II 

Calendar No. 269 

115TH CONGRESS 

1ST SESSION S. 1 

To provide for reconciliation pursuant to title II of the concurrent resolution 

on the budget for fiscal year 2018. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 28, 2017 

Mr. ENZI, from the Committee on the Budget, reported the following original 

bill; which was read twice and placed on the calendar 

A BILL 

To provide for reconciliation pursuant to title II of the 

concurrent resolution on the budget for fiscal year 2018. 

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

3 TITLE I 

4 SEC. 11000. SHORT TITLE, ETC. 

5 (a) SHORT TITLE.—This title may be cited as the 

6 ‘‘Tax Cuts and Jobs Act’’. 

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this title an amend9 ment or repeal is expressed in terms of an amendment 


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

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986. 

4 Subtitle A—Individual Tax Reform 

5 PART I—TAX RATE REFORM 

6 SEC. 11001. MODIFICATION OF RATES. 

7 (a) IN GENERAL.—Section 1 is amended by adding 

8 at the end the following new subsection: 

9 ‘‘(j) MODIFICATIONS FOR TAXABLE YEARS 2018 

10 THROUGH 2025.— 

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

12 year beginning after December 31, 2017, and before 

13 January 1, 2026— 

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

15 ‘‘(B) this section (other than subsection 

16 (i)) shall be applied as provided in paragraphs 

17 (2) through (7). 

18 ‘‘(2) RATE TABLES.— 

19 ‘‘(A) MARRIED INDIVIDUALS FILING JOINT

20 RETURNS AND SURVIVING SPOUSES.—The fol21 lowing table shall be applied in lieu of the table 

22 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 

$140,000.

$8,907, plus 22% of the excess over 

$77,400. 


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‘‘If taxable income is: The tax is: 

Over $140,000 but not over 

$320,000.

$22,679, plus 24% of the excess over 

$140,000. 

Over $320,000 but not over 

$400,000.

$65,879, plus 32% of the excess over 

$320,000. 

Over $400,000 but not over 

$1,000,000.

$91,479, plus 35% of the excess over 

$400,000. 

Over $1,000,000 ............................ $301,479 plus 38.5% of the excess 

over $1,000,000. 

1 ‘‘(B) HEADS OF HOUSEHOLDS.—The fol2 lowing table shall be applied in lieu of the table 

3 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 

$70,000.

$5,944, plus 22% of the excess over 

$51,800. 

Over $70,000 but not over 

$160,000.

$9,948, plus 24% of the excess over 

$70,000. 

Over $160,000 but not over 

$200,000.

$31,548, plus 32% of the excess over 

$160,000. 

Over $200,000 but not over 

$500,000.

$44,348, plus 35% of the excess over 

$200,000. 

Over $500,000 ............................... $149,348, plus 38.5% of the excess 

over $500,000. 

4 ‘‘(C) UNMARRIED INDIVIDUALS OTHER

5 THAN SURVIVING SPOUSES AND HEADS OF

6 HOUSEHOLDS.—The following table shall be ap7 plied in lieu of the table contained in subsection 

8 (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 

$70,000.

$4,453.50, plus 22% of the excess 

over $38,700. 

Over $70,000 but not over 

$160,000.

$11,339.50, plus 24% of the excess 

over $70,000. 

Over $160,000 but not over 

$200,000.

$32,939.50, plus 32% of the excess 

over $160,000. 

Over $200,000 but not over 

$500,000.

$45,739.50, plus 35% of the excess 

over $200,000. 


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‘‘If taxable income is: The tax is: 

Over $500,000 ............................... $150,739.50, plus 38.5% of the excess over $500,000. 

1 ‘‘(D) MARRIED INDIVIDUALS FILING SEPA2 RATE RETURNS.—The following table shall be 

3 applied in lieu of the table contained in sub4 section (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 

$70,000.

$4,453.50, plus 22% of the excess 

over $38,700. 

Over $70,000 but not over 

$160,000.

$11,339.50, plus 24% of the excess 

over $70,000. 

Over $160,000 but not over 

$200,000.

$32,939.50, plus 32% of the excess 

over $160,000. 

Over $200,000 but not over 

$500,000.

$45,739.50, plus 35% of the excess 

over $200,000. 

Over $500,000 ............................... $150,739.50, plus 38.5% of the excess over $500,000. 

5 ‘‘(E) ESTATES AND TRUSTS.—The fol6 lowing table shall be applied in lieu of the table 

7 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 38.5% of the excess 

over $12,500. 

8 ‘‘(F) REFERENCES TO RATE TABLES.— 

9 Any reference in this title to a rate of tax under 

10 subsection (c) shall be treated as a reference to 

11 the corresponding rate bracket under subpara12 graph (C) of this paragraph, except that the 

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1 est rate of tax applicable under subsection (c) 

2 shall be treated as a reference to the fourth 

3 lowest rate of tax under subparagraph (C). 

4 ‘‘(3) ADJUSTMENTS, ELIMINATION OF MAR5 RIAGE PENALTY; ETC.— 

6 ‘‘(A) NO ADJUSTMENT IN 2018.—The ta7 bles contained in paragraph (2) shall apply 

8 without adjustment for taxable years beginning 

9 after December 31, 2017, and before January 

10 1, 2019. 

11 ‘‘(B) SUBSEQUENT YEARS.—For taxable 

12 years beginning after December 31, 2018, the 

13 Secretary shall prescribe tables which shall 

14 apply in lieu of the tables contained in para15 graph (2) in the same manner as under para16 graphs (1) and (2) of subsection (f), except that 

17 in prescribing such tables— 

18 ‘‘(i) subsection (f)(3) shall be applied 

19 by substituting ‘calendar year 2017’ for 

20 ‘calendar year 2016’ in subparagraph 

21 (A)(ii) thereof, and 

22 ‘‘(ii) subsection (f)(7) shall not apply 

23 and— 

24 ‘‘(I) the maximum taxable in25 come in each of the rate brackets in 


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1 the table contained in paragraph 

2 (2)(A) (and the minimum taxable in3 come in the next higher taxable in4 come bracket with respect to each 

5 such bracket in such table) shall be 

6 200 percent of the maximum taxable 

7 income in the corresponding rate 

8 bracket in the table contained in para9 graph (2)(C) (after any other adjust10 ment under paragraph (3)), and 

11 ‘‘(II) the comparable taxable in12 come amounts in the table contained 

in paragraph (2)(D) shall be 1 13 ⁄2 of the 

14 amounts determined under subpara15 graph (A). 

16 ‘‘(4) SPECIAL RULES FOR CERTAIN CHILDREN

17 WITH UNEARNED INCOME.— 

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

19 to whom subsection (g) applies for the taxable 

20 year, the rules of subparagraphs (B) and (C) 

21 shall apply in lieu of the rule under subsection 

22 (g)(1). 

23 ‘‘(B) MODIFICATIONS TO APPLICABLE

24 RATE BRACKETS.—In determining the amount 

25 of tax imposed by this section for the taxable 


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1 year on a child described in subparagraph (A), 

2 the income tax table otherwise applicable under 

3 this subsection to the child shall be applied with 

4 the following modifications: 

5 ‘‘(i) 24-PERCENT BRACKET.—The 

6 maximum taxable income which is taxed at 

7 a rate below 24 percent shall not be more 

8 than the earned taxable income of such 

9 child. 

10 ‘‘(ii) 35-PERCENT BRACKET.—The 

11 maximum taxable income which is taxed at 

12 a rate below 35 percent shall not be more 

13 than the sum of— 

14 ‘‘(I) the earned taxable income of 

15 such child, plus 

16 ‘‘(II) the minimum taxable in17 come for the 35-percent bracket in the 

18 table under paragraph (2)(E) (as ad19 justed under paragraph (3)) for the 

20 taxable year. 

21 ‘‘(iii) 38.5-PERCENT BRACKET.—The 

22 maximum taxable income which is taxed at 

23 a rate below 38.5 percent shall not be 

24 more than the sum of— 


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1 ‘‘(I) the earned taxable income of 

2 such child, plus 

3 ‘‘(II) the minimum taxable in4 come for the 38.5-percent bracket in 

5 the table under paragraph (2)(E) (as 

6 adjusted under paragraph (3)) for the 

7 taxable year. 

8 ‘‘(C) COORDINATION WITH CAPITAL GAINS

9 RATES.—For purposes of applying section 1(h) 

10 (after the modifications under paragraph (5))— 

11 ‘‘(i) the maximum zero rate amount 

12 shall not be more than the sum of— 

13 ‘‘(I) the earned taxable income of 

14 such child, plus 

15 ‘‘(II) the amount in effect under 

16 paragraph (5)(B)(i)(IV) for the tax17 able year, and 

18 ‘‘(ii) the maximum 15-percent rate 

19 amount shall not be more than the sum 

20 of— 

21 ‘‘(I) the earned taxable income of 

22 such child, plus 

23 ‘‘(II) the amount in effect under 

24 paragraph (5)(B)(ii)(IV) for the tax25 able year. 


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1 ‘‘(D) EARNED TAXABLE INCOME.—For 

2 purposes of this paragraph, the term ‘earned 

3 taxable income’ means, with respect to any 

4 child for any taxable year, the taxable income 

5 of such child reduced (but not below zero) by 

6 the net unearned income (as defined in sub7 section (g)(4)) of such child. 

8 ‘‘(5) APPLICATION OF CURRENT INCOME TAX

9 BRACKETS TO CAPITAL GAINS BRACKETS.— 

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

11 be applied— 

12 ‘‘(i) by substituting ‘below the max13 imum zero rate amount’ for ‘which would 

14 (without regard to this paragraph) be 

15 taxed at a rate below 25 percent’ in sub16 paragraph (B)(i), and 

17 ‘‘(ii) by substituting ‘below the max18 imum 15-percent rate amount’ for ‘which 

19 would (without regard to this paragraph) 

20 be taxed at a rate below 39.6 percent’ in 

21 subparagraph (C)(ii)(I). 

22 ‘‘(B) MAXIMUM AMOUNTS DEFINED.—For 

23 purposes of applying section 1(h) with the 

24 modifications described in subparagraph (A)— 


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1 ‘‘(i) MAXIMUM ZERO RATE

2 AMOUNT.—The maximum zero rate 

3 amount shall be— 

4 ‘‘(I) in the case of a joint return 

or surviving spouse, $77,200 (1 5 ⁄2 such 

6 amount in the case of a married indi7 vidual filing a separate return), 

8 ‘‘(II) in the case of an individual 

9 who is a head of household (as de10 fined in section 2(b)), $51,700, 

11 ‘‘(III) in the case of any other in12 dividual (other than an estate or 

trust), an amount equal to 1 13 ⁄2 of the 

14 amount in effect for the taxable year 

15 under clause (i), and 

16 ‘‘(IV) in the case of an estate or 

17 trust, $2,600. 

18 ‘‘(ii) MAXIMUM 15-PERCENT RATE

19 AMOUNT.—The maximum 15-percent rate 

20 amount shall be— 

21 ‘‘(I) in the case of a joint return 

or surviving spouse, $479,000 (1 22 ⁄2

23 such amount in the case of a married 

24 individual filing a separate return), 


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1 ‘‘(II) in the case of an individual 

2 who is the head of a household (as de3 fined in section 2(b)), $452,400, 

4 ‘‘(III) in the case of any other in5 dividual (other than an estate or 

6 trust), $425,800, and 

7 ‘‘(IV) in the case of an estate or 

8 trust, $12,700. 

9 ‘‘(C) INFLATION ADJUSTMENT.—In the 

10 case of any taxable year beginning after 2018, 

11 each of the dollar amounts in clauses (i) and 

12 (ii) of subparagraph (B) shall be increased by 

13 an amount equal to— 

14 ‘‘(i) such dollar amount, multiplied by 

15 ‘‘(ii) the cost-of-living adjustment de16 termined under subsection (f)(3) for the 

17 calendar year in which the taxable year be18 gins, determined by substituting ‘calendar 

19 year 2017’ for ‘calendar year 2016’ in sub20 paragraph (A)(ii) thereof. 

21 ‘‘(6) SECTION 15 NOT TO APPLY.—Section 15 

22 shall not apply to any change in a rate of tax by rea23 son of this subsection.’’. 

24 (b) DUE DILIGENCE TAX PREPARER REQUIREMENT

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1 TUS.—Subsection (g) of section 6695 is amended to read 

2 as follows: 

3 ‘‘(g) FAILURE TO BE DILIGENT IN DETERMINING

4 ELIGIBILITY FOR CERTAIN TAX BENEFITS.—Any person 

5 who is a tax return preparer with respect to any return 

6 or claim for refund who fails to comply with due diligence 

7 requirements imposed by the Secretary by regulations with 

8 respect to determining— 

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

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

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

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

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

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2017. 

17 SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED 

18 CPI. 

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

20 amended by striking paragraph (3) and by inserting after 

21 paragraph (2) the following new paragraph: 

22 ‘‘(3) COST-OF-LIVING ADJUSTMENT.—For pur23 poses of this subsection— 


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1 ‘‘(A) IN GENERAL.—The cost-of-living ad2 justment for any calendar year is the percent3 age (if any) by which— 

4 ‘‘(i) the C-CPI-U for the preceding 

5 calendar year, exceeds 

6 ‘‘(ii) the CPI for calendar year 2016, 

7 multiplied by the amount determined 

8 under subparagraph (B). 

9 ‘‘(B) AMOUNT DETERMINED.—The 

10 amount determined under this clause is the 

11 amount obtained by dividing— 

12 ‘‘(i) the C-CPI-U for calendar year 

13 2016, by 

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

15 ‘‘(C) SPECIAL RULE FOR ADJUSTMENTS

16 WITH A BASE YEAR AFTER 2016.—For purposes 

17 of any provision of this title which provides for 

18 the substitution of a year after 2016 for ‘2016’ 

19 in subparagraph (A)(ii), subparagraph (A) shall 

20 be applied by substituting ‘the C-CPI-U for cal21 endar year 2016’ for ‘the CPI for calendar year 

22 2016’ and all that follows in clause (ii) there23 of.’’. 

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

25 by striking paragraph (7), by redesignating paragraph (6) 


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1 as paragraph (7), and by inserting after paragraph (5) 

2 the following new paragraph: 

3 ‘‘(6) C-CPI-U.—For purposes of this sub4 section— 

5 ‘‘(A) IN GENERAL.—The term ‘C-CPI-U’ 

6 means the Chained Consumer Price Index for 

7 All Urban Consumers (as published by the Bu8 reau of Labor Statistics of the Department of 

9 Labor). The values of the Chained Consumer 

10 Price Index for All Urban Consumers taken 

11 into account for purposes of determining the 

12 cost-of-living adjustment for any calendar year 

13 under this subsection shall be the latest values 

14 so published as of the date on which such Bu15 reau publishes the initial value of the Chained 

16 Consumer Price Index for All Urban Con17 sumers for the month of August for the pre18 ceding calendar year. 

19 ‘‘(B) DETERMINATION FOR CALENDAR

20 YEAR.—The C-CPI-U for any calendar year is 

21 the average of the C-CPI-U as of the close of 

22 the 12-month period ending on August 31 of 

23 such calendar year.’’. 


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1 (c) APPLICATION TO PERMANENT TAX TABLES.— 

2 Section 1(f)(2)(A) is amended by inserting ‘‘, determined 

3 by substituting ‘1992’ for ‘2016’ in paragraph (3)(A)(ii)’’. 

4 (d) APPLICATION TO OTHER INTERNAL REVENUE

5 CODE OF 1986 PROVISIONS.— 

6 (1) The following sections are each amended by 

7 striking ‘‘for ‘calendar year 1992’ in subparagraph 

8 (B)’’ and inserting ‘‘for ‘calendar year 2016’ in sub9 paragraph (A)(ii)’’: 

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

11 (B) Paragraphs (1)(A)(ii) and (2)(A)(ii) of 

12 section 25A(h). 

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

14 (D) Subsection (b)(2)(B)(ii)(II), and 

15 clauses (i) and (ii) of subsection (j)(1)(B), of 

16 section 32. 

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

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

19 (G) Subsections (e)(3)(D)(ii) and 

20 (h)(3)(H)(i)(II) of section 42. 

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

22 (I) Section 62(d)(3)(B). 

23 (J) Section 125(i)(2)(B). 

24 (K) Section 135(b)(2)(B)(ii). 

25 (L) Section 137(f)(2). 


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1 (M) Section 146(d)(2)(B). 

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

3 (O) Section 179(b)(6)(A)(ii). 

4 (P) Subsections (b)(5)(C)(i)(II) and 

5 (g)(8)(B) of section 219. 

6 (Q) Section 220(g)(2). 

7 (R) Section 221(f)(1)(B). 

8 (S) Section 223(g)(1)(B). 

9 (T) Section 408A(c)(3)(D)(ii). 

10 (U) Section 430(c)(7)(D)(vii)(II). 

11 (V) Section 512(d)(2)(B). 

12 (W) Section 513(h)(2)(C)(ii). 

13 (X) Section 831(b)(2)(D)(ii). 

14 (Y) Section 877A(a)(3)(B)(i)(II). 

15 (Z) Section 2010(c)(3)(B)(ii). 

16 (AA) Section 2032A(a)(3)(B). 

17 (BB) Section 2503(b)(2)(B). 

18 (CC) Section 4261(e)(4)(A)(ii). 

19 (DD) Section 5000A(c)(3)(D)(ii). 

20 (EE) Section 6323(i)(4)(B). 

21 (FF) Section 6334(g)(1)(B). 

22 (GG) Section 6601(j)(3)(B). 

23 (HH) Section 6651(i)(1). 

24 (II) Section 6652(c)(7)(A). 

25 (JJ) Section 6695(h)(1). 


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1 (KK) Section 6698(e)(1). 

2 (LL) Section 6699(e)(1). 

3 (MM) Section 6721(f)(1). 

4 (NN) Section 6722(f)(1). 

5 (OO) Section 7345(f)(2). 

6 (PP) Section 7430(c)(1). 

7 (QQ) Section 9831(d)(2)(D)(ii)(II). 

8 (2) Section 41(e)(5)(C)(ii) is amended— 

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

10 ‘‘1(f)(3)(A)(ii)’’, and 

11 (B) by striking ‘‘1992’’ and inserting 

12 ‘‘2016’’. 

13 (3) Section 42(h)(6)(G) is amended— 

14 (A) by striking ‘‘for ‘calendar year 1987’ ’’ 

15 in clause (i)(II) and inserting ‘‘for ‘calendar 

16 year 2016’ in subparagraph (A)(ii) thereof’’, 

17 and 

18 (B) by striking ‘‘if the CPI for any cal19 endar year’’ and all that follows in clause (ii) 

20 and inserting ‘‘if the C-CPI-U for any calendar 

21 year (as defined in section 1(f)(6)) exceeds the 

22 C-CPI-U for the preceding calendar year by 

23 more than 5 percent, the C-CPI-U for the base 

24 calendar year shall be increased such that such 

25 excess shall never be taken into account under 


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1 clause (i). In the case of a base calendar year 

2 before 2017, the C-CPI-U for such year shall 

3 be determined by multiplying the CPI for such 

4 year by the amount determined under section 

5 1(f)(3)(B).’’. 

6 (4) Section 132(f)(6)(A)(ii) is amended by 

7 striking ‘‘for ‘calendar year 1992’ ’’ and inserting 

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

9 thereof’’. 

10 (5) Section 162(o)(3) is amended by striking 

11 ‘‘adjusted for changes in the Consumer Price Index 

12 (as defined in section 1(f)(5)) since 1991’’ and in13 serting ‘‘adjusted by increasing any such amount 

14 under the 1991 agreement by an amount equal to— 

15 ‘‘(A) such amount, multiplied by 

16 ‘‘(B) the cost-of-living adjustment deter17 mined under section 1(f)(3) for the calendar 

18 year in which the taxable year begins, by sub19 stituting ‘calendar year 1990’ for ‘calendar year 

20 2016’ in subparagraph (A)(ii) thereof’’. 

21 (6) So much of clause (ii) of section 

22 213(d)(10)(B) as precedes the last sentence is 

23 amended to read as follows: 

24 ‘‘(ii) MEDICAL CARE COST ADJUST25 MENT.—For purposes of clause (i), the 


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1 medical care cost adjustment for any cal2 endar year is the percentage (if any) by 

3 which— 

4 ‘‘(I) the medical care component 

5 of the C-CPI-U (as defined in section 

6 1(f)(6)) for August of the preceding 

7 calendar year, exceeds 

8 ‘‘(II) such component of the CPI 

9 (as defined in section 1(f)(4)) for Au10 gust of 1996, multiplied by the 

11 amount determined under section 

12 1(f)(3)(B).’’. 

13 (7) Section 877(a)(2) is amended by striking 

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

15 ‘2016’ in subparagraph (A)(ii)’’. 

16 (8) Section 911(b)(2)(D)(ii)(II) is amended by 

17 striking ‘‘for ‘1992’ in subparagraph (B)’’ and in18 serting ‘‘for ‘2016’ in subparagraph (A)(ii)’’. 

19 (9) Paragraph (2) of section 1274A(d) is 

20 amended to read as follows: 

21 ‘‘(2) ADJUSTMENT FOR INFLATION.—In the 

22 case of any debt instrument arising out of a sale or 

23 exchange during any calendar year after 1989, each 

24 dollar amount contained in the preceding provisions 


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1 of this section shall be increased by an amount equal 

2 to— 

3 ‘‘(A) such amount, multiplied by 

4 ‘‘(B) the cost-of-living adjustment deter5 mined under section 1(f)(3) for the calendar 

6 year in which the taxable year begins, by sub7 stituting ‘calendar year 1988’ for ‘calendar year 

8 2016’ in subparagraph (A)(ii) thereof. 

9 Any increase under the preceding sentence shall be 

10 rounded to the nearest multiple of $100 (or, if such 

11 increase is a multiple of $50, such increase shall be 

12 increased to the nearest multiple of $100).’’. 

13 (10) Section 4161(b)(2)(C)(i)(II) is amended by 

14 striking ‘‘for ‘1992’ in subparagraph (B)’’ and in15 serting ‘‘for ‘2016’ in subparagraph (A)(ii)’’. 

16 (11) Section 4980I(b)(3)(C)(v)(II) is amended 

17 by striking ‘‘for ‘1992’ in subparagraph (B)’’ and 

18 inserting ‘‘for ‘2016’ in subparagraph (A)(ii)’’. 

19 (12) Section 6039F(d) is amended by striking 

20 ‘‘subparagraph (B) thereof shall be applied by sub21 stituting ‘1995’ for ‘1992’ ’’ and inserting ‘‘subpara22 graph (A)(ii) thereof shall be applied by substituting 

23 ‘1995’ for ‘2016’ ’’. 

24 (13) Section 7872(g)(5) is amended to read as 

25 follows: 


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1 ‘‘(5) ADJUSTMENT OF LIMIT FOR INFLATION.— 

2 In the case of any loan made during any calendar 

3 year after 1986, the dollar amount in paragraph (2) 

4 shall be increased by an amount equal to— 

5 ‘‘(A) such amount, multiplied by 

6 ‘‘(B) the cost-of-living adjustment deter7 mined under section 1(f)(3) for the calendar 

8 year in which the taxable year begins, by sub9 stituting ‘calendar year 1985’ for ‘calendar year 

10 2016’ in subparagraph (A)(ii) thereof. 

11 Any increase under the preceding sentence shall be 

12 rounded to the nearest multiple of $100 (or, if such 

13 increase is a multiple of $50, such increase shall be 

14 increased to the nearest multiple of $100).’’. 

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2017. 

18 PART II—DEDUCTION FOR QUALIFIED BUSINESS 

19 INCOME OF PASS-THRU ENTITIES 

20 SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS IN21 COME. 

22 (a) IN GENERAL.—Part VI of subchapter B of chap23 ter 1 is amended by adding at the end the following new 

24 section: 


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1 ‘‘SEC. 199A. QUALIFIED BUSINESS INCOME. 

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

3 than a corporation, there shall be allowed as a deduction 

4 for any taxable year an amount equal to the lesser of— 

5 ‘‘(1) the combined qualified business income 

6 amount of the taxpayer, or 

7 ‘‘(2) an amount equal to 17.4 percent of the ex8 cess (if any) of— 

9 ‘‘(A) the taxable income of the taxpayer 

10 for the taxable year, over 

11 ‘‘(B) any net capital gain (as defined in 

12 section 1(h)) of the taxpayer for the taxable 

13 year. 

14 ‘‘(b) COMBINED QUALIFIED BUSINESS INCOME

15 AMOUNT.—For purposes of this section— 

16 ‘‘(1) IN GENERAL.—The term ‘combined quali17 fied business income amount’ means, with respect to 

18 any taxable year, an amount equal to— 

19 ‘‘(A) the sum of the amounts determined 

20 under paragraph (2) for each qualified trade or 

21 business carried on by the taxpayer, plus 

22 ‘‘(B) 17.4 percent of the aggregate amount 

23 of the qualified REIT dividends and qualified 

24 cooperative dividends of the taxpayer for the 

25 taxable year. 


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1 ‘‘(2) DETERMINATION OF DEDUCTIBLE

2 AMOUNT FOR EACH TRADE OR BUSINESS.—The 

3 amount determined under this paragraph with re4 spect to any qualified trade or business is the lesser 

5 of— 

6 ‘‘(A) 17.4 percent of the taxpayer’s quali7 fied business income with respect to the quali8 fied trade or business, or 

9 ‘‘(B) 50 percent of the W-2 wages with re10 spect to the qualified trade or business. 

11 ‘‘(3) MODIFICATIONS TO THE WAGE LIMIT

12 BASED ON TAXABLE INCOME.— 

13 ‘‘(A) EXCEPTION FROM WAGE LIMIT.—In 

14 the case of any taxpayer whose taxable income 

15 for the taxable year does not exceed the thresh16 old amount, paragraph (2) shall be applied 

17 without regard to subparagraph (B). 

18 ‘‘(B) PHASE-IN OF LIMIT FOR CERTAIN

19 TAXPAYERS.— 

20 ‘‘(i) IN GENERAL.—If— 

21 ‘‘(I) the taxable income of a tax22 payer for any taxable year exceeds the 

23 threshold amount, but does not exceed 

24 the sum of the threshold amount plus 


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1 $50,000 ($100,000 in the case of a 

2 joint return), and 

3 ‘‘(II) the amount determined 

4 under paragraph (2)(B) (determined 

5 without regard to this subparagraph) 

6 with respect to any qualified trade or 

7 business carried on by the taxpayer is 

8 less than the amount determined 

9 under paragraph (2)(A) with respect 

10 such trade or business, 

11 then paragraph (2) shall be applied with 

12 respect to such trade or business without 

13 regard to subparagraph (B) thereof and by 

14 reducing the amount determined under 

15 subparagraph (A) thereof by the amount 

16 determined under clause (ii). 

17 ‘‘(ii) AMOUNT OF REDUCTION.—The 

18 amount determined under this subpara19 graph is the amount which bears the same 

20 ratio to the excess amount as— 

21 ‘‘(I) the amount by which the 

22 taxpayer’s taxable income for the tax23 able year exceeds the threshold 

24 amount, bears to 


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1 ‘‘(II) $50,000 ($100,000 in the 

2 case of a joint return). 

3 ‘‘(iii) EXCESS AMOUNT.—For pur4 poses of clause (ii), the excess amount is 

5 the excess of— 

6 ‘‘(I) the amount determined 

7 under paragraph (2)(A) (determined 

8 without regard to this paragraph), 

9 over 

10 ‘‘(II) the amount determined 

11 under paragraph (2)(B) (determined 

12 without regard to this paragraph). 

13 ‘‘(4) WAGES, ETC.— 

14 ‘‘(A) IN GENERAL.—The term ‘W-2 wages’ 

15 means, with respect to any person for any tax16 able year of such person, the amounts described 

17 in paragraphs (3) and (8) of section 6051(a) 

18 paid by such person with respect to employment 

19 of employees by such person during the cal20 endar year ending during such taxable year. 

21 ‘‘(B) LIMITATION TO WAGES ATTRIB22 UTABLE TO QUALIFIED BUSINESS INCOME.— 

23 Such term shall not include any amount which 

24 is not properly allocable to qualified business 

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


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1 ‘‘(C) RETURN REQUIREMENT.—Such term 

2 shall not include any amount which is not prop3 erly included in a return filed with the Social 

4 Security Administration on or before the 60th 

5 day after the due date (including extensions) 

6 for such return. 

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

8 TAXABLE YEARS.—The Secretary shall provide for 

9 the application of this subsection in cases of a short 

10 taxable year or where the taxpayer acquires, or dis11 poses of, the major portion of a trade or business or 

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

13 business during the taxable year. 

14 ‘‘(c) QUALIFIED BUSINESS INCOME.—For purposes 

15 of this section— 

16 ‘‘(1) IN GENERAL.—The term ‘qualified busi17 ness income’ means, for any taxable year, the net 

18 amount of qualified items of income, gain, deduc19 tion, and loss with respect to any qualified trade or 

20 business of the taxpayer. 

21 ‘‘(2) CARRYOVER OF LOSSES.—If the net 

22 amount of qualified income, gain, deduction, and 

23 loss with respect to qualified trade or businesses of 

24 the taxpayer amount for any taxable year is less 

25 than zero, such amount shall be treated as a loss 


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1 from a qualified trade or business in the succeeding 

2 taxable year. 

3 ‘‘(3) QUALIFIED ITEMS OF INCOME, GAIN, DE4 DUCTION, AND LOSS.—For purposes of this sub5 section— 

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

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

8 means items of income, gain, deduction, and 

9 loss to the extent such items are— 

10 ‘‘(i) effectively connected with the con11 duct of a trade or business within the 

12 United States (within the meaning of sec13 tion 864(c), determined by substituting 

14 ‘qualified trade or business (within the 

15 meaning of section 199A)’ for ‘nonresident 

16 alien individual or a foreign corporation’ or 

17 for ‘a foreign corporation’ each place it ap18 pears), and 

19 ‘‘(ii) included or allowed in deter20 mining taxable income for the taxable year. 

21 ‘‘(B) EXCEPTIONS.—The following invest22 ment items shall not be taken into account as 

23 a qualified item of income, gain, deduction, or 

24 loss: 


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1 ‘‘(i) Any item of short-term capital 

2 gain, short-term capital loss, long-term 

3 capital gain, or long-term capital loss. 

4 ‘‘(ii) Any dividend, income equivalent 

5 to a dividend, or payment in lieu of divi6 dends described in section 954(c)(1)(G). 

7 ‘‘(iii) Any interest income other than 

8 interest income which is properly allocable 

9 to a trade or business. 

10 ‘‘(iv) Any item of gain or loss de11 scribed in subparagraph (C) or (D) of sec12 tion 954(c)(1) (applied by substituting 

13 ‘qualified trade or business’ for ‘controlled 

14 foreign corporation’). 

15 ‘‘(v) Any item of income, gain, deduc16 tion, or loss taken into account under sec17 tion 954(c)(1)(F) (determined without re18 gard to clause (ii) thereof and other than 

19 items attributable to notional principal 

20 contracts entered into in transactions 

21 qualifying under section 1221(a)(7)). 

22 ‘‘(vi) Any amount received from an 

23 annuity which is not received in connection 

24 with the trade or business. 


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1 ‘‘(vii) Any item of deduction or loss 

2 properly allocable to an amount described 

3 in any of the preceding clauses. 

4 ‘‘(4) TREATMENT OF REASONABLE COMPENSA5 TION AND GUARANTEED PAYMENTS.—Qualified busi6 ness income shall not include— 

7 ‘‘(A) reasonable compensation paid to the 

8 taxpayer by any qualified trade or business of 

9 the taxpayer for services rendered with respect 

10 to the trade or business, 

11 ‘‘(B) any guaranteed payment described in 

12 section 707(c) paid to a partner for services 

13 rendered with respect to the trade or business, 

14 and 

15 ‘‘(C) to the extent provided in regulations, 

16 any payment described in section 707(a) to a 

17 partner for services rendered with respect to the 

18 trade or business. 

19 ‘‘(d) QUALIFIED TRADE OR BUSINESS.—For pur20 poses of this section— 

21 ‘‘(1) IN GENERAL.—The term ‘qualified trade 

22 or business’ means any trade or business other than 

23 a specified service trade or business. 

24 ‘‘(2) SPECIFIED SERVICE TRADE OR BUSI25 NESS.— 


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1 ‘‘(A) IN GENERAL.—The term ‘specified 

2 service trade or business’ means— 

3 ‘‘(i) any trade or business involving 

4 the performance of services described in 

5 section 1202(e)(3)(A), including investing 

6 and investment management, trading, or 

7 dealing in securities (as defined in section 

8 475(c)(2)), partnership interests, or com9 modities (as defined in section 475(e)(2)). 

10 ‘‘(3) EXCEPTION FOR SPECIFIED SERVICE BUSI11 NESSES BASED ON TAXPAYER’S INCOME.— 

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

13 year, the taxable income of any taxpayer is less 

14 than the sum of the threshold amount plus 

15 $50,000 ($100,000 in the case of a joint re16 turn), then— 

17 ‘‘(i) the exception under paragraph 

18 (1) shall not apply to specified service 

19 trades or businesses of the taxpayer for the 

20 taxable year, but 

21 ‘‘(ii) only the applicable percentage of 

22 qualified items of income, gain, deduction, 

23 or loss, and the W-2 wages, of the tax24 payer allocable to such specified service 

25 trades or businesses shall be taken into acVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 count in computing the qualified business 

2 income and W-2 wages of the taxpayer for 

3 the taxable year for purposes of applying 

4 this section. 

5 ‘‘(B) APPLICABLE PERCENTAGE.—For 

6 purposes of subparagraph (A), the term ‘appli7 cable percentage’ means, with respect to any 

8 taxable year, 100 percent reduced (not below 

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

10 ‘‘(i) the taxable income of the tax11 payer for the taxable year in excess of the 

12 threshold amount, bears to 

13 ‘‘(ii) $50,000 ($100,000 in the case of 

14 a joint return). 

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

16 section— 

17 ‘‘(1) TAXABLE INCOME.—Taxable income shall 

18 be computed without regard to the deduction allow19 able under this section. 

20 ‘‘(2) THRESHOLD AMOUNT.— 

21 ‘‘(A) IN GENERAL.—The term ‘threshold 

22 amount’ means $250,000 (200 percent of such 

23 amount in the case of a joint return). 

24 ‘‘(B) INFLATION ADJUSTMENT.—In the 

25 case of any taxable year beginning after 2018, 


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1 the dollar amount in paragraph (1) shall be in2 creased by an amount equal to— 

3 ‘‘(i) such dollar amount, multiplied by 

4 ‘‘(ii) the cost-of-living adjustment de5 termined under section 1(f)(3) for the cal6 endar year in which the taxable year be7 gins. 

8 If any amount as increased under the preceding 

9 sentence is not a multiple of $1,000, such 

10 amount shall be rounded to the nearest multiple 

11 of $1,000. 

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

13 ‘qualified REIT dividend’ means any dividend from 

14 a real estate investment trust received during the 

15 taxable year which— 

16 ‘‘(A) is not a capital gain dividend, as de17 fined in section 857(b)(3), and 

18 ‘‘(B) is not qualified dividend income, as 

19 defined in section 1(h)(11). 

20 ‘‘(4) QUALIFIED COOPERATIVE DIVIDEND.— 

21 The term ‘qualified cooperative dividend’ means any 

22 patronage dividend (as defined in section 1388(a)), 

23 any per-unit retain allocation (as defined in section 

24 1388(f)), and any qualified written notice of alloca25 tion (as defined in section 1388(c)), or any similar 


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1 amount received from an organization described in 

2 subparagraph (B)(ii), which— 

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

4 ‘‘(B) is received from— 

5 ‘‘(i) an organization or corporation de6 scribed in section 501(c)(12) or 1381(a), 

7 or 

8 ‘‘(ii) an organization which is gov9 erned under this title by the rules applica10 ble to cooperatives under this title before 

11 the enactment of subchapter T. 

12 ‘‘(f) SPECIAL RULES.— 

13 ‘‘(1) APPLICATION TO PARTNERSHIPS AND S

14 CORPORATIONS.— 

15 ‘‘(A) IN GENERAL.—In the case of a part16 nership or S corporation— 

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

18 partner or shareholder level, 

19 ‘‘(ii) each partner or shareholder shall 

20 take into account such person’s allocable 

21 share of each qualified item of income, 

22 gain, deduction, and loss, and 

23 ‘‘(iii) each partner or shareholder 

24 shall be treated for purposes of subsection 

25 (b) as having W-2 wages for the taxable 


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1 year in an amount equal to such person’s 

2 allocable share of the W-2 wages of the 

3 partnership or S corporation for the tax4 able year (as determined under regulations 

5 prescribed by the Secretary). 

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

7 shareholder’s allocable share of W-2 wages shall 

8 be determined in the same manner as the part9 ner’s or shareholder’s allocable share of wage 

10 expenses. For purposes of this subparagraph, in 

11 the case of an S corporation, an allocable share 

12 shall be the shareholder’s pro rata share of an 

13 item. 

14 ‘‘(B) APPLICATION TO TRUSTS AND ES15 TATES.—This section shall not apply to any 

16 trust or estate. 

17 ‘‘(C) TREATMENT OF TRADES OR BUSI18 NESS IN PUERTO RICO.— 

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

20 taxpayer with qualified business income 

21 from sources within the commonwealth of 

22 Puerto Rico, if all such income is taxable 

23 under section 1 for such taxable year, then 

24 for purposes of determining the qualified 

25 business income of such taxpayer for such 


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1 taxable year, the term ‘United States’ shall 

2 include the Commonwealth of Puerto Rico. 

3 ‘‘(ii) SPECIAL RULE FOR APPLYING

4 WAGE LIMITATION.—In the case of any 

5 taxpayer described in clause (i), the deter6 mination of W-2 wages of such taxpayer 

7 with respect to any qualified trade or busi8 ness conducted in Puerto Rico shall be 

9 made without regard to any exclusion 

10 under section 3401(a)(8) for remuneration 

11 paid for services in Puerto Rico. 

12 ‘‘(2) COORDINATION WITH MINIMUM TAX.—For 

13 purposes of determining alternative minimum tax14 able income under section 55, qualified business in15 come shall be determined without regard to any ad16 justments under sections 56 through 59. 

17 ‘‘(3) DEDUCTION LIMITED TO INCOME

18 TAXES.—The deduction under subsection (a) shall 

19 only be allowed for purposes of this chapter. 

20 ‘‘(4) REGULATIONS.—The Secretary shall pre21 scribe such regulations as are necessary to carry out 

22 the purposes of this section, including regulations— 

23 ‘‘(A) for requiring or restricting the alloca24 tion of items and wages under this section and 


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1 such reporting requirements as the Secretary 

2 determines appropriate, and 

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

4 the case of tiered entities. 

5 ‘‘(g) TERMINATION.—This section shall not apply to 

6 taxable years beginning after December 31, 2025.’’. 

7 (b) ACCURACY-RELATED PENALTY ON DETERMINA8 TION OF APPLICABLE PERCENTAGE.—Section 6662(d)(1) 

9 is amended by inserting at the end the following new sub10 paragraph: 

11 ‘‘(C) SPECIAL RULE FOR TAXPAYERS

12 CLAIMING SECTION 199A DEDUCTION.—In the 

13 case of any taxpayer who claims the deduction 

14 allowed under section 199A for the taxable 

15 year, subparagraph (A) shall be applied by sub16 stituting ‘5 percent’ for ‘10 percent’.’’. 

17 (c) CONFORMING AMENDMENTS.— 

18 (1) Section 170(b)(2)(D) is amended by strik19 ing ‘‘, and’’ at the end of clause (iv), by redesig20 nating clause (v) as clause (vi), and by inserting 

21 after clause (iv) the following new clause: 

22 ‘‘(v) section 199A, and’’. 

23 (2) Section 172(d) is amended by adding at the 

24 end the following new paragraph: 


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1 ‘‘(8) QUALIFIED BUSINESS INCOME DEDUC2 TION.—The deduction under section 199A shall not 

3 be allowed.’’. 

4 (3) Section 246(b)(1) is amended by inserting 

5 ‘‘199A,’’ before ‘‘243(a)(1)’’. 

6 (4) Section 613(a) is amended by inserting 

7 ‘‘and without the deduction under section 199A’’ 

8 after ‘‘and without the deduction under section 

9 199’’. 

10 (5) Section 613A(d)(1) is amended by redesig11 nating subparagraphs (C), (D), and (E) as subpara12 graphs (D), (E), and (F), respectively, and by in13 serting after subparagraph (B), the following new 

14 subparagraph: 

15 ‘‘(C) any deduction allowable under section 

16 199A,’’. 

17 (6) The table of sections for part VI of sub18 chapter B of chapter 1 is amended by inserting at 

19 the end the following new item: 

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

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2017. 


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1 SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS 

2 OTHER THAN CORPORATIONS. 

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

4 at the end the following new subsection: 

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

6 NONCORPORATE TAXPAYERS.— 

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

8 of a taxpayer other than a corporation beginning 

9 after December 31, 2017, and before January 1, 

10 2026— 

11 ‘‘(A) subsection (j) (relating to limitation 

12 on excess farm losses of certain taxpayers) shall 

13 not apply, and 

14 ‘‘(B) any excess business loss of the tax15 payer for the taxable year shall not be allowed. 

16 ‘‘(2) DISALLOWED LOSS CARRYOVER.—Any loss 

17 which is disallowed under paragraph (1) shall be 

18 treated as a net operating loss carryover to the fol19 lowing taxable year under section 172. 

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

21 this subsection— 

22 ‘‘(A) IN GENERAL.—The term ‘excess busi23 ness loss’ means the excess (if any) of— 

24 ‘‘(i) the aggregate deductions of the 

25 taxpayer for the taxable year which are at26 tributable to trades or businesses of such 


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1 taxpayer (determined without regard to 

2 whether or not such deductions are dis3 allowed for such taxable year under para4 graph (1)), over 

5 ‘‘(ii) the sum of— 

6 ‘‘(I) the aggregate gross income 

7 or gain of such taxpayer for the tax8 able year which is attributable to such 

9 trades or businesses, plus 

10 ‘‘(II) $250,000 (200 percent of 

11 such amount in the case of a joint re12 turn). 

13 ‘‘(B) ADJUSTMENT FOR INFLATION.—In 

14 the case of any taxable year beginning after De15 cember 31, 2018, the $250,000 amount in sub16 paragraph (A)(ii)(II) shall be increased by an 

17 amount equal to— 

18 ‘‘(i) such dollar amount, multiplied by 

19 ‘‘(ii) the cost-of-living adjustment de20 termined under section 1(f)(3) for the cal21 endar year in which the taxable year be22 gins. 

23 If any amount as increased under the pre24 ceding sentence is not a multiple of 


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1 $1,000, such amount shall be rounded to 

2 the nearest multiple of $1,000. 

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

4 PARTNERSHIPS AND S CORPORATIONS.—In the case 

5 of a partnership or S corporation— 

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

7 partner or shareholder level, and 

8 ‘‘(B) each partner’s or shareholder’s allo9 cable share of the items of income, gain, deduc10 tion, or loss of the partnership or S corporation 

11 for any taxable year from trades or businesses 

12 attributable to the partnership or S corporation 

13 shall be taken into account by the partner or 

14 shareholder in applying this subsection to the 

15 taxable year of such partner or shareholder 

16 with or within which the taxable year of the 

17 partnership or S corporation ends. 

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

19 corporation, an allocable share shall be the share20 holder’s pro rata share of an item. 

21 ‘‘(5) ADDITIONAL REPORTING.—The Secretary 

22 shall prescribe such additional reporting require23 ments as the Secretary determines appropriate to 

24 carry out the purposes of this subsection. 


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

2 subsection shall be applied after the application of 

3 section 469.’’. 

4 (b) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable years beginning after 

6 December 31, 2017. 

7 PART III—TAX BENEFITS FOR FAMILIES AND 

8 INDIVIDUALS 

9 SEC. 11021. INCREASE IN STANDARD DEDUCTION. 

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

11 amended by adding at the end the following new para12 graph: 

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

14 THROUGH 2025.—In the case of a taxable year begin15 ning after December 31, 2017, and before January 

16 1, 2026— 

17 ‘‘(A) INCREASE IN STANDARD DEDUC18 TION.—Paragraph (2) shall be applied— 

19 ‘‘(i) by substituting ‘$18,000’ for 

20 ‘$4,400’ in subparagraph (B), and 

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

22 ‘$3,000’ in subparagraph (C). 

23 ‘‘(B) ADJUSTMENT FOR INFLATION.— 


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1 ‘‘(i) IN GENERAL.—Paragraph (4) 

2 shall not apply to the dollar amounts con3 tained in paragraphs (2)(B) and (2)(C). 

4 ‘‘(ii) ADJUSTMENT OF INCREASED

5 AMOUNTS.—In the case of a taxable year 

6 beginning after 2018, the $18,000 and 

7 $12,000 amounts in subparagraph (A) 

8 shall each be increased by an amount equal 

9 to— 

10 ‘‘(I) such dollar amount, multi11 plied by 

12 ‘‘(II) the cost-of-living adjust13 ment determined under section 1(f)(3) 

14 for the calendar year in which the tax15 able year begins, determined by sub16 stituting ‘2017’ for ‘2016’ in subpara17 graph (A)(ii) thereof.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD 

22 TAX CREDIT. 

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

24 at the end the following new subsection: 


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1 ‘‘(h) SPECIAL RULES FOR TAXABLE YEARS 2018 

2 THROUGH 2025.— 

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

4 year beginning after December 31, 2017, and before 

5 January 1, 2026, this section shall be applied as 

6 provided in paragraphs (2) through (8). 

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

8 applied by substituting ‘$2,000’ for ‘$1,000’. 

9 ‘‘(3) LIMITATION.—In lieu of the amount deter10 mined under subsection (b)(2), the threshold amount 

11 shall be $500,000. 

12 ‘‘(4) DEFINITION OF QUALIFYING CHILD.— 

13 Paragraph (1) of subsection (c) shall be applied by 

14 substituting ‘18’ for ‘17’. 

15 ‘‘(5) PARTIAL CREDIT ALLOWED FOR CERTAIN

16 OTHER DEPENDENTS.— 

17 ‘‘(A) IN GENERAL.—The credit determined 

18 under subsection (a) (after the application of 

19 paragraph (2)) shall be increased by $500 for 

20 each dependent of the taxpayer (as defined in 

21 section 152) other than a qualifying child de22 scribed in subsection (c) (after the application 

23 of paragraph (4)). 

24 ‘‘(B) EXCEPTION FOR CERTAIN NONCITI25 ZENS.—Subparagraph (A) shall not apply with 


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1 respect to any individual who would not be a 

2 dependent if subparagraph (A) of section 

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

4 that follows ‘resident of the United States’. 

5 ‘‘(6) MAXIMUM AMOUNT OF REFUNDABLE

6 CREDIT.— 

7 ‘‘(A) IN GENERAL.—Subsection (d)(1)(A) 

8 shall be applied without regard to paragraphs 

9 (2) and (5) of this subsection. 

10 ‘‘(B) ADJUSTMENT FOR INFLATION.—In 

11 the case of a taxable year beginning after 2017, 

12 subsection (d)(1)(A) shall be applied as if the 

13 $1,000 amount in subsection (a) were increased 

14 (but not to exceed the amount under paragraph 

15 (2) of this subsection) by an amount equal to— 

16 ‘‘(i) such dollar amount, multiplied by 

17 ‘‘(ii) the cost-of-living adjustment de18 termined under section 1(f)(3) for the cal19 endar year in which the taxable year be20 gins. 

21 Any increase determined under the preceding 

22 sentence shall be rounded to the next highest 

23 multiple of $100. 


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1 ‘‘(7) EARNED INCOME THRESHOLD FOR RE2 FUNDABLE CREDIT.—Subsection (d)(1)(B)(i) shall 

3 be applied by substituting ‘$2,500’ for ‘$3,000’. 

4 ‘‘(8) SOCIAL SECURITY NUMBER REQUIRED.— 

5 No credit shall be allowed under subsection (d) to a 

6 taxpayer with respect to any qualifying child unless 

7 the taxpayer includes the social security number of 

8 such child on the return of tax for the taxable year. 

9 For purposes of the preceding sentence, the term 

10 ‘social security number’ means a social security 

11 number issued to an individual by the Social Secu12 rity Administration, but only if the social security 

13 number is issued to a citizen of the United States 

14 or is issued pursuant to subclause (I) (or that por15 tion of subclause (III) that relates to subclause (I)) 

16 of section 205(c)(2)(B)(i) of the Social Security 

17 Act.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARI22 TABLE CONTRIBUTIONS. 

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

24 redesignating subparagraph (G) as subparagraph (H) and 


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1 by inserting after subparagraph (F) the following new 

2 subparagraph: 

3 ‘‘(G) INCREASED LIMITATION FOR CASH

4 CONTRIBUTIONS.— 

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

6 contribution of cash to an organization de7 scribed in subparagraph (A), the total 

8 amount of such contributions which may 

9 be taken into account under subsection (a) 

10 for any taxable year beginning after De11 cember 31, 2017, and before January 1, 

12 2026, shall not exceed 60 percent of the 

13 taxpayer’s contribution base for such year. 

14 ‘‘(ii) CARRYOVER.—If the aggregate 

15 amount of contributions described in clause 

16 (i) exceeds the applicable limitation under 

17 clause (i) for any taxable year described in 

18 such clause, such excess shall be treated 

19 (in a manner consistent with the rules of 

20 subsection (d)(1)) as a charitable contribu21 tion to which clause (i) applies in each of 

22 the 5 succeeding years in order of time. 

23 ‘‘(iii) COORDINATION WITH SUBPARA24 GRAPHS (A) AND (B).— 


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1 ‘‘(I) IN GENERAL.—Contribu2 tions taken into account under this 

3 subparagraph shall not be taken into 

4 account under subparagraph (A). 

5 ‘‘(II) LIMITATION REDUCTION.— 

6 Subparagraphs (A) and (B) shall be 

7 applied for each taxable year de8 scribed in clause (i), and each taxable 

9 year to which any contribution under 

10 this subparagraph is carried over 

11 under clause (ii), by reducing (but not 

12 below zero) the aggregate contribution 

13 limitation allowed for the taxable year 

14 under each such subparagraph by the 

15 aggregate contributions allowed under 

16 this subparagraph for such taxable 

17 year.’’. 

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

19 this section shall apply to contributions in taxable years 

20 beginning after December 31, 2017. 

21 SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE AC22 COUNTS. 

23 (a) INCREASE IN LIMITATION FOR CONTRIBUTIONS

24 FROM COMPENSATION OF INDIVIDUALS WITH DISABIL25 ITIES.— 


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

2 amended to read as follows: 

3 ‘‘(B) except in the case of contributions 

4 under subsection (c)(1)(C), if such contribution 

5 to an ABLE account would result in aggregate 

6 contributions from all contributors to the 

7 ABLE account for the taxable year exceeding 

8 the sum of— 

9 ‘‘(i) the amount in effect under sec10 tion 2503(b) for the calendar year in which 

11 the taxable year begins, plus 

12 ‘‘(ii) in the case of any contribution 

13 by a designated beneficiary described in 

14 paragraph (7) before January 1, 2026, the 

15 lesser of— 

16 ‘‘(I) compensation (as defined by 

17 section 219(f)(1)) includible in the 

18 designated beneficiary’s gross income 

19 for the preceding taxable year, or 

20 ‘‘(II) an amount equal to the 

21 poverty line for a one-person house22 hold, as determined for the calendar 

23 year preceding the calendar year in 

24 which the taxable year begins.’’. 


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1 (2) ELIGIBLE DESIGNATED BENEFICIARY.— 

2 Section 529A(b) is amended by adding at the end 

3 the following: 

4 ‘‘(7) SPECIAL RULES RELATED TO CONTRIBU5 TION LIMIT.—For purposes of paragraph 

6 (2)(B)(ii)— 

7 ‘‘(A) DESIGNATED BENEFICIARY.—A des8 ignated beneficiary described in this paragraph 

9 is an employee (including an employee within 

10 the meaning of section 401(c)) with respect to 

11 whom— 

12 ‘‘(i) no contribution is made for the 

13 taxable year to a defined contribution plan 

14 (within the meaning of section 414(i)) with 

15 respect to which the requirements of sec16 tion 401(a) or 403(a) are met, 

17 ‘‘(ii) no contribution is made for the 

18 taxable year to an annuity contract de19 scribed in section 403(b), and 

20 ‘‘(iii) no contribution is made for the 

21 taxable year to an eligible deferred com22 pensation plan described in section 457(b). 

23 ‘‘(B) POVERTY LINE.—The term ‘poverty 

24 line’ has the meaning given such term by secVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00049 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 tion 673 of the Community Services Block 

2 Grant Act (42 U.S.C. 9902).’’. 

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

4 CONTRIBUTIONS BY ACCOUNT HOLDER.—Section 

5 25B(d)(1) is amended by striking ‘‘and’’ at the end of sub6 paragraph (B)(ii), by striking the period at the end of sub7 paragraph (C) and inserting ‘‘, and’’, and by inserting at 

8 the end the following: 

9 ‘‘(D) the amount of contributions made be10 fore January 1, 2026, by such individual to the 

11 ABLE account (within the meaning of section 

12 529A) of which such individual is the des13 ignated beneficiary.’’. 

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

15 this section shall apply to taxable years beginning after 

16 the date of the enactment of this Act. 

17 SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 

18 PROGRAMS. 

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

20 is amended by striking ‘‘or’’ at the end of subclause (I), 

21 by striking the period at the end of subclause (II) and 

22 inserting ‘‘, or’’, and by adding at the end the following: 

23 ‘‘(III) before January 1, 2026, to 

24 an ABLE account (as defined in sec25 tion 529A(e)(6)) of the designated 


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1 beneficiary or a member of the family 

2 of the designated beneficiary. 

3 Subclause (III) shall not apply to so much 

4 of a distribution which, when added to all 

5 other contributions made to the ABLE ac6 count for the taxable year, exceeds the lim7 itation under section 529A(b)(2)(B).’’. 

8 (b) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to distributions after the date of 

10 the enactment of this Act. 

11 SEC. 11026. TREATMENT OF CERTAIN INDIVIDUALS PER12 FORMING SERVICES IN THE SINAI PENIN13 SULA OF EGYPT. 

14 (a) IN GENERAL.—For purposes of the following pro15 visions of the Internal Revenue Code of 1986, with respect 

16 to the applicable period, a qualified hazardous duty area 

17 shall be treated in the same manner as if it were a combat 

18 zone (as determined under section 112 of such Code): 

19 (1) Section 2(a)(3) (relating to special rule 

20 where deceased spouse was in missing status). 

21 (2) Section 112 (relating to the exclusion of 

22 certain combat pay of members of the Armed 

23 Forces). 

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

25 members of Armed Forces on death). 


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1 (4) Section 2201 (relating to members of the 

2 Armed Forces dying in combat zone or by reason of 

3 combat-zone-incurred wounds, etc.). 

4 (5) Section 3401(a)(1) (defining wages relating 

5 to combat pay for members of the Armed Forces). 

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

7 phone service originating from a combat zone from 

8 members of the Armed Forces). 

9 (7) Section 6013(f)(1) (relating to joint return 

10 where individual is in missing status). 

11 (8) Section 7508 (relating to time for per12 forming certain acts postponed by reason of service 

13 in combat zone). 

14 (b) QUALIFIED HAZARDOUS DUTY AREA.—For pur15 poses of this section, the term ‘‘qualified hazardous duty 

16 area’’ means the Sinai Peninsula of Egypt, if as of the 

17 date of the enactment of this section any member of the 

18 Armed Forces of the United States is entitled to special 

19 pay under section 310 of title 37, United States Code (re20 lating to special pay; duty subject to hostile fire or immi21 nent danger), for services performed in such location. 

22 Such term includes such location only during the period 

23 such entitlement is in effect. 

24 (c) APPLICABLE PERIOD.— 


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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the applicable period is— 

3 (A) the portion of the first taxable year 

4 ending after June 9, 2015, which begins on 

5 such date, and 

6 (B) any subsequent taxable year beginning 

7 before January 1, 2026. 

8 (2) WITHHOLDING.—In the case of subsection 

9 (a)(5), the applicable period is— 

10 (A) the portion of the first taxable year 

11 ending after the date of the enactment of this 

12 Act which begins on such date, and 

13 (B) any subsequent taxable year beginning 

14 before January 1, 2026. 

15 (d) EFFECTIVE DATE.— 

16 (1) IN GENERAL.—Except as provided in para17 graph (2), the provisions of this section shall take 

18 effect on June 9, 2015. 

19 (2) WITHHOLDING.—Subsection (a)(5) shall 

20 apply to remuneration paid after the date of the en21 actment of this Act. 


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1 SEC. 11027. EXTENSION OF WAIVER OF LIMITATIONS WITH 

2 RESPECT TO EXCLUDING FROM GROSS IN3 COME AMOUNTS RECEIVED BY WRONGFULLY 

4 INCARCERATED INDIVIDUALS. 

5 (a) IN GENERAL.—Section 304(d) of the Protecting 

6 Americans from Tax Hikes Act of 2015 (26 U.S.C. 139F 

7 note) is amended by striking ‘‘1-year’’ and inserting ‘‘2- 

8 year’’. 

9 (b) EFFECTIVE DATE.—The amendments made by 

10 this section shall take effect on the date of the enactment 

11 of this Act. 

12 SEC. 11028. UNBORN CHILDREN ALLOWED AS 529 ACCOUNT 

13 BENEFICIARIES. 

14 (a) IN GENERAL.—Section 529(e) is amended by 

15 adding at the end the following new paragraph: 

16 ‘‘(6) TREATMENT OF UNBORN CHILDREN.— 

17 ‘‘(A) IN GENERAL.—Nothing shall prevent 

18 an unborn child from being treated as a des19 ignated beneficiary or an individual under this 

20 section. 

21 ‘‘(B) UNBORN CHILD.—For purposes of 

22 this paragraph— 

23 ‘‘(i) IN GENERAL.—The term ‘unborn 

24 child’ means a child in utero. 

25 ‘‘(ii) CHILD IN UTERO.—The term 

26 ‘child in utero’ means a member of the 


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1 species homo sapiens, at any stage of de2 velopment, who is carried in the womb.’’. 

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

4 this section shall apply to contributions made after De5 cember 31, 2017. 

6 SEC. 11029. RELIEF FOR MISSISSIPPI RIVER DELTA FLOOD 

7 DISASTER AREA. 

8 (a) IN GENERAL.—For purposes of this section, the 

9 term ‘‘Mississippi River Delta flood disaster area’’ means 

10 any area— 

11 (1) with respect to which a major disaster has 

12 been declared by the President under section 401 of 

13 the Robert T. Stafford Disaster Relief and Emer14 gency Assistance Act before September 3, 2016, by 

15 reason of severe storms and flooding occurring in 

16 Louisiana during August of 2016, or 

17 (2) with respect to which a major disaster has 

18 been declared by the President under section 401 of 

19 the Robert T. Stafford Disaster Relief and Emer20 gency Assistance Act before March 31, 2016, by rea21 son of severe storms and flooding occurring in Lou22 isiana, Texas, and Mississippi during March of 

23 2016. 


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1 (b) SPECIAL RULES FOR USE OF RETIREMENT

2 FUNDS WITH RESPECT TO MISSISSIPPI DELTA AREAS

3 DAMAGED BY 2016 FLOODING.— 

4 (1) TAX-FAVORED WITHDRAWALS FROM RE5 TIREMENT PLANS.— 

6 (A) IN GENERAL.—Section 72(t) of the In7 ternal Revenue Code of 1986 shall not apply to 

8 any qualified Mississippi River Delta flooding 

9 distribution. 

10 (B) AGGREGATE DOLLAR LIMITATION.— 

11 (i) IN GENERAL.—For purposes of 

12 this subsection, the aggregate amount of 

13 distributions received by an individual 

14 which may be treated as qualified Mis15 sissippi River Delta flooding distributions 

16 for any taxable year shall not exceed the 

17 excess (if any) of— 

18 (I) $100,000, over 

19 (II) the aggregate amounts treat20 ed as qualified Mississippi River Delta 

21 flooding distributions received by such 

22 individual for all prior taxable years. 

23 (ii) TREATMENT OF PLAN DISTRIBU24 TIONS.—If a distribution to an individual 

25 would (without regard to clause (i)) be a 


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1 qualified Mississippi River Delta flooding 

2 distribution, a plan shall not be treated as 

3 violating any requirement of this title 

4 merely because the plan treats such dis5 tribution as a qualified Mississippi River 

6 Delta flooding distribution, unless the ag7 gregate amount of such distributions from 

8 all plans maintained by the employer (and 

9 any member of any controlled group which 

10 includes the employer) to such individual 

11 exceeds $100,000. 

12 (iii) CONTROLLED GROUP.—For pur13 poses of clause (ii), the term ‘‘controlled 

14 group’’ means any group treated as a sin15 gle employer under subsection (b), (c), 

16 (m), or (o) of section 414 of the Internal 

17 Revenue Code of 1986. 

18 (C) AMOUNT DISTRIBUTED MAY BE RE19 PAID.— 

20 (i) IN GENERAL.—Any individual who 

21 receives a qualified Mississippi River Delta 

22 flooding distribution may, at any time dur23 ing the 3-year period beginning on the day 

24 after the date on which such distribution 

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1 tions in an aggregate amount not to exceed 

2 the amount of such distribution to an eligi3 ble retirement plan of which such indi4 vidual is a beneficiary and to which a roll5 over contribution of such distribution could 

6 be made under section 402(c), 403(a)(4), 

7 403(b)(8), 408(d)(3), or 457(e)(16) of the 

8 Internal Revenue Code of 1986, as the 

9 case may be. 

10 (ii) TREATMENT OF REPAYMENTS OF

11 DISTRIBUTIONS FROM ELIGIBLE RETIRE12 MENT PLANS OTHER THAN IRAS.—For 

13 purposes of this title, if a contribution is 

14 made pursuant to clause (i) with respect to 

15 a qualified Mississippi River Delta flooding 

16 distribution from an eligible retirement 

17 plan other than an individual retirement 

18 plan, then the taxpayer shall, to the extent 

19 of the amount of the contribution, be treat20 ed as having received the qualified Mis21 sissippi River Delta flooding distribution in 

22 an eligible rollover distribution (as defined 

23 in section 402(c)(4) of the Internal Rev24 enue Code of 1986) and as having trans25 ferred the amount to the eligible retireVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00058 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 ment plan in a direct trustee to trustee 

2 transfer within 60 days of the distribution. 

3 (iii) TREATMENT OF REPAYMENTS

4 FOR DISTRIBUTIONS FROM IRAS.—For 

5 purposes of the Internal Revenue Code of 

6 1986, if a contribution is made pursuant 

7 to clause (i) with respect to a qualified 

8 Mississippi River Delta flooding distribu9 tion from an individual retirement plan (as 

10 defined by section 7701(a)(37) of the In11 ternal Revenue Code of 1986), then, to the 

12 extent of the amount of the contribution, 

13 the qualified Mississippi River Delta flood14 ing distribution shall be treated as a dis15 tribution described in section 408(d)(3) of 

16 such Code and as having been transferred 

17 to the eligible retirement plan in a direct 

18 trustee to trustee transfer within 60 days 

19 of the distribution. 

20 (D) DEFINITIONS.—For purposes of this 

21 paragraph— 

22 (i) QUALIFIED MISSISSIPPI RIVER

23 DELTA FLOODING DISTRIBUTION.—Except 

24 as provided in subparagraph (B), the term 


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1 ‘‘qualified Mississippi River Delta flooding 

2 distribution’’ means— 

3 (I) any distribution from an eligi4 ble retirement plan made on or after 

5 August 11, 2016, and before January 

6 1, 2018, to an individual whose prin7 cipal place of abode on August 11, 

8 2016, was located in the portion of 

9 Mississippi River Delta disaster area 

10 described in subsection (a)(1) and 

11 who has sustained an economic loss 

12 by reason of the severe storms and 

13 flooding giving rise to the Presidential 

14 declaration described in subsection 

15 (a)(1), or 

16 (II) any distribution from an eli17 gible retirement plan made on or after 

18 March 1, 2016, and before January 1, 

19 2018, to an individual whose principal 

20 place of abode on March 1, 2016, was 

21 located in the portion of Mississippi 

22 River Delta disaster area described in 

23 subsection (a)(2) and who has sus24 tained an economic loss by reason of 

25 the severe storms and flooding giving 


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1 rise to the Presidential declaration de2 scribed in subsection (a)(2). 

3 (ii) ELIGIBLE RETIREMENT PLAN.— 

4 The term ‘‘eligible retirement plan’’ shall 

5 have the meaning given such term by sec6 tion 402(c)(8)(B) of the Internal Revenue 

7 Code of 1986. 

8 (E) INCOME INCLUSION SPREAD OVER 3- 

9 YEAR PERIOD.— 

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

11 qualified Mississippi River Delta flooding 

12 distribution, unless the taxpayer elects not 

13 to have this subparagraph apply for any 

14 taxable year, any amount required to be 

15 included in gross income for such taxable 

16 year shall be so included ratably over the 

17 3-taxable-year period beginning with such 

18 taxable year. 

19 (ii) SPECIAL RULE.—For purposes of 

20 clause (i), rules similar to the rules of sub21 paragraph (E) of section 408A(d)(3) of the 

22 Internal Revenue Code of 1986 shall apply. 

23 (F) SPECIAL RULES.— 

24 (i) EXEMPTION OF DISTRIBUTIONS

25 FROM TRUSTEE TO TRUSTEE TRANSFER


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1 AND WITHHOLDING RULES.—For purposes 

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

3 the Internal Revenue Code of 1986, quali4 fied Mississippi River Delta flooding dis5 tributions shall not be treated as eligible 

6 rollover distributions. 

7 (ii) QUALIFIED MISSISSIPPI RIVER

8 DELTA FLOODING DISTRIBUTIONS TREAT9 ED AS MEETING PLAN DISTRIBUTION RE10 QUIREMENTS.—For purposes of the Inter11 nal Revenue Code of 1986, a qualified Mis12 sissippi River Delta flooding distribution 

13 shall be treated as meeting the require14 ments of sections 401(k)(2)(B)(i), 

15 403(b)(7)(A)(ii), 403(b)(11), and 

16 457(d)(1)(A) of the Internal Revenue Code 

17 of 1986. 

18 (2) PROVISIONS RELATING TO PLAN AMEND19 MENTS.— 

20 (A) IN GENERAL.—If this paragraph ap21 plies to any amendment to any plan or annuity 

22 contract, such plan or contract shall be treated 

23 as being operated in accordance with the terms 

24 of the plan during the period described in sub25 paragraph (B)(ii)(I). 


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1 (B) AMENDMENTS TO WHICH SUBSECTION

2 APPLIES.— 

3 (i) IN GENERAL.—This paragraph 

4 shall apply to any amendment to any plan 

5 or annuity contract which is made— 

6 (I) pursuant to any provision of 

7 this section, or pursuant to any regu8 lation under any provision of this sec9 tion; and 

10 (II) on or before the last day of 

11 the first plan year beginning on or 

12 after January 1, 2018, or such later 

13 date as the Secretary prescribes. 

14 In the case of a governmental plan (as de15 fined in section 414(d) of the Internal Rev16 enue Code of 1986), subclause (II) shall be 

17 applied by substituting the date which is 2 

18 years after the date otherwise applied 

19 under subclause (II). 

20 (ii) CONDITIONS.—This paragraph 

21 shall not apply to any amendment unless— 

22 (I) during the period— 

23 (aa) beginning on the date 

24 that this section or the regulation 

25 described in clause (i)(I) takes 


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1 effect (or in the case of a plan or 

2 contract amendment not required 

3 by this section or such regula4 tion, the effective date specified 

5 by the plan); and 

6 (bb) ending on the date de7 scribed in clause (i)(II) (or, if 

8 earlier, the date the plan or con9 tract amendment is adopted), 

10 the plan or contract is operated as if 

11 such plan or contract amendment 

12 were in effect; and 

13 (II) such plan or contract amend14 ment applies retroactively for such pe15 riod. 

16 (c) SPECIAL RULES FOR PERSONAL CASUALTY

17 LOSSES RELATED TO LOUISIANA SEVERE STORMS AND

18 FLOODING.— 

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

20 disaster loss for any taxable year beginning after 

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

22 (A) the amount determined under section 

23 165(h)(2)(A)(ii) of the Internal Revenue Code 

24 of 1986 shall be equal to the sum of— 

25 (i) such net disaster loss, and 


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1 (ii) so much of the excess referred to 

2 in the matter preceding clause (i) of sec3 tion 165(h)(2)(A) of such Code (reduced 

4 by the amount in clause (i) of this sub5 paragraph) as exceeds 10 percent of the 

6 adjusted gross income of the individual, 

7 (B) section 165(h)(1) of such Code shall 

8 be applied by substituting ‘‘$500’’ for ‘‘$500 

9 ($100 for taxable years beginning after Decem10 ber 31, 2009)’’, 

11 (C) the standard deduction determined 

12 under section 63(c) of such Code shall be in13 creased by the net disaster loss, and 

14 (D) section 56(b)(1)(E) of such Code shall 

15 not apply to so much of the standard deduction 

16 as is attributable to the increase under sub17 paragraph (C) of this paragraph. 

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

19 subsection, the term ‘‘net disaster loss’’ means the 

20 excess of qualified disaster-related personal casualty 

21 losses over personal casualty gains (as defined in 

22 section 165(h)(3)(A) of the Internal Revenue Code 

23 of 1986). 

24 (3) QUALIFIED DISASTER-RELATED PERSONAL

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1 graph, the term ‘‘qualified disaster-related personal 

2 casualty losses’’ means losses described in section 

3 165(c)(3) of the Internal Revenue Code of 1986 

4 which arise— 

5 (A) in the portion of the Mississippi River 

6 Delta flood disaster area described in sub7 section (a)(1) on or after August 11, 2016, and 

8 which are attributable to the severe storms and 

9 flooding giving rise to the Presidential declara10 tion described in subsection (a)(1), or 

11 (B) in the portion of the Mississippi River 

12 Delta flood disaster area described in sub13 section (a)(2) on or after March 1, 2016, and 

14 which are attributable to the severe storms and 

15 flooding giving rise to the Presidential declara16 tion described in subsection (a)(2). 

17 PART IV—EDUCATION 

18 SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED 

19 ON ACCOUNT OF DEATH OR DISABILITY. 

20 (a) IN GENERAL.—Section 108(f) is amended by 

21 adding at the end the following new paragraph: 

22 ‘‘(5) DISCHARGES ON ACCOUNT OF DEATH OR

23 DISABILITY.— 

24 ‘‘(A) IN GENERAL.—In the case of an indi25 vidual, gross income for any taxable year beginVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00066 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 ning after December 31, 2017, and before Jan2 uary 1, 2026, does not include any amount 

3 which (but for this subsection) would be includ4 ible in gross income for such taxable year by 

5 reasons of the discharge (in whole or in part) 

6 of any loan described in subparagraph (B) if 

7 such discharge was— 

8 ‘‘(i) pursuant to subsection (a) or (d) 

9 of section 437 of the Higher Education 

10 Act of 1965 or the parallel benefit under 

11 part D of title IV of such Act (relating to 

12 the repayment of loan liability), 

13 ‘‘(ii) pursuant to section 464(c)(1)(F) 

14 of such Act, or 

15 ‘‘(iii) otherwise discharged on account 

16 of the death or total and permanent dis17 ability of the student. 

18 ‘‘(B) LOANS DESCRIBED.—A loan is de19 scribed in this subparagraph if such loan is— 

20 ‘‘(i) a student loan (as defined in 

21 paragraph (2)), or 

22 ‘‘(ii) a private education loan (as de23 fined in section 140(7) of the Consumer 

24 Credit Protection Act (15 U.S.C. 

25 1650(7))).’’. 


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

2 this section shall apply to discharges of indebtedness after 

3 December 31, 2017. 

4 SEC. 11032. INCREASE IN DEDUCTION FOR TEACHER EX5 PENSES. 

6 (a) IN GENERAL.—Subparagraph (D) of section 

7 62(a)(2) is amended by striking ‘‘$250’’ and inserting 

8 ‘‘$250 ($500 in the case of taxable years beginning after 

9 December 31, 2017, and before January 1, 2026)’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2017. 

13 PART V—DEDUCTIONS AND EXCLUSIONS 

14 SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL 

15 EXEMPTIONS. 

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

17 amended— 

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

19 (4) and inserting ‘‘Except as provided in paragraph 

20 (5), in the case of’’, and 

21 (2) by adding at the end the following new 

22 paragraph: 

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

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1 ning after December 31, 2017, and before January 

2 1, 2026— 

3 ‘‘(A) EXEMPTION AMOUNT.—The term ‘ex4 emption amount’ means zero. 

