I 

115TH CONGRESS 

1ST SESSION H. R. 1 

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 

A BILL 

To provide for reconciliation pursuant to title II of the 

concurrent resolution on the budget for fiscal year 2018. 

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

3 SECTION 1. SHORT TITLE; ETC. 

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

5 ‘‘Tax Cuts and Jobs Act’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amendVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 ment or repeal is expressed in terms of an amendment 

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

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986. 

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

6 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. 

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. 

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

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. 


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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. Repeal 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. 

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. 

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. 


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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. 

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. 

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. Computation of life insurance tax reserves. 

Sec. 3704. Adjustment for change in computing reserves. 

Sec. 3705. Modification of rules for life insurance proration for purposes of determining the dividends received deduction. 

Sec. 3706. Repeal of special rule for distributions to shareholders from pre1984 policyholders surplus account. 

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

companies. 

Sec. 3708. Modification of discounting rules for property and casualty insurance companies. 

Sec. 3709. Repeal of special estimated tax payments. 


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Sec. 3710. Capitalization of certain policy acquisition expenses. 

Subtitle I—Compensation 

Sec. 3801. Nonqualified deferred compensation. 

Sec. 3802. Modification of limitation on excessive employee remuneration. 

Sec. 3803. Excise tax on excess tax-exempt organization executive compensation. 

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. 

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 


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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. 

Sec. 4502. Limitation on treaty benefits for certain deductible payments. 

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. 

Subtitle C—Requirements for Organizations Exempt From Tax 

Sec. 5201. Churches permitted to make statements relating to political campaign in ordinary course of religious services and activities. 

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

organizations. 


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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 

13 income 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 

16 25-percent bracket threshold amount, 

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

18 much of the taxable income as exceeds the 25-per19 cent bracket threshold amount but does not exceed 

20 the 35-percent bracket threshold amount, plus 

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

22 much of taxable income as exceeds the 35-percent 

23 bracket threshold amount but does not exceed the 

24 39.6 percent bracket threshold amount. 


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1 ‘‘(4) 39.6 PERCENT BRACKET.—39.6 percent of 

2 so much of taxable income as exceeds the 39.6-per3 cent bracket threshold amount. 

4 ‘‘(b) BRACKET THRESHOLD AMOUNTS.—For pur5 poses of this section— 

6 ‘‘(1) 25-PERCENT BRACKET THRESHOLD

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

8 amount’ means— 

9 ‘‘(A) in the case of a joint return or sur10 viving spouse, $90,000, 

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

12 the head of a household (as defined in section 

13 2(b)), $67,500, 

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

15 (other than an estate or trust), an amount 

equal to 1 16 ⁄2 of the amount in effect for the tax17 able year under subparagraph (A), and 

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

19 $2,550. 

20 ‘‘(2) 35-PERCENT BRACKET THRESHOLD

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

22 amount’ means— 

23 ‘‘(A) in the case of a joint return or sur24 viving spouse, $260,000, 


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

3 of the amount in effect for the taxable year 

4 under subparagraph (A), 

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

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

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

8 $9,150. 

9 ‘‘(3) 39-PERCENT BRACKET THRESHOLD

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

11 amount’ means— 

12 ‘‘(A) in the case of a joint return or sur13 viving spouse, $1,000,000, 

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

15 (other than an estate or trust), an amount 

equal to 1 16 ⁄2 of the amount in effect for the tax17 able year under subparagraph (A), and 

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

19 $12,500. 

20 ‘‘(c) INFLATION ADJUSTMENT.— 

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

22 year beginning after 2018, each dollar amount in 

23 subsection (b) (other than any amount determined 

24 by reference to such a dollar amount) shall be in25 creased by an amount equal to— 


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

2 ‘‘(B) the cost-of-living adjustment deter3 mined under this subsection for the calendar 

4 year in which the taxable year begins by sub5 stituting ‘2017’ for ‘2016’ in paragraph 

6 (2)(A)(ii). 

7 If any increase determined under the preceding sen8 tence is not a multiple of $100, such increase shall 

9 be rounded to the next lowest multiple of $100. 

10 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur11 poses of this subsection— 

12 ‘‘(A) IN GENERAL.—The cost-of-living ad13 justment for any calendar year is the percent14 age (if any) by which— 

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

16 calendar year, exceeds 

17 ‘‘(ii) the normalized CPI for calendar 

18 year 2016. 

19 ‘‘(B) SPECIAL RULE FOR ADJUSTMENTS

20 WITH A BASE YEAR AFTER 2016.—For purposes 

21 of any provision which provides for the substi22 tution of a year after 2016 for ‘2016’ in sub23 paragraph (A)(ii), subparagraph (A) shall be 

24 applied by substituting ‘C-CPI-U’ for ‘normal25 ized CPI’ in clause (ii). 


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

2 subsection, the normalized CPI for any calendar 

3 year is the product of— 

4 ‘‘(A) the CPI for such calendar year, mul5 tiplied by 

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

7 ‘‘(4) C-CPI-U TRANSITION MULTIPLE.—For 

8 purposes of this subsection, the term ‘C-CPI-U tran9 sition multiple’ means the amount obtained by divid10 ing— 

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

12 by 

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

14 ‘‘(5) C-CPI-U.—For purposes of this sub15 section— 

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

17 means the Chained Consumer Price Index for 

18 All Urban Consumers (as published by the Bu19 reau of Labor Statistics of the Department of 

20 Labor). The values of the Chained Consumer 

21 Price Index for All Urban Consumers taken 

22 into account for purposes of determining the 

23 cost-of-living adjustment for any calendar year 

24 under this subsection shall be the latest values 

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1 reau publishes the initial value of the Chained 

2 Consumer Price Index for All Urban Con3 sumers for the month of August for the pre4 ceding 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 

8 the 12-month period ending on August 31 of 

9 such 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 

14 the Department of Labor. For purposes of the 

15 preceding sentence, the revision of the Con16 sumer Price Index which is most consistent 

17 with the Consumer Price Index for calendar 

18 year 1986 shall be used. 

19 ‘‘(B) DETERMINATION FOR CALENDAR

20 YEAR.—The CPI for any calendar year is the 

21 average of the Consumer Price Index as of the 

22 close of the 12-month period ending on August 

23 31 of such calendar year. 

24 ‘‘(7) DELAY OF ADJUSTMENT BASED ON C-CPI25 U UNTIL 2023.—Notwithstanding any other provision 


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1 of this title, any cost-of-living adjustment deter2 mined under this subsection (or by reference to this 

3 subsection) shall be determined on the basis of CPI 

4 rather than C-CPI-U with respect to periods before 

5 January 1, 2023. Proper adjustments shall be made 

6 in the application of this subsection to carry out the 

7 preceding sentence. 

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

9 UNEARNED INCOME.— 

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

11 whom this subsection applies for any taxable year— 

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

13 amount shall not be more than the taxable in14 come of such child for the taxable year reduced 

15 by the net unearned income of such child, and 

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

17 amount shall not be more than the sum of— 

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

19 for the taxable year reduced by the net un20 earned income of such child, plus 

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

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

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

24 amount shall not be more than the sum of— 


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

2 for the taxable year reduced by the net un3 earned income of such child, plus 

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

5 subsection (b)(3)(C). 

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

7 This subsection shall apply to any child for any tax8 able year if— 

9 ‘‘(A) such child— 

10 ‘‘(i) has not attained age 18 before 

11 the close of the taxable year, or 

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

13 close of the taxable year and is described 

14 in paragraph (3), 

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

16 the close of the taxable year, and 

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

18 for the taxable year. 

19 ‘‘(3) CERTAIN CHILDREN WHOSE EARNED IN20 COME DOES NOT EXCEED ONE-HALF OF INDI21 VIDUAL’S SUPPORT.—A child is described in this 

22 paragraph if— 

23 ‘‘(A) such child— 

24 ‘‘(i) has not attained age 19 before 

25 the close of the taxable year, or 


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

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

3 age 24 before the close of the taxable year, 

4 and 

5 ‘‘(B) such child’s earned income (as de6 fined in section 911(d)(2)) for such taxable 

7 year does not exceed one-half of the amount of 

8 the individual’s support (within the meaning of 

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

10 section 7706(f)(5) (without regard to subpara11 graph (A) thereof)) for such taxable year. 

12 ‘‘(4) NET UNEARNED INCOME.—For purposes 

13 of this subsection— 

14 ‘‘(A) IN GENERAL.—The term ‘net un15 earned income’ means the excess of— 

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

17 income for the taxable year which is not 

18 attributable to earned income (as defined 

19 in section 911(d)(2)), over 

20 ‘‘(ii) the sum of— 

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

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

23 (relating to limitation on standard de24 duction in the case of certain depend25 ents), plus 


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1 ‘‘(II) The greater of the amount 

2 described in subclause (I) or, if the 

3 child itemizes his deductions for the 

4 taxable year, the amount of the 

5 itemized deductions allowed by this 

6 chapter for the taxable year which are 

7 directly connected with the production 

8 of the portion of adjusted gross in9 come referred to in clause (i). 

10 ‘‘(B) LIMITATION BASED ON TAXABLE IN11 COME.—The amount of the net unearned in12 come for any taxable year shall not exceed the 

13 individual’s taxable income for such taxable 

14 year. 

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

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

17 by this section (determined without regard to this 

18 subsection) shall be increased by 6 percent of the ex19 cess (if any) of— 

20 ‘‘(A) adjusted gross income, over 

21 ‘‘(B) the applicable dollar amount. 

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

23 under paragraph (1) with respect to any taxpayer 

24 for any taxable year shall not exceed 27.6 percent of 

25 the lesser of— 


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1 ‘‘(A) the taxpayer’s taxable income for 

2 such taxable year, or 

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

4 amount in effect with respect to the taxpayer 

5 for such taxable year. 

6 ‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur7 poses of this subsection, the term ‘applicable dollar 

8 amount’ means— 

9 ‘‘(A) in the case of a joint return or a sur10 viving spouse, $1,200,000, and 

11 ‘‘(B) in the case of any other individual, 

12 $1,000,000. 

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

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

15 (b) APPLICATION OF CURRENT INCOME TAX BRACK16 ETS TO CAPITAL GAINS BRACKETS.— 

17 (1) IN GENERAL.— 

18 (A) 0-PERCENT CAPITAL GAINS BRACK19 ET.—Section 1(h)(1) is amended by striking 

20 ‘‘which would (without regard to this para21 graph) be taxed at a rate below 25 percent’’ in 

22 subparagraph (B)(i) and inserting ‘‘below the 

23 15-percent rate threshold’’. 

24 (B) 15-PERCENT CAPITAL GAINS BRACK25 ET.—Section 1(h)(1)(C)(ii)(I) is amended by 


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1 striking ‘‘which would (without regard to this 

2 paragraph) be taxed at a rate below 39.6 per3 cent’’ and inserting ‘‘below the 20-percent rate 

4 threshold’’. 

5 (2) RATE THRESHOLDS DEFINED.—Section 

6 1(h) is amended by adding at the end the following 

7 new paragraph: 

8 ‘‘(12) RATE THRESHOLDS DEFINED.—For pur9 poses of this subsection— 

10 ‘‘(A) 15-PERCENT RATE THRESHOLD.— 

11 The 15-percent rate threshold shall be— 

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

surviving spouse, $77,200 (1 13 ⁄2 such amount 

14 in the case of a married individual filing a 

15 separate return), 

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

17 is the head of a household (as defined in 

18 section 2(b)), $51,700, 

19 ‘‘(iii) in the case of any other indi20 vidual (other than an estate or trust), an 

amount equal to 1 21 ⁄2 of the amount in effect 

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

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

24 $2,600. 


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1 ‘‘(B) 20-PERCENT RATE THRESHOLD.— 

2 The 20-percent rate threshold shall be— 

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

surviving spouse, $479,000 (1 4 ⁄2 such 

5 amount in the case of a married individual 

6 filing a separate return), 

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

8 is the head of a household (as defined in 

9 section 2(b)), $452,400, 

10 ‘‘(iii) in the case of any other indi11 vidual (other than an estate or trust), 

12 $425,800, and 

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

14 $12,700. 

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

16 case of any taxable year beginning after 2018, 

17 each of the dollar amounts in subparagraphs 

18 (A) and (B) shall be increased by an amount 

19 equal to— 

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

21 ‘‘(ii) the cost-of-living adjustment de22 termined under subsection (c)(2)(A) for 

23 the calendar year in which the taxable year 

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1 endar year 2017’ for ‘calendar year 2016’ 

2 in clause (ii) thereof.’’. 

3 (c) APPLICATION OF SECTION 15.— 

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

5 is amended by striking ‘‘by this chapter’’ and insert6 ing ‘‘by section 11 (or by reference to any such 

7 rates)’’. 

8 (2) CONFORMING AMENDMENTS.— 

9 (A) Section 15 is amended by striking sub10 sections (d) and (f) and by redesignating sub11 section (e) as subsection (d). 

12 (B) Section 15(d), as redesignated by sub13 paragraph (A), is amended by striking ‘‘section 

14 1 or 11(b)’’ and inserting ‘‘section 11(b)’’. 

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

16 ‘‘sections 15, 443, and 7851(a)(1)(A)’’ and in17 serting ‘‘sections 443 and 7851(a)(1)(A)’’. 

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

19 the Internal Revenue Code of 1986 shall not apply 

20 to any change in a rate of tax imposed by chapter 

21 1 of such Code which occurs by reason of any 

22 amendment made by this Act (other than the 

23 amendments made by section 3001). 

24 (d) EFFECTIVE DATE.— 


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

2 this section shall apply to taxable years beginning 

3 after December 31, 2017. 

4 (2) SUBSECTION (c).—The amendments made 

5 by subsection (c) shall take effect on the date of the 

6 enactment of this Act. 

7 SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION. 

8 (a) INCREASE IN STANDARD DEDUCTION.—Section 

9 63(c) is amended to read as follows: 

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

11 subtitle— 

12 ‘‘(1) IN GENERAL.—Except as otherwise pro13 vided in this subsection, the term ‘standard deduc14 tion’ means— 

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

16 (or a surviving spouse (as defined in section 

17 2(a)), 

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

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

20 the case of an unmarried individual with at 

21 least one qualifying child (within the meaning 

22 of section 7706), and 

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

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

25 any other case. 


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1 ‘‘(2) LIMITATION ON STANDARD DEDUCTION IN

2 THE CASE OF CERTAIN DEPENDENTS.—In the case 

3 of an individual who is a dependent of another tax4 payer for a taxable year beginning in the calendar 

5 year in which the individual’s taxable year begins, 

6 the standard deduction applicable to such individual 

7 for such individual’s taxable year shall not exceed 

8 the greater of— 

9 ‘‘(A) $500, or 

10 ‘‘(B) the sum of $250 and such individ11 ual’s earned income (within the means of sec12 tion 32). 

13 ‘‘(3) CERTAIN INDIVIDUALS, ETC., NOT ELIGI14 BLE FOR STANDARD DEDUCTION.—In the case of— 

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

16 return where either spouse itemizes deductions, 

17 ‘‘(B) a nonresident alien individual, 

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

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

20 months on account of a change in his annual 

21 accounting period, or 

22 ‘‘(D) an estate or trust, common trust 

23 fund, or partnership, 

24 the standard deduction shall be zero. 


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1 ‘‘(4) UNMARRIED INDIVIDUAL.—For purposes 

2 of this section, the term ‘unmarried individual’ 

3 means any individual who— 

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

5 taxable year (as determined by applying section 

6 7703), 

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

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

9 ‘‘(C) is not a dependent of another tax10 payer for a taxable year beginning in the cal11 endar year in which the individual’s taxable 

12 year begins. 

13 ‘‘(5) INFLATION ADJUSTMENTS.— 

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

15 the case of any taxable year beginning after 

16 2019, the dollar amount in paragraph (1)(A) 

17 shall be increased by an amount equal to— 

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

19 ‘‘(ii) the cost-of-living adjustment de20 termined under section 1(c)(2)(A) for the 

21 calendar year in which the taxable year be22 gins, determined by substituting ‘calendar 

23 year 2018’ for ‘calendar year 2016’ in 

24 clause (ii) thereof. 


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1 ‘‘(B) LIMITATION AMOUNT IN CASE OF

2 CERTAIN DEPENDENTS.—In the case of any 

3 taxable year beginning after 2017, each of the 

4 dollar amounts in paragraph (2) shall be in5 creased by an amount equal to— 

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

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

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

9 1(c)(2)(A) for the calendar year in which 

10 the taxable year begins determined by sub11 stituting ‘calendar year 1987’ for ‘calendar 

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

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

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

15 1(c)(2)(A) for the calendar year in which 

16 the taxable year begins determined by sub17 stituting ‘calendar year 1997’ for ‘calendar 

18 year 2016’ in clause (ii) thereof. 

19 If any increase determined under this paragraph is 

20 not a multiple of $100, such increase shall be round21 ed to the next lowest multiple of $100.’’. 

22 (b) CONFORMING AMENDMENTS.— 

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

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

25 the standard deduction’’. 


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1 (2) Section 63 is amended by striking sub2 sections (f) and (g). 

3 (3) Section 1398(c) is amended— 

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

5 thereof, 

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

7 heading of paragraph (3) and inserting 

8 ‘‘STANDARD’’, and 

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

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

11 ‘‘(including the additional standard deduction under 

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

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

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

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2017. 

18 SEC. 1003. REPEAL OF DEDUCTION FOR PERSONAL EXEMP19 TIONS. 

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

21 1 is hereby repealed. 

22 (b) DEFINITION OF DEPENDENT RETAINED.—Sec23 tion 152, prior to repeal by subsection (a), is hereby redes24 ignated as section 7706 and moved to the end of chapter 

25 79. 


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1 (c) APPLICATION TO ESTATES AND TRUSTS.—Sub2 section (b) of section 642 is amended— 

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

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

5 (3) by striking ‘‘DEDUCTION FOR PERSONAL

6 EXEMPTION’’ in the heading thereof and inserting 

7 ‘‘BASIC DEDUCTION’’. 

8 (d) APPLICATION TO NONRESIDENT ALIENS.—Sec9 tion 873(b) is amended by striking paragraph (3). 

10 (e) MODIFICATION OF WAGE WITHHOLDING

11 RULES.— 

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

13 by striking paragraph (2) 

14 (2) CONFORMING AMENDMENT.—Section 

15 3402(a) is amended— 

16 (A) by redesignating subparagraph (A) 

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

18 and (2) and moving such redesignated para19 graphs 2 ems to the left, and 

20 (B) by striking all that precedes ‘‘other21 wise provided in this section’’ and inserting the 

22 following: 

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

24 (3) NUMBER OF EXEMPTIONS.—Section 

25 3402(f)(1) is amended— 


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

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

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

4 and 

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

6 respect to whom, on the basis of facts existing 

7 at the beginning of such day, there may reason8 ably be expected to be allowable an exemption 

9 under section 151(c)’’ and inserting ‘‘who, on 

10 the basis of facts existing at the beginning of 

11 such day, is reasonably expected to be a de12 pendent of the employee’’. 

13 (f) MODIFICATION OF RETURN REQUIREMENT.— 

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

15 6012(a) is amended to read as follows: 

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

17 the taxable year, except that a return shall not be 

18 required of— 

19 ‘‘(A) an individual who is not married (de20 termined by applying section 7703) and who 

21 has gross income for the taxable year which 

22 does not exceed the standard deduction applica23 ble to such individual for such taxable year 

24 under section 63, or 


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

2 return if— 

3 ‘‘(i) the gross income of such indi4 vidual, when combined with the gross in5 come of such individual’s spouse, for the 

6 taxable year does not exceed the standard 

7 deduction which would be applicable to the 

8 taxpayer for such taxable year under sec9 tion 63 if such individual and such individ10 ual’s spouse made a joint return, 

11 ‘‘(ii) such individual and such individ12 ual’s spouse have the same household as 

13 their home at the close of the taxable year, 

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

15 make a separate return, and 

16 ‘‘(iv) neither such individual nor such 

17 individual’s spouse is an individual de18 scribed in section 63(c)(2) who has income 

19 (other than earned income) in excess of the 

20 amount in effect under section 

21 63(c)(2)(A).’’. 

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

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

24 the exemption amount plus the basic standard de25 duction under section 63(c)(2)(D)’’ and inserting 


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1 ‘‘the standard deduction in effect under section 

2 63(c)(1)(B)’’. 

3 (g) CONFORMING AMENDMENTS.— 

4 (1) Section 2(a)(1)(B) is amended by striking 

5 ‘‘a dependent’’ and all that follows through ‘‘section 

6 151’’ and inserting ‘‘a dependent who (within the 

7 meaning of section 7706, determined without regard 

8 to subsections (b)(1), (b)(2) and (d)(1)(B) thereof) 

9 is a son, stepson, daughter, or stepdaughter of the 

10 taxpayer’’. 

11 (2) Section 36B(b)(2)(A) is amended by strik12 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

13 (3) Section 36B(b)(3)(B) is amended by strik14 ing ‘‘unless a deduction is allowed under section 151 

15 for the taxable year with respect to a dependent’’ in 

16 the flush matter at the end and inserting ‘‘unless 

17 the taxpayer has a dependent for the taxable year’’. 

18 (4) Section 36B(c)(1)(D) is amended by strik19 ing ‘‘with respect to whom a deduction under section 

20 151 is allowable to another taxpayer’’ and inserting 

21 ‘‘who is a dependent of another taxpayer’’. 

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

23 ‘‘equal to the number of individuals for whom the 

24 taxpayer is allowed a deduction under section 151 

25 (relating to allowance of deduction for personal exVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00029 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 emptions) for the taxable year’’ and inserting ‘‘the 

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

3 number of the taxpayer’s dependents for the taxable 

4 year’’. 

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

6 ‘‘1 or more individuals for whom a taxpayer is al7 lowed a deduction under section 151 (relating to al8 lowance of deduction for personal exemptions) for 

9 the taxable year (including the taxpayer or his 

10 spouse)’’ and inserting ‘‘1 or more of the taxpayer, 

11 the taxpayer’s spouse, or any dependent of the tax12 payer’’. 

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

14 (A) by striking ‘‘section 152’’ and insert15 ing ‘‘section 7706’’, and 

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

17 inserting a comma. 

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

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

20 (9) Section 72(t)(7)(A)(iii) is amended by strik21 ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 

22 7706(f)(1)’’. 

23 (10) Section 105(b) is amended— 

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

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


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1 (B) by striking ‘‘section 152(f)(1)’’ and in2 serting ‘‘section 7706(f)(1)’’ and 

3 (C) by striking ‘‘section 152(e)’’ and in4 serting ‘‘section 7706(e)’’. 

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

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

7 (12) Section 125(e)(1)(D) is amended by strik8 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

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

10 (A) by striking ‘‘section 152(f)(1)’’ and in11 serting ‘‘section 7706(f)(1)’’, and 

12 (B) by striking ‘‘section 152(e)’’ and in13 serting ‘‘section 7706(e)’’. 

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

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

16 (15) Section 162(l)(1)(D) is amended by strik17 ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 

18 7706(f)(1)’’. 

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

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

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

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

23 7706(d)(2)’’. 

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

25 paragraph (3). 


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

2 ‘‘with respect to whom a deduction under section 

3 151 is allowable to’’ and inserting ‘‘who is a depend4 ent of’’. 

5 (20) Section 220(d)(2)(A) is amended by strik6 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

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

8 ‘‘with respect to whom a deduction under section 

9 151 is allowable to’’ and inserting ‘‘who is a depend10 ent of’’. 

11 (22) Section 223(d)(2)(A) is amended by strik12 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

13 (23) Section 401(h) is amended by striking 

14 ‘‘section 152(f)(1)’’ in the last sentence and insert15 ing ‘‘section 7706(f)(1)’’. 

16 (24) Section 402(l)(4)(D) is amended by strik17 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

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

19 by striking ‘‘section 152(a)’’ and inserting ‘‘section 

20 7706(a)’’. 

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

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

23 7706(f)(1)’’. 


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1 (27) Section 529(e)(2)(B) is amended by strik2 ing ‘‘section 152(d)(2)’’ and inserting ‘‘section 

3 7706(d)(2)’’. 

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

5 subparagraph (A) and by redesignating subpara6 graphs (B) through (F) as subparagraphs (A) 

7 through (E), respectively. 

8 (29) Section 874 is amended by striking sub9 section (b) and by redesignating subsection (c) as 

10 subsection (b). 

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

12 section 151 and’’. 

13 (31) Section 904(b) is amended by striking 

14 paragraph (1). 

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

16 ‘‘(other than the deduction under section 151, relat17 ing to personal exemptions)’’. 

18 (33) Section 933 is amended— 

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

20 under section 151, relating to personal exemp21 tions)’’ in paragraph (1), and 

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

23 for personal exemptions under section 151)’’ in 

24 paragraph (2). 


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

2 read as follows: 

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

4 the deduction allowed for such year under 

5 section 642(b).’’. 

6 (35) Section 1361(c)(1)(C) is amended by strik7 ing ‘‘section 152(f)(1)(C)’’ and inserting ‘‘section 

8 7706(f)(1)(C)’’. 

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

10 paragraph (7). 

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

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

13 7706(f)(2)’’. 

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

15 ‘‘other than the deductions referred to in section 

16 151 and’’. 

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

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

19 ‘‘the standard deduction in effect under section 

20 63(c)(1)(B).’’. 

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

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

23 (41) Section 5000A(c)(4)(A) is amended by 

24 striking ‘‘the number of individuals for whom the 

25 taxpayer is allowed a deduction under section 151 


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1 (relating to allowance of deduction for personal ex2 emptions) for the taxable year’’ and inserting ‘‘the 

3 sum of 1 (2 in the case of a joint return) plus the 

4 number of the taxpayer’s dependents for the taxable 

5 year’’. 

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

7 (A) by striking ‘‘had less than the exemp8 tion amount of gross income’’ in clause (ii) and 

9 inserting ‘‘had no gross income’’, 

10 (B) by striking ‘‘had gross income of the 

11 exemption amount or more’’ in clause (iii) and 

12 inserting ‘‘had any gross income’’, and 

13 (C) by striking the flush language fol14 lowing clause (iii). 

15 (43) Section 6014(b)(4), as amended by the 

16 preceding provisions of this Act, is amended by 

17 striking ‘‘where the taxpayer itemizes his deductions 

18 or’’. 

19 (44) Section 6103(l)(21)(A)(iii) is amended to 

20 read as follows: 

21 ‘‘(iii) the number of the taxpayer’s de22 pendents,’’. 

23 (45) Section 6213(g)(2) is amended by striking 

24 subparagraph (H). 


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1 (46) Section 6334(d)(2) is amended to read as 

2 follows: 

3 ‘‘(2) EXEMPT AMOUNT.— 

4 ‘‘(A) IN GENERAL.—For purposes of para5 graph (1), the term ‘exempt amount’ means an 

6 amount equal to— 

7 ‘‘(i) the standard deduction, divided 

8 by 

9 ‘‘(ii) 52. 

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

11 taxpayer submits to the Secretary a written and 

12 properly verified statement specifying the facts 

13 necessary to determine the proper amount 

14 under subparagraph (A), subparagraph (A) 

15 shall be applied as if the taxpayer were a mar16 ried individual filing a separate return with no 

17 dependents.’’. 

18 (47) Section 7702B(f)(2)(C)(iii) is amended by 

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

20 7706(d)(2)’’. 

21 (48) Section 7703(a) is amended by striking 

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

23 (49) Section 7703(b)(1) is amended by striking 

24 ‘‘section 152(f)(1)’’ and all that follows and insert25 ing ‘‘section 7706(f)(1),’’. 


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1 (50) Section 7706(a), as redesignated by this 

2 section, is amended by striking ‘‘this subtitle’’ and 

3 inserting ‘‘subtitle A’’. 

4 (51)(A) Section 7706(d)(1)(B), as redesignated 

5 by this section, is amended by striking ‘‘the exemp6 tion amount (as defined in section 151(d))’’ and in7 serting ‘‘$4,150’’. 

8 (B) Section 7706(d), as redesignated by this 

9 section, is amended by adding at the end the fol10 lowing new paragraph: 

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

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

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

14 amount equal to— 

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

16 ‘‘(B) the cost-of-living adjustment deter17 mined under section 1(c)(2)(A) for such cal18 endar year, determined by substituting ‘cal19 endar year 2017’ for ‘calendar year 2016’ in 

20 clause (ii) thereof. 

21 If any increase determined under the preceding sen22 tence is not a multiple of $100, such increase shall 

23 be rounded to the next lowest multiple of $100.’’. 


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1 (52) The table of sections for chapter 79 is 

2 amended by adding at the end the following new 

3 item: 

‘‘Sec. 7706. Dependent defined.’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2017. 

7 SEC. 1004. MAXIMUM RATE ON BUSINESS INCOME OF INDI8 VIDUALS. 

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

10 1 is amended by inserting after section 3 the following 

11 new section: 

12 ‘‘SEC. 4. 25 PERCENT MAXIMUM RATE ON BUSINESS IN13 COME OF INDIVIDUALS. 

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

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

16 reduced by the sum of— 

17 ‘‘(1) 10 percent of the lesser of— 

18 ‘‘(A) qualified business income, or 

19 ‘‘(B) the excess (if any) of— 

20 ‘‘(i) taxable income reduced by net 

21 capital gain (as defined in section 

22 1(h)(11)(A)), over 

23 ‘‘(ii) the maximum dollar amount for 

24 the 25-percent rate bracket which applies 


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1 to the taxpayer under section 1 for the 

2 taxable year, and 

3 ‘‘(2) 4.6 percent of the excess (if any) of— 

4 ‘‘(A) the lesser of— 

5 ‘‘(i) qualified business income, or 

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

7 under paragraph (1)(B), over 

8 ‘‘(B) the excess of— 

9 ‘‘(i) the maximum dollar amount for 

10 the 35-percent rate bracket which applies 

11 to the taxpayer under section 1 for the 

12 taxable year, over 

13 ‘‘(ii) the maximum dollar amount for 

14 the 25-percent rate bracket which applies 

15 to the taxpayer under section 1 for the 

16 taxable year. 

17 ‘‘(b) QUALIFIED BUSINESS INCOME.—For purposes 

18 of this section, the term ‘qualified business income’ means 

19 the excess (if any) of— 

20 ‘‘(1) the sum of— 

21 ‘‘(A) 100 percent of any net business in22 come derived from any passive business activity, 

23 plus 


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1 ‘‘(B) the capital percentage of any net 

2 business income derived from any active busi3 ness activity, 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 

9 derived from any active business activity, plus 

10 ‘‘(C) any carryover business loss deter11 mined 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) 

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

22 the taxpayer which are properly attributable to any 

23 business activity shall be taken into account under 

24 paragraph (1) as an item of income with respect to 

25 such business activity. 


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1 ‘‘(3) EXCEPTION FOR CERTAIN INVESTMENT2 RELATED ITEMS.—There shall not be taken into ac3 count 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 inter11 est income which is properly allocable to a trade 

12 or 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)), 


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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 APPLICA8 BLE TO DETERMINING TAXABLE INCOME.—Net busi9 ness income or loss shall be appropriately adjusted 

10 so as only to take into account any amount of in11 come, gain, deduction, or loss to the extent such 

12 amount affects the determination of taxable income 

13 for the taxable year. 

14 ‘‘(5) CARRYOVER BUSINESS LOSS.—For pur15 poses of subsection (b)(2)(C), the carryover business 

16 loss determined for any taxable year is the excess (if 

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

18 the sum described in subsection (b)(1) for such tax19 able year. 

20 ‘‘(d) PASSIVE AND ACTIVE BUSINESS ACTIVITY.— 

21 For purposes of this section— 

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

23 ‘passive business activity’ means any passive activity 

24 as defined in section 469(c) determined without re25 gard to paragraphs (3) and (6)(B) thereof. 


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1 ‘‘(2) ACTIVE BUSINESS ACTIVITY.—The term 

2 ‘active 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 

9 section— 

10 ‘‘(1) IN GENERAL.—Except as otherwise pro11 vided in this section, the term ‘capital percentage’ 

12 means 30 percent. 

13 ‘‘(2) INCREASED PERCENTAGE FOR CAPITAL-IN14 TENSIVE BUSINESS ACTIVITIES.—In the case of a 

15 taxpayer 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 

19 defined in subsection (f)) for each taxable year with 

20 respect to which such election applies. Any election 

21 made under this paragraph shall apply to the tax22 able year for which such election is made and each 

23 of the 4 subsequent taxable years. Such election 

24 shall be made not later than the due date (including 

25 extensions) for the return of tax for the taxable year 


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1 for which such election is made, and, once made, 

2 may not be revoked. 

3 ‘‘(3) TREATMENT OF SPECIFIED SERVICE AC4 TIVITIES.— 

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 

12 percent’. 

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 

20 such activity for such taxable year is at 

21 least 10 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. 


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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 inter7 ests, or commodities (as defined in section 

8 475(e)(2)). 

9 ‘‘(4) REDUCTION IN CAPITAL PERCENTAGE IN

10 CERTAIN CASES.—The capital percentage (deter11 mined after the application of paragraphs (2) and 

12 (3)) with respect to any active business activity shall 

13 not exceed 1 minus the quotient (not greater than 

14 1) of— 

15 ‘‘(A) any amounts described in subsection 

16 (c)(2) which are taken into account in deter17 mining the net business income derived from 

18 such activity, divided by 

19 ‘‘(B) such net business income. 

20 ‘‘(f) APPLICABLE PERCENTAGE.—For purposes of 

21 this section— 

22 ‘‘(1) IN GENERAL.—The term ‘applicable per23 centage’ means, with respect to any active business 

24 activity for any taxable year, the quotient (not great25 er than 1) of— 


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1 ‘‘(A) the specified return on capital with 

2 respect to such activity for such taxable year, 

3 divided by 

4 ‘‘(B) the taxpayer’s net business income 

5 derived from such activity for such taxable year. 

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

7 term ‘specified return on capital’ means, with re8 spect to any active business activity referred to in 

9 paragraph (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 

16 which is paid or accrued, and for which a de17 duction is allowed under this chapter, with re18 spect to such 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 (deter22 mined under section 1274(d) for the month in which 

23 or with which such taxable year ends) plus 7 per24 centage points. 

25 ‘‘(4) ASSET BALANCE.— 


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

2 with respect to any active business activity re3 ferred to in paragraph (1) for any taxable year 

4 equals the taxpayer’s adjusted basis of the 

5 property used in connection with such activity 

6 as of the end of the taxable year (determined 

7 without regard to sections 168(k) and 179). 

8 ‘‘(B) APPLICATION TO ACTIVITIES CAR9 RIED ON THROUGH PARTNERSHIPS AND S COR10 PORATIONS.—In the case of any active business 

11 activity carried on through a partnership or S 

12 corporation, the taxpayer shall take into ac13 count such taxpayer’s distributive or pro rata 

14 share (as the case may be) of the asset balance 

15 with respect to such activity as determined 

16 under this paragraph with respect to the part17 nership’s or S corporation’s adjusted basis of 

18 the property used in connection with such activ19 ity by the partnership or S corporation. 

20 ‘‘(g) REGULATIONS.—The Secretary may issue such 

21 regulations or other guidance as may be necessary or ap22 propriate to carry out the purposes of this section, includ23 ing regulations or other guidance— 


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

2 into account under subsection (f)(4) with respect to 

3 more than one activity, and 

4 ‘‘(2) which treats all specified service activities 

5 of the taxpayer as a single business activity for pur6 poses of this section to the extent that such activi7 ties would be treated as a single employer under 

8 subsection (a) or (b) of section 52 or subsection (m) 

9 or (o) of section 414. 

10 ‘‘(h) REFERENCES.—Any reference in this title to 

11 section 1 shall be treated as including a reference to this 

12 section unless the context of such reference clearly indi13 cates otherwise.’’. 

14 (b) 25 PERCENT RATE FOR CERTAIN DIVIDENDS OF

15 REAL ESTATE INVESTMENT TRUSTS AND COOPERA16 TIVES.—Section 1(h) is amended by adding at the end the 

17 following new paragraph: 

18 ‘‘(12) 25 PERCENT RATE FOR CERTAIN DIVI19 DENDS OF REAL ESTATE INVESTMENT TRUSTS AND

20 COOPERATIVES.— 

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

22 subsection, net capital gain (as defined in para23 graph (11)) and unrecaptured section 1250 

24 gain (as defined in paragraph (6)) shall each be 

25 increased by specified dividend income. 


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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) NET EARNINGS FROM SELF-EMPLOYMENT.— 

18 (1) APPLICATION TO LABOR PERCENTAGE OF

19 DISTRIBUTIVE AND PRO RATA SHARES.—Section 

20 1402(a) is amended— 

21 (A) by striking ‘‘the gross income derived 

22 by an individual from any trade or business car23 ried on by such individual, less the deductions 

24 allowed by this subtitle which are attributable 

25 to such trade or business, plus his distributive 


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1 share (whether or not distributed) of income or 

2 loss described in section 702(a)(8) from any 

3 trade or business carried on by a partnership of 

4 which he is a member’’ and inserting ‘‘the labor 

5 percentage of the gross income derived by an 

6 individual from any trade or business carried on 

7 by such individual, less the labor percentage of 

8 the deductions allowed by this subtitle which 

9 are attributable to such trade or business, plus 

10 the labor percentage of such individual’s dis11 tributive share (whether or not distributed) of 

12 income or loss described in section 702(a)(8) 

13 from any trade or business carried on by a 

14 partnership of which such individual is a mem15 ber, plus the labor percentage of such individ16 ual’s pro rata share (whether or not distrib17 uted) of nonseparately computed income or loss 

18 (as defined in section 1366(a)(2)) from any 

19 trade or business carried on by an S corpora20 tion in which such individual is a shareholder’’, 

21 and 

22 (B) by striking ‘‘and such distributive 

23 share of partnership ordinary income or loss’’ 

24 and inserting ‘‘, such distributive share of part25 nership ordinary income or loss, and such pro 


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1 rata share of S corporation nonseparately com2 puted income or loss’’. 

3 (2) LABOR PERCENTAGE.—Section 1402 is 

4 amended by adding at the end the following new 

5 subsection: 

6 ‘‘(m) LABOR PERCENTAGE.— 

7 ‘‘(1) IN GENERAL.—For purposes of this sec8 tion, the term ‘labor percentage’ means, with respect 

9 to any income or loss, the excess (expressed as a 

10 percentage) of 1 minus the capital percentage (ex11 pressed as a decimal) with respect to such income or 

12 loss. 

13 ‘‘(2) CAPITAL PERCENTAGE.—For purposes of 

14 paragraph (1), the term ‘capital percentage’ means 

15 the percentage which applied with respect to such 

16 income or loss under section 4(b)(1)(B). 

17 ‘‘(3) ADJUSTMENT FOR S CORPORATION

18 WAGES.—For purposes of this subsection, proper ad19 justment shall be made for wages paid to the tax20 payer with respect to any trade or business carried 

21 on by an S corporation in which the taxpayer is a 

22 shareholder.’’. 

23 (3) APPLICATION TO RENTAL INCOME.—Section 

24 1402(a) is amended by striking paragraph (1). 


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1 (4) APPLICATION TO LIMITED PARTNERS.—Sec2 tion 1402(a) is amended by striking paragraph (13). 

3 (d) CLERICAL AMENDMENT.—The table of sections 

4 for part I of subchapter A of chapter 1 is amended by 

5 inserting after the item relating to section 3 the following 

6 new item: 

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

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2017. 

10 (f) TRANSITION RULE.—In the case of any taxable 

11 year which includes December 31, 2017, the amendment 

12 made by subsection (a) shall apply with respect to such 

13 taxable year adjusted— 

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

15 tax in effect under section 1 of the Internal Revenue 

16 Code of 1986 with respect to such taxable year (and 

17 so as to achieve a 25 percent effective rate of tax 

18 on the business income (determined without regard 

19 to paragraph (2)) in the same manner as such 

20 amendment applies to taxable years beginning after 

21 such date with respect to the rates of tax in effect 

22 for such years), and 

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

24 tax (as otherwise determined under paragraph (1)) 

25 by the amount which bears the same proportion to 


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1 the amount of such reduction as the number of days 

2 in the taxable year which are before January 1, 

3 2018, bears to the number of days in the entire tax4 able year. 

5 SEC. 1005. CONFORMING AMENDMENTS RELATED TO SIM6 PLIFICATION OF INDIVIDUAL INCOME TAX 

7 RATES. 

8 (a) AMENDMENTS RELATED TO MODIFICATION OF

9 INFLATION ADJUSTMENT.— 

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

11 striking ‘‘consumer price index’’ and inserting ‘‘C12 CPI-U (as defined in section 1(c))’’. 

13 (2) Section 41(e)(5)(C) is amended to read as 

14 follows: 

15 ‘‘(C) COST-OF-LIVING ADJUSTMENT DE16 FINED.— 

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

18 adjustment for any calendar year is the 

19 cost-of-living adjustment for such calendar 

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

21 by substituting ‘calendar year 1987’ for 

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

23 ‘‘(ii) SPECIAL RULE WHERE BASE PE24 RIOD ENDS IN A CALENDAR YEAR OTHER

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


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1 any taxpayer does not end in 1983 or 

2 1984, clause (i) shall be applied by sub3 stituting the calendar year in which such 

4 base period ends for 1987.’’. 

5 (3) Section 42(e)(3)(D)(ii) is amended by strik6 ing ‘‘section 1(f)(3) for such calendar year by sub7 stituting ‘calendar year 2008’ for ‘calendar year 

8 1992’ in subparagraph (B) thereof’’ and inserting 

9 ‘‘section 1(c)(2)(A) for such calendar year by sub10 stituting ‘calendar year 2008’ for ‘calendar year 

11 2016’ in clause (ii) thereof’’. 

12 (4) Section 42(h)(3)(H)(i)(II) is amended by 

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

14 substituting ‘calendar year 2001’ for ‘calendar year 

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

16 ‘‘section 1(c)(2)(A) for such calendar year by sub17 stituting ‘calendar year 2001’ for ‘calendar year 

18 2016’ in clause (ii) thereof’’. 

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

20 striking ‘‘section 1(f)(3) for the calendar year, deter21 mined by substituting ‘calendar year 2012’ for ‘cal22 endar year 1992’ in subparagraph (B) thereof’’ and 

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

24 year, determined by substituting ‘‘calendar year 


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1 2012’’ for ‘‘calendar year 2016’’ in clause (ii) there2 of’ ’’. 

3 (6) Section 125(i)(2) is amended— 

4 (A) by striking ‘‘section 1(f)(3) for the cal5 endar year in which the taxable year begins by 

6 substituting ‘calendar year 2012’ for ‘calendar 

7 year 1992’ in subparagraph (B) thereof’’ in 

8 subparagraph (B) and inserting ‘‘section 

9 1(c)(2)(A) for the calendar year in which the 

10 taxable year begins’’, and 

11 (B) by striking ‘‘$50’’ both places it ap12 pears in the last sentence and inserting 

13 ‘‘$100’’. 

14 (7) Section 162(o)(3) is amended by inserting 

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

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

17 (8) Section 220(g)(2) is amended by striking 

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

19 taxable year begins by substituting ‘calendar year 

20 1997’ for ‘calendar year 1992’ in subparagraph (B) 

21 thereof’’ and inserting ‘‘section 1(c)(2)(A) for the 

22 calendar year in which the taxable year begins, de23 termined by substituting ‘calendar year 1997’ for 

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


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

2 that follows subparagraph (A) and inserting the fol3 lowing: 

4 ‘‘(B) the cost-of-living adjustment deter5 mined under section 1(c)(2)(A) for the calendar 

6 year in which the taxable year begins, deter7 mined— 

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

9 2016’ in clause (ii) thereof— 

10 ‘‘(I) except as provided in clause 

11 (ii), ‘calendar year 1997’, and 

12 ‘‘(II) in the case of each dollar 

13 amount in subsection (c)(2)(A), ‘cal14 endar year 2003’, and 

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

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

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

18 The Secretary shall publish the dollar amounts 

19 as adjusted under this subsection for taxable 

20 years beginning in any calendar year no later 

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

22 (10) Section 430(c)(7)(D)(vii)(II) is amended 

23 by striking ‘‘section 1(f)(3) for the calendar year, 

24 determined by substituting ‘calendar year 2009’ for 

25 ‘calendar year 1992’ in subparagraph (B) thereof’’ 


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

2 year, determined by substituting ‘calendar year 

3 2009’ for ‘calendar year 2016’ in clause (ii) there4 of’’. 

5 (11) Section 512(d)(2)(B) is amended by strik6 ing ‘‘section 1(f)(3) for the calendar year in which 

7 the taxable year begins, by substituting ‘calendar 

8 year 1994’ for ‘calendar year 1992’ in subparagraph 

9 (B) thereof’’and inserting ‘‘section 1(c)(2)(A) for the 

10 calendar year in which the taxable year begins, de11 termined by substituting ‘calendar year 1994’ for 

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

13 (12) Section 513(h)(2)(C)(ii) is amended by 

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

15 which the taxable year begins by substituting ‘cal16 endar year 1987’ for ‘calendar year 1992’ in sub17 paragraph (B) thereof’’ and inserting ‘‘section 

18 1(c)(2)(A) for the calendar year in which the taxable 

19 year begins, determined by substituting ‘calendar 

20 year 1987’ for ‘calendar year 2016’ in clause (ii) 

21 thereof’’. 

22 (13) Section 831(b)(2)(D)(ii) is amended by 

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

24 substituting ‘calendar year 2013’ for ‘calendar year 

25 1992’ in subparagraph (B) thereof’’ and inserting 


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1 ‘‘section 1(c)(2)(A) for such calendar year by sub2 stituting ‘calendar year 2013’ for ‘calendar year 

3 2016’ in clause (ii) thereof’’. 

4 (14) Section 877A(a)(3)(B)(i)(II) is amended 

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

6 which the taxable year begins, by substituting ‘cal7 endar year 2007’ for ‘calendar year 1992’ in sub8 paragraph (B) thereof’’ and inserting ‘‘section 

9 1(c)(2)(A) for the calendar year in which the taxable 

10 year begins, determined by substituting ‘calendar 

11 year 2007’ for ‘calendar year 2016’ in clause (ii) 

12 thereof’’. 

13 (15) Section 911(b)(2)(D)(ii)(II) is amended by 

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

15 which the taxable year begins, determined by sub16 stituting ‘2004’ for ‘1992’ in subparagraph (B) 

17 thereof’’ and inserting ‘‘section 1(c)(2)(A) for the 

18 calendar year in which the taxable year begins, de19 termined by substituting ‘calendar year 2004’ for 

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

21 (16) Section 1274A(d)(2) is amended to read 

22 as follows: 

23 ‘‘(2) INFLATION ADJUSTMENT.— 

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

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1 change during any calendar year after 2018, 

2 each adjusted dollar amount shall be increased 

3 by an amount equal to— 

4 ‘‘(i) such adjusted dollar amount, 

5 multiplied by 

6 ‘‘(ii) the cost-of-living adjustment de7 termined under section 1(c)(2)(A) for such 

8 calendar year, determined by substituting 

9 ‘calendar year 2017’ for ‘calendar year 

10 2016’ in clause (ii) thereof. 

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

12 purposes of this paragraph, the term ‘adjusted 

13 dollar amount’ means the dollar amounts in 

14 subsections (b) and (c), in each case as in effect 

15 for calendar year 2018. 

16 ‘‘(C) ROUNDING.—Any increase under sub17 paragraph (A) shall be rounded to the nearest 

18 multiple of $100.’’. 

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

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

21 substituting ‘calendar year 2010’ for ‘calendar year 

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

23 ‘‘section 1(c)(2)(A) for such calendar year, deter24 mined by substituting ‘calendar year 2010’ for ‘cal25 endar year 2016’ in clause (ii) thereof’’. 


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1 (18) Section 2032A(a)(3)(B) is amended by 

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

3 substituting ‘calendar year 1997’ for ‘calendar year 

4 1992’ in subparagraph (B) thereof’’ and inserting 

5 ‘‘section 1(c)(2)(A) for such calendar year, deter6 mined by substituting ‘calendar year 1997’ for ‘cal7 endar year 2016’ in clause (ii) thereof’’. 

8 (19) Section 2503(b)(2)(B) is amended by 

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

10 substituting ‘calendar year 1997’ for ‘calendar year 

11 1992’ in subparagraph (B) thereof’’ and inserting 

12 ‘‘section 1(c)(2)(A) for the calendar year, deter13 mined by substituting ‘calendar year 1997’ for ‘cal14 endar year 2016’ in clause (ii) thereof’’. 

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

16 striking ‘‘section 1(f)(3) for such calendar year, de17 termined by substituting ‘2004’ for ‘1992’ in sub18 paragraph (B) thereof’’ and inserting ‘‘section 

19 1(c)(2)(A) for such calendar year, determined by 

20 substituting ‘calendar year 2004’ for ‘calendar year 

21 2016’ in clause (ii) thereof’’. 

22 (21) Section 4261(e)(4)(A)(ii) is amended by 

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

24 substituting the year before the last nonindexed year 

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1 of’’ and inserting ‘‘section 1(c)(2)(A) for such cal2 endar year, determined by substituting the year be3 fore the last nonindexed year for ‘calendar year 

4 2016’ in clause (ii) thereof’’. 

5 (22) Section 4980I(b)(3)(C)(v)(II) is amended 

6 (A) by striking ‘‘section 1(f)(3)’’ and in7 serting ‘‘section 1(c)(2)(A)’’, 

8 (B) by striking ‘‘subparagraph (B)’’ and 

9 inserting ‘‘clause (ii)’’, and 

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

11 ‘‘2016’’. 

12 (23) Section 5000A(c)(3)(D)(ii) is amended— 

13 (A) by striking ‘‘section 1(f)(3)’’ and in14 serting ‘‘section 1(c)(2)(A)’’, 

15 (B) by striking ‘‘subparagraph (B)’’ and 

16 inserting ‘‘clause (ii)’’, and 

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

18 ‘‘2016’’. 

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

20 ‘‘section 1(f)(3), except that subparagraph (B) 

21 thereof’’ and inserting ‘‘section 1(c)(2)(A), except 

22 that clause (ii) thereof’’. 

23 (25) Section 6323(i)(4)(B) is amended by strik24 ing ‘‘section 1(f)(3) for the calendar year, deter25 mined by substituting ‘calendar year 1996’ for ‘calVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00061 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 endar year 1992’ in subparagraph (B) thereof’’ and 

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

3 determined by substituting ‘calendar year 1996’ for 

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

5 (26) Section 6334(g)(1)(B) is amended by 

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

7 substituting ‘calendar year 1998’ for ‘calendar year 

8 1992’ in subparagraph (B) thereof’’ and inserting 

9 ‘‘section 1(c)(2)(A) for such calendar year, deter10 mined by substituting ‘calendar year 1999’ for ‘cal11 endar year 2016’ in clause (ii) thereof’’. 

12 (27) Section 6601(j)(3)(B) is amended by strik13 ing ‘‘section 1(f)(3) for such calendar year by sub14 stituting ‘calendar year 1997’ for ‘calendar year 

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

16 ‘‘section 1(c)(2)(A) for such calendar year by sub17 stituting ‘calendar year 1997’ for ‘calendar year 

18 2016’ in clause (ii) thereof’’. 

19 (28) Section 6651(i)(1) is amended by striking 

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

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

22 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter23 mined by substituting ‘calendar year 2013’ for ‘cal24 endar year 2016’ in clause (ii) thereof’’. 

25 (29) Section 6721(f)(1) is amended— 


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1 (A) by striking ‘‘section 1(f)(3)’’ and in2 serting ‘‘section 1(c)(2)(A)’’, 

3 (B) by striking ‘‘subparagraph (B)’’ and 

4 inserting ‘‘clause (ii)’’, and 

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

6 ‘‘2016’’. 

7 (30) Section 6722(f)(1) is amended— 

8 (A) by striking ‘‘section 1(f)(3)’’ and in9 serting ‘‘section 1(c)(2)(A)’’, 

10 (B) by striking ‘‘subparagraph (B)’’ and 

11 inserting ‘‘clause (ii)’’, and 

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

13 ‘‘2016’’. 

14 (31) Section 6652(c)(7)(A) is amended by strik15 ing ‘‘section 1(f)(3) determined by substituting ‘cal16 endar year 2013’ for ‘calendar year 1992’ in sub17 paragraph (B) thereof’’ and inserting ‘‘section 

18 1(c)(2)(A) determined by substituting ‘calendar year 

19 2013’ for ‘calendar year 2016’ in clause (ii) there20 of’’. 

21 (32) Section 6695(h)(1) is amended by striking 

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

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

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1 mined by substituting ‘calendar year 2013’ for ‘cal2 endar year 2016’ in clause (ii) thereof’’. 

3 (33) Section 6698(e)(1) is amended by striking 

4 ‘‘ section 1(f)(3) determined by substituting ‘cal5 endar year 2013’ for ‘calendar year 1992’ in sub6 paragraph (B) thereof’’ and inserting ‘‘section 

7 1(c)(2)(A) determined by substituting ‘calendar year 

8 2013’ for ‘calendar year 2016’ in clause (ii) there9 of’’. 

10 (34) Section 6699(e)(1) is amended by striking 

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

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

13 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter14 mined by substituting ‘calendar year 2013’ for ‘cal15 endar year 2016’ in clause (ii) thereof’’. 

16 (35) Section 7345(f)(2) is amended by striking 

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

18 substituting ‘calendar year 2015’ for ‘calendar year 

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

20 ‘‘section 1(c)(2)(A) for the calendar year, deter21 mined by substituting ‘calendar year 2015’ for ‘cal22 endar year 2016’ in clause (ii) thereof’’. 

23 (36) Section 7430(c)(1) is amended by striking 

24 ‘‘section 1(f)(3) for such calendar year, by sub25 stituting ‘calendar year 1995’ for ‘calendar year 


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1 1992’ in subparagraph (B) thereof’’ in the flush text 

2 at the end and inserting ‘‘section 1(c)(2)(A) for such 

3 calendar year, determined by substituting ‘calendar 

4 year 1995’ for ‘calendar year 2016’ in clause (ii) 

5 thereof’’. 

6 (37) Section 7872(g)(5) is amended to read as 

7 follows: 

8 ‘‘(5) INFLATION ADJUSTMENT.— 

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

10 loan made during any calendar year after 2018 

11 to which paragraph (1) applies, the adjusted 

12 dollar amount shall be increased by an amount 

13 equal to— 

14 ‘‘(i) such adjusted dollar amount, 

15 multiplied by 

16 ‘‘(ii) the cost-of-living adjustment de17 termined under section 1(c)(2)(A) for such 

18 calendar year, determined by substituting 

19 ‘calendar year 2017’ for ‘calendar year 

20 2016’ in clause (ii) thereof. 

21 ‘‘(B) ADJUSTED DOLLAR AMOUNT.—For 

22 purposes of this paragraph, the term ‘adjusted 

23 dollar amount’ means the dollar amount in 

24 paragraph (2) as in effect for calendar year 

25 2018. 


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1 ‘‘(C) ROUNDING.—Any increase under sub2 paragraph (A) shall be rounded to the nearest 

3 multiple of $100.’’. 

4 (b) OTHER CONFORMING AMENDMENTS.— 

5 (1) Section 36B(b)(3)(B)(ii)(I)(aa) is amended 

6 to read as follows: 

7 ‘‘(aa) who is described in 

8 section 1(b)(1)(B) and who does 

9 not have any dependents for the 

10 taxable year,’’. 

11 (2) Section 486B(b)(1) is amended— 

12 (A) by striking ‘‘maximum rate in effect’’ 

13 and inserting ‘‘highest rate specified’’, and 

14 (B) by striking ‘‘section 1(e)’’ and insert15 ing ‘‘section 1’’. 

16 (3) Section 511(b)(1) is amended by striking 

17 ‘‘section 1(e)’’ and inserting ‘‘section 1’’. 

18 (4) Section 641(a) is amended by striking ‘‘sec19 tion 1(e) shall apply to the taxable income’’ and in20 serting ‘‘section 1 shall apply to the taxable in21 come’’. 

22 (5) Section 641(c)(2)(A) is amended to read as 

23 follows: 

24 ‘‘(A) Except to the extent provided in sec25 tion 1(h), the rate of tax shall be treated as 


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1 being the highest rate of tax set forth in section 

2 1(a).’’. 

