain or 

loss treated as effectively connected income under subparagraph (A) shall be reduced by the amount so treated with 

respect to such United States real property interest under 

section 897. 

‘‘(D) SALE OR EXCHANGE.—For purposes of this paragraph, the term ‘sale or exchange’ means any sale, 

exchange, or other disposition. 

‘‘(E) SECRETARIAL AUTHORITY.—The Secretary shall 

prescribe such regulations or other guidance as the Secretary determines appropriate for the application of this 

paragraph, including with respect to exchanges described 

in section 332, 351, 354, 355, 356, or 361.’’. 

(2) CONFORMING AMENDMENTS.—Section 864(c)(1) is 

amended— 

(A) by striking ‘‘and (7)’’ in subparagraph (A), and 

inserting ‘‘(7), and (8)’’, and 

(B) by striking ‘‘or (7)’’ in subparagraph (B), and 

inserting ‘‘(7), or (8)’’. 

(b) WITHHOLDING REQUIREMENTS.—Section 1446 is amended 

by redesignating subsection (f) as subsection (g) and by inserting 

after subsection (e) the following: 

‘‘(f) SPECIAL RULES FOR WITHHOLDING ON DISPOSITIONS OF

PARTNERSHIP INTERESTS.— ‘‘(1) IN GENERAL.—Except as provided in this subsection, 

if any portion of the gain (if any) on any disposition of an 

26 USC 864. 


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131 STAT. 2140 PUBLIC LAW 115–97—DEC. 22, 2017 

interest in a partnership would be treated under section 

864(c)(8) as effectively connected with the conduct of a trade 

or business within the United States, the transferee shall be 

required to deduct and withhold a tax equal to 10 percent 

of the amount realized on the disposition. 

‘‘(2) EXCEPTION IF NONFOREIGN AFFIDAVIT FURNISHED.— 

‘‘(A) IN GENERAL.—No person shall be required to 

deduct and withhold any amount under paragraph (1) with 

respect to any disposition if the transferor furnishes to 

the transferee an affidavit by the transferor stating, under 

penalty of perjury, the transferor’s United States taxpayer 

identification number and that the transferor is not a foreign person. 

‘‘(B) FALSE AFFIDAVIT.—Subparagraph (A) shall not 

apply to any disposition if— 

‘‘(i) the transferee has actual knowledge that the 

affidavit is false, or the transferee receives a notice 

(as described in section 1445(d)) from a transferor’s 

agent or transferee’s agent that such affidavit or statement is false, or 

‘‘(ii) the Secretary by regulations requires the 

transferee to furnish a copy of such affidavit or statement to the Secretary and the transferee fails to furnish a copy of such affidavit or statement to the Secretary at such time and in such manner as required 

by such regulations. 

‘‘(C) RULES FOR AGENTS.—The rules of section 1445(d) 

shall apply to a transferor’s agent or transferee’s agent 

with respect to any affidavit described in subparagraph 

(A) in the same manner as such rules apply with respect 

to the disposition of a United States real property interest 

under such section. 

‘‘(3) AUTHORITY OF SECRETARY TO PRESCRIBE REDUCED

AMOUNT.—At the request of the transferor or transferee, the 

Secretary may prescribe a reduced amount to be withheld under 

this section if the Secretary determines that to substitute such 

reduced amount will not jeopardize the collection of the tax 

imposed under this title with respect to gain treated under 

section 864(c)(8) as effectively connected with the conduct of 

a trade or business with in the United States. 

‘‘(4) PARTNERSHIP TO WITHHOLD AMOUNTS NOT WITHHELD

BY THE TRANSFEREE.—If a transferee fails to withhold any 

amount required to be withheld under paragraph (1), the partnership shall be required to deduct and withhold from distributions to the transferee a tax in an amount equal to the amount 

the transferee failed to withhold (plus interest under this title 

on such amount). 

‘‘(5) DEFINITIONS.—Any term used in this subsection which 

is also used under section 1445 shall have the same meaning 

as when used in such section. 

‘‘(6) REGULATIONS.—The Secretary shall prescribe such 

regulations or other guidance as may be necessary to carry 

out the purposes of this subsection, including regulations providing for exceptions from the provisions of this subsection.’’. 

(c) EFFECTIVE DATES.— 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2141 

(1) SUBSECTION (a).—The amendments made by subsection 

(a) shall apply to sales, exchanges, and dispositions on or after 

November 27, 2017. 

(2) SUBSECTION (b).—The amendment made by subsection 

(b) shall apply to sales, exchanges, and dispositions after 

December 31, 2017. 

SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN 

THE CASE OF TRANSFER OF PARTNERSHIP INTEREST. 

(a) IN GENERAL.—Paragraph (1) of section 743(d) is to read 

as follows: 

‘‘(1) IN GENERAL.—For purposes of this section, a partnership has a substantial built-in loss with respect to a transfer 

of an interest in the partnership if— 

‘‘(A) the partnership’s adjusted basis in the partnership property exceeds by more than $250,000 the fair market 

value of such property, or 

‘‘(B) the transferee partner would be allocated a loss of more than $250,000 if the partnership assets were sold 

for cash equal to their fair market value immediately after 

such transfer.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to transfers of partnership interests after December 

31, 2017. 

SEC. 13503. 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.— 

‘‘(A) IN GENERAL.—In determining the amount of any 

loss under paragraph (1), there shall be taken into account 

the partner’s distributive share of amounts described in 

paragraphs (4) and (6) of section 702(a). 

‘‘(B) EXCEPTION.—In the case of a charitable contribution of property whose fair market value exceeds its 

adjusted basis, subparagraph (A) shall not apply to the 

extent of the partner’s distributive share of such excess.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to partnership taxable years beginning after December 

31, 2017. 

SEC. 13504. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS. 

(a) IN GENERAL.—Paragraph (1) of section 708(b) is amended— 

(1) by striking ‘‘, or’’ at the end of subparagraph (A) 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) CONFORMING AMENDMENT.— 

26 USC 704 note. 

26 USC 743 note. 

26 USC 743. 

26 USC 1446 

note. 

26 USC 864 note. 


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131 STAT. 2142 PUBLIC LAW 115–97—DEC. 22, 2017 

(1) Section 168(i)(7)(B) is amended by striking the second 

sentence. 

(2) Section 743(e) is amended by striking paragraph (4) 

and redesignating paragraphs (5), (6), and (7) as paragraphs 

(4), (5), and (6). 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to partnership taxable years beginning after December 

31, 2017. 

Subpart B—Insurance Reforms 

SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES. 

(a) IN GENERAL.—Section 805(b) is amended by striking paragraph (4) and by redesignating paragraph (5) as paragraph (4). 

(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)(A) 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). 

(B) Section 831(b)(3) is amended by striking ‘‘except as 

provided in section 844,’’ 

(3) Section 381 is amended by striking subsection (d). 

(4) Section 805(a)(4)(B)(ii) is amended to read as follows: 

‘‘(ii) the deduction allowed under section 172,’’. 

(5) Section 805(a) is amended by striking paragraph (5). 

(6) Section 805(b)(2)(A)(iv) is amended to read as follows: 

‘‘(iv) any net operating loss carryback to the taxable year under section 172, and’’. 

(7) Section 953(b)(1)(B) is amended to read as follows: 

‘‘(B) So much of section 805(a)(8) as relates to the 

deduction allowed under section 172.’’. 

(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, 2017. 

SEC. 13512. 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— 

26 USC 

prec. 804. 

26 USC 381 note. 

26 USC 

prec. 841. 

26 USC 

prec. 804. 

26 USC 168 note. 

26 USC 168. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2143 

‘‘(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), as amended by this Act, 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), as amended by this Act, is amended 

by striking clause (iii) and by redesignating clauses (iv) and 

(v) as clauses (iii) and (iv), respectively. 

(7) Section 842(c) is amended by striking paragraph (1) 

and by redesignating paragraphs (2) and (3) as paragraphs 

(1) and (2), respectively. 

(8) Section 953(b)(1), as amended by section 13511, 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, 2017. 

SEC. 13513. 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, 2017. 

SEC. 13514. 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). 

26 USC 

prec. 811. 

26 USC 807 note. 

26 USC 453B 

note. 

26 USC 465. 


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131 STAT. 2144 PUBLIC LAW 115–97—DEC. 22, 2017 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

(d) PHASED INCLUSION OF REMAINING BALANCE OF POLICY- HOLDERS 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, 

2018) 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, 2017, 

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. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND 

CASUALTY INSURANCE COMPANIES. 

(a) IN GENERAL.—Section 832(b)(5)(B) is amended— 

(1) by striking ‘‘15 percent’’ and inserting ‘‘the applicable 

percentage’’, and 

(2) by inserting at the end the following new sentence: 

‘‘For purposes of this subparagraph, the applicable percentage 

is 5.25 percent divided by the highest rate in effect under 

section 11(b).’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13516. 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, 2017. 

SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES. 

(a) IN GENERAL.— 

(1) APPROPRIATE RATE OF INTEREST.—The second sentence 

of section 807(c) is amended to read as follows: ‘‘For purposes 

of paragraph (3), the appropriate rate of interest is the highest 

rate or rates permitted to be used to discount the obligations 

by the National Association of Insurance Commissioners as 

of the date the reserve is determined.’’. 

(2) METHOD OF COMPUTING RESERVES.—Section 807(d) is 

amended— 

(A) by striking paragraphs (1), (2), (4), and (5), 

(B) by redesignating paragraph (6) as paragraph (4), 

(C) by inserting before paragraph (3) the following 

new paragraphs: 

‘‘(1) DETERMINATION OF RESERVE.— 

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

than section 816), the amount of the life insurance reserves 

for any contract (other than a contract to which subparagraph (B) applies) shall be the greater of— 

‘‘(i) the net surrender value of such contract, or 

‘‘(ii) 92.81 percent of the reserve determined under 

paragraph (2). 

26 USC 847 note. 

26 USC 

prec. 841. 

26 USC 832 note. 

26 USC 801 note. 

26 USC 801 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2145 

‘‘(B) VARIABLE CONTRACTS.—For purposes of this part 

(other than section 816), the amount of the life insurance 

reserves for a variable contract shall be equal to the sum 

of— 

‘‘(i) the greater of— 

‘‘(I) the net surrender value of such contract, 

or 

‘‘(II) the portion of the reserve that is separately accounted for under section 817, plus 

‘‘(ii) 92.81 percent of the excess (if any) of the 

reserve determined under paragraph (2) over the 

amount in clause (i). 

‘‘(C) STATUTORY CAP.—In no event shall the reserves 

determined under subparagraphs (A) or (B) for any contract 

as of any time exceed the amount which would be taken 

into account with respect to such contract as of such time 

in determining statutory reserves (as defined in paragraph 

(4)). 

‘‘(D) NO DOUBLE COUNTING.—In no event shall any 

amount or item be taken into account more than once 

in determining any reserve under this subchapter. 

‘‘(2) AMOUNT OF RESERVE.—The amount of the reserve 

determined under this paragraph with respect to any contract 

shall be determined by using the tax reserve method applicable 

to such contract.’’. 

(D) by striking ‘‘(other than a qualified long-term care 

insurance contract, as defined in section 7702B(b)), a 2- 

year full preliminary term method’’ in paragraph (3)(A)(iii) 

and inserting ‘‘, the reserve method prescribed by the 

National Association of Insurance Commissioners which 

covers such contract as of the date the reserve is determined’’, 

(E) by striking ‘‘(as of the date of issuance)’’ in paragraph (3)(A)(iv)(I) and inserting ‘‘(as of the date the reserve 

is determined)’’, 

(F) by striking ‘‘as of the date of the issuance of’’ 

in paragraph (3)(A)(iv)(II) and inserting ‘‘as of the date 

the reserve is determined for’’, 

(G) by striking ‘‘in effect on the date of the issuance 

of the contract’’ in paragraph (3)(B)(i) and inserting 

‘‘applicable to the contract and in effect as of the date 

the reserve is determined’’, and 

(H) by striking ‘‘in effect on the date of the issuance 

of the contract’’ in paragraph (3)(B)(ii) and inserting 

‘‘applicable to the contract and in effect as of the date 

the reserve is determined’’. 

(3) SPECIAL RULES.—Section 807(e) is amended— 

(A) by striking paragraphs (2) and (5), 

(B) by redesignating paragraphs (3), (4), (6), and (7) 

as paragraphs (2), (3), (4), and (5), respectively, 

(C) by amending paragraph (2) (as so redesignated) 

to read as follows: 

‘‘(2) QUALIFIED SUPPLEMENTAL BENEFITS.— 

‘‘(A) QUALIFIED SUPPLEMENTAL BENEFITS TREATED

SEPARATELY.—For purposes of this part, the amount of 

the life insurance reserve for any qualified supplemental 

26 USC 807. 


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131 STAT. 2146 PUBLIC LAW 115–97—DEC. 22, 2017 

benefit shall be computed separately as though such benefit 

were under a separate contract. 

‘‘(B) QUALIFIED SUPPLEMENTAL BENEFIT.—For purposes 

of this paragraph, the term ‘qualified supplemental benefit’ 

means any supplemental benefit described in subparagraph 

(C) if— 

‘‘(i) there is a separately identified premium or 

charge for such benefit, and 

‘‘(ii) any net surrender value under the contract 

attributable to any other benefit is not available to 

fund such benefit. 

‘‘(C) SUPPLEMENTAL BENEFITS.—For purposes of this 

paragraph, the supplemental benefits described in this 

subparagraph are any— 

‘‘(i) guaranteed insurability, 

‘‘(ii) accidental death or disability benefit, 

‘‘(iii) convertibility, 

‘‘(iv) disability waiver benefit, or 

‘‘(v) other benefit prescribed by regulations, 

which is supplemental to a contract for which there is 

a reserve described in subsection (c).’’, and 

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

‘‘(6) REPORTING RULES.—The Secretary shall require 

reporting (at such time and in such manner as the Secretary 

shall prescribe) with respect to the opening balance and closing 

balance of reserves and with respect to the method of computing 

reserves for purposes of determining income.’’. 

(4) DEFINITION OF LIFE INSURANCE CONTRACT.—Section 

7702 is amended— 

(A) by striking clause (i) of subsection (c)(3)(B) and 

inserting the following: 

‘‘(i) reasonable mortality charges which meet the 

requirements prescribed in regulations to be promulgated by the Secretary or that do not exceed the mortality charges specified in the prevailing commissioners’ standard tables as defined in subsection 

(f)(10),’’ and 

(B) by adding at the end of subsection (f) the following 

new paragraph: 

‘‘(10) PREVAILING COMMISSIONERS’ STANDARD TABLES.—For 

purposes of subsection (c)(3)(B)(i), the term ‘prevailing commissioners’ standard tables’ means the most recent commissioners’ 

standard tables prescribed by the National Association of Insurance Commissioners which are permitted to be used in computing reserves for that type of contract under the insurance 

laws of at least 26 States when the contract was issued. If 

the prevailing commissioners’ standard tables as of the beginning of any calendar year (hereinafter in this paragraph 

referred to as the ‘year of change’) are different from the prevailing commissioners’ standard tables as of the beginning of 

the preceding calendar year, the issuer may use the prevailing 

commissioners’ standard tables as of the beginning of the preceding calendar year with respect to any contract issued after 

the change and before the close of the 3-year period beginning 

on the first day of the year of change.’’. 

(b) CONFORMING AMENDMENTS.— 

26 USC 7702. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2147 

(1) 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.’’. 

(2) 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 808(g)’’. 

(3) 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, and’’. 

(4) Section 848(e)(1)(B)(iii) is amended by striking 

‘‘807(e)(4)’’ and inserting ‘‘807(e)(3)’’. 

(5) Subparagraph (B) of section 954(i)(5) is amended by 

striking ‘‘shall be substituted for the prevailing State assumed 

interest rate,’’ and inserting ‘‘shall apply,’’. 

(c) EFFECTIVE DATE.— 

(1) IN GENERAL.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

(2) TRANSITION RULE.—For the first taxable year beginning 

after December 31, 2017, the reserve with respect to any contract (as determined under section 807(d) 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. 

(3) TRANSITION RELIEF.— 

(A) IN GENERAL.—If— 

(i) the reserve determined under section 807(d) 

of the Internal Revenue Code of 1986 (determined after 

application of paragraph (2)) with respect to any contract as of the close of the year preceding the first 

taxable year beginning after December 31, 2017, 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: 

26 USC 807 note. 

26 USC 808. 


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131 STAT. 2148 PUBLIC LAW 115–97—DEC. 22, 2017 

(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) or 832(c)(4) of 

such Code, as applicable. 

(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) or 832(b)(1)(C) of such 

Code, as applicable. 

SEC. 13518. 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. DEFINITION OF COMPANY’S SHARE AND POLICYHOLDER’S 

SHARE. 

‘‘(a) COMPANY’S SHARE.—For purposes of section 805(a)(4), the 

term ‘company’s share’ means, with respect to any taxable year 

beginning after December 31, 2017, 70 percent. 

‘‘(b) POLICYHOLDER’S SHARE.—For purposes of section 807, the 

term ‘policyholder’s share’ means, with respect to any taxable year 

beginning after December 31, 2017, 30 percent.’’. 

(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) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION 

EXPENSES. 

(a) IN GENERAL.— 

(1) Section 848(a)(2) is amended by striking ‘‘120-month’’ 

and inserting ‘‘180-month’’. 

(2) Section 848(c)(1) is amended by striking ‘‘1.75 percent’’ 

and inserting ‘‘2.09 percent’’. 

(3) Section 848(c)(2) is amended by striking ‘‘2.05 percent’’ 

and inserting ‘‘2.45 percent’’. 

(4) Section 848(c)(3) is amended by striking ‘‘7.7 percent’’ 

and inserting ‘‘9.2 percent’’. 

(b) CONFORMING AMENDMENTS.—Section 848(b)(1) is amended 

by striking ‘‘120-month’’ and inserting ‘‘180-month’’. 

(c) EFFECTIVE DATE.— 

(1) IN GENERAL.—The amendments made by this section 

shall apply to net premiums for taxable years beginning after 

December 31, 2017. 

(2) TRANSITION RULE.—Specified policy acquisition expenses 

first required to be capitalized in a taxable year beginning 

before January 1, 2018, will continue to be allowed as a deduction ratably over the 120-month period beginning with the 

first month in the second half of such taxable year. 

SEC. 13520. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS. 

(a) IN GENERAL.—Subpart B of part III of subchapter A of 

chapter 61, as amended by section 13306, is amended by adding 

at the end the following new section: 

26 USC 848 note. 

26 USC 812 note. 

26 USC 812. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2149 

‘‘SEC. 6050Y. 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— 

26 USC 6050Y. 


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131 STAT. 2150 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(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, 

‘‘(D) the gross amount of each such payment, and 

‘‘(E) such person’s estimate of the investment in the 

contract (as defined in section 72(e)(6)) with respect to 

the buyer. 

‘‘(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, with respect 

to any reportable policy sale, the amount of cash and the 

fair market value of any consideration transferred in the 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, as amended by section 

13306, is amended by inserting after the item relating to section 

6050X the following new item: 

‘‘Sec. 6050Y. 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 6050Y (relating to returns relating 

to certain life insurance contract transactions), and’’, 

and 

(B) by striking ‘‘or’’ at the end of subparagraph (HH) 

of paragraph (2), by striking the period at the end of 

subparagraph (II) of such paragraph and inserting ‘‘, or’’, 

and by inserting after such subparagraph (II) the following 

new subparagraph: 

‘‘(JJ) subsection (a)(2), (b)(2), or (c)(2) of section 6050Y 

(relating to returns relating to certain life insurance contract transactions).’’. 

26 USC 6724. 

26 USC 

prec. 6041. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2151 

(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 6050Y.’’, 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 6050Y.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to— 

(1) reportable policy sales (as defined in section 6050Y(d)(2) 

of the Internal Revenue Code of 1986 (as added by subsection 

(a)) after December 31, 2017, and 

(2) reportable death benefits (as defined in section 

6050Y(d)(4) of such Code (as added by subsection (a)) paid 

after December 31, 2017. 

SEC. 13521. 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. 13522. 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 

26 USC 1016 

note. 

26 USC 6047 

note. 

26 USC 6047. 


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131 STAT. 2152 PUBLIC LAW 115–97—DEC. 22, 2017 

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, 2017. 

SEC. 13523. 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), 

determined by substituting ‘60-month period’ for ‘24-month 

period’ therein).’’. 

(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 subparagraph: 

‘‘(B) TREATMENT OF CERTAIN LOSSES.— 

‘‘(i) 3-YEAR LOSS PAYMENT PATTERN.—In the case 

of any line of business not described in subparagraph 

(A)(ii), losses paid after the 1st year following the 

accident year shall be treated as paid equally in the 

2nd and 3rd year following the accident year. 

‘‘(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 average of the losses treated as 

paid in the 7th, 8th, and 9th years after the 

accident year (or, if lesser, the portion of the 

unpaid losses not theretofore taken into account). 

To the extent such unpaid losses have not been 

treated as paid before the 24th year after the 

accident year, they shall be treated as paid in 

such 24th year.’’. 

(c) REPEAL OF HISTORICAL PAYMENT PATTERN ELECTION.—Section 846, as amended by this Act, 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, 2017. 

(e) TRANSITIONAL RULE.—For the first taxable year beginning 

after December 31, 2017— 

(1) the unpaid losses and the expenses unpaid (as defined 

in paragraphs (5)(B) and (6) of section 832(b) of the Internal 

26 USC 846 note. 

26 USC 846 note. 

26 USC 101 note. 

26 USC 101. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2153 

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 2018, 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 2018. 

Subpart C—Banks and Financial Instruments 

SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS. 

(a) IN GENERAL.—Section 162, as amended by sections 13307, 

is amended by redesignating subsection (r) as subsection (s) and 

by inserting after subsection (q) the following new subsection: 

‘‘(r) 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.— 

‘‘(i) IN GENERAL.—For purposes of this paragraph, 

the term ‘expanded affiliated group’ means an affiliated 

group as defined in section 1504(a), determined— 

26 USC 162. 


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131 STAT. 2154 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(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). 

‘‘(ii) CONTROL OF NON-CORPORATE ENTITIES.—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 clause).’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13532. 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 another 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) is amended by striking clause (xiv) 

and by redesignating clauses (xv) to (xvii) as clauses (xiv) 

to (xvi). 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to advance refunding bonds issued after December 31, 

2017. 

Subpart D—S Corporations 

SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN 

ELECTING SMALL BUSINESS TRUST. 

(a) NO LOOK-THROUGH FOR ELIGIBILITY PURPOSES.—Section 

1361(c)(2)(B)(v) is amended by adding at the end the following 

new sentence: ‘‘This clause shall not apply for purposes of subsection 

(b)(1)(C).’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall take effect on January 1, 2018. 

SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING 

SMALL BUSINESS TRUSTS. 

(a) IN GENERAL.—Section 641(c)(2) is amended by inserting 

after subparagraph (D) the following new subparagraph: 

‘‘(E)(i) Section 642(c) shall not apply. 

‘‘(ii) For purposes of section 170(b)(1)(G), 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, 2017. 

26 USC 641 note. 

26 USC 1361 

note. 

26 USC 148 note. 

26 USC 149. 

26 USC 162 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2155 

SEC. 13543. MODIFICATION OF TREATMENT OF S CORPORATION 

CONVERSIONS TO C CORPORATIONS. 

(a) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION FROM S COR- PORATION TO C CORPORATION.—Section 481 is amended by adding 

at the end the following new subsection: 

‘‘(d) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION FROM S COR- PORATION TO C CORPORATION.— ‘‘(1) IN GENERAL.—In the case of an eligible terminated 

S corporation, any adjustment required by subsection (a)(2) 

which is attributable to such corporation’s revocation described 

in paragraph (2)(A)(ii) shall be taken into account ratably 

during the 6-taxable year period beginning with the year of 

change. 

‘‘(2) ELIGIBLE TERMINATED S CORPORATION.—For purposes 

of this subsection, the term ‘eligible terminated S corporation’ 

means any C corporation— 

‘‘(A) which— 

‘‘(i) was an S corporation on the day before the 

date of the enactment of the Tax Cuts and Jobs Act, 

and 

‘‘(ii) during the 2-year period beginning on the 

date of such enactment makes a revocation of its election under section 1362(a), and 

‘‘(B) the owners of the stock of which, determined on 

the date such revocation is made, are the same owners 

(and in identical proportions) as on the date of such enactment.’’. 

(b) CASH DISTRIBUTIONS FOLLOWING POST-TERMINATION TRANSITION PERIOD FROM S CORPORATION STATUS.—Section 1371 is 

amended by adding at the end the following new subsection: 

‘‘(f) CASH DISTRIBUTIONS FOLLOWING POST-TERMINATION

TRANSITION PERIOD.—In the case of a distribution of money by 

an eligible terminated S corporation (as defined in section 481(d)) 

after the post-termination transition period, the accumulated adjustments account shall be allocated to such distribution, and the 

distribution shall be chargeable to accumulated earnings and 

profits, in the same ratio as the amount of such accumulated 

adjustments account bears to the amount of such accumulated 

earnings and profits.’’. 

PART VII—EMPLOYMENT 

Subpart A—Compensation 

SEC. 13601. 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)’’. 

26 USC 481. 


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131 STAT. 2156 PUBLIC LAW 115–97—DEC. 22, 2017 

(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 

principal executive officer or principal 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, 2016.’’. 

(c) EXPANSION OF APPLICABLE EMPLOYER.— 

(1) IN GENERAL.—Section 162(m)(2) is amended to read 

as follows: 

‘‘(2) PUBLICLY HELD CORPORATION.—For purposes of this 

subsection, the term ‘publicly held corporation’ means any corporation which is an issuer (as defined in section 3 of the 

Securities Exchange Act of 1934 (15 U.S.C. 78c))— 

‘‘(A) the securities of which are required to be registered under section 12 of such Act (15 U.S.C. 78l), or 

‘‘(B) that is required to file reports under section 15(d) 

of such Act (15 U.S.C. 78o(d)).’’. 