5 ‘‘(B) REFERENCES.—For purposes of any 

6 other provision of this title, the reduction of the 

7 exemption amount to zero under subparagraph 

8 (A) shall not be taken into account in deter9 mining whether a deduction is allowed or allow10 able, or whether a taxpayer is entitled to a de11 duction, under this section.’’. 

12 (b) APPLICATION TO ESTATES AND TRUSTS.—Sec13 tion 642(b)(2)(C) is amended by adding at the end the 

14 following new clause: 

15 ‘‘(iii) YEARS WHEN PERSONAL EX16 EMPTION AMOUNT IS ZERO.— 

17 ‘‘(I) IN GENERAL.—In the case 

18 of any taxable year in which the ex19 emption amount under section 151(d) 

20 is zero, clause (i) shall be applied by 

21 substituting ‘$4,150’ for ‘the exemp22 tion amount under section 151(d)’. 

23 ‘‘(II) INFLATION ADJUST24 MENT.—In the case of any calendar 

25 year beginning after 2018, the $4,150 


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1 amount in subparagraph (A) shall be 

2 increased by an amount equal to— 

3 ‘‘(aa) such dollar amount, 

4 multiplied by 

5 ‘‘(bb) the cost-of-living ad6 justment determined under sec7 tion 1(f)(3) for the calendar year 

8 in which the taxable year begins, 

9 determined by substituting 

10 ‘2017’ for ‘2016’ in subpara11 graph (A)(ii) thereof. 

12 If any increase determined under the 

13 preceding sentence is not a multiple of 

14 $100, such increase shall be rounded 

15 to the next lowest multiple of $100.’’. 

16 (c) EXCEPTION FOR WAGE WITHHOLDING RULES.— 

17 Section 3402(a) is amended by adding at the end the fol18 lowing new paragraph: 

19 ‘‘(3) YEARS WHEN PERSONAL EXEMPTION

20 AMOUNT IS ZERO.— 

21 ‘‘(A) IN GENERAL.—In the case of any 

22 taxable year in which the exemption amount 

23 under section 151(d) is zero, paragraph (2) 

24 shall be applied by substituting ‘$4,150’ for ‘the 


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1 amount of one personal exemption provided in 

2 section 151(b)’. 

3 ‘‘(B) INFLATION ADJUSTMENT.—In the 

4 case of any calendar year beginning after 2018, 

5 the $4,150 amount in subparagraph (A) shall 

6 be increased by an amount equal to— 

7 ‘‘(i) such dollar amount, multiplied by 

8 ‘‘(ii) the cost-of-living adjustment de9 termined under section 1(f)(3) for the cal10 endar year in which the taxable year be11 gins, determined by substituting ‘2017’ for 

12 ‘2016’ in subparagraph (A)(ii) thereof. 

13 If any increase determined under the preceding 

14 sentence is not a multiple of $100, such in15 crease shall be rounded to the next lowest mul16 tiple of $100.’’. 

17 (d) EXCEPTION FOR DETERMINING PROPERTY EX18 EMPT FROM LEVY.—Section 6334(d) is amended by add19 ing at the end the following new paragraph: 

20 ‘‘(4) YEARS WHEN PERSONAL EXEMPTION

21 AMOUNT IS ZERO.— 

22 ‘‘(A) IN GENERAL.—In the case of any 

23 taxable year in which the exemption amount 

24 under section 151(d) is zero, paragraph (2) 

25 shall not apply and for purposes of paragraph 


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1 (1) the term ‘exempt amount’ means an amount 

2 equal to— 

3 ‘‘(i) the sum of the amount deter4 mined under subparagraph (B) and the 

5 standard deduction, divided by 

6 ‘‘(ii) 52. 

7 ‘‘(B) AMOUNT DETERMINED.—For pur8 poses of subparagraph (A), the amount deter9 mined under this subparagraph is $4,150 multi10 plied by the number of the taxpayer’s depend11 ents for the taxable year in which the levy oc12 curs. 

13 ‘‘(C) INFLATION ADJUSTMENT.—In the 

14 case of any taxable year beginning after 2018, 

15 the $4,150 amount in subparagraph (B) shall 

16 be increased by an amount equal to— 

17 ‘‘(i) such dollar amount, multiplied by 

18 ‘‘(ii) the cost-of-living adjustment de19 termined under section 1(f)(3) for the cal20 endar year in which the taxable year be21 gins, determined by substituting ‘2017’ for 

22 ‘2016’ in subparagraph (A)(ii) thereof. 

23 If any increase determined under the preceding 

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1 crease shall be rounded to the next lowest mul2 tiple of $100. 

3 ‘‘(D) VERIFIED STATEMENT.—Unless the 

4 taxpayer submits to the Secretary a written and 

5 properly verified statement specifying the facts 

6 necessary to determine the proper amount 

7 under subparagraph (A), subparagraph (A) 

8 shall be applied as if the taxpayer were a mar9 ried individual filing a separate return with no 

10 dependents.’’. 

11 (e) PERSONS REQUIRED TO MAKE RETURNS OF IN12 COME.—Section 6012 is amended by adding at the end 

13 the following new subsection: 

14 ‘‘(f) SPECIAL RULE FOR TAXABLE YEARS 2018 

15 THROUGH 2025.—In the case of a taxable year beginning 

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

17 subsection (a)(1) shall not apply, and every individual who 

18 has gross income for the taxable year shall be required 

19 to make returns with respect to income taxes under sub20 title A, except that a return shall not be required of— 

21 ‘‘(1) an individual who is not married (deter22 mined by applying section 7703) and who has gross 

23 income for the taxable year which does not exceed 

24 the standard deduction applicable to such individual 

25 for such taxable year under section 63, or 


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1 ‘‘(2) an individual entitled to make a joint re2 turn if— 

3 ‘‘(A) the gross income of such individual, 

4 when combined with the gross income of such 

5 individual’s spouse, for the taxable year does 

6 not exceed the standard deduction which would 

7 be applicable to the taxpayer for such taxable 

8 year under section 63 if such individual and 

9 such individual’s spouse made a joint return, 

10 ‘‘(B) such individual and such individual’s 

11 spouse have the same household as their home 

12 at the close of the taxable year, 

13 ‘‘(C) such individual’s spouse does not 

14 make a separate return, and 

15 ‘‘(D) neither such individual nor such indi16 vidual’s spouse is an individual described in sec17 tion 63(c)(5) who has income (other than 

18 earned income) in excess of the amount in ef19 fect under section 63(c)(5)(A). 

20 The amount specified in paragraph (1) or (2)(A) 

21 shall be increased by the amount of 1 additional 

22 standard deduction (within the meaning of section 

23 63(c)(3)) in the case of an individual entitled to 

24 such deduction by reason of section 63(f)(1)(A) (re25 lating to individuals age 65 or more), and by the 


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1 amount of each additional standard deduction to 

2 which the individual or the individual’s spouse is en3 titled by reason of section 63(f)(1).’’. 

4 (f) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable years beginning after 

6 December 31, 2017. 

7 SEC. 11042. SUSPENSION OF DEDUCTION FOR STATE AND 

8 LOCAL, ETC. TAXES. 

9 (a) IN GENERAL.—Subsection (b) of section 164 is 

10 amended by adding at the end the following new para11 graph: 

12 ‘‘(6) SUSPENSION OF INDIVIDUAL DEDUCTIONS

13 FOR TAXABLE YEARS 2018 THROUGH 2025.—In the 

14 case of an individual and a taxable year beginning 

15 after December 31, 2017, and before January 1, 

16 2026— 

17 ‘‘(A) paragraphs (1) and (2) of subsection 

18 (a) shall not apply to any real property or per19 sonal property taxes, other than taxes which are 

20 paid or accrued in carrying on a trade or busi21 ness or an activity described in section 212, and 

22 ‘‘(B) subsection (a)(3) shall not apply to 

23 any State or local taxes.’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 11043. SUSPENSION OF DEDUCTION FOR HOME EQ5 UITY INTEREST. 

6 (a) IN GENERAL.—Section 163(h)(3)(A)(ii) is 

7 amended by inserting ‘‘in the case of taxable years begin8 ning before January 1, 2018, or after December 31, 

9 2025,’’ before ‘‘home equity indebtedness’’. 

10 (b) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to taxable years ending after De12 cember 31, 2017. 

13 SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL 

14 CASUALTY LOSSES. 

15 (a) IN GENERAL.—Subsection (h) of section 165 is 

16 amended by adding at the end the following new para17 graph: 

18 ‘‘(5) LIMITATION FOR TAXABLE YEARS 2018

19 THROUGH 2025.—In the case of any loss of an indi20 vidual described in subsection (c)(3) which (but for 

21 this paragraph) would be deductible in a taxable 

22 year beginning after December 31, 2017, and before 

23 January 1, 2026 (without regard to any election 

24 under subsection (i), such loss shall be allowed only 

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1 clared disaster (as defined in subsection (i)(5)). The 

2 preceding sentence shall not apply to any deduction 

3 under section 172 which is carried to such a taxable 

4 year from a taxable year beginning before January 

5 1, 2018.’’. 

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

7 this section shall apply to losses incurred in taxable years 

8 beginning after December 31, 2017. 

9 SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED 

10 DEDUCTIONS. 

11 (a) IN GENERAL.—Section 67 is amended by adding 

12 at the end the following new subsection: 

13 ‘‘(g) SUSPENSION FOR TAXABLE YEARS 2018 

14 THROUGH 2025.—Notwithstanding subsection (a), no 

15 miscellaneous itemized deduction shall be allowed for any 

16 taxable year beginning after December 31, 2017, and be17 fore January 1, 2026.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON 

22 ITEMIZED DEDUCTIONS. 

23 (a) IN GENERAL.—Section 68 is amended by adding 

24 at the end the following new subsection: 


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1 ‘‘(f) SECTION NOT TO APPLY.—This section shall not 

2 apply to any taxable year beginning after December 31, 

3 2017, and before January 1, 2026.’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2017. 

7 SEC. 11047. MODIFICATION OF EXCLUSION OF GAIN FROM 

8 SALE OF PRINCIPAL RESIDENCE. 

9 (a) IN GENERAL.—Section 121 is amended by adding 

10 at the end the following new subsection: 

11 ‘‘(h) SPECIAL RULES FOR SALES OR EXCHANGES IN

12 TAXABLE YEARS 2018 THROUGH 2025.— 

13 ‘‘(1) IN GENERAL.—In applying this section 

14 with respect to sales or exchanges after December 

15 31, 2017, and before January 1, 2026— 

16 ‘‘(A) ‘8-year’ shall be substituted for ‘5- 

17 year’ each place it appears in subsections (a), 

18 (b)(5)(C)(ii)(I), and (c)(1)(B)(i)(I) and para19 graphs (7), (9), (10), and (12) of subsection 

20 (d), 

21 ‘‘(B) ‘5 years’ shall be substituted for ‘2 

22 years’ each place it appears in subsections (a), 

23 (b)(3), (b)(4), (b)(5)(C)(ii)(III), and 

24 (c)(1)(B)(ii), and 


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1 ‘‘(C) ‘5-year’ shall be substituted for ‘2- 

2 year’ in subsection (b)(3). 

3 ‘‘(2) EXCEPTION FOR BINDING CONTRACTS.— 

4 Paragraph (1) shall not apply to any sale or ex5 change with respect to which there was a written 

6 binding contract in effect before January 1, 2018, 

7 and at all times thereafter before the sale or ex8 change.’’. 

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

10 this section shall apply to sales and exchanges after De11 cember 31, 2017. 

12 SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED 

13 BICYCLE COMMUTING REIMBURSEMENT. 

14 (a) IN GENERAL.—Section 132(f) is amended by 

15 adding at the end the following new paragraph: 

16 ‘‘(8) SUSPENSION OF QUALIFIED BICYCLE COM17 MUTING REIMBURSEMENT EXCLUSION.—Paragraph 

18 (1)(D) shall not apply to any taxable year beginning 

19 after December 31, 2017, and before January 1, 

20 2026.’’. 

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2017. 


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1 SEC. 11049. SUSPENSION OF EXCLUSION FOR QUALIFIED 

2 MOVING EXPENSE REIMBURSEMENT. 

3 (a) IN GENERAL.—Section 132(g) is amended— 

4 (1) by striking ‘‘For purposes of this section, 

5 the term’’ and inserting ‘‘For purposes of this sec6 tion— 

7 ‘‘(1) IN GENERAL.—The term’’, and 

8 (2) by adding at the end the following new 

9 paragraph: 

10 ‘‘(2) SUSPENSION FOR TAXABLE YEARS 2018

11 THROUGH 2025.—Except in the case of a member of 

12 the Armed Forces of the United States on active 

13 duty who moves pursuant to a military order and in14 cident to a permanent change of station, subsection 

15 (a)(6) shall not apply to any taxable year beginning 

16 after December 31, 2017, and before January 1, 

17 2026.’’. 

18 (b) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 SEC. 11050. SUSPENSION OF DEDUCTION FOR MOVING EX22 PENSES. 

23 (a) IN GENERAL.—Section 217 is amended by adding 

24 at the end the following new subsection: 

25 ‘‘(k) SUSPENSION OF DEDUCTION FOR TAXABLE

26 YEARS 2018 THROUGH 2025.—Except in the case of an 


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1 individual to whom subsection (g) applies, this section 

2 shall not apply to any taxable year beginning after Decem3 ber 31, 2017, and before January 1, 2026.’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2017. 

7 SEC. 11051. LIMITATION ON WAGERING LOSSES. 

8 (a) IN GENERAL.—Section 165(d) is amended by 

9 adding at the end the following: ‘‘For purposes of the pre10 ceding sentence, in the case of taxable years beginning 

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

12 the term ‘losses from wagering transactions’ includes any 

13 deduction otherwise allowable under this chapter incurred 

14 in carrying on any wagering transaction.’’. 

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2017. 

18 PART VI—INCREASE IN ESTATE AND GIFT TAX 

19 EXEMPTION 

20 SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMP21 TION. 

22 (a) IN GENERAL.—Section 2010(c)(3) is amended by 

23 adding at the end the following new subparagraph: 

24 ‘‘(C) INCREASE IN BASIC EXCLUSION

25 AMOUNT.—In the case of estates of decedents 


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1 dying or gifts made after December 31, 2017, 

2 and before January 1, 2026, subparagraph (A) 

3 shall be applied by substituting ‘$10,000,000’ 

4 for ‘$5,000,000’.’’. 

5 (b) CONFORMING AMENDMENT.—Subsection (g) of 

6 section 2001 is amended to read as follows: 

7 ‘‘(g) MODIFICATIONS TO TAX PAYABLE.— 

8 ‘‘(1) MODIFICATIONS TO GIFT TAX PAYABLE TO

9 REFLECT DIFFERENT TAX RATES.—For purposes of 

10 applying subsection (b)(2) with respect to 1 or more 

11 gifts, the rates of tax under subsection (c) in effect 

12 at the decedent’s death shall, in lieu of the rates of 

13 tax in effect at the time of such gifts, be used both 

14 to compute— 

15 ‘‘(A) the tax imposed by chapter 12 with 

16 respect to such gifts, and 

17 ‘‘(B) the credit allowed against such tax 

18 under section 2505, including in computing— 

19 ‘‘(i) the applicable credit amount 

20 under section 2505(a)(1), and 

21 ‘‘(ii) the sum of the amounts allowed 

22 as a credit for all preceding periods under 

23 section 2505(a)(2). 

24 ‘‘(2) MODIFICATIONS TO ESTATE TAX PAYABLE

25 TO REFLECT DIFFERENT BASIC EXCLUSION


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1 AMOUNTS.—The Secretary shall prescribe such regu2 lations as may be necessary or appropriate to carry 

3 out this section with respect to any difference be4 tween— 

5 ‘‘(A) the basic exclusion amount under sec6 tion 2010(c)(3) applicable at the time of the de7 cedent’s death, and 

8 ‘‘(B) the basic exclusion amount under 

9 such section applicable with respect to any gifts 

10 made by the decedent.’’. 

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

12 this section shall apply to estates of decedents dying and 

13 gifts made after December 31, 2017. 

14 PART VII—TAXPAYER RIGHTS AND TAX 

15 ADMINISTRATION 

16 SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING 

17 IRS LEVY. 

18 (a) EXTENSION OF TIME FOR RETURN OF PROPERTY

19 SUBJECT TO LEVY.—Subsection (b) of section 6343 is 

20 amended by striking ‘‘9 months’’ and inserting ‘‘2 years’’. 

21 (b) PERIOD OF LIMITATION ON SUITS.—Subsection 

22 (c) of section 6532 is amended— 

23 (1) by striking ‘‘9 months’’ in paragraph (1) 

24 and inserting ‘‘2 years’’, and 


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1 (2) by striking ‘‘9-month’’ in paragraph (2) and 

2 inserting ‘‘2-year’’. 

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

4 this section shall apply to— 

5 (1) levies made after the date of the enactment 

6 of this Act, and 

7 (2) levies made on or before such date if the 9- 

8 month period has not expired under section 6343(b) 

9 of the Internal Revenue Code of 1986 (without re10 gard to this section) as of such date. 

11 SEC. 11072. INDIVIDUALS HELD HARMLESS ON IMPROPER 

12 LEVY ON RETIREMENT PLANS. 

13 (a) IN GENERAL.—Section 6343 is amended by add14 ing at the end the following new subsection: 

15 ‘‘(f) INDIVIDUALS HELD HARMLESS ON WRONGFUL

16 LEVY, ETC. ON RETIREMENT PLAN.— 

17 ‘‘(1) IN GENERAL.—If the Secretary determines 

18 that an individual’s account or benefit under an eli19 gible retirement plan (as defined in section 

20 402(c)(8)(B)) has been levied upon in a case to 

21 which subsection (b) or (d)(2)(A) applies and prop22 erty or an amount of money is returned to the indi23 vidual— 

24 ‘‘(A) the individual may contribute such 

25 property or an amount equal to the sum of— 


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1 ‘‘(i) the amount of money so returned 

2 by the Secretary, and 

3 ‘‘(ii) interest paid under subsection (c) 

4 on such amount of money, 

5 into such eligible retirement plan if such con6 tribution is permitted by the plan, or into an in7 dividual retirement plan (other than an endow8 ment contract) to which a rollover contribution 

9 of a distribution from such eligible retirement 

10 plan is permitted, but only if such contribution 

11 is made not later than the due date (not includ12 ing extensions) for filing the return of tax for 

13 the taxable year in which such property or 

14 amount of money is returned, and 

15 ‘‘(B) the Secretary shall, at the time such 

16 property or amount of money is returned, notify 

17 such individual that a contribution described in 

18 subparagraph (A) may be made. 

19 ‘‘(2) TREATMENT AS ROLLOVER.—The distribu20 tion on account of the levy and any contribution 

21 under paragraph (1) with respect to the return of 

22 such distribution shall be treated for purposes of 

23 this title as if such distribution and contribution 

24 were described in section 402(c), 402A(c)(3), 


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1 403(a)(4), 403(b)(8), 408(d)(3), 408A(d)(3), or 

2 457(e)(16), whichever is applicable; except that— 

3 ‘‘(A) the contribution shall be treated as 

4 having been made for the taxable year in which 

5 the distribution on account of the levy occurred, 

6 and the interest paid under subsection (c) shall 

7 be treated as earnings within the plan after the 

8 contribution and shall not be included in gross 

9 income, and 

10 ‘‘(B) such contribution shall not be taken 

11 into account under section 408(d)(3)(B). 

12 ‘‘(3) REFUND, ETC., OF INCOME TAX ON

13 LEVY.— 

14 ‘‘(A) IN GENERAL.—If any amount is in15 cludible in gross income for a taxable year by 

16 reason of a distribution on account of a levy re17 ferred to in paragraph (1) and any portion of 

18 such amount is treated as a rollover contribu19 tion under paragraph (2), any tax imposed by 

20 chapter 1 on such portion shall not be assessed, 

21 and if assessed shall be abated, and if collected 

22 shall be credited or refunded as an overpayment 

23 made on the due date for filing the return of 

24 tax for such taxable year. 


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1 ‘‘(B) EXCEPTION.—Subparagraph (A) 

2 shall not apply to a rollover contribution under 

3 this subsection which is made from an eligible 

4 retirement plan which is not a Roth IRA or a 

5 designated Roth account (within the meaning of 

6 section 402A) to a Roth IRA or a designated 

7 Roth account under an eligible retirement plan. 

8 ‘‘(4) INTEREST.—Notwithstanding subsection 

9 (d), interest shall be allowed under subsection (c) in 

10 a case in which the Secretary makes a determination 

11 described in subsection (d)(2)(A) with respect to a 

12 levy upon an individual retirement plan. 

13 ‘‘(5) TREATMENT OF INHERITED ACCOUNTS.— 

14 For purposes of paragraph (1)(A), section 

15 408(d)(3)(C) shall be disregarded in determining 

16 whether an individual retirement plan is a plan to 

17 which a rollover contribution of a distribution from 

18 the plan levied upon is permitted.’’. 

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

20 this section shall apply to amounts paid under subsections 

21 (b), (c), and (d)(2)(A) of section 6343 of the Internal Rev22 enue Code of 1986 in taxable years beginning after De23 cember 31, 2017. 


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1 SEC. 11073. MODIFICATION OF USER FEE REQUIREMENTS 

2 FOR INSTALLMENT AGREEMENTS. 

3 (a) IN GENERAL.—Section 6159 is amended by re4 designating subsection (f) as subsection (g) and by insert5 ing after subsection (e) the following new subsection: 

6 ‘‘(f) INSTALLMENT AGREEMENT FEES.— 

7 ‘‘(1) LIMITATION ON FEE AMOUNT.—The 

8 amount of any fee imposed on an installment agree9 ment under this section may not exceed the amount 

10 of such fee as in effect on the date of the enactment 

11 of this subsection. 

12 ‘‘(2) WAIVER OR REIMBURSEMENT.—In the 

13 case of any taxpayer with an adjusted gross income, 

14 as determined for the most recent year for which 

15 such information is available, which does not exceed 

16 250 percent of the applicable poverty level (as deter17 mined by the Secretary)— 

18 ‘‘(A) if the taxpayer has agreed to make 

19 payments under the installment agreement by 

20 electronic payment through a debit instrument, 

21 no fee shall be imposed on an installment agree22 ment under this section, and 

23 ‘‘(B) if the taxpayer is unable to make 

24 payments under the installment agreement by 

25 electronic payment through a debit instrument, 

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1 stallment agreement, pay the taxpayer an 

2 amount equal to any such fees imposed.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to agreements entered into on or 

5 after the date which is 60 days after the date of the enact6 ment of this Act. 

7 SEC. 11074. FORM 1040SR FOR SENIORS. 

8 (a) IN GENERAL.—The Secretary of the Treasury (or 

9 the Secretary’s delegate) shall make available a form, to 

10 be known as ‘‘Form 1040SR’’, for use by individuals to 

11 file the return of tax imposed by chapter 1 of the Internal 

12 Revenue Code of 1986. Such form shall be as similar as 

13 practicable to Form 1040EZ, except that— 

14 (1) the form shall be available only to individ15 uals who have attained age 65 as of the close of the 

16 taxable year, 

17 (2) the form may be used even if income for the 

18 taxable year includes— 

19 (A) social security benefits (as defined in 

20 section 86(d) of the Internal Revenue Code of 

21 1986), 

22 (B) distributions from qualified retirement 

23 plans (as defined in section 4974(c) of such 

24 Code), annuities or other such deferred pay25 ment arrangements, 


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1 (C) interest and dividends, or 

2 (D) capital gains and losses taken into ac3 count in determining adjusted net capital gain 

4 (as defined in section 1(h)(3) of such Code), 

5 and 

6 (3) the form shall be available without regard 

7 to the amount of any item of taxable income or the 

8 total amount of taxable income for the taxable year. 

9 (b) EFFECTIVE DATE.—The form required by sub10 section (a) shall be made available for taxable years begin11 ning after the date of the enactment of this Act and end12 ing before January 1, 2026. 

13 SEC. 11075. SENSE OF THE SENATE ON IMPROVING CUS14 TOMER SERVICE AND PROTECTIONS FOR 

15 TAXPAYERS BY REINSTATING APPROPRIATE 

16 FUNDING LEVELS. 

17 It is the sense of the Senate that politically motivated 

18 budget cuts— 

19 (1) are counterproductive to deficit reduction, 

20 (2) diminish the ability of the Internal Revenue 

21 Service to adequately serve taxpayers and protect 

22 taxpayer information, and 

23 (3) reduce the ability of the Internal Revenue 

24 Service to enforce the law. 


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1 SEC. 11076. RETURN PREPARATION PROGRAMS FOR LOW2 INCOME TAXPAYERS. 

3 (a) IN GENERAL.—Chapter 77 is amended by insert4 ing after section 7526 the following new section: 

5 ‘‘SEC. 7526A. RETURN PREPARATION PROGRAMS FOR LOW6 INCOME TAXPAYERS. 

7 ‘‘(a) VOLUNTEER INCOME TAX ASSISTANCE MATCH8 ING GRANT PROGRAM.— 

9 ‘‘(1) ESTABLISHMENT OF PROGRAM.—The Sec10 retary, through the Internal Revenue Service, shall 

11 establish a Community Volunteer Income Tax As12 sistance Matching Grant Program (hereinafter in 

13 this section referred to as the ‘VITA grant pro14 gram’). Except as otherwise provided in this section, 

15 the VITA grant program shall be administered in a 

16 manner which is substantially similar to the Commu17 nity Volunteer Income Tax Assistance matching 

18 grants demonstration program established under 

19 title I of division D of the Consolidated Appropria20 tions Act, 2008. 

21 ‘‘(2) MATCHING GRANTS.— 

22 ‘‘(A) IN GENERAL.—The Secretary shall, 

23 subject to the availability of appropriated funds, 

24 make available grants under the VITA grant 

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1 fied return preparation programs assisting low2 income taxpayers and members of underserved 

3 populations. 

4 ‘‘(B) APPLICATION.— 

5 ‘‘(i) IN GENERAL.—Subject to clause 

6 (ii), in order to be eligible for a grant 

7 under this section, a qualified return prep8 aration program shall submit an applica9 tion to the Secretary at such time, in such 

10 manner, and containing such information 

11 as the Secretary reasonably requires. 

12 ‘‘(ii) ACCURACY REVIEW.—In the case 

13 of any qualified return preparation pro14 gram which was awarded a grant under 

15 this section and was subsequently subject 

16 to a field site visit by the Internal Revenue 

17 Service (including through the Stakeholder 

18 Partnerships, Education, and Communica19 tion office) in which it was determined that 

20 the average accuracy rate for preparation 

21 of tax returns through such program was 

22 less than 90 percent, such program shall 

23 not be eligible for any additional grants 

24 under this section unless such program 

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1 cient documentation regarding the correc2 tive measures established by such program 

3 to address the deficiencies identified fol4 lowing the field site visit. 

5 ‘‘(C) PRIORITY.—In awarding grants 

6 under this section, the Secretary shall give pri7 ority to applications— 

8 ‘‘(i) demonstrating assistance to low9 income taxpayers, with emphasis on out10 reach to and services for such taxpayers, 

11 ‘‘(ii) demonstrating taxpayer outreach 

12 and educational activities relating to eligi13 bility and availability of income supports 

14 available through the Internal Revenue 

15 Code of 1986, such as the earned income 

16 tax credit, and 

17 ‘‘(iii) demonstrating specific outreach 

18 and focus on one or more underserved pop19 ulations. 

20 ‘‘(D) DURATION OF GRANTS.—Upon appli21 cation of a qualified return preparation pro22 gram, the Secretary is authorized to award a 

23 multi-year grant not to exceed 3 years. 

24 ‘‘(3) AGGREGATE LIMITATION.—Unless other25 wise provided by specific appropriation, the SecVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00093 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 retary shall not allocate more than $30,000,000 per 

2 fiscal year (exclusive of costs of administering the 

3 program) to carry out the purposes of this section. 

4 ‘‘(b) USE OF FUNDS.— 

5 ‘‘(1) IN GENERAL.—Qualified return prepara6 tion programs receiving a grant under this section 

7 may use the grant for— 

8 ‘‘(A) ordinary and necessary costs associ9 ated with program operation in accordance with 

10 Cost Principles Circulars as set forth by the Of11 fice of Management and Budget, including— 

12 ‘‘(i) for wages or salaries of persons 

13 coordinating the activities of the program, 

14 ‘‘(ii) to develop training materials, 

15 conduct training, and perform quality re16 views of the returns for which assistance 

17 has been provided under the program, and 

18 ‘‘(iii) for equipment purchases and ve19 hicle-related expenses associated with re20 mote or rural tax preparation services, 

21 ‘‘(B) outreach and educational activities 

22 described in subsection (a)(2)(C)(ii), and 

23 ‘‘(C) services related to financial education 

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1 tablishment of savings accounts in connection 

2 with tax return preparation. 

3 ‘‘(2) USE OF GRANTS FOR OVERHEAD EX4 PENSES PROHIBITED.—No grant made under this 

5 section may be used for overhead expenses that are 

6 not directly related to any qualified return prepara7 tion program. 

8 ‘‘(c) PROMOTION AND REFERRAL.— 

9 ‘‘(1) PROMOTION.—The Secretary shall pro10 mote the benefits of, and encourage the use of, tax 

11 preparation through qualified return preparation 

12 programs through the use of mass communications, 

13 referrals, and other means. 

14 ‘‘(2) INTERNAL REVENUE SERVICE REFER15 RALS.—The Secretary shall refer taxpayers to quali16 fied return preparation programs receiving funding 

17 under this section. 

18 ‘‘(3) VITA GRANTEE REFERRAL.—Qualified re19 turn preparation programs receiving a grant under 

20 this section are encouraged to refer, as appropriate, 

21 to local or regional Low Income Taxpayer Clinics in22 dividuals who are eligible to receive services at such 

23 clinics. 

24 ‘‘(d) DEFINITIONS.—For purposes of this section— 


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1 ‘‘(1) QUALIFIED RETURN PREPARATION PRO2 GRAM.—The term ‘qualified return preparation pro3 gram’ means any program— 

4 ‘‘(A) which provides assistance to individ5 uals, not less than 90 percent of whom are low6 income taxpayers, in preparing and filing Fed7 eral income tax returns, 

8 ‘‘(B) which is administered by a qualified 

9 entity, 

10 ‘‘(C) in which all of the volunteers who as11 sist in the preparation of Federal income tax 

12 returns meet the training requirements pre13 scribed by the Secretary, and 

14 ‘‘(D) which uses a quality review process 

15 which reviews 100 percent of all returns. 

16 ‘‘(2) QUALIFIED ENTITY.— 

17 ‘‘(A) IN GENERAL.—The term ‘qualified 

18 entity’ means any entity which— 

19 ‘‘(i) is an eligible organization (as de20 scribed in subparagraph (B)), 

21 ‘‘(ii) is in compliance with Federal tax 

22 filing and payment requirements, 

23 ‘‘(iii) is not debarred or suspended 

24 from Federal contracts, grants, or coopera25 tive agreements, and 


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1 ‘‘(iv) agrees to provide documentation 

2 to substantiate any matching funds pro3 vided under the VITA grant program. 

4 ‘‘(B) ELIGIBLE ORGANIZATION.— 

5 ‘‘(i) IN GENERAL.—Subject to clause 

6 (ii), the term ‘eligible organization’ 

7 means— 

8 ‘‘(I) an institution of higher edu9 cation which is described in section 

10 102 (other than subsection (a)(1)(C) 

11 thereof) of the Higher Education Act 

12 of 1965 (20 U.S.C. 1088), as in effect 

13 on the date of the enactment of this 

14 section, and which has not been dis15 qualified from participating in a pro16 gram under title IV of such Act, 

17 ‘‘(II) an organization described 

18 in section 501(c) of the Internal Rev19 enue Code of 1986 and exempt from 

20 tax under section 501(a) of such 

21 Code, 

22 ‘‘(III) a local government agency, 

23 including— 

24 ‘‘(aa) a county or municipal 

25 government agency, and 


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1 ‘‘(bb) an Indian tribe, as de2 fined in section 4(13) of the Na3 tive American Housing Assist4 ance and Self-Determination Act 

5 of 1996 (25 U.S.C. 4103(13)), 

6 including any tribally designated 

7 housing entity (as defined in sec8 tion 4(22) of such Act (25 

9 U.S.C. 4103(22))), tribal sub10 sidiary, subdivision, or other 

11 wholly owned tribal entity, or 

12 ‘‘(IV) a local, State, regional, or 

13 national coalition (with one lead orga14 nization which meets the eligibility re15 quirements of subclause (I), (II), or 

16 (III) acting as the applicant organiza17 tion). 

18 ‘‘(ii) ALTERNATIVE ELIGIBLE ORGANI19 ZATION.—If no eligible organization de20 scribed in clause (i) is available to assist 

21 the targeted population or community, the 

22 term ‘eligible organization’ shall include— 

23 ‘‘(I) a State government agency, 

24 and 


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1 ‘‘(II) a Cooperative Extension 

2 Service office. 

3 ‘‘(3) LOW-INCOME TAXPAYERS.—The term ‘low4 income taxpayer’ means a taxpayer who has income 

5 for the taxable year which does not exceed an 

6 amount equal to the completed phaseout amount 

7 under section 32(b) for a married couple filing a 

8 joint return with three or more qualifying children, 

9 as determined in a revenue procedure or other pub10 lished guidance. 

11 ‘‘(4) UNDERSERVED POPULATION.—The term 

12 ‘underserved population’ includes populations of per13 sons with disabilities, persons with limited English 

14 proficiency, Native Americans, individuals living in 

15 rural areas, members of the Armed Forces and their 

16 spouses, and the elderly.’’. 

17 (b) CLERICAL AMENDMENT.—The table of sections 

18 for chapter 77 is amended by inserting after the item re19 lating to section 7526 the following new item: 

‘‘7526A. Return preparation programs for low-income taxpayers.’’. 

20 SEC. 11077. FREE FILE PROGRAM. 

21 (a) The Secretary of the Treasury, or the Secretary’s 

22 delegate, shall continue to operate the IRS Free File Pro23 gram as established by the Internal Revenue Service and 

24 published in the Federal Register on November 4, 2002 


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1 (67 Fed. Reg. 67247), including any subsequent agree2 ments and governing rules established pursuant thereto. 

3 (b) The IRS Free File Program shall continue to pro4 vide free commercial-type online individual income tax 

5 preparation and electronic filing services to the lowest 70 

6 percent of taxpayers by income. The number of taxpayers 

7 eligible to receive such services each year shall be cal8 culated by the Internal Revenue Service annually based 

9 on prior year aggregate taxpayer adjusted gross income 

10 data. 

11 (c) In addition to the services described in subsection 

12 (b), and in the same manner, the IRS Free File Program 

13 shall continue to make available to all taxpayers (without 

14 regard to income) a basic, online electronic fillable forms 

15 utility. 

16 (d) The IRS Free File Program shall continue to 

17 work cooperatively with the private sector to provide the 

18 free individual income tax preparation and the electronic 

19 filing services described in subsections (b) and (c). 

20 (e) The IRS Free File Program shall work coopera21 tively with State government agencies to enhance and ex22 pand the use of the program to provide needed benefits 

23 to the taxpayer while reducing the cost of processing re24 turns. 


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1 (f) Nothing in this section is intended to impact the 

2 continuity of services provided under Taxpayer Assistance 

3 Centers, Tax Counseling for the Elderly, and Volunteer 

4 Income Tax Assistance programs. 

5 SEC. 11078. ATTORNEYS’ FEES RELATING TO AWARDS TO 

6 WHISTLEBLOWERS. 

7 (a) IN GENERAL.—Paragraph (21) of section 62(a) 

8 is amended to read as follows: 

9 ‘‘(21) ATTORNEYS’ FEES RELATING TO AWARDS

10 TO WHISTLEBLOWERS.— 

11 ‘‘(A) IN GENERAL.—Any deduction allow12 able under this chapter for attorney fees and 

13 court costs paid by, or on behalf of, the tax14 payer in connection with any award under— 

15 ‘‘(i) section 7623(b), or 

16 ‘‘(ii) in the case of taxable years be17 ginning after December 31, 2017, and be18 fore January 1, 2026, any action brought 

19 under— 

20 ‘‘(I) section 21F of the Securities 

21 Exchange Act of 1934 (15 U.S.C. 

22 78u-6), 

23 ‘‘(II) a State law relating to false 

24 or fraudulent claims that meets the 

25 requirements described in section 


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1 1909(b) of the Social Security Act (42 

2 U.S.C. 1396h(b)), or 

3 ‘‘(III) section 23 of the Com4 modity Exchange Act (7 U.S.C. 26). 

5 ‘‘(B) MAY NOT EXCEED AWARD.—Sub6 paragraph (A) shall not apply to any deduction 

7 in excess of the amount includible in the tax8 payer’s gross income for the taxable year on ac9 count of such award.’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2017. 

13 SEC. 11079. CLARIFICATION OF WHISTLEBLOWER AWARDS. 

14 (a) DEFINITION OF PROCEEDS.— 

15 (1) IN GENERAL.—Section 7623 is amended by 

16 adding at the end the following new subsection: 

17 ‘‘(c) PROCEEDS.—For purposes of this section, the 

18 term ‘proceeds’ includes— 

19 ‘‘(1) penalties, interest, additions to tax, and 

20 additional amounts provided under the internal rev21 enue laws, and 

22 ‘‘(2) any proceeds arising from laws for which 

23 the Internal Revenue Service is authorized to admin24 ister, enforce, or investigate, including— 


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1 ‘‘(A) criminal fines and civil forfeitures, 

2 and 

3 ‘‘(B) violations of reporting require4 ments.’’. 

5 (2) CONFORMING AMENDMENTS.—Paragraphs 

6 (1) and (2)(A) of section 7623(b) are each amended 

7 by striking ‘‘collected proceeds (including penalties, 

8 interest, additions to tax, and additional amounts) 

9 resulting from the action’’ and inserting ‘‘proceeds 

10 collected as a result of the action’’. 

11 (b) AMOUNT OF PROCEEDS DETERMINED WITHOUT

12 REGARD TO AVAILABILITY.—Paragraphs (1) and (2)(A) 

13 of section 7623(b) are each amended by inserting ‘‘(deter14 mined without regard to whether such proceeds are avail15 able to the Secretary)’’ after ‘‘in response to such action’’. 

16 (c) DISPUTED AMOUNT THRESHOLD.—Section 

17 7623(b)(5)(B) is amended by striking ‘‘tax, penalties, in18 terest, additions to tax, and additional amounts’’ and in19 serting ‘‘proceeds’’. 

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

21 this section shall apply to information provided before, on, 

22 or after the date of the enactment of this Act with respect 

23 to which a final determination for an award has not been 

24 made before such date of enactment. 


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1 PART VIII—INDIVIDUAL MANDATE 

2 SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY 

3 PAYMENT FOR INDIVIDUALS FAILING TO 

4 MAINTAIN MINIMUM ESSENTIAL COVERAGE. 

5 (a) IN GENERAL.—Section 5000A(c) is amended— 

6 (1) in paragraph (2)(B)(iii), by striking ‘‘2.5 

7 percent’’ and inserting ‘‘Zero percent’’, and 

8 (2) in paragraph (3)— 

9 (A) by striking ‘‘$695’’ in subparagraph 

10 (A) and inserting ‘‘$0’’, and 

11 (B) by striking subparagraph (D). 

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

13 this section shall apply to months beginning after Decem14 ber 31, 2018. 

15 Subtitle B—Alternative Minimum 

16 Tax 

17 SEC. 12001. REPEAL OF TAX FOR CORPORATIONS. 

18 (a) IN GENERAL.—Section 55(a) is amended by 

19 striking ‘‘There’’ and inserting ‘‘In the case of a taxpayer 

20 other than a corporation, there’’. 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Section 38(c)(6) is amended by adding at 

23 the end the following new subparagraph: 

24 ‘‘(E) CORPORATIONS.—In the case of a 

25 corporation, this subsection shall be applied by 


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1 treating the corporation as having a tentative 

2 minimum tax of zero.’’. 

3 (2)(A) Section 55(b)(1) is amended to read as 

4 follows: 

5 ‘‘(1) AMOUNT OF TENTATIVE TAX.— 

6 ‘‘(A) IN GENERAL.—The tentative min7 imum tax for the taxable year is the sum of— 

8 ‘‘(i) 26 percent of so much of the tax9 able excess as does not exceed $175,000, 

10 plus 

11 ‘‘(ii) 28 percent of so much of the tax12 able excess as exceeds $175,000. 

13 The amount determined under the preceding 

14 sentence shall be reduced by the alternative 

15 minimum tax foreign tax credit for the taxable 

16 year. 

17 ‘‘(B) TAXABLE EXCESS.—For purposes of 

18 this subsection, the term ‘taxable excess’ means 

19 so much of the alternative minimum taxable in20 come for the taxable year as exceeds the exemp21 tion amount. 

22 ‘‘(C) MARRIED INDIVIDUAL FILING SEPA23 RATE RETURN.—In the case of a married indi24 vidual filing a separate return, subparagraph 

25 (A) shall be applied by substituting 50 percent 


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1 of the dollar amount otherwise applicable under 

2 clause (i) and cause (ii) thereof. For purposes 

3 of the preceding sentence, marital status shall 

4 be determined under section 7703.’’. 

5 (B) Section 59(a) is amended— 

6 (i) by striking ‘‘subparagraph (A)(i) or 

7 (B)(i) of section 55(b)(1) (whichever applies) in 

8 lieu of the highest rate of tax specified in sec9 tion 1 or 11 (whichever applies)’’ in paragraph 

10 (1)(C) and inserting ‘‘section 55(b)(1) in lieu of 

11 the highest rate of tax specified in section 1’’, 

12 and 

13 (ii) in paragraph (2), by striking ‘‘means’’ 

14 and all that follows and inserting ‘‘means the 

15 amount determined under the first sentence of 

16 section 55(b)(1).’’. 

17 (C) Section 897(a)(2)(A) is amended by strik18 ing ‘‘section 55(b)(1)(A)’’ and inserting ‘‘section 

19 55(b)(1)’’. 

20 (D) Section 911(f) is amended— 

21 (i) in paragraph (1)(B)— 

22 (I) by striking ‘‘section 

23 55(b)(1)(A)(ii)’’ and inserting ‘‘section 

24 55(b)(1)(B)’’, and 


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1 (II) by striking ‘‘section 

2 55(b)(1)(A)(i)’’ and inserting ‘‘section 

3 55(b)(1)(A)’’, and 

4 (ii) in paragraph (2)(B), by striking ‘‘sec5 tion 55(b)(1)(A)(ii)’’ each place it appears and 

6 inserting ‘‘section 55(b)(1)(B)’’. 

7 (3) Section 55(c)(1) is amended by striking ‘‘, 

8 the section 936 credit allowable under section 27(b), 

9 and the Puerto Rico economic activity credit under 

10 section 30A’’. 

11 (4) Section 55(d) is amended— 

12 (A) by striking paragraph (2) and redesig13 nating paragraphs (3) and (4) as paragraphs 

14 (2) and (3), respectively, 

15 (B) in paragraph (2) (as so redesignated), 

16 by inserting ‘‘and’’ at the end of subparagraph 

17 (B), by striking ‘‘, and’’ at the end of subpara18 graph (C) and inserting a period, and by strik19 ing subparagraph (D), and 

20 (C) in paragraph (3) (as so redesig21 nated)— 

22 (i) by striking ‘‘(b)(1)(A)(i)’’ in sub23 paragraph (B)(i) and inserting 

24 ‘‘(b)(1)(A)’’, and 


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1 (ii) by striking ‘‘paragraph (3)’’ in 

2 subparagraph (B)(iii) and inserting ‘‘para3 graph (2)’’. 

4 (5) Section 55 is amended by striking sub5 section (e). 

6 (6)(A) Section 56 is amended by striking sub7 sections (c) and (g). 

8 (B) Section 847 is amended by striking the last 

9 sentence of paragraph (9). 

10 (C) Section 848 is amended by striking sub11 section (i). 

12 (7) Section 58(a) is amended by striking para13 graph (3) and redesignating paragraph (4) as para14 graph (3). 

15 (8) Section 59 is amended by striking sub16 sections (b) and (f). 

17 (9) Section 11(d) is amended by striking ‘‘the 

18 taxes imposed by subsection (a) and section 55’’ and 

19 inserting ‘‘the tax imposed by subsection (a)’’. 

20 (10) Section 12 is amended by striking para21 graph (7). 

22 (11) Section 168(k) is amended by striking 

23 paragraph (4). 

24 (12) Section 882(a)(1) is amended by striking 

25 ‘‘, 55,’’. 


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1 (13) Section 962(a)(1) is amended by striking 

2 ‘‘sections 11 and 55’’ and inserting ‘‘section 11’’. 

3 (14) Section 1561(a) is amended— 

4 (A) by inserting ‘‘and’’ at the end of para5 graph (1), by striking ‘‘, and’’ at the end of 

6 paragraph (2) and inserting a period, and by 

7 striking paragraph (3), and 

8 (B) by striking the last sentence. 

9 (15) Section 6425(c)(1)(A) is amended to read 

10 as follows: 

11 ‘‘(A) the tax imposed by section 11 or 

12 1201(a), or subchapter L of chapter 1, which13 ever is applicable, over’’. 

14 (16) Section 6655(e)(2) is amended by striking 

15 ‘‘and alternative minimum taxable income’’ each 

16 place it appears in subparagraphs (A) and (B)(i). 

17 (17) Section 6655(g)(1)(A) is amended by in18 serting ‘‘plus’’ at the end of clause (i), by striking 

19 clause (ii), and by redesignating clause (iii) as clause 

20 (ii). 

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2017. 


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1 SEC. 12002. SUSPENSION OF TAX ON INDIVIDUALS. 

2 (a) IN GENERAL.—Section 55(a) is amended by add3 ing at the end the following new flush sentence: 

4 ‘‘No tax shall be imposed by this section for any taxable 

5 year beginning after December 31, 2017, and before Jan6 uary 1, 2026, and the tentative minimum tax of any tax7 payer for any such taxable year shall be zero for purposes 

8 of this title.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2017. 

12 SEC. 12003. CREDIT FOR PRIOR YEAR MINIMUM TAX LI13 ABILITY. 

14 (a) CREDITS TREATED AS REFUNDABLE.—Section 

15 53 is amended by adding at the end the following new 

16 subsection: 

17 ‘‘(e) PORTION OF CREDIT TREATED AS REFUND18 ABLE.— 

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

20 year beginning in 2018, 2019, 2020, or 2021, the 

21 limitation under subsection (c) shall be increased by 

22 the AMT refundable credit amount for such year. 

23 ‘‘(2) AMT REFUNDABLE CREDIT AMOUNT.— 

24 For purposes of paragraph (1), the AMT refundable 

25 credit amount is an amount equal to 50 percent 


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1 (100 percent in the case of a taxable year beginning 

2 in 2021) of the excess (if any) of— 

3 ‘‘(A) the minimum tax credit determined 

4 under subsection (b) for the taxable year, over 

5 ‘‘(B) the minimum tax credit allowed 

6 under subsection (a) for such year (before the 

7 application of this subsection for such year). 

8 ‘‘(3) CREDIT REFUNDABLE.—For purposes of 

9 this title (other than this section), the credit allowed 

10 by reason of this subsection shall be treated as a 

11 credit allowed under subpart C (and not this sub12 part). 

13 ‘‘(4) SHORT TAXABLE YEARS.—In the case of 

14 any taxable year of less than 365 days, the AMT re15 fundable credit amount determined under paragraph 

16 (2) with respect to such taxable year shall be the 

17 amount which bears the same ratio to such amount 

18 determined without regard to this paragraph as the 

19 number of days in such taxable year bears to 365.’’. 

20 (b) TREATMENT OF REFERENCES.—Section 53(d) is 

21 amended by adding at the end the following new para22 graph: 

23 ‘‘(3) AMT TERM REFERENCES.—In the case of 

24 a corporation, any references in this subsection to 

25 section 55, 56, or 57 shall be treated as a reference 


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1 to such section as in effect before the amendments 

2 made by Tax Cuts and Jobs Act.’’. 

3 (c) CONFORMING AMENDMENT.—Section 

4 1374(b)(3)(B) is amended by striking the last sentence 

5 thereof. 

6 (d) EFFECTIVE DATE.— 

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

8 this section shall apply to taxable years beginning 

9 after December 31, 2017. 

10 (2) CONFORMING AMENDMENT.—The amend11 ment made by subsection (c) shall apply to taxable 

12 years beginning after December 31, 2021. 

13 Subtitle C—Business-related 

14 Provisions 

15 PART I—CORPORATE PROVISIONS 

16 Subpart A—20-percent Tax Rate 

17 SEC. 13001. 20-PERCENT CORPORATE TAX RATE. 

18 (a) IN GENERAL.—Subsection (b) of section 11 is 

19 amended to read as follows: 

20 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im21 posed by subsection (a) shall be 20 percent of taxable in22 come.’’. 

23 (b) CONFORMING AMENDMENTS.— 


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1 (1) The following sections are each amended by 

2 striking ‘‘section 11(b)(1)’’ and inserting ‘‘section 

3 11(b)’’: 

4 (A) Section 280C(c)(3)(B)(ii)(II). 

5 (B) Paragraphs (2)(B) and (6)(A)(ii) of 

6 section 860E(e). 

7 (C) Section 7874(e)(1)(B) 

8 (2)(A) Part I of subchapter P of chapter 1 is 

9 amended by striking section 1201 (and by striking 

10 the item relating to such section in the table of sec11 tions for such part). 

12 (B) Section 12 is amended by striking para13 graphs (4) and (6), and by redesignating paragraph 

14 (5) as paragraph (4). 

15 (C) Section 453A(c)(3) is amended by striking 

16 ‘‘or 1201 (whichever is appropriate)’’. 

17 (D) Section 527(b) is amended— 

18 (i) by striking paragraph (2), and 

19 (ii) by striking all that precedes ‘‘is hereby 

20 imposed’’ and inserting: 

21 ‘‘(b) TAX IMPOSED.—A tax’’. 

22 (E) Sections 594(a) is amended by striking 

23 ‘‘taxes imposed by section 11 or 1201(a)’’ and in24 serting ‘‘tax imposed by section 11’’. 


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1 (F) Section 691(c)(4) is amended by striking 

2 ‘‘1201,’’. 

3 (G) Section 801(a) is amended— 

4 (i) by striking paragraph (2), and 

5 (ii) by striking all that precedes ‘‘is hereby 

6 imposed’’ and inserting: 

7 ‘‘(a) TAX IMPOSED.—A tax’’. 

8 (H) Section 831(e) is amended by striking 

9 paragraph (1) and by redesignating paragraphs (2) 

10 and (3) as paragraphs (1) and (2), respectively. 

11 (I) Sections 832(c)(5) and 834(b)(1)(D) are 

12 each amended by striking ‘‘sec. 1201 and fol13 lowing,’’. 

14 (J) Section 852(b)(3)(A) is amended by strik15 ing ‘‘section 1201(a)’’ and inserting ‘‘section 11(b)’’. 

16 (K) Section 857(b)(3) is amended— 

17 (i) by striking subparagraph (A) and re18 designating subparagraphs (B) through (F) as 

19 subparagraphs (A) through (E), respectively, 

20 (ii) in subparagraph (C), as so redesig21 nated— 

22 (I) by striking ‘‘subparagraph (A)(ii)’’ 

23 in clause (i) thereof and inserting ‘‘para24 graph (1)’’, 


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1 (II) by striking ‘‘the tax imposed by 

2 subparagraph (A)(ii)’’ in clauses (ii) and 

3 (iv) thereof and inserting ‘‘the tax imposed 

4 by paragraph (1) on undistributed capital 

5 gain’’, 

6 (iii) in subparagraph (E), as so redesig7 nated, by striking ‘‘subparagraph (B) or (D)’’ 

8 and inserting ‘‘subparagraph (A) or (C)’’, and 

9 (iv) by adding at the end the following new 

10 subparagraph: 

11 ‘‘(F) UNDISTRIBUTED CAPITAL GAIN.— 

12 For purposes of this paragraph, the term ‘un13 distributed capital gain’ means the excess of the 

14 net capital gain over the deduction for divi15 dends paid (as defined in section 561) deter16 mined with reference to capital gain dividends 

17 only.’’. 

18 (L) Section 882(a)(1), as amended by section 

19 12001, is amended by striking ‘‘or 1201(a)’’. 

20 (M) Section 904(b) is amended— 

21 (i) by striking ‘‘or 1201(a)’’ in paragraph 

22 (2)(C), 

23 (ii) by striking paragraph (3)(D) and in24 serting the following: 


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1 ‘‘(D) CAPITAL GAIN RATE DIFFEREN2 TIAL.—There is a capital gain rate differential 

3 for any year if subsection (h) of section 1 ap4 plies to such taxable year.’’, and 

5 (iii) by striking paragraph (3)(E) and in6 serting the following: 

7 ‘‘(E) RATE DIFFERENTIAL PORTION.—The 

8 rate differential portion of foreign source net 

9 capital gain, net capital gain, or the excess of 

10 net capital gain from sources within the United 

11 States over net capital gain, as the case may 

12 be, is the same proportion of such amount as— 

13 ‘‘(i) the excess of— 

14 ‘‘(I) the highest rate of tax set 

15 forth in subsection (a), (b), (c), (d), or 

16 (e) of section 1 (whichever applies), 

17 over 

18 ‘‘(II) the alternative rate of tax 

19 determined under section 1(h), bears 

20 to 

21 ‘‘(ii) that rate referred to in subclause 

22 (I).’’. 

23 (N) Section 1374(b) is amended by striking 

24 paragraph (4). 


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1 (O) Section 1381(b) is amended by striking 

2 ‘‘taxes imposed by section 11 or 1201’’ and inserting 

3 ‘‘tax imposed by section 11’’. 

4 (P) Sections 6425(c)(1)(A), as amended by sec5 tion 12001, and 6655(g)(1)(A)(i) are each amended 

6 by striking ‘‘or 1201(a),’’. 

7 (Q) Section 7518(g)(6)(A) is amended by strik8 ing ‘‘or 1201(a)’’. 

9 (3)(A) Section 1445(e)(1) is amended— 

10 (i) by striking ‘‘35 percent’’ and inserting 

11 ‘‘the highest rate of tax in effect for the taxable 

12 year under section 11(b)’’, and 

13 (ii) by striking ‘‘of the gain’’ and inserting 

14 ‘‘multiplied by the gain’’. 

15 (B) Section 1445(e)(2) is amended by striking 

16 ‘‘35 percent of the amount’’ and inserting ‘‘the high17 est rate of tax in effect for the taxable year under 

18 section 11(b) multiplied by the amount’’. 

19 (C) Section 1445(e)(6) is amended— 

20 (i) by striking ‘‘35 percent’’ and inserting 

21 ‘‘the highest rate of tax in effect for the taxable 

22 year under section 11(b)’’, and 

23 (ii) by striking ‘‘of the amount’’ and in24 serting ‘‘multiplied by the amount’’. 


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1 (D) Section 1446(b)(2)(B) is amended by strik2 ing ‘‘section 11(b)(1)’’ and inserting ‘‘section 

3 11(b)’’. 

4 (4) Section 852(b)(1) is amended by striking 

5 the last sentence. 

6 (5)(A) Part I of subchapter B of chapter 5 is 

7 amended by striking section 1551 (and by striking 

8 the item relating to such section in the table of sec9 tions for such part). 

10 (B) Section 535(c)(5) is amended to read as 

11 follows: 

12 ‘‘(5) CROSS REFERENCE.—For limitation on 

13 credit provided in paragraph (2) or (3) in the case 

14 of certain controlled corporations, see section 

15 1561.’’. 

16 (6)(A) Section 1561, as amended by section 

17 12001, is amended to read as follows: 

18 ‘‘SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS 

19 CREDIT IN THE CASE OF CERTAIN CON20 TROLLED CORPORATIONS. 

21 ‘‘(a) IN GENERAL.—The component members of a 

22 controlled group of corporations on a December 31 shall, 

23 for their taxable years which include such December 31, 

24 be limited for purposes of this subtitle to one $250,000 

25 ($150,000 if any component member is a corporation deVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00118 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 scribed in section 535(c)(2)(B)) amount for purposes of 

2 computing the accumulated earnings credit under section 

3 535(c)(2) and (3). Such amount shall be divided equally 

4 among the component members of such group on such De5 cember 31 unless the Secretary prescribes regulations per6 mitting an unequal allocation of such amount. 

7 ‘‘(b) CERTAIN SHORT TAXABLE YEARS.—If a cor8 poration has a short taxable year which does not include 

9 a December 31 and is a component member of a controlled 

10 group of corporations with respect to such taxable year, 

11 then for purposes of this subtitle, the amount to be used 

12 in computing the accumulated earnings credit under sec13 tion 535(c)(2) and (3) of such corporation for such taxable 

14 year shall be the amount specified in subsection (a) with 

15 respect to such group, divided by the number of corpora16 tions which are component members of such group on the 

17 last day of such taxable year. For purposes of the pre18 ceding sentence, section 1563(b) shall be applied as if such 

19 last day were substituted for December 31.’’. 

20 (B) The table of sections for part II of sub21 chapter B of chapter 5 is amended by striking the 

22 item relating to section 1561 and inserting the fol23 lowing new item: 

‘‘Sec. 1561. Limitation on accumulated earnings credit in the case of certain 

controlled corporations.’’. 

24 (7) Section 7518(g)(6)(A) is amended— 


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1 (A) by striking ‘‘With respect to the por2 tion’’ and inserting ‘‘In the case of a taxpayer 

3 other than a corporation, with respect to the 

4 portion’’, and 

5 (B) by striking ‘‘(34 percent in the case of 

6 a corporation)’’. 

7 (c) EFFECTIVE DATE.— 

8 (1) IN GENERAL.—Except as otherwise pro9 vided in this subsection, the amendments made by 

10 this section shall apply to taxable years beginning 

11 after December 31, 2018. 

12 (2) WITHHOLDING.—The amendments made by 

13 subsection (b)(3) shall apply to distributions made 

14 after December 31, 2018. 

15 (3) CERTAIN TRANSFERS.—The amendments 

16 made by subsection (b)(6) shall apply to transfers 

17 made after December 31, 2018. 

18 (d) NORMALIZATION REQUIREMENTS.— 

19 (1) IN GENERAL.—A normalization method of 

20 accounting shall not be treated as being used with 

21 respect to any public utility property for purposes of 

22 section 167 or 168 of the Internal Revenue Code of 

23 1986 if the taxpayer, in computing its cost of service 

24 for ratemaking purposes and reflecting operating re25 sults in its regulated books of account, reduces the 


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1 excess tax reserve more rapidly or to a greater ex2 tent than such reserve would be reduced under the 

3 average rate assumption method. 

4 (2) ALTERNATIVE METHOD FOR CERTAIN TAX5 PAYERS.—If, as of the first day of the taxable year 

6 that includes the date of enactment of this Act— 

7 (A) the taxpayer was required by a regu8 latory agency to compute depreciation for public 

9 utility property on the basis of an average life 

10 or composite rate method, and 

11 (B) the taxpayer’s books and underlying 

12 records did not contain the vintage account 

13 data necessary to apply the average rate as14 sumption method, 

15 the taxpayer will be treated as using a normalization 

16 method of accounting if, with respect to such juris17 diction, the taxpayer uses the alternative method for 

18 public utility property that is subject to the regu19 latory authority of that jurisdiction. 

20 (3) DEFINITIONS.—For purposes of this sub21 section— 

22 (A) EXCESS TAX RESERVE.—The term 

23 ‘‘excess tax reserve’’ means the excess of— 

24 (i) the reserve for deferred taxes (as 

25 described in section 168(i)(9)(A)(ii) of the 


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1 Internal Revenue Code of 1986) as deter2 mined under the Internal Revenue Code of 

3 1986 as in effect on the day before the 

4 date of the enactment of this Act, over 

5 (ii) the amount which would be the 

6 balance in such reserve if the amount of 

7 such reserve were determined by assuming 

8 that the corporate rate reductions provided 

9 in this Act were in effect for all prior peri10 ods. 

11 (B) AVERAGE RATE ASSUMPTION METH12 OD.—The average rate assumption method is 

13 the method under which the excess in the re14 serve for deferred taxes is reduced over the re15 maining lives of the property as used in its reg16 ulated books of account which gave rise to the 

17 reserve for deferred taxes. Under such method, 

18 if timing differences for the property reverse, 

19 the amount of the adjustment to the reserve for 

20 the deferred taxes is calculated by multi21 plying— 

22 (i) the ratio of the aggregate deferred 

23 taxes for the property to the aggregate 

24 timing differences for the property as of 

25 the beginning of the period in question, by 


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1 (ii) the amount of the timing dif2 ferences which reverse during such period. 

3 (C) ALTERNATIVE METHOD.—The ‘‘alter4 native method’’ is the method in which the tax5 payer— 

6 (i) computes the excess tax reserve on 

7 all public utility property included in the 

8 plant account on the basis of the weighted 

9 average life or composite rate used to com10 pute depreciation for regulatory purposes, 

11 and 

12 (ii) reduces the excess tax reserve rat13 ably over the remaining regulatory life of 

14 the property. 

15 (4) TAX INCREASED FOR NORMALIZATION VIO16 LATION.—If, for any taxable year ending after the 

17 date of the enactment of this Act, the taxpayer does 

18 not use a normalization method of accounting, the 

19 taxpayer’s tax for the taxable year shall be increased 

20 by the amount by which it reduces its excess tax re21 serve more rapidly than permitted under a normal22 ization method of accounting. 


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1 SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUC2 TIONS TO REFLECT LOWER CORPORATE IN3 COME TAX RATES. 

4 (a) DIVIDENDS RECEIVED BY CORPORATIONS.— 

5 (1) IN GENERAL.—Section 243(a)(1) is amend6 ed by striking ‘‘70 percent’’ and inserting ‘‘50 per7 cent’’. 

8 (2) DIVIDENDS FROM 20-PERCENT OWNED COR9 PORATIONS.—Section 243(c)(1) is amended— 

10 (A) by striking ‘‘80 percent’’ and inserting 

11 ‘‘65 percent’’, and 

12 (B) by striking ‘‘70 percent’’ and inserting 

13 ‘‘50 percent’’. 

14 (3) CONFORMING AMENDMENT.—The heading 

15 for section 243(c) is amended by striking ‘‘RETEN16 TION OF 80-PERCENT DIVIDEND RECEIVED DEDUC17 TION’’ and inserting ‘‘INCREASED PERCENTAGE’’. 

18 (b) DIVIDENDS RECEIVED FROM FSC.—Section 

19 245(c)(1)(B) is amended— 

20 (1) by striking ‘‘70 percent’’ and inserting ‘‘50 

21 percent’’, and 

22 (2) by striking ‘‘80 percent’’ and inserting ‘‘65 

23 percent’’. 

24 (c) LIMITATION ON AGGREGATE AMOUNT OF DEDUC25 TIONS.—Section 246(b)(3) is amended— 


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1 (1) by striking ‘‘80 percent’’ in subparagraph 

2 (A) and inserting ‘‘65 percent’’, and 

3 (2) by striking ‘‘70 percent’’ in subparagraph 

4 (B) and inserting ‘‘50 percent’’. 

5 (d) REDUCTION IN DEDUCTION WHERE PORTFOLIO

6 STOCK IS DEBT-FINANCED.—Section 246A(a)(1) is 

7 amended— 

8 (1) by striking ‘‘70 percent’’ and inserting ‘‘50 

9 percent’’, and 

10 (2) by striking ‘‘80 percent’’ and inserting ‘‘65 

11 percent’’. 

12 (e) INCOME FROM SOURCES WITHIN THE UNITED

13 STATES.—Section 861(a)(2) is amended— 

14 (1) by striking ‘‘100/70th’’ and inserting ‘‘100/ 

15 50th’’ in subparagraph (B), and 

16 (2) in the flush sentence at the end— 

17 (A) by striking ‘‘100/80th’’ and inserting 

18 ‘‘100/65th’’, and 

19 (B) by striking ‘‘100/70th’’ and inserting 

20 ‘‘100/50th’’. 

21 (f) EFFECTIVE DATE.— 

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

23 this section (other than subsection (c) thereof) shall 

24 apply to dividends received by a corporation after 


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1 December 31, 2018, in taxable years ending after 

2 such date. 

3 (2) LIMITATION.—The amendments made by 

4 section 102(c) shall apply to taxable years beginning 

5 after December 31, 2018. 

6 Subpart B—Dividends Paid Deduction for Domestic 

7 Corporations 

8 SEC. 13011. DIVIDENDS PAID DEDUCTION. 

9 (a) GENERAL RULE.—Part VIII of subchapter B of 

10 chapter 1 is amended by inserting after section 241 the 

11 following: 

12 ‘‘Subpart B—Dividends Paid Deduction 

‘‘Sec. 242. Dividends paid deduction. 

13 ‘‘SEC. 242. DIVIDENDS PAID DEDUCTION. 

14 ‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an 

15 eligible corporation, there shall be allowed as a deduction 

16 an amount equal to zero percent of the aggregate amount 

17 of applicable dividends paid by the corporation during the 

18 taxable year. 

19 ‘‘(b) APPLICABLE DIVIDEND.—For purposes of this 

20 section— 

21 ‘‘(1) IN GENERAL.—The term ‘applicable divi22 dend’ means, with respect to an eligible corporation, 

23 any distribution by the eligible corporation during a 

24 taxable year which is— 


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1 ‘‘(A) treated as a dividend for purposes of 

2 this chapter, and 

3 ‘‘(B) paid out of its applicable earnings 

4 and profits. 

5 ‘‘(2) ORDERING RULE FOR DIVIDEND PAY6 MENTS.—For purposes of paragraph (1)(B), divi7 dends shall be treated as paid— 

8 ‘‘(A) first, out of exempt earnings and 

9 profits, 

10 ‘‘(B) second, out of applicable earnings 

11 and profits, and 

12 ‘‘(C) finally, out of earnings and profits 

13 not described in subparagraph (A) or (B). 

14 ‘‘(3) COORDINATION WITH OTHER DEDUC15 TIONS.—Such term shall not include— 

16 ‘‘(A) any amount allowed as a deduction 

17 under section 591 (relating to deduction for 

18 dividends paid by mutual savings banks, etc.), 

19 and 

20 ‘‘(B) any dividend described in paragraph 

21 (2) of section 404(k) (relating to deduction for 

22 dividends paid on certain employer securities). 

23 ‘‘(4) ELECTION TO TREAT CERTAIN DISTRIBU24 TIONS PAID AFTER CLOSE OF YEAR AS PAID DURING

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1 poration may elect on its return of tax for any tax2 able year to treat any distribution made on or before 

3 the 15th day of the 4th month following the close of 

4 the taxable year as having been made immediately 

5 before the close of the taxable year. The preceding 

6 sentence shall not apply for purposes of determining 

7 the time the distribution was received by the share8 holder to whom the distribution was made. 

9 ‘‘(5) APPLICABLE EARNINGS AND PROFITS.— 

10 ‘‘(A) IN GENERAL.—The term ‘applicable 

11 earnings and profits’ means, with respect to 

12 any corporation for any taxable year, its earn13 ings and profits for the taxable year and its 

14 earnings and profits accumulated in prior tax15 able years beginning after December 31, 2018. 

16 For purposes of the preceding sentence, earn17 ings and profits for the taxable year shall be 

18 determined without regard to the deduction 

19 under this section for the taxable year. 

20 ‘‘(B) EXEMPT EARNINGS AND PROFITS

21 NOT TREATED AS APPLICABLE EARNINGS AND

22 PROFITS.—The applicable earnings and profits 

23 of a corporation shall not include any exempt 

24 earnings and profits (as defined in paragraph 

25 (6)). 


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1 ‘‘(C) LOOK-THRU IN THE CASE OF DIVI2 DENDS RECEIVED FROM CONTROLLED FOREIGN

3 CORPORATION OR 10/50 CORPORATION.—If a 

4 corporation which is a United States share5 holder in a controlled foreign corporation, or is 

6 a shareholder in a foreign corporation with re7 spect to which the shareholder meets the stock 

8 ownership requirements of section 902(a), re9 ceives a dividend (other than a dividend to 

10 which subparagraph (B) applies) from such 

11 controlled foreign corporation or such foreign 

12 corporation, the earnings and profits from such 

13 dividend shall not be treated as applicable earn14 ings and profits of the corporation receiving 

15 such dividend to the extent of any portion of 

16 the dividend not properly allocable (as deter17 mined under section 316, as modified by section 

18 959(c) in the case of such controlled foreign 

19 corporation) to applicable earnings and profits 

20 of such controlled foreign corporation or such 

21 foreign corporation. 

22 ‘‘(6) EXEMPT EARNINGS AND PROFITS.— 

23 ‘‘(A) IN GENERAL.—The term ‘exempt 

24 earnings and profits’ means, with respect to 

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1 ings and profits for the taxable year and its 

2 earnings and profits accumulated in prior tax3 able years beginning after December 31, 2018, 

4 which are properly allocable to exempt amounts 

5 received or accrued by the corporation. 

6 ‘‘(B) EXEMPT AMOUNTS.—The term ‘ex7 empt amounts’ means, with respect to any cor8 poration— 

9 ‘‘(i) any dividend to the extent of the 

10 deduction allowable to the corporation 

11 under section 243, 245, or 245A with re12 spect to the dividend, 

13 ‘‘(ii) any foreign-derived intangible in14 come (as defined in section 250(b)) or 

15 global intangible low-taxed income (as de16 fined in section 951A(b)) to the extent of 

17 the deduction allowable to the corporation 

18 under section 250 with respect to any such 

19 income, 

20 ‘‘(iii) any increase in subpart F in21 come by reason of section 965 to the ex22 tent of the deduction allowable to the cor23 poration under section 965(c)(1) with re24 spect to any such income, and 


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1 ‘‘(iv) any other amount to the extent 

2 such amount is exempt from taxation 

3 under this title. 

4 ‘‘(7) PROPER ALLOCATION OF DIVIDENDS TO

5 EARNINGS AND PROFITS.— 

6 ‘‘(A) IN GENERAL.—The Secretary shall 

7 prescribe rules for the proper allocation of divi8 dends to earnings and profits for purposes of 

9 applying this subsection. 

10 ‘‘(B) LOOK THROUGH RULES.—For pur11 poses of paragraph (4)(C), such rules shall in12 clude rules requiring in appropriate cases the 

13 look through to earnings and profits of mem14 bers of any affiliated group including a con15 trolled foreign corporation or foreign corpora16 tion described in such paragraph where the 

17 earnings and profits of such controlled foreign 

18 corporation or such foreign corporation are at19 tributable to distributions received from other 

20 members of the group. 

21 ‘‘(c) ELIGIBLE CORPORATION.—For purposes of this 

22 section, the term ‘eligible corporation’ means any domestic 

23 corporation other than— 

24 ‘‘(1) a regulated investment company, 

25 ‘‘(2) a real estate investment trust, 


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1 ‘‘(3) an S corporation, 

2 ‘‘(4) a corporation which is exempt from tax 

3 under section 501 or 521, 

4 ‘‘(5) an organization taxable under subchapter 

5 T of this chapter (relating to cooperative organiza6 tions), 

7 ‘‘(6) a cooperative governed by the rules appli8 cable to cooperatives as in effect before the enact9 ment of subchapter T, or 

10 ‘‘(7) a DISC or former DISC. 

11 ‘‘(d) REPORTING REQUIREMENT.— 

12 ‘‘(1) IN GENERAL.—Each eligible corporation 

13 which makes payments of dividends during the re14 porting period for any taxable year shall make a re15 turn, according to the forms and regulations pre16 scribed by the Secretary, setting forth— 

17 ‘‘(A) the aggregate amount of such divi18 dends, 

19 ‘‘(B) the aggregate amount of such divi20 dends with respect to which the corporation is 

21 claiming a deduction under this section for the 

22 taxable year, 

23 ‘‘(C) the aggregate amount of such divi24 dends which the corporation paid during the pe25 riod beginning on the 1st day of the reporting 


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1 taxable year and ending on the 15th day of the 

2 4th month of such taxable year which the cor3 poration elected under subsection (b)(4) to treat 

4 as paid in the preceding taxable year, 

5 ‘‘(D) the aggregate amount of such divi6 dends which the corporation paid during the pe7 riod beginning on the 1st day of the taxable 

8 year following the reporting taxable year and 

9 ending on the 15th day of the 4th month of 

10 such following taxable year which the corpora11 tion elected under subsection (b)(4) to treat as 

12 paid in the reporting taxable year, and 

13 ‘‘(E) such other information with respect 

14 to such dividends as the Secretary shall require 

15 for the administration of this section. 

