In the Senate of the United States, 

December 2 (legislative day, December 1), 2017. 

Resolved, That the bill from the House of Representatives (H.R. 1) entitled ‘‘An Act to provide for reconciliation 

pursuant to titles II and V of the concurrent resolution on 

the budget for fiscal year 2018.’’, do pass with the following 

AMENDMENT: 

Strike all after the first word and insert the following: 

1 TITLE 

2 TITLE I 

3 SEC. 11000. SHORT TITLE, ETC. 

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

5 ‘‘Tax Cuts and Jobs Act’’. 

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

7 expressly provided, whenever in this title an amendment 

8 or repeal is expressed in terms of an amendment to, or re9 peal of, a section or other provision, the reference shall be 
2 

† HR 1 EAS 

1 considered to be made to a section or other provision of the 

2 Internal Revenue Code of 1986. 

3 Subtitle A—Individual Tax Reform 

4 PART I—TAX RATE REFORM 

5 SEC. 11001. MODIFICATION OF RATES. 

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

7 at the end the following new subsection: 

8 ‘‘(j) MODIFICATIONS FOR TAXABLE YEARS 2018 

9 THROUGH 2025.— 

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

11 beginning after December 31, 2017, and before Janu12 ary 1, 2026— 

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

14 ‘‘(B) this section (other than subsection (i)) 

15 shall be applied as provided in paragraphs (2) 

16 through (7). 

17 ‘‘(2) RATE TABLES.— 

18 ‘‘(A) MARRIED INDIVIDUALS FILING JOINT

19 RETURNS AND SURVIVING SPOUSES.—The fol20 lowing table shall be applied in lieu of the table 

21 contained in subsection (a): 

‘‘If taxable income is: The tax is: 

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

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

$19,050. 

Over $77,400 but not over $140,000 ........... $8,907, plus 22% of the excess over 

$77,400. 

Over $140,000 but not over $320,000 ......... $22,679, plus 24% of the excess over 

$140,000. 
3 

† HR 1 EAS 

‘‘If taxable income is: The tax is: 

Over $320,000 but not over $400,000 ......... $65,879, plus 32% of the excess over 

$320,000. 

Over $400,000 but not over $1,000,000 ...... $91,479, plus 35% of the excess over 

$400,000. 

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

over $1,000,000. 

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

3 contained in subsection (b): 

‘‘If taxable income is: The tax is: 

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

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

$13,600. 

Over $51,800 but not over $70,000 ............. $5,944, plus 22% of the excess over 

$51,800. 

Over $70,000 but not over $160,000 ........... $9,948, plus 24% of the excess over 

$70,000. 

Over $160,000 but not over $200,000 ......... $31,548, plus 32% of the excess over 

$160,000. 

Over $200,000 but not over $500,000 ......... $44,348, plus 35% of the excess over 

$200,000. 

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

over $500,000. 

4 ‘‘(C) UNMARRIED INDIVIDUALS OTHER

5 THAN SURVIVING SPOUSES AND HEADS OF

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

8 (c): 

‘‘If taxable income is: The tax is: 

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

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

$9,525. 

Over $38,700 but not over $70,000 ............. $4,453.50, plus 22% of the excess 

over $38,700. 

Over $70,000 but not over $160,000 ........... $11,339.50, plus 24% of the excess 

over $70,000. 

Over $160,000 but not over $200,000 ......... $32,939.50, plus 32% of the excess 

over $160,000. 
4 

† HR 1 EAS 

‘‘If taxable income is: The tax is: 

Over $200,000 but not over $500,000 ......... $45,739.50, plus 35% of the excess 

over $200,000. 

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

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

3 applied in lieu of the table contained in sub4 section (d): 

‘‘If taxable income is: The tax is: 

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

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

$9,525. 

Over $38,700 but not over $70,000 ............. $4,453.50, plus 22% of the excess 

over $38,700. 

Over $70,000 but not over $160,000 ........... $11,339.50, plus 24% of the excess 

over $70,000. 

Over $160,000 but not over $200,000 ......... $32,939.50, plus 32% of the excess 

over $160,000. 

Over $200,000 but not over $500,000 ......... $45,739.50, plus 35% of the excess 

over $200,000. 

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

5 ‘‘(E) ESTATES AND TRUSTS.—The following 

6 table shall be applied in lieu of the table con7 tained in subsection (e): 

‘‘If taxable income is: The tax is: 

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

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

$2,550. 

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

$9,150. 

Over $12,500 ................................................. $3,011.50, plus 38.5% of the excess 

over $12,500. 

8 ‘‘(F) REFERENCES TO RATE TABLES.—Any 

9 reference in this title to a rate of tax under sub-
5 

† HR 1 EAS 

1 section (c) shall be treated as a reference to the 

2 corresponding rate bracket under subparagraph 

3 (C) of this paragraph, except that the reference 

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

5 tax applicable under subsection (c) shall be treat6 ed as a reference to the fourth lowest rate of tax 

7 under subparagraph (C). 

8 ‘‘(3) ADJUSTMENTS.— 

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

10 contained in paragraph (2) shall apply without 

11 adjustment for taxable years beginning after De12 cember 31, 2017, and before January 1, 2019. 

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

14 years beginning after December 31, 2018, the 

15 Secretary shall prescribe tables which shall apply 

16 in lieu of the tables contained in paragraph (2) 

17 in the same manner as under paragraphs (1) 

18 and (2) of subsection (f), except that in pre19 scribing such tables— 

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

21 by substituting ‘calendar year 2017’ for 

22 ‘calendar year 2016’ in subparagraph 

23 (A)(ii) thereof, 
6 

† HR 1 EAS 

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

2 any unmarried individual other than a sur3 viving spouse or head of household, and 

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

5 ‘‘(4) SPECIAL RULES FOR CERTAIN CHILDREN

6 WITH UNEARNED INCOME.— 

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

8 whom subsection (g) applies for the taxable year, 

9 the rules of subparagraphs (B) and (C) shall 

10 apply in lieu of the rule under subsection (g)(1). 

11 ‘‘(B) MODIFICATIONS TO APPLICABLE RATE

12 BRACKETS.—In determining the amount of tax 

13 imposed by this section for the taxable year on 

14 a child described in subparagraph (A), the in15 come tax table otherwise applicable under this 

16 subsection to the child shall be applied with the 

17 following modifications: 

18 ‘‘(i) 24-PERCENT BRACKET.—The max19 imum taxable income which is taxed at a 

20 rate below 24 percent shall not be more than 

21 the earned taxable income of such child. 

22 ‘‘(ii) 35-PERCENT BRACKET.—The 

23 maximum taxable income which is taxed at 

24 a rate below 35 percent shall not be more 

25 than the sum of— 
7 

† HR 1 EAS 

1 ‘‘(I) the earned taxable income of 

2 such child, plus 

3 ‘‘(II) the minimum taxable in4 come for the 35-percent bracket in the 

5 table under paragraph (2)(E) (as ad6 justed under paragraph (3)) for the 

7 taxable year. 

8 ‘‘(iii) 38.5-PERCENT BRACKET.—The 

9 maximum taxable income which is taxed at 

10 a rate below 38.5 percent shall not be more 

11 than the sum of— 

12 ‘‘(I) the earned taxable income of 

13 such child, plus 

14 ‘‘(II) the minimum taxable in15 come for the 38.5-percent bracket in the 

16 table under paragraph (2)(E) (as ad17 justed under paragraph (3)) for the 

18 taxable year. 

19 ‘‘(C) COORDINATION WITH CAPITAL GAINS

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

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

22 ‘‘(i) the maximum zero rate amount 

23 shall not be more than the sum of— 

24 ‘‘(I) the earned taxable income of 

25 such child, plus 
8 

† HR 1 EAS 

1 ‘‘(II) the amount in effect under 

2 paragraph (5)(B)(i)(IV) for the taxable 

3 year, and 

4 ‘‘(ii) the maximum 15-percent rate 

5 amount shall not be more than the sum of— 

6 ‘‘(I) the earned taxable income of 

7 such child, plus 

8 ‘‘(II) the amount in effect under 

9 paragraph (5)(B)(ii)(IV) for the tax10 able year. 

11 ‘‘(D) EARNED TAXABLE INCOME.—For pur12 poses of this paragraph, the term ‘earned taxable 

13 income’ means, with respect to any child for any 

14 taxable year, the taxable income of such child re15 duced (but not below zero) by the net unearned 

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

17 child. 

18 ‘‘(5) APPLICATION OF CURRENT INCOME TAX

19 BRACKETS TO CAPITAL GAINS BRACKETS.— 

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

21 applied— 

22 ‘‘(i) by substituting ‘below the max23 imum zero rate amount’ for ‘which would 

24 (without regard to this paragraph) be taxed 
9 

† HR 1 EAS 

1 at a rate below 25 percent’ in subparagraph 

2 (B)(i), and 

3 ‘‘(ii) by substituting ‘below the max4 imum 15-percent rate amount’ for ‘which 

5 would (without regard to this paragraph) be 

6 taxed at a rate below 39.6 percent’ in sub7 paragraph (C)(ii)(I). 

8 ‘‘(B) MAXIMUM AMOUNTS DEFINED.—For 

9 purposes of applying section 1(h) with the modi10 fications described in subparagraph (A)— 

11 ‘‘(i) MAXIMUM ZERO RATE AMOUNT.— 

12 The maximum zero rate amount shall be— 

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

14 or surviving spouse, $77,200, 

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

16 who is a head of household (as defined 

17 in section 2(b)), $51,700, 

18 ‘‘(III) in the case of any other in19 dividual (other than an estate or 

trust), an amount equal to 1 20 ⁄2 of the 

21 amount in effect for the taxable year 

22 under subclause (I), and 

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

24 trust, $2,600. 
10 

† HR 1 EAS 

1 ‘‘(ii) MAXIMUM 15-PERCENT RATE

2 AMOUNT.—The maximum 15-percent rate 

3 amount shall be— 

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

or surviving spouse, $479,000 (1 5 ⁄2 such 

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

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

9 who is the head of a household (as de10 fined in section 2(b)), $452,400, 

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

13 trust), $425,800, and 

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

15 trust, $12,700. 

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

17 of any taxable year beginning after 2018, each of 

18 the dollar amounts in clauses (i) and (ii) of sub19 paragraph (B) shall be increased by an amount 

20 equal to— 

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

22 ‘‘(ii) the cost-of-living adjustment de23 termined under subsection (f)(3) for the cal24 endar year in which the taxable year be25 gins, determined by substituting ‘calendar 
11 

† HR 1 EAS 

1 year 2017’ for ‘calendar year 2016’ in sub2 paragraph (A)(ii) thereof. 

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

4 shall not apply to any change in a rate of tax by rea5 son of this subsection.’’. 

6 (b) DUE DILIGENCE TAX PREPARER REQUIREMENT

7 WITH RESPECT TO HEAD OF HOUSEHOLD FILING STA8 TUS.—Subsection (g) of section 6695 is amended to read 

9 as follows: 

10 ‘‘(g) FAILURE TO BE DILIGENT IN DETERMINING ELI11 GIBILITY FOR CERTAIN TAX BENEFITS.—Any person who 

12 is a tax return preparer with respect to any return or claim 

13 for refund who fails to comply with due diligence require14 ments imposed by the Secretary by regulations with respect 

15 to determining— 

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

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

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

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

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

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

22 section shall apply to taxable years beginning after Decem23 ber 31, 2017. 
12 

† HR 1 EAS 

1 SEC. 11002. INFLATION ADJUSTMENTS BASED ON CHAINED 

2 CPI. 

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

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

5 paragraph (2) the following new paragraph: 

6 ‘‘(3) COST-OF-LIVING ADJUSTMENT.—For pur7 poses of this subsection— 

8 ‘‘(A) IN GENERAL.—The cost-of-living ad9 justment for any calendar year is the percentage 

10 (if any) by which— 

11 ‘‘(i) the C–CPI–U for the preceding 

12 calendar year, exceeds 

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

14 multiplied by the amount determined under 

15 subparagraph (B). 

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

17 determined under this clause is the amount ob18 tained by dividing— 

19 ‘‘(i) the C–CPI–U for calendar year 

20 2016, by 

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

22 ‘‘(C) SPECIAL RULE FOR ADJUSTMENTS

23 WITH A BASE YEAR AFTER 2016.—For purposes 

24 of any provision of this title which provides for 

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

26 in subparagraph (A)(ii), subparagraph (A) shall 
13 

† HR 1 EAS 

1 be applied by substituting ‘the C–CPI–U for cal2 endar year 2016’ for ‘the CPI for calendar year 

3 2016’ and all that follows in clause (ii) thereof.’’. 

4 (b) C–CPI–U.—Subsection (f) of section 1 is amended 

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

6 as paragraph (7), and by inserting after paragraph (5) the 

7 following new paragraph: 

8 ‘‘(6) C–CPI–U.—For purposes of this sub9 section— 

10 ‘‘(A) IN GENERAL.—The term ‘C–CPI–U’ 

11 means the Chained Consumer Price Index for All 

12 Urban Consumers (as published by the Bureau of 

13 Labor Statistics of the Department of Labor). 

14 The values of the Chained Consumer Price Index 

15 for All Urban Consumers taken into account for 

16 purposes of determining the cost-of-living adjust17 ment for any calendar year under this subsection 

18 shall be the latest values so published as of the 

19 date on which such Bureau publishes the initial 

20 value of the Chained Consumer Price Index for 

21 All Urban Consumers for the month of August 

22 for the preceding calendar year. 

23 ‘‘(B) DETERMINATION FOR CALENDAR

24 YEAR.—The C–CPI–U for any calendar year is 

25 the average of the C–CPI–U as of the close of the 
14 

† HR 1 EAS 

1 12-month period ending on August 31 of such 

2 calendar year.’’. 

3 (c) APPLICATION TO PERMANENT TAX TABLES.—Sec4 tion 1(f)(2)(A) is amended by inserting ‘‘, determined by 

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

6 (d) APPLICATION TO OTHER INTERNAL REVENUE

7 CODE OF 1986 PROVISIONS.— 

8 (1) The following sections are each amended by 

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

10 (B)’’ and inserting ‘‘for ‘calendar year 2016’ in sub11 paragraph (A)(ii)’’: 

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

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

14 section 25A(h). 

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

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

17 (i) and (ii) of subsection (j)(1)(B), of section 32. 

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

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

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

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

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

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

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

25 (K) Section 63(c)(4)(B). 
15 

† HR 1 EAS 

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

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

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

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

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

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

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

8 (S) Subsections (b)(5)(C)(i)(II) and 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

25 (II) Section 6334(g)(1)(B). 
16 

† HR 1 EAS 

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

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

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

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

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

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

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

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

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

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

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

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

13 each amended— 

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

15 ‘‘1(f)(3)(A)(ii)’’, and 

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

17 ‘‘2016’’. 

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

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

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

21 year 2016’ in subparagraph (A)(ii) thereof’’, and 

22 (B) by striking ‘‘if the CPI for any cal23 endar year’’ and all that follows in clause (ii) 

24 and inserting ‘‘if the C–CPI–U for any calendar 

25 year (as defined in section 1(f)(6)) exceeds the 
17 

† HR 1 EAS 

1 C–CPI–U for the preceding calendar year by 

2 more than 5 percent, the C–CPI–U for the base 

3 calendar year shall be increased such that such 

4 excess shall never be taken into account under 

5 clause (i). In the case of a base calendar year be6 fore 2017, the C–CPI–U for such year shall be 

7 determined by multiplying the CPI for such year 

8 by the amount determined under section 

9 1(f)(3)(B).’’. 

10 (4) Section 59(j)(2)(B) is amended by striking 

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

12 ‘2016’ in subparagraph (A)(ii)’’. 

13 (5) Section 132(f)(6)(A)(ii) is amended by strik14 ing ‘‘for ‘calendar year 1992’ ’’ and inserting ‘‘for 

15 ‘calendar year 2016’ in subparagraph (A)(ii) there16 of’’. 

17 (6) Section 162(o)(3) is amended by striking 

18 ‘‘adjusted for changes in the Consumer Price Index 

19 (as defined in section 1(f)(5)) since 1991’’ and insert20 ing ‘‘adjusted by increasing any such amount under 

21 the 1991 agreement by an amount equal to— 

22 ‘‘(A) such amount, multiplied by 

23 ‘‘(B) the cost-of-living adjustment deter24 mined under section 1(f)(3) for the calendar year 

25 in which the taxable year begins, by substituting 
18 

† HR 1 EAS 

1 ‘calendar year 1990’ for ‘calendar year 2016’ in 

2 subparagraph (A)(ii) thereof’’. 

3 (7) So much of clause (ii) of section 

4 213(d)(10)(B) as precedes the last sentence is amend5 ed to read as follows: 

6 ‘‘(ii) MEDICAL CARE COST ADJUST7 MENT.—For purposes of clause (i), the med8 ical care cost adjustment for any calendar 

9 year is the percentage (if any) by which— 

10 ‘‘(I) the medical care component 

11 of the C–CPI–U (as defined in section 

12 1(f)(6)) for August of the preceding cal13 endar year, exceeds 

14 ‘‘(II) such component of the CPI 

15 (as defined in section 1(f)(4)) for Au16 gust of 1996, multiplied by the amount 

17 determined under section 1(f)(3)(B).’’. 

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

19 amended to read as follows: 

20 ‘‘(B) AUTOMOBILE PRICE INFLATION AD21 JUSTMENT.—For purposes of this paragraph— 

22 ‘‘(i) IN GENERAL.—The automobile 

23 price inflation adjustment for any calendar 

24 year is the percentage (if any) by which— 
19 

† HR 1 EAS 

1 ‘‘(I) the C–CPI–U automobile 

2 component for October of the preceding 

3 calendar year, exceeds 

4 ‘‘(II) the automobile component of 

5 the CPI (as defined in section 1(f)(4)) 

6 for October of 1987, multiplied by the 

7 amount determined under 1(f)(3)(B). 

8 ‘‘(ii) C–CPI–U AUTOMOBILE COMPO9 NENT.—The term ‘C–CPI–U automobile 

10 component’ means the automobile compo11 nent of the Chained Consumer Price Index 

12 for All Urban Consumers (as described in 

13 section 1(f)(6)).’’. 

14 (9) Section 911(b)(2)(D)(ii)(II) is amended by 

15 striking ‘‘for ‘1992’ in subparagraph (B)’’ and insert16 ing ‘‘for ‘2016’ in subparagraph (A)(ii)’’. 

17 (10) Paragraph (2) of section 1274A(d) is 

18 amended to read as follows: 

19 ‘‘(2) ADJUSTMENT FOR INFLATION.—In the case 

20 of any debt instrument arising out of a sale or ex21 change during any calendar year after 1989, each 

22 dollar amount contained in the preceding provisions 

23 of this section shall be increased by an amount equal 

24 to— 

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

† HR 1 EAS 

1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 1(f)(3) for the calendar year 

3 in which the taxable year begins, by substituting 

4 ‘calendar year 1988’ for ‘calendar year 2016’ in 

5 subparagraph (A)(ii) thereof. 

6 Any increase under the preceding sentence shall be 

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

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

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

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

11 striking ‘‘for ‘1992’ in subparagraph (B)’’ and insert12 ing ‘‘for ‘2016’ in subparagraph (A)(ii)’’. 

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

14 striking ‘‘for ‘1992’ in subparagraph (B)’’ and insert15 ing ‘‘for ‘2016’ in subparagraph (A)(ii)’’. 

16 (13) Section 6039F(d) is amended by striking 

17 ‘‘subparagraph (B) thereof shall be applied by sub18 stituting ‘1995’ for ‘1992’ ’’ and inserting ‘‘subpara19 graph (A)(ii) thereof shall be applied by substituting 

20 ‘1995’ for ‘2016’ ’’. 

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

22 follows: 

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

24 the case of any loan made during any calendar year 
21 

† HR 1 EAS 

1 after 1986, the dollar amount in paragraph (2) shall 

2 be increased by an amount equal to— 

3 ‘‘(A) such amount, multiplied by 

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

6 in which the taxable year begins, by substituting 

7 ‘calendar year 1985’ for ‘calendar year 2016’ in 

8 subparagraph (A)(ii) thereof. 

9 Any increase under the preceding sentence shall be 

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

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

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

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

14 section shall apply to taxable years beginning after Decem15 ber 31, 2017. 

16 PART II—DEDUCTION FOR QUALIFIED BUSINESS 

17 INCOME OF PASS-THRU ENTITIES 

18 SEC. 11011. DEDUCTION FOR QUALIFIED BUSINESS IN19 COME. 

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

21 1 is amended by adding at the end the following new sec22 tion: 
22 

† HR 1 EAS 

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

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

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

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

5 ‘‘(1) the combined qualified business income 

6 amount of the taxpayer, or 

7 ‘‘(2) an amount equal to 23 percent of the excess 

8 (if any) of— 

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

10 the taxable year, over 

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

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

13 ‘‘(b) COMBINED QUALIFIED BUSINESS INCOME

14 AMOUNT.—For purposes of this section— 

15 ‘‘(1) IN GENERAL.—The term ‘combined quali16 fied business income amount’ means, with respect to 

17 any taxable year, an amount equal to— 

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

19 under paragraph (2) for each qualified trade or 

20 business carried on by the taxpayer, plus 

21 ‘‘(B) 23 percent of the aggregate amount of 

22 the qualified REIT dividends and qualified coop23 erative dividends of the taxpayer for the taxable 

24 year. 

25 ‘‘(2) DETERMINATION OF DEDUCTIBLE AMOUNT

26 FOR EACH TRADE OR BUSINESS.—The amount deter-
23 

† HR 1 EAS 

1 mined under this paragraph with respect to any 

2 qualified trade or business is the lesser of— 

3 ‘‘(A) 23 percent of the taxpayer’s qualified 

4 business income with respect to the qualified 

5 trade or business, or 

6 ‘‘(B) 50 percent of the W–2 wages with re7 spect to the qualified trade or business. 

8 ‘‘(3) MODIFICATIONS TO THE WAGE LIMIT BASED

9 ON TAXABLE INCOME.— 

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

11 the case of any taxpayer whose taxable income 

12 for the taxable year does not exceed the threshold 

13 amount, paragraph (2) shall be applied without 

14 regard to subparagraph (B). 

15 ‘‘(B) PHASE-IN OF LIMIT FOR CERTAIN TAX16 PAYERS.— 

17 ‘‘(i) IN GENERAL.—If— 

18 ‘‘(I) the taxable income of a tax19 payer for any taxable year exceeds the 

20 threshold amount, but does not exceed 

21 the sum of the threshold amount plus 

22 $50,000 ($100,000 in the case of a 

23 joint return), and 

24 ‘‘(II) the amount determined 

25 under paragraph (2)(B) (determined 
24 

† HR 1 EAS 

1 without regard to this subparagraph) 

2 with respect to any qualified trade or 

3 business carried on by the taxpayer is 

4 less than the amount determined under 

5 paragraph (2)(A) with respect such 

6 trade or business, 

7 then paragraph (2) shall be applied with re8 spect to such trade or business without re9 gard to subparagraph (B) thereof and by re10 ducing the amount determined under sub11 paragraph (A) thereof by the amount deter12 mined under clause (ii). 

13 ‘‘(ii) AMOUNT OF REDUCTION.—The 

14 amount determined under this subpara15 graph is the amount which bears the same 

16 ratio to the excess amount as— 

17 ‘‘(I) the amount by which the tax18 payer’s taxable income for the taxable 

19 year exceeds the threshold amount, 

20 bears to 

21 ‘‘(II) $50,000 ($100,000 in the 

22 case of a joint return). 

23 ‘‘(iii) EXCESS AMOUNT.—For purposes 

24 of clause (ii), the excess amount is the excess 

25 of— 
25 

† HR 1 EAS 

1 ‘‘(I) the amount determined under 

2 paragraph (2)(A) (determined without 

3 regard to this paragraph), over 

4 ‘‘(II) the amount determined 

5 under paragraph (2)(B) (determined 

6 without regard to this paragraph). 

7 ‘‘(4) WAGES, ETC.— 

8 ‘‘(A) IN GENERAL.—The term ‘W–2 wages’ 

9 means, with respect to any person for any tax10 able year of such person, the amounts described 

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

12 paid by such person with respect to employment 

13 of employees by such person during the calendar 

14 year ending during such taxable year. 

15 ‘‘(B) LIMITATION TO WAGES ATTRIBUTABLE

16 TO QUALIFIED BUSINESS INCOME.—Such term 

17 shall not include any amount which is not prop18 erly allocable to qualified business income for 

19 purposes of subsection (c)(1). 

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

21 shall not include any amount which is not prop22 erly included in a return filed with the Social 

23 Security Administration on or before the 60th 

24 day after the due date (including extensions) for 

25 such return. 
26 

† HR 1 EAS 

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

2 TAXABLE YEARS.—The Secretary shall provide for the 

3 application of this subsection in cases of a short tax4 able year or where the taxpayer acquires, or disposes 

5 of, the major portion of a trade or business or the 

6 major portion of a separate unit of a trade or busi7 ness during the taxable year. 

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

9 this section— 

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

11 income’ means, for any taxable year, the net amount 

12 of qualified items of income, gain, deduction, and loss 

13 with respect to any qualified trade or business of the 

14 taxpayer. 

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

16 of qualified income, gain, deduction, and loss with re17 spect to qualified trade or businesses of the taxpayer 

18 amount for any taxable year is less than zero, such 

19 amount shall be treated as a loss from a qualified 

20 trade or business in the succeeding taxable year. 

21 ‘‘(3) QUALIFIED ITEMS OF INCOME, GAIN, DE22 DUCTION, AND LOSS.—For purposes of this sub23 section— 

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

25 items of income, gain, deduction, and loss’ 
27 

† HR 1 EAS 

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

2 to the extent such items are— 

3 ‘‘(i) effectively connected with the con4 duct of a trade or business within the 

5 United States (within the meaning of sec6 tion 864(c), determined by substituting 

7 ‘qualified trade or business (within the 

8 meaning of section 199A)’ for ‘nonresident 

9 alien individual or a foreign corporation’ or 

10 for ‘a foreign corporation’ each place it ap11 pears), and 

12 ‘‘(ii) included or allowed in deter13 mining taxable income for the taxable year. 

14 ‘‘(B) EXCEPTIONS.—The following invest15 ment items shall not be taken into account as a 

16 qualified item of income, gain, deduction, or loss: 

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

18 gain, short-term capital loss, long-term cap19 ital gain, or long-term capital loss. 

20 ‘‘(ii) Any dividend, income equivalent 

21 to a dividend, or payment in lieu of divi22 dends described in section 954(c)(1)(G). 

23 ‘‘(iii) Any interest income other than 

24 interest income which is properly allocable 

25 to a trade or business. 
28 

† HR 1 EAS 

1 ‘‘(iv) Any item of gain or loss de2 scribed in subparagraph (C) or (D) of sec3 tion 954(c)(1) (applied by substituting 

4 ‘qualified trade or business’ for ‘controlled 

5 foreign corporation’). 

6 ‘‘(v) Any item of income, gain, deduc7 tion, or loss taken into account under sec8 tion 954(c)(1)(F) (determined without re9 gard to clause (ii) thereof and other than 

10 items attributable to notional principal con11 tracts entered into in transactions quali12 fying under section 1221(a)(7)). 

13 ‘‘(vi) Any amount received from an 

14 annuity which is not received in connection 

15 with the trade or business. 

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

17 properly allocable to an amount described 

18 in any of the preceding clauses. 

19 ‘‘(4) TREATMENT OF REASONABLE COMPENSA20 TION AND GUARANTEED PAYMENTS.—Qualified busi21 ness income shall not include— 

22 ‘‘(A) reasonable compensation paid to the 

23 taxpayer by any qualified trade or business of 

24 the taxpayer for services rendered with respect to 

25 the trade or business, 
29 

† HR 1 EAS 

1 ‘‘(B) any guaranteed payment described in 

2 section 707(c) paid to a partner for services ren3 dered with respect to the trade or business, and 

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

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

6 partner for services rendered with respect to the 

7 trade or business. 

8 ‘‘(d) QUALIFIED TRADE OR BUSINESS.—For purposes 

9 of this section— 

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

11 business’ means any trade or business other than a 

12 specified service trade or business or the trade or busi13 ness of performing services as an employee. 

14 ‘‘(2) SPECIFIED SERVICE TRADE OR BUSINESS.— 

15 The term ‘specified service trade or business’ means 

16 any trade or business involving the performance of 

17 services described in section 1202(e)(3)(A), including 

18 investing and investment management, trading, or 

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

20 partnership interests, or commodities (as defined in 

21 section 475(e)(2)). 

22 ‘‘(3) EXCEPTION FOR SPECIFIED SERVICE BUSI23 NESSES BASED ON TAXPAYER’S INCOME.— 

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

25 year, the taxable income of any taxpayer is less 
30 

† HR 1 EAS 

1 than the sum of the threshold amount plus 

2 $50,000 ($100,000 in the case of a joint return), 

3 then— 

4 ‘‘(i) the exception under paragraph (1) 

5 shall not apply to specified service trades or 

6 businesses of the taxpayer for the taxable 

7 year, but 

8 ‘‘(ii) only the applicable percentage of 

9 qualified items of income, gain, deduction, 

10 or loss, and the W–2 wages, of the taxpayer 

11 allocable to such specified service trades or 

12 businesses shall be taken into account in 

13 computing the qualified business income 

14 and W–2 wages of the taxpayer for the tax15 able year for purposes of applying this sec16 tion. 

17 ‘‘(B) APPLICABLE PERCENTAGE.—For pur18 poses of subparagraph (A), the term ‘applicable 

19 percentage’ means, with respect to any taxable 

20 year, 100 percent reduced (not below zero) by the 

21 percentage equal to the ratio of— 

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

23 for the taxable year in excess of the thresh24 old amount, bears to 
31 

† HR 1 EAS 

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

2 a joint return). 

3 ‘‘(e) OTHER DEFINITIONS.—For purposes of this sec4 tion— 

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

6 computed without regard to the deduction allowable 

7 under this section. 

8 ‘‘(2) THRESHOLD AMOUNT.— 

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

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

11 amount in the case of a joint return). 

12 ‘‘(B) INFLATION ADJUSTMENT.—In the case 

13 of any taxable year beginning after 2018, the 

14 dollar amount in paragraph (1) shall be in15 creased by an amount equal to— 

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

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

21 year 2017’ for ‘calendar year 2016’ in sub22 paragraph (A)(ii) thereof. 

23 If any amount as increased under the preceding 

24 sentence is not a multiple of $1,000, such 
32 

† HR 1 EAS 

1 amount shall be rounded to the nearest multiple 

2 of $1,000. 

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

4 ‘qualified REIT dividend’ means any dividend from 

5 a real estate investment trust received during the tax6 able year which— 

7 ‘‘(A) is not a capital gain dividend, as de8 fined in section 857(b)(3), and 

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

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

11 ‘‘(4) QUALIFIED COOPERATIVE DIVIDEND.—The 

12 term ‘qualified cooperative dividend’ means any pa13 tronage dividend (as defined in section 1388(a)), any 

14 per-unit retain allocation (as defined in section 

15 1388(f)), and any qualified written notice of alloca16 tion (as defined in section 1388(c)), or any similar 

17 amount received from an organization described in 

18 subparagraph (B)(ii), which— 

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

20 ‘‘(B) is received from— 

21 ‘‘(i) an organization or corporation de22 scribed in section 501(c)(12) or 1381(a), or 

23 ‘‘(ii) an organization which is gov24 erned under this title by the rules applicable 
33 

† HR 1 EAS 

1 to cooperatives under this title before the en2 actment of subchapter T. 

3 ‘‘(f) SPECIAL RULES.— 

4 ‘‘(1) APPLICATION TO PARTNERSHIPS AND S COR5 PORATIONS.— 

6 ‘‘(A) IN GENERAL.—In the case of a part7 nership or S corporation— 

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

9 partner or shareholder level, 

10 ‘‘(ii) each partner or shareholder shall 

11 take into account such person’s allocable 

12 share of each qualified item of income, gain, 

13 deduction, and loss, and 

14 ‘‘(iii) each partner or shareholder shall 

15 be treated for purposes of subsection (b) as 

16 having W–2 wages for the taxable year in 

17 an amount equal to such person’s allocable 

18 share of the W–2 wages of the partnership 

19 or S corporation for the taxable year (as de20 termined under regulations prescribed by 

21 the Secretary). 

22 For purposes of clause (iii), a partner’s or share23 holder’s allocable share of W–2 wages shall be de24 termined in the same manner as the partner’s or 

25 shareholder’s allocable share of wage expenses. 
34 

† HR 1 EAS 

1 For purposes of this subparagraph, in the case of 

2 an S corporation, an allocable share shall be the 

3 shareholder’s pro rata share of an item. 

4 ‘‘(B) APPLICATION TO TRUSTS AND ES5 TATES.—This section shall not apply to any 

6 trust or estate. 

7 ‘‘(C) TREATMENT OF TRADES OR BUSINESS

8 IN PUERTO RICO.— 

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

10 taxpayer with qualified business income 

11 from sources within the commonwealth of 

12 Puerto Rico, if all such income is taxable 

13 under section 1 for such taxable year, then 

14 for purposes of determining the qualified 

15 business income of such taxpayer for such 

16 taxable year, the term ‘United States’ shall 

17 include the Commonwealth of Puerto Rico. 

18 ‘‘(ii) SPECIAL RULE FOR APPLYING

19 WAGE LIMITATION.—In the case of any tax20 payer described in clause (i), the determina21 tion of W–2 wages of such taxpayer with re22 spect to any qualified trade or business con23 ducted in Puerto Rico shall be made with24 out regard to any exclusion under section 
35 

† HR 1 EAS 

1 3401(a)(8) for remuneration paid for serv2 ices in Puerto Rico. 

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

4 purposes of determining alternative minimum taxable 

5 income under section 55, qualified business income 

6 shall be determined without regard to any adjust7 ments under sections 56 through 59. 

8 ‘‘(3) DEDUCTION LIMITED TO INCOME TAXES.— 

9 The deduction under subsection (a) shall only be al10 lowed for purposes of this chapter. 

11 ‘‘(4) REGULATIONS.—The Secretary shall pre12 scribe such regulations as are necessary to carry out 

13 the purposes of this section, including regulations— 

14 ‘‘(A) for requiring or restricting the alloca15 tion of items and wages under this section and 

16 such reporting requirements as the Secretary de17 termines appropriate, and 

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

19 the case of tiered entities. 

20 ‘‘(g) DEDUCTION ALLOWED TO SPECIFIED AGRICUL21 TURAL OR HORTICULTURAL COOPERATIVES.— 

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

23 year of a specified agricultural or horticultural coop24 erative beginning after December 31, 2018, there shall 
36 

† HR 1 EAS 

1 be allowed a deduction in an amount equal to the 

2 lesser of— 

3 ‘‘(A) 23 percent of the cooperative’s taxable 

4 income for the taxable year, or 

5 ‘‘(B) 50 percent of the W–2 wages of the co6 operative with respect to its trade or business. 

7 ‘‘(2) SPECIFIED AGRICULTURAL OR HORTI8 CULTURAL COOPERATIVE.—For purposes of this sub9 section, the term ‘specified agricultural or horti10 cultural cooperative’ means an organization to which 

11 part I of subchapter T applies which is engaged in— 

12 ‘‘(A) the manufacturing, production, 

13 growth, or extraction in whole or significant 

14 part of any agricultural or horticultural prod15 uct, 

16 ‘‘(B) the marketing of agricultural or horti17 cultural products which its patrons have so man18 ufactured, produced, grown, or extracted, or 

19 ‘‘(C) the provision of supplies, equipment, 

20 or services to farmers or to organizations de21 scribed in subparagraph (A) or (B). 

22 ‘‘(h) TERMINATION.—This section shall not apply to 

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

24 (b) APPLICATION TO PUBLICLY TRADED PARTNER25 SHIPS.— 
37 

† HR 1 EAS 

1 (1) IN GENERAL.—Section 199A(b)(1)(B), as 

2 added by subsection (a), is amended by striking ‘‘and 

3 qualified cooperative dividends’’ and inserting ‘‘, 

4 qualified cooperative dividends, and qualified pub5 licly traded partnership income’’. 

6 (2) QUALIFIED PUBLICLY TRADED PARTNERSHIP

7 INCOME.—Section 199A(e), as added by subsection 

8 (a), is amended by adding at the end the following 

9 new paragraph: 

10 ‘‘(5) QUALIFIED PUBLICLY TRADED PARTNER11 SHIP INCOME.—The term ‘qualified publicly traded 

12 partnership income’ means, with respect to any quali13 fied trade or business of a taxpayer, the sum of— 

14 ‘‘(A) the net amount of such taxpayer’s allo15 cable share of each qualified item of income, 

16 gain, deduction, and loss (as defined in sub17 section (c)(3) and determined after the applica18 tion of subsection (c)(4)) from a publicly traded 

19 partnership (as defined in section 7704(a)) 

20 which is not treated as a corporation under sec21 tion 7704(c), plus 

22 ‘‘(B) any gain recognized by such taxpayer 

23 upon disposition of its interest in such partner24 ship to the extent such gain is treated as an 

25 amount realized from the sale or exchange of 
38 

† HR 1 EAS 

1 property other than a capital asset under section 

2 751(a).’’. 

3 (3) CONFORMING AMENDMENT.—Section 

4 199A(c)(1), as added by subsection (a), is amended by 

5 adding at the end the following new sentence: ‘‘Such 

6 term shall not include any qualified publicly traded 

7 partnership income.’’. 

8 (c) ACCURACY-RELATED PENALTY ON DETERMINATION

9 OF APPLICABLE PERCENTAGE.—Section 6662(d)(1) is 

10 amended by inserting at the end the following new subpara11 graph: 

12 ‘‘(C) SPECIAL RULE FOR TAXPAYERS CLAIM13 ING SECTION 199A DEDUCTION.—In the case of 

14 any taxpayer who claims the deduction allowed 

15 under section 199A for the taxable year, sub16 paragraph (A) shall be applied by substituting ‘5 

17 percent’ for ‘10 percent’.’’. 

18 (d) CONFORMING AMENDMENTS.— 

19 (1) Section 170(b)(2)(D) is amended by striking 

20 ‘‘, and’’ at the end of clause (iv), by redesignating 

21 clause (v) as clause (vi), and by inserting after clause 

22 (iv) the following new clause: 

23 ‘‘(v) section 199A, and’’. 

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

25 end the following new paragraph: 
39 

† HR 1 EAS 

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

3 allowed.’’. 

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

5 ‘‘199A,’’ before ‘‘243(a)(1)’’. 

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

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

8 without the deduction under section 199’’. 

9 (5) Section 613A(d)(1) is amended by redesig10 nating subparagraphs (C), (D), and (E) as subpara11 graphs (D), (E), and (F), respectively, and by insert12 ing after subparagraph (B), the following new sub13 paragraph: 

14 ‘‘(C) any deduction allowable under section 

15 199A,’’. 

16 (6) The table of sections for part VI of sub17 chapter B of chapter 1 is amended by inserting at the 

18 end the following new item: 

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

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

20 section shall apply to taxable years beginning after Decem21 ber 31, 2017. 

22 SEC. 11012. LIMITATION ON LOSSES FOR TAXPAYERS 

23 OTHER THAN CORPORATIONS. 

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

25 at the end the following new subsection: 
40 

† HR 1 EAS 

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

2 NONCORPORATE TAXPAYERS.— 

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

4 a taxpayer other than a corporation beginning after 

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

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

7 on excess farm losses of certain taxpayers) shall 

8 not apply, and 

9 ‘‘(B) any excess business loss of the tax10 payer for the taxable year shall not be allowed. 

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

12 which is disallowed under paragraph (1) shall be 

13 treated as a net operating loss carryover to the fol14 lowing taxable year under section 172. 

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

16 this subsection— 

17 ‘‘(A) IN GENERAL.—The term ‘excess busi18 ness loss’ means the excess (if any) of— 

19 ‘‘(i) the aggregate deductions of the 

20 taxpayer for the taxable year which are at21 tributable to trades or businesses of such 

22 taxpayer (determined without regard to 

23 whether or not such deductions are dis24 allowed for such taxable year under para25 graph (1)), over 
41 

† HR 1 EAS 

1 ‘‘(ii) the sum of— 

2 ‘‘(I) the aggregate gross income or 

3 gain of such taxpayer for the taxable 

4 year which is attributable to such 

5 trades or businesses, plus 

6 ‘‘(II) $250,000 (200 percent of 

7 such amount in the case of a joint re8 turn). 

9 ‘‘(B) ADJUSTMENT FOR INFLATION.—In the 

10 case of any taxable year beginning after Decem11 ber 31, 2018, the $250,000 amount in subpara12 graph (A)(ii)(II) shall be increased by an 

13 amount equal to— 

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

15 ‘‘(ii) the cost-of-living adjustment de16 termined under section 1(f)(3) for the cal17 endar year in which the taxable year be18 gins, determined by substituting ‘2017’ for 

19 ‘2016’ in subparagraph (A)(ii) thereof. 

20 If any amount as increased under the pre21 ceding sentence is not a multiple of $1,000, 

22 such amount shall be rounded to the nearest 

23 multiple of $1,000. 
42 

† HR 1 EAS 

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

2 PARTNERSHIPS AND S CORPORATIONS.—In the case of 

3 a partnership or S corporation— 

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

5 partner or shareholder level, and 

6 ‘‘(B) each partner’s or shareholder’s allo7 cable share of the items of income, gain, deduc8 tion, or loss of the partnership or S corporation 

9 for any taxable year from trades or businesses 

10 attributable to the partnership or S corporation 

11 shall be taken into account by the partner or 

12 shareholder in applying this subsection to the 

13 taxable year of such partner or shareholder with 

14 or within which the taxable year of the partner15 ship or S corporation ends. 

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

17 corporation, an allocable share shall be the share18 holder’s pro rata share of an item. 

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

20 shall prescribe such additional reporting requirements 

21 as the Secretary determines appropriate to carry out 

22 the purposes of this subsection. 

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

24 subsection shall be applied after the application of 

25 section 469.’’. 
43 

† HR 1 EAS 

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

2 section shall apply to taxable years beginning after Decem3 ber 31, 2017. 

4 PART III—TAX BENEFITS FOR FAMILIES AND 

5 INDIVIDUALS 

6 SEC. 11021. INCREASE IN STANDARD DEDUCTION. 

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

8 amended by adding at the end the following new paragraph: 

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

10 THROUGH 2025.—In the case of a taxable year begin11 ning after December 31, 2017, and before January 1, 

12 2026— 

13 ‘‘(A) INCREASE IN STANDARD DEDUC14 TION.—Paragraph (2) shall be applied— 

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

16 ‘$4,400’ in subparagraph (B), and 

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

18 ‘$3,000’ in subparagraph (C). 

19 ‘‘(B) ADJUSTMENT FOR INFLATION.— 

20 ‘‘(i) IN GENERAL.—Paragraph (4) 

21 shall not apply to the dollar amounts con22 tained in paragraphs (2)(B) and (2)(C). 

23 ‘‘(ii) ADJUSTMENT OF INCREASED

24 AMOUNTS.—In the case of a taxable year be25 ginning after 2018, the $18,000 and 
44 

† HR 1 EAS 

1 $12,000 amounts in subparagraph (A) shall 

2 each be increased by an amount equal to— 

3 ‘‘(I) such dollar amount, multi4 plied by 

5 ‘‘(II) the cost-of-living adjustment 

6 determined under section 1(f)(3) for 

7 the calendar year in which the taxable 

8 year begins, determined by substituting 

9 ‘2017’ for ‘2016’ in subparagraph 

10 (A)(ii) thereof.’’. 

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

12 section shall apply to taxable years beginning after Decem13 ber 31, 2017. 

14 SEC. 11022. INCREASE IN AND MODIFICATION OF CHILD 

15 TAX CREDIT. 

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

17 at the end the following new subsection: 

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

19 THROUGH 2025.— 

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

21 beginning after December 31, 2017, and before Janu22 ary 1, 2026, this section shall be applied as provided 

23 in paragraphs (2), (3), (5), (6), (7), and (8). In the 

24 case of taxable year beginning after December 31, 
45 

† HR 1 EAS 

1 2017 and before January 1, 2025, this section shall 

2 be applied as provided in paragraph (4). 

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

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

5 ‘‘(3) LIMITATION.—In lieu of the amount deter6 mined under subsection (b)(2), the threshold amount 

7 shall be $500,000. 

8 ‘‘(4) DEFINITION OF QUALIFYING CHILD.—Para9 graph (1) of subsection (c) shall be applied by sub10 stituting ‘18’ for ‘17’. 

11 ‘‘(5) PARTIAL CREDIT ALLOWED FOR CERTAIN

12 OTHER DEPENDENTS.— 

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

14 under subsection (a) (after the application of 

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

16 each dependent of the taxpayer (as defined in 

17 section 152) other than a qualifying child de18 scribed in subsection (c) (after the application of 

19 paragraph (4)). 

20 ‘‘(B) EXCEPTION FOR CERTAIN NONCITI21 ZENS.—Subparagraph (A) shall not apply with 

22 respect to any individual who would not be a de23 pendent if subparagraph (A) of section 152(b)(3) 

24 were applied without regard to all that follows 

25 ‘resident of the United States’. 
46 

† HR 1 EAS 

1 ‘‘(6) MAXIMUM AMOUNT OF REFUNDABLE CRED2 IT.— 

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

4 shall be applied without regard to paragraphs 

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

6 ‘‘(B) ADJUSTMENT FOR INFLATION.—In the 

7 case of a taxable year beginning after 2017, sub8 section (d)(1)(A) shall be applied as if the $1,000 

9 amount in subsection (a) were increased (but not 

10 to exceed the amount under paragraph (2) of this 

11 subsection) by an amount equal to— 

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

13 ‘‘(ii) the cost-of-living adjustment de14 termined under section 1(f)(3) for the cal15 endar year in which the taxable year be16 gins. 

17 Any increase determined under the preceding 

18 sentence shall be rounded to the next highest 

19 multiple of $100. 

20 ‘‘(7) EARNED INCOME THRESHOLD FOR REFUND21 ABLE CREDIT.—Subsection (d)(1)(B)(i) shall be ap22 plied by substituting ‘$2,500’ for ‘$3,000’. 

23 ‘‘(8) SOCIAL SECURITY NUMBER REQUIRED.—No 

24 credit shall be allowed under subsection (d) to a tax25 payer with respect to any qualifying child unless the 
47 

† HR 1 EAS 

1 taxpayer includes the social security number of such 

2 child on the return of tax for the taxable year. For 

3 purposes of the preceding sentence, the term ‘social se4 curity number’ means a social security number issued 

5 to an individual by the Social Security Administra6 tion, but only if the social security number is issued 

7 to a citizen of the United States or is issued pursuant 

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

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

10 of the Social Security Act.’’. 

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

12 section shall apply to taxable years beginning after Decem13 ber 31, 2017. 

14 SEC. 11023. INCREASED LIMITATION FOR CERTAIN CHARI15 TABLE CONTRIBUTIONS. 

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

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

18 by inserting after subparagraph (F) the following new sub19 paragraph: 

20 ‘‘(G) INCREASED LIMITATION FOR CASH

21 CONTRIBUTIONS.— 

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

23 contribution of cash to an organization de24 scribed in subparagraph (A), the total 

25 amount of such contributions which may be 
48 

† HR 1 EAS 

1 taken into account under subsection (a) for 

2 any taxable year beginning after December 

3 31, 2017, and before January 1, 2026, shall 

4 not exceed 60 percent of the taxpayer’s con5 tribution base for such year. 

6 ‘‘(ii) CARRYOVER.—If the aggregate 

7 amount of contributions described in clause 

8 (i) exceeds the applicable limitation under 

9 clause (i) for any taxable year described in 

10 such clause, such excess shall be treated (in 

11 a manner consistent with the rules of sub12 section (d)(1)) as a charitable contribution 

13 to which clause (i) applies in each of the 5 

14 succeeding years in order of time. 

15 ‘‘(iii) COORDINATION WITH SUBPARA16 GRAPHS (A) AND (B).— 

17 ‘‘(I) IN GENERAL.—Contributions 

18 taken into account under this subpara19 graph shall not be taken into account 

20 under subparagraph (A). 

21 ‘‘(II) LIMITATION REDUCTION.— 

22 For each taxable year described in 

23 clause (i), and each taxable year to 

24 which any contribution under this sub25 paragraph is carried over under clause 
49 

† HR 1 EAS 

1 (ii), subparagraph (A) shall be applied 

2 by reducing (but not below zero) the 

3 contribution limitation allowed for the 

4 taxable year under such subparagraph 

5 by the aggregate contributions allowed 

6 under this subparagraph for such tax7 able year, and subparagraph (B) shall 

8 be applied by treating any reference to 

9 subparagraph (A) as a reference to 

10 both subparagraph (A) and this sub11 paragraph.’’. 

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

13 section shall apply to contributions in taxable years begin14 ning after December 31, 2017. 

15 SEC. 11024. INCREASED CONTRIBUTIONS TO ABLE AC16 COUNTS. 

17 (a) INCREASE IN LIMITATION FOR CONTRIBUTIONS

18 FROM COMPENSATION OF INDIVIDUALS WITH DISABIL19 ITIES.— 

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

21 amended to read as follows: 

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

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

24 to an ABLE account would result in aggregate 

25 contributions from all contributors to the ABLE 
50 

† HR 1 EAS 

1 account for the taxable year exceeding the sum 

2 of— 

3 ‘‘(i) the amount in effect under section 

4 2503(b) for the calendar year in which the 

5 taxable year begins, plus 

6 ‘‘(ii) in the case of any contribution by 

7 a designated beneficiary described in para8 graph (7) before January 1, 2026, the lesser 

9 of— 

10 ‘‘(I) compensation (as defined by 

11 section 219(f)(1)) includible in the des12 ignated beneficiary’s gross income for 

13 the taxable year, or 

14 ‘‘(II) an amount equal to the pov15 erty line for a one-person household, as 

16 determined for the calendar year pre17 ceding the calendar year in which the 

18 taxable year begins.’’. 

19 (2) RESPONSIBILITY FOR CONTRIBUTION LIMITA20 TION.—Paragraph (2) of section 529A(b) is amended 

21 by adding at the end the following: ‘‘A designated 

22 beneficiary (or a person acting on behalf of such bene23 ficiary) shall maintain adequate records for purposes 

24 of ensuring, and shall be responsible for ensuring, 
51 

† HR 1 EAS 

1 that the requirements of subparagraph (B)(ii) are 

2 met.’’ 

3 (3) ELIGIBLE DESIGNATED BENEFICIARY.—Sec4 tion 529A(b) is amended by adding at the end the fol5 lowing: 

6 ‘‘(7) SPECIAL RULES RELATED TO CONTRIBU7 TION LIMIT.—For purposes of paragraph (2)(B)(ii)— 

8 ‘‘(A) DESIGNATED BENEFICIARY.—A des9 ignated beneficiary described in this paragraph 

10 is an employee (including an employee within 

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

12 whom— 

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

14 taxable year to a defined contribution plan 

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

16 respect to which the requirements of section 

17 401(a) or 403(a) are met, 

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

19 taxable year to an annuity contract de20 scribed in section 403(b), and 

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

22 taxable year to an eligible deferred com23 pensation plan described in section 457(b). 

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

25 line’ has the meaning given such term by section 
52 

† HR 1 EAS 

1 673 of the Community Services Block Grant Act 

2 (42 U.S.C. 9902).’’. 

3 (b) ALLOWANCE OF SAVER’S CREDIT FOR ABLE CON4 TRIBUTIONS BY ACCOUNT HOLDER.—Section 25B(d)(1) is 

5 amended by striking ‘‘and’’ at the end of subparagraph 

6 (B)(ii), by striking the period at the end of subparagraph 

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

8 following: 

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

11 ABLE account (within the meaning of section 

12 529A) of which such individual is the designated 

13 beneficiary.’’. 

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

15 section shall apply to taxable years beginning after the date 

16 of the enactment of this Act. 

17 SEC. 11025. ROLLOVERS TO ABLE PROGRAMS FROM 529 

18 PROGRAMS. 

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

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

21 by striking the period at the end of subclause (II) and in22 serting ‘‘, or’’, and by adding at the end the following: 

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

24 an ABLE account (as defined in sec25 tion 529A(e)(6)) of the designated bene-
53 

† HR 1 EAS 

1 ficiary or a member of the family of 

2 the designated beneficiary. 

3 Subclause (III) shall not apply to so much 

4 of a distribution which, when added to all 

5 other contributions made to the ABLE ac6 count for the taxable year, exceeds the limi7 tation under section 529A(b)(2)(B)(i).’’. 

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

9 section shall apply to distributions after the date of the en10 actment of this Act. 

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

14 (a) IN GENERAL.—For purposes of the following provi15 sions of the Internal Revenue Code of 1986, with respect 

16 to the applicable period, a qualified hazardous duty area 

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

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

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

20 where deceased spouse was in missing status). 

21 (2) Section 112 (relating to the exclusion of cer22 tain combat pay of members of the Armed Forces). 

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

24 members of Armed Forces on death). 
54 

† HR 1 EAS 

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

2 Armed Forces dying in combat zone or by reason of 

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

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

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

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

7 phone service originating from a combat zone from 

8 members of the Armed Forces). 

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

10 where individual is in missing status). 

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

12 certain acts postponed by reason of service in combat 

13 zone). 

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

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

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

18 Forces of the United States is entitled to special pay under 

19 section 310 of title 37, United States Code (relating to spe20 cial pay; duty subject to hostile fire or imminent danger), 

21 for services performed in such location. Such term includes 

22 such location only during the period such entitlement is in 

23 effect. 

24 (c) APPLICABLE PERIOD.— 
55 

† HR 1 EAS 

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

3 (A) the portion of the first taxable year end4 ing after June 9, 2015, which begins on such 

5 date, and 

6 (B) any subsequent taxable year beginning 

7 before January 1, 2026. 

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

9 (a)(5), the applicable period is— 

10 (A) the portion of the first taxable year end11 ing after the date of the enactment of this Act 

12 which begins on such date, and 

13 (B) any subsequent taxable year beginning 

14 before January 1, 2026. 

15 (d) EFFECTIVE DATE.— 

16 (1) IN GENERAL.—Except as provided in para17 graph (2), the provisions of this section shall take ef18 fect on June 9, 2015. 

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

20 apply to remuneration paid after the date of the en21 actment of this Act. 
56 

† HR 1 EAS 

1 SEC. 11027. EXTENSION OF WAIVER OF LIMITATIONS WITH 

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

4 INCARCERATED INDIVIDUALS. 

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

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

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

8 year’’. 

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

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

11 Act. 

12 SEC. 11028. TEMPORARY REDUCTION IN MEDICAL EXPENSE 

13 DEDUCTION FLOOR. 

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

15 amended to read as follows: 

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

17 the case of any taxable year— 

18 ‘‘(1) beginning after December 31, 2012, and 

19 ending before January 1, 2017, in the case of a tax20 payer if such taxpayer or such taxpayer’s spouse has 

21 attained age 65 before the close of such taxable year, 

22 and 

23 ‘‘(2) beginning after December 31, 2016, and 

24 ending before January 1, 2019, in the case of any 

25 taxpayer, 
57 

† HR 1 EAS 

1 subsection (a) shall be applied with respect to a taxpayer 

2 by substituting ‘7.5 percent’ for ‘10 percent’.’’. 

3 (b) MINIMUM TAX PREFERENCE NOT TO APPLY.—Sec4 tion 56(b)(1)(B) is amended by adding at the end the fol5 lowing new sentence:‘‘This subparagraph shall not apply to 

6 taxable years beginning after December 31, 2016, and end7 ing before January 1, 2019’’. 

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

9 section shall apply to taxable years beginning after Decem10 ber 31, 2016. 

11 SEC. 11029. RELIEF FOR 2016 DISASTER AREAS. 

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

13 term ‘‘2016 disaster area’’ means any area with respect to 

14 which a major disaster has been declared by the President 

15 under section 401 of the Robert T. Stafford Disaster Relief 

16 and Emergency Assistance Act during calendar year 2016. 

17 (b) SPECIAL RULES FOR USE OF RETIREMENT FUNDS

18 WITH RESPECT TO AREAS DAMAGED BY 2016 DISAS19 TERS.— 

20 (1) TAX-FAVORED WITHDRAWALS FROM RETIRE21 MENT PLANS.— 

22 (A) IN GENERAL.—Section 72(t) of the In23 ternal Revenue Code of 1986 shall not apply to 

24 any qualified 2016 disaster distribution. 

25 (B) AGGREGATE DOLLAR LIMITATION.— 
58 

† HR 1 EAS 

1 (i) IN GENERAL.—For purposes of this 

2 subsection, the aggregate amount of dis3 tributions received by an individual which 

4 may be treated as qualified 2016 disaster 

5 distributions for any taxable year shall not 

6 exceed the excess (if any) of— 

7 (I) $100,000, over 

8 (II) the aggregate amounts treated 

9 as qualified 2016 disaster distributions 

10 received by such individual for all 

11 prior taxable years. 

12 (ii) TREATMENT OF PLAN DISTRIBU13 TIONS.—If a distribution to an individual 

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

15 qualified 2016 disaster distribution, a plan 

16 shall not be treated as violating any re17 quirement of this title merely because the 

18 plan treats such distribution as a qualified 

19 2016 disaster distribution, unless the aggre20 gate amount of such distributions from all 

21 plans maintained by the employer (and any 

22 member of any controlled group which in23 cludes the employer) to such individual ex24 ceeds $100,000. 
59 

† HR 1 EAS 

1 (iii) CONTROLLED GROUP.—For pur2 poses of clause (ii), the term ‘‘controlled 

3 group’’ means any group treated as a single 

4 employer under subsection (b), (c), (m), or 

5 (o) of section 414 of the Internal Revenue 

6 Code of 1986. 

7 (C) AMOUNT DISTRIBUTED MAY BE RE8 PAID.— 

9 (i) IN GENERAL.—Any individual who 

10 receives a qualified 2016 disaster distribu11 tion may, at any time during the 3-year 

12 period beginning on the day after the date 

13 on which such distribution was received, 

14 make one or more contributions in an ag15 gregate amount not to exceed the amount of 

16 such distribution to an eligible retirement 

17 plan of which such individual is a bene18 ficiary and to which a rollover contribution 

19 of such distribution could be made under 

20 section 402(c), 403(a)(4), 403(b)(8), 

21 408(d)(3), or 457(e)(16) of the Internal Rev22 enue Code of 1986, as the case may be. 

23 (ii) TREATMENT OF REPAYMENTS OF

24 DISTRIBUTIONS FROM ELIGIBLE RETIRE25 MENT PLANS OTHER THAN IRAS.—For pur-
60 

† HR 1 EAS 

1 poses of the Internal Revenue Code of 1986, 

2 if a contribution is made pursuant to clause 

3 (i) with respect to a qualified 2016 disaster 

4 distribution from an eligible retirement 

5 plan other than an individual retirement 

6 plan, then the taxpayer shall, to the extent 

7 of the amount of the contribution, be treated 

8 as having received the qualified 2016 dis9 aster distribution in an eligible rollover dis10 tribution (as defined in section 402(c)(4) of 

11 the Internal Revenue Code of 1986) and as 

12 having transferred the amount to the eligi13 ble retirement plan in a direct trustee to 

14 trustee transfer within 60 days of the dis15 tribution. 

16 (iii) TREATMENT OF REPAYMENTS FOR

17 DISTRIBUTIONS FROM IRAS.—For purposes 

18 of the Internal Revenue Code of 1986, if a 

19 contribution is made pursuant to clause (i) 

20 with respect to a qualified 2016 disaster 

21 distribution from an individual retirement 

22 plan (as defined by section 7701(a)(37) of 

23 the Internal Revenue Code of 1986), then, to 

24 the extent of the amount of the contribution, 

25 the qualified 2016 disaster distribution 
61 

† HR 1 EAS 

1 shall be treated as a distribution described 

2 in section 408(d)(3) of such Code and as 

3 having been transferred to the eligible re4 tirement plan in a direct trustee to trustee 

5 transfer within 60 days of the distribution. 

6 (D) DEFINITIONS.—For purposes of this 

7 paragraph— 

8 (i) QUALIFIED 2016 DISASTER DIS9 TRIBUTION.—Except as provided in sub10 paragraph (B), the term ‘‘qualified 2016 

11 disaster distribution’’ means any distribu12 tion from an eligible retirement plan made 

13 on or after January 1, 2016, and before 

14 January 1, 2018, to an individual whose 

15 principal place of abode at any time during 

16 calendar year 2016 was located in a dis17 aster area described in subsection (a) and 

18 who has sustained an economic loss by rea19 son of the events giving rise to the Presi20 dential declaration described in subsection 

21 (a) which was applicable to such area. 

22 (ii) ELIGIBLE RETIREMENT PLAN.— 

23 The term ‘‘eligible retirement plan’’ shall 

24 have the meaning given such term by sec-
62 

† HR 1 EAS 

1 tion 402(c)(8)(B) of the Internal Revenue 

2 Code of 1986. 

3 (E) INCOME INCLUSION SPREAD OVER 3- 

4 YEAR PERIOD.— 

5 (i) IN GENERAL.—In the case of any 

6 qualified 2016 disaster distribution, unless 

7 the taxpayer elects not to have this subpara8 graph apply for any taxable year, any 

9 amount required to be included in gross in10 come for such taxable year shall be so in11 cluded ratably over the 3-taxable-year pe12 riod beginning with such taxable year. 

13 (ii) SPECIAL RULE.—For purposes of 

14 clause (i), rules similar to the rules of sub15 paragraph (E) of section 408A(d)(3) of the 

16 Internal Revenue Code of 1986 shall apply. 

17 (F) SPECIAL RULES.— 

18 (i) EXEMPTION OF DISTRIBUTIONS

19 FROM TRUSTEE TO TRUSTEE TRANSFER AND

20 WITHHOLDING RULES.—For purposes of sec21 tions 401(a)(31), 402(f), and 3405 of the 

22 Internal Revenue Code of 1986, qualified 

23 2016 disaster distribution shall not be treat24 ed as eligible rollover distributions. 
63 

† HR 1 EAS 

1 (ii) QUALIFIED 2016 DISASTER DIS2 TRIBUTIONS TREATED AS MEETING PLAN

3 DISTRIBUTION REQUIREMENTS.—For pur4 poses of the Internal Revenue Code of 1986, 

5 a qualified 2016 disaster distribution shall 

6 be treated as meeting the requirements of 

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

8 403(b)(11), and 457(d)(1)(A) of the Internal 

9 Revenue Code of 1986. 

10 (2) PROVISIONS RELATING TO PLAN AMEND11 MENTS.— 

12 (A) IN GENERAL.—If this paragraph ap13 plies to any amendment to any plan or annuity 

14 contract, such plan or contract shall be treated 

15 as being operated in accordance with the terms 

16 of the plan during the period described in sub17 paragraph (B)(ii)(I). 

18 (B) AMENDMENTS TO WHICH SUBSECTION

19 APPLIES.— 

20 (i) IN GENERAL.—This paragraph 

21 shall apply to any amendment to any plan 

22 or annuity contract which is made— 

23 (I) pursuant to any provision of 

24 this section, or pursuant to any regula-
64 

† HR 1 EAS 

1 tion under any provision of this sec2 tion; and 

3 (II) on or before the last day of 

4 the first plan year beginning on or 

5 after January 1, 2018, or such later 

6 date as the Secretary prescribes. 

7 In the case of a governmental plan (as de8 fined in section 414(d) of the Internal Rev9 enue Code of 1986), subclause (II) shall be 

10 applied by substituting the date which is 2 

11 years after the date otherwise applied under 

12 subclause (II). 

13 (ii) CONDITIONS.—This paragraph 

14 shall not apply to any amendment unless— 

15 (I) during the period— 

16 (aa) beginning on the date 

17 that this section or the regulation 

18 described in clause (i)(I) takes ef19 fect (or in the case of a plan or 

20 contract amendment not required 

21 by this section or such regulation, 

22 the effective date specified by the 

23 plan); and 

24 (bb) ending on the date de25 scribed in clause (i)(II) (or, if 
65 

† HR 1 EAS 

1 earlier, the date the plan or con2 tract amendment is adopted), 

3 the plan or contract is operated as if 

4 such plan or contract amendment were 

5 in effect; and 

6 (II) such plan or contract amend7 ment applies retroactively for such pe8 riod. 

9 (c) SPECIAL RULES FOR PERSONAL CASUALTY LOSSES

10 RELATED TO 2016 MAJOR DISASTER.— 

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

12 disaster loss for any taxable year beginning after De13 cember 31, 2017, and before January 1, 2026— 

14 (A) the amount determined under section 

15 165(h)(2)(A)(ii) of the Internal Revenue Code of 

16 1986 shall be equal to the sum of— 

17 (i) such net disaster loss, and 

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

19 the matter preceding clause (i) of section 

20 165(h)(2)(A) of such Code (reduced by the 

21 amount in clause (i) of this subparagraph) 

22 as exceeds 10 percent of the adjusted gross 

23 income of the individual, 

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

25 applied by substituting ‘‘$500’’ for ‘‘$500 ($100 
66 

† HR 1 EAS 

1 for taxable years beginning after December 31, 

2 2009)’’, 

3 (C) the standard deduction determined 

4 under section 63(c) of such Code shall be in5 creased by the net disaster loss, and 

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

7 not apply to so much of the standard deduction 

8 as is attributable to the increase under subpara9 graph (C) of this paragraph. 

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

11 subsection, the term ‘‘net disaster loss’’ means the ex12 cess of qualified disaster-related personal casualty 

13 losses over personal casualty gains (as defined in sec14 tion 165(h)(3)(A) of the Internal Revenue Code of 

15 1986). 

