`[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1 Enrolled Bill (ENR)]

        H.R.1

                     One Hundred Fifteenth Congress

                                 of the

                        United States of America


                          AT THE FIRST SESSION

          Begun and held at the City of Washington on Tuesday,
          the third day of January, two thousand and seventeen


                                 An Act


 
    To provide for reconciliation pursuant to titles II and V of the 
        concurrent resolution on the budget for fiscal year 2018.

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

                                TITLE I

SECTION 11000. SHORT TITLE, ETC.
    (a) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this title an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

                   Subtitle A--Individual Tax Reform

                        PART I--TAX RATE REFORM

SEC. 11001. MODIFICATION OF RATES.
    (a) In General.--Section 1 is amended by adding at the end the 
following new subsection:
    ``(j) Modifications for Taxable Years 2018 Through 2025.--
        ``(1) In general.--In the case of a taxable year beginning 
    after December 31, 2017, and before January 1, 2026--
            ``(A) subsection (i) shall not apply, and
            ``(B) this section (other than subsection (i)) shall be 
        applied as provided in paragraphs (2) through (6).
        ``(2) Rate tables.--
            ``(A) Married individuals filing joint returns and 
        surviving spouses.--The following table shall be applied in 
        lieu of the table contained in subsection (a):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $19,050.....................  10% of taxable income.
Over $19,050 but not over $77,400....  $1,905, plus 12% of the excess
                                        over $19,050.
Over $77,400 but not over $165,000...  $8,907, plus 22% of the excess
                                        over $77,400.
Over $165,000 but not over $315,000..  $28,179, plus 24% of the excess
                                        over $165,000.
Over $315,000 but not over $400,000..  $64,179, plus 32% of the excess
                                        over $315,000.
Over $400,000 but not over $600,000..  $91,379, plus 35% of the excess
                                        over $400,000.
Over $600,000........................  $161,379, plus 37% of the excess
                                        over $600,000.


            ``(B) Heads of households.--The following table shall be 
        applied in lieu of the table contained in subsection (b):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $13,600.....................  10% of taxable income.
Over $13,600 but not over $51,800....  $1,360, plus 12% of the excess
                                        over $13,600.
Over $51,800 but not over $82,500....  $5,944, plus 22% of the excess
                                        over $51,800.
Over $82,500 but not over $157,500...  $12,698, plus 24% of the excess
                                        over $82,500.
Over $157,500 but not over $200,000..  $30,698, plus 32% of the excess
                                        over $157,500.
Over $200,000 but not over $500,000..  $44,298, plus 35% of the excess
                                        over $200,000.
Over $500,000........................  $149,298, plus 37% of the excess
                                        over $500,000.


            ``(C) Unmarried individuals other than surviving spouses 
        and heads of households.--The following table shall be applied 
        in lieu of the table contained in subsection (c):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $9,525......................  10% of taxable income.
Over $9,525 but not over $38,700.....  $952.50, plus 12% of the excess
                                        over $9,525.
Over $38,700 but not over $82,500....  $4,453.50, plus 22% of the excess
                                        over $38,700.
Over $82,500 but not over $157,500...  $14,089.50, plus 24% of the
                                        excess over $82,500.
Over $157,500 but not over $200,000..  $32,089.50, plus 32% of the
                                        excess over $157,500.
Over $200,000 but not over $500,000..  $45,689.50, plus 35% of the
                                        excess over $200,000.
Over $500,000........................  $150,689.50, plus 37% of the
                                        excess over $500,000.


            ``(D) Married individuals filing separate returns.--The 
        following table shall be applied in lieu of the table contained 
        in subsection (d):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $9,525......................  10% of taxable income.
Over $9,525 but not over $38,700.....  $952.50, plus 12% of the excess
                                        over $9,525.
Over $38,700 but not over $82,500....  $4,453.50, plus 22% of the excess
                                        over $38,700.
Over $82,500 but not over $157,500...  $14,089.50, plus 24% of the
                                        excess over $82,500.
Over $157,500 but not over $200,000..  $32,089.50, plus 32% of the
                                        excess over $157,500.
Over $200,000 but not over $300,000..  $45,689.50, plus 35% of the
                                        excess over $200,000.
Over $300,000........................  $80,689.50, plus 37% of the
                                        excess over $300,000.


            ``(E) Estates and trusts.--The following table shall be 
        applied in lieu of the table contained in subsection (e):


 
       ``If taxable income is:                    The tax is:
------------------------------------------------------------------------
Not over $2,550......................  10% of taxable income.
Over $2,550 but not over $9,150......  $255, plus 24% of the excess over
                                        $2,550.
Over $9,150 but not over $12,500.....  $1,839, plus 35% of the excess
                                        over $9,150.
Over $12,500.........................  $3,011.50, plus 37% of the excess
                                        over $12,500.


            ``(F) References to rate tables.--Any reference in this 
        title to a rate of tax under subsection (c) shall be treated as 
        a reference to the corresponding rate bracket under 
        subparagraph (C) of this paragraph, except that the reference 
        in section 3402(q)(1) to the third lowest rate of tax 
        applicable under subsection (c) shall be treated as a reference 
        to the fourth lowest rate of tax under subparagraph (C).
        ``(3) Adjustments.--
            ``(A) No adjustment in 2018.--The tables contained in 
        paragraph (2) shall apply without adjustment for taxable years 
        beginning after December 31, 2017, and before January 1, 2019.
            ``(B) Subsequent years.--For taxable years beginning after 
        December 31, 2018, the Secretary shall prescribe tables which 
        shall apply in lieu of the tables contained in paragraph (2) in 
        the same manner as under paragraphs (1) and (2) of subsection 
        (f) (applied without regard to clauses (i) and (ii) of 
        subsection (f)(2)(A)), except that in prescribing such tables--
                ``(i) subsection (f)(3) shall be applied by 
            substituting `calendar year 2017' for `calendar year 2016' 
            in subparagraph (A)(ii) thereof,
                ``(ii) subsection (f)(7)(B) shall apply to any 
            unmarried individual other than a surviving spouse or head 
            of household, and
                ``(iii) subsection (f)(8) shall not apply.
        ``(4) Special rules for certain children with unearned 
    income.--
            ``(A) In general.--In the case of a child to whom 
        subsection (g) applies for the taxable year, the rules of 
        subparagraphs (B) and (C) shall apply in lieu of the rule under 
        subsection (g)(1).
            ``(B) Modifications to applicable rate brackets.--In 
        determining the amount of tax imposed by this section for the 
        taxable year on a child described in subparagraph (A), the 
        income tax table otherwise applicable under this subsection to 
        the child shall be applied with the following modifications:
                ``(i) 24-percent bracket.--The maximum taxable income 
            which is taxed at a rate below 24 percent shall not be more 
            than the sum of--

                    ``(I) the earned taxable income of such child, plus
                    ``(II) the minimum taxable income for the 24-
                percent bracket in the table under paragraph (2)(E) (as 
                adjusted under paragraph (3)) for the taxable year.

                ``(ii) 35-percent bracket.--The maximum taxable income 
            which is taxed at a rate below 35 percent shall not be more 
            than the sum of--

                    ``(I) the earned taxable income of such child, plus
                    ``(II) the minimum taxable income for the 35-
                percent bracket in the table under paragraph (2)(E) (as 
                adjusted under paragraph (3)) for the taxable year.

                ``(iii) 37-percent bracket.--The maximum taxable income 
            which is taxed at a rate below 37 percent shall not be more 
            than the sum of--

                    ``(I) the earned taxable income of such child, plus
                    ``(II) the minimum taxable income for the 37-
                percent bracket in the table under paragraph (2)(E) (as 
                adjusted under paragraph (3)) for the taxable year.

            ``(C) Coordination with capital gains rates.--For purposes 
        of applying section 1(h) (after the modifications under 
        paragraph (5)(A))--
                ``(i) the maximum zero rate amount shall not be more 
            than the sum of--

                    ``(I) the earned taxable income of such child, plus
                    ``(II) the amount in effect under paragraph 
                (5)(B)(i)(IV) for the taxable year, and

                ``(ii) the maximum 15-percent rate amount shall not be 
            more than the sum of--

                    ``(I) the earned taxable income of such child, plus
                    ``(II) the amount in effect under paragraph 
                (5)(B)(ii)(IV) for the taxable year.

            ``(D) Earned taxable income.--For purposes of this 
        paragraph, the term `earned taxable income' means, with respect 
        to any child for any taxable year, the taxable income of such 
        child reduced (but not below zero) by the net unearned income 
        (as defined in subsection (g)(4)) of such child.
        ``(5) Application of current income tax brackets to capital 
    gains brackets.--
            ``(A) In general.--Section 1(h)(1) shall be applied--
                ``(i) by substituting `below the maximum zero rate 
            amount' for `which would (without regard to this paragraph) 
            be taxed at a rate below 25 percent' in subparagraph 
            (B)(i), and
                ``(ii) by substituting `below the maximum 15-percent 
            rate amount' for `which would (without regard to this 
            paragraph) be taxed at a rate below 39.6 percent' in 
            subparagraph (C)(ii)(I).
            ``(B) Maximum amounts defined.--For purposes of applying 
        section 1(h) with the modifications described in subparagraph 
        (A)--
                ``(i) Maximum zero rate amount.--The maximum zero rate 
            amount shall be--

                    ``(I) in the case of a joint return or surviving 
                spouse, $77,200,
                    ``(II) in the case of an individual who is a head 
                of household (as defined in section 2(b)), $51,700,
                    ``(III) in the case of any other individual (other 
                than an estate or trust), an amount equal to \1/2\ of 
                the amount in effect for the taxable year under 
                subclause (I), and
                    ``(IV) in the case of an estate or trust, $2,600.

                ``(ii) Maximum 15-percent rate amount.--The maximum 15-
            percent rate amount shall be--

                    ``(I) in the case of a joint return or surviving 
                spouse, $479,000 (\1/2\ such amount in the case of a 
                married individual filing a separate return),
                    ``(II) in the case of an individual who is the head 
                of a household (as defined in section 2(b)), $452,400,
                    ``(III) in the case of any other individual (other 
                than an estate or trust), $425,800, and
                    ``(IV) in the case of an estate or trust, $12,700.

            ``(C) Inflation adjustment.--In the case of any taxable 
        year beginning after 2018, each of the dollar amounts in 
        clauses (i) and (ii) of subparagraph (B) shall be increased by 
        an amount equal to--
                ``(i) such dollar amount, multiplied by
                ``(ii) the cost-of-living adjustment determined under 
            subsection (f)(3) for the calendar year in which the 
            taxable year begins, determined by substituting `calendar 
            year 2017' for `calendar year 2016' in subparagraph (A)(ii) 
            thereof.
        If any increase under this subparagraph is not a multiple of 
        $50, such increase shall be rounded to the next lowest multiple 
        of $50.
        ``(6) Section 15 not to apply.--Section 15 shall not apply to 
    any change in a rate of tax by reason of this subsection.''.
    (b) Due Diligence Tax Preparer Requirement With Respect to Head of 
Household Filing Status.--Subsection (g) of section 6695 is amended to 
read as follows:
    ``(g) Failure to Be Diligent in Determining Eligibility for Certain 
Tax Benefits.--Any person who is a tax return preparer with respect to 
any return or claim for refund who fails to comply with due diligence 
requirements imposed by the Secretary by regulations with respect to 
determining--
        ``(1) eligibility to file as a head of household (as defined in 
    section 2(b)) on the return, or
        ``(2) eligibility for, or the amount of, the credit allowable 
    by section 24, 25A(a)(1), or 32,
shall pay a penalty of $500 for each such failure.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED CPI.
    (a) In General.--Subsection (f) of section 1 is amended by striking 
paragraph (3) and by inserting after paragraph (2) the following new 
paragraph:
        ``(3) Cost-of-living adjustment.--For purposes of this 
    subsection--
            ``(A) In general.--The cost-of-living adjustment for any 
        calendar year is the percentage (if any) by which--
                ``(i) the C-CPI-U for the preceding calendar year, 
            exceeds
                ``(ii) the CPI for calendar year 2016, multiplied by 
            the amount determined under subparagraph (B).
            ``(B) Amount determined.--The amount determined under this 
        clause is the amount obtained by dividing--
                ``(i) the C-CPI-U for calendar year 2016, by
                ``(ii) the CPI for calendar year 2016.
            ``(C) Special rule for adjustments with a base year after 
        2016.--For purposes of any provision of this title which 
        provides for the substitution of a year after 2016 for `2016' 
        in subparagraph (A)(ii), subparagraph (A) shall be applied by 
        substituting `the C-CPI-U for calendar year 2016' for `the CPI 
        for calendar year 2016' and all that follows in clause (ii) 
        thereof.''.
    (b) C-CPI-U.--Subsection (f) of section 1 is amended by striking 
paragraph (7), by redesignating paragraph (6) as paragraph (7), and by 
inserting after paragraph (5) the following new paragraph:
        ``(6) C-CPI-U.--For purposes of this subsection--
            ``(A) In general.--The term `C-CPI-U' means the Chained 
        Consumer Price Index for All Urban Consumers (as published by 
        the Bureau of Labor Statistics of the Department of Labor). The 
        values of the Chained Consumer Price Index for All Urban 
        Consumers taken into account for purposes of determining the 
        cost-of-living adjustment for any calendar year under this 
        subsection shall be the latest values so published as of the 
        date on which such Bureau publishes the initial value of the 
        Chained Consumer Price Index for All Urban Consumers for the 
        month of August for the preceding calendar year.
            ``(B) Determination for calendar year.--The C-CPI-U for any 
        calendar year is the average of the C-CPI-U as of the close of 
        the 12-month period ending on August 31 of such calendar 
        year.''.
    (c) Application to Permanent Tax Tables.--
        (1) In general.--Section 1(f)(2)(A) is amended to read as 
    follows:
            ``(A) except as provided in paragraph (8), by increasing 
        the minimum and maximum dollar amounts for each bracket for 
        which a tax is imposed under such table by the cost-of-living 
        adjustment for such calendar year, determined--
                ``(i) except as provided in clause (ii), by 
            substituting `1992' for `2016' in paragraph (3)(A)(ii), and
                ``(ii) in the case of adjustments to the dollar amounts 
            at which the 36 percent rate bracket begins or at which the 
            39.6 percent rate bracket begins, by substituting `1993' 
            for `2016' in paragraph (3)(A)(ii),''.
        (2) Conforming amendments.--Section 1(i) is amended--
            (A) by striking ``for `1992' in subparagraph (B)'' in 
        paragraph (1)(C) and inserting ``for `2016' in subparagraph 
        (A)(ii)'', and
            (B) by striking ``subsection (f)(3)(B) shall be applied by 
        substituting `2012' for `1992''' in paragraph (3)(C) and 
        inserting ``subsection (f)(3)(A)(ii) shall be applied by 
        substituting `2012' for `2016'''.
    (d) Application to Other Internal Revenue Code of 1986 
Provisions.--
        (1) The following sections are each amended by striking ``for 
    `calendar year 1992' in subparagraph (B)'' and inserting ``for 
    `calendar year 2016' in subparagraph (A)(ii)'':
            (A) Section 23(h)(2).
            (B) Paragraphs (1)(A)(ii) and (2)(A)(ii) of section 25A(h).
            (C) Section 25B(b)(3)(B).
            (D) Subsection (b)(2)(B)(ii)(II), and clauses (i) and (ii) 
        of subsection (j)(1)(B), of section 32.
            (E) Section 36B(f)(2)(B)(ii)(II).
            (F) Section 41(e)(5)(C)(i).
            (G) Subsections (e)(3)(D)(ii) and (h)(3)(H)(i)(II) of 
        section 42.
            (H) Section 45R(d)(3)(B)(ii).
            (I) Section 55(d)(4)(A)(ii).
            (J) Section 62(d)(3)(B).
            (K) Section 63(c)(4)(B).
            (L) Section 125(i)(2)(B).
            (M) Section 135(b)(2)(B)(ii).
            (N) Section 137(f)(2).
            (O) Section 146(d)(2)(B).
            (P) Section 147(c)(2)(H)(ii).
            (Q) Section 151(d)(4)(B).
            (R) Section 179(b)(6)(A)(ii).
            (S) Subsections (b)(5)(C)(i)(II) and (g)(8)(B) of section 
        219.
            (T) Section 220(g)(2).
            (U) Section 221(f)(1)(B).
            (V) Section 223(g)(1)(B).
            (W) Section 408A(c)(3)(D)(ii).
            (X) Section 430(c)(7)(D)(vii)(II).
            (Y) Section 512(d)(2)(B).
            (Z) Section 513(h)(2)(C)(ii).
            (AA) Section 831(b)(2)(D)(ii).
            (BB) Section 877A(a)(3)(B)(i)(II).
            (CC) Section 2010(c)(3)(B)(ii).
            (DD) Section 2032A(a)(3)(B).
            (EE) Section 2503(b)(2)(B).
            (FF) Section 4261(e)(4)(A)(ii).
            (GG) Section 5000A(c)(3)(D)(ii).
            (HH) Section 6323(i)(4)(B).
            (II) Section 6334(g)(1)(B).
            (JJ) Section 6601(j)(3)(B).
            (KK) Section 6651(i)(1).
            (LL) Section 6652(c)(7)(A).
            (MM) Section 6695(h)(1).
            (NN) Section 6698(e)(1).
            (OO) Section 6699(e)(1).
            (PP) Section 6721(f)(1).
            (QQ) Section 6722(f)(1).
            (RR) Section 7345(f)(2).
            (SS) Section 7430(c)(1).
            (TT) Section 9831(d)(2)(D)(ii)(II).
        (2) Sections 41(e)(5)(C)(ii) and 68(b)(2)(B) are each amended--
            (A) by striking ``1(f)(3)(B)'' and inserting 
        ``1(f)(3)(A)(ii)'', and
            (B) by striking ``1992'' and inserting ``2016''.
        (3) Section 42(h)(6)(G) is amended--
            (A) by striking ``for `calendar year 1987''' in clause 
        (i)(II) and inserting ``for `calendar year 2016' in 
        subparagraph (A)(ii) thereof'', and
            (B) by striking ``if the CPI for any calendar year'' and 
        all that follows in clause (ii) and inserting ``if the C-CPI-U 
        for any calendar year (as defined in section 1(f)(6)) exceeds 
        the C-CPI-U for the preceding calendar year by more than 5 
        percent, the C-CPI-U for the base calendar year shall be 
        increased such that such excess shall never be taken into 
        account under clause (i). In the case of a base calendar year 
        before 2017, the C-CPI-U for such year shall be determined by 
        multiplying the CPI for such year by the amount determined 
        under section 1(f)(3)(B).''.
        (4) Section 59(j)(2)(B) is amended by striking ``for `1992' in 
    subparagraph (B)'' and inserting ``for `2016' in subparagraph 
    (A)(ii)''.
        (5) Section 132(f)(6)(A)(ii) is amended by striking ``for 
    `calendar year 1992''' and inserting ``for `calendar year 2016' in 
    subparagraph (A)(ii) thereof''.
        (6) Section 162(o)(3) is amended by striking ``adjusted for 
    changes in the Consumer Price Index (as defined in section 1(f)(5)) 
    since 1991'' and inserting ``adjusted by increasing any such amount 
    under the 1991 agreement by an amount equal to--
            ``(A) such amount, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, by substituting `calendar year 1990' for `calendar year 
        2016' in subparagraph (A)(ii) thereof''.
        (7) So much of clause (ii) of section 213(d)(10)(B) as precedes 
    the last sentence is amended to read as follows:
                ``(ii) Medical care cost adjustment.--For purposes of 
            clause (i), the medical care cost adjustment for any 
            calendar year is the percentage (if any) by which--

                    ``(I) the medical care component of the C-CPI-U (as 
                defined in section 1(f)(6)) for August of the preceding 
                calendar year, exceeds
                    ``(II) such component of the CPI (as defined in 
                section 1(f)(4)) for August of 1996, multiplied by the 
                amount determined under section 1(f)(3)(B).''.

        (8) Subparagraph (B) of section 280F(d)(7) is amended to read 
    as follows:
            ``(B) Automobile price inflation adjustment.--For purposes 
        of this paragraph--
                ``(i) In general.--The automobile price inflation 
            adjustment for any calendar year is the percentage (if any) 
            by which--

                    ``(I) the C-CPI-U automobile component for October 
                of the preceding calendar year, exceeds
                    ``(II) the automobile component of the CPI (as 
                defined in section 1(f)(4)) for October of 1987, 
                multiplied by the amount determined under 1(f)(3)(B).

                ``(ii) C-CPI-U automobile component.--The term `C-CPI-U 
            automobile component' means the automobile component of the 
            Chained Consumer Price Index for All Urban Consumers (as 
            described in section 1(f)(6)).''.
        (9) Section 911(b)(2)(D)(ii)(II) is amended by striking ``for 
    `1992' in subparagraph (B)'' and inserting ``for `2016' in 
    subparagraph (A)(ii)''.
        (10) Paragraph (2) of section 1274A(d) is amended to read as 
    follows:
        ``(2) Adjustment for inflation.--In the case of any debt 
    instrument arising out of a sale or exchange during any calendar 
    year after 1989, each dollar amount contained in the preceding 
    provisions of this section shall be increased by an amount equal 
    to--
            ``(A) such amount, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, by substituting `calendar year 1988' for `calendar year 
        2016' in subparagraph (A)(ii) thereof.
    Any increase under the preceding sentence shall be rounded to the 
    nearest multiple of $100 (or, if such increase is a multiple of 
    $50, such increase shall be increased to the nearest multiple of 
    $100).''.
        (11) Section 4161(b)(2)(C)(i)(II) is amended by striking ``for 
    `1992' in subparagraph (B)'' and inserting ``for `2016' in 
    subparagraph (A)(ii)''.
        (12) Section 4980I(b)(3)(C)(v)(II) is amended by striking ``for 
    `1992' in subparagraph (B)'' and inserting ``for `2016' in 
    subparagraph (A)(ii)''.
        (13) Section 6039F(d) is amended by striking ``subparagraph (B) 
    thereof shall be applied by substituting `1995' for `1992''' and 
    inserting ``subparagraph (A)(ii) thereof shall be applied by 
    substituting `1995' for `2016'''.
        (14) Section 7872(g)(5) is amended to read as follows:
        ``(5) Adjustment of limit for inflation.--In the case of any 
    loan made during any calendar year after 1986, the dollar amount in 
    paragraph (2) shall be increased by an amount equal to--
            ``(A) such amount, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, by substituting `calendar year 1985' for `calendar year 
        2016' in subparagraph (A)(ii) thereof.
    Any increase under the preceding sentence shall be rounded to the 
    nearest multiple of $100 (or, if such increase is a multiple of 
    $50, such increase shall be increased to the nearest multiple of 
    $100).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

 PART II--DEDUCTION FOR QUALIFIED BUSINESS INCOME OF PASS-THRU ENTITIES

SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS INCOME.
    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
adding at the end the following new section:
``SEC. 199A. QUALIFIED BUSINESS INCOME.
    ``(a) In General.--In the case of a taxpayer other than a 
corporation, there shall be allowed as a deduction for any taxable year 
an amount equal to the sum of--
        ``(1) the lesser of--
            ``(A) the combined qualified business income amount of the 
        taxpayer, or
            ``(B) an amount equal to 20 percent of the excess (if any) 
        of--
                ``(i) the taxable income of the taxpayer for the 
            taxable year, over
                ``(ii) the sum of any net capital gain (as defined in 
            section 1(h)), plus the aggregate amount of the qualified 
            cooperative dividends, of the taxpayer for the taxable 
            year, plus
        ``(2) the lesser of--
            ``(A) 20 percent of the aggregate amount of the qualified 
        cooperative dividends of the taxpayer for the taxable year, or
            ``(B) taxable income (reduced by the net capital gain (as 
        so defined)) of the taxpayer for the taxable year.
The amount determined under the preceding sentence shall not exceed the 
taxable income (reduced by the net capital gain (as so defined)) of the 
taxpayer for the taxable year.
    ``(b) Combined Qualified Business Income Amount.--For purposes of 
this section--
        ``(1) In general.--The term `combined qualified business income 
    amount' means, with respect to any taxable year, an amount equal 
    to--
            ``(A) the sum of the amounts determined under paragraph (2) 
        for each qualified trade or business carried on by the 
        taxpayer, plus
            ``(B) 20 percent of the aggregate amount of the qualified 
        REIT dividends and qualified publicly traded partnership income 
        of the taxpayer for the taxable year.
        ``(2) Determination of deductible amount for each trade or 
    business.--The amount determined under this paragraph with respect 
    to any qualified trade or business is the lesser of--
            ``(A) 20 percent of the taxpayer's qualified business 
        income with respect to the qualified trade or business, or
            ``(B) the greater of--
                ``(i) 50 percent of the W-2 wages with respect to the 
            qualified trade or business, or
                ``(ii) the sum of 25 percent of the W-2 wages with 
            respect to the qualified trade or business, plus 2.5 
            percent of the unadjusted basis immediately after 
            acquisition of all qualified property.
        ``(3) Modifications to limit based on taxable income.--
            ``(A) Exception from limit.--In the case of any taxpayer 
        whose taxable income for the taxable year does not exceed the 
        threshold amount, paragraph (2) shall be applied without regard 
        to subparagraph (B).
            ``(B) Phase-in of limit for certain taxpayers.--
                ``(i) In general.--If--

                    ``(I) the taxable income of a taxpayer for any 
                taxable year exceeds the threshold amount, but does not 
                exceed the sum of the threshold amount plus $50,000 
                ($100,000 in the case of a joint return), and
                    ``(II) the amount determined under paragraph (2)(B) 
                (determined without regard to this subparagraph) with 
                respect to any qualified trade or business carried on 
                by the taxpayer is less than the amount determined 
                under paragraph (2)(A) with respect such trade or 
                business,

            then paragraph (2) shall be applied with respect to such 
            trade or business without regard to subparagraph (B) 
            thereof and by reducing the amount determined under 
            subparagraph (A) thereof by the amount determined under 
            clause (ii).
                ``(ii) Amount of reduction.--The amount determined 
            under this subparagraph is the amount which bears the same 
            ratio to the excess amount as--

                    ``(I) the amount by which the taxpayer's taxable 
                income for the taxable year exceeds the threshold 
                amount, bears to
                    ``(II) $50,000 ($100,000 in the case of a joint 
                return).

                ``(iii) Excess amount.--For purposes of clause (ii), 
            the excess amount is the excess of--

                    ``(I) the amount determined under paragraph (2)(A) 
                (determined without regard to this paragraph), over
                    ``(II) the amount determined under paragraph (2)(B) 
                (determined without regard to this paragraph).

        ``(4) Wages, etc.--
            ``(A) In general.--The term `W-2 wages' means, with respect 
        to any person for any taxable year of such person, the amounts 
        described in paragraphs (3) and (8) of section 6051(a) paid by 
        such person with respect to employment of employees by such 
        person during the calendar year ending during such taxable 
        year.
            ``(B) Limitation to wages attributable to qualified 
        business income.--Such term shall not include any amount which 
        is not properly allocable to qualified business income for 
        purposes of subsection (c)(1).
            ``(C) Return requirement.--Such term shall not include any 
        amount which is not properly included in a return filed with 
        the Social Security Administration on or before the 60th day 
        after the due date (including extensions) for such return.
        ``(5) Acquisitions, dispositions, and short taxable years.--The 
    Secretary shall provide for the application of this subsection in 
    cases of a short taxable year or where the taxpayer acquires, or 
    disposes of, the major portion of a trade or business or the major 
    portion of a separate unit of a trade or business during the 
    taxable year.
        ``(6) Qualified property.--For purposes of this section:
            ``(A) In general.--The term `qualified property' means, 
        with respect to any qualified trade or business for a taxable 
        year, tangible property of a character subject to the allowance 
        for depreciation under section 167--
                ``(i) which is held by, and available for use in, the 
            qualified trade or business at the close of the taxable 
            year,
                ``(ii) which is used at any point during the taxable 
            year in the production of qualified business income, and
                ``(iii) the depreciable period for which has not ended 
            before the close of the taxable year.
            ``(B) Depreciable period.--The term `depreciable period' 
        means, with respect to qualified property of a taxpayer, the 
        period beginning on the date the property was first placed in 
        service by the taxpayer and ending on the later of--
                ``(i) the date that is 10 years after such date, or
                ``(ii) the last day of the last full year in the 
            applicable recovery period that would apply to the property 
            under section 168 (determined without regard to subsection 
            (g) thereof).
    ``(c) Qualified Business Income.--For purposes of this section--
        ``(1) In general.--The term `qualified business income' means, 
    for any taxable year, the net amount of qualified items of income, 
    gain, deduction, and loss with respect to any qualified trade or 
    business of the taxpayer. Such term shall not include any qualified 
    REIT dividends, qualified cooperative dividends, or qualified 
    publicly traded partnership income.
        ``(2) Carryover of losses.--If the net amount of qualified 
    income, gain, deduction, and loss with respect to qualified trades 
    or businesses of the taxpayer for any taxable year is less than 
    zero, such amount shall be treated as a loss from a qualified trade 
    or business in the succeeding taxable year.
        ``(3) Qualified items of income, gain, deduction, and loss.--
    For purposes of this subsection--
            ``(A) In general.--The term `qualified items of income, 
        gain, deduction, and loss' means items of income, gain, 
        deduction, and loss to the extent such items are--
                ``(i) effectively connected with the conduct of a trade 
            or business within the United States (within the meaning of 
            section 864(c), determined by substituting `qualified trade 
            or business (within the meaning of section 199A)' for 
            `nonresident alien individual or a foreign corporation' or 
            for `a foreign corporation' each place it appears), and
                ``(ii) included or allowed in determining taxable 
            income for the taxable year.
            ``(B) Exceptions.--The following investment items shall not 
        be taken into account as a qualified item of income, gain, 
        deduction, or loss:
                ``(i) Any item of short-term capital gain, short-term 
            capital loss, long-term capital gain, or long-term capital 
            loss.
                ``(ii) Any dividend, income equivalent to a dividend, 
            or payment in lieu of dividends described in section 
            954(c)(1)(G).
                ``(iii) Any interest income other than interest income 
            which is properly allocable to a trade or business.
                ``(iv) Any item of gain or loss described in 
            subparagraph (C) or (D) of section 954(c)(1) (applied by 
            substituting `qualified trade or business' for `controlled 
            foreign corporation').
                ``(v) Any item of income, gain, deduction, or loss 
            taken into account under section 954(c)(1)(F) (determined 
            without regard to clause (ii) thereof and other than items 
            attributable to notional principal contracts entered into 
            in transactions qualifying under section 1221(a)(7)).
                ``(vi) Any amount received from an annuity which is not 
            received in connection with the trade or business.
                ``(vii) Any item of deduction or loss properly 
            allocable to an amount described in any of the preceding 
            clauses.
        ``(4) Treatment of reasonable compensation and guaranteed 
    payments.--Qualified business income shall not include--
            ``(A) reasonable compensation paid to the taxpayer by any 
        qualified trade or business of the taxpayer for services 
        rendered with respect to the trade or business,
            ``(B) any guaranteed payment described in section 707(c) 
        paid to a partner for services rendered with respect to the 
        trade or business, and
            ``(C) to the extent provided in regulations, any payment 
        described in section 707(a) to a partner for services rendered 
        with respect to the trade or business.
    ``(d) Qualified Trade or Business.--For purposes of this section--
        ``(1) In general.--The term `qualified trade or business' means 
    any trade or business other than--
            ``(A) a specified service trade or business, or
            ``(B) the trade or business of performing services as an 
        employee.
        ``(2) Specified service trade or business.--The term `specified 
    service trade or business' means any trade or business--
            ``(A) which is described in section 1202(e)(3)(A) (applied 
        without regard to the words `engineering, architecture,') or 
        which would be so described if the term `employees or owners' 
        were substituted for `employees' therein, or
            ``(B) which involves the performance of services that 
        consist of investing and investment management, trading, or 
        dealing in securities (as defined in section 475(c)(2)), 
        partnership interests, or commodities (as defined in section 
        475(e)(2)).
        ``(3) Exception for specified service businesses based on 
    taxpayer's income.--
            ``(A) In general.--If, for any taxable year, the taxable 
        income of any taxpayer is less than the sum of the threshold 
        amount plus $50,000 ($100,000 in the case of a joint return), 
        then--
                ``(i) any specified service trade or business of the 
            taxpayer shall not fail to be treated as a qualified trade 
            or business due to paragraph (1)(A), but
                ``(ii) only the applicable percentage of qualified 
            items of income, gain, deduction, or loss, and the W-2 
            wages and the unadjusted basis immediately after 
            acquisition of qualified property, of the taxpayer 
            allocable to such specified service trade or business shall 
            be taken into account in computing the qualified business 
            income, W-2 wages, and the unadjusted basis immediately 
            after acquisition of qualified property of the taxpayer for 
            the taxable year for purposes of applying this section.
            ``(B) Applicable percentage.--For purposes of subparagraph 
        (A), the term `applicable percentage' means, with respect to 
        any taxable year, 100 percent reduced (not below zero) by the 
        percentage equal to the ratio of--
                ``(i) the taxable income of the taxpayer for the 
            taxable year in excess of the threshold amount, bears to
                ``(ii) $50,000 ($100,000 in the case of a joint 
            return).
    ``(e) Other Definitions.--For purposes of this section--
        ``(1) Taxable income.--Taxable income shall be computed without 
    regard to the deduction allowable under this section.
        ``(2) Threshold amount.--
            ``(A) In general.--The term `threshold amount' means 
        $157,500 (200 percent of such amount in the case of a joint 
        return).
            ``(B) Inflation adjustment.--In the case of any taxable 
        year beginning after 2018, the dollar amount in subparagraph 
        (A) shall be increased by an amount equal to--
                ``(i) such dollar amount, multiplied by
                ``(ii) the cost-of-living adjustment determined under 
            section 1(f)(3) for the calendar year in which the taxable 
            year begins, determined by substituting `calendar year 
            2017' for `calendar year 2016' in subparagraph (A)(ii) 
            thereof.
        The amount of any increase under the preceding sentence shall 
        be rounded as provided in section 1(f)(7).
        ``(3) Qualified reit dividend.--The term `qualified REIT 
    dividend' means any dividend from a real estate investment trust 
    received during the taxable year which--
            ``(A) is not a capital gain dividend, as defined in section 
        857(b)(3), and
            ``(B) is not qualified dividend income, as defined in 
        section 1(h)(11).
        ``(4) Qualified cooperative dividend.--The term `qualified 
    cooperative dividend' means any patronage dividend (as defined in 
    section 1388(a)), any per-unit retain allocation (as defined in 
    section 1388(f)), and any qualified written notice of allocation 
    (as defined in section 1388(c)), or any similar amount received 
    from an organization described in subparagraph (B)(ii), which--
            ``(A) is includible in gross income, and
            ``(B) is received from--
                ``(i) an organization or corporation described in 
            section 501(c)(12) or 1381(a), or
                ``(ii) an organization which is governed under this 
            title by the rules applicable to cooperatives under this 
            title before the enactment of subchapter T.
        ``(5) Qualified publicly traded partnership income.--The term 
    `qualified publicly traded partnership income' means, with respect 
    to any qualified trade or business of a taxpayer, the sum of--
            ``(A) the net amount of such taxpayer's allocable share of 
        each qualified item of income, gain, deduction, and loss (as 
        defined in subsection (c)(3) and determined after the 
        application of subsection (c)(4)) from a publicly traded 
        partnership (as defined in section 7704(a)) which is not 
        treated as a corporation under section 7704(c), plus
            ``(B) any gain recognized by such taxpayer upon disposition 
        of its interest in such partnership to the extent such gain is 
        treated as an amount realized from the sale or exchange of 
        property other than a capital asset under section 751(a).
    ``(f) Special Rules.--
        ``(1) Application to partnerships and s corporations.--
            ``(A) In general.--In the case of a partnership or S 
        corporation--
                ``(i) this section shall be applied at the partner or 
            shareholder level,
                ``(ii) each partner or shareholder shall take into 
            account such person's allocable share of each qualified 
            item of income, gain, deduction, and loss, and
                ``(iii) each partner or shareholder shall be treated 
            for purposes of subsection (b) as having W-2 wages and 
            unadjusted basis immediately after acquisition of qualified 
            property for the taxable year in an amount equal to such 
            person's allocable share of the W-2 wages and the 
            unadjusted basis immediately after acquisition of qualified 
            property of the partnership or S corporation for the 
            taxable year (as determined under regulations prescribed by 
            the Secretary).
        For purposes of clause (iii), a partner's or shareholder's 
        allocable share of W-2 wages shall be determined in the same 
        manner as the partner's or shareholder's allocable share of 
        wage expenses. For purposes of such clause, partner's or 
        shareholder's allocable share of the unadjusted basis 
        immediately after acquisition of qualified property shall be 
        determined in the same manner as the partner's or shareholder's 
        allocable share of depreciation. For purposes of this 
        subparagraph, in the case of an S corporation, an allocable 
        share shall be the shareholder's pro rata share of an item.
            ``(B) Application to trusts and estates.--Rules similar to 
        the rules under section 199(d)(1)(B)(i) (as in effect on 
        December 1, 2017) for the apportionment of W-2 wages shall 
        apply to the apportionment of W-2 wages and the apportionment 
        of unadjusted basis immediately after acquisition of qualified 
        property under this section.
            ``(C) Treatment of trades or business in puerto rico.--
                ``(i) In general.--In the case of any taxpayer with 
            qualified business income from sources within the 
            commonwealth of Puerto Rico, if all such income is taxable 
            under section 1 for such taxable year, then for purposes of 
            determining the qualified business income of such taxpayer 
            for such taxable year, the term `United States' shall 
            include the Commonwealth of Puerto Rico.
                ``(ii) Special rule for applying limit.--In the case of 
            any taxpayer described in clause (i), the determination of 
            W-2 wages of such taxpayer with respect to any qualified 
            trade or business conducted in Puerto Rico shall be made 
            without regard to any exclusion under section 3401(a)(8) 
            for remuneration paid for services in Puerto Rico.
        ``(2) Coordination with minimum tax.--For purposes of 
    determining alternative minimum taxable income under section 55, 
    qualified business income shall be determined without regard to any 
    adjustments under sections 56 through 59.
        ``(3) Deduction limited to income taxes.--The deduction under 
    subsection (a) shall only be allowed for purposes of this chapter.
        ``(4) Regulations.--The Secretary shall prescribe such 
    regulations as are necessary to carry out the purposes of this 
    section, including regulations--
            ``(A) for requiring or restricting the allocation of items 
        and wages under this section and such reporting requirements as 
        the Secretary determines appropriate, and
            ``(B) for the application of this section in the case of 
        tiered entities.
    ``(g) Deduction Allowed to Specified Agricultural or Horticultural 
Cooperatives.--
        ``(1) In general.--In the case of any taxable year of a 
    specified agricultural or horticultural cooperative beginning after 
    December 31, 2017, there shall be allowed a deduction in an amount 
    equal to the lesser of--
            ``(A) 20 percent of the excess (if any) of--
                ``(i) the gross income of a specified agricultural or 
            horticultural cooperative, over
                ``(ii) the qualified cooperative dividends (as defined 
            in subsection (e)(4)) paid during the taxable year for the 
            taxable year, or
            ``(B) the greater of--
                ``(i) 50 percent of the W-2 wages of the cooperative 
            with respect to its trade or business, or
                ``(ii) the sum of 25 percent of the W-2 wages of the 
            cooperative with respect to its trade or business, plus 2.5 
            percent of the unadjusted basis immediately after 
            acquisition of all qualified property of the cooperative.
        ``(2) Limitation.--The amount determined under paragraph (1) 
    shall not exceed the taxable income of the specified agricultural 
    or horticultural for the taxable year.
        ``(3) Specified agricultural or horticultural cooperative.--For 
    purposes of this subsection, the term `specified agricultural or 
    horticultural cooperative' means an organization to which part I of 
    subchapter T applies which is engaged in--
            ``(A) the manufacturing, production, growth, or extraction 
        in whole or significant part of any agricultural or 
        horticultural product,
            ``(B) the marketing of agricultural or horticultural 
        products which its patrons have so manufactured, produced, 
        grown, or extracted, or
            ``(C) the provision of supplies, equipment, or services to 
        farmers or to organizations described in subparagraph (A) or 
        (B).
    ``(h) Anti-abuse Rules.--The Secretary shall--
        ``(1) apply rules similar to the rules under section 179(d)(2) 
    in order to prevent the manipulation of the depreciable period of 
    qualified property using transactions between related parties, and
        ``(2) prescribe rules for determining the unadjusted basis 
    immediately after acquisition of qualified property acquired in 
    like-kind exchanges or involuntary conversions.
    ``(i) Termination.--This section shall not apply to taxable years 
beginning after December 31, 2025.''.
    (b) Treatment of Deduction in Computing Adjusted Gross and Taxable 
Income.--
        (1) Deduction not allowed in computing adjusted gross income.--
    Section 62(a) is amended by adding at the end the following new 
    sentence: ``The deduction allowed by section 199A shall not be 
    treated as a deduction described in any of the preceding paragraphs 
    of this subsection.''.
        (2) Deduction allowed to nonitemizers.--Section 63(b) is 
    amended by striking ``and'' at the end of paragraph (1), by 
    striking the period at the end of paragraph (2) and inserting ``, 
    and'', and by adding at the end the following new paragraph:
        ``(3) the deduction provided in section 199A.''.
        (3) Deduction allowed to itemizers without limits on itemized 
    deductions.--Section 63(d) is amended by striking ``and'' at the 
    end of paragraph (1), by striking the period at the end of 
    paragraph (2) and inserting ``, and'', and by adding at the end the 
    following new paragraph:
        ``(3) the deduction provided in section 199A.''.
        (4) Conforming amendment.--Section 3402(m)(1) is amended by 
    inserting ``and the estimated deduction allowed under section 
    199A'' after ``chapter 1''.
    (c) Accuracy-Related Penalty on Determination of Applicable 
Percentage.--Section 6662(d)(1) is amended by inserting at the end the 
following new subparagraph:
            ``(C) Special rule for taxpayers claiming section 199a 
        deduction.--In the case of any taxpayer who claims the 
        deduction allowed under section 199A for the taxable year, 
        subparagraph (A) shall be applied by substituting `5 percent' 
        for `10 percent'.''.
    (d) Conforming Amendments.--
        (1) Section 172(d) is amended by adding at the end the 
    following new paragraph:
        ``(8) Qualified business income deduction.--The deduction under 
    section 199A shall not be allowed.''.
        (2) Section 246(b)(1) is amended by inserting ``199A,'' before 
    ``243(a)(1)''.
        (3) Section 613(a) is amended by inserting ``and without the 
    deduction under section 199A'' after ``and without the deduction 
    under section 199''.
        (4) Section 613A(d)(1) is amended by redesignating 
    subparagraphs (C), (D), and (E) as subparagraphs (D), (E), and (F), 
    respectively, and by inserting after subparagraph (B), the 
    following new subparagraph:
            ``(C) any deduction allowable under section 199A,''.
        (5) Section 170(b)(2)(D) is amended by striking ``and'' in 
    clause (iv), by striking the period at the end of clause (v), and 
    by adding at the end the following new clause:
                ``(vi) section 199A(g).''.
        (6) The table of sections for part VI of subchapter B of 
    chapter 1 is amended by inserting at the end the following new 
    item:

``Sec. 199A. Qualified business income.''.

    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS OTHER THAN CORPORATIONS.
    (a) In General.--Section 461 is amended by adding at the end the 
following new subsection:
    ``(l) Limitation on Excess Business Losses of Noncorporate 
Taxpayers.--
        ``(1) Limitation.--In the case of taxable year of a taxpayer 
    other than a corporation beginning after December 31, 2017, and 
    before January 1, 2026--
            ``(A) subsection (j) (relating to limitation on excess farm 
        losses of certain taxpayers) shall not apply, and
            ``(B) any excess business loss of the taxpayer for the 
        taxable year shall not be allowed.
        ``(2) Disallowed loss carryover.--Any loss which is disallowed 
    under paragraph (1) shall be treated as a net operating loss 
    carryover to the following taxable year under section 172.
        ``(3) Excess business loss.--For purposes of this subsection--
            ``(A) In general.--The term `excess business loss' means 
        the excess (if any) of--
                ``(i) the aggregate deductions of the taxpayer for the 
            taxable year which are attributable to trades or businesses 
            of such taxpayer (determined without regard to whether or 
            not such deductions are disallowed for such taxable year 
            under paragraph (1)), over
                ``(ii) the sum of--

                    ``(I) the aggregate gross income or gain of such 
                taxpayer for the taxable year which is attributable to 
                such trades or businesses, plus
                    ``(II) $250,000 (200 percent of such amount in the 
                case of a joint return).

            ``(B) Adjustment for inflation.--In the case of any taxable 
        year beginning after December 31, 2018, the $250,000 amount in 
        subparagraph (A)(ii)(II) shall be increased by an amount equal 
        to--
                ``(i) such dollar amount, multiplied by
                ``(ii) the cost-of-living adjustment determined under 
            section 1(f)(3) for the calendar year in which the taxable 
            year begins, determined by substituting `2017' for `2016' 
            in subparagraph (A)(ii) thereof.
            If any amount as increased under the preceding sentence is 
            not a multiple of $1,000, such amount shall be rounded to 
            the nearest multiple of $1,000.
        ``(4) Application of subsection in case of partnerships and s 
    corporations.--In the case of a partnership or S corporation--
            ``(A) this subsection shall be applied at the partner or 
        shareholder level, and
            ``(B) each partner's or shareholder's allocable share of 
        the items of income, gain, deduction, or loss of the 
        partnership or S corporation for any taxable year from trades 
        or businesses attributable to the partnership or S corporation 
        shall be taken into account by the partner or shareholder in 
        applying this subsection to the taxable year of such partner or 
        shareholder with or within which the taxable year of the 
        partnership or S corporation ends.
    For purposes of this paragraph, in the case of an S corporation, an 
    allocable share shall be the shareholder's pro rata share of an 
    item.
        ``(5) Additional reporting.--The Secretary shall prescribe such 
    additional reporting requirements as the Secretary determines 
    necessary to carry out the purposes of this subsection.
        ``(6) Coordination with section 469.--This subsection shall be 
    applied after the application of section 469.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

          PART III--TAX BENEFITS FOR FAMILIES AND INDIVIDUALS

SEC. 11021. INCREASE IN STANDARD DEDUCTION.
    (a) In General.--Subsection (c) of section 63 is amended by adding 
at the end the following new paragraph:
        ``(7) Special rules for taxable years 2018 through 2025.--In 
    the case of a taxable year beginning after December 31, 2017, and 
    before January 1, 2026--
            ``(A) Increase in standard deduction.--Paragraph (2) shall 
        be applied--
                ``(i) by substituting `$18,000' for `$4,400' in 
            subparagraph (B), and
                ``(ii) by substituting `$12,000' for `$3,000' in 
            subparagraph (C).
            ``(B) Adjustment for inflation.--
                ``(i) In general.--Paragraph (4) shall not apply to the 
            dollar amounts contained in paragraphs (2)(B) and (2)(C).
                ``(ii) Adjustment of increased amounts.--In the case of 
            a taxable year beginning after 2018, the $18,000 and 
            $12,000 amounts in subparagraph (A) shall each be increased 
            by an amount equal to--

                    ``(I) such dollar amount, multiplied by
                    ``(II) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `2017' for `2016' in subparagraph (A)(ii) thereof.

            If any increase under this clause is not a multiple of $50, 
            such increase shall be rounded to the next lowest multiple 
            of $50.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.
SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD TAX CREDIT.
    (a) In General.--Section 24 is amended by adding at the end the 
following new subsection:
    ``(h) Special Rules for Taxable Years 2018 Through 2025.--
        ``(1) In general.--In the case of a taxable year beginning 
    after December 31, 2017, and before January 1, 2026, this section 
    shall be applied as provided in paragraphs (2) through (7).
        ``(2) Credit amount.--Subsection (a) shall be applied by 
    substituting `$2,000' for `$1,000'.
        ``(3) Limitation.--In lieu of the amount determined under 
    subsection (b)(2), the threshold amount shall be $400,000 in the 
    case of a joint return ($200,000 in any other case).
        ``(4) Partial credit allowed for certain other dependents.--
            ``(A) In general.--The credit determined under subsection 
        (a) (after the application of paragraph (2)) shall be increased 
        by $500 for each dependent of the taxpayer (as defined in 
        section 152) other than a qualifying child described in 
        subsection (c).
            ``(B) Exception for certain noncitizens.--Subparagraph (A) 
        shall not apply with respect to any individual who would not be 
        a dependent if subparagraph (A) of section 152(b)(3) were 
        applied without regard to all that follows `resident of the 
        United States'.
            ``(C) Certain qualifying children.--In the case of any 
        qualifying child with respect to whom a credit is not allowed 
        under this section by reason of paragraph (7), such child shall 
        be treated as a dependent to whom subparagraph (A) applies.
        ``(5) Maximum amount of refundable credit.--
            ``(A) In general.--The amount determined under subsection 
        (d)(1)(A) with respect to any qualifying child shall not exceed 
        $1,400, and such subsection shall be applied without regard to 
        paragraph (4) of this subsection.
            ``(B) Adjustment for inflation.--In the case of a taxable 
        year beginning after 2018, the $1,400 amount in subparagraph 
        (A) shall be increased by an amount equal to--
                ``(i) such dollar amount, multiplied by
                ``(ii) the cost-of-living adjustment determined under 
            section 1(f)(3) for the calendar year in which the taxable 
            year begins, determined by substituting `2017' for `2016' 
            in subparagraph (A)(ii) thereof.
        If any increase under this clause is not a multiple of $100, 
        such increase shall be rounded to the next lowest multiple of 
        $100.
        ``(6) Earned income threshold for refundable credit.--
    Subsection (d)(1)(B)(i) shall be applied by substituting `$2,500' 
    for `$3,000'.
        ``(7) Social security number required.--No credit shall be 
    allowed under this section to a taxpayer with respect to any 
    qualifying child unless the taxpayer includes the social security 
    number of such child on the return of tax for the taxable year. For 
    purposes of the preceding sentence, the term `social security 
    number' means a social security number issued to an individual by 
    the Social Security Administration, but only if the social security 
    number is issued--
            ``(A) to a citizen of the United States or pursuant to 
        subclause (I) (or that portion of subclause (III) that relates 
        to subclause (I)) of section 205(c)(2)(B)(i) of the Social 
        Security Act, and
            ``(B) before the due date for such return.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.
SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARITABLE CONTRIBUTIONS.
    (a) In General.--Section 170(b)(1) is amended by redesignating 
subparagraph (G) as subparagraph (H) and by inserting after 
subparagraph (F) the following new subparagraph:
            ``(G) Increased limitation for cash contributions.--
                ``(i) In general.--In the case of any contribution of 
            cash to an organization described in subparagraph (A), the 
            total amount of such contributions which may be taken into 
            account under subsection (a) for any taxable year beginning 
            after December 31, 2017, and before January 1, 2026, shall 
            not exceed 60 percent of the taxpayer's contribution base 
            for such year.
                ``(ii) Carryover.--If the aggregate amount of 
            contributions described in clause (i) exceeds the 
            applicable limitation under clause (i) for any taxable year 
            described in such clause, such excess shall be treated (in 
            a manner consistent with the rules of subsection (d)(1)) as 
            a charitable contribution to which clause (i) applies in 
            each of the 5 succeeding years in order of time.
                ``(iii) Coordination with subparagraphs (a) and (b).--

                    ``(I) In general.--Contributions taken into account 
                under this subparagraph shall not be taken into account 
                under subparagraph (A).
                    ``(II) Limitation reduction.--For each taxable year 
                described in clause (i), and each taxable year to which 
                any contribution under this subparagraph is carried 
                over under clause (ii), subparagraph (A) shall be 
                applied by reducing (but not below zero) the 
                contribution limitation allowed for the taxable year 
                under such subparagraph by the aggregate contributions 
                allowed under this subparagraph for such taxable year, 
                and subparagraph (B) shall be applied by treating any 
                reference to subparagraph (A) as a reference to both 
                subparagraph (A) and this subparagraph.''.

    (b) Effective Date.--The amendment made by this section shall apply 
to contributions in taxable years beginning after December 31, 2017.
SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE ACCOUNTS.
    (a) Increase in Limitation for Contributions From Compensation of 
Individuals With Disabilities.--
        (1) In general.--Section 529A(b)(2)(B) is amended to read as 
    follows:
            ``(B) except in the case of contributions under subsection 
        (c)(1)(C), if such contribution to an ABLE account would result 
        in aggregate contributions from all contributors to the ABLE 
        account for the taxable year exceeding the sum of--
                ``(i) the amount in effect under section 2503(b) for 
            the calendar year in which the taxable year begins, plus
                ``(ii) in the case of any contribution by a designated 
            beneficiary described in paragraph (7) before January 1, 
            2026, the lesser of--

                    ``(I) compensation (as defined by section 
                219(f)(1)) includible in the designated beneficiary's 
                gross income for the taxable year, or
                    ``(II) an amount equal to the poverty line for a 
                one-person household, as determined for the calendar 
                year preceding the calendar year in which the taxable 
                year begins.''.

        (2) Responsibility for contribution limitation.--Paragraph (2) 
    of section 529A(b) is amended by adding at the end the following: 
    ``A designated beneficiary (or a person acting on behalf of such 
    beneficiary) shall maintain adequate records for purposes of 
    ensuring, and shall be responsible for ensuring, that the 
    requirements of subparagraph (B)(ii) are met.''
        (3) Eligible designated beneficiary.--Section 529A(b) is 
    amended by adding at the end the following:
        ``(7) Special rules related to contribution limit.--For 
    purposes of paragraph (2)(B)(ii)--
            ``(A) Designated beneficiary.--A designated beneficiary 
        described in this paragraph is an employee (including an 
        employee within the meaning of section 401(c)) with respect to 
        whom--
                ``(i) no contribution is made for the taxable year to a 
            defined contribution plan (within the meaning of section 
            414(i)) with respect to which the requirements of section 
            401(a) or 403(a) are met,
                ``(ii) no contribution is made for the taxable year to 
            an annuity contract described in section 403(b), and
                ``(iii) no contribution is made for the taxable year to 
            an eligible deferred compensation plan described in section 
            457(b).
            ``(B) Poverty line.--The term `poverty line' has the 
        meaning given such term by section 673 of the Community 
        Services Block Grant Act (42 U.S.C. 9902).''.
    (b) Allowance of Saver's Credit for ABLE Contributions by Account 
Holder.--Section 25B(d)(1) is amended by striking ``and'' at the end of 
subparagraph (B)(ii), by striking the period at the end of subparagraph 
(C) and inserting ``, and'', and by inserting at the end the following:
            ``(D) the amount of contributions made before January 1, 
        2026, by such individual to the ABLE account (within the 
        meaning of section 529A) of which such individual is the 
        designated beneficiary.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 PROGRAMS.
    (a) In General.--Clause (i) of section 529(c)(3)(C) is amended by 
striking ``or'' at the end of subclause (I), by striking the period at 
the end of subclause (II) and inserting ``, or'', and by adding at the 
end the following:

                    ``(III) before January 1, 2026, to an ABLE account 
                (as defined in section 529A(e)(6)) of the designated 
                beneficiary or a member of the family of the designated 
                beneficiary.