16 ‘‘(2) REPORTING PERIOD; DUE DATE.—For 

17 purposes of this subsection— 

18 ‘‘(A) REPORTING PERIOD.—The term ‘re19 porting period’ means with, respect to any tax20 able year, the period beginning on the 1st day 

21 of the taxable year and ending on the 15th day 

22 of the 4th month following the close of the tax23 able year. 

24 ‘‘(B) DUE DATE.—Any return under para25 graph (1) with respect to any taxable year shall 


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1 be included with the return of income tax for 

2 such taxable year.’’. 

3 (b) PENALTY FOR FAILURE TO REPORT.—Section 

4 6652, as amended by subtitle E of this Act, is amended 

5 by adding at the end the following new subsection: 

6 ‘‘(r) FAILURE TO FILE RETURNS BY CORPORATIONS

7 ELIGIBLE FOR DIVIDENDS PAID DEDUCTION.— 

8 ‘‘(1) PENALTY FOR FAILURE TO FILE RE9 TURN.—In the case of a failure to make a return re10 quired under section 242(d) containing the informa11 tion required by such section by the due date for the 

12 return, the eligible corporation shall pay (on notice 

13 and demand by the Secretary and in the same man14 ner as tax) a penalty of $1,000 per day for each day 

15 such failure continues unless it is shown that such 

16 failure is due to reasonable cause. The maximum 

17 amount of the penalty under this paragraph with re18 spect to any failure for a taxable year shall not ex19 ceed $250,000. 

20 ‘‘(2) ELIGIBLE CORPORATION.—For purposes 

21 of this subsection, the term ‘eligible corporation’ has 

22 the meaning given such term by section 242(c).’’. 

23 (c) DIVIDENDS PAID DEDUCTION ALLOWABLE ONLY

24 IN TAXABLE YEAR OF DIVIDEND PAYMENT.— 


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1 (1) IN GENERAL.—Subsection (d) of section 

2 172, as amended by section 11011, is amended by 

3 adding at the end the following new paragraph: 

4 ‘‘(9) DIVIDENDS PAID DEDUCTION.—The de5 duction under section 242 shall not be allowed.’’. 

6 (2) TREATMENT OF CARRYBACKS AND

7 CARRYOVERS.—Subparagraph (A) of section 

8 172(b)(2), as amended by section 13302, is amended 

9 by striking ‘‘and (5)’’ and inserting ‘‘(5), and (8)’’. 

10 (d) OTHER CONFORMING AMENDMENTS.—Part VIII 

11 of subchapter B of chapter 1 is amended— 

12 (1) by striking the table of sections and insert13 ing the following: 

14 ‘‘PART VIII—SPECIAL DEDUCTIONS FOR 

15 CORPORATIONS 

‘‘SUBPART A. ALLOWANCE OF SPECIAL DEDUCTIONS. 

‘‘SUBPART B. DIVIDENDS PAID DEDUCTION. 

‘‘SUBPART C. DIVIDENDS RECEIVED DEDUCTIONS. 

‘‘SUBPART D. OTHER DEDUCTIONS. 

16 ‘‘Subpart A—Allowance of Special Deductions 

‘‘Sec. 241. Allowance of special deductions.’’, 

17 (2) by inserting the following before section 

18 243: 

19 ‘‘Subpart C—Dividends Received Deductions 

‘‘Sec. 243. Dividends received by corporations. 

‘‘Sec. 245. Dividends received from certain foreign corporations. 


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‘‘Sec. 245A. Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign 

corporations. 

‘‘Sec. 246. Rules applying to deductions for dividends received. 

‘‘Sec. 246A. Dividends received deduction reduced where portfolio stock is debt 

financed.’’, and 

1 (3) by inserting the following before section 

2 248: 

3 ‘‘Subpart D—Other Deductions 

‘‘Sec. 248. Organizational expenditures. 

‘‘Sec. 249. Limitation of deduction of bond premium on repurchase. 

‘‘Sec. 250. Foreign-derived intangible income and global intangible low-taxed 

income.’’. 

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

5 this section shall apply to dividends paid in taxable years 

6 of the payor beginning after December 31, 2018. 

7 SEC. 13012. TAX EQUIVALENT TO DIVIDENDS PAID DEDUC8 TION FOR CERTAIN FOREIGN CORPORA9 TIONS. 

10 (a) DIVIDENDS PAID DEDUCTION.—Paragraph (1) of 

11 section 882(c) is amended by adding at the end the fol12 lowing new subparagraph: 

13 ‘‘(C) SPECIAL RULE FOR DIVIDENDS PAID

14 DEDUCTION.—For purposes of subparagraph 

15 (A)— 

16 ‘‘(i) the deduction under section 242 

17 shall not be allowed for any taxable year, 

18 and 

19 ‘‘(ii) there shall be allowed, in lieu of 

20 such deduction, a deduction in an amount 


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1 equal to zero percent of the dividend equiv2 alent amount (as defined in section 

3 884(b)) of the foreign corporation for the 

4 taxable year.’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2018. 

8 SEC. 13013. ALLOCATION OF DIVIDEND EXPENSE AMONG 

9 MEMBERS OF WORLDWIDE AFFILIATED 

10 GROUPS. 

11 (a) IN GENERAL.—Paragraph (6) of section 864(e) 

12 is amended to read as follows: 

13 ‘‘(6) ALLOCATION AND APPORTIONMENT OF

14 OTHER EXPENSES.— 

15 ‘‘(A) IN GENERAL.—Except as provided in 

16 subparagraph (B), expenses other than interest 

17 which are not directly allocable or apportioned 

18 to any specific income producing activity shall 

19 be allocated and apportioned as if all members 

20 of the affiliated group were a single corpora21 tion. 

22 ‘‘(B) DIVIDEND EXPENSE.—The dividend 

23 expense of any domestic corporation which is a 

24 member of an affiliated group shall be allocated 

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1 out the United States in the same proportion 

2 which— 

3 ‘‘(i) the aggregate amount of income 

4 treated as from sources without the United 

5 States by all domestic corporations which 

6 are members of such group (determined 

7 without regard to such dividend expense), 

8 bears to 

9 ‘‘(ii) the aggregate income of all such 

10 domestic corporations from sources within 

11 and without the United States (as so de12 termined).’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2018. 

16 PART II—SMALL BUSINESS REFORMS 

17 SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DE18 PRECIABLE BUSINESS ASSETS. 

19 (a) INCREASE IN LIMITATION.— 

20 (1) DOLLAR LIMITATION.—Section 179(b)(1) is 

21 amended by striking ‘‘$500,000’’ and inserting 

22 ‘‘$1,000,000’’. 

23 (2) REDUCTION IN LIMITATION.—Section 

24 179(b)(2) is amended by striking ‘‘$2,000,000’’ and 

25 inserting ‘‘$2,500,000’’. 


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1 (3) INFLATION ADJUSTMENTS.— 

2 (A) IN GENERAL.—Subparagraph (A) of 

3 section 179(b)(6) is amended— 

4 (i) by striking ‘‘2015’’ and inserting 

5 ‘‘2018’’, and 

6 (ii) in clause (ii), by striking ‘‘cal7 endar year 2014’’ and inserting ‘‘calendar 

8 year 2017’’. 

9 (B) SPORT UTILITY VEHICLES.—Section 

10 179(b)(6) is amended— 

11 (i) in subparagraph (A), by striking 

12 ‘‘paragraphs (1) and (2)’’ and inserting 

13 ‘‘paragraphs (1), (2), and (5)(A)’’, and 

14 (ii) in subparagraph (B), by inserting 

15 ‘‘($100 in the case of any increase in the 

16 amount under paragraph (5)(A))’’ after 

17 ‘‘$10,000’’. 

18 (b) SECTION 179 PROPERTY TO INCLUDE QUALIFIED

19 REAL PROPERTY.— 

20 (1) IN GENERAL.—Subparagraph (B) of section 

21 179(d)(1) is amended to read as follows: 

22 ‘‘(B) which is— 

23 ‘‘(i) section 1245 property (as defined 

24 in section 1245(a)(3)), or 


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1 ‘‘(ii) qualified real property (as de2 fined in subsection (f)), and’’. 

3 (2) QUALIFIED REAL PROPERTY DEFINED.— 

4 Subsection (f) of section 179 is amended to read as 

5 follows: 

6 ‘‘(f) QUALIFIED REAL PROPERTY.—For purposes of 

7 this subsection, the term ‘qualified real property’ means— 

8 ‘‘(1) any qualified improvement property de9 scribed in section 168(e)(6), and 

10 ‘‘(2) any of the following improvements to non11 residential real property placed in service after the 

12 date such property was first placed in service: 

13 ‘‘(A) Roofs. 

14 ‘‘(B) Heating, ventilation, and air-condi15 tioning property. 

16 ‘‘(C) Fire protection and alarm systems. 

17 ‘‘(D) Security systems.’’. 

18 (c) REPEAL OF EXCLUSION FOR CERTAIN PROP19 ERTY.—The last sentence of section 179(d)(1) is amended 

20 by inserting ‘‘(other than paragraph (2) thereof)’’ after 

21 ‘‘section 50(b)’’. 

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

23 this section shall apply to property placed in service in 

24 taxable years beginning after December 31, 2017. 


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1 SEC. 13102. MODIFICATIONS OF GROSS RECEIPTS TEST FOR 

2 USE OF CASH METHOD OF ACCOUNTING BY 

3 CORPORATIONS AND PARTNERSHIPS. 

4 (a) MODIFICATIONS OF GROSS RECEIPTS TEST.— 

5 (1) IN GENERAL.—So much of section 448(c) 

6 as precedes paragraph (2) is amended to read as fol7 lows: 

8 ‘‘(c) GROSS RECEIPTS TEST.— 

9 ‘‘(1) IN GENERAL.—A corporation or partner10 ship meets the gross receipts test of this subsection 

11 for any taxable year if the average annual gross re12 ceipts of such entity for the 3-taxable-year period 

13 ending with the taxable year which precedes such 

14 taxable year does not exceed the applicable dollar 

15 limit.’’. 

16 (2) APPLICABLE DOLLAR LIMIT.—Subsection 

17 (c) of section 448 is amended by adding at the end 

18 the following new paragraph: 

19 ‘‘(4) APPLICABLE DOLLAR LIMIT.— 

20 ‘‘(A) IN GENERAL.—The applicable dollar 

21 limit is $15,000,000. 

22 ‘‘(B) ADJUSTMENT FOR INFLATION.—In 

23 the case of any taxable year beginning after De24 cember 31, 2018, the $15,000,000 amount 

25 under subparagraph (A) shall be increased by 

26 an amount equal to— 


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1 ‘‘(i) such dollar amount, multiplied by 

2 ‘‘(ii) the cost-of-living adjustment de3 termined under section 1(f)(3) for the cal4 endar year in which the taxable year be5 gins, by substituting ‘calendar year 2017’ 

6 for ‘calendar year 2016’ in subparagraph 

7 (A)(ii) thereof. 

8 If any amount as increased under the preceding 

9 sentence is not a multiple of $1,000, such 

10 amount shall be rounded to the next lowest 

11 multiple of $1,000.’’. 

12 (3) CHANGE IN METHOD OF ACCOUNTING.— 

13 Paragraph (7) of section 448(d) is amended— 

14 (A) by striking ‘‘In the case of’’ and all 

15 that follows up to subparagraph (A) and insert16 ing: ‘‘If a taxpayer changes its method of ac17 counting because the taxpayer is prohibited 

18 from using the cash receipts and disbursement 

19 method of accounting by reason of subsection 

20 (a) or is no longer prohibited from using such 

21 method by reason of such subsection—’’, and 

22 (B) by inserting ‘‘and’’ at the end of sub23 paragraph (A), by striking ‘‘, and’’ at the end 

24 of subparagraph (B) and inserting a period, 

25 and by striking subparagraph (C). 


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1 (4) CONFORMING AMENDMENT.—Paragraph (3) 

2 of section 448(b) is amended to read as follows: 

3 ‘‘(3) ENTITIES SATISFYING GROSS RECEIPTS

4 TEST.—Paragraphs (1) and (2) of subsection (a) 

5 shall not apply to any corporation or partnership for 

6 any taxable year if such entity meets the gross re7 ceipts test of subsection (c) for the taxable year.’’. 

8 (b) APPLICATION OF MODIFICATIONS TO FARMING

9 CORPORATIONS.— 

10 (1) IN GENERAL.—Paragraph (1) of section 

11 447(d) is amended to read as follows: 

12 ‘‘(1) IN GENERAL.—A corporation meets the re13 quirements of this subsection for any taxable year 

14 with respect to its gross receipts if the corporation 

15 meets the gross receipts test of section 448(c) for 

16 the taxable year.’’. 

17 (2) FAMILY CORPORATIONS.—Paragraph (2) of 

18 section 447(d) is amended— 

19 (A) by striking subparagraph (A) and in20 serting the following: 

21 ‘‘(A) IN GENERAL.—In the case of a fam22 ily corporation, in applying section 448(c) for 

23 purposes of paragraph (1)— 

24 ‘‘(i) paragraph (1) of section 448(c) 

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1 cable family corporation limit for the appli2 cable dollar limit, and 

3 ‘‘(ii) the rules of subparagraph (B) 

4 shall apply in computing gross receipts.’’, 

5 (B) Clause (i) of section 447(d)(2)(B) is 

6 amended by striking ‘‘the last sentence of para7 graph (1)’’ and inserting ‘‘paragraph (2) of sec8 tion 448(c)’’, and 

9 (C) by adding at the end the following new 

10 subparagraph: 

11 ‘‘(D) APPLICABLE FAMILY CORPORATION

12 LIMIT.— 

13 ‘‘(i) IN GENERAL.—The applicable 

14 family corporation limit is $25,000,000. 

15 ‘‘(ii) ADJUSTMENT FOR INFLATION.— 

16 In the case of any taxable year beginning 

17 after December 31, 2018, the $25,000,000 

18 amount under clause (i) shall be increased 

19 by an amount equal to— 

20 ‘‘(I) such dollar amount, multi21 plied by 

22 ‘‘(II) the cost-of-living adjust23 ment determined under section 1(f)(3) 

24 for the calendar year in which the tax25 able year begins, by substituting ‘calVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00144 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 endar year 2017’ for ‘calendar year 

2 2016’ in subparagraph (A)(ii) thereof. 

3 If any amount as increased under the pre4 ceding sentence is not a multiple of 

5 $1,000, such amount shall be rounded to 

6 the next lowest multiple of $1,000.’’. 

7 (3) EXCEPTION FOR CERTAIN CORPORA8 TIONS.—Subsection (c) of section 447 is amended by 

9 inserting ‘‘for any taxable year’’ after ‘‘not being a 

10 corporation’’. 

11 (4) CHANGE IN METHOD OF ACCOUNTING.— 

12 Section 447(f) is amended— 

13 (A) by striking ‘‘In the case of’’ and all 

14 that follows up to paragraph (1) and inserting 

15 the following: ‘‘If a taxpayer changes its method 

16 of accounting because the taxpayer is required 

17 to use an accrual method of accounting by rea18 son of subsection (a) or is no longer required to 

19 use such method by reason of such subsection— 

20 ’’, and 

21 (B) by striking paragraph (2) and insert22 ing the following: 

23 ‘‘(2) such change shall be treated as initiated 

24 by the taxpayer, and’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 13103. CLARIFICATION OF INVENTORY ACCOUNTING 

5 RULES FOR SMALL BUSINESSES. 

6 (a) CLARIFICATION OF INVENTORY RULES.— 

7 (1) IN GENERAL.—Section 471 is amended by 

8 redesignating subsection (c) as subsection (d) and by 

9 inserting after subsection (b) the following new sub10 section: 

11 ‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED

12 TO USE INVENTORIES.— 

13 ‘‘(1) IN GENERAL.—A qualified taxpayer shall 

14 not be required to use inventories under this section 

15 for a taxable year. 

16 ‘‘(2) TREATMENT OF TAXPAYERS NOT USING

17 INVENTORIES.—A qualified taxpayer who is not re18 quired under this subsection to use inventories with 

19 respect to any property for a taxable year beginning 

20 after December 31, 2017, may treat such property— 

21 ‘‘(A) as a non-incidental material or sup22 ply, or 

23 ‘‘(B) in a manner which conforms to the 

24 taxpayer’s method for accounting for such prop25 erty in— 


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1 ‘‘(i) an applicable financial statement 

2 (as defined in section 451(b)(1)), or 

3 ‘‘(ii) in the case of a taxpayer that 

4 does not have an applicable financial state5 ment, their books and records used for 

6 purposes of determining tax imposed by 

7 this title. 

8 ‘‘(3) QUALIFIED TAXPAYER.—For purposes of 

9 this subsection, the term ‘qualified taxpayer’ means, 

10 with respect to any taxable year, a taxpayer who 

11 meets the gross receipts test of section 448(c) for 

12 the taxable year (or, in the case of a sole proprietor13 ship, who would meet such test if such proprietor14 ship were a corporation). Such term shall not in15 clude a tax shelter prohibited from using the cash 

16 receipts and disbursements method of accounting 

17 under section 448(a)(3). 

18 ‘‘(4) COORDINATION WITH SECTION 481.—If a 

19 taxpayer changes its method of accounting because 

20 the taxpayer is not required to use inventories by 

21 reason of paragraph (1) or is required to use inven22 tories because such paragraph no longer applies to 

23 the taxpayer— 

24 ‘‘(A) such change shall be treated as initi25 ated by the taxpayer, and 


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1 ‘‘(B) such change shall be treated as made 

2 with the consent of the Secretary.’’. 

3 (2) CONFORMING AMENDMENT.—Subsection (c) 

4 of section 263A is amended by adding at the end the 

5 following new paragraph: 

6 ‘‘(8) EXCLUSION FROM INVENTORY RULES.— 

7 Nothing in this section shall require the use of in8 ventories for any taxable year by a qualified tax9 payer (within the meaning of section 471(c)(3)) who 

10 is not required to use inventories under section 471 

11 for such taxable year.’’. 

12 (b) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning after 

14 December 31, 2017. 

15 SEC. 13104. MODIFICATION OF RULES FOR UNIFORM CAP16 ITALIZATION OF CERTAIN EXPENSES. 

17 (a) IN GENERAL.—Section 263A(b) is amended by 

18 striking all that follows paragraph (1) and inserting the 

19 following new paragraphs: 

20 ‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real 

21 or personal property described in section 1221(a)(1) 

22 which is acquired by the taxpayer for resale. 

23 ‘‘(3) EXCEPTION FOR SMALL BUSINESSES.— 

24 This section shall not apply to any taxpayer who 

25 meets the gross receipts test under section 448(c) 


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1 for the taxable year (or, in the case of a sole propri2 etorship, who would meet such test if such propri3 etorship were a corporation), other than a tax shel4 ter prohibited from using the cash receipts and dis5 bursements method of accounting under section 

6 448(a)(3). 

7 ‘‘(4) FILMS, SOUND RECORDINGS, BOOKS, 

8 ETC.—For purposes of this subsection, the term 

9 ‘tangible personal property’ shall include a film, 

10 sound recording, video tape, book, or similar prop11 erty. 

12 ‘‘(5) COORDINATION WITH SECTION 481.—If a 

13 taxpayer changes its method of accounting because 

14 this section does not apply to the taxpayer by reason 

15 of the exception under paragraph (3) or this section 

16 applies to the taxpayer because such exception no 

17 longer applies to the taxpayer— 

18 ‘‘(A) such change shall be treated as initi19 ated by the taxpayer, and 

20 ‘‘(B) such change shall be treated as made 

21 with the consent of the Secretary.’’. 

22 (b) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2017. 


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1 SEC. 13105. INCREASE IN GROSS RECEIPTS TEST FOR CON2 STRUCTION CONTRACT EXCEPTION TO PER3 CENTAGE OF COMPLETION METHOD. 

4 (a) INCREASE.— 

5 (1) IN GENERAL.—Section 460(e)(1)(B) is 

6 amended— 

7 (A) in the matter preceding clause (i), by 

8 inserting ‘‘(other than a tax shelter prohibited 

9 from using the cash receipts and disbursements 

10 method of accounting under section 448(a)(3))’’ 

11 after ‘‘taxpayer’’, and 

12 (B) by striking clause (ii) and inserting the 

13 following: 

14 ‘‘(ii) who meets the gross receipts test 

15 of section 448(c) for the taxable year in 

16 which such contract is entered into (or, in 

17 the case of a sole proprietorship, who 

18 would meet such test if such proprietorship 

19 were a corporation).’’. 

20 (2) CONFORMING AMENDMENTS.— 

21 (A) Section 460(e) is amended by striking 

22 paragraphs (2) and (3) and by redesignating 

23 paragraphs (4) through (6) as paragraphs (2) 

24 through (4), respectively. 


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1 (B) The last sentence of section 56(a)(3) is 

2 amended by striking ‘‘section 460(e)(6)’’ and 

3 inserting ‘‘section 460(e)(4)’’. 

4 (b) COORDINATION WITH SECTION 481.—Section 

5 460(e), as amended by subsection (a), is amended by add6 ing at the end the following: 

7 ‘‘(5) COORDINATION WITH SECTION 481.—If a 

8 taxpayer changes its method of accounting because 

9 subsections (a), (b), (c)(1), and (c)(2) do not apply 

10 by reason of the exception under paragraph (1)(B) 

11 or such subsections apply to the taxpayer because 

12 such exception no longer applies to the taxpayer— 

13 ‘‘(A) such change shall be treated as initi14 ated by the taxpayer, 

15 ‘‘(B) such change shall be treated as made 

16 with the consent of the Secretary, and 

17 ‘‘(C) such change shall be permitted only 

18 on a cut-off basis for all similarly classified con19 tracts entered into on or after the year of 

20 change and no adjustments under section 

21 481(a) shall be made.’’. 

22 (c) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to contracts entered into after De24 cember 31, 2017, in taxable years ending after such date. 


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1 PART III—COST RECOVERY AND ACCOUNTING 

2 METHODS 

3 Subpart A—Cost Recovery 

4 SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR 

5 CERTAIN BUSINESS ASSETS. 

6 (a) IN GENERAL.— 

7 (1) 100 PERCENT EXPENSING.—Section 168(k) 

8 is amended— 

9 (A) in paragraph (1)(A), by striking ‘‘50 

10 percent’’ and inserting ‘‘100 percent’’, and 

11 (B) in paragraph (5)(A)(i), by striking ‘‘50 

12 percent’’ and inserting ‘‘100 percent’’. 

13 (2) EXTENSION THROUGH 2022.—Section 

14 168(k) is amended— 

15 (A) in the heading, by striking ‘‘DECEM16 BER 31, 2007, AND BEFORE JANUARY 1, 

17 2020’’ and inserting ‘‘SEPTEMBER 27, 2017, 

18 AND BEFORE JANUARY 1, 2023’’, 

19 (B) in paragraph (2)— 

20 (i) in subparagraph (A)(iii), clauses 

21 (i)(III) and (ii) of subparagraph (B), and 

22 subparagraph (E)(i), by striking ‘‘January 

23 1, 2020’’ each place it appears and insert24 ing ‘‘January 1, 2023’’, and 

25 (ii) in subparagraph (B)— 


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1 (I) in clause (i)(II), by striking 

2 ‘‘January 1, 2021’’ and inserting 

3 ‘‘January 1, 2024’’, and 

4 (II) in the heading of clause (ii), 

5 by striking ‘‘PRE-JANUARY 1, 2020’’ 

6 and inserting ‘‘PRE-JANUARY 1, 2023’’, 

7 and 

8 (C) in paragraph (5)(A), by striking ‘‘Jan9 uary 1, 2020’’ and inserting ‘‘January 1, 

10 2023’’. 

11 (3) EXCEPTION FOR PUBLIC UTILITIES.—Para12 graph (6) of section 168(k) is amended to read as 

13 follows: 

14 ‘‘(6) EXCEPTION FOR CERTAIN PUBLIC UTILITY

15 PROPERTY.—The term ‘qualified property’ shall not 

16 include any property which is primarily used in a 

17 trade or business described in clause (iv) of section 

18 163(j)(7)(A).’’. 

19 (4) SPECIAL RULE.—Section 168(k) is amended 

20 by adding at the end the following new paragraph: 

21 ‘‘(8) SPECIAL RULE FOR PROPERTY PLACED IN

22 SERVICE DURING CERTAIN PERIODS.— 

23 ‘‘(A) IN GENERAL.—In the case of quali24 fied property placed in service by the taxpayer 

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1 tember 27, 2017, if the taxpayer elects to have 

2 this paragraph apply for such taxable year, 

3 paragraphs (1)(A) and (5)(A)(i) shall be ap4 plied by substituting ‘50 percent’ for ‘100 per5 cent’. 

6 ‘‘(B) FORM OF ELECTION.—Any election 

7 under this paragraph shall be made at such 

8 time and in such form and manner as the Sec9 retary may prescribe.’’. 

10 (5) COORDINATION WITH SECTION 280F.—Sec11 tion 168(k)(2)(F) is amended by striking clause (iii). 

12 (6) QUALIFIED FILM AND TELEVISION AND

13 LIVE THEATRICAL PRODUCTIONS.— 

14 (A) IN GENERAL.—Clause (i) of section 

15 168(k)(2)(A), as amended by section 13204, is 

16 amended— 

17 (i) in subclause (II), by striking ‘‘or’’, 

18 (ii) in subclause (III), by adding ‘‘or’’ 

19 after the comma, and 

20 (iii) by adding at the end the fol21 lowing: 

22 ‘‘(IV) which is a qualified film or tele23 vision production (as defined in subsection 

24 (d) of section 181) for which a deduction 

25 would have been allowable under section 


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1 181 without regard to subsections (a)(2) 

2 and (g) of such section or this subsection, 

3 or 

4 ‘‘(V) which is a qualified live theat5 rical production (as defined in subsection 

6 (e) of section 181) for which a deduction 

7 would have been allowable under section 

8 181 without regard to subsections (a)(2) 

9 and (g) of such section or this sub10 section,’’. 

11 (B) PRODUCTION PLACED IN SERVICE.— 

12 Paragraph (2) of section 168(k) is amended by 

13 adding at the end the following: 

14 ‘‘(H) PRODUCTION PLACED IN SERVICE.— 

15 For purposes of subparagraph (A)— 

16 ‘‘(i) a qualified film or television pro17 duction shall be considered to be placed in 

18 service at the time of initial release or 

19 broadcast, and 

20 ‘‘(ii) a qualified live theatrical produc21 tion shall be considered to be placed in 

22 service at the time of the initial live staged 

23 performance.’’. 

24 (7) CONFORMING AMENDMENTS.— 


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1 (A) Paragraph (5) of section 168(k) is 

2 amended by striking subparagraph (F). 

3 (B) Clause (ii) of section 460(c)(6)(B) is 

4 amended by striking ‘‘January 1, 2020 (Janu5 ary 1, 2021’’ and inserting ‘‘January 1, 2023 

6 (January 1, 2024’’. 

7 (b) EFFECTIVE DATES.— 

8 (1) IN GENERAL.—Except as provided in para9 graph (2), the amendments made by subsection (a) 

10 shall apply to property placed in service after Sep11 tember 27, 2017, in taxable years ending after such 

12 date. 

13 (2) CERTAIN PLANTS.—The amendments made 

14 by paragraphs (1)(B) and (2)(C) of subsection (a) 

15 shall apply to specified plants planted or grafted 

16 after September 27, 2017, in taxable years ending 

17 after such date. 

18 SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITA19 TIONS ON LUXURY AUTOMOBILES AND PER20 SONAL USE PROPERTY. 

21 (a) LUXURY AUTOMOBILES.— 

22 (1) IN GENERAL.—280F(a)(1)(A) is amended— 

23 (A) in clause (i), by striking ‘‘$2,560’’ and 

24 inserting ‘‘$10,000’’, 


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1 (B) in clause (ii), by striking ‘‘$4,100’’ 

2 and inserting ‘‘$16,000’’, 

3 (C) in clause (iii), by striking ‘‘$2,450’’ 

4 and inserting ‘‘$9,600’’, and 

5 (D) in clause (iv), by striking ‘‘$1,475’’ 

6 and inserting ‘‘$5,760’’. 

7 (2) CONFORMING AMENDMENTS.— 

8 (A) Clause (ii) of section 280F(a)(1)(B) is 

9 amended by striking ‘‘$1,475’’ in the text and 

10 heading and inserting ‘‘$5,760’’. 

11 (B) Paragraph (7) of section 280F(d) is 

12 amended— 

13 (i) in subparagraph (A), by striking 

14 ‘‘1988’’ and inserting ‘‘2018’’, and 

15 (ii) in subparagraph (B)(i)(II), by 

16 striking ‘‘1987’’ and inserting ‘‘2017’’. 

17 (b) REMOVAL OF COMPUTER EQUIPMENT FROM

18 LISTED PROPERTY.— 

19 (1) IN GENERAL.—Section 280F(d)(4)(A) is 

20 amended— 

21 (A) by inserting ‘‘and’’ at the end of clause 

22 (iii), 

23 (B) by striking clause (iv), and 

24 (C) by redesignating clause (v) as clause 

25 (iv). 


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1 (2) CONFORMING AMENDMENT.—Section 

2 280F(d)(4) is amended by striking subparagraph 

3 (B) and by redesignating subparagraph (C) as sub4 paragraph (B). 

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

6 this section shall apply to property placed in service after 

7 December 31, 2017, in taxable years ending after such 

8 date. 

9 SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN 

10 FARM PROPERTY. 

11 (a) TREATMENT OF CERTAIN FARM PROPERTY AS 5- 

12 YEAR PROPERTY.—Clause (vii) of section 168(e)(3)(B) is 

13 amended by striking ‘‘after December 31, 2008, and which 

14 is placed in service before January 1, 2010’’ and inserting 

15 ‘‘after December 31, 2017’’. 

16 (b) REPEAL OF REQUIRED USE OF 150-PERCENT

17 DECLINING BALANCE METHOD.—Section 168(b)(2) is 

18 amended by striking subparagraph (B) and by redesig19 nating subparagraphs (C) and (D) as subparagraphs (B) 

20 and (C), respectively. 

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

22 this section shall apply to property placed in service after 

23 December 31, 2017, in taxable years ending after such 

24 date. 


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1 SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL 

2 PROPERTY. 

3 (a) RESIDENTIAL RENTAL PROPERTY AND NONRESI4 DENTIAL REAL PROPERTY.— 

5 (1) REDUCTION OF RECOVERY PERIOD.—The 

6 table contained in section 168(c) is amended— 

7 (A) by striking ‘‘27.5 years’’ and inserting 

8 ‘‘25 years’’, and 

9 (B) by striking ‘‘39 years’’ and inserting 

10 ‘‘25 years’’. 

11 (2) STATUTORY RECOVERY PERIOD.—The table 

12 contained in section 467(e)(3)(A) is amended— 

13 (A) by inserting ‘‘(other than residential 

14 rental property and nonresidential real prop15 erty)’’ after ‘‘15-year and 20-year property’’, 

16 and 

17 (B) by striking ‘‘19 years’’ and inserting 

18 ‘‘25 years’’. 

19 (3) CONFORMING AMENDMENT.—Clause (ii) of 

20 section 168(e)(2)(B) is amended by striking ‘‘27.5 

21 years’’ and inserting ‘‘25 years’’. 

22 (b) IMPROVEMENTS TO REAL PROPERTY.— 

23 (1) CLASSIFICATION OF QUALIFIED IMPROVE24 MENT PROPERTY AS 10-YEAR PROPERTY.—Subpara25 graph (D) of section 168(e)(3) is amended— 

26 (A) in clause (iii), by striking ‘‘and’’, 


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1 (B) in clause (iv), by striking the period 

2 and inserting ‘‘, and’’, and 

3 (C) by adding at the end the following new 

4 clause: 

5 ‘‘(v) any qualified improvement prop6 erty described in subsection (e)(6).’’. 

7 (2) ELIMINATION OF QUALIFIED LEASEHOLD

8 IMPROVEMENT, QUALIFIED RESTAURANT, AND

9 QUALIFIED RETAIL IMPROVEMENT PROPERTY.—Sub10 section (e) of section 168 is amended— 

11 (A) in subparagraph (E) of paragraph 

12 (3)— 

13 (i) by striking clauses (iv), (v), and 

14 (ix), 

15 (ii) in clause (vii), by inserting ‘‘and’’ 

16 at the end, 

17 (iii) in clause (viii), by striking ‘‘, 

18 and’’ and inserting a period, and 

19 (iv) by redesignating clauses (vi), 

20 (vii), and (viii), as so amended, as clauses 

21 (iv), (v), and (vi), respectively, and 

22 (B) by striking paragraphs (6), (7), and 

23 (8). 


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1 (3) APPLICATION OF STRAIGHT LINE METHOD

2 TO QUALIFIED IMPROVEMENT PROPERTY.—Para3 graph (3) of section 168(b) is amended— 

4 (A) by striking subparagraphs (G), (H), 

5 and (I), and 

6 (B) by inserting after subparagraph (F) 

7 the following new subparagraph: 

8 ‘‘(G) Qualified improvement property de9 scribed in subsection (e)(6).’’. 

10 (4) ALTERNATIVE DEPRECIATION SYSTEM.— 

11 (A) ELECTING REAL PROPERTY TRADE OR

12 BUSINESS.—Subsection (g) of section 168 is 

13 amended— 

14 (i) in paragraph (1)— 

15 (I) in subparagraph (D), by 

16 striking ‘‘and’’ at the end, 

17 (II) in subparagraph (E), by in18 serting ‘‘and’’ at the end, and 

19 (III) by inserting after subpara20 graph (E) the following new subpara21 graph: 

22 ‘‘(F) any property described in paragraph 

23 (8),’’, and 

24 (ii) by adding at the end the following 

25 new paragraph: 


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1 ‘‘(8) ELECTING REAL PROPERTY TRADE OR

2 BUSINESS.—The property described in this para3 graph shall consist of any nonresidential real prop4 erty, residential rental property, and qualified im5 provement property held by an electing real property 

6 trade or business (as defined in 163(j)(7)(B)).’’. 

7 (B) QUALIFIED IMPROVEMENT PROP8 ERTY.—The table contained in subparagraph 

9 (B) of section 168(g)(3) is amended— 

10 (i) by inserting after the item relating 

11 to subparagraph (D)(ii) the following new 

12 item: 

‘‘(D)(v) ......................................................................................... 20’’. 

13 , and 

14 (ii) by striking the item relating to 

15 subparagraph (E)(iv) and all that follows 

16 through the item relating to subparagraph 

17 (E)(ix) and inserting the following: 

‘‘(E)(iv) ........................................................................................ 20

(E)(v) ........................................................................................... 30

(E)(vi) .......................................................................................... 35’’. 

18 (C) APPLICABLE RECOVERY PERIOD FOR

19 RESIDENTIAL RENTAL PROPERTY.—The table 

20 contained in subparagraph (C) of section 

21 168(g)(2) is amended by striking clauses (iii) 

22 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’’. 


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1 (5) CONFORMING AMENDMENTS.— 

2 (A) Clause (i) of section 168(k)(2)(A) is 

3 amended— 

4 (i) in subclause (II), by inserting ‘‘or’’ 

5 after the comma, 

6 (ii) in subclause (III), by striking 

7 ‘‘or’’ at the end, and 

8 (iii) by striking subclause (IV). 

9 (B) Section 168 is amended— 

10 (i) in subsection (e), as amended by 

11 paragraph (2)(B), by adding at the end 

12 the following: 

13 ‘‘(6) QUALIFIED IMPROVEMENT PROPERTY.— 

14 ‘‘(A) IN GENERAL.—The term ‘qualified 

15 improvement property’ means any improvement 

16 to an interior portion of a building which is 

17 nonresidential real property if such improve18 ment is placed in service after the date such 

19 building was first placed in service. 

20 ‘‘(B) CERTAIN IMPROVEMENTS NOT IN21 CLUDED.—Such term shall not include any im22 provement for which the expenditure is attrib23 utable to— 

24 ‘‘(i) the enlargement of the building, 

25 ‘‘(ii) any elevator or escalator, or 


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1 ‘‘(iii) the internal structural frame2 work of the building.’’. 

3 (ii) in subsection (k), by striking 

4 paragraph (3). 

5 (c) EFFECTIVE DATE.— 

6 (1) APPLICATION.—The amendments made by 

7 this section shall apply to property placed in service 

8 after December 31, 2017. 

9 (2) SHORTER RECOVERY PERIOD OR MORE AC10 CELERATED DEPRECIATION METHOD.—In the case 

11 of property placed in service before January 1, 

12 2018, if the amendments made by this section result 

13 in— 

14 (A) an applicable recovery period which is 

15 less than the applicable recovery period for such 

16 property before enactment of such amendments, 

17 or 

18 (B) an applicable depreciation method 

19 which is more accelerated than the applicable 

20 depreciation method for such property before 

21 enactment of such amendments, 

22 the depreciation deduction for such property shall, 

23 for any taxable year beginning after December 31, 

24 2017, be determined as if such property were placed 

25 in service on January 1, 2018. 


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1 SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM 

2 FOR ELECTING FARMING BUSINESSES. 

3 (a) IN GENERAL.—Section 168(g)(1), as amended by 

4 section 13204, is amended by striking ‘‘and’’ at the end 

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

6 subparagraph (F), and by inserting after subparagraph 

7 (F) the following new subparagraph: 

8 ‘‘(G) any property with a recovery period 

9 of 10 years or more which is held by an electing 

10 farming business (as defined in section 

11 163(j)(7)(C)),’’. 

12 (b) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning after 

14 December 31, 2017. 

15 SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERI16 MENTAL EXPENDITURES. 

17 (a) IN GENERAL.—Section 174 is amended to read 

18 as follows: 

19 ‘‘SEC. 174. AMORTIZATION OF RESEARCH AND EXPERI20 MENTAL EXPENDITURES. 

21 ‘‘(a) IN GENERAL.—In the case of a taxpayer’s speci22 fied research or experimental expenditures for any taxable 

23 year— 

24 ‘‘(1) except as provided in paragraph (2), no 

25 deduction shall be allowed for such expenditures, 

26 and 


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1 ‘‘(2) the taxpayer shall— 

2 ‘‘(A) charge such expenditures to capital 

3 account, and 

4 ‘‘(B) be allowed an amortization deduction 

5 of such expenditures ratably over the 5-year pe6 riod (15-year period in the case of any specified 

7 research or experimental expenditures which are 

8 attributable to foreign research (within the 

9 meaning of section 41(d)(4)(F))) beginning 

10 with the midpoint of the taxable year in which 

11 such expenditures are paid or incurred. 

12 ‘‘(b) SPECIFIED RESEARCH OR EXPERIMENTAL EX13 PENDITURES.—For purposes of this section, the term 

14 ‘specified research or experimental expenditures’ means, 

15 with respect to any taxable year, research or experimental 

16 expenditures which are paid or incurred by the taxpayer 

17 during such taxable year in connection with the taxpayer’s 

18 trade or business. 

19 ‘‘(c) SPECIAL RULES.— 

20 ‘‘(1) LAND AND OTHER PROPERTY.—This sec21 tion shall not apply to any expenditure for the acqui22 sition or improvement of land, or for the acquisition 

23 or improvement of property to be used in connection 

24 with the research or experimentation and of a char25 acter which is subject to the allowance under section 


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1 167 (relating to allowance for depreciation, etc.) or 

2 section 611 (relating to allowance for depletion); but 

3 for purposes of this section allowances under section 

4 167, and allowances under section 611, shall be con5 sidered as expenditures. 

6 ‘‘(2) EXPLORATION EXPENDITURES.—This sec7 tion shall not apply to any expenditure paid or in8 curred for the purpose of ascertaining the existence, 

9 location, extent, or quality of any deposit of ore or 

10 other mineral (including oil and gas). 

11 ‘‘(3) SOFTWARE DEVELOPMENT.—For purposes 

12 of this section, any amount paid or incurred in con13 nection with the development of any software shall 

14 be treated as a research or experimental expendi15 ture. 

16 ‘‘(d) TREATMENT UPON DISPOSITION, RETIREMENT, 

17 OR ABANDONMENT.—If any property with respect to 

18 which specified research or experimental expenditures are 

19 paid or incurred is disposed, retired, or abandoned during 

20 the period during which such expenditures are allowed as 

21 an amortization deduction under this section, no deduction 

22 shall be allowed with respect to such expenditures on ac23 count of such disposition, retirement, or abandonment and 

24 such amortization deduction shall continue with respect to 

25 such expenditures.’’. 


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1 (b) CHANGE IN METHOD OF ACCOUNTING.—The 

2 amendments made by subsection (a) shall be treated as 

3 a change in method of accounting for purposes of section 

4 481 of the Internal Revenue Code of 1986 and— 

5 (1) such change shall be treated as initiated by 

6 the taxpayer, 

7 (2) such change shall be treated as made with 

8 the consent of the Secretary, and 

9 (3) such change shall be applied only on a cut10 off basis for any research or experimental expendi11 tures paid or incurred in taxable years beginning 

12 after December 31, 2025, and no adjustments under 

13 section 481(a) shall be made. 

14 (c) CLERICAL AMENDMENT.—The table of sections 

15 for part VI of subchapter B of chapter 1 is amended by 

16 striking the item relating to section 174 and inserting the 

17 following new item: 

‘‘Sec. 174. Amortization of research and experimental expenditures.’’. 

18 (d) CONFORMING AMENDMENTS.— 

19 (1) Section 41(d)(1)(A) is amended by striking 

20 ‘‘expenses under section 174’’ and inserting ‘‘speci21 fied research or experimental expenditures under 

22 section 174’’. 

23 (2) Subsection (c) of section 280C is amend24 ed— 


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1 (A) by striking paragraph (1) and insert2 ing the following: 

3 ‘‘(1) IN GENERAL.—If— 

4 ‘‘(A) the amount of the credit determined 

5 for the taxable year under section 41(a)(1), ex6 ceeds 

7 ‘‘(B) the amount allowable as a deduction 

8 for such taxable year for qualified research ex9 penses or basic research expenses, 

10 the amount chargeable to capital account for the 

11 taxable year for such expenses shall be reduced by 

12 the amount of such excess.’’, 

13 (B) by striking paragraph (2), 

14 (C) by redesignating paragraphs (3) (as 

15 amended by this Act) and (4) as paragraphs (2) 

16 and (3), respectively, and 

17 (D) in paragraph (2), as redesignated by 

18 subparagraph (C), by striking ‘‘paragraphs (1) 

19 and (2)’’ and inserting ‘‘paragraph (1)’’. 

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

21 this section shall apply to amounts paid or incurred in tax22 able years beginning after December 31, 2025. 


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1 SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANT2 ING CITRUS PLANTS LOST BY REASON OF 

3 CASUALTY. 

4 (a) IN GENERAL.—Section 263A(d)(2) is amended 

5 by adding at the end the following new subparagraph: 

6 ‘‘(C) SPECIAL TEMPORARY RULE FOR CIT7 RUS PLANTS LOST BY REASON OF CASUALTY.— 

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

9 replanting of citrus plants, subparagraph 

10 (A) shall apply to amounts paid or in11 curred by a person (other than the tax12 payer described in subparagraph (A)) if— 

13 ‘‘(I) the taxpayer described in 

14 subparagraph (A) has an equity inter15 est of not less than 50 percent in the 

16 replanted citrus plants at all times 

17 during the taxable year in which such 

18 amounts were paid or incurred and 

19 such other person holds any part of 

20 the remaining equity interest, or 

21 ‘‘(II) such other person acquired 

22 the entirety of such taxpayer’s equity 

23 interest in the land on which the lost 

24 or damaged citrus plants were located 

25 at the time of such loss or damage, 

26 and the replanting is on such land. 


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1 ‘‘(ii) TERMINATION.—Clause (i) shall 

2 not apply to any cost paid or incurred 

3 after the date which is 10 years after the 

4 date of the enactment of the Tax Cuts and 

5 Jobs Act.’’. 

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

7 this section shall apply to costs paid or incurred after the 

8 date of the enactment of this Act. 

9 Subpart B—Accounting Methods 

10 SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR 

11 OF INCLUSION. 

12 (a) INCLUSION NOT LATER THAN FOR FINANCIAL

13 ACCOUNTING PURPOSES.—Section 451 is amended by re14 designating subsections (b) through (i) as subsections (c) 

15 through (j), respectively, and by inserting after subsection 

16 (a) the following new subsection: 

17 ‘‘(b) INCLUSION NOT LATER THAN FOR FINANCIAL

18 ACCOUNTING PURPOSES.—Notwithstanding part V of 

19 subchapter P— 

20 ‘‘(1) FINANCIAL STATEMENT.— 

21 ‘‘(A) IN GENERAL.—In the case of a tax22 payer the taxable income of which is computed 

23 under the accrual method of accounting, the 

24 amount of any portion of any item of gross in25 come shall be included in gross income not later 


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1 than the taxable year with respect to which 

2 such amount is taken into account as income 

3 in— 

4 ‘‘(i) an applicable financial statement 

5 of the taxpayer, or 

6 ‘‘(ii) such other financial statement as 

7 the Secretary may specify for purposes of 

8 this subsection. 

9 ‘‘(B) EXCEPTION.—In the case of a tax10 payer which does not have a financial statement 

11 described in clause (i) or (ii) of subparagraph 

12 (A) for a taxable year, such subparagraph shall 

13 not apply. 

14 ‘‘(2) COORDINATION WITH SPECIAL RULES FOR

15 LONG-TERM CONTRACTS.—Paragraph (1) shall not 

16 apply with respect to any item of income to which 

17 section 460 applies. 

18 ‘‘(3) APPLICABLE FINANCIAL STATEMENT.— 

19 For purposes of this subsection, the term ‘applicable 

20 financial statement’ means— 

21 ‘‘(A) a financial statement which is cer22 tified as being prepared in accordance with gen23 erally accepted accounting principles and which 

24 is— 


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1 ‘‘(i) a 10–K (or successor form), or 

2 annual statement to shareholders, required 

3 to be filed by the taxpayer with the United 

4 States Securities and Exchange Commis5 sion, 

6 ‘‘(ii) an audited financial statement of 

7 the taxpayer which is used for— 

8 ‘‘(I) credit purposes, 

9 ‘‘(II) reporting to shareholders, 

10 partners, or other proprietors, or to 

11 beneficiaries, or 

12 ‘‘(III) any other substantial 

13 nontax purpose, 

14 but only if there is no statement of the 

15 taxpayer described in clause (i), or 

16 ‘‘(iii) filed by the taxpayer with any 

17 other Federal agency for purposes other 

18 than Federal tax purposes, but only if 

19 there is no statement of the taxpayer de20 scribed in clause (i) or (ii), 

21 ‘‘(B) a financial statement which is made 

22 on the basis of international financial reporting 

23 standards and is filed by the taxpayer with an 

24 agency of a foreign government which is equiva25 lent to the United States Securities and ExVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00173 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 change Commission and which has reporting 

2 standards not less stringent than the standards 

3 required by such Commission, but only if there 

4 is no statement of the taxpayer described in 

5 subparagraph (A), or 

6 ‘‘(C) a financial statement filed by the tax7 payer with any other regulatory or govern8 mental body specified by the Secretary, but only 

9 if there is no statement of the taxpayer de10 scribed in subparagraph (A) or (B). 

11 ‘‘(4) ALLOCATION OF TRANSACTION PRICE.— 

12 For purposes of this subsection, in the case of a con13 tract which contains multiple performance obliga14 tions, the allocation of the transaction price to each 

15 performance obligation shall be equal to the amount 

16 allocated to each performance obligation for pur17 poses of including such item in revenue in the appli18 cable financial statement of the taxpayer. 

19 ‘‘(5) GROUP OF ENTITIES.—For purposes of 

20 paragraph (1), if the financial results of a taxpayer 

21 are reported on the applicable financial statement 

22 (as defined in paragraph (3)) for a group of entities, 

23 such statement may be treated as the applicable fi24 nancial statement of the taxpayer.’’. 


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1 (b) TREATMENT OF ADVANCE PAYMENTS.—Section 

2 451, as amended by subsection (a), is amended by redesig3 nating subsections (c) through (j) as subsections (d) 

4 through (k), respectively, and by inserting after subsection 

5 (b) the following new subsection: 

6 ‘‘(c) TREATMENT OF ADVANCE PAYMENTS.— 

7 ‘‘(1) IN GENERAL.—A taxpayer which computes 

8 taxable income under the accrual method of account9 ing, and receives any advance payment during the 

10 taxable year, shall— 

11 ‘‘(A) except as provided in subparagraph 

12 (B), include such advance payment in gross in13 come for such taxable year, or 

14 ‘‘(B) if the taxpayer elects the application 

15 of this subparagraph with respect to the cat16 egory of advance payments to which such ad17 vance payment belongs, the taxpayer shall— 

18 ‘‘(i) to the extent that any portion of 

19 such advance payment is required under 

20 subsection (b) to be included in gross in21 come in the taxable year in which such 

22 payment is received, so include such por23 tion, and 

24 ‘‘(ii) include the remaining portion of 

25 such advance payment in gross income in 


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1 the taxable year following the taxable year 

2 in which such payment is received. 

3 ‘‘(2) ELECTION.— 

4 ‘‘(A) IN GENERAL.—Except as otherwise 

5 provided in this paragraph, the election under 

6 paragraph (1)(B) shall be made at such time, 

7 in such form and manner, and with respect to 

8 such categories of advance payments, as the 

9 Secretary may provide. 

10 ‘‘(B) PERIOD TO WHICH ELECTION AP11 PLIES.—An election under paragraph (1)(B) 

12 shall be effective for the taxable year with re13 spect to which it is first made and for all subse14 quent taxable years, unless the taxpayer secures 

15 the consent of the Secretary to revoke such 

16 election. For purposes of this title, the com17 putation of taxable income under an election 

18 made under paragraph (1)(B) shall be treated 

19 as a method of accounting. 

20 ‘‘(3) TAXPAYERS CEASING TO EXIST.—Except 

21 as otherwise provided by the Secretary, the election 

22 under paragraph (1)(B) shall not apply with respect 

23 to advance payments received by the taxpayer during 

24 a taxable year if such taxpayer ceases to exist during 

25 (or with the close of) such taxable year. 


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1 ‘‘(4) ADVANCE PAYMENT.—For purposes of this 

2 subsection— 

3 ‘‘(A) IN GENERAL.—The term ‘advance 

4 payment’ means any payment— 

5 ‘‘(i) the full inclusion of which in the 

6 gross income of the taxpayer for the tax7 able year of receipt is a permissible method 

8 of accounting under this section (deter9 mined without regard to this subsection), 

10 ‘‘(ii) any portion of which is included 

11 in revenue by the taxpayer in a financial 

12 statement described in clause (i) or (ii) of 

13 subsection (b)(1)(A) for a subsequent tax14 able year, and 

15 ‘‘(iii) which is for goods, services, or 

16 such other items as may be identified by 

17 the Secretary for purposes of this clause. 

18 ‘‘(B) EXCLUSIONS.—Except as otherwise 

19 provided by the Secretary, such term shall not 

20 include— 

21 ‘‘(i) rent, 

22 ‘‘(ii) insurance premiums governed by 

23 subchapter L, 

24 ‘‘(iii) payments with respect to finan25 cial instruments, 


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1 ‘‘(iv) payments with respect to war2 ranty or guarantee contracts under which 

3 a third party is the primary obligor, 

4 ‘‘(v) payments subject to section 

5 871(a), 881, 1441, or 1442, 

6 ‘‘(vi) payments in property to which 

7 section 83 applies, and 

8 ‘‘(vii) any other payment identified by 

9 the Secretary for purposes of this subpara10 graph. 

11 ‘‘(C) RECEIPT.—For purposes of this sub12 section, an item of gross income is received by 

13 the taxpayer if it is actually or constructively 

14 received, or if it is due and payable to the tax15 payer. 

16 ‘‘(D) ALLOCATION OF TRANSACTION

17 PRICE.—For purposes of this subsection, rules 

18 similar to subsection (b)(4) shall apply.’’. 

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2017. 

22 (d) COORDINATION WITH SECTION 481.— 

23 (1) IN GENERAL.—In the case of any qualified 

24 change in method of accounting for the taxpayer’s 


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1 first taxable year beginning after December 31, 

2 2017— 

3 (A) such change shall be treated as initi4 ated by the taxpayer, and 

5 (B) such change shall be treated as made 

6 with the consent of the Secretary of the Treas7 ury. 

8 (2) QUALIFIED CHANGE IN METHOD OF AC9 COUNTING.—For purposes of this subsection, the 

10 term ‘‘qualified change in method of accounting’’ 

11 means any change in method of accounting which— 

12 (A) is required by the amendments made 

13 by this section, or 

14 (B) was prohibited under the Internal Rev15 enue Code of 1986 prior to such amendments 

16 and is permitted under such Code after such 

17 amendments. 

18 PART IV—BUSINESS-RELATED EXCLUSIONS AND 

19 DEDUCTIONS 

20 SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST. 

21 (a) IN GENERAL.—Section 163(j) is amended to read 

22 as follows: 

23 ‘‘(j) LIMITATION ON BUSINESS INTEREST.— 


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1 ‘‘(1) IN GENERAL.—The amount allowed as a 

2 deduction under this chapter for any taxable year 

3 for business interest shall not exceed the sum of— 

4 ‘‘(A) the business interest income of such 

5 taxpayer for such taxable year, plus 

6 ‘‘(B) 30 percent of the adjusted taxable in7 come of such taxpayer for such taxable year. 

8 The amount determined under subparagraph (B) 

9 shall not be less than zero. 

10 ‘‘(2) CARRYFORWARD OF DISALLOWED BUSI11 NESS INTEREST.—The amount of any business in12 terest not allowed as a deduction for any taxable 

13 year by reason of paragraph (1) shall be treated as 

14 business interest paid or accrued in the succeeding 

15 taxable year. 

16 ‘‘(3) EXEMPTION FOR CERTAIN SMALL BUSI17 NESSES.—In the case of any taxpayer (other than a 

18 tax shelter prohibited from using the cash receipts 

19 and disbursements method of accounting under sec20 tion 448(a)(3)) which meets the gross receipts test 

21 of section 448(c) for any taxable year, paragraph (1) 

22 shall not apply to such taxpayer for such taxable 

23 year. In the case of any taxpayer which is not a cor24 poration or a partnership, the gross receipts test of 

25 section 448(c) shall be applied in the same manner 


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1 as if such taxpayer were a corporation or partner2 ship. 

3 ‘‘(4) APPLICATION TO PARTNERSHIPS, ETC.— 

4 ‘‘(A) IN GENERAL.—In the case of any 

5 partnership— 

6 ‘‘(i) this subsection shall be applied at 

7 the partnership level and any deduction for 

8 business interest shall be taken into ac9 count in determining the non-separately 

10 stated taxable income or loss of the part11 nership, and 

12 ‘‘(ii) the adjusted taxable income of 

13 each partner of such partnership— 

14 ‘‘(I) shall be determined without 

15 regard to such partner’s distributive 

16 share of the non-separately stated tax17 able income or loss of such partner18 ship, and 

19 ‘‘(II) shall be increased by such 

20 partner’s distributive share of such 

21 partnership’s excess taxable income. 

22 For purposes of clause (ii)(II), a partner’s 

23 distributive share of partnership excess 

24 taxable income shall be determined in the 

25 same manner as the partner’s distributive 


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1 share of nonseparately stated taxable in2 come or loss of the partnership. 

3 ‘‘(B) SPECIAL RULES FOR

4 CARRYFORWARDS.— 

5 ‘‘(i) IN GENERAL.—The amount of 

6 any business interest not allowed as a de7 duction to a partnership for any taxable 

8 year by reason of paragraph (1) for any 

9 taxable year— 

10 ‘‘(I) shall not be treated under 

11 paragraph (2) as business interest 

12 paid or accrued by the partnership in 

13 the succeeding taxable year, and 

14 ‘‘(II) shall, subject to clause (ii), 

15 be treated as excess business interest 

16 which is allocated to each partner in 

17 the same manner as the non-sepa18 rately stated taxable income or loss of 

19 the partnership. 

20 ‘‘(ii) TREATMENT OF EXCESS BUSI21 NESS INTEREST ALLOCATED TO PART22 NERS.—If a partner is allocated any excess 

23 business interest from a partnership under 

24 clause (i) for any taxable year— 


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1 ‘‘(I) such excess business interest 

2 shall be treated as business interest 

3 paid or accrued by the partner in the 

4 next succeeding taxable year in which 

5 the partner is allocated excess taxable 

6 income from such partnership, but 

7 only to the extent of such excess tax8 able income, and 

9 ‘‘(II) any portion of such excess 

10 business interest remaining after the 

11 application of subclause (I) shall, sub12 ject to the limitations of subclause (I), 

13 be treated as business interest paid or 

14 accrued in succeeding taxable years. 

15 For purposes of applying this paragraph, 

16 excess taxable income allocated to a part17 ner from a partnership for any taxable 

18 year shall not be taken into account under 

19 paragraph (1)(A) with respect to any busi20 ness interest other than excess business in21 terest from the partnership until all such 

22 excess business interest for such taxable 

23 year and all preceding taxable years has 

24 been treated as paid or accrued under 

25 clause (ii). 


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1 ‘‘(iii) BASIS ADJUSTMENTS.— 

2 ‘‘(I) IN GENERAL.—The adjusted 

3 basis of a partner in a partnership in4 terest shall be reduced (but not below 

5 zero) by the amount of excess busi6 ness interest allocated to the partner 

7 under clause (i)(II). 

8 ‘‘(II) SPECIAL RULE FOR DIS9 POSITIONS.—If a partner disposes of 

10 a partnership interest, the adjusted 

11 basis of the partner in the partnership 

12 interest shall be increased immediately 

13 before the disposition by the amount 

14 of the excess (if any) of the amount of 

15 the basis reduction under subclause 

16 (I) over the portion of any excess 

17 business interest allocated to the part18 ner under clause (i)(II) which has pre19 viously been treated under clause (ii) 

20 as business interest paid or accrued 

21 by the partner. The preceding sen22 tence shall also apply to transfers of 

23 the partnership interest (including by 

24 reason of death) in a transaction in 

25 which gain is not recognized in whole 


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1 or in part. No deduction shall be al2 lowed to the transferor or transferee 

3 under this chapter for any excess 

4 business interest resulting in a basis 

5 increase under this subclause. 

6 ‘‘(C) EXCESS TAXABLE INCOME.—The 

7 term ‘excess taxable income’ means, with re8 spect to any partnership, the amount which 

9 bears the same ratio to the partnership’s ad10 justed taxable income as— 

11 ‘‘(i) the excess (if any) of— 

12 ‘‘(I) the amount determined for 

13 the partnership under paragraph 

14 (1)(B), over 

15 ‘‘(II) the amount (if any) by 

16 which the business interest of the 

17 partnership exceeds the business in18 terest income of the partnership, 

19 bears to 

20 ‘‘(ii) the amount determined for the 

21 partnership under paragraph (1)(B). 

22 ‘‘(D) APPLICATION TO S CORPORATIONS.— 

23 Rules similar to the rules of subparagraphs (A) 

24 and (B) shall apply with respect to any S cor25 poration and its shareholders. 


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1 ‘‘(5) BUSINESS INTEREST.—For purposes of 

2 this subsection, the term ‘business interest’ means 

3 any interest paid or accrued on indebtedness prop4 erly allocable to a trade or business. Such term shall 

5 not include investment interest (within the meaning 

6 of subsection (d)). 

7 ‘‘(6) BUSINESS INTEREST INCOME.—For pur8 poses of this subsection, the term ‘business interest 

9 income’ means the amount of interest includible in 

10 the gross income of the taxpayer for the taxable year 

11 which is properly allocable to a trade or business. 

12 Such term shall not include investment income 

13 (within the meaning of subsection (d)). 

14 ‘‘(7) TRADE OR BUSINESS.—For purposes of 

15 this subsection— 

16 ‘‘(A) IN GENERAL.—The term ‘trade or 

17 business’ shall not include— 

18 ‘‘(i) the trade or business of per19 forming services as an employee, 

20 ‘‘(ii) any electing real property trade 

21 or business, 

22 ‘‘(iii) any electing farming business, 

23 or 

24 ‘‘(iv) the trade or business of the fur25 nishing or sale of— 


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1 ‘‘(I) electrical energy, water, or 

2 sewage disposal services, 

3 ‘‘(II) gas or steam through a 

4 local distribution system, or 

5 ‘‘(III) transportation of gas or 

6 steam by pipeline, 

7 if the rates for such furnishing or sale, as 

8 the case may be, have been established or 

9 approved by a State or political subdivision 

10 thereof, by any agency or instrumentality 

11 of the United States, by a public service or 

12 public utility commission or other similar 

13 body of any State or political subdivision 

14 thereof, or by the governing or ratemaking 

15 body of an electric cooperative. 

16 ‘‘(B) ELECTING REAL PROPERTY TRADE

17 OR BUSINESS.—For purposes of this paragraph, 

18 the term ‘electing real property trade or busi19 ness’ means any trade or business which is de20 scribed in section 469(c)(7)(C) and which 

21 makes an election under this subparagraph. 

22 Any such election shall be made at such time 

23 and in such manner as the Secretary shall pre24 scribe, and, once made, shall be irrevocable. 


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1 ‘‘(C) ELECTING FARMING BUSINESS.—For 

2 purposes of this paragraph, the term ‘electing 

3 farming business’ means a farming business (as 

4 defined in section 263A(e)(4)) which makes an 

5 election under this subparagraph. Any such 

6 election shall be made at such time and in such 

7 manner as the Secretary shall prescribe, and, 

8 once made, shall be irrevocable. 

9 ‘‘(8) ADJUSTED TAXABLE INCOME.—For pur10 poses of this subsection, the term ‘adjusted taxable 

11 income’ means the taxable income of the taxpayer— 

12 ‘‘(A) computed without regard to— 

13 ‘‘(i) any item of income, gain, deduc14 tion, or loss which is not properly allocable 

15 to a trade or business, 

16 ‘‘(ii) any business interest or business 

17 interest income, 

18 ‘‘(iii) the amount of any net operating 

19 loss deduction under section 172, and 

20 ‘‘(iv) the amount of any deduction al21 lowed under section 199 or 199A, and 

22 ‘‘(B) computed with such other adjust23 ments as provided by the Secretary. 

24 ‘‘(9) CROSS REFERENCES.— 


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1 ‘‘(A) For requirement that an electing real 

2 property trade or business use the alternative 

3 depreciation system, see section 168(g)(1)(F). 

4 ‘‘(B) For requirement that an electing 

5 farming business use the alternative deprecia6 tion system, see section 168(g)(1)(G).’’. 

7 (b) TREATMENT OF CARRYFORWARD OF DIS8 ALLOWED BUSINESS INTEREST IN CERTAIN CORPORATE

9 ACQUISITIONS.— 

10 (1) IN GENERAL.—Section 381(c) is amended 

11 by inserting after paragraph (19) the following new 

12 paragraph: 

13 ‘‘(20) CARRYFORWARD OF DISALLOWED BUSI14 NESS INTEREST.—The carryover of disallowed busi15 ness interest described in section 163(j)(2) to tax16 able years ending after the date of distribution or 

17 transfer.’’. 

18 (2) APPLICATION OF LIMITATION.—Section 

19 382(d) is amended by adding at the end the fol20 lowing new paragraph: 

21 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS22 ALLOWED INTEREST.—The term ‘pre-change loss’ 

23 shall include any carryover of disallowed interest de24 scribed in section 163(n) under rules similar to the 

25 rules of paragraph (1).’’. 


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1 (3) CONFORMING AMENDMENT.—Section 

2 382(k)(1) is amended by inserting after the first 

3 sentence the following: ‘‘Such term shall include any 

4 corporation entitled to use a carryforward of dis5 allowed interest described in section 381(c)(20).’’. 

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

7 this section shall apply to taxable years beginning after 

8 December 31, 2017. 

9 SEC. 13302. MODIFICATION OF NET OPERATING LOSS DE10 DUCTION. 

11 (a) LIMITATION ON DEDUCTION.— 

12 (1) IN GENERAL.—Section 172(a) is amended 

13 to read as follows: 

14 ‘‘(a) DEDUCTION ALLOWED.—There shall be allowed 

15 as a deduction for the taxable year an amount equal to 

16 the lesser of— 

17 ‘‘(1) the aggregate of the net operating loss 

18 carryovers to such year, plus the net operating loss 

19 carrybacks to such year, or 

20 ‘‘(2) 90 percent (80 percent in the case of tax21 able years beginning after December 31, 2022) of 

22 taxable income computed without regard to the de23 duction allowable under this section. 


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1 For purposes of this subtitle, the term ‘net operating loss 

2 deduction’ means the deduction allowed by this sub3 section.’’. 

4 (2) COORDINATION OF LIMITATION WITH

5 CARRYBACKS AND CARRYOVERS.—Section 172(b)(2) 

6 is amended by striking ‘‘shall be computed—’’ and 

7 all that follows and inserting ‘‘shall— 

8 ‘‘(A) be computed with the modifications 

9 specified in subsection (d) other than para10 graphs (1), (4), and (5) thereof, and by deter11 mining the amount of the net operating loss de12 duction without regard to the net operating loss 

13 for the loss year or for any taxable year there14 after, 

15 ‘‘(B) not be considered to be less than 

16 zero, and 

17 ‘‘(C) not exceed the amount determined 

18 under subsection (a)(2) for such prior taxable 

19 year.’’. 

20 (3) CONFORMING AMENDMENT.—Section 

21 172(d)(6) is amended by striking ‘‘and’’ at the end 

22 of subparagraph (A), by striking the period at the 

23 end of subparagraph (B) and inserting ‘‘; and’’, and 

24 by adding at the end the following new subpara25 graph: 


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1 ‘‘(C) subsection (a)(2) shall be applied by 

2 substituting ‘real estate investment trust tax3 able income (as defined in section 857(b)(2) but 

4 without regard to the deduction for dividends 

5 paid (as defined in section 561))’ for ‘taxable 

6 income’.’’. 

7 (b) REPEAL OF NET OPERATING LOSS CARRYBACK; 

8 INDEFINITE CARRYFORWARD.— 

9 (1) IN GENERAL.—Section 172(b)(1)(A) is 

10 amended— 

11 (A) by striking ‘‘shall be a net operating 

12 loss carryback to each of the 2 taxable years’’ 

13 in clause (i) and inserting ‘‘except as otherwise 

14 provided in this paragraph, shall not be a net 

15 operating loss carryback to any taxable year’’, 

16 and 

17 (B) by striking ‘‘to each of the 20 taxable 

18 years’’ in clause (ii) and inserting ‘‘to each tax19 able year’’. 

20 (2) CONFORMING AMENDMENT.—Section 

21 172(b)(1) is amended by striking subparagraphs (B) 

22 through (F). 

23 (c) TREATMENT OF FARMING LOSSES.— 

24 (1) ALLOWANCE OF CARRYBACKS.—Section 

25 172(b)(1), as amended by subsection (b)(2), is 


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1 amended by adding at the end the following new 

2 subparagraph: 

3 ‘‘(B) FARMING LOSSES.— 

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

5 portion of a net operating loss for the tax6 able year which is a farming loss with re7 spect to the taxpayer, such loss shall be a 

8 net operating loss carryback to each of the 

9 2 taxable years preceding the taxable year 

10 of such loss. 

11 ‘‘(ii) FARMING LOSS.—For purposes 

12 of this section, the term ‘farming loss’ 

13 means the lesser of— 

14 ‘‘(I) the amount which would be 

15 the net operating loss for the taxable 

16 year if only income and deductions at17 tributable to farming businesses (as 

18 defined in section 263A(e)(4)) are 

19 taken into account, or 

20 ‘‘(II) the amount of the net oper21 ating loss for such taxable year. 

22 ‘‘(iii) COORDINATION WITH PARA23 GRAPH (2).—For purposes of applying 

24 paragraph (2), a farming loss for any tax25 able year shall be treated as a separate net 


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1 operating loss for such taxable year to be 

2 taken into account after the remaining 

3 portion of the net operating loss for such 

4 taxable year. 

5 ‘‘(iv) ELECTION.—Any taxpayer enti6 tled to a 2-year carryback under clause (i) 

7 from any loss year may elect not to have 

8 such clause apply to such loss year. Such 

9 election shall be made in such manner as 

10 prescribed by the Secretary and shall be 

11 made by the due date (including extensions 

12 of time) for filing the taxpayer’s return for 

13 the taxable year of the net operating loss. 

14 Such election, once made for any taxable 

15 year, shall be irrevocable for such taxable 

16 year.’’. 

17 (2) CONFORMING AMENDMENTS.— 

18 (A) Section 172 is amended by striking 

19 subsections (f), (g), and (h), and by redesig20 nating subsection (i) as subsection (f). 

21 (B) Section 537(b)(4) is amended by in22 serting ‘‘(as in effect before the date of enact23 ment of the Tax Cuts and Jobs Act)’’ after ‘‘as 

24 defined in section 172(f)’’. 

25 (d) TREATMENT OF CERTAIN INSURANCE LOSSES.— 


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1 (1) TREATMENT OF CARRYFORWARDS AND

2 CARRYBACKS.—Section 172(b)(1), as amended by 

3 subsections (b)(2) and (c)(1), is amended by adding 

4 at the end the following new subparagraph: 

5 ‘‘(C) INSURANCE COMPANIES.—In the case 

6 of an insurance company (as defined in section 

7 816(a)) other than a life insurance company, 

8 the net operating loss for any taxable year— 

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

10 carryback to each of the 2 taxable years 

11 preceding the taxable year of such loss, 

12 and 

13 ‘‘(ii) shall be a net operating loss car14 ryover to each of the 20 taxable years fol15 lowing the taxable year of the loss.’’. 

16 (2) EXEMPTION FROM LIMITATION.—Section 

17 172, as amended by subsection (c)(2)(A), is amend18 ed by redesignating subsection (f) as subsection (g) 

19 and inserting after subsection (e) the following new 

20 subsection: 

21 ‘‘(f) SPECIAL RULE FOR INSURANCE COMPANIES.— 

22 In the case of an insurance company (as defined in section 

23 816(a)) other than a life insurance company— 

24 ‘‘(1) the amount of the deduction allowed under 

25 subsection (a) shall be the aggregate of the net operVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00195 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 ating loss carryovers to such year, plus the net oper2 ating loss carrybacks to such year, and 

3 ‘‘(2) subparagraph (C) of subsection (b)(2) 

4 shall not apply.’’. 

5 (e) EFFECTIVE DATE.— 

6 (1) NET OPERATING LOSS LIMITATION.—The 

7 amendments made by subsections (a) and (d)(2) 

8 shall apply to losses arising in taxable years begin9 ning after December 31, 2017. 

10 (2) CARRYFORWARDS AND CARRYBACKS.—The 

11 amendments made by subsections (b), (c), and 

12 (d)(1) shall apply to net operating losses arising in 

13 taxable years ending after December 31, 2017. 

14 SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY. 

15 (a) IN GENERAL.—Section 1031(a)(1) is amended by 

16 striking ‘‘property’’ each place it appears and inserting 

17 ‘‘real property’’. 

18 (b) CONFORMING AMENDMENTS.— 

19 (1) Paragraph (2) of section 1031(a) is amend20 ed to read as follows: 

21 ‘‘(2) EXCEPTION FOR REAL PROPERTY HELD

22 FOR SALE.—This subsection shall not apply to any 

23 exchange of real property held primarily for sale.’’. 

24 (2) Section 1031 is amended by striking sub25 sections (e). 


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1 (3) Section 1031, as amended by paragraph 

2 (2), is amended by inserting after subsection (d) the 

3 following new subsection: 

4 ‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.— 

5 For purposes of this section, an interest in a partnership 

6 which has in effect a valid election under section 761(a) 

7 to be excluded from the application of all of subchapter 

8 K shall be treated as an interest in each of the assets of 

9 such partnership and not as an interest in a partnership.’’. 

10 (4) Section 1031(h) is amended to read as fol11 lows: 

12 ‘‘(h) SPECIAL RULES FOR FOREIGN REAL PROP13 ERTY.—Real property located in the United States and 

14 real property located outside the United States are not 

15 property of a like kind.’’. 