3 (6) Section 646(b) is amended to read as fol4 lows: 

5 ‘‘(b) TAXATION OF INCOME OF TRUST.—Except as 

6 provided in subsection (f)(1)(B)(ii), there is hereby im7 posed on the taxable income of an electing Settlement 

8 Trust a tax at the rate specified in section 1(a)(1). Such 

9 tax shall be in lieu of the income tax otherwise imposed 

10 by this chapter on such income.’’. 

11 (7) Section 685(c) is amended by striking ‘‘Sec12 tion 1(e)’’ and inserting ‘‘Section 1’’. 

13 (8) Section 904(b)(3)(E)(ii)(I) is amended by 

14 striking ‘‘set forth in subsection (a), (b), (c), (d), or 

15 (e) of section 1 (whichever applies)’’ and inserting 

16 ‘‘the highest rate of tax specified in section 1’’. 

17 (9) Section 1398(c)(2) is amended by striking 

18 ‘‘subsection (d) of’’. 

19 (10) Section 3402(p)(1)(B) is amended by 

20 striking ‘‘any percentage applicable to any of the 3 

21 lowest income brackets in the table under section 

22 1(c),’’ and inserting ‘‘12 percent, 25 percent,’’. 

23 (11) Section 3402(q)(1) is amended by striking 

24 ‘‘the product of third lowest rate of tax applicable 


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1 under section 1(c) and’’ and inserting ‘‘25 percent 

2 of’’. 

3 (12) Section 3402(r)(3) is amended by striking 

4 ‘‘the amount of tax which would be imposed by sec5 tion 1(c) (determined without regard to any rate of 

6 tax in excess of the fourth lowest rate of tax applica7 ble under section 1(c)) on an amount of taxable in8 come equal to’’ and inserting ‘‘an amount equal to 

9 the product of 25 percent multiplied by’’. 

10 (13) Section 3406(a)(1) is amended by striking 

11 ‘‘the product of the fourth lowest rate of tax applica12 ble under section 1(c) and’’ and inserting ‘‘25 per13 cent of’’. 

14 (14) Section 6103(e)(1)(A)(iii) is amended by 

15 striking ‘‘section 1(g) (as in effect on the day before 

16 the enactment of theTax Cuts and Jobs Act)’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2017. 


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1 Subtitle B—Simplification and Re2 form of Family and Individual 

3 Tax Credits 

4 SEC. 1101. ENHANCEMENT OF CHILD TAX CREDIT AND NEW 

5 FAMILY TAX CREDIT. 

6 (a) INCREASE IN CREDIT AMOUNT AND ADDITION OF

7 OTHER DEPENDENTS.— 

8 (1) IN GENERAL.—Section 24(a) is amended— 

9 (A) by striking ‘‘qualifying child’’ and inserting 

10 ‘‘dependent’’, 

11 (B) by striking ‘‘for which the taxpayer is al12 lowed a deduction under section 151’’, and 

13 (C) by striking ‘‘an amount equal to $1,000.’’ 

14 and inserting the following: ‘‘an amount equal to— 

15 ‘‘(1) in the case of a qualifying child, $1,600, 

16 and 

17 ‘‘(2) for taxable years beginning before January 

18 1, 2023, in the case of the taxpayer (each spouse in 

19 the case of a joint return) and any dependent to 

20 whom paragraph (1) does not apply, $300.’’. 

21 (2) CONFORMING AMENDMENTS.— 

22 (A) Section 24(c) is amended— 

23 (i) by redesignating paragraphs (1) and 

24 (2) as paragraphs (2) and (3), respectively, 


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1 (ii) by striking ‘‘152(c)’’ in paragraph (2) 

2 (as so redesignated) and inserting ‘‘7706(c)’’, 

3 (iii) by inserting before paragraph (2) (as 

4 so redesignated) the following new paragraph: 

5 ‘‘(1) DEPENDENT.— 

6 ‘‘(A) IN GENERAL.—The term ‘dependent’ 

7 shall have the meaning given such term by sec8 tion 7706. 

9 ‘‘(B) CERTAIN INDIVIDUALS NOT TREATED

10 AS DEPENDENTS.—In the case of an individual 

11 with respect to whom a credit under this section 

12 is allowable to another taxpayer for a taxable 

13 year beginning in the calendar year in which 

14 the individual’s taxable year begins, the amount 

15 applicable to such individual under subsection 

16 (a) for such individual’s taxable year shall be 

17 zero.’’, 

18 (iv) in paragraph (3) (as so redesig19 nated)— 

20 (I) by striking ‘‘term ‘qualifying 

21 child’ ’’ and inserting ‘‘terms ‘qualifying 

22 child’ and ‘dependent’ ’’, and 

23 (II) by striking ‘‘152(b)(3)’’ and in24 serting ‘‘7706(b)(3)’’, and 


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1 (v) in the heading by striking ‘‘QUALI2 FYING’’ and inserting ‘‘DEPENDENT; QUALI3 FYING’’ 

4 (B) The heading for section 24 is amended by 

5 inserting ‘‘AND FAMILY’’ after ‘‘CHILD’’. 

6 (C) The table of sections for subpart A of part 

7 IV of subchapter A of chapter 1 is amended by 

8 striking the item relating to section 24 and inserting 

9 the following new item: 

‘‘Sec. 24. Child and dependent tax credit.’’. 

10 (b) ELIMINATION OF MARRIAGE PENALTY.—Section 

11 24(b)(2) is amended— 

12 (1) by striking ‘‘$110,000’’ in subparagraph (A) and 

13 inserting ‘‘$230,000’’, 

14 (2) by inserting ‘‘and’’ at the end of subparagraph 

15 (A), 

16 (3) by striking ‘‘$75,000 in the case of an individual 

17 who is not married’’ and all that follows through the pe18 riod at the end and inserting ‘‘one-half of the amount in 

19 effect under subparagraph (A) for the taxable year in the 

20 case of any other individual.’’. 

21 (c) CREDIT REFUNDABLE UP TO $1,000 PER

22 CHILD.— 

23 (1) IN GENERAL.—Section 24(d)(1)(A) is amended 

24 by striking all that follows ‘‘under this section’’ and insert25 ing the following: ‘‘determined— 


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1 ‘‘(i) without regard to this subsection 

2 and the limitation under section 26(a), 

3 ‘‘(ii) without regard to subsection 

4 (a)(2), and 

5 ‘‘(iii) by substituting ‘$1,000’ for 

6 ‘$1,600’ in subsection (a)(1), or’’. 

7 (2) INFLATION ADJUSTMENT.—Section 24(d) is 

8 amended by inserting after paragraph (2) the following 

9 new paragraph: 

10 ‘‘(3) INFLATION ADJUSTMENT.—In the case of 

11 any taxable year beginning in a calendar year after 

12 2017, the $1,000 amount in paragraph (1)(A)(iii) 

13 shall be increased by an amount equal to— 

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

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

16 section 1(c)(2)(A) for such calendar year. 

17 Any increase determined under the preceding sen18 tence shall be rounded to the next highest multiple 

19 of $100 and shall not exceed the amount in effect 

20 under subsection (a)(2).’’. 

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2017. 

24 SEC. 1102. REPEAL OF NONREFUNDABLE CREDITS. 

25 (a) REPEAL OF SECTION 22.— 


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1 (1) IN GENERAL.—Subpart A of part IV of sub2 chapter A of chapter 1 is amended by striking sec3 tion 22 (and by striking the item relating to such 

4 section in the table of sections for such subpart). 

5 (2) CONFORMING AMENDMENT.— 

6 (A) Section 86(f) is amended by striking 

7 paragraph (1) and by redesignating paragraphs 

8 (2), (3), and (4) as paragraphs (1), (2), and 

9 (3), respectively. 

10 (B)(i) Subsections (c)(3)(B) and (d)(4)(A) 

11 of section 7706, as redesignated by this Act, 

12 are each amended by striking ‘‘(as defined in 

13 section 22(e)(3)’’. 

14 (ii) Section 7706(f), as redesignated by 

15 this Act, is amended by redesignating para16 graph (7) as paragraph (8) and by inserting 

17 after paragraph (6) the following new para18 graph: 

19 ‘‘(7) PERMANENT AND TOTAL DISABILITY DE20 FINED.—An individual is permanently and totally 

21 disabled if he is unable to engage in any substantial 

22 gainful activity by reason of any medically deter23 minable physical or mental impairment which can be 

24 expected to result in death or which has lasted or 

25 can be expected to last for a continuous period of 


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1 not less than 12 months. An individual shall not be 

2 considered to be permanently and totally disabled 

3 unless he furnishes proof of the existence thereof in 

4 such form and manner, and at such times, as the 

5 Secretary may require.’’. 

6 (iii) Section 415(c)(3)(C)(i) is amended by 

7 striking ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 

8 (iv) Section 422(c)(6) is amended by strik9 ing ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 

10 (b) REPEAL OF SECTION 23.—Subpart A of part IV 

11 of subchapter A of chapter 1 is amended by striking sec12 tion 23 (and by striking the item relating to such section 

13 in the table of sections for such subpart). 

14 (c) TERMINATION OF SECTION 25.—Section 25, as 

15 amended by section 3601, is amended by adding at the 

16 end the following new subsection: 

17 ‘‘(k) TERMINATION.—No credit shall be allowed 

18 under this section with respect to any mortgage credit cer19 tificate issued after December 31, 2017.’’. 

20 (d) REPEAL OF SECTION 30D.— 

21 (1) IN GENERAL.—Subpart B of part IV of 

22 subchapter A of chapter 1 is amended by striking 

23 section 30D (and by striking the item relating to 

24 such section in the table of sections for such sub25 part). 


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1 (2) CONFORMING AMENDMENTS.— 

2 (A) Section 38(b) is amended by striking 

3 paragraph (35). 

4 (B) Section 1016(a) is amended by strik5 ing paragraph (37). 

6 (C) Section 6501(m) is amended by strik7 ing ‘‘30D(e)(4),’’. 

8 (e) EFFECTIVE DATE.— 

9 (1) IN GENERAL.—Except as provided in para10 graphs (2) and (3), the amendments made by this 

11 section shall apply to taxable years beginning after 

12 December 31, 2017. 

13 (2) SUBSECTION (c).—The amendment made 

14 by subsection (c) shall apply to taxable years ending 

15 after December 31, 2017. 

16 (3) SUBSECTION (d).—The amendments made 

17 by subsection (d) shall apply to vehicles placed in 

18 service in taxable years beginning after December 

19 31, 2017. 

20 SEC. 1103. REFUNDABLE CREDIT PROGRAM INTEGRITY. 

21 (a) SOCIAL SECURITY NUMBER REQUIRED TO CLAIM

22 THE REFUNDABLE PORTION OF THE CHILD TAX CRED23 IT.— 

24 (1) IN GENERAL.—Section 24(d), as amended 

25 by the preceding provisions of this Act, is amended 


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1 by redesignating paragraph (5) as paragraph (4) 

2 and by adding at the end the following new para3 graph: 

4 ‘‘(5) IDENTIFICATION REQUIREMENT.— 

5 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

6 not apply to any taxpayer for any taxable year 

7 unless the taxpayer includes the taxpayer’s so8 cial security number on the return of tax for 

9 such taxable year. 

10 ‘‘(B) JOINT RETURNS.—In the case of a 

11 joint return, the requirement of subparagraph 

12 (A) shall be treated as met if the social security 

13 number of either spouse is included on such re14 turn. 

15 ‘‘(C) SOCIAL SECURITY NUMBER.—For 

16 purposes of this paragraph, the term ‘social se17 curity number’ means a social security number 

18 issued to an individual by the Social Security 

19 Administration (but only if the social security 

20 number is issued to a citizen of the United 

21 States or pursuant to subclause (I) (or that 

22 portion of subclause (III) that relates to sub23 clause (I)) of section 205(c)(2)(B)(i) of the So24 cial Security Act).’’. 


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1 (2) OMISSIONS TREATED AS MATHEMATICAL OR

2 CLERICAL ERROR.— 

3 (A) IN GENERAL.—Section 6213(g)(2)(I) 

4 is amended to read as follows: 

5 ‘‘(I) an omission of a correct social secu6 rity number required under section 24(d)(5) 

7 (relating to refundable portion of child tax cred8 it), or a correct TIN required under section 

9 24(e) (relating to child tax credit), to be in10 cluded on a return,’’. 

11 (3) CLERICAL AMENDMENT.—The heading for 

12 section 24(e) is amended by striking ‘‘IDENTIFICA13 TION REQUIREMENTS’’ and inserting ‘‘GENERAL

14 IDENTIFICATION REQUIREMENTS’’. 

15 (b) SOCIAL SECURITY NUMBER MUST BE PRO16 VIDED.— 

17 (1) IN GENERAL.—Section 25A(f)(1)(A), as 

18 amended by section 1201 of this Act, is amended by 

19 striking ‘‘taxpayer identification number’’ each place 

20 it appears and inserting ‘‘social security number’’. 

21 (2) OMISSION TREATED AS MATHEMATICAL OR

22 CLERICAL ERROR.—Section 6213(g)(2)(J) is amend23 ed by striking ‘‘TIN’’ and inserting ‘‘social security 

24 number and employer identification number’’. 


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1 (c) INDIVIDUALS PROHIBITED FROM ENGAGING IN

2 EMPLOYMENT IN UNITED STATES NOT ELIGIBLE FOR

3 EARNED INCOME TAX CREDIT.—Section 32(m) is amend4 ed— 

5 (1) by striking ‘‘(other than:’’ and all that fol6 lows through ‘‘of the Social Security Act)’’, and 

7 (2) by inserting before the period at the end the 

8 following: ‘‘, but only if, in the case of subsection 

9 (c)(1)(E), the social security number is issued to a 

10 citizen of the United States or pursuant to subclause 

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

12 subclause (I)) of section 205(c)(2)(B)(i) of the So13 cial Security Act’’. 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2017. 

17 Subtitle C—Simplification and 

18 Reform of Education Incentives 

19 SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT. 

20 (a) IN GENERAL.—Section 25A is amended to read 

21 as follows: 

22 ‘‘SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT. 

23 ‘‘(a) IN GENERAL.—In the case of an individual, 

24 there shall be allowed as a credit against the tax imposed 


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1 by this chapter for the taxable year an amount equal to 

2 the sum of— 

3 ‘‘(1) 100 percent of so much of the qualified 

4 tuition and related expenses paid by the taxpayer 

5 during the taxable year (for education furnished to 

6 any eligible student for whom an election is in effect 

7 under this section for such taxable year during any 

8 academic period beginning in such taxable year) as 

9 does not exceed $2,000, plus 

10 ‘‘(2) 25 percent of so much of such expenses so 

11 paid as exceeds the dollar amount in effect under 

12 paragraph (1) but does not exceed twice such dollar 

13 amount. 

14 ‘‘(b) PORTION OF CREDIT REFUNDABLE.—40 per15 cent of the credit allowable under subsection (a)(1) (deter16 mined without regard to this subsection and section 26(a) 

17 and after application of all other provisions of this section) 

18 shall be treated as a credit allowable under subpart C (and 

19 not under this part). The preceding sentence shall not 

20 apply to any taxpayer for any taxable year if such tax21 payer is a child to whom section 1(d) applies for such tax22 able year. 

23 ‘‘(c) LIMITATION BASED ON MODIFIED ADJUSTED

24 GROSS INCOME.— 


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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.— 

16 For purposes of this subsection, the term ‘modified 

17 adjusted gross income’ means the adjusted gross in18 come of the taxpayer for the taxable year increased 

19 by any amount excluded from gross income under 

20 section 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 


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1 with respect to such student for any 5 prior taxable 

2 years. 

3 ‘‘(2) CREDIT ALLOWED ONLY FOR FIRST 5

4 YEARS 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 

9 has completed (before the beginning of such 

10 taxable year) the first 5 years of postsecondary 

11 education 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 

15 taxable 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 

19 shall not exceed an amount equal to 50 

20 percent of the credit otherwise determined 

21 with respect to such student under this 

22 section (without regard to this subpara23 graph), and 

24 ‘‘(ii) the amount of the credit deter25 mined under subsection (b) and allowable 


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1 under subpart C shall not exceed an 

2 amount equal to 40 percent of the amount 

3 determined with respect to such student 

4 under clause (i). 

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

6 ‘‘(1) ELIGIBLE STUDENT.—The term ‘eligible 

7 student’ means, with respect to any academic period, 

8 a student who— 

9 ‘‘(A) meets the requirements of section 

10 484(a)(1) of the Higher Education Act of 1965 

11 (20 U.S.C. 1091(a)(1)), as in effect on August 

12 5, 1997, and 

‘‘(B) is carrying at least 1 13 ⁄2 the normal 

14 full-time work load for the course of study the 

15 student is pursuing. 

16 ‘‘(2) QUALIFIED TUITION AND RELATED EX17 PENSES.— 

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

19 tuition and related expenses’ means tuition, 

20 fees, and course materials, required for enroll21 ment or attendance of— 

22 ‘‘(i) the taxpayer, 

23 ‘‘(ii) the taxpayer’s spouse, or 

24 ‘‘(iii) any dependent of the taxpayer, 


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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 

7 education involving sports, games, or hobbies, 

8 unless such course or other education is part of 

9 the individual’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.— 

16 The term ‘eligible educational institution’ means an 

17 institution— 

18 ‘‘(A) which is described in section 481 of 

19 the Higher Education Act of 1965 (20 U.S.C. 

20 1088), 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.— 


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1 ‘‘(A) STUDENT.—No credit shall be al2 lowed under subsection (a) to a taxpayer with 

3 respect to the qualified tuition and related ex4 penses of an individual unless the taxpayer in5 cludes the name and taxpayer identification 

6 number of such individual on the return of tax 

7 for the taxable year, and such taxpayer identi8 fication number was issued on or before the due 

9 date for filing such return. 

10 ‘‘(B) TAXPAYER.—No credit shall be al11 lowed under this section if the identifying num12 ber of the taxpayer was issued after the due 

13 date for filing 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 

17 any institution to which qualified tuition and 

18 related expenses were paid with respect to the 

19 individual. 

20 ‘‘(2) ADJUSTMENT FOR CERTAIN SCHOLAR21 SHIPS, ETC.—The amount of qualified tuition and 

22 related expenses otherwise taken into account under 

23 subsection (a) with respect to an individual for an 

24 academic period shall be reduced (before the applica25 tion of subsection (c)) by the sum of any amounts 


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1 paid for the benefit of such individual which are allo2 cable to such 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, be10 quest, devise, or inheritance within the meaning 

11 of section 102(a)) for such individual’s edu12 cational expenses, or attributable to such indi13 vidual’s enrollment at an eligible educational in14 stitution, which is excludable from gross income 

15 under any 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 individual’s 


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1 taxable year shall be treated for purposes of 

2 this section as paid by such other taxpayer. 

3 ‘‘(4) TREATMENT OF CERTAIN PREPAY4 MENTS.—If qualified tuition and related expenses 

5 are paid by the taxpayer during a taxable year for 

6 an academic period which begins during the first 3 

7 months following such taxable year, such academic 

8 period shall be treated for purposes of this section 

9 as beginning during such taxable year. 

10 ‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit 

11 shall be allowed under this section for any amount 

12 for which a deduction is allowed under any other 

13 provision of this chapter. 

14 ‘‘(6) NO CREDIT FOR MARRIED INDIVIDUALS

15 FILING SEPARATE RETURNS.—If the taxpayer is a 

16 married individual (within the meaning of section 

17 7703), this section shall apply only if the taxpayer 

18 and the taxpayer’s spouse file a joint return for the 

19 taxable 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. 


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1 ‘‘(8) RESTRICTIONS ON TAXPAYERS WHO IM2 PROPERLY 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 

12 years after the most recent taxable 

13 year for which there was a final deter14 mination that the taxpayer’s claim of 

15 credit under this section was due to 

16 fraud, and 

17 ‘‘(II) the period of 2 taxable 

18 years after the most recent taxable 

19 year for which there was a final deter20 mination that the taxpayer’s claim of 

21 credit under this section was due to 

22 reckless or intentional disregard of 

23 rules and regulations (but not due to 

24 fraud). 


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1 ‘‘(B) TAXPAYERS MAKING IMPROPER

2 PRIOR CLAIMS.—In the case of a taxpayer who 

3 is denied credit under this section for any tax4 able year as a result of the deficiency proce5 dures under subchapter B of chapter 63, no 

6 credit shall be allowed under this section for 

7 any subsequent taxable year unless the taxpayer 

8 provides such information as the Secretary may 

9 require to demonstrate eligibility for such cred10 it. 

11 ‘‘(g) INFLATION ADJUSTMENT.— 

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

13 year beginning after 2018, the $80,000 amount in 

14 subsection (c)(1)(A)(ii) shall each be increased by an 

15 amount equal to— 

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

17 ‘‘(B) the cost-of-living adjustment deter18 mined under section 1(c)(2)(A) for the calendar 

19 year in which the taxable year begins, deter20 mined by substituting ‘calendar year 2017’ for 

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

22 ‘‘(2) ROUNDING.—If any amount as adjusted 

23 under paragraph (1) is not a multiple of $1,000, 

24 such amount shall be rounded to the next lowest 

25 multiple of $1,000. 


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1 ‘‘(h) REGULATIONS.—The Secretary may prescribe 

2 such regulations or other guidance as may be necessary 

3 or appropriate to carry out this section, including regula4 tions providing for a recapture of the credit allowed under 

5 this section in cases where there is a refund in a subse6 quent taxable year of any amount which was taken into 

7 account in determining the amount of such credit.’’. 

8 (b) CONFORMING AMENDMENTS.— 

9 (1) Section 72(t)(7)(B) is amended by striking 

10 ‘‘section 25A(g)(2)’’ and inserting ‘‘section 

11 25A(f)(2)’’. 

12 (2) Section 529(c)(3)(B)(v)(I) is amended by 

13 striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 

14 25A(f)(2)’’. 

15 (3) Section 529(e)(3)(B)(i) is amended by strik16 ing ‘‘section 25A(b)(3)’’ and inserting ‘‘section 

17 25A(d)’’. 

18 (4) Section 530(d)(2)(C) is amended— 

19 (A) by striking ‘‘section 25A(g)(2)’’ in 

20 clause (i)(I) and inserting ‘‘section 25A(f)(2)’’, 

21 and 

22 (B) by striking ‘‘HOPE AND LIFETIME

23 LEARNING CREDITS’’ in the heading and insert24 ing ‘‘AMERICAN OPPORTUNITY TAX CREDIT’’. 


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1 (5) Section 530(d)(4)(B)(iii) is amended by 

2 striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 

3 25A(d)(4)(B)’’. 

4 (6) Section 6050S(e) is amended by striking 

5 ‘‘subsection (g)(2)’’ and inserting ‘‘subsection 

6 (f)(2)’’. 

7 (7) Section 6211(b)(4)(A) is amended by strik8 ing ‘‘subsection (i)(6)’’ and inserting ‘‘subsection 

9 (b)’’. 

10 (8) Section 6213(g)(2)(J) is amended by strik11 ing ‘‘TIN required under section 25A(g)(1)’’ and in12 serting ‘‘TIN, and employer identification number, 

13 required under section 25A(f)(1)’’. 

14 (9) Section 6213(g)(2)(Q) is amended to read 

15 as follows: 

16 ‘‘(Q) an omission of information required 

17 by section 25A(f)(8)(B) or an entry on the re18 turn claiming the credit determined under sec19 tion 25A(a) for a taxable year for which the 

20 credit is disallowed under section 

21 25A(f)(8)(A).’’. 

22 (10) Section 1004(c) of division B of the Amer23 ican Recovery and Reinvestment Tax Act of 2009 is 

24 amended— 

25 (A) in paragraph (1)— 


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1 (i) by striking ‘‘section 25A(i)(6)’’ 

2 each place it appears and inserting ‘‘sec3 tion 25A(b)’’, and 

4 (ii) by striking ‘‘with respect to tax5 able years beginning after 2008 and before 

6 2018’’ each place it appears and inserting 

7 ‘‘with respect to each taxable year’’, 

8 (B) in paragraph (2), by striking ‘‘Section 

9 25A(i)(6)’’ and inserting ‘‘Section 25A(b)’’, and 

10 (C) in paragraph (3)(C), by striking ‘‘sub11 section (i)(6)’’ and inserting ‘‘subsection (b)’’. 

12 (11) The table of sections for subpart A of part 

13 IV of subchapter A of chapter 1 is amended by 

14 striking the item relating to section 25A and insert15 ing the following new item: 

‘‘Sec. 25A. American opportunity tax credit.’’. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2017. 

19 SEC. 1202. CONSOLIDATION OF EDUCATION SAVINGS 

20 RULES. 

21 (a) NO NEW CONTRIBUTIONS TO COVERDELL EDU22 CATION SAVINGS ACCOUNT.—Section 530(b)(1)(A) is 

23 amended to read as follows: 


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1 ‘‘(A) Except in the case of rollover con2 tributions, no contribution will be accepted after 

3 December 31, 2017.’’. 

4 (b) LIMITED DISTRIBUTION ALLOWED FOR ELEMEN5 TARY AND SECONDARY TUITION.— 

6 (1) IN GENERAL.—Section 529(c) is amended 

7 by adding at the end the following new paragraph: 

8 ‘‘(7) TREATMENT OF ELEMENTARY AND SEC9 ONDARY TUITION.—Any reference in this subsection 

10 to the term ‘qualified higher education expense’ shall 

11 include a reference to expenses for tuition in connec12 tion with enrollment at an elementary or secondary 

13 school.’’. 

14 (2) LIMITATION.—Section 529(e)(3)(A) is 

15 amended by adding at the end the following: ‘‘The 

16 amount of cash distributions from all qualified tui17 tion programs described in subsection (b)(1)(A)(ii) 

18 with respect to a beneficiary during any taxable 

19 year, shall, in the aggregate, include not more than 

20 $10,000 in expenses for tuition incurred during the 

21 taxable year in connection with the enrollment or at22 tendance of the beneficiary as an elementary or sec23 ondary school student at a public, private, or reli24 gious school.’’. 


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1 (c) ROLLOVERS TO QUALIFIED TUITION PROGRAMS

2 PERMITTED.—Section 530(d)(5) is amended by inserting 

3 ‘‘, or into (by purchase or contribution) a qualified tuition 

4 program (as defined in section 529),’’ after ‘‘into another 

5 Coverdell education savings account’’. 

6 (d) DISTRIBUTIONS FROM QUALIFIED TUITION PRO7 GRAMS FOR CERTAIN EXPENSES ASSOCIATED WITH REG8 ISTERED APPRENTICESHIP PROGRAMS.—Section 

9 529(e)(3) is amended by adding at the end the following 

10 new subparagraph: 

11 ‘‘(C) CERTAIN EXPENSES ASSOCIATED

12 WITH REGISTERED APPRENTICESHIP PRO13 GRAMS.—The term ‘qualified higher education 

14 expenses’ shall include books, supplies, and 

15 equipment required for the enrollment or at16 tendance of a designated beneficiary in an ap17 prenticeship program registered and certified 

18 with the Secretary of Labor under section 1 of 

19 the National Apprenticeship Act (29 U.S.C. 

20 50).’’. 

21 (e) UNBORN CHILDREN ALLOWED AS ACCOUNT

22 BENEFICIARIES.—Section 529(e) is amended by adding at 

23 the end the following new paragraph: 

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


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

2 an unborn child from being treated as a des3 ignated beneficiary or an individual under this 

4 section. 

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

6 this paragraph— 

7 ‘‘(i) IN GENERAL.—The term ‘unborn 

8 child’ means a child in utero. 

9 ‘‘(ii) CHILD IN UTERO.—The term 

10 ‘child in utero’ means a member of the 

11 species homo sapiens, at any stage of de12 velopment, who is carried in the womb.’’. 

13 (f) EFFECTIVE DATES.— 

14 (1) IN GENERAL.—Except as otherwise pro15 vided in this subsection, the amendments made by 

16 this section shall apply to contributions made after 

17 December 31, 2017. 

18 (2) ROLLOVERS TO QUALIFIED TUITION PRO19 GRAMS.—The amendments made by subsection (b) 

20 shall apply to distributions after December 31, 

21 2017. 

22 SEC. 1203. REFORMS TO DISCHARGE OF CERTAIN STUDENT 

23 LOAN INDEBTEDNESS. 

24 (a) TREATMENT OF STUDENT LOANS DISCHARGED

25 ON ACCOUNT OF DEATH OR DISABILITY.—Section 108(f) 


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1 is amended by adding at the end the following new para2 graph: 

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

4 DISABILITY.— 

5 ‘‘(A) IN GENERAL.—In the case of an indi6 vidual, gross income does not include any 

7 amount which (but for this subsection) would 

8 be includible in gross income by reasons of the 

9 discharge (in whole or in part) of any loan de10 scribed in subparagraph (B) if such discharge 

11 was— 

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

13 of section 437 of the Higher Education 

14 Act of 1965 or the parallel benefit under 

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

16 the repayment of loan liability), 

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

18 of such Act, or 

19 ‘‘(iii) otherwise discharged on account 

20 of the death or total and permanent dis21 ability of the student. 

22 ‘‘(B) LOANS DESCRIBED.—A loan is de23 scribed in this subparagraph if such loan is— 

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

25 paragraph (2)), or 


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1 ‘‘(ii) a private education loan (as de2 fined in section 140(7) of the Consumer 

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

4 1650(7))).’’. 

5 (b) EXCLUSION FROM GROSS INCOME FOR PAY6 MENTS MADE UNDER INDIAN HEALTH SERVICE LOAN

7 REPAYMENT PROGRAM.— 

8 (1) IN GENERAL.—Section 108(f)(4) is amend9 ed by inserting ‘‘under section 108 of the Indian 

10 Health Care Improvement Act,’’ after ‘‘338I of such 

11 Act,’’. 

12 (2) CLERICAL AMENDMENT.—The heading for 

13 section 108(f)(4) is amended by striking ‘‘AND CER14 TAIN’’ and inserting ‘‘, INDIAN HEALTH SERVICE

15 LOAN REPAYMENT PROGRAM, AND CERTAIN’’. 

16 (c) EFFECTIVE DATES.— 

17 (1) SUBSECTION (a).—The amendment made 

18 by subsection (a)(1) shall apply to discharges of in19 debtedness after December 31, 2017. 

20 (2) SUBSECTION (b).—The amendments made 

21 by subsection (b) shall apply to amounts received in 

22 taxable years beginning after December 31, 2017. 


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1 SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO 

2 EDUCATION. 

3 (a) IN GENERAL.—Subchapter B of chapter 1 is 

4 amended— 

5 (1) in part VII by striking sections 221 and 

6 222 (and by striking the items relating to such sec7 tions in the table of sections for such part), 

8 (2) in part VII by striking sections 135 and 

9 127 (and by striking the items relating to such sec10 tions in the table of sections for such part), and 

11 (3) by striking subsection (d) of section 117. 

12 (b) CONFORMING AMENDMENT RELATING TO SEC13 TION 221.— 

14 (1) Section 62(a) is amended by striking para15 graph (17). 

16 (2) Section 163(h)(2) is amended by striking 

17 subparagraph (F). 

18 (3) Section 6050S(a) is amended— 

19 (A) by inserting ‘‘or’’ at the end of para20 graph (1), 

21 (B) by striking ‘‘or’’ at the end of para22 graph (2), and 

23 (C) by striking paragraph (3). 

24 (4) Section 6050S(e) is amended by striking all 

25 that follows ‘‘thereof)’’ and inserting a period. 


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1 (c) CONFORMING AMENDMENT RELATING TO SEC2 TION 222.—Section 62(a) is amended by striking para3 graph (18). 

4 (d) CONFORMING AMENDMENTS RELATING TO SEC5 TION 127.— 

6 (1) Section 125(f)(1) is amended by striking 

7 ‘‘127,’’. 

8 (2) Section 132(j)(8) is amended by striking 

9 ‘‘which are not excludable from gross income under 

10 section 127’’. 

11 (3) Section 414(n)(3)(C) is amended by strik12 ing ‘‘127,’’. 

13 (4) Section 414(t)(2) is amended by striking 

14 ‘‘127,’’. 

15 (5) Section 3121(a)(18) is amended by striking 

16 ‘‘127,’’. 

17 (6) Section 3231(e) is amended by striking 

18 paragraph (6). 

19 (7) Section 3306(b)(13) is amended by ‘‘127,’’. 

20 (8) Section 3401(a)(18) is amended by striking 

21 ‘‘127,’’. 

22 (9) Section 6039D(d)(1) is amended by striking 

23 ‘‘, 127’’. 

24 (e) CONFORMING AMENDMENTS RELATING TO SEC25 TION 117(d).— 


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1 (1) Section 117(c)(1) is amended— 

2 (A) by striking ‘‘subsections (a) and (d)’’ 

3 and inserting ‘‘subsection (a)’’, and 

4 (B) by striking ‘‘or qualified tuition reduc5 tion’’. 

6 (2) Section 414(n)(3)(C) is amended by strik7 ing ‘‘117(d),’’. 

8 (3) Section 414(t)(2) is amended by striking 

9 ‘‘117(d),’’. 

10 (f) EFFECTIVE DATES.— 

11 (1) IN GENERAL.—Except as otherwise pro12 vided in this subsection, the amendments made by 

13 this section shall apply to taxable years beginning 

14 after December 31, 2017. 

15 (2) AMENDMENTS RELATING TO SECTION

16 117(d).—The amendments made by subsections 

17 (a)(3) and (e) shall apply to amounts paid or in18 curred after December 31, 2017. 

19 Subtitle D—Simplification and 

20 Reform of Deductions 

21 SEC. 1301. REPEAL OF OVERALL LIMITATION ON ITEMIZED 

22 DEDUCTIONS. 

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

24 1 is amended by striking section 68 (and the item relating 

25 to such section in the table of sections for such part). 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 1302. MORTGAGE INTEREST. 

5 (a) MODIFICATION OF LIMITATIONS.— 

6 (1) IN GENERAL.—Section 163(h)(3) is amend7 ed to read as follows: 

8 ‘‘(3) QUALIFIED RESIDENCE INTEREST.—For 

9 purposes of this subsection— 

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

11 residence interest’ means any interest which is 

12 paid or accrued during the taxable year on in13 debtedness 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 tax18 payer, 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 

24 sentence); but only to the extent the amount of 

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1 nancing does not exceed the amount of the refi2 nanced indebtedness. 

3 ‘‘(B) LIMITATION.— 

4 ‘‘(i) IN GENERAL.—The aggregate 

5 amount of indebtedness taken into account 

6 under subparagraph (A) for any period 

7 shall not exceed $500,000 (half of such 

8 amount in the case of a married individual 

9 filing a separate return). 

10 ‘‘(C) TREATMENT OF INDEBTEDNESS IN11 CURRED ON OR BEFORE NOVEMBER 2, 2017.— 

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

13 pre-November 2, 2017, indebtedness, this 

14 paragraph shall apply as in effect imme15 diately before the enactment of the Tax 

16 Cuts and Jobs Act. 

17 ‘‘(ii) PRE-NOVEMBER 2, 2017, INDEBT18 EDNESS.—For purposes of this subpara19 graph, the term ‘pre-November 2, 2017, 

20 indebtedness’ means— 

21 ‘‘(I) any principal residence ac22 quisition indebtedness which was in23 curred on or before November 2, 

24 2017, or 


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1 ‘‘(II) any principal residence ac2 quisition indebtedness which is in3 curred after November 2, 2017, to re4 finance indebtedness described in 

5 clause (i) (or refinanced indebtedness 

6 meeting the requirements of this 

7 clause) to the extent (immediately 

8 after the refinancing) the principal 

9 amount of the indebtedness resulting 

10 from the refinancing does not exceed 

11 the principal amount of the refinanced 

12 indebtedness (immediately before the 

13 refinancing). 

14 ‘‘(iii) LIMITATION ON PERIOD OF RE15 FINANCING.—clause (ii)(II) shall not apply 

16 to any indebtedness after— 

17 ‘‘(I) the expiration of the term of 

18 the original indebtedness, or 

19 ‘‘(II) if the principal of such 

20 original indebtedness is not amortized 

21 over its term, the expiration of the 

22 term of the 1st refinancing of such in23 debtedness (or if earlier, the date 

24 which is 30 years after the date of 

25 such 1st refinancing). 


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1 ‘‘(iv) BINDING CONTRACT EXCEP2 TION.—In the case of a taxpayer who en3 ters into a written binding contract before 

4 November 2, 2017, to close on the pur5 chase of a principal residence before Janu6 ary 1, 2018, and who purchases such resi7 dence before April 1, 2018, subparagraphs 

8 (A) and (B) shall be applied by sub9 stituting ‘April 1, 2018’ for ‘November 2, 

10 2017’.’’. 

11 (2) CONFORMING AMENDMENTS.— 

12 (A) Section 108(h)(2) is by striking ‘‘for 

13 ‘$1,000,000 ($500,000’ in clause (ii) thereof’’ 

14 and inserting ‘‘for ‘$500,000 ($250,000’ in 

15 paragraph (2)(A), and ‘$1,000,000’ for 

16 ‘$500,000’ in paragraph (2)(B), thereof’’ 

17 (B) Section 163(h) is amended— 

18 (i) by striking subparagraphs (E) and 

19 (F) in paragraph (4), and 

20 (ii) by striking paragraph (5). 

21 (b) TAXPAYERS LIMITED TO 1 QUALIFIED RESI22 DENCE.—Section 163(h)(4)(A)(i) is amended to read as 

23 follows: 

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1 dence (within the meaning of section 121) 

2 of the taxpayer. Rules similar to the rules 

3 of paragraph (3)(C) shall apply for pur4 poses of the preceding sentence.’’. 

5 (c) EFFECTIVE DATES.— 

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

7 this section shall apply to interest paid or accrued 

8 in taxable years beginning after December 31, 2017, 

9 with respect to indebtedness incurred before, on, or 

10 after such date. 

11 (2) TREATMENT OF GRANDFATHERED INDEBT12 EDNESS.—For application of the amendments made 

13 by this section to grandfathered indebtedness, see 

14 paragraph (3)(C), and the second sentence of para15 graph (4)(A)(i), of section 163(h) of the Internal 

16 Revenue Code of 1986, as amended by this section. 

17 SEC. 1303. REPEAL OF DEDUCTION FOR CERTAIN TAXES 

18 NOT PAID OR ACCRUED IN A TRADE OR BUSI19 NESS. 

20 (a) IN GENERAL.—Section 164(b)(5) is amended to 

21 read as follows: 

22 ‘‘(5) LIMITATION IN CASE OF INDIVIDUALS.—In 

23 the case of a taxpayer other than a corporation— 

24 ‘‘(A) foreign real property taxes (other 

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1 rying on a trade or business or an activity de2 scribed in section 212) shall not be taken into 

3 account under subsection (a)(1), 

4 ‘‘(B) the aggregate amount of taxes (other 

5 than taxes which are paid or accrued in car6 rying on a trade or business or an activity de7 scribed in section 212) taken into account 

8 under subsection (a)(1) and for any taxable 

9 year shall not exceed $10,000 ($5,000 in the 

10 case of a married individual filing a separate re11 turn), 

12 ‘‘(C) subsection (a)(2) shall only apply to 

13 taxes which are paid or accrued in carrying on 

14 a trade or business or an activity described in 

15 section 212, and 

16 ‘‘(D) subsection (a)(3) shall not apply to 

17 State and local taxes.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 SEC. 1304. REPEAL OF DEDUCTION FOR PERSONAL CAS22 UALTY LOSSES. 

23 (a) IN GENERAL.—Section 165(c) is amended by in24 serting ‘‘and’’ at the end of paragraph (1), by striking 


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1 ‘‘; and’’ at the end of paragraph (2) and inserting a pe2 riod, and by striking paragraph (3). 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 165(h) is amended to read as fol5 lows: 

6 ‘‘(h) SPECIAL RULE WHERE PERSONAL CASUALTY

7 GAINS EXCEED PERSONAL CASUALTY LOSSES.— 

8 ‘‘(1) IN GENERAL.—If the personal casualty 

9 gains for any taxable year exceed the personal cas10 ualty losses for such taxable year— 

11 ‘‘(A) all such gains shall be treated as 

12 gains from sales or exchanges of capital assets, 

13 and 

14 ‘‘(B) all such losses shall be treated as 

15 losses from sales or exchanges of capital assets. 

16 ‘‘(2) DEFINITIONS OF PERSONAL CASUALTY

17 GAIN AND PERSONAL CASUALTY LOSS.—For pur18 poses of this subsection— 

19 ‘‘(A) PERSONAL CASUALTY LOSS.—The 

20 term ‘personal casualty loss’ means any loss of 

21 property not connected with a trade or business 

22 or a transaction entered into for profit, if such 

23 loss arises from fire, storm, shipwreck, or other 

24 casualty, or from theft. 


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1 ‘‘(B) PERSONAL CASUALTY GAIN.—The 

2 term ‘personal casualty gain’ means the recog3 nized gain from any involuntary conversion of 

4 property which is described in subparagraph 

5 (A) arising from fire, storm, shipwreck, or other 

6 casualty, or from theft.’’. 

7 (2) Subsection (i) of section 165 is amended— 

8 (A) in paragraph (1)— 

9 (i) by striking ‘‘(as defined by clause 

10 (ii) of subsection (h)(3)(C))’’, and 

11 (ii) by striking ‘‘(as defined by clause 

12 (i) of such subsection)’’, 

13 (B) by striking ‘‘(as defined by subsection 

14 (h)(3)(C)(i)’’ in paragraph (4), and 

15 (C) by adding at the end the following new 

16 paragraph: 

17 ‘‘(5) FEDERALLY DECLARED DISASTER.—For 

18 purposes of this subsection— 

19 ‘‘(A) FEDERALLY DECLARED DISASTER.— 

20 The term ‘federally declared disaster’ means 

21 any disaster subsequently determined by the 

22 President of the United States to warrant as23 sistance by the Federal Government under the 

24 Robert T. Stafford Disaster Relief and Emer25 gency Assistance Act. 


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1 ‘‘(B) DISASTER AREA.—The term ‘disaster 

2 area’ means the area so determined to warrant 

3 such assistance.’’. 

4 (3) Section 165 is amended by striking sub5 section (k). 

6 (4)(A) Section 165(l)(1) is amended by striking 

7 ‘‘a loss described in subsection (c)(3)’’ and inserting 

8 ‘‘an ordinary loss described in subsection (c)(2)’’. 

9 (B) Section 165(l) is amended— 

10 (i) by striking paragraph (5), 

11 (ii) by redesignating paragraphs (2), (3), 

12 and (4) as paragraphs (3), (4), and (5), respec13 tively, and 

14 (iii) by inserting after paragraph (1) the 

15 following new paragraph: 

16 ‘‘(2) LIMITATIONS.— 

17 ‘‘(A) DEPOSIT MAY NOT BE FEDERALLY

18 INSURED.—No election may be made under 

19 paragraph (1) with respect to any loss on a de20 posit in a qualified financial institution if part 

21 or all of such deposit is insured under Federal 

22 law. 

23 ‘‘(B) DOLLAR LIMITATION.—With respect 

24 to each financial institution, the aggregate 

25 amount of losses attributable to deposits in 


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1 such financial institution to which an election 

2 under paragraph (1) may be made by the tax3 payer for any taxable year shall not exceed 

4 $20,000 ($10,000 in the case of a separate re5 turn by a married individual). The limitation of 

6 the preceding sentence shall be reduced by the 

7 amount of any insurance proceeds under any 

8 State law which can reasonably be expected to 

9 be received with respect to losses on deposits in 

10 such institution.’’. 

11 (5) Section 172(b)(1)(E)(ii), prior to amend12 ment under title III, is amended by striking sub13 clause (I) and by redesignating subclauses (II) and 

14 (III) as subclauses (I) and (II), respectively 

15 (6) Section 172(d)(4)(C) is amended by strik16 ing ‘‘paragraph (2) or (3) of section 165(c)’’ and in17 serting ‘‘section 165(c)(2)’’. 

18 (7) Section 274(f) is amended by striking 

19 ‘‘CASUALTY LOSSES,’’ in the heading thereof. 

20 (8) Section 280A(b) is amended by striking 

21 ‘‘CASUALTY LOSSES,’’ in the heading thereof. 

22 (9) Section 873(b), as amended by the pre23 ceding provisions of this Act, is amended by striking 

24 paragraph (1) and by redesignating paragraphs (2) 

25 and (3) as paragraphs (1) and (2), respectively. 


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1 (10) Section 504(b) of the Disaster Tax Relief 

2 and Airport and Airway Extension Act of 2017 is 

3 amended by adding at the end the following new 

4 paragraph: 

5 ‘‘(4) COORDINATION WITH TAX REFORM.—This 

6 subsection shall be applied without regard to the 

7 amendments made by section 1306 of the Tax Cuts 

8 and Jobs Act.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2017. 

12 SEC. 1305. LIMITATION ON WAGERING LOSSES. 

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

14 adding at the end the following: ‘‘For purposes of the pre15 ceding sentence, the term ‘losses from wagering trans16 actions’ includes any deduction otherwise allowable under 

17 this chapter incurred in carrying on any wagering trans18 action.’’. 

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2017. 

22 SEC. 1306. CHARITABLE CONTRIBUTIONS. 

23 (a) INCREASED LIMITATION FOR CASH CONTRIBU24 TIONS.— 


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1 (1) IN GENERAL.—Section 170(b)(1) is amend2 ed by redesignating subparagraph (G) as subpara3 graph (H) and by inserting after subparagraph (F) 

4 the following new subparagraph: 

5 ‘‘(G) INCREASED LIMITATION FOR CASH

6 CONTRIBUTIONS.— 

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

8 contribution of cash to an organization de9 scribed in subparagraph (A), the total 

10 amount of such contributions which may 

11 be taken into account under subsection (a) 

12 for any taxable year shall not exceed 60 

13 percent of the taxpayer’s contribution base 

14 for such year. 

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

16 amount of contributions described in clause 

17 (i) exceeds the applicable limitation under 

18 clause (i), such excess shall be treated (in 

19 a manner consistent with the rules of sub20 section (d)(1)) as a charitable contribution 

21 to which clause (i) applies in each of the 

22 5 succeeding years in order of time. 

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


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

3 subparagraph shall not be taken into 

4 account under subparagraph (A). 

5 ‘‘(II) LIMITATION REDUCTION.— 

6 Subparagraphs (A) and (B) shall be 

7 applied by reducing (but not below 

8 zero) the aggregate contribution limi9 tation allowed for the taxable year 

10 under each such subparagraph by the 

11 aggregate contributions allowed under 

12 this subparagraph for such taxable 

13 year.’’. 

14 (b) DENIAL OF DEDUCTION FOR COLLEGE ATH15 LETIC EVENT SEATING RIGHTS.—Section 170(l)(1) is 

16 amended to read as follows: 

17 ‘‘(1) IN GENERAL.—No deduction shall be al18 lowed under this section for any amount described in 

19 paragraph (2).’’. 

20 (c) CHARITABLE MILEAGE RATE ADJUSTED FOR IN21 FLATION.—Section 170(i) is amended by striking ‘‘shall 

22 be 14 cents per mile’’ and inserting ‘‘shall be a rate which 

23 takes into account the variable cost of operating an auto24 mobile’’. 


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1 (d) REPEAL OF SUBSTANTIATION EXCEPTION IN

2 CASE OF CONTRIBUTIONS REPORTED BY DONEE.—Sec3 tion 170(f)(8) is amended by striking subparagraph (D) 

4 and by redesignating subparagraph (E) as subparagraph 

5 (D). 

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

7 this section shall apply to contributions made in taxable 

8 years beginning after December 31, 2017. 

9 SEC. 1307. REPEAL OF DEDUCTION FOR TAX PREPARATION 

10 EXPENSES. 

11 (a) IN GENERAL.—Section 212 is amended by adding 

12 ‘‘or’’ at the end of paragraph (1), by striking ‘‘; or’’ at 

13 the end of paragraph (2) and inserting a period, and by 

14 striking paragraph (3). 

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2017. 

18 SEC. 1308. REPEAL OF MEDICAL EXPENSE DEDUCTION. 

19 (a) IN GENERAL.—Part VII of subchapter B is 

20 amended by striking by striking section 213 (and by strik21 ing the item relating to such section in the table of section 

22 for such subpart). 

23 (b) CONFORMING AMENDMENTS.— 

24 (1)(A) Section 105(f) is amended to read as fol25 lows: 


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1 ‘‘(f) MEDICAL CARE.—For purposes of this section— 

2 ‘‘(1) IN GENERAL.—The term ‘medical care’ 

3 means amounts paid— 

4 ‘‘(A) for the diagnosis, cure, mitigation, 

5 treatment, or prevention of disease, or for the 

6 purpose of affecting any structure or function 

7 of the body, 

8 ‘‘(B) for transportation primarily for and 

9 essential to medical care referred to in subpara10 graph (A), 

11 ‘‘(C) for qualified long-term care services 

12 (as defined in section 7702B(c)), or 

13 ‘‘(D) for insurance (including amounts 

14 paid as premiums under part B of title XVIII 

15 of the Social Security Act, relating to supple16 mentary medical insurance for the aged) cov17 ering medical care referred to in subparagraphs 

18 (A) and (B) or for any qualified long-term care 

19 insurance contract (as defined in section 

20 7702B(b)). 

21 In the case of a qualified long-term care insurance 

22 contract (as defined in section 7702B(b)), only eligi23 ble long-term care premiums (as defined in para24 graph (7)) shall be taken into account under sub25 paragraph (D). 


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1 ‘‘(2) AMOUNTS PAID FOR CERTAIN LODGING

2 AWAY FROM HOME TREATED AS PAID FOR MEDICAL

3 CARE.—Amounts paid for lodging (not lavish or ex4 travagant under the circumstances) while away from 

5 home primarily for and essential to medical care re6 ferred to in paragraph (1)(A) shall be treated as 

7 amounts paid for medical care if— 

8 ‘‘(A) the medical care referred to in para9 graph (1)(A) is provided by a physician in a li10 censed hospital (or in a medical care facility 

11 which is related to, or the equivalent of, a li12 censed hospital), and 

13 ‘‘(B) there is no significant element of per14 sonal pleasure, recreation, or vacation in the 

15 travel away from home. 

16 The amount taken into account under the preceding 

17 sentence shall not exceed $50 for each night for each 

18 individual. 

19 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the 

20 meaning given to such term by section 1861(r) of 

21 the Social Security Act (42 U.S.C. 1395x(r)). 

22 ‘‘(4) CONTRACTS COVERING OTHER THAN MED23 ICAL CARE.—In the case of an insurance contract 

24 under which amounts are payable for other than 


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1 medical care referred to in subparagraphs (A), (B) 

2 and (C) of paragraph (1)— 

3 ‘‘(A) no amount shall be treated as paid 

4 for insurance to which paragraph (1)(D) applies 

5 unless the charge for such insurance is either 

6 separately stated in the contract, or furnished 

7 to the policyholder by the insurance company in 

8 a separate statement, 

9 ‘‘(B) the amount taken into account as the 

10 amount paid for such insurance shall not exceed 

11 such charge, and 

12 ‘‘(C) no amount shall be treated as paid 

13 for such insurance if the amount specified in 

14 the contract (or furnished to the policyholder by 

15 the insurance company in a separate statement) 

16 as the charge for such insurance is unreason17 ably large in relation to the total charges under 

18 the contract. 

19 ‘‘(5) CERTAIN PRE-PAID CONTRACTS.—Subject 

20 to the limitations of paragraph (4), premiums paid 

21 during the taxable year by a taxpayer before he at22 tains the age of 65 for insurance covering medical 

23 care (within the meaning of subparagraphs (A), (B), 

24 and (C) of paragraph (1)) for the taxpayer, his 

25 spouse, or a dependent after the taxpayer attains the 


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1 age of 65 shall be treated as expenses paid during 

2 the taxable year for insurance which constitutes 

3 medical care if premiums for such insurance are 

4 payable (on a level payment basis) under the con5 tract for a period of 10 years or more or until the 

6 year in which the taxpayer attains the age of 65 

7 (but in no case for a period of less than 5 years). 

8 ‘‘(6) COSMETIC SURGERY.— 

9 ‘‘(A) IN GENERAL.—The term ‘medical 

10 care’ does not include cosmetic surgery or other 

11 similar procedures, unless the surgery or proce12 dure is necessary to ameliorate a deformity 

13 arising from, or directly related to, a congenital 

14 abnormality, a personal injury resulting from 

15 an accident or trauma, or disfiguring disease. 

16 ‘‘(B) COSMETIC SURGERY DEFINED .—For 

17 purposes of this paragraph, the term ‘cosmetic 

18 surgery’ means any procedure which is directed 

19 at improving the patient’s appearance and does 

20 not meaningfully promote the proper function 

21 of the body or prevent or treat illness or dis22 ease. 

23 ‘‘(7) ELIGIBLE LONG-TERM CARE PREMIUMS.— 

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

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1 miums’ means the amount paid during a tax2 able year for any qualified long-term care insur3 ance contract (as defined in section 7702B(b)) 

4 covering an individual, to the extent such 

5 amount does not exceed the limitation deter6 mined under 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 

7 ‘‘(B) INDEXING.— 

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

9 taxable year beginning after 1997, each 

10 dollar amount in subparagraph (A) shall 

11 be increased by the medical care cost ad12 justment of such amount for such calendar 

13 year. Any increase determined under the 

14 preceding sentence shall be rounded to the 

15 nearest multiple of $10. 

16 ‘‘(ii) MEDICAL CARE COST ADJUST17 MENT.—For purposes of clause (i), the 

18 medical care cost adjustment for any cal19 endar year is the adjustment prescribed by 

20 the Secretary, in consultation with the Sec21 retary of Health and Human Services, for 


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1 purposes of such clause. To the extent that 

2 CPI (as defined section 1(c)), or any com3 ponent thereof, is taken into account in de4 termining such adjustment, such adjust5 ment shall be determined by taking into 

6 account C-CPI-U (as so defined), or the 

7 corresponding component thereof, in lieu of 

8 such CPI (or component thereof), but only 

9 with respect to the portion of such adjust10 ment which relates to periods after Decem11 ber 31, 2017. 

12 ‘‘(8) CERTAIN PAYMENTS TO RELATIVES

13 TREATED AS NOT PAID FOR MEDICAL CARE.—An 

14 amount paid for a qualified long-term care service 

15 (as defined in section 7702B(c)) provided to an indi16 vidual shall be treated as not paid for medical care 

17 if such service is provided— 

18 ‘‘(A) by the spouse of the individual or by 

19 a relative (directly or through a partnership, 

20 corporation, or other entity) unless the service 

21 is provided by a licensed professional with re22 spect to such service, or 

23 ‘‘(B) by a corporation or partnership which 

24 is related (within the meaning of section 267(b) 

25 or 707(b)) to the individual. 


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1 For purposes of this paragraph, the term ‘relative’ 

2 means an individual bearing a relationship to the in3 dividual which is described in any of subparagraphs 

4 (A) through (G) of section 7706(d)(2). This para5 graph shall not apply for purposes of subsection (b) 

6 with respect to reimbursements through insurance.’’. 

7 (B) Section 72(t)(2)(D)(i)(III) is amended by 

8 striking ‘‘section 213(d)(1)(D)’’ and inserting ‘‘sec9 tion 105(f)(1)(D)’’. 

10 (C) Section 104(a) is amended by striking ‘‘sec11 tion 213(d)(1)’’ in the last sentence and inserting 

12 ‘‘section 105(f)(1)’’. 

13 (D) Section 105(b) is amended by striking 

14 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

15 (E) Section 139D is amended by striking ‘‘sec16 tion 213’’ and inserting ‘‘section 223’’. 

17 (F) Section 162(l)(2) is amended by striking 

18 ‘‘section 213(d)(10)’’ and inserting ‘‘section 

19 105(f)(7)’’. 

20 (G) Section 220(d)(2)(A) is amended by strik21 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

22 (H) Section 223(d)(2)(A) is amended by strik23 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

24 (I) Section 419A(f)(2) is amended by striking 

25 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 


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1 (J) Section 501(c)(26)(A) is amended by strik2 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

3 (K) Section 2503(e) is amended by striking 

4 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

5 (L) Section 4980B(c)(4)(B)(i)(I) is amended by 

6 striking ‘‘section 213(d)’’ and inserting ‘‘section 

7 105(f)’’. 

