II 

Calendar No. 266 

115TH CONGRESS 

1ST SESSION H. R. 1 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 27, 2017 

Received; read the first time 

NOVEMBER 28, 2017 

Read the second time and placed on the calendar 

AN ACT 

To provide for reconciliation pursuant to titles II and V 

of the concurrent resolution on the budget for fiscal 

year 2018. 

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

3 SECTION 1. SHORT TITLE; ETC. 

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

5 ‘‘Tax Cuts and Jobs Act’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 

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


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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

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

4 this Act is as follows: 

Sec. 1. Short title; etc. 

TITLE I—TAX REFORM FOR INDIVIDUALS 

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

Exemptions 

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

Sec. 1002. Enhancement of standard deduction. 

Sec. 1003. Repeal of deduction for personal exemptions. 

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

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

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

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

Sec. 1102. Repeal of nonrefundable credits. 

Sec. 1103. Refundable credit program integrity. 

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

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

credit. 

Subtitle C—Simplification and Reform of Education Incentives 

Sec. 1201. American opportunity tax credit. 

Sec. 1202. Consolidation of education savings rules. 

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

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

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

programs. 

Subtitle D—Simplification and Reform of Deductions 

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

Sec. 1302. Mortgage interest. 

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

or business. 

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

Sec. 1305. Limitation on wagering losses. 

Sec. 1306. Charitable contributions. 

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

Sec. 1308. Repeal of medical expense deduction. 

Sec. 1309. Repeal of deduction for alimony payments. 

Sec. 1310. Repeal of deduction for moving expenses. 

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

savings accounts. 


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

Subtitle E—Simplification and Reform of Exclusions and Taxable 

Compensation 

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

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

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

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

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

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

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

Sec. 1501. Repeal of special rule permitting recharacterization of Roth IRA 

contributions as traditional IRA contributions. 

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

Sec. 1503. Modification of rules governing hardship distributions. 

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

deferred arrangements. 

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

in certain cases. 

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

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

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

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

TITLE II—ALTERNATIVE MINIMUM TAX REPEAL 

Sec. 2001. Repeal of alternative minimum tax. 

TITLE III—BUSINESS TAX REFORM 

Subtitle A—Tax Rates 

Sec. 3001. Reduction in corporate tax rate. 

Subtitle B—Cost Recovery 

Sec. 3101. Increased expensing. 

Subtitle C—Small Business Reforms 

Sec. 3201. Expansion of section 179 expensing. 

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

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

interest. 

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

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

Sec. 3301. Interest. 

Sec. 3302. Modification of net operating loss deduction. 


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

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

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

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

activities. 

Sec. 3307. Entertainment, etc. expenses. 

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

fringe benefit expenses for which deduction is disallowed. 

Sec. 3309. Limitation on deduction for FDIC premiums. 

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

small business investment companies. 

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

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

Sec. 3313. Repeal of technical termination of partnerships. 

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

interests held in connection with performance of investment 

services. 

Sec. 3315. Amortization of research and experimental expenditures. 

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

Subtitle E—Reform of Business Credits 

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

rare diseases or conditions. 

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

Sec. 3403. Repeal of rehabilitation credit. 

Sec. 3404. Repeal of work opportunity tax credit. 

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

Sec. 3406. Termination of new markets tax credit. 

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

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

paid with respect to employee tips. 

Subtitle F—Energy Credits 

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

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

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

Sec. 3504. Repeal of enhanced oil recovery credit. 

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

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

facilities. 

Subtitle G—Bond Reforms 

Sec. 3601. Termination of private activity bonds. 

Sec. 3602. Repeal of advance refunding bonds. 

Sec. 3603. Repeal of tax credit bonds. 

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

Subtitle H—Insurance 

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

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

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


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Sec. 3704. Adjustment for change in computing reserves. 

Sec. 3705. Repeal of special rule for distributions to shareholders from pre1984 policyholders surplus account. 

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

companies. 

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

Sec. 3708. Repeal of special estimated tax payments. 

Subtitle I—Compensation 

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

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

Sec. 3803. Treatment of qualified equity grants. 

TITLE IV—TAXATION OF FOREIGN INCOME AND FOREIGN 

PERSONS 

Subtitle A—Establishment of Participation Exemption System for Taxation of 

Foreign Income 

Sec. 4001. Deduction for foreign-source portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations. 

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

States property. 

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

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

Subtitle B—Modifications Related to Foreign Tax Credit System 

Sec. 4101. Repeal of section 902 indirect foreign tax credits; determination of 

section 960 credit on current year basis. 

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

of production activities. 

Subtitle C—Modification of Subpart F Provisions 

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

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

subpart F income. 

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

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

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

controlled foreign corporation. 

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

30 days before subpart F inclusions apply. 

Subtitle D—Prevention of Base Erosion 

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

high returns. 


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

are members of an international financial reporting group. 

Sec. 4303. Excise tax on certain payments from domestic corporations to related foreign corporations; election to treat such payments as 

effectively connected income. 

Subtitle E—Provisions Related to Possessions of the United States 

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

to domestic production activities in Puerto Rico. 

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

taxes to Puerto Rico and the Virgin Islands. 

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

Subtitle F—Other International Reforms 

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

TITLE V—EXEMPT ORGANIZATIONS 

Subtitle A—Unrelated Business Income Tax 

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

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

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

Subtitle B—Excise Taxes 

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

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

art museum. 

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

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

independently-operated philanthropic business holdings. 

Subtitle C—Requirements for Organizations Exempt From Tax 

Sec. 5201. 501(c)(3) organizations permitted to make statements relating to 

political campaign in ordinary course of activities. 

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

organizations. 


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1 TITLE I—TAX REFORM FOR 

2 INDIVIDUALS 

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

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

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

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

10 (h) and inserting the following: 

11 ‘‘SEC. 1. TAX IMPOSED. 

12 ‘‘(a) IN GENERAL.—There is hereby imposed on the 

13 income of every individual a tax equal to the sum of— 

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

15 much of the taxable income as does not exceed the 

16 25-percent bracket threshold amount, 

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

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

20 the 35-percent bracket threshold amount, plus 

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

22 much of taxable income as exceeds the 35-percent 

23 bracket threshold amount but does not exceed the 

24 39.6 percent bracket threshold amount. 


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

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

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

6 ‘‘(1) 25-PERCENT BRACKET THRESHOLD

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

8 amount’ means— 

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

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

12 the head of a household (as defined in section 

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

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

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

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

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

19 $2,550. 

20 ‘‘(2) 35-PERCENT BRACKET THRESHOLD

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

22 amount’ means— 

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


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

3 of the amount in effect for the taxable year 

4 under subparagraph (A), and 

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

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

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

8 $9,150. 

9 ‘‘(3) 39.6-PERCENT BRACKET THRESHOLD

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

11 amount’ means— 

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

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

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

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

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

19 $12,500. 

20 ‘‘(c) INFLATION ADJUSTMENT.— 

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

22 year beginning after 2018, each dollar amount in 

23 subsections (b) and (e)(3) (other than any amount 

24 determined by reference to such a dollar amount) 

25 shall be increased by an amount equal to— 


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

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

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

6 (2)(A)(ii). 

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

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

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

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

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

16 calendar year, exceeds 

17 ‘‘(ii) the normalized CPI for calendar 

18 year 2016. 

19 ‘‘(B) SPECIAL RULE FOR ADJUSTMENTS

20 WITH A BASE YEAR AFTER 2016.—For purposes 

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

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


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

2 subsection, the normalized CPI for any calendar 

3 year is the product of— 

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

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

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

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

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

12 by 

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

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

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

17 means the Chained Consumer Price Index for 

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

20 Labor). The values of the Chained Consumer 

21 Price Index for All Urban Consumers taken 

22 into account for purposes of determining the 

23 cost-of-living adjustment for any calendar year 

24 under this subsection shall be the latest values 

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1 reau publishes the initial value of the Chained 

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

5 ‘‘(B) DETERMINATION FOR CALENDAR

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

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

8 the 12-month period ending on August 31 of 

9 such calendar year. 

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

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

12 Price Index’ means the last Consumer Price 

13 Index for All Urban Consumers published by 

14 the Department of Labor. For purposes of the 

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

17 with the Consumer Price Index for calendar 

18 year 1986 shall be used. 

19 ‘‘(B) DETERMINATION FOR CALENDAR

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

21 average of the Consumer Price Index as of the 

22 close of the 12-month period ending on August 

23 31 of such calendar year. 

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

25 UNEARNED INCOME.— 


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

2 whom this subsection applies for any taxable year— 

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

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

6 by the net unearned income of such child, and 

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

8 amount shall not be more than the sum of— 

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

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

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

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

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

15 amount shall not be more than the sum of— 

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

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

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

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

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

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

24 ‘‘(A) such child— 


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

2 the close of the taxable year, or 

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

4 close of the taxable year and is described 

5 in paragraph (3), 

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

7 the close of the taxable year, and 

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

9 for the taxable year. 

10 ‘‘(3) CERTAIN CHILDREN WHOSE EARNED IN11 COME DOES NOT EXCEED ONE-HALF OF INDI12 VIDUAL’S SUPPORT.—A child is described in this 

13 paragraph if— 

14 ‘‘(A) such child— 

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

16 the close of the taxable year, or 

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

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

19 age 24 before the close of the taxable year, 

20 and 

21 ‘‘(B) such child’s earned income (as de22 fined in section 911(d)(2)) for such taxable 

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

24 the individual’s support (within the meaning of 

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


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1 section 7706(f)(5) (without regard to subpara2 graph (A) thereof)) for such taxable year. 

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

4 of this subsection— 

5 ‘‘(A) IN GENERAL.—The term ‘net un6 earned income’ means the excess of— 

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

8 income for the taxable year which is not 

9 attributable to earned income (as defined 

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

11 ‘‘(ii) the sum of— 

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

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

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

17 ‘‘(II) The greater of the amount 

18 described in subclause (I) or, if the 

19 child itemizes his deductions for the 

20 taxable year, the amount of the 

21 itemized deductions allowed by this 

22 chapter for the taxable year which are 

23 directly connected with the production 

24 of the portion of adjusted gross in25 come referred to in clause (i). 


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1 ‘‘(B) LIMITATION BASED ON TAXABLE IN2 COME.—The amount of the net unearned in3 come for any taxable year shall not exceed the 

4 individual’s taxable income for such taxable 

5 year. 

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

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

8 by this section (determined without regard to this 

9 subsection) shall be increased by 6 percent of the ex10 cess (if any) of— 

11 ‘‘(A) adjusted gross income, over 

12 ‘‘(B) the applicable dollar amount. 

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

14 under paragraph (1) with respect to any taxpayer 

15 for any taxable year shall not exceed 27.6 percent of 

16 the lesser of— 

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

18 such taxable year, or 

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

20 amount in effect with respect to the taxpayer 

21 for such taxable year. 

22 ‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur23 poses of this subsection, the term ‘applicable dollar 

24 amount’ means— 


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1 ‘‘(A) in the case of a joint return or a sur2 viving spouse, $1,200,000, 

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

5 of the amount in effect for the taxable year 

6 under subparagraph (A), and 

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

8 $1,000,000. 

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

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

11 (b) APPLICATION OF CURRENT INCOME TAX BRACK12 ETS TO CAPITAL GAINS BRACKETS.— 

13 (1) IN GENERAL.— 

14 (A) 0-PERCENT CAPITAL GAINS BRACK15 ET.—Section 1(h)(1) is amended by striking 

16 ‘‘which would (without regard to this para17 graph) be taxed at a rate below 25 percent’’ in 

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

19 15-percent rate threshold’’. 

20 (B) 15-PERCENT CAPITAL GAINS BRACK21 ET.—Section 1(h)(1)(C)(ii)(I) is amended by 

22 striking ‘‘which would (without regard to this 

23 paragraph) be taxed at a rate below 39.6 per24 cent’’ and inserting ‘‘below the 20-percent rate 

25 threshold’’. 


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1 (2) RATE THRESHOLDS DEFINED.—Section 

2 1(h) is amended by adding at the end the following 

3 new paragraph: 

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

6 ‘‘(A) 15-PERCENT RATE THRESHOLD.— 

7 The 15-percent rate threshold shall be— 

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

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

10 in the case of a married individual filing a 

11 separate return), 

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

13 is the head of a household (as defined in 

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

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

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

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

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

20 $2,600. 

21 ‘‘(B) 20-PERCENT RATE THRESHOLD.— 

22 The 20-percent rate threshold shall be— 

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

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


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1 amount in the case of a married individual 

2 filing a separate return), 

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

4 is the head of a household (as defined in 

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

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

8 $425,800, and 

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

10 $12,700. 

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

12 case of any taxable year beginning after 2018, 

13 each of the dollar amounts in subparagraphs 

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

15 equal to— 

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

17 ‘‘(ii) the cost-of-living adjustment de18 termined under subsection (c)(2)(A) for 

19 the calendar year in which the taxable year 

20 begins, determined by substituting ‘cal21 endar year 2017’ for ‘calendar year 2016’ 

22 in clause (ii) thereof.’’. 

23 (c) APPLICATION OF SECTION 15.— 

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

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1 ing ‘‘by section 11 (or by reference to any such 

2 rates)’’. 

3 (2) CONFORMING AMENDMENTS.— 

4 (A) Section 15 is amended by striking sub5 sections (d) and (f) and by redesignating sub6 section (e) as subsection (d). 

7 (B) Section 15(d), as redesignated by sub8 paragraph (A), is amended by striking ‘‘section 

9 1 or 11(b)’’ and inserting ‘‘section 11(b)’’. 

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

11 ‘‘sections 15, 443, and 7851(a)(1)(A)’’ and in12 serting ‘‘sections 443 and 7851(a)(1)(A)’’. 

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

14 the Internal Revenue Code of 1986 shall not apply 

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

16 1 of such Code which occurs by reason of any 

17 amendment made by this Act (other than the 

18 amendments made by section 3001). 

19 (d) EFFECTIVE DATE.— 

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

21 this section shall apply to taxable years beginning 

22 after December 31, 2017. 

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

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

25 enactment of this Act. 


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1 SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION. 

2 (a) INCREASE IN STANDARD DEDUCTION.—Section 

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

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

5 subtitle— 

6 ‘‘(1) IN GENERAL.—Except as otherwise pro7 vided in this subsection, the term ‘standard deduc8 tion’ means— 

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

10 (or a surviving spouse (as defined in section 

11 2(a)), 

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

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

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

15 in section 2(b)), and 

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

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

18 any other case. 

19 ‘‘(2) LIMITATION ON STANDARD DEDUCTION IN

20 THE CASE OF CERTAIN DEPENDENTS.—In the case 

21 of an individual who is a dependent of another tax22 payer for a taxable year beginning in the calendar 

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

24 the standard deduction applicable to such individual 

25 for such individual’s taxable year shall not exceed 

26 the greater of— 


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1 ‘‘(A) $500, or 

2 ‘‘(B) the sum of $250 and such individ3 ual’s earned income (within the means of sec4 tion 32). 

5 ‘‘(3) CERTAIN INDIVIDUALS, ETC., NOT ELIGI6 BLE FOR STANDARD DEDUCTION.—In the case of— 

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

8 return where either spouse itemizes deductions, 

9 ‘‘(B) a nonresident alien individual, 

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

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

12 months on account of a change in his annual 

13 accounting period, or 

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

15 fund, or partnership, 

16 the standard deduction shall be zero. 

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

18 of this section, the term ‘unmarried individual’ 

19 means any individual who— 

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

21 taxable year (as determined by applying section 

22 7703), 

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

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


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1 ‘‘(C) is not a dependent of another tax2 payer for a taxable year beginning in the cal3 endar year in which the individual’s taxable 

4 year begins. 

5 ‘‘(5) INFLATION ADJUSTMENTS.— 

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

7 the case of any taxable year beginning after 

8 2019, the dollar amount in paragraph (1)(A) 

9 shall be 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(c)(2)(A) for the 

13 calendar year in which the taxable year be14 gins, determined by substituting ‘calendar 

15 year 2018’ for ‘calendar year 2016’ in 

16 clause (ii) thereof. 

17 ‘‘(B) LIMITATION AMOUNT IN CASE OF

18 CERTAIN DEPENDENTS.—In the case of any 

19 taxable year beginning after 2017, each of the 

20 dollar amounts in paragraph (2) shall be in21 creased by an amount equal to— 

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

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

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

25 1(c)(2)(A) for the calendar year in which 


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1 the taxable year begins determined by sub2 stituting ‘calendar year 1987’ for ‘calendar 

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

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

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

6 1(c)(2)(A) for the calendar year in which 

7 the taxable year begins determined by sub8 stituting ‘calendar year 1997’ for ‘calendar 

9 year 2016’ in clause (ii) thereof. 

10 If any increase determined under this paragraph is 

11 not a multiple of $100, such increase shall be round12 ed to the next lowest multiple of $100.’’. 

13 (b) CONFORMING AMENDMENTS.— 

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

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

16 the standard deduction’’. 

17 (2) Section 63 is amended by striking sub18 sections (f) and (g). 

19 (3) Section 1398(c) is amended— 

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

21 thereof, 

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

23 heading of paragraph (3) and inserting 

24 ‘‘STANDARD’’, and 

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


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

2 ‘‘(including the additional standard deduction under 

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

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

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

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

7 this section shall apply to taxable years beginning after 

8 December 31, 2017. 

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

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

12 1 is hereby repealed. 

13 (b) DEFINITION OF DEPENDENT RETAINED.—Sec14 tion 152, prior to repeal by subsection (a), is hereby redes15 ignated as section 7706 and moved to the end of chapter 

16 79. 

17 (c) APPLICATION TO ESTATES AND TRUSTS.—Sub18 section (b) of section 642 is amended— 

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

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

21 (3) by striking ‘‘DEDUCTION FOR PERSONAL

22 EXEMPTION’’ in the heading thereof and inserting 

23 ‘‘BASIC DEDUCTION’’. 

24 (d) APPLICATION TO NONRESIDENT ALIENS.—Sec25 tion 873(b) is amended by striking paragraph (3). 


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1 (e) MODIFICATION OF WAGE WITHHOLDING

2 RULES.— 

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

4 by striking paragraph (2). 

5 (2) CONFORMING AMENDMENT.—Section 

6 3402(a) is amended— 

7 (A) by redesignating subparagraphs (A) 

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

9 and (2) and moving such redesignated para10 graphs 2 ems to the left, and 

11 (B) by striking all that precedes ‘‘other12 wise provided in this section’’ and inserting the 

13 following: 

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

15 (3) NUMBER OF EXEMPTIONS.—Section 

16 3402(f)(1) is amended— 

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

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

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

20 and 

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

22 respect to whom, on the basis of facts existing 

23 at the beginning of such day, there may reason24 ably be expected to be allowable an exemption 

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


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1 the basis of facts existing at the beginning of 

2 such day, is reasonably expected to be a de3 pendent of the employee’’. 

4 (f) MODIFICATION OF RETURN REQUIREMENT.— 

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

6 6012(a) is amended to read as follows: 

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

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

9 required of— 

10 ‘‘(A) an individual who is not married (de11 termined by applying section 7703) and who 

12 has gross income for the taxable year which 

13 does not exceed the standard deduction applica14 ble to such individual for such taxable year 

15 under section 63, or 

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

17 return if— 

18 ‘‘(i) the gross income of such indi19 vidual, when combined with the gross in20 come of such individual’s spouse, for the 

21 taxable year does not exceed the standard 

22 deduction which would be applicable to the 

23 taxpayer for such taxable year under sec24 tion 63 if such individual and such individ25 ual’s spouse made a joint return, 


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

3 their home at the close of the taxable year, 

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

5 make a separate return, and 

6 ‘‘(iv) neither such individual nor such 

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

9 (other than earned income) in excess of the 

10 amount in effect under section 

11 63(c)(2)(A).’’. 

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

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

14 the exemption amount plus the basic standard de15 duction under section 63(c)(2)(D)’’ and inserting 

16 ‘‘the standard deduction in effect under section 

17 63(c)(1)(B)’’. 

18 (g) CONFORMING AMENDMENTS.— 

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

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

21 151’’ and inserting ‘‘a dependent who (within the 

22 meaning of section 7706, determined without regard 

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

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

25 taxpayer’’. 


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1 (2) Section 36B(b)(2)(A) is amended by strik2 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

3 (3) Section 36B(b)(3)(B) is amended by strik4 ing ‘‘unless a deduction is allowed under section 151 

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

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

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

8 (4) Section 36B(c)(1)(D) is amended by strik9 ing ‘‘with respect to whom a deduction under section 

10 151 is allowable to another taxpayer’’ and inserting 

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

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

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

14 taxpayer is allowed a deduction under section 151 

15 (relating to allowance of deduction for personal ex16 emptions) for the taxable year’’ and inserting ‘‘the 

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

18 number of the taxpayer’s dependents for the taxable 

19 year’’. 

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

21 ‘‘1 or more individuals for whom a taxpayer is al22 lowed a deduction under section 151 (relating to al23 lowance of deduction for personal exemptions) for 

24 the taxable year (including the taxpayer or his 

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


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1 the taxpayer’s spouse, or any dependent of the tax2 payer’’. 

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

4 (A) by striking ‘‘section 152’’ and insert5 ing ‘‘section 7706’’, and 

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

7 inserting a comma. 

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

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

10 (9) Section 72(t)(7)(A)(iii) is amended by strik11 ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 

12 7706(f)(1)’’. 

13 (10) Section 105(b) is amended— 

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

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

16 (B) by striking ‘‘section 152(f)(1)’’ and in17 serting ‘‘section 7706(f)(1)’’ and 

18 (C) by striking ‘‘section 152(e)’’ and in19 serting ‘‘section 7706(e)’’. 

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

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

22 (12) Section 125(e)(1)(D) is amended by strik23 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

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


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

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

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

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

7 (15) Section 162(l)(1)(D) is amended by strik8 ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 

9 7706(f)(1)’’. 

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

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

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

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

14 7706(d)(2)’’. 

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

16 paragraph (3). 

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

18 ‘‘with respect to whom a deduction under section 

19 151 is allowable to’’ and inserting ‘‘who is a depend20 ent of’’. 

21 (20) Section 220(d)(2)(A) is amended by strik22 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

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

24 ‘‘with respect to whom a deduction under section 


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1 151 is allowable to’’ and inserting ‘‘who is a depend2 ent of’’. 

3 (22) Section 223(d)(2)(A) is amended by strik4 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

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

6 ‘‘section 152(f)(1)’’ in the last sentence and insert7 ing ‘‘section 7706(f)(1)’’. 

8 (24) Section 402(l)(4)(D) is amended by strik9 ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 

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

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

12 7706(a)’’. 

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

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

15 7706(f)(1)’’. 

16 (27) Section 529(e)(2)(B) is amended by strik17 ing ‘‘section 152(d)(2)’’ and inserting ‘‘section 

18 7706(d)(2)’’. 

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

20 subparagraph (A) and by redesignating subpara21 graphs (B) through (F) as subparagraphs (A) 

22 through (E), respectively. 

23 (29) Section 874 is amended by striking sub24 section (b) and by redesignating subsection (c) as 

25 subsection (b). 


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

2 section 151 and’’. 

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

4 paragraph (1). 

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

6 ‘‘(other than the deduction under section 151, relat7 ing to personal exemptions)’’. 

8 (33) Section 933 is amended— 

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

10 under section 151, relating to personal exemp11 tions)’’ in paragraph (1), and 

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

13 for personal exemptions under section 151)’’ in 

14 paragraph (2). 

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

16 read as follows: 

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

18 the deduction allowed for such year under 

19 section 642(b).’’. 

20 (35) Section 1361(c)(1)(C) is amended by strik21 ing ‘‘section 152(f)(1)(C)’’ and inserting ‘‘section 

22 7706(f)(1)(C)’’. 

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

24 paragraph (7). 


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

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

3 7706(f)(2)’’. 

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

5 ‘‘other than the deductions referred to in section 

6 151 and’’. 

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

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

9 ‘‘the standard deduction in effect under section 

10 63(c)(1)(B).’’. 

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

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

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

14 striking ‘‘the number of individuals for whom the 

15 taxpayer is allowed a deduction under section 151 

16 (relating to allowance of deduction for personal ex17 emptions) for the taxable year’’ and inserting ‘‘the 

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

19 number of the taxpayer’s dependents for the taxable 

20 year’’. 

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

22 (A) by striking ‘‘had less than the exemp23 tion amount of gross income’’ in clause (ii) and 

24 inserting ‘‘had no gross income’’, 


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

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

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

4 (C) by striking the flush language fol5 lowing clause (iii). 

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

7 read as follows: 

8 ‘‘(iii) the number of the taxpayer’s de9 pendents,’’. 

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

11 subparagraph (H). 

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

13 follows: 

14 ‘‘(2) EXEMPT AMOUNT.— 

15 ‘‘(A) IN GENERAL.—For purposes of para16 graph (1), the term ‘exempt amount’ means an 

17 amount equal to— 

18 ‘‘(i) the standard deduction, divided 

19 by 

20 ‘‘(ii) 52. 

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

22 taxpayer submits to the Secretary a written and 

23 properly verified statement specifying the facts 

24 necessary to determine the proper amount 

25 under subparagraph (A), subparagraph (A) 


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1 shall be applied as if the taxpayer were a mar2 ried individual filing a separate return with no 

3 dependents.’’. 

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

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

6 7706(d)(2)’’. 

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

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

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

10 ‘‘section 152(f)(1)’’ and all that follows and insert11 ing ‘‘section 7706(f)(1),’’. 

12 (49) Section 7706(a), as redesignated by this 

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

14 inserting ‘‘subtitle A’’. 

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

16 by this section, is amended by striking ‘‘the exemp17 tion amount (as defined in section 151(d))’’ and in18 serting ‘‘$4,150’’. 

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

20 section, is amended by adding at the end the fol21 lowing new paragraph: 

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

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

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

25 amount equal to— 


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

2 ‘‘(B) the cost-of-living adjustment deter3 mined under section 1(c)(2)(A) for such cal4 endar year, determined by substituting ‘cal5 endar year 2017’ for ‘calendar year 2016’ in 

6 clause (ii) thereof. 

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

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

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

11 amended by adding at the end the following new 

12 item: 

‘‘Sec. 7706. Dependent defined.’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2017. 

16 SEC. 1004. MAXIMUM RATE ON BUSINESS INCOME OF INDI17 VIDUALS. 

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

19 1 is amended by inserting after section 3 the following 

20 new section: 

21 ‘‘SEC. 4. 25 PERCENT MAXIMUM RATE ON BUSINESS IN22 COME OF INDIVIDUALS. 

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

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

25 reduced by the sum of— 


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1 ‘‘(1) 10 percent of the lesser of— 

2 ‘‘(A) qualified business income, or 

3 ‘‘(B) the excess (if any) of— 

4 ‘‘(i) taxable income reduced by net 

5 capital gain (as defined in section 

6 1(h)(11)(A)), over 

7 ‘‘(ii) the maximum dollar amount for 

8 the 25-percent rate bracket which applies 

9 to the taxpayer under section 1 for the 

10 taxable year, and 

11 ‘‘(2) 4.6 percent of the excess (if any) of— 

12 ‘‘(A) the lesser of— 

13 ‘‘(i) qualified business income, or 

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

15 under paragraph (1)(B), over 

16 ‘‘(B) the excess of— 

17 ‘‘(i) the maximum dollar amount for 

18 the 35-percent rate bracket which applies 

19 to the taxpayer under section 1 for the 

20 taxable year, over 

21 ‘‘(ii) the maximum dollar amount for 

22 the 25-percent rate bracket which applies 

23 to the taxpayer under section 1 for the 

24 taxable year. 


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

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

3 the excess (if any) of— 

4 ‘‘(1) the sum of— 

5 ‘‘(A) 100 percent of any net business in6 come derived from any passive business activity, 

7 plus 

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

9 business income derived from any active busi10 ness activity, over 

11 ‘‘(2) the sum of— 

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

13 derived from any passive business activity, 

14 ‘‘(B) except as provided in subsection 

15 (e)(3)(A), 30 percent of any net business loss 

16 derived from any active business activity, plus 

17 ‘‘(C) any carryover business loss deter18 mined for the preceding taxable year. 

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

20 LOSS.—For purposes of this section— 

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

22 shall be determined with respect to any business ac23 tivity by appropriately netting items of income, gain, 

24 deduction, and loss with respect to such business ac25 tivity. 


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

2 section 3401), payments described in subsection (a) 

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

4 the taxpayer which are properly attributable to any 

5 business activity shall be taken into account under 

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

7 such business activity. 

8 ‘‘(3) EXCEPTION FOR CERTAIN INVESTMENT9 RELATED ITEMS.—There shall not be taken into ac10 count under paragraph (1)— 

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

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

13 or long-term capital loss, 

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

15 dividend, or payment in lieu of dividends de16 scribed in section 954(c)(1)(G), 

17 ‘‘(C) any interest income other than inter18 est income which is properly allocable to a trade 

19 or business, 

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

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

22 (applied by substituting ‘business activity’ for 

23 ‘controlled foreign corporation’), 

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

25 or loss taken into account under section 


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

2 clause (ii) thereof and other than items attrib3 utable to notional principal contracts entered 

4 into in transactions qualifying under section 

5 1221(a)(7)), 

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

7 which is not received in connection with the 

8 trade or business of the business activity, and 

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

10 allocable to an amount described in any of the 

11 preceding subparagraphs. 

12 ‘‘(4) APPLICATION OF RESTRICTIONS APPLICA13 BLE TO DETERMINING TAXABLE INCOME.—Net busi14 ness income or loss shall be appropriately adjusted 

15 so as only to take into account any amount of in16 come, gain, deduction, or loss to the extent such 

17 amount affects the determination of taxable income 

18 for the taxable year. 

19 ‘‘(5) CARRYOVER BUSINESS LOSS.—For pur20 poses of subsection (b)(2)(C), the carryover business 

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

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

23 the sum described in subsection (b)(1) for such tax24 able year. 


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

2 For purposes of this section— 

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

4 ‘passive business activity’ means any passive activity 

5 as defined in section 469(c) determined without re6 gard to paragraphs (3) and (6)(B) thereof. 

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

8 ‘active business activity’ means any business activity 

9 which is not a passive business activity. 

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

11 activity’ means any activity (within the meaning of 

12 section 469) which involves the conduct of any trade 

13 or business. 

14 ‘‘(e) CAPITAL PERCENTAGE.—For purposes of this 

15 section— 

16 ‘‘(1) IN GENERAL.—Except as otherwise pro17 vided in this section, the term ‘capital percentage’ 

18 means 30 percent. 

19 ‘‘(2) INCREASED PERCENTAGE FOR CAPITAL-IN20 TENSIVE BUSINESS ACTIVITIES.—In the case of a 

21 taxpayer who elects the application of this paragraph 

22 with respect to any active business activity (other 

23 than a specified service activity), the capital percent24 age shall be equal to the applicable percentage (as 

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


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1 respect to which such election applies. Any election 

2 made under this paragraph shall apply to the tax3 able year for which such election is made and each 

4 of the 4 subsequent taxable years. Such election 

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

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

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

8 may not be revoked. 

9 ‘‘(3) TREATMENT OF SPECIFIED SERVICE AC10 TIVITIES.— 

11 ‘‘(A) IN GENERAL.—In the case of any ac12 tive business activity which is a specified service 

13 activity— 

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

15 percent, and 

16 ‘‘(ii) subsection (b)(2)(B) shall be ap17 plied by substituting ‘0 percent’ for ‘30 

18 percent’. 

19 ‘‘(B) EXCEPTION FOR CAPITAL-INTENSIVE

20 SPECIFIED SERVICE ACTIVITIES.—If— 

21 ‘‘(i) the taxpayer elects the application 

22 of this subparagraph with respect to such 

23 activity for any taxable year, and 

24 ‘‘(ii) the applicable percentage (as de25 fined in subsection (f)) with respect to 


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1 such activity for such taxable year is at 

2 least 10 percent, 

3 then subparagraph (A) shall not apply and the 

4 capital percentage with respect to such activity 

5 shall be equal to such applicable percentage. 

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

7 term ‘specified service activity’ means any activ8 ity involving the performance of services de9 scribed in section 1202(e)(3)(A), including in10 vesting, trading, or dealing in securities (as de11 fined in section 475(c)(2)), partnership inter12 ests, or commodities (as defined in section 

13 475(e)(2)). 

14 ‘‘(4) REDUCTION IN CAPITAL PERCENTAGE IN

15 CERTAIN CASES.—The capital percentage (deter16 mined after the application of paragraphs (2) and 

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

18 not exceed 1 minus the quotient (not greater than 

19 1) of— 

20 ‘‘(A) any amounts described in subsection 

21 (c)(2) which are taken into account in deter22 mining the net business income derived from 

23 such activity, divided by 

24 ‘‘(B) such net business income. 


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

2 this section— 

3 ‘‘(1) IN GENERAL.—The term ‘applicable per4 centage’ means, with respect to any active business 

5 activity for any taxable year, the quotient (not great6 er than 1) of— 

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

8 respect to such activity for such taxable year, 

9 divided by 

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

11 derived from such activity for such taxable year. 

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

13 term ‘specified return on capital’ means, with re14 spect to any active business activity referred to in 

15 paragraph (1), the excess of— 

16 ‘‘(A) the product of— 

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

18 taxable year, multiplied by 

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

20 such activity for such taxable year, over 

21 ‘‘(B) an amount equal to the interest 

22 which is paid or accrued, and for which a de23 duction is allowed under this chapter, with re24 spect to such activity for such taxable year. 


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

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

3 taxable year, the Federal short-term rate (deter4 mined under section 1274(d) for the month in which 

5 or with which such taxable year ends) plus 7 per6 centage points. 

7 ‘‘(4) ASSET BALANCE.— 

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

9 with respect to any active business activity re10 ferred to in paragraph (1) for any taxable year 

11 equals the taxpayer’s adjusted basis of any 

12 property described in section 1221(a)(2) which 

13 is used in connection with such activity as of 

14 the end of the taxable year (determined without 

15 regard to sections 168(k) and 179). 

16 ‘‘(B) APPLICATION TO ACTIVITIES CAR17 RIED ON THROUGH PARTNERSHIPS AND S COR18 PORATIONS.—In the case of any active business 

19 activity carried on through a partnership or S 

20 corporation, the taxpayer shall take into ac21 count such taxpayer’s distributive or pro rata 

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

23 with respect to such activity as determined with 

24 respect to such partnership or S corporation 

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1 stituting ‘the partnership’s or S corporation’s 

2 adjusted basis’ for ‘the taxpayer’s adjusted 

3 basis’). 

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

5 NET ACTIVE BUSINESS INCOME.— 

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

7 1 shall be reduced by 3 percent of the excess (if any) 

8 of— 

9 ‘‘(A) the least of— 

10 ‘‘(i) qualified active business income, 

11 ‘‘(ii) taxable income reduced by net 

12 capital gain (as defined in section 

13 1(h)(11)(A)), or 

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

15 amount, over 

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

17 over the applicable threshold amount. 

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

19 case of any taxable year beginning before January 1, 

20 2022, paragraph (1) shall be applied by substituting 

21 for ‘3 percent’— 

22 ‘‘(A) in the case of any taxable year begin23 ning after December 31, 2017, and before Jan24 uary 1, 2020, ‘1 percent’, and 


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1 ‘‘(B) in the case of any taxable year begin2 ning after December 31, 2019, and before Jan3 uary 1, 2022, ‘2 percent’. 

4 ‘‘(3) QUALIFIED ACTIVE BUSINESS INCOME.— 

5 For purposes of this subsection, the term ‘qualified 

6 active business income’ means the excess (if any) 

7 of— 

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

9 any active business activity, over 

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

11 any active business activity. 

12 ‘‘(4) 9-PERCENT BRACKET THRESHOLD

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

14 ‘9-percent bracket threshold amount’ means— 

15 ‘‘(A) in the case of a joint return or sur16 viving spouse, $75,000, 

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

18 the head of a household (as defined in section 

2(b)), 3 19 ⁄4 of the amount in effect for the taxable 

20 year under subparagraph (A), and 

‘‘(C) in the case of any other individual, 1 21 ⁄2

22 of the amount in effect for the taxable year 

23 under subparagraph (A). 


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

2 purposes of this subsection, the term ‘applicable 

3 threshold amount’ means— 

4 ‘‘(A) in the case of a joint return or sur5 viving spouse, $150,000, 

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

7 the head of a household (as defined in section 

2(b)), 3 8 ⁄4 of the amount in effect for the taxable 

9 year under subparagraph (A), and 

‘‘(C) in the case of any other individual, 1 10 ⁄2

11 of the amount in effect for the taxable year 

12 under subparagraph (A). 

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

14 shall not apply to any estate or trust. 

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

16 any taxable year beginning after 2018, the dollar 

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

18 be increased by an amount equal to— 

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

20 ‘‘(B) the cost-of-living adjustment deter21 mined under subsection (c)(2)(A) for the cal22 endar year in which the taxable year begins, de23 termined by substituting ‘calendar year 2017’ 

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


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

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

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

5 regulations or other guidance as may be necessary or ap6 propriate to carry out the purposes of this section, includ7 ing regulations or other guidance— 

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

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

10 more than one activity, and 

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

12 of the taxpayer as a single business activity for pur13 poses of this section to the extent that such activi14 ties would be treated as a single employer under 

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

16 or (o) of section 414. 

17 ‘‘(i) REFERENCES.—Any reference in this title to sec18 tion 1 shall be treated as including a reference to this sec19 tion unless the context of such reference clearly indicates 

20 otherwise.’’. 

21 (b) 25 PERCENT RATE FOR CERTAIN DIVIDENDS OF

22 REAL ESTATE INVESTMENT TRUSTS AND COOPERA23 TIVES.—Section 1(h), as amended by the preceding provi24 sions of this Act, is amended by adding at the end the 

25 following new paragraph: 


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1 ‘‘(13) 25 PERCENT RATE FOR CERTAIN DIVI2 DENDS OF REAL ESTATE INVESTMENT TRUSTS AND

3 COOPERATIVES.— 

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

5 subsection, net capital gain (as defined in para6 graph (11)) and unrecaptured section 1250 

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

8 increased by specified dividend income. 

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

10 purposes of this paragraph, the term ‘specified 

11 dividend income’ means— 

12 ‘‘(i) in the case of any dividend re13 ceived from a real estate investment trust, 

14 the portion of such dividend which is nei15 ther— 

16 ‘‘(I) a capital gain dividend (as 

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

18 ‘‘(II) taken into account in deter19 mining qualified dividend income (as 

20 defined in paragraph (11)), and 

21 ‘‘(ii) any dividend which is includible 

22 in gross income and which is received from 

23 an organization or corporation described in 

24 section 501(c)(12) or 1381(a).’’. 


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1 (c) CLERICAL AMENDMENT.—The table of sections 

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

3 inserting after the item relating to section 3 the following 

4 new item: 

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

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2017. 

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

9 year which includes December 31, 2017, the amendment 

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

11 taxable year adjusted— 

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

13 tax in effect under section 1 of the Internal Revenue 

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

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

16 on the business income (determined without regard 

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

18 amendment applies to taxable years beginning after 

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

20 for such years), and 

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

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

23 by the amount which bears the same proportion to 

24 the amount of such reduction as the number of days 

25 in the taxable year which are before January 1, 


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1 2018, bears to the number of days in the entire tax2 able year. 

3 SEC. 1005. CONFORMING AMENDMENTS RELATED TO SIM4 PLIFICATION OF INDIVIDUAL INCOME TAX 

5 RATES. 

6 (a) AMENDMENTS RELATED TO MODIFICATION OF

7 INFLATION ADJUSTMENT.— 

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

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

10 which the taxable year begins determined by sub11 stituting ‘calendar year 2008’ for ‘calendar year 

12 1992’ in subparagraph (B) thereof’’ and inserting 

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

14 the taxable year begins determined by substituting 

15 ‘calendar year 2008’ for ‘calendar year 2016’ in 

16 clause (ii) thereof’’. 

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

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

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

20 1(c)(2)(A)’’, 

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

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

23 inserting ‘‘for ‘calendar year 2016’ in clause (ii) 

24 thereof’’, and 


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

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

3 1’’ and inserting ‘‘for ‘calendar year 2016’ in 

4 clause (ii) thereof’’. 

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

6 striking ‘‘consumer price index’’ and inserting ‘‘C7 CPI-U (as defined in section 1(c))’’. 

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

9 follows: 

10 ‘‘(C) COST-OF-LIVING ADJUSTMENT DE11 FINED.— 

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

13 adjustment for any calendar year is the 

14 cost-of-living adjustment for such calendar 

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

16 by substituting ‘calendar year 1987’ for 

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

18 ‘‘(ii) SPECIAL RULE WHERE BASE PE19 RIOD ENDS IN A CALENDAR YEAR OTHER

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

21 any taxpayer does not end in 1983 or 

22 1984, clause (i) shall be applied by sub23 stituting the calendar year in which such 

24 base period ends for 1987.’’. 


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1 (5) Section 42(e)(3)(D)(ii) is amended by strik2 ing ‘‘section 1(f)(3) for such calendar year by sub3 stituting ‘calendar year 2008’ for ‘calendar year 

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

5 ‘‘section 1(c)(2)(A) for such calendar year by sub6 stituting ‘calendar year 2008’ for ‘calendar year 

7 2016’ in clause (ii) thereof’’. 

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

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

10 substituting ‘calendar year 2001’ for ‘calendar year 

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

12 ‘‘section 1(c)(2)(A) for such calendar year by sub13 stituting ‘calendar year 2001’ for ‘calendar year 

14 2016’ in clause (ii) thereof’’. 

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

16 striking ‘‘section 1(f)(3) for the calendar year, deter17 mined by substituting ‘calendar year 2012’ for ‘cal18 endar year 1992’ in subparagraph (B) thereof’’ and 

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

20 year, determined by substituting ‘‘calendar year 

21 2012’’ for ‘‘calendar year 2016’’ in clause (ii) there22 of’ ’’. 

23 (8) Section 125(i)(2) is amended— 

24 (A) by striking ‘‘section 1(f)(3) for the cal25 endar year in which the taxable year begins by 


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1 substituting ‘calendar year 2012’ for ‘calendar 

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

3 subparagraph (B) and inserting ‘‘section 

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

5 taxable year begins’’, and 

6 (B) by striking ‘‘$50’’ both places it ap7 pears in the last sentence and inserting 

8 ‘‘$100’’. 

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

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

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

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

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

14 taxable year begins by substituting ‘calendar year 

15 1997’ for ‘calendar year 1992’ in subparagraph (B) 

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

17 calendar year in which the taxable year begins, de18 termined by substituting ‘calendar year 1997’ for 

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

20 (11) Section 223(g)(1) is amended by striking 

21 all that follows subparagraph (A) and inserting the 

22 following: 

23 ‘‘(B) the cost-of-living adjustment deter24 mined under section 1(c)(2)(A) for the calendar 


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1 year in which the taxable year begins, deter2 mined— 

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

4 2016’ in clause (ii) thereof— 

5 ‘‘(I) except as provided in clause 

6 (ii), ‘calendar year 1997’, and 

7 ‘‘(II) in the case of each dollar 

8 amount in subsection (c)(2)(A), ‘cal9 endar year 2003’, and 

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

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

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

13 The Secretary shall publish the dollar amounts 

14 as adjusted under this subsection for taxable 

15 years beginning in any calendar year no later 

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

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

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

19 determined by substituting ‘calendar year 2009’ for 

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

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

22 year, determined by substituting ‘calendar year 

23 2009’ for ‘calendar year 2016’ in clause (ii) there24 of’’. 


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1 (13) Section 512(d)(2)(B) is amended by strik2 ing ‘‘section 1(f)(3) for the calendar year in which 

3 the taxable year begins, by substituting ‘calendar 

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

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

6 calendar year in which the taxable year begins, de7 termined by substituting ‘calendar year 1994’ for 

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

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

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

11 which the taxable year begins by substituting ‘cal12 endar year 1987’ for ‘calendar year 1992’ in sub13 paragraph (B) thereof’’ and inserting ‘‘section 

14 1(c)(2)(A) for the calendar year in which the taxable 

15 year begins, determined by substituting ‘calendar 

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

17 thereof’’. 