16 (3) QUALIFIED DISASTER-RELATED PERSONAL

17 CASUALTY LOSSES.—For purposes of this paragraph, 

18 the term ‘‘qualified disaster-related personal casualty 

19 losses’’ means losses described in section 165(c)(3) of 

20 the Internal Revenue Code of 1986 which arise in a 

21 disaster area described in subsection (a) on or after 

22 January 1, 2016, and which are attributable to the 

23 events giving rise to the Presidential declaration de24 scribed in subsection (a) which was applicable to such 

25 area. 
67 

† HR 1 EAS 

1 PART IV—EDUCATION 

2 SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED 

3 ON ACCOUNT OF DEATH OR DISABILITY. 

4 (a) IN GENERAL.—Section 108(f) is amended by add5 ing at the end the following new paragraph: 

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

7 DISABILITY.— 

8 ‘‘(A) IN GENERAL.—In the case of an indi9 vidual, gross income for any taxable year begin10 ning after December 31, 2017, and before Janu11 ary 1, 2026, does not include any amount which 

12 (but for this subsection) would be includible in 

13 gross income for such taxable year by reasons of 

14 the discharge (in whole or in part) of any loan 

15 described in subparagraph (B) if such discharge 

16 was— 

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

18 of section 437 of the Higher Education Act 

19 of 1965 or the parallel benefit under part D 

20 of title IV of such Act (relating to the re21 payment of loan liability), 

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

23 of such Act, or 

24 ‘‘(iii) otherwise discharged on account 

25 of the death or total and permanent dis26 ability of the student. 
68 

† HR 1 EAS 

1 ‘‘(B) LOANS DESCRIBED.—A loan is de2 scribed in this subparagraph if such loan is— 

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

4 paragraph (2)), or 

5 ‘‘(ii) a private education loan (as de6 fined in section 140(7) of the Consumer 

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

8 1650(7))).’’. 

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

10 section shall apply to discharges of indebtedness after De11 cember 31, 2017. 

12 SEC. 11032. INCREASE IN DEDUCTION FOR TEACHER EX13 PENSES. 

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

15 62(a)(2) is amended by striking ‘‘$250’’ and inserting 

16 ‘‘$250 ($500 in the case of taxable years beginning after 

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

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

19 section shall apply to taxable years beginning after Decem20 ber 31, 2017. 

21 SEC. 11033. 529 ACCOUNT FUNDING FOR ELEMENTARY AND 

22 SECONDARY EDUCATION. 

23 (a) IN GENERAL.— 

24 (1) IN GENERAL.—Section 529(c) is amended by 

25 adding at the end the following new paragraph: 
69 

† HR 1 EAS 

1 ‘‘(7) TREATMENT OF ELEMENTARY AND SEC2 ONDARY TUITION.—Any reference in this subsection to 

3 the term ‘qualified higher education expense’ shall in4 clude a reference to— 

5 ‘‘(A) expenses for tuition in connection with 

6 enrollment or attendance at an elementary or 

7 secondary public, private, or religious school, 

8 and 

9 ‘‘(B) expenses for— 

10 ‘‘(i) curriculum and curricular mate11 rials, 

12 ‘‘(ii) books or other instructional mate13 rials, 

14 ‘‘(iii) online educational materials, 

15 ‘‘(iv) tuition for tutoring or edu16 cational classes outside of the home (but 

17 only if the tutor or instructor is not related 

18 to the student), 

19 ‘‘(v) dual enrollment in an institution 

20 of higher education, and 

21 ‘‘(vi) educational therapies for students 

22 with disabilities, 

23 in connection with a homeschool (whether treated 

24 as a homeschool or a private school for purposes 

25 of applicable State law).’’. 
70 

† HR 1 EAS 

1 (2) LIMITATION.—Section 529(e)(3)(A) is 

2 amended by adding at the end the following: ‘‘The 

3 amount of cash distributions from all qualified tui4 tion programs described in subsection (b)(1)(A)(ii) 

5 with respect to a beneficiary during any taxable year 

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

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

8 during the taxable year.’’. 

9 (b) EFFECTIVE DATE.—The amendments made by sub10 section (a) shall apply to contributions made after Decem11 ber 31, 2017. 

12 (c) OFFSET.— 

13 (1) MODIFICATION OF RULES RELATING TO

14 HARDSHIP WITHDRAWALS FROM CASH OR DEFERRED

15 ARRANGEMENTS.—Section 401(k) is amended by add16 ing at the end the following: 

17 ‘‘(14) SPECIAL RULES RELATING TO HARDSHIP

18 WITHDRAWALS.—For purposes of paragraph 

19 (2)(B)(i)(IV)— 

20 ‘‘(A) AMOUNTS WHICH MAY BE WITH21 DRAWN.—The following amounts may be distrib22 uted upon hardship of the employee: 

23 ‘‘(i) Contributions to a profit-sharing 

24 or stock bonus plan to which section 

25 402(e)(3) applies. 
71 

† HR 1 EAS 

1 ‘‘(ii) Qualified nonelective contribu2 tions (as defined in subsection (m)(4)(C)). 

3 ‘‘(iii) Qualified matching contributions 

4 described in paragraph (3)(D)(ii)(I). 

5 ‘‘(iv) Earnings on any contributions 

6 described in clause (i), (ii), or (iii). 

7 ‘‘(B) NO REQUIREMENT TO TAKE AVAIL8 ABLE LOAN.—A distribution shall not be treated 

9 as failing to be made upon the hardship of an 

10 employee solely because the employee does not 

11 take any available loan under the plan.’’.’’. 

12 (2) CONFORMING AMENDMENT.—Section 

13 401(k)(2)(B)(i)(IV) is amended to read as follows: 

14 ‘‘(IV) subject to the provisions of 

15 paragraph (14), upon hardship of the 

16 employee, or’’.’’. 

17 (3) EFFECTIVE DATE.—The amendments made 

18 by this subsection shall apply to plan years beginning 

19 after December 31, 2017. 

20 PART V—DEDUCTIONS AND EXCLUSIONS 

21 SEC. 11041. SUSPENSION OF DEDUCTION FOR PERSONAL 

22 EXEMPTIONS. 

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

24 amended— 
72 

† HR 1 EAS 

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

2 and inserting ‘‘Except as provided in paragraph (5), 

3 in the case of’’, and 

4 (2) by adding at the end the following new para5 graph: 

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

7 THROUGH 2025.—In the case of a taxable year begin8 ning after December 31, 2017, and before January 1, 

9 2026— 

10 ‘‘(A) EXEMPTION AMOUNT.—The term ‘ex11 emption amount’ means zero. 

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

13 other provision of this title, the reduction of the 

14 exemption amount to zero under subparagraph 

15 (A) shall not be taken into account in deter16 mining whether a deduction is allowed or allow17 able, or whether a taxpayer is entitled to a de18 duction, under this section.’’. 

19 (b) APPLICATION TO ESTATES AND TRUSTS.—Section 

20 642(b)(2)(C) is amended by adding at the end the following 

21 new clause: 

22 ‘‘(iii) YEARS WHEN PERSONAL EXEMP23 TION AMOUNT IS ZERO.— 

24 ‘‘(I) IN GENERAL.—In the case of 

25 any taxable year in which the exemp-
73 

† HR 1 EAS 

1 tion amount under section 151(d) is 

2 zero, clause (i) shall be applied by sub3 stituting ‘$4,150’ for ‘the exemption 

4 amount under section 151(d)’. 

5 ‘‘(II) INFLATION ADJUSTMENT.— 

6 In the case of any calendar year begin7 ning after 2018, the $4,150 amount in 

8 subparagraph (A) shall be increased by 

9 an amount equal to— 

10 ‘‘(aa) such dollar amount, 

11 multiplied by 

12 ‘‘(bb) the cost-of-living ad13 justment determined under section 

14 1(f)(3) for the calendar year in 

15 which the taxable year begins, de16 termined by substituting ‘2017’ 

17 for ‘2016’ in subparagraph (A)(ii) 

18 thereof. 

19 If any increase determined under the 

20 preceding sentence is not a multiple of 

21 $100, such increase shall be rounded to 

22 the next lowest multiple of $100.’’. 

23 (c) EXCEPTION FOR WAGE WITHHOLDING RULES.— 

24 Section 3402(a) is amended by adding at the end the fol25 lowing new paragraph: 
74 

† HR 1 EAS 

1 ‘‘(3) YEARS WHEN PERSONAL EXEMPTION

2 AMOUNT IS ZERO.— 

3 ‘‘(A) IN GENERAL.—In the case of any tax4 able year in which the exemption amount under 

5 section 151(d) is zero, paragraph (2) shall be ap6 plied by substituting ‘$4,150’ for ‘the amount of 

7 one personal exemption provided in section 

8 151(b)’. 

9 ‘‘(B) INFLATION ADJUSTMENT.—In the case 

10 of any calendar year beginning after 2018, the 

11 $4,150 amount in subparagraph (A) shall be in12 creased by an amount equal to— 

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

14 ‘‘(ii) the cost-of-living adjustment de15 termined under section 1(f)(3) for the cal16 endar year in which the taxable year be17 gins, determined by substituting ‘2017’ for 

18 ‘2016’ in subparagraph (A)(ii) thereof. 

19 If any increase determined under the preceding 

20 sentence is not a multiple of $100, such increase 

21 shall be rounded to the next lowest multiple of 

22 $100.’’. 

23 (d) EXCEPTION FOR DETERMINING PROPERTY EX24 EMPT FROM LEVY.—Section 6334(d) is amended by adding 

25 at the end the following new paragraph: 
75 

† HR 1 EAS 

1 ‘‘(4) YEARS WHEN PERSONAL EXEMPTION

2 AMOUNT IS ZERO.— 

3 ‘‘(A) IN GENERAL.—In the case of any tax4 able year in which the exemption amount under 

5 section 151(d) is zero, paragraph (2) shall not 

6 apply and for purposes of paragraph (1) the 

7 term ‘exempt amount’ means an amount equal 

8 to— 

9 ‘‘(i) the sum of the amount determined 

10 under subparagraph (B) and the standard 

11 deduction, divided by 

12 ‘‘(ii) 52. 

13 ‘‘(B) AMOUNT DETERMINED.—For purposes 

14 of subparagraph (A), the amount determined 

15 under this subparagraph is $4,150 multiplied by 

16 the number of the taxpayer’s dependents for the 

17 taxable year in which the levy occurs. 

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

19 of any taxable year beginning after 2018, the 

20 $4,150 amount in subparagraph (B) shall be in21 creased by an amount equal to— 

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

23 ‘‘(ii) the cost-of-living adjustment de24 termined under section 1(f)(3) for the cal25 endar year in which the taxable year be-
76 

† HR 1 EAS 

1 gins, determined by substituting ‘2017’ for 

2 ‘2016’ in subparagraph (A)(ii) thereof. 

3 If any increase determined under the preceding 

4 sentence is not a multiple of $100, such increase 

5 shall be rounded to the next lowest multiple of 

6 $100. 

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

8 taxpayer submits to the Secretary a written and 

9 properly verified statement specifying the facts 

10 necessary to determine the proper amount under 

11 subparagraph (A), subparagraph (A) shall be ap12 plied as if the taxpayer were a married indi13 vidual filing a separate return with no depend14 ents.’’. 

15 (e) PERSONS REQUIRED TO MAKE RETURNS OF IN16 COME.—Section 6012 is amended by adding at the end the 

17 following new subsection: 

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

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

20 after December 31, 2017, and before January 1, 2026, sub21 section (a)(1) shall not apply, and every individual who 

22 has gross income for the taxable year shall be required to 

23 make returns with respect to income taxes under subtitle 

24 A, except that a return shall not be required of— 
77 

† HR 1 EAS 

1 ‘‘(1) an individual who is not married (deter2 mined by applying section 7703) and who has gross 

3 income for the taxable year which does not exceed the 

4 standard deduction applicable to such individual for 

5 such taxable year under section 63, or 

6 ‘‘(2) an individual entitled to make a joint re7 turn if— 

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

9 when combined with the gross income of such in10 dividual’s spouse, for the taxable year does not 

11 exceed the standard deduction which would be 

12 applicable to the taxpayer for such taxable year 

13 under section 63 if such individual and such in14 dividual’s spouse made a joint return, 

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

16 spouse have the same household as their home at 

17 the close of the taxable year, 

18 ‘‘(C) such individual’s spouse does not make 

19 a separate return, and 

20 ‘‘(D) neither such individual nor such indi21 vidual’s spouse is an individual described in sec22 tion 63(c)(5) who has income (other than earned 

23 income) in excess of the amount in effect under 

24 section 63(c)(5)(A).’’. 
78 

† HR 1 EAS 

1 (f) EFFECTIVE DATE.—The amendments made by this 

2 section shall apply to taxable years beginning after Decem3 ber 31, 2017. 

4 SEC. 11042. SUSPENSION OF DEDUCTION FOR STATE AND 

5 LOCAL, ETC. TAXES. 

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

7 amended by adding at the end the following new paragraph: 

8 ‘‘(6) SUSPENSION OF INDIVIDUAL DEDUCTIONS

9 FOR TAXABLE YEARS 2018 THROUGH 2025.—In the case 

10 of an individual and a taxable year beginning after 

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

12 ‘‘(A) foreign real property taxes (other than 

13 taxes which are paid or accrued in carrying on 

14 a trade or business or an activity described in 

15 section 212) shall not be taken into account 

16 under subsection (a)(1), 

17 ‘‘(B) the aggregate amount of taxes (other 

18 than taxes which are paid or accrued in car19 rying on a trade or business or an activity de20 scribed in section 212) taken into account under 

21 subsection (a)(1) for any taxable year shall not 

22 exceed $10,000 ($5,000 in the case of a married 

23 individual filing a separate return), 

24 ‘‘(C) subsection (a)(2) shall only apply to 

25 taxes which are paid or accrued in carrying on 
79 

† HR 1 EAS 

1 a trade or business or an activity described in 

2 section 212, 

3 ‘‘(D) subsection (a)(3) shall not apply to 

4 State and local taxes, and 

5 ‘‘(E) paragraph (5) shall not apply.’’. 

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

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

9 SEC. 11043. SUSPENSION OF DEDUCTION FOR HOME EQ10 UITY INTEREST. 

11 (a) IN GENERAL.—Section 163(h)(3)(A)(ii) is amend12 ed by inserting ‘‘in the case of taxable years beginning be13 fore January 1, 2018, or after December 31, 2025,’’ before 

14 ‘‘home equity indebtedness’’. 

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

16 section shall apply to taxable years ending after December 

17 31, 2017. 

18 SEC. 11044. MODIFICATION OF DEDUCTION FOR PERSONAL 

19 CASUALTY LOSSES. 

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

21 amended by adding at the end the following new paragraph: 

22 ‘‘(5) LIMITATION FOR TAXABLE YEARS 2018

23 THROUGH 2025.—In the case of an individual, any 

24 loss described in subsection (c)(3) which (but for this 

25 paragraph) would be deductible in a taxable year be-
80 

† HR 1 EAS 

1 ginning after December 31, 2017, and before January 

2 1, 2026, shall be allowed only to the extent it is at3 tributable to a Federally declared disaster (as defined 

4 in subsection (i)(5)). The preceding sentence shall not 

5 apply to any deduction under section 172 which is 

6 carried to such a taxable year from a taxable year be7 ginning before January 1, 2018.’’. 

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

9 section shall apply to losses incurred in taxable years begin10 ning after December 31, 2017. 

11 SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED 

12 DEDUCTIONS. 

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

14 at the end the following new subsection: 

15 ‘‘(g) SUSPENSION FOR TAXABLE YEARS 2018 

16 THROUGH 2025.—Notwithstanding subsection (a), no mis17 cellaneous itemized deduction shall be allowed for any tax18 able year beginning after December 31, 2017, and before 

19 January 1, 2026.’’. 

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

21 section shall apply to taxable years beginning after Decem22 ber 31, 2017. 
81 

† HR 1 EAS 

1 SEC. 11046. SUSPENSION OF OVERALL LIMITATION ON 

2 ITEMIZED DEDUCTIONS. 

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

4 at the end the following new subsection: 

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

6 apply to any taxable year beginning after December 31, 

7 2017, and before January 1, 2026.’’. 

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

9 section shall apply to taxable years beginning after Decem10 ber 31, 2017. 

11 SEC. 11047. MODIFICATION OF EXCLUSION OF GAIN FROM 

12 SALE OF PRINCIPAL RESIDENCE. 

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

14 at the end the following new subsection: 

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

16 TAXABLE YEARS 2018 THROUGH 2025.— 

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

18 with respect to sales or exchanges after December 31, 

19 2017, and before January 1, 2026— 

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

21 each place it appears in subsections (a), 

22 (b)(5)(C)(ii)(I), and (c)(1)(B)(i)(I) and para23 graphs (7), (9), (10), and (12) of subsection (d), 

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

25 years’ each place it appears in subsections (a), 
82 

† HR 1 EAS 

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

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

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

4 in subsection (b)(3). 

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

6 Paragraph (1) shall not apply to any sale or ex7 change with respect to which there was a written 

8 binding contract in effect before January 1, 2018, and 

9 at all times thereafter before the sale or exchange.’’. 

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

11 section shall apply to sales and exchanges after December 

12 31, 2017. 

13 SEC. 11048. SUSPENSION OF EXCLUSION FOR QUALIFIED BI14 CYCLE COMMUTING REIMBURSEMENT. 

15 (a) IN GENERAL.—Section 132(f) is amended by add16 ing at the end the following new paragraph: 

17 ‘‘(8) SUSPENSION OF QUALIFIED BICYCLE COM18 MUTING REIMBURSEMENT EXCLUSION.—Paragraph 

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

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

21 2026.’’. 

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

23 section shall apply to taxable years beginning after Decem24 ber 31, 2017. 
83 

† HR 1 EAS 

1 SEC. 11049. SUSPENSION OF EXCLUSION FOR QUALIFIED 

2 MOVING EXPENSE REIMBURSEMENT. 

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

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

5 term’’ and inserting ‘‘For purposes of this section— 

6 ‘‘(1) IN GENERAL.—The term’’, and 

7 (2) by adding at the end the following new para8 graph: 

9 ‘‘(2) SUSPENSION FOR TAXABLE YEARS 2018

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

11 the Armed Forces of the United States on active duty 

12 who moves pursuant to a military order and incident 

13 to a permanent change of station, subsection (a)(6) 

14 shall not apply to any taxable year beginning after 

15 December 31, 2017, and before January 1, 2026.’’. 

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

17 section shall apply to taxable years beginning after Decem18 ber 31, 2017. 

19 SEC. 11050. SUSPENSION OF DEDUCTION FOR MOVING EX20 PENSES. 

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

22 at the end the following new subsection: 

23 ‘‘(k) SUSPENSION OF DEDUCTION FOR TAXABLE

24 YEARS 2018 THROUGH 2025.—Except in the case of an in25 dividual to whom subsection (g) applies, this section shall 
84 

† HR 1 EAS 

1 not apply to any taxable year beginning after December 

2 31, 2017, and before January 1, 2026.’’. 

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

4 section shall apply to taxable years beginning after Decem5 ber 31, 2017. 

6 SEC. 11051. LIMITATION ON WAGERING LOSSES. 

7 (a) IN GENERAL.—Section 165(d) is amended by add8 ing at the end the following: ‘‘For purposes of the preceding 

9 sentence, in the case of taxable years beginning after Decem10 ber 31, 2017, and before January 1, 2026, the term ‘losses 

11 from wagering transactions’ includes any deduction other12 wise allowable under this chapter incurred in carrying on 

13 any wagering transaction.’’. 

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

15 section shall apply to taxable years beginning after Decem16 ber 31, 2017. 

17 PART VI—INCREASE IN ESTATE AND GIFT TAX 

18 EXEMPTION 

19 SEC. 11061. INCREASE IN ESTATE AND GIFT TAX EXEMP20 TION. 

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

22 adding at the end the following new subparagraph: 

23 ‘‘(C) INCREASE IN BASIC EXCLUSION

24 AMOUNT.—In the case of estates of decedents 

25 dying or gifts made after December 31, 2017, 
85 

† HR 1 EAS 

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

2 shall be applied by substituting ‘$10,000,000’ for 

3 ‘$5,000,000’.’’. 

4 (b) CONFORMING AMENDMENT.—Subsection (g) of sec5 tion 2001 is amended to read as follows: 

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

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

8 REFLECT DIFFERENT TAX RATES.—For purposes of 

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

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

11 the decedent’s death shall, in lieu of the rates of tax 

12 in effect at the time of such gifts, be used both to com13 pute— 

14 ‘‘(A) the tax imposed by chapter 12 with re15 spect to such gifts, and 

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

17 under section 2505, including in computing— 

18 ‘‘(i) the applicable credit amount 

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

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

21 as a credit for all preceding periods under 

22 section 2505(a)(2). 

23 ‘‘(2) MODIFICATIONS TO ESTATE TAX PAYABLE

24 TO REFLECT DIFFERENT BASIC EXCLUSION

25 AMOUNTS.—The Secretary shall prescribe such regula-
86 

† HR 1 EAS 

1 tions as may be necessary or appropriate to carry out 

2 this section with respect to any difference between— 

3 ‘‘(A) the basic exclusion amount under sec4 tion 2010(c)(3) applicable at the time of the de5 cedent’s death, and 

6 ‘‘(B) the basic exclusion amount under such 

7 section applicable with respect to any gifts made 

8 by the decedent.’’. 

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

10 section shall apply to estates of decedents dying and gifts 

11 made after December 31, 2017. 

12 PART VII—TAXPAYER RIGHTS AND TAX 

13 ADMINISTRATION 

14 SEC. 11071. EXTENSION OF TIME LIMIT FOR CONTESTING 

15 IRS LEVY. 

16 (a) EXTENSION OF TIME FOR RETURN OF PROPERTY

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

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

19 (b) PERIOD OF LIMITATION ON SUITS.—Subsection (c) 

20 of section 6532 is amended— 

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

22 and inserting ‘‘2 years’’, and 

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

24 inserting ‘‘2-year’’. 
87 

† HR 1 EAS 

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

2 section shall apply to— 

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

4 of this Act, and 

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

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

7 of the Internal Revenue Code of 1986 (without regard 

8 to this section) as of such date. 

9 SEC. 11072. MODIFICATION OF USER FEE REQUIREMENTS 

10 FOR INSTALLMENT AGREEMENTS. 

11 (a) IN GENERAL.—Section 6159 is amended by redes12 ignating subsection (f) as subsection (g) and by inserting 

13 after subsection (e) the following new subsection: 

14 ‘‘(f) INSTALLMENT AGREEMENT FEES.— 

15 ‘‘(1) LIMITATION ON FEE AMOUNT.—The amount 

16 of any fee imposed on an installment agreement 

17 under this section may not exceed the amount of such 

18 fee as in effect on the date of the enactment of this 

19 subsection. 

20 ‘‘(2) WAIVER OR REIMBURSEMENT.—In the case 

21 of any taxpayer with an adjusted gross income, as de22 termined for the most recent year for which such in23 formation is available, which does not exceed 250 per24 cent of the applicable poverty level (as determined by 

25 the Secretary)— 
88 

† HR 1 EAS 

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

2 payments under the installment agreement by 

3 electronic payment through a debit instrument, 

4 no fee shall be imposed on an installment agree5 ment under this section, and 

6 ‘‘(B) if the taxpayer is unable to make pay7 ments under the installment agreement by elec8 tronic payment through a debit instrument, the 

9 Secretary shall, upon completion of the install10 ment agreement, pay the taxpayer an amount 

11 equal to any such fees imposed.’’. 

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

13 section shall apply to agreements entered into on or after 

14 the date which is 60 days after the date of the enactment 

15 of this Act. 

16 SEC. 11073. ATTORNEYS’ FEES RELATING TO AWARDS TO 

17 WHISTLEBLOWERS. 

18 (a) IN GENERAL.—Paragraph (21) of section 62(a) is 

19 amended to read as follows: 

20 ‘‘(21) ATTORNEYS’ FEES RELATING TO AWARDS

21 TO WHISTLEBLOWERS.— 

22 ‘‘(A) IN GENERAL.—Any deduction allow23 able under this chapter for attorney fees and 

24 court costs paid by, or on behalf of, the taxpayer 

25 in connection with any award under— 
89 

† HR 1 EAS 

1 ‘‘(i) section 7623(b), or 

2 ‘‘(ii) any action brought under— 

3 ‘‘(I) section 21F of the Securities 

4 Exchange Act of 1934 (15 U.S.C. 78u– 

5 6), 

6 ‘‘(II) a State false claims act, in7 cluding a State false claims act with 

8 qui tam provisions, or 

9 ‘‘(III) section 23 of the Com10 modity Exchange Act (7 U.S.C. 26). 

11 ‘‘(B) MAY NOT EXCEED AWARD.—Subpara12 graph (A) shall not apply to any deduction in 

13 excess of the amount includible in the taxpayer’s 

14 gross income for the taxable year on account of 

15 such award.’’. 

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

17 section shall apply to taxable years beginning after Decem18 ber 31, 2017. 

19 SEC. 11074. CLARIFICATION OF WHISTLEBLOWER AWARDS. 

20 (a) DEFINITION OF PROCEEDS.— 

21 (1) IN GENERAL.—Section 7623 is amended by 

22 adding at the end the following new subsection: 

23 ‘‘(c) PROCEEDS.—For purposes of this section, the 

24 term ‘proceeds’ includes— 
90 

† HR 1 EAS 

1 ‘‘(1) penalties, interest, additions to tax, and ad2 ditional amounts provided under the internal revenue 

3 laws, and 

4 ‘‘(2) any proceeds arising from laws for which 

5 the Internal Revenue Service is authorized to admin6 ister, enforce, or investigate, including— 

7 ‘‘(A) criminal fines and civil forfeitures, 

8 and 

9 ‘‘(B) violations of reporting requirements.’’. 

10 (2) CONFORMING AMENDMENTS.—Paragraphs 

11 (1) and (2)(A) of section 7623(b) are each amended 

12 by striking ‘‘collected proceeds (including penalties, 

13 interest, additions to tax, and additional amounts) 

14 resulting from the action’’ and inserting ‘‘proceeds 

15 collected as a result of the action’’. 

16 (b) AMOUNT OF PROCEEDS DETERMINED WITHOUT

17 REGARD TO AVAILABILITY.—Paragraphs (1) and (2)(A) of 

18 section 7623(b) are each amended by inserting ‘‘(determined 

19 without regard to whether such proceeds are available to 

20 the Secretary)’’ after ‘‘in response to such action’’. 

21 (c) DISPUTED AMOUNT THRESHOLD.—Section 

22 7623(b)(5)(B) is amended by striking ‘‘tax, penalties, inter23 est, additions to tax, and additional amounts’’ and insert24 ing ‘‘proceeds’’. 
91 

† HR 1 EAS 

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

2 section shall apply to information provided before, on, or 

3 after the date of the enactment of this Act with respect to 

4 which a final determination for an award has not been 

5 made before such date of enactment. 

6 PART VIII—INDIVIDUAL MANDATE 

7 SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY 

8 PAYMENT FOR INDIVIDUALS FAILING TO 

9 MAINTAIN MINIMUM ESSENTIAL COVERAGE. 

10 (a) IN GENERAL.—Section 5000A(c) is amended— 

11 (1) in paragraph (2)(B)(iii), by striking ‘‘2.5 

12 percent’’ and inserting ‘‘Zero percent’’, and 

13 (2) in paragraph (3)— 

14 (A) by striking ‘‘$695’’ in subparagraph 

15 (A) and inserting ‘‘$0’’, and 

16 (B) by striking subparagraph (D). 

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

18 section shall apply to months beginning after December 31, 

19 2018. 

20 Subtitle B—Alternative Minimum 

21 Tax 

22 SEC. 12001. INCREASED EXEMPTION FOR INDIVIDUALS. 

23 (a) INCREASED EXEMPTION.—Section 55(d) is amend24 ed by adding at the end the following new paragraph: 
92 

† HR 1 EAS 

1 ‘‘(5) SPECIAL RULE FOR TAXABLE YEARS BEGIN2 NING AFTER 2017 AND BEFORE 2026.— 

3 ‘‘(A) IN GENERAL.—In the case of any tax4 able year beginning after December 31, 2017, 

5 and before January 1, 2026— 

6 ‘‘(i) paragraph (1) shall be applied— 

7 ‘‘(I) by substituting ‘$109,400’ for 

8 ‘$78,750’ in subparagraph (A), and 

9 ‘‘(II) by substituting ‘$70,300’ for 

10 ‘$50,600’ in subparagraph (B), and 

11 ‘‘(ii) paragraph (3) shall be applied— 

12 ‘‘(I) by substituting ‘$208,400’ for 

13 ‘$150,000’ in subparagraph (A), 

14 ‘‘(II) by substituting ‘$156,300’ 

15 for ‘$112,500’ in subparagraph (B), 

16 and 

17 ‘‘(III) in the case of a taxpayer 

18 described in paragraph (1)(D), without 

19 regard to the substitution under sub20 clause (I). 

21 ‘‘(B) INFLATION ADJUSTMENT.— 

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

23 taxable year beginning in a calendar year 

24 after 2018, the amounts described in clause 
93 

† HR 1 EAS 

1 (ii) shall each be increased by an amount 

2 equal to— 

3 ‘‘(I) such dollar amount, multi4 plied by 

5 ‘‘(II) the cost-of-living adjustment 

6 determined under section 1(f)(3) for 

7 the calendar year in which the taxable 

8 year begins, determined by substituting 

9 ‘calendar year 2017’ for ‘calendar year 

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

11 ‘‘(ii) AMOUNTS DESCRIBED.—The 

12 amounts described in this clause are the 

13 $109,400 amount in subparagraph 

14 (A)(i)(I), the $70,300 amount in subpara15 graph (A)(i)(II), the $208,400 amount in 

16 subparagraph (A)(ii)(I), and the $156,300 

17 amount in subparagraph (A)(ii)(II). 

18 ‘‘(iii) ROUNDING.—Any increased 

19 amount determined under clause (i) shall be 

20 rounded to the nearest multiple of $100.’’. 

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

22 section shall apply to taxable years beginning after Decem23 ber 31, 2017. 
94 

† HR 1 EAS 

1 Subtitle C—Business-related 

2 Provisions 

3 PART I—CORPORATE PROVISIONS 

4 SEC. 13001. 20-PERCENT CORPORATE TAX RATE. 

5 (a) IN GENERAL.—Subsection (b) of section 11 is 

6 amended to read as follows: 

7 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im8 posed by subsection (a) shall be 20 percent of taxable in9 come.’’. 

10 (b) CONFORMING AMENDMENTS.— 

11 (1) The following sections are each amended by 

12 striking ‘‘section 11(b)(1)’’ and inserting ‘‘section 

13 11(b)’’: 

14 (A) Section 280C(c)(3)(B)(ii)(II). 

15 (B) Paragraphs (2)(B) and (6)(A)(ii) of 

16 section 860E(e). 

17 (C) Section 7874(e)(1)(B). 

18 (2)(A) Part I of subchapter P of chapter 1 is 

19 amended by striking section 1201 (and by striking the 

20 item relating to such section in the table of sections 

21 for such part). 

22 (B) Section 12 is amended by striking para23 graphs (4) and (6), and by redesignating paragraph 

24 (5) as paragraph (4). 
95 

† HR 1 EAS 

1 (C) Section 453A(c)(3) is amended by striking 

2 ‘‘or 1201 (whichever is appropriate)’’. 

3 (D) Section 527(b) is amended— 

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

5 (ii) by striking all that precedes ‘‘is hereby 

6 imposed’’ and inserting: 

7 ‘‘(b) TAX IMPOSED.—A tax’’. 

8 (E) Sections 594(a) is amended by striking 

9 ‘‘taxes imposed by section 11 or 1201(a)’’ and insert10 ing ‘‘tax imposed by section 11’’. 

11 (F) Section 691(c)(4) is amended by striking 

12 ‘‘1201,’’. 

13 (G) Section 801(a) is amended— 

14 (i) by striking paragraph (2), and 

15 (ii) by striking all that precedes ‘‘is hereby 

16 imposed’’ and inserting: 

17 ‘‘(a) TAX IMPOSED.—A tax’’. 

18 (H) Section 831(e) is amended by striking para19 graph (1) and by redesignating paragraphs (2) and 

20 (3) as paragraphs (1) and (2), respectively. 

21 (I) Sections 832(c)(5) and 834(b)(1)(D) are each 

22 amended by striking ‘‘sec. 1201 and following,’’. 

23 (J) Section 852(b)(3)(A) is amended by striking 

24 ‘‘section 1201(a)’’ and inserting ‘‘section 11(b)’’. 

25 (K) Section 857(b)(3) is amended— 
96 

† HR 1 EAS 

1 (i) by striking subparagraph (A) and redes2 ignating subparagraphs (B) through (F) as sub3 paragraphs (A) through (E), respectively, 

4 (ii) in subparagraph (C), as so redesig5 nated— 

6 (I) by striking ‘‘subparagraph (A)(ii)’’ 

7 in clause (i) thereof and inserting ‘‘para8 graph (1)’’, 

9 (II) by striking ‘‘the tax imposed by 

10 subparagraph (A)(ii)’’ in clauses (ii) and 

11 (iv) thereof and inserting ‘‘the tax imposed 

12 by paragraph (1) on undistributed capital 

13 gain’’, 

14 (iii) in subparagraph (E), as so redesig15 nated, by striking ‘‘subparagraph (B) or (D)’’ 

16 and inserting ‘‘subparagraph (A) or (C)’’, and 

17 (iv) by adding at the end the following new 

18 subparagraph: 

19 ‘‘(F) UNDISTRIBUTED CAPITAL GAIN.—For 

20 purposes of this paragraph, the term ‘undistrib21 uted capital gain’ means the excess of the net 

22 capital gain over the deduction for dividends 

23 paid (as defined in section 561) determined with 

24 reference to capital gain dividends only.’’. 
97 

† HR 1 EAS 

1 (L) Section 882(a)(1) is amended by striking ‘‘, 

2 55, or 1201(a)’’ and inserting ‘‘or 55’’. 

3 (M) Section 904(b) is amended— 

4 (i) by striking ‘‘or 1201(a)’’ in paragraph 

5 (2)(C), 

6 (ii) by striking paragraph (3)(D) and in7 serting the following: 

8 ‘‘(D) CAPITAL GAIN RATE DIFFERENTIAL.— 

9 There is a capital gain rate differential for any 

10 year if subsection (h) of section 1 applies to such 

11 taxable year.’’, and 

12 (iii) by striking paragraph (3)(E) and in13 serting the following: 

14 ‘‘(E) RATE DIFFERENTIAL PORTION.—The 

15 rate differential portion of foreign source net 

16 capital gain, net capital gain, or the excess of 

17 net capital gain from sources within the United 

18 States over net capital gain, as the case may be, 

19 is the same proportion of such amount as— 

20 ‘‘(i) the excess of— 

21 ‘‘(I) the highest rate of tax set 

22 forth in subsection (a), (b), (c), (d), or 

23 (e) of section 1 (whichever applies), 

24 over 
98 

† HR 1 EAS 

1 ‘‘(II) the alternative rate of tax 

2 determined under section 1(h), bears to 

3 ‘‘(ii) that rate referred to in subclause 

4 (I).’’. 

5 (N) Section 1374(b) is amended by striking 

6 paragraph (4). 

7 (O) Section 1381(b) is amended by striking 

8 ‘‘taxes imposed by section 11 or 1201’’ and inserting 

9 ‘‘tax imposed by section 11’’. 

10 (P) Sections 6425(c)(1)(A) and 6655(g)(1)(A)(i) 

11 are each amended by striking ‘‘or 1201(a),’’. 

12 (Q) Section 7518(g)(6)(A) is amended by strik13 ing ‘‘or 1201(a)’’. 

14 (3)(A) Section 1445(e)(1) is amended— 

15 (i) by striking ‘‘35 percent’’ and inserting 

16 ‘‘the highest rate of tax in effect for the taxable 

17 year under section 11(b)’’, and 

18 (ii) by striking ‘‘of the gain’’ and inserting 

19 ‘‘multiplied by the gain’’. 

20 (B) Section 1445(e)(2) is amended by striking 

21 ‘‘35 percent of the amount’’ and inserting ‘‘the highest 

22 rate of tax in effect for the taxable year under section 

23 11(b) multiplied by the amount’’. 

24 (C) Section 1445(e)(6) is amended— 
99 

† HR 1 EAS 

1 (i) by striking ‘‘35 percent’’ and inserting 

2 ‘‘the highest rate of tax in effect for the taxable 

3 year under section 11(b)’’, and 

4 (ii) by striking ‘‘of the amount’’ and insert5 ing ‘‘multiplied by the amount’’. 

6 (D) Section 1446(b)(2)(B) is amended by strik7 ing ‘‘section 11(b)(1)’’ and inserting ‘‘section 11(b)’’. 

8 (4) Section 852(b)(1) is amended by striking the 

9 last sentence. 

10 (5)(A) Part I of subchapter B of chapter 5 is 

11 amended by striking section 1551 (and by striking the 

12 item relating to such section in the table of sections 

13 for such part). 

14 (B) Section 535(c)(5) is amended to read as fol15 lows: 

16 ‘‘(5) CROSS REFERENCE.—For limitation on 

17 credit provided in paragraph (2) or (3) in the case 

18 of certain controlled corporations, see section 1561.’’. 

19 (6)(A) Section 1561(a) is amended— 

20 (i) by striking paragraph (1) and redesig21 nating paragraphs (2) and (3) as paragraphs 

22 (1) and (2), respectively, 

23 (ii) by striking ‘‘amounts specified in para24 graph (1) and the amount specified in para-
100 

† HR 1 EAS 

1 graph (3)’’ and inserting ‘‘the amount specified 

2 in paragraph (2)’’, 

3 (iii) by striking ‘‘The amounts specified in 

4 paragraph (2)’’ and inserting ‘‘The amounts 

5 specified in paragraph (1)’’, 

6 (iv) by striking the third sentence in the 

7 flush language, and 

8 (v) by striking ‘‘under paragraph (3)’’ and 

9 inserting ‘‘under paragraph (2)’’. 

10 (B) The first sentence of section 1561(b) is 

11 amended to read as follows: ‘‘If a corporation has a 

12 short taxable year which does not include a December 

13 31 and is a component member of a controlled group 

14 of corporations with respect to such taxable year, then 

15 for purposes of this subtitle the amount to be used in 

16 computing the accumulated earnings credit under sec17 tion 535(c)(2) and (3) of such corporation for such 

18 taxable year shall be the amount specified in sub19 section (a)(1) divided by the number of corporations 

20 which are component members of such group on the 

21 last day of such taxable year.’’ 

22 (7) Section 7518(g)(6)(A) is amended— 

23 (A) by striking ‘‘With respect to the por24 tion’’ and inserting ‘‘In the case of a taxpayer 
101 

† HR 1 EAS 

1 other than a corporation, with respect to the por2 tion’’, and 

3 (B) by striking ‘‘(34 percent in the case of 

4 a corporation)’’. 

5 (c) EFFECTIVE DATE.— 

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

7 in this subsection, the amendments made by this sec8 tion shall apply to taxable years beginning after De9 cember 31, 2018. 

10 (2) WITHHOLDING.—The amendments made by 

11 subsection (b)(3) shall apply to distributions made 

12 after December 31, 2018. 

13 (3) CERTAIN TRANSFERS.—The amendments 

14 made by subsection (b)(6) shall apply to transfers 

15 made after December 31, 2018. 

16 (d) NORMALIZATION REQUIREMENTS.— 

17 (1) IN GENERAL.—A normalization method of 

18 accounting shall not be treated as being used with re19 spect to any public utility property for purposes of 

20 section 167 or 168 of the Internal Revenue Code of 

21 1986 if the taxpayer, in computing its cost of service 

22 for ratemaking purposes and reflecting operating re23 sults in its regulated books of account, reduces the ex24 cess tax reserve more rapidly or to a greater extent 
102 

† HR 1 EAS 

1 than such reserve would be reduced under the average 

2 rate assumption method. 

3 (2) ALTERNATIVE METHOD FOR CERTAIN TAX4 PAYERS.—If, as of the first day of the taxable year 

5 that includes the date of enactment of this Act— 

6 (A) the taxpayer was required by a regu7 latory agency to compute depreciation for public 

8 utility property on the basis of an average life 

9 or composite rate method, and 

10 (B) the taxpayer’s books and underlying 

11 records did not contain the vintage account data 

12 necessary to apply the average rate assumption 

13 method, 

14 the taxpayer will be treated as using a normalization 

15 method of accounting if, with respect to such jurisdic16 tion, the taxpayer uses the alternative method for 

17 public utility property that is subject to the regu18 latory authority of that jurisdiction. 

19 (3) DEFINITIONS.—For purposes of this sub20 section— 

21 (A) EXCESS TAX RESERVE.—The term ‘‘ex22 cess tax reserve’’ means the excess of— 

23 (i) the reserve for deferred taxes (as de24 scribed in section 168(i)(9)(A)(ii) of the In25 ternal Revenue Code of 1986) as determined 
103 

† HR 1 EAS 

1 under the Internal Revenue Code of 1986 as 

2 in effect on the day before the date of the en3 actment of this Act, over 

4 (ii) the amount which would be the 

5 balance in such reserve if the amount of 

6 such reserve were determined by assuming 

7 that the corporate rate reductions provided 

8 in this Act were in effect for all prior peri9 ods. 

10 (B) AVERAGE RATE ASSUMPTION METH11 OD.—The average rate assumption method is the 

12 method under which the excess in the reserve for 

13 deferred taxes is reduced over the remaining lives 

14 of the property as used in its regulated books of 

15 account which gave rise to the reserve for de16 ferred taxes. Under such method, if timing dif17 ferences for the property reverse, the amount of 

18 the adjustment to the reserve for the deferred 

19 taxes is calculated by multiplying— 

20 (i) the ratio of the aggregate deferred 

21 taxes for the property to the aggregate tim22 ing differences for the property as of the be23 ginning of the period in question, by 

24 (ii) the amount of the timing dif25 ferences which reverse during such period. 
104 

† HR 1 EAS 

1 (C) ALTERNATIVE METHOD.—The ‘‘alter2 native method’’ is the method in which the tax3 payer— 

4 (i) computes the excess tax reserve on 

5 all public utility property included in the 

6 plant account on the basis of the weighted 

7 average life or composite rate used to com8 pute depreciation for regulatory purposes, 

9 and 

10 (ii) reduces the excess tax reserve rat11 ably over the remaining regulatory life of 

12 the property. 

13 (4) TAX INCREASED FOR NORMALIZATION VIOLA14 TION.—If, for any taxable year ending after the date 

15 of the enactment of this Act, the taxpayer does not use 

16 a normalization method of accounting, the taxpayer’s 

17 tax for the taxable year shall be increased by the 

18 amount by which it reduces its excess tax reserve 

19 more rapidly than permitted under a normalization 

20 method of accounting. 

21 SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUC22 TIONS TO REFLECT LOWER CORPORATE IN23 COME TAX RATES. 

24 (a) DIVIDENDS RECEIVED BY CORPORATIONS.— 
105 

† HR 1 EAS 

1 (1) IN GENERAL.—Section 243(a)(1) is amended 

2 by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’. 

3 (2) DIVIDENDS FROM 20-PERCENT OWNED COR4 PORATIONS.—Section 243(c)(1) is amended— 

5 (A) by striking ‘‘80 percent’’ and inserting 

6 ‘‘65 percent’’, and 

7 (B) by striking ‘‘70 percent’’ and inserting 

8 ‘‘50 percent’’. 

9 (3) CONFORMING AMENDMENT.—The heading for 

10 section 243(c) is amended by striking ‘‘RETENTION OF

11 80-PERCENT DIVIDEND RECEIVED DEDUCTION’’ and 

12 inserting ‘‘INCREASED PERCENTAGE’’. 

13 (b) DIVIDENDS RECEIVED FROM FSC.—Section 

14 245(c)(1)(B) is amended— 

15 (1) by striking ‘‘70 percent’’ and inserting ‘‘50 

16 percent’’, and 

17 (2) by striking ‘‘80 percent’’ and inserting ‘‘65 

18 percent’’. 

19 (c) LIMITATION ON AGGREGATE AMOUNT OF DEDUC20 TIONS.—Section 246(b)(3) is amended— 

21 (1) by striking ‘‘80 percent’’ in subparagraph 

22 (A) and inserting ‘‘65 percent’’, and 

23 (2) by striking ‘‘70 percent’’ in subparagraph 

24 (B) and inserting ‘‘50 percent’’. 
106 

† HR 1 EAS 

1 (d) REDUCTION IN DEDUCTION WHERE PORTFOLIO

2 STOCK IS DEBT-FINANCED.—Section 246A(a)(1) is amend3 ed— 

4 (1) by striking ‘‘70 percent’’ and inserting ‘‘50 

5 percent’’, and 

6 (2) by striking ‘‘80 percent’’ and inserting ‘‘65 

7 percent’’. 

8 (e) INCOME FROM SOURCES WITHIN THE UNITED

9 STATES.—Section 861(a)(2) is amended— 

10 (1) by striking ‘‘100/70th’’ and inserting ‘‘100/ 

11 50th’’ in subparagraph (B), and 

12 (2) in the flush sentence at the end— 

13 (A) by striking ‘‘100/80th’’ and inserting 

14 ‘‘100/65th’’, and 

15 (B) by striking ‘‘100/70th’’ and inserting 

16 ‘‘100/50th’’. 

17 (f) EFFECTIVE DATE.—The amendments made by this 

18 section shall apply to taxable years beginning after Decem19 ber 31, 2018. 

20 PART II—SMALL BUSINESS REFORMS 

21 SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DE22 PRECIABLE BUSINESS ASSETS. 

23 (a) INCREASE IN LIMITATION.— 
107 

† HR 1 EAS 

1 (1) DOLLAR LIMITATION.—Section 179(b)(1) is 

2 amended by striking ‘‘$500,000’’ and inserting 

3 ‘‘$1,000,000’’. 

4 (2) REDUCTION IN LIMITATION.—Section 

5 179(b)(2) is amended by striking ‘‘$2,000,000’’ and 

6 inserting ‘‘$2,500,000’’. 

7 (3) INFLATION ADJUSTMENTS.— 

8 (A) IN GENERAL.—Subparagraph (A) of 

9 section 179(b)(6), as amended by section 

10 11002(d), is amended— 

11 (i) by striking ‘‘2015’’ and inserting 

12 ‘‘2018’’, and 

13 (ii) in clause (ii), by striking ‘‘cal14 endar year 2014’’ and inserting ‘‘calendar 

15 year 2017’’. 

16 (B) SPORT UTILITY VEHICLES.—Section 

17 179(b)(6) is amended— 

18 (i) in subparagraph (A), by striking 

19 ‘‘paragraphs (1) and (2)’’ and inserting 

20 ‘‘paragraphs (1), (2), and (5)(A)’’, and 

21 (ii) in subparagraph (B), by inserting 

22 ‘‘($100 in the case of any increase in the 

23 amount under paragraph (5)(A))’’ after 

24 ‘‘$10,000’’. 
108 

† HR 1 EAS 

1 (b) SECTION 179 PROPERTY TO INCLUDE QUALIFIED

2 REAL PROPERTY.— 

3 (1) IN GENERAL.—Subparagraph (B) of section 

4 179(d)(1) is amended to read as follows: 

5 ‘‘(B) which is— 

6 ‘‘(i) section 1245 property (as defined 

7 in section 1245(a)(3)), or 

8 ‘‘(ii) at the election of the taxpayer, 

9 qualified real property (as defined in sub10 section (f)), and’’. 

11 (2) QUALIFIED REAL PROPERTY DEFINED.—Sub12 section (f) of section 179 is amended to read as fol13 lows: 

14 ‘‘(f) QUALIFIED REAL PROPERTY.—For purposes of 

15 this section, the term ‘qualified real property’ means— 

16 ‘‘(1) any qualified improvement property de17 scribed in section 168(e)(6), and 

18 ‘‘(2) any of the following improvements to non19 residential real property placed in service after the 

20 date such property was first placed in service: 

21 ‘‘(A) Roofs. 

22 ‘‘(B) Heating, ventilation, and air-condi23 tioning property. 

24 ‘‘(C) Fire protection and alarm systems. 

25 ‘‘(D) Security systems.’’. 
109 

† HR 1 EAS 

1 (c) REPEAL OF EXCLUSION FOR CERTAIN PROP2 ERTY.—The last sentence of section 179(d)(1) is amended 

3 by inserting ‘‘(other than paragraph (2) thereof)’’ after 

4 ‘‘section 50(b)’’. 

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

6 section shall apply to property placed in service in taxable 

7 years beginning after December 31, 2017. 

8 SEC. 13102. MODIFICATIONS OF GROSS RECEIPTS TEST FOR 

9 USE OF CASH METHOD OF ACCOUNTING BY 

10 CORPORATIONS AND PARTNERSHIPS. 

11 (a) MODIFICATIONS OF GROSS RECEIPTS TEST.— 

12 (1) IN GENERAL.—So much of section 448(c) as 

13 precedes paragraph (2) is amended to read as follows: 

14 ‘‘(c) GROSS RECEIPTS TEST.— 

15 ‘‘(1) IN GENERAL.—A corporation or partnership 

16 meets the gross receipts test of this subsection for any 

17 taxable year if the average annual gross receipts of 

18 such entity for the 3-taxable-year period ending with 

19 the taxable year which precedes such taxable year does 

20 not exceed the applicable dollar limit.’’. 

21 (2) APPLICABLE DOLLAR LIMIT.—Subsection (c) 

22 of section 448 is amended by adding at the end the 

23 following new paragraph: 

24 ‘‘(4) APPLICABLE DOLLAR LIMIT.— 
110 

† HR 1 EAS 

1 ‘‘(A) IN GENERAL.—The applicable dollar 

2 limit is $15,000,000. 

3 ‘‘(B) ADJUSTMENT FOR INFLATION.—In the 

4 case of any taxable year beginning after Decem5 ber 31, 2018, the $15,000,000 amount under sub6 paragraph (A) shall be increased by an amount 

7 equal to— 

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

9 ‘‘(ii) the cost-of-living adjustment de10 termined under section 1(f)(3) for the cal11 endar year in which the taxable year be12 gins, by substituting ‘calendar year 2017’ 

13 for ‘calendar year 2016’ in subparagraph 

14 (A)(ii) thereof. 

15 If any amount as increased under the preceding 

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

17 amount shall be rounded to the next lowest mul18 tiple of $1,000.’’. 

19 (3) CHANGE IN METHOD OF ACCOUNTING.— 

20 Paragraph (7) of section 448(d) is amended— 

21 (A) by striking ‘‘In the case of’’ and all that 

22 follows up to subparagraph (A) and inserting: 

23 ‘‘If a taxpayer changes its method of accounting 

24 because the taxpayer is prohibited from using the 

25 cash receipts and disbursement method of ac-
111 

† HR 1 EAS 

1 counting by reason of subsection (a) or is no 

2 longer prohibited from using such method by rea3 son of such subsection—’’, and 

4 (B) by inserting ‘‘and’’ at the end of sub5 paragraph (A), by striking ‘‘, and’’ at the end of 

6 subparagraph (B) and inserting a period, and 

7 by striking subparagraph (C). 

8 (4) CONFORMING AMENDMENT.—Paragraph (3) 

9 of section 448(b) is amended to read as follows: 

10 ‘‘(3) ENTITIES SATISFYING GROSS RECEIPTS

11 TEST.—Paragraphs (1) and (2) of subsection (a) shall 

12 not apply to any corporation or partnership for any 

13 taxable year if such entity meets the gross receipts test 

14 of subsection (c) for the taxable year.’’. 

15 (b) APPLICATION OF MODIFICATIONS TO FARMING

16 CORPORATIONS.— 

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

18 447(d) is amended to read as follows: 

19 ‘‘(1) IN GENERAL.—A corporation meets the re20 quirements of this subsection for any taxable year 

21 with respect to its gross receipts if the corporation 

22 meets the gross receipts test of section 448(c) for the 

23 taxable year.’’. 

24 (2) FAMILY CORPORATIONS.—Paragraph (2) of 

25 section 447(d) is amended— 
112 

† HR 1 EAS 

1 (A) by striking subparagraph (A) and in2 serting the following: 

3 ‘‘(A) IN GENERAL.—In the case of a family 

4 corporation, in applying section 448(c) for pur5 poses of paragraph (1)— 

6 ‘‘(i) paragraph (1) of section 448(c) 

7 shall be applied by substituting the applica8 ble family corporation limit for the applica9 ble dollar limit, and 

10 ‘‘(ii) the rules of subparagraph (B) 

11 shall apply in computing gross receipts.’’, 

12 (B) in subparagraph (B)(i), by striking 

13 ‘‘the last sentence of paragraph (1)’’ and insert14 ing ‘‘paragraph (2) of section 448(c)’’, and 

15 (C) by adding at the end the following new 

16 subparagraph: 

17 ‘‘(D) APPLICABLE FAMILY CORPORATION

18 LIMIT.— 

19 ‘‘(i) IN GENERAL.—The applicable 

20 family corporation limit is $25,000,000. 

21 ‘‘(ii) ADJUSTMENT FOR INFLATION.— 

22 In the case of any taxable year beginning 

23 after December 31, 2018, the $25,000,000 

24 amount under clause (i) shall be increased 

25 by an amount equal to— 
113 

† HR 1 EAS 

1 ‘‘(I) such dollar amount, multi2 plied by 

3 ‘‘(II) the cost-of-living adjustment 

4 determined under section 1(f)(3) for 

5 the calendar year in which the taxable 

6 year begins, by substituting ‘calendar 

7 year 2017’ for ‘calendar year 2016’ in 

8 subparagraph (A)(ii) thereof. 

9 If any amount as increased under the pre10 ceding sentence is not a multiple of $1,000, 

11 such amount shall be rounded to the next 

12 lowest multiple of $1,000.’’. 

13 (3) EXCEPTION FOR CERTAIN CORPORATIONS.— 

14 Subsection (c) of section 447 is amended by inserting 

15 ‘‘for any taxable year’’ after ‘‘not being a corpora16 tion’’. 

17 (4) CHANGE IN METHOD OF ACCOUNTING.—Sec18 tion 447(f) is amended— 

19 (A) by striking ‘‘In the case of’’ and all that 

20 follows up to paragraph (1) and inserting the 

21 following: ‘‘If a taxpayer changes its method of 

22 accounting because the taxpayer is required to 

23 use an accrual method of accounting by reason 

24 of subsection (a) or is no longer required to use 
114 

† HR 1 EAS 

1 such method by reason of such subsection—’’, 

2 and 

3 (B) by striking paragraph (2) and inserting 

4 the following: 

5 ‘‘(2) such change shall be treated as initiated by 

6 the taxpayer, and’’. 

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

8 section shall apply to taxable years beginning after Decem9 ber 31, 2017. 

10 SEC. 13103. CLARIFICATION OF INVENTORY ACCOUNTING 

11 RULES FOR SMALL BUSINESSES. 

12 (a) CLARIFICATION OF INVENTORY RULES.— 

13 (1) IN GENERAL.—Section 471 is amended by re14 designating subsection (c) as subsection (d) and by 

15 inserting after subsection (b) the following new sub16 section: 

17 ‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED TO

18 USE INVENTORIES.— 

19 ‘‘(1) IN GENERAL.—A qualified taxpayer shall 

20 not be required to use inventories under this section 

21 for a taxable year. 

22 ‘‘(2) TREATMENT OF TAXPAYERS NOT USING IN23 VENTORIES.—A qualified taxpayer who is not re24 quired under this subsection to use inventories with 
115 

† HR 1 EAS 

1 respect to any property for a taxable year beginning 

2 after December 31, 2017, may treat such property— 

3 ‘‘(A) as a non-incidental material or sup4 ply, or 

5 ‘‘(B) in a manner which conforms to the 

6 taxpayer’s method for accounting for such prop7 erty in— 

8 ‘‘(i) an applicable financial statement 

9 (as defined in section 451(b)(3)), or 

10 ‘‘(ii) in the case of a taxpayer that 

11 does not have an applicable financial state12 ment, their books and records used for pur13 poses of determining tax imposed by this 

14 title. 

15 ‘‘(3) QUALIFIED TAXPAYER.—For purposes of 

16 this subsection, the term ‘qualified taxpayer’ means, 

17 with respect to any taxable year, a taxpayer who 

18 meets the gross receipts test of section 448(c) for the 

19 taxable year (or, in the case of a sole proprietorship, 

20 who would meet such test if such proprietorship were 

21 a corporation). Such term shall not include a tax 

22 shelter prohibited from using the cash receipts and 

23 disbursements method of accounting under section 

24 448(a)(3). 
116 

† HR 1 EAS 

1 ‘‘(4) COORDINATION WITH SECTION 481.—If a 

2 taxpayer changes its method of accounting because the 

3 taxpayer is not required to use inventories by reason 

4 of paragraph (1) or is required to use inventories be5 cause such paragraph no longer applies to the tax6 payer— 

7 ‘‘(A) such change shall be treated as initi8 ated by the taxpayer, and 

9 ‘‘(B) such change shall be treated as made 

10 with the consent of the Secretary.’’. 

11 (2) CONFORMING AMENDMENT.—Subsection (c) 

12 of section 263A is amended by adding at the end the 

13 following new paragraph: 

14 ‘‘(8) EXCLUSION FROM INVENTORY RULES.— 

15 Nothing in this section shall require the use of inven16 tories for any taxable year by a qualified taxpayer 

17 (within the meaning of section 471(c)(3)) who is not 

18 required to use inventories under section 471 for such 

19 taxable year.’’. 

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

21 section shall apply to taxable years beginning after Decem22 ber 31, 2017. 
117 

† HR 1 EAS 

1 SEC. 13104. MODIFICATION OF RULES FOR UNIFORM CAP2 ITALIZATION OF CERTAIN EXPENSES. 

3 (a) IN GENERAL.—Section 263A(b) is amended by 

4 striking all that follows paragraph (1) and inserting the 

5 following new paragraphs: 

6 ‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real 

7 or personal property described in section 1221(a)(1) 

8 which is acquired by the taxpayer for resale. 

9 ‘‘(3) EXCEPTION FOR SMALL BUSINESSES.—This 

10 section shall not apply to any taxpayer who meets the 

11 gross receipts test under section 448(c) for the taxable 

12 year (or, in the case of a sole proprietorship, who 

13 would meet such test if such proprietorship were a 

14 corporation), other than a tax shelter prohibited from 

15 using the cash receipts and disbursements method of 

16 accounting under section 448(a)(3). 

17 ‘‘(4) FILMS, SOUND RECORDINGS, BOOKS, ETC.— 

18 For purposes of this subsection, the term ‘tangible 

19 personal property’ shall include a film, sound record20 ing, video tape, book, or similar property. 

21 ‘‘(5) COORDINATION WITH SECTION 481.—If a 

22 taxpayer changes its method of accounting because 

23 this section does not apply to the taxpayer by reason 

24 of the exception under paragraph (3) or this section 

25 applies to the taxpayer because such exception no 

26 longer applies to the taxpayer— 
118 

† HR 1 EAS 

1 ‘‘(A) such change shall be treated as initi2 ated by the taxpayer, and 

3 ‘‘(B) such change shall be treated as made 

4 with the consent of the Secretary.’’. 

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

6 section shall apply to taxable years beginning after Decem7 ber 31, 2017. 

8 SEC. 13105. INCREASE IN GROSS RECEIPTS TEST FOR CON9 STRUCTION CONTRACT EXCEPTION TO PER10 CENTAGE OF COMPLETION METHOD. 

11 (a) INCREASE.— 

12 (1) IN GENERAL.—Section 460(e)(1)(B) is 

13 amended— 

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

15 inserting ‘‘(other than a tax shelter prohibited 

16 from using the cash receipts and disbursements 

17 method of accounting under section 448(a)(3))’’ 

18 after ‘‘taxpayer’’, and 

19 (B) by striking clause (ii) and inserting the 

20 following: 

21 ‘‘(ii) who meets the gross receipts test 

22 of section 448(c) for the taxable year in 

23 which such contract is entered into (or, in 

24 the case of a sole proprietorship, who would 
119 

† HR 1 EAS 

1 meet such test if such proprietorship were a 

2 corporation).’’. 

3 (2) CONFORMING AMENDMENTS.— 

4 (A) Section 460(e) is amended by striking 

5 paragraphs (2) and (3) and by redesignating 

6 paragraphs (4) through (6) as paragraphs (2) 

7 through (4), respectively. 

8 (B) The last sentence of section 56(a)(3) is 

9 amended by striking ‘‘section 460(e)(6)’’ and in10 serting ‘‘section 460(e)(4)’’. 

11 (b) COORDINATION WITH SECTION 481.—Section 

12 460(e), as amended by subsection (a), is amended by adding 

13 at the end the following: 

14 ‘‘(5) COORDINATION WITH SECTION 481.—If a 

15 taxpayer changes its method of accounting because 

16 subsections (a), (b), (c)(1), and (c)(2) do not apply by 

17 reason of the exception under paragraph (1)(B) or 

18 such subsections apply to the taxpayer because such 

19 exception no longer applies to the taxpayer— 

20 ‘‘(A) such change shall be treated as initi21 ated by the taxpayer, 

22 ‘‘(B) such change shall be treated as made 

23 with the consent of the Secretary, and 

24 ‘‘(C) such change shall be permitted only on 

25 a cut-off basis for all similarly classified con-
120 

† HR 1 EAS 

1 tracts entered into on or after the year of change 

2 and no adjustments under section 481(a) shall be 

3 made.’’. 

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

5 section shall apply to contracts entered into after December 

6 31, 2017, in taxable years ending after such date. 

7 PART III—COST RECOVERY AND ACCOUNTING 

8 METHODS 

9 Subpart A—Cost Recovery 

10 SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR 

11 CERTAIN BUSINESS ASSETS. 

12 (a) INCREASED EXPENSING.— 

13 (1) IN GENERAL.—Section 168(k) is amended— 

14 (A) in paragraph (1)(A), by striking ‘‘50 

15 percent’’ and inserting ‘‘the applicable percent16 age’’, and 

17 (B) in paragraph (5)(A)(i), by striking ‘‘50 

18 percent’’ and inserting ‘‘the applicable percent19 age’’. 

20 (2) APPLICABLE PERCENTAGE.—Paragraph (6) 

21 of section 168(k) is amended to read as follows: 

22 ‘‘(6) APPLICABLE PERCENTAGE.—For purposes 

23 of this subsection— 
121 

† HR 1 EAS 

1 ‘‘(A) IN GENERAL.—Except as otherwise 

2 provided in this paragraph, the term ‘applicable 

3 percentage’ means— 

4 ‘‘(i) in the case of property placed in 

5 service after September 27, 2017, and before 

6 January 1, 2023, 100 percent, 

7 ‘‘(ii) in the case of property placed in 

8 service after December 31, 2022, and before 

9 January 1, 2024, 80 percent, 

10 ‘‘(iii) in the case of property placed in 

11 service after December 31, 2023, and before 

12 January 1, 2025, 60 percent, 

13 ‘‘(iv) in the case of property placed in 

14 service after December 31, 2024, and before 

15 January 1, 2026, 40 percent, and 

16 ‘‘(v) in the case of property placed in 

17 service after December 31, 2025, and before 

18 January 1, 2027, 20 percent. 

19 ‘‘(B) RULE FOR PROPERTY WITH LONGER

20 PRODUCTION PERIODS.—In the case of property 

21 described in paragraph (2)(B) or (C), the term 

22 ‘applicable percentage’ means— 

23 ‘‘(i) in the case of property placed in 

24 service after September 27, 2017, and before 

25 January 1, 2024, 100 percent, 
122 

† HR 1 EAS 

1 ‘‘(ii) in the case of property placed in 

2 service after December 31, 2023, and before 

3 January 1, 2025, 80 percent, 

4 ‘‘(iii) in the case of property placed in 

5 service after December 31, 2024, and before 

6 January 1, 2026, 60 percent, 

7 ‘‘(iv) in the case of property placed in 

8 service after December 31, 2025, and before 

9 January 1, 2027, 40 percent, and 

10 ‘‘(v) in the case of property placed in 

11 service after December 31, 2026, and before 

12 January 1, 2028, 20 percent. 

13 ‘‘(C) RULE FOR PLANTS BEARING FRUITS

14 AND NUTS.—In the case of a specified plant de15 scribed in paragraph (5), the term ‘applicable 

16 percentage’ means— 

17 ‘‘(i) in the case of a plant which is 

18 planted or grafted after September 27, 2017, 

19 and before January 1, 2023, 100 percent, 

20 ‘‘(ii) in the case of a plant which is 

21 planted or grafted after December 31, 2022, 

22 and before January 1, 2024, 80 percent, 

23 ‘‘(iii) in the case of a plant which is 

24 planted or grafted after December 31, 2023, 

25 and before January 1, 2025, 60 percent, 
123 

† HR 1 EAS 

1 ‘‘(iv) in the case of a plant which is 

2 planted or grafted after December 31, 2024, 

3 and before January 1, 2026, 40 percent, 

4 and 

5 ‘‘(v) in the case of a plant which is 

6 planted or grafted after December 31, 2025, 

7 and before January 1, 2027, 20 percent.’’. 

8 (3) CONFORMING AMENDMENT.—Paragraph (5) 

9 of section 168(k) is amended by striking subpara10 graph (F). 

11 (b) EXTENSION.— 

12 (1) IN GENERAL.—Section 168(k) is amended— 

13 (A) in paragraph (2)— 

14 (i) in subparagraph (A)(iii), clauses 

15 (i)(III) and (ii) of subparagraph (B), and 

16 subparagraph (E)(i), by striking ‘‘January 

17 1, 2020’’ each place it appears and insert18 ing ‘‘January 1, 2027’’, and 

19 (ii) in subparagraph (B)— 

20 (I) in clause (i)(II), by striking 

21 ‘‘January 1, 2021’’ and inserting 

22 ‘‘January 1, 2028’’, and 

23 (II) in the heading of clause (ii), 

24 by striking ‘‘PRE-JANUARY 1, 2020’’ and 

25 inserting ‘‘PRE-JANUARY 1, 2027’’, and 
124 

† HR 1 EAS 

1 (B) in paragraph (5)(A), by striking ‘‘Jan2 uary 1, 2020’’ and inserting ‘‘January 1, 2027’’. 