8 (M) Section 6041(f) is amended by striking 

9 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

10 (N) Section 7702B(a)(2) is amended by strik11 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

12 (O) Section 7702B(a)(4) is amended by strik13 ing ‘‘section 213(d)(1)(D)’’ and inserting ‘‘section 

14 105(f)(1)(D)’’. 

15 (P) Section 7702B(d)(5) is amended by striking 

16 ‘‘section 213(d)(10)’’ and inserting ‘‘section 

17 105(f)(7)’’. 

18 (Q) Section 9832(d)(3) is amended by striking 

19 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

20 (2) Section 72(t)(2)(B) is amended to read as 

21 follows: 

22 ‘‘(B) MEDICAL EXPENSES.—Distributions 

23 made to an individual (other than distributions 

24 described in subparagraph (A), (C), or (D) to 


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1 the extent such distributions do not exceed the 

2 excess of— 

3 ‘‘(i) the expenses paid by the taxpayer 

4 during the taxable year, not compensated 

5 for by insurance or otherwise, for medical 

6 care (as defined in 105(f)) of the taxpayer, 

7 his spouse, or a dependent (as defined in 

8 section 7706, determined without regard to 

9 subsections (b)(1), (b)(2), and (d)(1)(B) 

10 thereof), over 

11 ‘‘(ii) 10 percent of the taxpayer’s ad12 justed gross income.’’. 

13 (3) Section 162(l) is amended by striking para14 graph (3). 

15 (4) Section 402(l) is amended by striking para16 graph (7) and redesignating paragraph (8) as para17 graph (7). 

18 (5) Section 220(f) is amended by striking para19 graph (6). 

20 (6) Section 223(f) is amended by striking para21 graph (6). 

22 (7) Section 7702B(e) is amended by striking 

23 paragraph (2). 

24 (8) Section 7706(f)(7), as redesignated by this 

25 Act, is amended by striking ‘‘sections 105(b), 


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1 132(h)(2)(B), and 213(d)(5)’’ and inserting ‘‘sec2 tions 105(b) and 132(h)(2)(B)’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAY7 MENTS. 

8 (a) IN GENERAL.—Part VII of subchapter B is 

9 amended by striking by striking section 215 (and by strik10 ing the item relating to such section in the table of section 

11 for such subpart). 

12 (b) CONFORMING AMENDMENTS.— 

13 (1) AMENDMENTS RELATING TO SECTION

14 215.— 

15 (A) CORRESPONDING REPEAL OF PROVI16 SIONS PROVIDING FOR INCLUSION OF ALIMONY

17 IN GROSS INCOME.— 

18 (i) Subsection (a) of section 61 is 

19 amended by striking paragraph (8) and by 

20 redesignating paragraphs (9) through (15) 

21 as paragraphs (8) through (14), respec22 tively. 

23 (ii) Part II of subchapter B of chapter 

24 1 is amended by striking section 71 (and 


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1 by striking the item relating to such sec2 tion in the table of sections for such part). 

3 (iii) Subpart F of part I of subchapter 

4 J of chapter 1 is amended by striking sec5 tion 682 (and by striking the item relating 

6 to such section in the table of sections for 

7 such subpart). 

8 (B) RELATED TO REPEAL OF SECTION

9 215.— 

10 (i) Section 62(a) is amended by strik11 ing paragraph (10). 

12 (ii) Section 3402(m)(1) is amended by 

13 striking ‘‘(other than paragraph (10) 

14 thereof)’’. 

15 (C) RELATED TO REPEAL OF SECTION

16 71.— 

17 (i) Section 121(d)(3) is amended— 

18 (I) by striking ‘‘(as defined in 

19 section 71(b)(2))’’ in subparagraph 

20 (B), and 

21 (II) by adding at the end the fol22 lowing new subparagraph: 

23 ‘‘(C) DIVORCE OR SEPARATION INSTRU24 MENT.—For purposes of this paragraph, the 


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1 term ‘divorce or separation instrument’ 

2 means— 

3 ‘‘(i) a decree of divorce or separate 

4 maintenance or a written instrument inci5 dent to such a decree, 

6 ‘‘(ii) a written separation agreement, 

7 or 

8 ‘‘(iii) a decree (not described in clause 

9 (i)) requiring a spouse to make payments 

10 for the support or maintenance of the 

11 other spouse.’’. 

12 (ii) Section 220(f)(7) is amended by 

13 striking ‘‘subparagraph (A) of section 

14 71(b)(2)’’ and inserting ‘‘clause (i) of sec15 tion 121(d)(3)(C)’’. 

16 (iii) Section 223(f)(7) is amended by 

17 striking ‘‘subparagraph (A) of section 

18 71(b)(2)’’ and inserting ‘‘clause (i) of sec19 tion 121(d)(3)(C)’’. 

20 (iv) Section 382(l)(3)(B)(iii) is 

21 amended by striking ‘‘section 71(b)(2)’’ 

22 and inserting ‘‘section 121(d)(3)(C)’’. 

23 (v) Section 408(d)(6) is amended by 

24 striking ‘‘subparagraph (A) of section 


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1 71(b)(2)’’ and inserting ‘‘clause (i) of sec2 tion 121(d)(3)(C)’’. 

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

4 this section shall apply to— 

5 (1) any divorce or separation instrument (as de6 fined in section 71(b)(2) of the Internal Revenue 

7 Code of 1986 as in effect before the date of the en8 actment of this Act) executed after December 31, 

9 2017, and 

10 (2) any divorce or separation instrument (as so 

11 defined) executed on or before such date and modi12 fied after such date if the modification expressly 

13 provides that the amendments made by this section 

14 apply to such modification. 

15 SEC. 1310. REPEAL OF DEDUCTION FOR MOVING EX16 PENSES. 

17 (a) IN GENERAL.—Part VII of subchapter B is 

18 amended by striking by striking section 217 (and by strik19 ing the item relating to such section in the table of section 

20 for such subpart). 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Section 62(a) is amended by striking para23 graph (15). 

24 (2) Section 274(m)(3) is amended by striking 

25 ‘‘(other than section 217)’’. 


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1 (3) Section 3121(a) is amended by striking 

2 paragraph (11). 

3 (4) Section 3306(b) is amended by striking 

4 paragraph (9). 

5 (5) Section 3401(a) is amended by striking 

6 paragraph (15). 

7 (6) Section 7872(f) is amended by striking 

8 paragraph (11). 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2017. 

12 SEC. 1311. TERMINATION OF DEDUCTION AND EXCLUSIONS 

13 FOR CONTRIBUTIONS TO MEDICAL SAVINGS 

14 ACCOUNTS. 

15 (a) TERMINATION OF INCOME TAX DEDUCTION.— 

16 Section 220 is amended by adding at the end the following 

17 new subsection: 

18 ‘‘(k) TERMINATION.—No deduction shall be allowed 

19 under subsection (a) with respect to any taxable year be20 ginning after December 31, 2017.’’. 

21 (b) TERMINATION OF EXCLUSION FOR EMPLOYER22 PROVIDED CONTRIBUTIONS.—Section 106 is amended by 

23 striking subsection (b). 

24 (c) CONFORMING AMENDMENTS.— 


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1 (1) Section 62(a) is amended by striking para2 graph (16). 

3 (2) Section 106(d) is amended by striking para4 graph (2), by redesignating paragraph (3) as para5 graph (6), and by inserting after paragraph (1) the 

6 following new paragraphs: 

7 ‘‘(2) NO CONSTRUCTIVE RECEIPT.—No amount 

8 shall be included in the gross income of any em9 ployee solely because the employee may choose be10 tween the contributions referred to in paragraph (1) 

11 and employer contributions to another health plan of 

12 the employer. 

13 ‘‘(3) SPECIAL RULE FOR DEDUCTION OF EM14 PLOYER CONTRIBUTIONS.—Any employer contribu15 tion to a health savings account (as so defined), if 

16 otherwise allowable as a deduction under this chap17 ter, shall be allowed only for the taxable year in 

18 which paid. 

19 ‘‘(4) EMPLOYER HEALTH SAVINGS ACCOUNT

20 CONTRIBUTION REQUIRED TO BE SHOWN ON RE21 TURN.—Every individual required to file a return 

22 under section 6012 for the taxable year shall include 

23 on such return the aggregate amount contributed by 

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1 fined) of such individual or such individual’s spouse 

2 for such taxable year. 

3 ‘‘(5) HEALTH SAVINGS ACCOUNT CONTRIBU4 TIONS NOT PART OF COBRA COVERAGE.—Paragraph 

5 (1) shall not apply for purposes of section 4980B.’’. 

6 (3) Section 223(b)(4) is amended by striking 

7 subparagraph (A), by redesignating subparagraphs 

8 (B) and (C) as subparagraphs (A) and (B), respec9 tively, and by striking the second sentence thereof. 

10 (4) Section 223(b)(5) is amended by striking 

11 ‘‘under paragraph (3))’’ and all that follows through 

12 ‘‘shall be divided equally between them’’ and insert13 ing the following: ‘‘under paragraph (3)) shall be di14 vided equally between the spouses’’. 

15 (5) Section 223(c) is amended by striking para16 graph (5). 

17 (6) Section 3231(e) is amended by striking 

18 paragraph (10). 

19 (7) Section 3306(b) is amended by striking 

20 paragraph (17). 

21 (8) Section 3401(a) is amended by striking 

22 paragraph (21). 

23 (9) Chapter 43 is amended by striking section 

24 4980E (and by striking the item relating to such 

25 section in the table of sections for such chapter). 


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1 (10) Section 4980G is amended to read as fol2 lows: 

3 ‘‘SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COM4 PARABLE HEALTH SAVINGS ACCOUNT CON5 TRIBUTIONS. 

6 ‘‘(a) IN GENERAL.—In the case of an employer who 

7 makes a contribution to the health savings account of any 

8 employee during a calendar year, there is hereby imposed 

9 a tax on the failure of such employer to meet the require10 ments of subsection (d) for such calendar year. 

11 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im12 posed by subsection (a) on any failure for any calendar 

13 year is the amount equal to 35 percent of the aggregate 

14 amount contributed by the employer to health savings ac15 counts of employees for taxable years of such employees 

16 ending with or within such calendar year. 

17 ‘‘(c) WAIVER BY SECRETARY.—In the case of a fail18 ure which is due to reasonable cause and not to willful 

19 neglect, the Secretary may waive part or all of the tax 

20 imposed by subsection (a) to the extent that the payment 

21 of such tax would be excessive relative to the failure in22 volved. 

23 ‘‘(d) EMPLOYER REQUIRED TO MAKE COMPARABLE

24 HEALTH SAVINGS ACCOUNT CONTRIBUTIONS FOR ALL

25 PARTICIPATING EMPLOYEES.— 


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1 ‘‘(1) IN GENERAL.—An employer meets the re2 quirements of this subsection for any calendar year 

3 if the employer makes available comparable con4 tributions to the health savings accounts of all com5 parable participating employees for each coverage 

6 period during such calendar year. 

7 ‘‘(2) COMPARABLE CONTRIBUTIONS.— 

8 ‘‘(A) IN GENERAL.—For purposes of para9 graph (1), the term ‘comparable contributions’ 

10 means contributions— 

11 ‘‘(i) which are the same amount, or 

12 ‘‘(ii) which are the same percentage of 

13 the annual deductible limit under the high 

14 deductible health plan covering the employ15 ees. 

16 ‘‘(B) PART-YEAR EMPLOYEES.—In the 

17 case of an employee who is employed by the em18 ployer for only a portion of the calendar year, 

19 a contribution to the health savings account of 

20 such employee shall be treated as comparable if 

21 it is an amount which bears the same ratio to 

22 the comparable amount (determined without re23 gard to this subparagraph) as such portion 

24 bears to the entire calendar year. 


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1 ‘‘(3) COMPARABLE PARTICIPATING EMPLOY2 EES.— 

3 ‘‘(A) IN GENERAL.—For purposes of para4 graph (1), the term ‘comparable participating 

5 employees’ means all employees— 

6 ‘‘(i) who are eligible individuals cov7 ered under any high deductible health plan 

8 of the employer, and 

9 ‘‘(ii) who have the same category of 

10 coverage. 

11 ‘‘(B) CATEGORIES OF COVERAGE.—For 

12 purposes of subparagraph (B), the categories of 

13 coverage are self-only and family coverage. 

14 ‘‘(4) PART-TIME EMPLOYEES.— 

15 ‘‘(A) IN GENERAL .—Paragraph (3) shall 

16 be applied separately with respect to part-time 

17 employees and other employees. 

18 ‘‘(B) PART-TIME EMPLOYEE.—For pur19 poses of subparagraph (A), the term ‘part-time 

20 employee’ means any employee who is custom21 arily employed for fewer than 30 hours per 

22 week. 

23 ‘‘(5) SPECIAL RULE FOR NON-HIGHLY COM24 PENSATED EMPLOYEES.—For purposes of applying 

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1 count of an employee who is not a highly com2 pensated employee (as defined in section 414(q)), 

3 highly compensated employees shall not be treated 

4 as comparable participating employees. 

5 ‘‘(e) CONTROLLED GROUPS.—For purposes of this 

6 section, all persons treated as a single employer under sub7 section (b), (c), (m), or (o) of section 414 shall be treated 

8 as 1 employer. 

9 ‘‘(f) DEFINITIONS.—Terms used in this section which 

10 are also used in section 223 have the respective meanings 

11 given such terms in section 223. 

12 ‘‘(g) REGULATIONS.—The Secretary shall issue regu13 lations to carry out the purposes of this section.’’. 

14 (11) Section 6051(a) is amended by striking 

15 paragraph (11). 

16 (12) Section 6051(a)(14)(A) is amended by 

17 striking ‘‘paragraphs (11) and (12)’’ and inserting 

18 ‘‘paragraph (12)’’. 

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2017. 


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1 SEC. 1312. DENIAL OF DEDUCTION FOR EXPENSES ATTRIB2 UTABLE TO THE TRADE OR BUSINESS OF 

3 BEING AN EMPLOYEE. 

4 (a) IN GENERAL.—Part IX of subchapter B of chap5 ter 1 is amended by inserting after the item relating to 

6 section 262 the following new item: 

7 ‘‘SEC. 262A. EXPENSES ATTRIBUTABLE TO BEING AN EM8 PLOYEE. 

9 ‘‘(a) IN GENERAL.—Except as otherwise provided in 

10 this section, no deduction shall be allowed with respect to 

11 any trade or business of the taxpayer which consists of 

12 the performance of services by the taxpayer as an em13 ployee. 

14 ‘‘(b) EXCEPTION FOR ABOVE-THE-LINE DEDUC15 TIONS.—Subsection (a) shall not apply to any deduction 

16 allowable (determined without regard to subsection (a)) in 

17 determining adjusted gross income.’’. 

18 (b) REPEAL OF CERTAIN ABOVE-THE-LINE TRADE

19 AND BUSINESS DEDUCTIONS OF EMPLOYEES.— 

20 (1) IN GENERAL.—Section 62(a)(2) is amend21 ed— 

22 (A) by striking subparagraphs (B), (C), 

23 and (D), and 

24 (B) by redesignating subparagraph (E) as 

25 subparagraph (B). 

26 (2) CONFORMING AMENDMENTS.— 


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1 (A) Section 62 is amended by striking sub2 sections (b) and (d) and by redesignating sub3 sections (c) and (e) as subsections (b) and (c), 

4 respectively. 

5 (B) Section 62(a)(20) is amended by strik6 ing ‘‘subsection (e)’’ and inserting ‘‘subsection 

7 (c)’’. 

8 (c) CONTINUED EXCLUSION OF WORKING CONDI9 TION FRINGE BENEFITS.—Section 132(d) is amended by 

10 inserting ‘‘(determined without regard to section 262A)’’ 

11 after ‘‘section 162’’. 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2017. 

15 Subtitle E—Simplification and Re16 form of Exclusions and Taxable 

17 Compensation 

18 SEC. 1401. LIMITATION ON EXCLUSION FOR EMPLOYER19 PROVIDED HOUSING. 

20 (a) IN GENERAL.—Section 119 is amended by adding 

21 at the end the following new subsection: 

22 ‘‘(e) LIMITATION ON EXCLUSION OF LODGING.— 

23 ‘‘(1) IN GENERAL.—The aggregate amount ex24 cluded from gross income of the taxpayer under sub25 sections (a) and (d) with respect to lodging for any 


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1 taxable year shall not exceed $50,000 (half such 

2 amount in the case of a married individual filing a 

3 separate return). 

4 ‘‘(2) LIMITATION TO 1 HOME.—Subsections (a) 

5 and (d) (separately and in combination) shall not 

6 apply with respect to more than 1 residence of the 

7 taxpayer at any given time. In the case of a joint re8 turn, the preceding sentence shall apply separately 

9 to each spouse for any period during which each 

10 spouse resides separate from the other spouse in a 

11 residence which is provided in connection with the 

12 employment of each spouse, respectively. 

13 ‘‘(3) LIMITATION FOR HIGHLY COMPENSATED

14 EMPLOYEES.— 

15 ‘‘(A) REDUCED FOR EXCESS COMPENSA16 TION.—In the case of an individual whose com17 pensation for the taxable year exceeds the 

18 amount in effect under section 414(q)(1)(B)(i) 

19 for the calendar in which such taxable year be20 gins, the $50,000 amount under paragraph (1) 

21 shall be reduced (but not below zero) by an 

22 amount equal to 50 percent of such excess. For 

23 purposes of the preceding sentence, the term 

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1 tion and benefit base limitation in section 

2 3121(a)(1)). 

3 ‘‘(B) EXCLUSION DENIED FOR 5-PERCENT

4 OWNERS.—In the case of an individual who is 

5 a 5-percent owner (as defined in section 

6 416(i)(1)(B)(i)) of the employer at any time 

7 during the taxable year, the amount under 

8 paragraph (1) shall be zero.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2017. 

12 SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRIN13 CIPAL RESIDENCE. 

14 (a) REQUIREMENT THAT RESIDENCE BE PRINCIPAL

15 RESIDENCE FOR 5 YEARS DURING 8-YEAR PERIOD.— 

16 Subsection (a) of section 121 is amended— 

17 (1) by striking ‘‘5-year period’’ and inserting 

18 ‘‘8-year period’’, and 

19 (2) by striking ‘‘2 years’’ and inserting ‘‘5 

20 years’’. 

21 (b) APPLICATION TO ONLY 1 SALE OR EXCHANGE

22 EVERY 5 YEARS.—Paragraph (3) of section 121(b) is 

23 amended to read as follows: 

24 ‘‘(3) APPLICATION TO ONLY 1 SALE OR EX25 CHANGE EVERY 5 YEARS.—Subsection (a) shall not 


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1 apply to any sale or exchange by the taxpayer if, 

2 during the 5-year period ending on the date of such 

3 sale or exchange, there was any other sale or ex4 change by the taxpayer to which subsection (a) ap5 plied.’’. 

6 (c) PHASEOUT BASED ON MODIFIED ADJUSTED

7 GROSS INCOME.—Section 121 is amended by adding at 

8 the end the following new subsection: 

9 ‘‘(h) PHASEOUT BASED ON MODIFIED ADJUSTED

10 GROSS INCOME.— 

11 ‘‘(1) IN GENERAL.—If the average modified ad12 justed gross income of the taxpayer for the taxable 

13 year and the 2 preceding taxable years exceeds 

14 $250,000 (twice such amount in the case of a joint 

15 return), the amount which would (but for this sub16 section) be excluded from gross income under sub17 section (a) for such taxable year shall be reduced 

18 (but not below zero) by the amount of such excess. 

19 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.— 

20 For purposes of this subsection, the term ‘modified 

21 adjusted gross income’ means, with respect to any 

22 taxable year, adjusted gross income determined after 

23 application of this section (but without regard to 

24 subsection (b)(1) and this subsection). 


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1 ‘‘(3) SPECIAL RULE FOR JOINT RETURNS.—In 

2 the case of a joint return, the average modified ad3 justed gross income of the taxpayer shall be deter4 mined without regard to any taxable year with re5 spect to which the taxpayer did not file a joint re6 turn.’’. 

7 (d) CONFORMING AMENDMENTS.— 

8 (1) The last paragraph of section 121(b) (relat9 ing to exclusion of gain allocated to nonqualified 

10 use) is redesignated as paragraph (5). 

11 (2) The following provisions of section 121 are 

12 each amended by striking ‘‘5-year period’’ each place 

13 it appears therein and inserting ‘‘8-year period’’: 

14 (A) Subsection (b)(5)(C)(ii)(I) (as redesig15 nated by paragraph (1)). 

16 (B) Subsection (c)(1)(B)(i)(I). 

17 (C) Subsection (d)(7)(B). 

18 (D) Subparagraphs (A) and (B) of sub19 section (d)(9). 

20 (E) Subsection (d)(10) 

21 (F) Subsection (d)(12)(A). 

22 (3) Section 121(c)(1)(B)(ii) is amended by 

23 striking ‘‘2 years’’ and inserting ‘‘5 years’’: 


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

2 this section shall apply to sales and exchanges after De3 cember 31, 2017. 

4 SEC. 1403. REPEAL OF EXCLUSION, ETC., FOR EMPLOYEE 

5 ACHIEVEMENT AWARDS. 

6 (a) IN GENERAL.—Section 74 is amended by striking 

7 subsection (c). 

8 (b) REPEAL OF LIMITATION ON DEDUCTION.—Sec9 tion 274 is amended by striking subsection (j). 

10 (c) CONFORMING AMENDMENTS.— 

11 (1) Section 102(c)(2) is amended by striking 

12 the first sentence. 

13 (2) Section 414(n)(3)(C) is amended by strik14 ing ‘‘274(j),’’. 

15 (3) Section 414(t)(2) is amended by striking 

16 ‘‘274(j),’’. 

17 (4) Section 3121(a)(20) is amended by striking 

18 ‘‘74(c)’’. 

19 (5) Section 3231(e)(5) is amended by striking 

20 ‘‘74(c),’’. 

21 (6) Section 3306(b)(16) is amended by striking 

22 ‘‘74(c),’’. 

23 (7) Section 3401(a)(19) is amended by striking 

24 ‘‘74(c),’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 1404. REPEAL OF EXCLUSION FOR DEPENDENT CARE 

5 ASSISTANCE PROGRAMS. 

6 (a) IN GENERAL.—Part III of subchapter B of chap7 ter 1 is amended by striking section 129 (and by striking 

8 the item relating to such section in the table of sections 

9 for such part). 

10 (b) CONFORMING AMENDMENTS.— 

11 (1) Section 414(n)(3)(C) is amended by strik12 ing ‘‘, 129’’. 

13 (2) Section 414(r)(1) is amended by striking 

14 ‘‘sections 129(d)(8) and’’ and inserting ‘‘section’’. 

15 (3) Section 414(t)(2) is amended by striking ‘‘, 

16 129’’. 

17 (4) Section 125(j)(6) is amended— 

18 (A) by inserting ‘‘or’’ before ‘‘section 

19 105(h)’’, and 

20 (B) by striking ‘‘, or paragraph (2), (3), 

21 (4), or (8) of section 129(d)’’. 

22 (5) Section 3121(a)(18) is amended by striking 

23 ‘‘129,’’. 

24 (6) Section 3306(b)(13) is amended by striking 

25 ‘‘129,’’. 


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1 (7) Section 3401(a)(18) is amended by striking 

2 ‘‘129,’’. 

3 (8) Section 6039D(d)(1) is amended by striking 

4 ‘‘, 129’’. 

5 (9) Section 6051(a) is amended by striking 

6 paragraph (9). 

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2017. 

10 SEC. 1405. REPEAL OF EXCLUSION FOR QUALIFIED MOVING 

11 EXPENSE REIMBURSEMENT. 

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

13 striking paragraph (6). 

14 (b) CONFORMING AMENDMENTS.— 

15 (1) Section 82 is amended by striking ‘‘Except 

16 as provided in section 132(a)(6), there’’ and insert17 ing ‘‘There’’. 

18 (2) Section 132 is amended by striking sub19 section (g). 

20 (3) Section 132(l) is amended by striking by 

21 striking ‘‘subsections (e) and (g)’’ and inserting 

22 ‘‘subsection (e)’’. 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2017. 


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1 SEC. 1406. REPEAL OF EXCLUSION FOR ADOPTION ASSIST2 ANCE PROGRAMS. 

3 (a) IN GENERAL.—Part III of subchapter B of chap4 ter 1 is amended by striking section 137 (and by striking 

5 the item relating to such section in the table of sections 

6 for such part). 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Sections 414(n)(3)(C), 414(t)(2), 

9 74(d)(2)(B), 86(b)(2)(A), 219(g)(3)(A)(ii) are each 

10 amended by striking ‘‘, 137’’. 

11 (2) Section 1016(a), as amended by the pre12 ceding provision of this Act, is amended by striking 

13 paragraph (26). 

14 (3) Section 6039D(d)(1), as amended by the 

15 preceding provisions of this Act, is amended— 

16 (A) by striking ‘‘, or 137’’, and 

17 (B) by inserting ‘‘or’’ before ‘‘125’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 


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1 Subtitle F—Simplification and Re2 form of Savings, Pensions, Re3 tirement 

4 SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE5 CHARACTERIZATION OF ROTH IRA CON6 TRIBUTIONS AS TRADITIONAL IRA CON7 TRIBUTIONS. 

8 (a) IN GENERAL.—Section 408A(d) is amended by 

9 striking paragraph (6) and by redesignating paragraph 

10 (7) as paragraph (6). 

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

12 this section shall apply to taxable years beginning after 

13 December 31, 2017. 

14 SEC. 1502. REDUCTION IN MINIMUM AGE FOR ALLOWABLE 

15 IN-SERVICE DISTRIBUTIONS. 

16 (a) IN GENERAL.—Section 401(a)(36) is amended by 

striking ‘‘age 62’’ and inserting ‘‘age 59 1 17 ⁄2’’. 

18 (b) APPLICATION TO GOVERNMENTAL SECTION

19 457(b) PLANS.—Clause (i) of section 457(d)(1)(A) is 

20 amended by inserting ‘‘(in the case of a plan maintained 

21 by an employer described in subsection (e)(1)(A), age 59 

1 22 ⁄2)’’ before the comma at the end. 

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

24 this section shall apply to plan years beginning after De25 cember 31, 2017. 


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1 SEC. 1503. MODIFICATION OF RULES GOVERNING HARD2 SHIP DISTRIBUTIONS. 

3 (a) IN GENERAL.—Not later than 1 year after the 

4 date of the enactment of this Act, the Secretary of the 

5 Treasury shall modify Treasury Regulation section 

6 1.401(k)–1(d)(3)(iv)(E) to— 

7 (1) delete the 6-month prohibition on contribu8 tions imposed by paragraph (2) thereof, and 

9 (2) make any other modifications necessary to 

10 carry out the purposes of section 

11 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 

12 1986. 

13 (b) EFFECTIVE DATE.—The revised regulations 

14 under this section shall apply to plan years beginning after 

15 December 31, 2017. 

16 SEC. 1504. MODIFICATION OF RULES RELATING TO HARD17 SHIP WITHDRAWALS FROM CASH OR DE18 FERRED ARRANGEMENTS. 

19 (a) IN GENERAL.—Section 401(k) is amended by 

20 adding at the end the following: 

21 ‘‘(14) SPECIAL RULES RELATING TO HARDSHIP

22 WITHDRAWALS.—For purposes of paragraph 

23 (2)(B)(i)(IV)— 

24 ‘‘(A) AMOUNTS WHICH MAY BE WITH25 DRAWN.—The following amounts may be dis26 tributed upon hardship of the employee: 


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1 ‘‘(i) Contributions to a profit-sharing 

2 or stock bonus plan to which section 

3 402(e)(3) applies. 

4 ‘‘(ii) Qualified nonelective contribu5 tions (as defined in subsection (m)(4)(C)). 

6 ‘‘(iii) Qualified matching contributions 

7 described in paragraph (3)(D)(ii)(I). 

8 ‘‘(iv) Earnings on any contributions 

9 described in clause (i), (ii), or (iii). 

10 ‘‘(B) NO REQUIREMENT TO TAKE AVAIL11 ABLE LOAN.—A distribution shall not be treat12 ed as failing to be made upon the hardship of 

13 an employee solely because the employee does 

14 not take any available loan under the plan.′′.’’. 

15 (b) CONFORMING AMENDMENT.—Section 

16 401(k)(2)(B)(i)(IV) is amended to read as follows: 

17 ‘‘(IV) subject to the provisions of 

18 paragraph (14), upon hardship of the 

19 employee, or′′.’’. 

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

21 this section shall apply to plan years beginning after De22 cember 31, 2017. 


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1 SEC. 1505. EXTENDED ROLLOVER PERIOD FOR THE ROLL2 OVER OF PLAN LOAN OFFSET AMOUNTS IN 

3 CERTAIN CASES. 

4 (a) IN GENERAL.—Paragraph (3) of section 402(c) 

5 is amended by adding at the end the following new sub6 paragraph: 

7 ‘‘(C) ROLLOVER OF CERTAIN PLAN LOAN

8 OFFSET AMOUNTS.— 

9 ‘‘(i) IN GENERAL.—In the case of a 

10 qualified plan loan offset amount, para11 graph (1) shall not apply to any transfer 

12 of such amount made after the due date 

13 (including extensions) for filing the return 

14 of tax for the taxable year in which such 

15 amount is treated as distributed from a 

16 qualified employer plan. 

17 ‘‘(ii) QUALIFIED PLAN LOAN OFFSET

18 AMOUNT.—For purposes of this subpara19 graph, the term ‘qualified plan loan offset 

20 amount’ means a plan loan offset amount 

21 which is treated as distributed from a 

22 qualified employer plan to a participant or 

23 beneficiary solely by reason of— 

24 ‘‘(I) the termination of the quali25 fied employer plan, or 


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1 ‘‘(II) the failure to meet the re2 payment terms of the loan from such 

3 plan because of the separation from 

4 service of the participant (whether 

5 due to layoff, cessation of business, 

6 termination of employment, or other7 wise). 

8 ‘‘(iii) PLAN LOAN OFFSET AMOUNT.— 

9 For purposes of clause (ii), the term ‘plan 

10 loan offset amount’ means the amount by 

11 which the participant’s accrued benefit 

12 under the plan is reduced in order to repay 

13 a loan from the plan. 

14 ‘‘(iv) LIMITATION.—This subpara15 graph shall not apply to any plan loan off16 set amount unless such plan loan offset 

17 amount relates to a loan to which section 

18 72(p)(1) does not apply by reason of sec19 tion 72(p)(2). 

20 ‘‘(v) QUALIFIED EMPLOYER PLAN.— 

21 For purposes of this subsection, the term 

22 ‘qualified employer plan’ has the meaning 

23 given such term by section 72(p)(4).’’. 


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1 (b) CONFORMING AMENDMENT.—Subparagraph (A) 

2 of section 402(c)(3) is amended by striking ‘‘subpara3 graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2017. 

7 SEC. 1506. MODIFICATION OF NONDISCRIMINATION RULES 

8 TO PROTECT OLDER, LONGER SERVICE PAR9 TICIPANTS. 

10 (a) IN GENERAL.—Section 401 is amended— 

11 (1) by redesignating subsection (o) as sub12 section (p), and 

13 (2) by inserting after subsection (n) the fol14 lowing new subsection: 

15 ‘‘(o) SPECIAL RULES FOR APPLYING NON16 DISCRIMINATION RULES TO PROTECT OLDER, LONGER

17 SERVICE AND GRANDFATHERED PARTICIPANTS.— 

18 ‘‘(1) TESTING OF DEFINED BENEFIT PLANS

19 WITH CLOSED CLASSES OF PARTICIPANTS.— 

20 ‘‘(A) BENEFITS, RIGHTS, OR FEATURES

21 PROVIDED TO CLOSED CLASSES.—A defined 

22 benefit plan which provides benefits, rights, or 

23 features to a closed class of participants shall 

24 not fail to satisfy the requirements of sub25 section (a)(4) by reason of the composition of 


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1 such closed class or the benefits, rights, or fea2 tures provided to such closed class, if— 

3 ‘‘(i) for the plan year as of which the 

4 class closes and the 2 succeeding plan 

5 years, such benefits, rights, and features 

6 satisfy the requirements of subsection 

7 (a)(4) (without regard to this subpara8 graph but taking into account the rules of 

9 subparagraph (I)), 

10 ‘‘(ii) after the date as of which the 

11 class was closed, any plan amendment 

12 which modifies the closed class or the ben13 efits, rights, and features provided to such 

14 closed class does not discriminate signifi15 cantly in favor of highly compensated em16 ployees, and 

17 ‘‘(iii) the class was closed before April 

18 5, 2017, or the plan is described in sub19 paragraph (C). 

20 ‘‘(B) AGGREGATE TESTING WITH DEFINED

21 CONTRIBUTION PLANS PERMITTED ON A BENE22 FITS BASIS.— 

23 ‘‘(i) IN GENERAL.—For purposes of 

24 determining compliance with subsection 

25 (a)(4) and section 410(b), a defined benefit 


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1 plan described in clause (iii) may be aggre2 gated and tested on a benefits basis with 

3 1 or more defined contribution plans, in4 cluding with the portion of 1 or more de5 fined contribution plans which— 

6 ‘‘(I) provides matching contribu7 tions (as defined in subsection 

8 (m)(4)(A)), 

9 ‘‘(II) provides annuity contracts 

10 described in section 403(b) which are 

11 purchased with matching contribu12 tions or nonelective contributions, or 

13 ‘‘(III) consists of an employee 

14 stock ownership plan (within the 

15 meaning of section 4975(e)(7)) or a 

16 tax credit employee stock ownership 

17 plan (within the meaning of section 

18 409(a)). 

19 ‘‘(ii) SPECIAL RULES FOR MATCHING

20 CONTRIBUTIONS.—For purposes of clause 

21 (i), if a defined benefit plan is aggregated 

22 with a portion of a defined contribution 

23 plan providing matching contributions— 

24 ‘‘(I) such defined benefit plan 

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1 tion of such defined contribution plan 

2 which provides elective deferrals de3 scribed in subparagraph (A) or (C) of 

4 section 402(g)(3), and 

5 ‘‘(II) such matching contribu6 tions shall be treated in the same 

7 manner as nonelective contributions, 

8 including for purposes of applying the 

9 rules of subsection (l). 

10 ‘‘(iii) PLANS DESCRIBED.—A defined 

11 benefit plan is described in this clause if— 

12 ‘‘(I) the plan provides benefits to 

13 a closed class of participants, 

14 ‘‘(II) for the plan year as of 

15 which the class closes and the 2 suc16 ceeding plan years, the plan satisfies 

17 the requirements of section 410(b) 

18 and subsection (a)(4) (without regard 

19 to this subparagraph but taking into 

20 account the rules of subparagraph 

21 (I)), 

22 ‘‘(III) after the date as of which 

23 the class was closed, any plan amend24 ment which modifies the closed class 

25 or the benefits provided to such closed 


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1 class does not discriminate signifi2 cantly in favor of highly compensated 

3 employees, and 

4 ‘‘(IV) the class was closed before 

5 April 5, 2017, or the plan is described 

6 in subparagraph (C). 

7 ‘‘(C) PLANS DESCRIBED.—A plan is de8 scribed in this subparagraph if, taking into ac9 count any predecessor plan— 

10 ‘‘(i) such plan has been in effect for 

11 at least 5 years as of the date the class is 

12 closed, and 

13 ‘‘(ii) during the 5-year period pre14 ceding the date the class is closed, there 

15 has not been a substantial increase in the 

16 coverage or value of the benefits, rights, or 

17 features described in subparagraph (A) or 

18 in the coverage or benefits under the plan 

19 described in subparagraph (B)(iii) (which20 ever is applicable). 

21 ‘‘(D) DETERMINATION OF SUBSTANTIAL

22 INCREASE FOR BENEFITS, RIGHTS, AND FEA23 TURES.—In applying subparagraph (C)(ii) for 

24 purposes of subparagraph (A)(iii), a plan shall 

25 be treated as having had a substantial increase 


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1 in coverage or value of the benefits, rights, or 

2 features described in subparagraph (A) during 

3 the applicable 5-year period only if, during such 

4 period— 

5 ‘‘(i) the number of participants cov6 ered by such benefits, rights, or features 

7 on the date such period ends is more than 

8 50 percent greater than the number of 

9 such participants on the first day of the 

10 plan year in which such period began, or 

11 ‘‘(ii) such benefits, rights, and fea12 tures have been modified by 1 or more 

13 plan amendments in such a way that, as of 

14 the date the class is closed, the value of 

15 such benefits, rights, and features to the 

16 closed class as a whole is substantially 

17 greater than the value as of the first day 

18 of such 5-year period, solely as a result of 

19 such amendments. 

20 ‘‘(E) DETERMINATION OF SUBSTANTIAL

21 INCREASE FOR AGGREGATE TESTING ON BENE22 FITS BASIS.—In applying subparagraph (C)(ii) 

23 for purposes of subparagraph (B)(iii)(IV), a 

24 plan shall be treated as having had a substan25 tial increase in coverage or benefits during the 


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1 applicable 5-year period only if, during such pe2 riod— 

3 ‘‘(i) the number of participants bene4 fitting under the plan on the date such pe5 riod ends is more than 50 percent greater 

6 than the number of such participants on 

7 the first day of the plan year in which such 

8 period began, or 

9 ‘‘(ii) the average benefit provided to 

10 such participants on the date such period 

11 ends is more than 50 percent greater than 

12 the average benefit provided on the first 

13 day of the plan year in which such period 

14 began. 

15 ‘‘(F) CERTAIN EMPLOYEES DIS16 REGARDED.—For purposes of subparagraphs 

17 (D) and (E), any increase in coverage or value 

18 or in coverage or benefits, whichever is applica19 ble, which is attributable to such coverage and 

20 value or coverage and benefits provided to em21 ployees— 

22 ‘‘(i) who became participants as a re23 sult of a merger, acquisition, or similar 

24 event which occurred during the 7-year peVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00155 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 riod preceding the date the class is closed, 

2 or 

3 ‘‘(ii) who became participants by rea4 son of a merger of the plan with another 

5 plan which had been in effect for at least 

6 5 years as of the date of the merger, 

7 shall be disregarded, except that clause (ii) 

8 shall apply for purposes of subparagraph (D) 

9 only if, under the merger, the benefits, rights, 

10 or features under 1 plan are conformed to the 

11 benefits, rights, or features of the other plan 

12 prospectively. 

13 ‘‘(G) RULES RELATING TO AVERAGE BEN14 EFIT.—For purposes of subparagraph (E)— 

15 ‘‘(i) the average benefit provided to 

16 participants under the plan will be treated 

17 as having remained the same between the 

18 2 dates described in subparagraph (E)(ii) 

19 if the benefit formula applicable to such 

20 participants has not changed between such 

21 dates, and 

22 ‘‘(ii) if the benefit formula applicable 

23 to 1 or more participants under the plan 

24 has changed between such 2 dates, then 

25 the average benefit under the plan shall be 


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1 considered to have increased by more than 

2 50 percent only if— 

3 ‘‘(I) the total amount determined 

4 under section 430(b)(1)(A)(i) for all 

5 participants benefitting under the 

6 plan for the plan year in which the 5- 

7 year period described in subparagraph 

8 (E) ends, exceeds 

9 ‘‘(II) the total amount deter10 mined under section 430(b)(1)(A)(i) 

11 for all such participants for such plan 

12 year, by using the benefit formula in 

13 effect for each such participant for 

14 the first plan year in such 5-year pe15 riod, by more than 50 percent. 

16 In the case of a CSEC plan (as defined in 

17 section 414(y)), the normal cost of the 

18 plan (as determined under section 

19 433(j)(1)(B)) shall be used in lieu of the 

20 amount determined under section 

21 430(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 


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1 a single plan rather than as separate plans 

2 maintained by each participating employer. 

3 ‘‘(I) SPECIAL RULES.—For purposes of 

4 subparagraphs (A)(i) and (B)(iii)(II), the fol5 lowing 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 

19 merger, acquisition, divestiture, or similar 

20 event. 

21 ‘‘(iv) Aggregation and all other testing 

22 methodologies otherwise applicable under 

23 subsection (a)(4) and section 410(b) may 

24 be taken into account. 


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1 The rule of clause (ii) shall also apply for pur2 poses of determining whether plans to which 

3 subparagraph (B)(i) applies may be aggregated 

4 and treated as 1 plan for purposes of deter5 mining whether such plans meet the require6 ments of subsection (a)(4) and section 410(b). 

7 ‘‘(J) SPUN-OFF PLANS.—For purposes of 

8 this paragraph, if a portion of a defined benefit 

9 plan described in subparagraph (A) or (B)(iii) 

10 is spun off to another employer and the spun11 off plan continues to satisfy the requirements 

12 of— 

13 ‘‘(i) subparagraph (A)(i) or 

14 (B)(iii)(II), whichever is applicable, if the 

15 original plan was still within the 3-year pe16 riod described in such subparagraph at the 

17 time of the spin off, and 

18 ‘‘(ii) subparagraph (A)(ii) or 

19 (B)(iii)(III), whichever is applicable, 

20 the treatment under subparagraph (A) or (B) 

21 of the spun-off plan shall continue with respect 

22 to such other employer. 

23 ‘‘(2) TESTING OF DEFINED CONTRIBUTION

24 PLANS.— 


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1 ‘‘(A) TESTING ON A BENEFITS BASIS.—A 

2 defined contribution plan shall be permitted to 

3 be tested on a benefits basis if— 

4 ‘‘(i) such defined contribution plan 

5 provides make-whole contributions to a 

6 closed class of participants whose accruals 

7 under a defined benefit plan have been re8 duced or eliminated, 

9 ‘‘(ii) for the plan year of the defined 

10 contribution plan as of which the class eli11 gible to receive such make-whole contribu12 tions closes and the 2 succeeding plan 

13 years, such closed class of participants sat14 isfies the requirements of section 

15 410(b)(2)(A)(i) (determined by applying 

16 the rules of paragraph (1)(I)), 

17 ‘‘(iii) after the date as of which the 

18 class was closed, any plan amendment to 

19 the defined contribution plan which modi20 fies the closed class or the allocations, ben21 efits, rights, and features provided to such 

22 closed class does not discriminate signifi23 cantly in favor of highly compensated em24 ployees, and 


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1 ‘‘(iv) the class was closed before April 

2 5, 2017, or the defined benefit plan under 

3 clause (i) is described in paragraph (1)(C) 

4 (as applied for purposes of paragraph 

5 (1)(B)(iii)(IV)). 

6 ‘‘(B) AGGREGATION WITH PLANS INCLUD7 ING MATCHING CONTRIBUTIONS.— 

8 ‘‘(i) IN GENERAL.—With respect to 1 

9 or more defined contribution plans de10 scribed in subparagraph (A), for purposes 

11 of determining compliance with subsection 

12 (a)(4) and section 410(b), the portion of 

13 such plans which provides make-whole con14 tributions or other nonelective contribu15 tions may be aggregated and tested on a 

16 benefits basis with the portion of 1 or 

17 more other defined contribution plans 

18 which— 

19 ‘‘(I) provides matching contribu20 tions (as defined in subsection 

21 (m)(4)(A)), 

22 ‘‘(II) provides annuity contracts 

23 described in section 403(b) which are 

24 purchased with matching contribu25 tions or nonelective contributions, or 


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1 ‘‘(III) consists of an employee 

2 stock ownership plan (within the 

3 meaning of section 4975(e)(7)) or a 

4 tax credit employee stock ownership 

5 plan (within the meaning of section 

6 409(a)). 

7 ‘‘(ii) SPECIAL RULES FOR MATCHING

8 CONTRIBUTIONS.—Rules similar to the 

9 rules of paragraph (1)(B)(ii) shall apply 

10 for purposes of clause (i). 

11 ‘‘(C) SPECIAL RULES FOR TESTING DE12 FINED CONTRIBUTION PLAN FEATURES PRO13 VIDING MATCHING CONTRIBUTIONS TO CERTAIN

14 OLDER, LONGER SERVICE PARTICIPANTS.—In 

15 the case of a defined contribution plan which 

16 provides benefits, rights, or features to a closed 

17 class of participants whose accruals under a de18 fined benefit plan have been reduced or elimi19 nated, the plan shall not fail to satisfy the re20 quirements of subsection (a)(4) solely by reason 

21 of the composition of the closed class or the 

22 benefits, rights, or features provided to such 

23 closed class if the defined contribution plan and 

24 defined benefit plan otherwise meet the require25 ments of subparagraph (A) but for the fact that 


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1 the make-whole contributions under the defined 

2 contribution plan are made in whole or in part 

3 through matching contributions. 

4 ‘‘(D) SPUN-OFF PLANS.—For purposes of 

5 this paragraph, if a portion of a defined con6 tribution plan described in subparagraph (A) or 

7 (C) is spun off to another employer, the treat8 ment under subparagraph (A) or (C) of the 

9 spun-off plan shall continue with respect to the 

10 other employer if such plan continues to comply 

11 with the requirements of clauses (ii) (if the 

12 original plan was still within the 3-year period 

13 described in such clause at the time of the spin 

14 off) and (iii) of subparagraph (A), as deter15 mined for purposes of subparagraph (A) or (C), 

16 whichever is applicable. 

17 ‘‘(3) DEFINITIONS.—For purposes of this sub18 section— 

19 ‘‘(A) MAKE-WHOLE CONTRIBUTIONS.—Ex20 cept as otherwise provided in paragraph (2)(C), 

21 the term ‘make-whole contributions’ means non22 elective allocations for each employee in the 

23 class which are reasonably calculated, in a con24 sistent manner, to replace some or all of the re25 tirement benefits which the employee would 


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1 have received under the defined benefit plan 

2 and any other plan or qualified cash or deferred 

3 arrangement under subsection (k)(2) if no 

4 change had been made to such defined benefit 

5 plan and such other plan or arrangement. For 

6 purposes of the preceding sentence, consistency 

7 shall not be required with respect to employees 

8 who were subject to different benefit formulas 

9 under the defined benefit plan. 

10 ‘‘(B) REFERENCES TO CLOSED CLASS OF

11 PARTICIPANTS.—References to a closed class of 

12 participants and similar references to a closed 

13 class shall include arrangements under which 1 

14 or more classes of participants are closed, ex15 cept that 1 or more classes of participants 

16 closed on different dates shall not be aggre17 gated for purposes of determining the date any 

18 such class was closed. 

19 ‘‘(C) HIGHLY COMPENSATED EMPLOYEE.— 

20 The term ‘highly compensated employee’ has 

21 the meaning given such term in section 

22 414(q).′′.’’. 

23 (b) PARTICIPATION REQUIREMENTS.—Paragraph 

24 (26) of section 401(a) is amended by adding at the end 

25 the following new subparagraph: 


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1 ‘‘(I) PROTECTED PARTICIPANTS.— 

2 ‘‘(i) IN GENERAL.—A plan shall be 

3 deemed to satisfy the requirements of sub4 paragraph (A) if— 

5 ‘‘(I) the plan is amended— 

6 ‘‘(aa) to cease all benefit ac7 cruals, or 

8 ‘‘(bb) to provide future ben9 efit accruals only to a closed 

10 class of participants, 

11 ‘‘(II) the plan satisfies subpara12 graph (A) (without regard to this sub13 paragraph) as of the effective date of 

14 the amendment, and 

15 ‘‘(III) the amendment was adopt16 ed before April 5, 2017, or the plan is 

17 described in clause (ii). 

18 ‘‘(ii) PLANS DESCRIBED.—A plan is 

19 described in this clause if the plan would 

20 be described in subsection (o)(1)(C), as ap21 plied for purposes of subsection 

22 (o)(1)(B)(iii)(IV) and by treating the effec23 tive date of the amendment as the date the 

24 class was closed for purposes of subsection 

25 (o)(1)(C). 


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1 ‘‘(iii) SPECIAL RULES.—For purposes 

2 of clause (i)(II), in applying section 

3 410(b)(6)(C), the amendments described in 

4 clause (i) shall not be treated as a signifi5 cant change in coverage under section 

6 410(b)(6)(C)(i)(II). 

7 ‘‘(iv) SPUN-OFF PLANS.—For pur8 poses of this subparagraph, if a portion of 

9 a plan described in clause (i) is spun off to 

10 another employer, the treatment under 

11 clause (i) of the spun-off plan shall con12 tinue with respect to the other employer.’’. 

13 (c) EFFECTIVE DATE.— 

14 (1) IN GENERAL.—Except as provided in para15 graph (2), the amendments made by this section 

16 shall take effect on the date of the enactment of this 

17 Act, without regard to whether any plan modifica18 tions referred to in such amendments are adopted or 

19 effective before, on, or after such date of enactment. 

20 (2) SPECIAL RULES.— 

21 (A) ELECTION OF EARLIER APPLICA22 TION.—At the election of the plan sponsor, the 

23 amendments made by this section shall apply to 

24 plan years beginning after December 31, 2013. 


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1 (B) CLOSED CLASSES OF PARTICIPANTS.— 

2 For purposes of paragraphs (1)(A)(iii), 

3 (1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) 

4 of the Internal Revenue Code of 1986 (as added 

5 by this section), a closed class of participants 

6 shall be treated as being closed before April 5, 

7 2017, if the plan sponsor’s intention to create 

8 such closed class is reflected in formal written 

9 documents and communicated to participants 

10 before such date. 

11 (C) CERTAIN POST-ENACTMENT PLAN

12 AMENDMENTS.—A plan shall not be treated as 

13 failing to be eligible for the application of sec14 tion 401(o)(1)(A), 401(o)(1)(B)(iii), or 

15 401(a)(26) of such Code (as added by this sec16 tion) to such plan solely because in the case 

17 of— 

18 (i) such section 401(o)(1)(A), the plan 

19 was amended before the date of the enact20 ment of this Act to eliminate 1 or more 

21 benefits, rights, or features, and is further 

22 amended after such date of enactment to 

23 provide such previously eliminated benefits, 

24 rights, or features to a closed class of par25 ticipants, or 


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1 (ii) such section 401(o)(1)(B)(iii) or 

2 section 401(a)(26), the plan was amended 

3 before the date of the enactment of this 

4 Act to cease all benefit accruals, and is 

5 further amended after such date of enact6 ment to provide benefit accruals to a closed 

7 class of participants. Any such section 

8 shall only apply if the plan otherwise meets 

9 the requirements of such section and in ap10 plying such section, the date the class of 

11 participants is closed shall be the effective 

12 date of the later amendment. 

13 Subtitle G—Estate, Gift, and Gen14 eration-skipping Transfer Taxes 

15 SEC. 1601. INCREASE IN CREDIT AGAINST ESTATE, GIFT, 

16 AND GENERATION-SKIPPING TRANSFER TAX. 

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

18 striking ‘‘$5,000,000’’ and inserting ‘‘$10,000,000’’. 

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

20 this section shall apply to estates of decedents dying, gen21 eration-skipping transfers, and gifts made, after Decem22 ber 31, 2017. 

23 SEC. 1602. REPEAL OF ESTATE AND GENERATION-SKIPPING 

24 TRANSFER TAXES. 

25 (a) ESTATE TAX REPEAL.— 


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1 (1) IN GENERAL.—Subchapter C of chapter 11 

2 is amended by adding at the end the following new 

3 section: 

4 ‘‘SEC. 2210. TERMINATION. 

5 ‘‘(a) IN GENERAL.—Except as provided in subsection 

6 (b), this chapter shall not apply to the estates of decedents 

7 dying after December 31, 2023. 

8 ‘‘(b) CERTAIN DISTRIBUTIONS FROM QUALIFIED

9 DOMESTIC TRUSTS.—In applying section 2056A with re10 spect to the surviving spouse of a decedent dying on or 

11 before December 31, 2023— 

12 ‘‘(1) section 2056A(b)(1)(A) shall not apply to 

13 distributions made after the 10-year period begin14 ning on such date, and 

15 ‘‘(2) section 2056A(b)(1)(B) shall not apply 

16 after such date.’’. 

17 (2) CONFORMING AMENDMENTS.—Section 

18 1014(b) is amended— 

19 (A) in paragraph (6), by striking ‘‘was in20 cludible in determining’’ and all that follows 

21 through the end and inserting ‘‘was includible 

22 (or would have been includible without regard 

23 to section 2210) in determining the value of the 

24 decedent’s gross estate under chapter 11 of 

25 subtitle B’’, 


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1 (B) in paragraph (9), by striking ‘‘required 

2 to be included’’ through ‘‘Code of 1939’’ and 

3 inserting ‘‘required to be included (or would 

4 have been required to be included without re5 gard to section 2210) in determining the value 

6 of the decedent’s gross estate under chapter 11 

7 of subtitle B’’, and 

8 (C) in paragraph (10), by striking ‘‘Prop9 erty includible in the gross estate’’ and insert10 ing ‘‘Property includible (or which would have 

11 been includible without regard to section 2210) 

12 in the gross estate’’. 

13 (3) CLERICAL AMENDMENT.—The table of sec14 tions for subchapter C of chapter 11 is amended by 

15 adding at the end the following new item: 

‘‘Sec. 2210. Termination.’’. 

16 (b) GENERATION-SKIPPING TRANSFER TAX RE17 PEAL.— 

18 (1) IN GENERAL.—Subchapter G of chapter 13 

19 of subtitle B of such Code is amended by adding at 

20 the end the following new section: 

21 ‘‘SEC. 2664. TERMINATION. 

22 ‘‘This chapter shall not apply to generation-skipping 

23 transfers after December 31, 2023.’’. 

24 (2) CLERICAL AMENDMENT.—The table of sec25 tions for subchapter G of chapter 13 of such Code 


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1 is amended by adding at the end the following new 

2 item: 

‘‘Sec. 2664. Termination.’’. 

3 (c) CONFORMING AMENDMENTS RELATED TO GIFT

4 TAX.— 

5 (1) COMPUTATION OF GIFT TAX.—Section 2502 

6 is amended by adding at the end the following new 

7 subsection: 

8 ‘‘(d) GIFTS MADE AFTER 2023.— 

9 ‘‘(1) IN GENERAL.—In the case of a gift made 

10 after December 31, 2023, subsection (a) shall be ap11 plied by substituting ‘subsection (d)(2)’ for ‘section 

12 2001(c)’ and ‘such subsection’ for ‘such section’. 

13 ‘‘(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. 


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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.’’. 

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 2023.— 

5 ‘‘(1) IN GENERAL.—In the case of a gift made 

6 after December 31, 2023, 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 

10 with respect to which such tentative tax is to be 

11 computed were $10,000,000’ for ‘the applicable 

12 credit amount in effect under section 2010(c) which 

13 would apply if the donor died as of the end of the 

14 calendar year’. 

15 ‘‘(2) INFLATION ADJUSTMENT.— 

16 ‘‘(A) IN GENERAL.—In the case of any cal17 endar year after 2023, the dollar amount in 

18 subsection (a)(1) (after application of this sub19 section) shall be increased by an amount equal 

20 to— 

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


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1 ‘‘(ii) the cost-of-living adjustment de2 termined under section 1(f)(3) for such 

3 calendar year by substituting ‘calendar 

4 year 2011’ for ‘calendar year 1992’ in sub5 paragraph (B) thereof. 

6 ‘‘(B) ROUNDING.—If any amount as ad7 justed under paragraph (1) is not a multiple of 

8 $10,000, such amount shall be rounded to the 

9 nearest multiple of $10,000.’’. 

10 (3) OTHER CONFORMING AMENDMENTS RE11 LATED TO GIFT TAX.—Section 2801 is amended by 

12 adding at the end the following new subsection: 

13 striking and inserting ‘‘section 2502(a)(2)’’ 

14 ‘‘(g) GIFTS RECEIVED AFTER 2023.—In the case of 

15 a gift received after December 31, 2023, subsection (a)(1) 

16 shall be applied by substituting ‘section 2502(a)(2)’ for 

17 ‘section 2001(c) as in effect on the date of such receipt’.’’. 

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

19 this section shall apply to estates of decedents dying, gen20 eration-skipping transfers, and gifts made, after Decem21 ber 31, 2023. 


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1 TITLE II—ALTERNATIVE 

2 MINIMUM TAX REPEAL 

3 SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX. 

4 (a) IN GENERAL.—Subchapter A of chapter 1 is 

5 amended by striking part VI (and by striking the item 

6 relating to such part in the table of parts for subchapter 

7 A). 

8 (b) CREDIT FOR PRIOR YEAR MINIMUM TAX LIABIL9 ITY.— 

10 (1) LIMITATION.—Subsection (c) of section 53 

11 is amended to read as follows: 

12 ‘‘(c) LIMITATION.—The credit allowable under sub13 section (a) shall not exceed the regular tax liability of the 

14 taxpayer reduced by the sum of the credits allowed under 

15 subparts A, B, and D.’’. 