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

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

20 substituting ‘calendar year 2013’ for ‘calendar year 

21 1992’ in subparagraph (B) thereof’’ and inserting 

22 ‘‘section 1(c)(2)(A) for such calendar year by sub23 stituting ‘calendar year 2013’ for ‘calendar year 

24 2016’ in clause (ii) thereof’’. 


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

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

3 which the taxable year begins, by substituting ‘cal4 endar year 2007’ for ‘calendar year 1992’ in sub5 paragraph (B) thereof’’ and inserting ‘‘section 

6 1(c)(2)(A) for the calendar year in which the taxable 

7 year begins, determined by substituting ‘calendar 

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

9 thereof’’. 

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

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

12 which the taxable year begins, determined by sub13 stituting ‘2004’ for ‘1992’ in subparagraph (B) 

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

15 calendar year in which the taxable year begins, de16 termined by substituting ‘calendar year 2004’ for 

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

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

19 as follows: 

20 ‘‘(2) INFLATION ADJUSTMENT.— 

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

22 debt instrument arising out of a sale or ex23 change during any calendar year after 2018, 

24 each adjusted dollar amount shall be increased 

25 by an amount equal to— 


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1 ‘‘(i) such adjusted dollar amount, 

2 multiplied by 

3 ‘‘(ii) the cost-of-living adjustment de4 termined under section 1(c)(2)(A) for such 

5 calendar year, determined by substituting 

6 ‘calendar year 2017’ for ‘calendar year 

7 2016’ in clause (ii) thereof. 

8 ‘‘(B) ADJUSTED DOLLAR AMOUNTS.—For 

9 purposes of this paragraph, the term ‘adjusted 

10 dollar amount’ means the dollar amounts in 

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

12 for calendar year 2018. 

13 ‘‘(C) ROUNDING.—Any increase under sub14 paragraph (A) shall be rounded to the nearest 

15 multiple of $100.’’. 

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

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

18 substituting ‘calendar year 2010’ for ‘calendar year 

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

20 ‘‘section 1(c)(2)(A) for such calendar year, deter21 mined by substituting ‘calendar year 2010’ for ‘cal22 endar year 2016’ in clause (ii) thereof’’. 

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

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

25 substituting ‘calendar year 1997’ for ‘calendar year 


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

2 ‘‘section 1(c)(2)(A) for such calendar year, deter3 mined by substituting ‘calendar year 1997’ for ‘cal4 endar year 2016’ in clause (ii) thereof’’. 

5 (21) Section 2503(b)(2)(B) is amended by 

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

7 substituting ‘calendar year 1997’ for ‘calendar year 

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

9 ‘‘section 1(c)(2)(A) for the calendar year, deter10 mined by substituting ‘calendar year 1997’ for ‘cal11 endar year 2016’ in clause (ii) thereof’’. 

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

13 striking ‘‘section 1(f)(3) for such calendar year, de14 termined by substituting ‘2004’ for ‘1992’ in sub15 paragraph (B) thereof’’ and inserting ‘‘section 

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

17 substituting ‘calendar year 2004’ for ‘calendar year 

18 2016’ in clause (ii) thereof’’. 

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

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

21 substituting the year before the last nonindexed year 

22 for ‘calendar year 1992’ in subparagraph (B) there23 of’’ and inserting ‘‘section 1(c)(2)(A) for such cal24 endar year, determined by substituting the year beVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00061 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 fore the last nonindexed year for ‘calendar year 

2 2016’ in clause (ii) thereof’’. 

3 (24) Section 4980I(b)(3)(C)(v)(II) is amend4 ed— 

5 (A) by striking ‘‘section 1(f)(3)’’ and in6 serting ‘‘section 1(c)(2)(A)’’, 

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

8 inserting ‘‘clause (ii)’’, and 

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

10 ‘‘2016’’. 

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

12 (A) by striking ‘‘section 1(f)(3)’’ and in13 serting ‘‘section 1(c)(2)(A)’’, 

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

15 inserting ‘‘clause (ii)’’, and 

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

17 ‘‘2016’’. 

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

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

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

21 that clause (ii) thereof’’. 

22 (27) Section 6323(i)(4)(B) is amended by strik23 ing ‘‘section 1(f)(3) for the calendar year, deter24 mined by substituting ‘calendar year 1996’ for ‘cal25 endar year 1992’ in subparagraph (B) thereof’’ and 


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

2 determined by substituting ‘calendar year 1996’ for 

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

4 (28) Section 6334(g)(1)(B) is amended by 

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

6 substituting ‘calendar year 1998’ for ‘calendar year 

7 1992’ in subparagraph (B) thereof’’ and inserting 

8 ‘‘section 1(c)(2)(A) for such calendar year, deter9 mined by substituting ‘calendar year 1999’ for ‘cal10 endar year 2016’ in clause (ii) thereof’’. 

11 (29) Section 6601(j)(3)(B) is amended by strik12 ing ‘‘section 1(f)(3) for such calendar year by sub13 stituting ‘calendar year 1997’ for ‘calendar year 

14 1992’ in subparagraph (B) thereof’’ and inserting 

15 ‘‘section 1(c)(2)(A) for such calendar year by sub16 stituting ‘calendar year 1997’ for ‘calendar year 

17 2016’ in clause (ii) thereof’’. 

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

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

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

21 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter22 mined by substituting ‘calendar year 2013’ for ‘cal23 endar year 2016’ in clause (ii) thereof’’. 

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


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

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

4 inserting ‘‘clause (ii)’’, and 

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

6 ‘‘2016’’. 

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

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

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

11 inserting ‘‘clause (ii)’’, and 

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

13 ‘‘2016’’. 

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

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

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

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

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

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

24 (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deterVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00064 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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

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

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

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

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

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

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

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

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

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

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

17 substituting ‘calendar year 2015’ for ‘calendar year 

18 1992’ in subparagraph (B) thereof’’ and inserting 

19 ‘‘section 1(c)(2)(A) for the calendar year, deter20 mined by substituting ‘calendar year 2015’ for ‘cal21 endar year 2016’ in clause (ii) thereof’’. 

22 (38) Section 7430(c)(1) is amended by striking 

23 ‘‘section 1(f)(3) for such calendar year, by sub24 stituting ‘calendar year 1995’ for ‘calendar year 

25 1992’ in subparagraph (B) thereof’’ in the flush text 


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

2 calendar year, determined by substituting ‘calendar 

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

4 thereof’’. 

5 (39) Section 7872(g)(5) is amended to read as 

6 follows: 

7 ‘‘(5) INFLATION ADJUSTMENT.— 

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

9 loan made during any calendar year after 2018 

10 to which paragraph (1) applies, the adjusted 

11 dollar amount shall be increased by an amount 

12 equal to— 

13 ‘‘(i) such adjusted dollar amount, 

14 multiplied by 

15 ‘‘(ii) the cost-of-living adjustment de16 termined under section 1(c)(2)(A) for such 

17 calendar year, determined by substituting 

18 ‘calendar year 2017’ for ‘calendar year 

19 2016’ in clause (ii) thereof. 

20 ‘‘(B) ADJUSTED DOLLAR AMOUNT.—For 

21 purposes of this paragraph, the term ‘adjusted 

22 dollar amount’ means the dollar amount in 

23 paragraph (2) as in effect for calendar year 

24 2018. 


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

3 multiple of $100.’’. 

4 (40) Section 219(b)(5)(C)(i)(II) is amended by 

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

6 which the taxable year begins, determined by sub7 stituting ‘calendar year 2007’ for ‘calendar year 

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

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

10 the taxable year begins, determined by substituting 

11 ‘calendar year 2007’ for ‘calendar year 2016’ in 

12 clause (ii) thereof’’. 

13 (41) Section 219(g)(8)(B) is amended by strik14 ing ‘‘section 1(f)(3) for the calendar year in which 

15 the taxable year begins, determined by substituting 

16 ‘calendar year 2005’ for ‘calendar year 1992’ in sub17 paragraph (B) thereof’’ and inserting ‘‘section 

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

19 year begins, determined by substituting ‘calendar 

20 year 2005’ for ‘calendar year 2016’ in clause (ii) 

21 thereof’’. 

22 (b) OTHER CONFORMING AMENDMENTS.— 

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

24 to read as follows: 


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1 ‘‘(aa) who is described in 

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

3 not have any dependents for the 

4 taxable year,’’. 

5 (2) Section 486B(b)(1) is amended— 

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

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

8 (B) by striking ‘‘section 1(e)’’ and insert9 ing ‘‘section 1’’. 

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

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

12 (4) Section 641(a) is amended by striking ‘‘sec13 tion 1(e) shall apply to the taxable income’’ and in14 serting ‘‘section 1 shall apply to the taxable in15 come’’. 

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

17 follows: 

18 ‘‘(A) Except to the extent provided in sec19 tion 1(h), the rate of tax shall be treated as 

20 being the highest rate of tax set forth in section 

21 1(a).’’. 

22 (6) Section 646(b) is amended to read as fol23 lows: 

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

25 provided in subsection (f)(1)(B)(ii), there is hereby imVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00068 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 posed on the taxable income of an electing Settlement 

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

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

4 by this chapter on such income.’’. 

5 (7) Section 685(c) is amended by striking ‘‘Sec6 tion 1(e)’’ and inserting ‘‘Section 1’’. 

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

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

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

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

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

12 ‘‘subsection (d) of’’. 

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

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

15 lowest income brackets in the table under section 

16 1(c),’’ and inserting ‘‘12 percent, 25 percent,’’. 

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

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

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

20 of’’. 

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

22 ‘‘the amount of tax which would be imposed by sec23 tion 1(c) (determined without regard to any rate of 

24 tax in excess of the fourth lowest rate of tax applica25 ble under section 1(c)) on an amount of taxable inVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00069 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 come equal to’’ and inserting ‘‘an amount equal to 

2 the product of 25 percent multiplied by’’. 

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

4 ‘‘the product of the fourth lowest rate of tax applica5 ble under section 1(c) and’’ and inserting ‘‘25 per6 cent of’’. 

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

8 inserting ‘‘(as in effect on the day before the date 

9 of the enactment of the Tax Cuts and Jobs Act)’’ 

10 after ‘‘section 1(g)’’. 

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

12 this section shall apply to taxable years beginning after 

13 December 31, 2017. 

14 Subtitle B—Simplification and Re15 form of Family and Individual 

16 Tax Credits 

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

18 FAMILY TAX CREDIT. 

19 (a) INCREASE IN CREDIT AMOUNT AND ADDITION OF

20 OTHER DEPENDENTS.— 

21 (1) IN GENERAL.—Section 24(a) is amended to read 

22 as follows: 

23 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al24 lowed as a credit against the tax imposed by this chapter 

25 for the taxable year an amount equal to the sum of— 


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1 ‘‘(1) with respect to each qualifying child of the 

2 taxpayer, $1,600, and 

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

4 1, 2023, with respect to the taxpayer (each spouse 

5 in the case of a joint return) and each dependent of 

6 the taxpayer to whom paragraph (1) does not apply, 

7 $300.’’. 

8 (2) CONFORMING AMENDMENTS.— 

9 (A) Section 24(c) is amended— 

10 (i) by redesignating paragraphs (1) and 

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

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

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

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

15 so redesignated) the following new paragraph: 

16 ‘‘(1) DEPENDENT.— 

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

18 shall have the meaning given such term by sec19 tion 7706. 

20 ‘‘(B) CERTAIN INDIVIDUALS NOT TREATED

21 AS DEPENDENTS.—In the case of an individual 

22 with respect to whom a credit under this section 

23 is allowable to another taxpayer for a taxable 

24 year beginning in the calendar year in which 

25 the individual’s taxable year begins, the amount 


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1 applicable to such individual under subsection 

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

3 zero.’’, 

4 (iv) in paragraph (3) (as so redesig5 nated)— 

6 (I) by striking ‘‘term ‘qualifying 

7 child’ ’’ and inserting ‘‘terms ‘qualifying 

8 child’ and ‘dependent’ ’’, and 

9 (II) by striking ‘‘152(b)(3)’’ and in10 serting ‘‘7706(b)(3)’’, and 

11 (v) in the heading by striking ‘‘QUALI12 FYING’’ and inserting ‘‘DEPENDENT; QUALI13 FYING’’. 

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

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

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

17 IV of subchapter A of chapter 1 is amended by 

18 striking the item relating to section 24 and inserting 

19 the following new item: 

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

20 (b) ELIMINATION OF MARRIAGE PENALTY.—Section 

21 24(b)(2) is amended— 

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

23 inserting ‘‘$230,000’’, 

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

25 (A), 


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

2 who is not married’’ and all that follows through the pe3 riod at the end and inserting ‘‘one-half of the amount in 

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

5 case of any other individual.’’. 

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

7 CHILD.— 

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

9 by striking all that follows ‘‘under this section’’ and insert10 ing the following: ‘‘determined— 

11 ‘‘(i) without regard to this subsection 

12 and the limitation under section 26(a), 

13 ‘‘(ii) without regard to subsection 

14 (a)(2), and 

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

16 ‘$1,600’ in subsection (a)(1), or’’. 

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

18 amended by inserting after paragraph (2) the following 

19 new paragraph: 

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

21 any taxable year beginning in a calendar year after 

22 2017, the $1,000 amount in paragraph (1)(A)(iii) 

23 shall be increased by an amount equal to— 

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


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

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

3 Any increase determined under the preceding sen4 tence shall be rounded to the next highest multiple 

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

6 under subsection (a)(2).’’. 

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2017. 

10 SEC. 1102. REPEAL OF NONREFUNDABLE CREDITS. 

11 (a) REPEAL OF SECTION 22.— 

12 (1) IN GENERAL.—Subpart A of part IV of sub13 chapter A of chapter 1 is amended by striking sec14 tion 22 (and by striking the item relating to such 

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

16 (2) CONFORMING AMENDMENT.— 

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

18 paragraph (1) and by redesignating paragraphs 

19 (2), (3), and (4) as paragraphs (1), (2), and 

20 (3), respectively. 

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

22 of section 7706, as redesignated by this Act, 

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

24 section 22(e)(3)’’. 


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

2 this Act, is amended by redesignating para3 graph (7) as paragraph (8) and by inserting 

4 after paragraph (6) the following new para5 graph: 

6 ‘‘(7) PERMANENT AND TOTAL DISABILITY DE7 FINED.—An individual is permanently and totally 

8 disabled if he is unable to engage in any substantial 

9 gainful activity by reason of any medically deter10 minable physical or mental impairment which can be 

11 expected to result in death or which has lasted or 

12 can be expected to last for a continuous period of 

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

14 considered to be permanently and totally disabled 

15 unless he furnishes proof of the existence thereof in 

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

17 Secretary may require.’’. 

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

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

20 (iv) Section 422(c)(6) is amended by strik21 ing ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 

22 (b) TERMINATION OF SECTION 25.—Section 25, as 

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

24 end the following new subsection: 


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

2 under this section with respect to any mortgage credit cer3 tificate issued after December 31, 2017.’’. 

4 (c) REPEAL OF SECTION 30D.— 

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

6 subchapter A of chapter 1 is amended by striking 

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

8 such section in the table of sections for such sub9 part). 

10 (2) CONFORMING AMENDMENTS.— 

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

12 paragraph (35). 

13 (B) Section 1016(a) is amended by strik14 ing paragraph (37). 

15 (C) Section 6501(m) is amended by strik16 ing ‘‘30D(e)(4),’’. 

17 (d) EFFECTIVE DATE.— 

18 (1) IN GENERAL.—Except as provided in para19 graphs (2) and (3), the amendments made by this 

20 section shall apply to taxable years beginning after 

21 December 31, 2017. 

22 (2) SUBSECTION (b).—The amendment made 

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

24 after December 31, 2017. 


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1 (3) SUBSECTION (c).—The amendments made 

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

3 service in taxable years beginning after December 

4 31, 2017. 

5 SEC. 1103. REFUNDABLE CREDIT PROGRAM INTEGRITY. 

6 (a) IDENTIFICATION REQUIREMENTS FOR CHILD

7 AND FAMILY TAX CREDIT.— 

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

9 read as follows: 

10 ‘‘(e) IDENTIFICATION REQUIREMENTS.— 

11 ‘‘(1) REQUIREMENTS FOR QUALIFYING

12 CHILD.—No credit shall be allowed under this sec13 tion to a taxpayer with respect to any qualifying 

14 child unless the taxpayer includes the name and so15 cial security number of such qualifying child on the 

16 return of tax for the taxable year. The preceding 

17 sentence shall not prevent a qualifying child from 

18 being treated as a dependent described in subsection 

19 (a)(2). 

20 ‘‘(2) OTHER IDENTIFICATION REQUIRE21 MENTS.—No credit shall be allowed under this sec22 tion with respect to any individual unless the tax23 payer identification number of such individual is in24 cluded on the return of tax for the taxable year and 


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1 such identifying number was issued before the due 

2 date for filing the return for the taxable year. 

3 ‘‘(3) SOCIAL SECURITY NUMBER.—For pur4 poses of this subsection, the term ‘social security 

5 number’ means a social security number issued by 

6 the Social Security Administration (but only if the 

7 social security number is issued to a citizen of the 

8 United States or pursuant to subclause (I) (or that 

9 portion of subclause (III) that relates to subclause 

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

11 Act)).’’. 

12 (2) OMISSIONS TREATED AS MATHEMATICAL OR

13 CLERICAL ERROR.— 

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

15 is amended to read as follows: 

16 ‘‘(I) an omission of a correct social secu17 rity number, or a correct TIN, required under 

18 section 24(e) (relating to child tax credit), to be 

19 included on a return,’’. 

20 (b) SOCIAL SECURITY NUMBER MUST BE PRO21 VIDED.— 

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

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

24 striking ‘‘taxpayer identification number’’ each place 

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


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1 (2) OMISSION TREATED AS MATHEMATICAL OR

2 CLERICAL ERROR.—Section 6213(g)(2)(J) is amend3 ed by striking ‘‘TIN’’ and inserting ‘‘social security 

4 number and employer identification number’’. 

5 (c) INDIVIDUALS PROHIBITED FROM ENGAGING IN

6 EMPLOYMENT IN UNITED STATES NOT ELIGIBLE FOR

7 EARNED INCOME TAX CREDIT.—Section 32(m) is amend8 ed— 

9 (1) by striking ‘‘(other than:’’ and all that fol10 lows through ‘‘of the Social Security Act)’’, and 

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

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

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

14 citizen of the United States or pursuant to subclause 

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

16 subclause (I)) of section 205(c)(2)(B)(i) of the So17 cial Security Act’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 SEC. 1104. PROCEDURES TO REDUCE IMPROPER CLAIMS 

22 OF EARNED INCOME CREDIT. 

23 (a) CLARIFICATION REGARDING DETERMINATION OF

24 SELF-EMPLOYMENT INCOME WHICH IS TREATED AS

25 EARNED INCOME.—Section 32(c)(2)(B) is amended by 


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1 striking ‘‘and’’ at the end of clause (v), by striking the 

2 period at the end of clause (vi) and inserting ‘‘, and’’, and 

3 by adding at the end the following new clause: 

4 ‘‘(vii) in determining the taxpayer’s 

5 net earnings from self-employment under 

6 subparagraph (A)(ii) there shall not fail to 

7 be taken into account any deduction which 

8 is allowable to the taxpayer under this sub9 title.’’. 

10 (b) REQUIRED QUARTERLY REPORTING OF WAGES

11 OF EMPLOYEES.—Section 6011 is amended by adding at 

12 the end the following new subsection: 

13 ‘‘(i) EMPLOYER REPORTING OF WAGES.—Every per14 son required to deduct and withhold from an employee a 

15 tax under section 3101 or 3402 shall include on each re16 turn or statement submitted with respect to such tax, the 

17 name and address of such employee and the amount of 

18 wages for such employee on which such tax was with19 held.’’. 

20 (c) EFFECTIVE DATE.— 

21 (1) IN GENERAL.—Except as provided in para22 graph (2), the amendments made by this section 

23 shall apply to taxable years ending after the date of 

24 the enactment of this Act. 


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1 (2) REPORTING.—The Secretary of the Treas2 ury, or his designee, may delay the application of the 

3 amendment made by subsection (b) for such period 

4 as such Secretary (or designee) determines to be 

5 reasonable to allow persons adequate time to modify 

6 electronic (or other) systems to permit such person 

7 to comply with the requirements of such amend8 ment. 

9 SEC. 1105. CERTAIN INCOME DISALLOWED FOR PURPOSES 

10 OF THE EARNED INCOME TAX CREDIT. 

11 (a) SUBSTANTIATION REQUIREMENT.—Section 32 is 

12 amended by adding at the end the following new sub13 section: 

14 ‘‘(n) INCONSISTENT INCOME REPORTING.—If the 

15 earned income of a taxpayer claimed on a return for pur16 poses of this section is not substantiated by statements 

17 or returns under sections 6051, 6052, 6041(a), or 6050W 

18 with respect to such taxpayer, the Secretary may require 

19 such taxpayer to provide books and records to substantiate 

20 such income, including for the purpose of preventing 

21 fraud.’’. 

22 (b) EXCLUSION OF UNSUBSTANTIATED AMOUNT

23 FROM EARNED INCOME.—Section 32(c)(2) is amended by 

24 adding at the end the following new subparagraph: 


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1 ‘‘(C) EXCLUSION.—In the case of a tax2 payer with respect to which there is an incon3 sistency described in subsection (n) who fails to 

4 substantiate such inconsistency to the satisfac5 tion of the Secretary, the term ‘earned income’ 

6 shall not include amounts to the extent of such 

7 inconsistency.’’. 

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

9 this section shall apply to taxable years ending after the 

10 date of the enactment of this Act. 

11 Subtitle C—Simplification and 

12 Reform of Education Incentives 

13 SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT. 

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

15 as follows: 

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

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

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

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

20 the sum of— 

21 ‘‘(1) 100 percent of so much of the qualified 

22 tuition and related expenses paid by the taxpayer 

23 during the taxable year (for education furnished to 

24 any eligible student for whom an election is in effect 

25 under this section for such taxable year during any 


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1 academic period beginning in such taxable year) as 

2 does not exceed $2,000, plus 

3 ‘‘(2) 25 percent of so much of such expenses so 

4 paid as exceeds the dollar amount in effect under 

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

6 amount. 

7 ‘‘(b) PORTION OF CREDIT REFUNDABLE.—40 per8 cent of the credit allowable under subsection (a)(1) (deter9 mined without regard to this subsection and section 26(a) 

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

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

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

13 apply to any taxpayer for any taxable year if such tax14 payer is a child to whom section 1(d) applies for such tax15 able year. 

16 ‘‘(c) LIMITATION BASED ON MODIFIED ADJUSTED

17 GROSS INCOME.— 

18 ‘‘(1) IN GENERAL.—The amount allowable as a 

19 credit under subsection (a) for any taxable year shall 

20 be reduced (but not below zero) by an amount which 

21 bears the same ratio to the amount so allowable (de22 termined without regard to this subsection and sub23 section (b) but after application of all other provi24 sions of this section) as— 

25 ‘‘(A) the excess of— 


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1 ‘‘(i) the taxpayer’s modified adjusted 

2 gross income for such taxable year, over 

3 ‘‘(ii) $80,000 (twice such amount in 

4 the case of a joint return), bears to 

5 ‘‘(B) $10,000 (twice such amount in the 

6 case of a joint return). 

7 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.— 

8 For purposes of this subsection, the term ‘modified 

9 adjusted gross income’ means the adjusted gross in10 come of the taxpayer for the taxable year increased 

11 by any amount excluded from gross income under 

12 section 911, 931, or 933. 

13 ‘‘(d) OTHER LIMITATIONS.— 

14 ‘‘(1) CREDIT ALLOWED ONLY FOR 5 TAXABLE

15 YEARS.—An election to have this section apply may 

16 not be made for any taxable year if such an election 

17 (by the taxpayer or any other individual) is in effect 

18 with respect to such student for any 5 prior taxable 

19 years. 

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

21 YEARS OF POSTSECONDARY EDUCATION.— 

22 ‘‘(A) IN GENERAL.—No credit shall be al23 lowed under subsection (a) for a taxable year 

24 with respect to the qualified tuition and related 

25 expenses of an eligible student if the student 


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1 has completed (before the beginning of such 

2 taxable year) the first 5 years of postsecondary 

3 education at an eligible educational institution. 

4 ‘‘(B) FIFTH YEAR LIMITATIONS.—In the 

5 case of an eligible student with respect to whom 

6 an election has been in effect for 4 preceding 

7 taxable years for purposes of the fifth taxable 

8 year— 

9 ‘‘(i) the amount of the credit allowed 

10 under this section for the taxable year 

11 shall not exceed an amount equal to 50 

12 percent of the credit otherwise determined 

13 with respect to such student under this 

14 section (without regard to this subpara15 graph), and 

16 ‘‘(ii) the amount of the credit deter17 mined under subsection (b) and allowable 

18 under subpart C shall not exceed an 

19 amount equal to 40 percent of the amount 

20 determined with respect to such student 

21 under clause (i). 

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

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

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

25 a student who— 


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1 ‘‘(A) meets the requirements of section 

2 484(a)(1) of the Higher Education Act of 1965 

3 (20 U.S.C. 1091(a)(1)), as in effect on August 

4 5, 1997, and 

‘‘(B) is carrying at least 1 5 ⁄2 the normal 

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

7 student is pursuing. 

8 ‘‘(2) QUALIFIED TUITION AND RELATED EX9 PENSES.— 

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

11 tuition and related expenses’ means tuition, 

12 fees, and course materials, required for enroll13 ment or attendance of— 

14 ‘‘(i) the taxpayer, 

15 ‘‘(ii) the taxpayer’s spouse, or 

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

17 at an eligible educational institution for courses 

18 of instruction of such individual at such institu19 tion. 

20 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV21 ING SPORTS, ETC.—Such term does not include 

22 expenses with respect to any course or other 

23 education involving sports, games, or hobbies, 

24 unless such course or other education is part of 

25 the individual’s degree program. 


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1 ‘‘(C) EXCEPTION FOR NONACADEMIC

2 FEES.—Such term does not include student ac3 tivity fees, athletic fees, insurance expenses, or 

4 other expenses unrelated to an individual’s aca5 demic course of instruction. 

6 ‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.— 

7 The term ‘eligible educational institution’ means an 

8 institution— 

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

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

11 1088), as in effect on August 5, 1997, and 

12 ‘‘(B) which is eligible to participate in a 

13 program under title IV of such Act. 

14 ‘‘(f) SPECIAL RULES.— 

15 ‘‘(1) IDENTIFICATION REQUIREMENTS.— 

16 ‘‘(A) STUDENT.—No credit shall be al17 lowed under subsection (a) to a taxpayer with 

18 respect to the qualified tuition and related ex19 penses of an individual unless the taxpayer in20 cludes the name and taxpayer identification 

21 number of such individual on the return of tax 

22 for the taxable year, and such taxpayer identi23 fication number was issued on or before the due 

24 date for filing such return. 


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1 ‘‘(B) TAXPAYER.—No credit shall be al2 lowed under this section if the identifying num3 ber of the taxpayer was issued after the due 

4 date for filing the return for the taxable year. 

5 ‘‘(C) INSTITUTION.—No credit shall be al6 lowed under this section unless the taxpayer in7 cludes the employer identification number of 

8 any institution to which qualified tuition and 

9 related expenses were paid with respect to the 

10 individual. 

11 ‘‘(2) ADJUSTMENT FOR CERTAIN SCHOLAR12 SHIPS, ETC.—The amount of qualified tuition and 

13 related expenses otherwise taken into account under 

14 subsection (a) with respect to an individual for an 

15 academic period shall be reduced (before the applica16 tion of subsection (c)) by the sum of any amounts 

17 paid for the benefit of such individual which are allo18 cable to such period as— 

19 ‘‘(A) a qualified scholarship which is ex20 cludable from gross income under section 117, 

21 ‘‘(B) an educational assistance allowance 

22 under chapter 30, 31, 32, 34, or 35 of title 38, 

23 United States Code, or under chapter 1606 of 

24 title 10, United States Code, and 


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1 ‘‘(C) a payment (other than a gift, be2 quest, devise, or inheritance within the meaning 

3 of section 102(a)) for such individual’s edu4 cational expenses, or attributable to such indi5 vidual’s enrollment at an eligible educational in6 stitution, which is excludable from gross income 

7 under any law of the United States. 

8 ‘‘(3) TREATMENT OF EXPENSES PAID BY DE9 PENDENT.—If an individual is a dependent of an10 other taxpayer for a taxable year beginning in the 

11 calendar year in which such individuals taxable year 

12 begins— 

13 ‘‘(A) no credit shall be allowed under sub14 section (a) to such individual for such individ15 ual’s taxable year, and 

16 ‘‘(B) qualified tuition and related expenses 

17 paid by such individual during such individual’s 

18 taxable year shall be treated for purposes of 

19 this section as paid by such other taxpayer. 

20 ‘‘(4) TREATMENT OF CERTAIN PREPAY21 MENTS.—If qualified tuition and related expenses 

22 are paid by the taxpayer during a taxable year for 

23 an academic period which begins during the first 3 

24 months following such taxable year, such academic 


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1 period shall be treated for purposes of this section 

2 as beginning during such taxable year. 

3 ‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit 

4 shall be allowed under this section for any amount 

5 for which a deduction is allowed under any other 

6 provision of this chapter. 

7 ‘‘(6) NO CREDIT FOR MARRIED INDIVIDUALS

8 FILING SEPARATE RETURNS.—If the taxpayer is a 

9 married individual (within the meaning of section 

10 7703), this section shall apply only if the taxpayer 

11 and the taxpayer’s spouse file a joint return for the 

12 taxable year. 

13 ‘‘(7) NONRESIDENT ALIENS.—If the taxpayer is 

14 a nonresident alien individual for any portion of the 

15 taxable year, this section shall apply only if such in16 dividual is treated as a resident alien of the United 

17 States for purposes of this chapter by reason of an 

18 election under subsection (g) or (h) of section 6013. 

19 ‘‘(8) RESTRICTIONS ON TAXPAYERS WHO IM20 PROPERLY CLAIMED CREDIT IN PRIOR YEAR.— 

21 ‘‘(A) TAXPAYERS MAKING PRIOR FRAUDU22 LENT OR RECKLESS CLAIMS.— 

23 ‘‘(i) IN GENERAL.—No credit shall be 

24 allowed under this section for any taxable 

25 year in the disallowance period. 


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1 ‘‘(ii) DISALLOWANCE PERIOD.—For 

2 purposes of clause (i), the disallowance pe3 riod is— 

4 ‘‘(I) the period of 10 taxable 

5 years after the most recent taxable 

6 year for which there was a final deter7 mination that the taxpayer’s claim of 

8 credit under this section was due to 

9 fraud, and 

10 ‘‘(II) the period of 2 taxable 

11 years after the most recent taxable 

12 year for which there was a final deter13 mination that the taxpayer’s claim of 

14 credit under this section was due to 

15 reckless or intentional disregard of 

16 rules and regulations (but not due to 

17 fraud). 

18 ‘‘(B) TAXPAYERS MAKING IMPROPER

19 PRIOR CLAIMS.—In the case of a taxpayer who 

20 is denied credit under this section for any tax21 able year as a result of the deficiency proce22 dures under subchapter B of chapter 63, no 

23 credit shall be allowed under this section for 

24 any subsequent taxable year unless the taxpayer 

25 provides such information as the Secretary may 


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1 require to demonstrate eligibility for such cred2 it. 

3 ‘‘(g) INFLATION ADJUSTMENT.— 

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

5 year beginning after 2018, the $80,000 amount in 

6 subsection (c)(1)(A)(ii) shall each be increased by an 

7 amount equal to— 

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

9 ‘‘(B) the cost-of-living adjustment deter10 mined under section 1(c)(2)(A) for the calendar 

11 year in which the taxable year begins, deter12 mined by substituting ‘calendar year 2017’ for 

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

14 ‘‘(2) ROUNDING.—If any amount as adjusted 

15 under paragraph (1) is not a multiple of $1,000, 

16 such amount shall be rounded to the next lowest 

17 multiple of $1,000. 

18 ‘‘(h) REGULATIONS.—The Secretary may prescribe 

19 such regulations or other guidance as may be necessary 

20 or appropriate to carry out this section, including regula21 tions providing for a recapture of the credit allowed under 

22 this section in cases where there is a refund in a subse23 quent taxable year of any amount which was taken into 

24 account in determining the amount of such credit.’’. 

25 (b) CONFORMING AMENDMENTS.— 


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1 (1) Section 72(t)(7)(B) is amended by striking 

2 ‘‘section 25A(g)(2)’’ and inserting ‘‘section 

3 25A(f)(2)’’. 

4 (2) Section 529(c)(3)(B)(v)(I) is amended by 

5 striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 

6 25A(f)(2)’’. 

7 (3) Section 529(e)(3)(B)(i) is amended by strik8 ing ‘‘section 25A(b)(3)’’ and inserting ‘‘section 

9 25A(d)’’. 

10 (4) Section 530(d)(2)(C) is amended— 

11 (A) by striking ‘‘section 25A(g)(2)’’ in 

12 clause (i)(I) and inserting ‘‘section 25A(f)(2)’’, 

13 and 

14 (B) by striking ‘‘HOPE AND LIFETIME

15 LEARNING CREDITS’’ in the heading and insert16 ing ‘‘AMERICAN OPPORTUNITY TAX CREDIT’’. 

17 (5) Section 530(d)(4)(B)(iii) is amended by 

18 striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 

19 25A(d)(4)(B)’’. 

20 (6) Section 6050S(e) is amended by striking 

21 ‘‘subsection (g)(2)’’ and inserting ‘‘subsection 

22 (f)(2)’’. 

23 (7) Section 6211(b)(4)(A) is amended by strik24 ing ‘‘subsection (i)(6)’’ and inserting ‘‘subsection 

25 (b)’’. 


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1 (8) Section 6213(g)(2)(J) is amended by strik2 ing ‘‘TIN required under section 25A(g)(1)’’ and in3 serting ‘‘TIN, and employer identification number, 

4 required under section 25A(f)(1)’’. 

5 (9) Section 6213(g)(2)(Q) is amended to read 

6 as follows: 

7 ‘‘(Q) an omission of information required 

8 by section 25A(f)(8)(B) or an entry on the re9 turn claiming the credit determined under sec10 tion 25A(a) for a taxable year for which the 

11 credit is disallowed under section 

12 25A(f)(8)(A).’’. 

13 (10) Section 1004(c) of division B of the Amer14 ican Recovery and Reinvestment Tax Act of 2009 is 

15 amended— 

16 (A) in paragraph (1)— 

17 (i) by striking ‘‘section 25A(i)(6)’’ 

18 each place it appears and inserting ‘‘sec19 tion 25A(b)’’, and 

20 (ii) by striking ‘‘with respect to tax21 able years beginning after 2008 and before 

22 2018’’ each place it appears and inserting 

23 ‘‘with respect to each taxable year’’, 

24 (B) in paragraph (2), by striking ‘‘Section 

25 25A(i)(6)’’ and inserting ‘‘Section 25A(b)’’, and 


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1 (C) in paragraph (3)(C), by striking ‘‘sub2 section (i)(6)’’ and inserting ‘‘subsection (b)’’. 

3 (11) The table of sections for subpart A of part 

4 IV of subchapter A of chapter 1 is amended by 

5 striking the item relating to section 25A and insert6 ing the following new item: 

‘‘Sec. 25A. American opportunity tax credit.’’. 

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2017. 

10 SEC. 1202. CONSOLIDATION OF EDUCATION SAVINGS 

11 RULES. 

12 (a) NO NEW CONTRIBUTIONS TO COVERDELL EDU13 CATION SAVINGS ACCOUNT.—Section 530(b)(1)(A) is 

14 amended to read as follows: 

15 ‘‘(A) Except in the case of rollover con16 tributions, no contribution will be accepted after 

17 December 31, 2017.’’. 

18 (b) LIMITED DISTRIBUTION ALLOWED FOR ELEMEN19 TARY AND SECONDARY TUITION.— 

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

21 by adding at the end the following new paragraph: 

22 ‘‘(7) TREATMENT OF ELEMENTARY AND SEC23 ONDARY TUITION.—Any reference in this subsection 

24 to the term ‘qualified higher education expense’ shall 

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1 tion with enrollment at an elementary or secondary 

2 school.’’. 

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

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

5 amount of cash distributions from all qualified tui6 tion programs described in subsection (b)(1)(A)(ii) 

7 with respect to a beneficiary during any taxable 

8 year, shall, in the aggregate, include not more than 

9 $10,000 in expenses for tuition incurred during the 

10 taxable year in connection with the enrollment or at11 tendance of the beneficiary as an elementary or sec12 ondary school student at a public, private, or reli13 gious school.’’. 

14 (c) ROLLOVERS TO QUALIFIED TUITION PROGRAMS

15 PERMITTED.—Section 530(d)(5) is amended by inserting 

16 ‘‘, or into (by purchase or contribution) a qualified tuition 

17 program (as defined in section 529),’’ after ‘‘into another 

18 Coverdell education savings account’’. 

19 (d) DISTRIBUTIONS FROM QUALIFIED TUITION PRO20 GRAMS FOR CERTAIN EXPENSES ASSOCIATED WITH REG21 ISTERED APPRENTICESHIP PROGRAMS.—Section 

22 529(e)(3) is amended by adding at the end the following 

23 new subparagraph: 

24 ‘‘(C) CERTAIN EXPENSES ASSOCIATED

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1 GRAMS.—The term ‘qualified higher education 

2 expenses’ shall include books, supplies, and 

3 equipment required for the enrollment or at4 tendance of a designated beneficiary in an ap5 prenticeship program registered and certified 

6 with the Secretary of Labor under section 1 of 

7 the National Apprenticeship Act (29 U.S.C. 

8 50).’’. 

9 (e) UNBORN CHILDREN ALLOWED AS ACCOUNT

10 BENEFICIARIES.—Section 529(e) is amended by adding at 

11 the end the following new paragraph: 

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

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

14 an unborn child from being treated as a des15 ignated beneficiary or an individual under this 

16 section. 

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

18 this paragraph— 

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

20 child’ means a child in utero. 

21 ‘‘(ii) CHILD IN UTERO.—The term 

22 ‘child in utero’ means a member of the 

23 species homo sapiens, at any stage of de24 velopment, who is carried in the womb.’’. 

25 (f) EFFECTIVE DATES.— 


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1 (1) IN GENERAL.—Except as otherwise pro2 vided in this subsection, the amendments made by 

3 this section shall apply to contributions made after 

4 December 31, 2017. 

5 (2) ROLLOVERS TO QUALIFIED TUITION PRO6 GRAMS.—The amendments made by subsection (b) 

7 shall apply to distributions after December 31, 

8 2017. 

9 SEC. 1203. REFORMS TO DISCHARGE OF CERTAIN STUDENT 

10 LOAN INDEBTEDNESS. 

11 (a) TREATMENT OF STUDENT LOANS DISCHARGED

12 ON ACCOUNT OF DEATH OR DISABILITY.—Section 108(f) 

13 is amended by adding at the end the following new para14 graph: 

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

16 DISABILITY.— 

17 ‘‘(A) IN GENERAL.—In the case of an indi18 vidual, gross income does not include any 

19 amount which (but for this subsection) would 

20 be includible in gross income by reasons of the 

21 discharge (in whole or in part) of any loan de22 scribed in subparagraph (B) if such discharge 

23 was— 

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

25 of section 437 of the Higher Education 


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1 Act of 1965 or the parallel benefit under 

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

3 the repayment of loan liability), 

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

5 of such Act, or 

6 ‘‘(iii) otherwise discharged on account 

7 of the death or total and permanent dis8 ability of the student. 

9 ‘‘(B) LOANS DESCRIBED.—A loan is de10 scribed in this subparagraph if such loan is— 

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

12 paragraph (2)), or 

13 ‘‘(ii) a private education loan (as de14 fined in section 140(7) of the Consumer 

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

16 1650(7))).’’. 

17 (b) EXCLUSION FROM GROSS INCOME FOR PAY18 MENTS MADE UNDER INDIAN HEALTH SERVICE LOAN

19 REPAYMENT PROGRAM.— 

20 (1) IN GENERAL.—Section 108(f)(4) is amend21 ed by inserting ‘‘under section 108 of the Indian 

22 Health Care Improvement Act,’’ after ‘‘338I of such 

23 Act,’’. 

24 (2) CLERICAL AMENDMENT.—The heading for 

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1 TAIN’’ and inserting ‘‘, INDIAN HEALTH SERVICE

2 LOAN REPAYMENT PROGRAM, AND CERTAIN’’. 

3 (c) EFFECTIVE DATES.— 

4 (1) SUBSECTION (a).—The amendment made 

5 by subsection (a)(1) shall apply to discharges of in6 debtedness after December 31, 2017. 

7 (2) SUBSECTION (b).—The amendments made 

8 by subsection (b) shall apply to amounts received in 

9 taxable years beginning after December 31, 2017. 

10 SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO 

11 EDUCATION. 

12 (a) IN GENERAL.—Subchapter B of chapter 1 is 

13 amended— 

14 (1) in part VII by striking sections 221 and 

15 222 (and by striking the items relating to such sec16 tions in the table of sections for such part), 

17 (2) in part VII by striking sections 135 and 

18 127 (and by striking the items relating to such sec19 tions in the table of sections for such part), and 

20 (3) by striking subsection (d) of section 117. 

21 (b) CONFORMING AMENDMENT RELATING TO SEC22 TION 221.— 

23 (1) Section 62(a) is amended by striking para24 graph (17). 


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1 (2) Section 74(d) is amended by striking 

2 ‘‘221,’’. 

3 (3) Section 86(b)(2)(A) is amended by striking 

4 ‘‘221,’’. 

5 (4) Section 219(g)(3)(A)(ii) is amended by 

6 striking ‘‘221,’’. 

7 (5) Section 163(h)(2) is amended by striking 

8 subparagraph (F). 

9 (6) Section 6050S(a) is amended— 

10 (A) by inserting ‘‘or’’ at the end of para11 graph (1), 

12 (B) by striking ‘‘or’’ at the end of para13 graph (2), and 

14 (C) by striking paragraph (3). 

15 (7) Section 6050S(e) is amended by striking all 

16 that follows ‘‘thereof)’’ and inserting a period. 

17 (c) CONFORMING AMENDMENTS RELATED TO SEC18 TION 222.— 

19 (1) Section 62(a) is amended by striking para20 graph (18). 

21 (2) Section 74(d)(2)(B) is amended by striking 

22 ‘‘222,’’. 

23 (3) Section 86(b)(2)(A) is amended by striking 

24 ‘‘222,’’. 


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1 (4) Section 219(g)(3)(A)(ii) is amended by 

2 striking ‘‘222,’’. 

3 (d) CONFORMING AMENDMENTS RELATING TO SEC4 TION 127.— 

5 (1) Section 125(f)(1) is amended by striking 

6 ‘‘127,’’. 

7 (2) Section 132(j)(8) is amended by striking 

8 ‘‘which are not excludable from gross income under 

9 section 127’’. 

10 (3) Section 414(n)(3)(C) is amended by strik11 ing ‘‘127,’’. 

12 (4) Section 414(t)(2) is amended by striking 

13 ‘‘127,’’. 

14 (5) Section 3121(a)(18) is amended by striking 

15 ‘‘127,’’. 

16 (6) Section 3231(e) is amended by striking 

17 paragraph (6). 

18 (7) Section 3306(b)(13) is amended by ‘‘127,’’. 

19 (8) Section 3401(a)(18) is amended by striking 

20 ‘‘127,’’. 

21 (9) Section 6039D(d)(1) is amended by striking 

22 ‘‘, 127’’. 

23 (e) CONFORMING AMENDMENTS RELATING TO SEC24 TION 117(d).— 

25 (1) Section 117(c)(1) is amended— 


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1 (A) by striking ‘‘subsections (a) and (d)’’ 

2 and inserting ‘‘subsection (a)’’, and 

3 (B) by striking ‘‘or qualified tuition reduc4 tion’’. 

5 (2) Section 414(n)(3)(C) is amended by strik6 ing ‘‘117(d),’’. 

7 (3) Section 414(t)(2) is amended by striking 

8 ‘‘117(d),’’. 