3 (2) CONFORMING AMENDMENTS.— 

4 (A) Clause (ii) of section 460(c)(6)(B) is 

5 amended by striking ‘‘January 1, 2020 (Janu6 ary 1, 2021’’ and inserting ‘‘January 1, 2027 

7 (January 1, 2028’’. 

8 (B) The heading of section 168(k) is amend9 ed by striking ‘‘ACQUIRED AFTER DECEMBER

10 31, 2007, AND BEFORE JANUARY 1, 2020’’. 

11 (c) EXCEPTION FOR PUBLIC UTILITIES.—Section 

12 168(k) is amended by adding at the end the following new 

13 paragraph: 

14 ‘‘(8) EXCEPTION FOR CERTAIN PROPERTY.—The 

15 term ‘qualified property’ shall not include any prop16 erty which is primarily used in a trade or business 

17 described in clause (iv) of section 163(j)(7)(A).’’. 

18 (d) SPECIAL RULE.—Section 168(k), as amended by 

19 subsection (c), is amended by adding at the end the fol20 lowing new paragraph: 

21 ‘‘(9) SPECIAL RULE FOR PROPERTY PLACED IN

22 SERVICE DURING CERTAIN PERIODS.— 

23 ‘‘(A) IN GENERAL.—In the case of qualified 

24 property placed in service by the taxpayer dur25 ing the first taxable year ending after September 
125 

† HR 1 EAS 

1 27, 2017, if the taxpayer elects to have this para2 graph apply for such taxable year, paragraphs 

3 (1)(A) and (5)(A)(i) shall be applied by sub4 stituting ‘50 percent’ for ‘the applicable percent5 age’. 

6 ‘‘(B) FORM OF ELECTION.—Any election 

7 under this paragraph shall be made at such time 

8 and in such form and manner as the Secretary 

9 may prescribe.’’. 

10 (e) COORDINATION WITH SECTION 280F.—Section 

11 168(k)(2)(F) is amended by striking clause (iii). 

12 (f) QUALIFIED FILM AND TELEVISION AND LIVE THE13 ATRICAL PRODUCTIONS.— 

14 (1) IN GENERAL.—Clause (i) of section 

15 168(k)(2)(A), as amended by section 13204, is amend16 ed— 

17 (A) in subclause (II), by striking ‘‘or’’, 

18 (B) in subclause (III), by adding ‘‘or’’ after 

19 the comma, and 

20 (C) by adding at the end the following: 

21 ‘‘(IV) which is a qualified film or tele22 vision production (as defined in subsection 

23 (d) of section 181) for which a deduction 

24 would have been allowable under section 
126 

† HR 1 EAS 

1 181 without regard to subsections (a)(2) 

2 and (g) of such section or this subsection, or 

3 ‘‘(V) which is a qualified live theat4 rical production (as defined in subsection 

5 (e) of section 181) for which a deduction 

6 would have been allowable under section 

7 181 without regard to subsections (a)(2) 

8 and (g) of such section or this subsection,’’. 

9 (2) PRODUCTION PLACED IN SERVICE.—Para10 graph (2) of section 168(k) is amended by adding at 

11 the end the following: 

12 ‘‘(H) PRODUCTION PLACED IN SERVICE.— 

13 For purposes of subparagraph (A)— 

14 ‘‘(i) a qualified film or television pro15 duction shall be considered to be placed in 

16 service at the time of initial release or 

17 broadcast, and 

18 ‘‘(ii) a qualified live theatrical produc19 tion shall be considered to be placed in serv20 ice at the time of the initial live staged per21 formance.’’. 

22 (g) EFFECTIVE DATES.—The amendments made by 

23 this section shall apply to property placed in service, and 

24 specified plants planted or grafted after, after September 

25 27, 2017, in taxable years ending after such date. 
127 

† HR 1 EAS 

1 SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITA2 TIONS ON LUXURY AUTOMOBILES AND PER3 SONAL USE PROPERTY. 

4 (a) LUXURY AUTOMOBILES.— 

5 (1) IN GENERAL.—280F(a)(1)(A) is amended— 

6 (A) in clause (i), by striking ‘‘$2,560’’ and 

7 inserting ‘‘$10,000’’, 

8 (B) in clause (ii), by striking ‘‘$4,100’’ and 

9 inserting ‘‘$16,000’’, 

10 (C) in clause (iii), by striking ‘‘$2,450’’ and 

11 inserting ‘‘$9,600’’, and 

12 (D) in clause (iv), by striking ‘‘$1,475’’ and 

13 inserting ‘‘$5,760’’. 

14 (2) CONFORMING AMENDMENTS.— 

15 (A) Clause (ii) of section 280F(a)(1)(B) is 

16 amended by striking ‘‘$1,475’’ in the text and 

17 heading and inserting ‘‘$5,760’’. 

18 (B) Paragraph (7) of section 280F(d) is 

19 amended— 

20 (i) in subparagraph (A), by striking 

21 ‘‘1988’’ and inserting ‘‘2018’’, and 

22 (ii) in subparagraph (B)(i)(II), by 

23 striking ‘‘1987’’ and inserting ‘‘2017’’. 

24 (b) REMOVAL OF COMPUTER EQUIPMENT FROM LIST25 ED PROPERTY.— 
128 

† HR 1 EAS 

1 (1) IN GENERAL.—Section 280F(d)(4)(A) is 

2 amended— 

3 (A) by inserting ‘‘and’’ at the end of clause 

4 (iii), 

5 (B) by striking clause (iv), and 

6 (C) by redesignating clause (v) as clause 

7 (iv). 

8 (2) CONFORMING AMENDMENT.—Section 

9 280F(d)(4) is amended by striking subparagraph (B) 

10 and by redesignating subparagraph (C) as subpara11 graph (B). 

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

13 section shall apply to property placed in service after De14 cember 31, 2017, in taxable years ending after such date. 

15 SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN 

16 FARM PROPERTY. 

17 (a) TREATMENT OF CERTAIN FARM PROPERTY AS 5- 

18 YEAR PROPERTY.—Clause (vii) of section 168(e)(3)(B) is 

19 amended by striking ‘‘after December 31, 2008, and which 

20 is placed in service before January 1, 2010’’ and inserting 

21 ‘‘after December 31, 2017’’. 

22 (b) REPEAL OF REQUIRED USE OF 150-PERCENT DE23 CLINING BALANCE METHOD.—Section 168(b)(2) is amend24 ed by striking subparagraph (B) and by redesignating sub-
129 

† HR 1 EAS 

1 paragraphs (C) and (D) as subparagraphs (B) and (C), re2 spectively. 

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

4 section shall apply to property placed in service after De5 cember 31, 2017, in taxable years ending after such date. 

6 SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL 

7 PROPERTY. 

8 (a) RESIDENTIAL RENTAL PROPERTY AND NONRESI9 DENTIAL REAL PROPERTY.— 

10 (1) REDUCTION OF RECOVERY PERIOD.—The 

11 table contained in section 168(c) is amended— 

12 (A) by striking ‘‘27.5 years’’ and inserting 

13 ‘‘25 years’’, and 

14 (B) by striking ‘‘39 years’’ and inserting 

15 ‘‘25 years’’. 

16 (2) STATUTORY RECOVERY PERIOD.—The table 

17 contained in section 467(e)(3)(A) is amended— 

18 (A) by inserting ‘‘(other than residential 

19 rental property and nonresidential real prop20 erty)’’ after ‘‘15-year and 20-year property’’, 

21 and 

22 (B) by striking ‘‘19 years’’ and inserting 

23 ‘‘25 years’’. 
130 

† HR 1 EAS 

1 (3) CONFORMING AMENDMENT.—Clause (ii) of 

2 section 168(e)(2)(B) is amended by striking ‘‘27.5 

3 years’’ and inserting ‘‘25 years’’. 

4 (b) IMPROVEMENTS TO REAL PROPERTY.— 

5 (1) CLASSIFICATION OF QUALIFIED IMPROVE6 MENT PROPERTY AS 10-YEAR PROPERTY.—Subpara7 graph (D) of section 168(e)(3) is amended— 

8 (A) in clause (iii), by striking ‘‘and’’, 

9 (B) in clause (iv), by striking the period 

10 and inserting ‘‘, and’’, and 

11 (C) by adding at the end the following new 

12 clause: 

13 ‘‘(v) any qualified improvement prop14 erty described in subsection (e)(6).’’. 

15 (2) ELIMINATION OF QUALIFIED LEASEHOLD IM16 PROVEMENT, QUALIFIED RESTAURANT, AND QUALI17 FIED RETAIL IMPROVEMENT PROPERTY.—Subsection 

18 (e) of section 168 is amended— 

19 (A) in subparagraph (E) of paragraph 

20 (3)— 

21 (i) by striking clauses (iv), (v), and 

22 (ix), 

23 (ii) in clause (vii), by inserting ‘‘and’’ 

24 at the end, 
131 

† HR 1 EAS 

1 (iii) in clause (viii), by striking ‘‘, 

2 and’’ and inserting a period, and 

3 (iv) by redesignating clauses (vi), (vii), 

4 and (viii), as so amended, as clauses (iv), 

5 (v), and (vi), respectively, and 

6 (B) by striking paragraphs (6), (7), and 

7 (8). 

8 (3) APPLICATION OF STRAIGHT LINE METHOD TO

9 QUALIFIED IMPROVEMENT PROPERTY.—Paragraph (3) 

10 of section 168(b) is amended— 

11 (A) by striking subparagraphs (G), (H), 

12 and (I), and 

13 (B) by inserting after subparagraph (F) the 

14 following new subparagraph: 

15 ‘‘(G) Qualified improvement property de16 scribed in subsection (e)(6).’’. 

17 (4) ALTERNATIVE DEPRECIATION SYSTEM.— 

18 (A) ELECTING REAL PROPERTY TRADE OR

19 BUSINESS.—Subsection (g) of section 168 is 

20 amended— 

21 (i) in paragraph (1)— 

22 (I) in subparagraph (D), by strik23 ing ‘‘and’’ at the end, 

24 (II) in subparagraph (E), by in25 serting ‘‘and’’ at the end, and 
132 

† HR 1 EAS 

1 (III) by inserting after subpara2 graph (E) the following new subpara3 graph: 

4 ‘‘(F) any property described in paragraph 

5 (8),’’, and 

6 (ii) by adding at the end the following 

7 new paragraph: 

8 ‘‘(8) ELECTING REAL PROPERTY TRADE OR BUSI9 NESS.—The property described in this paragraph 

10 shall consist of any nonresidential real property, resi11 dential rental property, and qualified improvement 

12 property held by an electing real property trade or 

13 business (as defined in 163(j)(7)(B)).’’. 

14 (B) QUALIFIED IMPROVEMENT PROPERTY.— 

15 The table contained in subparagraph (B) of sec16 tion 168(g)(3) is amended— 

17 (i) by inserting after the item relating 

18 to subparagraph (D)(ii) the following new 

19 item: 

‘‘(D)(v) ................................................................................................ 20’’. 

20 , and 

21 (ii) by striking the item relating to 

22 subparagraph (E)(iv) and all that follows 

23 through the item relating to subparagraph 

24 (E)(ix) and inserting the following: 

‘‘(E)(iv) ............................................................................................... 20

(E)(v) .................................................................................................. 30

(E)(vi) ................................................................................................. 35’’. 
133 

† HR 1 EAS 

1 (C) APPLICABLE RECOVERY PERIOD FOR

2 RESIDENTIAL RENTAL PROPERTY.—The table 

3 contained in subparagraph (C) of section 

4 168(g)(2) is amended by striking clauses (iii) 

5 and (iv) and inserting the following: 

‘‘(iii) Residential rental property .................................................... 30 years

(iv) Nonresidential real property ..................................................... 40 years

(v) Any railroad grading or tunnel bore or water utility property .................................................................................................. 50 years’’. 

6 (5) CONFORMING AMENDMENTS.— 

7 (A) Clause (i) of section 168(k)(2)(A) is 

8 amended— 

9 (i) in subclause (II), by inserting ‘‘or’’ 

10 after the comma, 

11 (ii) in subclause (III), by striking ‘‘or’’ 

12 at the end, and 

13 (iii) by striking subclause (IV). 

14 (B) Section 168 is amended— 

15 (i) in subsection (e), as amended by 

16 paragraph (2)(B), by adding at the end the 

17 following: 

18 ‘‘(6) QUALIFIED IMPROVEMENT PROPERTY.— 

19 ‘‘(A) IN GENERAL.—The term ‘qualified im20 provement property’ means any improvement to 

21 an interior portion of a building which is non22 residential real property if such improvement is 

23 placed in service after the date such building was 

24 first placed in service. 
134 

† HR 1 EAS 

1 ‘‘(B) CERTAIN IMPROVEMENTS NOT IN2 CLUDED.—Such term shall not include any im3 provement for which the expenditure is attrib4 utable to— 

5 ‘‘(i) the enlargement of the building, 

6 ‘‘(ii) any elevator or escalator, or 

7 ‘‘(iii) the internal structural frame8 work of the building.’’. 

9 (ii) in subsection (k), by striking para10 graph (3). 

11 (c) EFFECTIVE DATE.— 

12 (1) IN GENERAL.—Except as provided in para13 graph (2), the amendments made by this section shall 

14 apply to property placed in service after December 

15 31, 2017. 

16 (2) AMENDMENTS RELATED TO ELECTING REAL

17 PROPERTY TRADE OR BUSINESS.—The amendments 

18 made by subsection (b)(4)(A) shall apply to taxable 

19 years beginning after December 31, 2017. 

20 SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM 

21 FOR ELECTING FARMING BUSINESSES. 

22 (a) IN GENERAL.—Section 168(g)(1), as amended by 

23 section 13204, is amended by striking ‘‘and’’ at the end of 

24 subparagraph (E), by inserting ‘‘and’’ at the end of sub-
135 

† HR 1 EAS 

1 paragraph (F), and by inserting after subparagraph (F) 

2 the following new subparagraph: 

3 ‘‘(G) any property with a recovery period of 

4 10 years or more which is held by an electing 

5 farming business (as defined in section 

6 163(j)(7)(C)),’’. 

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

8 section shall apply to taxable years beginning after Decem9 ber 31, 2017. 

10 SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERI11 MENTAL EXPENDITURES. 

12 (a) IN GENERAL.—Section 174 is amended to read as 

13 follows: 

14 ‘‘SEC. 174. AMORTIZATION OF RESEARCH AND EXPERI15 MENTAL EXPENDITURES. 

16 ‘‘(a) IN GENERAL.—In the case of a taxpayer’s speci17 fied research or experimental expenditures for any taxable 

18 year— 

19 ‘‘(1) except as provided in paragraph (2), no de20 duction shall be allowed for such expenditures, and 

21 ‘‘(2) the taxpayer shall— 

22 ‘‘(A) charge such expenditures to capital ac23 count, and 

24 ‘‘(B) be allowed an amortization deduction 

25 of such expenditures ratably over the 5-year pe-
136 

† HR 1 EAS 

1 riod (15-year period in the case of any specified 

2 research or experimental expenditures which are 

3 attributable to foreign research (within the 

4 meaning of section 41(d)(4)(F))) beginning with 

5 the midpoint of the taxable year in which such 

6 expenditures are paid or incurred. 

7 ‘‘(b) SPECIFIED RESEARCH OR EXPERIMENTAL EX8 PENDITURES.—For purposes of this section, the term ‘speci9 fied research or experimental expenditures’ means, with re10 spect to any taxable year, research or experimental expendi11 tures which are paid or incurred by the taxpayer during 

12 such taxable year in connection with the taxpayer’s trade 

13 or business. 

14 ‘‘(c) SPECIAL RULES.— 

15 ‘‘(1) LAND AND OTHER PROPERTY.—This section 

16 shall not apply to any expenditure for the acquisition 

17 or improvement of land, or for the acquisition or im18 provement of property to be used in connection with 

19 the research or experimentation and of a character 

20 which is subject to the allowance under section 167 

21 (relating to allowance for depreciation, etc.) or section 

22 611 (relating to allowance for depletion); but for pur23 poses of this section allowances under section 167, 

24 and allowances under section 611, shall be considered 

25 as expenditures. 
137 

† HR 1 EAS 

1 ‘‘(2) EXPLORATION EXPENDITURES.—This sec2 tion shall not apply to any expenditure paid or in3 curred for the purpose of ascertaining the existence, 

4 location, extent, or quality of any deposit of ore or 

5 other mineral (including oil and gas). 

6 ‘‘(3) SOFTWARE DEVELOPMENT.—For purposes 

7 of this section, any amount paid or incurred in con8 nection with the development of any software shall be 

9 treated as a research or experimental expenditure. 

10 ‘‘(d) TREATMENT UPON DISPOSITION, RETIREMENT, 

11 OR ABANDONMENT.—If any property with respect to which 

12 specified research or experimental expenditures are paid or 

13 incurred is disposed, retired, or abandoned during the pe14 riod during which such expenditures are allowed as an am15 ortization deduction under this section, no deduction shall 

16 be allowed with respect to such expenditures on account of 

17 such disposition, retirement, or abandonment and such am18 ortization deduction shall continue with respect to such ex19 penditures.’’. 

20 (b) CHANGE IN METHOD OF ACCOUNTING.—The 

21 amendments made by subsection (a) shall be treated as a 

22 change in method of accounting for purposes of section 481 

23 of the Internal Revenue Code of 1986 and— 

24 (1) such change shall be treated as initiated by 

25 the taxpayer, 
138 

† HR 1 EAS 

1 (2) such change shall be treated as made with the 

2 consent of the Secretary, and 

3 (3) such change shall be applied only on a cut4 off basis for any research or experimental expendi5 tures paid or incurred in taxable years beginning 

6 after December 31, 2025, and no adjustments under 

7 section 481(a) shall be made. 

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

9 part VI of subchapter B of chapter 1 is amended by striking 

10 the item relating to section 174 and inserting the following 

11 new item: 

‘‘Sec. 174. Amortization of research and experimental expenditures.’’. 

12 (d) CONFORMING AMENDMENTS.— 

13 (1) Section 41(d)(1)(A) is amended by striking 

14 ‘‘expenses under section 174’’ and inserting ‘‘specified 

15 research or experimental expenditures under section 

16 174’’. 

17 (2) Subsection (c) of section 280C is amended— 

18 (A) by striking paragraph (1) and inserting 

19 the following: 

20 ‘‘(1) IN GENERAL.—If— 

21 ‘‘(A) the amount of the credit determined 

22 for the taxable year under section 41(a)(1), ex23 ceeds 
139 

† HR 1 EAS 

1 ‘‘(B) the amount allowable as a deduction 

2 for such taxable year for qualified research ex3 penses or basic research expenses, 

4 the amount chargeable to capital account for the tax5 able year for such expenses shall be reduced by the 

6 amount of such excess.’’, 

7 (B) by striking paragraph (2), 

8 (C) by redesignating paragraphs (3) (as 

9 amended by this Act) and (4) as paragraphs (2) 

10 and (3), respectively, and 

11 (D) in paragraph (2), as redesignated by 

12 subparagraph (C), by striking ‘‘paragraphs (1) 

13 and (2)’’ and inserting ‘‘paragraph (1)’’. 

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

15 section shall apply to amounts paid or incurred in taxable 

16 years beginning after December 31, 2025. 

17 SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANT18 ING CITRUS PLANTS LOST BY REASON OF 

19 CASUALTY. 

20 (a) IN GENERAL.—Section 263A(d)(2) is amended by 

21 adding at the end the following new subparagraph: 

22 ‘‘(C) SPECIAL TEMPORARY RULE FOR CIT23 RUS PLANTS LOST BY REASON OF CASUALTY.— 

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

25 replanting of citrus plants, subparagraph 
140 

† HR 1 EAS 

1 (A) shall apply to amounts paid or in2 curred by a person (other than the taxpayer 

3 described in subparagraph (A)) if— 

4 ‘‘(I) the taxpayer described in 

5 subparagraph (A) has an equity inter6 est of not less than 50 percent in the 

7 replanted citrus plants at all times 

8 during the taxable year in which such 

9 amounts were paid or incurred and 

10 such other person holds any part of the 

11 remaining equity interest, or 

12 ‘‘(II) such other person acquired 

13 the entirety of such taxpayer’s equity 

14 interest in the land on which the lost 

15 or damaged citrus plants were located 

16 at the time of such loss or damage, and 

17 the replanting is on such land. 

18 ‘‘(ii) TERMINATION.—Clause (i) shall 

19 not apply to any cost paid or incurred after 

20 the date which is 10 years after the date of 

21 the enactment of the Tax Cuts and Jobs 

22 Act.’’. 

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

24 section shall apply to costs paid or incurred after the date 

25 of the enactment of this Act. 
141 

† HR 1 EAS 

1 Subpart B—Accounting Methods 

2 SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR 

3 OF INCLUSION. 

4 (a) INCLUSION NOT LATER THAN FOR FINANCIAL AC5 COUNTING PURPOSES.—Section 451 is amended by redesig6 nating subsections (b) through (i) as subsections (c) through 

7 (j), respectively, and by inserting after subsection (a) the 

8 following new subsection: 

9 ‘‘(b) INCLUSION NOT LATER THAN FOR FINANCIAL AC10 COUNTING PURPOSES.— 

11 ‘‘(1) INCOME TAKEN INTO ACCOUNT IN FINANCIAL

12 STATEMENT.— 

13 ‘‘(A) IN GENERAL.—In the case of a tax14 payer the taxable income of which is computed 

15 under an accrual method of accounting, the all 

16 events test with respect to any item of gross in17 come (or portion thereof) shall not be treated as 

18 met any later than when such item (or portion 

19 thereof) is taken into account as revenue in— 

20 ‘‘(i) an applicable financial statement 

21 of the taxpayer, or 

22 ‘‘(ii) such other financial statement as 

23 the Secretary may specify for purposes of 

24 this subsection. 

25 ‘‘(B) EXCEPTION.—This paragraph shall 

26 not apply to— 
142 

† HR 1 EAS 

1 ‘‘(i) a taxpayer which does not have a 

2 financial statement described in clause (i) 

3 or (ii) of subparagraph (A) for a taxable 

4 year, or 

5 ‘‘(ii) any item of gross income in con6 nection with a mortgage servicing contract. 

7 ‘‘(C) ALL EVENTS TEST.—For purposes of 

8 this section, the all events test is met with respect 

9 to any item of gross income if all the events have 

10 occurred which fix the right to receive such in11 come and the amount of such income can be de12 termined with reasonable accuracy. 

13 ‘‘(2) COORDINATION WITH SPECIAL METHODS OF

14 ACCOUNTING.—Paragraph (1) shall not apply with 

15 respect to any item of gross income for which the tax16 payer uses a special method of accounting provided 

17 under any other provision of this chapter, other than 

18 any provision of part V of subchapter P (except as 

19 provided in clause (ii) of paragraph (1)(B)). 

20 ‘‘(3) APPLICABLE FINANCIAL STATEMENT.—For 

21 purposes of this subsection, the term ‘applicable fi22 nancial statement’ means— 

23 ‘‘(A) a financial statement which is cer24 tified as being prepared in accordance with gen-
143 

† HR 1 EAS 

1 erally accepted accounting principles and which 

2 is— 

3 ‘‘(i) a 10–K (or successor form), or an4 nual statement to shareholders, required to 

5 be filed by the taxpayer with the United 

6 States Securities and Exchange Commis7 sion, 

8 ‘‘(ii) an audited financial statement of 

9 the taxpayer which is used for— 

10 ‘‘(I) credit purposes, 

11 ‘‘(II) reporting to shareholders, 

12 partners, or other proprietors, or to 

13 beneficiaries, or 

14 ‘‘(III) any other substantial 

15 nontax purpose, 

16 but only if there is no statement of the tax17 payer described in clause (i), or 

18 ‘‘(iii) filed by the taxpayer with any 

19 other Federal agency for purposes other 

20 than Federal tax purposes, but only if there 

21 is no statement of the taxpayer described in 

22 clause (i) or (ii), 

23 ‘‘(B) a financial statement which is made 

24 on the basis of international financial reporting 

25 standards and is filed by the taxpayer with an 
144 

† HR 1 EAS 

1 agency of a foreign government which is equiva2 lent to the United States Securities and Ex3 change Commission and which has reporting 

4 standards not less stringent than the standards 

5 required by such Commission, but only if there 

6 is no statement of the taxpayer described in sub7 paragraph (A), or 

8 ‘‘(C) a financial statement filed by the tax9 payer with any other regulatory or governmental 

10 body specified by the Secretary, but only if there 

11 is no statement of the taxpayer described in sub12 paragraph (A) or (B). 

13 ‘‘(4) ALLOCATION OF TRANSACTION PRICE.—For 

14 purposes of this subsection, in the case of a contract 

15 which contains multiple performance obligations, the 

16 allocation of the transaction price to each perform17 ance obligation shall be equal to the amount allocated 

18 to each performance obligation for purposes of includ19 ing such item in revenue in the applicable financial 

20 statement of the taxpayer. 

21 ‘‘(5) GROUP OF ENTITIES.—For purposes of 

22 paragraph (1), if the financial results of a taxpayer 

23 are reported on the applicable financial statement (as 

24 defined in paragraph (3)) for a group of entities, such 
145 

† HR 1 EAS 

1 statement may be treated as the applicable financial 

2 statement of the taxpayer.’’. 

3 (b) TREATMENT OF ADVANCE PAYMENTS.—Section 

4 451, as amended by subsection (a), is amended by redesig5 nating subsections (c) through (j) as subsections (d) through 

6 (k), respectively, and by inserting after subsection (b) the 

7 following new subsection: 

8 ‘‘(c) TREATMENT OF ADVANCE PAYMENTS.— 

9 ‘‘(1) IN GENERAL.—A taxpayer which computes 

10 taxable income under the accrual method of account11 ing, and receives any advance payment during the 

12 taxable year, shall— 

13 ‘‘(A) except as provided in subparagraph 

14 (B), include such advance payment in gross in15 come for such taxable year, or 

16 ‘‘(B) if the taxpayer elects the application 

17 of this subparagraph with respect to the category 

18 of advance payments to which such advance pay19 ment belongs, the taxpayer shall— 

20 ‘‘(i) to the extent that any portion of 

21 such advance payment is required under 

22 subsection (b) to be included in gross in23 come in the taxable year in which such pay24 ment is received, so include such portion, 

25 and 
146 

† HR 1 EAS 

1 ‘‘(ii) include the remaining portion of 

2 such advance payment in gross income in 

3 the taxable year following the taxable year 

4 in which such payment is received. 

5 ‘‘(2) ELECTION.— 

6 ‘‘(A) IN GENERAL.—Except as otherwise 

7 provided in this paragraph, the election under 

8 paragraph (1)(B) shall be made at such time, in 

9 such form and manner, and with respect to such 

10 categories of advance payments, as the Secretary 

11 may provide. 

12 ‘‘(B) PERIOD TO WHICH ELECTION AP13 PLIES.—An election under paragraph (1)(B) 

14 shall be effective for the taxable year with respect 

15 to which it is first made and for all subsequent 

16 taxable years, unless the taxpayer secures the 

17 consent of the Secretary to revoke such election. 

18 For purposes of this title, the computation of 

19 taxable income under an election made under 

20 paragraph (1)(B) shall be treated as a method of 

21 accounting. 

22 ‘‘(3) TAXPAYERS CEASING TO EXIST.—Except as 

23 otherwise provided by the Secretary, the election 

24 under paragraph (1)(B) shall not apply with respect 

25 to advance payments received by the taxpayer during 
147 

† HR 1 EAS 

1 a taxable year if such taxpayer ceases to exist during 

2 (or with the close of) such taxable year. 

3 ‘‘(4) ADVANCE PAYMENT.—For purposes of this 

4 subsection— 

5 ‘‘(A) IN GENERAL.—The term ‘advance pay6 ment’ means any payment— 

7 ‘‘(i) the full inclusion of which in the 

8 gross income of the taxpayer for the taxable 

9 year of receipt is a permissible method of 

10 accounting under this section (determined 

11 without regard to this subsection), 

12 ‘‘(ii) any portion of which is included 

13 in revenue by the taxpayer in a financial 

14 statement described in clause (i) or (ii) of 

15 subsection (b)(1)(A) for a subsequent taxable 

16 year, and 

17 ‘‘(iii) which is for goods, services, or 

18 such other items as may be identified by the 

19 Secretary for purposes of this clause. 

20 ‘‘(B) EXCLUSIONS.—Except as otherwise 

21 provided by the Secretary, such term shall not 

22 include— 

23 ‘‘(i) rent, 

24 ‘‘(ii) insurance premiums governed by 

25 subchapter L, 
148 

† HR 1 EAS 

1 ‘‘(iii) payments with respect to finan2 cial instruments, 

3 ‘‘(iv) payments with respect to war4 ranty or guarantee contracts under which a 

5 third party is the primary obligor, 

6 ‘‘(v) payments subject to section 

7 871(a), 881, 1441, or 1442, 

8 ‘‘(vi) payments in property to which 

9 section 83 applies, and 

10 ‘‘(vii) any other payment identified by 

11 the Secretary for purposes of this subpara12 graph. 

13 ‘‘(C) RECEIPT.—For purposes of this sub14 section, an item of gross income is received by 

15 the taxpayer if it is actually or constructively re16 ceived, or if it is due and payable to the tax17 payer. 

18 ‘‘(D) ALLOCATION OF TRANSACTION

19 PRICE.—For purposes of this subsection, rules 

20 similar to subsection (b)(4) shall apply.’’. 

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

22 section shall apply to taxable years beginning after Decem23 ber 31, 2017. 

24 (d) COORDINATION WITH SECTION 481.— 
149 

† HR 1 EAS 

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

2 change in method of accounting for the taxpayer’s 

3 first taxable year beginning after December 31, 

4 2017— 

5 (A) such change shall be treated as initiated 

6 by the taxpayer, and 

7 (B) such change shall be treated as made 

8 with the consent of the Secretary of the Treasury. 

9 (2) QUALIFIED CHANGE IN METHOD OF AC10 COUNTING.—For purposes of this subsection, the term 

11 ‘‘qualified change in method of accounting’’ means 

12 any change in method of accounting which— 

13 (A) is required by the amendments made by 

14 this section, or 

15 (B) was prohibited under the Internal Rev16 enue Code of 1986 prior to such amendments 

17 and is permitted under such Code after such 

18 amendments. 

19 (e) SPECIAL RULES FOR ORIGINAL ISSUE DIS20 COUNT.—Notwithstanding subsection (c), in the case of in21 come from a debt instrument having original issue dis22 count— 

23 (1) the amendments made by this section shall 

24 apply to taxable years beginning after December 31, 

25 2018, and 
150 

† HR 1 EAS 

1 (2) the period for taking into account any ad2 justments under section 481 by reason of a qualified 

3 change in method of accounting (as defined in sub4 section (d)) shall be 6 years. 

5 PART IV—BUSINESS-RELATED EXCLUSIONS AND 

6 DEDUCTIONS 

7 SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST. 

8 (a) IN GENERAL.—Section 163(j) is amended to read 

9 as follows: 

10 ‘‘(j) LIMITATION ON BUSINESS INTEREST.— 

11 ‘‘(1) IN GENERAL.—The amount allowed as a de12 duction under this chapter for any taxable year for 

13 business interest shall not exceed the sum of— 

14 ‘‘(A) the business interest income of such 

15 taxpayer for such taxable year, plus 

16 ‘‘(B) 30 percent of the adjusted taxable in17 come of such taxpayer for such taxable year. 

18 The amount determined under subparagraph (B) 

19 shall not be less than zero. 

20 ‘‘(2) CARRYFORWARD OF DISALLOWED BUSINESS

21 INTEREST.—The amount of any business interest not 

22 allowed as a deduction for any taxable year by reason 

23 of paragraph (1) shall be treated as business interest 

24 paid or accrued in the succeeding taxable year. 
151 

† HR 1 EAS 

1 ‘‘(3) EXEMPTION FOR CERTAIN SMALL BUSI2 NESSES.—In the case of any taxpayer (other than a 

3 tax shelter prohibited from using the cash receipts 

4 and disbursements method of accounting under sec5 tion 448(a)(3)) which meets the gross receipts test of 

6 section 448(c) for any taxable year, paragraph (1) 

7 shall not apply to such taxpayer for such taxable 

8 year. In the case of any taxpayer which is not a cor9 poration or a partnership, the gross receipts test of 

10 section 448(c) shall be applied in the same manner as 

11 if such taxpayer were a corporation or partnership. 

12 ‘‘(4) APPLICATION TO PARTNERSHIPS, ETC.— 

13 ‘‘(A) IN GENERAL.—In the case of any part14 nership— 

15 ‘‘(i) this subsection shall be applied at 

16 the partnership level and any deduction for 

17 business interest shall be taken into account 

18 in determining the non-separately stated 

19 taxable income or loss of the partnership, 

20 and 

21 ‘‘(ii) the adjusted taxable income of 

22 each partner of such partnership— 

23 ‘‘(I) shall be determined without 

24 regard to such partner’s distributive 

25 share of any items of income, gain, de-
152 

† HR 1 EAS 

1 duction, or loss of such partnership, 

2 and 

3 ‘‘(II) shall be increased by such 

4 partner’s distributive share of such 

5 partnership’s excess taxable income. 

6 For purposes of clause (ii)(II), a partner’s 

7 distributive share of partnership excess tax8 able income shall be determined in the same 

9 manner as the partner’s distributive share 

10 of nonseparately stated taxable income or 

11 loss of the partnership. 

12 ‘‘(B) SPECIAL RULES FOR

13 CARRYFORWARDS.— 

14 ‘‘(i) IN GENERAL.—The amount of any 

15 business interest not allowed as a deduction 

16 to a partnership for any taxable year by 

17 reason of paragraph (1) for any taxable 

18 year— 

19 ‘‘(I) shall not be treated under 

20 paragraph (2) as business interest paid 

21 or accrued by the partnership in the 

22 succeeding taxable year, and 

23 ‘‘(II) shall, subject to clause (ii), 

24 be treated as excess business interest 

25 which is allocated to each partner in 
153 

† HR 1 EAS 

1 the same manner as the non-separately 

2 stated taxable income or loss of the 

3 partnership. 

4 ‘‘(ii) TREATMENT OF EXCESS BUSI5 NESS INTEREST ALLOCATED TO PART6 NERS.—If a partner is allocated any excess 

7 business interest from a partnership under 

8 clause (i) for any taxable year— 

9 ‘‘(I) such excess business interest 

10 shall be treated as business interest 

11 paid or accrued by the partner in the 

12 next succeeding taxable year in which 

13 the partner is allocated excess taxable 

14 income from such partnership, but 

15 only to the extent of such excess taxable 

16 income, and 

17 ‘‘(II) any portion of such excess 

18 business interest remaining after the 

19 application of subclause (I) shall, sub20 ject to the limitations of subclause (I), 

21 be treated as business interest paid or 

22 accrued in succeeding taxable years. 

23 For purposes of applying this paragraph, 

24 excess taxable income allocated to a partner 

25 from a partnership for any taxable year 
154 

† HR 1 EAS 

1 shall not be taken into account under para2 graph (1)(A) with respect to any business 

3 interest other than excess business interest 

4 from the partnership until all such excess 

5 business interest for such taxable year and 

6 all preceding taxable years has been treated 

7 as paid or accrued under clause (ii). 

8 ‘‘(iii) BASIS ADJUSTMENTS.— 

9 ‘‘(I) IN GENERAL.—The adjusted 

10 basis of a partner in a partnership in11 terest shall be reduced (but not below 

12 zero) by the amount of excess business 

13 interest allocated to the partner under 

14 clause (i)(II). 

15 ‘‘(II) SPECIAL RULE FOR DISPOSI16 TIONS.—If a partner disposes of a 

17 partnership interest, the adjusted basis 

18 of the partner in the partnership inter19 est shall be increased immediately be20 fore the disposition by the amount of 

21 the excess (if any) of the amount of the 

22 basis reduction under subclause (I) 

23 over the portion of any excess business 

24 interest allocated to the partner under 

25 clause (i)(II) which has previously 
155 

† HR 1 EAS 

1 been treated under clause (ii) as busi2 ness interest paid or accrued by the 

3 partner. The preceding sentence shall 

4 also apply to transfers of the partner5 ship interest (including by reason of 

6 death) in a transaction in which gain 

7 is not recognized in whole or in part. 

8 No deduction shall be allowed to the 

9 transferor or transferee under this 

10 chapter for any excess business interest 

11 resulting in a basis increase under this 

12 subclause. 

13 ‘‘(C) EXCESS TAXABLE INCOME.—The term 

14 ‘excess taxable income’ means, with respect to 

15 any partnership, the amount which bears the 

16 same ratio to the partnership’s adjusted taxable 

17 income as— 

18 ‘‘(i) the excess (if any) of— 

19 ‘‘(I) the amount determined for 

20 the partnership under paragraph 

21 (1)(B), over 

22 ‘‘(II) the amount (if any) by 

23 which the business interest of the part24 nership exceeds the business interest in25 come of the partnership, bears to 
156 

† HR 1 EAS 

1 ‘‘(ii) the amount determined for the 

2 partnership under paragraph (1)(B). 

3 ‘‘(D) APPLICATION TO S CORPORATIONS.— 

4 Rules similar to the rules of subparagraphs (A) 

5 and (C) shall apply with respect to any S cor6 poration and its shareholders. 

7 ‘‘(5) BUSINESS INTEREST.—For purposes of this 

8 subsection, the term ‘business interest’ means any in9 terest paid or accrued on indebtedness properly allo10 cable to a trade or business. Such term shall not in11 clude investment interest (within the meaning of sub12 section (d)). 

13 ‘‘(6) BUSINESS INTEREST INCOME.—For pur14 poses of this subsection, the term ‘business interest in15 come’ means the amount of interest includible in the 

16 gross income of the taxpayer for the taxable year 

17 which is properly allocable to a trade or business. 

18 Such term shall not include investment income (with19 in the meaning of subsection (d)). 

20 ‘‘(7) TRADE OR BUSINESS.—For purposes of this 

21 subsection— 

22 ‘‘(A) IN GENERAL.—The term ‘trade or 

23 business’ shall not include— 

24 ‘‘(i) the trade or business of performing 

25 services as an employee, 
157 

† HR 1 EAS 

1 ‘‘(ii) any electing real property trade 

2 or business, 

3 ‘‘(iii) any electing farming business, or 

4 ‘‘(iv) the trade or business of the fur5 nishing or sale of— 

6 ‘‘(I) electrical energy, water, or 

7 sewage disposal services, 

8 ‘‘(II) gas or steam through a local 

9 distribution system, or 

10 ‘‘(III) transportation of gas or 

11 steam by pipeline, 

12 if the rates for such furnishing or sale, as 

13 the case may be, have been established or 

14 approved by a State or political subdivision 

15 thereof, by any agency or instrumentality of 

16 the United States, by a public service or 

17 public utility commission or other similar 

18 body of any State or political subdivision 

19 thereof, or by the governing or ratemaking 

20 body of an electric cooperative. 

21 ‘‘(B) ELECTING REAL PROPERTY TRADE OR

22 BUSINESS.—For purposes of this paragraph, the 

23 term ‘electing real property trade or business’ 

24 means any trade or business which is described 

25 in section 469(c)(7)(C) and which makes an elec-
158 

† HR 1 EAS 

1 tion under this subparagraph. Any such election 

2 shall be made at such time and in such manner 

3 as the Secretary shall prescribe, and, once made, 

4 shall be irrevocable. 

5 ‘‘(C) ELECTING FARMING BUSINESS.—For 

6 purposes of this paragraph, the term ‘electing 

7 farming business’ means— 

8 ‘‘(i) a farming business (as defined in 

9 section 263A(e)(4)) which makes an election 

10 under this subparagraph, or 

11 ‘‘(ii) any trade or business of a speci12 fied agricultural or horticultural coopera13 tive (as defined in section 199A(g)(2)) with 

14 respect to which the cooperative makes an 

15 election under this subparagraph. 

16 Any such election shall be made at such time 

17 and in such manner as the Secretary shall pre18 scribe, and, once made, shall be irrevocable. 

19 ‘‘(8) ADJUSTED TAXABLE INCOME.—For pur20 poses of this subsection, the term ‘adjusted taxable in21 come’ means the taxable income of the taxpayer— 

22 ‘‘(A) computed without regard to— 

23 ‘‘(i) any item of income, gain, deduc24 tion, or loss which is not properly allocable 

25 to a trade or business, 
159 

† HR 1 EAS 

1 ‘‘(ii) any business interest or business 

2 interest income, 

3 ‘‘(iii) the amount of any net operating 

4 loss deduction under section 172, and 

5 ‘‘(iv) the amount of any deduction al6 lowed under section 199 or 199A, and 

7 ‘‘(B) computed with such other adjustments 

8 as provided by the Secretary. 

9 ‘‘(9) CROSS REFERENCES.— 

10 ‘‘(A) For requirement that an electing real 

11 property trade or business use the alternative de12 preciation system, see section 168(g)(1)(F). 

13 ‘‘(B) For requirement that an electing farm14 ing business use the alternative depreciation sys15 tem, see section 168(g)(1)(G).’’. 

16 (b) TREATMENT OF CARRYFORWARD OF DISALLOWED

17 BUSINESS INTEREST IN CERTAIN CORPORATE ACQUISI18 TIONS.— 

19 (1) IN GENERAL.—Section 381(c) is amended by 

20 inserting after paragraph (19) the following new 

21 paragraph: 

22 ‘‘(20) CARRYFORWARD OF DISALLOWED BUSI23 NESS INTEREST.—The carryover of disallowed busi24 ness interest described in section 163(j)(2) to taxable 
160 

† HR 1 EAS 

1 years ending after the date of distribution or trans2 fer.’’. 

3 (2) APPLICATION OF LIMITATION.—Section 

4 382(d) is amended by adding at the end the following 

5 new paragraph: 

6 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS7 ALLOWED INTEREST.—The term ‘pre-change loss’ 

8 shall include any carryover of disallowed interest de9 scribed in section 163(n) under rules similar to the 

10 rules of paragraph (1).’’. 

11 (3) CONFORMING AMENDMENT.—Section 

12 382(k)(1) is amended by inserting after the first sen13 tence the following: ‘‘Such term shall include any cor14 poration entitled to use a carryforward of disallowed 

15 interest described in section 381(c)(20).’’. 

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

17 section shall apply to taxable years beginning after Decem18 ber 31, 2017. 

19 SEC. 13302. MODIFICATION OF NET OPERATING LOSS DE20 DUCTION. 

21 (a) LIMITATION ON DEDUCTION.— 

22 (1) IN GENERAL.—Section 172(a) is amended to 

23 read as follows: 
161 

† HR 1 EAS 

1 ‘‘(a) DEDUCTION ALLOWED.—There shall be allowed 

2 as a deduction for the taxable year an amount equal to the 

3 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 (80 percent in the case of taxable 

8 years beginning after December 31, 2022) of taxable 

9 income computed without regard to the deduction al10 lowable under this section. 

11 For purposes of this subtitle, the term ‘net operating loss 

12 deduction’ means the deduction allowed by this subsection.’’. 

13 (2) COORDINATION OF LIMITATION WITH

14 CARRYBACKS AND CARRYOVERS.—Section 172(b)(2) is 

15 amended by striking ‘‘shall be computed—’’ and all 

16 that follows and inserting ‘‘shall— 

17 ‘‘(A) be computed with the modifications 

18 specified in subsection (d) other than paragraphs 

19 (1), (4), and (5) thereof, and by determining the 

20 amount of the net operating loss deduction with21 out regard to the net operating loss for the loss 

22 year or for any taxable year thereafter, 

23 ‘‘(B) not be considered to be less than zero, 

24 and 
162 

† HR 1 EAS 

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 of 

6 subparagraph (A), by striking the period at the end 

7 of subparagraph (B) and inserting ‘‘; and’’, and by 

8 adding at the end the following new subparagraph: 

9 ‘‘(C) subsection (a)(2) shall be applied by 

10 substituting ‘real estate investment trust taxable 

11 income (as defined in section 857(b)(2) but with12 out regard to the deduction for dividends paid 

13 (as defined in section 561))’ for ‘taxable in14 come’.’’. 

15 (b) REPEAL OF NET OPERATING LOSS CARRYBACK; 

16 INDEFINITE CARRYFORWARD.— 

17 (1) IN GENERAL.—Section 172(b)(1)(A) is 

18 amended— 

19 (A) by striking ‘‘shall be a net operating 

20 loss carryback to each of the 2 taxable years’’ in 

21 clause (i) and inserting ‘‘except as otherwise pro22 vided in this paragraph, shall not be a net oper23 ating loss carryback to any taxable year’’, and 
163 

† HR 1 EAS 

1 (B) by striking ‘‘to each of the 20 taxable 

2 years’’ in clause (ii) and inserting ‘‘to each tax3 able year’’. 

4 (2) CONFORMING AMENDMENT.—Section 

5 172(b)(1) is amended by striking subparagraphs (B) 

6 through (F). 

7 (c) TREATMENT OF FARMING LOSSES.— 

8 (1) ALLOWANCE OF CARRYBACKS.—Section 

9 172(b)(1), as amended by subsection (b)(2), is amend10 ed by adding at the end the following new subpara11 graph: 

12 ‘‘(B) FARMING LOSSES.— 

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

14 portion of a net operating loss for the tax15 able year which is a farming loss with re16 spect to the taxpayer, such loss shall be a 

17 net operating loss carryback to each of the 

18 2 taxable years preceding the taxable year 

19 of such loss. 

20 ‘‘(ii) FARMING LOSS.—For purposes of 

21 this section, the term ‘farming loss’ means 

22 the lesser of— 

23 ‘‘(I) the amount which would be 

24 the net operating loss for the taxable 

25 year if only income and deductions at-
164 

† HR 1 EAS 

1 tributable to farming businesses (as de2 fined in section 263A(e)(4)) are taken 

3 into account, or 

4 ‘‘(II) the amount of the net oper5 ating loss for such taxable year. 

6 ‘‘(iii) COORDINATION WITH PARA7 GRAPH (2).—For purposes of applying para8 graph (2), a farming loss for any taxable 

9 year shall be treated as a separate net oper10 ating loss for such taxable year to be taken 

11 into account after the remaining portion of 

12 the net operating loss for such taxable year. 

13 ‘‘(iv) ELECTION.—Any taxpayer enti14 tled to a 2-year carryback under clause (i) 

15 from any loss year may elect not to have 

16 such clause apply to such loss year. Such 

17 election shall be made in such manner as 

18 prescribed by the Secretary and shall be 

19 made by the due date (including extensions 

20 of time) for filing the taxpayer’s return for 

21 the taxable year of the net operating loss. 

22 Such election, once made for any taxable 

23 year, shall be irrevocable for such taxable 

24 year.’’. 

25 (2) CONFORMING AMENDMENTS.— 
165 

† HR 1 EAS 

1 (A) Section 172 is amended by striking sub2 sections (f), (g), and (h), and by redesignating 

3 subsection (i) as subsection (f). 

4 (B) Section 537(b)(4) is amended by insert5 ing ‘‘(as in effect before the date of enactment of 

6 the Tax Cuts and Jobs Act)’’ after ‘‘as defined in 

7 section 172(f)’’. 

8 (d) TREATMENT OF CERTAIN INSURANCE LOSSES.— 

9 (1) TREATMENT OF CARRYFORWARDS AND

10 CARRYBACKS.—Section 172(b)(1), as amended by sub11 sections (b)(2) and (c)(1), is amended by adding at 

12 the end the following new subparagraph: 

13 ‘‘(C) INSURANCE COMPANIES.—In the case 

14 of an insurance company (as defined in section 

15 816(a)) other than a life insurance company, the 

16 net operating loss for any taxable year— 

17 ‘‘(i) shall be a net operating loss 

18 carryback to each of the 2 taxable years pre19 ceding the taxable year of such loss, and 

20 ‘‘(ii) shall be a net operating loss car21 ryover to each of the 20 taxable years fol22 lowing the taxable year of the loss.’’. 

23 (2) EXEMPTION FROM LIMITATION.—Section 172, 

24 as amended by subsection (c)(2)(A), is amended by re25 designating subsection (f) as subsection (g) and in-
166 

† HR 1 EAS 

1 serting after subsection (e) the following new sub2 section: 

3 ‘‘(f) SPECIAL RULE FOR INSURANCE COMPANIES.—In 

4 the case of an insurance company (as defined in section 

5 816(a)) other than a life insurance company— 

6 ‘‘(1) the amount of the deduction allowed under 

7 subsection (a) shall be the aggregate of the net oper8 ating loss carryovers to such year, plus the net oper9 ating loss carrybacks to such year, and 

10 ‘‘(2) subparagraph (C) of subsection (b)(2) shall 

11 not apply.’’. 

12 (e) EFFECTIVE DATE.— 

13 (1) NET OPERATING LOSS LIMITATION.—The 

14 amendments made by subsections (a) and (d)(2) shall 

15 apply to losses arising in taxable years beginning 

16 after December 31, 2017. 

17 (2) CARRYFORWARDS AND CARRYBACKS.—The 

18 amendments made by subsections (b), (c), and (d)(1) 

19 shall apply to net operating losses arising in taxable 

20 years ending after December 31, 2017. 

21 SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY. 

22 (a) IN GENERAL.—Section 1031(a)(1) is amended by 

23 striking ‘‘property’’ each place it appears and inserting 

24 ‘‘real property’’. 

25 (b) CONFORMING AMENDMENTS.— 
167 

† HR 1 EAS 

1 (1)(A) Paragraph (2) of section 1031(a) is 

2 amended to read as follows: 

3 ‘‘(2) EXCEPTION FOR REAL PROPERTY HELD FOR

4 SALE.—This subsection shall not apply to any ex5 change of real property held primarily for sale.’’. 

6 (B) Section 1031 is amended by striking sub7 section (i). 

8 (2) Section 1031 is amended by striking sub9 section (e). 

10 (3) Section 1031, as amended by paragraph (2), 

11 is amended by inserting after subsection (d) the fol12 lowing new subsection: 

13 ‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.—For 

14 purposes of this section, an interest in a partnership which 

15 has in effect a valid election under section 761(a) to be ex16 cluded from the application of all of subchapter K shall be 

17 treated as an interest in each of the assets of such partner18 ship and not as an interest in a partnership.’’. 

19 (4) Section 1031(h) is amended to read as fol20 lows: 

21 ‘‘(h) SPECIAL RULES FOR FOREIGN REAL PROP22 ERTY.—Real property located in the United States and real 

23 property located outside the United States are not property 

24 of a like kind.’’. 
168 

† HR 1 EAS 

1 (5) The heading of section 1031 is amended by 

2 striking ‘‘PROPERTY’’ and inserting ‘‘REAL PROP3 ERTY’’. 

4 (6) The table of sections for part III of sub5 chapter O of chapter 1 is amended by striking the 

6 item relating to section 1031 and inserting the fol7 lowing new item: 

‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’. 

8 (c) EFFECTIVE DATE.— 

9 (1) IN GENERAL.—Except as otherwise provided 

10 in this subsection, the amendments made by this sec11 tion shall apply to exchanges completed after Decem12 ber 31, 2017. 

13 (2) TRANSITION RULE.—The amendments made 

14 by this section shall not apply to any exchange if— 

15 (A) the property disposed of by the taxpayer 

16 in the exchange is disposed of on or before De17 cember 31 2017, or 

18 (B) the property received by the taxpayer in 

19 the exchange is received on or before December 

20 31, 2017. 

21 SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF 

22 EXPENSES FOR FRINGE BENEFITS. 

23 (a) NO DEDUCTION ALLOWED FOR ENTERTAINMENT

24 EXPENSES.— 

25 (1) IN GENERAL.—Section 274(a) is amended— 
169 

† HR 1 EAS 

1 (A) in paragraph (1)(A), by striking ‘‘un2 less’’ and all that follows through ‘‘trade or busi3 ness,’’, 

4 (B) by striking the flush sentence at the end 

5 of paragraph (1), and 

6 (C) by striking paragraph (2)(C). 

7 (2) CONFORMING AMENDMENTS.— 

8 (A) Section 274(d) is amended— 

9 (i) by striking paragraph (2) and re10 designating paragraphs (3) and (4) as 

11 paragraphs (2) and (3), respectively, and 

12 (ii) in the flush text following para13 graph (3) (as so redesignated)— 

14 (I) by striking ‘‘, entertainment, 

15 amusement, recreation, or use of the fa16 cility or property,’’ in item (B), and 

17 (II) by striking ‘‘(D) the business 

18 relationship to the taxpayer of persons 

19 entertained, using the facility or prop20 erty, or receiving the gift’’ and insert21 ing ‘‘(D) the business relationship to 

22 the taxpayer of the person receiving the 

23 benefit’’, 

24 (B) Section 274 is amended by striking sub25 section (l). 
170 

† HR 1 EAS 

1 (C) Section 274(n) is amended by striking 

2 ‘‘AND ENTERTAINMENT’’ in the heading. 

3 (D) Section 274(n)(1) is amended to read 

4 as follows: 

5 ‘‘(1) IN GENERAL.—The amount allowable as a 

6 deduction under this chapter for any expense for food 

7 or beverages shall not exceed 50 percent of the amount 

8 of such expense which would (but for this paragraph) 

9 be allowable as a deduction under this chapter.’’. 

10 (E) Section 274(n)(2) is amended— 

11 (i) in subparagraph (B), by striking 

12 ‘‘in the case of an expense for food or bev13 erages,’’, 

14 (ii) by striking subparagraph (C) and 

15 redesignating subparagraphs (D) and (E) 

16 as subparagraphs (C) and (D), respectively, 

17 (iii) by striking ‘‘of subparagraph (E)’’ 

18 the last sentence and inserting ‘‘of subpara19 graph (D)’’, and 

20 (iv) by striking ‘‘in subparagraph (D)’’ 

21 in the last sentence and inserting ‘‘in sub22 paragraph (C)’’. 

23 (F) Clause (iv) of section 7701(b)(5)(A) is 

24 amended to read as follows: 
171 

† HR 1 EAS 

1 ‘‘(iv) a professional athlete who is tem2 porarily in the United States to compete in 

3 a sports event— 

4 ‘‘(I) which is organized for the 

5 primary purpose of benefiting an orga6 nization which is described in section 

7 501(c)(3) and exempt from tax under 

8 section 501(a), 

9 ‘‘(II) all of the net proceeds of 

10 which are contributed to such organi11 zation, and, 

12 ‘‘(III) which utilizes volunteers for 

13 substantially all of the work performed 

14 in carrying out such event.’’. 

15 (b) ONLY 50 PERCENT OF EXPENSES FOR MEALS PRO16 VIDED ON OR NEAR BUSINESS PREMISES ALLOWED AS DE17 DUCTION.—Paragraph (2) of section 274(n), as amended by 

18 subsection (a), is amended— 

19 (1) by striking subparagraph (B), 

20 (2) by redesignating subparagraphs (C) and (D) 

21 as subparagraphs (B) and (C), respectively, 

22 (3) by striking ‘‘of subparagraph (D)’’ in the last 

23 sentence and inserting ‘‘of subparagraph (C)’’, and 

24 (4) by striking ‘‘in subparagraph (C)’’ in the 

25 last sentence and inserting ‘‘in subparagraph (B)’’. 
172 

† HR 1 EAS 

1 (c) TREATMENT OF TRANSPORTATION BENEFITS.— 

2 Section 274, as amended by subsection (a), is amended— 

3 (1) in subsection (a)— 

4 (A) in the heading, by striking ‘‘OR RECRE5 ATION’’ and inserting ‘‘RECREATION, OR QUALI6 FIED TRANSPORTATION FRINGES’’, and 

7 (B) by adding at the end the following new 

8 paragraph: 

9 ‘‘(4) QUALIFIED TRANSPORTATION FRINGES.—No 

10 deduction shall be allowed under this chapter for the 

11 expense of any qualified transportation fringe (as de12 fined in section 132(f)) provided to an employee of the 

13 taxpayer.’’, and 

14 (2) by inserting after subsection (k) the following 

15 new subsection: 

16 ‘‘(l) TRANSPORTATION AND COMMUTING BENEFITS.— 

17 No deduction shall be allowed under this chapter for any 

18 expense incurred for providing any transportation, or any 

19 payment or reimbursement, to an employee of the taxpayer 

20 in connection with travel between the employee’s residence 

21 and place of employment, except as necessary for ensuring 

22 the safety of the employee.’’. 

23 (d) ELIMINATION OF DEDUCTION FOR MEALS PRO24 VIDED AT CONVENIENCE OF EMPLOYER.—Section 274, as 

25 amended by subsection (c), is amended— 
173 

† HR 1 EAS 

1 (1) by redesignating subsection (o) as subsection 

2 (p), and 

3 (2) by inserting after subsection (n) the following 

4 new subsection: 

5 ‘‘(o) MEALS PROVIDED AT CONVENIENCE OF EM6 PLOYER.—No deduction shall be allowed under this chapter 

7 for— 

8 ‘‘(1) any expense for the operation of a facility 

9 described in section 132(e)(2), and any expense for 

10 food or beverages, including under section 132(e)(1), 

11 associated with such facility, or 

12 ‘‘(2) any expense for meals described in section 

13 119(a).’’. 

14 (e) EFFECTIVE DATE.— 

15 (1) IN GENERAL.—Except as provided in para16 graph (2), the amendments made by this section shall 

17 apply to amounts incurred or paid after December 

18 31, 2017. 

19 (2) EFFECTIVE DATE FOR ELIMINATION OF DE20 DUCTION FOR MEALS PROVIDED AT CONVENIENCE OF

21 EMPLOYER.—The amendments made by subsection (d) 

22 shall apply to amounts incurred or paid after Decem23 ber 31, 2025. 
174 

† HR 1 EAS 

1 SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIB2 UTABLE TO DOMESTIC PRODUCTION ACTIVI3 TIES. 

4 (a) REPEAL.— 

5 (1) TAXPAYERS OTHER THAN CORPORATIONS.— 

6 Section 199 is amended by adding at the end the fol7 lowing new subsection: 

8 ‘‘(e) PARTIAL TERMINATION FOR TAXPAYERS OTHER

9 THAN CORPORATIONS.—In the case of a taxpayer other 

10 than a C corporation, this section shall not apply to any 

11 taxable year beginning after December 31, 2017.’’. 

12 (2) CERTAIN SPECIAL RULES FOR COOPERA13 TIVES.—Section 199(d)(3) is amended by adding at 

14 the end the following new subparagraph: 

15 ‘‘(G) PARTIAL TERMINATION.—Subpara16 graphs (A) and (B) shall not apply to any tax17 able year beginning after December 31, 2017.’’. 

18 (3) TOTAL REPEAL.—Part VI of subchapter B of 

19 chapter 1, as amended by paragraphs (1) and (2), is 

20 amended by striking section 199 (and by striking the 

21 item relating to such section in the table of sections 

22 for such part). 

23 (b) CONFORMING AMENDMENTS.— 

24 (1) Sections 74(d)(2)(B), 86(b)(2)(A), 

25 135(c)(4)(A), 137(b)(3)(A), 219(g)(3)(A)(ii), 

26 221(b)(2)(C), 222(b)(2)(C), 246(b)(1), and 
175 

† HR 1 EAS 

1 469(i)(3)(F)(iii) are each amended by striking 

2 ‘‘199,’’. 

3 (2) Section 170(b)(2)(D), as amended by section 

4 11011, is amended by striking clause (iv) and by re5 designating clauses (v) and (vi) as redesignating 

6 clauses (iv) as clause (v), respectively. 

7 (3) Section 172(d) is amended by striking para8 graph (7). 

9 (4) Section 613(a) is amended by striking ‘‘and 

10 without the deduction under section 199’’. 

11 (5) Section 613A(d)(1) is amended by striking 

12 subparagraph (B) and by redesignating subpara13 graphs (C), (D), and (E) as subparagraphs (B), (C), 

14 and (D). 

15 (c) EFFECTIVE DATE.— 

16 (1) IN GENERAL.—Except as provided in para17 graph (2), the amendments made by this section shall 

18 apply to taxable years beginning after December 31, 

19 2018. 

20 (2) EARLIER TERMINATION FOR CERTAIN TAX21 PAYERS.—The amendment made by paragraphs (1) 

22 and (2) of subsection (a) shall apply to taxable years 

23 beginning after December 31, 2017. 
176 

† HR 1 EAS 

1 SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, 

2 PENALTIES, AND OTHER AMOUNTS. 

3 (a) DENIAL OF DEDUCTION.— 

4 (1) IN GENERAL.—Subsection (f) of section 162 

5 is amended to read as follows: 

6 ‘‘(f) FINES, PENALTIES, AND OTHER AMOUNTS.— 

7 ‘‘(1) IN GENERAL.—Except as provided in the 

8 following paragraphs of this subsection, no deduction 

9 otherwise allowable shall be allowed under this chap10 ter for any amount paid or incurred (whether by suit, 

11 agreement, or otherwise) to, or at the direction of, a 

12 government or governmental entity in relation to the 

13 violation of any law or the investigation or inquiry 

14 by such government or entity into the potential viola15 tion of any law. 

16 ‘‘(2) EXCEPTION FOR AMOUNTS CONSTITUTING

17 RESTITUTION OR PAID TO COME INTO COMPLIANCE

18 WITH LAW.— 

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

20 not apply to any amount that— 

21 ‘‘(i) the taxpayer establishes— 

22 ‘‘(I) constitutes restitution (in23 cluding remediation of property) for 

24 damage or harm which was or may be 

25 caused by the violation of any law or 

26 the potential violation of any law, or 
177 

† HR 1 EAS 

1 ‘‘(II) is paid to come into compli2 ance with any law which was violated 

3 or otherwise involved in the investiga4 tion or inquiry described in paragraph 

5 (1), 

6 ‘‘(ii) is identified as restitution or as 

7 an amount paid to come into compliance 

8 with such law, as the case may be, in the 

9 court order or settlement agreement, and 

10 ‘‘(iii) in the case of any amount of res11 titution for failure to pay any tax imposed 

12 under this title in the same manner as if 

13 such amount were such tax, would have 

14 been allowed as a deduction under this 

15 chapter if it had been timely paid. 

16 The identification under clause (ii) alone shall 

17 not be sufficient to make the establishment re18 quired under clause (i). 

19 ‘‘(B) LIMITATION.—Subparagraph (A) shall 

20 not apply to any amount paid or incurred as re21 imbursement to the government or entity for the 

22 costs of any investigation or litigation. 

23 ‘‘(3) EXCEPTION FOR AMOUNTS PAID OR IN24 CURRED AS THE RESULT OF CERTAIN COURT OR25 DERS.—Paragraph (1) shall not apply to any 
178 

† HR 1 EAS 

1 amount paid or incurred by reason of any order of 

2 a court in a suit in which no government or govern3 mental entity is a party. 

4 ‘‘(4) EXCEPTION FOR TAXES DUE.—Paragraph 

5 (1) shall not apply to any amount paid or incurred 

6 as taxes due. 

7 ‘‘(5) TREATMENT OF CERTAIN NONGOVERN8 MENTAL REGULATORY ENTITIES.—For purposes of 

9 this subsection, the following nongovernmental entities 

10 shall be treated as governmental entities: 

11 ‘‘(A) Any nongovernmental entity which ex12 ercises self-regulatory powers (including impos13 ing sanctions) in connection with a qualified 

14 board or exchange (as defined in section 

15 1256(g)(7)). 

16 ‘‘(B) To the extent provided in regulations, 

17 any nongovernmental entity which exercises self18 regulatory powers (including imposing sanc19 tions) as part of performing an essential govern20 mental function.’’. 

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

22 this subsection shall apply to amounts paid or in23 curred on or after the date of the enactment of this 

24 Act, except that such amendments shall not apply to 

25 amounts paid or incurred under any binding order or 
179 

† HR 1 EAS 

1 agreement entered into before such date. Such excep2 tion shall not apply to an order or agreement requir3 ing court approval unless the approval was obtained 

4 before such date. 

5 (b) REPORTING OF DEDUCTIBLE AMOUNTS.— 

6 (1) IN GENERAL.—Subpart B of part III of sub7 chapter A of chapter 61 is amended by inserting after 

8 section 6050W the following new section: 

9 ‘‘SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN 

10 FINES, PENALTIES, AND OTHER AMOUNTS. 

11 ‘‘(a) REQUIREMENT OF REPORTING.— 

12 ‘‘(1) IN GENERAL.—The appropriate official of 

13 any government or any entity described in section 

14 162(f)(5) which is involved in a suit or agreement de15 scribed in paragraph (2) shall make a return in such 

16 form as determined by the Secretary setting forth— 

17 ‘‘(A) the amount required to be paid as a 

18 result of the suit or agreement to which para19 graph (1) of section 162(f) applies, 

20 ‘‘(B) any amount required to be paid as a 

21 result of the suit or agreement which constitutes 

22 restitution or remediation of property, and 

23 ‘‘(C) any amount required to be paid as a 

24 result of the suit or agreement for the purpose of 

25 coming into compliance with any law which was 
180 

† HR 1 EAS 

1 violated or involved in the investigation or in2 quiry. 

3 ‘‘(2) SUIT OR AGREEMENT DESCRIBED.— 

4 ‘‘(A) IN GENERAL.—A suit or agreement is 

5 described in this paragraph if— 

6 ‘‘(i) it is— 

7 ‘‘(I) a suit with respect to a viola8 tion of any law over which the govern9 ment or entity has authority and with 

10 respect to which there has been a court 

11 order, or 

12 ‘‘(II) an agreement which is en13 tered into with respect to a violation of 

14 any law over which the government or 

15 entity has authority, or with respect to 

16 an investigation or inquiry by the gov17 ernment or entity into the potential 

18 violation of any law over which such 

19 government or entity has authority, 

20 and 

21 ‘‘(ii) the aggregate amount involved in 

22 all court orders and agreements with respect 

23 to the violation, investigation, or inquiry is 

24 $600 or more. 
181 

† HR 1 EAS 

1 ‘‘(B) ADJUSTMENT OF REPORTING THRESH2 OLD.—The Secretary shall adjust the $600 

3 amount in subparagraph (A)(ii) as necessary in 

4 order to ensure the efficient administration of the 

5 internal revenue laws. 

