IB 

Union Calendar No. 302 

115TH CONGRESS 

1ST SESSION H. R. 1 

[Report No. 115–409] 

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

on the budget for fiscal year 2018. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 2, 2017 

Mr. BRADY of Texas (for himself, Mr. RYAN of Wisconsin, Mr. SAM JOHNSON

of Texas, Mr. NUNES, Mr. TIBERI, Mr. REICHERT, Mr. ROSKAM, Mr. 

BUCHANAN, Mr. SMITH of Nebraska, Ms. JENKINS of Kansas, Mr. PAULSEN, Mr. MARCHANT, Mrs. BLACK, Mr. REED, Mr. KELLY of Pennsylvania, Mr. RENACCI, Mr. MEEHAN, Mrs. NOEM, Mr. HOLDING, Mr. 

SMITH of Missouri, Mr. RICE of South Carolina, Mr. SCHWEIKERT, Mrs. 

WALORSKI, Mr. CURBELO of Florida, and Mr. BISHOP of Michigan) introduced the following bill; which was referred to the Committee on Ways 

and Means 

NOVEMBER 13, 2017 

Reported with amendments, committed to the Committee of the Whole House 

on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on November 2, 2017] 


lotter on DSKBCFDHB2PROD with BILLS
2 

•HR 1 RH

A BILL 

To provide for reconciliation pursuant to title II of the 

concurrent resolution on the budget for fiscal year 2018. 


lotter on DSKBCFDHB2PROD with BILLS
3 

•HR 1 RH

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

3 SECTION 1. SHORT TITLE; ETC. 

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

5 Cuts and Jobs Act’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as otherwise 

7 expressly provided, whenever in this Act an amendment or 

8 repeal is expressed in terms of an amendment to, or repeal 

9 of, a section or other provision, the reference shall be consid10 ered to be made to a section or other provision of the Inter11 nal Revenue Code of 1986. 

12 (c) TABLE OF CONTENTS.—The table of contents for 

13 this Act is as follows: 

Sec. 1. Short title; etc. 

TITLE I—TAX REFORM FOR INDIVIDUALS 

Subtitle A—Simplification and Reform of Rates, Standard Deduction, and 

Exemptions 

Sec. 1001. Reduction and simplification of individual income tax rates. 

Sec. 1002. Enhancement of standard deduction. 

Sec. 1003. Repeal of deduction for personal exemptions. 

Sec. 1004. Maximum rate on business income of individuals. 

Sec. 1005. Conforming amendments related to simplification of individual income 

tax rates. 

Subtitle B—Simplification and Reform of Family and Individual Tax Credits 

Sec. 1101. Enhancement of child tax credit and new family tax credit. 

Sec. 1102. Repeal of nonrefundable credits. 

Sec. 1103. Refundable credit program integrity. 

Sec. 1104. Procedures to reduce improper claims of earned income credit. 

Sec. 1105. Certain income disallowed for purposes of the earned income tax credit. 

Subtitle C—Simplification and Reform of Education Incentives 

Sec. 1201. American opportunity tax credit. 

Sec. 1202. Consolidation of education savings rules. 

Sec. 1203. Reforms to discharge of certain student loan indebtedness. 


lotter on DSKBCFDHB2PROD with BILLS
4 

•HR 1 RH

Sec. 1204. Repeal of other provisions relating to education. 

Sec. 1205. Rollovers between qualified tuition programs and qualified ABLE programs. 

Subtitle D—Simplification and Reform of Deductions 

Sec. 1301. Repeal of overall limitation on itemized deductions. 

Sec. 1302. Mortgage interest. 

Sec. 1303. Repeal of deduction for certain taxes not paid or accrued in a trade 

or business. 

Sec. 1304. Repeal of deduction for personal casualty losses. 

Sec. 1305. Limitation on wagering losses. 

Sec. 1306. Charitable contributions. 

Sec. 1307. Repeal of deduction for tax preparation expenses. 

Sec. 1308. Repeal of medical expense deduction. 

Sec. 1309. Repeal of deduction for alimony payments. 

Sec. 1310. Repeal of deduction for moving expenses. 

Sec. 1311. Termination of deduction and exclusions for contributions to medical 

savings accounts. 

Sec. 1312. Denial of deduction for expenses attributable to the trade or business 

of being an employee. 

Subtitle E—Simplification and Reform of Exclusions and Taxable 

Compensation 

Sec. 1401. Limitation on exclusion for employer-provided housing. 

Sec. 1402. Exclusion of gain from sale of a principal residence. 

Sec. 1403. Repeal of exclusion, etc., for employee achievement awards. 

Sec. 1404. Sunset of exclusion for dependent care assistance programs. 

Sec. 1405. Repeal of exclusion for qualified moving expense reimbursement. 

Sec. 1406. Repeal of exclusion for adoption assistance programs. 

Subtitle F—Simplification and Reform of Savings, Pensions, Retirement 

Sec. 1501. Repeal of special rule permitting recharacterization of Roth IRA contributions as traditional IRA contributions. 

Sec. 1502. Reduction in minimum age for allowable in-service distributions. 

Sec. 1503. Modification of rules governing hardship distributions. 

Sec. 1504. Modification of rules relating to hardship withdrawals from cash or 

deferred arrangements. 

Sec. 1505. Extended rollover period for the rollover of plan loan offset amounts 

in certain cases. 

Sec. 1506. Modification of nondiscrimination rules to protect older, longer service 

participants. 

Subtitle G—Estate, Gift, and Generation-skipping Transfer Taxes 

Sec. 1601. Increase in credit against estate, gift, and generation-skipping transfer 

tax. 

Sec. 1602. Repeal of estate and generation-skipping transfer taxes. 

TITLE II—ALTERNATIVE MINIMUM TAX REPEAL 

Sec. 2001. Repeal of alternative minimum tax. 


lotter on DSKBCFDHB2PROD with BILLS
5 

•HR 1 RH

TITLE III—BUSINESS TAX REFORM 

Subtitle A—Tax Rates 

Sec. 3001. Reduction in corporate tax rate. 

Subtitle B—Cost Recovery 

Sec. 3101. Increased expensing. 

Subtitle C—Small Business Reforms 

Sec. 3201. Expansion of section 179 expensing. 

Sec. 3202. Small business accounting method reform and simplification. 

Sec. 3203. Small business exception from limitation on deduction of business interest. 

Sec. 3204. Modification of treatment of S corporation conversions to C corporations. 

Subtitle D—Reform of Business-related Exclusions, Deductions, etc. 

Sec. 3301. Interest. 

Sec. 3302. Modification of net operating loss deduction. 

Sec. 3303. Like-kind exchanges of real property. 

Sec. 3304. Revision of treatment of contributions to capital. 

Sec. 3305. Repeal of deduction for local lobbying expenses. 

Sec. 3306. Repeal of deduction for income attributable to domestic production activities. 

Sec. 3307. Entertainment, etc. expenses. 

Sec. 3308. Unrelated business taxable income increased by amount of certain 

fringe benefit expenses for which deduction is disallowed. 

Sec. 3309. Limitation on deduction for FDIC premiums. 

Sec. 3310. Repeal of rollover of publicly traded securities gain into specialized 

small business investment companies. 

Sec. 3311. Certain self-created property not treated as a capital asset. 

Sec. 3312. Repeal of special rule for sale or exchange of patents. 

Sec. 3313. Repeal of technical termination of partnerships. 

Sec. 3314. Recharacterization of certain gains in the case of partnership profits 

interests held in connection with performance of investment services. 

Sec. 3315. Amortization of research and experimental expenditures. 

Sec. 3316. Uniform treatment of expenses in contingency fee cases. 

Subtitle E—Reform of Business Credits 

Sec. 3401. Repeal of credit for clinical testing expenses for certain drugs for rare 

diseases or conditions. 

Sec. 3402. Repeal of employer-provided child care credit. 

Sec. 3403. Repeal of rehabilitation credit. 

Sec. 3404. Repeal of work opportunity tax credit. 

Sec. 3405. Repeal of deduction for certain unused business credits. 

Sec. 3406. Termination of new markets tax credit. 

Sec. 3407. Repeal of credit for expenditures to provide access to disabled individuals. 

Sec. 3408. Modification of credit for portion of employer social security taxes 

paid with respect to employee tips. 


lotter on DSKBCFDHB2PROD with BILLS
6 

•HR 1 RH

Subtitle F—Energy Credits 

Sec. 3501. Modifications to credit for electricity produced from certain renewable 

resources. 

Sec. 3502. Modification of the energy investment tax credit. 

Sec. 3503. Extension and phaseout of residential energy efficient property. 

Sec. 3504. Repeal of enhanced oil recovery credit. 

Sec. 3505. Repeal of credit for producing oil and gas from marginal wells. 

Sec. 3506. Modifications of credit for production from advanced nuclear power facilities. 

Subtitle G—Bond Reforms 

Sec. 3601. Termination of private activity bonds. 

Sec. 3602. Repeal of advance refunding bonds. 

Sec. 3603. Repeal of tax credit bonds. 

Sec. 3604. No tax exempt bonds for professional stadiums. 

Subtitle H—Insurance 

Sec. 3701. Net operating losses of life insurance companies. 

Sec. 3702. Repeal of small life insurance company deduction. 

Sec. 3703. Surtax on life insurance company taxable income. 

Sec. 3704. Adjustment for change in computing reserves. 

Sec. 3705. Repeal of special rule for distributions to shareholders from pre-1984 

policyholders surplus account. 

Sec. 3706. Modification of proration rules for property and casualty insurance 

companies. 

Sec. 3707. Modification of discounting rules for property and casualty insurance 

companies. 

Sec. 3708. Repeal of special estimated tax payments. 

Subtitle I—Compensation 

Sec. 3801. Modification of limitation on excessive employee remuneration. 

Sec. 3802. Excise tax on excess tax-exempt organization executive compensation. 

Sec. 3803. Treatment of qualified equity grants. 

TITLE IV—TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS 

Subtitle A—Establishment of Participation Exemption System for Taxation of 

Foreign Income 

Sec. 4001. Deduction for foreign-source portion of dividends received by domestic 

corporations from specified 10-percent owned foreign corporations. 

Sec. 4002. Application of participation exemption to investments in United 

States property. 

Sec. 4003. Limitation on losses with respect to specified 10-percent owned foreign 

corporations. 

Sec. 4004. Treatment of deferred foreign income upon transition to participation 

exemption system of taxation. 

Subtitle B—Modifications Related to Foreign Tax Credit System 

Sec. 4101. Repeal of section 902 indirect foreign tax credits; determination of section 960 credit on current year basis. 


lotter on DSKBCFDHB2PROD with BILLS
7 

•HR 1 RH

Sec. 4102. Source of income from sales of inventory determined solely on basis 

of production activities. 

Subtitle C—Modification of Subpart F Provisions 

Sec. 4201. Repeal of inclusion based on withdrawal of previously excluded subpart F income from qualified investment. 

Sec. 4202. Repeal of treatment of foreign base company oil related income as subpart F income. 

Sec. 4203. Inflation adjustment of de minimis exception for foreign base company 

income. 

Sec. 4204. Look-thru rule for related controlled foreign corporations made permanent. 

Sec. 4205. Modification of stock attribution rules for determining status as a controlled foreign corporation. 

Sec. 4206. Elimination of requirement that corporation must be controlled for 30 

days before subpart F inclusions apply. 

Subtitle D—Prevention of Base Erosion 

Sec. 4301. Current year inclusion by United States shareholders with foreign high 

returns. 

Sec. 4302. Limitation on deduction of interest by domestic corporations which are 

members of an international financial reporting group. 

Sec. 4303. Excise tax on certain payments from domestic corporations to related 

foreign corporations; election to treat such payments as effectively connected income. 

Subtitle E—Provisions Related to Possessions of the United States 

Sec. 4401. Extension of deduction allowable with respect to income attributable 

to domestic production activities in Puerto Rico. 

Sec. 4402. Extension of temporary increase in limit on cover over of rum excise 

taxes to Puerto Rico and the Virgin Islands. 

Sec. 4403. Extension of American Samoa economic development credit. 

Subtitle F—Other International Reforms 

Sec. 4501. Restriction on insurance business exception to passive foreign investment company rules. 

TITLE V—EXEMPT ORGANIZATIONS 

Subtitle A—Unrelated Business Income Tax 

Sec. 5001. Clarification of unrelated business income tax treatment of entities 

treated as exempt from taxation under section 501(a). 

Sec. 5002. Exclusion of research income limited to publicly available research. 

Subtitle B—Excise Taxes 

Sec. 5101. Simplification of excise tax on private foundation investment income. 

Sec. 5102. Private operating foundation requirements relating to operation of art 

museum. 

Sec. 5103. Excise tax based on investment income of private colleges and universities. 

Sec. 5104. Exception from private foundation excess business holding tax for 

independently-operated philanthropic business holdings. 


lotter on DSKBCFDHB2PROD with BILLS
8 

•HR 1 RH

Subtitle C—Requirements for Organizations Exempt From Tax 

Sec. 5201. 501(c)(3) organizations permitted to make statements relating to political campaign in ordinary course of activities. 

Sec. 5202. Additional reporting requirements for donor advised fund sponsoring 

organizations. 

1 TITLE I—TAX REFORM FOR 

2 INDIVIDUALS 

3 Subtitle A—Simplification and Re4 form of Rates, Standard Deduc5 tion, and Exemptions 

6 SEC. 1001. REDUCTION AND SIMPLIFICATION OF INDI7 VIDUAL INCOME TAX RATES. 

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

9 subsection (i) and by striking all that precedes subsection 

10 (h) and inserting the following: 

11 ‘‘SEC. 1. TAX IMPOSED. 

12 ‘‘(a) IN GENERAL.—There is hereby imposed on the in13 come of every individual a tax equal to the sum of— 

14 ‘‘(1) 12 PERCENT BRACKET.—12 percent of so 

15 much of the taxable income as does not exceed the 25- 

16 percent bracket threshold amount, 

17 ‘‘(2) 25 PERCENT BRACKET.—25 percent of so 

18 much of the taxable income as exceeds the 25-percent 

19 bracket threshold amount but does not exceed the 35- 

20 percent bracket threshold amount, plus 

21 ‘‘(3) 35 PERCENT BRACKET.—35 percent of so 

22 much of taxable income as exceeds the 35-percent 


lotter on DSKBCFDHB2PROD with BILLS
9 

•HR 1 RH

1 bracket threshold amount but does not exceed the 39.6 

2 percent bracket threshold amount. 

3 ‘‘(4) 39.6 PERCENT BRACKET.—39.6 percent of so 

4 much of taxable income as exceeds the 39.6-percent 

5 bracket threshold amount. 

6 ‘‘(b) BRACKET THRESHOLD AMOUNTS.—For purposes 

7 of this section— 

8 ‘‘(1) 25-PERCENT BRACKET THRESHOLD

9 AMOUNT.—The term ‘25-percent bracket threshold 

10 amount’ means— 

11 ‘‘(A) in the case of a joint return or sur12 viving spouse, $90,000, 

13 ‘‘(B) in the case of an individual who is the 

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

15 $67,500, 

16 ‘‘(C) in the case of any other individual 

17 (other than an estate or trust), an amount equal 

to 1 18 ⁄2 of the amount in effect for the taxable year 

19 under subparagraph (A), and 

20 ‘‘(D) in the case of an estate or trust, 

21 $2,550. 

22 ‘‘(2) 35-PERCENT BRACKET THRESHOLD

23 AMOUNT.—The term ‘35-percent bracket threshold 

24 amount’ means— 


lotter on DSKBCFDHB2PROD with BILLS
10 

•HR 1 RH

1 ‘‘(A) in the case of a joint return or sur2 viving spouse, $260,000, 

3 ‘‘(B) in the case of a married individual filing a separate return, an amount equal to 1 4 ⁄2 of 

5 the amount in effect for the taxable year under 

6 subparagraph (A), and 

7 ‘‘(C) in the case of any other individual 

8 (other than an estate or trust), $200,000, and 

9 ‘‘(D) in the case of an estate or trust, 

10 $9,150. 

11 ‘‘(3) 39.6-PERCENT BRACKET THRESHOLD

12 AMOUNT.—The term ‘39.6-percent bracket threshold 

13 amount’ means— 

14 ‘‘(A) in the case of a joint return or sur15 viving spouse, $1,000,000, 

16 ‘‘(B) in the case of any other individual 

17 (other than an estate or trust), an amount equal 

to 1 18 ⁄2 of the amount in effect for the taxable year 

19 under subparagraph (A), and 

20 ‘‘(C) in the case of an estate or trust, 

21 $12,500. 

22 ‘‘(c) INFLATION ADJUSTMENT.— 

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

24 year beginning after 2018, each dollar amount in sub25 sections (b) and (e)(3) (other than any amount deterVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
11 

•HR 1 RH

1 mined by reference to such a dollar amount) shall be 

2 increased by an amount equal to— 

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

4 ‘‘(B) the cost-of-living adjustment deter5 mined under this subsection for the calendar 

6 year in which the taxable year begins by sub7 stituting ‘2017’ for ‘2016’ in paragraph 

8 (2)(A)(ii). 

9 If any increase determined under the preceding sen10 tence is not a multiple of $100, such increase shall be 

11 rounded to the next lowest multiple of $100. 

12 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur13 poses of this subsection— 

14 ‘‘(A) IN GENERAL.—The cost-of-living ad15 justment for any calendar year is the percentage 

16 (if any) by which— 

17 ‘‘(i) the C-CPI-U for the preceding cal18 endar year, exceeds 

19 ‘‘(ii) the normalized CPI for calendar 

20 year 2016. 

21 ‘‘(B) SPECIAL RULE FOR ADJUSTMENTS

22 WITH A BASE YEAR AFTER 2016.—For purposes 

23 of any provision which provides for the substi24 tution of a year after 2016 for ‘2016’ in sub25 paragraph (A)(ii), subparagraph (A) shall be 


lotter on DSKBCFDHB2PROD with BILLS
12 

•HR 1 RH

1 applied by substituting ‘C-CPI-U’ for ‘normal2 ized CPI’ in clause (ii). 

3 ‘‘(3) NORMALIZED CPI.—For purposes of this 

4 subsection, the normalized CPI for any calendar year 

5 is the product of— 

6 ‘‘(A) the CPI for such calendar year, multi7 plied by 

8 ‘‘(B) the C-CPI-U transition multiple. 

9 ‘‘(4) C-CPI-U TRANSITION MULTIPLE.—For pur10 poses of this subsection, the term ‘C-CPI-U transition 

11 multiple’ means the amount obtained by dividing— 

12 ‘‘(A) the C-CPI-U for calendar year 2016, 

13 by 

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

15 ‘‘(5) C-CPI-U.—For purposes of this sub16 section— 

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

18 means the Chained Consumer Price Index for All 

19 Urban Consumers (as published by the Bureau of 

20 Labor Statistics of the Department of Labor). 

21 The values of the Chained Consumer Price Index 

22 for All Urban Consumers taken into account for 

23 purposes of determining the cost-of-living adjust24 ment for any calendar year under this subsection 

25 shall be the latest values so published as of the 


lotter on DSKBCFDHB2PROD with BILLS
13 

•HR 1 RH

1 date on which such Bureau publishes the initial 

2 value of the Chained Consumer Price Index for 

3 All Urban Consumers for the month of August 

4 for the preceding calendar year. 

5 ‘‘(B) DETERMINATION FOR CALENDAR

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

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

8 12-month period ending on August 31 of such 

9 calendar year. 

10 ‘‘(6) CPI.—For purposes of this subsection— 

11 ‘‘(A) IN GENERAL.—The term ‘Consumer 

12 Price Index’ means the last Consumer Price 

13 Index for All Urban Consumers published by the 

14 Department of Labor. For purposes of the pre15 ceding sentence, the revision of the Consumer 

16 Price Index which is most consistent with the 

17 Consumer Price Index for calendar year 1986 

18 shall be used. 

19 ‘‘(B) DETERMINATION FOR CALENDAR

20 YEAR.—The CPI for any calendar year is the av21 erage of the Consumer Price Index as of the close 

22 of the 12-month period ending on August 31 of 

23 such calendar year. 

24 ‘‘(d) SPECIAL RULES FOR CERTAIN CHILDREN WITH

25 UNEARNED INCOME.— 


lotter on DSKBCFDHB2PROD with BILLS
14 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—In the case of any child to 

2 whom this subsection applies for any taxable year— 

3 ‘‘(A) the 25-percent bracket threshold 

4 amount shall not be more than the taxable in5 come of such child for the taxable year reduced 

6 by the net unearned income of such child, and 

7 ‘‘(B) the 35-percent bracket threshold 

8 amount shall not be more than the sum of— 

9 ‘‘(i) the taxable income of such child 

10 for the taxable year reduced by the net un11 earned income of such child, plus 

12 ‘‘(ii) the dollar amount in effect under 

13 subsection (b)(2)(D) for the taxable year. 

14 ‘‘(C) the 39.6-percent bracket threshold 

15 amount shall not be more than the sum of— 

16 ‘‘(i) the taxable income of such child 

17 for the taxable year reduced by the net un18 earned income of such child, plus 

19 ‘‘(ii) the dollar amount in effect under 

20 subsection (b)(3)(C). 

21 ‘‘(2) CHILD TO WHOM SUBSECTION APPLIES.— 

22 This subsection shall apply to any child for any tax23 able year if— 

24 ‘‘(A) such child— 


lotter on DSKBCFDHB2PROD with BILLS
15 

•HR 1 RH

1 ‘‘(i) has not attained age 18 before the 

2 close of the taxable year, or 

3 ‘‘(ii) has attained age 18 before the 

4 close of the taxable year and is described in 

5 paragraph (3), 

6 ‘‘(B) either parent of such child is alive at 

7 the close of the taxable year, and 

8 ‘‘(C) such child does not file a joint return 

9 for the taxable year. 

10 ‘‘(3) CERTAIN CHILDREN WHOSE EARNED IN11 COME DOES NOT EXCEED ONE-HALF OF INDIVIDUAL’S

12 SUPPORT.—A child is described in this paragraph 

13 if— 

14 ‘‘(A) such child— 

15 ‘‘(i) has not attained age 19 before the 

16 close of the taxable year, or 

17 ‘‘(ii) is a student (within the meaning 

18 of section 7706(f)(2)) who has not attained 

19 age 24 before the close of the taxable year, 

20 and 

21 ‘‘(B) such child’s earned income (as defined 

22 in section 911(d)(2)) for such taxable year does 

23 not exceed one-half of the amount of the individ24 ual’s support (within the meaning of section 

25 7706(c)(1)(D) after the application of section 


lotter on DSKBCFDHB2PROD with BILLS
16 

•HR 1 RH

1 7706(f)(5) (without regard to subparagraph (A) 

2 thereof)) for such taxable year. 

3 ‘‘(4) NET UNEARNED INCOME.—For purposes of 

4 this subsection— 

5 ‘‘(A) IN GENERAL.—The term ‘net unearned 

6 income’ means the excess of— 

7 ‘‘(i) the portion of the adjusted gross 

8 income for the taxable year which is not at9 tributable to earned income (as defined in 

10 section 911(d)(2)), over 

11 ‘‘(ii) the sum of— 

12 ‘‘(I) the amount in effect for the 

13 taxable year under section 63(c)(2)(A) 

14 (relating to limitation on standard de15 duction in the case of certain depend16 ents), plus 

17 ‘‘(II) The greater of the amount 

18 described in subclause (I) or, if the 

19 child itemizes his deductions for the 

20 taxable year, the amount of the 

21 itemized deductions allowed by this 

22 chapter for the taxable year which are 

23 directly connected with the production 

24 of the portion of adjusted gross income 

25 referred to in clause (i). 


lotter on DSKBCFDHB2PROD with BILLS
17 

•HR 1 RH

1 ‘‘(B) LIMITATION BASED ON TAXABLE IN2 COME.—The amount of the net unearned income 

3 for any taxable year shall not exceed the individ4 ual’s taxable income for such taxable year. 

5 ‘‘(e) PHASEOUT OF 12-PERCENT RATE.— 

6 ‘‘(1) IN GENERAL.—The amount of tax imposed 

7 by this section (determined without regard to this 

8 subsection) shall be increased by 6 percent of the ex9 cess (if any) of— 

10 ‘‘(A) adjusted gross income, over 

11 ‘‘(B) the applicable dollar amount. 

12 ‘‘(2) LIMITATION.—The increase determined 

13 under paragraph (1) with respect to any taxpayer for 

14 any taxable year shall not exceed 27.6 percent of the 

15 lesser of— 

16 ‘‘(A) the taxpayer’s taxable income for such 

17 taxable year, or 

18 ‘‘(B) the 25-percent bracket threshold 

19 amount in effect with respect to the taxpayer for 

20 such taxable year. 

21 ‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur22 poses of this subsection, the term ‘applicable dollar 

23 amount’ means— 

24 ‘‘(A) in the case of a joint return or a sur25 viving spouse, $1,200,000, 


lotter on DSKBCFDHB2PROD with BILLS
18 

•HR 1 RH

1 ‘‘(B) in the case of a married individual filing a separate return, an amount equal to 1 2 ⁄2 of 

3 the amount in effect for the taxable year under 

4 subparagraph (A), and 

5 ‘‘(C) in the case of any other individual, 

6 $1,000,000. 

7 ‘‘(4) ESTATES AND TRUSTS.—Paragraph (1) 

8 shall not apply in the case of an estate or trust.’’. 

9 (b) APPLICATION OF CURRENT INCOME TAX BRACK10 ETS TO CAPITAL GAINS BRACKETS.— 

11 (1) IN GENERAL.— 

12 (A) 0-PERCENT CAPITAL GAINS BRACKET.— 

13 Section 1(h)(1) is amended by striking ‘‘which 

14 would (without regard to this paragraph) be 

15 taxed at a rate below 25 percent’’ in subpara16 graph (B)(i) and inserting ‘‘below the 15-percent 

17 rate threshold’’. 

18 (B) 15-PERCENT CAPITAL GAINS BRACK19 ET.—Section 1(h)(1)(C)(ii)(I) is amended by 

20 striking ‘‘which would (without regard to this 

21 paragraph) be taxed at a rate below 39.6 per22 cent’’ and inserting ‘‘below the 20-percent rate 

23 threshold’’. 


lotter on DSKBCFDHB2PROD with BILLS
19 

•HR 1 RH

1 (2) RATE THRESHOLDS DEFINED.—Section 1(h) 

2 is amended by adding at the end the following new 

3 paragraph: 

4 ‘‘(12) RATE THRESHOLDS DEFINED.—For pur5 poses of this subsection— 

6 ‘‘(A) 15-PERCENT RATE THRESHOLD.—The 

7 15-percent rate threshold shall be— 

8 ‘‘(i) in the case of a joint return or 

surviving spouse, $77,200 (1 9 ⁄2 such amount 

10 in the case of a married individual filing a 

11 separate return), 

12 ‘‘(ii) in the case of an individual who 

13 is the head of a household (as defined in sec14 tion 2(b)), $51,700, 

15 ‘‘(iii) in the case of any other indi16 vidual (other than an estate or trust), an 

amount equal to 1 17 ⁄2 of the amount in effect 

18 for the taxable year under clause (i), and 

19 ‘‘(iv) in the case of an estate or trust, 

20 $2,600. 

21 ‘‘(B) 20-PERCENT RATE THRESHOLD.—The 

22 20-percent rate threshold shall be— 

23 ‘‘(i) in the case of a joint return or 

surviving spouse, $479,000 (1 24 ⁄2 such amount 


lotter on DSKBCFDHB2PROD with BILLS
20 

•HR 1 RH

1 in the case of a married individual filing a 

2 separate return), 

3 ‘‘(ii) in the case of an individual who 

4 is the head of a household (as defined in sec5 tion 2(b)), $452,400, 

6 ‘‘(iii) in the case of any other indi7 vidual (other than an estate or trust), 

8 $425,800, and 

9 ‘‘(iv) in the case of an estate or trust, 

10 $12,700. 

11 ‘‘(C) INFLATION ADJUSTMENT.—In the case 

12 of any taxable year beginning after 2018, each of 

13 the dollar amounts in subparagraphs (A) and 

14 (B) shall be increased by an amount equal to— 

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

16 ‘‘(ii) the cost-of-living adjustment de17 termined under subsection (c)(2)(A) for the 

18 calendar year in which the taxable year be19 gins, determined by substituting ‘calendar 

20 year 2017’ for ‘calendar year 2016’ in 

21 clause (ii) thereof.’’. 

22 (c) APPLICATION OF SECTION 15.— 

23 (1) IN GENERAL.—Subsection (a) of section 15 is 

24 amended by striking ‘‘by this chapter’’ and inserting 

25 ‘‘by section 11 (or by reference to any such rates)’’. 


lotter on DSKBCFDHB2PROD with BILLS
21 

•HR 1 RH

1 (2) CONFORMING AMENDMENTS.— 

2 (A) Section 15 is amended by striking sub3 sections (d) and (f) and by redesignating sub4 section (e) as subsection (d). 

5 (B) Section 15(d), as redesignated by sub6 paragraph (A), is amended by striking ‘‘section 

7 1 or 11(b)’’ and inserting ‘‘section 11(b)’’. 

8 (C) Section 6013(c) is amended by striking 

9 ‘‘sections 15, 443, and 7851(a)(1)(A)’’ and in10 serting ‘‘sections 443 and 7851(a)(1)(A)’’. 

11 (3) APPLICATION TO THIS ACT.—Section 15 of 

12 the Internal Revenue Code of 1986 shall not apply to 

13 any change in a rate of tax imposed by chapter 1 of 

14 such Code which occurs by reason of any amendment 

15 made by this Act (other than the amendments made 

16 by section 3001). 

17 (d) EFFECTIVE DATE.— 

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

19 this section shall apply to taxable years beginning 

20 after December 31, 2017. 

21 (2) SUBSECTION (c).—The amendments made by 

22 subsection (c) shall take effect on the date of the enact23 ment of this Act. 


lotter on DSKBCFDHB2PROD with BILLS
22 

•HR 1 RH

1 SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION. 

2 (a) INCREASE IN STANDARD DEDUCTION.—Section 

3 63(c) is amended to read as follows: 

4 ‘‘(c) STANDARD DEDUCTION.—For purposes of this 

5 subtitle— 

6 ‘‘(1) IN GENERAL.—Except as otherwise provided 

7 in this subsection, the term ‘standard deduction’ 

8 means— 

9 ‘‘(A) $24,400, in the case of a joint return 

10 (or a surviving spouse (as defined in section 

11 2(a)), 

12 ‘‘(B) three-quarters of the amount in effect 

13 under subparagraph (A) for the taxable year, in 

14 the case of the head of a household (as defined in 

15 section 2(b)), and 

16 ‘‘(C) one-half of the amount in effect under 

17 subparagraph (A) for the taxable year, in any 

18 other case. 

19 ‘‘(2) LIMITATION ON STANDARD DEDUCTION IN

20 THE CASE OF CERTAIN DEPENDENTS.—In the case of 

21 an individual who is a dependent of another taxpayer 

22 for a taxable year beginning in the calendar year in 

23 which the individual’s taxable year begins, the stand24 ard deduction applicable to such individual for such 

25 individual’s taxable year shall not exceed the greater 

26 of— 


lotter on DSKBCFDHB2PROD with BILLS
23 

•HR 1 RH

1 ‘‘(A) $500, or 

2 ‘‘(B) the sum of $250 and such individual’s 

3 earned income (within the means of section 32). 

4 ‘‘(3) CERTAIN INDIVIDUALS, ETC., NOT ELIGIBLE

5 FOR STANDARD DEDUCTION.—In the case of— 

6 ‘‘(A) a married individual filing a separate 

7 return where either spouse itemizes deductions, 

8 ‘‘(B) a nonresident alien individual, 

9 ‘‘(C) an individual making a return under 

10 section 443(a)(1) for a period of less than 12 

11 months on account of a change in his annual ac12 counting period, or 

13 ‘‘(D) an estate or trust, common trust fund, 

14 or partnership, 

15 the standard deduction shall be zero. 

16 ‘‘(4) UNMARRIED INDIVIDUAL.—For purposes of 

17 this section, the term ‘unmarried individual’ means 

18 any individual who— 

19 ‘‘(A) is not married as of the close of the 

20 taxable year (as determined by applying section 

21 7703), 

22 ‘‘(B) is not a surviving spouse (as defined 

23 in section 2(a)) for the taxable year, and 

24 ‘‘(C) is not a dependent of another taxpayer 

25 for a taxable year beginning in the calendar 


lotter on DSKBCFDHB2PROD with BILLS
24 

•HR 1 RH

1 year in which the individual’s taxable year be2 gins. 

3 ‘‘(5) INFLATION ADJUSTMENTS.— 

4 ‘‘(A) STANDARD DEDUCTION AMOUNT.—In 

5 the case of any taxable year beginning after 

6 2019, the dollar amount in paragraph (1)(A) 

7 shall be increased by an amount equal to— 

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

9 ‘‘(ii) the cost-of-living adjustment de10 termined under section 1(c)(2)(A) for the 

11 calendar year in which the taxable year be12 gins, determined by substituting ‘calendar 

13 year 2018’ for ‘calendar year 2016’ in 

14 clause (ii) thereof. 

15 ‘‘(B) LIMITATION AMOUNT IN CASE OF CER16 TAIN DEPENDENTS.—In the case of any taxable 

17 year beginning after 2017, each of the dollar 

18 amounts in paragraph (2) shall be increased by 

19 an amount equal to— 

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

21 ‘‘(ii)(I) in the case of the dollar 

22 amount in paragraph (2)(A), under section 

23 1(c)(2)(A) for the calendar year in which 

24 the taxable year begins determined by subVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
25 

•HR 1 RH

1 stituting ‘calendar year 1987’ for ‘calendar 

2 year 2016’ in clause (ii) thereof, and 

3 ‘‘(II) in the case of the dollar amount 

4 in paragraph (2)(B), under section 

5 1(c)(2)(A) for the calendar year in which 

6 the taxable year begins determined by sub7 stituting ‘calendar year 1997’ for ‘calendar 

8 year 2016’ in clause (ii) thereof. 

9 If any increase determined under this paragraph is 

10 not a multiple of $100, such increase shall be rounded 

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

12 (b) CONFORMING AMENDMENTS.— 

13 (1) Section 63(b) is amended by striking ‘‘, 

14 minus—’’ and all that follows and inserting ‘‘minus 

15 the standard deduction’’. 

16 (2) Section 63 is amended by striking sub17 sections (f) and (g). 

18 (3) Section 1398(c) is amended— 

19 (A) by striking ‘‘BASIC’’ in the heading 

20 thereof, 

21 (B) by striking ‘‘BASIC STANDARD’’ in the 

22 heading of paragraph (3) and inserting ‘‘STAND23 ARD’’, and 

24 (C) by striking ‘‘basic’’ in paragraph (3). 


lotter on DSKBCFDHB2PROD with BILLS
26 

•HR 1 RH

1 (4) Section 3402(m)(3) is amended by striking 

2 ‘‘(including the additional standard deduction under 

3 section 63(c)(3) for the aged and blind)’’. 

4 (5) Section 6014(b)(4) is amended by striking 

5 ‘‘section 63(c)(5)’’ and inserting ‘‘section 63(c)(2)’’. 

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

7 section shall apply to taxable years beginning after Decem8 ber 31, 2017. 

9 SEC. 1003. REPEAL OF DEDUCTION FOR PERSONAL EXEMP10 TIONS. 

11 (a) IN GENERAL.—Part V of subchapter B of chapter 

12 1 is hereby repealed. 

13 (b) DEFINITION OF DEPENDENT RETAINED.—Section 

14 152, prior to repeal by subsection (a), is hereby redesignated 

15 as section 7706 and moved to the end of chapter 79. 

16 (c) APPLICATION TO ESTATES AND TRUSTS.—Sub17 section (b) of section 642 is amended— 

18 (1) by striking paragraph (2)(C), 

19 (2) by striking paragraph (3), and 

20 (3) by striking ‘‘DEDUCTION FOR PERSONAL EX21 EMPTION’’ in the heading thereof and inserting 

22 ‘‘BASIC DEDUCTION’’. 

23 (d) APPLICATION TO NONRESIDENT ALIENS.—Section 

24 873(b) is amended by striking paragraph (3). 

25 (e) MODIFICATION OF WAGE WITHHOLDING RULES.— 


lotter on DSKBCFDHB2PROD with BILLS
27 

•HR 1 RH

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

2 by striking paragraph (2). 

3 (2) CONFORMING AMENDMENT.—Section 3402(a) 

4 is amended— 

5 (A) by redesignating subparagraphs (A) 

6 and (B) of paragraph (1) as paragraphs (1) and 

7 (2) and moving such redesignated paragraphs 2 

8 ems to the left, and 

9 (B) by striking all that precedes ‘‘otherwise 

10 provided in this section’’ and inserting the fol11 lowing: 

12 ‘‘(a) REQUIREMENT OF WITHHOLDING.—Except as’’. 

13 (3) NUMBER OF EXEMPTIONS.—Section 

14 3402(f)(1) is amended— 

15 (A) in subparagraph (A), by striking ‘‘an 

16 individual described in section 151(d)(2)’’ and 

17 inserting ‘‘a dependent of any other taxpayer’’, 

18 and 

19 (B) in subparagraph (C), by striking ‘‘with 

20 respect to whom, on the basis of facts existing at 

21 the beginning of such day, there may reasonably 

22 be expected to be allowable an exemption under 

23 section 151(c)’’ and inserting ‘‘who, on the basis 

24 of facts existing at the beginning of such day, is 


lotter on DSKBCFDHB2PROD with BILLS
28 

•HR 1 RH

1 reasonably expected to be a dependent of the em2 ployee’’. 

3 (f) MODIFICATION OF RETURN REQUIREMENT.— 

4 (1) IN GENERAL.—Paragraph (1) of section 

5 6012(a) is amended to read as follows: 

6 ‘‘(1) Every individual who has gross income for 

7 the taxable year, except that a return shall not be re8 quired of— 

9 ‘‘(A) an individual who is not married (de10 termined by applying section 7703) and who has 

11 gross income for the taxable year which does not 

12 exceed the standard deduction applicable to such 

13 individual for such taxable year under section 

14 63, or 

15 ‘‘(B) an individual entitled to make a joint 

16 return if— 

17 ‘‘(i) the gross income of such indi18 vidual, when combined with the gross in19 come of such individual’s spouse, for the 

20 taxable year does not exceed the standard 

21 deduction which would be applicable to the 

22 taxpayer for such taxable year under section 

23 63 if such individual and such individual’s 

24 spouse made a joint return, 


lotter on DSKBCFDHB2PROD with BILLS
29 

•HR 1 RH

1 ‘‘(ii) such individual and such individ2 ual’s spouse have the same household as 

3 their home at the close of the taxable year, 

4 ‘‘(iii) such individual’s spouse does not 

5 make a separate return, and 

6 ‘‘(iv) neither such individual nor such 

7 individual’s spouse is an individual de8 scribed in section 63(c)(2) who has income 

9 (other than earned income) in excess of the 

10 amount in effect under section 

11 63(c)(2)(A).’’. 

12 (2) BANKRUPTCY ESTATES.—Paragraph (8) of 

13 section 6012(a) is amended by striking ‘‘the sum of 

14 the exemption amount plus the basic standard deduc15 tion under section 63(c)(2)(D)’’ and inserting ‘‘the 

16 standard deduction in effect under section 

17 63(c)(1)(B)’’. 

18 (g) CONFORMING AMENDMENTS.— 

19 (1) Section 2(a)(1)(B) is amended by striking ‘‘a 

20 dependent’’ and all that follows through ‘‘section 151’’ 

21 and inserting ‘‘a dependent who (within the meaning 

22 of section 7706, determined without regard to sub23 sections (b)(1), (b)(2) and (d)(1)(B) thereof) is a son, 

24 stepson, daughter, or stepdaughter of the taxpayer’’. 


lotter on DSKBCFDHB2PROD with BILLS
30 

•HR 1 RH

1 (2) Section 36B(b)(2)(A) is amended by striking 

2 ‘‘section 152’’ and inserting ‘‘section 7706’’. 

3 (3) Section 36B(b)(3)(B) is amended by striking 

4 ‘‘unless a deduction is allowed under section 151 for 

5 the taxable year with respect to a dependent’’ in the 

6 flush matter at the end and inserting ‘‘unless the tax7 payer has a dependent for the taxable year’’. 

8 (4) Section 36B(c)(1)(D) is amended by striking 

9 ‘‘with respect to whom a deduction under section 151 

10 is allowable to another taxpayer’’ and inserting ‘‘who 

11 is a dependent of another taxpayer’’. 

12 (5) Section 36B(d)(1) is amended by striking 

13 ‘‘equal to the number of individuals for whom the tax14 payer is allowed a deduction under section 151 (relat15 ing to allowance of deduction for personal exemp16 tions) for the taxable year’’ and inserting ‘‘the sum 

17 of 1 (2 in the case of a joint return) plus the number 

18 of the taxpayer’s dependents for the taxable year’’. 

19 (6) Section 36B(e)(1) is amended by striking ‘‘1 

20 or more individuals for whom a taxpayer is allowed 

21 a deduction under section 151 (relating to allowance 

22 of deduction for personal exemptions) for the taxable 

23 year (including the taxpayer or his spouse)’’ and in24 serting ‘‘1 or more of the taxpayer, the taxpayer’s 

25 spouse, or any dependent of the taxpayer’’. 


lotter on DSKBCFDHB2PROD with BILLS
31 

•HR 1 RH

1 (7) Section 42(i)(3)(D)(ii)(I) is amended— 

2 (A) by striking ‘‘section 152’’ and inserting 

3 ‘‘section 7706’’, and 

4 (B) by striking the period at the end and 

5 inserting a comma. 

6 (8) Section 72(t)(2)(D)(i)(III) is amended by 

7 striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 

8 (9) Section 72(t)(7)(A)(iii) is amended by strik9 ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 

10 7706(f)(1)’’. 

11 (10) Section 105(b) is amended— 

12 (A) by striking ‘‘as defined in section 152’’ 

13 and inserting ‘‘as defined in section 7706’’, 

14 (B) by striking ‘‘section 152(f)(1)’’ and in15 serting ‘‘section 7706(f)(1)’’ and 

16 (C) by striking ‘‘section 152(e)’’ and insert17 ing ‘‘section 7706(e)’’. 

18 (11) Section 105(c)(1) is amended by striking 

19 ‘‘section 152’’ and inserting ‘‘section 7706’’. 

20 (12) Section 125(e)(1)(D) is amended by striking 

21 ‘‘section 152’’ and inserting ‘‘section 7706’’. 

22 (13) Section 132(h)(2)(B) is amended— 

23 (A) by striking ‘‘section 152(f)(1)’’ and in24 serting ‘‘section 7706(f)(1)’’, and 


lotter on DSKBCFDHB2PROD with BILLS
32 

•HR 1 RH

1 (B) by striking ‘‘section 152(e)’’ and insert2 ing ‘‘section 7706(e)’’. 

3 (14) Section 139D(c)(5) is amended by striking 

4 ‘‘section 152’’ and inserting ‘‘section 7706’’. 

5 (15) Section 162(l)(1)(D) is amended by striking 

6 ‘‘section 152(f)(1)’’ and inserting ‘‘section 

7 7706(f)(1)’’. 

8 (16) Section 170(g)(1) is amended by striking 

9 ‘‘section 152’’ and inserting ‘‘section 7706’’. 

10 (17) Section 170(g)(3) is amended by striking 

11 ‘‘section 152(d)(2)’’ and inserting ‘‘section 

12 7706(d)(2)’’. 

13 (18) Section 172(d) is amended by striking 

14 paragraph (3). 

15 (19) Section 220(b)(6) is amended by striking 

16 ‘‘with respect to whom a deduction under section 151 

17 is allowable to’’ and inserting ‘‘who is a dependent 

18 of’’. 

19 (20) Section 220(d)(2)(A) is amended by striking 

20 ‘‘section 152’’ and inserting ‘‘section 7706’’. 

21 (21) Section 223(b)(6) is amended by striking 

22 ‘‘with respect to whom a deduction under section 151 

23 is allowable to’’ and inserting ‘‘who is a dependent 

24 of’’. 


lotter on DSKBCFDHB2PROD with BILLS
33 

•HR 1 RH

1 (22) Section 223(d)(2)(A) is amended by striking 

2 ‘‘section 152’’ and inserting ‘‘section 7706’’. 

3 (23) Section 401(h) is amended by striking ‘‘sec4 tion 152(f)(1)’’ in the last sentence and inserting 

5 ‘‘section 7706(f)(1)’’. 

6 (24) Section 402(l)(4)(D) is amended by striking 

7 ‘‘section 152’’ and inserting ‘‘section 7706’’. 

8 (25) Section 409A(a)(2)(B)(ii)(I) is amended by 

9 striking ‘‘section 152(a)’’ and inserting ‘‘section 

10 7706(a)’’. 

11 (26) Section 501(c)(9) is amended by striking 

12 ‘‘section 152(f)(1)’’ and inserting ‘‘section 

13 7706(f)(1)’’. 

14 (27) Section 529(e)(2)(B) is amended by striking 

15 ‘‘section 152(d)(2)’’ and inserting ‘‘section 

16 7706(d)(2)’’. 

17 (28) Section 703(a)(2) is amended by striking 

18 subparagraph (A) and by redesignating subpara19 graphs (B) through (F) as subparagraphs (A) through 

20 (E), respectively. 

21 (29) Section 874 is amended by striking sub22 section (b) and by redesignating subsection (c) as sub23 section (b). 

24 (30) Section 891 is amended by striking ‘‘under 

25 section 151 and’’. 


lotter on DSKBCFDHB2PROD with BILLS
34 

•HR 1 RH

1 (31) Section 904(b) is amended by striking para2 graph (1). 

3 (32) Section 931(b)(1) is amended by striking 

4 ‘‘(other than the deduction under section 151, relating 

5 to personal exemptions)’’. 

6 (33) Section 933 is amended— 

7 (A) by striking ‘‘(other than the deduction 

8 under section 151, relating to personal exemp9 tions)’’ in paragraph (1), and 

10 (B) by striking ‘‘(other than the deduction 

11 for personal exemptions under section 151)’’ in 

12 paragraph (2). 

13 (34) Section 1212(b)(2)(B)(ii) is amended to 

14 read as follows: 

15 ‘‘(ii) in the case of an estate or trust, 

16 the deduction allowed for such year under 

17 section 642(b).’’. 

18 (35) Section 1361(c)(1)(C) is amended by strik19 ing ‘‘section 152(f)(1)(C)’’ and inserting ‘‘section 

20 7706(f)(1)(C)’’. 

21 (36) Section 1402(a) is amended by striking 

22 paragraph (7). 

23 (37) Section 2032A(c)(7)(D) is amended by 

24 striking ‘‘section 152(f)(2)’’ and inserting ‘‘section 

25 7706(f)(2)’’. 


lotter on DSKBCFDHB2PROD with BILLS
35 

•HR 1 RH

1 (38) Section 3402(m)(1) is amended by striking 

2 ‘‘other than the deductions referred to in section 151 

3 and’’. 

4 (39) Section 3402(r)(2) is amended by striking 

5 ‘‘the sum of—’’ and all that follows and inserting 

6 ‘‘the standard deduction in effect under section 

7 63(c)(1)(B).’’. 

8 (40) Section 5000A(b)(3)(A) is amended by 

9 striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 

10 (41) Section 5000A(c)(4)(A) is amended by strik11 ing ‘‘the number of individuals for whom the tax12 payer is allowed a deduction under section 151 (relat13 ing to allowance of deduction for personal exemp14 tions) for the taxable year’’ and inserting ‘‘the sum 

15 of 1 (2 in the case of a joint return) plus the number 

16 of the taxpayer’s dependents for the taxable year’’. 

17 (42) Section 6013(b)(3)(A) is amended— 

18 (A) by striking ‘‘had less than the exemp19 tion amount of gross income’’ in clause (ii) and 

20 inserting ‘‘had no gross income’’, 

21 (B) by striking ‘‘had gross income of the ex22 emption amount or more’’ in clause (iii) and in23 serting ‘‘had any gross income’’, and 

24 (C) by striking the flush language following 

25 clause (iii). 


lotter on DSKBCFDHB2PROD with BILLS
36 

•HR 1 RH

1 (43) Section 6103(l)(21)(A)(iii) is amended to 

2 read as follows: 

3 ‘‘(iii) the number of the taxpayer’s de4 pendents,’’. 

5 (44) Section 6213(g)(2) is amended by striking 

6 subparagraph (H). 

7 (45) Section 6334(d)(2) is amended to read as 

8 follows: 

9 ‘‘(2) EXEMPT AMOUNT.— 

10 ‘‘(A) IN GENERAL.—For purposes of para11 graph (1), the term ‘exempt amount’ means an 

12 amount equal to— 

13 ‘‘(i) the standard deduction, divided by 

14 ‘‘(ii) 52. 

15 ‘‘(B) VERIFIED STATEMENT.—Unless the 

16 taxpayer submits to the Secretary a written and 

17 properly verified statement specifying the facts 

18 necessary to determine the proper amount under 

19 subparagraph (A), subparagraph (A) shall be ap20 plied as if the taxpayer were a married indi21 vidual filing a separate return with no depend22 ents.’’. 

23 (46) Section 7702B(f)(2)(C)(iii) is amended by 

24 striking ‘‘section 152(d)(2)’’ and inserting ‘‘section 

25 7706(d)(2)’’. 


lotter on DSKBCFDHB2PROD with BILLS
37 

•HR 1 RH

1 (47) Section 7703(a) is amended by striking 

2 ‘‘part V of subchapter B of chapter 1 and’’. 

3 (48) Section 7703(b)(1) is amended by striking 

4 ‘‘section 152(f)(1)’’ and all that follows and inserting 

5 ‘‘section 7706(f)(1),’’. 

6 (49) Section 7706(a), as redesignated by this sec7 tion, is amended by striking ‘‘this subtitle’’ and in8 serting ‘‘subtitle A’’. 

9 (50)(A) Section 7706(d)(1)(B), as redesignated 

10 by this section, is amended by striking ‘‘the exemp11 tion amount (as defined in section 151(d))’’ and in12 serting ‘‘$4,150’’. 

13 (B) Section 7706(d), as redesignated by this sec14 tion, is amended by adding at the end the following 

15 new paragraph: 

16 ‘‘(6) INFLATION ADJUSTMENT.—In the case of 

17 any calendar year beginning after 2018, the $4,150 

18 amount in paragraph (1)(B) shall be increased by an 

19 amount equal to— 

20 ‘‘(A) such dollar amount, multiplied by 

21 ‘‘(B) the cost-of-living adjustment deter22 mined under section 1(c)(2)(A) for such calendar 

23 year, determined by substituting ‘calendar year 

24 2017’ for ‘calendar year 2016’ in clause (ii) 

25 thereof. 


lotter on DSKBCFDHB2PROD with BILLS
38 

•HR 1 RH

1 If any increase determined under the preceding sen2 tence is not a multiple of $100, such increase shall be 

3 rounded to the next lowest multiple of $100.’’. 

4 (51) The table of sections for chapter 79 is 

5 amended by adding at the end the following new item: 

‘‘Sec. 7706. Dependent defined.’’. 

6 (h) EFFECTIVE DATE.—The amendments made by this 

7 section shall apply to taxable years beginning after Decem8 ber 31, 2017. 

9 SEC. 1004. MAXIMUM RATE ON BUSINESS INCOME OF INDI10 VIDUALS. 

11 (a) IN GENERAL.—Part I of subchapter A of chapter 

12 1 is amended by inserting after section 3 the following new 

13 section: 

14 ‘‘SEC. 4. 25 PERCENT MAXIMUM RATE ON BUSINESS INCOME 

15 OF INDIVIDUALS. 

16 ‘‘(a) REDUCTION IN TAX TO ACHIEVE 25 PERCENT

17 MAXIMUM RATE.—The tax imposed by section 1 shall be 

18 reduced by the sum of— 

19 ‘‘(1) 10 percent of the lesser of— 

20 ‘‘(A) qualified business income, or 

21 ‘‘(B) the excess (if any) of— 

22 ‘‘(i) taxable income reduced by net 

23 capital gain (as defined in section 

24 1(h)(11)(A)), over 


lotter on DSKBCFDHB2PROD with BILLS
39 

•HR 1 RH

1 ‘‘(ii) the maximum dollar amount for 

2 the 25-percent rate bracket which applies to 

3 the taxpayer under section 1 for the taxable 

4 year, and 

5 ‘‘(2) 4.6 percent of the excess (if any) of— 

6 ‘‘(A) the lesser of— 

7 ‘‘(i) qualified business income, or 

8 ‘‘(ii) the excess (if any) determined 

9 under paragraph (1)(B), over 

10 ‘‘(B) the excess of— 

11 ‘‘(i) the maximum dollar amount for 

12 the 35-percent rate bracket which applies to 

13 the taxpayer under section 1 for the taxable 

14 year, over 

15 ‘‘(ii) the maximum dollar amount for 

16 the 25-percent rate bracket which applies to 

17 the taxpayer under section 1 for the taxable 

18 year. 

19 ‘‘(b) QUALIFIED BUSINESS INCOME.—For purposes of 

20 this section, the term ‘qualified business income’ means the 

21 excess (if any) of— 

22 ‘‘(1) the sum of— 

23 ‘‘(A) 100 percent of any net business income 

24 derived from any passive business activity, plus 


lotter on DSKBCFDHB2PROD with BILLS
40 

•HR 1 RH

1 ‘‘(B) the capital percentage of any net busi2 ness income derived from any active business ac3 tivity, over 

4 ‘‘(2) the sum of— 

5 ‘‘(A) 100 percent of any net business loss 

6 derived from any passive business activity, 

7 ‘‘(B) except as provided in subsection 

8 (e)(3)(A), 30 percent of any net business loss de9 rived from any active business activity, plus 

10 ‘‘(C) any carryover business loss determined 

11 for the preceding taxable year. 

12 ‘‘(c) DETERMINATION OF NET BUSINESS INCOME OR

13 LOSS.—For purposes of this section— 

14 ‘‘(1) IN GENERAL.—Net business income or loss 

15 shall be determined with respect to any business ac16 tivity by appropriately netting items of income, gain, 

17 deduction, and loss with respect to such business ac18 tivity. 

19 ‘‘(2) WAGES, ETC.—Any wages (as defined in 

20 section 3401), payments described in subsection (a) or 

21 (c) of section 707, or directors’ fees received by the 

22 taxpayer which are properly attributable to any busi23 ness activity shall be taken into account under para24 graph (1) as an item of income with respect to such 

25 business activity. 


lotter on DSKBCFDHB2PROD with BILLS
41 

•HR 1 RH

1 ‘‘(3) EXCEPTION FOR CERTAIN INVESTMENT-RE2 LATED ITEMS.—There shall not be taken into account 

3 under paragraph (1)— 

4 ‘‘(A) any item of short-term capital gain, 

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

6 or long-term capital loss, 

7 ‘‘(B) any dividend, income equivalent to a 

8 dividend, or payment in lieu of dividends de9 scribed in section 954(c)(1)(G), 

10 ‘‘(C) any interest income other than interest 

11 income which is properly allocable to a trade or 

12 business, 

13 ‘‘(D) any item of gain or loss described in 

14 subparagraph (C) or (D) of section 954(c)(1) 

15 (applied by substituting ‘business activity’ for 

16 ‘controlled foreign corporation’), 

17 ‘‘(E) any item of income, gain, deduction, 

18 or loss taken into account under section 

19 954(c)(1)(F) (determined without regard to 

20 clause (ii) thereof and other than items attrib21 utable to notional principal contracts entered 

22 into in transactions qualifying under section 

23 1221(a)(7)), 


lotter on DSKBCFDHB2PROD with BILLS
42 

•HR 1 RH

1 ‘‘(F) any amount received from an annuity 

2 which is not received in connection with the 

3 trade or business of the business activity, and 

4 ‘‘(G) any item of deduction or loss properly 

5 allocable to an amount described in any of the 

6 preceding subparagraphs. 

7 ‘‘(4) APPLICATION OF RESTRICTIONS APPLICABLE

8 TO DETERMINING TAXABLE INCOME.—Net business in9 come or loss shall be appropriately adjusted so as 

10 only to take into account any amount of income, 

11 gain, deduction, or loss to the extent such amount af12 fects the determination of taxable income for the tax13 able year. 

14 ‘‘(5) CARRYOVER BUSINESS LOSS.—For purposes 

15 of subsection (b)(2)(C), the carryover business loss de16 termined for any taxable year is the excess (if any) 

17 of the sum described in subsection (b)(2) over the sum 

18 described in subsection (b)(1) for such taxable year. 

19 ‘‘(d) PASSIVE AND ACTIVE BUSINESS ACTIVITY.—For 

20 purposes of this section— 

21 ‘‘(1) PASSIVE BUSINESS ACTIVITY.—The term 

22 ‘passive business activity’ means any passive activity 

23 as defined in section 469(c) determined without re24 gard to paragraphs (3) and (6)(B) thereof. 


lotter on DSKBCFDHB2PROD with BILLS
43 

•HR 1 RH

1 ‘‘(2) ACTIVE BUSINESS ACTIVITY.—The term ‘ac2 tive business activity’ means any business activity 

3 which is not a passive business activity. 

4 ‘‘(3) BUSINESS ACTIVITY.—The term ‘business 

5 activity’ means any activity (within the meaning of 

6 section 469) which involves the conduct of any trade 

7 or business. 

8 ‘‘(e) CAPITAL PERCENTAGE.—For purposes of this sec9 tion— 

10 ‘‘(1) IN GENERAL.—Except as otherwise provided 

11 in this section, the term ‘capital percentage’ means 30 

12 percent. 

13 ‘‘(2) INCREASED PERCENTAGE FOR CAPITAL-IN14 TENSIVE BUSINESS ACTIVITIES.—In the case of a tax15 payer who elects the application of this paragraph 

16 with respect to any active business activity (other 

17 than a specified service activity), the capital percent18 age shall be equal to the applicable percentage (as de19 fined in subsection (f)) for each taxable year with re20 spect to which such election applies. Any election 

21 made under this paragraph shall apply to the taxable 

22 year for which such election is made and each of the 

23 4 subsequent taxable years. Such election shall be 

24 made not later than the due date (including exten25 sions) for the return of tax for the taxable year for 


lotter on DSKBCFDHB2PROD with BILLS
44 

•HR 1 RH

1 which such election is made, and, once made, may not 

2 be revoked. 

3 ‘‘(3) TREATMENT OF SPECIFIED SERVICE ACTIVI4 TIES.— 

5 ‘‘(A) IN GENERAL.—In the case of any ac6 tive business activity which is a specified service 

7 activity— 

8 ‘‘(i) the capital percentage shall be 0 

9 percent, and 

10 ‘‘(ii) subsection (b)(2)(B) shall be ap11 plied by substituting ‘0 percent’ for ‘30 per12 cent’. 

13 ‘‘(B) EXCEPTION FOR CAPITAL-INTENSIVE

14 SPECIFIED SERVICE ACTIVITIES.—If— 

15 ‘‘(i) the taxpayer elects the application 

16 of this subparagraph with respect to such 

17 activity for any taxable year, and 

18 ‘‘(ii) the applicable percentage (as de19 fined in subsection (f)) with respect to such 

20 activity for such taxable year is at least 10 

21 percent, 

22 then subparagraph (A) shall not apply and the 

23 capital percentage with respect to such activity 

24 shall be equal to such applicable percentage. 


lotter on DSKBCFDHB2PROD with BILLS
45 

•HR 1 RH

1 ‘‘(C) SPECIFIED SERVICE ACTIVITY.—The 

2 term ‘specified service activity’ means any activ3 ity involving the performance of services de4 scribed in section 1202(e)(3)(A), including in5 vesting, trading, or dealing in securities (as de6 fined in section 475(c)(2)), partnership interests, 

7 or commodities (as defined in section 475(e)(2)). 

8 ‘‘(4) REDUCTION IN CAPITAL PERCENTAGE IN

9 CERTAIN CASES.—The capital percentage (determined 

10 after the application of paragraphs (2) and (3)) with 

11 respect to any active business activity shall not exceed 

12 1 minus the quotient (not greater than 1) of— 

13 ‘‘(A) any amounts described in subsection 

14 (c)(2) which are taken into account in deter15 mining the net business income derived from 

16 such activity, divided by 

17 ‘‘(B) such net business income. 

18 ‘‘(f) APPLICABLE PERCENTAGE.—For purposes of this 

19 section— 

20 ‘‘(1) IN GENERAL.—The term ‘applicable per21 centage’ means, with respect to any active business 

22 activity for any taxable year, the quotient (not great23 er than 1) of— 


lotter on DSKBCFDHB2PROD with BILLS
46 

•HR 1 RH

1 ‘‘(A) the specified return on capital with re2 spect to such activity for such taxable year, di3 vided by 

4 ‘‘(B) the taxpayer’s net business income de5 rived from such activity for such taxable year. 

6 ‘‘(2) SPECIFIED RETURN ON CAPITAL.—The term 

7 ‘specified return on capital’ means, with respect to 

8 any active business activity referred to in paragraph 

9 (1), the excess of— 

10 ‘‘(A) the product of— 

11 ‘‘(i) the deemed rate of return for the 

12 taxable year, multiplied by 

13 ‘‘(ii) the asset balance with respect to 

14 such activity for such taxable year, over 

15 ‘‘(B) an amount equal to the interest which 

16 is paid or accrued, and for which a deduction is 

17 allowed under this chapter, with respect to such 

18 activity for such taxable year. 

19 ‘‘(3) DEEMED RATE OF RETURN.—The term 

20 ‘deemed rate of return’ means, with respect to any 

21 taxable year, the Federal short-term rate (determined 

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

23 which such taxable year ends) plus 7 percentage 

24 points. 

25 ‘‘(4) ASSET BALANCE.— 


lotter on DSKBCFDHB2PROD with BILLS
47 

•HR 1 RH

1 ‘‘(A) IN GENERAL.—The asset balance with 

2 respect to any active business activity referred to 

3 in paragraph (1) for any taxable year equals the 

4 taxpayer’s adjusted basis of any property de5 scribed in section 1221(a)(2) which is used in 

6 connection with such activity as of the end of the 

7 taxable year (determined without regard to sec8 tions 168(k) and 179). 

9 ‘‘(B) APPLICATION TO ACTIVITIES CARRIED

10 ON THROUGH PARTNERSHIPS AND S CORPORA11 TIONS.—In the case of any active business activ12 ity carried on through a partnership or S cor13 poration, the taxpayer shall take into account 

14 such taxpayer’s distributive or pro rata share (as 

15 the case may be) of the asset balance with respect 

16 to such activity as determined with respect to 

17 such partnership or S corporation under sub18 paragraph (A) (applied by substituting ‘the 

19 partnership’s or S corporation’s adjusted basis’ 

20 for ‘the taxpayer’s adjusted basis’). 

21 ‘‘(g) REDUCED RATE FOR SMALL BUSINESSES WITH

22 NET ACTIVE BUSINESS INCOME.— 

23 ‘‘(1) IN GENERAL.—The tax imposed by section 

24 1 shall be reduced by 3 percent of the excess (if any) 

25 of— 


lotter on DSKBCFDHB2PROD with BILLS
48 

•HR 1 RH

1 ‘‘(A) the least of— 

2 ‘‘(i) qualified active business income, 

3 ‘‘(ii) taxable income reduced by net 

4 capital gain (as defined in section 

5 1(h)(11)(A)), or 

6 ‘‘(iii) the 9-percent bracket threshold 

7 amount, over 

8 ‘‘(B) the excess (if any) of taxable income 

9 over the applicable threshold amount. 

10 ‘‘(2) PHASE-IN OF RATE REDUCTION.—In the 

11 case of any taxable year beginning before January 1, 

12 2022, paragraph (1) shall be applied by substituting 

13 for ‘3 percent’— 

14 ‘‘(A) in the case of any taxable year begin15 ning after December 31, 2017, and before Janu16 ary 1, 2020, ‘1 percent’, and 

17 ‘‘(B) in the case of any taxable year begin18 ning after December 31, 2019, and before Janu19 ary 1, 2022, ‘2 percent’. 

20 ‘‘(3) QUALIFIED ACTIVE BUSINESS INCOME.—For 

21 purposes of this subsection, the term ‘qualified active 

22 business income’ means the excess (if any) of— 

23 ‘‘(A) any net business income derived from 

24 any active business activity, over 


lotter on DSKBCFDHB2PROD with BILLS
49 

•HR 1 RH

1 ‘‘(B) any net business loss derived from any 

2 active business activity. 

3 ‘‘(4) 9-PERCENT BRACKET THRESHOLD

4 AMOUNT.—For purposes of this subsection, the term 

5 ‘9-percent bracket threshold amount’ means— 

6 ‘‘(A) in the case of a joint return or sur7 viving spouse, $75,000, 

8 ‘‘(B) in the case of an individual who is the 

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

3 10 ⁄4 of the amount in effect for the taxable year 

11 under subparagraph (A), and 

‘‘(C) in the case of any other individual, 1 12 ⁄2

13 of the amount in effect for the taxable year under 

14 subparagraph (A). 

15 ‘‘(5) APPLICABLE THRESHOLD AMOUNT.—For 

16 purposes of this subsection, the term ‘applicable 

17 threshold amount’ means— 

18 ‘‘(A) in the case of a joint return or sur19 viving spouse, $150,000, 

20 ‘‘(B) in the case of an individual who is the 

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

3 22 ⁄4 of the amount in effect for the taxable year 

23 under subparagraph (A), and 


lotter on DSKBCFDHB2PROD with BILLS
50 

•HR 1 RH

‘‘(C) in the case of any other individual, 1 1 ⁄2

2 of the amount in effect for the taxable year under 

3 subparagraph (A). 

4 ‘‘(6) ESTATES AND TRUSTS.—Paragraph (1) 

5 shall not apply to any estate or trust. 

6 ‘‘(7) INFLATION ADJUSTMENT.—In the case of 

7 any taxable year beginning after 2018, the dollar 

8 amounts in paragraphs (4)(A) and (5)(A) shall each 

9 be increased by an amount equal to— 

10 ‘‘(A) such dollar amount, multiplied by 

11 ‘‘(B) the cost-of-living adjustment deter12 mined under subsection (c)(2)(A) for the cal13 endar year in which the taxable year begins, de14 termined by substituting ‘calendar year 2017’ for 

15 ‘calendar year 2016’ in clause (ii) thereof. 

16 If any increase determined under the preceding sen17 tence is not a multiple of $100, such increase shall be 

18 rounded to the next lowest multiple of $100. 

19 ‘‘(h) REGULATIONS.—The Secretary may issue such 

20 regulations or other guidance as may be necessary or appro21 priate to carry out the purposes of this section, including 

22 regulations or other guidance— 

23 ‘‘(1) which ensures that no amount is taken into 

24 account under subsection (f)(4) with respect to more 

25 than one activity, and 


lotter on DSKBCFDHB2PROD with BILLS
51 

•HR 1 RH

1 ‘‘(2) which treats all specified service activities of 

2 the taxpayer as a single business activity for purposes 

3 of this section to the extent that such activities would 

4 be treated as a single employer under subsection (a) 

5 or (b) of section 52 or subsection (m) or (o) of section 

6 414. 

7 ‘‘(i) REFERENCES.—Any reference in this title to sec8 tion 1 shall be treated as including a reference to this sec9 tion unless the context of such reference clearly indicates 

10 otherwise.’’. 

11 (b) 25 PERCENT RATE FOR CERTAIN DIVIDENDS OF

12 REAL ESTATE INVESTMENT TRUSTS AND COOPERATIVES.— 

13 Section 1(h), as amended by the preceding provisions of this 

14 Act, is amended by adding at the end the following new 

15 paragraph: 

16 ‘‘(13) 25 PERCENT RATE FOR CERTAIN DIVI17 DENDS OF REAL ESTATE INVESTMENT TRUSTS AND

18 COOPERATIVES.— 

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

20 subsection, net capital gain (as defined in para21 graph (11)) and unrecaptured section 1250 gain 

22 (as defined in paragraph (6)) shall each be in23 creased by specified dividend income. 


lotter on DSKBCFDHB2PROD with BILLS
52 

•HR 1 RH

1 ‘‘(B) SPECIFIED DIVIDEND INCOME.—For 

2 purposes of this paragraph, the term ‘specified 

3 dividend income’ means— 

4 ‘‘(i) in the case of any dividend re5 ceived from a real estate investment trust, 

6 the portion of such dividend which is nei7 ther— 

8 ‘‘(I) a capital gain dividend (as 

9 defined in section 852(b)(3)), nor 

10 ‘‘(II) taken into account in deter11 mining qualified dividend income (as 

12 defined in paragraph (11)), and 

13 ‘‘(ii) any dividend which is includible 

14 in gross income and which is received from 

15 an organization or corporation described in 

16 section 501(c)(12) or 1381(a).’’. 

17 (c) CLERICAL AMENDMENT.—The table of sections for 

18 part I of subchapter A of chapter 1 is amended by inserting 

19 after the item relating to section 3 the following new item: 

‘‘Sec. 4. 25 percent maximum rate on business income of individuals.’’. 

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

21 section shall apply to taxable years beginning after Decem22 ber 31, 2017. 