9 (f) CONFORMING AMENDMENTS RELATED TO SEC10 TION 135.— 

11 (1) Section 74(d)(2)(B) is amended by striking 

12 ‘‘135,’’. 

13 (2) Section 86(b)(2)(A) is amended by striking 

14 ‘‘135,’’. 

15 (3) Section 219(g)(3)(A)(ii) is amended by 

16 striking ‘‘135,’’. 

17 (g) EFFECTIVE DATES.— 

18 (1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, the amendments made by 

20 this section shall apply to taxable years beginning 

21 after December 31, 2017. 

22 (2) AMENDMENTS RELATING TO SECTION

23 117(d).—The amendments made by subsections 

24 (a)(3) and (e) shall apply to amounts paid or in25 curred after December 31, 2017. 


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1 SEC. 1205. ROLLOVERS BETWEEN QUALIFIED TUITION PRO2 GRAMS AND QUALIFIED ABLE PROGRAMS. 

3 (a) ROLLOVERS FROM QUALIFIED TUITION PRO4 GRAMS TO QUALIFIED ABLE PROGRAMS.—Section 

5 529(c)(3)(C)(i) is amended by striking ‘‘or’’ at the end 

6 of subclause (I), by striking the period at the end of sub7 clause (II) and inserting ‘‘, or’’, and by adding at the end 

8 the following new subclause: 

9 ‘‘(III) to an ABLE account (as 

10 defined in section 529A(e)(6)) of the 

11 designated beneficiary or a member of 

12 the family of the designated bene13 ficiary. 

14 Subclause (III) shall not apply to so much 

15 of a distribution which, when added to all 

16 other contributions made to the ABLE ac17 count for the taxable year, exceeds the lim18 itation under section 529A(b)(2)(B).’’. 

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

20 this section shall apply to distributions after December 31, 

21 2017. 


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1 Subtitle D—Simplification and 

2 Reform of Deductions 

3 SEC. 1301. REPEAL OF OVERALL LIMITATION ON ITEMIZED 

4 DEDUCTIONS. 

5 (a) IN GENERAL.—Part 1 of subchapter B of chapter 

6 1 is amended by striking section 68 (and the item relating 

7 to such section in the table of sections for such part). 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2017. 

11 SEC. 1302. MORTGAGE INTEREST. 

12 (a) MODIFICATION OF LIMITATIONS.— 

13 (1) IN GENERAL.—Section 163(h)(3) is amend14 ed to read as follows: 

15 ‘‘(3) QUALIFIED RESIDENCE INTEREST.—For 

16 purposes of this subsection— 

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

18 residence interest’ means any interest which is 

19 paid or accrued during the taxable year on in20 debtedness which— 

21 ‘‘(i) is incurred in acquiring, con22 structing, or substantially improving any 

23 qualified residence (determined as of the 

24 time the interest is accrued) of the tax25 payer, and 


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1 ‘‘(ii) is secured by such residence. 

2 Such term also includes interest on any indebt3 edness secured by such residence resulting from 

4 the refinancing of indebtedness meeting the re5 quirements of the preceding sentence (or this 

6 sentence); but only to the extent the amount of 

7 the indebtedness resulting from such refi8 nancing does not exceed the amount of the refi9 nanced indebtedness. 

10 ‘‘(B) LIMITATION.—The aggregate amount 

11 of indebtedness taken into account under sub12 paragraph (A) for any period shall not exceed 

13 $500,000 (half of such amount in the case of 

14 a married individual filing a separate return). 

15 ‘‘(C) TREATMENT OF INDEBTEDNESS IN16 CURRED ON OR BEFORE NOVEMBER 2, 2017.— 

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

18 pre-November 2, 2017, indebtedness, this 

19 paragraph shall apply as in effect imme20 diately before the enactment of the Tax 

21 Cuts and Jobs Act. 

22 ‘‘(ii) PRE-NOVEMBER 2, 2017, INDEBT23 EDNESS.—For purposes of this subpara24 graph, the term ‘pre-November 2, 2017, 

25 indebtedness’ means— 


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1 ‘‘(I) any principal residence ac2 quisition indebtedness which was in3 curred on or before November 2, 

4 2017, or 

5 ‘‘(II) any principal residence ac6 quisition indebtedness which is in7 curred after November 2, 2017, to re8 finance indebtedness described in 

9 clause (i) (or refinanced indebtedness 

10 meeting the requirements of this 

11 clause) to the extent (immediately 

12 after the refinancing) the principal 

13 amount of the indebtedness resulting 

14 from the refinancing does not exceed 

15 the principal amount of the refinanced 

16 indebtedness (immediately before the 

17 refinancing). 

18 ‘‘(iii) LIMITATION ON PERIOD OF RE19 FINANCING.—clause (ii)(II) shall not apply 

20 to any indebtedness after— 

21 ‘‘(I) the expiration of the term of 

22 the original indebtedness, or 

23 ‘‘(II) if the principal of such 

24 original indebtedness is not amortized 

25 over its term, the expiration of the 


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1 term of the 1st refinancing of such in2 debtedness (or if earlier, the date 

3 which is 30 years after the date of 

4 such 1st refinancing). 

5 ‘‘(iv) BINDING CONTRACT EXCEP6 TION.—In the case of a taxpayer who en7 ters into a written binding contract before 

8 November 2, 2017, to close on the pur9 chase of a principal residence before Janu10 ary 1, 2018, and who purchases such resi11 dence before April 1, 2018, subparagraphs 

12 (A) and (B) shall be applied by sub13 stituting ‘April 1, 2018’ for ‘November 2, 

14 2017’.’’. 

15 (2) CONFORMING AMENDMENTS.— 

16 (A) Section 108(h)(2) is by striking ‘‘for 

17 ‘$1,000,000 ($500,000’ in clause (ii) thereof’’ 

18 and inserting ‘‘for ‘$500,000 ($250,000’ in 

19 paragraph (2)(A), and ‘$1,000,000’ for 

20 ‘$500,000’ in paragraph (2)(B), thereof’’. 

21 (B) Section 163(h) is amended by striking 

22 subparagraphs (E) and (F) in paragraph (4). 

23 (b) TAXPAYERS LIMITED TO 1 QUALIFIED RESI24 DENCE.—Section 163(h)(4)(A)(i) is amended to read as 

25 follows: 


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1 ‘‘(i) IN GENERAL.—The term ‘quali2 fied residence’ means the principal resi3 dence (within the meaning of section 121) 

4 of the taxpayer.’’. 

5 (c) EFFECTIVE DATES.— 

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

7 this section shall apply to interest paid or accrued 

8 in taxable years beginning after December 31, 2017, 

9 with respect to indebtedness incurred before, on, or 

10 after such date. 

11 (2) TREATMENT OF GRANDFATHERED INDEBT12 EDNESS.—For application of the amendments made 

13 by this section to grandfathered indebtedness, see 

14 paragraph (3)(C) of section 163(h) of the Internal 

15 Revenue Code of 1986, as amended by this section. 

16 SEC. 1303. REPEAL OF DEDUCTION FOR CERTAIN TAXES 

17 NOT PAID OR ACCRUED IN A TRADE OR BUSI18 NESS. 

19 (a) IN GENERAL.—Section 164(b)(5) is amended to 

20 read as follows: 

21 ‘‘(5) LIMITATION IN CASE OF INDIVIDUALS.—In 

22 the case of a taxpayer other than a corporation— 

23 ‘‘(A) foreign real property taxes (other 

24 than taxes which are paid or accrued in car25 rying on a trade or business or an activity deVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00109 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 scribed in section 212) shall not be taken into 

2 account under subsection (a)(1), 

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

4 than taxes which are paid or accrued in car5 rying on a trade or business or an activity de6 scribed in section 212) taken into account 

7 under subsection (a)(1) for any taxable year 

8 shall not exceed $10,000 ($5,000 in the case of 

9 a married individual filing a separate return), 

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

11 taxes which are paid or accrued in carrying on 

12 a trade or business or an activity described in 

13 section 212, and 

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

15 State and local taxes.’’. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2017. 

19 SEC. 1304. REPEAL OF DEDUCTION FOR PERSONAL CAS20 UALTY LOSSES. 

21 (a) IN GENERAL.—Section 165(c) is amended by in22 serting ‘‘and’’ at the end of paragraph (1), by striking 

23 ‘‘; and’’ at the end of paragraph (2) and inserting a pe24 riod, and by striking paragraph (3). 

25 (b) CONFORMING AMENDMENTS.— 


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1 (1) Section 165(h) is amended to read as fol2 lows: 

3 ‘‘(h) SPECIAL RULE WHERE PERSONAL CASUALTY

4 GAINS EXCEED PERSONAL CASUALTY LOSSES.— 

5 ‘‘(1) IN GENERAL.—If the personal casualty 

6 gains for any taxable year exceed the personal cas7 ualty losses for such taxable year— 

8 ‘‘(A) all such gains shall be treated as 

9 gains from sales or exchanges of capital assets, 

10 and 

11 ‘‘(B) all such losses shall be treated as 

12 losses from sales or exchanges of capital assets. 

13 ‘‘(2) DEFINITIONS OF PERSONAL CASUALTY

14 GAIN AND PERSONAL CASUALTY LOSS.—For pur15 poses of this subsection— 

16 ‘‘(A) PERSONAL CASUALTY LOSS.—The 

17 term ‘personal casualty loss’ means any loss of 

18 property not connected with a trade or business 

19 or a transaction entered into for profit, if such 

20 loss arises from fire, storm, shipwreck, or other 

21 casualty, or from theft. 

22 ‘‘(B) PERSONAL CASUALTY GAIN.—The 

23 term ‘personal casualty gain’ means the recog24 nized gain from any involuntary conversion of 

25 property which is described in subparagraph 


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1 (A) arising from fire, storm, shipwreck, or other 

2 casualty, or from theft.’’. 

3 (2) Section 165 is amended by striking sub4 section (k). 

5 (3)(A) Section 165(l)(1) is amended by striking 

6 ‘‘a loss described in subsection (c)(3)’’ and inserting 

7 ‘‘an ordinary loss described in subsection (c)(2)’’. 

8 (B) Section 165(l) is amended— 

9 (i) by striking paragraph (5), 

10 (ii) by redesignating paragraphs (2), (3), 

11 and (4) as paragraphs (3), (4), and (5), respec12 tively, and 

13 (iii) by inserting after paragraph (1) the 

14 following new paragraph: 

15 ‘‘(2) LIMITATIONS.— 

16 ‘‘(A) DEPOSIT MAY NOT BE FEDERALLY

17 INSURED.—No election may be made under 

18 paragraph (1) with respect to any loss on a de19 posit in a qualified financial institution if part 

20 or all of such deposit is insured under Federal 

21 law. 

22 ‘‘(B) DOLLAR LIMITATION.—With respect 

23 to each financial institution, the aggregate 

24 amount of losses attributable to deposits in 

25 such financial institution to which an election 


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1 under paragraph (1) may be made by the tax2 payer for any taxable year shall not exceed 

3 $20,000 ($10,000 in the case of a separate re4 turn by a married individual). The limitation of 

5 the preceding sentence shall be reduced by the 

6 amount of any insurance proceeds under any 

7 State law which can reasonably be expected to 

8 be received with respect to losses on deposits in 

9 such institution.’’. 

10 (4) Section 172(b)(1)(E)(ii), prior to amend11 ment under title III, is amended by striking sub12 clause (I) and by redesignating subclauses (II) and 

13 (III) as subclauses (I) and (II), respectively. 

14 (5) Section 172(d)(4)(C) is amended by strik15 ing ‘‘paragraph (2) or (3) of section 165(c)’’ and in16 serting ‘‘section 165(c)(2)’’. 

17 (6) Section 274(f) is amended by striking 

18 ‘‘CASUALTY LOSSES,’’ in the heading thereof. 

19 (7) Section 280A(b) is amended by striking 

20 ‘‘CASUALTY LOSSES,’’ in the heading thereof. 

21 (8) Section 873(b), as amended by the pre22 ceding provisions of this Act, is amended by striking 

23 paragraph (1) and by redesignating paragraphs (2) 

24 and (3) as paragraphs (1) and (2), respectively. 


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1 (9) Section 504(b) of the Disaster Tax Relief 

2 and Airport and Airway Extension Act of 2017 is 

3 amended by adding at the end the following new 

4 paragraph: 

5 ‘‘(4) COORDINATION WITH TAX REFORM.—This 

6 subsection shall be applied without regard to the 

7 amendments made by section 1304 of the Tax Cuts 

8 and Jobs Act.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2017. 

12 SEC. 1305. LIMITATION ON WAGERING LOSSES. 

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

14 adding at the end the following: ‘‘For purposes of the pre15 ceding sentence, the term ‘losses from wagering trans16 actions’ includes any deduction otherwise allowable under 

17 this chapter incurred in carrying on any wagering trans18 action.’’. 

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2017. 

22 SEC. 1306. CHARITABLE CONTRIBUTIONS. 

23 (a) INCREASED LIMITATION FOR CASH CONTRIBU24 TIONS.—Section 170(b)(1) is amended by redesignating 


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1 subparagraph (G) as subparagraph (H) and by inserting 

2 after subparagraph (F) the following new subparagraph: 

3 ‘‘(G) INCREASED LIMITATION FOR CASH

4 CONTRIBUTIONS.— 

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

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

8 amount of such contributions which may 

9 be taken into account under subsection (a) 

10 for any taxable year shall not exceed 60 

11 percent of the taxpayer’s contribution base 

12 for such year. 

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

14 amount of contributions described in clause 

15 (i) exceeds the applicable limitation under 

16 clause (i), such excess shall be treated (in 

17 a manner consistent with the rules of sub18 section (d)(1)) as a charitable contribution 

19 to which clause (i) applies in each of the 

20 5 succeeding years in order of time. 

21 ‘‘(iii) COORDINATION WITH SUBPARA22 GRAPHS (A) AND (B).— 

23 ‘‘(I) IN GENERAL.—Contribu24 tions taken into account under this 


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1 subparagraph shall not be taken into 

2 account under subparagraph (A). 

3 ‘‘(II) LIMITATION REDUCTION.— 

4 Subparagraphs (A) and (B) shall be 

5 applied by reducing (but not below 

6 zero) the aggregate contribution limi7 tation allowed for the taxable year 

8 under each such subparagraph by the 

9 aggregate contributions allowed under 

10 this subparagraph for such taxable 

11 year.’’. 

12 (b) DENIAL OF DEDUCTION FOR COLLEGE ATH13 LETIC EVENT SEATING RIGHTS.—Section 170(l)(1) is 

14 amended to read as follows: 

15 ‘‘(1) IN GENERAL.—No deduction shall be al16 lowed under this section for any amount described in 

17 paragraph (2).’’. 

18 (c) CHARITABLE MILEAGE RATE ADJUSTED FOR IN19 FLATION.—Section 170(i) is amended by striking ‘‘shall 

20 be 14 cents per mile’’ and inserting ‘‘shall be a rate which 

21 takes into account the variable cost of operating an auto22 mobile’’. 

23 (d) REPEAL OF SUBSTANTIATION EXCEPTION IN

24 CASE OF CONTRIBUTIONS REPORTED BY DONEE.—Sec25 tion 170(f)(8) is amended by striking subparagraph (D) 


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1 and by redesignating subparagraph (E) as subparagraph 

2 (D). 

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

4 this section shall apply to contributions made in taxable 

5 years beginning after December 31, 2017. 

6 SEC. 1307. REPEAL OF DEDUCTION FOR TAX PREPARATION 

7 EXPENSES. 

8 (a) IN GENERAL.—Section 212 is amended by adding 

9 ‘‘or’’ at the end of paragraph (1), by striking ‘‘; or’’ at 

10 the end of paragraph (2) and inserting a period, and by 

11 striking paragraph (3). 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2017. 

15 SEC. 1308. REPEAL OF MEDICAL EXPENSE DEDUCTION. 

16 (a) IN GENERAL.—Part VII of subchapter B is 

17 amended by striking by striking section 213 (and by strik18 ing the item relating to such section in the table of sec19 tions for such subpart). 

20 (b) CONFORMING AMENDMENTS.— 

21 (1)(A) Section 105(f) is amended to read as fol22 lows: 

23 ‘‘(f) MEDICAL CARE.—For purposes of this section— 

24 ‘‘(1) IN GENERAL.—The term ‘medical care’ 

25 means amounts paid— 


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1 ‘‘(A) for the diagnosis, cure, mitigation, 

2 treatment, or prevention of disease, or for the 

3 purpose of affecting any structure or function 

4 of the body, 

5 ‘‘(B) for transportation primarily for and 

6 essential to medical care referred to in subpara7 graph (A), 

8 ‘‘(C) for qualified long-term care services 

9 (as defined in section 7702B(c)), or 

10 ‘‘(D) for insurance (including amounts 

11 paid as premiums under part B of title XVIII 

12 of the Social Security Act, relating to supple13 mentary medical insurance for the aged) cov14 ering medical care referred to in subparagraphs 

15 (A) and (B) or for any qualified long-term care 

16 insurance contract (as defined in section 

17 7702B(b)). 

18 In the case of a qualified long-term care insurance 

19 contract (as defined in section 7702B(b)), only eligi20 ble long-term care premiums (as defined in para21 graph (7)) shall be taken into account under sub22 paragraph (D). 

23 ‘‘(2) AMOUNTS PAID FOR CERTAIN LODGING

24 AWAY FROM HOME TREATED AS PAID FOR MEDICAL

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1 travagant under the circumstances) while away from 

2 home primarily for and essential to medical care re3 ferred to in paragraph (1)(A) shall be treated as 

4 amounts paid for medical care if— 

5 ‘‘(A) the medical care referred to in para6 graph (1)(A) is provided by a physician in a li7 censed hospital (or in a medical care facility 

8 which is related to, or the equivalent of, a li9 censed hospital), and 

10 ‘‘(B) there is no significant element of per11 sonal pleasure, recreation, or vacation in the 

12 travel away from home. 

13 The amount taken into account under the preceding 

14 sentence shall not exceed $50 for each night for each 

15 individual. 

16 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the 

17 meaning given to such term by section 1861(r) of 

18 the Social Security Act (42 U.S.C. 1395x(r)). 

19 ‘‘(4) CONTRACTS COVERING OTHER THAN MED20 ICAL CARE.—In the case of an insurance contract 

21 under which amounts are payable for other than 

22 medical care referred to in subparagraphs (A), (B) 

23 and (C) of paragraph (1)— 

24 ‘‘(A) no amount shall be treated as paid 

25 for insurance to which paragraph (1)(D) applies 


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1 unless the charge for such insurance is either 

2 separately stated in the contract, or furnished 

3 to the policyholder by the insurance company in 

4 a separate statement, 

5 ‘‘(B) the amount taken into account as the 

6 amount paid for such insurance shall not exceed 

7 such charge, and 

8 ‘‘(C) no amount shall be treated as paid 

9 for such insurance if the amount specified in 

10 the contract (or furnished to the policyholder by 

11 the insurance company in a separate statement) 

12 as the charge for such insurance is unreason13 ably large in relation to the total charges under 

14 the contract. 

15 ‘‘(5) CERTAIN PRE-PAID CONTRACTS.—Subject 

16 to the limitations of paragraph (4), premiums paid 

17 during the taxable year by a taxpayer before he at18 tains the age of 65 for insurance covering medical 

19 care (within the meaning of subparagraphs (A), (B), 

20 and (C) of paragraph (1)) for the taxpayer, his 

21 spouse, or a dependent after the taxpayer attains the 

22 age of 65 shall be treated as expenses paid during 

23 the taxable year for insurance which constitutes 

24 medical care if premiums for such insurance are 

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1 tract for a period of 10 years or more or until the 

2 year in which the taxpayer attains the age of 65 

3 (but in no case for a period of less than 5 years). 

4 ‘‘(6) COSMETIC SURGERY.— 

5 ‘‘(A) IN GENERAL.—The term ‘medical 

6 care’ does not include cosmetic surgery or other 

7 similar procedures, unless the surgery or proce8 dure is necessary to ameliorate a deformity 

9 arising from, or directly related to, a congenital 

10 abnormality, a personal injury resulting from 

11 an accident or trauma, or disfiguring disease. 

12 ‘‘(B) COSMETIC SURGERY DEFINED .—For 

13 purposes of this paragraph, the term ‘cosmetic 

14 surgery’ means any procedure which is directed 

15 at improving the patient’s appearance and does 

16 not meaningfully promote the proper function 

17 of the body or prevent or treat illness or dis18 ease. 

19 ‘‘(7) ELIGIBLE LONG-TERM CARE PREMIUMS.— 

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

21 section, the term ‘eligible long-term care pre22 miums’ means the amount paid during a tax23 able year for any qualified long-term care insur24 ance contract (as defined in section 7702B(b)) 

25 covering an individual, to the extent such 


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1 amount does not exceed the limitation deter2 mined under the following table: 

‘‘In the case of an individual with an 

attained age before the close of the 

taxable year of: 

The limitation is: 

40 or less $200 

More than 40 but not more than 50 $375 

More than 50 but not more than 60 $750 

More than 60 but not more than 70 $2,000 

More than 70 $2,500 

3 ‘‘(B) INDEXING.— 

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

5 taxable year beginning after 1997, each 

6 dollar amount in subparagraph (A) shall 

7 be increased by the medical care cost ad8 justment of such amount for such calendar 

9 year. Any increase determined under the 

10 preceding sentence shall be rounded to the 

11 nearest multiple of $10. 

12 ‘‘(ii) MEDICAL CARE COST ADJUST13 MENT.—For purposes of clause (i), the 

14 medical care cost adjustment for any cal15 endar year is the adjustment prescribed by 

16 the Secretary, in consultation with the Sec17 retary of Health and Human Services, for 

18 purposes of such clause. To the extent that 

19 CPI (as defined section 1(c)), or any com20 ponent thereof, is taken into account in de21 termining such adjustment, such adjustVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00122 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 ment shall be determined by taking into 

2 account C-CPI-U (as so defined), or the 

3 corresponding component thereof, in lieu of 

4 such CPI (or component thereof), but only 

5 with respect to the portion of such adjust6 ment which relates to periods after Decem7 ber 31, 2017. 

8 ‘‘(8) CERTAIN PAYMENTS TO RELATIVES

9 TREATED AS NOT PAID FOR MEDICAL CARE.—An 

10 amount paid for a qualified long-term care service 

11 (as defined in section 7702B(c)) provided to an indi12 vidual shall be treated as not paid for medical care 

13 if such service is provided— 

14 ‘‘(A) by the spouse of the individual or by 

15 a relative (directly or through a partnership, 

16 corporation, or other entity) unless the service 

17 is provided by a licensed professional with re18 spect to such service, or 

19 ‘‘(B) by a corporation or partnership which 

20 is related (within the meaning of section 267(b) 

21 or 707(b)) to the individual. 

22 For purposes of this paragraph, the term ‘relative’ 

23 means an individual bearing a relationship to the in24 dividual which is described in any of subparagraphs 

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1 graph shall not apply for purposes of subsection (b) 

2 with respect to reimbursements through insurance.’’. 

3 (B) Section 72(t)(2)(D)(i)(III) is amended by 

4 striking ‘‘section 213(d)(1)(D)’’ and inserting ‘‘sec5 tion 105(f)(1)(D)’’. 

6 (C) Section 104(a) is amended by striking ‘‘sec7 tion 213(d)(1)’’ in the last sentence and inserting 

8 ‘‘section 105(f)(1)’’. 

9 (D) Section 105(b) is amended by striking 

10 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

11 (E) Section 139D is amended by striking ‘‘sec12 tion 213’’ and inserting ‘‘section 223’’. 

13 (F) Section 162(l)(2) is amended by striking 

14 ‘‘section 213(d)(10)’’ and inserting ‘‘section 

15 105(f)(7)’’. 

16 (G) Section 220(d)(2)(A) is amended by strik17 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

18 (H) Section 223(d)(2)(A) is amended by strik19 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

20 (I) Section 419A(f)(2) is amended by striking 

21 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

22 (J) Section 501(c)(26)(A) is amended by strik23 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

24 (K) Section 2503(e) is amended by striking 

25 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 


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1 (L) Section 4980B(c)(4)(B)(i)(I) is amended by 

2 striking ‘‘section 213(d)’’ and inserting ‘‘section 

3 105(f)’’. 

4 (M) Section 6041(f) is amended by striking 

5 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

6 (N) Section 7702B(a)(2) is amended by strik7 ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

8 (O) Section 7702B(a)(4) is amended by strik9 ing ‘‘section 213(d)(1)(D)’’ and inserting ‘‘section 

10 105(f)(1)(D)’’. 

11 (P) Section 7702B(d)(5) is amended by striking 

12 ‘‘section 213(d)(10)’’ and inserting ‘‘section 

13 105(f)(7)’’. 

14 (Q) Section 9832(d)(3) is amended by striking 

15 ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 

16 (2) Section 72(t)(2)(B) is amended to read as 

17 follows: 

18 ‘‘(B) MEDICAL EXPENSES.—Distributions 

19 made to an individual (other than distributions 

20 described in subparagraph (A), (C), or (D) to 

21 the extent such distributions do not exceed the 

22 excess of— 

23 ‘‘(i) the expenses paid by the taxpayer 

24 during the taxable year, not compensated 

25 for by insurance or otherwise, for medical 


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1 care (as defined in 105(f)) of the taxpayer, 

2 his spouse, or a dependent (as defined in 

3 section 7706, determined without regard to 

4 subsections (b)(1), (b)(2), and (d)(1)(B) 

5 thereof), over 

6 ‘‘(ii) 10 percent of the taxpayer’s ad7 justed gross income.’’. 

8 (3) Section 162(l) is amended by striking para9 graph (3). 

10 (4) Section 402(l) is amended by striking para11 graph (7) and redesignating paragraph (8) as para12 graph (7). 

13 (5) Section 220(f) is amended by striking para14 graph (6). 

15 (6) Section 223(f) is amended by striking para16 graph (6). 

17 (7) Section 7702B(e) is amended by striking 

18 paragraph (2). 

19 (8) Section 7706(f)(7), as redesignated by this 

20 Act, is amended by striking ‘‘sections 105(b), 

21 132(h)(2)(B), and 213(d)(5)’’ and inserting ‘‘sec22 tions 105(b) and 132(h)(2)(B)’’. 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2017. 


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1 SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAY2 MENTS. 

3 (a) IN GENERAL.—Part VII of subchapter B is 

4 amended by striking by striking section 215 (and by strik5 ing the item relating to such section in the table of sec6 tions for such subpart). 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) CORRESPONDING REPEAL OF PROVISIONS

9 PROVIDING FOR INCLUSION OF ALIMONY IN GROSS

10 INCOME.— 

11 (A) Subsection (a) of section 61 is amend12 ed by striking paragraph (8) and by redesig13 nating paragraphs (9) through (15) as para14 graphs (8) through (14), respectively. 

15 (B) Part II of subchapter B of chapter 1 

16 is amended by striking section 71 (and by strik17 ing the item relating to such section in the 

18 table of sections for such part). 

19 (C) Subpart F of part I of subchapter J 

20 of chapter 1 is amended by striking section 682 

21 (and by striking the item relating to such sec22 tion in the table of sections for such subpart). 

23 (2) RELATED TO REPEAL OF SECTION 215.— 

24 (A) Section 62(a) is amended by striking 

25 paragraph (10). 


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1 (B) Section 3402(m)(1) is amended by 

2 striking ‘‘(other than paragraph (10) thereof)’’. 

3 (3) RELATED TO REPEAL OF SECTION 71.— 

4 (A) Section 121(d)(3) is amended— 

5 (i) by striking ‘‘(as defined in section 

6 71(b)(2))’’ in subparagraph (B), and 

7 (ii) by adding at the end the following 

8 new subparagraph: 

9 ‘‘(C) DIVORCE OR SEPARATION INSTRU10 MENT.—For purposes of this paragraph, the 

11 term ‘divorce or separation instrument’ 

12 means— 

13 ‘‘(i) a decree of divorce or separate 

14 maintenance or a written instrument inci15 dent to such a decree, 

16 ‘‘(ii) a written separation agreement, 

17 or 

18 ‘‘(iii) a decree (not described in clause 

19 (i)) requiring a spouse to make payments 

20 for the support or maintenance of the 

21 other spouse.’’. 

22 (B) Section 220(f)(7) is amended by strik23 ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 

24 inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 


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1 (C) Section 223(f)(7) is amended by strik2 ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 

3 inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 

4 (D) Section 382(l)(3)(B)(iii) is amended 

5 by striking ‘‘section 71(b)(2)’’ and inserting 

6 ‘‘section 121(d)(3)(C)’’. 

7 (E) Section 408(d)(6) is amended by strik8 ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 

9 inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 

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

11 this section shall apply to— 

12 (1) any divorce or separation instrument (as de13 fined in section 71(b)(2) of the Internal Revenue 

14 Code of 1986 as in effect before the date of the en15 actment of this Act) executed after December 31, 

16 2017, and 

17 (2) any divorce or separation instrument (as so 

18 defined) executed on or before such date and modi19 fied after such date if the modification expressly 

20 provides that the amendments made by this section 

21 apply to such modification. 

22 SEC. 1310. REPEAL OF DEDUCTION FOR MOVING EX23 PENSES. 

24 (a) IN GENERAL.—Part VII of subchapter B is 

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1 ing the item relating to such section in the table of sec2 tions for such subpart). 

3 (b) RETENTION OF MOVING EXPENSES FOR MEM4 BERS OF ARMED FORCES.—Section 134(b) is amended by 

5 adding at the end the following new paragraph: 

6 ‘‘(7) MOVING EXPENSES.—The term ‘qualified 

7 military benefit’ includes any benefit described in 

8 section 217(g) (as in effect before the enactment of 

9 the Tax Cuts And Jobs Act).’’. 

10 (c) CONFORMING AMENDMENTS.— 

11 (1) Section 62(a) is amended by striking para12 graph (15). 

13 (2) Section 274(m)(3) is amended by striking 

14 ‘‘(other than section 217)’’. 

15 (3) Section 3121(a) is amended by striking 

16 paragraph (11). 

17 (4) Section 3306(b) is amended by striking 

18 paragraph (9). 

19 (5) Section 3401(a) is amended by striking 

20 paragraph (15). 

21 (6) Section 7872(f) is amended by striking 

22 paragraph (11). 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2017. 


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1 SEC. 1311. TERMINATION OF DEDUCTION AND EXCLUSIONS 

2 FOR CONTRIBUTIONS TO MEDICAL SAVINGS 

3 ACCOUNTS. 

4 (a) TERMINATION OF INCOME TAX DEDUCTION.— 

5 Section 220 is amended by adding at the end the following 

6 new subsection: 

7 ‘‘(k) TERMINATION.—No deduction shall be allowed 

8 under subsection (a) with respect to any taxable year be9 ginning after December 31, 2017.’’. 

10 (b) TERMINATION OF EXCLUSION FOR EMPLOYER11 PROVIDED CONTRIBUTIONS.—Section 106 is amended by 

12 striking subsection (b). 

13 (c) CONFORMING AMENDMENTS.— 

14 (1) Section 62(a) is amended by striking para15 graph (16). 

16 (2) Section 106(d) is amended by striking para17 graph (2), by redesignating paragraph (3) as para18 graph (6), and by inserting after paragraph (1) the 

19 following new paragraphs: 

20 ‘‘(2) NO CONSTRUCTIVE RECEIPT.—No amount 

21 shall be included in the gross income of any em22 ployee solely because the employee may choose be23 tween the contributions referred to in paragraph (1) 

24 and employer contributions to another health plan of 

25 the employer. 


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1 ‘‘(3) SPECIAL RULE FOR DEDUCTION OF EM2 PLOYER CONTRIBUTIONS.—Any employer contribu3 tion to a health savings account (as so defined), if 

4 otherwise allowable as a deduction under this chap5 ter, shall be allowed only for the taxable year in 

6 which paid. 

7 ‘‘(4) EMPLOYER HEALTH SAVINGS ACCOUNT

8 CONTRIBUTION REQUIRED TO BE SHOWN ON RE9 TURN.—Every individual required to file a return 

10 under section 6012 for the taxable year shall include 

11 on such return the aggregate amount contributed by 

12 employers to the health savings accounts (as so de13 fined) of such individual or such individual’s spouse 

14 for such taxable year. 

15 ‘‘(5) HEALTH SAVINGS ACCOUNT CONTRIBU16 TIONS NOT PART OF COBRA COVERAGE.—Paragraph 

17 (1) shall not apply for purposes of section 4980B.’’. 

18 (3) Section 223(b)(4) is amended by striking 

19 subparagraph (A), by redesignating subparagraphs 

20 (B) and (C) as subparagraphs (A) and (B), respec21 tively, and by striking the second sentence thereof. 

22 (4) Section 223(b)(5) is amended by striking 

23 ‘‘under paragraph (3))’’ and all that follows through 

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1 ing the following: ‘‘under paragraph (3)) shall be di2 vided equally between the spouses’’. 

3 (5) Section 223(c) is amended by striking para4 graph (5). 

5 (6) Section 3231(e) is amended by striking 

6 paragraph (10). 

7 (7) Section 3306(b) is amended by striking 

8 paragraph (17). 

9 (8) Section 3401(a) is amended by striking 

10 paragraph (21). 

11 (9) Chapter 43 is amended by striking section 

12 4980E (and by striking the item relating to such 

13 section in the table of sections for such chapter). 

14 (10) Section 4980G is amended to read as fol15 lows: 

16 ‘‘SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COM17 PARABLE HEALTH SAVINGS ACCOUNT CON18 TRIBUTIONS. 

19 ‘‘(a) IN GENERAL.—In the case of an employer who 

20 makes a contribution to the health savings account of any 

21 employee during a calendar year, there is hereby imposed 

22 a tax on the failure of such employer to meet the require23 ments of subsection (d) for such calendar year. 

24 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im25 posed by subsection (a) on any failure for any calendar 


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1 year is the amount equal to 35 percent of the aggregate 

2 amount contributed by the employer to health savings ac3 counts of employees for taxable years of such employees 

4 ending with or within such calendar year. 

5 ‘‘(c) WAIVER BY SECRETARY.—In the case of a fail6 ure which is due to reasonable cause and not to willful 

7 neglect, the Secretary may waive part or all of the tax 

8 imposed by subsection (a) to the extent that the payment 

9 of such tax would be excessive relative to the failure in10 volved. 

11 ‘‘(d) EMPLOYER REQUIRED TO MAKE COMPARABLE

12 HEALTH SAVINGS ACCOUNT CONTRIBUTIONS FOR ALL

13 PARTICIPATING EMPLOYEES.— 

14 ‘‘(1) IN GENERAL.—An employer meets the re15 quirements of this subsection for any calendar year 

16 if the employer makes available comparable con17 tributions to the health savings accounts of all com18 parable participating employees for each coverage 

19 period during such calendar year. 

20 ‘‘(2) COMPARABLE CONTRIBUTIONS.— 

21 ‘‘(A) IN GENERAL.—For purposes of para22 graph (1), the term ‘comparable contributions’ 

23 means contributions— 

24 ‘‘(i) which are the same amount, or 


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1 ‘‘(ii) which are the same percentage of 

2 the annual deductible limit under the high 

3 deductible health plan covering the employ4 ees. 

5 ‘‘(B) PART-YEAR EMPLOYEES.—In the 

6 case of an employee who is employed by the em7 ployer for only a portion of the calendar year, 

8 a contribution to the health savings account of 

9 such employee shall be treated as comparable if 

10 it is an amount which bears the same ratio to 

11 the comparable amount (determined without re12 gard to this subparagraph) as such portion 

13 bears to the entire calendar year. 

14 ‘‘(3) COMPARABLE PARTICIPATING EMPLOY15 EES.— 

16 ‘‘(A) IN GENERAL.—For purposes of para17 graph (1), the term ‘comparable participating 

18 employees’ means all employees— 

19 ‘‘(i) who are eligible individuals cov20 ered under any high deductible health plan 

21 of the employer, and 

22 ‘‘(ii) who have the same category of 

23 coverage. 


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1 ‘‘(B) CATEGORIES OF COVERAGE.—For 

2 purposes of subparagraph (B), the categories of 

3 coverage are self-only and family coverage. 

4 ‘‘(4) PART-TIME EMPLOYEES.— 

5 ‘‘(A) IN GENERAL .—Paragraph (3) shall 

6 be applied separately with respect to part-time 

7 employees and other employees. 

8 ‘‘(B) PART-TIME EMPLOYEE.—For pur9 poses of subparagraph (A), the term ‘part-time 

10 employee’ means any employee who is custom11 arily employed for fewer than 30 hours per 

12 week. 

13 ‘‘(5) SPECIAL RULE FOR NON-HIGHLY COM14 PENSATED EMPLOYEES.—For purposes of applying 

15 this section to a contribution to a health savings ac16 count of an employee who is not a highly com17 pensated employee (as defined in section 414(q)), 

18 highly compensated employees shall not be treated 

19 as comparable participating employees. 

20 ‘‘(e) CONTROLLED GROUPS.—For purposes of this 

21 section, all persons treated as a single employer under sub22 section (b), (c), (m), or (o) of section 414 shall be treated 

23 as 1 employer. 


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1 ‘‘(f) DEFINITIONS.—Terms used in this section which 

2 are also used in section 223 have the respective meanings 

3 given such terms in section 223. 

4 ‘‘(g) REGULATIONS.—The Secretary shall issue regu5 lations to carry out the purposes of this section.’’. 

6 (11) Section 6051(a) is amended by striking 

7 paragraph (11). 

8 (12) Section 6051(a)(14)(A) is amended by 

9 striking ‘‘paragraphs (11) and (12)’’ and inserting 

10 ‘‘paragraph (12)’’. 

11 (d) EFFECTIVE DATE.—The amendment made by 

12 this section shall apply to taxable years beginning after 

13 December 31, 2017. 

14 SEC. 1312. DENIAL OF DEDUCTION FOR EXPENSES ATTRIB15 UTABLE TO THE TRADE OR BUSINESS OF 

16 BEING AN EMPLOYEE. 

17 (a) IN GENERAL.—Part IX of subchapter B of chap18 ter 1 is amended by inserting after the item relating to 

19 section 262 the following new item: 

20 ‘‘SEC. 262A. EXPENSES ATTRIBUTABLE TO BEING AN EM21 PLOYEE. 

22 ‘‘(a) IN GENERAL.—Except as otherwise provided in 

23 this section, no deduction shall be allowed with respect to 

24 any trade or business of the taxpayer which consists of 


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1 the performance of services by the taxpayer as an em2 ployee. 

3 ‘‘(b) EXCEPTION FOR ABOVE-THE-LINE DEDUC4 TIONS.—Subsection (a) shall not apply to any deduction 

5 allowable (determined without regard to subsection (a)) in 

6 determining adjusted gross income.’’. 

7 (b) REPEAL OF CERTAIN ABOVE-THE-LINE TRADE

8 AND BUSINESS DEDUCTIONS OF EMPLOYEES.— 

9 (1) IN GENERAL.—Section 62(a)(2) is amend10 ed— 

11 (A) by striking subparagraphs (B), (C), 

12 and (D), and 

13 (B) by redesignating subparagraph (E) as 

14 subparagraph (B). 

15 (2) CONFORMING AMENDMENTS.— 

16 (A) Section 62 is amended by striking sub17 sections (b) and (d) and by redesignating sub18 sections (c) and (e) as subsections (b) and (c), 

19 respectively. 

20 (B) Section 62(a)(20) is amended by strik21 ing ‘‘subsection (e)’’ and inserting ‘‘subsection 

22 (c)’’. 

23 (c) CONTINUED EXCLUSION OF WORKING CONDI24 TION FRINGE BENEFITS.—Section 132(d) is amended by 


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1 inserting ‘‘(determined without regard to section 262A)’’ 

2 after ‘‘section 162’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 Subtitle E—Simplification and Re7 form of Exclusions and Taxable 

8 Compensation 

9 SEC. 1401. LIMITATION ON EXCLUSION FOR EMPLOYER10 PROVIDED HOUSING. 

11 (a) IN GENERAL.—Section 119 is amended by adding 

12 at the end the following new subsection: 

13 ‘‘(e) LIMITATION ON EXCLUSION OF LODGING.— 

14 ‘‘(1) IN GENERAL.—The aggregate amount ex15 cluded from gross income of the taxpayer under sub16 sections (a) and (d) with respect to lodging for any 

17 taxable year shall not exceed $50,000 (half such 

18 amount in the case of a married individual filing a 

19 separate return). 

20 ‘‘(2) LIMITATION TO 1 HOME.—Subsections (a) 

21 and (d) (separately and in combination) shall not 

22 apply with respect to more than 1 residence of the 

23 taxpayer at any given time. In the case of a joint re24 turn, the preceding sentence shall apply separately 

25 to each spouse for any period during which each 


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1 spouse resides separate from the other spouse in a 

2 residence which is provided in connection with the 

3 employment of each spouse, respectively. 

4 ‘‘(3) LIMITATION FOR HIGHLY COMPENSATED

5 EMPLOYEES.— 

6 ‘‘(A) REDUCED FOR EXCESS COMPENSA7 TION.—In the case of an individual whose com8 pensation for the taxable year exceeds the 

9 amount in effect under section 414(q)(1)(B)(i) 

10 for the calendar in which such taxable year be11 gins, the $50,000 amount under paragraph (1) 

12 shall be reduced (but not below zero) by an 

13 amount equal to 50 percent of such excess. For 

14 purposes of the preceding sentence, the term 

15 ‘compensation’ means wages (as defined in sec16 tion 3121(a) (without regard to the contribu17 tion and benefit base limitation in section 

18 3121(a)(1)). 

19 ‘‘(B) EXCLUSION DENIED FOR 5-PERCENT

20 OWNERS.—In the case of an individual who is 

21 a 5-percent owner (as defined in section 

22 416(i)(1)(B)(i)) of the employer at any time 

23 during the taxable year, the amount under 

24 paragraph (1) shall be zero.’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRIN5 CIPAL RESIDENCE. 

6 (a) REQUIREMENT THAT RESIDENCE BE PRINCIPAL

7 RESIDENCE FOR 5 YEARS DURING 8-YEAR PERIOD.— 

8 Subsection (a) of section 121 is amended— 

9 (1) by striking ‘‘5-year period’’ and inserting 

10 ‘‘8-year period’’, and 

11 (2) by striking ‘‘2 years’’ and inserting ‘‘5 

12 years’’. 

13 (b) APPLICATION TO ONLY 1 SALE OR EXCHANGE

14 EVERY 5 YEARS.—Paragraph (3) of section 121(b) is 

15 amended to read as follows: 

16 ‘‘(3) APPLICATION TO ONLY 1 SALE OR EX17 CHANGE EVERY 5 YEARS.—Subsection (a) shall not 

18 apply to any sale or exchange by the taxpayer if, 

19 during the 5-year period ending on the date of such 

20 sale or exchange, there was any other sale or ex21 change by the taxpayer to which subsection (a) ap22 plied.’’. 

23 (c) PHASEOUT BASED ON MODIFIED ADJUSTED

24 GROSS INCOME.—Section 121 is amended by adding at 

25 the end the following new subsection: 


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1 ‘‘(h) PHASEOUT BASED ON MODIFIED ADJUSTED

2 GROSS INCOME.— 

3 ‘‘(1) IN GENERAL.—If the average modified ad4 justed gross income of the taxpayer for the taxable 

5 year and the 2 preceding taxable years exceeds 

6 $250,000 (twice such amount in the case of a joint 

7 return), the amount which would (but for this sub8 section) be excluded from gross income under sub9 section (a) for such taxable year shall be reduced 

10 (but not below zero) by the amount of such excess. 

11 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.— 

12 For purposes of this subsection, the term ‘modified 

13 adjusted gross income’ means, with respect to any 

14 taxable year, adjusted gross income determined after 

15 application of this section (but without regard to 

16 subsection (b)(1) and this subsection). 

17 ‘‘(3) SPECIAL RULE FOR JOINT RETURNS.—In 

18 the case of a joint return, the average modified ad19 justed gross income of the taxpayer shall be deter20 mined without regard to any taxable year with re21 spect to which the taxpayer did not file a joint re22 turn.’’. 