            Subclause (III) shall not apply to so much of a 
            distribution which, when added to all other contributions 
            made to the ABLE account for the taxable year, exceeds the 
            limitation under section 529A(b)(2)(B)(i).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions after the date of the enactment of this Act.
SEC. 11026. TREATMENT OF CERTAIN INDIVIDUALS PERFORMING SERVICES IN THE 
SINAI PENINSULA OF EGYPT.
    (a) In General.--For purposes of the following provisions of the 
Internal Revenue Code of 1986, with respect to the applicable period, a 
qualified hazardous duty area shall be treated in the same manner as if 
it were a combat zone (as determined under section 112 of such Code):
        (1) Section 2(a)(3) (relating to special rule where deceased 
    spouse was in missing status).
        (2) Section 112 (relating to the exclusion of certain combat 
    pay of members of the Armed Forces).
        (3) Section 692 (relating to income taxes of members of Armed 
    Forces on death).
        (4) Section 2201 (relating to members of the Armed Forces dying 
    in combat zone or by reason of combat-zone-incurred wounds, etc.).
        (5) Section 3401(a)(1) (defining wages relating to combat pay 
    for members of the Armed Forces).
        (6) Section 4253(d) (relating to the taxation of phone service 
    originating from a combat zone from members of the Armed Forces).
        (7) Section 6013(f)(1) (relating to joint return where 
    individual is in missing status).
        (8) Section 7508 (relating to time for performing certain acts 
    postponed by reason of service in combat zone).
    (b) Qualified Hazardous Duty Area.--For purposes of this section, 
the term ``qualified hazardous duty area'' means the Sinai Peninsula of 
Egypt, if as of the date of the enactment of this section any member of 
the Armed Forces of the United States is entitled to special pay under 
section 310 of title 37, United States Code (relating to special pay; 
duty subject to hostile fire or imminent danger), for services 
performed in such location. Such term includes such location only 
during the period such entitlement is in effect.
    (c) Applicable Period.--
        (1) In general.--Except as provided in paragraph (2), the 
    applicable period is--
            (A) the portion of the first taxable year ending after June 
        9, 2015, which begins on such date, and
            (B) any subsequent taxable year beginning before January 1, 
        2026.
        (2) Withholding.--In the case of subsection (a)(5), the 
    applicable period is--
            (A) the portion of the first taxable year ending after the 
        date of the enactment of this Act which begins on such date, 
        and
            (B) any subsequent taxable year beginning before January 1, 
        2026.
    (d) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    provisions of this section shall take effect on June 9, 2015.
        (2) Withholding.--Subsection (a)(5) shall apply to remuneration 
    paid after the date of the enactment of this Act.
SEC. 11027. TEMPORARY REDUCTION IN MEDICAL EXPENSE DEDUCTION FLOOR.
    (a) In General.--Subsection (f) of section 213 is amended to read 
as follows:
    ``(f) Special Rules for 2013 Through 2018.--In the case of any 
taxable year--
        ``(1) beginning after December 31, 2012, and ending before 
    January 1, 2017, in the case of a taxpayer if such taxpayer or such 
    taxpayer's spouse has attained age 65 before the close of such 
    taxable year, and
        ``(2) beginning after December 31, 2016, and ending before 
    January 1, 2019, in the case of any taxpayer,
subsection (a) shall be applied with respect to a taxpayer by 
substituting `7.5 percent' for `10 percent'.''.
    (b) Minimum Tax Preference Not to Apply.--Section 56(b)(1)(B) is 
amended by adding at the end the following new sentence: ``This 
subparagraph shall not apply to taxable years beginning after December 
31, 2016, and ending before January 1, 2019''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2016.
SEC. 11028. RELIEF FOR 2016 DISASTER AREAS.
    (a) In General.--For purposes of this section, the term ``2016 
disaster area'' means any area with respect to which a major disaster 
has been declared by the President under section 401 of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act during calendar 
year 2016.
    (b) Special Rules for Use of Retirement Funds With Respect to Areas 
Damaged by 2016 Disasters.--
        (1) Tax-favored withdrawals from retirement plans.--
            (A) In general.--Section 72(t) of the Internal Revenue Code 
        of 1986 shall not apply to any qualified 2016 disaster 
        distribution.
            (B) Aggregate dollar limitation.--
                (i) In general.--For purposes of this subsection, the 
            aggregate amount of distributions received by an individual 
            which may be treated as qualified 2016 disaster 
            distributions for any taxable year shall not exceed the 
            excess (if any) of--

                    (I) $100,000, over
                    (II) the aggregate amounts treated as qualified 
                2016 disaster distributions received by such individual 
                for all prior taxable years.

                (ii) Treatment of plan distributions.--If a 
            distribution to an individual would (without regard to 
            clause (i)) be a qualified 2016 disaster distribution, a 
            plan shall not be treated as violating any requirement of 
            this title merely because the plan treats such distribution 
            as a qualified 2016 disaster distribution, unless the 
            aggregate amount of such distributions from all plans 
            maintained by the employer (and any member of any 
            controlled group which includes the employer) to such 
            individual exceeds $100,000.
                (iii) Controlled group.--For purposes of clause (ii), 
            the term ``controlled group'' means any group treated as a 
            single employer under subsection (b), (c), (m), or (o) of 
            section 414 of the Internal Revenue Code of 1986.
            (C) Amount distributed may be repaid.--
                (i) In general.--Any individual who receives a 
            qualified 2016 disaster distribution may, at any time 
            during the 3-year period beginning on the day after the 
            date on which such distribution was received, make one or 
            more contributions in an aggregate amount not to exceed the 
            amount of such distribution to an eligible retirement plan 
            of which such individual is a beneficiary and to which a 
            rollover contribution of such distribution could be made 
            under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 
            457(e)(16) of the Internal Revenue Code of 1986, as the 
            case may be.
                (ii) Treatment of repayments of distributions from 
            eligible retirement plans other than iras.--For purposes of 
            the Internal Revenue Code of 1986, if a contribution is 
            made pursuant to clause (i) with respect to a qualified 
            2016 disaster distribution from an eligible retirement plan 
            other than an individual retirement plan, then the taxpayer 
            shall, to the extent of the amount of the contribution, be 
            treated as having received the qualified 2016 disaster 
            distribution in an eligible rollover distribution (as 
            defined in section 402(c)(4) of the Internal Revenue Code 
            of 1986) and as having transferred the amount to the 
            eligible retirement plan in a direct trustee to trustee 
            transfer within 60 days of the distribution.
                (iii) Treatment of repayments for distributions from 
            iras.--For purposes of the Internal Revenue Code of 1986, 
            if a contribution is made pursuant to clause (i) with 
            respect to a qualified 2016 disaster distribution from an 
            individual retirement plan (as defined by section 
            7701(a)(37) of the Internal Revenue Code of 1986), then, to 
            the extent of the amount of the contribution, the qualified 
            2016 disaster distribution shall be treated as a 
            distribution described in section 408(d)(3) of such Code 
            and as having been transferred to the eligible retirement 
            plan in a direct trustee to trustee transfer within 60 days 
            of the distribution.
            (D) Definitions.--For purposes of this paragraph--
                (i) Qualified 2016 disaster distribution.--Except as 
            provided in subparagraph (B), the term ``qualified 2016 
            disaster distribution'' means any distribution from an 
            eligible retirement plan made on or after January 1, 2016, 
            and before January 1, 2018, to an individual whose 
            principal place of abode at any time during calendar year 
            2016 was located in a disaster area described in subsection 
            (a) and who has sustained an economic loss by reason of the 
            events giving rise to the Presidential declaration 
            described in subsection (a) which was applicable to such 
            area.
                (ii) Eligible retirement plan.--The term ``eligible 
            retirement plan'' shall have the meaning given such term by 
            section 402(c)(8)(B) of the Internal Revenue Code of 1986.
            (E) Income inclusion spread over 3-year period.--
                (i) In general.--In the case of any qualified 2016 
            disaster distribution, unless the taxpayer elects not to 
            have this subparagraph apply for any taxable year, any 
            amount required to be included in gross income for such 
            taxable year shall be so included ratably over the 3-
            taxable-year period beginning with such taxable year.
                (ii) Special rule.--For purposes of clause (i), rules 
            similar to the rules of subparagraph (E) of section 
            408A(d)(3) of the Internal Revenue Code of 1986 shall 
            apply.
            (F) Special rules.--
                (i) Exemption of distributions from trustee to trustee 
            transfer and withholding rules.--For purposes of sections 
            401(a)(31), 402(f), and 3405 of the Internal Revenue Code 
            of 1986, qualified 2016 disaster distribution shall not be 
            treated as eligible rollover distributions.
                (ii) Qualified 2016 disaster distributions treated as 
            meeting plan distribution requirements.--For purposes of 
            the Internal Revenue Code of 1986, a qualified 2016 
            disaster distribution shall be treated as meeting the 
            requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 
            403(b)(11), and 457(d)(1)(A) of the Internal Revenue Code 
            of 1986.
        (2) Provisions relating to plan amendments.--
            (A) In general.--If this paragraph applies to any amendment 
        to any plan or annuity contract, such plan or contract shall be 
        treated as being operated in accordance with the terms of the 
        plan during the period described in subparagraph (B)(ii)(I).
            (B) Amendments to which subsection applies.--
                (i) In general.--This paragraph shall apply to any 
            amendment to any plan or annuity contract which is made--

                    (I) pursuant to any provision of this section, or 
                pursuant to any regulation under any provision of this 
                section, and
                    (II) on or before the last day of the first plan 
                year beginning on or after January 1, 2018, or such 
                later date as the Secretary prescribes.

            In the case of a governmental plan (as defined in section 
            414(d) of the Internal Revenue Code of 1986), subclause 
            (II) shall be applied by substituting the date which is 2 
            years after the date otherwise applied under subclause 
            (II).
                (ii) Conditions.--This paragraph shall not apply to any 
            amendment to a plan or contract unless such amendment 
            applies retroactively for such period, and shall not apply 
            to any such amendment unless the plan or contract is 
            operated as if such amendment were in effect during the 
            period--

                    (I) beginning on the date that this section or the 
                regulation described in clause (i)(I) takes effect (or 
                in the case of a plan or contract amendment not 
                required by this section or such regulation, the 
                effective date specified by the plan), and
                    (II) ending on the date described in clause (i)(II) 
                (or, if earlier, the date the plan or contract 
                amendment is adopted).

    (c) Special Rules for Personal Casualty Losses Related to 2016 
Major Disaster.--
        (1) In general.--If an individual has a net disaster loss for 
    any taxable year beginning after December 31, 2015, and before 
    January 1, 2018--
            (A) the amount determined under section 165(h)(2)(A)(ii) of 
        the Internal Revenue Code of 1986 shall be equal to the sum 
        of--
                (i) such net disaster loss, and
                (ii) so much of the excess referred to in the matter 
            preceding clause (i) of section 165(h)(2)(A) of such Code 
            (reduced by the amount in clause (i) of this subparagraph) 
            as exceeds 10 percent of the adjusted gross income of the 
            individual,
            (B) section 165(h)(1) of such Code shall be applied by 
        substituting ``$500'' for ``$500 ($100 for taxable years 
        beginning after December 31, 2009)'',
            (C) the standard deduction determined under section 63(c) 
        of such Code shall be increased by the net disaster loss, and
            (D) section 56(b)(1)(E) of such Code shall not apply to so 
        much of the standard deduction as is attributable to the 
        increase under subparagraph (C) of this paragraph.
        (2) Net disaster loss.--For purposes of this subsection, the 
    term ``net disaster loss'' means the excess of qualified disaster-
    related personal casualty losses over personal casualty gains (as 
    defined in section 165(h)(3)(A) of the Internal Revenue Code of 
    1986).
        (3) Qualified disaster-related personal casualty losses.--For 
    purposes of this paragraph, the term ``qualified disaster-related 
    personal casualty losses'' means losses described in section 
    165(c)(3) of the Internal Revenue Code of 1986 which arise in a 
    disaster area described in subsection (a) on or after January 1, 
    2016, and which are attributable to the events giving rise to the 
    Presidential declaration described in subsection (a) which was 
    applicable to such area.

                           PART IV--EDUCATION

SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED ON ACCOUNT OF DEATH 
OR DISABILITY.
    (a) In General.--Section 108(f) is amended by adding at the end the 
following new paragraph:
        ``(5) Discharges on account of death or disability.--
            ``(A) In general.--In the case of an individual, gross 
        income does not include any amount which (but for this 
        subsection) would be includible in gross income for such 
        taxable year by reasons of the discharge (in whole or in part) 
        of any loan described in subparagraph (B) after December 31, 
        2017, and before January 1, 2026, if such discharge was--
                ``(i) pursuant to subsection (a) or (d) of section 437 
            of the Higher Education Act of 1965 or the parallel benefit 
            under part D of title IV of such Act (relating to the 
            repayment of loan liability),
                ``(ii) pursuant to section 464(c)(1)(F) of such Act, or
                ``(iii) otherwise discharged on account of the death or 
            total and permanent disability of the student.
            ``(B) Loans described.--A loan is described in this 
        subparagraph if such loan is--
                ``(i) a student loan (as defined in paragraph (2)), or
                ``(ii) a private education loan (as defined in section 
            140(7) of the Consumer Credit Protection Act (15 U.S.C. 
            1650(7))).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to discharges of indebtedness after December 31, 2017.
SEC. 11032. 529 ACCOUNT FUNDING FOR ELEMENTARY AND SECONDARY EDUCATION.
    (a) In General.--
        (1) In general.--Section 529(c) is amended by adding at the end 
    the following new paragraph:
        ``(7) Treatment of elementary and secondary tuition.--Any 
    reference in this subsection to the term `qualified higher 
    education expense' shall include a reference to expenses for 
    tuition in connection with enrollment or attendance at an 
    elementary or secondary public, private, or religious school.''.
        (2) Limitation.--Section 529(e)(3)(A) is amended by adding at 
    the end the following: ``The amount of cash distributions from all 
    qualified tuition programs described in subsection (b)(1)(A)(ii) 
    with respect to a beneficiary during any taxable year shall, in the 
    aggregate, include not more than $10,000 in expenses described in 
    subsection (c)(7) incurred during the taxable year.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions made after December 31, 2017.

                   PART V--DEDUCTIONS AND EXCLUSIONS

SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL EXEMPTIONS.
    (a) In General.--Subsection (d) of section 151 is amended--
        (1) by striking ``In the case of'' in paragraph (4) and 
    inserting ``Except as provided in paragraph (5), in the case of'', 
    and
        (2) by adding at the end the following new paragraph:
        ``(5) Special rules for taxable years 2018 through 2025.--In 
    the case of a taxable year beginning after December 31, 2017, and 
    before January 1, 2026--
            ``(A) Exemption amount.--The term `exemption amount' means 
        zero.
            ``(B) References.--For purposes of any other provision of 
        this title, the reduction of the exemption amount to zero under 
        subparagraph (A) shall not be taken into account in determining 
        whether a deduction is allowed or allowable, or whether a 
        taxpayer is entitled to a deduction, under this section.''.
    (b) Application to Estates and Trusts.--Section 642(b)(2)(C) is 
amended by adding at the end the following new clause:
                ``(iii) Years when personal exemption amount is zero.--

                    ``(I) In general.--In the case of any taxable year 
                in which the exemption amount under section 151(d) is 
                zero, clause (i) shall be applied by substituting 
                `$4,150' for `the exemption amount under section 
                151(d)'.
                    ``(II) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2018, 
                the $4,150 amount in subparagraph (A) shall be 
                increased in the same manner as provided in section 
                6334(d)(4)(C).''.

    (c) Modification of Wage Withholding Rules.--
        (1) In general.--Section 3402(a)(2) is amended by striking 
    ``means the amount'' and all that follows and inserting ``means the 
    amount by which the wages exceed the taxpayer's withholding 
    allowance, prorated to the payroll period.''.
        (2) Conforming amendments.--
            (A) Section 3401 is amended by striking subsection (e).
            (B) Paragraphs (1) and (2) of section 3402(f) are amended 
        to read as follows:
        ``(1) In general.--Under rules determined by the Secretary, an 
    employee receiving wages shall on any day be entitled to a 
    withholding allowance determined based on--
            ``(A) whether the employee is an individual for whom a 
        deduction is allowable with respect to another taxpayer under 
        section 151;
            ``(B) if the employee is married, whether the employee's 
        spouse is entitled to an allowance, or would be so entitled if 
        such spouse were an employee receiving wages, under 
        subparagraph (A) or (D), but only if such spouse does not have 
        in effect a withholding allowance certificate claiming such 
        allowance;
            ``(C) the number of individuals with respect to whom, on 
        the basis of facts existing at the beginning of such day, there 
        may reasonably be expected to be allowable a credit under 
        section 24(a) for the taxable year under subtitle A in respect 
        of which amounts deducted and withheld under this chapter in 
        the calendar year in which such day falls are allowed as a 
        credit;
            ``(D) any additional amounts to which the employee elects 
        to take into account under subsection (m), but only if the 
        employee's spouse does not have in effect a withholding 
        allowance certificate making such an election;
            ``(E) the standard deduction allowable to such employee 
        (one-half of such standard deduction in the case of an employee 
        who is married (as determined under section 7703) and whose 
        spouse is an employee receiving wages subject to withholding); 
        and
            ``(F) whether the employee has withholding allowance 
        certificates in effect with respect to more than 1 employer.
        ``(2) Allowance certificates.--
            ``(A) On commencement of employment.--On or before the date 
        of the commencement of employment with an employer, the 
        employee shall furnish the employer with a signed withholding 
        allowance certificate relating to the withholding allowance 
        claimed by the employee, which shall in no event exceed the 
        amount to which the employee is entitled.
            ``(B) Change of status.--If, on any day during the calendar 
        year, an employee's withholding allowance is in excess of the 
        withholding allowance to which the employee would be entitled 
        had the employee submitted a true and accurate withholding 
        allowance certificate to the employer on that day, the employee 
        shall within 10 days thereafter furnish the employer with a new 
        withholding allowance certificate. If, on any day during the 
        calendar year, an employee's withholding allowance is greater 
        than the withholding allowance claimed, the employee may 
        furnish the employer with a new withholding allowance 
        certificate relating to the withholding allowance to which the 
        employee is so entitled, which shall in no event exceed the 
        amount to which the employee is entitled on such day.
            ``(C) Change of status which affects next calendar year.--
        If on any day during the calendar year the withholding 
        allowance to which the employee will be, or may reasonably be 
        expected to be, entitled at the beginning of the employee's 
        next taxable year under subtitle A is different from the 
        allowance to which the employee is entitled on such day, the 
        employee shall, in such cases and at such times as the 
        Secretary shall by regulations prescribe, furnish the employer 
        with a withholding allowance certificate relating to the 
        withholding allowance which the employee claims with respect to 
        such next taxable year, which shall in no event exceed the 
        withholding allowance to which the employee will be, or may 
        reasonably be expected to be, so entitled.''.
            (C) Subsections (b)(1), (b)(2), (f)(3), (f)(4), (f)(5), 
        (f)(7) (including the heading thereof), (g)(4), (l)(1), (l)(2), 
        and (n) of section 3402 are each amended by striking 
        ``exemption'' each place it appears and inserting 
        ``allowance''.
            (D) The heading of section 3402(f) is amended by striking 
        ``Exemptions'' and inserting ``Allowance''.
            (E) Section 3402(m) is amended by striking ``additional 
        withholding allowances or additional reductions in withholding 
        under this subsection. In determining the number of additional 
        withholding allowances'' and inserting ``an additional 
        withholding allowance or additional reductions in withholding 
        under this subsection. In determining the additional 
        withholding allowance''.
            (F) Paragraphs (3) and (4) of section 3405(a) (and the 
        heading for such paragraph (4)) are each amended by striking 
        ``exemption'' each place it appears and inserting 
        ``allowance''.
            (G) Section 3405(a)(4) is amended by striking ``shall be 
        determined'' and all that follows through ``3 withholding 
        exemptions'' and inserting ``shall be determined under rules 
        prescribed by the Secretary''.
    (d) Exception for Determining Property Exempt From Levy.--Section 
6334(d) is amended by adding at the end the following new paragraph:
        ``(4) Years when personal exemption amount is zero.--
            ``(A) In general.--In the case of any taxable year in which 
        the exemption amount under section 151(d) is zero, paragraph 
        (2) shall not apply and for purposes of paragraph (1) the term 
        `exempt amount' means an amount equal to--
                ``(i) the sum of the amount determined under 
            subparagraph (B) and the standard deduction, divided by
                ``(ii) 52.
            ``(B) Amount determined.--For purposes of subparagraph (A), 
        the amount determined under this subparagraph is $4,150 
        multiplied by the number of the taxpayer's dependents for the 
        taxable year in which the levy occurs.
            ``(C) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2018, the $4,150 amount 
        in subparagraph (B) shall be increased by an amount equal to--
                ``(i) such dollar amount, multiplied by
                ``(ii) the cost-of-living adjustment determined under 
            section 1(f)(3) for the calendar year in which the taxable 
            year begins, determined by substituting `2017' for `2016' 
            in subparagraph (A)(ii) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $100, such increase shall be rounded to the next 
        lowest multiple of $100.
            ``(D) Verified statement.--Unless the taxpayer submits to 
        the Secretary a written and properly verified statement 
        specifying the facts necessary to determine the proper amount 
        under subparagraph (A), subparagraph (A) shall be applied as if 
        the taxpayer were a married individual filing a separate return 
        with no dependents.''.
    (e) Persons Required to Make Returns of Income.--Section 6012 is 
amended by adding at the end the following new subsection:
    ``(f) Special Rule for Taxable Years 2018 Through 2025.--In the 
case of a taxable year beginning after December 31, 2017, and before 
January 1, 2026, subsection (a)(1) shall not apply, and every 
individual who has gross income for the taxable year shall be required 
to make returns with respect to income taxes under subtitle A, except 
that a return shall not be required of--
        ``(1) an individual who is not married (determined by applying 
    section 7703) and who has gross income for the taxable year which 
    does not exceed the standard deduction applicable to such 
    individual for such taxable year under section 63, or
        ``(2) an individual entitled to make a joint return if--
            ``(A) the gross income of such individual, when combined 
        with the gross income of such individual's spouse, for the 
        taxable year does not exceed the standard deduction which would 
        be applicable to the taxpayer for such taxable year under 
        section 63 if such individual and such individual's spouse made 
        a joint return,
            ``(B) such individual and such individual's spouse have the 
        same household as their home at the close of the taxable year,
            ``(C) such individual's spouse does not make a separate 
        return, and
            ``(D) neither such individual nor such individual's spouse 
        is an individual described in section 63(c)(5) who has income 
        (other than earned income) in excess of the amount in effect 
        under section 63(c)(5)(A).''.
    (f) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to taxable years 
    beginning after December 31, 2017.
        (2) Wage withholding.--The Secretary of the Treasury may 
    administer section 3402 for taxable years beginning before January 
    1, 2019, without regard to the amendments made by subsections (a) 
    and (c).
SEC. 11042. LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC. TAXES.
    (a) In General.--Subsection (b) of section 164 is amended by adding 
at the end the following new paragraph:
        ``(6) Limitation on individual deductions for taxable years 
    2018 through 2025.--In the case of an individual and a taxable year 
    beginning after December 31, 2017, and before January 1, 2026--
            ``(A) foreign real property taxes shall not be taken into 
        account under subsection (a)(1), and
            ``(B) the aggregate amount of taxes taken into account 
        under paragraphs (1), (2), and (3) of subsection (a) and 
        paragraph (5) of this subsection for any taxable year shall not 
        exceed $10,000 ($5,000 in the case of a married individual 
        filing a separate return).
    The preceding sentence shall not apply to any foreign taxes 
    described in subsection (a)(3) or to any taxes described in 
    paragraph (1) and (2) of subsection (a) which are paid or accrued 
    in carrying on a trade or business or an activity described in 
    section 212. For purposes of subparagraph (B), an amount paid in a 
    taxable year beginning before January 1, 2018, with respect to a 
    State or local income tax imposed for a taxable year beginning 
    after December 31, 2017, shall be treated as paid on the last day 
    of the taxable year for which such tax is so imposed.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2016.
SEC. 11043. LIMITATION ON DEDUCTION FOR QUALIFIED RESIDENCE INTEREST.
    (a) In General.--Section 163(h)(3) is amended by adding at the end 
the following new subparagraph:
            ``(F) Special rules for taxable years 2018 through 2025.--
                ``(i) In general.--In the case of taxable years 
            beginning after December 31, 2017, and before January 1, 
            2026--

                    ``(I) Disallowance of home equity indebtedness 
                interest.--Subparagraph (A)(ii) shall not apply.
                    ``(II) Limitation on acquisition indebtedness.--
                Subparagraph (B)(ii) shall be applied by substituting 
                `$750,000 ($375,000' for `$1,000,000 ($500,000'.
                    ``(III) Treatment of indebtedness incurred on or 
                before december 15, 2017.--Subclause (II) shall not 
                apply to any indebtedness incurred on or before 
                December 15, 2017, and, in applying such subclause to 
                any indebtedness incurred after such date, the 
                limitation under such subclause shall be reduced (but 
                not below zero) by the amount of any indebtedness 
                incurred on or before December 15, 2017, which is 
                treated as acquisition indebtedness for purposes of 
                this subsection for the taxable year.
                    ``(IV) Binding contract exception.--In the case of 
                a taxpayer who enters into a written binding contract 
                before December 15, 2017, to close on the purchase of a 
                principal residence before January 1, 2018, and who 
                purchases such residence before April 1, 2018, 
                subclause (III) shall be applied by substituting `April 
                1, 2018' for `December 15, 2017'.

                ``(ii) Treatment of limitation in taxable years after 
            december 31, 2025.--In the case of taxable years beginning 
            after December 31, 2025, the limitation under subparagraph 
            (B)(ii) shall be applied to the aggregate amount of 
            indebtedness of the taxpayer described in subparagraph 
            (B)(i) without regard to the taxable year in which the 
            indebtedness was incurred.
                ``(iii) Treatment of refinancings of indebtedness.--

                    ``(I) In general.--In the case of any indebtedness 
                which is incurred to refinance indebtedness, such 
                refinanced indebtedness shall be treated for purposes 
                of clause (i)(III) as incurred on the date that the 
                original indebtedness was incurred to the extent the 
                amount of the indebtedness resulting from such 
                refinancing does not exceed the amount of the 
                refinanced indebtedness.
                    ``(II) Limitation on period of refinancing.--
                Subclause (I) shall not apply to any indebtedness after 
                the expiration of the term of the original indebtedness 
                or, if the principal of such original indebtedness is 
                not amortized over its term, the expiration of the term 
                of the 1st refinancing of such indebtedness (or if 
                earlier, the date which is 30 years after the date of 
                such 1st refinancing).

                ``(iv) Coordination with exclusion of income from 
            discharge of indebtedness.--Section 108(h)(2) shall be 
            applied without regard to this subparagraph.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL CASUALTY LOSSES.
    (a) In General.--Subsection (h) of section 165 is amended by adding 
at the end the following new paragraph:
        ``(5) Limitation for taxable years 2018 through 2025.--
            ``(A) In general.--In the case of an individual, except as 
        provided in subparagraph (B), any personal casualty loss which 
        (but for this paragraph) would be deductible in a taxable year 
        beginning after December 31, 2017, and before January 1, 2026, 
        shall be allowed as a deduction under subsection (a) only to 
        the extent it is attributable to a Federally declared disaster 
        (as defined in subsection (i)(5)).
            ``(B) Exception related to personal casualty gains.--If a 
        taxpayer has personal casualty gains for any taxable year to 
        which subparagraph (A) applies--
                ``(i) subparagraph (A) shall not apply to the portion 
            of the personal casualty loss not attributable to a 
            Federally declared disaster (as so defined) to the extent 
            such loss does not exceed such gains, and
                ``(ii) in applying paragraph (2) for purposes of 
            subparagraph (A) to the portion of personal casualty loss 
            which is so attributable to such a disaster, the amount of 
            personal casualty gains taken into account under paragraph 
            (2)(A) shall be reduced by the portion of such gains taken 
            into account under clause (i).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to losses incurred in taxable years beginning after December 31, 2017.
SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS.
    (a) In General.--Section 67 is amended by adding at the end the 
following new subsection:
    ``(g) Suspension for Taxable Years 2018 Through 2025.--
Notwithstanding subsection (a), no miscellaneous itemized deduction 
shall be allowed for any taxable year beginning after December 31, 
2017, and before January 1, 2026.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.
SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON ITEMIZED DEDUCTIONS.
    (a) In General.--Section 68 is amended by adding at the end the 
following new subsection:
    ``(f) Section Not to Apply.--This section shall not apply to any 
taxable year beginning after December 31, 2017, and before January 1, 
2026.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 11047. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE COMMUTING 
REIMBURSEMENT.
    (a) In General.--Section 132(f) is amended by adding at the end the 
following new paragraph:
        ``(8) Suspension of qualified bicycle commuting reimbursement 
    exclusion.--Paragraph (1)(D) shall not apply to any taxable year 
    beginning after December 31, 2017, and before January 1, 2026.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.
SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED MOVING EXPENSE 
REIMBURSEMENT.
    (a) In General.--Section 132(g) is amended--
        (1) by striking ``For purposes of this section, the term'' and 
    inserting ``For purposes of this section--
        ``(1) In general.--The term'', and
        (2) by adding at the end the following new paragraph:
        ``(2) Suspension for taxable years 2018 through 2025.--Except 
    in the case of a member of the Armed Forces of the United States on 
    active duty who moves pursuant to a military order and incident to 
    a permanent change of station, subsection (a)(6) shall not apply to 
    any taxable year beginning after December 31, 2017, and before 
    January 1, 2026.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 11049. SUSPENSION OF DEDUCTION FOR MOVING EXPENSES.
    (a) In General.--Section 217 is amended by adding at the end the 
following new subsection:
    ``(k) Suspension of Deduction for Taxable Years 2018 Through 
2025.--Except in the case of an individual to whom subsection (g) 
applies, this section shall not apply to any taxable year beginning 
after December 31, 2017, and before January 1, 2026.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.
SEC. 11050. LIMITATION ON WAGERING LOSSES.
    (a) In General.--Section 165(d) is amended by adding at the end the 
following: ``For purposes of the preceding sentence, in the case of 
taxable years beginning after December 31, 2017, and before January 1, 
2026, the term `losses from wagering transactions' includes any 
deduction otherwise allowable under this chapter incurred in carrying 
on any wagering transaction.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.
SEC. 11051. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.
    (a) In General.--Part VII of subchapter B is amended by striking 
section 215 (and by striking the item relating to such section in the 
table of sections for such subpart).
    (b) Conforming Amendments.--
        (1) Corresponding repeal of provisions providing for inclusion 
    of alimony in gross income.--
            (A) Subsection (a) of section 61 is amended by striking 
        paragraph (8) and by redesignating paragraphs (9) through (15) 
        as paragraphs (8) through (14), respectively.
            (B) Part II of subchapter B of chapter 1 is amended by 
        striking section 71 (and by striking the item relating to such 
        section in the table of sections for such part).
            (C) Subpart F of part I of subchapter J of chapter 1 is 
        amended by striking section 682 (and by striking the item 
        relating to such section in the table of sections for such 
        subpart).
        (2) Related to repeal of section 215.--
            (A) Section 62(a) is amended by striking paragraph (10).
            (B) Section 3402(m)(1) is amended by striking ``(other than 
        paragraph (10) thereof)''.
            (C) Section 6724(d)(3) is amended by striking subparagraph 
        (C) and by redesignating subparagraph (D) as subparagraph (C).
        (3) Related to repeal of section 71.--
            (A) Section 121(d)(3) is amended--
                (i) by striking ``(as defined in section 71(b)(2))'' in 
            subparagraph (B), and
                (ii) by adding at the end the following new 
            subparagraph:
            ``(C) Divorce or separation instrument.--For purposes of 
        this paragraph, the term `divorce or separation instrument' 
        means--
                ``(i) a decree of divorce or separate maintenance or a 
            written instrument incident to such a decree,
                ``(ii) a written separation agreement, or
                ``(iii) a decree (not described in clause (i)) 
            requiring a spouse to make payments for the support or 
            maintenance of the other spouse.''.
            (B) Section 152(d)(5) is amended to read as follows:
        ``(5) Special rules for support.--
            ``(A) In general.--For purposes of this subsection--
                ``(i) payments to a spouse of alimony or separate 
            maintenance payments shall not be treated as a payment by 
            the payor spouse for the support of any dependent, and
                ``(ii) in the case of the remarriage of a parent, 
            support of a child received from the parent's spouse shall 
            be treated as received from the parent.
            ``(B) Alimony or separate maintenance payment.--For 
        purposes of subparagraph (A), the term `alimony or separate 
        maintenance payment' means any payment in cash if--
                ``(i) such payment is received by (or on behalf of) a 
            spouse under a divorce or separation instrument (as defined 
            in section 121(d)(3)(C)),
                ``(ii) in the case of an individual legally separated 
            from the individual's spouse under a decree of divorce or 
            of separate maintenance, the payee spouse and the payor 
            spouse are not members of the same household at the time 
            such payment is made, and
                ``(iii) there is no liability to make any such payment 
            for any period after the death of the payee spouse and 
            there is no liability to make any payment (in cash or 
            property) as a substitute for such payments after the death 
            of the payee spouse.''.
            (C) Section 219(f)(1) is amended by striking the third 
        sentence.
            (D) Section 220(f)(7) is amended by striking ``subparagraph 
        (A) of section 71(b)(2)'' and inserting ``clause (i) of section 
        121(d)(3)(C)''.
            (E) Section 223(f)(7) is amended by striking ``subparagraph 
        (A) of section 71(b)(2)'' and inserting ``clause (i) of section 
        121(d)(3)(C)''.
            (F) Section 382(l)(3)(B)(iii) is amended by striking 
        ``section 71(b)(2)'' and inserting ``section 121(d)(3)(C)''.
            (G) Section 408(d)(6) is amended by striking ``subparagraph 
        (A) of section 71(b)(2)'' and inserting ``clause (i) of section 
        121(d)(3)(C)''.
        (4) Additional conforming amendments.--Section 7701(a)(17) is 
    amended--
            (A) by striking ``sections 682 and 2516'' and inserting 
        ``section 2516'', and
            (B) by striking ``such sections'' each place it appears and 
        inserting ``such section''.
    (c) Effective Date.--The amendments made by this section shall 
apply to--
        (1) any divorce or separation instrument (as defined in section 
    71(b)(2) of the Internal Revenue Code of 1986 as in effect before 
    the date of the enactment of this Act) executed after December 31, 
    2018, and
        (2) any divorce or separation instrument (as so defined) 
    executed on or before such date and modified after such date if the 
    modification expressly provides that the amendments made by this 
    section apply to such modification.

           PART VI--INCREASE IN ESTATE AND GIFT TAX EXEMPTION

SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMPTION.
    (a) In General.--Section 2010(c)(3) is amended by adding at the end 
the following new subparagraph:
            ``(C) Increase in basic exclusion amount.--In the case of 
        estates of decedents dying or gifts made after December 31, 
        2017, and before January 1, 2026, subparagraph (A) shall be 
        applied by substituting `$10,000,000' for `$5,000,000'.''.
    (b) Conforming Amendment.--Subsection (g) of section 2001 is 
amended to read as follows:
    ``(g) Modifications to Tax Payable.--
        ``(1) Modifications to gift tax payable to reflect different 
    tax rates.--For purposes of applying subsection (b)(2) with respect 
    to 1 or more gifts, the rates of tax under subsection (c) in effect 
    at the decedent's death shall, in lieu of the rates of tax in 
    effect at the time of such gifts, be used both to compute--
            ``(A) the tax imposed by chapter 12 with respect to such 
        gifts, and
            ``(B) the credit allowed against such tax under section 
        2505, including in computing--
                ``(i) the applicable credit amount under section 
            2505(a)(1), and
                ``(ii) the sum of the amounts allowed as a credit for 
            all preceding periods under section 2505(a)(2).
        ``(2) Modifications to estate tax payable to reflect different 
    basic exclusion amounts.--The Secretary shall prescribe such 
    regulations as may be necessary or appropriate to carry out this 
    section with respect to any difference between--
            ``(A) the basic exclusion amount under section 2010(c)(3) 
        applicable at the time of the decedent's death, and
            ``(B) the basic exclusion amount under such section 
        applicable with respect to any gifts made by the decedent.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying and gifts made after December 31, 
2017.

       PART VII--EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY

SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING IRS LEVY.
    (a) Extension of Time for Return of Property Subject to Levy.--
Subsection (b) of section 6343 is amended by striking ``9 months'' and 
inserting ``2 years''.
    (b) Period of Limitation on Suits.--Subsection (c) of section 6532 
is amended--
        (1) by striking ``9 months'' in paragraph (1) and inserting ``2 
    years'', and
        (2) by striking ``9-month'' in paragraph (2) and inserting ``2-
    year''.
    (c) Effective Date.--The amendments made by this section shall 
apply to--
        (1) levies made after the date of the enactment of this Act, 
    and
        (2) levies made on or before such date if the 9-month period 
    has not expired under section 6343(b) of the Internal Revenue Code 
    of 1986 (without regard to this section) as of such date.

                     PART VIII--INDIVIDUAL MANDATE

SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR 
INDIVIDUALS FAILING TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.
    (a) In General.--Section 5000A(c) is amended--
        (1) in paragraph (2)(B)(iii), by striking ``2.5 percent'' and 
    inserting ``Zero percent'', and
        (2) in paragraph (3)--
            (A) by striking ``$695'' in subparagraph (A) and inserting 
        ``$0'', and
            (B) by striking subparagraph (D).
    (b) Effective Date.--The amendments made by this section shall 
apply to months beginning after December 31, 2018.

                  Subtitle B--Alternative Minimum Tax

SEC. 12001. REPEAL OF TAX FOR CORPORATIONS.
    (a) In General.--Section 55(a) is amended by striking ``There'' and 
inserting ``In the case of a taxpayer other than a corporation, 
there''.
    (b) Conforming Amendments.--
        (1) Section 38(c)(6) is amended by adding at the end the 
    following new subparagraph:
            ``(E) Corporations.--In the case of a corporation, this 
        subsection shall be applied by treating the corporation as 
        having a tentative minimum tax of zero.''.
        (2) Section 53(d)(2) is amended by inserting ``, except that in 
    the case of a corporation, the tentative minimum tax shall be 
    treated as zero'' before the period at the end.
        (3)(A) Section 55(b)(1) is amended to read as follows:
        ``(1) Amount of tentative tax.--
            ``(A) In general.--The tentative minimum tax for the 
        taxable year is the sum of--
                ``(i) 26 percent of so much of the taxable excess as 
            does not exceed $175,000, plus
                ``(ii) 28 percent of so much of the taxable excess as 
            exceeds $175,000.
        The amount determined under the preceding sentence shall be 
        reduced by the alternative minimum tax foreign tax credit for 
        the taxable year.
            ``(B) Taxable excess.--For purposes of this subsection, the 
        term `taxable excess' means so much of the alternative minimum 
        taxable income for the taxable year as exceeds the exemption 
        amount.
            ``(C) Married individual filing separate return.--In the 
        case of a married individual filing a separate return, 
        subparagraph (A) shall be applied by substituting 50 percent of 
        the dollar amount otherwise applicable under clause (i) and 
        clause (ii) thereof. For purposes of the preceding sentence, 
        marital status shall be determined under section 7703.''.
        (B) Section 55(b)(3) is amended by striking ``paragraph 
    (1)(A)(i)'' and inserting ``paragraph (1)(A)''.
        (C) Section 59(a) is amended--
            (i) by striking ``subparagraph (A)(i) or (B)(i) of section 
        55(b)(1) (whichever applies) in lieu of the highest rate of tax 
        specified in section 1 or 11 (whichever applies)'' in paragraph 
        (1)(C) and inserting ``section 55(b)(1) in lieu of the highest 
        rate of tax specified in section 1'', and
            (ii) in paragraph (2), by striking ``means'' and all that 
        follows and inserting ``means the amount determined under the 
        first sentence of section 55(b)(1)(A).''.
        (D) Section 897(a)(2)(A) is amended by striking ``section 
    55(b)(1)(A)'' and inserting ``section 55(b)(1)''.
        (E) Section 911(f) is amended--
            (i) in paragraph (1)(B)--
                (I) by striking ``section 55(b)(1)(A)(ii)'' and 
            inserting ``section 55(b)(1)(B)'', and
                (II) by striking ``section 55(b)(1)(A)(i)'' and 
            inserting ``section 55(b)(1)(A)'', and
            (ii) in paragraph (2)(B), by striking ``section 
        55(b)(1)(A)(ii)'' each place it appears and inserting ``section 
        55(b)(1)(B)''.
        (4) Section 55(c)(1) is amended by striking ``, the section 936 
    credit allowable under section 27(b), and the Puerto Rico economic 
    activity credit under section 30A''.
        (5) Section 55(d), as amended by section 11002, is amended--
            (A) by striking paragraph (2) and redesignating paragraphs 
        (3) and (4) as paragraphs (2) and (3), respectively,
            (B) in paragraph (2) (as so redesignated), by inserting 
        ``and'' at the end of subparagraph (B), by striking ``, and'' 
        at the end of subparagraph (C) and inserting a period, and by 
        striking subparagraph (D), and
            (C) in paragraph (3) (as so redesignated)--
                (i) by striking ``(b)(1)(A)(i)'' in subparagraph (B)(i) 
            and inserting ``(b)(1)(A)'', and
                (ii) by striking ``paragraph (3)'' in subparagraph 
            (B)(iii) and inserting ``paragraph (2)''.
        (6) Section 55 is amended by striking subsection (e).
        (7) Section 56(b)(2) is amended by striking subparagraph (C) 
    and by redesignating subparagraph (D) as subparagraph (C).
        (8)(A) Section 56 is amended by striking subsections (c) and 
    (g).
        (B) Section 847 is amended by striking the last sentence of 
    paragraph (9).
        (C) Section 848 is amended by striking subsection (i).
        (9) Section 58(a) is amended by striking paragraph (3) and 
    redesignating paragraph (4) as paragraph (3).
        (10) Section 59 is amended by striking subsections (b) and (f).
        (11) Section 11(d) is amended by striking ``the taxes imposed 
    by subsection (a) and section 55'' and inserting ``the tax imposed 
    by subsection (a)''.
        (12) Section 12 is amended by striking paragraph (7).
        (13) Section 168(k) is amended by striking paragraph (4).
        (14) Section 882(a)(1) is amended by striking ``, 55,''.
        (15) Section 962(a)(1) is amended by striking ``sections 11 and 
    55'' and inserting ``section 11''.
        (16) Section 1561(a) is amended--
            (A) by inserting ``and'' at the end of paragraph (1), by 
        striking ``, and'' at the end of paragraph (2) and inserting a 
        period, and by striking paragraph (3), and
            (B) by striking the last sentence.
        (17) Section 6425(c)(1)(A) is amended to read as follows:
            ``(A) the tax imposed by section 11 or 1201(a), or 
        subchapter L of chapter 1, whichever is applicable, over''.
        (18) Section 6655(e)(2) is amended by striking ``and 
    alternative minimum taxable income'' each place it appears in 
    subparagraphs (A) and (B)(i).
        (19) Section 6655(g)(1)(A) is amended by inserting ``plus'' at 
    the end of clause (i), by striking clause (ii), and by 
    redesignating clause (iii) as clause (ii).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 12002. CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY OF 
CORPORATIONS.
    (a) Credits Treated as Refundable.--Section 53 is amended by adding 
at the end the following new subsection:
    ``(e) Portion of Credit Treated as Refundable.--
        ``(1) In general.--In the case of any taxable year of a 
    corporation beginning in 2018, 2019, 2020, or 2021, the limitation 
    under subsection (c) shall be increased by the AMT refundable 
    credit amount for such year.
        ``(2) AMT refundable credit amount.--For purposes of paragraph 
    (1), the AMT refundable credit amount is an amount equal to 50 
    percent (100 percent in the case of a taxable year beginning in 
    2021) of the excess (if any) of--
            ``(A) the minimum tax credit determined under subsection 
        (b) for the taxable year, over
            ``(B) the minimum tax credit allowed under subsection (a) 
        for such year (before the application of this subsection for 
        such year).
        ``(3) Credit refundable.--For purposes of this title (other 
    than this section), the credit allowed by reason of this subsection 
    shall be treated as a credit allowed under subpart C (and not this 
    subpart).
        ``(4) Short taxable years.--In the case of any taxable year of 
    less than 365 days, the AMT refundable credit amount determined 
    under paragraph (2) with respect to such taxable year shall be the 
    amount which bears the same ratio to such amount determined without 
    regard to this paragraph as the number of days in such taxable year 
    bears to 365.''.
    (b) Treatment of References.--Section 53(d) is amended by adding at 
the end the following new paragraph:
        ``(3) AMT term references.--In the case of a corporation, any 
    references in this subsection to section 55, 56, or 57 shall be 
    treated as a reference to such section as in effect before the 
    amendments made by Tax Cuts and Jobs Act.''.
    (c) Conforming Amendment.--Section 1374(b)(3)(B) is amended by 
striking the last sentence thereof.
    (d) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to taxable years beginning after December 31, 2017.
        (2) Conforming amendment.--The amendment made by subsection (c) 
    shall apply to taxable years beginning after December 31, 2021.
SEC. 12003. INCREASED EXEMPTION FOR INDIVIDUALS.
    (a) In General.--Section 55(d), as amended by the preceding 
provisions of this Act, is amended by adding at the end the following 
new paragraph:
        ``(4) Special rule for taxable years beginning after 2017 and 
    before 2026.--
            ``(A) In general.--In the case of any taxable year 
        beginning after December 31, 2017, and before January 1, 2026--
                ``(i) paragraph (1) shall be applied--

                    ``(I) by substituting `$109,400' for `$78,750' in 
                subparagraph (A), and
                    ``(II) by substituting `$70,300' for `$50,600' in 
                subparagraph (B), and

                ``(ii) paragraph (2) shall be applied--

                    ``(I) by substituting `$1,000,000' for `$150,000' 
                in subparagraph (A),
                    ``(II) by substituting `50 percent of the dollar 
                amount applicable under subparagraph (A)' for 
                `$112,500' in subparagraph (B), and
                    ``(III) in the case of a taxpayer described in 
                paragraph (1)(D), without regard to the substitution 
                under subclause (I).

            ``(B) Inflation adjustment.--
                ``(i) In general.--In the case of any taxable year 
            beginning in a calendar year after 2018, the amounts 
            described in clause (ii) shall each be increased by an 
            amount equal to--

                    ``(I) such dollar amount, multiplied by
                    ``(II) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2017' for `calendar year 2016' in 
                subparagraph (A)(ii) thereof.

                ``(ii) Amounts described.--The amounts described in 
            this clause are the $109,400 amount in subparagraph 
            (A)(i)(I), the $70,300 amount in subparagraph (A)(i)(II), 
            and the $1,000,000 amount in subparagraph (A)(ii)(I).
                ``(iii) Rounding.--Any increased amount determined 
            under clause (i) shall be rounded to the nearest multiple 
            of $100.
                ``(iv) Coordination with current adjustments.--In the 
            case of any taxable year to which subparagraph (A) applies, 
            no adjustment shall be made under paragraph (3) to any of 
            the numbers which are substituted under subparagraph (A) 
            and adjusted under this subparagraph.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

                Subtitle C--Business-related Provisions

                      PART I--CORPORATE PROVISIONS

SEC. 13001. 21-PERCENT CORPORATE TAX RATE.
    (a) In General.--Subsection (b) of section 11 is amended to read as 
follows:
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) shall be 21 percent of taxable income.''.
    (b) Conforming Amendments.--
        (1) The following sections are each amended by striking 
    ``section 11(b)(1)'' and inserting ``section 11(b)'':
            (A) Section 280C(c)(3)(B)(ii)(II).
            (B) Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e).
            (C) Section 7874(e)(1)(B).
        (2)(A) Part I of subchapter P of chapter 1 is amended by 
    striking section 1201 (and by striking the item relating to such 
    section in the table of sections for such part).
        (B) Section 12 is amended by striking paragraphs (4) and (6), 
    and by redesignating paragraph (5) as paragraph (4).
        (C) Section 453A(c)(3) is amended by striking ``or 1201 
    (whichever is appropriate)''.
        (D) Section 527(b) is amended--
            (i) by striking paragraph (2), and
            (ii) by striking all that precedes ``is hereby imposed'' 
        and inserting:
    ``(b) Tax Imposed.--A tax''.
        (E) Sections 594(a) is amended by striking ``taxes imposed by 
    section 11 or 1201(a)'' and inserting ``tax imposed by section 
    11''.
        (F) Section 691(c)(4) is amended by striking ``1201,''.
        (G) Section 801(a) is amended--
            (i) by striking paragraph (2), and
            (ii) by striking all that precedes ``is hereby imposed'' 
        and inserting:
    ``(a) Tax Imposed.--A tax''.
        (H) Section 831(e) is amended by striking paragraph (1) and by 
    redesignating paragraphs (2) and (3) as paragraphs (1) and (2), 
    respectively.
        (I) Sections 832(c)(5) and 834(b)(1)(D) are each amended by 
    striking ``sec. 1201 and following,''.
        (J) Section 852(b)(3)(A) is amended by striking ``section 
    1201(a)'' and inserting ``section 11(b)''.
        (K) Section 857(b)(3) is amended--
            (i) by striking subparagraph (A) and redesignating 
        subparagraphs (B) through (F) as subparagraphs (A) through (E), 
        respectively,
            (ii) in subparagraph (C), as so redesignated--
                (I) by striking ``subparagraph (A)(ii)'' in clause (i) 
            thereof and inserting ``paragraph (1)'',
                (II) by striking ``the tax imposed by subparagraph 
            (A)(ii)'' in clauses (ii) and (iv) thereof and inserting 
            ``the tax imposed by paragraph (1) on undistributed capital 
            gain'',
            (iii) in subparagraph (E), as so redesignated, by striking 
        ``subparagraph (B) or (D)'' and inserting ``subparagraph (A) or 
        (C)'', and
            (iv) by adding at the end the following new subparagraph:
            ``(F) Undistributed capital gain.--For purposes of this 
        paragraph, the term `undistributed capital gain' means the 
        excess of the net capital gain over the deduction for dividends 
        paid (as defined in section 561) determined with reference to 
        capital gain dividends only.''.
        (L) Section 882(a)(1), as amended by section 12001, is further 
    amended by striking ``or 1201(a)''.
        (M) Section 904(b) is amended--
            (i) by striking ``or 1201(a)'' in paragraph (2)(C),
            (ii) by striking paragraph (3)(D) and inserting the 
        following:
            ``(D) Capital gain rate differential.--There is a capital 
        gain rate differential for any year if subsection (h) of 
        section 1 applies to such taxable year.'', and
            (iii) by striking paragraph (3)(E) and inserting the 
        following:
            ``(E) Rate differential portion.--The rate differential 
        portion of foreign source net capital gain, net capital gain, 
        or the excess of net capital gain from sources within the 
        United States over net capital gain, as the case may be, is the 
        same proportion of such amount as--
                ``(i) the excess of--

                    ``(I) the highest rate of tax set forth in 
                subsection (a), (b), (c), (d), or (e) of section 1 
                (whichever applies), over
                    ``(II) the alternative rate of tax determined under 
                section 1(h), bears to

                ``(ii) that rate referred to in subclause (I).''.
        (N) Section 1374(b) is amended by striking paragraph (4).
        (O) Section 1381(b) is amended by striking ``taxes imposed by 
    section 11 or 1201'' and inserting ``tax imposed by section 11''.
        (P) Sections 6425(c)(1)(A), as amended by section 12001, and 
    6655(g)(1)(A)(i) are each amended by striking ``or 1201(a),''.
        (Q) Section 7518(g)(6)(A) is amended by striking ``or 
    1201(a)''.
        (3)(A) Section 1445(e)(1) is amended--
            (i) by striking ``35 percent'' and inserting ``the highest 
        rate of tax in effect for the taxable year under section 
        11(b)'', and
            (ii) by striking ``of the gain'' and inserting ``multiplied 
        by the gain''.
        (B) Section 1445(e)(2) is amended by striking ``35 percent of 
    the amount'' and inserting ``the highest rate of tax in effect for 
    the taxable year under section 11(b) multiplied by the amount''.
        (C) Section 1445(e)(6) is amended--
            (i) by striking ``35 percent'' and inserting ``the highest 
        rate of tax in effect for the taxable year under section 
        11(b)'', and
            (ii) by striking ``of the amount'' and inserting 
        ``multiplied by the amount''.
        (D) Section 1446(b)(2)(B) is amended by striking ``section 
    11(b)(1)'' and inserting ``section 11(b)''.
        (4) Section 852(b)(1) is amended by striking the last sentence.
        (5)(A) Part I of subchapter B of chapter 5 is amended by 
    striking section 1551 (and by striking the item relating to such 
    section in the table of sections for such part).
        (B) Section 535(c)(5) is amended to read as follows:
        ``(5) Cross reference.--For limitation on credit provided in 
    paragraph (2) or (3) in the case of certain controlled 
    corporations, see section 1561.''.
        (6)(A) Section 1561, as amended by section 12001, is amended to 
    read as follows:
``SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE CASE OF 
CERTAIN CONTROLLED CORPORATIONS.
    ``(a) In General.--The component members of a controlled group of 
corporations on a December 31 shall, for their taxable years which 
include such December 31, be limited for purposes of this subtitle to 
one $250,000 ($150,000 if any component member is a corporation 
described in section 535(c)(2)(B)) amount for purposes of computing the 
accumulated earnings credit under section 535(c)(2) and (3). Such 
amount shall be divided equally among the component members of such 
group on such December 31 unless the Secretary prescribes regulations 
permitting an unequal allocation of such amount.
    ``(b) Certain Short Taxable Years.--If a corporation has a short 
taxable year which does not include a December 31 and is a component 
member of a controlled group of corporations with respect to such 
taxable year, then for purposes of this subtitle, the amount to be used 
in computing the accumulated earnings credit under section 535(c)(2) 
and (3) of such corporation for such taxable year shall be the amount 
specified in subsection (a) with respect to such group, divided by the 
number of corporations which are component members of such group on the 
last day of such taxable year. For purposes of the preceding sentence, 
section 1563(b) shall be applied as if such last day were substituted 
for December 31.''.
            (B) The table of sections for part II of subchapter B of 
        chapter 5 is amended by striking the item relating to section 
        1561 and inserting the following new item:

``Sec. 1561. Limitation on accumulated earnings credit in the case of 
          certain controlled corporations.''.