6 ‘‘(3) TIME OF FILING.—The return required 

7 under this subsection shall be filed at the time the 

8 agreement is entered into, as determined by the Sec9 retary. 

10 ‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVIDUALS

11 INVOLVED IN THE SETTLEMENT.—Every person required to 

12 make a return under subsection (a) shall furnish to each 

13 person who is a party to the suit or agreement a written 

14 statement showing— 

15 ‘‘(1) the name of the government or entity, and 

16 ‘‘(2) the information supplied to the Secretary 

17 under subsection (a)(1). 

18 The written statement required under the preceding sen19 tence shall be furnished to the person at the same time the 

20 government or entity provides the Secretary with the infor21 mation required under subsection (a). 

22 ‘‘(c) APPROPRIATE OFFICIAL DEFINED.—For purposes 

23 of this section, the term ‘appropriate official’ means the offi24 cer or employee having control of the suit, investigation, 
182 

† HR 1 EAS 

1 or inquiry or the person appropriately designated for pur2 poses of this section.’’. 

3 (2) CONFORMING AMENDMENT.—The table of sec4 tions for subpart B of part III of subchapter A of 

5 chapter 61 is amended by inserting after the item re6 lating to section 6050W the following new item: 

‘‘Sec. 6050X. Information with respect to certain fines, penalties, and other 

amounts.’’. 

7 (3) EFFECTIVE DATE.—The amendments made 

8 by this subsection shall apply to amounts paid or in9 curred on or after the date of the enactment of this 

10 Act, except that such amendments shall not apply to 

11 amounts paid or incurred under any binding order or 

12 agreement entered into before such date. Such excep13 tion shall not apply to an order or agreement requir14 ing court approval unless the approval was obtained 

15 before such date. 

16 SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS 

17 SUBJECT TO NONDISCLOSURE AGREEMENTS 

18 PAID IN CONNECTION WITH SEXUAL HARASS19 MENT OR SEXUAL ABUSE. 

20 (a) DENIAL OF DEDUCTION.—Section 162 is amended 

21 by redesignating subsection (q) as subsection (r) and by in22 serting after subsection (p) the following new subsection: 
183 

† HR 1 EAS 

1 ‘‘(q) PAYMENTS RELATED TO SEXUAL HARASSMENT

2 AND SEXUAL ABUSE.—No deduction shall be allowed under 

3 this chapter for— 

4 ‘‘(1) any settlement or payment related to sexual 

5 harassment or sexual abuse if such settlement or pay6 ment is subject to a nondisclosure agreement, or 

7 ‘‘(2) attorney’s fees related to such a settlement 

8 or payment.’’. 

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

10 section shall apply to amounts paid or incurred after the 

11 date of the enactment of this Act. 

12 SEC. 13308. REPEAL OF DEDUCTION FOR LOCAL LOBBYING 

13 EXPENSES. 

14 (a) IN GENERAL.—Section 162(e) is amended by strik15 ing paragraphs (2) and (7) and by redesignating para16 graphs (3), (4), (5), (6), and (8) as paragraphs (2), (3), 

17 (4), (5), and (6), respectively. 

18 (b) CONFORMING AMENDMENT.—Section 

19 6033(e)(1)(B)(ii) is amended by striking ‘‘section 

20 162(e)(5)(B)(ii)’’ and inserting ‘‘section 162(e)(4)(B)(ii)’’. 

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

22 section shall apply to amounts paid or incurred on or after 

23 the date of the enactment of this Act. 
184 

† HR 1 EAS 

1 SEC. 13309. RECHARACTERIZATION OF CERTAIN GAINS IN 

2 THE CASE OF PARTNERSHIP PROFITS INTER3 ESTS HELD IN CONNECTION WITH PERFORM4 ANCE OF INVESTMENT SERVICES. 

5 (a) IN GENERAL.—Part IV of subchapter O of chapter 

6 1 is amended— 

7 (1) by redesignating section 1061 as section 

8 1062, and 

9 (2) by inserting after section 1060 the following 

10 new section: 

11 ‘‘SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNEC12 TION WITH PERFORMANCE OF SERVICES. 

13 ‘‘(a) IN GENERAL.—If one or more applicable partner14 ship interests are held by a taxpayer at any time during 

15 the taxable year, the excess (if any) of— 

16 ‘‘(1) the taxpayer’s net long-term capital gain 

17 with respect to such interests for such taxable year, 

18 over 

19 ‘‘(2) the taxpayer’s net long-term capital gain 

20 with respect to such interests for such taxable year 

21 computed by applying paragraphs (3) and (4) of sec22 tions 1222 by substituting ‘3 years’ for ‘1 year’, 

23 shall be treated as short-term capital gain, notwithstanding 

24 section 83 or any election in effect under section 83(b). 

25 ‘‘(b) SPECIAL RULE.—To the extent provided by the 

26 Secretary, subsection (a) shall not apply to income or gain 
185 

† HR 1 EAS 

1 attributable to any asset not held for portfolio investment 

2 on behalf of third party investors. 

3 ‘‘(c) APPLICABLE PARTNERSHIP INTEREST.—For pur4 poses of this section— 

5 ‘‘(1) IN GENERAL.—Except as provided in this 

6 paragraph or paragraph (4), the term ‘applicable 

7 partnership interest’ means any interest in a partner8 ship which, directly or indirectly, is transferred to (or 

9 is held by) the taxpayer in connection with the per10 formance of substantial services by the taxpayer, or 

11 any other related person, in any applicable trade or 

12 business. The previous sentence shall not apply to an 

13 interest held by a person who is employed by another 

14 entity that is conducting a trade or business (other 

15 than an applicable trade or business) and only pro16 vides services to such other entity. 

17 ‘‘(2) APPLICABLE TRADE OR BUSINESS.—The 

18 term ‘applicable trade or business’ means any activ19 ity conducted on a regular, continuous, and substan20 tial basis which, regardless of whether the activity is 

21 conducted in one or more entities, consists, in whole 

22 or in part, of— 

23 ‘‘(A) raising or returning capital, and 

24 ‘‘(B) either— 
186 

† HR 1 EAS 

1 ‘‘(i) investing in (or disposing of) spec2 ified assets (or identifying specified assets 

3 for such investing or disposition), or 

4 ‘‘(ii) developing specified assets. 

5 ‘‘(3) SPECIFIED ASSET.—The term ‘specified 

6 asset’ means securities (as defined in section 475(c)(2) 

7 without regard to the last sentence thereof), commod8 ities (as defined in section 475(e)(2)), real estate held 

9 for rental or investment, cash or cash equivalents, op10 tions or derivative contracts with respect to any of the 

11 foregoing, and an interest in a partnership to the ex12 tent of the partnership’s proportionate interest in any 

13 of the foregoing. 

14 ‘‘(4) EXCEPTIONS.—The term ‘applicable part15 nership interest’ shall not include— 

16 ‘‘(A) any interest in a partnership directly 

17 or indirectly held by a corporation, or 

18 ‘‘(B) any capital interest in the partnership 

19 which provides the taxpayer with a right to 

20 share in partnership capital commensurate 

21 with— 

22 ‘‘(i) the amount of capital contributed 

23 (determined at the time of receipt of such 

24 partnership interest), or 
187 

† HR 1 EAS 

1 ‘‘(ii) the value of such interest subject 

2 to tax under section 83 upon the receipt or 

3 vesting of such interest. 

4 ‘‘(5) THIRD PARTY INVESTOR.—The term ‘third 

5 party investor’ means a person who— 

6 ‘‘(A) holds an interest in the partnership 

7 which does not constitute property held in con8 nection with an applicable trade or business; 

9 and 

10 ‘‘(B) is not (and has not been) actively en11 gaged, and is (and was) not related to a person 

12 so engaged, in (directly or indirectly) providing 

13 substantial services described in paragraph (1) 

14 for such partnership or any applicable trade or 

15 business. 

16 ‘‘(d) TRANSFER OF APPLICABLE PARTNERSHIP INTER17 EST TO RELATED PERSON.— 

18 ‘‘(1) IN GENERAL.—If a taxpayer transfers any 

19 applicable partnership interest, directly or indirectly, 

20 to a person related to the taxpayer, the taxpayer shall 

21 include in gross income (as short term capital gain) 

22 the excess (if any) of— 

23 ‘‘(A) so much of the taxpayer’s long-term 

24 capital gains with respect to such interest for 

25 such taxable year attributable to the sale or ex-
188 

† HR 1 EAS 

1 change of any asset held for not more than 3 

2 years as is allocable to such interest, over 

3 ‘‘(B) any amount treated as short term cap4 ital gain under subsection (a) with respect to the 

5 transfer of such interest. 

6 ‘‘(2) RELATED PERSON.—For purposes of this 

7 paragraph, a person is related to the taxpayer if— 

8 ‘‘(A) the person is a member of the tax9 payer’s family within the meaning of section 

10 318(a)(1), or 

11 ‘‘(B) the person performed a service within 

12 the current calendar year or the preceding three 

13 calendar years in any applicable trade or busi14 ness in which or for which the taxpayer per15 formed a service. 

16 ‘‘(e) REPORTING.—The Secretary shall require such re17 porting (at the time and in the manner prescribed by the 

18 Secretary) as is necessary to carry out the purposes of this 

19 section. 

20 ‘‘(f) REGULATIONS.—The Secretary shall issue such 

21 regulations or other guidance as is necessary or appropriate 

22 to carry out the purposes of this section’’. 

23 (b) CLERICAL AMENDMENT.—The table of sections for 

24 part IV of subchapter O of chapter 1 is amended by striking 
189 

† HR 1 EAS 

1 the item relating to 1061 and inserting the following new 

2 items: 

‘‘Sec. 1061. Partnership interests held in connection with performance of services. 

‘‘Sec. 1062. Cross references.’’. 

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

4 section shall apply to taxable years beginning after Decem5 ber 31, 2017. 

6 SEC. 13310. PROHIBITION ON CASH, GIFT CARDS, AND 

7 OTHER NON-TANGIBLE PERSONAL PROPERTY 

8 AS EMPLOYEE ACHIEVEMENT AWARDS. 

9 (a) IN GENERAL.—Subparagraph (A) of section 

10 274(j)(3) is amended— 

11 (1) by striking ‘‘The term’’ and inserting the fol12 lowing: 

13 ‘‘(i) IN GENERAL.—The term’’. 

14 (2) by redesignating clauses (i), (ii), and (iii) as 

15 subclauses (I), (II), and (III), respectively, and con16 forming the margins accordingly, and 

17 (3) by adding at the end the following new 

18 clause: 

19 ‘‘(ii) TANGIBLE PERSONAL PROP20 ERTY.—For purposes of clause (i), the term 

21 ‘tangible personal property’ shall not in22 clude— 

23 ‘‘(I) cash, cash equivalents, gift 

24 cards, gift coupons, or gift certificates 
190 

† HR 1 EAS 

1 (other than arrangements conferring 

2 only the right to select and receive tan3 gible personal property from a limited 

4 array of such items pre-selected or pre5 approved by the employer), or 

6 ‘‘(II) vacations, meals, lodging, 

7 tickets to theater or sporting events, 

8 stocks, bonds, other securities, and 

9 other similar items.’’. 

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

11 section shall apply to amounts paid or incurred after De12 cember 31, 2017. 

13 SEC. 13311. FLOOR PLAN FINANCING. 

14 (a) APPLICATION OF INTEREST LIMITATION.— 

15 (1) IN GENERAL.—Section 163(j), as amended by 

16 section 13301, is amended— 

17 (A) in paragraph (1), by striking ‘‘plus’’ at 

18 the end of subparagraph (A), by striking the pe19 riod at the end of subparagraph (B) and insert20 ing ‘‘, plus’’, and by inserting after subpara21 graph (B) the following new subparagraph: 

22 ‘‘(C) the floor plan financing interest of 

23 such taxpayer for such taxable year.’’, and 
191 

† HR 1 EAS 

1 (B) in paragraph (4)(C)(i)(II), by inserting 

2 ‘‘, reduced by the floor plan financing interest,’’ 

3 after ‘‘business interest of the partnership’’, and 

4 (C) by redesignating paragraph (9) as 

5 paragraph (10) and inserting after paragraph 

6 (8) the following new paragraph: 

7 ‘‘(9) FLOOR PLAN FINANCING INTEREST DE8 FINED.—For purposes of this subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘floor plan fi10 nancing interest’ means interest paid or accrued 

11 on floor plan financing indebtedness. 

12 ‘‘(B) FLOOR PLAN FINANCING INDEBTED13 NESS.—The term ‘floor plan financing indebted14 ness’ means indebtedness— 

15 ‘‘(i) used to finance the acquisition of 

16 motor vehicles held for sale or lease, and 

17 ‘‘(ii) secured by the inventory so ac18 quired. 

19 ‘‘(C) MOTOR VEHICLE.—The term ‘motor 

20 vehicle’ means a motor vehicle that is any of the 

21 following: 

22 ‘‘(i) An automobile. 

23 ‘‘(ii) A truck. 

24 ‘‘(iii) A recreational vehicle. 

25 ‘‘(iv) A motorcycle. 
192 

† HR 1 EAS 

1 ‘‘(v) Any self-propelled vehicle designed 

2 for transporting persons or property on a 

3 public street, highway, or road. 

4 ‘‘(vi) A boat. 

5 ‘‘(vii) Farm machinery or equip6 ment.’’. 

7 (2) EFFECTIVE DATE.—The amendments made 

8 by this subsection shall apply to taxable years begin9 ning after December 31, 2017. 

10 (b) EXCEPTION FROM 100 PERCENT EXPENSING.— 

11 (1) IN GENERAL.—Paragraph (6) of section 

12 168(k), as added by section 13201(a)(4), is amend13 ed— 

14 (A) by striking ‘‘shall not include any prop15 erty’’ and inserting ‘‘shall not include— 

16 ‘‘(A) any property’’, and 

17 (B) by adding at the end the following new 

18 subparagraph: 

19 ‘‘(B) any property used in a trade or busi20 ness that has had floor plan financing indebted21 ness (as defined in paragraph (9) of section 

22 163(j)), if the floor plan financing interest re23 lated to such indebtedness was taken into ac24 count under paragraph (1)(C) of such section.’’. 
193 

† HR 1 EAS 

1 (2) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to property placed in 

3 service after September 27, 2017, in taxable years 

4 ending after such date. 

5 SEC. 13312. ELIMINATION OF DEDUCTION FOR LIVING EX6 PENSES INCURRED BY MEMBERS OF CON7 GRESS. 

8 (a) IN GENERAL.—Subsection (a) of section 162 is 

9 amended in the matter following paragraph (3) by striking 

10 ‘‘in excess of $3,000’’. 

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

12 section shall apply to taxable years beginning after the date 

13 of the enactment of this Act. 

14 PART V—BUSINESS CREDITS 

15 Subpart A—General Provisions 

16 SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT. 

17 (a) CREDIT RATE.—Subsection (a) of section 45C is 

18 amended by striking ‘‘50 percent’’ and inserting ‘‘27.5 per19 cent’’. 

20 (b) ELECTION OF REDUCED CREDIT.—Subsection (b) 

21 of section 280C is amended by redesignating paragraph (3) 

22 as paragraph (4) and by inserting after paragraph (2) the 

23 following new paragraph: 

24 ‘‘(3) ELECTION OF REDUCED CREDIT.— 
194 

† HR 1 EAS 

1 ‘‘(A) IN GENERAL.—In the case of any tax2 able year for which an election is made under 

3 this paragraph— 

4 ‘‘(i) paragraphs (1) and (2) shall not 

5 apply, and 

6 ‘‘(ii) the amount of the credit under 

7 section 45C(a) shall be the amount deter8 mined under subparagraph (B). 

9 ‘‘(B) AMOUNT OF REDUCED CREDIT.—The 

10 amount of credit determined under this subpara11 graph for any taxable year shall be the amount 

12 equal to the excess of— 

13 ‘‘(i) the amount of credit determined 

14 under section 45C(a) without regard to this 

15 paragraph, over 

16 ‘‘(ii) the product of— 

17 ‘‘(I) the amount described in 

18 clause (i), and 

19 ‘‘(II) the maximum rate of tax 

20 under section 11(b). 

21 ‘‘(C) ELECTION.—An election under this 

22 paragraph for any taxable year shall be made 

23 not later than the time for filing the return of 

24 tax for such year (including extensions), shall be 

25 made on such return, and shall be made in such 
195 

† HR 1 EAS 

1 manner as the Secretary shall prescribe. Such an 

2 election, once made, shall be irrevocable.’’. 

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

4 section shall apply to taxable years beginning after Decem5 ber 31, 2017. 

6 SEC. 13402. REHABILITATION CREDIT LIMITED TO CER7 TIFIED HISTORIC STRUCTURES. 

8 (a) IN GENERAL.—Subsection (a) of section 47 is 

9 amended to read as follows: 

10 ‘‘(a) GENERAL RULE.— 

11 ‘‘(1) IN GENERAL.—For purposes of section 46, 

12 for any taxable year during the 5-year period begin13 ning in the taxable year in which a qualified reha14 bilitated building is placed in service, the rehabilita15 tion credit for such year is an amount equal to the 

16 ratable share for such year. 

17 ‘‘(2) RATABLE SHARE.—For purposes of para18 graph (1), the ratable share for any taxable year dur19 ing the period described in such paragraph is the 

20 amount equal to 20 percent of the qualified rehabili21 tation expenditures with respect to the qualified reha22 bilitated building, as allocated ratably to each year 

23 during such period.’’. 

24 (b) CONFORMING AMENDMENTS.— 

25 (1) Section 47(c) is amended— 
196 

† HR 1 EAS 

1 (A) in paragraph (1)— 

2 (i) in subparagraph (A), by amending 

3 clause (iii) to read as follows: 

4 ‘‘(iii) such building is a certified his5 toric structure, and’’, 

6 (ii) by striking subparagraph (B), and 

7 (iii) by redesignating subparagraphs 

8 (C) and (D) as subparagraphs (B) and (C), 

9 respectively, and 

10 (B) in paragraph (2)(B), by amending 

11 clause (iv) to read as follows: 

12 ‘‘(iv) CERTIFIED HISTORIC STRUC13 TURE.—Any expenditure attributable to the 

14 rehabilitation of a qualified rehabilitated 

15 building unless the rehabilitation is a cer16 tified rehabilitation (within the meaning of 

17 subparagraph (C)).’’. 

18 (2) Paragraph (4) of section 145(d) is amend19 ed— 

20 (A) by striking ‘‘of section 47(c)(1)(C)’’ each 

21 place it appears and inserting ‘‘of section 

22 47(c)(1)(B)’’, and 

23 (B) by striking ‘‘section 47(c)(1)(C)(i)’’ and 

24 inserting ‘‘section 47(c)(1)(B)(i)’’. 

25 (c) EFFECTIVE DATE.— 
197 

† HR 1 EAS 

1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section shall 

3 apply to amounts paid or incurred after December 

4 31, 2017. 

5 (2) TRANSITION RULE.—In the case of qualified 

6 rehabilitation expenditures with respect to any build7 ing— 

8 (A) owned or leased by the taxpayer during 

9 the entirety of the period after December 31, 

10 2017, and 

11 (B) with respect to which the 24-month pe12 riod selected by the taxpayer under section 

13 47(c)(1)(B) of the Internal Revenue Code of 1986 

14 (as amended by subsection (b)) begins not later 

15 than 180 days after the date of the enactment of 

16 this Act, 

17 the amendments made by this section shall apply to 

18 such expenditures paid or incurred after the end of 

19 the taxable year in which the 24-month period re20 ferred to in subparagraph (B) ends. 

21 SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MED22 ICAL LEAVE. 

23 (a) IN GENERAL.— 
198 

† HR 1 EAS 

1 (1) ALLOWANCE OF CREDIT.—Subpart D of part 

2 IV of subchapter A of chapter 1 is amended by adding 

3 at the end the following new section: 

4 ‘‘SEC. 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MED5 ICAL LEAVE. 

6 ‘‘(a) ESTABLISHMENT OF CREDIT.— 

7 ‘‘(1) IN GENERAL.—For purposes of section 38, 

8 in the case of an eligible employer, the paid family 

9 and medical leave credit is an amount equal to the 

10 applicable percentage of the amount of wages paid to 

11 qualifying employees during any period in which 

12 such employees are on family and medical leave. 

13 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

14 of paragraph (1), the term ‘applicable percentage’ 

15 means 12.5 percent increased (but not above 25 per16 cent) by 0.25 percentage points for each percentage 

17 point by which the rate of payment (as described 

18 under subsection (c)(1)(B)) exceeds 50 percent. 

19 ‘‘(b) LIMITATION.— 

20 ‘‘(1) IN GENERAL.—The credit allowed under 

21 subsection (a) with respect to any employee for any 

22 taxable year shall not exceed an amount equal to the 

23 product of the normal hourly wage rate of such em24 ployee for each hour (or fraction thereof) of actual 

25 services performed for the employer and the number 
199 

† HR 1 EAS 

1 of hours (or fraction thereof) for which family and 

2 medical leave is taken. 

3 ‘‘(2) NON-HOURLY WAGE RATE.—For purposes of 

4 paragraph (1), in the case of any employee who is not 

5 paid on an hourly wage rate, the wages of such em6 ployee shall be prorated to an hourly wage rate under 

7 regulations established by the Secretary. 

8 ‘‘(3) MAXIMUM AMOUNT OF LEAVE SUBJECT TO

9 CREDIT.—The amount of family and medical leave 

10 that may be taken into account with respect to any 

11 employee under subsection (a) for any taxable year 

12 shall not exceed 12 weeks. 

13 ‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this sec14 tion— 

15 ‘‘(1) IN GENERAL.—The term ‘eligible employer’ 

16 means any employer who has in place a policy that 

17 meets the following requirements: 

18 ‘‘(A) The policy provides— 

19 ‘‘(i) in the case of a qualifying em20 ployee who is not a part-time employee (as 

21 defined in section 4980E(d)(4)(B)), not less 

22 than 2 weeks of annual paid family and 

23 medical leave, and 

24 ‘‘(ii) in the case of a qualifying em25 ployee who is a part-time employee, an 
200 

† HR 1 EAS 

1 amount of annual paid family and medical 

2 leave that is not less than an amount which 

3 bears the same ratio to the amount of an4 nual paid family and medical leave that is 

5 provided to a qualifying employee described 

6 in clause (i) as— 

7 ‘‘(I) the number of hours the em8 ployee is expected to work during any 

9 week, bears to 

10 ‘‘(II) the number of hours an 

11 equivalent qualifying employee de12 scribed in clause (i) is expected to work 

13 during the week. 

14 ‘‘(B) The policy requires that the rate of 

15 payment under the program is not less than 50 

16 percent of the wages normally paid to such em17 ployee for services performed for the employer. 

18 ‘‘(2) SPECIAL RULE FOR CERTAIN EMPLOYERS.— 

19 ‘‘(A) IN GENERAL.—An added employer 

20 shall not be treated as an eligible employer un21 less such employer provides paid family and 

22 medical leave in compliance with a policy which 

23 ensures that the employer— 

24 ‘‘(i) will not interfere with, restrain, or 

25 deny the exercise of or the attempt to exer-
201 

† HR 1 EAS 

1 cise, any right provided under the policy, 

2 and 

3 ‘‘(ii) will not discharge or in any other 

4 manner discriminate against any indi5 vidual for opposing any practice prohibited 

6 by the policy. 

7 ‘‘(B) ADDED EMPLOYER; ADDED EM8 PLOYEE.—For purposes of this paragraph— 

9 ‘‘(i) ADDED EMPLOYEE.—The term 

10 ‘added employee’ means a qualifying em11 ployee who is not covered by title I of the 

12 Family and Medical Leave Act of 1993, as 

13 amended. 

14 ‘‘(ii) ADDED EMPLOYER.—The term 

15 ‘added employer’ means an eligible em16 ployer (determined without regard to this 

17 paragraph), whether or not covered by that 

18 title I, who offers paid family and medical 

19 leave to added employees. 

20 ‘‘(3) AGGREGATION RULE.—All persons which 

21 are treated as a single employer under subsections (a) 

22 and (b) of section 52 shall be treated as a single tax23 payer. 

24 ‘‘(4) TREATMENT OF BENEFITS MANDATED OR

25 PAID FOR BY STATE OR LOCAL GOVERNMENTS.—For 
202 

† HR 1 EAS 

1 purposes of this section, any leave which is paid by 

2 a State or local government or required by State or 

3 local law shall not be taken into account in deter4 mining the amount of paid family and medical leave 

5 provided by the employer. 

6 ‘‘(5) NO INFERENCE.—Nothing in this subsection 

7 shall be construed as subjecting an employer to any 

8 penalty, liability, or other consequence (other than in9 eligibility for the credit allowed by reason of sub10 section (a) or recapturing the benefit of such credit) 

11 for failure to comply with the requirements of this 

12 subsection. 

13 ‘‘(d) QUALIFYING EMPLOYEES.—For purposes of this 

14 section, the term ‘qualifying employee’ means any employee 

15 (as defined in section 3(e) of the Fair Labor Standards Act 

16 of 1938, as amended) who— 

17 ‘‘(1) has been employed by the employer for 1 

18 year or more, and 

19 ‘‘(2) for the preceding year, had compensation 

20 not in excess of an amount equal to 60 percent of the 

21 amount applicable for such year under clause (i) of 

22 section 414(q)(1)(B). 

23 ‘‘(e) FAMILY AND MEDICAL LEAVE.— 

24 ‘‘(1) IN GENERAL.—Except as provided in para25 graph (2), for purposes of this section, the term ‘fam-
203 

† HR 1 EAS 

1 ily and medical leave’ means leave for any 1 or more 

2 of the purposes described under subparagraph (A), 

3 (B), (C), (D), or (E) of paragraph (1), or paragraph 

4 (3), of section 102(a) of the Family and Medical 

5 Leave Act of 1993, as amended, whether the leave is 

6 provided under that Act or by a policy of the em7 ployer. 

8 ‘‘(2) EXCLUSION.—If an employer provides paid 

9 leave as vacation leave, personal leave, or medical or 

10 sick leave (other than leave specifically for 1 or more 

11 of the purposes referred to in paragraph (1)), that 

12 paid leave shall not be considered to be family and 

13 medical leave under paragraph (1). 

14 ‘‘(3) DEFINITIONS.—In this subsection, the terms 

15 ‘vacation leave’, ‘personal leave’, and ‘medical or sick 

16 leave’ mean those 3 types of leave, within the meaning 

17 of section 102(d)(2) of that Act. 

18 ‘‘(f) DETERMINATIONS MADE BY SECRETARY OF

19 TREASURY.—For purposes of this section, any determina20 tion as to whether an employer or an employee satisfies the 

21 applicable requirements for an eligible employer (as de22 scribed in subsection (c)) or qualifying employee (as de23 scribed in subsection (d)), respectively, shall be made by the 

24 Secretary based on such information, to be provided by the 
204 

† HR 1 EAS 

1 employer, as the Secretary determines to be necessary or 

2 appropriate. 

3 ‘‘(g) WAGES.—For purposes of this section, the term 

4 ‘wages’ has the meaning given such term by subsection (b) 

5 of section 3306 (determined without regard to any dollar 

6 limitation contained in such section). Such term shall not 

7 include any amount taken into account for purposes of de8 termining any other credit allowed under this subpart. 

9 ‘‘(h) ELECTION TO HAVE CREDIT NOT APPLY.— 

10 ‘‘(1) IN GENERAL.—A taxpayer may elect to 

11 have this section not apply for any taxable year. 

12 ‘‘(2) OTHER RULES.—Rules similar to the rules 

13 of paragraphs (2) and (3) of section 51(j) shall apply 

14 for purposes of this subsection. 

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

16 wages paid in taxable years beginning after December 31, 

17 2019.’’. 

18 (b) CREDIT PART OF GENERAL BUSINESS CREDIT.— 

19 Section 38(b) is amended by striking ‘‘plus’’ at the end of 

20 paragraph (35), by striking the period at the end of para21 graph (36) and inserting ‘‘, plus’’, and by adding at the 

22 end the following new paragraph: 

23 ‘‘(37) in the case of an eligible employer (as de24 fined in section 45S(c)), the paid family and medical 

25 leave credit determined under section 45S(a).’’. 
205 

† HR 1 EAS 

1 (c) CREDIT ALLOWED AGAINST AMT.—Subparagraph 

2 (B) of section 38(c)(4) is amended by redesignating clauses 

3 (ix) through (xi) as clauses (x) through (xii), respectively, 

4 and by inserting after clause (viii) the following new clause: 

5 ‘‘(ix) the credit determined under sec6 tion 45S,’’. 

7 (d) CONFORMING AMENDMENTS.— 

8 (1) DENIAL OF DOUBLE BENEFIT.—Section 

9 280C(a) is amended by inserting ‘‘45S(a),’’ after 

10 ‘‘45P(a),’’. 

11 (2) ELECTION TO HAVE CREDIT NOT APPLY.— 

12 Section 6501(m) is amended by inserting ‘‘45S(h),’’ 

13 after ‘‘45H(g),’’. 

14 (3) CLERICAL AMENDMENT.—The table of sec15 tions for subpart D of part IV of subchapter A of 

16 chapter 1 is amended by adding at the end the fol17 lowing new item: 

‘‘Sec. 45S. Employer credit for paid family and medical leave.’’. 

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

19 section shall apply to wages paid in taxable years begin20 ning after December 31, 2017. 
206 

† HR 1 EAS 

1 Subpart B—Provisions Relating to Low-income 

2 Housing Credit 

3 SEC. 13411. TREATMENT OF VETERANS’ PREFERENCE AS 

4 NOT VIOLATING GENERAL PUBLIC USE RE5 QUIREMENTS. 

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

7 42(g)(9) is amended to read as follows: 

8 ‘‘(C) who are veterans of the Armed 

9 Forces.’’. 

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

11 section shall apply to buildings placed in service before, on, 

12 or after the date of the enactment of this Act. 

13 SEC. 13412. INCREASE IN CREDIT FOR CERTAIN RURAL 

14 HOUSING. 

15 (a) IN GENERAL.—Section 42(d)(5)(B) is amended by 

16 adding at the end the following new clause: 

17 ‘‘(vi) CERTAIN NEW BUILDINGS IN

18 RURAL AREAS.—For purposes of clause (i), 

19 a building described in subsection 

20 (b)(1)(B)(i) which is located in a rural area 

21 (as defined in section 520 of the Housing 

22 Act of 1949) shall be treated in the same 

23 manner as a new building located in a dif24 ficult development area which is designated 

25 for purposes of this subparagraph.’’. 
207 

† HR 1 EAS 

1 (b) OFFSET.—Section 42(d)(5)(B)(i) is amended by 

2 striking ‘‘130 percent’’ both places it appears in subclauses 

3 (I) and (II) and inserting ‘‘125 percent’’. 

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

5 section shall apply to buildings placed in service after the 

6 date of the enactment of this Act. 

7 PART VI—PROVISIONS RELATED TO SPECIFIC 

8 ENTITIES AND INDUSTRIES 

9 Subpart A—Partnership Provisions 

10 SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN 

11 PERSONS FROM SALE OR EXCHANGE OF IN12 TERESTS IN PARTNERSHIPS ENGAGED IN 

13 TRADE OR BUSINESS WITHIN THE UNITED 

14 STATES. 

15 (a) IN GENERAL.—Section 864(c) is amended by add16 ing at the end the following: 

17 ‘‘(8) GAIN OR LOSS OF FOREIGN PERSONS FROM

18 SALE OR EXCHANGE OF CERTAIN PARTNERSHIP IN19 TERESTS.— 

20 ‘‘(A) IN GENERAL.—Notwithstanding any 

21 other provision of this subtitle, if a nonresident 

22 alien individual or foreign corporation owns, di23 rectly or indirectly, an interest in a partnership 

24 which is engaged in any trade or business within 

25 the United States, gain or loss on the sale or ex-
208 

† HR 1 EAS 

1 change of all (or any portion of) such interest 

2 shall be treated as effectively connected with the 

3 conduct of such trade or business to the extent 

4 such gain or loss does not exceed the amount de5 termined under subparagraph (B). 

6 ‘‘(B) AMOUNT TREATED AS EFFECTIVELY

7 CONNECTED.—The amount determined under 

8 this subparagraph with respect to any partner9 ship interest sold or exchanged— 

10 ‘‘(i) in the case of any gain on the sale 

11 or exchange of the partnership interest, is— 

12 ‘‘(I) the portion of the partner’s 

13 distributive share of the amount of 

14 gain which would have been effectively 

15 connected with the conduct of a trade 

16 or business within the United States if 

17 the partnership had sold all of its as18 sets at their fair market value as of the 

19 date of the sale or exchange of such in20 terest, or 

21 ‘‘(II) zero if no gain on such 

22 deemed sale would have been so effec23 tively connected, and 

24 ‘‘(ii) in the case of any loss on the sale 

25 or exchange of the partnership interest, is— 
209 

† HR 1 EAS 

1 ‘‘(I) the portion of the partner’s 

2 distributive share of the amount of loss 

3 on the deemed sale described in clause 

4 (i)(I) which would have been so effec5 tively connected, or 

6 ‘‘(II) zero if no loss on such 

7 deemed sale would be have been so ef8 fectively connected. 

9 For purposes of this subparagraph, a part10 ner’s distributive share of gain or loss on 

11 the deemed sale shall be determined in the 

12 same manner as such partner’s distributive 

13 share of the non-separately stated taxable 

14 income or loss of such partnership. 

15 ‘‘(C) COORDINATION WITH UNITED STATES

16 REAL PROPERTY INTERESTS.—If a partnership 

17 described in subparagraph (A) holds any United 

18 States real property interest (as defined in sec19 tion 897(c)) at the time of the sale or exchange 

20 of the partnership interest, then the gain or loss 

21 treated as effectively connected income under 

22 subparagraph (A) shall be reduced by the 

23 amount so treated with respect to such United 

24 States real property interest under section 897. 
210 

† HR 1 EAS 

1 ‘‘(D) SALE OR EXCHANGE.—For purposes of 

2 this paragraph, an individual or corporation 

3 shall be treated as having sold or exchanged any 

4 interest in a partnership if, under any provision 

5 of this subtitle, gain or loss is realized from the 

6 sale or exchange of such interest. 

7 ‘‘(E) SECRETARIAL AUTHORITY.—The Sec8 retary shall prescribe such regulations as the 

9 Secretary determines appropriate for the appli10 cation of this paragraph, including regulations 

11 which provide that, notwithstanding subpara12 graph (D), this paragraph applies in a case even 

13 if gain or loss from a sale or exchange would not 

14 be realized under any other provision of this sub15 title.’’. 

16 (b) WITHHOLDING REQUIREMENTS.—Section 1446 is 

17 amended by redesignating subsection (f) as subsection (g) 

18 and by inserting after subsection (e) the following: 

19 ‘‘(f) SPECIAL RULES FOR WITHHOLDING ON SALES OF

20 PARTNERSHIP INTERESTS.— 

21 ‘‘(1) IN GENERAL.—Except as provided in this 

22 subsection, if any portion of the gain (if any) on any 

23 disposition of an interest in a partnership would be 

24 treated under section 864(c)(8) as effectively con25 nected with the conduct of a trade or business within 
211 

† HR 1 EAS 

1 the United States, the transferee shall be required to 

2 deduct and withhold a tax equal to 10 percent of the 

3 amount realized on the disposition. 

4 ‘‘(2) EXCEPTION IF NONFOREIGN AFFIDAVIT FUR5 NISHED.— 

6 ‘‘(A) IN GENERAL.—No person shall be re7 quired to deduct and withhold any amount 

8 under paragraph (1) with respect to any disposi9 tion if the transferor furnishes to the transferee 

10 an affidavit by the transferor stating, under pen11 alty of perjury, the transferor’s United States 

12 taxpayer identification number and that the 

13 transferor is not a foreign person. 

14 ‘‘(B) FALSE AFFIDAVIT.—Subparagraph (A) 

15 shall not apply to any disposition if— 

16 ‘‘(i) the transferee has actual knowl17 edge that the affidavit is false, or the trans18 feree receives a notice (as described in sec19 tion 1445(d)) from a transferor’s agent or 

20 transferee’s agent that such affidavit or 

21 statement is false, or 

22 ‘‘(ii) the Secretary by regulations re23 quires the transferee to furnish a copy of 

24 such affidavit or statement to the Secretary 

25 and the transferee fails to furnish a copy of 
212 

† HR 1 EAS 

1 such affidavit or statement to the Secretary 

2 at such time and in such manner as re3 quired by such regulations. 

4 ‘‘(C) RULES FOR AGENTS.—The rules of sec5 tion 1445(d) shall apply to a transferor’s agent 

6 or transferee’s agent with respect to any affidavit 

7 described in subparagraph (A) in the same man8 ner as such rules apply with respect to the dis9 position of a United States real property interest 

10 under such section. 

11 ‘‘(3) AUTHORITY OF SECRETARY TO PRESCRIBE

12 REDUCED AMOUNT.—At the request of the transferor 

13 or transferee, the Secretary may prescribe a reduced 

14 amount to be withheld under this section if the Sec15 retary determines that to substitute such reduced 

16 amount will not jeopardize the collection of the tax 

17 imposed under this title with respect to gain treated 

18 under section 864(c)(8) as effectively connected with 

19 the conduct of a trade or business with in the United 

20 States. 

21 ‘‘(4) PARTNERSHIP TO WITHHOLD AMOUNTS NOT

22 WITHHELD BY THE TRANSFEREE.—If a transferee 

23 fails to withhold any amount required to be withheld 

24 under paragraph (1), the partnership shall be re25 quired to deduct and withhold from distributions to 
213 

† HR 1 EAS 

1 the transferee a tax in an amount equal to the 

2 amount the transferee failed to withhold (plus interest 

3 under this title on such amount). 

4 ‘‘(5) DEFINITIONS.—Any term used in this sub5 section which is also used under section 1445 shall 

6 have the same meaning as when used in such section. 

7 ‘‘(6) REGULATIONS.—The Secretary shall pre8 scribe such regulations as may be necessary to carry 

9 out the purposes of this subsection, including regula10 tions providing for exceptions from the provisions of 

11 this subsection.’’. 

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

13 section shall apply to sales and exchanges on or after No14 vember 27, 2017. 

15 SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN 

16 LOSS IN THE CASE OF TRANSFER OF PART17 NERSHIP INTEREST. 

18 (a) IN GENERAL.—Paragraph (1) of section 743(d) is 

19 to read as follows: 

20 ‘‘(1) IN GENERAL.—For purposes of this section, 

21 a partnership has a substantial built-in loss with re22 spect to a transfer of an interest in the partnership 

23 if— 

24 ‘‘(A) the partnership’s adjusted basis in the 

25 partnership property exceeds by more than 
214 

† HR 1 EAS 

1 $250,000 the fair market value of such property, 

2 or 

3 ‘‘(B) the transferee partner would be allo4 cated a loss of more than $250,000 if the part5 nership assets were sold for cash equal to their 

6 fair market value immediately after such trans7 fer.’’. 

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

9 section shall apply to transfers of partnership interests after 

10 December 31, 2017. 

11 SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN 

12 TAXES TAKEN INTO ACCOUNT IN DETER13 MINING LIMITATION ON ALLOWANCE OF 

14 PARTNER’S SHARE OF LOSS. 

15 (a) IN GENERAL.—Subsection (d) of section 704 is 

16 amended— 

17 (1) by striking ‘‘A partner’s distributive share’’ 

18 and inserting the following: 

19 ‘‘(1) IN GENERAL.—A partner’s distributive 

20 share’’, 

21 (2) by striking ‘‘Any excess of such loss’’ and in22 serting the following: 

23 ‘‘(2) CARRYOVER.—Any excess of such loss’’, and 

24 (3) by adding at the end the following new para25 graph: 
215 

† HR 1 EAS 

1 ‘‘(3) SPECIAL RULES.— 

2 ‘‘(A) IN GENERAL.—In determining the 

3 amount of any loss under paragraph (1), there 

4 shall be taken into account the partner’s dis5 tributive share of amounts described in para6 graphs (4) and (6) of section 702(a). 

7 ‘‘(B) EXCEPTION.—In the case of a chari8 table contribution of property whose fair market 

9 value exceeds its adjusted basis, subparagraph 

10 (A) shall not apply to the extent of the partner’s 

11 distributive share of such excess.’’. 

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

13 section shall apply to partnership taxable years beginning 

14 after December 31, 2017. 

15 Subpart B—Insurance Reforms 

16 SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE 

17 COMPANIES. 

18 (a) IN GENERAL.—Section 805(b) is amended by strik19 ing paragraph (4) and by redesignating paragraph (5) as 

20 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 the 

24 item relating to such section in the table of sections 

25 for such part). 
216 

† HR 1 EAS 

1 (2)(A) Part III of subchapter L of chapter 1 is 

2 amended by striking section 844 (and by striking the 

3 item relating to such section in the table of sections 

4 for such part). 

5 (B) Section 831(b)(3) is amended by striking 

6 ‘‘except as provided in section 844,’’ 

7 (3) Section 381 is amended by striking sub8 section (d). 

9 (4) Section 805(a)(4)(B)(ii) is amended to read 

10 as follows: 

11 ‘‘(ii) the deduction allowed under sec12 tion 172,’’. 

13 (5) Section 805(a) is amended by striking para14 graph (5). 

15 (6) Section 805(b)(2)(A)(iv) is amended to read 

16 as follows: 

17 ‘‘(iv) any net operating loss carryback 

18 to the taxable year under section 172, and’’. 

19 (7) Section 953(b)(1)(B) is amended to read as 

20 follows: 

21 ‘‘(B) So much of section 805(a)(8) as relates 

22 to the deduction allowed under section 172.’’. 

23 (8) Section 1351(i)(3) is amended by striking 

24 ‘‘or the operations loss deduction under section 810,’’. 
217 

† HR 1 EAS 

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

2 section shall apply to losses arising in taxable years begin3 ning after December 31, 2017. 

4 SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY 

5 DEDUCTION. 

6 (a) IN GENERAL.—Part I of subchapter L of chapter 

7 1 is amended by striking section 806 (and by striking the 

8 item relating to such section in the table of sections for such 

9 part). 

10 (b) CONFORMING AMENDMENTS.— 

11 (1) Section 453B(e) is amended— 

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

13 806(b)(3))’’ in paragraph (2)(B), and 

14 (B) by adding at the end the following new 

15 paragraph: 

16 ‘‘(3) NONINSURANCE BUSINESS.— 

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

18 subsection, the term ‘noninsurance business’ 

19 means any activity which is not an insurance 

20 business. 

21 ‘‘(B) CERTAIN ACTIVITIES TREATED AS IN22 SURANCE BUSINESSES.—For purposes of sub23 paragraph (A), any activity which is not an in24 surance business shall be treated as an insurance 

25 business if— 
218 

† HR 1 EAS 

1 ‘‘(i) it is of a type traditionally car2 ried on by life insurance companies for in3 vestment purposes, but only if the carrying 

4 on of such activity (other than in the case 

5 of real estate) does not constitute the active 

6 conduct of a trade or business, or 

7 ‘‘(ii) it involves the performance of ad8 ministrative services in connection with 

9 plans providing life insurance, pension, or 

10 accident and health benefits.’’. 

11 (2) Section 465(c)(7)(D)(v)(II) is amended by 

12 striking ‘‘section 806(b)(3)’’ and inserting ‘‘section 

13 453B(e)(3)’’. 

14 (3) Section 801(a)(2) is amended by striking 

15 subparagraph (C). 

16 (4) Section 804 is amended by striking 

17 ‘‘means—’’ and all that follows and inserting ‘‘means 

18 the general deductions provided in section 805.’’. 

19 (5) Section 805(a)(4)(B), as amended by this 

20 Act, is amended by striking clause (i) and by redesig21 nating clauses (ii), (iii), and (iv) as clauses (i), (ii), 

22 and (iii), respectively. 

23 (6) Section 805(b)(2)(A), as amended by this 

24 Act, is amended by striking clause (iii) and by redes-
219 

† HR 1 EAS 

1 ignating clauses (iv) and (v) as clauses (iii) and (iv), 

2 respectively. 

3 (7) Section 842(c) is amended by striking para4 graph (1) and by redesignating paragraphs (2) and 

5 (3) as paragraphs (1) and (2), respectively. 

6 (8) Section 953(b)(1), as amended by section 

7 13511, is amended by striking subparagraph (A) and 

8 by redesignating subparagraphs (B) and (C) as sub9 paragraphs (A) and (B), respectively. 

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

11 section shall apply to taxable years beginning after Decem12 ber 31, 2017. 

13 SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RE14 SERVES. 

15 (a) IN GENERAL.—Paragraph (1) of section 807(f) is 

16 amended to read as follows: 

17 ‘‘(1) TREATMENT AS CHANGE IN METHOD OF AC18 COUNTING.—If the basis for determining any item re19 ferred to in subsection (c) as of the close of any tax20 able year differs from the basis for such determination 

21 as of the close of the preceding taxable year, then so 

22 much of the difference between— 

23 ‘‘(A) the amount of the item at the close of 

24 the taxable year, computed on the new basis, and 
220 

† HR 1 EAS 

1 ‘‘(B) the amount of the item at the close of 

2 the taxable year, computed on the old basis, 

3 as is attributable to contracts issued before the taxable 

4 year shall be taken into account under section 481 as 

5 adjustments attributable to a change in method of ac6 counting initiated by the taxpayer and made with the 

7 consent of the Secretary.’’. 

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

9 section shall apply to taxable years beginning after Decem10 ber 31, 2017. 

11 SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS 

12 TO SHAREHOLDERS FROM PRE-1984 POLICY13 HOLDERS SURPLUS ACCOUNT. 

14 (a) IN GENERAL.—Subpart D of part I of subchapter 

15 L is amended by striking section 815 (and by striking the 

16 item relating to such section in the table of sections for such 

17 subpart). 

18 (b) CONFORMING AMENDMENT.—Section 801 is 

19 amended by striking subsection (c). 

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

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

23 (d) PHASED INCLUSION OF REMAINING BALANCE OF

24 POLICYHOLDERS SURPLUS ACCOUNTS.—In the case of any 

25 stock life insurance company which has a balance (deter-
221 

† HR 1 EAS 

1 mined as of the close of such company’s last taxable year 

2 beginning before January 1, 2018) in an existing policy3 holders surplus account (as defined in section 815 of the 

4 Internal Revenue Code of 1986, as in effect before its re5 peal), the tax imposed by section 801 of such Code for the 

6 first 8 taxable years beginning after December 31, 2017, 

7 shall be the amount which would be imposed by such section 

8 for such year on the sum of— 

9 (1) life insurance company taxable income for 

10 such year (within the meaning of such section 801 but 

11 not less than zero), plus 

(2) 1 12 ⁄8 of such balance. 

13 SEC. 13515. MODIFICATION OF PRORATION RULES FOR 

14 PROPERTY AND CASUALTY INSURANCE COM15 PANIES. 

16 (a) IN GENERAL.—Section 832(b)(5)(B) is amended— 

17 (1) by striking ‘‘15 percent’’ and inserting ‘‘the 

18 applicable percentage’’, and 

19 (2) by inserting at the end the following new sen20 tence: ‘‘For purposes of this subparagraph, the appli21 cable percentage is 5.25 percent divided by the highest 

22 rate in effect under section 11(b).’’. 

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

24 section shall apply to taxable years beginning after Decem25 ber 31, 2017. 
222 

† HR 1 EAS 

1 SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAY2 MENTS. 

3 (a) IN GENERAL.—Part III of subchapter L of chapter 

4 1 is amended by striking section 847 (and by striking the 

5 item relating to such section in the table of sections for such 

6 part). 

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

8 section shall apply to taxable years beginning after Decem9 ber 31, 2017. 

10 SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RE11 SERVES. 

12 (a) IN GENERAL.— 

13 (1) COMPUTATION OF RESERVES.—Section 

14 807(c) is amended to read as follows: 

15 ‘‘(c) ITEMS TAKEN INTO ACCOUNT.—The items re16 ferred to in subsections (a) and (b) are as follows— 

17 ‘‘(1) The life insurance reserves (as defined in 

18 section 816(b)). 

19 ‘‘(2) The unearned premiums and unpaid losses 

20 included in total reserves under section 816(c)(2). 

21 ‘‘(3) The amounts (discounted at the appropriate 

22 rate of interest) necessary to satisfy the obligations 

23 under insurance and annuity contracts, but only if 

24 such obligations do not involve (at the time with re25 spect to which the computation is made under this 

26 paragraph) life, accident, or health contingencies. 
223 

† HR 1 EAS 

1 ‘‘(4) Dividend accumulations, and other 

2 amounts, held at interest in connection with insur3 ance and annuity contracts. 

4 ‘‘(5) Premiums received in advance, and liabil5 ities for premium deposit funds. 

6 ‘‘(6) Reasonable special contingency reserves 

7 under contracts of group term life insurance or group 

8 accident and health insurance which are established 

9 and maintained for the provision of insurance on re10 tired lives, for premium stabilization, or a combina11 tion thereof. 

12 For purposes of paragraph (3), the appropriate rate of in13 terest is the highest rate or rates permitted to be used to 

14 discount the obligations by the National Association of In15 surance Commissioners as of the date the reserve is deter16 mined. In no case shall the amount determined under para17 graph (3) for any contract be less than the net surrender 

18 value of such contract. For purposes of paragraph (2) and 

19 section 805(a)(1), the amount of the unpaid losses (other 

20 than losses on life insurance contracts) shall be the amount 

21 of the discounted unpaid losses as defined in section 846.’’. 

22 (2) Section 807(d) is amended— 

23 (A) by striking paragraphs (1), (2), (4), 

24 and (5), 
224 

† HR 1 EAS 

1 (B) by redesignating paragraph (6) as 

2 paragraph (4), 

3 (C) by inserting before paragraph (3) the 

4 following new paragraphs: 

5 ‘‘(1) DETERMINATION OF RESERVE.— 

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

7 part (other than section 816), the amount of the 

8 life insurance reserves for any contract (other 

9 than a contract to which subparagraph (B) ap10 plies) shall be the greater of— 

11 ‘‘(i) the net surrender value of such 

12 contract, or 

13 ‘‘(ii) 92.87 percent of the reserve deter14 mined under paragraph (2). 

15 ‘‘(B) VARIABLE CONTRACTS.—For purposes 

16 of this part (other than section 816), the amount 

17 of the life insurance reserves for a variable con18 tract shall be equal to the sum of— 

19 ‘‘(i) the greater of— 

20 ‘‘(I) the net surrender value of 

21 such contract, or 

22 ‘‘(II) the portion of the reserve 

23 that is separately accounted for under 

24 section 817, plus 
225 

† HR 1 EAS 

1 ‘‘(ii) 92.87 percent of the excess (if 

2 any) of the reserve determined under para3 graph (2) over the amount in clause (i). 

4 ‘‘(C) STATUTORY CAP.—In no event shall 

5 the reserves determined under subparagraphs (A) 

6 or (B) for any contract as of any time exceed the 

7 amount which would be taken into account with 

8 respect to such contract as of such time in deter9 mining statutory reserves (as defined in para10 graph (4)). 

11 ‘‘(2) AMOUNT OF RESERVE.—The amount of the 

12 reserve determined under this paragraph with respect 

13 to any contract shall be determined by using the tax 

14 reserve method applicable to such contract.’’, 

15 (D) by striking ‘‘(as of the date of 

16 issuance)’’ in paragraph (3)(A)(iv)(I) and in17 serting ‘‘(as of the date the reserve is deter18 mined)’’, 

19 (E) by striking ‘‘as of the date of the 

20 issuance of’’ in paragraph (3)(A)(iv)(II) and in21 serting ‘‘as of the date the reserve is determined 

22 for’’, 

23 (F) by striking ‘‘in effect on the date of the 

24 issuance of the contract’’ in paragraph (3)(B)(i) 

25 and inserting ‘‘applicable to the contract and in 
226 

† HR 1 EAS 

1 effect as of the date the reserve is determined’’, 

2 and 

3 (G) by striking ‘‘in effect on the date of the 

4 issuance of the contract’’ in paragraph (3)(B)(ii) 

5 and inserting ‘‘applicable to the contract and in 

6 effect as of the date the reserve is determined’’. 

7 (3) Section 807(e) is amended— 

8 (A) by striking paragraphs (2) and (5), 

9 (B) by redesignating paragraphs (3), (4), 

10 (6), and (7) as paragraphs (2), (3), (4), and (5), 

11 respectively, 

12 (C) by amending paragraph (2) (as so re13 designated) to read as follows: 

14 ‘‘(2) QUALIFIED SUPPLEMENTAL BENEFITS.— 

15 ‘‘(A) QUALIFIED SUPPLEMENTAL BENEFITS

16 TREATED SEPARATELY.—For purposes of this 

17 part, the amount of the life insurance reserve for 

18 any qualified supplemental benefit shall be com19 puted separately as though such benefit were 

20 under a separate contract. 

21 ‘‘(B) QUALIFIED SUPPLEMENTAL BEN22 EFIT.—For purposes of this paragraph, the term 

23 ‘qualified supplemental benefit’ means any sup24 plemental benefit described in subparagraph (C) 

25 if— 
227 

† HR 1 EAS 

1 ‘‘(i) there is a separately identified 

2 premium or charge for such benefit, and 

3 ‘‘(ii) any net surrender value under the 

4 contract attributable to any other benefit is 

5 not available to fund such benefit. 

6 ‘‘(C) SUPPLEMENTAL BENEFITS.—For pur7 poses of this paragraph, the supplemental bene8 fits described in this subparagraph are any— 

9 ‘‘(i) guaranteed insurability, 

10 ‘‘(ii) accidental death or disability 

11 benefit, 

12 ‘‘(iii) convertibility, 

13 ‘‘(iv) disability waiver benefit, or 

14 ‘‘(v) other benefit prescribed by regula15 tions, 

16 which is supplemental to a contract for which 

17 there is a reserve described in subsection (c).’’, 

18 and 

19 (D) by adding at the end the following new 

20 paragraph: 

21 ‘‘(6) REPORTING RULES.—The Secretary shall 

22 require reporting (at such time and in such manner 

23 as the Secretary shall prescribe) with respect to the 

24 opening balance and closing balance of reserves and 
228 

† HR 1 EAS 

1 with respect to the method of computing reserves for 

2 purposes of determining income.’’. 

3 (4) Section 7702 is amended— 

4 (A) by striking clause (i) of subsection 

5 (c)(3)(B) and inserting the following: 

6 ‘‘(i) reasonable mortality charges 

7 which meet the requirements prescribed in 

8 regulations to be promulgated by the Sec9 retary or that do not exceed the mortality 

10 charges specified in the prevailing commis11 sioners’ standard tables as defined in sub12 section (f)(10),’’ and 

13 (B) by adding at the end of subsection (f) 

14 the following new paragraph: 

15 ‘‘(10) PREVAILING COMMISSIONERS’ STANDARD

16 TABLES.—For purposes of subsection (c)(3)(B)(i), the 

17 term ‘prevailing commissioners’ standard tables’ 

18 means the most recent commissioners’ standard tables 

19 prescribed by the National Association of Insurance 

20 Commissioners which are permitted to be used in 

21 computing reserves for that type of contract under the 

22 insurance laws of at least 26 States when the contract 

23 was issued. If the prevailing commissioners’ standard 

24 tables as of the beginning of any calendar year (here25 inafter in this paragraph referred to as the ‘year of 
229 

† HR 1 EAS 

1 change’) are different from the prevailing commis2 sioners’ standard tables as of the beginning of the pre3 ceding calendar year, the issuer may use the pre4 vailing commissioners’ standard tables as of the be5 ginning of the preceding calendar year with respect to 

6 any contract issued after the change and before the 

7 close of the 3-year period beginning on the first day 

8 of the year of change.’’. 

9 (b) CONFORMING AMENDMENTS.— 

10 (1) Section 808 is amended by adding at the end 

11 the following new subsection: 

12 ‘‘(g) PREVAILING STATE ASSUMED INTEREST RATE.— 

13 For purposes of this subchapter— 

14 ‘‘(1) IN GENERAL.—The term ‘prevailing State 

15 assumed interest rate’ means, with respect to any con16 tract, the highest assumed interest rate permitted to 

17 be used in computing life insurance reserves for in18 surance contracts or annuity contracts (as the case 

19 may be) under the insurance laws of at least 26 

20 States. For purposes of the preceding sentence, the ef21 fect of nonforfeiture laws of a State on interest rates 

22 for reserves shall not be taken into account. 

23 ‘‘(2) WHEN RATE DETERMINED.—The prevailing 

24 State assumed interest rate with respect to any con-
230 

† HR 1 EAS 

1 tract shall be determined as of the beginning of the 

2 calendar year in which the contract was 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 rate 

6 in effect under section 807’’ and inserting ‘‘the inter7 est 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 sub11 section (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 sec24 tion had applied to such reserve in such preceding 

25 taxable year. 
231 

† HR 1 EAS 

1 (3) TRANSITION RELIEF.— 

2 (A) IN GENERAL.—If— 

3 (i) the reserve determined under section 

4 807(d)(2) of the Internal Revenue Code of 

5 1986 (determined without regard to the 

6 amendments made by this section) with re7 spect to any contract as of the close of the 

8 year preceding the first taxable year begin9 ning after December 31, 2017, differs from 

10 (ii) the reserve which would have been 

11 determined with respect to such contract as 

12 of the close of such taxable year under such 

13 section determined without regard to para14 graph (2), 

15 then the difference between the amount of the re16 serve described in clause (i) and the amount of 

17 the reserve described in clause (ii) shall be taken 

18 into account under the method provided in sub19 paragraph (B). 

20 (B) METHOD.—The method provided in this 

21 subparagraph is as follows: 

22 (i) If the amount determined under 

23 subparagraph (A)(i) exceeds the amount de24 termined under subparagraph (A)(ii), 1/8 of 

25 such excess shall be taken into account, for 
232 

† HR 1 EAS 

1 each of the 8 succeeding taxable years, as a 

2 deduction under section 805(a)(2) or 

3 832(c)(4) of such Code, as applicable. 

4 (ii) If the amount determined under 

5 subparagraph (A)(ii) exceeds the amount 

6 determined under subparagraph (A)(i), 1/8 

7 of such excess shall be included in gross in8 come, for each of the 8 succeeding taxable 

9 years, under section 803(a)(2) or 

10 832(b)(1)(C) of such Code, as applicable. 

11 SEC. 13518. 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 as 

16 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, 70 

22 percent. 

23 ‘‘(b) POLICYHOLDER’S SHARE.—For purposes of sec24 tion 807, the term ‘policyholder’s share’ means, with respect 
233 

† HR 1 EAS 

1 to any taxable year beginning after December 31, 2017, 30 

2 percent.’’. 

3 (b) CONFORMING AMENDMENT.—Section 817A(e)(2) is 

4 amended by striking ‘‘, 807(d)(2)(B), and 812’’ and insert5 ing ‘‘and 807(d)(2)(B)’’. 

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

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

9 SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISI10 TION EXPENSES. 

11 (a) IN GENERAL.— 

12 (1) Section 848(a)(2) is amended by striking 

13 ‘‘120-month’’ and inserting ‘‘180-month’’. 

14 (2) Section 848(c)(1) is amended by striking 

15 ‘‘1.75 percent’’ and inserting ‘‘2.1 percent’’. 

16 (3) Section 848(c)(2) is amended by striking 

17 ‘‘2.05 percent’’ and inserting ‘‘2.46 percent’’. 

18 (4) Section 848(c)(3) is amended by striking 

19 ‘‘7.7 percent’’ and inserting ‘‘9.24 percent’’. 

20 (b) CONFORMING AMENDMENTS.—Section 848(b)(1) is 

21 amended by striking ‘‘120-month’’ and inserting ‘‘180- 

22 month’’. 

23 (c) EFFECTIVE DATE.— 
234 

† HR 1 EAS 

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

2 this section shall apply to net premiums for taxable 

3 years beginning after December 31, 2017. 

4 (2) TRANSITION RULE.—Specified policy acqui5 sition expenses first required to be capitalized in a 

6 taxable year beginning before January 1, 2018, will 

7 continue to be allowed as a deduction ratably over the 

8 120-month period beginning with the first month in 

9 the second half of such taxable year. 

10 SEC. 13520. TAX REPORTING FOR LIFE SETTLEMENT TRANS11 ACTIONS. 

12 (a) IN GENERAL.—Subpart B of part III of subchapter 

13 A of chapter 61, as amended by section 13306, is amended 

14 by adding at the end the following new section: 

15 ‘‘SEC. 6050Y. RETURNS RELATING TO CERTAIN LIFE INSUR16 ANCE CONTRACT TRANSACTIONS. 

17 ‘‘(a) REQUIREMENT OF REPORTING OF CERTAIN PAY18 MENTS.— 

19 ‘‘(1) IN GENERAL.—Every person who acquires a 

20 life insurance contract or any interest in a life insur21 ance contract in a reportable policy sale during any 

22 taxable year shall make a return for such taxable year 

23 (at such time and in such manner as the Secretary 

24 shall prescribe) setting forth— 
235 

† HR 1 EAS 

1 ‘‘(A) the name, address, and TIN of such 

2 person, 

3 ‘‘(B) the name, address, and TIN of each re4 cipient of payment in the reportable policy sale, 

5 ‘‘(C) the date of such sale, 

6 ‘‘(D) the name of the issuer of the life insur7 ance contract sold and the policy number of such 

8 contract, and 

9 ‘‘(E) the amount of each payment. 

10 ‘‘(2) STATEMENT TO BE FURNISHED TO PERSONS

11 WITH RESPECT TO WHOM INFORMATION IS RE12 QUIRED.—Every person required to make a return 

13 under this subsection shall furnish to each person 

14 whose name is required to be set forth in such return 

15 a written statement showing— 

16 ‘‘(A) the name, address, and phone number 

17 of the information contact of the person required 

18 to make such return, and 

19 ‘‘(B) the information required to be shown 

20 on such return with respect to such person, ex21 cept that in the case of an issuer of a life insur22 ance contract, such statement is not required to 

23 include the information specified in paragraph 

24 (1)(E). 
236 

† HR 1 EAS 

1 ‘‘(b) REQUIREMENT OF REPORTING OF SELLER’S

2 BASIS IN LIFE INSURANCE CONTRACTS.— 

3 ‘‘(1) IN GENERAL.—Upon receipt of the state4 ment required under subsection (a)(2) or upon notice 

5 of a transfer of a life insurance contract to a foreign 

6 person, each issuer of a life insurance contract shall 

7 make a return (at such time and in such manner as 

8 the Secretary shall prescribe) setting forth— 

9 ‘‘(A) the name, address, and TIN of the sell10 er who transfers any interest in such contract in 

11 such sale, 

12 ‘‘(B) the investment in the contract (as de13 fined in section 72(e)(6)) with respect to such 

14 seller, and 

15 ‘‘(C) the policy number of such contract. 

16 ‘‘(2) STATEMENT TO BE FURNISHED TO PERSONS

17 WITH RESPECT TO WHOM INFORMATION IS RE18 QUIRED.—Every person required to make a return 

19 under this subsection shall furnish to each person 

20 whose name is required to be set forth in such return 

21 a written statement showing— 

22 ‘‘(A) the name, address, and phone number 

23 of the information contact of the person required 

24 to make such return, and 
237 

† HR 1 EAS 

1 ‘‘(B) the information required to be shown 

2 on such return with respect to each seller whose 

3 name is required to be set forth in such return. 

4 ‘‘(c) REQUIREMENT OF REPORTING WITH RESPECT TO

5 REPORTABLE DEATH BENEFITS.— 

6 ‘‘(1) IN GENERAL.—Every person who makes a 

7 payment of reportable death benefits during any tax8 able year shall make a return for such taxable year 

9 (at such time and in such manner as the Secretary 

10 shall prescribe) setting forth— 

11 ‘‘(A) the name, address, and TIN of the per12 son making such payment, 

13 ‘‘(B) the name, address, and TIN of each re14 cipient of such payment, 

15 ‘‘(C) the date of each such payment, 

16 ‘‘(D) the gross amount of each such pay17 ment, and 

18 ‘‘(E) such person’s estimate of the invest19 ment in the contract (as defined in section 

20 72(e)(6)) with respect to the buyer. 

21 ‘‘(2) STATEMENT TO BE FURNISHED TO PERSONS

22 WITH RESPECT TO WHOM INFORMATION IS RE23 QUIRED.—Every person required to make a return 

24 under this subsection shall furnish to each person 
238 

† HR 1 EAS 

1 whose name is required to be set forth in such return 

2 a written statement showing— 

3 ‘‘(A) the name, address, and phone number 

4 of the information contact of the person required 

5 to make such return, and 

6 ‘‘(B) the information required to be shown 

7 on such return with respect to each recipient of 

8 payment whose name is required to be set forth 

9 in such return. 

10 ‘‘(d) DEFINITIONS.—For purposes of this section: 

11 ‘‘(1) PAYMENT.—The term ‘payment’ means, 

12 with respect to any reportable policy sale, the amount 

13 of cash and the fair market value of any consider14 ation transferred in the sale. 

15 ‘‘(2) REPORTABLE POLICY SALE.—The term ‘re16 portable policy sale’ has the meaning given such term 

17 in section 101(a)(3)(B). 

18 ‘‘(3) ISSUER.—The term ‘issuer’ means any life 

19 insurance company that bears the risk with respect to 

20 a life insurance contract on the date any return or 

21 statement is required to be made under this section. 