23 (d) CONFORMING AMENDMENTS.— 


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1 (1) The following provisions of section 121 are 

2 each amended by striking ‘‘5-year period’’ each place 

3 it appears therein and inserting ‘‘8-year period’’: 

4 (A) Subsection (b)(5)(C)(ii)(I). 

5 (B) Subsection (c)(1)(B)(i)(I). 

6 (C) Subsection (d)(7)(B). 

7 (D) Subparagraphs (A) and (B) of sub8 section (d)(9). 

9 (E) Subsection (d)(10). 

10 (F) Subsection (d)(12)(A). 

11 (2) Section 121(c)(1)(B)(ii) is amended by 

12 striking ‘‘2 years’’ and inserting ‘‘5 years’’: 

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

14 this section shall apply to sales and exchanges after De15 cember 31, 2017. 

16 SEC. 1403. REPEAL OF EXCLUSION, ETC., FOR EMPLOYEE 

17 ACHIEVEMENT AWARDS. 

18 (a) IN GENERAL.—Section 74 is amended by striking 

19 subsection (c). 

20 (b) REPEAL OF LIMITATION ON DEDUCTION.—Sec21 tion 274 is amended by striking subsection (j). 

22 (c) CONFORMING AMENDMENTS.— 

23 (1) Section 102(c)(2) is amended by striking 

24 the first sentence. 


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1 (2) Section 414(n)(3)(C) is amended by strik2 ing ‘‘274(j),’’. 

3 (3) Section 414(t)(2) is amended by striking 

4 ‘‘274(j),’’. 

5 (4) Section 3121(a)(20) is amended by striking 

6 ‘‘74(c)’’. 

7 (5) Section 3231(e)(5) is amended by striking 

8 ‘‘74(c),’’. 

9 (6) Section 3306(b)(16) is amended by striking 

10 ‘‘74(c),’’. 

11 (7) Section 3401(a)(19) is amended by striking 

12 ‘‘74(c),’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2017. 

16 SEC. 1404. SUNSET OF EXCLUSION FOR DEPENDENT CARE 

17 ASSISTANCE PROGRAMS. 

18 (a) IN GENERAL.—Section 129 is amended by adding 

19 at the end the following new subsection: 

20 ‘‘(f) TERMINATION.—Subsection (a) shall not apply 

21 to taxable years beginning after December 31, 2022.’’. 

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

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

24 of this Act. 


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1 SEC. 1405. REPEAL OF EXCLUSION FOR QUALIFIED MOVING 

2 EXPENSE REIMBURSEMENT. 

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

4 striking paragraph (6). 

5 (b) CONFORMING AMENDMENTS.— 

6 (1) Section 82 is amended by striking ‘‘Except 

7 as provided in section 132(a)(6), there’’ and insert8 ing ‘‘There’’. 

9 (2) Section 132 is amended by striking sub10 section (g). 

11 (3) Section 132(l) is amended by striking by 

12 striking ‘‘subsections (e) and (g)’’ and inserting 

13 ‘‘subsection (e)’’. 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2017. 

17 SEC. 1406. REPEAL OF EXCLUSION FOR ADOPTION ASSIST18 ANCE PROGRAMS. 

19 (a) IN GENERAL.—Part III of subchapter B of chap20 ter 1 is amended by striking section 137 (and by striking 

21 the item relating to such section in the table of sections 

22 for such part). 

23 (b) CONFORMING AMENDMENTS.— 

24 (1) Sections 414(n)(3)(C), 414(t)(2), 

25 74(d)(2)(B), 86(b)(2)(A), 219(g)(3)(A)(ii) are each 

26 amended by striking ‘‘, 137’’. 


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1 (2) Section 1016(a), as amended by the pre2 ceding provision of this Act, is amended by striking 

3 paragraph (26). 

4 (3) Section 6039D(d)(1), as amended by the 

5 preceding provisions of this Act, is amended— 

6 (A) by striking ‘‘, or 137’’, and 

7 (B) by inserting ‘‘or’’ before ‘‘125’’. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2017. 

11 Subtitle F—Simplification and Re12 form of Savings, Pensions, Re13 tirement 

14 SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE15 CHARACTERIZATION OF ROTH IRA CON16 TRIBUTIONS AS TRADITIONAL IRA CON17 TRIBUTIONS. 

18 (a) IN GENERAL.—Section 408A(d) is amended by 

19 striking paragraph (6) and by redesignating paragraph 

20 (7) as paragraph (6). 

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2017. 


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1 SEC. 1502. REDUCTION IN MINIMUM AGE FOR ALLOWABLE 

2 IN-SERVICE DISTRIBUTIONS. 

3 (a) IN GENERAL.—Section 401(a)(36) is amended by 

striking ‘‘age 62’’ and inserting ‘‘age 59 1 4 ⁄2’’. 

5 (b) APPLICATION TO GOVERNMENTAL SECTION

6 457(b) PLANS.—Clause (i) of section 457(d)(1)(A) is 

7 amended by inserting ‘‘(in the case of a plan maintained 

8 by an employer described in subsection (e)(1)(A), age 59 

1 9 ⁄2)’’ before the comma at the end. 

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

11 this section shall apply to plan years beginning after De12 cember 31, 2017. 

13 SEC. 1503. MODIFICATION OF RULES GOVERNING HARD14 SHIP DISTRIBUTIONS. 

15 (a) IN GENERAL.—Not later than 1 year after the 

16 date of the enactment of this Act, the Secretary of the 

17 Treasury shall modify Treasury Regulation section 

18 1.401(k)–1(d)(3)(iv)(E) to— 

19 (1) delete the 6-month prohibition on contribu20 tions imposed by paragraph (2) thereof, and 

21 (2) make any other modifications necessary to 

22 carry out the purposes of section 

23 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 

24 1986. 


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1 (b) EFFECTIVE DATE.—The revised regulations 

2 under this section shall apply to plan years beginning after 

3 December 31, 2017. 

4 SEC. 1504. MODIFICATION OF RULES RELATING TO HARD5 SHIP WITHDRAWALS FROM CASH OR DE6 FERRED ARRANGEMENTS. 

7 (a) IN GENERAL.—Section 401(k) is amended by 

8 adding at the end the following: 

9 ‘‘(14) SPECIAL RULES RELATING TO HARDSHIP

10 WITHDRAWALS.—For purposes of paragraph 

11 (2)(B)(i)(IV)— 

12 ‘‘(A) AMOUNTS WHICH MAY BE WITH13 DRAWN.—The following amounts may be dis14 tributed upon hardship of the employee: 

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

16 or stock bonus plan to which section 

17 402(e)(3) applies. 

18 ‘‘(ii) Qualified nonelective contribu19 tions (as defined in subsection (m)(4)(C)). 

20 ‘‘(iii) Qualified matching contributions 

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

22 ‘‘(iv) Earnings on any contributions 

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

24 ‘‘(B) NO REQUIREMENT TO TAKE AVAIL25 ABLE LOAN.—A distribution shall not be treatVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00148 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 ed as failing to be made upon the hardship of 

2 an employee solely because the employee does 

3 not take any available loan under the plan.′′.’’. 

4 (b) CONFORMING AMENDMENT.—Section 

5 401(k)(2)(B)(i)(IV) is amended to read as follows: 

6 ‘‘(IV) subject to the provisions of 

7 paragraph (14), upon hardship of the 

8 employee, or′′.’’. 

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

10 this section shall apply to plan years beginning after De11 cember 31, 2017. 

12 SEC. 1505. EXTENDED ROLLOVER PERIOD FOR THE ROLL13 OVER OF PLAN LOAN OFFSET AMOUNTS IN 

14 CERTAIN CASES. 

15 (a) IN GENERAL.—Paragraph (3) of section 402(c) 

16 is amended by adding at the end the following new sub17 paragraph: 

18 ‘‘(C) ROLLOVER OF CERTAIN PLAN LOAN

19 OFFSET AMOUNTS.— 

20 ‘‘(i) IN GENERAL.—In the case of a 

21 qualified plan loan offset amount, para22 graph (1) shall not apply to any transfer 

23 of such amount made after the due date 

24 (including extensions) for filing the return 

25 of tax for the taxable year in which such 


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1 amount is treated as distributed from a 

2 qualified employer plan. 

3 ‘‘(ii) QUALIFIED PLAN LOAN OFFSET

4 AMOUNT.—For purposes of this subpara5 graph, the term ‘qualified plan loan offset 

6 amount’ means a plan loan offset amount 

7 which is treated as distributed from a 

8 qualified employer plan to a participant or 

9 beneficiary solely by reason of— 

10 ‘‘(I) the termination of the quali11 fied employer plan, or 

12 ‘‘(II) the failure to meet the re13 payment terms of the loan from such 

14 plan because of the separation from 

15 service of the participant (whether 

16 due to layoff, cessation of business, 

17 termination of employment, or other18 wise). 

19 ‘‘(iii) PLAN LOAN OFFSET AMOUNT.— 

20 For purposes of clause (ii), the term ‘plan 

21 loan offset amount’ means the amount by 

22 which the participant’s accrued benefit 

23 under the plan is reduced in order to repay 

24 a loan from the plan. 


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1 ‘‘(iv) LIMITATION.—This subpara2 graph shall not apply to any plan loan off3 set amount unless such plan loan offset 

4 amount relates to a loan to which section 

5 72(p)(1) does not apply by reason of sec6 tion 72(p)(2). 

7 ‘‘(v) QUALIFIED EMPLOYER PLAN.— 

8 For purposes of this subsection, the term 

9 ‘qualified employer plan’ has the meaning 

10 given such term by section 72(p)(4).’’. 

11 (b) CONFORMING AMENDMENT.—Subparagraph (A) 

12 of section 402(c)(3) is amended by striking ‘‘subpara13 graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2017. 

17 SEC. 1506. MODIFICATION OF NONDISCRIMINATION RULES 

18 TO PROTECT OLDER, LONGER SERVICE PAR19 TICIPANTS. 

20 (a) IN GENERAL.—Section 401 is amended— 

21 (1) by redesignating subsection (o) as sub22 section (p), and 

23 (2) by inserting after subsection (n) the fol24 lowing new subsection: 


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1 ‘‘(o) SPECIAL RULES FOR APPLYING NON2 DISCRIMINATION RULES TO PROTECT OLDER, LONGER

3 SERVICE AND GRANDFATHERED PARTICIPANTS.— 

4 ‘‘(1) TESTING OF DEFINED BENEFIT PLANS

5 WITH CLOSED CLASSES OF PARTICIPANTS.— 

6 ‘‘(A) BENEFITS, RIGHTS, OR FEATURES

7 PROVIDED TO CLOSED CLASSES.—A defined 

8 benefit plan which provides benefits, rights, or 

9 features to a closed class of participants shall 

10 not fail to satisfy the requirements of sub11 section (a)(4) by reason of the composition of 

12 such closed class or the benefits, rights, or fea13 tures provided to such closed class, if— 

14 ‘‘(i) for the plan year as of which the 

15 class closes and the 2 succeeding plan 

16 years, such benefits, rights, and features 

17 satisfy the requirements of subsection 

18 (a)(4) (without regard to this subpara19 graph but taking into account the rules of 

20 subparagraph (I)), 

21 ‘‘(ii) after the date as of which the 

22 class was closed, any plan amendment 

23 which modifies the closed class or the ben24 efits, rights, and features provided to such 

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1 cantly in favor of highly compensated em2 ployees, and 

3 ‘‘(iii) the class was closed before April 

4 5, 2017, or the plan is described in sub5 paragraph (C). 

6 ‘‘(B) AGGREGATE TESTING WITH DEFINED

7 CONTRIBUTION PLANS PERMITTED ON A BENE8 FITS BASIS.— 

9 ‘‘(i) IN GENERAL.—For purposes of 

10 determining compliance with subsection 

11 (a)(4) and section 410(b), a defined benefit 

12 plan described in clause (iii) may be aggre13 gated and tested on a benefits basis with 

14 1 or more defined contribution plans, in15 cluding with the portion of 1 or more de16 fined contribution plans which— 

17 ‘‘(I) provides matching contribu18 tions (as defined in subsection 

19 (m)(4)(A)), 

20 ‘‘(II) provides annuity contracts 

21 described in section 403(b) which are 

22 purchased with matching contribu23 tions or nonelective contributions, or 

24 ‘‘(III) consists of an employee 

25 stock ownership plan (within the 


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1 meaning of section 4975(e)(7)) or a 

2 tax credit employee stock ownership 

3 plan (within the meaning of section 

4 409(a)). 

5 ‘‘(ii) SPECIAL RULES FOR MATCHING

6 CONTRIBUTIONS.—For purposes of clause 

7 (i), if a defined benefit plan is aggregated 

8 with a portion of a defined contribution 

9 plan providing matching contributions— 

10 ‘‘(I) such defined benefit plan 

11 must also be aggregated with any por12 tion of such defined contribution plan 

13 which provides elective deferrals de14 scribed in subparagraph (A) or (C) of 

15 section 402(g)(3), and 

16 ‘‘(II) such matching contribu17 tions shall be treated in the same 

18 manner as nonelective contributions, 

19 including for purposes of applying the 

20 rules of subsection (l). 

21 ‘‘(iii) PLANS DESCRIBED.—A defined 

22 benefit plan is described in this clause if— 

23 ‘‘(I) the plan provides benefits to 

24 a closed class of participants, 


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1 ‘‘(II) for the plan year as of 

2 which the class closes and the 2 suc3 ceeding plan years, the plan satisfies 

4 the requirements of section 410(b) 

5 and subsection (a)(4) (without regard 

6 to this subparagraph but taking into 

7 account the rules of subparagraph 

8 (I)), 

9 ‘‘(III) after the date as of which 

10 the class was closed, any plan amend11 ment which modifies the closed class 

12 or the benefits provided to such closed 

13 class does not discriminate signifi14 cantly in favor of highly compensated 

15 employees, and 

16 ‘‘(IV) the class was closed before 

17 April 5, 2017, or the plan is described 

18 in subparagraph (C). 

19 ‘‘(C) PLANS DESCRIBED.—A plan is de20 scribed in this subparagraph if, taking into ac21 count any predecessor plan— 

22 ‘‘(i) such plan has been in effect for 

23 at least 5 years as of the date the class is 

24 closed, and 


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1 ‘‘(ii) during the 5-year period pre2 ceding the date the class is closed, there 

3 has not been a substantial increase in the 

4 coverage or value of the benefits, rights, or 

5 features described in subparagraph (A) or 

6 in the coverage or benefits under the plan 

7 described in subparagraph (B)(iii) (which8 ever is applicable). 

9 ‘‘(D) DETERMINATION OF SUBSTANTIAL

10 INCREASE FOR BENEFITS, RIGHTS, AND FEA11 TURES.—In applying subparagraph (C)(ii) for 

12 purposes of subparagraph (A)(iii), a plan shall 

13 be treated as having had a substantial increase 

14 in coverage or value of the benefits, rights, or 

15 features described in subparagraph (A) during 

16 the applicable 5-year period only if, during such 

17 period— 

18 ‘‘(i) the number of participants cov19 ered by such benefits, rights, or features 

20 on the date such period ends is more than 

21 50 percent greater than the number of 

22 such participants on the first day of the 

23 plan year in which such period began, or 

24 ‘‘(ii) such benefits, rights, and fea25 tures have been modified by 1 or more 


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1 plan amendments in such a way that, as of 

2 the date the class is closed, the value of 

3 such benefits, rights, and features to the 

4 closed class as a whole is substantially 

5 greater than the value as of the first day 

6 of such 5-year period, solely as a result of 

7 such amendments. 

8 ‘‘(E) DETERMINATION OF SUBSTANTIAL

9 INCREASE FOR AGGREGATE TESTING ON BENE10 FITS BASIS.—In applying subparagraph (C)(ii) 

11 for purposes of subparagraph (B)(iii)(IV), a 

12 plan shall be treated as having had a substan13 tial increase in coverage or benefits during the 

14 applicable 5-year period only if, during such pe15 riod— 

16 ‘‘(i) the number of participants bene17 fitting under the plan on the date such pe18 riod ends is more than 50 percent greater 

19 than the number of such participants on 

20 the first day of the plan year in which such 

21 period began, or 

22 ‘‘(ii) the average benefit provided to 

23 such participants on the date such period 

24 ends is more than 50 percent greater than 

25 the average benefit provided on the first 


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1 day of the plan year in which such period 

2 began. 

3 ‘‘(F) CERTAIN EMPLOYEES DIS4 REGARDED.—For purposes of subparagraphs 

5 (D) and (E), any increase in coverage or value 

6 or in coverage or benefits, whichever is applica7 ble, which is attributable to such coverage and 

8 value or coverage and benefits provided to em9 ployees— 

10 ‘‘(i) who became participants as a re11 sult of a merger, acquisition, or similar 

12 event which occurred during the 7-year pe13 riod preceding the date the class is closed, 

14 or 

15 ‘‘(ii) who became participants by rea16 son of a merger of the plan with another 

17 plan which had been in effect for at least 

18 5 years as of the date of the merger, 

19 shall be disregarded, except that clause (ii) 

20 shall apply for purposes of subparagraph (D) 

21 only if, under the merger, the benefits, rights, 

22 or features under 1 plan are conformed to the 

23 benefits, rights, or features of the other plan 

24 prospectively. 


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1 ‘‘(G) RULES RELATING TO AVERAGE BEN2 EFIT.—For purposes of subparagraph (E)— 

3 ‘‘(i) the average benefit provided to 

4 participants under the plan will be treated 

5 as having remained the same between the 

6 2 dates described in subparagraph (E)(ii) 

7 if the benefit formula applicable to such 

8 participants has not changed between such 

9 dates, and 

10 ‘‘(ii) if the benefit formula applicable 

11 to 1 or more participants under the plan 

12 has changed between such 2 dates, then 

13 the average benefit under the plan shall be 

14 considered to have increased by more than 

15 50 percent only if— 

16 ‘‘(I) the total amount determined 

17 under section 430(b)(1)(A)(i) for all 

18 participants benefitting under the 

19 plan for the plan year in which the 5- 

20 year period described in subparagraph 

21 (E) ends, exceeds 

22 ‘‘(II) the total amount deter23 mined under section 430(b)(1)(A)(i) 

24 for all such participants for such plan 

25 year, by using the benefit formula in 


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1 effect for each such participant for 

2 the first plan year in such 5-year pe3 riod, by more than 50 percent. 

4 In the case of a CSEC plan (as defined in 

5 section 414(y)), the normal cost of the 

6 plan (as determined under section 

7 433(j)(1)(B)) shall be used in lieu of the 

8 amount determined under section 

9 430(b)(1)(A)(i). 

10 ‘‘(H) TREATMENT AS SINGLE PLAN.—For 

11 purposes of subparagraphs (E) and (G), a plan 

12 described in section 413(c) shall be treated as 

13 a single plan rather than as separate plans 

14 maintained by each participating employer. 

15 ‘‘(I) SPECIAL RULES.—For purposes of 

16 subparagraphs (A)(i) and (B)(iii)(II), the fol17 lowing rules shall apply: 

18 ‘‘(i) In applying section 410(b)(6)(C), 

19 the closing of the class of participants shall 

20 not be treated as a significant change in 

21 coverage under section 410(b)(6)(C)(i)(II). 

22 ‘‘(ii) 2 or more plans shall not fail to 

23 be eligible to be aggregated and treated as 

24 a single plan solely by reason of having dif25 ferent plan years. 


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1 ‘‘(iii) Changes in the employee popu2 lation shall be disregarded to the extent at3 tributable to individuals who become em4 ployees or cease to be employees, after the 

5 date the class is closed, by reason of a 

6 merger, acquisition, divestiture, or similar 

7 event. 

8 ‘‘(iv) Aggregation and all other testing 

9 methodologies otherwise applicable under 

10 subsection (a)(4) and section 410(b) may 

11 be taken into account. 

12 The rule of clause (ii) shall also apply for pur13 poses of determining whether plans to which 

14 subparagraph (B)(i) applies may be aggregated 

15 and treated as 1 plan for purposes of deter16 mining whether such plans meet the require17 ments of subsection (a)(4) and section 410(b). 

18 ‘‘(J) SPUN-OFF PLANS.—For purposes of 

19 this paragraph, if a portion of a defined benefit 

20 plan described in subparagraph (A) or (B)(iii) 

21 is spun off to another employer and the spun22 off plan continues to satisfy the requirements 

23 of— 

24 ‘‘(i) subparagraph (A)(i) or 

25 (B)(iii)(II), whichever is applicable, if the 


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1 original plan was still within the 3-year pe2 riod described in such subparagraph at the 

3 time of the spin off, and 

4 ‘‘(ii) subparagraph (A)(ii) or 

5 (B)(iii)(III), whichever is applicable, 

6 the treatment under subparagraph (A) or (B) 

7 of the spun-off plan shall continue with respect 

8 to such other employer. 

9 ‘‘(2) TESTING OF DEFINED CONTRIBUTION

10 PLANS.— 

11 ‘‘(A) TESTING ON A BENEFITS BASIS.—A 

12 defined contribution plan shall be permitted to 

13 be tested on a benefits basis if— 

14 ‘‘(i) such defined contribution plan 

15 provides make-whole contributions to a 

16 closed class of participants whose accruals 

17 under a defined benefit plan have been re18 duced or eliminated, 

19 ‘‘(ii) for the plan year of the defined 

20 contribution plan as of which the class eli21 gible to receive such make-whole contribu22 tions closes and the 2 succeeding plan 

23 years, such closed class of participants sat24 isfies the requirements of section 


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1 410(b)(2)(A)(i) (determined by applying 

2 the rules of paragraph (1)(I)), 

3 ‘‘(iii) after the date as of which the 

4 class was closed, any plan amendment to 

5 the defined contribution plan which modi6 fies the closed class or the allocations, ben7 efits, rights, and features provided to such 

8 closed class does not discriminate signifi9 cantly in favor of highly compensated em10 ployees, and 

11 ‘‘(iv) the class was closed before April 

12 5, 2017, or the defined benefit plan under 

13 clause (i) is described in paragraph (1)(C) 

14 (as applied for purposes of paragraph 

15 (1)(B)(iii)(IV)). 

16 ‘‘(B) AGGREGATION WITH PLANS INCLUD17 ING MATCHING CONTRIBUTIONS.— 

18 ‘‘(i) IN GENERAL.—With respect to 1 

19 or more defined contribution plans de20 scribed in subparagraph (A), for purposes 

21 of determining compliance with subsection 

22 (a)(4) and section 410(b), the portion of 

23 such plans which provides make-whole con24 tributions or other nonelective contribu25 tions may be aggregated and tested on a 


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1 benefits basis with the portion of 1 or 

2 more other defined contribution plans 

3 which— 

4 ‘‘(I) provides matching contribu5 tions (as defined in subsection 

6 (m)(4)(A)), 

7 ‘‘(II) provides annuity contracts 

8 described in section 403(b) which are 

9 purchased with matching contribu10 tions or nonelective contributions, or 

11 ‘‘(III) consists of an employee 

12 stock ownership plan (within the 

13 meaning of section 4975(e)(7)) or a 

14 tax credit employee stock ownership 

15 plan (within the meaning of section 

16 409(a)). 

17 ‘‘(ii) SPECIAL RULES FOR MATCHING

18 CONTRIBUTIONS.—Rules similar to the 

19 rules of paragraph (1)(B)(ii) shall apply 

20 for purposes of clause (i). 

21 ‘‘(C) SPECIAL RULES FOR TESTING DE22 FINED CONTRIBUTION PLAN FEATURES PRO23 VIDING MATCHING CONTRIBUTIONS TO CERTAIN

24 OLDER, LONGER SERVICE PARTICIPANTS.—In 

25 the case of a defined contribution plan which 


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1 provides benefits, rights, or features to a closed 

2 class of participants whose accruals under a de3 fined benefit plan have been reduced or elimi4 nated, the plan shall not fail to satisfy the re5 quirements of subsection (a)(4) solely by reason 

6 of the composition of the closed class or the 

7 benefits, rights, or features provided to such 

8 closed class if the defined contribution plan and 

9 defined benefit plan otherwise meet the require10 ments of subparagraph (A) but for the fact that 

11 the make-whole contributions under the defined 

12 contribution plan are made in whole or in part 

13 through matching contributions. 

14 ‘‘(D) SPUN-OFF PLANS.—For purposes of 

15 this paragraph, if a portion of a defined con16 tribution plan described in subparagraph (A) or 

17 (C) is spun off to another employer, the treat18 ment under subparagraph (A) or (C) of the 

19 spun-off plan shall continue with respect to the 

20 other employer if such plan continues to comply 

21 with the requirements of clauses (ii) (if the 

22 original plan was still within the 3-year period 

23 described in such clause at the time of the spin 

24 off) and (iii) of subparagraph (A), as deterVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00165 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 mined for purposes of subparagraph (A) or (C), 

2 whichever is applicable. 

3 ‘‘(3) DEFINITIONS.—For purposes of this sub4 section— 

5 ‘‘(A) MAKE-WHOLE CONTRIBUTIONS.—Ex6 cept as otherwise provided in paragraph (2)(C), 

7 the term ‘make-whole contributions’ means non8 elective allocations for each employee in the 

9 class which are reasonably calculated, in a con10 sistent manner, to replace some or all of the re11 tirement benefits which the employee would 

12 have received under the defined benefit plan 

13 and any other plan or qualified cash or deferred 

14 arrangement under subsection (k)(2) if no 

15 change had been made to such defined benefit 

16 plan and such other plan or arrangement. For 

17 purposes of the preceding sentence, consistency 

18 shall not be required with respect to employees 

19 who were subject to different benefit formulas 

20 under the defined benefit plan. 

21 ‘‘(B) REFERENCES TO CLOSED CLASS OF

22 PARTICIPANTS.—References to a closed class of 

23 participants and similar references to a closed 

24 class shall include arrangements under which 1 

25 or more classes of participants are closed, exVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00166 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 cept that 1 or more classes of participants 

2 closed on different dates shall not be aggre3 gated for purposes of determining the date any 

4 such class was closed. 

5 ‘‘(C) HIGHLY COMPENSATED EMPLOYEE.— 

6 The term ‘highly compensated employee’ has 

7 the meaning given such term in section 

8 414(q).′′.’’. 

9 (b) PARTICIPATION REQUIREMENTS.—Paragraph 

10 (26) of section 401(a) is amended by adding at the end 

11 the following new subparagraph: 

12 ‘‘(I) PROTECTED PARTICIPANTS.— 

13 ‘‘(i) IN GENERAL.—A plan shall be 

14 deemed to satisfy the requirements of sub15 paragraph (A) if— 

16 ‘‘(I) the plan is amended— 

17 ‘‘(aa) to cease all benefit ac18 cruals, or 

19 ‘‘(bb) to provide future ben20 efit accruals only to a closed 

21 class of participants, 

22 ‘‘(II) the plan satisfies subpara23 graph (A) (without regard to this sub24 paragraph) as of the effective date of 

25 the amendment, and 


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1 ‘‘(III) the amendment was adopt2 ed before April 5, 2017, or the plan is 

3 described in clause (ii). 

4 ‘‘(ii) PLANS DESCRIBED.—A plan is 

5 described in this clause if the plan would 

6 be described in subsection (o)(1)(C), as ap7 plied for purposes of subsection 

8 (o)(1)(B)(iii)(IV) and by treating the effec9 tive date of the amendment as the date the 

10 class was closed for purposes of subsection 

11 (o)(1)(C). 

12 ‘‘(iii) SPECIAL RULES.—For purposes 

13 of clause (i)(II), in applying section 

14 410(b)(6)(C), the amendments described in 

15 clause (i) shall not be treated as a signifi16 cant change in coverage under section 

17 410(b)(6)(C)(i)(II). 

18 ‘‘(iv) SPUN-OFF PLANS.—For pur19 poses of this subparagraph, if a portion of 

20 a plan described in clause (i) is spun off to 

21 another employer, the treatment under 

22 clause (i) of the spun-off plan shall con23 tinue with respect to the other employer.’’. 

24 (c) EFFECTIVE DATE.— 


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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section 

3 shall take effect on the date of the enactment of this 

4 Act, without regard to whether any plan modifica5 tions referred to in such amendments are adopted or 

6 effective before, on, or after such date of enactment. 

7 (2) SPECIAL RULES.— 

8 (A) ELECTION OF EARLIER APPLICA9 TION.—At the election of the plan sponsor, the 

10 amendments made by this section shall apply to 

11 plan years beginning after December 31, 2013. 

12 (B) CLOSED CLASSES OF PARTICIPANTS.— 

13 For purposes of paragraphs (1)(A)(iii), 

14 (1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) 

15 of the Internal Revenue Code of 1986 (as added 

16 by this section), a closed class of participants 

17 shall be treated as being closed before April 5, 

18 2017, if the plan sponsor’s intention to create 

19 such closed class is reflected in formal written 

20 documents and communicated to participants 

21 before such date. 

22 (C) CERTAIN POST-ENACTMENT PLAN

23 AMENDMENTS.—A plan shall not be treated as 

24 failing to be eligible for the application of sec25 tion 401(o)(1)(A), 401(o)(1)(B)(iii), or 


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1 401(a)(26) of such Code (as added by this sec2 tion) to such plan solely because in the case 

3 of— 

4 (i) such section 401(o)(1)(A), the plan 

5 was amended before the date of the enact6 ment of this Act to eliminate 1 or more 

7 benefits, rights, or features, and is further 

8 amended after such date of enactment to 

9 provide such previously eliminated benefits, 

10 rights, or features to a closed class of par11 ticipants, or 

12 (ii) such section 401(o)(1)(B)(iii) or 

13 section 401(a)(26), the plan was amended 

14 before the date of the enactment of this 

15 Act to cease all benefit accruals, and is 

16 further amended after such date of enact17 ment to provide benefit accruals to a closed 

18 class of participants. Any such section 

19 shall only apply if the plan otherwise meets 

20 the requirements of such section and in ap21 plying such section, the date the class of 

22 participants is closed shall be the effective 

23 date of the later amendment. 


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1 Subtitle G—Estate, Gift, and Gen2 eration-skipping Transfer Taxes 

3 SEC. 1601. INCREASE IN CREDIT AGAINST ESTATE, GIFT, 

4 AND GENERATION-SKIPPING TRANSFER TAX. 

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

6 striking ‘‘$5,000,000’’ and inserting ‘‘$10,000,000’’. 

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

8 this section shall apply to estates of decedents dying, gen9 eration-skipping transfers, and gifts made, after Decem10 ber 31, 2017. 

11 SEC. 1602. REPEAL OF ESTATE AND GENERATION-SKIPPING 

12 TRANSFER TAXES. 

13 (a) ESTATE TAX REPEAL.— 

14 (1) IN GENERAL.—Subchapter C of chapter 11 

15 is amended by adding at the end the following new 

16 section: 

17 ‘‘SEC. 2210. TERMINATION. 

18 ‘‘(a) IN GENERAL.—Except as provided in subsection 

19 (b), this chapter shall not apply to the estates of decedents 

20 dying after December 31, 2024. 

21 ‘‘(b) CERTAIN DISTRIBUTIONS FROM QUALIFIED

22 DOMESTIC TRUSTS.—In applying section 2056A with re23 spect to the surviving spouse of a decedent dying on or 

24 before December 31, 2024— 


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1 ‘‘(1) section 2056A(b)(1)(A) shall not apply to 

2 distributions made after the 10-year period begin3 ning on such date, and 

4 ‘‘(2) section 2056A(b)(1)(B) shall not apply 

5 after such date.’’. 

6 (2) CONFORMING AMENDMENTS.—Section 

7 1014(b) is amended— 

8 (A) in paragraph (6), by striking ‘‘was in9 cludible in determining’’ and all that follows 

10 through the end and inserting ‘‘was includible 

11 (or would have been includible without regard 

12 to section 2210) in determining the value of the 

13 decedent’s gross estate under chapter 11 of 

14 subtitle B’’ , 

15 (B) in paragraph (9), by striking ‘‘required 

16 to be included’’ through ‘‘Code of 1939’’ and 

17 inserting ‘‘required to be included (or would 

18 have been required to be included without re19 gard to section 2210) in determining the value 

20 of the decedent’s gross estate under chapter 11 

21 of subtitle B’’, and 

22 (C) in paragraph (10), by striking ‘‘Prop23 erty includible in the gross estate’’ and insert24 ing ‘‘Property includible (or which would have 


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1 been includible without regard to section 2210) 

2 in the gross estate’’. 

3 (3) CLERICAL AMENDMENT.—The table of sec4 tions for subchapter C of chapter 11 is amended by 

5 adding at the end the following new item: 

‘‘Sec. 2210. Termination.’’. 

6 (b) GENERATION-SKIPPING TRANSFER TAX RE7 PEAL.— 

8 (1) IN GENERAL.—Subchapter G of chapter 13 

9 of subtitle B of such Code is amended by adding at 

10 the end the following new section: 

11 ‘‘SEC. 2664. TERMINATION. 

12 ‘‘This chapter shall not apply to generation-skipping 

13 transfers after December 31, 2024.’’. 

14 (2) CLERICAL AMENDMENT.—The table of sec15 tions for subchapter G of chapter 13 of such Code 

16 is amended by adding at the end the following new 

17 item: 

‘‘Sec. 2664. Termination.’’. 

18 (c) CONFORMING AMENDMENTS RELATED TO GIFT

19 TAX.— 

20 (1) COMPUTATION OF GIFT TAX.—Section 2502 

21 is amended by adding at the end the following new 

22 subsection: 

23 ‘‘(d) GIFTS MADE AFTER 2024.— 


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1 ‘‘(1) IN GENERAL.—In the case of a gift made 

2 after December 31, 2024, subsection (a) shall be ap3 plied by substituting ‘subsection (d)(2)’ for ‘section 

4 2001(c)’ and ‘such subsection’ for ‘such section’. 

5 ‘‘(2) RATE SCHEDULE.— 

‘‘If the amount with respect to which the 

tentative tax to be computed is:.

The tentative tax 

is: 

Not over $10,000 ........................................................... 18% of such amount. 

Over $10,000 but not over $20,000 .............................. $1,800, plus 20% of 

the excess over 

$10,000. 

Over $20,000 but not over $40,000 .............................. $3,800, plus 22% of 

the excess over 

$20,000. 

Over $40,000 but not over $60,000 .............................. $8,200, plus 24% of 

the excess over 

$40,000. 

Over $60,000 but not over $80,000 .............................. $13,000, plus 26% of 

the excess over 

$60,000. 

Over $80,000 but not over $100,000 ............................ $18,200, plus 28% of 

the excess over 

$80,000. 

Over $100,000 but not over $150,000 .......................... $23,800, plus 30% of 

the excess over 

$100,000. 

Over $150,000 but not over $250,000 .......................... $38,800, plus 32% of 

the excess of 

$150,000. 

Over $250,000 but not over $500,000 .......................... $70,800, plus 34% of 

the excess over 

$250,000. 

Over $500,000 ............................................................... $155,800, plus 35% of 

the excess of 

$500,000.’’. 

6 (2) LIFETIME GIFT EXEMPTION.—Section 2505 

7 is amended by adding at the end the following new 

8 subsection: 

9 ‘‘(d) GIFTS MADE AFTER 2024.— 

10 ‘‘(1) IN GENERAL.—In the case of a gift made 

11 after December 31, 2024, subsection (a)(1) shall be 


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1 applied by substituting ‘the amount of the tentative 

2 tax which would be determined under the rate sched3 ule set forth in section 2502(a)(2) if the amount 

4 with respect to which such tentative tax is to be 

5 computed were $10,000,000’ for ‘the applicable 

6 credit amount in effect under section 2010(c) which 

7 would apply if the donor died as of the end of the 

8 calendar year’. 

9 ‘‘(2) INFLATION ADJUSTMENT.— 

10 ‘‘(A) IN GENERAL.—In the case of any cal11 endar year after 2024, the dollar amount in 

12 subsection (a)(1) (after application of this sub13 section) shall be increased by an amount equal 

14 to— 

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

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

18 calendar year by substituting ‘calendar 

19 year 2011’ for ‘calendar year 2016’ in 

20 clause (ii) thereof. 

21 ‘‘(B) ROUNDING.—If any amount as ad22 justed under paragraph (1) is not a multiple of 

23 $10,000, such amount shall be rounded to the 

24 nearest multiple of $10,000.’’. 


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1 (3) OTHER CONFORMING AMENDMENTS RE2 LATED TO GIFT TAX.—Section 2801 is amended by 

3 adding at the end the following new subsection: 

4 ‘‘(g) GIFTS RECEIVED AFTER 2024.—In the case of 

5 a gift received after December 31, 2024, subsection (a)(1) 

6 shall be applied by substituting ‘section 2502(a)(2)’ for 

7 ‘section 2001(c) as in effect on the date of such receipt’.’’. 

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

9 this section shall apply to estates of decedents dying, gen10 eration-skipping transfers, and gifts made, after Decem11 ber 31, 2024. 

12 TITLE II—ALTERNATIVE 

13 MINIMUM TAX REPEAL 

14 SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX. 

15 (a) IN GENERAL.—Subchapter A of chapter 1 is 

16 amended by striking part VI (and by striking the item 

17 relating to such part in the table of parts for subchapter 

18 A). 

19 (b) CREDIT FOR PRIOR YEAR MINIMUM TAX LIABIL20 ITY.— 

21 (1) LIMITATION.—Subsection (c) of section 53 

22 is amended to read as follows: 

23 ‘‘(c) LIMITATION.—The credit allowable under sub24 section (a) shall not exceed the regular tax liability of the 


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1 taxpayer reduced by the sum of the credits allowed under 

2 subparts A, B, and D.’’. 

3 (2) CREDITS TREATED AS REFUNDABLE.—Sec4 tion 53 is amended by adding at the end the fol5 lowing new subsection: 

6 ‘‘(e) PORTION OF CREDIT TREATED AS REFUND7 ABLE.— 

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

9 year beginning in 2019, 2020, 2021, or 2022, the 

10 limitation under subsection (c) shall be increased by 

11 the AMT refundable credit amount for such year. 

12 ‘‘(2) AMT REFUNDABLE CREDIT AMOUNT.— 

13 For purposes of paragraph (1), the AMT refundable 

14 credit amount is an amount equal to 50 percent 

15 (100 percent in the case of a taxable year beginning 

16 in 2022) of the excess (if any) of— 

17 ‘‘(A) the minimum tax credit determined 

18 under subsection (b) for the taxable year, over 

19 ‘‘(B) the minimum tax credit allowed 

20 under subsection (a) for such year (before the 

21 application of this subsection for such year). 

22 ‘‘(3) CREDIT REFUNDABLE.—For purposes of 

23 this title (other than this section), the credit allowed 

24 by reason of this subsection shall be treated as a 


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1 credit allowed under subpart C (and not this sub2 part). 

3 ‘‘(4) SHORT TAXABLE YEARS.—In the case of 

4 any taxable year of less than 365 days, the AMT re5 fundable credit amount determined under paragraph 

6 (2) with respect to such taxable year shall be the 

7 amount which bears the same ratio to such amount 

8 determined without regard to this paragraph as the 

9 number of days in such taxable year bears to 365.’’. 

10 (3) TREATMENT OF REFERENCES.—Section 

11 53(d) is amended by adding at the end the following 

12 new paragraph: 

13 ‘‘(3) AMT TERM REFERENCES.—Any references 

14 in this subsection to section 55, 56, or 57 shall be 

15 treated as a reference to such section as in effect be16 fore its repeal by the Tax Cuts and Jobs Act.’’. 

17 (c) CONFORMING AMENDMENTS RELATED TO AMT 

18 REPEAL.— 

19 (1) Section 2(d) is amended by striking ‘‘sec20 tions 1 and 55’’ and inserting ‘‘section 1’’. 

21 (2) Section 5(a) is amended by striking para22 graph (4). 

23 (3) Section 11(d) is amended by striking ‘‘the 

24 taxes imposed by subsection (a) and section 55’’ and 

25 inserting ‘‘the tax imposed by subsection (a)’’. 


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1 (4) Section 12 is amended by striking para2 graph (7). 

3 (5) Section 26(a) is amended to read as follows: 

4 ‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The 

5 aggregate amount of credits allowed by this subpart for 

6 the taxable year shall not exceed the taxpayer’s regular 

7 tax liability for the taxable year.’’. 

8 (6) Section 26(b)(2) is amended by striking 

9 subparagraph (A). 

10 (7) Section 26 is amended by striking sub11 section (c). 

12 (8) Section 38(c) is amended— 

13 (A) by striking paragraphs (1) through 

14 (5), 

15 (B) by redesignating paragraph (6) as 

16 paragraph (2), 

17 (C) by inserting before paragraph (2) (as 

18 so redesignated) the following new paragraph: 

19 ‘‘(1) IN GENERAL.—The credit allowed under 

20 subsection (a) for any taxable year shall not exceed 

21 the excess (if any) of— 

22 ‘‘(A) the sum of— 

23 ‘‘(i) so much of the regular tax liabil24 ity as does not exceed $25,000, plus 


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1 ‘‘(ii) 75 percent of so much of the reg2 ular tax liability as exceeds $25,000, over 

3 ‘‘(B) the sum of the credits allowable 

4 under subparts A and B of this part.’’, and 

5 (D) by striking ‘‘subparagraph (B) of 

6 paragraph (1)’’ each place it appears in para7 graph (2) (as so redesignated) and inserting 

8 ‘‘clauses (i) and (ii) of paragraph (1)(A)’’. 

9 (9) Section 39(a) is amended— 

10 (A) by striking ‘‘or the eligible small busi11 ness credits’’ in paragraph (3)(A), and 

12 (B) by striking paragraph (4). 

13 (10) Section 45D(g)(4)(B) is amended by strik14 ing ‘‘or for purposes of section 55’’. 

15 (11) Section 54(c)(1) is amended to read as fol16 lows: 

17 ‘‘(1) regular tax liability (as defined in section 

18 26(b)), over’’. 

19 (12) Section 54A(c)(1)(A) is amended to read 

20 as follows: 

21 ‘‘(A) regular tax liability (as defined in 

22 section 26(b)), over’’. 

23 (13) Section 148(b)(3) is amended to read as 

24 follows: 


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1 ‘‘(3) TAX-EXEMPT BONDS NOT TREATED AS IN2 VESTMENT PROPERTY.—The term ‘investment prop3 erty’ does not include any tax-exempt bond.’’. 

4 (14) Section 168(k)(2) is amended by striking 

5 subparagraph (G). 

6 (15) Section 168(k) is amended by striking 

7 paragraph (4). 

8 (16) Section 168(k)(5) is amended by striking 

9 subparagraph (E). 

10 (17) Section 168(m)(2)(B)(i) is amended by 

11 striking ‘‘(determined without regard to paragraph 

12 (4) thereof)’’. 

13 (18) Section 168(m)(2) is amended by striking 

14 subparagraph (D). 

15 (19) Section 173 is amended by striking sub16 section (b). 

17 (20) Section 263(c) is amended by striking 

18 ‘‘section 59(e) or 291’’ and inserting ‘‘section 291’’. 

19 (21) Section 263A(c) is amended by striking 

20 paragraph (6) and by redesignating paragraph (7) 

21 (as amended) as paragraph (6). 

22 (22) Section 382(l) is amended by striking 

23 paragraph (7) and by redesignating paragraph (8) 

24 as paragraph (7). 


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1 (23) Section 443 is amended by striking sub2 section (d) and by redesignating subsection (e) as 

3 subsection (d). 

4 (24) Section 616 is amended by striking sub5 section (e). 

6 (25) Section 617 is amended by striking sub7 section (i). 

8 (26) Section 641(c) is amended— 

9 (A) in paragraph (2) by striking subpara10 graph (B) and by redesignating subparagraphs 

11 (C) and (D) as subparagraphs (B) and (C), re12 spectively, and 

13 (B) in paragraph (3), by striking ‘‘para14 graph (2)(C)’’ and inserting ‘‘paragraph 

15 (2)(B)’’. 

16 (27) Subsections (b) and (c) of section 666 are 

17 each amended by striking ‘‘(other than the tax im18 posed by section 55)’’. 

19 (28) Section 848 is amended by striking sub20 section (i). 

21 (29) Section 860E(a) is amended by striking 

22 paragraph (4). 

23 (30) Section 871(b)(1) is amended by striking 

24 ‘‘or 55’’. 