16 (2) CREDITS TREATED AS REFUNDABLE.—Sec17 tion 53 is amended by adding at the end the fol18 lowing new subsection: 

19 ‘‘(e) PORTION OF CREDIT TREATED AS REFUND20 ABLE.— 

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

22 year beginning in 2019, 2020, 2021, or 2022, the 

23 limitation under subsection (c) shall be increased by 

24 the AMT refundable credit amount for such year. 


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1 ‘‘(2) AMT REFUNDABLE CREDIT AMOUNT.— 

2 For purposes of paragraph (1), the AMT refundable 

3 credit amount is an amount equal to 50 percent 

4 (100 percent in the case of a taxable year beginning 

5 in 2022) of the excess (if any) of— 

6 ‘‘(A) the minimum tax credit determined 

7 under subsection (b) for the taxable year, over 

8 ‘‘(B) the minimum tax credit allowed 

9 under subsection (a) for such year (before the 

10 application of this subsection for such year). 

11 ‘‘(3) CREDIT REFUNDABLE.—For purposes of 

12 this title (other than this section), the credit allowed 

13 by reason of this subsection shall be treated as a 

14 credit allowed under subpart C (and not this sub15 part). 

16 ‘‘(4) SHORT TAXABLE YEARS.—In the case of 

17 any taxable year of less than 365 days, the AMT re18 fundable credit amount determined under paragraph 

19 (2) with respect to such taxable year shall be the 

20 amount which bears the same ratio to such amount 

21 determined without regard to this paragraph as the 

22 number of days in such taxable year bears to 365.’’. 

23 (3) TREATMENT OF REFERENCES.—Section 

24 53(d) is amended by adding at the end the following 

25 new paragraph: 


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1 ‘‘(3) AMT TERM REFERENCES.—Any references 

2 in this subsection to section 55, 56, or 57 shall be 

3 treated as a reference to such section as in effect be4 fore its repeal by the Tax Cuts and Jobs Act.’’. 

5 (c) CONFORMING AMENDMENTS RELATED TO AMT 

6 REPEAL.— 

7 (1) Section 2(d) is amended by striking ‘‘sec8 tions 1 and 55’’ and inserting ‘‘section 1’’. 

9 (2) Section 5(a) is amended by striking para10 graph (4). 

11 (3) Section 11(d) is amended by striking ‘‘the 

12 taxes imposed by subsection (a) and section 55’’ and 

13 inserting ‘‘the tax imposed by subsection (a)’’. 

14 (4) Section 12 is amended by striking para15 graph (7). 

16 (5) Section 26(a) is amended to read as follows: 

17 ‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The 

18 aggregate amount of credits allowed by this subpart for 

19 the taxable year shall not exceed the taxpayer’s regular 

20 tax liability for the taxable year.’’. 

21 (6) Section 26(b)(2) is amended by striking 

22 subparagraph (A). 

23 (7) Section 26 is amended by striking sub24 section (c). 

25 (8) Section 38(c) is amended— 


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1 (A) by striking paragraphs (1) through 

2 (5), 

3 (B) by redesignating paragraph (6) as 

4 paragraph (2), 

5 (C) by inserting before paragraph (2) (as 

6 so redesignated) the following new paragraph: 

7 ‘‘(1) IN GENERAL.—The credit allowed under 

8 subsection (a) for any taxable year shall not exceed 

9 the excess (if any) of— 

10 ‘‘(A) the sum of— 

11 ‘‘(i) so much of the regular tax liabil12 ity as does not exceed $25,000, plus 

13 ‘‘(ii) 75 percent of so much of the reg14 ular tax liability as exceeds $25,000, over 

15 ‘‘(B) the sum of the credits allowable 

16 under subparts A and B of this part.’’, and 

17 (D) by striking ‘‘subparagraph (B) of 

18 paragraph (1)’’ each place it appears in para19 graph (2) (as so redesignated) and inserting 

20 ‘‘clauses (i) and (ii) of paragraph (1)(A)’’. 

21 (9) Section 39(a) is amended— 

22 (A) by striking ‘‘or the eligible small busi23 ness credits’’ in paragraph (3)(A), and 

24 (B) by striking paragraph (4). 


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1 (10) Section 45D(g)(4)(B) is amended by strik2 ing ‘‘or for purposes of section 55’’. 

3 (11) Section 54(c)(1) is amended to read as fol4 lows: 

5 ‘‘(1) regular tax liability (as defined in section 

6 26(b)), over’’. 

7 (12) Section 54A(c)(1)(A) is amended to read 

8 as follows: 

9 ‘‘(A) regular tax liability (as defined in 

10 section 26(b)), over’’. 

11 (13) Section 148(b)(3) is amended to read as 

12 follows: 

13 ‘‘(3) TAX-EXEMPT BONDS NOT TREATED AS IN14 VESTMENT PROPERTY.—The term ‘investment prop15 erty’ does not include any tax-exempt bond.’’. 

16 (14) Section 168(k)(2) is amended by striking 

17 subparagraph (G). 

18 (15) Section 168(k) is amended by striking 

19 paragraph (4). 

20 (16) Section 168(k)(5) is amended by striking 

21 subparagraph (E). 

22 (17) Section 168(m)(2)(B)(i) is amended by 

23 striking ‘‘(determined without regard to paragraph 

24 (4) thereof)’’. 


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1 (18) Section 168(m)(2) is amended by striking 

2 subparagraph (D). 

3 (19) Section 173 is amended by striking sub4 section (b). 

5 (20) Section 174(f) is amended to read as fol6 lows: 

7 ‘‘(f) CROSS REFERENCE.—For adjustments to basis 

8 of property for amounts allowed as deductions as deferred 

9 expenses under subsection (b), see section 1016(a)(14).’’. 

10 (21) Section 263(c) is amended by striking 

11 ‘‘section 59(e) or 291’’ and inserting ‘‘section 291’’. 

12 (22) Section 263A(c) is amended by striking 

13 paragraph (6) and by redesignating paragraph (7) 

14 (as amended) as paragraph (6). 

15 (23) Section 382(l) is amended by striking 

16 paragraph (7) and by redesignating paragraph (8) 

17 as paragraph (7). 

18 (24) Section 443 is amended by striking sub19 section (d) and by redesignating subsection (e) as 

20 subsection (d). 

21 (25) Section 616 is amended by striking sub22 section (e). 

23 (26) Section 617 is amended by striking sub24 section (i). 

25 (27) Section 641(c) is amended— 


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1 (A) in paragraph (2) by striking subpara2 graph (B) and by redesignating subparagraphs 

3 (C) and (D) as subparagraphs (B) and (C), re4 spectively, and 

5 (B) in paragraph (3), by striking ‘‘para6 graph (2)(C)’’ and inserting ‘‘paragraph 

7 (2)(B)’’. 

8 (28) Subsections (b) and (c) of section 666 are 

9 each amended by striking ‘‘(other than the tax im10 posed by section 55)’’. 

11 (29) Section 848 is amended by striking sub12 section (i). 

13 (30) Section 860E(a) is amended by striking 

14 paragraph (4). 

15 (31) Section 871(b)(1) is amended by striking 

16 ‘‘or 55’’. 

17 (32) Section 882(a)(1) is amended by striking 

18 ‘‘55,’’. 

19 (33) Section 897(a) is amended to read as fol20 lows: 

21 ‘‘(a) TREATMENT AS EFFECTIVELY CONNECTED

22 WITH UNITED STATES TRADE OR BUSINESS.—For pur23 poses of this title, gain or loss of a nonresident alien indi24 vidual or a foreign corporation from the disposition of a 


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1 United States real property interest shall be taken into 

2 account— 

3 ‘‘(1) in the case of a nonresident alien indi4 vidual, under section 871(b)(1), or 

5 ‘‘(2) in the case of a foreign corporation, under 

6 section 882(a)(1), 

7 as if the taxpayer were engaged in a trade or business 

8 within the United States during the taxable year and as 

9 if such gain or loss were effectively connected with such 

10 trade or business.’’. 

11 (34) Section 904(k) is amended to read as fol12 lows: 

13 ‘‘(k) CROSS REFERENCE.—For increase of limitation 

14 under subsection (a) for taxes paid with respect to 

15 amounts received which were included in the gross income 

16 of the taxpayer for a prior taxable year as a United States 

17 shareholder with respect to a controlled foreign corpora18 tion, see section 960(b).’’. 

19 (35) Section 911(f) is amended to read as fol20 lows: 

21 ‘‘(f) DETERMINATION OF TAX LIABILITY.— 

22 ‘‘(1) IN GENERAL.—If, for any taxable year, 

23 any amount is excluded from gross income of a tax24 payer under subsection (a), then, notwithstanding 

25 section 1, if such taxpayer has taxable income for 


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1 such taxable year, the tax imposed by section 1 for 

2 such taxable year shall be equal to the excess (if 

3 any) of— 

4 ‘‘(A) the tax which would be imposed by 

5 section 1 for such taxable year if the taxpayer’s 

6 taxable income were increased by the amount 

7 excluded under subsection (a) for such taxable 

8 year, over 

9 ‘‘(B) the tax which would be imposed by 

10 section 1 for such taxable year if the taxpayer’s 

11 taxable income were equal to the amount ex12 cluded under subsection (a) for such taxable 

13 year. 

14 For purposes of this paragraph, the amount ex15 cluded under subsection (a) shall be reduced by the 

16 aggregate amount of any deductions or exclusions 

17 disallowed under subsection (d)(6) with respect to 

18 such excluded amount. 

19 ‘‘(2) TREATMENT OF CAPITAL GAIN EXCESS.— 

20 ‘‘(A) IN GENERAL.—In applying section 

21 1(h) for purposes of determining the tax under 

22 paragraph (1)(A) for any taxable year in which, 

23 without regard to this subsection, the tax24 payer’s net capital gain exceeds taxable income 


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1 (hereafter in this subparagraph referred to as 

2 the capital gain excess)— 

3 ‘‘(i) the taxpayer’s net capital gain 

4 (determined without regard to section 

5 1(h)(11)) shall be reduced (but not below 

6 zero) by such capital gain excess, 

7 ‘‘(ii) the taxpayer’s qualified dividend 

8 income shall be reduced by so much of 

9 such capital gain excess as exceeds the tax10 payer’s net capital gain (determined with11 out regard to section 1(h)(11) and the re12 duction under clause (i)), and 

13 ‘‘(iii) adjusted net capital gain, 

14 unrecaptured section 1250 gain, and 28- 

15 percent rate gain shall each be determined 

16 after increasing the amount described in 

17 section 1(h)(4)(B) by such capital gain ex18 cess. 

19 ‘‘(B) DEFINITIONS.—Terms used in this 

20 paragraph which are also used in section 1(h) 

21 shall have the respective meanings given such 

22 terms by section 1(h).’’. 

23 (36) Section 962(a)(1) is amended— 

24 (A) by striking ‘‘sections 1 and 55’’ and 

25 inserting ‘‘section 1’’, and 


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1 (B) by striking ‘‘sections 11 and 55’’ and 

2 inserting ‘‘section 11’’. 

3 (37) Section 1016(a) is amended by striking 

4 paragraph (20). 

5 (38) Section 1202(a)(4) is amended by insert6 ing ‘‘and’’ at the end of subparagraph (A), by strik7 ing ‘‘, and’’ and inserting a period at the end of sub8 paragraph (B), and by striking subparagraph (C). 

9 (39) Section 1374(b)(3)(B) is amended by 

10 striking the last sentence thereof. 

11 (40) Section 1561(a) is amended— 

12 (A) by inserting ‘‘and’’ at the end of para13 graph (1), by striking ‘‘, and’’ at the end of 

14 paragraph (2) and inserting a period, and by 

15 striking paragraph (3), and 

16 (B) by striking the last sentence. 

17 (41) Section 6015(d)(2)(B) is amended by 

18 striking ‘‘or 55’’. 

19 (42) Section 6211(b)(4)(A) is amended by 

20 striking‘‘, 168(k)(4)’’. 

21 (43) Section 6425(c)(1)(A) is amended to read 

22 as follows: 

23 ‘‘(A) the tax imposed under section 11 or 

24 subchapter L of chapter 1, whichever is applica25 ble, over’’. 


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1 (44) Section 6654(d)(2) is amended— 

2 (A) in clause (i) of subparagraph (B), by 

3 striking ‘‘, alternative minimum taxable in4 come,’’, and 

5 (B) in clause (i) of subparagraph (C), by 

6 striking ‘‘, alternative minimum taxable in7 come,’’. 

8 (45) Section 6655(e)(2)(B)(i) is amended by 

9 striking ‘‘The taxable income and alternative min10 imum taxable income shall’’ and inserting ‘‘Taxable 

11 income shall’’. 

12 (46) Section 6655(g)(1)(A) is amended by add13 ing ‘‘plus’’ at the end of clause (i), by striking clause 

14 (ii), and by redesignating clause (iii) as clause (ii). 

15 (47) Section 6662(e)(3)(C) is amended by strik16 ing ‘‘the regular tax (as defined in section 55(c))’’ 

17 and inserting ‘‘the regular tax liability (as defined in 

18 section 26(b))’’. 

19 (d) EFFECTIVE DATES.— 

20 (1) IN GENERAL.—Except as otherwise pro21 vided in this subsection, the amendments made by 

22 this section shall apply to taxable years beginning 

23 after December 31, 2017. 

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1 ment made by subsection (a) as relates to the repeal 

2 of section 59(e) of the Internal Revenue Code of 

3 1986 shall apply to amounts paid or incurred after 

4 December 31, 2017. 

5 (3) TREATMENT OF NET OPERATING LOSS

6 CARRYBACKS.—For purposes of section 56(d) of the 

7 Internal Revenue Code of 1986 (as in effect before 

8 its repeal), the amount of any net operating loss 

9 which may be carried back from a taxable year be10 ginning after December 31, 2017, to taxable years 

11 beginning before January 1, 2018, shall be deter12 mined without regard to any adjustments under sec13 tion 56(d)(2)(A) of such Code (as so in effect). 

14 TITLE III—BUSINESS TAX 

15 REFORM 

16 Subtitle A—Tax Rates 

17 SEC. 3001. REDUCTION IN CORPORATE TAX RATE. 

18 (a) IN GENERAL.—Section 11(b) is amended to read 

19 as follows: 

20 ‘‘(b) AMOUNT OF TAX.— 

21 ‘‘(1) IN GENERAL.—Except as otherwise pro22 vided in this subsection, the amount of the tax im23 posed by subsection (a) shall be 20 percent of tax24 able income. 


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1 ‘‘(2) SPECIAL RULE FOR PERSONAL SERVICE

2 CORPORATIONS.— 

3 ‘‘(A) IN GENERAL.—In the case of a per4 sonal service corporation (as defined in section 

5 448(d)(2)), the amount of the tax imposed by 

6 subsection (a) shall be 25 percent of taxable in7 come. 

8 ‘‘(B) REFERENCES TO CORPORATE

9 RATE.—Any reference to the rate imposed 

10 under this section or to the highest rate in ef11 fect under this section (or any similar ref12 erence) shall be determined without regard to 

13 the rate imposed with respect to personal serv14 ice corporations (as so defined).’’. 

15 (b) CONFORMING AMENDMENTS.— 

16 (1)(A) Part I of subchapter P of chapter 1 is 

17 amended by striking section 1201 (and by striking 

18 the item relating to such section in the table of sec19 tions for such part). 

20 (B) Section 12 is amended by striking para21 graph (4). 

22 (C) Section 527(b) is amended— 

23 (i) by striking paragraph (2), and 

24 (ii) by striking all that precedes ‘‘is hereby 

25 imposed’’ and inserting: 


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1 ‘‘(b) TAX IMPOSED.—A tax’’. 

2 (D) Section 594(a) is amended by striking 

3 ‘‘taxes imposed by section 11 or 1201(a)’’ and in4 serting ‘‘tax imposed by section 11’’. 

5 (E) Section 691(c)(4) is amended by striking 

6 ‘‘1201,’’. 

7 (F) Section 801(a) is amended— 

8 (i) by striking paragraph (2), and 

9 (ii) by striking all that precedes ‘‘is hereby 

10 imposed’’ and inserting: 

11 ‘‘(a) TAX IMPOSED.—A tax’’. 

12 (G) Section 831(e) is amended by striking para13 graph (1) and by redesignating paragraphs (2) and 

14 (3) as paragraphs (1) and (2), respectively. 

15 (H) Sections 832(c)(5) and 834(b)(1)(D) are 

16 each amended by striking ‘‘sec. 1201 and fol17 lowing,’’. 

18 (I) Section 852(b)(3)(A) is amended by striking 

19 ‘‘section 1201(a)’’ and inserting ‘‘section 11(b)(1)’’. 

20 (J) Section 857(b)(3) is amended— 

21 (i) by striking subparagraph (A) and re22 designating subparagraphs (B) through (F) as 

23 subparagraphs (A) through (E), respectively, 

24 (ii) in subparagraph (C), as so redesig25 nated— 


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1 (I) by striking ‘‘subparagraph (A)(ii)’’ 

2 in clause (i) thereof and inserting ‘‘para3 graph (1)’’, 

4 (II) by striking ‘‘the tax imposed by 

5 subparagraph (A)(ii)’’ in clauses (ii) and 

6 (iv) thereof and inserting ‘‘the tax imposed 

7 by paragraph (1) on undistributed capital 

8 gain’’, 

9 (iii) in subparagraph (E), as so redesig10 nated, by striking ‘‘subparagraph (B) or (D)’’ 

11 and inserting ‘‘subparagraph (A) or (C)’’, and 

12 (iv) by adding at the end the following new 

13 subparagraph: 

14 ‘‘(F) UNDISTRIBUTED CAPITAL GAIN.— 

15 For purposes of this paragraph, the term ‘un16 distributed capital gain’ means the excess of the 

17 net capital gain over the deduction for divi18 dends paid (as defined in section 561) deter19 mined with reference to capital gain dividends 

20 only.’’. 

21 (K) Section 882(a)(1) is amended by striking ‘‘, 

22 or 1201(a)’’. 

23 (L) Section 1374(b) is amended by striking 

24 paragraph (4). 


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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 regula10 tions, 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 regula15 tions, 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 

18 the item relating to such section in the table of sec19 tions 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 

23 follows: 

24 ‘‘(5) CROSS REFERENCE.—For limitation on 

25 credit provided in paragraph (2) or (3) in the case 


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1 of certain controlled corporations, see section 

2 1561.’’. 

3 (6)(A) Section 1561, as amended by the pre4 ceding provisions of this Act, is amended to read as 

5 follows: 

6 ‘‘SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS 

7 CREDIT IN THE CASE OF CERTAIN CON8 TROLLED CORPORATIONS. 

9 ‘‘(a) IN GENERAL.—The component members of a 

10 controlled group of corporations on a December 31 shall, 

11 for their taxable years which include such December 31, 

12 be limited for purposes of this subtitle to one $250,000 

13 ($150,000 if any component member is a corporation de14 scribed in section 535(c)(2)(B)) amount for purposes of 

15 computing the accumulated earnings credit under section 

16 535(c)(2) and (3). Such amount shall be divided equally 

17 among the component members of such group on such De18 cember 31 unless the Secretary prescribes regulations per19 mitting an unequal allocation of such amount. 

20 ‘‘(b) CERTAIN SHORT TAXABLE YEARS.—If a cor21 poration has a short taxable year which does not include 

22 a December 31 and is a component member of a controlled 

23 group of corporations with respect to such taxable year, 

24 then for purposes of this subtitle, the amount to be used 

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1 tion 535(c)(2) and (3) of such corporation for such taxable 

2 year shall be the amount specified in subsection (a) with 

3 respect to such group, divided by the number of corpora4 tions which are component members of such group on the 

5 last day of such taxable year. For purposes of the pre6 ceding sentence, section 1563(b) shall be applied as if such 

7 last day were substituted for December 31.’’. 

8 (B) The table of sections for part II of sub9 chapter B of chapter 5 is amended by striking the 

10 item relating to section 1561 and inserting the fol11 lowing new item: 

‘‘Sec. 1561. Limitation on accumulated earnings credit in the case of certain 

controlled corporations.’’. 

12 (7) Section 7518(g)(6)(A) is amended— 

13 (A) by striking ‘‘With respect to the por14 tion’’ and inserting ‘‘In the case of a taxpayer 

15 other than a corporation, with respect to the 

16 portion’’, and 

17 (B) by striking ‘‘(34 percent in the case of 

18 a corporation)’’. 

19 (c) EFFECTIVE DATE.— 

20 (1) IN GENERAL.—Except as otherwise pro21 vided in this subsection, the amendments made by 

22 this section shall apply to taxable years beginning 

23 after December 31, 2017. 


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1 (2) CERTAIN CONFORMING AMENDMENTS.—The 

2 amendments made by paragraphs (2), (3), and (4) 

3 of subsection (b) shall apply to distributions after 

4 December 31, 2017. 

5 (d) NORMALIZATION REQUIREMENTS.— 

6 (1) IN GENERAL.—A normalization method of 

7 accounting shall not be treated as being used with 

8 respect to any public utility property for purposes of 

9 section 167 or 168 of the Internal Revenue Code of 

10 1986 if the taxpayer, in computing its cost of service 

11 for ratemaking purposes and reflecting operating re12 sults in its regulated books of account, reduces the 

13 excess tax reserve more rapidly or to a greater ex14 tent than such reserve would be reduced under the 

15 average rate assumption method. 

16 (2) ALTERNATIVE METHOD FOR CERTAIN TAX17 PAYERS.—If, as of the first day of the taxable year 

18 that includes the date of enactment of this Act— 

19 (A) the taxpayer was required by a regu20 latory agency to compute depreciation for public 

21 utility property on the basis of an average life 

22 or composite rate method, and 

23 (B) the taxpayer’s books and underlying 

24 records did not contain the vintage account 


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1 data necessary to apply the average rate as2 sumption method, 

3 the taxpayer will be treated as using a normalization 

4 method of accounting if, with respect to such juris5 diction, the taxpayer uses the alternative method for 

6 public utility property that is subject to the regu7 latory authority of that jurisdiction. 

8 (3) DEFINITIONS.—For purposes of this sub9 section— 

10 (A) EXCESS TAX RESERVE.—The term 

11 ‘‘excess tax reserve’’ means the excess of— 

12 (i) the reserve for deferred taxes (as 

13 described in section 168(i)(9)(A)(ii) of the 

14 Internal Revenue Code of 1986 as in effect 

15 on the day before the date of the enact16 ment of this Act), over 

17 (ii) the amount which would be the 

18 balance in such reserve if the amount of 

19 such reserve were determined by assuming 

20 that the corporate rate reductions provided 

21 in this Act were in effect for all prior peri22 ods. 

23 (B) AVERAGE RATE ASSUMPTION METH24 OD.—The average rate assumption method is 

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1 serve for deferred taxes is reduced over the re2 maining lives of the property as used in its reg3 ulated books of account which gave rise to the 

4 reserve for deferred taxes. Under such method, 

5 if timing differences for the property reverse, 

6 the amount of the adjustment to the reserve for 

7 the deferred taxes is calculated by multi8 plying— 

9 (i) the ratio of the aggregate deferred 

10 taxes for the property to the aggregate 

11 timing differences for the property as of 

12 the beginning of the period in question, by 

13 (ii) the amount of the timing dif14 ferences which reverse during such period. 

15 (C) ALTERNATIVE METHOD.—The ‘‘alter16 native method’’ is the method in which the tax17 payer— 

18 (i) computes the excess tax reserve on 

19 all public utility property included in the 

20 plant account on the basis of the weighted 

21 average life or composite rate used to com22 pute depreciation for regulatory purposes, 

23 and 


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1 (ii) reduces the excess tax reserve rat2 ably over the remaining regulatory life of 

3 the property. 

4 (4) TAX INCREASED FOR NORMALIZATION VIO5 LATION.—If, for any taxable year ending after the 

6 date of the enactment of this Act, the taxpayer does 

7 not use a normalization method of accounting, the 

8 taxpayer’s tax for the taxable year shall be increased 

9 by the amount by which it reduces its excess tax re10 serve more rapidly than permitted under a normal11 ization method of accounting. 

12 Subtitle B—Cost Recovery 

13 SEC. 3101. INCREASED EXPENSING. 

14 (a) 100 PERCENT EXPENSING.—Section 

15 168(k)(1)(A) is amended by striking ‘‘50 percent’’ and in16 serting ‘‘100 percent’’. 

17 (b) EXTENSION THROUGH JANUARY 1, 2023.—Sec18 tion 168(k)(2) is amended— 

19 (1) in subparagraph (A)(iii), by striking ‘‘Janu20 ary 1, 2020’’ and inserting ‘‘January 1, 2023’’, 

21 (2) in subparagraph (B)(i)(II), by striking 

22 ‘‘January 1, 2021’’ and inserting ‘‘January 1, 

23 2024’’, 


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1 (3) in subparagraph (B)(i)(III), by striking 

2 ‘‘January 1, 2020’’ and inserting ‘‘January 1, 

3 2023’’, 

4 (4) in subparagraph (B)(ii), by striking ‘‘Janu5 ary 1, 2020’’ in each place it appears and inserting 

6 ‘‘January 1, 2023’’, and 

7 (5) in subparagraph (E)(i), by striking ‘‘Janu8 ary 1, 2020’’ and replacing it with ‘‘January 1, 

9 2023’’. 

10 (c) APPLICATION TO USED PROPERTY.— 

11 (1) IN GENERAL.—Section 168(k)(2)(A)(ii) is 

12 amended to read as follows: 

13 ‘‘(ii) the original use of which begins 

14 with the taxpayer or the acquisition of 

15 which by the taxpayer meets the require16 ments of clause (ii) of subparagraph (E), 

17 and’’. 

18 (2) ACQUISITION REQUIREMENTS.—Section 

19 168(k)(2)(E)(ii) is amended to read as follows: 

20 ‘‘(ii) ACQUISITION REQUIREMENTS.— 

21 An acquisition of property meets the re22 quirements of this clause if— 

23 ‘‘(I) such property was not used 

24 by the taxpayer at any time prior to 

25 such acquisition, and 


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1 ‘‘(II) the acquisition of such 

2 property meets the requirements of 

3 paragraphs (2)(A), (2)(B), (2)(C), 

4 and (3) of section 179(d).’’, 

5 (3) ANTI-ABUSE RULES.—Section 168(k)(2)(E) 

6 is further amended by amending clause (iii)(I) to 

7 read as follows: 

8 ‘‘(I) property is used by a lessor 

9 of such property and such use is the 

10 lessor’s first use of such property,’’. 

11 (d) EXCEPTION FOR CERTAIN TRADES AND BUSI12 NESSES NOT SUBJECT TO LIMITATION ON INTEREST EX13 PENSE.—Section 168(k)(2), as amended by section 2001, 

14 is amended by inserting after subparagraph (F) the fol15 lowing new subparagraph: 

16 ‘‘(G) EXCEPTION FOR CERTAIN PROPERTY

17 OF REAL PROPERTY BUSINESSES AND REGU18 LATED UTILITIES.—The term ‘qualified prop19 erty’ shall not include any property used in a 

20 trade or business described in subparagraph 

21 (B) or (C) of section 163(j)(7).’’. 

22 (e) COORDINATION WITH SECTION 280F.—Section 

23 168(k)(2)(F) is amended— 

24 (1) by striking ‘‘$8,000’’ in clauses (i) and (iii) 

25 and inserting ‘‘$16,000’’, and 


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1 (2) in clause (iii)— 

2 (A) by striking ‘‘placed in service by the 

3 taxpayer after December 31, 2017’’ and insert4 ing ‘‘acquired by the taxpayer before September 

5 28, 2017, and placed in service by the taxpayer 

6 after September 27, 2017’’, and 

7 (B) by redesignating subclauses (I) and 

8 (II) as subclauses (II) and (III) respectively, 

9 and inserting before clause (II), as so redesig10 nated, the following new subclause: 

11 ‘‘(I) in the case of a passenger 

12 automobile placed in service before 

13 January 1, 2018, ‘$8,000’,’’. 

14 (f) CONFORMING AMENDMENTS.— 

15 (1) Section (k)(2)(B)(i)(III), as amended, is 

16 amended by inserting ‘‘binding’’ before ‘‘contract’’. 

17 (2) Section 168(k)(5) is amended by— 

18 (A) by striking ‘‘January 1, 2020’’ in sub19 paragraph (A) and inserting ‘‘January 1, 

20 2023’’, 

21 (B) by striking ‘‘50 percent’’ in subpara22 graph (A)(i) and inserting ‘‘100 percent’’, and 

23 (C) by striking subparagraph (F). 

24 (3) Section 168(k)(6) is amended to read as fol25 lows: 


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1 ‘‘(6) PHASE DOWN.—In the case of qualified 

2 property acquired by the taxpayer before September 

3 28, 2017, and placed in service by the taxpayer after 

4 September 27, 2017, paragraph (1)(A) shall be ap5 plied by substituting for ‘100 percent’— 

6 ‘‘(A) ‘50 percent’ in the case of— 

7 ‘‘(i) property placed in service before 

8 January 1, 2018, and 

9 ‘‘(ii) property described in subpara10 graph (B) or (C) of paragraph (2) which 

11 is placed in service in 2018, 

12 ‘‘(B) ‘40 percent’ in the case of— 

13 ‘‘(i) property placed in service in 2018 

14 (other than property described in subpara15 graph (B) or (C) of paragraph (2)), and 

16 ‘‘(ii) property described in subpara17 graph (B) or (C) of paragraph (2) which 

18 is placed in service in 2019, and 

19 ‘‘(C) ‘30 percent’ in the case of— 

20 ‘‘(i) property placed in service in 2019 

21 (other than property described in subpara22 graph (B) or (C) of paragraph (2)), and 

23 ‘‘(ii) property described in subpara24 graph (B) or (C) of paragraph (2) which 

25 is placed in service in 2020.’’. 


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1 (4) The heading of section 168(k) is amended 

2 by striking ‘‘SPECIAL ALLOWANCE FOR CERTAIN

3 PROPERTY ACQUIRED AFTER DECEMBER 31, 2007, 

4 AND BEFORE JANUARY 1, 2020’’ and inserting 

5 ‘‘FULL EXPENSING OF CERTAIN PROPERTY’’. 

6 (5) Section 460(c)(6)(B)(ii) is amended by 

7 striking ‘‘January 1, 2020 (January 1, 2021 in the 

8 case of property described in section 168(k)(2)(B))’’ 

9 and inserting ‘‘January 1, 2023 (January 1, 2024 in 

10 the case of property described in section 

11 168(k)(2)(B))’’. 

12 (g) EFFECTIVE DATE.— 

13 (1) IN GENERAL.—Except at provided by para14 graph (2), the amendments made by this section 

15 shall apply to property which— 

16 (A) is acquired after September 27, 2017, 

17 and 

18 (B) is placed in service after such date. 

19 For purposes of the preceding sentence, property 

20 shall not be treated as acquired after the date on 

21 which a written binding contract is entered into for 

22 such acquisition. 

23 (2) SPECIFIED PLANTS.—The amendments 

24 made by subsection (f)(2) shall apply to specified 

25 plants planted or grafted after September 27, 2017. 


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1 (3) TRANSITION RULE.—In the case of any tax2 payer’s first taxable year ending after September 27, 

3 2017, the taxpayer may elect (at such time and in 

4 such form and manner as the Secretary of the 

5 Treasury, or his designee, may provide) to apply sec6 tion 168 of the Internal Revenue Code of 1986 with7 out regard to the amendments made by this section. 

8 (4) LIMITATION ON NET OPERATING LOSS

9 CARRYBACKS ATTRIBUTABLE TO FULL EXPENS10 ING.—In the case of any taxable year which includes 

11 any portion of the period beginning on September 

12 28, 2017, and ending on December 31, 2017, the 

13 amount of any net operating loss for such taxable 

14 year which may be treated as a net operating loss 

15 carryback (including any such carryback attributable 

16 to any specified liability loss under section 

17 172(b)(1)(C), any corporate equity reduction inter18 est loss under section 172(b)(1)(D), any eligible loss 

19 under section 172(b)(1)(E), and any farming loss 

20 under section 172(b)(1)(F)) shall be determined 

21 without regard to the amendments made by this sec22 tion. For purposes of this paragraph, terms which 

23 are used in section 172 of the Internal Revenue 

24 Code of 1986 (determined without regard to the 


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1 amendments made by section 3302) shall have the 

2 same meaning as when used in such section. 

3 Subtitle C—Small Business 

4 Reforms 

5 SEC. 3201. EXPANSION OF SECTION 179 EXPENSING. 

6 (a) INCREASED DOLLAR LIMITATIONS.— 

7 (1) IN GENERAL.—Section 179(b) is amend8 ed— 

9 (A) by inserting ‘‘($5,000,000, in the case 

10 of taxable years beginning before January 1, 

11 2023)’’ after ‘‘$500,000’’ in paragraph (1), and 

12 (B) by inserting ‘‘($20,000,000, in the 

13 case of taxable years beginning before January 

14 1, 2023)’’ after ‘‘$2,000,000’’ in paragraph (2). 

15 (2) INFLATION ADJUSTMENT.—Section 

16 179(b)(6) is amended to read as follows: 

17 ‘‘(6) INFLATION ADJUSTMENT.— 

18 ‘‘(A) IN GENERAL.—In the case of a tax19 able year beginning after 2015 (2018 in the 

20 case of the $5,000,000 and $20,000,000 

21 amounts in subsection (b)), each dollar amount 

22 in subsection (b) shall be increased by an 

23 amount equal to such dollar amount multiplied 

24 by— 


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1 ‘‘(i) in the case of the $500,000 and 

2 $2,000,000 amounts in subsection (b), the 

3 cost-of-living adjustment determined under 

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

5 which the taxable year begins, determined 

6 by substituting ‘calendar year 2014’ for 

7 ‘calendar year 2016’ in subparagraph 

8 (A)(ii) thereof, and 

9 ‘‘(ii) in the case of the $5,000,000 

10 and $20,000,000 amounts in subsection 

11 (b), the cost-of-living adjustment deter12 mined under section 1(c)(2) for the cal13 endar year in which the taxable year be14 gins, determined by substituting ‘calendar 

15 year 2017’ for ‘calendar year 2016’ in sub16 paragraph (A)(ii) thereof. 

17 ‘‘(B) ROUNDING.—The amount of any in18 crease under subparagraph (A) shall be round19 ed to the nearest multiple of $10,000 

20 ($100,000 in the case of the $5,000,000 and 

21 $20,000,000 amounts in subsection (b)).’’. 

22 (b) APPLICATION TO QUALIFIED ENERGY EFFICIENT

23 HEATING AND AIR-CONDITIONING PROPERTY.— 

24 (1) IN GENERAL.—Section 179(f)(2) is amend25 ed by striking ‘‘and’’ at the end of subparagraph 


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1 (B), by striking the period at the end of subpara2 graph (C) and inserting ‘‘, and’’, and by adding at 

3 the end the following new subparagraph: 

4 ‘‘(D) qualified energy efficient heating and 

5 air-conditioning property.’’. 

6 (2) QUALIFIED ENERGY EFFICIENT HEATING

7 AND AIR-CONDITIONING PROPERTY.—Section 179(f) 

8 is amended by adding at the end the following new 

9 paragraph: 

10 ‘‘(3) QUALIFIED ENERGY EFFICIENT HEATING

11 AND AIR-CONDITIONING PROPERTY.—For purposes 

12 of this subsection— 

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

14 energy efficient heating and air-conditioning 

15 property’ means any section 1250 property— 

16 ‘‘(i) with respect to which depreciation 

17 (or amortization in lieu of depreciation) is 

18 allowable, 

19 ‘‘(ii) which is installed as part of a 

20 building’s heating, cooling, ventilation, or 

21 hot water system, and 

22 ‘‘(iii) which is within the scope of 

23 Standard 90.1–2007 or any successor 

24 standard. 


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1 ‘‘(B) STANDARD 90.1–2007.—The term 

2 ‘Standard 90.1–2007’ means Standard 90.1– 

3 2007 of the American Society of Heating, Re4 frigerating and Air-Conditioning Engineers and 

5 the Illuminating Engineering Society of North 

6 America (as in effect on the day before the date 

7 of the adoption of Standard 90.1–2010 of such 

8 Societies).’’. 

9 (c) EFFECTIVE DATE.— 

10 (1) INCREASED DOLLAR LIMITATIONS.—The 

11 amendments made by subsection (a) shall apply to 

12 taxable years beginning after December 31, 2017. 

13 (2) APPLICATION TO QUALIFIED ENERGY EFFI14 CIENT HEATING AND AIR-CONDITIONING PROP15 ERTY.—The amendments made by subsection (b) 

16 shall apply to property acquired and placed in serv17 ice after November 2, 2017. For purposes of the 

18 preceding sentence, property shall not be treated as 

19 acquired after the date on which a written binding 

20 contract is entered into for such acquisition. 

21 SEC. 3202. SMALL BUSINESS ACCOUNTING METHOD RE22 FORM AND SIMPLIFICATION. 

23 (a) MODIFICATION OF LIMITATION ON CASH METH24 OD OF ACCOUNTING.— 


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1 (1) INCREASED LIMITATION.—So much of sec2 tion 448(c) as precedes paragraph (2) is amended to 

3 read as follows: 

4 ‘‘(c) GROSS RECEIPTS TEST.—For purposes of this 

5 section— 

6 ‘‘(1) IN GENERAL.—A corporation or partner7 ship meets the gross receipts test of this subsection 

8 for any taxable year if the average annual gross re9 ceipts of such entity for the 3-taxable-year period 

10 ending with the taxable year which precedes such 

11 taxable year does not exceed $25,000,000.’’. 

12 (2) APPLICATION OF EXCEPTION ON ANNUAL

13 BASIS.—Section 448(b)(3) is amended to read as fol14 lows: 

15 ‘‘(3) ENTITIES WHICH MEET GROSS RECEIPTS

16 TEST.—Paragraphs (1) and (2) of subsection (a) 

17 shall not apply to any corporation or partnership for 

18 any taxable year if such entity (or any predecessor) 

19 meets the gross receipts test of subsection (c) for 

20 such taxable year.’’. 

21 (3) INFLATION ADJUSTMENT.—Section 448(c) 

22 is amended by adding at the end the following new 

23 paragraph: 

24 ‘‘(4) ADJUSTMENT FOR INFLATION.—In the 

25 case of any taxable year beginning after December 


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1 31, 2018, the dollar amount in paragraph (1) shall 

2 be increased by an amount equal to— 

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

4 ‘‘(B) the cost-of-living adjustment deter5 mined under section 1(c)(2) for the calendar 

6 year in which the taxable year begins, by sub7 stituting ‘calendar year 2017’ for ‘calendar year 

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

9 If any amount as increased under the preceding sen10 tence is not a multiple of $1,000,000, such amount 

11 shall be rounded to the nearest multiple of 

12 $1,000,000.’’. 

13 (4) COORDINATION WITH SECTION 481.—Sec14 tion 448(d)(7) is amended to read as follows: 

15 ‘‘(7) COORDINATION WITH SECTION 481.—Any 

16 change in method of accounting made pursuant to 

17 this section shall be treated for purposes of section 

18 481 as initiated by the taxpayer and made with the 

19 consent of the Secretary.’’. 

20 (5) APPLICATION OF EXCEPTION TO CORPORA21 TIONS ENGAGED IN FARMING.— 

22 (A) IN GENERAL.—Section 447(c) is 

23 amended— 


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1 (i) by inserting ‘‘for any taxable year’’ 

2 after ‘‘not being a corporation’’ in the mat3 ter preceding paragraph (1), and 

4 (ii) by amending paragraph (2) to 

5 read as follows: 

6 ‘‘(2) a corporation which meets the gross re7 ceipts test of section 448(c) for such taxable year.’’. 

8 (B) COORDINATION WITH SECTION 481.— 

9 Section 447(f) is amended to read as follows: 

10 ‘‘(f) COORDINATION WITH SECTION 481.—Any 

11 change in method of accounting made pursuant to this 

12 section shall be treated for purposes of section 481 as ini13 tiated by the taxpayer and made with the consent of the 

14 Secretary.’’. 

15 (C) CONFORMING AMENDMENTS.—Section 

16 447 is amended— 

17 (i) by striking subsections (d), (e), 

18 (h), and (i), and 

19 (ii) by redesignating subsections (f) 

20 and (g) (as amended by subparagraph (B)) 

21 as subsections (d) and (e), respectively. 

22 (b) EXEMPTION FROM UNICAP REQUIREMENTS.— 

23 (1) IN GENERAL.—Section 263A is amended by 

24 redesignating subsection (i) as subsection (j) and by 


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1 inserting after subsection (h) the following new sub2 section: 

3 ‘‘(i) EXEMPTION FOR CERTAIN SMALL BUSI4 NESSES.— 

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

6 (other than a tax shelter prohibited from using the 

7 cash receipts and disbursements method of account8 ing under section 448(a)(3)) which meets the gross 

9 receipts test of section 448(c) for any taxable year, 

10 this section shall not apply with respect to such tax11 payer for such taxable year. 

12 ‘‘(2) APPLICATION OF GROSS RECEIPTS TEST

13 TO INDIVIDUALS, ETC.—In the case of any taxpayer 

14 which is not a corporation or a partnership, the 

15 gross receipts test of section 448(c) shall be applied 

16 in the same manner as if each trade or business of 

17 such taxpayer were a corporation or partnership. 

18 ‘‘(3) COORDINATION WITH SECTION 481.—Any 

19 change in method of accounting made pursuant to 

20 this subsection shall be treated for purposes of sec21 tion 481 as initiated by the taxpayer and made with 

22 the consent of the Secretary.’’. 

23 (2) CONFORMING AMENDMENT.—Section 

24 263A(b)(2) is amended to read as follows: 


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1 ‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real 

2 or personal property described in section 1221(a)(1) 

3 which is acquired by the taxpayer for resale.’’. 

4 (c) EXEMPTION FROM INVENTORIES.—Section 471 

5 is amended by redesignating subsection (c) as subsection 

6 (d) and by inserting after subsection (b) the following new 

7 subsection: 

8 ‘‘(c) EXEMPTION FOR CERTAIN SMALL BUSI9 NESSES.— 

10 ‘‘(1) IN GENERAL.—In the case of any taxpayer 

11 (other than a tax shelter prohibited from using the 

12 cash receipts and disbursements method of account13 ing under section 448(a)(3)) which meets the gross 

14 receipts test of section 448(c) for any taxable year— 

15 ‘‘(A) subsection (a) shall not apply with re16 spect to such taxpayer for such taxable year, 

17 and 

18 ‘‘(B) the taxpayer’s method of accounting 

19 for inventory for such taxable year shall not be 

20 treated as failing to clearly reflect income if 

21 such method either— 

22 ‘‘(i) treats inventory as non-incidental 

23 materials and supplies, or 

24 ‘‘(ii) conforms to such taxpayer’s 

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1 cable financial statement of the taxpayer 

2 with respect to such taxable year or, if the 

3 taxpayer does not have any applicable fi4 nancial statement with respect to such tax5 able year, the books and records of the 

6 taxpayer prepared in accordance with the 

7 taxpayer’s accounting procedures. 

8 ‘‘(2) APPLICABLE FINANCIAL STATEMENT.— 

9 For purposes of this subsection, the term ‘applicable 

10 financial statement’ means— 

11 ‘‘(A) a financial statement which is cer12 tified as being prepared in accordance with gen13 erally accepted accounting principles and which 

14 is— 

15 ‘‘(i) a 10-K (or successor form), or 

16 annual statement to shareholders, required 

17 to be filed by the taxpayer with the United 

18 States Securities and Exchange Commis19 sion, 

20 ‘‘(ii) an audited financial statement of 

21 the taxpayer which is used for— 

22 ‘‘(I) credit purposes, 

23 ‘‘(II) reporting to shareholders, 

24 partners, or other proprietors, or to 

25 beneficiaries, or 


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1 ‘‘(III) any other substantial 

2 nontax purpose, 

3 but only if there is no statement of the 

4 taxpayer described in clause (i), or 

5 ‘‘(iii) filed by the taxpayer with any 

6 other Federal or State agency for nontax 

7 purposes, but only if there is no statement 

8 of the taxpayer described in clause (i) or 

9 (ii), or 

10 ‘‘(B) a financial statement of the taxpayer 

11 which— 

12 ‘‘(i) is used for a purpose described in 

13 subclause (I), (II), or (III) of subpara14 graph (A)(ii), or 

15 ‘‘(ii) filed by the taxpayer with any 

16 regulatory or governmental body (whether 

17 domestic or foreign) specified by the Sec18 retary, 

19 but only if there is no statement of the taxpayer 

20 described in subparagraph (A). 

21 ‘‘(3) APPLICATION OF GROSS RECEIPTS TEST

22 TO INDIVIDUALS, ETC.—In the case of any taxpayer 

23 which is not a corporation or a partnership, the 

24 gross receipts test of section 448(c) shall be applied 


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1 in the same manner as if each trade or business of 

2 such taxpayer were a corporation or partnership. 

3 ‘‘(4) COORDINATION WITH SECTION 481.—Any 

4 change in method of accounting made pursuant to 

5 this subsection shall be treated for purposes of sec6 tion 481 as initiated by the taxpayer and made with 

7 the consent of the Secretary.’’. 

8 (d) EXEMPTION FROM PERCENTAGE COMPLETION

9 FOR LONG-TERM CONTRACTS.— 

10 (1) IN GENERAL.—Section 460(e)(1)(B) is 

11 amended— 

12 (A) by inserting ‘‘(other than a tax shelter 

13 prohibited from using the cash receipts and dis14 bursements method of accounting under section 

15 448(a)(3))’’ after ‘‘taxpayer’’ in the matter pre16 ceding clause (i), and 

17 (B) by amending clause (ii) to read as fol18 lows: 

19 ‘‘(ii) who meets the gross receipts test 

20 of section 448(c) for the taxable year in 

21 which such contract is entered into.’’. 

22 (2) CONFORMING AMENDMENTS.—Section 

23 460(e) is amended by striking paragraphs (2) and 

24 (3), by redesignating paragraphs (4), (5), and (6) as 

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1 serting after paragraph (1) the following new para2 graph: 

3 ‘‘(2) RULES RELATED TO GROSS RECEIPTS

4 TEST.— 

5 ‘‘(A) APPLICATION OF GROSS RECEIPTS

6 TEST TO INDIVIDUALS, ETC.—For purposes of 

7 paragraph (1)(B)(ii), in the case of any tax8 payer which is not a corporation or a partner9 ship, the gross receipts test of section 448(c) 

10 shall be applied in the same manner as if each 

11 trade or business of such taxpayer were a cor12 poration or partnership. 

13 ‘‘(B) COORDINATION WITH SECTION 481.— 

14 Any change in method of accounting made pur15 suant to paragraph (1)(B)(ii) shall be treated 

16 as initiated by the taxpayer and made with the 

17 consent of the Secretary. Such change shall be 

18 effected on a cut-off basis for all similarly clas19 sified contracts entered into on or after the 

20 year of change.’’. 

21 (e) EFFECTIVE DATE.— 

22 (1) IN GENERAL.—Except as otherwise pro23 vided in this subsection, the amendments made by 

24 this section shall apply to taxable years beginning 

25 after December 31, 2017. 


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1 (2) PRESERVATION OF SUSPENSE ACCOUNT

2 RULES WITH RESPECT TO ANY EXISTING SUSPENSE

3 ACCOUNTS.—So much of the amendments made by 

4 subsection (a)(5)(C) as relate to section 447(i) of 

5 the Internal Revenue Code of 1986 shall not apply 

6 with respect to any suspense account established 

7 under such section before the date of the enactment 

8 of this Act. 

9 (3) EXEMPTION FROM PERCENTAGE COMPLE10 TION FOR LONG-TERM CONTRACTS.—The amend11 ments made by subsection (d) shall apply to con12 tracts entered into after December 31, 2017, in tax13 able years ending after such date. 

14 SEC. 3203. SMALL BUSINESS EXCEPTION FROM LIMITATION 

15 ON DEDUCTION OF BUSINESS INTEREST. 

16 (a) IN GENERAL.—Section 163(j)(2), as amended by 

17 section 3301, is amended to read as follows: 

18 ‘‘(2) EXEMPTION FOR CERTAIN SMALL BUSI19 NESSES.—In the case of any taxpayer (other than a 

20 tax shelter prohibited from using the cash receipts 

21 and disbursements method of accounting under sec22 tion 448(a)(3)) which meets the gross receipts test 

23 of section 448(c) for any taxable year, paragraph (1) 

24 shall not apply to such taxpayer for such taxable 

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1 poration or a partnership, the gross receipts test of 

2 section 448(c) shall be applied in the same manner 

3 as if such taxpayer were a corporation or partner4 ship.’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2017. 

8 Subtitle D—Reform of Business9 related Exclusions, Deductions, etc. 

10 SEC. 3301. INTEREST. 

11 (a) IN GENERAL.—Section 163(j) is amended to read 

12 as follows: 

13 ‘‘(j) LIMITATION ON BUSINESS INTEREST.— 

14 ‘‘(1) IN GENERAL.—In the case of any taxpayer 

15 for any taxable year, the amount allowed as a deduc16 tion under this chapter for business interest shall 

17 not exceed the sum of— 

18 ‘‘(A) the business interest income of such 

19 taxpayer for such taxable year, plus 

20 ‘‘(B) 30 percent of the adjusted taxable in21 come of such taxpayer for such taxable year. 

22 The amount determined under subparagraph (B) 

23 (after any increases in such amount under para24 graph (3)(A)(iii)) shall not be less than zero. 


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1 ‘‘(2) EXEMPTION FOR CERTAIN SMALL BUSI2 NESSES.—For exemption for certain small busi3 nesses, see the amendment made by section 3204 of 

4 the Tax Cuts and Jobs Act. 

5 ‘‘(3) APPLICATION TO PARTNERSHIPS, ETC.— 

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

7 partnership— 

8 ‘‘(i) this subsection shall be applied at 

9 the partnership level and any deduction for 

10 business interest shall be taken into ac11 count in determining the non-separately 

12 stated taxable income or loss of the part13 nership, 

14 ‘‘(ii) the adjusted taxable income of 

15 each partner of such partnership shall be 

16 determined without regard to such part17 ner’s distributive share of the non-sepa18 rately stated taxable income or loss of such 

19 partnership, and 

20 ‘‘(iii) the amount determined under 

21 paragraph (1)(B) with respect to each 

22 partner of such partnership shall be in23 creased by such partner’s distributive 

24 share of such partnership’s excess amount. 


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1 ‘‘(B) EXCESS AMOUNT.—The term ‘excess 

2 amount’ means, with respect to any partner3 ship, the excess (if any) of— 

4 ‘‘(i) 30 percent of the adjusted taxable 

5 income of the partnership, over 

6 ‘‘(ii) the amount (if any) by which the 

7 business interest of the partnership ex8 ceeds the business interest income of the 

9 partnership. 

10 ‘‘(C) APPLICATION TO S CORPORATIONS.— 

11 Rules similar to the rules of subparagraphs (A) 

12 and (B) shall apply with respect to any S cor13 poration and its shareholders. 

14 ‘‘(4) BUSINESS INTEREST.—For purposes of 

15 this subsection, the term ‘business interest’ means 

16 any interest paid or accrued on indebtedness prop17 erly allocable to a trade or business. Such term shall 

18 not include investment interest (within the meaning 

19 of subsection (d)). 

20 ‘‘(5) BUSINESS INTEREST INCOME.—For pur21 poses of this subsection, the term ‘business interest 

22 income’ means the amount of interest includible in 

23 the gross income of the taxpayer for the taxable year 

24 which is properly allocable to a trade or business. 


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1 Such term shall not include investment income 

2 (within the meaning of subsection (d)). 

3 ‘‘(6) ADJUSTED TAXABLE INCOME.—For pur4 poses of this subsection, the term ‘adjusted taxable 

5 income’ means the taxable income of the taxpayer— 

6 ‘‘(A) computed without regard to— 

7 ‘‘(i) any item of income, gain, deduc8 tion, or loss which is not properly allocable 

9 to a trade or business, 

10 ‘‘(ii) any business interest or business 

11 interest income, 

12 ‘‘(iii) the amount of any net operating 

13 loss deduction under section 172, and 

14 ‘‘(iv) any deduction allowable for de15 preciation, amortization, or depletion, and 

16 ‘‘(B) computed with such other adjust17 ments as the Secretary may provide. 

18 ‘‘(7) TRADE OR BUSINESS.—For purposes of 

19 this subsection, the term ‘trade or business’ shall not 

20 include— 

21 ‘‘(A) the trade or business of performing 

22 services as an employee, 

23 ‘‘(B) a real property trade or business (as 

24 such term is defined in section 469(c)(7)(C)), 

25 or 


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1 ‘‘(C) the trade or business of the fur2 nishing or sale of— 

3 ‘‘(i) electrical energy, water, or sewage 

4 disposal services, 

5 ‘‘(ii) gas or steam through a local dis6 tribution system, or 

7 ‘‘(iii) transportation of gas or steam 

8 by pipeline, or 

9 if the rates for such furnishing or sale, as the 

10 case may be, have been established or approved 

11 by a State or political subdivision thereof, by 

12 any agency or instrumentality of the United 

13 States, or by a public service or public utility 

14 commission or other similar body of any State 

15 or political subdivision thereof. 

16 ‘‘(8) CARRYFORWARD OF DISALLOWED INTER17 EST.—For carryforward of interest disallowed under 

18 paragraph (1), see subsection (o).’’. 

19 (b) CARRYFORWARD OF DISALLOWED BUSINESS IN20 TEREST.—Section 163, after amendment by section 

21 4302(a) and before amendment by section 4302(b), is 

22 amended by inserting after subsection (n) the following 

23 new subsection: 

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1 lowed as a deduction for any taxable year by reason of 

2 subsection (j) shall be treated as business interest paid 

3 or accrued in the succeeding taxable year. Business inter4 est paid or accrued in any taxable year (determined with5 out regard to the preceding sentence) shall not be carried 

6 past the 5th taxable year following such taxable year, de7 termined by treating business interest as allowed as a de8 duction on a first-in, first-out basis.’’. 

9 (c) TREATMENT OF CARRYFORWARD OF DIS10 ALLOWED BUSINESS INTEREST IN CERTAIN CORPORATE

11 ACQUISITIONS.— 

12 (1) IN GENERAL.—Section 381(c) is amended 

13 by inserting after paragraph (19) the following new 

14 paragraph: 

15 ‘‘(20) CARRYFORWARD OF DISALLOWED INTER16 EST.—The carryover of disallowed interest described 

17 in section 163(o) to taxable years ending after the 

18 date of distribution or transfer.’’. 

19 (2) APPLICATION OF LIMITATION.—Section 

20 382(d) is amended by adding at the end the fol21 lowing new paragraph: 

22 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS23 ALLOWED INTEREST.—The term ‘pre-change loss’ 

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1 scribed in section 163(o) under rules similar to the 

2 rules of paragraph (1).’’. 

3 (3) CONFORMING AMENDMENT.—Section 

4 382(k)(1) is amended by inserting after the first 

5 sentence the following: ‘‘Such term shall include any 

6 corporation entitled to use a carryforward of dis7 allowed interest described in section 381(c)(20).’’ 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2017. 

11 SEC. 3302. MODIFICATION OF NET OPERATING LOSS DE12 DUCTION. 

13 (a) INDEFINITE CARRYFORWARD OF NET OPER14 ATING LOSSES.—Section 172(b)(1)(A)(ii) is amended by 

15 striking ‘‘to each of the 20 taxable years’’ and inserting 

16 ‘‘to each taxable year’’. 

17 (b) REPEAL OF NET OPERATING LOSS CARRYBACKS

18 OTHER THAN 1-YEAR CARRYBACK OF ELIGIBLE DIS19 ASTER LOSSES.— 

20 (1) IN GENERAL.—Section 172(b)(1)(A)(i) is 

21 amended to read as follows: 

22 ‘‘(i) in the case of any portion of a net 

23 operating loss for the taxable year which is 

24 an eligible disaster loss with respect to the 

25 taxpayer, shall be a net operating loss 


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1 carryback to the taxable year preceding the 

2 taxable year of such loss, and’’. 