        (7) Section 7518(g)(6)(A) is amended--
            (A) by striking ``With respect to the portion'' and 
        inserting ``In the case of a taxpayer other than a corporation, 
        with respect to the portion'', and
            (B) by striking ``(34 percent in the case of a 
        corporation)''.
    (c) Effective Date.--
        (1) In general.--Except as otherwise provided in this 
    subsection, the amendments made by subsections (a) and (b) shall 
    apply to taxable years beginning after December 31, 2017.
        (2) Withholding.--The amendments made by subsection (b)(3) 
    shall apply to distributions made after December 31, 2017.
        (3) Certain transfers.--The amendments made by subsection 
    (b)(6) shall apply to transfers made after December 31, 2017.
    (d) Normalization Requirements.--
        (1) In general.--A normalization method of accounting shall not 
    be treated as being used with respect to any public utility 
    property for purposes of section 167 or 168 of the Internal Revenue 
    Code of 1986 if the taxpayer, in computing its cost of service for 
    ratemaking purposes and reflecting operating results in its 
    regulated books of account, reduces the excess tax reserve more 
    rapidly or to a greater extent than such reserve would be reduced 
    under the average rate assumption method.
        (2) Alternative method for certain taxpayers.--If, as of the 
    first day of the taxable year that includes the date of enactment 
    of this Act--
            (A) the taxpayer was required by a regulatory agency to 
        compute depreciation for public utility property on the basis 
        of an average life or composite rate method, and
            (B) the taxpayer's books and underlying records did not 
        contain the vintage account data necessary to apply the average 
        rate assumption method,
    the taxpayer will be treated as using a normalization method of 
    accounting if, with respect to such jurisdiction, the taxpayer uses 
    the alternative method for public utility property that is subject 
    to the regulatory authority of that jurisdiction.
        (3) Definitions.--For purposes of this subsection--
            (A) Excess tax reserve.--The term ``excess tax reserve'' 
        means the excess of--
                (i) the reserve for deferred taxes (as described in 
            section 168(i)(9)(A)(ii) of the Internal Revenue Code of 
            1986) as of the day before the corporate rate reductions 
            provided in the amendments made by this section take 
            effect, over
                (ii) the amount which would be the balance in such 
            reserve if the amount of such reserve were determined by 
            assuming that the corporate rate reductions provided in 
            this Act were in effect for all prior periods.
            (B) Average rate assumption method.--The average rate 
        assumption method is the method under which the excess in the 
        reserve for deferred taxes is reduced over the remaining lives 
        of the property as used in its regulated books of account which 
        gave rise to the reserve for deferred taxes. Under such method, 
        during the time period in which the timing differences for the 
        property reverse, the amount of the adjustment to the reserve 
        for the deferred taxes is calculated by multiplying--
                (i) the ratio of the aggregate deferred taxes for the 
            property to the aggregate timing differences for the 
            property as of the beginning of the period in question, by
                (ii) the amount of the timing differences which reverse 
            during such period.
            (C) Alternative method.--The ``alternative method'' is the 
        method in which the taxpayer--
                (i) computes the excess tax reserve on all public 
            utility property included in the plant account on the basis 
            of the weighted average life or composite rate used to 
            compute depreciation for regulatory purposes, and
                (ii) reduces the excess tax reserve ratably over the 
            remaining regulatory life of the property.
        (4) Tax increased for normalization violation.--If, for any 
    taxable year ending after the date of the enactment of this Act, 
    the taxpayer does not use a normalization method of accounting for 
    the corporate rate reductions provided in the amendments made by 
    this section--
            (A) the taxpayer's tax for the taxable year shall be 
        increased by the amount by which it reduces its excess tax 
        reserve more rapidly than permitted under a normalization 
        method of accounting, and
            (B) such taxpayer shall not be treated as using a 
        normalization method of accounting for purposes of subsections 
        (f)(2) and (i)(9)(C) of section 168 of the Internal Revenue 
        Code of 1986.
SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO REFLECT LOWER 
CORPORATE INCOME TAX RATES.
    (a) Dividends Received by Corporations.--
        (1) In general.--Section 243(a)(1) is amended by striking ``70 
    percent'' and inserting ``50 percent''.
        (2) Dividends from 20-percent owned corporations.--Section 
    243(c)(1) is amended--
            (A) by striking ``80 percent'' and inserting ``65 
        percent'', and
            (B) by striking ``70 percent'' and inserting ``50 
        percent''.
        (3) Conforming amendment.--The heading for section 243(c) is 
    amended by striking ``Retention of 80-percent Dividend Received 
    Deduction'' and inserting ``Increased Percentage''.
    (b) Dividends Received From FSC.--Section 245(c)(1)(B) is amended--
        (1) by striking ``70 percent'' and inserting ``50 percent'', 
    and
        (2) by striking ``80 percent'' and inserting ``65 percent''.
    (c) Limitation on Aggregate Amount of Deductions.--Section 
246(b)(3) is amended--
        (1) by striking ``80 percent'' in subparagraph (A) and 
    inserting ``65 percent'', and
        (2) by striking ``70 percent'' in subparagraph (B) and 
    inserting ``50 percent''.
    (d) Reduction in Deduction Where Portfolio Stock Is Debt-
financed.--Section 246A(a)(1) is amended--
        (1) by striking ``70 percent'' and inserting ``50 percent'', 
    and
        (2) by striking ``80 percent'' and inserting ``65 percent''.
    (e) Income From Sources Within the United States.--Section 
861(a)(2) is amended--
        (1) by striking ``100/70th'' and inserting ``100/50th'' in 
    subparagraph (B), and
        (2) in the flush sentence at the end--
            (A) by striking ``100/80th'' and inserting ``100/65th'', 
        and
            (B) by striking ``100/70th'' and inserting ``100/50th''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

                    PART II--SMALL BUSINESS REFORMS

SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DEPRECIABLE BUSINESS 
ASSETS.
    (a) Increase in Limitation.--
        (1) Dollar limitation.--Section 179(b)(1) is amended by 
    striking ``$500,000'' and inserting ``$1,000,000''.
        (2) Reduction in limitation.--Section 179(b)(2) is amended by 
    striking ``$2,000,000'' and inserting ``$2,500,000''.
        (3) Inflation adjustments.--
            (A) In general.--Subparagraph (A) of section 179(b)(6), as 
        amended by section 11002(d), is amended--
                (i) by striking ``2015'' and inserting ``2018'', and
                (ii) in clause (ii), by striking ``calendar year 2014'' 
            and inserting ``calendar year 2017''.
            (B) Sport utility vehicles.--Section 179(b)(6) is amended--
                (i) in subparagraph (A), by striking ``paragraphs (1) 
            and (2)'' and inserting ``paragraphs (1), (2), and 
            (5)(A)'', and
                (ii) in subparagraph (B), by inserting ``($100 in the 
            case of any increase in the amount under paragraph 
            (5)(A))'' after ``$10,000''.
    (b) Section 179 Property To Include Qualified Real Property.--
        (1) In general.--Subparagraph (B) of section 179(d)(1) is 
    amended to read as follows:
            ``(B) which is--
                ``(i) section 1245 property (as defined in section 
            1245(a)(3)), or
                ``(ii) at the election of the taxpayer, qualified real 
            property (as defined in subsection (f)), and''.
        (2) Qualified real property defined.--Subsection (f) of section 
    179 is amended to read as follows:
    ``(f) Qualified Real Property.--For purposes of this section, the 
term `qualified real property' means--
        ``(1) any qualified improvement property described in section 
    168(e)(6), and
        ``(2) any of the following improvements to nonresidential real 
    property placed in service after the date such property was first 
    placed in service:
            ``(A) Roofs.
            ``(B) Heating, ventilation, and air-conditioning property.
            ``(C) Fire protection and alarm systems.
            ``(D) Security systems.''.
    (c) Repeal of Exclusion for Certain Property.--The last sentence of 
section 179(d)(1) is amended by inserting ``(other than paragraph (2) 
thereof)'' after ``section 50(b)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 2017.
SEC. 13102. SMALL BUSINESS ACCOUNTING METHOD REFORM AND SIMPLIFICATION.
    (a) Modification of Limitation on Cash Method of Accounting.--
        (1) Increased limitation.--So much of section 448(c) as 
    precedes paragraph (2) is amended to read as follows:
    ``(c) Gross Receipts Test.--For purposes of this section--
        ``(1) In general.--A corporation or partnership meets the gross 
    receipts test of this subsection for any taxable year if the 
    average annual gross receipts of such entity for the 3-taxable-year 
    period ending with the taxable year which precedes such taxable 
    year does not exceed $25,000,000.''.
        (2) Application of exception on annual basis.--Section 
    448(b)(3) is amended to read as follows:
        ``(3) Entities which meet gross receipts test.--Paragraphs (1) 
    and (2) of subsection (a) shall not apply to any corporation or 
    partnership for any taxable year if such entity (or any 
    predecessor) meets the gross receipts test of subsection (c) for 
    such taxable year.''.
        (3) Inflation adjustment.--Section 448(c) is amended by adding 
    at the end the following new paragraph:
        ``(4) Adjustment for inflation.--In the case of any taxable 
    year beginning after December 31, 2018, the dollar amount in 
    paragraph (1) shall be increased by an amount equal to--
            ``(A) such dollar amount, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, by substituting `calendar year 2017' for `calendar year 
        2016' in subparagraph (A)(ii) thereof.
    If any amount as increased under the preceding sentence is not a 
    multiple of $1,000,000, such amount shall be rounded to the nearest 
    multiple of $1,000,000.''.
        (4) Coordination with section 481.--Section 448(d)(7) is 
    amended to read as follows:
        ``(7) Coordination with section 481.--Any change in method of 
    accounting made pursuant to this section shall be treated for 
    purposes of section 481 as initiated by the taxpayer and made with 
    the consent of the Secretary.''.
        (5) Application of exception to corporations engaged in 
    farming.--
            (A) In general.--Section 447(c) is amended--
                (i) by inserting ``for any taxable year'' after ``not 
            being a corporation'' in the matter preceding paragraph 
            (1), and
                (ii) by amending paragraph (2) to read as follows:
        ``(2) a corporation which meets the gross receipts test of 
    section 448(c) for such taxable year.''.
            (B) Coordination with section 481.--Section 447(f) is 
        amended to read as follows:
    ``(f) Coordination With Section 481.--Any change in method of 
accounting made pursuant to this section shall be treated for purposes 
of section 481 as initiated by the taxpayer and made with the consent 
of the Secretary.''.
            (C) Conforming amendments.--Section 447 is amended--
                (i) by striking subsections (d), (e), (h), and (i), and
                (ii) by redesignating subsections (f) and (g) (as 
            amended by subparagraph (B)) as subsections (d) and (e), 
            respectively.
    (b) Exemption From UNICAP Requirements.--
        (1) In general.--Section 263A is amended by redesignating 
    subsection (i) as subsection (j) and by inserting after subsection 
    (h) the following new subsection:
    ``(i) Exemption for Certain Small Businesses.--
        ``(1) In general.--In the case of any taxpayer (other than a 
    tax shelter prohibited from using the cash receipts and 
    disbursements method of accounting under section 448(a)(3)) which 
    meets the gross receipts test of section 448(c) for any taxable 
    year, this section shall not apply with respect to such taxpayer 
    for such taxable year.
        ``(2) Application of gross receipts test to individuals, etc.-- 
    In the case of any taxpayer which is not a corporation or a 
    partnership, the gross receipts test of section 448(c) shall be 
    applied in the same manner as if each trade or business of such 
    taxpayer were a corporation or partnership.
        ``(3) Coordination with section 481.--Any change in method of 
    accounting made pursuant to this subsection shall be treated for 
    purposes of section 481 as initiated by the taxpayer and made with 
    the consent of the Secretary.''.
        (2) Conforming amendment.--Section 263A(b)(2) is amended to 
    read as follows:
        ``(2) Property acquired for resale.--Real or personal property 
    described in section 1221(a)(1) which is acquired by the taxpayer 
    for resale.''.
    (c) Exemption From Inventories.--Section 471 is amended by 
redesignating subsection (c) as subsection (d) and by inserting after 
subsection (b) the following new subsection:
    ``(c) Exemption for Certain Small Businesses.--
        ``(1) In general.--In the case of any taxpayer (other than a 
    tax shelter prohibited from using the cash receipts and 
    disbursements method of accounting under section 448(a)(3)) which 
    meets the gross receipts test of section 448(c) for any taxable 
    year--
            ``(A) subsection (a) shall not apply with respect to such 
        taxpayer for such taxable year, and
            ``(B) the taxpayer's method of accounting for inventory for 
        such taxable year shall not be treated as failing to clearly 
        reflect income if such method either--
                ``(i) treats inventory as non-incidental materials and 
            supplies, or
                ``(ii) conforms to such taxpayer's method of accounting 
            reflected in an applicable financial statement of the 
            taxpayer with respect to such taxable year or, if the 
            taxpayer does not have any applicable financial statement 
            with respect to such taxable year, the books and records of 
            the taxpayer prepared in accordance with the taxpayer's 
            accounting procedures.
        ``(2) Applicable financial statement.--For purposes of this 
    subsection, the term `applicable financial statement' has the 
    meaning given the term in section 451(b)(3).
        ``(3) Application of gross receipts test to individuals, etc.--
    In the case of any taxpayer which is not a corporation or a 
    partnership, the gross receipts test of section 448(c) shall be 
    applied in the same manner as if each trade or business of such 
    taxpayer were a corporation or partnership.
        ``(4) Coordination with section 481.--Any change in method of 
    accounting made pursuant to this subsection shall be treated for 
    purposes of section 481 as initiated by the taxpayer and made with 
    the consent of the Secretary.''.
    (d) Exemption From Percentage Completion for Long-term Contracts.--
        (1) In general.--Section 460(e)(1)(B) is amended--
            (A) by inserting ``(other than a tax shelter prohibited 
        from using the cash receipts and disbursements method of 
        accounting under section 448(a)(3))'' after ``taxpayer'' in the 
        matter preceding clause (i), and
            (B) by amending clause (ii) to read as follows:
                ``(ii) who meets the gross receipts test of section 
            448(c) for the taxable year in which such contract is 
            entered into.''.
        (2) Conforming amendments.--Section 460(e) is amended by 
    striking paragraphs (2) and (3), by redesignating paragraphs (4), 
    (5), and (6) as paragraphs (3), (4), and (5), respectively, and by 
    inserting after paragraph (1) the following new paragraph:
        ``(2) Rules related to gross receipts test.--
            ``(A) Application of gross receipts test to individuals, 
        etc.-- For purposes of paragraph (1)(B)(ii), in the case of any 
        taxpayer which is not a corporation or a partnership, the gross 
        receipts test of section 448(c) shall be applied in the same 
        manner as if each trade or business of such taxpayer were a 
        corporation or partnership.
            ``(B) Coordination with section 481.--Any change in method 
        of accounting made pursuant to paragraph (1)(B)(ii) shall be 
        treated as initiated by the taxpayer and made with the consent 
        of the Secretary. Such change shall be effected on a cut-off 
        basis for all similarly classified contracts entered into on or 
        after the year of change.''.
    (e) Effective Date.--
        (1) In general.--Except as otherwise provided in this 
    subsection, the amendments made by this section shall apply to 
    taxable years beginning after December 31, 2017.
        (2) Preservation of suspense account rules with respect to any 
    existing suspense accounts.--So much of the amendments made by 
    subsection (a)(5)(C) as relate to section 447(i) of the Internal 
    Revenue Code of 1986 shall not apply with respect to any suspense 
    account established under such section before the date of the 
    enactment of this Act.
        (3) Exemption from percentage completion for long-term 
    contracts.--The amendments made by subsection (d) shall apply to 
    contracts entered into after December 31, 2017, in taxable years 
    ending after such date.

             PART III--COST RECOVERY AND ACCOUNTING METHODS

                        Subpart A--Cost Recovery

SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR CERTAIN BUSINESS 
ASSETS.
    (a) Increased Expensing.--
        (1) In general.--Section 168(k) is amended--
            (A) in paragraph (1)(A), by striking ``50 percent'' and 
        inserting ``the applicable percentage'', and
            (B) in paragraph (5)(A)(i), by striking ``50 percent'' and 
        inserting ``the applicable percentage''.
        (2) Applicable percentage.--Paragraph (6) of section 168(k) is 
    amended to read as follows:
        ``(6) Applicable percentage.--For purposes of this subsection--
            ``(A) In general.--Except as otherwise provided in this 
        paragraph, the term `applicable percentage' means--
                ``(i) in the case of property placed in service after 
            September 27, 2017, and before January 1, 2023, 100 
            percent,
                ``(ii) in the case of property placed in service after 
            December 31, 2022, and before January 1, 2024, 80 percent,
                ``(iii) in the case of property placed in service after 
            December 31, 2023, and before January 1, 2025, 60 percent,
                ``(iv) in the case of property placed in service after 
            December 31, 2024, and before January 1, 2026, 40 percent, 
            and
                ``(v) in the case of property placed in service after 
            December 31, 2025, and before January 1, 2027, 20 percent.
            ``(B) Rule for property with longer production periods.--In 
        the case of property described in subparagraph (B) or (C) of 
        paragraph (2), the term `applicable percentage' means--
                ``(i) in the case of property placed in service after 
            September 27, 2017, and before January 1, 2024, 100 
            percent,
                ``(ii) in the case of property placed in service after 
            December 31, 2023, and before January 1, 2025, 80 percent,
                ``(iii) in the case of property placed in service after 
            December 31, 2024, and before January 1, 2026, 60 percent,
                ``(iv) in the case of property placed in service after 
            December 31, 2025, and before January 1, 2027, 40 percent, 
            and
                ``(v) in the case of property placed in service after 
            December 31, 2026, and before January 1, 2028, 20 percent.
            ``(C) Rule for plants bearing fruits and nuts.--In the case 
        of a specified plant described in paragraph (5), the term 
        `applicable percentage' means--
                ``(i) in the case of a plant which is planted or 
            grafted after September 27, 2017, and before January 1, 
            2023, 100 percent,
                ``(ii) in the case of a plant which is planted or 
            grafted after December 31, 2022, and before January 1, 
            2024, 80 percent,
                ``(iii) in the case of a plant which is planted or 
            grafted after December 31, 2023, and before January 1, 
            2025, 60 percent,
                ``(iv) in the case of a plant which is planted or 
            grafted after December 31, 2024, and before January 1, 
            2026, 40 percent, and
                ``(v) in the case of a plant which is planted or 
            grafted after December 31, 2025, and before January 1, 
            2027, 20 percent.''.
        (3) Conforming amendment.--
            (A) Paragraph (5) of section 168(k) is amended by striking 
        subparagraph (F).
            (B) Section 168(k) is amended by adding at the end the 
        following new paragraph:
        ``(8) Phase down.--In the case of qualified property acquired 
    by the taxpayer before September 28, 2017, and placed in service by 
    the taxpayer after September 27, 2017, paragraph (6) shall be 
    applied by substituting for each percentage therein--
            ``(A) `50 percent' in the case of--
                ``(i) property placed in service before January 1, 
            2018, and
                ``(ii) property described in subparagraph (B) or (C) of 
            paragraph (2) which is placed in service in 2018,
            ``(B) `40 percent' in the case of--
                ``(i) property placed in service in 2018 (other than 
            property described in subparagraph (B) or (C) of paragraph 
            (2)), and
                ``(ii) property described in subparagraph (B) or (C) of 
            paragraph (2) which is placed in service in 2019,
            ``(C) `30 percent' in the case of--
                ``(i) property placed in service in 2019 (other than 
            property described in subparagraph (B) or (C) of paragraph 
            (2)), and
                ``(ii) property described in subparagraph (B) or (C) of 
            paragraph (2) which is placed in service in 2020, and
            ``(D) `0 percent' in the case of--
                ``(i) property placed in service after 2019 (other than 
            property described in subparagraph (B) or (C) of paragraph 
            (2)), and
                ``(ii) property described in subparagraph (B) or (C) of 
            paragraph (2) which is placed in service after 2020.''.
    (b) Extension.--
        (1) In general.--Section 168(k) is amended--
            (A) in paragraph (2)--
                (i) in subparagraph (A)(iii), clauses (i)(III) and (ii) 
            of subparagraph (B), and subparagraph (E)(i), by striking 
            ``January 1, 2020'' each place it appears and inserting 
            ``January 1, 2027'', and
                (ii) in subparagraph (B)--

                    (I) in clause (i)(II), by striking ``January 1, 
                2021'' and inserting ``January 1, 2028'', and
                    (II) in the heading of clause (ii), by striking 
                ``pre-january 1, 2020'' and inserting ``pre-january 1, 
                2027'', and

            (B) in paragraph (5)(A), by striking ``January 1, 2020'' 
        and inserting ``January 1, 2027''.
        (2) Conforming amendments.--
            (A) Clause (ii) of section 460(c)(6)(B) is amended by 
        striking ``January 1, 2020 (January 1, 2021'' and inserting 
        ``January 1, 2027 (January 1, 2028''.
            (B) The heading of section 168(k) is amended by striking 
        ``Acquired After December 31, 2007, and Before January 1, 
        2020''.
    (c) Application to Used Property.--
        (1) In general.--Section 168(k)(2)(A)(ii) is amended to read as 
    follows:
                ``(ii) the original use of which begins with the 
            taxpayer or the acquisition of which by the taxpayer meets 
            the requirements of clause (ii) of subparagraph (E), and''.
        (2) Acquisition requirements.--Section 168(k)(2)(E)(ii) is 
    amended to read as follows:
                ``(ii) Acquisition requirements.--An acquisition of 
            property meets the requirements of this clause if--

                    ``(I) such property was not used by the taxpayer at 
                any time prior to such acquisition, and
                    ``(II) the acquisition of such property meets the 
                requirements of paragraphs (2)(A), (2)(B), (2)(C), and 
                (3) of section 179(d).'',

        (3) Anti-abuse rules.--Section 168(k)(2)(E) is further amended 
    by amending clause (iii)(I) to read as follows:

                    ``(I) property is used by a lessor of such property 
                and such use is the lessor's first use of such 
                property,''.

    (d) Exception for Certain Property.--Section 168(k), as amended by 
this section, is amended by adding at the end the following new 
paragraph:
        ``(9) Exception for certain property.--The term `qualified 
    property' shall not include--
            ``(A) any property which is primarily used in a trade or 
        business described in clause (iv) of section 163(j)(7)(A), or
            ``(B) any property used in a trade or business that has had 
        floor plan financing indebtedness (as defined in paragraph (9) 
        of section 163(j)), if the floor plan financing interest 
        related to such indebtedness was taken into account under 
        paragraph (1)(C) of such section.''.
    (e) Special Rule.--Section 168(k), as amended by this section, is 
amended by adding at the end the following new paragraph:
        ``(10) Special rule for property placed in service during 
    certain periods.--
            ``(A) In general.--In the case of qualified property placed 
        in service by the taxpayer during the first taxable year ending 
        after September 27, 2017, if the taxpayer elects to have this 
        paragraph apply for such taxable year, paragraphs (1)(A) and 
        (5)(A)(i) shall be applied by substituting `50 percent' for 
        `the applicable percentage'.
            ``(B) Form of election.--Any election under this paragraph 
        shall be made at such time and in such form and manner as the 
        Secretary may prescribe.''.
    (f) Coordination With Section 280F.--Clause (iii) of section 
168(k)(2)(F) is amended by striking ``placed in service by the taxpayer 
after December 31, 2017'' and inserting ``acquired by the taxpayer 
before September 28, 2017, and placed in service by the taxpayer after 
September 27, 2017''.
    (g) Qualified Film and Television and Live Theatrical 
Productions.--
        (1) In general.--Clause (i) of section 168(k)(2)(A), as amended 
    by section 13204, is amended--
            (A) in subclause (II), by striking ``or'',
            (B) in subclause (III), by adding ``or'' after the comma, 
        and
            (C) by adding at the end the following:
                ``(IV) which is a qualified film or television 
            production (as defined in subsection (d) of section 181) 
            for which a deduction would have been allowable under 
            section 181 without regard to subsections (a)(2) and (g) of 
            such section or this subsection, or
                ``(V) which is a qualified live theatrical production 
            (as defined in subsection (e) of section 181) for which a 
            deduction would have been allowable under section 181 
            without regard to subsections (a)(2) and (g) of such 
            section or this subsection,''.
        (2) Production placed in service.--Paragraph (2) of section 
    168(k) is amended by adding at the end the following:
            ``(H) Production placed in service.--For purposes of 
        subparagraph (A)--
                ``(i) a qualified film or television production shall 
            be considered to be placed in service at the time of 
            initial release or broadcast, and
                ``(ii) a qualified live theatrical production shall be 
            considered to be placed in service at the time of the 
            initial live staged performance.''.
    (h) Effective Date.--
        (1) In general.--Except as provided by paragraph (2), the 
    amendments made by this section shall apply to property which--
            (A) is acquired after September 27, 2017, and
            (B) is placed in service after such date.
    For purposes of the preceding sentence, property shall not be 
    treated as acquired after the date on which a written binding 
    contract is entered into for such acquisition.
        (2) Specified plants.--The amendments made by this section 
    shall apply to specified plants planted or grafted after September 
    27, 2017.
SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITATIONS ON LUXURY 
AUTOMOBILES AND PERSONAL USE PROPERTY.
    (a) Luxury Automobiles.--
        (1) In general.--280F(a)(1)(A) is amended--
            (A) in clause (i), by striking ``$2,560'' and inserting 
        ``$10,000'',
            (B) in clause (ii), by striking ``$4,100'' and inserting 
        ``$16,000'',
            (C) in clause (iii), by striking ``$2,450'' and inserting 
        ``$9,600'', and
            (D) in clause (iv), by striking ``$1,475'' and inserting 
        ``$5,760''.
        (2) Conforming amendments.--
            (A) Clause (ii) of section 280F(a)(1)(B) is amended by 
        striking ``$1,475'' in the text and heading and inserting 
        ``$5,760''.
            (B) Paragraph (7) of section 280F(d) is amended--
                (i) in subparagraph (A), by striking ``1988'' and 
            inserting ``2018'', and
                (ii) in subparagraph (B)(i)(II), by striking ``1987'' 
            and inserting ``2017''.
    (b) Removal of Computer Equipment From Listed Property.--
        (1) In general.--Section 280F(d)(4)(A) is amended--
            (A) by inserting ``and'' at the end of clause (iii),
            (B) by striking clause (iv), and
            (C) by redesignating clause (v) as clause (iv).
        (2) Conforming amendment.--Section 280F(d)(4) is amended by 
    striking subparagraph (B) and by redesignating subparagraph (C) as 
    subparagraph (B).
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2017, in taxable 
years ending after such date.
SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN FARM PROPERTY.
    (a) Treatment of Certain Farm Property as 5-Year Property.--Clause 
(vii) of section 168(e)(3)(B) is amended by striking ``after December 
31, 2008, and which is placed in service before January 1, 2010'' and 
inserting ``after December 31, 2017''.
    (b) Repeal of Required Use of 150-Percent Declining Balance 
Method.--Section 168(b)(2) is amended by striking subparagraph (B) and 
by redesignating subparagraphs (C) and (D) as subparagraphs (B) and 
(C), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2017, in taxable 
years ending after such date.
SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY.
    (a) Improvements to Real Property.--
        (1) Elimination of qualified leasehold improvement, qualified 
    restaurant, and qualified retail improvement property.--Subsection 
    (e) of section 168 is amended--
            (A) in subparagraph (E) of paragraph (3)--
                (i) by striking clauses (iv), (v), and (ix),
                (ii) in clause (vii), by inserting ``and'' at the end,
                (iii) in clause (viii), by striking ``, and'' and 
            inserting a period, and
                (iv) by redesignating clauses (vi), (vii), and (viii), 
            as so amended, as clauses (iv), (v), and (vi), 
            respectively, and
            (B) by striking paragraphs (6), (7), and (8).
        (2) Application of straight line method to qualified 
    improvement property.--Paragraph (3) of section 168(b) is amended--
            (A) by striking subparagraphs (G), (H), and (I), and
            (B) by inserting after subparagraph (F) the following new 
        subparagraph:
            ``(G) Qualified improvement property described in 
        subsection (e)(6).''.
        (3) Alternative depreciation system.--
            (A) Electing real property trade or business.--Subsection 
        (g) of section 168 is amended--
                (i) in paragraph (1)--

                    (I) in subparagraph (D), by striking ``and'' at the 
                end,
                    (II) in subparagraph (E), by inserting ``and'' at 
                the end, and
                    (III) by inserting after subparagraph (E) the 
                following new subparagraph:

            ``(F) any property described in paragraph (8),'', and
                (ii) by adding at the end the following new paragraph:
        ``(8) Electing real property trade or business.--The property 
    described in this paragraph shall consist of any nonresidential 
    real property, residential rental property, and qualified 
    improvement property held by an electing real property trade or 
    business (as defined in 163(j)(7)(B)).''.
            (B) Qualified improvement property.--The table contained in 
        subparagraph (B) of section 168(g)(3) is amended--
                (i) by inserting after the item relating to 
            subparagraph (D)(ii) the following new item:
    ``(D)(v)..................................................
                                                                    20''

                    , and

                (ii) by striking the item relating to subparagraph 
            (E)(iv) and all that follows through the item relating to 
            subparagraph (E)(ix) and inserting the following:
    ``(E)(iv).................................................
                                                                     20 
    (E)(v)....................................................
                                                                     30 
    (E)(vi)...................................................
                                                                   35''.

            (C) Applicable recovery period for residential rental 
        property.--The table contained in subparagraph (C) of section 
        168(g)(2) is amended by striking clauses (iii) and (iv) and 
        inserting the following:
    ``(iii) Residential rental property.......................
                                                               30 years 
    (iv) Nonresidential real property.........................
                                                               40 years 
    (v) Any railroad grading or tunnel bore or water utility 
      property................................................
                                                             50 years''.

        (4) Conforming amendments.--
            (A) Clause (i) of section 168(k)(2)(A) is amended--
                (i) in subclause (II), by inserting ``or'' after the 
            comma,
                (ii) in subclause (III), by striking ``or'' at the end, 
            and
                (iii) by striking subclause (IV).
            (B) Section 168 is amended--
                (i) in subsection (e), as amended by paragraph (1)(B), 
            by adding at the end the following:
        ``(6) Qualified improvement property.--
            ``(A) In general.--The term `qualified improvement 
        property' means any improvement to an interior portion of a 
        building which is nonresidential real property if such 
        improvement is placed in service after the date such building 
        was first placed in service.
            ``(B) Certain improvements not included.--Such term shall 
        not include any improvement for which the expenditure is 
        attributable to--
                ``(i) the enlargement of the building,
                ``(ii) any elevator or escalator, or
                ``(iii) the internal structural framework of the 
            building.'', and
                (ii) in subsection (k), by striking paragraph (3).
    (b) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to property placed in 
    service after December 31, 2017.
        (2) Amendments related to electing real property trade or 
    business.--The amendments made by subsection (a)(3)(A) shall apply 
    to taxable years beginning after December 31, 2017.
SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR ELECTING FARMING 
BUSINESSES.
    (a) In General.--Section 168(g)(1), as amended by section 13204, is 
amended by striking ``and'' at the end of subparagraph (E), by 
inserting ``and'' at the end of subparagraph (F), and by inserting 
after subparagraph (F) the following new subparagraph:
            ``(G) any property with a recovery period of 10 years or 
        more which is held by an electing farming business (as defined 
        in section 163(j)(7)(C)),''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.
    (a) In General.--Section 174 is amended to read as follows:
    ``SEC. 174. AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.
    ``(a) In General.--In the case of a taxpayer's specified research 
or experimental expenditures for any taxable year--
        ``(1) except as provided in paragraph (2), no deduction shall 
    be allowed for such expenditures, and
        ``(2) the taxpayer shall--
            ``(A) charge such expenditures to capital account, and
            ``(B) be allowed an amortization deduction of such 
        expenditures ratably over the 5-year period (15-year period in 
        the case of any specified research or experimental expenditures 
        which are attributable to foreign research (within the meaning 
        of section 41(d)(4)(F))) beginning with the midpoint of the 
        taxable year in which such expenditures are paid or incurred.
    ``(b) Specified Research or Experimental Expenditures.--For 
purposes of this section, the term `specified research or experimental 
expenditures' means, with respect to any taxable year, research or 
experimental expenditures which are paid or incurred by the taxpayer 
during such taxable year in connection with the taxpayer's trade or 
business.
    ``(c) Special Rules.--
        ``(1) Land and other property.--This section shall not apply to 
    any expenditure for the acquisition or improvement of land, or for 
    the acquisition or improvement of property to be used in connection 
    with the research or experimentation and of a character which is 
    subject to the allowance under section 167 (relating to allowance 
    for depreciation, etc.) or section 611 (relating to allowance for 
    depletion); but for purposes of this section allowances under 
    section 167, and allowances under section 611, shall be considered 
    as expenditures.
        ``(2) Exploration expenditures.--This section shall not apply 
    to any expenditure paid or incurred for the purpose of ascertaining 
    the existence, location, extent, or quality of any deposit of ore 
    or other mineral (including oil and gas).
        ``(3) Software development.--For purposes of this section, any 
    amount paid or incurred in connection with the development of any 
    software shall be treated as a research or experimental 
    expenditure.
    ``(d) Treatment Upon Disposition, Retirement, or Abandonment.--If 
any property with respect to which specified research or experimental 
expenditures are paid or incurred is disposed, retired, or abandoned 
during the period during which such expenditures are allowed as an 
amortization deduction under this section, no deduction shall be 
allowed with respect to such expenditures on account of such 
disposition, retirement, or abandonment and such amortization deduction 
shall continue with respect to such expenditures.''.
    (b) Change in Method of Accounting.--The amendments made by 
subsection (a) shall be treated as a change in method of accounting for 
purposes of section 481 of the Internal Revenue Code of 1986 and--
        (1) such change shall be treated as initiated by the taxpayer,
        (2) such change shall be treated as made with the consent of 
    the Secretary, and
        (3) such change shall be applied only on a cut-off basis for 
    any research or experimental expenditures paid or incurred in 
    taxable years beginning after December 31, 2021, and no adjustments 
    under section 481(a) shall be made.
    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by striking the item relating to 
section 174 and inserting the following new item:

``Sec. 174. Amortization of research and experimental expenditures.''.

    (d) Conforming Amendments.--
        (1) Section 41(d)(1)(A) is amended by striking ``expenses under 
    section 174'' and inserting ``specified research or experimental 
    expenditures under section 174''.
        (2) Subsection (c) of section 280C is amended--
            (A) by striking paragraph (1) and inserting the following:
        ``(1) In general.--If--
            ``(A) the amount of the credit determined for the taxable 
        year under section 41(a)(1), exceeds
            ``(B) the amount allowable as a deduction for such taxable 
        year for qualified research expenses or basic research 
        expenses,
    the amount chargeable to capital account for the taxable year for 
    such expenses shall be reduced by the amount of such excess.'',
            (B) by striking paragraph (2),
            (C) by redesignating paragraphs (3) (as amended by this 
        Act) and (4) as paragraphs (2) and (3), respectively, and
            (D) in paragraph (2), as redesignated by subparagraph (C), 
        by striking ``paragraphs (1) and (2)'' and inserting 
        ``paragraph (1)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2021.
SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS PLANTS LOST 
BY REASON OF CASUALTY.
    (a) In General.--Section 263A(d)(2) is amended by adding at the end 
the following new subparagraph:
            ``(C) Special temporary rule for citrus plants lost by 
        reason of casualty.--
                ``(i) In general.--In the case of the replanting of 
            citrus plants, subparagraph (A) shall apply to amounts paid 
            or incurred by a person (other than the taxpayer described 
            in subparagraph (A)) if--

                    ``(I) the taxpayer described in subparagraph (A) 
                has an equity interest of not less than 50 percent in 
                the replanted citrus plants at all times during the 
                taxable year in which such amounts were paid or 
                incurred and such other person holds any part of the 
                remaining equity interest, or
                    ``(II) such other person acquired the entirety of 
                such taxpayer's equity interest in the land on which 
                the lost or damaged citrus plants were located at the 
                time of such loss or damage, and the replanting is on 
                such land.

                ``(ii) Termination.--Clause (i) shall not apply to any 
            cost paid or incurred after the date which is 10 years 
            after the date of the enactment of the Tax Cuts and Jobs 
            Act.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to costs paid or incurred after the date of the enactment of this Act.

                     Subpart B--Accounting Methods

SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF INCLUSION.
    (a) Inclusion Not Later Than for Financial Accounting Purposes.--
Section 451 is amended by redesignating subsections (b) through (i) as 
subsections (c) through (j), respectively, and by inserting after 
subsection (a) the following new subsection:
    ``(b) Inclusion Not Later Than for Financial Accounting Purposes.--
        ``(1) Income taken into account in financial statement.--
            ``(A) In general.--In the case of a taxpayer the taxable 
        income of which is computed under an accrual method of 
        accounting, the all events test with respect to any item of 
        gross income (or portion thereof) shall not be treated as met 
        any later than when such item (or portion thereof) is taken 
        into account as revenue in--
                ``(i) an applicable financial statement of the 
            taxpayer, or
                ``(ii) such other financial statement as the Secretary 
            may specify for purposes of this subsection.
            ``(B) Exception.--This paragraph shall not apply to--
                ``(i) a taxpayer which does not have a financial 
            statement described in clause (i) or (ii) of subparagraph 
            (A) for a taxable year, or
                ``(ii) any item of gross income in connection with a 
            mortgage servicing contract.
            ``(C) All events test.--For purposes of this section, the 
        all events test is met with respect to any item of gross income 
        if all the events have occurred which fix the right to receive 
        such income and the amount of such income can be determined 
        with reasonable accuracy.
        ``(2) Coordination with special methods of accounting.--
    Paragraph (1) shall not apply with respect to any item of gross 
    income for which the taxpayer uses a special method of accounting 
    provided under any other provision of this chapter, other than any 
    provision of part V of subchapter P (except as provided in clause 
    (ii) of paragraph (1)(B)).
        ``(3) Applicable financial statement.--For purposes of this 
    subsection, the term `applicable financial statement' means--
            ``(A) a financial statement which is certified as being 
        prepared in accordance with generally accepted accounting 
        principles and which is--
                ``(i) a 10-K (or successor form), or annual statement 
            to shareholders, required to be filed by the taxpayer with 
            the United States Securities and Exchange Commission,
                ``(ii) an audited financial statement of the taxpayer 
            which is used for--

                    ``(I) credit purposes,
                    ``(II) reporting to shareholders, partners, or 
                other proprietors, or to beneficiaries, or
                    ``(III) any other substantial nontax purpose,

            but only if there is no statement of the taxpayer described 
            in clause (i), or
                ``(iii) filed by the taxpayer with any other Federal 
            agency for purposes other than Federal tax purposes, but 
            only if there is no statement of the taxpayer described in 
            clause (i) or (ii),
            ``(B) a financial statement which is made on the basis of 
        international financial reporting standards and is filed by the 
        taxpayer with an agency of a foreign government which is 
        equivalent to the United States Securities and Exchange 
        Commission and which has reporting standards not less stringent 
        than the standards required by such Commission, but only if 
        there is no statement of the taxpayer described in subparagraph 
        (A), or
            ``(C) a financial statement filed by the taxpayer with any 
        other regulatory or governmental body specified by the 
        Secretary, but only if there is no statement of the taxpayer 
        described in subparagraph (A) or (B).
        ``(4) Allocation of transaction price.--For purposes of this 
    subsection, in the case of a contract which contains multiple 
    performance obligations, the allocation of the transaction price to 
    each performance obligation shall be equal to the amount allocated 
    to each performance obligation for purposes of including such item 
    in revenue in the applicable financial statement of the taxpayer.
        ``(5) Group of entities.--For purposes of paragraph (1), if the 
    financial results of a taxpayer are reported on the applicable 
    financial statement (as defined in paragraph (3)) for a group of 
    entities, such statement shall be treated as the applicable 
    financial statement of the taxpayer.''.
    (b) Treatment of Advance Payments.--Section 451, as amended by 
subsection (a), is amended by redesignating subsections (c) through (j) 
as subsections (d) through (k), respectively, and by inserting after 
subsection (b) the following new subsection:
    ``(c) Treatment of Advance Payments.--
        ``(1) In general.--A taxpayer which computes taxable income 
    under the accrual method of accounting, and receives any advance 
    payment during the taxable year, shall--
            ``(A) except as provided in subparagraph (B), include such 
        advance payment in gross income for such taxable year, or
            ``(B) if the taxpayer elects the application of this 
        subparagraph with respect to the category of advance payments 
        to which such advance payment belongs, the taxpayer shall--
                ``(i) to the extent that any portion of such advance 
            payment is required under subsection (b) to be included in 
            gross income in the taxable year in which such payment is 
            received, so include such portion, and
                ``(ii) include the remaining portion of such advance 
            payment in gross income in the taxable year following the 
            taxable year in which such payment is received.
        ``(2) Election.--
            ``(A) In general.--Except as otherwise provided in this 
        paragraph, the election under paragraph (1)(B) shall be made at 
        such time, in such form and manner, and with respect to such 
        categories of advance payments, as the Secretary may provide.
            ``(B) Period to which election applies.--An election under 
        paragraph (1)(B) shall be effective for the taxable year with 
        respect to which it is first made and for all subsequent 
        taxable years, unless the taxpayer secures the consent of the 
        Secretary to revoke such election. For purposes of this title, 
        the computation of taxable income under an election made under 
        paragraph (1)(B) shall be treated as a method of accounting.
        ``(3) Taxpayers ceasing to exist.--Except as otherwise provided 
    by the Secretary, the election under paragraph (1)(B) shall not 
    apply with respect to advance payments received by the taxpayer 
    during a taxable year if such taxpayer ceases to exist during (or 
    with the close of) such taxable year.
        ``(4) Advance payment.--For purposes of this subsection--
            ``(A) In general.--The term `advance payment' means any 
        payment--
                ``(i) the full inclusion of which in the gross income 
            of the taxpayer for the taxable year of receipt is a 
            permissible method of accounting under this section 
            (determined without regard to this subsection),
                ``(ii) any portion of which is included in revenue by 
            the taxpayer in a financial statement described in clause 
            (i) or (ii) of subsection (b)(1)(A) for a subsequent 
            taxable year, and
                ``(iii) which is for goods, services, or such other 
            items as may be identified by the Secretary for purposes of 
            this clause.
            ``(B) Exclusions.--Except as otherwise provided by the 
        Secretary, such term shall not include--
                ``(i) rent,
                ``(ii) insurance premiums governed by subchapter L,
                ``(iii) payments with respect to financial instruments,
                ``(iv) payments with respect to warranty or guarantee 
            contracts under which a third party is the primary obligor,
                ``(v) payments subject to section 871(a), 881, 1441, or 
            1442,
                ``(vi) payments in property to which section 83 
            applies, and
                ``(vii) any other payment identified by the Secretary 
            for purposes of this subparagraph.
            ``(C) Receipt.--For purposes of this subsection, an item of 
        gross income is received by the taxpayer if it is actually or 
        constructively received, or if it is due and payable to the 
        taxpayer.
            ``(D) Allocation of transaction price.--For purposes of 
        this subsection, rules similar to subsection (b)(4) shall 
        apply.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
    (d) Coordination With Section 481.--
        (1) In general.--In the case of any qualified change in method 
    of accounting for the taxpayer's first taxable year beginning after 
    December 31, 2017--
            (A) such change shall be treated as initiated by the 
        taxpayer, and
            (B) such change shall be treated as made with the consent 
        of the Secretary of the Treasury.
        (2) Qualified change in method of accounting.--For purposes of 
    this subsection, the term ``qualified change in method of 
    accounting'' means any change in method of accounting which--
            (A) is required by the amendments made by this section, or
            (B) was prohibited under the Internal Revenue Code of 1986 
        prior to such amendments and is permitted under such Code after 
        such amendments.
    (e) Special Rules for Original Issue Discount.--Notwithstanding 
subsection (c), in the case of income from a debt instrument having 
original issue discount--
        (1) the amendments made by this section shall apply to taxable 
    years beginning after December 31, 2018, and
        (2) the period for taking into account any adjustments under 
    section 481 by reason of a qualified change in method of accounting 
    (as defined in subsection (d)) shall be 6 years.

          PART IV--BUSINESS-RELATED EXCLUSIONS AND DEDUCTIONS

SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST.
    (a) In General.--Section 163(j) is amended to read as follows:
    ``(j) Limitation on Business Interest.--
        ``(1) In general.--The amount allowed as a deduction under this 
    chapter for any taxable year for business interest shall not exceed 
    the sum of--
            ``(A) the business interest income of such taxpayer for 
        such taxable year,
            ``(B) 30 percent of the adjusted taxable income of such 
        taxpayer for such taxable year, plus
            ``(C) the floor plan financing interest of such taxpayer 
        for such taxable year.
    The amount determined under subparagraph (B) shall not be less than 
    zero.
        ``(2) Carryforward of disallowed business interest.--The amount 
    of any business interest not allowed as a deduction for any taxable 
    year by reason of paragraph (1) shall be treated as business 
    interest paid or accrued in the succeeding taxable year.
        ``(3) Exemption for certain small businesses.--In the case of 
    any taxpayer (other than a tax shelter prohibited from using the 
    cash receipts and disbursements method of accounting under section 
    448(a)(3)) which meets the gross receipts test of section 448(c) 
    for any taxable year, paragraph (1) shall not apply to such 
    taxpayer for such taxable year. In the case of any taxpayer which 
    is not a corporation or a partnership, the gross receipts test of 
    section 448(c) shall be applied in the same manner as if such 
    taxpayer were a corporation or partnership.
        ``(4) Application to partnerships, etc.--
            ``(A) In general.--In the case of any partnership--
                ``(i) this subsection shall be applied at the 
            partnership level and any deduction for business interest 
            shall be taken into account in determining the non-
            separately stated taxable income or loss of the 
            partnership, and
                ``(ii) the adjusted taxable income of each partner of 
            such partnership--

                    ``(I) shall be determined without regard to such 
                partner's distributive share of any items of income, 
                gain, deduction, or loss of such partnership, and
                    ``(II) shall be increased by such partner's 
                distributive share of such partnership's excess taxable 
                income.

            For purposes of clause (ii)(II), a partner's distributive 
            share of partnership excess taxable income shall be 
            determined in the same manner as the partner's distributive 
            share of nonseparately stated taxable income or loss of the 
            partnership.
            ``(B) Special rules for carryforwards.--
                ``(i) In general.--The amount of any business interest 
            not allowed as a deduction to a partnership for any taxable 
            year by reason of paragraph (1) for any taxable year--

                    ``(I) shall not be treated under paragraph (2) as 
                business interest paid or accrued by the partnership in 
                the succeeding taxable year, and
                    ``(II) shall, subject to clause (ii), be treated as 
                excess business interest which is allocated to each 
                partner in the same manner as the non-separately stated 
                taxable income or loss of the partnership.

                ``(ii) Treatment of excess business interest allocated 
            to partners.--If a partner is allocated any excess business 
            interest from a partnership under clause (i) for any 
            taxable year--

                    ``(I) such excess business interest shall be 
                treated as business interest paid or accrued by the 
                partner in the next succeeding taxable year in which 
                the partner is allocated excess taxable income from 
                such partnership, but only to the extent of such excess 
                taxable income, and
                    ``(II) any portion of such excess business interest 
                remaining after the application of subclause (I) shall, 
                subject to the limitations of subclause (I), be treated 
                as business interest paid or accrued in succeeding 
                taxable years.

            For purposes of applying this paragraph, excess taxable 
            income allocated to a partner from a partnership for any 
            taxable year shall not be taken into account under 
            paragraph (1)(A) with respect to any business interest 
            other than excess business interest from the partnership 
            until all such excess business interest for such taxable 
            year and all preceding taxable years has been treated as 
            paid or accrued under clause (ii).
                ``(iii) Basis adjustments.--

                    ``(I) In general.--The adjusted basis of a partner 
                in a partnership interest shall be reduced (but not 
                below zero) by the amount of excess business interest 
                allocated to the partner under clause (i)(II).
                    ``(II) Special rule for dispositions.--If a partner 
                disposes of a partnership interest, the adjusted basis 
                of the partner in the partnership interest shall be 
                increased immediately before the disposition by the 
                amount of the excess (if any) of the amount of the 
                basis reduction under subclause (I) over the portion of 
                any excess business interest allocated to the partner 
                under clause (i)(II) which has previously been treated 
                under clause (ii) as business interest paid or accrued 
                by the partner. The preceding sentence shall also apply 
                to transfers of the partnership interest (including by 
                reason of death) in a transaction in which gain is not 
                recognized in whole or in part. No deduction shall be 
                allowed to the transferor or transferee under this 
                chapter for any excess business interest resulting in a 
                basis increase under this subclause.

            ``(C) Excess taxable income.--The term `excess taxable 
        income' means, with respect to any partnership, the amount 
        which bears the same ratio to the partnership's adjusted 
        taxable income as--
                ``(i) the excess (if any) of--

                    ``(I) the amount determined for the partnership 
                under paragraph (1)(B), over
                    ``(II) the amount (if any) by which the business 
                interest of the partnership, reduced by the floor plan 
                financing interest, exceeds the business interest 
                income of the partnership, bears to

                ``(ii) the amount determined for the partnership under 
            paragraph (1)(B).
            ``(D) Application to s corporations.--Rules similar to the 
        rules of subparagraphs (A) and (C) shall apply with respect to 
        any S corporation and its shareholders.
        ``(5) Business interest.--For purposes of this subsection, the 
    term `business interest' means any interest paid or accrued on 
    indebtedness properly allocable to a trade or business. Such term 
    shall not include investment interest (within the meaning of 
    subsection (d)).
        ``(6) Business interest income.--For purposes of this 
    subsection, the term `business interest income' means the amount of 
    interest includible in the gross income of the taxpayer for the 
    taxable year which is properly allocable to a trade or business. 
    Such term shall not include investment income (within the meaning 
    of subsection (d)).
        ``(7) Trade or business.--For purposes of this subsection--
            ``(A) In general.--The term `trade or business' shall not 
        include--
                ``(i) the trade or business of performing services as 
            an employee,
                ``(ii) any electing real property trade or business,
                ``(iii) any electing farming business, or
                ``(iv) the trade or business of the furnishing or sale 
            of--

                    ``(I) electrical energy, water, or sewage disposal 
                services,
                    ``(II) gas or steam through a local distribution 
                system, or
                    ``(III) transportation of gas or steam by pipeline,

            if the rates for such furnishing or sale, as the case may 
            be, have been established or approved by a State or 
            political subdivision thereof, by any agency or 
            instrumentality of the United States, by a public service 
            or public utility commission or other similar body of any 
            State or political subdivision thereof, or by the governing 
            or ratemaking body of an electric cooperative.
            ``(B) Electing real property trade or business.--For 
        purposes of this paragraph, the term `electing real property 
        trade or business' means any trade or business which is 
        described in section 469(c)(7)(C) and which makes an election 
        under this subparagraph. Any such election shall be made at 
        such time and in such manner as the Secretary shall prescribe, 
        and, once made, shall be irrevocable.
            ``(C) Electing farming business.--For purposes of this 
        paragraph, the term `electing farming business' means--
                ``(i) a farming business (as defined in section 
            263A(e)(4)) which makes an election under this 
            subparagraph, or
                ``(ii) any trade or business of a specified 
            agricultural or horticultural cooperative (as defined in 
            section 199A(g)(2)) with respect to which the cooperative 
            makes an election under this subparagraph.
        Any such election shall be made at such time and in such manner 
        as the Secretary shall prescribe, and, once made, shall be 
        irrevocable.
        ``(8) Adjusted taxable income.--For purposes of this 
    subsection, the term `adjusted taxable income' means the taxable 
    income of the taxpayer--
            ``(A) computed without regard to--
                ``(i) any item of income, gain, deduction, or loss 
            which is not properly allocable to a trade or business,
                ``(ii) any business interest or business interest 
            income,
                ``(iii) the amount of any net operating loss deduction 
            under section 172,
                ``(iv) the amount of any deduction allowed under 
            section 199A, and
                ``(v) in the case of taxable years beginning before 
            January 1, 2022, any deduction allowable for depreciation, 
            amortization, or depletion, and
            ``(B) computed with such other adjustments as provided by 
        the Secretary.
        ``(9) Floor plan financing interest defined.--For purposes of 
    this subsection--
            ``(A) In general.--The term `floor plan financing interest' 
        means interest paid or accrued on floor plan financing 
        indebtedness.
            ``(B) Floor plan financing indebtedness.--The term `floor 
        plan financing indebtedness' means indebtedness--
                ``(i) used to finance the acquisition of motor vehicles 
            held for sale or lease, and
                ``(ii) secured by the inventory so acquired.
            ``(C) Motor vehicle.--The term `motor vehicle' means a 
        motor vehicle that is any of the following:
                ``(i) Any self-propelled vehicle designed for 
            transporting persons or property on a public street, 
            highway, or road.
                ``(ii) A boat.
                ``(iii) Farm machinery or equipment.
        ``(10) Cross references.--
            ``(A) For requirement that an electing real property trade 
        or business use the alternative depreciation system, see 
        section 168(g)(1)(F).
            ``(B) For requirement that an electing farming business use 
        the alternative depreciation system, see section 
        168(g)(1)(G).''.
    (b) Treatment of Carryforward of Disallowed Business Interest in 
Certain Corporate Acquisitions.--
        (1) In general.--Section 381(c) is amended by inserting after 
    paragraph (19) the following new paragraph:
        ``(20) Carryforward of disallowed business interest.--The 
    carryover of disallowed business interest described in section 
    163(j)(2) to taxable years ending after the date of distribution or 
    transfer.''.
        (2) Application of limitation.--Section 382(d) is amended by 
    adding at the end the following new paragraph:
        ``(3) Application to carryforward of disallowed interest.--The 
    term `pre-change loss' shall include any carryover of disallowed 
    interest described in section 163(j)(2) under rules similar to the 
    rules of paragraph (1).''.
        (3) Conforming amendment.--Section 382(k)(1) is amended by 
    inserting after the first sentence the following: ``Such term shall 
    include any corporation entitled to use a carryforward of 
    disallowed interest described in section 381(c)(20).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.
    (a) Limitation on Deduction.--
        (1) In general.--Section 172(a) is amended to read as follows:
    ``(a) Deduction Allowed.--There shall be allowed as a deduction for 
the taxable year an amount equal to the lesser of--
        ``(1) the aggregate of the net operating loss carryovers to 
    such year, plus the net operating loss carrybacks to such year, or
        ``(2) 80 percent of taxable income computed without regard to 
    the deduction allowable under this section.
For purposes of this subtitle, the term `net operating loss deduction' 
means the deduction allowed by this subsection.''.
        (2) Coordination of limitation with carrybacks and 
    carryovers.--Section 172(b)(2) is amended by striking ``shall be 
    computed--'' and all that follows and inserting ``shall--
            ``(A) be computed with the modifications specified in 
        subsection (d) other than paragraphs (1), (4), and (5) thereof, 
        and by determining the amount of the net operating loss 
        deduction without regard to the net operating loss for the loss 
        year or for any taxable year thereafter,
            ``(B) not be considered to be less than zero, and
            ``(C) not exceed the amount determined under subsection 
        (a)(2) for such prior taxable year.''.
        (3) Conforming amendment.--Section 172(d)(6) is amended by 
    striking ``and'' at the end of subparagraph (A), by striking the 
    period at the end of subparagraph (B) and inserting ``; and'', and 
    by adding at the end the following new subparagraph:
            ``(C) subsection (a)(2) shall be applied by substituting 
        `real estate investment trust taxable income (as defined in 
        section 857(b)(2) but without regard to the deduction for 
        dividends paid (as defined in section 561))' for `taxable 
        income'.''.
    (b) Repeal of Net Operating Loss Carryback; Indefinite 
Carryforward.--
        (1) In general.--Section 172(b)(1)(A) is amended--
            (A) by striking ``shall be a net operating loss carryback 
        to each of the 2 taxable years'' in clause (i) and inserting 
        ``except as otherwise provided in this paragraph, shall not be 
        a net operating loss carryback to any taxable year'', and
            (B) by striking ``to each of the 20 taxable years'' in 
        clause (ii) and inserting ``to each taxable year''.
        (2) Conforming amendment.--Section 172(b)(1) is amended by 
    striking subparagraphs (B) through (F).
    (c) Treatment of Farming Losses.--
        (1) Allowance of carrybacks.--Section 172(b)(1), as amended by 
    subsection (b)(2), is amended by adding at the end the following 
    new subparagraph:
            ``(B) Farming losses.--
                ``(i) In general.--In the case of any portion of a net 
            operating loss for the taxable year which is a farming loss 
            with respect to the taxpayer, such loss shall be a net 
            operating loss carryback to each of the 2 taxable years 
            preceding the taxable year of such loss.
                ``(ii) Farming loss.--For purposes of this section, the 
            term `farming loss' means the lesser of--

                    ``(I) the amount which would be the net operating 
                loss for the taxable year if only income and deductions 
                attributable to farming businesses (as defined in 
                section 263A(e)(4)) are taken into account, or
                    ``(II) the amount of the net operating loss for 
                such taxable year.