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1 (31) Section 882(a)(1) is amended by striking 

2 ‘‘55,’’. 

3 (32) Section 897(a) is amended to read as fol4 lows: 

5 ‘‘(a) TREATMENT AS EFFECTIVELY CONNECTED

6 WITH UNITED STATES TRADE OR BUSINESS.—For pur7 poses of this title, gain or loss of a nonresident alien indi8 vidual or a foreign corporation from the disposition of a 

9 United States real property interest shall be taken into 

10 account— 

11 ‘‘(1) in the case of a nonresident alien indi12 vidual, under section 871(b)(1), or 

13 ‘‘(2) in the case of a foreign corporation, under 

14 section 882(a)(1), 

15 as if the taxpayer were engaged in a trade or business 

16 within the United States during the taxable year and as 

17 if such gain or loss were effectively connected with such 

18 trade or business.’’. 

19 (33) Section 904(k) is amended to read as fol20 lows: 

21 ‘‘(k) CROSS REFERENCE.—For increase of limitation 

22 under subsection (a) for taxes paid with respect to 

23 amounts received which were included in the gross income 

24 of the taxpayer for a prior taxable year as a United States 


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1 shareholder with respect to a controlled foreign corpora2 tion, see section 960(b).’’. 

3 (34) Section 911(f) is amended to read as fol4 lows: 

5 ‘‘(f) DETERMINATION OF TAX LIABILITY.— 

6 ‘‘(1) IN GENERAL.—If, for any taxable year, 

7 any amount is excluded from gross income of a tax8 payer under subsection (a), then, notwithstanding 

9 section 1, if such taxpayer has taxable income for 

10 such taxable year, the tax imposed by section 1 for 

11 such taxable year shall be equal to the excess (if 

12 any) of— 

13 ‘‘(A) the tax which would be imposed by 

14 section 1 for such taxable year if the taxpayer’s 

15 taxable income were increased by the amount 

16 excluded under subsection (a) for such taxable 

17 year, over 

18 ‘‘(B) the tax which would be imposed by 

19 section 1 for such taxable year if the taxpayer’s 

20 taxable income were equal to the amount ex21 cluded under subsection (a) for such taxable 

22 year. 

23 For purposes of this paragraph, the amount ex24 cluded under subsection (a) shall be reduced by the 

25 aggregate amount of any deductions or exclusions 


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1 disallowed under subsection (d)(6) with respect to 

2 such excluded amount. 

3 ‘‘(2) TREATMENT OF CAPITAL GAIN EXCESS.— 

4 ‘‘(A) IN GENERAL.—In applying section 

5 1(h) for purposes of determining the tax under 

6 paragraph (1)(A) for any taxable year in which, 

7 without regard to this subsection, the tax8 payer’s net capital gain exceeds taxable income 

9 (hereafter in this subparagraph referred to as 

10 the capital gain excess)— 

11 ‘‘(i) the taxpayer’s net capital gain 

12 (determined without regard to section 

13 1(h)(11)) shall be reduced (but not below 

14 zero) by such capital gain excess, 

15 ‘‘(ii) the taxpayer’s qualified dividend 

16 income shall be reduced by so much of 

17 such capital gain excess as exceeds the tax18 payer’s net capital gain (determined with19 out regard to section 1(h)(11) and the re20 duction under clause (i)), and 

21 ‘‘(iii) adjusted net capital gain, 

22 unrecaptured section 1250 gain, and 28- 

23 percent rate gain shall each be determined 

24 after increasing the amount described in 


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1 section 1(h)(4)(B) by such capital gain ex2 cess. 

3 ‘‘(B) DEFINITIONS.—Terms used in this 

4 paragraph which are also used in section 1(h) 

5 shall have the respective meanings given such 

6 terms by section 1(h).’’. 

7 (35) Section 962(a)(1) is amended— 

8 (A) by striking ‘‘sections 1 and 55’’ and 

9 inserting ‘‘section 1’’, and 

10 (B) by striking ‘‘sections 11 and 55’’ and 

11 inserting ‘‘section 11’’. 

12 (36) Section 1016(a) is amended by striking 

13 paragraph (20). 

14 (37) Section 1202(a)(4) is amended by insert15 ing ‘‘and’’ at the end of subparagraph (A), by strik16 ing ‘‘, and’’ and inserting a period at the end of sub17 paragraph (B), and by striking subparagraph (C). 

18 (38) Section 1374(b)(3)(B) is amended by 

19 striking the last sentence thereof. 

20 (39) Section 1561(a) is amended— 

21 (A) by inserting ‘‘and’’ at the end of para22 graph (1), by striking ‘‘, and’’ at the end of 

23 paragraph (2) and inserting a period, and by 

24 striking paragraph (3), and 

25 (B) by striking the last sentence. 


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1 (40) Section 6015(d)(2)(B) is amended by 

2 striking ‘‘or 55’’. 

3 (41) Section 6211(b)(4)(A) is amended by 

4 striking‘‘, 168(k)(4)’’. 

5 (42) Section 6425(c)(1)(A) is amended to read 

6 as follows: 

7 ‘‘(A) the tax imposed under section 11 or 

8 subchapter L of chapter 1, whichever is applica9 ble, over’’. 

10 (43) Section 6654(d)(2) is amended— 

11 (A) in clause (i) of subparagraph (B), by 

12 striking ‘‘, alternative minimum taxable in13 come,’’, and 

14 (B) in clause (i) of subparagraph (C), by 

15 striking ‘‘, alternative minimum taxable in16 come,’’. 

17 (44) Section 6655(e)(2)(B)(i) is amended by 

18 striking ‘‘The taxable income and alternative min19 imum taxable income shall’’ and inserting ‘‘Taxable 

20 income shall’’. 

21 (45) Section 6655(g)(1)(A) is amended by add22 ing ‘‘plus’’ at the end of clause (i), by striking clause 

23 (ii), and by redesignating clause (iii) as clause (ii). 

24 (46) Section 6662(e)(3)(C) is amended by strik25 ing ‘‘the regular tax (as defined in section 55(c))’’ 


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1 and inserting ‘‘the regular tax liability (as defined in 

2 section 26(b))’’. 

3 (d) EFFECTIVE DATES.— 

4 (1) IN GENERAL.—Except as otherwise pro5 vided in this subsection, the amendments made by 

6 this section shall apply to taxable years beginning 

7 after December 31, 2017. 

8 (2) PRIOR ELECTIONS WITH RESPECT TO CER9 TAIN TAX PREFERENCES.—So much of the amend10 ment made by subsection (a) as relates to the repeal 

11 of section 59(e) of the Internal Revenue Code of 

12 1986 shall apply to amounts paid or incurred after 

13 December 31, 2017. 

14 (3) TREATMENT OF NET OPERATING LOSS

15 CARRYBACKS.—For purposes of section 56(d) of the 

16 Internal Revenue Code of 1986 (as in effect before 

17 its repeal), the amount of any net operating loss 

18 which may be carried back from a taxable year be19 ginning after December 31, 2017, to taxable years 

20 beginning before January 1, 2018, shall be deter21 mined without regard to any adjustments under sec22 tion 56(d)(2)(A) of such Code (as so in effect). 


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1 TITLE III—BUSINESS TAX 

2 REFORM 

3 Subtitle A—Tax Rates 

4 SEC. 3001. REDUCTION IN CORPORATE TAX RATE. 

5 (a) IN GENERAL.—Section 11(b) is amended to read 

6 as follows: 

7 ‘‘(b) AMOUNT OF TAX.— 

8 ‘‘(1) IN GENERAL.—Except as otherwise pro9 vided in this subsection, the amount of the tax im10 posed by subsection (a) shall be 20 percent of tax11 able income. 

12 ‘‘(2) SPECIAL RULE FOR PERSONAL SERVICE

13 CORPORATIONS.— 

14 ‘‘(A) IN GENERAL.—In the case of a per15 sonal service corporation (as defined in section 

16 448(d)(2)), the amount of the tax imposed by 

17 subsection (a) shall be 25 percent of taxable in18 come. 

19 ‘‘(B) REFERENCES TO CORPORATE

20 RATE.—Any reference to the rate imposed 

21 under this section or to the highest rate in ef22 fect under this section (or any similar ref23 erence) shall be determined without regard to 

24 the rate imposed with respect to personal serv25 ice corporations (as so defined).’’. 


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1 (b) CONFORMING AMENDMENTS.— 

2 (1)(A) Part I of subchapter P of chapter 1 is 

3 amended by striking section 1201 (and by striking 

4 the item relating to such section in the table of sec5 tions for such part). 

6 (B) Section 12 is amended by striking para7 graph (4). 

8 (C) Section 527(b) is amended— 

9 (i) by striking paragraph (2), and 

10 (ii) by striking all that precedes ‘‘is hereby 

11 imposed’’ and inserting: 

12 ‘‘(b) TAX IMPOSED.—A tax’’. 

13 (D) Section 594(a) is amended by striking 

14 ‘‘taxes imposed by section 11 or 1201(a)’’ and in15 serting ‘‘tax imposed by section 11’’. 

16 (E) Section 691(c)(4) is amended by striking 

17 ‘‘1201,’’. 

18 (F) Section 801(a) is amended— 

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

20 (ii) by striking all that precedes ‘‘is hereby 

21 imposed’’ and inserting: 

22 ‘‘(a) TAX IMPOSED.—A tax’’. 

23 (G) Section 831(e) is amended by striking para24 graph (1) and by redesignating paragraphs (2) and 

25 (3) as paragraphs (1) and (2), respectively. 


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1 (H) Sections 832(c)(5) and 834(b)(1)(D) are 

2 each amended by striking ‘‘sec. 1201 and fol3 lowing,’’. 

4 (I) Section 852(b)(3)(A) is amended by striking 

5 ‘‘section 1201(a)’’ and inserting ‘‘section 11(b)(1)’’. 

6 (J) Section 857(b)(3) is amended— 

7 (i) by striking subparagraph (A) and re8 designating subparagraphs (B) through (F) as 

9 subparagraphs (A) through (E), respectively, 

10 (ii) in subparagraph (C), as so redesig11 nated— 

12 (I) by striking ‘‘subparagraph (A)(ii)’’ 

13 in clause (i) thereof and inserting ‘‘para14 graph (1)’’, 

15 (II) by striking ‘‘the tax imposed by 

16 subparagraph (A)(ii)’’ in clauses (ii) and 

17 (iv) thereof and inserting ‘‘the tax imposed 

18 by paragraph (1) on undistributed capital 

19 gain’’, 

20 (iii) in subparagraph (E), as so redesig21 nated, by striking ‘‘subparagraph (B) or (D)’’ 

22 and inserting ‘‘subparagraph (A) or (C)’’, and 

23 (iv) by adding at the end the following new 

24 subparagraph: 


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1 ‘‘(F) UNDISTRIBUTED CAPITAL GAIN.— 

2 For purposes of this paragraph, the term ‘un3 distributed capital gain’ means the excess of the 

4 net capital gain over the deduction for divi5 dends paid (as defined in section 561) deter6 mined with reference to capital gain dividends 

7 only.’’. 

8 (K) Section 882(a)(1) is amended by striking ‘‘, 

9 or 1201(a)’’. 

10 (L) Section 1374(b) is amended by striking 

11 paragraph (4). 

12 (M) Section 1381(b) is amended by striking 

13 ‘‘taxes imposed by section 11 or 1201’’ and inserting 

14 ‘‘tax imposed by section 11’’. 

15 (N) Section 6655(g)(1)(A)(i) is amended by 

16 striking ‘‘or 1201(a),’’. 

17 (O) Section 7518(g)(6)(A) is amended by strik18 ing ‘‘or 1201(a)’’. 

19 (2) Section 1445(e)(1) is amended by striking 

20 ‘‘35 percent (or, to the extent provided in regula21 tions, 20 percent)’’ and inserting ‘‘20 percent’’. 

22 (3) Section 1445(e)(2) is amended by striking 

23 ‘‘35 percent’’ and inserting ‘‘20 percent’’. 


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1 (4) Section 1445(e)(6) is amended by striking 

2 ‘‘35 percent (or, to the extent provided in regula3 tions, 20 percent)’’ and inserting ‘‘20 percent’’. 

4 (5)(A) Part I of subchapter B of chapter 5 is 

5 amended by striking section 1551 (and by striking 

6 the item relating to such section in the table of sec7 tions for such part). 

8 (B) Section 12 is amended by striking para9 graph (6). 

10 (C) Section 535(c)(5) is amended to read as 

11 follows: 

12 ‘‘(5) CROSS REFERENCE.—For limitation on 

13 credit provided in paragraph (2) or (3) in the case 

14 of certain controlled corporations, see section 

15 1561.’’. 

16 (6)(A) Section 1561, as amended by the pre17 ceding provisions of this Act, is amended to read as 

18 follows: 

19 ‘‘SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS 

20 CREDIT IN THE CASE OF CERTAIN CON21 TROLLED CORPORATIONS. 

22 ‘‘(a) IN GENERAL.—The component members of a 

23 controlled group of corporations on a December 31 shall, 

24 for their taxable years which include such December 31, 

25 be limited for purposes of this subtitle to one $250,000 


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1 ($150,000 if any component member is a corporation de2 scribed in section 535(c)(2)(B)) amount for purposes of 

3 computing the accumulated earnings credit under section 

4 535(c)(2) and (3). Such amount shall be divided equally 

5 among the component members of such group on such De6 cember 31 unless the Secretary prescribes regulations per7 mitting an unequal allocation of such amount. 

8 ‘‘(b) CERTAIN SHORT TAXABLE YEARS.—If a cor9 poration has a short taxable year which does not include 

10 a December 31 and is a component member of a controlled 

11 group of corporations with respect to such taxable year, 

12 then for purposes of this subtitle, the amount to be used 

13 in computing the accumulated earnings credit under sec14 tion 535(c)(2) and (3) of such corporation for such taxable 

15 year shall be the amount specified in subsection (a) with 

16 respect to such group, divided by the number of corpora17 tions which are component members of such group on the 

18 last day of such taxable year. For purposes of the pre19 ceding sentence, section 1563(b) shall be applied as if such 

20 last day were substituted for December 31.’’. 

21 (B) The table of sections for part II of sub22 chapter B of chapter 5 is amended by striking the 

23 item relating to section 1561 and inserting the fol24 lowing new item: 

‘‘Sec. 1561. Limitation on accumulated earnings credit in the case of certain 

controlled corporations.’’. 


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1 (7) Section 7518(g)(6)(A) is amended— 

2 (A) by striking ‘‘With respect to the por3 tion’’ and inserting ‘‘In the case of a taxpayer 

4 other than a corporation, with respect to the 

5 portion’’, and 

6 (B) by striking ‘‘(34 percent in the case of 

7 a corporation)’’. 

8 (c) REDUCTION IN DIVIDEND RECEIVED DEDUC9 TIONS TO REFLECT LOWER CORPORATE INCOME TAX

10 RATES.— 

11 (1) DIVIDENDS RECEIVED BY CORPORATIONS.— 

12 (A) IN GENERAL.—Section 243(a)(1) is 

13 amended by striking ‘‘70 percent’’ and inserting 

14 ‘‘50 percent’’. 

15 (B) DIVIDENDS FROM 20-PERCENT OWNED

16 CORPORATIONS.—Section 243(c)(1) is amend17 ed— 

18 (i) by striking ‘‘80 percent’’ and in19 serting ‘‘65 percent’’, and 

20 (ii) by striking ‘‘70 percent’’ and in21 serting ‘‘50 percent’’. 

22 (C) CONFORMING AMENDMENT.—The 

23 heading for section 243(c) is amended by strik24 ing ‘‘RETENTION OF 80-PERCENT DIVIDEND


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1 RECEIVED DEDUCTION’’ and inserting ‘‘IN2 CREASED PERCENTAGE’’. 

3 (2) DIVIDENDS RECEIVED FROM FSC.—Section 

4 245(c)(1)(B) is amended— 

5 (A) by striking ‘‘70 percent’’ and inserting 

6 ‘‘50 percent’’, and 

7 (B) by striking ‘‘80 percent’’ and inserting 

8 ‘‘65 percent’’. 

9 (3) LIMITATION ON AGGREGATE AMOUNT OF

10 DEDUCTIONS.—Section 246(b)(3) is amended— 

11 (A) by striking ‘‘80 percent’’ in subpara12 graph (A) and inserting ‘‘65 percent’’, and 

13 (B) by striking ‘‘70 percent’’ in subpara14 graph (B) and inserting ‘‘50 percent’’. 

15 (4) REDUCTION IN DEDUCTION WHERE PORT16 FOLIO STOCK IS DEBT-FINANCED.—Section 

17 246A(a)(1) is amended— 

18 (A) by striking ‘‘70 percent’’ and inserting 

19 ‘‘50 percent’’, and 

20 (B) by striking ‘‘80 percent’’ and inserting 

21 ‘‘65 percent’’. 

22 (5) INCOME FROM SOURCES WITHIN THE

23 UNITED STATES.—Section 861(a)(2) is amended— 

24 (A) by striking ‘‘100/70th’’ and inserting 

25 ‘‘100/50th’’ in subparagraph (B), and 


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1 (B) in the flush sentence at the end— 

2 (i) by striking ‘‘100/80th’’ and insert3 ing ‘‘100/65th’’, and 

4 (ii) by striking ‘‘100/70th’’ and insert5 ing ‘‘100/50th’’. 

6 (d) EFFECTIVE DATE.— 

7 (1) IN GENERAL.—Except as otherwise pro8 vided in this subsection, the amendments made by 

9 this section shall apply to taxable years beginning 

10 after December 31, 2017. 

11 (2) CERTAIN CONFORMING AMENDMENTS.—The 

12 amendments made by paragraphs (2), (3), and (4) 

13 of subsection (b) shall apply to distributions after 

14 December 31, 2017. 

15 (e) NORMALIZATION REQUIREMENTS.— 

16 (1) IN GENERAL.—A normalization method of 

17 accounting shall not be treated as being used with 

18 respect to any public utility property for purposes of 

19 section 167 or 168 of the Internal Revenue Code of 

20 1986 if the taxpayer, in computing its cost of service 

21 for ratemaking purposes and reflecting operating re22 sults in its regulated books of account, reduces the 

23 excess tax reserve more rapidly or to a greater ex24 tent than such reserve would be reduced under the 

25 average rate assumption method. 


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1 (2) ALTERNATIVE METHOD FOR CERTAIN TAX2 PAYERS.—If, as of the first day of the taxable year 

3 that includes the date of enactment of this Act— 

4 (A) the taxpayer was required by a regu5 latory agency to compute depreciation for public 

6 utility property on the basis of an average life 

7 or composite rate method, and 

8 (B) the taxpayer’s books and underlying 

9 records did not contain the vintage account 

10 data necessary to apply the average rate as11 sumption method, 

12 the taxpayer will be treated as using a normalization 

13 method of accounting if, with respect to such juris14 diction, the taxpayer uses the alternative method for 

15 public utility property that is subject to the regu16 latory authority of that jurisdiction. 

17 (3) DEFINITIONS.—For purposes of this sub18 section— 

19 (A) EXCESS TAX RESERVE.—The term 

20 ‘‘excess tax reserve’’ means the excess of— 

21 (i) the reserve for deferred taxes (as 

22 described in section 168(i)(9)(A)(ii) of the 

23 Internal Revenue Code of 1986 as in effect 

24 on the day before the date of the enact25 ment of this Act), over 


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1 (ii) the amount which would be the 

2 balance in such reserve if the amount of 

3 such reserve were determined by assuming 

4 that the corporate rate reductions provided 

5 in this Act were in effect for all prior peri6 ods. 

7 (B) AVERAGE RATE ASSUMPTION METH8 OD.—The average rate assumption method is 

9 the method under which the excess in the re10 serve for deferred taxes is reduced over the re11 maining lives of the property as used in its reg12 ulated books of account which gave rise to the 

13 reserve for deferred taxes. Under such method, 

14 if timing differences for the property reverse, 

15 the amount of the adjustment to the reserve for 

16 the deferred taxes is calculated by multi17 plying— 

18 (i) the ratio of the aggregate deferred 

19 taxes for the property to the aggregate 

20 timing differences for the property as of 

21 the beginning of the period in question, by 

22 (ii) the amount of the timing dif23 ferences which reverse during such period. 


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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 VIO14 LATION.—If, for any taxable year ending after the 

15 date of the enactment of this Act, the taxpayer does 

16 not use a normalization method of accounting, the 

17 taxpayer’s tax for the taxable year shall be increased 

18 by the amount by which it reduces its excess tax re19 serve more rapidly than permitted under a normal20 ization method of accounting. 

21 Subtitle B—Cost Recovery 

22 SEC. 3101. INCREASED EXPENSING. 

23 (a) 100 PERCENT EXPENSING.—Section 

24 168(k)(1)(A) is amended by striking ‘‘50 percent’’ and in25 serting ‘‘100 percent’’. 


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1 (b) EXTENSION THROUGH JANUARY 1, 2023.—Sec2 tion 168(k)(2) is amended— 

3 (1) in subparagraph (A)(iii), by striking ‘‘Janu4 ary 1, 2020’’ and inserting ‘‘January 1, 2023’’, 

5 (2) in subparagraph (B)(i)(II), by striking 

6 ‘‘January 1, 2021’’ and inserting ‘‘January 1, 

7 2024’’, 

8 (3) in subparagraph (B)(i)(III), by striking 

9 ‘‘January 1, 2020’’ and inserting ‘‘January 1, 

10 2023’’, 

11 (4) in subparagraph (B)(ii), by striking ‘‘Janu12 ary 1, 2020’’ in each place it appears and inserting 

13 ‘‘January 1, 2023’’, and 

14 (5) in subparagraph (E)(i), by striking ‘‘Janu15 ary 1, 2020’’ and replacing it with ‘‘January 1, 

16 2023’’. 

17 (c) APPLICATION TO USED PROPERTY.— 

18 (1) IN GENERAL.—Section 168(k)(2)(A)(ii) is 

19 amended to read as follows: 

20 ‘‘(ii) the original use of which begins 

21 with the taxpayer or the acquisition of 

22 which by the taxpayer meets the require23 ments of clause (ii) of subparagraph (E), 

24 and’’. 


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1 (2) ACQUISITION REQUIREMENTS.—Section 

2 168(k)(2)(E)(ii) is amended to read as follows: 

3 ‘‘(ii) ACQUISITION REQUIREMENTS.— 

4 An acquisition of property meets the re5 quirements of this clause if— 

6 ‘‘(I) such property was not used 

7 by the taxpayer at any time prior to 

8 such acquisition, and 

9 ‘‘(II) the acquisition of such 

10 property meets the requirements of 

11 paragraphs (2)(A), (2)(B), (2)(C), 

12 and (3) of section 179(d).’’, 

13 (3) ANTI-ABUSE RULES.—Section 168(k)(2)(E) 

14 is further amended by amending clause (iii)(I) to 

15 read as follows: 

16 ‘‘(I) property is used by a lessor 

17 of such property and such use is the 

18 lessor’s first use of such property,’’. 

19 (d) EXCEPTION FOR CERTAIN TRADES AND BUSI20 NESSES NOT SUBJECT TO LIMITATION ON INTEREST EX21 PENSE.—Section 168(k)(2), as amended by section 2001, 

22 is amended by inserting after subparagraph (F) the fol23 lowing new subparagraph: 

24 ‘‘(G) EXCEPTION FOR PROPERTY OF CER25 TAIN BUSINESSES NOT SUBJECT TO LIMITATION


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1 ON INTEREST EXPENSE.—The term ‘qualified 

2 property’ shall not include any property used 

3 in— 

4 ‘‘(i) a trade or business described in 

5 subparagraph (B) or (C) of section 

6 163(j)(7), or 

7 ‘‘(ii) a trade or business that has had 

8 floor plan financing indebtedness (as de9 fined in paragraph (9) of section 163(j)), 

10 if the floor plan financing interest related 

11 to such indebtedness was taken into ac12 count under paragraph (1)(C) of such sec13 tion.’’. 

14 (e) COORDINATION WITH SECTION 280F.—Section 

15 168(k)(2)(F) is amended— 

16 (1) by striking ‘‘$8,000’’ in clauses (i) and (iii) 

17 and inserting ‘‘$16,000’’, and 

18 (2) in clause (iii)— 

19 (A) by striking ‘‘placed in service by the 

20 taxpayer after December 31, 2017’’ and insert21 ing ‘‘acquired by the taxpayer before September 

22 28, 2017, and placed in service by the taxpayer 

23 after September 27, 2017’’, and 

24 (B) by redesignating subclauses (I) and 

25 (II) as subclauses (II) and (III) respectively, 


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1 and inserting before clause (II), as so redesig2 nated, the following new subclause: 

3 ‘‘(I) in the case of a passenger 

4 automobile placed in service before 

5 January 1, 2018, ‘$8,000’,’’. 

6 (f) CONFORMING AMENDMENTS.— 

7 (1) Section 168(k)(2)(B)(i)(III), as amended, is 

8 amended by inserting ‘‘binding’’ before ‘‘contract’’. 

9 (2) Section 168(k)(5) is amended by— 

10 (A) by striking ‘‘January 1, 2020’’ in sub11 paragraph (A) and inserting ‘‘January 1, 

12 2023’’, 

13 (B) by striking ‘‘50 percent’’ in subpara14 graph (A)(i) and inserting ‘‘100 percent’’, and 

15 (C) by striking subparagraph (F). 

16 (3) Section 168(k)(6) is amended to read as fol17 lows: 

18 ‘‘(6) PHASE DOWN.—In the case of qualified 

19 property acquired by the taxpayer before September 

20 28, 2017, and placed in service by the taxpayer after 

21 September 27, 2017, paragraph (1)(A) shall be ap22 plied by substituting for ‘100 percent’— 

23 ‘‘(A) ‘50 percent’ in the case of— 

24 ‘‘(i) property placed in service before 

25 January 1, 2018, and 


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1 ‘‘(ii) property described in subpara2 graph (B) or (C) of paragraph (2) which 

3 is placed in service in 2018, 

4 ‘‘(B) ‘40 percent’ in the case of— 

5 ‘‘(i) property placed in service in 2018 

6 (other than property described in subpara7 graph (B) or (C) of paragraph (2)), and 

8 ‘‘(ii) property described in subpara9 graph (B) or (C) of paragraph (2) which 

10 is placed in service in 2019, and 

11 ‘‘(C) ‘30 percent’ in the case of— 

12 ‘‘(i) property placed in service in 2019 

13 (other than property described in subpara14 graph (B) or (C) of paragraph (2)), and 

15 ‘‘(ii) property described in subpara16 graph (B) or (C) of paragraph (2) which 

17 is placed in service in 2020.’’. 

18 (4) The heading of section 168(k) is amended 

19 by striking ‘‘SPECIAL ALLOWANCE FOR CERTAIN

20 PROPERTY ACQUIRED AFTER DECEMBER 31, 2007, 

21 AND BEFORE JANUARY 1, 2020’’ and inserting 

22 ‘‘FULL EXPENSING OF CERTAIN PROPERTY’’. 

23 (5) Section 460(c)(6)(B)(ii) is amended by 

24 striking ‘‘January 1, 2020 (January 1, 2021 in the 

25 case of property described in section 168(k)(2)(B))’’ 


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1 and inserting ‘‘January 1, 2023 (January 1, 2024 in 

2 the case of property described in section 

3 168(k)(2)(B))’’. 

4 (g) EFFECTIVE DATE.— 

5 (1) IN GENERAL.—Except at provided by para6 graph (2), the amendments made by this section 

7 shall apply to property which— 

8 (A) is acquired after September 27, 2017, 

9 and 

10 (B) is placed in service after such date. 

11 For purposes of the preceding sentence, property 

12 shall not be treated as acquired after the date on 

13 which a written binding contract is entered into for 

14 such acquisition. 

15 (2) SPECIFIED PLANTS.—The amendments 

16 made by subsection (f)(2) shall apply to specified 

17 plants planted or grafted after September 27, 2017. 

18 (3) TRANSITION RULE.—In the case of any tax19 payer’s first taxable year ending after September 27, 

20 2017, the taxpayer may elect (at such time and in 

21 such form and manner as the Secretary of the 

22 Treasury, or his designee, may provide) to apply sec23 tion 168 of the Internal Revenue Code of 1986 with24 out regard to the amendments made by this section. 


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1 (4) LIMITATION ON NET OPERATING LOSS

2 CARRYBACKS ATTRIBUTABLE TO FULL EXPENS3 ING.—In the case of any taxable year which includes 

4 any portion of the period beginning on September 

5 28, 2017, and ending on December 31, 2017, the 

6 amount of any net operating loss for such taxable 

7 year which may be treated as a net operating loss 

8 carryback (including any such carryback attributable 

9 to any specified liability loss under section 

10 172(b)(1)(C), any corporate equity reduction inter11 est loss under section 172(b)(1)(D), any eligible loss 

12 under section 172(b)(1)(E), and any farming loss 

13 under section 172(b)(1)(F)) shall be determined 

14 without regard to the amendments made by this sec15 tion. For purposes of this paragraph, terms which 

16 are used in section 172 of the Internal Revenue 

17 Code of 1986 (determined without regard to the 

18 amendments made by section 3302) shall have the 

19 same meaning as when used in such section. 

20 Subtitle C—Small Business 

21 Reforms 

22 SEC. 3201. EXPANSION OF SECTION 179 EXPENSING. 

23 (a) INCREASED DOLLAR LIMITATIONS.— 

24 (1) IN GENERAL.—Section 179(b) is amend25 ed— 


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1 (A) by inserting ‘‘($5,000,000, in the case 

2 of taxable years beginning before January 1, 

3 2023)’’ after ‘‘$500,000’’ in paragraph (1), and 

4 (B) by inserting ‘‘($20,000,000, in the 

5 case of taxable years beginning before January 

6 1, 2023)’’ after ‘‘$2,000,000’’ in paragraph (2). 

7 (2) INFLATION ADJUSTMENT.—Section 

8 179(b)(6) is amended to read as follows: 

9 ‘‘(6) INFLATION ADJUSTMENT.— 

10 ‘‘(A) IN GENERAL.—In the case of a tax11 able year beginning after 2015 (2018 in the 

12 case of the $5,000,000 and $20,000,000 

13 amounts in subsection (b)), each dollar amount 

14 in subsection (b) shall be increased by an 

15 amount equal to such dollar amount multiplied 

16 by— 

17 ‘‘(i) in the case of the $500,000 and 

18 $2,000,000 amounts in subsection (b), the 

19 cost-of-living adjustment determined under 

20 section 1(c)(2) for the calendar year in 

21 which the taxable year begins, determined 

22 by substituting ‘calendar year 2014’ for 

23 ‘calendar year 2016’ in subparagraph 

24 (A)(ii) thereof, and 


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1 ‘‘(ii) in the case of the $5,000,000 

2 and $20,000,000 amounts in subsection 

3 (b), the cost-of-living adjustment deter4 mined under section 1(c)(2) for the cal5 endar year in which the taxable year be6 gins, determined by substituting ‘calendar 

7 year 2017’ for ‘calendar year 2016’ in sub8 paragraph (A)(ii) thereof. 

9 ‘‘(B) ROUNDING.—The amount of any in10 crease under subparagraph (A) shall be round11 ed to the nearest multiple of $10,000 

12 ($100,000 in the case of the $5,000,000 and 

13 $20,000,000 amounts in subsection (b)).’’. 

14 (b) APPLICATION TO QUALIFIED ENERGY EFFICIENT

15 HEATING AND AIR-CONDITIONING PROPERTY.— 

16 (1) IN GENERAL.—Section 179(f)(2) is amend17 ed by striking ‘‘and’’ at the end of subparagraph 

18 (B), by striking the period at the end of subpara19 graph (C) and inserting ‘‘, and’’, and by adding at 

20 the end the following new subparagraph: 

21 ‘‘(D) qualified energy efficient heating and 

22 air-conditioning property.’’. 

23 (2) QUALIFIED ENERGY EFFICIENT HEATING

24 AND AIR-CONDITIONING PROPERTY.—Section 179(f) 


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1 is amended by adding at the end the following new 

2 paragraph: 

3 ‘‘(3) QUALIFIED ENERGY EFFICIENT HEATING

4 AND AIR-CONDITIONING PROPERTY.—For purposes 

5 of this subsection— 

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

7 energy efficient heating and air-conditioning 

8 property’ means any section 1250 property— 

9 ‘‘(i) with respect to which depreciation 

10 (or amortization in lieu of depreciation) is 

11 allowable, 

12 ‘‘(ii) which is installed as part of a 

13 building’s heating, cooling, ventilation, or 

14 hot water system, and 

15 ‘‘(iii) which is within the scope of 

16 Standard 90.1–2007 or any successor 

17 standard. 

18 ‘‘(B) STANDARD 90.1–2007.—The term 

19 ‘Standard 90.1–2007’ means Standard 90.1– 

20 2007 of the American Society of Heating, Re21 frigerating and Air-Conditioning Engineers and 

22 the Illuminating Engineering Society of North 

23 America (as in effect on the day before the date 

24 of the adoption of Standard 90.1–2010 of such 

25 Societies).’’. 


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1 (c) EFFECTIVE DATE.— 

2 (1) INCREASED DOLLAR LIMITATIONS.—The 

3 amendments made by subsection (a) shall apply to 

4 taxable years beginning after December 31, 2017. 

5 (2) APPLICATION TO QUALIFIED ENERGY EFFI6 CIENT HEATING AND AIR-CONDITIONING PROP7 ERTY.—The amendments made by subsection (b) 

8 shall apply to property acquired and placed in serv9 ice after November 2, 2017. For purposes of the 

10 preceding sentence, property shall not be treated as 

11 acquired after the date on which a written binding 

12 contract is entered into for such acquisition. 

13 SEC. 3202. SMALL BUSINESS ACCOUNTING METHOD RE14 FORM AND SIMPLIFICATION. 

15 (a) MODIFICATION OF LIMITATION ON CASH METH16 OD OF ACCOUNTING.— 

17 (1) INCREASED LIMITATION.—So much of sec18 tion 448(c) as precedes paragraph (2) is amended to 

19 read as follows: 

20 ‘‘(c) GROSS RECEIPTS TEST.—For purposes of this 

21 section— 

22 ‘‘(1) IN GENERAL.—A corporation or partner23 ship meets the gross receipts test of this subsection 

24 for any taxable year if the average annual gross re25 ceipts of such entity for the 3-taxable-year period 


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1 ending with the taxable year which precedes such 

2 taxable year does not exceed $25,000,000.’’. 

3 (2) APPLICATION OF EXCEPTION ON ANNUAL

4 BASIS.—Section 448(b)(3) is amended to read as fol5 lows: 

6 ‘‘(3) ENTITIES WHICH MEET GROSS RECEIPTS

7 TEST.—Paragraphs (1) and (2) of subsection (a) 

8 shall not apply to any corporation or partnership for 

9 any taxable year if such entity (or any predecessor) 

10 meets the gross receipts test of subsection (c) for 

11 such taxable year.’’. 

12 (3) INFLATION ADJUSTMENT.—Section 448(c) 

13 is amended by adding at the end the following new 

14 paragraph: 

15 ‘‘(4) ADJUSTMENT FOR INFLATION.—In the 

16 case of any taxable year beginning after December 

17 31, 2018, the dollar amount in paragraph (1) shall 

18 be increased by an amount equal to— 

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

20 ‘‘(B) the cost-of-living adjustment deter21 mined under section 1(c)(2) for the calendar 

22 year in which the taxable year begins, by sub23 stituting ‘calendar year 2017’ for ‘calendar year 

24 2016’ in subparagraph (A)(ii) thereof. 


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1 If any amount as increased under the preceding sen2 tence is not a multiple of $1,000,000, such amount 

3 shall be rounded to the nearest multiple of 

4 $1,000,000.’’. 

5 (4) COORDINATION WITH SECTION 481.—Sec6 tion 448(d)(7) is amended to read as follows: 

7 ‘‘(7) COORDINATION WITH SECTION 481.—Any 

8 change in method of accounting made pursuant to 

9 this section shall be treated for purposes of section 

10 481 as initiated by the taxpayer and made with the 

11 consent of the Secretary.’’. 

12 (5) APPLICATION OF EXCEPTION TO CORPORA13 TIONS ENGAGED IN FARMING.— 

14 (A) IN GENERAL.—Section 447(c) is 

15 amended— 

16 (i) by inserting ‘‘for any taxable year’’ 

17 after ‘‘not being a corporation’’ in the mat18 ter preceding paragraph (1), and 

19 (ii) by amending paragraph (2) to 

20 read as follows: 

21 ‘‘(2) a corporation which meets the gross re22 ceipts test of section 448(c) for such taxable year.’’. 

23 (B) COORDINATION WITH SECTION 481.— 

24 Section 447(f) is amended to read as follows: 


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1 ‘‘(f) COORDINATION WITH SECTION 481.—Any 

2 change in method of accounting made pursuant to this 

3 section shall be treated for purposes of section 481 as ini4 tiated by the taxpayer and made with the consent of the 

5 Secretary.’’. 

6 (C) CONFORMING AMENDMENTS.—Section 

7 447 is amended— 

8 (i) by striking subsections (d), (e), 

9 (h), and (i), and 

10 (ii) by redesignating subsections (f) 

11 and (g) (as amended by subparagraph (B)) 

12 as subsections (d) and (e), respectively. 

13 (b) EXEMPTION FROM UNICAP REQUIREMENTS.— 

14 (1) IN GENERAL.—Section 263A is amended by 

15 redesignating subsection (i) as subsection (j) and by 

16 inserting after subsection (h) the following new sub17 section: 

18 ‘‘(i) EXEMPTION FOR CERTAIN SMALL BUSI19 NESSES.— 

20 ‘‘(1) IN GENERAL.—In the case of any taxpayer 

21 (other than a tax shelter prohibited from using the 

22 cash receipts and disbursements method of account23 ing under section 448(a)(3)) which meets the gross 

24 receipts test of section 448(c) for any taxable year, 


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1 this section shall not apply with respect to such tax2 payer for such taxable year. 

3 ‘‘(2) APPLICATION OF GROSS RECEIPTS TEST

4 TO INDIVIDUALS, ETC.—In the case of any taxpayer 

5 which is not a corporation or a partnership, the 

6 gross receipts test of section 448(c) shall be applied 

7 in the same manner as if each trade or business of 

8 such taxpayer were a corporation or partnership. 

9 ‘‘(3) COORDINATION WITH SECTION 481.—Any 

10 change in method of accounting made pursuant to 

11 this subsection shall be treated for purposes of sec12 tion 481 as initiated by the taxpayer and made with 

13 the consent of the Secretary.’’. 

14 (2) CONFORMING AMENDMENT.—Section 

15 263A(b)(2) is amended to read as follows: 

16 ‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real 

17 or personal property described in section 1221(a)(1) 

18 which is acquired by the taxpayer for resale.’’. 

19 (c) EXEMPTION FROM INVENTORIES.—Section 471 

20 is amended by redesignating subsection (c) as subsection 

21 (d) and by inserting after subsection (b) the following new 

22 subsection: 

23 ‘‘(c) EXEMPTION FOR CERTAIN SMALL BUSI24 NESSES.— 


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

2 (other than a tax shelter prohibited from using the 

3 cash receipts and disbursements method of account4 ing under section 448(a)(3)) which meets the gross 

5 receipts test of section 448(c) for any taxable year— 

6 ‘‘(A) subsection (a) shall not apply with re7 spect to such taxpayer for such taxable year, 

8 and 

9 ‘‘(B) the taxpayer’s method of accounting 

10 for inventory for such taxable year shall not be 

11 treated as failing to clearly reflect income if 

12 such method either— 

13 ‘‘(i) treats inventory as non-incidental 

14 materials and supplies, or 

15 ‘‘(ii) conforms to such taxpayer’s 

16 method of accounting reflected in an appli17 cable financial statement of the taxpayer 

18 with respect to such taxable year or, if the 

19 taxpayer does not have any applicable fi20 nancial statement with respect to such tax21 able year, the books and records of the 

22 taxpayer prepared in accordance with the 

23 taxpayer’s accounting procedures. 


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1 ‘‘(2) APPLICABLE FINANCIAL STATEMENT.— 

2 For purposes of this subsection, the term ‘applicable 

3 financial statement’ means— 

4 ‘‘(A) a financial statement which is cer5 tified as being prepared in accordance with gen6 erally accepted accounting principles and which 

7 is— 

8 ‘‘(i) a 10-K (or successor form), or 

9 annual statement to shareholders, required 

10 to be filed by the taxpayer with the United 

11 States Securities and Exchange Commis12 sion, 

13 ‘‘(ii) an audited financial statement of 

14 the taxpayer which is used for— 

15 ‘‘(I) credit purposes, 

16 ‘‘(II) reporting to shareholders, 

17 partners, or other proprietors, or to 

18 beneficiaries, or 

19 ‘‘(III) any other substantial 

20 nontax purpose, 

21 but only if there is no statement of the 

22 taxpayer described in clause (i), or 

23 ‘‘(iii) filed by the taxpayer with any 

24 other Federal or State agency for nontax 

25 purposes, but only if there is no statement 


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1 of the taxpayer described in clause (i) or 

2 (ii), or 

3 ‘‘(B) a financial statement of the taxpayer 

4 which— 

5 ‘‘(i) is used for a purpose described in 

6 subclause (I), (II), or (III) of subpara7 graph (A)(ii), or 

8 ‘‘(ii) filed by the taxpayer with any 

9 regulatory or governmental body (whether 

10 domestic or foreign) specified by the Sec11 retary, 

12 but only if there is no statement of the taxpayer 

13 described in subparagraph (A). 

14 ‘‘(3) APPLICATION OF GROSS RECEIPTS TEST

15 TO INDIVIDUALS, ETC.—In the case of any taxpayer 

16 which is not a corporation or a partnership, the 

17 gross receipts test of section 448(c) shall be applied 

18 in the same manner as if each trade or business of 

19 such taxpayer were a corporation or partnership. 

20 ‘‘(4) COORDINATION WITH SECTION 481.—Any 

21 change in method of accounting made pursuant to 

22 this subsection shall be treated for purposes of sec23 tion 481 as initiated by the taxpayer and made with 

24 the consent of the Secretary.’’. 


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1 (d) EXEMPTION FROM PERCENTAGE COMPLETION

2 FOR LONG-TERM CONTRACTS.— 

3 (1) IN GENERAL.—Section 460(e)(1)(B) is 

4 amended— 

5 (A) by inserting ‘‘(other than a tax shelter 

6 prohibited from using the cash receipts and dis7 bursements method of accounting under section 

8 448(a)(3))’’ after ‘‘taxpayer’’ in the matter pre9 ceding clause (i), and 

10 (B) by amending clause (ii) to read as fol11 lows: 

12 ‘‘(ii) who meets the gross receipts test 

13 of section 448(c) for the taxable year in 

14 which such contract is entered into.’’. 

15 (2) CONFORMING AMENDMENTS.—Section 

16 460(e) is amended by striking paragraphs (2) and 

17 (3), by redesignating paragraphs (4), (5), and (6) as 

18 paragraphs (3), (4), and (5), respectively, and by in19 serting after paragraph (1) the following new para20 graph: 

21 ‘‘(2) RULES RELATED TO GROSS RECEIPTS

22 TEST.— 

23 ‘‘(A) APPLICATION OF GROSS RECEIPTS

24 TEST TO INDIVIDUALS, ETC.—For purposes of 

25 paragraph (1)(B)(ii), in the case of any taxVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00219 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 payer which is not a corporation or a partner2 ship, the gross receipts test of section 448(c) 

3 shall be applied in the same manner as if each 

4 trade or business of such taxpayer were a cor5 poration or partnership. 

6 ‘‘(B) COORDINATION WITH SECTION 481.— 

7 Any change in method of accounting made pur8 suant to paragraph (1)(B)(ii) shall be treated 

9 as initiated by the taxpayer and made with the 

10 consent of the Secretary. Such change shall be 

11 effected on a cut-off basis for all similarly clas12 sified contracts entered into on or after the 

13 year of change.’’. 

14 (e) EFFECTIVE DATE.— 

15 (1) IN GENERAL.—Except as otherwise pro16 vided in this subsection, the amendments made by 

17 this section shall apply to taxable years beginning 

18 after December 31, 2017. 