16 (5) Section 1031(i) is amended to read as fol17 lows: 

18 ‘‘(i) SPECIAL RULES FOR MUTUAL DITCH, RES19 ERVOIR, OR IRRIGATION COMPANY STOCK.—For purposes 

20 of subsection (a), shares in a mutual ditch, reservoir, or 

21 irrigation company shall be treated as real property if at 

22 the time of the exchange— 

23 ‘‘(1) the mutual ditch, reservoir, or irrigation 

24 company is an organization described in section 

25 501(c)(12)(A) (determined without regard to the 


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1 percentage of its income that is collected from its 

2 members for the purpose of meeting losses and ex3 penses), and 

4 ‘‘(2) the shares in such company have been rec5 ognized by the highest court of the State in which 

6 such company was organized or by applicable State 

7 statute as constituting or representing real property 

8 or an interest in real property.’’. 

9 (6) The heading of section 1031 is amended by 

10 striking ‘‘PROPERTY’’ and inserting ‘‘REAL PROP11 ERTY’’. 

12 (7) The table of sections for part III of sub13 chapter O of chapter 1 is amended by striking the 

14 item relating to section 1031 and inserting the fol15 lowing new item: 

‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’. 

16 (c) EFFECTIVE DATE.— 

17 (1) IN GENERAL.—Except as otherwise pro18 vided in this subsection, the amendments made by 

19 this section shall apply to exchanges completed after 

20 December 31, 2017. 

21 (2) TRANSITION RULE.—The amendments 

22 made by this section shall not apply to any exchange 

23 if— 


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1 (A) the property disposed of by the tax2 payer in the exchange is disposed of on or be3 fore December 31 2017, or 

4 (B) the property received by the taxpayer 

5 in the exchange is received on or before Decem6 ber 31, 2017. 

7 SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF 

8 EXPENSES FOR FRINGE BENEFITS. 

9 (a) NO DEDUCTION ALLOWED FOR ENTERTAINMENT

10 EXPENSES.— 

11 (1) IN GENERAL.—Section 274(a) is amend12 ed— 

13 (A) in paragraph (1)(A), by striking ‘‘un14 less’’ and all that follows through ‘‘trade or 

15 business,’’, 

16 (B) by striking the flush sentence at the 

17 end of paragraph (1), and 

18 (C) by striking paragraph (2)(C). 

19 (2) CONFORMING AMENDMENTS.— 

20 (A) Section 274(d) is amended— 

21 (i) by striking paragraph (2) and re22 designating paragraphs (3) and (4) as 

23 paragraphs (2) and (3), respectively, and 

24 (ii) in the flush text following para25 graph (3) (as so redesignated)— 


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1 (I) by striking ‘‘, entertainment, 

2 amusement, recreation, or use of the 

3 facility or property,’’ in item (B), and 

4 (II) by striking ‘‘(D) the business 

5 relationship to the taxpayer of persons 

6 entertained, using the facility or prop7 erty, or receiving the gift’’ and insert8 ing ‘‘(D) the business relationship to 

9 the taxpayer of the person receiving 

10 the benefit’’, 

11 (B) Section 274 is amended by striking 

12 subsection (l). 

13 (C) Section 274(n) is amended by striking 

14 ‘‘AND ENTERTAINMENT’’ in the heading. 

15 (D) Section 274(n)(1) is amended to read 

16 as follows: 

17 ‘‘(1) IN GENERAL.—The amount allowable as a 

18 deduction under this chapter for any expense for 

19 food or beverages shall not exceed 50 percent of the 

20 amount of such expense which would (but for this 

21 paragraph) be allowable as a deduction under this 

22 chapter.’’. 

23 (E) Section 274(n)(2) is amended— 


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1 (i) in subparagraph (B), by striking 

2 ‘‘in the case of an expense for food or bev3 erages,’’, 

4 (ii) by striking subparagraph (C) and 

5 redesignating subparagraphs (D) and (E) 

6 as subparagraphs (C) and (D), respec7 tively, 

8 (iii) by striking ‘‘of subparagraph 

9 (E)’’ the last sentence and inserting ‘‘of 

10 subparagraph (D)’’, and 

11 (iv) by striking ‘‘in subparagraph 

12 (D)’’ in the last sentence and inserting ‘‘in 

13 subparagraph (C)’’. 

14 (F) Clause (iv) of section 7701(b)(5)(A) is 

15 amended to read as follows: 

16 ‘‘(iv) a professional athlete who is 

17 temporarily in the United States to com18 pete in a sports event— 

19 ‘‘(I) which is organized for the 

20 primary purpose of benefiting an or21 ganization which is described in sec22 tion 501(c)(3) and exempt from tax 

23 under section 501(a), 


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1 ‘‘(II) all of the net proceeds of 

2 which are contributed to such organi3 zation, and, 

4 ‘‘(III) which utilizes volunteers 

5 for substantially all of the work per6 formed in carrying out such event.’’. 

7 (b) ONLY 50 PERCENT OF EXPENSES FOR MEALS

8 PROVIDED ON OR NEAR BUSINESS PREMISES ALLOWED

9 AS DEDUCTION.—Paragraph (2) of section 274(n), as 

10 amended by subsection (a), is amended— 

11 (1) by striking subparagraph (B), 

12 (2) by redesignating subparagraphs (C) and 

13 (D) as subparagraphs (B) and (C), respectively, 

14 (3) by striking ‘‘of subparagraph (D)’’ in the 

15 last sentence and inserting ‘‘of subparagraph (C)’’, 

16 and 

17 (4) by striking ‘‘in subparagraph (C)’’ in the 

18 last sentence and inserting ‘‘in subparagraph (B)’’. 

19 (c) TREATMENT OF TRANSPORTATION BENEFITS.— 

20 Section 274, as amended by subsection (a), is amended— 

21 (1) in subsection (a)— 

22 (A) in the heading, by striking ‘‘OR

23 RECREATION’’ and inserting ‘‘RECREATION, OR

24 QUALIFIED TRANSPORTATION FRINGES’’, and 


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1 (B) by adding at the end the following new 

2 paragraph: 

3 ‘‘(4) QUALIFIED TRANSPORTATION FRINGES.— 

4 No deduction shall be allowed under this chapter for 

5 the expense of any qualified transportation fringe 

6 (as defined in section 132(f)) provided to an em7 ployee of the taxpayer.’’, and 

8 (2) by inserting after subsection (k) the fol9 lowing new subsection: 

10 ‘‘(l) TRANSPORTATION AND COMMUTING BENE11 FITS.—No deduction shall be allowed under this chapter 

12 for any expense incurred for providing any transportation, 

13 or any payment or reimbursement, to an employee of the 

14 taxpayer in connection with travel between the employee’s 

15 residence and place of employment, except as necessary 

16 for ensuring the safety of the employee.’’. 

17 (d) ELIMINATION OF DEDUCTION FOR MEALS PRO18 VIDED AT CONVENIENCE OF EMPLOYER.—Section 274, as 

19 amended by subsection (c), is amended— 

20 (1) by redesignating subsection (o) as sub21 section (p), and 

22 (2) by inserting after subsection (n) the fol23 lowing new subsection: 


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1 ‘‘(o) MEALS PROVIDED AT CONVENIENCE OF EM2 PLOYER.—No deduction shall be allowed under this chap3 ter for— 

4 ‘‘(1) any expense for the operation of a facility 

5 described in section 132(e)(2), and any expense for 

6 food or beverages, including under section 132(e)(1), 

7 associated with such facility, or 

8 ‘‘(2) any expense for meals described in section 

9 119(a).’’. 

10 (e) EFFECTIVE DATE.— 

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section 

13 shall apply to amounts incurred or paid after De14 cember 31, 2017. 

15 (2) EFFECTIVE DATE FOR ELIMINATION OF DE16 DUCTION FOR MEALS PROVIDED AT CONVENIENCE

17 OF EMPLOYER.—The amendments made by sub18 section (d) shall apply to amounts incurred or paid 

19 after December 31, 2025. 

20 SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIB21 UTABLE TO DOMESTIC PRODUCTION ACTIVI22 TIES. 

23 (a) IN GENERAL.—Part VI of subchapter B of chap24 ter 1 is amended by striking section 199 (and by striking 


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1 the item relating to such section in the table of sections 

2 for such part). 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Sections 74(d)(2)(B), 86(b)(2)(A), 

5 135(c)(4)(A), 137(b)(3)(A), 219(g)(3)(A)(ii), 

6 221(b)(2)(C), 222(b)(2)(C), 246(b)(1), and 

7 469(i)(3)(F)(iii) are each amended by striking 

8 ‘‘199,’’. 

9 (2) Section 170(b)(2)(D), as amended by sec10 tion 11011, is amended by striking clause (iv) and 

11 by redesignating clauses (v) and (vi) as redesig12 nating clauses (iv) as clause (v), respectively. 

13 (3) Section 172(d) is amended by striking para14 graph (7). 

15 (4) Section 613(a) is amended by striking ‘‘and 

16 without the deduction under section 199’’. 

17 (5) Section 613A(d)(1) is amended by striking 

18 subparagraph (B) and by redesignating subpara19 graphs (C), (D), and (E) as subparagraphs (B), (C), 

20 and (D). 

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

22 this subsection shall apply to taxable years beginning after 

23 December 31, 2018. 


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1 SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, 

2 PENALTIES, AND OTHER AMOUNTS. 

3 (a) DENIAL OF DEDUCTION.— 

4 (1) IN GENERAL.—Subsection (f) of section 162 

5 is amended to read as follows: 

6 ‘‘(f) FINES, PENALTIES, AND OTHER AMOUNTS.— 

7 ‘‘(1) IN GENERAL.—Except as provided in the 

8 following paragraphs of this subsection, no deduction 

9 otherwise allowable shall be allowed under this chap10 ter for any amount paid or incurred (whether by 

11 suit, agreement, or otherwise) to, or at the direction 

12 of, a government or governmental entity in relation 

13 to the violation of any law or the investigation or in14 quiry by such government or entity into the potential 

15 violation of any law. 

16 ‘‘(2) EXCEPTION FOR AMOUNTS CONSTITUTING

17 RESTITUTION OR PAID TO COME INTO COMPLIANCE

18 WITH LAW.— 

19 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

20 not apply to any amount that— 

21 ‘‘(i) the taxpayer establishes— 

22 ‘‘(I) constitutes restitution (in23 cluding remediation of property) for 

24 damage or harm which was or may be 

25 caused by the violation of any law or 

26 the potential violation of any law, or 


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1 ‘‘(II) is paid to come into compli2 ance with any law which was violated 

3 or otherwise involved in the investiga4 tion or inquiry described in paragraph 

5 (1), 

6 ‘‘(ii) is identified as restitution or as 

7 an amount paid to come into compliance 

8 with such law, as the case may be, in the 

9 court order or settlement agreement, and 

10 ‘‘(iii) in the case of any amount of 

11 restitution for failure to pay any tax im12 posed under this title in the same manner 

13 as if such amount were such tax, would 

14 have been allowed as a deduction under 

15 this chapter if it had been timely paid. 

16 The identification under clause (ii) alone shall 

17 not be sufficient to make the establishment re18 quired under clause (i). 

19 ‘‘(B) LIMITATION.—Subparagraph (A) 

20 shall not apply to any amount paid or incurred 

21 as reimbursement to the government or entity 

22 for the costs of any investigation or litigation. 

23 ‘‘(3) EXCEPTION FOR AMOUNTS PAID OR IN24 CURRED AS THE RESULT OF CERTAIN COURT OR25 DERS.—Paragraph (1) shall not apply to any 


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1 amount paid or incurred by reason of any order of 

2 a court in a suit in which no government or govern3 mental entity is a party. 

4 ‘‘(4) EXCEPTION FOR TAXES DUE.—Paragraph 

5 (1) shall not apply to any amount paid or incurred 

6 as taxes due. 

7 ‘‘(5) TREATMENT OF CERTAIN NONGOVERN8 MENTAL REGULATORY ENTITIES.—For purposes of 

9 this subsection, the following nongovernmental enti10 ties shall be treated as governmental entities: 

11 ‘‘(A) Any nongovernmental entity which 

12 exercises self-regulatory powers (including im13 posing sanctions) in connection with a qualified 

14 board or exchange (as defined in section 

15 1256(g)(7)). 

16 ‘‘(B) To the extent provided in regulations, 

17 any nongovernmental entity which exercises 

18 self-regulatory powers (including imposing sanc19 tions) as part of performing an essential gov20 ernmental function.’’. 

21 (2) EFFECTIVE DATE.—The amendment made 

22 by this subsection shall apply to amounts paid or in23 curred on or after the date of the enactment of this 

24 Act, except that such amendments shall not apply to 

25 amounts paid or incurred under any binding order 


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1 or agreement entered into before such date. Such ex2 ception shall not apply to an order or agreement re3 quiring court approval unless the approval was ob4 tained before such date. 

5 (b) REPORTING OF DEDUCTIBLE AMOUNTS.— 

6 (1) IN GENERAL.—Subpart B of part III of 

7 subchapter A of chapter 61 is amended by inserting 

8 after section 6050W the following new section: 

9 ‘‘SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN 

10 FINES, PENALTIES, AND OTHER AMOUNTS. 

11 ‘‘(a) REQUIREMENT OF REPORTING.— 

12 ‘‘(1) IN GENERAL.—The appropriate official of 

13 any government or any entity described in section 

14 162(f)(5) which is involved in a suit or agreement 

15 described in paragraph (2) shall make a return in 

16 such form as determined by the Secretary setting 

17 forth— 

18 ‘‘(A) the amount required to be paid as a 

19 result of the suit or agreement to which para20 graph (1) of section 162(f) applies, 

21 ‘‘(B) any amount required to be paid as a 

22 result of the suit or agreement which con23 stitutes restitution or remediation of property, 

24 and 


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1 ‘‘(C) any amount required to be paid as a 

2 result of the suit or agreement for the purpose 

3 of coming into compliance with any law which 

4 was violated or involved in the investigation or 

5 inquiry. 

6 ‘‘(2) SUIT OR AGREEMENT DESCRIBED.— 

7 ‘‘(A) IN GENERAL.—A suit or agreement is 

8 described in this paragraph if— 

9 ‘‘(i) it is— 

10 ‘‘(I) a suit with respect to a vio11 lation of any law over which the gov12 ernment or entity has authority and 

13 with respect to which there has been 

14 a court order, or 

15 ‘‘(II) an agreement which is en16 tered into with respect to a violation 

17 of any law over which the government 

18 or entity has authority, or with re19 spect to an investigation or inquiry by 

20 the government or entity into the po21 tential violation of any law over which 

22 such government or entity has author23 ity, and 

24 ‘‘(ii) the aggregate amount involved in 

25 all court orders and agreements with reVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00210 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 spect to the violation, investigation, or in2 quiry is $600 or more. 

3 ‘‘(B) ADJUSTMENT OF REPORTING

4 THRESHOLD.—The Secretary shall adjust the 

5 $600 amount in subparagraph (A)(ii) as nec6 essary in order to ensure the efficient adminis7 tration of the internal revenue laws. 

8 ‘‘(3) TIME OF FILING.—The return required 

9 under this subsection shall be filed at the time the 

10 agreement is entered into, as determined by the Sec11 retary. 

12 ‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVID13 UALS INVOLVED IN THE SETTLEMENT.—Every person re14 quired to make a return under subsection (a) shall furnish 

15 to each person who is a party to the suit or agreement 

16 a written statement showing— 

17 ‘‘(1) the name of the government or entity, and 

18 ‘‘(2) the information supplied to the Secretary 

19 under subsection (a)(1). 

20 The written statement required under the preceding sen21 tence shall be furnished to the person at the same time 

22 the government or entity provides the Secretary with the 

23 information required under subsection (a). 

24 ‘‘(c) APPROPRIATE OFFICIAL DEFINED.—For pur25 poses of this section, the term ‘appropriate official’ means 


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1 the officer or employee having control of the suit, inves2 tigation, or inquiry or the person appropriately designated 

3 for purposes of this section.’’. 

4 (2) CONFORMING AMENDMENT.—The table of 

5 sections for subpart B of part III of subchapter A 

6 of chapter 61 is amended by inserting after the item 

7 relating to section 6050W the following new item: 

‘‘Sec. 6050X. Information with respect to certain fines, penalties, and other 

amounts.’’. 

8 (3) EFFECTIVE DATE.—The amendments made 

9 by this subsection shall apply to amounts paid or in10 curred on or after the date of the enactment of this 

11 Act, except that such amendments shall not apply to 

12 amounts paid or incurred under any binding order 

13 or agreement entered into before such date. Such ex14 ception shall not apply to an order or agreement re15 quiring court approval unless the approval was ob16 tained before such date. 

17 SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS 

18 SUBJECT TO NONDISCLOSURE AGREEMENTS 

19 PAID IN CONNECTION WITH SEXUAL HARASS20 MENT OR SEXUAL ABUSE. 

21 (a) DENIAL OF DEDUCTION.—Section 162 is amend22 ed by redesignating subsection (q) as subsection (r) and 

23 by inserting after subsection (p) the following new sub24 section: 


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1 ‘‘(q) PAYMENTS RELATED TO SEXUAL HARASSMENT

2 AND SEXUAL ABUSE.—No deduction shall be allowed 

3 under this chapter for— 

4 ‘‘(1) any settlement or payment related to sex5 ual harassment or sexual abuse if such settlement or 

6 payment is subject to a nondisclosure agreement, or 

7 ‘‘(2) attorney’s fees related to such a settlement 

8 or payment.’’. 

9 (b) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to amounts paid or incurred after 

11 the date of the enactment of this Act. 

12 SEC. 13308. UNIFORM TREATMENT OF EXPENSES IN CON13 TINGENCY FEE CASES. 

14 (a) IN GENERAL.—Section 162, as amended by sec15 tion 13307, is amended by redesignating subsection (r) as 

16 subsection (s) and by inserting after subsection (q) the 

17 following new subsection: 

18 ‘‘(r) EXPENSES IN CONTINGENCY FEE CASES.—No 

19 deduction shall be allowed under subsection (a) to a tax20 payer for any expense— 

21 ‘‘(1) paid or incurred in the course of the trade 

22 or business of practicing law, and 

23 ‘‘(2) resulting from a case for which the tax24 payer is compensated primarily on a contingent 

25 basis, 


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1 until such time as such contingency is resolved.’’. 

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

3 this section shall apply to expenses and costs paid or in4 curred in taxable years beginning after the date of the en5 actment of this Act. 

6 SEC. 13309. REPEAL OF DEDUCTION FOR LOCAL LOBBYING 

7 EXPENSES. 

8 (a) IN GENERAL.—Section 162(e) is amended by 

9 striking paragraphs (2) and (7) and by redesignating 

10 paragraphs (3), (4), (5), (6), and (8) as paragraphs (2), 

11 (3), (4), (5), and (6), respectively. 

12 (b) CONFORMING AMENDMENT.—Section 

13 6033(e)(1)(B)(ii) is amended by striking ‘‘section 

14 162(e)(5)(B)(ii)’’ and inserting ‘‘section 

15 162(e)(4)(B)(ii)’’. 

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

17 this section shall apply to amounts paid or incurred on 

18 or after the date of the enactment of this Act. 

19 SEC. 13310. RECHARACTERIZATION OF CERTAIN GAINS IN 

20 THE CASE OF PARTNERSHIP PROFITS INTER21 ESTS HELD IN CONNECTION WITH PERFORM22 ANCE OF INVESTMENT SERVICES. 

23 (a) IN GENERAL.—Part IV of subchapter O of chap24 ter 1 is amended— 


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1 (1) by redesignating section 1061 as section 

2 1062, and 

3 (2) by inserting after section 1060 the following 

4 new section: 

5 ‘‘SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNEC6 TION WITH PERFORMANCE OF SERVICES. 

7 ‘‘(a) IN GENERAL.—If one or more applicable part8 nership interests are held by a taxpayer at any time during 

9 the taxable year, the excess (if any) of— 

10 ‘‘(1) the taxpayer’s net long-term capital gain 

11 with respect to such interests for such taxable year, 

12 over 

13 ‘‘(2) the taxpayer’s net long-term capital gain 

14 with respect to such interests for such taxable year 

15 computed by applying paragraphs (3) and (4) of sec16 tions 1222 by substituting ‘3 years’ for ‘1 year’, 

17 shall be treated as short-term capital gain, notwith18 standing section 83 or any election in effect under section 

19 83(b). 

20 ‘‘(b) SPECIAL RULE.—To the extent provided by the 

21 Secretary, subsection (a) shall not apply to income or gain 

22 attributable to any asset not held for portfolio investment 

23 on behalf of third party investors. 

24 ‘‘(c) APPLICABLE PARTNERSHIP INTEREST.—For 

25 purposes of this section— 


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1 ‘‘(1) IN GENERAL.—Except as provided in this 

2 paragraph or paragraph (4), the term ‘applicable 

3 partnership interest’ means any interest in a part4 nership which, directly or indirectly, is transferred to 

5 (or is held by) the taxpayer in connection with the 

6 performance of substantial services by the taxpayer, 

7 or any other related person, in any applicable trade 

8 or business. The previous sentence shall not apply to 

9 an interest held by a person who is employed by an10 other entity that is conducting a trade or business 

11 (other than an applicable trade or business) and 

12 only provides services to such other entity. 

13 ‘‘(2) APPLICABLE TRADE OR BUSINESS.—The 

14 term ‘applicable trade or business’ means any activ15 ity conducted on a regular, continuous, and substan16 tial basis which, regardless of whether the activity is 

17 conducted in one or more entities, consists, in whole 

18 or in part, of— 

19 ‘‘(A) raising or returning capital, and 

20 ‘‘(B) either— 

21 ‘‘(i) investing in (or disposing of) 

22 specified assets (or identifying specified as23 sets for such investing or disposition), or 

24 ‘‘(ii) developing specified assets. 


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1 ‘‘(3) SPECIFIED ASSET.—The term ‘specified 

2 asset’ means securities (as defined in section 

3 475(c)(2) without regard to the last sentence there4 of), commodities (as defined in section 475(e)(2)), 

5 real estate held for rental or investment, cash or 

6 cash equivalents, options or derivative contracts with 

7 respect to any of the foregoing, and an interest in 

8 a partnership to the extent of the partnership’s pro9 portionate interest in any of the foregoing. 

10 ‘‘(4) EXCEPTIONS.—The term ‘applicable part11 nership interest’ shall not include— 

12 ‘‘(A) any interest in a partnership directly 

13 or indirectly held by a corporation, or 

14 ‘‘(B) any capital interest in the partner15 ship which provides the taxpayer with a right to 

16 share in partnership capital commensurate 

17 with— 

18 ‘‘(i) the amount of capital contributed 

19 (determined at the time of receipt of such 

20 partnership interest), or 

21 ‘‘(ii) the value of such interest subject 

22 to tax under section 83 upon the receipt or 

23 vesting of such interest. 

24 ‘‘(5) THIRD PARTY INVESTOR.—The term ‘third 

25 party investor’ means a person who— 


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1 ‘‘(A) holds an interest in the partnership 

2 which does not constitute property held in con3 nection with an applicable trade or business; 

4 and 

5 ‘‘(B) is not (and has not been) actively en6 gaged, and is (and was) not related to a person 

7 so engaged, in (directly or indirectly) providing 

8 substantial services described in paragraph (1) 

9 for such partnership or any applicable trade or 

10 business. 

11 ‘‘(d) TRANSFER OF APPLICABLE PARTNERSHIP IN12 TEREST TO RELATED PERSON.— 

13 ‘‘(1) IN GENERAL.—If a taxpayer transfers any 

14 applicable partnership interest, directly or indirectly, 

15 to a person related to the taxpayer, the taxpayer 

16 shall include in gross income (as short term capital 

17 gain) the excess (if any) of— 

18 ‘‘(A) so much of the taxpayer’s long-term 

19 capital gains with respect to such interest for 

20 such taxable year attributable to the sale or ex21 change of any asset held for not more than 3 

22 years as is allocable to such interest, over 

23 ‘‘(B) any amount treated as short term 

24 capital gain under subsection (a) with respect 

25 to the transfer of such interest. 


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1 ‘‘(2) RELATED PERSON.—For purposes of this 

2 paragraph, a person is related to the taxpayer if— 

3 ‘‘(A) the person is a member of the tax4 payer’s family within the meaning of section 

5 318(a)(1), or 

6 ‘‘(B) the person performed a service within 

7 the current calendar year or the preceding three 

8 calendar years in any applicable trade or busi9 ness in which or for which the taxpayer per10 formed a service. 

11 ‘‘(e) REPORTING.—The Secretary shall require such 

12 reporting (at the time and in the manner prescribed by 

13 the Secretary) as is necessary to carry out the purposes 

14 of this section. 

15 ‘‘(f) REGULATIONS.—The Secretary shall issue such 

16 regulations or other guidance as is necessary or appro17 priate to carry out the purposes of this section’’. 

18 (b) CLERICAL AMENDMENT.—The table of sections 

19 for part IV of subchapter O of chapter 1 is amended by 

20 striking the item relating to 1061 and inserting the fol21 lowing new items: 

‘‘Sec. 1061. Partnership interests held in connection with performance of services. 

‘‘Sec. 1062. Cross references.’’. 

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

23 this section shall apply to taxable years beginning after 

24 December 31, 2017. 


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1 PART V—BUSINESS CREDITS 

2 Subpart A—General Provisions 

3 SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT. 

4 (a) CREDIT RATE.—Subsection (a) of section 45C is 

5 amended by striking ‘‘50 percent’’ and inserting ‘‘27.5 

6 percent’’. 

7 (b) DISCLOSURE OF CREDITS.—Section 45C is 

8 amended by adding at the end the following new sub9 section: 

10 ‘‘(e) DISCLOSURE OF CREDITS.—The Secretary shall 

11 publicly disclose the identity of any taxpayer (in the case 

12 of a pass-thru entity, the name of the entity) to whom 

13 a credit is allowed under this section, as well as the 

14 amount of such credit, the drug with respect to which the 

15 qualified clinical testing expenses were taken into account 

16 under this section, and the rare disease or condition for 

17 which such drug was being tested.’’. 

18 (c) ELECTION OF REDUCED CREDIT.—Subsection 

19 (b) of section 280C is amended by redesignating para20 graph (3) as paragraph (4) and by inserting after para21 graph (2) the following new paragraph: 

22 ‘‘(3) ELECTION OF REDUCED CREDIT.— 

23 ‘‘(A) IN GENERAL.—In the case of any 

24 taxable year for which an election is made 

25 under this paragraph— 


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1 ‘‘(i) paragraphs (1) and (2) shall not 

2 apply, and 

3 ‘‘(ii) the amount of the credit under 

4 section 45C(a) shall be the amount deter5 mined under subparagraph (B). 

6 ‘‘(B) AMOUNT OF REDUCED CREDIT.—The 

7 amount of credit determined under this sub8 paragraph for any taxable year shall be the 

9 amount equal to the excess of— 

10 ‘‘(i) the amount of credit determined 

11 under section 45C(a) without regard to 

12 this paragraph, over 

13 ‘‘(ii) the product of— 

14 ‘‘(I) the amount described in 

15 clause (i), and 

16 ‘‘(II) the maximum rate of tax 

17 under section 11(b). 

18 ‘‘(C) ELECTION.—An election under this 

19 paragraph for any taxable year shall be made 

20 not later than the time for filing the return of 

21 tax for such year (including extensions), shall 

22 be made on such return, and shall be made in 

23 such manner as the Secretary shall prescribe. 

24 Such an election, once made, shall be irrev25 ocable.’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 13402. REHABILITATION CREDIT LIMITED TO CER5 TIFIED HISTORIC STRUCTURES. 

6 (a) IN GENERAL.—Subsection (a) of section 47 is 

7 amended to read as follows: 

8 ‘‘(a) GENERAL RULE.— 

9 ‘‘(1) IN GENERAL.—For purposes of section 46, 

10 for any taxable year during the 5-year period begin11 ning in the taxable year in which a qualified reha12 bilitated building is placed in service, the rehabilita13 tion credit for such year is an amount equal to the 

14 ratable share for such year. 

15 ‘‘(2) RATABLE SHARE.—For purposes of para16 graph (1), the ratable share for any taxable year 

17 during the period described in such paragraph is the 

18 amount equal to 20 percent of the qualified rehabili19 tation expenditures with respect to the qualified re20 habilitated building, as allocated ratably to each year 

21 during such period.’’. 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) Section 47(c) is amended— 

24 (A) in paragraph (1)— 


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1 (i) in subparagraph (A), by amending 

2 clause (iii) to read as follows: 

3 ‘‘(iii) such building is a certified his4 toric structure, and’’, 

5 (ii) by striking subparagraph (B), and 

6 (iii) by redesignating subparagraphs 

7 (C) and (D) as subparagraphs (B) and 

8 (C), respectively, and 

9 (B) in paragraph (2)(B), by amending 

10 clause (iv) to read as follows: 

11 ‘‘(iv) CERTIFIED HISTORIC STRUC12 TURE.—Any expenditure attributable to 

13 the rehabilitation of a qualified rehabili14 tated building unless the rehabilitation is a 

15 certified rehabilitation (within the meaning 

16 of subparagraph (C)).’’. 

17 (2) Paragraph (4) of section 145(d) is amend18 ed— 

19 (A) by striking ‘‘of section 47(c)(1)(C)’’ 

20 each place it appears and inserting ‘‘of section 

21 47(c)(1)(B)’’, and 

22 (B) by striking ‘‘section 47(c)(1)(C)(i)’’ 

23 and inserting ‘‘section 47(c)(1)(B)(i)’’. 

24 (c) EFFECTIVE DATE.— 


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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section 

3 shall apply to amounts paid or incurred after De4 cember 31, 2017. 

5 (2) TRANSITION RULE.—In the case of quali6 fied rehabilitation expenditures with respect to any 

7 building— 

8 (A) owned or leased by the taxpayer dur9 ing the entirety of the period after December 

10 31, 2017, and 

11 (B) with respect to which the 24-month 

12 period selected by the taxpayer under section 

13 47(c)(1)(B) of the Internal Revenue Code of 

14 1986 (as amended by subsection (b)) begins not 

15 later than 180 days after the date of the enact16 ment of this Act, 

17 the amendments made by this section shall apply to 

18 such expenditures paid or incurred after the end of 

19 the taxable year in which the 24-month period re20 ferred to in subparagraph (B) ends. 

21 SEC. 13403. REPEAL OF DEDUCTION FOR CERTAIN UNUSED 

22 BUSINESS CREDITS. 

23 (a) IN GENERAL.—Part VI of subchapter B of chap24 ter 1 is amended by striking section 196 (and by striking 


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1 the item relating to such section in the table of sections 

2 for such part). 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 SEC. 13404. EMPLOYER CREDIT FOR PAID FAMILY AND 

7 MEDICAL LEAVE. 

8 (a) IN GENERAL.— 

9 (1) ALLOWANCE OF CREDIT.—Subpart D of 

10 part IV of subchapter A of chapter 1 is amended by 

11 adding at the end the following new section: 

12 ‘‘SEC. 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MED13 ICAL LEAVE. 

14 ‘‘(a) ESTABLISHMENT OF CREDIT.— 

15 ‘‘(1) IN GENERAL.—For purposes of section 38, 

16 in the case of an eligible employer, the paid family 

17 and medical leave credit is an amount equal to the 

18 applicable percentage of the amount of wages paid 

19 to qualifying employees during any period in which 

20 such employees are on family and medical leave. 

21 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

22 of paragraph (1), the term ‘applicable percentage’ 

23 means 12.5 percent increased (but not above 25 per24 cent) by 0.25 percentage points for each percentage 


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1 point by which the rate of payment (as described 

2 under subsection (c)(1)(B)) exceeds 50 percent. 

3 ‘‘(b) LIMITATION.— 

4 ‘‘(1) IN GENERAL.—The credit allowed under 

5 subsection (a) with respect to any employee for any 

6 taxable year shall not exceed an amount equal to the 

7 product of the normal hourly wage rate of such em8 ployee for each hour (or fraction thereof) of actual 

9 services performed for the employer and the number 

10 of hours (or fraction thereof) for which family and 

11 medical leave is taken. 

12 ‘‘(2) NON-HOURLY WAGE RATE.—For purposes 

13 of paragraph (1), in the case of any employee who 

14 is not paid on an hourly wage rate, the wages of 

15 such employee shall be prorated to an hourly wage 

16 rate under regulations established by the Secretary. 

17 ‘‘(3) MAXIMUM AMOUNT OF LEAVE SUBJECT TO

18 CREDIT.—The amount of family and medical leave 

19 that may be taken into account with respect to any 

20 employee under subsection (a) for any taxable year 

21 shall not exceed 12 weeks. 

22 ‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this 

23 section— 


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1 ‘‘(1) IN GENERAL.—The term ‘eligible em2 ployer’ means any employer who has in place a pol3 icy that meets the following requirements: 

4 ‘‘(A) The policy provides— 

5 ‘‘(i) in the case of a qualifying em6 ployee who is not a part-time employee (as 

7 defined in section 4980E(d)(4)(B)), not 

8 less than 2 weeks of annual paid family 

9 and medical leave, and 

10 ‘‘(ii) in the case of a qualifying em11 ployee who is a part-time employee, an 

12 amount of annual paid family and medical 

13 leave that is not less than an amount 

14 which bears the same ratio to the amount 

15 of annual paid family and medical leave 

16 that is provided to a qualifying employee 

17 described in clause (i) as— 

18 ‘‘(I) the number of hours the em19 ployee is expected to work during any 

20 week, bears to 

21 ‘‘(II) the number of hours an 

22 equivalent qualifying employee de23 scribed in clause (i) is expected to 

24 work during the week. 


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1 ‘‘(B) The policy requires that the rate of 

2 payment under the program is not less than 50 

3 percent of the wages normally paid to such em4 ployee for services performed for the employer. 

5 ‘‘(2) SPECIAL RULE FOR CERTAIN EMPLOY6 ERS.— 

7 ‘‘(A) IN GENERAL.—An added employer 

8 shall not be treated as an eligible employer un9 less such employer provides paid family and 

10 medical leave in compliance with a policy which 

11 ensures that the employer— 

12 ‘‘(i) will not interfere with, restrain, 

13 or deny the exercise of or the attempt to 

14 exercise, any right provided under the pol15 icy, and 

16 ‘‘(ii) will not discharge or in any other 

17 manner discriminate against any individual 

18 for opposing any practice prohibited by the 

19 policy. 

20 ‘‘(B) ADDED EMPLOYER; ADDED EM21 PLOYEE.—For purposes of this paragraph— 

22 ‘‘(i) ADDED EMPLOYEE.—The term 

23 ‘added employee’ means a qualifying em24 ployee who is not covered by title I of the 


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1 Family and Medical Leave Act of 1993, as 

2 amended. 

3 ‘‘(ii) ADDED EMPLOYER.—The term 

4 ‘added employer’ means an eligible em5 ployer (determined without regard to this 

6 paragraph), whether or not covered by that 

7 title I, who offers paid family and medical 

8 leave to added employees. 

9 ‘‘(3) AGGREGATION RULE.—All persons which 

10 are treated as a single employer under subsections 

11 (a) and (b) of section 52 shall be treated as a single 

12 taxpayer. 

13 ‘‘(4) TREATMENT OF BENEFITS MANDATED OR

14 PAID FOR BY STATE OR LOCAL GOVERNMENTS.—For 

15 purposes of this section, any leave which is paid by 

16 a State or local government or required by State or 

17 local law shall not be taken into account in deter18 mining the amount of paid family and medical leave 

19 provided by the employer. 

20 ‘‘(5) NO INFERENCE.—Nothing in this sub21 section shall be construed as subjecting an employer 

22 to any penalty, liability, or other consequence (other 

23 than ineligibility for the credit allowed by reason of 

24 subsection (a) or recapturing the benefit of such 


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1 credit) for failure to comply with the requirements 

2 of this subsection. 

3 ‘‘(d) QUALIFYING EMPLOYEES.—For purposes of 

4 this section, the term ‘qualifying employee’ means any em5 ployee (as defined in section 3(e) of the Fair Labor Stand6 ards Act of 1938, as amended) who— 

7 ‘‘(1) has been employed by the employer for 1 

8 year or more, and 

9 ‘‘(2) for the preceding year, had compensation 

10 not in excess of an amount equal to 60 percent of 

11 the amount applicable for such year under clause (i) 

12 of section 414(q)(1)(B). 

13 ‘‘(e) FAMILY AND MEDICAL LEAVE.— 

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graph (2), for purposes of this section, the term 

16 ‘family and medical leave’ means leave for any 1 or 

17 more of the purposes described under subparagraph 

18 (A), (B), (C), (D), or (E) of paragraph (1), or para19 graph (3), of section 102(a) of the Family and Med20 ical Leave Act of 1993, as amended, whether the 

21 leave is provided under that Act or by a policy of the 

22 employer. 

23 ‘‘(2) EXCLUSION.—If an employer provides paid 

24 leave as vacation leave, personal leave, or medical or 

25 sick leave (other than leave specifically for 1 or more 


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1 of the purposes referred to in paragraph (1)), that 

2 paid leave shall not be considered to be family and 

3 medical leave under paragraph (1). 

4 ‘‘(3) DEFINITIONS.—In this subsection, the 

5 terms ‘vacation leave’, ‘personal leave’, and ‘medical 

6 or sick leave’ mean those 3 types of leave, within the 

7 meaning of section 102(d)(2) of that Act. 

8 ‘‘(f) WAGES.—For purposes of this section, the term 

9 ‘wages’ has the meaning given such term by subsection 

10 (b) of section 3306 (determined without regard to any dol11 lar limitation contained in such section). Such term shall 

12 not include any amount taken into account for purposes 

13 of determining any other credit allowed under this sub14 part. 

15 ‘‘(g) ELECTION TO HAVE CREDIT NOT APPLY.— 

16 ‘‘(1) IN GENERAL.—A taxpayer may elect to 

17 have this section not apply for any taxable year. 

18 ‘‘(2) OTHER RULES.—Rules similar to the rules 

19 of paragraphs (2) and (3) of section 51(j) shall 

20 apply for purposes of this subsection. 

21 ‘‘(h) TERMINATION.—This section shall not apply to 

22 wages paid in taxable years beginning after December 31, 

23 2019.’’. 

24 (b) CREDIT PART OF GENERAL BUSINESS CREDIT.— 

25 Section 38(b) is amended by striking ‘‘plus’’ at the end 


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1 of paragraph (35), by striking the period at the end of 

2 paragraph (36) and inserting ‘‘, plus’’, and by adding at 

3 the end the following new paragraph: 

4 ‘‘(37) in the case of an eligible employer (as de5 fined in section 45S(c)), the paid family and medical 

6 leave credit determined under section 45S(a).’’. 

7 (c) CREDIT ALLOWED AGAINST AMT.—Subpara8 graph (B) of section 38(c)(4) is amended by redesignating 

9 clauses (ix) through (xi) as clauses (x) through (xii), re10 spectively, and by inserting after clause (viii) the following 

11 new clause: 

12 ‘‘(ix) the credit determined under sec13 tion 45S,’’. 

14 (d) CONFORMING AMENDMENTS.— 

15 (1) DENIAL OF DOUBLE BENEFIT.—Section 

16 280C(a) is amended by inserting ‘‘45S(a),’’ after 

17 ‘‘45P(a),’’. 

18 (2) ELECTION TO HAVE CREDIT NOT APPLY.— 

19 Section 6501(m) is amended by inserting ‘‘45S(g),’’ 

20 after ‘‘45H(g),’’. 

21 (3) CLERICAL AMENDMENT.—The table of sec22 tions for subpart D of part IV of subchapter A of 

23 chapter 1 is amended by adding at the end the fol24 lowing new item: 

‘‘Sec. 45S. Employer credit for paid family and medical leave.’’. 


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

2 this section shall apply to wages paid in taxable years be3 ginning after December 31, 2017. 

4 Subpart B—Provisions Relating to Low-income 

5 Housing Credit 

6 SEC. 13411. RECONSTRUCTION OR REPLACEMENT PERIOD 

7 AFTER CASUALTY LOSS. 

8 (a) IN GENERAL.—Subparagraph (E) of section 

9 42(j)(4) is amended by striking ‘‘a reasonable period es10 tablished by the Secretary’’ and inserting ‘‘a reasonable 

11 period established by the applicable housing credit agency 

12 (not to exceed 25 months from the date on which the cas13 ualty loss arises). The determination under paragraph (1) 

14 shall not be made with respect to a property the basis of 

15 which is affected by a casualty loss until the period de16 scribed in the preceding sentence with respect to such 

17 property has expired.’’. 

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

19 this section shall apply to casualty losses arising after the 

20 date of the enactment of this Act. 

21 SEC. 13412. MODIFICATION OF RIGHTS RELATING TO 

22 BUILDING PURCHASE. 

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

24 42(i)(7) is amended— 


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1 (1) by striking ‘‘a right of 1st refusal’’ and in2 serting ‘‘an option’’, and 

3 (2) by striking ‘‘the property’’ and inserting 

4 ‘‘the property or a partnership interest relating to 

5 the property’’. 

6 (b) CONFORMING AMENDMENT.—Subparagraph (B) 

7 of section 42(i)(7) is amended by adding at the end the 

8 following new sentence: ‘‘In the case of a purchase of a 

9 partnership interest, the minimum purchase price is an 

10 amount equal to such interest’s ratable share of the 

11 amount determined under the first sentence of this sub12 paragraph.’’. 

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

14 this section shall apply to agreements entered into or 

15 amended after the date of the enactment of this Act. 

16 SEC. 13413. DETERMINATION OF COMMUNITY REVITALIZA17 TION PLAN TO BE MADE BY HOUSING CREDIT 

18 AGENCY. 

19 (a) IN GENERAL.—Subclause (III) of section 

20 42(m)(1)(B)(ii) is amended by inserting ‘‘, as determined 

21 by the housing credit agency according to criteria estab22 lished by such agency,’’ after ‘‘(d)(5)(C)) and’’. 

23 (b) CRITERIA.—Paragraph (1) of section 42(m) is 

24 amended by adding at the end the following new subpara25 graph: 


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1 ‘‘(E) CRITERIA FOR DETERMINATION RE2 LATING TO CONCERTED COMMUNITY REVITAL3 IZATION PLAN.—For purposes of subparagraph 

4 (B)(ii)(III), the criteria for determining wheth5 er the development of a project contributes to 

6 a concerted community development plan shall 

7 take into account any factors the agency deems 

8 appropriate, including the extent to which the 

9 proposed plan— 

10 ‘‘(i) is geographically specific, 

11 ‘‘(ii) outlines a clear plan for imple12 mentation and goals for outcomes, 

13 ‘‘(iii) includes a strategy for applying 

14 for or obtaining commitments of public or 

15 private investment (or both) in nonhousing 

16 infrastructure, amenities, or services, and 

17 ‘‘(iv) demonstrates the need for com18 munity revitalization.’’. 

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

20 this section shall apply to allocations of housing credit dol21 lar amounts made under qualified allocation plans (as de22 fined in section 42(m)(1)(B) of the Internal Revenue Code 

23 of 1986) adopted after December 31, 2017. 


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1 SEC. 13414. PROHIBITION OF LOCAL APPROVAL AND CON2 TRIBUTION REQUIREMENTS. 

3 (a) IN GENERAL.—Paragraph (1) of section 42(m), 

4 as amended by section 13413, is further amended— 

5 (1) by striking clause (ii) of subparagraph (A) 

6 and by redesignating clauses (iii) and (iv) thereof as 

7 clauses (ii) and (iii), and 

8 (2) by adding at the end the following new sub9 paragraph: 

10 ‘‘(F) LOCAL APPROVAL OR CONTRIBUTION

11 NOT TAKEN INTO ACCOUNT.—The selection cri12 teria under a qualified allocation plan shall not 

13 include consideration of— 

14 ‘‘(i) any support or opposition with re15 spect to the project from local or elected 

16 officials, or 

17 ‘‘(ii) any local government contribu18 tion to the project, except to the extent 

19 such contribution is taken into account as 

20 part of a broader consideration of the 

21 project’s ability to leverage outside funding 

22 sources, and is not prioritized over any 

23 other source of outside funding.’’. 

24 (b) EFFECTIVE DATE.—The amendments made by 

25 this section shall apply to allocations of housing credit dol26 lar amounts made after December 31, 2017. 


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1 SEC. 13415. SELECTION CRITERIA UNDER QUALIFIED ALLO2 CATION PLANS. 

3 (a) IN GENERAL.—Subparagraph (C) of section 

4 42(m)(1) is amended by striking ‘‘and’’ at the end of 

5 clause (ix), by striking the period at the end of clause (x) 

6 and inserting ‘‘, and’’, and by adding at the end the fol7 lowing new clause: 

8 ‘‘(xi) the affordable housing needs of 

9 individuals in the State who are members 

10 of Indian tribes (as defined in section 

11 45A(c)(6)).’’. 

12 (b) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to allocations of credits under sec14 tion 42 of the Internal Revenue Code of 1986 made after 

15 December 31, 2017. 

16 SEC. 13416. AFFORDABLE HOUSING TAX CREDIT. 

17 (a) IN GENERAL.—The heading of section 42 is 

18 amended by striking ‘‘LOW-INCOME’’ and inserting ‘‘AF19 FORDABLE’’. 

20 (b) CONFORMING AMENDMENTS.— 

21 (1) Subsection (a) of section 42 is amended by 

22 striking ‘‘low-income’’ and inserting ‘‘affordable’’. 

23 (2) Paragraph (5) of section 38(b) is amended 

24 by striking ‘‘low-income’’ and inserting ‘‘affordable’’. 


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1 (3) The heading of subparagraph (D) of section 

2 469(i)(3) is amended by striking ‘‘LOW-INCOME’’ 

3 and inserting ‘‘AFFORDABLE’’. 

4 (4) The heading of subparagraph (B) of section 

5 469(i)(6) is amended by striking ‘‘LOW-INCOME’’ 

6 and inserting ‘‘AFFORDABLE’’. 

7 (5) Paragraph (7) of section 772(a) is amended 

8 by striking ‘‘low-income’’ and inserting ‘‘affordable’’. 

9 (6) Paragraph (5) of section 772(d) is amended 

10 by striking ‘‘low-income’’ and inserting ‘‘affordable’’. 

11 (c) CLERICAL AMENDMENT.—The item relating to 

12 section 42 in the table of sections for subpart D of part 

13 IV of subchapter A of chapter 1 is amended to read as 

14 follows: 

‘‘Sec. 42. Affordable housing credit.’’. 

15 PART VI—PROVISIONS RELATED TO SPECIFIC 

16 ENTITIES AND INDUSTRIES 

17 Subpart A—Partnership Provisions 

18 SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN 

19 PERSONS FROM SALE OR EXCHANGE OF IN20 TERESTS IN PARTNERSHIPS ENGAGED IN 

21 TRADE OR BUSINESS WITHIN THE UNITED 

22 STATES. 

23 (a) IN GENERAL.—Section 864(c) is amended by 

24 adding at the end the following: 


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1 ‘‘(8) GAIN OR LOSS OF FOREIGN PERSONS

2 FROM SALE OR EXCHANGE OF CERTAIN PARTNER3 SHIP INTERESTS.— 

4 ‘‘(A) IN GENERAL.—Notwithstanding any 

5 other provision of this subtitle, if a nonresident 

6 alien individual or foreign corporation owns, di7 rectly or indirectly, an interest in a partnership 

8 which is engaged in any trade or business with9 in the United States, gain or loss on the sale 

10 or exchange of all (or any portion of) such in11 terest shall be treated as effectively connected 

12 with the conduct of such trade or business to 

13 the extent such gain or loss does not exceed the 

14 amount determined under subparagraph (B). 

15 ‘‘(B) AMOUNT TREATED AS EFFECTIVELY

16 CONNECTED.—The amount determined under 

17 this subparagraph with respect to any partner18 ship interest sold or exchanged— 

19 ‘‘(i) in the case of any gain on the 

20 sale or exchange of the partnership inter21 est, is— 

22 ‘‘(I) the portion of the partner’s 

23 distributive share of the amount of 

24 gain which would have been effectively 

25 connected with the conduct of a trade 


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1 or business within the United States 

2 if the partnership had sold all of its 

3 assets at their fair market value as of 

4 the date of the sale or exchange of 

5 such interest, or 

6 ‘‘(II) zero if no gain on such 

7 deemed sale would have been so effec8 tively connected, and 

9 ‘‘(ii) in the case of any loss on the 

10 sale or exchange of the partnership inter11 est, is— 

12 ‘‘(I) the portion of the partner’s 

13 distributive share of the amount of 

14 loss on the deemed sale described in 

15 clause (i)(I) which would have been so 

16 effectively connected, or 

17 ‘‘(II) zero if no loss on such 

18 deemed sale would be have been so ef19 fectively connected. 

20 For purposes of this subparagraph, a part21 ner’s distributive share of gain or loss on 

22 the deemed sale shall be determined in the 

23 same manner as such partner’s distributive 

24 share of the non-separately stated taxable 

25 income or loss of such partnership. 


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1 ‘‘(C) COORDINATION WITH UNITED STATES

2 REAL PROPERTY INTERESTS.—If a partnership 

3 described in subparagraph (A) holds any United 

4 States real property interest (as defined in sec5 tion 897(c)) at the time of the sale or exchange 

6 of the partnership interest, then the gain or loss 

7 treated as effectively connected income under 

8 subparagraph (A) shall be reduced by the 

9 amount so treated with respect to such United 

10 States real property interest under section 897. 

11 ‘‘(D) SALE OR EXCHANGE.—For purposes 

12 of this paragraph, an individual or corporation 

13 shall be treated as having sold or exchanged 

14 any interest in a partnership if, under any pro15 vision of this subtitle, gain or loss is realized 

16 from the sale or exchange of such interest. 

17 ‘‘(E) SECRETARIAL AUTHORITY.—The Sec18 retary shall prescribe such regulations as the 

19 Secretary determines appropriate for the appli20 cation of this paragraph, including regulations 

21 which provide that, notwithstanding subpara22 graph (D), this paragraph applies in a case 

23 even if gain or loss from a sale or exchange 

24 would not be realized under any other provision 

25 of this subtitle.’’. 


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1 (b) WITHHOLDING REQUIREMENTS.—Section 1446 

2 is amended by redesignating subsection (f) as subsection 

3 (g) and by inserting after subsection (e) the following: 

4 ‘‘(f) SPECIAL RULES FOR WITHHOLDING ON SALES

5 OF PARTNERSHIP INTERESTS.— 

6 ‘‘(1) IN GENERAL.—Except as provided in this 

7 subsection, if any portion of the gain (if any) on any 

8 disposition of an interest in a partnership would be 

9 treated under section 864(c)(8) as effectively con10 nected with the conduct of a trade or business with11 in the United States, the transferee shall be required 

12 to deduct and withhold a tax equal to 10 percent of 

13 the amount realized on the disposition. 

14 ‘‘(2) EXCEPTION IF NONFOREIGN AFFIDAVIT

15 FURNISHED.— 

16 ‘‘(A) IN GENERAL.—No person shall be re17 quired to deduct and withhold any amount 

18 under paragraph (1) with respect to any dis19 position if the transferor furnishes to the trans20 feree an affidavit by the transferor stating, 

21 under penalty of perjury, the transferor’s 

22 United States taxpayer identification number 

23 and that the transferor is not a foreign person. 

24 ‘‘(B) FALSE AFFIDAVIT.—Subparagraph 

25 (A) shall not apply to any disposition if— 


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1 ‘‘(i) the transferee has actual knowl2 edge that the affidavit is false, or the 

3 transferee receives a notice (as described in 

4 section 1445(d)) from a transferor’s agent 

5 or transferee’s agent that such affidavit or 

6 statement is false, or 

7 ‘‘(ii) the Secretary by regulations re8 quires the transferee to furnish a copy of 

9 such affidavit or statement to the Sec10 retary and the transferee fails to furnish a 

11 copy of such affidavit or statement to the 

12 Secretary at such time and in such manner 

13 as required by such regulations. 

14 ‘‘(C) RULES FOR AGENTS.—The rules of 

15 section 1445(d) shall apply to a transferor’s 

16 agent or transferee’s agent with respect to any 

17 affidavit described in subparagraph (A) in the 

18 same manner as such rules apply with respect 

19 to the disposition of a United States real prop20 erty interest under such section. 

21 ‘‘(3) AUTHORITY OF SECRETARY TO PRESCRIBE

22 REDUCED AMOUNT.—At the request of the trans23 feror or transferee, the Secretary may prescribe a 

24 reduced amount to be withheld under this section if 

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1 duced amount will not jeopardize the collection of 

2 the tax imposed under this title with respect to gain 

3 treated under section 864(c)(8) as effectively con4 nected with the conduct of a trade or business with 

5 in the United States. 

6 ‘‘(4) PARTNERSHIP TO WITHHOLD AMOUNTS

7 NOT WITHHELD BY THE TRANSFEREE.—If a trans8 feree fails to withhold any amount required to be 

9 withheld under paragraph (1), the partnership shall 

10 be required to deduct and withhold from distribu11 tions to the transferee a tax in an amount equal to 

12 the amount the transferee failed to withhold (plus 

13 interest under this title on such amount). 

14 ‘‘(5) DEFINITIONS.—Any term used in this sub15 section which is also used under section 1445 shall 

16 have the same meaning as when used in such sec17 tion. 

18 ‘‘(6) REGULATIONS.—The Secretary shall pre19 scribe such regulations as may be necessary to carry 

20 out the purposes of this subsection, including regula21 tions providing for exceptions from the provisions of 

22 this subsection.’’. 

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

24 this section shall apply to sales and exchanges on or after 

25 November 27, 2017. 


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1 SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN 

2 LOSS IN THE CASE OF TRANSFER OF PART3 NERSHIP INTEREST. 

4 (a) IN GENERAL.—Paragraph (1) of section 743(d) 

5 is to read as follows: 

6 ‘‘(1) IN GENERAL.—For purposes of this sec7 tion, a partnership has a substantial built-in loss 

8 with respect to a transfer of an interest in the part9 nership if— 

10 ‘‘(A) the partnership’s adjusted basis in 

11 the partnership property exceeds by more than 

12 $250,000 the fair market value of such prop13 erty, or 

14 ‘‘(B) the transferee partner would be allo15 cated a loss of more than $250,000 if the part16 nership assets were sold for cash equal to their 

17 fair market value immediately after such trans18 fer.’’. 

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

20 this section shall apply to transfers of partnership inter21 ests after December 31, 2017. 


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1 SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN 

2 TAXES TAKEN INTO ACCOUNT IN DETER3 MINING LIMITATION ON ALLOWANCE OF 

4 PARTNER’S SHARE OF LOSS. 

5 (a) IN GENERAL.—Subsection (d) of section 704 is 

6 amended— 

7 (1) by striking ‘‘A partner’s distributive share’’ 

8 and inserting the following: 

9 ‘‘(1) IN GENERAL.—A partner’s distributive 

10 share’’, 

11 (2) by striking ‘‘Any excess of such loss’’ and 

12 inserting the following: 

13 ‘‘(2) CARRYOVER.—Any excess of such loss’’, 

14 and 

15 (3) by adding at the end the following new 

16 paragraph: 

17 ‘‘(3) SPECIAL RULES.— 

18 ‘‘(A) IN GENERAL.—In determining the 

19 amount of any loss under paragraph (1), there 

20 shall be taken into account the partner’s dis21 tributive share of amounts described in para22 graphs (4) and (6) of section 702(a). 

23 ‘‘(B) EXCEPTION.—In the case of a chari24 table contribution of property whose fair mar25 ket value exceeds its adjusted basis, subparaVerDate Sep 11 2014 00:22 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00246 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 graph (A) shall not apply to the extent of the 

2 partner’s distributive share of such excess.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to partnership taxable years begin5 ning after December 31, 2017. 

6 Subpart B—Insurance Reforms 

7 SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE 

8 COMPANIES. 

9 (a) IN GENERAL.—Section 805(b) is amended by 

10 striking paragraph (4) and by redesignating paragraph 

11 (5) as paragraph (4). 

12 (b) CONFORMING AMENDMENTS.— 

13 (1) Part I of subchapter L of chapter 1 is 

14 amended by striking section 810 (and by striking 

15 the item relating to such section in the table of sec16 tions for such part). 

17 (2)(A) Part III of subchapter L of chapter 1 is 

18 amended by striking section 844 (and by striking 

19 the item relating to such section in the table of sec20 tions for such part). 

21 (B) Section 831(b)(3) is amended by striking 

22 ‘‘except as provided in section 844,’’ 

23 (3) Section 381 is amended by striking sub24 section (d). 


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1 (4) Section 805(a)(4)(B)(ii) is amended to read 

2 as follows: 

3 ‘‘(ii) the deduction allowed under sec4 tion 172,’’. 

5 (5) Section 805(a) is amended by striking para6 graph (5). 

7 (6) Section 805(b)(2)(A)(iv) is amended to read 

8 as follows: 

9 ‘‘(iv) any net operating loss carryback 

10 to the taxable year under section 172, 

11 and’’. 

12 (7) Section 953(b)(1)(B) is amended to read as 

13 follows: 

14 ‘‘(B) So much of section 805(a)(8) as re15 lates to the deduction allowed under section 

16 172.’’. 

17 (8) Section 1351(i)(3) is amended by striking 

18 ‘‘or the operations loss deduction under section 

19 810,’’. 

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

21 this section shall apply to losses arising in taxable years 

22 beginning after December 31, 2017. 


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1 SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY 

2 DEDUCTION. 

3 (a) IN GENERAL.—Part I of subchapter L of chapter 

4 1 is amended by striking section 806 (and by striking the 

5 item relating to such section in the table of sections for 

6 such part). 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 453B(e) is amended— 

9 (A) by striking ‘‘(as defined in section 

10 806(b)(3))’’ in paragraph (2)(B), and 

11 (B) by adding at the end the following new 

12 paragraph: 

13 ‘‘(3) NONINSURANCE BUSINESS.— 

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

15 subsection, the term ‘noninsurance business’ 

16 means any activity which is not an insurance 

17 business. 

18 ‘‘(B) CERTAIN ACTIVITIES TREATED AS IN19 SURANCE BUSINESSES.—For purposes of sub20 paragraph (A), any activity which is not an in21 surance business shall be treated as an insur22 ance business if— 

23 ‘‘(i) it is of a type traditionally carried 

24 on by life insurance companies for invest25 ment purposes, but only if the carrying on 

26 of such activity (other than in the case of 


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1 real estate) does not constitute the active 

2 conduct of a trade or business, or 

3 ‘‘(ii) it involves the performance of ad4 ministrative services in connection with 

5 plans providing life insurance, pension, or 

6 accident and health benefits.’’. 

7 (2) Section 465(c)(7)(D)(v)(II) is amended by 

8 striking ‘‘section 806(b)(3)’’ and inserting ‘‘section 

9 453B(e)(3)’’. 

10 (3) Section 801(a)(2) is amended by striking 

11 subparagraph (C). 

12 (4) Section 804 is amended by striking 

13 ‘‘means—’’ and all that follows and inserting 

14 ‘‘means the general deductions provided in section 

15 805.’’. 

16 (5) Section 805(a)(4)(B), as amended by this 

17 Act, is amended by striking clause (i) and by redes18 ignating clauses (ii), (iii), and (iv) as clauses (i), (ii), 

19 and (iii), respectively. 

20 (6) Section 805(b)(2)(A), as amended by this 

21 Act, is amended by striking clause (iii) and by redes22 ignating clauses (iv) and (v) as clauses (iii) and (iv), 

23 respectively. 


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1 (7) Section 842(c) is amended by striking para2 graph (1) and by redesignating paragraphs (2) and 

3 (3) as paragraphs (1) and (2), respectively. 

4 (8) Section 953(b)(1), as amended by section 

5 13511, is amended by striking subparagraph (A) 

6 and by redesignating subparagraphs (B) and (C) as 

7 subparagraphs (A) and (B), respectively. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2017. 

11 SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RE12 SERVES. 

13 (a) IN GENERAL.—Paragraph (1) of section 807(f) 

14 is amended to read as follows: 

15 ‘‘(1) TREATMENT AS CHANGE IN METHOD OF

16 ACCOUNTING.—If the basis for determining any item 

17 referred to in subsection (c) as of the close of any 

18 taxable year differs from the basis for such deter19 mination as of the close of the preceding taxable 

20 year, then so much of the difference between— 

21 ‘‘(A) the amount of the item at the close 

22 of the taxable year, computed on the new basis, 

23 and 

24 ‘‘(B) the amount of the item at the close 

25 of the taxable year, computed on the old basis, 


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1 as is attributable to contracts issued before the tax2 able year shall be taken into account under section 

3 481 as adjustments attributable to a change in 

4 method of accounting initiated by the taxpayer and 

5 made with the consent of the Secretary.’’. 

6 (b) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to taxable years beginning after 

8 December 31, 2017. 

9 SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS 

10 TO SHAREHOLDERS FROM PRE-1984 POLICY11 HOLDERS SURPLUS ACCOUNT. 

12 (a) IN GENERAL.—Subpart D of part I of subchapter 

13 L is amended by striking section 815 (and by striking the 

14 item relating to such section in the table of sections for 

15 such subpart). 

16 (b) CONFORMING AMENDMENT.—Section 801 is 

17 amended by striking subsection (c). 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 (d) PHASED INCLUSION OF REMAINING BALANCE OF

22 POLICYHOLDERS SURPLUS ACCOUNTS.—In the case of 

23 any stock life insurance company which has a balance (de24 termined as of the close of such company’s last taxable 

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1 icyholders surplus account (as defined in section 815 of 

2 the Internal Revenue Code of 1986, as in effect before 

3 its repeal), the tax imposed by section 801 of such Code 

4 for the first 8 taxable years beginning after December 31, 

5 2017, shall be the amount which would be imposed by 

6 such section for such year on the sum of— 

7 (1) life insurance company taxable income for 

8 such year (within the meaning of such section 801 

9 but not less than zero), plus 

(2) 1 10 ⁄8 of such balance. 

11 SEC. 13515. MODIFICATION OF PRORATION RULES FOR 

12 PROPERTY AND CASUALTY INSURANCE COM13 PANIES. 

14 (a) IN GENERAL.—Section 832(b)(5)(B) is amend15 ed— 

16 (1) by striking ‘‘15 percent’’ and inserting ‘‘the 

17 applicable percentage’’, and 

18 (2) by inserting at the end the following new 

19 sentence: ‘‘For purposes of this subparagraph, the 

20 applicable percentage is 5.25 percent divided by the 

21 highest rate in effect under section 11(b).’’. 

22 (b) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2017. 


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1 SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAY2 MENTS. 

3 (a) IN GENERAL.—Part III of subchapter L of chap4 ter 1 is amended by striking section 847 (and by striking 

5 the item relating to such section in the table of sections 

6 for such part). 

7 (b) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to taxable years beginning after 

9 December 31, 2017. 

10 SEC. 13517. CAPITALIZATION OF CERTAIN POLICY ACQUISI11 TION EXPENSES. 

12 (a) AMORTIZATION PERIOD.—Section 848 is amend13 ed by striking ‘‘120-month’’ each place it appears in sub14 sections (a)(2) and (b)(1) and inserting ‘‘600-month’’. 

15 (b) DETERMINATION OF EXPENSES.—Paragraph (1) 

16 of section 848(c) is amended— 

17 (1) by striking ‘‘1.75 percent’’ in subparagraph 

18 (A) and inserting ‘‘3.17 percent’’, 

19 (2) by striking ‘‘2.05 percent’’ in subparagraph 

20 (B) and inserting ‘‘3.72 percent’’, and 

21 (3) by striking ‘‘7.7 percent’’ in subparagraph 

22 (C) and inserting ‘‘13.97 percent’’. 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2017. 


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1 SEC. 13518. TAX REPORTING FOR LIFE SETTLEMENT 

2 TRANSACTIONS. 

3 (a) IN GENERAL.—Subpart B of part III of sub4 chapter A of chapter 61, as amended by section 13305, 

5 is amended by adding at the end the following new section: 

6 ‘‘SEC. 6050Y. RETURNS RELATING TO CERTAIN LIFE INSUR7 ANCE CONTRACT TRANSACTIONS. 

8 ‘‘(a) REQUIREMENT OF REPORTING OF CERTAIN

9 PAYMENTS.— 

10 ‘‘(1) IN GENERAL.—Every person who acquires 

11 a life insurance contract or any interest in a life in12 surance contract in a reportable policy sale during 

13 any taxable year shall make a return for such tax14 able year (at such time and in such manner as the 

15 Secretary shall prescribe) setting forth— 

16 ‘‘(A) the name, address, and TIN of such 

17 person, 

18 ‘‘(B) the name, address, and TIN of each 

19 recipient of payment in the reportable policy 

20 sale, 

21 ‘‘(C) the date of such sale, 

22 ‘‘(D) the name of the issuer of the life in23 surance contract sold and the policy number of 

24 such contract, and 

25 ‘‘(E) the amount of each payment. 


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1 ‘‘(2) STATEMENT TO BE FURNISHED TO PER2 SONS WITH RESPECT TO WHOM INFORMATION IS RE3 QUIRED.—Every person required to make a return 

4 under this subsection shall furnish to each person 

5 whose name is required to be set forth in such re6 turn a written statement showing— 

7 ‘‘(A) the name, address, and phone num8 ber of the information contact of the person re9 quired to make such return, and 

10 ‘‘(B) the information required to be shown 

11 on such return with respect to such person, ex12 cept that in the case of an issuer of a life insur13 ance contract, such statement is not required to 

14 include the information specified in paragraph 

15 (1)(E). 

16 ‘‘(b) REQUIREMENT OF REPORTING OF SELLER’S

17 BASIS IN LIFE INSURANCE CONTRACTS.— 

18 ‘‘(1) IN GENERAL.—Upon receipt of the state19 ment required under subsection (a)(2) or upon no20 tice of a transfer of a life insurance contract to a 

21 foreign person, each issuer of a life insurance con22 tract shall make a return (at such time and in such 

23 manner as the Secretary shall prescribe) setting 

24 forth— 


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1 ‘‘(A) the name, address, and TIN of the 

2 seller who transfers any interest in such con3 tract in such sale, 

4 ‘‘(B) the investment in the contract (as de5 fined in section 72(e)(6)) with respect to such 

6 seller, and 

7 ‘‘(C) the policy number of such contract. 

8 ‘‘(2) STATEMENT TO BE FURNISHED TO PER9 SONS WITH RESPECT TO WHOM INFORMATION IS RE10 QUIRED.—Every person required to make a return 

11 under this subsection shall furnish to each person 

12 whose name is required to be set forth in such re13 turn a written statement showing— 

14 ‘‘(A) the name, address, and phone num15 ber of the information contact of the person re16 quired to make such return, and 

17 ‘‘(B) the information required to be shown 

18 on such return with respect to each seller whose 

19 name is required to be set forth in such return. 

20 ‘‘(c) REQUIREMENT OF REPORTING WITH RESPECT

21 TO REPORTABLE DEATH BENEFITS.— 

22 ‘‘(1) IN GENERAL.—Every person who makes a 

23 payment of reportable death benefits during any tax24 able year shall make a return for such taxable year 


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1 (at such time and in such manner as the Secretary 

2 shall prescribe) setting forth— 

3 ‘‘(A) the name, address, and TIN of the 

4 person making such payment, 

5 ‘‘(B) the name, address, and TIN of each 

6 recipient of such payment, 

7 ‘‘(C) the date of each such payment, and 

8 ‘‘(D) the gross amount of each such pay9 ment. 

10 ‘‘(E) such person’s estimate of the invest11 ment in the contract (as defined in section 

12 72(e)(6)) with respect to the buyer. 

13 ‘‘(2) STATEMENT TO BE FURNISHED TO PER14 SONS WITH RESPECT TO WHOM INFORMATION IS RE15 QUIRED.—Every person required to make a return 

16 under this subsection shall furnish to each person 

17 whose name is required to be set forth in such re18 turn a written statement showing— 

19 ‘‘(A) the name, address, and phone num20 ber of the information contact of the person re21 quired to make such return, and 

22 ‘‘(B) the information required to be shown 

23 on such return with respect to each recipient of 

24 payment whose name is required to be set forth 

25 in such return. 


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1 ‘‘(d) DEFINITIONS.—For purposes of this section: 

2 ‘‘(1) PAYMENT.—The term ‘payment’ means, 

3 with respect to any reportable policy sale, the 

4 amount of cash and the fair market value of any 

5 consideration transferred in the sale. 

6 ‘‘(2) REPORTABLE POLICY SALE.—The term 

7 ‘reportable policy sale’ has the meaning given such 

8 term in section 101(a)(3)(B). 

9 ‘‘(3) ISSUER.—The term ‘issuer’ means any life 

10 insurance company that bears the risk with respect 

11 to a life insurance contract on the date any return 

12 or statement is required to be made under this sec13 tion. 

14 ‘‘(4) REPORTABLE DEATH BENEFITS.—The 

15 term ‘reportable death benefits’ means amounts paid 

16 by reason of the death of the insured under a life 

17 insurance contract that has been transferred in a re18 portable policy sale.’’. 

19 (b) CLERICAL AMENDMENT.—The table of sections 

20 for subpart B of part III of subchapter A of chapter 61, 

21 as amended by section 13305, is amended by inserting 

22 after the item relating to section 6050X the following new 

23 item: 

‘‘Sec. 6050Y. Returns relating to certain life insurance contract transactions.’’. 

24 (c) CONFORMING AMENDMENTS.— 


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1 (1) Subsection (d) of section 6724 is amend2 ed— 

3 (A) by striking ‘‘or’’ at the end of clause 

4 (xxiv) of paragraph (1)(B), by striking ‘‘and’’ 

5 at the end of clause (xxv) of such paragraph 

6 and inserting ‘‘or’’, and by inserting after such 

7 clause (xxv) the following new clause: 

8 ‘‘(xxvi) section 6050Y (relating to re9 turns relating to certain life insurance con10 tract transactions), and’’, and 

11 (B) by striking ‘‘or’’ at the end of subpara12 graph (HH) of paragraph (2), by striking the 

13 period at the end of subparagraph (II) of such 

14 paragraph and inserting ‘‘, or’’, and by insert15 ing after such subparagraph (II) the following 

16 new subparagraph: 

17 ‘‘(JJ) subsection (a)(2), (b)(2), or (c)(2) of 

18 section 6050Y (relating to returns relating to 

19 certain life insurance contract transactions).’’. 

20 (2) Section 6047 is amended— 

21 (A) by redesignating subsection (g) as sub22 section (h), 

23 (B) by inserting after subsection (f) the 

24 following new subsection: 


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1 ‘‘(g) INFORMATION RELATING TO LIFE INSURANCE

2 CONTRACT TRANSACTIONS.—This section shall not apply 

3 to any information which is required to be reported under 

4 section 6050Y.’’, and 

5 (C) by adding at the end of subsection (h), 

6 as so redesignated, the following new para7 graph: 

8 ‘‘(4) For provisions requiring reporting of infor9 mation relating to certain life insurance contract 

10 transactions, see section 6050Y.’’. 

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

12 this section shall apply to— 

13 (1) reportable policy sales (as defined in section 

14 6050Y(d)(2) of the Internal Revenue Code of 1986 

15 (as added by subsection (a)) after December 31, 

16 2017, and 

17 (2) reportable death benefits (as defined in sec18 tion 6050Y(d)(4) of such Code (as added by sub19 section (a)) paid after December 31, 2017. 

20 SEC. 13519. CLARIFICATION OF TAX BASIS OF LIFE INSUR21 ANCE CONTRACTS. 

22 (a) CLARIFICATION WITH RESPECT TO ADJUST23 MENTS.—Paragraph (1) of section 1016(a) is amended by 

24 striking subparagraph (A) and all that follows and insert25 ing the following: 


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1 ‘‘(A) for— 

2 ‘‘(i) taxes or other carrying charges 

3 described in section 266; or 

4 ‘‘(ii) expenditures described in section 

5 173 (relating to circulation expenditures), 

6 for which deductions have been taken by the 

7 taxpayer in determining taxable income for the 

8 taxable year or prior taxable years; or 

9 ‘‘(B) for mortality, expense, or other rea10 sonable charges incurred under an annuity or 

11 life insurance contract;’’. 

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

13 this section shall apply to transactions entered into after 

14 August 25, 2009. 

15 SEC. 13520. EXCEPTION TO TRANSFER FOR VALUABLE CON16 SIDERATION RULES. 

17 (a) IN GENERAL.—Subsection (a) of section 101 is 

18 amended by inserting after paragraph (2) the following 

19 new paragraph: 

20 ‘‘(3) EXCEPTION TO VALUABLE CONSIDERATION

21 RULES FOR COMMERCIAL TRANSFERS.— 

22 ‘‘(A) IN GENERAL.—The second sentence 

23 of paragraph (2) shall not apply in the case of 

24 a transfer of a life insurance contract, or any 


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1 interest therein, which is a reportable policy 

2 sale. 