23 (e) TRANSITION RULE.—In the case of any taxable 

24 year which includes December 31, 2017, the amendment 


lotter on DSKBCFDHB2PROD with BILLS
53 

•HR 1 RH

1 made by subsection (a) shall apply with respect to such tax2 able year adjusted— 

3 (1) so as to apply with respect to the rates of tax 

4 in effect under section 1 of the Internal Revenue Code 

5 of 1986 with respect to such taxable year (and so as 

6 to achieve a 25 percent effective rate of tax on the 

7 business income (determined without regard to para8 graph (2)) in the same manner as such amendment 

9 applies to taxable years beginning after such date 

10 with respect to the rates of tax in effect for such 

11 years), and 

12 (2) by reducing the amount of the reduction in 

13 tax (as otherwise determined under paragraph (1)) by 

14 the amount which bears the same proportion to the 

15 amount of such reduction as the number of days in 

16 the taxable year which are before January 1, 2018, 

17 bears to the number of days in the entire taxable 

18 year. 

19 SEC. 1005. CONFORMING AMENDMENTS RELATED TO SIM20 PLIFICATION OF INDIVIDUAL INCOME TAX 

21 RATES. 

22 (a) AMENDMENTS RELATED TO MODIFICATION OF IN23 FLATION ADJUSTMENT.— 

24 (1) Section 32(b)(2)(B)(ii)(II) is amended by 

25 striking ‘‘section 1(f)(3) for the calendar year in 


lotter on DSKBCFDHB2PROD with BILLS
54 

•HR 1 RH

1 which the taxable year begins determined by sub2 stituting ‘calendar year 2008’ for ‘calendar year 

3 1992’ in subparagraph (B) thereof’’ and inserting 

4 ‘‘section 1(c)(2)(A) for the calendar year in which the 

5 taxable year begins determined by substituting ‘cal6 endar year 2008’ for ‘calendar year 2016’ in clause 

7 (ii) thereof’’. 

8 (2) Section 32(j)(1)(B) is amended— 

9 (A) in the matter preceding clause (i), by 

10 striking ‘‘section 1(f)(3)’’ and inserting ‘‘section 

11 1(c)(2)(A)’’, 

12 (B) in clause (i), by striking ‘‘for ‘calendar 

13 year 1992’ in subparagraph (B) thereof’’ and in14 serting ‘‘for ‘calendar year 2016’ in clause (ii) 

15 thereof’’, and 

16 (C) in clause (ii), by striking ‘‘for ‘calendar 

17 year 1992’ in subparagraph (B) of such section 

18 1’’ and inserting ‘‘for ‘calendar year 2016’ in 

19 clause (ii) thereof’’. 

20 (3) Section 36B(b)(3)(A)(ii)(II) is amended by 

21 striking ‘‘consumer price index’’ and inserting ‘‘C22 CPI-U (as defined in section 1(c))’’. 

23 (4) Section 41(e)(5)(C) is amended to read as 

24 follows: 


lotter on DSKBCFDHB2PROD with BILLS
55 

•HR 1 RH

1 ‘‘(C) COST-OF-LIVING ADJUSTMENT DE2 FINED.— 

3 ‘‘(i) IN GENERAL.—The cost-of-living 

4 adjustment for any calendar year is the 

5 cost-of-living adjustment for such calendar 

6 year determined under section 1(c)(2)(A), 

7 by substituting ‘calendar year 1987’ for 

8 ‘calendar year 2016’ in clause (ii) thereof. 

9 ‘‘(ii) SPECIAL RULE WHERE BASE PE10 RIOD ENDS IN A CALENDAR YEAR OTHER

11 THAN 1983 OR 1984.—If the base period of 

12 any taxpayer does not end in 1983 or 1984, 

13 clause (i) shall be applied by substituting 

14 the calendar year in which such base period 

15 ends for 1987.’’. 

16 (5) Section 42(e)(3)(D)(ii) is amended by strik17 ing ‘‘section 1(f)(3) for such calendar year by sub18 stituting ‘calendar year 2008’ for ‘calendar year 

19 1992’ in subparagraph (B) thereof’’ and inserting 

20 ‘‘section 1(c)(2)(A) for such calendar year by sub21 stituting ‘calendar year 2008’ for ‘calendar year 

22 2016’ in clause (ii) thereof’’. 

23 (6) Section 42(h)(3)(H)(i)(II) is amended by 

24 striking ‘‘section 1(f)(3) for such calendar year by 

25 substituting ‘calendar year 2001’ for ‘calendar year 


lotter on DSKBCFDHB2PROD with BILLS
56 

•HR 1 RH

1 1992’ in subparagraph (B) thereof’’ and inserting 

2 ‘‘section 1(c)(2)(A) for such calendar year by sub3 stituting ‘calendar year 2001’ for ‘calendar year 

4 2016’ in clause (ii) thereof’’. 

5 (7) Section 45R(d)(3)(B)(ii) is amended by 

6 striking ‘‘section 1(f)(3) for the calendar year, deter7 mined by substituting ‘calendar year 2012’ for ‘cal8 endar year 1992’ in subparagraph (B) thereof’’ and 

9 inserting ‘‘ ‘section 1(c)(2)(A) for such calendar year, 

10 determined by substituting ‘‘calendar year 2012’’ for 

11 ‘‘calendar year 2016’’ in clause (ii) thereof’ ’’. 

12 (8) Section 125(i)(2) is amended— 

13 (A) by striking ‘‘section 1(f)(3) for the cal14 endar year in which the taxable year begins by 

15 substituting ‘calendar year 2012’ for ‘calendar 

16 year 1992’ in subparagraph (B) thereof’’ in sub17 paragraph (B) and inserting ‘‘section 1(c)(2)(A) 

18 for the calendar year in which the taxable year 

19 begins’’, and 

20 (B) by striking ‘‘$50’’ both places it appears 

21 in the last sentence and inserting ‘‘$100’’. 

22 (9) Section 162(o)(3) is amended by inserting 

23 ‘‘as in effect before enactment of the Tax Cuts and 

24 Jobs Act’’ after ‘‘section 1(f)(5)’’. 


lotter on DSKBCFDHB2PROD with BILLS
57 

•HR 1 RH

1 (10) Section 220(g)(2) is amended by striking 

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

3 taxable year begins by substituting ‘calendar year 

4 1997’ for ‘calendar year 1992’ in subparagraph (B) 

5 thereof’’ and inserting ‘‘section 1(c)(2)(A) for the cal6 endar year in which the taxable year begins, deter7 mined by substituting ‘calendar year 1997’ for ‘cal8 endar year 2016’ in clause (ii) thereof’’. 

9 (11) Section 223(g)(1) is amended by striking all 

10 that follows subparagraph (A) and inserting the fol11 lowing: 

12 ‘‘(B) the cost-of-living adjustment deter13 mined under section 1(c)(2)(A) for the calendar 

14 year in which the taxable year begins, deter15 mined— 

16 ‘‘(i) by substituting for ‘calendar year 

17 2016’ in clause (ii) thereof— 

18 ‘‘(I) except as provided in clause 

19 (ii), ‘calendar year 1997’, and 

20 ‘‘(II) in the case of each dollar 

21 amount in subsection (c)(2)(A), ‘cal22 endar year 2003’, and 

23 ‘‘(ii) by substituting ‘March 31’ for 

24 ‘August 31’ in paragraphs (5)(B) and 

25 (6)(B) of section 1(c). 


lotter on DSKBCFDHB2PROD with BILLS
58 

•HR 1 RH

1 The Secretary shall publish the dollar amounts 

2 as adjusted under this subsection for taxable 

3 years beginning in any calendar year no later 

4 than June 1 of the preceding calendar year.’’. 

5 (12) Section 430(c)(7)(D)(vii)(II) is amended by 

6 striking ‘‘section 1(f)(3) for the calendar year, deter7 mined by substituting ‘calendar year 2009’ for ‘cal8 endar year 1992’ in subparagraph (B) thereof’’ and 

9 inserting ‘‘section 1(c)(2)(A) for the calendar year, 

10 determined by substituting ‘calendar year 2009’ for 

11 ‘calendar year 2016’ in clause (ii) thereof’’. 

12 (13) Section 512(d)(2)(B) is amended by strik13 ing ‘‘section 1(f)(3) for the calendar year in which the 

14 taxable year begins, by substituting ‘calendar year 

15 1994’ for ‘calendar year 1992’ in subparagraph (B) 

16 thereof’’and inserting ‘‘section 1(c)(2)(A) for the cal17 endar year in which the taxable year begins, deter18 mined by substituting ‘calendar year 1994’ for ‘cal19 endar year 2016’ in clause (ii) thereof’’. 

20 (14) Section 513(h)(2)(C)(ii) is amended by 

21 striking ‘‘section 1(f)(3) for the calendar year in 

22 which the taxable year begins by substituting ‘cal23 endar year 1987’ for ‘calendar year 1992’ in subpara24 graph (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) 

25 for the calendar year in which the taxable year beVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00058 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
59 

•HR 1 RH

1 gins, determined by substituting ‘calendar year 1987’ 

2 for ‘calendar year 2016’ in clause (ii) thereof’’. 

3 (15) Section 831(b)(2)(D)(ii) is amended by 

4 striking ‘‘section 1(f)(3) for such calendar year by 

5 substituting ‘calendar year 2013’ for ‘calendar year 

6 1992’ in subparagraph (B) thereof’’ and inserting 

7 ‘‘section 1(c)(2)(A) for such calendar year by sub8 stituting ‘calendar year 2013’ for ‘calendar year 

9 2016’ in clause (ii) thereof’’. 

10 (16) Section 877A(a)(3)(B)(i)(II) is amended by 

11 striking ‘‘section 1(f)(3) for the calendar year in 

12 which the taxable year begins, by substituting ‘cal13 endar year 2007’ for ‘calendar year 1992’ in subpara14 graph (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) 

15 for the calendar year in which the taxable year be16 gins, determined by substituting ‘calendar year 2007’ 

17 for ‘calendar year 2016’ in clause (ii) thereof’’. 

18 (17) Section 911(b)(2)(D)(ii)(II) is amended by 

19 striking ‘‘section 1(f)(3) for the calendar year in 

20 which the taxable year begins, determined by sub21 stituting ‘2004’ for ‘1992’ in subparagraph (B) there22 of’’ and inserting ‘‘section 1(c)(2)(A) for the calendar 

23 year in which the taxable year begins, determined by 

24 substituting ‘calendar year 2004’ for ‘calendar year 

25 2016’ in clause (ii) thereof’’. 


lotter on DSKBCFDHB2PROD with BILLS
60 

•HR 1 RH

1 (18) Section 1274A(d)(2) is amended to read as 

2 follows: 

3 ‘‘(2) INFLATION ADJUSTMENT.— 

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

5 instrument arising out of a sale or exchange dur6 ing any calendar year after 2018, each adjusted 

7 dollar amount shall be increased by an amount 

8 equal to— 

9 ‘‘(i) such adjusted dollar amount, mul10 tiplied by 

11 ‘‘(ii) the cost-of-living adjustment de12 termined under section 1(c)(2)(A) for such 

13 calendar year, determined by substituting 

14 ‘calendar year 2017’ for ‘calendar year 

15 2016’ in clause (ii) thereof. 

16 ‘‘(B) ADJUSTED DOLLAR AMOUNTS.—For 

17 purposes of this paragraph, the term ‘adjusted 

18 dollar amount’ means the dollar amounts in sub19 sections (b) and (c), in each case as in effect for 

20 calendar year 2018. 

21 ‘‘(C) ROUNDING.—Any increase under sub22 paragraph (A) shall be rounded to the nearest 

23 multiple of $100.’’. 

24 (19) Section 2010(c)(3)(B)(ii) is amended by 

25 striking ‘‘section 1(f)(3) for such calendar year by 


lotter on DSKBCFDHB2PROD with BILLS
61 

•HR 1 RH

1 substituting ‘calendar year 2010’ for ‘calendar year 

2 1992’ in subparagraph (B) thereof’’ and inserting 

3 ‘‘section 1(c)(2)(A) for such calendar year, determined 

4 by substituting ‘calendar year 2010’ for ‘calendar 

5 year 2016’ in clause (ii) thereof’’. 

6 (20) Section 2032A(a)(3)(B) is amended by 

7 striking ‘‘section 1(f)(3) for such calendar year by 

8 substituting ‘calendar year 1997’ for ‘calendar year 

9 1992’ in subparagraph (B) thereof’’ and inserting 

10 ‘‘section 1(c)(2)(A) for such calendar year, determined 

11 by substituting ‘calendar year 1997’ for ‘calendar 

12 year 2016’ in clause (ii) thereof’’. 

13 (21) Section 2503(b)(2)(B) is amended by strik14 ing ‘‘section 1(f)(3) for such calendar year by sub15 stituting ‘calendar year 1997’ for ‘calendar year 

16 1992’ in subparagraph (B) thereof’’ and inserting 

17 ‘‘section 1(c)(2)(A) for the calendar year, determined 

18 by substituting ‘calendar year 1997’ for ‘calendar 

19 year 2016’ in clause (ii) thereof’’. 

20 (22) Section 4161(b)(2)(C)(i)(II) is amended by 

21 striking ‘‘section 1(f)(3) for such calendar year, deter22 mined by substituting ‘2004’ for ‘1992’ in subpara23 graph (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) 

24 for such calendar year, determined by substituting 


lotter on DSKBCFDHB2PROD with BILLS
62 

•HR 1 RH

1 ‘calendar year 2004’ for ‘calendar year 2016’ in 

2 clause (ii) thereof’’. 

3 (23) Section 4261(e)(4)(A)(ii) is amended by 

4 striking ‘‘section 1(f)(3) for such calendar year by 

5 substituting the year before the last nonindexed year 

6 for ‘calendar year 1992’ in subparagraph (B) thereof’’ 

7 and inserting ‘‘section 1(c)(2)(A) for such calendar 

8 year, determined by substituting the year before the 

9 last nonindexed year for ‘calendar year 2016’ in 

10 clause (ii) thereof’’. 

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

12 (A) by striking ‘‘section 1(f)(3)’’ and insert13 ing ‘‘section 1(c)(2)(A)’’, 

14 (B) by striking ‘‘subparagraph (B)’’ and in15 serting ‘‘clause (ii)’’, and 

16 (C) by striking ‘‘1992’’ and inserting 

17 ‘‘2016’’. 

18 (25) Section 5000A(c)(3)(D)(ii) is amended— 

19 (A) by striking ‘‘section 1(f)(3)’’ and insert20 ing ‘‘section 1(c)(2)(A)’’, 

21 (B) by striking ‘‘subparagraph (B)’’ and in22 serting ‘‘clause (ii)’’, and 

23 (C) by striking ‘‘1992’’ and inserting 

24 ‘‘2016’’. 


lotter on DSKBCFDHB2PROD with BILLS
63 

•HR 1 RH

1 (26) Section 6039F(d) is amended by striking 

2 ‘‘section 1(f)(3), except that subparagraph (B) there3 of’’ and inserting ‘‘section 1(c)(2)(A), except that 

4 clause (ii) thereof’’. 

5 (27) Section 6323(i)(4)(B) is amended by strik6 ing ‘‘section 1(f)(3) for the calendar year, determined 

7 by substituting ‘calendar year 1996’ for ‘calendar 

8 year 1992’ in subparagraph (B) thereof’’ and insert9 ing ‘‘section 1(c)(2)(A) for the calendar year, deter10 mined by substituting ‘calendar year 1996’ for ‘cal11 endar year 2016’ in clause (ii) thereof’’. 

12 (28) Section 6334(g)(1)(B) is amended by strik13 ing ‘‘section 1(f)(3) for such calendar year, by sub14 stituting ‘calendar year 1998’ for ‘calendar year 

15 1992’ in subparagraph (B) thereof’’ and inserting 

16 ‘‘section 1(c)(2)(A) for such calendar year, determined 

17 by substituting ‘calendar year 1999’ for ‘calendar 

18 year 2016’ in clause (ii) thereof’’. 

19 (29) Section 6601(j)(3)(B) is amended by strik20 ing ‘‘section 1(f)(3) for such calendar year by sub21 stituting ‘calendar year 1997’ for ‘calendar year 

22 1992’ in subparagraph (B) thereof’’ and inserting 

23 ‘‘section 1(c)(2)(A) for such calendar year by sub24 stituting ‘calendar year 1997’ for ‘calendar year 

25 2016’ in clause (ii) thereof’’. 


lotter on DSKBCFDHB2PROD with BILLS
64 

•HR 1 RH

1 (30) Section 6651(i)(1) is amended by striking 

2 ‘‘section 1(f)(3) determined by substituting ‘calendar 

3 year 2013’ for ‘calendar year 1992’ in subparagraph 

4 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter5 mined by substituting ‘calendar year 2013’ for ‘cal6 endar year 2016’ in clause (ii) thereof’’. 

7 (31) Section 6721(f)(1) is amended— 

8 (A) by striking ‘‘section 1(f)(3)’’ and insert9 ing ‘‘section 1(c)(2)(A)’’, 

10 (B) by striking ‘‘subparagraph (B)’’ and in11 serting ‘‘clause (ii)’’, and 

12 (C) by striking ‘‘1992’’ and inserting 

13 ‘‘2016’’. 

14 (32) Section 6722(f)(1) is amended— 

15 (A) by striking ‘‘section 1(f)(3)’’ and insert16 ing ‘‘section 1(c)(2)(A)’’, 

17 (B) by striking ‘‘subparagraph (B)’’ and in18 serting ‘‘clause (ii)’’, and 

19 (C) by striking ‘‘1992’’ and inserting 

20 ‘‘2016’’. 

21 (33) Section 6652(c)(7)(A) is amended by strik22 ing ‘‘section 1(f)(3) determined by substituting ‘cal23 endar year 2013’ for ‘calendar year 1992’ in subpara24 graph (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) 


lotter on DSKBCFDHB2PROD with BILLS
65 

•HR 1 RH

1 determined by substituting ‘calendar year 2013’ for 

2 ‘calendar year 2016’ in clause (ii) thereof’’. 

3 (34) Section 6695(h)(1) is amended by striking 

4 ‘‘section 1(f)(3) determined by substituting ‘calendar 

5 year 2013’ for ‘calendar year 1992’ in subparagraph 

6 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter7 mined by substituting ‘calendar year 2013’ for ‘cal8 endar year 2016’ in clause (ii) thereof’’. 

9 (35) Section 6698(e)(1) is amended by striking 

10 ‘‘section 1(f)(3) determined by substituting ‘calendar 

11 year 2013’ for ‘calendar year 1992’ in subparagraph 

12 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter13 mined by substituting ‘calendar year 2013’ for ‘cal14 endar year 2016’ in clause (ii) thereof’’. 

15 (36) Section 6699(e)(1) is amended by striking 

16 ‘‘section 1(f)(3) determined by substituting ‘calendar 

17 year 2013’ for ‘calendar year 1992’ in subparagraph 

18 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter19 mined by substituting ‘calendar year 2013’ for ‘cal20 endar year 2016’ in clause (ii) thereof’’. 

21 (37) Section 7345(f)(2) is amended by striking 

22 ‘‘section 1(f)(3) for the calendar year, determined by 

23 substituting ‘calendar year 2015’ for ‘calendar year 

24 1992’ in subparagraph (B) thereof’’ and inserting 

25 ‘‘section 1(c)(2)(A) for the calendar year, determined 


lotter on DSKBCFDHB2PROD with BILLS
66 

•HR 1 RH

1 by substituting ‘calendar year 2015’ for ‘calendar 

2 year 2016’ in clause (ii) thereof’’. 

3 (38) Section 7430(c)(1) is amended by striking 

4 ‘‘section 1(f)(3) for such calendar year, by sub5 stituting ‘calendar year 1995’ for ‘calendar year 

6 1992’ in subparagraph (B) thereof’’ in the flush text 

7 at the end and inserting ‘‘section 1(c)(2)(A) for such 

8 calendar year, determined by substituting ‘calendar 

9 year 1995’ for ‘calendar year 2016’ in clause (ii) 

10 thereof’’. 

11 (39) Section 7872(g)(5) is amended to read as 

12 follows: 

13 ‘‘(5) INFLATION ADJUSTMENT.— 

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

15 made during any calendar year after 2018 to 

16 which paragraph (1) applies, the adjusted dollar 

17 amount shall be increased by an amount equal 

18 to— 

19 ‘‘(i) such adjusted dollar amount, mul20 tiplied by 

21 ‘‘(ii) the cost-of-living adjustment de22 termined under section 1(c)(2)(A) for such 

23 calendar year, determined by substituting 

24 ‘calendar year 2017’ for ‘calendar year 

25 2016’ in clause (ii) thereof. 


lotter on DSKBCFDHB2PROD with BILLS
67 

•HR 1 RH

1 ‘‘(B) ADJUSTED DOLLAR AMOUNT.—For 

2 purposes of this paragraph, the term ‘adjusted 

3 dollar amount’ means the dollar amount in 

4 paragraph (2) as in effect for calendar year 

5 2018. 

6 ‘‘(C) ROUNDING.—Any increase under sub7 paragraph (A) shall be rounded to the nearest 

8 multiple of $100.’’. 

9 (40) Section 219(b)(5)(C)(i)(II) is amended by 

10 striking ‘‘section 1(f)(3) for the calendar year in 

11 which the taxable year begins, determined by sub12 stituting ‘calendar year 2007’ for ‘calendar year 

13 1992’ in subparagraph (B) thereof’’ and inserting 

14 ‘‘section 1(c)(2)(A) for the calendar year in which the 

15 taxable year begins, determined by substituting ‘cal16 endar year 2007’ for ‘calendar year 2016’ in clause 

17 (ii) thereof’’. 

18 (41) Section 219(g)(8)(B) is amended by striking 

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

20 taxable year begins, determined by substituting ‘cal21 endar year 2005’ for ‘calendar year 1992’ in subpara22 graph (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) 

23 for the calendar year in which the taxable year be24 gins, determined by substituting ‘calendar year 2005’ 

25 for ‘calendar year 2016’ in clause (ii) thereof’’. 


lotter on DSKBCFDHB2PROD with BILLS
68 

•HR 1 RH

1 (b) OTHER CONFORMING AMENDMENTS.— 

2 (1) Section 36B(b)(3)(B)(ii)(I)(aa) is amended 

3 to read as follows: 

4 ‘‘(aa) who is described in sec5 tion 1(b)(1)(B) and who does not 

6 have any dependents for the tax7 able year,’’. 

8 (2) Section 486B(b)(1) is amended— 

9 (A) by striking ‘‘maximum rate in effect’’ 

10 and inserting ‘‘highest rate specified’’, and 

11 (B) by striking ‘‘section 1(e)’’ and inserting 

12 ‘‘section 1’’. 

13 (3) Section 511(b)(1) is amended by striking 

14 ‘‘section 1(e)’’ and inserting ‘‘section 1’’. 

15 (4) Section 641(a) is amended by striking ‘‘sec16 tion 1(e) shall apply to the taxable income’’ and in17 serting ‘‘section 1 shall apply to the taxable income’’. 

18 (5) Section 641(c)(2)(A) is amended to read as 

19 follows: 

20 ‘‘(A) Except to the extent provided in sec21 tion 1(h), the rate of tax shall be treated as being 

22 the highest rate of tax set forth in section 1(a).’’. 

23 (6) Section 646(b) is amended to read as follows: 

24 ‘‘(b) TAXATION OF INCOME OF TRUST.—Except as pro25 vided in subsection (f)(1)(B)(ii), there is hereby imposed on 


lotter on DSKBCFDHB2PROD with BILLS
69 

•HR 1 RH

1 the taxable income of an electing Settlement Trust a tax 

2 at the rate specified in section 1(a)(1). Such tax shall be 

3 in lieu of the income tax otherwise imposed by this chapter 

4 on such income.’’. 

5 (7) Section 685(c) is amended by striking ‘‘Sec6 tion 1(e)’’ and inserting ‘‘Section 1’’. 

7 (8) Section 904(b)(3)(E)(ii)(I) is amended by 

8 striking ‘‘set forth in subsection (a), (b), (c), (d), or 

9 (e) of section 1 (whichever applies)’’ and inserting 

10 ‘‘the highest rate of tax specified in section 1’’. 

11 (9) Section 1398(c)(2) is amended by striking 

12 ‘‘subsection (d) of’’. 

13 (10) Section 3402(p)(1)(B) is amended by strik14 ing ‘‘any percentage applicable to any of the 3 lowest 

15 income brackets in the table under section 1(c),’’ and 

16 inserting ‘‘12 percent, 25 percent,’’. 

17 (11) Section 3402(q)(1) is amended by striking 

18 ‘‘the product of third lowest rate of tax applicable 

19 under section 1(c) and’’ and inserting ‘‘25 percent 

20 of’’. 

21 (12) Section 3402(r)(3) is amended by striking 

22 ‘‘the amount of tax which would be imposed by sec23 tion 1(c) (determined without regard to any rate of 

24 tax in excess of the fourth lowest rate of tax applica25 ble under section 1(c)) on an amount of taxable inVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00069 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
70 

•HR 1 RH

1 come equal to’’ and inserting ‘‘an amount equal to the 

2 product of 25 percent multiplied by’’. 

3 (13) Section 3406(a)(1) is amended by striking 

4 ‘‘the product of the fourth lowest rate of tax applica5 ble under section 1(c) and’’ and inserting ‘‘25 percent 

6 of’’. 

7 (14) Section 6103(e)(1)(A)(iii) is amended by 

8 inserting ‘‘(as in effect on the day before the date of 

9 the enactment of the Tax Cuts and Jobs Act)’’ after 

10 ‘‘section 1(g)’’. 

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

12 section shall apply to taxable years beginning after Decem13 ber 31, 2017. 

14 Subtitle B—Simplification and Re15 form of Family and Individual 

16 Tax Credits 

17 SEC. 1101. ENHANCEMENT OF CHILD TAX CREDIT AND NEW 

18 FAMILY TAX CREDIT. 

19 (a) INCREASE IN CREDIT AMOUNT AND ADDITION OF

20 OTHER DEPENDENTS.— 

21 (1) IN GENERAL.—Section 24(a) is amended to read 

22 as follows: 

23 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be allowed 

24 as a credit against the tax imposed by this chapter for the 

25 taxable year an amount equal to the sum of— 


lotter on DSKBCFDHB2PROD with BILLS
71 

•HR 1 RH

1 ‘‘(1) with respect to each qualifying child of the 

2 taxpayer, $1,600, and 

3 ‘‘(2) for taxable years beginning before January 

4 1, 2023, with respect to the taxpayer (each spouse in 

5 the case of a joint return) and each dependent of the 

6 taxpayer to whom paragraph (1) does not apply, 

7 $300.’’. 

8 (2) CONFORMING AMENDMENTS.— 

9 (A) Section 24(c) is amended— 

10 (i) by redesignating paragraphs (1) and (2) 

11 as paragraphs (2) and (3), respectively, 

12 (ii) by striking ‘‘152(c)’’ in paragraph (2) 

13 (as so redesignated) and inserting ‘‘7706(c)’’, 

14 (iii) by inserting before paragraph (2) (as 

15 so redesignated) the following new paragraph: 

16 ‘‘(1) DEPENDENT.— 

17 ‘‘(A) IN GENERAL.—The term ‘dependent’ 

18 shall have the meaning given such term by sec19 tion 7706. 

20 ‘‘(B) CERTAIN INDIVIDUALS NOT TREATED

21 AS DEPENDENTS.—In the case of an individual 

22 with respect to whom a credit under this section 

23 is allowable to another taxpayer for a taxable 

24 year beginning in the calendar year in which the 

25 individual’s taxable year begins, the amount apVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00071 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
72 

•HR 1 RH

1 plicable to such individual under subsection (a) 

2 for such individual’s taxable year shall be zero.’’, 

3 (iv) in paragraph (3) (as so redesignated)— 

4 (I) by striking ‘‘term ‘qualifying 

5 child’ ’’ and inserting ‘‘terms ‘qualifying 

6 child’ and ‘dependent’ ’’, and 

7 (II) by striking ‘‘152(b)(3)’’ and in8 serting ‘‘7706(b)(3)’’, and 

9 (v) in the heading by striking ‘‘QUALI10 FYING’’ and inserting ‘‘DEPENDENT; QUALI11 FYING’’. 

12 (B) The heading for section 24 is amended by 

13 inserting ‘‘AND FAMILY’’ after ‘‘CHILD’’. 

14 (C) The table of sections for subpart A of part 

15 IV of subchapter A of chapter 1 is amended by strik16 ing the item relating to section 24 and inserting the 

17 following new item: 

‘‘Sec. 24. Child and family tax credit.’’. 

18 (b) ELIMINATION OF MARRIAGE PENALTY.—Section 

19 24(b)(2) is amended— 

20 (1) by striking ‘‘$110,000’’ in subparagraph (A) and 

21 inserting ‘‘$230,000’’, 

22 (2) by inserting ‘‘and’’ at the end of subparagraph (A), 

23 (3) by striking ‘‘$75,000 in the case of an individual 

24 who is not married’’ and all that follows through the period 

25 at the end and inserting ‘‘one-half of the amount in effect 


lotter on DSKBCFDHB2PROD with BILLS
73 

•HR 1 RH

1 under subparagraph (A) for the taxable year in the case 

2 of any other individual.’’. 

3 (c) CREDIT REFUNDABLE UP TO $1,000 PER CHILD.— 

4 (1) IN GENERAL.—Section 24(d)(1)(A) is amended by 

5 striking all that follows ‘‘under this section’’ and inserting 

6 the following: ‘‘determined— 

7 ‘‘(i) without regard to this subsection 

8 and the limitation under section 26(a), 

9 ‘‘(ii) without regard to subsection 

10 (a)(2), and 

11 ‘‘(iii) by substituting ‘$1,000’ for 

12 ‘$1,600’ in subsection (a)(1), or’’. 

13 (2) INFLATION ADJUSTMENT.—Section 24(d) is 

14 amended by inserting after paragraph (2) the following new 

15 paragraph: 

16 ‘‘(3) INFLATION ADJUSTMENT.—In the case of 

17 any taxable year beginning in a calendar year after 

18 2017, the $1,000 amount in paragraph (1)(A)(iii) 

19 shall be increased by an amount equal to— 

20 ‘‘(A) such dollar amount, multiplied by 

21 ‘‘(B) the cost-of-living adjustment under sec22 tion 1(c)(2)(A) for such calendar year. 

23 Any increase determined under the preceding sentence 

24 shall be rounded to the next highest multiple of $100 


lotter on DSKBCFDHB2PROD with BILLS
74 

•HR 1 RH

1 and shall not exceed the amount in effect under sub2 section (a)(2).’’. 

3 (d) EFFECTIVE DATE.—The amendments made by this 

4 section shall apply to taxable years beginning after Decem5 ber 31, 2017. 

6 SEC. 1102. REPEAL OF NONREFUNDABLE CREDITS. 

7 (a) REPEAL OF SECTION 22.— 

8 (1) IN GENERAL.—Subpart A of part IV of sub9 chapter A of chapter 1 is amended by striking section 

10 22 (and by striking the item relating to such section 

11 in the table of sections for such subpart). 

12 (2) CONFORMING AMENDMENT.— 

13 (A) Section 86(f) is amended by striking 

14 paragraph (1) and by redesignating paragraphs 

15 (2), (3), and (4) as paragraphs (1), (2), and (3), 

16 respectively. 

17 (B)(i) Subsections (c)(3)(B) and (d)(4)(A) 

18 of section 7706, as redesignated by this Act, are 

19 each amended by striking ‘‘(as defined in section 

20 22(e)(3)’’. 

21 (ii) Section 7706(f), as redesignated by this 

22 Act, is amended by redesignating paragraph (7) 

23 as paragraph (8) and by inserting after para24 graph (6) the following new paragraph: 


lotter on DSKBCFDHB2PROD with BILLS
75 

•HR 1 RH

1 ‘‘(7) PERMANENT AND TOTAL DISABILITY DE2 FINED.—An individual is permanently and totally 

3 disabled if he is unable to engage in any substantial 

4 gainful activity by reason of any medically deter5 minable physical or mental impairment which can be 

6 expected to result in death or which has lasted or can 

7 be expected to last for a continuous period of not less 

8 than 12 months. An individual shall not be consid9 ered to be permanently and totally disabled unless he 

10 furnishes proof of the existence thereof in such form 

11 and manner, and at such times, as the Secretary may 

12 require.’’. 

13 (iii) Section 415(c)(3)(C)(i) is amended by 

14 striking ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 

15 (iv) Section 422(c)(6) is amended by strik16 ing ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 

17 (b) TERMINATION OF SECTION 25.—Section 25, as 

18 amended by section 3601, is amended by adding at the end 

19 the following new subsection: 

20 ‘‘(k) TERMINATION.—No credit shall be allowed under 

21 this section with respect to any mortgage credit certificate 

22 issued after December 31, 2017.’’. 

23 (c) REPEAL OF SECTION 30D.— 

24 (1) IN GENERAL.—Subpart B of part IV of sub25 chapter A of chapter 1 is amended by striking section 


lotter on DSKBCFDHB2PROD with BILLS
76 

•HR 1 RH

1 30D (and by striking the item relating to such section 

2 in the table of sections for such subpart). 

3 (2) CONFORMING AMENDMENTS.— 

4 (A) Section 38(b) is amended by striking 

5 paragraph (35). 

6 (B) Section 1016(a) is amended by striking 

7 paragraph (37). 

8 (C) Section 6501(m) is amended by striking 

9 ‘‘30D(e)(4),’’. 

10 (d) EFFECTIVE DATE.— 

11 (1) IN GENERAL.—Except as provided in para12 graphs (2) and (3), the amendments made by this sec13 tion shall apply to taxable years beginning after De14 cember 31, 2017. 

15 (2) SUBSECTION (b).—The amendment made by 

16 subsection (c) shall apply to taxable years ending 

17 after December 31, 2017. 

18 (3) SUBSECTION (c).—The amendments made by 

19 subsection (d) shall apply to vehicles placed in service 

20 in taxable years beginning after December 31, 2017. 

21 SEC. 1103. REFUNDABLE CREDIT PROGRAM INTEGRITY. 

22 (a) IDENTIFICATION REQUIREMENTS FOR CHILD AND

23 FAMILY TAX CREDIT.— 

24 (1) IN GENERAL.—Section 24(e) is amended to 

25 read as follows: 


lotter on DSKBCFDHB2PROD with BILLS
77 

•HR 1 RH

1 ‘‘(e) IDENTIFICATION REQUIREMENTS.— 

2 ‘‘(1) REQUIREMENTS FOR QUALIFYING CHILD.— 

3 No credit shall be allowed under this section to a tax4 payer with respect to any qualifying child unless the 

5 taxpayer includes the name and social security num6 ber of such qualifying child on the return of tax for 

7 the taxable year. The preceding sentence shall not pre8 vent a qualifying child from being treated as a de9 pendent described in subsection (a)(2). 

10 ‘‘(2) OTHER IDENTIFICATION REQUIREMENTS.— 

11 No credit shall be allowed under this section with re12 spect to any individual unless the taxpayer identi13 fication number of such individual is included on the 

14 return of tax for the taxable year and such identi15 fying number was issued before the due date for filing 

16 the return for the taxable year. 

17 ‘‘(3) SOCIAL SECURITY NUMBER.—For purposes 

18 of this subsection, the term ‘social security number’ 

19 means a social security number issued by the Social 

20 Security Administration (but only if the social secu21 rity number is issued to a citizen of the United States 

22 or pursuant to subclause (I) (or that portion of sub23 clause (III) that relates to subclause (I)) of section 

24 205(c)(2)(B)(i) of the Social Security Act)).’’. 


lotter on DSKBCFDHB2PROD with BILLS
78 

•HR 1 RH

1 (2) OMISSIONS TREATED AS MATHEMATICAL OR

2 CLERICAL ERROR.— 

3 (A) IN GENERAL.—Section 6213(g)(2)(I) is 

4 amended to read as follows: 

5 ‘‘(I) an omission of a correct social security 

6 number, or a correct TIN, required under section 

7 24(e) (relating to child tax credit), to be included 

8 on a return,’’. 

9 (b) SOCIAL SECURITY NUMBER MUST BE PRO10 VIDED.— 

11 (1) IN GENERAL.—Section 25A(f)(1)(A), as 

12 amended by section 1201 of this Act, is amended by 

13 striking ‘‘taxpayer identification number’’ each place 

14 it appears and inserting ‘‘social security number’’. 

15 (2) OMISSION TREATED AS MATHEMATICAL OR

16 CLERICAL ERROR.—Section 6213(g)(2)(J) is amended 

17 by striking ‘‘TIN’’ and inserting ‘‘social security 

18 number and employer identification number’’. 

19 (c) INDIVIDUALS PROHIBITED FROM ENGAGING IN

20 EMPLOYMENT IN UNITED STATES NOT ELIGIBLE FOR

21 EARNED INCOME TAX CREDIT.—Section 32(m) is amend22 ed— 

23 (1) by striking ‘‘(other than:’’ and all that fol24 lows through ‘‘of the Social Security Act)’’, and 


lotter on DSKBCFDHB2PROD with BILLS
79 

•HR 1 RH

1 (2) by inserting before the period at the end the 

2 following: ‘‘, but only if, in the case of subsection 

3 (c)(1)(E), the social security number is issued to a 

4 citizen of the United States or pursuant to subclause 

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

6 subclause (I)) of section 205(c)(2)(B)(i) of the Social 

7 Security Act’’. 

8 (d) EFFECTIVE DATE.—The amendments made by this 

9 section shall apply to taxable years beginning after Decem10 ber 31, 2017. 

11 SEC. 1104. PROCEDURES TO REDUCE IMPROPER CLAIMS OF 

12 EARNED INCOME CREDIT. 

13 (a) CLARIFICATION REGARDING DETERMINATION OF

14 SELF-EMPLOYMENT INCOME WHICH IS TREATED AS

15 EARNED INCOME.—Section 32(c)(2)(B) is amended by 

16 striking ‘‘and’’ at the end of clause (v), by striking the pe17 riod at the end of clause (vi) and inserting ‘‘, and’’, and 

18 by adding at the end the following new clause: 

19 ‘‘(vii) in determining the taxpayer’s 

20 net earnings from self-employment under 

21 subparagraph (A)(ii) there shall not fail to 

22 be taken into account any deduction which 

23 is allowable to the taxpayer under this sub24 title.’’. 


lotter on DSKBCFDHB2PROD with BILLS
80 

•HR 1 RH

1 (b) REQUIRED QUARTERLY REPORTING OF WAGES OF

2 EMPLOYEES.—Section 6011 is amended by adding at the 

3 end the following new subsection: 

4 ‘‘(i) EMPLOYER REPORTING OF WAGES.—Every per5 son required to deduct and withhold from an employee a 

6 tax under section 3101 or 3402 shall include on each return 

7 or statement submitted with respect to such tax, the name 

8 and address of such employee and the amount of wages for 

9 such employee on which such tax was withheld.’’. 

10 (c) EFFECTIVE DATE.— 

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section shall 

13 apply to taxable years ending after the date of the en14 actment of this Act. 

15 (2) REPORTING.—The Secretary of the Treasury, 

16 or his designee, may delay the application of the 

17 amendment made by subsection (b) for such period as 

18 such Secretary (or designee) determines to be reason19 able to allow persons adequate time to modify elec20 tronic (or other) systems to permit such person to 

21 comply with the requirements of such amendment. 

22 SEC. 1105. CERTAIN INCOME DISALLOWED FOR PURPOSES 

23 OF THE EARNED INCOME TAX CREDIT. 

24 (a) SUBSTANTIATION REQUIREMENT.—Section 32 is 

25 amended by adding at the end the following new subsection: 


lotter on DSKBCFDHB2PROD with BILLS
81 

•HR 1 RH

1 ‘‘(n) INCONSISTENT INCOME REPORTING.—If the 

2 earned income of a taxpayer claimed on a return for pur3 poses of this section is not substantiated by statements or 

4 returns under sections 6051, 6052, 6041(a), or 6050W with 

5 respect to such taxpayer, the Secretary may require such 

6 taxpayer to provide books and records to substantiate such 

7 income, including for the purpose of preventing fraud.’’. 

8 (b) EXCLUSION OF UNSUBSTANTIATED AMOUNT FROM

9 EARNED INCOME.—Section 32(c)(2) is amended by adding 

10 at the end the following new subparagraph: 

11 ‘‘(C) EXCLUSION.—In the case of a tax12 payer with respect to which there is an inconsist13 ency described in subsection (n) who fails to sub14 stantiate such inconsistency to the satisfaction of 

15 the Secretary, the term ‘earned income’ shall not 

16 include amounts to the extent of such inconsist17 ency.’’. 

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

19 section shall apply to taxable years ending after the date 

20 of the enactment of this Act. 

21 Subtitle C—Simplification and 

22 Reform of Education Incentives 

23 SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT. 

24 (a) IN GENERAL.—Section 25A is amended to read as 

25 follows: 


lotter on DSKBCFDHB2PROD with BILLS
82 

•HR 1 RH

1 ‘‘SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT. 

2 ‘‘(a) IN GENERAL.—In the case of an individual, there 

3 shall be allowed as a credit against the tax imposed by this 

4 chapter for the taxable year an amount equal to the sum 

5 of— 

6 ‘‘(1) 100 percent of so much of the qualified tui7 tion and related expenses paid by the taxpayer dur8 ing the taxable year (for education furnished to any 

9 eligible student for whom an election is in effect under 

10 this section for such taxable year during any aca11 demic period beginning in such taxable year) as does 

12 not exceed $2,000, plus 

13 ‘‘(2) 25 percent of so much of such expenses so 

14 paid as exceeds the dollar amount in effect under 

15 paragraph (1) but does not exceed twice such dollar 

16 amount. 

17 ‘‘(b) PORTION OF CREDIT REFUNDABLE.—40 percent 

18 of the credit allowable under subsection (a)(1) (determined 

19 without regard to this subsection and section 26(a) and 

20 after application of all other provisions of this section) shall 

21 be treated as a credit allowable under subpart C (and not 

22 under this part). The preceding sentence shall not apply 

23 to any taxpayer for any taxable year if such taxpayer is 

24 a child to whom section 1(d) applies for such taxable year. 

25 ‘‘(c) LIMITATION BASED ON MODIFIED ADJUSTED

26 GROSS INCOME.— 


lotter on DSKBCFDHB2PROD with BILLS
83 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—The amount allowable as a 

2 credit under subsection (a) for any taxable year shall 

3 be reduced (but not below zero) by an amount which 

4 bears the same ratio to the amount so allowable (de5 termined without regard to this subsection and sub6 section (b) but after application of all other provi7 sions of this section) as— 

8 ‘‘(A) the excess of— 

9 ‘‘(i) the taxpayer’s modified adjusted 

10 gross income for such taxable year, over 

11 ‘‘(ii) $80,000 (twice such amount in 

12 the case of a joint return), bears to 

13 ‘‘(B) $10,000 (twice such amount in the 

14 case of a joint return). 

15 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—For 

16 purposes of this subsection, the term ‘modified ad17 justed gross income’ means the adjusted gross income 

18 of the taxpayer for the taxable year increased by any 

19 amount excluded from gross income under section 

20 911, 931, or 933. 

21 ‘‘(d) OTHER LIMITATIONS.— 

22 ‘‘(1) CREDIT ALLOWED ONLY FOR 5 TAXABLE

23 YEARS.—An election to have this section apply may 

24 not be made for any taxable year if such an election 

25 (by the taxpayer or any other individual) is in effect 


lotter on DSKBCFDHB2PROD with BILLS
84 

•HR 1 RH

1 with respect to such student for any 5 prior taxable 

2 years. 

3 ‘‘(2) CREDIT ALLOWED ONLY FOR FIRST 5 YEARS

4 OF POSTSECONDARY EDUCATION.— 

5 ‘‘(A) IN GENERAL.—No credit shall be al6 lowed under subsection (a) for a taxable year 

7 with respect to the qualified tuition and related 

8 expenses of an eligible student if the student has 

9 completed (before the beginning of such taxable 

10 year) the first 5 years of postsecondary education 

11 at an eligible educational institution. 

12 ‘‘(B) FIFTH YEAR LIMITATIONS.—In the 

13 case of an eligible student with respect to whom 

14 an election has been in effect for 4 preceding tax15 able years for purposes of the fifth taxable 

16 year— 

17 ‘‘(i) the amount of the credit allowed 

18 under this section for the taxable year shall 

19 not exceed an amount equal to 50 percent of 

20 the credit otherwise determined with respect 

21 to such student under this section (without 

22 regard to this subparagraph), and 

23 ‘‘(ii) the amount of the credit deter24 mined under subsection (b) and allowable 

25 under subpart C shall not exceed an amount 


lotter on DSKBCFDHB2PROD with BILLS
85 

•HR 1 RH

1 equal to 40 percent of the amount deter2 mined with respect to such student under 

3 clause (i). 

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

5 ‘‘(1) ELIGIBLE STUDENT.—The term ‘eligible 

6 student’ means, with respect to any academic period, 

7 a student who— 

8 ‘‘(A) meets the requirements of section 

9 484(a)(1) of the Higher Education Act of 1965 

10 (20 U.S.C. 1091(a)(1)), as in effect on August 5, 

11 1997, and 

‘‘(B) is carrying at least 1 12 ⁄2 the normal full13 time work load for the course of study the stu14 dent is pursuing. 

15 ‘‘(2) QUALIFIED TUITION AND RELATED EX16 PENSES.— 

17 ‘‘(A) IN GENERAL.—The term ‘qualified tui18 tion and related expenses’ means tuition, fees, 

19 and course materials, required for enrollment or 

20 attendance of— 

21 ‘‘(i) the taxpayer, 

22 ‘‘(ii) the taxpayer’s spouse, or 

23 ‘‘(iii) any dependent of the taxpayer, 


lotter on DSKBCFDHB2PROD with BILLS
86 

•HR 1 RH

1 at an eligible educational institution for courses 

2 of instruction of such individual at such institu3 tion. 

4 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV5 ING SPORTS, ETC.—Such term does not include 

6 expenses with respect to any course or other edu7 cation involving sports, games, or hobbies, unless 

8 such course or other education is part of the in9 dividual’s degree program. 

10 ‘‘(C) EXCEPTION FOR NONACADEMIC

11 FEES.—Such term does not include student ac12 tivity fees, athletic fees, insurance expenses, or 

13 other expenses unrelated to an individual’s aca14 demic course of instruction. 

15 ‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.—The 

16 term ‘eligible educational institution’ means an insti17 tution— 

18 ‘‘(A) which is described in section 481 of the 

19 Higher Education Act of 1965 (20 U.S.C. 1088), 

20 as in effect on August 5, 1997, and 

21 ‘‘(B) which is eligible to participate in a 

22 program under title IV of such Act. 

23 ‘‘(f) SPECIAL RULES.— 

24 ‘‘(1) IDENTIFICATION REQUIREMENTS.— 


lotter on DSKBCFDHB2PROD with BILLS
87 

•HR 1 RH

1 ‘‘(A) STUDENT.—No credit shall be allowed 

2 under subsection (a) to a taxpayer with respect 

3 to the qualified tuition and related expenses of 

4 an individual unless the taxpayer includes the 

5 name and taxpayer identification number of 

6 such individual on the return of tax for the tax7 able year, and such taxpayer identification num8 ber was issued on or before the due date for filing 

9 such return. 

10 ‘‘(B) TAXPAYER.—No credit shall be allowed 

11 under this section if the identifying number of 

12 the taxpayer was issued after the due date for fil13 ing the return for the taxable year. 

14 ‘‘(C) INSTITUTION.—No credit shall be al15 lowed under this section unless the taxpayer in16 cludes the employer identification number of any 

17 institution to which qualified tuition and related 

18 expenses were paid with respect to the indi19 vidual. 

20 ‘‘(2) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS, 

21 ETC.—The amount of qualified tuition and related ex22 penses otherwise taken into account under subsection 

23 (a) with respect to an individual for an academic pe24 riod shall be reduced (before the application of sub25 section (c)) by the sum of any amounts paid for the 


lotter on DSKBCFDHB2PROD with BILLS
88 

•HR 1 RH

1 benefit of such individual which are allocable to such 

2 period as— 

3 ‘‘(A) a qualified scholarship which is ex4 cludable from gross income under section 117, 

5 ‘‘(B) an educational assistance allowance 

6 under chapter 30, 31, 32, 34, or 35 of title 38, 

7 United States Code, or under chapter 1606 of 

8 title 10, United States Code, and 

9 ‘‘(C) a payment (other than a gift, bequest, 

10 devise, or inheritance within the meaning of sec11 tion 102(a)) for such individual’s educational ex12 penses, or attributable to such individual’s en13 rollment at an eligible educational institution, 

14 which is excludable from gross income under any 

15 law of the United States. 

16 ‘‘(3) TREATMENT OF EXPENSES PAID BY DE17 PENDENT.—If an individual is a dependent of an18 other taxpayer for a taxable year beginning in the 

19 calendar year in which such individuals taxable year 

20 begins— 

21 ‘‘(A) no credit shall be allowed under sub22 section (a) to such individual for such individ23 ual’s taxable year, and 

24 ‘‘(B) qualified tuition and related expenses 

25 paid by such individual during such individVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00088 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
89 

•HR 1 RH

1 ual’s taxable year shall be treated for purposes of 

2 this section as paid by such other taxpayer. 

3 ‘‘(4) TREATMENT OF CERTAIN PREPAYMENTS.—If 

4 qualified tuition and related expenses are paid by the 

5 taxpayer during a taxable year for an academic pe6 riod which begins during the first 3 months following 

7 such taxable year, such academic period shall be 

8 treated for purposes of this section as beginning dur9 ing such taxable year. 

10 ‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit 

11 shall be allowed under this section for any amount for 

12 which a deduction is allowed under any other provi13 sion of this chapter. 

14 ‘‘(6) NO CREDIT FOR MARRIED INDIVIDUALS FIL15 ING SEPARATE RETURNS.—If the taxpayer is a mar16 ried individual (within the meaning of section 7703), 

17 this section shall apply only if the taxpayer and the 

18 taxpayer’s spouse file a joint return for the taxable 

19 year. 

20 ‘‘(7) NONRESIDENT ALIENS.—If the taxpayer is 

21 a nonresident alien individual for any portion of the 

22 taxable year, this section shall apply only if such in23 dividual is treated as a resident alien of the United 

24 States for purposes of this chapter by reason of an 

25 election under subsection (g) or (h) of section 6013. 


lotter on DSKBCFDHB2PROD with BILLS
90 

•HR 1 RH

1 ‘‘(8) RESTRICTIONS ON TAXPAYERS WHO IMPROP2 ERLY CLAIMED CREDIT IN PRIOR YEAR.— 

3 ‘‘(A) TAXPAYERS MAKING PRIOR FRAUDU4 LENT OR RECKLESS CLAIMS.— 

5 ‘‘(i) IN GENERAL.—No credit shall be 

6 allowed under this section for any taxable 

7 year in the disallowance period. 

8 ‘‘(ii) DISALLOWANCE PERIOD.—For 

9 purposes of clause (i), the disallowance pe10 riod is— 

11 ‘‘(I) the period of 10 taxable years 

12 after the most recent taxable year for 

13 which there was a final determination 

14 that the taxpayer’s claim of credit 

15 under this section was due to fraud, 

16 and 

17 ‘‘(II) the period of 2 taxable years 

18 after the most recent taxable year for 

19 which there was a final determination 

20 that the taxpayer’s claim of credit 

21 under this section was due to reckless 

22 or intentional disregard of rules and 

23 regulations (but not due to fraud). 

24 ‘‘(B) TAXPAYERS MAKING IMPROPER PRIOR

25 CLAIMS.—In the case of a taxpayer who is deVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00090 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
91 

•HR 1 RH

1 nied credit under this section for any taxable 

2 year as a result of the deficiency procedures 

3 under subchapter B of chapter 63, no credit shall 

4 be allowed under this section for any subsequent 

5 taxable year unless the taxpayer provides such 

6 information as the Secretary may require to 

7 demonstrate eligibility for such credit. 

8 ‘‘(g) INFLATION ADJUSTMENT.— 

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

10 beginning after 2018, the $80,000 amount in sub11 section (c)(1)(A)(ii) shall each be increased by an 

12 amount equal to— 

13 ‘‘(A) such dollar amount, multiplied by 

14 ‘‘(B) the cost-of-living adjustment deter15 mined under section 1(c)(2)(A) for the calendar 

16 year in which the taxable year begins, deter17 mined by substituting ‘calendar year 2017’ for 

18 ‘calendar year 2016’ in clause (ii) thereof. 

19 ‘‘(2) ROUNDING.—If any amount as adjusted 

20 under paragraph (1) is not a multiple of $1,000, such 

21 amount shall be rounded to the next lowest multiple 

22 of $1,000. 

23 ‘‘(h) REGULATIONS.—The Secretary may prescribe 

24 such regulations or other guidance as may be necessary or 

25 appropriate to carry out this section, including regulations 


lotter on DSKBCFDHB2PROD with BILLS
92 

•HR 1 RH

1 providing for a recapture of the credit allowed under this 

2 section in cases where there is a refund in a subsequent 

3 taxable year of any amount which was taken into account 

4 in determining the amount of such credit.’’. 

5 (b) CONFORMING AMENDMENTS.— 

6 (1) Section 72(t)(7)(B) is amended by striking 

7 ‘‘section 25A(g)(2)’’ and inserting ‘‘section 25A(f)(2)’’. 

8 (2) Section 529(c)(3)(B)(v)(I) is amended by 

9 striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 

10 25A(f)(2)’’. 

11 (3) Section 529(e)(3)(B)(i) is amended by strik12 ing ‘‘section 25A(b)(3)’’ and inserting ‘‘section 

13 25A(d)’’. 

14 (4) Section 530(d)(2)(C) is amended— 

15 (A) by striking ‘‘section 25A(g)(2)’’ in 

16 clause (i)(I) and inserting ‘‘section 25A(f)(2)’’, 

17 and 

18 (B) by striking ‘‘HOPE AND LIFETIME

19 LEARNING CREDITS’’ in the heading and insert20 ing ‘‘AMERICAN OPPORTUNITY TAX CREDIT’’. 

21 (5) Section 530(d)(4)(B)(iii) is amended by 

22 striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 

23 25A(d)(4)(B)’’. 

24 (6) Section 6050S(e) is amended by striking 

25 ‘‘subsection (g)(2)’’ and inserting ‘‘subsection (f)(2)’’. 


lotter on DSKBCFDHB2PROD with BILLS
93 

•HR 1 RH

1 (7) Section 6211(b)(4)(A) is amended by striking 

2 ‘‘subsection (i)(6)’’ and inserting ‘‘subsection (b)’’. 

3 (8) Section 6213(g)(2)(J) is amended by striking 

4 ‘‘TIN required under section 25A(g)(1)’’ and inserting 

5 ‘‘TIN, and employer identification number, required 

6 under section 25A(f)(1)’’. 

7 (9) Section 6213(g)(2)(Q) is amended to read as 

8 follows: 

9 ‘‘(Q) an omission of information required 

10 by section 25A(f)(8)(B) or an entry on the re11 turn claiming the credit determined under sec12 tion 25A(a) for a taxable year for which the 

13 credit is disallowed under section 25A(f)(8)(A).’’. 

14 (10) Section 1004(c) of division B of the Amer15 ican Recovery and Reinvestment Tax Act of 2009 is 

16 amended— 

17 (A) in paragraph (1)— 

18 (i) by striking ‘‘section 25A(i)(6)’’ each 

19 place it appears and inserting ‘‘section 

20 25A(b)’’, and 

21 (ii) by striking ‘‘with respect to taxable 

22 years beginning after 2008 and before 

23 2018’’ each place it appears and inserting 

24 ‘‘with respect to each taxable year’’, 


lotter on DSKBCFDHB2PROD with BILLS
94 

•HR 1 RH

1 (B) in paragraph (2), by striking ‘‘Section 

2 25A(i)(6)’’ and inserting ‘‘Section 25A(b)’’, and 

3 (C) in paragraph (3)(C), by striking ‘‘sub4 section (i)(6)’’ and inserting ‘‘subsection (b)’’. 

5 (11) The table of sections for subpart A of part 

6 IV of subchapter A of chapter 1 is amended by strik7 ing the item relating to section 25A and inserting the 

8 following new item: 

‘‘Sec. 25A. American opportunity tax credit.’’. 

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

10 section shall apply to taxable years beginning after Decem11 ber 31, 2017. 

12 SEC. 1202. CONSOLIDATION OF EDUCATION SAVINGS 

13 RULES. 

14 (a) NO NEW CONTRIBUTIONS TO COVERDELL EDU15 CATION SAVINGS ACCOUNT.—Section 530(b)(1)(A) is 

16 amended to read as follows: 

17 ‘‘(A) Except in the case of rollover contribu18 tions, no contribution will be accepted after De19 cember 31, 2017.’’. 

20 (b) LIMITED DISTRIBUTION ALLOWED FOR ELEMEN21 TARY AND SECONDARY TUITION.— 

22 (1) IN GENERAL.—Section 529(c) is amended by 

23 adding at the end the following new paragraph: 

24 ‘‘(7) TREATMENT OF ELEMENTARY AND SEC25 ONDARY TUITION.—Any reference in this subsection to 


lotter on DSKBCFDHB2PROD with BILLS
95 

•HR 1 RH

1 the term ‘qualified higher education expense’ shall in2 clude a reference to expenses for tuition in connection 

3 with enrollment at an elementary or secondary 

4 school.’’. 

5 (2) LIMITATION.—Section 529(e)(3)(A) is 

6 amended by adding at the end the following: ‘‘The 

7 amount of cash distributions from all qualified tui8 tion programs described in subsection (b)(1)(A)(ii) 

9 with respect to a beneficiary during any taxable year, 

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

11 in expenses for tuition incurred during the taxable 

12 year in connection with the enrollment or attendance 

13 of the beneficiary as an elementary or secondary 

14 school student at a public, private, or religious 

15 school.’’. 

16 (c) ROLLOVERS TO QUALIFIED TUITION PROGRAMS

17 PERMITTED.—Section 530(d)(5) is amended by inserting ‘‘, 

18 or into (by purchase or contribution) a qualified tuition 

19 program (as defined in section 529),’’ after ‘‘into another 

20 Coverdell education savings account’’. 

21 (d) DISTRIBUTIONS FROM QUALIFIED TUITION PRO22 GRAMS FOR CERTAIN EXPENSES ASSOCIATED WITH REG23 ISTERED APPRENTICESHIP PROGRAMS.—Section 529(e)(3) 

24 is amended by adding at the end the following new subpara25 graph: 


lotter on DSKBCFDHB2PROD with BILLS
96 

•HR 1 RH

1 ‘‘(C) CERTAIN EXPENSES ASSOCIATED WITH

2 REGISTERED APPRENTICESHIP PROGRAMS.—The 

3 term ‘qualified higher education expenses’ shall 

4 include books, supplies, and equipment required 

5 for the enrollment or attendance of a designated 

6 beneficiary in an apprenticeship program reg7 istered and certified with the Secretary of Labor 

8 under section 1 of the National Apprenticeship 

9 Act (29 U.S.C. 50).’’. 

10 (e) UNBORN CHILDREN ALLOWED AS ACCOUNT BENE11 FICIARIES.—Section 529(e) is amended by adding at the 

12 end the following new paragraph: 

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

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

15 an unborn child from being treated as a des16 ignated beneficiary or an individual under this 

17 section. 

18 ‘‘(B) UNBORN CHILD.—For purposes of this 

19 paragraph— 

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

21 child’ means a child in utero. 

22 ‘‘(ii) CHILD IN UTERO.—The term 

23 ‘child in utero’ means a member of the spe24 cies homo sapiens, at any stage of develop25 ment, who is carried in the womb.’’. 


lotter on DSKBCFDHB2PROD with BILLS
97 

•HR 1 RH

1 (f) EFFECTIVE DATES.— 

2 (1) IN GENERAL.—Except as otherwise provided 

3 in this subsection, the amendments made by this sec4 tion shall apply to contributions made after December 

5 31, 2017. 

6 (2) ROLLOVERS TO QUALIFIED TUITION PRO7 GRAMS.—The amendments made by subsection (b) 

8 shall apply to distributions after December 31, 2017. 

9 SEC. 1203. REFORMS TO DISCHARGE OF CERTAIN STUDENT 

10 LOAN INDEBTEDNESS. 

11 (a) TREATMENT OF STUDENT LOANS DISCHARGED ON

12 ACCOUNT OF DEATH OR DISABILITY.—Section 108(f) is 

13 amended by adding at the end the following new paragraph: 

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

15 DISABILITY.— 

16 ‘‘(A) IN GENERAL.—In the case of an indi17 vidual, gross income does not include any 

18 amount which (but for this subsection) would be 

19 includible in gross income by reasons of the dis20 charge (in whole or in part) of any loan de21 scribed in subparagraph (B) if such discharge 

22 was— 

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

24 of section 437 of the Higher Education Act 

25 of 1965 or the parallel benefit under part D 


lotter on DSKBCFDHB2PROD with BILLS
98 

•HR 1 RH

1 of title IV of such Act (relating to the re2 payment of loan liability), 

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

4 of such Act, or 

5 ‘‘(iii) otherwise discharged on account 

6 of the death or total and permanent dis7 ability of the student. 

8 ‘‘(B) LOANS DESCRIBED.—A loan is de9 scribed in this subparagraph if such loan is— 

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

11 paragraph (2)), or 

12 ‘‘(ii) a private education loan (as de13 fined in section 140(7) of the Consumer 

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

15 1650(7))).’’. 

16 (b) EXCLUSION FROM GROSS INCOME FOR PAYMENTS

17 MADE UNDER INDIAN HEALTH SERVICE LOAN REPAYMENT

18 PROGRAM.— 

19 (1) IN GENERAL.—Section 108(f)(4) is amended 

20 by inserting ‘‘under section 108 of the Indian Health 

21 Care Improvement Act,’’ after ‘‘338I of such Act,’’. 

22 (2) CLERICAL AMENDMENT.—The heading for 

23 section 108(f)(4) is amended by striking ‘‘AND CER24 TAIN’’ and inserting ‘‘, INDIAN HEALTH SERVICE

25 LOAN REPAYMENT PROGRAM, AND CERTAIN’’. 


lotter on DSKBCFDHB2PROD with BILLS
99 

•HR 1 RH

1 (c) EFFECTIVE DATES.— 

2 (1) SUBSECTION (a).—The amendment made by 

3 subsection (a)(1) shall apply to discharges of indebt4 edness after December 31, 2017. 

5 (2) SUBSECTION (b).—The amendments made by 

6 subsection (b) shall apply to amounts received in tax7 able years beginning after December 31, 2017. 

8 SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO 

9 EDUCATION. 

10 (a) IN GENERAL.—Subchapter B of chapter 1 is 

11 amended— 

12 (1) in part VII by striking sections 221 and 222 

13 (and by striking the items relating to such sections in 

14 the table of sections for such part), 

15 (2) in part VII by striking sections 135 and 127 

16 (and by striking the items relating to such sections in 

17 the table of sections for such part), and 

18 (3) by striking subsection (d) of section 117. 

19 (b) CONFORMING AMENDMENT RELATING TO SECTION

20 221.— 

21 (1) Section 62(a) is amended by striking para22 graph (17). 

23 (2) Section 74(d) is amended by striking ‘‘221,’’. 

24 (3) Section 86(b)(2)(A) is amended by striking 

25 ‘‘221,’’. 


lotter on DSKBCFDHB2PROD with BILLS
100 

•HR 1 RH

1 (4) Section 219(g)(3)(A)(ii) is amended by strik2 ing ‘‘221,’’. 

3 (5) Section 163(h)(2) is amended by striking 

4 subparagraph (F). 

5 (6) Section 6050S(a) is amended— 

6 (A) by inserting ‘‘or’’ at the end of para7 graph (1), 

8 (B) by striking ‘‘or’’ at the end of para9 graph (2), and 

10 (C) by striking paragraph (3). 

11 (7) Section 6050S(e) is amended by striking all 

12 that follows ‘‘thereof)’’ and inserting a period. 

13 (c) CONFORMING AMENDMENTS RELATED TO SECTION

14 222.— 

15 (1) Section 62(a) is amended by striking para16 graph (18). 

17 (2) Section 74(d)(2)(B) is amended by striking 

18 ‘‘222,’’. 

19 (3) Section 86(b)(2)(A) is amended by striking 

20 ‘‘222,’’. 

21 (4) Section 219(g)(3)(A)(ii) is amended by strik22 ing ‘‘222,’’. 

23 (d) CONFORMING AMENDMENTS RELATING TO SEC24 TION 127.— 


lotter on DSKBCFDHB2PROD with BILLS
101 

•HR 1 RH

1 (1) Section 125(f)(1) is amended by striking 

2 ‘‘127,’’. 

3 (2) Section 132(j)(8) is amended by striking 

4 ‘‘which are not excludable from gross income under 

5 section 127’’. 

6 (3) Section 414(n)(3)(C) is amended by striking 

7 ‘‘127,’’. 

8 (4) Section 414(t)(2) is amended by striking 

9 ‘‘127,’’. 

10 (5) Section 3121(a)(18) is amended by striking 

11 ‘‘127,’’. 

12 (6) Section 3231(e) is amended by striking para13 graph (6). 

14 (7) Section 3306(b)(13) is amended by ‘‘127,’’. 

15 (8) Section 3401(a)(18) is amended by striking 

16 ‘‘127,’’. 

17 (9) Section 6039D(d)(1) is amended by striking 

18 ‘‘, 127’’. 

19 (e) CONFORMING AMENDMENTS RELATING TO SECTION

20 117(d).— 

21 (1) Section 117(c)(1) is amended— 

22 (A) by striking ‘‘subsections (a) and (d)’’ 

23 and inserting ‘‘subsection (a)’’, and 

24 (B) by striking ‘‘or qualified tuition reduc25 tion’’. 


lotter on DSKBCFDHB2PROD with BILLS
102 

•HR 1 RH

1 (2) Section 414(n)(3)(C) is amended by striking 

2 ‘‘117(d),’’. 

3 (3) Section 414(t)(2) is amended by striking 

4 ‘‘117(d),’’. 

5 (f) CONFORMING AMENDMENTS RELATED TO SECTION

6 135.— 

7 (1) Section 74(d)(2)(B) is amended by striking 

8 ‘‘135,’’. 

9 (2) Section 86(b)(2)(A) is amended by striking 

10 ‘‘135,’’. 

11 (3) Section 219(g)(3)(A)(ii) is amended by strik12 ing ‘‘135,’’. 

13 (g) EFFECTIVE DATES.— 

14 (1) IN GENERAL.—Except as otherwise provided 

15 in this subsection, the amendments made by this sec16 tion shall apply to taxable years beginning after De17 cember 31, 2017. 

18 (2) AMENDMENTS RELATING TO SECTION

19 117(d).—The amendments made by subsections (a)(3) 

20 and (e) shall apply to amounts paid or incurred after 

21 December 31, 2017. 

22 SEC. 1205. ROLLOVERS BETWEEN QUALIFIED TUITION PRO23 GRAMS AND QUALIFIED ABLE PROGRAMS. 

24 (a) ROLLOVERS FROM QUALIFIED TUITION PROGRAMS

25 TO QUALIFIED ABLE PROGRAMS.—Section 529(c)(3)(C)(i) 


lotter on DSKBCFDHB2PROD with BILLS
103 

•HR 1 RH

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

2 by striking the period at the end of subclause (II) and in3 serting ‘‘, or’’, and by adding at the end the following new 

4 subclause: 

5 ‘‘(III) to an ABLE account (as 

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

7 designated beneficiary or a member of 

8 the family of the designated bene9 ficiary. 

10 Subclause (III) shall not apply to so much 

11 of a distribution which, when added to all 

12 other contributions made to the ABLE ac13 count for the taxable year, exceeds the limi14 tation under section 529A(b)(2)(B).’’. 

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

16 section shall apply to distributions after December 31, 2017. 

17 Subtitle D—Simplification and 

18 Reform of Deductions 

19 SEC. 1301. REPEAL OF OVERALL LIMITATION ON ITEMIZED 

20 DEDUCTIONS. 

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

22 1 is amended by striking section 68 (and the item relating 

23 to such section in the table of sections for such part). 


lotter on DSKBCFDHB2PROD with BILLS
104 

•HR 1 RH

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

2 section shall apply to taxable years beginning after Decem3 ber 31, 2017. 

4 SEC. 1302. MORTGAGE INTEREST. 

5 (a) MODIFICATION OF LIMITATIONS.— 

6 (1) IN GENERAL.—Section 163(h)(3) is amended 

7 to read as follows: 

8 ‘‘(3) QUALIFIED RESIDENCE INTEREST.—For 

9 purposes of this subsection— 

10 ‘‘(A) IN GENERAL.—The term ‘qualified res11 idence interest’ means any interest which is paid 

12 or accrued during the taxable year on indebted13 ness which— 

14 ‘‘(i) is incurred in acquiring, con15 structing, or substantially improving any 

16 qualified residence (determined as of the 

17 time the interest is accrued) of the taxpayer, 

18 and 

19 ‘‘(ii) is secured by such residence. 