19 (2) PRESERVATION OF SUSPENSE ACCOUNT

20 RULES WITH RESPECT TO ANY EXISTING SUSPENSE

21 ACCOUNTS.—So much of the amendments made by 

22 subsection (a)(5)(C) as relate to section 447(i) of 

23 the Internal Revenue Code of 1986 shall not apply 

24 with respect to any suspense account established 


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1 under such section before the date of the enactment 

2 of this Act. 

3 (3) EXEMPTION FROM PERCENTAGE COMPLE4 TION FOR LONG-TERM CONTRACTS.—The amend5 ments made by subsection (d) shall apply to con6 tracts entered into after December 31, 2017, in tax7 able years ending after such date. 

8 SEC. 3203. SMALL BUSINESS EXCEPTION FROM LIMITATION 

9 ON DEDUCTION OF BUSINESS INTEREST. 

10 (a) IN GENERAL.—Section 163(j)(2), as amended by 

11 section 3301, is amended to read as follows: 

12 ‘‘(2) EXEMPTION FOR CERTAIN SMALL BUSI13 NESSES.—In the case of any taxpayer (other than a 

14 tax shelter prohibited from using the cash receipts 

15 and disbursements method of accounting under sec16 tion 448(a)(3)) which meets the gross receipts test 

17 of section 448(c) for any taxable year, paragraph (1) 

18 shall not apply to such taxpayer for such taxable 

19 year. In the case of any taxpayer which is not a cor20 poration or a partnership, the gross receipts test of 

21 section 448(c) shall be applied in the same manner 

22 as if such taxpayer were a corporation or partner23 ship.’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 3204. MODIFICATION OF TREATMENT OF S CORPORA5 TION CONVERSIONS TO C CORPORATIONS. 

6 (a) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION

7 FROM S CORPORATION TO C CORPORATION.—Section 481 

8 is amended by adding at the end the following new sub9 section: 

10 ‘‘(d) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION

11 FROM S CORPORATION TO C CORPORATION.— 

12 ‘‘(1) IN GENERAL.—In the case of an eligible 

13 terminated S corporation, any adjustment required 

14 by subsection (a)(2) which is attributable to such 

15 corporation’s revocation described in paragraph 

16 (2)(A)(ii) shall be taken into account ratably during 

17 the 6-taxable year period beginning with the year of 

18 change. 

19 ‘‘(2) ELIGIBLE TERMINATED S CORPORA20 TION.—For purposes of this subsection, the term ‘el21 igible terminated S corporation’ means any C cor22 poration— 

23 ‘‘(A) which— 


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1 ‘‘(i) was an S corporation on the day 

2 before the date of the enactment of the 

3 Tax 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, de9 termined on the date such revocation is made, 

10 are the same owners (and in identical propor11 tions) as on the date of such enactment.’’. 

12 (b) CASH DISTRIBUTIONS FOLLOWING POST-TERMI13 NATION TRANSITION PERIOD FROM S CORPORATION STA14 TUS.—Section 1371 is amended by adding at the end the 

15 following new subsection: 

16 ‘‘(f) CASH DISTRIBUTIONS FOLLOWING POST-TERMI17 NATION TRANSITION PERIOD.—In the case of a distribu18 tion of money by an eligible terminated S corporation (as 

19 defined in section 481(d)) after the post-termination tran20 sition period, the accumulated adjustments account shall 

21 be allocated to such distribution, and the distribution shall 

22 be chargeable to accumulated earnings and profits, in the 

23 same ratio as the amount of such accumulated adjust24 ments account bears to the amount of such accumulated 

25 earnings and profits.’’. 


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1 Subtitle D—Reform of Business2 related Exclusions, Deductions, etc. 

3 SEC. 3301. INTEREST. 

4 (a) IN GENERAL.—Section 163(j) is amended to read 

5 as follows: 

6 ‘‘(j) LIMITATION ON BUSINESS INTEREST.— 

7 ‘‘(1) IN GENERAL.—In the case of any taxpayer 

8 for any taxable year, the amount allowed as a deduc9 tion under this chapter for business interest shall 

10 not exceed the sum of— 

11 ‘‘(A) the business interest income of such 

12 taxpayer for such taxable year, 

13 ‘‘(B) 30 percent of the adjusted taxable in14 come of such taxpayer for such taxable year, 

15 plus 

16 ‘‘(C) the floor plan financing interest of 

17 such taxpayer for such taxable year. 

18 The amount determined under subparagraph (B) 

19 (after any increases in such amount under para20 graph (3)(A)(iii)) shall not be less than zero. 

21 ‘‘(2) EXEMPTION FOR CERTAIN SMALL BUSI22 NESSES.—For exemption for certain small busi23 nesses, see the amendment made by section 3203 of 

24 the Tax Cuts and Jobs Act. 

25 ‘‘(3) APPLICATION TO PARTNERSHIPS, ETC.— 


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

2 partnership— 

3 ‘‘(i) this subsection shall be applied at 

4 the partnership level and any deduction for 

5 business interest shall be taken into ac6 count in determining the non-separately 

7 stated taxable income or loss of the part8 nership, 

9 ‘‘(ii) the adjusted taxable income of 

10 each partner of such partnership shall be 

11 determined without regard to such part12 ner’s distributive share of the non-sepa13 rately stated taxable income or loss of such 

14 partnership, and 

15 ‘‘(iii) the amount determined under 

16 paragraph (1)(B) with respect to each 

17 partner of such partnership shall be in18 creased by such partner’s distributive 

19 share of such partnership’s excess amount. 

20 ‘‘(B) EXCESS AMOUNT.—The term ‘excess 

21 amount’ means, with respect to any partner22 ship, the excess (if any) of— 

23 ‘‘(i) 30 percent of the adjusted taxable 

24 income of the partnership, over 


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1 ‘‘(ii) the amount (if any) by which the 

2 business interest of the partnership, re3 duced by floor plan financing interest, ex4 ceeds the business interest income of the 

5 partnership. 

6 ‘‘(C) APPLICATION TO S CORPORATIONS.— 

7 Rules similar to the rules of subparagraphs (A) 

8 and (B) shall apply with respect to any S cor9 poration and its shareholders. 

10 ‘‘(4) BUSINESS INTEREST.—For purposes of 

11 this subsection, the term ‘business interest’ means 

12 any interest paid or accrued on indebtedness prop13 erly allocable to a trade or business. Such term shall 

14 not include investment interest (within the meaning 

15 of subsection (d)). 

16 ‘‘(5) BUSINESS INTEREST INCOME.—For pur17 poses of this subsection, the term ‘business interest 

18 income’ means the amount of interest includible in 

19 the gross income of the taxpayer for the taxable year 

20 which is properly allocable to a trade or business. 

21 Such term shall not include investment income 

22 (within the meaning of subsection (d)). 

23 ‘‘(6) ADJUSTED TAXABLE INCOME.—For pur24 poses of this subsection, the term ‘adjusted taxable 

25 income’ means the taxable income of the taxpayer— 


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1 ‘‘(A) computed without regard to— 

2 ‘‘(i) any item of income, gain, deduc3 tion, or loss which is not properly allocable 

4 to a trade or business, 

5 ‘‘(ii) any business interest or business 

6 interest income, 

7 ‘‘(iii) the amount of any net operating 

8 loss deduction under section 172, and 

9 ‘‘(iv) any deduction allowable for de10 preciation, amortization, or depletion, and 

11 ‘‘(B) computed with such other adjust12 ments as the Secretary may provide. 

13 ‘‘(7) TRADE OR BUSINESS.—For purposes of 

14 this subsection, the term ‘trade or business’ shall not 

15 include— 

16 ‘‘(A) the trade or business of performing 

17 services as an employee, 

18 ‘‘(B) a real property trade or business (as 

19 such term is defined in section 469(c)(7)(C)), 

20 or 

21 ‘‘(C) the trade or business of the fur22 nishing or sale of— 

23 ‘‘(i) electrical energy, water, or sewage 

24 disposal services, 


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1 ‘‘(ii) gas or steam through a local dis2 tribution system, or 

3 ‘‘(iii) transportation of gas or steam 

4 by pipeline, 

5 if the rates for such furnishing or sale, as the 

6 case may be, have been established or approved 

7 by a State or political subdivision thereof, by 

8 any agency or instrumentality of the United 

9 States, or by a public service or public utility 

10 commission or other similar body of any State 

11 or political subdivision thereof. 

12 ‘‘(8) CARRYFORWARD OF DISALLOWED INTER13 EST.—For carryforward of interest disallowed under 

14 paragraph (1), see subsection (o). 

15 ‘‘(9) FLOOR PLAN FINANCING INTEREST DE16 FINED.—For purposes of this subsection— 

17 ‘‘(A) IN GENERAL.—The term ‘floor plan 

18 financing interest’ means interest paid or ac19 crued on floor plan financing indebtedness. 

20 ‘‘(B) FLOOR PLAN FINANCING INDEBTED21 NESS.—The term ‘floor plan financing indebt22 edness’ means indebtedness— 

23 ‘‘(i) used to finance the acquisition of 

24 motor vehicles held for sale to retail cus25 tomers, and 


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1 ‘‘(ii) secured by the inventory so ac2 quired. 

3 ‘‘(C) MOTOR VEHICLE.—The term ‘motor 

4 vehicle’ means a motor vehicle that is any of 

5 the following: 

6 ‘‘(i) An automobile. 

7 ‘‘(ii) A truck. 

8 ‘‘(iii) A recreational vehicle. 

9 ‘‘(iv) A motorcycle. 

10 ‘‘(v) A boat. 

11 ‘‘(vi) Farm machinery or equipment. 

12 ‘‘(vii) Construction machinery or 

13 equipment.’’. 

14 (b) CARRYFORWARD OF DISALLOWED BUSINESS IN15 TEREST.—Section 163, after amendment by section 

16 4302(a) and before amendment by section 4302(b), is 

17 amended by inserting after subsection (n) the following 

18 new subsection: 

19 ‘‘(o) CARRYFORWARD OF DISALLOWED BUSINESS IN20 TEREST.—The amount of any business interest not al21 lowed as a deduction for any taxable year by reason of 

22 subsection (j) shall be treated as business interest paid 

23 or accrued in the succeeding taxable year. Business inter24 est paid or accrued in any taxable year (determined with25 out regard to the preceding sentence) shall not be carried 


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1 past the 5th taxable year following such taxable year, de2 termined by treating business interest as allowed as a de3 duction on a first-in, first-out basis.’’. 

4 (c) TREATMENT OF CARRYFORWARD OF DIS5 ALLOWED BUSINESS INTEREST IN CERTAIN CORPORATE

6 ACQUISITIONS.— 

7 (1) IN GENERAL.—Section 381(c) is amended 

8 by inserting after paragraph (19) the following new 

9 paragraph: 

10 ‘‘(20) CARRYFORWARD OF DISALLOWED INTER11 EST.—The carryover of disallowed interest described 

12 in section 163(o) to taxable years ending after the 

13 date of distribution or transfer.’’. 

14 (2) APPLICATION OF LIMITATION.—Section 

15 382(d) is amended by adding at the end the fol16 lowing new paragraph: 

17 ‘‘(3) APPLICATION TO CARRYFORWARD OF DIS18 ALLOWED INTEREST.—The term ‘pre-change loss’ 

19 shall include any carryover of disallowed interest de20 scribed in section 163(o) under rules similar to the 

21 rules of paragraph (1).’’. 

22 (3) CONFORMING AMENDMENT.—Section 

23 382(k)(1) is amended by inserting after the first 

24 sentence the following: ‘‘Such term shall include any 


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1 corporation entitled to use a carryforward of dis2 allowed interest described in section 381(c)(20).’’ 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 SEC. 3302. MODIFICATION OF NET OPERATING LOSS DE7 DUCTION. 

8 (a) INDEFINITE CARRYFORWARD OF NET OPER9 ATING LOSSES.—Section 172(b)(1)(A)(ii) is amended by 

10 striking ‘‘to each of the 20 taxable years’’ and inserting 

11 ‘‘to each taxable year’’. 

12 (b) REPEAL OF NET OPERATING LOSS CARRYBACKS

13 OTHER THAN 1-YEAR CARRYBACK OF ELIGIBLE DIS14 ASTER LOSSES.— 

15 (1) IN GENERAL.—Section 172(b)(1)(A)(i) is 

16 amended to read as follows: 

17 ‘‘(i) in the case of any portion of a net 

18 operating loss for the taxable year which is 

19 an eligible disaster loss with respect to the 

20 taxpayer, shall be a net operating loss 

21 carryback to the taxable year preceding the 

22 taxable year of such loss, and’’. 

23 (2) CONFORMING AMENDMENTS.— 


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1 (A) Section 172(b)(1) is amended by strik2 ing subparagraphs (B) through (F) and insert3 ing the following: 

4 ‘‘(B) ELIGIBLE DISASTER LOSS.— 

5 ‘‘(i) IN GENERAL.—For purposes of 

6 subparagraph (A)(i), the term ‘eligible dis7 aster loss’ means— 

8 ‘‘(I) in the case of a taxpayer 

9 which is a small business, net oper10 ating losses attributable to federally 

11 declared disasters (as defined by sec12 tion 165(i)(5)), and 

13 ‘‘(II) in the case of a taxpayer 

14 engaged in the trade or business of 

15 farming, net operating losses attrib16 utable to such federally declared dis17 asters. 

18 ‘‘(ii) SMALL BUSINESS.—For purposes 

19 of this subparagraph, the term ‘small busi20 ness’ means a corporation or partnership 

21 which meets the gross receipts test of sec22 tion 448(c) (determined by substituting 

23 ‘$5,000,000’ for ‘$25,000,000’ each place 

24 it appears therein) for the taxable year in 

25 which the loss arose (or, in the case of a 


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1 sole proprietorship, which would meet such 

2 test if such proprietorship were a corpora3 tion). 

4 ‘‘(iii) TRADE OR BUSINESS OF FARM5 ING.—For purposes of this subparagraph, 

6 the trade or business of farming shall in7 clude the trade or business of— 

8 ‘‘(I) operating a nursery or sod 

9 farm, or 

10 ‘‘(II) the raising or harvesting of 

11 trees bearing fruit, nuts, or other 

12 crops, or ornamental trees. 

13 For purposes of subclause (II), an ever14 green tree which is more than 6 years old 

15 at the time severed from the roots shall 

16 not be treated as an ornamental tree.’’. 

17 (B) Section 172 is amended by striking 

18 subsections (f), (g), and (h). 

19 (c) LIMITATION OF NET OPERATING LOSS TO 90 

20 PERCENT OF TAXABLE INCOME.— 

21 (1) IN GENERAL.—Section 172(a) is amended 

22 to read as follows: 

23 ‘‘(a) DEDUCTION ALLOWED.—There shall be allowed 

24 as a deduction for the taxable year an amount equal to 

25 the lesser of— 


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1 ‘‘(1) the aggregate of the net operating loss 

2 carryovers to such year, plus the net operating loss 

3 carrybacks to such year, or 

4 ‘‘(2) 90 percent of taxable income computed 

5 without regard to the deduction allowable under this 

6 section. 

7 For purposes of this subtitle, the term ‘net operating loss 

8 deduction’ means the deduction allowed by this sub9 section.’’. 

10 (2) COORDINATION OF LIMITATION WITH

11 CARRYBACKS AND CARRYOVERS.—Section 172(b)(2) 

12 is amended by striking ‘‘shall be computed—’’ and 

13 all that follows and inserting ‘‘shall— 

14 ‘‘(A) be computed with the modifications 

15 specified in subsection (d) other than para16 graphs (1), (4), and (5) thereof, and by deter17 mining the amount of the net operating loss de18 duction without regard to the net operating loss 

19 for the loss year or for any taxable year there20 after, 

21 ‘‘(B) not be considered to be less than 

22 zero, and 

23 ‘‘(C) not exceed the amount determined 

24 under subsection (a)(2) for such prior taxable 

25 year.’’. 


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1 (3) CONFORMING AMENDMENT.—Section 

2 172(d)(6) is amended by striking ‘‘and’’ at the end 

3 of subparagraph (A), by striking the period at the 

4 end of subparagraph (B) and inserting ‘‘; and’’, and 

5 by adding at the end the following new subpara6 graph: 

7 ‘‘(C) subsection (a)(2) shall be applied by 

8 substituting ‘real estate investment trust tax9 able income (as defined in section 857(b)(2) but 

10 without regard to the deduction for dividends 

11 paid (as defined in section 561))’ for ‘taxable 

12 income’.’’. 

13 (d) ANNUAL INCREASE OF INDEFINITE CARRYOVER

14 AMOUNTS.—Section 172(b) is amended by redesignating 

15 paragraph (3) as paragraph (4) and by inserting after 

16 paragraph (2) the following new paragraph: 

17 ‘‘(3) ANNUAL INCREASE OF INDEFINITE CARRY18 OVER AMOUNTS.—For purposes of paragraph (2)— 

19 ‘‘(A) the amount of any indefinite net op20 erating loss which is carried to the next suc21 ceeding taxable year after the loss year (within 

22 the meaning of paragraph (2)) shall be in23 creased by an amount equal to— 

24 ‘‘(i) the amount of the loss which may 

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1 able year (determined without regard to 

2 this paragraph), multiplied by 

3 ‘‘(ii) the sum of— 

4 ‘‘(I) the annual Federal short5 term rate (determined under section 

6 1274(d)) for the last month ending 

7 before the beginning of such taxable 

8 year, plus 

9 ‘‘(II) 4 percentage points, and 

10 ‘‘(B) the amount of any indefinite net op11 erating loss which is carried to any succeeding 

12 taxable year (after such next succeeding taxable 

13 year) shall be an amount equal to— 

14 ‘‘(i) the excess of— 

15 ‘‘(I) the amount of the loss car16 ried to the prior taxable year (after 

17 any increase under this paragraph 

18 with respect to such amount), over 

19 ‘‘(II) the amount by which such 

20 loss was reduced under paragraph (2) 

21 by reason of the taxable income for 

22 such prior taxable year, multiplied by 

23 ‘‘(ii) a percentage equal to 100 per24 cent plus the percentage determined under 


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1 subparagraph (A)(ii) with respect to such 

2 succeeding taxable year. 

3 For purposes of the preceding sentence, the 

4 term ‘indefinite net operating loss’ means any 

5 net operating loss arising in a taxable year be6 ginning after December 31, 2017.’’. 

7 (e) EFFECTIVE DATE.— 

8 (1) CARRYFORWARDS AND CARRYBACKS.—The 

9 amendments made by subsections (a) and (b) shall 

10 apply to net operating losses arising in taxable years 

11 beginning after December 31, 2017. 

12 (2) NET OPERATING LOSS LIMITED TO 90 PER13 CENT OF TAXABLE INCOME.—The amendments 

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

15 beginning after December 31, 2017. 

16 (3) ANNUAL INCREASE IN CARRYOVER

17 AMOUNTS.—The amendments made by subsection 

18 (d) shall apply to amounts carried to taxable years 

19 beginning after December 31, 2017. 

20 (4) SPECIAL RULE FOR NET DISASTER

21 LOSSES.—Notwithstanding paragraph (1), the 

22 amendments made by subsection (b) shall not apply 

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1 tion 504(b) of the Disaster Tax Relief and Airport 

2 and Airway Extension Act of 2017 applies. 

3 SEC. 3303. LIKE-KIND EXCHANGES OF REAL PROPERTY. 

4 (a) IN GENERAL.—Section 1031(a)(1) is amended by 

5 striking ‘‘property’’ each place it appears and inserting 

6 ‘‘real property’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Paragraph (2) of section 1031(a) is amend9 ed to read as follows: 

10 ‘‘(2) EXCEPTION FOR REAL PROPERTY HELD

11 FOR SALE.—This subsection shall not apply to any 

12 exchange of real property held primarily for sale.’’. 

13 (2) Section 1031 is amended by striking sub14 sections (e) and (i). 

15 (3) Section 1031, as amended by paragraph 

16 (2), is amended by inserting after subsection (d) the 

17 following new subsection: 

18 ‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.— 

19 For purposes of this section, an interest in a partnership 

20 which has in effect a valid election under section 761(a) 

21 to be excluded from the application of all of subchapter 

22 K shall be treated as an interest in each of the assets of 

23 such partnership and not as an interest in a partnership.’’. 

24 (4) Section 1031(h) is amended to read as fol25 lows: 


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1 ‘‘(h) SPECIAL RULES FOR FOREIGN REAL PROP2 ERTY.—Real property located in the United States and 

3 real property located outside the United States are not 

4 property of a like kind.’’. 

5 (5) The heading of section 1031 is amended by 

6 striking ‘‘PROPERTY’’ and inserting ‘‘REAL PROP7 ERTY’’. 

8 (6) The table of sections for part III of sub9 chapter O of chapter 1 is amended by striking the 

10 item relating to section 1031 and inserting the fol11 lowing new item: 

‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’. 

12 (c) EFFECTIVE DATE.— 

13 (1) IN GENERAL.—Except as otherwise pro14 vided in this subsection, the amendments made by 

15 this section shall apply to exchanges completed after 

16 December 31, 2017. 

17 (2) TRANSITION RULE.—The amendments 

18 made by this section shall not apply to any exchange 

19 if— 

20 (A) the property disposed of by the tax21 payer in the exchange is disposed of on or be22 fore December 31 2017, or 

23 (B) the property received by the taxpayer 

24 in the exchange is received on or before Decem25 ber 31, 2017. 


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1 SEC. 3304. REVISION OF TREATMENT OF CONTRIBUTIONS 

2 TO CAPITAL. 

3 (a) INCLUSION OF CONTRIBUTIONS TO CAPITAL.— 

4 Part II of subchapter B of chapter 1 is amended by insert5 ing after section 75 the following new section: 

6 ‘‘SEC. 76. CONTRIBUTIONS TO CAPITAL. 

7 ‘‘(a) IN GENERAL.—Gross income includes any con8 tribution to the capital of any entity. 

9 ‘‘(b) TREATMENT OF CONTRIBUTIONS IN EXCHANGE

10 FOR STOCK, ETC.— 

11 ‘‘(1) IN GENERAL.—In the case of any con12 tribution of money or other property to a corpora13 tion in exchange for stock of such corporation— 

14 ‘‘(A) such contribution shall not be treated 

15 for purposes of subsection (a) as a contribution 

16 to the capital of such corporation (and shall not 

17 be includible in the gross income of such cor18 poration), and 

19 ‘‘(B) no gain or loss shall be recognized to 

20 such corporation upon the issuance of such 

21 stock. 

22 ‘‘(2) TREATMENT LIMITED TO VALUE OF

23 STOCK.—For purposes of this subsection, a contribu24 tion of money or other property to a corporation 

25 shall be treated as being in exchange for stock of 

26 such corporation only to the extent that the fair 


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1 market value of such money and other property does 

2 not exceed the fair market value of such stock. 

3 ‘‘(3) APPLICATION TO ENTITIES OTHER THAN

4 CORPORATIONS.—In the case of any entity other 

5 than a corporation, rules similar to the rules of 

6 paragraphs (1) and (2) shall apply in the case of 

7 any contribution of money or other property to such 

8 entity in exchange for any interest in such entity. 

9 ‘‘(c) TREASURY STOCK TREATED AS STOCK.—Any 

10 reference in this section to stock shall be treated as includ11 ing a reference to treasury stock.’’. 

12 (b) BASIS OF CORPORATION IN CONTRIBUTED PROP13 ERTY.— 

14 (1) CONTRIBUTIONS TO CAPITAL.—Subsection 

15 (c) of section 362 is amended to read as follows: 

16 ‘‘(c) CONTRIBUTIONS TO CAPITAL.—If property 

17 other than money is transferred to a corporation as a con18 tribution to the capital of such corporation (within the 

19 meaning of section 76) then the basis of such property 

20 shall be the greater of— 

21 ‘‘(1) the basis determined in the hands of the 

22 transferor, increased by the amount of gain recog23 nized to the transferor on such transfer, or 


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1 ‘‘(2) the amount included in gross income by 

2 such corporation under section 76 with respect to 

3 such contribution.’’. 

4 (2) CONTRIBUTIONS IN EXCHANGE FOR

5 STOCK.—Paragraph (2) of section 362(a) is amend6 ed by striking ‘‘contribution to capital’’ and insert7 ing ‘‘contribution in exchange for stock of such cor8 poration (determined under rules similar to the rules 

9 of paragraphs (2) and (3) of section 76(b))’’. 

10 (c) CONFORMING AMENDMENTS.— 

11 (1) Section 108(e) is amended by striking para12 graph (6). 

13 (2) Part III of subchapter B of chapter 1 is 

14 amended by striking section 118 (and by striking 

15 the item relating to such section in the table of sec16 tions for such part). 

17 (3) The table of sections for part II of sub18 chapter B of chapter 1 is amended by inserting after 

19 the item relating to section 75 the following new 

20 item: 

‘‘Sec. 76. Contributions to capital.’’. 

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

22 this section shall apply to contributions made, and trans23 actions entered into, after the date of the enactment of 

24 this Act. 


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1 SEC. 3305. REPEAL OF DEDUCTION FOR LOCAL LOBBYING 

2 EXPENSES. 

3 (a) IN GENERAL.—Section 162(e) is amended by 

4 striking paragraphs (2) and (7) and by redesignating 

5 paragraphs (3), (4), (5), (6), and (8) as paragraphs (2), 

6 (3), (4), (5), and (6), respectively. 

7 (b) CONFORMING AMENDMENT.—Section 

8 6033(e)(1)(B)(ii) is amended by striking ‘‘section 

9 162(e)(5)(B)(ii)’’ and inserting ‘‘section 

10 162(e)(4)(B)(ii)’’. 

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

12 this section shall apply to amounts paid or incurred after 

13 December 31, 2017. 

14 SEC. 3306. REPEAL OF DEDUCTION FOR INCOME ATTRIB15 UTABLE TO DOMESTIC PRODUCTION ACTIVI16 TIES. 

17 (a) IN GENERAL.—Part VI of subchapter B of chap18 ter 1 is amended by striking section 199 (and by striking 

19 the item relating to such section in the table of sections 

20 for such part). 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Sections 74(d)(2)(B), 86(b)(2)(A), 

23 137(b)(3)(A), 219(g)(3)(A)(ii), and 246(b)(1) are 

24 each amended by striking ‘‘199,’’. 

25 (2) Section 170(b)(2)(D), as amended by the 

26 preceding provisions of this Act, is amended by 


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1 striking clause (iv), by redesignating clause (v) as 

2 clause (iv), and by inserting ‘‘and’’ at the end of 

3 clause (iii). 

4 (3) Section 172(d) is amended by striking para5 graph (7). 

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

7 without the deduction under section 199’’. 

8 (5) Section 613A(d)(1) is amended by striking 

9 subparagraph (B) and by redesignating subpara10 graphs (C), (D), and (E) as subparagraphs (B), (C), 

11 and (D), respectively. 

12 (6) Section 1402(a) is amended by adding 

13 ‘‘and’’ at the end of paragraph (15) and by striking 

14 paragraph (16). 

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2017. 

18 SEC. 3307. ENTERTAINMENT, ETC. EXPENSES. 

19 (a) DENIAL OF DEDUCTION.—Subsection (a) of sec20 tion 274 is amended to read as follows: 

21 ‘‘(a) ENTERTAINMENT, AMUSEMENT, RECREATION, 

22 AND OTHER FRINGE BENEFITS .— 

23 ‘‘(1) IN GENERAL.—No deduction otherwise al24 lowable under this chapter shall be allowed for 


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1 amounts paid or incurred for any of the following 

2 items: 

3 ‘‘(A) ACTIVITY.—With respect to an activ4 ity which is of a type generally considered to 

5 constitute entertainment, amusement, or recre6 ation. 

7 ‘‘(B) MEMBERSHIP DUES.—With respect 

8 to membership in any club organized for busi9 ness, pleasure, recreation or other social pur10 poses. 

11 ‘‘(C) AMENITY.—With respect to a de 

12 minimis fringe (as defined in section 132(e)(1)) 

13 that is primarily personal in nature and involv14 ing property or services that are not directly re15 lated to the taxpayer’s trade or business. 

16 ‘‘(D) FACILITY.—With respect to a facility 

17 or portion thereof used in connection with an 

18 activity referred to in subparagraph (A), mem19 bership dues or similar amounts referred to in 

20 subparagraph (B), or an amenity referred to in 

21 subparagraph (C). 

22 ‘‘(E) QUALIFIED TRANSPORTATION

23 FRINGE AND PARKING FACILITY.—Which is a 

24 qualified transportation fringe (as defined in 

25 section 132(f)) or which is a parking facility 


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1 used in connection with qualified parking (as 

2 defined in section 132(f)(5)(C)). 

3 ‘‘(F) ON-PREMISES ATHLETIC FACILITY.— 

4 Which is an on-premises athletic facility as de5 fined in section 132(j)(4)(B). 

6 ‘‘(2) SPECIAL RULES.—For purposes of apply7 ing paragraph (1), an activity described in section 

8 212 shall be treated as a trade or business. 

9 ‘‘(3) REGULATIONS.—Under the regulations 

10 prescribed to carry out this section, the Secretary 

11 shall include regulations— 

12 ‘‘(A) defining entertainment, amenities, 

13 recreation, amusement, and facilities for pur14 poses of this subsection, 

15 ‘‘(B) providing for the appropriate alloca16 tion of depreciation and other costs with respect 

17 to facilities used for parking or for on-premises 

18 athletic facilities, and 

19 ‘‘(C) specifying arrangements a primary 

20 purpose of which is the avoidance of this sub21 section.’’. 

22 (b) EXCEPTION FOR CERTAIN EXPENSES INCLUD23 IBLE IN INCOME OF RECIPIENT.— 


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1 (1) EXPENSES TREATED AS COMPENSATION.— 

2 Paragraph (2) of section 274(e) is amended to read 

3 as follows: 

4 ‘‘(2) EXPENSES TREATED AS COMPENSATION.— 

5 Expenses for goods, services, and facilities, to the 

6 extent that the expenses do not exceed the amount 

7 of the expenses which are treated by the taxpayer, 

8 with respect to the recipient of the entertainment, 

9 amusement, or recreation, as compensation to an 

10 employee on the taxpayer’s return of tax under this 

11 chapter and as wages to such employee for purposes 

12 of chapter 24 (relating to withholding of income tax 

13 at source on wages).’’. 

14 (2) EXPENSES INCLUDIBLE IN INCOME OF PER15 SONS WHO ARE NOT EMPLOYEES.—Paragraph (9) of 

16 section 274(e) is amended by striking ‘‘to the extent 

17 that the expenses’’ and inserting ‘‘to the extent that 

18 the expenses do not exceed the amount of the ex19 penses that’’. 

20 (c) EXCEPTIONS FOR REIMBURSED EXPENSES.— 

21 Paragraph (3) of section 274(e) is amended to read as 

22 follows: 

23 ‘‘(3) REIMBURSED EXPENSES.— 

24 ‘‘(A) IN GENERAL.—Expenses paid or in25 curred by the taxpayer, in connection with the 


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1 performance by him of services for another per2 son (whether or not such other person is the 

3 taxpayer’s employer), under a reimbursement or 

4 other expense allowance arrangement with such 

5 other person, but this paragraph shall apply— 

6 ‘‘(i) where the services are performed 

7 for an employer, only if the employer has 

8 not treated such expenses in the manner 

9 provided in paragraph (2), or 

10 ‘‘(ii) where the services are performed 

11 for a person other than an employer, only 

12 if the taxpayer accounts (to the extent pro13 vided by subsection (d)) to such person. 

14 ‘‘(B) EXCEPTION.—Except as provided by 

15 the Secretary, subparagraph (A) shall not 

16 apply— 

17 ‘‘(i) in the case of an arrangement in 

18 which the person other than the employer 

19 is an entity described in section 

20 168(h)(2)(A), or 

21 ‘‘(ii) to any other arrangement des22 ignated by the Secretary as having the ef23 fect of avoiding the limitation under sub24 paragraph (A).’’. 


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1 (d) 50 PERCENT LIMITATION ON MEALS AND EN2 TERTAINMENT EXPENSES.—Subsection (n) of section 274 

3 is amended to read as follows: 

4 ‘‘(n) LIMITATION ON CERTAIN EXPENSES.— 

5 ‘‘(1) IN GENERAL.—The amount allowable as a 

6 deduction under this chapter for any expense for 

7 food or beverages (pursuant to subsection (e)(1)) or 

8 business meals (pursuant to subsection (k)(1)) shall 

9 not exceed 50 percent of the amount of such expense 

10 or item which would (but for this paragraph) be al11 lowable as a deduction under this chapter. 

12 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not 

13 apply to any expense if— 

14 ‘‘(A) such expense is described in para15 graph (2), (3), (6), (7), or (8) of subsection (e), 

16 ‘‘(B) in the case of an expense for food or 

17 beverages, such expense is excludable from the 

18 gross income of the recipient under section 132 

19 by reason of subsection (e) thereof (relating to 

20 de minimis fringes) or under section 119 (relat21 ing to meals and lodging furnished for conven22 ience of employer), or 

23 ‘‘(C) in the case of an employer who pays 

24 or reimburses moving expenses of an employee, 


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1 such expenses are includible in the income of 

2 the employee under section 82. 

3 ‘‘(3) SPECIAL RULE FOR INDIVIDUALS SUBJECT

4 TO FEDERAL HOURS OF SERVICE.—In the case of 

5 any expenses for food or beverages consumed while 

6 away from home (within the meaning of section 

7 162(a)(2)) by an individual during, or incident to, 

8 the period of duty subject to the hours of service 

9 limitations of the Department of Transportation, 

10 paragraph (1) shall be applied by substituting ‘80 

11 percent’ for ‘50 percent’.’’. 

12 (e) CONFORMING AMENDMENTS.— 

13 (1) Section 274(d) is amended— 

14 (A) by striking paragraph (2) and redesig15 nating paragraphs (3) and (4) as paragraphs 

16 (2) and (3), respectively, and 

17 (B) in the flush material following para18 graph (3) (as so redesignated)— 

19 (i) by striking ‘‘, entertainment, 

20 amusement, recreation, or’’ in item (B), 

21 and 

22 (ii) by striking ‘‘(D) the business rela23 tionship to the taxpayer of persons enter24 tained, using the facility or property, or re25 ceiving the gift’’ and inserting ‘‘(D) the 


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1 business relationship to the taxpayer of the 

2 person receiving the benefit’’. 

3 (2) Section 274(e) is amended by striking para4 graph (4) and redesignating paragraphs (5), (6), 

5 (7), (8), and (9) as paragraphs (4), (5), (6), (7), 

6 and (8), respectively. 

7 (3) Section 274(k)(2)(A) is amended by strik8 ing ‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), (7), or 

9 (8)’’. 

10 (4) Section 274 is amended by striking sub11 section (l). 

12 (5) Section 274(m)(1)(B)(ii) is amended by 

13 striking ‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), 

14 (7), or (8)’’. 

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

16 this section shall apply to amounts paid or incurred after 

17 December 31, 2017. 

18 SEC. 3308. UNRELATED BUSINESS TAXABLE INCOME IN19 CREASED BY AMOUNT OF CERTAIN FRINGE 

20 BENEFIT EXPENSES FOR WHICH DEDUCTION 

21 IS DISALLOWED. 

22 (a) IN GENERAL.—Section 512(a) is amended by 

23 adding at the end the following new paragraph: 

24 ‘‘(6) INCREASE IN UNRELATED BUSINESS TAX25 ABLE INCOME BY DISALLOWED FRINGE.—Unrelated 


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1 business taxable income of an organization shall be 

2 increased by any amount for which a deduction is 

3 not allowable under this chapter by reason of section 

4 274 and which is paid or incurred by such organiza5 tion for any qualified transportation fringe (as de6 fined in section 132(f)), any parking facility used in 

7 connection with qualified parking (as defined in sec8 tion 132(f)(5)(C)), or any on-premises athletic facil9 ity (as defined in section 132(j)(4)(B)). The pre10 ceding sentence shall not apply to the extent the 

11 amount paid or incurred is directly connected with 

12 an unrelated trade or business which is regularly 

13 carried on by the organization. The Secretary may 

14 issue such regulations or other guidance as may be 

15 necessary or appropriate to carry out the purposes 

16 of this paragraph, including regulations or other 

17 guidance providing for the appropriate allocation of 

18 depreciation and other costs with respect to facilities 

19 used for parking or for on-premises athletic facili20 ties. 

21 ’’. 

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

23 this section shall apply to amounts paid or incurred after 

24 December 31, 2017. 


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1 SEC. 3309. LIMITATION ON DEDUCTION FOR FDIC PRE2 MIUMS. 

3 (a) IN GENERAL.—Section 162 is amended by redes4 ignating subsection (q) as subsection (r) and by inserting 

5 after subsection (p) the following new subsection: 

6 ‘‘(q) DISALLOWANCE OF FDIC PREMIUMS PAID BY

7 CERTAIN LARGE FINANCIAL INSTITUTIONS.— 

8 ‘‘(1) IN GENERAL.—No deduction shall be al9 lowed for the applicable percentage of any FDIC 

10 premium paid or incurred by the taxpayer. 

11 ‘‘(2) EXCEPTION FOR SMALL INSTITUTIONS.— 

12 Paragraph (1) shall not apply to any taxpayer for 

13 any taxable year if the total consolidated assets of 

14 such taxpayer (determined as of the close of such 

15 taxable year) do not exceed $10,000,000,000. 

16 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes 

17 of this subsection, the term ‘applicable percentage’ 

18 means, with respect to any taxpayer for any taxable 

19 year, the ratio (expressed as a percentage but not 

20 greater than 100 percent) which— 

21 ‘‘(A) the excess of— 

22 ‘‘(i) the total consolidated assets of 

23 such taxpayer (determined as of the close 

24 of such taxable year), over 

25 ‘‘(ii) $10,000,000,000, bears to 

26 ‘‘(B) $40,000,000,000. 


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1 ‘‘(4) FDIC PREMIUMS.—For purposes of this 

2 subsection, the term ‘FDIC premium’ means any as3 sessment imposed under section 7(b) of the Federal 

4 Deposit Insurance Act (12 U.S.C. 1817(b)). 

5 ‘‘(5) TOTAL CONSOLIDATED ASSETS.—For pur6 poses of this subsection, the term ‘total consolidated 

7 assets’ has the meaning given such term under sec8 tion 165 of the Dodd-Frank Wall Street Reform and 

9 Consumer Protection Act (12 U.S.C. 5365). 

10 ‘‘(6) AGGREGATION RULE.— 

11 ‘‘(A) IN GENERAL.—Members of an ex12 panded affiliated group shall be treated as a 

13 single taxpayer for purposes of applying this 

14 subsection. 

15 ‘‘(B) EXPANDED AFFILIATED GROUP.— 

16 For purposes of this paragraph, the term ‘ex17 panded affiliated group’ means an affiliated 

18 group as defined in section 1504(a), deter19 mined— 

20 ‘‘(i) by substituting ‘more than 50 

21 percent’ for ‘at least 80 percent’ each place 

22 it appears, and 

23 ‘‘(ii) without regard to paragraphs (2) 

24 and (3) of section 1504(b). 


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1 A partnership or any other entity (other than a 

2 corporation) shall be treated as a member of an 

3 expanded affiliated group if such entity is con4 trolled (within the meaning of section 

5 954(d)(3)) by members of such group (includ6 ing any entity treated as a member of such 

7 group by reason of this sentence).’’. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2017. 

11 SEC. 3310. REPEAL OF ROLLOVER OF PUBLICLY TRADED 

12 SECURITIES GAIN INTO SPECIALIZED SMALL 

13 BUSINESS INVESTMENT COMPANIES. 

14 (a) IN GENERAL.—Part III of subchapter O of chap15 ter 1 is amended by striking section 1044 (and by striking 

16 the item relating to such section in the table of sections 

17 of such part). 

18 (b) CONFORMING AMENDMENTS.—Section 

19 1016(a)(23) is amended— 

20 (1) by striking ‘‘1044,’’, and 

21 (2) by striking ‘‘1044(d),’’. 

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

23 this section shall apply to sales after December 31, 2017. 


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1 SEC. 3311. CERTAIN SELF-CREATED PROPERTY NOT TREAT2 ED AS A CAPITAL ASSET. 

3 (a) PATENTS, ETC.—Section 1221(a)(3) is amended 

4 by inserting ‘‘a patent, invention, model or design (wheth5 er or not patented), a secret formula or process,’’ before 

6 ‘‘a copyright’’. 

7 (b) CONFORMING AMENDMENT.—Section 

8 1231(b)(1)(C) is amended by inserting ‘‘a patent, inven9 tion, model or design (whether or not patented), a secret 

10 formula or process,’’ before ‘‘a copyright’’. 

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

12 this section shall apply to dispositions after December 31, 

13 2017. 

14 SEC. 3312. REPEAL OF SPECIAL RULE FOR SALE OR EX15 CHANGE OF PATENTS. 

16 (a) IN GENERAL.—Part IV of subchapter P of chap17 ter 1 is amended by striking section 1235 (and by striking 

18 the item relating to such section in the table of sections 

19 of such part). 

20 (b) CONFORMING AMENDMENTS.— 

21 (1) Section 483(d) is amended by striking para22 graph (4). 

23 (2) Section 901(l)(5) is amended by striking 

24 ‘‘without regard to section 1235 or any similar rule’’ 

25 and inserting ‘‘without regard to any provision 

26 which treats a disposition as a sale or exchange of 


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1 a capital asset held for more than 1 year or any 

2 similar provision’’. 

3 (3) Section 1274(c)(3) is amended by striking 

4 subparagraph (E) and redesignating subparagraph 

5 (F) as subparagraph (E). 

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

7 this section shall apply to dispositions after December 31, 

8 2017. 

9 SEC. 3313. REPEAL OF TECHNICAL TERMINATION OF PART10 NERSHIPS. 

11 (a) IN GENERAL.—Paragraph (1) of section 708(b) 

12 is amended— 

13 (1) by striking ‘‘, or’’ at the end of subpara14 graph (A) and all that follows and inserting a pe15 riod, and 

16 (2) by striking ‘‘only if—’’ and all that follows 

17 through ‘‘no part of any business’’ and inserting the 

18 following: ‘‘only if no part of any business’’. 

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

20 this section shall apply to partnership taxable years begin21 ning after December 31, 2017. 


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1 SEC. 3314. 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 chap6 ter 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 part14 nership 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. 

24 ‘‘(b) SPECIAL RULE.—To the extent provided by the 

25 Secretary, subsection (a) shall not apply to income or gain 


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1 attributable to any asset not held for portfolio investment 

2 on behalf of third party investors. 

3 ‘‘(c) APPLICABLE PARTNERSHIP INTEREST.—For 

4 purposes 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 part8 nership which, directly or indirectly, is transferred to 

9 (or is held by) the taxpayer in connection with the 

10 performance of substantial services by the taxpayer, 

11 or any other related person, in any applicable trade 

12 or business. The previous sentence shall not apply to 

13 an interest held by a person who is employed by an14 other entity that is conducting a trade or business 

15 (other than an applicable trade or business) and 

16 only provides 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— 


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1 ‘‘(i) investing in (or disposing of) 

2 specified assets (or identifying specified as3 sets 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 

7 475(c)(2) without regard to the last sentence there8 of), commodities (as defined in section 475(e)(2)), 

9 real estate held for rental or investment, cash or 

10 cash equivalents, options or derivative contracts with 

11 respect to any of the foregoing, and an interest in 

12 a partnership to the extent of the partnership’s pro13 portionate interest in any 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 partner19 ship 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 


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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 IN17 TEREST 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 

21 shall include in gross income (as short term capital 

22 gain) the excess (if any) of— 

23 ‘‘(A) so much of the taxpayer’s long-term 

24 capital gains with respect to such interest for 

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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 

4 capital gain under subsection (a) with respect 

5 to the 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 

17 reporting (at the time and in the manner prescribed by 

18 the Secretary) as is necessary to carry out the purposes 

19 of this section. 

20 ‘‘(f) REGULATIONS.—The Secretary shall issue such 

21 regulations or other guidance as is necessary or appro22 priate to carry out the purposes of this section’’. 