3 ‘‘(B) REPORTABLE POLICY SALE.—For 

4 purposes of this paragraph, the term ‘reportable 

5 policy sale’ means the acquisition of an interest 

6 in a life insurance contract, directly or indi7 rectly, if the acquirer has no substantial family, 

8 business, or financial relationship with the in9 sured apart from the acquirer’s interest in such 

10 life insurance contract. For purposes of the pre11 ceding sentence, the term ‘indirectly’ applies to 

12 the acquisition of an interest in a partnership, 

13 trust, or other entity that holds an interest in 

14 the life insurance contract.’’. 

15 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

16 section 101(a) is amended by striking ‘‘paragraph (2)’’ 

17 and inserting ‘‘paragraphs (2) and (3)’’. 

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

19 this section shall apply to transfers after December 31, 

20 2017. 


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1 Subpart C—Banks and Financial Instruments 

2 SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PRE3 MIUMS. 

4 (a) IN GENERAL.—Section 162 is amended by redes5 ignating subsection (q) as subsection (r) and by inserting 

6 after subsection (p) the following new subsection: 

7 ‘‘(q) DISALLOWANCE OF FDIC PREMIUMS PAID BY

8 CERTAIN LARGE FINANCIAL INSTITUTIONS.— 

9 ‘‘(1) IN GENERAL.—No deduction shall be al10 lowed for the applicable percentage of any FDIC 

11 premium paid or incurred by the taxpayer. 

12 ‘‘(2) EXCEPTION FOR SMALL INSTITUTIONS.— 

13 Paragraph (1) shall not apply to any taxpayer for 

14 any taxable year if the total consolidated assets of 

15 such taxpayer (determined as of the close of such 

16 taxable year) do not exceed $10,000,000,000. 

17 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes 

18 of this subsection, the term ‘applicable percentage’ 

19 means, with respect to any taxpayer for any taxable 

20 year, the ratio (expressed as a percentage but not 

21 greater than 100 percent) which— 

22 ‘‘(A) the excess of— 

23 ‘‘(i) the total consolidated assets of 

24 such taxpayer (determined as of the close 

25 of such taxable year), over 

26 ‘‘(ii) $10,000,000,000, bears to 


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1 ‘‘(B) $40,000,000,000. 

2 ‘‘(4) FDIC PREMIUMS.—For purposes of this 

3 subsection, the term ‘FDIC premium’ means any as4 sessment imposed under section 7(b) of the Federal 

5 Deposit Insurance Act (12 U.S.C. 1817(b)). 

6 ‘‘(5) TOTAL CONSOLIDATED ASSETS.—For pur7 poses of this subsection, the term ‘total consolidated 

8 assets’ has the meaning given such term under sec9 tion 165 of the Dodd-Frank Wall Street Reform and 

10 Consumer Protection Act (12 U.S.C. 5365). 

11 ‘‘(6) AGGREGATION RULE.— 

12 ‘‘(A) IN GENERAL.—Members of an ex13 panded affiliated group shall be treated as a 

14 single taxpayer for purposes of applying this 

15 subsection. 

16 ‘‘(B) EXPANDED AFFILIATED GROUP.— 

17 ‘‘(i) IN GENERAL.—For purposes of 

18 this paragraph, the term ‘expanded affili19 ated group’ means an affiliated group as 

20 defined in section 1504(a), determined— 

21 ‘‘(I) by substituting ‘more than 

22 50 percent’ for ‘at least 80 percent’ 

23 each place it appears, and 

24 ‘‘(II) without regard to para25 graphs (2) and (3) of section 1504(b). 


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1 ‘‘(ii) CONTROL OF NON-CORPORATE

2 ENTITIES.—A partnership or any other en3 tity (other than a corporation) shall be 

4 treated as a member of an expanded affili5 ated group if such entity is controlled 

6 (within the meaning of section 954(d)(3)) 

7 by members of such group (including any 

8 entity treated as a member of such group 

9 by reason of this clause).’’. 

10 (b) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to taxable years beginning after 

12 December 31, 2017. 

13 SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS. 

14 (a) IN GENERAL.—Paragraph (1) of section 149(d) 

15 is amended by striking ‘‘as part of an issue described in 

16 paragraph (2), (3), or (4).’’ and inserting ‘‘to advance re17 fund another bond.’’. 

18 (b) CONFORMING AMENDMENTS.— 

19 (1) Section 149(d) is amended by striking para20 graphs (2), (3), (4), and (6) and by redesignating 

21 paragraphs (5) and (7) as paragraphs (2) and (3). 

22 (2) Section 148(f)(4)(C) is amended by striking 

23 clause (xiv) and by redesignating clauses (xv) to 

24 (xvii) as clauses (xiv) to (xvi). 


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

2 this section shall apply to advance refunding bonds issued 

3 after December 31, 2017. 

4 SEC. 13533. COST BASIS OF SPECIFIED SECURITIES DETER5 MINED WITHOUT REGARD TO IDENTIFICA6 TION. 

7 (a) IN GENERAL.—Section 1012 is amended by add8 ing at the end the following new subsection: 

9 ‘‘(e) COST BASIS OF SPECIFIED SECURITIES DETER10 MINED WITHOUT REGARD TO IDENTIFICATION.— 

11 ‘‘(1) IN GENERAL.—Unless the Secretary per12 mits the use of an average basis method for deter13 mining cost, in the case of the sale, exchange, or 

14 other disposition of a specified security (within the 

15 meaning of section 6045(g)(3)(B)), the basis (and 

16 holding period) of such security shall be determined 

17 on a first-in first-out basis. 

18 ‘‘(2) EXCEPTION.—In the case of a sale, ex19 change, or other disposition of a specified security 

20 by a regulated investment company (as defined in 

21 section 851(a)), paragraph (1) shall not apply.’’. 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) Section 1012(c)(1) is amended by striking 

24 ‘‘the conventions prescribed by regulations under 


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1 this section’’ and inserting ‘‘the method applicable 

2 for determining the cost of such security’’. 

3 (2) Section 1012(c)(2)(A) is amended by insert4 ing ‘‘(as in effect prior to the enactment of the Tax 

5 Cuts and Jobs Act)’’ after ‘‘this section’’. 

6 (3) Section 6045(g)(2)(B)(i)(I) is amended by 

7 striking ‘‘unless the customer notifies the broker by 

8 means of making an adequate identification of the 

9 stock sold or transferred’’. 

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

11 this section shall apply to sales, exchanges, and other dis12 positions after December 31, 2017. 

13 Subpart D—S Corporations 

14 SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF 

15 AN ELECTING SMALL BUSINESS TRUST. 

16 (a) NO LOOK-THROUGH FOR ELIGIBILITY PUR17 POSES.—Section 1361(c)(2)(B)(v) is amended by adding 

18 at the end the following new sentence: ‘‘This clause shall 

19 not apply for purposes of subsection (b)(1)(C).’’. 

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

21 this section shall take effect on January 1, 2018. 


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1 SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR 

2 ELECTING SMALL BUSINESS TRUSTS. 

3 (a) IN GENERAL.—Section 641(c)(2) is amended by 

4 inserting after subparagraph (D) the following new sub5 paragraph: 

6 ‘‘(E)(i) Section 642(c) shall not apply. 

7 ‘‘(ii) For purposes of section 170(b)(1)(G), 

8 adjusted gross income shall be computed in the 

9 same manner as in the case of an individual, 

10 except that the deductions for costs which are 

11 paid or incurred in connection with the admin12 istration of the trust and which would not have 

13 been incurred if the property were not held in 

14 such trust shall be treated as allowable in arriv15 ing at adjusted gross income.’’. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2017. 

19 PART VII—EMPLOYMENT 

20 Subpart A—Compensation 

21 SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE 

22 EMPLOYEE REMUNERATION. 

23 (a) REPEAL OF PERFORMANCE-BASED COMPENSA24 TION AND COMMISSION EXCEPTIONS FOR LIMITATION ON

25 EXCESSIVE EMPLOYEE REMUNERATION.— 


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1 (1) IN GENERAL.—Paragraph (4) of section 

2 162(m) is amended by striking subparagraphs (B) 

3 and (C) and by redesignating subparagraphs (D), 

4 (E), (F), and (G) as subparagraphs (B), (C), (D), 

5 and (E), respectively. 

6 (2) CONFORMING AMENDMENTS.— 

7 (A) Paragraphs (5)(E) and (6)(D) of sec8 tion 162(m) are each amended by striking 

9 ‘‘subparagraphs (B), (C), and (D)’’ and insert10 ing ‘‘subparagraph (B)’’. 

11 (B) Paragraphs (5)(G) and (6)(G) of sec12 tion 162(m) are each amended by striking ‘‘(F) 

13 and (G)’’ and inserting ‘‘(D) and (E)’’. 

14 (b) MODIFICATION OF DEFINITION OF COVERED EM15 PLOYEES.—Paragraph (3) of section 162(m) is amend16 ed— 

17 (1) in subparagraph (A), by striking ‘‘as of the 

18 close of the taxable year, such employee is the chief 

19 executive officer of the taxpayer or is’’ and inserting 

20 ‘‘such employee is the principal executive officer or 

21 principal financial officer of the taxpayer at any 

22 time during the taxable year, or was’’, 

23 (2) in subparagraph (B)— 

24 (A) by striking ‘‘4’’ and inserting ‘‘3’’, and 


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1 (B) by striking ‘‘(other than the chief exec2 utive officer)’’ and inserting ‘‘(other than any 

3 individual described in subparagraph (A))’’, and 

4 (3) by striking ‘‘or’’ at the end of subparagraph 

5 (A), by striking the period at the end of subpara6 graph (B) and inserting ‘‘, or’’, and by adding at the 

7 end the following: 

8 ‘‘(C) was a covered employee of the tax9 payer (or any predecessor) for any preceding 

10 taxable year beginning after December 31, 

11 2016.’’. 

12 (c) EXPANSION OF APPLICABLE EMPLOYER.— 

13 (1) IN GENERAL.—Section 162(m)(2) is amend14 ed to read as follows: 

15 ‘‘(2) PUBLICLY HELD CORPORATION.—For pur16 poses of this subsection, the term ‘publicly held cor17 poration’ means any corporation which is an issuer 

18 (as defined in section 3 of the Securities Exchange 

19 Act of 1934 (15 U.S.C. 78c))— 

20 ‘‘(A) the securities of which are required to 

21 be registered under section 12 of such Act (15 

22 U.S.C. 78l), or 

23 ‘‘(B) that is required to file reports under 

24 section 15(d) of such Act (15 U.S.C. 78o(d)).’’. 


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1 (2) CONFORMING AMENDMENT.—Section 

2 162(m)(3), as amended by subsection (b), is amend3 ed by adding at the end the following flush sentence: 

4 ‘‘Such term shall include any employee who would be 

5 described in subparagraph (B) if the reporting de6 scribed in such subparagraph were required as so 

7 described.’’. 

8 (d) SPECIAL RULE FOR REMUNERATION PAID TO

9 BENEFICIARIES, ETC.—Paragraph (4) of section 162(m), 

10 as amended by subsection (a), is amended by adding at 

11 the end the following new subparagraph: 

12 ‘‘(F) SPECIAL RULE FOR REMUNERATION

13 PAID TO BENEFICIARIES, ETC.—Remuneration 

14 shall not fail to be applicable employee remu15 neration merely because it is includible in the 

16 income of, or paid to, a person other than the 

17 covered employee, including after the death of 

18 the covered employee.’’. 

19 (e) EFFECTIVE DATE.— 

20 (1) IN GENERAL.—Except as provided in para21 graph (2), the amendments made by this section 

22 shall apply to taxable years beginning after Decem23 ber 31, 2017. 

24 (2) EXCEPTION FOR BINDING CONTRACTS.— 

25 The amendments made by this section shall not 


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1 apply to remuneration which is pursuant to a writ2 ten binding contract which was in effect on Novem3 ber 2, 2017, and which was not modified in any ma4 terial respect on or after such date. 

5 SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANI6 ZATION EXECUTIVE COMPENSATION. 

7 (a) IN GENERAL.—Subchapter D of chapter 42 is 

8 amended by adding at the end the following new section: 

9 ‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION 

10 EXECUTIVE COMPENSATION. 

11 ‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 

12 equal to 20 percent of the sum of— 

13 ‘‘(1) so much of the remuneration paid (other 

14 than any excess parachute payment) by an applica15 ble tax-exempt organization for the taxable year with 

16 respect to employment of any covered employee in 

17 excess of $1,000,000, plus 

18 ‘‘(2) any excess parachute payment paid by 

19 such an organization to any covered employee. 

20 For purposes of the preceding sentence, remuneration 

21 shall be treated as paid when there is no substantial risk 

22 of forfeiture of the rights to such remuneration. 

23 ‘‘(b) LIABILITY FOR TAX.—The employer shall be lia24 ble for the tax imposed under subsection (a). 


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1 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section— 

3 ‘‘(1) APPLICABLE TAX-EXEMPT ORGANIZA4 TION.—The term ‘applicable tax-exempt organiza5 tion’ means any organization which for the taxable 

6 year— 

7 ‘‘(A) is exempt from taxation under section 

8 501(a), 

9 ‘‘(B) is a farmers’ cooperative organization 

10 described in section 521(b)(1), 

11 ‘‘(C) has income excluded from taxation 

12 under section 115(1), or 

13 ‘‘(D) is a political organization described in 

14 section 527(e)(1). 

15 ‘‘(2) COVERED EMPLOYEE.—For purposes of 

16 this section, the term ‘covered employee’ means any 

17 employee (including any former employee) of an ap18 plicable tax-exempt organization if the employee— 

19 ‘‘(A) is one of the 5 highest compensated 

20 employees of the organization for the taxable 

21 year, or 

22 ‘‘(B) was a covered employee of the organi23 zation (or any predecessor) for any preceding 

24 taxable year beginning after December 31, 

25 2016. 


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1 ‘‘(3) REMUNERATION.—For purposes of this 

2 section, the term ‘remuneration’ means wages (as 

3 defined in section 3401(a)), except that such term 

4 shall not include any designated Roth contribution 

5 (as defined in section 402A(c)) and shall include 

6 amounts required to be included in gross income 

7 under section 457(f). 

8 ‘‘(4) REMUNERATION FROM RELATED ORGANI9 ZATIONS.— 

10 ‘‘(A) IN GENERAL.—Remuneration of a 

11 covered employee by an applicable tax-exempt 

12 organization shall include any remuneration 

13 paid with respect to employment of such em14 ployee by any related person or governmental 

15 entity. 

16 ‘‘(B) RELATED ORGANIZATIONS.—A per17 son or governmental entity shall be treated as 

18 related to an applicable tax-exempt organization 

19 if such person or governmental entity— 

20 ‘‘(i) controls, or is controlled by, the 

21 organization, 

22 ‘‘(ii) is controlled by one or more per23 sons which control the organization, 

24 ‘‘(iii) is a supported organization (as 

25 defined in section 509(f)(3)) during the 


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1 taxable year with respect to the organiza2 tion, 

3 ‘‘(iv) is a supporting organization de4 scribed in section 509(a)(3) during the 

5 taxable year with respect to the organiza6 tion, or 

7 ‘‘(v) in the case of an organization 

8 which is a voluntary employees’ beneficiary 

9 association described in section 501(c)(9), 

10 establishes, maintains, or makes contribu11 tions to such voluntary employees’ bene12 ficiary association. 

13 ‘‘(C) LIABILITY FOR TAX.—In any case in 

14 which remuneration from more than one em15 ployer is taken into account under this para16 graph in determining the tax imposed by sub17 section (a), each such employer shall be liable 

18 for such tax in an amount which bears the 

19 same ratio to the total tax determined under 

20 subsection (a) with respect to such remunera21 tion as— 

22 ‘‘(i) the amount of remuneration paid 

23 by such employer with respect to such em24 ployee, bears to 


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1 ‘‘(ii) the amount of remuneration paid 

2 by all such employers to such employee. 

3 ‘‘(5) EXCESS PARACHUTE PAYMENT.—For pur4 poses of determining the tax imposed by subsection 

5 (a)(2)— 

6 ‘‘(A) IN GENERAL.—The term ‘excess 

7 parachute payment’ means an amount equal to 

8 the excess of any parachute payment over the 

9 portion of the base amount allocated to such 

10 payment. 

11 ‘‘(B) PARACHUTE PAYMENT.—The term 

12 ‘parachute payment’ means any payment in the 

13 nature of compensation to (or for the benefit 

14 of) a covered employee if— 

15 ‘‘(i) such payment is contingent on 

16 such employee’s separation from employ17 ment with the employer, and 

18 ‘‘(ii) the aggregate present value of 

19 the payments in the nature of compensa20 tion to (or for the benefit of) such indi21 vidual which are contingent on such sepa22 ration equals or exceeds an amount equal 

23 to 3 times the base amount. 

24 Such term does not include any payment de25 scribed in section 280G(b)(6) (relating to exVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00277 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 emption for payments under qualified plans) or 

2 any payment made under or to an annuity con3 tract described in section 403(b) or a plan de4 scribed in section 457(b). 

5 ‘‘(C) BASE AMOUNT.—Rules similar to the 

6 rules of 280G(b)(3) shall apply for purposes of 

7 determining the base amount. 

8 ‘‘(D) PROPERTY TRANSFERS; PRESENT

9 VALUE.—Rules similar to the rules of para10 graphs (3) and (4) of section 280G(d) shall 

11 apply. 

12 ‘‘(6) COORDINATION WITH DEDUCTION LIMITA13 TION.—Remuneration the deduction for which is not 

14 allowed by reason of section 162(m) shall not be 

15 taken into account for purposes of this section. 

16 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 

17 such regulations as may be necessary to prevent avoidance 

18 of the tax under this section, including regulations pre19 venting employees from being misclassified as contractors 

20 or from being compensated through a pass-through or 

21 other entity to avoid such tax.’’. 

22 (b) CLERICAL AMENDMENT.—The table of sections 

23 for subchapter D of chapter 42 is amended by adding at 

24 the end the following new item: 

‘‘Sec. 4960. Tax on excess exempt organization executive compensation.’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS. 

5 (a) IN GENERAL.—Section 83 is amended by adding 

6 at the end the following new subsection: 

7 ‘‘(i) QUALIFIED EQUITY GRANTS.— 

8 ‘‘(1) IN GENERAL.—For purposes of this sub9 title— 

10 ‘‘(A) TIMING OF INCLUSION.—If qualified 

11 stock is transferred to a qualified employee who 

12 makes an election with respect to such stock 

13 under this subsection, subsection (a) shall be 

14 applied by including the amount determined 

15 under such subsection with respect to such 

16 stock in income of the employee in the taxable 

17 year determined under subparagraph (B) in lieu 

18 of the taxable year described in subsection (a). 

19 ‘‘(B) TAXABLE YEAR DETERMINED.—The 

20 taxable year determined under this subpara21 graph is the taxable year of the employee which 

22 includes the earliest of— 

23 ‘‘(i) the first date such qualified stock 

24 becomes transferable (including, solely for 


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1 purposes of this clause, becoming transfer2 able to the employer), 

3 ‘‘(ii) the date the employee first be4 comes an excluded employee, 

5 ‘‘(iii) the first date on which any stock 

6 of the corporation which issued the quali7 fied stock becomes readily tradable on an 

8 established securities market (as deter9 mined by the Secretary, but not including 

10 any market unless such market is recog11 nized as an established securities market 

12 by the Secretary for purposes of a provi13 sion of this title other than this sub14 section), 

15 ‘‘(iv) the date that is 5 years after the 

16 first date the rights of the employee in 

17 such stock are transferable or are not sub18 ject to a substantial risk of forfeiture, 

19 whichever occurs earlier, or 

20 ‘‘(v) the date on which the employee 

21 revokes (at such time and in such manner 

22 as the Secretary provides) the election 

23 under this subsection with respect to such 

24 stock. 

25 ‘‘(2) QUALIFIED STOCK.— 


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

2 subsection, the term ‘qualified stock’ means, 

3 with respect to any qualified employee, any 

4 stock in a corporation which is the employer of 

5 such employee, if— 

6 ‘‘(i) such stock is received— 

7 ‘‘(I) in connection with the exer8 cise of an option, or 

9 ‘‘(II) in settlement of a restricted 

10 stock unit, and 

11 ‘‘(ii) such option or restricted stock 

12 unit was granted by the corporation— 

13 ‘‘(I) in connection with the per14 formance of services as an employee, 

15 and 

16 ‘‘(II) during a calendar year in 

17 which such corporation was an eligible 

18 corporation. 

19 ‘‘(B) LIMITATION.—The term ‘qualified 

20 stock’ shall not include any stock if the em21 ployee may sell such stock to, or otherwise re22 ceive cash in lieu of stock from, the corporation 

23 at the time that the rights of the employee in 

24 such stock first become transferable or not sub25 ject to a substantial risk of forfeiture. 


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1 ‘‘(C) ELIGIBLE CORPORATION.—For pur2 poses of subparagraph (A)(ii)(II)— 

3 ‘‘(i) IN GENERAL.—The term ‘eligible 

4 corporation’ means, with respect to any 

5 calendar year, any corporation if— 

6 ‘‘(I) no stock of such corporation 

7 (or any predecessor of such corpora8 tion) is readily tradable on an estab9 lished securities market (as deter10 mined under paragraph (1)(B)(iii)) 

11 during any preceding calendar year, 

12 and 

13 ‘‘(II) such corporation has a writ14 ten plan under which, in such cal15 endar year, not less than 80 percent 

16 of all employees who provide services 

17 to such corporation in the United 

18 States (or any possession of the 

19 United States) are granted stock op20 tions, or restricted stock units, with 

21 the same rights and privileges to re22 ceive qualified stock. 

23 ‘‘(ii) SAME RIGHTS AND PRIVI24 LEGES.—For purposes of clause (i)(II)— 


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1 ‘‘(I) except as provided in sub2 clauses (II) and (III), the determina3 tion of rights and privileges with re4 spect to stock shall be made in a simi5 lar manner as under section 

6 423(b)(5), 

7 ‘‘(II) employees shall not fail to 

8 be treated as having the same rights 

9 and privileges to receive qualified 

10 stock solely because the number of 

11 shares available to all employees is not 

12 equal in amount, so long as the num13 ber of shares available to each em14 ployee is more than a de minimis 

15 amount, and 

16 ‘‘(III) rights and privileges with 

17 respect to the exercise of an option 

18 shall not be treated as the same as 

19 rights and privileges with respect to 

20 the settlement of a restricted stock 

21 unit. 

22 ‘‘(iii) EMPLOYEE.—For purposes of 

23 clause (i)(II), the term ‘employee’ shall not 

24 include any employee described in section 

25 4980E(d)(4) or any excluded employee. 


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1 ‘‘(iv) SPECIAL RULE FOR CALENDAR

2 YEARS BEFORE 2018.—In the case of any 

3 calendar year beginning before January 1, 

4 2018, clause (i)(II) shall be applied with5 out regard to whether the rights and privi6 leges with respect to the qualified stock are 

7 the same. 

8 ‘‘(3) QUALIFIED EMPLOYEE; EXCLUDED EM9 PLOYEE.—For purposes of this subsection— 

10 ‘‘(A) IN GENERAL.—The term ‘qualified 

11 employee’ means any individual who— 

12 ‘‘(i) is not an excluded employee, and 

13 ‘‘(ii) agrees in the election made 

14 under this subsection to meet such require15 ments as are determined by the Secretary 

16 to be necessary to ensure that the with17 holding requirements of the corporation 

18 under chapter 24 with respect to the quali19 fied stock are met. 

20 ‘‘(B) EXCLUDED EMPLOYEE.—The term 

21 ‘excluded employee’ means, with respect to any 

22 corporation, any individual— 

23 ‘‘(i) who was a 1-percent owner (with24 in the meaning of section 416(i)(1)(B)(ii)) 


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1 at any time during the 10 preceding cal2 endar years, 

3 ‘‘(ii) who is or has been at any prior 

4 time— 

5 ‘‘(I) the chief executive officer of 

6 such corporation or an individual act7 ing in such a capacity, or 

8 ‘‘(II) the chief financial officer of 

9 such corporation or an individual act10 ing in such a capacity, 

11 ‘‘(iii) who bears a relationship de12 scribed in section 318(a)(1) to any indi13 vidual described in subclause (I) or (II) of 

14 clause (ii), or 

15 ‘‘(iv) who was for any of the 10 pre16 ceding taxable years one of the 4 highest 

17 compensated officers of such corporation, 

18 determined with respect to each such tax19 able year on the basis of the shareholder 

20 disclosure rules for compensation under 

21 the Securities Exchange Act of 1934 (as if 

22 such rules applied to such corporation). 

23 ‘‘(4) ELECTION.— 

24 ‘‘(A) TIME FOR MAKING ELECTION.—An 

25 election with respect to qualified stock shall be 


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1 made under this subsection no later than 30 

2 days after the first date the rights of the em3 ployee in such stock are transferable or are not 

4 subject to a substantial risk of forfeiture, 

5 whichever occurs earlier, and shall be made in 

6 a manner similar to the manner in which an 

7 election is made under subsection (b). 

8 ‘‘(B) LIMITATIONS.—No election may be 

9 made under this section with respect to any 

10 qualified stock if— 

11 ‘‘(i) the qualified employee has made 

12 an election under subsection (b) with re13 spect to such qualified stock, 

14 ‘‘(ii) any stock of the corporation 

15 which issued the qualified stock is readily 

16 tradable on an established securities mar17 ket (as determined under paragraph 

18 (1)(B)(iii)) at any time before the election 

19 is made, or 

20 ‘‘(iii) such corporation purchased any 

21 of its outstanding stock in the calendar 

22 year preceding the calendar year which in23 cludes the first date the rights of the em24 ployee in such stock are transferable or are 


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1 not subject to a substantial risk of for2 feiture, unless— 

3 ‘‘(I) not less than 25 percent of 

4 the total dollar amount of the stock so 

5 purchased is deferral stock, and 

6 ‘‘(II) the determination of which 

7 individuals from whom deferral stock 

8 is purchased is made on a reasonable 

9 basis. 

10 ‘‘(C) DEFINITIONS AND SPECIAL RULES

11 RELATED TO LIMITATION ON STOCK REDEMP12 TIONS.— 

13 ‘‘(i) DEFERRAL STOCK.—For pur14 poses of this paragraph, the term ‘deferral 

15 stock’ means stock with respect to which 

16 an election is in effect under this sub17 section. 

18 ‘‘(ii) DEFERRAL STOCK WITH RE19 SPECT TO ANY INDIVIDUAL NOT TAKEN

20 INTO ACCOUNT IF INDIVIDUAL HOLDS DE21 FERRAL STOCK WITH LONGER DEFERRAL

22 PERIOD.—Stock purchased by a corpora23 tion from any individual shall not be treat24 ed as deferral stock for purposes of sub25 paragraph (B)(iii) if such individual (imVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00287 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 mediately after such purchase) holds any 

2 deferral stock with respect to which an 

3 election has been in effect under this sub4 section for a longer period than the elec5 tion with respect to the stock so pur6 chased. 

7 ‘‘(iii) PURCHASE OF ALL OUT8 STANDING DEFERRAL STOCK.—The re9 quirements of subclauses (I) and (II) of 

10 subparagraph (B)(iii) shall be treated as 

11 met if the stock so purchased includes all 

12 of the corporation’s outstanding deferral 

13 stock. 

14 ‘‘(iv) REPORTING.—Any corporation 

15 which has outstanding deferral stock as of 

16 the beginning of any calendar year and 

17 which purchases any of its outstanding 

18 stock during such calendar year shall in19 clude on its return of tax for the taxable 

20 year in which, or with which, such calendar 

21 year ends the total dollar amount of its 

22 outstanding stock so purchased during 

23 such calendar year and such other infor24 mation as the Secretary requires for pur25 poses of administering this paragraph. 


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1 ‘‘(5) CONTROLLED GROUPS.—For purposes of 

2 this subsection, all persons treated as a single em3 ployer under section 414(b) shall be treated as 1 

4 corporation. 

5 ‘‘(6) NOTICE REQUIREMENT.—Any corporation 

6 which transfers qualified stock to a qualified em7 ployee shall, at the time that (or a reasonable period 

8 before) an amount attributable to such stock would 

9 (but for this subsection) first be includible in the 

10 gross income of such employee— 

11 ‘‘(A) certify to such employee that such 

12 stock is qualified stock, and 

13 ‘‘(B) notify such employee— 

14 ‘‘(i) that the employee may be eligible 

15 to elect to defer income on such stock 

16 under this subsection, and 

17 ‘‘(ii) that, if the employee makes such 

18 an election— 

19 ‘‘(I) the amount of income recog20 nized at the end of the deferral period 

21 will be based on the value of the stock 

22 at the time at which the rights of the 

23 employee in such stock first become 

24 transferable or not subject to substan25 tial risk of forfeiture, notwithstanding 


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1 whether the value of the stock has de2 clined during the deferral period, 

3 ‘‘(II) the amount of such income 

4 recognized at the end of the deferral 

5 period will be subject to withholding 

6 under section 3401(i) at the rate de7 termined under section 3402(t), and 

8 ‘‘(III) the responsibilities of the 

9 employee (as determined by the Sec10 retary under paragraph (3)(A)(ii)) 

11 with respect to such withholding. 

12 ‘‘(7) RESTRICTED STOCK UNITS.—This section 

13 (other than this subsection), including any election 

14 under subsection (b), shall not apply to restricted 

15 stock units.’’. 

16 (b) WITHHOLDING.— 

17 (1) TIME OF WITHHOLDING.—Section 3401 is 

18 amended by adding at the end the following new 

19 subsection: 

20 ‘‘(i) QUALIFIED STOCK FOR WHICH AN ELECTION IS

21 IN EFFECT UNDER SECTION 83(i).—For purposes of sub22 section (a), qualified stock (as defined in section 83(i)) 

23 with respect to which an election is made under section 

24 83(i) shall be treated as wages— 


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1 ‘‘(1) received on the earliest date described in 

2 section 83(i)(1)(B), and 

3 ‘‘(2) in an amount equal to the amount in4 cluded in income under section 83 for the taxable 

5 year which includes such date.’’. 

6 (2) AMOUNT OF WITHHOLDING.—Section 3402 

7 is amended by adding at the end the following new 

8 subsection: 

9 ‘‘(t) RATE OF WITHHOLDING FOR CERTAIN

10 STOCK.—In the case of any qualified stock (as defined in 

11 section 83(i)(2)) with respect to which an election is made 

12 under section 83(i)— 

13 ‘‘(1) the rate of tax under subsection (a) shall 

14 not be less than the maximum rate of tax in effect 

15 under section 1, and 

16 ‘‘(2) such stock shall be treated for purposes of 

17 section 3501(b) in the same manner as a non-cash 

18 fringe benefit.’’. 

19 (c) COORDINATION WITH OTHER DEFERRED COM20 PENSATION RULES.— 

21 (1) ELECTION TO APPLY DEFERRAL TO STATU22 TORY OPTIONS.— 

23 (A) INCENTIVE STOCK OPTIONS.—Section 

24 422(b) is amended by adding at the end the fol25 lowing: ‘‘Such term shall not include any option 


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1 if an election is made under section 83(i) with 

2 respect to the stock received in connection with 

3 the exercise of such option.’’. 

4 (B) EMPLOYEE STOCK PURCHASE

5 PLANS.—Section 423 is amended— 

6 (i) by adding at the end of subsection 

7 (a) the following flush sentence: 

8 ‘‘The preceding sentence shall not apply to any share of 

9 stock with respect to which an election is made under sec10 tion 83(i).’’, and 

11 (ii) in subsection (b)(5), by striking 

12 ‘‘and’’ before ‘‘the plan’’ and by inserting 

13 ‘‘, and the rules of section 83(i) shall apply 

14 in determining which employees have a 

15 right to make an election under such sec16 tion’’ before the semicolon at the end. 

17 (2) EXCLUSION FROM DEFINITION OF NON18 QUALIFIED DEFERRED COMPENSATION PLAN.—Sub19 section (d) of section 409A is amended by adding at 

20 the end the following new paragraph: 

21 ‘‘(7) TREATMENT OF QUALIFIED STOCK.—An 

22 arrangement under which an employee may receive 

23 qualified stock (as defined in section 83(i)(2)) shall 

24 not be treated as a nonqualified deferred compensa25 tion plan solely because of an employee’s election, or 


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1 ability to make an election, to defer recognition of 

2 income under section 83(i).’’. 

3 (d) INFORMATION REPORTING.—Section 6051(a) is 

4 amended by striking ‘‘and’’ at the end of paragraph (13), 

5 by striking the period at the end of paragraph (14) and 

6 inserting a comma, and by inserting after paragraph (14) 

7 the following new paragraphs: 

8 ‘‘(15) the amount includible in gross income 

9 under subparagraph (A) of section 83(i)(1) with re10 spect to an event described in subparagraph (B) of 

11 such section which occurs in such calendar year, and 

12 ‘‘(16) the aggregate amount of income which is 

13 being deferred pursuant to elections under section 

14 83(i), determined as of the close of the calendar 

15 year.’’. 

16 (e) PENALTY FOR FAILURE OF EMPLOYER TO PRO17 VIDE NOTICE OF TAX CONSEQUENCES.—Section 6652 is 

18 amended by adding at the end the following new sub19 section: 

20 ‘‘(p) FAILURE TO PROVIDE NOTICE UNDER SECTION

21 83(i).—In the case of each failure to provide a notice as 

22 required by section 83(i)(6), at the time prescribed there23 for, unless it is shown that such failure is due to reason24 able cause and not to willful neglect, there shall be paid, 

25 on notice and demand of the Secretary and in the same 


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1 manner as tax, by the person failing to provide such no2 tice, an amount equal to $100 for each such failure, but 

3 the total amount imposed on such person for all such fail4 ures during any calendar year shall not exceed $50,000.’’. 

5 (f) EFFECTIVE DATES.— 

6 (1) IN GENERAL.—Except as provided in para7 graph (2), the amendments made by this section 

8 shall apply to stock attributable to options exercised, 

9 or restricted stock units settled, after December 31, 

10 2017. 

11 (2) REQUIREMENT TO PROVIDE NOTICE.—The 

12 amendments made by subsection (e) shall apply to 

13 failures after December 31, 2017. 

14 (g) TRANSITION RULE.—Until such time as the Sec15 retary (or the Secretary’s delegate) issues regulations or 

16 other guidance for purposes of implementing the require17 ments of paragraph (2)(C)(i)(II) of section 83(i) of the 

18 Internal Revenue Code of 1986 (as added by this section), 

19 or the requirements of paragraph (6) of such section, a 

20 corporation shall be treated as being in compliance with 

21 such requirements (respectively) if such corporation com22 plies with a reasonable good faith interpretation of such 

23 requirements. 


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1 SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK 

2 COMPENSATION OF INSIDERS IN EXPATRI3 ATED CORPORATIONS. 

4 (a) IN GENERAL.—Section 4985(a)(1) is amended by 

5 striking ‘‘section 1(h)(1)(C)’’ and inserting ‘‘section 

6 1(h)(1)(D)’’. 

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

8 this section shall apply to corporations first becoming ex9 patriated corporations (as defined in section 4985 of the 

10 Internal Revenue Code of 1986) after the date of enact11 ment of this Act. 

12 Subpart B—Retirement Plans 

13 SEC. 13611. CONFORMITY OF CONTRIBUTION LIMITS FOR 

14 EMPLOYER-SPONSORED RETIREMENT PLANS. 

15 (a) 403(B) PLANS.— 

16 (1) ELIMINATION OF SPECIAL CATCH-UP

17 RULE.—Subsection (g) of section 402 is amended by 

18 striking paragraph (7) and by redesignating para19 graph (8) as paragraph (7). 

20 (2) ELIMINATION OF POST TERMINATION NON21 ELECTIVE CONTRIBUTIONS.—Subsection (b) of sec22 tion 403 is amended— 

23 (A) in paragraph (3), by striking ‘‘for the 

24 most recent period’’ and all that follows 

25 through ‘‘more than five years’’, and 

26 (B) by striking paragraph (4). 


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1 (3) ELIMINATION OF SEPARATE 415(C) LIM2 ITS.—Paragraph (4) of section 415(k) is amended 

3 by striking ‘‘each employer with respect to which the 

4 participant has the control required’’ and inserting 

5 ‘‘the employer and each employer which is part of 

6 the same controlled group or under common con7 trol’’. 

8 (b) 457(B) PLANS.— 

9 (1) ELIMINATION OF SEPARATE DEFERRAL

10 LIMIT.—Paragraph (3) of section 402(g) is amended 

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

12 by striking the period at the end of subparagraph 

13 (D) and inserting ‘‘, and’’, and by inserting after 

14 subparagraph (D) the following new subparagraph: 

15 ‘‘(E) any amount deferred under an eligi16 ble deferred compensation plan (as defined in 

17 section 457(b)) of an eligible employer de18 scribed in section 457(e)(1)(A).’’. 

19 (2) TAKEN INTO ACCOUNT UNDER LIMITATION

20 FOR DEFINED CONTRIBUTION PLANS.— 

21 (A) IN GENERAL.—Paragraph (2) of sec22 tion 415(a) is amended— 

23 (i) by striking ‘‘or’’ at the end of sub24 paragraph (B), by inserting ‘‘or’’ at the 

25 end of subparagraph (C), and by inserting 


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1 after subparagraph (C) the following new 

2 subparagraph: 

3 ‘‘(D) an eligible deferred compensation 

4 plan (as defined in section 457(b)) of an eligible 

5 employer described in section 457(e)(1)(A),’’, 

6 and 

7 (ii) by striking ‘‘or 408(k)’’ in the 

8 flush language and inserting ‘‘408(k), or 

9 457(b)’’. 

10 (B) DEFINITION.—Paragraph (1) of sec11 tion 415(k) is amended by striking ‘‘or’’ at the 

12 end of subparagraph (C), by striking the period 

13 at the end of subparagraph (D) and inserting 

14 ‘‘, or’’, and by adding at the end the following 

15 new subparagraph: 

16 ‘‘(E) an eligible deferred compensation 

17 plan (as defined in section 457(b)) of an eligible 

18 employer described in section 457(e)(1)(A).’’. 

19 (3) ELIMINATION OF SPECIAL CATCH-UP

20 RULE.—Paragraph (3) of section 457(b) is amended 

21 by inserting ‘‘in the case of an eligible employer de22 scribed in subsection (e)(1)(B),’’ before ‘‘which’’. 

23 (c) CONFORMING AMENDMENTS.— 

24 (1) Section 25B(d)(1)(B) is amended— 

25 (A) by striking clause (ii), and 


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1 (B) by striking ‘‘the amount of—’’ and all 

2 that follows through ‘‘any elective deferrals’’ 

3 and inserting ‘‘the amount of any elective defer4 rals’’. 

5 (2) Section 402A(e)(2) is amended by striking 

6 ‘‘means—’’ and all that follows and inserting 

7 ‘‘means any elective deferral described in subpara8 graph (A), (C), or (E) of section 402(g)(3).’’ 

9 (3) Section 457(e) is amended by striking para10 graph (18). 

11 (4) Section 414(u)(2)(C) is amended by insert12 ing ‘‘of an eligible employer described in section 

13 457(e)(1)(B)’’ after ‘‘(as defined in section 

14 457(b))’’. 

15 (5) Section 414(v)(2)(D) is amended— 

16 (A) by striking ‘‘clauses (i), (ii), and (iv) 

17 of’’, and 

18 (B) by striking ‘‘, and plans described in 

19 clause (iii)’’ and all that follows and inserting 

20 a period. 

21 (6) Section 414(v)(3)(A)(i) is amended by strik22 ing ‘‘(determined without regard to section 

23 457(b)(3))’’. 


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1 (7) Section 414(v)(6)(B) is amended by striking 

2 ‘‘subsection (u)(2)(C)’’ and inserting ‘‘section 

3 402(g)(3)’’. 

4 (8) Section 414(v)(6) is amended by striking 

5 subparagraph (C). 

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

7 this section shall apply to plan years and taxable years 

8 beginning after December 31, 2017. 

9 SEC. 13612. REPEAL OF SPECIAL RULE PERMITTING RE10 CHARACTERIZATION OF ROTH IRA CON11 TRIBUTIONS AS TRADITIONAL IRA CON12 TRIBUTIONS. 

13 (a) IN GENERAL.—Section 408A(d) is amended by 

14 striking paragraph (6) and by redesignating paragraph 

15 (7) as paragraph (6). 

16 (b) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years beginning after 

18 December 31, 2017. 

19 SEC. 13613. MODIFICATION OF RULES APPLICABLE TO 

20 LENGTH OF SERVICE AWARD PLANS. 

21 (a) MAXIMUM DEFERRAL AMOUNT.—Clause (ii) of 

22 section 457(e)(11)(B) is amended by striking ‘‘$3,000’’ 

23 and inserting ‘‘$6,000’’. 


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1 (b) COST OF LIVING ADJUSTMENT.—Subparagraph 

2 (B) of section 457(e)(11) is amended by adding at the 

3 end the following: 

4 ‘‘(iii) COST OF LIVING ADJUST5 MENT.—In the case of taxable years begin6 ning after December 31, 2017, the Sec7 retary shall adjust the $6,000 amount 

8 under clause (ii) at the same time and in 

9 the same manner as under section 415(d), 

10 except that the base period shall be the 

11 calendar quarter beginning July 1, 2016, 

12 and any increase under this paragraph 

13 that is not a multiple of $500 shall be 

14 rounded to the next lowest multiple of 

15 $500.’’. 

16 (c) APPLICATION OF LIMITATION ON ACCRUALS.— 

17 Subparagraph (B) of section 457(e)(11), as amended by 

18 subsection (b), is amended by adding at the end the fol19 lowing: 

20 ‘‘(iv) SPECIAL RULE FOR APPLICA21 TION OF LIMITATION ON ACCRUALS FOR

22 CERTAIN PLANS.—In the case of a plan de23 scribed in subparagraph (A)(ii) which is a 

24 defined benefit plan (as defined in section 

25 414(j)), the limitation under clause (ii) 


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1 shall apply to the actuarial present value 

2 of the aggregate amount of length of serv3 ice awards accruing with respect to any 

4 year of service. Such actuarial present 

5 value with respect to any year shall be cal6 culated using reasonable actuarial assump7 tions and methods, assuming payment will 

8 be made under the most valuable form of 

9 payment under the plan with payment 

10 commencing at the later of the earliest age 

11 at which unreduced benefits are payable 

12 under the plan or the participant’s age at 

13 the time of the calculation.’’. 

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

15 this Act shall apply to taxable years beginning after De16 cember 31, 2017. 

17 SEC. 13614. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN 

18 OFFSET AMOUNTS. 

19 (a) IN GENERAL.—Paragraph (3) of section 402(c) 

20 is amended by redesignating subparagraph (B) as sub21 paragraph (C) and by inserting after subparagraph (A) 

22 the following new subparagraph: 

23 ‘‘(B) ROLLOVER OF CERTAIN PLAN LOAN

24 OFFSET AMOUNTS.— 


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1 ‘‘(i) IN GENERAL.—In the case of an 

2 eligible rollover distribution of a qualified 

3 plan loan offset amount, the requirements 

4 of subparagraph (A) shall be treated as 

5 met if such transfer occurs on or before 

6 the due date (including extensions) for fil7 ing the return of tax for the taxable year 

8 in which such amount is treated as distrib9 uted from a qualified employer plan. 

10 ‘‘(ii) QUALIFIED PLAN LOAN OFFSET

11 AMOUNT.—For purposes of this subpara12 graph, the term ‘qualified plan loan offset 

13 amount’ means a plan loan offset amount 

14 which is treated as distributed from a 

15 qualified employer plan to a participant or 

16 beneficiary solely by reason of— 

17 ‘‘(I) the termination of the quali18 fied employer plan, or 

19 ‘‘(II) the failure to meet the re20 payment terms of the loan from such 

21 plan because of the severance from 

22 employment of the participant. 

23 ‘‘(iii) PLAN LOAN OFFSET AMOUNT.— 

24 For purposes of clause (ii), the term ‘plan 

25 loan offset amount’ means the amount by 


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1 which the participant’s accrued benefit 

2 under the plan is reduced in order to repay 

3 a loan from the plan. 

4 ‘‘(iv) LIMITATION.—This subpara5 graph shall not apply to any plan loan off6 set amount unless such plan loan offset 

7 amount relates to a loan to which section 

8 72(p)(1) does not apply by reason of sec9 tion 72(p)(2). 

10 ‘‘(v) QUALIFIED EMPLOYER PLAN.— 

11 For purposes of this subsection, the term 

12 ‘qualified employer plan’ has the meaning 

13 given such term by section 72(p)(4).’’. 

14 (b) CONFORMING AMENDMENT.—Subparagraph (A) 

15 of section 402(c)(3) is amended by striking ‘‘subpara16 graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 

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

18 this section shall apply to plan loan offset amounts which 

19 are treated as distributed in taxable years beginning after 

20 December 31, 2017. 

21 PART VIII—EXEMPT ORGANIZATIONS 

22 SEC. 13701. EXCISE TAX BASED ON INVESTMENT INCOME 

23 OF PRIVATE COLLEGES AND UNIVERSITIES. 

24 (a) IN GENERAL.—Chapter 42 is amended by adding 

25 at the end the following new subchapter: 


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1 ‘‘Subchapter H—Excise Tax Based on Invest2 ment Income of Private Colleges and Uni3 versities 

‘‘Sec. 4968. Excise tax based on investment income of private colleges and universities. 

4 ‘‘SEC. 4968. EXCISE TAX BASED ON INVESTMENT INCOME 

5 OF PRIVATE COLLEGES AND UNIVERSITIES. 

6 ‘‘(a) TAX IMPOSED.—There is hereby imposed on 

7 each applicable educational institution for the taxable year 

8 a tax equal to 1.4 percent of the net investment income 

9 of such institution for the taxable year. 

10 ‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For 

11 purposes of this subchapter— 

12 ‘‘(1) IN GENERAL.—The term ‘applicable edu13 cational institution’ means an eligible educational in14 stitution (as defined in section 25A(f)(2))— 

15 ‘‘(A) which had at least 500 tuition-paying 

16 students during the preceding taxable year, 

17 ‘‘(B) which is not described in the first 

18 sentence of section 511(a)(2)(B) (relating to 

19 State colleges and universities), and 

20 ‘‘(C) the aggregate fair market value of 

21 the assets of which at the end of the preceding 

22 taxable year (other than those assets which are 

23 used directly in carrying out the institution’s 


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1 exempt purpose) is at least $250,000 per stu2 dent of the institution. 

3 ‘‘(2) STUDENTS.—For purposes of paragraph 

4 (1), the number of students of an institution shall 

5 be based on the daily average number of full-time 

6 students attending such institution (with part-time 

7 students taken into account on a full-time student 

8 equivalent basis). 

9 ‘‘(c) NET INVESTMENT INCOME.—For purposes of 

10 this section, net investment income shall be determined 

11 under rules similar to the rules of section 4940(c). 

12 ‘‘(d) ASSETS AND NET INVESTMENT INCOME OF RE13 LATED ORGANIZATIONS.— 

14 ‘‘(1) IN GENERAL.—For purposes of sub15 sections (b)(1)(C) and (c), assets and net investment 

16 income of any related organization with respect to 

17 an educational institution shall be treated as assets 

18 and net investment income, respectively, of the edu19 cational institution, except that— 

20 ‘‘(A) no such amount shall be taken into 

21 account with respect to more than 1 educational 

22 institution, and 

23 ‘‘(B) unless such organization is controlled 

24 by such institution or is described in section 

25 509(a)(3) with respect to such institution for 


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1 the taxable year, assets and net investment in2 come which are not intended or available for 

3 the use or benefit of the educational institution 

4 shall not be taken into account. 

5 ‘‘(2) RELATED ORGANIZATION.—For purposes 

6 of this subsection, the term ‘related organization’ 

7 means, with respect to an educational institution, 

8 any organization which— 

9 ‘‘(A) controls, or is controlled by, such in10 stitution, 

11 ‘‘(B) is controlled by 1 or more persons 

12 which also control such institution, or 

13 ‘‘(C) is a supported organization (as de14 fined in section 509(f)(3)), or an organization 

15 described in section 509(a)(3), during the tax16 able year with respect to such institution.’’. 

17 (b) CLERICAL AMENDMENT.—The table of sub18 chapters for chapter 42 is amended by adding at the end 

19 the following new item: 

‘‘SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE

COLLEGES AND UNIVERSITIES’’. 

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2017. 


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1 SEC. 13702. NAME AND LOGO ROYALTIES TREATED AS UN2 RELATED BUSINESS TAXABLE INCOME. 

3 (a) IN GENERAL.—Section 513 is amended by adding 

4 at the end the following new subsection: 

5 ‘‘(k) NAME AND LOGO ROYALTIES.—Any sale or li6 censing by an organization of any name or logo of the 

7 organization (including any trademark or copyright relat8 ing to such name or logo) shall be treated as an unrelated 

9 trade or business regularly carried on by such organiza10 tion.’’. 

11 (b) CALCULATION OF UNRELATED BUSINESS TAX12 ABLE INCOME.—Subsection (b) of section 512 is amended 

13 by adding at the end the following new paragraph: 

14 ‘‘(20) SPECIAL RULE FOR NAME AND LOGO

15 ROYALTIES.—Notwithstanding paragraph (1), (2), 

16 (3), or (5), any income derived from any sale or li17 censing described in section 513(k) shall be included 

18 as an item of gross income derived from an unre19 lated trade or business.’’. 

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2017. 


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1 SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME SEPA2 RATELY COMPUTED FOR EACH TRADE OR 

3 BUSINESS ACTIVITY. 

4 (a) IN GENERAL.—Subsection (a) of section 512 is 

5 amended by adding at the end the following new para6 graph: 

7 ‘‘(6) SPECIAL RULE FOR ORGANIZATION WITH

8 MORE THAN 1 UNRELATED TRADE OR BUSINESS.— 

9 In the case of any organization with more than 1 

10 unrelated trade or business— 

11 ‘‘(A) unrelated business taxable income, in12 cluding for purposes of determining any net op13 erating loss deduction, shall be computed sepa14 rately with respect to each such trade or busi15 ness and without regard to subsection (b)(12), 

16 ‘‘(B) the unrelated business taxable income 

17 of such organization shall be the sum of the un18 related business taxable income so computed 

19 with respect to each such trade or business, less 

20 a specific deduction under subsection (b)(12), 

21 and 

22 ‘‘(C) for purposes of subparagraph (B), 

23 unrelated business taxable income with respect 

24 to any such trade or business shall not be less 

25 than zero.’’. 

26 (b) EFFECTIVE DATE.— 


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1 (1) IN GENERAL.—Except to the extent pro2 vided in paragraph (2), the amendment made by this 

3 section shall apply to taxable years beginning after 

4 December 31, 2017. 

5 (2) CARRYOVERS OF NET OPERATING

6 LOSSES.—If any net operating loss arising in a tax7 able year beginning before January 1, 2018, is car8 ried over to a taxable year beginning on or after 

9 such date— 

10 (A) subparagraph (A) of section 512(a)(6) 

11 of the Internal Revenue Code of 1986, as added 

12 by this Act, shall not apply to such net oper13 ating loss, and 

14 (B) the unrelated business taxable income 

15 of the organization, after the application of sub16 paragraph (B) of such section, shall be reduced 

17 by the amount of such net operating loss. 

18 SEC. 13704. REPEAL OF TAX-EXEMPT STATUS FOR PROFES19 SIONAL SPORTS LEAGUES. 

20 (a) IN GENERAL.—Paragraph (6) of section 501(c) 

21 is amended— 

22 (1) by striking ‘‘, boards of trade, or profes23 sional’’ and all that follows through ‘‘players)’’ and 

24 inserting ‘‘, or boards of trade’’, and 


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1 (2) by adding at the end the following: ‘‘This 

2 paragraph shall not apply to any professional sports 

3 league (whether or not administering a pension fund 

4 for players).’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2017. 

8 SEC. 13705. MODIFICATION OF TAXES ON EXCESS BENEFIT 

9 TRANSACTIONS. 

10 (a) ORGANIZATION LEVEL TAX.—Subsection (a) of 

11 section 4958 is amended by adding at the end the fol12 lowing new paragraph: 

13 ‘‘(3) ON THE ORGANIZATION.—In any case in 

14 which a tax is imposed by paragraph (1), there is 

15 hereby imposed on the organization a tax equal to 

16 10 percent of the excess benefit, unless the partici17 pation of the organization in the excess benefit 

18 transaction is not willful and is due to reasonable 

19 cause.’’. 

20 (b) MINIMUM STANDARDS OF ORGANIZATION DUE

21 DILIGENCE.—Subsection (d) of section 4958 is amended 

22 by adding at the end the following new paragraph: 

23 ‘‘(3) MINIMUM STANDARDS OF ORGANIZATION

24 DUE DILIGENCE.— 


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1 ‘‘(A) IN GENERAL.—Subsection (a)(3) 

2 shall not apply to a transaction, if— 

3 ‘‘(i) the organization establishes that 

4 the minimum standards of due diligence 

5 described in subparagraph (B) were met 

6 with respect to the transaction, or 

7 ‘‘(ii) the organization establishes to 

8 the satisfaction of the Secretary that other 

9 reasonable procedures were used to ensure 

10 that no excess benefit was provided. 

11 ‘‘(B) MINIMUM STANDARDS.—An organiza12 tion shall be treated as satisfying the minimum 

13 standards of due diligence described in this sub14 paragraph with respect to any transaction, if— 

15 ‘‘(i) the transaction was approved in 

16 advance by an authorized body of the orga17 nization composed entirely of individuals 

18 who did not have a conflict of interest with 

19 respect to the transaction, 

20 ‘‘(ii) the authorized body obtained and 

21 relied upon appropriate data as to com22 parability prior to approval of the trans23 action, and 


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1 ‘‘(iii) the authorized body adequately 

2 and concurrently documented the basis for 

3 approving the transaction. 

4 ‘‘(C) NO PRESUMPTION AS TO REASON5 ABLENESS.—Meeting the requirements of 

6 clause (i) or (ii) of subparagraph (A) with re7 spect to a transaction shall not give rise to a 

8 presumption of reasonableness for purposes of 

9 the taxes imposed by paragraphs (1) of (2) of 

10 subsection (a) and shall not, by itself, support 

11 a conclusion that a manager did not act know12 ingly for purposes of subsection (a)(2) or that 

13 the organization did not act wilfully or without 

14 reasonable cause for purposes of subsection 

15 (a)(3).’’. 

16 (c) REPEAL OF EXCEPTION FOR MANAGER RELI17 ANCE ON PROFESSIONAL ADVICE.—Section 4958 is 

18 amended by adding at the end the following new sub19 section: 

20 ‘‘(g) NO SAFE HARBOR FOR RELIANCE ON PROFES21 SIONAL ADVICE.—An organization manager’s reliance on 

22 a written opinion of a professional with respect to elements 

23 of a transaction within the professional’s expertise shall 

24 not, by itself, preclude the manager from being treated 

25 as participating in the transaction knowingly.’’. 


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1 (d) ATHLETIC COACHES AND INVESTMENT MAN2 AGERS TREATED AS DISQUALIFIED PERSONS.— 

3 (1) ATHLETIC COACHES.— 

4 (A) IN GENERAL.—Paragraph (1) of sec5 tion 4958(f) is amended by striking ‘‘and’’ at 

6 the end of subparagraph (E), by striking the 

7 period at the end of subparagraph (F) and in8 serting ‘‘, and’’, and by adding at the end the 

9 following new subparagraph: 

10 ‘‘(G) which involves an eligible educational 

11 institution (as defined in section 25A(f)(2)), 

12 any person who performs services as an athletic 

13 coach for the organization.’’. 

14 (B) FAMILY MEMBERS.—Subparagraph 

15 (B) of section 4958(f)(1) is amended by insert16 ing ‘‘or (G)’’ after ‘‘subparagraph (A)’’. 

17 (2) INVESTMENT ADVISORS.— 

18 (A) IN GENERAL.—Subparagraph (F) of 

19 section 4958(f)(1) is amended— 

20 (i) by striking ‘‘which involves a spon21 soring organization (as defined in section 

22 4966(d)(1)),’’, and 

23 (ii) by striking ‘‘such sponsoring orga24 nization (as so defined)’’ and inserting 

25 ‘‘the organization’’. 


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1 (B) INVESTMENT ADVISOR DEFINITION.— 

2 Subparagraph (B) of section 4958(f)(8) is 

3 amended to read as follows: 

4 ‘‘(B) INVESTMENT ADVISOR DEFINED.— 

5 For purposes of subparagraph (A), the term 

6 ‘investment advisor’ means— 

7 ‘‘(i) with respect to any organization, 

8 any person who is compensated by such or9 ganization and is primarily responsible for 

10 managing the investment of, or providing 

11 investment advice with respect to, assets of 

12 such organization, and 

13 ‘‘(ii) with respect to any sponsoring 

14 organization (as defined in section 

15 4966(d)(1)), any person (other than an 

16 employee of such organization) com17 pensated by such organization for man18 aging the investment of, or providing in19 vestment advice with respect to, assets 

20 maintained in donor advised funds (as de21 fined in section 4966(d)(2)) owned by such 

22 organization.’’. 

23 (e) APPLICATION TO UNIONS AND TRADE ASSOCIA24 TIONS.—Paragraph (1) of section 4958(e) is amended by 

25 inserting ‘‘(5), (6),’’ after ‘‘(4),’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 13706. EXCEPTION FROM PRIVATE FOUNDATION EX5 CESS BUSINESS HOLDING TAX FOR INDE6 PENDENTLY-OPERATED PHILANTHROPIC 

7 BUSINESS HOLDINGS. 

8 (a) IN GENERAL.—Section 4943 is amended by add9 ing at the end the following new subsection: 

10 ‘‘(g) EXCEPTION FOR CERTAIN HOLDINGS LIMITED

11 TO INDEPENDENTLY-OPERATED PHILANTHROPIC BUSI12 NESS.— 

13 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

14 apply with respect to the holdings of a private foun15 dation in any business enterprise which meets the 

16 requirements of paragraphs (2), (3), and (4) for the 

17 taxable year. 

18 ‘‘(2) OWNERSHIP.—The requirements of this 

19 paragraph are met if— 

20 ‘‘(A) 100 percent of the voting stock in the 

21 business enterprise is held by the private foun22 dation at all times during the taxable year, and 

23 ‘‘(B) all the private foundation’s ownership 

24 interests in the business enterprise were ac25 quired by means other than by purchase. 


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1 ‘‘(3) ALL PROFITS TO CHARITY.— 

2 ‘‘(A) IN GENERAL.—The requirements of 

3 this paragraph are met if the business enter4 prise, not later than 120 days after the close of 

5 the taxable year, distributes an amount equal to 

6 its net operating income for such taxable year 

7 to the private foundation. 

8 ‘‘(B) NET OPERATING INCOME.—For pur9 poses of this paragraph, the net operating in10 come of any business enterprise for any taxable 

11 year is an amount equal to the gross income of 

12 the business enterprise for the taxable year, re13 duced by the sum of— 

14 ‘‘(i) the deductions allowed by chapter 

15 1 for the taxable year which are directly 

16 connected with the production of such in17 come, 

18 ‘‘(ii) the tax imposed by chapter 1 on 

19 the business enterprise for the taxable 

20 year, and 

21 ‘‘(iii) an amount for a reasonable re22 serve for working capital and other busi23 ness needs of the business enterprise. 


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1 ‘‘(4) INDEPENDENT OPERATION.—The require2 ments of this paragraph are met if, at all times dur3 ing the taxable year— 

4 ‘‘(A) no substantial contributor (as defined 

5 in section 4958(c)(3)(C)) to the private founda6 tion or family member (as determined under 

7 section 4958(f)(4)) of such a contributor is a 

8 director, officer, trustee, manager, employee, or 

9 contractor of the business enterprise (or an in10 dividual having powers or responsibilities simi11 lar to any of the foregoing), 

12 ‘‘(B) at least a majority of the board of di13 rectors of the private foundation are persons 

14 who are not— 

15 ‘‘(i) directors or officers of the busi16 ness enterprise, or 

17 ‘‘(ii) family members (as so deter18 mined) of a substantial contributor (as so 

19 defined) to the private foundation, and 

20 ‘‘(C) there is no loan outstanding from the 

21 business enterprise to a substantial contributor 

22 (as so defined) to the private foundation or to 

23 any family member of such a contributor (as so 

24 determined). 


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1 ‘‘(5) CERTAIN DEEMED PRIVATE FOUNDATIONS

2 EXCLUDED.—This subsection shall not apply to— 

3 ‘‘(A) any fund or organization treated as a 

4 private foundation for purposes of this section 

5 by reason of subsection (e) or (f), 

6 ‘‘(B) any trust described in section 

7 4947(a)(1) (relating to charitable trusts), and 

8 ‘‘(C) any trust described in section 

9 4947(a)(2) (relating to split-interest trusts).’’. 

10 (b) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to taxable years beginning after 

12 December 31, 2017. 

13 SEC. 13707. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN 

14 EXCHANGE FOR COLLEGE ATHLETIC EVENT 

15 SEATING RIGHTS. 

16 (a) IN GENERAL.—Section 170(l)(1) is amended to 

17 read as follows: 

18 ‘‘(1) IN GENERAL.—No deduction shall be al19 lowed under this section for any amount described in 

20 paragraph (2).’’. 

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

22 this section shall apply to contributions made in taxable 

23 years beginning after December 31, 2017. 


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1 SEC. 13708. REPEAL OF SUBSTANTIATION EXCEPTION IN 

2 CASE OF CONTRIBUTIONS REPORTED BY 

3 DONEE. 

4 (a) IN GENERAL.—Section 170(f)(8) is amended by 

5 striking subparagraph (D) and by redesignating subpara6 graph (E) as subparagraph (D). 

7 (b) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to contributions made in taxable 

9 years beginning after December 31, 2016. 

10 PART IX—OTHER PROVISIONS 

11 Subpart A—Craft Beverage Modernization and Tax 

12 Reform 

13 SEC. 13801. RULE OF CONSTRUCTION. 

14 Nothing in this subpart, the amendments made by 

15 this subpart, or any regulation promulgated under this 

16 subpart or the amendments made by this subpart, shall 

17 be construed to preempt, supersede, or otherwise limit or 

18 restrict any State, local, or tribal law that prohibits or 

19 regulates the production or sale of distilled spirits, wine, 

20 or malt beverages. 

21 SEC. 13802. PRODUCTION PERIOD FOR BEER, WINE, AND 

22 DISTILLED SPIRITS. 

23 (a) IN GENERAL.—Section 263A(f) is amended— 

24 (1) by redesignating paragraph (4) as para25 graph (5), and 


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1 (2) by inserting after paragraph (3) the fol2 lowing new paragraph: 

3 ‘‘(4) EXEMPTION FOR AGING PROCESS OF

4 BEER, WINE, AND DISTILLED SPIRITS.— 

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

6 subsection, the production period shall not in7 clude the aging period for— 

8 ‘‘(i) beer (as defined in section 

9 5052(a)), 

10 ‘‘(ii) wine (as described in section 

11 5041(a)), or 

12 ‘‘(iii) distilled spirits (as defined in 

13 section 5002(a)(8)), except such spirits 

14 that are unfit for use for beverage pur15 poses. 

16 ‘‘(B) TERMINATION.—This paragraph 

17 shall not apply to interest costs paid or accrued 

18 after December 31, 2019.’’. 

19 (b) CONFORMING AMENDMENT.—Paragraph 

20 (5)(B)(ii) of section 263A(f), as redesignated by this sec21 tion, is amended by inserting ‘‘except as provided in para22 graph (4),’’ before ‘‘ending on the date’’. 

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

24 this section shall apply to interest costs paid or accrued 

25 in calendar years beginning after December 31, 2017. 


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1 SEC. 13803. REDUCED RATE OF EXCISE TAX ON BEER. 

2 (a) IN GENERAL.—Paragraph (1) of section 5051(a) 

3 is amended to read as follows: 

4 ‘‘(1) IN GENERAL.— 

5 ‘‘(A) IMPOSITION OF TAX.—A tax is here6 by imposed on all beer brewed or produced, and 

7 removed for consumption or sale, within the 

8 United States, or imported into the United 

9 States. Except as provided in paragraph (2), 

10 the rate of such tax shall be the amount deter11 mined under this paragraph. 

12 ‘‘(B) RATE.—Except as provided in sub13 paragraph (B), the rate of tax shall be $18 for 

14 per barrel. 

15 ‘‘(C) SPECIAL RULE.—In the case of beer 

16 removed after December 31, 2017, and before 

17 January 1, 2020, the rate of tax shall be— 

18 ‘‘(i) $16 on the first 6,000,000 barrels 

19 of beer— 

20 ‘‘(I) brewed by the brewer and 

21 removed during the calendar year for 

22 consumption or sale, or 

23 ‘‘(II) imported by the importer 

24 into the United States during the cal25 endar year, and 


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1 ‘‘(ii) $18 on any barrels of beer to 

2 which clause (i) does not apply. 

3 ‘‘(D) BARREL.—For purposes of this sec4 tion, a barrel shall contain not more than 31 

5 gallons of beer, and any tax imposed under this 

6 section shall be applied at a like rate for any 

7 other quantity or for fractional parts of a bar8 rel.’’. 

9 (b) REDUCED RATE FOR CERTAIN DOMESTIC PRO10 DUCTION.—Subparagraph (A) of section 5051(a)(2) is 

11 amended— 

12 (1) in the heading, by striking ‘‘$7 A BARREL’’, 

13 and 

14 (2) by inserting ‘‘($3.50 in the case of beer re15 moved after December 31, 2017, and before January 

16 1, 2020)’’ after ‘‘$7’’. 

17 (c) APPLICATION OF REDUCED TAX RATE FOR FOR18 EIGN MANUFACTURERS AND IMPORTERS.—Subsection (a) 

19 of section 5051 is amended— 

20 (1) in subparagraph (C)(ii) of paragraph (1), as 

21 amended by subsection (a), by inserting ‘‘but only if 

22 the importer is an electing importer under para23 graph (4) and the barrels have been assigned to the 

24 importer pursuant to such paragraph’’ after ‘‘during 

25 the calendar year’’, and 


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1 (2) by adding at the end the following new 

2 paragraph: 

3 ‘‘(4) REDUCED TAX RATE FOR FOREIGN MANU4 FACTURERS AND IMPORTERS.— 

5 ‘‘(A) IN GENERAL.—In the case of any 

6 barrels of beer which have been brewed or pro7 duced outside of the United States and im8 ported into the United States, the rate of tax 

9 applicable under clause (i) of paragraph (1)(C) 

10 (referred to in this paragraph as the ‘reduced 

11 tax rate’) may be assigned by the brewer (pro12 vided that the brewer makes an election de13 scribed in subparagraph (B)(ii)) to any electing 

14 importer of such barrels pursuant to the re15 quirements established by the Secretary under 

16 subparagraph (B). 

17 ‘‘(B) ASSIGNMENT.—The Secretary shall, 

18 through such rules, regulations, and procedures 

19 as are determined appropriate, establish proce20 dures for assignment of the reduced tax rate 

21 provided under this paragraph, which shall in22 clude— 

23 ‘‘(i) a limitation to ensure that the 

24 number of barrels of beer for which the reVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00323 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 duced tax rate has been assigned by a 

2 brewer— 

3 ‘‘(I) to any importer does not ex4 ceed the number of barrels of beer 

5 brewed or produced by such brewer 

6 during the calendar year which were 

7 imported into the United States by 

8 such importer, and 

9 ‘‘(II) to all importers does not 

10 exceed the 6,000,000 barrels to which 

11 the reduced tax rate applies, 

12 ‘‘(ii) procedures that allow the election 

13 of a brewer to assign and an importer to 

14 receive the reduced tax rate provided under 

15 this paragraph, 

16 ‘‘(iii) requirements that the brewer 

17 provide any information as the Secretary 

18 determines necessary and appropriate for 

19 purposes of carrying out this paragraph, 

20 and 

21 ‘‘(iv) procedures that allow for revoca22 tion of eligibility of the brewer and the im23 porter for the reduced tax rate provided 

24 under this paragraph in the case of any er25 roneous or fraudulent information provided 


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1 under clause (iii) which the Secretary 

2 deems to be material to qualifying for such 

3 reduced rate. 

4 ‘‘(C) CONTROLLED GROUP.—For purposes 

5 of this section, any importer making an election 

6 described in subparagraph (B)(ii) shall be 

7 deemed to be a member of the controlled group 

8 of the brewer, as described under paragraph 

9 (5).’’. 

10 (d) CONTROLLED GROUP AND SINGLE TAXPAYER

11 RULES.—Subsection (a) of section 5051, as amended by 

12 this section, is amended— 

13 (1) in paragraph (2)— 

14 (A) by striking subparagraph (B), and 

15 (B) by redesignating subparagraph (C) as 

16 subparagraph (B), and 

17 (2) by adding at the end the following new 

18 paragraph: 

19 ‘‘(5) CONTROLLED GROUP AND SINGLE TAX20 PAYER RULES.— 

21 ‘‘(A) IN GENERAL.—Except as provided in 

22 subparagraph (B), in the case of a controlled 

23 group, the 6,000,000 barrel quantity specified 

24 in paragraph (1)(C)(i) and the 2,000,000 barrel 

25 quantity specified in paragraph (2)(A) shall be 


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1 applied to the controlled group, and the 

2 6,000,000 barrel quantity specified in para3 graph (1)(C)(i) and the 60,000 barrel quantity 

4 specified in paragraph (2)(A) shall be appor5 tioned among the brewers who are members of 

6 such group in such manner as the Secretary or 

7 their delegate shall by regulations prescribe. 

8 For purposes of the preceding sentence, the 

9 term ‘controlled group’ has the meaning as10 signed to it by subsection (a) of section 1563, 

11 except that for such purposes the phrase ‘more 

12 than 50 percent’ shall be substituted for the 

13 phrase ‘at least 80 percent’ in each place it ap14 pears in such subsection. Under regulations 

15 prescribed by the Secretary, principles similar 

16 to the principles of the preceding two sentences 

17 shall be applied to a group of brewers under 

18 common control where one or more of the brew19 ers is not a corporation. 

20 ‘‘(B) FOREIGN MANUFACTURERS AND IM21 PORTERS.—For purposes of paragraph (4), in 

22 the case of a controlled group, the 6,000,000 

23 barrel quantity specified in paragraph (1)(C)(i) 

24 shall be applied to the controlled group and ap25 portioned among the members of such group in 


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1 such manner as the Secretary shall by regula2 tions prescribe. For purposes of the preceding 

3 sentence, the term ‘controlled group’ has the 

4 meaning given such term under subparagraph 

5 (A). Under regulations prescribed by the Sec6 retary, principles similar to the principles of the 

7 preceding two sentences shall be applied to a 

8 group of brewers under common control where 

9 one or more of the brewers is not a corporation. 

10 ‘‘(C) SINGLE TAXPAYER.—Pursuant to 

11 rules issued by the Secretary, two or more enti12 ties (whether or not under common control) 

13 that produce beer marketed under a similar 

14 brand, license, franchise, or other arrangement 

15 shall be treated as a single taxpayer for pur16 poses of the application of this subsection.’’. 

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

18 this section shall apply to beer removed after December 

19 31, 2017. 

20 SEC. 13804. SIMPLIFICATION OF RULES REGARDING 

21 RECORDS, STATEMENTS, AND RETURNS. 

22 (a) IN GENERAL.—Subsection (a) of section 5555 is 

23 amended by adding at the end the following: ‘‘For cal24 endar quarters beginning after December 31, 2017, and 

25 before January 1, 2020, the Secretary shall permit a perVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00327 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 son to employ a unified system for any records, state2 ments, and returns required to be kept, rendered, or made 

3 under this section for any beer produced in the brewery 

4 for which the tax imposed by section 5051 has been deter5 mined, including any beer which has been removed for 

6 consumption on the premises of the brewery.’’. 

7 (b) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to any calendar quarters beginning 

9 after December 31, 2017. 

10 SEC. 13805. TRANSFER OF BEER BETWEEN BONDED FACILI11 TIES. 

12 (a) IN GENERAL.—Section 5414 is amended— 

13 (1) by striking ‘‘Beer may be removed’’ and in14 serting ‘‘(a) IN GENERAL.—Beer may be removed’’, 

15 and 

16 (2) by adding at the end the following: 

17 ‘‘(b) TRANSFER OF BEER BETWEEN BONDED FA18 CILITIES.— 

19 ‘‘(1) IN GENERAL.—Beer may be removed from 

20 one brewery to another bonded brewery, without 

21 payment of tax, and may be mingled with beer at 

22 the receiving brewery, subject to such conditions, in23 cluding payment of the tax, and in such containers, 

24 as the Secretary by regulations shall prescribe, 

25 which shall include— 


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1 ‘‘(A) any removal from one brewery to an2 other brewery belonging to the same brewer, 

3 ‘‘(B) any removal from a brewery owned 

4 by one corporation to a brewery owned by an5 other corporation when— 

6 ‘‘(i) one such corporation owns the 

7 controlling interest in the other such cor8 poration, or 

9 ‘‘(ii) the controlling interest in each 

10 such corporation is owned by the same per11 son or persons, and 

12 ‘‘(C) any removal from one brewery to an13 other brewery when— 

14 ‘‘(i) the proprietors of transferring 

15 and receiving premises are independent of 

16 each other and neither has a proprietary 

17 interest, directly or indirectly, in the busi18 ness of the other, and 

19 ‘‘(ii) the transferor has divested itself 

20 of all interest in the beer so transferred 

21 and the transferee has accepted responsi22 bility for payment of the tax. 