20 Such term also includes interest on any indebt21 edness secured by such residence resulting from 

22 the refinancing of indebtedness meeting the re23 quirements of the preceding sentence (or this sen24 tence); but only to the extent the amount of the 

25 indebtedness resulting from such refinancing does 


lotter on DSKBCFDHB2PROD with BILLS
105 

•HR 1 RH

1 not exceed the amount of the refinanced indebted2 ness. 

3 ‘‘(B) LIMITATION.—The aggregate amount 

4 of indebtedness taken into account under sub5 paragraph (A) for any period shall not exceed 

6 $500,000 (half of such amount in the case of a 

7 married individual filing a separate return). 

8 ‘‘(C) TREATMENT OF INDEBTEDNESS IN9 CURRED ON OR BEFORE NOVEMBER 2, 2017.— 

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

11 pre-November 2, 2017, indebtedness, this 

12 paragraph shall apply as in effect imme13 diately before the enactment of the Tax Cuts 

14 and Jobs Act. 

15 ‘‘(ii) PRE-NOVEMBER 2, 2017, INDEBT16 EDNESS.—For purposes of this subpara17 graph, the term ‘pre-November 2, 2017, in18 debtedness’ means— 

19 ‘‘(I) any principal residence ac20 quisition indebtedness which was in21 curred on or before November 2, 2017, 

22 or 

23 ‘‘(II) any principal residence ac24 quisition indebtedness which is in25 curred after November 2, 2017, to refiVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00105 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
106 

•HR 1 RH

1 nance indebtedness described in clause 

2 (i) (or refinanced indebtedness meeting 

3 the requirements of this clause) to the 

4 extent (immediately after the refi5 nancing) the principal amount of the 

6 indebtedness resulting from the refi7 nancing does not exceed the principal 

8 amount of the refinanced indebtedness 

9 (immediately before the refinancing). 

10 ‘‘(iii) LIMITATION ON PERIOD OF REFI11 NANCING.—clause (ii)(II) shall not apply to 

12 any indebtedness after— 

13 ‘‘(I) the expiration of the term of 

14 the original indebtedness, or 

15 ‘‘(II) if the principal of such 

16 original indebtedness is not amortized 

17 over its term, the expiration of the 

18 term of the 1st refinancing of such in19 debtedness (or if earlier, the date which 

20 is 30 years after the date of such 1st 

21 refinancing). 

22 ‘‘(iv) BINDING CONTRACT EXCEP23 TION.—In the case of a taxpayer who enters 

24 into a written binding contract before No25 vember 2, 2017, to close on the purchase of 


lotter on DSKBCFDHB2PROD with BILLS
107 

•HR 1 RH

1 a principal residence before January 1, 

2 2018, and who purchases such residence be3 fore April 1, 2018, subparagraphs (A) and 

4 (B) shall be applied by substituting ‘April 

5 1, 2018’ for ‘November 2, 2017’.’’. 

6 (2) CONFORMING AMENDMENTS.— 

7 (A) Section 108(h)(2) is by striking ‘‘for 

8 ‘$1,000,000 ($500,000’ in clause (ii) thereof’’ and 

9 inserting ‘‘for ‘$500,000 ($250,000’ in paragraph 

10 (2)(A), and ‘$1,000,000’ for ‘$500,000’ in para11 graph (2)(B), thereof’’. 

12 (B) Section 163(h) is amended by striking 

13 subparagraphs (E) and (F) in paragraph (4). 

14 (b) TAXPAYERS LIMITED TO 1 QUALIFIED RESI15 DENCE.—Section 163(h)(4)(A)(i) is amended to read as fol16 lows: 

17 ‘‘(i) IN GENERAL.—The term ‘qualified 

18 residence’ means the principal residence 

19 (within the meaning of section 121) of the 

20 taxpayer.’’. 

21 (c) EFFECTIVE DATES.— 

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

23 this section shall apply to interest paid or accrued in 

24 taxable years beginning after December 31, 2017, 


lotter on DSKBCFDHB2PROD with BILLS
108 

•HR 1 RH

1 with respect to indebtedness incurred before, on, or 

2 after such date. 

3 (2) TREATMENT OF GRANDFATHERED INDEBTED4 NESS.—For application of the amendments made by 

5 this section to grandfathered indebtedness, see para6 graph (3)(C) of section 163(h) of the Internal Revenue 

7 Code of 1986, as amended by this section. 

8 SEC. 1303. REPEAL OF DEDUCTION FOR CERTAIN TAXES 

9 NOT PAID OR ACCRUED IN A TRADE OR BUSI10 NESS. 

11 (a) IN GENERAL.—Section 164(b)(5) is amended to 

12 read as follows: 

13 ‘‘(5) LIMITATION IN CASE OF INDIVIDUALS.—In 

14 the case of a taxpayer other than a corporation— 

15 ‘‘(A) foreign real property taxes (other than 

16 taxes which are paid or accrued in carrying on 

17 a trade or business or an activity described in 

18 section 212) shall not be taken into account 

19 under subsection (a)(1), 

20 ‘‘(B) the aggregate amount of taxes (other 

21 than taxes which are paid or accrued in car22 rying on a trade or business or an activity de23 scribed in section 212) taken into account under 

24 subsection (a)(1) for any taxable year shall not 


lotter on DSKBCFDHB2PROD with BILLS
109 

•HR 1 RH

1 exceed $10,000 ($5,000 in the case of a married 

2 individual filing a separate return), 

3 ‘‘(C) subsection (a)(2) shall only apply to 

4 taxes which are paid or accrued in carrying on 

5 a trade or business or an activity described in 

6 section 212, and 

7 ‘‘(D) subsection (a)(3) shall not apply to 

8 State and local taxes.’’. 

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

10 section shall apply to taxable years beginning after Decem11 ber 31, 2017. 

12 SEC. 1304. REPEAL OF DEDUCTION FOR PERSONAL CAS13 UALTY LOSSES. 

14 (a) IN GENERAL.—Section 165(c) is amended by in15 serting ‘‘and’’ at the end of paragraph (1), by striking ‘‘; 

16 and’’ at the end of paragraph (2) and inserting a period, 

17 and by striking paragraph (3). 

18 (b) CONFORMING AMENDMENTS.— 

19 (1) Section 165(h) is amended to read as follows: 

20 ‘‘(h) SPECIAL RULE WHERE PERSONAL CASUALTY

21 GAINS EXCEED PERSONAL CASUALTY LOSSES.— 

22 ‘‘(1) IN GENERAL.—If the personal casualty 

23 gains for any taxable year exceed the personal cas24 ualty losses for such taxable year— 


lotter on DSKBCFDHB2PROD with BILLS
110 

•HR 1 RH

1 ‘‘(A) all such gains shall be treated as gains 

2 from sales or exchanges of capital assets, and 

3 ‘‘(B) all such losses shall be treated as losses 

4 from sales or exchanges of capital assets. 

5 ‘‘(2) DEFINITIONS OF PERSONAL CASUALTY GAIN

6 AND PERSONAL CASUALTY LOSS.—For purposes of 

7 this subsection— 

8 ‘‘(A) PERSONAL CASUALTY LOSS.—The term 

9 ‘personal casualty loss’ means any loss of prop10 erty not connected with a trade or business or a 

11 transaction entered into for profit, if such loss 

12 arises from fire, storm, shipwreck, or other cas13 ualty, or from theft. 

14 ‘‘(B) PERSONAL CASUALTY GAIN.—The term 

15 ‘personal casualty gain’ means the recognized 

16 gain from any involuntary conversion of prop17 erty which is described in subparagraph (A) 

18 arising from fire, storm, shipwreck, or other cas19 ualty, or from theft.’’. 

20 (2) Section 165 is amended by striking sub21 section (k). 

22 (3)(A) Section 165(l)(1) is amended by striking 

23 ‘‘a loss described in subsection (c)(3)’’ and inserting 

24 ‘‘an ordinary loss described in subsection (c)(2)’’. 

25 (B) Section 165(l) is amended— 


lotter on DSKBCFDHB2PROD with BILLS
111 

•HR 1 RH

1 (i) by striking paragraph (5), 

2 (ii) by redesignating paragraphs (2), (3), 

3 and (4) as paragraphs (3), (4), and (5), respec4 tively, and 

5 (iii) by inserting after paragraph (1) the 

6 following new paragraph: 

7 ‘‘(2) LIMITATIONS.— 

8 ‘‘(A) DEPOSIT MAY NOT BE FEDERALLY IN9 SURED.—No election may be made under para10 graph (1) with respect to any loss on a deposit 

11 in a qualified financial institution if part or all 

12 of such deposit is insured under Federal law. 

13 ‘‘(B) DOLLAR LIMITATION.—With respect to 

14 each financial institution, the aggregate amount 

15 of losses attributable to deposits in such financial 

16 institution to which an election under paragraph 

17 (1) may be made by the taxpayer for any taxable 

18 year shall not exceed $20,000 ($10,000 in the 

19 case of a separate return by a married indi20 vidual). The limitation of the preceding sentence 

21 shall be reduced by the amount of any insurance 

22 proceeds under any State law which can reason23 ably be expected to be received with respect to 

24 losses on deposits in such institution.’’. 


lotter on DSKBCFDHB2PROD with BILLS
112 

•HR 1 RH

1 (4) Section 172(b)(1)(E)(ii), prior to amendment 

2 under title III, is amended by striking subclause (I) 

3 and by redesignating subclauses (II) and (III) as sub4 clauses (I) and (II), respectively. 

5 (5) Section 172(d)(4)(C) is amended by striking 

6 ‘‘paragraph (2) or (3) of section 165(c)’’ and insert7 ing ‘‘section 165(c)(2)’’. 

8 (6) Section 274(f) is amended by striking ‘‘CAS9 UALTY LOSSES,’’ in the heading thereof. 

10 (7) Section 280A(b) is amended by striking 

11 ‘‘CASUALTY LOSSES,’’ in the heading thereof. 

12 (8) Section 873(b), as amended by the preceding 

13 provisions of this Act, is amended by striking para14 graph (1) and by redesignating paragraphs (2) and 

15 (3) as paragraphs (1) and (2), respectively. 

16 (9) Section 504(b) of the Disaster Tax Relief and 

17 Airport and Airway Extension Act of 2017 is amend18 ed by adding at the end the following new paragraph: 

19 ‘‘(4) COORDINATION WITH TAX REFORM.—This 

20 subsection shall be applied without regard to the 

21 amendments made by section 1304 of the Tax Cuts 

22 and Jobs Act.’’. 

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

24 section shall apply to taxable years beginning after Decem25 ber 31, 2017. 


lotter on DSKBCFDHB2PROD with BILLS
113 

•HR 1 RH

1 SEC. 1305. LIMITATION ON WAGERING LOSSES. 

2 (a) IN GENERAL.—Section 165(d) is amended by add3 ing at the end the following: ‘‘For purposes of the preceding 

4 sentence, the term ‘losses from wagering transactions’ in5 cludes any deduction otherwise allowable under this chapter 

6 incurred in carrying on any wagering transaction.’’. 

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

8 section shall apply to taxable years beginning after Decem9 ber 31, 2017. 

10 SEC. 1306. CHARITABLE CONTRIBUTIONS. 

11 (a) INCREASED LIMITATION FOR CASH CONTRIBU12 TIONS.—Section 170(b)(1) is amended by redesignating 

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

14 after subparagraph (F) the following new subparagraph: 

15 ‘‘(G) INCREASED LIMITATION FOR CASH

16 CONTRIBUTIONS.— 

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

18 contribution of cash to an organization de19 scribed in subparagraph (A), the total 

20 amount of such contributions which may be 

21 taken into account under subsection (a) for 

22 any taxable year shall not exceed 60 percent 

23 of the taxpayer’s contribution base for such 

24 year. 

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

26 amount of contributions described in clause 


lotter on DSKBCFDHB2PROD with BILLS
114 

•HR 1 RH

1 (i) exceeds the applicable limitation under 

2 clause (i), such excess shall be treated (in a 

3 manner consistent with the rules of sub4 section (d)(1)) as a charitable contribution 

5 to which clause (i) applies in each of the 5 

6 succeeding years in order of time. 

7 ‘‘(iii) COORDINATION WITH SUBPARA8 GRAPHS (A) AND (B).— 

9 ‘‘(I) IN GENERAL.—Contributions 

10 taken into account under this subpara11 graph shall not be taken into account 

12 under subparagraph (A). 

13 ‘‘(II) LIMITATION REDUCTION.— 

14 Subparagraphs (A) and (B) shall be 

15 applied by reducing (but not below 

16 zero) the aggregate contribution limita17 tion allowed for the taxable year under 

18 each such subparagraph by the aggre19 gate contributions allowed under this 

20 subparagraph for such taxable year.’’. 

21 (b) DENIAL OF DEDUCTION FOR COLLEGE ATHLETIC

22 EVENT SEATING RIGHTS.—Section 170(l)(1) is amended to 

23 read as follows: 


lotter on DSKBCFDHB2PROD with BILLS
115 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—No deduction shall be al2 lowed under this section for any amount described in 

3 paragraph (2).’’. 

4 (c) CHARITABLE MILEAGE RATE ADJUSTED FOR IN5 FLATION.—Section 170(i) is amended by striking ‘‘shall be 

6 14 cents per mile’’ and inserting ‘‘shall be a rate which 

7 takes into account the variable cost of operating an auto8 mobile’’. 

9 (d) REPEAL OF SUBSTANTIATION EXCEPTION IN CASE

10 OF CONTRIBUTIONS REPORTED BY DONEE.—Section 

11 170(f)(8) is amended by striking subparagraph (D) and by 

12 redesignating subparagraph (E) as subparagraph (D). 

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

14 section shall apply to contributions made in taxable years 

15 beginning after December 31, 2017. 

16 SEC. 1307. REPEAL OF DEDUCTION FOR TAX PREPARATION 

17 EXPENSES. 

18 (a) IN GENERAL.—Section 212 is amended by adding 

19 ‘‘or’’ at the end of paragraph (1), by striking ‘‘; or’’ at the 

20 end of paragraph (2) and inserting a period, and by strik21 ing paragraph (3). 

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

23 section shall apply to taxable years beginning after Decem24 ber 31, 2017. 


lotter on DSKBCFDHB2PROD with BILLS
116 

•HR 1 RH

1 SEC. 1308. REPEAL OF MEDICAL EXPENSE DEDUCTION. 

2 (a) IN GENERAL.—Part VII of subchapter B is amend3 ed by striking by striking section 213 (and by striking the 

4 item relating to such section in the table of sections for such 

5 subpart). 

6 (b) CONFORMING AMENDMENTS.— 

7 (1)(A) Section 105(f) is amended to read as fol8 lows: 

9 ‘‘(f) MEDICAL CARE.—For purposes of this section— 

10 ‘‘(1) IN GENERAL.—The term ‘medical care’ 

11 means amounts paid— 

12 ‘‘(A) for the diagnosis, cure, mitigation, 

13 treatment, or prevention of disease, or for the 

14 purpose of affecting any structure or function of 

15 the body, 

16 ‘‘(B) for transportation primarily for and 

17 essential to medical care referred to in subpara18 graph (A), 

19 ‘‘(C) for qualified long-term care services 

20 (as defined in section 7702B(c)), or 

21 ‘‘(D) for insurance (including amounts paid 

22 as premiums under part B of title XVIII of the 

23 Social Security Act, relating to supplementary 

24 medical insurance for the aged) covering medical 

25 care referred to in subparagraphs (A) and (B) or 


lotter on DSKBCFDHB2PROD with BILLS
117 

•HR 1 RH

1 for any qualified long-term care insurance con2 tract (as defined in section 7702B(b)). 

3 In the case of a qualified long-term care insurance 

4 contract (as defined in section 7702B(b)), only eligi5 ble long-term care premiums (as defined in para6 graph (7)) shall be taken into account under subpara7 graph (D). 

8 ‘‘(2) AMOUNTS PAID FOR CERTAIN LODGING

9 AWAY FROM HOME TREATED AS PAID FOR MEDICAL

10 CARE.—Amounts paid for lodging (not lavish or ex11 travagant under the circumstances) while away from 

12 home primarily for and essential to medical care re13 ferred to in paragraph (1)(A) shall be treated as 

14 amounts paid for medical care if— 

15 ‘‘(A) the medical care referred to in para16 graph (1)(A) is provided by a physician in a li17 censed hospital (or in a medical care facility 

18 which is related to, or the equivalent of, a li19 censed hospital), and 

20 ‘‘(B) there is no significant element of per21 sonal pleasure, recreation, or vacation in the 

22 travel away from home. 

23 The amount taken into account under the preceding 

24 sentence shall not exceed $50 for each night for each 

25 individual. 


lotter on DSKBCFDHB2PROD with BILLS
118 

•HR 1 RH

1 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the 

2 meaning given to such term by section 1861(r) of the 

3 Social Security Act (42 U.S.C. 1395x(r)). 

4 ‘‘(4) CONTRACTS COVERING OTHER THAN MED5 ICAL CARE.—In the case of an insurance contract 

6 under which amounts are payable for other than med7 ical care referred to in subparagraphs (A), (B) and 

8 (C) of paragraph (1)— 

9 ‘‘(A) no amount shall be treated as paid for 

10 insurance to which paragraph (1)(D) applies 

11 unless the charge for such insurance is either sep12 arately stated in the contract, or furnished to the 

13 policyholder by the insurance company in a sep14 arate statement, 

15 ‘‘(B) the amount taken into account as the 

16 amount paid for such insurance shall not exceed 

17 such charge, and 

18 ‘‘(C) no amount shall be treated as paid for 

19 such insurance if the amount specified in the 

20 contract (or furnished to the policyholder by the 

21 insurance company in a separate statement) as 

22 the charge for such insurance is unreasonably 

23 large in relation to the total charges under the 

24 contract. 


lotter on DSKBCFDHB2PROD with BILLS
119 

•HR 1 RH

1 ‘‘(5) CERTAIN PRE-PAID CONTRACTS.—Subject to 

2 the limitations of paragraph (4), premiums paid dur3 ing the taxable year by a taxpayer before he attains 

4 the age of 65 for insurance covering medical care 

5 (within the meaning of subparagraphs (A), (B), and 

6 (C) of paragraph (1)) for the taxpayer, his spouse, or 

7 a dependent after the taxpayer attains the age of 65 

8 shall be treated as expenses paid during the taxable 

9 year for insurance which constitutes medical care if 

10 premiums for such insurance are payable (on a level 

11 payment basis) under the contract for a period of 10 

12 years or more or until the year in which the taxpayer 

13 attains the age of 65 (but in no case for a period of 

14 less than 5 years). 

15 ‘‘(6) COSMETIC SURGERY.— 

16 ‘‘(A) IN GENERAL.—The term ‘medical care’ 

17 does not include cosmetic surgery or other simi18 lar procedures, unless the surgery or procedure is 

19 necessary to ameliorate a deformity arising 

20 from, or directly related to, a congenital abnor21 mality, a personal injury resulting from an acci22 dent or trauma, or disfiguring disease. 

23 ‘‘(B) COSMETIC SURGERY DEFINED .—For 

24 purposes of this paragraph, the term ‘cosmetic 

25 surgery’ means any procedure which is directed 


lotter on DSKBCFDHB2PROD with BILLS
120 

•HR 1 RH

1 at improving the patient’s appearance and does 

2 not meaningfully promote the proper function of 

3 the body or prevent or treat illness or disease. 

4 ‘‘(7) ELIGIBLE LONG-TERM CARE PREMIUMS.— 

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

6 section, the term ‘eligible long-term care pre7 miums’ means the amount paid during a taxable 

8 year for any qualified long-term care insurance 

9 contract (as defined in section 7702B(b)) cov10 ering an individual, to the extent such amount 

11 does not exceed the limitation determined under 

12 the following table: 

‘‘In the case of an individual with an 

attained age before the close of the taxable year of: The limitation is: 

40 or less $200 

More than 40 but not more than 50 $375 

More than 50 but not more than 60 $750 

More than 60 but not more than 70 $2,000 

More than 70 $2,500 

13 ‘‘(B) INDEXING.— 

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

15 taxable year beginning after 1997, each dol16 lar amount in subparagraph (A) shall be 

17 increased by the medical care cost adjust18 ment of such amount for such calendar 

19 year. Any increase determined under the 

20 preceding sentence shall be rounded to the 

21 nearest multiple of $10. 


lotter on DSKBCFDHB2PROD with BILLS
121 

•HR 1 RH

1 ‘‘(ii) MEDICAL CARE COST ADJUST2 MENT.—For purposes of clause (i), the med3 ical care cost adjustment for any calendar 

4 year is the adjustment prescribed by the 

5 Secretary, in consultation with the Sec6 retary of Health and Human Services, for 

7 purposes of such clause. To the extent that 

8 CPI (as defined section 1(c)), or any com9 ponent thereof, is taken into account in de10 termining such adjustment, such adjustment 

11 shall be determined by taking into account 

12 C-CPI-U (as so defined), or the cor13 responding component thereof, in lieu of 

14 such CPI (or component thereof), but only 

15 with respect to the portion of such adjust16 ment which relates to periods after Decem17 ber 31, 2017. 

18 ‘‘(8) CERTAIN PAYMENTS TO RELATIVES TREAT19 ED AS NOT PAID FOR MEDICAL CARE.—An amount 

20 paid for a qualified long-term care service (as defined 

21 in section 7702B(c)) provided to an individual shall 

22 be treated as not paid for medical care if such service 

23 is provided— 

24 ‘‘(A) by the spouse of the individual or by 

25 a relative (directly or through a partnership, 


lotter on DSKBCFDHB2PROD with BILLS
122 

•HR 1 RH

1 corporation, or other entity) unless the service is 

2 provided by a licensed professional with respect 

3 to such service, or 

4 ‘‘(B) by a corporation or partnership which 

5 is related (within the meaning of section 267(b) 

6 or 707(b)) to the individual. 

7 For purposes of this paragraph, the term ‘relative’ 

8 means an individual bearing a relationship to the in9 dividual which is described in any of subparagraphs 

10 (A) through (G) of section 7706(d)(2). This para11 graph shall not apply for purposes of subsection (b) 

12 with respect to reimbursements through insurance.’’. 

13 (B) Section 72(t)(2)(D)(i)(III) is amended by 

14 striking ‘‘section 213(d)(1)(D)’’ and inserting ‘‘section 

15 105(f)(1)(D)’’. 

16 (C) Section 104(a) is amended by striking ‘‘sec17 tion 213(d)(1)’’ in the last sentence and inserting 

18 ‘‘section 105(f)(1)’’. 

19 (D) Section 105(b) is amended by striking ‘‘sec20 tion 213(d)’’ and inserting ‘‘section 105(f)’’. 

21 (E) Section 139D is amended by striking ‘‘sec22 tion 213’’ and inserting ‘‘section 223’’. 

23 (F) Section 162(l)(2) is amended by striking 

24 ‘‘section 213(d)(10)’’ and inserting ‘‘section 

25 105(f)(7)’’. 


lotter on DSKBCFDHB2PROD with BILLS
123 

•HR 1 RH

1 (G) Section 220(d)(2)(A) is amended by striking 

2 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

3 (H) Section 223(d)(2)(A) is amended by striking 

4 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

5 (I) Section 419A(f)(2) is amended by striking 

6 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

7 (J) Section 501(c)(26)(A) is amended by striking 

8 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

9 (K) Section 2503(e) is amended by striking ‘‘sec10 tion 213(d)’’ and inserting ‘‘section 105(f)’’. 

11 (L) Section 4980B(c)(4)(B)(i)(I) is amended by 

12 striking ‘‘section 213(d)’’ and inserting ‘‘section 

13 105(f)’’. 

14 (M) Section 6041(f) is amended by striking ‘‘sec15 tion 213(d)’’ and inserting ‘‘section 105(f)’’. 

16 (N) Section 7702B(a)(2) is amended by striking 

17 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

18 (O) Section 7702B(a)(4) is amended by striking 

19 ‘‘section 213(d)(1)(D)’’ and inserting ‘‘section 

20 105(f)(1)(D)’’. 

21 (P) Section 7702B(d)(5) is amended by striking 

22 ‘‘section 213(d)(10)’’ and inserting ‘‘section 

23 105(f)(7)’’. 

24 (Q) Section 9832(d)(3) is amended by striking 

25 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 


lotter on DSKBCFDHB2PROD with BILLS
124 

•HR 1 RH

1 (2) Section 72(t)(2)(B) is amended to read as 

2 follows: 

3 ‘‘(B) MEDICAL EXPENSES.—Distributions 

4 made to an individual (other than distributions 

5 described in subparagraph (A), (C), or (D) to the 

6 extent such distributions do not exceed the excess 

7 of— 

8 ‘‘(i) the expenses paid by the taxpayer 

9 during the taxable year, not compensated 

10 for by insurance or otherwise, for medical 

11 care (as defined in 105(f)) of the taxpayer, 

12 his spouse, or a dependent (as defined in 

13 section 7706, determined without regard to 

14 subsections (b)(1), (b)(2), and (d)(1)(B) 

15 thereof), over 

16 ‘‘(ii) 10 percent of the taxpayer’s ad17 justed gross income.’’. 

18 (3) Section 162(l) is amended by striking para19 graph (3). 

20 (4) Section 402(l) is amended by striking para21 graph (7) and redesignating paragraph (8) as para22 graph (7). 

23 (5) Section 220(f) is amended by striking para24 graph (6). 


lotter on DSKBCFDHB2PROD with BILLS
125 

•HR 1 RH

1 (6) Section 223(f) is amended by striking para2 graph (6). 

3 (7) Section 7702B(e) is amended by striking 

4 paragraph (2). 

5 (8) Section 7706(f)(7), as redesignated by this 

6 Act, is amended by striking ‘‘sections 105(b), 

7 132(h)(2)(B), and 213(d)(5)’’ and inserting ‘‘sections 

8 105(b) and 132(h)(2)(B)’’. 

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

10 section shall apply to taxable years beginning after Decem11 ber 31, 2017. 

12 SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAY13 MENTS. 

14 (a) IN GENERAL.—Part VII of subchapter B is amend15 ed by striking by striking section 215 (and by striking the 

16 item relating to such section in the table of sections for such 

17 subpart). 

18 (b) CONFORMING AMENDMENTS.— 

19 (1) CORRESPONDING REPEAL OF PROVISIONS

20 PROVIDING FOR INCLUSION OF ALIMONY IN GROSS IN21 COME.— 

22 (A) Subsection (a) of section 61 is amended 

23 by striking paragraph (8) and by redesignating 

24 paragraphs (9) through (15) as paragraphs (8) 

25 through (14), respectively. 


lotter on DSKBCFDHB2PROD with BILLS
126 

•HR 1 RH

1 (B) Part II of subchapter B of chapter 1 is 

2 amended by striking section 71 (and by striking 

3 the item relating to such section in the table of 

4 sections for such part). 

5 (C) Subpart F of part I of subchapter J of 

6 chapter 1 is amended by striking section 682 

7 (and by striking the item relating to such section 

8 in the table of sections for such subpart). 

9 (2) RELATED TO REPEAL OF SECTION 215.— 

10 (A) Section 62(a) is amended by striking 

11 paragraph (10). 

12 (B) Section 3402(m)(1) is amended by 

13 striking ‘‘(other than paragraph (10) thereof)’’. 

14 (3) RELATED TO REPEAL OF SECTION 71.— 

15 (A) Section 121(d)(3) is amended— 

16 (i) by striking ‘‘(as defined in section 

17 71(b)(2))’’ in subparagraph (B), and 

18 (ii) by adding at the end the following 

19 new subparagraph: 

20 ‘‘(C) DIVORCE OR SEPARATION INSTRU21 MENT.—For purposes of this paragraph, the 

22 term ‘divorce or separation instrument’ means— 

23 ‘‘(i) a decree of divorce or separate 

24 maintenance or a written instrument inci25 dent to such a decree, 


lotter on DSKBCFDHB2PROD with BILLS
127 

•HR 1 RH

1 ‘‘(ii) a written separation agreement, 

2 or 

3 ‘‘(iii) a decree (not described in clause 

4 (i)) requiring a spouse to make payments 

5 for the support or maintenance of the other 

6 spouse.’’. 

7 (B) Section 220(f)(7) is amended by strik8 ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 

9 inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 

10 (C) Section 223(f)(7) is amended by strik11 ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 

12 inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 

13 (D) Section 382(l)(3)(B)(iii) is amended by 

14 striking ‘‘section 71(b)(2)’’ and inserting ‘‘sec15 tion 121(d)(3)(C)’’. 

16 (E) Section 408(d)(6) is amended by strik17 ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 

18 inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 

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

20 section shall apply to— 

21 (1) any divorce or separation instrument (as de22 fined in section 71(b)(2) of the Internal Revenue Code 

23 of 1986 as in effect before the date of the enactment 

24 of this Act) executed after December 31, 2017, and 


lotter on DSKBCFDHB2PROD with BILLS
128 

•HR 1 RH

1 (2) any divorce or separation instrument (as so 

2 defined) executed on or before such date and modified 

3 after such date if the modification expressly provides 

4 that the amendments made by this section apply to 

5 such modification. 

6 SEC. 1310. REPEAL OF DEDUCTION FOR MOVING EXPENSES. 

7 (a) IN GENERAL.—Part VII of subchapter B is amend8 ed by striking by striking section 217 (and by striking the 

9 item relating to such section in the table of sections for such 

10 subpart). 

11 (b) RETENTION OF MOVING EXPENSES FOR MEMBERS

12 OF ARMED FORCES.—Section 134(b) is amended by adding 

13 at the end the following new paragraph: 

14 ‘‘(7) MOVING EXPENSES.—The term ‘qualified 

15 military benefit’ includes any benefit described in sec16 tion 217(g) (as in effect before the enactment of the 

17 Tax Cuts And Jobs Act).’’. 

18 (c) CONFORMING AMENDMENTS.— 

19 (1) Section 62(a) is amended by striking para20 graph (15). 

21 (2) Section 274(m)(3) is amended by striking 

22 ‘‘(other than section 217)’’. 

23 (3) Section 3121(a) is amended by striking 

24 paragraph (11). 


lotter on DSKBCFDHB2PROD with BILLS
129 

•HR 1 RH

1 (4) Section 3306(b) is amended by striking para2 graph (9). 

3 (5) Section 3401(a) is amended by striking 

4 paragraph (15). 

5 (6) Section 7872(f) is amended by striking para6 graph (11). 

7 (d) EFFECTIVE DATE.—The amendments made by this 

8 section shall apply to taxable years beginning after Decem9 ber 31, 2017. 

10 SEC. 1311. TERMINATION OF DEDUCTION AND EXCLUSIONS 

11 FOR CONTRIBUTIONS TO MEDICAL SAVINGS 

12 ACCOUNTS. 

13 (a) TERMINATION OF INCOME TAX DEDUCTION.—Sec14 tion 220 is amended by adding at the end the following 

15 new subsection: 

16 ‘‘(k) TERMINATION.—No deduction shall be allowed 

17 under subsection (a) with respect to any taxable year begin18 ning after December 31, 2017.’’. 

19 (b) TERMINATION OF EXCLUSION FOR EMPLOYER20 PROVIDED CONTRIBUTIONS.—Section 106 is amended by 

21 striking subsection (b). 

22 (c) CONFORMING AMENDMENTS.— 

23 (1) Section 62(a) is amended by striking para24 graph (16). 


lotter on DSKBCFDHB2PROD with BILLS
130 

•HR 1 RH

1 (2) Section 106(d) is amended by striking para2 graph (2), by redesignating paragraph (3) as para3 graph (6), and by inserting after paragraph (1) the 

4 following new paragraphs: 

5 ‘‘(2) NO CONSTRUCTIVE RECEIPT.—No amount 

6 shall be included in the gross income of any employee 

7 solely because the employee may choose between the 

8 contributions referred to in paragraph (1) and em9 ployer contributions to another health plan of the em10 ployer. 

11 ‘‘(3) SPECIAL RULE FOR DEDUCTION OF EM12 PLOYER CONTRIBUTIONS.—Any employer contribution 

13 to a health savings account (as so defined), if other14 wise allowable as a deduction under this chapter, 

15 shall be allowed only for the taxable year in which 

16 paid. 

17 ‘‘(4) EMPLOYER HEALTH SAVINGS ACCOUNT CON18 TRIBUTION REQUIRED TO BE SHOWN ON RETURN.— 

19 Every individual required to file a return under sec20 tion 6012 for the taxable year shall include on such 

21 return the aggregate amount contributed by employers 

22 to the health savings accounts (as so defined) of such 

23 individual or such individual’s spouse for such tax24 able year. 


lotter on DSKBCFDHB2PROD with BILLS
131 

•HR 1 RH

1 ‘‘(5) HEALTH SAVINGS ACCOUNT CONTRIBUTIONS

2 NOT PART OF COBRA COVERAGE.—Paragraph (1) 

3 shall not apply for purposes of section 4980B.’’. 

4 (3) Section 223(b)(4) is amended by striking 

5 subparagraph (A), by redesignating subparagraphs 

6 (B) and (C) as subparagraphs (A) and (B), respec7 tively, and by striking the second sentence thereof. 

8 (4) Section 223(b)(5) is amended by striking 

9 ‘‘under paragraph (3))’’ and all that follows through 

10 ‘‘shall be divided equally between them’’ and inserting 

11 the following: ‘‘under paragraph (3)) shall be divided 

12 equally between the spouses’’. 

13 (5) Section 223(c) is amended by striking para14 graph (5). 

15 (6) Section 3231(e) is amended by striking para16 graph (10). 

17 (7) Section 3306(b) is amended by striking para18 graph (17). 

19 (8) Section 3401(a) is amended by striking 

20 paragraph (21). 

21 (9) Chapter 43 is amended by striking section 

22 4980E (and by striking the item relating to such sec23 tion in the table of sections for such chapter). 

24 (10) Section 4980G is amended to read as fol25 lows: 


lotter on DSKBCFDHB2PROD with BILLS
132 

•HR 1 RH

1 ‘‘SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COM2 PARABLE HEALTH SAVINGS ACCOUNT CON3 TRIBUTIONS. 

4 ‘‘(a) IN GENERAL.—In the case of an employer who 

5 makes a contribution to the health savings account of any 

6 employee during a calendar year, there is hereby imposed 

7 a tax on the failure of such employer to meet the require8 ments of subsection (d) for such calendar year. 

9 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im10 posed by subsection (a) on any failure for any calendar 

11 year is the amount equal to 35 percent of the aggregate 

12 amount contributed by the employer to health savings ac13 counts of employees for taxable years of such employees end14 ing with or within such calendar year. 

15 ‘‘(c) WAIVER BY SECRETARY.—In the case of a failure 

16 which is due to reasonable cause and not to willful neglect, 

17 the Secretary may waive part or all of the tax imposed by 

18 subsection (a) to the extent that the payment of such tax 

19 would be excessive relative to the failure involved. 

20 ‘‘(d) EMPLOYER REQUIRED TO MAKE COMPARABLE

21 HEALTH SAVINGS ACCOUNT CONTRIBUTIONS FOR ALL PAR22 TICIPATING EMPLOYEES.— 

23 ‘‘(1) IN GENERAL.—An employer meets the re24 quirements of this subsection for any calendar year if 

25 the employer makes available comparable contribu26 tions to the health savings accounts of all comparable 


lotter on DSKBCFDHB2PROD with BILLS
133 

•HR 1 RH

1 participating employees for each coverage period dur2 ing such calendar year. 

3 ‘‘(2) COMPARABLE CONTRIBUTIONS.— 

4 ‘‘(A) IN GENERAL.—For purposes of para5 graph (1), the term ‘comparable contributions’ 

6 means contributions— 

7 ‘‘(i) which are the same amount, or 

8 ‘‘(ii) which are the same percentage of 

9 the annual deductible limit under the high 

10 deductible health plan covering the employ11 ees. 

12 ‘‘(B) PART-YEAR EMPLOYEES.—In the case 

13 of an employee who is employed by the employer 

14 for only a portion of the calendar year, a con15 tribution to the health savings account of such 

16 employee shall be treated as comparable if it is 

17 an amount which bears the same ratio to the 

18 comparable amount (determined without regard 

19 to this subparagraph) as such portion bears to 

20 the entire calendar year. 

21 ‘‘(3) COMPARABLE PARTICIPATING EMPLOY22 EES.— 

23 ‘‘(A) IN GENERAL.—For purposes of para24 graph (1), the term ‘comparable participating 

25 employees’ means all employees— 


lotter on DSKBCFDHB2PROD with BILLS
134 

•HR 1 RH

1 ‘‘(i) who are eligible individuals cov2 ered under any high deductible health plan 

3 of the employer, and 

4 ‘‘(ii) who have the same category of 

5 coverage. 

6 ‘‘(B) CATEGORIES OF COVERAGE.—For pur7 poses of subparagraph (B), the categories of cov8 erage are self-only and family coverage. 

9 ‘‘(4) PART-TIME EMPLOYEES.— 

10 ‘‘(A) IN GENERAL .—Paragraph (3) shall be 

11 applied separately with respect to part-time em12 ployees and other employees. 

13 ‘‘(B) PART-TIME EMPLOYEE.—For purposes 

14 of subparagraph (A), the term ‘part-time em15 ployee’ means any employee who is customarily 

16 employed for fewer than 30 hours per week. 

17 ‘‘(5) SPECIAL RULE FOR NON-HIGHLY COM18 PENSATED EMPLOYEES.—For purposes of applying 

19 this section to a contribution to a health savings ac20 count of an employee who is not a highly com21 pensated employee (as defined in section 414(q)), 

22 highly compensated employees shall not be treated as 

23 comparable participating employees. 

24 ‘‘(e) CONTROLLED GROUPS.—For purposes of this sec25 tion, all persons treated as a single employer under subVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00134 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
135 

•HR 1 RH

1 section (b), (c), (m), or (o) of section 414 shall be treated 

2 as 1 employer. 

3 ‘‘(f) DEFINITIONS.—Terms used in this section which 

4 are also used in section 223 have the respective meanings 

5 given such terms in section 223. 

6 ‘‘(g) REGULATIONS.—The Secretary shall issue regula7 tions to carry out the purposes of this section.’’. 

8 (11) Section 6051(a) is amended by striking 

9 paragraph (11). 

10 (12) Section 6051(a)(14)(A) is amended by strik11 ing ‘‘paragraphs (11) and (12)’’ and inserting ‘‘para12 graph (12)’’. 

13 (d) EFFECTIVE DATE.—The amendment made by this 

14 section shall apply to taxable years beginning after Decem15 ber 31, 2017. 

16 SEC. 1312. DENIAL OF DEDUCTION FOR EXPENSES ATTRIB17 UTABLE TO THE TRADE OR BUSINESS OF 

18 BEING AN EMPLOYEE. 

19 (a) IN GENERAL.—Part IX of subchapter B of chapter 

20 1 is amended by inserting after the item relating to section 

21 262 the following new item: 

22 ‘‘SEC. 262A. EXPENSES ATTRIBUTABLE TO BEING AN EM23 PLOYEE. 

24 ‘‘(a) IN GENERAL.—Except as otherwise provided in 

25 this section, no deduction shall be allowed with respect to 


lotter on DSKBCFDHB2PROD with BILLS
136 

•HR 1 RH

1 any trade or business of the taxpayer which consists of the 

2 performance of services by the taxpayer as an employee. 

3 ‘‘(b) EXCEPTION FOR ABOVE-THE-LINE DEDUC4 TIONS.—Subsection (a) shall not apply to any deduction 

5 allowable (determined without regard to subsection (a)) in 

6 determining adjusted gross income.’’. 

7 (b) REPEAL OF CERTAIN ABOVE-THE-LINE TRADE AND

8 BUSINESS DEDUCTIONS OF EMPLOYEES.— 

9 (1) IN GENERAL.—Section 62(a)(2) is amend10 ed— 

11 (A) by striking subparagraphs (B), (C), and 

12 (D), and 

13 (B) by redesignating subparagraph (E) as 

14 subparagraph (B). 

15 (2) CONFORMING AMENDMENTS.— 

16 (A) Section 62 is amended by striking sub17 sections (b) and (d) and by redesignating sub18 sections (c) and (e) as subsections (b) and (c), re19 spectively. 

20 (B) Section 62(a)(20) is amended by strik21 ing ‘‘subsection (e)’’ and inserting ‘‘subsection 

22 (c)’’. 

23 (c) CONTINUED EXCLUSION OF WORKING CONDITION

24 FRINGE BENEFITS.—Section 132(d) is amended by insertVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00136 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
137 

•HR 1 RH

1 ing ‘‘(determined without regard to section 262A)’’ after 

2 ‘‘section 162’’. 

3 (d) EFFECTIVE DATE.—The amendments made by this 

4 section shall apply to taxable years beginning after Decem5 ber 31, 2017. 

6 Subtitle E—Simplification and Re7 form of Exclusions and Taxable 

8 Compensation 

9 SEC. 1401. LIMITATION ON EXCLUSION FOR EMPLOYER10 PROVIDED HOUSING. 

11 (a) IN GENERAL.—Section 119 is amended by adding 

12 at the end the following new subsection: 

13 ‘‘(e) LIMITATION ON EXCLUSION OF LODGING.— 

14 ‘‘(1) IN GENERAL.—The aggregate amount ex15 cluded from gross income of the taxpayer under sub16 sections (a) and (d) with respect to lodging for any 

17 taxable year shall not exceed $50,000 (half such 

18 amount in the case of a married individual filing a 

19 separate return). 

20 ‘‘(2) LIMITATION TO 1 HOME.—Subsections (a) 

21 and (d) (separately and in combination) shall not 

22 apply with respect to more than 1 residence of the 

23 taxpayer at any given time. In the case of a joint re24 turn, the preceding sentence shall apply separately to 

25 each spouse for any period during which each spouse 


lotter on DSKBCFDHB2PROD with BILLS
138 

•HR 1 RH

1 resides separate from the other spouse in a residence 

2 which is provided in connection with the employment 

3 of each spouse, respectively. 

4 ‘‘(3) LIMITATION FOR HIGHLY COMPENSATED

5 EMPLOYEES.— 

6 ‘‘(A) REDUCED FOR EXCESS COMPENSA7 TION.—In the case of an individual whose com8 pensation for the taxable year exceeds the 

9 amount in effect under section 414(q)(1)(B)(i) 

10 for the calendar in which such taxable year be11 gins, the $50,000 amount under paragraph (1) 

12 shall be reduced (but not below zero) by an 

13 amount equal to 50 percent of such excess. For 

14 purposes of the preceding sentence, the term 

15 ‘compensation’ means wages (as defined in sec16 tion 3121(a) (without regard to the contribution 

17 and benefit base limitation in section 

18 3121(a)(1)). 

19 ‘‘(B) EXCLUSION DENIED FOR 5-PERCENT

20 OWNERS.—In the case of an individual who is a 

21 5-percent owner (as defined in section 

22 416(i)(1)(B)(i)) of the employer at any time 

23 during the taxable year, the amount under para24 graph (1) shall be zero.’’. 


lotter on DSKBCFDHB2PROD with BILLS
139 

•HR 1 RH

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

2 section shall apply to taxable years beginning after Decem3 ber 31, 2017. 

4 SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRIN5 CIPAL RESIDENCE. 

6 (a) REQUIREMENT THAT RESIDENCE BE PRINCIPAL

7 RESIDENCE FOR 5 YEARS DURING 8-YEAR PERIOD.—Sub8 section (a) of section 121 is amended— 

9 (1) by striking ‘‘5-year period’’ and inserting 

10 ‘‘8-year period’’, and 

11 (2) by striking ‘‘2 years’’ and inserting ‘‘5 

12 years’’. 

13 (b) APPLICATION TO ONLY 1 SALE OR EXCHANGE

14 EVERY 5 YEARS.—Paragraph (3) of section 121(b) is 

15 amended to read as follows: 

16 ‘‘(3) APPLICATION TO ONLY 1 SALE OR EX17 CHANGE EVERY 5 YEARS.—Subsection (a) shall not 

18 apply to any sale or exchange by the taxpayer if, dur19 ing the 5-year period ending on the date of such sale 

20 or exchange, there was any other sale or exchange by 

21 the taxpayer to which subsection (a) applied.’’. 

22 (c) PHASEOUT BASED ON MODIFIED ADJUSTED

23 GROSS INCOME.—Section 121 is amended by adding at the 

24 end the following new subsection: 


lotter on DSKBCFDHB2PROD with BILLS
140 

•HR 1 RH

1 ‘‘(h) PHASEOUT BASED ON MODIFIED ADJUSTED

2 GROSS INCOME.— 

3 ‘‘(1) IN GENERAL.—If the average modified ad4 justed gross income of the taxpayer for the taxable 

5 year and the 2 preceding taxable years exceeds 

6 $250,000 (twice such amount in the case of a joint re7 turn), the amount which would (but for this sub8 section) be excluded from gross income under sub9 section (a) for such taxable year shall be reduced (but 

10 not below zero) by the amount of such excess. 

11 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—For 

12 purposes of this subsection, the term ‘modified ad13 justed gross income’ means, with respect to any tax14 able year, adjusted gross income determined after ap15 plication of this section (but without regard to sub16 section (b)(1) and this subsection). 

17 ‘‘(3) SPECIAL RULE FOR JOINT RETURNS.—In 

18 the case of a joint return, the average modified ad19 justed gross income of the taxpayer shall be deter20 mined without regard to any taxable year with re21 spect to which the taxpayer did not file a joint re22 turn.’’. 

23 (d) CONFORMING AMENDMENTS.— 


lotter on DSKBCFDHB2PROD with BILLS
141 

•HR 1 RH

1 (1) The following provisions of section 121 are 

2 each amended by striking ‘‘5-year period’’ each place 

3 it appears therein and inserting ‘‘8-year period’’: 

4 (A) Subsection (b)(5)(C)(ii)(I). 

5 (B) Subsection (c)(1)(B)(i)(I). 

6 (C) Subsection (d)(7)(B). 

7 (D) Subparagraphs (A) and (B) of sub8 section (d)(9). 

9 (E) Subsection (d)(10). 

10 (F) Subsection (d)(12)(A). 

11 (2) Section 121(c)(1)(B)(ii) is amended by strik12 ing ‘‘2 years’’ and inserting ‘‘5 years’’: 

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

14 section shall apply to sales and exchanges after December 

15 31, 2017. 

16 SEC. 1403. REPEAL OF EXCLUSION, ETC., FOR EMPLOYEE 

17 ACHIEVEMENT AWARDS. 

18 (a) IN GENERAL.—Section 74 is amended by striking 

19 subsection (c). 

20 (b) REPEAL OF LIMITATION ON DEDUCTION.—Section 

21 274 is amended by striking subsection (j). 

22 (c) CONFORMING AMENDMENTS.— 

23 (1) Section 102(c)(2) is amended by striking the 

24 first sentence. 


lotter on DSKBCFDHB2PROD with BILLS
142 

•HR 1 RH

1 (2) Section 414(n)(3)(C) is amended by striking 

2 ‘‘274(j),’’. 

3 (3) Section 414(t)(2) is amended by striking 

4 ‘‘274(j),’’. 

5 (4) Section 3121(a)(20) is amended by striking 

6 ‘‘74(c)’’. 

7 (5) Section 3231(e)(5) is amended by striking 

8 ‘‘74(c),’’. 

9 (6) Section 3306(b)(16) is amended by striking 

10 ‘‘74(c),’’. 

11 (7) Section 3401(a)(19) is amended by striking 

12 ‘‘74(c),’’. 

13 (d) EFFECTIVE DATE.—The amendments made by this 

14 section shall apply to taxable years beginning after Decem15 ber 31, 2017. 

16 SEC. 1404. SUNSET OF EXCLUSION FOR DEPENDENT CARE 

17 ASSISTANCE PROGRAMS. 

18 (a) IN GENERAL.—Section 129 is amended by adding 

19 at the end the following new subsection: 

20 ‘‘(f) TERMINATION.—Subsection (a) shall not apply to 

21 taxable years beginning after December 31, 2022.’’. 

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

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

24 Act. 


lotter on DSKBCFDHB2PROD with BILLS
143 

•HR 1 RH

1 SEC. 1405. REPEAL OF EXCLUSION FOR QUALIFIED MOVING 

2 EXPENSE REIMBURSEMENT. 

3 (a) IN GENERAL.—Section 132(a) is amended by strik4 ing paragraph (6). 

5 (b) CONFORMING AMENDMENTS.— 

6 (1) Section 82 is amended by striking ‘‘Except 

7 as provided in section 132(a)(6), there’’ and inserting 

8 ‘‘There’’. 

9 (2) Section 132 is amended by striking sub10 section (g). 

11 (3) Section 132(l) is amended by striking by 

12 striking ‘‘subsections (e) and (g)’’ and inserting ‘‘sub13 section (e)’’. 

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

15 section shall apply to taxable years beginning after Decem16 ber 31, 2017. 

17 SEC. 1406. REPEAL OF EXCLUSION FOR ADOPTION ASSIST18 ANCE PROGRAMS. 

19 (a) IN GENERAL.—Part III of subchapter B of chapter 

20 1 is amended by striking section 137 (and by striking the 

21 item relating to such section in the table of sections for such 

22 part). 

23 (b) CONFORMING AMENDMENTS.— 

24 (1) Sections 414(n)(3)(C), 414(t)(2), 74(d)(2)(B), 

25 86(b)(2)(A), 219(g)(3)(A)(ii) are each amended by 

26 striking ‘‘, 137’’. 


lotter on DSKBCFDHB2PROD with BILLS
144 

•HR 1 RH

1 (2) Section 1016(a), as amended by the pre2 ceding provision of this Act, is amended by striking 

3 paragraph (26). 

4 (3) Section 6039D(d)(1), as amended by the pre5 ceding provisions of this Act, is amended— 

6 (A) by striking ‘‘, or 137’’, and 

7 (B) by inserting ‘‘or’’ before ‘‘125’’. 

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

9 section shall apply to taxable years beginning after Decem10 ber 31, 2017. 

11 Subtitle F—Simplification and Re12 form of Savings, Pensions, Re13 tirement 

14 SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE15 CHARACTERIZATION OF ROTH IRA CON16 TRIBUTIONS AS TRADITIONAL IRA CONTRIBU17 TIONS. 

18 (a) IN GENERAL.—Section 408A(d) is amended by 

19 striking paragraph (6) and by redesignating paragraph (7) 

20 as paragraph (6). 

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

22 section shall apply to taxable years beginning after Decem23 ber 31, 2017. 


lotter on DSKBCFDHB2PROD with BILLS
145 

•HR 1 RH

1 SEC. 1502. REDUCTION IN MINIMUM AGE FOR ALLOWABLE 

2 IN-SERVICE DISTRIBUTIONS. 

3 (a) IN GENERAL.—Section 401(a)(36) is amended by 

striking ‘‘age 62’’ and inserting ‘‘age 59 1 4 ⁄2’’. 

5 (b) APPLICATION TO GOVERNMENTAL SECTION 457(b) 

6 PLANS.—Clause (i) of section 457(d)(1)(A) is amended by 

7 inserting ‘‘(in the case of a plan maintained by an employer described in subsection (e)(1)(A), age 59 1 8 ⁄2)’’ before 

9 the comma at the end. 

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

11 section shall apply to plan years beginning after December 

12 31, 2017. 

13 SEC. 1503. MODIFICATION OF RULES GOVERNING HARD14 SHIP DISTRIBUTIONS. 

15 (a) IN GENERAL.—Not later than 1 year after the date 

16 of the enactment of this Act, the Secretary of the Treasury 

17 shall modify Treasury Regulation section 1.401(k)– 

18 1(d)(3)(iv)(E) to— 

19 (1) delete the 6-month prohibition on contribu20 tions imposed by paragraph (2) thereof, and 

21 (2) make any other modifications necessary to 

22 carry out the purposes of section 401(k)(2)(B)(i)(IV) 

23 of the Internal Revenue Code of 1986. 

24 (b) EFFECTIVE DATE.—The revised regulations under 

25 this section shall apply to plan years beginning after De26 cember 31, 2017. 


lotter on DSKBCFDHB2PROD with BILLS
146 

•HR 1 RH

1 SEC. 1504. MODIFICATION OF RULES RELATING TO HARD2 SHIP WITHDRAWALS FROM CASH OR DE3 FERRED ARRANGEMENTS. 

4 (a) IN GENERAL.—Section 401(k) is amended by add5 ing at the end the following: 

6 ‘‘(14) SPECIAL RULES RELATING TO HARDSHIP

7 WITHDRAWALS.—For purposes of paragraph 

8 (2)(B)(i)(IV)— 

9 ‘‘(A) AMOUNTS WHICH MAY BE WITH10 DRAWN.—The following amounts may be distrib11 uted upon hardship of the employee: 

12 ‘‘(i) Contributions to a profit-sharing 

13 or stock bonus plan to which section 

14 402(e)(3) applies. 

15 ‘‘(ii) Qualified nonelective contribu16 tions (as defined in subsection (m)(4)(C)). 

17 ‘‘(iii) Qualified matching contributions 

18 described in paragraph (3)(D)(ii)(I). 

19 ‘‘(iv) Earnings on any contributions 

20 described in clause (i), (ii), or (iii). 

21 ‘‘(B) NO REQUIREMENT TO TAKE AVAIL22 ABLE LOAN.—A distribution shall not be treated 

23 as failing to be made upon the hardship of an 

24 employee solely because the employee does not 

25 take any available loan under the plan.′′.’’. 


lotter on DSKBCFDHB2PROD with BILLS
147 

•HR 1 RH

1 (b) CONFORMING AMENDMENT.—Section 

2 401(k)(2)(B)(i)(IV) is amended to read as follows: 

3 ‘‘(IV) subject to the provisions of 

4 paragraph (14), upon hardship of the 

5 employee, or′′.’’. 

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

7 section shall apply to plan years beginning after December 

8 31, 2017. 

9 SEC. 1505. EXTENDED ROLLOVER PERIOD FOR THE ROLL10 OVER OF PLAN LOAN OFFSET AMOUNTS IN 

11 CERTAIN CASES. 

12 (a) IN GENERAL.—Paragraph (3) of section 402(c) is 

13 amended by adding at the end the following new subpara14 graph: 

15 ‘‘(C) ROLLOVER OF CERTAIN PLAN LOAN

16 OFFSET AMOUNTS.— 

17 ‘‘(i) IN GENERAL.—In the case of a 

18 qualified plan loan offset amount, para19 graph (1) shall not apply to any transfer of 

20 such amount made after the due date (in21 cluding extensions) for filing the return of 

22 tax for the taxable year in which such 

23 amount is treated as distributed from a 

24 qualified employer plan. 


lotter on DSKBCFDHB2PROD with BILLS
148 

•HR 1 RH

1 ‘‘(ii) QUALIFIED PLAN LOAN OFFSET

2 AMOUNT.—For purposes of this subpara3 graph, the term ‘qualified plan loan offset 

4 amount’ means a plan loan offset amount 

5 which is treated as distributed from a 

6 qualified employer plan to a participant or 

7 beneficiary solely by reason of— 

8 ‘‘(I) the termination of the quali9 fied employer plan, or 

10 ‘‘(II) the failure to meet the re11 payment terms of the loan from such 

12 plan because of the separation from 

13 service of the participant (whether due 

14 to layoff, cessation of business, termi15 nation of employment, or otherwise). 

16 ‘‘(iii) PLAN LOAN OFFSET AMOUNT.— 

17 For purposes of clause (ii), the term ‘plan 

18 loan offset amount’ means the amount by 

19 which the participant’s accrued benefit 

20 under the plan is reduced in order to repay 

21 a loan from the plan. 

22 ‘‘(iv) LIMITATION.—This subparagraph 

23 shall not apply to any plan loan offset 

24 amount unless such plan loan offset amount 

25 relates to a loan to which section 72(p)(1) 


lotter on DSKBCFDHB2PROD with BILLS
149 

•HR 1 RH

1 does not apply by reason of section 

2 72(p)(2). 

3 ‘‘(v) QUALIFIED EMPLOYER PLAN.— 

4 For purposes of this subsection, the term 

5 ‘qualified employer plan’ has the meaning 

6 given such term by section 72(p)(4).’’. 

7 (b) CONFORMING AMENDMENT.—Subparagraph (A) of 

8 section 402(c)(3) is amended by striking ‘‘subparagraph 

9 (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 

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

11 section shall apply to taxable years beginning after Decem12 ber 31, 2017. 

13 SEC. 1506. MODIFICATION OF NONDISCRIMINATION RULES 

14 TO PROTECT OLDER, LONGER SERVICE PAR15 TICIPANTS. 

16 (a) IN GENERAL.—Section 401 is amended— 

17 (1) by redesignating subsection (o) as subsection 

18 (p), and 

19 (2) by inserting after subsection (n) the following 

20 new subsection: 

21 ‘‘(o) SPECIAL RULES FOR APPLYING NONDISCRIMINA22 TION RULES TO PROTECT OLDER, LONGER SERVICE AND

23 GRANDFATHERED PARTICIPANTS.— 

24 ‘‘(1) TESTING OF DEFINED BENEFIT PLANS WITH

25 CLOSED CLASSES OF PARTICIPANTS.— 


lotter on DSKBCFDHB2PROD with BILLS
150 

•HR 1 RH

1 ‘‘(A) BENEFITS, RIGHTS, OR FEATURES

2 PROVIDED TO CLOSED CLASSES.—A defined ben3 efit plan which provides benefits, rights, or fea4 tures to a closed class of participants shall not 

5 fail to satisfy the requirements of subsection 

6 (a)(4) by reason of the composition of such closed 

7 class or the benefits, rights, or features provided 

8 to such closed class, if— 

9 ‘‘(i) for the plan year as of which the 

10 class closes and the 2 succeeding plan years, 

11 such benefits, rights, and features satisfy the 

12 requirements of subsection (a)(4) (without 

13 regard to this subparagraph but taking into 

14 account the rules of subparagraph (I)), 

15 ‘‘(ii) after the date as of which the 

16 class was closed, any plan amendment 

17 which modifies the closed class or the bene18 fits, rights, and features provided to such 

19 closed class does not discriminate signifi20 cantly in favor of highly compensated em21 ployees, and 

22 ‘‘(iii) the class was closed before April 

23 5, 2017, or the plan is described in sub24 paragraph (C). 


lotter on DSKBCFDHB2PROD with BILLS
151 

•HR 1 RH

1 ‘‘(B) AGGREGATE TESTING WITH DEFINED

2 CONTRIBUTION PLANS PERMITTED ON A BENE3 FITS BASIS.— 

4 ‘‘(i) IN GENERAL.—For purposes of de5 termining compliance with subsection (a)(4) 

6 and section 410(b), a defined benefit plan 

7 described in clause (iii) may be aggregated 

8 and tested on a benefits basis with 1 or 

9 more defined contribution plans, including 

10 with the portion of 1 or more defined con11 tribution plans which— 

12 ‘‘(I) provides matching contribu13 tions (as defined in subsection 

14 (m)(4)(A)), 

15 ‘‘(II) provides annuity contracts 

16 described in section 403(b) which are 

17 purchased with matching contributions 

18 or nonelective contributions, or 

19 ‘‘(III) consists of an employee 

20 stock ownership plan (within the 

21 meaning of section 4975(e)(7)) or a tax 

22 credit employee stock ownership plan 

23 (within the meaning of section 409(a)). 

24 ‘‘(ii) SPECIAL RULES FOR MATCHING

25 CONTRIBUTIONS.—For purposes of clause 


lotter on DSKBCFDHB2PROD with BILLS
152 

•HR 1 RH

1 (i), if a defined benefit plan is aggregated 

2 with a portion of a defined contribution 

3 plan providing matching contributions— 

4 ‘‘(I) such defined benefit plan 

5 must also be aggregated with any por6 tion of such defined contribution plan 

7 which provides elective deferrals de8 scribed in subparagraph (A) or (C) of 

9 section 402(g)(3), and 

10 ‘‘(II) such matching contributions 

11 shall be treated in the same manner as 

12 nonelective contributions, including for 

13 purposes of applying the rules of sub14 section (l). 

15 ‘‘(iii) PLANS DESCRIBED.—A defined 

16 benefit plan is described in this clause if— 

17 ‘‘(I) the plan provides benefits to 

18 a closed class of participants, 

19 ‘‘(II) for the plan year as of which 

20 the class closes and the 2 succeeding 

21 plan years, the plan satisfies the re22 quirements of section 410(b) and sub23 section (a)(4) (without regard to this 

24 subparagraph but taking into account 

25 the rules of subparagraph (I)), 


lotter on DSKBCFDHB2PROD with BILLS
153 

•HR 1 RH

1 ‘‘(III) after the date as of which 

2 the class was closed, any plan amend3 ment which modifies the closed class or 

4 the benefits provided to such closed 

5 class does not discriminate signifi6 cantly in favor of highly compensated 

7 employees, and 

8 ‘‘(IV) the class was closed before 

9 April 5, 2017, or the plan is described 

10 in subparagraph (C). 

11 ‘‘(C) PLANS DESCRIBED.—A plan is de12 scribed in this subparagraph if, taking into ac13 count any predecessor plan— 

14 ‘‘(i) such plan has been in effect for at 

15 least 5 years as of the date the class is 

16 closed, and 

17 ‘‘(ii) during the 5-year period pre18 ceding the date the class is closed, there has 

19 not been a substantial increase in the cov20 erage or value of the benefits, rights, or fea21 tures described in subparagraph (A) or in 

22 the coverage or benefits under the plan de23 scribed in subparagraph (B)(iii) (whichever 

24 is applicable). 


lotter on DSKBCFDHB2PROD with BILLS
154 

•HR 1 RH

1 ‘‘(D) DETERMINATION OF SUBSTANTIAL IN2 CREASE FOR BENEFITS, RIGHTS, AND FEA3 TURES.—In applying subparagraph (C)(ii) for 

4 purposes of subparagraph (A)(iii), a plan shall 

5 be treated as having had a substantial increase 

6 in coverage or value of the benefits, rights, or fea7 tures described in subparagraph (A) during the 

8 applicable 5-year period only if, during such pe9 riod— 

10 ‘‘(i) the number of participants covered 

11 by such benefits, rights, or features on the 

12 date such period ends is more than 50 per13 cent greater than the number of such par14 ticipants on the first day of the plan year 

15 in which such period began, or 

16 ‘‘(ii) such benefits, rights, and features 

17 have been modified by 1 or more plan 

18 amendments in such a way that, as of the 

19 date the class is closed, the value of such 

20 benefits, rights, and features to the closed 

21 class as a whole is substantially greater 

22 than the value as of the first day of such 5- 

23 year period, solely as a result of such 

24 amendments. 


lotter on DSKBCFDHB2PROD with BILLS
155 

•HR 1 RH

1 ‘‘(E) DETERMINATION OF SUBSTANTIAL IN2 CREASE FOR AGGREGATE TESTING ON BENEFITS

3 BASIS.—In applying subparagraph (C)(ii) for 

4 purposes of subparagraph (B)(iii)(IV), a plan 

5 shall be treated as having had a substantial in6 crease in coverage or benefits during the applica7 ble 5-year period only if, during such period— 

8 ‘‘(i) the number of participants benefit9 ting under the plan on the date such period 

10 ends is more than 50 percent greater than 

11 the number of such participants on the first 

12 day of the plan year in which such period 

13 began, or 

14 ‘‘(ii) the average benefit provided to 

15 such participants on the date such period 

16 ends is more than 50 percent greater than 

17 the average benefit provided on the first day 

18 of the plan year in which such period 

19 began. 

20 ‘‘(F) CERTAIN EMPLOYEES DIS21 REGARDED.—For purposes of subparagraphs (D) 

22 and (E), any increase in coverage or value or in 

23 coverage or benefits, whichever is applicable, 

24 which is attributable to such coverage and value 

25 or coverage and benefits provided to employees— 


lotter on DSKBCFDHB2PROD with BILLS
156 

•HR 1 RH

1 ‘‘(i) who became participants as a re2 sult of a merger, acquisition, or similar 

3 event which occurred during the 7-year pe4 riod preceding the date the class is closed, or 

5 ‘‘(ii) who became participants by rea6 son of a merger of the plan with another 

7 plan which had been in effect for at least 5 

8 years as of the date of the merger, 

9 shall be disregarded, except that clause (ii) shall 

10 apply for purposes of subparagraph (D) only if, 

11 under the merger, the benefits, rights, or features 

12 under 1 plan are conformed to the benefits, 

13 rights, or features of the other plan prospectively. 

14 ‘‘(G) RULES RELATING TO AVERAGE BEN15 EFIT.—For purposes of subparagraph (E)— 

16 ‘‘(i) the average benefit provided to 

17 participants under the plan will be treated 

18 as having remained the same between the 2 

19 dates described in subparagraph (E)(ii) if 

20 the benefit formula applicable to such par21 ticipants has not changed between such 

22 dates, and 

23 ‘‘(ii) if the benefit formula applicable 

24 to 1 or more participants under the plan 

25 has changed between such 2 dates, then the 


lotter on DSKBCFDHB2PROD with BILLS
157 

•HR 1 RH

1 average benefit under the plan shall be con2 sidered to have increased by more than 50 

3 percent only if— 

4 ‘‘(I) the total amount determined 

5 under section 430(b)(1)(A)(i) for all 

6 participants benefitting under the plan 

7 for the plan year in which the 5-year 

8 period described in subparagraph (E) 

9 ends, exceeds 

10 ‘‘(II) the total amount determined 

11 under section 430(b)(1)(A)(i) for all 

12 such participants for such plan year, 

13 by using the benefit formula in effect 

14 for each such participant for the first 

15 plan year in such 5-year period, by 

16 more than 50 percent. 

17 In the case of a CSEC plan (as defined in 

18 section 414(y)), the normal cost of the plan 

19 (as determined under section 433(j)(1)(B)) 

20 shall be used in lieu of the amount deter21 mined under section 430(b)(1)(A)(i). 

22 ‘‘(H) TREATMENT AS SINGLE PLAN.—For 

23 purposes of subparagraphs (E) and (G), a plan 

24 described in section 413(c) shall be treated as a 


lotter on DSKBCFDHB2PROD with BILLS
158 

•HR 1 RH

1 single plan rather than as separate plans main2 tained by each participating employer. 

3 ‘‘(I) SPECIAL RULES.—For purposes of sub4 paragraphs (A)(i) and (B)(iii)(II), the following 

5 rules shall apply: 

6 ‘‘(i) In applying section 410(b)(6)(C), 

7 the closing of the class of participants shall 

8 not be treated as a significant change in 

9 coverage under section 410(b)(6)(C)(i)(II). 

10 ‘‘(ii) 2 or more plans shall not fail to 

11 be eligible to be aggregated and treated as 

12 a single plan solely by reason of having dif13 ferent plan years. 

14 ‘‘(iii) Changes in the employee popu15 lation shall be disregarded to the extent at16 tributable to individuals who become em17 ployees or cease to be employees, after the 

18 date the class is closed, by reason of a merg19 er, acquisition, divestiture, or similar event. 

20 ‘‘(iv) Aggregation and all other testing 

21 methodologies otherwise applicable under 

22 subsection (a)(4) and section 410(b) may be 

23 taken into account. 

24 The rule of clause (ii) shall also apply for pur25 poses of determining whether plans to which subVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00158 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
159 

•HR 1 RH

1 paragraph (B)(i) applies may be aggregated and 

2 treated as 1 plan for purposes of determining 

3 whether such plans meet the requirements of sub4 section (a)(4) and section 410(b). 

5 ‘‘(J) SPUN-OFF PLANS.—For purposes of 

6 this paragraph, if a portion of a defined benefit 

7 plan described in subparagraph (A) or (B)(iii) 

8 is spun off to another employer and the spun-off 

9 plan continues to satisfy the requirements of— 

10 ‘‘(i) subparagraph (A)(i) or 

11 (B)(iii)(II), whichever is applicable, if the 

12 original plan was still within the 3-year pe13 riod described in such subparagraph at the 

14 time of the spin off, and 

15 ‘‘(ii) subparagraph (A)(ii) or 

16 (B)(iii)(III), whichever is applicable, 

17 the treatment under subparagraph (A) or (B) of 

18 the spun-off plan shall continue with respect to 

19 such other employer. 

20 ‘‘(2) TESTING OF DEFINED CONTRIBUTION

21 PLANS.— 

22 ‘‘(A) TESTING ON A BENEFITS BASIS.—A 

23 defined contribution plan shall be permitted to 

24 be tested on a benefits basis if— 


lotter on DSKBCFDHB2PROD with BILLS
160 

•HR 1 RH

1 ‘‘(i) such defined contribution plan 

2 provides make-whole contributions to a 

3 closed class of participants whose accruals 

4 under a defined benefit plan have been re5 duced or eliminated, 

6 ‘‘(ii) for the plan year of the defined 

7 contribution plan as of which the class eli8 gible to receive such make-whole contribu9 tions closes and the 2 succeeding plan years, 

10 such closed class of participants satisfies the 

11 requirements of section 410(b)(2)(A)(i) (de12 termined by applying the rules of para13 graph (1)(I)), 

14 ‘‘(iii) after the date as of which the 

15 class was closed, any plan amendment to 

16 the defined contribution plan which modi17 fies the closed class or the allocations, bene18 fits, rights, and features provided to such 

19 closed class does not discriminate signifi20 cantly in favor of highly compensated em21 ployees, and 

22 ‘‘(iv) the class was closed before April 

23 5, 2017, or the defined benefit plan under 

24 clause (i) is described in paragraph (1)(C) 


lotter on DSKBCFDHB2PROD with BILLS
161 

•HR 1 RH

1 (as applied for purposes of paragraph 

2 (1)(B)(iii)(IV)). 