23 (b) COORDINATION WITH SECTION 83.—Subsection 

24 (e) of section 83 is amended by striking ‘‘or’’ at the end 

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1 graph (5) and inserting ‘‘, or’’, and by adding at the end 

2 the following new paragraph: 

3 ‘‘(6) a transfer of an applicable partnership in4 terest to which section 1061 applies.’’. 

5 (c) CLERICAL AMENDMENT.—The table of sections 

6 for part IV of subchapter O of chapter 1 is amended by 

7 striking the item relating to 1061 and inserting the fol8 lowing new items: 

‘‘Sec. 1061. Partnership interests held in connection with performance of services. 

‘‘Sec. 1062. Cross references.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2017. 

12 SEC. 3315. AMORTIZATION OF RESEARCH AND EXPERI13 MENTAL EXPENDITURES. 

14 (a) IN GENERAL.—Section 174 is amended to read 

15 as follows: 

16 ‘‘SEC. 174. AMORTIZATION OF RESEARCH AND EXPERI17 MENTAL EXPENDITURES. 

18 ‘‘(a) IN GENERAL.—In the case of a taxpayer’s speci19 fied research or experimental expenditures for any taxable 

20 year— 

21 ‘‘(1) except as provided in paragraph (2), no 

22 deduction shall be allowed for such expenditures, 

23 and 

24 ‘‘(2) the taxpayer shall— 


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1 ‘‘(A) charge such expenditures to capital 

2 account, and 

3 ‘‘(B) be allowed an amortization deduction 

4 of such expenditures ratably over the 5-year pe5 riod (15-year period in the case of any specified 

6 research or experimental expenditures which are 

7 attributable to foreign research (within the 

8 meaning of section 41(d)(4)(F))) beginning 

9 with the midpoint of the taxable year in which 

10 such expenditures are paid or incurred. 

11 ‘‘(b) SPECIFIED RESEARCH OR EXPERIMENTAL EX12 PENDITURES.—For purposes of this section, the term 

13 ‘specified research or experimental expenditures’ means, 

14 with respect to any taxable year, research or experimental 

15 expenditures which are paid or incurred by the taxpayer 

16 during such taxable year in connection with the taxpayer’s 

17 trade or business. 

18 ‘‘(c) SPECIAL RULES.— 

19 ‘‘(1) LAND AND OTHER PROPERTY.—This sec20 tion shall not apply to any expenditure for the acqui21 sition or improvement of land, or for the acquisition 

22 or improvement of property to be used in connection 

23 with the research or experimentation and of a char24 acter which is subject to the allowance under section 

25 167 (relating to allowance for depreciation, etc.) or 


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1 section 611 (relating to allowance for depletion); but 

2 for purposes of this section allowances under section 

3 167, and allowances under section 611, shall be con4 sidered as expenditures. 

5 ‘‘(2) EXPLORATION EXPENDITURES.—This sec6 tion shall not apply to any expenditure paid or in7 curred for the purpose of ascertaining the existence, 

8 location, extent, or quality of any deposit of ore or 

9 other mineral (including oil and gas). 

10 ‘‘(3) SOFTWARE DEVELOPMENT.—For purposes 

11 of this section, any amount paid or incurred in con12 nection with the development of any software shall 

13 be treated as a research or experimental expendi14 ture. 

15 ‘‘(d) TREATMENT UPON DISPOSITION, RETIREMENT, 

16 OR ABANDONMENT.—If any property with respect to 

17 which specified research or experimental expenditures are 

18 paid or incurred is disposed, retired, or abandoned during 

19 the period during which such expenditures are allowed as 

20 an amortization deduction under this section, no deduction 

21 shall be allowed with respect to such expenditures on ac22 count of such disposition, retirement, or abandonment and 

23 such amortization deduction shall continue with respect to 

24 such expenditures.’’. 


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1 (b) CLERICAL AMENDMENT.—The table of sections 

2 for part VI of subchapter B of chapter 1 is amended by 

3 striking the item relating to section 174 and inserting the 

4 following new item: 

‘‘Sec. 174. Amortization of research and experimental expenditures.’’. 

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

6 this section shall apply to amounts paid or incurred in tax7 able years beginning after December 31, 2022. 

8 SEC. 3316. UNIFORM TREATMENT OF EXPENSES IN CONTIN9 GENCY FEE CASES. 

10 (a) IN GENERAL.—Section 162, as amended by the 

11 preceding provisions of this Act, is amended by redesig12 nating subsection (r) as subsection (s) and by inserting 

13 after subsection (q) the following new subsection: 

14 ‘‘(r) EXPENSES IN CONTINGENCY FEE CASES.—No 

15 deduction shall be allowed under subsection (a) to a tax16 payer for any expense— 

17 ‘‘(1) paid or incurred in the course of the trade 

18 or business of practicing law, and 

19 ‘‘(2) resulting from a case for which the tax20 payer is compensated primarily on a contingent 

21 basis, 

22 until such time as such contingency is resolved.’’. 

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

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1 curred in taxable years beginning after the date of the en2 actment of this Act. 

3 Subtitle E—Reform of Business 

4 Credits 

5 SEC. 3401. REPEAL OF CREDIT FOR CLINICAL TESTING EX6 PENSES FOR CERTAIN DRUGS FOR RARE DIS7 EASES OR CONDITIONS. 

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 is amended by striking section 45C 

10 (and by striking the item relating to such section in the 

11 table of sections for such subpart). 

12 (b) CONFORMING AMENDMENTS.— 

13 (1) Section 38(b) is amended by striking para14 graph (12). 

15 (2) Section 280C is amended by striking sub16 section (b). 

17 (3) Section 6501(m) is amended by striking 

18 ‘‘45C(d)(4),’’. 

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

20 this section shall apply to amounts paid or incurred in tax21 able years beginning after December 31, 2017. 

22 SEC. 3402. REPEAL OF EMPLOYER-PROVIDED CHILD CARE 

23 CREDIT. 

24 (a) IN GENERAL.—Subpart D of part IV of sub25 chapter A of chapter 1 is amended by striking section 45F 


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1 (and by striking the item relating to such section in the 

2 table of sections for such subpart). 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 38(b) is amended by striking para5 graph (15). 

6 (2) Section 1016(a) is amended by striking 

7 paragraph (28). 

8 (c) EFFECTIVE DATE.— 

9 (1) IN GENERAL.—Except as otherwise pro10 vided in this subsection, the amendments made by 

11 this section shall apply to taxable years beginning 

12 after December 31, 2017. 

13 (2) BASIS ADJUSTMENTS.—The amendment 

14 made by subsection (b)(2) shall apply to credits de15 termined for taxable years beginning after December 

16 31, 2017. 

17 SEC. 3403. REPEAL OF REHABILITATION CREDIT. 

18 (a) IN GENERAL.—Subpart E of part IV of sub19 chapter A of chapter 1 is amended by striking section 47 

20 (and by striking the item relating to such section in the 

21 table of sections for such subpart). 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) Section 170(f)(14)(A) is amended by insert24 ing ‘‘(as in effect before its repeal by the Tax Cuts 

25 and Jobs Act)’’ after ‘‘section 47’’. 


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1 (2) Section 170(h)(4) is amended— 

2 (A) by striking ‘‘(as defined in section 

3 47(c)(3)(B))’’ in subparagraph (C)(ii), and 

4 (B) by adding at the end the following new 

5 subparagraph: 

6 ‘‘(D) REGISTERED HISTORIC DISTRICT.— 

7 The term ‘registered historic district’ means— 

8 ‘‘(i) any district listed in the National 

9 Register, and 

10 ‘‘(ii) any district— 

11 ‘‘(I) which is designated under a 

12 statute of the appropriate State or 

13 local government, if such statute is 

14 certified by the Secretary of the Inte15 rior to the Secretary as containing cri16 teria which will substantially achieve 

17 the purpose of preserving and reha18 bilitating buildings of historic signifi19 cance to the district, and 

20 ‘‘(II) which is certified by the 

21 Secretary of the Interior to the Sec22 retary as meeting substantially all of 

23 the requirements for the listing of dis24 tricts in the National Register.’’. 


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1 (3) Section 469(i)(3) is amended by striking 

2 subparagraph (B). 

3 (4) Section 469(i)(6)(B) is amended— 

4 (A) by striking ‘‘in the case of—’’ and all 

5 that follows and inserting ‘‘in the case of any 

6 credit determined under section 42 for any tax7 able year.’’, and 

8 (B) by striking ‘‘, REHABILITATION CRED9 IT,’’ in the heading thereof. 

10 (5) Section 469(k)(1) is amended by striking ‘‘, 

11 or any rehabilitation credit determined under section 

12 47,’’. 

13 (c) EFFECTIVE DATE.— 

14 (1) IN GENERAL.—Except as provided in para15 graph (2), the amendments made by this section 

16 shall apply to amounts paid or incurred after De17 cember 31, 2017. 

18 (2) TRANSITION RULE.—In the case of quali19 fied rehabilitation expenditures (within the meaning 

20 of section 47 of the Internal Revenue Code of 1986 

21 as in effect before its repeal) with respect to any 

22 building— 

23 (A) owned or leased (as permitted by sec24 tion 47 of the Internal Revenue Code of 1986 


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1 as in effect before its repeal) by the taxpayer at 

2 all times after December 31, 2017, and 

3 (B) with respect to which the 24-month 

4 period selected by the taxpayer under section 

5 47(c)(1)(C) of such Code begins not later than 

6 the end of the 180-day period beginning on the 

7 date of the enactment of this Act, 

8 the amendments made by this section shall apply to 

9 such expenditures paid or incurred after the end of 

10 the taxable year in which the 24-month period re11 ferred to in subparagraph (B) ends. 

12 SEC. 3404. REPEAL OF WORK OPPORTUNITY TAX CREDIT. 

13 (a) IN GENERAL.—Subpart F of part IV of sub14 chapter A of chapter 1 is amended by striking section 51 

15 (and by striking the item relating to such section in the 

16 table of sections for such subpart). 

17 (b) CLERICAL AMENDMENT.—The heading of such 

18 subpart F (and the item relating to such subpart in the 

19 table of subparts for part IV of subchapter A of chapter 

20 1) are each amended by striking ‘‘Rules for Computing 

21 Work Opportunity Credit’’ and inserting ‘‘Special Rules’’. 

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

23 this section shall apply to amounts paid or incurred to 

24 individuals who begin work for the employer after Decem25 ber 31, 2017. 


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1 SEC. 3405. REPEAL OF DEDUCTION FOR CERTAIN UNUSED 

2 BUSINESS CREDITS. 

3 (a) IN GENERAL.—Part VI of subchapter B of chap4 ter 1 is amended by striking section 196 (and by striking 

5 the item relating to such section in the table of sections 

6 for such part). 

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2017. 

10 SEC. 3406. TERMINATION OF NEW MARKETS TAX CREDIT. 

11 (a) IN GENERAL.—Section 45D(f) is amended— 

12 (1) by striking ‘‘2019’’ in paragraph (1)(G) and 

13 inserting ‘‘2017’’, and 

14 (2) by striking ‘‘2024’’ in paragraph (3) and in15 serting ‘‘2022’’. 

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

17 this section shall apply to calendar years beginning after 

18 December 31, 2017. 

19 SEC. 3407. REPEAL OF CREDIT FOR EXPENDITURES TO 

20 PROVIDE ACCESS TO DISABLED INDIVID21 UALS. 

22 (a) IN GENERAL.—Subpart D of part IV of sub23 chapter A of chapter 1 is amended by striking section 44 

24 (and by striking the item relating to such section in the 

25 table of sections for such subpart). 


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1 (b) CONFORMING AMENDMENT.—Section 38(b) is 

2 amended by striking paragraph (7). 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 SEC. 3408. MODIFICATION OF CREDIT FOR PORTION OF EM7 PLOYER SOCIAL SECURITY TAXES PAID WITH 

8 RESPECT TO EMPLOYEE TIPS. 

9 (a) CREDIT DETERMINED WITH RESPECT TO MIN10 IMUM WAGE AS IN EFFECT.—Section 45B(b)(1)(B) is 

11 amended by striking ‘‘as in effect on January 1, 2007, 

12 and’’. 

13 (b) INFORMATION RETURN REQUIREMENT.—Section 

14 45B is amended by redesignating subsections (c) and (d) 

15 as subsections (d) and (e), respectively, and by inserting 

16 after subsection (b) the following new subsection: 

17 ‘‘(c) INFORMATION RETURN REQUIREMENT.— 

18 ‘‘(1) IN GENERAL.—No credit shall be deter19 mined under subsection (a) with respect to any food 

20 or beverage establishment of any taxpayer for any 

21 taxable year unless such taxpayer has, with respect 

22 to the calendar year which ends in or with such tax23 able year— 

24 ‘‘(A) made a report to the Secretary show25 ing the information described in section 


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1 6053(c)(1) with respect to such food or bev2 erage establishment, and 

3 ‘‘(B) furnished written statements to each 

4 employee of such food or beverage establish5 ment showing the information described in sec6 tion 6053(c)(2). 

7 ‘‘(2) ALLOCATION OF 10 PERCENT OF GROSS

8 RECEIPTS.—For purposes of determining the infor9 mation referred to in subparagraphs (A) and (B), 

10 section 6053(c)(3)(A)(i) shall be applied by sub11 stituting ‘10 percent’ for ‘8 percent’. For purposes 

12 of section 6053(c)(5), any reference to section 

13 6053(c)(3)(B) contained therein shall be treated as 

14 including a reference to this paragraph. 

15 ‘‘(3) FOOD OR BEVERAGE ESTABLISHMENT.— 

16 For purposes of this subsection, the term ‘food or 

17 beverage establishment’ means any trade or business 

18 (or portion thereof) which would be a large food or 

19 beverage establishment (as defined in section 

20 6053(c)(4)) if such section were applied without re21 gard to subparagraph (C) thereof.’’. 

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

23 this section shall apply to taxable years beginning after 

24 December 31, 2017. 


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1 Subtitle F—Energy Credits 

2 SEC. 3501. MODIFICATIONS TO CREDIT FOR ELECTRICITY 

3 PRODUCED FROM CERTAIN RENEWABLE RE4 SOURCES. 

5 (a) TERMINATION OF INFLATION ADJUSTMENT.— 

6 Section 45(b)(2) is amended— 

7 (1) by striking ‘‘The 1.5 cent amount’’ and in8 serting the following: 

9 ‘‘(A) IN GENERAL.—The 1.5 cent 

10 amount’’, and 

11 (2) by adding at the end the following new sub12 paragraph: 

13 ‘‘(B) TERMINATION.—Subparagraph (A) 

14 shall not apply with respect to any electricity or 

15 refined coal produced at a facility the construc16 tion of which begins after the date of the enact17 ment of this subparagraph.’’. 

18 (b) SPECIAL RULE FOR DETERMINATION OF BEGIN19 NING OF CONSTRUCTION.—Section 45(e) is amended by 

20 adding at the end the following new paragraph: 

21 ‘‘(12) SPECIAL RULE FOR DETERMINING BE22 GINNING OF CONSTRUCTION.—For purposes of sub23 section (d), the construction of any facility, modi24 fication, improvement, addition, or other property 

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1 less there is a continuous program of construction 

2 which begins before such date and ends on the date 

3 that such property is placed in service.’’. 

4 (c) EFFECTIVE DATES.— 

5 (1) TERMINATION OF INFLATION ADJUST6 MENT.—The amendments made by subsection (a) 

7 shall apply to taxable years ending after the date of 

8 the enactment of this Act. 

9 (2) SPECIAL RULE FOR DETERMINATION OF

10 BEGINNING OF CONSTRUCTION.—The amendment 

11 made by subsection (b) shall apply to taxable years 

12 beginning before, on, or after the date of the enact13 ment of this Act. 

14 SEC. 3502. MODIFICATION OF THE ENERGY INVESTMENT 

15 TAX CREDIT. 

16 (a) EXTENSION OF SOLAR ENERGY PROPERTY.— 

17 Section 48(a)(3)(A)(ii) is amended by striking ‘‘periods 

18 ending before January 1, 2017’’ and inserting ‘‘property 

19 the construction of which begins before January 1, 2022’’. 

20 (b) EXTENSION OF QUALIFIED FUEL CELL PROP21 ERTY.—Section 48(c)(1)(D) is amended by striking ‘‘for 

22 any period after December 31, 2016’’ and inserting ‘‘the 

23 construction of which does not begin before January 1, 

24 2022’’. 


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1 (c) EXTENSION OF QUALIFIED MICROTURBINE

2 PROPERTY.—Section 48(c)(2)(D) is amended by striking 

3 ‘‘for any period after December 31, 2016’’ and inserting 

4 ‘‘the construction of which does not begin before January 

5 1, 2022’’. 

6 (d) EXTENSION OF COMBINED HEAT AND POWER

7 SYSTEM PROPERTY.—Section 48(c)(3)(A)(iv) is amended 

8 by striking ‘‘which is placed in service before January 1, 

9 2017’’ and inserting ‘‘the construction of which begins be10 fore January 1, 2022’’. 

11 (e) EXTENSION OF QUALIFIED SMALL WIND EN12 ERGY PROPERTY.—Section 48(c)(4)(C) is amended by 

13 striking ‘‘for any period after December 31, 2016’’ and 

14 inserting ‘‘the construction of which does not begin before 

15 January 1, 2022’’. 

16 (f) EXTENSION OF THERMAL ENERGY PROPERTY.— 

17 Section 48(a)(3)(A)(vii) is amended by striking ‘‘periods 

18 ending before January 1, 2017’’ and inserting ‘‘property 

19 the construction of which begins before January 1, 2022’’. 

20 (g) PHASEOUT OF 30 PERCENT CREDIT RATE FOR

21 FUEL CELL AND SMALL WIND ENERGY PROPERTY.— 

22 Section 48(a) is amended by adding at the end the fol23 lowing new paragraph: 


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1 ‘‘(7) PHASEOUT FOR QUALIFIED FUEL CELL

2 PROPERTY AND QUALIFIED SMALL WIND ENERGY

3 PROPERTY.— 

4 ‘‘(A) IN GENERAL.—In the case of quali5 fied fuel cell property or qualified small wind 

6 energy property, the construction of which be7 gins before January 1, 2022, the energy per8 centage determined under paragraph (2) shall 

9 be equal to— 

10 ‘‘(i) in the case of any property the 

11 construction of which begins after Decem12 ber 31, 2019, and before January 1, 2021, 

13 26 percent, and 

14 ‘‘(ii) in the case of any property the 

15 construction of which begins after Decem16 ber 31, 2020, and before January 1, 2022, 

17 22 percent. 

18 ‘‘(B) PLACED IN SERVICE DEADLINE.—In 

19 the case of any qualified fuel cell property or 

20 qualified small wind energy property, the con21 struction of which begins before January 1, 

22 2022, and which is not placed in service before 

23 January 1, 2024, the energy percentage deter24 mined under paragraph (2) shall be equal to 10 

25 percent.’’. 


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1 (h) PHASEOUT FOR FIBER-OPTIC SOLAR ENERGY

2 PROPERTY.—Subparagraphs (A) and (B) of section 

3 48(a)(6) are each amended by inserting ‘‘or (3)(A)(ii)’’ 

4 after ‘‘paragraph (3)(A)(i)’’. 

5 (i) TERMINATION OF SOLAR ENERGY PROPERTY.— 

6 Section 48(a)(3)(A)(i) is amended by inserting ‘‘, the con7 struction of which begins before January 1, 2028, and’’ 

8 after ‘‘equipment’’. 

9 (j) TERMINATION OF GEOTHERMAL ENERGY PROP10 ERTY.—Section 48(a)(3)(A)(iii) is amended by inserting 

11 ‘‘, the construction of which begins before January 1, 

12 2028, and’’ after ‘‘equipment’’. 

13 (k) SPECIAL RULE FOR DETERMINATION OF BEGIN14 NING OF CONSTRUCTION.—Section 48(c) is amended by 

15 adding at the end the following new paragraph: 

16 ‘‘(5) SPECIAL RULE FOR DETERMINING BEGIN17 NING OF CONSTRUCTION.—The construction of any 

18 facility, modification, improvement, addition, or 

19 other property shall not be treated as beginning be20 fore any date unless there is a continuous program 

21 of construction which begins before such date and 

22 ends on the date that such property is placed in 

23 service.’’. 

24 (l) EFFECTIVE DATE.— 


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1 (1) IN GENERAL.—Except as otherwise pro2 vided in this subsection, the amendments made by 

3 this section shall apply to periods after December 

4 31, 2016, under rules similar to the rules of section 

5 48(m) of the Internal Revenue Code of 1986 (as in 

6 effect on the day before the date of the enactment 

7 of the Revenue Reconciliation Act of 1990). 

8 (2) EXTENSION OF COMBINED HEAT AND

9 POWER SYSTEM PROPERTY.—The amendment made 

10 by subsection (d) shall apply to property placed in 

11 service after December 31, 2016. 

12 (3) PHASEOUTS AND TERMINATIONS.—The 

13 amendments made by subsections (g), (h), (i), and 

14 (j) shall take effect on the date of the enactment of 

15 this Act. 

16 (4) SPECIAL RULE FOR DETERMINATION OF

17 BEGINNING OF CONSTRUCTION.—The amendment 

18 made by subsection (k) shall apply to taxable years 

19 beginning before, on, or after the date of the enact20 ment of this Act. 

21 SEC. 3503. EXTENSION AND PHASEOUT OF RESIDENTIAL 

22 ENERGY EFFICIENT PROPERTY. 

23 (a) EXTENSION.—Section 25D(h) is amended by 

24 striking ‘‘December 31, 2016 (December 31, 2021, in the 

25 case of any qualified solar electric property expenditures 


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1 and qualified solar water heating property expenditures)’’ 

2 and inserting ‘‘December 31, 2021’’. 

3 (b) PHASEOUT.— 

4 (1) IN GENERAL.—Paragraphs (3), (4), and (5) 

5 of section 25D(a) are amended by striking ‘‘30 per6 cent’’ each place it appears and inserting ‘‘the appli7 cable percentage’’. 

8 (2) CONFORMING AMENDMENT.—Section 

9 25D(g) of such Code is amended by striking ‘‘para10 graphs (1) and (2) of’’. 

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

12 this section shall apply to property placed in service after 

13 December 31, 2016. 

14 SEC. 3504. REPEAL OF ENHANCED OIL RECOVERY CREDIT. 

15 (a) IN GENERAL.—Subpart D of part IV of sub16 chapter A of chapter 1 is amended by striking section 43 

17 (and by striking the item relating to such section in the 

18 table of sections for such subpart). 

19 (b) CONFORMING AMENDMENTS.— 

20 (1) Section 38(b) is amended by striking para21 graph (6). 

22 (2) Section 6501(m) is amended by striking 

23 ‘‘43,’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2017. 

4 SEC. 3505. REPEAL OF CREDIT FOR PRODUCING OIL AND 

5 GAS FROM MARGINAL WELLS. 

6 (a) IN GENERAL.—Subpart D of part IV of sub7 chapter A of chapter 1 is amended by striking section 45I 

8 (and by striking the item relating to such section in the 

9 table of sections for such subpart). 

10 (b) CONFORMING AMENDMENT.—Section 38(b) is 

11 amended by striking paragraph (19). 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2017. 

15 SEC. 3506. MODIFICATIONS OF CREDIT FOR PRODUCTION 

16 FROM ADVANCED NUCLEAR POWER FACILI17 TIES. 

18 (a) TREATMENT OF UNUTILIZED LIMITATION

19 AMOUNTS.—Section 45J(b) is amended— 

20 (1) in paragraph (4), by inserting ‘‘or any 

21 amendment to’’ after ‘‘enactment of’’; and 

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

23 paragraph: 

24 ‘‘(5) ALLOCATION OF UNUTILIZED LIMITA25 TION.— 


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1 ‘‘(A) IN GENERAL.—Any unutilized na2 tional megawatt capacity limitation shall be al3 located by the Secretary under paragraph (3) 

4 as rapidly as is practicable after December 31, 

5 2020— 

6 ‘‘(i) first to facilities placed in service 

7 on or before such date to the extent that 

8 such facilities did not receive an allocation 

9 equal to their full nameplate capacity; and 

10 ‘‘(ii) then to facilities placed in service 

11 after such date in the order in which such 

12 facilities are placed in service. 

13 ‘‘(B) UNUTILIZED NATIONAL MEGAWATT

14 CAPACITY LIMITATION.—The term ‘unutilized 

15 national megawatt capacity limitation’ means 

16 the excess (if any) of— 

17 ‘‘(i) 6,000 megawatts, over 

18 ‘‘(ii) the aggregate amount of national 

19 megawatt capacity limitation allocated by 

20 the Secretary before January 1, 2021, re21 duced by any amount of such limitation 

22 which was allocated to a facility which was 

23 not placed in service before such date. 

24 ‘‘(C) COORDINATION WITH OTHER PROVI25 SIONS.—In the case of any unutilized national 


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1 megawatt capacity limitation allocated by the 

2 Secretary pursuant to this paragraph— 

3 ‘‘(i) such allocation shall be treated 

4 for purposes of this section in the same 

5 manner as an allocation of national mega6 watt capacity limitation; and 

7 ‘‘(ii) subsection (d)(1)(B) shall not 

8 apply to any facility which receives such al9 location.’’. 

10 (b) TRANSFER OF CREDIT BY CERTAIN PUBLIC EN11 TITIES.— 

12 (1) IN GENERAL.—Section 45J is amended— 

13 (A) by redesignating subsection (e) as sub14 section (f); and 

15 (B) by inserting after subsection (d) the 

16 following new subsection: 

17 ‘‘(e) TRANSFER OF CREDIT BY CERTAIN PUBLIC EN18 TITIES.— 

19 ‘‘(1) IN GENERAL.—If, with respect to a credit 

20 under subsection (a) for any taxable year— 

21 ‘‘(A) the taxpayer would be a qualified 

22 public entity; and 

23 ‘‘(B) such entity elects the application of 

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1 spect to all (or any portion specified in such 

2 election) of such credit, 

3 the eligible project partner specified in such election 

4 (and not the qualified public entity) shall be treated 

5 as the taxpayer for purposes of this title with re6 spect to such credit (or such portion thereof). 

7 ‘‘(2) DEFINITIONS.—For purposes of this sub8 section— 

9 ‘‘(A) QUALIFIED PUBLIC ENTITY.—The 

10 term ‘qualified public entity’ means— 

11 ‘‘(i) a Federal, State, or local govern12 ment entity, or any political subdivision, 

13 agency, or instrumentality thereof; 

14 ‘‘(ii) a mutual or cooperative electric 

15 company described in section 501(c)(12) or 

16 section 1381(a)(2); or 

17 ‘‘(iii) a not-for-profit electric utility 

18 which has or had received a loan or loan 

19 guarantee under the Rural Electrification 

20 Act of 1936. 

21 ‘‘(B) ELIGIBLE PROJECT PARTNER.—The 

22 term ‘eligible project partner’ means— 

23 ‘‘(i) any person responsible for, or 

24 participating in, the design or construction 

25 of the advanced nuclear power facility to 


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1 which the credit under subsection (a) re2 lates; 

3 ‘‘(ii) any person who participates in 

4 the provision of the nuclear steam supply 

5 system to the advanced nuclear power fa6 cility to which the credit under subsection 

7 (a) relates; 

8 ‘‘(iii) any person who participates in 

9 the provision of nuclear fuel to the ad10 vanced nuclear power facility to which the 

11 credit under subsection (a) relates; or 

12 ‘‘(iv) any person who has an owner13 ship interest in such facility. 

14 ‘‘(3) SPECIAL RULES.— 

15 ‘‘(A) APPLICATION TO PARTNERSHIPS.—In 

16 the case of a credit under subsection (a) which 

17 is determined at the partnership level— 

18 ‘‘(i) for purposes of paragraph (1)(A), 

19 a qualified public entity shall be treated as 

20 the taxpayer with respect to such entity’s 

21 distributive share of such credit; and 

22 ‘‘(ii) the term ‘eligible project partner’ 

23 shall include any partner of the partner24 ship. 


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1 ‘‘(B) TAXABLE YEAR IN WHICH CREDIT

2 TAKEN INTO ACCOUNT.—In the case of any 

3 credit (or portion thereof) with respect to which 

4 an election is made under paragraph (1), such 

5 credit shall be taken into account in the first 

6 taxable year of the eligible project partner end7 ing with, or after, the qualified public entity’s 

8 taxable year with respect to which the credit 

9 was determined. 

10 ‘‘(C) TREATMENT OF TRANSFER UNDER

11 PRIVATE USE RULES.—For purposes of section 

12 141(b)(1), any benefit derived by an eligible 

13 project partner in connection with an election 

14 under this subsection shall not be taken into ac15 count as a private business use.’’. 

16 (2) SPECIAL RULE FOR PROCEEDS OF TRANS17 FERS FOR MUTUAL OR COOPERATIVE ELECTRIC

18 COMPANIES.—Section 501(c)(12) of such Code is 

19 amended by adding at the end the following new 

20 subparagraph: 

21 ‘‘(I) In the case of a mutual or cooperative 

22 electric company described in this paragraph or 

23 an organization described in section 1381(a)(2), 

24 income received or accrued in connection with 

25 an election under section 45J(e)(1) shall be 


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1 treated as an amount collected from members 

2 for the sole purpose of meeting losses and ex3 penses.’’. 

4 (c) EFFECTIVE DATES.— 

5 (1) TREATMENT OF UNUTILIZED LIMITATION

6 AMOUNTS.—The amendment made by subsection (a) 

7 shall take effect on the date of the enactment of this 

8 Act. 

9 (2) TRANSFER OF CREDIT BY CERTAIN PUBLIC

10 ENTITIES.—The amendments made by subsection 

11 (b) shall apply to taxable years beginning after the 

12 date of the enactment of this Act. 

13 Subtitle G—Bond Reforms 

14 SEC. 3601. TERMINATION OF PRIVATE ACTIVITY BONDS. 

15 (a) IN GENERAL.—Paragraph (1) of section 103(b) 

16 is amended— 

17 (1) by striking ‘‘which is not a qualified bond 

18 (within the meaning of section 141)’’, and 

19 (2) by striking ‘‘WHICH IS NOT A QUALIFIED

20 BOND’’ in the heading thereof. 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Subpart A of part IV of subchapter B of 

23 chapter 1 is amended by striking sections 142, 143, 

24 144, 145, 146, and 147 (and by striking each of the 


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1 items relating to such sections in the table of sec2 tions for such subpart). 

3 (2) Section 25 is amended by adding at the end 

4 the following new subsection: 

5 ‘‘(j) COORDINATION WITH REPEAL OF PRIVATE AC6 TIVITY BONDS.—Any reference to section 143, 144, or 

7 146 shall be treated as a reference to such section as in 

8 effect before its repeal by the Tax Cuts and Jobs Act.’’. 

9 (3) Section 26(b)(2) is amended by striking 

10 subparagraph (D). 

11 (4) Section 141(b) is amended by striking para12 graphs (5) and (9). 

13 (5) Section 141(d) is amended by striking para14 graph (5). 

15 (6) Section 141 is amended by striking sub16 section (e). 

17 (7) Section 148(f)(4) is amended— 

18 (A) by striking ‘‘(determined in accordance 

19 with section 147(b)(2)(A))’’ in the flush matter 

20 following subparagraph (A)(ii) and inserting 

21 ‘‘(determined by taking into account the respec22 tive issue prices of the bonds issued as part of 

23 the issue)’’, and 

24 (B) by striking the last sentence of sub25 paragraph (D)(v). 


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1 (8) Clause (iv) of section 148(f)(4)(C) is 

2 amended to read as follows: 

3 ‘‘(iv) CONSTRUCTION ISSUE.—For 

4 purposes of this subparagraph— 

5 ‘‘(I) IN GENERAL.—The term 

6 ‘construction issue’ means any issue if 

7 at least 75 percent of the available 

8 construction proceeds of such issue 

9 are to be used for construction ex10 penditures. 

11 ‘‘(II) CONSTRUCTION.—The term 

12 ‘construction’ includes reconstruction 

13 and rehabilitation.’’. 

14 (9) Section 149(b)(3) is amended by striking 

15 subparagraph (C). 

16 (10) Section 149(e)(2) is amended— 

17 (A) by striking subparagraphs (C), (D), 

18 and (F) and by redesignating subparagraphs 

19 (E) and (G) as subparagraphs (C) and (D), re20 spectively, and 

21 (B) by striking the second sentence. 

22 (11) Section 149(f)(6) is amended— 

23 (A) by striking subparagraph (B), and 

24 (B) by striking ‘‘For purposes of this sub25 section’’ and all that follows through ‘‘The 


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1 term’’ and inserting the following: ‘‘For pur2 poses of this subsection, the term’’. 

3 (12) Section 150(e)(3) is amended to read as 

4 follows: 

5 ‘‘(3) PUBLIC APPROVAL REQUIREMENT.—A 

6 bond shall not be treated as part of an issue which 

7 meets the requirements of paragraph (1) unless such 

8 bond satisfies the requirements of section 147(f)(2) 

9 (as in effect before its repeal by the Tax Cuts and 

10 Jobs Act).’’. 

11 (13) Section 269A(b)(3) is amended by striking 

12 ‘‘144(a)(3)’’ and inserting ‘‘414(n)(6)(A)’’. 

13 (14) Section 414(m)(5) is amended by striking 

14 ‘‘section 144(a)(3)’’ and inserting ‘‘subsection 

15 (n)(6)(A)’’. 

16 (15) Section 414(n)(6)(A) is amended to read 

17 as follows: 

18 ‘‘(A) RELATED PERSONS.—A person is a 

19 related person to another person if— 

20 ‘‘(i) the relationship between such per21 sons would result in a disallowance of 

22 losses under section 267 or 707(b), or 

23 ‘‘(ii) such persons are members of the 

24 same controlled group of corporations (as 

25 defined in section 1563(a), except that 


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1 ‘more than 50 percent’ shall be substituted 

2 for ‘at least 80 percent’ each place it ap3 pears therein).’’. 

4 (16) Section 6045(e)(4)(B) is amended by in5 serting ‘‘(as in effect before its repeal by the Tax 

6 Cuts and Jobs Act)’’ after ‘‘section 143(m)(3)’’. 

7 (17) Section 6654(f)(1) is amended by inserting 

8 ‘‘(as in effect before its repeal by the Tax Cuts and 

9 Jobs Act)’’ after ‘‘section 143(m)’’. 

10 (18) Section 7871(c) is amended— 

11 (A) by striking paragraphs (2) and (3), 

12 and 

13 (B) by striking ‘‘TAX-EXEMPT BONDS.—’’ 

14 and all that follows through ‘‘Subsection (a) of 

15 section 103’’ and inserting the following: ‘‘TAX16 EXEMPT BONDS.—Subsection (a) of section 

17 103’’. 

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

19 this section shall apply to bonds issued after December 

20 31, 2017. 

21 SEC. 3602. REPEAL OF ADVANCE REFUNDING BONDS. 

22 (a) IN GENERAL.—Paragraph (1) of section 149(d) 

23 is amended by striking ‘‘as part of an issue described in 

24 paragraph (2), (3), or (4).’’ and inserting ‘‘to advance re25 fund another bond.’’. 


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1 (b) CONFORMING AMENDMENTS.— 

2 (1) Section 149(d) is amended by striking para3 graphs (2), (3), (4), and (6) and by redesignating 

4 paragraphs (5) and (7) as paragraphs (2) and (3). 

5 (2) Section 148(f)(4)(C) is amended by striking 

6 clause (xiv) and by redesignating clauses (xv) to 

7 (xvii) as clauses (xiv) to (xvi). 

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

9 this section shall apply to advance refunding bonds issued 

10 after December 31, 2017. 

11 SEC. 3603. REPEAL OF TAX CREDIT BONDS. 

12 (a) IN GENERAL.—Part IV of subchapter A of chap13 ter 1 is amended by striking subparts H, I, and J (and 

14 by striking the items relating to such subparts in the table 

15 of subparts for such part). 

16 (b) PAYMENTS TO ISSUERS.—Subchapter B of chap17 ter 65 is amended by striking section 6431 (and by strik18 ing the item relating to such section in the table of sec19 tions for such subchapter). 

20 (c) CONFORMING AMENDMENTS.— 

21 (1) Part IV of subchapter U of chapter 1 is 

22 amended by striking section 1397E (and by striking 

23 the item relating to such section in the table of sec24 tions for such part). 


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1 (2) Section 54(l)(3)(B) is amended by inserting 

2 ‘‘(as in effect before its repeal by the Tax Cuts and 

3 Jobs Act)’’ after ‘‘section 1397E(I)’’. 

4 (3) Section 6211(b)(4)(A) is amended by strik5 ing ‘‘, and 6431’’ and inserting ‘‘and’’ before 

6 ‘‘36B’’. 

7 (4) Section 6401(b)(1) is amended by striking 

8 ‘‘G, H, I, and J’’ and inserting ‘‘and G’’. 

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

10 this section shall apply to bonds issued after December 

11 31, 2017. 

12 SEC. 3604. NO TAX EXEMPT BONDS FOR PROFESSIONAL 

13 STADIUMS. 

14 (a) IN GENERAL.—Section 103(b), as amended by 

15 this Act, is further amended by adding at the end the fol16 lowing new paragraph: 

17 ‘‘(4) PROFESSIONAL STADIUM BOND.—Any pro18 fessional stadium bond.’’. 

19 (b) PROFESSIONAL STADIUM BOND DEFINED.—Sub20 section (c) of section 103 is amended by adding at the 

21 end the following new paragraph: 

22 ‘‘(3) PROFESSIONAL STADIUM BOND.—The 

23 term ‘professional stadium bond’ means any bond 

24 issued as part of an issue any proceeds of which are 

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1 locable to a facility (or appurtenant real property) 

2 which, during at least 5 days during any calendar 

3 year, is used as a stadium or arena for professional 

4 sports exhibitions, games, or training.’’. 

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

6 this section shall apply to bonds issued after November 

7 2, 2017. 

8 Subtitle H—Insurance 

9 SEC. 3701. NET OPERATING LOSSES OF LIFE INSURANCE 

10 COMPANIES. 

11 (a) IN GENERAL.—Section 805(b) is amended by 

12 striking paragraph (4) and by redesignating paragraph 

13 (5) as paragraph (4). 

14 (b) CONFORMING AMENDMENTS.— 

15 (1) Part I of subchapter L of chapter 1 is 

16 amended by striking section 810 (and by striking 

17 the item relating to such section in the table of sec18 tions for such part). 

19 (2) Part III of subchapter L of chapter 1 is 

20 amended by striking section 844 (and by striking 

21 the item relating to such section in the table of sec22 tions for such part). 

23 (3) Section 381 is amended by striking sub24 section (d). 


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1 (4) Section 805(a)(4)(B)(ii) is amended to read 

2 as follows: 

3 ‘‘(ii) the deduction allowed under sec4 tion 172,’’. 

5 (5) Section 805(a) is amended by striking para6 graph (5). 

7 (6) Section 953(b)(1)(B) is amended to read as 

8 follows: 

9 ‘‘(B) So much of section 805(a)(8) as re10 lates to the deduction allowed under section 

11 172.’’. 

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

13 this section shall apply to losses arising in taxable years 

14 beginning after December 31, 2017. 

15 SEC. 3702. REPEAL OF SMALL LIFE INSURANCE COMPANY 

16 DEDUCTION. 

17 (a) IN GENERAL.—Part I of subchapter L of chapter 

18 1 is amended by striking section 806 (and by striking the 

19 item relating to such section in the table of sections for 

20 such part). 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Section 453B(e) is amended— 

23 (A) by striking ‘‘(as defined in section 

24 806(b)(3))’’ in paragraph (2)(B), and 


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1 (B) by adding at the end the following new 

2 paragraph: 

3 ‘‘(3) NONINSURANCE BUSINESS.— 

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

5 subsection, the term ‘noninsurance business’ 

6 means any activity which is not an insurance 

7 business. 

8 ‘‘(B) CERTAIN ACTIVITIES TREATED AS IN9 SURANCE BUSINESSES.—For purposes of sub10 paragraph (A), any activity which is not an in11 surance business shall be treated as an insur12 ance business if— 

13 ‘‘(i) it is of a type traditionally carried 

14 on by life insurance companies for invest15 ment purposes, but only if the carrying on 

16 of such activity (other than in the case of 

17 real estate) does not constitute the active 

18 conduct of a trade or business, or 

19 ‘‘(ii) it involves the performance of ad20 ministrative services in connection with 

21 plans providing life insurance, pension, or 

22 accident and health benefits.’’. 

23 (2) Section 465(c)(7)(D)(v)(II) is amended by 

24 striking ‘‘section 806(b)(3)’’ and inserting ‘‘section 

25 453B(e)(3)’’. 


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1 (3) Section 801(a)(2) is amended by striking 

2 subparagraph (C). 

3 (4) Section 804 is amended by striking 

4 ‘‘means—’’ and all that follows and inserting 

5 ‘‘means the general deductions provided in section 

6 805.’’. 

7 (5) Section 805(a)(4)(B), as amended by sec8 tion 3701, is amended by striking clause (i) and by 

9 redesignating clauses (ii), (iii), and (iv) as clauses 

10 (i), (ii), and (iii), respectively. 

11 (6) Section 805(b)(2)(A) is amended by strik12 ing clause (iii) and by redesignating clauses (iv) and 

13 (v) as clauses (iii) and (iv), respectively. 

14 (7) Section 842(c) is amended by striking para15 graph (1) and by redesignating paragraphs (2) and 

16 (3) as paragraphs (1) and (2), respectively. 

17 (8) Section 953(b)(1), as amended by section 

18 3701, is amended by striking subparagraph (A) and 

19 by redesignating subparagraphs (B) and (C) as sub20 paragraphs (A) and (B), respectively. 

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2017. 


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1 SEC. 3703. SURTAX ON LIFE INSURANCE COMPANY TAX2 ABLE INCOME. 

3 (a) IN GENERAL.—Section 801(a)(1) is amended— 

4 (1) by striking ‘‘consist of a tax’’ and insert 

5 ‘‘consist of the sum of— 

6 ‘‘(A) a tax’’, and 

7 (2) by striking the period at the end and insert8 ing ‘‘, and’’, and 

9 (3) by adding at the end the following new sub10 paragraph: 

11 ‘‘(B) a tax equal to 8 percent of the life in12 surance company taxable income.’’. 

13 SEC. 3704. ADJUSTMENT FOR CHANGE IN COMPUTING RE14 SERVES. 

15 (a) IN GENERAL.—Paragraph (1) of section 807(f) 

16 is amended to read as follows: 

17 ‘‘(1) TREATMENT AS CHANGE IN METHOD OF

18 ACCOUNTING.—If the basis for determining any item 

19 referred to in subsection (c) as of the close of any 

20 taxable year differs from the basis for such deter21 mination as of the close of the preceding taxable 

22 year, then so much of the difference between— 

23 ‘‘(A) the amount of the item at the close 

24 of the taxable year, computed on the new basis, 

25 and 


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1 ‘‘(B) the amount of the item at the close 

2 of the taxable year, computed on the old basis, 

3 as is attributable to contracts issued before the tax4 able year shall be taken into account under section 

5 481 as adjustments attributable to a change in 

6 method of accounting initiated by the taxpayer and 

7 made with the consent of the Secretary.’’. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2017. 

11 SEC. 3705. 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 

17 such subpart). 

18 (b) CONFORMING AMENDMENT.—Section 801 is 

19 amended by striking subsection (c). 

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2017. 

23 (d) PHASED INCLUSION OF REMAINING BALANCE OF

24 POLICYHOLDERS SURPLUS ACCOUNTS.—In the case of 

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1 termined as of the close of such company’s last taxable 

2 year beginning before January 1, 2018) in an existing pol3 icyholders surplus account (as defined in section 815 of 

4 the Internal Revenue Code of 1986, as in effect before 

5 its repeal), the tax imposed by section 801 of such Code 

6 for the first 8 taxable years beginning after December 31, 

7 2017, shall be the amount which would be imposed by 

8 such section 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 

11 but not less than zero), plus 

(2) 1 12 ⁄8 of such balance. 