23 ‘‘(2) TRANSFER OF LIABILITY FOR TAX.—For 

24 purposes of paragraph (1)(C), such relief from liabil25 ity shall be effective from the time of removal from 


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1 the transferor’s bonded premises, or from the time 

2 of divestment of interest, whichever is later. 

3 ‘‘(3) TERMINATION.—This subsection shall not 

4 apply to any calendar quarter beginning after De5 cember 31, 2019.’’. 

6 (b) REMOVAL FROM BREWERY BY PIPELINE.—Sec7 tion 5412 is amended by inserting ‘‘pursuant to section 

8 5414 or’’ before ‘‘by pipeline’’. 

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

10 this section shall apply to any calendar quarters beginning 

11 after December 31, 2017. 

12 SEC. 13806. REDUCED RATE OF EXCISE TAX ON CERTAIN 

13 WINE. 

14 (a) IN GENERAL.—Section 5041(c) is amended by 

15 adding at the end the following new paragraph: 

16 ‘‘(8) SPECIAL RULE FOR 2018 AND 2019.— 

17 ‘‘(A) IN GENERAL.—In the case of wine re18 moved after December 31, 2017, and before 

19 January 1, 2020, paragraphs (1) and (2) shall 

20 not apply and there shall be allowed as a credit 

21 against any tax imposed by this title (other 

22 than chapters 2, 21, and 22) an amount equal 

23 to the sum of— 

24 ‘‘(i) $1 per wine gallon on the first 

25 30,000 wine gallons of wine, plus 


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1 ‘‘(ii) 90 cents per wine gallon on the 

2 first 100,000 wine gallons of wine to which 

3 clause (i) does not apply, plus 

4 ‘‘(iii) 53.5 cents per wine gallon on 

5 the first 620,000 wine gallons of wine to 

6 which clauses (i) and (ii) do not apply, 

7 which are produced by the producer and re8 moved during the calendar year for consump9 tion or sale, or which are imported by the im10 porter into the United States during the cal11 endar year. 

12 ‘‘(B) ADJUSTMENT OF CREDIT FOR HARD

13 CIDER.—In the case of wine described in sub14 section (b)(6), subparagraph (A) of this para15 graph shall be applied— 

16 ‘‘(i) in clause (i) of such subpara17 graph, by substituting ‘6.2 cents’ for ‘$1’, 

18 ‘‘(ii) in clause (ii) of such subpara19 graph, by substituting ‘5.6 cents’ for ‘90 

20 cents’, and 

21 ‘‘(iii) in clause (iii) of such subpara22 graph, by substituting ‘3.3 cents’ for ‘53.5 

23 cents’.’’, 

24 (b) CONTROLLED GROUP AND SINGLE TAXPAYER

25 RULES.—Paragraph (4) of section 5041(c) is amended by 


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1 striking ‘‘section 5051(a)(2)(B)’’ and inserting ‘‘section 

2 5051(a)(5)’’. 

3 (c) ALLOWANCE OF CREDIT FOR FOREIGN MANU4 FACTURERS AND IMPORTERS.—Subsection (c) of section 

5 5041, as amended by subsection (a), is amended— 

6 (1) in subparagraph (A) of paragraph (8), by 

7 inserting ‘‘but only if the importer is an electing im8 porter under paragraph (9) and the wine gallons of 

9 wine have been assigned to the importer pursuant to 

10 such paragraph’’ after ‘‘into the United States dur11 ing the calendar year’’, and 

12 (2) by adding at the end the following new 

13 paragraph: 

14 ‘‘(9) ALLOWANCE OF CREDIT FOR FOREIGN

15 MANUFACTURERS AND IMPORTERS.— 

16 ‘‘(A) IN GENERAL.—In the case of any 

17 wine gallons of wine which have been produced 

18 outside of the United States and imported into 

19 the United States, the credit allowable under 

20 paragraph (8) (referred to in this paragraph as 

21 the ‘tax credit’) may be assigned by the person 

22 who produced such wine (referred to in this 

23 paragraph as the ‘foreign producer’), provided 

24 that such person makes an election described in 

25 subparagraph (B)(ii), to any electing importer 


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1 of such wine gallons pursuant to the require2 ments established by the Secretary under sub3 paragraph (B). 

4 ‘‘(B) ASSIGNMENT.—The Secretary shall, 

5 through such rules, regulations, and procedures 

6 as are determined appropriate, establish proce7 dures for assignment of the tax credit provided 

8 under this paragraph, which shall include— 

9 ‘‘(i) a limitation to ensure that the 

10 number of wine gallons of wine for which 

11 the tax credit has been assigned by a for12 eign producer— 

13 ‘‘(I) to any importer does not ex14 ceed the number of wine gallons of 

15 wine produced by such foreign pro16 ducer during the calendar year which 

17 were imported into the United States 

18 by such importer, and 

19 ‘‘(II) to all importers does not 

20 exceed the 750,000 wine gallons of 

21 wine to which the tax credit applies, 

22 ‘‘(ii) procedures that allow the election 

23 of a foreign producer to assign and an im24 porter to receive the tax credit provided 

25 under this paragraph, 


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1 ‘‘(iii) requirements that the foreign 

2 producer provide any information as the 

3 Secretary determines necessary and appro4 priate for purposes of carrying out this 

5 paragraph, and 

6 ‘‘(iv) procedures that allow for revoca7 tion of eligibility of the foreign producer 

8 and the importer for the tax credit pro9 vided under this paragraph in the case of 

10 any erroneous or fraudulent information 

11 provided under clause (iii) which the Sec12 retary deems to be material to qualifying 

13 for such credit. 

14 ‘‘(C) CONTROLLED GROUP.—For purposes 

15 of this section, any importer making an election 

16 described in subparagraph (B)(ii) shall be 

17 deemed to be a member of the controlled group 

18 of the foreign producer, as described under 

19 paragraph (4).’’. 

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

21 this section shall apply to wine removed after December 

22 31, 2017. 


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1 SEC. 13807. ADJUSTMENT OF ALCOHOL CONTENT LEVEL 

2 FOR APPLICATION OF EXCISE TAX RATES. 

3 (a) IN GENERAL.—Paragraphs (1) and (2) of section 

4 5041(b) are each amended by inserting ‘‘(16 percent in 

5 the case of wine removed after December 31, 2017, and 

6 before January 1, 2020’’ after ‘‘14 percent’’. 

7 (b) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to wine removed after December 

9 31, 2017. 

10 SEC. 13808. DEFINITION OF MEAD AND LOW ALCOHOL BY 

11 VOLUME WINE. 

12 (a) IN GENERAL.—Section 5041 is amended— 

13 (1) in subsection (a), by striking ‘‘Still wines’’ 

14 and inserting ‘‘Subject to subsection (h), still 

15 wines’’, and 

16 (2) by adding at the end the following new sub17 section: 

18 ‘‘(h) MEAD AND LOW ALCOHOL BY VOLUME

19 WINE.— 

20 ‘‘(1) IN GENERAL.—For purposes of sub21 sections (a) and (b)(1), mead and low alcohol by vol22 ume wine shall be deemed to be still wines con23 taining not more than 16 percent of alcohol by vol24 ume. 

25 ‘‘(2) DEFINITIONS.— 


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1 ‘‘(A) MEAD.—For purposes of this section, 

2 the term ‘mead’ means a wine— 

3 ‘‘(i) containing not more than 0.64 

4 gram of carbon dioxide per hundred milli5 liters of wine, except that the Secretary 

6 shall by regulations prescribe such toler7 ances to this limitation as may be reason8 ably necessary in good commercial prac9 tice, 

10 ‘‘(ii) which is derived solely from 

11 honey and water, 

12 ‘‘(iii) which contains no fruit product 

13 or fruit flavoring, and 

14 ‘‘(iv) which contains less than 8.5 per15 cent alcohol by volume. 

16 ‘‘(B) LOW ALCOHOL BY VOLUME WINE.— 

17 For purposes of this section, the term ‘low alco18 hol by volume wine’ means a wine— 

19 ‘‘(i) containing not more than 0.64 

20 gram of carbon dioxide per hundred milli21 liters of wine, except that the Secretary 

22 shall by regulations prescribe such toler23 ances to this limitation as may be reason24 ably necessary in good commercial prac25 tice, 


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1 ‘‘(ii) which is derived— 

2 ‘‘(I) primarily from grapes, or 

3 ‘‘(II) from grape juice con4 centrate and water, 

5 ‘‘(iii) which contains no fruit product 

6 or fruit flavoring other than grape, and 

7 ‘‘(iv) which contains less than 8.5 per8 cent alcohol by volume. 

9 ‘‘(3) TERMINATION.—This subsection shall not 

10 apply to wine removed after December 31, 2019.’’. 

11 (b) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to wine removed after December 

13 31, 2017. 

14 SEC. 13809. REDUCED RATE OF EXCISE TAX ON CERTAIN 

15 DISTILLED SPIRITS. 

16 (a) IN GENERAL.—Section 5001 is amended by re17 designating subsection (c) as subsection (d) and by insert18 ing after subsection (b) the following new subsection: 

19 ‘‘(c) REDUCED RATE FOR 2018 AND 2019.— 

20 ‘‘(1) IN GENERAL.—In the case of a distilled 

21 spirits operation, the otherwise applicable tax rate 

22 under subsection (a)(1) shall be— 

23 ‘‘(A) $2.70 per proof gallon on the first 

24 100,000 proof gallons of distilled spirits, and 


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1 ‘‘(B) $13.34 per proof gallon on the first 

2 22,130,000 of proof gallons of distilled spirits 

3 to which subparagraph (A) does not apply, 

4 which have been distilled or processed by such oper5 ation and removed during the calendar year for con6 sumption or sale, or which have been imported by 

7 the importer into the United States during the cal8 endar year. 

9 ‘‘(2) CONTROLLED GROUPS.— 

10 ‘‘(A) IN GENERAL.—In the case of a con11 trolled group, the proof gallon quantities speci12 fied under subparagraphs (A) and (B) of para13 graph (1) shall be applied to such group and 

14 apportioned among the members of such group 

15 in such manner as the Secretary or their dele16 gate shall by regulations prescribe. 

17 ‘‘(B) DEFINITION.—For purposes of sub18 paragraph (A), the term ‘controlled group’ shall 

19 have the meaning given such term by subsection 

20 (a) of section 1563, except that ‘more than 50 

21 percent’ shall be substituted for ‘at least 80 

22 percent’ each place it appears in such sub23 section. 

24 ‘‘(C) RULES FOR NON-CORPORATIONS.— 

25 Under regulations prescribed by the Secretary, 


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1 principles similar to the principles of subpara2 graphs (A) and (B) shall be applied to a group 

3 under common control where one or more of the 

4 persons is not a corporation. 

5 ‘‘(D) SINGLE TAXPAYER.—Pursuant to 

6 rules issued by the Secretary, two or more enti7 ties (whether or not under common control) 

8 that produce distilled spirits marketed under a 

9 similar brand, license, franchise, or other ar10 rangement shall be treated as a single taxpayer 

11 for purposes of the application of this sub12 section. 

13 ‘‘(3) TERMINATION.—This subsection shall not 

14 apply to distilled spirits removed after December 31, 

15 2019.’’. 

16 (b) CONFORMING AMENDMENT.—Section 7652(f)(2) 

17 is amended by striking ‘‘section 5001(a)(1)’’ and inserting 

18 ‘‘subsection (a)(1) of section 5001, determined as if sub19 section (c)(1) of such section did not apply’’. 

20 (c) APPLICATION OF REDUCED TAX RATE FOR FOR21 EIGN MANUFACTURERS AND IMPORTERS.—Subsection (c) 

22 of section 5001, as added by subsection (a), is amended— 

23 (1) in paragraph (1), by inserting ‘‘but only if 

24 the importer is an electing importer under para25 graph (3) and the proof gallons of distilled spirits 


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1 have been assigned to the importer pursuant to such 

2 paragraph’’ after ‘‘into the United States during the 

3 calendar year’’, and 

4 (2) by adding at the end the following new 

5 paragraph: 

6 ‘‘(3) REDUCED TAX RATE FOR FOREIGN MANU7 FACTURERS AND IMPORTERS.— 

8 ‘‘(A) IN GENERAL.—In the case of any 

9 proof gallons of distilled spirits which have been 

10 produced outside of the United States and im11 ported into the United States, the rate of tax 

12 applicable under paragraph (1) (referred to in 

13 this paragraph as the ‘reduced tax rate’) may 

14 be assigned by the distilled sprits operation 

15 (provided that such operation makes an election 

16 described in subparagraph (B)(ii)) to any elect17 ing importer of such proof gallons pursuant to 

18 the requirements established by the Secretary 

19 under subparagraph (B). 

20 ‘‘(B) ASSIGNMENT.—The Secretary shall, 

21 through such rules, regulations, and procedures 

22 as are determined appropriate, establish proce23 dures for assignment of the reduced tax rate 

24 provided under this paragraph, which shall in25 clude— 


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1 ‘‘(i) a limitation to ensure that the 

2 number of proof gallons of distilled spirits 

3 for which the reduced tax rate has been as4 signed by a distilled spirits operation— 

5 ‘‘(I) to any importer does not ex6 ceed the number of proof gallons pro7 duced by such operation during the 

8 calendar year which were imported 

9 into the United States by such im10 porter, and 

11 ‘‘(II) to all importers does not 

12 exceed the 22,230,000 proof gallons of 

13 distilled spirits to which the reduced 

14 tax rate applies, 

15 ‘‘(ii) procedures that allow the election 

16 of a distilled spirits operation to assign 

17 and an importer to receive the reduced tax 

18 rate provided under this paragraph, 

19 ‘‘(iii) requirements that the distilled 

20 spirits operation provide any information 

21 as the Secretary determines necessary and 

22 appropriate for purposes of carrying out 

23 this paragraph, and 

24 ‘‘(iv) procedures that allow for revoca25 tion of eligibility of the distilled spirits opVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00341 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 eration and the importer for the reduced 

2 tax rate provided under this paragraph in 

3 the case of any erroneous or fraudulent in4 formation provided under clause (iii) which 

5 the Secretary deems to be material to 

6 qualifying for such reduced rate. 

7 ‘‘(C) CONTROLLED GROUP.— 

8 ‘‘(i) IN GENERAL.—For purposes of 

9 this section, any importer making an elec10 tion described in subparagraph (B)(ii) 

11 shall be deemed to be a member of the 

12 controlled group of the distilled spirits op13 eration, as described under paragraph (2). 

14 ‘‘(ii) APPORTIONMENT.—For purposes 

15 of this paragraph, in the case of a con16 trolled group, rules similar to section 

17 5051(a)(5)(B) shall apply.’’. 

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

19 this section shall apply to distilled spirits removed after 

20 December 31, 2017. 

21 SEC. 13810. BULK DISTILLED SPIRITS. 

22 (a) IN GENERAL.—Section 5212 is amended by add23 ing at the end the following sentence: ‘‘In the case of dis24 tilled spirits transferred in bond after December 31, 2017, 

25 and before January 1, 2020, this section shall be applied 


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1 without regard to whether distilled spirits are bulk dis2 tilled spirits.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply distilled spirits transferred in bond 

5 after December 31, 2017. 

6 Subpart B—Miscellaneous Provisions 

7 SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA 

8 NATIVE CORPORATIONS AND SETTLEMENT 

9 TRUSTS. 

10 (a) EXCLUSION FOR ANCSA PAYMENTS ASSIGNED

11 TO ALASKA NATIVE SETTLEMENT TRUSTS.— 

12 (1) IN GENERAL.—Part III of subchapter B of 

13 chapter 1 is amended by inserting before section 140 

14 the following new section: 

15 ‘‘SEC. 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLE16 MENT TRUSTS. 

17 ‘‘(a) IN GENERAL.—In the case of a Native Corpora18 tion, gross income shall not include the value of any pay19 ments that would otherwise be made, or treated as being 

20 made, to such Native Corporation pursuant to, or as re21 quired by, any provision of the Alaska Native Claims Set22 tlement Act (43 U.S.C. 1601 et seq.), including any pay23 ment that would otherwise be made to a Village Corpora24 tion pursuant to section 7(j) of the Alaska Native Claims 


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1 Settlement Act (43 U.S.C. 1606(j)), provided that any 

2 such payments— 

3 ‘‘(1) are assigned in writing to a Settlement 

4 Trust, and 

5 ‘‘(2) were not received by such Native Corpora6 tion prior to the assignment described in paragraph 

7 (1). 

8 ‘‘(b) INCLUSION IN GROSS INCOME.—In the case of 

9 a Settlement Trust which has been assigned payments de10 scribed in subsection (a), gross income shall include such 

11 payments when received by such Settlement Trust pursu12 ant to the assignment and shall have the same character 

13 as if such payments were received by the Native Corpora14 tion. 

15 ‘‘(c) AMOUNT AND SCOPE OF ASSIGNMENT.—The 

16 amount and scope of any assignment under subsection (a) 

17 shall be described with reasonable particularity and may 

18 either be in a percentage of one or more such payments 

19 or in a fixed dollar amount. 

20 ‘‘(d) DURATION OF ASSIGNMENT; REVOCABILITY.— 

21 Any assignment under subsection (a) shall specify— 

22 ‘‘(1) a duration either in perpetuity or for a pe23 riod of time, and 

24 ‘‘(2) whether such assignment is revocable. 


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1 ‘‘(e) PROHIBITION ON DEDUCTION.—Notwith2 standing section 247, no deduction shall be allowed to a 

3 Native Corporation for purposes of any amounts described 

4 in subsection (a). 

5 ‘‘(f) DEFINITIONS.—For purposes of this section, the 

6 terms ‘Native Corporation’ and ‘Settlement Trust’ have 

7 the same meaning given such terms under section 

8 646(h).’’. 

9 (2) CONFORMING AMENDMENT.—The table of 

10 sections for part III of subchapter B of chapter 1 

11 is amended by inserting before the item relating to 

12 section 140 the following new item: 

‘‘Sec. 139G. Assignments to Alaska Native Settlement Trusts.’’. 

13 (3) EFFECTIVE DATE.—The amendments made 

14 by this subsection shall apply to taxable years begin15 ning after December 31, 2016. 

16 (b) DEDUCTION OF CONTRIBUTIONS TO ALASKA NA17 TIVE SETTLEMENT TRUSTS.— 

18 (1) IN GENERAL.—Part VIII of subchapter B 

19 of chapter 1 is amended by inserting before section 

20 248 the following new section: 

21 ‘‘SEC. 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLE22 MENT TRUSTS. 

23 ‘‘(a) IN GENERAL.—In the case of a Native Corpora24 tion, there shall be allowed a deduction for any contribu25 tions made by such Native Corporation to a Settlement 


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1 Trust (regardless of whether an election under section 646 

2 is in effect for such Settlement Trust) for which the Na3 tive Corporation has made an annual election under sub4 section (e). 

5 ‘‘(b) AMOUNT OF DEDUCTION.—The amount of the 

6 deduction under subsection (a) shall be equal to— 

7 ‘‘(1) in the case of a cash contribution (regard8 less of the method of payment, including currency, 

9 coins, money order, or check), the amount of such 

10 contribution, or 

11 ‘‘(2) in the case of a contribution not described 

12 in paragraph (1), the lesser of— 

13 ‘‘(A) the Native Corporation’s adjusted 

14 basis in the property contributed, or 

15 ‘‘(B) the fair market value of the property 

16 contributed. 

17 ‘‘(c) LIMITATION AND CARRYOVER.— 

18 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

19 the deduction allowed under subsection (a) for any 

20 taxable year shall not exceed the taxable income (as 

21 determined without regard to such deduction) of the 

22 Native Corporation for the taxable year in which the 

23 contribution was made. 

24 ‘‘(2) CARRYOVER.—If the aggregate amount of 

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1 able year exceeds the limitation under paragraph 

2 (1), such excess shall be treated as a contribution 

3 described in subsection (a) in each of the 15 suc4 ceeding years in order of time. 

5 ‘‘(d) DEFINITIONS.—For purposes of this section, the 

6 terms ‘Native Corporation’ and ‘Settlement Trust’ have 

7 the same meaning given such terms under section 646(h). 

8 ‘‘(e) MANNER OF MAKING ELECTION.— 

9 ‘‘(1) IN GENERAL.—For each taxable year, a 

10 Native Corporation may elect to have this section 

11 apply for such taxable year on the income tax return 

12 or an amendment or supplement to the return of the 

13 Native Corporation, with such election to have effect 

14 solely for such taxable year. 

15 ‘‘(2) REVOCATION.—Any election made by a 

16 Native Corporation pursuant to this subsection may 

17 be revoked pursuant to an amendment or supple18 ment to the income tax return which has been timely 

19 filed by such Native Corporation. 

20 ‘‘(f) ADDITIONAL RULES.— 

21 ‘‘(1) EARNINGS AND PROFITS.—Notwith22 standing section 646(d)(2), in the case of a Native 

23 Corporation which claims a deduction under this sec24 tion for any taxable year, the earnings and profits 


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1 of such Native Corporation for such taxable year 

2 shall be reduced by the amount of such deduction. 

3 ‘‘(2) GAIN OR LOSS.—No gain or loss shall be 

4 recognized by the Native Corporation with respect to 

5 a contribution of property for which a deduction is 

6 allowed under this section. 

7 ‘‘(3) INCOME.—Subject to subsection (g), a Set8 tlement Trust shall include in income the amount of 

9 any deduction allowed under this section in the tax10 able year in which the Settlement Trust actually re11 ceives such contribution. 

12 ‘‘(4) PERIOD.—The holding period under sec13 tion 1223 of the Settlement Trust shall include the 

14 period the property was held by the Native Corpora15 tion. 

16 ‘‘(5) BASIS.—The basis that a Settlement Trust 

17 has for which a deduction is allowed under this sec18 tion shall be equal to the lesser of— 

19 ‘‘(A) the adjusted basis of the Native Cor20 poration in such property immediately before 

21 such contribution, or 

22 ‘‘(B) the fair market value of the property 

23 immediately before such contribution. 

24 ‘‘(6) PROHIBITION.—No deduction shall be al25 lowed under this section with respect to any conVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00348 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 tributions made to a Settlement Trust which are in 

2 violation of subsection (a)(2) or (c)(2) of section 39 

3 of the Alaska Native Claims Settlement Act (43 

4 U.S.C. 1629e). 

5 ‘‘(g) ELECTION BY SETTLEMENT TRUST TO DEFER

6 INCOME RECOGNITION.— 

7 ‘‘(1) IN GENERAL.—In the case of a contribu8 tion which consists of property other than cash, a 

9 Settlement Trust may elect to defer recognition of 

10 any income related to such property until the sale or 

11 exchange of such property, in whole or in part, by 

12 the Settlement Trust. 

13 ‘‘(2) TREATMENT.—In the case of property de14 scribed in paragraph (1), any income or gain real15 ized on the sale or exchange of such property shall 

16 be treated as— 

17 ‘‘(A) for such amount of the income or 

18 gain as is equal to or less than the amount of 

19 income which would be included in income at 

20 the time of contribution under subsection (f)(3) 

21 but for the taxpayer’s election under this sub22 section, ordinary income, and 

23 ‘‘(B) for any amounts of the income or 

24 gain which are in excess of the amount of in25 come which would be included in income at the 


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1 time of contribution under subsection (f)(3) but 

2 for the taxpayer’s election under this sub3 section, having the same character as if this 

4 subsection did not apply. 

5 ‘‘(3) ELECTION.— 

6 ‘‘(A) IN GENERAL.—For each taxable year, 

7 a Settlement Trust may elect to apply this sub8 section for any property described in paragraph 

9 (1) which was contributed during such year. 

10 Any property to which the election applies shall 

11 be identified and described with reasonable par12 ticularity on the income tax return or an 

13 amendment or supplement to the return of the 

14 Settlement Trust, with such election to have ef15 fect solely for such taxable year. 

16 ‘‘(B) REVOCATION.—Any election made by 

17 a Settlement Trust pursuant to this subsection 

18 may be revoked pursuant to an amended in19 come tax return which has been timely filed by 

20 such Settlement Trust. 

21 ‘‘(C) CERTAIN DISPOSITIONS.— 

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

23 property for which an election is in effect 

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1 sequent to the taxable year in which such 

2 property was contributed to the Settlement 

3 Trust— 

4 ‘‘(I) this section shall be applied 

5 as if the election under this subsection 

6 had not been made, 

7 ‘‘(II) any income or gain which 

8 would have been included in the year 

9 of contribution under subsection (f)(3) 

10 but for the taxpayer’s election under 

11 this subsection shall be included in in12 come for the taxable year of such con13 tribution, and 

14 ‘‘(III) the Settlement Trust shall 

15 pay any increase in tax resulting from 

16 such inclusion, including any applica17 ble interest, and increased by 10 per18 cent of the amount of such increase 

19 with interest. 

20 ‘‘(ii) ASSESSMENT.—Notwithstanding 

21 section 6501(a), any amount described in 

22 subclause (III) of clause (i) may be as23 sessed, or a proceeding in court with re24 spect to such amount may be initiated 

25 without assessment, within 4 years after 


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1 the date on which the return making the 

2 election under this subsection for such 

3 property was filed.’’. 

4 (2) CONFORMING AMENDMENT.—The table of 

5 sections for part VIII of subchapter B of chapter 1 

6 is amended by inserting before the item relating to 

7 section 248 the following new item: 

‘‘Sec. 247. Contributions to Alaska Native Settlement Trusts.’’. 

8 (3) PERMISSIVE AMENDMENTS TO TRUST

9 AGREEMENTS ESTABLISHING SETTLEMENT

10 TRUSTS.— 

11 (A) IN GENERAL.—Notwithstanding any 

12 provision of law, including any provision of the 

13 Alaska Native Claims Settlement Act (43 

14 U.S.C. 1601 et seq.), Alaska State law, or the 

15 terms of any trust agreement of a Settlement 

16 Trust (as defined under section 3(t) of the 

17 Alaska Native Claims Settlement Act (43 

18 U.S.C. 1602(t))), the terms of any trust agree19 ment of a Settlement Trust may, within the 1- 

20 year period following the date of the enactment 

21 of this Act, be amended as necessary to allow 

22 such Trust to make an election described in 

23 subsection (g) of section 247 of the Internal 

24 Revenue Code of 1986 (as added by paragraph 

25 (1)). 


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1 (B) AMENDMENT.—An amendment de2 scribed in subparagraph (A) shall be enacted 

3 pursuant to one or more agreements between 

4 the Native Corporation that established the Set5 tlement Trust and the trustees of such Trust 

6 and shall not require any vote by the bene7 ficiaries of such Trust or the shareholders of 

8 such Native Corporation. 

9 (C) REGISTRATION STATEMENT.—Any 

10 Settlement Trust which was registered in ac11 cordance with Alaska State law prior to the 

12 date of the enactment of an amendment de13 scribed in subparagraph (A) shall not be re14 quired to file a new or amended registration 

15 statement to reflect such amendment. 

16 (4) EFFECTIVE DATE.— 

17 (A) IN GENERAL.—The amendments made 

18 by this subsection shall apply to taxable years 

19 for which the period of limitation on refund or 

20 credit under section 6511 of the Internal Rev21 enue Code of 1986 has not expired. 

22 (B) ONE-YEAR WAIVER OF STATUTE OF

23 LIMITATIONS.—If the period of limitation on a 

24 credit or refund resulting from the amendments 

25 made by paragraph (1) expires before the end 


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1 of the 1-year period beginning on the date of 

2 the enactment of this Act, refund or credit of 

3 such overpayment (to the extent attributable to 

4 such amendments) may, nevertheless, be made 

5 or allowed if claim therefor is filed before the 

6 close of such 1-year period. 

7 (c) INFORMATION REPORTING FOR DEDUCTIBLE

8 CONTRIBUTIONS TO ALASKA NATIVE SETTLEMENT

9 TRUSTS.— 

10 (1) IN GENERAL.—Section 6039H is amend11 ed— 

12 (A) in the heading, by striking ‘‘SPON13 SORING’’, and 

14 (B) by adding at the end the following new 

15 subsection: 

16 ‘‘(e) DEDUCTIBLE CONTRIBUTIONS BY NATIVE COR17 PORATIONS TO ALASKA NATIVE SETTLEMENT TRUSTS.— 

18 ‘‘(1) IN GENERAL.—Any Native Corporation (as 

19 defined in subsection (m) of section 3 of the Alaska 

20 Native Claims Settlement Act (43 U.S.C. 1602(m))) 

21 which has made a contribution to a Settlement 

22 Trust (as defined in subsection (t) of such section) 

23 to which an election under subsection (e) of section 

24 247 applies shall provide such Settlement Trust with 

25 a statement regarding such election not later than 


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1 January 31 of the calendar year subsequent to the 

2 calendar year in which the contribution was made. 

3 ‘‘(2) CONTENT OF STATEMENT.—The state4 ment described in paragraph (1) shall include— 

5 ‘‘(A) the total amount of contributions to 

6 which the election under subsection (e) of sec7 tion 247 applies, 

8 ‘‘(B) for each contribution, whether such 

9 contribution was in cash, 

10 ‘‘(C) for each contribution which consists 

11 of property other than cash, the date that such 

12 property was acquired by the Native Corpora13 tion and the adjusted basis of such property on 

14 the date such property was contributed to the 

15 Settlement Trust, 

16 ‘‘(D) the date on which each contribution 

17 was made to the Settlement Trust, and 

18 ‘‘(E) such information as the Secretary de19 termines to be necessary or appropriate for the 

20 identification of each contribution and the accu21 rate inclusion of income relating to such con22 tributions by the Settlement Trust.’’. 

23 (2) CONFORMING AMENDMENT.—The item re24 lating to section 6039H in the table of sections for 


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1 subpart A of part III of subchapter A of chapter 61 

2 is amended to read as follows: 

‘‘Sec. 6039H. Information With Respect to Alaska Native Settlement Trusts 

and Native Corporations.’’. 

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to taxable years begin5 ning after December 31, 2016. 

6 (d) STATUTORY CONSTRUCTION.—This section is re7 medial Indian legislation enacted under the plenary au8 thority of the Congress under the Constitution of the 

9 United States to regulate Indian affairs, and any ambigu10 ities in section 139F or 247 of the Internal Revenue Code 

11 of 1986, as added by this Act, shall be resolved in favor 

12 of Native Corporations attempting to exclude income or 

13 claim a deduction thereunder. 

14 SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT 

15 SERVICES. 

16 (a) IN GENERAL.—Subsection (e) of section 4261 is 

17 amended by adding at the end the following new para18 graph: 

19 ‘‘(5) AMOUNTS PAID FOR AIRCRAFT MANAGE20 MENT SERVICES.— 

21 ‘‘(A) IN GENERAL.—No tax shall be im22 posed by this section or section 4271 on any 

23 amounts paid by an aircraft owner for aircraft 

24 management services related to— 


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1 ‘‘(i) maintenance and support of the 

2 aircraft owner’s aircraft, or 

3 ‘‘(ii) flights on the aircraft owner’s 

4 aircraft. 

5 ‘‘(B) AIRCRAFT MANAGEMENT SERV6 ICES.—For purposes of subparagraph (A), the 

7 term ‘aircraft management services’ includes— 

8 ‘‘(i) assisting an aircraft owner with 

9 administrative and support services, such 

10 as scheduling, flight planning, and weather 

11 forecasting, 

12 ‘‘(ii) obtaining insurance, 

13 ‘‘(iii) maintenance, storage and fuel14 ing of aircraft, 

15 ‘‘(iv) hiring, training, and provision of 

16 pilots and crew, 

17 ‘‘(v) establishing and complying with 

18 safety standards, and 

19 ‘‘(vi) such other services as are nec20 essary to support flights operated by an 

21 aircraft owner. 

22 ‘‘(C) LESSEE TREATED AS AIRCRAFT

23 OWNER.— 

24 ‘‘(i) IN GENERAL.—For purposes of 

25 this paragraph, the term ‘aircraft owner’ 


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1 includes a person who leases the aircraft 

2 other than under a disqualified lease. 

3 ‘‘(ii) DISQUALIFIED LEASE.—For pur4 poses of clause (i), the term ‘disqualified 

5 lease’ means a lease from a person pro6 viding aircraft management services with 

7 respect to such aircraft (or a related per8 son (within the meaning of section 

9 465(b)(3)(C)) to the person providing such 

10 services), if such lease is for a term of 31 

11 days or less. 

12 ‘‘(D) PRO RATA ALLOCATION.—In the case 

13 of amounts paid to any person which (but for 

14 this subsection) are subject to the tax imposed 

15 by subsection (a), a portion of which consists of 

16 amounts described in subparagraph (A), this 

17 paragraph shall apply on a pro rata basis only 

18 to the portion which consists of amounts de19 scribed in such subparagraph.’’. 

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

21 this section shall apply to amounts paid after the date of 

22 the enactment of this Act. 

23 SEC. 13823. OPPORTUNITY ZONES. 

24 (a) IN GENERAL.—Chapter 1 is amended by adding 

25 at the end the following: 


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1 ‘‘Subchapter Z—Opportunity Zones 

‘‘Sec. 1400Z–1. Designation. 

‘‘Sec. 1400Z–2. Special rules for capital gains invested in opportunity zones. 

2 ‘‘SEC. 1400Z–1. DESIGNATION. 

3 ‘‘(a) QUALIFIED OPPORTUNITY ZONE DEFINED.— 

4 For the purposes of this subchapter, the term ‘qualified 

5 opportunity zone’ means a population census tract that 

6 is a low-income community that is designated as a quali7 fied opportunity zone. 

8 ‘‘(b) DESIGNATION.— 

9 ‘‘(1) GOVERNOR.— 

10 ‘‘(A) IN GENERAL.—For purposes of sub11 section (a), a population census tract that is a 

12 low-income community is designated as a quali13 fied opportunity zone if— 

14 ‘‘(i) not later than the end of the de15 termination period, the governor of the 

16 State in which the tract is located— 

17 ‘‘(I) nominates the tract for des18 ignation as a qualified opportunity 

19 zone, and 

20 ‘‘(II) notifies the Secretary in 

21 writing of such nomination, and 

22 ‘‘(ii) the Secretary certifies such nomi23 nation and designates such tract as a 


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1 qualified opportunity zone before the end 

2 of the consideration period. 

3 ‘‘(B) EXTENSION OF PERIODS.—A gov4 ernor may request that the Secretary extend ei5 ther the determination or consideration period, 

6 or both (determined without regard to this sub7 paragraph), for an additional 30 days. 

8 ‘‘(C) DEEMED DESIGNATION IF SEC9 RETARY FAILS TO ACT.—Unless the tracts are 

10 ineligible for designation, if the Secretary de11 clines in writing to make such certification and 

12 designation or fails to act before the end of the 

13 consideration period, such nomination shall be 

14 deemed to be certified and designated, effective 

15 on the day after the last day of the consider16 ation period. 

17 ‘‘(2) SECRETARY.—If a governor fails to make 

18 the nominations and notifications by the end of the 

19 periods referred to in paragraphs (1)(A) and (1)(B), 

20 the Secretary shall designate and certify population 

21 census tracts that are low-income communities as 

22 qualified opportunity zones, as permitted by sub23 section (e). 

24 ‘‘(c) OTHER DEFINITIONS.—For purposes of this 

25 subsection— 


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1 ‘‘(1) LOW-INCOME COMMUNITIES.—The term 

2 ‘low-income community’ has the same meaning as 

3 when used in section 45D(e). 

4 ‘‘(2) DEFINITION OF PERIODS.— 

5 ‘‘(A) CONSIDERATION PERIOD.—The term 

6 ‘consideration period’ means the 30-day period 

7 beginning on the date on which the Secretary 

8 receives notice under subsection 

9 (b)(1)(A)(i)(II), as extended under subsection 

10 (b)(1)(B). 

11 ‘‘(B) DETERMINATION PERIOD.—The term 

12 ‘determination period’ means the 90-day period 

13 beginning on the date of the enactment of the 

14 Tax Cuts and Jobs Act, as extended under sub15 section (b)(1)(B). 

16 ‘‘(3) STATE.—For purposes of this section, the 

17 term ‘State’ includes any possession of the United 

18 States. 

19 ‘‘(d) GUIDANCE FOR OPPORTUNITY ZONE NOMINA20 TIONS.—When considering the nomination of qualified op21 portunity zones, governors should strive for the creation 

22 of qualified opportunity zones that are geographically con23 centrated and contiguous clusters of population census 

24 tracts and should give particular consideration to areas 

25 that— 


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1 ‘‘(1) are currently the focus of mutually rein2 forcing State, local, or private economic development 

3 initiatives to attract investment and foster startup 

4 activity, 

5 ‘‘(2) have demonstrated success in geographi6 cally targeted development programs, such as prom7 ise zones, new market tax credit, empowerment 

8 zones, and renewal communities, and 

9 ‘‘(3) have recently experienced significant lay10 offs due to business closures or relocations. 

11 ‘‘(e) NUMBER OF DESIGNATIONS.— 

12 ‘‘(1) IN GENERAL.—Except as provided by 

13 paragraph (2), the number of population census 

14 tracts in a State that may be designated as qualified 

15 opportunity zones under this section may not exceed 

16 25 percent of the number of low-income communities 

17 in the State. 

18 ‘‘(2) EXCEPTION.—If the number of low-income 

19 communities in a State is less than 100, then a total 

20 of 25 of such tracts may be designated as qualified 

21 opportunity zones. 

22 ‘‘(f) DESIGNATION OF TRACTS CONTIGUOUS WITH

23 LOW-INCOME COMMUNITIES.— 

24 ‘‘(1) IN GENERAL.—A population census tract 

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1 ignated as a qualified opportunity zone under this 

2 section if— 

3 ‘‘(A) the tract is contiguous with the low4 income community that is designated as a 

5 qualified opportunity zone, and 

6 ‘‘(B) the median family income of the tract 

7 does not exceed 125 percent of the median fam8 ily income of the low-income community with 

9 which the tract is contiguous. 

10 ‘‘(2) LIMITATION.—Not more than 5 percent of 

11 the population census tracts designated in a State as 

12 a qualified opportunity zone may be designated 

13 under paragraph (1). 

14 ‘‘(g) PERIOD FOR WHICH DESIGNATION IS IN EF15 FECT.—A designation as a qualified opportunity zone 

16 shall remain in effect for the period beginning on the date 

17 of the designation and ending at the close of the 10th cal18 endar year beginning on or after such date of designation. 

19 ‘‘SEC. 1400Z–2. SPECIAL RULES FOR CAPITAL GAINS IN20 VESTED IN OPPORTUNITY ZONES. 

21 ‘‘(a) IN GENERAL.—In the case of gain from the sale 

22 to, or exchange with, an unrelated person of any property 

23 held by the taxpayer, at the election of the taxpayer— 

24 ‘‘(1) gross income for the taxable year shall not 

25 include so much of such gain as does not exceed the 


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1 aggregate amount invested by the taxpayer in a 

2 qualified opportunity fund during the 180-day period 

3 beginning on the date of such sale or exchange, 

4 ‘‘(2) the amount of gain excluded by paragraph 

5 (1) shall be included in gross income as provided by 

6 subsection (b), and 

7 ‘‘(3) subsection (c) shall apply. 

8 No election may be made under the preceding sentence 

9 with respect to a sale or exchange if an election previously 

10 made with respect to such sale or exchange is in effect. 

11 ‘‘(b) DEFERRAL OF GAIN INVESTED IN OPPOR12 TUNITY ZONE PROPERTY.— 

13 ‘‘(1) YEAR OF INCLUSION.—Gain to which sub14 section (a)(2) applies shall be included in income in 

15 the taxable year which includes the earlier of— 

16 ‘‘(A) the date on which such investment is 

17 sold or exchanged, or 

18 ‘‘(B) December 31, 2026. 

19 ‘‘(2) AMOUNT INCLUDIBLE.— 

20 ‘‘(A) IN GENERAL.—The amount of gain 

21 included in gross income under subsection 

22 (a)(1) shall be the excess of— 

23 ‘‘(i) the lesser of the amount of gain 

24 excluded under paragraph (1) or the fair 

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1 termined as of the date described in para2 graph (1), over 

3 ‘‘(ii) the taxpayer’s basis in the in4 vestment. 

5 ‘‘(B) DETERMINATION OF BASIS.— 

6 ‘‘(i) IN GENERAL.—Except as other7 wise provided in this clause or subsection 

8 (c), the taxpayer’s basis in the investment 

9 shall be zero. 

10 ‘‘(ii) INCREASE FOR GAIN RECOG11 NIZED UNDER SUBSECTION (a)(2).—The 

12 basis in the investment shall be increased 

13 by the amount of gain recognized by rea14 son of subsection (a)(2) with respect to 

15 such property. 

16 ‘‘(iii) INVESTMENTS HELD FOR 5

17 YEARS.—In the case of any investment 

18 held for at least 5 years, the basis of such 

19 investment shall be increased by an 

20 amount equal to 10 percent of the amount 

21 of gain deferred by reason of subsection 

22 (a)(1). 

23 ‘‘(iv) INVESTMENTS HELD FOR 7

24 YEARS.—In the case of any investment 

25 held by the taxpayer for at least 7 years, 


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1 in addition to any adjustment made under 

2 clause (iii), the basis of such property shall 

3 be increased by an amount equal to 5 per4 cent of the amount of gain deferred by rea5 son of subsection (a)(1). 

6 ‘‘(c) SPECIAL RULE FOR INVESTMENTS HELD FOR

7 AT LEAST 10 YEARS.—In the case of any investment held 

8 by the taxpayer for at least 10 years and with respect to 

9 which the taxpayer makes an election under this clause, 

10 the basis of such property shall be equal to the fair market 

11 value of such investment on the date that the investment 

12 is sold or exchanged. 

13 ‘‘(d) QUALIFIED OPPORTUNITY FUND.—For pur14 poses of this section— 

15 ‘‘(1) QUALIFIED OPPORTUNITY FUND.—The 

16 term ‘qualified opportunity fund’ means any invest17 ment vehicle which is organized as a corporation or 

18 a partnership for the purpose of investing in quali19 fied opportunity zone property (other than another 

20 qualified opportunity fund) that holds at least 90 

21 percent of its assets in qualified opportunity zone 

22 property, determined— 

23 ‘‘(A) on the last day of the first 6-month 

24 period of the taxable year of the fund, and 


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1 ‘‘(B) on the last day of the taxable year of 

2 the fund. 

3 ‘‘(2) QUALIFIED OPPORTUNITY ZONE PROP4 ERTY.— 

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

6 opportunity zone property’ means property 

7 which is— 

8 ‘‘(i) qualified opportunity zone stock, 

9 ‘‘(ii) qualified opportunity zone part10 nership interest, or 

11 ‘‘(iii) qualified opportunity zone busi12 ness property. 

13 ‘‘(B) QUALIFIED OPPORTUNITY ZONE

14 STOCK.— 

15 ‘‘(i) IN GENERAL.—Except as pro16 vided in clause (ii), the term ‘qualified op17 portunity zone stock’ means any stock in a 

18 domestic corporation if— 

19 ‘‘(I) such stock is acquired by the 

20 taxpayer after December 31, 2017, at 

21 its original issue (directly or through 

22 an underwriter) from the corporation 

23 solely in exchange for cash, 

24 ‘‘(II) as of the time such stock 

25 was issued, such corporation was a 


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1 qualified opportunity zone business 

2 (or, in the case of a new corporation, 

3 such corporation was being organized 

4 for purposes of being a qualified op5 portunity zone business), and 

6 ‘‘(III) during substantially all of 

7 the taxpayer’s holding period for such 

8 stock, such corporation qualified as a 

9 qualified opportunity zone business. 

10 ‘‘(ii) REDEMPTIONS.—A rule similar 

11 to the rule of section 1202(c)(3) shall 

12 apply for purposes of this paragraph. 

13 ‘‘(C) QUALIFIED OPPORTUNITY ZONE

14 PARTNERSHIP INTEREST.—The term ‘qualified 

15 opportunity zone partnership interest’ means 

16 any capital or profits interest in a domestic 

17 partnership if— 

18 ‘‘(i) such interest is acquired by the 

19 taxpayer after December 31, 2017, from 

20 the partnership solely in exchange for cash, 

21 ‘‘(ii) as of the time such interest was 

22 acquired, such partnership was a qualified 

23 opportunity zone business (or, in the case 

24 of a new partnership, such partnership was 


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1 being organized for purposes of being a 

2 qualified opportunity zone business), and 

3 ‘‘(iii) during substantially all of the 

4 taxpayer’s holding period for such interest, 

5 such partnership qualified as a qualified 

6 opportunity zone business. 

7 ‘‘(D) QUALIFIED OPPORTUNITY ZONE

8 BUSINESS PROPERTY.— 

9 ‘‘(i) IN GENERAL.—The term ‘quali10 fied opportunity zone business property’ 

11 means tangible property used in a trade or 

12 business of the taxpayer if— 

13 ‘‘(I) such property was acquired 

14 by the taxpayer by purchase (as de15 fined in section 179(d)(2)) after De16 cember 31, 2017, 

17 ‘‘(II) the original use of such 

18 property in the qualified opportunity 

19 zone commences with the taxpayer or 

20 the taxpayer substantially improves 

21 the property, and 

22 ‘‘(III) during substantially all of 

23 the taxpayer’s holding period for such 

24 property, substantially all of the use 


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1 of such property was in a qualified op2 portunity zone. 

3 ‘‘(ii) SUBSTANTIAL IMPROVEMENT.— 

4 For purposes of subparagraph (A)(ii), 

5 property shall be treated as substantially 

6 improved by the taxpayer only if, during 

7 any 30-month period beginning after the 

8 date of acquisition of such property, addi9 tions to basis with respect to such property 

10 in the hands of the taxpayer exceed an 

11 amount equal to the adjusted basis of such 

12 property at the beginning of such 30- 

13 month period in the hands of the taxpayer. 

14 ‘‘(iii) RELATED PARTY.—For pur15 poses of subparagraph (A)(i), the related 

16 person rule of section 179(d)(2) shall be 

17 applied pursuant to paragraph (8) of this 

18 subsection in lieu of the application of such 

19 rule in section 179(d)(2)(A). 

20 ‘‘(3) QUALIFIED OPPORTUNITY ZONE BUSI21 NESS.— 

22 ‘‘(A) IN GENERAL.—The term ‘qualified 

23 opportunity zone business’ means a trade or 

24 business— 


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1 ‘‘(i) in which substantially all of the 

2 tangible property owned or leased by the 

3 taxpayer is qualified opportunity zone busi4 ness property, 

5 ‘‘(ii) which satisfies the requirements 

6 of paragraphs (2), (4), and (8) of section 

7 1397C(b), and 

8 ‘‘(iii) which is not described in section 

9 144(c)(6)(B). 

10 ‘‘(B) SPECIAL RULE.—For purposes of 

11 subparagraph (A), tangible property that ceases 

12 to be a qualified opportunity zone business 

13 property shall continue to be treated as a quali14 fied opportunity zone business property for the 

15 lesser of— 

16 ‘‘(i) 5 years after the date on which 

17 such tangible property ceases to be so 

18 qualified, or 

19 ‘‘(ii) the date on which such tangible 

20 property is no longer held by the qualified 

21 opportunity zone business. 

22 ‘‘(e) APPLICABLE RULES.— 

23 ‘‘(1) TREATMENT OF INVESTMENTS WITH

24 MIXED FUNDS.—In the case of any investment in a 

25 qualified opportunity fund only a portion of which 


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1 consists of investments of gain to which an election 

2 under subsection (a)(1) is in effect— 

3 ‘‘(A) such investment shall be treated as 2 

4 separate investments, consisting of— 

5 ‘‘(i) one investment that only includes 

6 amounts to which the election under sub7 section (a)(1) applies, and 

8 ‘‘(ii) a separate investment consisting 

9 of other amounts, and 

10 ‘‘(B) subsections (a), (b), and (c) shall 

11 only apply to the investment described in sub12 paragraph (A)(i). 

13 ‘‘(2) RELATED PERSONS.—For purposes of this 

14 section, persons are related to each other if such 

15 persons are described in section 267(b) or 707(b)(1), 

16 determined by substituting ‘20 percent’ for ‘50 per17 cent’ each place it occurs in such sections. 

18 ‘‘(3) DECEDENTS.—In the case of a decedent, 

19 amounts recognized under this section shall, if not 

20 properly includible in the gross income of the dece21 dent, be includible in gross income as provided by 

22 section 691. 

23 ‘‘(4) REGULATIONS.—The Secretary shall pre24 scribe such regulations as may be necessary or apVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00372 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 propriate to carry out the purposes of this section, 

2 including— 

3 ‘‘(A) rules for the certification of qualified 

4 opportunity funds for the purposes of this sec5 tion, and 

6 ‘‘(B) rules to prevent abuse. 

7 ‘‘(f) FAILURE OF QUALIFIED OPPORTUNITY FUND

8 TO MAINTAIN INVESTMENT STANDARD.— 

9 ‘‘(1) IN GENERAL.—If a qualified opportunity 

10 fund fails to meet the 90-percent requirement of 

11 subsection (c)(1), the qualified opportunity fund 

12 shall pay a penalty for each month it fails to meet 

13 the requirement in an amount equal to the product 

14 of— 

15 ‘‘(A) the excess of— 

16 ‘‘(i) the amount equal to 90 percent of 

17 its aggregate assets, over 

18 ‘‘(ii) the aggregate amount of quali19 fied opportunity zone property held by the 

20 fund, multiplied by 

21 ‘‘(B) the underpayment rate established 

22 under section 6621(a)(2) for such month. 

23 ‘‘(2) SPECIAL RULE FOR PARTNERSHIPS.—In 

24 the case that the qualified opportunity fund is a 

25 partnership, the penalty imposed by paragraph (1) 


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1 shall be taken into account proportionately as part 

2 of the distributive share of each partner of the part3 nership. 

4 ‘‘(3) REASONABLE CAUSE EXCEPTION.—No 

5 penalty shall be imposed under this subsection with 

6 respect to any failure if it is shown that such failure 

7 is due to reasonable cause.’’. 

8 (b) BASIS ADJUSTMENTS.—Section 1016(a) is 

9 amended by striking ‘‘and’’ at the end of paragraph (36), 

10 by striking the period at the end of paragraph (37) and 

11 inserting ‘‘, and’’, and by inserting after paragraph (37) 

12 the following: 

13 ‘‘(38) to the extent provided in subsections 

14 (b)(2) and (c) of section 1400Z–2.’’. 

15 (c) REPORT TO CONGRESS.—The Secretary of the 

16 Treasury, or the Secretary’s delegate, shall submit a re17 port to Congress on the opportunity zone incentives en18 acted by this section beginning 5 years after the date of 

19 enactment of this Act and annually thereafter. The report 

20 shall include an assessment of investments held by quali21 fied opportunity funds nationally and at the State level. 

22 To the extent such information is available, the report 

23 shall include the number of qualified opportunity funds, 

24 the amount of assets held in qualified opportunity funds, 

25 the composition of qualified opportunity fund investments 


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1 by asset class, the percentage of qualified opportunity zone 

2 census tracts designated under subchapter Z of the Inter3 nal Revenue Code of 1986 (as added by this section) that 

4 have received qualified opportunity fund investments. The 

5 report shall also include an assessment of the impacts and 

6 outcomes of the investments in those areas on economic 

7 indicators including job creation, poverty reduction, and 

8 new business starts, and other metrics as determined by 

9 the Secretary. 

10 (d) CLERICAL AMENDMENT.—The table of sub11 chapters for chapter 1 is amended by adding at the end 

12 the following new item: 

‘‘SUBCHAPTER Z. OPPORTUNITY ZONES’’. 

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

14 this section shall take effect on the date of the enactment 

15 of this Act. 


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1 Subtitle D—International Tax 

2 Provisions 

3 PART I—OUTBOUND TRANSACTIONS 

4 Subpart A—Establishment of Participation 

5 Exemption System for Taxation of Foreign Income 

6 SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION 

7 OF DIVIDENDS RECEIVED BY DOMESTIC COR8 PORATIONS FROM SPECIFIED 10-PERCENT 

9 OWNED FOREIGN CORPORATIONS. 

10 (a) IN GENERAL.—Part VIII of subchapter B of 

11 chapter 1 is amended by inserting after section 245 the 

12 following new section: 

13 ‘‘SEC. 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION 

14 OF DIVIDENDS RECEIVED BY DOMESTIC COR15 PORATIONS FROM SPECIFIED 10-PERCENT 

16 OWNED FOREIGN CORPORATIONS. 

17 ‘‘(a) IN GENERAL.—In the case of any dividend re18 ceived from a specified 10-percent owned foreign corpora19 tion by a domestic corporation which is a United States 

20 shareholder with respect to such foreign corporation, there 

21 shall be allowed as a deduction an amount equal to the 

22 foreign-source portion of such dividend. 

23 ‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN COR24 PORATION.—For purposes of this section— 


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1 ‘‘(1) IN GENERAL.—The term ‘specified 10-per2 cent owned foreign corporation’ means any foreign 

3 corporation with respect to which any domestic cor4 poration is a United States shareholder with respect 

5 to such corporation. 

6 ‘‘(2) EXCLUSION OF PASSIVE FOREIGN INVEST7 MENT COMPANIES.—Such term shall not include any 

8 corporation which is a passive foreign investment 

9 company (as defined in section 1297) with respect to 

10 the shareholder and which is not a controlled foreign 

11 corporation. 

12 ‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of 

13 this section— 

14 ‘‘(1) IN GENERAL.—The foreign-source portion 

15 of any dividend from a specified 10-percent owned 

16 foreign corporation is an amount which bears the 

17 same ratio to such dividend as— 

18 ‘‘(A) the undistributed foreign earnings of 

19 the specified 10-percent owned foreign corpora20 tion, bears to 

21 ‘‘(B) the total undistributed earnings of 

22 such foreign corporation. 

23 ‘‘(2) UNDISTRIBUTED EARNINGS.—The term 

24 ‘undistributed earnings’ means the amount of the 

25 earnings and profits of the specified 10-percent 


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1 owned foreign corporation (computed in accordance 

2 with sections 964(a) and 986)— 

3 ‘‘(A) as of the close of the taxable year of 

4 the specified 10-percent owned foreign corpora5 tion in which the dividend is distributed, and 

6 ‘‘(B) without diminution by reason of divi7 dends distributed during such taxable year. 

8 ‘‘(3) UNDISTRIBUTED FOREIGN EARNINGS.— 

9 The term ‘undistributed foreign earnings’ means the 

10 portion of the undistributed earnings which is attrib11 utable to neither— 

12 ‘‘(A) income described in subparagraph (A) 

13 of section 245(a)(5), nor 

14 ‘‘(B) dividends described in subparagraph 

15 (B) of such section (determined without regard 

16 to section 245(a)(12)). 

17 ‘‘(d) DISALLOWANCE OF FOREIGN TAX CREDIT, 

18 ETC.— 

19 ‘‘(1) IN GENERAL.—No credit shall be allowed 

20 under section 901 for any taxes paid or accrued (or 

21 treated as paid or accrued) with respect to any dis22 tribution any portion of which constitutes a dividend 

23 for which a deduction is allowed under this section. 

24 ‘‘(2) DENIAL OF DEDUCTION.—No deduction 

25 shall be allowed under this chapter for any tax for 


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1 which credit is not allowable under section 901 by 

2 reason of paragraph (1) (determined by treating the 

3 taxpayer as having elected the benefits of subpart A 

4 of part III of subchapter N). 

5 ‘‘(e) SPECIAL RULES FOR HYBRID DIVIDENDS.— 

6 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

7 apply to any dividend received by a United States 

8 shareholder from a controlled foreign corporation if 

9 the dividend is a hybrid dividend. 

10 ‘‘(2) HYBRID DIVIDENDS OF TIERED CORPORA11 TIONS.—If a controlled foreign corporation with re12 spect to which a domestic corporation is a United 

13 States shareholder receives a hybrid dividend from 

14 any other controlled foreign corporation with respect 

15 to which such domestic corporation is also a United 

16 States shareholder, then, notwithstanding any other 

17 provision of this title— 

18 ‘‘(A) the hybrid dividend shall be treated 

19 for purposes of section 951(a)(1)(A) as subpart 

20 F income of the receiving controlled foreign cor21 poration for the taxable year of the controlled 

22 foreign corporation in which the dividend was 

23 received, and 

24 ‘‘(B) the United States shareholder shall 

25 include in gross income an amount equal to the 


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1 shareholder’s pro rata share (determined in the 

2 same manner as under section 951(a)(2)) of the 

3 subpart F income described in subparagraph 

4 (A). 

5 ‘‘(3) DENIAL OF FOREIGN TAX CREDIT, ETC.— 

6 The rules of subsection (d) shall apply to any hybrid 

7 dividend received by, or any amount included under 

8 paragraph (2) in the gross income of, a United 

9 States shareholder. 

10 ‘‘(4) HYBRID DIVIDEND.—The term ‘hybrid 

11 dividend’ means an amount received from a con12 trolled foreign corporation— 

13 ‘‘(A) for which a deduction would be al14 lowed under subsection (a) but for this sub15 section, and 

16 ‘‘(B) for which the controlled foreign cor17 poration received a deduction (or other tax ben18 efit) from taxes imposed by any foreign coun19 try. 

20 ‘‘(f) SPECIAL RULE FOR PURGING DISTRIBUTIONS

21 OF PASSIVE FOREIGN INVESTMENT COMPANIES.—Any 

22 amount which is treated as a dividend under section 

23 1291(d)(2)(B) shall not be treated as a dividend for pur24 poses of this section. 


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1 ‘‘(g) REGULATIONS.—The Secretary shall prescribe 

2 such regulations or other guidance as may be necessary 

3 or appropriate to carry out the provisions of this section, 

4 including regulations for the treatment of United States 

5 shareholders owning stock of a specified 10 percent owned 

6 foreign corporation through a partnership.’’. 

7 (b) APPLICATION OF HOLDING PERIOD REQUIRE8 MENT.—Subsection (c) of section 246 is amended— 

9 (1) by striking ‘‘or 245’’ in paragraph (1) and 

10 inserting ‘‘245, or 245A’’, and 

11 (2) by adding at the end the following new 

12 paragraph: 

13 ‘‘(5) SPECIAL RULES FOR FOREIGN SOURCE

14 PORTION OF DIVIDENDS RECEIVED FROM SPECIFIED

15 10-PERCENT OWNED FOREIGN CORPORATIONS.— 

16 ‘‘(A) 1-YEAR HOLDING PERIOD REQUIRE17 MENT.—For purposes of section 245A— 

18 ‘‘(i) paragraph (1)(A) shall be ap19 plied— 

20 ‘‘(I) by substituting ‘365 days’ 

21 for ‘45 days’ each place it appears, 

22 and 

23 ‘‘(II) by substituting ‘731-day pe24 riod’ for ‘91-day period’, and 

25 ‘‘(ii) paragraph (2) shall not apply. 


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1 ‘‘(B) STATUS MUST BE MAINTAINED DUR2 ING HOLDING PERIOD.—For purposes of apply3 ing paragraph (1) with respect to section 245A, 

4 the taxpayer shall be treated as holding the 

5 stock referred to in paragraph (1) for any pe6 riod only if— 

7 ‘‘(i) the specified 10-percent owned 

8 foreign corporation referred to in section 

9 245A(a) is a specified 10-percent owned 

10 foreign corporation at all times during 

11 such period, and 

12 ‘‘(ii) the taxpayer is a United States 

13 shareholder with respect to such specified 

14 10-percent owned foreign corporation at all 

15 times during such period.’’. 

16 (c) APPLICATION OF RULES GENERALLY APPLICA17 BLE TO DEDUCTIONS FOR DIVIDENDS RECEIVED.— 

18 (1) TREATMENT OF DIVIDENDS FROM CERTAIN

19 CORPORATIONS.—Paragraph (1) of section 246(a) is 

20 amended by striking ‘‘and 245’’ and inserting ‘‘245, 

21 and 245A’’. 

22 (2) ASSETS GENERATING TAX-EXEMPT PORTION

23 OF DIVIDEND NOT TAKEN INTO ACCOUNT IN ALLO24 CATING AND APPORTIONING DEDUCTIBLE EX25 PENSES.—Paragraph (3) of section 864(e) is amendVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00382 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 ed by striking ‘‘or 245(a)’’ and inserting ‘‘, 245(a), 

2 or 245A’’. 

3 (3) COORDINATION WITH SECTION 1059.—Sub4 paragraph (B) of section 1059(b)(2) is amended by 

5 striking ‘‘or 245’’ and inserting ‘‘245, or 245A’’. 

6 (d) COORDINATION WITH FOREIGN TAX CREDIT

7 LIMITATION.—Subsection (b) of section 904 is amended 

8 by adding at the end the following new paragraph: 

9 ‘‘(5) TREATMENT OF DIVIDENDS FOR WHICH

10 DEDUCTION IS ALLOWED UNDER SECTION 245A.— 

11 For purposes of subsection (a), in the case of a do12 mestic corporation which is a United States share13 holder with respect to a specified 10-percent owned 

14 foreign corporation, such domestic corporation’s tax15 able income from sources without the United States 

16 shall be determined without regard to— 

17 ‘‘(A) the foreign-source portion of any divi18 dend received from such foreign corporation, 

19 and 

20 ‘‘(B) any deductions properly allocable to 

21 such portion. 

22 Any term which is used in section 245A and in this 

23 paragraph shall have the same meaning for purposes 

24 of this paragraph as when used in such section.’’. 

25 (e) CONFORMING AMENDMENTS.— 


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1 (1) Subsection (b) of section 951 is amended by 

2 striking ‘‘subpart’’ and inserting ‘‘title’’. 

3 (2) Subsection (a) of section 957 is amended by 

4 striking ‘‘subpart’’ in the matter preceding para5 graph (1) and inserting ‘‘title’’. 

6 (3) The table of sections for part VIII of sub7 chapter B of chapter 1 is amended by inserting after 

8 the item relating to section 245 the following new 

9 item: 

‘‘Sec. 245A. Dividends received by domestic corporations from certain foreign 

corporations.’’. 

10 (f) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to taxable years of foreign corpora12 tions beginning after December 31, 2017, and to taxable 

13 years of United States shareholders in which or with which 

14 such taxable years of foreign corporations end. 

15 SEC. 14102. SPECIAL RULES RELATING TO SALES OR 

16 TRANSFERS INVOLVING SPECIFIED 10-PER17 CENT OWNED FOREIGN CORPORATIONS. 

18 (a) SALES BY UNITED STATES PERSONS OF

19 STOCK.—Section 1248 is amended by redesignating sub20 section (j) as subsection (k) and by inserting after sub21 section (i) the following new subsection: 

22 ‘‘(j) COORDINATION WITH DIVIDENDS RECEIVED

23 DEDUCTION.—In the case of the sale or exchange by a 

24 domestic corporation of stock in a foreign corporation held 


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1 for 1 year or more, any amount received by the domestic 

2 corporation which is treated as a dividend by reason of 

3 this section shall be treated as a dividend for purposes 

4 of applying section 245A.’’. 

5 (b) BASIS IN SPECIFIED 10-PERCENT OWNED FOR6 EIGN CORPORATION REDUCED BY NONTAXED PORTION

7 OF DIVIDEND FOR PURPOSES OF DETERMINING LOSS.— 

8 (1) IN GENERAL.—Section 961 is amended by 

9 adding at the end the following new subsection: 

10 ‘‘(d) BASIS IN SPECIFIED 10-PERCENT OWNED FOR11 EIGN CORPORATION REDUCED BY NONTAXED PORTION

12 OF DIVIDEND FOR PURPOSES OF DETERMINING LOSS.— 

13 If a domestic corporation receives a dividend from a speci14 fied 10-percent owned foreign corporation (as defined in 

15 section 245A) in any taxable year, solely for purposes of 

16 determining loss on any disposition of stock of such for17 eign corporation in such taxable year or any subsequent 

18 taxable year, the basis of such domestic corporation in 

19 such stock shall be reduced (but not below zero) by the 

20 amount of any deduction allowable to such domestic cor21 poration under section 245A with respect to such stock.’’. 

22 (2) EFFECTIVE DATE.—The amendments made 

23 by this subsection shall apply to dividends received 

24 in taxable years beginning after December 31, 2017. 


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1 (c) SALE BY A CFC OF A LOWER TIER CFC.—Sec2 tion 964(e) is amended by adding at the end the following 

3 new paragraph: 

4 ‘‘(4) COORDINATION WITH DIVIDENDS RE5 CEIVED DEDUCTION.— 

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

7 year of a controlled foreign corporation begin8 ning after December 31, 2017, any amount is 

9 treated as a dividend under paragraph (1) by 

10 reason of a sale or exchange by the controlled 

11 foreign corporation of stock in another foreign 

12 corporation held for 1 year or more, then, not13 withstanding any other provision of this title— 

14 ‘‘(i) the foreign-source portion of such 

15 dividend shall be treated for purposes of 

16 section 951(a)(1)(A) as subpart F income 

17 of the selling controlled foreign corporation 

18 for such taxable year, 

19 ‘‘(ii) a United States shareholder with 

20 respect to the selling controlled foreign cor21 poration shall include in gross income for 

22 the taxable year of the shareholder with or 

23 within which such taxable year of the con24 trolled foreign corporation ends an amount 

25 equal to the shareholder’s pro rata share 


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1 (determined in the same manner as under 

2 section 951(a)(2)) of the amount treated 

3 as subpart F income under clause (i), and 

4 ‘‘(iii) the deduction under section 

5 245A(a) shall be allowable to the United 

6 States shareholder with respect to the sub7 part F income included in gross income 

8 under clause (ii) in the same manner as if 

9 such subpart F income were a dividend re10 ceived by the shareholder from the selling 

11 controlled foreign corporation. 

12 ‘‘(B) EFFECT OF LOSS ON EARNINGS AND

13 PROFITS.—For purposes of this title, in the 

14 case of a sale or exchange by a controlled for15 eign corporation of stock in another foreign cor16 poration in a taxable year of the selling con17 trolled foreign corporation beginning after De18 cember 31, 2017, to which this paragraph 

19 would apply if gain were recognized, the earn20 ings and profits of the selling controlled foreign 

21 corporation shall not be reduced by reason of 

22 any loss from such sale or exchange. 

23 ‘‘(C) FOREIGN-SOURCE PORTION.—For 

24 purposes of this paragraph, the foreign-source 

25 portion of any amount treated as a dividend 


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1 under paragraph (1) shall be determined in the 

2 same manner as under section 245A(c).’’. 

3 (d) TREATMENT OF FOREIGN BRANCH LOSSES

4 TRANSFERRED TO SPECIFIED 10-PERCENT OWNED FOR5 EIGN CORPORATIONS.— 

6 (1) IN GENERAL.—Part II of subchapter B of 

7 chapter 1 is amended by adding at the end the fol8 lowing new section: 

9 ‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANS10 FERRED TO SPECIFIED 10-PERCENT OWNED 

11 FOREIGN CORPORATIONS. 

12 ‘‘(a) IN GENERAL.—If a domestic corporation trans13 fers substantially all of the assets of a foreign branch 

14 (within the meaning of section 367(a)(3)(C), as in effect 

15 before the date of the enactment of the Tax Cuts and Jobs 

16 Act) to a specified 10-percent owned foreign corporation 

17 (as defined in section 245A) with respect to which it is 

18 a United States shareholder after such transfer, such do19 mestic corporation shall include in gross income for the 

20 taxable year which includes such transfer an amount equal 

21 to the transferred loss amount with respect to such trans22 fer. 

23 ‘‘(b) LIMITATION AND CARRYFORWARD BASED ON

24 FOREIGN-SOURCE DIVIDENDS RECEIVED.— 


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1 ‘‘(1) IN GENERAL.—The amount included in 

2 the gross income of the taxpayer under subsection 

3 (a) for any taxable year shall not exceed the amount 

4 allowed as a deduction under section 245A for such 

5 taxable year (taking into account dividends received 

6 from all specified 10-percent owned foreign corpora7 tions with respect to which the taxpayer is a United 

8 States shareholder). 

9 ‘‘(2) AMOUNTS NOT INCLUDED CARRIED FOR10 WARD.—Any amount not included in gross income 

11 for any taxable year by reason of paragraph (1) 

12 shall, subject to the application of paragraph (1) to 

13 the succeeding taxable year, be included in gross in14 come for the succeeding taxable year. 

15 ‘‘(c) TRANSFERRED LOSS AMOUNT.—For purposes 

16 of this section, the term ‘transferred loss amount’ means, 

17 with respect to any transfer of substantially all of the as18 sets of a foreign branch, the excess (if any) of— 

19 ‘‘(1) the sum of losses— 

20 ‘‘(A) which were incurred by the foreign 

21 branch after December 31, 2017, and before 

22 the transfer, and 

23 ‘‘(B) with respect to which a deduction was 

24 allowed to the taxpayer, over 

25 ‘‘(2) the sum of— 


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1 ‘‘(A) any taxable income of such branch 

2 for a taxable year after the taxable year in 

3 which the loss was incurred and through the 

4 close of the taxable year of the transfer, and 

5 ‘‘(B) any amount which is recognized 

6 under section 904(f)(3) on account of the trans7 fer. 

8 ‘‘(d) REDUCTION FOR RECOGNIZED GAINS.—The 

9 transferred loss amount shall be reduced (but not below 

10 zero) by the amount of gain recognized by the taxpayer 

11 on account of the transfer (other than amounts taken into 

12 account under subsection (c)(2)(B)). 

13 ‘‘(e) SOURCE OF INCOME.—Amounts included in 

14 gross income under this section shall be treated as derived 

15 from sources within the United States. 

16 ‘‘(f) BASIS ADJUSTMENTS.—Consistent with such 

17 regulations or other guidance as the Secretary shall pre18 scribe, proper adjustments shall be made in the adjusted 

19 basis of the taxpayer’s stock in the specified 10-percent 

20 owned foreign corporation to which the transfer is made, 

21 and in the transferee’s adjusted basis in the property 

22 transferred, to reflect amounts included in gross income 

23 under this section.’’. 

24 (2) CLERICAL AMENDMENT.—The table of sec25 tions for part II of subchapter B of chapter 1 is 


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1 amended by adding at the end the following new 

2 item: 

‘‘Sec. 91. Certain foreign branch losses transferred to specified 10-percent 

owned foreign corporations.’’. 

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to transfers after De5 cember 31, 2017. 

6 (e) REPEAL OF ACTIVE TRADE OR BUSINESS EXCEP7 TION UNDER SECTION 367.— 

8 (1) IN GENERAL.—Section 367(a) is amended 

9 by striking paragraph (3) and redesignating para10 graphs (4), (5), and (6) as paragraphs (3), (4), and 

11 (5), respectively 

12 (2) CONFORMING AMENDMENTS.—Section 

13 367(a)(4), as redesignated by paragraph (1), is 

14 amended— 

15 (A) by striking ‘‘Paragraphs (2) and (3)’’ 

16 and inserting ‘‘Paragraph (2)’’, and 

17 (B) by striking ‘‘PARAGRAPHS (2) AND (3)’’ 

18 in the heading and inserting ‘‘PARAGRAPH (2)’’. 

19 (3) EFFECTIVE DATE.—The amendments made 

20 by this subsection shall apply to transfers after De21 cember 31, 2017. 