3 ‘‘(B) AGGREGATION WITH PLANS INCLUDING

4 MATCHING CONTRIBUTIONS.— 

5 ‘‘(i) IN GENERAL.—With respect to 1 

6 or more defined contribution plans de7 scribed in subparagraph (A), for purposes of 

8 determining compliance with subsection 

9 (a)(4) and section 410(b), the portion of 

10 such plans which provides make-whole con11 tributions or other nonelective contributions 

12 may be aggregated and tested on a benefits 

13 basis with the portion of 1 or more other de14 fined contribution plans which— 

15 ‘‘(I) provides matching contribu16 tions (as defined in subsection 

17 (m)(4)(A)), 

18 ‘‘(II) provides annuity contracts 

19 described in section 403(b) which are 

20 purchased with matching contributions 

21 or nonelective contributions, or 

22 ‘‘(III) consists of an employee 

23 stock ownership plan (within the 

24 meaning of section 4975(e)(7)) or a tax 


lotter on DSKBCFDHB2PROD with BILLS
162 

•HR 1 RH

1 credit employee stock ownership plan 

2 (within the meaning of section 409(a)). 

3 ‘‘(ii) SPECIAL RULES FOR MATCHING

4 CONTRIBUTIONS.—Rules similar to the rules 

5 of paragraph (1)(B)(ii) shall apply for pur6 poses of clause (i). 

7 ‘‘(C) SPECIAL RULES FOR TESTING DE8 FINED CONTRIBUTION PLAN FEATURES PRO9 VIDING MATCHING CONTRIBUTIONS TO CERTAIN

10 OLDER, LONGER SERVICE PARTICIPANTS.—In the 

11 case of a defined contribution plan which pro12 vides benefits, rights, or features to a closed class 

13 of participants whose accruals under a defined 

14 benefit plan have been reduced or eliminated, the 

15 plan shall not fail to satisfy the requirements of 

16 subsection (a)(4) solely by reason of the composi17 tion of the closed class or the benefits, rights, or 

18 features provided to such closed class if the de19 fined contribution plan and defined benefit plan 

20 otherwise meet the requirements of subparagraph 

21 (A) but for the fact that the make-whole con22 tributions under the defined contribution plan 

23 are made in whole or in part through matching 

24 contributions. 


lotter on DSKBCFDHB2PROD with BILLS
163 

•HR 1 RH

1 ‘‘(D) SPUN-OFF PLANS.—For purposes of 

2 this paragraph, if a portion of a defined con3 tribution plan described in subparagraph (A) or 

4 (C) is spun off to another employer, the treat5 ment under subparagraph (A) or (C) of the 

6 spun-off plan shall continue with respect to the 

7 other employer if such plan continues to comply 

8 with the requirements of clauses (ii) (if the origi9 nal plan was still within the 3-year period de10 scribed in such clause at the time of the spin off) 

11 and (iii) of subparagraph (A), as determined for 

12 purposes of subparagraph (A) or (C), whichever 

13 is applicable. 

14 ‘‘(3) DEFINITIONS.—For purposes of this sub15 section— 

16 ‘‘(A) MAKE-WHOLE CONTRIBUTIONS.—Ex17 cept as otherwise provided in paragraph (2)(C), 

18 the term ‘make-whole contributions’ means non19 elective allocations for each employee in the class 

20 which are reasonably calculated, in a consistent 

21 manner, to replace some or all of the retirement 

22 benefits which the employee would have received 

23 under the defined benefit plan and any other 

24 plan or qualified cash or deferred arrangement 

25 under subsection (k)(2) if no change had been 


lotter on DSKBCFDHB2PROD with BILLS
164 

•HR 1 RH

1 made to such defined benefit plan and such other 

2 plan or arrangement. For purposes of the pre3 ceding sentence, consistency shall not be required 

4 with respect to employees who were subject to dif5 ferent benefit formulas under the defined benefit 

6 plan. 

7 ‘‘(B) REFERENCES TO CLOSED CLASS OF

8 PARTICIPANTS.—References to a closed class of 

9 participants and similar references to a closed 

10 class shall include arrangements under which 1 

11 or more classes of participants are closed, except 

12 that 1 or more classes of participants closed on 

13 different dates shall not be aggregated for pur14 poses of determining the date any such class was 

15 closed. 

16 ‘‘(C) HIGHLY COMPENSATED EMPLOYEE.— 

17 The term ‘highly compensated employee’ has the 

18 meaning given such term in section 414(q).′′.’’. 

19 (b) PARTICIPATION REQUIREMENTS.—Paragraph (26) 

20 of section 401(a) is amended by adding at the end the fol21 lowing new subparagraph: 

22 ‘‘(I) PROTECTED PARTICIPANTS.— 

23 ‘‘(i) IN GENERAL.—A plan shall be 

24 deemed to satisfy the requirements of sub25 paragraph (A) if— 


lotter on DSKBCFDHB2PROD with BILLS
165 

•HR 1 RH

1 ‘‘(I) the plan is amended— 

2 ‘‘(aa) to cease all benefit ac3 cruals, or 

4 ‘‘(bb) to provide future ben5 efit accruals only to a closed class 

6 of participants, 

7 ‘‘(II) the plan satisfies subpara8 graph (A) (without regard to this sub9 paragraph) as of the effective date of 

10 the amendment, and 

11 ‘‘(III) the amendment was adopt12 ed before April 5, 2017, or the plan is 

13 described in clause (ii). 

14 ‘‘(ii) PLANS DESCRIBED.—A plan is 

15 described in this clause if the plan would be 

16 described in subsection (o)(1)(C), as applied 

17 for purposes of subsection (o)(1)(B)(iii)(IV) 

18 and by treating the effective date of the 

19 amendment as the date the class was closed 

20 for purposes of subsection (o)(1)(C). 

21 ‘‘(iii) SPECIAL RULES.—For purposes 

22 of clause (i)(II), in applying section 

23 410(b)(6)(C), the amendments described in 

24 clause (i) shall not be treated as a signifiVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00165 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
166 

•HR 1 RH

1 cant change in coverage under section 

2 410(b)(6)(C)(i)(II). 

3 ‘‘(iv) SPUN-OFF PLANS.—For purposes 

4 of this subparagraph, if a portion of a plan 

5 described in clause (i) is spun off to another 

6 employer, the treatment under clause (i) of 

7 the spun-off plan shall continue with respect 

8 to the other employer.’’. 

9 (c) EFFECTIVE DATE.— 

10 (1) IN GENERAL.—Except as provided in para11 graph (2), the amendments made by this section shall 

12 take effect on the date of the enactment of this Act, 

13 without regard to whether any plan modifications re14 ferred to in such amendments are adopted or effective 

15 before, on, or after such date of enactment. 

16 (2) SPECIAL RULES.— 

17 (A) ELECTION OF EARLIER APPLICATION.— 

18 At the election of the plan sponsor, the amend19 ments made by this section shall apply to plan 

20 years beginning after December 31, 2013. 

21 (B) CLOSED CLASSES OF PARTICIPANTS.— 

22 For purposes of paragraphs (1)(A)(iii), 

23 (1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) 

24 of the Internal Revenue Code of 1986 (as added 

25 by this section), a closed class of participants 


lotter on DSKBCFDHB2PROD with BILLS
167 

•HR 1 RH

1 shall be treated as being closed before April 5, 

2 2017, if the plan sponsor’s intention to create 

3 such closed class is reflected in formal written 

4 documents and communicated to participants be5 fore such date. 

6 (C) CERTAIN POST-ENACTMENT PLAN

7 AMENDMENTS.—A plan shall not be treated as 

8 failing to be eligible for the application of section 

9 401(o)(1)(A), 401(o)(1)(B)(iii), or 401(a)(26) of 

10 such Code (as added by this section) to such plan 

11 solely because in the case of— 

12 (i) such section 401(o)(1)(A), the plan 

13 was amended before the date of the enact14 ment of this Act to eliminate 1 or more ben15 efits, rights, or features, and is further 

16 amended after such date of enactment to 

17 provide such previously eliminated benefits, 

18 rights, or features to a closed class of par19 ticipants, or 

20 (ii) such section 401(o)(1)(B)(iii) or 

21 section 401(a)(26), the plan was amended 

22 before the date of the enactment of this Act 

23 to cease all benefit accruals, and is further 

24 amended after such date of enactment to 

25 provide benefit accruals to a closed class of 


lotter on DSKBCFDHB2PROD with BILLS
168 

•HR 1 RH

1 participants. Any such section shall only 

2 apply if the plan otherwise meets the re3 quirements of such section and in applying 

4 such section, the date the class of partici5 pants is closed shall be the effective date of 

6 the later amendment. 

7 Subtitle G—Estate, Gift, and Gen8 eration-skipping Transfer Taxes 

9 SEC. 1601. INCREASE IN CREDIT AGAINST ESTATE, GIFT, 

10 AND GENERATION-SKIPPING TRANSFER TAX. 

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

12 striking ‘‘$5,000,000’’ and inserting ‘‘$10,000,000’’. 

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

14 section shall apply to estates of decedents dying, generation15 skipping transfers, and gifts made, after December 31, 

16 2017. 

17 SEC. 1602. REPEAL OF ESTATE AND GENERATION-SKIPPING 

18 TRANSFER TAXES. 

19 (a) ESTATE TAX REPEAL.— 

20 (1) IN GENERAL.—Subchapter C of chapter 11 is 

21 amended by adding at the end the following new sec22 tion: 


lotter on DSKBCFDHB2PROD with BILLS
169 

•HR 1 RH

1 ‘‘SEC. 2210. TERMINATION. 

2 ‘‘(a) IN GENERAL.—Except as provided in subsection 

3 (b), this chapter shall not apply to the estates of decedents 

4 dying after December 31, 2024. 

5 ‘‘(b) CERTAIN DISTRIBUTIONS FROM QUALIFIED DO6 MESTIC TRUSTS.—In applying section 2056A with respect 

7 to the surviving spouse of a decedent dying on or before 

8 December 31, 2024— 

9 ‘‘(1) section 2056A(b)(1)(A) shall not apply to 

10 distributions made after the 10-year period beginning 

11 on such date, and 

12 ‘‘(2) section 2056A(b)(1)(B) shall not apply after 

13 such date.’’. 

14 (2) CONFORMING AMENDMENTS.—Section 

15 1014(b) is amended— 

16 (A) in paragraph (6), by striking ‘‘was in17 cludible in determining’’ and all that follows 

18 through the end and inserting ‘‘was includible 

19 (or would have been includible without regard to 

20 section 2210) in determining the value of the de21 cedent’s gross estate under chapter 11 of subtitle 

22 B’’ , 

23 (B) in paragraph (9), by striking ‘‘required 

24 to be included’’ through ‘‘Code of 1939’’ and in25 serting ‘‘required to be included (or would have 

26 been required to be included without regard to 


lotter on DSKBCFDHB2PROD with BILLS
170 

•HR 1 RH

1 section 2210) in determining the value of the de2 cedent’s gross estate under chapter 11 of subtitle 

3 B’’, and 

4 (C) in paragraph (10), by striking ‘‘Prop5 erty includible in the gross estate’’ and inserting 

6 ‘‘Property includible (or which would have been 

7 includible without regard to section 2210) in the 

8 gross estate’’. 

9 (3) CLERICAL AMENDMENT.—The table of sec10 tions for subchapter C of chapter 11 is amended by 

11 adding at the end the following new item: 

‘‘Sec. 2210. Termination.’’. 

12 (b) GENERATION-SKIPPING TRANSFER TAX REPEAL.— 

13 (1) IN GENERAL.—Subchapter G of chapter 13 of 

14 subtitle B of such Code is amended by adding at the 

15 end the following new section: 

16 ‘‘SEC. 2664. TERMINATION. 

17 ‘‘This chapter shall not apply to generation-skipping 

18 transfers after December 31, 2024.’’. 

19 (2) CLERICAL AMENDMENT.—The table of sec20 tions for subchapter G of chapter 13 of such Code is 

21 amended by adding at the end the following new item: 

‘‘Sec. 2664. Termination.’’. 

22 (c) CONFORMING AMENDMENTS RELATED TO GIFT

23 TAX.— 


lotter on DSKBCFDHB2PROD with BILLS
171 

•HR 1 RH

1 (1) COMPUTATION OF GIFT TAX.—Section 2502 

2 is amended by adding at the end the following new 

3 subsection: 

4 ‘‘(d) GIFTS MADE AFTER 2024.— 

5 ‘‘(1) IN GENERAL.—In the case of a gift made 

6 after December 31, 2024, subsection (a) shall be ap7 plied by substituting ‘subsection (d)(2)’ for ‘section 

8 2001(c)’ and ‘such subsection’ for ‘such section’. 

9 ‘‘(2) RATE SCHEDULE.— 

‘‘If the amount with respect to which the 

tentative tax to be computed is:.

The tentative tax 

is: 

Not over $10,000 ................................................................. 18% of such amount. 

Over $10,000 but not over $20,000 ................................... $1,800, plus 20% of 

the excess over 

$10,000. 

Over $20,000 but not over $40,000 ................................... $3,800, plus 22% of 

the excess over 

$20,000. 

Over $40,000 but not over $60,000 ................................... $8,200, plus 24% of 

the excess over 

$40,000. 

Over $60,000 but not over $80,000 ................................... $13,000, plus 26% of 

the excess over 

$60,000. 

Over $80,000 but not over $100,000 ................................. $18,200, plus 28% of 

the excess over 

$80,000. 

Over $100,000 but not over $150,000 ............................... $23,800, plus 30% of 

the excess over 

$100,000. 

Over $150,000 but not over $250,000 ............................... $38,800, plus 32% of 

the excess of 

$150,000. 

Over $250,000 but not over $500,000 ............................... $70,800, plus 34% of 

the excess over 

$250,000. 

Over $500,000 ..................................................................... $155,800, plus 35% of 

the excess of 

$500,000.’’. 


lotter on DSKBCFDHB2PROD with BILLS
172 

•HR 1 RH

1 (2) LIFETIME GIFT EXEMPTION.—Section 2505 

2 is amended by adding at the end the following new 

3 subsection: 

4 ‘‘(d) GIFTS MADE AFTER 2024.— 

5 ‘‘(1) IN GENERAL.—In the case of a gift made 

6 after December 31, 2024, subsection (a)(1) shall be 

7 applied by substituting ‘the amount of the tentative 

8 tax which would be determined under the rate sched9 ule set forth in section 2502(a)(2) if the amount with 

10 respect to which such tentative tax is to be computed 

11 were $10,000,000’ for ‘the applicable credit amount in 

12 effect under section 2010(c) which would apply if the 

13 donor died as of the end of the calendar year’. 

14 ‘‘(2) INFLATION ADJUSTMENT.— 

15 ‘‘(A) IN GENERAL.—In the case of any cal16 endar year after 2024, the dollar amount in sub17 section (a)(1) (after application of this sub18 section) shall be increased by an amount equal 

19 to— 

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

21 ‘‘(ii) the cost-of-living adjustment de22 termined under section 1(c)(2)(A) of such 

23 calendar year by substituting ‘calendar year 

24 2011’ for ‘calendar year 2016’ in clause (ii) 

25 thereof. 


lotter on DSKBCFDHB2PROD with BILLS
173 

•HR 1 RH

1 ‘‘(B) ROUNDING.—If any amount as ad2 justed under paragraph (1) is not a multiple of 

3 $10,000, such amount shall be rounded to the 

4 nearest multiple of $10,000.’’. 

5 (3) OTHER CONFORMING AMENDMENTS RELATED

6 TO GIFT TAX.—Section 2801 is amended by adding at 

7 the end the following new subsection: 

8 ‘‘(g) GIFTS RECEIVED AFTER 2024.—In the case of a 

9 gift received after December 31, 2024, subsection (a)(1) shall 

10 be applied by substituting ‘section 2502(a)(2)’ for ‘section 

11 2001(c) as in effect on the date of such receipt’.’’. 

12 (d) EFFECTIVE DATE.—The amendments made by this 

13 section shall apply to estates of decedents dying, generation14 skipping transfers, and gifts made, after December 31, 

15 2024. 

16 TITLE II—ALTERNATIVE 

17 MINIMUM TAX REPEAL 

18 SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX. 

19 (a) IN GENERAL.—Subchapter A of chapter 1 is 

20 amended by striking part VI (and by striking the item re21 lating to such part in the table of parts for subchapter A). 

22 (b) CREDIT FOR PRIOR YEAR MINIMUM TAX LIABIL23 ITY.— 

24 (1) LIMITATION.—Subsection (c) of section 53 is 

25 amended to read as follows: 


lotter on DSKBCFDHB2PROD with BILLS
174 

•HR 1 RH

1 ‘‘(c) LIMITATION.—The credit allowable under sub2 section (a) shall not exceed the regular tax liability of the 

3 taxpayer reduced by the sum of the credits allowed under 

4 subparts A, B, and D.’’. 

5 (2) CREDITS TREATED AS REFUNDABLE.—Sec6 tion 53 is amended by adding at the end the following 

7 new subsection: 

8 ‘‘(e) PORTION OF CREDIT TREATED AS REFUND9 ABLE.— 

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

11 year beginning in 2019, 2020, 2021, or 2022, the lim12 itation under subsection (c) shall be increased by the 

13 AMT refundable credit amount for such year. 

14 ‘‘(2) AMT REFUNDABLE CREDIT AMOUNT.—For 

15 purposes of paragraph (1), the AMT refundable credit 

16 amount is an amount equal to 50 percent (100 per17 cent in the case of a taxable year beginning in 2022) 

18 of the excess (if any) of— 

19 ‘‘(A) the minimum tax credit determined 

20 under subsection (b) for the taxable year, over 

21 ‘‘(B) the minimum tax credit allowed under 

22 subsection (a) for such year (before the applica23 tion of this subsection for such year). 

24 ‘‘(3) CREDIT REFUNDABLE.—For purposes of 

25 this title (other than this section), the credit allowed 


lotter on DSKBCFDHB2PROD with BILLS
175 

•HR 1 RH

1 by reason of this subsection shall be treated as a cred2 it allowed under subpart C (and not this subpart). 

3 ‘‘(4) SHORT TAXABLE YEARS.—In the case of 

4 any taxable year of less than 365 days, the AMT re5 fundable credit amount determined under paragraph 

6 (2) with respect to such taxable year shall be the 

7 amount which bears the same ratio to such amount 

8 determined without regard to this paragraph as the 

9 number of days in such taxable year bears to 365.’’. 

10 (3) TREATMENT OF REFERENCES.—Section 

11 53(d) is amended by adding at the end the following 

12 new paragraph: 

13 ‘‘(3) AMT TERM REFERENCES.—Any references 

14 in this subsection to section 55, 56, or 57 shall be 

15 treated as a reference to such section as in effect be16 fore its repeal by the Tax Cuts and Jobs Act.’’. 

17 (c) CONFORMING AMENDMENTS RELATED TO AMT 

18 REPEAL.— 

19 (1) Section 2(d) is amended by striking ‘‘sections 

20 1 and 55’’ and inserting ‘‘section 1’’. 

21 (2) Section 5(a) is amended by striking para22 graph (4). 

23 (3) Section 11(d) is amended by striking ‘‘the 

24 taxes imposed by subsection (a) and section 55’’ and 

25 inserting ‘‘the tax imposed by subsection (a)’’. 


lotter on DSKBCFDHB2PROD with BILLS
176 

•HR 1 RH

1 (4) Section 12 is amended by striking paragraph 

2 (7). 

3 (5) Section 26(a) is amended to read as follows: 

4 ‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The 

5 aggregate amount of credits allowed by this subpart for the 

6 taxable year shall not exceed the taxpayer’s regular tax li7 ability for the taxable year.’’. 

8 (6) Section 26(b)(2) is amended by striking sub9 paragraph (A). 

10 (7) Section 26 is amended by striking subsection 

11 (c). 

12 (8) Section 38(c) is amended— 

13 (A) by striking paragraphs (1) through (5), 

14 (B) by redesignating paragraph (6) as 

15 paragraph (2), 

16 (C) by inserting before paragraph (2) (as so 

17 redesignated) the following new paragraph: 

18 ‘‘(1) IN GENERAL.—The credit allowed under 

19 subsection (a) for any taxable year shall not exceed 

20 the excess (if any) of— 

21 ‘‘(A) the sum of— 

22 ‘‘(i) so much of the regular tax liabil23 ity as does not exceed $25,000, plus 

24 ‘‘(ii) 75 percent of so much of the reg25 ular tax liability as exceeds $25,000, over 


lotter on DSKBCFDHB2PROD with BILLS
177 

•HR 1 RH

1 ‘‘(B) the sum of the credits allowable under 

2 subparts A and B of this part.’’, and 

3 (D) by striking ‘‘subparagraph (B) of para4 graph (1)’’ each place it appears in paragraph 

5 (2) (as so redesignated) and inserting ‘‘clauses 

6 (i) and (ii) of paragraph (1)(A)’’. 

7 (9) Section 39(a) is amended— 

8 (A) by striking ‘‘or the eligible small busi9 ness credits’’ in paragraph (3)(A), and 

10 (B) by striking paragraph (4). 

11 (10) Section 45D(g)(4)(B) is amended by strik12 ing ‘‘or for purposes of section 55’’. 

13 (11) Section 54(c)(1) is amended to read as fol14 lows: 

15 ‘‘(1) regular tax liability (as defined in section 

16 26(b)), over’’. 

17 (12) Section 54A(c)(1)(A) is amended to read as 

18 follows: 

19 ‘‘(A) regular tax liability (as defined in sec20 tion 26(b)), over’’. 

21 (13) Section 148(b)(3) is amended to read as fol22 lows: 

23 ‘‘(3) TAX-EXEMPT BONDS NOT TREATED AS IN24 VESTMENT PROPERTY.—The term ‘investment prop25 erty’ does not include any tax-exempt bond.’’. 


lotter on DSKBCFDHB2PROD with BILLS
178 

•HR 1 RH

1 (14) Section 168(k)(2) is amended by striking 

2 subparagraph (G). 

3 (15) Section 168(k) is amended by striking para4 graph (4). 

5 (16) Section 168(k)(5) is amended by striking 

6 subparagraph (E). 

7 (17) Section 168(m)(2)(B)(i) is amended by 

8 striking ‘‘(determined without regard to paragraph 

9 (4) thereof)’’. 

10 (18) Section 168(m)(2) is amended by striking 

11 subparagraph (D). 

12 (19) Section 173 is amended by striking sub13 section (b). 

14 (20) Section 263(c) is amended by striking ‘‘sec15 tion 59(e) or 291’’ and inserting ‘‘section 291’’. 

16 (21) Section 263A(c) is amended by striking 

17 paragraph (6) and by redesignating paragraph (7) 

18 (as amended) as paragraph (6). 

19 (22) Section 382(l) is amended by striking para20 graph (7) and by redesignating paragraph (8) as 

21 paragraph (7). 

22 (23) Section 443 is amended by striking sub23 section (d) and by redesignating subsection (e) as sub24 section (d). 


lotter on DSKBCFDHB2PROD with BILLS
179 

•HR 1 RH

1 (24) Section 616 is amended by striking sub2 section (e). 

3 (25) Section 617 is amended by striking sub4 section (i). 

5 (26) Section 641(c) is amended— 

6 (A) in paragraph (2) by striking subpara7 graph (B) and by redesignating subparagraphs 

8 (C) and (D) as subparagraphs (B) and (C), re9 spectively, and 

10 (B) in paragraph (3), by striking ‘‘para11 graph (2)(C)’’ and inserting ‘‘paragraph 

12 (2)(B)’’. 

13 (27) Subsections (b) and (c) of section 666 are 

14 each amended by striking ‘‘(other than the tax im15 posed by section 55)’’. 

16 (28) Section 848 is amended by striking sub17 section (i). 

18 (29) Section 860E(a) is amended by striking 

19 paragraph (4). 

20 (30) Section 871(b)(1) is amended by striking 

21 ‘‘or 55’’. 

22 (31) Section 882(a)(1) is amended by striking 

23 ‘‘55,’’. 

24 (32) Section 897(a) is amended to read as fol25 lows: 


lotter on DSKBCFDHB2PROD with BILLS
180 

•HR 1 RH

1 ‘‘(a) TREATMENT AS EFFECTIVELY CONNECTED WITH

2 UNITED STATES TRADE OR BUSINESS.—For purposes of 

3 this title, gain or loss of a nonresident alien individual or 

4 a foreign corporation from the disposition of a United 

5 States real property interest shall be taken into account— 

6 ‘‘(1) in the case of a nonresident alien indi7 vidual, under section 871(b)(1), or 

8 ‘‘(2) in the case of a foreign corporation, under 

9 section 882(a)(1), 

10 as if the taxpayer were engaged in a trade or business with11 in the United States during the taxable year and as if such 

12 gain or loss were effectively connected with such trade or 

13 business.’’. 

14 (33) Section 904(k) is amended to read as fol15 lows: 

16 ‘‘(k) CROSS REFERENCE.—For increase of limitation 

17 under subsection (a) for taxes paid with respect to amounts 

18 received which were included in the gross income of the tax19 payer for a prior taxable year as a United States share20 holder with respect to a controlled foreign corporation, see 

21 section 960(b).’’. 

22 (34) Section 911(f) is amended to read as fol23 lows: 

24 ‘‘(f) DETERMINATION OF TAX LIABILITY.— 


lotter on DSKBCFDHB2PROD with BILLS
181 

•HR 1 RH

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

2 amount is excluded from gross income of a taxpayer 

3 under subsection (a), then, notwithstanding section 1, 

4 if such taxpayer has taxable income for such taxable 

5 year, the tax imposed by section 1 for such taxable 

6 year shall be equal to the excess (if any) of— 

7 ‘‘(A) the tax which would be imposed by 

8 section 1 for such taxable year if the taxpayer’s 

9 taxable income were increased by the amount ex10 cluded under subsection (a) for such taxable 

11 year, over 

12 ‘‘(B) the tax which would be imposed by 

13 section 1 for such taxable year if the taxpayer’s 

14 taxable income were equal to the amount ex15 cluded under subsection (a) for such taxable 

16 year. 

17 For purposes of this paragraph, the amount excluded 

18 under subsection (a) shall be reduced by the aggregate 

19 amount of any deductions or exclusions disallowed 

20 under subsection (d)(6) with respect to such excluded 

21 amount. 

22 ‘‘(2) TREATMENT OF CAPITAL GAIN EXCESS.— 

23 ‘‘(A) IN GENERAL.—In applying section 

24 1(h) for purposes of determining the tax under 

25 paragraph (1)(A) for any taxable year in which, 


lotter on DSKBCFDHB2PROD with BILLS
182 

•HR 1 RH

1 without regard to this subsection, the taxpayer’s 

2 net capital gain exceeds taxable income (here3 after in this subparagraph referred to as the cap4 ital gain excess)— 

5 ‘‘(i) the taxpayer’s net capital gain 

6 (determined without regard to section 

7 1(h)(11)) shall be reduced (but not below 

8 zero) by such capital gain excess, 

9 ‘‘(ii) the taxpayer’s qualified dividend 

10 income shall be reduced by so much of such 

11 capital gain excess as exceeds the taxpayer’s 

12 net capital gain (determined without regard 

13 to section 1(h)(11) and the reduction under 

14 clause (i)), and 

15 ‘‘(iii) adjusted net capital gain, 

16 unrecaptured section 1250 gain, and 28- 

17 percent rate gain shall each be determined 

18 after increasing the amount described in 

19 section 1(h)(4)(B) by such capital gain ex20 cess. 

21 ‘‘(B) DEFINITIONS.—Terms used in this 

22 paragraph which are also used in section 1(h) 

23 shall have the respective meanings given such 

24 terms by section 1(h).’’. 

25 (35) Section 962(a)(1) is amended— 


lotter on DSKBCFDHB2PROD with BILLS
183 

•HR 1 RH

1 (A) by striking ‘‘sections 1 and 55’’ and in2 serting ‘‘section 1’’, and 

3 (B) by striking ‘‘sections 11 and 55’’ and 

4 inserting ‘‘section 11’’. 

5 (36) Section 1016(a) is amended by striking 

6 paragraph (20). 

7 (37) Section 1202(a)(4) is amended by inserting 

8 ‘‘and’’ at the end of subparagraph (A), by striking ‘‘, 

9 and’’ and inserting a period at the end of subpara10 graph (B), and by striking subparagraph (C). 

11 (38) Section 1374(b)(3)(B) is amended by strik12 ing the last sentence thereof. 

13 (39) Section 1561(a) is amended— 

14 (A) by inserting ‘‘and’’ at the end of para15 graph (1), by striking ‘‘, and’’ at the end of 

16 paragraph (2) and inserting a period, and by 

17 striking paragraph (3), and 

18 (B) by striking the last sentence. 

19 (40) Section 6015(d)(2)(B) is amended by strik20 ing ‘‘or 55’’. 

21 (41) Section 6211(b)(4)(A) is amended by 

22 striking‘‘, 168(k)(4)’’. 

23 (42) Section 6425(c)(1)(A) is amended to read as 

24 follows: 


lotter on DSKBCFDHB2PROD with BILLS
184 

•HR 1 RH

1 ‘‘(A) the tax imposed under section 11 or 

2 subchapter L of chapter 1, whichever is applica3 ble, over’’. 

4 (43) Section 6654(d)(2) is amended— 

5 (A) in clause (i) of subparagraph (B), by 

6 striking ‘‘, alternative minimum taxable in7 come,’’, and 

8 (B) in clause (i) of subparagraph (C), by 

9 striking ‘‘, alternative minimum taxable in10 come,’’. 

11 (44) Section 6655(e)(2)(B)(i) is amended by 

12 striking ‘‘The taxable income and alternative min13 imum taxable income shall’’ and inserting ‘‘Taxable 

14 income shall’’. 

15 (45) Section 6655(g)(1)(A) is amended by add16 ing ‘‘plus’’ at the end of clause (i), by striking clause 

17 (ii), and by redesignating clause (iii) as clause (ii). 

18 (46) Section 6662(e)(3)(C) is amended by strik19 ing ‘‘the regular tax (as defined in section 55(c))’’ 

20 and inserting ‘‘the regular tax liability (as defined in 

21 section 26(b))’’. 

22 (d) EFFECTIVE DATES.— 

23 (1) IN GENERAL.—Except as otherwise provided 

24 in this subsection, the amendments made by this secVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00184 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
185 

•HR 1 RH

1 tion shall apply to taxable years beginning after De2 cember 31, 2017. 

3 (2) PRIOR ELECTIONS WITH RESPECT TO CER4 TAIN TAX PREFERENCES.—So much of the amend5 ment made by subsection (a) as relates to the repeal 

6 of section 59(e) of the Internal Revenue Code of 1986 

7 shall apply to amounts paid or incurred after Decem8 ber 31, 2017. 

9 (3) TREATMENT OF NET OPERATING LOSS

10 CARRYBACKS.—For purposes of section 56(d) of the 

11 Internal Revenue Code of 1986 (as in effect before its 

12 repeal), the amount of any net operating loss which 

13 may be carried back from a taxable year beginning 

14 after December 31, 2017, to taxable years beginning 

15 before January 1, 2018, shall be determined without 

16 regard to any adjustments under section 56(d)(2)(A) 

17 of such Code (as so in effect). 

18 TITLE III—BUSINESS TAX 

19 REFORM 

20 Subtitle A—Tax Rates 

21 SEC. 3001. REDUCTION IN CORPORATE TAX RATE. 

22 (a) IN GENERAL.—Section 11(b) is amended to read 

23 as follows: 

24 ‘‘(b) AMOUNT OF TAX.— 


lotter on DSKBCFDHB2PROD with BILLS
186 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—Except as otherwise provided 

2 in this subsection, the amount of the tax imposed by 

3 subsection (a) shall be 20 percent of taxable income. 

4 ‘‘(2) SPECIAL RULE FOR PERSONAL SERVICE

5 CORPORATIONS.— 

6 ‘‘(A) IN GENERAL.—In the case of a per7 sonal service corporation (as defined in section 

8 448(d)(2)), the amount of the tax imposed by 

9 subsection (a) shall be 25 percent of taxable in10 come. 

11 ‘‘(B) REFERENCES TO CORPORATE RATE.— 

12 Any reference to the rate imposed under this sec13 tion or to the highest rate in effect under this 

14 section (or any similar reference) shall be deter15 mined without regard to the rate imposed with 

16 respect to personal service corporations (as so de17 fined).’’. 

18 (b) CONFORMING AMENDMENTS.— 

19 (1)(A) Part I of subchapter P of chapter 1 is 

20 amended by striking section 1201 (and by striking the 

21 item relating to such section in the table of sections 

22 for such part). 

23 (B) Section 12 is amended by striking para24 graph (4). 

25 (C) Section 527(b) is amended— 


lotter on DSKBCFDHB2PROD with BILLS
187 

•HR 1 RH

1 (i) by striking paragraph (2), and 

2 (ii) by striking all that precedes ‘‘is hereby 

3 imposed’’ and inserting: 

4 ‘‘(b) TAX IMPOSED.—A tax’’. 

5 (D) Section 594(a) is amended by striking 

6 ‘‘taxes imposed by section 11 or 1201(a)’’ and insert7 ing ‘‘tax imposed by section 11’’. 

8 (E) Section 691(c)(4) is amended by striking 

9 ‘‘1201,’’. 

10 (F) Section 801(a) is amended— 

11 (i) by striking paragraph (2), and 

12 (ii) by striking all that precedes ‘‘is hereby 

13 imposed’’ and inserting: 

14 ‘‘(a) TAX IMPOSED.—A tax’’. 

15 (G) Section 831(e) is amended by striking para16 graph (1) and by redesignating paragraphs (2) and 

17 (3) as paragraphs (1) and (2), respectively. 

18 (H) Sections 832(c)(5) and 834(b)(1)(D) are 

19 each amended by striking ‘‘sec. 1201 and following,’’. 

20 (I) Section 852(b)(3)(A) is amended by striking 

21 ‘‘section 1201(a)’’ and inserting ‘‘section 11(b)(1)’’. 

22 (J) Section 857(b)(3) is amended— 

23 (i) by striking subparagraph (A) and redes24 ignating subparagraphs (B) through (F) as sub25 paragraphs (A) through (E), respectively, 


lotter on DSKBCFDHB2PROD with BILLS
188 

•HR 1 RH

1 (ii) in subparagraph (C), as so redesig2 nated— 

3 (I) by striking ‘‘subparagraph (A)(ii)’’ 

4 in clause (i) thereof and inserting ‘‘para5 graph (1)’’, 

6 (II) by striking ‘‘the tax imposed by 

7 subparagraph (A)(ii)’’ in clauses (ii) and 

8 (iv) thereof and inserting ‘‘the tax imposed 

9 by paragraph (1) on undistributed capital 

10 gain’’, 

11 (iii) in subparagraph (E), as so redesig12 nated, by striking ‘‘subparagraph (B) or (D)’’ 

13 and inserting ‘‘subparagraph (A) or (C)’’, and 

14 (iv) by adding at the end the following new 

15 subparagraph: 

16 ‘‘(F) UNDISTRIBUTED CAPITAL GAIN.—For 

17 purposes of this paragraph, the term ‘undistrib18 uted capital gain’ means the excess of the net 

19 capital gain over the deduction for dividends 

20 paid (as defined in section 561) determined with 

21 reference to capital gain dividends only.’’. 

22 (K) Section 882(a)(1) is amended by striking ‘‘, 

23 or 1201(a)’’. 

24 (L) Section 1374(b) is amended by striking 

25 paragraph (4). 


lotter on DSKBCFDHB2PROD with BILLS
189 

•HR 1 RH

1 (M) Section 1381(b) is amended by striking 

2 ‘‘taxes imposed by section 11 or 1201’’ and inserting 

3 ‘‘tax imposed by section 11’’. 

4 (N) Section 6655(g)(1)(A)(i) is amended by 

5 striking ‘‘or 1201(a),’’. 

6 (O) Section 7518(g)(6)(A) is amended by strik7 ing ‘‘or 1201(a)’’. 

8 (2) Section 1445(e)(1) is amended by striking 

9 ‘‘35 percent (or, to the extent provided in regulations, 

10 20 percent)’’ and inserting ‘‘20 percent’’. 

11 (3) Section 1445(e)(2) is amended by striking 

12 ‘‘35 percent’’ and inserting ‘‘20 percent’’. 

13 (4) Section 1445(e)(6) is amended by striking 

14 ‘‘35 percent (or, to the extent provided in regulations, 

15 20 percent)’’ and inserting ‘‘20 percent’’. 

16 (5)(A) Part I of subchapter B of chapter 5 is 

17 amended by striking section 1551 (and by striking the 

18 item relating to such section in the table of sections 

19 for such part). 

20 (B) Section 12 is amended by striking para21 graph (6). 

22 (C) Section 535(c)(5) is amended to read as fol23 lows: 


lotter on DSKBCFDHB2PROD with BILLS
190 

•HR 1 RH

1 ‘‘(5) CROSS REFERENCE.—For limitation on 

2 credit provided in paragraph (2) or (3) in the case 

3 of certain controlled corporations, see section 1561.’’. 

4 (6)(A) Section 1561, as amended by the pre5 ceding provisions of this Act, is amended to read as 

6 follows: 

7 ‘‘SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS 

8 CREDIT IN THE CASE OF CERTAIN CON9 TROLLED CORPORATIONS. 

10 ‘‘(a) IN GENERAL.—The component members of a con11 trolled group of corporations on a December 31 shall, for 

12 their taxable years which include such December 31, be lim13 ited for purposes of this subtitle to one $250,000 ($150,000 

14 if any component member is a corporation described in sec15 tion 535(c)(2)(B)) amount for purposes of computing the 

16 accumulated earnings credit under section 535(c)(2) and 

17 (3). Such amount shall be divided equally among the com18 ponent members of such group on such December 31 unless 

19 the Secretary prescribes regulations permitting an unequal 

20 allocation of such amount. 

21 ‘‘(b) CERTAIN SHORT TAXABLE YEARS.—If a corpora22 tion has a short taxable year which does not include a De23 cember 31 and is a component member of a controlled group 

24 of corporations with respect to such taxable year, then for 

25 purposes of this subtitle, the amount to be used in comVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00190 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
191 

•HR 1 RH

1 puting the accumulated earnings credit under section 

2 535(c)(2) and (3) of such corporation for such taxable year 

3 shall be the amount specified in subsection (a) with respect 

4 to such group, divided by the number of corporations which 

5 are component members of such group on the last day of 

6 such taxable year. For purposes of the preceding sentence, 

7 section 1563(b) shall be applied as if such last day were 

8 substituted for December 31.’’. 

9 (B) The table of sections for part II of sub10 chapter B of chapter 5 is amended by striking the 

11 item relating to section 1561 and inserting the fol12 lowing new item: 

‘‘Sec. 1561. Limitation on accumulated earnings credit in the case of certain controlled corporations.’’. 

13 (7) Section 7518(g)(6)(A) is amended— 

14 (A) by striking ‘‘With respect to the por15 tion’’ and inserting ‘‘In the case of a taxpayer 

16 other than a corporation, with respect to the por17 tion’’, and 

18 (B) by striking ‘‘(34 percent in the case of 

19 a corporation)’’. 

20 (c) REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS

21 TO REFLECT LOWER CORPORATE INCOME TAX RATES.— 

22 (1) DIVIDENDS RECEIVED BY CORPORATIONS.— 


lotter on DSKBCFDHB2PROD with BILLS
192 

•HR 1 RH

1 (A) IN GENERAL.—Section 243(a)(1) is 

2 amended by striking ‘‘70 percent’’ and inserting 

3 ‘‘50 percent’’. 

4 (B) DIVIDENDS FROM 20-PERCENT OWNED

5 CORPORATIONS.—Section 243(c)(1) is amend6 ed— 

7 (i) by striking ‘‘80 percent’’ and in8 serting ‘‘65 percent’’, and 

9 (ii) by striking ‘‘70 percent’’ and in10 serting ‘‘50 percent’’. 

11 (C) CONFORMING AMENDMENT.—The head12 ing for section 243(c) is amended by striking 

13 ‘‘RETENTION OF 80-PERCENT DIVIDEND RE14 CEIVED DEDUCTION’’ and inserting ‘‘INCREASED

15 PERCENTAGE’’. 

16 (2) DIVIDENDS RECEIVED FROM FSC.—Section 

17 245(c)(1)(B) is amended— 

18 (A) by striking ‘‘70 percent’’ and inserting 

19 ‘‘50 percent’’, and 

20 (B) by striking ‘‘80 percent’’ and inserting 

21 ‘‘65 percent’’. 

22 (3) LIMITATION ON AGGREGATE AMOUNT OF DE23 DUCTIONS.—Section 246(b)(3) is amended— 

24 (A) by striking ‘‘80 percent’’ in subpara25 graph (A) and inserting ‘‘65 percent’’, and 


lotter on DSKBCFDHB2PROD with BILLS
193 

•HR 1 RH

1 (B) by striking ‘‘70 percent’’ in subpara2 graph (B) and inserting ‘‘50 percent’’. 

3 (4) REDUCTION IN DEDUCTION WHERE PORT4 FOLIO STOCK IS DEBT-FINANCED.—Section 

5 246A(a)(1) is amended— 

6 (A) by striking ‘‘70 percent’’ and inserting 

7 ‘‘50 percent’’, and 

8 (B) by striking ‘‘80 percent’’ and inserting 

9 ‘‘65 percent’’. 

10 (5) INCOME FROM SOURCES WITHIN THE UNITED

11 STATES.—Section 861(a)(2) is amended— 

12 (A) by striking ‘‘100/70th’’ and inserting 

13 ‘‘100/50th’’ in subparagraph (B), and 

14 (B) in the flush sentence at the end— 

15 (i) by striking ‘‘100/80th’’ and insert16 ing ‘‘100/65th’’, and 

17 (ii) by striking ‘‘100/70th’’ and insert18 ing ‘‘100/50th’’. 

19 (d) EFFECTIVE DATE.— 

20 (1) IN GENERAL.—Except as otherwise provided 

21 in this subsection, the amendments made by this sec22 tion shall apply to taxable years beginning after De23 cember 31, 2017. 

24 (2) CERTAIN CONFORMING AMENDMENTS.—The 

25 amendments made by paragraphs (2), (3), and (4) of 


lotter on DSKBCFDHB2PROD with BILLS
194 

•HR 1 RH

1 subsection (b) shall apply to distributions after De2 cember 31, 2017. 

3 (e) NORMALIZATION REQUIREMENTS.— 

4 (1) IN GENERAL.—A normalization method of 

5 accounting shall not be treated as being used with re6 spect to any public utility property for purposes of 

7 section 167 or 168 of the Internal Revenue Code of 

8 1986 if the taxpayer, in computing its cost of service 

9 for ratemaking purposes and reflecting operating re10 sults in its regulated books of account, reduces the ex11 cess tax reserve more rapidly or to a greater extent 

12 than such reserve would be reduced under the average 

13 rate assumption method. 

14 (2) ALTERNATIVE METHOD FOR CERTAIN TAX15 PAYERS.—If, as of the first day of the taxable year 

16 that includes the date of enactment of this Act— 

17 (A) the taxpayer was required by a regu18 latory agency to compute depreciation for public 

19 utility property on the basis of an average life 

20 or composite rate method, and 

21 (B) the taxpayer’s books and underlying 

22 records did not contain the vintage account data 

23 necessary to apply the average rate assumption 

24 method, 


lotter on DSKBCFDHB2PROD with BILLS
195 

•HR 1 RH

1 the taxpayer will be treated as using a normalization 

2 method of accounting if, with respect to such jurisdic3 tion, the taxpayer uses the alternative method for 

4 public utility property that is subject to the regu5 latory authority of that jurisdiction. 

6 (3) DEFINITIONS.—For purposes of this sub7 section— 

8 (A) EXCESS TAX RESERVE.—The term ‘‘ex9 cess tax reserve’’ means the excess of— 

10 (i) the reserve for deferred taxes (as de11 scribed in section 168(i)(9)(A)(ii) of the In12 ternal Revenue Code of 1986 as in effect on 

13 the day before the date of the enactment of 

14 this Act), over 

15 (ii) the amount which would be the 

16 balance in such reserve if the amount of 

17 such reserve were determined by assuming 

18 that the corporate rate reductions provided 

19 in this Act were in effect for all prior peri20 ods. 

21 (B) AVERAGE RATE ASSUMPTION METH22 OD.—The average rate assumption method is the 

23 method under which the excess in the reserve for 

24 deferred taxes is reduced over the remaining lives 

25 of the property as used in its regulated books of 


lotter on DSKBCFDHB2PROD with BILLS
196 

•HR 1 RH

1 account which gave rise to the reserve for de2 ferred taxes. Under such method, if timing dif3 ferences for the property reverse, the amount of 

4 the adjustment to the reserve for the deferred 

5 taxes is calculated by multiplying— 

6 (i) the ratio of the aggregate deferred 

7 taxes for the property to the aggregate tim8 ing differences for the property as of the be9 ginning of the period in question, by 

10 (ii) the amount of the timing dif11 ferences which reverse during such period. 

12 (C) ALTERNATIVE METHOD.—The ‘‘alter13 native method’’ is the method in which the tax14 payer— 

15 (i) computes the excess tax reserve on 

16 all public utility property included in the 

17 plant account on the basis of the weighted 

18 average life or composite rate used to com19 pute depreciation for regulatory purposes, 

20 and 

21 (ii) reduces the excess tax reserve rat22 ably over the remaining regulatory life of 

23 the property. 

24 (4) TAX INCREASED FOR NORMALIZATION VIOLA25 TION.—If, for any taxable year ending after the date 


lotter on DSKBCFDHB2PROD with BILLS
197 

•HR 1 RH

1 of the enactment of this Act, the taxpayer does not use 

2 a normalization method of accounting, the taxpayer’s 

3 tax for the taxable year shall be increased by the 

4 amount by which it reduces its excess tax reserve 

5 more rapidly than permitted under a normalization 

6 method of accounting. 

7 Subtitle B—Cost Recovery 

8 SEC. 3101. INCREASED EXPENSING. 

9 (a) 100 PERCENT EXPENSING.—Section 168(k)(1)(A) 

10 is amended by striking ‘‘50 percent’’ and inserting ‘‘100 

11 percent’’. 

12 (b) EXTENSION THROUGH JANUARY 1, 2023.—Section 

13 168(k)(2) is amended— 

14 (1) in subparagraph (A)(iii), by striking ‘‘Janu15 ary 1, 2020’’ and inserting ‘‘January 1, 2023’’, 

16 (2) in subparagraph (B)(i)(II), by striking 

17 ‘‘January 1, 2021’’ and inserting ‘‘January 1, 2024’’, 

18 (3) in subparagraph (B)(i)(III), by striking 

19 ‘‘January 1, 2020’’ and inserting ‘‘January 1, 2023’’, 

20 (4) in subparagraph (B)(ii), by striking ‘‘Janu21 ary 1, 2020’’ in each place it appears and inserting 

22 ‘‘January 1, 2023’’, and 

23 (5) in subparagraph (E)(i), by striking ‘‘Janu24 ary 1, 2020’’ and replacing it with ‘‘January 1, 

25 2023’’. 


lotter on DSKBCFDHB2PROD with BILLS
198 

•HR 1 RH

1 (c) APPLICATION TO USED PROPERTY.— 

2 (1) IN GENERAL.—Section 168(k)(2)(A)(ii) is 

3 amended to read as follows: 

4 ‘‘(ii) the original use of which begins 

5 with the taxpayer or the acquisition of 

6 which by the taxpayer meets the require7 ments of clause (ii) of subparagraph (E), 

8 and’’. 

9 (2) ACQUISITION REQUIREMENTS.—Section 

10 168(k)(2)(E)(ii) is amended to read as follows: 

11 ‘‘(ii) ACQUISITION REQUIREMENTS.— 

12 An acquisition of property meets the re13 quirements of this clause if— 

14 ‘‘(I) such property was not used 

15 by the taxpayer at any time prior to 

16 such acquisition, and 

17 ‘‘(II) the acquisition of such prop18 erty meets the requirements of para19 graphs (2)(A), (2)(B), (2)(C), and (3) 

20 of section 179(d).’’, 

21 (3) ANTI-ABUSE RULES.—Section 168(k)(2)(E) 

22 is further amended by amending clause (iii)(I) to 

23 read as follows: 


lotter on DSKBCFDHB2PROD with BILLS
199 

•HR 1 RH

1 ‘‘(I) property is used by a lessor 

2 of such property and such use is the 

3 lessor’s first use of such property,’’. 

4 (d) EXCEPTION FOR CERTAIN TRADES AND BUSI5 NESSES NOT SUBJECT TO LIMITATION ON INTEREST EX6 PENSE.—Section 168(k)(2), as amended by section 2001, is 

7 amended by inserting after subparagraph (F) the following 

8 new subparagraph: 

9 ‘‘(G) EXCEPTION FOR PROPERTY OF CER10 TAIN BUSINESSES NOT SUBJECT TO LIMITATION

11 ON INTEREST EXPENSE.—The term ‘qualified 

12 property’ shall not include any property used 

13 in— 

14 ‘‘(i) a trade or business described in 

15 subparagraph (B) or (C) of section 

16 163(j)(7), or 

17 ‘‘(ii) a trade or business that has had 

18 floor plan financing indebtedness (as de19 fined in paragraph (9) of section 163(j)), if 

20 the floor plan financing interest related to 

21 such indebtedness was taken into account 

22 under paragraph (1)(C) of such section.’’. 

23 (e) COORDINATION WITH SECTION 280F.—Section 

24 168(k)(2)(F) is amended— 


lotter on DSKBCFDHB2PROD with BILLS
200 

•HR 1 RH

1 (1) by striking ‘‘$8,000’’ in clauses (i) and (iii) 

2 and inserting ‘‘$16,000’’, and 

3 (2) in clause (iii)— 

4 (A) by striking ‘‘placed in service by the 

5 taxpayer after December 31, 2017’’ and inserting 

6 ‘‘acquired by the taxpayer before September 28, 

7 2017, and placed in service by the taxpayer after 

8 September 27, 2017’’, and 

9 (B) by redesignating subclauses (I) and (II) 

10 as subclauses (II) and (III) respectively, and in11 serting before clause (II), as so redesignated, the 

12 following new subclause: 

13 ‘‘(I) in the case of a passenger 

14 automobile placed in service before 

15 January 1, 2018, ‘$8,000’,’’. 

16 (f) CONFORMING AMENDMENTS.— 

17 (1) Section 168(k)(2)(B)(i)(III), as amended, is 

18 amended by inserting ‘‘binding’’ before ‘‘contract’’. 

19 (2) Section 168(k)(5) is amended by— 

20 (A) by striking ‘‘January 1, 2020’’ in sub21 paragraph (A) and inserting ‘‘January 1, 

22 2023’’, 

23 (B) by striking ‘‘50 percent’’ in subpara24 graph (A)(i) and inserting ‘‘100 percent’’, and 

25 (C) by striking subparagraph (F). 


lotter on DSKBCFDHB2PROD with BILLS
201 

•HR 1 RH

1 (3) Section 168(k)(6) is amended to read as fol2 lows: 

3 ‘‘(6) PHASE DOWN.—In the case of qualified 

4 property acquired by the taxpayer before September 

5 28, 2017, and placed in service by the taxpayer after 

6 September 27, 2017, paragraph (1)(A) shall be ap7 plied by substituting for ‘100 percent’— 

8 ‘‘(A) ‘50 percent’ in the case of— 

9 ‘‘(i) property placed in service before 

10 January 1, 2018, and 

11 ‘‘(ii) property described in subpara12 graph (B) or (C) of paragraph (2) which is 

13 placed in service in 2018, 

14 ‘‘(B) ‘40 percent’ in the case of— 

15 ‘‘(i) property placed in service in 2018 

16 (other than property described in subpara17 graph (B) or (C) of paragraph (2)), and 

18 ‘‘(ii) property described in subpara19 graph (B) or (C) of paragraph (2) which is 

20 placed in service in 2019, and 

21 ‘‘(C) ‘30 percent’ in the case of— 

22 ‘‘(i) property placed in service in 2019 

23 (other than property described in subpara24 graph (B) or (C) of paragraph (2)), and 


lotter on DSKBCFDHB2PROD with BILLS
202 

•HR 1 RH

1 ‘‘(ii) property described in subpara2 graph (B) or (C) of paragraph (2) which is 

3 placed in service in 2020.’’. 

4 (4) The heading of section 168(k) is amended by 

5 striking ‘‘SPECIAL ALLOWANCE FOR CERTAIN PROP6 ERTY ACQUIRED AFTER DECEMBER 31, 2007, AND

7 BEFORE JANUARY 1, 2020’’ and inserting ‘‘FULL EX8 PENSING OF CERTAIN PROPERTY’’. 

9 (5) Section 460(c)(6)(B)(ii) is amended by strik10 ing ‘‘January 1, 2020 (January 1, 2021 in the case 

11 of property described in section 168(k)(2)(B))’’ and 

12 inserting ‘‘January 1, 2023 (January 1, 2024 in the 

13 case of property described in section 168(k)(2)(B))’’. 

14 (g) EFFECTIVE DATE.— 

15 (1) IN GENERAL.—Except at provided by para16 graph (2), the amendments made by this section shall 

17 apply to property which— 

18 (A) is acquired after September 27, 2017, 

19 and 

20 (B) is placed in service after such date. 

21 For purposes of the preceding sentence, property shall 

22 not be treated as acquired after the date on which a 

23 written binding contract is entered into for such ac24 quisition. 


lotter on DSKBCFDHB2PROD with BILLS
203 

•HR 1 RH

1 (2) SPECIFIED PLANTS.—The amendments made 

2 by subsection (f)(2) shall apply to specified plants 

3 planted or grafted after September 27, 2017. 

4 (3) TRANSITION RULE.—In the case of any tax5 payer’s first taxable year ending after September 27, 

6 2017, the taxpayer may elect (at such time and in 

7 such form and manner as the Secretary of the Treas8 ury, or his designee, may provide) to apply section 

9 168 of the Internal Revenue Code of 1986 without re10 gard to the amendments made by this section. 

11 (4) LIMITATION ON NET OPERATING LOSS

12 CARRYBACKS ATTRIBUTABLE TO FULL EXPENSING.— 

13 In the case of any taxable year which includes any 

14 portion of the period beginning on September 28, 

15 2017, and ending on December 31, 2017, the amount 

16 of any net operating loss for such taxable year which 

17 may be treated as a net operating loss carryback (in18 cluding any such carryback attributable to any speci19 fied liability loss under section 172(b)(1)(C), any cor20 porate equity reduction interest loss under section 

21 172(b)(1)(D), any eligible loss under section 

22 172(b)(1)(E), and any farming loss under section 

23 172(b)(1)(F)) shall be determined without regard to 

24 the amendments made by this section. For purposes 

25 of this paragraph, terms which are used in section 


lotter on DSKBCFDHB2PROD with BILLS
204 

•HR 1 RH

1 172 of the Internal Revenue Code of 1986 (determined 

2 without regard to the amendments made by section 

3 3302) shall have the same meaning as when used in 

4 such section. 

5 Subtitle C—Small Business Reforms 

6 SEC. 3201. EXPANSION OF SECTION 179 EXPENSING. 

7 (a) INCREASED DOLLAR LIMITATIONS.— 

8 (1) IN GENERAL.—Section 179(b) is amended— 

9 (A) by inserting ‘‘($5,000,000, in the case of 

10 taxable years beginning before January 1, 

11 2023)’’ after ‘‘$500,000’’ in paragraph (1), and 

12 (B) by inserting ‘‘($20,000,000, in the case 

13 of taxable years beginning before January 1, 

14 2023)’’ after ‘‘$2,000,000’’ in paragraph (2). 

15 (2) INFLATION ADJUSTMENT.—Section 179(b)(6) 

16 is amended to read as follows: 

17 ‘‘(6) INFLATION ADJUSTMENT.— 

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

19 year beginning after 2015 (2018 in the case of 

20 the $5,000,000 and $20,000,000 amounts in sub21 section (b)), each dollar amount in subsection (b) 

22 shall be increased by an amount equal to such 

23 dollar amount multiplied by— 

24 ‘‘(i) in the case of the $500,000 and 

25 $2,000,000 amounts in subsection (b), the 


lotter on DSKBCFDHB2PROD with BILLS
205 

•HR 1 RH

1 cost-of-living adjustment determined under 

2 section 1(c)(2) for the calendar year in 

3 which the taxable year begins, determined 

4 by substituting ‘calendar year 2014’ for 

5 ‘calendar year 2016’ in subparagraph 

6 (A)(ii) thereof, and 

7 ‘‘(ii) in the case of the $5,000,000 and 

8 $20,000,000 amounts in subsection (b), the 

9 cost-of-living adjustment determined under 

10 section 1(c)(2) for the calendar year in 

11 which the taxable year begins, determined 

12 by substituting ‘calendar year 2017’ for 

13 ‘calendar year 2016’ in subparagraph 

14 (A)(ii) thereof. 

15 ‘‘(B) ROUNDING.—The amount of any in16 crease under subparagraph (A) shall be rounded 

17 to the nearest multiple of $10,000 ($100,000 in 

18 the case of the $5,000,000 and $20,000,000 

19 amounts in subsection (b)).’’. 

20 (b) APPLICATION TO QUALIFIED ENERGY EFFICIENT

21 HEATING AND AIR-CONDITIONING PROPERTY.— 

22 (1) IN GENERAL.—Section 179(f)(2) is amended 

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

24 striking the period at the end of subparagraph (C) 


lotter on DSKBCFDHB2PROD with BILLS
206 

•HR 1 RH

1 and inserting ‘‘, and’’, and by adding at the end the 

2 following new subparagraph: 

3 ‘‘(D) qualified energy efficient heating and 

4 air-conditioning property.’’. 

5 (2) QUALIFIED ENERGY EFFICIENT HEATING AND

6 AIR-CONDITIONING PROPERTY.—Section 179(f) is 

7 amended by adding at the end the following new 

8 paragraph: 

9 ‘‘(3) QUALIFIED ENERGY EFFICIENT HEATING

10 AND AIR-CONDITIONING PROPERTY.—For purposes of 

11 this subsection— 

12 ‘‘(A) IN GENERAL.—The term ‘qualified en13 ergy efficient heating and air-conditioning prop14 erty’ means any section 1250 property— 

15 ‘‘(i) with respect to which depreciation 

16 (or amortization in lieu of depreciation) is 

17 allowable, 

18 ‘‘(ii) which is installed as part of a 

19 building’s heating, cooling, ventilation, or 

20 hot water system, and 

21 ‘‘(iii) which is within the scope of 

22 Standard 90.1–2007 or any successor stand23 ard. 

24 ‘‘(B) STANDARD 90.1–2007.—The term 

25 ‘Standard 90.1–2007’ means Standard 90.1– 


lotter on DSKBCFDHB2PROD with BILLS
207 

•HR 1 RH

1 2007 of the American Society of Heating, Refrig2 erating and Air-Conditioning Engineers and the 

3 Illuminating Engineering Society of North 

4 America (as in effect on the day before the date 

5 of the adoption of Standard 90.1–2010 of such 

6 Societies).’’. 

7 (c) EFFECTIVE DATE.— 

8 (1) INCREASED DOLLAR LIMITATIONS.—The 

9 amendments made by subsection (a) shall apply to 

10 taxable years beginning after December 31, 2017. 

11 (2) APPLICATION TO QUALIFIED ENERGY EFFI12 CIENT HEATING AND AIR-CONDITIONING PROPERTY.— 

13 The amendments made by subsection (b) shall apply 

14 to property acquired and placed in service after No15 vember 2, 2017. For purposes of the preceding sen16 tence, property shall not be treated as acquired after 

17 the date on which a written binding contract is en18 tered into for such acquisition. 

19 SEC. 3202. SMALL BUSINESS ACCOUNTING METHOD RE20 FORM AND SIMPLIFICATION. 

21 (a) MODIFICATION OF LIMITATION ON CASH METHOD

22 OF ACCOUNTING.— 

23 (1) INCREASED LIMITATION.—So much of section 

24 448(c) as precedes paragraph (2) is amended to read 

25 as follows: 


lotter on DSKBCFDHB2PROD with BILLS
208 

•HR 1 RH

1 ‘‘(c) GROSS RECEIPTS TEST.—For purposes of this 

2 section— 

3 ‘‘(1) IN GENERAL.—A corporation or partnership 

4 meets the gross receipts test of this subsection for any 

5 taxable year if the average annual gross receipts of 

6 such entity for the 3-taxable-year period ending with 

7 the taxable year which precedes such taxable year does 

8 not exceed $25,000,000.’’. 

9 (2) APPLICATION OF EXCEPTION ON ANNUAL

10 BASIS.—Section 448(b)(3) is amended to read as fol11 lows: 

12 ‘‘(3) ENTITIES WHICH MEET GROSS RECEIPTS

13 TEST.—Paragraphs (1) and (2) of subsection (a) shall 

14 not apply to any corporation or partnership for any 

15 taxable year if such entity (or any predecessor) meets 

16 the gross receipts test of subsection (c) for such taxable 

17 year.’’. 

18 (3) INFLATION ADJUSTMENT.—Section 448(c) is 

19 amended by adding at the end the following new 

20 paragraph: 

21 ‘‘(4) ADJUSTMENT FOR INFLATION.—In the case 

22 of any taxable year beginning after December 31, 

23 2018, the dollar amount in paragraph (1) shall be in24 creased by an amount equal to— 

25 ‘‘(A) such dollar amount, multiplied by 


lotter on DSKBCFDHB2PROD with BILLS
209 

•HR 1 RH

1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 1(c)(2) for the calendar 

3 year in which the taxable year begins, by sub4 stituting ‘calendar year 2017’ for ‘calendar year 

5 2016’ in subparagraph (A)(ii) thereof. 

6 If any amount as increased under the preceding sen7 tence is not a multiple of $1,000,000, such amount 

8 shall be rounded to the nearest multiple of 

9 $1,000,000.’’. 

10 (4) COORDINATION WITH SECTION 481.—Section 

11 448(d)(7) is amended to read as follows: 

12 ‘‘(7) COORDINATION WITH SECTION 481.—Any 

13 change in method of accounting made pursuant to 

14 this section shall be treated for purposes of section 481 

15 as initiated by the taxpayer and made with the con16 sent of the Secretary.’’. 

17 (5) APPLICATION OF EXCEPTION TO CORPORA18 TIONS ENGAGED IN FARMING.— 

19 (A) IN GENERAL.—Section 447(c) is amend20 ed— 

21 (i) by inserting ‘‘for any taxable year’’ 

22 after ‘‘not being a corporation’’ in the mat23 ter preceding paragraph (1), and 

24 (ii) by amending paragraph (2) to 

25 read as follows: 


lotter on DSKBCFDHB2PROD with BILLS
210 

•HR 1 RH

1 ‘‘(2) a corporation which meets the gross receipts 

2 test of section 448(c) for such taxable year.’’. 

3 (B) COORDINATION WITH SECTION 481.— 

4 Section 447(f) is amended to read as follows: 

5 ‘‘(f) COORDINATION WITH SECTION 481.—Any change 

6 in method of accounting made pursuant to this section shall 

7 be treated for purposes of section 481 as initiated by the 

8 taxpayer and made with the consent of the Secretary.’’. 

9 (C) CONFORMING AMENDMENTS.—Section 

10 447 is amended— 

11 (i) by striking subsections (d), (e), (h), 

12 and (i), and 

13 (ii) by redesignating subsections (f) 

14 and (g) (as amended by subparagraph (B)) 

15 as subsections (d) and (e), respectively. 

16 (b) EXEMPTION FROM UNICAP REQUIREMENTS.— 

17 (1) IN GENERAL.—Section 263A is amended by 

18 redesignating subsection (i) as subsection (j) and by 

19 inserting after subsection (h) the following new sub20 section: 

21 ‘‘(i) EXEMPTION FOR CERTAIN SMALL BUSINESSES.— 

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

23 (other than a tax shelter prohibited from using the 

24 cash receipts and disbursements method of accounting 

25 under section 448(a)(3)) which meets the gross reVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00210 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
211 

•HR 1 RH

1 ceipts test of section 448(c) for any taxable year, this 

2 section shall not apply with respect to such taxpayer 

3 for such taxable year. 

4 ‘‘(2) APPLICATION OF GROSS RECEIPTS TEST TO

5 INDIVIDUALS, ETC.—In the case of any taxpayer 

6 which is not a corporation or a partnership, the gross 

7 receipts test of section 448(c) shall be applied in the 

8 same manner as if each trade or business of such tax9 payer were a corporation or partnership. 

10 ‘‘(3) COORDINATION WITH SECTION 481.—Any 

11 change in method of accounting made pursuant to 

12 this subsection shall be treated for purposes of section 

13 481 as initiated by the taxpayer and made with the 

14 consent of the Secretary.’’. 

15 (2) CONFORMING AMENDMENT.—Section 

16 263A(b)(2) is amended to read as follows: 

17 ‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real 

18 or personal property described in section 1221(a)(1) 

19 which is acquired by the taxpayer for resale.’’. 

20 (c) EXEMPTION FROM INVENTORIES.—Section 471 is 

21 amended by redesignating subsection (c) as subsection (d) 

22 and by inserting after subsection (b) the following new sub23 section: 

24 ‘‘(c) EXEMPTION FOR CERTAIN SMALL BUSINESSES.— 


lotter on DSKBCFDHB2PROD with BILLS
212 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—In the case of any taxpayer 

2 (other than a tax shelter prohibited from using the 

3 cash receipts and disbursements method of accounting 

4 under section 448(a)(3)) which meets the gross re5 ceipts test of section 448(c) for any taxable year— 

6 ‘‘(A) subsection (a) shall not apply with re7 spect to such taxpayer for such taxable year, and 

8 ‘‘(B) the taxpayer’s method of accounting 

9 for inventory for such taxable year shall not be 

10 treated as failing to clearly reflect income if such 

11 method either— 

12 ‘‘(i) treats inventory as non-incidental 

13 materials and supplies, or 

14 ‘‘(ii) conforms to such taxpayer’s meth15 od of accounting reflected in an applicable 

16 financial statement of the taxpayer with re17 spect to such taxable year or, if the tax18 payer does not have any applicable finan19 cial statement with respect to such taxable 

20 year, the books and records of the taxpayer 

21 prepared in accordance with the taxpayer’s 

22 accounting procedures. 

23 ‘‘(2) APPLICABLE FINANCIAL STATEMENT.—For 

24 purposes of this subsection, the term ‘applicable fi25 nancial statement’ means— 


lotter on DSKBCFDHB2PROD with BILLS
213 

•HR 1 RH

1 ‘‘(A) a financial statement which is cer2 tified as being prepared in accordance with gen3 erally accepted accounting principles and which 

4 is— 

5 ‘‘(i) a 10-K (or successor form), or an6 nual statement to shareholders, required to 

7 be filed by the taxpayer with the United 

8 States Securities and Exchange Commis9 sion, 

10 ‘‘(ii) an audited financial statement of 

11 the taxpayer which is used for— 

12 ‘‘(I) credit purposes, 

13 ‘‘(II) reporting to shareholders, 

14 partners, or other proprietors, or to 

15 beneficiaries, or 

16 ‘‘(III) any other substantial 

17 nontax purpose, 

18 but only if there is no statement of the tax19 payer described in clause (i), or 

20 ‘‘(iii) filed by the taxpayer with any 

21 other Federal or State agency for nontax 

22 purposes, but only if there is no statement 

23 of the taxpayer described in clause (i) or 

24 (ii), or 


lotter on DSKBCFDHB2PROD with BILLS
214 

•HR 1 RH

1 ‘‘(B) a financial statement of the taxpayer 

2 which— 

3 ‘‘(i) is used for a purpose described in 

4 subclause (I), (II), or (III) of subparagraph 

5 (A)(ii), or 

6 ‘‘(ii) filed by the taxpayer with any 

7 regulatory or governmental body (whether 

8 domestic or foreign) specified by the Sec9 retary, 

10 but only if there is no statement of the taxpayer 

11 described in subparagraph (A). 

12 ‘‘(3) APPLICATION OF GROSS RECEIPTS TEST TO

13 INDIVIDUALS, ETC.—In the case of any taxpayer 

14 which is not a corporation or a partnership, the gross 

15 receipts test of section 448(c) shall be applied in the 

16 same manner as if each trade or business of such tax17 payer were a corporation or partnership. 

18 ‘‘(4) COORDINATION WITH SECTION 481.—Any 

19 change in method of accounting made pursuant to 

20 this subsection shall be treated for purposes of section 

21 481 as initiated by the taxpayer and made with the 

22 consent of the Secretary.’’. 