(2) CONFORMING AMENDMENT.—Section 162(m)(3), as 

amended by subsection (b), is amended by adding at the end 

the following flush sentence: 

‘‘Such term shall include any employee who would be 

described in subparagraph (B) if the reporting described in 

such subparagraph were required as so described.’’. 

(d) 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.’’. 

(e) EFFECTIVE DATE.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to taxable years 

beginning after December 31, 2017. 

(2) EXCEPTION FOR BINDING CONTRACTS.—The amendments 

made by this section shall not apply to remuneration which 

is provided pursuant to a written binding contract which was 

in effect on November 2, 2017, and which was not modified 

in any material respect on or after such date. 

26 USC 162 note. 

26 USC 162. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2157 

SEC. 13602. 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 

the product of the rate of tax under section 11 and 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. 

For purposes of the preceding sentence, remuneration shall be 

treated as paid when there is no substantial risk of forfeiture 

(within the meaning of section 457(f)(3)(B)) of the rights to such 

remuneration. 

‘‘(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 

which 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), 

‘‘(C) has income excluded from taxation under section 

115(1), or 

‘‘(D) is a political organization described in section 

527(e)(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, 2016. 

‘‘(3) REMUNERATION.—For purposes of this section: 

‘‘(A) IN GENERAL.—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)) and shall include amounts 

required to be included in gross income under section 457(f). 

‘‘(B) EXCEPTION FOR REMUNERATION FOR MEDICAL SERVICES.—The term ‘remuneration’ shall not include the portion of any remuneration paid to a licensed medical professional (including a veterinarian) which is for the performance of medical or veterinary services by such professional. 

‘‘(4) REMUNERATION FROM RELATED ORGANIZATIONS.— 

‘‘(A) IN GENERAL.—Remuneration of a covered employee 

by an applicable tax-exempt organization shall include any 

26 USC 4960 

note. 


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131 STAT. 2158 PUBLIC LAW 115–97—DEC. 22, 2017 

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 which 

control the organization, 

‘‘(iii) is a supported organization (as defined in 

section 509(f)(3)) 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 which is a 

voluntary employees’ beneficiary association described 

in section 501(c)(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 of 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. 

‘‘(C) EXCEPTION.—Such term does not include any payment— 

‘‘(i) described in section 280G(b)(6) (relating to 

exemption for payments under qualified plans), 

‘‘(ii) made under or to an annuity contract 

described in section 403(b) or a plan described in section 457(b), 

‘‘(iii) to a licensed medical professional (including 

a veterinarian) to the extent that such payment is 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2159 

for the performance of medical or veterinary services 

by such professional, or 

‘‘(iv) to an individual who is not a highly compensated employee as defined in section 414(q). 

‘‘(D) BASE AMOUNT.—Rules similar to the rules of 

280G(b)(3) shall apply for purposes of determining the base 

amount. 

‘‘(E) 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. 

‘‘(d) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to prevent avoidance of the tax under 

this section, including regulations to prevent avoidance of such 

tax through the performance of services other than as an employee 

or by providing compensation through a pass-through or other 

entity to avoid such tax.’’. 

(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 tax-exempt organization executive compensation.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS. 

(a) IN GENERAL.—Section 83 is amended by adding at the 

end the following new subsection: 

‘‘(i) QUALIFIED EQUITY GRANTS.— 

‘‘(1) IN GENERAL.—For purposes of this subtitle— 

‘‘(A) TIMING OF INCLUSION.—If qualified stock is transferred to a qualified employee who makes an election with 

respect to such stock under this subsection, subsection 

(a) shall be applied by including the amount determined 

under such subsection with respect to such stock in income 

of the employee in the taxable year determined under 

subparagraph (B) in lieu of the taxable year described 

in subsection (a). 

‘‘(B) TAXABLE YEAR DETERMINED.—The taxable year 

determined under this subparagraph is the taxable year 

of the employee which includes the earliest of— 

‘‘(i) the first date such qualified stock becomes 

transferable (including, solely for purposes of this 

clause, becoming transferable to the employer), 

‘‘(ii) the date the employee first becomes an 

excluded employee, 

‘‘(iii) the first date on which any stock of the corporation which issued the qualified stock becomes 

readily tradable on an established securities market 

(as determined by the Secretary, but not including 

any market unless such market is recognized as an 

established securities market by the Secretary for purposes of a provision of this title other than this subsection), 

26 USC 83. 

26 USC 4960 

note. 

26 USC 

prec. 4958. 


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131 STAT. 2160 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(iv) the date that is 5 years after the first date 

the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, or 

‘‘(v) the date on which the employee revokes (at 

such time and in such manner as the Secretary provides) the election under this subsection with respect 

to such stock. 

‘‘(2) QUALIFIED STOCK.— ‘‘(A) IN GENERAL.—For purposes of this subsection, the 

term ‘qualified stock’ means, with respect to any qualified 

employee, any stock in a corporation which is the employer 

of such employee, if— 

‘‘(i) such stock is received— 

‘‘(I) in connection with the exercise of an 

option, or 

‘‘(II) in settlement of a restricted stock unit, 

and 

‘‘(ii) such option or restricted stock unit was 

granted by the corporation— 

‘‘(I) in connection with the performance of services as an employee, and 

‘‘(II) during a calendar year in which such 

corporation was an eligible corporation. 

‘‘(B) LIMITATION.—The term ‘qualified stock’ shall not 

include any stock if the employee may sell such stock 

to, or otherwise receive cash in lieu of stock from, the 

corporation at the time that the rights of the employee 

in such stock first become transferable or not subject to 

a substantial risk of forfeiture. 

‘‘(C) ELIGIBLE CORPORATION.—For purposes of subparagraph (A)(ii)(II)— 

‘‘(i) IN GENERAL.—The term ‘eligible corporation’ 

means, with respect to any calendar year, any corporation if— 

‘‘(I) no stock of such corporation (or any predecessor of such corporation) is readily tradable on 

an established securities market (as determined 

under paragraph (1)(B)(iii)) during any preceding 

calendar year, and 

‘‘(II) such corporation has a written plan under 

which, in such calendar year, not less than 80 

percent of all employees who provide services to 

such corporation in the United States (or any 

possession of the United States) are granted stock 

options, or are granted restricted stock units, with 

the same rights and privileges to receive qualified 

stock. 

‘‘(ii) SAME RIGHTS AND PRIVILEGES.—For purposes 

of clause (i)(II)— 

‘‘(I) except as provided in subclauses (II) and 

(III), the determination of rights and privileges 

with respect to stock shall be made in a similar 

manner as under section 423(b)(5), 

‘‘(II) employees shall not fail to be treated 

as having the same rights and privileges to receive 

qualified stock solely because the number of shares 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2161 

available to all employees is not equal in amount, 

so long as the number of shares available to each 

employee is more than a de minimis amount, and 

‘‘(III) rights and privileges with respect to the 

exercise of an option shall not be treated as the 

same as rights and privileges with respect to the 

settlement of a restricted stock unit. 

‘‘(iii) EMPLOYEE.—For purposes of clause (i)(II), the 

term ‘employee’ shall not include any employee 

described in section 4980E(d)(4) or any excluded 

employee. 

‘‘(iv) SPECIAL RULE FOR CALENDAR YEARS BEFORE

2018.—In the case of any calendar year beginning before 

January 1, 2018, clause (i)(II) shall be applied without 

regard to whether the rights and privileges with 

respect to the qualified stock are the same. 

‘‘(3) QUALIFIED EMPLOYEE; EXCLUDED EMPLOYEE.—For purposes of this subsection— 

‘‘(A) IN GENERAL.—The term ‘qualified employee’ means 

any individual who— 

‘‘(i) is not an excluded employee, and 

‘‘(ii) agrees in the election made under this subsection to meet such requirements as are determined 

by the Secretary to be necessary to ensure that the 

withholding requirements of the corporation under 

chapter 24 with respect to the qualified stock are met. 

‘‘(B) EXCLUDED EMPLOYEE.—The term ‘excluded 

employee’ means, with respect to any corporation, any individual— 

‘‘(i) who is a 1-percent owner (within the meaning 

of section 416(i)(1)(B)(ii)) at any time during the calendar year or who was such a 1 percent owner at 

any time during the 10 preceding calendar years, 

‘‘(ii) who is or has been at any prior time— 

‘‘(I) the chief executive officer of such corporation or an individual acting in such a capacity, 

or 

‘‘(II) the chief financial officer of such corporation or an individual acting in such a capacity, 

‘‘(iii) who bears a relationship described in section 

318(a)(1) to any individual described in subclause (I) 

or (II) of clause (ii), or 

‘‘(iv) who is one of the 4 highest compensated officers of such corporation for the taxable year, or was 

one of the 4 highest compensated officers of such corporation for any of the 10 preceding taxable years, 

determined with respect to each such taxable year 

on the basis of the shareholder disclosure rules for 

compensation under the Securities Exchange Act of 

1934 (as if such rules applied to such corporation). 

‘‘(4) ELECTION.— ‘‘(A) TIME FOR MAKING ELECTION.—An election with 

respect to qualified stock shall be made under this subsection no later than 30 days after the first date the rights 

of the employee in such stock are transferable or are not 

subject to a substantial risk of forfeiture, whichever occurs 

earlier, and shall be made in a manner similar to the 


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131 STAT. 2162 PUBLIC LAW 115–97—DEC. 22, 2017 

manner in which an election is made under subsection 

(b). 

‘‘(B) LIMITATIONS.—No election may be made under 

this section with respect to any qualified stock if— 

‘‘(i) the qualified employee has made an election 

under subsection (b) with respect to such qualified 

stock, 

‘‘(ii) any stock of the corporation which issued the 

qualified stock is readily tradable on an established 

securities market (as determined under paragraph 

(1)(B)(iii)) at any time before the election is made, 

or 

‘‘(iii) such corporation purchased any of its outstanding stock in the calendar year preceding the calendar year which includes the first date the rights 

of the employee in such stock are transferable or are 

not subject to a substantial risk of forfeiture, unless— 

‘‘(I) not less than 25 percent of the total dollar 

amount of the stock so purchased is deferral stock, 

and 

‘‘(II) the determination of which individuals 

from whom deferral stock is purchased is made 

on a reasonable basis. 

‘‘(C) DEFINITIONS AND SPECIAL RULES RELATED TO

LIMITATION ON STOCK REDEMPTIONS.— 

‘‘(i) DEFERRAL STOCK.—For purposes of this paragraph, the term ‘deferral stock’ means stock with 

respect to which an election is in effect under this 

subsection. 

‘‘(ii) DEFERRAL STOCK WITH RESPECT TO ANY INDIVIDUAL NOT TAKEN INTO ACCOUNT IF INDIVIDUAL HOLDS

DEFERRAL STOCK WITH LONGER DEFERRAL PERIOD.— 

Stock purchased by a corporation from any individual 

shall not be treated as deferral stock for purposes 

of subparagraph (B)(iii) if such individual (immediately 

after such purchase) holds any deferral stock with 

respect to which an election has been in effect under 

this subsection for a longer period than the election 

with respect to the stock so purchased. 

‘‘(iii) PURCHASE OF ALL OUTSTANDING DEFERRAL

STOCK.—The requirements of subclauses (I) and (II) 

of subparagraph (B)(iii) shall be treated as met if the 

stock so purchased includes all of the corporation’s 

outstanding deferral stock. 

‘‘(iv) REPORTING.—Any corporation which has outstanding deferral stock as of the beginning of any 

calendar year and which purchases any of its outstanding stock during such calendar year shall include 

on its return of tax for the taxable year in which, 

or with which, such calendar year ends the total dollar 

amount of its outstanding stock so purchased during 

such calendar year and such other information as the 

Secretary requires for purposes of administering this 

paragraph. 

‘‘(5) CONTROLLED GROUPS.—For purposes of this subsection, 

all persons treated as a single employer under section 414(b) 

shall be treated as 1 corporation. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2163 

‘‘(6) NOTICE REQUIREMENT.—Any corporation which transfers qualified stock to a qualified employee shall, at the time 

that (or a reasonable period before) an amount attributable 

to such stock would (but for this subsection) first be includible 

in the gross income of such employee— 

‘‘(A) certify to such employee that such stock is qualified stock, and 

‘‘(B) notify such employee— 

‘‘(i) that the employee may be eligible to elect 

to defer income on such stock under this subsection, 

and 

‘‘(ii) that, if the employee makes such an election— 

‘‘(I) the amount of income recognized at the 

end of the deferral period will be based on the 

value of the stock at the time at which the rights 

of the employee in such stock first become transferable or not subject to substantial risk of forfeiture, 

notwithstanding whether the value of the stock 

has declined during the deferral period, 

‘‘(II) the amount of such income recognized 

at the end of the deferral period will be subject 

to withholding under section 3401(i) at the rate 

determined under section 3402(t), and 

‘‘(III) the responsibilities of the employee (as 

determined by the Secretary under paragraph 

(3)(A)(ii)) with respect to such withholding. 

‘‘(7) RESTRICTED STOCK UNITS.—This section (other than 

this subsection), including any election under subsection (b), 

shall not apply to restricted stock units.’’. 

(b) WITHHOLDING.— 

(1) TIME OF WITHHOLDING.—Section 3401 is amended by 

adding at the end the following new subsection: 

‘‘(i) QUALIFIED STOCK FOR WHICH AN ELECTION IS IN EFFECT

UNDER SECTION 83(I).—For purposes of subsection (a), qualified 

stock (as defined in section 83(i)) with respect to which an election 

is made under section 83(i) shall be treated as wages— 

‘‘(1) received on the earliest date described in section 

83(i)(1)(B), and 

‘‘(2) in an amount equal to the amount included in income 

under section 83 for the taxable year which includes such 

date.’’. 

(2) AMOUNT OF WITHHOLDING.—Section 3402 is amended 

by adding at the end the following new subsection: 

‘‘(t) RATE OF WITHHOLDING FOR CERTAIN STOCK.—In the case 

of any qualified stock (as defined in section 83(i)(2)) with respect 

to which an election is made under section 83(i)— 

‘‘(1) the rate of tax under subsection (a) shall not be less 

than the maximum rate of tax in effect under section 1, and 

‘‘(2) such stock shall be treated for purposes of section 

3501(b) in the same manner as a non-cash fringe benefit.’’. 

(c) COORDINATION WITH OTHER DEFERRED COMPENSATION

RULES.— 

(1) ELECTION TO APPLY DEFERRAL TO STATUTORY OPTIONS.— 

(A) INCENTIVE STOCK OPTIONS.—Section 422(b) is 

amended by adding at the end the following: ‘‘Such term 

shall not include any option if an election is made under 

26 USC 3401. 


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131 STAT. 2164 PUBLIC LAW 115–97—DEC. 22, 2017 

section 83(i) with respect to the stock received in connection 

with the exercise of such option.’’. 

(B) EMPLOYEE STOCK PURCHASE PLANS.—Section 423 

is amended— 

(i) in subsection (b)(5), by striking ‘‘and’’ before 

‘‘the plan’’ and by inserting ‘‘, and the rules of section 

83(i) shall apply in determining which employees have 

a right to make an election under such section’’ before 

the semicolon at the end, and 

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

‘‘(d) COORDINATION WITH QUALIFIED EQUITY GRANTS.—An 

option for which an election is made under section 83(i) with respect 

to the stock received in connection with its exercise shall not be 

considered as granted pursuant an employee stock purchase plan.’’. 

(2) EXCLUSION FROM DEFINITION OF NONQUALIFIED

DEFERRED COMPENSATION PLAN.—Subsection (d) of section 409A 

is amended by adding at the end the following new paragraph: 

‘‘(7) TREATMENT OF QUALIFIED STOCK.—An arrangement 

under which an employee may receive qualified stock (as 

defined in section 83(i)(2)) shall not be treated as a nonqualified 

deferred compensation plan with respect to such employee 

solely because of such employee’s election, or ability to make 

an election, to defer recognition of income under section 83(i).’’. 

(d) INFORMATION REPORTING.—Section 6051(a) is amended by 

striking ‘‘and’’ at the end of paragraph (14)(B), by striking the 

period at the end of paragraph (15) and inserting a comma, and 

by inserting after paragraph (15) the following new paragraphs: 

‘‘(16) the amount includible in gross income under subparagraph (A) of section 83(i)(1) with respect to an event described 

in subparagraph (B) of such section which occurs in such calendar year, and 

‘‘(17) the aggregate amount of income which is being 

deferred pursuant to elections under section 83(i), determined 

as of the close of the calendar year.’’. 

(e) PENALTY FOR FAILURE OF EMPLOYER TO PROVIDE NOTICE

OF TAX CONSEQUENCES.—Section 6652 is amended by adding at 

the end the following new subsection: 

‘‘(p) FAILURE TO PROVIDE NOTICE UNDER SECTION 83(I).—In 

the case of each failure to provide a notice as required by section 

83(i)(6), at the time prescribed therefor, unless it is shown that 

such failure is due to reasonable cause and not to willful neglect, 

there shall be paid, on notice and demand of the Secretary and 

in the same manner as tax, by the person failing to provide such 

notice, an amount equal to $100 for each such failure, but the 

total amount imposed on such person for all such failures during 

any calendar year shall not exceed $50,000.’’. 

(f) EFFECTIVE DATES.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

amendments made by this section shall apply to stock attributable to options exercised, or restricted stock units settled, 

after December 31, 2017. 

(2) REQUIREMENT TO PROVIDE NOTICE.—The amendments 

made by subsection (e) shall apply to failures after December 

31, 2017. 

(g) TRANSITION RULE.—Until such time as the Secretary (or 

the Secretary’s delegate) issues regulations or other guidance for 

26 USC 83 note. 

26 USC 83 note. 

26 USC 423. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2165 

purposes of implementing the requirements of paragraph (2)(C)(i)(II) 

of section 83(i) of the Internal Revenue Code of 1986 (as added 

by this section), or the requirements of paragraph (6) of such 

section, a corporation shall be treated as being in compliance with 

such requirements (respectively) if such corporation complies with 

a reasonable good faith interpretation of such requirements. 

SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK COMPENSATION OF INSIDERS IN EXPATRIATED CORPORATIONS. 

(a) IN GENERAL.—Section 4985(a)(1) is amended by striking 

‘‘section 1(h)(1)(C)’’ and inserting ‘‘section 1(h)(1)(D)’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to corporations first becoming expatriated corporations 

(as defined in section 4985 of the Internal Revenue Code of 1986) 

after the date of enactment of this Act. 

Subpart B—Retirement Plans 

SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RECHARACTERIZATION OF ROTH CONVERSIONS. 

(a) IN GENERAL.—Section 408A(d)(6)(B) is amended by adding 

at the end the following new clause: 

‘‘(iii) CONVERSIONS.—Subparagraph (A) shall not 

apply in the case of a qualified rollover contribution 

to which subsection (d)(3) applies (including by reason 

of subparagraph (C) thereof).’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13612. MODIFICATION OF RULES APPLICABLE TO LENGTH OF 

SERVICE AWARD PLANS. 

(a) MAXIMUM DEFERRAL AMOUNT.—Clause (ii) of section 

457(e)(11)(B) is amended by striking ‘‘$3,000’’ and inserting 

‘‘$6,000’’. 

(b) COST OF LIVING ADJUSTMENT.—Subparagraph (B) of section 

457(e)(11) is amended by adding at the end the following: 

‘‘(iii) COST OF LIVING ADJUSTMENT.—In the case 

of taxable years beginning after December 31, 2017, 

the Secretary shall adjust the $6,000 amount under 

clause (ii) at the same time and in the same manner 

as under section 415(d), except that the base period 

shall be the calendar quarter beginning July 1, 2016, 

and any increase under this paragraph that is not 

a multiple of $500 shall be rounded to the next lowest 

multiple of $500.’’. 

(c) APPLICATION OF LIMITATION ON ACCRUALS.—Subparagraph 

(B) of section 457(e)(11), as amended by subsection (b), is amended 

by adding at the end the following: 

‘‘(iv) SPECIAL RULE FOR APPLICATION OF LIMITATION

ON ACCRUALS FOR CERTAIN PLANS.—In the case of a 

plan described in subparagraph (A)(ii) which is a 

defined benefit plan (as defined in section 414(j)), the 

limitation under clause (ii) shall apply to the actuarial 

present value of the aggregate amount of length of 

service awards accruing with respect to any year of 

service. Such actuarial present value with respect to 

any year shall be calculated using reasonable actuarial 

assumptions and methods, assuming payment will be 

26 USC 408A 

note. 

26 USC 4985 

note. 

26 USC 4985. 


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131 STAT. 2166 PUBLIC LAW 115–97—DEC. 22, 2017 

made under the most valuable form of payment under 

the plan with payment commencing at the later of 

the earliest age at which unreduced benefits are payable under the plan or the participant’s age at the 

time of the calculation.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET 

AMOUNTS. 

(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 severance 

from employment of the participant. 

‘‘(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 AMENDMENTS.—Section 402(c)(3) is amended— 

(1) by striking ‘‘TRANSFER MUST BE MADE WITHIN 60 DAYS

OF RECEIPT’’ in the heading and inserting ‘‘TIME LIMIT ON TRANSFERS’’, and 

(2) by striking ‘‘subparagraph (B)’’ in subparagraph (A) 

and inserting ‘‘subparagraphs (B) and (C)’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to plan loan offset amounts which are treated as distributed in taxable years beginning after December 31, 2017. 

26 USC 402 note. 

26 USC 402. 

26 USC 457 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2167 

PART VIII—EXEMPT ORGANIZATIONS 

SEC. 13701. 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. 4968. Excise tax based on investment income of private colleges and universities. 

‘‘SEC. 4968. 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 1.4 

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(f)(2))— 

‘‘(A) which had at least 500 students during the preceding taxable year, 

‘‘(B) more than 50 percent of the students of which 

are located in the United States, 

‘‘(C) which is not described in the first sentence of 

section 511(a)(2)(B) (relating to State colleges and universities), and 

‘‘(D) 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 directly in carrying out 

the institution’s exempt purpose) is at least $500,000 per 

student of the institution. 

‘‘(2) STUDENTS.—For purposes of paragraph (1), the number 

of students of an institution (including for purposes of determining the number of students at a particular location) 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). 

‘‘(d) ASSETS AND NET INVESTMENT INCOME OF RELATED

ORGANIZATIONS.— 

‘‘(1) IN GENERAL.—For purposes of subsections (b)(1)(C) and 

(c), assets and net investment income of any related organization with respect to an educational institution shall be treated 

as assets and net investment income, respectively, of the educational institution, except that— 

‘‘(A) no such amount shall be taken into account with 

respect to more than 1 educational institution, and 

‘‘(B) unless such organization is controlled by such 

institution or is described in section 509(a)(3) with respect 

to such institution for the taxable year, assets and net 

26 USC 4968. 

26 USC 

prec. 4968. 


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131 STAT. 2168 PUBLIC LAW 115–97—DEC. 22, 2017 

investment income which are not intended or available 

for the use or benefit of the educational institution shall 

not be taken into account. 

‘‘(2) RELATED ORGANIZATION.—For purposes of this subsection, the term ‘related organization’ means, with respect 

to an educational institution, any organization which— 

‘‘(A) controls, or is controlled by, such institution, 

‘‘(B) is controlled by 1 or more persons which also 

control such institution, or 

‘‘(C) is a supported organization (as defined in section 

509(f)(3)), or an organization described in section 509(a)(3), 

during the taxable year with respect to such institution.’’. 

(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, 2017. 

SEC. 13702. 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, including for 

purposes of determining any net operating loss deduction, 

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.’’. 

(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, 2017. 

(2) CARRYOVERS OF NET OPERATING LOSSES.—If any net 

operating loss arising in a taxable year beginning before 

January 1, 2018, is carried over to a taxable year beginning 

on or after such date— 

(A) subparagraph (A) of section 512(a)(6) of the Internal 

Revenue Code of 1986, as added by this Act, shall not 

apply to such net operating loss, and 

(B) the unrelated business taxable income of the 

organization, after the application of subparagraph (B) of 

such section, shall be reduced by the amount of such net 

operating loss. 

26 USC 512 note. 

26 USC 512. 

26 USC 4968 

note. 

26 USC 

prec. 4940. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2169 

SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY 

AMOUNT OF CERTAIN FRINGE BENEFIT EXPENSES FOR 

WHICH DEDUCTION IS DISALLOWED. 

(a) IN GENERAL.—Section 512(a), as amended by this Act, is 

further amended by adding at the end the following new paragraph: 

‘‘(7) INCREASE IN UNRELATED BUSINESS TAXABLE INCOME

BY DISALLOWED FRINGE.—Unrelated business taxable income 

of an organization shall be increased by any amount for which 

a deduction is not allowable under this chapter by reason 

of section 274 and which is paid or incurred by such organization for any qualified transportation fringe (as defined in section 

132(f)), any parking facility used in connection with qualified 

parking (as defined in section 132(f)(5)(C)), or any on-premises 

athletic facility (as defined in section 132(j)(4)(B)). The preceding sentence shall not apply to the extent the amount paid 

or incurred is directly connected with an unrelated trade or 

business which is regularly carried on by the organization. 

The Secretary shall issue such regulations or other guidance 

as may be necessary or appropriate to carry out the purposes 

of this paragraph, including regulations or other guidance providing for the appropriate allocation of depreciation and other 

costs with respect to facilities used for parking or for onpremises athletic facilities.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to amounts paid or incurred after December 31, 2017. 

SEC. 13704. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE 

FOR COLLEGE ATHLETIC EVENT SEATING RIGHTS. 

(a) IN GENERAL.—Section 170(l) is amended— 

(1) by striking paragraph (1) and inserting the following: 

‘‘(1) IN GENERAL.—No deduction shall be allowed under 

this section for any amount described in paragraph (2).’’, and 

(2) in paragraph (2)(B), by striking ‘‘such amount would 

be allowable as a deduction under this section but for the 

fact that’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to contributions made in taxable years beginning after 

December 31, 2017. 

SEC. 13705. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF CONTRIBUTIONS REPORTED BY DONEE. 

(a) IN GENERAL.—Section 170(f)(8) is amended by striking 

subparagraph (D) and by redesignating subparagraph (E) as 

subparagraph (D). 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to contributions made in taxable years beginning after 

December 31, 2016. 