22 ‘‘(4) REPORTABLE DEATH BENEFITS.—The term 

23 ‘reportable death benefits’ means amounts paid by 

24 reason of the death of the insured under a life insur-
239 

† HR 1 EAS 

1 ance contract that has been transferred in a report2 able policy sale.’’. 

3 (b) CLERICAL AMENDMENT.—The table of sections for 

4 subpart B of part III of subchapter A of chapter 61, as 

5 amended by section 13306, is amended by inserting after 

6 the item relating to section 6050X the following new item: 

‘‘Sec. 6050Y. Returns relating to certain life insurance contract transactions.’’. 

7 (c) CONFORMING AMENDMENTS.— 

8 (1) Subsection (d) of section 6724 is amended— 

9 (A) by striking ‘‘or’’ at the end of clause 

10 (xxiv) of paragraph (1)(B), by striking ‘‘and’’ at 

11 the end of clause (xxv) of such paragraph and 

12 inserting ‘‘or’’, and by inserting after such clause 

13 (xxv) the following new clause: 

14 ‘‘(xxvi) section 6050Y (relating to re15 turns relating to certain life insurance con16 tract transactions), and’’, and 

17 (B) by striking ‘‘or’’ at the end of subpara18 graph (HH) of paragraph (2), by striking the 

19 period at the end of subparagraph (II) of such 

20 paragraph and inserting ‘‘, or’’, and by insert21 ing after such subparagraph (II) the following 

22 new subparagraph: 

23 ‘‘(JJ) subsection (a)(2), (b)(2), or (c)(2) of 

24 section 6050Y (relating to returns relating to 

25 certain life insurance contract transactions).’’. 
240 

† HR 1 EAS 

1 (2) Section 6047 is amended— 

2 (A) by redesignating subsection (g) as sub3 section (h), 

4 (B) by inserting after subsection (f) the fol5 lowing new subsection: 

6 ‘‘(g) INFORMATION RELATING TO LIFE INSURANCE

7 CONTRACT TRANSACTIONS.—This section shall not apply to 

8 any information which is required to be reported under sec9 tion 6050Y.’’, and 

10 (C) by adding at the end of subsection (h), 

11 as so redesignated, the following new paragraph: 

12 ‘‘(4) For provisions requiring reporting of infor13 mation relating to certain life insurance contract 

14 transactions, see section 6050Y.’’. 

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

16 section shall apply to— 

17 (1) reportable policy sales (as defined in section 

18 6050Y(d)(2) of the Internal Revenue Code of 1986 (as 

19 added by subsection (a)) after December 31, 2017, 

20 and 

21 (2) reportable death benefits (as defined in sec22 tion 6050Y(d)(4) of such Code (as added by subsection 

23 (a)) paid after December 31, 2017. 
241 

† HR 1 EAS 

1 SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSUR2 ANCE CONTRACTS. 

3 (a) CLARIFICATION WITH RESPECT TO ADJUST4 MENTS.—Paragraph (1) of section 1016(a) is amended by 

5 striking subparagraph (A) and all that follows and insert6 ing the following: 

7 ‘‘(A) for— 

8 ‘‘(i) taxes or other carrying charges de9 scribed in section 266; or 

10 ‘‘(ii) expenditures described in section 

11 173 (relating to circulation expenditures), 

12 for which deductions have been taken by the tax13 payer in determining taxable income for the tax14 able year or prior taxable years; or 

15 ‘‘(B) for mortality, expense, or other reason16 able charges incurred under an annuity or life 

17 insurance contract;’’. 

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

19 section shall apply to transactions entered into after August 

20 25, 2009. 

21 SEC. 13522. EXCEPTION TO TRANSFER FOR VALUABLE CON22 SIDERATION RULES. 

23 (a) IN GENERAL.—Subsection (a) of section 101 is 

24 amended by inserting after paragraph (2) the following new 

25 paragraph: 
242 

† HR 1 EAS 

1 ‘‘(3) EXCEPTION TO VALUABLE CONSIDERATION

2 RULES FOR COMMERCIAL TRANSFERS.— 

3 ‘‘(A) IN GENERAL.—The second sentence of 

4 paragraph (2) shall not apply in the case of a 

5 transfer of a life insurance contract, or any in6 terest therein, which is a reportable policy sale. 

7 ‘‘(B) REPORTABLE POLICY SALE.—For pur8 poses of this paragraph, the term ‘reportable pol9 icy sale’ means the acquisition of an interest in 

10 a life insurance contract, directly or indirectly, 

11 if the acquirer has no substantial family, busi12 ness, or financial relationship with the insured 

13 apart from the acquirer’s interest in such life in14 surance contract. For purposes of the preceding 

15 sentence, the term ‘indirectly’ applies to the ac16 quisition of an interest in a partnership, trust, 

17 or other entity that holds an interest in the life 

18 insurance contract.’’. 

19 (b) CONFORMING AMENDMENT.—Paragraph (1) of sec20 tion 101(a) is amended by striking ‘‘paragraph (2)’’ and 

21 inserting ‘‘paragraphs (2) and (3)’’. 

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

23 section shall apply to transfers after December 31, 2017. 
243 

† HR 1 EAS 

1 Subpart C—Banks and Financial Instruments 

2 SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PRE3 MIUMS. 

4 (a) IN GENERAL.—Section 162, as amended by sec5 tions 13307 and 13308, is amended by redesignating sub6 section (s) as subsection (t) and by inserting after sub7 section (r) the following new subsection: 

8 ‘‘(s) DISALLOWANCE OF FDIC PREMIUMS PAID BY

9 CERTAIN LARGE FINANCIAL INSTITUTIONS.— 

10 ‘‘(1) IN GENERAL.—No deduction shall be al11 lowed for the applicable percentage of any FDIC pre12 mium paid or incurred by the taxpayer. 

13 ‘‘(2) EXCEPTION FOR SMALL INSTITUTIONS.— 

14 Paragraph (1) shall not apply to any taxpayer for 

15 any taxable year if the total consolidated assets of 

16 such taxpayer (determined as of the close of such tax17 able year) do not exceed $10,000,000,000. 

18 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes 

19 of this subsection, the term ‘applicable percentage’ 

20 means, with respect to any taxpayer for any taxable 

21 year, the ratio (expressed as a percentage but not 

22 greater than 100 percent) which— 

23 ‘‘(A) the excess of— 

24 ‘‘(i) the total consolidated assets of 

25 such taxpayer (determined as of the close of 

26 such taxable year), over 
244 

† HR 1 EAS 

1 ‘‘(ii) $10,000,000,000, bears to 

2 ‘‘(B) $40,000,000,000. 

3 ‘‘(4) FDIC PREMIUMS.—For purposes of this 

4 subsection, the term ‘FDIC premium’ means any as5 sessment imposed under section 7(b) of the Federal 

6 Deposit Insurance Act (12 U.S.C. 1817(b)). 

7 ‘‘(5) TOTAL CONSOLIDATED ASSETS.—For pur8 poses of this subsection, the term ‘total consolidated 

9 assets’ has the meaning given such term under section 

10 165 of the Dodd-Frank Wall Street Reform and Con11 sumer Protection Act (12 U.S.C. 5365). 

12 ‘‘(6) AGGREGATION RULE.— 

13 ‘‘(A) IN GENERAL.—Members of an ex14 panded affiliated group shall be treated as a sin15 gle taxpayer for purposes of applying this sub16 section. 

17 ‘‘(B) EXPANDED AFFILIATED GROUP.— 

18 ‘‘(i) IN GENERAL.—For purposes of 

19 this paragraph, the term ‘expanded affili20 ated group’ means an affiliated group as 

21 defined in section 1504(a), determined— 

22 ‘‘(I) by substituting ‘more than 50 

23 percent’ for ‘at least 80 percent’ each 

24 place it appears, and 
245 

† HR 1 EAS 

1 ‘‘(II) without regard to para2 graphs (2) and (3) of section 1504(b). 

3 ‘‘(ii) CONTROL OF NON-CORPORATE EN4 TITIES.—A partnership or any other entity 

5 (other than a corporation) shall be treated 

6 as a member of an expanded affiliated 

7 group if such entity is controlled (within 

8 the meaning of section 954(d)(3)) by mem9 bers of such group (including any entity 

10 treated as a member of such group by rea11 son of this clause).’’. 

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

13 section shall apply to taxable years beginning after Decem14 ber 31, 2017. 

15 SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS. 

16 (a) IN GENERAL.—Paragraph (1) of section 149(d) is 

17 amended by striking ‘‘as part of an issue described in para18 graph (2), (3), or (4).’’ and inserting ‘‘to advance refund 

19 another bond.’’. 

20 (b) CONFORMING AMENDMENTS.— 

21 (1) Section 149(d) is amended by striking para22 graphs (2), (3), (4), and (6) and by redesignating 

23 paragraphs (5) and (7) as paragraphs (2) and (3). 
246 

† HR 1 EAS 

1 (2) Section 148(f)(4)(C) is amended by striking 

2 clause (xiv) and by redesignating clauses (xv) to 

3 (xvii) as clauses (xiv) to (xvi). 

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

5 section shall apply to advance refunding bonds issued after 

6 December 31, 2017. 

7 SEC. 13533. COST BASIS OF SPECIFIED SECURITIES DETER8 MINED WITHOUT REGARD TO IDENTIFICA9 TION. 

10 (a) IN GENERAL.—Section 1012 is amended by adding 

11 at the end the following new subsection: 

12 ‘‘(e) COST BASIS OF SPECIFIED SECURITIES DETER13 MINED WITHOUT REGARD TO IDENTIFICATION.— 

14 ‘‘(1) IN GENERAL.—Unless the Secretary permits 

15 the use of an average basis method for determining 

16 cost, in the case of the sale, exchange, or other disposi17 tion of a specified security (within the meaning of 

18 section 6045(g)(3)(B)), the basis (and holding period) 

19 of such security shall be determined on a first-in first20 out basis. 

21 ‘‘(2) EXCEPTION.—In the case of a sale, ex22 change, or other disposition of a specified security by 

23 a regulated investment company (as defined in sec24 tion 851(a)), paragraph (1) shall not apply.’’. 

25 (b) CONFORMING AMENDMENTS.— 
247 

† HR 1 EAS 

1 (1) Section 1012(c)(1) is amended by striking 

2 ‘‘the conventions prescribed by regulations under this 

3 section’’ and inserting ‘‘the method applicable for de4 termining the cost of such security’’. 

5 (2) Section 1012(c)(2)(A) is amended by insert6 ing ‘‘(as in effect prior to the enactment of the Tax 

7 Cuts and Jobs Act)’’ after ‘‘this section’’. 

8 (3) Section 6045(g)(2)(B)(i)(I) is amended by 

9 striking ‘‘unless the customer notifies the broker by 

10 means of making an adequate identification of the 

11 stock sold or transferred’’. 

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

13 section shall apply to sales, exchanges, and other disposi14 tions after December 31, 2017. 

15 Subpart D—S Corporations 

16 SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF 

17 AN ELECTING SMALL BUSINESS TRUST. 

18 (a) NO LOOK-THROUGH FOR ELIGIBILITY PUR19 POSES.—Section 1361(c)(2)(B)(v) is amended by adding at 

20 the end the following new sentence: ‘‘This clause shall not 

21 apply for purposes of subsection (b)(1)(C).’’. 

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

23 section shall take effect on January 1, 2018. 
248 

† HR 1 EAS 

1 SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR 

2 ELECTING SMALL BUSINESS TRUSTS. 

3 (a) IN GENERAL.—Section 641(c)(2) is amended by 

4 inserting after subparagraph (D) the following new sub5 paragraph: 

6 ‘‘(E)(i) Section 642(c) shall not apply. 

7 ‘‘(ii) For purposes of section 170(b)(1)(G), 

8 adjusted gross income shall be computed in the 

9 same manner as in the case of an individual, ex10 cept that the deductions for costs which are paid 

11 or incurred in connection with the administra12 tion of the trust and which would not have been 

13 incurred if the property were not held in such 

14 trust shall be treated as allowable in arriving at 

15 adjusted gross income.’’. 

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

17 section shall apply to taxable years beginning after Decem18 ber 31, 2017. 

19 SEC. 13543. MODIFICATION OF TREATMENT OF S CORPORA20 TION CONVERSIONS TO C CORPORATIONS. 

21 (a) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION

22 FROM S CORPORATION TO C CORPORATION.—Section 481 

23 is amended by adding at the end the following new sub24 section: 

25 ‘‘(d) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION

26 FROM S CORPORATION TO C CORPORATION.—(1) IN GEN-
249 

† HR 1 EAS 

1 ERAL.—In the case of an eligible terminated S corpora2 tion, any increase in tax under this chapter by reason of 

3 an adjustment required by subsection (a)(2), and which is 

4 attributable to such corporation’s revocation described in 

5 paragraph (2)(A)(ii), shall be taken into account ratably 

6 during the 6-taxable year period beginning with the year 

7 of change.’’. 

8 (b) IN GENERAL.—Section 1371 is amended by adding 

9 at the end the following new subsection: 

10 ‘‘(f) CASH DISTRIBUTIONS FOLLOWING POST-TERMI11 NATION TRANSITION PERIOD.— 

12 ‘‘(1) IN GENERAL.—In the case of a distribution 

13 of money by an eligible terminated S corporation 

14 after the post-termination transition period, the accu15 mulated adjustments account shall be allocated to 

16 such distribution, and the distribution shall be 

17 chargeable to accumulated earnings and profits, in 

18 the same ratio as the amount of such accumulated ad19 justments account bears to the amount of such accu20 mulated earnings and profits. 

21 ‘‘(2) ELIGIBLE TERMINATED S CORPORATION.— 

22 For purposes of this subsection, the term ‘eligible ter23 minated S corporation’ means any C corporation— 

24 ‘‘(A) which— 
250 

† HR 1 EAS 

1 ‘‘(i) was an S corporation on the day 

2 before the date of the enactment of the Tax 

3 Cuts and Jobs Act, and 

4 ‘‘(ii) during the 2-year period begin5 ning on the date of such enactment makes 

6 a revocation of its election under section 

7 1362(a), and 

8 ‘‘(B) the owners of the stock of which, deter9 mined on the date such revocation is made, are 

10 the same owners (and in identical proportions) 

11 as on the date of such enactment.’’. 

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

13 section shall apply to distributions after the date of the en14 actment of this Act. 

15 PART VII—EMPLOYMENT 

16 Subpart A—Compensation 

17 SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE 

18 EMPLOYEE REMUNERATION. 

19 (a) REPEAL OF PERFORMANCE-BASED COMPENSATION

20 AND COMMISSION EXCEPTIONS FOR LIMITATION ON EXCES21 SIVE EMPLOYEE REMUNERATION.— 

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

23 162(m) is amended by striking subparagraphs (B) 

24 and (C) and by redesignating subparagraphs (D), 
251 

† HR 1 EAS 

1 (E), (F), and (G) as subparagraphs (B), (C), (D), 

2 and (E), respectively. 

3 (2) CONFORMING AMENDMENTS.— 

4 (A) Paragraphs (5)(E) and (6)(D) of sec5 tion 162(m) are each amended by striking ‘‘sub6 paragraphs (B), (C), and (D)’’ and inserting 

7 ‘‘subparagraph (B)’’. 

8 (B) Paragraphs (5)(G) and (6)(G) of sec9 tion 162(m) are each amended by striking ‘‘(F) 

10 and (G)’’ and inserting ‘‘(D) and (E)’’. 

11 (b) MODIFICATION OF DEFINITION OF COVERED EM12 PLOYEES.—Paragraph (3) of section 162(m) is amended— 

13 (1) in subparagraph (A), by striking ‘‘as of the 

14 close of the taxable year, such employee is the chief ex15 ecutive officer of the taxpayer or is’’ and inserting 

16 ‘‘such employee is the principal executive officer or 

17 principal financial officer of the taxpayer at any 

18 time during the taxable year, or was’’, 

19 (2) in subparagraph (B)— 

20 (A) by striking ‘‘4’’ and inserting ‘‘3’’, and 

21 (B) by striking ‘‘(other than the chief execu22 tive officer)’’ and inserting ‘‘(other than any in23 dividual described in subparagraph (A))’’, and 

24 (3) by striking ‘‘or’’ at the end of subparagraph 

25 (A), by striking the period at the end of subparagraph 
252 

† HR 1 EAS 

1 (B) and inserting ‘‘, or’’, and by adding at the end 

2 the following: 

3 ‘‘(C) was a covered employee of the taxpayer 

4 (or any predecessor) for any preceding taxable 

5 year beginning after December 31, 2016.’’. 

6 (c) EXPANSION OF APPLICABLE EMPLOYER.— 

7 (1) IN GENERAL.—Section 162(m)(2) is amended 

8 to read as follows: 

9 ‘‘(2) PUBLICLY HELD CORPORATION.—For pur10 poses of this subsection, the term ‘publicly held cor11 poration’ means any corporation which is an issuer 

12 (as defined in section 3 of the Securities Exchange 

13 Act of 1934 (15 U.S.C. 78c))— 

14 ‘‘(A) the securities of which are required to 

15 be registered under section 12 of such Act (15 

16 U.S.C. 78l), or 

17 ‘‘(B) that is required to file reports under 

18 section 15(d) of such Act (15 U.S.C. 78o(d)).’’. 

19 (2) CONFORMING AMENDMENT.—Section 

20 162(m)(3), as amended by subsection (b), is amended 

21 by adding at the end the following flush sentence: 

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 de25 scribed.’’. 
253 

† HR 1 EAS 

1 (d) SPECIAL RULE FOR REMUNERATION PAID TO

2 BENEFICIARIES, ETC.—Paragraph (4) of section 162(m), as 

3 amended by subsection (a), is amended by adding at the 

4 end the following 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 the 

11 covered employee.’’. 

12 (e) EFFECTIVE DATE.— 

13 (1) IN GENERAL.—Except as provided in para14 graph (2), the amendments made by this section shall 

15 apply to taxable years beginning after December 31, 

16 2017. 

17 (2) EXCEPTION FOR BINDING CONTRACTS.—The 

18 amendments made by this section shall not apply to 

19 remuneration which is pursuant to a written binding 

20 contract which was in effect on November 2, 2017, 

21 and which was not modified in any material respect 

22 on or after such date. 
254 

† HR 1 EAS 

1 SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANI2 ZATION EXECUTIVE COMPENSATION. 

3 (a) IN GENERAL.—Subchapter D of chapter 42 is 

4 amended by adding at the end the following new section: 

5 ‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION 

6 EXECUTIVE COMPENSATION. 

7 ‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 

8 equal to 20 percent of the sum of— 

9 ‘‘(1) so much of the remuneration paid (other 

10 than any excess parachute payment) by an applicable 

11 tax-exempt organization for the taxable year with re12 spect to employment of any covered employee in ex13 cess of $1,000,000, plus 

14 ‘‘(2) any excess parachute payment paid by such 

15 an organization to any covered employee. 

16 For purposes of the preceding sentence, remuneration shall 

17 be treated as paid when there is no substantial risk of for18 feiture of the rights to such remuneration. 

19 ‘‘(b) LIABILITY FOR TAX.—The employer shall be liable 

20 for the tax imposed under subsection (a). 

21 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur22 poses of this section— 

23 ‘‘(1) APPLICABLE TAX-EXEMPT ORGANIZATION.— 

24 The term ‘applicable tax-exempt organization’ means 

25 any organization which for the taxable year— 
255 

† HR 1 EAS 

1 ‘‘(A) is exempt from taxation under section 

2 501(a), 

3 ‘‘(B) is a farmers’ cooperative organization 

4 described in section 521(b)(1), 

5 ‘‘(C) has income excluded from taxation 

6 under section 115(1), or 

7 ‘‘(D) is a political organization described in 

8 section 527(e)(1). 

9 ‘‘(2) COVERED EMPLOYEE.—For purposes of this 

10 section, the term ‘covered employee’ means any em11 ployee (including any former employee) of an appli12 cable tax-exempt organization if the employee— 

13 ‘‘(A) is one of the 5 highest compensated 

14 employees of the organization for the taxable 

15 year, or 

16 ‘‘(B) was a covered employee of the organi17 zation (or any predecessor) for any preceding 

18 taxable year beginning after December 31, 2016. 

19 ‘‘(3) REMUNERATION.—For purposes of this sec20 tion, the term ‘remuneration’ means wages (as de21 fined in section 3401(a)), except that such term shall 

22 not include any designated Roth contribution (as de23 fined in section 402A(c)) and shall include amounts 

24 required to be included in gross income under section 

25 457(f). 
256 

† HR 1 EAS 

1 ‘‘(4) REMUNERATION FROM RELATED ORGANIZA2 TIONS.— 

3 ‘‘(A) IN GENERAL.—Remuneration of a cov4 ered employee by an applicable tax-exempt orga5 nization shall include any remuneration paid 

6 with respect to employment of such employee by 

7 any related person or governmental entity. 

8 ‘‘(B) RELATED ORGANIZATIONS.—A person 

9 or governmental entity shall be treated as related 

10 to an applicable tax-exempt organization if such 

11 person or governmental entity— 

12 ‘‘(i) controls, or is controlled by, the 

13 organization, 

14 ‘‘(ii) is controlled by one or more per15 sons which control the organization, 

16 ‘‘(iii) is a supported organization (as 

17 defined in section 509(f)(3)) during the tax18 able year with respect to the organization, 

19 ‘‘(iv) is a supporting organization de20 scribed in section 509(a)(3) during the tax21 able year with respect to the organization, 

22 or 

23 ‘‘(v) in the case of an organization 

24 which is a voluntary employees’ beneficiary 

25 association described in section 501(c)(9), 
257 

† HR 1 EAS 

1 establishes, maintains, or makes contribu2 tions to such voluntary employees’ bene3 ficiary association. 

4 ‘‘(C) LIABILITY FOR TAX.—In any case in 

5 which remuneration from more than one em6 ployer is taken into account under this para7 graph in determining the tax imposed by sub8 section (a), each such employer shall be liable for 

9 such tax in an amount which bears the same 

10 ratio to the total tax determined under sub11 section (a) with respect to such remuneration 

12 as— 

13 ‘‘(i) the amount of remuneration paid 

14 by such employer with respect to such em15 ployee, bears to 

16 ‘‘(ii) the amount of remuneration paid 

17 by all such employers to such employee. 

18 ‘‘(5) EXCESS PARACHUTE PAYMENT.—For pur19 poses of determining the tax imposed by subsection 

20 (a)(2)— 

21 ‘‘(A) IN GENERAL.—The term ‘excess para22 chute payment’ means an amount equal to the 

23 excess of any parachute payment over the por24 tion of the base amount allocated to such pay25 ment. 
258 

† HR 1 EAS 

1 ‘‘(B) PARACHUTE PAYMENT.—The term 

2 ‘parachute payment’ means any payment in the 

3 nature of compensation to (or for the benefit of) 

4 a covered employee if— 

5 ‘‘(i) such payment is contingent on 

6 such employee’s separation from employ7 ment with the employer, and 

8 ‘‘(ii) the aggregate present value of the 

9 payments in the nature of compensation to 

10 (or for the benefit of) such individual which 

11 are contingent on such separation equals or 

12 exceeds an amount equal to 3 times the base 

13 amount. 

14 Such term does not include any payment de15 scribed in section 280G(b)(6) (relating to exemp16 tion for payments under qualified plans) or any 

17 payment made under or to an annuity contract 

18 described in section 403(b) or a plan described 

19 in section 457(b). 

20 ‘‘(C) BASE AMOUNT.—Rules similar to the 

21 rules of 280G(b)(3) shall apply for purposes of 

22 determining the base amount. 

23 ‘‘(D) PROPERTY TRANSFERS; PRESENT

24 VALUE.—Rules similar to the rules of para-
259 

† HR 1 EAS 

1 graphs (3) and (4) of section 280G(d) shall 

2 apply. 

3 ‘‘(6) COORDINATION WITH DEDUCTION LIMITA4 TION.—Remuneration the deduction for which is not 

5 allowed by reason of section 162(m) shall not be taken 

6 into account for purposes of this section. 

7 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 

8 such regulations as may be necessary to prevent avoidance 

9 of the tax under this section, including regulations pre10 venting employees from being misclassified as contractors 

11 or from being compensated through a pass-through or other 

12 entity to avoid such tax.’’. 

13 (b) CLERICAL AMENDMENT.—The table of sections for 

14 subchapter D of chapter 42 is amended by adding at the 

15 end the following new item: 

‘‘Sec. 4960. Tax on excess tax-exempt organization executive compensation.’’. 

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

17 section shall apply to taxable years beginning after Decem18 ber 31, 2017. 

19 SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS. 

20 (a) IN GENERAL.—Section 83 is amended by adding 

21 at the end the following new subsection: 

22 ‘‘(i) QUALIFIED EQUITY GRANTS.— 

23 ‘‘(1) IN GENERAL.—For purposes of this sub24 title— 
260 

† HR 1 EAS 

1 ‘‘(A) TIMING OF INCLUSION.—If qualified 

2 stock is transferred to a qualified employee who 

3 makes an election with respect to such stock 

4 under this subsection, subsection (a) shall be ap5 plied by including the amount determined under 

6 such subsection with respect to such stock in in7 come of the employee in the taxable year deter8 mined under subparagraph (B) in lieu of the 

9 taxable year described in subsection (a). 

10 ‘‘(B) TAXABLE YEAR DETERMINED.—The 

11 taxable year determined under this subpara12 graph is the taxable year of the employee which 

13 includes the earliest of— 

14 ‘‘(i) the first date such qualified stock 

15 becomes transferable (including, solely for 

16 purposes of this clause, becoming transfer17 able to the employer), 

18 ‘‘(ii) the date the employee first be19 comes an excluded employee, 

20 ‘‘(iii) the first date on which any stock 

21 of the corporation which issued the qualified 

22 stock becomes readily tradable on an estab23 lished securities market (as determined by 

24 the Secretary, but not including any market 

25 unless such market is recognized as an es-
261 

† HR 1 EAS 

1 tablished securities market by the Secretary 

2 for purposes of a provision of this title other 

3 than this subsection), 

4 ‘‘(iv) the date that is 5 years after the 

5 first date the rights of the employee in such 

6 stock are transferable or are not subject to 

7 a substantial risk of forfeiture, whichever 

8 occurs earlier, or 

9 ‘‘(v) the date on which the employee re10 vokes (at such time and in such manner as 

11 the Secretary provides) the election under 

12 this subsection with respect to such stock. 

13 ‘‘(2) QUALIFIED STOCK.— 

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

15 subsection, the term ‘qualified stock’ means, with 

16 respect to any qualified employee, any stock in 

17 a corporation which is the employer of such em18 ployee, if— 

19 ‘‘(i) such stock is received— 

20 ‘‘(I) in connection with the exer21 cise of an option, or 

22 ‘‘(II) in settlement of a restricted 

23 stock unit, and 

24 ‘‘(ii) such option or restricted stock 

25 unit was granted by the corporation— 
262 

† HR 1 EAS 

1 ‘‘(I) in connection with the per2 formance of services as an employee, 

3 and 

4 ‘‘(II) during a calendar year in 

5 which such corporation was an eligible 

6 corporation. 

7 ‘‘(B) LIMITATION.—The term ‘qualified 

8 stock’ shall not include any stock if the employee 

9 may sell such stock to, or otherwise receive cash 

10 in lieu of stock from, the corporation at the time 

11 that the rights of the employee in such stock first 

12 become transferable or not subject to a substan13 tial risk of forfeiture. 

14 ‘‘(C) ELIGIBLE CORPORATION.—For pur15 poses of subparagraph (A)(ii)(II)— 

16 ‘‘(i) IN GENERAL.—The term ‘eligible 

17 corporation’ means, with respect to any cal18 endar year, any corporation if— 

19 ‘‘(I) no stock of such corporation 

20 (or any predecessor of such corpora21 tion) is readily tradable on an estab22 lished securities market (as determined 

23 under paragraph (1)(B)(iii)) during 

24 any preceding calendar year, and 
263 

† HR 1 EAS 

1 ‘‘(II) such corporation has a writ2 ten plan under which, in such calendar 

3 year, not less than 80 percent of all 

4 employees who provide services to such 

5 corporation in the United States (or 

6 any possession of the United States) 

7 are granted stock options, or restricted 

8 stock units, with the same rights and 

9 privileges to receive qualified stock. 

10 ‘‘(ii) SAME RIGHTS AND PRIVILEGES.— 

11 For purposes of clause (i)(II)— 

12 ‘‘(I) except as provided in sub13 clauses (II) and (III), the determina14 tion of rights and privileges with re15 spect to stock shall be made in a simi16 lar manner as under section 423(b)(5), 

17 ‘‘(II) employees shall not fail to be 

18 treated as having the same rights and 

19 privileges to receive qualified stock 

20 solely because the number of shares 

21 available to all employees is not equal 

22 in amount, so long as the number of 

23 shares available to each employee is 

24 more than a de minimis amount, and 
264 

† HR 1 EAS 

1 ‘‘(III) rights and privileges with 

2 respect to the exercise of an option 

3 shall not be treated as the same as 

4 rights and privileges with respect to 

5 the settlement of a restricted stock unit. 

6 ‘‘(iii) EMPLOYEE.—For purposes of 

7 clause (i)(II), the term ‘employee’ shall not 

8 include any employee described in section 

9 4980E(d)(4) or any excluded employee. 

10 ‘‘(iv) SPECIAL RULE FOR CALENDAR

11 YEARS BEFORE 2018.—In the case of any 

12 calendar year beginning before January 1, 

13 2018, clause (i)(II) shall be applied without 

14 regard to whether the rights and privileges 

15 with respect to the qualified stock are the 

16 same. 

17 ‘‘(3) QUALIFIED EMPLOYEE; EXCLUDED EM18 PLOYEE.—For purposes of this subsection— 

19 ‘‘(A) IN GENERAL.—The term ‘qualified em20 ployee’ means any individual who— 

21 ‘‘(i) is not an excluded employee, and 

22 ‘‘(ii) agrees in the election made under 

23 this subsection to meet such requirements as 

24 are determined by the Secretary to be nec25 essary to ensure that the withholding re-
265 

† HR 1 EAS 

1 quirements of the corporation under chapter 

2 24 with respect to the qualified stock are 

3 met. 

4 ‘‘(B) EXCLUDED EMPLOYEE.—The term ‘ex5 cluded employee’ means, with respect to any cor6 poration, any individual— 

7 ‘‘(i) who was a 1-percent owner (with8 in the meaning of section 416(i)(1)(B)(ii)) 

9 at any time during the 10 preceding cal10 endar years, 

11 ‘‘(ii) who is or has been at any prior 

12 time— 

13 ‘‘(I) the chief executive officer of 

14 such corporation or an individual act15 ing in such a capacity, or 

16 ‘‘(II) the chief financial officer of 

17 such corporation or an individual act18 ing in such a capacity, 

19 ‘‘(iii) who bears a relationship de20 scribed in section 318(a)(1) to any indi21 vidual described in subclause (I) or (II) of 

22 clause (ii), or 

23 ‘‘(iv) who was for any of the 10 pre24 ceding taxable years one of the 4 highest 

25 compensated officers of such corporation, de-
266 

† HR 1 EAS 

1 termined with respect to each such taxable 

2 year on the basis of the shareholder disclo3 sure rules for compensation under the Secu4 rities Exchange Act of 1934 (as if such rules 

5 applied to such corporation). 

6 ‘‘(4) ELECTION.— 

7 ‘‘(A) TIME FOR MAKING ELECTION.—An 

8 election with respect to qualified stock shall be 

9 made under this subsection no later than 30 

10 days after the first date the rights of the em11 ployee in such stock are transferable or are not 

12 subject to a substantial risk of forfeiture, which13 ever occurs earlier, and shall be made in a man14 ner similar to the manner in which an election 

15 is made under subsection (b). 

16 ‘‘(B) LIMITATIONS.—No election may be 

17 made under this section with respect to any 

18 qualified stock if— 

19 ‘‘(i) the qualified employee has made 

20 an election under subsection (b) with respect 

21 to such qualified stock, 

22 ‘‘(ii) any stock of the corporation 

23 which issued the qualified stock is readily 

24 tradable on an established securities market 

25 (as determined under paragraph 
267 

† HR 1 EAS 

1 (1)(B)(iii)) at any time before the election 

2 is made, or 

3 ‘‘(iii) such corporation purchased any 

4 of its outstanding stock in the calendar year 

5 preceding the calendar year which includes 

6 the first date the rights of the employee in 

7 such stock are transferable or are not subject 

8 to a substantial risk of forfeiture, unless— 

9 ‘‘(I) not less than 25 percent of 

10 the total dollar amount of the stock so 

11 purchased is deferral stock, and 

12 ‘‘(II) the determination of which 

13 individuals from whom deferral stock 

14 is purchased is made on a reasonable 

15 basis. 

16 ‘‘(C) DEFINITIONS AND SPECIAL RULES RE17 LATED TO LIMITATION ON STOCK REDEMP18 TIONS.— 

19 ‘‘(i) DEFERRAL STOCK.—For purposes 

20 of this paragraph, the term ‘deferral stock’ 

21 means stock with respect to which an elec22 tion is in effect under this subsection. 

23 ‘‘(ii) DEFERRAL STOCK WITH RESPECT

24 TO ANY INDIVIDUAL NOT TAKEN INTO AC25 COUNT IF INDIVIDUAL HOLDS DEFERRAL
268 

† HR 1 EAS 

1 STOCK WITH LONGER DEFERRAL PERIOD.— 

2 Stock purchased by a corporation from any 

3 individual shall not be treated as deferral 

4 stock for purposes of subparagraph (B)(iii) 

5 if such individual (immediately after such 

6 purchase) holds any deferral stock with re7 spect to which an election has been in effect 

8 under this subsection for a longer period 

9 than the election with respect to the stock so 

10 purchased. 

11 ‘‘(iii) PURCHASE OF ALL OUTSTANDING

12 DEFERRAL STOCK.—The requirements of 

13 subclauses (I) and (II) of subparagraph 

14 (B)(iii) shall be treated as met if the stock 

15 so purchased includes all of the corpora16 tion’s outstanding deferral stock. 

17 ‘‘(iv) REPORTING.—Any corporation 

18 which has outstanding deferral stock as of 

19 the beginning of any calendar year and 

20 which purchases any of its outstanding 

21 stock during such calendar year shall in22 clude on its return of tax for the taxable 

23 year in which, or with which, such calendar 

24 year ends the total dollar amount of its out25 standing stock so purchased during such 
269 

† HR 1 EAS 

1 calendar year and such other information 

2 as the Secretary requires for purposes of ad3 ministering this paragraph. 

4 ‘‘(5) CONTROLLED GROUPS.—For purposes of 

5 this subsection, all persons treated as a single em6 ployer under section 414(b) shall be treated as 1 cor7 poration. 

8 ‘‘(6) NOTICE REQUIREMENT.—Any corporation 

9 which transfers qualified stock to a qualified employee 

10 shall, at the time that (or a reasonable period before) 

11 an amount attributable to such stock would (but for 

12 this subsection) first be includible in the gross income 

13 of such employee— 

14 ‘‘(A) certify to such employee that such 

15 stock is qualified stock, and 

16 ‘‘(B) notify such employee— 

17 ‘‘(i) that the employee may be eligible 

18 to elect to defer income on such stock under 

19 this subsection, and 

20 ‘‘(ii) that, if the employee makes such 

21 an election— 

22 ‘‘(I) the amount of income recog23 nized at the end of the deferral period 

24 will be based on the value of the stock 

25 at the time at which the rights of the 
270 

† HR 1 EAS 

1 employee in such stock first become 

2 transferable or not subject to substan3 tial risk of forfeiture, notwithstanding 

4 whether the value of the stock has de5 clined during the deferral period, 

6 ‘‘(II) the amount of such income 

7 recognized at the end of the deferral pe8 riod will be subject to withholding 

9 under section 3401(i) at the rate deter10 mined under section 3402(t), and 

11 ‘‘(III) the responsibilities of the 

12 employee (as determined by the Sec13 retary under paragraph (3)(A)(ii)) 

14 with respect to such withholding. 

15 ‘‘(7) RESTRICTED STOCK UNITS.—This section 

16 (other than this subsection), including any election 

17 under subsection (b), shall not apply to restricted 

18 stock units.’’. 

19 (b) WITHHOLDING.— 

20 (1) TIME OF WITHHOLDING.—Section 3401 is 

21 amended by adding at the end the following new sub22 section: 

23 ‘‘(i) QUALIFIED STOCK FOR WHICH AN ELECTION IS

24 IN EFFECT UNDER SECTION 83(i).—For purposes of sub25 section (a), qualified stock (as defined in section 83(i)) with 
271 

† HR 1 EAS 

1 respect to which an election is made under section 83(i) 

2 shall be treated as wages— 

3 ‘‘(1) received on the earliest date described in 

4 section 83(i)(1)(B), and 

5 ‘‘(2) in an amount equal to the amount included 

6 in income under section 83 for the taxable year which 

7 includes such date.’’. 

8 (2) AMOUNT OF WITHHOLDING.—Section 3402 is 

9 amended by adding at the end the following new sub10 section: 

11 ‘‘(t) RATE OF WITHHOLDING FOR CERTAIN STOCK.— 

12 In the case of any qualified stock (as defined in section 

13 83(i)(2)) with respect to which an election is made under 

14 section 83(i)— 

15 ‘‘(1) the rate of tax under subsection (a) shall 

16 not be less than the maximum rate of tax in effect 

17 under section 1, and 

18 ‘‘(2) such stock shall be treated for purposes of 

19 section 3501(b) in the same manner as a non-cash 

20 fringe benefit.’’. 

21 (c) COORDINATION WITH OTHER DEFERRED COM22 PENSATION RULES.— 

23 (1) ELECTION TO APPLY DEFERRAL TO STATU24 TORY OPTIONS.— 
272 

† HR 1 EAS 

1 (A) INCENTIVE STOCK OPTIONS.—Section 

2 422(b) is amended by adding at the end the fol3 lowing: ‘‘Such term shall not include any option 

4 if an election is made under section 83(i) with 

5 respect to the stock received in connection with 

6 the exercise of such option.’’. 

7 (B) EMPLOYEE STOCK PURCHASE PLANS.— 

8 Section 423 is amended— 

9 (i) by adding at the end of subsection 

10 (a) the following flush sentence: 

11 ‘‘The preceding sentence shall not apply to any share of 

12 stock with respect to which an election is made under sec13 tion 83(i).’’, and 

14 (ii) in subsection (b)(5), by striking 

15 ‘‘and’’ before ‘‘the plan’’ and by inserting ‘‘, 

16 and the rules of section 83(i) shall apply in 

17 determining which employees have a right 

18 to make an election under such section’’ be19 fore the semicolon at the end. 

20 (2) EXCLUSION FROM DEFINITION OF NON21 QUALIFIED DEFERRED COMPENSATION PLAN.—Sub22 section (d) of section 409A is amended by adding at 

23 the end the following new paragraph: 

24 ‘‘(7) TREATMENT OF QUALIFIED STOCK.—An ar25 rangement under which an employee may receive 
273 

† HR 1 EAS 

1 qualified stock (as defined in section 83(i)(2)) shall 

2 not be treated as a nonqualified deferred compensa3 tion plan solely because of an employee’s election, or 

4 ability to make an election, to defer recognition of in5 come under section 83(i).’’. 

6 (d) INFORMATION REPORTING.—Section 6051(a) is 

7 amended by striking ‘‘and’’ at the end of paragraph 

8 (14)(B), by striking the period at the end of paragraph (15) 

9 and inserting a comma, and by inserting after paragraph 

10 (15) the following new paragraphs: 

11 ‘‘(16) the amount includible in gross income 

12 under subparagraph (A) of section 83(i)(1) with re13 spect to an event described in subparagraph (B) of 

14 such section which occurs in such calendar year, and 

15 ‘‘(17) the aggregate amount of income which is 

16 being deferred pursuant to elections under section 

17 83(i), determined as of the close of the calendar 

18 year.’’. 

19 (e) PENALTY FOR FAILURE OF EMPLOYER TO PRO20 VIDE NOTICE OF TAX CONSEQUENCES.—Section 6652 is 

21 amended by adding at the end the following new subsection: 

22 ‘‘(p) FAILURE TO PROVIDE NOTICE UNDER SECTION

23 83(i).—In the case of each failure to provide a notice as 

24 required by section 83(i)(6), at the time prescribed therefor, 

25 unless it is shown that such failure is due to reasonable 
274 

† HR 1 EAS 

1 cause and not to willful neglect, there shall be paid, on no2 tice and demand of the Secretary and in the same manner 

3 as tax, by the person failing to provide such notice, an 

4 amount equal to $100 for each such failure, but the total 

5 amount imposed on such person for all such failures during 

6 any calendar year shall not exceed $50,000.’’. 

7 (f) EFFECTIVE DATES.— 

8 (1) IN GENERAL.—Except as provided in para9 graph (2), the amendments made by this section shall 

10 apply to stock attributable to options exercised, or re11 stricted stock units settled, after December 31, 2017. 

12 (2) REQUIREMENT TO PROVIDE NOTICE.—The 

13 amendments made by subsection (e) shall apply to 

14 failures after December 31, 2017. 

15 (g) TRANSITION RULE.—Until such time as the Sec16 retary (or the Secretary’s delegate) issues regulations or 

17 other guidance for purposes of implementing the require18 ments of paragraph (2)(C)(i)(II) of section 83(i) of the In19 ternal Revenue Code of 1986 (as added by this section), or 

20 the requirements of paragraph (6) of such section, a cor21 poration shall be treated as being in compliance with such 

22 requirements (respectively) if such corporation complies 

23 with a reasonable good faith interpretation of such require24 ments. 
275 

† HR 1 EAS 

1 SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK 

2 COMPENSATION OF INSIDERS IN EXPATRI3 ATED CORPORATIONS. 

4 (a) IN GENERAL.—Section 4985(a)(1) is amended by 

5 striking ‘‘section 1(h)(1)(C)’’ and inserting ‘‘section 

6 1(h)(1)(D)’’. 

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

8 section shall apply to corporations first becoming expatri9 ated corporations (as defined in section 4985 of the Internal 

10 Revenue Code of 1986) after the date of enactment of this 

11 Act. 

12 Subpart B—Retirement Plans 

13 SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RE14 CHARACTERIZATION OF ROTH IRA CON15 TRIBUTIONS AS TRADITIONAL IRA CONTRIBU16 TIONS. 

17 (a) IN GENERAL.—Section 408A(d) is amended by 

18 striking paragraph (6) and by redesignating paragraph (7) 

19 as paragraph (6). 

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

21 section shall apply to taxable years beginning after Decem22 ber 31, 2017. 
276 

† HR 1 EAS 

1 SEC. 13612. MODIFICATION OF RULES APPLICABLE TO 

2 LENGTH OF SERVICE AWARD PLANS. 

3 (a) MAXIMUM DEFERRAL AMOUNT.—Clause (ii) of sec4 tion 457(e)(11)(B) is amended by striking ‘‘$3,000’’ and in5 serting ‘‘$6,000’’. 

6 (b) COST OF LIVING ADJUSTMENT.—Subparagraph 

7 (B) of section 457(e)(11) is amended by adding at the end 

8 the following: 

9 ‘‘(iii) COST OF LIVING ADJUSTMENT.— 

10 In the case of taxable years beginning after 

11 December 31, 2017, the Secretary shall ad12 just the $6,000 amount under clause (ii) at 

13 the same time and in the same manner as 

14 under section 415(d), except that the base 

15 period shall be the calendar quarter begin16 ning July 1, 2016, and any increase under 

17 this paragraph that is not a multiple of 

18 $500 shall be rounded to the next lowest 

19 multiple of $500.’’. 

20 (c) APPLICATION OF LIMITATION ON ACCRUALS.—Sub21 paragraph (B) of section 457(e)(11), as amended by sub22 section (b), is amended by adding at the end the following: 

23 ‘‘(iv) SPECIAL RULE FOR APPLICATION

24 OF LIMITATION ON ACCRUALS FOR CERTAIN

25 PLANS.—In the case of a plan described in 

26 subparagraph (A)(ii) which is a defined 
277 

† HR 1 EAS 

1 benefit plan (as defined in section 414(j)), 

2 the limitation under clause (ii) shall apply 

3 to the actuarial present value of the aggre4 gate amount of length of service awards ac5 cruing with respect to any year of service. 

6 Such actuarial present value with respect to 

7 any year shall be calculated using reason8 able actuarial assumptions and methods, 

9 assuming payment will be made under the 

10 most valuable form of payment under the 

11 plan with payment commencing at the later 

12 of the earliest age at which unreduced bene13 fits are payable under the plan or the par14 ticipant’s age at the time of the calcula15 tion.’’. 

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

17 section shall apply to taxable years beginning after Decem18 ber 31, 2017. 

19 SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN 

20 OFFSET AMOUNTS. 

21 (a) IN GENERAL.—Paragraph (3) of section 402(c) is 

22 amended by redesignating subparagraph (B) as subpara23 graph (C) and by inserting after subparagraph (A) the fol24 lowing new subparagraph: 
278 

† HR 1 EAS 

1 ‘‘(B) ROLLOVER OF CERTAIN PLAN LOAN

2 OFFSET AMOUNTS.— 

3 ‘‘(i) IN GENERAL.—In the case of an 

4 eligible rollover distribution of a qualified 

5 plan loan offset amount, the requirements of 

6 subparagraph (A) shall be treated as met if 

7 such transfer occurs on or before the due 

8 date (including extensions) for filing the re9 turn of tax for the taxable year in which 

10 such amount is treated as distributed from 

11 a qualified employer plan. 

12 ‘‘(ii) QUALIFIED PLAN LOAN OFFSET

13 AMOUNT.—For purposes of this subpara14 graph, the term ‘qualified plan loan offset 

15 amount’ means a plan loan offset amount 

16 which is treated as distributed from a 

17 qualified employer plan to a participant or 

18 beneficiary solely by reason of— 

19 ‘‘(I) the termination of the quali20 fied employer plan, or 

21 ‘‘(II) the failure to meet the re22 payment terms of the loan from such 

23 plan because of the severance from em24 ployment of the participant. 
279 

† HR 1 EAS 

1 ‘‘(iii) PLAN LOAN OFFSET AMOUNT.— 

2 For purposes of clause (ii), the term ‘plan 

3 loan offset amount’ means the amount by 

4 which the participant’s accrued benefit 

5 under the plan is reduced in order to repay 

6 a loan from the plan. 

7 ‘‘(iv) LIMITATION.—This subparagraph 

8 shall not apply to any plan loan offset 

9 amount unless such plan loan offset amount 

10 relates to a loan to which section 72(p)(1) 

11 does not apply by reason of section 

12 72(p)(2). 

13 ‘‘(v) QUALIFIED EMPLOYER PLAN.— 

14 For purposes of this subsection, the term 

15 ‘qualified employer plan’ has the meaning 

16 given such term by section 72(p)(4).’’. 

17 (b) CONFORMING AMENDMENT.—Subparagraph (A) of 

18 section 402(c)(3) is amended by striking ‘‘subparagraph 

19 (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 

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

21 section shall apply to plan loan offset amounts which are 

22 treated as distributed in taxable years beginning after De23 cember 31, 2017. 
280 

† HR 1 EAS 

1 PART VIII—EXEMPT ORGANIZATIONS 

2 SEC. 13701. EXCISE TAX BASED ON INVESTMENT INCOME OF 

3 PRIVATE COLLEGES AND UNIVERSITIES. 

4 (a) IN GENERAL.—Chapter 42 is amended by adding 

5 at the end the following new subchapter: 

6 ‘‘Subchapter H—Excise Tax Based on Invest7 ment Income of Private Colleges and Uni8 versities 

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

9 ‘‘SEC. 4968. EXCISE TAX BASED ON INVESTMENT INCOME OF 

10 PRIVATE COLLEGES AND UNIVERSITIES. 

11 ‘‘(a) TAX IMPOSED.—There is hereby imposed on each 

12 applicable educational institution for the taxable year a tax 

13 equal to 1.4 percent of the net investment income of such 

14 institution for the taxable year. 

15 ‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For 

16 purposes of this subchapter— 

17 ‘‘(1) IN GENERAL.—The term ‘applicable edu18 cational institution’ means an eligible educational in19 stitution (as defined in section 25A(f)(2))— 

20 ‘‘(A) which had at least 500 tuition-paying 

21 students during the preceding taxable year, 

22 ‘‘(B) which is not described in the first sen23 tence of section 511(a)(2)(B) (relating to State 

24 colleges and universities), and 
281 

† HR 1 EAS 

1 ‘‘(C) the aggregate fair market value of the 

2 assets of which at the end of the preceding tax3 able year (other than those assets which are used 

4 directly in carrying out the institution’s exempt 

5 purpose) is at least $500,000 per student of the 

6 institution. 

7 ‘‘(2) STUDENTS.—For purposes of paragraph 

8 (1), the number of students of an institution shall be 

9 based on the daily average number of full-time stu10 dents attending such institution (with part-time stu11 dents taken into account on a full-time student equiv12 alent basis). 

13 ‘‘(c) NET INVESTMENT INCOME.—For purposes of this 

14 section, net investment income shall be determined under 

15 rules similar to the rules of section 4940(c). 

16 ‘‘(d) ASSETS AND NET INVESTMENT INCOME OF RE17 LATED ORGANIZATIONS.— 

18 ‘‘(1) IN GENERAL.—For purposes of subsections 

19 (b)(1)(C) and (c), assets and net investment income 

20 of any related organization with respect to an edu21 cational institution shall be treated as assets and net 

22 investment income, respectively, of the educational in23 stitution, except that— 
282 

† HR 1 EAS 

1 ‘‘(A) no such amount shall be taken into ac2 count with respect to more than 1 educational 

3 institution, and 

4 ‘‘(B) unless such organization is controlled 

5 by such institution or is described in section 

6 509(a)(3) with respect to such institution for the 

7 taxable year, assets and net investment income 

8 which are not intended or available for the use 

9 or benefit of the educational institution shall not 

10 be taken into account. 

11 ‘‘(2) RELATED ORGANIZATION.—For purposes of 

12 this subsection, the term ‘related organization’ means, 

13 with respect to an educational institution, any orga14 nization which— 

15 ‘‘(A) controls, or is controlled by, such insti16 tution, 

17 ‘‘(B) is controlled by 1 or more persons 

18 which also control such institution, or 

19 ‘‘(C) is a supported organization (as de20 fined in section 509(f)(3)), or an organization 

21 described in section 509(a)(3), during the taxable 

22 year with respect to such institution.’’. 

23 (b) CLERICAL AMENDMENT.—The table of subchapters 

24 for chapter 42 is amended by adding at the end the fol25 lowing new item: 
283 

† HR 1 EAS 

‘‘SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE

COLLEGES AND UNIVERSITIES’’. 

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

2 section shall apply to taxable years beginning after Decem3 ber 31, 2017. 

4 SEC. 13702. UNRELATED BUSINESS TAXABLE INCOME SEPA5 RATELY COMPUTED FOR EACH TRADE OR 

6 BUSINESS ACTIVITY. 

7 (a) IN GENERAL.—Subsection (a) of section 512 is 

8 amended by adding at the end the following new paragraph: 

9 ‘‘(6) SPECIAL RULE FOR ORGANIZATION WITH

10 MORE THAN 1 UNRELATED TRADE OR BUSINESS.—In 

11 the case of any organization with more than 1 unre12 lated trade or business— 

13 ‘‘(A) unrelated business taxable income, in14 cluding for purposes of determining any net op15 erating loss deduction, shall be computed sepa16 rately with respect to each such trade or business 

17 and without regard to subsection (b)(12), 

18 ‘‘(B) the unrelated business taxable income 

19 of such organization shall be the sum of the unre20 lated business taxable income so computed with 

21 respect to each such trade or business, less a spe22 cific deduction under subsection (b)(12), and 

23 ‘‘(C) for purposes of subparagraph (B), un24 related business taxable income with respect to 
284 

† HR 1 EAS 

1 any such trade or business shall not be less than 

2 zero.’’. 

3 (b) EFFECTIVE DATE.— 

4 (1) IN GENERAL.—Except to the extent provided 

5 in paragraph (2), the amendment made by this sec6 tion shall apply to taxable years beginning after De7 cember 31, 2017. 

8 (2) CARRYOVERS OF NET OPERATING LOSSES.— 

9 If any net operating loss arising in a taxable year be10 ginning before January 1, 2018, is carried over to a 

11 taxable year beginning on or after such date— 

12 (A) subparagraph (A) of section 512(a)(6) 

13 of the Internal Revenue Code of 1986, as added 

14 by this Act, shall not apply to such net operating 

15 loss, and 

16 (B) the unrelated business taxable income of 

17 the organization, after the application of sub18 paragraph (B) of such section, shall be reduced 

19 by the amount of such net operating loss. 

20 SEC. 13703. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN 

21 EXCHANGE FOR COLLEGE ATHLETIC EVENT 

22 SEATING RIGHTS. 

23 (a) IN GENERAL.—Section 170(l) is amended— 

24 (1) by striking paragraph (1) and inserting the 

25 following: 
285 

† HR 1 EAS 

1 ‘‘(1) IN GENERAL.—No deduction shall be al2 lowed under this section for any amount described in 

3 paragraph (2).’’, and 

4 (2) in paragraph (2)(B), by striking ‘‘such 

5 amount would be allowable as a deduction under this 

6 section but for the fact that’’. 

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

8 section shall apply to contributions made in taxable years 

9 beginning after December 31, 2017. 

10 SEC. 13704. REPEAL OF SUBSTANTIATION EXCEPTION IN 

11 CASE OF CONTRIBUTIONS REPORTED BY 

12 DONEE. 

13 (a) IN GENERAL.—Section 170(f)(8) is amended by 

14 striking subparagraph (D) and by redesignating subpara15 graph (E) as subparagraph (D). 

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

17 section shall apply to contributions made in taxable years 

18 beginning after December 31, 2016. 

19 PART IX—OTHER PROVISIONS 

20 Subpart A—Craft Beverage Modernization and Tax 

21 Reform 

22 SEC. 13801. PRODUCTION PERIOD FOR BEER, WINE, AND 

23 DISTILLED SPIRITS. 

24 (a) IN GENERAL.—Section 263A(f) is amended— 
286 

† HR 1 EAS 

1 (1) by redesignating paragraph (4) as para2 graph (5), and 

3 (2) by inserting after paragraph (3) the fol4 lowing new paragraph: 

5 ‘‘(4) EXEMPTION FOR AGING PROCESS OF BEER, 

6 WINE, AND DISTILLED SPIRITS.— 

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

8 subsection, the production period shall not in9 clude the aging period for— 

10 ‘‘(i) beer (as defined in section 

11 5052(a)), 

12 ‘‘(ii) wine (as described in section 

13 5041(a)), or 

14 ‘‘(iii) distilled spirits (as defined in 

15 section 5002(a)(8)), except such spirits that 

16 are unfit for use for beverage purposes. 

17 ‘‘(B) TERMINATION.—This paragraph shall 

18 not apply to interest costs paid or accrued after 

19 December 31, 2019.’’. 

20 (b) CONFORMING AMENDMENT.—Paragraph (5)(B)(ii) 

21 of section 263A(f), as redesignated by this section, is amend22 ed by inserting ‘‘except as provided in paragraph (4),’’ be23 fore ‘‘ending on the date’’. 
287 

† HR 1 EAS 

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

2 section shall apply to interest costs paid or accrued in cal3 endar years beginning after December 31, 2017. 

4 SEC. 13802. REDUCED RATE OF EXCISE TAX ON BEER. 

5 (a) IN GENERAL.—Paragraph (1) of section 5051(a) 

6 is amended to read as follows: 

7 ‘‘(1) IN GENERAL.— 

8 ‘‘(A) IMPOSITION OF TAX.—A tax is hereby 

9 imposed on all beer brewed or produced, and re10 moved for consumption or sale, within the 

11 United States, or imported into the United 

12 States. Except as provided in paragraph (2), the 

13 rate of such tax shall be the amount determined 

14 under this paragraph. 

15 ‘‘(B) RATE.—Except as provided in sub16 paragraph (C), the rate of tax shall be $18 for 

17 per barrel. 

18 ‘‘(C) SPECIAL RULE.—In the case of beer re19 moved after December 31, 2017, and before Jan20 uary 1, 2020, the rate of tax shall be— 

21 ‘‘(i) $16 on the first 6,000,000 barrels 

22 of beer— 

23 ‘‘(I) brewed by the brewer and re24 moved during the calendar year for 

25 consumption or sale, or 
288 

† HR 1 EAS 

1 ‘‘(II) imported by the importer 

2 into the United States during the cal3 endar year, and 

4 ‘‘(ii) $18 on any barrels of beer to 

5 which clause (i) does not apply. 

6 ‘‘(D) BARREL.—For purposes of this sec7 tion, a barrel shall contain not more than 31 

8 gallons of beer, and any tax imposed under this 

9 section shall be applied at a like rate for any 

10 other quantity or for fractional parts of a bar11 rel.’’. 

12 (b) REDUCED RATE FOR CERTAIN DOMESTIC PRODUC13 TION.—Subparagraph (A) of section 5051(a)(2) is amend14 ed— 

15 (1) in the heading, by striking ‘‘$7 A BARREL’’, 

16 and 

17 (2) by inserting ‘‘($3.50 in the case of beer re18 moved after December 31, 2017, and before January 

19 1, 2020)’’ after ‘‘$7’’. 

20 (c) APPLICATION OF REDUCED TAX RATE FOR FOR21 EIGN MANUFACTURERS AND IMPORTERS.—Subsection (a) 

22 of section 5051 is amended— 

23 (1) in subparagraph (C)(i)(II) of paragraph (1), 

24 as amended by subsection (a), by inserting ‘‘but only 

25 if the importer is an electing importer under para-
289 

† HR 1 EAS 

1 graph (4) and the barrels have been assigned to the 

2 importer pursuant to such paragraph’’ after ‘‘during 

3 the calendar year’’, and 

4 (2) by adding at the end the following new para5 graph: 

6 ‘‘(4) REDUCED TAX RATE FOR FOREIGN MANU7 FACTURERS AND IMPORTERS.— 

8 ‘‘(A) IN GENERAL.—In the case of any bar9 rels of beer which have been brewed or produced 

10 outside of the United States and imported into 

11 the United States, the rate of tax applicable 

12 under clause (i) of paragraph (1)(C) (referred to 

13 in this paragraph as the ‘reduced tax rate’) may 

14 be assigned by the brewer (provided that the 

15 brewer makes an election described in subpara16 graph (B)(ii)) to any electing importer of such 

17 barrels pursuant to the requirements established 

18 by the Secretary under subparagraph (B). 

19 ‘‘(B) ASSIGNMENT.—The Secretary shall, 

20 through such rules, regulations, and procedures 

21 as are determined appropriate, establish proce22 dures for assignment of the reduced tax rate pro23 vided under this paragraph, which shall in24 clude— 
290 

† HR 1 EAS 

1 ‘‘(i) a limitation to ensure that the 

2 number of barrels of beer for which the re3 duced tax rate has been assigned by a brew4 er— 

5 ‘‘(I) to any importer does not ex6 ceed the number of barrels of beer 

7 brewed or produced by such brewer 

8 during the calendar year which were 

9 imported into the United States by 

10 such importer, and 

11 ‘‘(II) to all importers does not ex12 ceed the 6,000,000 barrels to which the 

13 reduced tax rate applies, 

14 ‘‘(ii) procedures that allow the election 

15 of a brewer to assign and an importer to re16 ceive the reduced tax rate provided under 

17 this paragraph, 

18 ‘‘(iii) requirements that the brewer 

19 provide any information as the Secretary 

20 determines necessary and appropriate for 

21 purposes of carrying out this paragraph, 

22 and 

23 ‘‘(iv) procedures that allow for revoca24 tion of eligibility of the brewer and the im25 porter for the reduced tax rate provided 
291 

† HR 1 EAS 

1 under this paragraph in the case of any er2 roneous or fraudulent information provided 

3 under clause (iii) which the Secretary 

4 deems to be material to qualifying for such 

5 reduced rate. 

6 ‘‘(C) CONTROLLED GROUP.—For purposes 

7 of this section, any importer making an election 

8 described in subparagraph (B)(ii) shall be 

9 deemed to be a member of the controlled group 

10 of the brewer, as described under paragraph 

11 (5).’’. 

12 (d) CONTROLLED GROUP AND SINGLE TAXPAYER

13 RULES.—Subsection (a) of section 5051, as amended by this 

14 section, is amended— 

15 (1) in paragraph (2)— 

16 (A) by striking subparagraph (B), and 

17 (B) by redesignating subparagraph (C) as 

18 subparagraph (B), and 

19 (2) by adding at the end the following new para20 graph: 

21 ‘‘(5) CONTROLLED GROUP AND SINGLE TAXPAYER

22 RULES.— 

23 ‘‘(A) IN GENERAL.—Except as provided in 

24 subparagraph (B), in the case of a controlled 

25 group, the 6,000,000 barrel quantity specified in 
292 

† HR 1 EAS 

1 paragraph (1)(C)(i) and the 2,000,000 barrel 

2 quantity specified in paragraph (2)(A) shall be 

3 applied to the controlled group, and the 

4 6,000,000 barrel quantity specified in paragraph 

5 (1)(C)(i) and the 60,000 barrel quantity speci6 fied in paragraph (2)(A) shall be apportioned 

7 among the brewers who are members of such 

8 group in such manner as the Secretary or their 

9 delegate shall by regulations prescribe. For pur10 poses of the preceding sentence, the term ‘con11 trolled group’ has the meaning assigned to it by 

12 subsection (a) of section 1563, except that for 

13 such purposes the phrase ‘more than 50 percent’ 

14 shall be substituted for the phrase ‘at least 80 

15 percent’ in each place it appears in such sub16 section. Under regulations prescribed by the Sec17 retary, principles similar to the principles of the 

18 preceding two sentences shall be applied to a 

19 group of brewers under common control where 

20 one or more of the brewers is not a corporation. 

21 ‘‘(B) FOREIGN MANUFACTURERS AND IM22 PORTERS.—For purposes of paragraph (4), in 

23 the case of a controlled group, the 6,000,000 bar24 rel quantity specified in paragraph (1)(C)(i) 

25 shall be applied to the controlled group and ap-
293 

† HR 1 EAS 

1 portioned among the members of such group in 

2 such manner as the Secretary shall by regula3 tions prescribe. For purposes of the preceding 

4 sentence, the term ‘controlled group’ has the 

5 meaning given such term under subparagraph 

6 (A). Under regulations prescribed by the Sec7 retary, principles similar to the principles of the 

8 preceding two sentences shall be applied to a 

9 group of brewers under common control where 

10 one or more of the brewers is not a corporation. 

11 ‘‘(C) SINGLE TAXPAYER.—Pursuant to rules 

12 issued by the Secretary, two or more entities 

13 (whether or not under common control) that 

14 produce beer marketed under a similar brand, li15 cense, franchise, or other arrangement shall be 

16 treated as a single taxpayer for purposes of the 

17 application of this subsection.’’. 

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

19 section shall apply to beer removed after December 31, 2017. 

20 SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILI21 TIES. 

22 (a) IN GENERAL.—Section 5414 is amended— 

23 (1) by striking ‘‘Beer may be removed’’ and in24 serting ‘‘(a) IN GENERAL.—Beer may be removed’’, 

25 and 
294 

† HR 1 EAS 

1 (2) by adding at the end the following: 

2 ‘‘(b) TRANSFER OF BEER BETWEEN BONDED FACILI3 TIES.— 

4 ‘‘(1) IN GENERAL.—Beer may be removed from 

5 one bonded brewery to another bonded brewery, with6 out payment of tax, and may be mingled with beer 

7 at the receiving brewery, subject to such conditions, 

8 including payment of the tax, and in such containers, 

9 as the Secretary by regulations shall prescribe, which 

10 shall include— 

11 ‘‘(A) any removal from one brewery to an12 other brewery belonging to the same brewer, 

13 ‘‘(B) any removal from a brewery owned by 

14 one corporation to a brewery owned by another 

15 corporation when— 

16 ‘‘(i) one such corporation owns the con17 trolling interest in the other such corpora18 tion, or 

19 ‘‘(ii) the controlling interest in each 

20 such corporation is owned by the same per21 son or persons, and 

22 ‘‘(C) any removal from one brewery to an23 other brewery when— 

24 ‘‘(i) the proprietors of transferring and 

25 receiving premises are independent of each 
295 

† HR 1 EAS 

1 other and neither has a proprietary interest, 

2 directly or indirectly, in the business of the 

3 other, and 

4 ‘‘(ii) the transferor has divested itself 

5 of all interest in the beer so transferred and 

6 the transferee has accepted responsibility for 

7 payment of the tax. 

8 ‘‘(2) TRANSFER OF LIABILITY FOR TAX.—For 

9 purposes of paragraph (1)(C), such relief from liabil10 ity shall be effective from the time of removal from the 

11 transferor’s bonded premises, or from the time of di12 vestment of interest, whichever is later. 

13 ‘‘(3) TERMINATION.—This subsection shall not 

14 apply to any calendar quarter beginning after Decem15 ber 31, 2019.’’. 

16 (b) REMOVAL FROM BREWERY BY PIPELINE.—Section 

17 5412 is amended by inserting ‘‘pursuant to section 5414 

18 or’’ before ‘‘by pipeline’’. 

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

20 section shall apply to any calendar quarters beginning after 

21 December 31, 2017. 

22 SEC. 13804. REDUCED RATE OF EXCISE TAX ON CERTAIN 

23 WINE. 

24 (a) IN GENERAL.—Section 5041(c) is amended by add25 ing at the end the following new paragraph: 
296 

† HR 1 EAS 

1 ‘‘(8) SPECIAL RULE FOR 2018 AND 2019.— 

2 ‘‘(A) IN GENERAL.—In the case of wine re3 moved after December 31, 2017, and before Jan4 uary 1, 2020, paragraphs (1) and (2) shall not 

5 apply and there shall be allowed as a credit 

6 against any tax imposed by this title (other than 

7 chapters 2, 21, and 22) an amount equal to the 

8 sum of— 

9 ‘‘(i) $1 per wine gallon on the first 

10 30,000 wine gallons of wine, plus 

11 ‘‘(ii) 90 cents per wine gallon on the 

12 first 100,000 wine gallons of wine to which 

13 clause (i) does not apply, plus 

14 ‘‘(iii) 53.5 cents per wine gallon on the 

15 first 620,000 wine gallons of wine to which 

16 clauses (i) and (ii) do not apply, 

17 which are produced by the producer and removed 

18 during the calendar year for consumption or 

19 sale, or which are imported by the importer into 

20 the United States during the calendar year. 