23 (d) EXEMPTION FROM PERCENTAGE COMPLETION FOR

24 LONG-TERM CONTRACTS.— 


lotter on DSKBCFDHB2PROD with BILLS
215 

•HR 1 RH

1 (1) IN GENERAL.—Section 460(e)(1)(B) is 

2 amended— 

3 (A) by inserting ‘‘(other than a tax shelter 

4 prohibited from using the cash receipts and dis5 bursements method of accounting under section 

6 448(a)(3))’’ after ‘‘taxpayer’’ in the matter pre7 ceding clause (i), and 

8 (B) by amending clause (ii) to read as fol9 lows: 

10 ‘‘(ii) who meets the gross receipts test 

11 of section 448(c) for the taxable year in 

12 which such contract is entered into.’’. 

13 (2) CONFORMING AMENDMENTS.—Section 460(e) 

14 is amended by striking paragraphs (2) and (3), by re15 designating paragraphs (4), (5), and (6) as para16 graphs (3), (4), and (5), respectively, and by insert17 ing after paragraph (1) the following new paragraph: 

18 ‘‘(2) RULES RELATED TO GROSS RECEIPTS

19 TEST.— 

20 ‘‘(A) APPLICATION OF GROSS RECEIPTS

21 TEST TO INDIVIDUALS, ETC.—For purposes of 

22 paragraph (1)(B)(ii), in the case of any tax23 payer which is not a corporation or a partner24 ship, the gross receipts test of section 448(c) shall 

25 be applied in the same manner as if each trade 


lotter on DSKBCFDHB2PROD with BILLS
216 

•HR 1 RH

1 or business of such taxpayer were a corporation 

2 or partnership. 

3 ‘‘(B) COORDINATION WITH SECTION 481.— 

4 Any change in method of accounting made pur5 suant to paragraph (1)(B)(ii) shall be treated as 

6 initiated by the taxpayer and made with the 

7 consent of the Secretary. Such change shall be ef8 fected on a cut-off basis for all similarly classi9 fied contracts entered into on or after the year 

10 of change.’’. 

11 (e) EFFECTIVE DATE.— 

12 (1) IN GENERAL.—Except as otherwise provided 

13 in this subsection, the amendments made by this sec14 tion shall apply to taxable years beginning after De15 cember 31, 2017. 

16 (2) PRESERVATION OF SUSPENSE ACCOUNT

17 RULES WITH RESPECT TO ANY EXISTING SUSPENSE

18 ACCOUNTS.—So much of the amendments made by 

19 subsection (a)(5)(C) as relate to section 447(i) of the 

20 Internal Revenue Code of 1986 shall not apply with 

21 respect to any suspense account established under 

22 such section before the date of the enactment of this 

23 Act. 

24 (3) EXEMPTION FROM PERCENTAGE COMPLETION

25 FOR LONG-TERM CONTRACTS.—The amendments made 


lotter on DSKBCFDHB2PROD with BILLS
217 

•HR 1 RH

1 by subsection (d) shall apply to contracts entered into 

2 after December 31, 2017, in taxable years ending 

3 after such date. 

4 SEC. 3203. SMALL BUSINESS EXCEPTION FROM LIMITATION 

5 ON DEDUCTION OF BUSINESS INTEREST. 

6 (a) IN GENERAL.—Section 163(j)(2), as amended by 

7 section 3301, is amended to read as follows: 

8 ‘‘(2) EXEMPTION FOR CERTAIN SMALL BUSI9 NESSES.—In the case of any taxpayer (other than a 

10 tax shelter prohibited from using the cash receipts 

11 and disbursements method of accounting under sec12 tion 448(a)(3)) which meets the gross receipts test of 

13 section 448(c) for any taxable year, paragraph (1) 

14 shall not apply to such taxpayer for such taxable 

15 year. In the case of any taxpayer which is not a cor16 poration or a partnership, the gross receipts test of 

17 section 448(c) shall be applied in the same manner as 

18 if such taxpayer were a corporation or partnership.’’. 

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

20 section shall apply to taxable years beginning after Decem21 ber 31, 2017. 

22 SEC. 3204. MODIFICATION OF TREATMENT OF S CORPORA23 TION CONVERSIONS TO C CORPORATIONS. 

24 (a) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION

25 FROM S CORPORATION TO C CORPORATION.—Section 481 


lotter on DSKBCFDHB2PROD with BILLS
218 

•HR 1 RH

1 is amended by adding at the end the following new sub2 section: 

3 ‘‘(d) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION

4 FROM S CORPORATION TO C CORPORATION.— 

5 ‘‘(1) IN GENERAL.—In the case of an eligible ter6 minated S corporation, any adjustment required by 

7 subsection (a)(2) which is attributable to such cor8 poration’s revocation described in paragraph 

9 (2)(A)(ii) shall be taken into account ratably during 

10 the 6-taxable year period beginning with the year of 

11 change. 

12 ‘‘(2) ELIGIBLE TERMINATED S CORPORATION.— 

13 For purposes of this subsection, the term ‘eligible ter14 minated S corporation’ means any C corporation— 

15 ‘‘(A) which— 

16 ‘‘(i) was an S corporation on the day 

17 before the date of the enactment of the Tax 

18 Cuts and Jobs Act, and 

19 ‘‘(ii) during the 2-year period begin20 ning on the date of such enactment makes 

21 a revocation of its election under section 

22 1362(a), and 

23 ‘‘(B) the owners of the stock of which, deter24 mined on the date such revocation is made, are 


lotter on DSKBCFDHB2PROD with BILLS
219 

•HR 1 RH

1 the same owners (and in identical proportions) 

2 as on the date of such enactment.’’. 

3 (b) CASH DISTRIBUTIONS FOLLOWING POST-TERMI4 NATION TRANSITION PERIOD FROM S CORPORATION STA5 TUS.—Section 1371 is amended by adding at the end the 

6 following new subsection: 

7 ‘‘(f) CASH DISTRIBUTIONS FOLLOWING POST-TERMI8 NATION TRANSITION PERIOD.—In the case of a distribution 

9 of money by an eligible terminated S corporation (as de10 fined in section 481(d)) after the post-termination transi11 tion period, the accumulated adjustments account shall be 

12 allocated to such distribution, and the distribution shall be 

13 chargeable to accumulated earnings and profits, in the same 

14 ratio as the amount of such accumulated adjustments ac15 count bears to the amount of such accumulated earnings 

16 and profits.’’. 

17 Subtitle D—Reform of Business18 related Exclusions, Deductions, etc. 

19 SEC. 3301. INTEREST. 

20 (a) IN GENERAL.—Section 163(j) is amended to read 

21 as follows: 

22 ‘‘(j) LIMITATION ON BUSINESS INTEREST.— 

23 ‘‘(1) IN GENERAL.—In the case of any taxpayer 

24 for any taxable year, the amount allowed as a deducVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00219 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
220 

•HR 1 RH

1 tion under this chapter for business interest shall not 

2 exceed the sum of— 

3 ‘‘(A) the business interest income of such 

4 taxpayer for such taxable year, 

5 ‘‘(B) 30 percent of the adjusted taxable in6 come of such taxpayer for such taxable year, plus 

7 ‘‘(C) the floor plan financing interest of 

8 such taxpayer for such taxable year. 

9 The amount determined under subparagraph (B) 

10 (after any increases in such amount under paragraph 

11 (3)(A)(iii)) shall not be less than zero. 

12 ‘‘(2) EXEMPTION FOR CERTAIN SMALL BUSI13 NESSES.—For exemption for certain small businesses, 

14 see the amendment made by section 3203 of the Tax 

15 Cuts and Jobs Act. 

16 ‘‘(3) APPLICATION TO PARTNERSHIPS, ETC.— 

17 ‘‘(A) IN GENERAL.—In the case of any part18 nership— 

19 ‘‘(i) this subsection shall be applied at 

20 the partnership level and any deduction for 

21 business interest shall be taken into account 

22 in determining the non-separately stated 

23 taxable income or loss of the partnership, 

24 ‘‘(ii) the adjusted taxable income of 

25 each partner of such partnership shall be 


lotter on DSKBCFDHB2PROD with BILLS
221 

•HR 1 RH

1 determined without regard to such partner’s 

2 distributive share of the non-separately stat3 ed taxable income or loss of such partner4 ship, and 

5 ‘‘(iii) the amount determined under 

6 paragraph (1)(B) with respect to each part7 ner of such partnership shall be increased 

8 by such partner’s distributive share of such 

9 partnership’s excess amount. 

10 ‘‘(B) EXCESS AMOUNT.—The term ‘excess 

11 amount’ means, with respect to any partnership, 

12 the excess (if any) of— 

13 ‘‘(i) 30 percent of the adjusted taxable 

14 income of the partnership, over 

15 ‘‘(ii) the amount (if any) by which the 

16 business interest of the partnership, reduced 

17 by floor plan financing interest, exceeds the 

18 business interest income of the partnership. 

19 ‘‘(C) APPLICATION TO S CORPORATIONS.— 

20 Rules similar to the rules of subparagraphs (A) 

21 and (B) shall apply with respect to any S cor22 poration and its shareholders. 

23 ‘‘(4) BUSINESS INTEREST.—For purposes of this 

24 subsection, the term ‘business interest’ means any in25 terest paid or accrued on indebtedness properly alloVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00221 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
222 

•HR 1 RH

1 cable to a trade or business. Such term shall not in2 clude investment interest (within the meaning of sub3 section (d)). 

4 ‘‘(5) BUSINESS INTEREST INCOME.—For pur5 poses of this subsection, the term ‘business interest in6 come’ means the amount of interest includible in the 

7 gross income of the taxpayer for the taxable year 

8 which is properly allocable to a trade or business. 

9 Such term shall not include investment income (with10 in the meaning of subsection (d)). 

11 ‘‘(6) ADJUSTED TAXABLE INCOME.—For pur12 poses of this subsection, the term ‘adjusted taxable in13 come’ means the taxable income of the taxpayer— 

14 ‘‘(A) computed without regard to— 

15 ‘‘(i) any item of income, gain, deduc16 tion, or loss which is not properly allocable 

17 to a trade or business, 

18 ‘‘(ii) any business interest or business 

19 interest income, 

20 ‘‘(iii) the amount of any net operating 

21 loss deduction under section 172, and 

22 ‘‘(iv) any deduction allowable for de23 preciation, amortization, or depletion, and 

24 ‘‘(B) computed with such other adjustments 

25 as the Secretary may provide. 


lotter on DSKBCFDHB2PROD with BILLS
223 

•HR 1 RH

1 ‘‘(7) TRADE OR BUSINESS.—For purposes of this 

2 subsection, the term ‘trade or business’ shall not in3 clude— 

4 ‘‘(A) the trade or business of performing 

5 services as an employee, 

6 ‘‘(B) a real property trade or business (as 

7 such term is defined in section 469(c)(7)(C)), or 

8 ‘‘(C) the trade or business of the furnishing 

9 or sale of— 

10 ‘‘(i) electrical energy, water, or sewage 

11 disposal services, 

12 ‘‘(ii) gas or steam through a local dis13 tribution system, or 

14 ‘‘(iii) transportation of gas or steam 

15 by pipeline, 

16 if the rates for such furnishing or sale, as the 

17 case may be, have been established or approved 

18 by a State or political subdivision thereof, by 

19 any agency or instrumentality of the United 

20 States, or by a public service or public utility 

21 commission or other similar body of any State 

22 or political subdivision thereof. 

23 ‘‘(8) CARRYFORWARD OF DISALLOWED INTER24 EST.—For carryforward of interest disallowed under 

25 paragraph (1), see subsection (o). 


lotter on DSKBCFDHB2PROD with BILLS
224 

•HR 1 RH

1 ‘‘(9) FLOOR PLAN FINANCING INTEREST DE2 FINED.—For purposes of this subsection— 

3 ‘‘(A) IN GENERAL.—The term ‘floor plan fi4 nancing interest’ means interest paid or accrued 

5 on floor plan financing indebtedness. 

6 ‘‘(B) FLOOR PLAN FINANCING INDEBTED7 NESS.—The term ‘floor plan financing indebted8 ness’ means indebtedness— 

9 ‘‘(i) used to finance the acquisition of 

10 motor vehicles held for sale to retail cus11 tomers, and 

12 ‘‘(ii) secured by the inventory so ac13 quired. 

14 ‘‘(C) MOTOR VEHICLE.—The term ‘motor 

15 vehicle’ means a motor vehicle that is any of the 

16 following: 

17 ‘‘(i) An automobile. 

18 ‘‘(ii) A truck. 

19 ‘‘(iii) A recreational vehicle. 

20 ‘‘(iv) A motorcycle. 

21 ‘‘(v) A boat. 

22 ‘‘(vi) Farm machinery or equipment. 

23 ‘‘(vii) Construction machinery or 

24 equipment.’’. 


lotter on DSKBCFDHB2PROD with BILLS
225 

•HR 1 RH

1 (b) CARRYFORWARD OF DISALLOWED BUSINESS IN2 TEREST.—Section 163, after amendment by section 4302(a) 

3 and before amendment by section 4302(b), is amended by 

4 inserting after subsection (n) the following new subsection: 

5 ‘‘(o) CARRYFORWARD OF DISALLOWED BUSINESS IN6 TEREST.—The amount of any business interest not allowed 

7 as a deduction for any taxable year by reason of subsection 

8 (j) shall be treated as business interest paid or accrued in 

9 the succeeding taxable year. Business interest paid or ac10 crued in any taxable year (determined without regard to 

11 the preceding sentence) shall not be carried past the 5th tax12 able year following such taxable year, determined by treat13 ing business interest as allowed as a deduction on a first14 in, first-out basis.’’. 

15 (c) TREATMENT OF CARRYFORWARD OF DISALLOWED

16 BUSINESS INTEREST IN CERTAIN CORPORATE ACQUISI17 TIONS.— 

18 (1) IN GENERAL.—Section 381(c) is amended by 

19 inserting after paragraph (19) the following new 

20 paragraph: 

21 ‘‘(20) CARRYFORWARD OF DISALLOWED INTER22 EST.—The carryover of disallowed interest described 

23 in section 163(o) to taxable years ending after the 

24 date of distribution or transfer.’’. 


lotter on DSKBCFDHB2PROD with BILLS
226 

•HR 1 RH

1 (2) APPLICATION OF LIMITATION.—Section 

2 382(d) is amended by adding at the end the following 

3 new paragraph: 

4 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS5 ALLOWED INTEREST.—The term ‘pre-change loss’ 

6 shall include any carryover of disallowed interest de7 scribed in section 163(o) under rules similar to the 

8 rules of paragraph (1).’’. 

9 (3) CONFORMING AMENDMENT.—Section 

10 382(k)(1) is amended by inserting after the first sen11 tence the following: ‘‘Such term shall include any cor12 poration entitled to use a carryforward of disallowed 

13 interest described in section 381(c)(20).’’ 

14 (d) EFFECTIVE DATE.—The amendments made by this 

15 section shall apply to taxable years beginning after Decem16 ber 31, 2017. 

17 SEC. 3302. MODIFICATION OF NET OPERATING LOSS DE18 DUCTION. 

19 (a) INDEFINITE CARRYFORWARD OF NET OPERATING

20 LOSSES.—Section 172(b)(1)(A)(ii) is amended by striking 

21 ‘‘to each of the 20 taxable years’’ and inserting ‘‘to each 

22 taxable year’’. 

23 (b) REPEAL OF NET OPERATING LOSS CARRYBACKS

24 OTHER THAN 1-YEAR CARRYBACK OF ELIGIBLE DISASTER

25 LOSSES.— 


lotter on DSKBCFDHB2PROD with BILLS
227 

•HR 1 RH

1 (1) IN GENERAL.—Section 172(b)(1)(A)(i) is 

2 amended to read as follows: 

3 ‘‘(i) in the case of any portion of a net 

4 operating loss for the taxable year which is 

5 an eligible disaster loss with respect to the 

6 taxpayer, shall be a net operating loss 

7 carryback to the taxable year preceding the 

8 taxable year of such loss, and’’. 

9 (2) CONFORMING AMENDMENTS.— 

10 (A) Section 172(b)(1) is amended by strik11 ing subparagraphs (B) through (F) and insert12 ing the following: 

13 ‘‘(B) ELIGIBLE DISASTER LOSS.— 

14 ‘‘(i) IN GENERAL.—For purposes of 

15 subparagraph (A)(i), the term ‘eligible dis16 aster loss’ means— 

17 ‘‘(I) in the case of a taxpayer 

18 which is a small business, net oper19 ating losses attributable to federally de20 clared disasters (as defined by section 

21 165(i)(5)), and 

22 ‘‘(II) in the case of a taxpayer en23 gaged in the trade or business of farm24 ing, net operating losses attributable to 

25 such federally declared disasters. 


lotter on DSKBCFDHB2PROD with BILLS
228 

•HR 1 RH

1 ‘‘(ii) SMALL BUSINESS.—For purposes 

2 of this subparagraph, the term ‘small busi3 ness’ means a corporation or partnership 

4 which meets the gross receipts test of section 

5 448(c) (determined by substituting 

6 ‘$5,000,000’ for ‘$25,000,000’ each place it 

7 appears therein) for the taxable year in 

8 which the loss arose (or, in the case of a sole 

9 proprietorship, which would meet such test 

10 if such proprietorship were a corporation). 

11 ‘‘(iii) TRADE OR BUSINESS OF FARM12 ING.—For purposes of this subparagraph, 

13 the trade or business of farming shall in14 clude the trade or business of— 

15 ‘‘(I) operating a nursery or sod 

16 farm, or 

17 ‘‘(II) the raising or harvesting of 

18 trees bearing fruit, nuts, or other crops, 

19 or ornamental trees. 

20 For purposes of subclause (II), an evergreen 

21 tree which is more than 6 years old at the 

22 time severed from the roots shall not be 

23 treated as an ornamental tree.’’. 

24 (B) Section 172 is amended by striking sub25 sections (f), (g), and (h). 


lotter on DSKBCFDHB2PROD with BILLS
229 

•HR 1 RH

1 (c) LIMITATION OF NET OPERATING LOSS TO 90 PER2 CENT OF TAXABLE INCOME.— 

3 (1) IN GENERAL.—Section 172(a) is amended to 

4 read as follows: 

5 ‘‘(a) DEDUCTION ALLOWED.—There shall be allowed 

6 as a deduction for the taxable year an amount equal to the 

7 lesser of— 

8 ‘‘(1) the aggregate of the net operating loss 

9 carryovers to such year, plus the net operating loss 

10 carrybacks to such year, or 

11 ‘‘(2) 90 percent of taxable income computed 

12 without regard to the deduction allowable under this 

13 section. 

14 For purposes of this subtitle, the term ‘net operating loss 

15 deduction’ means the deduction allowed by this subsection.’’. 

16 (2) COORDINATION OF LIMITATION WITH

17 CARRYBACKS AND CARRYOVERS.—Section 172(b)(2) is 

18 amended by striking ‘‘shall be computed—’’ and all 

19 that follows and inserting ‘‘shall— 

20 ‘‘(A) be computed with the modifications 

21 specified in subsection (d) other than paragraphs 

22 (1), (4), and (5) thereof, and by determining the 

23 amount of the net operating loss deduction with24 out regard to the net operating loss for the loss 

25 year or for any taxable year thereafter, 


lotter on DSKBCFDHB2PROD with BILLS
230 

•HR 1 RH

1 ‘‘(B) not be considered to be less than zero, 

2 and 

3 ‘‘(C) not exceed the amount determined 

4 under subsection (a)(2) for such prior taxable 

5 year.’’. 

6 (3) CONFORMING AMENDMENT.—Section 

7 172(d)(6) is amended by striking ‘‘and’’ at the end of 

8 subparagraph (A), by striking the period at the end 

9 of subparagraph (B) and inserting ‘‘; and’’, and by 

10 adding at the end the following new subparagraph: 

11 ‘‘(C) subsection (a)(2) shall be applied by 

12 substituting ‘real estate investment trust taxable 

13 income (as defined in section 857(b)(2) but with14 out regard to the deduction for dividends paid 

15 (as defined in section 561))’ for ‘taxable in16 come’.’’. 

17 (d) ANNUAL INCREASE OF INDEFINITE CARRYOVER

18 AMOUNTS.—Section 172(b) is amended by redesignating 

19 paragraph (3) as paragraph (4) and by inserting after 

20 paragraph (2) the following new paragraph: 

21 ‘‘(3) ANNUAL INCREASE OF INDEFINITE CARRY22 OVER AMOUNTS.—For purposes of paragraph (2)— 

23 ‘‘(A) the amount of any indefinite net oper24 ating loss which is carried to the next succeeding 

25 taxable year after the loss year (within the 


lotter on DSKBCFDHB2PROD with BILLS
231 

•HR 1 RH

1 meaning of paragraph (2)) shall be increased by 

2 an amount equal to— 

3 ‘‘(i) the amount of the loss which may 

4 be so carried over to such succeeding taxable 

5 year (determined without regard to this 

6 paragraph), multiplied by 

7 ‘‘(ii) the sum of— 

8 ‘‘(I) the annual Federal short9 term rate (determined under section 

10 1274(d)) for the last month ending be11 fore the beginning of such taxable year, 

12 plus 

13 ‘‘(II) 4 percentage points, and 

14 ‘‘(B) the amount of any indefinite net oper15 ating loss which is carried to any succeeding 

16 taxable year (after such next succeeding taxable 

17 year) shall be an amount equal to— 

18 ‘‘(i) the excess of— 

19 ‘‘(I) the amount of the loss carried 

20 to the prior taxable year (after any in21 crease under this paragraph with re22 spect to such amount), over 

23 ‘‘(II) the amount by which such 

24 loss was reduced under paragraph (2) 


lotter on DSKBCFDHB2PROD with BILLS
232 

•HR 1 RH

1 by reason of the taxable income for 

2 such prior taxable year, multiplied by 

3 ‘‘(ii) a percentage equal to 100 percent 

4 plus the percentage determined under sub5 paragraph (A)(ii) with respect to such suc6 ceeding taxable year. 

7 For purposes of the preceding sentence, the term 

8 ‘indefinite net operating loss’ means any net op9 erating loss arising in a taxable year beginning 

10 after December 31, 2017.’’. 

11 (e) EFFECTIVE DATE.— 

12 (1) CARRYFORWARDS AND CARRYBACKS.—The 

13 amendments made by subsections (a) and (b) shall 

14 apply to net operating losses arising in taxable years 

15 beginning after December 31, 2017. 

16 (2) NET OPERATING LOSS LIMITED TO 90 PER17 CENT OF TAXABLE INCOME.—The amendments made 

18 by subsection (c) shall apply to taxable years begin19 ning after December 31, 2017. 

20 (3) ANNUAL INCREASE IN CARRYOVER

21 AMOUNTS.—The amendments made by subsection (d) 

22 shall apply to amounts carried to taxable years begin23 ning after December 31, 2017. 

24 (4) SPECIAL RULE FOR NET DISASTER

25 LOSSES.—Notwithstanding paragraph (1), the 


lotter on DSKBCFDHB2PROD with BILLS
233 

•HR 1 RH

1 amendments made by subsection (b) shall not apply 

2 to the portion of the net operating loss for any taxable 

3 year which is a net disaster loss to which section 

4 504(b) of the Disaster Tax Relief and Airport and 

5 Airway Extension Act of 2017 applies. 

6 SEC. 3303. LIKE-KIND EXCHANGES OF REAL PROPERTY. 

7 (a) IN GENERAL.—Section 1031(a)(1) is amended by 

8 striking ‘‘property’’ each place it appears and inserting 

9 ‘‘real property’’. 

10 (b) CONFORMING AMENDMENTS.— 

11 (1) Paragraph (2) of section 1031(a) is amended 

12 to read as follows: 

13 ‘‘(2) EXCEPTION FOR REAL PROPERTY HELD FOR

14 SALE.—This subsection shall not apply to any ex15 change of real property held primarily for sale.’’. 

16 (2) Section 1031 is amended by striking sub17 sections (e) and (i). 

18 (3) Section 1031, as amended by paragraph (2), 

19 is amended by inserting after subsection (d) the fol20 lowing new subsection: 

21 ‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.—For 

22 purposes of this section, an interest in a partnership which 

23 has in effect a valid election under section 761(a) to be ex24 cluded from the application of all of subchapter K shall be 


lotter on DSKBCFDHB2PROD with BILLS
234 

•HR 1 RH

1 treated as an interest in each of the assets of such partner2 ship and not as an interest in a partnership.’’. 

3 (4) Section 1031(h) is amended to read as fol4 lows: 

5 ‘‘(h) SPECIAL RULES FOR FOREIGN REAL PROP6 ERTY.—Real property located in the United States and real 

7 property located outside the United States are not property 

8 of a like kind.’’. 

9 (5) The heading of section 1031 is amended by 

10 striking ‘‘PROPERTY’’ and inserting ‘‘REAL PROP11 ERTY’’. 

12 (6) The table of sections for part III of sub13 chapter O of chapter 1 is amended by striking the 

14 item relating to section 1031 and inserting the fol15 lowing new item: 

‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’. 

16 (c) EFFECTIVE DATE.— 

17 (1) IN GENERAL.—Except as otherwise provided 

18 in this subsection, the amendments made by this sec19 tion shall apply to exchanges completed after Decem20 ber 31, 2017. 

21 (2) TRANSITION RULE.—The amendments made 

22 by this section shall not apply to any exchange if— 

23 (A) the property disposed of by the taxpayer 

24 in the exchange is disposed of on or before De25 cember 31 2017, or 


lotter on DSKBCFDHB2PROD with BILLS
235 

•HR 1 RH

1 (B) the property received by the taxpayer in 

2 the exchange is received on or before December 

3 31, 2017. 

4 SEC. 3304. REVISION OF TREATMENT OF CONTRIBUTIONS 

5 TO CAPITAL. 

6 (a) INCLUSION OF CONTRIBUTIONS TO CAPITAL.—Part 

7 II of subchapter B of chapter 1 is amended by inserting 

8 after section 75 the following new section: 

9 ‘‘SEC. 76. CONTRIBUTIONS TO CAPITAL. 

10 ‘‘(a) IN GENERAL.—Gross income includes any con11 tribution to the capital of any entity. 

12 ‘‘(b) TREATMENT OF CONTRIBUTIONS IN EXCHANGE

13 FOR STOCK, ETC.— 

14 ‘‘(1) IN GENERAL.—In the case of any contribu15 tion of money or other property to a corporation in 

16 exchange for stock of such corporation— 

17 ‘‘(A) such contribution shall not be treated 

18 for purposes of subsection (a) as a contribution 

19 to the capital of such corporation (and shall not 

20 be includible in the gross income of such corpora21 tion), and 

22 ‘‘(B) no gain or loss shall be recognized to 

23 such corporation upon the issuance of such stock. 

24 ‘‘(2) TREATMENT LIMITED TO VALUE OF

25 STOCK.—For purposes of this subsection, a contribuVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00235 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
236 

•HR 1 RH

1 tion of money or other property to a corporation shall 

2 be treated as being in exchange for stock of such cor3 poration only to the extent that the fair market value 

4 of such money and other property does not exceed the 

5 fair market value of such stock. 

6 ‘‘(3) APPLICATION TO ENTITIES OTHER THAN

7 CORPORATIONS.—In the case of any entity other than 

8 a corporation, rules similar to the rules of paragraphs 

9 (1) and (2) shall apply in the case of any contribu10 tion of money or other property to such entity in ex11 change for any interest in such entity. 

12 ‘‘(c) TREASURY STOCK TREATED AS STOCK.—Any ref13 erence in this section to stock shall be treated as including 

14 a reference to treasury stock.’’. 

15 (b) BASIS OF CORPORATION IN CONTRIBUTED PROP16 ERTY.— 

17 (1) CONTRIBUTIONS TO CAPITAL.—Subsection (c) 

18 of section 362 is amended to read as follows: 

19 ‘‘(c) CONTRIBUTIONS TO CAPITAL.—If property other 

20 than money is transferred to a corporation as a contribu21 tion to the capital of such corporation (within the meaning 

22 of section 76) then the basis of such property shall be the 

23 greater of— 


lotter on DSKBCFDHB2PROD with BILLS
237 

•HR 1 RH

1 ‘‘(1) the basis determined in the hands of the 

2 transferor, increased by the amount of gain recog3 nized to the transferor on such transfer, or 

4 ‘‘(2) the amount included in gross income by 

5 such corporation under section 76 with respect to such 

6 contribution.’’. 

7 (2) CONTRIBUTIONS IN EXCHANGE FOR STOCK.— 

8 Paragraph (2) of section 362(a) is amended by strik9 ing ‘‘contribution to capital’’ and inserting ‘‘con10 tribution in exchange for stock of such corporation 

11 (determined under rules similar to the rules of para12 graphs (2) and (3) of section 76(b))’’. 

13 (c) CONFORMING AMENDMENTS.— 

14 (1) Section 108(e) is amended by striking para15 graph (6). 

16 (2) Part III of subchapter B of chapter 1 is 

17 amended by striking section 118 (and by striking the 

18 item relating to such section in the table of sections 

19 for such part). 

20 (3) The table of sections for part II of subchapter 

21 B of chapter 1 is amended by inserting after the item 

22 relating to section 75 the following new item: 

‘‘Sec. 76. Contributions to capital.’’. 

23 (d) EFFECTIVE DATE.—The amendments made by this 

24 section shall apply to contributions made, and transactions 

25 entered into, after the date of the enactment of this Act. 


lotter on DSKBCFDHB2PROD with BILLS
238 

•HR 1 RH

1 SEC. 3305. REPEAL OF DEDUCTION FOR LOCAL LOBBYING 

2 EXPENSES. 

3 (a) IN GENERAL.—Section 162(e) is amended by strik4 ing paragraphs (2) and (7) and by redesignating para5 graphs (3), (4), (5), (6), and (8) as paragraphs (2), (3), 

6 (4), (5), and (6), respectively. 

7 (b) CONFORMING AMENDMENT.—Section 

8 6033(e)(1)(B)(ii) is amended by striking ‘‘section 

9 162(e)(5)(B)(ii)’’ and inserting ‘‘section 162(e)(4)(B)(ii)’’. 

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

11 section shall apply to amounts paid or incurred after De12 cember 31, 2017. 

13 SEC. 3306. REPEAL OF DEDUCTION FOR INCOME ATTRIB14 UTABLE TO DOMESTIC PRODUCTION ACTIVI15 TIES. 

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

17 1 is amended by striking section 199 (and by striking the 

18 item relating to such section in the table of sections for such 

19 part). 

20 (b) CONFORMING AMENDMENTS.— 

21 (1) Sections 74(d)(2)(B), 86(b)(2)(A), 

22 137(b)(3)(A), 219(g)(3)(A)(ii), and 246(b)(1) are each 

23 amended by striking ‘‘199,’’. 

24 (2) Section 170(b)(2)(D), as amended by the pre25 ceding provisions of this Act, is amended by striking 


lotter on DSKBCFDHB2PROD with BILLS
239 

•HR 1 RH

1 clause (iv), by redesignating clause (v) as clause (iv), 

2 and by inserting ‘‘and’’ at the end of clause (iii). 

3 (3) Section 172(d) is amended by striking para4 graph (7). 

5 (4) Section 613(a) is amended by striking ‘‘and 

6 without the deduction under section 199’’. 

7 (5) Section 613A(d)(1) is amended by striking 

8 subparagraph (B) and by redesignating subpara9 graphs (C), (D), and (E) as subparagraphs (B), (C), 

10 and (D), respectively. 

11 (6) Section 1402(a) is amended by adding ‘‘and’’ 

12 at the end of paragraph (15) and by striking para13 graph (16). 

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

15 section shall apply to taxable years beginning after Decem16 ber 31, 2017. 

17 SEC. 3307. ENTERTAINMENT, ETC. EXPENSES. 

18 (a) DENIAL OF DEDUCTION.—Subsection (a) of section 

19 274 is amended to read as follows: 

20 ‘‘(a) ENTERTAINMENT, AMUSEMENT, RECREATION, 

21 AND OTHER FRINGE BENEFITS .— 

22 ‘‘(1) IN GENERAL.—No deduction otherwise al23 lowable under this chapter shall be allowed for 

24 amounts paid or incurred for any of the following 

25 items: 


lotter on DSKBCFDHB2PROD with BILLS
240 

•HR 1 RH

1 ‘‘(A) ACTIVITY.—With respect to an activity 

2 which is of a type generally considered to con3 stitute entertainment, amusement, or recreation. 

4 ‘‘(B) MEMBERSHIP DUES.—With respect to 

5 membership in any club organized for business, 

6 pleasure, recreation or other social purposes. 

7 ‘‘(C) AMENITY.—With respect to a de mini8 mis fringe (as defined in section 132(e)(1)) that 

9 is primarily personal in nature and involving 

10 property or services that are not directly related 

11 to the taxpayer’s trade or business. 

12 ‘‘(D) FACILITY.—With respect to a facility 

13 or portion thereof used in connection with an ac14 tivity referred to in subparagraph (A), member15 ship dues or similar amounts referred to in sub16 paragraph (B), or an amenity referred to in sub17 paragraph (C). 

18 ‘‘(E) QUALIFIED TRANSPORTATION FRINGE

19 AND PARKING FACILITY.—Which is a qualified 

20 transportation fringe (as defined in section 

21 132(f)) or which is a parking facility used in 

22 connection with qualified parking (as defined in 

23 section 132(f)(5)(C)). 


lotter on DSKBCFDHB2PROD with BILLS
241 

•HR 1 RH

1 ‘‘(F) ON-PREMISES ATHLETIC FACILITY.— 

2 Which is an on-premises athletic facility as de3 fined in section 132(j)(4)(B). 

4 ‘‘(2) SPECIAL RULES.—For purposes of applying 

5 paragraph (1), an activity described in section 212 

6 shall be treated as a trade or business. 

7 ‘‘(3) REGULATIONS.—Under the regulations pre8 scribed to carry out this section, the Secretary shall 

9 include regulations— 

10 ‘‘(A) defining entertainment, amenities, 

11 recreation, amusement, and facilities for pur12 poses of this subsection, 

13 ‘‘(B) providing for the appropriate alloca14 tion of depreciation and other costs with respect 

15 to facilities used for parking or for on-premises 

16 athletic facilities, and 

17 ‘‘(C) specifying arrangements a primary 

18 purpose of which is the avoidance of this sub19 section.’’. 

20 (b) EXCEPTION FOR CERTAIN EXPENSES INCLUDIBLE

21 IN INCOME OF RECIPIENT.— 

22 (1) EXPENSES TREATED AS COMPENSATION.— 

23 Paragraph (2) of section 274(e) is amended to read 

24 as follows: 


lotter on DSKBCFDHB2PROD with BILLS
242 

•HR 1 RH

1 ‘‘(2) EXPENSES TREATED AS COMPENSATION.— 

2 Expenses for goods, services, and facilities, to the ex3 tent that the expenses do not exceed the amount of the 

4 expenses which are treated by the taxpayer, with re5 spect to the recipient of the entertainment, amuse6 ment, or recreation, as compensation to an employee 

7 on the taxpayer’s return of tax under this chapter 

8 and as wages to such employee for purposes of chapter 

9 24 (relating to withholding of income tax at source on 

10 wages).’’. 

11 (2) EXPENSES INCLUDIBLE IN INCOME OF PER12 SONS WHO ARE NOT EMPLOYEES.—Paragraph (9) of 

13 section 274(e) is amended by striking ‘‘to the extent 

14 that the expenses’’ and inserting ‘‘to the extent that 

15 the expenses do not exceed the amount of the expenses 

16 that’’. 

17 (c) EXCEPTIONS FOR REIMBURSED EXPENSES.— 

18 Paragraph (3) of section 274(e) is amended to read as fol19 lows: 

20 ‘‘(3) REIMBURSED EXPENSES.— 

21 ‘‘(A) IN GENERAL.—Expenses paid or in22 curred by the taxpayer, in connection with the 

23 performance by him of services for another per24 son (whether or not such other person is the tax25 payer’s employer), under a reimbursement or 


lotter on DSKBCFDHB2PROD with BILLS
243 

•HR 1 RH

1 other expense allowance arrangement with such 

2 other person, but this paragraph shall apply— 

3 ‘‘(i) where the services are performed 

4 for an employer, only if the employer has 

5 not treated such expenses in the manner 

6 provided in paragraph (2), or 

7 ‘‘(ii) where the services are performed 

8 for a person other than an employer, only 

9 if the taxpayer accounts (to the extent pro10 vided by subsection (d)) to such person. 

11 ‘‘(B) EXCEPTION.—Except as provided by 

12 the Secretary, subparagraph (A) shall not 

13 apply— 

14 ‘‘(i) in the case of an arrangement in 

15 which the person other than the employer is 

16 an entity described in section 168(h)(2)(A), 

17 or 

18 ‘‘(ii) to any other arrangement des19 ignated by the Secretary as having the effect 

20 of avoiding the limitation under subpara21 graph (A).’’. 

22 (d) 50 PERCENT LIMITATION ON MEALS AND ENTER23 TAINMENT EXPENSES.—Subsection (n) of section 274 is 

24 amended to read as follows: 

25 ‘‘(n) LIMITATION ON CERTAIN EXPENSES.— 


lotter on DSKBCFDHB2PROD with BILLS
244 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—The amount allowable as a 

2 deduction under this chapter for any expense for food 

3 or beverages (pursuant to subsection (e)(1)) or busi4 ness meals (pursuant to subsection (k)(1)) shall not 

5 exceed 50 percent of the amount of such expense or 

6 item which would (but for this paragraph) be allow7 able as a deduction under this chapter. 

8 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not 

9 apply to any expense if— 

10 ‘‘(A) such expense is described in paragraph 

11 (2), (3), (6), (7), or (8) of subsection (e), 

12 ‘‘(B) in the case of an expense for food or 

13 beverages, such expense is excludable from the 

14 gross income of the recipient under section 132 

15 by reason of subsection (e) thereof (relating to de 

16 minimis fringes) or under section 119 (relating 

17 to meals and lodging furnished for convenience of 

18 employer), or 

19 ‘‘(C) in the case of an employer who pays 

20 or reimburses moving expenses of an employee, 

21 such expenses are includible in the income of the 

22 employee under section 82. 

23 ‘‘(3) SPECIAL RULE FOR INDIVIDUALS SUBJECT

24 TO FEDERAL HOURS OF SERVICE.—In the case of any 

25 expenses for food or beverages consumed while away 


lotter on DSKBCFDHB2PROD with BILLS
245 

•HR 1 RH

1 from home (within the meaning of section 162(a)(2)) 

2 by an individual during, or incident to, the period of 

3 duty subject to the hours of service limitations of the 

4 Department of Transportation, paragraph (1) shall be 

5 applied by substituting ‘80 percent’ for ‘50 percent’.’’. 

6 (e) CONFORMING AMENDMENTS.— 

7 (1) Section 274(d) is amended— 

8 (A) by striking paragraph (2) and redesig9 nating paragraphs (3) and (4) as paragraphs 

10 (2) and (3), respectively, and 

11 (B) in the flush material following para12 graph (3) (as so redesignated)— 

13 (i) by striking ‘‘, entertainment, 

14 amusement, recreation, or’’ in item (B), 

15 and 

16 (ii) by striking ‘‘(D) the business rela17 tionship to the taxpayer of persons enter18 tained, using the facility or property, or re19 ceiving the gift’’ and inserting ‘‘(D) the 

20 business relationship to the taxpayer of the 

21 person receiving the benefit’’. 

22 (2) Section 274(e) is amended by striking para23 graph (4) and redesignating paragraphs (5), (6), (7), 

24 (8), and (9) as paragraphs (4), (5), (6), (7), and (8), 

25 respectively. 


lotter on DSKBCFDHB2PROD with BILLS
246 

•HR 1 RH

1 (3) Section 274(k)(2)(A) is amended by striking 

2 ‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), (7), or (8)’’. 

3 (4) Section 274 is amended by striking sub4 section (l). 

5 (5) Section 274(m)(1)(B)(ii) is amended by 

6 striking ‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), (7), 

7 or (8)’’. 

8 (f) EFFECTIVE DATE.—The amendments made by this 

9 section shall apply to amounts paid or incurred after De10 cember 31, 2017. 

11 SEC. 3308. UNRELATED BUSINESS TAXABLE INCOME IN12 CREASED BY AMOUNT OF CERTAIN FRINGE 

13 BENEFIT EXPENSES FOR WHICH DEDUCTION 

14 IS DISALLOWED. 

15 (a) IN GENERAL.—Section 512(a) is amended by add16 ing at the end the following new paragraph: 

17 ‘‘(6) INCREASE IN UNRELATED BUSINESS TAX18 ABLE INCOME BY DISALLOWED FRINGE.—Unrelated 

19 business taxable income of an organization shall be 

20 increased by any amount for which a deduction is not 

21 allowable under this chapter by reason of section 274 

22 and which is paid or incurred by such organization 

23 for any qualified transportation fringe (as defined in 

24 section 132(f)), any parking facility used in connec25 tion with qualified parking (as defined in section 


lotter on DSKBCFDHB2PROD with BILLS
247 

•HR 1 RH

1 132(f)(5)(C)), or any on-premises athletic facility (as 

2 defined in section 132(j)(4)(B)). The preceding sen3 tence shall not apply to the extent the amount paid 

4 or incurred is directly connected with an unrelated 

5 trade or business which is regularly carried on by the 

6 organization. The Secretary may issue such regula7 tions or other guidance as may be necessary or appro8 priate to carry out the purposes of this paragraph, 

9 including regulations or other guidance providing for 

10 the appropriate allocation of depreciation and other 

11 costs with respect to facilities used for parking or for 

12 on-premises athletic facilities. 

13 ’’. 

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

15 section shall apply to amounts paid or incurred after De16 cember 31, 2017. 

17 SEC. 3309. LIMITATION ON DEDUCTION FOR FDIC PRE18 MIUMS. 

19 (a) IN GENERAL.—Section 162 is amended by redesig20 nating subsection (q) as subsection (r) and by inserting 

21 after subsection (p) the following new subsection: 

22 ‘‘(q) DISALLOWANCE OF FDIC PREMIUMS PAID BY

23 CERTAIN LARGE FINANCIAL INSTITUTIONS.— 


lotter on DSKBCFDHB2PROD with BILLS
248 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—No deduction shall be al2 lowed for the applicable percentage of any FDIC pre3 mium paid or incurred by the taxpayer. 

4 ‘‘(2) EXCEPTION FOR SMALL INSTITUTIONS.— 

5 Paragraph (1) shall not apply to any taxpayer for 

6 any taxable year if the total consolidated assets of 

7 such taxpayer (determined as of the close of such tax8 able year) do not exceed $10,000,000,000. 

9 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes 

10 of this subsection, the term ‘applicable percentage’ 

11 means, with respect to any taxpayer for any taxable 

12 year, the ratio (expressed as a percentage but not 

13 greater than 100 percent) which— 

14 ‘‘(A) the excess of— 

15 ‘‘(i) the total consolidated assets of 

16 such taxpayer (determined as of the close of 

17 such taxable year), over 

18 ‘‘(ii) $10,000,000,000, bears to 

19 ‘‘(B) $40,000,000,000. 

20 ‘‘(4) FDIC PREMIUMS.—For purposes of this 

21 subsection, the term ‘FDIC premium’ means any as22 sessment imposed under section 7(b) of the Federal 

23 Deposit Insurance Act (12 U.S.C. 1817(b)). 

24 ‘‘(5) TOTAL CONSOLIDATED ASSETS.—For pur25 poses of this subsection, the term ‘total consolidated 


lotter on DSKBCFDHB2PROD with BILLS
249 

•HR 1 RH

1 assets’ has the meaning given such term under section 

2 165 of the Dodd-Frank Wall Street Reform and Con3 sumer Protection Act (12 U.S.C. 5365). 

4 ‘‘(6) AGGREGATION RULE.— 

5 ‘‘(A) IN GENERAL.—Members of an ex6 panded affiliated group shall be treated as a sin7 gle taxpayer for purposes of applying this sub8 section. 

9 ‘‘(B) EXPANDED AFFILIATED GROUP.—For 

10 purposes of this paragraph, the term ‘expanded 

11 affiliated group’ means an affiliated group as 

12 defined in section 1504(a), determined— 

13 ‘‘(i) by substituting ‘more than 50 per14 cent’ for ‘at least 80 percent’ each place it 

15 appears, and 

16 ‘‘(ii) without regard to paragraphs (2) 

17 and (3) of section 1504(b). 

18 A partnership or any other entity (other than a 

19 corporation) shall be treated as a member of an 

20 expanded affiliated group if such entity is con21 trolled (within the meaning of section 954(d)(3)) 

22 by members of such group (including any entity 

23 treated as a member of such group by reason of 

24 this sentence).’’. 


lotter on DSKBCFDHB2PROD with BILLS
250 

•HR 1 RH

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

2 section shall apply to taxable years beginning after Decem3 ber 31, 2017. 

4 SEC. 3310. REPEAL OF ROLLOVER OF PUBLICLY TRADED SE5 CURITIES GAIN INTO SPECIALIZED SMALL 

6 BUSINESS INVESTMENT COMPANIES. 

7 (a) IN GENERAL.—Part III of subchapter O of chapter 

8 1 is amended by striking section 1044 (and by striking the 

9 item relating to such section in the table of sections of such 

10 part). 

11 (b) CONFORMING AMENDMENTS.—Section 1016(a)(23) 

12 is amended— 

13 (1) by striking ‘‘1044,’’, and 

14 (2) by striking ‘‘1044(d),’’. 

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

16 section shall apply to sales after December 31, 2017. 

17 SEC. 3311. CERTAIN SELF-CREATED PROPERTY NOT TREAT18 ED AS A CAPITAL ASSET. 

19 (a) PATENTS, ETC.—Section 1221(a)(3) is amended by 

20 inserting ‘‘a patent, invention, model or design (whether or 

21 not patented), a secret formula or process,’’ before ‘‘a copy22 right’’. 

23 (b) CONFORMING AMENDMENT.—Section 

24 1231(b)(1)(C) is amended by inserting ‘‘a patent, invenVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00250 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
251 

•HR 1 RH

1 tion, model or design (whether or not patented), a secret 

2 formula or process,’’ before ‘‘a copyright’’. 

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

4 section shall apply to dispositions after December 31, 2017. 

5 SEC. 3312. REPEAL OF SPECIAL RULE FOR SALE OR EX6 CHANGE OF PATENTS. 

7 (a) IN GENERAL.—Part IV of subchapter P of chapter 

8 1 is amended by striking section 1235 (and by striking the 

9 item relating to such section in the table of sections of such 

10 part). 

11 (b) CONFORMING AMENDMENTS.— 

12 (1) Section 483(d) is amended by striking para13 graph (4). 

14 (2) Section 901(l)(5) is amended by striking 

15 ‘‘without regard to section 1235 or any similar rule’’ 

16 and inserting ‘‘without regard to any provision which 

17 treats a disposition as a sale or exchange of a capital 

18 asset held for more than 1 year or any similar provi19 sion’’. 

20 (3) Section 1274(c)(3) is amended by striking 

21 subparagraph (E) and redesignating subparagraph 

22 (F) as subparagraph (E). 

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

24 section shall apply to dispositions after December 31, 2017. 


lotter on DSKBCFDHB2PROD with BILLS
252 

•HR 1 RH

1 SEC. 3313. REPEAL OF TECHNICAL TERMINATION OF PART2 NERSHIPS. 

3 (a) IN GENERAL.—Paragraph (1) of section 708(b) is 

4 amended— 

5 (1) by striking ‘‘, or’’ at the end of subparagraph 

6 (A) and all that follows and inserting a period, and 

7 (2) by striking ‘‘only if—’’ and all that follows 

8 through ‘‘no part of any business’’ and inserting the 

9 following: ‘‘only if no part of any business’’. 

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

11 section shall apply to partnership taxable years beginning 

12 after December 31, 2017. 

13 SEC. 3314. RECHARACTERIZATION OF CERTAIN GAINS IN 

14 THE CASE OF PARTNERSHIP PROFITS INTER15 ESTS HELD IN CONNECTION WITH PERFORM16 ANCE OF INVESTMENT SERVICES. 

17 (a) IN GENERAL.—Part IV of subchapter O of chapter 

18 1 is amended— 

19 (1) by redesignating section 1061 as section 

20 1062, and 

21 (2) by inserting after section 1060 the following 

22 new section: 


lotter on DSKBCFDHB2PROD with BILLS
253 

•HR 1 RH

1 ‘‘SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNEC2 TION WITH PERFORMANCE OF SERVICES. 

3 ‘‘(a) IN GENERAL.—If one or more applicable partner4 ship interests are held by a taxpayer at any time during 

5 the taxable year, the excess (if any) of— 

6 ‘‘(1) the taxpayer’s net long-term capital gain 

7 with respect to such interests for such taxable year, 

8 over 

9 ‘‘(2) the taxpayer’s net long-term capital gain 

10 with respect to such interests for such taxable year 

11 computed by applying paragraphs (3) and (4) of sec12 tions 1222 by substituting ‘3 years’ for ‘1 year’, 

13 shall be treated as short-term capital gain. 

14 ‘‘(b) SPECIAL RULE.—To the extent provided by the 

15 Secretary, subsection (a) shall not apply to income or gain 

16 attributable to any asset not held for portfolio investment 

17 on behalf of third party investors. 

18 ‘‘(c) APPLICABLE PARTNERSHIP INTEREST.—For pur19 poses of this section— 

20 ‘‘(1) IN GENERAL.—Except as provided in this 

21 paragraph or paragraph (4), the term ‘applicable 

22 partnership interest’ means any interest in a partner23 ship which, directly or indirectly, is transferred to (or 

24 is held by) the taxpayer in connection with the per25 formance of substantial services by the taxpayer, or 

26 any other related person, in any applicable trade or 


lotter on DSKBCFDHB2PROD with BILLS
254 

•HR 1 RH

1 business. The previous sentence shall not apply to an 

2 interest held by a person who is employed by another 

3 entity that is conducting a trade or business (other 

4 than an applicable trade or business) and only pro5 vides services to such other entity. 

6 ‘‘(2) APPLICABLE TRADE OR BUSINESS.—The 

7 term ‘applicable trade or business’ means any activ8 ity conducted on a regular, continuous, and substan9 tial basis which, regardless of whether the activity is 

10 conducted in one or more entities, consists, in whole 

11 or in part, of— 

12 ‘‘(A) raising or returning capital, and 

13 ‘‘(B) either— 

14 ‘‘(i) investing in (or disposing of) spec15 ified assets (or identifying specified assets 

16 for such investing or disposition), or 

17 ‘‘(ii) developing specified assets. 

18 ‘‘(3) SPECIFIED ASSET.—The term ‘specified 

19 asset’ means securities (as defined in section 475(c)(2) 

20 without regard to the last sentence thereof), commod21 ities (as defined in section 475(e)(2)), real estate held 

22 for rental or investment, cash or cash equivalents, op23 tions or derivative contracts with respect to any of the 

24 foregoing, and an interest in a partnership to the exVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00254 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
255 

•HR 1 RH

1 tent of the partnership’s proportionate interest in any 

2 of the foregoing. 

3 ‘‘(4) EXCEPTIONS.—The term ‘applicable part4 nership interest’ shall not include— 

5 ‘‘(A) any interest in a partnership directly 

6 or indirectly held by a corporation, or 

7 ‘‘(B) any capital interest in the partnership 

8 which provides the taxpayer with a right to 

9 share in partnership capital commensurate 

10 with— 

11 ‘‘(i) the amount of capital contributed 

12 (determined at the time of receipt of such 

13 partnership interest), or 

14 ‘‘(ii) the value of such interest subject 

15 to tax under section 83 upon the receipt or 

16 vesting of such interest. 

17 ‘‘(5) THIRD PARTY INVESTOR.—The term ‘third 

18 party investor’ means a person who— 

19 ‘‘(A) holds an interest in the partnership 

20 which does not constitute property held in con21 nection with an applicable trade or business; 

22 and 

23 ‘‘(B) is not (and has not been) actively en24 gaged, and is (and was) not related to a person 

25 so engaged, in (directly or indirectly) providing 


lotter on DSKBCFDHB2PROD with BILLS
256 

•HR 1 RH

1 substantial services described in paragraph (1) 

2 for such partnership or any applicable trade or 

3 business. 

4 ‘‘(d) TRANSFER OF APPLICABLE PARTNERSHIP INTER5 EST TO RELATED PERSON.— 

6 ‘‘(1) IN GENERAL.—If a taxpayer transfers any 

7 applicable partnership interest, directly or indirectly, 

8 to a person related to the taxpayer, the taxpayer shall 

9 include in gross income (as short term capital gain) 

10 the excess (if any) of— 

11 ‘‘(A) so much of the taxpayer’s long-term 

12 capital gains with respect to such interest for 

13 such taxable year attributable to the sale or ex14 change of any asset held for not more than 3 

15 years as is allocable to such interest, over 

16 ‘‘(B) any amount treated as short term cap17 ital gain under subsection (a) with respect to the 

18 transfer of such interest. 

19 ‘‘(2) RELATED PERSON.—For purposes of this 

20 paragraph, a person is related to the taxpayer if— 

21 ‘‘(A) the person is a member of the tax22 payer’s family within the meaning of section 

23 318(a)(1), or 

24 ‘‘(B) the person performed a service within 

25 the current calendar year or the preceding three 


lotter on DSKBCFDHB2PROD with BILLS
257 

•HR 1 RH

1 calendar years in any applicable trade or busi2 ness in which or for which the taxpayer per3 formed a service. 

4 ‘‘(e) REPORTING.—The Secretary shall require such re5 porting (at the time and in the manner prescribed by the 

6 Secretary) as is necessary to carry out the purposes of this 

7 section. 

8 ‘‘(f) REGULATIONS.—The Secretary shall issue such 

9 regulations or other guidance as is necessary or appropriate 

10 to carry out the purposes of this section’’. 

11 (b) COORDINATION WITH SECTION 83.—Subsection (e) 

12 of section 83 is amended by striking ‘‘or’’ at the end of 

13 paragraph (4), by striking the period at the end of para14 graph (5) and inserting ‘‘, or’’, and by adding at the end 

15 the following new paragraph: 

16 ‘‘(6) a transfer of an applicable partnership in17 terest to which section 1061 applies.’’. 

18 (c) CLERICAL AMENDMENT.—The table of sections for 

19 part IV of subchapter O of chapter 1 is amended by striking 

20 the item relating to 1061 and inserting the following new 

21 items: 

‘‘Sec. 1061. Partnership interests held in connection with performance of services. 

‘‘Sec. 1062. Cross references.’’. 

22 (d) EFFECTIVE DATE.—The amendments made by this 

23 section shall apply to taxable years beginning after Decem24 ber 31, 2017. 


lotter on DSKBCFDHB2PROD with BILLS
258 

•HR 1 RH

1 SEC. 3315. AMORTIZATION OF RESEARCH AND EXPERI2 MENTAL EXPENDITURES. 

3 (a) IN GENERAL.—Section 174 is amended to read as 

4 follows: 

5 ‘‘SEC. 174. AMORTIZATION OF RESEARCH AND EXPERI6 MENTAL EXPENDITURES. 

7 ‘‘(a) IN GENERAL.—In the case of a taxpayer’s speci8 fied research or experimental expenditures for any taxable 

9 year— 

10 ‘‘(1) except as provided in paragraph (2), no de11 duction shall be allowed for such expenditures, and 

12 ‘‘(2) the taxpayer shall— 

13 ‘‘(A) charge such expenditures to capital ac14 count, and 

15 ‘‘(B) be allowed an amortization deduction 

16 of such expenditures ratably over the 5-year pe17 riod (15-year period in the case of any specified 

18 research or experimental expenditures which are 

19 attributable to foreign research (within the 

20 meaning of section 41(d)(4)(F))) beginning with 

21 the midpoint of the taxable year in which such 

22 expenditures are paid or incurred. 

23 ‘‘(b) SPECIFIED RESEARCH OR EXPERIMENTAL EX24 PENDITURES.—For purposes of this section, the term ‘speci25 fied research or experimental expenditures’ means, with re26 spect to any taxable year, research or experimental expendiVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00258 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
259 

•HR 1 RH

1 tures which are paid or incurred by the taxpayer during 

2 such taxable year in connection with the taxpayer’s trade 

3 or business. 

4 ‘‘(c) SPECIAL RULES.— 

5 ‘‘(1) LAND AND OTHER PROPERTY.—This section 

6 shall not apply to any expenditure for the acquisition 

7 or improvement of land, or for the acquisition or im8 provement of property to be used in connection with 

9 the research or experimentation and of a character 

10 which is subject to the allowance under section 167 

11 (relating to allowance for depreciation, etc.) or section 

12 611 (relating to allowance for depletion); but for pur13 poses of this section allowances under section 167, 

14 and allowances under section 611, shall be considered 

15 as expenditures. 

16 ‘‘(2) EXPLORATION EXPENDITURES.—This sec17 tion shall not apply to any expenditure paid or in18 curred for the purpose of ascertaining the existence, 

19 location, extent, or quality of any deposit of ore or 

20 other mineral (including oil and gas). 

21 ‘‘(3) SOFTWARE DEVELOPMENT.—For purposes 

22 of this section, any amount paid or incurred in con23 nection with the development of any software shall be 

24 treated as a research or experimental expenditure. 


lotter on DSKBCFDHB2PROD with BILLS
260 

•HR 1 RH

1 ‘‘(d) TREATMENT UPON DISPOSITION, RETIREMENT, 

2 OR ABANDONMENT.—If any property with respect to which 

3 specified research or experimental expenditures are paid or 

4 incurred is disposed, retired, or abandoned during the pe5 riod during which such expenditures are allowed as an am6 ortization deduction under this section, no deduction shall 

7 be allowed with respect to such expenditures on account of 

8 such disposition, retirement, or abandonment and such am9 ortization deduction shall continue with respect to such ex10 penditures.’’. 

11 (b) CLERICAL AMENDMENT.—The table of sections for 

12 part VI of subchapter B of chapter 1 is amended by striking 

13 the item relating to section 174 and inserting the following 

14 new item: 

‘‘Sec. 174. Amortization of research and experimental expenditures.’’. 

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

16 section shall apply to amounts paid or incurred in taxable 

17 years beginning after December 31, 2022. 

18 SEC. 3316. UNIFORM TREATMENT OF EXPENSES IN CONTIN19 GENCY FEE CASES. 

20 (a) IN GENERAL.—Section 162, as amended by the 

21 preceding provisions of this Act, is amended by redesig22 nating subsection (r) as subsection (s) and by inserting 

23 after subsection (q) the following new subsection: 


lotter on DSKBCFDHB2PROD with BILLS
261 

•HR 1 RH

1 ‘‘(r) EXPENSES IN CONTINGENCY FEE CASES.—No de2 duction shall be allowed under subsection (a) to a taxpayer 

3 for any expense— 

4 ‘‘(1) paid or incurred in the course of the trade 

5 or business of practicing law, and 

6 ‘‘(2) resulting from a case for which the taxpayer 

7 is compensated primarily on a contingent basis, 

8 until such time as such contingency is resolved.’’. 

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

10 section shall apply to expenses and costs paid or incurred 

11 in taxable years beginning after the date of the enactment 

12 of this Act. 

13 Subtitle E—Reform of Business 

14 Credits 

15 SEC. 3401. REPEAL OF CREDIT FOR CLINICAL TESTING EX16 PENSES FOR CERTAIN DRUGS FOR RARE DIS17 EASES OR CONDITIONS. 

18 (a) IN GENERAL.—Subpart D of part IV of subchapter 

19 A of chapter 1 is amended by striking section 45C (and 

20 by striking the item relating to such section in the table 

21 of sections for such subpart). 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) Section 38(b) is amended by striking para24 graph (12). 


lotter on DSKBCFDHB2PROD with BILLS
262 

•HR 1 RH

1 (2) Section 280C is amended by striking sub2 section (b). 

3 (3) Section 6501(m) is amended by striking 

4 ‘‘45C(d)(4),’’. 

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

6 section shall apply to amounts paid or incurred in taxable 

7 years beginning after December 31, 2017. 

8 SEC. 3402. REPEAL OF EMPLOYER-PROVIDED CHILD CARE 

9 CREDIT. 

10 (a) IN GENERAL.—Subpart D of part IV of subchapter 

11 A of chapter 1 is amended by striking section 45F (and 

12 by striking the item relating to such section in the table 

13 of sections for such subpart). 

14 (b) CONFORMING AMENDMENTS.— 

15 (1) Section 38(b) is amended by striking para16 graph (15). 

17 (2) Section 1016(a) is amended by striking 

18 paragraph (28). 

19 (c) EFFECTIVE DATE.— 

20 (1) IN GENERAL.—Except as otherwise provided 

21 in this subsection, the amendments made by this sec22 tion shall apply to taxable years beginning after De23 cember 31, 2017. 

24 (2) BASIS ADJUSTMENTS.—The amendment 

25 made by subsection (b)(2) shall apply to credits deterVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00262 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
263 

•HR 1 RH

1 mined for taxable years beginning after December 31, 

2 2017. 

3 SEC. 3403. REPEAL OF REHABILITATION CREDIT. 

4 (a) IN GENERAL.—Subpart E of part IV of subchapter 

5 A of chapter 1 is amended by striking section 47 (and by 

6 striking the item relating to such section in the table of sec7 tions for such subpart). 

8 (b) CONFORMING AMENDMENTS.— 

9 (1) Section 170(f)(14)(A) is amended by insert10 ing ‘‘(as in effect before its repeal by the Tax Cuts 

11 and Jobs Act)’’ after ‘‘section 47’’. 

12 (2) Section 170(h)(4) is amended— 

13 (A) by striking ‘‘(as defined in section 

14 47(c)(3)(B))’’ in subparagraph (C)(ii), and 

15 (B) by adding at the end the following new 

16 subparagraph: 

17 ‘‘(D) REGISTERED HISTORIC DISTRICT.— 

18 The term ‘registered historic district’ means— 

19 ‘‘(i) any district listed in the National 

20 Register, and 

21 ‘‘(ii) any district— 

22 ‘‘(I) which is designated under a 

23 statute of the appropriate State or 

24 local government, if such statute is cer25 tified by the Secretary of the Interior 


lotter on DSKBCFDHB2PROD with BILLS
264 

•HR 1 RH

1 to the Secretary as containing criteria 

2 which will substantially achieve the 

3 purpose of preserving and rehabili4 tating buildings of historic significance 

5 to the district, and 

6 ‘‘(II) which is certified by the Sec7 retary of the Interior to the Secretary 

8 as meeting substantially all of the re9 quirements for the listing of districts 

10 in the National Register.’’. 

11 (3) Section 469(i)(3) is amended by striking sub12 paragraph (B). 

13 (4) Section 469(i)(6)(B) is amended— 

14 (A) by striking ‘‘in the case of—’’ and all 

15 that follows and inserting ‘‘in the case of any 

16 credit determined under section 42 for any tax17 able year.’’, and 

18 (B) by striking ‘‘, REHABILITATION CRED19 IT,’’ in the heading thereof. 

20 (5) Section 469(k)(1) is amended by striking ‘‘, 

21 or any rehabilitation credit determined under section 

22 47,’’. 

23 (c) EFFECTIVE DATE.— 

24 (1) IN GENERAL.—Except as provided in para25 graph (2), the amendments made by this section shall 


lotter on DSKBCFDHB2PROD with BILLS
265 

•HR 1 RH

1 apply to amounts paid or incurred after December 

2 31, 2017. 

3 (2) TRANSITION RULE.—In the case of qualified 

4 rehabilitation expenditures (within the meaning of 

5 section 47 of the Internal Revenue Code of 1986 as in 

6 effect before its repeal) with respect to any building— 

7 (A) owned or leased (as permitted by sec8 tion 47 of the Internal Revenue Code of 1986 as 

9 in effect before its repeal) by the taxpayer at all 

10 times after December 31, 2017, and 

11 (B) with respect to which the 24-month pe12 riod selected by the taxpayer under section 

13 47(c)(1)(C) of such Code begins not later than 

14 the end of the 180-day period beginning on the 

15 date of the enactment of this Act, 

16 the amendments made by this section shall apply to 

17 such expenditures paid or incurred after the end of 

18 the taxable year in which the 24-month period re19 ferred to in subparagraph (B) ends. 

20 SEC. 3404. REPEAL OF WORK OPPORTUNITY TAX CREDIT. 

21 (a) IN GENERAL.—Subpart F of part IV of subchapter 

22 A of chapter 1 is amended by striking section 51 (and by 

23 striking the item relating to such section in the table of sec24 tions for such subpart). 


lotter on DSKBCFDHB2PROD with BILLS
266 

•HR 1 RH

1 (b) CLERICAL AMENDMENT.—The heading of such sub2 part F (and the item relating to such subpart in the table 

3 of subparts for part IV of subchapter A of chapter 1) are 

4 each amended by striking ‘‘Rules for Computing Work Op5 portunity Credit’’ and inserting ‘‘Special Rules’’. 

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

7 section shall apply to amounts paid or incurred to individ8 uals who begin work for the employer after December 31, 

9 2017. 

10 SEC. 3405. REPEAL OF DEDUCTION FOR CERTAIN UNUSED 

11 BUSINESS CREDITS. 

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

13 1 is amended by striking section 196 (and by striking the 

14 item relating to such section in the table of sections for such 

15 part). 

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

17 section shall apply to taxable years beginning after Decem18 ber 31, 2017. 

19 SEC. 3406. TERMINATION OF NEW MARKETS TAX CREDIT. 

20 (a) IN GENERAL.—Section 45D(f) is amended— 

21 (1) by striking ‘‘2019’’ in paragraph (1)(G) and 

22 inserting ‘‘2017’’, and 

23 (2) by striking ‘‘2024’’ in paragraph (3) and in24 serting ‘‘2022’’. 


lotter on DSKBCFDHB2PROD with BILLS
267 

•HR 1 RH

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

2 section shall apply to calendar years beginning after De3 cember 31, 2017. 

4 SEC. 3407. REPEAL OF CREDIT FOR EXPENDITURES TO PRO5 VIDE ACCESS TO DISABLED INDIVIDUALS. 

6 (a) IN GENERAL.—Subpart D of part IV of subchapter 

7 A of chapter 1 is amended by striking section 44 (and by 

8 striking the item relating to such section in the table of sec9 tions for such subpart). 

10 (b) CONFORMING AMENDMENT.—Section 38(b) is 

11 amended by striking paragraph (7). 

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

13 section shall apply to taxable years beginning after Decem14 ber 31, 2017. 

15 SEC. 3408. MODIFICATION OF CREDIT FOR PORTION OF EM16 PLOYER SOCIAL SECURITY TAXES PAID WITH 

17 RESPECT TO EMPLOYEE TIPS. 

18 (a) CREDIT DETERMINED WITH RESPECT TO MIN19 IMUM WAGE AS IN EFFECT.—Section 45B(b)(1)(B) is 

20 amended by striking ‘‘as in effect on January 1, 2007, 

21 and’’. 

22 (b) INFORMATION RETURN REQUIREMENT.—Section 

23 45B is amended by redesignating subsections (c) and (d) 

24 as subsections (d) and (e), respectively, and by inserting 

25 after subsection (b) the following new subsection: 


lotter on DSKBCFDHB2PROD with BILLS
268 

•HR 1 RH

1 ‘‘(c) INFORMATION RETURN REQUIREMENT.— 

2 ‘‘(1) IN GENERAL.—No credit shall be determined 

3 under subsection (a) with respect to any food or bev4 erage establishment of any taxpayer for any taxable 

5 year unless such taxpayer has, with respect to the cal6 endar year which ends in or with such taxable year— 

7 ‘‘(A) made a report to the Secretary show8 ing the information described in section 

9 6053(c)(1) with respect to such food or beverage 

10 establishment, and 

11 ‘‘(B) furnished written statements to each 

12 employee of such food or beverage establishment 

13 showing the information described in section 

14 6053(c)(2). 

15 ‘‘(2) ALLOCATION OF 10 PERCENT OF GROSS RE16 CEIPTS.—For purposes of determining the informa17 tion referred to in subparagraphs (A) and (B), section 

18 6053(c)(3)(A)(i) shall be applied by substituting ‘10 

19 percent’ for ‘8 percent’. For purposes of section 

20 6053(c)(5), any reference to section 6053(c)(3)(B) 

21 contained therein shall be treated as including a ref22 erence to this paragraph. 

23 ‘‘(3) FOOD OR BEVERAGE ESTABLISHMENT.—For 

24 purposes of this subsection, the term ‘food or beverage 

25 establishment’ means any trade or business (or porVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00268 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
269 

•HR 1 RH

1 tion thereof) which would be a large food or beverage 

2 establishment (as defined in section 6053(c)(4)) if 

3 such section were applied without regard to subpara4 graph (C) thereof.’’. 

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

6 section shall apply to taxable years beginning after Decem7 ber 31, 2017. 