PART IX—OTHER PROVISIONS 

Subpart A—Craft Beverage Modernization and 

Tax Reform 

SEC. 13801. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED 

SPIRITS. 

(a) IN GENERAL.—Section 263A(f) is amended— 

(1) by redesignating paragraph (4) as paragraph (5), and 

26 USC 170 note. 

26 USC 170 note. 

26 USC 512 note. 

26 USC 512. 


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131 STAT. 2170 PUBLIC LAW 115–97—DEC. 22, 2017 

(2) by inserting after paragraph (3) the following new paragraph: 

‘‘(4) EXEMPTION FOR AGING PROCESS OF BEER, WINE, AND

DISTILLED SPIRITS.— ‘‘(A) IN GENERAL.—For purposes of this subsection, the 

production period shall not include the aging period for— 

‘‘(i) beer (as defined in section 5052(a)), 

‘‘(ii) wine (as described in section 5041(a)), or 

‘‘(iii) distilled spirits (as defined in section 

5002(a)(8)), except such spirits that are unfit for use 

for beverage purposes. 

‘‘(B) TERMINATION.—This paragraph shall not apply 

to interest costs paid or accrued after December 31, 2019.’’. 

(b) CONFORMING AMENDMENT.—Paragraph (5)(B)(ii) of section 

263A(f), as redesignated by this section, is amended by inserting 

‘‘except as provided in paragraph (4),’’ before ‘‘ending on the date’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to interest costs paid or accrued in calendar years 

beginning after December 31, 2017. 

SEC. 13802. REDUCED RATE OF EXCISE TAX ON BEER. 

(a) IN GENERAL.—Paragraph (1) of section 5051(a) is amended 

to read as follows: 

‘‘(1) IN GENERAL.— 

‘‘(A) IMPOSITION OF TAX.—A tax is hereby imposed on 

all beer brewed or produced, and removed for consumption 

or sale, within the United States, or imported into the 

United States. Except as provided in paragraph (2), the 

rate of such tax shall be the amount determined under 

this paragraph. 

‘‘(B) RATE.—Except as provided in subparagraph (C), 

the rate of tax shall be $18 for per barrel. 

‘‘(C) SPECIAL RULE.—In the case of beer removed after 

December 31, 2017, and before January 1, 2020, the rate 

of tax shall be— 

‘‘(i) $16 on the first 6,000,000 barrels of beer— 

‘‘(I) brewed by the brewer and removed during 

the calendar year for consumption or sale, or 

‘‘(II) imported by the importer into the United 

States during the calendar year, and 

‘‘(ii) $18 on any barrels of beer to which clause 

(i) does not apply. 

‘‘(D) BARREL.—For purposes of this section, a barrel 

shall contain not more than 31 gallons of beer, and any 

tax imposed under this section shall be applied at a like 

rate for any other quantity or for fractional parts of a 

barrel.’’. 

(b) REDUCED RATE FOR CERTAIN DOMESTIC PRODUCTION.— 

Subparagraph (A) of section 5051(a)(2) is amended— 

(1) in the heading, by striking ‘‘$7 A BARREL’’, and 

(2) by inserting ‘‘($3.50 in the case of beer removed after December 31, 2017, and before January 1, 2020)’’ after ‘‘$7’’. 

(c) APPLICATION OF REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND IMPORTERS.—Subsection (a) of section 5051 is 

amended— 

(1) in subparagraph (C)(i)(II) of paragraph (1), as amended 

by subsection (a), by inserting ‘‘but only if the importer is 

26 USC 263A 

note. 

26 USC 263A. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2171 

an electing importer under paragraph (4) and the barrels have 

been assigned to the importer pursuant to such paragraph’’ 

after ‘‘during the calendar year’’, and 

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

‘‘(4) REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND

IMPORTERS.— ‘‘(A) IN GENERAL.—In the case of any barrels of beer 

which have been brewed or produced outside of the United 

States and imported into the United States, the rate of 

tax applicable under clause (i) of paragraph (1)(C) (referred 

to in this paragraph as the ‘reduced tax rate’) may be 

assigned by the brewer (provided that the brewer makes 

an election described in subparagraph (B)(ii)) to any 

electing importer of such barrels pursuant to the requirements established by the Secretary under subparagraph 

(B). 

‘‘(B) ASSIGNMENT.—The Secretary shall, through such 

rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the reduced 

tax rate provided under this paragraph, which shall 

include— 

‘‘(i) a limitation to ensure that the number of barrels of beer for which the reduced tax rate has been 

assigned by a brewer— 

‘‘(I) to any importer does not exceed the 

number of barrels of beer brewed or produced by 

such brewer during the calendar year which were 

imported into the United States by such importer, 

and 

‘‘(II) to all importers does not exceed the 

6,000,000 barrels to which the reduced tax rate 

applies, 

‘‘(ii) procedures that allow the election of a brewer 

to assign and an importer to receive the reduced tax 

rate provided under this paragraph, 

‘‘(iii) requirements that the brewer provide any 

information as the Secretary determines necessary and 

appropriate for purposes of carrying out this paragraph, and 

‘‘(iv) procedures that allow for revocation of eligibility of the brewer and the importer for the reduced 

tax rate provided under this paragraph in the case 

of any erroneous or fraudulent information provided 

under clause (iii) which the Secretary deems to be 

material to qualifying for such reduced rate. 

‘‘(C) CONTROLLED GROUP.—For purposes of this section, 

any importer making an election described in subparagraph 

(B)(ii) shall be deemed to be a member of the controlled 

group of the brewer, as described under paragraph (5).’’. 

(d) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.—Subsection (a) of section 5051, as amended by this section, is amended— 

(1) in paragraph (2)— 

(A) by striking subparagraph (B), and 

(B) by redesignating subparagraph (C) as subparagraph (B), and 

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

‘‘(5) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.— 

26 USC 5051. 


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131 STAT. 2172 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(A) IN GENERAL.—Except as provided in subparagraph 

(B), in the case of a controlled group, the 6,000,000 barrel 

quantity specified in paragraph (1)(C)(i) and the 2,000,000 

barrel quantity specified in paragraph (2)(A) shall be 

applied to the controlled group, and the 6,000,000 barrel 

quantity specified in paragraph (1)(C)(i) and the 60,000 

barrel quantity specified in paragraph (2)(A) shall be apportioned among the brewers who are members of such group 

in such manner as the Secretary or their delegate shall 

by regulations prescribe. For purposes of the preceding 

sentence, the term ‘controlled group’ has the meaning 

assigned to it by subsection (a) of section 1563, except 

that for such purposes the phrase ‘more than 50 percent’ 

shall be substituted for the phrase ‘at least 80 percent’ 

in each place it appears in such subsection. Under regulations prescribed by the Secretary, principles similar to the 

principles of the preceding two sentences shall be applied 

to a group of brewers under common control where one 

or more of the brewers is not a corporation. 

‘‘(B) FOREIGN MANUFACTURERS AND IMPORTERS.—For 

purposes of paragraph (4), in the case of a controlled group, 

the 6,000,000 barrel quantity specified in paragraph 

(1)(C)(i) shall be applied to the controlled group and apportioned among the members of such group in such manner 

as the Secretary shall by regulations prescribe. For purposes of the preceding sentence, the term ‘controlled group’ 

has the meaning given such term under subparagraph 

(A). Under regulations prescribed by the Secretary, principles similar to the principles of the preceding two sentences shall be applied to a group of brewers under common 

control where one or more of the brewers is not a corporation. 

‘‘(C) SINGLE TAXPAYER.—Pursuant to rules issued by 

the Secretary, two or more entities (whether or not under 

common control) that produce beer marketed under a 

similar brand, license, franchise, or other arrangement 

shall be treated as a single taxpayer for purposes of the 

application of this subsection.’’. 

(e) EFFECTIVE DATE.—The amendments made by this section 

shall apply to beer removed after December 31, 2017. 

SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILITIES. 

(a) IN GENERAL.—Section 5414 is amended— 

(1) by striking ‘‘Beer may be removed’’ and inserting ‘‘(a) 

IN GENERAL.—Beer may be removed’’, and 

(2) by adding at the end the following: 

‘‘(b) TRANSFER OF BEER BETWEEN BONDED FACILITIES.— 

‘‘(1) IN GENERAL.—Beer may be removed from one bonded 

brewery to another bonded brewery, without payment of tax, 

and may be mingled with beer at the receiving brewery, subject 

to such conditions, including payment of the tax, and in such 

containers, as the Secretary by regulations shall prescribe, 

which shall include— 

‘‘(A) any removal from one brewery to another brewery 

belonging to the same brewer, 

‘‘(B) any removal from a brewery owned by one corporation to a brewery owned by another corporation when— 

26 USC 5414. 

26 USC 5051 

note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2173 

‘‘(i) one such corporation owns the controlling 

interest in the other such corporation, or 

‘‘(ii) the controlling interest in each such corporation is owned by the same person or persons, and 

‘‘(C) any removal from one brewery to another brewery 

when— 

‘‘(i) the proprietors of transferring and receiving 

premises are independent of each other and neither 

has a proprietary interest, directly or indirectly, in 

the business of the other, and 

‘‘(ii) the transferor has divested itself of all interest 

in the beer so transferred and the transferee has 

accepted responsibility for payment of the tax. 

‘‘(2) TRANSFER OF LIABILITY FOR TAX.—For purposes of paragraph (1)(C), such relief from liability shall be effective from 

the time of removal from the transferor’s bonded premises, 

or from the time of divestment of interest, whichever is later. 

‘‘(3) TERMINATION.—This subsection shall not apply to any 

calendar quarter beginning after December 31, 2019.’’. 

(b) REMOVAL FROM BREWERY BY PIPELINE.—Section 5412 is 

amended by inserting ‘‘pursuant to section 5414 or’’ before ‘‘by 

pipeline’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to any calendar quarters beginning after December 

31, 2017. 

SEC. 13804. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE. 

(a) IN GENERAL.—Section 5041(c) is amended by adding at 

the end the following new paragraph: 

‘‘(8) SPECIAL RULE FOR 2018 AND 2019.— 

‘‘(A) IN GENERAL.—In the case of wine removed after 

December 31, 2017, and before January 1, 2020, paragraphs 

(1) and (2) shall not apply and there shall be allowed 

as a credit against any tax imposed by this title (other 

than chapters 2, 21, and 22) an amount equal to the 

sum of— 

‘‘(i) $1 per wine gallon on the first 30,000 wine 

gallons of wine, plus 

‘‘(ii) 90 cents per wine gallon on the first 100,000 

wine gallons of wine to which clause (i) does not apply, 

plus 

‘‘(iii) 53.5 cents per wine gallon on the first 620,000 

wine gallons of wine to which clauses (i) and (ii) do 

not apply, 

which are produced by the producer and removed during 

the calendar year for consumption or sale, or which are 

imported by the importer into the United States during 

the calendar year. 

‘‘(B) ADJUSTMENT OF CREDIT FOR HARD CIDER.—In the 

case of wine described in subsection (b)(6), subparagraph 

(A) of this paragraph shall be applied— 

‘‘(i) in clause (i) of such subparagraph, by substituting ‘6.2 cents’ for ‘$1’, 

‘‘(ii) in clause (ii) of such subparagraph, by substituting ‘5.6 cents’ for ‘90 cents’, and 

‘‘(iii) in clause (iii) of such subparagraph, by substituting ‘3.3 cents’ for ‘53.5 cents’.’’, 

26 USC 5412 

note. 

26 USC 5412. 


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131 STAT. 2174 PUBLIC LAW 115–97—DEC. 22, 2017 

(b) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.—Paragraph (4) of section 5041(c) is amended by striking ‘‘section 

5051(a)(2)(B)’’ and inserting ‘‘section 5051(a)(5)’’. 

(c) ALLOWANCE OF CREDIT FOR FOREIGN MANUFACTURERS AND

IMPORTERS.—Subsection (c) of section 5041, as amended by subsection (a), is amended— 

(1) in subparagraph (A) of paragraph (8), by inserting ‘‘but 

only if the importer is an electing importer under paragraph 

(9) and the wine gallons of wine have been assigned to the 

importer pursuant to such paragraph’’ after ‘‘into the United 

States during the calendar year’’, and 

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

‘‘(9) ALLOWANCE OF CREDIT FOR FOREIGN MANUFACTURERS

AND IMPORTERS.— 

‘‘(A) IN GENERAL.—In the case of any wine gallons 

of wine which have been produced outside of the United 

States and imported into the United States, the credit 

allowable under paragraph (8) (referred to in this paragraph as the ‘tax credit’) may be assigned by the person 

who produced such wine (referred to in this paragraph 

as the ‘foreign producer’), provided that such person makes 

an election described in subparagraph (B)(ii), to any 

electing importer of such wine gallons pursuant to the 

requirements established by the Secretary under subparagraph (B). 

‘‘(B) ASSIGNMENT.—The Secretary shall, through such 

rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the tax credit 

provided under this paragraph, which shall include— 

‘‘(i) a limitation to ensure that the number of wine 

gallons of wine for which the tax credit has been 

assigned by a foreign producer— 

‘‘(I) to any importer does not exceed the 

number of wine gallons of wine produced by such 

foreign producer during the calendar year which 

were imported into the United States by such 

importer, and 

‘‘(II) to all importers does not exceed the 

750,000 wine gallons of wine to which the tax 

credit applies, 

‘‘(ii) procedures that allow the election of a foreign 

producer to assign and an importer to receive the tax 

credit provided under this paragraph, 

‘‘(iii) requirements that the foreign producer provide any information as the Secretary determines necessary and appropriate for purposes of carrying out 

this paragraph, and 

‘‘(iv) procedures that allow for revocation of eligibility of the foreign producer and the importer for 

the tax credit provided under this paragraph in the 

case of any erroneous or fraudulent information provided under clause (iii) which the Secretary deems 

to be material to qualifying for such credit. 

‘‘(C) CONTROLLED GROUP.—For purposes of this section, 

any importer making an election described in subparagraph 

(B)(ii) shall be deemed to be a member of the controlled 

26 USC 5041. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2175 

group of the foreign producer, as described under paragraph 

(4).’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to wine removed after December 31, 2017. 

SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICATION OF EXCISE TAX RATES. 

(a) IN GENERAL.—Paragraphs (1) and (2) of section 5041(b) 

are each amended by inserting ‘‘(16 percent in the case of wine 

removed after December 31, 2017, and before January 1, 2020’’ 

after ‘‘14 percent’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to wine removed after December 31, 2017. 

SEC. 13806. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME 

WINE. 

(a) IN GENERAL.—Section 5041 is amended— 

(1) in subsection (a), by striking ‘‘Still wines’’ and inserting 

‘‘Subject to subsection (h), still wines’’, and 

(2) by adding at the end the following new subsection: 

‘‘(h) MEAD AND LOW ALCOHOL BY VOLUME WINE.— 

‘‘(1) IN GENERAL.—For purposes of subsections (a) and 

(b)(1), mead and low alcohol by volume wine shall be deemed 

to be still wines containing not more than 16 percent of alcohol 

by volume. 

‘‘(2) DEFINITIONS.— 

‘‘(A) MEAD.—For purposes of this section, the term 

‘mead’ means a wine— 

‘‘(i) containing not more than 0.64 gram of carbon 

dioxide per hundred milliliters of wine, except that 

the Secretary shall by regulations prescribe such tolerances to this limitation as may be reasonably necessary 

in good commercial practice, 

‘‘(ii) which is derived solely from honey and water, 

‘‘(iii) which contains no fruit product or fruit flavoring, and 

‘‘(iv) which contains less than 8.5 percent alcohol 

by volume. 

‘‘(B) LOW ALCOHOL BY VOLUME WINE.—For purposes 

of this section, the term ‘low alcohol by volume wine’ means 

a wine— 

‘‘(i) containing not more than 0.64 gram of carbon 

dioxide per hundred milliliters of wine, except that 

the Secretary shall by regulations prescribe such tolerances to this limitation as may be reasonably necessary 

in good commercial practice, 

‘‘(ii) which is derived— 

‘‘(I) primarily from grapes, or 

‘‘(II) from grape juice concentrate and water, 

‘‘(iii) which contains no fruit product or fruit flavoring other than grape, and 

‘‘(iv) which contains less than 8.5 percent alcohol 

by volume. 

‘‘(3) TERMINATION.—This subsection shall not apply to wine 

removed after December 31, 2019.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to wine removed after December 31, 2017. 

26 USC 5401 

note. 

26 USC 5401 

note. 

26 USC 5041. 

26 USC 5401 

note. 


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131 STAT. 2176 PUBLIC LAW 115–97—DEC. 22, 2017 

SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED 

SPIRITS. 

(a) IN GENERAL.—Section 5001 is amended by redesignating 

subsection (c) as subsection (d) and by inserting after subsection 

(b) the following new subsection: 

‘‘(c) REDUCED RATE FOR 2018 AND 2019.— 

‘‘(1) IN GENERAL.—In the case of a distilled spirits operation, the otherwise applicable tax rate under subsection (a)(1) 

shall be— 

‘‘(A) $2.70 per proof gallon on the first 100,000 proof 

gallons of distilled spirits, and ‘‘(B) $13.34 per proof gallon on the first 22,130,000 

of proof gallons of distilled spirits to which subparagraph 

(A) does not apply, 

which have been distilled or processed by such operation and 

removed during the calendar year for consumption or sale, 

or which have been imported by the importer into the United 

States during the calendar year. 

‘‘(2) CONTROLLED GROUPS.— ‘‘(A) IN GENERAL.—In the case of a controlled group, 

the proof gallon quantities specified under subparagraphs 

(A) and (B) of paragraph (1) shall be applied to such group 

and apportioned among the members of such group in 

such manner as the Secretary or their delegate shall by 

regulations prescribe. 

‘‘(B) DEFINITION.—For purposes of subparagraph (A), 

the term ‘controlled group’ shall have the meaning given 

such term by subsection (a) of section 1563, except that 

‘more than 50 percent’ shall be substituted for ‘at least 

80 percent’ each place it appears in such subsection. 

‘‘(C) RULES FOR NON-CORPORATIONS.—Under regulations prescribed by the Secretary, principles similar to the 

principles of subparagraphs (A) and (B) shall be applied 

to a group under common control where one or more of 

the persons is not a corporation. 

‘‘(D) SINGLE TAXPAYER.—Pursuant to rules issued by 

the Secretary, two or more entities (whether or not under 

common control) that produce distilled spirits marketed 

under a similar brand, license, franchise, or other arrangement shall be treated as a single taxpayer for purposes 

of the application of this subsection. 

‘‘(3) TERMINATION.—This subsection shall not apply to distilled spirits removed after December 31, 2019.’’. 

(b) CONFORMING AMENDMENT.—Section 7652(f)(2) is amended 

by striking ‘‘section 5001(a)(1)’’ and inserting ‘‘subsection (a)(1) of 

section 5001, determined as if subsection (c)(1) of such section 

did not apply’’. 

(c) APPLICATION OF REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND IMPORTERS.—Subsection (c) of section 5001, as added 

by subsection (a), is amended— 

(1) in paragraph (1), by inserting ‘‘but only if the importer 

is an electing importer under paragraph (3) and the proof 

gallons of distilled spirits have been assigned to the importer 

pursuant to such paragraph’’ after ‘‘into the United States 

during the calendar year’’, and 

(2) by redesignating paragraph (3) as paragraph (4) and 

by inserting after paragraph (2) the following new paragraph: 

26 USC 5001. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2177 

‘‘(3) REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND

IMPORTERS.— ‘‘(A) IN GENERAL.—In the case of any proof gallons 

of distilled spirits which have been produced outside of 

the United States and imported into the United States, 

the rate of tax applicable under paragraph (1) (referred 

to in this paragraph as the ‘reduced tax rate’) may be 

assigned by the distilled spirits operation (provided that 

such operation makes an election described in subparagraph (B)(ii)) to any electing importer of such proof gallons 

pursuant to the requirements established by the Secretary 

under subparagraph (B). 

‘‘(B) ASSIGNMENT.—The Secretary shall, through such 

rules, regulations, and procedures as are determined appropriate, establish procedures for assignment of the reduced 

tax rate provided under this paragraph, which shall 

include— 

‘‘(i) a limitation to ensure that the number of proof 

gallons of distilled spirits for which the reduced tax 

rate has been assigned by a distilled spirits operation— 

‘‘(I) to any importer does not exceed the 

number of proof gallons produced by such operation during the calendar year which were 

imported into the United States by such importer, 

and 

‘‘(II) to all importers does not exceed the 

22,230,000 proof gallons of distilled spirits to which 

the reduced tax rate applies, 

‘‘(ii) procedures that allow the election of a distilled 

spirits operation to assign and an importer to receive 

the reduced tax rate provided under this paragraph, 

‘‘(iii) requirements that the distilled spirits operation provide any information as the Secretary determines necessary and appropriate for purposes of carrying out this paragraph, and 

‘‘(iv) procedures that allow for revocation of eligibility of the distilled spirits operation and the importer 

for the reduced tax rate provided under this paragraph 

in the case of any erroneous or fraudulent information 

provided under clause (iii) which the Secretary deems 

to be material to qualifying for such reduced rate. 

‘‘(C) CONTROLLED GROUP.— 

‘‘(i) IN GENERAL.—For purposes of this section, any 

importer making an election described in subparagraph 

(B)(ii) shall be deemed to be a member of the controlled 

group of the distilled spirits operation, as described 

under paragraph (2). 

‘‘(ii) APPORTIONMENT.—For purposes of this paragraph, in the case of a controlled group, rules similar 

to section 5051(a)(5)(B) shall apply.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distilled spirits removed after December 31, 2017. 

SEC. 13808. BULK DISTILLED SPIRITS. 

(a) IN GENERAL.—Section 5212 is amended by adding at the 

end the following sentence: ‘‘In the case of distilled spirits transferred in bond after December 31, 2017, and before January 1, 

26 USC 5212. 

26 USC 5001 

note. 


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131 STAT. 2178 PUBLIC LAW 115–97—DEC. 22, 2017 

2020, this section shall be applied without regard to whether distilled spirits are bulk distilled spirits.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply distilled spirits transferred in bond after December 

31, 2017. 

Subpart B—Miscellaneous Provisions 

SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA NATIVE 

CORPORATIONS AND SETTLEMENT TRUSTS. 

(a) EXCLUSION FOR ANCSA PAYMENTS ASSIGNED TO ALASKA

NATIVE SETTLEMENT TRUSTS.— 

(1) IN GENERAL.—Part III of subchapter B of chapter 1 

is amended by inserting before section 140 the following new 

section: 

‘‘SEC. 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLEMENT TRUSTS. 

‘‘(a) IN GENERAL.—In the case of a Native Corporation, gross 

income shall not include the value of any payments that would 

otherwise be made, or treated as being made, to such Native Corporation pursuant to, or as required by, any provision of the Alaska 

Native Claims Settlement Act (43 U.S.C. 1601 et seq.), including 

any payment that would otherwise be made to a Village Corporation 

pursuant to section 7(j) of the Alaska Native Claims Settlement 

Act (43 U.S.C. 1606(j)), provided that any such payments— 

‘‘(1) are assigned in writing to a Settlement Trust, and 

‘‘(2) were not received by such Native Corporation prior 

to the assignment described in paragraph (1). 

‘‘(b) INCLUSION IN GROSS INCOME.—In the case of a Settlement 

Trust which has been assigned payments described in subsection 

(a), gross income shall include such payments when received by 

such Settlement Trust pursuant to the assignment and shall have 

the same character as if such payments were received by the 

Native Corporation. 

‘‘(c) AMOUNT AND SCOPE OF ASSIGNMENT.—The amount and 

scope of any assignment under subsection (a) shall be described 

with reasonable particularity and may either be in a percentage 

of one or more such payments or in a fixed dollar amount. 

‘‘(d) DURATION OF ASSIGNMENT; REVOCABILITY.—Any assignment under subsection (a) shall specify— 

‘‘(1) a duration either in perpetuity or for a period of 

time, and 

‘‘(2) whether such assignment is revocable. 

‘‘(e) PROHIBITION ON DEDUCTION.—Notwithstanding section 247, 

no deduction shall be allowed to a Native Corporation for purposes 

of any amounts described in subsection (a). 

‘‘(f) DEFINITIONS.—For purposes of this section, the terms 

‘Native Corporation’ and ‘Settlement Trust’ have the same meaning 

given such terms under section 646(h).’’. 

(2) 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. 139G. Assignments to Alaska Native Settlement Trusts.’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after December 

31, 2016. 

26 USC 139G 

note. 

26 USC 

prec. 101. 

26 USC 139G. 

26 USC 5212 

note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2179 

(b) DEDUCTION OF CONTRIBUTIONS TO ALASKA NATIVE SETTLEMENT TRUSTS.— 

(1) IN GENERAL.—Part VIII of subchapter B of chapter 

1 is amended by inserting before section 248 the following 

new section: 

‘‘SEC. 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLEMENT TRUSTS. 

‘‘(a) IN GENERAL.—In the case of a Native Corporation, there 

shall be allowed a deduction for any contributions made by such 

Native Corporation to a Settlement Trust (regardless of whether 

an election under section 646 is in effect for such Settlement Trust) 

for which the Native Corporation has made an annual election 

under subsection (e). 

‘‘(b) AMOUNT OF DEDUCTION.—The amount of the deduction 

under subsection (a) shall be equal to— 

‘‘(1) in the case of a cash contribution (regardless of the 

method of payment, including currency, coins, money order, 

or check), the amount of such contribution, or 

‘‘(2) in the case of a contribution not described in paragraph 

(1), the lesser of— 

‘‘(A) the Native Corporation’s adjusted basis in the 

property contributed, or 

‘‘(B) the fair market value of the property contributed. 

‘‘(c) LIMITATION AND CARRYOVER.— 

‘‘(1) IN GENERAL.—Subject to paragraph (2), the deduction 

allowed under subsection (a) for any taxable year shall not 

exceed the taxable income (as determined without regard to 

such deduction) of the Native Corporation for the taxable year 

in which the contribution was made. 