3 (2) CONFORMING AMENDMENTS.— 

4 (A) Section 172(b)(1) is amended by strik5 ing subparagraphs (B) through (F) and insert6 ing the following: 

7 ‘‘(B) ELIGIBLE DISASTER LOSS.— 

8 ‘‘(i) IN GENERAL.—For purposes of 

9 subparagraph (A)(i), the term ‘eligible dis10 aster loss’ means— 

11 ‘‘(I) in the case of a taxpayer 

12 which is a small business, net oper13 ating losses attributable to federally 

14 declared disasters (as defined by sec15 tion 165(i)(5)), and 

16 ‘‘(II) in the case of a taxpayer 

17 engaged in the trade or business of 

18 farming, net operating losses attrib19 utable to such federally declared dis20 asters. 

21 ‘‘(ii) SMALL BUSINESS.—For purposes 

22 of this subparagraph, the term ‘small busi23 ness’ means a corporation or partnership 

24 which meets the gross receipts test of sec25 tion 448(c) (determined by substituting 


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1 ‘$5,000,000’ for ‘$25,000,000’ each place 

2 it appears therein) for the taxable year in 

3 which the loss arose (or, in the case of a 

4 sole proprietorship, which would meet such 

5 test if such proprietorship were a corpora6 tion). 

7 ‘‘(iii) TRADE OR BUSINESS OF FARM8 ING.—For purposes of this subparagraph, 

9 the trade or business of farming shall in10 clude the trade or business of— 

11 ‘‘(I) operating a nursery or sod 

12 farm, or 

13 ‘‘(II) the raising or harvesting of 

14 trees bearing fruit, nuts, or other 

15 crops, or ornamental trees. 

16 For purposes of subclause (II), an ever17 green tree which is more than 6 years old 

18 at the time severed from the roots shall 

19 not be treated as an ornamental tree.’’. 

20 (B) Section 172 is amended by striking 

21 subsections (f), (g), and (h). 

22 (c) LIMITATION OF NET OPERATING LOSS TO 90 

23 PERCENT OF TAXABLE INCOME.— 

24 (1) IN GENERAL.—Section 172(a) is amended 

25 to read as follows: 


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1 ‘‘(a) DEDUCTION ALLOWED.—There shall be allowed 

2 as a deduction for the taxable year an amount equal to 

3 the lesser of— 

4 ‘‘(1) the aggregate of the net operating loss 

5 carryovers to such year, plus the net operating loss 

6 carrybacks to such year, or 

7 ‘‘(2) 90 percent of taxable income computed 

8 without regard to the deduction allowable under this 

9 section. 

10 For purposes of this subtitle, the term ‘net operating loss 

11 deduction’ means the deduction allowed by this sub12 section.’’. 

13 (2) COORDINATION OF LIMITATION WITH

14 CARRYBACKS AND CARRYOVERS.—Section 172(b)(2) 

15 is amended by striking ‘‘shall be computed—’’ and 

16 all that follows and inserting ‘‘shall— 

17 ‘‘(A) be computed with the modifications 

18 specified in subsection (d) other than para19 graphs (1), (4), and (5) thereof, and by deter20 mining the amount of the net operating loss de21 duction without regard to the net operating loss 

22 for the loss year or for any taxable year there23 after, 

24 ‘‘(B) not be considered to be less than 

25 zero, and 


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1 ‘‘(C) not exceed the amount determined 

2 under subsection (a)(2) for such prior taxable 

3 year.’’. 

4 (3) CONFORMING AMENDMENT.—Section 

5 172(d)(6) is amended by striking ‘‘and’’ at the end 

6 of subparagraph (A), by striking the period at the 

7 end of subparagraph (B) and inserting ‘‘; and’’, and 

8 by adding at the end the following new subpara9 graph: 

10 ‘‘(C) subsection (a)(2) shall be applied by 

11 substituting ‘real estate investment trust tax12 able income (as defined in section 857(b)(2) but 

13 without regard to the deduction for dividends 

14 paid (as defined in section 561))’ for ‘taxable 

15 income’.’’. 

16 (d) ANNUAL INCREASE OF INDEFINITE CARRYOVER

17 AMOUNTS.—Section 172(b) is amended by redesignating 

18 paragraph (3) as paragraph (4) and by inserting after 

19 paragraph (2) the following new paragraph: 

20 ‘‘(3) ANNUAL INCREASE OF INDEFINITE CARRY21 OVER AMOUNTS.—For purposes of paragraph (2)— 

22 ‘‘(A) the amount of any indefinite net op23 erating loss which is carried to the next suc24 ceeding taxable year after the loss year (within 


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1 the meaning of paragraph (2)) shall be in2 creased by an amount equal to— 

3 ‘‘(i) the amount of the loss which may 

4 be so carried over to such succeeding tax5 able year (determined without regard to 

6 this 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 

11 before the beginning of such taxable 

12 year, plus 

13 ‘‘(II) 4 percentage points, and 

14 ‘‘(B) the amount of any indefinite net op15 erating 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 car20 ried to the prior taxable year (after 

21 any increase under this paragraph 

22 with respect to such amount), over 

23 ‘‘(II) the amount by which such 

24 loss was reduced under paragraph (2) 


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1 by reason of the taxable income for 

2 such prior taxable year, multiplied by 

3 ‘‘(ii) a percentage equal to 100 per4 cent plus the percentage determined under 

5 subparagraph (A)(ii) with respect to such 

6 succeeding taxable year. 

7 For purposes of the preceding sentence, the 

8 term ‘indefinite net operating loss’ means any 

9 net operating loss arising in a taxable year be10 ginning 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 

18 made by subsection (c) shall apply to taxable years 

19 beginning after December 31, 2017. 

20 (3) ANNUAL INCREASE IN CARRYOVER

21 AMOUNTS.—The amendments made by subsection 

22 (d) shall apply to amounts carried to taxable years 

23 beginning after December 31, 2017. 

24 (4) SPECIAL RULE FOR NET DISASTER

25 LOSSES.—Notwithstanding paragraph (1), the 


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1 amendments made by subsection (b) shall not apply 

2 to the portion of the net operating loss for any tax3 able year which is a net disaster loss to which sec4 tion 504(b) of the Disaster Tax Relief and Airport 

5 and 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 amend12 ed to read as follows: 

13 ‘‘(2) EXCEPTION FOR REAL PROPERTY HELD

14 FOR SALE.—This subsection shall not apply to any 

15 exchange 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 

19 (2), is amended by inserting after subsection (d) the 

20 following new subsection: 

21 ‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.— 

22 For purposes of this section, an interest in a partnership 

23 which has in effect a valid election under section 761(a) 

24 to be excluded from the application of all of subchapter 


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1 K shall be treated as an interest in each of the assets of 

2 such partnership 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 

7 real property located outside the United States are not 

8 property 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 pro18 vided in this subsection, the amendments made by 

19 this section shall apply to exchanges completed after 

20 December 31, 2017. 

21 (2) TRANSITION RULE.—The amendments 

22 made by this section shall not apply to any exchange 

23 if— 


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1 (A) the property disposed of by the tax2 payer in the exchange is disposed of on or be3 fore December 31 2017, or 

4 (B) the property received by the taxpayer 

5 in the exchange is received on or before Decem6 ber 31, 2017. 

7 SEC. 3304. REVISION OF TREATMENT OF CONTRIBUTIONS 

8 TO CAPITAL. 

9 (a) INCLUSION OF CONTRIBUTIONS TO CAPITAL.— 

10 Part II of subchapter B of chapter 1 is amended by insert11 ing after section 75 the following new section: 

12 ‘‘SEC. 76. CONTRIBUTIONS TO CAPITAL. 

13 ‘‘(a) IN GENERAL.—Gross income includes any con14 tribution to the capital of any entity. 

15 ‘‘(b) TREATMENT OF CONTRIBUTIONS IN EXCHANGE

16 FOR STOCK, ETC.— 

17 ‘‘(1) IN GENERAL.—In the case of any con18 tribution of money or other property to a corpora19 tion in exchange for stock of such corporation— 

20 ‘‘(A) such contribution shall not be treated 

21 for purposes of subsection (a) as a contribution 

22 to the capital of such corporation (and shall not 

23 be includible in the gross income of such cor24 poration), and 


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1 ‘‘(B) no gain or loss shall be recognized to 

2 such corporation upon the issuance of such 

3 stock. 

4 ‘‘(2) TREATMENT LIMITED TO VALUE OF

5 STOCK.—For purposes of this subsection, a contribu6 tion of money or other property to a corporation 

7 shall be treated as being in exchange for stock of 

8 such corporation only to the extent that the fair 

9 market value of such money and other property does 

10 not exceed the fair market value of such stock. 

11 ‘‘(3) APPLICATION TO ENTITIES OTHER THAN

12 CORPORATIONS.—In the case of any entity other 

13 than a corporation, rules similar to the rules of 

14 paragraphs (1) and (2) shall apply in the case of 

15 any contribution of money or other property to such 

16 entity in exchange for any interest in such entity. 

17 ‘‘(c) TREASURY STOCK TREATED AS STOCK.—Any 

18 reference in this section to stock shall be treated as includ19 ing a reference to treasury stock.’’. 

20 (b) BASIS OF CORPORATION IN CONTRIBUTED PROP21 ERTY.— 

22 (1) CONTRIBUTIONS TO CAPITAL.—Subsection 

23 (c) of section 362 is amended to read as follows: 

24 ‘‘(c) CONTRIBUTIONS TO CAPITAL.—If property 

25 other than money is transferred to a corporation as a conVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00233 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 tribution to the capital of such corporation (within the 

2 meaning of section 76) then the basis of such property 

3 shall be the greater of— 

4 ‘‘(1) the basis determined in the hands of the 

5 transferor, increased by the amount of gain recog6 nized to the transferor on such transfer, or 

7 ‘‘(2) the amount included in gross income by 

8 such corporation under section 76 with respect to 

9 such contribution.’’. 

10 (2) CONTRIBUTIONS IN EXCHANGE FOR

11 STOCK.—Paragraph (2) of section 362(a) is amend12 ed by striking ‘‘contribution to capital’’ and insert13 ing ‘‘contribution in exchange for stock of such cor14 poration (determined under rules similar to the rules 

15 of paragraphs (2) and (3) of section 76(b))’’. 

16 (c) CONFORMING AMENDMENTS.— 

17 (1) Section 108(e) is amended by striking para18 graph (6). 

19 (2) Part III of subchapter B of chapter 1 is 

20 amended by striking section 118 (and by striking 

21 the item relating to such section in the table of sec22 tions for such part). 

23 (3) The table of sections for part II of sub24 chapter B of chapter 1 is amended by inserting after 


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1 the item relating to section 75 the following new 

2 item: 

‘‘Sec. 76. Contributions to capital.’’. 

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

4 this section shall apply to contributions made, and trans5 actions entered into, after the date of the enactment of 

6 this Act. 

7 SEC. 3305. REPEAL OF DEDUCTION FOR LOCAL LOBBYING 

8 EXPENSES. 

9 (a) IN GENERAL.—Section 162(e) is amended by 

10 striking paragraphs (2) and (7) and by redesignating 

11 paragraphs (3), (4), (5), (6), and (8) as paragraphs (2), 

12 (3), (4), (5), and (6), respectively. 

13 (b) CONFORMING AMENDMENT.—Section 

14 6033(e)(1)(B)(ii) is amended by striking ‘‘section 

15 162(e)(5)(B)(ii)’’ and inserting ‘‘section 

16 162(e)(4)(B)(ii)’’. 

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

18 this section shall apply to amounts paid or incurred after 

19 December 31, 2017. 

20 SEC. 3306. REPEAL OF DEDUCTION FOR INCOME ATTRIB21 UTABLE TO DOMESTIC PRODUCTION ACTIVI22 TIES. 

23 (a) IN GENERAL.—Part VI of subchapter B of chap24 ter 1 is amended by striking section 199 (and by striking 


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1 the item relating to such section in the table of sections 

2 for such part). 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Sections 74(d)(2)(B), 86(b)(2)(A), 

5 137(b)(3)(A), and 246(b)(1) are each amended by 

6 striking ‘‘199,’’. 

7 (2) Section 170(b)(2)(D), as amended by the 

8 preceding provisions of this Act, is amended by 

9 striking clause (iv), by redesignating clause (v) as 

10 clause (iv), and by inserting ‘‘and’’ at the end of 

11 clause (iii). 

12 (3) Section 172(d) is amended by striking para13 graph (7). 

14 (4) Section 613(a) is amended by striking ‘‘and 

15 without the deduction under section 199’’. 

16 (5) Section 613A(d)(1) is amended by striking 

17 subparagraph (B) and by redesignating subpara18 graphs (C), (D), and (E) as subparagraphs (B), (C), 

19 and (D), respectively. 

20 (6) Section 1402(a) is amended by adding 

21 ‘‘and’’ at the end of paragraph (15) and by striking 

22 paragraph (16). 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2017. 


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1 SEC. 3307. ENTERTAINMENT, ETC. EXPENSES. 

2 (a) DENIAL OF DEDUCTION.—Subsection (a) of sec3 tion 274 is amended to read as follows: 

4 ‘‘(a) ENTERTAINMENT, AMUSEMENT, RECREATION, 

5 AND OTHER FRINGE BENEFITS .— 

6 ‘‘(1) IN GENERAL.—No deduction otherwise al7 lowable under this chapter shall be allowed for 

8 amounts paid or incurred for any of the following 

9 items: 

10 ‘‘(A) ACTIVITY.—With respect to an activ11 ity which is of a type generally considered to 

12 constitute entertainment, amusement, or recre13 ation. 

14 ‘‘(B) MEMBERSHIP DUES.—With respect 

15 to membership in any club organized for busi16 ness, pleasure, recreation or other social pur17 poses. 

18 ‘‘(C) AMENITY.—With respect to a de 

19 minimis fringe (as defined in section 132(e)(1)) 

20 that is primarily personal in nature and involv21 ing property or services that are not directly re22 lated to the taxpayer’s trade or business. 

23 ‘‘(D) FACILITY.—With respect to a facility 

24 or portion thereof used in connection with an 

25 activity referred to in subparagraph (A), mem26 bership dues or similar amounts referred to in 


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1 subparagraph (B), or an amenity referred to in 

2 subparagraph (C). 

3 ‘‘(E) QUALIFIED TRANSPORTATION

4 FRINGE AND PARKING FACILITY.—Which is a 

5 qualified transportation fringe (as defined in 

6 section 132(f)) or which is a parking facility 

7 used in connection with qualified parking (as 

8 defined in section 132(f)(5)(C)). 

9 ‘‘(F) ON-PREMISES ATHLETIC FACILITY.— 

10 Which is an on-premises athletic facility as de11 fined in section 132(j)(4)(B). 

12 ‘‘(2) SPECIAL RULES.—For purposes of apply13 ing paragraph (1), an activity described in section 

14 212 shall be treated as a trade or business. 

15 ‘‘(3) REGULATIONS.—Under the regulations 

16 prescribed to carry out this section, the Secretary 

17 shall include regulations— 

18 ‘‘(A) defining entertainment, amenities, 

19 recreation, amusement, and facilities for pur20 poses of this subsection, 

21 ‘‘(B) providing for the appropriate alloca22 tion of depreciation and other costs with respect 

23 to facilities used for parking or for on-premises 

24 athletic facilities, and 


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1 ‘‘(C) specifying arrangements a primary 

2 purpose of which is the avoidance of this sub3 section.’’. 

4 (b) EXCEPTION FOR CERTAIN EXPENSES INCLUD5 IBLE IN INCOME OF RECIPIENT.— 

6 (1) EXPENSES TREATED AS COMPENSATION.— 

7 Paragraph (2) of section 274(e) is amended to read 

8 as follows: 

9 ‘‘(2) EXPENSES TREATED AS COMPENSATION.— 

10 Expenses for goods, services, and facilities, to the 

11 extent that the expenses do not exceed the amount 

12 of the expenses which are treated by the taxpayer, 

13 with respect to the recipient of the entertainment, 

14 amusement, or recreation, as compensation to an 

15 employee on the taxpayer’s return of tax under this 

16 chapter and as wages to such employee for purposes 

17 of chapter 24 (relating to withholding of income tax 

18 at source on wages).’’. 

19 (2) EXPENSES INCLUDIBLE IN INCOME OF PER20 SONS WHO ARE NOT EMPLOYEES.—Paragraph (9) of 

21 section 274(e) is amended by striking ‘‘to the extent 

22 that the expenses’’ and inserting ‘‘to the extent that 

23 the expenses do not exceed the amount of the ex24 penses that’’. 


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1 (c) EXCEPTIONS FOR REIMBURSED EXPENSES.— 

2 Paragraph (3) of section 274(e) is amended to read as 

3 follows: 

4 ‘‘(3) REIMBURSED EXPENSES.— 

5 ‘‘(A) IN GENERAL.—Expenses paid or in6 curred by the taxpayer, in connection with the 

7 performance by him of services for another per8 son (whether or not such other person is the 

9 taxpayer’s employer), under a reimbursement or 

10 other expense allowance arrangement with such 

11 other person, but this paragraph shall apply— 

12 ‘‘(i) where the services are performed 

13 for an employer, only if the employer has 

14 not treated such expenses in the manner 

15 provided in paragraph (2), or 

16 ‘‘(ii) where the services are performed 

17 for a person other than an employer, only 

18 if the taxpayer accounts (to the extent pro19 vided by subsection (d)) to such person. 

20 ‘‘(B) EXCEPTION.—Except as provided by 

21 the Secretary, subparagraph (A) shall not 

22 apply— 

23 ‘‘(i) in the case of an arrangement in 

24 which the person other than the employer 


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1 is an entity described in section 

2 168(h)(2)(A), or 

3 ‘‘(ii) to any other arrangement des4 ignated by the Secretary as having the ef5 fect of avoiding the limitation under sub6 paragraph (A).’’. 

7 (d) 50 PERCENT LIMITATION ON MEALS AND EN8 TERTAINMENT EXPENSES.—Subsection (n) of section 274 

9 is amended to read as follows: 

10 ‘‘(n) LIMITATION ON CERTAIN EXPENSES.— 

11 ‘‘(1) IN GENERAL.—The amount allowable as a 

12 deduction under this chapter for any expense for 

13 food or beverages (pursuant to subsection (e)(1)) or 

14 business meals (pursuant to subsection (k)(1)) shall 

15 not exceed 50 percent of the amount of such expense 

16 or item which would (but for this paragraph) be al17 lowable as a deduction under this chapter. 

18 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not 

19 apply to any expense if— 

20 ‘‘(A) such expense is described in para21 graph (2), (3), (6), (7), or (8) of subsection (e), 

22 ‘‘(B) in the case of an expense for food or 

23 beverages, such expense is excludable from the 

24 gross income of the recipient under section 132 

25 by reason of subsection (e) thereof (relating to 


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1 de minimis fringes) or under section 119 (relat2 ing to meals and lodging furnished for conven3 ience of employer), or 

4 ‘‘(C) in the case of an employer who pays 

5 or reimburses moving expenses of an employee, 

6 such expenses are includible in the income of 

7 the employee under section 82. 

8 ‘‘(3) SPECIAL RULE FOR INDIVIDUALS SUBJECT

9 TO FEDERAL HOURS OF SERVICE.—In the case of 

10 any expenses for food or beverages consumed while 

11 away from home (within the meaning of section 

12 162(a)(2)) by an individual during, or incident to, 

13 the period of duty subject to the hours of service 

14 limitations of the Department of Transportation, 

15 paragraph (1) shall be applied by substituting ‘80 

16 percent’ for ‘50 percent’.’’. 

17 (e) CONFORMING AMENDMENTS.— 

18 (1) Section 274(d) is amended— 

19 (A) by striking paragraph (2) and redesig20 nating paragraphs (3) and (4) as paragraphs 

21 (2) and (3), respectively, and 

22 (B) in the flush material following para23 graph (3) (as so redesignated)— 


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1 (i) by striking ‘‘, entertainment, 

2 amusement, recreation, or’’ in item (B), 

3 and 

4 (ii) by striking ‘‘(D) the business rela5 tionship to the taxpayer of persons enter6 tained, using the facility or property, or re7 ceiving the gift’’ and inserting ‘‘(D) the 

8 business relationship to the taxpayer of the 

9 person receiving the benefit’’. 

10 (2) Section 274(e) is amended by striking para11 graph (4) and redesignating paragraphs (5), (6), 

12 (7), (8), and (9) as paragraphs (4), (5), (6), (7), 

13 and (8), respectively. 

14 (3) Section 274(k)(2)(A) is amended by strik15 ing ‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), (7), or 

16 (8)’’. 

17 (4) Section 274 is amended by striking sub18 section (l). 

19 (5) Section 274(m)(1)(B)(ii) is amended by 

20 striking ‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), 

21 (7), or (8)’’. 

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

23 this section shall apply to amounts paid or incurred after 

24 December 31, 2017. 


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1 SEC. 3308. UNRELATED BUSINESS TAXABLE INCOME IN2 CREASED BY AMOUNT OF CERTAIN FRINGE 

3 BENEFIT EXPENSES FOR WHICH DEDUCTION 

4 IS DISALLOWED. 

5 (a) IN GENERAL.—Section 512(a) is amended by 

6 adding at the end the following new paragraph: 

7 ‘‘(6) INCREASE IN UNRELATED BUSINESS TAX8 ABLE INCOME BY DISALLOWED FRINGE.—Unrelated 

9 business taxable income of an organization shall be 

10 increased by any amount for which a deduction is 

11 not allowable under this chapter by reason of section 

12 274 and which is paid or incurred by such organiza13 tion for any qualified transportation fringe (as de14 fined in section 132(f)), any parking facility used in 

15 connection with qualified parking (as defined in sec16 tion 132(f)(5)(C)), or any on-premises athletic facil17 ity (as defined in section 132(j)(4)(B)). The pre18 ceding sentence shall not apply to the extent the 

19 amount paid or incurred is directly connected with 

20 an unrelated trade or business which is regularly 

21 carried on by the organization. The Secretary may 

22 issue such regulations or other guidance as may be 

23 necessary or appropriate to carry out the purposes 

24 of this paragraph, including regulations or other 

25 guidance providing for the appropriate allocation of 

26 depreciation and other costs with respect to facilities 


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1 used for parking or for on-premises athletic facili2 ties.’’. 

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

4 this section shall apply to amounts paid or incurred after 

5 December 31, 2017. 

6 SEC. 3309. LIMITATION ON DEDUCTION FOR FDIC PRE7 MIUMS. 

8 (a) IN GENERAL.—Section 162 is amended by redes9 ignating subsection (q) as subsection (r) and by inserting 

10 after subsection (p) the following new subsection: 

11 ‘‘(q) DISALLOWANCE OF FDIC PREMIUMS PAID BY

12 CERTAIN LARGE FINANCIAL INSTITUTIONS.— 

13 ‘‘(1) IN GENERAL.—No deduction shall be al14 lowed for the applicable percentage of any FDIC 

15 premium paid or incurred by the taxpayer. 

16 ‘‘(2) EXCEPTION FOR SMALL INSTITUTIONS.— 

17 Paragraph (1) shall not apply to any taxpayer for 

18 any taxable year if the total consolidated assets of 

19 such taxpayer (determined as of the close of such 

20 taxable year) do not exceed $10,000,000,000. 

21 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes 

22 of this subsection, the term ‘applicable percentage’ 

23 means, with respect to any taxpayer for any taxable 

24 year, the ratio (expressed as a percentage but not 

25 greater than 100 percent) which— 


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1 ‘‘(A) the excess of— 

2 ‘‘(i) the total consolidated assets of 

3 such taxpayer (determined as of the close 

4 of such taxable year), over 

5 ‘‘(ii) $10,000,000,000, bears to 

6 ‘‘(B) $40,000,000,000. 

7 ‘‘(4) FDIC PREMIUMS.—For purposes of this 

8 subsection, the term ‘FDIC premium’ means any as9 sessment imposed under section 7(b) of the Federal 

10 Deposit Insurance Act (12 U.S.C. 1817(b)). 

11 ‘‘(5) TOTAL CONSOLIDATED ASSETS.—For pur12 poses of this subsection, the term ‘total consolidated 

13 assets’ has the meaning given such term under sec14 tion 165 of the Dodd-Frank Wall Street Reform and 

15 Consumer Protection Act (12 U.S.C. 5365). 

16 ‘‘(6) AGGREGATION RULE.— 

17 ‘‘(A) IN GENERAL.—Members of an ex18 panded affiliated group shall be treated as a 

19 single taxpayer for purposes of applying this 

20 subsection. 

21 ‘‘(B) EXPANDED AFFILIATED GROUP.— 

22 For purposes of this paragraph, the term ‘ex23 panded affiliated group’ means an affiliated 

24 group as defined in section 1504(a), deter25 mined— 


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1 ‘‘(i) by substituting ‘more than 50 

2 percent’ for ‘at least 80 percent’ each place 

3 it appears, and 

4 ‘‘(ii) without regard to paragraphs (2) 

5 and (3) of section 1504(b). 

6 A partnership or any other entity (other than a 

7 corporation) shall be treated as a member of an 

8 expanded affiliated group if such entity is con9 trolled (within the meaning of section 

10 954(d)(3)) by members of such group (includ11 ing any entity treated as a member of such 

12 group by reason of this sentence).’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2017. 

16 SEC. 3310. REPEAL OF ROLLOVER OF PUBLICLY TRADED 

17 SECURITIES GAIN INTO SPECIALIZED SMALL 

18 BUSINESS INVESTMENT COMPANIES. 

19 (a) IN GENERAL.—Part III of subchapter O of chap20 ter 1 is amended by striking section 1044 (and by striking 

21 the item relating to such section in the table of sections 

22 of such part). 

23 (b) CONFORMING AMENDMENTS.—Section 

24 1016(a)(23) is amended— 

25 (1) by striking ‘‘1044,’’, and 


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1 (2) by striking ‘‘1044(d),’’. 

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

3 this section shall apply to sales after December 31, 2017. 

4 SEC. 3311. CERTAIN SELF-CREATED PROPERTY NOT TREAT5 ED AS A CAPITAL ASSET. 

6 (a) PATENTS, ETC.—Section 1221(a)(3) is amended 

7 by inserting ‘‘a patent, invention, model or design (wheth8 er or not patented), a secret formula or process,’’ before 

9 ‘‘a copyright’’. 

10 (b) SELF-CREATED MUSICAL WORKS.—Section 

11 1221(b) is amended by striking paragraph (3) and redes12 ignating paragraph (4) as paragraph (3). 

13 (c) CONFORMING AMENDMENTS.— 

14 (1) Section 170(e)(1)(A) is amended by striking 

15 ‘‘(determined without regard to section 

16 1221(b)(3))’’. 

17 (2) Section 1231(b)(1)(C) is amended by insert18 ing ‘‘a patent, invention, model or design (whether 

19 or not patented), a secret formula or process,’’ be20 fore ‘‘a copyright’’. 

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

22 this section shall apply to dispositions after December 31, 

23 2017. 


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1 SEC. 3312. REPEAL OF SPECIAL RULE FOR SALE OR EX2 CHANGE OF PATENTS. 

3 (a) IN GENERAL.—Part IV of subchapter P of chap4 ter 1 is amended by striking section 1235 (and by striking 

5 the item relating to such section in the table of sections 

6 of such part). 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 483(d) is amended by striking para9 graph (4). 

10 (2) Section 901(l)(5) is amended by striking 

11 ‘‘without regard to section 1235 or any similar rule’’ 

12 and inserting ‘‘without regard to any provision 

13 which treats a disposition as a sale or exchange of 

14 a capital asset held for more than 1 year or any 

15 similar provision’’. 

16 (3) Section 1274(c)(3) is amended by striking 

17 subparagraph (E) and redesignating subparagraph 

18 (F) as subparagraph (E). 

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

20 this section shall apply to dispositions after December 31, 

21 2017. 

22 SEC. 3313. REPEAL OF TECHNICAL TERMINATION OF PART23 NERSHIPS. 

24 (a) IN GENERAL.—Paragraph (1) of section 708(b) 

25 is amended— 


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1 (1) by striking ‘‘, or’’ at the end of subpara2 graph (A) and all that follows and inserting a pe3 riod, and 

4 (2) by striking ‘‘only if—’’ and all that follows 

5 through ‘‘no part of any business’’ and inserting the 

6 following: ‘‘only if no part of any business’’. 

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

8 this section shall apply to partnership taxable years begin9 ning after December 31, 2017. 

10 Subtitle E—Reform of Business 

11 Credits 

12 SEC. 3401. REPEAL OF CREDIT FOR CLINICAL TESTING EX13 PENSES FOR CERTAIN DRUGS FOR RARE DIS14 EASES OR CONDITIONS. 

15 (a) IN GENERAL.—Subpart D of part IV of sub16 chapter A of chapter 1 is amended by striking section 45C 

17 (and by striking the item relating to such section in the 

18 table of sections for such subpart). 

19 (b) CONFORMING AMENDMENTS.— 

20 (1) Section 38(b) is amended by striking para21 graph (12). 

22 (2) Section 280C is amended by striking sub23 section (b). 

24 (3) Section 6501(m) is amended by striking 

25 ‘‘45C(d)(4),’’. 


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

2 this section shall apply to amounts paid or incurred in tax3 able years beginning after December 31, 2017. 

4 SEC. 3402. REPEAL OF EMPLOYER-PROVIDED CHILD CARE 

5 CREDIT. 

6 (a) IN GENERAL.—Subpart D of part IV of sub7 chapter A of chapter 1 is amended by striking section 45F 

8 (and by striking the item relating to such section in the 

9 table of sections for such subpart). 

10 (b) CONFORMING AMENDMENTS.— 

11 (1) Section 38(b) is amended by striking para12 graph (15). 

13 (2) Section 1016(a) is amended by striking 

14 paragraph (28). 

15 (c) EFFECTIVE DATE.— 

16 (1) IN GENERAL.—Except as otherwise pro17 vided in this subsection, the amendments made by 

18 this section shall apply to taxable years beginning 

19 after December 31, 2017. 

20 (2) BASIS ADJUSTMENTS.—The amendment 

21 made by subsection (b)(2) shall apply to credits de22 termined for taxable years beginning after December 

23 31, 2017. 


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1 SEC. 3403. REPEAL OF REHABILITATION CREDIT. 

2 (a) IN GENERAL.—Subpart E of part IV of sub3 chapter A of chapter 1 is amended by striking section 47 

4 (and by striking the item relating to such section in the 

5 table of sections for such subpart). 

6 (b) CONFORMING AMENDMENTS.— 

7 (1) Section 170(f)(14)(A) is amended by insert8 ing ‘‘(as in effect before its repeal by the Tax Cuts 

9 and Jobs Act)’’ after ‘‘section 47’’. 

10 (2) Section 170(h)(4) is amended— 

11 (A) by striking ‘‘(as defined in section 

12 47(c)(3)(B))’’ in subparagraph (C)(ii), and 

13 (B) by adding at the end the following new 

14 subparagraph: 

15 ‘‘(D) REGISTERED HISTORIC DISTRICT.— 

16 The term ‘registered historic district’ means— 

17 ‘‘(i) any district listed in the National 

18 Register, and 

19 ‘‘(ii) any district— 

20 ‘‘(I) which is designated under a 

21 statute of the appropriate State or 

22 local government, if such statute is 

23 certified by the Secretary of the Inte24 rior to the Secretary as containing cri25 teria which will substantially achieve 

26 the purpose of preserving and rehaVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00252 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 bilitating buildings of historic signifi2 cance to the district, and 

3 ‘‘(II) which is certified by the 

4 Secretary of the Interior to the Sec5 retary as meeting substantially all of 

6 the requirements for the listing of dis7 tricts in the National Register.’’. 

8 (3) Section 469(i)(3) is amended by striking 

9 subparagraph (B). 

10 (4) Section 469(i)(6)(B) is amended— 

11 (A) by striking ‘‘in the case of—’’ and all 

12 that follows and inserting ‘‘in the case of any 

13 credit determined under section 42 for any tax14 able year.’’, and 

15 (B) by striking ‘‘, REHABILITATION CRED16 IT,’’ in the heading thereof. 

17 (5) Section 469(k)(1) is amended by striking ‘‘, 

18 or any rehabilitation credit determined under section 

19 47,’’. 

20 (c) EFFECTIVE DATE.— 

21 (1) IN GENERAL.—Except as provided in para22 graph (2), the amendments made by this section 

23 shall apply to amounts paid or incurred after De24 cember 31, 2017. 


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1 (2) TRANSITION RULE.—In the case of quali2 fied rehabilitation expenditures (within the meaning 

3 of section 47 of the Internal Revenue Code of 1986 

4 as in effect before its repeal) with respect to any 

5 building— 

6 (A) owned or leased (as permitted by sec7 tion 47 of the Internal Revenue Code of 1986 

8 as in effect before its repeal) by the taxpayer at 

9 all times after December 31, 2017, and 

10 (B) with respect to which the 24-month 

11 period selected by the taxpayer under section 

12 47(c)(1)(C) of such Code begins not later than 

13 the end of the 180-day period beginning on the 

14 date of the enactment of this Act, 

15 the amendments made by this section shall apply to 

16 such expenditures paid or incurred after the end of 

17 the taxable year in which the 24-month period re18 ferred to in subparagraph (B) ends. 

19 SEC. 3404. REPEAL OF WORK OPPORTUNITY TAX CREDIT. 

20 (a) IN GENERAL.—Subpart F of part IV of sub21 chapter A of chapter 1 is amended by striking section 51 

22 (and by striking the item relating to such section in the 

23 table of sections for such subpart). 

24 (b) CLERICAL AMENDMENT.—The heading of such 

25 subpart F (and the item relating to such subpart in the 


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1 table of subparts for part IV of subchapter A of chapter 

2 1) are each amended by striking ‘‘Rules for Computing 

3 Work Opportunity Credit’’ and inserting ‘‘Special Rules’’. 

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

5 this section shall apply to amounts paid or incurred to 

6 individuals who begin work for the employer after Decem7 ber 31, 2017. 

8 SEC. 3405. REPEAL OF DEDUCTION FOR CERTAIN UNUSED 

9 BUSINESS CREDITS. 

10 (a) IN GENERAL.—Part VI of subchapter B of chap11 ter 1 is amended by striking section 196 (and by striking 

12 the item relating to such section in the table of sections 

13 for such part). 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2017. 

17 SEC. 3406. TERMINATION OF NEW MARKETS TAX CREDIT. 

18 (a) IN GENERAL.—Section 45D(f) is amended— 

19 (1) by striking ‘‘2019’’ in paragraph (1)(G) and 

20 inserting ‘‘2017’’, and 

21 (2) by striking ‘‘2024’’ in paragraph (3) and in22 serting ‘‘2022’’. 

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

24 this section shall apply to calendar years beginning after 

25 December 31, 2017. 


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1 SEC. 3407. REPEAL OF CREDIT FOR EXPENDITURES TO 

2 PROVIDE ACCESS TO DISABLED INDIVID3 UALS. 

4 (a) IN GENERAL.—Subpart D of part IV of sub5 chapter A of chapter 1 is amended by striking section 44 

6 (and by striking the item relating to such section in the 

7 table of sections for such subpart). 

8 (b) CONFORMING AMENDMENT.—Section 38(b) is 

9 amended by striking paragraph (7). 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2017. 

13 SEC. 3408. MODIFICATION OF CREDIT FOR PORTION OF EM14 PLOYER SOCIAL SECURITY TAXES PAID WITH 

15 RESPECT TO EMPLOYEE TIPS. 

16 (a) CREDIT DETERMINED WITH RESPECT TO MIN17 IMUM WAGE AS IN EFFECT.—Section 45B(b)(1)(B) is 

18 amended by striking ‘‘as in effect on January 1, 2007, 

19 and’’. 

20 (b) INFORMATION RETURN REQUIREMENT.—Section 

21 45B is amended by redesignating subsections (c) and (d) 

22 as subsections (d) and (e), respectively, and by inserting 

23 after subsection (b) the following new subsection: 

24 ‘‘(c) INFORMATION RETURN REQUIREMENT.— 

25 ‘‘(1) IN GENERAL.—No credit shall be deter26 mined under subsection (a) with respect to any food 


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1 or beverage establishment of any taxpayer for any 

2 taxable year unless such taxpayer has, with respect 

3 to the calendar year which ends in or with such tax4 able year— 

5 ‘‘(A) made a report to the Secretary show6 ing the information described in section 

7 6053(c)(1) with respect to such food or bev8 erage establishment, and 

9 ‘‘(B) furnished written statements to each 

10 employee of such food or beverage establish11 ment showing the information described in sec12 tion 6053(c)(2). 

13 ‘‘(2) ALLOCATION OF 10 PERCENT OF GROSS

14 RECEIPTS.—For purposes of determining the infor15 mation referred to in subparagraphs (A) and (B), 

16 section 6053(c)(3)(A)(i) shall be applied by sub17 stituting ‘10 percent’ for ‘8 percent’. For purposes 

18 of section 6053(c)(5), any reference to section 

19 6053(c)(3)(B) contained therein shall be treated as 

20 including a reference to this paragraph. 

21 ‘‘(3) FOOD OR BEVERAGE ESTABLISHMENT.— 

22 For purposes of this subsection, the term ‘food or 

23 beverage establishment’ means any trade or business 

24 (or portion thereof) which would be a large food or 

25 beverage establishment (as defined in section 


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1 6053(c)(4)) if such section were applied without re2 gard to subparagraph (C) thereof.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 Subtitle F—Energy Credits 

7 SEC. 3501. MODIFICATIONS TO CREDIT FOR ELECTRICITY 

8 PRODUCED FROM CERTAIN RENEWABLE RE9 SOURCES. 

10 (a) TERMINATION OF INFLATION ADJUSTMENT.— 

11 Section 45(b)(2) is amended— 

12 (1) by striking ‘‘The 1.5 cent amount’’ and in13 serting the following: 

14 ‘‘(A) IN GENERAL.—The 1.5 cent 

15 amount’’, and 

16 (2) by adding at the end the following new sub17 paragraph: 

18 ‘‘(B) TERMINATION.—Subparagraph (A) 

19 shall not apply with respect to any electricity or 

20 refined coal produced at a facility the construc21 tion of which begins after the date of the enact22 ment of this subparagraph.’’. 

23 (b) SPECIAL RULE FOR DETERMINATION OF BEGIN24 NING OF CONSTRUCTION.—Section 45(e) is amended by 

25 adding at the end the following new paragraph: 


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1 ‘‘(12) SPECIAL RULE FOR DETERMINING BE2 GINNING OF CONSTRUCTION.—For purposes of sub3 section (d), the construction of any facility, modi4 fication, improvement, addition, or other property 

5 shall not be treated as beginning before any date un6 less there is a continuous program of construction 

7 which begins before such date and ends on the date 

8 that such property is placed in service.’’. 

9 (c) EFFECTIVE DATES.— 

10 (1) TERMINATION OF INFLATION ADJUST11 MENT.—The amendments made by subsection (a) 

12 shall apply to taxable years ending after the date of 

13 the enactment of this Act. 

14 (2) SPECIAL RULE FOR DETERMINATION OF

15 BEGINNING OF CONSTRUCTION.—The amendment 

16 made by subsection (b) shall apply to taxable years 

17 beginning before, on, or after the date of the enact18 ment of this Act. 

19 SEC. 3502. MODIFICATION OF THE ENERGY INVESTMENT 

20 TAX CREDIT. 

21 (a) EXTENSION OF SOLAR ENERGY PROPERTY.— 

22 Section 48(a)(3)(A)(ii) is amended by striking ‘‘periods 

23 ending before January 1, 2017’’ and inserting ‘‘property 

24 the construction of which begins before January 1, 2022’’. 


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1 (b) EXTENSION OF QUALIFIED FUEL CELL PROP2 ERTY.—Section 48(c)(1)(D) is amended by striking ‘‘for 

3 any period after December 31, 2016’’ and inserting ‘‘the 

4 construction of which does not begin before January 1, 

5 2022’’. 

6 (c) EXTENSION OF QUALIFIED MICROTURBINE

7 PROPERTY.—Section 48(c)(2)(D) is amended by striking 

8 ‘‘for any period after December 31, 2016’’ and inserting 

9 ‘‘the construction of which does not begin before January 

10 1, 2022’’. 

11 (d) EXTENSION OF COMBINED HEAT AND POWER

12 SYSTEM PROPERTY.—Section 48(c)(3)(A)(iv) is amended 

13 by striking ‘‘which is placed in service before January 1, 

14 2017’’ and inserting ‘‘the construction of which begins be15 fore January 1, 2022’’. 

16 (e) EXTENSION OF QUALIFIED SMALL WIND EN17 ERGY PROPERTY.—Section 48(c)(4)(C) is amended by 

18 striking ‘‘for any period after December 31, 2016’’ and 

19 inserting ‘‘the construction of which does not begin before 

20 January 1, 2022’’. 

21 (f) EXTENSION OF THERMAL ENERGY PROPERTY.— 

22 Section 48(a)(3)(A)(vii) is amended by striking ‘‘periods 

23 ending before January 1, 2017’’ and inserting ‘‘property 

24 the construction of which begins before January 1, 2022’’. 


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1 (g) PHASEOUT OF 30 PERCENT CREDIT RATE FOR

2 FUEL CELL AND SMALL WIND ENERGY PROPERTY.— 

3 Section 48(a) is amended by adding at the end the fol4 lowing new paragraph: 

5 ‘‘(7) PHASEOUT FOR QUALIFIED FUEL CELL

6 PROPERTY AND QUALIFIED SMALL WIND ENERGY

7 PROPERTY.— 

8 ‘‘(A) IN GENERAL.—In the case of quali9 fied fuel cell property or qualified small wind 

10 energy property, the construction of which be11 gins before January 1, 2022, the energy per12 centage determined under paragraph (2) shall 

13 be equal to— 

14 ‘‘(i) in the case of any property the 

15 construction of which begins after Decem16 ber 31, 2019, and before January 1, 2021, 

17 26 percent, and 

18 ‘‘(ii) in the case of any property the 

19 construction of which begins after Decem20 ber 31, 2020, and before January 1, 2022, 

21 22 percent. 

22 ‘‘(B) PLACED IN SERVICE DEADLINE.—In 

23 the case of any qualified fuel cell property or 

24 qualified small wind energy property, the con25 struction of which begins before January 1, 


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1 2022, and which is not placed in service before 

2 January 1, 2024, the energy percentage deter3 mined under paragraph (2) shall be equal to 10 

4 percent.’’. 

5 (h) PHASEOUT FOR FIBER-OPTIC SOLAR ENERGY

6 PROPERTY.—Subparagraphs (A) and (B) of section 

7 48(a)(6) are each amended by inserting ‘‘or (3)(A)(ii)’’ 

8 after ‘‘paragraph (3)(A)(i)’’. 

9 (i) TERMINATION OF SOLAR ENERGY PROPERTY.— 

10 Section 48(a)(3)(A)(i) is amended by inserting ‘‘, the con11 struction of which begins before January 1, 2028, and’’ 

12 after ‘‘equipment’’. 

13 (j) TERMINATION OF GEOTHERMAL ENERGY PROP14 ERTY.—Section 48(a)(3)(A)(iii) is amended by inserting 

15 ‘‘, the construction of which begins before January 1, 

16 2028, and’’ after ‘‘equipment’’. 

17 (k) SPECIAL RULE FOR DETERMINATION OF BEGIN18 NING OF CONSTRUCTION.—Section 48(c) is amended by 

19 adding at the end the following new paragraph: 

20 ‘‘(5) SPECIAL RULE FOR DETERMINING BEGIN21 NING OF CONSTRUCTION.—The construction of any 

22 facility, modification, improvement, addition, or 

23 other property shall not be treated as beginning be24 fore any date unless there is a continuous program 

25 of construction which begins before such date and 


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1 ends on the date that such property is placed in 

2 service.’’. 

3 (l) EFFECTIVE DATE.— 

4 (1) IN GENERAL.—Except as otherwise pro5 vided in this subsection, the amendments made by 

6 this section shall apply to periods after December 

7 31, 2016, under rules similar to the rules of section 

8 48(m) of the Internal Revenue Code of 1986 (as in 

9 effect on the day before the date of the enactment 

10 of the Revenue Reconciliation Act of 1990). 

11 (2) EXTENSION OF COMBINED HEAT AND

12 POWER SYSTEM PROPERTY.—The amendment made 

13 by subsection (d) shall apply to property placed in 

14 service after December 31, 2016. 

15 (3) PHASEOUTS AND TERMINATIONS.—The 

16 amendments made by subsections (g), (h), (i), and 

17 (j) shall take effect on the date of the enactment of 

18 this Act. 

19 (4) SPECIAL RULE FOR DETERMINATION OF

20 BEGINNING OF CONSTRUCTION.—The amendment 

21 made by subsection (k) shall apply to taxable years 

22 beginning before, on, or after the date of the enact23 ment of this Act. 


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1 SEC. 3503. EXTENSION AND PHASEOUT OF RESIDENTIAL 

2 ENERGY EFFICIENT PROPERTY. 

3 (a) EXTENSION.—Section 25D(h) is amended by 

4 striking ‘‘December 31, 2016 (December 31, 2021, in the 

5 case of any qualified solar electric property expenditures 

6 and qualified solar water heating property expenditures)’’ 

7 and 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 

14 25D(g) of such Code is amended by striking ‘‘para15 graphs (1) and (2) of’’. 

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

17 this section shall apply to property placed in service after 

18 December 31, 2016. 

19 SEC. 3504. REPEAL OF ENHANCED OIL RECOVERY CREDIT. 

20 (a) IN GENERAL.—Subpart D of part IV of sub21 chapter A of chapter 1 is amended by striking section 43 

22 (and by striking the item relating to such section in the 

23 table of sections for such subpart). 

24 (b) CONFORMING AMENDMENTS.— 

25 (1) Section 38(b) is amended by striking para26 graph (6). 


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1 (2) Section 6501(m) is amended by striking 

2 ‘‘43,’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 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 sub9 chapter A of chapter 1 is amended by striking section 45I 

10 (and by striking the item relating to such section in the 

11 table of sections 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 

15 this section shall apply to taxable years beginning after 

16 December 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 

25 paragraph: 


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1 ‘‘(5) ALLOCATION OF UNUTILIZED LIMITA2 TION.— 

3 ‘‘(A) IN GENERAL.—Any unutilized na4 tional megawatt capacity limitation shall be al5 located by the Secretary under paragraph (3) 

6 as rapidly as is practicable after December 31, 

7 2020— 

8 ‘‘(i) first to facilities placed in service 

9 on or before such date to the extent that 

10 such facilities did not receive an allocation 

11 equal to their full nameplate capacity; and 

12 ‘‘(ii) then to facilities placed in service 

13 after such date in the order in which such 

14 facilities are placed in service. 

15 ‘‘(B) UNUTILIZED NATIONAL MEGAWATT

16 CAPACITY LIMITATION.—The term ‘unutilized 

17 national megawatt capacity limitation’ means 

18 the excess (if any) of— 

19 ‘‘(i) 6,000 megawatts, over 

20 ‘‘(ii) the aggregate amount of national 

21 megawatt capacity limitation allocated by 

22 the Secretary before January 1, 2021, re23 duced by any amount of such limitation 

24 which was allocated to a facility which was 

25 not placed in service before such date. 


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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 

6 for purposes of this section in the same 

7 manner as an allocation of national mega8 watt capacity 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 EN13 TITIES.— 

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 

18 following new subsection: 

19 ‘‘(e) TRANSFER OF CREDIT BY CERTAIN PUBLIC EN20 TITIES.— 

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 

24 public entity; and 


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1 ‘‘(B) such entity elects the application of 

2 this paragraph for such taxable year with re3 spect to all (or any portion specified in such 

4 election) 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 re8 spect to such credit (or such portion thereof). 

9 ‘‘(2) DEFINITIONS.—For purposes of this sub10 section— 

11 ‘‘(A) QUALIFIED PUBLIC ENTITY.—The 

12 term ‘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— 


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1 ‘‘(i) any person responsible for, or 

2 participating in, the design or construction 

3 of 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 fa9 cility to which the credit under subsection 

10 (a) relates; 

11 ‘‘(iii) any person who participates in 

12 the provision of nuclear fuel to the ad13 vanced nuclear power facility to which the 

14 credit 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 


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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 

6 credit (or portion thereof) with respect to which 

7 an election is made under paragraph (1), such 

8 credit shall be taken into account in the first 

9 taxable year of the eligible project partner end10 ing with, or after, the qualified public entity’s 

11 taxable year with respect to which the credit 

12 was determined. 

13 ‘‘(C) TREATMENT OF TRANSFER UNDER

14 PRIVATE USE RULES.—For purposes of section 

15 141(b)(1), any benefit derived by an eligible 

16 project partner in connection with an election 

17 under this subsection shall not be taken into ac18 count as a private business use.’’. 

19 (2) SPECIAL RULE FOR PROCEEDS OF TRANS20 FERS FOR MUTUAL OR COOPERATIVE ELECTRIC

21 COMPANIES.—Section 501(c)(12) of such Code is 

22 amended by adding at the end the following new 

23 subparagraph: 

24 ‘‘(I) In the case of a mutual or cooperative 

25 electric company described in this paragraph or 


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1 an organization described in section 1381(a)(2), 

2 income received or accrued in connection with 

3 an election under section 45J(e)(1) shall be 

4 treated as an amount collected from members 

5 for the sole purpose of meeting losses and ex6 penses.’’. 

7 (c) EFFECTIVE DATES.— 

8 (1) TREATMENT OF UNUTILIZED LIMITATION

9 AMOUNTS.—The amendment made by subsection (a) 

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

11 Act. 

12 (2) TRANSFER OF CREDIT BY CERTAIN PUBLIC

13 ENTITIES.—The amendments made by subsection 

14 (b) shall apply to taxable years beginning after the 

15 date of the enactment of this Act. 

16 Subtitle G—Bond Reforms 

17 SEC. 3601. TERMINATION OF PRIVATE ACTIVITY BONDS. 

18 (a) IN GENERAL.—Paragraph (1) of section 103(b) 

19 is amended— 

20 (1) by striking ‘‘which is not a qualified bond 

21 (within the meaning of section 141)’’, and 

22 (2) by striking ‘‘WHICH IS NOT A QUALIFIED

23 BOND’’ in the heading thereof. 

24 (b) CONFORMING AMENDMENTS.— 


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1 (1) Subpart A of part IV of subchapter B of 

2 chapter 1 is amended by striking sections 142, 143, 

3 144, 145, 146, and 147 (and by striking each of the 

4 items relating to such sections in the table of sec5 tions for such subpart). 

6 (2) Section 25 is amended by adding at the end 

7 the following new subsection: 

8 ‘‘(j) COORDINATION WITH REPEAL OF PRIVATE AC9 TIVITY BONDS.—Any reference to section 143, 144, or 

10 146 shall be treated as a reference to such section as in 

11 effect before its repeal by the Tax Cuts and Jobs Act.’’. 

12 (3) Section 26(b)(2) is amended by striking 

13 subparagraph (D). 

14 (4) Section 141(b) is amended by striking para15 graphs (5) and (9). 

16 (5) Section 141(d) is amended by striking para17 graph (5). 

18 (6) Section 141 is amended by striking sub19 section (e). 

20 (7) Section 148(f)(4) is amended— 

21 (A) by striking ‘‘(determined in accordance 

22 with section 147(b)(2)(A))’’ in the flush matter 

23 following subparagraph (A)(ii) and inserting 

24 ‘‘(determined by taking into account the respecVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00272 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 tive issue prices of the bonds issued as part of 

2 the issue)’’, and 

3 (B) by striking the last sentence of sub4 paragraph (D)(v). 

5 (8) Clause (iv) of section 148(f)(4)(C) is 

6 amended to read as follows: 

7 ‘‘(iv) CONSTRUCTION ISSUE.—For 

8 purposes of this subparagraph— 

9 ‘‘(I) IN GENERAL.—The term 

10 ‘construction issue’ means any issue if 

11 at least 75 percent of the available 

12 construction proceeds of such issue 

13 are to be used for construction ex14 penditures. 

15 ‘‘(II) CONSTRUCTION.—The term 

16 ‘construction’ includes reconstruction 

17 and rehabilitation’’. 

18 (9) Section 149(b)(3) is amended by striking 

19 subparagraph (C). 

20 (10) Section 149(e)(2) is amended— 

21 (A) by striking subparagraphs (C), (D), 

22 and (F) and by redesignating subparagraphs 

23 (E) and (G) as subparagraphs (C) and (D), re24 spectively, and 

25 (B) by striking the second sentence. 


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1 (11) Section 149(f)(6) is amended— 

2 (A) by striking subparagraph (B), and 

3 (B) by striking ‘‘For purposes of this sub4 section’’ and all that follows through ‘‘The 

5 term’’ and inserting the following: ‘‘For pur6 poses of this subsection, the term’’. 

7 (12) Section 150(e)(3) is amended to read as 

8 follows: 

9 ‘‘(3) PUBLIC APPROVAL REQUIREMENT.—A 

10 bond shall not be treated as part of an issue which 

11 meets the requirements of paragraph (1) unless such 

12 bond satisfies the requirements of section 147(f)(2) 

13 (as in effect before its repeal by the Tax Cuts and 

14 Jobs Act).’’. 

15 (13) Section 269A(b)(3) is amended by striking 

16 ‘‘144(a)(3)’’ and inserting ‘‘414(n)(6)(A)’’. 

17 (14) Section 414(m)(5) is amended by striking 

18 ‘‘section 144(a)(3)’’ and inserting ‘‘subsection 

19 (n)(6)(A)’’. 

20 (15) Section 414(n)(6)(A) is amended to read 

21 as follows: 

22 ‘‘(A) RELATED PERSONS.—A person is a 

23 related person to another person if— 


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1 ‘‘(i) the relationship between such per2 sons would result in a disallowance of 

3 losses under section 267 or 707(b), or 

4 ‘‘(ii) such persons are members of the 

5 same controlled group of corporations (as 

6 defined in section 1563(a), except that 

7 ‘more than 50 percent’ shall be substituted 

8 for ‘at least 80 percent’ each place it ap9 pears therein).’’. 

10 (16) Section 6045(e)(4)(B) is amended by in11 serting ‘‘(as in effect before its repeal by the Tax 

12 Cuts and Jobs Act)’’ after ‘‘section 143(m)(3)’’. 

13 (17) Section 6654(f)(1) is amended by inserting 

14 ‘‘(as in effect before its repeal by the Tax Cuts and 

15 Jobs Act)’’ after ‘‘section 143(m)’’. 

16 (18) Section 7871(c) is amended— 

17 (A) by striking paragraphs (2) and (3), 

18 and 

19 (B) by striking ‘‘TAX-EXEMPT BONDS.—’’ 

20 and all that follows through ‘‘Subsection (a) of 

21 section 103’’ and inserting the following: ‘‘TAX22 EXEMPT BONDS.—Subsection (a) of section 

23 103’’. 


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

2 this section shall apply to bonds issued after December 

3 31, 2017. 

4 SEC. 3602. REPEAL OF ADVANCE REFUNDING BONDS. 

5 (a) IN GENERAL.—Paragraph (1) of section 149(d) 

6 is amended by striking ‘‘as part of an issue described in 

7 paragraph (2), (3), or (4).’’ and inserting ‘‘to advance re8 fund another bond.’’. 

9 (b) CONFORMING AMENDMENTS.— 

10 (1) Section 149(d) is amended by striking para11 graphs (2), (3), (4), and (6) and by redesignating 

12 paragraphs (5) and (7) as paragraphs (2) and (3). 

13 (2) Section 148(f)(4)(C) is amended by striking 

14 clause (xiv) and by redesignating clauses (xv) to 

15 (xvii) as clauses (xiv) to (xvi). 

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

17 this section shall apply to advance refunding bonds issued 

18 after December 31, 2017. 

19 SEC. 3603. REPEAL OF TAX CREDIT BONDS. 

20 (a) IN GENERAL.—Part IV of subchapter A of chap21 ter 1 is amended by striking subparts H, I, and J (and 

22 by striking the items relating to such subparts in the table 

23 of subparts for such part). 

24 (b) PAYMENTS TO ISSUERS.—Subchapter B of chap25 ter 65 is amended by striking section 6431 (and by strikVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00276 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 ing the item relating to such section in the table of sec2 tions for such subchapter). 