21 ‘‘(B) ADJUSTMENT OF CREDIT FOR HARD

22 CIDER.—In the case of wine described in sub23 section (b)(6), subparagraph (A) of this para24 graph shall be applied— 
297 

† HR 1 EAS 

1 ‘‘(i) in clause (i) of such subparagraph, 

2 by substituting ‘6.2 cents’ for ‘$1’, 

3 ‘‘(ii) in clause (ii) of such subpara4 graph, by substituting ‘5.6 cents’ for ‘90 

5 cents’, and 

6 ‘‘(iii) in clause (iii) of such subpara7 graph, by substituting ‘3.3 cents’ for ‘53.5 

8 cents’.’’, 

9 (b) CONTROLLED GROUP AND SINGLE TAXPAYER

10 RULES.—Paragraph (4) of section 5041(c) is amended by 

11 striking ‘‘section 5051(a)(2)(B)’’ and inserting ‘‘section 

12 5051(a)(5)’’. 

13 (c) ALLOWANCE OF CREDIT FOR FOREIGN MANUFAC14 TURERS AND IMPORTERS.—Subsection (c) of section 5041, 

15 as amended by subsection (a), is amended— 

16 (1) in subparagraph (A) of paragraph (8), by 

17 inserting ‘‘but only if the importer is an electing im18 porter under paragraph (9) and the wine gallons of 

19 wine have been assigned to the importer pursuant to 

20 such paragraph’’ after ‘‘into the United States during 

21 the calendar year’’, and 

22 (2) by adding at the end the following new para23 graph: 

24 ‘‘(9) ALLOWANCE OF CREDIT FOR FOREIGN MAN25 UFACTURERS AND IMPORTERS.— 
298 

† HR 1 EAS 

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

2 gallons of wine which have been produced outside 

3 of the United States and imported into the 

4 United States, the credit allowable under para5 graph (8) (referred to in this paragraph as the 

6 ‘tax credit’) may be assigned by the person who 

7 produced such wine (referred to in this para8 graph as the ‘foreign producer’), provided that 

9 such person makes an election described in sub10 paragraph (B)(ii), to any electing importer of 

11 such wine gallons pursuant to the requirements 

12 established by the Secretary under subparagraph 

13 (B). 

14 ‘‘(B) ASSIGNMENT.—The Secretary shall, 

15 through such rules, regulations, and procedures 

16 as are determined appropriate, establish proce17 dures for assignment of the tax credit provided 

18 under this paragraph, which shall include— 

19 ‘‘(i) a limitation to ensure that the 

20 number of wine gallons of wine for which 

21 the tax credit has been assigned by a foreign 

22 producer— 

23 ‘‘(I) to any importer does not ex24 ceed the number of wine gallons of 

25 wine produced by such foreign pro-
299 

† HR 1 EAS 

1 ducer during the calendar year which 

2 were imported into the United States 

3 by such importer, and 

4 ‘‘(II) to all importers does not ex5 ceed the 750,000 wine gallons of wine 

6 to which the tax credit applies, 

7 ‘‘(ii) procedures that allow the election 

8 of a foreign producer to assign and an im9 porter to receive the tax credit provided 

10 under this paragraph, 

11 ‘‘(iii) requirements that the foreign 

12 producer provide any information as the 

13 Secretary determines necessary and appro14 priate for purposes of carrying out this 

15 paragraph, and 

16 ‘‘(iv) procedures that allow for revoca17 tion of eligibility of the foreign producer 

18 and the importer for the tax credit provided 

19 under this paragraph in the case of any er20 roneous or fraudulent information provided 

21 under clause (iii) which the Secretary 

22 deems to be material to qualifying for such 

23 credit. 

24 ‘‘(C) CONTROLLED GROUP.—For purposes 

25 of this section, any importer making an election 
300 

† HR 1 EAS 

1 described in subparagraph (B)(ii) shall be 

2 deemed to be a member of the controlled group 

3 of the foreign producer, as described under para4 graph (4).’’. 

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

6 section shall apply to wine removed after December 31, 

7 2017. 

8 SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL 

9 FOR APPLICATION OF EXCISE TAX RATES. 

10 (a) IN GENERAL.—Paragraphs (1) and (2) of section 

11 5041(b) are each amended by inserting ‘‘(16 percent in the 

12 case of wine removed after December 31, 2017, and before 

13 January 1, 2020’’ after ‘‘14 percent’’. 

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

15 section shall apply to wine removed after December 31, 

16 2017. 

17 SEC. 13806. DEFINITION OF MEAD AND LOW ALCOHOL BY 

18 VOLUME WINE. 

19 (a) IN GENERAL.—Section 5041 is amended— 

20 (1) in subsection (a), by striking ‘‘Still wines’’ 

21 and inserting ‘‘Subject to subsection (h), still wines’’, 

22 and 

23 (2) by adding at the end the following new sub24 section: 

25 ‘‘(h) MEAD AND LOW ALCOHOL BY VOLUME WINE.— 
301 

† HR 1 EAS 

1 ‘‘(1) IN GENERAL.—For purposes of subsections 

2 (a) and (b)(1), mead and low alcohol by volume wine 

3 shall be deemed to be still wines containing not more 

4 than 16 percent of alcohol by volume. 

5 ‘‘(2) DEFINITIONS.— 

6 ‘‘(A) MEAD.—For purposes of this section, 

7 the term ‘mead’ means a wine— 

8 ‘‘(i) containing not more than 0.64 

9 gram of carbon dioxide per hundred milli10 liters of wine, except that the Secretary 

11 shall by regulations prescribe such toler12 ances to this limitation as may be reason13 ably necessary in good commercial practice, 

14 ‘‘(ii) which is derived solely from 

15 honey and water, 

16 ‘‘(iii) which contains no fruit product 

17 or fruit flavoring, and 

18 ‘‘(iv) which contains less than 8.5 per19 cent alcohol by volume. 

20 ‘‘(B) LOW ALCOHOL BY VOLUME WINE.— 

21 For purposes of this section, the term ‘low alco22 hol by volume wine’ means a wine— 

23 ‘‘(i) containing not more than 0.64 

24 gram of carbon dioxide per hundred milli25 liters of wine, except that the Secretary 
302 

† HR 1 EAS 

1 shall by regulations prescribe such toler2 ances to this limitation as may be reason3 ably necessary in good commercial practice, 

4 ‘‘(ii) which is derived— 

5 ‘‘(I) primarily from grapes, or 

6 ‘‘(II) from grape juice concentrate 

7 and water, 

8 ‘‘(iii) which contains no fruit product 

9 or fruit flavoring other than grape, and 

10 ‘‘(iv) which contains less than 8.5 per11 cent alcohol by volume. 

12 ‘‘(3) TERMINATION.—This subsection shall not 

13 apply to wine removed after December 31, 2019.’’. 

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

15 section shall apply to wine removed after December 31, 

16 2017. 

17 SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN 

18 DISTILLED SPIRITS. 

19 (a) IN GENERAL.—Section 5001 is amended by redes20 ignating subsection (c) as subsection (d) and by inserting 

21 after subsection (b) the following new subsection: 

22 ‘‘(c) REDUCED RATE FOR 2018 AND 2019.— 

23 ‘‘(1) IN GENERAL.—In the case of a distilled 

24 spirits operation, the otherwise applicable tax rate 

25 under subsection (a)(1) shall be— 
303 

† HR 1 EAS 

1 ‘‘(A) $2.70 per proof gallon on the first 

2 100,000 proof gallons of distilled spirits, and 

3 ‘‘(B) $13.34 per proof gallon on the first 

4 22,130,000 of proof gallons of distilled spirits to 

5 which subparagraph (A) does not apply, 

6 which have been distilled or processed by such oper7 ation and removed during the calendar year for con8 sumption or sale, or which have been imported by the 

9 importer into the United States during the calendar 

10 year. 

11 ‘‘(2) CONTROLLED GROUPS.— 

12 ‘‘(A) IN GENERAL.—In the case of a con13 trolled group, the proof gallon quantities speci14 fied under subparagraphs (A) and (B) of para15 graph (1) shall be applied to such group and ap16 portioned among the members of such group in 

17 such manner as the Secretary or their delegate 

18 shall by regulations prescribe. 

19 ‘‘(B) DEFINITION.—For purposes of sub20 paragraph (A), the term ‘controlled group’ shall 

21 have the meaning given such term by subsection 

22 (a) of section 1563, except that ‘more than 50 

23 percent’ shall be substituted for ‘at least 80 per24 cent’ each place it appears in such subsection. 
304 

† HR 1 EAS 

1 ‘‘(C) RULES FOR NON-CORPORATIONS.— 

2 Under regulations prescribed by the Secretary, 

3 principles similar to the principles of subpara4 graphs (A) and (B) shall be applied to a group 

5 under common control where one or more of the 

6 persons is not a corporation. 

7 ‘‘(D) SINGLE TAXPAYER.—Pursuant to rules 

8 issued by the Secretary, two or more entities 

9 (whether or not under common control) that 

10 produce distilled spirits marketed under a simi11 lar brand, license, franchise, or other arrange12 ment shall be treated as a single taxpayer for 

13 purposes of the application of this subsection. 

14 ‘‘(3) TERMINATION.—This subsection shall not 

15 apply to distilled spirits removed after December 31, 

16 2019.’’. 

17 (b) CONFORMING AMENDMENT.—Section 7652(f)(2) is 

18 amended by striking ‘‘section 5001(a)(1)’’ and inserting 

19 ‘‘subsection (a)(1) of section 5001, determined as if sub20 section (c)(1) of such section did not apply’’. 

21 (c) APPLICATION OF REDUCED TAX RATE FOR FOR22 EIGN MANUFACTURERS AND IMPORTERS.—Subsection (c) of 

23 section 5001, as added by subsection (a), is amended— 

24 (1) in paragraph (1), by inserting ‘‘but only if 

25 the importer is an electing importer under paragraph 
305 

† HR 1 EAS 

1 (3) and the proof gallons of distilled spirits have been 

2 assigned to the importer pursuant to such paragraph’’ 

3 after ‘‘into the United States during the calendar 

4 year’’, and 

5 (2) by redesignating paragraph (3) as para6 graph (4) and by inserting after paragraph (2) the 

7 following new paragraph: 

8 ‘‘(3) REDUCED TAX RATE FOR FOREIGN MANU9 FACTURERS AND IMPORTERS.— 

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

11 gallons of distilled spirits which have been pro12 duced outside of the United States and imported 

13 into the United States, the rate of tax applicable 

14 under paragraph (1) (referred to in this para15 graph as the ‘reduced tax rate’) may be assigned 

16 by the distilled sprits operation (provided that 

17 such operation makes an election described in 

18 subparagraph (B)(ii)) to any electing importer 

19 of such proof gallons pursuant to the require20 ments established by the Secretary under sub21 paragraph (B). 

22 ‘‘(B) ASSIGNMENT.—The Secretary shall, 

23 through such rules, regulations, and procedures 

24 as are determined appropriate, establish proce25 dures for assignment of the reduced tax rate pro-
306 

† HR 1 EAS 

1 vided under this paragraph, which shall in2 clude— 

3 ‘‘(i) a limitation to ensure that the 

4 number of proof gallons of distilled spirits 

5 for which the reduced tax rate has been as6 signed by a distilled spirits operation— 

7 ‘‘(I) to any importer does not ex8 ceed the number of proof gallons pro9 duced by such operation during the 

10 calendar year which were imported 

11 into the United States by such im12 porter, and 

13 ‘‘(II) to all importers does not ex14 ceed the 22,230,000 proof gallons of 

15 distilled spirits to which the reduced 

16 tax rate applies, 

17 ‘‘(ii) procedures that allow the election 

18 of a distilled spirits operation to assign and 

19 an importer to receive the reduced tax rate 

20 provided under this paragraph, 

21 ‘‘(iii) requirements that the distilled 

22 spirits operation provide any information 

23 as the Secretary determines necessary and 

24 appropriate for purposes of carrying out 

25 this paragraph, and 
307 

† HR 1 EAS 

1 ‘‘(iv) procedures that allow for revoca2 tion of eligibility of the distilled spirits op3 eration and the importer for the reduced tax 

4 rate provided under this paragraph in the 

5 case of any erroneous or fraudulent infor6 mation provided under clause (iii) which 

7 the Secretary deems to be material to quali8 fying for such reduced rate. 

9 ‘‘(C) CONTROLLED GROUP.— 

10 ‘‘(i) IN GENERAL.—For purposes of 

11 this section, any importer making an elec12 tion described in subparagraph (B)(ii) shall 

13 be deemed to be a member of the controlled 

14 group of the distilled spirits operation, as 

15 described under paragraph (2). 

16 ‘‘(ii) APPORTIONMENT.—For purposes 

17 of this paragraph, in the case of a con18 trolled group, rules similar to section 

19 5051(a)(5)(B) shall apply.’’. 

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

21 section shall apply to distilled spirits removed after Decem22 ber 31, 2017. 

23 SEC. 13808. BULK DISTILLED SPIRITS. 

24 (a) IN GENERAL.—Section 5212 is amended by adding 

25 at the end the following sentence: ‘‘In the case of distilled 
308 

† HR 1 EAS 

1 spirits transferred in bond after December 31, 2017, and 

2 before January 1, 2020, this section shall be applied with3 out regard to whether distilled spirits are bulk distilled 

4 spirits.’’. 

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

6 section shall apply distilled spirits transferred in bond after 

7 December 31, 2017. 

8 Subpart B—Miscellaneous Provisions 

9 SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA 

10 NATIVE CORPORATIONS AND SETTLEMENT 

11 TRUSTS. 

12 (a) EXCLUSION FOR ANCSA PAYMENTS ASSIGNED TO

13 ALASKA NATIVE SETTLEMENT TRUSTS.— 

14 (1) IN GENERAL.—Part III of subchapter B of 

15 chapter 1 is amended by inserting before section 140 

16 the following new section: 

17 ‘‘SEC. 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLE18 MENT TRUSTS. 

19 ‘‘(a) IN GENERAL.—In the case of a Native Corpora20 tion, gross income shall not include the value of any pay21 ments that would otherwise be made, or treated as being 

22 made, to such Native Corporation pursuant to, or as re23 quired by, any provision of the Alaska Native Claims Set24 tlement Act (43 U.S.C. 1601 et seq.), including any pay25 ment that would otherwise be made to a Village Corporation 
309 

† HR 1 EAS 

1 pursuant to section 7(j) of the Alaska Native Claims Settle2 ment Act (43 U.S.C. 1606(j)), provided that any such pay3 ments— 

4 ‘‘(1) are assigned in writing to a Settlement 

5 Trust, and 

6 ‘‘(2) were not received by such Native Corpora7 tion prior to the assignment described in paragraph 

8 (1). 

9 ‘‘(b) INCLUSION IN GROSS INCOME.—In the case of a 

10 Settlement Trust which has been assigned payments de11 scribed in subsection (a), gross income shall include such 

12 payments when received by such Settlement Trust pursuant 

13 to the assignment and shall have the same character as if 

14 such payments were received by the Native Corporation. 

15 ‘‘(c) AMOUNT AND SCOPE OF ASSIGNMENT.—The 

16 amount and scope of any assignment under subsection (a) 

17 shall be described with reasonable particularity and may 

18 either be in a percentage of one or more such payments or 

19 in a fixed dollar amount. 

20 ‘‘(d) DURATION OF ASSIGNMENT; REVOCABILITY.— 

21 Any assignment under subsection (a) shall specify— 

22 ‘‘(1) a duration either in perpetuity or for a pe23 riod of time, and 

24 ‘‘(2) whether such assignment is revocable. 
310 

† HR 1 EAS 

1 ‘‘(e) PROHIBITION ON DEDUCTION.—Notwithstanding 

2 section 247, no deduction shall be allowed to a Native Cor3 poration for purposes of any amounts described in sub4 section (a). 

5 ‘‘(f) DEFINITIONS.—For purposes of this section, the 

6 terms ‘Native Corporation’ and ‘Settlement Trust’ have the 

7 same meaning given such terms under section 646(h).’’. 

8 (2) CONFORMING AMENDMENT.—The table of sec9 tions for part III of subchapter B of chapter 1 is 

10 amended by inserting before the item relating to sec11 tion 140 the following new item: 

‘‘Sec. 139G. Assignments to Alaska Native Settlement Trusts.’’. 

12 (3) EFFECTIVE DATE.—The amendments made 

13 by this subsection shall apply to taxable years begin14 ning after December 31, 2016. 

15 (b) DEDUCTION OF CONTRIBUTIONS TO ALASKA NA16 TIVE SETTLEMENT TRUSTS.— 

17 (1) IN GENERAL.—Part VIII of subchapter B of 

18 chapter 1 is amended by inserting before section 248 

19 the following new section: 

20 ‘‘SEC. 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLE21 MENT TRUSTS. 

22 ‘‘(a) IN GENERAL.—In the case of a Native Corpora23 tion, there shall be allowed a deduction for any contribu24 tions made by such Native Corporation to a Settlement 

25 Trust (regardless of whether an election under section 646 
311 

† HR 1 EAS 

1 is in effect for such Settlement Trust) for which the Native 

2 Corporation has made an annual election under subsection 

3 (e). 

4 ‘‘(b) AMOUNT OF DEDUCTION.—The amount of the de5 duction under subsection (a) shall be equal to— 

6 ‘‘(1) in the case of a cash contribution (regard7 less of the method of payment, including currency, 

8 coins, money order, or check), the amount of such con9 tribution, or 

10 ‘‘(2) in the case of a contribution not described 

11 in paragraph (1), the lesser of— 

12 ‘‘(A) the Native Corporation’s adjusted basis 

13 in the property contributed, or 

14 ‘‘(B) the fair market value of the property 

15 contributed. 

16 ‘‘(c) LIMITATION AND CARRYOVER.— 

17 ‘‘(1) IN GENERAL.—Subject to paragraph (2), the 

18 deduction allowed under subsection (a) for any tax19 able year shall not exceed the taxable income (as de20 termined without regard to such deduction) of the Na21 tive Corporation for the taxable year in which the 

22 contribution was made. 

23 ‘‘(2) CARRYOVER.—If the aggregate amount of 

24 contributions described in subsection (a) for any tax25 able year exceeds the limitation under paragraph (1), 
312 

† HR 1 EAS 

1 such excess shall be treated as a contribution described 

2 in subsection (a) in each of the 15 succeeding years 

3 in order of time. 

4 ‘‘(d) DEFINITIONS.—For purposes of this section, the 

5 terms ‘Native Corporation’ and ‘Settlement Trust’ have the 

6 same meaning given such terms under section 646(h). 

7 ‘‘(e) MANNER OF MAKING ELECTION.— 

8 ‘‘(1) IN GENERAL.—For each taxable year, a Na9 tive Corporation may elect to have this section apply 

10 for such taxable year on the income tax return or an 

11 amendment or supplement to the return of the Native 

12 Corporation, with such election to have effect solely 

13 for such taxable year. 

14 ‘‘(2) REVOCATION.—Any election made by a Na15 tive Corporation pursuant to this subsection may be 

16 revoked pursuant to a timely filed amendment or sup17 plement to the income tax return of such Native Cor18 poration. 

19 ‘‘(f) ADDITIONAL RULES.— 

20 ‘‘(1) EARNINGS AND PROFITS.—Notwithstanding 

21 section 646(d)(2), in the case of a Native Corporation 

22 which claims a deduction under this section for any 

23 taxable year, the earnings and profits of such Native 

24 Corporation for such taxable year shall be reduced by 

25 the amount of such deduction. 
313 

† HR 1 EAS 

1 ‘‘(2) GAIN OR LOSS.—No gain or loss shall be 

2 recognized by the Native Corporation with respect to 

3 a contribution of property for which a deduction is 

4 allowed under this section. 

5 ‘‘(3) INCOME.—Subject to subsection (g), a Set6 tlement Trust shall include in income the amount of 

7 any deduction allowed under this section in the tax8 able year in which the Settlement Trust actually re9 ceives such contribution. 

10 ‘‘(4) PERIOD.—The holding period under section 

11 1223 of the Settlement Trust shall include the period 

12 the property was held by the Native Corporation. 

13 ‘‘(5) BASIS.—The basis that a Settlement Trust 

14 has for which a deduction is allowed under this sec15 tion shall be equal to the lesser of— 

16 ‘‘(A) the adjusted basis of the Native Cor17 poration in such property immediately before 

18 such contribution, or 

19 ‘‘(B) the fair market value of the property 

20 immediately before such contribution. 

21 ‘‘(6) PROHIBITION.—No deduction shall be al22 lowed under this section with respect to any contribu23 tions made to a Settlement Trust which are in viola24 tion of subsection (a)(2) or (c)(2) of section 39 of the 
314 

† HR 1 EAS 

1 Alaska Native Claims Settlement Act (43 U.S.C. 

2 1629e). 

3 ‘‘(g) ELECTION BY SETTLEMENT TRUST TO DEFER IN4 COME RECOGNITION.— 

5 ‘‘(1) IN GENERAL.—In the case of a contribution 

6 which consists of property other than cash, a Settle7 ment Trust may elect to defer recognition of any in8 come related to such property until the sale or ex9 change of such property, in whole or in part, by the 

10 Settlement Trust. 

11 ‘‘(2) TREATMENT.—In the case of property de12 scribed in paragraph (1), any income or gain realized 

13 on the sale or exchange of such property shall be 

14 treated as— 

15 ‘‘(A) for such amount of the income or gain 

16 as is equal to or less than the amount of income 

17 which would be included in income at the time 

18 of contribution under subsection (f)(3) but for the 

19 taxpayer’s election under this subsection, ordi20 nary income, and 

21 ‘‘(B) for any amounts of the income or gain 

22 which are in excess of the amount of income 

23 which would be included in income at the time 

24 of contribution under subsection (f)(3) but for the 

25 taxpayer’s election under this subsection, having 
315 

† HR 1 EAS 

1 the same character as if this subsection did not 

2 apply. 

3 ‘‘(3) ELECTION.— 

4 ‘‘(A) IN GENERAL.—For each taxable year, 

5 a Settlement Trust may elect to apply this sub6 section for any property described in paragraph 

7 (1) which was contributed during such year. Any 

8 property to which the election applies shall be 

9 identified and described with reasonable particu10 larity on the income tax return or an amend11 ment or supplement to the return of the Settle12 ment Trust, with such election to have effect sole13 ly for such taxable year. 

14 ‘‘(B) REVOCATION.—Any election made by 

15 a Settlement Trust pursuant to this subsection 

16 may be revoked pursuant to a timely filed 

17 amendment or supplement to the income tax re18 turn of such Settlement Trust. 

19 ‘‘(C) CERTAIN DISPOSITIONS.— 

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

21 property for which an election is in effect 

22 under this subsection and which is disposed 

23 of within the first taxable year subsequent 

24 to the taxable year in which such property 

25 was contributed to the Settlement Trust— 
316 

† HR 1 EAS 

1 ‘‘(I) this section shall be applied 

2 as if the election under this subsection 

3 had not been made, 

4 ‘‘(II) any income or gain which 

5 would have been included in the year 

6 of contribution under subsection (f)(3) 

7 but for the taxpayer’s election under 

8 this subsection shall be included in in9 come for the taxable year of such con10 tribution, and 

11 ‘‘(III) the Settlement Trust shall 

12 pay any increase in tax resulting from 

13 such inclusion, including any applica14 ble interest, and increased by 10 per15 cent of the amount of such increase 

16 with interest. 

17 ‘‘(ii) ASSESSMENT.—Notwithstanding 

18 section 6501(a), any amount described in 

19 subclause (III) of clause (i) may be assessed, 

20 or a proceeding in court with respect to 

21 such amount may be initiated without as22 sessment, within 4 years after the date on 

23 which the return making the election under 

24 this subsection for such property was filed.’’. 
317 

† HR 1 EAS 

1 (2) CONFORMING AMENDMENT.—The table of sec2 tions for part VIII of subchapter B of chapter 1 is 

3 amended by inserting before the item relating to sec4 tion 248 the following new item: 

‘‘Sec. 247. Contributions to Alaska Native Settlement Trusts.’’. 

5 (3) EFFECTIVE DATE.— 

6 (A) IN GENERAL.—The amendments made 

7 by this subsection shall apply to taxable years 

8 for which the period of limitation on refund or 

9 credit under section 6511 of the Internal Rev10 enue Code of 1986 has not expired. 

11 (B) ONE-YEAR WAIVER OF STATUTE OF LIM12 ITATIONS.—If the period of limitation on a cred13 it or refund resulting from the amendments 

14 made by paragraph (1) expires before the end of 

15 the 1-year period beginning on the date of the 

16 enactment of this Act, refund or credit of such 

17 overpayment (to the extent attributable to such 

18 amendments) may, nevertheless, be made or al19 lowed if claim therefor is filed before the close of 

20 such 1-year period. 

21 (c) INFORMATION REPORTING FOR DEDUCTIBLE CON22 TRIBUTIONS TO ALASKA NATIVE SETTLEMENT TRUSTS.— 

23 (1) IN GENERAL.—Section 6039H is amended— 

24 (A) in the heading, by striking ‘‘SPON25 SORING’’, and 
318 

† HR 1 EAS 

1 (B) by adding at the end the following new 

2 subsection: 

3 ‘‘(e) DEDUCTIBLE CONTRIBUTIONS BY NATIVE COR4 PORATIONS TO ALASKA NATIVE SETTLEMENT TRUSTS.— 

5 ‘‘(1) IN GENERAL.—Any Native Corporation (as 

6 defined in subsection (m) of section 3 of the Alaska 

7 Native Claims Settlement Act (43 U.S.C. 1602(m))) 

8 which has made a contribution to a Settlement Trust 

9 (as defined in subsection (t) of such section) to which 

10 an election under subsection (e) of section 247 applies 

11 shall provide such Settlement Trust with a statement 

12 regarding such election not later than January 31 of 

13 the calendar year subsequent to the calendar year in 

14 which the contribution was made. 

15 ‘‘(2) CONTENT OF STATEMENT.—The statement 

16 described in paragraph (1) shall include— 

17 ‘‘(A) the total amount of contributions to 

18 which the election under subsection (e) of section 

19 247 applies, 

20 ‘‘(B) for each contribution, whether such 

21 contribution was in cash, 

22 ‘‘(C) for each contribution which consists of 

23 property other than cash, the date that such 

24 property was acquired by the Native Corporation 

25 and the adjusted basis and fair market value of 
319 

† HR 1 EAS 

1 such property on the date such property was con2 tributed to the Settlement Trust, 

3 ‘‘(D) the date on which each contribution 

4 was made to the Settlement Trust, and 

5 ‘‘(E) such information as the Secretary de6 termines to be necessary or appropriate for the 

7 identification of each contribution and the accu8 rate inclusion of income relating to such con9 tributions by the Settlement Trust.’’. 

10 (2) CONFORMING AMENDMENT.—The item relat11 ing to section 6039H in the table of sections for sub12 part A of part III of subchapter A of chapter 61 is 

13 amended to read as follows: 

‘‘Sec. 6039H. Information With Respect to Alaska Native Settlement Trusts and 

Native Corporations.’’. 

14 (3) EFFECTIVE DATE.—The amendments made 

15 by this subsection shall apply to taxable years begin16 ning after December 31, 2016. 

17 SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT 

18 SERVICES. 

19 (a) IN GENERAL.—Subsection (e) of section 4261 is 

20 amended by adding at the end the following new paragraph: 

21 ‘‘(5) AMOUNTS PAID FOR AIRCRAFT MANAGE22 MENT SERVICES.— 

23 ‘‘(A) IN GENERAL.—No tax shall be imposed 

24 by this section or section 4271 on any amounts 
320 

† HR 1 EAS 

1 paid by an aircraft owner for aircraft manage2 ment services related to— 

3 ‘‘(i) maintenance and support of the 

4 aircraft owner’s aircraft, or 

5 ‘‘(ii) flights on the aircraft owner’s air6 craft. 

7 ‘‘(B) AIRCRAFT MANAGEMENT SERVICES.— 

8 For purposes of subparagraph (A), the term ‘air9 craft management services’ includes— 

10 ‘‘(i) assisting an aircraft owner with 

11 administrative and support services, such 

12 as scheduling, flight planning, and weather 

13 forecasting, 

14 ‘‘(ii) obtaining insurance, 

15 ‘‘(iii) maintenance, storage and fueling 

16 of aircraft, 

17 ‘‘(iv) hiring, training, and provision of 

18 pilots and crew, 

19 ‘‘(v) establishing and complying with 

20 safety standards, and 

21 ‘‘(vi) such other services as are nec22 essary to support flights operated by an air23 craft owner. 

24 ‘‘(C) LESSEE TREATED AS AIRCRAFT

25 OWNER.— 
321 

† HR 1 EAS 

1 ‘‘(i) IN GENERAL.—For purposes of 

2 this paragraph, the term ‘aircraft owner’ 

3 includes a person who leases the aircraft 

4 other than under a disqualified lease. 

5 ‘‘(ii) DISQUALIFIED LEASE.—For pur6 poses of clause (i), the term ‘disqualified 

7 lease’ means a lease from a person pro8 viding aircraft management services with 

9 respect to such aircraft (or a related person 

10 (within the meaning of section 

11 465(b)(3)(C)) to the person providing such 

12 services), if such lease is for a term of 31 

13 days or less. 

14 ‘‘(D) PRO RATA ALLOCATION.—In the case 

15 of amounts paid to any person which (but for 

16 this subsection) are subject to the tax imposed by 

17 subsection (a), a portion of which consists of 

18 amounts described in subparagraph (A), this 

19 paragraph shall apply on a pro rata basis only 

20 to the portion which consists of amounts de21 scribed in such subparagraph.’’. 

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

23 section shall apply to amounts paid after the date of the 

24 enactment of this Act. 
322 

† HR 1 EAS 

1 SEC. 13823. OPPORTUNITY ZONES. 

2 (a) IN GENERAL.—Chapter 1 is amended by adding 

3 at the end the following: 

4 ‘‘Subchapter Z—Opportunity Zones 

‘‘Sec. 1400Z–1. Designation. 

‘‘Sec. 1400Z–2. Special rules for capital gains invested in opportunity zones. 

5 ‘‘SEC. 1400Z–1. DESIGNATION. 

6 ‘‘(a) QUALIFIED OPPORTUNITY ZONE DEFINED.—For 

7 the purposes of this subchapter, the term ‘qualified oppor8 tunity zone’ means a population census tract that is a low9 income community that is designated as a qualified oppor10 tunity zone. 

11 ‘‘(b) DESIGNATION.— 

12 ‘‘(1) IN GENERAL.—For purposes of subsection 

13 (a), a population census tract that is a low-income 

14 community is designated as a qualified opportunity 

15 zone if— 

16 ‘‘(A) not later than the end of the deter17 mination period, the governor of the State in 

18 which the tract is located— 

19 ‘‘(i) nominates the tract for designa20 tion as a qualified opportunity zone, and 

21 ‘‘(ii) notifies the Secretary in writing 

22 of such nomination, and 

23 ‘‘(B) the Secretary certifies such nomina24 tion and designates such tract as a qualified op-
323 

† HR 1 EAS 

1 portunity zone before the end of the consideration 

2 period. 

3 ‘‘(2) EXTENSION OF PERIODS.—A governor may 

4 request that the Secretary extend either the deter5 mination or consideration period, or both (determined 

6 without regard to this subparagraph), for an addi7 tional 30 days. 

8 ‘‘(c) OTHER DEFINITIONS.—For purposes of this sub9 section— 

10 ‘‘(1) LOW-INCOME COMMUNITIES.—The term 

11 ‘low-income community’ has the same meaning as 

12 when used in section 45D(e). 

13 ‘‘(2) DEFINITION OF PERIODS.— 

14 ‘‘(A) CONSIDERATION PERIOD.—The term 

15 ‘consideration period’ means the 30-day period 

16 beginning on the date on which the Secretary re17 ceives notice under subsection (b)(1)(A)(ii), as 

18 extended under subsection (b)(2). 

19 ‘‘(B) DETERMINATION PERIOD.—The term 

20 ‘determination period’ means the 90-day period 

21 beginning on the date of the enactment of the 

22 Tax Cuts and Jobs Act, as extended under sub23 section (b)(2). 
324 

† HR 1 EAS 

1 ‘‘(3) STATE.—For purposes of this section, the 

2 term ‘State’ includes any possession of the United 

3 States. 

4 ‘‘(d) NUMBER OF DESIGNATIONS.— 

5 ‘‘(1) IN GENERAL.—Except as provided by para6 graph (2), the number of population census tracts in 

7 a State that may be designated as qualified oppor8 tunity zones under this section may not exceed 25 

9 percent of the number of low-income communities in 

10 the State. 

11 ‘‘(2) EXCEPTION.—If the number of low-income 

12 communities in a State is less than 100, then a total 

13 of 25 of such tracts may be designated as qualified 

14 opportunity zones. 

15 ‘‘(e) DESIGNATION OF TRACTS CONTIGUOUS WITH

16 LOW-INCOME COMMUNITIES.— 

17 ‘‘(1) IN GENERAL.—A population census tract 

18 that is not a low-income community may be des19 ignated as a qualified opportunity zone under this 

20 section if— 

21 ‘‘(A) the tract is contiguous with the low-in22 come community that is designated as a quali23 fied opportunity zone, and 

24 ‘‘(B) the median family income of the tract 

25 does not exceed 125 percent of the median family 
325 

† HR 1 EAS 

1 income of the low-income community with which 

2 the tract is contiguous. 

3 ‘‘(2) LIMITATION.—Not more than 5 percent of 

4 the population census tracts designated in a State as 

5 a qualified opportunity zone may be designated under 

6 paragraph (1). 

7 ‘‘(f) PERIOD FOR WHICH DESIGNATION IS IN EF8 FECT.—A designation as a qualified opportunity zone shall 

9 remain in effect for the period beginning on the date of the 

10 designation and ending at the close of the 10th calendar 

11 year beginning on or after such date of designation. 

12 ‘‘SEC. 1400Z–2. SPECIAL RULES FOR CAPITAL GAINS IN13 VESTED IN OPPORTUNITY ZONES. 

14 ‘‘(a) IN GENERAL.—In the case of gain from the sale 

15 to, or exchange with, an unrelated person of any property 

16 held by the taxpayer, at the election of the taxpayer— 

17 ‘‘(1) gross income for the taxable year shall not 

18 include so much of such gain as does not exceed the 

19 aggregate amount invested by the taxpayer in a 

20 qualified opportunity fund during the 180-day period 

21 beginning on the date of such sale or exchange, 

22 ‘‘(2) the amount of gain excluded by paragraph 

23 (1) shall be included in gross income as provided by 

24 subsection (b), and 

25 ‘‘(3) subsection (c) shall apply. 
326 

† HR 1 EAS 

1 No election may be made under the preceding sentence with 

2 respect to a sale or exchange if an election previously made 

3 with respect to such sale or exchange is in effect. 

4 ‘‘(b) DEFERRAL OF GAIN INVESTED IN OPPORTUNITY

5 ZONE PROPERTY.— 

6 ‘‘(1) YEAR OF INCLUSION.—Gain to which sub7 section (a)(2) applies shall be included in income in 

8 the taxable year which includes the earlier of— 

9 ‘‘(A) the date on which such investment is 

10 sold or exchanged, or 

11 ‘‘(B) December 31, 2026. 

12 ‘‘(2) AMOUNT INCLUDIBLE.— 

13 ‘‘(A) IN GENERAL.—The amount of gain in14 cluded in gross income under subsection (a)(1) 

15 shall be the excess of— 

16 ‘‘(i) the lesser of the amount of gain ex17 cluded under paragraph (1) or the fair 

18 market value of the property as determined 

19 as of the date described in paragraph (1), 

20 over 

21 ‘‘(ii) the taxpayer’s basis in the invest22 ment. 

23 ‘‘(B) DETERMINATION OF BASIS.— 

24 ‘‘(i) IN GENERAL.—Except as otherwise 

25 provided in this clause or subsection (c), the 
327 

† HR 1 EAS 

1 taxpayer’s basis in the investment shall be 

2 zero. 

3 ‘‘(ii) INCREASE FOR GAIN RECOGNIZED

4 UNDER SUBSECTION (a)(2).—The basis in 

5 the investment shall be increased by the 

6 amount of gain recognized by reason of sub7 section (a)(2) with respect to such property. 

8 ‘‘(iii) INVESTMENTS HELD FOR 5

9 YEARS.—In the case of any investment held 

10 for at least 5 years, the basis of such invest11 ment shall be increased by an amount equal 

12 to 10 percent of the amount of gain deferred 

13 by reason of subsection (a)(1). 

14 ‘‘(iv) INVESTMENTS HELD FOR 7

15 YEARS.—In the case of any investment held 

16 by the taxpayer for at least 7 years, in ad17 dition to any adjustment made under clause 

18 (iii), the basis of such property shall be in19 creased by an amount equal to 5 percent of 

20 the amount of gain deferred by reason of 

21 subsection (a)(1). 

22 ‘‘(c) SPECIAL RULE FOR INVESTMENTS HELD FOR AT

23 LEAST 10 YEARS.—In the case of any investment held by 

24 the taxpayer for at least 10 years and with respect to which 

25 the taxpayer makes an election under this clause, the basis 
328 

† HR 1 EAS 

1 of such property shall be equal to the fair market value of 

2 such investment on the date that the investment is sold or 

3 exchanged. 

4 ‘‘(d) QUALIFIED OPPORTUNITY FUND.—For purposes 

5 of this section— 

6 ‘‘(1) QUALIFIED OPPORTUNITY FUND.—The term 

7 ‘qualified opportunity fund’ means any investment 

8 vehicle which is organized as a corporation or a part9 nership for the purpose of investing in qualified op10 portunity zone property (other than another qualified 

11 opportunity fund) that holds at least 90 percent of its 

12 assets in qualified opportunity zone property, deter13 mined— 

14 ‘‘(A) on the last day of the first 6-month pe15 riod of the taxable year of the fund, and 

16 ‘‘(B) on the last day of the taxable year of 

17 the fund. 

18 ‘‘(2) QUALIFIED OPPORTUNITY ZONE PROP19 ERTY.— 

20 ‘‘(A) IN GENERAL.—The term ‘qualified op21 portunity zone property’ means property which 

22 is— 

23 ‘‘(i) qualified opportunity zone stock, 

24 ‘‘(ii) qualified opportunity zone part25 nership interest, or 
329 

† HR 1 EAS 

1 ‘‘(iii) qualified opportunity zone busi2 ness property. 

3 ‘‘(B) QUALIFIED OPPORTUNITY ZONE

4 STOCK.— 

5 ‘‘(i) IN GENERAL.—Except as provided 

6 in clause (ii), the term ‘qualified oppor7 tunity zone stock’ means any stock in a do8 mestic corporation if— 

9 ‘‘(I) such stock is acquired by the 

10 taxpayer after December 31, 2017, at 

11 its original issue (directly or through 

12 an underwriter) from the corporation 

13 solely in exchange for cash, 

14 ‘‘(II) as of the time such stock was 

15 issued, such corporation was a quali16 fied opportunity zone business (or, in 

17 the case of a new corporation, such cor18 poration was being organized for pur19 poses of being a qualified opportunity 

20 zone business), and 

21 ‘‘(III) during substantially all of 

22 the taxpayer’s holding period for such 

23 stock, such corporation qualified as a 

24 qualified opportunity zone business. 
330 

† HR 1 EAS 

1 ‘‘(ii) REDEMPTIONS.—A rule similar 

2 to the rule of section 1202(c)(3) shall apply 

3 for purposes of this paragraph. 

4 ‘‘(C) QUALIFIED OPPORTUNITY ZONE PART5 NERSHIP INTEREST.—The term ‘qualified oppor6 tunity zone partnership interest’ means any cap7 ital or profits interest in a domestic partnership 

8 if— 

9 ‘‘(i) such interest is acquired by the 

10 taxpayer after December 31, 2017, from the 

11 partnership solely in exchange for cash, 

12 ‘‘(ii) as of the time such interest was 

13 acquired, such partnership was a qualified 

14 opportunity zone business (or, in the case of 

15 a new partnership, such partnership was 

16 being organized for purposes of being a 

17 qualified opportunity zone business), and 

18 ‘‘(iii) during substantially all of the 

19 taxpayer’s holding period for such interest, 

20 such partnership qualified as a qualified 

21 opportunity zone business. 

22 ‘‘(D) QUALIFIED OPPORTUNITY ZONE BUSI23 NESS PROPERTY.— 

24 ‘‘(i) IN GENERAL.—The term ‘qualified 

25 opportunity zone business property’ means 
331 

† HR 1 EAS 

1 tangible property used in a trade or busi2 ness of the taxpayer if— 

3 ‘‘(I) such property was acquired 

4 by the taxpayer by purchase (as de5 fined in section 179(d)(2)) after De6 cember 31, 2017, 

7 ‘‘(II) the original use of such 

8 property in the qualified opportunity 

9 zone commences with the taxpayer or 

10 the taxpayer substantially improves 

11 the property, and 

12 ‘‘(III) during substantially all of 

13 the taxpayer’s holding period for such 

14 property, substantially all of the use of 

15 such property was in a qualified op16 portunity zone. 

17 ‘‘(ii) SUBSTANTIAL IMPROVEMENT.— 

18 For purposes of subparagraph (A)(ii), prop19 erty shall be treated as substantially im20 proved by the taxpayer only if, during any 

21 30-month period beginning after the date of 

22 acquisition of such property, additions to 

23 basis with respect to such property in the 

24 hands of the taxpayer exceed an amount 

25 equal to the adjusted basis of such property 
332 

† HR 1 EAS 

1 at the beginning of such 30-month period in 

2 the hands of the taxpayer. 

3 ‘‘(iii) RELATED PARTY.—For purposes 

4 of subparagraph (A)(i), the related person 

5 rule of section 179(d)(2) shall be applied 

6 pursuant to paragraph (8) of this sub7 section in lieu of the application of such 

8 rule in section 179(d)(2)(A). 

9 ‘‘(3) QUALIFIED OPPORTUNITY ZONE BUSI10 NESS.— 

11 ‘‘(A) IN GENERAL.—The term ‘qualified op12 portunity zone business’ means a trade or busi13 ness— 

14 ‘‘(i) in which substantially all of the 

15 tangible property owned or leased by the 

16 taxpayer is qualified opportunity zone busi17 ness property, 

18 ‘‘(ii) which satisfies the requirements of 

19 paragraphs (2), (4), and (8) of section 

20 1397C(b), and 

21 ‘‘(iii) which is not described in section 

22 144(c)(6)(B). 

23 ‘‘(B) SPECIAL RULE.—For purposes of sub24 paragraph (A), tangible property that ceases to 

25 be a qualified opportunity zone business prop-
333 

† HR 1 EAS 

1 erty shall continue to be treated as a qualified 

2 opportunity zone business property for the lesser 

3 of— 

4 ‘‘(i) 5 years after the date on which 

5 such tangible property ceases to be so quali6 fied, or 

7 ‘‘(ii) the date on which such tangible 

8 property is no longer held by the qualified 

9 opportunity zone business. 

10 ‘‘(e) APPLICABLE RULES.— 

11 ‘‘(1) TREATMENT OF INVESTMENTS WITH MIXED

12 FUNDS.—In the case of any investment in a qualified 

13 opportunity fund only a portion of which consists of 

14 investments of gain to which an election under sub15 section (a)(1) is in effect— 

16 ‘‘(A) such investment shall be treated as 2 

17 separate investments, consisting of— 

18 ‘‘(i) one investment that only includes 

19 amounts to which the election under sub20 section (a)(1) applies, and 

21 ‘‘(ii) a separate investment consisting 

22 of other amounts, and 

23 ‘‘(B) subsections (a), (b), and (c) shall only 

24 apply to the investment described in subpara25 graph (A)(i). 
334 

† HR 1 EAS 

1 ‘‘(2) RELATED PERSONS.—For purposes of this 

2 section, persons are related to each other if such per3 sons are described in section 267(b) or 707(b)(1), de4 termined by substituting ‘20 percent’ for ‘50 percent’ 

5 each place it occurs in such sections. 

6 ‘‘(3) DECEDENTS.—In the case of a decedent, 

7 amounts recognized under this section shall, if not 

8 properly includible in the gross income of the dece9 dent, be includible in gross income as provided by sec10 tion 691. 

11 ‘‘(4) REGULATIONS.—The Secretary shall pre12 scribe such regulations as may be necessary or appro13 priate to carry out the purposes of this section, in14 cluding— 

15 ‘‘(A) rules for the certification of qualified 

16 opportunity funds for the purposes of this sec17 tion, and 

18 ‘‘(B) rules to prevent abuse. 

19 ‘‘(f) FAILURE OF QUALIFIED OPPORTUNITY FUND TO

20 MAINTAIN INVESTMENT STANDARD.— 

21 ‘‘(1) IN GENERAL.—If a qualified opportunity 

22 fund fails to meet the 90-percent requirement of sub23 section (c)(1), the qualified opportunity fund shall 

24 pay a penalty for each month it fails to meet the re25 quirement in an amount equal to the product of— 
335 

† HR 1 EAS 

1 ‘‘(A) the excess of— 

2 ‘‘(i) the amount equal to 90 percent of 

3 its aggregate assets, over 

4 ‘‘(ii) the aggregate amount of qualified 

5 opportunity zone property held by the fund, 

6 multiplied by 

7 ‘‘(B) the underpayment rate established 

8 under section 6621(a)(2) for such month. 

9 ‘‘(2) SPECIAL RULE FOR PARTNERSHIPS.—In the 

10 case that the qualified opportunity fund is a partner11 ship, the penalty imposed by paragraph (1) shall be 

12 taken into account proportionately as part of the dis13 tributive share of each partner of the partnership. 

14 ‘‘(3) REASONABLE CAUSE EXCEPTION.—No pen15 alty shall be imposed under this subsection with re16 spect to any failure if it is shown that such failure 

17 is due to reasonable cause.’’. 

18 (b) BASIS ADJUSTMENTS.—Section 1016(a) is amend19 ed by striking ‘‘and’’ at the end of paragraph (36), by strik20 ing the period at the end of paragraph (37) and inserting 

21 ‘‘, and’’, and by inserting after paragraph (37) the fol22 lowing: 

23 ‘‘(38) to the extent provided in subsections (b)(2) 

24 and (c) of section 1400Z–2.’’. 
336 

† HR 1 EAS 

1 (c) CLERICAL AMENDMENT.—The table of subchapters 

2 for chapter 1 is amended by adding at the end the following 

3 new item: 

‘‘SUBCHAPTER Z. OPPORTUNITY ZONES’’. 

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

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

6 Act. 

7 Subtitle D—International Tax 

8 Provisions 

9 PART I—OUTBOUND TRANSACTIONS 

10 Subpart A—Establishment of Participation 

11 Exemption System for Taxation of Foreign Income 

12 SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION 

13 OF DIVIDENDS RECEIVED BY DOMESTIC COR14 PORATIONS FROM SPECIFIED 10-PERCENT 

15 OWNED FOREIGN CORPORATIONS. 

16 (a) IN GENERAL.—Part VIII of subchapter B of chap17 ter 1 is amended by inserting after section 245 the following 

18 new section: 

19 ‘‘SEC. 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION 

20 OF DIVIDENDS RECEIVED BY DOMESTIC COR21 PORATIONS FROM SPECIFIED 10-PERCENT 

22 OWNED FOREIGN CORPORATIONS. 

23 ‘‘(a) IN GENERAL.—In the case of any dividend re24 ceived from a specified 10-percent owned foreign corpora25 tion by a domestic corporation which is a United States 
337 

† HR 1 EAS 

1 shareholder with respect to such foreign corporation, there 

2 shall be allowed as a deduction an amount equal to the for3 eign-source portion of such dividend. 

4 ‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN COR5 PORATION.—For purposes of this section— 

6 ‘‘(1) IN GENERAL.—The term ‘specified 10-per7 cent owned foreign corporation’ means any foreign 

8 corporation with respect to which any domestic cor9 poration is a United States shareholder with respect 

10 to such corporation. 

11 ‘‘(2) EXCLUSION OF PASSIVE FOREIGN INVEST12 MENT COMPANIES.—Such term shall not include any 

13 corporation which is a passive foreign investment 

14 company (as defined in section 1297) with respect to 

15 the shareholder and which is not a controlled foreign 

16 corporation. 

17 ‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of this 

18 section— 

19 ‘‘(1) IN GENERAL.—The foreign-source portion of 

20 any dividend from a specified 10-percent owned for21 eign corporation is an amount which bears the same 

22 ratio to such dividend as— 

23 ‘‘(A) the undistributed foreign earnings of 

24 the specified 10-percent owned foreign corpora25 tion, bears to 
338 

† HR 1 EAS 

1 ‘‘(B) the total undistributed earnings of 

2 such foreign corporation. 

3 ‘‘(2) UNDISTRIBUTED EARNINGS.—The term ‘un4 distributed earnings’ means the amount of the earn5 ings and profits of the specified 10-percent owned for6 eign corporation (computed in accordance with sec7 tions 964(a) and 986)— 

8 ‘‘(A) as of the close of the taxable year of the 

9 specified 10-percent owned foreign corporation in 

10 which the dividend is distributed, and 

11 ‘‘(B) without diminution by reason of divi12 dends distributed during such taxable year. 

13 ‘‘(3) UNDISTRIBUTED FOREIGN EARNINGS.—The 

14 term ‘undistributed foreign earnings’ means the por15 tion of the undistributed earnings which is attrib16 utable to neither— 

17 ‘‘(A) income described in subparagraph (A) 

18 of section 245(a)(5), nor 

19 ‘‘(B) dividends described in subparagraph 

20 (B) of such section (determined without regard to 

21 section 245(a)(12)). 

22 ‘‘(d) DISALLOWANCE OF FOREIGN TAX CREDIT, ETC.— 

23 ‘‘(1) IN GENERAL.—No credit shall be allowed 

24 under section 901 for any taxes paid or accrued (or 

25 treated as paid or accrued) with respect to any dis-
339 

† HR 1 EAS 

1 tribution any portion of which constitutes a dividend 

2 for which a deduction is allowed under this section. 

3 ‘‘(2) 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 ‘‘(e) SPECIAL RULES FOR HYBRID DIVIDENDS.— 

10 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

11 apply to any dividend received by a United States 

12 shareholder from a controlled foreign corporation if 

13 the dividend is a hybrid dividend. 

14 ‘‘(2) HYBRID DIVIDENDS OF TIERED CORPORA15 TIONS.—If a controlled foreign corporation with re16 spect to which a domestic corporation is a United 

17 States shareholder receives a hybrid dividend from 

18 any other controlled foreign corporation with respect 

19 to which such domestic corporation is also a United 

20 States shareholder, then, notwithstanding any other 

21 provision of this title— 

22 ‘‘(A) the hybrid dividend shall be treated for 

23 purposes of section 951(a)(1)(A) as subpart F in24 come of the receiving controlled foreign corpora25 tion for the taxable year of the controlled foreign 
340 

† HR 1 EAS 

1 corporation in which the dividend was received, 

2 and 

3 ‘‘(B) the United States shareholder shall in4 clude in gross income an amount equal to the 

5 shareholder’s pro rata share (determined in the 

6 same manner as under section 951(a)(2)) of the 

7 subpart F income described in subparagraph 

8 (A). 

9 ‘‘(3) DENIAL OF FOREIGN TAX CREDIT, ETC.— 

10 The rules of subsection (d) shall apply to any hybrid 

11 dividend received by, or any amount included under 

12 paragraph (2) in the gross income of, a United States 

13 shareholder. 

14 ‘‘(4) HYBRID DIVIDEND.—The term ‘hybrid divi15 dend’ means an amount received from a controlled 

16 foreign corporation— 

17 ‘‘(A) for which a deduction would be al18 lowed under subsection (a) but for this sub19 section, and 

20 ‘‘(B) for which the controlled foreign cor21 poration received a deduction (or other tax ben22 efit) from taxes imposed by any foreign country. 

23 ‘‘(f) SPECIAL RULE FOR PURGING DISTRIBUTIONS OF

24 PASSIVE FOREIGN INVESTMENT COMPANIES.—Any amount 

25 which is treated as a dividend under section 1291(d)(2)(B) 
341 

† HR 1 EAS 

1 shall not be treated as a dividend for purposes of this sec2 tion. 

3 ‘‘(g) REGULATIONS.—The Secretary shall prescribe 

4 such regulations or other guidance as may be necessary or 

5 appropriate to carry out the provisions of this section, in6 cluding regulations for the treatment of United States 

7 shareholders owning stock of a specified 10 percent owned 

8 foreign corporation through a partnership.’’. 

9 (b) APPLICATION OF HOLDING PERIOD REQUIRE10 MENT.—Subsection (c) of section 246 is amended— 

11 (1) by striking ‘‘or 245’’ in paragraph (1) and 

12 inserting ‘‘245, or 245A’’, and 

13 (2) by adding at the end the following new para14 graph: 

15 ‘‘(5) SPECIAL RULES FOR FOREIGN SOURCE POR16 TION OF DIVIDENDS RECEIVED FROM SPECIFIED 10- 

17 PERCENT OWNED FOREIGN CORPORATIONS.— 

18 ‘‘(A) 1-YEAR HOLDING PERIOD REQUIRE19 MENT.—For purposes of section 245A— 

20 ‘‘(i) paragraph (1)(A) shall be ap21 plied— 

22 ‘‘(I) by substituting ‘365 days’ for 

23 ‘45 days’ each place it appears, and 

24 ‘‘(II) by substituting ‘731-day pe25 riod’ for ‘91-day period’, and 
342 

† HR 1 EAS 

1 ‘‘(ii) paragraph (2) shall not apply. 

2 ‘‘(B) STATUS MUST BE MAINTAINED DURING

3 HOLDING PERIOD.—For purposes of applying 

4 paragraph (1) with respect to section 245A, the 

5 taxpayer shall be treated as holding the stock re6 ferred to in paragraph (1) for any period only 

7 if— 

8 ‘‘(i) the specified 10-percent owned for9 eign corporation referred to in section 

10 245A(a) is a specified 10-percent owned for11 eign corporation at all times during such 

12 period, and 

13 ‘‘(ii) the taxpayer is a United States 

14 shareholder with respect to such specified 

15 10-percent owned foreign corporation at all 

16 times during such period.’’. 

17 (c) APPLICATION OF RULES GENERALLY APPLICABLE

18 TO DEDUCTIONS FOR DIVIDENDS RECEIVED.— 

19 (1) TREATMENT OF DIVIDENDS FROM CERTAIN

20 CORPORATIONS.—Paragraph (1) of section 246(a) is 

21 amended by striking ‘‘and 245’’ and inserting ‘‘245, 

22 and 245A’’. 

23 (2) ASSETS GENERATING TAX-EXEMPT PORTION

24 OF DIVIDEND NOT TAKEN INTO ACCOUNT IN ALLO25 CATING AND APPORTIONING DEDUCTIBLE EX-
343 

† HR 1 EAS 

1 PENSES.—Paragraph (3) of section 864(e) is amended 

2 by striking ‘‘or 245(a)’’ and inserting ‘‘, 245(a), or 

3 245A’’. 

4 (3) COORDINATION WITH SECTION 1059.—Sub5 paragraph (B) of section 1059(b)(2) is amended by 

6 striking ‘‘or 245’’ and inserting ‘‘245, or 245A’’. 

7 (d) COORDINATION WITH FOREIGN TAX CREDIT LIMI8 TATION.—Subsection (b) of section 904 is amended by add9 ing at the end the following new paragraph: 

10 ‘‘(5) TREATMENT OF DIVIDENDS FOR WHICH DE11 DUCTION IS ALLOWED UNDER SECTION 245A.—For 

12 purposes of subsection (a), in the case of a domestic 

13 corporation which is a United States shareholder with 

14 respect to a specified 10-percent owned foreign cor15 poration, such domestic corporation’s taxable income 

16 from sources without the United States shall be deter17 mined without regard to— 

18 ‘‘(A) the foreign-source portion of any divi19 dend received from such foreign corporation, and 

20 ‘‘(B) any deductions properly allocable to 

21 such portion. 

22 Any term which is used in section 245A and in this 

23 paragraph shall have the same meaning for purposes 

24 of this paragraph as when used in such section.’’. 

25 (e) CONFORMING AMENDMENTS.— 
344 

† HR 1 EAS 

1 (1) Subsection (b) of section 951 is amended by 

2 striking ‘‘subpart’’ and inserting ‘‘title’’. 

3 (2) Subsection (a) of section 957 is amended by 

4 striking ‘‘subpart’’ in the matter preceding paragraph 

5 (1) and inserting ‘‘title’’. 

6 (3) The table of sections for part VIII of sub7 chapter B of chapter 1 is amended by inserting after 

8 the item relating to section 245 the following new 

9 item: 

‘‘Sec. 245A. Dividends received by domestic corporations from certain foreign corporations.’’. 

10 (f) EFFECTIVE DATE.—The amendments made by this 

11 section shall apply to taxable years of foreign corporations 

12 beginning after December 31, 2017, and to taxable years 

13 of United States shareholders in which or with which such 

14 taxable years of foreign corporations end. 

15 SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANS16 FERS INVOLVING SPECIFIED 10-PERCENT 

17 OWNED FOREIGN CORPORATIONS. 

18 (a) SALES BY UNITED STATES PERSONS OF STOCK.— 

19 Section 1248 is amended by redesignating subsection (j) as 

20 subsection (k) and by inserting after subsection (i) the fol21 lowing new subsection: 

22 ‘‘(j) COORDINATION WITH DIVIDENDS RECEIVED DE23 DUCTION.—In the case of the sale or exchange by a domestic 

24 corporation of stock in a foreign corporation held for 1 year 
345 

† HR 1 EAS 

1 or more, any amount received by the domestic corporation 

2 which is treated as a dividend by reason of this section shall 

3 be treated as a dividend for purposes of applying section 

4 245A.’’. 

5 (b) BASIS IN SPECIFIED 10-PERCENT OWNED FOREIGN

6 CORPORATION REDUCED BY NONTAXED PORTION OF DIVI7 DEND FOR PURPOSES OF DETERMINING LOSS.— 

8 (1) IN GENERAL.—Section 961 is amended by 

9 adding at the end the following new subsection: 

10 ‘‘(d) BASIS IN SPECIFIED 10-PERCENT OWNED FOR11 EIGN CORPORATION REDUCED BY NONTAXED PORTION OF

12 DIVIDEND FOR PURPOSES OF DETERMINING LOSS.—If a 

13 domestic corporation receives a dividend from a specified 

14 10-percent owned foreign corporation (as defined in section 

15 245A) in any taxable year, solely for purposes of deter16 mining loss on any disposition of stock of such foreign cor17 poration in such taxable year or any subsequent taxable 

18 year, the basis of such domestic corporation in such stock 

19 shall be reduced (but not below zero) by the amount of any 

20 deduction allowable to such domestic corporation under sec21 tion 245A with respect to such stock.’’. 

22 (2) EFFECTIVE DATE.—The amendments made 

23 by this subsection shall apply to dividends received in 

24 taxable years beginning after December 31, 2017. 
346 

† HR 1 EAS 

1 (c) SALE BY A CFC OF A LOWER TIER CFC.—Section 

2 964(e) is amended by adding at the end the following new 

3 paragraph: 

4 ‘‘(4) COORDINATION WITH DIVIDENDS RECEIVED

5 DEDUCTION.— 

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

7 of a controlled foreign corporation beginning 

8 after December 31, 2017, any amount is treated 

9 as a dividend under paragraph (1) by reason of 

10 a sale or exchange by the controlled foreign cor11 poration of stock in another foreign corporation 

12 held for 1 year or more, then, notwithstanding 

13 any other provision of this title— 

14 ‘‘(i) the foreign-source portion of such 

15 dividend shall be treated for purposes of sec16 tion 951(a)(1)(A) as subpart F income of 

17 the selling controlled foreign corporation for 

18 such taxable year, 

19 ‘‘(ii) a United States shareholder with 

20 respect to the selling controlled foreign cor21 poration shall include in gross income for 

22 the taxable year of the shareholder with or 

23 within which such taxable year of the con24 trolled foreign corporation ends an amount 

25 equal to the shareholder’s pro rata share 
347 

† HR 1 EAS 

1 (determined in the same manner as under 

2 section 951(a)(2)) of the amount treated as 

3 subpart F income under clause (i), and 

4 ‘‘(iii) the deduction under section 

5 245A(a) shall be allowable to the United 

6 States shareholder with respect to the sub7 part F income included in gross income 

8 under clause (ii) in the same manner as if 

9 such subpart F income were a dividend re10 ceived by the shareholder from the selling 

11 controlled foreign corporation. 

12 ‘‘(B) EFFECT OF LOSS ON EARNINGS AND

13 PROFITS.—For purposes of this title, in the case 

14 of a sale or exchange by a controlled foreign cor15 poration of stock in another foreign corporation 

16 in a taxable year of the selling controlled foreign 

17 corporation beginning after December 31, 2017, 

18 to which this paragraph would apply if gain 

19 were recognized, the earnings and profits of the 

20 selling controlled foreign corporation shall not be 

21 reduced by reason of any loss from such sale or 

22 exchange. 

23 ‘‘(C) FOREIGN-SOURCE PORTION.—For pur24 poses of this paragraph, the foreign-source por25 tion of any amount treated as a dividend under 
348 

† HR 1 EAS 

1 paragraph (1) shall be determined in the same 

2 manner as under section 245A(c).’’. 

3 (d) TREATMENT OF FOREIGN BRANCH LOSSES TRANS4 FERRED TO SPECIFIED 10-PERCENT OWNED FOREIGN COR5 PORATIONS.— 

6 (1) IN GENERAL.—Part II of subchapter B of 

7 chapter 1 is amended by adding at the end the fol8 lowing new section: 

9 ‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANS10 FERRED TO SPECIFIED 10-PERCENT OWNED 

11 FOREIGN CORPORATIONS. 

12 ‘‘(a) IN GENERAL.—If a domestic corporation trans13 fers substantially all of the assets of a foreign branch (with14 in the meaning of section 367(a)(3)(C), as in effect before 

15 the date of the enactment of the Tax Cuts and Jobs Act) 

16 to a specified 10-percent owned foreign corporation (as de17 fined in section 245A) with respect to which it is a United 

18 States shareholder after such transfer, such domestic cor19 poration shall include in gross income for the taxable year 

20 which includes such transfer an amount equal to the trans21 ferred loss amount with respect to such transfer. 

22 ‘‘(b) LIMITATION AND CARRYFORWARD BASED ON

23 FOREIGN-SOURCE DIVIDENDS RECEIVED.— 

24 ‘‘(1) IN GENERAL.—The amount included in the 

25 gross income of the taxpayer under subsection (a) for 
349 

† HR 1 EAS 

1 any taxable year shall not exceed the amount allowed 

2 as a deduction under section 245A for such taxable 

3 year (taking into account dividends received from all 

4 specified 10-percent owned foreign corporations with 

5 respect to which the taxpayer is a United States 

6 shareholder). 

7 ‘‘(2) AMOUNTS NOT INCLUDED CARRIED FOR8 WARD.—Any amount not included in gross income for 

9 any taxable year by reason of paragraph (1) shall, 

10 subject to the application of paragraph (1) to the suc11 ceeding taxable year, be included in gross income for 

12 the succeeding taxable year. 

13 ‘‘(c) TRANSFERRED LOSS AMOUNT.—For purposes of 

14 this section, the term ‘transferred loss amount’ means, with 

15 respect to any transfer of substantially all of the assets of 

16 a foreign branch, the excess (if any) of— 

17 ‘‘(1) the sum of losses— 

18 ‘‘(A) which were incurred by the foreign 

19 branch after December 31, 2017, and before the 

20 transfer, and 

21 ‘‘(B) with respect to which a deduction was 

22 allowed to the taxpayer, over 

23 ‘‘(2) the sum of— 

24 ‘‘(A) any taxable income of such branch for 

25 a taxable year after the taxable year in which 
350 

† HR 1 EAS 

1 the loss was incurred and through the close of the 

2 taxable year of the transfer, and 

3 ‘‘(B) any amount which is recognized under 

4 section 904(f)(3) on account of the transfer. 

5 ‘‘(d) REDUCTION FOR RECOGNIZED GAINS.—The 

6 transferred loss amount shall be reduced (but not below 

7 zero) by the amount of gain recognized by the taxpayer on 

8 account of the transfer (other than amounts taken into ac9 count under subsection (c)(2)(B)). 

10 ‘‘(e) SOURCE OF INCOME.—Amounts included in gross 

11 income under this section shall be treated as derived from 

12 sources within the United States. 

13 ‘‘(f) BASIS ADJUSTMENTS.—Consistent with such reg14 ulations or other guidance as the Secretary shall prescribe, 

15 proper adjustments shall be made in the adjusted basis of 

16 the taxpayer’s stock in the specified 10-percent owned for17 eign corporation to which the transfer is made, and in the 

18 transferee’s adjusted basis in the property transferred, to 

19 reflect amounts included in gross income under this sec20 tion.’’. 

21 (2) CLERICAL AMENDMENT.—The table of sec22 tions for part II of subchapter B of chapter 1 is 

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

‘‘Sec. 91. Certain foreign branch losses transferred to specified 10-percent owned 

foreign corporations.’’. 
351 

† HR 1 EAS 

1 (3) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to transfers after De3 cember 31, 2017. 