                ``(iii) Coordination with paragraph (2).--For purposes 
            of applying paragraph (2), a farming loss for any taxable 
            year shall be treated as a separate net operating loss for 
            such taxable year to be taken into account after the 
            remaining portion of the net operating loss for such 
            taxable year.
                ``(iv) Election.--Any taxpayer entitled to a 2-year 
            carryback under clause (i) from any loss year may elect not 
            to have such clause apply to such loss year. Such election 
            shall be made in such manner as prescribed by the Secretary 
            and shall be made by the due date (including extensions of 
            time) for filing the taxpayer's return for the taxable year 
            of the net operating loss. Such election, once made for any 
            taxable year, shall be irrevocable for such taxable 
            year.''.
        (2) Conforming amendments.--
            (A) Section 172 is amended by striking subsections (f), 
        (g), and (h), and by redesignating subsection (i) as subsection 
        (f).
            (B) Section 537(b)(4) is amended by inserting ``(as in 
        effect before the date of enactment of the Tax Cuts and Jobs 
        Act)'' after ``as defined in section 172(f)''.
    (d) Treatment of Certain Insurance Losses.--
        (1) Treatment of carryforwards and carrybacks.--Section 
    172(b)(1), as amended by subsections (b)(2) and (c)(1), is amended 
    by adding at the end the following new subparagraph:
            ``(C) Insurance companies.--In the case of an insurance 
        company (as defined in section 816(a)) other than a life 
        insurance company, the net operating loss for any taxable 
        year--
                ``(i) shall be a net operating loss carryback to each 
            of the 2 taxable years preceding the taxable year of such 
            loss, and
                ``(ii) shall be a net operating loss carryover to each 
            of the 20 taxable years following the taxable year of the 
            loss.''.
        (2) Exemption from limitation.--Section 172, as amended by 
    subsection (c)(2)(A), is amended by redesignating subsection (f) as 
    subsection (g) and inserting after subsection (e) the following new 
    subsection:
    ``(f) Special Rule for Insurance Companies.--In the case of an 
insurance company (as defined in section 816(a)) other than a life 
insurance company--
        ``(1) the amount of the deduction allowed under subsection (a) 
    shall be the aggregate of the net operating loss carryovers to such 
    year, plus the net operating loss carrybacks to such year, and
        ``(2) subparagraph (C) of subsection (b)(2) shall not apply.''.
    (e) Effective Date.--
        (1) Net operating loss limitation.--The amendments made by 
    subsections (a) and (d)(2) shall apply to losses arising in taxable 
    years beginning after December 31, 2017.
        (2) Carryforwards and carrybacks.--The amendments made by 
    subsections (b), (c), and (d)(1) shall apply to net operating 
    losses arising in taxable years ending after December 31, 2017.
SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY.
    (a) In General.--Section 1031(a)(1) is amended by striking 
``property'' each place it appears and inserting ``real property''.
    (b) Conforming Amendments.--
        (1)(A) Paragraph (2) of section 1031(a) is amended to read as 
    follows:
        ``(2) Exception for real property held for sale.--This 
    subsection shall not apply to any exchange of real property held 
    primarily for sale.''.
        (B) Section 1031 is amended by striking subsection (i).
        (2) Section 1031 is amended by striking subsection (e).
        (3) Section 1031, as amended by paragraph (2), is amended by 
    inserting after subsection (d) the following new subsection:
    ``(e) Application to Certain Partnerships.--For purposes of this 
section, an interest in a partnership which has in effect a valid 
election under section 761(a) to be excluded from the application of 
all of subchapter K shall be treated as an interest in each of the 
assets of such partnership and not as an interest in a partnership.''.
        (4) Section 1031(h) is amended to read as follows:
    ``(h) Special Rules for Foreign Real Property.--Real property 
located in the United States and real property located outside the 
United States are not property of a like kind.''.
        (5) The heading of section 1031 is amended by striking 
    ``property'' and inserting ``real property''.
        (6) The table of sections for part III of subchapter O of 
    chapter 1 is amended by striking the item relating to section 1031 
    and inserting the following new item:

``Sec. 1031. Exchange of real property held for productive use or 
          investment.''.

    (c) Effective Date.--
        (1) In general.--Except as otherwise provided in this 
    subsection, the amendments made by this section shall apply to 
    exchanges completed after December 31, 2017.
        (2) Transition rule.--The amendments made by this section shall 
    not apply to any exchange if--
            (A) the property disposed of by the taxpayer in the 
        exchange is disposed of on or before December 31, 2017, or
            (B) the property received by the taxpayer in the exchange 
        is received on or before December 31, 2017.
SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES FOR FRINGE 
BENEFITS.
    (a) No Deduction Allowed for Entertainment Expenses.--
        (1) In general.--Section 274(a) is amended--
            (A) in paragraph (1)(A), by striking ``unless'' and all 
        that follows through ``trade or business,'',
            (B) by striking the flush sentence at the end of paragraph 
        (1), and
            (C) by striking paragraph (2)(C).
        (2) Conforming amendments.--
            (A) Section 274(d) is amended--
                (i) by striking paragraph (2) and redesignating 
            paragraphs (3) and (4) as paragraphs (2) and (3), 
            respectively, and
                (ii) in the flush text following paragraph (3) (as so 
            redesignated)--

                    (I) by striking ``, entertainment, amusement, 
                recreation, or use of the facility or property,'' in 
                item (B), and
                    (II) by striking ``(D) the business relationship to 
                the taxpayer of persons entertained, using the facility 
                or property, or receiving the gift'' and inserting 
                ``(D) the business relationship to the taxpayer of the 
                person receiving the benefit'',

            (B) Section 274 is amended by striking subsection (l).
            (C) Section 274(n) is amended by striking ``and 
        Entertainment'' in the heading.
            (D) Section 274(n)(1) is amended to read as follows:
        ``(1) In general.--The amount allowable as a deduction under 
    this chapter for any expense for food or beverages shall not exceed 
    50 percent of the amount of such expense which would (but for this 
    paragraph) be allowable as a deduction under this chapter.''.
            (E) Section 274(n)(2) is amended--
                (i) in subparagraph (B), by striking ``in the case of 
            an expense for food or beverages,'',
                (ii) by striking subparagraph (C) and redesignating 
            subparagraphs (D) and (E) as subparagraphs (C) and (D), 
            respectively,
                (iii) by striking ``of subparagraph (E)'' the last 
            sentence and inserting ``of subparagraph (D)'', and
                (iv) by striking ``in subparagraph (D)'' in the last 
            sentence and inserting ``in subparagraph (C)''.
            (F) Clause (iv) of section 7701(b)(5)(A) is amended to read 
        as follows:
                ``(iv) a professional athlete who is temporarily in the 
            United States to compete in a sports event--

                    ``(I) which is organized for the primary purpose of 
                benefiting an organization which is described in 
                section 501(c)(3) and exempt from tax under section 
                501(a),
                    ``(II) all of the net proceeds of which are 
                contributed to such organization, and,
                    ``(III) which utilizes volunteers for substantially 
                all of the work performed in carrying out such 
                event.''.

    (b) Only 50 Percent of Expenses for Meals Provided on or Near 
Business Premises Allowed as Deduction.--Paragraph (2) of section 
274(n), as amended by subsection (a), is amended--
        (1) by striking subparagraph (B),
        (2) by redesignating subparagraphs (C) and (D) as subparagraphs 
    (B) and (C), respectively,
        (3) by striking ``of subparagraph (D)'' in the last sentence 
    and inserting ``of subparagraph (C)'', and
        (4) by striking ``in subparagraph (C)'' in the last sentence 
    and inserting ``in subparagraph (B)''.
    (c) Treatment of Transportation Benefits.--Section 274, as amended 
by subsection (a), is amended--
        (1) in subsection (a)--
            (A) in the heading, by striking ``or Recreation'' and 
        inserting ``Recreation, or Qualified Transportation Fringes'', 
        and
            (B) by adding at the end the following new paragraph:
        ``(4) Qualified transportation fringes.--No deduction shall be 
    allowed under this chapter for the expense of any qualified 
    transportation fringe (as defined in section 132(f)) provided to an 
    employee of the taxpayer.'', and
        (2) by inserting after subsection (k) the following new 
    subsection:
    ``(l) Transportation and Commuting Benefits.--
        ``(1) In general.--No deduction shall be allowed under this 
    chapter for any expense incurred for providing any transportation, 
    or any payment or reimbursement, to an employee of the taxpayer in 
    connection with travel between the employee's residence and place 
    of employment, except as necessary for ensuring the safety of the 
    employee.
        ``(2) Exception.--In the case of any qualified bicycle 
    commuting reimbursement (as described in section 132(f)(5)(F)), 
    this subsection shall not apply for any amounts paid or incurred 
    after December 31, 2017, and before January 1, 2026.''.
    (d) Elimination of Deduction for Meals Provided at Convenience of 
Employer.--Section 274, as amended by subsection (c), is amended--
        (1) by redesignating subsection (o) as subsection (p), and
        (2) by inserting after subsection (n) the following new 
    subsection:
    ``(o) Meals Provided at Convenience of Employer.--No deduction 
shall be allowed under this chapter for--
        ``(1) any expense for the operation of a facility described in 
    section 132(e)(2), and any expense for food or beverages, including 
    under section 132(e)(1), associated with such facility, or
        ``(2) any expense for meals described in section 119(a).''.
    (e) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to amounts incurred or 
    paid after December 31, 2017.
        (2) Effective date for elimination of deduction for meals 
    provided at convenience of employer.--The amendments made by 
    subsection (d) shall apply to amounts incurred or paid after 
    December 31, 2025.
SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO DOMESTIC 
PRODUCTION ACTIVITIES.
    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 199 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Conforming Amendments.--
        (1) Sections 74(d)(2)(B), 86(b)(2)(A), 135(c)(4)(A), 
    137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C), 222(b)(2)(C), 
    246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking 
    ``199,''.
        (2) Section 170(b)(2)(D), as amended by subtitle A, is amended 
    by striking clause (iv), and by redesignating clauses (v) and (vi) 
    as clauses (iv) and (v).
        (3) Section 172(d) is amended by striking paragraph (7).
        (4) Section 613(a), as amended by section 11011, is amended by 
    striking ``and without the deduction under section 199''.
        (5) Section 613A(d)(1), as amended by section 11011, is amended 
    by striking subparagraph (B) and by redesignating subparagraphs 
    (C), (D), (E), and (F) as subparagraphs (B), (C), (D), and (E), 
    respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, AND OTHER 
AMOUNTS.
    (a) Denial of Deduction.--
        (1) In general.--Subsection (f) of section 162 is amended to 
    read as follows:
    ``(f) Fines, Penalties, and Other Amounts.--
        ``(1) In general.--Except as provided in the following 
    paragraphs of this subsection, no deduction otherwise allowable 
    shall be allowed under this chapter for any amount paid or incurred 
    (whether by suit, agreement, or otherwise) to, or at the direction 
    of, a government or governmental entity in relation to the 
    violation of any law or the investigation or inquiry by such 
    government or entity into the potential violation of any law.
        ``(2) Exception for amounts constituting restitution or paid to 
    come into compliance with law.--
            ``(A) In general.--Paragraph (1) shall not apply to any 
        amount that--
                ``(i) the taxpayer establishes--

                    ``(I) constitutes restitution (including 
                remediation of property) for damage or harm which was 
                or may be caused by the violation of any law or the 
                potential violation of any law, or
                    ``(II) is paid to come into compliance with any law 
                which was violated or otherwise involved in the 
                investigation or inquiry described in paragraph (1),

                ``(ii) is identified as restitution or as an amount 
            paid to come into compliance with such law, as the case may 
            be, in the court order or settlement agreement, and
                ``(iii) in the case of any amount of restitution for 
            failure to pay any tax imposed under this title in the same 
            manner as if such amount were such tax, would have been 
            allowed as a deduction under this chapter if it had been 
            timely paid.
        The identification under clause (ii) alone shall not be 
        sufficient to make the establishment required under clause (i).
            ``(B) Limitation.--Subparagraph (A) shall not apply to any 
        amount paid or incurred as reimbursement to the government or 
        entity for the costs of any investigation or litigation.
        ``(3) Exception for amounts paid or incurred as the result of 
    certain court orders.--Paragraph (1) shall not apply to any amount 
    paid or incurred by reason of any order of a court in a suit in 
    which no government or governmental entity is a party.
        ``(4) Exception for taxes due.--Paragraph (1) shall not apply 
    to any amount paid or incurred as taxes due.
        ``(5) Treatment of certain nongovernmental regulatory 
    entities.--For purposes of this subsection, the following 
    nongovernmental entities shall be treated as governmental entities:
            ``(A) Any nongovernmental entity which exercises self-
        regulatory powers (including imposing sanctions) in connection 
        with a qualified board or exchange (as defined in section 
        1256(g)(7)).
            ``(B) To the extent provided in regulations, any 
        nongovernmental entity which exercises self-regulatory powers 
        (including imposing sanctions) as part of performing an 
        essential governmental function.''.
        (2) Effective date.--The amendment made by this subsection 
    shall apply to amounts paid or incurred on or after the date of the 
    enactment of this Act, except that such amendments shall not apply 
    to amounts paid or incurred under any binding order or agreement 
    entered into before such date. Such exception shall not apply to an 
    order or agreement requiring court approval unless the approval was 
    obtained before such date.
    (b) Reporting of Deductible Amounts.--
        (1) In general.--Subpart B of part III of subchapter A of 
    chapter 61 is amended by inserting after section 6050W the 
    following new section:
``SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN FINES, PENALTIES, AND 
OTHER AMOUNTS.
    ``(a) Requirement of Reporting.--
        ``(1) In general.--The appropriate official of any government 
    or any entity described in section 162(f)(5) which is involved in a 
    suit or agreement described in paragraph (2) shall make a return in 
    such form as determined by the Secretary setting forth--
            ``(A) the amount required to be paid as a result of the 
        suit or agreement to which paragraph (1) of section 162(f) 
        applies,
            ``(B) any amount required to be paid as a result of the 
        suit or agreement which constitutes restitution or remediation 
        of property, and
            ``(C) any amount required to be paid as a result of the 
        suit or agreement for the purpose of coming into compliance 
        with any law which was violated or involved in the 
        investigation or inquiry.
        ``(2) Suit or agreement described.--
            ``(A) In general.--A suit or agreement is described in this 
        paragraph if--
                ``(i) it is--

                    ``(I) a suit with respect to a violation of any law 
                over which the government or entity has authority and 
                with respect to which there has been a court order, or
                    ``(II) an agreement which is entered into with 
                respect to a violation of any law over which the 
                government or entity has authority, or with respect to 
                an investigation or inquiry by the government or entity 
                into the potential violation of any law over which such 
                government or entity has authority, and

                ``(ii) the aggregate amount involved in all court 
            orders and agreements with respect to the violation, 
            investigation, or inquiry is $600 or more.
            ``(B) Adjustment of reporting threshold.--The Secretary 
        shall adjust the $600 amount in subparagraph (A)(ii) as 
        necessary in order to ensure the efficient administration of 
        the internal revenue laws.
        ``(3) Time of filing.--The return required under this 
    subsection shall be filed at the time the agreement is entered 
    into, as determined by the Secretary.
    ``(b) Statements to Be Furnished to Individuals Involved in the 
Settlement.--Every person required to make a return under subsection 
(a) shall furnish to each person who is a party to the suit or 
agreement a written statement showing--
        ``(1) the name of the government or entity, and
        ``(2) the information supplied to the Secretary under 
    subsection (a)(1).
The written statement required under the preceding sentence shall be 
furnished to the person at the same time the government or entity 
provides the Secretary with the information required under subsection 
(a).
    ``(c) Appropriate Official Defined.--For purposes of this section, 
the term `appropriate official' means the officer or employee having 
control of the suit, investigation, or inquiry or the person 
appropriately designated for purposes of this section.''.
        (2) Conforming amendment.--The table of sections for subpart B 
    of part III of subchapter A of chapter 61 is amended by inserting 
    after the item relating to section 6050W the following new item:

``Sec. 6050X. Information with respect to certain fines, penalties, and 
          other amounts.''.

        (3) Effective date.--The amendments made by this subsection 
    shall apply to amounts paid or incurred on or after the date of the 
    enactment of this Act, except that such amendments shall not apply 
    to amounts paid or incurred under any binding order or agreement 
    entered into before such date. Such exception shall not apply to an 
    order or agreement requiring court approval unless the approval was 
    obtained before such date.
SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO 
NONDISCLOSURE AGREEMENTS PAID IN CONNECTION WITH SEXUAL HARASSMENT OR 
SEXUAL ABUSE.
    (a) Denial of Deduction.--Section 162 is amended by redesignating 
subsection (q) as subsection (r) and by inserting after subsection (p) 
the following new subsection:
    ``(q) Payments Related to Sexual Harassment and Sexual Abuse.--No 
deduction shall be allowed under this chapter for--
        ``(1) any settlement or payment related to sexual harassment or 
    sexual abuse if such settlement or payment is subject to a 
    nondisclosure agreement, or
        ``(2) attorney's fees related to such a settlement or 
    payment.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after the date of the enactment of 
this Act.
SEC. 13308. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES.
    (a) In General.--Section 162(e) is amended by striking paragraphs 
(2) and (7) and by redesignating paragraphs (3), (4), (5), (6), and (8) 
as paragraphs (2), (3), (4), (5), and (6), respectively.
    (b) Conforming Amendment.--Section 6033(e)(1)(B)(ii) is amended by 
striking ``section 162(e)(5)(B)(ii)'' and inserting ``section 
162(e)(4)(B)(ii)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred on or after the date of the enactment 
of this Act.
SEC. 13309. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE OF 
PARTNERSHIP PROFITS INTERESTS HELD IN CONNECTION WITH PERFORMANCE OF 
INVESTMENT SERVICES.
    (a) In General.--Part IV of subchapter O of chapter 1 is amended--
        (1) by redesignating section 1061 as section 1062, and
        (2) by inserting after section 1060 the following new section:
``SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNECTION WITH PERFORMANCE 
OF SERVICES.
    ``(a) In General.--If one or more applicable partnership interests 
are held by a taxpayer at any time during the taxable year, the excess 
(if any) of--
        ``(1) the taxpayer's net long-term capital gain with respect to 
    such interests for such taxable year, over
        ``(2) the taxpayer's net long-term capital gain with respect to 
    such interests for such taxable year computed by applying 
    paragraphs (3) and (4) of sections 1222 by substituting `3 years' 
    for `1 year',
shall be treated as short-term capital gain, notwithstanding section 83 
or any election in effect under section 83(b).
    ``(b) Special Rule.--To the extent provided by the Secretary, 
subsection (a) shall not apply to income or gain attributable to any 
asset not held for portfolio investment on behalf of third party 
investors.
    ``(c) Applicable Partnership Interest.--For purposes of this 
section--
        ``(1) In general.--Except as provided in this paragraph or 
    paragraph (4), the term `applicable partnership interest' means any 
    interest in a partnership which, directly or indirectly, is 
    transferred to (or is held by) the taxpayer in connection with the 
    performance of substantial services by the taxpayer, or any other 
    related person, in any applicable trade or business. The previous 
    sentence shall not apply to an interest held by a person who is 
    employed by another entity that is conducting a trade or business 
    (other than an applicable trade or business) and only provides 
    services to such other entity.
        ``(2) Applicable trade or business.--The term `applicable trade 
    or business' means any activity conducted on a regular, continuous, 
    and substantial basis which, regardless of whether the activity is 
    conducted in one or more entities, consists, in whole or in part, 
    of--
            ``(A) raising or returning capital, and
            ``(B) either--
                ``(i) investing in (or disposing of) specified assets 
            (or identifying specified assets for such investing or 
            disposition), or
                ``(ii) developing specified assets.
        ``(3) Specified asset.--The term `specified asset' means 
    securities (as defined in section 475(c)(2) without regard to the 
    last sentence thereof), commodities (as defined in section 
    475(e)(2)), real estate held for rental or investment, cash or cash 
    equivalents, options or derivative contracts with respect to any of 
    the foregoing, and an interest in a partnership to the extent of 
    the partnership's proportionate interest in any of the foregoing.
        ``(4) Exceptions.--The term `applicable partnership interest' 
    shall not include--
            ``(A) any interest in a partnership directly or indirectly 
        held by a corporation, or
            ``(B) any capital interest in the partnership which 
        provides the taxpayer with a right to share in partnership 
        capital commensurate with--
                ``(i) the amount of capital contributed (determined at 
            the time of receipt of such partnership interest), or
                ``(ii) the value of such interest subject to tax under 
            section 83 upon the receipt or vesting of such interest.
        ``(5) Third party investor.--The term `third party investor' 
    means a person who--
            ``(A) holds an interest in the partnership which does not 
        constitute property held in connection with an applicable trade 
        or business; and
            ``(B) is not (and has not been) actively engaged, and is 
        (and was) not related to a person so engaged, in (directly or 
        indirectly) providing substantial services described in 
        paragraph (1) for such partnership or any applicable trade or 
        business.
    ``(d) Transfer of Applicable Partnership Interest to Related 
Person.--
        ``(1) In general.--If a taxpayer transfers any applicable 
    partnership interest, directly or indirectly, to a person related 
    to the taxpayer, the taxpayer shall include in gross income (as 
    short term capital gain) the excess (if any) of--
            ``(A) so much of the taxpayer's long-term capital gains 
        with respect to such interest for such taxable year 
        attributable to the sale or exchange of any asset held for not 
        more than 3 years as is allocable to such interest, over
            ``(B) any amount treated as short term capital gain under 
        subsection (a) with respect to the transfer of such interest.
        ``(2) Related person.--For purposes of this paragraph, a person 
    is related to the taxpayer if--
            ``(A) the person is a member of the taxpayer's family 
        within the meaning of section 318(a)(1), or
            ``(B) the person performed a service within the current 
        calendar year or the preceding three calendar years in any 
        applicable trade or business in which or for which the taxpayer 
        performed a service.
    ``(e) Reporting.--The Secretary shall require such reporting (at 
the time and in the manner prescribed by the Secretary) as is necessary 
to carry out the purposes of this section.
    ``(f) Regulations.--The Secretary shall issue such regulations or 
other guidance as is necessary or appropriate to carry out the purposes 
of this section''.
    (b) Clerical Amendment.--The table of sections for part IV of 
subchapter O of chapter 1 is amended by striking the item relating to 
1061 and inserting the following new items:

``Sec. 1061. Partnership interests held in connection with performance 
          of services.
``Sec. 1062. Cross references.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13310. PROHIBITION ON CASH, GIFT CARDS, AND OTHER NON-TANGIBLE 
PERSONAL PROPERTY AS EMPLOYEE ACHIEVEMENT AWARDS.
    (a) In General.--Subparagraph (A) of section 274(j)(3) is amended--
        (1) by striking ``The term'' and inserting the following:
                ``(i) In general.--The term''.
        (2) by redesignating clauses (i), (ii), and (iii) as subclauses 
    (I), (II), and (III), respectively, and conforming the margins 
    accordingly, and
        (3) by adding at the end the following new clause:
                ``(ii) Tangible personal property.--For purposes of 
            clause (i), the term `tangible personal property' shall not 
            include--

                    ``(I) cash, cash equivalents, gift cards, gift 
                coupons, or gift certificates (other than arrangements 
                conferring only the right to select and receive 
                tangible personal property from a limited array of such 
                items pre-selected or pre-approved by the employer), or
                    ``(II) vacations, meals, lodging, tickets to 
                theater or sporting events, stocks, bonds, other 
                securities, and other similar items.''.

    (b) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2017.
SEC. 13311. ELIMINATION OF DEDUCTION FOR LIVING EXPENSES INCURRED BY 
MEMBERS OF CONGRESS.
    (a) In General.--Subsection (a) of section 162 is amended in the 
matter following paragraph (3) by striking ``in excess of $3,000''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.
SEC. 13312. CERTAIN CONTRIBUTIONS BY GOVERNMENTAL ENTITIES NOT TREATED 
AS CONTRIBUTIONS TO CAPITAL.
    (a) In General.--Section 118 is amended--
        (1) by striking subsections (b), (c), and (d),
        (2) by redesignating subsection (e) as subsection (d), and
        (3) by inserting after subsection (a) the following new 
    subsections:
    ``(b) Exceptions.--For purposes of subsection (a), the term 
`contribution to the capital of the taxpayer' does not include--
        ``(1) any contribution in aid of construction or any other 
    contribution as a customer or potential customer, and
        ``(2) any contribution by any governmental entity or civic 
    group (other than a contribution made by a shareholder as such).
    ``(c) Regulations.--The Secretary shall issue such regulations or 
other guidance as may be necessary or appropriate to carry out this 
section, including regulations or other guidance for determining 
whether any contribution constitutes a contribution in aid of 
construction.''.
    (b) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to contributions made 
    after the date of enactment of this Act.
        (2) Exception.--The amendments made by this section shall not 
    apply to any contribution, made after the date of enactment of this 
    Act by a governmental entity, which is made pursuant to a master 
    development plan that has been approved prior to such date by a 
    governmental entity.
SEC. 13313. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES GAIN INTO 
SPECIALIZED SMALL BUSINESS INVESTMENT COMPANIES.
    (a) In General.--Part III of subchapter O of chapter 1 is amended 
by striking section 1044 (and by striking the item relating to such 
section in the table of sections of such part).
    (b) Conforming Amendments.--Section 1016(a)(23) is amended--
        (1) by striking ``1044,'', and
        (2) by striking ``1044(d),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales after December 31, 2017.
SEC. 13314. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A CAPITAL 
ASSET.
    (a) Patents, etc.--Section 1221(a)(3) is amended by inserting ``a 
patent, invention, model or design (whether or not patented), a secret 
formula or process,'' before ``a copyright''.
    (b) Conforming Amendment.--Section 1231(b)(1)(C) is amended by 
inserting ``a patent, invention, model or design (whether or not 
patented), a secret formula or process,'' before ``a copyright''.
    (c) Effective Date.--The amendments made by this section shall 
apply to dispositions after December 31, 2017.

                        PART V--BUSINESS CREDITS

SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT.
    (a) Credit Rate.--Subsection (a) of section 45C is amended by 
striking ``50 percent'' and inserting ``25 percent''.
    (b) Election of Reduced Credit.--Subsection (b) of section 280C is 
amended by redesignating paragraph (3) as paragraph (4) and by 
inserting after paragraph (2) the following new paragraph:
        ``(3) Election of reduced credit.--
            ``(A) In general.--In the case of any taxable year for 
        which an election is made under this paragraph--
                ``(i) paragraphs (1) and (2) shall not apply, and
                ``(ii) the amount of the credit under section 45C(a) 
            shall be the amount determined under subparagraph (B).
            ``(B) Amount of reduced credit.--The amount of credit 
        determined under this subparagraph for any taxable year shall 
        be the amount equal to the excess of--
                ``(i) the amount of credit determined under section 
            45C(a) without regard to this paragraph, over
                ``(ii) the product of--

                    ``(I) the amount described in clause (i), and
                    ``(II) the maximum rate of tax under section 11(b).

            ``(C) Election.--An election under this paragraph for any 
        taxable year shall be made not later than the time for filing 
        the return of tax for such year (including extensions), shall 
        be made on such return, and shall be made in such manner as the 
        Secretary shall prescribe. Such an election, once made, shall 
        be irrevocable.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13402. REHABILITATION CREDIT LIMITED TO CERTIFIED HISTORIC 
STRUCTURES.
    (a) In General.--Subsection (a) of section 47 is amended to read as 
follows:
    ``(a) General Rule.--
        ``(1) In general.--For purposes of section 46, for any taxable 
    year during the 5-year period beginning in the taxable year in 
    which a qualified rehabilitated building is placed in service, the 
    rehabilitation credit for such year is an amount equal to the 
    ratable share for such year.
        ``(2) Ratable share.--For purposes of paragraph (1), the 
    ratable share for any taxable year during the period described in 
    such paragraph is the amount equal to 20 percent of the qualified 
    rehabilitation expenditures with respect to the qualified 
    rehabilitated building, as allocated ratably to each year during 
    such period.''.
    (b) Conforming Amendments.--
        (1) Section 47(c) is amended--
            (A) in paragraph (1)--
                (i) in subparagraph (A), by amending clause (iii) to 
            read as follows:
                ``(iii) such building is a certified historic 
            structure, and'',
                (ii) by striking subparagraph (B), and
                (iii) by redesignating subparagraphs (C) and (D) as 
            subparagraphs (B) and (C), respectively, and
            (B) in paragraph (2)(B), by amending clause (iv) to read as 
        follows:
                ``(iv) Certified historic structure.--Any expenditure 
            attributable to the rehabilitation of a qualified 
            rehabilitated building unless the rehabilitation is a 
            certified rehabilitation (within the meaning of 
            subparagraph (C)).''.
        (2) Paragraph (4) of section 145(d) is amended--
            (A) by striking ``of section 47(c)(1)(C)'' each place it 
        appears and inserting ``of section 47(c)(1)(B)'', and
            (B) by striking ``section 47(c)(1)(C)(i)'' and inserting 
        ``section 47(c)(1)(B)(i)''.
    (c) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to amounts paid or 
    incurred after December 31, 2017.
        (2) Transition rule.--In the case of qualified rehabilitation 
    expenditures with respect to any building--
            (A) owned or leased by the taxpayer during the entirety of 
        the period after December 31, 2017, and
            (B) with respect to which the 24-month period selected by 
        the taxpayer under clause (i) of section 47(c)(1)(B) of the 
        Internal Revenue Code (as amended by subsection (b)), or the 
        60-month period applicable under clause (ii) of such section, 
        begins not later than 180 days after the date of the enactment 
        of this Act,
    the amendments made by this section shall apply to such 
    expenditures paid or incurred after the end of the taxable year in 
    which the 24-month period, or the 60-month period, referred to in 
    subparagraph (B) ends.
SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.
    (a) In General.--
        (1) Allowance of credit.--Subpart D of part IV of subchapter A 
    of chapter 1 is amended by adding at the end the following new 
    section:
    ``SEC. 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE.
    ``(a) Establishment of Credit.--
        ``(1) In general.--For purposes of section 38, in the case of 
    an eligible employer, the paid family and medical leave credit is 
    an amount equal to the applicable percentage of the amount of wages 
    paid to qualifying employees during any period in which such 
    employees are on family and medical leave.
        ``(2) Applicable percentage.--For purposes of paragraph (1), 
    the term `applicable percentage' means 12.5 percent increased (but 
    not above 25 percent) by 0.25 percentage points for each percentage 
    point by which the rate of payment (as described under subsection 
    (c)(1)(B)) exceeds 50 percent.
    ``(b) Limitation.--
        ``(1) In general.--The credit allowed under subsection (a) with 
    respect to any employee for any taxable year shall not exceed an 
    amount equal to the product of the normal hourly wage rate of such 
    employee for each hour (or fraction thereof) of actual services 
    performed for the employer and the number of hours (or fraction 
    thereof) for which family and medical leave is taken.
        ``(2) Non-hourly wage rate.--For purposes of paragraph (1), in 
    the case of any employee who is not paid on an hourly wage rate, 
    the wages of such employee shall be prorated to an hourly wage rate 
    under regulations established by the Secretary.
        ``(3) Maximum amount of leave subject to credit.--The amount of 
    family and medical leave that may be taken into account with 
    respect to any employee under subsection (a) for any taxable year 
    shall not exceed 12 weeks.
    ``(c) Eligible Employer.--For purposes of this section--
        ``(1) In general.--The term `eligible employer' means any 
    employer who has in place a written policy that meets the following 
    requirements:
            ``(A) The policy provides--
                ``(i) in the case of a qualifying employee who is not a 
            part-time employee (as defined in section 4980E(d)(4)(B)), 
            not less than 2 weeks of annual paid family and medical 
            leave, and
                ``(ii) in the case of a qualifying employee who is a 
            part-time employee, an amount of annual paid family and 
            medical leave that is not less than an amount which bears 
            the same ratio to the amount of annual paid family and 
            medical leave that is provided to a qualifying employee 
            described in clause (i) as--

                    ``(I) the number of hours the employee is expected 
                to work during any week, bears to
                    ``(II) the number of hours an equivalent qualifying 
                employee described in clause (i) is expected to work 
                during the week.

            ``(B) The policy requires that the rate of payment under 
        the program is not less than 50 percent of the wages normally 
        paid to such employee for services performed for the employer.
        ``(2) Special rule for certain employers.--
            ``(A) In general.--An added employer shall not be treated 
        as an eligible employer unless such employer provides paid 
        family and medical leave in compliance with a written policy 
        which ensures that the employer--
                ``(i) will not interfere with, restrain, or deny the 
            exercise of or the attempt to exercise, any right provided 
            under the policy, and
                ``(ii) will not discharge or in any other manner 
            discriminate against any individual for opposing any 
            practice prohibited by the policy.
            ``(B) Added employer; added employee.--For purposes of this 
        paragraph--
                ``(i) Added employee.--The term `added employee' means 
            a qualifying employee who is not covered by title I of the 
            Family and Medical Leave Act of 1993, as amended.
                ``(ii) Added employer.--The term `added employer' means 
            an eligible employer (determined without regard to this 
            paragraph), whether or not covered by that title I, who 
            offers paid family and medical leave to added employees.
        ``(3) Aggregation rule.--All persons which are treated as a 
    single employer under subsections (a) and (b) of section 52 shall 
    be treated as a single taxpayer.
        ``(4) Treatment of benefits mandated or paid for by state or 
    local governments.--For purposes of this section, any leave which 
    is paid by a State or local government or required by State or 
    local law shall not be taken into account in determining the amount 
    of paid family and medical leave provided by the employer.
        ``(5) No inference.--Nothing in this subsection shall be 
    construed as subjecting an employer to any penalty, liability, or 
    other consequence (other than ineligibility for the credit allowed 
    by reason of subsection (a) or recapturing the benefit of such 
    credit) for failure to comply with the requirements of this 
    subsection.
    ``(d) Qualifying Employees.--For purposes of this section, the term 
`qualifying employee' means any employee (as defined in section 3(e) of 
the Fair Labor Standards Act of 1938, as amended) who--
        ``(1) has been employed by the employer for 1 year or more, and
        ``(2) for the preceding year, had compensation not in excess of 
    an amount equal to 60 percent of the amount applicable for such 
    year under clause (i) of section 414(q)(1)(B).
    ``(e) Family and Medical Leave.--
        ``(1) In general.--Except as provided in paragraph (2), for 
    purposes of this section, the term `family and medical leave' means 
    leave for any 1 or more of the purposes described under 
    subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or 
    paragraph (3), of section 102(a) of the Family and Medical Leave 
    Act of 1993, as amended, whether the leave is provided under that 
    Act or by a policy of the employer.
        ``(2) Exclusion.--If an employer provides paid leave as 
    vacation leave, personal leave, or medical or sick leave (other 
    than leave specifically for 1 or more of the purposes referred to 
    in paragraph (1)), that paid leave shall not be considered to be 
    family and medical leave under paragraph (1).
        ``(3) Definitions.--In this subsection, the terms `vacation 
    leave', `personal leave', and `medical or sick leave' mean those 3 
    types of leave, within the meaning of section 102(d)(2) of that 
    Act.
    ``(f) Determinations Made by Secretary of Treasury.--For purposes 
of this section, any determination as to whether an employer or an 
employee satisfies the applicable requirements for an eligible employer 
(as described in subsection (c)) or qualifying employee (as described 
in subsection (d)), respectively, shall be made by the Secretary based 
on such information, to be provided by the employer, as the Secretary 
determines to be necessary or appropriate.
    ``(g) Wages.--For purposes of this section, the term `wages' has 
the meaning given such term by subsection (b) of section 3306 
(determined without regard to any dollar limitation contained in such 
section). Such term shall not include any amount taken into account for 
purposes of determining any other credit allowed under this subpart.
    ``(h) Election to Have Credit Not Apply.--
        ``(1) In general.--A taxpayer may elect to have this section 
    not apply for any taxable year.
        ``(2) Other rules.--Rules similar to the rules of paragraphs 
    (2) and (3) of section 51(j) shall apply for purposes of this 
    subsection.
    ``(i) Termination.--This section shall not apply to wages paid in 
taxable years beginning after December 31, 2019.''.
    (b) Credit Part of General Business Credit.--Section 38(b) is 
amended by striking ``plus'' at the end of paragraph (35), by striking 
the period at the end of paragraph (36) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
        ``(37) in the case of an eligible employer (as defined in 
    section 45S(c)), the paid family and medical leave credit 
    determined under section 45S(a).''.
    (c) Credit Allowed Against AMT.--Subparagraph (B) of section 
38(c)(4) is amended by redesignating clauses (ix) through (xi) as 
clauses (x) through (xii), respectively, and by inserting after clause 
(viii) the following new clause:
                ``(ix) the credit determined under section 45S,''.
    (d) Conforming Amendments.--
        (1) Denial of double benefit.--Section 280C(a) is amended by 
    inserting ``45S(a),'' after ``45P(a),''.
        (2) Election to have credit not apply.--Section 6501(m) is 
    amended by inserting ``45S(h),'' after ``45H(g),''.
        (3) Clerical amendment.--The table of sections for subpart D of 
    part IV of subchapter A of chapter 1 is amended by adding at the 
    end the following new item:

``Sec. 45S. Employer credit for paid family and medical leave.''.

    (e) Effective Date.--The amendments made by this section shall 
apply to wages paid in taxable years beginning after December 31, 2017.
SEC. 13404. REPEAL OF TAX CREDIT BONDS.
    (a) In General.--Part IV of subchapter A of chapter 1 is amended by 
striking subparts H, I, and J (and by striking the items relating to 
such subparts in the table of subparts for such part).
    (b) Payments to Issuers.--Subchapter B of chapter 65 is amended by 
striking section 6431 (and by striking the item relating to such 
section in the table of sections for such subchapter).
    (c) Conforming Amendments.--
        (1) Part IV of subchapter U of chapter 1 is amended by striking 
    section 1397E (and by striking the item relating to such section in 
    the table of sections for such part).
        (2) Section 54(l)(3)(B) is amended by inserting ``(as in effect 
    before its repeal by the Tax Cuts and Jobs Act)'' after ``section 
    1397E(I)''.
        (3) Section 6211(b)(4)(A) is amended by striking ``, and 6431'' 
    and inserting ``and'' before ``36B''.
        (4) Section 6401(b)(1) is amended by striking ``G, H, I, and 
    J'' and inserting ``and G''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 2017.

    PART VI--PROVISIONS RELATED TO SPECIFIC ENTITIES AND INDUSTRIES

                   Subpart A--Partnership Provisions

SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN PERSONS FROM SALE OR 
EXCHANGE OF INTERESTS IN PARTNERSHIPS ENGAGED IN TRADE OR BUSINESS 
WITHIN THE UNITED STATES.
    (a) Amount Treated as Effectively Connected.--
        (1) In general.--Section 864(c) is amended by adding at the end 
    the following:
        ``(8) Gain or loss of foreign persons from sale or exchange of 
    certain partnership interests.--
            ``(A) In general.--Notwithstanding any other provision of 
        this subtitle, if a nonresident alien individual or foreign 
        corporation owns, directly or indirectly, an interest in a 
        partnership which is engaged in any trade or business within 
        the United States, gain or loss on the sale or exchange of all 
        (or any portion of) such interest shall be treated as 
        effectively connected with the conduct of such trade or 
        business to the extent such gain or loss does not exceed the 
        amount determined under subparagraph (B).
            ``(B) Amount treated as effectively connected.--The amount 
        determined under this subparagraph with respect to any 
        partnership interest sold or exchanged--
                ``(i) in the case of any gain on the sale or exchange 
            of the partnership interest, is--

                    ``(I) the portion of the partner's distributive 
                share of the amount of gain which would have been 
                effectively connected with the conduct of a trade or 
                business within the United States if the partnership 
                had sold all of its assets at their fair market value 
                as of the date of the sale or exchange of such 
                interest, or
                    ``(II) zero if no gain on such deemed sale would 
                have been so effectively connected, and

                ``(ii) in the case of any loss on the sale or exchange 
            of the partnership interest, is--

                    ``(I) the portion of the partner's distributive 
                share of the amount of loss on the deemed sale 
                described in clause (i)(I) which would have been so 
                effectively connected, or
                    ``(II) zero if no loss on such deemed sale would be 
                have been so effectively connected.

            For purposes of this subparagraph, a partner's distributive 
            share of gain or loss on the deemed sale shall be 
            determined in the same manner as such partner's 
            distributive share of the non-separately stated taxable 
            income or loss of such partnership.
            ``(C) Coordination with united states real property 
        interests.--If a partnership described in subparagraph (A) 
        holds any United States real property interest (as defined in 
        section 897(c)) at the time of the sale or exchange of the 
        partnership interest, then the gain or loss treated as 
        effectively connected income under subparagraph (A) shall be 
        reduced by the amount so treated with respect to such United 
        States real property interest under section 897.
            ``(D) Sale or exchange.--For purposes of this paragraph, 
        the term `sale or exchange' means any sale, exchange, or other 
        disposition.
            ``(E) Secretarial authority.--The Secretary shall prescribe 
        such regulations or other guidance as the Secretary determines 
        appropriate for the application of this paragraph, including 
        with respect to exchanges described in section 332, 351, 354, 
        355, 356, or 361.''.
        (2) Conforming amendments.--Section 864(c)(1) is amended--
            (A) by striking ``and (7)'' in subparagraph (A), and 
        inserting ``(7), and (8)'', and
            (B) by striking ``or (7)'' in subparagraph (B), and 
        inserting ``(7), or (8)''.
    (b) Withholding Requirements.--Section 1446 is amended by 
redesignating subsection (f) as subsection (g) and by inserting after 
subsection (e) the following:
    ``(f) Special Rules for Withholding on Dispositions of Partnership 
Interests.--
        ``(1) In general.--Except as provided in this subsection, if 
    any portion of the gain (if any) on any disposition of an interest 
    in a partnership would be treated under section 864(c)(8) as 
    effectively connected with the conduct of a trade or business 
    within the United States, the transferee shall be required to 
    deduct and withhold a tax equal to 10 percent of the amount 
    realized on the disposition.
        ``(2) Exception if nonforeign affidavit furnished.--
            ``(A) In general.--No person shall be required to deduct 
        and withhold any amount under paragraph (1) with respect to any 
        disposition if the transferor furnishes to the transferee an 
        affidavit by the transferor stating, under penalty of perjury, 
        the transferor's United States taxpayer identification number 
        and that the transferor is not a foreign person.
            ``(B) False affidavit.--Subparagraph (A) shall not apply to 
        any disposition if--
                ``(i) the transferee has actual knowledge that the 
            affidavit is false, or the transferee receives a notice (as 
            described in section 1445(d)) from a transferor's agent or 
            transferee's agent that such affidavit or statement is 
            false, or
                ``(ii) the Secretary by regulations requires the 
            transferee to furnish a copy of such affidavit or statement 
            to the Secretary and the transferee fails to furnish a copy 
            of such affidavit or statement to the Secretary at such 
            time and in such manner as required by such regulations.
            ``(C) Rules for agents.--The rules of section 1445(d) shall 
        apply to a transferor's agent or transferee's agent with 
        respect to any affidavit described in subparagraph (A) in the 
        same manner as such rules apply with respect to the disposition 
        of a United States real property interest under such section.
        ``(3) Authority of secretary to prescribe reduced amount.--At 
    the request of the transferor or transferee, the Secretary may 
    prescribe a reduced amount to be withheld under this section if the 
    Secretary determines that to substitute such reduced amount will 
    not jeopardize the collection of the tax imposed under this title 
    with respect to gain treated under section 864(c)(8) as effectively 
    connected with the conduct of a trade or business with in the 
    United States.
        ``(4) Partnership to withhold amounts not withheld by the 
    transferee.--If a transferee fails to withhold any amount required 
    to be withheld under paragraph (1), the partnership shall be 
    required to deduct and withhold from distributions to the 
    transferee a tax in an amount equal to the amount the transferee 
    failed to withhold (plus interest under this title on such amount).
        ``(5) Definitions.--Any term used in this subsection which is 
    also used under section 1445 shall have the same meaning as when 
    used in such section.
        ``(6) Regulations.--The Secretary shall prescribe such 
    regulations or other guidance as may be necessary to carry out the 
    purposes of this subsection, including regulations providing for 
    exceptions from the provisions of this subsection.''.
    (c) Effective Dates.--
        (1) Subsection (a).--The amendments made by subsection (a) 
    shall apply to sales, exchanges, and dispositions on or after 
    November 27, 2017.
        (2) Subsection (b).--The amendment made by subsection (b) shall 
    apply to sales, exchanges, and dispositions after December 31, 
    2017.
SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN THE CASE 
OF TRANSFER OF PARTNERSHIP INTEREST.
    (a) In General.--Paragraph (1) of section 743(d) is to read as 
follows:
        ``(1) In general.--For purposes of this section, a partnership 
    has a substantial built-in loss with respect to a transfer of an 
    interest in the partnership if--
            ``(A) the partnership's adjusted basis in the partnership 
        property exceeds by more than $250,000 the fair market value of 
        such property, or
            ``(B) the transferee partner would be allocated a loss of 
        more than $250,000 if the partnership assets were sold for cash 
        equal to their fair market value immediately after such 
        transfer.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transfers of partnership interests after December 31, 2017.
SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN INTO 
ACCOUNT IN DETERMINING LIMITATION ON ALLOWANCE OF PARTNER'S SHARE OF 
LOSS.
    (a) In General.--Subsection (d) of section 704 is amended--
        (1) by striking ``A partner's distributive share'' and 
    inserting the following:
        ``(1) In general.--A partner's distributive share'',
        (2) by striking ``Any excess of such loss'' and inserting the 
    following:
        ``(2) Carryover.--Any excess of such loss'', and
        (3) by adding at the end the following new paragraph:
        ``(3) Special rules.--
            ``(A) In general.--In determining the amount of any loss 
        under paragraph (1), there shall be taken into account the 
        partner's distributive share of amounts described in paragraphs 
        (4) and (6) of section 702(a).
            ``(B) Exception.--In the case of a charitable contribution 
        of property whose fair market value exceeds its adjusted basis, 
        subparagraph (A) shall not apply to the extent of the partner's 
        distributive share of such excess.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 2017.
SEC. 13504. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS.
    (a) In General.--Paragraph (1) of section 708(b) is amended--
        (1) by striking ``, or'' at the end of subparagraph (A) and all 
    that follows and inserting a period, and
        (2) by striking ``only if--'' and all that follows through ``no 
    part of any business'' and inserting the following: ``only if no 
    part of any business''.
    (b) Conforming Amendment.--
        (1) Section 168(i)(7)(B) is amended by striking the second 
    sentence.
        (2) Section 743(e) is amended by striking paragraph (4) and 
    redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5), 
    and (6).
    (c) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 2017.

                      Subpart B--Insurance Reforms

SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES.
    (a) In General.--Section 805(b) is amended by striking paragraph 
(4) and by redesignating paragraph (5) as paragraph (4).
    (b) Conforming Amendments.--
        (1) Part I of subchapter L of chapter 1 is amended by striking 
    section 810 (and by striking the item relating to such section in 
    the table of sections for such part).
        (2)(A) Part III of subchapter L of chapter 1 is amended by 
    striking section 844 (and by striking the item relating to such 
    section in the table of sections for such part).
        (B) Section 831(b)(3) is amended by striking ``except as 
    provided in section 844,''
        (3) Section 381 is amended by striking subsection (d).
        (4) Section 805(a)(4)(B)(ii) is amended to read as follows:
                ``(ii) the deduction allowed under section 172,''.
        (5) Section 805(a) is amended by striking paragraph (5).
        (6) Section 805(b)(2)(A)(iv) is amended to read as follows:
                ``(iv) any net operating loss carryback to the taxable 
            year under section 172, and''.
        (7) Section 953(b)(1)(B) is amended to read as follows:
            ``(B) So much of section 805(a)(8) as relates to the 
        deduction allowed under section 172.''.
        (8) Section 1351(i)(3) is amended by striking ``or the 
    operations loss deduction under section 810,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to losses arising in taxable years beginning after December 31, 
2017.
SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.
    (a) In General.--Part I of subchapter L of chapter 1 is amended by 
striking section 806 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Conforming Amendments.--
        (1) Section 453B(e) is amended--
            (A) by striking ``(as defined in section 806(b)(3))'' in 
        paragraph (2)(B), and
            (B) by adding at the end the following new paragraph:
        ``(3) Noninsurance business.--
            ``(A) In general.--For purposes of this subsection, the 
        term `noninsurance business' means any activity which is not an 
        insurance business.
            ``(B) Certain activities treated as insurance businesses.--
        For purposes of subparagraph (A), any activity which is not an 
        insurance business shall be treated as an insurance business 
        if--
                ``(i) it is of a type traditionally carried on by life 
            insurance companies for investment purposes, but only if 
            the carrying on of such activity (other than in the case of 
            real estate) does not constitute the active conduct of a 
            trade or business, or
                ``(ii) it involves the performance of administrative 
            services in connection with plans providing life insurance, 
            pension, or accident and health benefits.''.
        (2) Section 465(c)(7)(D)(v)(II) is amended by striking 
    ``section 806(b)(3)'' and inserting ``section 453B(e)(3)''.
        (3) Section 801(a)(2) is amended by striking subparagraph (C).
        (4) Section 804 is amended by striking ``means--'' and all that 
    follows and inserting ``means the general deductions provided in 
    section 805.''.
        (5) Section 805(a)(4)(B), as amended by this Act, is amended by 
    striking clause (i) and by redesignating clauses (ii), (iii), and 
    (iv) as clauses (i), (ii), and (iii), respectively.
        (6) Section 805(b)(2)(A), as amended by this Act, is amended by 
    striking clause (iii) and by redesignating clauses (iv) and (v) as 
    clauses (iii) and (iv), respectively.
        (7) Section 842(c) is amended by striking paragraph (1) and by 
    redesignating paragraphs (2) and (3) as paragraphs (1) and (2), 
    respectively.
        (8) Section 953(b)(1), as amended by section 13511, is amended 
    by striking subparagraph (A) and by redesignating subparagraphs (B) 
    and (C) as subparagraphs (A) and (B), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.
    (a) In General.--Paragraph (1) of section 807(f) is amended to read 
as follows:
        ``(1) Treatment as change in method of accounting.--If the 
    basis for determining any item referred to in subsection (c) as of 
    the close of any taxable year differs from the basis for such 
    determination as of the close of the preceding taxable year, then 
    so much of the difference between--
            ``(A) the amount of the item at the close of the taxable 
        year, computed on the new basis, and
            ``(B) the amount of the item at the close of the taxable 
        year, computed on the old basis,
    as is attributable to contracts issued before the taxable year 
    shall be taken into account under section 481 as adjustments 
    attributable to a change in method of accounting initiated by the 
    taxpayer and made with the consent of the Secretary.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO SHAREHOLDERS 
FROM PRE-1984 POLICYHOLDERS SURPLUS ACCOUNT.
    (a) In General.--Subpart D of part I of subchapter L is amended by 
striking section 815 (and by striking the item relating to such section 
in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 801 is amended by striking 
subsection (c).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
    (d) Phased Inclusion of Remaining Balance of Policyholders Surplus 
Accounts.--In the case of any stock life insurance company which has a 
balance (determined as of the close of such company's last taxable year 
beginning before January 1, 2018) in an existing policyholders surplus 
account (as defined in section 815 of the Internal Revenue Code of 
1986, as in effect before its repeal), the tax imposed by section 801 
of such Code for the first 8 taxable years beginning after December 31, 
2017, shall be the amount which would be imposed by such section for 
such year on the sum of--
        (1) life insurance company taxable income for such year (within 
    the meaning of such section 801 but not less than zero), plus
        (2) \1/8\ of such balance.
SEC. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND CASUALTY 
INSURANCE COMPANIES.
    (a) In General.--Section 832(b)(5)(B) is amended--
        (1) by striking ``15 percent'' and inserting ``the applicable 
    percentage'', and
        (2) by inserting at the end the following new sentence: ``For 
    purposes of this subparagraph, the applicable percentage is 5.25 
    percent divided by the highest rate in effect under section 
    11(b).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.
    (a) In General.--Part III of subchapter L of chapter 1 is amended 
by striking section 847 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES.
    (a) In General.--
        (1) Appropriate rate of interest.--The second sentence of 
    section 807(c) is amended to read as follows: ``For purposes of 
    paragraph (3), the appropriate rate of interest is the highest rate 
    or rates permitted to be used to discount the obligations by the 
    National Association of Insurance Commissioners as of the date the 
    reserve is determined.''.
        (2) Method of computing reserves.--Section 807(d) is amended--
            (A) by striking paragraphs (1), (2), (4), and (5),
            (B) by redesignating paragraph (6) as paragraph (4),
            (C) by inserting before paragraph (3) the following new 
        paragraphs:
        ``(1) Determination of reserve.--
            ``(A) In general.--For purposes of this part (other than 
        section 816), the amount of the life insurance reserves for any 
        contract (other than a contract to which subparagraph (B) 
        applies) shall be the greater of--
                ``(i) the net surrender value of such contract, or
                ``(ii) 92.81 percent of the reserve determined under 
            paragraph (2).
            ``(B) Variable contracts.--For purposes of this part (other 
        than section 816), the amount of the life insurance reserves 
        for a variable contract shall be equal to the sum of--
                ``(i) the greater of--

                    ``(I) the net surrender value of such contract, or
                    ``(II) the portion of the reserve that is 
                separately accounted for under section 817, plus