‘‘(2) CARRYOVER.—If the aggregate amount of contributions 

described in subsection (a) for any taxable year exceeds the 

limitation under paragraph (1), such excess shall be treated 

as a contribution described in subsection (a) in each of the 

15 succeeding years in order of time. 

‘‘(d) DEFINITIONS.—For purposes of this section, the terms 

‘Native Corporation’ and ‘Settlement Trust’ have the same meaning 

given such terms under section 646(h). 

‘‘(e) MANNER OF MAKING ELECTION.— 

‘‘(1) IN GENERAL.—For each taxable year, a Native Corporation may elect to have this section apply for such taxable 

year on the income tax return or an amendment or supplement 

to the return of the Native Corporation, with such election 

to have effect solely for such taxable year. 

‘‘(2) REVOCATION.—Any election made by a Native Corporation pursuant to this subsection may be revoked pursuant 

to a timely filed amendment or supplement to the income 

tax return of such Native Corporation. 

‘‘(f) ADDITIONAL RULES.— 

‘‘(1) EARNINGS AND PROFITS.—Notwithstanding section 

646(d)(2), in the case of a Native Corporation which claims 

a deduction under this section for any taxable year, the earnings 

and profits of such Native Corporation for such taxable year 

shall be reduced by the amount of such deduction. 

‘‘(2) GAIN OR LOSS.—No gain or loss shall be recognized 

by the Native Corporation with respect to a contribution of 

property for which a deduction is allowed under this section. 

26 USC 247. 


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131 STAT. 2180 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(3) INCOME.—Subject to subsection (g), a Settlement Trust 

shall include in income the amount of any deduction allowed 

under this section in the taxable year in which the Settlement 

Trust actually receives such contribution. 

‘‘(4) PERIOD.—The holding period under section 1223 of 

the Settlement Trust shall include the period the property 

was held by the Native Corporation. 

‘‘(5) BASIS.—The basis that a Settlement Trust has for 

which a deduction is allowed under this section shall be equal 

to the lesser of— 

‘‘(A) the adjusted basis of the Native Corporation in 

such property immediately before such contribution, or 

‘‘(B) the fair market value of the property immediately 

before such contribution. 

‘‘(6) PROHIBITION.—No deduction shall be allowed under 

this section with respect to any contributions made to a Settlement Trust which are in violation of subsection (a)(2) or (c)(2) 

of section 39 of the Alaska Native Claims Settlement Act (43 

U.S.C. 1629e). 

‘‘(g) ELECTION BY SETTLEMENT TRUST TO DEFER INCOME RECOGNITION.— 

‘‘(1) IN GENERAL.—In the case of a contribution which consists of property other than cash, a Settlement Trust may 

elect to defer recognition of any income related to such property 

until the sale or exchange of such property, in whole or in 

part, by the Settlement Trust. 

‘‘(2) TREATMENT.—In the case of property described in paragraph (1), any income or gain realized on the sale or exchange 

of such property shall be treated as— 

‘‘(A) for such amount of the income or gain as is equal 

to or less than the amount of income which would be 

included in income at the time of contribution under subsection (f)(3) but for the taxpayer’s election under this 

subsection, ordinary income, and 

‘‘(B) for any amounts of the income or gain which 

are in excess of the amount of income which would be 

included in income at the time of contribution under subsection (f)(3) but for the taxpayer’s election under this 

subsection, having the same character as if this subsection 

did not apply. 

‘‘(3) ELECTION.— 

‘‘(A) IN GENERAL.—For each taxable year, a Settlement 

Trust may elect to apply this subsection for any property 

described in paragraph (1) which was contributed during 

such year. Any property to which the election applies shall 

be identified and described with reasonable particularity 

on the income tax return or an amendment or supplement 

to the return of the Settlement Trust, with such election 

to have effect solely for such taxable year. 

‘‘(B) REVOCATION.—Any election made by a Settlement 

Trust pursuant to this subsection may be revoked pursuant 

to a timely filed amendment or supplement to the income 

tax return of such Settlement Trust. 

‘‘(C) CERTAIN DISPOSITIONS.— 

‘‘(i) IN GENERAL.—In the case of any property for 

which an election is in effect under this subsection 

and which is disposed of within the first taxable year 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2181 

subsequent to the taxable year in which such property 

was contributed to the Settlement Trust— 

‘‘(I) this section shall be applied as if the election under this subsection had not been made, 

‘‘(II) any income or gain which would have 

been included in the year of contribution under 

subsection (f)(3) but for the taxpayer’s election 

under this subsection shall be included in income 

for the taxable year of such contribution, and 

‘‘(III) the Settlement Trust shall pay any 

increase in tax resulting from such inclusion, 

including any applicable interest, and increased 

by 10 percent of the amount of such increase with 

interest. 

‘‘(ii) ASSESSMENT.—Notwithstanding section 

6501(a), any amount described in subclause (III) of 

clause (i) may be assessed, or a proceeding in court 

with respect to such amount may be initiated without 

assessment, within 4 years after the date on which 

the return making the election under this subsection 

for such property was filed.’’. 

(2) CONFORMING AMENDMENT.—The table of sections for 

part VIII of subchapter B of chapter 1 is amended by inserting 

before the item relating to section 248 the following new item: 

‘‘Sec. 247. Contributions to Alaska Native Settlement Trusts.’’. 

(3) EFFECTIVE DATE.— 

(A) IN GENERAL.—The amendments made by this subsection 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. 

(B) ONE-YEAR WAIVER OF STATUTE OF LIMITATIONS.— 

If the period of limitation on a credit or refund resulting 

from the amendments made by paragraph (1) 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. 

(c) INFORMATION REPORTING FOR DEDUCTIBLE CONTRIBUTIONS

TO ALASKA NATIVE SETTLEMENT TRUSTS.— 

(1) IN GENERAL.—Section 6039H is amended— 

(A) in the heading, by striking ‘‘SPONSORING’’, and 

(B) by adding at the end the following new subsection: 

‘‘(e) DEDUCTIBLE CONTRIBUTIONS BY NATIVE CORPORATIONS TO

ALASKA NATIVE SETTLEMENT TRUSTS.— 

‘‘(1) IN GENERAL.—Any Native Corporation (as defined in 

subsection (m) of section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m))) which has made a contribution 

to a Settlement Trust (as defined in subsection (t) of such 

section) to which an election under subsection (e) of section 

247 applies shall provide such Settlement Trust with a statement regarding such election not later than January 31 of 

the calendar year subsequent to the calendar year in which 

the contribution was made. 

‘‘(2) CONTENT OF STATEMENT.—The statement described in 

paragraph (1) shall include— 

26 USC 6039H. 

26 USC 247 note. 

26 USC 

prec. 241. 


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131 STAT. 2182 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(A) the total amount of contributions to which the 

election under subsection (e) of section 247 applies, 

‘‘(B) for each contribution, whether such contribution 

was in cash, 

‘‘(C) for each contribution which consists of property 

other than cash, the date that such property was acquired 

by the Native Corporation and the adjusted basis and 

fair market value of such property on the date such property was contributed to the Settlement Trust, 

‘‘(D) the date on which each contribution was made 

to the Settlement Trust, and 

‘‘(E) such information as the Secretary determines to 

be necessary or appropriate for the identification of each 

contribution and the accurate inclusion of income relating 

to such contributions by the Settlement Trust.’’. 

(2) CONFORMING AMENDMENT.—The item relating to section 

6039H in the table of sections for subpart A of part III of 

subchapter A of chapter 61 is amended to read as follows: 

‘‘Sec. 6039H. Information With Respect to Alaska Native Settlement Trusts and 

Native Corporations.’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after December 

31, 2016. 

SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES. 

(a) IN GENERAL.—Subsection (e) of section 4261 is amended 

by adding at the end the following new paragraph: 

‘‘(5) AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.— 

‘‘(A) IN GENERAL.—No tax shall be imposed by this 

section or section 4271 on any amounts paid by an aircraft 

owner for aircraft management services related to— 

‘‘(i) maintenance and support of the aircraft 

owner’s aircraft, or 

‘‘(ii) flights on the aircraft owner’s aircraft. 

‘‘(B) AIRCRAFT MANAGEMENT SERVICES.—For purposes 

of subparagraph (A), the term ‘aircraft management services’ includes— 

‘‘(i) assisting an aircraft owner with administrative 

and support services, such as scheduling, flight planning, and weather forecasting, 

‘‘(ii) obtaining insurance, 

‘‘(iii) maintenance, storage and fueling of aircraft, 

‘‘(iv) hiring, training, and provision of pilots and 

crew, 

‘‘(v) establishing and complying with safety standards, and 

‘‘(vi) such other services as are necessary to support flights operated by an aircraft owner. 

‘‘(C) LESSEE TREATED AS AIRCRAFT OWNER.— 

‘‘(i) IN GENERAL.—For purposes of this paragraph, 

the term ‘aircraft owner’ includes a person who leases 

the aircraft other than under a disqualified lease. 

‘‘(ii) DISQUALIFIED LEASE.—For purposes of clause 

(i), the term ‘disqualified lease’ means a lease from 

a person providing aircraft management services with 

respect to such aircraft (or a related person (within 

26 USC 4261. 

26 USC 6039H 

note. 

26 USC 

prec. 6031. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2183 

the meaning of section 465(b)(3)(C)) to the person providing such services), if such lease is for a term of 

31 days or less. 

‘‘(D) PRO RATA ALLOCATION.—In the case of amounts 

paid to any person which (but for this subsection) are 

subject to the tax imposed by subsection (a), a portion 

of which consists of amounts described in subparagraph 

(A), this paragraph shall apply on a pro rata basis only 

to the portion which consists of amounts described in such 

subparagraph.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to amounts paid after the date of the enactment of 

this Act. 

SEC. 13823. OPPORTUNITY ZONES. 

(a) IN GENERAL.—Chapter 1 is amended by adding at the 

end the following: 

‘‘Subchapter Z—Opportunity Zones 

‘‘Sec. 1400Z–1. Designation. 

‘‘Sec. 1400Z–2. Special rules for capital gains invested in opportunity zones. 

‘‘SEC. 1400Z–1. DESIGNATION. 

‘‘(a) QUALIFIED OPPORTUNITY ZONE DEFINED.—For the purposes 

of this subchapter, the term ‘qualified opportunity zone’ means 

a population census tract that is a low-income community that 

is designated as a qualified opportunity zone. 

‘‘(b) DESIGNATION.— 

‘‘(1) IN GENERAL.—For purposes of subsection (a), a population census tract that is a low-income community is designated as a qualified opportunity zone if— 

‘‘(A) not later than the end of the determination period, 

the chief executive officer of the State in which the tract 

is located— 

‘‘(i) nominates the tract for designation as a qualified opportunity zone, and 

‘‘(ii) notifies the Secretary in writing of such 

nomination, and 

‘‘(B) the Secretary certifies such nomination and designates such tract as a qualified opportunity zone before 

the end of the consideration period. 

‘‘(2) EXTENSION OF PERIODS.—A chief executive officer of 

a State may request that the Secretary extend either the determination or consideration period, or both (determined without 

regard to this subparagraph), for an additional 30 days. 

‘‘(c) OTHER DEFINITIONS.—For purposes of this subsection— 

‘‘(1) LOW-INCOME COMMUNITIES.—The term ‘low-income 

community’ has the same meaning as when used in section 

45D(e). 

‘‘(2) DEFINITION OF PERIODS.— ‘‘(A) CONSIDERATION PERIOD.—The term ‘consideration 

period’ means the 30-day period beginning on the date 

on which the Secretary receives notice under subsection 

(b)(1)(A)(ii), as extended under subsection (b)(2). 

‘‘(B) DETERMINATION PERIOD.—The term ‘determination 

period’ means the 90-day period beginning on the date 

26 USC 1400Z–1. 

26 USC 

prec. 1400Z–1. 

26 USC 4261 

note. 


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131 STAT. 2184 PUBLIC LAW 115–97—DEC. 22, 2017 

of the enactment of the Tax Cuts and Jobs Act, as extended 

under subsection (b)(2). 

‘‘(3) STATE.—For purposes of this section, the term ‘State’ 

includes any possession of the United States. 

‘‘(d) NUMBER OF DESIGNATIONS.— ‘‘(1) IN GENERAL.—Except as provided by paragraph (2), 

the number of population census tracts in a State that may 

be designated as qualified opportunity zones under this section 

may not exceed 25 percent of the number of low-income communities in the State. 

‘‘(2) EXCEPTION.—If the number of low-income communities 

in a State is less than 100, then a total of 25 of such tracts 

may be designated as qualified opportunity zones. 

‘‘(e) DESIGNATION OF TRACTS CONTIGUOUS WITH LOW-INCOME

COMMUNITIES.— ‘‘(1) IN GENERAL.—A population census tract that is not 

a low-income community may be designated as a qualified 

opportunity zone under this section if— 

‘‘(A) the tract is contiguous with the low-income 

community that is designated as a qualified opportunity 

zone, and 

‘‘(B) the median family income of the tract does not 

exceed 125 percent of the median family income of the 

low-income community with which the tract is contiguous. 

‘‘(2) LIMITATION.—Not more than 5 percent of the population census tracts designated in a State as a qualified opportunity zone may be designated under paragraph (1). 

‘‘(f) PERIOD FOR WHICH DESIGNATION IS IN EFFECT.—A designation as a qualified opportunity zone shall remain in effect for 

the period beginning on the date of the designation and ending 

at the close of the 10th calendar year beginning on or after such 

date of designation. 

‘‘SEC. 1400Z–2. SPECIAL RULES FOR CAPITAL GAINS INVESTED IN 

OPPORTUNITY ZONES. 

‘‘(a) IN GENERAL.— 

‘‘(1) TREATMENT OF GAINS.—In the case of gain from the 

sale to, or exchange with, an unrelated person of any property 

held by the taxpayer, at the election of the taxpayer— 

‘‘(A) gross income for the taxable year shall not include 

so much of such gain as does not exceed the aggregate 

amount invested by the taxpayer in a qualified opportunity 

fund during the 180-day period beginning on the date of 

such sale or exchange, 

‘‘(B) the amount of gain excluded by subparagraph 

(A) shall be included in gross income as provided by subsection (b), and 

‘‘(C) subsection (c) shall apply. 

‘‘(2) ELECTION.—No election may be made under paragraph 

(1)— 

‘‘(A) with respect to a sale or exchange if an election 

previously made with respect to such sale or exchange 

is in effect, or 

‘‘(B) with respect to any sale or exchange after 

December 31, 2026. 

‘‘(b) DEFERRAL OF GAIN INVESTED IN OPPORTUNITY ZONE PROP- ERTY.— 

26 USC 1400Z–2. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2185 

‘‘(1) YEAR OF INCLUSION.—Gain to which subsection 

(a)(1)(B) applies shall be included in income in the taxable 

year which includes the earlier of— 

‘‘(A) the date on which such investment is sold or 

exchanged, or 

‘‘(B) December 31, 2026. 

‘‘(2) AMOUNT INCLUDIBLE.— ‘‘(A) IN GENERAL.—The amount of gain included in 

gross income under subsection (a)(1)(A) shall be the excess 

of— 

‘‘(i) the lesser of the amount of gain excluded under 

paragraph (1) or the fair market value of the investment as determined as of the date described in paragraph (1), over 

‘‘(ii) the taxpayer’s basis in the investment. 

‘‘(B) DETERMINATION OF BASIS.— ‘‘(i) IN GENERAL.—Except as otherwise provided 

in this clause or subsection (c), the taxpayer’s basis 

in the investment shall be zero. 

‘‘(ii) INCREASE FOR GAIN RECOGNIZED UNDER SUBSECTION (a)(1)(B).—The basis in the investment shall 

be increased by the amount of gain recognized by reason of subsection (a)(1)(B) with respect to such property. 

‘‘(iii) INVESTMENTS HELD FOR 5 YEARS.—In the case 

of any investment held for at least 5 years, the basis 

of such investment shall be increased by an amount 

equal to 10 percent of the amount of gain deferred 

by reason of subsection (a)(1)(A). 

‘‘(iv) INVESTMENTS HELD FOR 7 YEARS.—In the case 

of any investment held by the taxpayer for at least 

7 years, in addition to any adjustment made under 

clause (iii), the basis of such property shall be increased 

by an amount equal to 5 percent of the amount of 

gain deferred by reason of subsection (a)(1)(A). 

‘‘(c) SPECIAL RULE FOR INVESTMENTS HELD FOR AT LEAST 10 

YEARS.—In the case of any investment held by the taxpayer for 

at least 10 years and with respect to which the taxpayer makes 

an election under this clause, the basis of such property shall 

be equal to the fair market value of such investment on the date 

that the investment is sold or exchanged. 

‘‘(d) QUALIFIED OPPORTUNITY FUND.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘qualified opportunity fund’ 

means any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified 

opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in 

qualified opportunity zone property, determined by the average 

of the percentage of qualified opportunity zone property held 

in the fund as measured— 

‘‘(A) on the last day of the first 6-month period of 

the taxable year of the fund, and 

‘‘(B) on the last day of the taxable year of the fund. 

‘‘(2) QUALIFIED OPPORTUNITY ZONE PROPERTY.— ‘‘(A) IN GENERAL.—The term ‘qualified opportunity zone 

property’ means property which is— 


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131 STAT. 2186 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(i) qualified opportunity zone stock, 

‘‘(ii) qualified opportunity zone partnership 

interest, or 

‘‘(iii) qualified opportunity zone business property. 

‘‘(B) QUALIFIED OPPORTUNITY ZONE STOCK.— 

‘‘(i) IN GENERAL.—Except as provided in clause 

(ii), the term ‘qualified opportunity zone stock’ means 

any stock in a domestic corporation if— 

‘‘(I) such stock is acquired by the qualified 

opportunity fund after December 31, 2017, at its 

original issue (directly or through an underwriter) 

from the corporation solely in exchange for cash, 

‘‘(II) as of the time such stock was issued, 

such corporation was a qualified opportunity zone 

business (or, in the case of a new corporation, 

such corporation was being organized for purposes 

of being a qualified opportunity zone business), 

and 

‘‘(III) during substantially all of the qualified 

opportunity fund’s holding period for such stock, 

such corporation qualified as a qualified opportunity zone business. 

‘‘(ii) REDEMPTIONS.—A rule similar to the rule of 

section 1202(c)(3) shall apply for purposes of this paragraph. 

‘‘(C) QUALIFIED OPPORTUNITY ZONE PARTNERSHIP

INTEREST.—The term ‘qualified opportunity zone partnership interest’ means any capital or profits interest in a 

domestic partnership if— 

‘‘(i) such interest is acquired by the qualified opportunity fund after December 31, 2017, from the partnership solely in exchange for cash, 

‘‘(ii) as of the time such interest was acquired, 

such partnership was a qualified opportunity zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a qualified opportunity zone business), and 

‘‘(iii) during substantially all of the qualified opportunity fund’s holding period for such interest, such 

partnership qualified as a qualified opportunity zone 

business. 

‘‘(D) QUALIFIED OPPORTUNITY ZONE BUSINESS PROPERTY.— 

‘‘(i) IN GENERAL.—The term ‘qualified opportunity 

zone business property’ means tangible property used 

in a trade or business of the qualified opportunity 

fund if— 

‘‘(I) such property was acquired by the qualified opportunity fund by purchase (as defined in 

section 179(d)(2)) after December 31, 2017, 

‘‘(II) the original use of such property in the 

qualified opportunity zone commences with the 

qualified opportunity fund or the qualified opportunity fund substantially improves the property, 

and 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2187 

‘‘(III) during substantially all of the qualified 

opportunity fund’s holding period for such property, substantially all of the use of such property 

was in a qualified opportunity zone. 

‘‘(ii) SUBSTANTIAL IMPROVEMENT.—For purposes of 

subparagraph (A)(ii), property shall be treated as 

substantially improved by the qualified opportunity 

fund only if, during any 30-month period beginning 

after the date of acquisition of such property, additions 

to basis with respect to such property in the hands 

of the qualified opportunity fund exceed an amount 

equal to the adjusted basis of such property at the 

beginning of such 30-month period in the hands of 

the qualified opportunity fund. 

‘‘(iii) RELATED PARTY.—For purposes of subparagraph (A)(i), the related person rule of section 179(d)(2) 

shall be applied pursuant to paragraph (8) of this 

subsection in lieu of the application of such rule in 

section 179(d)(2)(A). 

‘‘(3) QUALIFIED OPPORTUNITY ZONE BUSINESS.— 

‘‘(A) IN GENERAL.—The term ‘qualified opportunity zone 

business’ means a trade or business— 

‘‘(i) in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone business property (determined by substituting ‘qualified opportunity zone business’ for 

‘qualified opportunity fund’ each place it appears in 

paragraph (2)(D)), 

‘‘(ii) which satisfies the requirements of paragraphs 

(2), (4), and (8) of section 1397C(b), and 

‘‘(iii) which is not described in section 144(c)(6)(B). 

‘‘(B) SPECIAL RULE.—For purposes of subparagraph (A), 

tangible property that ceases to be a qualified opportunity 

zone business property shall continue to be treated as 

a qualified opportunity zone business property for the lesser 

of— 

‘‘(i) 5 years after the date on which such tangible 

property ceases to be so qualified, or 

‘‘(ii) the date on which such tangible property is 

no longer held by the qualified opportunity zone business. 

‘‘(e) APPLICABLE RULES.— 

‘‘(1) TREATMENT OF INVESTMENTS WITH MIXED FUNDS.—In 

the case of any investment in a qualified opportunity fund 

only a portion of which consists of investments of gain to 

which an election under subsection (a) is in effect— 

‘‘(A) such investment shall be treated as 2 separate 

investments, consisting of— 

‘‘(i) one investment that only includes amounts 

to which the election under subsection (a) applies, and 

‘‘(ii) a separate investment consisting of other 

amounts, and 

‘‘(B) subsections (a), (b), and (c) shall only apply to 

the investment described in subparagraph (A)(i). 

‘‘(2) RELATED PERSONS.—For purposes of this section, persons are related to each other if such persons are described 


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131 STAT. 2188 PUBLIC LAW 115–97—DEC. 22, 2017 

in section 267(b) or 707(b)(1), determined by substituting ‘20 

percent’ for ‘50 percent’ each place it occurs in such sections. 

‘‘(3) DECEDENTS.—In the case of a decedent, amounts recognized under this section shall, if not properly includible in 

the gross income of the decedent, be includible in gross income 

as provided by section 691. 

‘‘(4) REGULATIONS.—The Secretary shall prescribe such 

regulations as may be necessary or appropriate to carry out 

the purposes of this section, including— 

‘‘(A) rules for the certification of qualified opportunity 

funds for the purposes of this section, 

‘‘(B) rules to ensure a qualified opportunity fund has 

a reasonable period of time to reinvest the return of capital 

from investments in qualified opportunity zone stock and 

qualified opportunity zone partnership interests, and to 

reinvest proceeds received from the sale or disposition of 

qualified opportunity zone property, and 

‘‘(C) rules to prevent abuse. 

‘‘(f) FAILURE OF QUALIFIED OPPORTUNITY FUND TO MAINTAIN

INVESTMENT STANDARD.— 

‘‘(1) IN GENERAL.—If a qualified opportunity fund fails to 

meet the 90-percent requirement of subsection (c)(1), the qualified opportunity fund shall pay a penalty for each month it 

fails to meet the requirement in an amount equal to the product 

of— 

‘‘(A) the excess of— 

‘‘(i) the amount equal to 90 percent of its aggregate 

assets, over 

‘‘(ii) the aggregate amount of qualified opportunity 

zone property held by the fund, multiplied by 

‘‘(B) the underpayment rate established under section 

6621(a)(2) for such month. 

‘‘(2) SPECIAL RULE FOR PARTNERSHIPS.—In the case that 

the qualified opportunity fund is a partnership, the penalty 

imposed by paragraph (1) shall be taken into account proportionately as part of the distributive share of each partner 

of the partnership. 

‘‘(3) REASONABLE CAUSE EXCEPTION.—No penalty shall be 

imposed under this subsection with respect to any failure if 

it is shown that such failure is due to reasonable cause.’’. 

(b) BASIS ADJUSTMENTS.—Section 1016(a) is amended by 

striking ‘‘and’’ at the end of paragraph (36), by striking the period 

at the end of paragraph (37) and inserting ‘‘, and’’, and by inserting 

after paragraph (37) the following: 

‘‘(38) to the extent provided in subsections (b)(2) and (c) 

of section 1400Z–2.’’. 

(c) CLERICAL AMENDMENT.—The table of subchapters for 

chapter 1 is amended by adding at the end the following new 

item: 

‘‘SUBCHAPTER Z. OPPORTUNITY ZONES’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall take effect on the date of the enactment of this Act. 

26 USC 1016 

note. 

26 USC prec. 1. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2189 

Subtitle D—International Tax Provisions 

PART I—OUTBOUND TRANSACTIONS 

Subpart A—Establishment of Participation 

Exemption System for Taxation of Foreign Income 

SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS RECEIVED BY DOMESTIC CORPORATIONS FROM 

SPECIFIED 10-PERCENT OWNED 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. DEDUCTION FOR FOREIGN SOURCE-PORTION OF DIVIDENDS RECEIVED BY DOMESTIC CORPORATIONS FROM 

SPECIFIED 10-PERCENT OWNED 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 the foreign-source portion of such dividend. 

‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATION.— 

For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘specified 10-percent owned 

foreign corporation’ means any foreign corporation with respect 

to which any domestic corporation is a United States shareholder with respect to such corporation. 

‘‘(2) EXCLUSION OF PASSIVE FOREIGN INVESTMENT COMPANIES.—Such term shall not include any corporation which is 

a passive foreign investment company (as defined in section 

1297) with respect to the shareholder and which is not a 

controlled foreign corporation. 

‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of this section— 

‘‘(1) IN GENERAL.—The foreign-source portion of any dividend from a specified 10-percent owned foreign corporation 

is an amount which bears the same ratio to such dividend 

as— 

‘‘(A) the undistributed foreign earnings of the specified 

10-percent owned foreign corporation, bears to 

‘‘(B) the total undistributed earnings of such foreign 

corporation. 