8 Subtitle F—Energy Credits 

9 SEC. 3501. MODIFICATIONS TO CREDIT FOR ELECTRICITY 

10 PRODUCED FROM CERTAIN RENEWABLE RE11 SOURCES. 

12 (a) TERMINATION OF INFLATION ADJUSTMENT.—Sec13 tion 45(b)(2) is amended— 

14 (1) by striking ‘‘The 1.5 cent amount’’ and in15 serting the following: 

16 ‘‘(A) IN GENERAL.—The 1.5 cent amount’’, 

17 and 

18 (2) by adding at the end the following new sub19 paragraph: 

20 ‘‘(B) TERMINATION.—Subparagraph (A) 

21 shall not apply with respect to any electricity or 

22 refined coal produced at a facility the construc23 tion of which begins after the date of the enact24 ment of this subparagraph.’’. 


lotter on DSKBCFDHB2PROD with BILLS
270 

•HR 1 RH

1 (b) SPECIAL RULE FOR DETERMINATION OF BEGIN2 NING OF CONSTRUCTION.—Section 45(e) is amended by 

3 adding at the end the following new paragraph: 

4 ‘‘(12) SPECIAL RULE FOR DETERMINING BEGIN5 NING OF CONSTRUCTION.—For purposes of subsection 

6 (d), the construction of any facility, modification, im7 provement, addition, or other property shall not be 

8 treated as beginning before any date unless there is a 

9 continuous program of construction which begins be10 fore such date and ends on the date that such prop11 erty is placed in service.’’. 

12 (c) EFFECTIVE DATES.— 

13 (1) TERMINATION OF INFLATION ADJUSTMENT.— 

14 The amendments made by subsection (a) shall apply 

15 to taxable years ending after the date of the enact16 ment of this Act. 

17 (2) SPECIAL RULE FOR DETERMINATION OF BE18 GINNING OF CONSTRUCTION.—The amendment made 

19 by subsection (b) shall apply to taxable years begin20 ning before, on, or after the date of the enactment of 

21 this Act. 

22 SEC. 3502. MODIFICATION OF THE ENERGY INVESTMENT 

23 TAX CREDIT. 

24 (a) EXTENSION OF SOLAR ENERGY PROPERTY.—Sec25 tion 48(a)(3)(A)(ii) is amended by striking ‘‘periods ending 


lotter on DSKBCFDHB2PROD with BILLS
271 

•HR 1 RH

1 before January 1, 2017’’ and inserting ‘‘property the con2 struction of which begins before January 1, 2022’’. 

3 (b) EXTENSION OF QUALIFIED FUEL CELL PROP4 ERTY.—Section 48(c)(1)(D) is amended by striking ‘‘for 

5 any period after December 31, 2016’’ and inserting ‘‘the 

6 construction of which does not begin before January 1, 

7 2022’’. 

8 (c) EXTENSION OF QUALIFIED MICROTURBINE PROP9 ERTY.—Section 48(c)(2)(D) is amended by striking ‘‘for 

10 any period after December 31, 2016’’ and inserting ‘‘the 

11 construction of which does not begin before January 1, 

12 2022’’. 

13 (d) EXTENSION OF COMBINED HEAT AND POWER SYS14 TEM PROPERTY.—Section 48(c)(3)(A)(iv) is amended by 

15 striking ‘‘which is placed in service before January 1, 2017’’ 

16 and inserting ‘‘the construction of which begins before Jan17 uary 1, 2022’’. 

18 (e) EXTENSION OF QUALIFIED SMALL WIND ENERGY

19 PROPERTY.—Section 48(c)(4)(C) is amended by striking 

20 ‘‘for any period after December 31, 2016’’ and inserting 

21 ‘‘the construction of which does not begin before January 

22 1, 2022’’. 

23 (f) EXTENSION OF THERMAL ENERGY PROPERTY.— 

24 Section 48(a)(3)(A)(vii) is amended by striking ‘‘periods 


lotter on DSKBCFDHB2PROD with BILLS
272 

•HR 1 RH

1 ending before January 1, 2017’’ and inserting ‘‘property 

2 the construction of which begins before January 1, 2022’’. 

3 (g) PHASEOUT OF 30 PERCENT CREDIT RATE FOR

4 FUEL CELL AND SMALL WIND ENERGY PROPERTY.—Sec5 tion 48(a) is amended by adding at the end the following 

6 new paragraph: 

7 ‘‘(7) PHASEOUT FOR QUALIFIED FUEL CELL

8 PROPERTY AND QUALIFIED SMALL WIND ENERGY

9 PROPERTY.— 

10 ‘‘(A) IN GENERAL.—In the case of qualified 

11 fuel cell property or qualified small wind energy 

12 property, the construction of which begins before 

13 January 1, 2022, the energy percentage deter14 mined under paragraph (2) shall be equal to— 

15 ‘‘(i) in the case of any property the 

16 construction of which begins after December 

17 31, 2019, and before January 1, 2021, 26 

18 percent, and 

19 ‘‘(ii) in the case of any property the 

20 construction of which begins after December 

21 31, 2020, and before January 1, 2022, 22 

22 percent. 

23 ‘‘(B) PLACED IN SERVICE DEADLINE.—In 

24 the case of any qualified fuel cell property or 

25 qualified small wind energy property, the conVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00272 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
273 

•HR 1 RH

1 struction of which begins before January 1, 

2 2022, and which is not placed in service before 

3 January 1, 2024, the energy percentage deter4 mined under paragraph (2) shall be equal to 10 

5 percent.’’. 

6 (h) PHASEOUT FOR FIBER-OPTIC SOLAR ENERGY

7 PROPERTY.—Subparagraphs (A) and (B) of section 

8 48(a)(6) are each amended by inserting ‘‘or (3)(A)(ii)’’ 

9 after ‘‘paragraph (3)(A)(i)’’. 

10 (i) TERMINATION OF SOLAR ENERGY PROPERTY.— 

11 Section 48(a)(3)(A)(i) is amended by inserting ‘‘, the con12 struction of which begins before January 1, 2028, and’’ 

13 after ‘‘equipment’’. 

14 (j) TERMINATION OF GEOTHERMAL ENERGY PROP15 ERTY.—Section 48(a)(3)(A)(iii) is amended by inserting ‘‘, 

16 the construction of which begins before January 1, 2028, 

17 and’’ after ‘‘equipment’’. 

18 (k) SPECIAL RULE FOR DETERMINATION OF BEGIN19 NING OF CONSTRUCTION.—Section 48(c) is amended by 

20 adding at the end the following new paragraph: 

21 ‘‘(5) SPECIAL RULE FOR DETERMINING BEGIN22 NING OF CONSTRUCTION.—The construction of any fa23 cility, modification, improvement, addition, or other 

24 property shall not be treated as beginning before any 

25 date unless there is a continuous program of construcVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00273 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
274 

•HR 1 RH

1 tion which begins before such date and ends on the 

2 date that such property is placed in service.’’. 

3 (l) EFFECTIVE DATE.— 

4 (1) IN GENERAL.—Except as otherwise provided 

5 in this subsection, the amendments made by this sec6 tion shall apply to periods after December 31, 2016, 

7 under rules similar to the rules of section 48(m) of the 

8 Internal Revenue Code of 1986 (as in effect on the 

9 day before the date of the enactment of the Revenue 

10 Reconciliation Act of 1990). 

11 (2) EXTENSION OF COMBINED HEAT AND POWER

12 SYSTEM PROPERTY.—The amendment made by sub13 section (d) shall apply to property placed in service 

14 after December 31, 2016. 

15 (3) PHASEOUTS AND TERMINATIONS.—The 

16 amendments made by subsections (g), (h), (i), and (j) 

17 shall take effect on the date of the enactment of this 

18 Act. 

19 (4) SPECIAL RULE FOR DETERMINATION OF BE20 GINNING OF CONSTRUCTION.—The amendment made 

21 by subsection (k) shall apply to taxable years begin22 ning before, on, or after the date of the enactment of 

23 this Act. 


lotter on DSKBCFDHB2PROD with BILLS
275 

•HR 1 RH

1 SEC. 3503. EXTENSION AND PHASEOUT OF RESIDENTIAL 

2 ENERGY EFFICIENT PROPERTY. 

3 (a) EXTENSION.—Section 25D(h) is amended by strik4 ing ‘‘December 31, 2016 (December 31, 2021, in the case 

5 of any qualified solar electric property expenditures and 

6 qualified solar water heating property expenditures)’’ and 

7 inserting ‘‘December 31, 2021’’. 

8 (b) PHASEOUT.— 

9 (1) IN GENERAL.—Paragraphs (3), (4), and (5) 

10 of section 25D(a) are amended by striking ‘‘30 per11 cent’’ each place it appears and inserting ‘‘the appli12 cable percentage’’. 

13 (2) CONFORMING AMENDMENT.—Section 25D(g) 

14 of such Code is amended by striking ‘‘paragraphs (1) 

15 and (2) of’’. 

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

17 section shall apply to property placed in service after De18 cember 31, 2016. 

19 SEC. 3504. REPEAL OF ENHANCED OIL RECOVERY CREDIT. 

20 (a) IN GENERAL.—Subpart D of part IV of subchapter 

21 A of chapter 1 is amended by striking section 43 (and by 

22 striking the item relating to such section in the table of sec23 tions for such subpart). 

24 (b) CONFORMING AMENDMENTS.— 

25 (1) Section 38(b) is amended by striking para26 graph (6). 


lotter on DSKBCFDHB2PROD with BILLS
276 

•HR 1 RH

1 (2) Section 6501(m) is amended by striking 

2 ‘‘43,’’. 

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

4 section shall apply to taxable years beginning after Decem5 ber 31, 2017. 

6 SEC. 3505. REPEAL OF CREDIT FOR PRODUCING OIL AND 

7 GAS FROM MARGINAL WELLS. 

8 (a) IN GENERAL.—Subpart D of part IV of subchapter 

9 A of chapter 1 is amended by striking section 45I (and by 

10 striking the item relating to such section in the table of sec11 tions for such subpart). 

12 (b) CONFORMING AMENDMENT.—Section 38(b) is 

13 amended by striking paragraph (19). 

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

15 section shall apply to taxable years beginning after Decem16 ber 31, 2017. 

17 SEC. 3506. MODIFICATIONS OF CREDIT FOR PRODUCTION 

18 FROM ADVANCED NUCLEAR POWER FACILI19 TIES. 

20 (a) TREATMENT OF UNUTILIZED LIMITATION

21 AMOUNTS.—Section 45J(b) is amended— 

22 (1) in paragraph (4), by inserting ‘‘or any 

23 amendment to’’ after ‘‘enactment of’’; and 

24 (2) by adding at the end the following new para25 graph: 


lotter on DSKBCFDHB2PROD with BILLS
277 

•HR 1 RH

1 ‘‘(5) ALLOCATION OF UNUTILIZED LIMITATION.— 

2 ‘‘(A) IN GENERAL.—Any unutilized na3 tional megawatt capacity limitation shall be al4 located by the Secretary under paragraph (3) as 

5 rapidly as is practicable after December 31, 

6 2020— 

7 ‘‘(i) first to facilities placed in service 

8 on or before such date to the extent that 

9 such facilities did not receive an allocation 

10 equal to their full nameplate capacity; and 

11 ‘‘(ii) then to facilities placed in service 

12 after such date in the order in which such 

13 facilities are placed in service. 

14 ‘‘(B) UNUTILIZED NATIONAL MEGAWATT CA15 PACITY LIMITATION.—The term ‘unutilized na16 tional megawatt capacity limitation’ means the 

17 excess (if any) of— 

18 ‘‘(i) 6,000 megawatts, over 

19 ‘‘(ii) the aggregate amount of national 

20 megawatt capacity limitation allocated by 

21 the Secretary before January 1, 2021, re22 duced by any amount of such limitation 

23 which was allocated to a facility which was 

24 not placed in service before such date. 


lotter on DSKBCFDHB2PROD with BILLS
278 

•HR 1 RH

1 ‘‘(C) COORDINATION WITH OTHER PROVI2 SIONS.—In the case of any unutilized national 

3 megawatt capacity limitation allocated by the 

4 Secretary pursuant to this paragraph— 

5 ‘‘(i) such allocation shall be treated for 

6 purposes of this section in the same manner 

7 as an allocation of national megawatt ca8 pacity limitation; and 

9 ‘‘(ii) subsection (d)(1)(B) shall not 

10 apply to any facility which receives such al11 location.’’. 

12 (b) TRANSFER OF CREDIT BY CERTAIN PUBLIC ENTI13 TIES.— 

14 (1) IN GENERAL.—Section 45J is amended— 

15 (A) by redesignating subsection (e) as sub16 section (f); and 

17 (B) by inserting after subsection (d) the fol18 lowing new subsection: 

19 ‘‘(e) TRANSFER OF CREDIT BY CERTAIN PUBLIC ENTI20 TIES.— 

21 ‘‘(1) IN GENERAL.—If, with respect to a credit 

22 under subsection (a) for any taxable year— 

23 ‘‘(A) the taxpayer would be a qualified pub24 lic entity; and 


lotter on DSKBCFDHB2PROD with BILLS
279 

•HR 1 RH

1 ‘‘(B) such entity elects the application of 

2 this paragraph for such taxable year with respect 

3 to all (or any portion specified in such election) 

4 of such credit, 

5 the eligible project partner specified in such election 

6 (and not the qualified public entity) shall be treated 

7 as the taxpayer for purposes of this title with respect 

8 to such credit (or such portion thereof). 

9 ‘‘(2) DEFINITIONS.—For purposes of this sub10 section— 

11 ‘‘(A) QUALIFIED PUBLIC ENTITY.—The term 

12 ‘qualified public entity’ means— 

13 ‘‘(i) a Federal, State, or local govern14 ment entity, or any political subdivision, 

15 agency, or instrumentality thereof; 

16 ‘‘(ii) a mutual or cooperative electric 

17 company described in section 501(c)(12) or 

18 section 1381(a)(2); or 

19 ‘‘(iii) a not-for-profit electric utility 

20 which has or had received a loan or loan 

21 guarantee under the Rural Electrification 

22 Act of 1936. 

23 ‘‘(B) ELIGIBLE PROJECT PARTNER.—The 

24 term ‘eligible project partner’ means— 


lotter on DSKBCFDHB2PROD with BILLS
280 

•HR 1 RH

1 ‘‘(i) any person responsible for, or par2 ticipating in, the design or construction of 

3 the advanced nuclear power facility to 

4 which the credit under subsection (a) re5 lates; 

6 ‘‘(ii) any person who participates in 

7 the provision of the nuclear steam supply 

8 system to the advanced nuclear power facil9 ity to which the credit under subsection (a) 

10 relates; 

11 ‘‘(iii) any person who participates in 

12 the provision of nuclear fuel to the advanced 

13 nuclear power facility to which the credit 

14 under subsection (a) relates; or 

15 ‘‘(iv) any person who has an owner16 ship interest in such facility. 

17 ‘‘(3) SPECIAL RULES.— 

18 ‘‘(A) APPLICATION TO PARTNERSHIPS.—In 

19 the case of a credit under subsection (a) which 

20 is determined at the partnership level— 

21 ‘‘(i) for purposes of paragraph (1)(A), 

22 a qualified public entity shall be treated as 

23 the taxpayer with respect to such entity’s 

24 distributive share of such credit; and 


lotter on DSKBCFDHB2PROD with BILLS
281 

•HR 1 RH

1 ‘‘(ii) the term ‘eligible project partner’ 

2 shall include any partner of the partner3 ship. 

4 ‘‘(B) TAXABLE YEAR IN WHICH CREDIT

5 TAKEN INTO ACCOUNT.—In the case of any credit 

6 (or portion thereof) with respect to which an 

7 election is made under paragraph (1), such cred8 it shall be taken into account in the first taxable 

9 year of the eligible project partner ending with, 

10 or after, the qualified public entity’s taxable year 

11 with respect to which the credit was determined. 

12 ‘‘(C) TREATMENT OF TRANSFER UNDER PRI13 VATE USE RULES.—For purposes of section 

14 141(b)(1), any benefit derived by an eligible 

15 project partner in connection with an election 

16 under this subsection shall not be taken into ac17 count as a private business use.’’. 

18 (2) SPECIAL RULE FOR PROCEEDS OF TRANS19 FERS FOR MUTUAL OR COOPERATIVE ELECTRIC COM20 PANIES.—Section 501(c)(12) of such Code is amended 

21 by adding at the end the following new subparagraph: 

22 ‘‘(I) In the case of a mutual or cooperative 

23 electric company described in this paragraph or 

24 an organization described in section 1381(a)(2), 

25 income received or accrued in connection with 


lotter on DSKBCFDHB2PROD with BILLS
282 

•HR 1 RH

1 an election under section 45J(e)(1) shall be treat2 ed as an amount collected from members for the 

3 sole purpose of meeting losses and expenses.’’. 

4 (c) EFFECTIVE DATES.— 

5 (1) TREATMENT OF UNUTILIZED LIMITATION

6 AMOUNTS.—The amendment made by subsection (a) 

7 shall take effect on the date of the enactment of this 

8 Act. 

9 (2) TRANSFER OF CREDIT BY CERTAIN PUBLIC

10 ENTITIES.—The amendments made by subsection (b) 

11 shall apply to taxable years beginning after the date 

12 of the enactment of this Act. 

13 Subtitle G—Bond Reforms 

14 SEC. 3601. TERMINATION OF PRIVATE ACTIVITY BONDS. 

15 (a) IN GENERAL.—Paragraph (1) of section 103(b) is 

16 amended— 

17 (1) by striking ‘‘which is not a qualified bond 

18 (within the meaning of section 141)’’, and 

19 (2) by striking ‘‘WHICH IS NOT A QUALIFIED

20 BOND’’ in the heading thereof. 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Subpart A of part IV of subchapter B of 

23 chapter 1 is amended by striking sections 142, 143, 

24 144, 145, 146, and 147 (and by striking each of the 


lotter on DSKBCFDHB2PROD with BILLS
283 

•HR 1 RH

1 items relating to such sections in the table of sections 

2 for such subpart). 

3 (2) Section 25 is amended by adding at the end 

4 the following new subsection: 

5 ‘‘(j) COORDINATION WITH REPEAL OF PRIVATE ACTIV6 ITY BONDS.—Any reference to section 143, 144, or 146 shall 

7 be treated as a reference to such section as in effect before 

8 its repeal by the Tax Cuts and Jobs Act.’’. 

9 (3) Section 26(b)(2) is amended by striking sub10 paragraph (D). 

11 (4) Section 141(b) is amended by striking para12 graphs (5) and (9). 

13 (5) Section 141(d) is amended by striking para14 graph (5). 

15 (6) Section 141 is amended by striking sub16 section (e). 

17 (7) Section 148(f)(4) is amended— 

18 (A) by striking ‘‘(determined in accordance 

19 with section 147(b)(2)(A))’’ in the flush matter 

20 following subparagraph (A)(ii) and inserting 

21 ‘‘(determined by taking into account the respec22 tive issue prices of the bonds issued as part of the 

23 issue)’’, and 

24 (B) by striking the last sentence of subpara25 graph (D)(v). 


lotter on DSKBCFDHB2PROD with BILLS
284 

•HR 1 RH

1 (8) Clause (iv) of section 148(f)(4)(C) is amend2 ed to read as follows: 

3 ‘‘(iv) CONSTRUCTION ISSUE.—For pur4 poses of this subparagraph— 

5 ‘‘(I) IN GENERAL.—The term ‘con6 struction issue’ means any issue if at 

7 least 75 percent of the available con8 struction proceeds of such issue are to 

9 be used for construction expenditures. 

10 ‘‘(II) CONSTRUCTION.—The term 

11 ‘construction’ includes reconstruction 

12 and rehabilitation.’’. 

13 (9) Section 149(b)(3) is amended by striking 

14 subparagraph (C). 

15 (10) Section 149(e)(2) is amended— 

16 (A) by striking subparagraphs (C), (D), 

17 and (F) and by redesignating subparagraphs (E) 

18 and (G) as subparagraphs (C) and (D), respec19 tively, and 

20 (B) by striking the second sentence. 

21 (11) Section 149(f)(6) is amended— 

22 (A) by striking subparagraph (B), and 

23 (B) by striking ‘‘For purposes of this sub24 section’’ and all that follows through ‘‘The term’’ 


lotter on DSKBCFDHB2PROD with BILLS
285 

•HR 1 RH

1 and inserting the following: ‘‘For purposes of 

2 this subsection, the term’’. 

3 (12) Section 150(e)(3) is amended to read as fol4 lows: 

5 ‘‘(3) PUBLIC APPROVAL REQUIREMENT.—A bond 

6 shall not be treated as part of an issue which meets 

7 the requirements of paragraph (1) unless such bond 

8 satisfies the requirements of section 147(f)(2) (as in 

9 effect before its repeal by the Tax Cuts and Jobs 

10 Act).’’. 

11 (13) Section 269A(b)(3) is amended by striking 

12 ‘‘144(a)(3)’’ and inserting ‘‘414(n)(6)(A)’’. 

13 (14) Section 414(m)(5) is amended by striking 

14 ‘‘section 144(a)(3)’’ and inserting ‘‘subsection 

15 (n)(6)(A)’’. 

16 (15) Section 414(n)(6)(A) is amended to read as 

17 follows: 

18 ‘‘(A) RELATED PERSONS.—A person is a re19 lated person to another person if— 

20 ‘‘(i) the relationship between such per21 sons would result in a disallowance of losses 

22 under section 267 or 707(b), or 

23 ‘‘(ii) such persons are members of the 

24 same controlled group of corporations (as 

25 defined in section 1563(a), except that ‘more 


lotter on DSKBCFDHB2PROD with BILLS
286 

•HR 1 RH

1 than 50 percent’ shall be substituted for ‘at 

2 least 80 percent’ each place it appears 

3 therein).’’. 

4 (16) Section 6045(e)(4)(B) is amended by insert5 ing ‘‘(as in effect before its repeal by the Tax Cuts 

6 and Jobs Act)’’ after ‘‘section 143(m)(3)’’. 

7 (17) Section 6654(f)(1) is amended by inserting 

8 ‘‘(as in effect before its repeal by the Tax Cuts and 

9 Jobs Act)’’ after ‘‘section 143(m)’’. 

10 (18) Section 7871(c) is amended— 

11 (A) by striking paragraphs (2) and (3), and 

12 (B) by striking ‘‘TAX-EXEMPT BONDS.—’’ 

13 and all that follows through ‘‘Subsection (a) of 

14 section 103’’ and inserting the following: ‘‘TAX15 EXEMPT BONDS.—Subsection (a) of section 103’’. 

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

17 section shall apply to bonds issued after December 31, 2017. 

18 SEC. 3602. REPEAL OF ADVANCE REFUNDING BONDS. 

19 (a) IN GENERAL.—Paragraph (1) of section 149(d) is 

20 amended by striking ‘‘as part of an issue described in para21 graph (2), (3), or (4).’’ and inserting ‘‘to advance refund 

22 another bond.’’. 

23 (b) CONFORMING AMENDMENTS.— 


lotter on DSKBCFDHB2PROD with BILLS
287 

•HR 1 RH

1 (1) Section 149(d) is amended by striking para2 graphs (2), (3), (4), and (6) and by redesignating 

3 paragraphs (5) and (7) as paragraphs (2) and (3). 

4 (2) Section 148(f)(4)(C) is amended by striking 

5 clause (xiv) and by redesignating clauses (xv) to 

6 (xvii) as clauses (xiv) to (xvi). 

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

8 section shall apply to advance refunding bonds issued after 

9 December 31, 2017. 

10 SEC. 3603. REPEAL OF TAX CREDIT BONDS. 

11 (a) IN GENERAL.—Part IV of subchapter A of chapter 

12 1 is amended by striking subparts H, I, and J (and by 

13 striking the items relating to such subparts in the table of 

14 subparts for such part). 

15 (b) PAYMENTS TO ISSUERS.—Subchapter B of chapter 

16 65 is amended by striking section 6431 (and by striking 

17 the item relating to such section in the table of sections for 

18 such subchapter). 

19 (c) CONFORMING AMENDMENTS.— 

20 (1) Part IV of subchapter U of chapter 1 is 

21 amended by striking section 1397E (and by striking 

22 the item relating to such section in the table of sec23 tions for such part). 


lotter on DSKBCFDHB2PROD with BILLS
288 

•HR 1 RH

1 (2) Section 54(l)(3)(B) is amended by inserting 

2 ‘‘(as in effect before its repeal by the Tax Cuts and 

3 Jobs Act)’’ after ‘‘section 1397E(I)’’. 

4 (3) Section 6211(b)(4)(A) is amended by striking 

5 ‘‘, and 6431’’ and inserting ‘‘and’’ before ‘‘36B’’. 

6 (4) Section 6401(b)(1) is amended by striking 

7 ‘‘G, H, I, and J’’ and inserting ‘‘and G’’. 

8 (d) EFFECTIVE DATE.—The amendments made by this 

9 section shall apply to bonds issued after December 31, 2017. 

10 SEC. 3604. NO TAX EXEMPT BONDS FOR PROFESSIONAL 

11 STADIUMS. 

12 (a) IN GENERAL.—Section 103(b), as amended by this 

13 Act, is further amended by adding at the end the following 

14 new paragraph: 

15 ‘‘(4) PROFESSIONAL STADIUM BOND.—Any pro16 fessional stadium bond.’’. 

17 (b) PROFESSIONAL STADIUM BOND DEFINED.—Sub18 section (c) of section 103 is amended by adding at the end 

19 the following new paragraph: 

20 ‘‘(3) PROFESSIONAL STADIUM BOND.—The term 

21 ‘professional stadium bond’ means any bond issued as 

22 part of an issue any proceeds of which are used to fi23 nance or refinance capital expenditures allocable to a 

24 facility (or appurtenant real property) which, during 

25 at least 5 days during any calendar year, is used as 


lotter on DSKBCFDHB2PROD with BILLS
289 

•HR 1 RH

1 a stadium or arena for professional sports exhibitions, 

2 games, or training.’’. 

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

4 section shall apply to bonds issued after November 2, 2017. 

5 Subtitle H—Insurance 

6 SEC. 3701. NET OPERATING LOSSES OF LIFE INSURANCE 

7 COMPANIES. 

8 (a) IN GENERAL.—Section 805(b) is amended by strik9 ing paragraph (4) and by redesignating paragraph (5) as 

10 paragraph (4). 

11 (b) CONFORMING AMENDMENTS.— 

12 (1) Part I of subchapter L of chapter 1 is 

13 amended by striking section 810 (and by striking the 

14 item relating to such section in the table of sections 

15 for such part). 

16 (2) Part III of subchapter L of chapter 1 is 

17 amended by striking section 844 (and by striking the 

18 item relating to such section in the table of sections 

19 for such part). 

20 (3) Section 381 is amended by striking sub21 section (d). 

22 (4) Section 805(a)(4)(B)(ii) is amended to read 

23 as follows: 

24 ‘‘(ii) the deduction allowed under sec25 tion 172,’’. 


lotter on DSKBCFDHB2PROD with BILLS
290 

•HR 1 RH

1 (5) Section 805(a) is amended by striking para2 graph (5). 

3 (6) Section 953(b)(1)(B) is amended to read as 

4 follows: 

5 ‘‘(B) So much of section 805(a)(8) as relates 

6 to the deduction allowed under section 172.’’. 

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

8 section shall apply to losses arising in taxable years begin9 ning after December 31, 2017. 

10 SEC. 3702. REPEAL OF SMALL LIFE INSURANCE COMPANY 

11 DEDUCTION. 

12 (a) IN GENERAL.—Part I of subchapter L of chapter 

13 1 is amended by striking section 806 (and by striking the 

14 item relating to such section in the table of sections for such 

15 part). 

16 (b) CONFORMING AMENDMENTS.— 

17 (1) Section 453B(e) is amended— 

18 (A) by striking ‘‘(as defined in section 

19 806(b)(3))’’ in paragraph (2)(B), and 

20 (B) by adding at the end the following new 

21 paragraph: 

22 ‘‘(3) NONINSURANCE BUSINESS.— 

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

24 subsection, the term ‘noninsurance business’ 


lotter on DSKBCFDHB2PROD with BILLS
291 

•HR 1 RH

1 means any activity which is not an insurance 

2 business. 

3 ‘‘(B) CERTAIN ACTIVITIES TREATED AS IN4 SURANCE BUSINESSES.—For purposes of sub5 paragraph (A), any activity which is not an in6 surance business shall be treated as an insurance 

7 business if— 

8 ‘‘(i) it is of a type traditionally car9 ried on by life insurance companies for in10 vestment purposes, but only if the carrying 

11 on of such activity (other than in the case 

12 of real estate) does not constitute the active 

13 conduct of a trade or business, or 

14 ‘‘(ii) it involves the performance of ad15 ministrative services in connection with 

16 plans providing life insurance, pension, or 

17 accident and health benefits.’’. 

18 (2) Section 465(c)(7)(D)(v)(II) is amended by 

19 striking ‘‘section 806(b)(3)’’ and inserting ‘‘section 

20 453B(e)(3)’’. 

21 (3) Section 801(a)(2) is amended by striking 

22 subparagraph (C). 

23 (4) Section 804 is amended by striking 

24 ‘‘means—’’ and all that follows and inserting ‘‘means 

25 the general deductions provided in section 805.’’. 


lotter on DSKBCFDHB2PROD with BILLS
292 

•HR 1 RH

1 (5) Section 805(a)(4)(B), as amended by section 

2 3701, is amended by striking clause (i) and by redes3 ignating clauses (ii), (iii), and (iv) as clauses (i), 

4 (ii), and (iii), respectively. 

5 (6) Section 805(b)(2)(A) is amended by striking 

6 clause (iii) and by redesignating clauses (iv) and (v) 

7 as clauses (iii) and (iv), respectively. 

8 (7) Section 842(c) is amended by striking para9 graph (1) and by redesignating paragraphs (2) and 

10 (3) as paragraphs (1) and (2), respectively. 

11 (8) Section 953(b)(1), as amended by section 

12 3701, is amended by striking subparagraph (A) and 

13 by redesignating subparagraphs (B) and (C) as sub14 paragraphs (A) and (B), respectively. 

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

16 section shall apply to taxable years beginning after Decem17 ber 31, 2017. 

18 SEC. 3703. SURTAX ON LIFE INSURANCE COMPANY TAXABLE 

19 INCOME. 

20 (a) IN GENERAL.—Section 801(a)(1) is amended— 

21 (1) by striking ‘‘consist of a tax’’ and insert 

22 ‘‘consist of the sum of— 

23 ‘‘(A) a tax’’, and 

24 (2) by striking the period at the end and insert25 ing ‘‘, and’’, and 


lotter on DSKBCFDHB2PROD with BILLS
293 

•HR 1 RH

1 (3) by adding at the end the following new sub2 paragraph: 

3 ‘‘(B) a tax equal to 8 percent of the life in4 surance company taxable income.’’. 

5 SEC. 3704. ADJUSTMENT FOR CHANGE IN COMPUTING RE6 SERVES. 

7 (a) IN GENERAL.—Paragraph (1) of section 807(f) is 

8 amended to read as follows: 

9 ‘‘(1) TREATMENT AS CHANGE IN METHOD OF AC10 COUNTING.—If the basis for determining any item re11 ferred to in subsection (c) as of the close of any tax12 able year differs from the basis for such determination 

13 as of the close of the preceding taxable year, then so 

14 much of the difference between— 

15 ‘‘(A) the amount of the item at the close of 

16 the taxable year, computed on the new basis, and 

17 ‘‘(B) the amount of the item at the close of 

18 the taxable year, computed on the old basis, 

19 as is attributable to contracts issued before the taxable 

20 year shall be taken into account under section 481 as 

21 adjustments attributable to a change in method of ac22 counting initiated by the taxpayer and made with the 

23 consent of the Secretary.’’. 


lotter on DSKBCFDHB2PROD with BILLS
294 

•HR 1 RH

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

2 section shall apply to taxable years beginning after Decem3 ber 31, 2017. 

4 SEC. 3705. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS 

5 TO SHAREHOLDERS FROM PRE-1984 POLICY6 HOLDERS SURPLUS ACCOUNT. 

7 (a) IN GENERAL.—Subpart D of part I of subchapter 

8 L is amended by striking section 815 (and by striking the 

9 item relating to such section in the table of sections for such 

10 subpart). 

11 (b) CONFORMING AMENDMENT.—Section 801 is 

12 amended by striking subsection (c). 

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

14 section shall apply to taxable years beginning after Decem15 ber 31, 2017. 

16 (d) PHASED INCLUSION OF REMAINING BALANCE OF

17 POLICYHOLDERS SURPLUS ACCOUNTS.—In the case of any 

18 stock life insurance company which has a balance (deter19 mined as of the close of such company’s last taxable year 

20 beginning before January 1, 2018) in an existing policy21 holders surplus account (as defined in section 815 of the 

22 Internal Revenue Code of 1986, as in effect before its re23 peal), the tax imposed by section 801 of such Code for the 

24 first 8 taxable years beginning after December 31, 2017, 


lotter on DSKBCFDHB2PROD with BILLS
295 

•HR 1 RH

1 shall be the amount which would be imposed by such section 

2 for such year on the sum of— 

3 (1) life insurance company taxable income for 

4 such year (within the meaning of such section 801 but 

5 not less than zero), plus 

(2) 1 6 ⁄8 of such balance. 

7 SEC. 3706. MODIFICATION OF PRORATION RULES FOR 

8 PROPERTY AND CASUALTY INSURANCE COM9 PANIES. 

10 (a) IN GENERAL.—Section 832(b)(5)(B) is amended 

11 by striking ‘‘15 percent’’ and inserting ‘‘26.25 percent’’. 

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

13 section shall apply to taxable years beginning after Decem14 ber 31, 2017. 

15 SEC. 3707. MODIFICATION OF DISCOUNTING RULES FOR 

16 PROPERTY AND CASUALTY INSURANCE COM17 PANIES. 

18 (a) MODIFICATION OF RATE OF INTEREST USED TO

19 DISCOUNT UNPAID LOSSES.—Paragraph (2) of section 

20 846(c) is amended to read as follows: 

21 ‘‘(2) DETERMINATION OF ANNUAL RATE.—The 

22 annual rate determined by the Secretary under this 

23 paragraph for any calendar year shall be a rate de24 termined on the basis of the corporate bond yield 

25 curve (as defined in section 430(h)(2)(D)(i)).’’. 


lotter on DSKBCFDHB2PROD with BILLS
296 

•HR 1 RH

1 (b) MODIFICATION OF COMPUTATIONAL RULES FOR

2 LOSS PAYMENT PATTERNS.—Section 846(d)(3) is amended 

3 by striking subparagraphs (B) through (G) and inserting 

4 the following new subparagraphs: 

5 ‘‘(B) TREATMENT OF CERTAIN LOSSES.— 

6 Losses which would have been treated as paid in 

7 the last year of the period applicable under sub8 paragraph (A)(i) or (A)(ii) shall be treated as 

9 paid in the following manner: 

10 ‘‘(i) 3-YEAR LOSS PAYMENT PAT11 TERN.— 

12 ‘‘(I) IN GENERAL.—The period 

13 taken into account under subpara14 graph (A)(i) shall be extended to the 

15 extent required under subclause (II). 

16 ‘‘(II) COMPUTATION OF EXTEN17 SION.—The amount of losses which 

18 would have been treated as paid in the 

19 3d year after the accident year shall be 

20 treated as paid in such 3d year and 

21 each subsequent year in an amount 

22 equal to the average of the losses treat23 ed as paid in the 1st and 2d years 

24 after the accident year (or, if lesser, the 

25 portion of the unpaid losses not thereVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00296 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
297 

•HR 1 RH

1 tofore taken into account). To the ex2 tent such unpaid losses have not been 

3 treated as paid before the 18th year 

4 after the accident year, they shall be 

5 treated as paid in such 18th year. 

6 ‘‘(ii) 10-YEAR LOSS PAYMENT PAT7 TERN.— 

8 ‘‘(I) IN GENERAL.—The period 

9 taken into account under subpara10 graph (A)(ii) shall be extended to the 

11 extent required under subclause (II). 

12 ‘‘(II) COMPUTATION OF EXTEN13 SION.—The amount of losses which 

14 would have been treated as paid in the 

15 10th year after the accident year shall 

16 be treated as paid in such 10th year 

17 and each subsequent year in an 

18 amount equal to the amount of the av19 erage of the losses treated as paid in 

20 the 7th, 8th, and 9th years after the ac21 cident year (or, if lesser, the portion of 

22 the unpaid losses not theretofore taken 

23 into account). To the extent such un24 paid losses have not been treated as 

25 paid before the 25th year after the acVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00297 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
298 

•HR 1 RH

1 cident year, they shall be treated as 

2 paid in such 25th year.’’. 

3 (c) REPEAL OF HISTORICAL PAYMENT PATTERN

4 ELECTION.—Section 846 is amended by striking subsection 

5 (e) and by redesignating subsections (f) and (g) as sub6 sections (e) and (f), respectively. 

7 (d) EFFECTIVE DATE.—The amendments made by this 

8 section shall apply to taxable years beginning after Decem9 ber 31, 2017. 

10 (e) TRANSITIONAL RULE.—For the first taxable year 

11 beginning after December 31, 2017— 

12 (1) the unpaid losses and the expenses unpaid 

13 (as defined in paragraphs (5)(B) and (6) of section 

14 832(b) of the Internal Revenue Code of 1986) at the 

15 end of the preceding taxable year, and 

16 (2) the unpaid losses as defined in sections 

17 807(c)(2) and 805(a)(1) of such Code at the end of the 

18 preceding taxable year, 

19 shall be determined as if the amendments made by this sec20 tion had applied to such unpaid losses and expenses unpaid 

21 in the preceding taxable year and by using the interest rate 

22 and loss payment patterns applicable to accident years end23 ing with calendar year 2018, and any adjustment shall be 

24 taken into account ratably in such first taxable year and 

25 the 7 succeeding taxable years. For subsequent taxable 


lotter on DSKBCFDHB2PROD with BILLS
299 

•HR 1 RH

1 years, such amendments shall be applied with respect to 

2 such unpaid losses and expenses unpaid by using the inter3 est rate and loss payment patterns applicable to accident 

4 years ending with calendar year 2018. 

5 SEC. 3708. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS. 

6 (a) IN GENERAL.—Part III of subchapter L of chapter 

7 1 is amended by striking section 847 (and by striking the 

8 item relating to such section in the table of sections for such 

9 part). 

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

11 section shall apply to taxable years beginning after Decem12 ber 31, 2017. 

13 Subtitle I—Compensation 

14 SEC. 3801. MODIFICATION OF LIMITATION ON EXCESSIVE 

15 EMPLOYEE REMUNERATION. 

16 (a) REPEAL OF PERFORMANCE-BASED COMPENSATION

17 AND COMMISSION EXCEPTIONS FOR LIMITATION ON EXCES18 SIVE EMPLOYEE REMUNERATION.— 

19 (1) IN GENERAL.—Section 162(m)(4) is amended 

20 by striking subparagraphs (B) and (C) and by redes21 ignating subparagraphs (D), (E), (F), and (G) as 

22 subparagraphs (B), (C), (D), and (E), respectively. 

23 (2) CONFORMING AMENDMENTS.— 

24 (A) Paragraphs (5)(E) and (6)(D) of sec25 tion 162(m) are each amended by striking ‘‘subVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00299 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
300 

•HR 1 RH

1 paragraphs (B), (C), and (D)’’ and inserting 

2 ‘‘subparagraph (B)’’. 

3 (B) Paragraphs (5)(G) and (6)(G) of sec4 tion 162(m) are each amended by striking ‘‘(F) 

5 and (G)’’ and inserting ‘‘(D) and (E)’’. 

6 (b) EXPANSION OF APPLICABLE EMPLOYER.—Section 

7 162(m)(2) is amended to read as follows: 

8 ‘‘(2) PUBLICLY HELD CORPORATION.—For pur9 poses of this subsection, the term ‘publicly held cor10 poration’ means any corporation which is an issuer 

11 (as defined in section 3 of the Securities Exchange 

12 Act of 1934 (15 U.S.C. 78c))— 

13 ‘‘(A) the securities of which are required to 

14 be registered under section 12 of such Act (15 

15 U.S.C. 78l), or 

16 ‘‘(B) that is required to file reports under 

17 section 15(d) of such Act (15 U.S.C. 78o(d)).’’. 

18 (c) MODIFICATION OF DEFINITION OF COVERED EM19 PLOYEES.—Section 162(m)(3) is amended— 

20 (1) in subparagraph (A), by striking ‘‘as of the 

21 close of the taxable year, such employee is the chief ex22 ecutive officer of the taxpayer or is’’ and inserting 

23 ‘‘such employee is the principal executive officer or 

24 principal financial officer of the taxpayer at any 

25 time during the taxable year, or was’’, 


lotter on DSKBCFDHB2PROD with BILLS
301 

•HR 1 RH

1 (2) in subparagraph (B)— 

2 (A) by striking ‘‘4’’ and inserting ‘‘3’’, and 

3 (B) by striking ‘‘(other than the chief execu4 tive officer)’’ and inserting ‘‘(other than the 

5 principal executive officer or principal financial 

6 officer)’’, and 

7 (3) by striking ‘‘or’’ at the end of subparagraph 

8 (A), by striking the period at the end of subparagraph 

9 (B) and inserting ‘‘, or’’, and by adding at the end 

10 the following: 

11 ‘‘(C) was a covered employee of the taxpayer 

12 (or any predecessor) for any preceding taxable 

13 year beginning after December 31, 2016. 

14 Such term shall include any employee who would be 

15 described in subparagraph (B) if the reporting de16 scribed in such subparagraph were required as so de17 scribed.’’. 

18 (d) SPECIAL RULE FOR REMUNERATION PAID TO

19 BENEFICIARIES, ETC.—Section 162(m)(4), as amended by 

20 subsection (a), is amended by adding at the end the fol21 lowing new subparagraph: 

22 ‘‘(F) SPECIAL RULE FOR REMUNERATION

23 PAID TO BENEFICIARIES, ETC.—Remuneration 

24 shall not fail to be applicable employee remu25 neration merely because it is includible in the 


lotter on DSKBCFDHB2PROD with BILLS
302 

•HR 1 RH

1 income of, or paid to, a person other than the 

2 covered employee, including after the death of the 

3 covered employee.’’. 

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

5 section shall apply to taxable years beginning after Decem6 ber 31, 2017. 

7 SEC. 3802. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZA8 TION EXECUTIVE COMPENSATION. 

9 (a) IN GENERAL.—Subchapter D of chapter 42 is 

10 amended by adding at the end the following new section: 

11 ‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION 

12 EXECUTIVE COMPENSATION. 

13 ‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 

14 equal to 20 percent of the sum of— 

15 ‘‘(1) so much of the remuneration paid (other 

16 than any excess parachute payment) by an applicable 

17 tax-exempt organization for the taxable year with re18 spect to employment of any covered employee in ex19 cess of $1,000,000, plus 

20 ‘‘(2) any excess parachute payment paid by such 

21 an organization to any covered employee. 

22 ‘‘(b) LIABILITY FOR TAX.—The employer shall be liable 

23 for the tax imposed under subsection (a). 

24 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur25 poses of this section— 


lotter on DSKBCFDHB2PROD with BILLS
303 

•HR 1 RH

1 ‘‘(1) APPLICABLE TAX-EXEMPT ORGANIZATION.— 

2 The term ‘applicable tax-exempt organization’ means 

3 any organization that for the taxable year— 

4 ‘‘(A) is exempt from taxation under section 

5 501(a), 

6 ‘‘(B) is a farmers’ cooperative organization 

7 described in section 521(b)(1), 

8 ‘‘(C) has income excluded from taxation 

9 under section 115(1), or 

10 ‘‘(D) is a political organization described in 

11 section 527(e)(1). 

12 ‘‘(2) COVERED EMPLOYEE.—For purposes of this 

13 section, the term ‘covered employee’ means any em14 ployee (including any former employee) of an appli15 cable tax-exempt organization if the employee— 

16 ‘‘(A) is one of the 5 highest compensated 

17 employees of the organization for the taxable 

18 year, or 

19 ‘‘(B) was a covered employee of the organi20 zation (or any predecessor) for any preceding 

21 taxable year beginning after December 31, 2016. 

22 ‘‘(3) REMUNERATION.—For purposes of this sec23 tion, the term ‘remuneration’ means wages (as de24 fined in section 3401(a)), except that such term shall 


lotter on DSKBCFDHB2PROD with BILLS
304 

•HR 1 RH

1 not include any designated Roth contribution (as de2 fined in section 402A(c)). 

3 ‘‘(4) REMUNERATION FROM RELATED ORGANIZA4 TIONS.— 

5 ‘‘(A) IN GENERAL.—Remuneration of a cov6 ered employee paid by an applicable tax-exempt 

7 organization shall include any remuneration 

8 paid with respect to employment of such em9 ployee by any related person or governmental en10 tity. 

11 ‘‘(B) RELATED ORGANIZATIONS.—A person 

12 or governmental entity shall be treated as related 

13 to an applicable tax-exempt organization if such 

14 person or governmental entity— 

15 ‘‘(i) controls, or is controlled by, the 

16 organization, 

17 ‘‘(ii) is controlled by one or more per18 sons that control the organization, 

19 ‘‘(iii) is a supported organization (as 

20 defined in section 509(f)(2)) during the tax21 able year with respect to the organization, 

22 ‘‘(iv) is a supporting organization de23 scribed in section 509(a)(3) during the tax24 able year with respect to the organization, 

25 or 


lotter on DSKBCFDHB2PROD with BILLS
305 

•HR 1 RH

1 ‘‘(v) in the case of an organization that 

2 is a voluntary employees’ beneficiary asso3 ciation described in section 501(a)(9), estab4 lishes, maintains, or makes contributions to 

5 such voluntary employees’ beneficiary asso6 ciation. 

7 ‘‘(C) LIABILITY FOR TAX.—In any case in 

8 which remuneration from more than one em9 ployer is taken into account under this para10 graph in determining the tax imposed by sub11 section (a), each such employer shall be liable for 

12 such tax in an amount which bears the same 

13 ratio to the total tax determined under sub14 section (a) with respect to such remuneration 

15 as— 

16 ‘‘(i) the amount of remuneration paid 

17 by such employer with respect to such em18 ployee, bears to 

19 ‘‘(ii) the amount of remuneration paid 

20 by all such employers to such employee. 

21 ‘‘(5) EXCESS PARACHUTE PAYMENT.—For pur22 poses determining the tax imposed by subsection 

23 (a)(2)— 

24 ‘‘(A) IN GENERAL.—The term ‘excess para25 chute payment’ means an amount equal to the 


lotter on DSKBCFDHB2PROD with BILLS
306 

•HR 1 RH

1 excess of any parachute payment over the por2 tion of the base amount allocated to such pay3 ment. 

4 ‘‘(B) PARACHUTE PAYMENT.—The term 

5 ‘parachute payment’ means any payment in the 

6 nature of compensation to (or for the benefit of) 

7 a covered employee if— 

8 ‘‘(i) such payment is contingent on 

9 such employee’s separation from employ10 ment with the employer, and 

11 ‘‘(ii) the aggregate present value of the 

12 payments in the nature of compensation to 

13 (or for the benefit of) such individual which 

14 are contingent on such separation equals or 

15 exceeds an amount equal to 3 times the base 

16 amount. 

17 Such term does not include any payment de18 scribed in section 280G(b)(6) (relating to exemp19 tion for payments under qualified plans) or any 

20 payment made under or to an annuity contract 

21 described in section 403(b) or a plan described 

22 in section 457(b). 

23 ‘‘(C) BASE AMOUNT.—Rules similar to the 

24 rules of 280G(b)(3) shall apply for purposes of 

25 determining the base amount. 


lotter on DSKBCFDHB2PROD with BILLS
307 

•HR 1 RH

1 ‘‘(D) PROPERTY TRANSFERS; PRESENT

2 VALUE.—Rules similar to the rules of para3 graphs (3) and (4) of section 280G(d) shall 

4 apply. 

5 ‘‘(6) COORDINATION WITH DEDUCTION LIMITA6 TION.—Remuneration the deduction for which is not 

7 allowed by reason of section 162(m) shall not be taken 

8 into account for purposes of this section. 

9 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 

10 such regulations as may be necessary to prevent avoidance 

11 of the purposes of this section through the performance of 

12 services other than as an employee.’’. 

13 (b) CLERICAL AMENDMENT.—The table of sections for 

14 subchapter D of chapter 42 is amended by adding at the 

15 end the following new item: 

‘‘Sec. 4960. Tax on excess exempt organization executive compensation.’’. 

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

17 section shall apply to taxable years beginning after Decem18 ber 31, 2017. 

19 SEC. 3803. TREATMENT OF QUALIFIED EQUITY GRANTS. 

20 (a) IN GENERAL.— 

21 (1) ELECTION TO DEFER INCOME.—Section 83 is 

22 amended by adding at the end the following new sub23 section: 

24 ‘‘(i) QUALIFIED EQUITY GRANTS.— 


lotter on DSKBCFDHB2PROD with BILLS
308 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—For purposes of this subtitle, 

2 if qualified stock is transferred to a qualified em3 ployee who makes an election with respect to such 

4 stock under this subsection— 

5 ‘‘(A) except as provided in subparagraph 

6 (B), no amount shall be included in income 

7 under subsection (a) for the first taxable year in 

8 which the rights of the employee in such stock 

9 are transferable or are not subject to a substan10 tial risk of forfeiture, whichever is applicable, 

11 and 

12 ‘‘(B) an amount equal to the amount which 

13 would be included in income of the employee 

14 under subsection (a) (determined without regard 

15 to this subsection) shall be included in income 

16 for the taxable year of the employee which in17 cludes the earliest of— 

18 ‘‘(i) the first date such qualified stock 

19 becomes transferable (including transferable 

20 to the employer), 

21 ‘‘(ii) the date the employee first be22 comes an excluded employee, 

23 ‘‘(iii) the first date on which any stock 

24 of the corporation which issued the qualified 

25 stock becomes readily tradable on an estabVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00308 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
309 

•HR 1 RH

1 lished securities market (as determined by 

2 the Secretary, but not including any market 

3 unless such market is recognized as an es4 tablished securities market by the Secretary 

5 for purposes of a provision of this title other 

6 than this subsection), 

7 ‘‘(iv) the date that is 5 years after the 

8 first date the rights of the employee in such 

9 stock are transferable or are not subject to 

10 a substantial risk of forfeiture, whichever 

11 occurs earlier, or 

12 ‘‘(v) the date on which the employee re13 vokes (at such time and in such manner as 

14 the Secretary may provide) the election 

15 under this subsection with respect to such 

16 stock. 

17 ‘‘(2) QUALIFIED STOCK.— 

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

19 subsection, the term ‘qualified stock’ means, with 

20 respect to any qualified employee, any stock in 

21 a corporation which is the employer of such em22 ployee, if— 

23 ‘‘(i) such stock is received— 

24 ‘‘(I) in connection with the exer25 cise of an option, or 


lotter on DSKBCFDHB2PROD with BILLS
310 

•HR 1 RH

1 ‘‘(II) in settlement of a restricted 

2 stock unit, and 

3 ‘‘(ii) such option or restricted stock 

4 unit was provided by the corporation— 

5 ‘‘(I) in connection with the per6 formance of services as an employee, 

7 and 

8 ‘‘(II) during a calendar year in 

9 which such corporation was an eligible 

10 corporation. 

11 ‘‘(B) LIMITATION.—The term ‘qualified 

12 stock’ shall not include any stock if the employee 

13 may sell such stock to, or otherwise receive cash 

14 in lieu of stock from, the corporation at the time 

15 that the rights of the employee in such stock first 

16 become transferable or not subject to a substan17 tial risk of forfeiture. 

18 ‘‘(C) ELIGIBLE CORPORATION.—For pur19 poses of subparagraph (A)(ii)(II)— 

20 ‘‘(i) IN GENERAL.—The term ‘eligible 

21 corporation’ means, with respect to any cal22 endar year, any corporation if— 

23 ‘‘(I) no stock of such corporation 

24 (or any predecessor of such corpora25 tion) is readily tradable on an estabVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00310 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
311 

•HR 1 RH

1 lished securities market (as determined 

2 under paragraph (1)(B)(iii)) during 

3 any preceding calendar year, and 

4 ‘‘(II) such corporation has a writ5 ten plan under which, in such calendar 

6 year, not less than 80 percent of all 

7 employees who provide services to such 

8 corporation in the United States (or 

9 any possession of the United States) 

10 are granted stock options, or restricted 

11 stock units, with the same rights and 

12 privileges to receive qualified stock. 

13 ‘‘(ii) SAME RIGHTS AND PRIVILEGES.— 

14 For purposes of clause (i)(II)— 

15 ‘‘(I) except as provided in sub16 clauses (II) and (III), the determina17 tion of rights and privileges with re18 spect to stock shall be determined in a 

19 similar manner as provided under sec20 tion 423(b)(5), 

21 ‘‘(II) employees shall not fail to be 

22 treated as having the same rights and 

23 privileges to receive qualified stock 

24 solely because the number of shares 

25 available to all employees is not equal 


lotter on DSKBCFDHB2PROD with BILLS
312 

•HR 1 RH

1 in amount, so long as the number of 

2 shares available to each employee is 

3 more than a de minimis amount, and 

4 ‘‘(III) rights and privileges with 

5 respect to the exercise of an option 

6 shall not be treated as the same as 

7 rights and privileges with respect to 

8 the settlement of a restricted stock unit. 

9 ‘‘(iii) EMPLOYEE.—For purposes of 

10 clause (i)(II), the term ‘employee’ shall not 

11 include any employee described in section 

12 4980E(d)(4) or any excluded employee. 

13 ‘‘(iv) SPECIAL RULE FOR CALENDAR

14 YEARS BEFORE 2018.—In the case of any 

15 calendar year beginning before January 1, 

16 2018, clause (i)(II) shall be applied without 

17 regard to whether the rights and privileges 

18 with respect to the qualified stock are the 

19 same. 

20 ‘‘(3) QUALIFIED EMPLOYEE; EXCLUDED EM21 PLOYEE.—For purposes of this subsection— 

22 ‘‘(A) IN GENERAL.—The term ‘qualified em23 ployee’ means any individual who— 

24 ‘‘(i) is not an excluded employee, and 


lotter on DSKBCFDHB2PROD with BILLS
313 

•HR 1 RH

1 ‘‘(ii) agrees in the election made under 

2 this subsection to meet such requirements as 

3 determined by the Secretary to be necessary 

4 to ensure that the withholding requirements 

5 of the corporation under chapter 24 with re6 spect to the qualified stock are met. 

7 ‘‘(B) EXCLUDED EMPLOYEE.—The term ‘ex8 cluded employee’ means, with respect to any cor9 poration, any individual— 

10 ‘‘(i) who was a 1-percent owner (with11 in the meaning of section 416(i)(1)(B)(ii)) 

12 at any time during the 10 preceding cal13 endar years, 

14 ‘‘(ii) who is or has been at any prior 

15 time— 

16 ‘‘(I) the chief executive officer of 

17 such corporation or an individual act18 ing in such a capacity, or 

19 ‘‘(II) the chief financial officer of 

20 such corporation or an individual act21 ing in such a capacity, 

22 ‘‘(iii) who bears a relationship de23 scribed in section 318(a)(1) to any indi24 vidual described in subclause (I) or (II) of 

25 clause (ii), or 


lotter on DSKBCFDHB2PROD with BILLS
314 

•HR 1 RH

1 ‘‘(iv) who has been for any of the 10 

2 preceding taxable years one of the 4 highest 

3 compensated officers of such corporation de4 termined with respect to each such taxable 

5 year on the basis of the shareholder disclo6 sure rules for compensation under the Secu7 rities Exchange Act of 1934 (as if such rules 

8 applied to such corporation). 

9 ‘‘(4) ELECTION.— 

10 ‘‘(A) TIME FOR MAKING ELECTION.—An 

11 election with respect to qualified stock shall be 

12 made under this subsection no later than 30 

13 days after the first time the rights of the em14 ployee in such stock are transferable or are not 

15 subject to a substantial risk of forfeiture, which16 ever occurs earlier, and shall be made in a man17 ner similar to the manner in which an election 

18 is made under subsection (b). 

19 ‘‘(B) LIMITATIONS.—No election may be 

20 made under this section with respect to any 

21 qualified stock if— 

22 ‘‘(i) the qualified employee has made 

23 an election under subsection (b) with respect 

24 to such qualified stock, 


lotter on DSKBCFDHB2PROD with BILLS
315 

•HR 1 RH

1 ‘‘(ii) any stock of the corporation 

2 which issued the qualified stock is readily 

3 tradable on an established securities market 

4 (as determined under paragraph 

5 (1)(B)(iii)) at any time before the election 

6 is made, or 

7 ‘‘(iii) such corporation purchased any 

8 of its outstanding stock in the calendar year 

9 preceding the calendar year which includes 

10 the first time the rights of the employee in 

11 such stock are transferable or are not subject 

12 to a substantial risk of forfeiture, unless— 

13 ‘‘(I) not less than 25 percent of 

14 the total dollar amount of the stock so 

15 purchased is deferral stock, and 

16 ‘‘(II) the determination of which 

17 individuals from whom deferral stock 

18 is purchased is made on a reasonable 

19 basis. 

20 ‘‘(C) DEFINITIONS AND SPECIAL RULES RE21 LATED TO LIMITATION ON STOCK REDEMP22 TIONS.— 

23 ‘‘(i) DEFERRAL STOCK.—For purposes 

24 of this paragraph, the term ‘deferral stock’ 


lotter on DSKBCFDHB2PROD with BILLS
316 

•HR 1 RH

1 means stock with respect to which an elec2 tion is in effect under this subsection. 

3 ‘‘(ii) DEFERRAL STOCK WITH RESPECT

4 TO ANY INDIVIDUAL NOT TAKEN INTO AC5 COUNT IF INDIVIDUAL HOLDS DEFERRAL

6 STOCK WITH LONGER DEFERRAL PERIOD.— 

7 Stock purchased by a corporation from any 

8 individual shall not be treated as deferral 

9 stock for purposes of clause (iii) if such in10 dividual (immediately after such purchase) 

11 holds any deferral stock with respect to 

12 which an election has been in effect under 

13 this subsection for a longer period than the 

14 election with respect to the stock so pur15 chased. 

16 ‘‘(iii) PURCHASE OF ALL OUTSTANDING

17 DEFERRAL STOCK.—The requirements of 

18 subclauses (I) and (II) of subparagraph 

19 (B)(iii) shall be treated as met if the stock 

20 so purchased includes all of the corpora21 tion’s outstanding deferral stock. 

22 ‘‘(iv) REPORTING.—Any corporation 

23 which has outstanding deferral stock as of 

24 the beginning of any calendar year and 

25 which purchases any of its outstanding 


lotter on DSKBCFDHB2PROD with BILLS
317 

•HR 1 RH

1 stock during such calendar year shall in2 clude on its return of tax for the taxable 

3 year in which, or with which, such calendar 

4 year ends the total dollar amount of its out5 standing stock so purchased during such 

6 calendar year and such other information 

7 as the Secretary may require for purposes of 

8 administering this paragraph. 

9 ‘‘(5) CONTROLLED GROUPS.—For purposes of 

10 this subsection, all corporations which are members of 

11 the same controlled group of corporations (as defined 

12 in section 1563(a)) shall be treated as one corpora13 tion. 

14 ‘‘(6) NOTICE REQUIREMENT.—Any corporation 

15 that transfers qualified stock to a qualified employee 

16 shall, at the time that (or a reasonable period before) 

17 an amount attributable to such stock would (but for 

18 this subsection) first be includible in the gross income 

19 of such employee— 

20 ‘‘(A) certify to such employee that such 

21 stock is qualified stock, and 

22 ‘‘(B) notify such employee— 

23 ‘‘(i) that the employee may elect to 

24 defer income on such stock under this sub25 section, and 


lotter on DSKBCFDHB2PROD with BILLS
318 

•HR 1 RH

1 ‘‘(ii) that, if the employee makes such 

2 an election— 

3 ‘‘(I) the amount of income recog4 nized at the end of the deferral period 

5 will be based on the value of the stock 

6 at the time at which the rights of the 

7 employee in such stock first become 

8 transferable or not subject to substan9 tial risk of forfeiture, notwithstanding 

10 whether the value of the stock has de11 clined during the deferral period, 

12 ‘‘(II) the amount of such income 

13 recognized at the end of the deferral pe14 riod will be subject to withholding 

15 under section 3401(i) at the rate deter16 mined under section 3402(t), and 

17 ‘‘(III) the responsibilities of the 

18 employee (as determined by the Sec19 retary under paragraph (3)(A)(ii)) 

20 with respect to such withholding. 

21 ‘‘(7) RESTRICTED STOCK UNITS.—This section 

22 (other than this subsection), including any election 

23 under subsection (b), shall not apply to restricted 

24 stock units.’’. 


lotter on DSKBCFDHB2PROD with BILLS
319 

•HR 1 RH

1 (2) DEDUCTION BY EMPLOYER.—Subsection (h) 

2 of section 83 is amended by striking ‘‘or (d)(2)’’ and 

3 inserting ‘‘(d)(2), or (i)’’. 

4 (b) WITHHOLDING.— 

5 (1) TIME OF WITHHOLDING.—Section 3401 is 

6 amended by adding at the end the following new sub7 section: 

8 ‘‘(i) QUALIFIED STOCK FOR WHICH AN ELECTION IS

9 IN EFFECT UNDER SECTION 83(i).—For purposes of sub10 section (a), qualified stock (as defined in section 83(i)) with 

11 respect to which an election is made under section 83(i) 

12 shall be treated as wages— 

13 ‘‘(1) received on the earliest date described in 

14 section 83(i)(1)(B), and 

15 ‘‘(2) in an amount equal to the amount included 

16 in income under section 83 for the taxable year which 

17 includes such date.’’. 

18 (2) AMOUNT OF WITHHOLDING.—Section 3402 is 

19 amended by adding at the end the following new sub20 section: 

21 ‘‘(t) RATE OF WITHHOLDING FOR CERTAIN STOCK.— 

22 In the case of any qualified stock (as defined in section 

23 83(i)) with respect to which an election is made under sec24 tion 83(i)— 


lotter on DSKBCFDHB2PROD with BILLS
320 

•HR 1 RH

1 ‘‘(1) the rate of tax under subsection (a) shall 

2 not be less than the maximum rate of tax in effect 

3 under section 1, and 

4 ‘‘(2) such stock shall be treated for purposes of 

5 section 3501(b) in the same manner as a non-cash 

6 fringe benefit.’’. 

7 (c) COORDINATION WITH OTHER DEFERRED COM8 PENSATION RULES.— 

9 (1) ELECTION TO APPLY DEFERRAL TO STATU10 TORY OPTIONS.— 

11 (A) INCENTIVE STOCK OPTIONS.—Section 

12 422(b) is amended by adding at the end the fol13 lowing: ‘‘Such term shall not include any option 

14 if an election is made under section 83(i) with 

15 respect to the stock received in connection with 

16 the exercise of such option.’’. 

17 (B) EMPLOYEE STOCK PURCHASE PLANS.— 

18 Section 423(a) is amended by adding at the end 

19 the following flush sentence: 

20 ‘‘The preceding sentence shall not apply to any share of 

21 stock with respect to which an election is made under sec22 tion 83(i).’’. 

23 (2) EXCLUSION FROM DEFINITION OF NON24 QUALIFIED DEFERRED COMPENSATION PLAN.—SubVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00320 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
321 

•HR 1 RH

1 section (d) of section 409A is amended by adding at 

2 the end the following new paragraph: 

3 ‘‘(7) TREATMENT OF QUALIFIED STOCK.—An ar4 rangement under which an employee may receive 

5 qualified stock (as defined in section 83(i)(2)) shall 

6 not be treated as a nonqualified deferred compensa7 tion plan solely because of an employee’s election, or 

8 ability to make an election, to defer recognition of in9 come under section 83(i).’’. 

10 (d) INFORMATION REPORTING.—Section 6051(a) is 

11 amended by striking ‘‘and’’ at the end of paragraph (13), 

12 by striking the period at the end of paragraph (14) and 

13 inserting a comma, and by inserting after paragraph (14) 

14 the following new paragraphs: 

15 ‘‘(15) the amount excludable from gross income 

16 under subparagraph (A) of section 83(i)(1), 

17 ‘‘(16) the amount includible in gross income 

18 under subparagraph (B) of section 83(i)(1) with re19 spect to an event described in such subparagraph 

20 which occurs in such calendar year, and 

21 ‘‘(17) the aggregate amount of income which is 

22 being deferred pursuant to elections under section 

23 83(i), determined as of the close of the calendar 

24 year.’’. 


lotter on DSKBCFDHB2PROD with BILLS
322 

•HR 1 RH

1 (e) PENALTY FOR FAILURE OF EMPLOYER TO PRO2 VIDE NOTICE OF TAX CONSEQUENCES.—Section 6652 is 

3 amended by adding at the end the following new subsection: 

4 ‘‘(o) FAILURE TO PROVIDE NOTICE UNDER SECTION

5 83(i).—In the case of each failure to provide a notice as 

6 required by section 83(i)(6), at the time prescribed therefor, 

7 unless it is shown that such failure is due to reasonable 

8 cause and not to willful neglect, there shall be paid, on no9 tice and demand of the Secretary and in the same manner 

10 as tax, by the person failing to provide such notice, an 

11 amount equal to $100 for each such failure, but the total 

12 amount imposed on such person for all such failures during 

13 any calendar year shall not exceed $50,000.’’. 

14 (f) EFFECTIVE DATES.— 

15 (1) IN GENERAL.—Except as provided in para16 graph (2), the amendments made by this section shall 

17 apply to stock attributable to options exercised, or re18 stricted stock units settled, after December 31, 2017. 

19 (2) REQUIREMENT TO PROVIDE NOTICE.—The 

20 amendments made by subsection (e) shall apply to 

21 failures after December 31, 2017. 

22 (g) TRANSITION RULE.—Until such time as the Sec23 retary (or the Secretary’s delegate) issue regulations or 

24 other guidance for purposes of implementing the require25 ments of paragraph (2)(C)(i)(II) of section 83(i) of the InVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00322 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
323 

•HR 1 RH

1 ternal Revenue Code of 1986 (as added by this section), or 

2 the requirements of paragraph (6) of such section, a cor3 poration shall be treated as being in compliance with such 

4 requirements (respectively) if such corporation complies 

5 with a reasonable good faith interpretation of such require6 ments. 

7 TITLE IV—TAXATION OF FOR8 EIGN INCOME AND FOREIGN 

9 PERSONS 

10 Subtitle A—Establishment of Par11 ticipation Exemption System for 

12 Taxation of Foreign Income 

13 SEC. 4001. DEDUCTION FOR FOREIGN-SOURCE PORTION OF 

14 DIVIDENDS RECEIVED BY DOMESTIC COR15 PORATIONS FROM SPECIFIED 10-PERCENT 

16 OWNED FOREIGN CORPORATIONS. 

17 (a) IN GENERAL.—Part VIII of subchapter B of chap18 ter 1 is amended by inserting after section 245 the following 

19 new section: 

20 ‘‘SEC. 245A. DEDUCTION FOR FOREIGN-SOURCE PORTION 

21 OF DIVIDENDS RECEIVED BY DOMESTIC COR22 PORATIONS FROM SPECIFIED 10-PERCENT 

23 OWNED FOREIGN CORPORATIONS. 

24 ‘‘(a) IN GENERAL.—In the case of any dividend re25 ceived from a specified 10-percent owned foreign corporaVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00323 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
324 

•HR 1 RH

1 tion by a domestic corporation which is a United States 

2 shareholder with respect to such foreign corporation, there 

3 shall be allowed as a deduction an amount equal to the for4 eign-source portion of such dividend. 

5 ‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN COR6 PORATION.—For purposes of this section, the term ‘specified 

7 10-percent owned foreign corporation’ means any foreign 

8 corporation with respect to which any domestic corporation 

9 is a United States shareholder. Such term shall not include 

10 any passive foreign investment company (within the mean11 ing of subpart D of part VI of subchapter P) that is not 

12 a controlled foreign corporation. 

13 ‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of this 

14 section— 

15 ‘‘(1) IN GENERAL.—The foreign-source portion of 

16 any dividend is an amount which bears the same 

17 ratio to such dividend as— 

18 ‘‘(A) the post-1986 undistributed foreign 

19 earnings of the specified 10-percent owned for20 eign corporation, bears to 

21 ‘‘(B) the total post-1986 undistributed earn22 ings of such foreign corporation. 

23 ‘‘(2) POST-1986 UNDISTRIBUTED EARNINGS.—The 

24 term ‘post-1986 undistributed earnings’ means the 

25 amount of the earnings and profits of the specified 


lotter on DSKBCFDHB2PROD with BILLS
325 

•HR 1 RH

1 10-percent owned foreign corporation (computed in 

2 accordance with sections 964(a) and 986) accumu3 lated in taxable years beginning after December 31, 

4 1986— 

5 ‘‘(A) as of the close of the taxable year of the 

6 specified 10-percent owned foreign corporation in 

7 which the dividend is distributed, and 

8 ‘‘(B) without diminution by reason of divi9 dends distributed during such taxable year. 

10 ‘‘(3) POST-1986 UNDISTRIBUTED FOREIGN EARN11 INGS.—The term ‘post-1986 undistributed foreign 

12 earnings’ means the portion of the post-1986 undis13 tributed earnings which is attributable to neither— 

14 ‘‘(A) income described in subparagraph (A) 

15 of section 245(a)(5), nor 

16 ‘‘(B) dividends described in subparagraph 

17 (B) of such section (determined without regard to 

18 section 245(a)(12)). 