                ``(ii) 92.81 percent of the excess (if any) of the 
            reserve determined under paragraph (2) over the amount in 
            clause (i).
            ``(C) Statutory cap.--In no event shall the reserves 
        determined under subparagraphs (A) or (B) for any contract as 
        of any time exceed the amount which would be taken into account 
        with respect to such contract as of such time in determining 
        statutory reserves (as defined in paragraph (4)).
            ``(D) No double counting.--In no event shall any amount or 
        item be taken into account more than once in determining any 
        reserve under this subchapter.
        ``(2) Amount of reserve.--The amount of the reserve determined 
    under this paragraph with respect to any contract shall be 
    determined by using the tax reserve method applicable to such 
    contract.''.
            (D) by striking ``(other than a qualified long-term care 
        insurance contract, as defined in section 7702B(b)), a 2-year 
        full preliminary term method'' in paragraph (3)(A)(iii) and 
        inserting ``, the reserve method prescribed by the National 
        Association of Insurance Commissioners which covers such 
        contract as of the date the reserve is determined'',
            (E) by striking ``(as of the date of issuance)'' in 
        paragraph (3)(A)(iv)(I) and inserting ``(as of the date the 
        reserve is determined)'',
            (F) by striking ``as of the date of the issuance of'' in 
        paragraph (3)(A)(iv)(II) and inserting ``as of the date the 
        reserve is determined for'',
            (G) by striking ``in effect on the date of the issuance of 
        the contract'' in paragraph (3)(B)(i) and inserting 
        ``applicable to the contract and in effect as of the date the 
        reserve is determined'', and
            (H) by striking ``in effect on the date of the issuance of 
        the contract'' in paragraph (3)(B)(ii) and inserting 
        ``applicable to the contract and in effect as of the date the 
        reserve is determined''.
        (3) Special rules.--Section 807(e) is amended--
            (A) by striking paragraphs (2) and (5),
            (B) by redesignating paragraphs (3), (4), (6), and (7) as 
        paragraphs (2), (3), (4), and (5), respectively,
            (C) by amending paragraph (2) (as so redesignated) to read 
        as follows:
        ``(2) Qualified supplemental benefits.--
            ``(A) Qualified supplemental benefits treated separately.--
        For purposes of this part, the amount of the life insurance 
        reserve for any qualified supplemental benefit shall be 
        computed separately as though such benefit were under a 
        separate contract.
            ``(B) Qualified supplemental benefit.--For purposes of this 
        paragraph, the term `qualified supplemental benefit' means any 
        supplemental benefit described in subparagraph (C) if--
                ``(i) there is a separately identified premium or 
            charge for such benefit, and
                ``(ii) any net surrender value under the contract 
            attributable to any other benefit is not available to fund 
            such benefit.
            ``(C) Supplemental benefits.--For purposes of this 
        paragraph, the supplemental benefits described in this 
        subparagraph are any--
                ``(i) guaranteed insurability,
                ``(ii) accidental death or disability benefit,
                ``(iii) convertibility,
                ``(iv) disability waiver benefit, or
                ``(v) other benefit prescribed by regulations,
        which is supplemental to a contract for which there is a 
        reserve described in subsection (c).'', and
            (D) by adding at the end the following new paragraph:
        ``(6) Reporting rules.--The Secretary shall require reporting 
    (at such time and in such manner as the Secretary shall prescribe) 
    with respect to the opening balance and closing balance of reserves 
    and with respect to the method of computing reserves for purposes 
    of determining income.''.
        (4) Definition of life insurance contract.--Section 7702 is 
    amended--
            (A) by striking clause (i) of subsection (c)(3)(B) and 
        inserting the following:
                ``(i) reasonable mortality charges which meet the 
            requirements prescribed in regulations to be promulgated by 
            the Secretary or that do not exceed the mortality charges 
            specified in the prevailing commissioners' standard tables 
            as defined in subsection (f)(10),'' and
            (B) by adding at the end of subsection (f) the following 
        new paragraph:
        ``(10) Prevailing commissioners' standard tables.--For purposes 
    of subsection (c)(3)(B)(i), the term `prevailing commissioners' 
    standard tables' means the most recent commissioners' standard 
    tables prescribed by the National Association of Insurance 
    Commissioners which are permitted to be used in computing reserves 
    for that type of contract under the insurance laws of at least 26 
    States when the contract was issued. If the prevailing 
    commissioners' standard tables as of the beginning of any calendar 
    year (hereinafter in this paragraph referred to as the `year of 
    change') are different from the prevailing commissioners' standard 
    tables as of the beginning of the preceding calendar year, the 
    issuer may use the prevailing commissioners' standard tables as of 
    the beginning of the preceding calendar year with respect to any 
    contract issued after the change and before the close of the 3-year 
    period beginning on the first day of the year of change.''.
    (b) Conforming Amendments.--
        (1) Section 808 is amended by adding at the end the following 
    new subsection:
    ``(g) Prevailing State Assumed Interest Rate.--For purposes of this 
subchapter--
        ``(1) In general.--The term `prevailing State assumed interest 
    rate' means, with respect to any contract, the highest assumed 
    interest rate permitted to be used in computing life insurance 
    reserves for insurance contracts or annuity contracts (as the case 
    may be) under the insurance laws of at least 26 States. For 
    purposes of the preceding sentence, the effect of nonforfeiture 
    laws of a State on interest rates for reserves shall not be taken 
    into account.
        ``(2) When rate determined.--The prevailing State assumed 
    interest rate with respect to any contract shall be determined as 
    of the beginning of the calendar year in which the contract was 
    issued.''.
        (2) Paragraph (1) of section 811(d) is amended by striking 
    ``the greater of the prevailing State assumed interest rate or 
    applicable Federal interest rate in effect under section 807'' and 
    inserting ``the interest rate in effect under section 808(g)''.
        (3) Subparagraph (A) of section 846(f)(6) is amended by 
    striking ``except that'' and all that follows and inserting 
    ``except that the limitation of subsection (a)(3) shall apply, 
    and''.
        (4) Section 848(e)(1)(B)(iii) is amended by striking 
    ``807(e)(4)'' and inserting ``807(e)(3)''.
        (5) Subparagraph (B) of section 954(i)(5) is amended by 
    striking ``shall be substituted for the prevailing State assumed 
    interest rate,'' and inserting ``shall apply,''.
    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to taxable years beginning after December 31, 2017.
        (2) Transition rule.--For the first taxable year beginning 
    after December 31, 2017, the reserve with respect to any contract 
    (as determined under section 807(d) of the Internal Revenue Code of 
    1986) at the end of the preceding taxable year shall be determined 
    as if the amendments made by this section had applied to such 
    reserve in such preceding taxable year.
        (3) Transition relief.--
            (A) In general.--If--
                (i) the reserve determined under section 807(d) of the 
            Internal Revenue Code of 1986 (determined after application 
            of paragraph (2)) with respect to any contract as of the 
            close of the year preceding the first taxable year 
            beginning after December 31, 2017, differs from
                (ii) the reserve which would have been determined with 
            respect to such contract as of the close of such taxable 
            year under such section determined without regard to 
            paragraph (2),
        then the difference between the amount of the reserve described 
        in clause (i) and the amount of the reserve described in clause 
        (ii) shall be taken into account under the method provided in 
        subparagraph (B).
            (B) Method.--The method provided in this subparagraph is as 
        follows:
                (i) If the amount determined under subparagraph (A)(i) 
            exceeds the amount determined under subparagraph (A)(ii), 
            1/8 of such excess shall be taken into account, for each of 
            the 8 succeeding taxable years, as a deduction under 
            section 805(a)(2) or 832(c)(4) of such Code, as applicable.
                (ii) If the amount determined under subparagraph 
            (A)(ii) exceeds the amount determined under subparagraph 
            (A)(i), 1/8 of such excess shall be included in gross 
            income, for each of the 8 succeeding taxable years, under 
            section 803(a)(2) or 832(b)(1)(C) of such Code, as 
            applicable.
SEC. 13518. MODIFICATION OF RULES FOR LIFE INSURANCE PRORATION FOR 
PURPOSES OF DETERMINING THE DIVIDENDS RECEIVED DEDUCTION.
    (a) In General.--Section 812 is amended to read as follows:
    ``SEC. 812. DEFINITION OF COMPANY'S SHARE AND POLICYHOLDER'S SHARE.
    ``(a) Company's Share.--For purposes of section 805(a)(4), the term 
`company's share' means, with respect to any taxable year beginning 
after December 31, 2017, 70 percent.
    ``(b) Policyholder's Share.--For purposes of section 807, the term 
`policyholder's share' means, with respect to any taxable year 
beginning after December 31, 2017, 30 percent.''.
    (b) Conforming Amendment.--Section 817A(e)(2) is amended by 
striking ``, 807(d)(2)(B), and 812'' and inserting ``and 
807(d)(2)(B)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.
    (a) In General.--
        (1) Section 848(a)(2) is amended by striking ``120-month'' and 
    inserting ``180-month''.
        (2) Section 848(c)(1) is amended by striking ``1.75 percent'' 
    and inserting ``2.09 percent''.
        (3) Section 848(c)(2) is amended by striking ``2.05 percent'' 
    and inserting ``2.45 percent''.
        (4) Section 848(c)(3) is amended by striking ``7.7 percent'' 
    and inserting ``9.2 percent''.
    (b) Conforming Amendments.--Section 848(b)(1) is amended by 
striking ``120-month'' and inserting ``180-month''.
    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to net premiums for taxable years beginning after December 
    31, 2017.
        (2) Transition rule.--Specified policy acquisition expenses 
    first required to be capitalized in a taxable year beginning before 
    January 1, 2018, will continue to be allowed as a deduction ratably 
    over the 120-month period beginning with the first month in the 
    second half of such taxable year.
SEC. 13520. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS.
    (a) In General.--Subpart B of part III of subchapter A of chapter 
61, as amended by section 13306, is amended by adding at the end the 
following new section:
``SEC. 6050Y. RETURNS RELATING TO CERTAIN LIFE INSURANCE CONTRACT 
TRANSACTIONS.
    ``(a) Requirement of Reporting of Certain Payments.--
        ``(1) In general.--Every person who acquires a life insurance 
    contract or any interest in a life insurance contract in a 
    reportable policy sale during any taxable year shall make a return 
    for such taxable year (at such time and in such manner as the 
    Secretary shall prescribe) setting forth--
            ``(A) the name, address, and TIN of such person,
            ``(B) the name, address, and TIN of each recipient of 
        payment in the reportable policy sale,
            ``(C) the date of such sale,
            ``(D) the name of the issuer of the life insurance contract 
        sold and the policy number of such contract, and
            ``(E) the amount of each payment.
        ``(2) Statement to be furnished to persons with respect to whom 
    information is required.--Every person required to make a return 
    under this subsection shall furnish to each person whose name is 
    required to be set forth in such return a written statement 
    showing--
            ``(A) the name, address, and phone number of the 
        information contact of the person required to make such return, 
        and
            ``(B) the information required to be shown on such return 
        with respect to such person, except that in the case of an 
        issuer of a life insurance contract, such statement is not 
        required to include the information specified in paragraph 
        (1)(E).
    ``(b) Requirement of Reporting of Seller's Basis in Life Insurance 
Contracts.--
        ``(1) In general.--Upon receipt of the statement required under 
    subsection (a)(2) or upon notice of a transfer of a life insurance 
    contract to a foreign person, each issuer of a life insurance 
    contract shall make a return (at such time and in such manner as 
    the Secretary shall prescribe) setting forth--
            ``(A) the name, address, and TIN of the seller who 
        transfers any interest in such contract in such sale,
            ``(B) the investment in the contract (as defined in section 
        72(e)(6)) with respect to such seller, and
            ``(C) the policy number of such contract.
        ``(2) Statement to be furnished to persons with respect to whom 
    information is required.--Every person required to make a return 
    under this subsection shall furnish to each person whose name is 
    required to be set forth in such return a written statement 
    showing--
            ``(A) the name, address, and phone number of the 
        information contact of the person required to make such return, 
        and
            ``(B) the information required to be shown on such return 
        with respect to each seller whose name is required to be set 
        forth in such return.
    ``(c) Requirement of Reporting With Respect to Reportable Death 
Benefits.--
        ``(1) In general.--Every person who makes a payment of 
    reportable death benefits during any taxable year shall make a 
    return for such taxable year (at such time and in such manner as 
    the Secretary shall prescribe) setting forth--
            ``(A) the name, address, and TIN of the person making such 
        payment,
            ``(B) the name, address, and TIN of each recipient of such 
        payment,
            ``(C) the date of each such payment,
            ``(D) the gross amount of each such payment, and
            ``(E) such person's estimate of the investment in the 
        contract (as defined in section 72(e)(6)) with respect to the 
        buyer.
        ``(2) Statement to be furnished to persons with respect to whom 
    information is required.--Every person required to make a return 
    under this subsection shall furnish to each person whose name is 
    required to be set forth in such return a written statement 
    showing--
            ``(A) the name, address, and phone number of the 
        information contact of the person required to make such return, 
        and
            ``(B) the information required to be shown on such return 
        with respect to each recipient of payment whose name is 
        required to be set forth in such return.
    ``(d) Definitions.--For purposes of this section:
        ``(1) Payment.--The term `payment' means, with respect to any 
    reportable policy sale, the amount of cash and the fair market 
    value of any consideration transferred in the sale.
        ``(2) Reportable policy sale.--The term `reportable policy 
    sale' has the meaning given such term in section 101(a)(3)(B).
        ``(3) Issuer.--The term `issuer' means any life insurance 
    company that bears the risk with respect to a life insurance 
    contract on the date any return or statement is required to be made 
    under this section.
        ``(4) Reportable death benefits.--The term `reportable death 
    benefits' means amounts paid by reason of the death of the insured 
    under a life insurance contract that has been transferred in a 
    reportable policy sale.''.
    (b) Clerical Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61, as amended by section 13306, is 
amended by inserting after the item relating to section 6050X the 
following new item:

``Sec. 6050Y. Returns relating to certain life insurance contract 
          transactions.''.

    (c) Conforming Amendments.--
        (1) Subsection (d) of section 6724 is amended--
            (A) by striking ``or'' at the end of clause (xxiv) of 
        paragraph (1)(B), by striking ``and'' at the end of clause 
        (xxv) of such paragraph and inserting ``or'', and by inserting 
        after such clause (xxv) the following new clause:
                ``(xxvi) section 6050Y (relating to returns relating to 
            certain life insurance contract transactions), and'', and
            (B) by striking ``or'' at the end of subparagraph (HH) of 
        paragraph (2), by striking the period at the end of 
        subparagraph (II) of such paragraph and inserting ``, or'', and 
        by inserting after such subparagraph (II) the following new 
        subparagraph:
            ``(JJ) subsection (a)(2), (b)(2), or (c)(2) of section 
        6050Y (relating to returns relating to certain life insurance 
        contract transactions).''.
        (2) Section 6047 is amended--
            (A) by redesignating subsection (g) as subsection (h),
            (B) by inserting after subsection (f) the following new 
        subsection:
    ``(g) Information Relating to Life Insurance Contract 
Transactions.--This section shall not apply to any information which is 
required to be reported under section 6050Y.'', and
            (C) by adding at the end of subsection (h), as so 
        redesignated, the following new paragraph:
        ``(4) For provisions requiring reporting of information 
    relating to certain life insurance contract transactions, see 
    section 6050Y.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to--
        (1) reportable policy sales (as defined in section 6050Y(d)(2) 
    of the Internal Revenue Code of 1986 (as added by subsection (a)) 
    after December 31, 2017, and
        (2) reportable death benefits (as defined in section 
    6050Y(d)(4) of such Code (as added by subsection (a)) paid after 
    December 31, 2017.
SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE CONTRACTS.
    (a) Clarification With Respect to Adjustments.--Paragraph (1) of 
section 1016(a) is amended by striking subparagraph (A) and all that 
follows and inserting the following:
            ``(A) for--
                ``(i) taxes or other carrying charges described in 
            section 266; or
                ``(ii) expenditures described in section 173 (relating 
            to circulation expenditures),
        for which deductions have been taken by the taxpayer in 
        determining taxable income for the taxable year or prior 
        taxable years; or
            ``(B) for mortality, expense, or other reasonable charges 
        incurred under an annuity or life insurance contract;''.
    (b) Effective Date.--The amendment made by this section shall apply 
to transactions entered into after August 25, 2009.
SEC. 13522. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDERATION RULES.
    (a) In General.--Subsection (a) of section 101 is amended by 
inserting after paragraph (2) the following new paragraph:
        ``(3) Exception to valuable consideration rules for commercial 
    transfers.--
            ``(A) In general.--The second sentence of paragraph (2) 
        shall not apply in the case of a transfer of a life insurance 
        contract, or any interest therein, which is a reportable policy 
        sale.
            ``(B) Reportable policy sale.--For purposes of this 
        paragraph, the term `reportable policy sale' means the 
        acquisition of an interest in a life insurance contract, 
        directly or indirectly, if the acquirer has no substantial 
        family, business, or financial relationship with the insured 
        apart from the acquirer's interest in such life insurance 
        contract. For purposes of the preceding sentence, the term 
        `indirectly' applies to the acquisition of an interest in a 
        partnership, trust, or other entity that holds an interest in 
        the life insurance contract.''.
    (b) Conforming Amendment.--Paragraph (1) of section 101(a) is 
amended by striking ``paragraph (2)'' and inserting ``paragraphs (2) 
and (3)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers after December 31, 2017.
SEC. 13523. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY AND CASUALTY 
INSURANCE COMPANIES.
    (a) Modification of Rate of Interest Used to Discount Unpaid 
Losses.--Paragraph (2) of section 846(c) is amended to read as follows:
        ``(2) Determination of annual rate.--The annual rate determined 
    by the Secretary under this paragraph for any calendar year shall 
    be a rate determined on the basis of the corporate bond yield curve 
    (as defined in section 430(h)(2)(D)(i), determined by substituting 
    `60-month period' for `24-month period' therein).''.
    (b) Modification of Computational Rules for Loss Payment 
Patterns.--Section 846(d)(3) is amended by striking subparagraphs (B) 
through (G) and inserting the following new subparagraph:
            ``(B) Treatment of certain losses.--
                ``(i) 3-year loss payment pattern.--In the case of any 
            line of business not described in subparagraph (A)(ii), 
            losses paid after the 1st year following the accident year 
            shall be treated as paid equally in the 2nd and 3rd year 
            following the accident year.
                ``(ii) 10-year loss payment pattern.--

                    ``(I) In general.--The period taken into account 
                under subparagraph (A)(ii) shall be extended to the 
                extent required under subclause (II).
                    ``(II) Computation of extension.--The amount of 
                losses which would have been treated as paid in the 
                10th year after the accident year shall be treated as 
                paid in such 10th year and each subsequent year in an 
                amount equal to the amount of the average of the losses 
                treated as paid in the 7th, 8th, and 9th years after 
                the accident year (or, if lesser, the portion of the 
                unpaid losses not theretofore taken into account). To 
                the extent such unpaid losses have not been treated as 
                paid before the 24th year after the accident year, they 
                shall be treated as paid in such 24th year.''.

    (c) Repeal of Historical Payment Pattern Election.--Section 846, as 
amended by this Act, is amended by striking subsection (e) and by 
redesignating subsections (f) and (g) as subsections (e) and (f), 
respectively.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
    (e) Transitional Rule.--For the first taxable year beginning after 
December 31, 2017--
        (1) the unpaid losses and the expenses unpaid (as defined in 
    paragraphs (5)(B) and (6) of section 832(b) of the Internal Revenue 
    Code of 1986) at the end of the preceding taxable year, and
        (2) the unpaid losses as defined in sections 807(c)(2) and 
    805(a)(1) of such Code at the end of the preceding taxable year,
shall be determined as if the amendments made by this section had 
applied to such unpaid losses and expenses unpaid in the preceding 
taxable year and by using the interest rate and loss payment patterns 
applicable to accident years ending with calendar year 2018, and any 
adjustment shall be taken into account ratably in such first taxable 
year and the 7 succeeding taxable years. For subsequent taxable years, 
such amendments shall be applied with respect to such unpaid losses and 
expenses unpaid by using the interest rate and loss payment patterns 
applicable to accident years ending with calendar year 2018.

               Subpart C--Banks and Financial Instruments

SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.
    (a) In General.--Section 162, as amended by sections 13307, is 
amended by redesignating subsection (r) as subsection (s) and by 
inserting after subsection (q) the following new subsection:
    ``(r) Disallowance of FDIC Premiums Paid by Certain Large Financial 
Institutions.--
        ``(1) In general.--No deduction shall be allowed for the 
    applicable percentage of any FDIC premium paid or incurred by the 
    taxpayer.
        ``(2) Exception for small institutions.--Paragraph (1) shall 
    not apply to any taxpayer for any taxable year if the total 
    consolidated assets of such taxpayer (determined as of the close of 
    such taxable year) do not exceed $10,000,000,000.
        ``(3) Applicable percentage.--For purposes of this subsection, 
    the term `applicable percentage' means, with respect to any 
    taxpayer for any taxable year, the ratio (expressed as a percentage 
    but not greater than 100 percent) which--
            ``(A) the excess of--
                ``(i) the total consolidated assets of such taxpayer 
            (determined as of the close of such taxable year), over
                ``(ii) $10,000,000,000, bears to
            ``(B) $40,000,000,000.
        ``(4) FDIC premiums.--For purposes of this subsection, the term 
    `FDIC premium' means any assessment imposed under section 7(b) of 
    the Federal Deposit Insurance Act (12 U.S.C. 1817(b)).
        ``(5) Total consolidated assets.--For purposes of this 
    subsection, the term `total consolidated assets' has the meaning 
    given such term under section 165 of the Dodd-Frank Wall Street 
    Reform and Consumer Protection Act (12 U.S.C. 5365).
        ``(6) Aggregation rule.--
            ``(A) In general.--Members of an expanded affiliated group 
        shall be treated as a single taxpayer for purposes of applying 
        this subsection.
            ``(B) Expanded affiliated group.--
                ``(i) In general.--For purposes of this paragraph, the 
            term `expanded affiliated group' means an affiliated group 
            as defined in section 1504(a), determined--

                    ``(I) by substituting `more than 50 percent' for 
                `at least 80 percent' each place it appears, and
                    ``(II) without regard to paragraphs (2) and (3) of 
                section 1504(b).

                ``(ii) Control of non-corporate entities.--A 
            partnership or any other entity (other than a corporation) 
            shall be treated as a member of an expanded affiliated 
            group if such entity is controlled (within the meaning of 
            section 954(d)(3)) by members of such group (including any 
            entity treated as a member of such group by reason of this 
            clause).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS.
    (a) In General.--Paragraph (1) of section 149(d) is amended by 
striking ``as part of an issue described in paragraph (2), (3), or 
(4).'' and inserting ``to advance refund another bond.''.
    (b) Conforming Amendments.--
        (1) Section 149(d) is amended by striking paragraphs (2), (3), 
    (4), and (6) and by redesignating paragraphs (5) and (7) as 
    paragraphs (2) and (3).
        (2) Section 148(f)(4)(C) is amended by striking clause (xiv) 
    and by redesignating clauses (xv) to (xvii) as clauses (xiv) to 
    (xvi).
    (c) Effective Date.--The amendments made by this section shall 
apply to advance refunding bonds issued after December 31, 2017.

                       Subpart D--S Corporations

SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN ELECTING SMALL 
BUSINESS TRUST.
    (a) No Look-through for Eligibility Purposes.--Section 
1361(c)(2)(B)(v) is amended by adding at the end the following new 
sentence: ``This clause shall not apply for purposes of subsection 
(b)(1)(C).''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 2018.
SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING SMALL 
BUSINESS TRUSTS.
    (a) In General.--Section 641(c)(2) is amended by inserting after 
subparagraph (D) the following new subparagraph:
            ``(E)(i) Section 642(c) shall not apply.
            ``(ii) For purposes of section 170(b)(1)(G), adjusted gross 
        income shall be computed in the same manner as in the case of 
        an individual, except that the deductions for costs which are 
        paid or incurred in connection with the administration of the 
        trust and which would not have been incurred if the property 
        were not held in such trust shall be treated as allowable in 
        arriving at adjusted gross income.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.
SEC. 13543. MODIFICATION OF TREATMENT OF S CORPORATION CONVERSIONS TO C 
CORPORATIONS.
    (a) Adjustments Attributable to Conversion From S Corporation to C 
Corporation.--Section 481 is amended by adding at the end the following 
new subsection:
    ``(d) Adjustments Attributable to Conversion From S Corporation to 
C Corporation.--
        ``(1) In general.--In the case of an eligible terminated S 
    corporation, any adjustment required by subsection (a)(2) which is 
    attributable to such corporation's revocation described in 
    paragraph (2)(A)(ii) shall be taken into account ratably during the 
    6-taxable year period beginning with the year of change.
        ``(2) Eligible terminated s corporation.--For purposes of this 
    subsection, the term `eligible terminated S corporation' means any 
    C corporation--
            ``(A) which--
                ``(i) was an S corporation on the day before the date 
            of the enactment of the Tax Cuts and Jobs Act, and
                ``(ii) during the 2-year period beginning on the date 
            of such enactment makes a revocation of its election under 
            section 1362(a), and
            ``(B) the owners of the stock of which, determined on the 
        date such revocation is made, are the same owners (and in 
        identical proportions) as on the date of such enactment.''.
    (b) Cash Distributions Following Post-termination Transition Period 
From S Corporation Status.--Section 1371 is amended by adding at the 
end the following new subsection:
    ``(f) Cash Distributions Following Post-termination Transition 
Period.--In the case of a distribution of money by an eligible 
terminated S corporation (as defined in section 481(d)) after the post-
termination transition period, the accumulated adjustments account 
shall be allocated to such distribution, and the distribution shall be 
chargeable to accumulated earnings and profits, in the same ratio as 
the amount of such accumulated adjustments account bears to the amount 
of such accumulated earnings and profits.''.

                          PART VII--EMPLOYMENT

                        Subpart A--Compensation

SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE 
REMUNERATION.
    (a) Repeal of Performance-based Compensation and Commission 
Exceptions for Limitation on Excessive Employee Remuneration.--
        (1) In general.--Paragraph (4) of section 162(m) is amended by 
    striking subparagraphs (B) and (C) and by redesignating 
    subparagraphs (D), (E), (F), and (G) as subparagraphs (B), (C), 
    (D), and (E), respectively.
        (2) Conforming amendments.--
            (A) Paragraphs (5)(E) and (6)(D) of section 162(m) are each 
        amended by striking ``subparagraphs (B), (C), and (D)'' and 
        inserting ``subparagraph (B)''.
            (B) Paragraphs (5)(G) and (6)(G) of section 162(m) are each 
        amended by striking ``(F) and (G)'' and inserting ``(D) and 
        (E)''.
    (b) Modification of Definition of Covered Employees.--Paragraph (3) 
of section 162(m) is amended--
        (1) in subparagraph (A), by striking ``as of the close of the 
    taxable year, such employee is the chief executive officer of the 
    taxpayer or is'' and inserting ``such employee is the principal 
    executive officer or principal financial officer of the taxpayer at 
    any time during the taxable year, or was'',
        (2) in subparagraph (B)--
            (A) by striking ``4'' and inserting ``3'', and
            (B) by striking ``(other than the chief executive 
        officer)'' and inserting ``(other than any individual described 
        in subparagraph (A))'', and
        (3) by striking ``or'' at the end of subparagraph (A), by 
    striking the period at the end of subparagraph (B) and inserting 
    ``, or'', and by adding at the end the following:
            ``(C) was a covered employee of the taxpayer (or any 
        predecessor) for any preceding taxable year beginning after 
        December 31, 2016.''.
    (c) Expansion of Applicable Employer.--
        (1) In general.--Section 162(m)(2) is amended to read as 
    follows:
        ``(2) Publicly held corporation.--For purposes of this 
    subsection, the term `publicly held corporation' means any 
    corporation which is an issuer (as defined in section 3 of the 
    Securities Exchange Act of 1934 (15 U.S.C. 78c))--
            ``(A) the securities of which are required to be registered 
        under section 12 of such Act (15 U.S.C. 78l), or
            ``(B) that is required to file reports under section 15(d) 
        of such Act (15 U.S.C. 78o(d)).''.
        (2) Conforming amendment.--Section 162(m)(3), as amended by 
    subsection (b), is amended by adding at the end the following flush 
    sentence:
        ``Such term shall include any employee who would be described 
    in subparagraph (B) if the reporting described in such subparagraph 
    were required as so described.''.
    (d) Special Rule for Remuneration Paid to Beneficiaries, etc.--
Paragraph (4) of section 162(m), as amended by subsection (a), is 
amended by adding at the end the following new subparagraph:
            ``(F) Special rule for remuneration paid to beneficiaries, 
        etc.--Remuneration shall not fail to be applicable employee 
        remuneration merely because it is includible in the income of, 
        or paid to, a person other than the covered employee, including 
        after the death of the covered employee.''.
    (e) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to taxable years 
    beginning after December 31, 2017.
        (2) Exception for binding contracts.--The amendments made by 
    this section shall not apply to remuneration which is provided 
    pursuant to a written binding contract which was in effect on 
    November 2, 2017, and which was not modified in any material 
    respect on or after such date.
SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE 
COMPENSATION.
    (a) In General.--Subchapter D of chapter 42 is amended by adding at 
the end the following new section:
``SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE 
COMPENSATION.
    ``(a) Tax Imposed.--There is hereby imposed a tax equal to the 
product of the rate of tax under section 11 and the sum of--
        ``(1) so much of the remuneration paid (other than any excess 
    parachute payment) by an applicable tax-exempt organization for the 
    taxable year with respect to employment of any covered employee in 
    excess of $1,000,000, plus
        ``(2) any excess parachute payment paid by such an organization 
    to any covered employee.
For purposes of the preceding sentence, remuneration shall be treated 
as paid when there is no substantial risk of forfeiture (within the 
meaning of section 457(f)(3)(B)) of the rights to such remuneration.
    ``(b) Liability for Tax.--The employer shall be liable for the tax 
imposed under subsection (a).
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
        ``(1) Applicable tax-exempt organization.--The term `applicable 
    tax-exempt organization' means any organization which for the 
    taxable year--
            ``(A) is exempt from taxation under section 501(a),
            ``(B) is a farmers' cooperative organization described in 
        section 521(b)(1),
            ``(C) has income excluded from taxation under section 
        115(1), or
            ``(D) is a political organization described in section 
        527(e)(1).
        ``(2) Covered employee.--For purposes of this section, the term 
    `covered employee' means any employee (including any former 
    employee) of an applicable tax-exempt organization if the 
    employee--
            ``(A) is one of the 5 highest compensated employees of the 
        organization for the taxable year, or
            ``(B) was a covered employee of the organization (or any 
        predecessor) for any preceding taxable year beginning after 
        December 31, 2016.
        ``(3) Remuneration.--For purposes of this section:
            ``(A) In general.--The term `remuneration' means wages (as 
        defined in section 3401(a)), except that such term shall not 
        include any designated Roth contribution (as defined in section 
        402A(c)) and shall include amounts required to be included in 
        gross income under section 457(f).
            ``(B) Exception for remuneration for medical services.--The 
        term `remuneration' shall not include the portion of any 
        remuneration paid to a licensed medical professional (including 
        a veterinarian) which is for the performance of medical or 
        veterinary services by such professional.
        ``(4) Remuneration from related organizations.--
            ``(A) In general.--Remuneration of a covered employee by an 
        applicable tax-exempt organization shall include any 
        remuneration paid with respect to employment of such employee 
        by any related person or governmental entity.
            ``(B) Related organizations.--A person or governmental 
        entity shall be treated as related to an applicable tax-exempt 
        organization if such person or governmental entity--
                ``(i) controls, or is controlled by, the organization,
                ``(ii) is controlled by one or more persons which 
            control the organization,
                ``(iii) is a supported organization (as defined in 
            section 509(f)(3)) during the taxable year with respect to 
            the organization,
                ``(iv) is a supporting organization described in 
            section 509(a)(3) during the taxable year with respect to 
            the organization, or
                ``(v) in the case of an organization which is a 
            voluntary employees' beneficiary association described in 
            section 501(c)(9), establishes, maintains, or makes 
            contributions to such voluntary employees' beneficiary 
            association.
            ``(C) Liability for tax.--In any case in which remuneration 
        from more than one employer is taken into account under this 
        paragraph in determining the tax imposed by subsection (a), 
        each such employer shall be liable for such tax in an amount 
        which bears the same ratio to the total tax determined under 
        subsection (a) with respect to such remuneration as--
                ``(i) the amount of remuneration paid by such employer 
            with respect to such employee, bears to
                ``(ii) the amount of remuneration paid by all such 
            employers to such employee.
        ``(5) Excess parachute payment.--For purposes of determining 
    the tax imposed by subsection (a)(2)--
            ``(A) In general.--The term `excess parachute payment' 
        means an amount equal to the excess of any parachute payment 
        over the portion of the base amount allocated to such payment.
            ``(B) Parachute payment.--The term `parachute payment' 
        means any payment in the nature of compensation to (or for the 
        benefit of) a covered employee if--
                ``(i) such payment is contingent on such employee's 
            separation from employment with the employer, and
                ``(ii) the aggregate present value of the payments in 
            the nature of compensation to (or for the benefit of) such 
            individual which are contingent on such separation equals 
            or exceeds an amount equal to 3 times the base amount.
            ``(C) Exception.--Such term does not include any payment--
                ``(i) described in section 280G(b)(6) (relating to 
            exemption for payments under qualified plans),
                ``(ii) made under or to an annuity contract described 
            in section 403(b) or a plan described in section 457(b),
                ``(iii) to a licensed medical professional (including a 
            veterinarian) to the extent that such payment is for the 
            performance of medical or veterinary services by such 
            professional, or
                ``(iv) to an individual who is not a highly compensated 
            employee as defined in section 414(q).
            ``(D) Base amount.--Rules similar to the rules of 
        280G(b)(3) shall apply for purposes of determining the base 
        amount.
            ``(E) Property transfers; present value.--Rules similar to 
        the rules of paragraphs (3) and (4) of section 280G(d) shall 
        apply.
        ``(6) Coordination with deduction limitation.--Remuneration the 
    deduction for which is not allowed by reason of section 162(m) 
    shall not be taken into account for purposes of this section.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to prevent avoidance of the tax under this section, 
including regulations to prevent avoidance of such tax through the 
performance of services other than as an employee or by providing 
compensation through a pass-through or other entity to avoid such 
tax.''.
    (b) Clerical Amendment.--The table of sections for subchapter D of 
chapter 42 is amended by adding at the end the following new item:

``Sec. 4960. Tax on excess tax-exempt organization executive 
          compensation.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS.
    (a) In General.--Section 83 is amended by adding at the end the 
following new subsection:
    ``(i) Qualified Equity Grants.--
        ``(1) In general.--For purposes of this subtitle--
            ``(A) Timing of inclusion.--If qualified stock is 
        transferred to a qualified employee who makes an election with 
        respect to such stock under this subsection, subsection (a) 
        shall be applied by including the amount determined under such 
        subsection with respect to such stock in income of the employee 
        in the taxable year determined under subparagraph (B) in lieu 
        of the taxable year described in subsection (a).
            ``(B) Taxable year determined.--The taxable year determined 
        under this subparagraph is the taxable year of the employee 
        which includes the earliest of--
                ``(i) the first date such qualified stock becomes 
            transferable (including, solely for purposes of this 
            clause, becoming transferable to the employer),
                ``(ii) the date the employee first becomes an excluded 
            employee,
                ``(iii) the first date on which any stock of the 
            corporation which issued the qualified stock becomes 
            readily tradable on an established securities market (as 
            determined by the Secretary, but not including any market 
            unless such market is recognized as an established 
            securities market by the Secretary for purposes of a 
            provision of this title other than this subsection),
                ``(iv) the date that is 5 years after the first date 
            the rights of the employee in such stock are transferable 
            or are not subject to a substantial risk of forfeiture, 
            whichever occurs earlier, or
                ``(v) the date on which the employee revokes (at such 
            time and in such manner as the Secretary provides) the 
            election under this subsection with respect to such stock.
        ``(2) Qualified stock.--
            ``(A) In general.--For purposes of this subsection, the 
        term `qualified stock' means, with respect to any qualified 
        employee, any stock in a corporation which is the employer of 
        such employee, if--
                ``(i) such stock is received--

                    ``(I) in connection with the exercise of an option, 
                or
                    ``(II) in settlement of a restricted stock unit, 
                and

                ``(ii) such option or restricted stock unit was granted 
            by the corporation--

                    ``(I) in connection with the performance of 
                services as an employee, and
                    ``(II) during a calendar year in which such 
                corporation was an eligible corporation.

            ``(B) Limitation.--The term `qualified stock' shall not 
        include any stock if the employee may sell such stock to, or 
        otherwise receive cash in lieu of stock from, the corporation 
        at the time that the rights of the employee in such stock first 
        become transferable or not subject to a substantial risk of 
        forfeiture.
            ``(C) Eligible corporation.--For purposes of subparagraph 
        (A)(ii)(II)--
                ``(i) In general.--The term `eligible corporation' 
            means, with respect to any calendar year, any corporation 
            if--

                    ``(I) no stock of such corporation (or any 
                predecessor of such corporation) is readily tradable on 
                an established securities market (as determined under 
                paragraph (1)(B)(iii)) during any preceding calendar 
                year, and
                    ``(II) such corporation has a written plan under 
                which, in such calendar year, not less than 80 percent 
                of all employees who provide services to such 
                corporation in the United States (or any possession of 
                the United States) are granted stock options, or are 
                granted restricted stock units, with the same rights 
                and privileges to receive qualified stock.

                ``(ii) Same rights and privileges.--For purposes of 
            clause (i)(II)--

                    ``(I) except as provided in subclauses (II) and 
                (III), the determination of rights and privileges with 
                respect to stock shall be made in a similar manner as 
                under section 423(b)(5),
                    ``(II) employees shall not fail to be treated as 
                having the same rights and privileges to receive 
                qualified stock solely because the number of shares 
                available to all employees is not equal in amount, so 
                long as the number of shares available to each employee 
                is more than a de minimis amount, and
                    ``(III) rights and privileges with respect to the 
                exercise of an option shall not be treated as the same 
                as rights and privileges with respect to the settlement 
                of a restricted stock unit.

                ``(iii) Employee.--For purposes of clause (i)(II), the 
            term `employee' shall not include any employee described in 
            section 4980E(d)(4) or any excluded employee.
                ``(iv) Special rule for calendar years before 2018.--In 
            the case of any calendar year beginning before January 1, 
            2018, clause (i)(II) shall be applied without regard to 
            whether the rights and privileges with respect to the 
            qualified stock are the same.
        ``(3) Qualified employee; excluded employee.--For purposes of 
    this subsection--
            ``(A) In general.--The term `qualified employee' means any 
        individual who--
                ``(i) is not an excluded employee, and
                ``(ii) agrees in the election made under this 
            subsection to meet such requirements as are determined by 
            the Secretary to be necessary to ensure that the 
            withholding requirements of the corporation under chapter 
            24 with respect to the qualified stock are met.
            ``(B) Excluded employee.--The term `excluded employee' 
        means, with respect to any corporation, any individual--
                ``(i) who is a 1-percent owner (within the meaning of 
            section 416(i)(1)(B)(ii)) at any time during the calendar 
            year or who was such a 1 percent owner at any time during 
            the 10 preceding calendar years,
                ``(ii) who is or has been at any prior time--

                    ``(I) the chief executive officer of such 
                corporation or an individual acting in such a capacity, 
                or
                    ``(II) the chief financial officer of such 
                corporation or an individual acting in such a capacity,

                ``(iii) who bears a relationship described in section 
            318(a)(1) to any individual described in subclause (I) or 
            (II) of clause (ii), or
                ``(iv) who is one of the 4 highest compensated officers 
            of such corporation for the taxable year, or was one of the 
            4 highest compensated officers of such corporation for any 
            of the 10 preceding taxable years, determined with respect 
            to each such taxable year on the basis of the shareholder 
            disclosure rules for compensation under the Securities 
            Exchange Act of 1934 (as if such rules applied to such 
            corporation).
        ``(4) Election.--
            ``(A) Time for making election.--An election with respect 
        to qualified stock shall be made under this subsection no later 
        than 30 days after the first date the rights of the employee in 
        such stock are transferable or are not subject to a substantial 
        risk of forfeiture, whichever occurs earlier, and shall be made 
        in a manner similar to the manner in which an election is made 
        under subsection (b).
            ``(B) Limitations.--No election may be made under this 
        section with respect to any qualified stock if--
                ``(i) the qualified employee has made an election under 
            subsection (b) with respect to such qualified stock,
                ``(ii) any stock of the corporation which issued the 
            qualified stock is readily tradable on an established 
            securities market (as determined under paragraph 
            (1)(B)(iii)) at any time before the election is made, or
                ``(iii) such corporation purchased any of its 
            outstanding stock in the calendar year preceding the 
            calendar year which includes the first date the rights of 
            the employee in such stock are transferable or are not 
            subject to a substantial risk of forfeiture, unless--

                    ``(I) not less than 25 percent of the total dollar 
                amount of the stock so purchased is deferral stock, and
                    ``(II) the determination of which individuals from 
                whom deferral stock is purchased is made on a 
                reasonable basis.

            ``(C) Definitions and special rules related to limitation 
        on stock redemptions.--
                ``(i) Deferral stock.--For purposes of this paragraph, 
            the term `deferral stock' means stock with respect to which 
            an election is in effect under this subsection.
                ``(ii) Deferral stock with respect to any individual 
            not taken into account if individual holds deferral stock 
            with longer deferral period.--Stock purchased by a 
            corporation from any individual shall not be treated as 
            deferral stock for purposes of subparagraph (B)(iii) if 
            such individual (immediately after such purchase) holds any 
            deferral stock with respect to which an election has been 
            in effect under this subsection for a longer period than 
            the election with respect to the stock so purchased.
                ``(iii) Purchase of all outstanding deferral stock.--
            The requirements of subclauses (I) and (II) of subparagraph 
            (B)(iii) shall be treated as met if the stock so purchased 
            includes all of the corporation's outstanding deferral 
            stock.
                ``(iv) Reporting.--Any corporation which has 
            outstanding deferral stock as of the beginning of any 
            calendar year and which purchases any of its outstanding 
            stock during such calendar year shall include on its return 
            of tax for the taxable year in which, or with which, such 
            calendar year ends the total dollar amount of its 
            outstanding stock so purchased during such calendar year 
            and such other information as the Secretary requires for 
            purposes of administering this paragraph.
        ``(5) Controlled groups.--For purposes of this subsection, all 
    persons treated as a single employer under section 414(b) shall be 
    treated as 1 corporation.
        ``(6) Notice requirement.--Any corporation which transfers 
    qualified stock to a qualified employee shall, at the time that (or 
    a reasonable period before) an amount attributable to such stock 
    would (but for this subsection) first be includible in the gross 
    income of such employee--
            ``(A) certify to such employee that such stock is qualified 
        stock, and
            ``(B) notify such employee--
                ``(i) that the employee may be eligible to elect to 
            defer income on such stock under this subsection, and
                ``(ii) that, if the employee makes such an election--

                    ``(I) the amount of income recognized at the end of 
                the deferral period will be based on the value of the 
                stock at the time at which the rights of the employee 
                in such stock first become transferable or not subject 
                to substantial risk of forfeiture, notwithstanding 
                whether the value of the stock has declined during the 
                deferral period,
                    ``(II) the amount of such income recognized at the 
                end of the deferral period will be subject to 
                withholding under section 3401(i) at the rate 
                determined under section 3402(t), and
                    ``(III) the responsibilities of the employee (as 
                determined by the Secretary under paragraph (3)(A)(ii)) 
                with respect to such withholding.

        ``(7) Restricted stock units.--This section (other than this 
    subsection), including any election under subsection (b), shall not 
    apply to restricted stock units.''.
    (b) Withholding.--
        (1) Time of withholding.--Section 3401 is amended by adding at 
    the end the following new subsection:
    ``(i) Qualified Stock for Which an Election Is in Effect Under 
Section 83(i).--For purposes of subsection (a), qualified stock (as 
defined in section 83(i)) with respect to which an election is made 
under section 83(i) shall be treated as wages--
        ``(1) received on the earliest date described in section 
    83(i)(1)(B), and
        ``(2) in an amount equal to the amount included in income under 
    section 83 for the taxable year which includes such date.''.
        (2) Amount of withholding.--Section 3402 is amended by adding 
    at the end the following new subsection:
    ``(t) Rate of Withholding for Certain Stock.--In the case of any 
qualified stock (as defined in section 83(i)(2)) with respect to which 
an election is made under section 83(i)--
        ``(1) the rate of tax under subsection (a) shall not be less 
    than the maximum rate of tax in effect under section 1, and
        ``(2) such stock shall be treated for purposes of section 
    3501(b) in the same manner as a non-cash fringe benefit.''.
    (c) Coordination With Other Deferred Compensation Rules.--
        (1) Election to apply deferral to statutory options.--
            (A) Incentive stock options.--Section 422(b) is amended by 
        adding at the end the following: ``Such term shall not include 
        any option if an election is made under section 83(i) with 
        respect to the stock received in connection with the exercise 
        of such option.''.
            (B) Employee stock purchase plans.--Section 423 is 
        amended--
                (i) in subsection (b)(5), by striking ``and'' before 
            ``the plan'' and by inserting ``, and the rules of section 
            83(i) shall apply in determining which employees have a 
            right to make an election under such section'' before the 
            semicolon at the end, and
                (ii) by adding at the end the following new subsection:
    ``(d) Coordination With Qualified Equity Grants.--An option for 
which an election is made under section 83(i) with respect to the stock 
received in connection with its exercise shall not be considered as 
granted pursuant an employee stock purchase plan.''.
        (2) Exclusion from definition of nonqualified deferred 
    compensation plan.--Subsection (d) of section 409A is amended by 
    adding at the end the following new paragraph:
        ``(7) Treatment of qualified stock.--An arrangement under which 
    an employee may receive qualified stock (as defined in section 
    83(i)(2)) shall not be treated as a nonqualified deferred 
    compensation plan with respect to such employee solely because of 
    such employee's election, or ability to make an election, to defer 
    recognition of income under section 83(i).''.
    (d) Information Reporting.--Section 6051(a) is amended by striking 
``and'' at the end of paragraph (14)(B), by striking the period at the 
end of paragraph (15) and inserting a comma, and by inserting after 
paragraph (15) the following new paragraphs:
        ``(16) the amount includible in gross income under subparagraph 
    (A) of section 83(i)(1) with respect to an event described in 
    subparagraph (B) of such section which occurs in such calendar 
    year, and
        ``(17) the aggregate amount of income which is being deferred 
    pursuant to elections under section 83(i), determined as of the 
    close of the calendar year.''.
    (e) Penalty for Failure of Employer to Provide Notice of Tax 
Consequences.--Section 6652 is amended by adding at the end the 
following new subsection:
    ``(p) Failure to Provide Notice Under Section 83(i).--In the case 
of each failure to provide a notice as required by section 83(i)(6), at 
the time prescribed therefor, unless it is shown that such failure is 
due to reasonable cause and not to willful neglect, there shall be 
paid, on notice and demand of the Secretary and in the same manner as 
tax, by the person failing to provide such notice, an amount equal to 
$100 for each such failure, but the total amount imposed on such person 
for all such failures during any calendar year shall not exceed 
$50,000.''.
    (f) Effective Dates.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to stock attributable 
    to options exercised, or restricted stock units settled, after 
    December 31, 2017.
        (2) Requirement to provide notice.--The amendments made by 
    subsection (e) shall apply to failures after December 31, 2017.
    (g) Transition Rule.--Until such time as the Secretary (or the 
Secretary's delegate) issues regulations or other guidance for purposes 
of implementing the requirements of paragraph (2)(C)(i)(II) of section 
83(i) of the Internal Revenue Code of 1986 (as added by this section), 
or the requirements of paragraph (6) of such section, a corporation 
shall be treated as being in compliance with such requirements 
(respectively) if such corporation complies with a reasonable good 
faith interpretation of such requirements.
SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK COMPENSATION OF 
INSIDERS IN EXPATRIATED CORPORATIONS.
    (a) In General.--Section 4985(a)(1) is amended by striking 
``section 1(h)(1)(C)'' and inserting ``section 1(h)(1)(D)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to corporations first becoming expatriated corporations (as defined in 
section 4985 of the Internal Revenue Code of 1986) after the date of 
enactment of this Act.

                      Subpart B--Retirement Plans

SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RECHARACTERIZATION OF 
ROTH CONVERSIONS.
    (a) In General.--Section 408A(d)(6)(B) is amended by adding at the 
end the following new clause:
                ``(iii) Conversions.--Subparagraph (A) shall not apply 
            in the case of a qualified rollover contribution to which 
            subsection (d)(3) applies (including by reason of 
            subparagraph (C) thereof).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13612. MODIFICATION OF RULES APPLICABLE TO LENGTH OF SERVICE AWARD 
PLANS.
    (a) Maximum Deferral Amount.--Clause (ii) of section 457(e)(11)(B) 
is amended by striking ``$3,000'' and inserting ``$6,000''.
    (b) Cost of Living Adjustment.--Subparagraph (B) of section 
457(e)(11) is amended by adding at the end the following:
                ``(iii) Cost of living adjustment.--In the case of 
            taxable years beginning after December 31, 2017, the 
            Secretary shall adjust the $6,000 amount under clause (ii) 
            at the same time and in the same manner as under section 
            415(d), except that the base period shall be the calendar 
            quarter beginning July 1, 2016, and any increase under this 
            paragraph that is not a multiple of $500 shall be rounded 
            to the next lowest multiple of $500.''.
    (c) Application of Limitation on Accruals.--Subparagraph (B) of 
section 457(e)(11), as amended by subsection (b), is amended by adding 
at the end the following:
                ``(iv) Special rule for application of limitation on 
            accruals for certain plans.--In the case of a plan 
            described in subparagraph (A)(ii) which is a defined 
            benefit plan (as defined in section 414(j)), the limitation 
            under clause (ii) shall apply to the actuarial present 
            value of the aggregate amount of length of service awards 
            accruing with respect to any year of service. Such 
            actuarial present value with respect to any year shall be 
            calculated using reasonable actuarial assumptions and 
            methods, assuming payment will be made under the most 
            valuable form of payment under the plan with payment 
            commencing at the later of the earliest age at which 
            unreduced benefits are payable under the plan or the 
            participant's age at the time of the calculation.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET AMOUNTS.
    (a) In General.--Paragraph (3) of section 402(c) is amended by 
adding at the end the following new subparagraph:
            ``(C) Rollover of certain plan loan offset amounts.--
                ``(i) In general.--In the case of a qualified plan loan 
            offset amount, paragraph (1) shall not apply to any 
            transfer of such amount made after the due date (including 
            extensions) for filing the return of tax for the taxable 
            year in which such amount is treated as distributed from a 
            qualified employer plan.
                ``(ii) Qualified plan loan offset amount.--For purposes 
            of this subparagraph, the term `qualified plan loan offset 
            amount' means a plan loan offset amount which is treated as 
            distributed from a qualified employer plan to a participant 
            or beneficiary solely by reason of--

                    ``(I) the termination of the qualified employer 
                plan, or
                    ``(II) the failure to meet the repayment terms of 
                the loan from such plan because of the severance from 
                employment of the participant.

                ``(iii) Plan loan offset amount.--For purposes of 
            clause (ii), the term `plan loan offset amount' means the 
            amount by which the participant's accrued benefit under the 
            plan is reduced in order to repay a loan from the plan.
                ``(iv) Limitation.--This subparagraph shall not apply 
            to any plan loan offset amount unless such plan loan offset 
            amount relates to a loan to which section 72(p)(1) does not 
            apply by reason of section 72(p)(2).
                ``(v) Qualified employer plan.--For purposes of this 
            subsection, the term `qualified employer plan' has the 
            meaning given such term by section 72(p)(4).''.
    (b) Conforming Amendments.--Section 402(c)(3) is amended--
        (1) by striking ``Transfer must be made within 60 days of 
    receipt'' in the heading and inserting ``Time limit on transfers'', 
    and
        (2) by striking ``subparagraph (B)'' in subparagraph (A) and 
    inserting ``subparagraphs (B) and (C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan loan offset amounts which are treated as distributed in 
taxable years beginning after December 31, 2017.

                    PART VIII--EXEMPT ORGANIZATIONS

SEC. 13701. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES 
AND UNIVERSITIES.
    (a) In General.--Chapter 42 is amended by adding at the end the 
following new subchapter:

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

``Sec. 4968. Excise tax based on investment income of private colleges 
          and universities.

``SEC. 4968. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES 
AND UNIVERSITIES.
    ``(a) Tax Imposed.--There is hereby imposed on each applicable 
educational institution for the taxable year a tax equal to 1.4 percent 
of the net investment income of such institution for the taxable year.
    ``(b) Applicable Educational Institution.--For purposes of this 
subchapter--
        ``(1) In general.--The term `applicable educational 
    institution' means an eligible educational institution (as defined 
    in section 25A(f)(2))--
            ``(A) which had at least 500 students during the preceding 
        taxable year,
            ``(B) more than 50 percent of the students of which are 
        located in the United States,
            ``(C) which is not described in the first sentence of 
        section 511(a)(2)(B) (relating to State colleges and 
        universities), and
            ``(D) the aggregate fair market value of the assets of 
        which at the end of the preceding taxable year (other than 
        those assets which are used directly in carrying out the 
        institution's exempt purpose) is at least $500,000 per student 
        of the institution.
        ``(2) Students.--For purposes of paragraph (1), the number of 
    students of an institution (including for purposes of determining 
    the number of students at a particular location) shall be based on 
    the daily average number of full-time students attending such 
    institution (with part-time students taken into account on a full-
    time student equivalent basis).
    ``(c) Net Investment Income.--For purposes of this section, net 
investment income shall be determined under rules similar to the rules 
of section 4940(c).
    ``(d) Assets and Net Investment Income of Related Organizations.--
        ``(1) In general.--For purposes of subsections (b)(1)(C) and 
    (c), assets and net investment income of any related organization 
    with respect to an educational institution shall be treated as 
    assets and net investment income, respectively, of the educational 
    institution, except that--
            ``(A) no such amount shall be taken into account with 
        respect to more than 1 educational institution, and
            ``(B) unless such organization is controlled by such 
        institution or is described in section 509(a)(3) with respect 
        to such institution for the taxable year, assets and net 
        investment income which are not intended or available for the 
        use or benefit of the educational institution shall not be 
        taken into account.
        ``(2) Related organization.--For purposes of this subsection, 
    the term `related organization' means, with respect to an 
    educational institution, any organization which--
            ``(A) controls, or is controlled by, such institution,
            ``(B) is controlled by 1 or more persons which also control 
        such institution, or
            ``(C) is a supported organization (as defined in section 
        509(f)(3)), or an organization described in section 509(a)(3), 
        during the taxable year with respect to such institution.''.
    (b) Clerical Amendment.--The table of subchapters for chapter 42 is 
amended by adding at the end the following new item:

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

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 13702. UNRELATED BUSINESS TAXABLE INCOME SEPARATELY COMPUTED FOR 
EACH TRADE OR BUSINESS ACTIVITY.
    (a) In General.--Subsection (a) of section 512 is amended by adding 
at the end the following new paragraph:
        ``(6) Special rule for organization with more than 1 unrelated 
    trade or business.--In the case of any organization with more than 
    1 unrelated trade or business--
            ``(A) unrelated business taxable income, including for 
        purposes of determining any net operating loss deduction, shall 
        be computed separately with respect to each such trade or 
        business and without regard to subsection (b)(12),
            ``(B) the unrelated business taxable income of such 
        organization shall be the sum of the unrelated business taxable 
        income so computed with respect to each such trade or business, 
        less a specific deduction under subsection (b)(12), and
            ``(C) for purposes of subparagraph (B), unrelated business 
        taxable income with respect to any such trade or business shall 
        not be less than zero.''.
    (b) Effective Date.--
        (1) In general.--Except to the extent provided in paragraph 
    (2), the amendment made by this section shall apply to taxable 
    years beginning after December 31, 2017.
        (2) Carryovers of net operating losses.--If any net operating 
    loss arising in a taxable year beginning before January 1, 2018, is 
    carried over to a taxable year beginning on or after such date--
            (A) subparagraph (A) of section 512(a)(6) of the Internal 
        Revenue Code of 1986, as added by this Act, shall not apply to 
        such net operating loss, and
            (B) the unrelated business taxable income of the 
        organization, after the application of subparagraph (B) of such 
        section, shall be reduced by the amount of such net operating 
        loss.
SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY AMOUNT OF 
CERTAIN FRINGE BENEFIT EXPENSES FOR WHICH DEDUCTION IS DISALLOWED.
    (a) In General.--Section 512(a), as amended by this Act, is further 
amended by adding at the end the following new paragraph:
        ``(7) Increase in unrelated business taxable income by 
    disallowed fringe.--Unrelated business taxable income of an 
    organization shall be increased by any amount for which a deduction 
    is not allowable under this chapter by reason of section 274 and 
    which is paid or incurred by such organization for any qualified 
    transportation fringe (as defined in section 132(f)), any parking 
    facility used in connection with qualified parking (as defined in 
    section 132(f)(5)(C)), or any on-premises athletic facility (as 
    defined in section 132(j)(4)(B)). The preceding sentence shall not 
    apply to the extent the amount paid or incurred is directly 
    connected with an unrelated trade or business which is regularly 
    carried on by the organization. The Secretary shall issue such 
    regulations or other guidance as may be necessary or appropriate to 
    carry out the purposes of this paragraph, including regulations or 
    other guidance providing for the appropriate allocation of 
    depreciation and other costs with respect to facilities used for 
    parking or for on-premises athletic facilities.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred after December 31, 2017.
SEC. 13704. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE FOR 
COLLEGE ATHLETIC EVENT SEATING RIGHTS.
    (a) In General.--Section 170(l) is amended--
        (1) by striking paragraph (1) and inserting the following:
        ``(1) In general.--No deduction shall be allowed under this 
    section for any amount described in paragraph (2).'', and
        (2) in paragraph (2)(B), by striking ``such amount would be 
    allowable as a deduction under this section but for the fact 
    that''.
    (b) Effective Date.--The amendments made by this section shall 
apply to contributions made in taxable years beginning after December 
31, 2017.
SEC. 13705. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF CONTRIBUTIONS 
REPORTED BY DONEE.
    (a) In General.--Section 170(f)(8) is amended by striking 
subparagraph (D) and by redesignating subparagraph (E) as subparagraph 
(D).
    (b) Effective Date.--The amendments made by this section shall 
apply to contributions made in taxable years beginning after December 
31, 2016.