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1 SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME 

2 UPON TRANSITION TO PARTICIPATION EX3 EMPTION SYSTEM OF TAXATION. 

4 (a) IN GENERAL.—Section 965 is amended to read 

5 as follows: 

6 ‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME 

7 UPON TRANSITION TO PARTICIPATION EX8 EMPTION SYSTEM OF TAXATION. 

9 ‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME

10 AS SUBPART F INCOME.—In the case of the last taxable 

11 year of a deferred income corporation which begins before 

12 January 1, 2018, the subpart F income of such foreign 

13 corporation (as otherwise determined for such taxable year 

14 under section 952) shall be increased by the greater of— 

15 ‘‘(1) the accumulated post-1986 deferred for16 eign income of such corporation determined as of 

17 November 9, 2017, or 

18 ‘‘(2) the accumulated post-1986 deferred for19 eign income of such corporation determined as of 

20 December 31, 2017. 

21 ‘‘(b) REDUCTION IN AMOUNTS INCLUDED IN GROSS

22 INCOME OF UNITED STATES SHAREHOLDERS OF SPECI23 FIED FOREIGN CORPORATIONS WITH DEFICITS IN EARN24 INGS AND PROFITS.— 

25 ‘‘(1) IN GENERAL.—In the case of a taxpayer 

26 which is a United States shareholder with respect to 


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1 at least one deferred foreign income corporation and 

2 at least one E&P deficit foreign corporation, the 

3 amount which would (but for this subsection) be 

4 taken into account under section 951(a)(1) by rea5 son of subsection (a) as such United States share6 holder’s pro rata share of the subpart F income of 

7 each deferred foreign income corporation shall be re8 duced by the amount of such United States share9 holder’s aggregate foreign E&P deficit which is allo10 cated under paragraph (2) to such deferred foreign 

11 income corporation. 

12 ‘‘(2) ALLOCATION OF AGGREGATE FOREIGN E&P

13 DEFICIT.—The aggregate foreign E&P deficit of any 

14 United States shareholder shall be allocated among 

15 the deferred foreign income corporations of such 

16 United States shareholder in an amount which bears 

17 the same proportion to such aggregate as— 

18 ‘‘(A) such United States shareholder’s pro 

19 rata share of the accumulated post-1986 de20 ferred foreign income of each such deferred for21 eign income corporation, bears to 

22 ‘‘(B) the aggregate of such United States 

23 shareholder’s pro rata share of the accumulated 

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1 ferred foreign income corporations of such 

2 United States shareholder. 

3 ‘‘(3) DEFINITIONS RELATED TO E&P DEFI4 CITS.—For purposes of this subsection— 

5 ‘‘(A) AGGREGATE FOREIGN E&P DEF6 ICIT.— 

7 ‘‘(i) IN GENERAL.—The term ‘aggre8 gate foreign E&P deficit’ means, with re9 spect to any United States shareholder, the 

10 lesser of— 

11 ‘‘(I) the aggregate of such share12 holder’s pro rata shares of the speci13 fied E&P deficits of the E&P deficit 

14 foreign corporations of such share15 holder, or 

16 ‘‘(II) the amount determined 

17 under paragraph (2)(B). 

18 ‘‘(ii) ALLOCATION OF DEFICIT.—If 

19 the amount described in clause (i)(II) is 

20 less than the amount described in clause 

21 (i)(I), then the shareholder shall designate, 

22 in such form and manner as the Secretary 

23 determines— 

24 ‘‘(I) the amount of the specified 

25 E&P deficit which is to be taken into 


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1 account for each E&P deficit corpora2 tion with respect to the taxpayer, and 

3 ‘‘(II) in the case of an E&P def4 icit corporation which has a qualified 

5 deficit (as defined in section 952), the 

6 portion (if any) of the deficit taken 

7 into account under subclause (I) 

8 which is attributable to a qualified 

9 deficit, including the qualified activi10 ties to which such portion is attrib11 utable. 

12 ‘‘(B) E&P DEFICIT FOREIGN CORPORA13 TION.—The term ‘E&P deficit foreign corpora14 tion’ means, with respect to any taxpayer, any 

15 specified foreign corporation with respect to 

16 which such taxpayer is a United States share17 holder, if— 

18 ‘‘(i) such specified foreign corporation 

19 has a deficit in post-1986 earnings and 

20 profits, and 

21 ‘‘(ii) as of November 9, 2017— 

22 ‘‘(I) such corporation was a spec23 ified foreign corporation, and 


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1 ‘‘(II) such taxpayer was a United 

2 States shareholder of such corpora3 tion. 

4 ‘‘(C) SPECIFIED E&P DEFICIT.—The term 

5 ‘specified E&P deficit’ means, with respect to 

6 any E&P deficit foreign corporation, the 

7 amount of the deficit referred to in subpara8 graph (B). 

9 ‘‘(4) TREATMENT OF EARNINGS AND PROFITS

10 IN FUTURE YEARS.— 

11 ‘‘(A) REDUCED EARNINGS AND PROFITS

12 TREATED AS PREVIOUSLY TAXED INCOME

13 WHEN DISTRIBUTED.—For purposes of apply14 ing section 959 in any taxable year beginning 

15 after December 31, 2017, with respect to any 

16 United States shareholder of a deferred foreign 

17 income corporation, an amount equal to such 

18 shareholder’s reduction under paragraph (1) 

19 which is allocated to such deferred foreign in20 come corporation under this subsection shall be 

21 treated as an amount which was included in the 

22 gross income of such United States shareholder 

23 under section 951(a). 

24 ‘‘(B) E&P DEFICITS.—For purposes of this 

25 title, a United States shareholder’s pro rata 


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1 share of the earnings and profits of any speci2 fied E&P deficit foreign corporation under this 

3 subsection shall be increased by the amount of 

4 the specified E&P deficit of such corporation 

5 taken into account by such shareholder under 

6 paragraph (1), and, for purposes of section 952, 

7 such increase shall be attributable to the same 

8 activity to which the deficit so taken into ac9 count was attributable. 

10 ‘‘(c) APPLICATION OF PARTICIPATION EXEMPTION

11 TO INCLUDED INCOME.— 

12 ‘‘(1) IN GENERAL.—In the case of a United 

13 States shareholder of a deferred foreign income cor14 poration, there shall be allowed as a deduction for 

15 the taxable year in which an amount is included in 

16 the gross income of such United States shareholder 

17 under section 951(a)(1) by reason of this section an 

18 amount equal to the sum of— 

19 ‘‘(A) 85.7 percent of the excess (if any) 

20 of— 

21 ‘‘(i) the amount so included as gross 

22 income, over 

23 ‘‘(ii) the amount of such United 

24 States shareholder’s aggregate foreign cash 

25 position, plus 


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1 ‘‘(B) 71.4 percent of so much of the 

2 amount described in subparagraph (A)(ii) as 

3 does not exceed the amount described in sub4 paragraph (A)(i). 

5 ‘‘(2) AGGREGATE FOREIGN CASH POSITION.— 

6 For purposes of this subsection— 

7 ‘‘(A) IN GENERAL.—The term ‘aggregate 

8 foreign cash position’ means, with respect to 

9 any United States shareholder, the greater of— 

10 ‘‘(i) the aggregate of such United 

11 States shareholder’s pro rata share of the 

12 cash position of each specified foreign cor13 poration of such United States shareholder 

14 determined as of the close of the last tax15 able year of such specified foreign corpora16 tion which begins before January 1, 2018, 

17 or 

18 ‘‘(ii) one half of the sum of— 

19 ‘‘(I) the aggregate described in 

20 clause (i) determined as of the close of 

21 the last taxable year of each such 

22 specified foreign corporation which 

23 ends before November 9, 2017, plus 

24 ‘‘(II) the aggregate described in 

25 clause (i) determined as of the close of 


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1 the taxable year of each such specified 

2 foreign corporation which precedes the 

3 taxable year referred to in subclause 

4 (I). 

5 ‘‘(B) CASH POSITION.—For purposes of 

6 this paragraph, the cash position of any speci7 fied foreign corporation is the sum of— 

8 ‘‘(i) cash and foreign currency held by 

9 such foreign corporation, 

10 ‘‘(ii) the net accounts receivable of 

11 such foreign corporation, plus 

12 ‘‘(iii) the fair market value of the fol13 lowing assets held by such corporation: 

14 ‘‘(I) Personal property which is 

15 of a type that is actively traded and 

16 for which there is an established fi17 nancial market (other than stock in 

18 the specified foreign corporation). 

19 ‘‘(II) Commercial paper, certifi20 cates of deposit, the securities of the 

21 Federal government and of any State 

22 or foreign government. 

23 ‘‘(III) Any obligation with a term 

24 of less than one year. 


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1 ‘‘(IV) Any asset which the Sec2 retary identifies as being economically 

3 equivalent to any asset described in 

4 this subparagraph. 

5 ‘‘(C) NET ACCOUNTS RECEIVABLE.—For 

6 purposes of this paragraph, the term ‘net ac7 counts receivable’ means, with respect to any 

8 specified foreign corporation, the excess (if any) 

9 of— 

10 ‘‘(i) such corporation’s accounts re11 ceivable, over 

12 ‘‘(ii) such corporation’s accounts pay13 able (determined consistent with the rules 

14 of section 461). 

15 ‘‘(D) PREVENTION OF DOUBLE COUNT16 ING.—Cash positions of a specified foreign cor17 poration described in clause (ii) or (iii)(III) of 

18 subparagraph (B) shall not be taken into ac19 count by a United States shareholder under 

20 subparagraph (A) to the extent that such 

21 United States shareholder demonstrates to the 

22 satisfaction of the Secretary that such amount 

23 is so taken into account by such United States 

24 shareholder with respect to another specified 

25 foreign corporation. 


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1 ‘‘(E) CASH POSITIONS OF CERTAIN NON2 CORPORATE ENTITIES TAKEN INTO ACCOUNT.— 

3 An entity shall be treated as a specified foreign 

4 corporation of a United States shareholder for 

5 purposes of determining such United States 

6 shareholder’s aggregate foreign cash position 

7 if— 

8 ‘‘(i) such entity is a foreign entity 

9 which would be a specified foreign corpora10 tion of such United States shareholder if 

11 such entity were a corporation, or 

12 ‘‘(ii) any interest in such entity is held 

13 by a specified foreign corporation of such 

14 United States shareholder (determined 

15 after application of clause (i)) and such en16 tity would be a specified foreign corpora17 tion of such United States shareholder if 

18 such entity were a foreign corporation. 

19 ‘‘(F) ANTI-ABUSE.—If the Secretary deter20 mines that a principal purpose of any trans21 action was to reduce the aggregate foreign cash 

22 position taken into account under this sub23 section, such transaction shall be disregarded 

24 for purposes of this subsection. 


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1 ‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; 

2 ACCUMULATED POST-1986 DEFERRED FOREIGN IN3 COME.—For purposes of this section— 

4 ‘‘(1) DEFERRED FOREIGN INCOME CORPORA5 TION.—The term ‘deferred foreign income corpora6 tion’ means, with respect to any United States 

7 shareholder, any specified foreign corporation of 

8 such United States shareholder which has accumu9 lated post-1986 deferred foreign income (as of the 

10 close of the taxable year referred to in subsection 

11 (a)) greater than zero. 

12 ‘‘(2) ACCUMULATED POST-1986 DEFERRED FOR13 EIGN INCOME.—The term ‘accumulated post-1986 

14 deferred foreign income’ means the post-1986 earn15 ings and profits except to the extent such earnings— 

16 ‘‘(A) are attributable to income of the 

17 specified foreign corporation which is effectively 

18 connected with the conduct of a trade or busi19 ness within the United States and subject to 

20 tax under this chapter, or 

21 ‘‘(B) in the case of a controlled foreign 

22 corporation, if distributed, would be excluded 

23 from the gross income of a United States share24 holder under section 959. 


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1 To the extent provided in regulations or other guid2 ance prescribed by the Secretary, in the case of any 

3 controlled foreign corporation which has share4 holders which are not United States shareholders, 

5 accumulated post-1986 deferred foreign income shall 

6 be appropriately reduced by amounts which would be 

7 described in subparagraph (B) if such shareholders 

8 were United States shareholders. 

9 ‘‘(3) POST-1986 EARNINGS AND PROFITS.—The 

10 term ‘post-1986 earnings and profits’ means the 

11 earnings and profits of the foreign corporation (com12 puted in accordance with sections 964(a) and 986, 

13 and by only taking into account periods when the 

14 foreign corporation was a specified foreign corpora15 tion) accumulated in taxable years beginning after 

16 December 31, 1986, and determined— 

17 ‘‘(A) as of the date of the taxable year re18 ferred to in paragraph (1) or (2) of subsection 

19 (a), whichever is applicable with respect to such 

20 foreign corporation, and 

21 ‘‘(B) without diminution by reason of divi22 dends distributed during the taxable year end23 ing with or including such date. 

24 ‘‘(e) SPECIFIED FOREIGN CORPORATION.— 


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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the term ‘specified foreign corporation’ 

3 means— 

4 ‘‘(A) any controlled foreign corporation, 

5 and 

6 ‘‘(B) any section 902 corporation (as de7 fined in section 909(d)(5) as in effect before the 

8 date of the enactment of the Tax Cuts and Jobs 

9 Act). 

10 ‘‘(2) APPLICATION TO SECTION 902 CORPORA11 TIONS.—For purposes of sections 951 and 961, a 

12 section 902 corporation (as so defined) shall be 

13 treated as a controlled foreign corporation solely for 

14 purposes of taking into account the subpart F in15 come of such corporation under subsection (a) (and 

16 for purposes of applying subsection (e)). 

17 ‘‘(3) EXCLUSION OF PASSIVE FOREIGN INVEST18 MENT COMPANIES.—Such term shall not include any 

19 corporation which is a passive foreign investment 

20 company (as defined in section 1297) with respect to 

21 the shareholder and which is not a controlled foreign 

22 corporation. 

23 ‘‘(f) DETERMINATIONS OF PRO RATA SHARE.—For 

24 purposes of this section, the determination of any United 

25 States shareholder’s pro rata share of any amount with 


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1 respect to any specified foreign corporation shall be deter2 mined under rules similar to the rules of section 951(a)(2) 

3 by treating such amount in the same manner as subpart 

4 F income (and by treating such specified foreign corpora5 tion as a controlled foreign corporation). 

6 ‘‘(g) DISALLOWANCE OF FOREIGN TAX CREDIT, 

7 ETC.— 

8 ‘‘(1) IN GENERAL.—No credit shall be allowed 

9 under section 901 for the applicable percentage of 

10 any taxes paid or accrued (or treated as paid or ac11 crued) with respect to any amount for which a de12 duction is allowed under this section. 

13 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

14 of this subsection, the term ‘applicable percentage’ 

15 means the amount (expressed as a percentage) equal 

16 to the sum of— 

17 ‘‘(A) 0.857 multiplied by the ratio of— 

18 ‘‘(i) the excess to which subsection 

19 (c)(1)(A) applies, divided by 

20 ‘‘(ii) the sum of such excess plus the 

21 amount to which subsection (c)(1)(B) ap22 plies, plus 

23 ‘‘(B) 0.714 multiplied by the ratio of— 

24 ‘‘(i) the amount to which subsection 

25 (c)(1)(B) applies, divided by 


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1 ‘‘(ii) the sum described in subpara2 graph (A)(ii). 

3 ‘‘(3) DENIAL OF DEDUCTION.—No deduction 

4 shall be allowed under this chapter for any tax for 

5 which credit is not allowable under section 901 by 

6 reason of paragraph (1) (determined by treating the 

7 taxpayer as having elected the benefits of subpart A 

8 of part III of subchapter N). 

9 ‘‘(4) COORDINATION WITH SECTION 78.—Sec10 tion 78 shall not apply to any tax for which credit 

11 is not allowable under section 901 by reason of para12 graph (1). 

13 ‘‘(h) ELECTION TO PAY LIABILITY IN INSTALL14 MENTS.— 

15 ‘‘(1) IN GENERAL.—In the case of a United 

16 States shareholder of a deferred foreign income cor17 poration, such United States shareholder may elect 

18 to pay the net tax liability under this section in 8 

19 installments of the following amounts: 

20 ‘‘(A) 8 percent of the net tax liability in 

21 the case of each of the first 5 of such install22 ments, 

23 ‘‘(B) 15 percent of the net tax liability in 

24 the case of the 6th such installment, 


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1 ‘‘(C) 20 percent of the net tax liability in 

2 the case of the 7th such installment, and 

3 ‘‘(D) 25 percent of the net tax liability in 

4 the case of the 8th such installment. 

5 ‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.— 

6 If an election is made under paragraph (1), the first 

7 installment shall be paid on the due date (deter8 mined without regard to any extension of time for 

9 filing the return) for the return of tax for the tax10 able year described in subsection (a) and each suc11 ceeding installment shall be paid on the due date (as 

12 so determined) for the return of tax for the taxable 

13 year following the taxable year with respect to which 

14 the preceding installment was made. 

15 ‘‘(3) ACCELERATION OF PAYMENT.—If there is 

16 an addition to tax for failure to timely pay any in17 stallment required under this subsection, a liquida18 tion or sale of substantially all the assets of the tax19 payer (including in a title 11 or similar case), a ces20 sation of business by the taxpayer, or any similar 

21 circumstance, then the unpaid portion of all remain22 ing installments shall be due on the date of such 

23 event (or in the case of a title 11 or similar case, 

24 the day before the petition is filed). The preceding 

25 sentence shall not apply to the sale of substantially 


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1 all the assets of a taxpayer to a buyer if such buyer 

2 enters into an agreement with the Secretary under 

3 which such buyer is liable for the remaining install4 ments due under this subsection in the same manner 

5 as if such buyer were the taxpayer. 

6 ‘‘(4) PRORATION OF DEFICIENCY TO INSTALL7 MENTS.—If an election is made under paragraph (1) 

8 to pay the net tax liability under this section in in9 stallments and a deficiency has been assessed with 

10 respect to such net tax liability, the deficiency shall 

11 be prorated to the installments payable under para12 graph (1). The part of the deficiency so prorated to 

13 any installment the date for payment of which has 

14 not arrived shall be collected at the same time as, 

15 and as a part of, such installment. The part of the 

16 deficiency so prorated to any installment the date 

17 for payment of which has arrived shall be paid upon 

18 notice and demand from the Secretary. This sub19 section shall not apply if the deficiency is due to 

20 negligence, to intentional disregard of rules and reg21 ulations, or to fraud with intent to evade tax. 

22 ‘‘(5) ELECTION.—Any election under paragraph 

23 (1) shall be made not later than the due date for the 

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1 section (a) and shall be made in such manner as the 

2 Secretary shall provide. 

3 ‘‘(6) NET TAX LIABILITY UNDER THIS SEC4 TION.—For purposes of this subsection— 

5 ‘‘(A) IN GENERAL.—The net tax liability 

6 under this section with respect to any United 

7 States shareholder is the excess (if any) of— 

8 ‘‘(i) such taxpayer’s net income tax 

9 for the taxable year in which an amount is 

10 included in the gross income of such 

11 United States shareholder under section 

12 951(a)(1) by reason of this section, over 

13 ‘‘(ii) such taxpayer’s net income tax 

14 for such taxable year determined— 

15 ‘‘(I) without regard to this sec16 tion, and 

17 ‘‘(II) without regard to any in18 come or deduction properly attrib19 utable to a dividend received by such 

20 United States shareholder from any 

21 deferred foreign income corporation. 

22 ‘‘(B) NET INCOME TAX.—The term ‘net 

23 income tax’ means the regular tax liability re24 duced by the credits allowed under subparts A, 

25 B, and D of part IV of subchapter A. 


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1 ‘‘(i) SPECIAL RULES FOR S CORPORATION SHARE2 HOLDERS.— 

3 ‘‘(1) IN GENERAL.—In the case of any S cor4 poration which is a United States shareholder of a 

5 deferred foreign income corporation, each share6 holder of such S corporation may elect to defer pay7 ment of such shareholder’s net tax liability under 

8 this section with respect to such S corporation until 

9 the shareholder’s taxable year which includes the 

10 triggering event with respect to such liability. Any 

11 net tax liability payment of which is deferred under 

12 the preceding sentence shall be assessed on the re13 turn of tax as an addition to tax in the shareholder’s 

14 taxable year which includes such triggering event. 

15 ‘‘(2) TRIGGERING EVENT.— 

16 ‘‘(A) IN GENERAL.—In the case of any 

17 shareholder’s net tax liability under this section 

18 with respect to any S corporation, the trig19 gering event with respect to such liability is 

20 whichever of the following occurs first: 

21 ‘‘(i) Such corporation ceases to be an 

22 S corporation (determined as of the first 

23 day of the first taxable year that such cor24 poration is not an S corporation). 


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1 ‘‘(ii) A liquidation or sale of substan2 tially all the assets of such S corporation 

3 (including in a title 11 or similar case), a 

4 cessation of business by such S corpora5 tion, such S corporation ceases to exist, or 

6 any similar circumstance. 

7 ‘‘(iii) A transfer of any share of stock 

8 in such S corporation by the taxpayer (in9 cluding by reason of death, or otherwise). 

10 ‘‘(B) PARTIAL TRANSFERS OF STOCK.—In 

11 the case of a transfer of less than all of the tax12 payer’s shares of stock in the S corporation, 

13 such transfer shall only be a triggering event 

14 with respect to so much of the taxpayer’s net 

15 tax liability under this section with respect to 

16 such S corporation as is properly allocable to 

17 such stock. 

18 ‘‘(C) TRANSFER OF LIABILITY.—A trans19 fer described in clause (iii) of subparagraph (A) 

20 shall not be treated as a triggering event if the 

21 transferee enters into an agreement with the 

22 Secretary under which such transferee is liable 

23 for net tax liability with respect to such stock 

24 in the same manner as if such transferee were 

25 the taxpayer. 


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1 ‘‘(3) NET TAX LIABILITY.—A shareholder’s net 

2 tax liability under this section with respect to any S 

3 corporation is the net tax liability under this section 

4 which would be determined under subsection (h)(6) 

5 if the only subpart F income taken into account by 

6 such shareholder by reason of this section were allo7 cations from such S corporation. 

8 ‘‘(4) ELECTION TO PAY DEFERRED LIABILITY

9 IN INSTALLMENTS.—In the case of a taxpayer which 

10 elects to defer payment under paragraph (1)— 

11 ‘‘(A) subsection (h) shall be applied sepa12 rately with respect to the liability to which such 

13 election applies, 

14 ‘‘(B) an election under subsection (h) with 

15 respect to such liability shall be treated as time16 ly made if made not later than the due date for 

17 the return of tax for the taxable year in which 

18 the triggering event with respect to such liabil19 ity occurs, 

20 ‘‘(C) the first installment under subsection 

21 (h) with respect to such liability shall be paid 

22 not later than such due date (but determined 

23 without regard to any extension of time for fil24 ing the return), and 


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1 ‘‘(D) if the triggering event with respect to 

2 any net tax liability is described in paragraph 

3 (2)(A)(ii), an election under subsection (h) with 

4 respect to such liability may be made only with 

5 the consent of the Secretary. 

6 ‘‘(5) JOINT AND SEVERAL LIABILITY OF S COR7 PORATION.—If any shareholder of an S corporation 

8 elects to defer payment under paragraph (1), such 

9 S corporation shall be jointly and severally liable for 

10 such payment and any penalty, addition to tax, or 

11 additional amount attributable thereto. 

12 ‘‘(6) EXTENSION OF LIMITATION ON COLLEC13 TION.—Any limitation on the time period for the col14 lection of a liability deferred under this subsection 

15 shall not be treated as beginning before the date of 

16 the triggering event with respect to such liability. 

17 ‘‘(7) ANNUAL REPORTING OF NET TAX LIABIL18 ITY.— 

19 ‘‘(A) IN GENERAL.—Any shareholder of an 

20 S corporation which makes an election under 

21 paragraph (1) shall report the amount of such 

22 shareholder’s deferred net tax liability on such 

23 shareholder’s return of tax for the taxable year 

24 for which such election is made and on the re25 turn of tax for each taxable year thereafter 


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1 until such amount has been fully assessed on 

2 such returns. 

3 ‘‘(B) DEFERRED NET TAX LIABILITY.— 

4 For purposes of this paragraph, the term ‘de5 ferred net tax liability’ means, with respect to 

6 any taxable year, the amount of net tax liability 

7 payment of which has been deferred under 

8 paragraph (1) and which has not been assessed 

9 on a return of tax for any prior taxable year. 

10 ‘‘(C) FAILURE TO REPORT.—In the case of 

11 any failure to report any amount required to be 

12 reported under subparagraph (A) with respect 

13 to any taxable year before the due date for the 

14 return of tax for such taxable year, there shall 

15 be assessed on such return as an addition to 

16 tax 5 percent of such amount. 

17 ‘‘(8) ELECTION.—Any election under paragraph 

18 (1)— 

19 ‘‘(A) shall be made by the shareholder of 

20 the S corporation not later than the due date 

21 for such shareholder’s return of tax for the tax22 able year which includes the close of the taxable 

23 year of such S corporation in which the amount 

24 described in subsection (a) is taken into ac25 count, and 


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1 ‘‘(B) shall be made in such manner as the 

2 Secretary shall provide. 

3 ‘‘(j) REPORTING BY S CORPORATION.—Each S cor4 poration which is a United States shareholder of a speci5 fied foreign corporation shall report in its return of tax 

6 under section 6037(a) the amount includible in its gross 

7 income for such taxable year by reason of this section and 

8 the amount of the deduction allowable by subsection (b). 

9 Any copy provided to a shareholder under section 6037(b) 

10 shall include a statement of such shareholder’s pro rata 

11 share of such amounts. 

12 ‘‘(k) EXTENSION OF LIMITATION ON ASSESSMENT.— 

13 Notwithstanding section 6501, the limitation on the time 

14 period for the assessment of the net tax liability under 

15 this section (as defined in subsection (h)(6)) shall not ex16 pire before the date that is 6 years after the return for 

17 the taxable year described in such subsection was filed. 

18 ‘‘(l) RECAPTURE FOR EXPATRIATED ENTITIES.— 

19 ‘‘(1) IN GENERAL.—If a deduction is allowed 

20 under subsection (c) to a United States shareholder 

21 and such shareholder first becomes an expatriated 

22 entity at any time during the 10-year period begin23 ning on the date of the enactment of the Tax Cuts 

24 and Jobs Act, then— 


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1 ‘‘(A) the tax imposed by this chapter shall 

2 be increased for the first taxable year in which 

3 such taxpayer becomes an expatriated entity by 

4 an amount equal to 35 percent of the amount 

5 of the deduction allowed to the specified foreign 

6 corporation under subsection (c), and 

7 ‘‘(B) no credits shall be allowed against 

8 the increase in tax under subparagraph (A). 

9 ‘‘(2) EXPATRIATED ENTITY.—For purposes of 

10 this subsection, the term ‘expatriated entity’ has the 

11 same meaning given such term under section 

12 7874(a)(2), except that such term shall not include 

13 an entity if the surrogate foreign corporation with 

14 respect to the entity is treated as a domestic cor15 poration under section 7874(b). 

16 ‘‘(m) SPECIAL RULES FOR UNITED STATES SHARE17 HOLDERS WHICH ARE REAL ESTATE INVESTMENT

18 TRUSTS.— 

19 ‘‘(1) IN GENERAL.—If a real estate investment 

20 trust is a United States shareholder in 1 or more de21 ferred foreign income corporations— 

22 ‘‘(A) any amount required to be taken into 

23 account under section 951(a)(1) by reason of 

24 this section shall not be taken into account as 

25 gross income of the real estate investment trust 


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1 for purposes of applying paragraphs (2) and (3) 

2 of section 856(c) to any taxable year for which 

3 such amount is taken into account under sec4 tion 951(a)(1), and 

5 ‘‘(B) if the real estate investment trust 

6 elects the application of this subparagraph, not7 withstanding subsection (a), any amount re8 quired to be taken into account under section 

9 951(a)(1) by reason of this section shall, in lieu 

10 of the taxable year in which it would otherwise 

11 be included in gross income (for purposes of the 

12 computation of real estate investment trust tax13 able income under section 857(b)), be included 

14 in gross income as follows: 

15 ‘‘(i) 8 percent of such amount in the 

16 case of each of the taxable years in the 5- 

17 taxable year period beginning with the tax18 able year in which such amount would oth19 erwise be included. 

20 ‘‘(ii) 15 percent of such amount in the 

21 case of the 1st taxable year following such 

22 period. 

23 ‘‘(iii) 20 percent of such amount in 

24 the case of the 2nd taxable year following 

25 such period. 


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1 ‘‘(iv) 25 percent of such amount in 

2 the case of the 3rd taxable year following 

3 such period. 

4 ‘‘(2) RULES FOR TRUSTS ELECTING DEFERRED

5 INCLUSION.— 

6 ‘‘(A) ELECTION.—Any election under 

7 paragraph (1)(B) shall be made not later than 

8 the due date for the first taxable year in the 5- 

9 taxable year period described in clause (i) of 

10 paragraph (1)(B) and shall be made in such 

11 manner as the Secretary shall provide. 

12 ‘‘(B) SPECIAL RULES.—If an election 

13 under paragraph (1)(B) is in effect with respect 

14 to any real estate investment trust, the fol15 lowing rules shall apply: 

16 ‘‘(i) APPLICATION OF PARTICIPATION

17 EXEMPTION.—For purposes of subsection 

18 (c)(1)— 

19 ‘‘(I) the aggregate amount to 

20 which subparagraph (A) or (B) of 

21 subsection (c)(1) applies shall be de22 termined without regard to the elec23 tion, 

24 ‘‘(II) each such aggregate 

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1 able year described in paragraph 

2 (1)(B) in the same proportion as the 

3 amount included in the gross income 

4 of such United States shareholder 

5 under section 951(a)(1) by reason of 

6 this section is allocated to each such 

7 taxable year. 

8 ‘‘(III) NO INSTALLMENT PAY9 MENTS.—The real estate investment 

10 trust may not make an election under 

11 subsection (g) for any taxable year de12 scribed in paragraph (1)(B). 

13 ‘‘(ii) ACCELERATION OF INCLUSION.— 

14 If there is a liquidation or sale of substan15 tially all the assets of the real estate in16 vestment trust (including in a title 11 or 

17 similar case), a cessation of business by 

18 such trust, or any similar circumstance, 

19 then any amount not yet included in gross 

20 income under paragraph (1)(B) shall be in21 cluded in gross income as of the day before 

22 the date of the event and the unpaid por23 tion of any tax liability with respect to 

24 such inclusion shall be due on the date of 

25 such event (or in the case of a title 11 or 


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1 similar case, the day before the petition is 

2 filed). 

3 ‘‘(n) ELECTION NOT TO APPLY NET OPERATING

4 LOSS DEDUCTION.— 

5 ‘‘(1) IN GENERAL.—If a United States share6 holder of a deferred foreign income corporation 

7 elects the application of this subsection for the tax8 able year described in subsection (a), then the 

9 amount described in paragraph (2) shall not be 

10 taken into account— 

11 ‘‘(A) in determining the amount of the net 

12 operating loss deduction under section 172 of 

13 such shareholder for such taxable year, or 

14 ‘‘(B) in determining the amount of taxable 

15 income for such taxable year which may be re16 duced by net operating loss carryovers or 

17 carrybacks to such taxable year under section 

18 172. 

19 ‘‘(2) AMOUNT DESCRIBED.—The amount de20 scribed in this paragraph is the sum of— 

21 ‘‘(A) the amount required to be taken into 

22 account under section 951(a)(1) by reason of 

23 this section (determined after the application of 

24 subsection (c)), plus 


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1 ‘‘(B) in the case of a domestic corporation 

2 which chooses to have the benefits of subpart A 

3 of part III of subchapter N for the taxable 

4 year, the taxes deemed to be paid by such cor5 poration under subsections (a) and (b) of sec6 tion 960 for such taxable year with respect to 

7 the amount described in subparagraph (A) 

8 which are treated as a dividends under section 

9 78. 

10 ‘‘(3) ELECTION.—Any election under this sub11 section shall be made not later than the due date 

12 (including extensions) for filing the return of tax for 

13 the taxable year and shall be made in such manner 

14 as the Secretary shall prescribe. 

15 ‘‘(o) REGULATIONS.—The Secretary shall prescribe 

16 such regulations or other guidance as may be necessary 

17 or appropriate to carry out the provisions of this section 

18 or to prevent the avoidance of the purposes of this section, 

19 including through a reduction in earnings and profits 

20 through changes in entity classification, changes in ac21 counting methods, or otherwise.’’. 

22 (b) CLERICAL AMENDMENT.—The table of sections 

23 for subpart F of part III of subchapter N of chapter 1 

24 is amended by striking the item relating to section 965 

25 and inserting the following: 


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‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation exemption system of taxation.’’. 

1 Subpart B—Rules Related to Passive and Mobile 

2 Income 

3 CHAPTER 1—TAXATION OF FOREIGN-DE4 RIVED INTANGIBLE INCOME AND 

5 GLOBAL INTANGIBLE LOW-TAXED IN6 COME 

7 SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTAN8 GIBLE LOW-TAXED INCOME BY UNITED 

9 STATES SHAREHOLDERS. 

10 (a) IN GENERAL.—Subpart F of part III of sub11 chapter N of chapter 1 is amended by inserting after sec12 tion 951 the following new section: 

13 ‘‘SEC. 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME IN14 CLUDED IN GROSS INCOME OF UNITED 

15 STATES SHAREHOLDERS. 

16 ‘‘(a) IN GENERAL.—Each person who is a United 

17 States shareholder of any controlled foreign corporation 

18 for any taxable year of such United States shareholder 

19 shall include in gross income such shareholder’s global in20 tangible low-taxed income for such taxable year. 

21 ‘‘(b) GLOBAL INTANGIBLE LOW-TAXED INCOME.— 

22 For purposes of this section— 

23 ‘‘(1) IN GENERAL.—The term ‘global intangible 

24 low-taxed income’ means, with respect to any United 


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1 States shareholder for any taxable year of such 

2 United States shareholder, the excess (if any) of— 

3 ‘‘(A) such shareholder’s net CFC tested in4 come for such taxable year, over 

5 ‘‘(B) such shareholder’s net deemed tan6 gible income return for such taxable year. 

7 ‘‘(2) NET DEEMED TANGIBLE INCOME RE8 TURN.—The term ‘net deemed tangible income re9 turn’ means, with respect to any United States 

10 shareholder for any taxable year, an amount equal 

11 to 10 percent of the aggregate of such shareholder’s 

12 pro rata share of the qualified business asset invest13 ment of each controlled foreign corporation with re14 spect to which such shareholder is a United States 

15 shareholder for such taxable year (determined for 

16 each taxable year of each such controlled foreign 

17 corporation which ends in or with such taxable year 

18 of such United States shareholder). 

19 ‘‘(c) NET CFC TESTED INCOME.—For purposes of 

20 this section— 

21 ‘‘(1) IN GENERAL.—The term ‘net CFC tested 

22 income’ means, with respect to any United States 

23 shareholder for any taxable year of such United 

24 States shareholder, the excess (if any) of— 


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1 ‘‘(A) the aggregate of such shareholder’s 

2 pro rata share of the tested income of each con3 trolled foreign corporation with respect to which 

4 such shareholder is a United States shareholder 

5 for such taxable year of such United States 

6 shareholder (determined for each taxable year 

7 of such controlled foreign corporation which 

8 ends in or with such taxable year of such 

9 United States shareholder), over 

10 ‘‘(B) the aggregate of such shareholder’s 

11 pro rata share of the tested loss of each con12 trolled foreign corporation with respect to which 

13 such shareholder is a United States shareholder 

14 for such taxable year of such United States 

15 shareholder (determined for each taxable year 

16 of such controlled foreign corporation which 

17 ends in or with such taxable year of such 

18 United States shareholder). 

19 ‘‘(2) TESTED INCOME; TESTED LOSS.—For pur20 poses of this section— 

21 ‘‘(A) TESTED INCOME.—The term ‘tested 

22 income’ means, with respect to any controlled 

23 foreign corporation for any taxable year of such 

24 controlled foreign corporation, the excess (if 

25 any) of— 


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1 ‘‘(i) the gross income of such corpora2 tion determined without regard to— 

3 ‘‘(I) any item of income described 

4 in section 952(b), 

5 ‘‘(II) any gross income taken into 

6 account in determining the subpart F 

7 income of such corporation, 

8 ‘‘(III) any gross income excluded 

9 from the foreign base company income 

10 (as defined in section 954) and the in11 surance income (as defined in section 

12 953) of such corporation by reason of 

13 section 954(b)(4), 

14 ‘‘(IV) any dividend received from 

15 a related person (as defined in section 

16 954(d)(3)), and 

17 ‘‘(V) any foreign oil and gas ex18 traction income (as defined in section 

19 907(c)(1)) of such corporation, over 

20 ‘‘(ii) the deductions (including taxes) 

21 properly allocable to such gross income 

22 under rules similar to the rules of section 

23 954(b)(5). 

24 ‘‘(B) TESTED LOSS.— 


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1 ‘‘(i) IN GENERAL.—The term ‘tested 

2 loss’ means, with respect to any controlled 

3 foreign corporation for any taxable year of 

4 such controlled foreign corporation, the ex5 cess (if any) of the amount described in 

6 subparagraph (A)(ii) over the amount de7 scribed in subparagraph (A)(i). 

8 ‘‘(ii) COORDINATION WITH SUBPART F

9 TO DENY DOUBLE BENEFIT OF LOSSES.— 

10 Section 952(c)(1)(A) shall be applied by 

11 increasing the earnings and profits of the 

12 controlled foreign corporation by the tested 

13 loss of such corporation. 

14 ‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.— 

15 For purposes of this section— 

16 ‘‘(1) IN GENERAL.—The term ‘qualified busi17 ness asset investment’ means, with respect to any 

18 corporation for any taxable year of such controlled 

19 foreign corporation, the average of the aggregate of 

20 the corporation’s adjusted bases as of the close of 

21 each quarter of such taxable year in specified tan22 gible property — 

23 ‘‘(A) used in a trade or business of the 

24 corporation, and 


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1 ‘‘(B) of a type with respect to which a de2 duction is allowable under section 167. 

3 ‘‘(2) SPECIFIED TANGIBLE PROPERTY.— 

4 ‘‘(A) IN GENERAL.—The term ‘specified 

5 tangible property’ means, except as provided in 

6 subparagraph (B), any tangible property used 

7 in the production of tested income. 

8 ‘‘(B) DUAL USE PROPERTY.—In the case 

9 of property used both in the production of test10 ed income and income which is not tested in11 come, such property shall be treated as speci12 fied tangible property in the same proportion 

13 that the gross income described in subsection 

14 (c)(1)(A) produced with respect to such prop15 erty bears to the total gross income produced 

16 with respect to such property. 

17 ‘‘(3) DETERMINATION OF ADJUSTED BASIS.— 

18 For purposes of this subsection, notwithstanding any 

19 provision of this title (or any other provision of law) 

20 which is enacted after the date of the enactment of 

21 this section, the adjusted basis in any property shall 

22 be determined using the alternative depreciation sys23 tem under section 168(g). 

24 ‘‘(4) REGULATIONS.—The Secretary shall issue 

25 such regulations or other guidance as the Secretary 


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1 determines appropriate to prevent the avoidance of 

2 the purposes of this subsection, including regulations 

3 or other guidance which provide for the treatment of 

4 property if— 

5 ‘‘(A) such property is transferred, or held, 

6 temporarily, or 

7 ‘‘(B) the avoidance of the purposes of this 

8 paragraph is a factor in the transfer or holding 

9 of such property. 

10 ‘‘(e) DETERMINATION OF PRO RATA SHARE, ETC.— 

11 For purposes of this section— 

12 ‘‘(1) IN GENERAL.—The pro rata shares re13 ferred to in subsections (b), (c)(1)(A), and (c)(1)(B), 

14 respectively, shall be determined under the rules of 

15 section 951(a)(2) in the same manner as such sec16 tion applies to subpart F income and shall be taken 

17 into account in the taxable year of the United States 

18 shareholder in which or with which the taxable year 

19 of the controlled foreign corporation ends. 

20 ‘‘(2) TREATMENT AS UNITED STATES SHARE21 HOLDER.—For purposes of paragraph (1), a person 

22 shall be treated as a United States shareholder of a 

23 controlled foreign corporation for any taxable year 

24 only if such person owns (within the meaning of sec25 tion 958(a)) stock in such foreign corporation on the 


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1 last day, in such year, on which such foreign cor2 poration is a controlled foreign corporation. 

3 ‘‘(3) TREATMENT AS CONTROLLED FOREIGN

4 CORPORATION.—A foreign corporation shall be treat5 ed as a controlled foreign corporation for any tax6 able year if such foreign corporation is a controlled 

7 foreign corporation at any time during such taxable 

8 year. 

9 ‘‘(f) TREATMENT AS SUBPART F INCOME FOR CER10 TAIN PURPOSES.— 

11 ‘‘(1) IN GENERAL.— 

12 ‘‘(A) APPLICATION.—Except as provided in 

13 subparagraph (B), any global intangible low14 taxed income included in gross income under 

15 subsection (a) shall be treated in the same 

16 manner as an amount included under section 

17 951(a)(1)(A) for purposes of applying sections 

18 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 

19 959, 961, 962(c), 962(d), 993(a)(1)(E), 

20 996(f)(1), 1248(b)(1), 1248(d)(1), 

21 6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4). 

22 ‘‘(B) EXCEPTION.—The Secretary shall 

23 provide rules for the application of subpara24 graph (A) to other provisions of this title in any 

25 case in which the determination of subpart F 


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1 income is required to be made at the level of 

2 the controlled foreign corporation. 

3 ‘‘(2) ALLOCATION OF GLOBAL INTANGIBLE

4 LOW-TAXED INCOME TO CONTROLLED FOREIGN COR5 PORATIONS.—For purposes of the sections referred 

6 to in paragraph (1), with respect to any controlled 

7 foreign corporation any pro rata amount from which 

8 is taken into account in determining the global in9 tangible low-taxed income included in gross income 

10 of a United States shareholder under subsection (a), 

11 the portion of such global intangible low-taxed in12 come which is treated as being with respect to such 

13 controlled foreign corporation is— 

14 ‘‘(A) in the case of a controlled foreign 

15 corporation with no tested income, zero, and 

16 ‘‘(B) in the case of a controlled foreign 

17 corporation with tested income, the portion of 

18 such global intangible low-taxed income which 

19 bears the same ratio to such global intangible 

20 low-taxed income as— 

21 ‘‘(i) such United States shareholder’s 

22 pro rata amount of the tested income of 

23 such controlled foreign corporation, bears 

24 to 


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1 ‘‘(ii) the aggregate amount described 

2 in subsection (c)(1)(A) with respect to 

3 such United States shareholder.’’. 

4 (b) FOREIGN TAX CREDIT.— 

5 (1) APPLICATION OF DEEMED PAID FOREIGN

6 TAX CREDIT.—Section 960 is amended adding at the 

7 end the following new subsection: 

8 ‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY

9 ATTRIBUTABLE TO TESTED INCOME.— 

10 ‘‘(1) IN GENERAL.—For purposes of this sub11 part, if any amount is includible in the gross income 

12 of a domestic corporation under section 951A, such 

13 domestic corporation shall be deemed to have paid 

14 foreign income taxes equal to 80 percent of the 

15 product of— 

16 ‘‘(A) such domestic corporation’s inclusion 

17 percentage, multiplied by 

18 ‘‘(B) the aggregate tested foreign income 

19 taxes paid or accrued by controlled foreign cor20 porations. 

21 ‘‘(2) INCLUSION PERCENTAGE.—For purposes 

22 of paragraph (1), the term ‘inclusion percentage’ 

23 means, with respect to any domestic corporation, the 

24 ratio (expressed as a percentage) of— 


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1 ‘‘(A) such corporation’s global intangible 

2 low-taxed income (as defined in section 

3 951A(b)), divided by 

4 ‘‘(B) the aggregate amount described in 

5 section 951A(c)(1)(A) with respect to such cor6 poration. 

7 ‘‘(3) TESTED FOREIGN INCOME TAXES.—For 

8 purposes of paragraph (1), the term ‘tested foreign 

9 income taxes’ means, with respect to any domestic 

10 corporation which is a United States shareholder of 

11 a controlled foreign corporation, the foreign income 

12 taxes paid or accrued by such foreign corporation 

13 which are properly attributable to the tested income 

14 of such foreign corporation taken into account by 

15 such domestic corporation under section 951A.’’. 

16 (2) APPLICATION OF FOREIGN TAX CREDIT

17 LIMITATION.— 

18 (A) SEPARATE BASKET FOR GLOBAL IN19 TANGIBLE LOW-TAXED INCOME.—Section 

20 904(d)(1) is amended by redesignating subpara21 graphs (A) and (B) as subparagraphs (B) and 

22 (C), respectively, and by inserting before sub23 paragraph (B) (as so redesignated) the fol24 lowing new subparagraph: 


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1 ‘‘(A) any amount includible in gross in2 come under section 951A (other than passive 

3 category income),’’. 

4 (B) EXCLUSION FROM GENERAL CAT5 EGORY INCOME.—Section 904(d)(2)(A)(ii) is 

6 amended by inserting ‘‘income described in 

7 paragraph (1)(A) and’’ before ‘‘passive category 

8 income’’. 

9 (C) NO CARRYOVER OR CARRYBACK OF EX10 CESS TAXES.—Section 904(c) is amended by 

11 adding at the end the following: ‘‘This sub12 section shall not apply to taxes paid or accrued 

13 with respect to amounts described in subsection 

14 (d)(1)(A).’’. 

15 (c) CLERICAL AMENDMENT .—The table of sections 

16 for subpart F of part III of subchapter N of chapter 1 

17 is amended by inserting after the item relating to section 

18 951 the following new item: 

‘‘Sec. 951A. Global intangible low-taxed income included in gross income of 

United States shareholders.’’. 

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

20 this section shall apply to taxable years of foreign corpora21 tions beginning after December 31, 2017, and to taxable 

22 years of United States shareholders in which or with which 

23 such taxable years of foreign corporations end. 


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1 SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTAN2 GIBLE INCOME AND GLOBAL INTANGIBLE 

3 LOW-TAXED INCOME. 

4 (a) IN GENERAL.—Part VIII of subchapter B of 

5 chapter 1 is amended by adding at the end the following 

6 new section: 

7 ‘‘SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND 

8 GLOBAL INTANGIBLE LOW-TAXED INCOME. 

9 ‘‘(a) ALLOWANCE OF DEDUCTION.— 

10 ‘‘(1) IN GENERAL.—In the case of a domestic 

11 corporation for any taxable year, there shall be al12 lowed as a deduction an amount equal to the sum 

13 of— 

14 ‘‘(A) 37.5 percent of the foreign-derived in15 tangible income of such domestic corporation 

16 for such taxable year, plus 

17 ‘‘(B) 50 percent of the global intangible 

18 low-taxed income amount (if any) which is in19 cluded in the gross income of such domestic 

20 corporation under section 951A for such taxable 

21 year. 

22 ‘‘(2) LIMITATION BASED ON TAXABLE IN23 COME.— 

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

25 year— 


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1 ‘‘(i) the sum of the foreign-derived in2 tangible income and the global intangible 

3 low-taxed income amount otherwise taken 

4 into account by the domestic corporation 

5 under paragraph (1), exceeds 

6 ‘‘(ii) the taxable income of the domes7 tic corporation (determined without regard 

8 to this section), 

9 then the amount of the foreign-derived intan10 gible income and the global intangible low-taxed 

11 income amount so taken into account shall be 

12 reduced as provided in subparagraph (B). 

13 ‘‘(B) REDUCTION.—For purposes of sub14 paragraph (A)— 

15 ‘‘(i) foreign-derived intangible income 

16 shall be reduced by an amount which bears 

17 the same ratio to the excess described in 

18 subparagraph (A) as such foreign-derived 

19 intangible income bears to the sum de20 scribed in subparagraph (A)(i), and 

21 ‘‘(ii) the global intangible low-taxed 

22 income amount shall be reduced by the re23 mainder of such excess. 

24 ‘‘(3) REDUCTION IN DEDUCTION FOR TAXABLE

25 YEARS AFTER 2025.—In the case of any taxable year 


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1 beginning after December 31, 2025, paragraph (1) 

2 shall be applied by substituting— 

3 ‘‘(A) ‘21.875 percent’ for ‘37.5 percent’ in 

4 subparagraph (A), and 

5 ‘‘(B) ‘37.5 percent’ for ‘50 percent’ in sub6 paragraph (B). 

7 ‘‘(b) FOREIGN-DERIVED INTANGIBLE INCOME.—For 

8 purposes of this section— 

9 ‘‘(1) IN GENERAL.—The foreign-derived intan10 gible income of any domestic corporation is the 

11 amount which bears the same ratio to the deemed 

12 intangible income of such corporation as— 

13 ‘‘(A) the foreign-derived deduction eligible 

14 income of such corporation, bears to 

15 ‘‘(B) the deduction eligible income of such 

16 corporation. 

17 ‘‘(2) DEEMED INTANGIBLE INCOME.—For pur18 poses of this subsection— 

19 ‘‘(A) IN GENERAL.—The term ‘deemed in20 tangible income’ means the excess (if any) of— 

21 ‘‘(i) the deduction eligible income of 

22 the domestic corporation, over 

23 ‘‘(ii) the deemed tangible income re24 turn of the corporation. 


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1 ‘‘(B) DEEMED TANGIBLE INCOME RE2 TURN.—The term ‘deemed tangible income re3 turn’ means, with respect to any corporation, 

4 an amount equal to 10 percent of the corpora5 tion’s qualified business asset investment (as 

6 defined in section 951A(d), determined by sub7 stituting ‘deduction eligible income’ for ‘tested 

8 income’ in paragraph (2) thereof). 

9 ‘‘(3) DEDUCTION ELIGIBLE INCOME.— 

10 ‘‘(A) IN GENERAL.—The term ‘deduction 

11 eligible income’ means, with respect to any do12 mestic corporation, the excess (if any) of— 

13 ‘‘(i) gross income of such corporation 

14 determined without regard to— 

15 ‘‘(I) the subpart F income of 

16 such corporation determined under 

17 section 951, 

18 ‘‘(II) the global intangible low19 taxed income determined under sec20 tion 951A, 

21 ‘‘(III) any financial services in22 come (as defined in section 

23 904(d)(2)(D)) of such corporation 

24 which is not described in clause (ii), 


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1 ‘‘(IV) any dividend received from 

2 a corporation which is a controlled 

3 foreign corporation of such domestic 

4 corporation, 

5 ‘‘(V) any domestic oil and gas ex6 traction income of such corporation, 

7 and 

8 ‘‘(VI) any foreign branch income 

9 (as defined in section 904(d)(2)(J)), 

10 over 

11 ‘‘(ii) the deductions (including taxes) 

12 properly allocable to such gross income 

13 under rules similar to the rules of section 

14 954(b)(5). 

15 ‘‘(B) DOMESTIC OIL AND GAS EXTRACTION

16 INCOME.—For purposes of subparagraph (A), 

17 the term ‘domestic oil and gas extraction in18 come’ means income described in section 

19 907(c)(1), determined by substituting ‘within 

20 the United States’ for ‘without the United 

21 States’. 

22 ‘‘(4) FOREIGN-DERIVED DEDUCTION ELIGIBLE

23 INCOME.—The term ‘foreign-derived deduction eligi24 ble income’ means, with respect to any taxpayer for 


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1 any taxable year, any deduction eligible income of 

2 such taxpayer which is derived in connection with— 

3 ‘‘(A) property— 

4 ‘‘(i) which is sold by the taxpayer to 

5 any person who is not a United States per6 son, and 

7 ‘‘(ii) which the taxpayer establishes to 

8 the satisfaction of the Secretary is for a 

9 foreign use, or 

10 ‘‘(B) services provided by the taxpayer 

11 which the taxpayer establishes to the satisfac12 tion of the Secretary are provided to any per13 son, or with respect to property, not located 

14 within the United States. 

15 ‘‘(5) RULES RELATING TO FOREIGN USE PROP16 ERTY OR SERVICES.—For purposes of this sub17 section— 

18 ‘‘(A) FOREIGN USE.—The term ‘foreign 

19 use’ means any use, consumption, or disposition 

20 which is not within the United States. 

21 ‘‘(B) PROPERTY OR SERVICES PROVIDED

22 TO DOMESTIC INTERMEDIARIES.— 

23 ‘‘(i) PROPERTY.—If a taxpayer sells 

24 property to another person (other than a 

25 related party) for further manufacture or 


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1 other modification within the United 

2 States, such property shall not be treated 

3 as sold for a foreign use even if such other 

4 person subsequently uses such property for 

5 a foreign use. 

6 ‘‘(ii) SERVICES.—If a taxpayer pro7 vides services to another person (other 

8 than a related party) located within the 

9 United States, such services shall not be 

10 treated as described in paragraph (4)(B) 

11 even if such other person uses such serv12 ices in providing services which are so de13 scribed. 

14 ‘‘(C) SPECIAL RULES WITH RESPECT TO

15 RELATED PARTY TRANSACTIONS.— 

16 ‘‘(i) SALES TO RELATED PARTIES.—If 

17 property is sold to a related party who is 

18 not a United States person, such sale shall 

19 not be treated as for a foreign use unless 

20 such property is sold by the related party 

21 to another person who is an unrelated 

22 party who is not a United States person 

23 and the taxpayer establishes to the satis24 faction of the Secretary that such property 

25 is for a foreign use. 


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1 ‘‘(ii) SERVICE PROVIDED TO RELATED

2 PARTIES.—If a service is provided to a re3 lated party who is not located in the 

4 United States, such service shall be not be 

5 treated described in subparagraph (A)(ii) 

6 unless the taxpayer established to the sat7 isfaction of the Secretary that such service 

8 is not substantially similar to services pro9 vided by such related party to persons lo10 cated within the United States. 

11 ‘‘(D) RELATED PARTY.—For purposes of 

12 this paragraph, the term ‘related party’ means 

13 any member of an affiliated group as defined in 

14 section 1504(a), determined— 

15 ‘‘(i) by substituting ‘more than 50 

16 percent’ for ‘at least 80 percent’ each place 

17 it appears, and 

18 ‘‘(ii) without regard to paragraphs (2) 

19 and (3) of section 1504(b). 

20 Any person (other than a corporation) shall be 

21 treated as a member of such group if such per22 son is controlled by members of such group (in23 cluding any entity treated as a member of such 

24 group by reason of this sentence) or controls 

25 any such member. For purposes of the preVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00441 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 ceding sentence, control shall be determined 

2 under the rules of section 954(d)(3). 

3 ‘‘(E) SOLD.—For purposes of this sub4 section, the terms ‘sold’, ‘sells’, and ‘sale’ shall 

5 include any lease, license, exchange, or other 

6 disposition. 

7 ‘‘(c) REGULATIONS.—The Secretary shall prescribe 

8 such regulations or other guidance as may be necessary 

9 or appropriate to carry out the provisions of this section.’’. 

10 (b) CONFORMING AMENDMENTS.— 

11 (1) Section 172(d), as amended by section 

12 13011, is amended by adding at the end the fol13 lowing new paragraph: 

14 ‘‘(10) DEDUCTION FOR FOREIGN-DERIVED IN15 TANGIBLE INCOME.—The deduction under section 

16 250 shall not be allowed.’’. 

17 (2) Section 246(b)(1) is amended— 

18 (A) by striking ‘‘and subsection (a) and (b) 

19 of section 245’’ the first place it appears and 

20 inserting ‘‘, subsection (a) and (b) of section 

21 245, and section 250’’, 

22 (B) by striking ‘‘and subsection (a) and 

23 (b) of section 245’’ the second place it appears 

24 and inserting ‘‘subsection (a) and (b) of section 

25 245, and 250’’. 


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1 (3) Section 469(i)(3)(F)(iii) is amended by 

2 striking ‘‘and 222’’ and inserting ‘‘222, and 250’’. 

3 (4) The table of sections for part VIII of sub4 chapter B of chapter 1 is amended by adding at the 

5 end the following new item: 

‘‘Sec. 250. Foreign-derived intangible income and global intangible low-taxed 

income.’’. 

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

7 this section shall apply to taxable years beginning after 

8 December 31, 2017. 

9 SEC. 14203. SPECIAL RULES FOR TRANSFERS OF INTAN10 GIBLE PROPERTY FROM CONTROLLED FOR11 EIGN CORPORATIONS TO UNITED STATES 

12 SHAREHOLDERS. 

13 (a) IN GENERAL.—Subpart F of part III of sub14 chapter N of chapter 1 is amended by adding at the end 

15 the following new section: 

16 ‘‘SEC. 966. TRANSFERS OF INTANGIBLE PROPERTY TO 

17 UNITED STATES SHAREHOLDERS. 

18 ‘‘(a) IN GENERAL.—In the case of any distribution 

19 of intangible property which is held by a controlled foreign 

20 corporation on the date of enactment of this section and 

21 which is described in subsection (b)— 

22 ‘‘(1) for purposes of part I of subchapter C and 

23 any other provision of this title specified by the Sec24 retary, the fair market value of such property on the 


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1 date of such distribution shall be treated as not ex2 ceeding the adjusted basis of such property imme3 diately before such distribution, and 

4 ‘‘(2) if the distribution is to a United States 

5 shareholder and is not a dividend— 

6 ‘‘(A) the United States shareholder’s ad7 justed basis in the stock of the controlled for8 eign corporation with respect to which such dis9 tribution is made shall be increased by the 

10 amount (if any) of such distribution which 

11 would (but for this subsection) be includible in 

12 gross income, and 

13 ‘‘(B) the adjusted basis of such property in 

14 the hands of such United States shareholder 

15 immediately after such distribution shall be 

16 such adjusted basis immediately before such 

17 distribution reduced by the amount of the in18 crease described in subparagraph (A). 

19 ‘‘(b) DISTRIBUTION.—A distribution is described in 

20 this section if the distribution is— 

21 ‘‘(1) received by a domestic corporation from a 

22 controlled foreign corporation with respect to which 

23 such corporation is a United States shareholder, and 

24 ‘‘(2) made by the controlled foreign corporation 

25 before the last day of the third taxable year of the 


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1 controlled foreign corporation beginning after De2 cember 31, 2017. 

3 ‘‘(c) INTANGIBLE PROPERTY.—For purposes of this 

4 subsection, the term ‘intangible property’ has the meaning 

5 given such term by section 936(h)(3)(B) or which is com6 puter software described in section 197(e)(3)(B).’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 197(f)(2)(B)(i) is amended by in9 serting ‘‘966(a),’’ after ‘‘731,’’. 

10 (2) The table of sections for subpart F of part 

11 III of subchapter N of chapter 1 is amended by add12 ing at the end the following new item: 

‘‘Sec. 966. Transfers of intangible property to United States shareholders.’’. 

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

14 this section shall apply to distributions made in taxable 

15 years of foreign corporations beginning after December 

16 31, 2017, and to taxable years of United States share17 holders in which or with which such taxable years of for18 eign corporations end. 

19 CHAPTER 2—OTHER MODIFICATIONS OF 

20 SUBPART F PROVISIONS 

21 SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE 

22 COMPANY OIL RELATED INCOME. 

23 (a) REPEAL.—Subsection (a) of section 954 is 

24 amended— 


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1 (1) by inserting ‘‘and’’ at the end of paragraph 

2 (2), 

3 (2) by striking the comma at the end of para4 graph (3) and inserting a period, and 

5 (3) by striking paragraph (5). 

6 (b) CONFORMING AMENDMENTS.— 

7 (1) Section 952(c)(1)(B)(iii) is amended by 

8 striking subclause (I) and redesignating subclauses 

9 (II) through (V) as subclauses (I) through (IV), re10 spectively. 

11 (2) Section 954(b) is amended— 

12 (A) by striking the second sentence of 

13 paragraph (4), 

14 (B) by striking ‘‘the foreign base company 

15 services income, and the foreign base company 

16 oil related income’’ in paragraph (5) and insert17 ing ‘‘and the foreign base company services in18 come’’, and 

19 (C) by striking paragraph (6). 

20 (3) Section 954 is amended by striking sub21 section (g). 

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

23 this section shall apply to taxable years of foreign corpora24 tions beginning after December 31, 2017, and to taxable 


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1 years of United States shareholders with or within which 

2 such taxable years of foreign corporations end. 

3 SEC. 14212. INFLATION ADJUSTMENT OF DE MINIMIS EX4 CEPTION FOR FOREIGN BASE COMPANY IN5 COME. 

6 (a) IN GENERAL.—Section 954(b)(3) is amended by 

7 adding at the end the following new subparagraph: 

8 ‘‘(D) INFLATION ADJUSTMENT.—In the 

9 case of any taxable year beginning after 2017, 

10 the dollar amount in subparagraph (A)(ii) shall 

11 be increased by an amount equal to— 

12 ‘‘(i) such dollar amount, multiplied by 

13 ‘‘(ii) the cost-of-living adjustment de14 termined under section 1(f)(3) for the cal15 endar year in which the taxable year be16 gins. 

17 Any increase determined under the preceding 

18 sentence shall be rounded to the nearest mul19 tiple of $50,000.’’. 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to taxable years of foreign corpora22 tions beginning after December 31, 2017, and to taxable 

23 years of United States shareholders in which or with which 

24 such taxable years of foreign corporations end. 


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1 SEC. 14213. REPEAL OF INCLUSION BASED ON WITH2 DRAWAL OF PREVIOUSLY EXCLUDED SUB3 PART F INCOME FROM QUALIFIED INVEST4 MENT. 

5 (a) IN GENERAL.—Subpart F of part III of sub6 chapter N of chapter 1 is amended by striking section 955. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1)(A) Section 951(a)(1)(A) is amended to read 

9 as follows: 

10 ‘‘(A) his pro rata share (determined under 

11 paragraph (2)) of the corporation’s subpart F 

12 income for such year, and’’. 

13 (B) Section 851(b) is amended by striking ‘‘sec14 tion 951(a)(1)(A)(i)’’ in the flush language at the 

15 end and inserting ‘‘section 951(a)(1)(A)’’. 

16 (C) Section 952(c)(1)(B)(i) is amended by 

17 striking ‘‘section 951(a)(1)(A)(i)’’ and inserting 

18 ‘‘section 951(a)(1)(A)’’. 

19 (D) Section 953(c)(1)(C) is amended by strik20 ing ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 

21 951(a)(1)(A)’’. 

22 (2) Section 951(a) is amended by striking para23 graph (3). 

24 (3) Section 953(d)(4)(B)(iv)(II) is amended by 

25 striking ‘‘or amounts referred to in clause (ii) or (iii) 

26 of section 951(a)(1)(A)’’. 


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1 (4) Section 964(b) is amended by striking ‘‘, 

2 955,’’. 

3 (5) Section 970 is amended by striking sub4 section (b). 

5 (6) The table of sections for subpart F of part 

6 III of subchapter N of chapter 1 is amended by 

7 striking the item relating to section 955. 

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

9 this section shall apply to taxable years of foreign corpora10 tions beginning after December 31, 2017, and to taxable 

11 years of United States shareholders in which or with which 

12 such taxable years of foreign corporations end. 

13 SEC. 14214. MODIFICATION OF STOCK ATTRIBUTION RULES 

14 FOR DETERMINING STATUS AS A CON15 TROLLED FOREIGN CORPORATION. 

16 (a) IN GENERAL.—Section 958(b) is amended— 

17 (1) by striking paragraph (4), and 

18 (2) by striking ‘‘Paragraphs (1) and (4)’’ in the 

19 last sentence and inserting ‘‘Paragraph (1)’’. 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to— 

22 (1) the last taxable year of foreign corporations 

23 beginning before January 1, 2018, and each subse24 quent taxable year of such foreign corporations, and 


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1 (2) taxable years of United States shareholders 

2 in which or with which such taxable years of foreign 

3 corporations end. 

4 SEC. 14215. MODIFICATION OF DEFINITION OF UNITED 

5 STATES SHAREHOLDER. 

6 (a) IN GENERAL.—Section 951(b) is amended by in7 serting ‘‘, or 10 percent or more of the total value of 

8 shares of all classes of stock of such foreign corporation’’ 

9 after ‘‘such foreign corporation’’. 

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

11 this section shall apply to taxable years of foreign corpora12 tions beginning after December 31, 2017, and to taxable 

13 years of United States shareholders with or within which 

14 such taxable years of foreign corporations end. 

15 SEC. 14216. ELIMINATION OF REQUIREMENT THAT COR16 PORATION MUST BE CONTROLLED FOR 30 

17 DAYS BEFORE SUBPART F INCLUSIONS 

18 APPLY. 

19 (a) IN GENERAL.—Section 951(a)(1) is amended by 

20 striking ‘‘for an uninterrupted period of 30 days or more’’ 

21 and inserting ‘‘at any time’’. 

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

23 this section shall apply to taxable years of foreign corpora24 tions beginning after December 31, 2017, and to taxable 


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1 years of United States shareholders with or within which 

2 such taxable years of foreign corporations end. 

3 SEC. 14217. LOOK-THRU RULE FOR RELATED CONTROLLED 

4 FOREIGN CORPORATIONS MADE PERMA5 NENT. 

6 (a) IN GENERAL.—Paragraph (6) of section 954(c) 

7 is amended by striking subparagraph (C). 

8 (b) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to taxable years of foreign corpora10 tions beginning after December 31, 2017, and to taxable 

11 years of United States shareholders in which or with which 

12 such taxable years of foreign corporations end. 

13 SEC. 14218. CORPORATIONS ELIGIBLE FOR DEDUCTION 

14 FOR DIVIDENDS FROM CONTROLLED FOR15 EIGN CORPORATIONS EXEMPT FROM SUB16 PART F INCLUSION FOR INVESTMENT IN 

17 UNITED STATES PROPERTY. 

18 (a) IN GENERAL.—Section 956(a) is amended by in19 serting ‘‘(other than a corporation)’’ after ‘‘United States 

20 shareholder’’ in the matter preceding paragraph (1). 

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

22 this section shall apply to taxable years of controlled for23 eign corporations ending after December 31, 2017, and 

24 to taxable years of United States shareholders with or 


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1 within which such taxable years of controlled foreign cor2 porations end. 

3 CHAPTER 3—PREVENTION OF BASE 

4 EROSION 

5 SEC. 14221. DENIAL OF DEDUCTION FOR INTEREST EX6 PENSE OF UNITED STATES SHAREHOLDERS 

7 WHICH ARE MEMBERS OF WORLDWIDE AF8 FILIATED GROUPS WITH EXCESS DOMESTIC 

9 INDEBTEDNESS. 

10 (a) IN GENERAL.—Section 163 is amended by redes11 ignating subsection (n) as subsection (o) and by inserting 

12 after subsection (m) the following new subsection: 

13 ‘‘(n) DISALLOWANCE OF DEDUCTION FOR INTEREST

14 EXPENSE OF UNITED STATES SHAREHOLDERS WHICH

15 ARE MEMBERS OF WORLDWIDE AFFILIATED GROUPS

16 WITH EXCESS DOMESTIC INDEBTEDNESS.— 

17 ‘‘(1) IN GENERAL.—In the case of any domestic 

18 corporation which is a member of a worldwide affili19 ated group, the deduction allowed under this chapter 

20 for interest paid or accrued by such domestic cor21 poration during the taxable year shall be reduced by 

22 the product of— 

23 ‘‘(A) the net interest expense of such do24 mestic corporation, multiplied by 


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1 ‘‘(B) the debt-to-equity differential per2 centage of such worldwide affiliated group. 

3 ‘‘(2) CARRYFORWARD.—Any amount disallowed 

4 under paragraph (1) for any taxable year shall be 

5 treated as interest paid or accrued in the succeeding 

6 taxable year. 

7 ‘‘(3) DEBT-TO-EQUITY DIFFERENTIAL PER8 CENTAGE.— 

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

10 subsection, the term ‘debt-to-equity differential 

11 percentage’ means, with respect to any world12 wide affiliated group, the percentage which the 

13 excess domestic indebtedness of such group 

14 bears to the total indebtedness of the domestic 

15 corporations which are members of such group. 

16 ‘‘(B) EXCESS DOMESTIC INDEBTED17 NESS.—For purposes of subparagraph (A), the 

18 term ‘excess domestic indebtedness’ means, with 

19 respect to any worldwide affiliated group, the 

20 excess (if any) of— 

21 ‘‘(i) the total indebtedness of the do22 mestic corporations which are members of 

23 such group, over 

24 ‘‘(ii) 110 percent of the amount which 

25 the total indebtedness of such domestic 


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1 corporations would be if the ratio of such 

2 indebtedness to the total equity of such do3 mestic corporations equaled the ratio 

4 which— 

5 ‘‘(I) the total indebtedness of 

6 such group, bears to 

7 ‘‘(II) the total equity of such 

8 group. 

9 ‘‘(C) TOTAL EQUITY.—For purposes of 

10 subparagraph (B), the term ‘total equity’ 

11 means, with respect to one or more corpora12 tions, the excess (if any) of— 

13 ‘‘(i) the money and all other assets of 

14 such corporations, over 

15 ‘‘(ii) the total indebtedness of such 

16 corporations. 

17 ‘‘(D) SPECIAL RULES FOR DETERMINING

18 DEBT AND EQUITY.— 

19 ‘‘(i) IN GENERAL.—For purposes of 

20 this paragraph— 

21 ‘‘(I) the amount taken into ac22 count with respect to any asset shall 

23 be the adjusted basis thereof for pur24 poses of determining gain, 


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1 ‘‘(II) the amount taken into ac2 count with respect to any indebted3 ness with original issue discount shall 

4 be its issue price plus the portion of 

5 the original issue discount previously 

6 accrued as determined under the rules 

7 of section 1272 (determined without 

8 regard to subsection (a)(7) or (b)(4) 

9 thereof), and 

10 ‘‘(III) there shall be such other 

11 adjustments as the Secretary shall by 

12 regulations prescribe. 

13 ‘‘(ii) INTRAGROUP DEBT AND EQUITY

14 INTERESTS DISREGARDED.—For purposes 

15 of this paragraph, the total indebtedness, 

16 and the assets, of any group of corpora17 tions shall be determined by treating all 

18 members of such group as one corporation. 

19 ‘‘(iii) DETERMINATION OF ASSETS OF

20 DOMESTIC GROUP.—For purposes of this 

21 paragraph, the assets of the domestic cor22 porations which are members of any world23 wide affiliated group shall be determined 

24 by disregarding any interest held by any 

25 such domestic corporation in any foreign 


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1 corporation which is a member of such 

2 group. 

3 ‘‘(4) OTHER DEFINITIONS.—For purposes of 

4 this subsection— 

5 ‘‘(A) WORLDWIDE AFFILIATED GROUP.— 

6 The term ‘worldwide affiliated group’ means a 

7 group consisting of the includible members of 

8 an affiliated group, as defined in section 

9 1504(a), determined— 

10 ‘‘(i) by substituting ‘more than 50 

11 percent’ for ‘at least 80 percent’ each place 

12 it appears in such section, and 

13 ‘‘(ii) without regard to paragraphs 

14 (2), (3), and (4) of section 1504(b). 

15 ‘‘(B) NET INTEREST EXPENSE.—The term 

16 ‘net interest expense’ means the excess (if any) 

17 of 

18 ‘‘(i) the interest paid or accrued by 

19 the taxpayer during the taxable year, over 

20 ‘‘(ii) the amount of interest includible 

21 in the gross income of such taxpayer for 

22 such taxable year. 

23 The Secretary shall by regulations provide for 

24 adjustments in determining the amount of net 

25 interest expense if necessary. 


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1 ‘‘(5) TREATMENT OF AFFILIATED GROUP.—For 

2 purposes of this subsection, all members of the same 

3 affiliated group (within the meaning of section 

4 1504(a) applied by substituting ‘more than 50 per5 cent’ for ‘at least 80 percent’ each place it appears) 

6 shall be treated as one taxpayer. 

7 ‘‘(6) REGULATIONS.—The Secretary shall pre8 scribe such regulations or other guidance as may be 

9 appropriate to carry out the purposes of this sub10 section, including regulations or other guidance— 

11 ‘‘(A) to prevent the avoidance of the pur12 poses of this subsection, 

13 ‘‘(B) providing such adjustments in the 

14 case of corporations which are members of an 

15 affiliated group as may be appropriate to carry 

16 out the purposes of this subsection, 

17 ‘‘(C) providing for the coordination of this 

18 subsection with section 884, 

19 ‘‘(D) providing for the reallocation of 

20 shares of partnership indebtedness, or distribu21 tive shares of the partnership’s interest income 

22 or interest expense, and 

23 ‘‘(E) providing for the coordination with 

24 the limitation under subsection (j).’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 14222. LIMITATIONS ON INCOME SHIFTING THROUGH 

5 INTANGIBLE PROPERTY TRANSFERS. 

6 (a) DEFINITION OF INTANGIBLE ASSET.—Section 

7 936(h)(3)(B) is amended— 

8 (1) by striking ‘‘or’’ at the end of clause (v), 

9 (2) by striking clause (vi) and inserting the fol10 lowing: 

11 ‘‘(vi) any goodwill, going concern 

12 value, or workforce in place (including its 

13 composition and terms and conditions 

14 (contractual or otherwise) of its employ15 ment); or 

16 ‘‘(vii) any other item the value or po17 tential value of which is not attributable to 

18 tangible property or the services of any in19 dividual.’’, and 

20 (3) by striking the flush language after clause 

21 (vii), as added by paragraph (2). 