4 (e) REPEAL OF ACTIVE TRADE OR BUSINESS EXCEP5 TION UNDER SECTION 367.— 

6 (1) IN GENERAL.—Section 367(a) is amended by 

7 striking paragraph (3) and redesignating paragraphs 

8 (4), (5), and (6) as paragraphs (3), (4), and (5), re9 spectively. 

10 (2) CONFORMING AMENDMENTS.—Section 

11 367(a)(4), as redesignated by paragraph (1), is 

12 amended— 

13 (A) by striking ‘‘Paragraphs (2) and (3)’’ 

14 and inserting ‘‘Paragraph (2)’’, and 

15 (B) by striking ‘‘PARAGRAPHS (2) AND (3)’’ 

16 in the heading and inserting ‘‘PARAGRAPH (2)’’. 

17 (3) EFFECTIVE DATE.—The amendments made 

18 by this subsection shall apply to transfers after De19 cember 31, 2017. 

20 SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME 

21 UPON TRANSITION TO PARTICIPATION EX22 EMPTION SYSTEM OF TAXATION. 

23 (a) IN GENERAL.—Section 965 is amended to read as 

24 follows: 
352 

† HR 1 EAS 

1 ‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME 

2 UPON TRANSITION TO PARTICIPATION EX3 EMPTION SYSTEM OF TAXATION. 

4 ‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME AS

5 SUBPART F INCOME.—In the case of the last taxable year 

6 of a deferred income corporation which begins before Janu7 ary 1, 2018, the subpart F income of such foreign corpora8 tion (as otherwise determined for such taxable year under 

9 section 952) shall be increased by the greater of— 

10 ‘‘(1) the accumulated post-1986 deferred foreign 

11 income of such corporation determined as of Novem12 ber 9, 2017, or 

13 ‘‘(2) the accumulated post-1986 deferred foreign 

14 income of such corporation determined as of December 

15 31, 2017. 

16 ‘‘(b) REDUCTION IN AMOUNTS INCLUDED IN GROSS IN17 COME OF UNITED STATES SHAREHOLDERS OF SPECIFIED

18 FOREIGN CORPORATIONS WITH DEFICITS IN EARNINGS

19 AND PROFITS.— 

20 ‘‘(1) IN GENERAL.—In the case of a taxpayer 

21 which is a United States shareholder with respect to 

22 at least one deferred foreign income corporation and 

23 at least one E&P deficit foreign corporation, the 

24 amount which would (but for this subsection) be taken 

25 into account under section 951(a)(1) by reason of sub26 section (a) as such United States shareholder’s pro 
353 

† HR 1 EAS 

1 rata share of the subpart F income of each deferred 

2 foreign income corporation shall be reduced by the 

3 amount of such United States shareholder’s aggregate 

4 foreign E&P deficit which is allocated under para5 graph (2) to such deferred foreign income corporation. 

6 ‘‘(2) ALLOCATION OF AGGREGATE FOREIGN E&P

7 DEFICIT.—The aggregate foreign E&P deficit of any 

8 United States shareholder shall be allocated among 

9 the deferred foreign income corporations of such 

10 United States shareholder in an amount which bears 

11 the same proportion to such aggregate as— 

12 ‘‘(A) such United States shareholder’s pro 

13 rata share of the accumulated post-1986 deferred 

14 foreign income of each such deferred foreign in15 come corporation, bears to 

16 ‘‘(B) the aggregate of such United States 

17 shareholder’s pro rata share of the accumulated 

18 post-1986 deferred foreign income of all deferred 

19 foreign income corporations of such United 

20 States shareholder. 

21 ‘‘(3) DEFINITIONS RELATED TO E&P DEFICITS.— 

22 For purposes of this subsection— 

23 ‘‘(A) AGGREGATE FOREIGN E&P DEFICIT.— 

24 ‘‘(i) IN GENERAL.—The term ‘aggre25 gate foreign E&P deficit’ means, with re-
354 

† HR 1 EAS 

1 spect to any United States shareholder, the 

2 lesser of— 

3 ‘‘(I) the aggregate of such share4 holder’s pro rata shares of the specified 

5 E&P deficits of the E&P deficit foreign 

6 corporations of such shareholder, or 

7 ‘‘(II) the amount determined 

8 under paragraph (2)(B). 

9 ‘‘(ii) ALLOCATION OF DEFICIT.—If the 

10 amount described in clause (i)(II) is less 

11 than the amount described in clause (i)(I), 

12 then the shareholder shall designate, in such 

13 form and manner as the Secretary deter14 mines— 

15 ‘‘(I) the amount of the specified 

16 E&P deficit which is to be taken into 

17 account for each E&P deficit corpora18 tion with respect to the taxpayer, and 

19 ‘‘(II) in the case of an E&P def20 icit corporation which has a qualified 

21 deficit (as defined in section 952), the 

22 portion (if any) of the deficit taken 

23 into account under subclause (I) which 

24 is attributable to a qualified deficit, 
355 

† HR 1 EAS 

1 including the qualified activities to 

2 which such portion is attributable. 

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 9, 2017— 

13 ‘‘(I) such corporation was a speci14 fied foreign corporation, and 

15 ‘‘(II) such taxpayer was a United 

16 States shareholder of such corporation. 

17 ‘‘(C) SPECIFIED E&P DEFICIT.—The term 

18 ‘specified E&P deficit’ means, with respect to 

19 any E&P deficit foreign corporation, the amount 

20 of the deficit referred to in subparagraph (B). 

21 ‘‘(4) TREATMENT OF EARNINGS AND PROFITS IN

22 FUTURE YEARS.— 

23 ‘‘(A) REDUCED EARNINGS AND PROFITS

24 TREATED AS PREVIOUSLY TAXED INCOME WHEN

25 DISTRIBUTED.—For purposes of applying section 
356 

† HR 1 EAS 

1 959 in any taxable year beginning after Decem2 ber 31, 2017, with respect to any United States 

3 shareholder of a deferred foreign income corpora4 tion, an amount equal to such shareholder’s re5 duction under paragraph (1) which is allocated 

6 to such deferred foreign income corporation 

7 under this subsection shall be treated as an 

8 amount which was included in the gross income 

9 of such United States shareholder under section 

10 951(a). 

11 ‘‘(B) E&P DEFICITS.—For purposes of this 

12 title, a United States shareholder’s pro rata 

13 share of the earnings and profits of any specified 

14 E&P deficit foreign corporation under this sub15 section shall be increased by the amount of the 

16 specified E&P deficit of such corporation taken 

17 into account by such shareholder under para18 graph (1), and, for purposes of section 952, such 

19 increase shall be attributable to the same activity 

20 to which the deficit so taken into account was at21 tributable. 

22 ‘‘(c) APPLICATION OF PARTICIPATION EXEMPTION TO

23 INCLUDED INCOME.— 

24 ‘‘(1) IN GENERAL.—In the case of a United 

25 States shareholder of a deferred foreign income cor-
357 

† HR 1 EAS 

1 poration, there shall be allowed as a deduction for the 

2 taxable year in which an amount is included in the 

3 gross income of such United States shareholder under 

4 section 951(a)(1) by reason of this section an amount 

5 equal to the sum of— 

6 ‘‘(A) 78.6 percent of the excess (if any) of— 

7 ‘‘(i) the amount so included as gross 

8 income, over 

9 ‘‘(ii) the amount of such United States 

10 shareholder’s aggregate foreign cash posi11 tion, plus 

12 ‘‘(B) 58.6 percent of so much of the amount 

13 described in subparagraph (A)(ii) as does not ex14 ceed the amount described in subparagraph 

15 (A)(i). 

16 ‘‘(2) AGGREGATE FOREIGN CASH POSITION.—For 

17 purposes of this subsection— 

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

19 foreign cash position’ means, with respect to any 

20 United States shareholder, the greater of— 

21 ‘‘(i) the aggregate of such United 

22 States shareholder’s pro rata share of the 

23 cash position of each specified foreign cor24 poration of such United States shareholder 

25 determined as of the close of the last taxable 
358 

† HR 1 EAS 

1 year of such specified foreign corporation 

2 which begins before January 1, 2018, or 

3 ‘‘(ii) one half of the sum of— 

4 ‘‘(I) the aggregate described in 

5 clause (i) determined as of the close of 

6 the last taxable year of each such speci7 fied foreign corporation which ends be8 fore November 9, 2017, plus 

9 ‘‘(II) the aggregate described in 

10 clause (i) determined as of the close of 

11 the taxable year of each such specified 

12 foreign corporation which precedes the 

13 taxable year referred to in subclause 

14 (I). 

15 ‘‘(B) CASH POSITION.—For purposes of this 

16 paragraph, the cash position of any specified for17 eign corporation is the sum of— 

18 ‘‘(i) cash and foreign currency held by 

19 such foreign corporation, 

20 ‘‘(ii) the net accounts receivable of such 

21 foreign corporation, plus 

22 ‘‘(iii) the fair market value of the fol23 lowing assets held by such corporation: 

24 ‘‘(I) Personal property which is of 

25 a type that is actively traded and for 
359 

† HR 1 EAS 

1 which there is an established financial 

2 market (other than stock in the speci3 fied foreign corporation). 

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 obligation with a term 

9 of less than one year. 

10 ‘‘(IV) Any asset which the Sec11 retary identifies as being economically 

12 equivalent to any asset described in 

13 this subparagraph. 

14 ‘‘(C) NET ACCOUNTS RECEIVABLE.—For 

15 purposes of this paragraph, the term ‘net ac16 counts receivable’ means, with respect to any 

17 specified foreign corporation, the excess (if any) 

18 of— 

19 ‘‘(i) such corporation’s accounts receiv20 able, over 

21 ‘‘(ii) such corporation’s accounts pay22 able (determined consistent with the rules of 

23 section 461). 

24 ‘‘(D) PREVENTION OF DOUBLE COUNTING.— 

25 Cash positions of a specified foreign corporation 
360 

† HR 1 EAS 

1 described in clause (ii) or (iii)(III) of subpara2 graph (B) shall not be taken into account by a 

3 United States shareholder under subparagraph 

4 (A) to the extent that such United States share5 holder demonstrates to the satisfaction of the Sec6 retary that such amount is so taken into account 

7 by such United States shareholder with respect to 

8 another specified foreign corporation. 

9 ‘‘(E) CASH POSITIONS OF CERTAIN NON10 CORPORATE ENTITIES TAKEN INTO ACCOUNT.— 

11 An entity shall be treated as a specified foreign 

12 corporation of a United States shareholder for 

13 purposes of determining such United States 

14 shareholder’s aggregate foreign cash position if— 

15 ‘‘(i) such entity is a foreign entity 

16 which would be a specified foreign corpora17 tion of such United States shareholder if 

18 such entity were a corporation, or 

19 ‘‘(ii) any interest in such entity is held 

20 by a specified foreign corporation of such 

21 United States shareholder (determined after 

22 application of clause (i)) and such entity 

23 would be a specified foreign corporation of 

24 such United States shareholder if such enti25 ty were a foreign corporation. 
361 

† HR 1 EAS 

1 ‘‘(F) ANTI-ABUSE.—If the Secretary deter2 mines that a principal purpose of any trans3 action was to reduce the aggregate foreign cash 

4 position taken into account under this sub5 section, such transaction shall be disregarded for 

6 purposes of this subsection. 

7 ‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; AC8 CUMULATED POST-1986 DEFERRED FOREIGN INCOME.— 

9 For purposes of this section— 

10 ‘‘(1) DEFERRED FOREIGN INCOME CORPORA11 TION.—The term ‘deferred foreign income corporation’ 

12 means, with respect to any United States shareholder, 

13 any specified foreign corporation of such United 

14 States shareholder which has accumulated post-1986 

15 deferred foreign income (as of the close of the taxable 

16 year referred to in subsection (a)) greater than zero. 

17 ‘‘(2) ACCUMULATED POST-1986 DEFERRED FOR18 EIGN INCOME.—The term ‘accumulated post-1986 de19 ferred foreign income’ means the post-1986 earnings 

20 and profits except to the extent such earnings— 

21 ‘‘(A) are attributable to income of the speci22 fied foreign corporation which is effectively con23 nected with the conduct of a trade or business 

24 within the United States and subject to tax 

25 under this chapter, or 
362 

† HR 1 EAS 

1 ‘‘(B) in the case of a controlled foreign cor2 poration, if distributed, would be excluded from 

3 the gross income of a United States shareholder 

4 under section 959. 

5 To the extent provided in regulations or other guid6 ance prescribed by the Secretary, in the case of any 

7 controlled foreign corporation which has shareholders 

8 which are not United States shareholders, accumu9 lated post-1986 deferred foreign income shall be ap10 propriately reduced by amounts which would be de11 scribed in subparagraph (B) if such shareholders were 

12 United States shareholders. 

13 ‘‘(3) POST-1986 EARNINGS AND PROFITS.—The 

14 term ‘post-1986 earnings and profits’ means the earn15 ings and profits of the foreign corporation (computed 

16 in accordance with sections 964(a) and 986, and by 

17 only taking into account periods when the foreign cor18 poration was a specified foreign corporation) accumu19 lated in taxable years beginning after December 31, 

20 1986, and determined— 

21 ‘‘(A) as of the date of the taxable year re22 ferred to in paragraph (1) or (2) of subsection 

23 (a), whichever is applicable with respect to such 

24 foreign corporation, and 
363 

† HR 1 EAS 

1 ‘‘(B) without diminution by reason of divi2 dends distributed during the taxable year ending 

3 with or including such date. 

4 ‘‘(e) SPECIFIED FOREIGN CORPORATION.— 

5 ‘‘(1) IN GENERAL.—For purposes of this section, 

6 the term ‘specified foreign corporation’ means— 

7 ‘‘(A) any controlled foreign corporation, 

8 and 

9 ‘‘(B) any section 902 corporation (as de10 fined in section 909(d)(5) as in effect before the 

11 date of the enactment of the Tax Cuts and Jobs 

12 Act). 

13 ‘‘(2) APPLICATION TO SECTION 902 CORPORA14 TIONS.—For purposes of sections 951 and 961, a sec15 tion 902 corporation (as so defined) shall be treated 

16 as a controlled foreign corporation solely for purposes 

17 of taking into account the subpart F income of such 

18 corporation under subsection (a) (and for purposes of 

19 applying subsection (e)). 

20 ‘‘(3) EXCLUSION OF PASSIVE FOREIGN INVEST21 MENT COMPANIES.—Such term shall not include any 

22 corporation which is a passive foreign investment 

23 company (as defined in section 1297) with respect to 

24 the shareholder and which is not a controlled foreign 

25 corporation. 
364 

† HR 1 EAS 

1 ‘‘(f) DETERMINATIONS OF PRO RATA SHARE.—For 

2 purposes of this section, the determination of any United 

3 States shareholder’s pro rata share of any amount with re4 spect to any specified foreign corporation shall be deter5 mined under rules similar to the rules of section 951(a)(2) 

6 by treating such amount in the same manner as subpart 

7 F income (and by treating such specified foreign corpora8 tion as a controlled foreign corporation). 

9 ‘‘(g) DISALLOWANCE OF FOREIGN TAX CREDIT, ETC.— 

10 ‘‘(1) IN GENERAL.—No credit shall be allowed 

11 under section 901 for the applicable percentage of any 

12 taxes paid or accrued (or treated as paid or accrued) 

13 with respect to any amount for which a deduction is 

14 allowed under this section. 

15 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

16 of this subsection, the term ‘applicable percentage’ 

17 means the amount (expressed as a percentage) equal 

18 to the sum of— 

19 ‘‘(A) 0.786 multiplied by the ratio of— 

20 ‘‘(i) the excess to which subsection 

21 (c)(1)(A) applies, divided by 

22 ‘‘(ii) the sum of such excess plus the 

23 amount to which subsection (c)(1)(B) ap24 plies, plus 

25 ‘‘(B) 0.586 multiplied by the ratio of— 
365 

† HR 1 EAS 

1 ‘‘(i) the amount to which subsection 

2 (c)(1)(B) applies, divided by 

3 ‘‘(ii) the sum described in subpara4 graph (A)(ii). 

5 ‘‘(3) DENIAL OF DEDUCTION.—No deduction 

6 shall be allowed under this chapter for any tax for 

7 which credit is not allowable under section 901 by 

8 reason of paragraph (1) (determined by treating the 

9 taxpayer as having elected the benefits of subpart A 

10 of part III of subchapter N). 

11 ‘‘(4) COORDINATION WITH SECTION 78.—Section 

12 78 shall not apply to any tax for which credit is not 

13 allowable under section 901 by reason of paragraph 

14 (1). 

15 ‘‘(h) ELECTION TO PAY LIABILITY IN INSTALL16 MENTS.— 

17 ‘‘(1) IN GENERAL.—In the case of a United 

18 States shareholder of a deferred foreign income cor19 poration, such United States shareholder may elect to 

20 pay the net tax liability under this section in 8 in21 stallments of the following amounts: 

22 ‘‘(A) 8 percent of the net tax liability in the 

23 case of each of the first 5 of such installments, 

24 ‘‘(B) 15 percent of the net tax liability in 

25 the case of the 6th such installment, 
366 

† HR 1 EAS 

1 ‘‘(C) 20 percent of the net tax liability in 

2 the case of the 7th such installment, and 

3 ‘‘(D) 25 percent of the net tax liability in 

4 the case of the 8th such installment. 

5 ‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.—If 

6 an election is made under paragraph (1), the first in7 stallment shall be paid on the due date (determined 

8 without regard to any extension of time for filing the 

9 return) for the return of tax for the taxable year de10 scribed in subsection (a) and each succeeding install11 ment shall be paid on the due date (as so determined) 

12 for the return of tax for the taxable year following the 

13 taxable year with respect to which the preceding in14 stallment was made. 

15 ‘‘(3) ACCELERATION OF PAYMENT.—If there is 

16 an addition to tax for failure to timely pay any in17 stallment required under this subsection, a liquida18 tion or sale of substantially all the assets of the tax19 payer (including in a title 11 or similar case), a ces20 sation of business by the taxpayer, or any similar cir21 cumstance, then the unpaid portion of all remaining 

22 installments shall be due on the date of such event (or 

23 in the case of a title 11 or similar case, the day before 

24 the petition is filed). The preceding sentence shall not 

25 apply to the sale of substantially all the assets of a 
367 

† HR 1 EAS 

1 taxpayer to a buyer if such buyer enters into an 

2 agreement with the Secretary under which such buyer 

3 is liable for the remaining installments due under 

4 this subsection in the same manner as if such buyer 

5 were the taxpayer. 

6 ‘‘(4) PRORATION OF DEFICIENCY TO INSTALL7 MENTS.—If an election is made under paragraph (1) 

8 to pay the net tax liability under this section in in9 stallments and a deficiency has been assessed with re10 spect to such net tax liability, the deficiency shall be 

11 prorated to the installments payable under paragraph 

12 (1). The part of the deficiency so prorated to any in13 stallment the date for payment of which has not ar14 rived shall be collected at the same time as, and as 

15 a part of, such installment. The part of the deficiency 

16 so prorated to any installment the date for payment 

17 of which has arrived shall be paid upon notice and 

18 demand from the Secretary. This subsection shall not 

19 apply if the deficiency is due to negligence, to inten20 tional disregard of rules and regulations, or to fraud 

21 with intent to evade tax. 

22 ‘‘(5) ELECTION.—Any election under paragraph 

23 (1) shall be made not later than the due date for the 

24 return of tax for the taxable year described in sub-
368 

† HR 1 EAS 

1 section (a) and shall be made in such manner as the 

2 Secretary shall provide. 

3 ‘‘(6) NET TAX LIABILITY UNDER THIS SEC4 TION.—For purposes of this subsection— 

5 ‘‘(A) IN GENERAL.—The net tax liability 

6 under this section with respect to any United 

7 States shareholder is the excess (if any) of— 

8 ‘‘(i) such taxpayer’s net income tax for 

9 the taxable year in which an amount is in10 cluded in the gross income of such United 

11 States shareholder under section 951(a)(1) 

12 by reason of this section, over 

13 ‘‘(ii) such taxpayer’s net income tax 

14 for such taxable year determined— 

15 ‘‘(I) without regard to this sec16 tion, and 

17 ‘‘(II) without regard to any in18 come or deduction properly attrib19 utable to a dividend received by such 

20 United States shareholder from any de21 ferred foreign income corporation. 

22 ‘‘(B) NET INCOME TAX.—The term ‘net in23 come tax’ means the regular tax liability reduced 

24 by the credits allowed under subparts A, B, and 

25 D of part IV of subchapter A. 
369 

† HR 1 EAS 

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 shareholder 

6 of such S corporation may elect to defer payment of 

7 such shareholder’s net tax liability under this section 

8 with respect to such S corporation until the share9 holder’s taxable year which includes the triggering 

10 event with respect to such liability. Any net tax li11 ability payment of which is deferred under the pre12 ceding sentence shall be assessed on the return of tax 

13 as an addition to tax in the shareholder’s taxable 

14 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 triggering 

19 event with respect to such liability is whichever 

20 of the following occurs first: 

21 ‘‘(i) Such corporation ceases to be an S 

22 corporation (determined as of the first day 

23 of the first taxable year that such corpora24 tion is not an S corporation). 
370 

† HR 1 EAS 

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 corporation, 

5 such S corporation ceases to exist, or any 

6 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, such 

13 transfer shall only be a triggering event with re14 spect to so much of the taxpayer’s net tax liabil15 ity under this section with respect to such S cor16 poration as is properly allocable to such stock. 

17 ‘‘(C) TRANSFER OF LIABILITY.—A transfer 

18 described in clause (iii) of subparagraph (A) 

19 shall not be treated as a triggering event if the 

20 transferee enters into an agreement with the Sec21 retary under which such transferee is liable for 

22 net tax liability with respect to such stock in the 

23 same manner as if such transferee were the tax24 payer. 
371 

† HR 1 EAS 

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) if 

5 the only subpart F income taken into account by such 

6 shareholder by reason of this section were allocations 

7 from such S corporation. 

8 ‘‘(4) ELECTION TO PAY DEFERRED LIABILITY IN

9 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 timely 

16 made if made not later than the due date for the 

17 return of tax for the taxable year in which the 

18 triggering event with respect to such liability oc19 curs, 

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 filing 

24 the return), and 
372 

† HR 1 EAS 

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 S 

9 corporation shall be jointly and severally liable for 

10 such payment and any penalty, addition to tax, or 

11 additional amount attributable thereto. 

12 ‘‘(6) EXTENSION OF LIMITATION ON COLLEC13 TION.—Any limitation on the time period for the col14 lection of a liability deferred under this subsection 

15 shall not be treated as beginning before the date of the 

16 triggering event with respect to such liability. 

17 ‘‘(7) ANNUAL REPORTING OF NET TAX LIABIL18 ITY.— 

19 ‘‘(A) IN GENERAL.—Any shareholder of an 

20 S corporation which makes an election under 

21 paragraph (1) shall report the amount of such 

22 shareholder’s deferred net tax liability on such 

23 shareholder’s return of tax for the taxable year 

24 for which such election is made and on the re25 turn of tax for each taxable year thereafter until 
373 

† HR 1 EAS 

1 such amount has been fully assessed on such re2 turns. 

3 ‘‘(B) DEFERRED NET TAX LIABILITY.—For 

4 purposes of this paragraph, the term ‘deferred 

5 net tax liability’ means, with respect to any tax6 able year, the amount of net tax liability pay7 ment of which has been deferred under para8 graph (1) and which has not been assessed on a 

9 return of tax for any prior taxable year. 

10 ‘‘(C) FAILURE TO REPORT.—In the case of 

11 any failure to report any amount required to be 

12 reported under subparagraph (A) with respect to 

13 any taxable year before the due date for the re14 turn of tax for such taxable year, there shall be 

15 assessed on such return as an addition to tax 5 

16 percent of such amount. 

17 ‘‘(8) ELECTION.—Any election under paragraph 

18 (1)— 

19 ‘‘(A) shall be made by the shareholder of the 

20 S corporation not later than the due date for 

21 such shareholder’s return of tax for the taxable 

22 year which includes the close of the taxable year 

23 of such S corporation in which the amount de24 scribed in subsection (a) is taken into account, 

25 and 
374 

† HR 1 EAS 

1 ‘‘(B) shall be made in such manner as the 

2 Secretary shall provide. 

3 ‘‘(j) REPORTING BY S CORPORATION.—Each S cor4 poration which is a United States shareholder of a specified 

5 foreign corporation shall report in its return of tax under 

6 section 6037(a) the amount includible in its gross income 

7 for such taxable year by reason of this section and the 

8 amount of the deduction allowable by subsection (b). Any 

9 copy provided to a shareholder under section 6037(b) shall 

10 include a statement of such shareholder’s pro rata share of 

11 such amounts. 

12 ‘‘(k) EXTENSION OF LIMITATION ON ASSESSMENT.— 

13 Notwithstanding section 6501, the limitation on the time 

14 period for the assessment of the net tax liability under this 

15 section (as defined in subsection (h)(6)) shall not expire be16 fore the date that is 6 years after the return for the taxable 

17 year described in such subsection was filed. 

18 ‘‘(l) RECAPTURE FOR EXPATRIATED ENTITIES.— 

19 ‘‘(1) IN GENERAL.—If a deduction is allowed 

20 under subsection (c) to a United States shareholder 

21 and such shareholder first becomes an expatriated en22 tity at any time during the 10-year period beginning 

23 on the date of the enactment of the Tax Cuts and Jobs 

24 Act, then— 
375 

† HR 1 EAS 

1 ‘‘(A) the tax imposed by this chapter shall 

2 be increased for the first taxable year in which 

3 such taxpayer becomes an expatriated entity by 

4 an amount equal to 35 percent of the amount of 

5 the deduction allowed to the specified foreign cor6 poration under subsection (c), and 

7 ‘‘(B) no credits shall be allowed against the 

8 increase in tax under subparagraph (A). 

9 ‘‘(2) EXPATRIATED ENTITY.—For purposes of 

10 this subsection, the term ‘expatriated entity’ has the 

11 same meaning given such term under section 

12 7874(a)(2), except that such term shall not include an 

13 entity if the surrogate foreign corporation with re14 spect to the entity is treated as a domestic corpora15 tion under section 7874(b). 

16 ‘‘(m) SPECIAL RULES FOR UNITED STATES SHARE17 HOLDERS WHICH ARE REAL ESTATE INVESTMENT

18 TRUSTS.— 

19 ‘‘(1) IN GENERAL.—If a real estate investment 

20 trust is a United States shareholder in 1 or more de21 ferred foreign income corporations— 

22 ‘‘(A) any amount required to be taken into 

23 account under section 951(a)(1) by reason of this 

24 section shall not be taken into account as gross 

25 income of the real estate investment trust for 
376 

† HR 1 EAS 

1 purposes of applying paragraphs (2) and (3) of 

2 section 856(c) to any taxable year for which such 

3 amount is taken into account under section 

4 951(a)(1), and 

5 ‘‘(B) if the real estate investment trust elects 

6 the application of this subparagraph, notwith7 standing subsection (a), any amount required to 

8 be taken into account under section 951(a)(1) by 

9 reason of this section shall, in lieu of the taxable 

10 year in which it would otherwise be included in 

11 gross income ((for purposes of the computation of 

12 real estate investment trust taxable income under 

13 section 857(b)), be included in gross income as 

14 follows: 

15 ‘‘(i) 8 percent of such amount in the 

16 case of each of the taxable years in the 5- 

17 taxable year period beginning with the tax18 able year in which such amount would oth19 erwise be included. 

20 ‘‘(ii) 15 percent of such amount in the 

21 case of the 1st taxable year following such 

22 period. 

23 ‘‘(iii) 20 percent of such amount in the 

24 case of the 2nd taxable year following such 

25 period. 
377 

† HR 1 EAS 

1 ‘‘(iv) 25 percent of such amount in the 

2 case of the 3rd taxable year following such 

3 period. 

4 ‘‘(2) RULES FOR TRUSTS ELECTING DEFERRED

5 INCLUSION.— 

6 ‘‘(A) ELECTION.—Any election under para7 graph (1)(B) shall be made not later than the 

8 due date for the first taxable year in the 5-tax9 able year period described in clause (i) of para10 graph (1)(B) and shall be made in such manner 

11 as the Secretary shall provide. 

12 ‘‘(B) SPECIAL RULES.—If an election under 

13 paragraph (1)(B) is in effect with respect to any 

14 real estate investment trust, the following rules 

15 shall apply: 

16 ‘‘(i) APPLICATION OF PARTICIPATION

17 EXEMPTION.—For purposes of subsection 

18 (c)(1)— 

19 ‘‘(I) the aggregate amount to 

20 which subparagraph (A) or (B) of sub21 section (c)(1) applies shall be deter22 mined without regard to the election, 

23 ‘‘(II) each such aggregate amount 

24 shall be allocated to each taxable year 

25 described in paragraph (1)(B) in the 
378 

† HR 1 EAS 

1 same proportion as the amount in2 cluded in the gross income of such 

3 United States shareholder under sec4 tion 951(a)(1) by reason of this section 

5 is allocated to each such taxable year. 

6 ‘‘(III) NO INSTALLMENT PAY7 MENTS.—The real estate investment 

8 trust may not make an election under 

9 subsection (g) for any taxable year de10 scribed in paragraph (1)(B). 

11 ‘‘(ii) ACCELERATION OF INCLUSION.— 

12 If there is a liquidation or sale of substan13 tially all the assets of the real estate invest14 ment trust (including in a title 11 or simi15 lar case), a cessation of business by such 

16 trust, or any similar circumstance, then 

17 any amount not yet included in gross in18 come under paragraph (1)(B) shall be in19 cluded in gross income as of the day before 

20 the date of the event and the unpaid portion 

21 of any tax liability with respect to such in22 clusion shall be due on the date of such 

23 event (or in the case of a title 11 or similar 

24 case, the day before the petition is filed). 
379 

† HR 1 EAS 

1 ‘‘(n) ELECTION NOT TO APPLY NET OPERATING LOSS

2 DEDUCTION.— 

3 ‘‘(1) IN GENERAL.—If a United States share4 holder of a deferred foreign income corporation elects 

5 the application of this subsection for the taxable year 

6 described in subsection (a), then the amount described 

7 in paragraph (2) shall not be taken into account— 

8 ‘‘(A) in determining the amount of the net 

9 operating loss deduction under section 172 of 

10 such shareholder for such taxable year, or 

11 ‘‘(B) in determining the amount of taxable 

12 income for such taxable year which may be re13 duced by net operating loss carryovers or 

14 carrybacks to such taxable year under section 

15 172. 

16 ‘‘(2) AMOUNT DESCRIBED.—The amount de17 scribed in this paragraph is the sum of— 

18 ‘‘(A) the amount required to be taken into 

19 account under section 951(a)(1) by reason of this 

20 section (determined after the application of sub21 section (c)), plus 

22 ‘‘(B) in the case of a domestic corporation 

23 which chooses to have the benefits of subpart A 

24 of part III of subchapter N for the taxable year, 

25 the taxes deemed to be paid by such corporation 
380 

† HR 1 EAS 

1 under subsections (a) and (b) of section 960 for 

2 such taxable year with respect to the amount de3 scribed in subparagraph (A) which are treated 

4 as a dividends under section 78. 

5 ‘‘(3) ELECTION.—Any election under this sub6 section shall be made not later than the due date (in7 cluding extensions) for filing the return of tax for the 

8 taxable year and shall be made in such manner as the 

9 Secretary shall prescribe. 

10 ‘‘(o) REGULATIONS.—The Secretary shall prescribe 

11 such regulations or other guidance as may be necessary or 

12 appropriate to carry out the provisions of this section or 

13 to prevent the avoidance of the purposes of this section, in14 cluding through a reduction in earnings and profits 

15 through changes in entity classification, changes in ac16 counting methods, or otherwise.’’. 

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

18 subpart F of part III of subchapter N of chapter 1 is 

19 amended by striking the item relating to section 965 and 

20 inserting the following: 

‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation 

exemption system of taxation.’’. 
381 

† HR 1 EAS 

1 Subpart B—Rules Related to Passive and Mobile 

2 Income 

3 CHAPTER 1—TAXATION OF FOREIGN-DE4 RIVED INTANGIBLE INCOME AND 

5 GLOBAL INTANGIBLE LOW-TAXED IN6 COME 

7 SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTAN8 GIBLE LOW-TAXED INCOME BY UNITED 

9 STATES SHAREHOLDERS. 

10 (a) IN GENERAL.—Subpart F of part III of subchapter 

11 N of chapter 1 is amended by inserting after section 951 

12 the following new section: 

13 ‘‘SEC. 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME IN14 CLUDED IN GROSS INCOME OF UNITED 

15 STATES SHAREHOLDERS. 

16 ‘‘(a) IN GENERAL.—Each person who is a United 

17 States shareholder of any controlled foreign corporation for 

18 any taxable year of such United States shareholder shall 

19 include in gross income such shareholder’s global intangible 

20 low-taxed income for such taxable year. 

21 ‘‘(b) GLOBAL INTANGIBLE LOW-TAXED INCOME.—For 

22 purposes of this section— 

23 ‘‘(1) IN GENERAL.—The term ‘global intangible 

24 low-taxed income’ means, with respect to any United 

25 States shareholder for any taxable year of such 

26 United States shareholder, the excess (if any) of— 
382 

† HR 1 EAS 

1 ‘‘(A) such shareholder’s net CFC tested in2 come for such taxable year, over 

3 ‘‘(B) such shareholder’s net deemed tangible 

4 income return for such taxable year. 

5 ‘‘(2) NET DEEMED TANGIBLE INCOME RETURN.— 

6 The term ‘net deemed tangible income return’ means, 

7 with respect to any United States shareholder for any 

8 taxable year, an amount equal to 10 percent of the 

9 aggregate of such shareholder’s pro rata share of the 

10 qualified business asset investment of each controlled 

11 foreign corporation with respect to which such share12 holder is a United States shareholder for such taxable 

13 year (determined for each taxable year of each such 

14 controlled foreign corporation which ends in or with 

15 such taxable year of such United States shareholder). 

16 ‘‘(c) NET CFC TESTED INCOME.—For purposes of this 

17 section— 

18 ‘‘(1) IN GENERAL.—The term ‘net CFC tested in19 come’ means, with respect to any United States share20 holder for any taxable year of such United States 

21 shareholder, the excess (if any) of— 

22 ‘‘(A) the aggregate of such shareholder’s pro 

23 rata share of the tested income of each controlled 

24 foreign corporation with respect to which such 

25 shareholder is a United States shareholder for 
383 

† HR 1 EAS 

1 such taxable year of such United States share2 holder (determined for each taxable year of such 

3 controlled foreign corporation which ends in or 

4 with such taxable year of such United States 

5 shareholder), over 

6 ‘‘(B) the aggregate of such shareholder’s pro 

7 rata share of the tested loss of each controlled for8 eign corporation with respect to which such 

9 shareholder is a United States shareholder for 

10 such taxable year of such United States share11 holder (determined for each taxable year of such 

12 controlled foreign corporation which ends in or 

13 with such taxable year of such United States 

14 shareholder). 

15 ‘‘(2) TESTED INCOME; TESTED LOSS.—For pur16 poses of this section— 

17 ‘‘(A) TESTED INCOME.—The term ‘tested in18 come’ means, with respect to any controlled for19 eign corporation for any taxable year of such 

20 controlled foreign corporation, the excess (if any) 

21 of— 

22 ‘‘(i) the gross income of such corpora23 tion determined without regard to— 

24 ‘‘(I) any item of income described 

25 in section 952(b), 
384 

† HR 1 EAS 

1 ‘‘(II) any gross income taken into 

2 account in determining the subpart F 

3 income of such corporation, 

4 ‘‘(III) any gross income excluded 

5 from the foreign base company income 

6 (as defined in section 954) and the in7 surance income (as defined in section 

8 953) of such corporation by reason of 

9 section 954(b)(4), 

10 ‘‘(IV) any dividend received from 

11 a related person (as defined in section 

12 954(d)(3)), and 

13 ‘‘(V) any foreign oil and gas ex14 traction income (as defined in section 

15 907(c)(1)) of such corporation, over 

16 ‘‘(ii) the deductions (including taxes) 

17 properly allocable to such gross income 

18 under rules similar to the rules of section 

19 954(b)(5). 

20 ‘‘(B) TESTED LOSS.— 

21 ‘‘(i) IN GENERAL.—The term ‘tested 

22 loss’ means, with respect to any controlled 

23 foreign corporation for any taxable year of 

24 such controlled foreign corporation, the ex25 cess (if any) of the amount described in sub-
385 

† HR 1 EAS 

1 paragraph (A)(ii) over the amount de2 scribed in subparagraph (A)(i). 

3 ‘‘(ii) COORDINATION WITH SUBPART F

4 TO DENY DOUBLE BENEFIT OF LOSSES.— 

5 Section 952(c)(1)(A) shall be applied by in6 creasing the earnings and profits of the con7 trolled foreign corporation by the tested loss 

8 of such corporation. 

9 ‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.—For 

10 purposes of this section— 

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

12 asset investment’ means, with respect to any corpora13 tion for any taxable year of such controlled foreign 

14 corporation, the average of the aggregate of the cor15 poration’s adjusted bases as of the close of each quar16 ter of such taxable year in specified tangible prop17 erty— 

18 ‘‘(A) used in a trade or business of the cor19 poration, and 

20 ‘‘(B) of a type with respect to which a de21 duction is allowable under section 167. 

22 ‘‘(2) SPECIFIED TANGIBLE PROPERTY.— 

23 ‘‘(A) IN GENERAL.—The term ‘specified tan24 gible property’ means, except as provided in sub-
386 

† HR 1 EAS 

1 paragraph (B), any tangible property used in 

2 the production of tested income. 

3 ‘‘(B) DUAL USE PROPERTY.—In the case of 

4 property used both in the production of tested in5 come and income which is not tested income, 

6 such property shall be treated as specified tan7 gible property in the same proportion that the 

8 gross income described in subsection (c)(1)(A) 

9 produced with respect to such property bears to 

10 the total gross income produced with respect to 

11 such property. 

12 ‘‘(3) DETERMINATION OF ADJUSTED BASIS.—For 

13 purposes of this subsection, notwithstanding any pro14 vision of this title (or any other provision of law) 

15 which is enacted after the date of the enactment of 

16 this section, the adjusted basis in any property shall 

17 be determined using the alternative depreciation sys18 tem under section 168(g). 

19 ‘‘(4) REGULATIONS.—The Secretary shall issue 

20 such regulations or other guidance as the Secretary 

21 determines appropriate to prevent the avoidance of 

22 the purposes of this subsection, including regulations 

23 or other guidance which provide for the treatment of 

24 property if— 
387 

† HR 1 EAS 

1 ‘‘(A) such property is transferred, or held, 

2 temporarily, or 

3 ‘‘(B) the avoidance of the purposes of this 

4 paragraph is a factor in the transfer or holding 

5 of such property. 

6 ‘‘(e) DETERMINATION OF PRO RATA SHARE, ETC.— 

7 For purposes of this section— 

8 ‘‘(1) IN GENERAL.—The pro rata shares referred 

9 to in subsections (b), (c)(1)(A), and (c)(1)(B), respec10 tively, shall be determined under the rules of section 

11 951(a)(2) in the same manner as such section applies 

12 to subpart F income and shall be taken into account 

13 in the taxable year of the United States shareholder 

14 in which or with which the taxable year of the con15 trolled foreign corporation ends. 

16 ‘‘(2) TREATMENT AS UNITED STATES SHARE17 HOLDER.—For purposes of paragraph (1), a person 

18 shall be treated as a United States shareholder of a 

19 controlled foreign corporation for any taxable year 

20 only if such person owns (within the meaning of sec21 tion 958(a)) stock in such foreign corporation on the 

22 last day, in such year, on which such foreign corpora23 tion is a controlled foreign corporation. 

24 ‘‘(3) TREATMENT AS CONTROLLED FOREIGN COR25 PORATION.—A foreign corporation shall be treated as 
388 

† HR 1 EAS 

1 a controlled foreign corporation for any taxable year 

2 if such foreign corporation is a controlled foreign cor3 poration at any time during such taxable year. 

4 ‘‘(f) TREATMENT AS SUBPART F INCOME FOR CERTAIN

5 PURPOSES.— 

6 ‘‘(1) IN GENERAL.— 

7 ‘‘(A) APPLICATION.—Except as provided in 

8 subparagraph (B), any global intangible low9 taxed income included in gross income under 

10 subsection (a) shall be treated in the same man11 ner as an amount included under section 

12 951(a)(1)(A) for purposes of applying sections 

13 168(h)(2)(B), 535(b)(10), 851(b), 904(h)(1), 959, 

14 961, 962(c), 962(d), 993(a)(1)(E), 996(f)(1), 

15 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 

16 6654(d)(2)(D), and 6655(e)(4). 

17 ‘‘(B) EXCEPTION.—The Secretary shall pro18 vide rules for the application of subparagraph 

19 (A) to other provisions of this title in any case 

20 in which the determination of subpart F income 

21 is required to be made at the level of the con22 trolled foreign corporation. 

23 ‘‘(2) ALLOCATION OF GLOBAL INTANGIBLE LOW24 TAXED INCOME TO CONTROLLED FOREIGN CORPORA25 TIONS.—For purposes of the sections referred to in 
389 

† HR 1 EAS 

1 paragraph (1), with respect to any controlled foreign 

2 corporation any pro rata amount from which is taken 

3 into account in determining the global intangible low4 taxed income included in gross income of a United 

5 States shareholder under subsection (a), the portion of 

6 such global intangible low-taxed income which is 

7 treated as being with respect to such controlled foreign 

8 corporation is— 

9 ‘‘(A) in the case of a controlled foreign cor10 poration with no tested income, zero, and 

11 ‘‘(B) in the case of a controlled foreign cor12 poration with tested income, the portion of such 

13 global intangible low-taxed income which bears 

14 the same ratio to such global intangible low15 taxed income as— 

16 ‘‘(i) such United States shareholder’s 

17 pro rata amount of the tested income of 

18 such controlled foreign corporation, bears to 

19 ‘‘(ii) the aggregate amount described in 

20 subsection (c)(1)(A) with respect to such 

21 United States shareholder.’’. 

22 (b) FOREIGN TAX CREDIT.— 

23 (1) APPLICATION OF DEEMED PAID FOREIGN TAX

24 CREDIT.—Section 960 is amended adding at the end 

25 the following new subsection: 
390 

† HR 1 EAS 

1 ‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY

2 ATTRIBUTABLE TO TESTED INCOME.— 

3 ‘‘(1) IN GENERAL.—For purposes of this subpart, 

4 if any amount is includible in the gross income of a 

5 domestic corporation under section 951A, such domes6 tic corporation shall be deemed to have paid foreign 

7 income taxes equal to 80 percent of the product of— 

8 ‘‘(A) such domestic corporation’s inclusion 

9 percentage, multiplied by 

10 ‘‘(B) the aggregate tested foreign income 

11 taxes paid or accrued by controlled foreign cor12 porations. 

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

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

15 with respect to any domestic corporation, the ratio 

16 (expressed as a percentage) of— 

17 ‘‘(A) such corporation’s global intangible 

18 low-taxed income (as defined in section 951A(b)), 

19 divided by 

20 ‘‘(B) the aggregate amount described in sec21 tion 951A(c)(1)(A) with respect to such corpora22 tion. 

23 ‘‘(3) TESTED FOREIGN INCOME TAXES.—For 

24 purposes of paragraph (1), the term ‘tested foreign in25 come taxes’ means, with respect to any domestic cor-
391 

† HR 1 EAS 

1 poration which is a United States shareholder of a 

2 controlled foreign corporation, the foreign income 

3 taxes paid or accrued by such foreign corporation 

4 which are properly attributable to the tested income 

5 of such foreign corporation taken into account by such 

6 domestic corporation under section 951A.’’. 

7 (2) APPLICATION OF FOREIGN TAX CREDIT LIMI8 TATION.— 

9 (A) SEPARATE BASKET FOR GLOBAL INTAN10 GIBLE LOW-TAXED INCOME.—Section 904(d)(1) 

11 is amended by redesignating subparagraphs (A) 

12 and (B) as subparagraphs (B) and (C), respec13 tively, and by inserting before subparagraph (B) 

14 (as so redesignated) the following new subpara15 graph: 

16 ‘‘(A) any amount includible in gross income 

17 under section 951A (other than passive category 

18 income),’’. 

19 (B) EXCLUSION FROM GENERAL CATEGORY

20 INCOME.—Section 904(d)(2)(A)(ii) is amended 

21 by inserting ‘‘income described in paragraph 

22 (1)(A) and’’ before ‘‘passive category income’’. 

23 (C) NO CARRYOVER OR CARRYBACK OF EX24 CESS TAXES.—Section 904(c) is amended by 

25 adding at the end the following: ‘‘This subsection 
392 

† HR 1 EAS 

1 shall not apply to taxes paid or accrued with re2 spect to amounts described in subsection 

3 (d)(1)(A).’’. 

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

5 subpart F of part III of subchapter N of chapter 1 is 

6 amended by inserting after the item relating to section 951 

7 the following new item: 

‘‘Sec. 951A. Global intangible low-taxed income included in gross income of 

United States shareholders.’’. 

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

9 section shall apply to taxable years of foreign corporations 

10 beginning after December 31, 2017, and to taxable years 

11 of United States shareholders in which or with which such 

12 taxable years of foreign corporations end. 

13 SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTAN14 GIBLE INCOME AND GLOBAL INTANGIBLE 

15 LOW-TAXED INCOME. 

16 (a) IN GENERAL.—Part VIII of subchapter B of chap17 ter 1 is amended by adding at the end the following new 

18 section: 

19 ‘‘SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND 

20 GLOBAL INTANGIBLE LOW-TAXED INCOME. 

21 ‘‘(a) ALLOWANCE OF DEDUCTION.— 

22 ‘‘(1) IN GENERAL.—In the case of a domestic 

23 corporation for any taxable year, there shall be al-
393 

† HR 1 EAS 

1 lowed as a deduction an amount equal to the sum 

2 of— 

3 ‘‘(A) 37.5 percent of the foreign-derived in4 tangible income of such domestic corporation for 

5 such taxable year, plus 

6 ‘‘(B) 50 percent of the global intangible low7 taxed income amount (if any) which is included 

8 in the gross income of such domestic corporation 

9 under section 951A for such taxable year. 

10 ‘‘(2) LIMITATION BASED ON TAXABLE INCOME.— 

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

12 year— 

13 ‘‘(i) the sum of the foreign-derived in14 tangible income and the global intangible 

15 low-taxed income amount otherwise taken 

16 into account by the domestic corporation 

17 under paragraph (1), exceeds 

18 ‘‘(ii) the taxable income of the domestic 

19 corporation (determined without regard to 

20 this section), 

21 then the amount of the foreign-derived intangible 

22 income and the global intangible low-taxed in23 come amount so taken into account shall be re24 duced as provided in subparagraph (B). 
394 

† HR 1 EAS 

1 ‘‘(B) REDUCTION.—For purposes of sub2 paragraph (A)— 

3 ‘‘(i) foreign-derived intangible income 

4 shall be reduced by an amount which bears 

5 the same ratio to the excess described in 

6 subparagraph (A) as such foreign-derived 

7 intangible income bears to the sum de8 scribed in subparagraph (A)(i), and 

9 ‘‘(ii) the global intangible low-taxed 

10 income amount shall be reduced by the re11 mainder of such excess. 

12 ‘‘(3) REDUCTION IN DEDUCTION FOR TAXABLE

13 YEARS AFTER 2025.—In the case of any taxable year 

14 beginning after December 31, 2025, paragraph (1) 

15 shall be applied by substituting— 

16 ‘‘(A) ‘21.875 percent’ for ‘37.5 percent’ in 

17 subparagraph (A), and 

18 ‘‘(B) ‘37.5 percent’ for ‘50 percent’ in sub19 paragraph (B). 

20 ‘‘(b) FOREIGN-DERIVED INTANGIBLE INCOME.—For 

21 purposes of this section— 

22 ‘‘(1) IN GENERAL.—The foreign-derived intan23 gible income of any domestic corporation is the 

24 amount which bears the same ratio to the deemed in25 tangible income of such corporation as— 
395 

† HR 1 EAS 

1 ‘‘(A) the foreign-derived deduction eligible 

2 income of such corporation, bears to 

3 ‘‘(B) the deduction eligible income of such 

4 corporation. 

5 ‘‘(2) DEEMED INTANGIBLE INCOME.—For pur6 poses of this subsection— 

7 ‘‘(A) IN GENERAL.—The term ‘deemed in8 tangible income’ means the excess (if any) of— 

9 ‘‘(i) the deduction eligible income of the 

10 domestic corporation, over 

11 ‘‘(ii) the deemed tangible income re12 turn of the corporation. 

13 ‘‘(B) DEEMED TANGIBLE INCOME RE14 TURN.—The term ‘deemed tangible income re15 turn’ means, with respect to any corporation, an 

16 amount equal to 10 percent of the corporation’s 

17 qualified business asset investment (as defined in 

18 section 951A(d), determined by substituting ‘de19 duction eligible income’ for ‘tested income’ in 

20 paragraph (2) thereof). 

21 ‘‘(3) DEDUCTION ELIGIBLE INCOME.— 

22 ‘‘(A) IN GENERAL.—The term ‘deduction el23 igible income’ means, with respect to any domes24 tic corporation, the excess (if any) of— 
396 

† HR 1 EAS 

1 ‘‘(i) gross income of such corporation 

2 determined without regard to— 

3 ‘‘(I) the subpart F income of such 

4 corporation determined under section 

5 951, 

6 ‘‘(II) the global intangible low7 taxed income determined under section 

8 951A, 

9 ‘‘(III) any financial services in10 come (as defined in section 

11 904(d)(2)(D)) of such corporation 

12 which is not described in clause (ii), 

13 ‘‘(IV) any dividend received from 

14 a corporation which is a controlled for15 eign corporation of such domestic cor16 poration, 

17 ‘‘(V) any domestic oil and gas ex18 traction income of such corporation, 

19 and 

20 ‘‘(VI) any foreign branch income 

21 (as defined in section 904(d)(2)(J)), 

22 over 

23 ‘‘(ii) the deductions (including taxes) 

24 properly allocable to such gross income 
397 

† HR 1 EAS 

1 under rules similar to the rules of section 

2 954(b)(5). 

3 ‘‘(B) DOMESTIC OIL AND GAS EXTRACTION

4 INCOME.—For purposes of subparagraph (A), the 

5 term ‘domestic oil and gas extraction income’ 

6 means income described in section 907(c)(1), de7 termined by substituting ‘within the United 

8 States’ for ‘without the United States’. 

9 ‘‘(4) FOREIGN-DERIVED DEDUCTION ELIGIBLE

10 INCOME.—The term ‘foreign-derived deduction eligible 

11 income’ means, with respect to any taxpayer for any 

12 taxable year, any deduction eligible income of such 

13 taxpayer which is derived in connection with— 

14 ‘‘(A) property— 

15 ‘‘(i) which is sold by the taxpayer to 

16 any person who is not a United States per17 son, and 

18 ‘‘(ii) which the taxpayer establishes to 

19 the satisfaction of the Secretary is for a for20 eign use, or 

21 ‘‘(B) services provided by the taxpayer 

22 which the taxpayer establishes to the satisfaction 

23 of the Secretary are provided to any person, or 

24 with respect to property, not located within the 

25 United States. 
398 

† HR 1 EAS 

1 ‘‘(5) RULES RELATING TO FOREIGN USE PROP2 ERTY OR SERVICES.—For purposes of this sub3 section— 

4 ‘‘(A) FOREIGN USE.—The term ‘foreign use’ 

5 means any use, consumption, or disposition 

6 which is not within the United States. 

7 ‘‘(B) PROPERTY OR SERVICES PROVIDED TO

8 DOMESTIC INTERMEDIARIES.— 

9 ‘‘(i) PROPERTY.—If a taxpayer sells 

10 property to another person (other than a re11 lated party) for further manufacture or 

12 other modification within the United States, 

13 such property shall not be treated as sold 

14 for a foreign use even if such other person 

15 subsequently uses such property for a for16 eign use. 

17 ‘‘(ii) SERVICES.—If a taxpayer pro18 vides services to another person (other than 

19 a related party) located within the United 

20 States, such services shall not be treated as 

21 described in paragraph (4)(B) even if such 

22 other person uses such services in providing 

23 services which are so described. 

24 ‘‘(C) SPECIAL RULES WITH RESPECT TO RE25 LATED PARTY TRANSACTIONS.— 
399 

† HR 1 EAS 

1 ‘‘(i) SALES TO RELATED PARTIES.—If 

2 property is sold to a related party who is 

3 not a United States person, such sale shall 

4 not be treated as for a foreign use unless— 

5 ‘‘(I) such property is ultimately 

6 sold by a related party, or used by a 

7 related party in connection with prop8 erty which is sold or the provision of 

9 services, to another person who is an 

10 unrelated party who is not a United 

11 States person, and 

12 ‘‘(II) the taxpayer establishes to 

13 the satisfaction of the Secretary that 

14 such property is for a foreign use. 

15 For purposes of this clause, a sale of prop16 erty shall be treated as a sale of each of the 

17 components thereof. 

18 ‘‘(ii) SERVICE PROVIDED TO RELATED

19 PARTIES.—If a service is provided to a re20 lated party who is not located in the United 

21 States, such service shall not be treated de22 scribed in subparagraph (A)(ii) unless the 

23 taxpayer established to the satisfaction of 

24 the Secretary that such service is not sub25 stantially similar to services provided by 
400 

† HR 1 EAS 

1 such related party to persons located within 

2 the United States. 

3 ‘‘(D) RELATED PARTY.—For purposes of 

4 this paragraph, the term ‘related party’ means 

5 any member of an affiliated group as defined in 

6 section 1504(a), determined— 

7 ‘‘(i) by substituting ‘more than 50 per8 cent’ for ‘at least 80 percent’ each place it 

9 appears, and 

10 ‘‘(ii) without regard to paragraphs (2) 

11 and (3) of section 1504(b). 

12 Any person (other than a corporation) shall be 

13 treated as a member of such group if such person 

14 is controlled by members of such group (includ15 ing any entity treated as a member of such 

16 group by reason of this sentence) or controls any 

17 such member. For purposes of the preceding sen18 tence, control shall be determined under the rules 

19 of section 954(d)(3). 

20 ‘‘(E) SOLD.—For purposes of this sub21 section, the terms ‘sold’, ‘sells’, and ‘sale’ shall 

22 include any lease, license, exchange, or other dis23 position. 
401 

† HR 1 EAS 

1 ‘‘(c) REGULATIONS.—The Secretary shall prescribe 

2 such regulations or other guidance as may be necessary or 

3 appropriate to carry out the provisions of this section.’’. 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Section 172(d), as amended by section 13011, 

6 is amended by adding at the end the following new 

7 paragraph: 

8 ‘‘(10) DEDUCTION FOR FOREIGN-DERIVED INTAN9 GIBLE INCOME.—The deduction under section 250 

10 shall not be allowed.’’. 

11 (2) Section 246(b)(1) is amended— 

12 (A) by striking ‘‘and subsection (a) and (b) 

13 of section 245’’ the first place it appears and in14 serting ‘‘, subsection (a) and (b) of section 245, 

15 and section 250’’, 

16 (B) by striking ‘‘and subsection (a) and (b) 

17 of section 245’’ the second place it appears and 

18 inserting ‘‘subsection (a) and (b) of section 245, 

19 and 250’’. 

20 (3) Section 469(i)(3)(F)(iii) is amended by strik21 ing ‘‘and 222’’ and inserting ‘‘222, and 250’’. 

22 (4) The table of sections for part VIII of sub23 chapter B of chapter 1 is amended by adding at the 

24 end the following new item: 

‘‘Sec. 250. Foreign-derived intangible income and global intangible low-taxed income.’’. 
402 

† HR 1 EAS 

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

2 section shall apply to taxable years beginning after Decem3 ber 31, 2017. 

4 SEC. 14203. SPECIAL RULES FOR TRANSFERS OF INTAN5 GIBLE PROPERTY FROM CONTROLLED FOR6 EIGN CORPORATIONS TO UNITED STATES 

7 SHAREHOLDERS. 

8 (a) IN GENERAL.—Subpart F of part III of subchapter 

9 N of chapter 1 is amended by adding at the end the fol10 lowing new section: 

11 ‘‘SEC. 966. TRANSFERS OF INTANGIBLE PROPERTY TO 

12 UNITED STATES SHAREHOLDERS. 

13 ‘‘(a) IN GENERAL.—In the case of any distribution of 

14 intangible property which is held by a controlled foreign 

15 corporation on the date of enactment of this section and 

16 which is described in subsection (b)— 

17 ‘‘(1) for purposes of part I of subchapter C and 

18 any other provision of this title specified by the Sec19 retary, the fair market value of such property on the 

20 date of such distribution shall be treated as not ex21 ceeding the adjusted basis of such property imme22 diately before such distribution, and 

23 ‘‘(2) if the distribution is to a United States 

24 shareholder and is not a dividend— 
403 

† HR 1 EAS 

1 ‘‘(A) the United States shareholder’s ad2 justed basis in the stock of the controlled foreign 

3 corporation with respect to which such distribu4 tion is made shall be increased by the amount (if 

5 any) of such distribution which would (but for 

6 this subsection) be includible in gross income, 

7 and 

8 ‘‘(B) the adjusted basis of such property in 

9 the hands of such United States shareholder im10 mediately after such distribution shall be such 

11 adjusted basis immediately before such distribu12 tion reduced by the amount of the increase de13 scribed in subparagraph (A). 

14 ‘‘(b) DISTRIBUTION.—A distribution is described in 

15 this section if the distribution is— 

16 ‘‘(1) received by a domestic corporation from a 

17 controlled foreign corporation with respect to which 

18 such corporation is a United States shareholder, and 

19 ‘‘(2) made by the controlled foreign corporation 

20 before the last day of the third taxable year of the con21 trolled foreign corporation beginning after December 

22 31, 2017. 

23 ‘‘(c) INTANGIBLE PROPERTY.—For purposes of this 

24 subsection, the term ‘intangible property’ has the meaning 
404 

† HR 1 EAS 

1 given such term by section 936(h)(3)(B) or which is com2 puter software described in section 197(e)(3)(B).’’. 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 197(f)(2)(B)(i) is amended by insert5 ing ‘‘966(a),’’ after ‘‘731,’’. 

6 (2) The table of sections for subpart F of part III 

7 of subchapter N of chapter 1 is amended by adding 

8 at the end the following new item: 

‘‘Sec. 966. Transfers of intangible property to United States shareholders.’’. 

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

10 section shall apply to distributions made in taxable years 

11 of foreign corporations beginning after December 31, 2017, 

12 and to taxable years of United States shareholders in which 

13 or with which such taxable years of foreign corporations 

14 end. 

15 CHAPTER 2—OTHER MODIFICATIONS OF 

16 SUBPART F PROVISIONS 

17 SEC. 14211. ELIMINATION OF INCLUSION OF FOREIGN BASE 

18 COMPANY OIL RELATED INCOME. 

19 (a) REPEAL.—Subsection (a) of section 954 is amend20 ed— 

21 (1) by inserting ‘‘and’’ at the end of paragraph 

22 (2), 

23 (2) by striking the comma at the end of para24 graph (3) and inserting a period, and 

25 (3) by striking paragraph (5). 
405 

† HR 1 EAS 

1 (b) CONFORMING AMENDMENTS.— 

2 (1) Section 952(c)(1)(B)(iii) is amended by 

3 striking subclause (I) and redesignating subclauses 

4 (II) through (V) as subclauses (I) through (IV), re5 spectively. 

6 (2) Section 954(b) is amended— 

7 (A) by striking the second sentence of para8 graph (4), 

9 (B) by striking ‘‘the foreign base company 

10 services income, and the foreign base company 

11 oil related income’’ in paragraph (5) and insert12 ing ‘‘and the foreign base company services in13 come’’, and 

14 (C) by striking paragraph (6). 

15 (3) Section 954 is amended by striking sub16 section (g). 

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

18 section shall apply to taxable years of foreign corporations 

19 beginning after December 31, 2017, and to taxable years 

20 of United States shareholders with or within which such 

21 taxable years of foreign corporations end. 
406 

† HR 1 EAS 

1 SEC. 14212. INFLATION ADJUSTMENT OF DE MINIMIS EX2 CEPTION FOR FOREIGN BASE COMPANY IN3 COME. 

4 (a) IN GENERAL.—Section 954(b)(3) is amended by 

5 adding at the end the following new subparagraph: 

6 ‘‘(D) INFLATION ADJUSTMENT.—In the case 

7 of any taxable year beginning after 2017, the 

8 dollar amount in subparagraph (A)(ii) shall be 

9 increased by an amount equal to— 

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

11 ‘‘(ii) the cost-of-living adjustment de12 termined under section 1(f)(3) for the cal13 endar year in which the taxable year be14 gins. 

15 Any increase determined under the preceding 

16 sentence shall be rounded to the nearest multiple 

17 of $50,000.’’. 

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

19 section shall apply to taxable years of foreign corporations 

20 beginning after December 31, 2017, and to taxable years 

21 of United States shareholders in which or with which such 

22 taxable years of foreign corporations end. 
407 

† HR 1 EAS 

1 SEC. 14213. REPEAL OF INCLUSION BASED ON WITHDRAWAL 

2 OF PREVIOUSLY EXCLUDED SUBPART F IN3 COME FROM QUALIFIED INVESTMENT. 

4 (a) IN GENERAL.—Subpart F of part III of subchapter 

5 N of chapter 1 is amended by striking section 955. 

6 (b) CONFORMING AMENDMENTS.— 

7 (1)(A) Section 951(a)(1)(A) is amended to read 

8 as follows: 

9 ‘‘(A) his pro rata share (determined under 

10 paragraph (2)) of the corporation’s subpart F 

11 income for such year, and’’. 

12 (B) Section 851(b) is amended by striking ‘‘sec13 tion 951(a)(1)(A)(i)’’ in the flush language at the end 

14 and inserting ‘‘section 951(a)(1)(A)’’. 

15 (C) Section 952(c)(1)(B)(i) is amended by strik16 ing ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 

17 951(a)(1)(A)’’. 

18 (D) Section 953(c)(1)(C) is amended by striking 

19 ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 

20 951(a)(1)(A)’’. 

21 (2) Section 951(a) is amended by striking para22 graph (3). 

23 (3) Section 953(d)(4)(B)(iv)(II) is amended by 

24 striking ‘‘or amounts referred to in clause (ii) or (iii) 

25 of section 951(a)(1)(A)’’. 
408 

† HR 1 EAS 

1 (4) Section 964(b) is amended by striking ‘‘, 

2 955,’’. 

3 (5) Section 970 is amended by striking sub4 section (b). 

5 (6) The table of sections for subpart F of part III 

6 of subchapter N of chapter 1 is amended by striking 

7 the item relating to section 955. 

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

9 section shall apply to taxable years of foreign corporations 

10 beginning after December 31, 2017, and to taxable years 

11 of United States shareholders in which or with which such 

12 taxable years of foreign corporations end. 

13 SEC. 14214. MODIFICATION OF STOCK ATTRIBUTION RULES 

14 FOR DETERMINING STATUS AS A CON15 TROLLED FOREIGN CORPORATION. 

16 (a) IN GENERAL.—Section 958(b) is amended— 

17 (1) by striking paragraph (4), and 

18 (2) by striking ‘‘Paragraphs (1) and (4)’’ in the 

19 last sentence and inserting ‘‘Paragraph (1)’’. 

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

21 section shall apply to— 

22 (1) the last taxable year of foreign corporations 

23 beginning before January 1, 2018, and each subse24 quent taxable year of such foreign corporations, and 
409 

† HR 1 EAS 

1 (2) taxable years of United States shareholders 

2 in which or with which such taxable years of foreign 

3 corporations end. 

4 SEC. 14215. MODIFICATION OF DEFINITION OF UNITED 

5 STATES SHAREHOLDER. 

6 (a) IN GENERAL.—Section 951(b) is amended by in7 serting ‘‘, or 10 percent or more of the total value of shares 

8 of all classes of stock of such foreign corporation’’ after 

9 ‘‘such foreign corporation’’. 

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

11 section shall apply to taxable years of foreign corporations 

12 beginning after December 31, 2017, and to taxable years 

13 of United States shareholders with or within which such 

14 taxable years of foreign corporations end. 

15 SEC. 14216. ELIMINATION OF REQUIREMENT THAT COR16 PORATION MUST BE CONTROLLED FOR 30 

17 DAYS BEFORE SUBPART F INCLUSIONS 

18 APPLY. 

19 (a) IN GENERAL.—Section 951(a)(1) is amended by 

20 striking ‘‘for an uninterrupted period of 30 days or more’’ 

21 and inserting ‘‘at any time’’. 

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

23 section shall apply to taxable years of foreign corporations 

24 beginning after December 31, 2017, and to taxable years 
410 

† HR 1 EAS 

1 of United States shareholders with or within which such 

2 taxable years of foreign corporations end. 

3 SEC. 14217. LOOK-THRU RULE FOR RELATED CONTROLLED 

4 FOREIGN CORPORATIONS MADE PERMANENT. 

5 (a) IN GENERAL.—Paragraph (6) of section 954(c) is 

6 amended by striking subparagraph (C). 

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

8 section shall apply to taxable years of foreign corporations 

9 beginning after December 31, 2017, and to taxable years 

10 of United States shareholders in which or with which such 

11 taxable years of foreign corporations end. 

12 SEC. 14218. CORPORATIONS ELIGIBLE FOR DEDUCTION FOR 

13 DIVIDENDS FROM CONTROLLED FOREIGN 

14 CORPORATIONS EXEMPT FROM SUBPART F 

15 INCLUSION FOR INVESTMENT IN UNITED 

16 STATES PROPERTY. 

17 (a) IN GENERAL.—Section 956(a) is amended by in18 serting ‘‘(other than a corporation)’’ after ‘‘United States 

19 shareholder’’ in the matter preceding paragraph (1). 