                       PART IX--OTHER PROVISIONS

         Subpart A--Craft Beverage Modernization and Tax Reform

SEC. 13801. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED SPIRITS.
    (a) In General.--Section 263A(f) is amended--
        (1) by redesignating paragraph (4) as paragraph (5), and
        (2) by inserting after paragraph (3) the following new 
    paragraph:
        ``(4) Exemption for aging process of beer, wine, and distilled 
    spirits.--
            ``(A) In general.--For purposes of this subsection, the 
        production period shall not include the aging period for--
                ``(i) beer (as defined in section 5052(a)),
                ``(ii) wine (as described in section 5041(a)), or
                ``(iii) distilled spirits (as defined in section 
            5002(a)(8)), except such spirits that are unfit for use for 
            beverage purposes.
            ``(B) Termination.--This paragraph shall not apply to 
        interest costs paid or accrued after December 31, 2019.''.
    (b) Conforming Amendment.--Paragraph (5)(B)(ii) of section 263A(f), 
as redesignated by this section, is amended by inserting ``except as 
provided in paragraph (4),'' before ``ending on the date''.
    (c) Effective Date.--The amendments made by this section shall 
apply to interest costs paid or accrued in calendar years beginning 
after December 31, 2017.
SEC. 13802. REDUCED RATE OF EXCISE TAX ON BEER.
    (a) In General.--Paragraph (1) of section 5051(a) is amended to 
read as follows:
        ``(1) In general.--
            ``(A) Imposition of tax.--A tax is hereby imposed on all 
        beer brewed or produced, and removed for consumption or sale, 
        within the United States, or imported into the United States. 
        Except as provided in paragraph (2), the rate of such tax shall 
        be the amount determined under this paragraph.
            ``(B) Rate.--Except as provided in subparagraph (C), the 
        rate of tax shall be $18 for per barrel.
            ``(C) Special rule.--In the case of beer removed after 
        December 31, 2017, and before January 1, 2020, the rate of tax 
        shall be--
                ``(i) $16 on the first 6,000,000 barrels of beer--

                    ``(I) brewed by the brewer and removed during the 
                calendar year for consumption or sale, or
                    ``(II) imported by the importer into the United 
                States during the calendar year, and

                ``(ii) $18 on any barrels of beer to which clause (i) 
            does not apply.
            ``(D) Barrel.--For purposes of this section, a barrel shall 
        contain not more than 31 gallons of beer, and any tax imposed 
        under this section shall be applied at a like rate for any 
        other quantity or for fractional parts of a barrel.''.
    (b) Reduced Rate for Certain Domestic Production.--Subparagraph (A) 
of section 5051(a)(2) is amended--
        (1) in the heading, by striking ``$7 a barrel'', and
        (2) by inserting ``($3.50 in the case of beer removed after 
    December 31, 2017, and before January 1, 2020)'' after ``$7''.
    (c) Application of Reduced Tax Rate for Foreign Manufacturers and 
Importers.--Subsection (a) of section 5051 is amended--
        (1) in subparagraph (C)(i)(II) of paragraph (1), as amended by 
    subsection (a), by inserting ``but only if the importer is an 
    electing importer under paragraph (4) and the barrels have been 
    assigned to the importer pursuant to such paragraph'' after 
    ``during the calendar year'', and
        (2) by adding at the end the following new paragraph:
        ``(4) Reduced tax rate for foreign manufacturers and 
    importers.--
            ``(A) In general.--In the case of any barrels of beer which 
        have been brewed or produced outside of the United States and 
        imported into the United States, the rate of tax applicable 
        under clause (i) of paragraph (1)(C) (referred to in this 
        paragraph as the `reduced tax rate') may be assigned by the 
        brewer (provided that the brewer makes an election described in 
        subparagraph (B)(ii)) to any electing importer of such barrels 
        pursuant to the requirements established by the Secretary under 
        subparagraph (B).
            ``(B) Assignment.--The Secretary shall, through such rules, 
        regulations, and procedures as are determined appropriate, 
        establish procedures for assignment of the reduced tax rate 
        provided under this paragraph, which shall include--
                ``(i) a limitation to ensure that the number of barrels 
            of beer for which the reduced tax rate has been assigned by 
            a brewer--

                    ``(I) to any importer does not exceed the number of 
                barrels of beer brewed or produced by such brewer 
                during the calendar year which were imported into the 
                United States by such importer, and
                    ``(II) to all importers does not exceed the 
                6,000,000 barrels to which the reduced tax rate 
                applies,

                ``(ii) procedures that allow the election of a brewer 
            to assign and an importer to receive the reduced tax rate 
            provided under this paragraph,
                ``(iii) requirements that the brewer provide any 
            information as the Secretary determines necessary and 
            appropriate for purposes of carrying out this paragraph, 
            and
                ``(iv) procedures that allow for revocation of 
            eligibility of the brewer and the importer for the reduced 
            tax rate provided under this paragraph in the case of any 
            erroneous or fraudulent information provided under clause 
            (iii) which the Secretary deems to be material to 
            qualifying for such reduced rate.
            ``(C) Controlled group.--For purposes of this section, any 
        importer making an election described in subparagraph (B)(ii) 
        shall be deemed to be a member of the controlled group of the 
        brewer, as described under paragraph (5).''.
    (d) Controlled Group and Single Taxpayer Rules.--Subsection (a) of 
section 5051, as amended by this section, is amended--
        (1) in paragraph (2)--
            (A) by striking subparagraph (B), and
            (B) by redesignating subparagraph (C) as subparagraph (B), 
        and
        (2) by adding at the end the following new paragraph:
        ``(5) Controlled group and single taxpayer rules.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        in the case of a controlled group, the 6,000,000 barrel 
        quantity specified in paragraph (1)(C)(i) and the 2,000,000 
        barrel quantity specified in paragraph (2)(A) shall be applied 
        to the controlled group, and the 6,000,000 barrel quantity 
        specified in paragraph (1)(C)(i) and the 60,000 barrel quantity 
        specified in paragraph (2)(A) shall be apportioned among the 
        brewers who are members of such group in such manner as the 
        Secretary or their delegate shall by regulations prescribe. For 
        purposes of the preceding sentence, the term `controlled group' 
        has the meaning assigned to it by subsection (a) of section 
        1563, except that for such purposes the phrase `more than 50 
        percent' shall be substituted for the phrase `at least 80 
        percent' in each place it appears in such subsection. Under 
        regulations prescribed by the Secretary, principles similar to 
        the principles of the preceding two sentences shall be applied 
        to a group of brewers under common control where one or more of 
        the brewers is not a corporation.
            ``(B) Foreign manufacturers and importers.--For purposes of 
        paragraph (4), in the case of a controlled group, the 6,000,000 
        barrel quantity specified in paragraph (1)(C)(i) shall be 
        applied to the controlled group and apportioned among the 
        members of such group in such manner as the Secretary shall by 
        regulations prescribe. For purposes of the preceding sentence, 
        the term `controlled group' has the meaning given such term 
        under subparagraph (A). Under regulations prescribed by the 
        Secretary, principles similar to the principles of the 
        preceding two sentences shall be applied to a group of brewers 
        under common control where one or more of the brewers is not a 
        corporation.
            ``(C) Single taxpayer.--Pursuant to rules issued by the 
        Secretary, two or more entities (whether or not under common 
        control) that produce beer marketed under a similar brand, 
        license, franchise, or other arrangement shall be treated as a 
        single taxpayer for purposes of the application of this 
        subsection.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to beer removed after December 31, 2017.
SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILITIES.
    (a) In General.--Section 5414 is amended--
        (1) by striking ``Beer may be removed'' and inserting ``(a) In 
    General.--Beer may be removed'', and
        (2) by adding at the end the following:
    ``(b) Transfer of Beer Between Bonded Facilities.--
        ``(1) In general.--Beer may be removed from one bonded brewery 
    to another bonded brewery, without payment of tax, and may be 
    mingled with beer at the receiving brewery, subject to such 
    conditions, including payment of the tax, and in such containers, 
    as the Secretary by regulations shall prescribe, which shall 
    include--
            ``(A) any removal from one brewery to another brewery 
        belonging to the same brewer,
            ``(B) any removal from a brewery owned by one corporation 
        to a brewery owned by another corporation when--
                ``(i) one such corporation owns the controlling 
            interest in the other such corporation, or
                ``(ii) the controlling interest in each such 
            corporation is owned by the same person or persons, and
            ``(C) any removal from one brewery to another brewery 
        when--
                ``(i) the proprietors of transferring and receiving 
            premises are independent of each other and neither has a 
            proprietary interest, directly or indirectly, in the 
            business of the other, and
                ``(ii) the transferor has divested itself of all 
            interest in the beer so transferred and the transferee has 
            accepted responsibility for payment of the tax.
        ``(2) Transfer of liability for tax.--For purposes of paragraph 
    (1)(C), such relief from liability shall be effective from the time 
    of removal from the transferor's bonded premises, or from the time 
    of divestment of interest, whichever is later.
        ``(3) Termination.--This subsection shall not apply to any 
    calendar quarter beginning after December 31, 2019.''.
    (b) Removal From Brewery by Pipeline.--Section 5412 is amended by 
inserting ``pursuant to section 5414 or'' before ``by pipeline''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any calendar quarters beginning after December 31, 2017.
SEC. 13804. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE.
    (a) In General.--Section 5041(c) is amended by adding at the end 
the following new paragraph:
        ``(8) Special rule for 2018 and 2019.--
            ``(A) In general.--In the case of wine removed after 
        December 31, 2017, and before January 1, 2020, paragraphs (1) 
        and (2) shall not apply and there shall be allowed as a credit 
        against any tax imposed by this title (other than chapters 2, 
        21, and 22) an amount equal to the sum of--
                ``(i) $1 per wine gallon on the first 30,000 wine 
            gallons of wine, plus
                ``(ii) 90 cents per wine gallon on the first 100,000 
            wine gallons of wine to which clause (i) does not apply, 
            plus
                ``(iii) 53.5 cents per wine gallon on the first 620,000 
            wine gallons of wine to which clauses (i) and (ii) do not 
            apply,
        which are produced by the producer and removed during the 
        calendar year for consumption or sale, or which are imported by 
        the importer into the United States during the calendar year.
            ``(B) Adjustment of credit for hard cider.--In the case of 
        wine described in subsection (b)(6), subparagraph (A) of this 
        paragraph shall be applied--
                ``(i) in clause (i) of such subparagraph, by 
            substituting `6.2 cents' for `$1',
                ``(ii) in clause (ii) of such subparagraph, by 
            substituting `5.6 cents' for `90 cents', and
                ``(iii) in clause (iii) of such subparagraph, by 
            substituting `3.3 cents' for `53.5 cents'.'',
    (b) Controlled Group and Single Taxpayer Rules.--Paragraph (4) of 
section 5041(c) is amended by striking ``section 5051(a)(2)(B)'' and 
inserting ``section 5051(a)(5)''.
    (c) Allowance of Credit for Foreign Manufacturers and Importers.--
Subsection (c) of section 5041, as amended by subsection (a), is 
amended--
        (1) in subparagraph (A) of paragraph (8), by inserting ``but 
    only if the importer is an electing importer under paragraph (9) 
    and the wine gallons of wine have been assigned to the importer 
    pursuant to such paragraph'' after ``into the United States during 
    the calendar year'', and
        (2) by adding at the end the following new paragraph:
        ``(9) Allowance of credit for foreign manufacturers and 
    importers.--
            ``(A) In general.--In the case of any wine gallons of wine 
        which have been produced outside of the United States and 
        imported into the United States, the credit allowable under 
        paragraph (8) (referred to in this paragraph as the `tax 
        credit') may be assigned by the person who produced such wine 
        (referred to in this paragraph as the `foreign producer'), 
        provided that such person makes an election described in 
        subparagraph (B)(ii), to any electing importer of such wine 
        gallons pursuant to the requirements established by the 
        Secretary under subparagraph (B).
            ``(B) Assignment.--The Secretary shall, through such rules, 
        regulations, and procedures as are determined appropriate, 
        establish procedures for assignment of the tax credit provided 
        under this paragraph, which shall include--
                ``(i) a limitation to ensure that the number of wine 
            gallons of wine for which the tax credit has been assigned 
            by a foreign producer--

                    ``(I) to any importer does not exceed the number of 
                wine gallons of wine produced by such foreign producer 
                during the calendar year which were imported into the 
                United States by such importer, and
                    ``(II) to all importers does not exceed the 750,000 
                wine gallons of wine to which the tax credit applies,

                ``(ii) procedures that allow the election of a foreign 
            producer to assign and an importer to receive the tax 
            credit provided under this paragraph,
                ``(iii) requirements that the foreign producer provide 
            any information as the Secretary determines necessary and 
            appropriate for purposes of carrying out this paragraph, 
            and
                ``(iv) procedures that allow for revocation of 
            eligibility of the foreign producer and the importer for 
            the tax credit provided under this paragraph in the case of 
            any erroneous or fraudulent information provided under 
            clause (iii) which the Secretary deems to be material to 
            qualifying for such credit.
            ``(C) Controlled group.--For purposes of this section, any 
        importer making an election described in subparagraph (B)(ii) 
        shall be deemed to be a member of the controlled group of the 
        foreign producer, as described under paragraph (4).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to wine removed after December 31, 2017.
SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICATION OF 
EXCISE TAX RATES.
    (a) In General.--Paragraphs (1) and (2) of section 5041(b) are each 
amended by inserting ``(16 percent in the case of wine removed after 
December 31, 2017, and before January 1, 2020'' after ``14 percent''.
    (b) Effective Date.--The amendments made by this section shall 
apply to wine removed after December 31, 2017.
SEC. 13806. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME WINE.
    (a) In General.--Section 5041 is amended--
        (1) in subsection (a), by striking ``Still wines'' and 
    inserting ``Subject to subsection (h), still wines'', and
        (2) by adding at the end the following new subsection:
    ``(h) Mead and Low Alcohol by Volume Wine.--
        ``(1) In general.--For purposes of subsections (a) and (b)(1), 
    mead and low alcohol by volume wine shall be deemed to be still 
    wines containing not more than 16 percent of alcohol by volume.
        ``(2) Definitions.--
            ``(A) Mead.--For purposes of this section, the term `mead' 
        means a wine--
                ``(i) containing not more than 0.64 gram of carbon 
            dioxide per hundred milliliters of wine, except that the 
            Secretary shall by regulations prescribe such tolerances to 
            this limitation as may be reasonably necessary in good 
            commercial practice,
                ``(ii) which is derived solely from honey and water,
                ``(iii) which contains no fruit product or fruit 
            flavoring, and
                ``(iv) which contains less than 8.5 percent alcohol by 
            volume.
            ``(B) Low alcohol by volume wine.--For purposes of this 
        section, the term `low alcohol by volume wine' means a wine--
                ``(i) containing not more than 0.64 gram of carbon 
            dioxide per hundred milliliters of wine, except that the 
            Secretary shall by regulations prescribe such tolerances to 
            this limitation as may be reasonably necessary in good 
            commercial practice,
                ``(ii) which is derived--

                    ``(I) primarily from grapes, or
                    ``(II) from grape juice concentrate and water,

                ``(iii) which contains no fruit product or fruit 
            flavoring other than grape, and
                ``(iv) which contains less than 8.5 percent alcohol by 
            volume.
        ``(3) Termination.--This subsection shall not apply to wine 
    removed after December 31, 2019.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to wine removed after December 31, 2017.
SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED SPIRITS.
    (a) In General.--Section 5001 is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection (b) 
the following new subsection:
    ``(c) Reduced Rate for 2018 and 2019.--
        ``(1) In general.--In the case of a distilled spirits 
    operation, the otherwise applicable tax rate under subsection 
    (a)(1) shall be--
            ``(A) $2.70 per proof gallon on the first 100,000 proof 
        gallons of distilled spirits, and
            ``(B) $13.34 per proof gallon on the first 22,130,000 of 
        proof gallons of distilled spirits to which subparagraph (A) 
        does not apply,
    which have been distilled or processed by such operation and 
    removed during the calendar year for consumption or sale, or which 
    have been imported by the importer into the United States during 
    the calendar year.
        ``(2) Controlled groups.--
            ``(A) In general.--In the case of a controlled group, the 
        proof gallon quantities specified under subparagraphs (A) and 
        (B) of paragraph (1) shall be applied to such group and 
        apportioned among the members of such group in such manner as 
        the Secretary or their delegate shall by regulations prescribe.
            ``(B) Definition.--For purposes of subparagraph (A), the 
        term `controlled group' shall have the meaning given such term 
        by subsection (a) of section 1563, except that `more than 50 
        percent' shall be substituted for `at least 80 percent' each 
        place it appears in such subsection.
            ``(C) Rules for non-corporations.--Under regulations 
        prescribed by the Secretary, principles similar to the 
        principles of subparagraphs (A) and (B) shall be applied to a 
        group under common control where one or more of the persons is 
        not a corporation.
            ``(D) Single taxpayer.--Pursuant to rules issued by the 
        Secretary, two or more entities (whether or not under common 
        control) that produce distilled spirits marketed under a 
        similar brand, license, franchise, or other arrangement shall 
        be treated as a single taxpayer for purposes of the application 
        of this subsection.
        ``(3) Termination.--This subsection shall not apply to 
    distilled spirits removed after December 31, 2019.''.
    (b) Conforming Amendment.--Section 7652(f)(2) is amended by 
striking ``section 5001(a)(1)'' and inserting ``subsection (a)(1) of 
section 5001, determined as if subsection (c)(1) of such section did 
not apply''.
    (c) Application of Reduced Tax Rate for Foreign Manufacturers and 
Importers.--Subsection (c) of section 5001, as added by subsection (a), 
is amended--
        (1) in paragraph (1), by inserting ``but only if the importer 
    is an electing importer under paragraph (3) and the proof gallons 
    of distilled spirits have been assigned to the importer pursuant to 
    such paragraph'' after ``into the United States during the calendar 
    year'', and
        (2) by redesignating paragraph (3) as paragraph (4) and by 
    inserting after paragraph (2) the following new paragraph:
        ``(3) Reduced tax rate for foreign manufacturers and 
    importers.--
            ``(A) In general.--In the case of any proof gallons of 
        distilled spirits which have been produced outside of the 
        United States and imported into the United States, the rate of 
        tax applicable under paragraph (1) (referred to in this 
        paragraph as the `reduced tax rate') may be assigned by the 
        distilled spirits operation (provided that such operation makes 
        an election described in subparagraph (B)(ii)) to any electing 
        importer of such proof gallons pursuant to the requirements 
        established by the Secretary under subparagraph (B).
            ``(B) Assignment.--The Secretary shall, through such rules, 
        regulations, and procedures as are determined appropriate, 
        establish procedures for assignment of the reduced tax rate 
        provided under this paragraph, which shall include--
                ``(i) a limitation to ensure that the number of proof 
            gallons of distilled spirits for which the reduced tax rate 
            has been assigned by a distilled spirits operation--

                    ``(I) to any importer does not exceed the number of 
                proof gallons produced by such operation during the 
                calendar year which were imported into the United 
                States by such importer, and
                    ``(II) to all importers does not exceed the 
                22,230,000 proof gallons of distilled spirits to which 
                the reduced tax rate applies,

                ``(ii) procedures that allow the election of a 
            distilled spirits operation to assign and an importer to 
            receive the reduced tax rate provided under this paragraph,
                ``(iii) requirements that the distilled spirits 
            operation provide any information as the Secretary 
            determines necessary and appropriate for purposes of 
            carrying out this paragraph, and
                ``(iv) procedures that allow for revocation of 
            eligibility of the distilled spirits operation and the 
            importer for the reduced tax rate provided under this 
            paragraph in the case of any erroneous or fraudulent 
            information provided under clause (iii) which the Secretary 
            deems to be material to qualifying for such reduced rate.
            ``(C) Controlled group.--
                ``(i) In general.--For purposes of this section, any 
            importer making an election described in subparagraph 
            (B)(ii) shall be deemed to be a member of the controlled 
            group of the distilled spirits operation, as described 
            under paragraph (2).
                ``(ii) Apportionment.--For purposes of this paragraph, 
            in the case of a controlled group, rules similar to section 
            5051(a)(5)(B) shall apply.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to distilled spirits removed after December 31, 2017.
SEC. 13808. BULK DISTILLED SPIRITS.
    (a) In General.--Section 5212 is amended by adding at the end the 
following sentence: ``In the case of distilled spirits transferred in 
bond after December 31, 2017, and before January 1, 2020, this section 
shall be applied without regard to whether distilled spirits are bulk 
distilled spirits.''.
    (b) Effective Date.--The amendments made by this section shall 
apply distilled spirits transferred in bond after December 31, 2017.

                  Subpart B--Miscellaneous Provisions

SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA NATIVE CORPORATIONS 
AND SETTLEMENT TRUSTS.
    (a) Exclusion for ANCSA Payments Assigned to Alaska Native 
Settlement Trusts.--
        (1) In general.--Part III of subchapter B of chapter 1 is 
    amended by inserting before section 140 the following new section:
``SEC. 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLEMENT TRUSTS.
    ``(a) In General.--In the case of a Native Corporation, gross 
income shall not include the value of any payments that would otherwise 
be made, or treated as being made, to such Native Corporation pursuant 
to, or as required by, any provision of the Alaska Native Claims 
Settlement Act (43 U.S.C. 1601 et seq.), including any payment that 
would otherwise be made to a Village Corporation pursuant to section 
7(j) of the Alaska Native Claims Settlement Act (43 U.S.C. 1606(j)), 
provided that any such payments--
        ``(1) are assigned in writing to a Settlement Trust, and
        ``(2) were not received by such Native Corporation prior to the 
    assignment described in paragraph (1).
    ``(b) Inclusion in Gross Income.--In the case of a Settlement Trust 
which has been assigned payments described in subsection (a), gross 
income shall include such payments when received by such Settlement 
Trust pursuant to the assignment and shall have the same character as 
if such payments were received by the Native Corporation.
    ``(c) Amount and Scope of Assignment.--The amount and scope of any 
assignment under subsection (a) shall be described with reasonable 
particularity and may either be in a percentage of one or more such 
payments or in a fixed dollar amount.
    ``(d) Duration of Assignment; Revocability.--Any assignment under 
subsection (a) shall specify--
        ``(1) a duration either in perpetuity or for a period of time, 
    and
        ``(2) whether such assignment is revocable.
    ``(e) Prohibition on Deduction.--Notwithstanding section 247, no 
deduction shall be allowed to a Native Corporation for purposes of any 
amounts described in subsection (a).
    ``(f) Definitions.--For purposes of this section, the terms `Native 
Corporation' and `Settlement Trust' have the same meaning given such 
terms under section 646(h).''.
        (2) Conforming amendment.--The table of sections for part III 
    of subchapter B of chapter 1 is amended by inserting before the 
    item relating to section 140 the following new item:

``Sec. 139G. Assignments to Alaska Native Settlement Trusts.''.

        (3) Effective date.--The amendments made by this subsection 
    shall apply to taxable years beginning after December 31, 2016.
    (b) Deduction of Contributions to Alaska Native Settlement 
Trusts.--
        (1) In general.--Part VIII of subchapter B of chapter 1 is 
    amended by inserting before section 248 the following new section:
    ``SEC. 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLEMENT TRUSTS.
    ``(a) In General.--In the case of a Native Corporation, there shall 
be allowed a deduction for any contributions made by such Native 
Corporation to a Settlement Trust (regardless of whether an election 
under section 646 is in effect for such Settlement Trust) for which the 
Native Corporation has made an annual election under subsection (e).
    ``(b) Amount of Deduction.--The amount of the deduction under 
subsection (a) shall be equal to--
        ``(1) in the case of a cash contribution (regardless of the 
    method of payment, including currency, coins, money order, or 
    check), the amount of such contribution, or
        ``(2) in the case of a contribution not described in paragraph 
    (1), the lesser of--
            ``(A) the Native Corporation's adjusted basis in the 
        property contributed, or
            ``(B) the fair market value of the property contributed.
    ``(c) Limitation and Carryover.--
        ``(1) In general.--Subject to paragraph (2), the deduction 
    allowed under subsection (a) for any taxable year shall not exceed 
    the taxable income (as determined without regard to such deduction) 
    of the Native Corporation for the taxable year in which the 
    contribution was made.
        ``(2) Carryover.--If the aggregate amount of contributions 
    described in subsection (a) for any taxable year exceeds the 
    limitation under paragraph (1), such excess shall be treated as a 
    contribution described in subsection (a) in each of the 15 
    succeeding years in order of time.
    ``(d) Definitions.--For purposes of this section, the terms `Native 
Corporation' and `Settlement Trust' have the same meaning given such 
terms under section 646(h).
    ``(e) Manner of Making Election.--
        ``(1) In general.--For each taxable year, a Native Corporation 
    may elect to have this section apply for such taxable year on the 
    income tax return or an amendment or supplement to the return of 
    the Native Corporation, with such election to have effect solely 
    for such taxable year.
        ``(2) Revocation.--Any election made by a Native Corporation 
    pursuant to this subsection may be revoked pursuant to a timely 
    filed amendment or supplement to the income tax return of such 
    Native Corporation.
    ``(f) Additional Rules.--
        ``(1) Earnings and profits.--Notwithstanding section 646(d)(2), 
    in the case of a Native Corporation which claims a deduction under 
    this section for any taxable year, the earnings and profits of such 
    Native Corporation for such taxable year shall be reduced by the 
    amount of such deduction.
        ``(2) Gain or loss.--No gain or loss shall be recognized by the 
    Native Corporation with respect to a contribution of property for 
    which a deduction is allowed under this section.
        ``(3) Income.--Subject to subsection (g), a Settlement Trust 
    shall include in income the amount of any deduction allowed under 
    this section in the taxable year in which the Settlement Trust 
    actually receives such contribution.
        ``(4) Period.--The holding period under section 1223 of the 
    Settlement Trust shall include the period the property was held by 
    the Native Corporation.
        ``(5) Basis.--The basis that a Settlement Trust has for which a 
    deduction is allowed under this section shall be equal to the 
    lesser of--
            ``(A) the adjusted basis of the Native Corporation in such 
        property immediately before such contribution, or
            ``(B) the fair market value of the property immediately 
        before such contribution.
        ``(6) Prohibition.--No deduction shall be allowed under this 
    section with respect to any contributions made to a Settlement 
    Trust which are in violation of subsection (a)(2) or (c)(2) of 
    section 39 of the Alaska Native Claims Settlement Act (43 U.S.C. 
    1629e).
    ``(g) Election by Settlement Trust to Defer Income Recognition.--
        ``(1) In general.--In the case of a contribution which consists 
    of property other than cash, a Settlement Trust may elect to defer 
    recognition of any income related to such property until the sale 
    or exchange of such property, in whole or in part, by the 
    Settlement Trust.
        ``(2) Treatment.--In the case of property described in 
    paragraph (1), any income or gain realized on the sale or exchange 
    of such property shall be treated as--
            ``(A) for such amount of the income or gain as is equal to 
        or less than the amount of income which would be included in 
        income at the time of contribution under subsection (f)(3) but 
        for the taxpayer's election under this subsection, ordinary 
        income, and
            ``(B) for any amounts of the income or gain which are in 
        excess of the amount of income which would be included in 
        income at the time of contribution under subsection (f)(3) but 
        for the taxpayer's election under this subsection, having the 
        same character as if this subsection did not apply.
        ``(3) Election.--
            ``(A) In general.--For each taxable year, a Settlement 
        Trust may elect to apply this subsection for any property 
        described in paragraph (1) which was contributed during such 
        year. Any property to which the election applies shall be 
        identified and described with reasonable particularity on the 
        income tax return or an amendment or supplement to the return 
        of the Settlement Trust, with such election to have effect 
        solely for such taxable year.
            ``(B) Revocation.--Any election made by a Settlement Trust 
        pursuant to this subsection may be revoked pursuant to a timely 
        filed amendment or supplement to the income tax return of such 
        Settlement Trust.
            ``(C) Certain dispositions.--
                ``(i) In general.--In the case of any property for 
            which an election is in effect under this subsection and 
            which is disposed of within the first taxable year 
            subsequent to the taxable year in which such property was 
            contributed to the Settlement Trust--

                    ``(I) this section shall be applied as if the 
                election under this subsection had not been made,
                    ``(II) any income or gain which would have been 
                included in the year of contribution under subsection 
                (f)(3) but for the taxpayer's election under this 
                subsection shall be included in income for the taxable 
                year of such contribution, and
                    ``(III) the Settlement Trust shall pay any increase 
                in tax resulting from such inclusion, including any 
                applicable interest, and increased by 10 percent of the 
                amount of such increase with interest.

                ``(ii) Assessment.--Notwithstanding section 6501(a), 
            any amount described in subclause (III) of clause (i) may 
            be assessed, or a proceeding in court with respect to such 
            amount may be initiated without assessment, within 4 years 
            after the date on which the return making the election 
            under this subsection for such property was filed.''.
        (2) Conforming amendment.--The table of sections for part VIII 
    of subchapter B of chapter 1 is amended by inserting before the 
    item relating to section 248 the following new item:

``Sec. 247. Contributions to Alaska Native Settlement Trusts.''.

        (3) Effective date.--
            (A) In general.--The amendments made by this subsection 
        shall apply to taxable years for which the period of limitation 
        on refund or credit under section 6511 of the Internal Revenue 
        Code of 1986 has not expired.
            (B) One-year waiver of statute of limitations.--If the 
        period of limitation on a credit or refund resulting from the 
        amendments made by paragraph (1) expires before the end of the 
        1-year period beginning on the date of the enactment of this 
        Act, refund or credit of such overpayment (to the extent 
        attributable to such amendments) may, nevertheless, be made or 
        allowed if claim therefor is filed before the close of such 1-
        year period.
    (c) Information Reporting for Deductible Contributions to Alaska 
Native Settlement Trusts.--
        (1) In general.--Section 6039H is amended--
            (A) in the heading, by striking ``sponsoring'', and
            (B) by adding at the end the following new subsection:
    ``(e) Deductible Contributions by Native Corporations to Alaska 
Native Settlement Trusts.--
        ``(1) In general.--Any Native Corporation (as defined in 
    subsection (m) of section 3 of the Alaska Native Claims Settlement 
    Act (43 U.S.C. 1602(m))) which has made a contribution to a 
    Settlement Trust (as defined in subsection (t) of such section) to 
    which an election under subsection (e) of section 247 applies shall 
    provide such Settlement Trust with a statement regarding such 
    election not later than January 31 of the calendar year subsequent 
    to the calendar year in which the contribution was made.
        ``(2) Content of statement.--The statement described in 
    paragraph (1) shall include--
            ``(A) the total amount of contributions to which the 
        election under subsection (e) of section 247 applies,
            ``(B) for each contribution, whether such contribution was 
        in cash,
            ``(C) for each contribution which consists of property 
        other than cash, the date that such property was acquired by 
        the Native Corporation and the adjusted basis and fair market 
        value of such property on the date such property was 
        contributed to the Settlement Trust,
            ``(D) the date on which each contribution was made to the 
        Settlement Trust, and
            ``(E) such information as the Secretary determines to be 
        necessary or appropriate for the identification of each 
        contribution and the accurate inclusion of income relating to 
        such contributions by the Settlement Trust.''.
        (2) Conforming amendment.--The item relating to section 6039H 
    in the table of sections for subpart A of part III of subchapter A 
    of chapter 61 is amended to read as follows:

``Sec. 6039H. Information With Respect to Alaska Native Settlement 
          Trusts and Native Corporations.''.

        (3) Effective date.--The amendments made by this subsection 
    shall apply to taxable years beginning after December 31, 2016.
SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.
    (a) In General.--Subsection (e) of section 4261 is amended by 
adding at the end the following new paragraph:
        ``(5) Amounts paid for aircraft management services.--
            ``(A) In general.--No tax shall be imposed by this section 
        or section 4271 on any amounts paid by an aircraft owner for 
        aircraft management services related to--
                ``(i) maintenance and support of the aircraft owner's 
            aircraft, or
                ``(ii) flights on the aircraft owner's aircraft.
            ``(B) Aircraft management services.--For purposes of 
        subparagraph (A), the term `aircraft management services' 
        includes--
                ``(i) assisting an aircraft owner with administrative 
            and support services, such as scheduling, flight planning, 
            and weather forecasting,
                ``(ii) obtaining insurance,
                ``(iii) maintenance, storage and fueling of aircraft,
                ``(iv) hiring, training, and provision of pilots and 
            crew,
                ``(v) establishing and complying with safety standards, 
            and
                ``(vi) such other services as are necessary to support 
            flights operated by an aircraft owner.
            ``(C) Lessee treated as aircraft owner.--
                ``(i) In general.--For purposes of this paragraph, the 
            term `aircraft owner' includes a person who leases the 
            aircraft other than under a disqualified lease.
                ``(ii) Disqualified lease.--For purposes of clause (i), 
            the term `disqualified lease' means a lease from a person 
            providing aircraft management services with respect to such 
            aircraft (or a related person (within the meaning of 
            section 465(b)(3)(C)) to the person providing such 
            services), if such lease is for a term of 31 days or less.
            ``(D) Pro rata allocation.--In the case of amounts paid to 
        any person which (but for this subsection) are subject to the 
        tax imposed by subsection (a), a portion of which consists of 
        amounts described in subparagraph (A), this paragraph shall 
        apply on a pro rata basis only to the portion which consists of 
        amounts described in such subparagraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid after the date of the enactment of this Act.
SEC. 13823. OPPORTUNITY ZONES.
    (a) In General.--Chapter 1 is amended by adding at the end the 
following:

                   ``Subchapter Z--Opportunity Zones

``Sec. 1400Z-1. Designation.
``Sec. 1400Z-2. Special rules for capital gains invested in opportunity 
          zones.

``SEC. 1400Z-1. DESIGNATION.
    ``(a) Qualified Opportunity Zone Defined.--For the purposes of this 
subchapter, the term `qualified opportunity zone' means a population 
census tract that is a low-income community that is designated as a 
qualified opportunity zone.
    ``(b) Designation.--
        ``(1) In general.--For purposes of subsection (a), a population 
    census tract that is a low-income community is designated as a 
    qualified opportunity zone if--
            ``(A) not later than the end of the determination period, 
        the chief executive officer of the State in which the tract is 
        located--
                ``(i) nominates the tract for designation as a 
            qualified opportunity zone, and
                ``(ii) notifies the Secretary in writing of such 
            nomination, and
            ``(B) the Secretary certifies such nomination and 
        designates such tract as a qualified opportunity zone before 
        the end of the consideration period.
        ``(2) Extension of periods.--A chief executive officer of a 
    State may request that the Secretary extend either the 
    determination or consideration period, or both (determined without 
    regard to this subparagraph), for an additional 30 days.
    ``(c) Other Definitions.--For purposes of this subsection--
        ``(1) Low-income communities.--The term `low-income community' 
    has the same meaning as when used in section 45D(e).
        ``(2) Definition of periods.--
            ``(A) Consideration period.--The term `consideration 
        period' means the 30-day period beginning on the date on which 
        the Secretary receives notice under subsection (b)(1)(A)(ii), 
        as extended under subsection (b)(2).
            ``(B) Determination period.--The term `determination 
        period' means the 90-day period beginning on the date of the 
        enactment of the Tax Cuts and Jobs Act, as extended under 
        subsection (b)(2).
        ``(3) State.--For purposes of this section, the term `State' 
    includes any possession of the United States.
    ``(d) Number of Designations.--
        ``(1) In general.--Except as provided by paragraph (2), the 
    number of population census tracts in a State that may be 
    designated as qualified opportunity zones under this section may 
    not exceed 25 percent of the number of low-income communities in 
    the State.
        ``(2) Exception.--If the number of low-income communities in a 
    State is less than 100, then a total of 25 of such tracts may be 
    designated as qualified opportunity zones.
    ``(e) Designation of Tracts Contiguous With Low-income 
Communities.--
        ``(1) In general.--A population census tract that is not a low-
    income community may be designated as a qualified opportunity zone 
    under this section if--
            ``(A) the tract is contiguous with the low-income community 
        that is designated as a qualified opportunity zone, and
            ``(B) the median family income of the tract does not exceed 
        125 percent of the median family income of the low-income 
        community with which the tract is contiguous.
        ``(2) Limitation.--Not more than 5 percent of the population 
    census tracts designated in a State as a qualified opportunity zone 
    may be designated under paragraph (1).
    ``(f) Period for Which Designation Is in Effect.--A designation as 
a qualified opportunity zone shall remain in effect for the period 
beginning on the date of the designation and ending at the close of the 
10th calendar year beginning on or after such date of designation.
``SEC. 1400Z-2. SPECIAL RULES FOR CAPITAL GAINS INVESTED IN OPPORTUNITY 
ZONES.
    ``(a) In General.--
        ``(1) Treatment of gains.--In the case of gain from the sale 
    to, or exchange with, an unrelated person of any property held by 
    the taxpayer, at the election of the taxpayer--
            ``(A) gross income for the taxable year shall not include 
        so much of such gain as does not exceed the aggregate amount 
        invested by the taxpayer in a qualified opportunity fund during 
        the 180-day period beginning on the date of such sale or 
        exchange,
            ``(B) the amount of gain excluded by subparagraph (A) shall 
        be included in gross income as provided by subsection (b), and
            ``(C) subsection (c) shall apply.
        ``(2) Election.--No election may be made under paragraph (1)--
            ``(A) with respect to a sale or exchange if an election 
        previously made with respect to such sale or exchange is in 
        effect, or
            ``(B) with respect to any sale or exchange after December 
        31, 2026.
    ``(b) Deferral of Gain Invested in Opportunity Zone Property.--
        ``(1) Year of inclusion.--Gain to which subsection (a)(1)(B) 
    applies shall be included in income in the taxable year which 
    includes the earlier of--
            ``(A) the date on which such investment is sold or 
        exchanged, or
            ``(B) December 31, 2026.
        ``(2) Amount includible.--
            ``(A) In general.--The amount of gain included in gross 
        income under subsection (a)(1)(A) shall be the excess of--
                ``(i) the lesser of the amount of gain excluded under 
            paragraph (1) or the fair market value of the investment as 
            determined as of the date described in paragraph (1), over
                ``(ii) the taxpayer's basis in the investment.
            ``(B) Determination of basis.--
                ``(i) In general.--Except as otherwise provided in this 
            clause or subsection (c), the taxpayer's basis in the 
            investment shall be zero.
                ``(ii) Increase for gain recognized under subsection 
            (a)(1)(B).--The basis in the investment shall be increased 
            by the amount of gain recognized by reason of subsection 
            (a)(1)(B) with respect to such property.
                ``(iii) Investments held for 5 years.--In the case of 
            any investment held for at least 5 years, the basis of such 
            investment shall be increased by an amount equal to 10 
            percent of the amount of gain deferred by reason of 
            subsection (a)(1)(A).
                ``(iv) Investments held for 7 years.--In the case of 
            any investment held by the taxpayer for at least 7 years, 
            in addition to any adjustment made under clause (iii), the 
            basis of such property shall be increased by an amount 
            equal to 5 percent of the amount of gain deferred by reason 
            of subsection (a)(1)(A).
    ``(c) Special Rule for Investments Held for at Least 10 Years.--In 
the case of any investment held by the taxpayer for at least 10 years 
and with respect to which the taxpayer makes an election under this 
clause, the basis of such property shall be equal to the fair market 
value of such investment on the date that the investment is sold or 
exchanged.
    ``(d) Qualified Opportunity Fund.--For purposes of this section--
        ``(1) In general.--The term `qualified opportunity fund' means 
    any investment vehicle which is organized as a corporation or a 
    partnership for the purpose of investing in qualified opportunity 
    zone property (other than another qualified opportunity fund) that 
    holds at least 90 percent of its assets in qualified opportunity 
    zone property, determined by the average of the percentage of 
    qualified opportunity zone property held in the fund as measured--
            ``(A) on the last day of the first 6-month period of the 
        taxable year of the fund, and
            ``(B) on the last day of the taxable year of the fund.
        ``(2) Qualified opportunity zone property.--
            ``(A) In general.--The term `qualified opportunity zone 
        property' means property which is--
                ``(i) qualified opportunity zone stock,
                ``(ii) qualified opportunity zone partnership interest, 
            or
                ``(iii) qualified opportunity zone business property.
            ``(B) Qualified opportunity zone stock.--
                ``(i) In general.--Except as provided in clause (ii), 
            the term `qualified opportunity zone stock' means any stock 
            in a domestic corporation if--

                    ``(I) such stock is acquired by the qualified 
                opportunity fund after December 31, 2017, at its 
                original issue (directly or through an underwriter) 
                from the corporation solely in exchange for cash,
                    ``(II) as of the time such stock was issued, such 
                corporation was a qualified opportunity zone business 
                (or, in the case of a new corporation, such corporation 
                was being organized for purposes of being a qualified 
                opportunity zone business), and
                    ``(III) during substantially all of the qualified 
                opportunity fund's holding period for such stock, such 
                corporation qualified as a qualified opportunity zone 
                business.

                ``(ii) Redemptions.--A rule similar to the rule of 
            section 1202(c)(3) shall apply for purposes of this 
            paragraph.
            ``(C) Qualified opportunity zone partnership interest.--The 
        term `qualified opportunity zone partnership interest' means 
        any capital or profits interest in a domestic partnership if--
                ``(i) such interest is acquired by the qualified 
            opportunity fund after December 31, 2017, from the 
            partnership solely in exchange for cash,
                ``(ii) as of the time such interest was acquired, such 
            partnership was a qualified opportunity zone business (or, 
            in the case of a new partnership, such partnership was 
            being organized for purposes of being a qualified 
            opportunity zone business), and
                ``(iii) during substantially all of the qualified 
            opportunity fund's holding period for such interest, such 
            partnership qualified as a qualified opportunity zone 
            business.
            ``(D) Qualified opportunity zone business property.--
                ``(i) In general.--The term `qualified opportunity zone 
            business property' means tangible property used in a trade 
            or business of the qualified opportunity fund if--

                    ``(I) such property was acquired by the qualified 
                opportunity fund by purchase (as defined in section 
                179(d)(2)) after December 31, 2017,
                    ``(II) the original use of such property in the 
                qualified opportunity zone commences with the qualified 
                opportunity fund or the qualified opportunity fund 
                substantially improves the property, and
                    ``(III) during substantially all of the qualified 
                opportunity fund's holding period for such property, 
                substantially all of the use of such property was in a 
                qualified opportunity zone.

                ``(ii) Substantial improvement.--For purposes of 
            subparagraph (A)(ii), property shall be treated as 
            substantially improved by the qualified opportunity fund 
            only if, during any 30-month period beginning after the 
            date of acquisition of such property, additions to basis 
            with respect to such property in the hands of the qualified 
            opportunity fund exceed an amount equal to the adjusted 
            basis of such property at the beginning of such 30-month 
            period in the hands of the qualified opportunity fund.
                ``(iii) Related party.--For purposes of subparagraph 
            (A)(i), the related person rule of section 179(d)(2) shall 
            be applied pursuant to paragraph (8) of this subsection in 
            lieu of the application of such rule in section 
            179(d)(2)(A).
        ``(3) Qualified opportunity zone business.--
            ``(A) In general.--The term `qualified opportunity zone 
        business' means a trade or business--
                ``(i) in which substantially all of the tangible 
            property owned or leased by the taxpayer is qualified 
            opportunity zone business property (determined by 
            substituting `qualified opportunity zone business' for 
            `qualified opportunity fund' each place it appears in 
            paragraph (2)(D)),
                ``(ii) which satisfies the requirements of paragraphs 
            (2), (4), and (8) of section 1397C(b), and
                ``(iii) which is not described in section 144(c)(6)(B).
            ``(B) Special rule.--For purposes of subparagraph (A), 
        tangible property that ceases to be a qualified opportunity 
        zone business property shall continue to be treated as a 
        qualified opportunity zone business property for the lesser 
        of--
                ``(i) 5 years after the date on which such tangible 
            property ceases to be so qualified, or
                ``(ii) the date on which such tangible property is no 
            longer held by the qualified opportunity zone business.
    ``(e) Applicable Rules.--
        ``(1) Treatment of investments with mixed funds.--In the case 
    of any investment in a qualified opportunity fund only a portion of 
    which consists of investments of gain to which an election under 
    subsection (a) is in effect--
            ``(A) such investment shall be treated as 2 separate 
        investments, consisting of--
                ``(i) one investment that only includes amounts to 
            which the election under subsection (a) applies, and
                ``(ii) a separate investment consisting of other 
            amounts, and
            ``(B) subsections (a), (b), and (c) shall only apply to the 
        investment described in subparagraph (A)(i).
        ``(2) Related persons.--For purposes of this section, persons 
    are related to each other if such persons are described in section 
    267(b) or 707(b)(1), determined by substituting `20 percent' for 
    `50 percent' each place it occurs in such sections.
        ``(3) Decedents.--In the case of a decedent, amounts recognized 
    under this section shall, if not properly includible in the gross 
    income of the decedent, be includible in gross income as provided 
    by section 691.
        ``(4) Regulations.--The Secretary shall prescribe such 
    regulations as may be necessary or appropriate to carry out the 
    purposes of this section, including--
            ``(A) rules for the certification of qualified opportunity 
        funds for the purposes of this section,
            ``(B) rules to ensure a qualified opportunity fund has a 
        reasonable period of time to reinvest the return of capital 
        from investments in qualified opportunity zone stock and 
        qualified opportunity zone partnership interests, and to 
        reinvest proceeds received from the sale or disposition of 
        qualified opportunity zone property, and
            ``(C) rules to prevent abuse.
    ``(f) Failure of Qualified Opportunity Fund to Maintain Investment 
Standard.--
        ``(1) In general.--If a qualified opportunity fund fails to 
    meet the 90-percent requirement of subsection (c)(1), the qualified 
    opportunity fund shall pay a penalty for each month it fails to 
    meet the requirement in an amount equal to the product of--
            ``(A) the excess of--
                ``(i) the amount equal to 90 percent of its aggregate 
            assets, over
                ``(ii) the aggregate amount of qualified opportunity 
            zone property held by the fund, multiplied by
            ``(B) the underpayment rate established under section 
        6621(a)(2) for such month.
        ``(2) Special rule for partnerships.--In the case that the 
    qualified opportunity fund is a partnership, the penalty imposed by 
    paragraph (1) shall be taken into account proportionately as part 
    of the distributive share of each partner of the partnership.
        ``(3) Reasonable cause exception.--No penalty shall be imposed 
    under this subsection with respect to any failure if it is shown 
    that such failure is due to reasonable cause.''.
    (b) Basis Adjustments.--Section 1016(a) is amended by striking 
``and'' at the end of paragraph (36), by striking the period at the end 
of paragraph (37) and inserting ``, and'', and by inserting after 
paragraph (37) the following:
        ``(38) to the extent provided in subsections (b)(2) and (c) of 
    section 1400Z-2.''.
    (c) Clerical Amendment.--The table of subchapters for chapter 1 is 
amended by adding at the end the following new item:

                  ``subchapter z. opportunity zones''.

    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                Subtitle D--International Tax Provisions

                     PART I--OUTBOUND TRANSACTIONS

Subpart A--Establishment of Participation Exemption System for Taxation 
                           of Foreign Income

SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS RECEIVED 
BY DOMESTIC CORPORATIONS FROM SPECIFIED 10-PERCENT OWNED FOREIGN 
CORPORATIONS.
    (a) In General.--Part VIII of subchapter B of chapter 1 is amended 
by inserting after section 245 the following new section:
``SEC. 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION OF DIVIDENDS RECEIVED 
BY DOMESTIC CORPORATIONS FROM SPECIFIED 10-PERCENT OWNED FOREIGN 
CORPORATIONS.
    ``(a) In General.--In the case of any dividend received from a 
specified 10-percent owned foreign corporation by a domestic 
corporation which is a United States shareholder with respect to such 
foreign corporation, there shall be allowed as a deduction an amount 
equal to the foreign-source portion of such dividend.
    ``(b) Specified 10-percent Owned Foreign Corporation.--For purposes 
of this section--
        ``(1) In general.--The term `specified 10-percent owned foreign 
    corporation' means any foreign corporation with respect to which 
    any domestic corporation is a United States shareholder with 
    respect to such corporation.
        ``(2) Exclusion of passive foreign investment companies.--Such 
    term shall not include any corporation which is a passive foreign 
    investment company (as defined in section 1297) with respect to the 
    shareholder and which is not a controlled foreign corporation.
    ``(c) Foreign-source Portion.--For purposes of this section--
        ``(1) In general.--The foreign-source portion of any dividend 
    from a specified 10-percent owned foreign corporation is an amount 
    which bears the same ratio to such dividend as--
            ``(A) the undistributed foreign earnings of the specified 
        10-percent owned foreign corporation, bears to
            ``(B) the total undistributed earnings of such foreign 
        corporation.
        ``(2) Undistributed earnings.--The term `undistributed 
    earnings' means the amount of the earnings and profits of the 
    specified 10-percent owned foreign corporation (computed in 
    accordance with sections 964(a) and 986)--
            ``(A) as of the close of the taxable year of the specified 
        10-percent owned foreign corporation in which the dividend is 
        distributed, and
            ``(B) without diminution by reason of dividends distributed 
        during such taxable year.
        ``(3) Undistributed foreign earnings.--The term `undistributed 
    foreign earnings' means the portion of the undistributed earnings 
    which is attributable to neither--
            ``(A) income described in subparagraph (A) of section 
        245(a)(5), nor
            ``(B) dividends described in subparagraph (B) of such 
        section (determined without regard to section 245(a)(12)).
    ``(d) Disallowance of Foreign Tax Credit, etc.--
        ``(1) In general.--No credit shall be allowed under section 901 
    for any taxes paid or accrued (or treated as paid or accrued) with 
    respect to any dividend for which a deduction is allowed under this 
    section.
        ``(2) Denial of deduction.--No deduction shall be allowed under 
    this chapter for any tax for which credit is not allowable under 
    section 901 by reason of paragraph (1) (determined by treating the 
    taxpayer as having elected the benefits of subpart A of part III of 
    subchapter N).
    ``(e) Special Rules for Hybrid Dividends.--
        ``(1) In general.--Subsection (a) shall not apply to any 
    dividend received by a United States shareholder from a controlled 
    foreign corporation if the dividend is a hybrid dividend.
        ``(2) Hybrid dividends of tiered corporations.--If a controlled 
    foreign corporation with respect to which a domestic corporation is 
    a United States shareholder receives a hybrid dividend from any 
    other controlled foreign corporation with respect to which such 
    domestic corporation is also a United States shareholder, then, 
    notwithstanding any other provision of this title--
            ``(A) the hybrid dividend shall be treated for purposes of 
        section 951(a)(1)(A) as subpart F income of the receiving 
        controlled foreign corporation for the taxable year of the 
        controlled foreign corporation in which the dividend was 
        received, and
            ``(B) the United States shareholder shall include in gross 
        income an amount equal to the shareholder's pro rata share 
        (determined in the same manner as under section 951(a)(2)) of 
        the subpart F income described in subparagraph (A).
        ``(3) Denial of foreign tax credit, etc.--The rules of 
    subsection (d) shall apply to any hybrid dividend received by, or 
    any amount included under paragraph (2) in the gross income of, a 
    United States shareholder.
        ``(4) Hybrid dividend.--The term `hybrid dividend' means an 
    amount received from a controlled foreign corporation--
            ``(A) for which a deduction would be allowed under 
        subsection (a) but for this subsection, and
            ``(B) for which the controlled foreign corporation received 
        a deduction (or other tax benefit) with respect to any income, 
        war profits, or excess profits taxes imposed by any foreign 
        country or possession of the United States.
    ``(f) Special Rule for Purging Distributions of Passive Foreign 
Investment Companies.--Any amount which is treated as a dividend under 
section 1291(d)(2)(B) shall not be treated as a dividend for purposes 
of this section.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section, including regulations for the treatment of 
United States shareholders owning stock of a specified 10 percent owned 
foreign corporation through a partnership.''.
    (b) Application of Holding Period Requirement.--Subsection (c) of 
section 246 is amended--
        (1) by striking ``or 245'' in paragraph (1) and inserting 
    ``245, or 245A'', and
        (2) by adding at the end the following new paragraph:
        ``(5) Special rules for foreign source portion of dividends 
    received from specified 10-percent owned foreign corporations.--
            ``(A) 1-year holding period requirement.--For purposes of 
        section 245A--
                ``(i) paragraph (1)(A) shall be applied--

                    ``(I) by substituting `365 days' for `45 days' each 
                place it appears, and
                    ``(II) by substituting `731-day period' for `91-day 
                period', and

                ``(ii) paragraph (2) shall not apply.
            ``(B) Status must be maintained during holding period.--For 
        purposes of applying paragraph (1) with respect to section 
        245A, the taxpayer shall be treated as holding the stock 
        referred to in paragraph (1) for any period only if--
                ``(i) the specified 10-percent owned foreign 
            corporation referred to in section 245A(a) is a specified 
            10-percent owned foreign corporation at all times during 
            such period, and
                ``(ii) the taxpayer is a United States shareholder with 
            respect to such specified 10-percent owned foreign 
            corporation at all times during such period.''.
    (c) Application of Rules Generally Applicable to Deductions for 
Dividends Received.--
        (1) Treatment of dividends from certain corporations.--
    Paragraph (1) of section 246(a) is amended by striking ``and 245'' 
    and inserting ``245, and 245A''.
        (2) Coordination with section 1059.--Subparagraph (B) of 
    section 1059(b)(2) is amended by striking ``or 245'' and inserting 
    ``245, or 245A''.
    (d) Coordination With Foreign Tax Credit Limitation.--Subsection 
(b) of section 904 is amended by adding at the end the following new 
paragraph:
        ``(5) Treatment of dividends for which deduction is allowed 
    under section 245a.--For purposes of subsection (a), in the case of 
    a domestic corporation which is a United States shareholder with 
    respect to a specified 10-percent owned foreign corporation, such 
    shareholder's taxable income from sources without the United States 
    (and entire taxable income) shall be determined without regard to--
            ``(A) the foreign-source portion of any dividend received 
        from such foreign corporation, and
            ``(B) any deductions properly allocable or apportioned to--
                ``(i) income (other than amounts includible under 
            section 951(a)(1) or 951A(a)) with respect to stock of such 
            specified 10-percent owned foreign corporation, or
                ``(ii) such stock to the extent income with respect to 
            such stock is other than amounts includible under section 
            951(a)(1) or 951A(a).
    Any term which is used in section 245A and in this paragraph shall 
    have the same meaning for purposes of this paragraph as when used 
    in such section.''.
    (e) Conforming Amendments.--
        (1) Subsection (b) of section 951 is amended by striking 
    ``subpart'' and inserting ``title''.
        (2) Subsection (a) of section 957 is amended by striking 
    ``subpart'' in the matter preceding paragraph (1) and inserting 
    ``title''.
        (3) The table of sections for part VIII of subchapter B of 
    chapter 1 is amended by inserting after the item relating to 
    section 245 the following new item:

``Sec. 245A. Deduction for foreign source-portion of dividends received 
          by domestic corporations from certain 10-percent owned foreign 
          corporations.''.