19 ‘‘(4) TREATMENT OF DISTRIBUTIONS FROM

20 EARNINGS BEFORE 1987.— 

21 ‘‘(A) IN GENERAL.—In the case of any divi22 dend paid out of earnings and profits of the 

23 specified 10-percent owned foreign corporation 

24 (computed in accordance with sections 964(a) 


lotter on DSKBCFDHB2PROD with BILLS
326 

•HR 1 RH

1 and 986) accumulated in taxable years begin2 ning before January 1, 1987— 

3 ‘‘(i) paragraphs (1), (2), and (3) shall 

4 be applied without regard to the phrase 

5 ‘post-1986’ each place it appears, and 

6 ‘‘(ii) paragraph (2) shall be applied by 

7 substituting ‘after the date specified in sec8 tion 316(a)(1)’ for ‘in taxable years begin9 ning after December 31, 1986’. 

10 ‘‘(B) DIVIDENDS PAID FIRST OUT OF POST11 1986 EARNINGS.—Dividends shall be treated as 

12 paid out of post-1986 undistributed earnings to 

13 the extent thereof. 

14 ‘‘(5) TREATMENT OF CERTAIN DIVIDENDS IN EX15 CESS OF UNDISTRIBUTED EARNINGS.—In the case of 

16 any dividend from the specified 10-percent owned for17 eign corporation which is in excess of undistributed 

18 earnings (as determined under paragraph (2) after 

19 taking into account the modifications described in 

20 clauses (i) and (ii) of paragraph (4)(A)), the foreign21 source portion of such dividend is an amount which 

22 bears the same ratio to such dividend as— 

23 ‘‘(A) the portion of the earnings and profits 

24 described in subparagraph (B) which is attrib25 utable to neither income described in paragraph 


lotter on DSKBCFDHB2PROD with BILLS
327 

•HR 1 RH

1 (3)(A) nor dividends described in paragraph 

2 (3)(B), bears to 

3 ‘‘(B) the earnings and profits of such cor4 poration for the taxable year in which such dis5 tribution is made (computed as of the close of the 

6 taxable year without diminution by reason of 

7 any distributions made during the taxable year). 

8 ‘‘(d) DISALLOWANCE OF FOREIGN TAX CREDIT, ETC.— 

9 ‘‘(1) IN GENERAL.—No credit shall be allowed 

10 under section 901 for any taxes paid or accrued (or 

11 treated as paid or accrued) with respect to any divi12 dend for which a deduction is allowed under this sec13 tion. 

14 ‘‘(2) DENIAL OF DEDUCTION.—No deduction 

15 shall be allowed under this chapter for any tax for 

16 which credit is not allowable under section 901 by 

17 reason of paragraph (1) (determined by treating the 

18 taxpayer as having elected the benefits of subpart A 

19 of part III of subchapter N). 

20 ‘‘(e) REGULATIONS.—The Secretary may prescribe 

21 such regulations or other guidance as may be necessary or 

22 appropriate to carry out the provisions of this section.’’. 

23 (b) APPLICATION OF HOLDING PERIOD REQUIRE24 MENT.—Section 246(c) is amended— 


lotter on DSKBCFDHB2PROD with BILLS
328 

•HR 1 RH

1 (1) by striking ‘‘or 245’’ in paragraph (1) and 

2 inserting ‘‘245, or 245A’’, and 

3 (2) by adding at the end the following new para4 graph: 

5 ‘‘(5) SPECIAL RULES FOR FOREIGN SOURCE POR6 TION OF DIVIDENDS RECEIVED FROM SPECIFIED 10- 

7 PERCENT OWNED FOREIGN CORPORATIONS.— 

8 ‘‘(A) 6-MONTH HOLDING PERIOD REQUIRE9 MENT.—For purposes of section 245A— 

10 ‘‘(i) paragraph (1)(A) shall be ap11 plied— 

12 ‘‘(I) by substituting ‘180 days’ for 

13 ‘45 days’each place it appears, and 

14 ‘‘(II) by substituting ‘361-day pe15 riod’ for ‘91-day period’, and 

16 ‘‘(ii) paragraph (2) shall not apply. 

17 ‘‘(B) STATUS MUST BE MAINTAINED DURING

18 HOLDING PERIOD.—For purposes of applying 

19 paragraph (1) with respect to section 245A, the 

20 taxpayer shall be treated as holding the stock re21 ferred to in paragraph (1) for any period only 

22 if— 

23 ‘‘(i) the specified 10-percent owned for24 eign corporation referred to in section 


lotter on DSKBCFDHB2PROD with BILLS
329 

•HR 1 RH

1 245A(a) is a specified 10-percent owned for2 eign corporation for such period, and 

3 ‘‘(ii) the taxpayer is a United States 

4 shareholder with respect to such specified 

5 10-percent owned foreign corporation for 

6 such period.’’. 

7 (c) APPLICATION OF RULES GENERALLY APPLICABLE

8 TO DEDUCTIONS FOR DIVIDENDS RECEIVED.— 

9 (1) TREATMENT OF DIVIDENDS FROM CERTAIN

10 CORPORATIONS.—Section 246(a)(1) is amended by 

11 striking ‘‘and 245’’ and inserting ‘‘245, and 245A’’. 

12 (2) COORDINATION WITH SECTION 1059.—Section 

13 1059(b)(2)(B) is amended by striking ‘‘or 245’’ and 

14 inserting ‘‘245, or 245A’’. 

15 (d) COORDINATION WITH FOREIGN TAX CREDIT LIMI16 TATION.—Section 904(b) is amended by adding at the end 

17 the following new paragraph: 

18 ‘‘(5) TREATMENT OF DIVIDENDS FOR WHICH DE19 DUCTION IS ALLOWED UNDER SECTION 245A.—For 

20 purposes of subsection (a), in the case of a United 

21 States shareholder with respect to a specified 10-per22 cent owned foreign corporation, such shareholder’s 

23 taxable income from sources without the United 

24 States (and entire taxable income) shall be deter25 mined without regard to— 


lotter on DSKBCFDHB2PROD with BILLS
330 

•HR 1 RH

1 ‘‘(A) the foreign-source portion of any divi2 dend received from such foreign corporation, and 

3 ‘‘(B) any deductions properly allocable or 

4 apportioned to— 

5 ‘‘(i) income (other than subpart F in6 come (as defined in section 952) and foreign 

7 high return amounts (as defined in section 

8 951A(b)) with respect to stock of such speci9 fied 10-percent owned foreign corporation, 

10 or 

11 ‘‘(ii) such stock (to the extent income 

12 with respect to such stock is other than sub13 part F income (as so defined) or foreign 

14 high return amounts (as so defined)). 

15 Any term which is used in section 245A and in this 

16 paragraph shall have the same meaning for purposes 

17 of this paragraph as when used in such section.’’. 

18 (e) CONFORMING AMENDMENTS.— 

19 (1) Section 245(a)(4) is amended by striking 

20 ‘‘section 902(c)(1)’’ and inserting ‘‘section 245A(c)(2) 

21 applied by substituting ‘qualified 10-percent owned 

22 foreign corporation’ for ‘specified 10-percent owned 

23 foreign corporation’ each place it appears’’. 

24 (2) Section 951(b) is amended by striking ‘‘sub25 part’’ and inserting ‘‘title’’. 


lotter on DSKBCFDHB2PROD with BILLS
331 

•HR 1 RH

1 (3) Section 957(a) is amended by striking ‘‘sub2 part’’ in the matter preceding paragraph (1) and in3 serting ‘‘title’’. 

4 (4) The table of sections for part VIII of sub5 chapter B of chapter 1 is amended by inserting after 

6 section 245 the following new item: 

‘‘Sec. 245A. Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations.’’. 

7 (f) EFFECTIVE DATE.—The amendments made by this 

8 section shall apply to distributions made after (and, in the 

9 case of the amendments made by subsection (d), deductions 

10 with respect to taxable years ending after) December 31, 

11 2017. 

12 SEC. 4002. APPLICATION OF PARTICIPATION EXEMPTION TO 

13 INVESTMENTS IN UNITED STATES PROPERTY. 

14 (a) IN GENERAL.—Section 956(a) is amended in the 

15 matter preceding paragraph (1) by inserting ‘‘(other than 

16 a corporation)’’ after ‘‘United States shareholder’’. 

17 (b) REGULATORY AUTHORITY TO PREVENT ABUSE.— 

18 Section 956(e) is amended by striking ‘‘including regula19 tions to prevent’’ and inserting ‘‘including regulations— 

20 ‘‘(1) to address United States shareholders that 

21 are partnerships with corporate partners, and 

22 ‘‘(2) to prevent’’. 


lotter on DSKBCFDHB2PROD with BILLS
332 

•HR 1 RH

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

2 section shall apply to taxable years of foreign corporations 

3 beginning after December 31, 2017. 

4 SEC. 4003. LIMITATION ON LOSSES WITH RESPECT TO SPEC5 IFIED 10-PERCENT OWNED FOREIGN COR6 PORATIONS. 

7 (a) BASIS IN SPECIFIED 10-PERCENT OWNED FOR8 EIGN CORPORATION REDUCED BY NONTAXED PORTION OF

9 DIVIDEND FOR PURPOSES OF DETERMINING LOSS.— 

10 (1) IN GENERAL.—Section 961 is amended by 

11 adding at the end the following new subsection: 

12 ‘‘(d) BASIS IN SPECIFIED 10-PERCENT OWNED FOR13 EIGN CORPORATION REDUCED BY NONTAXED PORTION OF

14 DIVIDEND FOR PURPOSES OF DETERMINING LOSS.—If a 

15 domestic corporation received a dividend from a specified 

16 10-percent owned foreign corporation (as defined in section 

17 245A) in any taxable year, solely for purposes of deter18 mining loss on any disposition of stock of such foreign cor19 poration in such taxable year or any subsequent taxable 

20 year, the basis of such domestic corporation in such stock 

21 shall be reduced (but not below zero) by the amount of any 

22 deduction allowable to such domestic corporation under sec23 tion 245A with respect to such stock except to the extent 

24 such basis was reduced under section 1059 by reason of a 

25 dividend for which such a deduction was allowable.’’. 


lotter on DSKBCFDHB2PROD with BILLS
333 

•HR 1 RH

1 (2) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to distributions made 

3 after December 31, 2017. 

4 (b) TREATMENT OF FOREIGN BRANCH LOSSES TRANS5 FERRED TO SPECIFIED 10-PERCENT OWNED FOREIGN COR6 PORATIONS.— 

7 (1) IN GENERAL.—Part II of subchapter B of 

8 chapter 1 is amended by adding at the end the fol9 lowing new section: 

10 ‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANS11 FERRED TO SPECIFIED 10-PERCENT OWNED 

12 FOREIGN CORPORATIONS. 

13 ‘‘(a) IN GENERAL.—If a domestic corporation trans14 fers substantially all of the assets of a foreign branch (with15 in the meaning of section 367(a)(3)(C)) to a specified 10- 

16 percent owned foreign corporation (as defined in section 

17 245A) with respect to which it is a United States share18 holder after such transfer, such domestic corporation shall 

19 include in gross income for the taxable year which includes 

20 such transfer an amount equal to the transferred loss 

21 amount with respect to such transfer. 

22 ‘‘(b) TRANSFERRED LOSS AMOUNT.—For purposes of 

23 this section, the term ‘transferred loss amount’ means, with 

24 respect to any transfer of substantially all of the assets of 

25 a foreign branch, the excess (if any) of— 


lotter on DSKBCFDHB2PROD with BILLS
334 

•HR 1 RH

1 ‘‘(1) the sum of losses— 

2 ‘‘(A) which were incurred by the foreign 

3 branch after December 31, 2017, and before the 

4 transfer, and 

5 ‘‘(B) with respect to which a deduction was 

6 allowed to the taxpayer, over 

7 ‘‘(2) the sum of— 

8 ‘‘(A) any taxable income of such branch for 

9 a taxable year after the taxable year in which 

10 the loss was incurred and through the close of the 

11 taxable year of the transfer, and 

12 ‘‘(B) any amount which is recognized under 

13 section 904(f)(3) on account of the transfer. 

14 ‘‘(c) REDUCTION FOR RECOGNIZED GAINS.— 

15 ‘‘(1) IN GENERAL.—In the case of a transfer not 

16 described in section 367(a)(3)(C), the transferred loss 

17 amount shall be reduced (but not below zero) by the 

18 amount of gain recognized by the taxpayer on account 

19 of the transfer (other than amounts taken into ac20 count under subsection (c)(2)(B)). 

21 ‘‘(2) COORDINATION WITH RECOGNITION UNDER

22 SECTION 367.—In the case of a transfer described in 

23 section 367(a)(3)(C), the transferred loss amount shall 

24 not exceed the excess (if any) of— 


lotter on DSKBCFDHB2PROD with BILLS
335 

•HR 1 RH

1 ‘‘(A) the excess of the amount described in 

2 section 367(a)(3)(C)(i) over the amount described 

3 in section 367(a)(3)(C)(ii) with respect to such 

4 transfer, over 

5 ‘‘(B) the amount of gain recognized under 

6 section 367(a)(3)(C) with respect to such trans7 fer. 

8 ‘‘(d) SOURCE OF INCOME.—Amounts included in gross 

9 income under this section shall be treated as derived from 

10 sources within the United States. 

11 ‘‘(e) BASIS ADJUSTMENTS.—Consistent with such reg12 ulations or other guidance as the Secretary may prescribe, 

13 proper adjustments shall be made in the adjusted basis of 

14 the taxpayer’s stock in the specified 10-percent owned for15 eign corporation to which the transfer is made, and in the 

16 transferee’s adjusted basis in the property transferred, to 

17 reflect amounts included in gross income under this sec18 tion.’’. 

19 (2) AMOUNTS RECOGNIZED UNDER SECTION 367

20 ON TRANSFER OF FOREIGN BRANCH WITH PREVIOUSLY

21 DEDUCTED LOSSES TREATED AS UNITED STATES

22 SOURCE.—Section 367(a)(3)(C) is amended by strik23 ing ‘‘outside’’ in the last sentence and inserting 

24 ‘‘within’’. 


lotter on DSKBCFDHB2PROD with BILLS
336 

•HR 1 RH

1 (3) CLERICAL AMENDMENT.—The table of sec2 tions for part II of subchapter B of chapter 1 is 

3 amended by adding at the end the following new item: 

‘‘Sec. 91. Certain foreign branch losses transferred to specified 10-percent owned 

foreign corporations.’’. 

4 (4) EFFECTIVE DATE.—The amendments made 

5 by this subsection shall apply to transfers after De6 cember 31, 2017. 

7 SEC. 4004. TREATMENT OF DEFERRED FOREIGN INCOME 

8 UPON TRANSITION TO PARTICIPATION EX9 EMPTION SYSTEM OF TAXATION. 

10 (a) IN GENERAL.—Section 965 is amended to read as 

11 follows: 

12 ‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME 

13 UPON TRANSITION TO PARTICIPATION EX14 EMPTION SYSTEM OF TAXATION. 

15 ‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME AS

16 SUBPART F INCOME.—In the case of the last taxable year 

17 of a deferred foreign income corporation which begins before 

18 January 1, 2018, the subpart F income of such foreign cor19 poration (as otherwise determined for such taxable year 

20 under section 952) shall be increased by the greater of— 

21 ‘‘(1) the accumulated post-1986 deferred foreign 

22 income of such corporation determined as of Novem23 ber 2, 2017, or 


lotter on DSKBCFDHB2PROD with BILLS
337 

•HR 1 RH

1 ‘‘(2) the accumulated post-1986 deferred foreign 

2 income of such corporation determined as of December 

3 31, 2017. 

4 ‘‘(b) REDUCTION IN AMOUNTS INCLUDED IN GROSS IN5 COME OF UNITED STATES SHAREHOLDERS OF SPECIFIED

6 FOREIGN CORPORATIONS WITH DEFICITS IN EARNINGS

7 AND PROFITS.— 

8 ‘‘(1) IN GENERAL.—In the case of a taxpayer 

9 which is a United States shareholder with respect to 

10 at least one deferred foreign income corporation and 

11 at least one E&P deficit foreign corporation, the 

12 amount which would (but for this subsection) be taken 

13 into account under section 951(a)(1) by reason of sub14 section (a) as such United States shareholder’s pro 

15 rata share of the subpart F income of each deferred 

16 foreign income corporation shall be reduced (but not 

17 below zero) by the amount of such United States 

18 shareholder’s aggregate foreign E&P deficit which is 

19 allocated under paragraph (2) to such deferred foreign 

20 income corporation. 

21 ‘‘(2) ALLOCATION OF AGGREGATE FOREIGN E&P

22 DEFICIT.—The aggregate foreign E&P deficit of any 

23 United States shareholder shall be allocated among 

24 the deferred foreign income corporations of such 


lotter on DSKBCFDHB2PROD with BILLS
338 

•HR 1 RH

1 United States shareholder in an amount which bears 

2 the same proportion to such aggregate as— 

3 ‘‘(A) such United States shareholder’s pro 

4 rata share of the accumulated post-1986 deferred 

5 foreign income of each such deferred foreign in6 come corporation, bears to 

7 ‘‘(B) the aggregate of such United States 

8 shareholder’s pro rata share of the accumulated 

9 post-1986 deferred foreign income of all deferred 

10 foreign income corporations of such United 

11 States shareholder. 

12 ‘‘(3) DEFINITIONS RELATED TO E&P DEFICITS.— 

13 For purposes of this subsection— 

14 ‘‘(A) AGGREGATE FOREIGN E&P DEFICIT.— 

15 The term ‘aggregate foreign E&P deficit’ means, 

16 with respect to any United States shareholder, 

17 the aggregate of such shareholder’s pro rata 

18 shares of the specified E&P deficits of the E&P 

19 deficit foreign corporations of such shareholder. 

20 ‘‘(B) E&P DEFICIT FOREIGN CORPORA21 TION.—The term ‘E&P deficit foreign corpora22 tion’ means, with respect to any taxpayer, any 

23 specified foreign corporation with respect to 

24 which such taxpayer is a United States share25 holder, if— 


lotter on DSKBCFDHB2PROD with BILLS
339 

•HR 1 RH

1 ‘‘(i) such specified foreign corporation 

2 has a deficit in post-1986 earnings and 

3 profits, and 

4 ‘‘(ii) as of November 2, 2017— 

5 ‘‘(I) such corporation was a speci6 fied foreign corporation, and 

7 ‘‘(II) such taxpayer was a United 

8 States shareholder of such corporation. 

9 ‘‘(C) SPECIFIED E&P DEFICIT.—The term 

10 ‘specified E&P deficit’ means, with respect to 

11 any E&P deficit foreign corporation, the amount 

12 of the deficit referred to in subparagraph (B). 

13 ‘‘(4) NETTING AMONG UNITED STATES SHARE14 HOLDERS IN SAME AFFILIATED GROUP.— 

15 ‘‘(A) IN GENERAL.—In the case of any af16 filiated group which includes at least one E&P 

17 net surplus shareholder and one E&P net deficit 

18 shareholder, the amount which would (but for 

19 this paragraph) be taken into account under sec20 tion 951(a)(1) by reason of subsection (a) by 

21 each such E&P net surplus shareholder shall be 

22 reduced (but not below zero) by such share23 holder’s applicable share of the affiliated group’s 

24 aggregate unused E&P deficit. 


lotter on DSKBCFDHB2PROD with BILLS
340 

•HR 1 RH

1 ‘‘(B) E&P NET SURPLUS SHAREHOLDER.— 

2 For purposes of this paragraph, the term ‘E&P 

3 net surplus shareholder’ means any United 

4 States shareholder which would (determined 

5 without regard to this paragraph) take into ac6 count an amount greater than zero under section 

7 951(a)(1) by reason of subsection (a). 

8 ‘‘(C) E&P NET DEFICIT SHAREHOLDER.— 

9 For purposes of this paragraph, the term ‘E&P 

10 net deficit shareholder’ means any United States 

11 shareholder if— 

12 ‘‘(i) the aggregate foreign E&P deficit 

13 with respect to such shareholder (as defined 

14 in paragraph (3)(A)), exceeds 

15 ‘‘(ii) the amount which would (but for 

16 this subsection) be taken into account by 

17 such shareholder under section 951(a)(1) by 

18 reason of subsection (a). 

19 ‘‘(D) AGGREGATE UNUSED E&P DEFICIT.— 

20 For purposes of this paragraph— 

21 ‘‘(i) IN GENERAL.—The term ‘aggre22 gate unused E&P deficit’ means, with re23 spect to any affiliated group, the lesser of— 

24 ‘‘(I) the sum of the excesses de25 scribed in subparagraph (C), deterVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00340 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
341 

•HR 1 RH

1 mined with respect to each E&P net 

2 deficit shareholder in such group, or 

3 ‘‘(II) the amount determined 

4 under subparagraph (E)(ii). 

5 ‘‘(ii) REDUCTION WITH RESPECT TO

6 E&P NET DEFICIT SHAREHOLDERS WHICH

7 ARE NOT WHOLLY OWNED BY THE AFFILI8 ATED GROUP.—If the group ownership per9 centage of any E&P net deficit shareholder 

10 is less than 100 percent, the amount of the 

11 excess described in subparagraph (C) which 

12 is taken into account under clause (i)(I) 

13 with respect to such E&P net deficit share14 holder shall be such group ownership per15 centage of such amount. 

16 ‘‘(E) APPLICABLE SHARE.—For purposes of 

17 this paragraph, the term ‘applicable share’ 

18 means, with respect to any E&P net surplus 

19 shareholder in any affiliated group, the amount 

20 which bears the same proportion to such group’s 

21 aggregate unused E&P deficit as— 

22 ‘‘(i) the product of— 

23 ‘‘(I) such shareholder’s group own24 ership percentage, multiplied by 


lotter on DSKBCFDHB2PROD with BILLS
342 

•HR 1 RH

1 ‘‘(II) the amount which would 

2 (but for this paragraph) be taken into 

3 account under section 951(a)(1) by 

4 reason of subsection (a) by such share5 holder, bears to 

6 ‘‘(ii) the aggregate amount determined 

7 under clause (i) with respect to all E&P net 

8 surplus shareholders in such group. 

9 ‘‘(F) GROUP OWNERSHIP PERCENTAGE.— 

10 For purposes of this paragraph, the term ‘group 

11 ownership percentage’ means, with respect to 

12 any United States shareholder in any affiliated 

13 group, the percentage of the value of the stock of 

14 such United States shareholder which is held by 

15 other includible corporations in such affiliated 

16 group. Notwithstanding the preceding sentence, 

17 the group ownership percentage of the common 

18 parent of the affiliated group is 100 percent. 

19 Any term used in this subparagraph which is 

20 also used in section 1504 shall have the same 

21 meaning as when used in such section. 

22 ‘‘(c) APPLICATION OF PARTICIPATION EXEMPTION TO

23 INCLUDED INCOME.— 

24 ‘‘(1) IN GENERAL.—In the case of a United 

25 States shareholder of a deferred foreign income corVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00342 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
343 

•HR 1 RH

1 poration, there shall be allowed as a deduction for the 

2 taxable year in which an amount is included in the 

3 gross income of such United States shareholder under 

4 section 951(a)(1) by reason of this section an amount 

5 equal to the sum of— 

6 ‘‘(A) the United States shareholder’s 7 per7 cent rate equivalent percentage of the excess (if 

8 any) of— 

9 ‘‘(i) the amount so included as gross 

10 income, over 

11 ‘‘(ii) the amount of such United States 

12 shareholder’s aggregate foreign cash posi13 tion, plus 

14 ‘‘(B) the United States shareholder’s 14 per15 cent rate equivalent percentage of so much of the 

16 amount described in subparagraph (A)(ii) as 

17 does not exceed the amount described in subpara18 graph (A)(i). 

19 ‘‘(2) 7 AND 14 PERCENT RATE EQUIVALENT PER20 CENTAGES.—For purposes of this subsection— 

21 ‘‘(A) 7 PERCENT RATE EQUIVALENT PER22 CENTAGE.—The term ‘7 percent rate equivalent 

23 percentage’ means, with respect to any United 

24 States shareholder for any taxable year, the per25 centage which would result in the amount to 


lotter on DSKBCFDHB2PROD with BILLS
344 

•HR 1 RH

1 which such percentage applies being subject to a 

2 7 percent rate of tax determined by only taking 

3 into account a deduction equal to such percent4 age of such amount and the highest rate of tax 

5 specified in section 11 for such taxable year. In 

6 the case of any taxable year of a United States 

7 shareholder to which section 15 applies, the high8 est rate of tax under section 11 before the effec9 tive date of the change in rates and the highest 

10 rate of tax under section 11 after the effective 

11 date of such change shall each be taken into ac12 count under the preceding sentence in the same 

13 proportions as the portion of such taxable year 

14 which is before and after such effective date, re15 spectively. 

16 ‘‘(B) 14 PERCENT RATE EQUIVALENT PER17 CENTAGE.—The term ‘14 percent rate equivalent 

18 percentage’ means, with respect to any United 

19 States shareholder for any taxable year, the per20 centage determined under subparagraph (A) ap21 plied by substituting ‘14 percent rate of tax’ for 

22 ‘7 percent rate of tax’. 

23 ‘‘(3) AGGREGATE FOREIGN CASH POSITION.—For 

24 purposes of this subsection— 


lotter on DSKBCFDHB2PROD with BILLS
345 

•HR 1 RH

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

2 foreign cash position’ means, with respect to any 

3 United States shareholder, one-third of the sum 

4 of— 

5 ‘‘(i) the aggregate of such United 

6 States shareholder’s pro rata share of the 

7 cash position of each specified foreign cor8 poration of such United States shareholder 

9 determined as of November 2, 2017, 

10 ‘‘(ii) the aggregate described in clause 

11 (i) determined as of the close of the last tax12 able year of each such specified foreign cor13 poration which ends before November 2, 

14 2017, and 

15 ‘‘(iii) the aggregate described in clause 

16 (i) determined as of the close of the taxable 

17 year of each such specified foreign corpora18 tion which precedes the taxable year re19 ferred to in clause (ii). 

20 In the case of any foreign corporation which did 

21 not exist as of the determination date described 

22 in clause (ii) or (iii), this subparagraph shall be 

23 applied separately to such foreign corporation by 

24 not taking into account such clause and by sub25 stituting ‘one-half (100 percent in the case that 


lotter on DSKBCFDHB2PROD with BILLS
346 

•HR 1 RH

1 both clauses (ii) and (iii) are disregarded)’ for 

2 ‘one-third’. 

3 ‘‘(B) CASH POSITION.—For purposes of this 

4 paragraph, the cash position of any specified for5 eign corporation is the sum of— 

6 ‘‘(i) cash held by such foreign corpora7 tion, 

8 ‘‘(ii) the net accounts receivable of such 

9 foreign corporation, plus 

10 ‘‘(iii) the fair market value of the fol11 lowing assets held by such corporation: 

12 ‘‘(I) Actively traded personal 

13 property for which there is an estab14 lished financial market. 

15 ‘‘(II) Commercial paper, certifi16 cates of deposit, the securities of the 

17 Federal government and of any State 

18 or foreign government. 

19 ‘‘(III) Any foreign currency. 

20 ‘‘(IV) Any obligation with a term 

21 of less than one year. 

22 ‘‘(V) Any asset which the Sec23 retary identifies as being economically 

24 equivalent to any asset described in 

25 this subparagraph. 


lotter on DSKBCFDHB2PROD with BILLS
347 

•HR 1 RH

1 ‘‘(C) NET ACCOUNTS RECEIVABLE.—For 

2 purposes of this paragraph, the term ‘net ac3 counts receivable’ means, with respect to any 

4 specified foreign corporation, the excess (if any) 

5 of— 

6 ‘‘(i) such corporation’s accounts receiv7 able, over 

8 ‘‘(ii) such corporation’s accounts pay9 able (determined consistent with the rules of 

10 section 461). 

11 ‘‘(D) PREVENTION OF DOUBLE COUNTING.— 

12 ‘‘(i) IN GENERAL.—The applicable per13 centage of each specified cash position of a 

14 specified foreign corporation shall not be 

15 taken into account by— 

16 ‘‘(I) the United States shareholder 

17 referred to in clause (ii) with respect to 

18 such position, or 

19 ‘‘(II) any United States share20 holder which is an includible corpora21 tion in the same affiliated group as 

22 such United States shareholder referred 

23 to in clause (ii). 


lotter on DSKBCFDHB2PROD with BILLS
348 

•HR 1 RH

1 ‘‘(ii) SPECIFIED CASH POSITION.—For 

2 purposes of this subparagraph, the term 

3 ‘specified cash position’ means— 

4 ‘‘(I) amounts described in sub5 paragraph (B)(ii) to the extent such 

6 amounts are receivable from another 

7 specified foreign corporation with re8 spect to any United States shareholder, 

9 ‘‘(II) amounts described in sub10 paragraph (B)(iii)(I) to the extent 

11 such amounts consist of an equity in12 terest in another specified foreign cor13 poration with respect to any United 

14 States shareholder, and 

15 ‘‘(III) amounts described in sub16 paragraph (B)(iii)(IV) to the extent 

17 that another specified foreign corpora18 tion with respect to any United States 

19 shareholder is obligated to repay such 

20 amount. 

21 ‘‘(iii) APPLICABLE PERCENTAGE.—For 

22 purposes of this subparagraph, the term 

23 ‘applicable percentage’ means— 

24 ‘‘(I) with respect to each specified 

25 cash position described in subclause (I) 


lotter on DSKBCFDHB2PROD with BILLS
349 

•HR 1 RH

1 or (III) of clause (ii), the pro rata 

2 share of the United States shareholder 

3 referred to in clause (ii) with respect to 

4 the specified foreign corporation re5 ferred to in such clause, and 

6 ‘‘(II) with respect to each specified 

7 cash position described in clause 

8 (ii)(II), the ratio (expressed as a per9 centage and not in excess of 100 per10 cent) of the United States shareholder’s 

11 pro rata share of the cash position of 

12 the specified foreign corporation re13 ferred to in such clause divided by the 

14 amount of such specified cash position. 

15 For purposes of this subparagraph, a sepa16 rate applicable percentage shall be deter17 mined under each of subclauses (I) and (II) 

18 with respect to each specified foreign cor19 poration referred to in clause (ii) with re20 spect to which a specified cash position is 

21 determined for the specified foreign corpora22 tion referred to in clause (i). 

23 ‘‘(iv) REDUCTION WITH RESPECT TO

24 AFFILIATED GROUP MEMBERS NOT WHOLLY

25 OWNED BY THE AFFILIATED GROUP.—For 


lotter on DSKBCFDHB2PROD with BILLS
350 

•HR 1 RH

1 purposes of clause (i)(II), in the case of an 

2 includible corporation the group ownership 

3 percentage of which is less than 100 percent 

4 (as determined under subsection (b)(4)(F)), 

5 the amount not take into account by reason 

6 of such clause shall be the group ownership 

7 percentage of such amount (determined 

8 without regard to this clause). 

9 ‘‘(E) CERTAIN BLOCKED ASSETS NOT TAKEN

10 INTO ACCOUNT.—A cash position of a specified 

11 foreign corporation shall not be taken into ac12 count under subparagraph (A) if such position 

13 could not (as of the date that it would otherwise 

14 have been taken into account under clause (i), 

15 (ii), or (iii) of subparagraph (A)) have been dis16 tributed by such specified foreign corporation to 

17 United States shareholders of such specified for18 eign corporation because of currency or other re19 strictions or limitations imposed under the laws 

20 of any foreign country (within the meaning of 

21 section 964(b)). 

22 ‘‘(F) CASH POSITIONS OF CERTAIN NON23 CORPORATE ENTITIES TAKEN INTO ACCOUNT.— 

24 An entity (other than a domestic corporation) 

25 shall be treated as a specified foreign corporation 


lotter on DSKBCFDHB2PROD with BILLS
351 

•HR 1 RH

1 of a United States shareholder for purposes of de2 termining such United States shareholder’s ag3 gregate foreign cash position if any interest in 

4 such entity is held by a specified foreign corpora5 tion of such United States shareholder (deter6 mined after application of this subparagraph) 

7 and such entity would be a specified foreign cor8 poration of such United States shareholder if 

9 such entity were a foreign corporation. 

10 ‘‘(G) TIME OF CERTAIN DETERMINA11 TIONS.—For purposes of this paragraph, the de12 termination of whether a person is a United 

13 States shareholder, whether a person is a speci14 fied foreign corporation, and the pro rata share 

15 of a United States shareholder with respect to a 

16 specified foreign corporation, shall be determined 

17 as of the end of the taxable year described in sub18 section (a). 

19 ‘‘(H) ANTI-ABUSE.—If the Secretary deter20 mines that the principal purpose of any trans21 action was to reduce the aggregate foreign cash 

22 position taken into account under this sub23 section, such transaction shall be disregarded for 

24 purposes of this subsection. 


lotter on DSKBCFDHB2PROD with BILLS
352 

•HR 1 RH

1 ‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; AC2 CUMULATED POST-1986 DEFERRED FOREIGN INCOME.— 

3 For purposes of this section— 

4 ‘‘(1) DEFERRED FOREIGN INCOME CORPORA5 TION.—The term ‘deferred foreign income corporation’ 

6 means, with respect to any United States shareholder, 

7 any specified foreign corporation of such United 

8 States shareholder which has accumulated post-1986 

9 deferred foreign income (as of the date referred to in 

10 paragraph (1) or (2) of subsection (a), whichever is 

11 applicable with respect to such foreign corporation) 

12 greater than zero. 

13 ‘‘(2) ACCUMULATED POST-1986 DEFERRED FOR14 EIGN INCOME.—The term ‘accumulated post-1986 de15 ferred foreign income’ means the post-1986 earnings 

16 and profits except to the extent such earnings— 

17 ‘‘(A) are attributable to income of the speci18 fied foreign corporation which is effectively con19 nected with the conduct of a trade or business 

20 within the United States and subject to tax 

21 under this chapter, or 

22 ‘‘(B) if distributed, would be excluded from 

23 the gross income of a United States shareholder 

24 under section 959. 


lotter on DSKBCFDHB2PROD with BILLS
353 

•HR 1 RH

1 To the extent provided in regulations or other guid2 ance prescribed by the Secretary, in the case of any 

3 controlled foreign corporation which has shareholders 

4 which are not United States shareholders, accumu5 lated post-1986 deferred foreign income shall be ap6 propriately reduced by amounts which would be de7 scribed in subparagraph (B) if such shareholders were 

8 United States shareholders. 

9 ‘‘(3) POST-1986 EARNINGS AND PROFITS.—The 

10 term ‘post-1986 earnings and profits’ means the earn11 ings and profits of the foreign corporation (computed 

12 in accordance with sections 964(a) and 986) accumu13 lated in taxable years beginning after December 31, 

14 1986, and determined— 

15 ‘‘(A) as of the date referred to in paragraph 

16 (1) or (2) of subsection (a), whichever is applica17 ble with respect to such foreign corporation, 

18 ‘‘(B) without diminution by reason of divi19 dends distributed during the taxable year ending 

20 with or including such date, and 

21 ‘‘(C) increased by the amount of any quali22 fied deficit (within the meaning of section 

23 952(c)(1)(B)(ii)) arising before January 1, 2018, 

24 which is treated as a qualified deficit (within the 

25 meaning of such section as amended by the Tax 


lotter on DSKBCFDHB2PROD with BILLS
354 

•HR 1 RH

1 Cuts and Jobs Act) for purposes of such foreign 

2 corporation’s first taxable year beginning after 

3 December 31, 2017. 

4 ‘‘(e) SPECIFIED FOREIGN CORPORATION.— 

5 ‘‘(1) IN GENERAL.—For purposes of this section, 

6 the term ‘specified foreign corporation’ means— 

7 ‘‘(A) any controlled foreign corporation, 

8 and 

9 ‘‘(B) any foreign corporation with respect 

10 to which one or more domestic corporations is a 

11 United States shareholder (determined without 

12 regard to section 958(b)(4)). 

13 ‘‘(2) APPLICATION TO CERTAIN FOREIGN COR14 PORATIONS.—For purposes of sections 951 and 961, a 

15 foreign corporation described in paragraph (1)(B) 

16 shall be treated as a controlled foreign corporation 

17 solely for purposes of taking into account the subpart 

18 F income of such corporation under subsection (a) 

19 (and for purposes of applying subsection (f)). 

20 ‘‘(3) EXCEPTION FOR PASSIVE FOREIGN INVEST21 MENT COMPANIES.—The term ‘specified foreign cor22 poration’ shall not include any passive foreign invest23 ment company (within the meaning of subpart D of 

24 part VI of subchapter P) that is not a controlled for25 eign corporation. 


lotter on DSKBCFDHB2PROD with BILLS
355 

•HR 1 RH

1 ‘‘(f) DETERMINATIONS OF PRO RATA SHARE.—For 

2 purposes of this section, the determination of any United 

3 States shareholder’s pro rata share of any amount with re4 spect to any specified foreign corporation shall be deter5 mined under rules similar to the rules of section 951(a)(2) 

6 by treating such amount in the same manner as subpart 

7 F income (and by treating such specified foreign corpora8 tion as a controlled foreign corporation). 

9 ‘‘(g) DISALLOWANCE OF FOREIGN TAX CREDIT, ETC.— 

10 ‘‘(1) IN GENERAL.—No credit shall be allowed 

11 under section 901 for the applicable percentage of any 

12 taxes paid or accrued (or treated as paid or accrued) 

13 with respect to any amount for which a deduction is 

14 allowed under this section. 

15 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

16 of this subsection, the term ‘applicable percentage’ 

17 means the amount (expressed as a percentage) equal 

18 to the sum of— 

19 ‘‘(A) 80 percent of the ratio of— 

20 ‘‘(i) the excess to which subsection 

21 (c)(1)(A) applies, divided by 

22 ‘‘(ii) the sum of such excess plus the 

23 amount to which subsection (c)(1)(B) ap24 plies, plus 

25 ‘‘(B) 60 percent of the ratio of— 


lotter on DSKBCFDHB2PROD with BILLS
356 

•HR 1 RH

1 ‘‘(i) the amount to which subsection 

2 (c)(1)(B) applies, divided by 

3 ‘‘(ii) the sum described in subpara4 graph (A)(ii). 

5 ‘‘(3) DENIAL OF DEDUCTION.—No deduction 

6 shall be allowed under this chapter for any tax for 

7 which credit is not allowable under section 901 by 

8 reason of paragraph (1) (determined by treating the 

9 taxpayer as having elected the benefits of subpart A 

10 of part III of subchapter N). 

11 ‘‘(4) COORDINATION WITH SECTION 78.—With re12 spect to the taxes treated as paid or accrued by a do13 mestic corporation with respect to amounts which are 

14 includible in gross income of such domestic corpora15 tion by reason of this section, section 78 shall apply 

16 only to so much of such taxes as bears the same pro17 portion to the amount of such taxes as— 

18 ‘‘(A) the excess of— 

19 ‘‘(i) the amounts which are includible 

20 in gross income of such domestic corpora21 tion by reason of this section, over 

22 ‘‘(ii) the deduction allowable under 

23 subsection (c) with respect to such amounts, 

24 bears to 

25 ‘‘(B) such amounts. 


lotter on DSKBCFDHB2PROD with BILLS
357 

•HR 1 RH

1 ‘‘(5) EXTENSION OF FOREIGN TAX CREDIT CAR2 RYOVER PERIOD.—With respect to any taxes paid or 

3 accrued (or treated as paid or accrued) with respect 

4 to any amount for which a deduction is allowed 

5 under this section, section 904(c) shall be applied by 

6 substituting ‘first 20 succeeding taxable years’ for 

7 ‘first 10 succeeding taxable years’. 

8 ‘‘(h) ELECTION TO PAY LIABILITY IN INSTALL9 MENTS.— 

10 ‘‘(1) IN GENERAL.—In the case of a United 

11 States shareholder of a deferred foreign income cor12 poration, such United States shareholder may elect to 

13 pay the net tax liability under this section in 8 equal 

14 installments. 

15 ‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.—If 

16 an election is made under paragraph (1), the first in17 stallment shall be paid on the due date (determined 

18 without regard to any extension of time for filing the 

19 return) for the return of tax for the taxable year de20 scribed in subsection (a) and each succeeding install21 ment shall be paid on the due date (as so determined) 

22 for the return of tax for the taxable year following the 

23 taxable year with respect to which the preceding in24 stallment was made. 


lotter on DSKBCFDHB2PROD with BILLS
358 

•HR 1 RH

1 ‘‘(3) ACCELERATION OF PAYMENT.—If there is 

2 an addition to tax for failure to timely pay any in3 stallment required under this subsection, a liquida4 tion or sale of substantially all the assets of the tax5 payer (including in a title 11 or similar case), a ces6 sation of business by the taxpayer, or any similar cir7 cumstance, then the unpaid portion of all remaining 

8 installments shall be due on the date of such event (or 

9 in the case of a title 11 or similar case, the day before 

10 the petition is filed). The preceding sentence shall not 

11 apply to the sale of substantially all the assets of a 

12 taxpayer to a buyer if such buyer enters into an 

13 agreement with the Secretary under which such buyer 

14 is liable for the remaining installments due under 

15 this subsection in the same manner as if such buyer 

16 were the taxpayer. 

17 ‘‘(4) PRORATION OF DEFICIENCY TO INSTALL18 MENTS.—If an election is made under paragraph (1) 

19 to pay the net tax liability under this section in in20 stallments and a deficiency has been assessed with re21 spect to such net tax liability, the deficiency shall be 

22 prorated to the installments payable under paragraph 

23 (1). The part of the deficiency so prorated to any in24 stallment the date for payment of which has not ar25 rived shall be collected at the same time as, and as 


lotter on DSKBCFDHB2PROD with BILLS
359 

•HR 1 RH

1 a part of, such installment. The part of the deficiency 

2 so prorated to any installment the date for payment 

3 of which has arrived shall be paid upon notice and 

4 demand from the Secretary. This subsection shall not 

5 apply if the deficiency is due to negligence, to inten6 tional disregard of rules and regulations, or to fraud 

7 with intent to evade tax. 

8 ‘‘(5) ELECTION.—Any election under paragraph 

9 (1) shall be made not later than the due date for the 

10 return of tax for the taxable year described in sub11 section (a) and shall be made in such manner as the 

12 Secretary may provide. 

13 ‘‘(6) NET TAX LIABILITY UNDER THIS SEC14 TION.—For purposes of this subsection— 

15 ‘‘(A) IN GENERAL.—The net tax liability 

16 under this section with respect to any United 

17 States shareholder is the excess (if any) of— 

18 ‘‘(i) such taxpayer’s net income tax for 

19 the taxable year in which an amount is in20 cluded in the gross income of such United 

21 States shareholder under section 951(a)(1) 

22 by reason of this section, over 

23 ‘‘(ii) such taxpayer’s net income tax 

24 for such taxable year determined— 


lotter on DSKBCFDHB2PROD with BILLS
360 

•HR 1 RH

1 ‘‘(I) without regard to this sec2 tion, and 

3 ‘‘(II) without regard to any in4 come, deduction, or credit, properly at5 tributable to a dividend received by 

6 such United States shareholder from 

7 any deferred foreign income corpora8 tion. 

9 ‘‘(B) NET INCOME TAX.—The term ‘net in10 come tax’ means the regular tax liability reduced 

11 by the credits allowed under subparts A, B, and 

12 D of part IV of subchapter A. 

13 ‘‘(i) SPECIAL RULES FOR S CORPORATION SHARE14 HOLDERS.— 

15 ‘‘(1) IN GENERAL.—In the case of any S cor16 poration which is a United States shareholder of a 

17 deferred foreign income corporation, each shareholder 

18 of such S corporation may elect to defer payment of 

19 such shareholder’s net tax liability under this section 

20 with respect to such S corporation until the share21 holder’s taxable year which includes the triggering 

22 event with respect to such liability. Any net tax li23 ability payment of which is deferred under the pre24 ceding sentence shall be assessed on the return as an 


lotter on DSKBCFDHB2PROD with BILLS
361 

•HR 1 RH

1 addition to tax in the shareholder’s taxable year 

2 which includes such triggering event. 

3 ‘‘(2) TRIGGERING EVENT.— 

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

5 shareholder’s net tax liability under this section 

6 with respect to any S corporation, the triggering 

7 event with respect to such liability is whichever 

8 of the following occurs first: 

9 ‘‘(i) Such corporation ceases to be an S 

10 corporation (determined as of the first day 

11 of the first taxable year that such corpora12 tion is not an S corporation). 

13 ‘‘(ii) A liquidation or sale of substan14 tially all the assets of such S corporation 

15 (including in a title 11 or similar case), a 

16 cessation of business by such S corporation, 

17 such S corporation ceases to exist, or any 

18 similar circumstance. 

19 ‘‘(iii) A transfer of any share of stock 

20 in such S corporation by the taxpayer (in21 cluding by reason of death, or otherwise). 

22 ‘‘(B) PARTIAL TRANSFERS OF STOCK.—In 

23 the case of a transfer of less than all of the tax24 payer’s shares of stock in the S corporation, such 

25 transfer shall only be a triggering event with reVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00361 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
362 

•HR 1 RH

1 spect to so much of the taxpayer’s net tax liabil2 ity under this section with respect to such S cor3 poration as is properly allocable to such stock. 

4 ‘‘(C) TRANSFER OF LIABILITY.—A transfer 

5 described in clause (iii) shall not be treated as 

6 a triggering event if the transferee enters into an 

7 agreement with the Secretary under which such 

8 transferee is liable for net tax liability with re9 spect to such stock in the same manner as if such 

10 transferee were the taxpayer. 

11 ‘‘(3) NET TAX LIABILITY.—A shareholder’s net 

12 tax liability under this section with respect to any S 

13 corporation is the net tax liability under this section 

14 which would be determined under subsection (h)(6) if 

15 the only subpart F income taken into account by such 

16 shareholder by reason of this section were allocations 

17 from such S corporation. 

18 ‘‘(4) ELECTION TO PAY DEFERRED LIABILITY IN

19 INSTALLMENTS.—In the case of a taxpayer which 

20 elects to defer payment under paragraph (1)— 

21 ‘‘(A) subsection (h) shall be applied sepa22 rately with respect to the liability to which such 

23 election applies, 

24 ‘‘(B) an election under subsection (h) with 

25 respect to such liability shall be treated as timely 


lotter on DSKBCFDHB2PROD with BILLS
363 

•HR 1 RH

1 made if made not later than the due date for the 

2 return of tax for the taxable year in which the 

3 triggering event with respect to such liability oc4 curs, 

5 ‘‘(C) the first installment under subsection 

6 (h) with respect to such liability shall be paid 

7 not later than such due date (but determined 

8 without regard to any extension of time for filing 

9 the return), and 

10 ‘‘(D) if the triggering event with respect to 

11 any net tax liability is described in paragraph 

12 (2)(A)(ii), an election under subsection (h) with 

13 respect to such liability may be made only with 

14 the consent of the Secretary. 

15 ‘‘(5) JOINT AND SEVERAL LIABILITY OF S COR16 PORATION.—If any shareholder of an S corporation 

17 elects to defer payment under paragraph (1), such S 

18 corporation shall be jointly and severally liable for 

19 such payment and any penalty, addition to tax, or 

20 additional amount attributable thereto. 

21 ‘‘(6) EXTENSION OF LIMITATION ON COLLEC22 TION.—Notwithstanding any other provision of law, 

23 any limitation on the time period for the collection of 

24 a liability deferred under this subsection shall not be 


lotter on DSKBCFDHB2PROD with BILLS
364 

•HR 1 RH

1 treated as beginning before the date of the triggering 

2 event with respect to such liability. 

3 ‘‘(7) ANNUAL REPORTING OF NET TAX LIABIL4 ITY.— 

5 ‘‘(A) IN GENERAL.—Any shareholder of an 

6 S corporation which makes an election under 

7 paragraph (1) shall report the amount of such 

8 shareholder’s deferred net tax liability on such 

9 shareholder’s return of tax for the taxable year 

10 for which such election is made and on the re11 turn of tax for each taxable year thereafter until 

12 such amount has been fully assessed on such re13 turns. 

14 ‘‘(B) DEFERRED NET TAX LIABILITY.—For 

15 purposes of this paragraph, the term ‘deferred 

16 net tax liability’ means, with respect to any tax17 able year, the amount of net tax liability pay18 ment of which has been deferred under para19 graph (1) and which has not been assessed on a 

20 return of tax for any prior taxable year. 

21 ‘‘(C) FAILURE TO REPORT.—In the case of 

22 any failure to report any amount required to be 

23 reported under subparagraph (A) with respect to 

24 any taxable year before the due date for the re25 turn of tax for such taxable year, there shall be 


lotter on DSKBCFDHB2PROD with BILLS
365 

•HR 1 RH

1 assessed on such return as an addition to tax 5 

2 percent of such amount. 

3 ‘‘(8) ELECTION.—Any election under paragraph 

4 (1)— 

5 ‘‘(A) shall be made by the shareholder of the 

6 S corporation not later than the due date for 

7 such shareholder’s return of tax for the taxable 

8 year which includes the close of the taxable year 

9 of such S corporation in which the amount de10 scribed in subsection (a) is taken into account, 

11 and 

12 ‘‘(B) shall be made in such manner as the 

13 Secretary may provide. 

14 ‘‘(j) REPORTING BY S CORPORATION.—Each S cor15 poration which is a United States shareholder of a deferred 

16 foreign income corporation shall report in its return of tax 

17 under section 6037(a) the amount includible in its gross 

18 income for such taxable year by reason of this section and 

19 the amount of the deduction allowable by subsection (c). 

20 Any copy provided to a shareholder under section 6037(b) 

21 shall include a statement of such shareholder’s pro rata 

22 share of such amounts. 

23 ‘‘(k) INCLUSION OF DEFERRED FOREIGN INCOME

24 UNDER THIS SECTION NOT TO TRIGGER RECAPTURE OF

25 OVERALL FOREIGN LOSS, ETC.—For purposes of sections 


lotter on DSKBCFDHB2PROD with BILLS
366 

•HR 1 RH

1 904(f)(1) and 907(c)(4), in the case of a United States 

2 shareholder of a deferred foreign income corporation, such 

3 United States shareholder’s taxable income from sources 

4 without the United States and combined foreign oil and gas 

5 income shall be determined without regard to this section. 

6 ‘‘(l) REGULATIONS.—The Secretary may prescribe 

7 such regulations or other guidance as may be necessary or 

8 appropriate to carry out the provisions of this section.’’. 

9 (b) CLERICAL AMENDMENT.—The table of sections for 

10 subpart F of part III of subchapter N of chapter 1 is 

11 amended by striking the item relating to section 965 and 

12 inserting the following: 

‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation 

exemption system of taxation.’’. 

13 Subtitle B—Modifications Related 

14 to Foreign Tax Credit System 

15 SEC. 4101. REPEAL OF SECTION 902 INDIRECT FOREIGN TAX 

16 CREDITS; DETERMINATION OF SECTION 960 

17 CREDIT ON CURRENT YEAR BASIS. 

18 (a) REPEAL OF SECTION 902 INDIRECT FOREIGN TAX

19 CREDITS.—Subpart A of part III of subchapter N of chap20 ter 1 is amended by striking section 902. 

21 (b) DETERMINATION OF SECTION 960 CREDIT ON CUR22 RENT YEAR BASIS.—Section 960 is amended— 

23 (1) by striking subsection (c), by redesignating 

24 subsection (b) as subsection (c), by striking all that 


lotter on DSKBCFDHB2PROD with BILLS
367 

•HR 1 RH

1 precedes subsection (c) (as so redesignated) and in2 serting the following: 

3 ‘‘SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLU4 SIONS. 

5 ‘‘(a) IN GENERAL.—For purposes of this subpart, if 

6 there is included in the gross income of a domestic corpora7 tion any item of income under section 951(a)(1) with re8 spect to any controlled foreign corporation with respect to 

9 which such domestic corporation is a United States share10 holder, such domestic corporation shall be deemed to have 

11 paid so much of such foreign corporation’s foreign income 

12 taxes as are properly attributable to such item of income. 

13 ‘‘(b) SPECIAL RULES FOR DISTRIBUTIONS FROM PRE14 VIOUSLY TAXED EARNINGS AND PROFITS.—For purposes of 

15 this subpart— 

16 ‘‘(1) IN GENERAL.—If any portion of a distribu17 tion from a controlled foreign corporation to a domes18 tic corporation which is a United States shareholder 

19 with respect to such controlled foreign corporation is 

20 excluded from gross income under section 959(a), such 

21 domestic corporation shall be deemed to have paid so 

22 much of such foreign corporation’s foreign income 

23 taxes as— 

24 ‘‘(A) are properly attributable to such por25 tion, and 


lotter on DSKBCFDHB2PROD with BILLS
368 

•HR 1 RH

1 ‘‘(B) have not been deemed to have to been 

2 paid by such domestic corporation under this 

3 section for the taxable year or any prior taxable 

4 year. 

5 ‘‘(2) TIERED CONTROLLED FOREIGN CORPORA6 TIONS.—If section 959(b) applies to any portion of a 

7 distribution from a controlled foreign corporation to 

8 another controlled foreign corporation, such controlled 

9 foreign corporation shall be deemed to have paid so 

10 much of such other controlled foreign corporation’s 

11 foreign income taxes as— 

12 ‘‘(A) are properly attributable to such por13 tion, and 

14 ‘‘(B) have not been deemed to have been 

15 paid by a domestic corporation under this sec16 tion for the taxable year or any prior taxable 

17 year.’’, 

18 (2) and by adding after subsection (c) (as so re19 designated) the following new subsections: 

20 ‘‘(d) FOREIGN INCOME TAXES.—The term ‘foreign in21 come taxes’ means any income, war profits, or excess profits 

22 taxes paid or accrued to any foreign country or possession 

23 of the United States. 


lotter on DSKBCFDHB2PROD with BILLS
369 

•HR 1 RH

1 ‘‘(e) REGULATIONS.—The Secretary may prescribe 

2 such regulations or other guidance as may be necessary or 

3 appropriate to carry out the provisions of this section.’’. 

4 (c) CONFORMING AMENDMENTS.— 

5 (1) Section 78 is amended to read as follows: 

6 ‘‘SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CRED7 IT. 

8 ‘‘If a domestic corporation chooses to have the benefits 

9 of subpart A of part III of subchapter N (relating to foreign 

10 tax credit) for any taxable year, an amount equal to the 

11 taxes deemed to be paid by such corporation under sub12 sections (a) and (b) of section 960 for such taxable year 

13 shall be treated for purposes of this title (other than sections 

14 959, 960, and 961) as an item of income required to be 

15 included in the gross income of such domestic corporation 

16 under section 951(a) for such taxable year.’’. 

17 (2) Section 245(a)(10)(C) is amended by striking 

18 ‘‘sections 902, 907, and 960’’ and inserting ‘‘sections 

19 907 and 960’’. 

20 (3) Sections 535(b)(1) and 545(b)(1) are each 

21 amended by striking ‘‘section 902(a) or 960(a)(1)’’ 

22 and inserting ‘‘section 960’’. 

23 (4) Section 814(f)(1) is amended— 

24 (A) by striking subparagraph (B), and 


lotter on DSKBCFDHB2PROD with BILLS
370 

•HR 1 RH

1 (B) by striking all that precedes ‘‘No in2 come’’ and inserting the following: 

3 ‘‘(1) TREATMENT OF FOREIGN TAXES.—’’. 

4 (5) Section 865(h)(1)(B) is amended by striking 

5 ‘‘sections 902, 907, and 960’’ and inserting ‘‘sections 

6 907 and 960’’. 

7 (6) Section 901(a) is amended by striking ‘‘sec8 tions 902 and 960’’ and inserting ‘‘section 960’’. 

9 (7) Section 901(e)(2) is amended by striking 

10 ‘‘but is not limited to—’’ and all that follows through 

11 ‘‘that portion’’ and inserting ‘‘but is not limited to, 

12 that portion’’. 

13 (8) Section 901(f) is amended by striking ‘‘sec14 tions 902 and 960’’ and inserting ‘‘section 960’’. 

15 (9) Section 901(j)(1)(A) is amended by striking 

16 ‘‘902 or’’. 

17 (10) Section 901(j)(1)(B) is amended by striking 

18 ‘‘sections 902 and 960’’ and inserting ‘‘section 960’’. 

19 (11) Section 901(k)(2) is amended by striking 

20 ‘‘section 853, 902, or 960’’ and inserting ‘‘section 853 

21 or 960’’. 

22 (12) Section 901(k)(6) is amended by striking 

23 ‘‘902 or’’. 

24 (13) Section 901(m)(1) is amended by striking 

25 ‘‘relevant foreign assets—’’ and all that follows and 


lotter on DSKBCFDHB2PROD with BILLS
371 

•HR 1 RH

1 inserting ‘‘relevant foreign assets shall not be taken 

2 into account in determining the credit allowed under 

3 subsection (a).’’. 

4 (14) Section 904(d)(1) is amended by striking 

5 ‘‘sections 902, 907, and 960’’ and inserting ‘‘sections 

6 907 and 960’’. 

7 (15) Section 904(d)(6)(A) is amended by striking 

8 ‘‘sections 902, 907, and 960’’ and inserting ‘‘sections 

9 907 and 960’’. 

10 (16) Section 904(h)(10)(A) is amended by strik11 ing ‘‘sections 902, 907, and 960’’ and inserting ‘‘sec12 tions 907 and 960’’. 

13 (17) Section 904 is amended by striking sub14 section (k). 

15 (18) Section 905(c)(1) is amended by striking 

16 the last sentence. 

17 (19) Section 905(c)(2)(B)(i) is amended to read 

18 as follows: 

19 ‘‘(i) shall be taken into account for the 

20 taxable year to which such taxes relate, 

21 and’’. 

22 (20) Section 906(a) is amended by striking ‘‘(or 

23 deemed, under section 902, paid or accrued during 

24 the taxable year)’’. 


lotter on DSKBCFDHB2PROD with BILLS
372 

•HR 1 RH

1 (21) Section 906(b) is amended by striking para2 graphs (4) and (5). 

3 (22) Section 907(b)(2)(B) is amended by striking 

4 ‘‘902 or’’. 

5 (23) Section 907(c)(3) is amended— 

6 (A) by striking subparagraph (A) and re7 designating subparagraphs (B) and (C) as sub8 paragraphs (A) and (B), respectively, and 

9 (B) by striking ‘‘section 960(a)’’ in sub10 paragraph (A) (as so redesignated) and inserting 

11 ‘‘section 960’’. 

12 (24) Section 907(c)(5) is amended by striking 

13 ‘‘902 or’’. 

14 (25) Section 907(f)(2)(B)(i) is amended by strik15 ing ‘‘902 or’’. 

16 (26) Section 908(a) is amended by striking ‘‘902 

17 or’’. 

18 (27) Section 909(b) is amended— 

19 (A) by striking ‘‘section 902 corporation’’ in 

20 the matter preceding paragraph (1) and insert21 ing ‘‘10/50 corporation’’, 

22 (B) by striking ‘‘902 or’’ in paragraph (1), 

23 (C) by striking ‘‘by such section 902 cor24 poration’’ and all that follows in the matter fol25 lowing paragraph (2) and inserting ‘‘by such 10/ 


lotter on DSKBCFDHB2PROD with BILLS
373 

•HR 1 RH

1 50 corporation or a domestic corporation which 

2 is a United States shareholder with respect to 

3 such 10/50 corporation.’’, and 

4 (D) by striking ‘‘SECTION 902 CORPORA5 TIONS’’ in the heading thereof and inserting ‘‘10/ 

6 50 CORPORATIONS’’. 

7 (28) Section 909(d)(5) is amended to read as fol8 lows: 

9 ‘‘(5) 10/50 CORPORATION.—The term ‘10/50 cor10 poration’ means any foreign corporation with respect 

11 to which one or more domestic corporations is a 

12 United States shareholder.’’. 

13 (29) Section 958(a)(1) is amended by striking 

14 ‘‘960(a)(1)’’ and inserting ‘‘960’’. 

15 (30) Section 959(d) is amended by striking ‘‘Ex16 cept as provided in section 960(a)(3), any’’ and in17 serting ‘‘Any’’. 

18 (31) Section 959(e) is amended by striking ‘‘sec19 tion 960(b)’’ and inserting ‘‘section 960(c)’’. 

20 (32) Section 1291(g)(2)(A) is amended by strik21 ing ‘‘any distribution—’’ and all that follows through 

22 ‘‘but only if’’ and inserting ‘‘any distribution, any 

23 withholding tax imposed with respect to such dis24 tribution, but only if’’. 


lotter on DSKBCFDHB2PROD with BILLS
374 

•HR 1 RH

1 (33) Section 6038(c)(1)(B) is amended by strik2 ing ‘‘sections 902 (relating to foreign tax credit for 

3 corporate stockholder in foreign corporation) and 960 

4 (relating to special rules for foreign tax credit)’’ and 

5 inserting ‘‘section 960’’. 

6 (34) Section 6038(c)(4) is amended by striking 

7 subparagraph (C). 

8 (35) The table of sections for subpart A of part 

9 III of subchapter N of chapter 1 is amended by strik10 ing the item relating to section 902. 

11 (36) The table of sections for subpart F of part 

12 III of subchapter N of chapter 1 is amended by strik13 ing the item relating to section 960 and inserting the 

14 following: 

‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’. 

15 (d) EFFECTIVE DATE.—The amendments made by this 

16 section shall apply to taxable years beginning after Decem17 ber 31, 2017. 

18 SEC. 4102. SOURCE OF INCOME FROM SALES OF INVENTORY 

19 DETERMINED SOLELY ON BASIS OF PRODUC20 TION ACTIVITIES. 

21 (a) IN GENERAL.—Section 863(b) is amended by add22 ing at the end the following: ‘‘Gains, profits, and income 

23 from the sale or exchange of inventory property described 

24 in paragraph (2) shall be allocated and apportioned be25 tween sources within and without the United States solely 


lotter on DSKBCFDHB2PROD with BILLS
375 

•HR 1 RH

1 on the basis of the production activities with respect to the 

2 property.’’. 

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

4 section shall apply to taxable years beginning after Decem5 ber 31, 2017. 

6 Subtitle C—Modification of Subpart 

7 F Provisions 

8 SEC. 4201. REPEAL OF INCLUSION BASED ON WITHDRAWAL 

9 OF PREVIOUSLY EXCLUDED SUBPART F IN10 COME FROM QUALIFIED INVESTMENT. 

11 (a) IN GENERAL.—Subpart F of part III of subchapter 

12 N of chapter 1 is amended by striking section 955. 

13 (b) CONFORMING AMENDMENTS.— 

14 (1)(A) Section 951(a)(1)(A) is amended to read 

15 as follows: 

16 ‘‘(A) his pro rata share (determined under 

17 paragraph (2)) of the corporation’s subpart F 

18 income for such year, and’’. 

19 (B) Section 851(b)(3) is amended by striking 

20 ‘‘section 951(a)(1)(A)(i)’’ in the flush language at the 

21 end and inserting ‘‘section 951(a)(1)(A)’’. 

22 (C) Section 952(c)(1)(B)(i) is amended by strik23 ing ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 

24 951(a)(1)(A)’’. 


lotter on DSKBCFDHB2PROD with BILLS
376 

•HR 1 RH

1 (D) Section 953(c)(1)(C) is amended by striking 

2 ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 

3 951(a)(1)(A)’’. 

4 (2) Section 951(a) is amended by striking para5 graph (3). 

6 (3) Section 953(d)(4)(B)(iv)(II) is amended by 

7 striking ‘‘or amounts referred to in clause (ii) or (iii) 

8 of section 951(a)(1)(A)’’. 

9 (4) Section 964(b) is amended by striking ‘‘, 

10 955,’’. 

11 (5) Section 970 is amended by striking sub12 section (b). 

13 (6) The table of sections for subpart F of part III 

14 of subchapter N of chapter 1 is amended by striking 

15 the item relating to section 955. 

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

17 section shall apply to taxable years of foreign corporations 

18 beginning after December 31, 2017, and to taxable years 

19 of United States shareholders in which or with which such 

20 taxable years of foreign corporations end. 

21 SEC. 4202. REPEAL OF TREATMENT OF FOREIGN BASE COM22 PANY OIL RELATED INCOME AS SUBPART F 

23 INCOME. 

24 (a) IN GENERAL.—Section 954(a) is amended by strik25 ing paragraph (5), by striking the comma at the end of 


lotter on DSKBCFDHB2PROD with BILLS
377 

•HR 1 RH

1 paragraph (3) and inserting a period, and by inserting 

2 ‘‘and’’ at the end of paragraph (2). 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 952(c)(1)(B)(iii) is amended by 

5 striking subclause (I) and by redesignating subclauses 

6 (II) through (V) as subclauses (I) through (IV), re7 spectively. 

8 (2) Section 954(b)(4) is amended by striking the 

9 last sentence. 

10 (3) Section 954(b)(5) is amended by striking 

11 ‘‘the foreign base company services income, and the 

12 foreign base company oil related income’’ and insert13 ing ‘‘and the foreign base company services income’’. 

14 (4) Section 954(b) is amended by striking para15 graph (6). 

16 (5) Section 954 is amended by striking sub17 section (g). 

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

19 section shall apply to taxable years of foreign corporations 

20 beginning after December 31, 2017, and to taxable years 

21 of United States shareholders in which or with which such 

22 taxable years of foreign corporations end. 


lotter on DSKBCFDHB2PROD with BILLS
378 

•HR 1 RH

1 SEC. 4203. INFLATION ADJUSTMENT OF DE MINIMIS EXCEP2 TION FOR FOREIGN BASE COMPANY INCOME. 

3 (a) IN GENERAL.—Section 954(b)(3) is amended by 

4 adding at the end the following new subparagraph: 

5 ‘‘(D) INFLATION ADJUSTMENT.—In the case 

6 of any taxable year beginning after 2017, the 

7 dollar amount in subparagraph (A)(ii) shall be 

8 increased by an amount equal to— 

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

10 ‘‘(ii) the cost-of-living adjustment de11 termined under section 1(c)(2)(A) for the 

12 calendar year in which the taxable year be13 gins. 

14 Any increase determined under the preceding 

15 sentence shall be rounded to the nearest multiple 

16 of $50,000.’’. 

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

18 section shall apply to taxable years of foreign corporations 

19 beginning after December 31, 2017, and to taxable years 

20 of United States shareholders in which or with which such 

21 taxable years of foreign corporations end. 

22 SEC. 4204. LOOK-THRU RULE FOR RELATED CONTROLLED 

23 FOREIGN CORPORATIONS MADE PERMANENT. 

24 (a) IN GENERAL.—Paragraph (6) of section 954(c) is 

25 amended by striking subparagraph (C). 


lotter on DSKBCFDHB2PROD with BILLS
379 

•HR 1 RH

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

2 section shall apply to taxable years of foreign corporations 

3 beginning after December 31, 2019, and to taxable years 

4 of United States shareholders in which or with which such 

5 taxable years of foreign corporations end. 

6 SEC. 4205. MODIFICATION OF STOCK ATTRIBUTION RULES 

7 FOR DETERMINING STATUS AS A CON8 TROLLED FOREIGN CORPORATION. 

9 (a) IN GENERAL.—Section 958(b) is amended— 

10 (1) by striking paragraph (4), and 

11 (2) by striking ‘‘Paragraphs (1) and (4)’’ in the 

12 last sentence and inserting ‘‘Paragraph (1)’’. 

13 (b) APPLICATION OF CERTAIN REPORTING REQUIRE14 MENTS.—Section 6038(e)(2) is amended by striking ‘‘except 

15 that—’’ and all that follows through ‘‘in applying subpara16 graph (C)’’ and inserting ‘‘except that in applying subpara17 graph (C)’’. 

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

19 section shall apply to taxable years of foreign corporations 

20 beginning after December 31, 2017, and to taxable years 

21 of United States shareholders in which or with which such 

22 taxable years of foreign corporations end. 


lotter on DSKBCFDHB2PROD with BILLS
380 

•HR 1 RH

1 SEC. 4206. ELIMINATION OF REQUIREMENT THAT COR2 PORATION MUST BE CONTROLLED FOR 30 

3 DAYS BEFORE SUBPART F INCLUSIONS 

4 APPLY. 

5 (a) IN GENERAL.—Section 951(a)(1) is amended by 

6 striking ‘‘for an uninterrupted period of 30 days or more’’ 

7 and inserting ‘‘at any time’’. 

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

9 section shall apply to taxable years of foreign corporations 

10 beginning after December 31, 2017, and to taxable years 

11 of United States shareholders with or within which such 

12 taxable years of foreign corporations end. 

13 Subtitle D—Prevention of Base 

14 Erosion 

15 SEC. 4301. CURRENT YEAR INCLUSION BY UNITED STATES 

16 SHAREHOLDERS WITH FOREIGN HIGH RE17 TURNS. 

18 (a) IN GENERAL.—Subpart F of part III of subchapter 

19 N of chapter 1 is amended by inserting after section 951 

20 the following new section: 

21 ‘‘SEC. 951A. FOREIGN HIGH RETURN AMOUNT INCLUDED IN 

22 GROSS INCOME OF UNITED STATES SHARE23 HOLDERS. 

24 ‘‘(a) IN GENERAL.—Each person who is a United 

25 States shareholder of any controlled foreign corporation for 

26 any taxable year of such United States shareholder shall 


lotter on DSKBCFDHB2PROD with BILLS
381 

•HR 1 RH

1 include in gross income for such taxable year 50 percent 

2 of such shareholder’s foreign high return amount for such 

3 taxable year. 