‘‘(2) UNDISTRIBUTED EARNINGS.—The term ‘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)— 

‘‘(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) UNDISTRIBUTED FOREIGN EARNINGS.—The term ‘undistributed foreign earnings’ means the portion of the undistributed earnings which is attributable to neither— 

26 USC 245A. 


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131 STAT. 2190 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(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)). 

‘‘(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) SPECIAL RULES FOR HYBRID DIVIDENDS.— ‘‘(1) IN GENERAL.—Subsection (a) shall not apply to any 

dividend received by a United States shareholder from a controlled foreign corporation if the dividend is a hybrid dividend. 

‘‘(2) HYBRID DIVIDENDS OF TIERED CORPORATIONS.—If a controlled foreign corporation with respect to which a domestic 

corporation is a United States shareholder receives a hybrid 

dividend from any other controlled foreign corporation with 

respect to which such domestic corporation is also a United 

States shareholder, then, notwithstanding any other provision 

of this title— 

‘‘(A) the hybrid dividend shall be treated for purposes 

of section 951(a)(1)(A) as subpart F income of the receiving 

controlled foreign corporation for the taxable year of the 

controlled foreign corporation in which the dividend was 

received, and 

‘‘(B) the United States shareholder shall include in 

gross income an amount equal to the shareholder’s pro 

rata share (determined in the same manner as under section 951(a)(2)) of the subpart F income described in 

subparagraph (A). 

‘‘(3) DENIAL OF FOREIGN TAX CREDIT, ETC.—The rules of 

subsection (d) shall apply to any hybrid dividend received by, 

or any amount included under paragraph (2) in the gross income 

of, a United States shareholder. 

‘‘(4) HYBRID DIVIDEND.—The term ‘hybrid dividend’ means 

an amount received from a controlled foreign corporation— 

‘‘(A) for which a deduction would be allowed under 

subsection (a) but for this subsection, and 

‘‘(B) for which the controlled foreign corporation 

received a deduction (or other tax benefit) with respect 

to any income, war profits, or excess profits taxes imposed 

by any foreign country or possession of the United States. 

‘‘(f) SPECIAL RULE FOR PURGING DISTRIBUTIONS OF PASSIVE

FOREIGN INVESTMENT COMPANIES.—Any amount which is treated 

as a dividend under section 1291(d)(2)(B) shall not be treated as 

a dividend for purposes of this section. 

‘‘(g) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to 

carry out the provisions of this section, including regulations for 

the treatment of United States shareholders owning stock of a 

specified 10 percent owned foreign corporation through a partnership.’’. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2191 

(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 DIVI- DENDS RECEIVED FROM SPECIFIED 10-PERCENT OWNED FOREIGN

CORPORATIONS.— ‘‘(A) 1-YEAR HOLDING PERIOD REQUIREMENT.—For purposes of section 245A— 

‘‘(i) paragraph (1)(A) shall be applied— 

‘‘(I) by substituting ‘365 days’ for ‘45 days’ 

each place it appears, and 

‘‘(II) by substituting ‘731-day period’ for ‘91- 

day period’, and 

‘‘(ii) paragraph (2) shall not apply. 

‘‘(B) STATUS MUST BE MAINTAINED DURING HOLDING

PERIOD.—For purposes of applying paragraph (1) with 

respect to section 245A, the taxpayer shall be treated as 

holding the stock referred to in paragraph (1) for any 

period only if— 

‘‘(i) the specified 10-percent owned foreign corporation referred to in section 245A(a) is a specified 10- 

percent owned foreign corporation at all times during 

such period, and 

‘‘(ii) the taxpayer is a United States shareholder 

with respect to such specified 10-percent owned foreign 

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) 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 is amended by adding at the end 

the following new paragraph: 

‘‘(5) 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 shareholder’s taxable income from sources 

without the United States (and entire taxable income) 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 or apportioned 

to— 

‘‘(i) income (other than amounts includible under 

section 951(a)(1) or 951A(a)) with respect to stock of 

such specified 10-percent owned foreign corporation, 

or 

‘‘(ii) such stock to the extent income with respect 

to such stock is other than amounts includible under 

section 951(a)(1) or 951A(a). 

26 USC 246. 


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131 STAT. 2192 PUBLIC LAW 115–97—DEC. 22, 2017 

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) Subsection (b) of section 951 is amended by striking 

‘‘subpart’’ and inserting ‘‘title’’. 

(2) Subsection (a) of section 957 is amended by striking 

‘‘subpart’’ in the matter preceding paragraph (1) and inserting 

‘‘title’’. 

(3) 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. Deduction for foreign source-portion of dividends received by domestic 

corporations from certain 10-percent owned foreign corporations.’’. 

(f) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions made after (and, in the case of the 

amendments made by subsection (d), deductions with respect to 

taxable years ending after) December 31, 2017. 

SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS 

INVOLVING SPECIFIED 10-PERCENT OWNED FOREIGN 

CORPORATIONS. 

(a) SALES BY UNITED STATES PERSONS OF STOCK.— (1) IN GENERAL.—Section 1248 is amended by redesignating 

subsection (j) as subsection (k) and by inserting after subsection 

(i) the following new subsection: 

‘‘(j) COORDINATION WITH DIVIDENDS RECEIVED DEDUCTION.— In the case of the sale or exchange by a domestic corporation 

of stock in a foreign corporation held for 1 year or more, any 

amount received by the domestic corporation which is treated as 

a dividend by reason of this section shall be treated as a dividend 

for purposes of applying section 245A.’’. 

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to sales or exchanges after December 31, 

2017. 

(b) BASIS IN SPECIFIED 10-PERCENT OWNED FOREIGN CORPORA- TION 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 CORPORA- TION 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 of stock of such foreign 

corporation in such taxable year or any subsequent taxable year, 

the basis of such domestic corporation in such stock shall be reduced 

(but not below zero) by the amount of any deduction allowable 

to such domestic corporation under section 245A with respect to 

such stock except to the extent such basis was reduced under 

section 1059 by reason of a dividend for which such a deduction 

was allowable.’’. 

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to distributions made after December 31, 

2017. 

(c) SALE BY A CFC OF A LOWER TIER CFC.— 

26 USC 961 note. 

26 USC 1248 

note. 

26 USC 245A 

note. 

26 USC 241 prec. 

26 USC 951. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2193 

(1) IN GENERAL.—Section 964(e) is amended by adding at 

the end the following new paragraph: 

‘‘(4) COORDINATION WITH DIVIDENDS RECEIVED DEDUCTION.— ‘‘(A) IN GENERAL.—If, for any taxable year of a controlled foreign corporation beginning after December 31, 

2017, any amount is treated as a dividend under paragraph 

(1) by reason of a sale or exchange by the controlled foreign 

corporation of stock in another foreign corporation held 

for 1 year or more, then, notwithstanding any other provision of this title— 

‘‘(i) the foreign-source portion of such dividend 

shall be treated for purposes of section 951(a)(1)(A) 

as subpart F income of the selling controlled foreign 

corporation for such taxable year, 

‘‘(ii) a United States shareholder with respect to 

the selling controlled foreign corporation shall include 

in gross income for the taxable year of the shareholder 

with or within which such taxable year of the controlled 

foreign corporation ends an amount equal to the shareholder’s pro rata share (determined in the same 

manner as under section 951(a)(2)) of the amount 

treated as subpart F income under clause (i), and 

‘‘(iii) the deduction under section 245A(a) shall 

be allowable to the United States shareholder with 

respect to the subpart F income included in gross 

income under clause (ii) in the same manner as if 

such subpart F income were a dividend received by 

the shareholder from the selling controlled foreign corporation. 

‘‘(B) APPLICATION OF BASIS OR SIMILAR ADJUSTMENT.— 

For purposes of this title, in the case of a sale or exchange 

by a controlled foreign corporation of stock in another foreign corporation in a taxable year of the selling controlled 

foreign corporation beginning after December 31, 2017, 

rules similar to the rules of section 961(d) shall apply. 

‘‘(C) FOREIGN-SOURCE PORTION.—For purposes of this 

paragraph, the foreign-source portion of any amount 

treated as a dividend under paragraph (1) shall be determined in the same manner as under section 245A(c).’’. 

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to sales or exchanges after December 31, 

2017. 

(d) TREATMENT OF FOREIGN BRANCH LOSSES TRANSFERRED TO

SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS.— 

(1) IN GENERAL.—Part II of subchapter B of chapter 1 

is amended by adding at the end the following new section: 

‘‘SEC. 91. 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), as in effect before the date of the enactment 

of the Tax Cuts and Jobs Act) 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 

26 USC 91. 

26 USC 964 note. 

26 USC 964. 


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131 STAT. 2194 PUBLIC LAW 115–97—DEC. 22, 2017 

year which includes such transfer an amount equal to the transferred loss amount with respect to such transfer. 

‘‘(b) 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, 2017, 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. 

‘‘(c) REDUCTION FOR RECOGNIZED GAINS.—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 (b)(2)(B)). 

‘‘(d) SOURCE OF INCOME.—Amounts included in gross income 

under this section shall be treated as derived from sources within 

the United States. 

‘‘(e) BASIS ADJUSTMENTS.—Consistent with such regulations or 

other guidance as the Secretary shall 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) CLERICAL AMENDMENT.—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. Certain foreign branch losses transferred to specified 10-percent owned 

foreign corporations.’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to transfers after December 31, 2017. 

(4) TRANSITION RULE.—The amount of gain taken into 

account under section 91(c) of the Internal Revenue Code of 

1986, as added by this subsection, shall be reduced by the 

amount of gain which would be recognized under section 

367(a)(3)(C) (determined without regard to the amendments 

made by subsection (e)) with respect to losses incurred before 

January 1, 2018. 

(e) REPEAL OF ACTIVE TRADE OR BUSINESS EXCEPTION UNDER

SECTION 367.— 

(1) IN GENERAL.—Section 367(a) is amended by striking 

paragraph (3) and redesignating paragraphs (4), (5), and (6) 

as paragraphs (3), (4), and (5), respectively. 

(2) CONFORMING AMENDMENTS.—Section 367(a)(4), as 

redesignated by paragraph (1), is amended— 

(A) by striking ‘‘Paragraphs (2) and (3)’’ and inserting 

‘‘Paragraph (2)’’, and 

26 USC 367. 

26 USC 91 note. 

26 USC 91 note. 

26 USC 71 prec. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2195 

(B) by striking ‘‘PARAGRAPHS (2) AND (3)’’ in the heading 

and inserting ‘‘PARAGRAPH (2)’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to transfers after December 31, 2017. 

SEC. 14103. 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, 2018, 

the subpart F income of such foreign corporation (as otherwise 

determined for such taxable year under section 952) shall be 

increased by the greater of— 

‘‘(1) the accumulated post-1986 deferred foreign income 

of such corporation determined as of November 2, 2017, or 

‘‘(2) the accumulated post-1986 deferred foreign income 

of such corporation determined as of December 31, 2017. 

‘‘(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 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.— 

‘‘(i) IN GENERAL.—The term ‘aggregate foreign E&P 

deficit’ means, with respect to any United States shareholder, the lesser of— 

‘‘(I) the aggregate of such shareholder’s pro 

rata shares of the specified E&P deficits of the 

26 USC 965. 

26 USC 367 note. 


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131 STAT. 2196 PUBLIC LAW 115–97—DEC. 22, 2017 

E&P deficit foreign corporations of such shareholder, or 

‘‘(II) the amount determined under paragraph 

(2)(B). 

‘‘(ii) ALLOCATION OF DEFICIT.—If the amount 

described in clause (i)(II) is less than the amount 

described in clause (i)(I), then the shareholder shall 

designate, in such form and manner as the Secretary 

determines— 

‘‘(I) the amount of the specified E&P deficit 

which is to be taken into account for each E&P 

deficit corporation with respect to the taxpayer, 

and 

‘‘(II) in the case of an E&P deficit corporation 

which has a qualified deficit (as defined in section 

952), the portion (if any) of the deficit taken into 

account under subclause (I) which is attributable 

to a qualified deficit, including the qualified activities to which such portion is attributable. 

‘‘(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, as of November 2, 2017— 

‘‘(i) such specified foreign corporation has a deficit 

in post-1986 earnings and profits, 

‘‘(ii) such corporation was a specified foreign corporation, and 

‘‘(iii) 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). 

‘‘(4) TREATMENT OF EARNINGS AND PROFITS IN FUTURE

YEARS.— 

‘‘(A) REDUCED EARNINGS AND PROFITS TREATED AS PREVIOUSLY TAXED INCOME WHEN DISTRIBUTED.—For purposes 

of applying section 959 in any taxable year beginning with 

the taxable year described in subsection (a), with respect 

to any United States shareholder of a deferred foreign 

income corporation, an amount equal to such shareholder’s 

reduction under paragraph (1) which is allocated to such 

deferred foreign income corporation under this subsection 

shall be treated as an amount which was included in the 

gross income of such United States shareholder under section 951(a). 

‘‘(B) E&P DEFICITS.—For purposes of this title, with 

respect to any taxable year beginning with the taxable 

year described in subsection (a), a United States shareholder’s pro rata share of the earnings and profits of any 

E&P deficit foreign corporation under this subsection shall 

be increased by the amount of the specified E&P deficit 

of such corporation taken into account by such shareholder 

under paragraph (1), and, for purposes of section 952, such 

increase shall be attributable to the same activity to which 

the deficit so taken into account was attributable. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2197 

‘‘(5) NETTING AMONG UNITED STATES SHAREHOLDERS IN

SAME AFFILIATED GROUP.— 

‘‘(A) IN GENERAL.—In the case of any affiliated group 

which includes at least one E&P net surplus shareholder 

and one E&P net deficit shareholder, the amount which 

would (but for this paragraph) be taken into account under 

section 951(a)(1) by reason of subsection (a) by each such 

E&P net surplus shareholder shall be reduced (but not 

below zero) by such shareholder’s applicable share of the 

affiliated group’s aggregate unused E&P deficit. 

‘‘(B) E&P NET SURPLUS SHAREHOLDER.—For purposes 

of this paragraph, the term ‘E&P net surplus shareholder’ 

means any United States shareholder which would (determined without regard to this paragraph) take into account 

an amount greater than zero under section 951(a)(1) by 

reason of subsection (a). 

‘‘(C) E&P NET DEFICIT SHAREHOLDER.—For purposes 

of this paragraph, the term ‘E&P net deficit shareholder’ 

means any United States shareholder if— 

‘‘(i) the aggregate foreign E&P deficit with respect 

to such shareholder (as defined in paragraph (3)(A) 

without regard to clause (i)(II) thereof), exceeds 

‘‘(ii) the amount which would (but for this subsection) be taken into account by such shareholder 

under section 951(a)(1) by reason of subsection (a). 

‘‘(D) AGGREGATE UNUSED E&P DEFICIT.—For purposes 

of this paragraph— 

‘‘(i) IN GENERAL.—The term ‘aggregate unused 

E&P deficit’ means, with respect to any affiliated 

group, the lesser of— 

‘‘(I) the sum of the excesses described in 

subparagraph (C), determined with respect to each 

E&P net deficit shareholder in such group, or 

‘‘(II) the amount determined under subparagraph (E)(ii). 

‘‘(ii) REDUCTION WITH RESPECT TO E&P NET DEFICIT

SHAREHOLDERS WHICH ARE NOT WHOLLY OWNED BY THE

AFFILIATED GROUP.—If the group ownership percentage 

of any E&P net deficit shareholder is less than 100 

percent, the amount of the excess described in subparagraph (C) which is taken into account under clause 

(i)(I) with respect to such E&P net deficit shareholder 

shall be such group ownership percentage of such 

amount. 

‘‘(E) APPLICABLE SHARE.—For purposes of this paragraph, the term ‘applicable share’ means, with respect to 

any E&P net surplus shareholder in any affiliated group, 

the amount which bears the same proportion to such 

group’s aggregate unused E&P deficit as— 

‘‘(i) the product of— 

‘‘(I) such shareholder’s group ownership 

percentage, multiplied by 

‘‘(II) the amount which would (but for this 

paragraph) be taken into account under section 

951(a)(1) by reason of subsection (a) by such shareholder, bears to 


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131 STAT. 2198 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(ii) the aggregate amount determined under 

clause (i) with respect to all E&P net surplus shareholders in such group. 

‘‘(F) GROUP OWNERSHIP PERCENTAGE.—For purposes of 

this paragraph, the term ‘group ownership percentage’ 

means, with respect to any United States shareholder in 

any affiliated group, the percentage of the value of the 

stock of such United States shareholder which is held 

by other includible corporations in such affiliated group. 

Notwithstanding the preceding sentence, the group ownership percentage of the common parent of the affiliated 

group is 100 percent. Any term used in this subparagraph 

which is also used in section 1504 shall have the same 

meaning as when used in such section. 

‘‘(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) the United States shareholder’s 8 percent rate 

equivalent percentage 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) the United States shareholder’s 15.5 percent rate 

equivalent percentage of so much of the amount described 

in subparagraph (A)(ii) as does not exceed the amount 

described in subparagraph (A)(i). 

‘‘(2) 8 AND 15.5 PERCENT RATE EQUIVALENT PERCENTAGES.— 

For purposes of this subsection— 

‘‘(A) 8 PERCENT RATE EQUIVALENT PERCENTAGE.—The 

term ‘8 percent rate equivalent percentage’ means, with 

respect to any United States shareholder for any taxable 

year, the percentage which would result in the amount 

to which such percentage applies being subject to a 8 

percent rate of tax determined by only taking into account 

a deduction equal to such percentage of such amount and 

the highest rate of tax specified in section 11 for such 

taxable year. In the case of any taxable year of a United 

States shareholder to which section 15 applies, the highest 

rate of tax under section 11 before the effective date of 

the change in rates and the highest rate of tax under 

section 11 after the effective date of such change shall 

each be taken into account under the preceding sentence 

in the same proportions as the portion of such taxable 

year which is before and after such effective date, respectively. 

‘‘(B) 15.5 PERCENT RATE EQUIVALENT PERCENTAGE.— 

The term ‘15.5 percent rate equivalent percentage’ means, 

with respect to any United States shareholder for any 

taxable year, the percentage determined under subparagraph (A) applied by substituting ‘15.5 percent rate of 

tax’ for ‘8 percent rate of tax’. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2199 

‘‘(3) 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, 2018, 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 November 2, 2017, 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 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) Personal property which is of a type that 

is actively traded and 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 foreign currency. 

‘‘(IV) Any obligation with a term of less than 

one year. 

‘‘(V) 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), (iii)(I), or (iii)(IV) 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. 


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131 STAT. 2200 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(E) CASH POSITIONS OF CERTAIN NON-CORPORATE ENTI- TIES TAKEN INTO ACCOUNT.—An entity (other than a corporation) shall be treated as a specified foreign corporation 

of a United States shareholder for purposes of determining 

such United States shareholder’s aggregate foreign cash 

position if any interest in such entity is held by a specified 

foreign corporation of such United States shareholder 

(determined after application of this subparagraph) and 

such entity would be a specified foreign corporation of 

such United States shareholder if such entity were a foreign 

corporation. 

‘‘(F) ANTI-ABUSE.—If the Secretary determines that a 

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 post1986 deferred foreign income (as of the date referred to in 

paragraph (1) or (2) of 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, or 

‘‘(B) in the case of a controlled foreign corporation, 

if distributed, would be excluded from the gross income 

of a United States shareholder under section 959. 

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) if such shareholders were United 

States shareholders. 

‘‘(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, and by only taking into account periods when 

the foreign corporation was a specified foreign corporation) 

accumulated in taxable years beginning after December 31, 

1986, and determined— 

‘‘(A) as of the date referred to in paragraph (1) or 

(2) of subsection (a), whichever is applicable with respect 

to such foreign corporation, and 

‘‘(B) without diminution by reason of dividends distributed during the taxable year described in subsection (a) 

other than dividends distributed to another specified foreign corporation. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2201 

‘‘(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 foreign corporation with respect to which one 

or more domestic corporations is a United States shareholder. 

‘‘(2) APPLICATION TO CERTAIN FOREIGN CORPORATIONS.—For 

purposes of sections 951 and 961, a foreign corporation 

described in paragraph (1)(B) 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)). 

‘‘(3) EXCLUSION OF PASSIVE FOREIGN INVESTMENT COMPANIES.—Such term shall not include any corporation which is 

a passive foreign investment company (as defined in section 

1297) with respect to the shareholder and which is not a 

controlled foreign corporation. 

‘‘(f) DETERMINATIONS OF PRO RATA SHARE.— 

‘‘(1) IN GENERAL.—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). 

‘‘(2) SPECIAL RULES.—The portion which is included in the 

income of a United States shareholder under section 951(a)(1) 

by reason of subsection (a) which is equal to the deduction 

allowed under subsection (c) by reason of such inclusion— 

‘‘(A) shall be treated as income exempt from tax for 

purposes of sections 705(a)(1)(B) and 1367(a)(1)(A), and 

‘‘(B) shall not be treated as income exempt from tax 

for purposes of determining whether an adjustment shall 

be made to an accumulated adjustment account under section 1368(e)(1)(A). 

‘‘(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) 0.771 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) 0.557 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 


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131 STAT. 2202 PUBLIC LAW 115–97—DEC. 22, 2017 

treating the taxpayer as having elected the benefits of subpart 

A of part III of subchapter N). 

‘‘(4) COORDINATION WITH SECTION 78.—With respect to the 

taxes treated as paid or accrued by a domestic corporation 

with respect to amounts which are includible in gross income 

of such domestic corporation by reason of this section, section 

78 shall apply only to so much of such taxes as bears the 

same proportion to the amount of such taxes as— 

‘‘(A) the excess of— 

‘‘(i) the amounts which are includible in gross 

income of such domestic corporation by reason of this 

section, over 

‘‘(ii) the deduction allowable under subsection (c) 

with respect to such amounts, bears to 

‘‘(B) such amounts. 

‘‘(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 (a) 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 timely pay 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 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2203 

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 shall 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 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, over 

‘‘(ii) such taxpayer’s net income tax for such taxable year determined— 

‘‘(I) without regard to this section, and 

‘‘(II) without regard to any income or deduction 

properly attributable to a dividend received by 

such United States shareholder from any deferred 

foreign income corporation. 

‘‘(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. Any net tax liability payment of which 

is deferred under the preceding sentence shall be assessed 

on the return of tax as an addition to tax in the shareholder’s 

taxable year which includes such triggering event. 

‘‘(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. 


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131 STAT. 2204 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(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) of subparagraph (A) 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)— 

‘‘(A) subsection (h) shall be applied 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.—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) ANNUAL REPORTING OF NET TAX LIABILITY.— 

‘‘(A) IN GENERAL.—Any shareholder of an S corporation 

which makes an election under paragraph (1) shall report 

the amount of such shareholder’s deferred net tax liability 

on such shareholder’s return of tax for the taxable year 

for which such election is made and on the return of 

tax for each taxable year thereafter until such amount 

has been fully assessed on such returns. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2205 

‘‘(B) DEFERRED NET TAX LIABILITY.—For purposes of 

this paragraph, the term ‘deferred net tax liability’ means, 

with respect to any taxable year, the amount of net tax 

liability payment of which has been deferred under paragraph (1) and which has not been assessed on a return 

of tax for any prior taxable year. 

‘‘(C) FAILURE TO REPORT.—In the case of any failure 

to report any amount required to be reported under 

subparagraph (A) with respect to any taxable year before 

the due date for the return of tax for such taxable year, 

there shall be assessed on such return as an addition 

to tax 5 percent of such amount. 

‘‘(8) ELECTION.—Any election under paragraph (1)— 

‘‘(A) shall be made by the shareholder of the S corporation not later than the due date for such shareholder’s 

return of tax for the taxable year which includes the close 

of the taxable year of such S corporation in which the 

amount described in subsection (a) is taken into account, 

and 

‘‘(B) shall be made in such manner as the Secretary 

shall provide. 

‘‘(j) REPORTING BY S CORPORATION.—Each S corporation which 

is a United States shareholder of a specified foreign corporation 

shall report in its return of tax under section 6037(a) the amount 

includible in its gross income for such taxable year by reason 

of this section and the amount of the deduction allowable by subsection (c). Any copy provided to a shareholder under section 6037(b) 

shall include a statement of such shareholder’s pro rata share 

of such amounts. 

‘‘(k) EXTENSION OF LIMITATION ON ASSESSMENT.—Notwithstanding section 6501, the limitation on the time period for the 

assessment of the net tax liability under this section (as defined 

in subsection (h)(6)) shall not expire before the date that is 6 

years after the return for the taxable year described in such subsection was filed. 

‘‘(l) RECAPTURE FOR EXPATRIATED ENTITIES.— 

‘‘(1) IN GENERAL.—If a deduction is allowed under subsection (c) to a United States shareholder and such shareholder 

first becomes an expatriated entity at any time during the 

10-year period beginning on the date of the enactment of the 

Tax Cuts and Jobs Act (with respect to a surrogate foreign 

corporation which first becomes a surrogate foreign corporation 

during such period), then— 

‘‘(A) the tax imposed by this chapter shall be increased 

for the first taxable year in which such taxpayer becomes 

an expatriated entity by an amount equal to 35 percent 

of the amount of the deduction allowed under subsection 

(c), and 

‘‘(B) no credits shall be allowed against the increase 

in tax under subparagraph (A). 

‘‘(2) EXPATRIATED ENTITY.—For purposes of this subsection, 

the term ‘expatriated entity’ has the same meaning given such 

term under section 7874(a)(2), except that such term shall 

not include an entity if the surrogate foreign corporation with 

respect to the entity is treated as a domestic corporation under 

section 7874(b). 


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131 STAT. 2206 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(3) SURROGATE FOREIGN CORPORATION.—For purposes of 

this subsection, the term ‘surrogate foreign corporation’ has 

the meaning given such term in section 7874(a)(2)(B). 