    (f) Effective Date.--The amendments made by this section shall 
apply to distributions made after (and, in the case of the amendments 
made by subsection (d), deductions with respect to taxable years ending 
after) December 31, 2017.
SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS INVOLVING 
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS.
    (a) Sales by United States Persons of Stock.--
        (1) In general.--Section 1248 is amended by redesignating 
    subsection (j) as subsection (k) and by inserting after subsection 
    (i) the following new subsection:
    ``(j) Coordination With Dividends Received Deduction.--In the case 
of the sale or exchange by a domestic corporation of stock in a foreign 
corporation held for 1 year or more, any amount received by the 
domestic corporation which is treated as a dividend by reason of this 
section shall be treated as a dividend for purposes of applying section 
245A.''.
        (2) Effective date.--The amendments made by this subsection 
    shall apply to sales or exchanges after December 31, 2017.
    (b) Basis in Specified 10-percent Owned Foreign Corporation Reduced 
by Nontaxed Portion of Dividend for Purposes of Determining Loss.--
        (1) In general.--Section 961 is amended by adding at the end 
    the following new subsection:
    ``(d) Basis in Specified 10-percent Owned Foreign Corporation 
Reduced by Nontaxed Portion of Dividend for Purposes of Determining 
Loss.--If a domestic corporation received a dividend from a specified 
10-percent owned foreign corporation (as defined in section 245A) in 
any taxable year, solely for purposes of determining loss on any 
disposition of stock of such foreign corporation in such taxable year 
or any subsequent taxable year, the basis of such domestic corporation 
in such stock shall be reduced (but not below zero) by the amount of 
any deduction allowable to such domestic corporation under section 245A 
with respect to such stock except to the extent such basis was reduced 
under section 1059 by reason of a dividend for which such a deduction 
was allowable.''.
        (2) Effective date.--The amendments made by this subsection 
    shall apply to distributions made after December 31, 2017.
    (c) Sale by a CFC of a Lower Tier CFC.--
        (1) In general.--Section 964(e) is amended by adding at the end 
    the following new paragraph:
        ``(4) Coordination with dividends received deduction.--
            ``(A) In general.--If, for any taxable year of a controlled 
        foreign corporation beginning after December 31, 2017, any 
        amount is treated as a dividend under paragraph (1) by reason 
        of a sale or exchange by the controlled foreign corporation of 
        stock in another foreign corporation held for 1 year or more, 
        then, notwithstanding any other provision of this title--
                ``(i) the foreign-source portion of such dividend shall 
            be treated for purposes of section 951(a)(1)(A) as subpart 
            F income of the selling controlled foreign corporation for 
            such taxable year,
                ``(ii) a United States shareholder with respect to the 
            selling controlled foreign corporation shall include in 
            gross income for the taxable year of the shareholder with 
            or within which such taxable year of the controlled foreign 
            corporation ends an amount equal to the shareholder's pro 
            rata share (determined in the same manner as under section 
            951(a)(2)) of the amount treated as subpart F income under 
            clause (i), and
                ``(iii) the deduction under section 245A(a) shall be 
            allowable to the United States shareholder with respect to 
            the subpart F income included in gross income under clause 
            (ii) in the same manner as if such subpart F income were a 
            dividend received by the shareholder from the selling 
            controlled foreign corporation.
            ``(B) Application of basis or similar adjustment.--For 
        purposes of this title, in the case of a sale or exchange by a 
        controlled foreign corporation of stock in another foreign 
        corporation in a taxable year of the selling controlled foreign 
        corporation beginning after December 31, 2017, rules similar to 
        the rules of section 961(d) shall apply.
            ``(C) Foreign-source portion.--For purposes of this 
        paragraph, the foreign-source portion of any amount treated as 
        a dividend under paragraph (1) shall be determined in the same 
        manner as under section 245A(c).''.
        (2) Effective date.--The amendments made by this subsection 
    shall apply to sales or exchanges after December 31, 2017.
    (d) Treatment of Foreign Branch Losses Transferred to Specified 10-
percent Owned Foreign Corporations.--
        (1) In general.--Part II of subchapter B of chapter 1 is 
    amended by adding at the end the following new section:
  ``SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANSFERRED TO SPECIFIED 10-
      PERCENT OWNED FOREIGN CORPORATIONS.
    ``(a) In General.--If a domestic corporation transfers 
substantially all of the assets of a foreign branch (within the meaning 
of section 367(a)(3)(C), as in effect before the date of the enactment 
of the Tax Cuts and Jobs Act) to a specified 10-percent owned foreign 
corporation (as defined in section 245A) with respect to which it is a 
United States shareholder after such transfer, such domestic 
corporation shall include in gross income for the taxable year which 
includes such transfer an amount equal to the transferred loss amount 
with respect to such transfer.
    ``(b) Transferred Loss Amount.--For purposes of this section, the 
term `transferred loss amount' means, with respect to any transfer of 
substantially all of the assets of a foreign branch, the excess (if 
any) of--
        ``(1) the sum of losses--
            ``(A) which were incurred by the foreign branch after 
        December 31, 2017, and before the transfer, and
            ``(B) with respect to which a deduction was allowed to the 
        taxpayer, over
        ``(2) the sum of--
            ``(A) any taxable income of such branch for a taxable year 
        after the taxable year in which the loss was incurred and 
        through the close of the taxable year of the transfer, and
            ``(B) any amount which is recognized under section 
        904(f)(3) on account of the transfer.
    ``(c) Reduction for Recognized Gains.--The transferred loss amount 
shall be reduced (but not below zero) by the amount of gain recognized 
by the taxpayer on account of the transfer (other than amounts taken 
into account under subsection (b)(2)(B)).
    ``(d) Source of Income.--Amounts included in gross income under 
this section shall be treated as derived from sources within the United 
States.
    ``(e) Basis Adjustments.--Consistent with such regulations or other 
guidance as the Secretary shall prescribe, proper adjustments shall be 
made in the adjusted basis of the taxpayer's stock in the specified 10-
percent owned foreign corporation to which the transfer is made, and in 
the transferee's adjusted basis in the property transferred, to reflect 
amounts included in gross income under this section.''.
        (2) Clerical amendment.--The table of sections for part II of 
    subchapter B of chapter 1 is amended by adding at the end the 
    following new item:

``Sec. 91. Certain foreign branch losses transferred to specified 10-
          percent owned foreign corporations.''.

        (3) Effective date.--The amendments made by this subsection 
    shall apply to transfers after December 31, 2017.
        (4) Transition rule.--The amount of gain taken into account 
    under section 91(c) of the Internal Revenue Code of 1986, as added 
    by this subsection, shall be reduced by the amount of gain which 
    would be recognized under section 367(a)(3)(C) (determined without 
    regard to the amendments made by subsection (e)) with respect to 
    losses incurred before January 1, 2018.
    (e) Repeal of Active Trade or Business Exception Under Section 
367.--
        (1) In general.--Section 367(a) is amended by striking 
    paragraph (3) and redesignating paragraphs (4), (5), and (6) as 
    paragraphs (3), (4), and (5), respectively.
        (2) Conforming amendments.--Section 367(a)(4), as redesignated 
    by paragraph (1), is amended--
            (A) by striking ``Paragraphs (2) and (3)'' and inserting 
        ``Paragraph (2)'', and
            (B) by striking ``Paragraphs (2) and (3)'' in the heading 
        and inserting ``Paragraph (2)''.
        (3) Effective date.--The amendments made by this subsection 
    shall apply to transfers after December 31, 2017.
SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO 
PARTICIPATION EXEMPTION SYSTEM OF TAXATION.
    (a) In General.--Section 965 is amended to read as follows:
    ``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO 
      PARTICIPATION EXEMPTION SYSTEM OF TAXATION.
    ``(a) Treatment of Deferred Foreign Income as Subpart F Income.--In 
the case of the last taxable year of a deferred foreign income 
corporation which begins before January 1, 2018, the subpart F income 
of such foreign corporation (as otherwise determined for such taxable 
year under section 952) shall be increased by the greater of--
        ``(1) the accumulated post-1986 deferred foreign income of such 
    corporation determined as of November 2, 2017, or
        ``(2) the accumulated post-1986 deferred foreign income of such 
    corporation determined as of December 31, 2017.
    ``(b) Reduction in Amounts Included in Gross Income of United 
States Shareholders of Specified Foreign Corporations With Deficits in 
Earnings and Profits.--
        ``(1) In general.--In the case of a taxpayer which is a United 
    States shareholder with respect to at least one deferred foreign 
    income corporation and at least one E&P deficit foreign 
    corporation, the amount which would (but for this subsection) be 
    taken into account under section 951(a)(1) by reason of subsection 
    (a) as such United States shareholder's pro rata share of the 
    subpart F income of each deferred foreign income corporation shall 
    be reduced by the amount of such United States shareholder's 
    aggregate foreign E&P deficit which is allocated under paragraph 
    (2) to such deferred foreign income corporation.
        ``(2) Allocation of aggregate foreign e&p deficit.--The 
    aggregate foreign E&P deficit of any United States shareholder 
    shall be allocated among the deferred foreign income corporations 
    of such United States shareholder in an amount which bears the same 
    proportion to such aggregate as--
            ``(A) such United States shareholder's pro rata share of 
        the accumulated post-1986 deferred foreign income of each such 
        deferred foreign income corporation, bears to
            ``(B) the aggregate of such United States shareholder's pro 
        rata share of the accumulated post-1986 deferred foreign income 
        of all deferred foreign income corporations of such United 
        States shareholder.
        ``(3) Definitions related to e&p deficits.--For purposes of 
    this subsection--
            ``(A) Aggregate foreign e&p deficit.--
                ``(i) In general.--The term `aggregate foreign E&P 
            deficit' means, with respect to any United States 
            shareholder, the lesser of--

                    ``(I) the aggregate of such shareholder's pro rata 
                shares of the specified E&P deficits of the E&P deficit 
                foreign corporations of such shareholder, or
                    ``(II) the amount determined under paragraph 
                (2)(B).

                ``(ii) Allocation of deficit.--If the amount described 
            in clause (i)(II) is less than the amount described in 
            clause (i)(I), then the shareholder shall designate, in 
            such form and manner as the Secretary determines--

                    ``(I) the amount of the specified E&P deficit which 
                is to be taken into account for each E&P deficit 
                corporation with respect to the taxpayer, and
                    ``(II) in the case of an E&P deficit corporation 
                which has a qualified deficit (as defined in section 
                952), the portion (if any) of the deficit taken into 
                account under subclause (I) which is attributable to a 
                qualified deficit, including the qualified activities 
                to which such portion is attributable.

            ``(B) E&P deficit foreign corporation.--The term `E&P 
        deficit foreign corporation' means, with respect to any 
        taxpayer, any specified foreign corporation with respect to 
        which such taxpayer is a United States shareholder, if, as of 
        November 2, 2017--
                ``(i) such specified foreign corporation has a deficit 
            in post-1986 earnings and profits,
                ``(ii) such corporation was a specified foreign 
            corporation, and
                ``(iii) such taxpayer was a United States shareholder 
            of such corporation.
            ``(C) Specified e&p deficit.--The term `specified E&P 
        deficit' means, with respect to any E&P deficit foreign 
        corporation, the amount of the deficit referred to in 
        subparagraph (B).
        ``(4) Treatment of earnings and profits in future years.--
            ``(A) Reduced earnings and profits treated as previously 
        taxed income when distributed.--For purposes of applying 
        section 959 in any taxable year beginning with the taxable year 
        described in subsection (a), with respect to any United States 
        shareholder of a deferred foreign income corporation, an amount 
        equal to such shareholder's reduction under paragraph (1) which 
        is allocated to such deferred foreign income corporation under 
        this subsection shall be treated as an amount which was 
        included in the gross income of such United States shareholder 
        under section 951(a).
            ``(B) E&P deficits.--For purposes of this title, with 
        respect to any taxable year beginning with the taxable year 
        described in subsection (a), a United States shareholder's pro 
        rata share of the earnings and profits of any E&P deficit 
        foreign corporation under this subsection shall be increased by 
        the amount of the specified E&P deficit of such corporation 
        taken into account by such shareholder under paragraph (1), 
        and, for purposes of section 952, such increase shall be 
        attributable to the same activity to which the deficit so taken 
        into account was attributable.
        ``(5) Netting among united states shareholders in same 
    affiliated group.--
            ``(A) In general.--In the case of any affiliated group 
        which includes at least one E&P net surplus shareholder and one 
        E&P net deficit shareholder, the amount which would (but for 
        this paragraph) be taken into account under section 951(a)(1) 
        by reason of subsection (a) by each such E&P net surplus 
        shareholder shall be reduced (but not below zero) by such 
        shareholder's applicable share of the affiliated group's 
        aggregate unused E&P deficit.
            ``(B) E&P net surplus shareholder.--For purposes of this 
        paragraph, the term `E&P net surplus shareholder' means any 
        United States shareholder which would (determined without 
        regard to this paragraph) take into account an amount greater 
        than zero under section 951(a)(1) by reason of subsection (a).
            ``(C) E&P net deficit shareholder.--For purposes of this 
        paragraph, the term `E&P net deficit shareholder' means any 
        United States shareholder if--
                ``(i) the aggregate foreign E&P deficit with respect to 
            such shareholder (as defined in paragraph (3)(A) without 
            regard to clause (i)(II) thereof), exceeds
                ``(ii) the amount which would (but for this subsection) 
            be taken into account by such shareholder under section 
            951(a)(1) by reason of subsection (a).
            ``(D) Aggregate unused e&p deficit.--For purposes of this 
        paragraph--
                ``(i) In general.--The term `aggregate unused E&P 
            deficit' means, with respect to any affiliated group, the 
            lesser of--

                    ``(I) the sum of the excesses described in 
                subparagraph (C), determined with respect to each E&P 
                net deficit shareholder in such group, or
                    ``(II) the amount determined under subparagraph 
                (E)(ii).

                ``(ii) Reduction with respect to e&p net deficit 
            shareholders which are not wholly owned by the affiliated 
            group.--If the group ownership percentage of any E&P net 
            deficit shareholder is less than 100 percent, the amount of 
            the excess described in subparagraph (C) which is taken 
            into account under clause (i)(I) with respect to such E&P 
            net deficit shareholder shall be such group ownership 
            percentage of such amount.
            ``(E) Applicable share.--For purposes of this paragraph, 
        the term `applicable share' means, with respect to any E&P net 
        surplus shareholder in any affiliated group, the amount which 
        bears the same proportion to such group's aggregate unused E&P 
        deficit as--
                ``(i) the product of--

                    ``(I) such shareholder's group ownership 
                percentage, multiplied by
                    ``(II) the amount which would (but for this 
                paragraph) be taken into account under section 
                951(a)(1) by reason of subsection (a) by such 
                shareholder, bears to

                ``(ii) the aggregate amount determined under clause (i) 
            with respect to all E&P net surplus shareholders in such 
            group.
            ``(F) Group ownership percentage.--For purposes of this 
        paragraph, the term `group ownership percentage' means, with 
        respect to any United States shareholder in any affiliated 
        group, the percentage of the value of the stock of such United 
        States shareholder which is held by other includible 
        corporations in such affiliated group. Notwithstanding the 
        preceding sentence, the group ownership percentage of the 
        common parent of the affiliated group is 100 percent. Any term 
        used in this subparagraph which is also used in section 1504 
        shall have the same meaning as when used in such section.
    ``(c) Application of Participation Exemption to Included Income.--
        ``(1) In general.--In the case of a United States shareholder 
    of a deferred foreign income corporation, there shall be allowed as 
    a deduction for the taxable year in which an amount is included in 
    the gross income of such United States shareholder under section 
    951(a)(1) by reason of this section an amount equal to the sum of--
            ``(A) the United States shareholder's 8 percent rate 
        equivalent percentage of the excess (if any) of--
                ``(i) the amount so included as gross income, over
                ``(ii) the amount of such United States shareholder's 
            aggregate foreign cash position, plus
            ``(B) the United States shareholder's 15.5 percent rate 
        equivalent percentage of so much of the amount described in 
        subparagraph (A)(ii) as does not exceed the amount described in 
        subparagraph (A)(i).
        ``(2) 8 and 15.5 percent rate equivalent percentages.--For 
    purposes of this subsection--
            ``(A) 8 percent rate equivalent percentage.--The term `8 
        percent rate equivalent percentage' means, with respect to any 
        United States shareholder for any taxable year, the percentage 
        which would result in the amount to which such percentage 
        applies being subject to a 8 percent rate of tax determined by 
        only taking into account a deduction equal to such percentage 
        of such amount and the highest rate of tax specified in section 
        11 for such taxable year. In the case of any taxable year of a 
        United States shareholder to which section 15 applies, the 
        highest rate of tax under section 11 before the effective date 
        of the change in rates and the highest rate of tax under 
        section 11 after the effective date of such change shall each 
        be taken into account under the preceding sentence in the same 
        proportions as the portion of such taxable year which is before 
        and after such effective date, respectively.
            ``(B) 15.5 percent rate equivalent percentage.--The term 
        `15.5 percent rate equivalent percentage' means, with respect 
        to any United States shareholder for any taxable year, the 
        percentage determined under subparagraph (A) applied by 
        substituting `15.5 percent rate of tax' for `8 percent rate of 
        tax'.
        ``(3) Aggregate foreign cash position.--For purposes of this 
    subsection--
            ``(A) In general.--The term `aggregate foreign cash 
        position' means, with respect to any United States shareholder, 
        the greater of--
                ``(i) the aggregate of such United States shareholder's 
            pro rata share of the cash position of each specified 
            foreign corporation of such United States shareholder 
            determined as of the close of the last taxable year of such 
            specified foreign corporation which begins before January 
            1, 2018, or
                ``(ii) one half of the sum of--

                    ``(I) the aggregate described in clause (i) 
                determined as of the close of the last taxable year of 
                each such specified foreign corporation which ends 
                before November 2, 2017, plus
                    ``(II) the aggregate described in clause (i) 
                determined as of the close of the taxable year of each 
                such specified foreign corporation which precedes the 
                taxable year referred to in subclause (I).

            ``(B) Cash position.--For purposes of this paragraph, the 
        cash position of any specified foreign corporation is the sum 
        of--
                ``(i) cash held by such foreign corporation,
                ``(ii) the net accounts receivable of such foreign 
            corporation, plus
                ``(iii) the fair market value of the following assets 
            held by such corporation:

                    ``(I) Personal property which is of a type that is 
                actively traded and for which there is an established 
                financial market.
                    ``(II) Commercial paper, certificates of deposit, 
                the securities of the Federal government and of any 
                State or foreign government.
                    ``(III) Any foreign currency.
                    ``(IV) Any obligation with a term of less than one 
                year.
                    ``(V) Any asset which the Secretary identifies as 
                being economically equivalent to any asset described in 
                this subparagraph.

            ``(C) Net accounts receivable.--For purposes of this 
        paragraph, the term `net accounts receivable' means, with 
        respect to any specified foreign corporation, the excess (if 
        any) of--
                ``(i) such corporation's accounts receivable, over
                ``(ii) such corporation's accounts payable (determined 
            consistent with the rules of section 461).
            ``(D) Prevention of double counting.--Cash positions of a 
        specified foreign corporation described in clause (ii), 
        (iii)(I), or (iii)(IV) of subparagraph (B) shall not be taken 
        into account by a United States shareholder under subparagraph 
        (A) to the extent that such United States shareholder 
        demonstrates to the satisfaction of the Secretary that such 
        amount is so taken into account by such United States 
        shareholder with respect to another specified foreign 
        corporation.
            ``(E) Cash positions of certain non-corporate entities 
        taken into account.--An entity (other than a corporation) shall 
        be treated as a specified foreign corporation of a United 
        States shareholder for purposes of determining such United 
        States shareholder's aggregate foreign cash position if any 
        interest in such entity is held by a specified foreign 
        corporation of such United States shareholder (determined after 
        application of this subparagraph) and such entity would be a 
        specified foreign corporation of such United States shareholder 
        if such entity were a foreign corporation.
            ``(F) Anti-abuse.--If the Secretary determines that a 
        principal purpose of any transaction was to reduce the 
        aggregate foreign cash position taken into account under this 
        subsection, such transaction shall be disregarded for purposes 
        of this subsection.
    ``(d) Deferred Foreign Income Corporation; Accumulated Post-1986 
Deferred Foreign Income.--For purposes of this section--
        ``(1) Deferred foreign income corporation.--The term `deferred 
    foreign income corporation' means, with respect to any United 
    States shareholder, any specified foreign corporation of such 
    United States shareholder which has accumulated post-1986 deferred 
    foreign income (as of the date referred to in paragraph (1) or (2) 
    of subsection (a)) greater than zero.
        ``(2) Accumulated post-1986 deferred foreign income.--The term 
    `accumulated post-1986 deferred foreign income' means the post-1986 
    earnings and profits except to the extent such earnings--
            ``(A) are attributable to income of the specified foreign 
        corporation which is effectively connected with the conduct of 
        a trade or business within the United States and subject to tax 
        under this chapter, or
            ``(B) in the case of a controlled foreign corporation, if 
        distributed, would be excluded from the gross income of a 
        United States shareholder under section 959.
    To the extent provided in regulations or other guidance prescribed 
    by the Secretary, in the case of any controlled foreign corporation 
    which has shareholders which are not United States shareholders, 
    accumulated post-1986 deferred foreign income shall be 
    appropriately reduced by amounts which would be described in 
    subparagraph (B) if such shareholders were United States 
    shareholders.
        ``(3) Post-1986 earnings and profits.--The term `post-1986 
    earnings and profits' means the earnings and profits of the foreign 
    corporation (computed in accordance with sections 964(a) and 986, 
    and by only taking into account periods when the foreign 
    corporation was a specified foreign corporation) accumulated in 
    taxable years beginning after December 31, 1986, and determined--
            ``(A) as of the date referred to in paragraph (1) or (2) of 
        subsection (a), whichever is applicable with respect to such 
        foreign corporation, and
            ``(B) without diminution by reason of dividends distributed 
        during the taxable year described in subsection (a) other than 
        dividends distributed to another specified foreign corporation.
    ``(e) Specified Foreign Corporation.--
        ``(1) In general.--For purposes of this section, the term 
    `specified foreign corporation' means--
            ``(A) any controlled foreign corporation, and
            ``(B) any foreign corporation with respect to which one or 
        more domestic corporations is a United States shareholder.
        ``(2) Application to certain foreign corporations.--For 
    purposes of sections 951 and 961, a foreign corporation described 
    in paragraph (1)(B) shall be treated as a controlled foreign 
    corporation solely for purposes of taking into account the subpart 
    F income of such corporation under subsection (a) (and for purposes 
    of applying subsection (f)).
        ``(3) Exclusion of passive foreign investment companies.--Such 
    term shall not include any corporation which is a passive foreign 
    investment company (as defined in section 1297) with respect to the 
    shareholder and which is not a controlled foreign corporation.
    ``(f) Determinations of Pro Rata Share.--
        ``(1) In general.--For purposes of this section, the 
    determination of any United States shareholder's pro rata share of 
    any amount with respect to any specified foreign corporation shall 
    be determined under rules similar to the rules of section 951(a)(2) 
    by treating such amount in the same manner as subpart F income (and 
    by treating such specified foreign corporation as a controlled 
    foreign corporation).
        ``(2) Special rules.--The portion which is included in the 
    income of a United States shareholder under section 951(a)(1) by 
    reason of subsection (a) which is equal to the deduction allowed 
    under subsection (c) by reason of such inclusion--
            ``(A) shall be treated as income exempt from tax for 
        purposes of sections 705(a)(1)(B) and 1367(a)(1)(A), and
            ``(B) shall not be treated as income exempt from tax for 
        purposes of determining whether an adjustment shall be made to 
        an accumulated adjustment account under section 1368(e)(1)(A).
    ``(g) Disallowance of Foreign Tax Credit, etc.--
        ``(1) In general.--No credit shall be allowed under section 901 
    for the applicable percentage of any taxes paid or accrued (or 
    treated as paid or accrued) with respect to any amount for which a 
    deduction is allowed under this section.
        ``(2) Applicable percentage.--For purposes of this subsection, 
    the term `applicable percentage' means the amount (expressed as a 
    percentage) equal to the sum of--
            ``(A) 0.771 multiplied by the ratio of--
                ``(i) the excess to which subsection (c)(1)(A) applies, 
            divided by
                ``(ii) the sum of such excess plus the amount to which 
            subsection (c)(1)(B) applies, plus
            ``(B) 0.557 multiplied by the ratio of--
                ``(i) the amount to which subsection (c)(1)(B) applies, 
            divided by
                ``(ii) the sum described in subparagraph (A)(ii).
        ``(3) Denial of deduction.--No deduction shall be allowed under 
    this chapter for any tax for which credit is not allowable under 
    section 901 by reason of paragraph (1) (determined by treating the 
    taxpayer as having elected the benefits of subpart A of part III of 
    subchapter N).
        ``(4) Coordination with section 78.--With respect to the taxes 
    treated as paid or accrued by a domestic corporation with respect 
    to amounts which are includible in gross income of such domestic 
    corporation by reason of this section, section 78 shall apply only 
    to so much of such taxes as bears the same proportion to the amount 
    of such taxes as--
            ``(A) the excess of--
                ``(i) the amounts which are includible in gross income 
            of such domestic corporation by reason of this section, 
            over
                ``(ii) the deduction allowable under subsection (c) 
            with respect to such amounts, bears to
            ``(B) such amounts.
    ``(h) Election To Pay Liability in Installments.--
        ``(1) In general.--In the case of a United States shareholder 
    of a deferred foreign income corporation, such United States 
    shareholder may elect to pay the net tax liability under this 
    section in 8 installments of the following amounts:
            ``(A) 8 percent of the net tax liability in the case of 
        each of the first 5 of such installments,
            ``(B) 15 percent of the net tax liability in the case of 
        the 6th such installment,
            ``(C) 20 percent of the net tax liability in the case of 
        the 7th such installment, and
            ``(D) 25 percent of the net tax liability in the case of 
        the 8th such installment.
        ``(2) Date for payment of installments.--If an election is made 
    under paragraph (1), the first installment shall be paid on the due 
    date (determined without regard to any extension of time for filing 
    the return) for the return of tax for the taxable year described in 
    subsection (a) and each succeeding installment shall be paid on the 
    due date (as so determined) for the return of tax for the taxable 
    year following the taxable year with respect to which the preceding 
    installment was made.
        ``(3) Acceleration of payment.--If there is an addition to tax 
    for failure to timely pay any installment required under this 
    subsection, a liquidation or sale of substantially all the assets 
    of the taxpayer (including in a title 11 or similar case), a 
    cessation of business by the taxpayer, or any similar circumstance, 
    then the unpaid portion of all remaining installments shall be due 
    on the date of such event (or in the case of a title 11 or similar 
    case, the day before the petition is filed). The preceding sentence 
    shall not apply to the sale of substantially all the assets of a 
    taxpayer to a buyer if such buyer enters into an agreement with the 
    Secretary under which such buyer is liable for the remaining 
    installments due under this subsection in the same manner as if 
    such buyer were the taxpayer.
        ``(4) Proration of deficiency to installments.--If an election 
    is made under paragraph (1) to pay the net tax liability under this 
    section in installments and a deficiency has been assessed with 
    respect to such net tax liability, the deficiency shall be prorated 
    to the installments payable under paragraph (1). The part of the 
    deficiency so prorated to any installment the date for payment of 
    which has not arrived shall be collected at the same time as, and 
    as a part of, such installment. The part of the deficiency so 
    prorated to any installment the date for payment of which has 
    arrived shall be paid upon notice and demand from the Secretary. 
    This subsection shall not apply if the deficiency is due to 
    negligence, to intentional disregard of rules and regulations, or 
    to fraud with intent to evade tax.
        ``(5) Election.--Any election under paragraph (1) shall be made 
    not later than the due date for the return of tax for the taxable 
    year described in subsection (a) and shall be made in such manner 
    as the Secretary shall provide.
        ``(6) Net tax liability under this section.--For purposes of 
    this subsection--
            ``(A) In general.--The net tax liability under this section 
        with respect to any United States shareholder is the excess (if 
        any) of--
                ``(i) such taxpayer's net income tax for the taxable 
            year in which an amount is included in the gross income of 
            such United States shareholder under section 951(a)(1) by 
            reason of this section, over
                ``(ii) such taxpayer's net income tax for such taxable 
            year determined--

                    ``(I) without regard to this section, and
                    ``(II) without regard to any income or deduction 
                properly attributable to a dividend received by such 
                United States shareholder from any deferred foreign 
                income corporation.

            ``(B) Net income tax.--The term `net income tax' means the 
        regular tax liability reduced by the credits allowed under 
        subparts A, B, and D of part IV of subchapter A.
    ``(i) Special Rules for S Corporation Shareholders.--
        ``(1) In general.--In the case of any S corporation which is a 
    United States shareholder of a deferred foreign income corporation, 
    each shareholder of such S corporation may elect to defer payment 
    of such shareholder's net tax liability under this section with 
    respect to such S corporation until the shareholder's taxable year 
    which includes the triggering event with respect to such liability. 
    Any net tax liability payment of which is deferred under the 
    preceding sentence shall be assessed on the return of tax as an 
    addition to tax in the shareholder's taxable year which includes 
    such triggering event.
        ``(2) Triggering event.--
            ``(A) In general.--In the case of any shareholder's net tax 
        liability under this section with respect to any S corporation, 
        the triggering event with respect to such liability is 
        whichever of the following occurs first:
                ``(i) Such corporation ceases to be an S corporation 
            (determined as of the first day of the first taxable year 
            that such corporation is not an S corporation).
                ``(ii) A liquidation or sale of substantially all the 
            assets of such S corporation (including in a title 11 or 
            similar case), a cessation of business by such S 
            corporation, such S corporation ceases to exist, or any 
            similar circumstance.
                ``(iii) A transfer of any share of stock in such S 
            corporation by the taxpayer (including by reason of death, 
            or otherwise).
            ``(B) Partial transfers of stock.--In the case of a 
        transfer of less than all of the taxpayer's shares of stock in 
        the S corporation, such transfer shall only be a triggering 
        event with respect to so much of the taxpayer's net tax 
        liability under this section with respect to such S corporation 
        as is properly allocable to such stock.
            ``(C) Transfer of liability.--A transfer described in 
        clause (iii) of subparagraph (A) shall not be treated as a 
        triggering event if the transferee enters into an agreement 
        with the Secretary under which such transferee is liable for 
        net tax liability with respect to such stock in the same manner 
        as if such transferee were the taxpayer.
        ``(3) Net tax liability.--A shareholder's net tax liability 
    under this section with respect to any S corporation is the net tax 
    liability under this section which would be determined under 
    subsection (h)(6) if the only subpart F income taken into account 
    by such shareholder by reason of this section were allocations from 
    such S corporation.
        ``(4) Election to pay deferred liability in installments.--In 
    the case of a taxpayer which elects to defer payment under 
    paragraph (1)--
            ``(A) subsection (h) shall be applied separately with 
        respect to the liability to which such election applies,
            ``(B) an election under subsection (h) with respect to such 
        liability shall be treated as timely made if made not later 
        than the due date for the return of tax for the taxable year in 
        which the triggering event with respect to such liability 
        occurs,
            ``(C) the first installment under subsection (h) with 
        respect to such liability shall be paid not later than such due 
        date (but determined without regard to any extension of time 
        for filing the return), and
            ``(D) if the triggering event with respect to any net tax 
        liability is described in paragraph (2)(A)(ii), an election 
        under subsection (h) with respect to such liability may be made 
        only with the consent of the Secretary.
        ``(5) Joint and several liability of s corporation.--If any 
    shareholder of an S corporation elects to defer payment under 
    paragraph (1), such S corporation shall be jointly and severally 
    liable for such payment and any penalty, addition to tax, or 
    additional amount attributable thereto.
        ``(6) Extension of limitation on collection.--Any limitation on 
    the time period for the collection of a liability deferred under 
    this subsection shall not be treated as beginning before the date 
    of the triggering event with respect to such liability.
        ``(7) Annual reporting of net tax liability.--
            ``(A) In general.--Any shareholder of an S corporation 
        which makes an election under paragraph (1) shall report the 
        amount of such shareholder's deferred net tax liability on such 
        shareholder's return of tax for the taxable year for which such 
        election is made and on the return of tax for each taxable year 
        thereafter until such amount has been fully assessed on such 
        returns.
            ``(B) Deferred net tax liability.--For purposes of this 
        paragraph, the term `deferred net tax liability' means, with 
        respect to any taxable year, the amount of net tax liability 
        payment of which has been deferred under paragraph (1) and 
        which has not been assessed on a return of tax for any prior 
        taxable year.
            ``(C) Failure to report.--In the case of any failure to 
        report any amount required to be reported under subparagraph 
        (A) with respect to any taxable year before the due date for 
        the return of tax for such taxable year, there shall be 
        assessed on such return as an addition to tax 5 percent of such 
        amount.
        ``(8) Election.--Any election under paragraph (1)--
            ``(A) shall be made by the shareholder of the S corporation 
        not later than the due date for such shareholder's return of 
        tax for the taxable year which includes the close of the 
        taxable year of such S corporation in which the amount 
        described in subsection (a) is taken into account, and
            ``(B) shall be made in such manner as the Secretary shall 
        provide.
    ``(j) Reporting by S Corporation.--Each S corporation which is a 
United States shareholder of a specified foreign corporation shall 
report in its return of tax under section 6037(a) the amount includible 
in its gross income for such taxable year by reason of this section and 
the amount of the deduction allowable by subsection (c). Any copy 
provided to a shareholder under section 6037(b) shall include a 
statement of such shareholder's pro rata share of such amounts.
    ``(k) Extension of Limitation on Assessment.--Notwithstanding 
section 6501, the limitation on the time period for the assessment of 
the net tax liability under this section (as defined in subsection 
(h)(6)) shall not expire before the date that is 6 years after the 
return for the taxable year described in such subsection was filed.
    ``(l) Recapture for Expatriated Entities.--
        ``(1) In general.--If a deduction is allowed under subsection 
    (c) to a United States shareholder and such shareholder first 
    becomes an expatriated entity at any time during the 10-year period 
    beginning on the date of the enactment of the Tax Cuts and Jobs Act 
    (with respect to a surrogate foreign corporation which first 
    becomes a surrogate foreign corporation during such period), then--
            ``(A) the tax imposed by this chapter shall be increased 
        for the first taxable year in which such taxpayer becomes an 
        expatriated entity by an amount equal to 35 percent of the 
        amount of the deduction allowed under subsection (c), and
            ``(B) no credits shall be allowed against the increase in 
        tax under subparagraph (A).
        ``(2) Expatriated entity.--For purposes of this subsection, the 
    term `expatriated entity' has the same meaning given such term 
    under section 7874(a)(2), except that such term shall not include 
    an entity if the surrogate foreign corporation with respect to the 
    entity is treated as a domestic corporation under section 7874(b).
        ``(3) Surrogate foreign corporation.--For purposes of this 
    subsection, the term `surrogate foreign corporation' has the 
    meaning given such term in section 7874(a)(2)(B).
    ``(m) Special Rules for United States Shareholders Which Are Real 
Estate Investment Trusts.--
        ``(1) In general.--If a real estate investment trust is a 
    United States shareholder in 1 or more deferred foreign income 
    corporations--
            ``(A) any amount required to be taken into account under 
        section 951(a)(1) by reason of this section shall not be taken 
        into account as gross income of the real estate investment 
        trust for purposes of applying paragraphs (2) and (3) of 
        section 856(c) to any taxable year for which such amount is 
        taken into account under section 951(a)(1), and
            ``(B) if the real estate investment trust elects the 
        application of this subparagraph, notwithstanding subsection 
        (a), any amount required to be taken into account under section 
        951(a)(1) by reason of this section shall, in lieu of the 
        taxable year in which it would otherwise be included in gross 
        income (for purposes of the computation of real estate 
        investment trust taxable income under section 857(b)), be 
        included in gross income as follows:
                ``(i) 8 percent of such amount in the case of each of 
            the taxable years in the 5-taxable year period beginning 
            with the taxable year in which such amount would otherwise 
            be included.
                ``(ii) 15 percent of such amount in the case of the 1st 
            taxable year following such period.
                ``(iii) 20 percent of such amount in the case of the 
            2nd taxable year following such period.
                ``(iv) 25 percent of such amount in the case of the 3rd 
            taxable year following such period.
        ``(2) Rules for trusts electing deferred inclusion.--
            ``(A) Election.--Any election under paragraph (1)(B) shall 
        be made not later than the due date for the first taxable year 
        in the 5-taxable year period described in clause (i) of 
        paragraph (1)(B) and shall be made in such manner as the 
        Secretary shall provide.
            ``(B) Special rules.--If an election under paragraph (1)(B) 
        is in effect with respect to any real estate investment trust, 
        the following rules shall apply:
                ``(i) Application of participation exemption.--For 
            purposes of subsection (c)(1)--

                    ``(I) the aggregate amount to which subparagraph 
                (A) or (B) of subsection (c)(1) applies shall be 
                determined without regard to the election,
                    ``(II) each such aggregate amount shall be 
                allocated to each taxable year described in paragraph 
                (1)(B) in the same proportion as the amount included in 
                the gross income of such United States shareholder 
                under section 951(a)(1) by reason of this section is 
                allocated to each such taxable year.
                    ``(III) No installment payments.--The real estate 
                investment trust may not make an election under 
                subsection (g) for any taxable year described in 
                paragraph (1)(B).

                ``(ii) Acceleration of inclusion.--If there is a 
            liquidation or sale of substantially all the assets of the 
            real estate investment trust (including in a title 11 or 
            similar case), a cessation of business by such trust, or 
            any similar circumstance, then any amount not yet included 
            in gross income under paragraph (1)(B) shall be included in 
            gross income as of the day before the date of the event and 
            the unpaid portion of any tax liability with respect to 
            such inclusion shall be due on the date of such event (or 
            in the case of a title 11 or similar case, the day before 
            the petition is filed).
    ``(n) Election Not To Apply Net Operating Loss Deduction.--
        ``(1) In general.--If a United States shareholder of a deferred 
    foreign income corporation elects the application of this 
    subsection for the taxable year described in subsection (a), then 
    the amount described in paragraph (2) shall not be taken into 
    account--
            ``(A) in determining the amount of the net operating loss 
        deduction under section 172 of such shareholder for such 
        taxable year, or
            ``(B) in determining the amount of taxable income for such 
        taxable year which may be reduced by net operating loss 
        carryovers or carrybacks to such taxable year under section 
        172.
        ``(2) Amount described.--The amount described in this paragraph 
    is the sum of--
            ``(A) the amount required to be taken into account under 
        section 951(a)(1) by reason of this section (determined after 
        the application of subsection (c)), plus
            ``(B) in the case of a domestic corporation which chooses 
        to have the benefits of subpart A of part III of subchapter N 
        for the taxable year, the taxes deemed to be paid by such 
        corporation under subsections (a) and (b) of section 960 for 
        such taxable year with respect to the amount described in 
        subparagraph (A) which are treated as a dividends under section 
        78.
        ``(3) Election.--Any election under this subsection shall be 
    made not later than the due date (including extensions) for filing 
    the return of tax for the taxable year and shall be made in such 
    manner as the Secretary shall prescribe.
    ``(o) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section, including--
        ``(1) regulations or other guidance to provide appropriate 
    basis adjustments, and
        ``(2) regulations or other guidance to prevent the avoidance of 
    the purposes of this section, including through a reduction in 
    earnings and profits, through changes in entity classification or 
    accounting methods, or otherwise.''.
    (b) Clerical Amendment.--The table of sections for subpart F of 
part III of subchapter N of chapter 1 is amended by striking the item 
relating to section 965 and inserting the following:

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

         Subpart B--Rules Related to Passive and Mobile Income

  CHAPTER 1--TAXATION OF FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL 
                      INTANGIBLE LOW-TAXED INCOME

SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTANGIBLE LOW-TAXED 
INCOME BY UNITED STATES SHAREHOLDERS.
    (a) In General.--Subpart F of part III of subchapter N of chapter 1 
is amended by inserting after section 951 the following new section:
``SEC. 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME INCLUDED IN GROSS 
INCOME OF UNITED STATES SHAREHOLDERS.
    ``(a) In General.--Each person who is a United States shareholder 
of any controlled foreign corporation for any taxable year of such 
United States shareholder shall include in gross income such 
shareholder's global intangible low-taxed income for such taxable year.
    ``(b) Global Intangible Low-taxed Income.--For purposes of this 
section--
        ``(1) In general.--The term `global intangible low-taxed 
    income' means, with respect to any United States shareholder for 
    any taxable year of such United States shareholder, the excess (if 
    any) of--
            ``(A) such shareholder's net CFC tested income for such 
        taxable year, over
            ``(B) such shareholder's net deemed tangible income return 
        for such taxable year.
        ``(2) Net deemed tangible income return.--The term `net deemed 
    tangible income return' means, with respect to any United States 
    shareholder for any taxable year, the excess of--
            ``(A) 10 percent of the aggregate of such shareholder's pro 
        rata share of the qualified business asset investment of each 
        controlled foreign corporation with respect to which such 
        shareholder is a United States shareholder for such taxable 
        year (determined for each taxable year of each such controlled 
        foreign corporation which ends in or with such taxable year of 
        such United States shareholder), over
            ``(B) the amount of interest expense taken into account 
        under subsection (c)(2)(A)(ii) in determining the shareholder's 
        net CFC tested income for the taxable year to the extent the 
        interest income attributable to such expense is not taken into 
        account in determining such shareholder's net CFC tested 
        income.
    ``(c) Net CFC Tested Income.--For purposes of this section--
        ``(1) In general.--The term `net CFC tested income' means, with 
    respect to any United States shareholder for any taxable year of 
    such United States shareholder, the excess (if any) of--
            ``(A) the aggregate of such shareholder's pro rata share of 
        the tested income of each controlled foreign corporation with 
        respect to which such shareholder is a United States 
        shareholder for such taxable year of such United States 
        shareholder (determined for each taxable year of such 
        controlled foreign corporation which ends in or with such 
        taxable year of such United States shareholder), over
            ``(B) the aggregate of such shareholder's pro rata share of 
        the tested loss of each controlled foreign corporation with 
        respect to which such shareholder is a United States 
        shareholder for such taxable year of such United States 
        shareholder (determined for each taxable year of such 
        controlled foreign corporation which ends in or with such 
        taxable year of such United States shareholder).
        ``(2) Tested income; tested loss.--For purposes of this 
    section--
            ``(A) Tested income.--The term `tested income' means, with 
        respect to any controlled foreign corporation for any taxable 
        year of such controlled foreign corporation, the excess (if 
        any) of--
                ``(i) the gross income of such corporation determined 
            without regard to--

                    ``(I) any item of income described in section 
                952(b),
                    ``(II) any gross income taken into account in 
                determining the subpart F income of such corporation,
                    ``(III) any gross income excluded from the foreign 
                base company income (as defined in section 954) and the 
                insurance income (as defined in section 953) of such 
                corporation by reason of section 954(b)(4),
                    ``(IV) any dividend received from a related person 
                (as defined in section 954(d)(3)), and
                    ``(V) any foreign oil and gas extraction income (as 
                defined in section 907(c)(1)) of such corporation, over

                ``(ii) the deductions (including taxes) properly 
            allocable to such gross income under rules similar to the 
            rules of section 954(b)(5) (or to which such deductions 
            would be allocable if there were such gross income).
            ``(B) Tested loss.--
                ``(i) In general.--The term `tested loss' means, with 
            respect to any controlled foreign corporation for any 
            taxable year of such controlled foreign corporation, the 
            excess (if any) of the amount described in subparagraph 
            (A)(ii) over the amount described in subparagraph (A)(i).
                ``(ii) Coordination with subpart f to deny double 
            benefit of losses.--Section 952(c)(1)(A) shall be applied 
            by increasing the earnings and profits of the controlled 
            foreign corporation by the tested loss of such corporation.
    ``(d) Qualified Business Asset Investment.--For purposes of this 
section--
        ``(1) In general.--The term `qualified business asset 
    investment' means, with respect to any controlled foreign 
    corporation for any taxable year, the average of such corporation's 
    aggregate adjusted bases as of the close of each quarter of such 
    taxable year in specified tangible property--
            ``(A) used in a trade or business of the corporation, and
            ``(B) of a type with respect to which a deduction is 
        allowable under section 167.
        ``(2) Specified tangible property.--
            ``(A) In general.--The term `specified tangible property' 
        means, except as provided in subparagraph (B), any tangible 
        property used in the production of tested income.
            ``(B) Dual use property.--In the case of property used both 
        in the production of tested income and income which is not 
        tested income, such property shall be treated as specified 
        tangible property in the same proportion that the gross income 
        described in subsection (c)(1)(A) produced with respect to such 
        property bears to the total gross income produced with respect 
        to such property.
        ``(3) Determination of adjusted basis.--For purposes of this 
    subsection, notwithstanding any provision of this title (or any 
    other provision of law) which is enacted after the date of the 
    enactment of this section, the adjusted basis in any property shall 
    be determined--
            ``(A) by using the alternative depreciation system under 
        section 168(g), and
            ``(B) by allocating the depreciation deduction with respect 
        to such property ratably to each day during the period in the 
        taxable year to which such depreciation relates.
        ``(3) Partnership property.--For purposes of this subsection, 
    if a controlled foreign corporation holds an interest in a 
    partnership at the close of such taxable year of the controlled 
    foreign corporation, such controlled foreign corporation shall take 
    into account under paragraph (1) the controlled foreign 
    corporation's distributive share of the aggregate of the 
    partnership's adjusted bases (determined as of such date in the 
    hands of the partnership) in tangible property held by such 
    partnership to the extent such property--
            ``(A) is used in the trade or business of the partnership,
            ``(B) is of a type with respect to which a deduction is 
        allowable under section 167, and
            ``(C) is used in the production of tested income 
        (determined with respect to such controlled foreign 
        corporation's distributive share of income with respect to such 
        property).
    For purposes of this paragraph, the controlled foreign 
    corporation's distributive share of the adjusted basis of any 
    property shall be the controlled foreign corporation's distributive 
    share of income with respect to such property.
        ``(4) Regulations.--The Secretary shall issue such regulations 
    or other guidance as the Secretary determines appropriate to 
    prevent the avoidance of the purposes of this subsection, including 
    regulations or other guidance which provide for the treatment of 
    property if--
            ``(A) such property is transferred, or held, temporarily, 
        or
            ``(B) the avoidance of the purposes of this paragraph is a 
        factor in the transfer or holding of such property.
    ``(e) Determination of Pro Rata Share, etc.--For purposes of this 
section--
        ``(1) In general.--The pro rata shares referred to in 
    subsections (b), (c)(1)(A), and (c)(1)(B), respectively, shall be 
    determined under the rules of section 951(a)(2) in the same manner 
    as such section applies to subpart F income and shall be taken into 
    account in the taxable year of the United States shareholder in 
    which or with which the taxable year of the controlled foreign 
    corporation ends.
        ``(2) Treatment as united states shareholder.--A person shall 
    be treated as a United States shareholder of a controlled foreign 
    corporation for any taxable year of such person only if such person 
    owns (within the meaning of section 958(a)) stock in such foreign 
    corporation on the last day in the taxable year of such foreign 
    corporation on which such foreign corporation is a controlled 
    foreign corporation.
        ``(3) Treatment as controlled foreign corporation.--A foreign 
    corporation shall be treated as a controlled foreign corporation 
    for any taxable year if such foreign corporation is a controlled 
    foreign corporation at any time during such taxable year.
    ``(f) Treatment as Subpart F Income for Certain Purposes.--
        ``(1) In general.--
            ``(A) Application.--Except as provided in subparagraph (B), 
        any global intangible low-taxed income included in gross income 
        under subsection (a) shall be treated in the same manner as an 
        amount included under section 951(a)(1)(A) for purposes of 
        applying sections 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 
        959, 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 1248(d)(1), 
        6501(e)(1)(C), 6654(d)(2)(D), and 6655(e)(4).
            ``(B) Exception.--The Secretary shall provide rules for the 
        application of subparagraph (A) to other provisions of this 
        title in any case in which the determination of subpart F 
        income is required to be made at the level of the controlled 
        foreign corporation.
        ``(2) Allocation of global intangible low-taxed income to 
    controlled foreign corporations.--For purposes of the sections 
    referred to in paragraph (1), with respect to any controlled 
    foreign corporation any pro rata amount from which is taken into 
    account in determining the global intangible low-taxed income 
    included in gross income of a United States shareholder under 
    subsection (a), the portion of such global intangible low-taxed 
    income which is treated as being with respect to such controlled 
    foreign corporation is--
            ``(A) in the case of a controlled foreign corporation with 
        no tested income, zero, and
            ``(B) in the case of a controlled foreign corporation with 
        tested income, the portion of such global intangible low-taxed 
        income which bears the same ratio to such global intangible 
        low-taxed income as--
                ``(i) such United States shareholder's pro rata amount 
            of the tested income of such controlled foreign 
            corporation, bears to
                ``(ii) the aggregate amount described in subsection 
            (c)(1)(A) with respect to such United States 
            shareholder.''.
    (b) Foreign Tax Credit.--
        (1) Application of deemed paid foreign tax credit.--Section 960 
    is amended adding at the end the following new subsection:
    ``(d) Deemed Paid Credit for Taxes Properly Attributable to Tested 
Income.--
        ``(1) In general.--For purposes of subpart A of this part, if 
    any amount is includible in the gross income of a domestic 
    corporation under section 951A, such domestic corporation shall be 
    deemed to have paid foreign income taxes equal to 80 percent of the 
    product of--
            ``(A) such domestic corporation's inclusion percentage, 
        multiplied by
            ``(B) the aggregate tested foreign income taxes paid or 
        accrued by controlled foreign corporations.
        ``(2) Inclusion percentage.--For purposes of paragraph (1), the 
    term `inclusion percentage' means, with respect to any domestic 
    corporation, the ratio (expressed as a percentage) of--
            ``(A) such corporation's global intangible low-taxed income 
        (as defined in section 951A(b)), divided by
            ``(B) the aggregate amount described in section 
        951A(c)(1)(A) with respect to such corporation.
        ``(3) Tested foreign income taxes.--For purposes of paragraph 
    (1), the term `tested foreign income taxes' means, with respect to 
    any domestic corporation which is a United States shareholder of a 
    controlled foreign corporation, the foreign income taxes paid or 
    accrued by such foreign corporation which are properly attributable 
    to the tested income of such foreign corporation taken into account 
    by such domestic corporation under section 951A.''.
        (2) Application of foreign tax credit limitation.--
            (A) Separate basket for global intangible low-taxed 
        income.--Section 904(d)(1) is amended by redesignating 
        subparagraphs (A) and (B) as subparagraphs (B) and (C), 
        respectively, and by inserting before subparagraph (B) (as so 
        redesignated) the following new subparagraph:
            ``(A) any amount includible in gross income under section 
        951A (other than passive category income),''.
            (B) Exclusion from general category income.--Section 
        904(d)(2)(A)(ii) is amended by inserting ``income described in 
        paragraph (1)(A) and'' before ``passive category income''.
            (C) No carryover or carryback of excess taxes.--Section 
        904(c) is amended by adding at the end the following: ``This 
        subsection shall not apply to taxes paid or accrued with 
        respect to amounts described in subsection (d)(1)(A).''.
    (c) Clerical Amendment.--The table of sections for subpart F of 
part III of subchapter N of chapter 1 is amended by inserting after the 
item relating to section 951 the following new item:

``Sec. 951A. Global intangible low-taxed income included in gross income 
          of United States shareholders.''.

    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2017, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.
SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL 
INTANGIBLE LOW-TAXED INCOME.
    (a) In General.--Part VIII of subchapter B of chapter 1 is amended 
by adding at the end the following new section:
    ``SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL INTANGIBLE 
      LOW-TAXED INCOME.
    ``(a) Allowance of Deduction.--
        ``(1) In general.--In the case of a domestic corporation for 
    any taxable year, there shall be allowed as a deduction an amount 
    equal to the sum of--
            ``(A) 37.5 percent of the foreign-derived intangible income 
        of such domestic corporation for such taxable year, plus
            ``(B) 50 percent of--
                ``(i) the global intangible low-taxed income amount (if 
            any) which is included in the gross income of such domestic 
            corporation under section 951A for such taxable year, and
                ``(ii) the amount treated as a dividend received by 
            such corporation under section 78 which is attributable to 
            the amount described in clause (i).
        ``(2) Limitation based on taxable income.--
            ``(A) In general.--If, for any taxable year--
                ``(i) the sum of the foreign-derived intangible income 
            and the global intangible low-taxed income amount otherwise 
            taken into account by the domestic corporation under 
            paragraph (1), exceeds
                ``(ii) the taxable income of the domestic corporation 
            (determined without regard to this section),
        then the amount of the foreign-derived intangible income and 
        the global intangible low-taxed income amount so taken into 
        account shall be reduced as provided in subparagraph (B).
            ``(B) Reduction.--For purposes of subparagraph (A)--
                ``(i) foreign-derived intangible income shall be 
            reduced by an amount which bears the same ratio to the 
            excess described in subparagraph (A) as such foreign-
            derived intangible income bears to the sum described in 
            subparagraph (A)(i), and
                ``(ii) the global intangible low-taxed income amount 
            shall be reduced by the remainder of such excess.
        ``(3) Reduction in deduction for taxable years after 2025.--In 
    the case of any taxable year beginning after December 31, 2025, 
    paragraph (1) shall be applied by substituting--
            ``(A) `21.875 percent' for `37.5 percent' in subparagraph 
        (A), and
            ``(B) `37.5 percent' for `50 percent' in subparagraph (B).
    ``(b) Foreign-derived Intangible Income.--For purposes of this 
section--
        ``(1) In general.--The foreign-derived intangible income of any 
    domestic corporation is the amount which bears the same ratio to 
    the deemed intangible income of such corporation as--
            ``(A) the foreign-derived deduction eligible income of such 
        corporation, bears to
            ``(B) the deduction eligible income of such corporation.
        ``(2) Deemed intangible income.--For purposes of this 
    subsection--
            ``(A) In general.--The term `deemed intangible income' 
        means the excess (if any) of--
                ``(i) the deduction eligible income of the domestic 
            corporation, over
                ``(ii) the deemed tangible income return of the 
            corporation.
            ``(B) Deemed tangible income return.--The term `deemed 
        tangible income return' means, with respect to any corporation, 
        an amount equal to 10 percent of the corporation's qualified 
        business asset investment (as defined in section 951A(d), 
        determined by substituting `deduction eligible income' for 
        `tested income' in paragraph (2) thereof and without regard to 
        whether the corporation is a controlled foreign corporation).
        ``(3) Deduction eligible income.--
            ``(A) In general.--The term `deduction eligible income' 
        means, with respect to any domestic corporation, the excess (if 
        any) of--
                ``(i) gross income of such corporation determined 
            without regard to--

                    ``(I) any amount included in the gross income of 
                such corporation under section 951(a)(1),
                    ``(II) the global intangible low-taxed income 
                included in the gross income of such corporation under 
                section 951A,
                    ``(III) any financial services income (as defined 
                in section 904(d)(2)(D)) of such corporation,
                    ``(IV) any dividend received from a corporation 
                which is a controlled foreign corporation of such 
                domestic corporation,
                    ``(V) any domestic oil and gas extraction income of 
                such corporation, and
                    ``(VI) any foreign branch income (as defined in 
                section 904(d)(2)(J)), over

                ``(ii) the deductions (including taxes) properly 
            allocable to such gross income.
            ``(B) Domestic oil and gas extraction income.--For purposes 
        of subparagraph (A), the term `domestic oil and gas extraction 
        income' means income described in section 907(c)(1), determined 
        by substituting `within the United States' for `without the 
        United States'.
        ``(4) Foreign-derived deduction eligible income.--The term 
    `foreign-derived deduction eligible income' means, with respect to 
    any taxpayer for any taxable year, any deduction eligible income of 
    such taxpayer which is derived in connection with--
            ``(A) property--
                ``(i) which is sold by the taxpayer to any person who 
            is not a United States person, and
                ``(ii) which the taxpayer establishes to the 
            satisfaction of the Secretary is for a foreign use, or
            ``(B) services provided by the taxpayer which the taxpayer 
        establishes to the satisfaction of the Secretary are provided 
        to any person, or with respect to property, not located within 
        the United States.
        ``(5) Rules relating to foreign use property or services.--For 
    purposes of this subsection--
            ``(A) Foreign use.--The term `foreign use' means any use, 
        consumption, or disposition which is not within the United 
        States.
            ``(B) Property or services provided to domestic 
        intermediaries.--
                ``(i) Property.--If a taxpayer sells property to 
            another person (other than a related party) for further 
            manufacture or other modification within the United States, 
            such property shall not be treated as sold for a foreign 
            use even if such other person subsequently uses such 
            property for a foreign use.
                ``(ii) Services.--If a taxpayer provides services to 
            another person (other than a related party) located within 
            the United States, such services shall not be treated as 
            described in paragraph (4)(B) even if such other person 
            uses such services in providing services which are so 
            described.
            ``(C) Special rules with respect to related party 
        transactions.--
                ``(i) Sales to related parties.--If property is sold to 
            a related party who is not a United States person, such 
            sale shall not be treated as for a foreign use unless--

                    ``(I) such property is ultimately sold by a related 
                party, or used by a related party in connection with 
                property which is sold or the provision of services, to 
                another person who is an unrelated party who is not a 
                United States person, and
                    ``(II) the taxpayer establishes to the satisfaction 
                of the Secretary that such property is for a foreign 
                use.