22 (b) CLARIFICATION OF ALLOWABLE VALUATION

23 METHODS.— 


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1 (1) FOREIGN CORPORATIONS.—Section 

2 367(d)(2) is amended by adding at the end the fol3 lowing new subparagraph: 

4 ‘‘(D) REGULATORY AUTHORITY.—For pur5 poses of the last sentence of subparagraph (A), 

6 the Secretary shall require— 

7 ‘‘(i) the valuation of transfers of in8 tangible property, including intangible 

9 property transferred with other property or 

10 services, on an aggregate basis, or 

11 ‘‘(ii) the valuation of such a transfer 

12 on the basis of the realistic alternatives to 

13 such a transfer, 

14 if the Secretary determines that such basis is 

15 the most reliable means of valuation of such 

16 transfers.’’. 

17 (2) ALLOCATION AMONG TAXPAYERS.—Section 

18 482 is amended by adding at the end the following: 

19 ‘‘For purposes of this section, the Secretary shall re20 quire the valuation of transfers of intangible prop21 erty (including intangible property transferred with 

22 other property or services) on an aggregate basis or 

23 the valuation of such a transfer on the basis of the 

24 realistic alternatives to such a transfer, if the SecVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00459 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 retary determines that such basis is the most reli2 able means of valuation of such transfers.’’. 

3 (c) EFFECTIVE DATE.— 

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

5 this section shall apply to transfers in taxable years 

6 beginning after December 31, 2017. 

7 (2) NO INFERENCE.—Nothing in the amend8 ment made by subsection (a) shall be construed to 

9 create any inference with respect to the application 

10 of section 936(h)(3) of the Internal Revenue Code of 

11 1986, or the authority of the Secretary of the Treas12 ury to provide regulations for such application, with 

13 respect to taxable years beginning before January 1, 

14 2018. 

15 SEC. 14223. CERTAIN RELATED PARTY AMOUNTS PAID OR 

16 ACCRUED IN HYBRID TRANSACTIONS OR 

17 WITH HYBRID ENTITIES. 

18 (a) IN GENERAL.—Part IX of subchapter B of chap19 ter 1 is amended by inserting after section 267 the fol20 lowing: 

21 ‘‘SEC. 267A. CERTAIN RELATED PARTY AMOUNTS PAID OR 

22 ACCRUED IN HYBRID TRANSACTIONS OR 

23 WITH HYBRID ENTITIES. 

24 ‘‘(a) IN GENERAL.—No deduction shall be allowed 

25 under this chapter for any disqualified related party 


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1 amount paid or accrued pursuant to a hybrid transaction 

2 or by, or to, a hybrid entity. 

3 ‘‘(b) DISQUALIFIED RELATED PARTY AMOUNT.—For 

4 purposes of this section— 

5 ‘‘(1) DISQUALIFIED RELATED PARTY

6 AMOUNT.—The term ‘disqualified related party 

7 amount’ means any interest or royalty paid or ac8 crued to a related party to the extent that— 

9 ‘‘(A) such amount is not included in the 

10 income of such related party under the tax law 

11 of the country of which such related party is a 

12 resident for tax purposes or is subject to tax, 

13 or 

14 ‘‘(B) such related party is allowed a deduc15 tion with respect to such amount under the tax 

16 law of such country. 

17 Such term shall not include any payment to the ex18 tent such payment is included in the gross income 

19 of a United States shareholder under section 951(a). 

20 ‘‘(2) RELATED PARTY.—The term ‘related 

21 party’ means a related person as defined in section 

22 954(d)(3), except that such section shall be applied 

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1 eign corporation otherwise referred to in such sec2 tion. 

3 ‘‘(c) HYBRID TRANSACTION.—For purposes of this 

4 section, the term ‘hybrid transaction’ means any trans5 action, series of transactions, agreement, or instrument 

6 one or more payments with respect to which are treated 

7 as interest or royalties for purposes of this chapter and 

8 which are not so treated for purposes the tax law of the 

9 foreign country of which the recipient of such payment 

10 is resident for tax purposes or is subject to tax. 

11 ‘‘(d) HYBRID ENTITY.—For purposes of this section, 

12 the term ‘hybrid entity’ means any entity which is either— 

13 ‘‘(1) treated as fiscally transparent for purposes 

14 of this chapter but not so treated for purposes of the 

15 tax law of the foreign country of which the entity is 

16 resident for tax purposes or is subject to tax, or 

17 ‘‘(2) treated as fiscally transparent for purposes 

18 of such tax law but not so treated for purposes of 

19 this chapter. 

20 ‘‘(e) REGULATIONS.—The Secretary shall issue such 

21 regulations or other guidance as may be necessary or ap22 propriate to carry out the purposes of this section, includ23 ing regulations or other guidance providing for— 


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1 ‘‘(1) rules for treating certain conduit arrange2 ments which involve a hybrid transaction or a hybrid 

3 entity as subject to subsection (a), 

4 ‘‘(2) rules for the application of this section to 

5 foreign branches, 

6 ‘‘(3) rules for treating certain structured trans7 actions as subject to subsection (a), 

8 ‘‘(4) rules for treating a tax preference as an 

9 exclusion from income for purposes of applying sub10 section (b)(1) if such tax preference has the effect 

11 of reducing the generally applicable statutory rate by 

12 25 percent or more, 

13 ‘‘(5) rules for treating the entire amount of in14 terest or royalty paid or accrued to a related party 

15 as a disqualified related party amount if such 

16 amount is subject to a participation exemption sys17 tem or other system which provides for the exclusion 

18 or deduction of a substantial portion of such 

19 amount, 

20 ‘‘(6) rules for determining the tax residence of 

21 a foreign entity if the entity is otherwise considered 

22 a resident of more than one country or of no coun23 try, 

24 ‘‘(7) exceptions from subsection (a) with respect 

25 to— 


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1 ‘‘(A) cases in which the disqualified related 

2 party amount is taxed under the laws of a for3 eign country other than the country of which 

4 the related party is a resident for tax purposes, 

5 and 

6 ‘‘(B) other cases which the Secretary de7 termines do not present a risk of eroding the 

8 Federal tax base, 

9 ‘‘(8) requirements for record keeping and infor10 mation reporting in addition to any requirements 

11 imposed by section 6038A.’’. 

12 (b) CONFORMING AMENDMENT.—The table of sec13 tions for part IX of subchapter B of chapter 1 is amended 

14 by inserting after the item relating to section 267 the fol15 lowing new item: 

‘‘Sec. 267A. Certain related party amounts paid or accrued in hybrid transactions or with hybrid entities.’’. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2017. 

19 SEC. 14224. TERMINATION OF SPECIAL RULES FOR DOMES20 TIC INTERNATIONAL SALES CORPORATIONS. 

21 (a) IN GENERAL.—Part IV of subchapter N of chap22 ter 1 (relating to domestic international sales corpora23 tions) is amended by adding at the end the following new 

24 subpart: 


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1 ‘‘Subpart C—Termination 

‘‘Sec. 998. Termination of domestic international sales corporation provisions. 

2 ‘‘SEC. 998. TERMINATION OF DOMESTIC INTERNATIONAL 

3 SALES CORPORATION PROVISIONS. 

4 ‘‘(a) TERMINATION OF ELECTION.—Any election 

5 under section 992(b) in effect for a corporation’s last tax6 able year beginning in 2018 shall be terminated effective 

7 for such corporation’s next succeeding taxable year. 

8 ‘‘(b) NO NEW ELECTION.—No election may be made 

9 under section 992(b) for any taxable year beginning after 

10 December 31, 2018. 

11 ‘‘(c) EFFECT OF TERMINATION.—A shareholder of a 

12 corporation whose election is terminated by reason of sub13 section (a) shall be deemed to have received a distribution 

14 to which section 995(b)(2) applies for the first taxable 

15 year for which the termination is effective. Such distribu16 tion (or any actual distribution after termination to the 

17 extent paid out of the corporation’s accumulated DISC in18 come) shall not be treated as qualified dividend income 

19 (within the meaning of section 1(h)(11)(B)).’’. 

20 (b) CONFORMING AMENDMENT.—The table of con21 tents for part IV of subchapter N of chapter 1 is amended 

22 by adding at the end the following new item: 

‘‘SUBPART C—TERMINATION’’. 


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1 SEC. 14225. SHAREHOLDERS OF SURROGATE FOREIGN COR2 PORATIONS NOT ELIGIBLE FOR REDUCED 

3 RATE ON DIVIDENDS. 

4 (a) IN GENERAL.—Section 1(h)(11)(C)(iii) is amend5 ed— 

6 (1) by striking ‘‘shall not include any foreign 

7 corporation’’ and inserting ‘‘shall not include— 

8 ‘‘(I) any foreign corporation’’, 

9 (2) by striking the period at the end and insert10 ing ‘‘, and’’, and 

11 (3) by adding at the end the following new sub12 clause: 

13 ‘‘(II) any corporation which is a 

14 surrogate foreign corporation (as de15 fined in section 7874(a)(2)(B)) other 

16 than a foreign corporation which is 

17 treated as a domestic corporation 

18 under section 7874(b).’’. 

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

20 this section shall apply to dividends paid in taxable years 

21 beginning after December 31, 2017. 


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1 Subpart C—Modifications Related to Foreign Tax 

2 Credit System 

3 SEC. 14301. REPEAL OF SECTION 902 INDIRECT FOREIGN 

4 TAX CREDITS; DETERMINATION OF SECTION 

5 960 CREDIT ON CURRENT YEAR BASIS. 

6 (a) REPEAL OF SECTION 902 INDIRECT FOREIGN

7 TAX CREDITS.—Subpart A of part III of subchapter N 

8 of chapter 1 is amended by striking section 902. 

9 (b) DETERMINATION OF SECTION 960 CREDIT ON

10 CURRENT YEAR BASIS.—Section 960, as amended by sec11 tion 14201, is amended— 

12 (1) by striking subsection (c), by redesignating 

13 subsection (b) as subsection (c), by striking all that 

14 precedes subsection (c) (as so redesignated) and in15 serting the following: 

16 ‘‘SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLU17 SIONS. 

18 ‘‘(a) IN GENERAL.—For purposes of this subpart, if 

19 there is included in the gross income of a domestic cor20 poration any item of income under section 951(a)(1) with 

21 respect to any controlled foreign corporation with respect 

22 to which such domestic corporation is a United States 

23 shareholder, such domestic corporation shall be deemed to 

24 have paid so much of such foreign corporation’s foreign 

25 income taxes as are properly attributable to such item of 

26 income. 


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1 ‘‘(b) SPECIAL RULES FOR DISTRIBUTIONS FROM

2 PREVIOUSLY TAXED EARNINGS AND PROFITS.—For pur3 poses of this subpart— 

4 ‘‘(1) IN GENERAL.—If any portion of a dis5 tribution from a controlled foreign corporation to a 

6 domestic corporation which is a United States share7 holder with respect to such controlled foreign cor8 poration is excluded from gross income under section 

9 959(a), such domestic corporation shall be deemed 

10 to have paid so much of such foreign corporation’s 

11 foreign income taxes as— 

12 ‘‘(A) are properly attributable to such por13 tion, and 

14 ‘‘(B) have not been deemed to have to been 

15 paid by such domestic corporation under this 

16 section for the taxable year or any prior taxable 

17 year. 

18 ‘‘(2) TIERED CONTROLLED FOREIGN CORPORA19 TIONS.—If section 959(b) applies to any portion of 

20 a distribution from a controlled foreign corporation 

21 to another controlled foreign corporation, such con22 trolled foreign corporation shall be deemed to have 

23 paid so much of such other controlled foreign cor24 poration’s foreign income taxes as— 


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1 ‘‘(A) are properly attributable to such por2 tion, and 

3 ‘‘(B) have not been deemed to have been 

4 paid by a domestic corporation under this sec5 tion for any prior taxable year.’’, 

6 (2) and by adding after subsection (d) (as 

7 added by section 14201) the following new sub8 sections: 

9 ‘‘(e) FOREIGN INCOME TAXES.—The term ‘foreign 

10 income taxes’ means any income, war profits, or excess 

11 profits taxes paid or accrued to any foreign country or 

12 possession of the United States. 

13 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

14 such regulations or other guidance as may be necessary 

15 or appropriate to carry out the provisions of this section.’’. 

16 (c) CONFORMING AMENDMENTS.— 

17 (1) Section 78, as amended by section 14201, 

18 is amended to read as follows: 

19 ‘‘SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX 

20 CREDIT. 

21 ‘‘If a domestic corporation chooses to have the bene22 fits of subpart A of part III of subchapter N (relating 

23 to foreign tax credit) for any taxable year— 

24 ‘‘(1) an amount equal to the taxes deemed to 

25 be paid by such corporation under subsections (a) 


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1 and (b) of section 960 for such taxable year shall be 

2 treated for purposes of this title (other than section 

3 960) as an item of income required to be included 

4 in the gross income of such domestic corporation 

5 under section 951(a), and 

6 ‘‘(2) an amount equal to the aggregate tested 

7 foreign income taxes deemed paid by such corpora8 tion under section 960(d) (determined without re9 gard to the phrase ‘80 percent of’ in paragraph (1) 

10 thereof) shall be treated for purposes of this title 

11 (other than section 960) as an addition to the global 

12 intangible low-taxed income of such domestic cor13 poration under section 951A(a) for such taxable 

14 year.’’. 

15 (2) Paragraph (4) of section 245(a) is amended 

16 to read as follows: 

17 ‘‘(4) POST-1986 UNDISTRIBUTED EARNINGS.— 

18 The term ‘post-1986 undistributed earnings’ means 

19 the amount of the earnings and profits of the for20 eign corporation (computed in accordance with sec21 tions 964(a) and 986) accumulated in taxable years 

22 beginning after December 31, 1986— 

23 ‘‘(A) as of the close of the taxable year of 

24 the foreign corporation in which the dividend is 

25 distributed, and 


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1 ‘‘(B) without diminution by reason of divi2 dends distributed during such taxable year.’’. 

3 (3) Section 245(a)(10)(C) is amended by strik4 ing ‘‘902, 907, and 960’’ and inserting ‘‘907 and 

5 960’’. 

6 (4) Sections 535(b)(1) and 545(b)(1) are each 

7 amended by striking ‘‘section 902(a) or 960(a)(1)’’ 

8 and inserting ‘‘section 960’’. 

9 (5) Section 814(f)(1) is amended— 

10 (A) by striking subparagraph (B), and 

11 (B) by striking all that precedes ‘‘No in12 come’’ and inserting the following: 

13 ‘‘(1) TREATMENT OF FOREIGN TAXES.—’’. 

14 (6) Section 865(h)(1)(B) is amended by strik15 ing ‘‘902, 907,’’ and inserting ‘‘907’’. 

16 (7) Section 901(a) is amended by striking ‘‘sec17 tions 902 and 960’’ and inserting ‘‘section 960’’. 

18 (8) Section 901(e)(2) is amended by striking 

19 ‘‘but is not limited to—’’ and all that follows 

20 through ‘‘that portion’’ and inserting ‘‘but is not 

21 limited to that portion’’. 

22 (9) Section 901(f) is amended by striking ‘‘sec23 tions 902 and 960’’ and inserting ‘‘section 960’’. 

24 (10) Section 901(j)(1)(A) is amended by strik25 ing ‘‘902 or’’. 


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1 (11) Section 901(j)(1)(B) is amended by strik2 ing ‘‘sections 902 and 960’’ and inserting ‘‘section 

3 960’’. 

4 (12) Section 901(k)(2) is amended by striking 

5 ‘‘, 902,’’. 

6 (13) Section 901(k)(6) is amended by striking 

7 ‘‘902 or’’. 

8 (14) Section 901(m)(1) is amended by striking 

9 ‘‘relevant foreign assets—’’ and all that follows and 

10 inserting ‘‘relevant foreign assets shall not be taken 

11 into account in determining the credit allowed under 

12 subsection (a).’’. 

13 (15) Section 904(d)(6)(A) is amended by strik14 ing ‘‘902, 907,’’ and inserting ‘‘907’’. 

15 (16) Section 904(h)(10)(A) is amended by 

16 striking ‘‘sections 902, 907, and 960’’ and inserting 

17 ‘‘sections 907 and 960’’. 

18 (17) Section 904(k) is amended to read as fol19 lows: 

20 ‘‘(k) CROSS REFERENCES.—For increase of limita21 tion under subsection (a) for taxes paid with respect to 

22 amounts received which were included in the gross income 

23 of the taxpayer for a prior taxable year as a United States 

24 shareholder with respect to a controlled foreign corpora25 tion, see section 960(c).’’. 


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1 (18) Section 905(c)(1) is amended by striking 

2 the last sentence. 

3 (19) Section 905(c)(2)(B)(i) is amended to read 

4 as follows: 

5 ‘‘(i) shall be taken into account for 

6 the taxable year to which such taxes relate, 

7 and’’. 

8 (20) Section 906(a) is amended by striking ‘‘(or 

9 deemed, under section 902, paid or accrued during 

10 the taxable year)’’. 

11 (21) Section 906(b) is amended by striking 

12 paragraphs (4) and (5). 

13 (22) Section 907(b)(2)(B) is amended by strik14 ing ‘‘902 or’’. 

15 (23) Section 907(c)(3) is amended— 

16 (A) by striking subparagraph (A) and re17 designating subparagraphs (B) and (C) as sub18 paragraphs (A) and (B), respectively, and 

19 (B) by striking ‘‘section 960(a)’’ in sub20 paragraph (A) (as so redesignated) and insert21 ing ‘‘section 960’’. 

22 (24) Section 907(c)(5) is amended by striking 

23 ‘‘902 or’’. 

24 (25) Section 907(f)(2)(B)(i) is amended by 

25 striking ‘‘902 or’’. 


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1 (26) Section 908(a) is amended by striking 

2 ‘‘902 or’’. 

3 (27) Section 909(b) is amended— 

4 (A) by striking ‘‘section 902 corporation’’ 

5 in the matter preceding paragraph (1) and in6 serting ‘‘specified 10-percent owned foreign cor7 poration (as defined in section 245A(b))’’, 

8 (B) by striking ‘‘902 or’’ in paragraph (1), 

9 (C) by striking ‘‘by such section 902 cor10 poration’’ and all that follows in the matter fol11 lowing paragraph (2) and inserting ‘‘by such 

12 specified 10-percent owned foreign corporation 

13 or a domestic corporation which is a United 

14 States shareholder with respect to such speci15 fied 10-percent owned foreign corporation.’’, 

16 and 

17 (D) by striking ‘‘SECTION 902 CORPORA18 TIONS’’ in the heading thereof and inserting 

19 ‘‘SPECIFIED 10-PERCENT OWNED FOREIGN

20 CORPORATIONS’’. 

21 (28) Section 909(d) is amended by striking 

22 paragraph (5). 

23 (29) Section 958(a)(1) is amended by striking 

24 ‘‘960(a)(1)’’ and inserting ‘‘960’’. 


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1 (30) Section 959(d) is amended by striking 

2 ‘‘Except as provided in section 960(a)(3), any’’ and 

3 inserting ‘‘Any’’. 

4 (31) Section 959(e) is amended by striking 

5 ‘‘section 960(b)’’ and inserting ‘‘section 960(c)’’. 

6 (32) Section 1291(g)(2)(A) is amended by 

7 striking ‘‘any distribution—’’ and all that follows 

8 through ‘‘but only if’’ and inserting ‘‘any distribu9 tion, any withholding tax imposed with respect to 

10 such distribution, but only if’’. 

11 (33) Section 6038(c)(1)(B) is amended by 

12 striking ‘‘sections 902 (relating to foreign tax credit 

13 for corporate stockholder in foreign corporation) and 

14 960 (relating to special rules for foreign tax credit)’’ 

15 and inserting ‘‘section 960’’. 

16 (34) Section 6038(c)(4) is amended by striking 

17 subparagraph (C). 

18 (35) The table of sections for subpart A of part 

19 III of subchapter N of chapter 1 is amended by 

20 striking the item relating to section 902. 

21 (36) The table of sections for subpart F of part 

22 III of subchapter N of chapter 1 is amended by 

23 striking the item relating to section 960 and insert24 ing the following: 

‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’. 


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

2 this section shall apply to taxable years of foreign corpora3 tions beginning after December 31, 2017, and to taxable 

4 years of United States shareholders in which or with which 

5 such taxable years of foreign corporations end. 

6 SEC. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION 

7 BASKET FOR FOREIGN BRANCH INCOME. 

8 (a) IN GENERAL.—Section 904(d)(1), as amended by 

9 section 14201, is amended by redesignating subpara10 graphs (B) and (C) as subparagraphs (C) and (D), respec11 tively, and by inserting after subparagraph (A) the fol12 lowing new subparagraph: 

13 ‘‘(B) foreign branch income,’’. 

14 (b) FOREIGN BRANCH INCOME.— 

15 (1) IN GENERAL.—Section 904(d)(2) is amend16 ed by inserting after subparagraph (I) the following 

17 new subparagraph: 

18 ‘‘(J) FOREIGN BRANCH INCOME.— 

19 ‘‘(i) IN GENERAL.—The term ‘foreign 

20 branch income’ means the business profits 

21 of such United States person which are at22 tributable to 1 or more qualified business 

23 units (as defined in section 989(a)) in 1 or 

24 more foreign countries. For purposes of 

25 the preceding sentence, the amount of 


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1 business profits attributable to a qualified 

2 business unit shall be determined under 

3 rules established by the Secretary. 

4 ‘‘(ii) EXCEPTION.—Such term shall 

5 not include any income which is passive 

6 category income.’’. 

7 (2) CONFORMING AMENDMENT.—Section 

8 904(d)(2)(A)(ii), as amended by section 14201, is 

9 amended by striking ‘‘income described in paragraph 

10 (1)(A) and’’ and inserting ‘‘income described in 

11 paragraph (1)(A), foreign branch income, and’’. 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2017. 

15 SEC. 14303. ACCELERATION OF ELECTION TO ALLOCATE IN16 TEREST, ETC., ON A WORLDWIDE BASIS. 

17 (a) IN GENERAL.—Section 864(f)(6) is amended by 

18 striking ‘‘December 31, 2020’’ and inserting ‘‘December 

19 31, 2017’’. 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to taxable years beginning after 

22 December 31, 2017. 


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1 SEC. 14304. SOURCE OF INCOME FROM SALES OF INVEN2 TORY DETERMINED SOLELY ON BASIS OF 

3 PRODUCTION ACTIVITIES. 

4 (a) IN GENERAL.—Section 863(b) is amended by 

5 adding at the end the following: ‘‘Gains, profits, and in6 come from the sale or exchange of inventory property de7 scribed in paragraph (2) shall be allocated and appor8 tioned between sources within and without the United 

9 States solely on the basis of the production activities with 

10 respect to the property.’’. 

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

12 this section shall apply to taxable years beginning after 

13 December 31, 2017. 

14 PART II—INBOUND TRANSACTIONS 

15 SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX. 

16 (a) IMPOSITION OF TAX.—Subchapter A of chapter 

17 1 is amended by adding at the end the following new part: 

18 ‘‘PART VII—BASE EROSION AND ANTI-ABUSE TAX 

‘‘Sec. 59A. Tax on base erosion payments of taxpayers with substantial gross 

receipts. 

19 ‘‘SEC. 59A. TAX ON BASE EROSION PAYMENTS OF TAX20 PAYERS WITH SUBSTANTIAL GROSS RE21 CEIPTS. 

22 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

23 on each applicable taxpayer for any taxable year a tax 

24 equal to the base erosion minimum tax amount for the 


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1 taxable year. Such tax shall be in addition to any other 

2 tax imposed by this subtitle. 

3 ‘‘(b) BASE EROSION MINIMUM TAX AMOUNT.—For 

4 purposes of this section— 

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (2), the term ‘base erosion minimum tax 

7 amount’ means, with respect to any applicable tax8 payer for any taxable year, the excess (if any) of— 

9 ‘‘(A) an amount equal to 10 percent of the 

10 modified taxable income of such taxpayer for 

11 the taxable year, over 

12 ‘‘(B) an amount equal to the regular tax li13 ability (as defined in section 26(b)) of the tax14 payer for the taxable year, reduced (but not 

15 below zero) by the excess (if any) of— 

16 ‘‘(i) the credits allowed under this 

17 chapter against such regular tax liability, 

18 over 

19 ‘‘(ii) the credit allowed under section 

20 38 for the taxable year which is properly 

21 allocable to the research credit determined 

22 under section 41(a). 

23 ‘‘(2) MODIFICATIONS FOR TAXABLE YEARS BE24 GINNING AFTER 2025.—In the case of any taxable 


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1 year beginning after December 31, 2025, paragraph 

2 (1) shall be applied— 

3 ‘‘(A) by substituting ‘12.5 percent’ for ‘10 

4 percent’ in subparagraph (A) thereof, and 

5 ‘‘(B) by reducing (but not below zero) the 

6 regular tax liability (as defined in section 

7 26(b)) for purposes of subparagraph (B) there8 of by the aggregate amount of the credits al9 lowed under this chapter against such regular 

10 tax liability rather than the excess described in 

11 such subparagraph. 

12 ‘‘(c) MODIFIED TAXABLE INCOME.—For purposes of 

13 this section— 

14 ‘‘(1) IN GENERAL.—The term ‘modified taxable 

15 income’ means the taxable income of the taxpayer 

16 computed under this chapter for the taxable year, 

17 determined without regard to— 

18 ‘‘(A) any base erosion tax benefit with re19 spect to any base erosion payment, or 

20 ‘‘(B) the base erosion percentage of any 

21 net operating loss deduction allowed under sec22 tion 172 for the taxable year. 

23 ‘‘(2) BASE EROSION TAX BENEFIT.— 

24 ‘‘(A) IN GENERAL.—The term ‘base ero25 sion tax benefit’ means— 


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1 ‘‘(i) any deduction described in sub2 section (d)(1) which is allowed under this 

3 chapter for the taxable year with respect to 

4 any base erosion payment, 

5 ‘‘(ii) in the case of a base erosion pay6 ment described in subsection (d)(2), any 

7 deduction allowed under this chapter for 

8 the taxable year for depreciation (or amor9 tization in lieu of depreciation) with re10 spect to the property acquired with such 

11 payment, and 

12 ‘‘(iii) in the case of a base erosion 

13 payment described in subsection (d)(3), 

14 any reduction in gross receipts with re15 spect to such payment in computing gross 

16 income of the taxpayer for the taxable year 

17 for purposes of this chapter. 

18 ‘‘(B) TAX BENEFITS DISREGARDED IF TAX

19 WITHHELD ON BASE EROSION PAYMENT.— 

20 ‘‘(i) IN GENERAL.—Except as pro21 vided in clause (ii), any base erosion tax 

22 benefit attributable to any base erosion 

23 payment— 

24 ‘‘(I) on which tax is imposed by 

25 section 871 or 881, and 


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1 ‘‘(II) with respect to which tax 

2 has been deducted and withheld under 

3 section 1441 or 1442, 

4 shall not be taken into account in com5 puting modified taxable income under 

6 paragraph (1)(A) or the base erosion per7 centage under paragraph (4). 

8 ‘‘(ii) EXCEPTION.—The amount not 

9 taken into account in computing modified 

10 taxable income by reason of clause (i) shall 

11 be reduced under rules similar to the rules 

12 under section 163(j)(5)(B) (as in effect be13 fore the date of the enactment of the Tax 

14 Cuts and Jobs Act). 

15 ‘‘(3) SPECIAL RULES FOR DETERMINING INTER16 EST FOR WHICH DEDUCTION ALLOWED.—For pur17 poses of applying paragraph (1), in the case of a 

18 taxpayer to which subsection (j) or (n) of section 

19 163 applies for the taxable year, the reduction in the 

20 amount of interest for which a deduction is allowed 

21 by reason of such subsection shall be treated as allo22 cable first to interest paid or accrued to persons who 

23 are not related parties with respect to the taxpayer 

24 and then to such related parties. 


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1 ‘‘(4) BASE EROSION PERCENTAGE.—For pur2 poses of paragraph (1)(B)— 

3 ‘‘(A) IN GENERAL.—The term ‘base ero4 sion percentage’ means, for any taxable year, 

5 the percentage determined by dividing— 

6 ‘‘(i) the aggregate amount of base 

7 erosion tax benefits of the taxpayer for the 

8 taxable year, by 

9 ‘‘(ii) the aggregate amount of the de10 ductions allowable to the taxpayer under 

11 this chapter for the taxable year. 

12 ‘‘(B) SPECIAL RULES.—The amount under 

13 subparagraph (A)(ii) shall be determined— 

14 ‘‘(i) by taking into account base ero15 sion tax benefits described in clauses (i) 

16 and (ii) of paragraph (2)(A), and 

17 ‘‘(ii) by not taking into account any 

18 deduction allowed under section 172, 

19 245A, or 250 for the taxable year. 

20 ‘‘(d) BASE EROSION PAYMENT.—For purposes of 

21 this section— 

22 ‘‘(1) IN GENERAL.—The term ‘base erosion 

23 payment’ means any amount paid or accrued by the 

24 taxpayer to a foreign person which is a related party 


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1 of the taxpayer and with respect to which a deduc2 tion is allowable under this chapter. 

3 ‘‘(2) PURCHASE OF DEPRECIABLE PROPERTY.— 

4 Such term shall also include any amount paid or ac5 crued by the taxpayer to a foreign person which is 

6 a related party of the taxpayer in connection with 

7 the acquisition by the taxpayer from such person of 

8 property of a character subject to the allowance of 

9 depreciation (or amortization in lieu of depreciation). 

10 ‘‘(3) CERTAIN PAYMENTS TO EXPATRIATED EN11 TITIES.— 

12 ‘‘(A) IN GENERAL.—Such term shall also 

13 include any amount paid or accrued by the tax14 payer with respect to a person described in sub15 paragraph (B) which results in a reduction of 

16 the gross receipts of the taxpayer. 

17 ‘‘(B) PERSON DESCRIBED.—A person is 

18 described in this subparagraph if such person is 

19 a— 

20 ‘‘(i) surrogate foreign corporation 

21 which is a related party of the taxpayer, 

22 but only if such person first became a sur23 rogate foreign corporation after November 

24 9, 2017, or 


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1 ‘‘(ii) foreign person which is a mem2 ber of the same expanded affiliated group 

3 as the surrogate foreign corporation. 

4 ‘‘(C) DEFINITIONS.—For purposes of this 

5 paragraph— 

6 ‘‘(i) SURROGATE FOREIGN CORPORA7 TION.—The term ‘surrogate foreign cor8 poration’ has the meaning given such term 

9 by section 7874(a)(2) but does not include 

10 a foreign corporation treated as a domestic 

11 corporation under section 7874(b). 

12 ‘‘(ii) EXPANDED AFFILIATED

13 GROUP.—The term ‘expanded affiliated 

14 group’ has the meaning given such term by 

15 section 7874(c)(1). 

16 ‘‘(4) EXCEPTION FOR CERTAIN AMOUNTS WITH

17 RESPECT TO SERVICES.—Paragraph (1) shall not 

18 apply to any amount paid or accrued by a taxpayer 

19 for services if— 

20 ‘‘(A) such services are services which meet 

21 the requirements for eligibility for use of the 

22 services cost method under section 482 (deter23 mined without regard to the requirement that 

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1 damental risks of business success or failure), 

2 and 

3 ‘‘(B) such amount constitutes the total 

4 services cost with no markup. 

5 ‘‘(e) APPLICABLE TAXPAYER.—For purposes of this 

6 section— 

7 ‘‘(1) IN GENERAL.—The term ‘applicable tax8 payer’ means, with respect to any taxable year, a 

9 taxpayer— 

10 ‘‘(A) which is a corporation other than a 

11 regulated investment company, a real estate in12 vestment trust, or an S corporation, 

13 ‘‘(B) the average annual gross receipts of 

14 which for the 3-taxable-year period ending with 

15 the preceding taxable year are at least 

16 $500,000,000, and 

17 ‘‘(C) the base erosion percentage (as deter18 mined under subsection (c)(4)) of which for the 

19 taxable year is 4 percent or higher. 

20 ‘‘(2) GROSS RECEIPTS.— 

21 ‘‘(A) SPECIAL RULE FOR FOREIGN PER22 SONS.—In the case of a foreign person the 

23 gross receipts of which are taken into account 

24 for purposes of paragraph (1)(B), only gross re25 ceipts which are taken into account in deterVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00486 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 mining income which is effectively connected 

2 with the conduct of a trade or business within 

3 the United States shall be taken into account. 

4 In the case of a taxpayer which is a foreign per5 son, the preceding sentence shall not apply to 

6 the gross receipts of any United States person 

7 which are aggregated with the taxpayer’s gross 

8 receipts by reason of paragraph (3). 

9 ‘‘(B) OTHER RULES MADE APPLICABLE.— 

10 Rules similar to the rules of subparagraphs (B), 

11 (C), and (D) of section 448(c)(3) shall apply in 

12 determining gross receipts for purposes of this 

13 section. 

14 ‘‘(3) AGGREGATION RULES.—All persons treat15 ed as a single employer under subsection (a) of sec16 tion 52 shall be treated as 1 person for purposes of 

17 this subsection and subsection (c)(4), except that in 

18 applying section 1563 for purposes of section 52, the 

19 exception for foreign corporations under section 

20 1563(b)(2)(C) shall be disregarded. 

21 ‘‘(f) FOREIGN PERSON.—For purposes of this sec22 tion, the term ‘foreign person’ has the meaning given such 

23 term by section 6038A(c)(3). 

24 ‘‘(g) RELATED PARTY.—For purposes of this sec25 tion— 


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1 ‘‘(1) IN GENERAL.—The term ‘related party’ 

2 means, with respect to any applicable taxpayer— 

3 ‘‘(A) any 25-percent owner of the taxpayer, 

4 ‘‘(B) any person who is related (within the 

5 meaning of section 267(b) or 707(b)(1)) to the 

6 taxpayer or any 25-percent owner of the tax7 payer, and 

8 ‘‘(C) any other person who is related (with9 in the meaning of section 482) to the taxpayer. 

10 ‘‘(2) 25-PERCENT OWNER.—The term ‘25-per11 cent owner’ means, with respect to any corporation, 

12 any person who owns at least 25 percent of— 

13 ‘‘(A) the total voting power of all classes of 

14 stock of a corporation entitled to vote, or 

15 ‘‘(B) the total value of all classes of stock 

16 of such corporation. 

17 ‘‘(3) SECTION 318 TO APPLY.—Section 318 

18 shall apply for purposes of paragraphs (1) and (2), 

19 except that— 

20 ‘‘(A) ‘10 percent’ shall be substituted for 

21 ‘50 percent’ in section 318(a)(2)(C), and 

22 ‘‘(B) subparagraphs (A), (B), and (C) of 

23 section 318(a)(3) shall not be applied so as to 

24 consider a United States person as owning 


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1 stock which is owned by a person who is not a 

2 United States person. 

3 ‘‘(h) REGULATIONS.—The Secretary shall prescribe 

4 such regulations or other guidance as may be necessary 

5 or appropriate to carry out the provisions of this section, 

6 including regulations providing for such adjustments to 

7 the application of this section as are necessary to prevent 

8 the avoidance of the purposes of this section, including 

9 through— 

10 ‘‘(1) the use of unrelated persons, conduit 

11 transactions, or other intermediaries, or 

12 ‘‘(2) transactions or arrangements designed, in 

13 whole or in part— 

14 ‘‘(A) to characterize payments otherwise 

15 subject to this section as payments not subject 

16 to this section, or 

17 ‘‘(B) to substitute payments not subject to 

18 this section for payments otherwise subject to 

19 this section.’’. 

20 (b) REPORTING REQUIREMENTS AND PENALTIES.— 

21 (1) IN GENERAL.—Subsection (b) of section 

22 6038A is amended to read as follows: 

23 ‘‘(b) REQUIRED INFORMATION.— 

24 ‘‘(1) IN GENERAL.—For purposes of subsection 

25 (a), the information described in this subsection is 


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1 such information as the Secretary prescribes by reg2 ulations relating to— 

3 ‘‘(A) the name, principal place of business, 

4 nature of business, and country or countries in 

5 which organized or resident, of each person 

6 which— 

7 ‘‘(i) is a related party to the reporting 

8 corporation, and 

9 ‘‘(ii) had any transaction with the re10 porting corporation during its taxable year, 

11 ‘‘(B) the manner in which the reporting 

12 corporation is related to each person referred to 

13 in subparagraph (A), and 

14 ‘‘(C) transactions between the reporting 

15 corporation and each foreign person which is a 

16 related party to the reporting corporation. 

17 ‘‘(2) ADDITIONAL INFORMATION REGARDING

18 BASE EROSION PAYMENTS.—For purposes of sub19 section (a) and section 6038C, if the reporting cor20 poration or the foreign corporation to whom section 

21 6038C applies is an applicable taxpayer, the infor22 mation described in this subsection shall include— 

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1 ments, and base erosion tax benefits of the tax2 payer for purposes of section 59A for the tax3 able year, and 

4 ‘‘(B) such other information as the Sec5 retary determines necessary to carry out such 

6 section. 

7 For purposes of this paragraph, any term used in 

8 this paragraph which is also used in section 59A 

9 shall have the same meaning as when used in such 

10 section.’’. 

11 (2) INCREASE IN PENALTY.—Paragraphs (1) 

12 and (2) of section 6038A(d) are each amended by 

13 striking ‘‘$10,000’’ and inserting ‘‘$25,000’’. 

14 (c) DISALLOWANCE OF CREDITS AGAINST BASE

15 EROSION TAX.—Paragraph (2) of section 26(b) is amend16 ed by inserting after subparagraph (A) the following new 

17 subparagraph: 

18 ‘‘(B) section 59A (relating to base erosion 

19 and anti-abuse tax),’’. 

20 (d) CONFORMING AMENDMENTS.— 

21 (1) The table of parts for subchapter A of chap22 ter 1 is amended by adding after the item relating 

23 to part VI the following new item: 

‘‘Part VII. Base erosion and anti-abuse tax’’. 


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1 (2) Paragraph (1) of section 882(a), as amend2 ed by this Act, is amended by inserting ‘‘ or 59A,’’ 

3 after ‘‘section 11,’’. 

4 (3) Subparagraph (A) of section 6425(c)(1), as 

5 amended by sections 12001 and 13001, is amended 

6 to read as follows: 

7 ‘‘(A) the sum of— 

8 ‘‘(i) the tax imposed by section 11, or 

9 subchapter L of chapter 1, whichever is 

10 applicable, plus 

11 ‘‘(ii) the tax imposed by section 59A, 

12 over’’. 

13 (4)(A) Subparagraph (A) of section 6655(g)(1), 

14 as amended by sections 12001 and 13001, is amend15 ed by striking ‘‘plus’’ at the end of clause (i), by re16 designating clause (ii) as clause (iii), and by insert17 ing after clause (i) the following new clause: 

18 ‘‘(ii) the tax imposed by section 59A, 

19 plus’’. 

20 (B) Subparagraphs (A)(i) and (B)(i) of section 

21 6655(e)(2), as amended by section 13001, are each 

22 amended by inserting ‘‘and modified taxable income’’ 

23 after ‘‘taxable income’’. 


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1 (C) Subparagraph (B) of section 6655(e)(2) is 

2 amended by adding at the end the following new 

3 clause: 

4 ‘‘(iii) MODIFIED TAXABLE INCOME.— 

5 The term ‘modified taxable income’ has the 

6 meaning given such term by section 

7 59A(c)(1).’’. 

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

9 this section shall apply to base erosion payments (as de10 fined in section 59A(d) of the Internal Revenue Code of 

11 1986, as added by this section) paid or accrued in taxable 

12 years beginning after December 31, 2017. 

13 PART III—OTHER PROVISIONS 

14 SEC. 14501. TAXATION OF PASSENGER CRUISE GROSS IN15 COME OF FOREIGN CORPORATIONS AND 

16 NONRESIDENT ALIEN INDIVIDUALS. 

17 (a) IN GENERAL.—Section 882 is amended by redes18 ignating subsection (f) as subsection (g) and by inserting 

19 after subsection (e) the following new subsection: 

20 ‘‘(f) TREATMENT OF PASSENGER CRUISE GROSS IN21 COME.— 

22 ‘‘(1) IN GENERAL.—For purposes of this title, 

23 the effectively connected passenger cruise gross in24 come of a foreign corporation shall be treated as 


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1 gross income which is effectively connected with the 

2 conduct of a trade or business in the United States. 

3 ‘‘(2) EFFECTIVELY CONNECTED PASSENGER

4 CRUISE GROSS INCOME.—For purposes of this sub5 section, the term ‘effectively connected passenger 

6 cruise gross income’ means, with respect to the oper7 ation of any ship in a covered voyage, the United 

8 States territorial waters percentage of the gross in9 come (determined without regard to section 

10 883(a)(1)) derived from such operation, including 

11 any amount received with respect to the provision of 

12 any on- or off-board activities, services, or sales, 

13 with respect to passengers incidental to such oper14 ation (or with respect to any agreement with any 

15 person with respect to the provision of any such ac16 tivities, services, or sales). 

17 ‘‘(3) UNITED STATES TERRITORIAL WATERS

18 PERCENTAGE.—For purposes of this subsection— 

19 ‘‘(A) IN GENERAL.—The term ‘United 

20 States territorial waters percentage’ means, 

21 with respect to the operation of any ship in any 

22 covered voyage, the ratio (expressed as a per23 centage) of— 

24 ‘‘(i) the number of days during such 

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1 torial waters of the United States, divided 

2 by 

3 ‘‘(ii) the total number of days of such 

4 voyage. 

5 ‘‘(B) CALENDAR DAY RULE.—If a ship— 

6 ‘‘(i) is operated in a covered voyage, 

7 or 

8 ‘‘(ii) is operated in the territorial 

9 waters of the United States during a cov10 ered voyage, 

11 for any portion of a calendar day, such ship 

12 shall be treated as having operated in a covered 

13 voyage, or as having operated in such territorial 

14 waters, respectively, for the entirety of such 

15 day. 

16 ‘‘(C) TERRITORIAL WATERS.—The terri17 torial waters of the United States shall be 

18 treated as consisting of those waters which 

19 are— 

20 ‘‘(i) within the international boundary 

21 line between the United States and any 

22 contiguous foreign country, or 

23 ‘‘(ii) within 12 nautical miles from low 

24 tide on the coastline of the United States. 


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1 ‘‘(4) COVERED VOYAGE.—For purposes of this 

2 subsection— 

3 ‘‘(A) IN GENERAL.—The term ‘covered 

4 voyage’ has the meaning given such term by 

5 section 4472(1). 

6 ‘‘(B) ANTI-ABUSE RULE.—Except as oth7 erwise provided by the Secretary, if passengers 

8 embark a ship in the United States and more 

9 than 10 percent of such passengers disembark 

10 in the United States, the operation of such ship 

11 at all times between such events shall be treat12 ed as a covered voyage. Nothing in the pre13 ceding sentence shall preclude any operation of 

14 a ship (including any operation of a ship before 

15 or after such events) which would otherwise be 

16 treated as part of a covered voyage from being 

17 so treated. 

18 ‘‘(5) TREATMENT OF OTHERWISE EFFECTIVELY

19 CONNECTED INCOME.—Gross income which would, 

20 without regard to this subsection, be gross income 

21 which is effectively connected with the conduct of a 

22 trade or business in the United States— 

23 ‘‘(A) shall be so treated, and 

24 ‘‘(B) shall not be taken into account as 

25 gross income under paragraph (2).’’. 


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1 (b) APPLICATION TO NONRESIDENT ALIEN INDIVID2 UALS.—Section 871 is amended by redesignating sub3 section (n) as subsection (o) and by inserting after sub4 section (m) the following new subsection: 

5 ‘‘(n) TREATMENT OF PASSENGER CRUISE GROSS IN6 COME.— 

7 ‘‘(1) IN GENERAL.—For purposes of this title, 

8 the effectively connected passenger cruise gross in9 come of a nonresident alien individual shall be treat10 ed as gross income which is effectively connected 

11 with the conduct of a trade or business in the 

12 United States. 

13 ‘‘(2) DEFINITIONS AND SPECIAL RULES.—For 

14 purposes of this subsection— 

15 ‘‘(A) DEFINITIONS.—Terms used in this 

16 subsection which are also used in section 882(f) 

17 shall have the same meaning as when used in 

18 such section, except that section 882(f)(2) shall 

19 be applied by substituting ‘section 872(b)(1)’ 

20 for ‘section 883(a)(1)’. 

21 ‘‘(B) TREATMENT OF OTHERWISE EFFEC22 TIVELY CONNECTED INCOME.—Rules similar to 

23 the rules of section 882(f)(5) shall apply for 

24 purposes of this subsection.’’. 


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1 (c) COORDINATION WITH RECIPROCAL EXEMPTIONS

2 FOR SHIPPING INCOME.— 

3 (1) IN GENERAL.—Section 883(a)(1) is amend4 ed by striking ‘‘Gross income’’ and inserting ‘‘Ex5 cept as provided in section 882(f), gross income’’. 

6 (2) NONRESIDENT ALIEN INDIVIDUALS.—Sec7 tion 872(b)(1) is amended by striking ‘‘Gross in8 come’’ and inserting ‘‘Except as provided in section 

9 871(n), gross income’’. 

10 (d) COORDINATION WITH TAX ON GROSS TRANSPOR11 TATION INCOME.—Section 887(b)(4) is amended by add12 ing at the end the following new flush text: 

13 ‘‘The preceding sentence shall not apply to any 

14 United States source gross transportation income 

15 which is effectively connected passenger cruise gross 

16 income (within the meaning of section 871(n) or 

17 882(f)).’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 SEC. 14502. RESTRICTION ON INSURANCE BUSINESS EXCEP22 TION TO PASSIVE FOREIGN INVESTMENT 

23 COMPANY RULES. 

24 (a) IN GENERAL.—Section 1297(b)(2)(B) is amend25 ed to read as follows: 


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1 ‘‘(B) derived in the active conduct of an in2 surance business by a qualifying insurance cor3 poration (as defined in subsection (f)),’’. 

4 (b) QUALIFYING INSURANCE CORPORATION DE5 FINED.—Section 1297 is amended by adding at the end 

6 the following new subsection: 

7 ‘‘(f) QUALIFYING INSURANCE CORPORATION.—For 

8 purposes of subsection (b)(2)(B)— 

9 ‘‘(1) IN GENERAL.—The term ‘qualifying insur10 ance corporation’ means, with respect to any taxable 

11 year, a foreign corporation— 

12 ‘‘(A) which would be subject to tax under 

13 subchapter L if such corporation were a domes14 tic corporation, and 

15 ‘‘(B) the applicable insurance liabilities of 

16 which constitute more than 25 percent of its 

17 total assets, determined on the basis of such li18 abilities and assets as reported on the corpora19 tion’s applicable financial statement for the last 

20 year ending with or within the taxable year. 

21 ‘‘(2) ALTERNATIVE FACTS AND CIR22 CUMSTANCES TEST FOR CERTAIN CORPORATIONS.— 

23 If a corporation fails to qualify as a qualified insur24 ance corporation under paragraph (1) solely because 

25 the percentage determined under paragraph (1)(B) 


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1 is 25 percent or less, a United States person that 

2 owns stock in such corporation may elect to treat 

3 such stock as stock of a qualifying insurance cor4 poration if— 

5 ‘‘(A) the percentage so determined for the 

6 corporation is at least 10 percent, and 

7 ‘‘(B) under regulations provided by the 

8 Secretary, based on the applicable facts and cir9 cumstances— 

10 ‘‘(i) the corporation is predominantly 

11 engaged in an insurance business, and 

12 ‘‘(ii) such failure is due solely to run13 off-related or rating-related circumstances 

14 involving such insurance business. 

15 ‘‘(3) APPLICABLE INSURANCE LIABILITIES.— 

16 For purposes of this subsection— 

17 ‘‘(A) IN GENERAL.—The term ‘applicable 

18 insurance liabilities’ means, with respect to any 

19 life or property and casualty insurance busi20 ness— 

21 ‘‘(i) loss and loss adjustment ex22 penses, and 

23 ‘‘(ii) reserves (other than deficiency, 

24 contingency, or unearned premium re25 serves) for life and health insurance risks 


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1 and life and health insurance claims with 

2 respect to contracts providing coverage for 

3 mortality or morbidity risks. 

4 ‘‘(B) LIMITATIONS ON AMOUNT OF LIABIL5 ITIES.—Any amount determined under clause 

6 (i) or (ii) of subparagraph (A) shall not exceed 

7 the lesser of such amount— 

8 ‘‘(i) as reported to the applicable in9 surance regulatory body in the applicable 

10 financial statement described in paragraph 

11 (4)(A) (or, if less, the amount required by 

12 applicable law or regulation), or 

13 ‘‘(ii) as determined under regulations 

14 prescribed by the Secretary. 

15 ‘‘(4) OTHER DEFINITIONS AND RULES.—For 

16 purposes of this subsection— 

17 ‘‘(A) APPLICABLE FINANCIAL STATE18 MENT.—The term ‘applicable financial state19 ment’ means a statement for financial reporting 

20 purposes which— 

21 ‘‘(i) is made on the basis of generally 

22 accepted accounting principles, 

23 ‘‘(ii) is made on the basis of inter24 national financial reporting standards, but 


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1 only if there is no statement that meets 

2 the requirement of clause (i), or 

3 ‘‘(iii) except as otherwise provided by 

4 the Secretary in regulations, is the annual 

5 statement which is required to be filed 

6 with the applicable insurance regulatory 

7 body, but only if there is no statement 

8 which meets the requirements of clause (i) 

9 or (ii). 

10 ‘‘(B) APPLICABLE INSURANCE REGU11 LATORY BODY.—The term ‘applicable insurance 

12 regulatory body’ means, with respect to any in13 surance business, the entity established by law 

14 to license, authorize, or regulate such business 

15 and to which the statement described in sub16 paragraph (A) is provided.’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2017. 

20 SEC. 14503. REPEAL OF FAIR MARKET VALUE METHOD OF 

21 INTEREST EXPENSE APPORTIONMENT. 

22 (a) IN GENERAL.—Paragraph (2) of section 864(e) 

23 is amended to read as follows: 

24 ‘‘(2) GROSS INCOME AND FAIR MARKET VALUE

25 METHODS MAY NOT BE USED FOR INTEREST.—All 


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1 allocations and apportionments of interest expense 

2 shall be determined using the adjusted bases of as3 sets rather than on the basis of the fair market 

4 value of the assets or gross income.’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2017. 

8 SEC. 14504. MODIFICATION TO SOURCE RULES INVOLVING 

9 POSSESSIONS. 

10 (a) IN GENERAL.—Subsection (b)(2) of Section 937 

11 of the Internal Revenue Code of 1986 is amended by in12 serting ‘‘, but only to the extent such income is attrib13 utable to an office or fixed place of business within the 

14 United States (determined under the rules of Section 

15 864(c)(5))’’ before the period at the end. 

16 (b) SOURCE RULES FOR PERSONAL PROPERTY

17 SALES.—Subsection (j)(3) of section 865 of the Internal 

18 Revenue Code of 1986 is amended by inserting ‘‘932,’’ 

19 after ‘‘931,’’. 

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2018. 


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1 SEC. 14505. REPEAL OF EXCLUSION APPLICABLE TO CER2 TAIN PASSENGER AIRCRAFT OPERATED BY A 

3 FOREIGN CORPORATION. 

4 (a) IN GENERAL.—Section 883 is amended— 

5 (1) by striking ‘‘Gross income’’ in subsection 

6 (a)(2) and inserting ‘‘Except as provided in sub7 section (d), gross income’’, and 

8 (2) by adding at the end the following new sub9 section: 

10 ‘‘(d) EXCEPTION FOR AIRCRAFT OPERATED BY FOR11 EIGN CORPORATIONS.— 

12 ‘‘(1) IN GENERAL.—Subsection (a)(2) shall not 

13 apply to any corporation operating a passenger air14 line if— 

15 ‘‘(A) the corporation is organized in a for16 eign country the residents of which are not eli17 gible for a reduced rate of tax or an exemption 

18 from tax under section 881 or 882, and 

19 ‘‘(B) such foreign country has fewer than 

20 2 arrivals and departures, per week, from pas21 senger airline carriers which— 

22 ‘‘(i) are organized under the laws of 

23 the United States or any State, and 

24 ‘‘(ii) have annual gross operational 

25 revenues of more than $1,000,000,000. 


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1 For purposes of subparagraph (B), an aircraft that 

2 lands in one country and subsequently departs from 

3 that country shall be treated as having engaged in 

4 1 arrival and departure. 

5 ‘‘(2) INFLATION ADJUSTMENT.—In the case of 

6 any calendar year beginning after 2018, the dollar 

7 amount in subparagraph (A)(ii) shall be increased 

8 by an amount equal to— 

9 ‘‘(A) such dollar amount, multiplied by 

10 ‘‘(B) the cost-of-living adjustment deter11 mined under section 1(f)(3) for the calendar 

12 year, determined by substituting ‘calendar year 

13 2017’ for ‘calendar year 2016’ in subparagraph 

14 (A)(ii) thereof. 

15 Any increase determined under the preceding sen16 tence shall be rounded to the nearest multiple of 

17 $1,000,000.’’. 

18 (b) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 


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1 Subtitle E—Revenue Dependent 

2 Proposals 

3 SEC. 15001. REPEAL OF INCREASED LIMITATION ON NET 

4 OPERATING LOSSES. 

5 Section 172(a)(2), as amended by section 13302, is 

6 amended by striking ‘‘(80 percent, in the case of taxable 

7 years beginning after December 31, 2022)’’. 

8 SEC. 15002. REPEAL OF LIMITATION ON DEDUCTION FOR 

9 MEALS PROVIDED AT THE CONVENIENCE OF 

10 THE EMPLOYER. 

11 Section 274, as amended by section 13304, is amend12 ed by striking subsection (o) and redesignating subsection 

13 (p) as subsection (o). 

14 SEC. 15003. REPEAL OF REDUCED DEDUCTION FOR GLOBAL 

15 INTANGIBLE LOW-TAXED INCOME AND FOR16 EIGN-DERIVED INTANGIBLE INCOME. 

17 Section 250(a), as added by section 14202, is amend18 ed by striking paragraph (3). 

19 SEC. 15004. REPEAL OF MODIFICATIONS TO THE BASE ERO20 SION AND ANTI-ABUSE TAX. 

21 Section 59A(b), as added by section 14401, is amend22 ed to read as follows: 

23 ‘‘(b) BASE EROSION MINIMUM TAX AMOUNT.—For 

24 purposes of this section, the term ‘base erosion minimum 


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1 tax amount’ means, with respect to any applicable tax2 payer for any taxable year, the excess (if any) of— 

3 ‘‘(1) an amount equal to 10 percent of the 

4 modified taxable income of such taxpayer for the 

5 taxable year, over 

6 ‘‘(2) an amount equal to the regular tax liabil7 ity (as defined in section 26(b)) of the taxpayer for 

8 the taxable year, reduced (but not below zero) by the 

9 excess (if any) of— 

10 ‘‘(A) the credits allowed under this chapter 

11 against such regular tax liability, over 

12 ‘‘(B) the credit allowed under section 38 

13 for the taxable year which is properly allocable 

14 to the research credit determined under section 

15 41(a).’’. 

16 SEC. 15005. REPEAL OF AMORTIZATION OF RESEARCH AND 

17 EXPERIMENTAL EXPENDITURES. 

18 (a) IN GENERAL.—Section 174, as amended by sec19 tion 13206, is amended to read as follows: 

20 ‘‘SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES. 

21 ‘‘(a) TREATMENT AS EXPENSES.— 

22 ‘‘(1) IN GENERAL.—A taxpayer may treat re23 search or experimental expenditures which are paid 

24 or incurred by him during the taxable year in con25 nection with his trade or business as expenses which 


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1 are not chargeable to capital account. The expendi2 tures so treated shall be allowed as a deduction. 

3 ‘‘(2) WHEN METHOD MAY BE ADOPTED.— 

4 ‘‘(A) WITHOUT CONSENT.—A taxpayer 

5 may, without the consent of the Secretary, 

6 adopt the method provided in this subsection 

7 for his first taxable year for which expenditures 

8 described in paragraph (1) are paid or incurred. 

9 ‘‘(B) WITH CONSENT.—A taxpayer may, 

10 with the consent of the Secretary, adopt at any 

11 time the method provided in this subsection. 

12 ‘‘(3) SCOPE.—The method adopted under this 

13 subsection shall apply to all expenditures described 

14 in paragraph (1). The method adopted shall be ad15 hered to in computing taxable income for the taxable 

16 year and for all subsequent taxable years unless, 

17 with the approval of the Secretary, a change to a 

18 different method is authorized with respect to part 

19 or all of such expenditures. 

20 ‘‘(b) AMORTIZATION OF CERTAIN RESEARCH AND

21 EXPERIMENTAL EXPENDITURES.— 

22 ‘‘(1) IN GENERAL.—At the election of the tax23 payer, made in accordance with regulations pre24 scribed by the Secretary, research or experimental 

25 expenditures which are— 


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1 ‘‘(A) paid or incurred by the taxpayer in 

2 connection with his trade or business, 

3 ‘‘(B) not treated as expenses under sub4 section (a), and 

5 ‘‘(C) chargeable to capital account but not 

6 chargeable to property of a character which is 

7 subject to the allowance under section 167 (re8 lating to allowance for depreciation, etc.) or sec9 tion 611 (relating to allowance for depletion), 

10 may be treated as deferred expenses. In computing 

11 taxable income, such deferred expenses shall be al12 lowed as a deduction ratably over such period of not 

13 less than 60 months as may be selected by the tax14 payer (beginning with the month in which the tax15 payer first realizes benefits from such expenditures). 

16 Such deferred expenses are expenditures properly 

17 chargeable to capital account for purposes of section 

18 1016(a)(1) (relating to adjustments to basis of prop19 erty). 

20 ‘‘(2) TIME FOR AND SCOPE OF ELECTION.—The 

21 election provided by paragraph (1) may be made for 

22 any taxable year, but only if made not later than the 

23 time prescribed by law for filing the return for such 

24 taxable year (including extensions thereof). The 

25 method so elected, and the period selected by the 


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1 taxpayer, shall be adhered to in computing taxable 

2 income for the taxable year for which the election is 

3 made and for all subsequent taxable years unless, 

4 with the approval of the Secretary, a change to a 

5 different method (or to a different period) is author6 ized with respect to part or all of such expenditures. 

7 The election shall not apply to any expenditure paid 

8 or incurred during any taxable year before the tax9 able year for which the taxpayer makes the election. 

10 ‘‘(c) LAND AND OTHER PROPERTY.—This section 

11 shall not apply to any expenditure for the acquisition or 

12 improvement of land, or for the acquisition or improve13 ment of property to be used in connection with the re14 search or experimentation and of a character which is sub15 ject to the allowance under section 167 (relating to allow16 ance for depreciation, etc.) or section 611 (relating to al17 lowance for depletion); but for purposes of this section al18 lowances under section 167, and allowances under section 

19 611, shall be considered as expenditures. 

20 ‘‘(d) EXPLORATION EXPENDITURES.—This section 

21 shall not apply to any expenditure paid or incurred for 

22 the purpose of ascertaining the existence, location, extent, 

23 or quality of any deposit of ore or other mineral (including 

24 oil and gas). 


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1 ‘‘(e) ONLY REASONABLE RESEARCH EXPENDITURES

2 ELIGIBLE.—This section shall apply to a research or ex3 perimental expenditure only to the extent that the amount 

4 thereof is reasonable under the circumstances. 

5 ‘‘(f) CROSS REFERENCES.— 

6 ‘‘(1) For adjustments to basis of property for 

7 amounts allowed as deductions as deferred expenses 

8 under subsection (b), see section 1016(a)(14). 

9 ‘‘(2) For election of 10-year amortization of ex10 penditures allowable as a deduction under subsection 

11 (a), see section 59(e).’’. 

12 (b) CHANGE IN METHOD OF ACCOUNTING.—The 

13 amendments made by subsection (a) shall be treated as 

14 a change in method of accounting for purposes of section 

15 481 of the Internal Revenue Code of 1986 and— 

16 (1) such change shall be treated as initiated by 

17 the taxpayer, 

18 (2) such change shall be treated as made with 

19 the consent of the Secretary, and 

20 (3) such change shall be applied only on a cut21 off basis for any research or experimental expendi22 tures paid or incurred in taxable years beginning 

23 after December 31, 2025, and no adjustments under 

24 section 481(a) shall be made. 

25 (c) CONFORMING AMENDMENTS.— 


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1 (1) Section 41(d)(1)(A), as amended by section 

2 13206, is amended by striking ‘‘specified research or 

3 experimental expenditures under section 174’’ and 

4 inserting ‘‘expenses under section 174’’. 

5 (2) Subsection (c) of section 280C, as amended 

6 by section 13206, is amended— 

7 (A) by redesignating paragraphs (2) and 

8 (3) as paragraphs (3) and (4), respectively, and 

9 (B) by striking paragraph (1) and insert10 ing the following: 

11 ‘‘(1) IN GENERAL.—No deduction shall be al12 lowed for that portion of the qualified research ex13 penses (as defined in section 41(b)) or basic re14 search expenses (as defined in section 41(e)(2)) oth15 erwise allowable as a deduction for the taxable year 

16 which is equal to the amount of the credit deter17 mined for such taxable year under section 41(a). 

18 ‘‘(2) SIMILAR RULE WHERE TAXPAYER CAP19 ITALIZES RATHER THAN DEDUCTS EXPENSES.—If— 

20 ‘‘(A) the amount of the credit determined 

21 for the taxable year under section 41(a)(1), ex22 ceeds 

23 ‘‘(B) the amount allowable as a deduction 

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1 penses or basic research expenses (determined 

2 without regard to paragraph (1)), 

3 the amount chargeable to capital account for the 

4 taxable year for such expenses shall be reduced by 

5 the amount of such excess.’’, and 

6 (C) in paragraph (3)(A)(i), as redesignated 

7 by subparagraph (A), by striking ‘‘paragraph 

8 (1)’’ and inserting ‘‘paragraphs (1) and (2)’’. 

9 (3) The table of sections for part VI of sub10 chapter B of chapter 1, as amended by section 

11 13206, is amended by striking the item related to 

12 section 174 and inserting the following: 

‘‘Sec. 174. Research and experimental expenditures.’’. 

13 SEC. 15006. REPORTING. 

14 (a) IN GENERAL.—Subpart B of part III of sub15 chapter A of chapter 61, as amended by this Act, is 

16 amended by adding at the end the following new section: 

17 ‘‘SEC. 6050Z. TRANSACTION AFFECTING REVENUE DEPEND18 ENT PROPOSALS. 

19 ‘‘(a) RESEARCH AND EXPERIMENTAL EXPENDI20 TURES.—Any taxpayer who makes research and experi21 mental expenditures (within the meaning of section 174) 

22 during a taxable year shall make a return according to 

23 the forms and regulations prescribed by the Secretary, set24 ting forth the aggregate amount of such expenditures. 


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1 ‘‘(b) FOREIGN RELATED PARTY PAYMENTS.—Any 

2 taxpayer who makes a payment to a foreign person which 

3 is a related party (as such terms are defined in section 

4 59A) of the taxpayer during the taxable year shall make 

5 a return according to the forms and regulations prescribed 

6 by the Secretary, setting forth— 

7 ‘‘(1) the amount of such payments by type and 

8 separately stated, and 

9 ‘‘(2) any amount paid which results in a reduc10 tion of gross receipts to the taxpayer. 

11 ‘‘(c) FOREIGN-DERIVED INTANGIBLE INCOME.—Any 

12 taxpayer who has foreign-derived intangible income (as de13 fined in section 250(b)) for a taxable year shall make a 

14 return according to the forms and regulations prescribed 

15 by the Secretary, setting forth— 

16 ‘‘(1) the aggregate amount of such income, 

17 ‘‘(2) the amount of foreign-derived deduction el18 igible income (as defined in section 250(b)(4)), and 

19 ‘‘(3) a certification that any income described 

20 in paragraph (2) does not relate to the sale of prod21 ucts for any use, consumption, or disposition within 

22 the United States.’’. 

23 (b) PENALTY.—Section 6652, as amended by section 

24 13603, is amended by adding at the end the following new 

25 subsection: 


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1 ‘‘(q) FAILURE TO FILE WITH RESPECT TO TRANS2 ACTIONS AFFECTING REVENUE DEPENDENT PRO3 POSALS.—In the case of any failure to make a return re4 quired under section 6050Z containing the information re5 quired by such section on the date prescribed therefor (de6 termined with regard to any extension of time for filing), 

7 unless it is shown that such failure is due to reasonable 

8 cause, there shall be paid (on notice and demand by the 

9 Secretary and in the same manner as tax) by the person 

10 failing to file such return, an amount equal to $1,000 for 

11 each day during which such failure continues, but the total 

12 amount imposed under this subsection with respect to any 

13 return shall not exceed $250,000.’’. 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2024. 

17 SEC. 15007. EFFECTIVE DATE. 

18 (a) IN GENERAL.—The amendments made by this 

19 subtitle shall apply to taxable years beginning after De20 cember 31, 2025. 

21 (b) REVENUE REQUIREMENT.—Notwithstanding 

22 subsection (a), the amendments made by this subtitle shall 

23 not take effect unless— 

24 (1) the excess of— 


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1 (A) the cumulative aggregate on-budget 

2 Federal revenue from all sources for the period 

3 beginning on October 1, 2017, and ending on 

4 September 30, 2026, (as determined by the 

5 Secretary of the Treasury based on amounts re6 ported in the Financial Report of the United 

7 States), over 

8 (B) $27,487,000,000,000, is greater than 

9 or equal to 

10 (2) $900,000,000,000. 

11 TITLE II 

12 SEC. 20001. OIL AND GAS PROGRAM. 

13 (a) DEFINITIONS.—In this section: 

14 (1) COASTAL PLAIN.—The term ‘‘Coastal 

15 Plain’’ means the area identified as the 1002 Area 

16 on the plates prepared by the United States Geologi17 cal Survey entitled ‘‘ANWR Map – Plate 1’’ and 

18 ‘‘ANWR Map – Plate 2’’, dated October 24, 2017, 

19 and on file with the United States Geological Survey 

20 and the Office of the Solicitor of the Department of 

21 the Interior. 

22 (2) SECRETARY.—The term ‘‘Secretary’’ means 

23 the Secretary of the Interior, acting through the Bu24 reau of Land Management. 

25 (b) OIL AND GAS PROGRAM.— 


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1 (1) IN GENERAL.—Section 1003 of the Alaska 

2 National Interest Lands Conservation Act (16 

3 U.S.C. 3143) is repealed. 

4 (2) ESTABLISHMENT.— 

5 (A) IN GENERAL.—The Secretary shall es6 tablish and administer a competitive oil and gas 

7 program for the leasing, development, produc8 tion, and transportation of oil and gas in and 

9 from the Coastal Plain. 

10 (B) PURPOSES.—Section 303(2)(B) of the 

11 Alaska National Interest Lands Conservation 

12 Act (Public Law 96–487; 94 Stat. 2390) is 

13 amended— 

14 (i) in clause (iii), by striking ‘‘and’’ at 

15 the end; 

16 (ii) in clause (iv), by striking the pe17 riod at the end and inserting ‘‘; and’’; and 

18 (iii) by adding at the end the fol19 lowing: 

20 ‘‘(v) to provide for an oil and gas pro21 gram on the Coastal Plain.’’. 

22 (3) MANAGEMENT.—Except as otherwise pro23 vided in this section, the Secretary shall manage the 

24 oil and gas program on the Coastal Plain in accord25 ance with the Naval Petroleum Reserves Production 


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1 Act of 1976 (42 U.S.C. 6501 et seq.) (including reg2 ulations). 

3 (4) ROYALTIES.—Notwithstanding the Mineral 

4 Leasing Act (30 U.S.C. 181 et seq.), the royalty 

5 rate for leases issued pursuant to this section shall 

6 be 16.67 percent. 

7 (5) RECEIPTS.—Notwithstanding the Mineral 

8 Leasing Act (30 U.S.C. 181 et seq.), of the amount 

9 of adjusted bonus, rental, and royalty receipts de10 rived from the oil and gas program and operations 

11 on Federal land authorized under this section— 

12 (A) 50 percent shall be paid to the State 

13 of Alaska; and 

14 (B) the balance shall be deposited into the 

15 Treasury as miscellaneous receipts. 

16 (c) 2 LEASE SALES WITHIN 10 YEARS.— 

17 (1) REQUIREMENT.— 

18 (A) IN GENERAL.—Subject to subpara19 graph (B), the Secretary shall conduct not 

20 fewer than 2 lease sales area-wide under the oil 

21 and gas program under this section by not later 

22 than 10 years after the date of enactment of 

23 this Act. 

24 (B) SALE ACREAGES; SCHEDULE.— 


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1 (i) ACREAGES.—The Secretary shall 

2 offer for lease under the oil and gas pro3 gram under this section— 

4 (I) not fewer than 400,000 acres 

5 area-wide in each lease sale; and 

6 (II) those areas that have the 

7 highest potential for the discovery of 

8 hydrocarbons. 

9 (ii) SCHEDULE.—The Secretary shall 

10 offer— 

11 (I) the initial lease sale under the 

12 oil and gas program under this sec13 tion not later than 4 years after the 

14 date of enactment of this Act; and 

15 (II) a second lease sale under the 

16 oil and gas program under this sec17 tion not later than 7 years after the 

18 date of enactment of this Act. 

19 (2) RIGHTS-OF-WAY.—The Secretary shall issue 

20 any rights-of-way or easements across the Coastal 

21 Plain for the exploration, development, production, 

22 or transportation necessary to carry out this section. 

23 (3) SURFACE DEVELOPMENT.—In admin24 istering this section, the Secretary shall authorize up 

25 to 2,000 surface acres of Federal land on the CoastVerDate Sep 11 2014 00:08 Nov 29, 2017 Jkt 079200 PO 00000 Frm 00519 Fmt 6652 Sfmt 6201 E:\BILLS\S1.PCS S1

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1 al Plain to be covered by production and support fa2 cilities (including airstrips and any area covered by 

3 gravel berms or piers for support of pipelines) dur4 ing the term of the leases under the oil and gas pro5 gram under this section. 

6 SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED 

7 QUALIFIED OUTER CONTINENTAL SHELF 

8 REVENUES. 

9 Section 105(f)(1) of the Gulf of Mexico Energy Secu10 rity Act of 2006 (43 U.S.C. 1331 note; Public Law 109– 

11 432) is amended by striking ‘‘exceed $500,000,000 for 

12 each of fiscal years 2016 through 2055.’’ and inserting 

13 the following: ‘‘exceed— 

14 ‘‘(A) $500,000,000 for each of fiscal years 

15 2016 through 2019; 

16 ‘‘(B) $650,000,000 for each of fiscal years 

17 2020 and 2021; and 

18 ‘‘(C) $500,000,000 for each of fiscal years 

19 2022 through 2055.’’. 

20 SEC. 20003. STRATEGIC PETROLEUM RESERVE DRAWDOWN 

21 AND SALE. 

22 (a) DRAWDOWN AND SALE.— 

23 (1) IN GENERAL.—Notwithstanding section 161 

24 of the Energy Policy and Conservation Act (42 

25 U.S.C. 6241), except as provided in subsections (b) 


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1 and (c), the Secretary of Energy shall draw down 

2 and sell from the Strategic Petroleum Reserve 

3 5,000,000 barrels of crude oil during the period of 

4 fiscal years 2026 through 2027. 

5 (2) DEPOSIT OF AMOUNTS RECEIVED FROM

6 SALE.—Amounts received from a sale under para7 graph (1) shall be deposited in the general fund of 

8 the Treasury during the fiscal year in which the sale 

9 occurs. 

10 (b) EMERGENCY PROTECTION.—The Secretary of 

11 Energy shall not draw down and sell crude oil under sub12 section (a) in a quantity that would limit the authority 

13 to sell petroleum products under subsection (h) of section 

14 161 of the Energy Policy and Conservation Act (42 U.S.C. 

15 6241) in the full quantity authorized by that subsection. 

16 (c) LIMITATION.—The Secretary of Energy shall not 

17 drawdown or conduct sales of crude oil under subsection 

18 (a) after the date on which a total of $325,000,000 has 

19 been deposited in the general fund of the Treasury from 

20 sales authorized under that subsection. 


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Calendar No. 269 

115TH CONGRESS 

1ST SESSION S. 1 

A BILL 

To provide for reconciliation pursuant to title II of 

year 2018. the concurrent resolution on the budget for fiscal 

NOVEMBER 28, 2017 

Read twice and placed on the calendar 


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