3 (c) CONFORMING AMENDMENTS.— 

4 (1) Part IV of subchapter U of chapter 1 is 

5 amended by striking section 1397E (and by striking 

6 the item relating to such section in the table of sec7 tions for such part). 

8 (2) Section 54(l)(3)(B) is amended by inserting 

9 ‘‘(as in effect before its repeal by the Tax Cuts and 

10 Jobs Act)’’ after ‘‘section 1397E(I)’’. 

11 (3) Section 6211(b)(4)(A) is amended by strik12 ing ‘‘, and 6431’’ and inserting ‘‘and’’ before 

13 ‘‘36B’’. 

14 (4) Section 6401(b)(1) is amended by striking 

15 ‘‘G, H, I, and J’’ and inserting ‘‘and G’’. 

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

17 this section shall apply to bonds issued after December 

18 31, 2017. 

19 SEC. 3604. NO TAX EXEMPT BONDS FOR PROFESSIONAL 

20 STADIUMS. 

21 (a) IN GENERAL.—Section 103(b), as amended by 

22 this Act, is further amended by adding at the end the fol23 lowing new paragraph: 

24 ‘‘(4) PROFESSIONAL STADIUM BOND.—Any pro25 fessional stadium bond.’’. 


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1 (b) PROFESSIONAL STADIUM BOND DEFINED.—Sub2 section (c) of section 103 is amended by adding at the 

3 end the following new paragraph: 

4 ‘‘(3) PROFESSIONAL STADIUM BOND.—The 

5 term ‘professional stadium bond’ means any bond 

6 issued as part of an issue any proceeds of which are 

7 used to finance or refinance capital expenditures al8 locable to a facility (or appurtenant real property) 

9 which, during at least 5 days during any calendar 

10 year, is used as a stadium or arena for professional 

11 sports exhibitions, games, or training.’’. 

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

13 this section shall apply to bonds issued after November 

14 2, 2017. 

15 Subtitle H—Insurance 

16 SEC. 3701. NET OPERATING LOSSES OF LIFE INSURANCE 

17 COMPANIES. 

18 (a) IN GENERAL.—Section 805(b) is amended by 

19 striking paragraph (4) and by redesignating paragraph 

20 (5) as paragraph (4). 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Part I of subchapter L of chapter 1 is 

23 amended by striking section 810 (and by striking 

24 the item relating to such section in the table of sec25 tions for such part). 


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1 (2) Part III of subchapter L of chapter 1 is 

2 amended by striking section 844 (and by striking 

3 the item relating to such section in the table of sec4 tions for such part). 

5 (3) Section 381 is amended by striking sub6 section (d). 

7 (4) Section 805(a)(4)(B)(ii) is amended to read 

8 as follows: 

9 ‘‘(ii) the deduction allowed under sec10 tion 172,’’. 

11 (5) Section 805(a) is amended by striking para12 graph (5). 

13 (6) Section 953(b)(1)(B) is amended to read as 

14 follows: 

15 ‘‘(B) So much of section 805(a)(8) as re16 lates to the deduction allowed under section 

17 172.’’. 

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

19 this section shall apply to losses arising in taxable years 

20 beginning after December 31, 2017. 

21 SEC. 3702. REPEAL OF SMALL LIFE INSURANCE COMPANY 

22 DEDUCTION. 

23 (a) IN GENERAL.—Part I of subchapter L of chapter 

24 1 is amended by striking section 806 (and by striking the 


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1 item relating to such section in the table of sections for 

2 such part). 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 453B(e) is amended— 

5 (A) by striking ‘‘(as defined in section 

6 806(b)(3))’’ in paragraph (2)(B), and 

7 (B) by adding at the end the following new 

8 paragraph: 

9 ‘‘(3) NONINSURANCE BUSINESS.— 

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

11 subsection, the term ‘noninsurance business’ 

12 means any activity which is not an insurance 

13 business. 

14 ‘‘(B) CERTAIN ACTIVITIES TREATED AS IN15 SURANCE BUSINESSES.—For purposes of sub16 paragraph (A), any activity which is not an in17 surance business shall be treated as an insur18 ance business if— 

19 ‘‘(i) it is of a type traditionally carried 

20 on by life insurance companies for invest21 ment purposes, but only if the carrying on 

22 of such activity (other than in the case of 

23 real estate) does not constitute the active 

24 conduct of a trade or business, or 


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1 ‘‘(ii) it involves the performance of ad2 ministrative services in connection with 

3 plans providing life insurance, pension, or 

4 accident and health benefits.’’. 

5 (2) Section 465(c)(7)(D)(v)(II) is amended by 

6 striking ‘‘section 806(b)(3)’’ and inserting ‘‘section 

7 453B(e)(3)’’. 

8 (3) Section 801(a)(2) is amended by striking 

9 subparagraph (C). 

10 (4) Section 804 is amended by striking 

11 ‘‘means—’’ and all that follows and inserting 

12 ‘‘means the general deductions provided in section 

13 805.’’. 

14 (5) Section 805(a)(4)(B), as amended by sec15 tion 3701, is amended by striking clause (i) and by 

16 redesignating clauses (ii), (iii), and (iv) as clauses 

17 (i), (ii), and (iii), respectively. 

18 (6) Section 805(b)(2)(A) is amended by strik19 ing clause (iii) and by redesignating clauses (iv) and 

20 (v) as clauses (iii) and (iv), respectively. 

21 (7) Section 842(c) is amended by striking para22 graph (1) and by redesignating paragraphs (2) and 

23 (3) as paragraphs (1) and (2), respectively. 

24 (8) Section 953(b)(1), as amended by section 

25 3701, is amended by striking subparagraph (A) and 


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1 by redesignating subparagraphs (B) and (C) as sub2 paragraphs (A) and (B), respectively. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 SEC. 3703. COMPUTATION OF LIFE INSURANCE TAX RE7 SERVES. 

8 (a) IN GENERAL.—Section 807 is amended by strik9 ing subsections (c), (d), and (e) and inserting the following 

10 new subsections: 

11 ‘‘(c) ITEMS DESCRIBED.—The items described in this 

12 subsection are the reserves for future unaccrued claims 

13 defined in subsection (e) as determined by applying the 

14 method of computing the reserves in subsection (d). 

15 ‘‘(d) METHOD OF COMPUTING RESERVES FOR PUR16 POSES OF DETERMINING INCOME.—For purposes of this 

17 part (other than section 816), the amount of the reserves 

18 for future unaccrued claims shall be 76.5 percent of the 

19 amount of such reserves as defined in subsection (e). 

20 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur21 poses of this section— 

22 ‘‘(1) RESERVES FOR FUTURE UNACCRUED

23 CLAIMS.—The term ‘reserves for future unaccrued 

24 claims’ means— 


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1 ‘‘(A) life insurance reserves (as defined in 

2 section 816(b)) determined in accordance with 

3 the method prescribed by the National Associa4 tion of Insurance Commissioners and reported 

5 by the taxpayer on its annual statement for the 

6 calendar year that is the taxable year, 

7 ‘‘(B) unpaid losses included in total re8 serves under section 816(c)(2), and 

9 ‘‘(C) the amount (not included in subpara10 graph (A) or (B)) of reserves solely for claims 

11 with respect to insurance risks which are deter12 mined in accordance with the method prescribed 

13 by the National Association of Insurance Com14 missioners and reported by the taxpayer on its 

15 annual statement for the calendar year that is 

16 the taxable year, 

17 but not including any amount of asset adequacy re18 serves, contingency reserves, unearned premium re19 serves, or any other amount not constituting re20 serves for future unaccrued claims as provided in 

21 guidance by the Secretary. For purposes of subpara22 graph (B) and section 805(a)(1), the amount of the 

23 unpaid losses (other than losses on life insurance 

24 contracts) shall be the amount of the discounted un25 paid losses as defined in section 846. 


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1 ‘‘(2) REPORTING RULES.—The Secretary shall 

2 require reporting (at such time and in such manner 

3 as the Secretary shall prescribe) with respect to the 

4 opening balance and closing balance of reserves and 

5 with respect to the method of computing reserves for 

6 purposes of determining income.’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 808 is amended by adding at the 

9 end the following new subsection: 

10 ‘‘(g) PREVAILING STATE ASSUMED INTEREST

11 RATE.—For purposes of this subchapter— 

12 ‘‘(1) IN GENERAL.—The term ‘prevailing State 

13 assumed interest rate’ means, with respect to any 

14 contract, the highest assumed interest rate per15 mitted to be used in computing life insurance re16 serves for insurance contracts or annuity contracts 

17 (as the case may be) under the insurance laws of at 

18 least 26 States. For purposes of the preceding sen19 tence, the effect of nonforfeiture laws of a State on 

20 interest rates for reserves shall not be taken into ac21 count. 

22 ‘‘(2) WHEN RATE DETERMINED.—The pre23 vailing State assumed interest rate with respect to 

24 any contract shall be determined as of the beginning 


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1 of the calendar year in which the contract was 

2 issued.’’. 

3 (2) Paragraph (1) of section 811(d) is amended 

4 by striking ‘‘the greater of the prevailing State as5 sumed interest rate or applicable Federal interest 

6 rate in effect under section 807’’ and inserting ‘‘the 

7 interest rate in effect under section 808(g)’’. 

8 (3) Subparagraph (A) of section 846(f)(6) is 

9 amended by striking ‘‘except that’’ and all that fol10 lows and inserting ‘‘except that the limitation of 

11 subsection (a)(3) shall apply, and’’. 

12 (4) Subparagraph (B) of section 954(i)(5) is 

13 amended by striking ‘‘shall apply, and’’. 

14 (c) EFFECTIVE DATE.— 

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

16 this section shall apply to taxable years beginning 

17 after December 31, 2017. 

18 (2) TRANSITION RULE.—For the first taxable 

19 year beginning after December 31, 2017, the reserve 

20 with respect to any contract (as determined under 

21 section 807(d)(2) of the Internal Revenue Code of 

22 1986) at the end of the preceding taxable year shall 

23 be determined as if the amendments made by this 

24 section had applied to such reserve in such preceding 

25 taxable year. 


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1 (3) TRANSITION RELIEF.— 

2 (A) IN GENERAL.—If— 

3 (i) the reserve determined under sec4 tion 807(d)(2) of the Internal Revenue 

5 Code of 1986 (determined without regard 

6 to the amendments made by this section) 

7 with respect to any contract as of the close 

8 of the year preceding the first taxable year 

9 beginning after December 31, 2017, differs 

10 from 

11 (ii) the reserve which would have been 

12 determined with respect to such contract 

13 as of the close of such taxable year under 

14 such section determined without regard to 

15 paragraph (2), 

16 then the difference between the amount of the 

17 reserve described in clause (i) and the amount 

18 of the reserve described in clause (ii) shall be 

19 taken into account under the method provided 

20 in subparagraph (B). 

21 (B) METHOD.—The method provided in 

22 this subparagraph is as follows: 

23 (i) if the amount determined under 

24 subparagraph (A)(i) exceeds the amount 

determined under subparagraph (A)(ii), 1 25 ⁄8


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1 of such excess shall be taken into account, 

2 for each of the 8 succeeding taxable years, 

3 as a deduction under section 805(a)(2) of 

4 such Code, or 

5 (ii) if the amount determined under 

6 subparagraph (A)(ii) exceeds the amount 

determined under subparagraph (A)(i), 1 7 ⁄8

8 of such excess shall be included in gross in9 come, for each of the 8 succeeding taxable 

10 years, under section 803(a)(2) of such 

11 Code. 

12 SEC. 3704. ADJUSTMENT FOR CHANGE IN COMPUTING RE13 SERVES. 

14 (a) IN GENERAL.—Paragraph (1) of section 807(f) 

15 is amended to read as follows: 

16 ‘‘(1) TREATMENT AS CHANGE IN METHOD OF

17 ACCOUNTING.—If the basis for determining any item 

18 referred to in subsection (c) as of the close of any 

19 taxable year differs from the basis for such deter20 mination as of the close of the preceding taxable 

21 year, then so much of the difference between— 

22 ‘‘(A) the amount of the item at the close 

23 of the taxable year, computed on the new basis, 

24 and 


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1 ‘‘(B) the amount of the item at the close 

2 of the taxable year, computed on the old basis, 

3 as is attributable to contracts issued before the tax4 able year shall be taken into account under section 

5 481 as adjustments attributable to a change in 

6 method of accounting initiated by the taxpayer and 

7 made with the consent of the Secretary.’’. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2017. 

11 SEC. 3705. MODIFICATION OF RULES FOR LIFE INSURANCE 

12 PRORATION FOR PURPOSES OF DETER13 MINING THE DIVIDENDS RECEIVED DEDUC14 TION. 

15 (a) IN GENERAL.—Section 812 is amended to read 

16 as follows: 

17 ‘‘SEC. 812. DEFINITION OF COMPANY’S SHARE AND POLICY18 HOLDER’S SHARE. 

19 ‘‘(a) COMPANY’S SHARE.—For purposes of section 

20 805(a)(4), the term ‘company’s share’ means, with respect 

21 to any taxable year beginning after December 31, 2017, 

22 40 percent. 

23 ‘‘(b) POLICYHOLDER’S SHARE.—For purposes of sec24 tion 807, the term ‘policyholder’s share’ means, with reVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00288 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 spect to any taxable year beginning after December 31, 

2 2017, 60 percent.’’. 

3 (b) CONFORMING AMENDMENT.—Section 817A(e)(2) 

4 is amended by striking ‘‘, 807(d)(2)(B), and 812’’ and in5 serting ‘‘and 807(d)(2)(B)’’. 

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

7 this section shall apply to taxable years beginning after 

8 December 31, 2017. 

9 SEC. 3706. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS 

10 TO SHAREHOLDERS FROM PRE-1984 POLICY11 HOLDERS SURPLUS ACCOUNT. 

12 (a) IN GENERAL.—Subpart D of part I of subchapter 

13 L is amended by striking section 815 (and by striking the 

14 item relating to such section in the table of sections for 

15 such subpart). 

16 (b) CONFORMING AMENDMENT.—Section 801 is 

17 amended by striking subsection (c). 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 (d) PHASED INCLUSION OF REMAINING BALANCE OF

22 POLICYHOLDERS SURPLUS ACCOUNTS.—In the case of 

23 any stock life insurance company which has a balance (de24 termined as of the close of such company’s last taxable 

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1 icyholders surplus account (as defined in section 815 of 

2 the Internal Revenue Code of 1986, as in effect before 

3 its repeal), the tax imposed by section 801 of such Code 

4 for the first 8 taxable years beginning after December 31, 

5 2017, shall be the amount which would be imposed by 

6 such section for such year on the sum of— 

7 (1) life insurance company taxable income for 

8 such year (within the meaning of such section 801 

9 but not less than zero), plus 

(2) 1 10 ⁄8 of such balance. 

11 SEC. 3707. MODIFICATION OF PRORATION RULES FOR 

12 PROPERTY AND CASUALTY INSURANCE COM13 PANIES. 

14 (a) IN GENERAL.—Section 832(b)(5)(B) is amended 

15 by striking ‘‘15 percent’’ and inserting ‘‘26.25 percent’’. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2017. 

19 SEC. 3708. MODIFICATION OF DISCOUNTING RULES FOR 

20 PROPERTY AND CASUALTY INSURANCE COM21 PANIES. 

22 (a) MODIFICATION OF RATE OF INTEREST USED TO

23 DISCOUNT UNPAID LOSSES.—Paragraph (2) of section 

24 846(c) is amended to read as follows: 


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1 ‘‘(2) DETERMINATION OF ANNUAL RATE.—The 

2 annual rate determined by the Secretary under this 

3 paragraph for any calendar year shall be a rate de4 termined on the basis of the corporate bond yield 

5 curve (as defined in section 430(h)(2)(D)(i)).’’. 

6 (b) MODIFICATION OF COMPUTATIONAL RULES FOR

7 LOSS PAYMENT PATTERNS.—Section 846(d)(3) is amend8 ed by striking subparagraphs (B) through (G) and insert9 ing the following new subparagraphs: 

10 ‘‘(B) TREATMENT OF CERTAIN LOSSES.— 

11 Losses which would have been treated as paid 

12 in the last year of the period applicable under 

13 subparagraph (A)(i) or (A)(ii) shall be treated 

14 as paid in the following manner: 

15 ‘‘(i) 3-YEAR LOSS PAYMENT PAT16 TERN.— 

17 ‘‘(I) IN GENERAL.—The period 

18 taken into account under subpara19 graph (A)(i) shall be extended to the 

20 extent required under subclause (II). 

21 ‘‘(II) COMPUTATION OF EXTEN22 SION.—The amount of losses which 

23 would have been treated as paid in the 

24 3d year after the accident year shall 

25 be treated as paid in such 3d year 


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1 and each subsequent year in an 

2 amount equal to the average of the 

3 losses treated as paid in the 1st and 

4 2d years after the accident year (or, if 

5 lesser, the portion of the unpaid losses 

6 not theretofore taken into account). 

7 To the extent such unpaid losses have 

8 not been treated as paid before the 

9 18th year after the accident year, they 

10 shall be treated as paid in such 18th 

11 year. 

12 ‘‘(ii) 10-YEAR LOSS PAYMENT PAT13 TERN.— 

14 ‘‘(I) IN GENERAL.—The period 

15 taken into account under subpara16 graph (A)(ii) shall be extended to the 

17 extent required under subclause (II). 

18 ‘‘(II) COMPUTATION OF EXTEN19 SION.—The amount of losses which 

20 would have been treated as paid in the 

21 10th year after the accident year shall 

22 be treated as paid in such 10th year 

23 and each subsequent year in an 

24 amount equal to the amount of the 

25 average of the losses treated as paid 


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1 in the 7th, 8th, and 9th years after 

2 the accident year (or, if lesser, the 

3 portion of the unpaid losses not there4 tofore taken into account). To the ex5 tent such unpaid losses have not been 

6 treated as paid before the 25th year 

7 after the accident year, they shall be 

8 treated as paid in such 25th year.’’. 

9 (c) REPEAL OF HISTORICAL PAYMENT PATTERN

10 ELECTION.—Section 846 is amended by striking sub11 section (e) and by redesignating subsections (f) and (g) 

12 as subsections (e) and (f), respectively. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2017. 

16 (e) TRANSITIONAL RULE.—For the first taxable year 

17 beginning after December 31, 2017— 

18 (1) the unpaid losses and the expenses unpaid 

19 (as defined in paragraphs (5)(B) and (6) of section 

20 832(b) of the Internal Revenue Code of 1986) at the 

21 end of the preceding taxable year, and 

22 (2) the unpaid losses as defined in sections 

23 807(c)(2) and 805(a)(1) of such Code at the end of 

24 the preceding taxable year, 


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1 shall be determined as if the amendments made by this 

2 section had applied to such unpaid losses and expenses 

3 unpaid in the preceding taxable year and by using the in4 terest rate and loss payment patterns applicable to acci5 dent years ending with calendar year 2018, and any ad6 justment shall be taken into account ratably in such first 

7 taxable year and the 7 succeeding taxable years. For sub8 sequent taxable years, such amendments shall be applied 

9 with respect to such unpaid losses and expenses unpaid 

10 by using the interest rate and loss payment patterns appli11 cable to accident years ending with calendar year 2018. 

12 SEC. 3709. REPEAL OF SPECIAL ESTIMATED TAX PAY13 MENTS. 

14 (a) IN GENERAL.—Part III of subchapter L of chap15 ter 1 is amended by striking section 847 (and by striking 

16 the item relating to such section in the table of sections 

17 for such part). 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 SEC. 3710. CAPITALIZATION OF CERTAIN POLICY ACQUISI22 TION EXPENSES. 

23 (a) IN GENERAL.—Paragraph (1) of section 848(c) 

24 is amended by striking subparagraphs (A), (B), and (C) 

25 and inserting the following new subparagraphs: 


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1 ‘‘(A) 4 percent of the net premiums for 

2 such taxable year on specified insurance con3 tracts which are group contracts, and 

4 ‘‘(B) 11 percent of the net premiums for 

5 such taxable year on specified insurance con6 tracts not described in subparagraph (A).’’. 

7 (b) GROUP CONTRACTS.—So much of paragraph (2) 

8 of section 848(e) as precedes subparagraph (A) thereof is 

9 amended to read as follows: 

10 ‘‘(2) GROUP CONTRACT.—The term ‘group con11 tract’ means any specified insurance contract—’’. 

12 (c) CONFORMING AMENDMENTS.—Section 848(e) is 

13 amended by striking paragraphs (3) and (6) and by redes14 ignating paragraphs (4) and (5) as paragraphs (3) and 

15 (4), respectively. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2017. 

19 Subtitle I—Compensation 

20 SEC. 3801. NONQUALIFIED DEFERRED COMPENSATION. 

21 (a) IN GENERAL.—Subpart A of part I of subchapter 

22 D of chapter 1 is amended by adding at the end the fol23 lowing new section: 


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1 ‘‘SEC. 409B. NONQUALIFIED DEFERRED COMPENSATION. 

2 ‘‘(a) IN GENERAL.—Any compensation which is de3 ferred under a nonqualified deferred compensation plan 

4 shall be includible in the gross income of the person who 

5 performed the services to which such compensation relates 

6 when there is no substantial risk of forfeiture of the rights 

7 of such person to such compensation. 

8 ‘‘(b) DEFINITIONS.—For purposes of this section— 

9 ‘‘(1) SUBSTANTIAL RISK OF FORFEITURE.—The 

10 rights of a person to compensation shall be treated 

11 as subject to a substantial risk of forfeiture only if 

12 such person’s rights to such compensation are condi13 tioned upon the future performance of substantial 

14 services by any person. Such rights shall not be 

15 treated as subject to a substantial risk of forfeiture 

16 solely by reason of a covenant not to compete or the 

17 occurrence of a condition related to a purpose of the 

18 compensation other than the future performance of 

19 services. 

20 ‘‘(2) NONQUALIFIED DEFERRED COMPENSA21 TION PLAN.—For purposes of this section: 

22 ‘‘(A) NONQUALIFIED DEFERRED COM23 PENSATION PLAN.—The term ‘nonqualified de24 ferred compensation plan’ means any plan that 

25 provides for the deferral of compensation, other 

26 than— 


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1 ‘‘(i) a qualified employer plan, 

2 ‘‘(ii) any bona fide vacation leave, sick 

3 leave, compensatory time, disability pay, or 

4 death benefit plan, and 

5 ‘‘(iii) any other plan or arrangement 

6 designated by the Secretary consistent with 

7 the purposes of this section. 

8 ‘‘(B) EQUITY-BASED COMPENSATION.— 

9 The term ‘nonqualified deferred compensation 

10 plan’ shall include any plan that provides— 

11 ‘‘(i) a right to compensation based on 

12 the value of, or appreciation in value of, a 

13 specified number of equity units of the 

14 service recipient, whether paid in cash or 

15 equity, or 

16 ‘‘(ii) stock appreciation rights or stock 

17 options. 

18 Such term shall not include that portion of any 

19 plan which consists of a transfer of property de20 scribed in section 83 (other than stock options) 

21 or which consists of a trust to which section 

22 402(b) applies. 

23 ‘‘(3) QUALIFIED EMPLOYER PLAN.—The term 

24 ‘qualified employer plan’ means any plan, contract, 

25 pension, account, or trust described in section 


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1 408(p)(2)(D)(ii) or a simple retirement account 

2 (within the meaning of section 408(p)). 

3 ‘‘(4) PLAN INCLUDES ARRANGEMENTS, ETC.— 

4 The term ‘plan’ includes any agreement or arrange5 ment, including an agreement or arrangement that 

6 includes one person. 

7 ‘‘(5) EXCEPTION.—Compensation shall not be 

8 treated as deferred for purposes of this section if the 

9 service provider receives payment of such compensation not later than 2 1 10 ⁄2 months after the end of the 

11 taxable year of the service recipient during which the 

12 right to the payment of such compensation is no 

13 longer subject to a substantial risk of forfeiture. 

14 ‘‘(6) TREATMENT OF EARNINGS.—References to 

15 deferred compensation shall be treated as including 

16 references to income (whether actual or notional) at17 tributable to such compensation or such income. 

18 ‘‘(7) AGGREGATION RULES.—Except as pro19 vided by the Secretary, rules similar to the rules of 

20 subsections (b) and (c) of section 414 shall apply. 

21 ‘‘(c) NO INFERENCE ON EARLIER INCOME INCLU22 SION OR REQUIREMENT OF LATER INCLUSION.—Nothing 

23 in this section shall be construed to prevent the inclusion 

24 of amounts in gross income under any other provision of 

25 this chapter or any other rule of law earlier than the time 


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1 provided in this section. Any amount included in gross in2 come under this section shall not be required to be in3 cluded in gross income under any other provision of this 

4 chapter or any other rule of law later than the time pro5 vided in this section. 

6 ‘‘(d) APPLICATION TO EXISTING DEFERRALS.—In 

7 the case of any amount deferred to which this section does 

8 not otherwise apply solely by reason of the fact that the 

9 amount is attributable to services performed before Janu10 ary 1, 2018, to the extent such amount is not includible 

11 in gross income in a taxable year beginning before 2026, 

12 such amounts shall be includible in gross income in the 

13 later of— 

14 ‘‘(1) the last taxable year beginning before 

15 2026, or 

16 ‘‘(2) the taxable year in which there is no sub17 stantial risk of forfeiture of the rights to such com18 pensation. 

19 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

20 such regulations as may be necessary or appropriate to 

21 carry out the purposes of this section, including regula22 tions disregarding a substantial risk of forfeiture in cases 

23 where necessary to carry out the purposes of this sec24 tion.’’. 


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1 (b) REPORTING AND WITHHOLDING REQUIRE2 MENTS.— 

3 (1) WAGE WITHHOLDING.—The flush sentence 

4 at the end of section 3401(a) is amended by insert5 ing ‘‘or 409B’’ after ‘‘409A’’. 

6 (2) WITHHOLDING OF TAX ON NONRESIDENT

7 ALIENS.—Section 1441(c)(4) is amended by insert8 ing ‘‘(other than under a nonqualified deferred com9 pensation plan (within the meaning of section 

10 409B(b))’’ after ‘‘compensation for personal serv11 ices’’. 

12 (3) INFORMATION REPORTING.—Section 

13 6041(g) is amended— 

14 (A) by inserting ‘‘or 409B(b)’’ after 

15 ‘‘409A(d)’’ in paragraph (1), and 

16 (B) by inserting ‘‘or 409B’’ after ‘‘409A’’ 

17 in paragraph (2). 

18 (4) RECEIPTS FOR EMPLOYEES.—Section 

19 6051(a)(13), as amended by the preceding provi20 sions of this Act, is amended by inserting ‘‘or 

21 409B(b)’’ after ‘‘409A(d)’’. 

22 (c) TERMINATION OF CERTAIN OTHER NON23 QUALIFIED DEFERRED COMPENSATION RULES.— 

24 (1) NONQUALIFIED DEFERRED COMPENSA25 TION.— 


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1 (A) IN GENERAL.—Subpart A of part I of 

2 subchapter D of chapter 1 is amended by strik3 ing section 409A (and by striking the item re4 lating to such section in the table of sections 

5 for such subpart). 

6 (B) CONFORMING AMENDMENT.—Section 

7 26(b)(2) is amended by striking subparagraph 

8 (V). 

9 (2) 457(b) PLANS OF TAX EXEMPT ORGANIZA10 TIONS.—Section 457 is amended by adding at the 

11 end the following new subsection: 

12 ‘‘(h) TERMINATION OF CERTAIN PLANS.— 

13 ‘‘(1) TAX-EXEMPT ORGANIZATION PLANS.— 

14 This section shall not apply to amounts deferred 

15 which are attributable to services performed after 

16 December 31, 2017, under a plan maintained by an 

17 employer described in subsection (e)(1)(B). 

18 ‘‘(2) INELIGIBLE DEFERRED COMPENSATION

19 PLANS.—Subsection (f) shall not apply to amounts 

20 deferred which are attributable to services performed 

21 after December 31, 2017.’’. 

22 (3) NONQUALIFIED DEFERRED COMPENSATION

23 FROM CERTAIN TAX INDIFFERENT PARTIES.— 

24 (A) IN GENERAL.—Subpart B of part II of 

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1 ing section 457A (and by striking the item re2 lating to such section in the table of sections 

3 for such subpart). 

4 (B) CONFORMING AMENDMENT.—Section 

5 26(b)(2) is amended by striking subparagraph 

6 (X). 

7 (d) CLERICAL AMENDMENT.—The table of sections 

8 for part I of subchapter D of chapter 1 is amended by 

9 adding at the end the following new item: 

‘‘Sec. 409B. Nonqualified deferred compensation.’’. 

10 (e) EFFECTIVE DATE.— 

11 (1) IN GENERAL.—Except as otherwise pro12 vided in this subsection and section 409B(d) of the 

13 Internal Revenue Code of 1986 (as added by this 

14 Act), the amendments made by this section shall 

15 apply to amounts which are attributable to services 

16 performed after December 31, 2017. 

17 (2) ACCELERATED PAYMENTS.—No later than 

18 120 days after the date of the enactment of this Act, 

19 the Secretary shall issue guidance providing a lim20 ited period of time during which a nonqualified de21 ferred compensation arrangement attributable to 

22 services performed on or before December 31, 2017, 

23 may, without violating the requirements of section 

24 409A of the Internal Revenue Code of 1986, be 

25 amended to conform the date of distribution to the 


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1 date the amounts are required to be included in in2 come. 

3 (3) CERTAIN BACK-TO-BACK ARRANGEMENTS.— 

4 If the taxpayer is also a service recipient and main5 tains one or more nonqualified deferred compensa6 tion arrangements for its service providers under 

7 which any amount is attributable to services per8 formed on or before December 31, 2017, the guid9 ance issued under paragraph (3) shall permit such 

10 arrangements to be amended to conform the dates of 

11 distribution under such arrangement to the date 

12 amounts are required to be included in the income 

13 of such taxpayer under this subsection. 

14 (4) ACCELERATED PAYMENT NOT TREATED AS

15 MATERIAL MODIFICATION.—Any amendment to a 

16 nonqualified deferred compensation arrangement 

17 made pursuant to paragraph (3) or (4) shall not be 

18 treated as a material modification of the arrange19 ment for purposes of section 409A of the Internal 

20 Revenue Code of 1986. 

21 SEC. 3802. MODIFICATION OF LIMITATION ON EXCESSIVE 

22 EMPLOYEE REMUNERATION. 

23 (a) REPEAL OF PERFORMANCE-BASED COMPENSA24 TION AND COMMISSION EXCEPTIONS FOR LIMITATION ON

25 EXCESSIVE EMPLOYEE REMUNERATION.— 


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1 (1) IN GENERAL.—Section 162(m)(4) is amend2 ed by striking subparagraphs (B) and (C) and by re3 designating subparagraphs (D), (E), (F), and (G) as 

4 subparagraphs (B), (C), (D), and (E), respectively. 

5 (2) CONFORMING AMENDMENTS.— 

6 (A) Paragraphs (5)(E) and (6)(D) of sec7 tion 162(m) are each amended by striking 

8 ‘‘subparagraphs (B), (C), and (D)’’ and insert9 ing ‘‘subparagraph (B)’’. 

10 (B) Paragraphs (5)(G) and (6)(G) of sec11 tion 162(m) are each amended by striking ‘‘(F) 

12 and (G)’’ and inserting ‘‘(D) and (E)’’. 

13 (b) EXPANSION OF APPLICABLE EMPLOYER.—Sec14 tion 162(m)(2) is amended to read as follows: 

15 ‘‘(2) PUBLICLY HELD CORPORATION.—For pur16 poses of this subsection, the term ‘publicly held cor17 poration’ means any corporation which is an issuer 

18 (as defined in section 3 of the Securities Exchange 

19 Act of 1934 (15 U.S.C. 78c))— 

20 ‘‘(A) the securities of which are required to 

21 be registered under section 12 of such Act (15 

22 U.S.C. 78l), or 

23 ‘‘(B) that is required to file reports under 

24 section 15(d) of such Act (15 U.S.C. 78o(d)).’’. 


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1 (c) MODIFICATION OF DEFINITION OF COVERED EM2 PLOYEES.—Section 162(m)(3) is amended— 

3 (1) in subparagraph (A), by striking ‘‘as of the 

4 close of the taxable year, such employee is the chief 

5 executive officer of the taxpayer or is’’ and inserting 

6 ‘‘such employee is the principal executive officer or 

7 principal financial officer of the taxpayer at any 

8 time during the taxable year, or was’’, 

9 (2) in subparagraph (B)— 

10 (A) by striking ‘‘4’’ and inserting ‘‘3’’, and 

11 (B) by striking ‘‘(other than the chief exec12 utive officer)’’ and inserting ‘‘(other than the 

13 principal executive officer)’’, and 

14 (3) by striking ‘‘or’’ at the end of subparagraph 

15 (A), by striking the period at the end of subpara16 graph (B) and inserting ‘‘, or’’, and by adding at the 

17 end the following: 

18 ‘‘(C) was a covered employee of the tax19 payer (or any predecessor) for any preceding 

20 taxable year beginning after December 31, 

21 2016. 

22 Such term shall include any employee who would be 

23 described in subparagraph (B) if the reporting de24 scribed in such subparagraph were required as so 

25 described.’’. 


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1 (d) SPECIAL RULE FOR REMUNERATION PAID TO

2 BENEFICIARIES, ETC.—Section 162(m)(4), as amended by 

3 subsection (a), is amended by adding at the end the fol4 lowing new subparagraph: 

5 ‘‘(F) SPECIAL RULE FOR REMUNERATION

6 PAID TO BENEFICIARIES, ETC.—Remuneration 

7 shall not fail to be applicable employee remu8 neration merely because it is includible in the 

9 income of, or paid to, a person other than the 

10 covered employee, including after the death of 

11 the covered employee.’’. 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2017. 

15 SEC. 3803. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZA16 TION EXECUTIVE COMPENSATION. 

17 (a) IN GENERAL.—Subchapter D of chapter 42 is 

18 amended by adding at the end the following new section: 

19 ‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION 

20 EXECUTIVE COMPENSATION. 

21 ‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 

22 equal to 20 percent of the sum of— 

23 ‘‘(1) so much of the remuneration paid (other 

24 than any excess parachute payment) by an applica25 ble tax-exempt organization for the taxable year with 


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1 respect to employment of any covered employee in 

2 excess of $1,000,000, plus 

3 ‘‘(2) any excess parachute payment paid by 

4 such an organization to any covered employee. 

5 ‘‘(b) LIABILITY FOR TAX.—The employer shall be lia6 ble for the tax imposed under subsection (a). 

7 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur8 poses of this section— 

9 ‘‘(1) APPLICABLE TAX-EXEMPT ORGANIZA10 TION.—The term ‘applicable tax-exempt organiza11 tion’ means any organization that for the taxable 

12 year— 

13 ‘‘(A) is exempt from taxation under section 

14 501(a), 

15 ‘‘(B) is a farmers’ cooperative organization 

16 described in section 521(b)(1), 

17 ‘‘(C) has income excluded from taxation 

18 under section 115(1), or 

19 ‘‘(D) is a political organization described in 

20 section 527(e)(1). 

21 ‘‘(2) COVERED EMPLOYEE.—For purposes of 

22 this section, the term ‘covered employee’ means any 

23 employee (including any former employee) of an ap24 plicable tax-exempt organization if the employee— 


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1 ‘‘(A) is one of the 5 highest compensated 

2 employees of the organization for the taxable 

3 year, or 

4 ‘‘(B) was a covered employee of the organi5 zation (or any predecessor) for any preceding 

6 taxable year beginning after December 31, 

7 2016. 

8 ‘‘(3) REMUNERATION.—For purposes of this 

9 section, the term ‘remuneration’ means wages (as 

10 defined in section 3401(a)), except that such term 

11 shall not include any designated Roth contribution 

12 (as defined in section 402A(c)). 

13 ‘‘(4) REMUNERATION FROM RELATED ORGANI14 ZATIONS.— 

15 ‘‘(A) IN GENERAL.—Remuneration of a 

16 covered employee paid by an applicable tax-ex17 empt organization shall include any remunera18 tion paid with respect to employment of such 

19 employee by any related person or governmental 

20 entity. 

21 ‘‘(B) RELATED ORGANIZATIONS.—A per22 son or governmental entity shall be treated as 

23 related to an applicable tax-exempt organization 

24 if such person or governmental entity— 


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1 ‘‘(i) controls, or is controlled by, the 

2 organization, 

3 ‘‘(ii) is controlled by one or more per4 sons that control the organization, 

5 ‘‘(iii) is a supported organization (as 

6 defined in section 509(f)(2)) during the 

7 taxable year with respect to the organiza8 tion, 

9 ‘‘(iv) is a supporting organization de10 scribed in section 509(a)(3) during the 

11 taxable year with respect to the organiza12 tion, or 

13 ‘‘(v) in the case of an organization 

14 that is a voluntary employees’ beneficiary 

15 association described in section 501(a)(9), 

16 establishes, maintains, or makes contribu17 tions to such voluntary employees’ bene18 ficiary association. 

19 ‘‘(C) LIABILITY FOR TAX.—In any case in 

20 which remuneration from more than one em21 ployer is taken into account under this para22 graph in determining the tax imposed by sub23 section (a), each such employer shall be liable 

24 for such tax in an amount which bears the 

25 same ratio to the total tax determined under 


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1 subsection (a) with respect to such remunera2 tion as— 

3 ‘‘(i) the amount of remuneration paid 

4 by such employer with respect to such em5 ployee, bears to 

6 ‘‘(ii) the amount of remuneration paid 

7 by all such employers to such employee. 

8 ‘‘(5) EXCESS PARACHUTE PAYMENT.—For pur9 poses determining the tax imposed by subsection 

10 (a)(2)— 

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

12 parachute payment’ means an amount equal to 

13 the excess of any parachute payment over the 

14 portion of the base amount allocated to such 

15 payment. 

16 ‘‘(B) PARACHUTE PAYMENT.—The term 

17 ‘parachute payment’ means any payment in the 

18 nature of compensation to (or for the benefit 

19 of) a covered employee if— 

20 ‘‘(i) such payment is contingent on 

21 such employee’s separation from employ22 ment with the employer, and 

23 ‘‘(ii) the aggregate present value of 

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1 vidual which are contingent on such sepa2 ration equals or exceeds an amount equal 

3 to 3 times the base amount. 

4 Such term does not include any payment de5 scribed in section 280G(b)(6) (relating to ex6 emption for payments under qualified plans) or 

7 any payment made under or to an annuity con8 tract described in section 403(b) or a plan de9 scribed in section 457(b). 

10 ‘‘(C) BASE AMOUNT.—Rules similar to the 

11 rules of 280G(b)(3) shall apply for purposes of 

12 determining the base amount. 

13 ‘‘(D) PROPERTY TRANSFERS; PRESENT

14 VALUE.—Rules similar to the rules of para15 graphs (3) and (4) of section 280G(d) shall 

16 apply. 

17 ‘‘(6) COORDINATION WITH DEDUCTION LIMITA18 TION.—Remuneration the deduction for which is not 

19 allowed by reason of section 162(m) shall not be 

20 taken into account for purposes of this section. 

21 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 

22 such regulations as may be necessary to prevent avoidance 

23 of the purposes of this section through the performance 

24 of services other than as an employee.’’. 


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1 (b) CLERICAL AMENDMENT.—The table of sections 

2 for subchapter D of chapter 42 is amended by adding at 

3 the end the following new item: 

‘‘Sec. 4960. Tax on excess exempt organization executive compensation.’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2017. 

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 

18 chapter 1 is amended by inserting after section 245 the 

19 following 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. 

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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 

4 foreign-source portion of such dividend. 

5 ‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN COR6 PORATION.—For purposes of this section, the term ‘speci7 fied 10-percent owned foreign corporation’ means any for8 eign corporation with respect to which any domestic cor9 poration is a United States shareholder. Such term shall 

10 not include any passive foreign investment company (with11 in the meaning of subpart D of part VI of subchapter P) 

12 that is not a controlled foreign corporation. 

13 ‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of 

14 this section— 

15 ‘‘(1) IN GENERAL.—The foreign-source portion 

16 of 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 

22 earnings of such foreign corporation. 

23 ‘‘(2) POST-1986 UNDISTRIBUTED EARNINGS.— 

24 The term ‘post-1986 undistributed earnings’ means 

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1 fied 10-percent owned foreign corporation (computed 

2 in accordance with sections 964(a) and 986) accu3 mulated in taxable years beginning after December 

4 31, 1986— 

5 ‘‘(A) as of the close of the taxable year of 

6 the specified 10-percent owned foreign corpora7 tion in 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

11 EARNINGS.—The term ‘post-1986 undistributed for12 eign earnings’ means the portion of the post-1986 

13 undistributed earnings which is attributable to nei14 ther— 

15 ‘‘(A) income described in subparagraph (A) 

16 of section 245(a)(5), nor 

17 ‘‘(B) dividends described in subparagraph 

18 (B) of such section (determined without regard 

19 to section 245(a)(12)). 

20 ‘‘(4) TREATMENT OF DISTRIBUTIONS FROM

21 EARNINGS BEFORE 1987.— 

22 ‘‘(A) IN GENERAL.—In the case of any div23 idend paid out of earnings and profits of the 

24 specified 10-percent owned foreign corporation 

25 (computed in accordance with sections 964(a) 


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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

11 POST-1986 EARNINGS.—Dividends shall be treat12 ed as paid out of post-1986 undistributed earn13 ings to the extent thereof. 

14 ‘‘(5) TREATMENT OF CERTAIN DIVIDENDS IN

15 EXCESS OF UNDISTRIBUTED EARNINGS.—In the case 

16 of any dividend from the specified 10-percent owned 

17 foreign corporation which is in excess of undistrib18 uted earnings (as determined under paragraph (2) 

19 after taking into account the modifications described 

20 in clauses (i) and (ii) of paragraph (4)(A)), the for21 eign-source portion of such dividend is an amount 

22 which bears the same ratio to such dividend as— 

23 ‘‘(A) the portion of the earnings and prof24 its described in subparagraph (B) which is at25 tributable to neither income described in paraVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00315 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 graph (3)(A) nor dividends described in para2 graph (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 

6 the taxable year without diminution by reason 

7 of any distributions made during the taxable 

8 year). 

9 ‘‘(d) DISALLOWANCE OF FOREIGN TAX CREDIT, 

10 ETC.— 

11 ‘‘(1) IN GENERAL.—No credit shall be allowed 

12 under section 901 for any taxes paid or accrued (or 

13 treated as paid or accrued) with respect to any divi14 dend for which a deduction is allowed under this sec15 tion. 

16 ‘‘(2) DENIAL OF DEDUCTION.—No deduction 

17 shall be allowed under this chapter for any tax for 

18 which credit is not allowable under section 901 by 

19 reason of paragraph (1) (determined by treating the 

20 taxpayer as having elected the benefits of subpart A 

21 of part III of subchapter N). 

22 ‘‘(e) REGULATIONS.—The Secretary may prescribe 

23 such regulations or other guidance as may be necessary 

24 or appropriate to carry out the provisions of this section.’’. 


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1 (b) APPLICATION OF HOLDING PERIOD REQUIRE2 MENT.—Section 246(c) is amended— 

3 (1) by striking ‘‘or 245’’ in paragraph (1) and 

4 inserting ‘‘245, or 245A’’, and 

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

6 paragraph: 

7 ‘‘(5) SPECIAL RULES FOR FOREIGN SOURCE

8 PORTION OF DIVIDENDS RECEIVED FROM SPECIFIED

9 10-PERCENT OWNED FOREIGN CORPORATIONS.— 

10 ‘‘(A) 6-MONTH HOLDING PERIOD REQUIRE11 MENT.—For purposes of section 245A— 

12 ‘‘(i) paragraph (1)(A) shall be ap13 plied— 

14 ‘‘(I) by substituting ‘180 days’ 

15 for ‘45 days’each place it appears, and 

16 ‘‘(II) by substituting ‘361-day pe17 riod’ for ‘91-day period’, and 

18 ‘‘(ii) paragraph (2) shall not apply. 

19 ‘‘(B) STATUS MUST BE MAINTAINED DUR20 ING HOLDING PERIOD.—For purposes of apply21 ing paragraph (1) with respect to section 245A, 

22 the taxpayer shall be treated as holding the 

23 stock referred to in paragraph (1) for any pe24 riod only if— 


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1 ‘‘(i) the specified 10-percent owned 

2 foreign corporation referred to in section 

3 245A(a) is a specified 10-percent owned 

4 foreign corporation for such period, and 

5 ‘‘(ii) the taxpayer is a United States 

6 shareholder with respect to such specified 

7 10-percent owned foreign corporation for 

8 such period.’’. 

9 (c) APPLICATION OF RULES GENERALLY APPLICA10 BLE TO DEDUCTIONS FOR DIVIDENDS RECEIVED.— 

11 (1) TREATMENT OF DIVIDENDS FROM CERTAIN

12 CORPORATIONS.—Section 246(a)(1) is amended by 

13 striking ‘‘and 245’’ and inserting ‘‘245, and 245A’’. 

14 (2) COORDINATION WITH SECTION 1059.—Sec15 tion 1059(b)(2)(B) is amended by striking ‘‘or 245’’ 

16 and inserting ‘‘245, or 245A’’. 

17 (d) COORDINATION WITH FOREIGN TAX CREDIT

18 LIMITATION.—Section 904(b) is amended by adding at 

19 the end the following new paragraph: 

20 ‘‘(5) TREATMENT OF DIVIDENDS FOR WHICH

21 DEDUCTION IS ALLOWED UNDER SECTION 245A.— 

22 For purposes of subsection (a), in the case of a 

23 United States shareholder with respect to a specified 

24 10-percent owned foreign corporation, such share25 holder’s taxable income from sources without the 


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1 United States (and entire taxable income) shall be 

2 determined without regard to— 

3 ‘‘(A) the foreign-source portion of any divi4 dend received from such foreign corporation, 

5 and 

6 ‘‘(B) any deductions properly allocable or 

7 apportioned to— 

8 ‘‘(i) income (other than subpart F in9 come (as defined in section 952) and for10 eign high return amounts (as defined in 

11 section 951A(b)) with respect to stock of 

12 such specified 10-percent owned foreign 

13 corporation, or 

14 ‘‘(ii) such stock (to the extent income 

15 with respect to such stock is other than 

16 subpart F income (as so defined) or for17 eign high return amounts (as so defined)). 

18 Any term which is used in section 245A and in this 

19 paragraph shall have the same meaning for purposes 

20 of this paragraph as when used in such section.’’. 

21 (e) CONFORMING AMENDMENTS.— 

22 (1) Section 245(a)(4) is amended by striking 

23 ‘‘section 902(c)(1)’’ and inserting ‘‘section 

24 245A(c)(2) applied by substituting ‘qualified 10-per25 cent owned foreign corporation’ for ‘specified 10-perVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00319 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 cent owned foreign corporation’ each place it ap2 pears’’. 

3 (2) Section 951(b) is amended by striking ‘‘sub4 part’’ and inserting ‘‘title’’. 

5 (3) Section 957(a) is amended by striking ‘‘sub6 part’’ in the matter preceding paragraph (1) and in7 serting ‘‘title’’. 

8 (4) The table of sections for part VIII of sub9 chapter B of chapter 1 is amended by inserting after 

10 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.’’. 

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

12 this section shall apply to distributions made after (and, 

13 in the case of the amendments made by subsection (d), 

14 deductions with respect to taxable years ending after) De15 cember 31, 2017. 

16 SEC. 4002. APPLICATION OF PARTICIPATION EXEMPTION 

17 TO INVESTMENTS IN UNITED STATES PROP18 ERTY. 

19 (a) IN GENERAL.—Section 956(a) is amended in the 

20 matter preceding paragraph (1) by inserting ‘‘(other than 

21 a corporation)’’ after ‘‘United States shareholder’’. 

22 (b) REGULATORY AUTHORITY TO PREVENT

23 ABUSE.—Section 956(e) is amended by striking ‘‘includVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00320 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 ing regulations to prevent’’ and inserting ‘‘including regu2 lations— 

3 ‘‘(1) to address United States shareholders that 

4 are partnerships with corporate partners, and 

5 ‘‘(2) to prevent’’. 

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

7 this section shall apply to taxable years of foreign corpora8 tions beginning after December 31, 2017. 

9 SEC. 4003. LIMITATION ON LOSSES WITH RESPECT TO 

10 SPECIFIED 10-PERCENT OWNED FOREIGN 

11 CORPORATIONS. 

12 (a) BASIS IN SPECIFIED 10-PERCENT OWNED FOR13 EIGN CORPORATION REDUCED BY NONTAXED PORTION

14 OF DIVIDEND FOR PURPOSES OF DETERMINING LOSS.— 

15 (1) IN GENERAL.—Section 961 is amended by 

16 adding at the end the following new subsection: 

17 ‘‘(d) BASIS IN SPECIFIED 10-PERCENT OWNED FOR18 EIGN CORPORATION REDUCED BY NONTAXED PORTION

19 OF DIVIDEND FOR PURPOSES OF DETERMINING LOSS.— 

20 If a domestic corporation received a dividend from a speci21 fied 10-percent owned foreign corporation (as defined in 

22 section 245A) in any taxable year, solely for purposes of 

23 determining loss on any disposition of stock of such for24 eign corporation in such taxable year or any subsequent 

25 taxable year, the basis of such domestic corporation in 


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1 such stock shall be reduced (but not below zero) by the 

2 amount of any deduction allowable to such domestic cor3 poration under section 245A with respect to such stock 

4 except to the extent such basis was reduced under section 

5 1059 by reason of a dividend for which such a deduction 

6 was allowable.’’. 

7 (2) EFFECTIVE DATE.—The amendments made 

8 by this subsection shall apply to distributions made 

9 after December 31, 2017. 

10 (b) TREATMENT OF FOREIGN BRANCH LOSSES

11 TRANSFERRED TO SPECIFIED 10-PERCENT OWNED FOR12 EIGN CORPORATIONS.— 

13 (1) IN GENERAL.—Part II of subchapter B of 

14 chapter 1 is amended by adding at the end the fol15 lowing new section: 

16 ‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANS17 FERRED TO SPECIFIED 10-PERCENT OWNED 

18 FOREIGN CORPORATIONS. 

19 ‘‘(a) IN GENERAL.—If a domestic corporation trans20 fers substantially all of the assets of a foreign branch 

21 (within the meaning of section 367(a)(3)(C)) to a specified 

22 10-percent owned foreign corporation (as defined in sec23 tion 245A) with respect to which it is a United States 

24 shareholder after such transfer, such domestic corporation 

25 shall include in gross income for the taxable year which 


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1 includes such transfer an amount equal to the transferred 

2 loss amount with respect to such transfer. 

3 ‘‘(b) TRANSFERRED LOSS AMOUNT.—For purposes 

4 of this section, the term ‘transferred loss amount’ means, 

5 with respect to any transfer of substantially all of the as6 sets of a foreign branch, the excess (if any) of— 

7 ‘‘(1) the sum of losses— 

8 ‘‘(A) which were incurred by the foreign 

9 branch after December 31, 2017, and before 

10 the transfer, and 

11 ‘‘(B) with respect to which a deduction was 

12 allowed to the taxpayer, over 

13 ‘‘(2) the sum of— 

14 ‘‘(A) any taxable income of such branch 

15 for a taxable year after the taxable year in 

16 which the loss was incurred and through the 

17 close of the taxable year of the transfer, and 

18 ‘‘(B) any amount which is recognized 

19 under section 904(f)(3) on account of the trans20 fer. 

21 ‘‘(c) REDUCTION FOR RECOGNIZED GAINS.— 

22 ‘‘(1) IN GENERAL.—In the case of a transfer 

23 not described in section 367(a)(3)(C), the trans24 ferred loss amount shall be reduced (but not below 

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1 payer on account of the transfer (other than 

2 amounts taken into account under subsection 

3 (c)(2)(B)). 

4 ‘‘(2) COORDINATION WITH RECOGNITION

5 UNDER SECTION 367.—In the case of a transfer de6 scribed in section 367(a)(3)(C), the transferred loss 

7 amount shall not exceed the excess (if any) of— 

8 ‘‘(A) the excess of the amount described in 

9 section 367(a)(3)(C)(i) over the amount de10 scribed in section 367(a)(3)(C)(ii) with respect 

11 to such transfer, over 

12 ‘‘(B) the amount of gain recognized under 

13 section 367(a)(3)(C) with respect to such trans14 fer. 

15 ‘‘(d) SOURCE OF INCOME.—Amounts included in 

16 gross income under this section shall be treated as derived 

17 from sources within the United States. 

18 ‘‘(e) BASIS ADJUSTMENTS.—Consistent with such 

19 regulations or other guidance as the Secretary may pre20 scribe, proper adjustments shall be made in the adjusted 

21 basis of the taxpayer’s stock in the specified 10-percent 

22 owned foreign corporation to which the transfer is made, 

23 and in the transferee’s adjusted basis in the property 

24 transferred, to reflect amounts included in gross income 

25 under this section.’’. 


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1 (2) AMOUNTS RECOGNIZED UNDER SECTION 367

2 ON TRANSFER OF FOREIGN BRANCH WITH PRE3 VIOUSLY DEDUCTED LOSSES TREATED AS UNITED

4 STATES SOURCE.—Section 367(a)(3)(C) is amended 

5 by striking ‘‘outside’’ in the last sentence and insert6 ing ‘‘within’’. 

7 (3) CLERICAL AMENDMENT.—The table of sec8 tions for part II of subchapter B of chapter 1 is 

9 amended by adding at the end the following new 

10 item: 

‘‘Sec. 91. Certain foreign branch losses transferred to specified 10-percent 

owned foreign corporations.’’. 

11 (4) EFFECTIVE DATE.—The amendments made 

12 by this subsection shall apply to transfers after De13 cember 31, 2017. 

14 SEC. 4004. TREATMENT OF DEFERRED FOREIGN INCOME 

15 UPON TRANSITION TO PARTICIPATION EX16 EMPTION SYSTEM OF TAXATION. 

17 (a) IN GENERAL.—Section 965 is amended to read 

18 as follows: 

19 ‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME 

20 UPON TRANSITION TO PARTICIPATION EX21 EMPTION SYSTEM OF TAXATION. 

22 ‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME

23 AS SUBPART F INCOME.—In the case of the last taxable 

24 year of a deferred foreign income corporation which begins 


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1 before January 1, 2018, the subpart F income of such 

2 foreign corporation (as otherwise determined for such tax3 able year under section 952) shall be increased by the 

4 greater of— 

5 ‘‘(1) the accumulated post-1986 deferred for6 eign income of such corporation determined as of 

7 November 2, 2017, or 

8 ‘‘(2) the accumulated post-1986 deferred for9 eign income of such corporation determined as of 

10 December 31, 2017. 

11 ‘‘(b) REDUCTION IN AMOUNTS INCLUDED IN GROSS

12 INCOME OF UNITED STATES SHAREHOLDERS OF SPECI13 FIED FOREIGN CORPORATIONS WITH DEFICITS IN EARN14 INGS AND PROFITS.— 

15 ‘‘(1) IN GENERAL.—In the case of a taxpayer 

16 which is a United States shareholder with respect to 

17 at least one deferred foreign income corporation and 

18 at least one E&P deficit foreign corporation, the 

19 amount which would (but for this subsection) be 

20 taken into account under section 951(a)(1) by rea21 son of subsection (a) as such United States share22 holder’s pro rata share of the subpart F income of 

23 each deferred foreign income corporation shall be re24 duced (but not below zero) by the amount of such 

25 United States shareholder’s aggregate foreign E&P 


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1 deficit which is allocated under paragraph (2) to 

2 such deferred foreign income corporation. 

3 ‘‘(2) ALLOCATION OF AGGREGATE FOREIGN E&P

4 DEFICIT.—The aggregate foreign E&P deficit of any 

5 United States shareholder shall be allocated among 

6 the deferred foreign income corporations of such 

7 United States shareholder in an amount which bears 

8 the same proportion to such aggregate as— 

9 ‘‘(A) such United States shareholder’s pro 

10 rata share of the accumulated post-1986 de11 ferred foreign income of each such deferred for12 eign income corporation, bears to 

13 ‘‘(B) the aggregate of such United States 

14 shareholder’s pro rata share of the accumulated 

15 post-1986 deferred foreign income of all de16 ferred foreign income corporations of such 

17 United States shareholder. 

18 ‘‘(3) DEFINITIONS RELATED TO E&P DEFI19 CITS.—For purposes of this subsection— 

20 ‘‘(A) AGGREGATE FOREIGN E&P DEF21 ICIT.—The term ‘aggregate foreign E&P deficit’ 

22 means, with respect to any United States share23 holder, the aggregate of such shareholder’s pro 

24 rata shares of the specified E&P deficits of the 


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1 E&P deficit foreign corporations of such share2 holder. 