‘‘(m) SPECIAL RULES FOR UNITED STATES SHAREHOLDERS WHICH

ARE REAL ESTATE INVESTMENT TRUSTS.— ‘‘(1) IN GENERAL.—If a real estate investment trust is a 

United States shareholder in 1 or more deferred foreign income 

corporations— 

‘‘(A) any amount required to be taken into account 

under section 951(a)(1) by reason of this section shall not 

be taken into account as gross income of the real estate 

investment trust for purposes of applying paragraphs (2) 

and (3) of section 856(c) to any taxable year for which 

such amount is taken into account under section 951(a)(1), 

and 

‘‘(B) if the real estate investment trust elects the 

application of this subparagraph, notwithstanding subsection (a), any amount required to be taken into account 

under section 951(a)(1) by reason of this section shall, 

in lieu of the taxable year in which it would otherwise 

be included in gross income (for purposes of the computation of real estate investment trust taxable income under 

section 857(b)), be included in gross income as follows: 

‘‘(i) 8 percent of such amount in the case of each 

of the taxable years in the 5-taxable year period beginning with the taxable year in which such amount would 

otherwise be included. 

‘‘(ii) 15 percent of such amount in the case of 

the 1st taxable year following such period. 

‘‘(iii) 20 percent of such amount in the case of 

the 2nd taxable year following such period. 

‘‘(iv) 25 percent of such amount in the case of 

the 3rd taxable year following such period. 

‘‘(2) RULES FOR TRUSTS ELECTING DEFERRED INCLUSION.— 

‘‘(A) ELECTION.—Any election under paragraph (1)(B) 

shall be made not later than the due date for the first 

taxable year in the 5-taxable year period described in clause 

(i) of paragraph (1)(B) and shall be made in such manner 

as the Secretary shall provide. 

‘‘(B) SPECIAL RULES.—If an election under paragraph 

(1)(B) is in effect with respect to any real estate investment 

trust, the following rules shall apply: 

‘‘(i) APPLICATION OF PARTICIPATION EXEMPTION.— 

For purposes of subsection (c)(1)— 

‘‘(I) the aggregate amount to which subparagraph (A) or (B) of subsection (c)(1) applies shall 

be determined without regard to the election, 

‘‘(II) each such aggregate amount shall be allocated to each taxable year described in paragraph 

(1)(B) in the same proportion as the amount 

included in the gross income of such United States 

shareholder under section 951(a)(1) by reason of 

this section is allocated to each such taxable year. 

‘‘(III) NO INSTALLMENT PAYMENTS.—The real 

estate investment trust may not make an election 

under subsection (g) for any taxable year described 

in paragraph (1)(B). 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2207 

‘‘(ii) ACCELERATION OF INCLUSION.—If there is a 

liquidation or sale of substantially all the assets of 

the real estate investment trust (including in a title 

11 or similar case), a cessation of business by such 

trust, or any similar circumstance, then any amount 

not yet included in gross income under paragraph 

(1)(B) shall be included in gross income as of the day 

before the date of the event and the unpaid portion 

of any tax liability with respect to such inclusion 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). 

‘‘(n) ELECTION NOT TO APPLY NET OPERATING LOSS DEDUCTION.— 

‘‘(1) IN GENERAL.—If a United States shareholder of a 

deferred foreign income corporation elects the application of 

this subsection for the taxable year described in subsection 

(a), then the amount described in paragraph (2) shall not be 

taken into account— 

‘‘(A) in determining the amount of the net operating 

loss deduction under section 172 of such shareholder for 

such taxable year, or 

‘‘(B) in determining the amount of taxable income for 

such taxable year which may be reduced by net operating 

loss carryovers or carrybacks to such taxable year under 

section 172. 

‘‘(2) AMOUNT DESCRIBED.—The amount described in this 

paragraph is the sum of— 

‘‘(A) the amount required to be taken into account 

under section 951(a)(1) by reason of this section (determined after the application of subsection (c)), plus 

‘‘(B) in the case of a domestic corporation which chooses 

to have the benefits of subpart A of part III of subchapter 

N for the taxable year, the taxes deemed to be paid by 

such corporation under subsections (a) and (b) of section 

960 for such taxable year with respect to the amount 

described in subparagraph (A) which are treated as a dividends under section 78. 

‘‘(3) ELECTION.—Any election under this subsection shall 

be made not later than the due date (including extensions) 

for filing the return of tax for the taxable year and shall 

be made in such manner as the Secretary shall prescribe. 

‘‘(o) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to 

carry out the provisions of this section, including— 

‘‘(1) regulations or other guidance to provide appropriate 

basis adjustments, and 

‘‘(2) regulations or other guidance to prevent the avoidance 

of the purposes of this section, including through a reduction 

in earnings and profits, through changes in entity classification 

or accounting methods, or otherwise.’’. 


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131 STAT. 2208 PUBLIC LAW 115–97—DEC. 22, 2017 

(b) CLERICAL AMENDMENT.—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 965 and inserting the following: 

‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation exemption system of taxation.’’. 

Subpart B—Rules Related to Passive and Mobile 

Income 

CHAPTER 1—TAXATION OF FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL INTANGIBLE LOW-TAXED 

INCOME 

SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTANGIBLE LOWTAXED INCOME BY UNITED STATES SHAREHOLDERS. 

(a) IN GENERAL.—Subpart F of part III of subchapter N of 

chapter 1 is amended by inserting after section 951 the following 

new section: 

‘‘SEC. 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME INCLUDED IN 

GROSS INCOME OF UNITED STATES SHAREHOLDERS. 

‘‘(a) IN GENERAL.—Each person who is a United States shareholder of any controlled foreign corporation for any taxable year 

of such United States shareholder shall include in gross income 

such shareholder’s global intangible low-taxed income for such taxable year. 

‘‘(b) GLOBAL INTANGIBLE LOW-TAXED INCOME.—For purposes 

of this section— 

‘‘(1) IN GENERAL.—The term ‘global intangible low-taxed 

income’ means, with respect to any United States shareholder 

for any taxable year of such United States shareholder, the 

excess (if any) of— 

‘‘(A) such shareholder’s net CFC tested income for such 

taxable year, over 

‘‘(B) such shareholder’s net deemed tangible income 

return for such taxable year. 

‘‘(2) NET DEEMED TANGIBLE INCOME RETURN.—The term 

‘net deemed tangible income return’ means, with respect to 

any United States shareholder for any taxable year, the excess 

of— 

‘‘(A) 10 percent of the aggregate of such shareholder’s 

pro rata share of the qualified business asset investment 

of each controlled foreign corporation with respect to which 

such shareholder is a United States shareholder for such 

taxable year (determined for each taxable year of each 

such controlled foreign corporation which ends in or with 

such taxable year of such United States shareholder), over 

‘‘(B) the amount of interest expense taken into account 

under subsection (c)(2)(A)(ii) in determining the shareholder’s net CFC tested income for the taxable year to 

the extent the interest income attributable to such expense 

is not taken into account in determining such shareholder’s 

net CFC tested income. 

‘‘(c) NET CFC TESTED INCOME.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘net CFC tested income’ means, 

with respect to any United States shareholder for any taxable 

26 USC 951A. 

26 USC 951 prec. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2209 

year of such United States shareholder, the excess (if any) 

of— 

‘‘(A) the aggregate of such shareholder’s pro rata share 

of the tested income of each controlled foreign corporation 

with respect to which such shareholder is a United States 

shareholder for such taxable year of such United States 

shareholder (determined for each taxable year of such controlled foreign corporation which ends in or with such 

taxable year of such United States shareholder), over 

‘‘(B) the aggregate of such shareholder’s pro rata share 

of the tested loss of each controlled foreign corporation 

with respect to which such shareholder is a United States 

shareholder for such taxable year of such United States 

shareholder (determined for each taxable year of such controlled foreign corporation which ends in or with such 

taxable year of such United States shareholder). 

‘‘(2) TESTED INCOME; TESTED LOSS.—For purposes of this 

section— 

‘‘(A) TESTED INCOME.—The term ‘tested income’ means, 

with respect to any controlled foreign corporation for any 

taxable year of such controlled foreign corporation, the 

excess (if any) of— 

‘‘(i) the gross income of such corporation determined without regard to— 

‘‘(I) any item of income described in section 

952(b), 

‘‘(II) any gross income taken into account in 

determining the subpart F income of such corporation, 

‘‘(III) any gross income excluded from the foreign base company income (as defined in section 

954) and the insurance income (as defined in section 953) of such corporation by reason of section 

954(b)(4), 

‘‘(IV) any dividend received from a related person (as defined in section 954(d)(3)), and 

‘‘(V) any foreign oil and gas extraction income 

(as defined in section 907(c)(1)) of such corporation, 

over 

‘‘(ii) the deductions (including taxes) properly allocable to such gross income under rules similar to the 

rules of section 954(b)(5) (or to which such deductions 

would be allocable if there were such gross income). 

‘‘(B) TESTED LOSS.— 

‘‘(i) IN GENERAL.—The term ‘tested loss’ means, 

with respect to any controlled foreign corporation for 

any taxable year of such controlled foreign corporation, 

the excess (if any) of the amount described in subparagraph (A)(ii) over the amount described in subparagraph (A)(i). 

‘‘(ii) COORDINATION WITH SUBPART F TO DENY

DOUBLE BENEFIT OF LOSSES.—Section 952(c)(1)(A) shall 

be applied by increasing the earnings and profits of 

the controlled foreign corporation by the tested loss 

of such corporation. 

‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.—For purposes 

of this section— 


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131 STAT. 2210 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(1) IN GENERAL.—The term ‘qualified business asset investment’ means, with respect to any controlled foreign corporation 

for any taxable year, the average of such corporation’s aggregate 

adjusted bases as of the close of each quarter of such taxable 

year in specified tangible property— 

‘‘(A) used in a trade or business of the corporation, 

and 

‘‘(B) of a type with respect to which a deduction is 

allowable under section 167. 

‘‘(2) SPECIFIED TANGIBLE PROPERTY.— ‘‘(A) IN GENERAL.—The term ‘specified tangible property’ means, except as provided in subparagraph (B), any 

tangible property used in the production of tested income. 

‘‘(B) DUAL USE PROPERTY.—In the case of property used 

both in the production of tested income and income which 

is not tested income, such property shall be treated as 

specified tangible property in the same proportion that 

the gross income described in subsection (c)(1)(A) produced 

with respect to such property bears to the total gross 

income produced with respect to such property. 

‘‘(3) DETERMINATION OF ADJUSTED BASIS.—For purposes of 

this subsection, notwithstanding any provision of this title (or 

any other provision of law) which is enacted after the date 

of the enactment of this section, the adjusted basis in any 

property shall be determined— 

‘‘(A) by using the alternative depreciation system under 

section 168(g), and 

‘‘(B) by allocating the depreciation deduction with 

respect to such property ratably to each day during the 

period in the taxable year to which such depreciation 

relates. 

‘‘(3) PARTNERSHIP PROPERTY.—For purposes of this subsection, if a controlled foreign corporation holds an interest 

in a partnership at the close of such taxable year of the controlled foreign corporation, such controlled foreign corporation 

shall take into account under paragraph (1) the controlled 

foreign corporation’s distributive share of the aggregate of the 

partnership’s adjusted bases (determined as of such date in 

the hands of the partnership) in tangible property held by 

such partnership to the extent such property— 

‘‘(A) is used in the trade or business of the partnership, 

‘‘(B) is of a type with respect to which a deduction 

is allowable under section 167, and 

‘‘(C) is used in the production of tested income (determined with respect to such controlled foreign corporation’s 

distributive share of income with respect to such property). 

For purposes of this paragraph, the controlled foreign corporation’s distributive share of the adjusted basis of any property 

shall be the controlled foreign corporation’s distributive share 

of income with respect to such property. 

‘‘(4) REGULATIONS.—The Secretary shall issue such regulations or other guidance as the Secretary determines appropriate 

to prevent the avoidance of the purposes of this subsection, 

including regulations or other guidance which provide for the 

treatment of property if— 

‘‘(A) such property is transferred, or held, temporarily, 

or 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2211 

‘‘(B) the avoidance of the purposes of this paragraph 

is a factor in the transfer or holding of such property. 

‘‘(e) DETERMINATION OF PRO RATA SHARE, ETC.—For purposes 

of this section— 

‘‘(1) IN GENERAL.—The pro rata shares referred to in subsections (b), (c)(1)(A), and (c)(1)(B), respectively, shall be determined under the rules of section 951(a)(2) in the same manner 

as such section applies to subpart F income and shall be taken 

into account in the taxable year of the United States shareholder in which or with which the taxable year of the controlled 

foreign corporation ends. 

‘‘(2) TREATMENT AS UNITED STATES SHAREHOLDER.—A person shall be treated as a United States shareholder of a controlled foreign corporation for any taxable year of such person 

only if such person owns (within the meaning of section 958(a)) 

stock in such foreign corporation on the last day in the taxable 

year of such foreign corporation on which such foreign corporation is a controlled foreign corporation. 

‘‘(3) TREATMENT AS CONTROLLED FOREIGN CORPORATION.— 

A foreign corporation shall be treated as a controlled foreign 

corporation for any taxable year if such foreign corporation 

is a controlled foreign corporation at any time during such 

taxable year. 

‘‘(f) TREATMENT AS SUBPART F INCOME FOR CERTAIN PURPOSES.— 

‘‘(1) IN GENERAL.— 

‘‘(A) APPLICATION.—Except as provided in subparagraph (B), any global intangible low-taxed income included 

in gross income under subsection (a) shall be treated in 

the same manner as an amount included under section 

951(a)(1)(A) for purposes of applying sections 168(h)(2)(B), 

535(b)(10), 851(b), 904(h)(1), 959, 961, 962, 993(a)(1)(E), 

996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 

6654(d)(2)(D), and 6655(e)(4). 

‘‘(B) EXCEPTION.—The Secretary shall provide rules for 

the application of subparagraph (A) to other provisions 

of this title in any case in which the determination of 

subpart F income is required to be made at the level 

of the controlled foreign corporation. 

‘‘(2) ALLOCATION OF GLOBAL INTANGIBLE LOW-TAXED INCOME

TO CONTROLLED FOREIGN CORPORATIONS.—For purposes of the 

sections referred to in paragraph (1), with respect to any controlled foreign corporation any pro rata amount from which 

is taken into account in determining the global intangible lowtaxed income included in gross income of a United States 

shareholder under subsection (a), the portion of such global 

intangible low-taxed income which is treated as being with 

respect to such controlled foreign corporation is— 

‘‘(A) in the case of a controlled foreign corporation 

with no tested income, zero, and 

‘‘(B) in the case of a controlled foreign corporation 

with tested income, the portion of such global intangible 

low-taxed income which bears the same ratio to such global 

intangible low-taxed income as— 

‘‘(i) such United States shareholder’s pro rata 

amount of the tested income of such controlled foreign 

corporation, bears to 


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131 STAT. 2212 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(ii) the aggregate amount described in subsection 

(c)(1)(A) with respect to such United States shareholder.’’. 

(b) FOREIGN TAX CREDIT.— 

(1) APPLICATION OF DEEMED PAID FOREIGN TAX CREDIT.— 

Section 960 is amended adding at the end the following new 

subsection: 

‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY ATTRIBUTABLE

TO TESTED INCOME.— 

‘‘(1) IN GENERAL.—For purposes of subpart A of this part, 

if any amount is includible in the gross income of a domestic 

corporation under section 951A, such domestic corporation shall 

be deemed to have paid foreign income taxes equal to 80 percent 

of the product of— 

‘‘(A) such domestic corporation’s inclusion percentage, 

multiplied by 

‘‘(B) the aggregate tested foreign income taxes paid 

or accrued by controlled foreign corporations. 

‘‘(2) INCLUSION PERCENTAGE.—For purposes of paragraph 

(1), the term ‘inclusion percentage’ means, with respect to any 

domestic corporation, the ratio (expressed as a percentage) 

of— 

‘‘(A) such corporation’s global intangible low-taxed 

income (as defined in section 951A(b)), divided by 

‘‘(B) the aggregate amount described in section 

951A(c)(1)(A) with respect to such corporation. 

‘‘(3) TESTED FOREIGN INCOME TAXES.—For purposes of paragraph (1), the term ‘tested foreign income taxes’ means, with 

respect to any domestic corporation which is a United States 

shareholder of a controlled foreign corporation, the foreign 

income taxes paid or accrued by such foreign corporation which 

are properly attributable to the tested income of such foreign 

corporation taken into account by such domestic corporation 

under section 951A.’’. 

(2) APPLICATION OF FOREIGN TAX CREDIT LIMITATION.— 

(A) SEPARATE BASKET FOR GLOBAL INTANGIBLE LOWTAXED INCOME.—Section 904(d)(1) is amended by redesignating subparagraphs (A) and (B) as subparagraphs (B) 

and (C), respectively, and by inserting before subparagraph 

(B) (as so redesignated) the following new subparagraph: 

‘‘(A) any amount includible in gross income under section 951A (other than passive category income),’’. 

(B) EXCLUSION FROM GENERAL CATEGORY INCOME.— 

Section 904(d)(2)(A)(ii) is amended by inserting ‘‘income 

described in paragraph (1)(A) and’’ before ‘‘passive category 

income’’. 

(C) NO CARRYOVER OR CARRYBACK OF EXCESS TAXES.— 

Section 904(c) is amended by adding at the end the following: ‘‘This subsection shall not apply to taxes paid or 

accrued with respect to amounts described in subsection 

(d)(1)(A).’’. 

26 USC 960. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2213 

(c) CLERICAL AMENDMENT.—The table of sections for subpart 

F of part III of subchapter N of chapter 1 is amended by inserting 

after the item relating to section 951 the following new item: 

‘‘Sec. 951A. Global intangible low-taxed income included in gross income of United 

States shareholders.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years of foreign corporations beginning after 

December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end. 

SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME 

AND GLOBAL INTANGIBLE LOW-TAXED INCOME. 

(a) IN GENERAL.—Part VIII of subchapter B of chapter 1 is 

amended by adding at the end the following new section: 

‘‘SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL 

INTANGIBLE LOW-TAXED INCOME. 

‘‘(a) ALLOWANCE OF DEDUCTION.— 

‘‘(1) 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 sum of— 

‘‘(A) 37.5 percent of the foreign-derived intangible 

income of such domestic corporation for such taxable year, 

plus 

‘‘(B) 50 percent of— 

‘‘(i) the global intangible low-taxed income amount 

(if any) which is included in the gross income of such 

domestic corporation under section 951A for such taxable year, and 

‘‘(ii) the amount treated as a dividend received 

by such corporation under section 78 which is attributable to the amount described in clause (i). 

‘‘(2) LIMITATION BASED ON TAXABLE INCOME.— ‘‘(A) IN GENERAL.—If, for any taxable year— 

‘‘(i) the sum of the foreign-derived intangible 

income and the global intangible low-taxed income 

amount otherwise taken into account by the domestic 

corporation under paragraph (1), exceeds 

‘‘(ii) the taxable income of the domestic corporation 

(determined without regard to this section), 

then the amount of the foreign-derived intangible income 

and the global intangible low-taxed income amount so 

taken into account shall be reduced as provided in subparagraph (B). 

‘‘(B) REDUCTION.—For purposes of subparagraph (A)— 

‘‘(i) foreign-derived intangible income shall be 

reduced by an amount which bears the same ratio 

to the excess described in subparagraph (A) as such 

foreign-derived intangible income bears to the sum 

described in subparagraph (A)(i), and 

‘‘(ii) the global intangible low-taxed income amount 

shall be reduced by the remainder of such excess. 

‘‘(3) REDUCTION IN DEDUCTION FOR TAXABLE YEARS AFTER

2025.—In the case of any taxable year beginning after December 

31, 2025, paragraph (1) shall be applied by substituting— 

26 USC 250. 

26 USC 904 note. 

26 USC 951 prec. 


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131 STAT. 2214 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(A) ‘21.875 percent’ for ‘37.5 percent’ in subparagraph 

(A), and 

‘‘(B) ‘37.5 percent’ for ‘50 percent’ in subparagraph 

(B). 

‘‘(b) FOREIGN-DERIVED INTANGIBLE INCOME.—For purposes of 

this section— 

‘‘(1) IN GENERAL.—The foreign-derived intangible income 

of any domestic corporation is the amount which bears the 

same ratio to the deemed intangible income of such corporation 

as— 

‘‘(A) the foreign-derived deduction eligible income of 

such corporation, bears to 

‘‘(B) the deduction eligible income of such corporation. 

‘‘(2) DEEMED INTANGIBLE INCOME.—For purposes of this 

subsection— 

‘‘(A) IN GENERAL.—The term ‘deemed intangible 

income’ means the excess (if any) of— 

‘‘(i) the deduction eligible income of the domestic 

corporation, over 

‘‘(ii) the deemed tangible income return of the corporation. 

‘‘(B) DEEMED TANGIBLE INCOME RETURN.—The term 

‘deemed tangible income return’ means, with respect to 

any corporation, an amount equal to 10 percent of the 

corporation’s qualified business asset investment (as 

defined in section 951A(d), determined by substituting 

‘deduction eligible income’ for ‘tested income’ in paragraph 

(2) thereof and without regard to whether the corporation 

is a controlled foreign corporation). 

‘‘(3) DEDUCTION ELIGIBLE INCOME.— 

‘‘(A) IN GENERAL.—The term ‘deduction eligible income’ 

means, with respect to any domestic corporation, the excess 

(if any) of— 

‘‘(i) gross income of such corporation determined 

without regard to— 

‘‘(I) any amount included in the gross income 

of such corporation under section 951(a)(1), 

‘‘(II) the global intangible low-taxed income 

included in the gross income of such corporation 

under section 951A, 

‘‘(III) any financial services income (as defined 

in section 904(d)(2)(D)) of such corporation, 

‘‘(IV) any dividend received from a corporation 

which is a controlled foreign corporation of such 

domestic corporation, 

‘‘(V) any domestic oil and gas extraction 

income of such corporation, and 

‘‘(VI) any foreign branch income (as defined 

in section 904(d)(2)(J)), over 

‘‘(ii) the deductions (including taxes) properly allocable to such gross income. 

‘‘(B) DOMESTIC OIL AND GAS EXTRACTION INCOME.—For 

purposes of subparagraph (A), the term ‘domestic oil and 

gas extraction income’ means income described in section 

907(c)(1), determined by substituting ‘within the United 

States’ for ‘without the United States’. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2215 

‘‘(4) FOREIGN-DERIVED DEDUCTION ELIGIBLE INCOME.—The 

term ‘foreign-derived deduction eligible income’ means, with 

respect to any taxpayer for any taxable year, any deduction 

eligible income of such taxpayer which is derived in connection 

with— 

‘‘(A) property— 

‘‘(i) which is sold by the taxpayer to any person 

who is not a United States person, and 

‘‘(ii) which the taxpayer establishes to the satisfaction of the Secretary is for a foreign use, or 

‘‘(B) services provided by the taxpayer which the taxpayer establishes to the satisfaction of the Secretary are 

provided to any person, or with respect to property, not 

located within the United States. 

‘‘(5) RULES RELATING TO FOREIGN USE PROPERTY OR SERV- ICES.—For purposes of this subsection— 

‘‘(A) FOREIGN USE.—The term ‘foreign use’ means any 

use, consumption, or disposition which is not within the 

United States. 

‘‘(B) PROPERTY OR SERVICES PROVIDED TO DOMESTIC

INTERMEDIARIES.— 

‘‘(i) PROPERTY.—If a taxpayer sells property to 

another person (other than a related party) for further 

manufacture or other modification within the United 

States, such property shall not be treated as sold for 

a foreign use even if such other person subsequently 

uses such property for a foreign use. 

‘‘(ii) SERVICES.—If a taxpayer provides services to 

another person (other than a related party) located 

within the United States, such services shall not be 

treated as described in paragraph (4)(B) even if such 

other person uses such services in providing services 

which are so described. 

‘‘(C) SPECIAL RULES WITH RESPECT TO RELATED PARTY

TRANSACTIONS.— ‘‘(i) SALES TO RELATED PARTIES.—If property is sold 

to a related party who is not a United States person, 

such sale shall not be treated as for a foreign use 

unless— 

‘‘(I) such property is ultimately sold by a 

related party, or used by a related party in connection with property which is sold or the provision 

of services, to another person who is an unrelated 

party who is not a United States person, and 

‘‘(II) the taxpayer establishes to the satisfaction of the Secretary that such property is for 

a foreign use. 

For purposes of this clause, a sale of property shall 

be treated as a sale of each of the components thereof. 

‘‘(ii) SERVICE PROVIDED TO RELATED PARTIES.—If 

a service is provided to a related party who is not 

located in the United States, such service shall not 

be treated described in subparagraph (A)(ii) unless the 

taxpayer established to the satisfaction of the Secretary 

that such service is not substantially similar to services 

provided by such related party to persons located 

within the United States. 


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131 STAT. 2216 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(D) 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). 

‘‘(E) SOLD.—For purposes of this subsection, the terms 

‘sold’, ‘sells’, and ‘sale’ shall include any lease, license, 

exchange, or other disposition. 

‘‘(c) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to 

carry out the provisions of this section.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) Section 172(d), as amended by this Act, is amended 

by adding at the end the following new paragraph: 

‘‘(9) DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE

INCOME.—The deduction under section 250 shall not be 

allowed.’’. 

(2) Section 246(b)(1) is amended— 

(A) by striking ‘‘and subsection (a) and (b) of section 

245’’ the first place it appears and inserting ‘‘, subsection 

(a) and (b) of section 245, and section 250’’, 

(B) by striking ‘‘and subsection (a) and (b) of section 

245’’ the second place it appears and inserting ‘‘subsection 

(a) and (b) of section 245, and 250’’. 

(3) Section 469(i)(3)(F)(iii) is amended by striking ‘‘and 

222’’ and inserting ‘‘222, and 250’’. 

(4) The table of sections for part VIII of subchapter B 

of chapter 1 is amended by adding at the end the following 

new item: 

‘‘Sec. 250. Foreign-derived intangible income and global intangible low-taxed income.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

CHAPTER 2—OTHER MODIFICATIONS OF SUBPART F 

PROVISIONS 

SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY 

OIL RELATED INCOME. 

(a) REPEAL.—Subsection (a) of section 954 is amended— 

(1) by inserting ‘‘and’’ at the end of paragraph (2), 

(2) by striking the comma at the end of paragraph (3) 

and inserting a period, and 

(3) by striking paragraph (5). 