4 ‘‘(b) FOREIGN HIGH RETURN AMOUNT.—For purposes 

5 of this section— 

6 ‘‘(1) IN GENERAL.—The term ‘foreign high re7 turn amount’ means, with respect to any United 

8 States shareholder for any taxable year of such 

9 United States shareholder, the excess (if any) of— 

10 ‘‘(A) such shareholder’s net CFC tested in11 come for such taxable year, over 

12 ‘‘(B) the excess (if any) of— 

13 ‘‘(i) the applicable percentage of the 

14 aggregate of such shareholder’s pro rata 

15 share of the qualified business asset invest16 ment of each controlled foreign corporation 

17 with respect to which such shareholder is a 

18 United States shareholder for such taxable 

19 year (determined for each taxable year of 

20 each such controlled foreign corporation 

21 which ends in or with such taxable year of 

22 such United States shareholder), over 

23 ‘‘(ii) the amount of interest expense 

24 taken into account under subsection 

25 (c)(2)(A)(ii) in determining the shareVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00381 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
382 

•HR 1 RH

1 holder’s net CFC tested income for the tax2 able year. 

3 ‘‘(2) APPLICABLE PERCENTAGE.—The term ‘ap4 plicable percentage’ means, with respect to any tax5 able year, the Federal short-term rate (determined 

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

7 which such taxable year ends) plus 7 percentage 

8 points. 

9 ‘‘(c) NET CFC TESTED INCOME.—For purposes of this 

10 section— 

11 ‘‘(1) IN GENERAL.—The term ‘net CFC tested in12 come’ means, with respect to any United States share13 holder for any taxable year of such United States 

14 shareholder, the excess (if any) of— 

15 ‘‘(A) the aggregate of such shareholder’s pro 

16 rata share of the tested income of each controlled 

17 foreign corporation with respect to which such 

18 shareholder is a United States shareholder for 

19 such taxable year of such United States share20 holder (determined for each taxable year of such 

21 controlled foreign corporation which ends in or 

22 with such taxable year of such United States 

23 shareholder), over 

24 ‘‘(B) the aggregate of such shareholder’s pro 

25 rata share of the tested loss of each controlled forVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00382 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
383 

•HR 1 RH

1 eign corporation with respect to which such 

2 shareholder is a United States shareholder for 

3 such taxable year of such United States share4 holder (determined for each taxable year of such 

5 controlled foreign corporation which ends in or 

6 with such taxable year of such United States 

7 shareholder). 

8 ‘‘(2) TESTED INCOME; TESTED LOSS.—For pur9 poses of this section— 

10 ‘‘(A) TESTED INCOME.—The term ‘tested in11 come’ means, with respect to any controlled for12 eign corporation for any taxable year of such 

13 controlled foreign corporation, the excess (if any) 

14 of— 

15 ‘‘(i) the gross income of such corpora16 tion determined without regard to— 

17 ‘‘(I) any item of income which is 

18 effectively connected with the conduct 

19 by such corporation of a trade or busi20 ness within the United States if subject 

21 to tax under this chapter, 

22 ‘‘(II) any gross income taken into 

23 account in determining the subpart F 

24 income of such corporation, 


lotter on DSKBCFDHB2PROD with BILLS
384 

•HR 1 RH

1 ‘‘(III) except as otherwise pro2 vided by the Secretary, any amount ex3 cluded from the foreign personal hold4 ing company income (as defined in 

5 section 954) of such corporation by 

6 reason of section 954(c)(6) but only to 

7 the extent that any deduction allowable 

8 for the payment or accrual of such 

9 amount does not result in a reduction 

10 in the foreign high return amount of 

11 any United States shareholder (deter12 mined without regard to this sub13 clause), 

14 ‘‘(IV) any gross income excluded 

15 from the foreign personal holding com16 pany income (as defined in section 

17 954) of such corporation by reason of 

18 subsection (c)(2)(C), (h), or (i) of sec19 tion 954, 

20 ‘‘(V) any gross income excluded 

21 from the insurance income (as defined 

22 in section 953) of such corporation by 

23 reason of section 953(a)(2), 

24 ‘‘(VI) any gross income excluded 

25 from foreign base company income (as 


lotter on DSKBCFDHB2PROD with BILLS
385 

•HR 1 RH

1 defined in section 954) or insurance 

2 income (as defined in section 953) of 

3 such corporation by reason of section 

4 954(b)(4), 

5 ‘‘(VII) any dividend received from 

6 a related person (as defined in section 

7 954(d)(3)), and 

8 ‘‘(VIII) any commodities gross in9 come of such corporation, over 

10 ‘‘(ii) the deductions (including taxes) 

11 properly allocable to such gross income 

12 under rules similar to the rules of section 

13 954(b)(5) (or which would be so properly 

14 allocable if such corporation had such gross 

15 income). 

16 ‘‘(B) TESTED LOSS.—The term ‘tested loss’ 

17 means, with respect to any controlled foreign 

18 corporation for any taxable year of such con19 trolled foreign corporation, the excess (if any) of 

20 the amount described in subparagraph (A)(ii) 

21 over the amount described in subparagraph 

22 (A)(i). 

23 ‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.—For 

24 purposes of this section— 


lotter on DSKBCFDHB2PROD with BILLS
386 

•HR 1 RH

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

2 asset investment’ means, with respect to any con3 trolled foreign corporation for any taxable year of 

4 such controlled foreign corporation, the aggregate of 

5 the corporation’s adjusted bases (determined as of the 

6 close of such taxable year and after any adjustments 

7 with respect to such taxable year) in specified tan8 gible property— 

9 ‘‘(A) used in a trade or business of the cor10 poration, and 

11 ‘‘(B) of a type with respect to which a de12 duction is allowable under section 168. 

13 ‘‘(2) SPECIFIED TANGIBLE PROPERTY.—The term 

14 ‘specified tangible property’ means any tangible prop15 erty to the extent such property is used in the produc16 tion of tested income or tested loss. 

17 ‘‘(3) PARTNERSHIP PROPERTY.—For purposes of 

18 this subsection, if a controlled foreign corporation 

19 holds an interest in a partnership at the close of such 

20 taxable year of the controlled foreign corporation, 

21 such controlled foreign corporation shall take into ac22 count under paragraph (1) the controlled foreign cor23 poration’s distributive share of the aggregate of the 

24 partnership’s adjusted bases (determined as of such 

25 date in the hands of the partnership) in tangible 


lotter on DSKBCFDHB2PROD with BILLS
387 

•HR 1 RH

1 property held by such partnership to the extent such 

2 property— 

3 ‘‘(A) is used in the trade or business of the 

4 partnership, 

5 ‘‘(B) is of a type with respect to which a de6 duction is allowable under section 168, and 

7 ‘‘(C) is used in the production of tested in8 come or tested loss (determined with respect to 

9 such controlled foreign corporation’s distributive 

10 share of income or loss with respect to such prop11 erty). 

12 For purposes of this paragraph, the controlled foreign 

13 corporation’s distributive share of the adjusted basis 

14 of any property shall be the controlled foreign cor15 poration’s distributive share of income and loss with 

16 respect to such property. 

17 ‘‘(4) DETERMINATION OF ADJUSTED BASIS.—For 

18 purposes of this subsection, the adjusted basis in any 

19 property shall be determined without regard to any 

20 provision of this title (or any other provision of law) 

21 which is enacted after the date of the enactment of 

22 this section. 

23 ‘‘(5) REGULATIONS.—The Secretary shall issue 

24 such regulations or other guidance as the Secretary 

25 determines appropriate to prevent the avoidance of 


lotter on DSKBCFDHB2PROD with BILLS
388 

•HR 1 RH

1 the purposes of this subsection, including regulations 

2 or other guidance which provide for the treatment of 

3 property if— 

4 ‘‘(A) such property is transferred, or held, 

5 temporarily, or 

6 ‘‘(B) the avoidance of the purposes of this 

7 paragraph is a factor in the transfer or holding 

8 of such property. 

9 ‘‘(e) COMMODITIES GROSS INCOME.—For purposes of 

10 this section— 

11 ‘‘(1) COMMODITIES GROSS INCOME.—The term 

12 ‘commodities gross income’ means, with respect to 

13 any corporation— 

14 ‘‘(A) gross income of such corporation from 

15 the disposition of commodities which are pro16 duced or extracted by such corporation (or a 

17 partnership in which such corporation is a part18 ner), and 

19 ‘‘(B) gross income of such corporation from 

20 the disposition of property which gives rise to in21 come described in subparagraph (A). 

22 ‘‘(2) COMMODITY.—The term ‘commodity’ means 

23 any commodity described in section 475(e)(2)(A) or 

24 section 475(e)(2)(D) (determined without regard to 

25 clause (i) thereof and by substituting ‘a commodity 


lotter on DSKBCFDHB2PROD with BILLS
389 

•HR 1 RH

1 described in subparagraph (A)’ for ‘such a com2 modity’ in clause (ii) thereof). 

3 ‘‘(f) TAXABLE YEARS FOR WHICH PERSONS ARE

4 TREATED AS UNITED STATES SHAREHOLDERS OF CON5 TROLLED FOREIGN CORPORATIONS.—For purposes of this 

6 section— 

7 ‘‘(1) IN GENERAL.—A United States shareholder 

8 of a controlled foreign corporation shall be treated as 

9 a United States shareholder of such controlled foreign 

10 corporation for any taxable year of such United 

11 States shareholder if— 

12 ‘‘(A) a taxable year of such controlled for13 eign corporation ends in or with such taxable 

14 year of such person, and 

15 ‘‘(B) such person owns (within the meaning 

16 of section 958(a)) stock in such controlled foreign 

17 corporation on the last day, in such taxable year 

18 of such foreign corporation, on which the foreign 

19 corporation is a controlled foreign corporation. 

20 ‘‘(2) TREATMENT AS A CONTROLLED FOREIGN

21 CORPORATION.—Except for purposes of paragraph 

22 (1)(B) and the application of section 951(a)(2) to this 

23 section pursuant to subsection (g), a foreign corpora24 tion shall be treated as a controlled foreign corpora25 tion for any taxable year of such foreign corporation 


lotter on DSKBCFDHB2PROD with BILLS
390 

•HR 1 RH

1 if such foreign corporation is a controlled foreign cor2 poration at any time during such taxable year. 

3 ‘‘(g) DETERMINATION OF PRO RATA SHARE.—For 

4 purposes of this section, pro rata shares shall be determined 

5 under the rules of section 951(a)(2) in the same manner 

6 as such section applies to subpart F income. 

7 ‘‘(h) COORDINATION WITH SUBPART F.— 

8 ‘‘(1) TREATMENT AS SUBPART F INCOME FOR

9 CERTAIN PURPOSES.—Except as otherwise provided 

10 by the Secretary any foreign high return amount in11 cluded in gross income under subsection (a) shall be 

12 treated in the same manner as an amount included 

13 under section 951(a)(1)(A) for purposes of applying 

14 sections 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 

15 959, 961, 962, 993(a)(1)(E), 996(f)(1), 1248(b)(1), 

16 1248(d)(1), 6501(e)(1)(C), 6654(d)(2)(D), and 

17 6655(e)(4). 

18 ‘‘(2) ENTIRE FOREIGN HIGH RETURN AMOUNT

19 TAKEN INTO ACCOUNT FOR PURPOSES OF CERTAIN

20 SECTIONS.—For purposes of applying paragraph (1) 

21 with respect to sections 168(h)(2)(B), 851(b), 959, 

22 961, 962, 1248(b)(1), and 1248(d)(1), the foreign high 

23 return amount included in gross income under sub24 section (a) shall be determined by substituting ‘100 

25 percent’ for ‘50 percent’ in such subsection. 


lotter on DSKBCFDHB2PROD with BILLS
391 

•HR 1 RH

1 ‘‘(3) ALLOCATION OF FOREIGN HIGH RETURN

2 AMOUNT TO CONTROLLED FOREIGN CORPORATIONS.— 

3 For purposes of the sections referred to in paragraph 

4 (1), with respect to any controlled foreign corporation 

5 any pro rata amount from which is taken into ac6 count in determining the foreign high return amount 

7 included in gross income of a United States share8 holder under subsection (a), the portion of such for9 eign high return amount which is treated as being 

10 with respect to such controlled foreign corporation 

11 is— 

12 ‘‘(A) in the case of a controlled foreign cor13 poration with tested loss, zero, and 

14 ‘‘(B) in the case of a controlled foreign cor15 poration with tested income, the portion of such 

16 foreign high return amount which bears the same 

17 ratio to such foreign high return amount as— 

18 ‘‘(i) such United States shareholder’s 

19 pro rata amount of the tested income of 

20 such controlled foreign corporation, bears to 

21 ‘‘(ii) the aggregate amount determined 

22 under subsection (c)(1)(A) with respect to 

23 such United States shareholder. 

24 ‘‘(4) COORDINATION WITH SUBPART F TO DENY

25 DOUBLE BENEFIT OF LOSSES.—In the case of any 


lotter on DSKBCFDHB2PROD with BILLS
392 

•HR 1 RH

1 United States shareholder of any controlled foreign 

2 corporation, the amount included in gross income 

3 under section 951(a)(1)(A) shall be determined by in4 creasing the earnings and profits of such controlled 

5 foreign corporation (solely for purposes of deter6 mining such amount) by an amount that bears the 

7 same ratio (not greater than 1) to such shareholder’s 

8 pro rata share of the tested loss of such controlled for9 eign corporation as— 

10 ‘‘(A) the aggregate amount determined 

11 under subsection (c)(1)(A) with respect to such 

12 shareholder, bears to 

13 ‘‘(B) the aggregate amount determined 

14 under subsection (c)(1)(B) with respect to such 

15 shareholder.’’. 

16 (b) FOREIGN TAX CREDIT.— 

17 (1) APPLICATION OF DEEMED PAID FOREIGN TAX

18 CREDIT.—Section 960, as amended by the preceding 

19 provisions of this Act, is amended by redesignating 

20 subsections (d) and (e) as subsections (e) and (f), re21 spectively, and by inserting after subsection (c) the 

22 following new subsection: 

23 ‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY

24 ATTRIBUTABLE TO TESTED INCOME.— 


lotter on DSKBCFDHB2PROD with BILLS
393 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—For purposes of this subpart, 

2 if any amount is includible in the gross income of a 

3 domestic corporation under section 951A, such domes4 tic corporation shall be deemed to have paid foreign 

5 income taxes equal to 80 percent of— 

6 ‘‘(A) such domestic corporation’s foreign 

7 high return percentage, multiplied by 

8 ‘‘(B) the aggregate tested foreign income 

9 taxes paid or accrued by controlled foreign cor10 porations with respect to which such domestic 

11 corporation is a United States shareholder. 

12 ‘‘(2) FOREIGN HIGH RETURN PERCENTAGE.—For 

13 purposes of paragraph (1), the term ‘foreign high re14 turn percentage’ means, with respect to any domestic 

15 corporation, the ratio (expressed as a percentage) of— 

16 ‘‘(A) such corporation’s foreign high return 

17 amount (as defined in section 951A(b)), divided 

18 by 

19 ‘‘(B) the aggregate amount determined 

20 under section 951A(c)(1)(A) with respect to such 

21 corporation. 

22 ‘‘(3) TESTED FOREIGN INCOME TAXES.—For 

23 purposes of paragraph (1), the term ‘tested foreign in24 come taxes’ means, with respect to any domestic cor25 poration which is a United States shareholder of a 


lotter on DSKBCFDHB2PROD with BILLS
394 

•HR 1 RH

1 controlled foreign corporation, the foreign income 

2 taxes paid or accrued by such foreign corporation 

3 which are properly attributable to gross income de4 scribed in section 951A(c)(2)(A)(i).’’. 

5 (2) APPLICATION OF FOREIGN TAX CREDIT LIMI6 TATION.— 

7 (A) SEPARATE BASKET FOR FOREIGN HIGH

8 RETURN AMOUNT.—Section 904(d)(1) is amend9 ed by redesignating subparagraphs (A) and (B) 

10 as subparagraphs (B) and (C), respectively, and 

11 by inserting before subparagraph (B) (as so re12 designated) the following new subparagraph: 

13 ‘‘(A) any amount includible in gross income 

14 under section 951A,’’. 

15 (B) NO CARRYOVER OF EXCESS TAXES.— 

16 Section 904(c) is amended by adding at the end 

17 the following: ‘‘This subsection shall not apply to 

18 taxes paid or accrued with respect to amounts 

19 described in subsection (d)(1)(A).’’ 

20 (3) GROSS UP FOR DEEMED PAID FOREIGN TAX

21 CREDIT.—Section 78, as amended by the preceding 

22 provisions of this Act, is amended— 

23 (A) by striking ‘‘any taxable year, an 

24 amount’’ and inserting ‘‘any taxable year— 

25 ‘‘(1) an amount’’, and 


lotter on DSKBCFDHB2PROD with BILLS
395 

•HR 1 RH

1 (B) by striking the period at the end and 

2 inserting ‘‘, and 

3 ‘‘(2) an amount equal to the taxes deemed to be 

4 paid by such corporation under section 960(d) for 

5 such taxable year (determined by substituting ‘100 

6 percent’ for ‘80 percent’ in such section) shall be 

7 treated for purposes of this title (other than sections 

8 959, 960, and 961) as an increase in the foreign high 

9 return amount of such domestic corporation under 

10 section 951A for such taxable year.’’. 

11 (c) CONFORMING AMENDMENTS.— 

12 (1) Section 170(b)(2)(D) is amended by striking 

13 ‘‘computed without regard to’’ and all that follows 

14 and inserting ‘‘computed— 

15 ‘‘(i) without regard to— 

16 ‘‘(I) this section, 

17 ‘‘(II) part VIII (except section 

18 248), 

19 ‘‘(III) any net operating loss 

20 carryback to the taxable year under 

21 section 172, 

22 ‘‘(IV) any capital loss carryback 

23 to the taxable year under section 

24 1212(a)(1), and 


lotter on DSKBCFDHB2PROD with BILLS
396 

•HR 1 RH

1 ‘‘(ii) by substituting ‘100 percent’ for 

2 ‘50 percent’ in section 951A(a).’’. 

3 (2) Section 246(b)(1) is amended by— 

4 (A) striking ‘‘and without regard to’’ and 

5 inserting ‘‘without regard to’’, and 

6 (B) by striking the period at the end and 

7 inserting ‘‘, and by substituting ‘100 percent’ for 

8 ‘50 percent’ in section 951A(a).’’. 

9 (3) Section 469(i)(3)(F) is amended by striking 

10 ‘‘determined without regard to’’ and all that follows 

11 and inserting ‘‘determined— 

12 ‘‘(i) without regard to— 

13 ‘‘(I) any amount includible in 

14 gross income under section 86, 

15 ‘‘(II) the amounts allowable as a 

16 deduction under section 219, and 

17 ‘‘(III) any passive activity loss or 

18 any loss allowable by reason of sub19 section (c)(7), and 

20 ‘‘(ii) by substituting ‘100 percent’ for 

21 ‘50 percent’ in section 951A(a).’’. 

22 (4) Section 856(c)(2) is amended by striking 

23 ‘‘and’’ at the end of subparagraph (H), by adding 

24 ‘‘and’’ at the end of subparagraph (I), and by insertVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00396 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
397 

•HR 1 RH

1 ing after subparagraph (I) the following new sub2 paragraph: 

3 ‘‘(J) amounts includible in gross income 

4 under section 951A(a);’’. 

5 (5) Section 856(c)(3)(D) is amended by striking 

6 ‘‘dividends or other distributions on, and gain’’ and 

7 inserting ‘‘dividends, other distributions on, amounts 

8 includible in gross income under section 951A(a) with 

9 respect to, and gain’’. 

10 (6) The table of sections for subpart F of part III 

11 of subchapter N of chapter 1 is amended by inserting 

12 after the item relating to section 951 the following 

13 new item: 

‘‘Sec. 951A. Foreign high return amount included in gross income of United 

States shareholders.’’. 

14 (d) EFFECTIVE DATE.—The amendments made by this 

15 section shall apply to taxable years of foreign corporations 

16 beginning after December 31, 2017, and to taxable years 

17 of United States shareholders in which or with which such 

18 taxable years of foreign corporations end. 


lotter on DSKBCFDHB2PROD with BILLS
398 

•HR 1 RH

1 SEC. 4302. LIMITATION ON DEDUCTION OF INTEREST BY 

2 DOMESTIC CORPORATIONS WHICH ARE MEM3 BERS OF AN INTERNATIONAL FINANCIAL RE4 PORTING GROUP. 

5 (a) IN GENERAL.—Section 163 is amended by redesig6 nating subsection (n) as subsection (p) and by inserting 

7 after subsection (m) the following new subsection: 

8 ‘‘(n) LIMITATION ON DEDUCTION OF INTEREST BY DO9 MESTIC CORPORATIONS IN INTERNATIONAL FINANCIAL RE10 PORTING GROUPS.— 

11 ‘‘(1) IN GENERAL.—In the case of any domestic 

12 corporation which is a member of any international 

13 financial reporting group, the deduction under this 

14 chapter for interest paid or accrued during the tax15 able year shall not exceed the sum of— 

16 ‘‘(A) the allowable percentage of 110 percent 

17 of the excess (if any) of — 

18 ‘‘(i) the amount of such interest so 

19 paid or accrued, over 

20 ‘‘(ii) the amount described in subpara21 graph (B), plus 

22 ‘‘(B) the amount of interest includible in 

23 gross income of such corporation for such taxable 

24 year. 

25 ‘‘(2) INTERNATIONAL FINANCIAL REPORTING

26 GROUP.— 


lotter on DSKBCFDHB2PROD with BILLS
399 

•HR 1 RH

1 ‘‘(A) For purposes of this subsection, the 

2 term ‘international financial reporting group’ 

3 means, with respect to any reporting year, any 

4 group of entities which— 

5 ‘‘(i) includes— 

6 ‘‘(I) at least one foreign corpora7 tion engaged in a trade or business 

8 within the United States, or 

9 ‘‘(II) at least one domestic cor10 poration and one foreign corporation, 

11 ‘‘(ii) prepares consolidated financial 

12 statements with respect to such year, and 

13 ‘‘(iii) reports in such statements aver14 age annual gross receipts (determined in the 

15 aggregate with respect to all entities which 

16 are part of such group) for the 3-reporting17 year period ending with such reporting year 

18 in excess of $100,000,000. 

19 ‘‘(B) RULES RELATING TO DETERMINATION

20 OF AVERAGE GROSS RECEIPTS.—For purposes of 

21 subparagraph (A)(iii), rules similar to the rules 

22 of section 448(c)(3) shall apply. 

23 ‘‘(3) ALLOWABLE PERCENTAGE.—For purposes of 

24 this subsection— 


lotter on DSKBCFDHB2PROD with BILLS
400 

•HR 1 RH

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

2 percentage’ means, with respect to any domestic 

3 corporation for any taxable year, the ratio (ex4 pressed as a percentage and not greater than 100 

5 percent) of— 

6 ‘‘(i) such corporation’s allocable share 

7 of the international financial reporting 

8 group’s reported net interest expense for the 

9 reporting year of such group which ends in 

10 or with such taxable year of such corpora11 tion, over 

12 ‘‘(ii) such corporation’s reported net 

13 interest expense for such reporting year of 

14 such group. 

15 ‘‘(B) REPORTED NET INTEREST EXPENSE.— 

16 The term ‘reported net interest expense’ means— 

17 ‘‘(i) with respect to any international 

18 financial reporting group for any reporting 

19 year, the excess of— 

20 ‘‘(I) the aggregate amount of in21 terest expense reported in such group’s 

22 consolidated financial statements for 

23 such taxable year, over 

24 ‘‘(II) the aggregate amount of in25 terest income reported in such group’s 


lotter on DSKBCFDHB2PROD with BILLS
401 

•HR 1 RH

1 consolidated financial statements for 

2 such taxable year, and 

3 ‘‘(ii) with respect to any domestic cor4 poration for any reporting year, the excess 

5 of— 

6 ‘‘(I) the amount of interest ex7 pense of such corporation reported in 

8 the books and records of the inter9 national financial reporting group 

10 which are used in preparing such 

11 group’s consolidated financial state12 ments for such taxable year, over 

13 ‘‘(II) the amount of interest in14 come of such corporation reported in 

15 such books and records. 

16 ‘‘(C) ALLOCABLE SHARE OF REPORTED NET

17 INTEREST EXPENSE.—With respect to any do18 mestic corporation which is a member of any 

19 international financial reporting group, such 

20 corporation’s allocable share of such group’s re21 ported net interest expense for any reporting 

22 year is the portion of such expense which bears 

23 the same ratio to such expense as— 

24 ‘‘(i) the EBITDA of such corporation 

25 for such reporting year, bears to 


lotter on DSKBCFDHB2PROD with BILLS
402 

•HR 1 RH

1 ‘‘(ii) the EBITDA of such group for 

2 such reporting year. 

3 ‘‘(D) EBITDA.— 

4 ‘‘(i) IN GENERAL.—The term 

5 ‘EBITDA’ means, with respect to any re6 porting year, earnings before interest, taxes, 

7 depreciation, and amortization— 

8 ‘‘(I) as determined in the inter9 national financial reporting group’s 

10 consolidated financial statements for 

11 such year, or 

12 ‘‘(II) for purposes of subpara13 graph (A)(i), as determined in the 

14 books and records of the international 

15 financial reporting group which are 

16 used in preparing such statements if 

17 not determined in such statements. 

18 ‘‘(ii) TREATMENT OF DISREGARDED

19 ENTITIES.—The EBITDA of any domestic 

20 corporation shall not fail to include the 

21 EBITDA of any entity which is disregarded 

22 for purposes of this chapter. 

23 ‘‘(iii) TREATMENT OF INTRA-GROUP

24 DISTRIBUTIONS.—The EBITDA of any do25 mestic corporation shall be determined 


lotter on DSKBCFDHB2PROD with BILLS
403 

•HR 1 RH

1 without regard to any distribution received 

2 by such corporation from any other member 

3 of the international financial reporting 

4 group. 

5 ‘‘(E) SPECIAL RULES FOR NON-POSITIVE

6 EBITDA.— 

7 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 

8 In the case of any international financial 

9 reporting group the EBITDA of which is 

10 zero or less, paragraph (1) shall not apply 

11 to any member of such group the EBITDA 

12 of which is above zero. 

13 ‘‘(ii) NON-POSITIVE ENTITY EBITDA.— 

14 In the case of any group member the 

15 EBITDA of which is zero or less, paragraph 

16 (1) shall be applied without regard to sub17 paragraph (A) thereof. 

18 ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 

19 For purposes of this subsection, the term ‘consolidated 

20 financial statement’ means any consolidated financial 

21 statement described in paragraph (2)(A)(ii) if such 

22 statement is— 

23 ‘‘(A) a financial statement which is cer24 tified as being prepared in accordance with gen25 erally accepted accounting principles, interVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00403 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
404 

•HR 1 RH

1 national financial reporting standards, or any 

2 other comparable method of accounting identified 

3 by the Secretary, and which is— 

4 ‘‘(i) a 10-K (or successor form), or an5 nual statement to shareholders, required to 

6 be filed with the United States Securities 

7 and Exchange Commission, 

8 ‘‘(ii) an audited financial statement 

9 which is used for— 

10 ‘‘(I) credit purposes, 

11 ‘‘(II) reporting to shareholders, 

12 partners, or other proprietors, or to 

13 beneficiaries, or 

14 ‘‘(III) any other substantial 

15 nontax purpose, 

16 but only if there is no statement described 

17 in clause (i), or 

18 ‘‘(iii) filed with any other Federal or 

19 State agency for nontax purposes, but only 

20 if there is no statement described in clause 

21 (i) or (ii), or 

22 ‘‘(B) a financial statement which— 

23 ‘‘(i) is used for a purpose described in 

24 subclause (I), (II), or (III) of subparagraph 

25 (A)(ii), or 


lotter on DSKBCFDHB2PROD with BILLS
405 

•HR 1 RH

1 ‘‘(ii) filed with any regulatory or gov2 ernmental body (whether domestic or for3 eign) specified by the Secretary, 

4 but only if there is no statement described in 

5 subparagraph (A). 

6 ‘‘(5) REPORTING YEAR.—For purposes of this 

7 subsection, the term ‘reporting year’ means, with re8 spect to any international financial reporting group, 

9 the year with respect to which the consolidated finan10 cial statements are prepared. 

11 ‘‘(6) APPLICATION TO CERTAIN ENTITIES.— 

12 ‘‘(A) PARTNERSHIPS.—Except as otherwise 

13 provided by the Secretary in paragraph (7), this 

14 subsection shall apply to any partnership which 

15 is a member of any international financial re16 porting group under rules similar to the rules of 

17 section 163(j)(3). 

18 ‘‘(B) FOREIGN CORPORATIONS ENGAGED IN

19 TRADE OR BUSINESS WITHIN THE UNITED

20 STATES.—Except as otherwise provided by the 

21 Secretary in paragraph (8), any deduction for 

22 interest paid or accrued by a foreign corporation 

23 engaged in a trade or business within the United 

24 States shall be limited in a manner consistent 

25 with the principles of this subsection. 


lotter on DSKBCFDHB2PROD with BILLS
406 

•HR 1 RH

1 ‘‘(C) CONSOLIDATED GROUPS.—For pur2 poses of this subsection, the members of any 

3 group that file (or are required to file) a consoli4 dated return with respect to the tax imposed by 

5 chapter 1 for a taxable year shall be treated as 

6 a single corporation. 

7 ‘‘(7) REGULATIONS.—The Secretary may issue 

8 such regulations or other guidance as are necessary or 

9 appropriate to carry out the purposes of this sub10 section.’’. 

11 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 

12 (1) IN GENERAL.—Section 163(o) is amended to 

13 read as follows: 

14 ‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN15 TEREST.—The amount of any interest not allowed as a de16 duction for any taxable year by reason of subsection (j)(1) 

17 or (n)(1) (whichever imposes the lower limitation with re18 spect to such taxable year) shall be treated as interest (and 

19 as business interest for purposes of subsection (j)(1)) paid 

20 or accrued in the succeeding taxable year. Interest paid or 

21 accrued in any taxable year (determined without regard to 

22 the preceding sentence) shall not be carried past the 5th tax23 able year following such taxable year, determined by treat24 ing interest as allowed as a deduction on a first-in, first25 out basis.’’. 


lotter on DSKBCFDHB2PROD with BILLS
407 

•HR 1 RH

1 (2) TREATMENT OF CARRYFORWARD OF DIS2 ALLOWED INTEREST IN CERTAIN CORPORATE ACQUISI3 TIONS.—For rules related to the carryforward of dis4 allowed interest in certain corporate acquisitions, see 

5 the amendments made by section 3301(c). 

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

7 section shall apply to taxable years beginning after Decem8 ber 31, 2017. 

9 SEC. 4303. EXCISE TAX ON CERTAIN PAYMENTS FROM DO10 MESTIC CORPORATIONS TO RELATED FOR11 EIGN CORPORATIONS; ELECTION TO TREAT 

12 SUCH PAYMENTS AS EFFECTIVELY CON13 NECTED INCOME. 

14 (a) EXCISE TAX ON CERTAIN AMOUNTS FROM DOMES15 TIC CORPORATIONS TO FOREIGN AFFILIATES.— 

16 (1) IN GENERAL.—Chapter 36 is amended by 

17 adding at the end the following new subchapter: 

18 ‘‘Subchapter E—Tax on Certain Amounts to 

19 Foreign Affiliates 

‘‘Sec. 4491. Imposition of tax on certain amounts from domestic corporations to 

foreign affiliates. 

20 ‘‘SEC. 4491. IMPOSITION OF TAX ON CERTAIN AMOUNTS 

21 FROM DOMESTIC CORPORATIONS TO FOR22 EIGN AFFILIATES. 

23 ‘‘(a) IN GENERAL.—There is hereby imposed on each 

24 specified amount paid or incurred by a domestic corporaVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00407 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
408 

•HR 1 RH

1 tion to a foreign corporation which is a member of the same 

2 international financial reporting group as such domestic 

3 corporation a tax equal to the highest rate of tax in effect 

4 under section 11 multiplied by such amount. 

5 ‘‘(b) BY WHOM PAID.—The tax imposed by subsection 

6 (a) shall be paid by the domestic corporation described in 

7 such subsection. 

8 ‘‘(c) EXCEPTION FOR EFFECTIVELY CONNECTED IN9 COME.—Subsection (a) shall not apply to so much of any 

10 specified amount as is effectively connected with the conduct 

11 of a trade or business within the United States if such 

12 amount is subject to tax under chapter 1. In the case of 

13 any amount which is treated as effectively connected with 

14 the conduct of a trade or business within the United States 

15 by reason of section 882(g), the preceding sentence shall 

16 apply to such amount only if the domestic corporation pro17 vides to the Secretary (at such time and in such form and 

18 manner as the Secretary may provide) a copy of the election 

19 made under section 882(g) by the foreign corporation re20 ferred to in subsection (a). 

21 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—Terms used 

22 in this section that are also used in section 882(g) shall 

23 have the same meaning as when used in such section and 

24 rules similar to the rules of paragraphs (5) and (6) of such 

25 section shall apply for purposes of this section.’’. 


lotter on DSKBCFDHB2PROD with BILLS
409 

•HR 1 RH

1 (2) DENIAL OF DEDUCTION FOR TAX IMPOSED.— 

2 Section 275(a) is amended by inserting after para3 graph (6) the following new paragraph: 

4 ‘‘(7) Taxes imposed by section 4491.’’. 

5 (3) CLERICAL AMENDMENT.—The table of sub6 chapters for chapter 36 is amended by adding at the 

7 end the following new item: 

‘‘SUBCHAPTER E. TAX ON CERTAIN AMOUNTS TO FOREIGN AFFILIATES.’’. 

8 (b) ELECTION TO TREAT CERTAIN PAYMENTS FROM

9 DOMESTIC CORPORATIONS TO RELATED FOREIGN COR10 PORATIONS AS EFFECTIVELY CONNECTED INCOME.—Sec11 tion 882 is amended by adding at the end the following 

12 new subsection: 

13 ‘‘(g) ELECTION TO TREAT CERTAIN PAYMENTS FROM

14 DOMESTIC CORPORATIONS TO RELATED FOREIGN COR15 PORATIONS AS EFFECTIVELY CONNECTED INCOME.— 

16 ‘‘(1) IN GENERAL.—In the case of any specified 

17 amount paid or incurred by a domestic corporation 

18 to a foreign corporation which is a member of the 

19 same international financial reporting group as such 

20 domestic corporation and which has elected to be sub21 ject to the provisions of this subsection— 

22 ‘‘(A) such amount shall be taken into ac23 count (other than for purposes of sections 245, 

24 245A, and 881) in the taxable year of such forVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00409 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
410 

•HR 1 RH

1 eign corporation during which such amount is 

2 paid or incurred as if— 

3 ‘‘(i) such foreign corporation were en4 gaged in a trade or business within the 

5 United States, 

6 ‘‘(ii) such foreign corporation had a 

7 permanent establishment in the United 

8 States during the taxable year, and 

9 ‘‘(iii) such payment were effectively 

10 connected with the conduct of a trade or 

11 business within the United States and were 

12 attributable to such permanent establish13 ment, 

14 ‘‘(B) for purposes of subsection (c)(1)(A), no 

15 deduction shall be allowed with respect to such 

16 amount and such subsection shall be applied 

17 without regard to such amount, and 

18 ‘‘(C) the foreign corporation shall be al19 lowed a deduction (for the taxable year referred 

20 to in subparagraph (A)) equal to the deemed ex21 penses with respect to such amount. 

22 ‘‘(2) SPECIFIED AMOUNT.—For purposes of this 

23 subsection— 

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

25 amount’ means any amount which is, with reVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00410 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
411 

•HR 1 RH

1 spect to the payor, allowable as a deduction or 

2 includible in costs of goods sold, inventory, or the 

3 basis of a depreciable or amortizable asset. 

4 ‘‘(B) EXCEPTIONS.—The term ‘specified 

5 amount’ shall not include— 

6 ‘‘(i) interest, 

7 ‘‘(ii) any amount paid or incurred for 

8 the acquisition of any security described in 

9 section 475(c)(2) (determined without re10 gard to the last sentence thereof) or any 

11 commodity described in section 475(e)(2), 

12 ‘‘(iii) except as provided in subpara13 graph (C), any amount with respect to 

14 which tax is imposed under section 881(a), 

15 and 

16 ‘‘(iv) in the case of a payor which has 

17 elected to use a services cost method for pur18 poses of section 482, any amount paid or 

19 incurred for services if such amount is the 

20 total services cost with no markup. 

21 ‘‘(C) AMOUNTS NOT TREATED AS EFFEC22 TIVELY CONNECTED TO EXTENT OF GROSS-BASIS

23 TAX.—Subparagraph (B)(iii) shall only apply to 

24 so much of any specified amount as bears the 

25 proportion to such amount as— 


lotter on DSKBCFDHB2PROD with BILLS
412 

•HR 1 RH

1 ‘‘(i) the rate of tax imposed under sec2 tion 881(a) with respect to such amount, 

3 bears to 

4 ‘‘(ii) 30 percent. 

5 ‘‘(3) DEEMED EXPENSES.— 

6 ‘‘(A) IN GENERAL.—The deemed expenses 

7 with respect to any specified amount received by 

8 a foreign corporation during any reporting year 

9 is the amount of expenses such that the net in10 come ratio of such foreign corporation with re11 spect to such amount (taking into account only 

12 such specified amount and such deemed expenses) 

13 is equal to the net income ratio of the inter14 national financial reporting group determined 

15 for such reporting year with respect to the prod16 uct line to which the specified amount relates. 

17 ‘‘(B) NET INCOME RATIO.—For purposes of 

18 this paragraph, the term ‘net income ratio’ 

19 means the ratio of— 

20 ‘‘(i) net income determined without re21 gard to interest income, interest expense, 

22 and income taxes, divided by 

23 ‘‘(ii) revenues. 

24 ‘‘(C) METHOD OF DETERMINATION.— 

25 Amounts described in subparagraph (B) shall be 


lotter on DSKBCFDHB2PROD with BILLS
413 

•HR 1 RH

1 determined with respect to the international fi2 nancial reporting group on the basis of the con3 solidated financial statements referred to in 

4 paragraph (4)(A)(i) and the books and records of 

5 the members of the international financial re6 porting group which are used in preparing such 

7 statements, taking into account only revenues 

8 and expenses of the members of such group (other 

9 than the members of such group which are (or 

10 are treated as) a domestic corporation for pur11 poses of this subsection) derived from, or in12 curred with respect to— 

13 ‘‘(i) persons who are not members of 

14 such group, and 

15 ‘‘(ii) members of such group which are 

16 (or are treated as) a domestic corporation 

17 for purposes of this subsection. 

18 ‘‘(4) INTERNATIONAL FINANCIAL REPORTING

19 GROUP.—For purposes of this subsection— 

20 ‘‘(A) IN GENERAL.—The term ‘international 

21 financial reporting group’ means any group of 

22 entities, with respect to any specified amount, if 

23 such amount is paid or incurred during a re24 porting year of such group with respect to 

25 which— 


lotter on DSKBCFDHB2PROD with BILLS
414 

•HR 1 RH

1 ‘‘(i) such group prepares consolidated 

2 financial statements (within the meaning of 

3 section 163(n)(4)) with respect to such year, 

4 and 

5 ‘‘(ii) the average annual aggregate 

6 payment amount of such group for the 3-re7 porting-year period ending with such re8 porting year exceeds $100,000,000. 

9 ‘‘(B) ANNUAL AGGREGATE PAYMENT

10 AMOUNT.—The term ‘annual aggregate payment 

11 amount’ means, with respect to any reporting 

12 year of the group referred to in subparagraph 

13 (A)(i), the aggregate specified amounts to which 

14 paragraph (1) applies (or would apply if such 

15 group were an international financial reporting 

16 group). 

17 ‘‘(C) APPLICATION OF CERTAIN RULES.— 

18 Rules similar to the rules of subparagraphs (A), 

19 (B), and (D) of section 448(c)(3) shall apply for 

20 purposes of this paragraph. 

21 ‘‘(5) TREATMENT OF PARTNERSHIPS.—Any spec22 ified amount paid, incurred, or received by a partner23 ship which is a member of any international finan24 cial reporting group (and any amount treated as 

25 paid, incurred, or received by a partnership under 


lotter on DSKBCFDHB2PROD with BILLS
415 

•HR 1 RH

1 this paragraph) shall be treated for purposes of this 

2 subsection as amounts paid, incurred, or received, re3 spectively, by each partner of such partnership in an 

4 amount equal to such partner’s distributive share of 

5 the items of income, gain, deduction, or loss to which 

6 such amounts relate. 

7 ‘‘(6) TREATMENT OF AMOUNTS IN CONNECTION

8 WITH UNITED STATES TRADE OR BUSINESS.—Any 

9 specified amount paid, incurred, or received by a for10 eign corporation in connection with the conduct of a 

11 trade or business within the United States (other than 

12 a trade or business it is deemed to conduct pursuant 

13 to this subsection) shall be treated for purposes of this 

14 subsection as an amount paid, incurred, or received, 

15 respectively, by a domestic corporation. For purposes 

16 of the preceding sentence, a foreign corporation shall 

17 be deemed to pay, incur, and receive amounts with 

18 respect to a trade or business it conducts within the 

19 United States (other than a trade or business it is 

20 deemed to conduct pursuant to this subsection) to the 

21 extent such foreign corporation would be treated as 

22 paying, incurring, or receiving such amounts from 

23 such trade or business if such trade or business were 

24 a domestic corporation. 


lotter on DSKBCFDHB2PROD with BILLS
416 

•HR 1 RH

1 ‘‘(7) JOINT AND SEVERAL LIABILITY OF MEM2 BERS OF INTERNAL FINANCIAL REPORTING GROUP.— 

3 In the case of any underpayment with respect to any 

4 taxable year of a foreign corporation which is a mem5 ber of an international financial accounting group, 

6 each domestic corporation which is a member of such 

7 group at any time during such taxable year shall be 

8 jointly and severally liable for— 

9 ‘‘(A) so much of such underpayment as does 

10 not exceed the excess (if any) of such under11 payment over the amount of such underpayment 

12 determined without regard to this subsection, 

13 and 

14 ‘‘(B) any penalty, addition to tax, or addi15 tional amount attributable to the amount de16 scribed in subparagraph (A). 

17 ‘‘(8) FOREIGN TAX CREDIT ALLOWED.—The cred18 it allowed under section 906(a) with respect to 

19 amounts taken into account in income under para20 graph (1)(A) shall be limited to 80 percent of the 

21 amount of taxes paid or accrued and determined 

22 without regard to section 906(b)(1). 

23 ‘‘(9) ELECTION.—Any election under paragraph 

24 (1)— 


lotter on DSKBCFDHB2PROD with BILLS
417 

•HR 1 RH

1 ‘‘(A) shall be made at such time and in 

2 such form and manner as the Secretary may 

3 provide, and 

4 ‘‘(B) shall apply for the taxable year for 

5 which made and all subsequent taxable years un6 less revoked with the consent of the Secretary. 

7 ‘‘(10) REGULATIONS.—The Secretary may issue 

8 such regulations or other guidance as are necessary or 

9 appropriate to carry out the purposes of this sub10 section, including regulations or other guidance— 

11 ‘‘(A) to provide for the proper determina12 tion of product lines, and 

13 ‘‘(B) to prevent the avoidance of the pur14 poses of this subsection through the use of con15 duit transactions or by other means.’’. 

16 (c) REPORTING REQUIREMENTS.— 

17 (1) REPORTING BY FOREIGN CORPORATION.— 

18 Section 6038C(b) is amended to read as follows: 

19 ‘‘(b) REQUIRED INFORMATION.— 

20 ‘‘(1) IN GENERAL.—The information described in 

21 this subsection is— 

22 ‘‘(A) the information described in section 

23 6038A(b), and 

24 ‘‘(B) such other information as the Sec25 retary may prescribe by regulations relating to 


lotter on DSKBCFDHB2PROD with BILLS
418 

•HR 1 RH

1 any item not directly connected with a trans2 action for which information is required under 

3 subparagraph (A). 

4 ‘‘(2) CERTAIN PAYMENTS FROM RELATED DOMES5 TIC CORPORATIONS.— 

6 ‘‘(A) IN GENERAL.—In the case of any re7 porting corporation that receives during the tax8 able year any amount to which section 882(g)(1) 

9 applies, the information described in this sub10 section shall include, with respect to each mem11 ber of the international financial reporting 

12 group from which any such amount is received— 

13 ‘‘(i) the name and taxpayer identifica14 tion number of such member, 

15 ‘‘(ii) the aggregate amounts received 

16 from such member, 

17 ‘‘(iii) the product lines to which such 

18 amounts relate, the aggregate amounts re19 lating to each such product line, and the net 

20 income ratio for each such product line (de21 termined under section 882(g)(3)(B) with 

22 respect to the international financial report23 ing group), and 

24 ‘‘(iv) a summary of any changes in fi25 nancial accounting methods that affect the 


lotter on DSKBCFDHB2PROD with BILLS
419 

•HR 1 RH

1 computation of any net income ratio de2 scribed in clause (iii). 

3 ‘‘(B) DEFINITIONS AND SPECIAL RULES.— 

4 Terms used in this paragraph that are also used 

5 in section 882(g) shall have the same meaning as 

6 when used in such section and rules similar to 

7 the rules of paragraphs (5) and (6) of such sec8 tion shall apply for purposes of this para9 graph.’’. 

10 (2) REPORTING BY DOMESTIC GROUP MEM11 BERS.— 

12 (A) IN GENERAL .—Subpart A of part III 

13 of subchapter A of chapter 61 is amended by in14 serting after section 6038D the following new 

15 section: 

16 ‘‘SEC. 6038E. INFORMATION WITH RESPECT TO CERTAIN 

17 PAYMENTS FROM DOMESTIC CORPORATIONS 

18 TO RELATED FOREIGN CORPORATIONS. 

19 ‘‘(a) IN GENERAL.—In the case of any domestic cor20 poration which pays or incurs any amount to which section 

21 882(g)(1) applies, such person shall— 

22 ‘‘(1) make a return according to the forms and 

23 regulations prescribed the Secretary, setting forth the 

24 information described in subsection (b), and 


lotter on DSKBCFDHB2PROD with BILLS
420 

•HR 1 RH

1 ‘‘(2) maintain (at the location, in the manner, 

2 and to the extent prescribed in regulations) such 

3 records as may be appropriate to determine liability 

4 for tax pursuant to paragraphs (1) and (7) of section 

5 882(g). 

6 ‘‘(b) REQUIRED INFORMATION.—The information de7 scribed in this subsection is— 

8 ‘‘(1) the name and taxpayer identification num9 ber of the common parent of the international finan10 cial reporting group in which such domestic corpora11 tion is a member, and 

12 ‘‘(2) with respect to any person who receives an 

13 amount described in subsection (a) from such domes14 tic corporation— 

15 ‘‘(A) the name and taxpayer identification 

16 number of such person, 

17 ‘‘(B) the aggregate amounts received by such 

18 person, 

19 ‘‘(C) the product lines to which such 

20 amounts relate, the aggregate amounts relating 

21 to each such product line, and the net income 

22 ratio for each such product line (determined 

23 under section 882(g)(3)(B) with respect to the 

24 international financial reporting group), and 


lotter on DSKBCFDHB2PROD with BILLS
421 

•HR 1 RH

1 ‘‘(D) a summary of any changes in finan2 cial accounting methods that affect the computa3 tion of any net income ratios described in sub4 paragraph (C). 

5 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—Terms used 

6 in this paragraph that are also used in section 882(g) shall 

7 have the same meaning as when used in such section and 

8 rules similar to the rules of paragraphs (5) and (6) of such 

9 section shall apply for purposes of this paragraph.’’. 

10 (B) CLERICAL AMENDMENT.—The table of 

11 sections for subpart A of part III of subchapter 

12 A of chapter 61 is amended by inserting after the 

13 item relating to section 6038D the following new 

14 item: 

‘‘Sec. 6038E. Information with respect to certain payments from domestic corporations to related foreign corporations.’’. 

15 (d) EFFECTIVE DATE.—The amendments made by this 

16 section shall apply to amounts paid or incurred after De17 cember 31, 2018. 


lotter on DSKBCFDHB2PROD with BILLS
422 

•HR 1 RH

1 Subtitle E—Provisions Related to 

2 Possessions of the United States 

3 SEC. 4401. EXTENSION OF DEDUCTION ALLOWABLE WITH 

4 RESPECT TO INCOME ATTRIBUTABLE TO DO5 MESTIC PRODUCTION ACTIVITIES IN PUERTO 

6 RICO. 

7 (a) IN GENERAL.—Section 199(d)(8)(C), prior to its 

8 repeal by this Act, is amended— 

9 (1) by striking ‘‘first 11 taxable years’’ and in10 serting ‘‘first 12 taxable years’’, and 

11 (2) by striking ‘‘January 1, 2017’’ and inserting 

12 ‘‘January 1, 2018’’. 

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

14 section shall apply to taxable years beginning after Decem15 ber 31, 2016. 

16 SEC. 4402. EXTENSION OF TEMPORARY INCREASE IN LIMIT 

17 ON COVER OVER OF RUM EXCISE TAXES TO 

18 PUERTO RICO AND THE VIRGIN ISLANDS. 

19 (a) IN GENERAL.—Section 7652(f)(1) is amended by 

20 striking ‘‘January 1, 2017’’ and inserting ‘‘January 1, 

21 2023’’. 

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

23 section shall apply to distilled spirits brought into the 

24 United States after December 31, 2016. 


lotter on DSKBCFDHB2PROD with BILLS
423 

•HR 1 RH

1 SEC. 4403. EXTENSION OF AMERICAN SAMOA ECONOMIC DE2 VELOPMENT CREDIT. 

3 (a) IN GENERAL.—Section 119(d) of division A of the 

4 Tax Relief and Health Care Act of 2006 is amended— 

5 (1) by striking ‘‘January 1, 2017’’ each place it 

6 appears and inserting ‘‘January 1, 2023’’, 

7 (2) by striking ‘‘first 11 taxable years’’ in para8 graph (1) and inserting ‘‘first 17 taxable years’’, and 

9 (3) by striking ‘‘first 5 taxable years’’ in para10 graph (2) and inserting ‘‘first 11 taxable years’’. 

11 (b) TREATMENT OF CERTAIN REFERENCES.—Section 

12 119(e) of division A of the Tax Relief and Health Care Act 

13 of 2006 is amended by adding at the end the following: 

14 ‘‘References in this subsection to section 199 of the Internal 

15 Revenue Code of 1986 shall be treated as references to such 

16 section as in effect before its repeal by the Tax Cuts and 

17 Jobs Act.’’. 

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

19 section shall apply to taxable years beginning after Decem20 ber 31, 2016. 


lotter on DSKBCFDHB2PROD with BILLS
424 

•HR 1 RH

1 Subtitle F—Other International 

2 Reforms 

3 SEC. 4501. RESTRICTION ON INSURANCE BUSINESS EXCEP4 TION TO PASSIVE FOREIGN INVESTMENT 

5 COMPANY RULES. 

6 (a) IN GENERAL.—Section 1297(b)(2)(B) is amended 

7 to read as follows: 

8 ‘‘(B) derived in the active conduct of an in9 surance business by a qualifying insurance cor10 poration (as defined in subsection (f)),’’. 

11 (b) QUALIFYING INSURANCE CORPORATION DE12 FINED.—Section 1297 is amended by adding at the end the 

13 following new subsection: 

14 ‘‘(f) QUALIFYING INSURANCE CORPORATION.—For 

15 purposes of subsection (b)(2)(B)— 

16 ‘‘(1) IN GENERAL.—The term ‘qualifying insur17 ance corporation’ means, with respect to any taxable 

18 year, a foreign corporation— 

19 ‘‘(A) which would be subject to tax under 

20 subchapter L if such corporation were a domestic 

21 corporation, and 

22 ‘‘(B) the applicable insurance liabilities of 

23 which constitute more than 25 percent of its 

24 total assets, determined on the basis of such li25 abilities and assets as reported on the corporaVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00424 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
425 

•HR 1 RH

1 tion’s applicable financial statement for the last 

2 year ending with or within the taxable year. 

3 ‘‘(2) ALTERNATIVE FACTS AND CIRCUMSTANCES

4 TEST FOR CERTAIN CORPORATIONS.—If a corporation 

5 fails to qualify as a qualified insurance corporation 

6 under paragraph (1) solely because the percentage de7 termined under paragraph (1)(B) is 25 percent or 

8 less, a United States person that owns stock in such 

9 corporation may elect to treat such stock as stock of 

10 a qualifying insurance corporation if— 

11 ‘‘(A) the percentage so determined for the 

12 corporation is at least 10 percent, and 

13 ‘‘(B) under regulations provided by the Sec14 retary, based on the applicable facts and cir15 cumstances— 

16 ‘‘(i) the corporation is predominantly 

17 engaged in an insurance business, and 

18 ‘‘(ii) such failure is due solely to run19 off-related or rating-related circumstances 

20 involving such insurance business. 

21 ‘‘(3) APPLICABLE INSURANCE LIABILITIES.—For 

22 purposes of this subsection— 

23 ‘‘(A) IN GENERAL.—The term ‘applicable 

24 insurance liabilities’ means, with respect to any 


lotter on DSKBCFDHB2PROD with BILLS
426 

•HR 1 RH

1 life or property and casualty insurance busi2 ness— 

3 ‘‘(i) loss and loss adjustment expenses, 

4 and 

5 ‘‘(ii) reserves (other than deficiency, 

6 contingency, or unearned premium reserves) 

7 for life and health insurance risks and life 

8 and health insurance claims with respect to 

9 contracts providing coverage for mortality 

10 or morbidity risks. 

11 ‘‘(B) LIMITATIONS ON AMOUNT OF LIABIL12 ITIES.—Any amount determined under clause (i) 

13 or (ii) of subparagraph (A) shall not exceed the 

14 lesser of such amount— 

15 ‘‘(i) as reported to the applicable in16 surance regulatory body in the applicable 

17 financial statement described in paragraph 

18 (4)(A) (or, if less, the amount required by 

19 applicable law or regulation), or 

20 ‘‘(ii) as determined under regulations 

21 prescribed by the Secretary. 

22 ‘‘(4) OTHER DEFINITIONS AND RULES.—For 

23 purposes of this subsection— 

24 ‘‘(A) APPLICABLE FINANCIAL STATEMENT.— 

25 The term ‘applicable financial statement’ means 


lotter on DSKBCFDHB2PROD with BILLS
427 

•HR 1 RH

1 a statement for financial reporting purposes 

2 which— 

3 ‘‘(i) is made on the basis of generally 

4 accepted accounting principles, 

5 ‘‘(ii) is made on the basis of inter6 national financial reporting standards, but 

7 only if there is no statement that meets the 

8 requirement of clause (i), or 

9 ‘‘(iii) except as otherwise provided by 

10 the Secretary in regulations, is the annual 

11 statement which is required to be filed with 

12 the applicable insurance regulatory body, 

13 but only if there is no statement which 

14 meets the requirements of clause (i) or (ii). 

15 ‘‘(B) APPLICABLE INSURANCE REGULATORY

16 BODY.—The term ‘applicable insurance regu17 latory body’ means, with respect to any insur18 ance business, the entity established by law to li19 cense, authorize, or regulate such business and to 

20 which the statement described in subparagraph 

21 (A) is provided.’’. 

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

23 section shall apply to taxable years beginning after Decem24 ber 31, 2017. 


lotter on DSKBCFDHB2PROD with BILLS
428 

•HR 1 RH

1 TITLE V—EXEMPT 

2 ORGANIZATIONS 

3 Subtitle A—Unrelated Business 

4 Income Tax 

5 SEC. 5001. CLARIFICATION OF UNRELATED BUSINESS IN6 COME TAX TREATMENT OF ENTITIES TREAT7 ED AS EXEMPT FROM TAXATION UNDER SEC8 TION 501(a). 

9 (a) IN GENERAL.—Section 511 is amended by adding 

10 at the end the following new subsection: 

11 ‘‘(d) ORGANIZATIONS AND TRUSTS EXEMPT FROM

12 TAXATION NOT SOLELY BY REASON OF SECTION 501(a).— 

13 For purposes of subsections (a)(2) and (b)(2), an organiza14 tion or trust shall not fail to be treated as exempt from 

15 taxation under this subtitle by reason of section 501(a) sole16 ly because such organization is also so exempt, or excludes 

17 amounts from gross income, by reason of any other provi18 sion of this title.’’. 

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

20 section shall apply to taxable years beginning after Decem21 ber 31, 2017. 


lotter on DSKBCFDHB2PROD with BILLS
429 

•HR 1 RH

1 SEC. 5002. EXCLUSION OF RESEARCH INCOME LIMITED TO 

2 PUBLICLY AVAILABLE RESEARCH. 

3 (a) IN GENERAL.—Section 512(b)(9) is amended by 

4 striking ‘‘from research’’ and inserting ‘‘from such re5 search’’. 

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

7 section shall apply to taxable years beginning after Decem8 ber 31, 2017. 

9 Subtitle B—Excise Taxes 

10 SEC. 5101. SIMPLIFICATION OF EXCISE TAX ON PRIVATE 

11 FOUNDATION INVESTMENT INCOME. 

12 (a) RATE REDUCTION.—Section 4940(a) is amended 

13 by striking ‘‘2 percent’’ and inserting ‘‘1.4 percent’’. 

14 (b) REPEAL OF SPECIAL RULES FOR CERTAIN PRI15 VATE FOUNDATIONS.—Section 4940 is amended by striking 

16 subsection (e). 

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

18 section shall apply to taxable years beginning after Decem19 ber 31, 2017. 

20 SEC. 5102. PRIVATE OPERATING FOUNDATION REQUIRE21 MENTS RELATING TO OPERATION OF ART MU22 SEUM. 

23 (a) IN GENERAL.—Section 4942(j) is amended by add24 ing at the end the following new paragraph: 

25 ‘‘(6) ORGANIZATION OPERATING ART MUSEUM.— 

26 For purposes of this section, the term ‘operating founVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00429 Fmt 6652 Sfmt 6203 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS
430 

•HR 1 RH

1 dation’ shall not include an organization which oper2 ates an art museum as a substantial activity unless 

3 such museum is open during normal business hours 

4 to the public for at least 1,000 hours during the tax5 able year.’’. 

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

7 section shall apply to taxable years beginning after Decem8 ber 31, 2017. 

9 SEC. 5103. EXCISE TAX BASED ON INVESTMENT INCOME OF 

10 PRIVATE COLLEGES AND UNIVERSITIES. 

11 (a) IN GENERAL.—Chapter 42 is amended by adding 

12 at the end the following new subchapter: 

13 ‘‘Subchapter H—Excise Tax Based on Invest14 ment Income of Private Colleges and Uni15 versities 

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

16 ‘‘SEC. 4969. EXCISE TAX BASED ON INVESTMENT INCOME OF 

17 PRIVATE COLLEGES AND UNIVERSITIES. 

18 ‘‘(a) TAX IMPOSED.—There is hereby imposed on each 

19 applicable educational institution for the taxable year a tax 

20 equal to 1.4 percent of the net investment income of such 

21 institution for the taxable year. 

22 ‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For 

23 purposes of this subchapter— 


lotter on DSKBCFDHB2PROD with BILLS
431 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—The term ‘applicable edu2 cational institution’ means an eligible educational in3 stitution (as defined in section 25A(e)(3))— 

4 ‘‘(A) which has at least 500 students during 

5 the preceding taxable year, 

6 ‘‘(B) which is not described in the first sen7 tence of section 511(a)(2)(B), and 

8 ‘‘(C) the aggregate fair market value of the 

9 assets of which at the end of the preceding tax10 able year (other than those assets which are used 

11 directly in carrying out the institution’s exempt 

12 purpose) is at least $250,000 per student of the 

13 institution. 

14 ‘‘(2) STUDENTS.—For purposes of paragraph 

15 (1), the number of students of an institution shall be 

16 based on the daily average number of full-time stu17 dents attending such institution (with part-time stu18 dents taken into account on a full-time student equiv19 alent basis). 

20 ‘‘(c) NET INVESTMENT INCOME.—For purposes of this 

21 section, net investment income shall be determined under 

22 rules similar to the rules of section 4940(c). 

23 ‘‘(d) ASSETS AND NET INVESTMENT INCOME OF RE24 LATED ORGANIZATIONS.— 


lotter on DSKBCFDHB2PROD with BILLS
432 

•HR 1 RH

1 ‘‘(1) IN GENERAL.—For purposes of subsections 

2 (b)(1)(C) and (c), the assets and net investment in3 come of any related organization shall be treated as 

4 the assets and net investment income of the eligible 

5 educational institution. 

6 ‘‘(2) RELATED ORGANIZATION.—For purposes of 

7 this subsection, the term ‘related organization’ means, 

8 with respect to an eligible educational institution, 

9 any organization which— 

10 ‘‘(A) controls, or is controlled by, such insti11 tution, 

12 ‘‘(B) is controlled by one or more persons 

13 that control such institution, or 

14 ‘‘(C) is a supported organization (as de15 fined in section 509(f)(3)), or an organization 

16 described in section 509(a)(3), during the taxable 

17 year with respect to such institution.’’. 

18 (b) CLERICAL AMENDMENT.—The table of subchapters 

19 for chapter 42 is amended by adding at the end the fol20 lowing new item: 

‘‘SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE

COLLEGES AND UNIVERSITIES’’. 

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

22 section shall apply to taxable years beginning after Decem23 ber 31, 2017. 


lotter on DSKBCFDHB2PROD with BILLS
433 

•HR 1 RH

1 SEC. 5104. EXCEPTION FROM PRIVATE FOUNDATION EX2 CESS BUSINESS HOLDING TAX FOR INDE3 PENDENTLY-OPERATED PHILANTHROPIC 

4 BUSINESS HOLDINGS. 

5 (a) IN GENERAL.—Section 4943 is amended by adding 

6 at the end the following new subsection: 

7 ‘‘(g) EXCEPTION FOR CERTAIN HOLDINGS LIMITED TO

8 INDEPENDENTLY-OPERATED PHILANTHROPIC BUSINESS.— 

9 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

10 apply with respect to the holdings of a private foun11 dation in any business enterprise which for the tax12 able year meets— 

13 ‘‘(A) the ownership requirements of para14 graph (2), 

15 ‘‘(B) the all profits to charity distribution 

16 requirement of paragraph (3), and 

17 ‘‘(C) the independent operation require18 ments of paragraph (4). 

19 ‘‘(2) OWNERSHIP.—The ownership requirements 

20 of this paragraph are met if— 

21 ‘‘(A) 100 percent of the voting stock in the 

22 business enterprise is held by the private founda23 tion at all times during the taxable year, and 

24 ‘‘(B) all the private foundation’s ownership 

25 interests in the business enterprise were acquired 

26 not by purchase. 


lotter on DSKBCFDHB2PROD with BILLS
434 

•HR 1 RH

1 ‘‘(3) ALL PROFITS TO CHARITY.— 

2 ‘‘(A) IN GENERAL.—The all profits to char3 ity distribution requirement of this paragraph is 

4 met if the business enterprise, not later than 120 

5 days after the close of the taxable year, distrib6 utes an amount equal to its net operating income 

7 for such taxable year to the private foundation. 

8 ‘‘(B) NET OPERATING INCOME.—For pur9 poses of this paragraph, the net operating in10 come of any business enterprise for any taxable 

11 year is an amount equal to the gross income of 

12 the business enterprise for the taxable year, re13 duced by the sum of— 

14 ‘‘(i) the deductions allowed by chapter 

15 1 for the taxable year which are directly 

16 connected with the production of such in17 come, 

18 ‘‘(ii) the tax imposed by chapter 1 on 

19 the business enterprise for the taxable year, 

20 and 

21 ‘‘(iii) an amount for a reasonable re22 serve for working capital and other business 

23 needs of the business enterprise. 


lotter on DSKBCFDHB2PROD with BILLS
435 

•HR 1 RH

1 ‘‘(4) INDEPENDENT OPERATION.—The inde2 pendent operation requirements of this paragraph are 

3 met if, at all times during the taxable year— 

4 ‘‘(A) no substantial contributor (as defined 

5 in section 4958(c)(3)(C)) to the private founda6 tion, or family member of such a contributor (de7 termined under section 4958(f)(4)) is a director, 

8 officer, trustee, manager, employee, or contractor 

9 of the business enterprise (or an individual hav10 ing powers or responsibilities similar to any of 

11 the foregoing), 

12 ‘‘(B) at least a majority of the board of di13 rectors of the private foundation are not— 

14 ‘‘(i) also directors or officers of the 

15 business enterprise, or 

16 ‘‘(ii) members of the family (deter17 mined under section 4958(f)(4)) of a sub18 stantial contributor (as defined in section 

19 4958(c)(3)(C)) to the private foundation, 

20 and 

21 ‘‘(C) there is no loan outstanding from the 

22 business enterprise to a substantial contributor 

23 (as so defined) to the private foundation or a 

24 family member of such contributor (as so deter25 mined). 


lotter on DSKBCFDHB2PROD with BILLS
436 

•HR 1 RH

1 ‘‘(5) CERTAIN DEEMED PRIVATE FOUNDATIONS

2 EXCLUDED.—This subsection shall not apply to— 

3 ‘‘(A) any fund or organization treated as a 

4 private foundation for purposes of this section by 

5 reason of subsection (e) or (f), 

6 ‘‘(B) any trust described in section 

7 4947(a)(1) (relating to charitable trusts), and 

8 ‘‘(C) any trust described in section 

9 4947(a)(2) (relating to split-interest trusts).’’. 

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

11 section shall apply to taxable years beginning after Decem12 ber 31, 2017. 

13 Subtitle C—Requirements for 

14 Organizations Exempt From Tax 

15 SEC. 5201. 501(c)(3) ORGANIZATIONS PERMITTED TO MAKE 

16 STATEMENTS RELATING TO POLITICAL CAM17 PAIGN IN ORDINARY COURSE OF ACTIVITIES. 

18 (a) IN GENERAL.—Section 501 is amended by adding 

19 at the end the following new subsection: 

20 ‘‘(s) SPECIAL RULE RELATING TO POLITICAL CAM21 PAIGN STATEMENTS OF ORGANIZATIONS DESCRIBED IN

22 SUBSECTION (c)(3).— 

23 ‘‘(1) IN GENERAL.—For purposes of subsection 

24 (c)(3) and sections 170(c)(2), 2055, 2106, 2522, and 

25 4955, an organization shall not fail to be treated as 


lotter on DSKBCFDHB2PROD with BILLS
437 

•HR 1 RH

1 organized and operated exclusively for a purpose de2 scribed in subsection (c)(3), nor shall it be deemed to 

3 have participated in, or intervened in any political 

4 campaign on behalf of (or in opposition to) any can5 didate for public office, solely because of the content 

6 of any statement which— 

7 ‘‘(A) is made in the ordinary course of the 

8 organization’s regular and customary activities 

9 in carrying out its exempt purpose, and 

10 ‘‘(B) results in the organization incurring 

11 not more than de minimis incremental expenses. 

12 ‘‘(2) TERMINATION.—Paragraph (1) shall not 

13 apply to taxable years beginning after December 31, 

14 2023.’’. 

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

16 section shall apply to taxable years beginning after Decem17 ber 31, 2018. 

18 SEC. 5202. ADDITIONAL REPORTING REQUIREMENTS FOR 

19 DONOR ADVISED FUND SPONSORING ORGA20 NIZATIONS. 

21 (a) IN GENERAL.—Section 6033(k) is amended by 

22 striking ‘‘and’’ at the end of paragraph (2), by striking the 

23 period at the end of paragraph (3), and by adding at the 

24 end the following new paragraphs: 


lotter on DSKBCFDHB2PROD with BILLS
438 

•HR 1 RH

1 ‘‘(4) indicate the average amount of grants made 

2 from such funds during such taxable year (expressed 

3 as a percentage of the value of assets held in such 

4 funds at the beginning of such taxable year), and 

5 ‘‘(5) indicate whether the organization has a pol6 icy with respect to donor advised funds (as so de7 fined) for frequency and minimum level of distribu8 tions. 

9 Such organization shall include with such return a copy 

10 of any policy described in paragraph (5).’’. 

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

12 section shall apply for returns filed for taxable years begin13 ning after December 31, 2017. 

Amend the title so as to read: ‘‘A bill to provide for 

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


lotter on DSKBCFDHB2PROD with BILLS

lotter on DSKBCFDHB2PROD with BILLS
Union Calendar No. 302 

115TH CONGRESS 

1ST SESSION H. R. 1 

[Report No. 115–409] 

A BILL 

To provide for reconciliation pursuant to title II of 

year 2018. the concurrent resolution on the budget for fiscal 

NOVEMBER 13, 2017 

Reported with amendments, committed to the Committee 

dered to be printed of the Whole House on the State of the Union, and orVerDate Sep 11 2014 00:35 Nov 14, 2017 Jkt 079200 PO 00000 Frm 00440 Fmt 6651 Sfmt 6651 E:\BILLS\H1.RH H1

lotter on DSKBCFDHB2PROD with BILLS