3 ‘‘(B) E&P DEFICIT FOREIGN CORPORA4 TION.—The term ‘E&P deficit foreign corpora5 tion’ means, with respect to any taxpayer, any 

6 specified foreign corporation with respect to 

7 which such taxpayer is a United States share8 holder, if— 

9 ‘‘(i) such specified foreign corporation 

10 has a deficit in post-1986 earnings and 

11 profits, and 

12 ‘‘(ii) as of November 2, 2017— 

13 ‘‘(I) such corporation was a spec14 ified foreign corporation, and 

15 ‘‘(II) such taxpayer was a United 

16 States shareholder of such corpora17 tion. 

18 ‘‘(C) SPECIFIED E&P DEFICIT.—The term 

19 ‘specified E&P deficit’ means, with respect to 

20 any E&P deficit foreign corporation, the 

21 amount of the deficit referred to in subpara22 graph (B). 

23 ‘‘(4) NETTING AMONG UNITED STATES SHARE24 HOLDERS IN SAME AFFILIATED GROUP.— 


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1 ‘‘(A) IN GENERAL.—In the case of any af2 filiated group which includes at least one E&P 

3 net surplus shareholder and one E&P net def4 icit shareholder, the amount which would (but 

5 for this paragraph) be taken into account under 

6 section 951(a)(1) by reason of subsection (a) by 

7 each such E&P net surplus shareholder shall be 

8 reduced (but not below zero) by such share9 holder’s applicable share of the affiliated 

10 group’s aggregate unused E&P deficit. 

11 ‘‘(B) E&P NET SURPLUS SHARE12 HOLDER.—For purposes of this paragraph, the 

13 term ‘E&P net surplus shareholder’ means any 

14 United States shareholder which would (deter15 mined without regard to this paragraph) take 

16 into account an amount greater than zero 

17 under section 951(a)(1) by reason of subsection 

18 (a). 

19 ‘‘(C) E&P NET DEFICIT SHAREHOLDER.— 

20 For purposes of this paragraph, the term ‘E&P 

21 net deficit shareholder’ means any United 

22 States shareholder if— 

23 ‘‘(i) the aggregate foreign E&P deficit 

24 with respect to such shareholder (as de25 fined in paragraph (3)(A)), exceeds 


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1 ‘‘(ii) the amount which would (but for 

2 this subsection) be taken into account by 

3 such shareholder under section 951(a)(1) 

4 by reason of subsection (a). 

5 ‘‘(D) AGGREGATE UNUSED E&P DEFICIT.— 

6 For purposes of this paragraph— 

7 ‘‘(i) IN GENERAL.—The term ‘aggre8 gate unused E&P deficit’ means, with re9 spect to any affiliated group, the lesser 

10 of— 

11 ‘‘(I) the sum of the excesses de12 scribed in subparagraph (C), deter13 mined with respect to each E&P net 

14 deficit shareholder in such group, or 

15 ‘‘(II) the amount determined 

16 under subparagraph (E)(ii). 

17 ‘‘(ii) REDUCTION WITH RESPECT TO

18 E&P NET DEFICIT SHAREHOLDERS WHICH

19 ARE NOT WHOLLY OWNED BY THE AFFILI20 ATED GROUP.—If the group ownership per21 centage of any E&P net deficit shareholder 

22 is less than 100 percent, the amount of the 

23 excess described in subparagraph (C) 

24 which is taken into account under clause 

25 (i)(I) with respect to such E&P net deficit 


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1 shareholder shall be such group ownership 

2 percentage of such amount. 

3 ‘‘(E) APPLICABLE SHARE.—For purposes 

4 of this paragraph, the term ‘applicable share’ 

5 means, with respect to any E&P net surplus 

6 shareholder in any affiliated group, the amount 

7 which bears the same proportion to such 

8 group’s aggregate unused E&P deficit as— 

9 ‘‘(i) the product of— 

10 ‘‘(I) such shareholder’s group 

11 ownership percentage, multiplied by 

12 ‘‘(II) the amount which would 

13 (but for this paragraph) be taken into 

14 account under section 951(a)(1) by 

15 reason of subsection (a) by such 

16 shareholder, bears to 

17 ‘‘(ii) the aggregate amount deter18 mined under clause (i) with respect to all 

19 E&P net surplus shareholders in such 

20 group. 

21 ‘‘(F) GROUP OWNERSHIP PERCENTAGE.— 

22 For purposes of this paragraph, the term 

23 ‘group ownership percentage’ means, with re24 spect to any United States shareholder in any 

25 affiliated group, the percentage of the value of 


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1 the stock of such United States shareholder 

2 which is held by other includible corporations in 

3 such affiliated group. Notwithstanding the pre4 ceding sentence, the group ownership percent5 age of the common parent of the affiliated 

6 group is 100 percent. Any term used in this 

7 subparagraph which is also used in section 

8 1504 shall have the same meaning as when 

9 used in such section. 

10 ‘‘(c) APPLICATION OF PARTICIPATION EXEMPTION

11 TO INCLUDED INCOME.— 

12 ‘‘(1) IN GENERAL.—In the case of a United 

13 States shareholder of a deferred foreign income cor14 poration, there shall be allowed as a deduction for 

15 the taxable year in which an amount is included in 

16 the gross income of such United States shareholder 

17 under section 951(a)(1) by reason of this section an 

18 amount equal to the sum of— 

19 ‘‘(A) the United States shareholder’s 5 

20 percent rate equivalent percentage of the excess 

21 (if any) of— 

22 ‘‘(i) the amount so included as gross 

23 income, over 


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1 ‘‘(ii) the amount of such United 

2 States shareholder’s aggregate foreign cash 

3 position, plus 

4 ‘‘(B) the United States shareholder’s 12 

5 percent rate equivalent percentage of so much 

6 of the amount described in subparagraph (A)(ii) 

7 as does not exceed the amount described in sub8 paragraph (A)(i). 

9 ‘‘(2) 5 AND 12 PERCENT RATE EQUIVALENT

10 PERCENTAGES.—For purposes of this subsection— 

11 ‘‘(A) 5 PERCENT RATE EQUIVALENT PER12 CENTAGE.—The term ‘5 percent rate equivalent 

13 percentage’ means, with respect to any United 

14 States shareholder for any taxable year, the 

15 percentage which would result in the amount to 

16 which such percentage applies being subject to 

17 a 5 percent rate of tax determined by only tak18 ing into account a deduction equal to such per19 centage of such amount and the highest rate of 

20 tax specified in section 11 for such taxable 

21 year. In the case of any taxable year of a 

22 United States shareholder to which section 15 

23 applies, the highest rate of tax under section 11 

24 before the effective date of the change in rates 

25 and the highest rate of tax under section 11 


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1 after the effective date of such change shall 

2 each be taken into account under the preceding 

3 sentence in the same proportions as the portion 

4 of such taxable year which is before and after 

5 such effective date, respectively. 

6 ‘‘(B) 12 PERCENT RATE EQUIVALENT PER7 CENTAGE.—The term ‘12 percent rate equiva8 lent percentage’ means, with respect to any 

9 United States shareholder for any taxable year, 

10 the percentage determined under subparagraph 

11 (A) applied by substituting ‘12 percent rate of 

12 tax’ for ‘5 percent rate of tax’. 

13 ‘‘(3) AGGREGATE FOREIGN CASH POSITION.— 

14 For purposes of this subsection— 

15 ‘‘(A) IN GENERAL.—The term ‘aggregate 

16 foreign cash position’ means, with respect to 

17 any United States shareholder, one-third of the 

18 sum of— 

19 ‘‘(i) the aggregate of such United 

20 States shareholder’s pro rata share of the 

21 cash position of each specified foreign cor22 poration of such United States shareholder 

23 determined as of November 2, 2017, 

24 ‘‘(ii) the aggregate described in clause 

25 (i) determined as of the close of the last 


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1 taxable year of each such specified foreign 

2 corporation which ends before November 2, 

3 2017, and 

4 ‘‘(iii) the aggregate described in 

5 clause (i) determined as of the close of the 

6 taxable year of each such specified foreign 

7 corporation which precedes the taxable 

8 year referred to in clause (ii). 

9 In the case of any foreign corporation which did 

10 not exist as of the determination date described 

11 in clause (ii) or (iii), this subparagraph shall be 

12 applied separately to such foreign corporation 

13 by not taking into account such clause and by 

14 substituting ‘one-half (100 percent in the case 

15 that both clauses (ii) and (iii) are disregarded)’ 

16 for ‘one-third’. 

17 ‘‘(B) CASH POSITION.—For purposes of 

18 this paragraph, the cash position of any speci19 fied foreign corporation is the sum of— 

20 ‘‘(i) cash held by such foreign cor21 poration, 

22 ‘‘(ii) the net accounts receivable of 

23 such foreign corporation, plus 

24 ‘‘(iii) the fair market value of the fol25 lowing assets held by such corporation: 


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1 ‘‘(I) Actively traded personal 

2 property for which there is an estab3 lished financial market. 

4 ‘‘(II) Commercial paper, certifi5 cates of deposit, the securities of the 

6 Federal government and of any State 

7 or foreign government. 

8 ‘‘(III) Any foreign currency. 

9 ‘‘(IV) Any obligation with a term 

10 of less than one year. 

11 ‘‘(V) Any asset which the Sec12 retary identifies as being economically 

13 equivalent to any asset described in 

14 this subparagraph. 

15 ‘‘(C) NET ACCOUNTS RECEIVABLE.—For 

16 purposes of this paragraph, the term ‘net ac17 counts receivable’ means, with respect to any 

18 specified foreign corporation, the excess (if any) 

19 of— 

20 ‘‘(i) such corporation’s accounts re21 ceivable, over 

22 ‘‘(ii) such corporation’s accounts pay23 able (determined consistent with the rules 

24 of section 461). 


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1 ‘‘(D) PREVENTION OF DOUBLE COUNT2 ING.— 

3 ‘‘(i) IN GENERAL.—The applicable 

4 percentage of each specified cash position 

5 of a specified foreign corporation shall not 

6 be taken into account by— 

7 ‘‘(I) the United States share8 holder referred to in clause (ii) with 

9 respect to such position, or 

10 ‘‘(II) any United States share11 holder which is an includible corpora12 tion in the same affiliated group as 

13 such United States shareholder re14 ferred to in clause (ii). 

15 ‘‘(ii) SPECIFIED CASH POSITION.—For 

16 purposes of this subparagraph, the term 

17 ‘specified cash position’ means— 

18 ‘‘(I) amounts described in sub19 paragraph (B)(ii) to the extent such 

20 amounts are receivable from another 

21 specified foreign corporation with re22 spect to any United States share23 holder, 

24 ‘‘(II) amounts described in sub25 paragraph (B)(iii)(I) to the extent 


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1 such amounts consist of an equity in2 terest in another specified foreign cor3 poration with respect to any United 

4 States shareholder, and 

5 ‘‘(III) amounts described in sub6 paragraph (B)(iii)(IV) to the extent 

7 that another specified foreign corpora8 tion with respect to any United States 

9 shareholder is obligated to repay such 

10 amount. 

11 ‘‘(iii) APPLICABLE PERCENTAGE.— 

12 For purposes of this subparagraph, the 

13 term ‘applicable percentage’ means— 

14 ‘‘(I) with respect to each speci15 fied cash position described in sub16 clause (I) or (III) of clause (ii), the 

17 pro rata share of the United States 

18 shareholder referred to in clause (ii) 

19 with respect to the specified foreign 

20 corporation referred to in such clause, 

21 and 

22 ‘‘(II) with respect to each speci23 fied cash position described in clause 

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1 cent) of the United States share2 holder’s pro rata share of the cash po3 sition of the specified foreign corpora4 tion referred to in such clause divided 

5 by the amount of such specified cash 

6 position. 

7 For purposes of this subparagraph, a sepa8 rate applicable percentage shall be deter9 mined under each of subclauses (I) and 

10 (II) with respect to each specified foreign 

11 corporation referred to in clause (ii) with 

12 respect to which a specified cash position 

13 is determined for the specified foreign cor14 poration referred to in clause (i). 

15 ‘‘(iv) REDUCTION WITH RESPECT TO

16 AFFILIATED GROUP MEMBERS NOT WHOL17 LY OWNED BY THE AFFILIATED GROUP.— 

18 For purposes of clause (i)(II), in the case 

19 of an includible corporation the group own20 ership percentage of which is less than 100 

21 percent (as determined under subsection 

22 (b)(4)(F)), the amount not take into ac23 count by reason of such clause shall be the 

24 group ownership percentage of such 


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1 amount (determined without regard to this 

2 clause). 

3 ‘‘(E) CERTAIN BLOCKED ASSETS NOT

4 TAKEN INTO ACCOUNT.—A cash position of a 

5 specified foreign corporation shall not be taken 

6 into account under subparagraph (A) if such 

7 position could not (as of the date that it would 

8 otherwise have been taken into account under 

9 clause (i), (ii), or (iii) of subparagraph (A)) 

10 have been distributed by such specified foreign 

11 corporation to United States shareholders of 

12 such specified foreign corporation because of 

13 currency or other restrictions or limitations im14 posed under the laws of any foreign country 

15 (within the meaning of section 964(b)). 

16 ‘‘(F) CASH POSITIONS OF CERTAIN NON17 CORPORATE ENTITIES TAKEN INTO ACCOUNT.— 

18 An entity (other than a domestic corporation) 

19 shall be treated as a specified foreign corpora20 tion of a United States shareholder for pur21 poses of determining such United States share22 holder’s aggregate foreign cash position if any 

23 interest in such entity is held by a specified for24 eign corporation of such United States share25 holder (determined after application of this subVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00340 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 paragraph) and such entity would be a specified 

2 foreign corporation of such United States 

3 shareholder if such entity were a foreign cor4 poration 

5 ‘‘(G) TIME OF CERTAIN DETERMINA6 TIONS.—For purposes of this paragraph, the 

7 determination of whether a person is a United 

8 States shareholder, whether a person is a speci9 fied foreign corporation, and the pro rata share 

10 of a United States shareholder with respect to 

11 a specified foreign corporation, shall be deter12 mined as of the end of the taxable year de13 scribed in subsection (a). 

14 ‘‘(H) ANTI-ABUSE.—If the Secretary de15 termines that the principal purpose of any 

16 transaction was to reduce the aggregate foreign 

17 cash position taken into account under this sub18 section, such transaction shall be disregarded 

19 for purposes of this subsection. 

20 ‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; 

21 ACCUMULATED POST-1986 DEFERRED FOREIGN IN22 COME.—For purposes of this section— 

23 ‘‘(1) DEFERRED FOREIGN INCOME CORPORA24 TION.—The term ‘deferred foreign income corpora25 tion’ means, with respect to any United States 


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1 shareholder, any specified foreign corporation of 

2 such United States shareholder which has accumu3 lated post-1986 deferred foreign income (as of the 

4 date referred to in paragraph (1) or (2) of sub5 section (a), whichever is applicable with respect to 

6 such foreign corporation) greater than zero. 

7 ‘‘(2) ACCUMULATED POST-1986 DEFERRED FOR8 EIGN INCOME.—The term ‘accumulated post-1986 

9 deferred foreign income’ means the post-1986 earn10 ings and profits except to the extent such earnings— 

11 ‘‘(A) are attributable to income of the 

12 specified foreign corporation which is effectively 

13 connected with the conduct of a trade or busi14 ness within the United States and subject to 

15 tax under this chapter, or 

16 ‘‘(B) if distributed, would be excluded from 

17 the gross income of a United States shareholder 

18 under section 959. 

19 To the extent provided in regulations or other guid20 ance prescribed by the Secretary, in the case of any 

21 controlled foreign corporation which has share22 holders which are not United States shareholders, 

23 accumulated post-1986 deferred foreign income shall 

24 be appropriately reduced by amounts which would be 


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1 described in subparagraph (B) if such shareholders 

2 were United States shareholders. 

3 ‘‘(3) POST-1986 EARNINGS AND PROFITS.—The 

4 term ‘post-1986 earnings and profits’ means the 

5 earnings and profits of the foreign corporation (com6 puted in accordance with sections 964(a) and 986) 

7 accumulated in taxable years beginning after Decem8 ber 31, 1986, and determined— 

9 ‘‘(A) as of the date referred to in para10 graph (1) or (2) of subsection (a), whichever is 

11 applicable with respect to such foreign corpora12 tion, 

13 ‘‘(B) without diminution by reason of divi14 dends distributed during the taxable year end15 ing with or including such date, and 

16 ‘‘(C) increased by the amount of any quali17 fied deficit (within the meaning of section 

18 952(c)(1)(B)(ii)) arising before January 1, 

19 2018, which is treated as a qualified deficit 

20 (within the meaning of such section as amended 

21 by the Tax Cuts and Jobs Act) for purposes of 

22 such foreign corporation’s first taxable year be23 ginning after December 31, 2017. 

24 ‘‘(e) SPECIFIED FOREIGN CORPORATION.— 


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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the term ‘specified foreign corporation’ 

3 means— 

4 ‘‘(A) any controlled foreign corporation, 

5 and 

6 ‘‘(B) any foreign corporation with respect 

7 to which one or more domestic corporations is 

8 a United States shareholder (determined with9 out regard to section 958(b)(4)). 

10 ‘‘(2) APPLICATION TO CERTAIN FOREIGN COR11 PORATIONS.—For purposes of sections 951 and 961, 

12 a foreign corporation described in paragraph (1)(B) 

13 shall be treated as a controlled foreign corporation 

14 solely for purposes of taking into account the sub15 part F income of such corporation under subsection 

16 (a) (and for purposes of applying subsection (f)). 

17 ‘‘(3) EXCEPTION FOR PASSIVE FOREIGN IN18 VESTMENT COMPANIES.—The term ‘specified foreign 

19 corporation’ shall not include any passive foreign in20 vestment company (within the meaning of subpart D 

21 of part VI of subchapter P) that is not a controlled 

22 foreign corporation. 

23 ‘‘(f) DETERMINATIONS OF PRO RATA SHARE.—For 

24 purposes of this section, the determination of any United 

25 States shareholder’s pro rata share of any amount with 


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1 respect to any specified foreign corporation shall be deter2 mined under rules similar to the rules of section 951(a)(2) 

3 by treating such amount in the same manner as subpart 

4 F income (and by treating such specified foreign corpora5 tion as a controlled foreign corporation). 

6 ‘‘(g) DISALLOWANCE OF FOREIGN TAX CREDIT, 

7 ETC.— 

8 ‘‘(1) IN GENERAL.—No credit shall be allowed 

9 under section 901 for the applicable percentage of 

10 any taxes paid or accrued (or treated as paid or ac11 crued) with respect to any amount for which a de12 duction is allowed under this section. 

13 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

14 of this subsection, the term ‘applicable percentage’ 

15 means the amount (expressed as a percentage) equal 

16 to the sum of— 

17 ‘‘(A) 85.7 percent of the ratio of— 

18 ‘‘(i) the excess to which subsection 

19 (c)(1)(A) applies, divided by 

20 ‘‘(ii) the sum of such excess plus the 

21 amount to which subsection (c)(1)(B) ap22 plies, plus 

23 ‘‘(B) 65.7 percent of the ratio of— 

24 ‘‘(i) the amount to which subsection 

25 (c)(1)(B) applies, divided by 


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1 ‘‘(ii) the sum described in subpara2 graph (A)(ii). 

3 ‘‘(3) DENIAL OF DEDUCTION.—No deduction 

4 shall be allowed under this chapter for any tax for 

5 which credit is not allowable under section 901 by 

6 reason of paragraph (1) (determined by treating the 

7 taxpayer as having elected the benefits of subpart A 

8 of part III of subchapter N). 

9 ‘‘(4) COORDINATION WITH SECTION 78.—Sec10 tion 78 shall not apply to any tax for which credit 

11 is not allowable under section 901 by reason of para12 graph (1). 

13 ‘‘(5) EXTENSION OF FOREIGN TAX CREDIT CAR14 RYOVER PERIOD.—With respect to any taxes paid or 

15 accrued (or treated as paid or accrued) with respect 

16 to any amount for which a deduction is allowed 

17 under this section, section 904(c) shall be applied by 

18 substituting ‘first 20 succeeding taxable years’ for 

19 ‘first 10 succeeding taxable years’. 

20 ‘‘(h) ELECTION TO PAY LIABILITY IN INSTALL21 MENTS.— 

22 ‘‘(1) IN GENERAL.—In the case of a United 

23 States shareholder of a deferred foreign income cor24 poration, such United States shareholder may elect 


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1 to pay the net tax liability under this section in 8 

2 equal installments. 

3 ‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.— 

4 If an election is made under paragraph (1), the first 

5 installment shall be paid on the due date (deter6 mined without regard to any extension of time for 

7 filing the return) for the return of tax for the tax8 able year described in subsection (a) and each suc9 ceeding installment shall be paid on the due date (as 

10 so determined) for the return of tax for the taxable 

11 year following the taxable year with respect to which 

12 the preceding installment was made. 

13 ‘‘(3) ACCELERATION OF PAYMENT.—If there is 

14 an addition to tax for failure to timely pay any in15 stallment required under this subsection, a liquida16 tion or sale of substantially all the assets of the tax17 payer (including in a title 11 or similar case), a ces18 sation of business by the taxpayer, or any similar 

19 circumstance, then the unpaid portion of all remain20 ing installments shall be due on the date of such 

21 event (or in the case of a title 11 or similar case, 

22 the day before the petition is filed). The preceding 

23 sentence shall not apply to the sale of substantially 

24 all the assets of a taxpayer to a buyer if such buyer 

25 enters into an agreement with the Secretary under 


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1 which such buyer is liable for the remaining install2 ments due under this subsection in the same manner 

3 as if such buyer were the taxpayer. 

4 ‘‘(4) PRORATION OF DEFICIENCY TO INSTALL5 MENTS.—If an election is made under paragraph (1) 

6 to pay the net tax liability under this section in in7 stallments and a deficiency has been assessed with 

8 respect to such net tax liability, the deficiency shall 

9 be prorated to the installments payable under para10 graph (1). The part of the deficiency so prorated to 

11 any installment the date for payment of which has 

12 not arrived shall be collected at the same time as, 

13 and as a part of, such installment. The part of the 

14 deficiency so prorated to any installment the date 

15 for payment of which has arrived shall be paid upon 

16 notice and demand from the Secretary. This sub17 section shall not apply if the deficiency is due to 

18 negligence, to intentional disregard of rules and reg19 ulations, or to fraud with intent to evade tax. 

20 ‘‘(5) ELECTION.—Any election under paragraph 

21 (1) shall be made not later than the due date for the 

22 return of tax for the taxable year described in sub23 section (a) and shall be made in such manner as the 

24 Secretary may provide. 


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1 ‘‘(6) NET TAX LIABILITY UNDER THIS SEC2 TION.—For purposes of this subsection— 

3 ‘‘(A) IN GENERAL.—The net tax liability 

4 under this section with respect to any United 

5 States shareholder is the excess (if any) of— 

6 ‘‘(i) such taxpayer’s net income tax 

7 for the taxable year in which an amount is 

8 included in the gross income of such 

9 United States shareholder under section 

10 951(a)(1) by reason of this section, over 

11 ‘‘(ii) such taxpayer’s net income tax 

12 for such taxable year determined— 

13 ‘‘(I) without regard to this sec14 tion, and 

15 ‘‘(II) without regard to any in16 come, deduction, or credit, properly 

17 attributable to a dividend received by 

18 such United States shareholder from 

19 any deferred foreign income corpora20 tion. 

21 ‘‘(B) NET INCOME TAX.—The term ‘net 

22 income tax’ means the regular tax liability re23 duced by the credits allowed under subparts A, 

24 B, and D of part IV of subchapter A. 


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1 ‘‘(i) SPECIAL RULES FOR S CORPORATION SHARE2 HOLDERS.— 

3 ‘‘(1) IN GENERAL.—In the case of any S cor4 poration which is a United States shareholder of a 

5 deferred foreign income corporation, each share6 holder of such S corporation may elect to defer pay7 ment of such shareholder’s net tax liability under 

8 this section with respect to such S corporation until 

9 the shareholder’s taxable year which includes the 

10 triggering event with respect to such liability. Any 

11 net tax liability payment of which is deferred under 

12 the preceding sentence shall be assessed on the re13 turn as an addition to tax in the shareholder’s tax14 able year which includes such triggering event. 

15 ‘‘(2) TRIGGERING EVENT.— 

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

17 shareholder’s net tax liability under this section 

18 with respect to any S corporation, the trig19 gering event with respect to such liability is 

20 whichever of the following occurs first: 

21 ‘‘(i) Such corporation ceases to be an 

22 S corporation (determined as of the first 

23 day of the first taxable year that such cor24 poration is not an S corporation). 


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1 ‘‘(ii) A liquidation or sale of substan2 tially all the assets of such S corporation 

3 (including in a title 11 or similar case), a 

4 cessation of business by such S corpora5 tion, such S corporation ceases to exist, or 

6 any similar circumstance. 

7 ‘‘(iii) A transfer of any share of stock 

8 in such S corporation by the taxpayer (in9 cluding by reason of death, or otherwise). 

10 ‘‘(B) PARTIAL TRANSFERS OF STOCK.—In 

11 the case of a transfer of less than all of the tax12 payer’s shares of stock in the S corporation, 

13 such transfer shall only be a triggering event 

14 with respect to so much of the taxpayer’s net 

15 tax liability under this section with respect to 

16 such S corporation as is properly allocable to 

17 such stock. 

18 ‘‘(C) TRANSFER OF LIABILITY.—A trans19 fer described in clause (iii) shall not be treated 

20 as a triggering event if the transferee enters 

21 into an agreement with the Secretary under 

22 which such transferee is liable for net tax liabil23 ity with respect to such stock in the same man24 ner as if such transferee were the taxpayer. 


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1 ‘‘(3) NET TAX LIABILITY.—A shareholder’s net 

2 tax liability under this section with respect to any S 

3 corporation is the net tax liability under this section 

4 which would be determined under subsection (h)(6) 

5 if the only subpart F income taken into account by 

6 such shareholder by reason of this section were allo7 cations from such S corporation. 

8 ‘‘(4) ELECTION TO PAY DEFERRED LIABILITY

9 IN INSTALLMENTS.—In the case of a taxpayer which 

10 elects to defer payment under paragraph (1)— 

11 ‘‘(A) subsection (h) shall be applied sepa12 rately with respect to the liability to which such 

13 election applies, 

14 ‘‘(B) an election under subsection (h) with 

15 respect to such liability shall be treated as time16 ly made if made not later than the due date for 

17 the return of tax for the taxable year in which 

18 the triggering event with respect to such liabil19 ity occurs, 

20 ‘‘(C) the first installment under subsection 

21 (h) with respect to such liability shall be paid 

22 not later than such due date (but determined 

23 without regard to any extension of time for fil24 ing the return), and 


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1 ‘‘(D) if the triggering event with respect to 

2 any net tax liability is described in paragraph 

3 (2)(A)(ii), an election under subsection (h) with 

4 respect to such liability may be made only with 

5 the consent of the Secretary. 

6 ‘‘(5) JOINT AND SEVERAL LIABILITY OF S COR7 PORATION.—If any shareholder of an S corporation 

8 elects to defer payment under paragraph (1), such 

9 S corporation shall be jointly and severally liable for 

10 such payment and any penalty, addition to tax, or 

11 additional amount attributable thereto. 

12 ‘‘(6) EXTENSION OF LIMITATION ON COLLEC13 TION.—Notwithstanding any other provision of law, 

14 any limitation on the time period for the collection 

15 of a liability deferred under this subsection shall not 

16 be treated as beginning before the date of the trig17 gering event with respect to such liability. 

18 ‘‘(7) ANNUAL REPORTING OF NET TAX LIABIL19 ITY.— 

20 ‘‘(A) IN GENERAL.—Any shareholder of an 

21 S corporation which makes an election under 

22 paragraph (1) shall report the amount of such 

23 shareholder’s deferred net tax liability on such 

24 shareholder’s return of tax for the taxable year 

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1 turn of tax for each taxable year thereafter 

2 until such amount has been fully assessed on 

3 such returns. 

4 ‘‘(B) DEFERRED NET TAX LIABILITY.— 

5 For purposes of this paragraph, the term ‘de6 ferred net tax liability’ means, with respect to 

7 any taxable year, the amount of net tax liability 

8 payment of which has been deferred under 

9 paragraph (1) and which has not been assessed 

10 on a return of tax for any prior taxable year. 

11 ‘‘(C) FAILURE TO REPORT.—In the case of 

12 any failure to report any amount required to be 

13 reported under subparagraph (A) with respect 

14 to any taxable year before the due date for the 

15 return of tax for such taxable year, there shall 

16 be assessed on such return as an addition to 

17 tax 5 percent of such amount. 

18 ‘‘(8) ELECTION.—Any election under paragraph 

19 (1)— 

20 ‘‘(A) shall be made by the shareholder of 

21 the S corporation not later than the due date 

22 for such shareholder’s return of tax for the tax23 able year which includes the close of the taxable 

24 year of such S corporation in which the amount 


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1 described in subsection (a) is taken into ac2 count, and 

3 ‘‘(B) shall be made in such manner as the 

4 Secretary may provide. 

5 ‘‘(j) REPORTING BY S CORPORATION.—Each S cor6 poration which is a United States shareholder of a de7 ferred foreign income corporation shall report in its return 

8 of tax under section 6037(a) the amount includible in its 

9 gross income for such taxable year by reason of this sec10 tion and the amount of the deduction allowable by sub11 section (c). Any copy provided to a shareholder under sec12 tion 6037(b) shall include a statement of such share13 holder’s pro rata share of such amounts. 

14 ‘‘(k) INCLUSION OF DEFERRED FOREIGN INCOME

15 UNDER THIS SECTION NOT TO TRIGGER RECAPTURE OF

16 OVERALL FOREIGN LOSS, ETC.—For purposes of sections 

17 904(f)(1) and 907(c)(4), in the case of a United States 

18 shareholder of a deferred foreign income corporation, such 

19 United States shareholder’s taxable income from sources 

20 without the United States and combined foreign oil and 

21 gas income shall be determined without regard to this sec22 tion. 

23 ‘‘(l) REGULATIONS.—The Secretary may prescribe 

24 such regulations or other guidance as may be necessary 

25 or appropriate to carry out the provisions of this section.’’. 


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1 (b) CLERICAL AMENDMENT.—The table of section 

2 for subpart F of part III of subchapter N of chapter 1 

3 is amended by striking the item relating to section 965 

4 and inserting the following: 

‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation exemption system of taxation.’’. 

5 Subtitle B—Modifications Related 

6 to Foreign Tax Credit System 

7 SEC. 4101. REPEAL OF SECTION 902 INDIRECT FOREIGN 

8 TAX CREDITS; DETERMINATION OF SECTION 

9 960 CREDIT ON CURRENT YEAR BASIS. 

10 (a) REPEAL OF SECTION 902 INDIRECT FOREIGN

11 TAX CREDITS.—Subpart A of part III of subchapter N 

12 of chapter 1 is amended by striking section 902. 

13 (b) DETERMINATION OF SECTION 960 CREDIT ON

14 CURRENT YEAR BASIS.—Section 960 is amended— 

15 (1) by striking subsection (c), by redesignating 

16 subsection (b) as subsection (c), by striking all that 

17 precedes subsection (c) (as so redesignated) and in18 serting the following: 

19 ‘‘SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLU20 SIONS. 

21 ‘‘(a) IN GENERAL.—For purposes of this subpart, if 

22 there is included in the gross income of a domestic cor23 poration any item of income under section 951(a)(1) with 

24 respect to any controlled foreign corporation with respect 


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1 to which such domestic corporation is a United States 

2 shareholder, such domestic corporation shall be deemed to 

3 have paid so much of such foreign corporation’s foreign 

4 income taxes as are properly attributable to such item of 

5 income. 

6 ‘‘(b) SPECIAL RULES FOR DISTRIBUTIONS FROM

7 PREVIOUSLY TAXED EARNINGS AND PROFITS.—For pur8 poses of this subpart— 

9 ‘‘(1) IN GENERAL.—If any portion of a dis10 tribution from a controlled foreign corporation to a 

11 domestic corporation which is a United States share12 holder with respect to such controlled foreign cor13 poration is excluded from gross income under section 

14 959(a), such domestic corporation shall be deemed 

15 to have paid so much of such foreign corporation’s 

16 foreign income taxes as— 

17 ‘‘(A) are properly attributable to such por18 tion, and 

19 ‘‘(B) have not been deemed to have to been 

20 paid by such domestic corporation under this 

21 section for the taxable year or any prior taxable 

22 year. 

23 ‘‘(2) TIERED CONTROLLED FOREIGN CORPORA24 TIONS.—If section 959(b) applies to any portion of 

25 a distribution from a controlled foreign corporation 


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1 to another controlled foreign corporation, such con2 trolled foreign corporation shall be deemed to have 

3 paid so much of such other controlled foreign cor4 poration’s foreign income taxes as— 

5 ‘‘(A) are properly attributable to such por6 tion, and 

7 ‘‘(B) have not been deemed to have been 

8 paid by a domestic corporation under this sec9 tion for the taxable year or any prior taxable 

10 year.’’, 

11 (2) and by adding after subsection (c) (as so re12 designated) the following new subsections: 

13 ‘‘(d) FOREIGN INCOME TAXES.—The term ‘foreign 

14 income taxes’ means any income, war profits, or excess 

15 profits taxes paid or accrued to any foreign country or 

16 possession of the United States. 

17 ‘‘(e) REGULATIONS.—The Secretary may prescribe 

18 such regulations or other guidance as may be necessary 

19 or appropriate to carry out the provisions of this section.’’. 

20 (c) CONFORMING AMENDMENTS.— 

21 (1) Section 78 is amended to read as follows: 

22 ‘‘SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX 

23 CREDIT. 

24 ‘‘If a domestic corporation chooses to have the bene25 fits of subpart A of part III of subchapter N (relating 


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1 to foreign tax credit) for any taxable year, an amount 

2 equal to the taxes deemed to be paid by such corporation 

3 under subsections (a) and (b) of section 960 for such tax4 able year shall be treated for purposes of this title (other 

5 than sections 959, 960, and 961) as an item of income 

6 required to be included in the gross income of such domes7 tic corporation under section 951(a) for such taxable 

8 year.’’. 

9 (2) Section 245(a)(10)(C) is amended by strik10 ing ‘‘sections 902, 907, and 960’’ and inserting 

11 ‘‘sections 907 and 960’’. 

12 (3) Sections 535(b)(1) and 545(b)(1) are each 

13 amended by striking ‘‘section 902(a) or 960(a)(1)’’ 

14 and inserting ‘‘section 960’’. 

15 (4) Section 814(f)(1) is amended— 

16 (A) by striking subparagraph (B), and 

17 (B) by striking all that precedes ‘‘No in18 come’’ and inserting the following: 

19 ‘‘(1) TREATMENT OF FOREIGN TAXES.—’’. 

20 (5) Section 865(h)(1)(B) is amended by strik21 ing ‘‘sections 902, 907, and 960’’ and inserting 

22 ‘‘sections 907 and 960’’. 

23 (6) Section 901(a) is amended by striking ‘‘sec24 tions 902 and 960’’ and inserting ‘‘section 960’’. 


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1 (7) Section 901(e)(2) is amended by striking 

2 ‘‘but is not limited to—’’ and all that follows 

3 through ‘‘that portion’’ and inserting ‘‘but is not 

4 limited to, that portion’’. 

5 (8) Section 901(f) is amended by striking ‘‘sec6 tions 902 and 960’’ and inserting ‘‘section 960’’. 

7 (9) Section 901(j)(1)(A) is amended by striking 

8 ‘‘902 or’’. 

9 (10) Section 901(j)(1)(B) is amended by strik10 ing ‘‘sections 902 and 960’’ and inserting ‘‘section 

11 960’’. 

12 (11) Section 901(k)(2) is amended by striking 

13 ‘‘section 853, 902, or 960’’ and inserting ‘‘section 

14 853 or 960’’. 

15 (12) Section 901(k)(6) is amended by striking 

16 ‘‘902 or’’. 

17 (13) Section 901(m)(1) is amended by striking 

18 ‘‘relevant foreign assets—’’ and all that follows and 

19 inserting ‘‘relevant foreign assets shall not be taken 

20 into account in determining the credit allowed under 

21 subsection (a).’’. 

22 (14) Section 904(d)(1) is amended by striking 

23 ‘‘sections 902, 907, and 960’’ and inserting ‘‘sec24 tions 907 and 960’’. 


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1 (15) Section 904(d)(6)(A) is amended by strik2 ing ‘‘sections 902, 907, and 960’’ and inserting 

3 ‘‘sections 907 and 960’’. 

4 (16) Section 904(h)(10)(A) is amended by 

5 striking ‘‘sections 902, 907, and 960’’ and inserting 

6 ‘‘sections 907 and 960’’. 

7 (17) Section 904 is amended by striking sub8 section (k). 

9 (18) Section 905(c)(1) is amended by striking 

10 the last sentence. 

11 (19) Section 905(c)(2)(B)(i) is amended to read 

12 as follows: 

13 ‘‘(i) shall be taken into account for 

14 the taxable year to which such taxes relate, 

15 and’’. 

16 (20) Section 906(a) is amended by striking ‘‘(or 

17 deemed, under section 902, paid or accrued during 

18 the taxable year)’’. 

19 (21) Section 906(b) is amended by striking 

20 paragraphs (4) and (5). 

21 (22) Section 907(b)(2)(B) is amended by strik22 ing ‘‘902 or’’. 

23 (23) Section 907(c)(3) is amended— 


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1 (A) by striking subparagraph (A) and re2 designating subparagraphs (B) and (C) as sub3 paragraphs (A) and (B), respectively, and 

4 (B) by striking ‘‘section 960(a)’’ in sub5 paragraph (A) (as so redesignated) and insert6 ing ‘‘section 960’’. 

7 (24) Section 907(c)(5) is amended by striking 

8 ‘‘902 or’’. 

9 (25) Section 907(f)(2)(B)(i) is amended by 

10 striking ‘‘902 or’’. 

11 (26) Section 908(a) is amended by striking 

12 ‘‘902 or’’. 

13 (27) Section 909(b) is amended— 

14 (A) by striking ‘‘section 902 corporation’’ 

15 in the matter preceding paragraph (1) and in16 serting ‘‘10/50 corporation’’, 

17 (B) by striking ‘‘902 or’’ in paragraph (1), 

18 (C) by striking ‘‘by such section 902 cor19 poration’’ and all that follows in the matter fol20 lowing paragraph (2) and inserting ‘‘by such 

21 10/50 corporation or a domestic corporation 

22 which is a United States shareholder with re23 spect to such 10/50 corporation.’’, and 


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1 (D) by striking ‘‘SECTION 902 CORPORA2 TIONS’’ in the heading thereof and inserting 

3 ‘‘10/50 CORPORATIONS’’. 

4 (28) Section 909(d)(5) is amended to read as 

5 follows: 

6 ‘‘(5) 10/50 CORPORATION.—The term ‘10/50 

7 corporation’ means any foreign corporation with re8 spect to which one or more domestic corporations is 

9 a United States shareholder.’’. 

10 (29) Section 958(a)(1) is amended by striking 

11 ‘‘960(a)(1)’’ and inserting ‘‘960’’. 

12 (30) Section 959(d) is amended by striking 

13 ‘‘Except as provided in section 960(a)(3), any’’ and 

14 inserting ‘‘Any’’. 

15 (31) Section 959(e) is amended by striking 

16 ‘‘section 960(b)’’ and inserting ‘‘section 960(c)’’. 

17 (32) Section 1291(g)(2)(A) is amended by 

18 striking ‘‘any distribution—’’ and all that follows 

19 through ‘‘but only if’’ and inserting ‘‘any distribu20 tion, any withholding tax imposed with respect to 

21 such distribution, but only if’’. 

22 (33) Section 6038(c)(1)(B) is amended by 

23 striking ‘‘sections 902 (relating to foreign tax credit 

24 for corporate stockholder in foreign corporation) and 


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1 960 (relating to special rules for foreign tax credit)’’ 

2 and inserting ‘‘section 960’’. 

3 (34) Section 6038(c)(4) is amended by striking 

4 subparagraph (C). 

5 (35) The table of sections for subpart A of part 

6 III of subchapter N of chapter 1 is amended by 

7 striking the item relating to section 902. 

8 (36) The table of sections for subpart F of part 

9 III of subchapter N of chapter 1 is amended by 

10 striking the item relating to section 960 and insert11 ing the following: 

‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’. 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2017. 

15 SEC. 4102. SOURCE OF INCOME FROM SALES OF INVEN16 TORY DETERMINED SOLELY ON BASIS OF 

17 PRODUCTION ACTIVITIES. 

18 (a) IN GENERAL.—Section 863(b) is amended by 

19 adding at the end the following: ‘‘Gains, profits, and in20 come from the sale or exchange of inventory property de21 scribed in paragraph (2) shall be allocated and appor22 tioned between sources within and without the United 

23 States solely on the basis of the production activities with 

24 respect to the property.’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 Subtitle C—Modification of 

5 Subpart F Provisions 

6 SEC. 4201. REPEAL OF INCLUSION BASED ON WITHDRAWAL 

7 OF PREVIOUSLY EXCLUDED SUBPART F IN8 COME FROM QUALIFIED INVESTMENT. 

9 (a) IN GENERAL.—Subpart F of part III of sub10 chapter N of chapter 1 is amended by striking section 955. 

11 (b) CONFORMING AMENDMENTS.— 

12 (1)(A) Section 951(a)(1)(A) is amended to read 

13 as follows: 

14 ‘‘(A) his pro rata share (determined under 

15 paragraph (2)) of the corporation’s subpart F 

16 income for such year, and’’. 

17 (B) Section 851(b)(3) is amended by striking 

18 ‘‘section 951(a)(1)(A)(i)’’ in the flush language at 

19 the end and inserting ‘‘section 951(a)(1)(A)’’. 

20 (C) Section 952(c)(1)(B)(i) is amended by 

21 striking ‘‘section 951(a)(1)(A)(i)’’ and inserting 

22 ‘‘section 951(a)(1)(A)’’. 

23 (D) Section 953(c)(1)(C) is amended by strik24 ing ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 

25 951(a)(1)(A)’’. 


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1 (2) Section 951(a) is amended by striking para2 graph (3). 

3 (3) Section 953(d)(4)(B)(iv)(II) is amended by 

4 striking ‘‘or amounts referred to in clause (ii) or (iii) 

5 of section 951(a)(1)(A)’’. 

6 (4) Section 964(b) is amended by striking ‘‘, 

7 955,’’. 

8 (5) Section 970 is amended by striking sub9 section (b). 

10 (6) The table of sections for subpart F of part 

11 III of subchapter N of chapter 1 is amended by 

12 striking the item relating to section 955. 

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

14 this section shall apply to taxable years of foreign corpora15 tions beginning after December 31, 2017, and to taxable 

16 years of United States shareholders in which or with which 

17 such taxable years of foreign corporations end. 

18 SEC. 4202. REPEAL OF TREATMENT OF FOREIGN BASE COM19 PANY OIL RELATED INCOME AS SUBPART F 

20 INCOME. 

21 (a) IN GENERAL.—Section 954(a) is amended by 

22 striking paragraph (5), by striking the comma at the end 

23 of paragraph (3) and inserting a period, and by inserting 

24 ‘‘and’’ at the end of paragraph (2). 

25 (b) CONFORMING AMENDMENTS.— 


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1 (1) Section 952(c)(1)(B)(iii) is amended by 

2 striking subclause (I) and by redesignating sub3 clauses (II) through (V) as subclauses (I) through 

4 (IV), respectively. 

5 (2) Section 954(b)(4) is amended by striking 

6 the last sentence. 

7 (3) Section 954(b)(5) is amended by striking 

8 ‘‘the foreign base company services income, and the 

9 foreign base company oil related income’’ and insert10 ing ‘‘and the foreign base company services income’’. 

11 (4) Section 954(b) is amended by striking para12 graph (6). 

13 (5) Section 954 is amended by striking sub14 section (g). 

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

16 this section shall apply to taxable years of foreign corpora17 tions beginning after December 31, 2017, and to taxable 

18 years of United States shareholders in which or with which 

19 such taxable years of foreign corporations end. 

20 SEC. 4203. INFLATION ADJUSTMENT OF DE MINIMIS EXCEP21 TION FOR FOREIGN BASE COMPANY INCOME. 

22 (a) IN GENERAL.—Section 954(b)(3) is amended by 

23 adding at the end the following new subparagraph: 

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

25 case of any taxable year beginning after 2017, 


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1 the dollar amount in subparagraph (A)(ii) shall 

2 be increased by an amount equal to— 

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

4 ‘‘(ii) the cost-of-living adjustment de5 termined under section 1(c)(2)(A) for the 

6 calendar year in which the taxable year be7 gins. 

8 Any increase determined under the preceding 

9 sentence shall be rounded to the nearest mul10 tiple of $50,000.’’. 

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

12 this section shall apply to taxable years of foreign corpora13 tions beginning after December 31, 2017, and to taxable 

14 years of United States shareholders in which or with which 

15 such taxable years of foreign corporations end. 

16 SEC. 4204. LOOK-THRU RULE FOR RELATED CONTROLLED 

17 FOREIGN CORPORATIONS MADE PERMA18 NENT. 

19 (a) IN GENERAL.—Paragraph (6) of section 954(c) 

20 is amended by striking subparagraph (C). 

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

22 this section shall apply to taxable years of foreign corpora23 tions beginning after December 31, 2019, and to taxable 

24 years of United States shareholders in which or with which 

25 such taxable years of foreign corporations end. 


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1 SEC. 4205. MODIFICATION OF STOCK ATTRIBUTION RULES 

2 FOR DETERMINING STATUS AS A CON3 TROLLED FOREIGN CORPORATION. 

4 (a) IN GENERAL.—Section 958(b) is amended— 

5 (1) by striking paragraph (4), and 

6 (2) by striking ‘‘Paragraphs (1) and (4)’’ in the 

7 last sentence and inserting ‘‘Paragraph (1)’’. 

8 (b) APPLICATION OF CERTAIN REPORTING REQUIRE9 MENTS.—Section 6038(e)(2) is amended by striking ‘‘ex10 cept that—’’ and all that follows through ‘‘in applying 

11 subparagraph (C)’’ and inserting ‘‘except that in applying 

12 subparagraph (C)’’. 

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

14 this section shall apply to taxable years of foreign corpora15 tions beginning after December 31, 2017, and to taxable 

16 years of United States shareholders in which or with which 

17 such taxable years of foreign corporations end. 

18 SEC. 4206. ELIMINATION OF REQUIREMENT THAT COR19 PORATION MUST BE CONTROLLED FOR 30 

20 DAYS BEFORE SUBPART F INCLUSIONS 

21 APPLY. 

22 (a) IN GENERAL.—Section 951(a)(1) is amended by 

23 striking ‘‘for an uninterrupted period of 30 days or more’’ 

24 and inserting ‘‘at any time’’. 

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

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1 tions beginning after December 31, 2017, and to taxable 

2 years of United States shareholders with or within which 

3 such taxable years of foreign corporations end. 

4 Subtitle D—Prevention of Base 

5 Erosion 

6 SEC. 4301. CURRENT YEAR INCLUSION BY UNITED STATES 

7 SHAREHOLDERS WITH FOREIGN HIGH RE8 TURNS. 

9 (a) IN GENERAL.—Subpart F of part III of sub10 chapter N of chapter 1 is amended by inserting after sec11 tion 951 the following new section: 

12 ‘‘SEC. 951A. FOREIGN HIGH RETURN AMOUNT INCLUDED IN 

13 GROSS INCOME OF UNITED STATES SHARE14 HOLDERS. 

15 ‘‘(a) IN GENERAL.—Each person who is a United 

16 States shareholder of any controlled foreign corporation 

17 for any taxable year of such United States shareholder 

18 shall include in gross income for such taxable year 50 per19 cent of such shareholder’s foreign high return amount for 

20 such taxable year. 

21 ‘‘(b) FOREIGN HIGH RETURN AMOUNT.—For pur22 poses of this section— 

23 ‘‘(1) IN GENERAL.—The term ‘foreign high re24 turn amount’ means, with respect to any United 


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1 States shareholder for any taxable year of such 

2 United States shareholder, the excess (if any) of— 

3 ‘‘(A) such shareholder’s net CFC tested in4 come for such taxable year, over 

5 ‘‘(B) the excess (if any) of— 

6 ‘‘(i) the applicable percentage of the 

7 aggregate of such shareholder’s pro rata 

8 share of the qualified business asset invest9 ment of each controlled foreign corporation 

10 with respect to which such shareholder is 

11 a United States shareholder for such tax12 able year (determined for each taxable year 

13 of each such controlled foreign corporation 

14 which ends in or with such taxable year of 

15 such United States shareholder), over 

16 ‘‘(ii) the amount of interest expense 

17 taken into account under subsection 

18 (c)(2)(A)(ii) in determining the share19 holder’s net CFC tested income for the 

20 taxable year. 

21 ‘‘(2) APPLICABLE PERCENTAGE.—The term 

22 ‘applicable percentage’ means, with respect to any 

23 taxable year, the Federal short-term rate (deter24 mined under section 1274(d) for the month in which 


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1 or with which such taxable year ends) plus 7 per2 centage points. 

3 ‘‘(c) NET CFC TESTED INCOME.—For purposes of 

4 this section— 

5 ‘‘(1) IN GENERAL.—The term ‘net CFC tested 

6 income’ means, with respect to any United States 

7 shareholder for any taxable year of such United 

8 States shareholder, the excess (if any) of— 

9 ‘‘(A) the aggregate of such shareholder’s 

10 pro rata share of the tested income of each con11 trolled foreign corporation with respect to which 

12 such shareholder is a United States shareholder 

13 for such taxable year of such United States 

14 shareholder (determined for each taxable year 

15 of such controlled foreign corporation which 

16 ends in or with such taxable year of such 

17 United States shareholder), over 

18 ‘‘(B) the aggregate of such shareholder’s 

19 pro rata share of the tested loss of each con20 trolled foreign corporation with respect to which 

21 such shareholder is a United States shareholder 

22 for such taxable year of such United States 

23 shareholder (determined for each taxable year 

24 of such controlled foreign corporation which 


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1 ends in or with such taxable year of such 

2 United States shareholder). 

3 ‘‘(2) TESTED INCOME; TESTED LOSS.—For pur4 poses of this section— 

5 ‘‘(A) TESTED INCOME.—The term ‘tested 

6 income’ means, with respect to any controlled 

7 foreign corporation for any taxable year of such 

8 controlled foreign corporation, the excess (if 

9 any) of— 

10 ‘‘(i) the gross income of such corpora11 tion determined without regard to— 

12 ‘‘(I) any item of income which is 

13 effectively connected with the conduct 

14 by such corporation of a trade or 

15 business within the United States if 

16 subject to tax under this chapter, 

17 ‘‘(II) any gross income taken into 

18 account in determining the subpart F 

19 income of such corporation, 

20 ‘‘(III) except as otherwise pro21 vided by the Secretary, any amount 

22 excluded from the foreign personal 

23 holding company income (as defined 

24 in section 954) of such corporation by 

25 reason of section 954(c)(6) but only 


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1 to the extent that any deduction al2 lowable for the payment or accrual of 

3 such amount does not result in a re4 duction in the foreign high return 

5 amount of any United States share6 holder (determined without regard to 

7 this subclause), 

8 ‘‘(IV) any gross income excluded 

9 from the foreign personal holding 

10 company income (as defined in section 

11 954) of such corporation by reason of 

12 subsection (h) or (i) of section 954, 

13 ‘‘(V) any gross income excluded 

14 from the insurance income (as defined 

15 in section 953) of such corporation by 

16 reason of section 953(a)(2), 

17 ‘‘(VI) any gross income excluded 

18 from foreign base company income (as 

19 defined in section 954) or insurance 

20 income (as defined in section 953) of 

21 such corporation by reason of section 

22 954(b)(4), 

23 ‘‘(VII) any dividend received 

24 from a related person (as defined in 

25 section 954(d)(3)), and 


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1 ‘‘(VIII) any commodities gross 

2 income of such corporation, over 

3 ‘‘(ii) the deductions (including taxes) 

4 properly allocable to such gross income 

5 under rules similar to the rules of section 

6 954(b)(5) (or which would be so properly 

7 allocable if such corporation had such 

8 gross income). 

9 ‘‘(B) TESTED LOSS.—The term ‘tested 

10 loss’ means, with respect to any controlled for11 eign corporation for any taxable year of such 

12 controlled foreign corporation, the excess (if 

13 any) of the amount described in subparagraph 

14 (A)(ii) over the amount described in subpara15 graph (A)(i). 

16 ‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.— 

17 For purposes of this section— 

18 ‘‘(1) IN GENERAL.—The term ‘qualified busi19 ness asset investment’ means, with respect to any 

20 controlled foreign corporation for any taxable year of 

21 such controlled foreign corporation, the aggregate of 

22 the corporation’s adjusted bases (determined as of 

23 the close of such taxable year and after any adjust24 ments with respect to such taxable year) in specified 

25 tangible property— 


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1 ‘‘(A) used in a trade or business of the 

2 corporation, and 

3 ‘‘(B) of a type with respect to which a de4 duction is allowable under section 168. 

5 ‘‘(2) SPECIFIED TANGIBLE PROPERTY.—The 

6 term ‘specified tangible property’ means any tangible 

7 property to the extent such property is used in the 

8 production of tested income or tested loss. 

9 ‘‘(3) PARTNERSHIP PROPERTY.—For purposes 

10 of this subsection, if a controlled foreign corporation 

11 holds an interest in a partnership at the close of 

12 such taxable year of the controlled foreign corpora13 tion, such controlled foreign corporation shall take 

14 into account under paragraph (1) the controlled for15 eign corporation’s distributive share of the aggregate 

16 of the partnership’s adjusted bases (determined as 

17 of such date in the hands of the partnership) in tan18 gible property held by such partnership to the extent 

19 such property— 

20 ‘‘(A) is used in the trade or business of the 

21 partnership, and 

22 ‘‘(B) is used in the production of tested in23 come or tested loss (determined with respect to 

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1 tive share of income or loss with respect to such 

2 property). 

3 For purposes of this paragraph, the controlled for4 eign corporation’s distributive share of the adjusted 

5 basis of any property shall be the controlled foreign 

6 corporation’s distributive share of income and loss 

7 with respect to such property. 

8 ‘‘(4) DETERMINATION OF ADJUSTED BASIS.— 

9 For purposes of this subsection, the adjusted basis 

10 in any property shall be determined without regard 

11 to any provision of this title (or any other provision 

12 of law) which is enacted after the date of the enact13 ment of this section. 

14 ‘‘(5) REGULATIONS.—The Secretary shall issue 

15 such regulations or other guidance as the Secretary 

16 determines appropriate to prevent the avoidance of 

17 the purposes of this subsection, including regulations 

18 or other guidance which provide for the treatment of 

19 property if— 

20 ‘‘(A) such property is transferred, or held, 

21 temporarily, or 

22 ‘‘(B) the avoidance of the purposes of this 

23 paragraph is a factor in the transfer or holding 

24 of such property. 


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1 ‘‘(e) COMMODITIES GROSS INCOME.—For purposes 

2 of this section— 

3 ‘‘(1) COMMODITIES GROSS INCOME.—The term 

4 ‘commodities gross income’ means, with respect to 

5 any corporation, the gross income of such corpora6 tion from the disposition of commodities which are 

7 produced or extracted by such corporation. 

8 ‘‘(2) COMMODITY.—The term ‘commodity’ 

9 means any commodity described in section 

10 475(e)(2)(A) or section 475(e)(2)(D) (determined 

11 without regard to clause (i) thereof and by sub12 stituting ‘a commodity described in subparagraph 

13 (A)’ for ‘such a commodity’ in clause (ii) thereof). 