(b) CONFORMING AMENDMENTS.— 

26 USC 172 note. 

26 USC 241 prec. 

26 USC 172. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2217 

(1) Section 952(c)(1)(B)(iii) is amended by striking subclause 

(I) and redesignating subclauses (II) through (V) as subclauses 

(I) through (IV), respectively. 

(2) Section 954(b) is amended— 

(A) by striking the second sentence of paragraph (4), 

(B) by striking ‘‘the foreign base company services 

income, and the foreign base company oil related income’’ 

in paragraph (5) and inserting ‘‘and the foreign base company services income’’, and 

(C) by striking paragraph (6). 

(3) Section 954 is amended by striking subsection (g). 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years of foreign corporations beginning after 

December 31, 2017, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end. 

SEC. 14212. 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) Section 951(a)(1)(A) 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) 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) Section 952(c)(1)(B)(i) is amended by striking ‘‘section 

951(a)(1)(A)(i)’’ and inserting ‘‘section 951(a)(1)(A)’’. 

(D) Section 953(c)(1)(C) is amended by striking ‘‘section 

951(a)(1)(A)(i)’’ and inserting ‘‘section 951(a)(1)(A)’’. 

(2) Section 951(a) is amended by striking paragraph (3). 

(3) Section 953(d)(4)(B)(iv)(II) is amended by striking ‘‘or 

amounts referred to in clause (ii) or (iii) of section 951(a)(1)(A)’’. 

(4) Section 964(b) 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, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end. 

SEC. 14213. MODIFICATION OF STOCK ATTRIBUTION RULES FOR 

DETERMINING STATUS AS A CONTROLLED FOREIGN 

CORPORATION. 

(a) IN GENERAL.—Section 958(b) is amended— 

(1) by striking paragraph (4), and 

(2) by striking ‘‘Paragraphs (1) and (4)’’ in the last sentence 

and inserting ‘‘Paragraph (1)’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to— 

26 USC 958 note. 

26 USC 851 note. 

26 USC 951 prec. 

26 USC 952 note. 

26 USC 952. 


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131 STAT. 2218 PUBLIC LAW 115–97—DEC. 22, 2017 

(1) the last taxable year of foreign corporations beginning 

before January 1, 2018, and each subsequent taxable year 

of such foreign corporations, and 

(2) taxable years of United States shareholders in which 

or with which such taxable years of foreign corporations end. 

SEC. 14214. MODIFICATION OF DEFINITION OF UNITED STATES SHAREHOLDER. 

(a) IN GENERAL.—Section 951(b) is amended by inserting ‘‘, 

or 10 percent or more of the total value of shares of all classes 

of stock of such foreign corporation’’ after ‘‘such foreign corporation’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years of foreign corporations beginning after 

December 31, 2017, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end. 

SEC. 14215. ELIMINATION OF REQUIREMENT THAT CORPORATION 

MUST BE CONTROLLED FOR 30 DAYS BEFORE SUBPART 

F INCLUSIONS APPLY. 

(a) IN GENERAL.—Section 951(a)(1) is amended by striking ‘‘for 

an uninterrupted period of 30 days or more’’ and inserting ‘‘at 

any time’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years of foreign corporations beginning after 

December 31, 2017, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end. 

CHAPTER 3—PREVENTION OF BASE EROSION 

SEC. 14221. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE PROPERTY TRANSFERS. 

(a) DEFINITION OF INTANGIBLE ASSET.—Section 936(h)(3)(B) is 

amended— 

(1) by striking ‘‘or’’ at the end of clause (v), 

(2) by striking clause (vi) and inserting the following: 

‘‘(vi) any goodwill, going concern value, or 

workforce in place (including its composition and terms 

and conditions (contractual or otherwise) of its employment); or 

‘‘(vii) any other item the value or potential value 

of which is not attributable to tangible property or 

the services of any individual.’’, and 

(3) by striking the flush language after clause (vii), as 

added by paragraph (2). 

(b) CLARIFICATION OF ALLOWABLE VALUATION METHODS.— (1) FOREIGN CORPORATIONS.—Section 367(d)(2) is amended 

by adding at the end the following new subparagraph: 

‘‘(D) REGULATORY AUTHORITY.—For purposes of the last 

sentence of subparagraph (A), the Secretary shall require— 

‘‘(i) the valuation of transfers of intangible property, including intangible property transferred with 

other property or services, on an aggregate basis, or 

‘‘(ii) the valuation of such a transfer on the basis 

of the realistic alternatives to such a transfer, 

if the Secretary determines that such basis is the most 

reliable means of valuation of such transfers.’’. 

26 USC 951 note. 

26 USC 951 note. 

26 USC 951. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2219 

(2) ALLOCATION AMONG TAXPAYERS.—Section 482 is 

amended by adding at the end the following: ‘‘For purposes 

of this section, the Secretary shall require the valuation of 

transfers of intangible property (including intangible property 

transferred with other property or services) on an aggregate 

basis or the valuation of such a transfer on the basis of the 

realistic alternatives to such a transfer, if the Secretary determines that such basis is the most reliable means of valuation 

of such transfers.’’. 

(c) EFFECTIVE DATE.— (1) IN GENERAL.—The amendments made by this section 

shall apply to transfers in taxable years beginning after 

December 31, 2017. 

(2) NO INFERENCE.—Nothing in the amendment made by 

subsection (a) shall be construed to create any inference with 

respect to the application of section 936(h)(3) of the Internal 

Revenue Code of 1986, or the authority of the Secretary of 

the Treasury to provide regulations for such application, with 

respect to taxable years beginning before January 1, 2018. 

SEC. 14222. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED 

IN HYBRID TRANSACTIONS OR WITH HYBRID ENTITIES. 

(a) IN GENERAL.—Part IX of subchapter B of chapter 1 is 

amended by inserting after section 267 the following: 

‘‘SEC. 267A. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED 

IN HYBRID TRANSACTIONS OR WITH HYBRID ENTITIES. 

‘‘(a) IN GENERAL.—No deduction shall be allowed under this 

chapter for any disqualified related party amount paid or accrued 

pursuant to a hybrid transaction or by, or to, a hybrid entity. 

‘‘(b) DISQUALIFIED RELATED PARTY AMOUNT.—For purposes of 

this section— 

‘‘(1) DISQUALIFIED RELATED PARTY AMOUNT.—The term ‘disqualified related party amount’ means any interest or royalty 

paid or accrued to a related party to the extent that— 

‘‘(A) such amount is not included in the income of 

such related party under the tax law of the country of 

which such related party is a resident for tax purposes 

or is subject to tax, or 

‘‘(B) such related party is allowed a deduction with 

respect to such amount under the tax law of such country. 

Such term shall not include any payment to the extent such 

payment is included in the gross income of a United States 

shareholder under section 951(a). 

‘‘(2) RELATED PARTY.—The term ‘related party’ means a 

related person as defined in section 954(d)(3), except that such 

section shall be applied with respect to the person making 

the payment described in paragraph (1) in lieu of the controlled 

foreign corporation otherwise referred to in such section. 

‘‘(c) HYBRID TRANSACTION.—For purposes of this section, the 

term ‘hybrid transaction’ means any transaction, series of transactions, agreement, or instrument one or more payments with 

respect to which are treated as interest or royalties for purposes 

of this chapter and which are not so treated for purposes the 

tax law of the foreign country of which the recipient of such payment 

is resident for tax purposes or is subject to tax. 

‘‘(d) HYBRID ENTITY.—For purposes of this section, the term 

‘hybrid entity’ means any entity which is either— 

26 USC 267A. 

26 USC 963 note. 

26 USC 367 note. 

26 USC 482. 


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131 STAT. 2220 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(1) treated as fiscally transparent for purposes of this 

chapter but not so treated for purposes of the tax law of 

the foreign country of which the entity is resident for tax 

purposes or is subject to tax, or 

‘‘(2) treated as fiscally transparent for purposes of such 

tax law but not so treated for purposes of this chapter. 

‘‘(e) REGULATIONS.—The Secretary shall issue such regulations 

or other guidance as may be necessary or appropriate to carry 

out the purposes of this section, including regulations or other 

guidance providing for— 

‘‘(1) rules for treating certain conduit arrangements which 

involve a hybrid transaction or a hybrid entity as subject to 

subsection (a), 

‘‘(2) rules for the application of this section to branches 

or domestic entities, 

‘‘(3) rules for treating certain structured transactions as 

subject to subsection (a), 

‘‘(4) rules for treating a tax preference as an exclusion 

from income for purposes of applying subsection (b)(1) if such 

tax preference has the effect of reducing the generally 

applicable statutory rate by 25 percent or more, 

‘‘(5) rules for treating the entire amount of interest or 

royalty paid or accrued to a related party as a disqualified 

related party amount if such amount is subject to a participation exemption system or other system which provides for the 

exclusion or deduction of a substantial portion of such amount, 

‘‘(6) rules for determining the tax residence of a foreign 

entity if the entity is otherwise considered a resident of more 

than one country or of no country, 

‘‘(7) exceptions from subsection (a) with respect to— 

‘‘(A) cases in which the disqualified related party 

amount is taxed under the laws of a foreign country other 

than the country of which the related party is a resident 

for tax purposes, and 

‘‘(B) other cases which the Secretary determines do 

not present a risk of eroding the Federal tax base, 

‘‘(8) requirements for record keeping and information 

reporting in addition to any requirements imposed by section 

6038A.’’. 

(b) CONFORMING AMENDMENT.—The table of sections for part 

IX of subchapter B of chapter 1 is amended by inserting after 

the item relating to section 267 the following new item: 

‘‘Sec. 267A. Certain related party amounts paid or accrued in hybrid transactions 

or with hybrid entities.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 14223. SHAREHOLDERS OF SURROGATE FOREIGN CORPORATIONS 

NOT ELIGIBLE FOR REDUCED RATE ON DIVIDENDS. 

(a) IN GENERAL.—Section 1(h)(11)(C)(iii) is amended— 

(1) by striking ‘‘shall not include any foreign corporation’’ 

and inserting ‘‘shall not include— 

‘‘(I) any foreign corporation’’, 

(2) by striking the period at the end and inserting ‘‘, and’’, 

and 

(3) by adding at the end the following new subclause: 

26 USC 1. 

26 USC 267A 

note. 

26 USC 261 prec. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2221 

‘‘(II) any corporation which first becomes a 

surrogate foreign corporation (as defined in section 

7874(a)(2)(B)) after the date of the enactment of 

this subclause, other than a foreign corporation 

which is treated as a domestic corporation under 

section 7874(b).’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to dividends received after the date of the enactment 

of this Act. 

Subpart C—Modifications Related to Foreign Tax 

Credit System 

SEC. 14301. 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, as amended by section 14201, 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 subpart A of this part, 

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 such 

item of income. 

‘‘(b) SPECIAL RULES FOR DISTRIBUTIONS FROM PREVIOUSLY

TAXED EARNINGS AND PROFITS.—For purposes of subpart A of this 

part— 

‘‘(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 the taxable 

year or 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 

26 USC 902. 

26 USC 1 note. 


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131 STAT. 2222 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(B) have not been deemed to have been paid by a 

domestic corporation under this section for the taxable 

year or any prior taxable year.’’, 

(2) and by adding after subsection (d) (as added by section 

14201) the following new subsections: 

‘‘(e) 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. 

‘‘(f) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance 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 subsections (a), (b), and (d) 

of section 960 (determined without regard to the phrase ‘80 percent 

of’ in subsection (d)(1) thereof) for such taxable year shall be treated 

for purposes of this title (other than sections 245 and 245A) as 

a dividend received by such domestic corporation from the foreign 

corporation.’’. 

(2) Paragraph (4) of section 245(a) is amended to read 

as follows: 

‘‘(4) POST-1986 UNDISTRIBUTED EARNINGS.—The term ‘post1986 undistributed earnings’ means the amount of 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— 

‘‘(A) as of the close of the taxable year of the foreign 

corporation in which the dividend is distributed, and 

‘‘(B) without diminution by reason of dividends distributed during such taxable year.’’. 

(3) Section 245(a)(10)(C) is amended by striking ‘‘902, 907, 

and 960’’ and inserting ‘‘907 and 960’’. 

(4) Sections 535(b)(1) and 545(b)(1) are each amended by 

striking ‘‘section 902(a) or 960(a)(1)’’ and inserting ‘‘section 

960’’. 

(5) Section 814(f)(1) 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.—’’. 

(6) Section 865(h)(1)(B) is amended by striking ‘‘902, 907,’’ 

and inserting ‘‘907’’. 

(7) Section 901(a) is amended by striking ‘‘sections 902 

and 960’’ and inserting ‘‘section 960’’. 

(8) Section 901(e)(2) 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’’. 

(9) Section 901(f) is amended by striking ‘‘sections 902 

and 960’’ and inserting ‘‘section 960’’. 

(10) Section 901(j)(1)(A) is amended by striking ‘‘902 or’’. 

(11) Section 901(j)(1)(B) is amended by striking ‘‘sections 

902 and 960’’ and inserting ‘‘section 960’’. 

26 USC 78. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2223 

(12) Section 901(k)(2) is amended by striking ‘‘, 902,’’. 

(13) Section 901(k)(6) is amended by striking ‘‘902 or’’. 

(14) Section 901(m)(1)(B) is amended to read as follows: 

‘‘(B) in the case of a foreign income tax paid by a 

foreign corporation, shall not be taken into account for 

purposes of section 960.’’. 

(15) Section 904(d)(2)(E) is amended— 

(A) by amending clause (i) to read as follows: 

‘‘(i) NONCONTROLLED 10-PERCENT OWNED FOREIGN

CORPORATION.—The term ‘noncontrolled 10-percent 

owned foreign corporation’ means any foreign corporation which is— 

‘‘(I) a specified 10-percent owned foreign corporation (as defined in section 245A(b)), or 

‘‘(II) a passive foreign investment company (as 

defined in section 1297(a)) with respect to which 

the taxpayer meets the stock ownership requirements of section 902(a) (or, for purposes of applying 

paragraphs (3) and (4), the requirements of section 

902(b)). 

A controlled foreign corporation shall not be treated 

as a noncontrolled 10-percent owned foreign corporation with respect to any distribution out of its earnings 

and profits for periods during which it was a controlled 

foreign corporation. Any reference to section 902 in 

this clause shall be treated as a reference to such 

section as in effect before its repeal.’’, and 

(B) by striking ‘‘non-controlled section 902 corporation’’ 

in clause (ii) and inserting ‘‘noncontrolled 10-percent owned 

foreign corporation’’. 

(16) Section 904(d)(4) is amended— 

(A) by striking ‘‘noncontrolled section 902 corporation’’ 

each place it appears and inserting ‘‘noncontrolled 10-percent owned foreign corporation’’, 

(B) by striking ‘‘NONCONTROLLED SECTION 902 CORPORA- TIONS’’ in the heading thereof and inserting ‘‘NONCONTROLLED 10-PERCENT OWNED FOREIGN CORPORATIONS’’. 

(17) Section 904(d)(6)(A) is amended by striking ‘‘902, 907,’’ 

and inserting ‘‘907’’. 

(18) Section 904(h)(10)(A) is amended by striking ‘‘sections 

902, 907, and 960’’ and inserting ‘‘sections 907 and 960’’. 

(19) Section 904(k) is amended to read as follows: 

‘‘(k) CROSS REFERENCES.—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(c).’’. 

(20) Section 905(c)(1) is amended by striking the last sentence. 

(21) Section 905(c)(2)(B)(i) is amended to read as follows: 

‘‘(i) shall be taken into account for the taxable 

year to which such taxes relate, and’’. 

(22) Section 906(a) is amended by striking ‘‘(or deemed, 

under section 902, paid or accrued during the taxable year)’’. 

(23) Section 906(b) is amended by striking paragraphs (4) 

and (5). 

(24) Section 907(b)(2)(B) is amended by striking ‘‘902 or’’. 

26 USC 901. 


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131 STAT. 2224 PUBLIC LAW 115–97—DEC. 22, 2017 

(25) Section 907(c)(3)(A) is amended— 

(A) by striking subparagraph (A) and inserting the 

following: 

‘‘(A) interest, to the extent the category of income of 

such interest is determined under section 904(d)(3),’’, and 

(B) by striking ‘‘section 960(a)’’ in subparagraph (B) 

and inserting ‘‘section 960’’. 

(26) Section 907(c)(5) is amended by striking ‘‘902 or’’. 

(27) Section 907(f)(2)(B)(i) is amended by striking ‘‘902 

or’’. 

(28) Section 908(a) is amended by striking ‘‘902 or’’. 

(29) Section 909(b) is amended— 

(A) by striking ‘‘section 902 corporation’’ in the matter 

preceding paragraph (1) and inserting ‘‘specified 10-percent 

owned foreign corporation (as defined in section 245A(b) 

without regard to paragraph (2) thereof)’’, 

(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’’. 

(30) Section 909(d) is amended by striking paragraph (5). 

(31) Section 958(a)(1) is amended by striking ‘‘960(a)(1)’’ 

and inserting ‘‘960’’. 

(32) Section 959(d) is amended by striking ‘‘Except as provided in section 960(a)(3), any’’ and inserting ‘‘Any’’. 

(33) Section 959(e) is amended by striking ‘‘section 960(b)’’ 

and inserting ‘‘section 960(c)’’. 

(34) Section 1291(g)(2)(A) 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’’. 

(35) Section 1293(f) is amended by striking ‘‘and’’ at the 

end of paragraph (1), by striking the period at the end of 

paragraph (2) and inserting ‘‘, and’’, and by adding at the 

end the following new paragraph: 

‘‘(3) a domestic corporation which owns (or is treated under 

section 1298(a) as owning) stock of a qualified electing fund 

shall be treated in the same manner as a United States shareholder of a controlled foreign corporation (and such qualified 

electing fund shall be treated in the same manner as such 

controlled foreign corporation) if such domestic corporation 

meets the stock ownership requirements of subsection (a) or 

(b) of section 902 (as in effect before its repeal) with respect 

to such qualified electing fund.’’. 

(36) Section 6038(c)(1)(B) 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’’. 

(37) Section 6038(c)(4) is amended by striking subparagraph (C). 

26 USC 907. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2225 

(38) 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. 

(39) 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, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end. 

SEC. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION BASKET FOR 

FOREIGN BRANCH INCOME. 

(a) IN GENERAL.—Section 904(d)(1), as amended by section 

14201, is amended by redesignating subparagraphs (B) and (C) 

as subparagraphs (C) and (D), respectively, and by inserting after 

subparagraph (A) the following new subparagraph: 

‘‘(B) foreign branch income,’’. 

(b) FOREIGN BRANCH INCOME.— 

(1) IN GENERAL.—Section 904(d)(2) is amended by inserting 

after subparagraph (I) the following new subparagraph: 

‘‘(J) FOREIGN BRANCH INCOME.— 

‘‘(i) IN GENERAL.—The term ‘foreign branch income’ 

means the business profits of such United States person which are attributable to 1 or more qualified business units (as defined in section 989(a)) in 1 or more 

foreign countries. For purposes of the preceding sentence, the amount of business profits attributable to 

a qualified business unit shall be determined under 

rules established by the Secretary. 

‘‘(ii) EXCEPTION.—Such term shall not include any 

income which is passive category income.’’. 

(2) CONFORMING AMENDMENT.—Section 904(d)(2)(A)(ii), as 

amended by section 14201, is amended by striking ‘‘income 

described in paragraph (1)(A) and’’ and inserting ‘‘income 

described in paragraph (1)(A), foreign branch income, and’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 14303. SOURCE OF INCOME FROM SALES OF INVENTORY DETERMINED SOLELY ON BASIS OF PRODUCTION ACTIVITIES. 

(a) IN GENERAL.—Section 863(b) 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, 2017. 

SEC. 14304. ELECTION TO INCREASE PERCENTAGE OF DOMESTIC TAXABLE INCOME OFFSET BY OVERALL DOMESTIC LOSS 

TREATED AS FOREIGN SOURCE. 

(a) IN GENERAL.—Section 904(g) is amended by adding at the 

end the following new paragraph: 

26 USC 863 note. 

26 USC 904 note. 

26 USC 904. 

26 USC 78 note. 

26 USC 951 prec. 

26 USC 901 prec. 


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131 STAT. 2226 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(5) ELECTION TO INCREASE PERCENTAGE OF TAXABLE

INCOME TREATED AS FOREIGN SOURCE.— ‘‘(A) IN GENERAL.—If any pre-2018 unused overall 

domestic loss is taken into account under paragraph (1) 

for any applicable taxable year, the taxpayer may elect 

to have such paragraph applied to such loss by substituting 

a percentage greater than 50 percent (but not greater than 

100 percent) for 50 percent in subparagraph (B) thereof. 

‘‘(B) PRE-2018 UNUSED OVERALL DOMESTIC LOSS.—For 

purposes of this paragraph, the term ‘pre-2018 unused 

overall domestic loss’ means any overall domestic loss 

which— 

‘‘(i) arises in a qualified taxable year beginning 

before January 1, 2018, and 

‘‘(ii) has not been used under paragraph (1) for 

any taxable year beginning before such date. 

‘‘(C) APPLICABLE TAXABLE YEAR.—For purposes of this 

paragraph, the term ‘applicable taxable year’ means any 

taxable year of the taxpayer beginning after December 

31, 2017, and before January 1, 2028.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2017. 

PART II—INBOUND TRANSACTIONS 

SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX. 

(a) IMPOSITION OF TAX.—Subchapter A of chapter 1 is amended 

by adding at the end the following new part: 

‘‘PART VII—BASE EROSION AND ANTI-ABUSE 

TAX 

‘‘Sec. 59A. Tax on base erosion payments of taxpayers with substantial gross receipts. 

‘‘SEC. 59A. TAX ON BASE EROSION PAYMENTS OF TAXPAYERS WITH 

SUBSTANTIAL GROSS RECEIPTS. 

‘‘(a) IMPOSITION OF TAX.—There is hereby imposed on each 

applicable taxpayer for any taxable year a tax equal to the base 

erosion minimum tax amount for the taxable year. Such tax shall 

be in addition to any other tax imposed by this subtitle. 

‘‘(b) BASE EROSION MINIMUM TAX AMOUNT.—For purposes of 

this section— 

‘‘(1) IN GENERAL.—Except as provided in paragraphs (2) 

and (3), the term ‘base erosion minimum tax amount’ means, 

with respect to any applicable taxpayer for any taxable year, 

the excess (if any) of— 

‘‘(A) an amount equal to 10 percent (5 percent in the 

case of taxable years beginning in calendar year 2018) 

of the modified taxable income of such taxpayer for the 

taxable year, over 

‘‘(B) an amount equal to the regular tax liability (as 

defined in section 26(b)) of the taxpayer for the taxable 

year, reduced (but not below zero) by the excess (if any) 

of— 

‘‘(i) the credits allowed under this chapter against 

such regular tax liability, over 

26 USC 59A. 

26 USC 59A prec. 

26 USC 904 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2227 

‘‘(ii) the sum of— 

‘‘(I) the credit allowed under section 38 for 

the taxable year which is properly allocable to 

the research credit determined under section 41(a), 

plus 

‘‘(II) the portion of the applicable section 38 

credits not in excess of 80 percent of the lesser 

of the amount of such credits or the base erosion 

minimum tax amount (determined without regard 

to this subclause). 

‘‘(2) MODIFICATIONS FOR TAXABLE YEARS BEGINNING AFTER

2025.—In the case of any taxable year beginning after December 

31, 2025, paragraph (1) shall be applied— 

‘‘(A) by substituting ‘12.5 percent’ for ‘10 percent’ in 

subparagraph (A) thereof, and 

‘‘(B) by reducing (but not below zero) the regular tax 

liability (as defined in section 26(b)) for purposes of 

subparagraph (B) thereof by the aggregate amount of the 

credits allowed under this chapter against such regular 

tax liability rather than the excess described in such 

subparagraph. 

‘‘(3) INCREASED RATE FOR CERTAIN BANKS AND SECURITIES

DEALERS.— 

‘‘(A) IN GENERAL.—In the case of a taxpayer described 

in subparagraph (B) who is an applicable taxpayer for 

any taxable year, the percentage otherwise in effect under 

paragraphs (1)(A) and (2)(A) shall each be increased by 

one percentage point. 

‘‘(B) TAXPAYER DESCRIBED.—A taxpayer is described 

in this subparagraph if such taxpayer is a member of 

an affiliated group (as defined in section 1504(a)(1)) which 

includes— 

‘‘(i) a bank (as defined in section 581), or 

‘‘(ii) a registered securities dealer under section 

15(a) of the Securities Exchange Act of 1934. 

‘‘(4) APPLICABLE SECTION 38 CREDITS.—For purposes of paragraph (1)(B)(ii)(II), the term ‘applicable section 38 credits’ 

means the credit allowed under section 38 for the taxable 

year which is properly allocable to— 

‘‘(A) the low-income housing credit determined under 

section 42(a), 

‘‘(B) the renewable electricity production credit determined under section 45(a), and 

‘‘(C) the investment credit determined under section 

46, but only to the extent properly allocable to the energy 

credit determined under section 48. 

‘‘(c) MODIFIED TAXABLE INCOME.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘modified taxable income’ 

means the taxable income of the taxpayer computed under 

this chapter for the taxable year, determined without regard 

to— 

‘‘(A) any base erosion tax benefit with respect to any 

base erosion payment, or 

‘‘(B) the base erosion percentage of any net operating 

loss deduction allowed under section 172 for the taxable 

year. 

‘‘(2) BASE EROSION TAX BENEFIT.— 


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131 STAT. 2228 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(A) IN GENERAL.—The term ‘base erosion tax benefit’ 

means— 

‘‘(i) any deduction described in subsection (d)(1) 

which is allowed under this chapter for the taxable 

year with respect to any base erosion payment, 

‘‘(ii) in the case of a base erosion payment described 

in subsection (d)(2), any deduction allowed under this 

chapter for the taxable year for depreciation (or 

amortization in lieu of depreciation) with respect to 

the property acquired with such payment, 

‘‘(iii) in the case of a base erosion payment 

described in subsection (d)(3)— 

‘‘(I) any reduction under section 803(a)(1)(B) 

in the gross amount of premiums and other consideration on insurance and annuity contracts for 

premiums and other consideration arising out of 

indemnity insurance, and 

‘‘(II) any deduction under section 832(b)(4)(A) 

from the amount of gross premiums written on 

insurance contracts during the taxable year for 

premiums paid for reinsurance, and 

‘‘(iv) in the case of a base erosion payment 

described in subsection (d)(4), any reduction in gross 

receipts with respect to such payment in computing 

gross income of the taxpayer for the taxable year for 

purposes of this chapter. 