            For purposes of this clause, a sale of property shall be 
            treated as a sale of each of the components thereof.
                ``(ii) Service provided to related parties.--If a 
            service is provided to a related party who is not located 
            in the United States, such service shall not be treated 
            described in subparagraph (A)(ii) unless the taxpayer 
            established to the satisfaction of the Secretary that such 
            service is not substantially similar to services provided 
            by such related party to persons located within the United 
            States.
            ``(D) Related party.--For purposes of this paragraph, the 
        term `related party' means any member of an affiliated group as 
        defined in section 1504(a), determined--
                ``(i) by substituting `more than 50 percent' for `at 
            least 80 percent' each place it appears, and
                ``(ii) without regard to paragraphs (2) and (3) of 
            section 1504(b).
        Any person (other than a corporation) shall be treated as a 
        member of such group if such person is controlled by members of 
        such group (including any entity treated as a member of such 
        group by reason of this sentence) or controls any such member. 
        For purposes of the preceding sentence, control shall be 
        determined under the rules of section 954(d)(3).
            ``(E) Sold.--For purposes of this subsection, the terms 
        `sold', `sells', and `sale' shall include any lease, license, 
        exchange, or other disposition.
    ``(c) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section.''.
    (b) Conforming Amendments.--
        (1) Section 172(d), as amended by this Act, is amended by 
    adding at the end the following new paragraph:
        ``(9) Deduction for foreign-derived intangible income.--The 
    deduction under section 250 shall not be allowed.''.
        (2) Section 246(b)(1) is amended--
            (A) by striking ``and subsection (a) and (b) of section 
        245'' the first place it appears and inserting ``, subsection 
        (a) and (b) of section 245, and section 250'',
            (B) by striking ``and subsection (a) and (b) of section 
        245'' the second place it appears and inserting ``subsection 
        (a) and (b) of section 245, and 250''.
        (3) Section 469(i)(3)(F)(iii) is amended by striking ``and 
    222'' and inserting ``222, and 250''.
        (4) The table of sections for part VIII of subchapter B of 
    chapter 1 is amended by adding at the end the following new item:

``Sec. 250. Foreign-derived intangible income and global intangible low-
          taxed income.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

         CHAPTER 2--OTHER MODIFICATIONS OF SUBPART F PROVISIONS

SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE COMPANY OIL 
RELATED INCOME.
    (a) Repeal.--Subsection (a) of section 954 is amended--
        (1) by inserting ``and'' at the end of paragraph (2),
        (2) by striking the comma at the end of paragraph (3) and 
    inserting a period, and
        (3) by striking paragraph (5).
    (b) Conforming Amendments.--
        (1) Section 952(c)(1)(B)(iii) is amended by striking subclause 
    (I) and redesignating subclauses (II) through (V) as subclauses (I) 
    through (IV), respectively.
        (2) Section 954(b) is amended--
            (A) by striking the second sentence of paragraph (4),
            (B) by striking ``the foreign base company services income, 
        and the foreign base company oil related income'' in paragraph 
        (5) and inserting ``and the foreign base company services 
        income'', and
            (C) by striking paragraph (6).
        (3) Section 954 is amended by striking subsection (g).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2017, and to taxable years of United States shareholders with or 
within which such taxable years of foreign corporations end.
SEC. 14212. REPEAL OF INCLUSION BASED ON WITHDRAWAL OF PREVIOUSLY 
EXCLUDED SUBPART F INCOME FROM QUALIFIED INVESTMENT.
    (a) In General.--Subpart F of part III of subchapter N of chapter 1 
is amended by striking section 955.
    (b) Conforming Amendments.--
        (1)(A) Section 951(a)(1)(A) is amended to read as follows:
            ``(A) his pro rata share (determined under paragraph (2)) 
        of the corporation's subpart F income for such year, and''.
        (B) Section 851(b) is amended by striking ``section 
    951(a)(1)(A)(i)'' in the flush language at the end and inserting 
    ``section 951(a)(1)(A)''.
        (C) Section 952(c)(1)(B)(i) is amended by striking ``section 
    951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
        (D) Section 953(c)(1)(C) is amended by striking ``section 
    951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
        (2) Section 951(a) is amended by striking paragraph (3).
        (3) Section 953(d)(4)(B)(iv)(II) is amended by striking ``or 
    amounts referred to in clause (ii) or (iii) of section 
    951(a)(1)(A)''.
        (4) Section 964(b) is amended by striking ``, 955,''.
        (5) Section 970 is amended by striking subsection (b).
        (6) The table of sections for subpart F of part III of 
    subchapter N of chapter 1 is amended by striking the item relating 
    to section 955.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2017, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.
SEC. 14213. MODIFICATION OF STOCK ATTRIBUTION RULES FOR DETERMINING 
STATUS AS A CONTROLLED FOREIGN CORPORATION.
    (a) In General.--Section 958(b) is amended--
        (1) by striking paragraph (4), and
        (2) by striking ``Paragraphs (1) and (4)'' in the last sentence 
    and inserting ``Paragraph (1)''.
    (b) Effective Date.--The amendments made by this section shall 
apply to--
        (1) the last taxable year of foreign corporations beginning 
    before January 1, 2018, and each subsequent taxable year of such 
    foreign corporations, and
        (2) taxable years of United States shareholders in which or 
    with which such taxable years of foreign corporations end.
SEC. 14214. MODIFICATION OF DEFINITION OF UNITED STATES SHAREHOLDER.
    (a) In General.--Section 951(b) is amended by inserting ``, or 10 
percent or more of the total value of shares of all classes of stock of 
such foreign corporation'' after ``such foreign corporation''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of foreign corporations beginning after December 31, 
2017, and to taxable years of United States shareholders with or within 
which such taxable years of foreign corporations end.
SEC. 14215. ELIMINATION OF REQUIREMENT THAT CORPORATION MUST BE 
CONTROLLED FOR 30 DAYS BEFORE SUBPART F INCLUSIONS APPLY.
    (a) In General.--Section 951(a)(1) is amended by striking ``for an 
uninterrupted period of 30 days or more'' and inserting ``at any 
time''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years of foreign corporations beginning after December 31, 
2017, and to taxable years of United States shareholders with or within 
which such taxable years of foreign corporations end.

                 CHAPTER 3--PREVENTION OF BASE EROSION

SEC. 14221. LIMITATIONS ON INCOME SHIFTING THROUGH INTANGIBLE PROPERTY 
TRANSFERS.
    (a) Definition of Intangible Asset.--Section 936(h)(3)(B) is 
amended--
        (1) by striking ``or'' at the end of clause (v),
        (2) by striking clause (vi) and inserting the following:
                ``(vi) any goodwill, going concern value, or workforce 
            in place (including its composition and terms and 
            conditions (contractual or otherwise) of its employment); 
            or
                ``(vii) any other item the value or potential value of 
            which is not attributable to tangible property or the 
            services of any individual.'', and
        (3) by striking the flush language after clause (vii), as added 
    by paragraph (2).
    (b) Clarification of Allowable Valuation Methods.--
        (1) Foreign corporations.--Section 367(d)(2) is amended by 
    adding at the end the following new subparagraph:
            ``(D) Regulatory authority.--For purposes of the last 
        sentence of subparagraph (A), the Secretary shall require--
                ``(i) the valuation of transfers of intangible 
            property, including intangible property transferred with 
            other property or services, on an aggregate basis, or
                ``(ii) the valuation of such a transfer on the basis of 
            the realistic alternatives to such a transfer,
        if the Secretary determines that such basis is the most 
        reliable means of valuation of such transfers.''.
        (2) Allocation among taxpayers.--Section 482 is amended by 
    adding at the end the following: ``For purposes of this section, 
    the Secretary shall require the valuation of transfers of 
    intangible property (including intangible property transferred with 
    other property or services) on an aggregate basis or the valuation 
    of such a transfer on the basis of the realistic alternatives to 
    such a transfer, if the Secretary determines that such basis is the 
    most reliable means of valuation of such transfers.''.
    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to transfers in taxable years beginning after December 31, 
    2017.
        (2) No inference.--Nothing in the amendment made by subsection 
    (a) shall be construed to create any inference with respect to the 
    application of section 936(h)(3) of the Internal Revenue Code of 
    1986, or the authority of the Secretary of the Treasury to provide 
    regulations for such application, with respect to taxable years 
    beginning before January 1, 2018.
SEC. 14222. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN HYBRID 
TRANSACTIONS OR WITH HYBRID ENTITIES.
    (a) In General.--Part IX of subchapter B of chapter 1 is amended by 
inserting after section 267 the following:
``SEC. 267A. CERTAIN RELATED PARTY AMOUNTS PAID OR ACCRUED IN HYBRID 
TRANSACTIONS OR WITH HYBRID ENTITIES.
    ``(a) In General.--No deduction shall be allowed under this chapter 
for any disqualified related party amount paid or accrued pursuant to a 
hybrid transaction or by, or to, a hybrid entity.
    ``(b) Disqualified Related Party Amount.--For purposes of this 
section--
        ``(1) Disqualified related party amount.--The term 
    `disqualified related party amount' means any interest or royalty 
    paid or accrued to a related party to the extent that--
            ``(A) such amount is not included in the income of such 
        related party under the tax law of the country of which such 
        related party is a resident for tax purposes or is subject to 
        tax, or
            ``(B) such related party is allowed a deduction with 
        respect to such amount under the tax law of such country.
    Such term shall not include any payment to the extent such payment 
    is included in the gross income of a United States shareholder 
    under section 951(a).
        ``(2) Related party.--The term `related party' means a related 
    person as defined in section 954(d)(3), except that such section 
    shall be applied with respect to the person making the payment 
    described in paragraph (1) in lieu of the controlled foreign 
    corporation otherwise referred to in such section.
    ``(c) Hybrid Transaction.--For purposes of this section, the term 
`hybrid transaction' means any transaction, series of transactions, 
agreement, or instrument one or more payments with respect to which are 
treated as interest or royalties for purposes of this chapter and which 
are not so treated for purposes the tax law of the foreign country of 
which the recipient of such payment is resident for tax purposes or is 
subject to tax.
    ``(d) Hybrid Entity.--For purposes of this section, the term 
`hybrid entity' means any entity which is either--
        ``(1) treated as fiscally transparent for purposes of this 
    chapter but not so treated for purposes of the tax law of the 
    foreign country of which the entity is resident for tax purposes or 
    is subject to tax, or
        ``(2) treated as fiscally transparent for purposes of such tax 
    law but not so treated for purposes of this chapter.
    ``(e) Regulations.--The Secretary shall issue such regulations or 
other guidance as may be necessary or appropriate to carry out the 
purposes of this section, including regulations or other guidance 
providing for--
        ``(1) rules for treating certain conduit arrangements which 
    involve a hybrid transaction or a hybrid entity as subject to 
    subsection (a),
        ``(2) rules for the application of this section to branches or 
    domestic entities,
        ``(3) rules for treating certain structured transactions as 
    subject to subsection (a),
        ``(4) rules for treating a tax preference as an exclusion from 
    income for purposes of applying subsection (b)(1) if such tax 
    preference has the effect of reducing the generally applicable 
    statutory rate by 25 percent or more,
        ``(5) rules for treating the entire amount of interest or 
    royalty paid or accrued to a related party as a disqualified 
    related party amount if such amount is subject to a participation 
    exemption system or other system which provides for the exclusion 
    or deduction of a substantial portion of such amount,
        ``(6) rules for determining the tax residence of a foreign 
    entity if the entity is otherwise considered a resident of more 
    than one country or of no country,
        ``(7) exceptions from subsection (a) with respect to--
            ``(A) cases in which the disqualified related party amount 
        is taxed under the laws of a foreign country other than the 
        country of which the related party is a resident for tax 
        purposes, and
            ``(B) other cases which the Secretary determines do not 
        present a risk of eroding the Federal tax base,
        ``(8) requirements for record keeping and information reporting 
    in addition to any requirements imposed by section 6038A.''.
    (b) Conforming Amendment.--The table of sections for part IX of 
subchapter B of chapter 1 is amended by inserting after the item 
relating to section 267 the following new item:

``Sec. 267A. Certain related party amounts paid or accrued in hybrid 
          transactions or with hybrid entities.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 14223. SHAREHOLDERS OF SURROGATE FOREIGN CORPORATIONS NOT ELIGIBLE 
FOR REDUCED RATE ON DIVIDENDS.
    (a) In General.--Section 1(h)(11)(C)(iii) is amended--
        (1) by striking ``shall not include any foreign corporation'' 
    and inserting ``shall not include--

                    ``(I) any foreign corporation'',

        (2) by striking the period at the end and inserting ``, and'', 
    and
        (3) by adding at the end the following new subclause:

                    ``(II) any corporation which first becomes a 
                surrogate foreign corporation (as defined in section 
                7874(a)(2)(B)) after the date of the enactment of this 
                subclause, other than a foreign corporation which is 
                treated as a domestic corporation under section 
                7874(b).''.

    (b) Effective Date.--The amendments made by this section shall 
apply to dividends received after the date of the enactment of this 
Act.

     Subpart C--Modifications Related to Foreign Tax Credit System

SEC. 14301. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX CREDITS; 
DETERMINATION OF SECTION 960 CREDIT ON CURRENT YEAR BASIS.
    (a) Repeal of Section 902 Indirect Foreign Tax Credits.--Subpart A 
of part III of subchapter N of chapter 1 is amended by striking section 
902.
    (b) Determination of Section 960 Credit on Current Year Basis.--
Section 960, as amended by section 14201, is amended--
        (1) by striking subsection (c), by redesignating subsection (b) 
    as subsection (c), by striking all that precedes subsection (c) (as 
    so redesignated) and inserting the following:
    ``SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLUSIONS.
    ``(a) In General.--For purposes of subpart A of this part, if there 
is included in the gross income of a domestic corporation any item of 
income under section 951(a)(1) with respect to any controlled foreign 
corporation with respect to which such domestic corporation is a United 
States shareholder, such domestic corporation shall be deemed to have 
paid so much of such foreign corporation's foreign income taxes as are 
properly attributable to such item of income.
    ``(b) Special Rules for Distributions From Previously Taxed 
Earnings and Profits.--For purposes of subpart A of this part--
        ``(1) In general.--If any portion of a distribution from a 
    controlled foreign corporation to a domestic corporation which is a 
    United States shareholder with respect to such controlled foreign 
    corporation is excluded from gross income under section 959(a), 
    such domestic corporation shall be deemed to have paid so much of 
    such foreign corporation's foreign income taxes as--
            ``(A) are properly attributable to such portion, and
            ``(B) have not been deemed to have to been paid by such 
        domestic corporation under this section for the taxable year or 
        any prior taxable year.
        ``(2) Tiered controlled foreign corporations.--If section 
    959(b) applies to any portion of a distribution from a controlled 
    foreign corporation to another controlled foreign corporation, such 
    controlled foreign corporation shall be deemed to have paid so much 
    of such other controlled foreign corporation's foreign income taxes 
    as--
            ``(A) are properly attributable to such portion, and
            ``(B) have not been deemed to have been paid by a domestic 
        corporation under this section for the taxable year or any 
        prior taxable year.'',
        (2) and by adding after subsection (d) (as added by section 
    14201) the following new subsections:
    ``(e) Foreign Income Taxes.--The term `foreign income taxes' means 
any income, war profits, or excess profits taxes paid or accrued to any 
foreign country or possession of the United States.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section.''.
    (c) Conforming Amendments.--
        (1) Section 78 is amended to read as follows:
  ``SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CREDIT.
    ``If a domestic corporation chooses to have the benefits of subpart 
A of part III of subchapter N (relating to foreign tax credit) for any 
taxable year, an amount equal to the taxes deemed to be paid by such 
corporation under subsections (a), (b), and (d) of section 960 
(determined without regard to the phrase `80 percent of' in subsection 
(d)(1) thereof) for such taxable year shall be treated for purposes of 
this title (other than sections 245 and 245A) as a dividend received by 
such domestic corporation from the foreign corporation.''.
        (2) Paragraph (4) of section 245(a) is amended to read as 
    follows:
        ``(4) Post-1986 undistributed earnings.--The term `post-1986 
    undistributed earnings' means the amount of the earnings and 
    profits of the foreign corporation (computed in accordance with 
    sections 964(a) and 986) accumulated in taxable years beginning 
    after December 31, 1986--
            ``(A) as of the close of the taxable year of the foreign 
        corporation in which the dividend is distributed, and
            ``(B) without diminution by reason of dividends distributed 
        during such taxable year.''.
        (3) Section 245(a)(10)(C) is amended by striking ``902, 907, 
    and 960'' and inserting ``907 and 960''.
        (4) Sections 535(b)(1) and 545(b)(1) are each amended by 
    striking ``section 902(a) or 960(a)(1)'' and inserting ``section 
    960''.
        (5) Section 814(f)(1) is amended--
            (A) by striking subparagraph (B), and
            (B) by striking all that precedes ``No income'' and 
        inserting the following:
        ``(1) Treatment of foreign taxes.--''.
        (6) Section 865(h)(1)(B) is amended by striking ``902, 907,'' 
    and inserting ``907''.
        (7) Section 901(a) is amended by striking ``sections 902 and 
    960'' and inserting ``section 960''.
        (8) Section 901(e)(2) is amended by striking ``but is not 
    limited to--'' and all that follows through ``that portion'' and 
    inserting ``but is not limited to that portion''.
        (9) Section 901(f) is amended by striking ``sections 902 and 
    960'' and inserting ``section 960''.
        (10) Section 901(j)(1)(A) is amended by striking ``902 or''.
        (11) Section 901(j)(1)(B) is amended by striking ``sections 902 
    and 960'' and inserting ``section 960''.
        (12) Section 901(k)(2) is amended by striking ``, 902,''.
        (13) Section 901(k)(6) is amended by striking ``902 or''.
        (14) Section 901(m)(1)(B) is amended to read as follows:
            ``(B) in the case of a foreign income tax paid by a foreign 
        corporation, shall not be taken into account for purposes of 
        section 960.''.
        (15) Section 904(d)(2)(E) is amended--
            (A) by amending clause (i) to read as follows:
                ``(i) Noncontrolled 10-percent owned foreign 
            corporation.--The term `noncontrolled 10-percent owned 
            foreign corporation' means any foreign corporation which 
            is--

                    ``(I) a specified 10-percent owned foreign 
                corporation (as defined in section 245A(b)), or
                    ``(II) a passive foreign investment company (as 
                defined in section 1297(a)) with respect to which the 
                taxpayer meets the stock ownership requirements of 
                section 902(a) (or, for purposes of applying paragraphs 
                (3) and (4), the requirements of section 902(b)).

            A controlled foreign corporation shall not be treated as a 
            noncontrolled 10-percent owned foreign corporation with 
            respect to any distribution out of its earnings and profits 
            for periods during which it was a controlled foreign 
            corporation. Any reference to section 902 in this clause 
            shall be treated as a reference to such section as in 
            effect before its repeal.'', and
            (B) by striking ``non-controlled section 902 corporation'' 
        in clause (ii) and inserting ``noncontrolled 10-percent owned 
        foreign corporation''.
        (16) Section 904(d)(4) is amended--
            (A) by striking ``noncontrolled section 902 corporation'' 
        each place it appears and inserting ``noncontrolled 10-percent 
        owned foreign corporation'',
            (B) by striking ``noncontrolled section 902 corporations'' 
        in the heading thereof and inserting ``noncontrolled 10-percent 
        owned foreign corporations''.
        (17) Section 904(d)(6)(A) is amended by striking ``902, 907,'' 
    and inserting ``907''.
        (18) Section 904(h)(10)(A) is amended by striking ``sections 
    902, 907, and 960'' and inserting ``sections 907 and 960''.
        (19) Section 904(k) is amended to read as follows:
    ``(k) Cross References.--For increase of limitation under 
subsection (a) for taxes paid with respect to amounts received which 
were included in the gross income of the taxpayer for a prior taxable 
year as a United States shareholder with respect to a controlled 
foreign corporation, see section 960(c).''.
        (20) Section 905(c)(1) is amended by striking the last 
    sentence.
        (21) Section 905(c)(2)(B)(i) is amended to read as follows:
                ``(i) shall be taken into account for the taxable year 
            to which such taxes relate, and''.
        (22) Section 906(a) is amended by striking ``(or deemed, under 
    section 902, paid or accrued during the taxable year)''.
        (23) Section 906(b) is amended by striking paragraphs (4) and 
    (5).
        (24) Section 907(b)(2)(B) is amended by striking ``902 or''.
        (25) Section 907(c)(3)(A) is amended--
            (A) by striking subparagraph (A) and inserting the 
        following:
            ``(A) interest, to the extent the category of income of 
        such interest is determined under section 904(d)(3),'', and
            (B) by striking ``section 960(a)'' in subparagraph (B) and 
        inserting ``section 960''.
        (26) Section 907(c)(5) is amended by striking ``902 or''.
        (27) Section 907(f)(2)(B)(i) is amended by striking ``902 or''.
        (28) Section 908(a) is amended by striking ``902 or''.
        (29) Section 909(b) is amended--
            (A) by striking ``section 902 corporation'' in the matter 
        preceding paragraph (1) and inserting ``specified 10-percent 
        owned foreign corporation (as defined in section 245A(b) 
        without regard to paragraph (2) thereof)'',
            (B) by striking ``902 or'' in paragraph (1),
            (C) by striking ``by such section 902 corporation'' and all 
        that follows in the matter following paragraph (2) and 
        inserting ``by such specified 10-percent owned foreign 
        corporation or a domestic corporation which is a United States 
        shareholder with respect to such specified 10-percent owned 
        foreign corporation.'', and
            (D) by striking ``Section 902 Corporations'' in the heading 
        thereof and inserting ``Specified 10-percent Owned Foreign 
        Corporations''.
        (30) Section 909(d) is amended by striking paragraph (5).
        (31) Section 958(a)(1) is amended by striking ``960(a)(1)'' and 
    inserting ``960''.
        (32) Section 959(d) is amended by striking ``Except as provided 
    in section 960(a)(3), any'' and inserting ``Any''.
        (33) Section 959(e) is amended by striking ``section 960(b)'' 
    and inserting ``section 960(c)''.
        (34) Section 1291(g)(2)(A) is amended by striking ``any 
    distribution--'' and all that follows through ``but only if'' and 
    inserting ``any distribution, any withholding tax imposed with 
    respect to such distribution, but only if''.
        (35) Section 1293(f) is amended by striking ``and'' at the end 
    of paragraph (1), by striking the period at the end of paragraph 
    (2) and inserting ``, and'', and by adding at the end the following 
    new paragraph:
        ``(3) a domestic corporation which owns (or is treated under 
    section 1298(a) as owning) stock of a qualified electing fund shall 
    be treated in the same manner as a United States shareholder of a 
    controlled foreign corporation (and such qualified electing fund 
    shall be treated in the same manner as such controlled foreign 
    corporation) if such domestic corporation meets the stock ownership 
    requirements of subsection (a) or (b) of section 902 (as in effect 
    before its repeal) with respect to such qualified electing fund.''.
        (36) Section 6038(c)(1)(B) is amended by striking ``sections 
    902 (relating to foreign tax credit for corporate stockholder in 
    foreign corporation) and 960 (relating to special rules for foreign 
    tax credit)'' and inserting ``section 960''.
        (37) Section 6038(c)(4) is amended by striking subparagraph 
    (C).
        (38) The table of sections for subpart A of part III of 
    subchapter N of chapter 1 is amended by striking the item relating 
    to section 902.
        (39) The table of sections for subpart F of part III of 
    subchapter N of chapter 1 is amended by striking the item relating 
    to section 960 and inserting the following:

``Sec. 960. Deemed paid credit for subpart F inclusions.''.

    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2017, and to taxable years of United States shareholders in which 
or with which such taxable years of foreign corporations end.
SEC. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION BASKET FOR FOREIGN 
BRANCH INCOME.
    (a) In General.--Section 904(d)(1), as amended by section 14201, is 
amended by redesignating subparagraphs (B) and (C) as subparagraphs (C) 
and (D), respectively, and by inserting after subparagraph (A) the 
following new subparagraph:
            ``(B) foreign branch income,''.
    (b) Foreign Branch Income.--
        (1) In general.--Section 904(d)(2) is amended by inserting 
    after subparagraph (I) the following new subparagraph:
            ``(J) Foreign branch income.--
                ``(i) In general.--The term `foreign branch income' 
            means the business profits of such United States person 
            which are attributable to 1 or more qualified business 
            units (as defined in section 989(a)) in 1 or more foreign 
            countries. For purposes of the preceding sentence, the 
            amount of business profits attributable to a qualified 
            business unit shall be determined under rules established 
            by the Secretary.
                ``(ii) Exception.--Such term shall not include any 
            income which is passive category income.''.
        (2) Conforming amendment.--Section 904(d)(2)(A)(ii), as amended 
    by section 14201, is amended by striking ``income described in 
    paragraph (1)(A) and'' and inserting ``income described in 
    paragraph (1)(A), foreign branch income, and''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 14303. SOURCE OF INCOME FROM SALES OF INVENTORY DETERMINED SOLELY 
ON BASIS OF PRODUCTION ACTIVITIES.
    (a) In General.--Section 863(b) is amended by adding at the end the 
following: ``Gains, profits, and income from the sale or exchange of 
inventory property described in paragraph (2) shall be allocated and 
apportioned between sources within and without the United States solely 
on the basis of the production activities with respect to the 
property.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.
SEC. 14304. ELECTION TO INCREASE PERCENTAGE OF DOMESTIC TAXABLE INCOME 
OFFSET BY OVERALL DOMESTIC LOSS TREATED AS FOREIGN SOURCE.
    (a) In General.--Section 904(g) is amended by adding at the end the 
following new paragraph:
        ``(5) Election to increase percentage of taxable income treated 
    as foreign source.--
            ``(A) In general.--If any pre-2018 unused overall domestic 
        loss is taken into account under paragraph (1) for any 
        applicable taxable year, the taxpayer may elect to have such 
        paragraph applied to such loss by substituting a percentage 
        greater than 50 percent (but not greater than 100 percent) for 
        50 percent in subparagraph (B) thereof.
            ``(B) Pre-2018 unused overall domestic loss.--For purposes 
        of this paragraph, the term `pre-2018 unused overall domestic 
        loss' means any overall domestic loss which--
                ``(i) arises in a qualified taxable year beginning 
            before January 1, 2018, and
                ``(ii) has not been used under paragraph (1) for any 
            taxable year beginning before such date.
            ``(C) Applicable taxable year.--For purposes of this 
        paragraph, the term `applicable taxable year' means any taxable 
        year of the taxpayer beginning after December 31, 2017, and 
        before January 1, 2028.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

                     PART II--INBOUND TRANSACTIONS

SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX.
    (a) Imposition of Tax.--Subchapter A of chapter 1 is amended by 
adding at the end the following new part:

              ``PART VII--BASE EROSION AND ANTI-ABUSE TAX

``Sec. 59A. Tax on base erosion payments of taxpayers with substantial 
          gross receipts.

    ``SEC. 59A. TAX ON BASE EROSION PAYMENTS OF TAXPAYERS WITH 
      SUBSTANTIAL GROSS RECEIPTS.
    ``(a) Imposition of Tax.--There is hereby imposed on each 
applicable taxpayer for any taxable year a tax equal to the base 
erosion minimum tax amount for the taxable year. Such tax shall be in 
addition to any other tax imposed by this subtitle.
    ``(b) Base Erosion Minimum Tax Amount.--For purposes of this 
section--
        ``(1) In general.--Except as provided in paragraphs (2) and 
    (3), the term `base erosion minimum tax amount' means, with respect 
    to any applicable taxpayer for any taxable year, the excess (if 
    any) of--
            ``(A) an amount equal to 10 percent (5 percent in the case 
        of taxable years beginning in calendar year 2018) of the 
        modified taxable income of such taxpayer for the taxable year, 
        over
            ``(B) an amount equal to the regular tax liability (as 
        defined in section 26(b)) of the taxpayer for the taxable year, 
        reduced (but not below zero) by the excess (if any) of--
                ``(i) the credits allowed under this chapter against 
            such regular tax liability, over
                ``(ii) the sum of--

                    ``(I) the credit allowed under section 38 for the 
                taxable year which is properly allocable to the 
                research credit determined under section 41(a), plus
                    ``(II) the portion of the applicable section 38 
                credits not in excess of 80 percent of the lesser of 
                the amount of such credits or the base erosion minimum 
                tax amount (determined without regard to this 
                subclause).

        ``(2) Modifications for taxable years beginning after 2025.--In 
    the case of any taxable year beginning after December 31, 2025, 
    paragraph (1) shall be applied--
            ``(A) by substituting `12.5 percent' for `10 percent' in 
        subparagraph (A) thereof, and
            ``(B) by reducing (but not below zero) the regular tax 
        liability (as defined in section 26(b)) for purposes of 
        subparagraph (B) thereof by the aggregate amount of the credits 
        allowed under this chapter against such regular tax liability 
        rather than the excess described in such subparagraph.
        ``(3) Increased rate for certain banks and securities 
    dealers.--
            ``(A) In general.--In the case of a taxpayer described in 
        subparagraph (B) who is an applicable taxpayer for any taxable 
        year, the percentage otherwise in effect under paragraphs 
        (1)(A) and (2)(A) shall each be increased by one percentage 
        point.
            ``(B) Taxpayer described.--A taxpayer is described in this 
        subparagraph if such taxpayer is a member of an affiliated 
        group (as defined in section 1504(a)(1)) which includes--
                ``(i) a bank (as defined in section 581), or
                ``(ii) a registered securities dealer under section 
            15(a) of the Securities Exchange Act of 1934.
        ``(4) Applicable section 38 credits.--For purposes of paragraph 
    (1)(B)(ii)(II), the term `applicable section 38 credits' means the 
    credit allowed under section 38 for the taxable year which is 
    properly allocable to--
            ``(A) the low-income housing credit determined under 
        section 42(a),
            ``(B) the renewable electricity production credit 
        determined under section 45(a), and
            ``(C) the investment credit determined under section 46, 
        but only to the extent properly allocable to the energy credit 
        determined under section 48.
    ``(c) Modified Taxable Income.--For purposes of this section--
        ``(1) In general.--The term `modified taxable income' means the 
    taxable income of the taxpayer computed under this chapter for the 
    taxable year, determined without regard to--
            ``(A) any base erosion tax benefit with respect to any base 
        erosion payment, or
            ``(B) the base erosion percentage of any net operating loss 
        deduction allowed under section 172 for the taxable year.
        ``(2) Base erosion tax benefit.--
            ``(A) In general.--The term `base erosion tax benefit' 
        means--
                ``(i) any deduction described in subsection (d)(1) 
            which is allowed under this chapter for the taxable year 
            with respect to any base erosion payment,
                ``(ii) in the case of a base erosion payment described 
            in subsection (d)(2), any deduction allowed under this 
            chapter for the taxable year for depreciation (or 
            amortization in lieu of depreciation) with respect to the 
            property acquired with such payment,
                ``(iii) in the case of a base erosion payment described 
            in subsection (d)(3)--

                    ``(I) any reduction under section 803(a)(1)(B) in 
                the gross amount of premiums and other consideration on 
                insurance and annuity contracts for premiums and other 
                consideration arising out of indemnity insurance, and
                    ``(II) any deduction under section 832(b)(4)(A) 
                from the amount of gross premiums written on insurance 
                contracts during the taxable year for premiums paid for 
                reinsurance, and

                ``(iv) in the case of a base erosion payment described 
            in subsection (d)(4), any reduction in gross receipts with 
            respect to such payment in computing gross income of the 
            taxpayer for the taxable year for purposes of this chapter.
            ``(B) Tax benefits disregarded if tax withheld on base 
        erosion payment.--
                ``(i) In general.--Except as provided in clause (ii), 
            any base erosion tax benefit attributable to any base 
            erosion payment--

                    ``(I) on which tax is imposed by section 871 or 
                881, and
                    ``(II) with respect to which tax has been deducted 
                and withheld under section 1441 or 1442,

            shall not be taken into account in computing modified 
            taxable income under paragraph (1)(A) or the base erosion 
            percentage under paragraph (4).
                ``(ii) Exception.--The amount not taken into account in 
            computing modified taxable income by reason of clause (i) 
            shall be reduced under rules similar to the rules under 
            section 163(j)(5)(B) (as in effect before the date of the 
            enactment of the Tax Cuts and Jobs Act).
        ``(3) Special rules for determining interest for which 
    deduction allowed.--For purposes of applying paragraph (1), in the 
    case of a taxpayer to which section 163(j) applies for the taxable 
    year, the reduction in the amount of interest for which a deduction 
    is allowed by reason of such subsection shall be treated as 
    allocable first to interest paid or accrued to persons who are not 
    related parties with respect to the taxpayer and then to such 
    related parties.
        ``(4) Base erosion percentage.--For purposes of paragraph 
    (1)(B)--
            ``(A) In general.--The term `base erosion percentage' 
        means, for any taxable year, the percentage determined by 
        dividing--
                ``(i) the aggregate amount of base erosion tax benefits 
            of the taxpayer for the taxable year, by
                ``(ii) the sum of--

                    ``(I) the aggregate amount of the deductions 
                (including deductions described in clauses (i) and (ii) 
                of paragraph (2)(A)) allowable to the taxpayer under 
                this chapter for the taxable year, plus
                    ``(II) the base erosion tax benefits described in 
                clauses (iii) and (iv) of paragraph (2)(A) allowable to 
                the taxpayer for the taxable year.

            ``(B) Certain items not taken into account.--The amount 
        under subparagraph (A)(ii) shall be determined by not taking 
        into account--
                ``(i) any deduction allowed under section 172, 245A, or 
            250 for the taxable year,
                ``(ii) any deduction for amounts paid or accrued for 
            services to which the exception under subsection (d)(5) 
            applies, and
                ``(iii) any deduction for qualified derivative payments 
            which are not treated as a base erosion payment by reason 
            of subsection (h).
    ``(d) Base Erosion Payment.--For purposes of this section--
        ``(1) In general.--The term `base erosion payment' means any 
    amount paid or accrued by the taxpayer to a foreign person which is 
    a related party of the taxpayer and with respect to which a 
    deduction is allowable under this chapter.
        ``(2) Purchase of depreciable property.--Such term shall also 
    include any amount paid or accrued by the taxpayer to a foreign 
    person which is a related party of the taxpayer in connection with 
    the acquisition by the taxpayer from such person of property of a 
    character subject to the allowance for depreciation (or 
    amortization in lieu of depreciation).
        ``(3) Reinsurance payments.--Such term shall also include any 
    premium or other consideration paid or accrued by the taxpayer to a 
    foreign person which is a related party of the taxpayer for any 
    reinsurance payments which are taken into account under sections 
    803(a)(1)(B) or 832(b)(4)(A).
        ``(4) Certain payments to expatriated entities.--
            ``(A) In general.--Such term shall also include any amount 
        paid or accrued by the taxpayer with respect to a person 
        described in subparagraph (B) which results in a reduction of 
        the gross receipts of the taxpayer.
            ``(B) Person described.--A person is described in this 
        subparagraph if such person is a--
                ``(i) surrogate foreign corporation which is a related 
            party of the taxpayer, but only if such person first became 
            a surrogate foreign corporation after November 9, 2017, or
                ``(ii) foreign person which is a member of the same 
            expanded affiliated group as the surrogate foreign 
            corporation.
            ``(C) Definitions.--For purposes of this paragraph--
                ``(i) Surrogate foreign corporation.--The term 
            `surrogate foreign corporation' has the meaning given such 
            term by section 7874(a)(2)(B) but does not include a 
            foreign corporation treated as a domestic corporation under 
            section 7874(b).
                ``(ii) Expanded affiliated group.--The term `expanded 
            affiliated group' has the meaning given such term by 
            section 7874(c)(1).
        ``(5) Exception for certain amounts with respect to services.--
    Paragraph (1) shall not apply to any amount paid or accrued by a 
    taxpayer for services if--
            ``(A) such services are services which meet the 
        requirements for eligibility for use of the services cost 
        method under section 482 (determined without regard to the 
        requirement that the services not contribute significantly to 
        fundamental risks of business success or failure), and
            ``(B) such amount constitutes the total services cost with 
        no markup component.
    ``(e) Applicable Taxpayer.--For purposes of this section--
        ``(1) In general.--The term `applicable taxpayer' means, with 
    respect to any taxable year, a taxpayer--
            ``(A) which is a corporation other than a regulated 
        investment company, a real estate investment trust, or an S 
        corporation,
            ``(B) the average annual gross receipts of which for the 3-
        taxable-year period ending with the preceding taxable year are 
        at least $500,000,000, and
            ``(C) the base erosion percentage (as determined under 
        subsection (c)(4)) of which for the taxable year is 3 percent 
        (2 percent in the case of a taxpayer described in subsection 
        (b)(3)(B)) or higher.
        ``(2) Gross receipts.--
            ``(A) Special rule for foreign persons.--In the case of a 
        foreign person the gross receipts of which are taken into 
        account for purposes of paragraph (1)(B), only gross receipts 
        which are taken into account in determining income which is 
        effectively connected with the conduct of a trade or business 
        within the United States shall be taken into account. In the 
        case of a taxpayer which is a foreign person, the preceding 
        sentence shall not apply to the gross receipts of any United 
        States person which are aggregated with the taxpayer's gross 
        receipts by reason of paragraph (3).
            ``(B) Other rules made applicable.--Rules similar to the 
        rules of subparagraphs (B), (C), and (D) of section 448(c)(3) 
        shall apply in determining gross receipts for purposes of this 
        section.
        ``(3) Aggregation rules.--All persons treated as a single 
    employer under subsection (a) of section 52 shall be treated as 1 
    person for purposes of this subsection and subsection (c)(4), 
    except that in applying section 1563 for purposes of section 52, 
    the exception for foreign corporations under section 1563(b)(2)(C) 
    shall be disregarded.
    ``(f) Foreign Person.--For purposes of this section, the term 
`foreign person' has the meaning given such term by section 
6038A(c)(3).
    ``(g) Related Party.--For purposes of this section--
        ``(1) In general.--The term `related party' means, with respect 
    to any applicable taxpayer--
            ``(A) any 25-percent owner of the taxpayer,
            ``(B) any person who is related (within the meaning of 
        section 267(b) or 707(b)(1)) to the taxpayer or any 25-percent 
        owner of the taxpayer, and
            ``(C) any other person who is related (within the meaning 
        of section 482) to the taxpayer.
        ``(2) 25-percent owner.--The term `25-percent owner' means, 
    with respect to any corporation, any person who owns at least 25 
    percent of--
            ``(A) the total voting power of all classes of stock of a 
        corporation entitled to vote, or
            ``(B) the total value of all classes of stock of such 
        corporation.
        ``(3) Section 318 to apply.--Section 318 shall apply for 
    purposes of paragraphs (1) and (2), except that--
            ``(A) `10 percent' shall be substituted for `50 percent' in 
        section 318(a)(2)(C), and
            ``(B) subparagraphs (A), (B), and (C) of section 318(a)(3) 
        shall not be applied so as to consider a United States person 
        as owning stock which is owned by a person who is not a United 
        States person.
    ``(h) Exception for Certain Payments Made in the Ordinary Course of 
Trade or Business.--For purposes of this section--
        ``(1) In general.--Except as provided in paragraph (3), any 
    qualified derivative payment shall not be treated as a base erosion 
    payment.
        ``(2) Qualified derivative payment.--
            ``(A) In general.--The term `qualified derivative payment' 
        means any payment made by a taxpayer pursuant to a derivative 
        with respect to which the taxpayer--
                ``(i) recognizes gain or loss as if such derivative 
            were sold for its fair market value on the last business 
            day of the taxable year (and such additional times as 
            required by this title or the taxpayer's method of 
            accounting),
                ``(ii) treats any gain or loss so recognized as 
            ordinary, and
                ``(iii) treats the character of all items of income, 
            deduction, gain, or loss with respect to a payment pursuant 
            to the derivative as ordinary.
            ``(B) Reporting requirement.--No payments shall be treated 
        as qualified derivative payments under subparagraph (A) for any 
        taxable year unless the taxpayer includes in the information 
        required to be reported under section 6038B(b)(2) with respect 
        to such taxable year such information as is necessary to 
        identify the payments to be so treated and such other 
        information as the Secretary determines necessary to carry out 
        the provisions of this subsection.
        ``(3) Exceptions for payments otherwise treated as base erosion 
    payments.--This subsection shall not apply to any qualified 
    derivative payment if--
            ``(A) the payment would be treated as a base erosion 
        payment if it were not made pursuant to a derivative, including 
        any interest, royalty, or service payment, or
            ``(B) in the case of a contract which has derivative and 
        nonderivative components, the payment is properly allocable to 
        the nonderivative component.
        ``(4) Derivative defined.--For purposes of this subsection--
            ``(A) In general.--The term `derivative' means any contract 
        (including any option, forward contract, futures contract, 
        short position, swap, or similar contract) the value of which, 
        or any payment or other transfer with respect to which, is 
        (directly or indirectly) determined by reference to one or more 
        of the following:
                ``(i) Any share of stock in a corporation.
                ``(ii) Any evidence of indebtedness.
                ``(iii) Any commodity which is actively traded.
                ``(iv) Any currency.
                ``(v) Any rate, price, amount, index, formula, or 
            algorithm.
        Such term shall not include any item described in clauses (i) 
        through (v).
            ``(B) Treatment of american depository receipts and similar 
        instruments.--Except as otherwise provided by the Secretary, 
        for purposes of this part, American depository receipts (and 
        similar instruments) with respect to shares of stock in foreign 
        corporations shall be treated as shares of stock in such 
        foreign corporations.
            ``(C) Exception for certain contracts.--Such term shall not 
        include any insurance, annuity, or endowment contract issued by 
        an insurance company to which subchapter L applies (or issued 
        by any foreign corporation to which such subchapter would apply 
        if such foreign corporation were a domestic corporation).
    ``(i) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
provisions of this section, including regulations--
        ``(1) providing for such adjustments to the application of this 
    section as are necessary to prevent the avoidance of the purposes 
    of this section, including through--
            ``(A) the use of unrelated persons, conduit transactions, 
        or other intermediaries, or
            ``(B) transactions or arrangements designed, in whole or in 
        part--
                ``(i) to characterize payments otherwise subject to 
            this section as payments not subject to this section, or
                ``(ii) to substitute payments not subject to this 
            section for payments otherwise subject to this section and
        ``(2) for the application of subsection (g), including rules to 
    prevent the avoidance of the exceptions under subsection (g)(3).''.
    (b) Reporting Requirements and Penalties.--
        (1) In general.--Subsection (b) of section 6038A is amended to 
    read as follows:
    ``(b) Required Information.--
        ``(1) In general.--For purposes of subsection (a), the 
    information described in this subsection is such information as the 
    Secretary prescribes by regulations relating to--
            ``(A) the name, principal place of business, nature of 
        business, and country or countries in which organized or 
        resident, of each person which--
                ``(i) is a related party to the reporting corporation, 
            and
                ``(ii) had any transaction with the reporting 
            corporation during its taxable year,
            ``(B) the manner in which the reporting corporation is 
        related to each person referred to in subparagraph (A), and
            ``(C) transactions between the reporting corporation and 
        each foreign person which is a related party to the reporting 
        corporation.
        ``(2) Additional information regarding base erosion payments.--
    For purposes of subsection (a) and section 6038C, if the reporting 
    corporation or the foreign corporation to whom section 6038C 
    applies is an applicable taxpayer, the information described in 
    this subsection shall include--
            ``(A) such information as the Secretary determines 
        necessary to determine the base erosion minimum tax amount, 
        base erosion payments, and base erosion tax benefits of the 
        taxpayer for purposes of section 59A for the taxable year, and
            ``(B) such other information as the Secretary determines 
        necessary to carry out such section.
    For purposes of this paragraph, any term used in this paragraph 
    which is also used in section 59A shall have the same meaning as 
    when used in such section.''.
        (2) Increase in penalty.--Paragraphs (1) and (2) of section 
    6038A(d) are each amended by striking ``$10,000'' and inserting 
    ``$25,000''.
    (c) Disallowance of Credits Against Base Erosion Tax.--Paragraph 
(2) of section 26(b) is amended by inserting after subparagraph (A) the 
following new subparagraph:
            ``(B) section 59A (relating to base erosion and anti-abuse 
        tax),''.
    (d) Conforming Amendments.--
        (1) The table of parts for subchapter A of chapter 1 is amended 
    by adding after the item relating to part VI the following new 
    item:

             ``Part VII. Base Erosion and Anti-abuse Tax''.

        (2) Paragraph (1) of section 882(a), as amended by this Act, is 
    amended by inserting ``or 59A,'' after ``section 11,''.
        (3) Subparagraph (A) of section 6425(c)(1), as amended by 
    section 13001, is amended to read as follows:
            ``(A) the sum of--
                ``(i) the tax imposed by section 11, or subchapter L of 
            chapter 1, whichever is applicable, plus
                ``(ii) the tax imposed by section 59A, over''.
        (4)(A) Subparagraph (A) of section 6655(g)(1), as amended by 
    sections 12001 and 13001, is amended by striking ``plus'' at the 
    end of clause (i), by redesignating clause (ii) as clause (iii), 
    and by inserting after clause (i) the following new clause:
                ``(ii) the tax imposed by section 59A, plus''.
        (B) Subparagraphs (A)(i) and (B)(i) of section 6655(e)(2), as 
    amended by sections 12001 and 13001, are each amended by inserting 
    ``and modified taxable income'' after ``taxable income''.
        (C) Subparagraph (B) of section 6655(e)(2) is amended by adding 
    at the end the following new clause:
                ``(iii) Modified taxable income.--The term `modified 
            taxable income' has the meaning given such term by section 
            59A(c)(1).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to base erosion payments (as defined in section 59A(d) of the 
Internal Revenue Code of 1986, as added by this section) paid or 
accrued in taxable years beginning after December 31, 2017.

                       PART III--OTHER PROVISIONS

SEC. 14501. RESTRICTION ON INSURANCE BUSINESS EXCEPTION TO PASSIVE 
FOREIGN INVESTMENT COMPANY RULES.
    (a) In General.--Section 1297(b)(2)(B) is amended to read as 
follows:
            ``(B) derived in the active conduct of an insurance 
        business by a qualifying insurance corporation (as defined in 
        subsection (f)),''.
    (b) Qualifying Insurance Corporation Defined.--Section 1297 is 
amended by adding at the end the following new subsection:
    ``(f) Qualifying Insurance Corporation.--For purposes of subsection 
(b)(2)(B)--
        ``(1) In general.--The term `qualifying insurance corporation' 
    means, with respect to any taxable year, a foreign corporation--
            ``(A) which would be subject to tax under subchapter L if 
        such corporation were a domestic corporation, and
            ``(B) the applicable insurance liabilities of which 
        constitute more than 25 percent of its total assets, determined 
        on the basis of such liabilities and assets as reported on the 
        corporation's applicable financial statement for the last year 
        ending with or within the taxable year.
        ``(2) Alternative facts and circumstances test for certain 
    corporations.--If a corporation fails to qualify as a qualified 
    insurance corporation under paragraph (1) solely because the 
    percentage determined under paragraph (1)(B) is 25 percent or less, 
    a United States person that owns stock in such corporation may 
    elect to treat such stock as stock of a qualifying insurance 
    corporation if--
            ``(A) the percentage so determined for the corporation is 
        at least 10 percent, and
            ``(B) under regulations provided by the Secretary, based on 
        the applicable facts and circumstances--
                ``(i) the corporation is predominantly engaged in an 
            insurance business, and
                ``(ii) such failure is due solely to runoff-related or 
            rating-related circumstances involving such insurance 
            business.
        ``(3) Applicable insurance liabilities.--For purposes of this 
    subsection--
            ``(A) In general.--The term `applicable insurance 
        liabilities' means, with respect to any life or property and 
        casualty insurance business--
                ``(i) loss and loss adjustment expenses, and
                ``(ii) reserves (other than deficiency, contingency, or 
            unearned premium reserves) for life and health insurance 
            risks and life and health insurance claims with respect to 
            contracts providing coverage for mortality or morbidity 
            risks.
            ``(B) Limitations on amount of liabilities.--Any amount 
        determined under clause (i) or (ii) of subparagraph (A) shall 
        not exceed the lesser of such amount--
                ``(i) as reported to the applicable insurance 
            regulatory body in the applicable financial statement 
            described in paragraph (4)(A) (or, if less, the amount 
            required by applicable law or regulation), or
                ``(ii) as determined under regulations prescribed by 
            the Secretary.
        ``(4) Other definitions and rules.--For purposes of this 
    subsection--
            ``(A) Applicable financial statement.--The term `applicable 
        financial statement' means a statement for financial reporting 
        purposes which--
                ``(i) is made on the basis of generally accepted 
            accounting principles,
                ``(ii) is made on the basis of international financial 
            reporting standards, but only if there is no statement that 
            meets the requirement of clause (i), or
                ``(iii) except as otherwise provided by the Secretary 
            in regulations, is the annual statement which is required 
            to be filed with the applicable insurance regulatory body, 
            but only if there is no statement which meets the 
            requirements of clause (i) or (ii).
            ``(B) Applicable insurance regulatory body.--The term 
        `applicable insurance regulatory body' means, with respect to 
        any insurance business, the entity established by law to 
        license, authorize, or regulate such business and to which the 
        statement described in subparagraph (A) is provided.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
SEC. 14502. REPEAL OF FAIR MARKET VALUE METHOD OF INTEREST EXPENSE 
APPORTIONMENT.
    (a) In General.--Paragraph (2) of section 864(e) is amended to read 
as follows:
        ``(2) Gross income and fair market value methods may not be 
    used for interest.--All allocations and apportionments of interest 
    expense shall be determined using the adjusted bases of assets 
    rather than on the basis of the fair market value of the assets or 
    gross income.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

                                TITLE II

SEC. 20001. OIL AND GAS PROGRAM.
    (a) Definitions.--In this section:
        (1) Coastal plain.--The term ``Coastal Plain'' means the area 
    identified as the 1002 Area on the plates prepared by the United 
    States Geological Survey entitled ``ANWR Map - Plate 1'' and ``ANWR 
    Map - Plate 2'', dated October 24, 2017, and on file with the 
    United States Geological Survey and the Office of the Solicitor of 
    the Department of the Interior.
        (2) Secretary.--The term ``Secretary'' means the Secretary of 
    the Interior, acting through the Bureau of Land Management.
    (b) Oil and Gas Program.--
        (1) In general.--Section 1003 of the Alaska National Interest 
    Lands Conservation Act (16 U.S.C. 3143) shall not apply to the 
    Coastal Plain.
        (2) Establishment.--
            (A) In general.--The Secretary shall establish and 
        administer a competitive oil and gas program for the leasing, 
        development, production, and transportation of oil and gas in 
        and from the Coastal Plain.
            (B) Purposes.--Section 303(2)(B) of the Alaska National 
        Interest Lands Conservation Act (Public Law 96-487; 94 Stat. 
        2390) is amended--
                (i) in clause (iii), by striking ``and'' at the end;
                (ii) in clause (iv), by striking the period at the end 
            and inserting ``; and''; and
                (iii) by adding at the end the following:
                ``(v) to provide for an oil and gas program on the 
            Coastal Plain.''.
        (3) Management.--Except as otherwise provided in this section, 
    the Secretary shall manage the oil and gas program on the Coastal 
    Plain in a manner similar to the administration of lease sales 
    under the Naval Petroleum Reserves Production Act of 1976 (42 
    U.S.C. 6501 et seq.) (including regulations).
        (4) Royalties.--Notwithstanding the Mineral Leasing Act (30 
    U.S.C. 181 et seq.), the royalty rate for leases issued pursuant to 
    this section shall be 16.67 percent.
        (5) Receipts.--Notwithstanding the Mineral Leasing Act (30 
    U.S.C. 181 et seq.), of the amount of adjusted bonus, rental, and 
    royalty receipts derived from the oil and gas program and 
    operations on Federal land authorized under this section--
            (A) 50 percent shall be paid to the State of Alaska; and
            (B) the balance shall be deposited into the Treasury as 
        miscellaneous receipts.
    (c) 2 Lease Sales Within 10 Years.--
        (1) Requirement.--
            (A) In general.--Subject to subparagraph (B), the Secretary 
        shall conduct not fewer than 2 lease sales area-wide under the 
        oil and gas program under this section by not later than 10 
        years after the date of enactment of this Act.
            (B) Sale acreages; schedule.--
                (i) Acreages.--The Secretary shall offer for lease 
            under the oil and gas program under this section--

                    (I) not fewer than 400,000 acres area-wide in each 
                lease sale; and
                    (II) those areas that have the highest potential 
                for the discovery of hydrocarbons.

                (ii) Schedule.--The Secretary shall offer--

                    (I) the initial lease sale under the oil and gas 
                program under this section not later than 4 years after 
                the date of enactment of this Act; and
                    (II) a second lease sale under the oil and gas 
                program under this section not later than 7 years after 
                the date of enactment of this Act.

        (2) Rights-of-way.--The Secretary shall issue any rights-of-way 
    or easements across the Coastal Plain for the exploration, 
    development, production, or transportation necessary to carry out 
    this section.
        (3) Surface development.--In administering this section, the 
    Secretary shall authorize up to 2,000 surface acres of Federal land 
    on the Coastal Plain to be covered by production and support 
    facilities (including airstrips and any area covered by gravel 
    berms or piers for support of pipelines) during the term of the 
    leases under the oil and gas program under this section.
SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED OUTER 
CONTINENTAL SHELF REVENUES.
    Section 105(f)(1) of the Gulf of Mexico Energy Security Act of 2006 
(43 U.S.C. 1331 note; Public Law 109-432) is amended by striking 
``exceed $500,000,000 for each of fiscal years 2016 through 2055.'' and 
inserting the following: ``exceed--
            ``(A) $500,000,000 for each of fiscal years 2016 through 
        2019;
            ``(B) $650,000,000 for each of fiscal years 2020 and 2021; 
        and
            ``(C) $500,000,000 for each of fiscal years 2022 through 
        2055.''.
SEC. 20003. STRATEGIC PETROLEUM RESERVE DRAWDOWN AND SALE.
    (a) Drawdown and Sale.--
        (1) In general.--Notwithstanding section 161 of the Energy 
    Policy and Conservation Act (42 U.S.C. 6241), except as provided in 
    subsections (b) and (c), the Secretary of Energy shall draw down 
    and sell from the Strategic Petroleum Reserve 7,000,000 barrels of 
    crude oil during the period of fiscal years 2026 through 2027.
        (2) Deposit of amounts received from sale.--Amounts received 
    from a sale under paragraph (1) shall be deposited in the general 
    fund of the Treasury during the fiscal year in which the sale 
    occurs.
    (b) Emergency Protection.--The Secretary of Energy shall not draw 
down and sell crude oil under subsection (a) in a quantity that would 
limit the authority to sell petroleum products under subsection (h) of 
section 161 of the Energy Policy and Conservation Act (42 U.S.C. 6241) 
in the full quantity authorized by that subsection.
    (c) Limitation.--The Secretary of Energy shall not drawdown or 
conduct sales of crude oil under subsection (a) after the date on which 
a total of $600,000,000 has been deposited in the general fund of the 
Treasury from sales authorized under that subsection.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.`