14 ‘‘(f) TAXABLE YEARS FOR WHICH PERSONS ARE

15 TREATED AS UNITED STATES SHAREHOLDERS OF CON16 TROLLED FOREIGN CORPORATIONS.—For purposes of 

17 this section— 

18 ‘‘(1) IN GENERAL.—A United States share19 holder of a controlled foreign corporation shall be 

20 treated as a United States shareholder of such con21 trolled foreign corporation for any taxable year of 

22 such United States shareholder if— 

23 ‘‘(A) a taxable year of such controlled for24 eign corporation ends in or with such taxable 

25 year of such person, and 


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1 ‘‘(B) such person owns (within the mean2 ing of section 958(a)) stock in such controlled 

3 foreign corporation on the last day, in such tax4 able year of such foreign corporation, on which 

5 the foreign corporation is a controlled foreign 

6 corporation. 

7 ‘‘(2) TREATMENT AS A CONTROLLED FOREIGN

8 CORPORATION.—Except for purposes of paragraph 

9 (1)(B) and the application of section 951(a)(2) to 

10 this section pursuant to subsection (g), a foreign 

11 corporation shall be treated as a controlled foreign 

12 corporation for any taxable year of such foreign cor13 poration if such foreign corporation is a controlled 

14 foreign corporation at any time during such taxable 

15 year. 

16 ‘‘(g) DETERMINATION OF PRO RATA SHARE.—For 

17 purposes of this section, the pro rata shares referred to 

18 in subsections (b)(2), (c)(1)(A), (c)(1)(B), and 

19 (c)(2)(B)(ii), respectively, shall be determined under the 

20 rules of section 951(a)(2) in the same manner as such sec21 tion applies to subpart F income. 

22 ‘‘(h) COORDINATION WITH SUBPART F.— 

23 ‘‘(1) TREATMENT AS SUBPART F INCOME FOR

24 CERTAIN PURPOSES.—Except as otherwise provided 

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1 cluded in gross income under subsection (a) shall be 

2 treated in the same manner as an amount included 

3 under section 951(a)(1)(A) for purposes of applying 

4 sections 168(h)(2)(B), 535(b)(10), 851(b), 

5 904(h)(1), 959, 961, 962(c), 962(d), 993(a)(1)(E), 

6 996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 

7 6654(d)(2)(D), and 6655(e)(4). 

8 ‘‘(2) ENTIRE FOREIGN HIGH RETURN AMOUNT

9 TAKEN INTO ACCOUNT FOR PURPOSES OF CERTAIN

10 SECTIONS.—For purposes of applying paragraph (1) 

11 with respect to sections 168(h)(2)(B), 851(b), 959, 

12 961, 962(c), 962(d), 1248(b)(1), and 1248(d)(1), 

13 the foreign high return amount included in gross in14 come under subsection (a) shall be determined by 

15 substituting ‘100 percent’ for ‘50 percent’ in such 

16 subsection. 

17 ‘‘(3) ALLOCATION OF FOREIGN HIGH RETURN

18 AMOUNT TO CONTROLLED FOREIGN CORPORA19 TIONS.—For purposes of the sections referred to in 

20 paragraph (1), with respect to any controlled foreign 

21 corporation any pro rata amount from which is 

22 taken into account in determining the foreign high 

23 return amount included in gross income of a United 

24 States shareholder under subsection (a), the portion 

25 of such foreign high return amount which is treated 


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1 as being with respect to such controlled foreign cor2 poration is— 

3 ‘‘(A) in the case of a controlled foreign 

4 corporation with tested loss, zero, and 

5 ‘‘(B) in the case of a controlled foreign 

6 corporation with tested income, the portion of 

7 such foreign high return amount which bears 

8 the same ratio to such foreign high return 

9 amount as— 

10 ‘‘(i) such United States shareholder’s 

11 pro rata amount of the tested income of 

12 such controlled foreign corporation, bears 

13 to 

14 ‘‘(ii) the aggregate amount deter15 mined under subsection (c)(1)(A) with re16 spect to such United States shareholder. 

17 ‘‘(4) COORDINATION WITH SUBPART F TO DENY

18 DOUBLE BENEFIT OF LOSSES.—In the case of any 

19 United States shareholder of any controlled foreign 

20 corporation, the amount included in gross income 

21 under section 951(a)(1)(A) shall be determined by 

22 increasing the earnings and profits of such con23 trolled foreign corporation (solely for purposes of de24 termining such amount) by an amount that bears 

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1 holder’s pro rata share of the tested loss of such 

2 controlled foreign corporation as— 

3 ‘‘(A) the aggregate amount determined 

4 under subsection (c)(1)(A) with respect to such 

5 shareholder, bears to 

6 ‘‘(B) the aggregate amount determined 

7 under subsection (c)(1)(B) with respect to such 

8 shareholder.’’. 

9 (b) FOREIGN TAX CREDIT.— 

10 (1) APPLICATION OF DEEMED PAID FOREIGN

11 TAX CREDIT.—Section 960, as amended by the pre12 ceding provisions of this Act, is amended by redesig13 nating subsections (d) and (e) as subsections (e) and 

14 (f), respectively, and by inserting after subsection (c) 

15 the following new subsection: 

16 ‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY

17 ATTRIBUTABLE TO TESTED INCOME.— 

18 ‘‘(1) IN GENERAL.—For purposes of this sub19 part, if any amount is includible in the gross income 

20 of a domestic corporation under section 951A, such 

21 domestic corporation shall be deemed to have paid 

22 foreign income taxes equal to 80 percent of— 

23 ‘‘(A) such domestic corporation’s foreign 

24 high return percentage, multiplied by 


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1 ‘‘(B) the aggregate tested foreign income 

2 taxes paid or accrued by controlled foreign cor3 porations with respect to which such domestic 

4 corporation is a United States shareholder. 

5 ‘‘(2) FOREIGN HIGH RETURN PERCENTAGE.— 

6 For purposes of paragraph (1), the term ‘foreign 

7 high return percentage’ means, with respect to any 

8 domestic corporation, the ratio (expressed as a per9 centage) of— 

10 ‘‘(A) such corporation’s foreign high return 

11 amount (as defined in section 951A(b)), divided 

12 by 

13 ‘‘(B) the aggregate amount determined 

14 under section 951A(c)(1)(A) with respect to 

15 such corporation. 

16 ‘‘(3) TESTED FOREIGN INCOME TAXES.—For 

17 purposes of paragraph (1), the term ‘tested foreign 

18 income taxes’ means, with respect to any domestic 

19 corporation which is a United States shareholder of 

20 a controlled foreign corporation, the foreign income 

21 taxes paid or accrued by such foreign corporation 

22 which are properly attributable to gross income de23 scribed in section 951A(c)(2)(A)(i).’’. 

24 (2) APPLICATION OF FOREIGN TAX CREDIT

25 LIMITATION.— 


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1 (A) SEPARATE BASKET FOR FOREIGN

2 HIGH RETURN AMOUNT.—Section 904(d)(1) is 

3 amended by redesignating subparagraphs (A) 

4 and (B) as subparagraphs (B) and (C), respec5 tively, and by inserting before subparagraph 

6 (B) (as so redesignated) the following new sub7 paragraph: 

8 ‘‘(A) any amount includible in gross in9 come under section 951A,’’. 

10 (B) NO CARRYOVER OF EXCESS TAXES.— 

11 Section 904(c) is amended by adding at the end 

12 the following: ‘‘This subsection shall not apply 

13 to taxes paid or accrued with respect to 

14 amounts described in subsection (d)(1)(A).’’ 

15 (3) GROSS UP FOR DEEMED PAID FOREIGN TAX

16 CREDIT.—Section 78, as amended by the preceding 

17 provisions of this Act, is amended— 

18 (A) by striking ‘‘any taxable year, an 

19 amount’’ and inserting ‘‘any taxable year— 

20 ‘‘(1) an amount’’, and 

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

22 inserting ‘‘, and 

23 ‘‘(2) an amount equal to the taxes deemed to 

24 be paid by such corporation under section 960(d) for 

25 such taxable year (determined by substituting ‘100 


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1 percent’ for ‘80 percent’ in such section) shall be 

2 treated for purposes of this title (other than sections 

3 959, 960, and 961) as an increase in the foreign 

4 high return amount of such domestic corporation 

5 under section 951A for such taxable year.’’. 

6 (c) CONFORMING AMENDMENTS.— 

7 (1) Section 170(b)(2)(D) is amended by strik8 ing ‘‘computed without regard to’’ and all that fol9 lows and inserting ‘‘computed— 

10 ‘‘(i) without regard to— 

11 ‘‘(I) this section, 

12 ‘‘(II) part VIII (except section 

13 248), 

14 ‘‘(III) any net operating loss 

15 carryback to the taxable year under 

16 section 172, 

17 ‘‘(IV) any capital loss carryback 

18 to the taxable year under section 

19 1212(a)(1), and 

20 ‘‘(ii) by substituting ‘100 percent’ for 

21 ‘50 percent’ in section 951A(a).’’. 

22 (2) Section 246(b)(1) is amended by— 

23 (A) striking ‘‘and without regard to’’ and 

24 inserting ‘‘without regard to’’, and 


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

2 inserting ‘‘, and by substituting ‘100 percent’ 

3 for ‘50 percent’ in section 951A(a).’’. 

4 (3) Section 469(i)(3)(F) is amended by striking 

5 ‘‘determined without regard to’’ and all that follows 

6 and inserting ‘‘determined— 

7 ‘‘(i) without regard to— 

8 ‘‘(I) any amount includible in 

9 gross income under section 86, 

10 ‘‘(II) the amounts allowable as a 

11 deduction under section 219, and 

12 ‘‘(III) any passive activity loss or 

13 any loss allowable by reason of sub14 section (c)(7), and 

15 ‘‘(ii) by substituting ‘100 percent’ for 

16 ‘50 percent’ in section 951A(a).’’. 

17 (4) Section 856(c)(2) is amended by striking 

18 ‘‘and’’ at the end of subparagraph (H), by adding 

19 ‘‘and’’ at the end of subparagraph (I), and by insert20 ing after subparagraph (I) the following new sub21 paragraph: 

22 ‘‘(J) amounts includible in gross income 

23 under section 951A(a);’’. 

24 (5) Section 856(c)(3)(D) is amended by strik25 ing ‘‘dividends or other distributions on, and gain’’ 


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1 and inserting ‘‘dividends, other distributions on, 

2 amounts includible in gross income under section 

3 951A(a) with respect to, and gain’’. 

4 (6) The table of sections for subpart F of part 

5 III of subchapter N of chapter 1 is amended by in6 serting after the item relating to section 951 the fol7 lowing new item: 

‘‘Sec. 951A. Foreign high return amount included in gross income of United 

States shareholders.’’. 

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

9 this section shall apply to taxable years of foreign corpora10 tions beginning after December 31, 2017, and to taxable 

11 years of United States shareholders in which or with which 

12 such taxable years of foreign corporations end. 

13 SEC. 4302. LIMITATION ON DEDUCTION OF INTEREST BY 

14 DOMESTIC CORPORATIONS WHICH ARE MEM15 BERS OF AN INTERNATIONAL FINANCIAL RE16 PORTING GROUP. 

17 (a) IN GENERAL.—Section 163 is amended by redes18 ignating subsection (n) as subsection (p) and by inserting 

19 after subsection (m) the following new subsection: 

20 ‘‘(n) LIMITATION ON DEDUCTION OF INTEREST BY

21 DOMESTIC CORPORATIONS IN INTERNATIONAL FINAN22 CIAL REPORTING GROUPS.— 

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

24 corporation which is a member of any international 


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1 financial reporting group, the deduction under this 

2 chapter for interest paid or accrued during the tax3 able year shall not exceed the sum of— 

4 ‘‘(A) the allowable percentage of 110 per5 cent of the excess (if any) of— 

6 ‘‘(i) the amount of such interest so 

7 paid or accrued, over 

8 ‘‘(ii) the amount described in subpara9 graph (B), plus 

10 ‘‘(B) the amount of interest includible in 

11 gross income of such corporation for such tax12 able year. 

13 ‘‘(2) INTERNATIONAL FINANCIAL REPORTING

14 GROUP.— 

15 ‘‘(A) For purposes of this subsection, the 

16 term ‘international financial reporting group’ 

17 means, with respect to any reporting year, any 

18 group of entities which— 

19 ‘‘(i) includes— 

20 ‘‘(I) at least one foreign corpora21 tion engaged in a trade or business 

22 within the United States, or 

23 ‘‘(II) at least one domestic cor24 poration and one foreign corporation, 


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1 ‘‘(ii) prepares consolidated financial 

2 statements with respect to such year, and 

3 ‘‘(iii) reports in such statements aver4 age annual gross receipts (determined in 

5 the aggregate with respect to all entities 

6 which are part of such group) for the 3-re7 porting-year period ending with such re8 porting year in excess of $100,000,000. 

9 ‘‘(B) RULES RELATING TO DETERMINA10 TION OF AVERAGE GROSS RECEIPTS.—For pur11 poses of subparagraph (A)(iii), rules similar to 

12 the rules of section 448(c)(3) shall apply. 

13 ‘‘(3) ALLOWABLE PERCENTAGE.—For purposes 

14 of this subsection— 

15 ‘‘(A) IN GENERAL.—The term ‘allowable 

16 percentage’ means, with respect to any domestic 

17 corporation for any taxable year, the ratio (ex18 pressed as a percentage and not greater than 

19 100 percent) of— 

20 ‘‘(i) such corporation’s allocable share 

21 of the international financial reporting 

22 group’s reported net interest expense for 

23 the reporting year of such group which 

24 ends in or with such taxable year of such 

25 corporation, over 


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1 ‘‘(ii) such corporation’s reported net 

2 interest expense for such reporting year of 

3 such group. 

4 ‘‘(B) REPORTED NET INTEREST EX5 PENSE.—The term ‘reported net interest ex6 pense’ means— 

7 ‘‘(i) with respect to any international 

8 financial reporting group for any reporting 

9 year, the excess of— 

10 ‘‘(I) the aggregate amount of in11 terest expense reported in such 

12 group’s consolidated financial state13 ments for such taxable year, over 

14 ‘‘(II) the aggregate amount of in15 terest income reported in such group’s 

16 consolidated financial statements for 

17 such taxable year, and 

18 ‘‘(ii) with respect to any domestic cor19 poration for any reporting year, the excess 

20 of— 

21 ‘‘(I) the amount of interest ex22 pense of such corporation reported in 

23 the books and records of the inter24 national financial reporting group 

25 which are used in preparing such 


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1 group’s consolidated financial state2 ments for such taxable year, over 

3 ‘‘(II) the amount of interest in4 come of such corporation reported in 

5 such books and records. 

6 ‘‘(C) ALLOCABLE SHARE OF REPORTED

7 NET INTEREST EXPENSE.—With respect to any 

8 domestic corporation which is a member of any 

9 international financial reporting group, such 

10 corporation’s allocable share of such group’s re11 ported net interest expense for any reporting 

12 year is the portion of such expense which bears 

13 the same ratio to such expense as— 

14 ‘‘(i) the EBITDA of such corporation 

15 for such reporting year, bears to 

16 ‘‘(ii) the EBITDA of such group for 

17 such reporting year. 

18 ‘‘(D) EBITDA.— 

19 ‘‘(i) IN GENERAL.—The term 

20 ‘EBITDA’ means, with respect to any re21 porting year, earnings before interest, 

22 taxes, depreciation, and amortization— 

23 ‘‘(I) as determined in the inter24 national financial reporting group’s 


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1 consolidated financial statements for 

2 such year, or 

3 ‘‘(II) for purposes of subpara4 graph (A)(i), as determined in the 

5 books and records of the international 

6 financial reporting group which are 

7 used in preparing such statements if 

8 not determined in such statements. 

9 ‘‘(ii) TREATMENT OF DISREGARDED

10 ENTITIES.—The EBITDA of any domestic 

11 corporation shall not fail to include the 

12 EBITDA of any entity which is dis13 regarded for purposes of this chapter. 

14 ‘‘(iii) TREATMENT OF INTRA-GROUP

15 DISTRIBUTIONS.—The EBITDA of any do16 mestic corporation shall be determined 

17 without regard to any distribution received 

18 by such corporation from any other mem19 ber of the international financial reporting 

20 group. 

21 ‘‘(E) SPECIAL RULES FOR NON-POSITIVE

22 EBITDA.— 

23 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 

24 In the case of any international financial 

25 reporting group the EBITDA of which is 


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1 zero or less, paragraph (1) shall not apply 

2 to any member of such group the EBITDA 

3 of which is above zero. 

4 ‘‘(ii) NON-POSITIVE ENTITY

5 EBITDA.—In the case of any group mem6 ber the EBITDA of which is zero or less, 

7 paragraph (1) shall be applied without re8 gard to subparagraph (A) thereof. 

9 ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 

10 For purposes of this subsection, the term ‘consoli11 dated financial statement’ means any consolidated 

12 financial statement described in paragraph (2)(A)(ii) 

13 if such statement is— 

14 ‘‘(A) a financial statement which is cer15 tified as being prepared in accordance with gen16 erally accepted accounting principles, inter17 national financial reporting standards, or any 

18 other comparable method of accounting identi19 fied by the Secretary, and which is— 

20 ‘‘(i) a 10-K (or successor form), or 

21 annual statement to shareholders, required 

22 to be filed with the United States Securi23 ties and Exchange Commission, 

24 ‘‘(ii) an audited financial statement 

25 which is used for— 


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1 ‘‘(I) credit purposes, 

2 ‘‘(II) reporting to shareholders, 

3 partners, or other proprietors, or to 

4 beneficiaries, or 

5 ‘‘(III) any other substantial 

6 nontax purpose, 

7 but only if there is no statement described 

8 in clause (i), or 

9 ‘‘(iii) filed with any other Federal or 

10 State agency for nontax purposes, but only 

11 if there is no statement described in clause 

12 (i) or (ii), or 

13 ‘‘(B) a financial statement which— 

14 ‘‘(i) is used for a purpose described in 

15 subclause (I), (II), or (III) of subpara16 graph (A)(ii), or 

17 ‘‘(ii) filed with any regulatory or gov18 ernmental body (whether domestic or for19 eign) specified by the Secretary, 

20 but only if there is no statement described in 

21 subparagraph (A). 

22 ‘‘(5) REPORTING YEAR.—For purposes of this 

23 subsection, the term ‘reporting year’ means, with re24 spect to any international financial reporting group, 


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1 the year with respect to which the consolidated fi2 nancial statements are prepared. 

3 ‘‘(6) APPLICATION TO CERTAIN ENTITIES.— 

4 ‘‘(A) PARTNERSHIPS.—Except as other5 wise provided by the Secretary in paragraph 

6 (8), this subsection shall apply to any partner7 ship which is a member of any international fi8 nancial reporting group under rules similar to 

9 the rules of section 163(j)(3). 

10 ‘‘(B) FOREIGN CORPORATIONS ENGAGED

11 IN TRADE OR BUSINESS WITHIN THE UNITED

12 STATES.—Except as otherwise provided by the 

13 Secretary in paragraph (8), any deduction for 

14 interest paid or accrued by a foreign corpora15 tion engaged in a trade or business within the 

16 United States shall be limited in a manner con17 sistent with the principles of this subsection. 

18 ‘‘(C) CONSOLIDATED GROUPS.—For pur19 poses of this subsection, the members of any 

20 group that file (or are required to file) a con21 solidated return with respect to the tax imposed 

22 by chapter 1 for a taxable year shall be treated 

23 as a single corporation. 

24 ‘‘(7) REGULATIONS.—The Secretary may issue 

25 such regulations or other guidance as are necessary 


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1 or appropriate to carry out the purposes of this sub2 section.’’. 

3 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 

4 (1) IN GENERAL.—Section 163(o) is amended 

5 to read as follows: 

6 ‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN7 TEREST.—The amount of any interest not allowed as a 

8 deduction for any taxable year by reason of subsection 

9 (j)(1) or (n)(1) (whichever imposes the lower limitation 

10 with respect to such taxable year) shall be treated as inter11 est (and as business interest for purposes of subsection 

12 (j)(1)) paid or accrued in the succeeding taxable year. In13 terest paid or accrued in any taxable year (determined 

14 without regard to the preceding sentence) shall not be car15 ried past the 5th taxable year following such taxable year, 

16 determined by treating interest as allowed as a deduction 

17 on a first-in, first-out basis.’’. 

18 (2) TREATMENT OF CARRYFORWARD OF DIS19 ALLOWED INTEREST IN CERTAIN CORPORATE ACQUI20 SITIONS.—For rules related to the carryforward of 

21 disallowed interest in certain corporate acquisitions, 

22 see the amendments made by section 3301(c). 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2017. 


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1 SEC. 4303. EXCISE TAX ON CERTAIN PAYMENTS FROM DO2 MESTIC CORPORATIONS TO RELATED FOR3 EIGN CORPORATIONS; ELECTION TO TREAT 

4 SUCH PAYMENTS AS EFFECTIVELY CON5 NECTED INCOME. 

6 (a) EXCISE TAX ON CERTAIN AMOUNTS FROM DO7 MESTIC CORPORATIONS TO FOREIGN AFFILIATES.— 

8 (1) IN GENERAL.—Chapter 36 is amended by 

9 adding at the end the following new subchapter: 

10 ‘‘Subchapter E—Tax on Certain Amounts to 

11 Foreign Affiliates 

‘‘Sec. 4491. Imposition of tax on certain amounts from domestic corporations 

to foreign affiliates. 

12 ‘‘SEC. 4491. IMPOSITION OF TAX ON CERTAIN AMOUNTS 

13 FROM DOMESTIC CORPORATIONS TO FOR14 EIGN AFFILIATES. 

15 ‘‘(a) IN GENERAL.—There is hereby imposed on each 

16 specified amount paid or incurred by a domestic corpora17 tion to a foreign corporation which is a member of the 

18 same international financial reporting group as such do19 mestic corporation a tax equal to the highest rate of tax 

20 in effect under section 11 multiplied by such amount. 

21 ‘‘(b) BY WHOM PAID.—The tax imposed by sub22 section (a) shall be paid by the domestic corporation de23 scribed in such subsection. 


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1 ‘‘(c) EXCEPTION FOR EFFECTIVELY CONNECTED IN2 COME.—Subsection (a) shall not apply to so much of any 

3 specified amount as is effectively connected with the con4 duct of a trade or business within the United States if 

5 such amount is subject to tax under chapter 1. In the case 

6 of any amount which is treated as effectively connected 

7 with the conduct of a trade or business within the United 

8 States by reason of section 882(g), the preceding sentence 

9 shall apply to such amount only if the domestic corpora10 tion provides to the Secretary (at such time and in such 

11 form and manner as the Secretary may provide) a copy 

12 of the election made under section 882(g) by the foreign 

13 corporation referred to in subsection (a). 

14 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—Terms 

15 used in this section that are also used in section 882(g) 

16 shall have the same meaning as when used in such section 

17 and rules similar to the rules of paragraphs (5) and (6) 

18 of such section shall apply for purposes of this section.’’. 

19 (2) DENIAL OF DEDUCTION FOR TAX IM20 POSED.—Section 275(a) is amended by inserting 

21 after paragraph (6) the following new paragraph: 

22 ‘‘(7) Taxes imposed by section 4491.’’. 

23 (3) CLERICAL AMENDMENT.—The table of sub24 chapters for chapter 36 is amended by adding at the 

25 end the following new item: 

‘‘SUBCHAPTER E. TAX ON CERTAIN AMOUNTS TO FOREIGN AFFILIATES.’’. 


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1 (b) ELECTION TO TREAT CERTAIN PAYMENTS FROM

2 DOMESTIC CORPORATIONS TO RELATED FOREIGN COR3 PORATIONS AS EFFECTIVELY CONNECTED INCOME.—Sec4 tion 882 is amended by adding at the end the following 

5 new subsection: 

6 ‘‘(g) ELECTION TO TREAT CERTAIN PAYMENTS

7 FROM DOMESTIC CORPORATIONS TO RELATED FOREIGN

8 CORPORATIONS AS EFFECTIVELY CONNECTED INCOME.— 

9 ‘‘(1) IN GENERAL.—In the case of any specified 

10 amount paid or incurred by a domestic corporation 

11 to a foreign corporation which is a member of the 

12 same international financial reporting group as such 

13 domestic corporation and which has elected to be 

14 subject to the provisions of this subsection— 

15 ‘‘(A) such amount shall be taken into ac16 count (other than for purposes of sections 245, 

17 245A, and 881) as if such foreign corporation 

18 were engaged in a trade or business within the 

19 United States and had a permanent establish20 ment in the United States during the taxable 

21 year and as if such payment were effectively 

22 connected with the conduct of a trade or busi23 ness within the United States and were attrib24 utable to such permanent establishment, 


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1 ‘‘(B) for purposes of subsection (c)(1)(A), 

2 no deduction shall be allowed with respect to 

3 such amount and such subsection shall be ap4 plied without regard to such amount, and 

5 ‘‘(C) there shall be allowed as a deduction 

6 the deemed expenses with respect such amount. 

7 ‘‘(2) SPECIFIED AMOUNT.—For purposes of 

8 this subsection— 

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

10 amount’ means any amount which is, with re11 spect to the payor, allowable as a deduction or 

12 includible in costs of goods sold, inventory, or 

13 the basis of a depreciable or amortizable asset. 

14 ‘‘(B) EXCEPTIONS.—The term ‘specified 

15 amount’ shall not include— 

16 ‘‘(i) interest, 

17 ‘‘(ii) any amount paid or incurred for 

18 the acquisition of any commodity described 

19 in section 475(e)(2)(A) or section 

20 475(e)(2)(D) (determined without regard 

21 to subclause (i) thereof), 

22 ‘‘(iii) except as provided in subpara23 graph (C), any amount with respect to 

24 which tax is imposed under section 881(a), 

25 and 


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1 ‘‘(iv) in the case of a payor which has 

2 elected to use a services cost method for 

3 purposes of section 482, any amount paid 

4 or incurred for services if such amount is 

5 the total services cost with no markup. 

6 ‘‘(C) AMOUNTS TREATED AS EFFECTIVELY

7 CONNECTED TO EXTENT OF GROSS-BASIS

8 TAX.—Subparagraph (B)(iii) shall not apply to 

9 any specified amount to the extent of the same 

10 proportion of such amount as— 

11 ‘‘(i) the rate of tax imposed under 

12 section 881(a) with respect to such 

13 amount, bears to 

14 ‘‘(ii) 30 percent. 

15 ‘‘(3) DEEMED EXPENSES.— 

16 ‘‘(A) IN GENERAL.—The deemed expenses 

17 with respect to any specified amount received 

18 by a foreign corporation during any reporting 

19 year is the amount of expenses such that the 

20 net income ratio of such foreign corporation 

21 with respect to such amount (taking into ac22 count only such deemed expenses) is equal to 

23 the net income ratio of the international finan24 cial reporting group determined for such reportVerDate Sep 11 2014 23:58 Nov 02, 2017 Jkt 079200 PO 00000 Frm 00401 Fmt 6652 Sfmt 6201 E:\BILLS\H1.IH H1

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1 ing year with respect to the product line to 

2 which the specified amount relates. 

3 ‘‘(B) NET INCOME RATIO.—For purposes 

4 of this paragraph, the term ‘net income ratio’ 

5 means the ratio of— 

6 ‘‘(i) net income determined without 

7 regard to interest income, interest expense, 

8 and income taxes, divided by 

9 ‘‘(ii) revenues. 

10 ‘‘(C) METHOD OF DETERMINATION.— 

11 Amounts described in subparagraph (B) shall 

12 be determined on the basis of the consolidated 

13 financial statements referred to in paragraph 

14 (5)(A)(i) and the book and records of the mem15 bers of the internal financial reporting group 

16 which are used in preparing such statements. 

17 ‘‘(4) INTERNATIONAL FINANCIAL REPORTING

18 GROUP.—For purposes of this subsection— 

19 ‘‘(A) IN GENERAL.—The term ‘inter20 national financial reporting group’ means any 

21 group of entities, with respect to any specified 

22 amount, if such amount is paid or incurred dur23 ing a reporting year of such group with respect 

24 to which— 


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1 ‘‘(i) such group prepares consolidated 

2 financial statements (within the meaning 

3 of section 163(n)(4)) with respect to such 

4 year, and 

5 ‘‘(ii) the average annual aggregate 

6 payment amount of such group for the 3- 

7 reporting-year period ending with such re8 porting year exceeds $100,000,000. 

9 ‘‘(B) ANNUAL AGGREGATE PAYMENT

10 AMOUNT.—The term ‘annual aggregate pay11 ment amount’ means, with respect to any re12 porting year of the group referred to in sub13 paragraph (A)(i), the aggregate specified 

14 amounts to which paragraph (1) applies (or 

15 would apply if such group were an international 

16 financial reporting 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 

20 for purposes of this paragraph. 

21 ‘‘(5) TREATMENT OF PARTNERSHIPS.—Any 

22 specified amount paid, incurred, or received by a 

23 partnership which is a member of any international 

24 financial reporting group (and any amount treated 

25 as paid, incurred, or received by a partnership under 


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1 this paragraph) shall be treated for purposes of this 

2 subsection as amounts paid, incurred, or received, 

3 respectively, by each partner of such partnership in 

4 an amount equal to such partner’s distributive share 

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

6 which 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 

12 than a trade or business it is deemed to conduct 

13 pursuant to this subsection) shall be treated for pur14 poses of this subsection as an amount paid, in15 curred, or received, respectively, by a domestic cor16 poration. For purposes of the preceding sentence, a 

17 foreign corporation shall be deemed to pay, incur, 

18 and receive amounts with respect to a trade or busi19 ness it conducts within the United States (other 

20 than a trade or business it is deemed to conduct 

21 pursuant to this subsection) to the extent such for22 eign corporation would be treated as paying, incur23 ring, or receiving such amounts from such trade or 

24 business if such trade or business were a domestic 

25 corporation. 


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1 ‘‘(7) JOINT AND SEVERAL LIABILITY OF MEM2 BERS OF INTERNAL FINANCIAL REPORTING

3 GROUP.—In the case of any underpayment with re4 spect to any taxable year of a foreign corporation 

5 which is a member of an international financial ac6 counting group, each domestic corporation which is 

7 a member of such group at any time during such 

8 taxable year shall be jointly and severally liable 

9 for— 

10 ‘‘(A) so much of such underpayment as 

11 does not exceed the excess (if any) of such un12 derpayment over the amount of such under13 payment determined without regard to this sub14 section, and 

15 ‘‘(B) any penalty, addition to tax, or addi16 tional amount attributable to the amount de17 scribed in subparagraph (A). 

18 ‘‘(8) DISALLOWANCE OF FOREIGN TAX CREDIT, 

19 ETC.— 

20 ‘‘(A) IN GENERAL.—No credit shall be al21 lowed under section 901 for any taxes paid or 

22 accrued (or treated as paid or accrued) with re23 spect to any specified amount to which para24 graph (1) applies. 


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1 ‘‘(B) DENIAL OF DEDUCTION.—No deduc2 tion shall be allowed under this chapter for any 

3 tax for which credit is not allowable under sec4 tion 901 by reason of paragraph (1) (deter5 mined by treating the taxpayer as having elect6 ed the benefits of subpart A of part III of sub7 chapter N). 

8 ‘‘(9) RULES RELATED TO ELECTION.—Any 

9 election under paragraph (1) shall— 

10 ‘‘(A) be made at such time and in such 

11 form and manner as the Secretary may provide, 

12 and 

13 ‘‘(B) apply for the taxable year for which 

14 made and all subsequent taxable years unless 

15 revoked with the consent of the Secretary. 

16 ‘‘(10) REGULATIONS.—The Secretary may issue 

17 such regulations or other guidance as are necessary 

18 or appropriate to carry out the purposes of this sub19 section, including regulations or other guidance— 

20 ‘‘(A) to provide for the proper determina21 tion of product lines, and 

22 ‘‘(B) to prevent the avoidance of the pur23 poses of this subsection through the use of con24 duit transactions or by other means.’’. 

25 (c) REPORTING REQUIREMENTS.— 


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1 (1) REPORTING BY FOREIGN CORPORATION.— 

2 Section 6038C(b) is amended to read as follows: 

3 ‘‘(b) REQUIRED INFORMATION.— 

4 ‘‘(1) IN GENERAL.—The information described 

5 in this subsection is— 

6 ‘‘(A) the information described in section 

7 6038A(b), and 

8 ‘‘(B) such other information as the Sec9 retary may prescribe by regulations relating to 

10 any item not directly connected with a trans11 action for which information is required under 

12 subparagraph (A). 

13 ‘‘(2) CERTAIN PAYMENTS FROM RELATED DO14 MESTIC CORPORATIONS.— 

15 ‘‘(A) IN GENERAL.—In the case of any re16 porting corporation that receives during the 

17 taxable year any amount to which section 

18 882(g)(1) applies, the information described in 

19 this subsection shall include, with respect to 

20 each member of the international financial re21 porting group from which any such amount is 

22 received— 

23 ‘‘(i) the name and taxpayer identifica24 tion number of such member, 


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1 ‘‘(ii) the aggregate amounts received 

2 from such member, 

3 ‘‘(iii) the product lines to which such 

4 amounts relate, the aggregate amounts re5 lating to each such product line, and the 

6 net income ratio for each such product line 

7 (determined under section 882(g)(3)(B) 

8 with respect to the international financial 

9 reporting group), and 

10 ‘‘(iv) a summary of any changes in fi11 nancial accounting methods that affect the 

12 computation of any net income ratio de13 scribed in clause (iii). 

14 ‘‘(B) DEFINITIONS AND SPECIAL RULES.— 

15 Terms used in this paragraph that are also 

16 used in section 882(g) shall have the same 

17 meaning as when used in such section and rules 

18 similar to the rules of paragraphs (5) and (6) 

19 of such section shall apply for purposes of this 

20 paragraph.’’. 

21 (2) REPORTING BY DOMESTIC GROUP MEM22 BERS.— 

23 (A) IN GENERAL .—Subpart A of part III 

24 of subchapter A of chapter 61 is amended by 


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1 inserting after section 6038D the following new 

2 section: 

3 ‘‘SEC. 6038E. INFORMATION WITH RESPECT TO CERTAIN 

4 PAYMENTS FROM DOMESTIC CORPORATIONS 

5 TO RELATED FOREIGN CORPORATIONS. 

6 ‘‘(a) IN GENERAL.—In the case of any domestic cor7 poration which pays or accrues any amount to which sec8 tion 882(g)(1) applies, such person shall— 

9 ‘‘(1) make a return according to the forms and 

10 regulations prescribed the Secretary, setting forth 

11 the information described in subsection (b), and 

12 ‘‘(2) maintain (at the location, in the manner, 

13 and to the extent prescribed in regulations) such 

14 records as may be appropriate to determine liability 

15 for tax pursuant to paragraphs (1) and (7) of sec16 tion 882(g). 

17 ‘‘(b) REQUIRED INFORMATION.—The information de18 scribed in this subsection is— 

19 ‘‘(1) the name and taxpayer identification num20 ber of the common parent of the international finan21 cial reporting group in which such domestic corpora22 tion is a member, and 

23 ‘‘(2) with respect to any person who receives an 

24 amount described in subsection (a) from such do25 mestic corporation— 


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1 ‘‘(A) the name and taxpayer identification 

2 number of such person, 

3 ‘‘(B) the aggregate amounts received by 

4 such person, 

5 ‘‘(C) the product lines to which such 

6 amounts relate, the aggregate amounts relating 

7 to each such product line, and the net income 

8 ratio for each such product line (determined 

9 under section 882(g)(3)(B) with respect to the 

10 international financial reporting group), and 

11 ‘‘(D) a summary of any changes in finan12 cial accounting methods that affect the com13 putation of any net income ratios described in 

14 subparagraph (C). 

15 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—Terms 

16 used in this paragraph that are also used in section 882(g) 

17 shall have the same meaning as when used in such section 

18 and rules similar to the rules of paragraphs (5) and (6) 

19 of such section shall apply for purposes of this para20 graph.’’. 

21 (B) CLERICAL AMENDMENT.—The table of 

22 sections for subpart A of part III of subchapter 

23 A of chapter 61 is amended by inserting after 

24 the item relating to section 6038D the following 

25 new item: 


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‘‘Sec. 6038E. Information with respect to certain payments from domestic corporations to related foreign corporations.’’. 

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

2 this section shall apply to amounts paid or accrued after 

3 December 31, 2018. 

4 Subtitle E—Provisions Related to 

5 Possessions of the United States 

6 SEC. 4401. EXTENSION OF DEDUCTION ALLOWABLE WITH 

7 RESPECT TO INCOME ATTRIBUTABLE TO DO8 MESTIC PRODUCTION ACTIVITIES IN PUERTO 

9 RICO. 

10 (a) IN GENERAL.—Section 199(d)(8)(C), prior to its 

11 repeal by this Act, is amended— 

12 (1) by striking ‘‘first 11 taxable years’’ and in13 serting ‘‘first 12 taxable years’’, and 

14 (2) by striking ‘‘January 1, 2017’’ and insert15 ing ‘‘January 1, 2018’’. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2016. 

19 SEC. 4402. EXTENSION OF TEMPORARY INCREASE IN LIMIT 

20 ON COVER OVER OF RUM EXCISE TAXES TO 

21 PUERTO RICO AND THE VIRGIN ISLANDS. 

22 (a) IN GENERAL.—Section 7652(f)(1) is amended by 

23 striking ‘‘January 1, 2017’’ and inserting ‘‘January 1, 

24 2023’’. 


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

2 this section shall apply to distilled spirits brought into the 

3 United States after December 31, 2016. 

4 SEC. 4403. EXTENSION OF AMERICAN SAMOA ECONOMIC 

5 DEVELOPMENT CREDIT. 

6 (a) IN GENERAL.—Section 119(d) of division A of 

7 the Tax Relief and Health Care Act of 2006 is amended— 

8 (1) by striking ‘‘January 1, 2017’’ each place 

9 it appears and inserting ‘‘January 1, 2023’’, 

10 (2) by striking ‘‘first 11 taxable years’’ in para11 graph (1) and inserting ‘‘first 17 taxable years’’, 

12 and 

13 (3) by striking ‘‘first 5 taxable years’’ in para14 graph (2) and inserting ‘‘first 11 taxable years’’. 

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2016. 

18 Subtitle F—Other International 

19 Reforms 

20 SEC. 4501. RESTRICTION ON INSURANCE BUSINESS EXCEP21 TION TO PASSIVE FOREIGN INVESTMENT 

22 COMPANY RULES. 

23 (a) IN GENERAL.—Section 1297(b)(2)(B) is amend24 ed to read as follows: 


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1 ‘‘(B) derived in the active conduct of an in2 surance business by a qualifying insurance cor3 poration (as defined in subsection (f)),’’. 

4 (b) QUALIFYING INSURANCE CORPORATION DE5 FINED.—Section 1297 is amended by adding at the end 

6 the following new subsection: 

7 ‘‘(f) QUALIFYING INSURANCE CORPORATION.—For 

8 purposes of subsection (b)(2)(B)— 

9 ‘‘(1) IN GENERAL.—The term ‘qualifying insur10 ance corporation’ means, with respect to any taxable 

11 year, a foreign corporation— 

12 ‘‘(A) which would be subject to tax under 

13 subchapter L if such corporation were a domes14 tic corporation, and 

15 ‘‘(B) the applicable insurance liabilities of 

16 which constitute more than 25 percent of its 

17 total assets, determined on the basis of such li18 abilities and assets as reported on the corpora19 tion’s applicable financial statement for the last 

20 year ending with or within the taxable year. 

21 ‘‘(2) ALTERNATIVE FACTS AND CIR22 CUMSTANCES TEST FOR CERTAIN CORPORATIONS.— 

23 If a corporation fails to qualify as a qualified insur24 ance corporation under paragraph (1) solely because 

25 the percentage determined under paragraph (1)(B) 


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1 is 25 percent or less, a United States person that 

2 owns stock in such corporation may elect to treat 

3 such stock as stock of a qualifying insurance cor4 poration if— 

5 ‘‘(A) the percentage so determined for the 

6 corporation is at least 10 percent, and 

7 ‘‘(B) under regulations provided by the 

8 Secretary, based on the applicable facts and cir9 cumstances— 

10 ‘‘(i) the corporation is predominantly 

11 engaged in an insurance business, and 

12 ‘‘(ii) such failure is due solely to run13 off-related or rating-related circumstances 

14 involving such insurance business. 

15 ‘‘(3) APPLICABLE INSURANCE LIABILITIES.— 

16 For purposes of this subsection— 

17 ‘‘(A) IN GENERAL.—The term ‘applicable 

18 insurance liabilities’ means, with respect to any 

19 life or property and casualty insurance busi20 ness— 

21 ‘‘(i) loss and loss adjustment ex22 penses, and 

23 ‘‘(ii) reserves (other than deficiency, 

24 contingency, or unearned premium re25 serves) for life and health insurance risks 


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1 and life and health insurance claims with 

2 respect to contracts providing coverage for 

3 mortality or morbidity risks. 

4 ‘‘(B) LIMITATIONS ON AMOUNT OF LIABIL5 ITIES.—Any amount determined under clause 

6 (i) or (ii) of subparagraph (A) shall not exceed 

7 the lesser of such amount— 

8 ‘‘(i) as reported to the applicable in9 surance regulatory body in the applicable 

10 financial statement described in paragraph 

11 (4)(A) (or, if less, the amount required by 

12 applicable law or regulation), or 

13 ‘‘(ii) as determined under regulations 

14 prescribed by the Secretary. 

15 ‘‘(4) OTHER DEFINITIONS AND RULES.—For 

16 purposes of this subsection— 

17 ‘‘(A) APPLICABLE FINANCIAL STATE18 MENT.—The term ‘applicable financial state19 ment’ means a statement for financial reporting 

20 purposes which— 

21 ‘‘(i) is made on the basis of generally 

22 accepted accounting principles, 

23 ‘‘(ii) is made on the basis of inter24 national financial reporting standards, but 


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1 only if there is no statement that meets 

2 the requirement of clause (i), or 

3 ‘‘(iii) except as otherwise provided by 

4 the Secretary in regulations, is the annual 

5 statement which is required to be filed 

6 with the applicable insurance regulatory 

7 body, but only if there is no statement 

8 which meets the requirements of clause (i) 

9 or (ii). 

10 ‘‘(B) APPLICABLE INSURANCE REGU11 LATORY BODY.—The term ‘applicable insurance 

12 regulatory body’ means, with respect to any in13 surance business, the entity established by law 

14 to license, authorize, or regulate such business 

15 and to which the statement described in sub16 paragraph (A) is provided.’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2017. 

20 SEC. 4502. LIMITATION ON TREATY BENEFITS FOR CERTAIN 

21 DEDUCTIBLE PAYMENTS. 

22 (a) IN GENERAL.—Section 894 is amended by adding 

23 at the end the following new subsection: 

24 ‘‘(d) LIMITATION ON TREATY BENEFITS FOR CER25 TAIN DEDUCTIBLE PAYMENTS.— 


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1 ‘‘(1) IN GENERAL.—In the case of any deduct2 ible related-party payment, any withholding tax im3 posed under chapter 3 (and any tax imposed under 

4 subpart A or B of this part) with respect to such 

5 payment may not be reduced under any treaty of the 

6 United States unless any such withholding tax would 

7 be reduced under a treaty of the United States if 

8 such payment were made directly to the foreign par9 ent corporation. 

10 ‘‘(2) DEDUCTIBLE RELATED-PARTY PAY11 MENT.—For purposes of this subsection, the term 

12 ‘deductible related-party payment’ means any pay13 ment made, directly or indirectly, by any person to 

14 any other person if the payment is allowable as a de15 duction under this chapter and both persons are 

16 members of the same foreign controlled group of en17 tities. 

18 ‘‘(3) FOREIGN CONTROLLED GROUP OF ENTI19 TIES.—For purposes of this subsection— 

20 ‘‘(A) IN GENERAL.—The term ‘foreign 

21 controlled group of entities’ means a controlled 

22 group of entities the common parent of which 

23 is a foreign corporation. 

24 ‘‘(B) CONTROLLED GROUP OF ENTITIES.— 

25 The term ‘controlled group of entities’ means a 


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1 controlled group of corporations as defined in 

2 section 1563(a)(1), except that— 

3 ‘‘(i) ‘more than 50 percent’ shall be 

4 substituted for ‘at least 80 percent’ each 

5 place it appears therein, and 

6 ‘‘(ii) the determination shall be made 

7 without regard to subsections (a)(4) and 

8 (b)(2) of section 1563. 

9 A partnership or any other entity (other than a 

10 corporation) shall be treated as a member of a 

11 controlled group of entities if such entity is con12 trolled (within the meaning of section 

13 954(d)(3)) by members of such group (includ14 ing any entity treated as a member of such 

15 group by reason of this sentence). 

16 ‘‘(4) FOREIGN PARENT CORPORATION.—For 

17 purposes of this subsection, the term ‘foreign parent 

18 corporation’ means, with respect to any deductible 

19 related-party payment, the common parent of the 

20 foreign controlled group of entities referred to in 

21 paragraph (3)(A). 

22 ‘‘(5) REGULATIONS.—The Secretary may pre23 scribe such regulations or other guidance as are nec24 essary or appropriate to carry out the purposes of 


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1 this subsection, including regulations or other guid2 ance which provide for— 

3 ‘‘(A) the treatment of two or more persons 

4 as members of a foreign controlled group of en5 tities if such persons would be the common par6 ent of such group if treated as one corporation, 

7 and 

8 ‘‘(B) the treatment of any member of a 

9 foreign controlled group of entities as the com10 mon parent of such group if such treatment is 

11 appropriate taking into account the economic 

12 relationships among such entities.’’. 

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

14 this section shall apply to payments made after the date 

15 of the enactment of this Act. 

16 TITLE V—EXEMPT 

17 ORGANIZATIONS 

18 Subtitle A—Unrelated Business 

19 Income Tax 

20 SEC. 5001. CLARIFICATION OF UNRELATED BUSINESS IN21 COME TAX TREATMENT OF ENTITIES TREAT22 ED AS EXEMPT FROM TAXATION UNDER SEC23 TION 501(a). 

24 (a) IN GENERAL.—Section 511 is amended by adding 

25 at the end the following new subsection: 


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1 ‘‘(d) ORGANIZATIONS AND TRUSTS EXEMPT FROM

2 TAXATION NOT SOLELY BY REASON OF SECTION

3 501(a).—For purposes of subsections (a)(2) and (b)(2), 

4 an organization or trust shall not fail to be treated as ex5 empt from taxation under this subtitle by reason of section 

6 501(a) solely because such organization is also so exempt, 

7 or excludes amounts from gross income, by reason of any 

8 other provision of this title.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2017. 

12 SEC. 5002. EXCLUSION OF RESEARCH INCOME LIMITED TO 

13 PUBLICLY AVAILABLE RESEARCH. 

14 (a) IN GENERAL.—Section 512(b)(9) is amended by 

15 striking ‘‘from research’’ and inserting ‘‘from such re16 search’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2017. 

20 Subtitle B—Excise Taxes 

21 SEC. 5101. SIMPLIFICATION OF EXCISE TAX ON PRIVATE 

22 FOUNDATION INVESTMENT INCOME. 

23 (a) RATE REDUCTION.—Section 4940(a) is amended 

24 by striking ‘‘2 percent’’ and inserting ‘‘1.4 percent’’. 


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1 (b) REPEAL OF SPECIAL RULES FOR CERTAIN PRI2 VATE FOUNDATIONS.—Section 4940 is amended by strik3 ing subsection (e). 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2017. 

7 SEC. 5102. PRIVATE OPERATING FOUNDATION REQUIRE8 MENTS RELATING TO OPERATION OF ART 

9 MUSEUM. 

10 (a) IN GENERAL.—Section 4942(j) is amended by 

11 adding at the end the following new paragraph: 

12 ‘‘(6) ORGANIZATION OPERATING ART MU13 SEUM.—For purposes of this section, the term ‘oper14 ating foundation’ shall not include an organization 

15 which operates an art museum as a substantial ac16 tivity unless such museum is open during normal 

17 business hours to the public for at least 1,000 hours 

18 during the taxable year.’’. 

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2017. 

22 SEC. 5103. EXCISE TAX BASED ON INVESTMENT INCOME OF 

23 PRIVATE COLLEGES AND UNIVERSITIES. 

24 (a) IN GENERAL.—Chapter 42 is amended by adding 

25 at the end the following new subchapter: 


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1 ‘‘Subchapter H—Excise Tax Based on Invest2 ment Income of Private Colleges and Uni3 versities 

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

4 ‘‘SEC. 4969. EXCISE TAX BASED ON INVESTMENT INCOME 

5 OF PRIVATE COLLEGES AND UNIVERSITIES. 

6 ‘‘(a) TAX IMPOSED.—There is hereby imposed on 

7 each applicable educational institution for the taxable year 

8 a tax equal to 1.4 percent of the net investment income 

9 of such institution for the taxable year. 

10 ‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For 

11 purposes of this subchapter— 

12 ‘‘(1) IN GENERAL.—The term ‘applicable edu13 cational institution’ means an eligible educational in14 stitution (as defined in section 25A(e)(3))— 

15 ‘‘(A) which has at least 500 students dur16 ing the preceding taxable year, 

17 ‘‘(B) which is not described in the first 

18 sentence of section 511(a)(2)(B), and 

19 ‘‘(C) the aggregate fair market value of 

20 the assets of which at the end of the preceding 

21 taxable year (other than those assets which are 

22 used directly in carrying out the institution’s 

23 exempt purpose) is at least $100,000 per stu24 dent of the institution. 


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1 ‘‘(2) STUDENTS.—For purposes of paragraph 

2 (1), the number of students of an institution shall 

3 be based on the daily average number of full-time 

4 students attending such institution (with part-time 

5 students taken into account on a full-time student 

6 equivalent basis). 

7 ‘‘(c) NET INVESTMENT INCOME.—For purposes of 

8 this section, net investment income shall be determined 

9 under rules similar to the rules of section 4940(c).’’. 

10 (b) CLERICAL AMENDMENT.—The table of sub11 chapters for chapter 42 is amended by adding at the end 

12 the following new item: 

‘‘SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE

COLLEGES AND UNIVERSITIES’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2017. 

16 SEC. 5104. EXCEPTION FROM PRIVATE FOUNDATION EX17 CESS BUSINESS HOLDING TAX FOR INDE18 PENDENTLY-OPERATED PHILANTHROPIC 

19 BUSINESS HOLDINGS. 

20 (a) IN GENERAL.—Section 4943 is amended by add21 ing at the end the following new subsection: 

22 ‘‘(g) EXCEPTION FOR CERTAIN HOLDINGS LIMITED

23 TO INDEPENDENTLY-OPERATED PHILANTHROPIC BUSI24 NESS.— 


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1 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

2 apply with respect to the holdings of a private foun3 dation in any business enterprise which for the tax4 able year meets— 

5 ‘‘(A) the ownership requirements of para6 graph (2), 

7 ‘‘(B) the all profits to charity distribution 

8 requirement of paragraph (3), and 

9 ‘‘(C) the independent operation require10 ments of paragraph (4). 

11 ‘‘(2) OWNERSHIP.—The ownership require12 ments of this paragraph are met if— 

13 ‘‘(A) 100 percent of the voting stock in the 

14 business enterprise is held by the private foun15 dation at all times during the taxable year, and 

16 ‘‘(B) all the private foundation’s ownership 

17 interests in the business enterprise were ac18 quired not by purchase. 

19 ‘‘(3) ALL PROFITS TO CHARITY.— 

20 ‘‘(A) IN GENERAL.—The all profits to 

21 charity distribution requirement of this para22 graph is met if the business enterprise, not 

23 later than 120 days after the close of the tax24 able year, distributes an amount equal to its net 


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1 operating income for such taxable year to the 

2 private foundation. 

3 ‘‘(B) NET OPERATING INCOME.—For pur4 poses of this paragraph, the net operating in5 come of any business enterprise for any taxable 

6 year is an amount equal to the gross income of 

7 the business enterprise for the taxable year, re8 duced by the sum of— 

9 ‘‘(i) the deductions allowed by chapter 

10 1 for the taxable year which are directly 

11 connected with the production of such in12 come, 

13 ‘‘(ii) the tax imposed by chapter 1 on 

14 the business enterprise for the taxable 

15 year, and 

16 ‘‘(iii) an amount for a reasonable re17 serve for working capital and other busi18 ness needs of the business enterprise. 

19 ‘‘(4) INDEPENDENT OPERATION.—The inde20 pendent operation requirements of this paragraph 

21 are met if, at all times during the taxable year— 

22 ‘‘(A) no substantial contributor (as defined 

23 in section 4958(c)(3)(C)) to the private founda24 tion, or family member of such a contributor 

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1 rector, officer, trustee, manager, employee, or 

2 contractor of the business enterprise (or an in3 dividual having powers or responsibilities simi4 lar to any of the foregoing), 

5 ‘‘(B) at least a majority of the board of di6 rectors of the private foundation are not— 

7 ‘‘(i) also directors or officers of the 

8 business enterprise, or 

9 ‘‘(ii) members of the family (deter10 mined under section 4958(f)(4)) of a sub11 stantial contributor (as defined in section 

12 4958(c)(3)(C)) to the private foundation, 

13 and 

14 ‘‘(C) there is no loan outstanding from the 

15 business enterprise to a substantial contributor 

16 (as so defined) to the private foundation or a 

17 family member of such contributor (as so deter18 mined). 

19 ‘‘(5) CERTAIN DEEMED PRIVATE FOUNDATIONS

20 EXCLUDED.—This subsection shall not apply to— 

21 ‘‘(A) any fund or organization treated as a 

22 private foundation for purposes of this section 

23 by reason of subsection (e) or (f), 

24 ‘‘(B) any trust described in section 

25 4947(a)(1) (relating to charitable trusts), and 


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1 ‘‘(C) any trust described in section 

2 4947(a)(2) (relating to split-interest trusts).’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 Subtitle C—Requirements for 

7 Organizations Exempt From Tax 

8 SEC. 5201. CHURCHES PERMITTED TO MAKE STATEMENTS 

9 RELATING TO POLITICAL CAMPAIGN IN ORDI10 NARY COURSE OF RELIGIOUS SERVICES AND 

11 ACTIVITIES. 

12 (a) IN GENERAL.—Section 501 is amended by adding 

13 at the end the following new subsection: 

14 ‘‘(s) SPECIAL RULE RELATING TO POLITICAL CAM15 PAIGN STATEMENTS OF CHURCHES, INTEGRATED AUXIL16 IARIES, ETC.— 

17 ‘‘(1) IN GENERAL.—For purposes of subsection 

18 (c)(3) and sections 170(c)(2), 2055, 2106, 2522, 

19 and 4955, an organization described in section 

20 508(c)(1)(A) shall not fail to be treated as organized 

21 and operated exclusively for a religious purpose, nor 

22 shall it be deemed to have participated in, or inter23 vened in any political campaign on behalf of (or in 

24 opposition to) any candidate for public office, solely 

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1 ing, dialectic, or other presentation made during re2 ligious services or gatherings, but only if the prepa3 ration and presentation of such content— 

4 ‘‘(A) is in the ordinary course of the orga5 nization’s regular and customary activities in 

6 carrying out its exempt purpose, and 

7 ‘‘(B) results in the organization incurring 

8 not more than de minimis incremental ex9 penses.’’. 

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

11 this section shall apply to taxable years ending after the 

12 date of the enactment of this Act. 

13 SEC. 5202. ADDITIONAL REPORTING REQUIREMENTS FOR 

14 DONOR ADVISED FUND SPONSORING ORGA15 NIZATIONS. 

16 (a) IN GENERAL.—Section 6033(k) is amended by 

17 striking ‘‘and’’ at the end of paragraph (2), by striking 

18 the period at the end of paragraph (3), and by adding 

19 at the end the following new paragraphs: 

20 ‘‘(4) indicate the average amount of grants 

21 made from such funds during such taxable year (ex22 pressed as a percentage of the value of assets held 

23 in such funds at the beginning of such taxable year), 

24 and 


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1 ‘‘(5) indicate whether the organization has a 

2 policy with respect to donor advised funds (as so de3 fined) for frequency and minimum level of distribu4 tions. 

5 Such organization shall include with such return a copy 

6 of any policy described in paragraph (5).’’. 

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

8 this section shall apply for returns filed for taxable years 

9 beginning after December 31, 2017. 

Æ 


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