‘‘(B) TAX BENEFITS DISREGARDED IF TAX WITHHELD ON

BASE EROSION PAYMENT.— 

‘‘(i) IN GENERAL.—Except as provided in clause 

(ii), any base erosion tax benefit attributable to any 

base erosion payment— 

‘‘(I) on which tax is imposed by section 871 

or 881, and 

‘‘(II) with respect to which tax has been 

deducted and withheld under section 1441 or 1442, 

shall not be taken into account in computing modified 

taxable income under paragraph (1)(A) or the base 

erosion percentage under paragraph (4). 

‘‘(ii) EXCEPTION.—The amount not taken into 

account in computing modified taxable income by reason of clause (i) shall be reduced under rules similar 

to the rules under section 163(j)(5)(B) (as in effect 

before the date of the enactment of the Tax Cuts and 

Jobs Act). 

‘‘(3) SPECIAL RULES FOR DETERMINING INTEREST FOR WHICH

DEDUCTION ALLOWED.—For purposes of applying paragraph (1), 

in the case of a taxpayer to which section 163(j) applies for 

the taxable year, the reduction in the amount of interest for 

which a deduction is allowed by reason of such subsection 

shall be treated as allocable first to interest paid or accrued 

to persons who are not related parties with respect to the 

taxpayer and then to such related parties. 

‘‘(4) BASE EROSION PERCENTAGE.—For purposes of paragraph (1)(B)— 

‘‘(A) IN GENERAL.—The term ‘base erosion percentage’ 

means, for any taxable year, the percentage determined 

by dividing— 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2229 

‘‘(i) the aggregate amount of base erosion tax benefits of the taxpayer for the taxable year, by 

‘‘(ii) the sum of— 

‘‘(I) the aggregate amount of the deductions 

(including deductions described in clauses (i) and 

(ii) of paragraph (2)(A)) allowable to the taxpayer 

under this chapter for the taxable year, plus 

‘‘(II) the base erosion tax benefits described 

in clauses (iii) and (iv) of paragraph (2)(A) allowable to the taxpayer for the taxable year. 

‘‘(B) CERTAIN ITEMS NOT TAKEN INTO ACCOUNT.—The 

amount under subparagraph (A)(ii) shall be determined 

by not taking into account— 

‘‘(i) any deduction allowed under section 172, 245A, 

or 250 for the taxable year, 

‘‘(ii) any deduction for amounts paid or accrued 

for services to which the exception under subsection 

(d)(5) applies, and 

‘‘(iii) any deduction for qualified derivative payments which are not treated as a base erosion payment 

by reason of subsection (h). 

‘‘(d) BASE EROSION PAYMENT.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘base erosion payment’ means 

any amount paid or accrued by the taxpayer to a foreign person 

which is a related party of the taxpayer and with respect 

to which a deduction is allowable under this chapter. 

‘‘(2) PURCHASE OF DEPRECIABLE PROPERTY.—Such term 

shall also include any amount paid or accrued by the taxpayer 

to a foreign person which is a related party of the taxpayer 

in connection with the acquisition by the taxpayer from such 

person of property of a character subject to the allowance 

for depreciation (or amortization in lieu of depreciation). 

‘‘(3) REINSURANCE PAYMENTS.—Such term shall also include 

any premium or other consideration paid or accrued by the 

taxpayer to a foreign person which is a related party of the 

taxpayer for any reinsurance payments which are taken into 

account under sections 803(a)(1)(B) or 832(b)(4)(A). 

‘‘(4) CERTAIN PAYMENTS TO EXPATRIATED ENTITIES.— 

‘‘(A) IN GENERAL.—Such term shall also include any 

amount paid or accrued by the taxpayer with respect to 

a person described in subparagraph (B) which results in 

a reduction of the gross receipts of the taxpayer. 

‘‘(B) PERSON DESCRIBED.—A person is described in this 

subparagraph if such person is a— 

‘‘(i) surrogate foreign corporation which is a related 

party of the taxpayer, but only if such person first 

became a surrogate foreign corporation after November 

9, 2017, or 

‘‘(ii) foreign person which is a member of the same 

expanded affiliated group as the surrogate foreign corporation. 

‘‘(C) DEFINITIONS.—For purposes of this paragraph— 

‘‘(i) SURROGATE FOREIGN CORPORATION.—The term 

‘surrogate foreign corporation’ has the meaning given 

such term by section 7874(a)(2)(B) but does not include 

a foreign corporation treated as a domestic corporation 

under section 7874(b). 


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131 STAT. 2230 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(ii) EXPANDED AFFILIATED GROUP.—The term 

‘expanded affiliated group’ has the meaning given such 

term by section 7874(c)(1). 

‘‘(5) EXCEPTION FOR CERTAIN AMOUNTS WITH RESPECT TO

SERVICES.—Paragraph (1) shall not apply to any amount paid 

or accrued by a taxpayer for services if— 

‘‘(A) such services are services which meet the requirements for eligibility for use of the services cost method 

under section 482 (determined without regard to the 

requirement that the services not contribute significantly 

to fundamental risks of business success or failure), and 

‘‘(B) such amount constitutes the total services cost 

with no markup component. 

‘‘(e) APPLICABLE TAXPAYER.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘applicable taxpayer’ means, 

with respect to any taxable year, a taxpayer— 

‘‘(A) which is a corporation other than a regulated 

investment company, a real estate investment trust, or 

an S corporation, 

‘‘(B) the average annual gross receipts of which for 

the 3-taxable-year period ending with the preceding taxable 

year are at least $500,000,000, and 

‘‘(C) the base erosion percentage (as determined under 

subsection (c)(4)) of which for the taxable year is 3 percent 

(2 percent in the case of a taxpayer described in subsection 

(b)(3)(B)) or higher. 

‘‘(2) GROSS RECEIPTS.— 

‘‘(A) SPECIAL RULE FOR FOREIGN PERSONS.—In the case 

of a foreign person the gross receipts of which are taken 

into account for purposes of paragraph (1)(B), only gross 

receipts which are taken into account in determining 

income which is effectively connected with the conduct 

of a trade or business within the United States shall be 

taken into account. In the case of a taxpayer which is 

a foreign person, the preceding sentence shall not apply 

to the gross receipts of any United States person which 

are aggregated with the taxpayer’s gross receipts by reason 

of paragraph (3). 

‘‘(B) OTHER RULES MADE APPLICABLE.—Rules similar 

to the rules of subparagraphs (B), (C), and (D) of section 

448(c)(3) shall apply in determining gross receipts for purposes of this section. 

‘‘(3) AGGREGATION RULES.—All persons treated as a single 

employer under subsection (a) of section 52 shall be treated 

as 1 person for purposes of this subsection and subsection 

(c)(4), except that in applying section 1563 for purposes of 

section 52, the exception for foreign corporations under section 

1563(b)(2)(C) shall be disregarded. 

‘‘(f) FOREIGN PERSON.—For purposes of this section, the term 

‘foreign person’ has the meaning given such term by section 

6038A(c)(3). 

‘‘(g) RELATED PARTY.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘related party’ means, with 

respect to any applicable taxpayer— 

‘‘(A) any 25-percent owner of the taxpayer, 


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‘‘(B) any person who is related (within the meaning 

of section 267(b) or 707(b)(1)) to the taxpayer or any 25- 

percent owner of the taxpayer, and 

‘‘(C) any other person who is related (within the 

meaning of section 482) to the taxpayer. 

‘‘(2) 25-PERCENT OWNER.—The term ‘25-percent owner’ 

means, with respect to any corporation, any person who owns 

at least 25 percent of— 

‘‘(A) the total voting power of all classes of stock of 

a corporation entitled to vote, or 

‘‘(B) the total value of all classes of stock of such 

corporation. 

‘‘(3) SECTION 318 TO APPLY.—Section 318 shall apply for 

purposes of paragraphs (1) and (2), except that— 

‘‘(A) ‘10 percent’ shall be substituted for ‘50 percent’ 

in section 318(a)(2)(C), and 

‘‘(B) subparagraphs (A), (B), and (C) of section 318(a)(3) 

shall not be applied so as to consider a United States 

person as owning stock which is owned by a person who 

is not a United States person. 

‘‘(h) EXCEPTION FOR CERTAIN PAYMENTS MADE IN THE ORDINARY

COURSE OF TRADE OR BUSINESS.—For purposes of this section— 

‘‘(1) IN GENERAL.—Except as provided in paragraph (3), 

any qualified derivative payment shall not be treated as a 

base erosion payment. 

‘‘(2) QUALIFIED DERIVATIVE PAYMENT.— 

‘‘(A) IN GENERAL.—The term ‘qualified derivative payment’ means any payment made by a taxpayer pursuant 

to a derivative with respect to which the taxpayer— 

‘‘(i) recognizes gain or loss as if such derivative 

were sold for its fair market value on the last business 

day of the taxable year (and such additional times 

as required by this title or the taxpayer’s method of 

accounting), 

‘‘(ii) treats any gain or loss so recognized as ordinary, and 

‘‘(iii) treats the character of all items of income, 

deduction, gain, or loss with respect to a payment 

pursuant to the derivative as ordinary. 

‘‘(B) REPORTING REQUIREMENT.—No payments shall be 

treated as qualified derivative payments under subparagraph (A) for any taxable year unless the taxpayer includes 

in the information required to be reported under section 

6038B(b)(2) with respect to such taxable year such information as is necessary to identify the payments to be so 

treated and such other information as the Secretary determines necessary to carry out the provisions of this subsection. 

‘‘(3) EXCEPTIONS FOR PAYMENTS OTHERWISE TREATED AS

BASE EROSION PAYMENTS.—This subsection shall not apply to 

any qualified derivative payment if— 

‘‘(A) the payment would be treated as a base erosion 

payment if it were not made pursuant to a derivative, 

including any interest, royalty, or service payment, or 

‘‘(B) in the case of a contract which has derivative 

and nonderivative components, the payment is properly 

allocable to the nonderivative component. 


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131 STAT. 2232 PUBLIC LAW 115–97—DEC. 22, 2017 

‘‘(4) DERIVATIVE DEFINED.—For purposes of this subsection— 

‘‘(A) IN GENERAL.—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: 

‘‘(i) Any share of stock in a corporation. 

‘‘(ii) Any evidence of indebtedness. 

‘‘(iii) Any commodity which is actively traded. 

‘‘(iv) Any currency. 

‘‘(v) Any rate, price, amount, index, formula, or 

algorithm. 

Such term shall not include any item described in clauses 

(i) through (v). 

‘‘(B) 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. 

‘‘(C) EXCEPTION FOR CERTAIN CONTRACTS.—Such term 

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). 

‘‘(i) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to 

carry out the provisions of this section, including regulations— 

‘‘(1) providing for such adjustments to the application of 

this section as are necessary to prevent the avoidance of the 

purposes of this section, including through— 

‘‘(A) the use of unrelated persons, conduit transactions, 

or other intermediaries, or 

‘‘(B) transactions or arrangements designed, in whole 

or in part— 

‘‘(i) to characterize payments otherwise subject to 

this section as payments not subject to this section, 

or 

‘‘(ii) to substitute payments not subject to this 

section for payments otherwise subject to this section 

and 

‘‘(2) for the application of subsection (g), including rules 

to prevent the avoidance of the exceptions under subsection 

(g)(3).’’. 

(b) REPORTING REQUIREMENTS AND PENALTIES.— 

(1) IN GENERAL.—Subsection (b) of section 6038A is 

amended to read as follows: 

‘‘(b) REQUIRED INFORMATION.— ‘‘(1) IN GENERAL.—For purposes of subsection (a), the 

information described in this subsection is such information 

as the Secretary prescribes by regulations relating to— 

‘‘(A) the name, principal place of business, nature of 

business, and country or countries in which organized or 

resident, of each person which— 

26 USC 6038A. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2233 

‘‘(i) is a related party to the reporting corporation, 

and 

‘‘(ii) had any transaction with the reporting corporation during its taxable year, 

‘‘(B) the manner in which the reporting corporation 

is related to each person referred to in subparagraph (A), 

and 

‘‘(C) transactions between the reporting corporation 

and each foreign person which is a related party to the 

reporting corporation. 

‘‘(2) ADDITIONAL INFORMATION REGARDING BASE EROSION

PAYMENTS.—For purposes of subsection (a) and section 6038C, 

if the reporting corporation or the foreign corporation to whom 

section 6038C applies is an applicable taxpayer, the information 

described in this subsection shall include— 

‘‘(A) such information as the Secretary determines necessary to determine the base erosion minimum tax amount, 

base erosion payments, and base erosion tax benefits of 

the taxpayer for purposes of section 59A for the taxable 

year, and 

‘‘(B) such other information as the Secretary determines necessary to carry out such section. 

For purposes of this paragraph, any term used in this paragraph which is also used in section 59A shall have the same 

meaning as when used in such section.’’. 

(2) INCREASE IN PENALTY.—Paragraphs (1) and (2) of section 

6038A(d) are each amended by striking ‘‘$10,000’’ and inserting 

‘‘$25,000’’. 

(c) DISALLOWANCE OF CREDITS AGAINST BASE EROSION TAX.— 

Paragraph (2) of section 26(b) is amended by inserting after 

subparagraph (A) the following new subparagraph: 

‘‘(B) section 59A (relating to base erosion and antiabuse tax),’’. 

(d) CONFORMING AMENDMENTS.— 

(1) The table of parts for subchapter A of chapter 1 is 

amended by adding after the item relating to part VI the 

following new item: 

‘‘PART VII. BASE EROSION AND ANTI-ABUSE TAX’’. 

(2) Paragraph (1) of section 882(a), as amended by this 

Act, is amended by inserting ‘‘or 59A,’’ after ‘‘section 11,’’. 

(3) Subparagraph (A) of section 6425(c)(1), as amended 

by section 13001, is amended to read as follows: 

‘‘(A) the sum of— 

‘‘(i) the tax imposed by section 11, or subchapter 

L of chapter 1, whichever is applicable, plus 

‘‘(ii) the tax imposed by section 59A, over’’. 

(4)(A) Subparagraph (A) of section 6655(g)(1), as amended 

by sections 12001 and 13001, is amended by striking ‘‘plus’’ 

at the end of clause (i), by redesignating clause (ii) as clause 

(iii), and by inserting after clause (i) the following new clause: 

‘‘(ii) the tax imposed by section 59A, plus’’. 

(B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2), 

as amended by sections 12001 and 13001, are each amended 

by inserting ‘‘and modified taxable income’’ after ‘‘taxable 

income’’. 

26 USC 1 prec. 

26 USC 6038A. 


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131 STAT. 2234 PUBLIC LAW 115–97—DEC. 22, 2017 

(C) Subparagraph (B) of section 6655(e)(2) is amended by 

adding at the end the following new clause: 

‘‘(iii) MODIFIED TAXABLE INCOME.—The term ‘modified taxable income’ has the meaning given such term 

by section 59A(c)(1).’’. 

(e) EFFECTIVE DATE.—The amendments made by this section 

shall apply to base erosion payments (as defined in section 59A(d) 

of the Internal Revenue Code of 1986, as added by this section) 

paid or accrued in taxable years beginning after December 31, 

2017. 

PART III—OTHER PROVISIONS 

SEC. 14501. 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 qualifying insurance corporation (as defined 

in subsection (f)),’’. 

(b) QUALIFYING INSURANCE CORPORATION DEFINED.—Section 

1297 is amended by adding at the end the following new subsection: 

‘‘(f) QUALIFYING INSURANCE CORPORATION.—For purposes of 

subsection (b)(2)(B)— 

‘‘(1) IN GENERAL.—The term ‘qualifying insurance corporation’ means, with respect to any taxable year, a foreign corporation— 

‘‘(A) which would be subject to tax under subchapter 

L if such corporation were a domestic corporation, and 

‘‘(B) the applicable insurance liabilities of which constitute more than 25 percent of its total assets, determined 

on the basis of such liabilities and assets as reported on 

the corporation’s applicable financial statement for the last 

year ending with or within the taxable year. 

‘‘(2) ALTERNATIVE FACTS AND CIRCUMSTANCES TEST FOR CERTAIN CORPORATIONS.—If a corporation fails to qualify as a qualified insurance corporation under paragraph (1) solely because 

the percentage determined under paragraph (1)(B) is 25 percent 

or less, a United States person that owns stock in such corporation may elect to treat such stock as stock of a qualifying 

insurance corporation if— 

‘‘(A) the percentage so determined for the corporation 

is at least 10 percent, and 

‘‘(B) under regulations provided by the Secretary, based 

on the applicable facts and circumstances— 

‘‘(i) the corporation is predominantly engaged in 

an insurance business, and 

‘‘(ii) such failure is due solely to runoff-related 

or rating-related circumstances involving such insurance business. 

‘‘(3) APPLICABLE INSURANCE LIABILITIES.—For purposes of 

this subsection— 

‘‘(A) IN GENERAL.—The term ‘applicable insurance 

liabilities’ means, with respect to any life or property and 

casualty insurance business— 

‘‘(i) loss and loss adjustment expenses, and 

26 USC 1297. 

26 USC 26 note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2235 

‘‘(ii) reserves (other than deficiency, contingency, 

or unearned premium reserves) for life and health 

insurance risks and life and health insurance claims 

with respect to contracts providing coverage for mortality or morbidity risks. 

‘‘(B) LIMITATIONS ON AMOUNT OF LIABILITIES.—Any 

amount determined under clause (i) or (ii) of subparagraph 

(A) shall not exceed the lesser of such amount— 

‘‘(i) as reported to the applicable insurance regulatory body in the applicable financial statement 

described in paragraph (4)(A) (or, if less, the amount 

required by applicable law or regulation), or 

‘‘(ii) as determined under regulations prescribed 

by the Secretary. 

‘‘(4) OTHER DEFINITIONS AND RULES.—For purposes of this 

subsection— 

‘‘(A) 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 applicable insurance regulatory body, but only if there is no statement which 

meets the requirements of clause (i) or (ii). 

‘‘(B) APPLICABLE INSURANCE REGULATORY BODY.—The 

term ‘applicable insurance regulatory body’ means, with 

respect to any insurance business, the entity established 

by law to license, authorize, or regulate such business 

and to which the statement described in subparagraph 

(A) is provided.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 14502. REPEAL OF FAIR MARKET VALUE METHOD OF INTEREST 

EXPENSE APPORTIONMENT. 

(a) IN GENERAL.—Paragraph (2) of section 864(e) is amended 

to read as follows: 

‘‘(2) GROSS INCOME AND FAIR MARKET VALUE METHODS MAY

NOT BE USED FOR INTEREST.—All allocations and apportionments of interest expense shall be determined using the 

adjusted bases of assets rather than on the basis of the fair 

market value of the assets or gross income.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall apply to taxable years beginning after December 31, 2017. 

TITLE II 

SEC. 20001. OIL AND GAS PROGRAM. 

(a) DEFINITIONS.—In this section: 

(1) COASTAL PLAIN.—The term ‘‘Coastal Plain’’ means the 

area identified as the 1002 Area on the plates prepared by 

26 USC 3143 

note. 

26 USC 864 note. 

26 USC 864. 

26 USC 1297 

note. 


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131 STAT. 2236 PUBLIC LAW 115–97—DEC. 22, 2017 

the United States Geological Survey entitled ‘‘ANWR Map – 

Plate 1’’ and ‘‘ANWR Map – Plate 2’’, dated October 24, 2017, 

and on file with the United States Geological Survey and the 

Office of the Solicitor of the Department of the Interior. 

(2) SECRETARY.—The term ‘‘Secretary’’ means the Secretary 

of the Interior, acting through the Bureau of Land Management. 

(b) OIL AND GAS PROGRAM.— 

(1) IN GENERAL.—Section 1003 of the Alaska National 

Interest Lands Conservation Act (16 U.S.C. 3143) shall not 

apply to the Coastal Plain. 

(2) ESTABLISHMENT.— 

(A) IN GENERAL.—The Secretary shall establish and 

administer a competitive oil and gas program for the 

leasing, development, production, and transportation of oil 

and gas in and from the Coastal Plain. 

(B) PURPOSES.—Section 303(2)(B) of the Alaska 

National Interest Lands Conservation Act (Public Law 96– 

487; 94 Stat. 2390) is amended— 

(i) in clause (iii), by striking ‘‘and’’ at the end; 

(ii) in clause (iv), by striking the period at the 

end and inserting ‘‘; and’’; and 

(iii) by adding at the end the following: 

‘‘(v) to provide for an oil and gas program on 

the Coastal Plain.’’. 

(3) MANAGEMENT.—Except as otherwise provided in this 

section, the Secretary shall manage the oil and gas program 

on the Coastal Plain in a manner similar to the administration 

of lease sales under the Naval Petroleum Reserves Production 

Act of 1976 (42 U.S.C. 6501 et seq.) (including regulations). 

(4) ROYALTIES.—Notwithstanding the Mineral Leasing Act 

(30 U.S.C. 181 et seq.), the royalty rate for leases issued pursuant to this section shall be 16.67 percent. 

(5) RECEIPTS.—Notwithstanding the Mineral Leasing Act 

(30 U.S.C. 181 et seq.), of the amount of adjusted bonus, rental, 

and royalty receipts derived from the oil and gas program 

and operations on Federal land authorized under this section— 

(A) 50 percent shall be paid to the State of Alaska; 

and 

(B) the balance shall be deposited into the Treasury 

as miscellaneous receipts. 

(c) 2 LEASE SALES WITHIN 10 YEARS.— 

(1) REQUIREMENT.— 

(A) IN GENERAL.—Subject to subparagraph (B), the Secretary shall conduct not fewer than 2 lease sales areawide under the oil and gas program under this section 

by not later than 10 years after the date of enactment 

of this Act. 

(B) SALE ACREAGES; SCHEDULE.— 

(i) ACREAGES.—The Secretary shall offer for lease 

under the oil and gas program under this section— 

(I) not fewer than 400,000 acres area-wide 

in each lease sale; and 

(II) those areas that have the highest potential 

for the discovery of hydrocarbons. 

(ii) SCHEDULE.—The Secretary shall offer— 

16 USC 668dd 

note. 


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PUBLIC LAW 115–97—DEC. 22, 2017 131 STAT. 2237 

(I) the initial lease sale under the oil and 

gas program under this section not later than 4 

years after the date of enactment of this Act; and 

(II) a second lease sale under the oil and gas 

program under this section not later than 7 years 

after the date of enactment of this Act. 

(2) RIGHTS-OF-WAY.—The Secretary shall issue any rightsof-way or easements across the Coastal Plain for the exploration, development, production, or transportation necessary 

to carry out this section. 

(3) SURFACE DEVELOPMENT.—In administering this section, 

the Secretary shall authorize up to 2,000 surface acres of Federal land on the Coastal Plain to be covered by production 

and support facilities (including airstrips and any area covered 

by gravel berms or piers for support of pipelines) during the 

term of the leases under the oil and gas program under this 

section. 

SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED 

OUTER CONTINENTAL SHELF REVENUES. 

Section 105(f)(1) of the Gulf of Mexico Energy Security Act 

of 2006 (43 U.S.C. 1331 note; Public Law 109–432) is amended 

by striking ‘‘exceed $500,000,000 for each of fiscal years 2016 

through 2055.’’ and inserting the following: ‘‘exceed— 

‘‘(A) $500,000,000 for each of fiscal years 2016 through 

2019; 

‘‘(B) $650,000,000 for each of fiscal years 2020 and 

2021; and 

‘‘(C) $500,000,000 for each of fiscal years 2022 through 

2055.’’. 

SEC. 20003. STRATEGIC PETROLEUM RESERVE DRAWDOWN AND SALE. 

(a) DRAWDOWN AND SALE.— 

(1) IN GENERAL.—Notwithstanding section 161 of the 

Energy Policy and Conservation Act (42 U.S.C. 6241), except 

as provided in subsections (b) and (c), the Secretary of Energy 

shall draw down and sell from the Strategic Petroleum Reserve 

7,000,000 barrels of crude oil during the period of fiscal years 

2026 through 2027. 

(2) DEPOSIT OF AMOUNTS RECEIVED FROM SALE.—Amounts 

received from a sale under paragraph (1) shall be deposited 

in the general fund of the Treasury during the fiscal year 

in which the sale occurs. 

(b) EMERGENCY PROTECTION.—The Secretary of Energy shall 

not draw down and sell crude oil under subsection (a) in a quantity 

that would limit the authority to sell petroleum products under 

subsection (h) of section 161 of the Energy Policy and Conservation 

Act (42 U.S.C. 6241) in the full quantity authorized by that subsection. 

42 USC 6241 

note. 


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131 STAT. 2238 PUBLIC LAW 115–97—DEC. 22, 2017 

LEGISLATIVE HISTORY—H.R. 1 (S. 1): 

HOUSE REPORTS: Nos. 115–409 (Comm. on Ways and Means) and 115–466 

(Comm. of Conference). 

CONGRESSIONAL RECORD, Vol. 163 (2017): 

Nov. 15, 16, considered and passed House. 

Nov. 29–Dec. 1, considered and passed Senate, amended. 

Dec. 19, House agreed to conference report. Senate sustained point of order 

against conference report; receded from its amendment and concurred with 

an amendment. 

Dec. 20, House concurred in Senate amendment. 

DAILY COMPILATION OF PRESIDENTIAL DOCUMENTS (2017): 

Dec. 22, Presidential remarks. 

Æ 

(c) LIMITATION.—The Secretary of Energy shall not drawdown 

or conduct sales of crude oil under subsection (a) after the date 

on which a total of $600,000,000 has been deposited in the general 

fund of the Treasury from sales authorized under that subsection. 

Approved December 22, 2017. 


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