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

21 section shall apply to taxable years of controlled foreign cor22 porations ending after December 31, 2017, and to taxable 

23 years of United States shareholders with or within which 

24 such taxable years of controlled foreign corporations end. 
411 

† HR 1 EAS 

1 CHAPTER 3—PREVENTION OF BASE 

2 EROSION 

3 SEC. 14221. DENIAL OF DEDUCTION FOR INTEREST EX4 PENSE OF UNITED STATES SHAREHOLDERS 

5 WHICH ARE MEMBERS OF WORLDWIDE AF6 FILIATED GROUPS WITH EXCESS DOMESTIC 

7 INDEBTEDNESS. 

8 (a) IN GENERAL.—Section 163 is amended by redesig9 nating subsection (n) as subsection (o) and by inserting 

10 after subsection (m) the following new subsection: 

11 ‘‘(n) DISALLOWANCE OF DEDUCTION FOR INTEREST

12 EXPENSE OF UNITED STATES SHAREHOLDERS WHICH ARE

13 MEMBERS OF WORLDWIDE AFFILIATED GROUPS WITH EX14 CESS DOMESTIC INDEBTEDNESS.— 

15 ‘‘(1) IN GENERAL.—In the case of any domestic 

16 corporation which is a member of a worldwide affili17 ated group, the deduction allowed under this chapter 

18 for interest paid or accrued by such domestic corpora19 tion during the taxable year shall be reduced by the 

20 product of— 

21 ‘‘(A) the net interest expense of such domes22 tic corporation, multiplied by 

23 ‘‘(B) the debt-to-equity differential percent24 age of such worldwide affiliated group. 
412 

† HR 1 EAS 

1 ‘‘(2) CARRYFORWARD.—Any amount disallowed 

2 under paragraph (1) for any taxable year shall be 

3 treated as interest paid or accrued in the succeeding 

4 taxable year. 

5 ‘‘(3) DEBT-TO-EQUITY DIFFERENTIAL PERCENT6 AGE.— 

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

8 subsection, the term ‘debt-to-equity differential 

9 percentage’ means, with respect to any world10 wide affiliated group, the percentage which the 

11 excess domestic indebtedness of such group bears 

12 to the total indebtedness of the domestic corpora13 tions which are members of such group. 

14 ‘‘(B) EXCESS DOMESTIC INDEBTEDNESS.— 

15 For purposes of subparagraph (A), the term ‘ex16 cess domestic indebtedness’ means, with respect 

17 to any worldwide affiliated group, the excess (if 

18 any) of— 

19 ‘‘(i) the total indebtedness of the do20 mestic corporations which are members of 

21 such group, over 

22 ‘‘(ii) 110 percent of the amount which 

23 the total indebtedness of such domestic cor24 porations would be if the ratio of such in-
413 

† HR 1 EAS 

1 debtedness to the total equity of such domes2 tic corporations equaled the ratio which— 

3 ‘‘(I) the total indebtedness of such 

4 group, bears to 

5 ‘‘(II) the total equity of such 

6 group. 

7 ‘‘(C) TOTAL EQUITY.—For purposes of sub8 paragraph (B), the term ‘total equity’ means, 

9 with respect to one or more corporations, an 

10 amount equal to— 

11 ‘‘(i) the sum of the money and all other 

12 assets of such corporations, reduced (but not 

13 below one) by 

14 ‘‘(ii) the total indebtedness of such cor15 porations. 

16 ‘‘(D) SPECIAL RULES FOR DETERMINING

17 DEBT AND EQUITY.— 

18 ‘‘(i) IN GENERAL.—For purposes of 

19 this paragraph— 

20 ‘‘(I) the amount taken into ac21 count with respect to any asset shall be 

22 the adjusted basis thereof for purposes 

23 of determining gain, 

24 ‘‘(II) the amount taken into ac25 count with respect to any indebtedness 
414 

† HR 1 EAS 

1 with original issue discount shall be its 

2 issue price plus the portion of the 

3 original issue discount previously ac4 crued as determined under the rules of 

5 section 1272 (determined without re6 gard to subsection (a)(7) or (b)(4) 

7 thereof), and 

8 ‘‘(III) there shall be such other ad9 justments as the Secretary shall by reg10 ulations prescribe. 

11 ‘‘(ii) INTRAGROUP DEBT AND EQUITY

12 INTERESTS DISREGARDED.—For purposes of 

13 this paragraph, the total indebtedness, and 

14 the assets, of any group of corporations 

15 shall be determined by treating all members 

16 of such group as one corporation. 

17 ‘‘(iii) DETERMINATION OF ASSETS OF

18 DOMESTIC GROUP.—For purposes of this 

19 paragraph, the assets of the domestic cor20 porations which are members of any world21 wide affiliated group shall be determined by 

22 disregarding any interest held by any such 

23 domestic corporation in any foreign cor24 poration which is a member of such group. 
415 

† HR 1 EAS 

1 ‘‘(E) PHASE IN OF PERCENTAGE USED IN

2 DETERMINING EXCESS INDEBTEDNESS.—In the 

3 case of any taxable year beginning in a calendar 

4 year before 2022, the following percentages shall 

5 be substituted for ‘110 percent’ in applying sub6 paragraph (B)(ii): 

‘‘In the case of a taxable year beginning in: The percentage is: 

2018 ........................................................................... 130 

2019 ........................................................................... 125 

2020 ........................................................................... 120 

2021 ........................................................................... 115 

7 ‘‘(4) OTHER DEFINITIONS.—For purposes of this 

8 subsection— 

9 ‘‘(A) WORLDWIDE AFFILIATED GROUP.— 

10 The term ‘worldwide affiliated group’ means a 

11 group consisting of the includible members of an 

12 affiliated group, as defined in section 1504(a), 

13 determined— 

14 ‘‘(i) by substituting ‘more than 50 per15 cent’ for ‘at least 80 percent’ each place it 

16 appears in such section, and 

17 ‘‘(ii) without regard to paragraphs (2), 

18 (3), and (4) of section 1504(b). 

19 ‘‘(B) NET INTEREST EXPENSE.—The term 

20 ‘net interest expense’ means the excess (if any) of 

21 ‘‘(i) the interest paid or accrued by the 

22 taxpayer during the taxable year, over 
416 

† HR 1 EAS 

1 ‘‘(ii) the amount of interest includible 

2 in the gross income of such taxpayer for 

3 such taxable year. 

4 The Secretary shall by regulations provide for 

5 adjustments in determining the amount of net 

6 interest expense if necessary. 

7 ‘‘(5) TREATMENT OF AFFILIATED GROUP.—For 

8 purposes of this subsection, all members of the same 

9 affiliated group (within the meaning of section 

10 1504(a) applied by substituting ‘more than 50 per11 cent’ for ‘at least 80 percent’ each place it appears) 

12 shall be treated as one taxpayer. 

13 ‘‘(6) REGULATIONS.—The Secretary shall pre14 scribe such regulations or other guidance as may be 

15 appropriate to carry out the purposes of this sub16 section, including regulations or other guidance— 

17 ‘‘(A) to prevent the avoidance of the pur18 poses of this subsection, 

19 ‘‘(B) providing such adjustments in the case 

20 of corporations which are members of an affili21 ated group as may be appropriate to carry out 

22 the purposes of this subsection, 

23 ‘‘(C) providing for the coordination of this 

24 subsection with section 884, 
417 

† HR 1 EAS 

1 ‘‘(D) providing for the reallocation of shares 

2 of partnership indebtedness, or distributive 

3 shares of the partnership’s interest income or in4 terest expense, and 

5 ‘‘(E) providing for the coordination with 

6 the limitation under subsection (j).’’. 

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

8 section shall apply to taxable years beginning after Decem9 ber 31, 2017. 

10 SEC. 14222. LIMITATIONS ON INCOME SHIFTING THROUGH 

11 INTANGIBLE PROPERTY TRANSFERS. 

12 (a) DEFINITION OF INTANGIBLE ASSET.—Section 

13 936(h)(3)(B) is amended— 

14 (1) by striking ‘‘or’’ at the end of clause (v), 

15 (2) by striking clause (vi) and inserting the fol16 lowing: 

17 ‘‘(vi) any goodwill, going concern 

18 value, or workforce in place (including its 

19 composition and terms and conditions (con20 tractual or otherwise) of its employment); or 

21 ‘‘(vii) any other item the value or po22 tential value of which is not attributable to 

23 tangible property or the services of any in24 dividual.’’, and 
418 

† HR 1 EAS 

1 (3) by striking the flush language after clause 

2 (vii), as added by paragraph (2). 

3 (b) CLARIFICATION OF ALLOWABLE VALUATION METH4 ODS.— 

5 (1) FOREIGN CORPORATIONS.—Section 367(d)(2) 

6 is amended by adding at the end the following new 

7 subparagraph: 

8 ‘‘(D) REGULATORY AUTHORITY.—For pur9 poses of the last sentence of subparagraph (A), 

10 the Secretary shall require— 

11 ‘‘(i) the valuation of transfers of intan12 gible property, including intangible prop13 erty transferred with other property or serv14 ices, on an aggregate basis, or 

15 ‘‘(ii) the valuation of such a transfer 

16 on the basis of the realistic alternatives to 

17 such a transfer, 

18 if the Secretary determines that such basis is the 

19 most reliable means of valuation of such trans20 fers.’’. 

21 (2) ALLOCATION AMONG TAXPAYERS.—Section 

22 482 is amended by adding at the end the following: 

23 ‘‘For purposes of this section, the Secretary shall re24 quire the valuation of transfers of intangible property 

25 (including intangible property transferred with other 
419 

† HR 1 EAS 

1 property or services) on an aggregate basis or the 

2 valuation of such a transfer on the basis of the real3 istic alternatives to such a transfer, if the Secretary 

4 determines that such basis is the most reliable means 

5 of valuation of such transfers.’’. 

6 (c) EFFECTIVE DATE.— 

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

8 this section shall apply to transfers in taxable years 

9 beginning after December 31, 2017. 

10 (2) NO INFERENCE.—Nothing in the amendment 

11 made by subsection (a) shall be construed to create 

12 any inference with respect to the application of sec13 tion 936(h)(3) of the Internal Revenue Code of 1986, 

14 or the authority of the Secretary of the Treasury to 

15 provide regulations for such application, with respect 

16 to taxable years beginning before January 1, 2018. 

17 SEC. 14223. CERTAIN RELATED PARTY AMOUNTS PAID OR 

18 ACCRUED IN HYBRID TRANSACTIONS OR 

19 WITH HYBRID ENTITIES. 

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

21 1 is amended by inserting after section 267 the following: 
420 

† HR 1 EAS 

1 ‘‘SEC. 267A. CERTAIN RELATED PARTY AMOUNTS PAID OR 

2 ACCRUED IN HYBRID TRANSACTIONS OR 

3 WITH HYBRID ENTITIES. 

4 ‘‘(a) IN GENERAL.—No deduction shall be allowed 

5 under this chapter for any disqualified related party 

6 amount paid or accrued pursuant to a hybrid transaction 

7 or by, or to, a hybrid entity. 

8 ‘‘(b) DISQUALIFIED RELATED PARTY AMOUNT.—For 

9 purposes of this section— 

10 ‘‘(1) DISQUALIFIED RELATED PARTY AMOUNT.— 

11 The term ‘disqualified related party amount’ means 

12 any interest or royalty paid or accrued to a related 

13 party to the extent that— 

14 ‘‘(A) such amount is not included in the in15 come of such related party under the tax law of 

16 the country of which such related party is a resi17 dent for tax purposes or is subject to tax, or 

18 ‘‘(B) such related party is allowed a deduc19 tion with respect to such amount under the tax 

20 law of such country. 

21 Such term shall not include any payment to the ex22 tent such payment is included in the gross income of 

23 a United States shareholder under section 951(a). 

24 ‘‘(2) RELATED PARTY.—The term ‘related party’ 

25 means a related person as defined in section 

26 954(d)(3), except that such section shall be applied 
421 

† HR 1 EAS 

1 with respect to the person making the payment de2 scribed in paragraph (1) in lieu of the controlled for3 eign corporation otherwise referred to in such section. 

4 ‘‘(c) HYBRID TRANSACTION.—For purposes of this sec5 tion, the term ‘hybrid transaction’ means any transaction, 

6 series of transactions, agreement, or instrument one or more 

7 payments with respect to which are treated as interest or 

8 royalties for purposes of this chapter and which are not so 

9 treated for purposes the tax law of the foreign country of 

10 which the recipient of such payment is resident for tax pur11 poses or is subject to tax. 

12 ‘‘(d) HYBRID ENTITY.—For purposes of this section, 

13 the term ‘hybrid entity’ means any entity which is either— 

14 ‘‘(1) treated as fiscally transparent for purposes 

15 of this chapter but not so treated for purposes of the 

16 tax law of the foreign country of which the entity is 

17 resident for tax purposes or is subject to tax, or 

18 ‘‘(2) treated as fiscally transparent for purposes 

19 of such tax law but not so treated for purposes of this 

20 chapter. 

21 ‘‘(e) REGULATIONS.—The Secretary shall issue such 

22 regulations or other guidance as may be necessary or appro23 priate to carry out the purposes of this section, including 

24 regulations or other guidance providing for— 
422 

† HR 1 EAS 

1 ‘‘(1) rules for treating certain conduit arrange2 ments which involve a hybrid transaction or a hybrid 

3 entity as subject to subsection (a), 

4 ‘‘(2) rules for the application of this section to 

5 foreign branches, 

6 ‘‘(3) rules for treating certain structured trans7 actions as subject to subsection (a), 

8 ‘‘(4) rules for treating a tax preference as an ex9 clusion from income for purposes of applying sub10 section (b)(1) if such tax preference has the effect of 

11 reducing the generally applicable statutory rate by 25 

12 percent or more, 

13 ‘‘(5) rules for treating the entire amount of in14 terest or royalty paid or accrued to a related party 

15 as a disqualified related party amount if such 

16 amount is subject to a participation exemption sys17 tem or other system which provides for the exclusion 

18 or deduction of a substantial portion of such amount, 

19 ‘‘(6) rules for determining the tax residence of a 

20 foreign entity if the entity is otherwise considered a 

21 resident of more than one country or of no country, 

22 ‘‘(7) exceptions from subsection (a) with respect 

23 to— 

24 ‘‘(A) cases in which the disqualified related 

25 party amount is taxed under the laws of a for-
423 

† HR 1 EAS 

1 eign country other than the country of which the 

2 related party is a resident for tax purposes, and 

3 ‘‘(B) other cases which the Secretary deter4 mines do not present a risk of eroding the Fed5 eral tax base, 

6 ‘‘(8) requirements for record keeping and infor7 mation reporting in addition to any requirements 

8 imposed by section 6038A.’’. 

9 (b) CONFORMING AMENDMENT.—The table of sections 

10 for part IX of subchapter B of chapter 1 is amended by 

11 inserting after the item relating to section 267 the following 

12 new item: 

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

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

14 section shall apply to taxable years beginning after Decem15 ber 31, 2017. 

16 SEC. 14224. SHAREHOLDERS OF SURROGATE FOREIGN COR17 PORATIONS NOT ELIGIBLE FOR REDUCED 

18 RATE ON DIVIDENDS. 

19 (a) IN GENERAL.—Section 1(h)(11)(C)(iii) is amend20 ed— 

21 (1) by striking ‘‘shall not include any foreign 

22 corporation’’ and inserting ‘‘shall not include— 

23 ‘‘(I) any foreign corporation’’, 
424 

† HR 1 EAS 

1 (2) by striking the period at the end and insert2 ing ‘‘, and’’, and 

3 (3) by adding at the end the following new sub4 clause: 

5 ‘‘(II) any corporation which is a 

6 surrogate foreign corporation (as de7 fined in section 7874(a)(2)(B)) other 

8 than a foreign corporation which is 

9 treated as a domestic corporation 

10 under section 7874(b).’’. 

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

12 section shall apply to dividends paid in taxable years begin13 ning after December 31, 2017. 

14 Subpart C—Modifications Related to Foreign Tax 

15 Credit System 

16 SEC. 14301. REPEAL OF SECTION 902 INDIRECT FOREIGN 

17 TAX CREDITS; DETERMINATION OF SECTION 

18 960 CREDIT ON CURRENT YEAR BASIS. 

19 (a) REPEAL OF SECTION 902 INDIRECT FOREIGN TAX

20 CREDITS.—Subpart A of part III of subchapter N of chap21 ter 1 is amended by striking section 902. 

22 (b) DETERMINATION OF SECTION 960 CREDIT ON CUR23 RENT YEAR BASIS.—Section 960, as amended by section 

24 14201, is amended— 
425 

† HR 1 EAS 

1 (1) by striking subsection (c), by redesignating 

2 subsection (b) as subsection (c), by striking all that 

3 precedes subsection (c) (as so redesignated) and in4 serting the following: 

5 ‘‘SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLU6 SIONS. 

7 ‘‘(a) IN GENERAL.—For purposes of this subpart, if 

8 there is included in the gross income of a domestic corpora9 tion any item of income under section 951(a)(1) with re10 spect to any controlled foreign corporation with respect to 

11 which such domestic corporation is a United States share12 holder, such domestic corporation shall be deemed to have 

13 paid so much of such foreign corporation’s foreign income 

14 taxes as are properly attributable to such item of income. 

15 ‘‘(b) SPECIAL RULES FOR DISTRIBUTIONS FROM PRE16 VIOUSLY TAXED EARNINGS AND PROFITS.—For purposes of 

17 this subpart— 

18 ‘‘(1) IN GENERAL.—If any portion of a distribu19 tion from a controlled foreign corporation to a domes20 tic corporation which is a United States shareholder 

21 with respect to such controlled foreign corporation is 

22 excluded from gross income under section 959(a), such 

23 domestic corporation shall be deemed to have paid so 

24 much of such foreign corporation’s foreign income 

25 taxes as— 
426 

† HR 1 EAS 

1 ‘‘(A) are properly attributable to such por2 tion, and 

3 ‘‘(B) have not been deemed to have to been 

4 paid by such domestic corporation under this 

5 section for the taxable year or any prior taxable 

6 year. 

7 ‘‘(2) TIERED CONTROLLED FOREIGN CORPORA8 TIONS.—If section 959(b) applies to any portion of a 

9 distribution from a controlled foreign corporation to 

10 another controlled foreign corporation, such controlled 

11 foreign corporation shall be deemed to have paid so 

12 much of such other controlled foreign corporation’s 

13 foreign income taxes as— 

14 ‘‘(A) are properly attributable to such por15 tion, and 

16 ‘‘(B) have not been deemed to have been 

17 paid by a domestic corporation under this sec18 tion for any prior taxable year.’’, 

19 (2) and by adding after subsection (d) (as added 

20 by section 14201) the following new subsections: 

21 ‘‘(e) FOREIGN INCOME TAXES.—The term ‘foreign in22 come taxes’ means any income, war profits, or excess profits 

23 taxes paid or accrued to any foreign country or possession 

24 of the United States. 
427 

† HR 1 EAS 

1 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

2 such regulations or other guidance as may be necessary or 

3 appropriate to carry out the provisions of this section.’’. 

4 (c) CONFORMING AMENDMENTS.— 

5 (1) Section 78 is amended to read as follows: 

6 ‘‘SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX CRED7 IT. 

8 ‘‘If a domestic corporation chooses to have the benefits 

9 of subpart A of part III of subchapter N (relating to foreign 

10 tax credit) for any taxable year— 

11 ‘‘(1) an amount equal to the taxes deemed to be 

12 paid by such corporation under subsections (a) and 

13 (b) of section 960 for such taxable year shall be treat14 ed for purposes of this title (other than section 960) 

15 as an item of income required to be included in the 

16 gross income of such domestic corporation under sec17 tion 951(a), and 

18 ‘‘(2) an amount equal to the aggregate tested for19 eign income taxes deemed paid by such corporation 

20 under section 960(d) (determined without regard to 

21 the phrase ‘80 percent of’ in paragraph (1) thereof) 

22 shall be treated for purposes of this title (other than 

23 section 960) as an addition to the global intangible 

24 low-taxed income of such domestic corporation under 

25 section 951A(a) for such taxable year.’’. 
428 

† HR 1 EAS 

1 (2) Paragraph (4) of section 245(a) is amended 

2 to read as follows: 

3 ‘‘(4) POST-1986 UNDISTRIBUTED EARNINGS.—The 

4 term ‘post-1986 undistributed earnings’ means the 

5 amount of the earnings and profits of the foreign cor6 poration (computed in accordance with sections 

7 964(a) and 986) accumulated in taxable years begin8 ning after December 31, 1986— 

9 ‘‘(A) as of the close of the taxable year of the 

10 foreign corporation in which the dividend is dis11 tributed, and 

12 ‘‘(B) without diminution by reason of divi13 dends distributed during such taxable year.’’. 

14 (3) Section 245(a)(10)(C) is amended by striking 

15 ‘‘902, 907, and 960’’ and inserting ‘‘907 and 960’’. 

16 (4) Sections 535(b)(1) and 545(b)(1) are each 

17 amended by striking ‘‘section 902(a) or 960(a)(1)’’ 

18 and inserting ‘‘section 960’’. 

19 (5) Section 814(f)(1) is amended— 

20 (A) by striking subparagraph (B), and 

21 (B) by striking all that precedes ‘‘No in22 come’’ and inserting the following: 

23 ‘‘(1) TREATMENT OF FOREIGN TAXES.—’’. 

24 (6) Section 865(h)(1)(B) is amended by striking 

25 ‘‘902, 907,’’ and inserting ‘‘907’’. 
429 

† HR 1 EAS 

1 (7) Section 901(a) is amended by striking ‘‘sec2 tions 902 and 960’’ and inserting ‘‘section 960’’. 

3 (8) Section 901(e)(2) is amended by striking 

4 ‘‘but is not limited to—’’ and all that follows through 

5 ‘‘that portion’’ and inserting ‘‘but is not limited to 

6 that portion’’. 

7 (9) Section 901(f) is amended by striking ‘‘sec8 tions 902 and 960’’ and inserting ‘‘section 960’’. 

9 (10) Section 901(j)(1)(A) is amended by striking 

10 ‘‘902 or’’. 

11 (11) Section 901(j)(1)(B) is amended by striking 

12 ‘‘sections 902 and 960’’ and inserting ‘‘section 960’’. 

13 (12) Section 901(k)(2) is amended by striking ‘‘, 

14 902,’’. 

15 (13) Section 901(k)(6) is amended by striking 

16 ‘‘902 or’’. 

17 (14) 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 (15) Section 904(d)(6)(A) is amended by striking 

23 ‘‘902, 907,’’ and inserting ‘‘907’’. 
430 

† HR 1 EAS 

1 (16) Section 904(h)(10)(A) is amended by strik2 ing ‘‘sections 902, 907, and 960’’ and inserting ‘‘sec3 tions 907 and 960’’. 

4 (17) Section 904(k) is amended to read as fol5 lows: 

6 ‘‘(k) CROSS REFERENCES.—For increase of limitation 

7 under subsection (a) for taxes paid with respect to amounts 

8 received which were included in the gross income of the tax9 payer for a prior taxable year as a United States share10 holder with respect to a controlled foreign corporation, see 

11 section 960(c).’’. 

12 (18) Section 905(c)(1) is amended by striking 

13 the last sentence. 

14 (19) Section 905(c)(2)(B)(i) is amended to read 

15 as follows: 

16 ‘‘(i) shall be taken into account for the 

17 taxable year to which such taxes relate, 

18 and’’. 

19 (20) Section 906(a) is amended by striking ‘‘(or 

20 deemed, under section 902, paid or accrued during 

21 the taxable year)’’. 

22 (21) Section 906(b) is amended by striking para23 graphs (4) and (5). 

24 (22) Section 907(b)(2)(B) is amended by striking 

25 ‘‘902 or’’. 
431 

† HR 1 EAS 

1 (23) Section 907(c)(3) is amended— 

2 (A) by striking subparagraph (A) and re3 designating subparagraphs (B) and (C) as sub4 paragraphs (A) and (B), respectively, and 

5 (B) by striking ‘‘section 960(a)’’ in sub6 paragraph (A) (as so redesignated) and inserting 

7 ‘‘section 960’’. 

8 (24) Section 907(c)(5) is amended by striking 

9 ‘‘902 or’’. 

10 (25) Section 907(f)(2)(B)(i) is amended by strik11 ing ‘‘902 or’’. 

12 (26) Section 908(a) is amended by striking ‘‘902 

13 or’’. 

14 (27) Section 909(b) is amended— 

15 (A) by striking ‘‘section 902 corporation’’ in 

16 the matter preceding paragraph (1) and insert17 ing ‘‘specified 10-percent owned foreign corpora18 tion (as defined in section 245A(b))’’, 

19 (B) by striking ‘‘902 or’’ in paragraph (1), 

20 (C) by striking ‘‘by such section 902 cor21 poration’’ and all that follows in the matter fol22 lowing paragraph (2) and inserting ‘‘by such 

23 specified 10-percent owned foreign corporation or 

24 a domestic corporation which is a United States 
432 

† HR 1 EAS 

1 shareholder with respect to such specified 10-per2 cent owned foreign corporation.’’, and 

3 (D) by striking ‘‘SECTION 902 CORPORA4 TIONS’’ in the heading thereof and inserting 

5 ‘‘SPECIFIED 10-PERCENT OWNED FOREIGN COR6 PORATIONS’’. 

7 (28) Section 909(d) is amended by striking 

8 paragraph (5). 

9 (29) Section 958(a)(1) is amended by striking 

10 ‘‘960(a)(1)’’ and inserting ‘‘960’’. 

11 (30) Section 959(d) is amended by striking ‘‘Ex12 cept as provided in section 960(a)(3), any’’ and in13 serting ‘‘Any’’. 

14 (31) Section 959(e) is amended by striking ‘‘sec15 tion 960(b)’’ and inserting ‘‘section 960(c)’’. 

16 (32) Section 1291(g)(2)(A) is amended by strik17 ing ‘‘any distribution—’’ and all that follows through 

18 ‘‘but only if’’ and inserting ‘‘any distribution, any 

19 withholding tax imposed with respect to such dis20 tribution, but only if’’. 

21 (33) Section 6038(c)(1)(B) is amended by strik22 ing ‘‘sections 902 (relating to foreign tax credit for 

23 corporate stockholder in foreign corporation) and 960 

24 (relating to special rules for foreign tax credit)’’ and 

25 inserting ‘‘section 960’’. 
433 

† HR 1 EAS 

1 (34) Section 6038(c)(4) is amended by striking 

2 subparagraph (C). 

3 (35) The table of sections for subpart A of part 

4 III of subchapter N of chapter 1 is amended by strik5 ing the item relating to section 902. 

6 (36) The table of sections for subpart F of part 

7 III of subchapter N of chapter 1 is amended by strik8 ing the item relating to section 960 and inserting the 

9 following: 

‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’. 

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

11 section shall apply to taxable years of foreign corporations 

12 beginning after December 31, 2017, and to taxable years 

13 of United States shareholders in which or with which such 

14 taxable years of foreign corporations end. 

15 SEC. 14302. SEPARATE FOREIGN TAX CREDIT LIMITATION 

16 BASKET FOR FOREIGN BRANCH INCOME. 

17 (a) IN GENERAL.—Section 904(d)(1), as amended by 

18 section 14201, is amended by redesignating subparagraphs 

19 (B) and (C) as subparagraphs (C) and (D), respectively, 

20 and by inserting after subparagraph (A) the following new 

21 subparagraph: 

22 ‘‘(B) foreign branch income,’’. 

23 (b) FOREIGN BRANCH INCOME.— 
434 

† HR 1 EAS 

1 (1) IN GENERAL.—Section 904(d)(2) is amended 

2 by inserting after subparagraph (I) the following new 

3 subparagraph: 

4 ‘‘(J) FOREIGN BRANCH INCOME.— 

5 ‘‘(i) IN GENERAL.—The term ‘foreign 

6 branch income’ means the business profits of 

7 such United States person which are attrib8 utable to 1 or more qualified business units 

9 (as defined in section 989(a)) in 1 or more 

10 foreign countries. For purposes of the pre11 ceding sentence, the amount of business 

12 profits attributable to a qualified business 

13 unit shall be determined under rules estab14 lished by the Secretary. 

15 ‘‘(ii) EXCEPTION.—Such term shall not 

16 include any income which is passive cat17 egory income.’’. 

18 (2) CONFORMING AMENDMENT.—Section 

19 904(d)(2)(A)(ii), as amended by section 14201, is 

20 amended by striking ‘‘income described in paragraph 

21 (1)(A) and’’ and inserting ‘‘income described in para22 graph (1)(A), foreign branch income, and’’. 

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

24 section shall apply to taxable years beginning after Decem25 ber 31, 2017. 
435 

† HR 1 EAS 

1 SEC. 14303. ACCELERATION OF ELECTION TO ALLOCATE IN2 TEREST, ETC., ON A WORLDWIDE BASIS. 

3 (a) IN GENERAL.—Section 864(f)(6) is amended by 

4 striking ‘‘December 31, 2020’’ and inserting ‘‘December 31, 

5 2017’’. 

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

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

9 SEC. 14304. SOURCE OF INCOME FROM SALES OF INVEN10 TORY DETERMINED SOLELY ON BASIS OF 

11 PRODUCTION ACTIVITIES. 

12 (a) IN GENERAL.—Section 863(b) is amended by add13 ing at the end the following: ‘‘Gains, profits, and income 

14 from the sale or exchange of inventory property described 

15 in paragraph (2) shall be allocated and apportioned be16 tween sources within and without the United States solely 

17 on the basis of the production activities with respect to the 

18 property.’’. 

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

20 section shall apply to taxable years beginning after Decem21 ber 31, 2017. 
436 

† HR 1 EAS 

1 SEC. 14305. ELECTION TO INCREASE PERCENTAGE OF DO2 MESTIC TAXABLE INCOME OFFSET BY OVER3 ALL DOMESTIC LOSS TREATED AS FOREIGN 

4 SOURCE. 

5 (a) IN GENERAL.—Section 904(g) is amended by add6 ing at the end the following new paragraph: 

7 ‘‘(5) ELECTION TO INCREASE PERCENTAGE OF

8 TAXABLE INCOME TREATED AS FOREIGN SOURCE.— 

9 ‘‘(A) IN GENERAL.—If any pre-2018 unused 

10 overall domestic loss is taken into account under 

11 paragraph (1) for any applicable taxable year, 

12 the taxpayer may elect to have such paragraph 

13 applied to such loss by substituting a percentage 

14 greater than 50 percent (but not greater than 

15 100 percent) for 50 percent in subparagraph (B) 

16 thereof. 

17 ‘‘(B) PRE-2018 UNUSED OVERALL DOMESTIC

18 LOSS.—For purposes of this paragraph, the term 

19 ‘pre-2018 unused overall domestic loss’ means 

20 any overall domestic loss which— 

21 ‘‘(i) arises in a qualified taxable year 

22 beginning before January 1, 2018, and 

23 ‘‘(ii) has not been used under para24 graph (1) for any taxable year beginning 

25 before such date. 
437 

† HR 1 EAS 

1 ‘‘(C) APPLICABLE TAXABLE YEAR.—For 

2 purposes of this paragraph, the term ‘applicable 

3 taxable year’ means any taxable year of the tax4 payer beginning after December 31, 2017, and 

5 before January 1, 2028.’’. 

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

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

9 PART II—INBOUND TRANSACTIONS 

10 SEC. 14401. BASE EROSION AND ANTI-ABUSE TAX. 

11 (a) IMPOSITION OF TAX.—Subchapter A of chapter 1 

12 is amended by adding at the end the following new part: 

13 ‘‘PART VII—BASE EROSION AND ANTI-ABUSE TAX 

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

14 ‘‘SEC. 59A. TAX ON BASE EROSION PAYMENTS OF TAX15 PAYERS WITH SUBSTANTIAL GROSS RE16 CEIPTS. 

17 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed on 

18 each applicable taxpayer for any taxable year a tax equal 

19 to the base erosion minimum tax amount for the taxable 

20 year. Such tax shall be in addition to any other tax imposed 

21 by this subtitle. 

22 ‘‘(b) BASE EROSION MINIMUM TAX AMOUNT.—For 

23 purposes of this section— 
438 

† HR 1 EAS 

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graphs (2) and (3), the term ‘base erosion minimum 

3 tax amount’ means, with respect to any applicable 

4 taxpayer for any taxable year, the excess (if any) of— 

5 ‘‘(A) an amount equal to 10 percent of the 

6 modified taxable income of such taxpayer for the 

7 taxable year, over 

8 ‘‘(B) an amount equal to the regular tax li9 ability (as defined in section 26(b)) of the tax10 payer for the taxable year, reduced (but not 

11 below zero) by the excess (if any) of— 

12 ‘‘(i) the credits allowed under this 

13 chapter against such regular tax liability, 

14 over 

15 ‘‘(ii) the credit allowed under section 

16 38 for the taxable year which is properly al17 locable to the research credit determined 

18 under section 41(a). 

19 ‘‘(2) MODIFICATIONS FOR TAXABLE YEARS BE20 GINNING AFTER 2025.—In the case of any taxable year 

21 beginning after December 31, 2025, paragraph (1) 

22 shall be applied— 

23 ‘‘(A) by substituting ‘12.5 percent’ for ‘10 

24 percent’ in subparagraph (A) thereof, and 
439 

† HR 1 EAS 

1 ‘‘(B) by reducing (but not below zero) the 

2 regular tax liability (as defined in section 26(b)) 

3 for purposes of subparagraph (B) thereof by the 

4 aggregate amount of the credits allowed under 

5 this chapter against such regular tax liability 

6 rather than the excess described in such subpara7 graph. 

8 ‘‘(3) INCREASED RATE FOR CERTAIN BANKS AND

9 SECURITIES DEALERS.— 

10 ‘‘(A) IN GENERAL.—In the case of an appli11 cable taxpayer described in subparagraph (B) for 

12 any taxable year— 

13 ‘‘(i) paragraphs (1)(A) and (2)(A) 

14 shall each be applied by substituting ‘11 

15 percent’ for ‘10 percent’, and 

16 ‘‘(ii) paragraph (2)(A) shall be applied 

17 by substituting ‘13.5 percent’ for ‘12.5 per18 cent’. 

19 ‘‘(B) TAXPAYER DESCRIBED.—An applica20 ble taxpayer is described in this subparagraph if 

21 such taxpayer is a member of an affiliated group 

22 (as defined in section 1504(a)(1)) which in23 cludes— 

24 ‘‘(i) a bank (as defined in section 581), 

25 or 
440 

† HR 1 EAS 

1 ‘‘(ii) a registered securities dealer 

2 under section 15(a) of the Securities Ex3 change Act of 1934. 

4 ‘‘(c) MODIFIED TAXABLE INCOME.—For purposes of 

5 this section— 

6 ‘‘(1) IN GENERAL.—The term ‘modified taxable 

7 income’ means the taxable income of the taxpayer 

8 computed under this chapter for the taxable year, de9 termined without regard to— 

10 ‘‘(A) any base erosion tax benefit with re11 spect to any base erosion payment, or 

12 ‘‘(B) the base erosion percentage of any net 

13 operating loss deduction allowed under section 

14 172 for the taxable year. 

15 ‘‘(2) BASE EROSION TAX BENEFIT.— 

16 ‘‘(A) IN GENERAL.—The term ‘base erosion 

17 tax benefit’ means— 

18 ‘‘(i) any deduction described in sub19 section (d)(1) which is allowed under this 

20 chapter for the taxable year with respect to 

21 any base erosion payment, 

22 ‘‘(ii) in the case of a base erosion pay23 ment described in subsection (d)(2), any de24 duction allowed under this chapter for the 

25 taxable year for depreciation (or amortiza-
441 

† HR 1 EAS 

1 tion in lieu of depreciation) with respect to 

2 the property acquired with such payment, 

3 and 

4 ‘‘(iii) in the case of a base erosion pay5 ment described in subsection (d)(3), any re6 duction in gross receipts with respect to 

7 such payment in computing gross income of 

8 the taxpayer for the taxable year for pur9 poses of this chapter. 

10 ‘‘(B) TAX BENEFITS DISREGARDED IF TAX

11 WITHHELD ON BASE EROSION PAYMENT.— 

12 ‘‘(i) IN GENERAL.—Except as provided 

13 in clause (ii), any base erosion tax benefit 

14 attributable to any base erosion payment— 

15 ‘‘(I) on which tax is imposed by 

16 section 871 or 881, and 

17 ‘‘(II) with respect to which tax 

18 has been deducted and withheld under 

19 section 1441 or 1442, 

20 shall not be taken into account in com21 puting modified taxable income under para22 graph (1)(A) or the base erosion percentage 

23 under paragraph (4). 

24 ‘‘(ii) EXCEPTION.—The amount not 

25 taken into account in computing modified 
442 

† HR 1 EAS 

1 taxable income by reason of clause (i) shall 

2 be reduced under rules similar to the rules 

3 under section 163(j)(5)(B) (as in effect be4 fore the date of the enactment of the Tax 

5 Cuts and Jobs Act). 

6 ‘‘(3) SPECIAL RULES FOR DETERMINING INTER7 EST FOR WHICH DEDUCTION ALLOWED.—For pur8 poses of applying paragraph (1), in the case of a tax9 payer to which subsection (j) or (n) of section 163 ap10 plies for the taxable year, the reduction in the amount 

11 of interest for which a deduction is allowed by reason 

12 of such subsection shall be treated as allocable first to 

13 interest paid or accrued to persons who are not re14 lated parties with respect to the taxpayer and then to 

15 such related parties. 

16 ‘‘(4) BASE EROSION PERCENTAGE.—For pur17 poses of paragraph (1)(B)— 

18 ‘‘(A) IN GENERAL.—The term ‘base erosion 

19 percentage’ means, for any taxable year, the per20 centage determined by dividing— 

21 ‘‘(i) the aggregate amount of base ero22 sion tax benefits of the taxpayer for the tax23 able year, by 
443 

† HR 1 EAS 

1 ‘‘(ii) the aggregate amount of the de2 ductions allowable to the taxpayer under 

3 this chapter for the taxable year. 

4 ‘‘(B) SPECIAL RULES.—The amount under 

5 subparagraph (A)(ii) shall be determined— 

6 ‘‘(i) by taking into account base ero7 sion tax benefits described in clauses (i) and 

8 (ii) of paragraph (2)(A), and 

9 ‘‘(ii) by not taking into account any 

10 deduction allowed under section 172, 245A, 

11 or 250 for the taxable year. 

12 ‘‘(d) BASE EROSION PAYMENT.—For purposes of this 

13 section— 

14 ‘‘(1) IN GENERAL.—The term ‘base erosion pay15 ment’ means any amount paid or accrued by the tax16 payer to a foreign person which is a related party of 

17 the taxpayer and with respect to which a deduction 

18 is allowable under this chapter. 

19 ‘‘(2) PURCHASE OF DEPRECIABLE PROPERTY.— 

20 Such term shall also include any amount paid or ac21 crued by the taxpayer to a foreign person which is a 

22 related party of the taxpayer in connection with the 

23 acquisition by the taxpayer from such person of prop24 erty of a character subject to the allowance of depre25 ciation (or amortization in lieu of depreciation). 
444 

† HR 1 EAS 

1 ‘‘(3) CERTAIN PAYMENTS TO EXPATRIATED ENTI2 TIES.— 

3 ‘‘(A) IN GENERAL.—Such term shall also 

4 include any amount paid or accrued by the tax5 payer with respect to a person described in sub6 paragraph (B) which results in a reduction of 

7 the gross receipts of the taxpayer. 

8 ‘‘(B) PERSON DESCRIBED.—A person is de9 scribed in this subparagraph if such person is 

10 a— 

11 ‘‘(i) surrogate foreign corporation 

12 which is a related party of the taxpayer, 

13 but only if such person first became a surro14 gate foreign corporation after November 9, 

15 2017, or 

16 ‘‘(ii) foreign person which is a member 

17 of the same expanded affiliated group as the 

18 surrogate foreign corporation. 

19 ‘‘(C) DEFINITIONS.—For purposes of this 

20 paragraph— 

21 ‘‘(i) SURROGATE FOREIGN CORPORA22 TION.—The term ‘surrogate foreign corpora23 tion’ has the meaning given such term by 

24 section 7874(a)(2) but does not include a 
445 

† HR 1 EAS 

1 foreign corporation treated as a domestic 

2 corporation under section 7874(b). 

3 ‘‘(ii) EXPANDED AFFILIATED GROUP.— 

4 The term ‘expanded affiliated group’ has the 

5 meaning given such term by section 

6 7874(c)(1). 

7 ‘‘(4) EXCEPTION FOR CERTAIN AMOUNTS WITH

8 RESPECT TO SERVICES.—Paragraph (1) shall not 

9 apply to any amount paid or accrued by a taxpayer 

10 for services if— 

11 ‘‘(A) such services are services which meet 

12 the requirements for eligibility for use of the 

13 services cost method under section 482 (deter14 mined without regard to the requirement that the 

15 services not contribute significantly to funda16 mental risks of business success or failure), and 

17 ‘‘(B) such amount constitutes the total serv18 ices cost with no markup. 

19 ‘‘(e) APPLICABLE TAXPAYER.—For purposes of this 

20 section— 

21 ‘‘(1) IN GENERAL.—The term ‘applicable tax22 payer’ means, with respect to any taxable year, a tax23 payer— 
446 

† HR 1 EAS 

1 ‘‘(A) which is a corporation other than a 

2 regulated investment company, a real estate in3 vestment trust, or an S corporation, 

4 ‘‘(B) the average annual gross receipts of 

5 which for the 3-taxable-year period ending with 

6 the preceding taxable year are at least 

7 $500,000,000, and 

8 ‘‘(C) the base erosion percentage (as deter9 mined under subsection (c)(4)) of which for the 

10 taxable year is 4 percent or higher. 

11 ‘‘(2) GROSS RECEIPTS.— 

12 ‘‘(A) SPECIAL RULE FOR FOREIGN PER13 SONS.—In the case of a foreign person the gross 

14 receipts of which are taken into account for pur15 poses of paragraph (1)(B), only gross receipts 

16 which are taken into account in determining in17 come which is effectively connected with the con18 duct of a trade or business within the United 

19 States shall be taken into account. In the case of 

20 a taxpayer which is a foreign person, the pre21 ceding sentence shall not apply to the gross re22 ceipts of any United States person which are ag23 gregated with the taxpayer’s gross receipts by 

24 reason of paragraph (3). 
447 

† HR 1 EAS 

1 ‘‘(B) OTHER RULES MADE APPLICABLE.— 

2 Rules similar to the rules of subparagraphs (B), 

3 (C), and (D) of section 448(c)(3) shall apply in 

4 determining gross receipts for purposes of this 

5 section. 

6 ‘‘(3) AGGREGATION RULES.—All persons treated 

7 as a single employer under subsection (a) of section 

8 52 shall be treated as 1 person for purposes of this 

9 subsection and subsection (c)(4), except that in apply10 ing section 1563 for purposes of section 52, the excep11 tion for foreign corporations under section 

12 1563(b)(2)(C) shall be disregarded. 

13 ‘‘(f) FOREIGN PERSON.—For purposes of this section, 

14 the term ‘foreign person’ has the meaning given such term 

15 by section 6038A(c)(3). 

16 ‘‘(g) RELATED PARTY.—For purposes of this section— 

17 ‘‘(1) IN GENERAL.—The term ‘related party’ 

18 means, with respect to any applicable taxpayer— 

19 ‘‘(A) any 25-percent owner of the taxpayer, 

20 ‘‘(B) any person who is related (within the 

21 meaning of section 267(b) or 707(b)(1)) to the 

22 taxpayer or any 25-percent owner of the tax23 payer, and 

24 ‘‘(C) any other person who is related (with25 in the meaning of section 482) to the taxpayer. 
448 

† HR 1 EAS 

1 ‘‘(2) 25-PERCENT OWNER.—The term ‘25-percent 

2 owner’ means, with respect to any corporation, any 

3 person who owns at least 25 percent of— 

4 ‘‘(A) the total voting power of all classes of 

5 stock of a corporation entitled to vote, or 

6 ‘‘(B) the total value of all classes of stock of 

7 such corporation. 

8 ‘‘(3) SECTION 318 TO APPLY.—Section 318 shall 

9 apply for purposes of paragraphs (1) and (2), except 

10 that— 

11 ‘‘(A) ‘10 percent’ shall be substituted for ‘50 

12 percent’ in section 318(a)(2)(C), and 

13 ‘‘(B) subparagraphs (A), (B), and (C) of 

14 section 318(a)(3) shall not be applied so as to 

15 consider a United States person as owning stock 

16 which is owned by a person who is not a United 

17 States person. 

18 ‘‘(h) EXCEPTION FOR CERTAIN PAYMENTS MADE IN

19 THE ORDINARY COURSE OF TRADE OR BUSINESS.—For 

20 purposes of this section— 

21 ‘‘(1) IN GENERAL.—Except as provided in para22 graph (3), any qualified derivative payment shall not 

23 be treated as a base erosion payment. 

24 ‘‘(2) QUALIFIED DERIVATIVE PAYMENT.— 
449 

† HR 1 EAS 

1 ‘‘(A) IN GENERAL.—The term ‘qualified de2 rivative payment’ means any payment made by 

3 a taxpayer pursuant to a derivative with respect 

4 to which the taxpayer— 

5 ‘‘(i) recognizes gain or loss as if such 

6 derivative were sold for its fair market 

7 value on the last business day of the taxable 

8 year (and such additional times as required 

9 by this title or the taxpayer’s method of ac10 counting), 

11 ‘‘(ii) treats any gain or loss so recog12 nized as ordinary, and 

13 ‘‘(iii) treats the character of all items 

14 of income, deduction, gain, or loss with re15 spect to a payment pursuant to the deriva16 tive as ordinary. 

17 ‘‘(B) REPORTING REQUIREMENT.—No pay18 ments shall be treated as qualified derivative 

19 payments under subparagraph (A) for any tax20 able year unless the taxpayer includes in the in21 formation required to be reported under section 

22 6038B(b)(2) with respect to such taxable year 

23 such information as is necessary to identify the 

24 payments to be so treated and such other infor-
450 

† HR 1 EAS 

1 mation as the Secretary determines necessary to 

2 carry out the provisions of this subsection. 

3 ‘‘(3) EXCEPTIONS FOR PAYMENTS OTHERWISE

4 TREATED AS BASE EROSION PAYMENTS.—This sub5 section shall not apply to any qualified derivative 

6 payment if— 

7 ‘‘(A) the payment would be treated as a 

8 base erosion payment if it were not made pursu9 ant to a derivative, including any interest, roy10 alty, or service payment, or 

11 ‘‘(B) in the case of a contract which has de12 rivative and nonderivative components, the pay13 ment is properly allocable to the nonderivative 

14 component. 

15 ‘‘(4) DERIVATIVE DEFINED.—For purposes of 

16 this subsection— 

17 ‘‘(A) IN GENERAL.—The term ‘derivative’ 

18 means any contract (including any option, for19 ward contract, futures contract, short position, 

20 swap, or similar contract) the value of which, or 

21 any payment or other transfer with respect to 

22 which, is (directly or indirectly) determined by 

23 reference to one or more of the following: 

24 ‘‘(i) Any share of stock in a corpora25 tion. 
451 

† HR 1 EAS 

1 ‘‘(ii) Any evidence of indebtedness. 

2 ‘‘(iii) Any commodity which is actively 

3 traded. 

4 ‘‘(iv) Any currency. 

5 ‘‘(v) Any rate, price, amount, index, 

6 formula, or algorithm. 

7 ‘‘(B) TREATMENT OF AMERICAN DEPOSI8 TORY RECEIPTS AND SIMILAR INSTRUMENTS.— 

9 Except as otherwise provided by the Secretary, 

10 for purposes of this part, American depository 

11 receipts (and similar instruments) with respect 

12 to shares of stock in foreign corporations shall be 

13 treated as shares of stock in such foreign cor14 porations. 

15 ‘‘(i) REGULATIONS.—The Secretary shall prescribe 

16 such regulations or other guidance as may be necessary or 

17 appropriate to carry out the provisions of this section, in18 cluding regulations— 

19 ‘‘(1) providing for such adjustments to the appli20 cation of this section as are necessary to prevent the 

21 avoidance of the purposes of this section, including 

22 through— 

23 ‘‘(A) the use of unrelated persons, conduit 

24 transactions, or other intermediaries, or 
452 

† HR 1 EAS 

1 ‘‘(B) transactions or arrangements designed, 

2 in whole or in part— 

3 ‘‘(i) to characterize payments otherwise 

4 subject to this section as payments not sub5 ject to this section, or 

6 ‘‘(ii) to substitute payments not subject 

7 to this section for payments otherwise sub8 ject to this section and 

9 ‘‘(2) for the application of subsection (g), includ10 ing rules to prevent the avoidance of the exceptions 

11 under subsection (g)(3).’’. 

12 (b) REPORTING REQUIREMENTS AND PENALTIES.— 

13 (1) IN GENERAL.—Subsection (b) of section 

14 6038A is amended to read as follows: 

15 ‘‘(b) REQUIRED INFORMATION.— 

16 ‘‘(1) IN GENERAL.—For purposes of subsection 

17 (a), the information described in this subsection is 

18 such information as the Secretary prescribes by regu19 lations relating to— 

20 ‘‘(A) the name, principal place of business, 

21 nature of business, and country or countries in 

22 which organized or resident, of each person 

23 which— 

24 ‘‘(i) is a related party to the reporting 

25 corporation, and 
453 

† HR 1 EAS 

1 ‘‘(ii) had any transaction with the re2 porting corporation during its taxable year, 

3 ‘‘(B) the manner in which the reporting 

4 corporation is related to each person referred to 

5 in subparagraph (A), and 

6 ‘‘(C) transactions between the reporting cor7 poration and each foreign person which is a re8 lated party to the reporting corporation. 

9 ‘‘(2) ADDITIONAL INFORMATION REGARDING

10 BASE EROSION PAYMENTS.—For purposes of sub11 section (a) and section 6038C, if the reporting cor12 poration or the foreign corporation to whom section 

13 6038C applies is an applicable taxpayer, the informa14 tion described in this subsection shall include— 

15 ‘‘(A) such information as the Secretary de16 termines necessary to determine the base erosion 

17 minimum tax amount, base erosion payments, 

18 and base erosion tax benefits of the taxpayer for 

19 purposes of section 59A for the taxable year, and 

20 ‘‘(B) such other information as the Sec21 retary determines necessary to carry out such 

22 section. 

23 For purposes of this paragraph, any term used in this 

24 paragraph which is also used in section 59A shall 
454 

† HR 1 EAS 

1 have the same meaning as when used in such sec2 tion.’’. 

3 (2) INCREASE IN PENALTY.—Paragraphs (1) and 

4 (2) of section 6038A(d) are each amended by striking 

5 ‘‘$10,000’’ and inserting ‘‘$25,000’’. 

6 (c) DISALLOWANCE OF CREDITS AGAINST BASE ERO7 SION TAX.—Paragraph (2) of section 26(b) is amended by 

8 inserting after subparagraph (A) the following new sub9 paragraph: 

10 ‘‘(B) section 59A (relating to base erosion 

11 and anti-abuse tax),’’. 

12 (d) CONFORMING AMENDMENTS.— 

13 (1) The table of parts for subchapter A of chapter 

14 1 is amended by adding after the item relating to 

15 part VI the following new item: 

‘‘Part VII. Base erosion and anti-abuse tax’’. 

16 (2) Paragraph (1) of section 882(a), as amended 

17 by this Act, is amended by inserting ‘‘ or 59A,’’ after 

18 ‘‘section 11,’’. 

19 (3) Subparagraph (A) of section 6425(c)(1), as 

20 amended by section 13001, is amended to read as fol21 lows: 

22 ‘‘(A) the sum of— 

23 ‘‘(i) the tax imposed by section 11, or 

24 subchapter L of chapter 1, whichever is ap25 plicable, plus 
455 

† HR 1 EAS 

1 ‘‘(ii) the tax imposed by section 59A, 

2 over’’. 

3 (4)(A) Subparagraph (A) of section 6655(g)(1), 

4 as amended by section 13001, is amended by striking 

5 ‘‘plus’’ at the end of clause (i), by redesignating 

6 clause (ii) as clause (iii), and by inserting after 

7 clause (i) the following new clause: 

8 ‘‘(ii) the tax imposed by section 59A, 

9 plus’’. 

10 (B) Subparagraphs (A)(i) and (B)(i) of section 

11 6655(e)(2), as amended by section 13001, are each 

12 amended by inserting ‘‘and modified taxable income’’ 

13 after ‘‘taxable income’’. 

14 (C) Subparagraph (B) of section 6655(e)(2) is 

15 amended by adding at the end the following new 

16 clause: 

17 ‘‘(iii) MODIFIED TAXABLE INCOME.— 

18 The term ‘modified taxable income’ has the 

19 meaning given such term by section 

20 59A(c)(1).’’. 

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

22 section shall apply to base erosion payments (as defined in 

23 section 59A(d) of the Internal Revenue Code of 1986, as 

24 added by this section) paid or accrued in taxable years be25 ginning after December 31, 2017. 
456 

† HR 1 EAS 

1 PART III—OTHER PROVISIONS 

2 SEC. 14501. RESTRICTION ON INSURANCE BUSINESS EXCEP3 TION TO PASSIVE FOREIGN INVESTMENT 

4 COMPANY RULES. 

5 (a) IN GENERAL.—Section 1297(b)(2)(B) is amended 

6 to read as follows: 

7 ‘‘(B) derived in the active conduct of an in8 surance business by a qualifying insurance cor9 poration (as defined in subsection (f)),’’. 

10 (b) QUALIFYING INSURANCE CORPORATION DE11 FINED.—Section 1297 is amended by adding at the end the 

12 following new subsection: 

13 ‘‘(f) QUALIFYING INSURANCE CORPORATION.—For 

14 purposes of subsection (b)(2)(B)— 

15 ‘‘(1) IN GENERAL.—The term ‘qualifying insur16 ance corporation’ means, with respect to any taxable 

17 year, a foreign corporation— 

18 ‘‘(A) which would be subject to tax under 

19 subchapter L if such corporation were a domestic 

20 corporation, and 

21 ‘‘(B) the applicable insurance liabilities of 

22 which constitute more than 25 percent of its 

23 total assets, determined on the basis of such li24 abilities and assets as reported on the corpora25 tion’s applicable financial statement for the last 

26 year ending with or within the taxable year. 
457 

† HR 1 EAS 

1 ‘‘(2) ALTERNATIVE FACTS AND CIRCUMSTANCES

2 TEST FOR CERTAIN CORPORATIONS.—If a corporation 

3 fails to qualify as a qualified insurance corporation 

4 under paragraph (1) solely because the percentage de5 termined under paragraph (1)(B) is 25 percent or 

6 less, a United States person that owns stock in such 

7 corporation may elect to treat such stock as stock of 

8 a qualifying insurance corporation if— 

9 ‘‘(A) the percentage so determined for the 

10 corporation is at least 10 percent, and 

11 ‘‘(B) under regulations provided by the Sec12 retary, based on the applicable facts and cir13 cumstances— 

14 ‘‘(i) the corporation is predominantly 

15 engaged in an insurance business, and 

16 ‘‘(ii) such failure is due solely to run17 off-related or rating-related circumstances 

18 involving such insurance business. 

19 ‘‘(3) APPLICABLE INSURANCE LIABILITIES.—For 

20 purposes of this subsection— 

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

22 insurance liabilities’ means, with respect to any 

23 life or property and casualty insurance busi24 ness— 
458 

† HR 1 EAS 

1 ‘‘(i) loss and loss adjustment expenses, 

2 and 

3 ‘‘(ii) reserves (other than deficiency, 

4 contingency, or unearned premium reserves) 

5 for life and health insurance risks and life 

6 and health insurance claims with respect to 

7 contracts providing coverage for mortality 

8 or morbidity risks. 

9 ‘‘(B) LIMITATIONS ON AMOUNT OF LIABIL10 ITIES.—Any amount determined under clause (i) 

11 or (ii) of subparagraph (A) shall not exceed the 

12 lesser of such amount— 

13 ‘‘(i) as reported to the applicable in14 surance regulatory body in the applicable 

15 financial statement described in paragraph 

16 (4)(A) (or, if less, the amount required by 

17 applicable law or regulation), or 

18 ‘‘(ii) as determined under regulations 

19 prescribed by the Secretary. 

20 ‘‘(4) OTHER DEFINITIONS AND RULES.—For 

21 purposes of this subsection— 

22 ‘‘(A) APPLICABLE FINANCIAL STATEMENT.— 

23 The term ‘applicable financial statement’ means 

24 a statement for financial reporting purposes 

25 which— 
459 

† HR 1 EAS 

1 ‘‘(i) is made on the basis of generally 

2 accepted accounting principles, 

3 ‘‘(ii) is made on the basis of inter4 national financial reporting standards, but 

5 only if there is no statement that meets the 

6 requirement of clause (i), or 

7 ‘‘(iii) except as otherwise provided by 

8 the Secretary in regulations, is the annual 

9 statement which is required to be filed with 

10 the applicable insurance regulatory body, 

11 but only if there is no statement which 

12 meets the requirements of clause (i) or (ii). 

13 ‘‘(B) APPLICABLE INSURANCE REGULATORY

14 BODY.—The term ‘applicable insurance regu15 latory body’ means, with respect to any insur16 ance business, the entity established by law to li17 cense, authorize, or regulate such business and to 

18 which the statement described in subparagraph 

19 (A) is provided.’’. 

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

21 section shall apply to taxable years beginning after Decem22 ber 31, 2017. 
460 

† HR 1 EAS 

1 SEC. 14502. REPEAL OF FAIR MARKET VALUE METHOD OF 

2 INTEREST EXPENSE APPORTIONMENT. 

3 (a) IN GENERAL.—Paragraph (2) of section 864(e) is 

4 amended to read as follows: 

5 ‘‘(2) GROSS INCOME AND FAIR MARKET VALUE

6 METHODS MAY NOT BE USED FOR INTEREST.—All al7 locations and apportionments of interest expense shall 

8 be determined using the adjusted bases of assets rather 

9 than on the basis of the fair market value of the assets 

10 or gross income.’’. 

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

12 section shall apply to taxable years beginning after Decem13 ber 31, 2017. 

14 SEC. 14503. MODIFICATION TO SOURCE RULES INVOLVING 

15 POSSESSIONS. 

16 (a) IN GENERAL.—Subsection (b)(2) of Section 937 of 

17 the Internal Revenue Code of 1986 is amended by inserting 

18 ‘‘, but only to the extent such income is attributable to an 

19 office or fixed place of business within the United States 

20 (determined under the rules of Section 864(c)(5))’’ before 

21 the period at the end. 

22 (b) SOURCE RULES FOR PERSONAL PROPERTY

23 SALES.—Subsection (j)(3) of section 865 of the Internal 

24 Revenue Code of 1986 is amended by inserting ‘‘932,’’ after 

25 ‘‘931,’’. 
461 

† HR 1 EAS 

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

2 section shall apply to taxable years beginning after Decem3 ber 31, 2018. 

4 TITLE II 

5 SEC. 20001. OIL AND GAS PROGRAM. 

6 (a) DEFINITIONS.—In this section: 

7 (1) COASTAL PLAIN.—The term ‘‘Coastal Plain’’ 

8 means the area identified as the 1002 Area on the 

9 plates prepared by the United States Geological Sur10 vey entitled ‘‘ANWR Map – Plate 1’’ and ‘‘ANWR 

11 Map – Plate 2’’, dated October 24, 2017, and on file 

12 with the United States Geological Survey and the Of13 fice of the Solicitor of the Department of the Interior. 

14 (2) SECRETARY.—The term ‘‘Secretary’’ means 

15 the Secretary of the Interior, acting through the Bu16 reau of Land Management. 

17 (b) OIL AND GAS PROGRAM.— 

18 (1) IN GENERAL.—Section 1003 of the Alaska 

19 National Interest Lands Conservation Act (16 U.S.C. 

20 3143) shall not apply to the Coastal Plain. 

21 (2) ESTABLISHMENT.— 

22 (A) IN GENERAL.—The Secretary shall es23 tablish and administer a competitive oil and gas 

24 program for the leasing, development, produc-
462 

† HR 1 EAS 

1 tion, and transportation of oil and gas in and 

2 from the Coastal Plain. 

3 (B) PURPOSES.—Section 303(2)(B) of the 

4 Alaska National Interest Lands Conservation Act 

5 (Public Law 96–487; 94 Stat. 2390) is amend6 ed— 

7 (i) in clause (iii), by striking ‘‘and’’ at 

8 the end; 

9 (ii) in clause (iv), by striking the pe10 riod at the end and inserting ‘‘; and’’; and 

11 (iii) by adding at the end the fol12 lowing: 

13 ‘‘(v) to provide for an oil and gas pro14 gram on the Coastal Plain.’’. 

15 (3) MANAGEMENT.—Except as otherwise pro16 vided in this section, the Secretary shall manage the 

17 oil and gas program on the Coastal Plain in a man18 ner similar to the administration of lease sales under 

19 the Naval Petroleum Reserves Production Act of 1976 

20 (42 U.S.C. 6501 et seq.) (including regulations). 

21 (4) ROYALTIES.—Notwithstanding the Mineral 

22 Leasing Act (30 U.S.C. 181 et seq.), the royalty rate 

23 for leases issued pursuant to this section shall be 

24 16.67 percent. 
463 

† HR 1 EAS 

1 (5) RECEIPTS.—Notwithstanding the Mineral 

2 Leasing Act (30 U.S.C. 181 et seq.), of the amount of 

3 adjusted bonus, rental, and royalty receipts derived 

4 from the oil and gas program and operations on Fed5 eral land authorized under this section— 

6 (A) 50 percent shall be paid to the State of 

7 Alaska; and 

8 (B) the balance shall be deposited into the 

9 Treasury as miscellaneous receipts. 

10 (c) 2 LEASE SALES WITHIN 10 YEARS.— 

11 (1) REQUIREMENT.— 

12 (A) IN GENERAL.—Subject to subparagraph 

13 (B), the Secretary shall conduct not fewer than 

14 2 lease sales area-wide under the oil and gas 

15 program under this section by not later than 10 

16 years after the date of enactment of this Act. 

17 (B) SALE ACREAGES; SCHEDULE.— 

18 (i) ACREAGES.—The Secretary shall 

19 offer for lease under the oil and gas pro20 gram under this section— 

21 (I) not fewer than 400,000 acres 

22 area-wide in each lease sale; and 

23 (II) those areas that have the 

24 highest potential for the discovery of 

25 hydrocarbons. 
464 

† HR 1 EAS 

1 (ii) SCHEDULE.—The Secretary shall 

2 offer— 

3 (I) the initial lease sale under the 

4 oil and gas program under this section 

5 not later than 4 years after the date of 

6 enactment of this Act; and 

7 (II) a second lease sale under the 

8 oil and gas program under this section 

9 not later than 7 years after the date of 

10 enactment of this Act. 

11 (2) RIGHTS-OF-WAY.—The Secretary shall issue 

12 any rights-of-way or easements across the Coastal 

13 Plain for the exploration, development, production, or 

14 transportation necessary to carry out this section. 

15 (3) SURFACE DEVELOPMENT.—In administering 

16 this section, the Secretary shall authorize up to 2,000 

17 surface acres of Federal land on the Coastal Plain to 

18 be covered by production and support facilities (in19 cluding airstrips and any area covered by gravel 

20 berms or piers for support of pipelines) during the 

21 term of the leases under the oil and gas program 

22 under this section. 
465 

† HR 1 EAS 

1 SEC. 20002. LIMITATIONS ON AMOUNT OF DISTRIBUTED 

2 QUALIFIED OUTER CONTINENTAL SHELF 

3 REVENUES. 

4 Section 105(f)(1) of the Gulf of Mexico Energy Secu5 rity Act of 2006 (43 U.S.C. 1331 note; Public Law 109– 

6 432) is amended by striking ‘‘exceed $500,000,000 for each 

7 of fiscal years 2016 through 2055.’’ and inserting the fol8 lowing: ‘‘exceed— 

9 ‘‘(A) $500,000,000 for each of fiscal years 

10 2016 through 2019; 

11 ‘‘(B) $650,000,000 for each of fiscal years 

12 2020 and 2021; and 

13 ‘‘(C) $500,000,000 for each of fiscal years 

14 2022 through 2055.’’. 

15 SEC. 20003. STRATEGIC PETROLEUM RESERVE DRAWDOWN 

16 AND SALE. 

17 (a) DRAWDOWN AND SALE.— 

18 (1) IN GENERAL.—Notwithstanding section 161 

19 of the Energy Policy and Conservation Act (42 U.S.C. 

20 6241), except as provided in subsections (b) and (c), 

21 the Secretary of Energy shall draw down and sell 

22 from the Strategic Petroleum Reserve 7,000,000 bar23 rels of crude oil during the period of fiscal years 2026 

24 through 2027. 

25 (2) DEPOSIT OF AMOUNTS RECEIVED FROM

26 SALE.—Amounts received from a sale under para-
466 

† HR 1 EAS 

1 graph (1) shall be deposited in the general fund of the 

2 Treasury during the fiscal year in which the sale oc3 curs. 

4 (b) EMERGENCY PROTECTION.—The Secretary of En5 ergy shall not draw down and sell crude oil under sub6 section (a) in a quantity that would limit the authority 

7 to sell petroleum products under subsection (h) of section 

8 161 of the Energy Policy and Conservation Act (42 U.S.C. 

9 6241) in the full quantity authorized by that subsection. 

10 (c) LIMITATION.—The Secretary of Energy shall not 

11 drawdown or conduct sales of crude oil under subsection 

12 (a) after the date on which a total of $600,000,000 has been 

13 deposited in the general fund of the Treasury from sales 

14 authorized under that subsection. 

Attest: 

Secretary. 

115TH CONGRESS 

1ST SESSION H.R. 1 

AMENDMENT