13 SEC. 3706. MODIFICATION OF PRORATION RULES FOR 

14 PROPERTY AND CASUALTY INSURANCE COM15 PANIES. 

16 (a) IN GENERAL.—Section 832(b)(5)(B) is amended 

17 by striking ‘‘15 percent’’ and inserting ‘‘26.25 percent’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 


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1 SEC. 3707. MODIFICATION OF DISCOUNTING RULES FOR 

2 PROPERTY AND CASUALTY INSURANCE COM3 PANIES. 

4 (a) MODIFICATION OF RATE OF INTEREST USED TO

5 DISCOUNT UNPAID LOSSES.—Paragraph (2) of section 

6 846(c) is amended to read as follows: 

7 ‘‘(2) DETERMINATION OF ANNUAL RATE.—The 

8 annual rate determined by the Secretary under this 

9 paragraph for any calendar year shall be a rate de10 termined on the basis of the corporate bond yield 

11 curve (as defined in section 430(h)(2)(D)(i)).’’. 

12 (b) MODIFICATION OF COMPUTATIONAL RULES FOR

13 LOSS PAYMENT PATTERNS.—Section 846(d)(3) is amend14 ed by striking subparagraphs (B) through (G) and insert15 ing the following new subparagraphs: 

16 ‘‘(B) TREATMENT OF CERTAIN LOSSES.— 

17 Losses which would have been treated as paid 

18 in the last year of the period applicable under 

19 subparagraph (A)(i) or (A)(ii) shall be treated 

20 as paid in the following manner: 

21 ‘‘(i) 3-YEAR LOSS PAYMENT PAT22 TERN.— 

23 ‘‘(I) IN GENERAL.—The period 

24 taken into account under subpara25 graph (A)(i) shall be extended to the 

26 extent required under subclause (II). 


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1 ‘‘(II) COMPUTATION OF EXTEN2 SION.—The amount of losses which 

3 would have been treated as paid in the 

4 3d year after the accident year shall 

5 be treated as paid in such 3d year 

6 and each subsequent year in an 

7 amount equal to the average of the 

8 losses treated as paid in the 1st and 

9 2d years after the accident year (or, if 

10 lesser, the portion of the unpaid losses 

11 not theretofore taken into account). 

12 To the extent such unpaid losses have 

13 not been treated as paid before the 

14 18th year after the accident year, they 

15 shall be treated as paid in such 18th 

16 year. 

17 ‘‘(ii) 10-YEAR LOSS PAYMENT PAT18 TERN.— 

19 ‘‘(I) IN GENERAL.—The period 

20 taken into account under subpara21 graph (A)(ii) shall be extended to the 

22 extent required under subclause (II). 

23 ‘‘(II) COMPUTATION OF EXTEN24 SION.—The amount of losses which 

25 would have been treated as paid in the 


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1 10th year after the accident year shall 

2 be treated as paid in such 10th year 

3 and each subsequent year in an 

4 amount equal to the amount of the 

5 average of the losses treated as paid 

6 in the 7th, 8th, and 9th years after 

7 the accident year (or, if lesser, the 

8 portion of the unpaid losses not there9 tofore taken into account). To the ex10 tent such unpaid losses have not been 

11 treated as paid before the 25th year 

12 after the accident year, they shall be 

13 treated as paid in such 25th year.’’. 

14 (c) REPEAL OF HISTORICAL PAYMENT PATTERN

15 ELECTION.—Section 846 is amended by striking sub16 section (e) and by redesignating subsections (f) and (g) 

17 as subsections (e) and (f), respectively. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 (e) TRANSITIONAL RULE.—For the first taxable year 

22 beginning after December 31, 2017— 

23 (1) the unpaid losses and the expenses unpaid 

24 (as defined in paragraphs (5)(B) and (6) of section 


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1 832(b) of the Internal Revenue Code of 1986) at the 

2 end of the preceding taxable year, and 

3 (2) the unpaid losses as defined in sections 

4 807(c)(2) and 805(a)(1) of such Code at the end of 

5 the preceding taxable year, 

6 shall be determined as if the amendments made by this 

7 section had applied to such unpaid losses and expenses 

8 unpaid in the preceding taxable year and by using the in9 terest rate and loss payment patterns applicable to acci10 dent years ending with calendar year 2018, and any ad11 justment shall be taken into account ratably in such first 

12 taxable year and the 7 succeeding taxable years. For sub13 sequent taxable years, such amendments shall be applied 

14 with respect to such unpaid losses and expenses unpaid 

15 by using the interest rate and loss payment patterns appli16 cable to accident years ending with calendar year 2018. 

17 SEC. 3708. REPEAL OF SPECIAL ESTIMATED TAX PAY18 MENTS. 

19 (a) IN GENERAL.—Part III of subchapter L of chap20 ter 1 is amended by striking section 847 (and by striking 

21 the item relating to such section in the table of sections 

22 for such part). 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2017. 


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1 Subtitle I—Compensation 

2 SEC. 3801. MODIFICATION OF LIMITATION ON EXCESSIVE 

3 EMPLOYEE REMUNERATION. 

4 (a) REPEAL OF PERFORMANCE-BASED COMPENSA5 TION AND COMMISSION EXCEPTIONS FOR LIMITATION ON

6 EXCESSIVE EMPLOYEE REMUNERATION.— 

7 (1) IN GENERAL.—Section 162(m)(4) is amend8 ed by striking subparagraphs (B) and (C) and by re9 designating subparagraphs (D), (E), (F), and (G) as 

10 subparagraphs (B), (C), (D), and (E), respectively. 

11 (2) CONFORMING AMENDMENTS.— 

12 (A) Paragraphs (5)(E) and (6)(D) of sec13 tion 162(m) are each amended by striking 

14 ‘‘subparagraphs (B), (C), and (D)’’ and insert15 ing ‘‘subparagraph (B)’’. 

16 (B) Paragraphs (5)(G) and (6)(G) of sec17 tion 162(m) are each amended by striking ‘‘(F) 

18 and (G)’’ and inserting ‘‘(D) and (E)’’. 

19 (b) EXPANSION OF APPLICABLE EMPLOYER.—Sec20 tion 162(m)(2) is amended to read as follows: 

21 ‘‘(2) PUBLICLY HELD CORPORATION.—For pur22 poses of this subsection, the term ‘publicly held cor23 poration’ means any corporation which is an issuer 

24 (as defined in section 3 of the Securities Exchange 

25 Act of 1934 (15 U.S.C. 78c))— 


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1 ‘‘(A) the securities of which are required to 

2 be registered under section 12 of such Act (15 

3 U.S.C. 78l), or 

4 ‘‘(B) that is required to file reports under 

5 section 15(d) of such Act (15 U.S.C. 78o(d)).’’. 

6 (c) MODIFICATION OF DEFINITION OF COVERED EM7 PLOYEES.—Section 162(m)(3) is amended— 

8 (1) in subparagraph (A), by striking ‘‘as of the 

9 close of the taxable year, such employee is the chief 

10 executive officer of the taxpayer or is’’ and inserting 

11 ‘‘such employee is the principal executive officer or 

12 principal financial officer of the taxpayer at any 

13 time during the taxable year, or was’’, 

14 (2) in subparagraph (B)— 

15 (A) by striking ‘‘4’’ and inserting ‘‘3’’, and 

16 (B) by striking ‘‘(other than the chief exec17 utive officer)’’ and inserting ‘‘(other than the 

18 principal executive officer or principal financial 

19 officer)’’, and 

20 (3) by striking ‘‘or’’ at the end of subparagraph 

21 (A), by striking the period at the end of subpara22 graph (B) and inserting ‘‘, or’’, and by adding at the 

23 end the following: 

24 ‘‘(C) was a covered employee of the tax25 payer (or any predecessor) for any preceding 


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1 taxable year beginning after December 31, 

2 2016. 

3 Such term shall include any employee who would be 

4 described in subparagraph (B) if the reporting de5 scribed in such subparagraph were required as so 

6 described.’’. 

7 (d) SPECIAL RULE FOR REMUNERATION PAID TO

8 BENEFICIARIES, ETC.—Section 162(m)(4), as amended by 

9 subsection (a), is amended by adding at the end the fol10 lowing new subparagraph: 

11 ‘‘(F) SPECIAL RULE FOR REMUNERATION

12 PAID TO BENEFICIARIES, ETC.—Remuneration 

13 shall not fail to be applicable employee remu14 neration merely because it is includible in the 

15 income of, or paid to, a person other than the 

16 covered employee, including after the death of 

17 the covered employee.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2017. 

21 SEC. 3802. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZA22 TION EXECUTIVE COMPENSATION. 

23 (a) IN GENERAL.—Subchapter D of chapter 42 is 

24 amended by adding at the end the following new section: 


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1 ‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION 

2 EXECUTIVE COMPENSATION. 

3 ‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 

4 equal to 20 percent of the sum of— 

5 ‘‘(1) so much of the remuneration paid (other 

6 than any excess parachute payment) by an applica7 ble tax-exempt organization for the taxable year with 

8 respect to employment of any covered employee in 

9 excess of $1,000,000, plus 

10 ‘‘(2) any excess parachute payment paid by 

11 such an organization to any covered employee. 

12 ‘‘(b) LIABILITY FOR TAX.—The employer shall be lia13 ble for the tax imposed under subsection (a). 

14 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur15 poses of this section— 

16 ‘‘(1) APPLICABLE TAX-EXEMPT ORGANIZA17 TION.—The term ‘applicable tax-exempt organiza18 tion’ means any organization that for the taxable 

19 year— 

20 ‘‘(A) is exempt from taxation under section 

21 501(a), 

22 ‘‘(B) is a farmers’ cooperative organization 

23 described in section 521(b)(1), 

24 ‘‘(C) has income excluded from taxation 

25 under section 115(1), or 


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1 ‘‘(D) is a political organization described in 

2 section 527(e)(1). 

3 ‘‘(2) COVERED EMPLOYEE.—For purposes of 

4 this section, the term ‘covered employee’ means any 

5 employee (including any former employee) of an ap6 plicable tax-exempt organization if the employee— 

7 ‘‘(A) is one of the 5 highest compensated 

8 employees of the organization for the taxable 

9 year, or 

10 ‘‘(B) was a covered employee of the organi11 zation (or any predecessor) for any preceding 

12 taxable year beginning after December 31, 

13 2016. 

14 ‘‘(3) REMUNERATION.—For purposes of this 

15 section, the term ‘remuneration’ means wages (as 

16 defined in section 3401(a)), except that such term 

17 shall not include any designated Roth contribution 

18 (as defined in section 402A(c)). 

19 ‘‘(4) REMUNERATION FROM RELATED ORGANI20 ZATIONS.— 

21 ‘‘(A) IN GENERAL.—Remuneration of a 

22 covered employee paid by an applicable tax-ex23 empt organization shall include any remunera24 tion paid with respect to employment of such 


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1 employee by any related person or governmental 

2 entity. 

3 ‘‘(B) RELATED ORGANIZATIONS.—A per4 son or governmental entity shall be treated as 

5 related to an applicable tax-exempt organization 

6 if such person or governmental entity— 

7 ‘‘(i) controls, or is controlled by, the 

8 organization, 

9 ‘‘(ii) is controlled by one or more per10 sons that control the organization, 

11 ‘‘(iii) is a supported organization (as 

12 defined in section 509(f)(2)) during the 

13 taxable year with respect to the organiza14 tion, 

15 ‘‘(iv) is a supporting organization de16 scribed in section 509(a)(3) during the 

17 taxable year with respect to the organiza18 tion, or 

19 ‘‘(v) in the case of an organization 

20 that is a voluntary employees’ beneficiary 

21 association described in section 501(a)(9), 

22 establishes, maintains, or makes contribu23 tions to such voluntary employees’ bene24 ficiary association. 


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1 ‘‘(C) LIABILITY FOR TAX.—In any case in 

2 which remuneration from more than one em3 ployer is taken into account under this para4 graph in determining the tax imposed by sub5 section (a), each such employer shall be liable 

6 for such tax in an amount which bears the 

7 same ratio to the total tax determined under 

8 subsection (a) with respect to such remunera9 tion as— 

10 ‘‘(i) the amount of remuneration paid 

11 by such employer with respect to such em12 ployee, bears to 

13 ‘‘(ii) the amount of remuneration paid 

14 by all such employers to such employee. 

15 ‘‘(5) EXCESS PARACHUTE PAYMENT.—For pur16 poses determining the tax imposed by subsection 

17 (a)(2)— 

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

19 parachute payment’ means an amount equal to 

20 the excess of any parachute payment over the 

21 portion of the base amount allocated to such 

22 payment. 

23 ‘‘(B) PARACHUTE PAYMENT.—The term 

24 ‘parachute payment’ means any payment in the 


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1 nature of compensation to (or for the benefit 

2 of) a covered employee if— 

3 ‘‘(i) such payment is contingent on 

4 such employee’s separation from employ5 ment with the employer, and 

6 ‘‘(ii) the aggregate present value of 

7 the payments in the nature of compensa8 tion to (or for the benefit of) such indi9 vidual which are contingent on such sepa10 ration equals or exceeds an amount equal 

11 to 3 times the base amount. 

12 Such term does not include any payment de13 scribed in section 280G(b)(6) (relating to ex14 emption for payments under qualified plans) or 

15 any payment made under or to an annuity con16 tract described in section 403(b) or a plan de17 scribed in section 457(b). 

18 ‘‘(C) BASE AMOUNT.—Rules similar to the 

19 rules of 280G(b)(3) shall apply for purposes of 

20 determining the base amount. 

21 ‘‘(D) PROPERTY TRANSFERS; PRESENT

22 VALUE.—Rules similar to the rules of para23 graphs (3) and (4) of section 280G(d) shall 

24 apply. 


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1 ‘‘(6) COORDINATION WITH DEDUCTION LIMITA2 TION.—Remuneration the deduction for which is not 

3 allowed by reason of section 162(m) shall not be 

4 taken into account for purposes of this section. 

5 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 

6 such regulations as may be necessary to prevent avoidance 

7 of the purposes of this section through the performance 

8 of services other than as an employee.’’. 

9 (b) CLERICAL AMENDMENT.—The table of sections 

10 for subchapter D of chapter 42 is amended by adding at 

11 the end the following new item: 

‘‘Sec. 4960. Tax on excess exempt organization executive compensation.’’. 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2017. 

15 SEC. 3803. TREATMENT OF QUALIFIED EQUITY GRANTS. 

16 (a) IN GENERAL.— 

17 (1) ELECTION TO DEFER INCOME.—Section 83 

18 is amended by adding at the end the following new 

19 subsection: 

20 ‘‘(i) QUALIFIED EQUITY GRANTS.— 

21 ‘‘(1) IN GENERAL.—For purposes of this sub22 title, if qualified stock is transferred to a qualified 

23 employee who makes an election with respect to such 

24 stock under this subsection— 


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1 ‘‘(A) except as provided in subparagraph 

2 (B), no amount shall be included in income 

3 under subsection (a) for the first taxable year 

4 in which the rights of the employee in such 

5 stock are transferable or are not subject to a 

6 substantial risk of forfeiture, whichever is appli7 cable, and 

8 ‘‘(B) an amount equal to the amount 

9 which would be included in income of the em10 ployee under subsection (a) (determined without 

11 regard to this subsection) shall be included in 

12 income for the taxable year of the employee 

13 which includes the earliest of— 

14 ‘‘(i) the first date such qualified stock 

15 becomes transferable (including transfer16 able to the employer), 

17 ‘‘(ii) the date the employee first be18 comes an excluded employee, 

19 ‘‘(iii) the first date on which any stock 

20 of the corporation which issued the quali21 fied stock becomes readily tradable on an 

22 established securities market (as deter23 mined by the Secretary, but not including 

24 any market unless such market is recog25 nized as an established securities market 


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1 by the Secretary for purposes of a provi2 sion of this title other than this sub3 section), 

4 ‘‘(iv) the date that is 5 years after the 

5 first date the rights of the employee in 

6 such stock are transferable or are not sub7 ject to a substantial risk of forfeiture, 

8 whichever occurs earlier, or 

9 ‘‘(v) the date on which the employee 

10 revokes (at such time and in such manner 

11 as the Secretary may provide) the election 

12 under this subsection with respect to such 

13 stock. 

14 ‘‘(2) QUALIFIED STOCK.— 

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

16 subsection, the term ‘qualified stock’ means, 

17 with respect to any qualified employee, any 

18 stock in a corporation which is the employer of 

19 such employee, if— 

20 ‘‘(i) such stock is received— 

21 ‘‘(I) in connection with the exer22 cise of an option, or 

23 ‘‘(II) in settlement of a restricted 

24 stock unit, and 


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1 ‘‘(ii) such option or restricted stock 

2 unit was provided by the corporation— 

3 ‘‘(I) in connection with the per4 formance of services as an employee, 

5 and 

6 ‘‘(II) during a calendar year in 

7 which such corporation was an eligible 

8 corporation. 

9 ‘‘(B) LIMITATION.—The term ‘qualified 

10 stock’ shall not include any stock if the em11 ployee may sell such stock to, or otherwise re12 ceive cash in lieu of stock from, the corporation 

13 at the time that the rights of the employee in 

14 such stock first become transferable or not sub15 ject to a substantial risk of forfeiture. 

16 ‘‘(C) ELIGIBLE CORPORATION.—For pur17 poses of subparagraph (A)(ii)(II)— 

18 ‘‘(i) IN GENERAL.—The term ‘eligible 

19 corporation’ means, with respect to any 

20 calendar year, any corporation if— 

21 ‘‘(I) no stock of such corporation 

22 (or any predecessor of such corpora23 tion) is readily tradable on an estab24 lished securities market (as deter25 mined under paragraph (1)(B)(iii)) 


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1 during any preceding calendar year, 

2 and 

3 ‘‘(II) such corporation has a writ4 ten plan under which, in such cal5 endar year, not less than 80 percent 

6 of all employees who provide services 

7 to such corporation in the United 

8 States (or any possession of the 

9 United States) are granted stock op10 tions, or restricted stock units, with 

11 the same rights and privileges to re12 ceive qualified stock. 

13 ‘‘(ii) SAME RIGHTS AND PRIVI14 LEGES.—For purposes of clause (i)(II)— 

15 ‘‘(I) except as provided in sub16 clauses (II) and (III), the determina17 tion of rights and privileges with re18 spect to stock shall be determined in 

19 a similar manner as provided under 

20 section 423(b)(5), 

21 ‘‘(II) employees shall not fail to 

22 be treated as having the same rights 

23 and privileges to receive qualified 

24 stock solely because the number of 

25 shares available to all employees is not 


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1 equal in amount, so long as the num2 ber of shares available to each em3 ployee is more than a de minimis 

4 amount, and 

5 ‘‘(III) rights and privileges with 

6 respect to the exercise of an option 

7 shall not be treated as the same as 

8 rights and privileges with respect to 

9 the settlement of a restricted stock 

10 unit. 

11 ‘‘(iii) EMPLOYEE.—For purposes of 

12 clause (i)(II), the term ‘employee’ shall not 

13 include any employee described in section 

14 4980E(d)(4) or any excluded employee. 

15 ‘‘(iv) SPECIAL RULE FOR CALENDAR

16 YEARS BEFORE 2018.—In the case of any 

17 calendar year beginning before January 1, 

18 2018, clause (i)(II) shall be applied with19 out regard to whether the rights and privi20 leges with respect to the qualified stock are 

21 the same. 

22 ‘‘(3) QUALIFIED EMPLOYEE; EXCLUDED EM23 PLOYEE.—For purposes of this subsection— 

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

25 employee’ means any individual who— 


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1 ‘‘(i) is not an excluded employee, and 

2 ‘‘(ii) agrees in the election made 

3 under this subsection to meet such require4 ments as determined by the Secretary to 

5 be necessary to ensure that the with6 holding requirements of the corporation 

7 under chapter 24 with respect to the quali8 fied stock are met. 

9 ‘‘(B) EXCLUDED EMPLOYEE.—The term 

10 ‘excluded employee’ means, with respect to any 

11 corporation, any individual— 

12 ‘‘(i) who was a 1-percent owner (with13 in the meaning of section 416(i)(1)(B)(ii)) 

14 at any time during the 10 preceding cal15 endar years, 

16 ‘‘(ii) who is or has been at any prior 

17 time— 

18 ‘‘(I) the chief executive officer of 

19 such corporation or an individual act20 ing in such a capacity, or 

21 ‘‘(II) the chief financial officer of 

22 such corporation or an individual act23 ing in such a capacity, 

24 ‘‘(iii) who bears a relationship de25 scribed in section 318(a)(1) to any indiVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00320 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 vidual described in subclause (I) or (II) of 

2 clause (ii), or 

3 ‘‘(iv) who has been for any of the 10 

4 preceding taxable years one of the 4 high5 est compensated officers of such corpora6 tion determined with respect to each such 

7 taxable year on the basis of the share8 holder disclosure rules for compensation 

9 under the Securities Exchange Act of 1934 

10 (as if such rules applied to such corpora11 tion). 

12 ‘‘(4) ELECTION.— 

13 ‘‘(A) TIME FOR MAKING ELECTION.—An 

14 election with respect to qualified stock shall be 

15 made under this subsection no later than 30 

16 days after the first time the rights of the em17 ployee in such stock are transferable or are not 

18 subject to a substantial risk of forfeiture, 

19 whichever occurs earlier, and shall be made in 

20 a manner similar to the manner in which an 

21 election is made under subsection (b). 

22 ‘‘(B) LIMITATIONS.—No election may be 

23 made under this section with respect to any 

24 qualified stock if— 


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1 ‘‘(i) the qualified employee has made 

2 an election under subsection (b) with re3 spect to such qualified stock, 

4 ‘‘(ii) any stock of the corporation 

5 which issued the qualified stock is readily 

6 tradable on an established securities mar7 ket (as determined under paragraph 

8 (1)(B)(iii)) at any time before the election 

9 is made, or 

10 ‘‘(iii) such corporation purchased any 

11 of its outstanding stock in the calendar 

12 year preceding the calendar year which in13 cludes the first time the rights of the em14 ployee in such stock are transferable or are 

15 not subject to a substantial risk of for16 feiture, unless— 

17 ‘‘(I) not less than 25 percent of 

18 the total dollar amount of the stock so 

19 purchased is deferral stock, and 

20 ‘‘(II) the determination of which 

21 individuals from whom deferral stock 

22 is purchased is made on a reasonable 

23 basis. 


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1 ‘‘(C) DEFINITIONS AND SPECIAL RULES

2 RELATED TO LIMITATION ON STOCK REDEMP3 TIONS.— 

4 ‘‘(i) DEFERRAL STOCK.—For pur5 poses of this paragraph, the term ‘deferral 

6 stock’ means stock with respect to which 

7 an election is in effect under this sub8 section. 

9 ‘‘(ii) DEFERRAL STOCK WITH RE10 SPECT TO ANY INDIVIDUAL NOT TAKEN

11 INTO ACCOUNT IF INDIVIDUAL HOLDS DE12 FERRAL STOCK WITH LONGER DEFERRAL

13 PERIOD.—Stock purchased by a corpora14 tion from any individual shall not be treat15 ed as deferral stock for purposes of clause 

16 (iii) if such individual (immediately after 

17 such purchase) holds any deferral stock 

18 with respect to which an election has been 

19 in effect under this subsection for a longer 

20 period than the election with respect to the 

21 stock so purchased. 

22 ‘‘(iii) PURCHASE OF ALL OUT23 STANDING DEFERRAL STOCK.—The re24 quirements of subclauses (I) and (II) of 

25 subparagraph (B)(iii) shall be treated as 


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1 met if the stock so purchased includes all 

2 of the corporation’s outstanding deferral 

3 stock. 

4 ‘‘(iv) REPORTING.—Any corporation 

5 which has outstanding deferral stock as of 

6 the beginning of any calendar year and 

7 which purchases any of its outstanding 

8 stock during such calendar year shall in9 clude on its return of tax for the taxable 

10 year in which, or with which, such calendar 

11 year ends the total dollar amount of its 

12 outstanding stock so purchased during 

13 such calendar year and such other infor14 mation as the Secretary may require for 

15 purposes of administering this paragraph. 

16 ‘‘(5) CONTROLLED GROUPS.—For purposes of 

17 this subsection, all corporations which are members 

18 of the same controlled group of corporations (as de19 fined in section 1563(a)) shall be treated as one cor20 poration. 

21 ‘‘(6) NOTICE REQUIREMENT.—Any corporation 

22 that transfers qualified stock to a qualified employee 

23 shall, at the time that (or a reasonable period be24 fore) an amount attributable to such stock would 


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1 (but for this subsection) first be includible in the 

2 gross income of such employee— 

3 ‘‘(A) certify to such employee that such 

4 stock is qualified stock, and 

5 ‘‘(B) notify such employee— 

6 ‘‘(i) that the employee may elect to 

7 defer income on such stock under this sub8 section, and 

9 ‘‘(ii) that, if the employee makes such 

10 an election— 

11 ‘‘(I) the amount of income recog12 nized at the end of the deferral period 

13 will be based on the value of the stock 

14 at the time at which the rights of the 

15 employee in such stock first become 

16 transferable or not subject to substan17 tial risk of forfeiture, notwithstanding 

18 whether the value of the stock has de19 clined during the deferral period, 

20 ‘‘(II) the amount of such income 

21 recognized at the end of the deferral 

22 period will be subject to withholding 

23 under section 3401(i) at the rate de24 termined under section 3402(t), and 


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1 ‘‘(III) the responsibilities of the 

2 employee (as determined by the Sec3 retary under paragraph (3)(A)(ii)) 

4 with respect to such withholding. 

5 ‘‘(7) RESTRICTED STOCK UNITS.—This section 

6 (other than this subsection), including any election 

7 under subsection (b), shall not apply to restricted 

8 stock units.’’. 

9 (2) DEDUCTION BY EMPLOYER.—Subsection (h) 

10 of section 83 is amended by striking ‘‘or (d)(2)’’ and 

11 inserting ‘‘(d)(2), or (i)’’. 

12 (b) WITHHOLDING.— 

13 (1) TIME OF WITHHOLDING.—Section 3401 is 

14 amended by adding at the end the following new 

15 subsection: 

16 ‘‘(i) QUALIFIED STOCK FOR WHICH AN ELECTION IS

17 IN EFFECT UNDER SECTION 83(i).—For purposes of sub18 section (a), qualified stock (as defined in section 83(i)) 

19 with respect to which an election is made under section 

20 83(i) shall be treated as wages— 

21 ‘‘(1) received on the earliest date described in 

22 section 83(i)(1)(B), and 

23 ‘‘(2) in an amount equal to the amount in24 cluded in income under section 83 for the taxable 

25 year which includes such date.’’. 


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1 (2) AMOUNT OF WITHHOLDING.—Section 3402 

2 is amended by adding at the end the following new 

3 subsection: 

4 ‘‘(t) RATE OF WITHHOLDING FOR CERTAIN

5 STOCK.—In the case of any qualified stock (as defined in 

6 section 83(i)) with respect to which an election is made 

7 under section 83(i)— 

8 ‘‘(1) the rate of tax under subsection (a) shall 

9 not be less than the maximum rate of tax in effect 

10 under section 1, and 

11 ‘‘(2) such stock shall be treated for purposes of 

12 section 3501(b) in the same manner as a non-cash 

13 fringe benefit.’’. 

14 (c) COORDINATION WITH OTHER DEFERRED COM15 PENSATION RULES.— 

16 (1) ELECTION TO APPLY DEFERRAL TO STATU17 TORY OPTIONS.— 

18 (A) INCENTIVE STOCK OPTIONS.—Section 

19 422(b) is amended by adding at the end the fol20 lowing: ‘‘Such term shall not include any option 

21 if an election is made under section 83(i) with 

22 respect to the stock received in connection with 

23 the exercise of such option.’’. 


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1 (B) EMPLOYEE STOCK PURCHASE

2 PLANS.—Section 423(a) is amended by adding 

3 at the end the following flush sentence: 

4 ‘‘The preceding sentence shall not apply to any share of 

5 stock with respect to which an election is made under sec6 tion 83(i).’’. 

7 (2) EXCLUSION FROM DEFINITION OF NON8 QUALIFIED DEFERRED COMPENSATION PLAN.—Sub9 section (d) of section 409A is amended by adding at 

10 the end the following new paragraph: 

11 ‘‘(7) TREATMENT OF QUALIFIED STOCK.—An 

12 arrangement under which an employee may receive 

13 qualified stock (as defined in section 83(i)(2)) shall 

14 not be treated as a nonqualified deferred compensa15 tion plan solely because of an employee’s election, or 

16 ability to make an election, to defer recognition of 

17 income under section 83(i).’’. 

18 (d) INFORMATION REPORTING.—Section 6051(a) is 

19 amended by striking ‘‘and’’ at the end of paragraph (13), 

20 by striking the period at the end of paragraph (14) and 

21 inserting a comma, and by inserting after paragraph (14) 

22 the following new paragraphs: 

23 ‘‘(15) the amount excludable from gross income 

24 under subparagraph (A) of section 83(i)(1), 


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1 ‘‘(16) the amount includible in gross income 

2 under subparagraph (B) of section 83(i)(1) with re3 spect to an event described in such subparagraph 

4 which occurs in such calendar year, and 

5 ‘‘(17) the aggregate amount of income which is 

6 being deferred pursuant to elections under section 

7 83(i), determined as of the close of the calendar 

8 year.’’. 

9 (e) PENALTY FOR FAILURE OF EMPLOYER TO PRO10 VIDE NOTICE OF TAX CONSEQUENCES.—Section 6652 is 

11 amended by adding at the end the following new sub12 section: 

13 ‘‘(o) FAILURE TO PROVIDE NOTICE UNDER SECTION

14 83(i).—In the case of each failure to provide a notice as 

15 required by section 83(i)(6), at the time prescribed there16 for, unless it is shown that such failure is due to reason17 able cause and not to willful neglect, there shall be paid, 

18 on notice and demand of the Secretary and in the same 

19 manner as tax, by the person failing to provide such no20 tice, an amount equal to $100 for each such failure, but 

21 the total amount imposed on such person for all such fail22 ures during any calendar year shall not exceed $50,000.’’. 

23 (f) EFFECTIVE DATES.— 

24 (1) IN GENERAL.—Except as provided in para25 graph (2), the amendments made by this section 


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1 shall apply to stock attributable to options exercised, 

2 or restricted stock units settled, after December 31, 

3 2017. 

4 (2) REQUIREMENT TO PROVIDE NOTICE.—The 

5 amendments made by subsection (e) shall apply to 

6 failures after December 31, 2017. 

7 (g) TRANSITION RULE.—Until such time as the Sec8 retary (or the Secretary’s delegate) issue regulations or 

9 other guidance for purposes of implementing the require10 ments of paragraph (2)(C)(i)(II) of section 83(i) of the 

11 Internal Revenue Code of 1986 (as added by this section), 

12 or the requirements of paragraph (6) of such section, a 

13 corporation shall be treated as being in compliance with 

14 such requirements (respectively) if such corporation com15 plies with a reasonable good faith interpretation of such 

16 requirements. 


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1 TITLE IV—TAXATION OF FOR2 EIGN INCOME AND FOREIGN 

3 PERSONS 

4 Subtitle A—Establishment of Par5 ticipation Exemption System for 

6 Taxation of Foreign Income 

7 SEC. 4001. DEDUCTION FOR FOREIGN-SOURCE PORTION OF 

8 DIVIDENDS RECEIVED BY DOMESTIC COR9 PORATIONS FROM SPECIFIED 10-PERCENT 

10 OWNED FOREIGN CORPORATIONS. 

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

12 chapter 1 is amended by inserting after section 245 the 

13 following new section: 

14 ‘‘SEC. 245A. DEDUCTION FOR FOREIGN-SOURCE PORTION 

15 OF DIVIDENDS RECEIVED BY DOMESTIC COR16 PORATIONS FROM SPECIFIED 10-PERCENT 

17 OWNED FOREIGN CORPORATIONS. 

18 ‘‘(a) IN GENERAL.—In the case of any dividend re19 ceived from a specified 10-percent owned foreign corpora20 tion by a domestic corporation which is a United States 

21 shareholder with respect to such foreign corporation, there 

22 shall be allowed as a deduction an amount equal to the 

23 foreign-source portion of such dividend. 

24 ‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN COR25 PORATION.—For purposes of this section, the term ‘speciVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00331 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 fied 10-percent owned foreign corporation’ means any for2 eign corporation with respect to which any domestic cor3 poration is a United States shareholder. Such term shall 

4 not include any passive foreign investment company (with5 in the meaning of subpart D of part VI of subchapter P) 

6 that is not a controlled foreign corporation. 

7 ‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of 

8 this section— 

9 ‘‘(1) IN GENERAL.—The foreign-source portion 

10 of any dividend is an amount which bears the same 

11 ratio to such dividend as— 

12 ‘‘(A) the post-1986 undistributed foreign 

13 earnings of the specified 10-percent owned for14 eign corporation, bears to 

15 ‘‘(B) the total post-1986 undistributed 

16 earnings of such foreign corporation. 

17 ‘‘(2) POST-1986 UNDISTRIBUTED EARNINGS.— 

18 The term ‘post-1986 undistributed earnings’ means 

19 the amount of the earnings and profits of the speci20 fied 10-percent owned foreign corporation (computed 

21 in accordance with sections 964(a) and 986) accu22 mulated in taxable years beginning after December 

23 31, 1986— 


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1 ‘‘(A) as of the close of the taxable year of 

2 the specified 10-percent owned foreign corpora3 tion in which the dividend is distributed, and 

4 ‘‘(B) without diminution by reason of divi5 dends distributed during such taxable year. 

6 ‘‘(3) POST-1986 UNDISTRIBUTED FOREIGN

7 EARNINGS.—The term ‘post-1986 undistributed for8 eign earnings’ means the portion of the post-1986 

9 undistributed earnings which is attributable to nei10 ther— 

11 ‘‘(A) income described in subparagraph (A) 

12 of section 245(a)(5), nor 

13 ‘‘(B) dividends described in subparagraph 

14 (B) of such section (determined without regard 

15 to section 245(a)(12)). 

16 ‘‘(4) TREATMENT OF DISTRIBUTIONS FROM

17 EARNINGS BEFORE 1987.— 

18 ‘‘(A) IN GENERAL.—In the case of any div19 idend paid out of earnings and profits of the 

20 specified 10-percent owned foreign corporation 

21 (computed in accordance with sections 964(a) 

22 and 986) accumulated in taxable years begin23 ning before January 1, 1987— 


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1 ‘‘(i) paragraphs (1), (2), and (3) shall 

2 be applied without regard to the phrase 

3 ‘post-1986’ each place it appears, and 

4 ‘‘(ii) paragraph (2) shall be applied by 

5 substituting ‘after the date specified in sec6 tion 316(a)(1)’ for ‘in taxable years begin7 ning after December 31, 1986’. 

8 ‘‘(B) DIVIDENDS PAID FIRST OUT OF

9 POST-1986 EARNINGS.—Dividends shall be treat10 ed as paid out of post-1986 undistributed earn11 ings to the extent thereof. 

12 ‘‘(5) TREATMENT OF CERTAIN DIVIDENDS IN

13 EXCESS OF UNDISTRIBUTED EARNINGS.—In the case 

14 of any dividend from the specified 10-percent owned 

15 foreign corporation which is in excess of undistrib16 uted earnings (as determined under paragraph (2) 

17 after taking into account the modifications described 

18 in clauses (i) and (ii) of paragraph (4)(A)), the for19 eign-source portion of such dividend is an amount 

20 which bears the same ratio to such dividend as— 

21 ‘‘(A) the portion of the earnings and prof22 its described in subparagraph (B) which is at23 tributable to neither income described in para24 graph (3)(A) nor dividends described in para25 graph (3)(B), bears to 


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1 ‘‘(B) the earnings and profits of such cor2 poration for the taxable year in which such dis3 tribution is made (computed as of the close of 

4 the taxable year without diminution by reason 

5 of any distributions made during the taxable 

6 year). 

7 ‘‘(d) DISALLOWANCE OF FOREIGN TAX CREDIT, 

8 ETC.— 

9 ‘‘(1) IN GENERAL.—No credit shall be allowed 

10 under section 901 for any taxes paid or accrued (or 

11 treated as paid or accrued) with respect to any divi12 dend for which a deduction is allowed under this sec13 tion. 

14 ‘‘(2) DENIAL OF DEDUCTION.—No deduction 

15 shall be allowed under this chapter for any tax for 

16 which credit is not allowable under section 901 by 

17 reason of paragraph (1) (determined by treating the 

18 taxpayer as having elected the benefits of subpart A 

19 of part III of subchapter N). 

20 ‘‘(e) REGULATIONS.—The Secretary may prescribe 

21 such regulations or other guidance as may be necessary 

22 or appropriate to carry out the provisions of this section.’’. 

23 (b) APPLICATION OF HOLDING PERIOD REQUIRE24 MENT.—Section 246(c) is amended— 


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1 (1) by striking ‘‘or 245’’ in paragraph (1) and 

2 inserting ‘‘245, or 245A’’, and 

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

4 paragraph: 

5 ‘‘(5) SPECIAL RULES FOR FOREIGN SOURCE

6 PORTION OF DIVIDENDS RECEIVED FROM SPECIFIED

7 10-PERCENT OWNED FOREIGN CORPORATIONS.— 

8 ‘‘(A) 6-MONTH HOLDING PERIOD REQUIRE9 MENT.—For purposes of section 245A— 

10 ‘‘(i) paragraph (1)(A) shall be ap11 plied— 

12 ‘‘(I) by substituting ‘180 days’ 

13 for ‘45 days’each place it appears, and 

14 ‘‘(II) by substituting ‘361-day pe15 riod’ for ‘91-day period’, and 

16 ‘‘(ii) paragraph (2) shall not apply. 

17 ‘‘(B) STATUS MUST BE MAINTAINED DUR18 ING HOLDING PERIOD.—For purposes of apply19 ing paragraph (1) with respect to section 245A, 

20 the taxpayer shall be treated as holding the 

21 stock referred to in paragraph (1) for any pe22 riod only if— 

23 ‘‘(i) the specified 10-percent owned 

24 foreign corporation referred to in section 


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1 245A(a) is a specified 10-percent owned 

2 foreign corporation for such period, and 

3 ‘‘(ii) the taxpayer is a United States 

4 shareholder with respect to such specified 

5 10-percent owned foreign corporation for 

6 such period.’’. 

7 (c) APPLICATION OF RULES GENERALLY APPLICA8 BLE TO DEDUCTIONS FOR DIVIDENDS RECEIVED.— 

9 (1) TREATMENT OF DIVIDENDS FROM CERTAIN

10 CORPORATIONS.—Section 246(a)(1) is amended by 

11 striking ‘‘and 245’’ and inserting ‘‘245, and 245A’’. 

12 (2) COORDINATION WITH SECTION 1059.—Sec13 tion 1059(b)(2)(B) is amended by striking ‘‘or 245’’ 

14 and inserting ‘‘245, or 245A’’. 

15 (d) COORDINATION WITH FOREIGN TAX CREDIT

16 LIMITATION.—Section 904(b) is amended by adding at 

17 the end the following new paragraph: 

18 ‘‘(5) TREATMENT OF DIVIDENDS FOR WHICH

19 DEDUCTION IS ALLOWED UNDER SECTION 245A.— 

20 For purposes of subsection (a), in the case of a 

21 United States shareholder with respect to a specified 

22 10-percent owned foreign corporation, such share23 holder’s taxable income from sources without the 

24 United States (and entire taxable income) shall be 

25 determined without regard to— 


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1 ‘‘(A) the foreign-source portion of any divi2 dend received from such foreign corporation, 

3 and 

4 ‘‘(B) any deductions properly allocable or 

5 apportioned to— 

6 ‘‘(i) income (other than subpart F in7 come (as defined in section 952) and for8 eign high return amounts (as defined in 

9 section 951A(b)) with respect to stock of 

10 such specified 10-percent owned foreign 

11 corporation, or 

12 ‘‘(ii) such stock (to the extent income 

13 with respect to such stock is other than 

14 subpart F income (as so defined) or for15 eign high return amounts (as so defined)). 

16 Any term which is used in section 245A and in this 

17 paragraph shall have the same meaning for purposes 

18 of this paragraph as when used in such section.’’. 

19 (e) CONFORMING AMENDMENTS.— 

20 (1) Section 245(a)(4) is amended by striking 

21 ‘‘section 902(c)(1)’’ and inserting ‘‘section 

22 245A(c)(2) applied by substituting ‘qualified 10-per23 cent owned foreign corporation’ for ‘specified 10-per24 cent owned foreign corporation’ each place it ap25 pears’’. 


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1 (2) Section 951(b) is amended by striking ‘‘sub2 part’’ and inserting ‘‘title’’. 

3 (3) Section 957(a) is amended by striking ‘‘sub4 part’’ in the matter preceding paragraph (1) and in5 serting ‘‘title’’. 

6 (4) The table of sections for part VIII of sub7 chapter B of chapter 1 is amended by inserting after 

8 section 245 the following new item: 

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

corporations.’’. 

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

10 this section shall apply to distributions made after (and, 

11 in the case of the amendments made by subsection (d), 

12 deductions with respect to taxable years ending after) De13 cember 31, 2017. 

14 SEC. 4002. APPLICATION OF PARTICIPATION EXEMPTION 

15 TO INVESTMENTS IN UNITED STATES PROP16 ERTY. 

17 (a) IN GENERAL.—Section 956(a) is amended in the 

18 matter preceding paragraph (1) by inserting ‘‘(other than 

19 a corporation)’’ after ‘‘United States shareholder’’. 

20 (b) REGULATORY AUTHORITY TO PREVENT

21 ABUSE.—Section 956(e) is amended by striking ‘‘includ22 ing regulations to prevent’’ and inserting ‘‘including regu23 lations— 


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1 ‘‘(1) to address United States shareholders that 

2 are partnerships with corporate partners, and 

3 ‘‘(2) to prevent’’. 

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

5 this section shall apply to taxable years of foreign corpora6 tions beginning after December 31, 2017. 

7 SEC. 4003. LIMITATION ON LOSSES WITH RESPECT TO 

8 SPECIFIED 10-PERCENT OWNED FOREIGN 

9 CORPORATIONS. 

10 (a) BASIS IN SPECIFIED 10-PERCENT OWNED FOR11 EIGN CORPORATION REDUCED BY NONTAXED PORTION

12 OF DIVIDEND FOR PURPOSES OF DETERMINING LOSS.— 

13 (1) IN GENERAL.—Section 961 is amended by 

14 adding at the end the following new subsection: 

15 ‘‘(d) BASIS IN SPECIFIED 10-PERCENT OWNED FOR16 EIGN CORPORATION REDUCED BY NONTAXED PORTION

17 OF DIVIDEND FOR PURPOSES OF DETERMINING LOSS.— 

18 If a domestic corporation received a dividend from a speci19 fied 10-percent owned foreign corporation (as defined in 

20 section 245A) in any taxable year, solely for purposes of 

21 determining loss on any disposition of stock of such for22 eign corporation in such taxable year or any subsequent 

23 taxable year, the basis of such domestic corporation in 

24 such stock shall be reduced (but not below zero) by the 

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1 poration under section 245A with respect to such stock 

2 except to the extent such basis was reduced under section 

3 1059 by reason of a dividend for which such a deduction 

4 was allowable.’’. 

5 (2) EFFECTIVE DATE.—The amendments made 

6 by this subsection shall apply to distributions made 

7 after December 31, 2017. 

8 (b) TREATMENT OF FOREIGN BRANCH LOSSES

9 TRANSFERRED TO SPECIFIED 10-PERCENT OWNED FOR10 EIGN CORPORATIONS.— 

11 (1) IN GENERAL.—Part II of subchapter B of 

12 chapter 1 is amended by adding at the end the fol13 lowing new section: 

14 ‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANS15 FERRED TO SPECIFIED 10-PERCENT OWNED 

16 FOREIGN CORPORATIONS. 

17 ‘‘(a) IN GENERAL.—If a domestic corporation trans18 fers substantially all of the assets of a foreign branch 

19 (within the meaning of section 367(a)(3)(C)) to a specified 

20 10-percent owned foreign corporation (as defined in sec21 tion 245A) with respect to which it is a United States 

22 shareholder after such transfer, such domestic corporation 

23 shall include in gross income for the taxable year which 

24 includes such transfer an amount equal to the transferred 

25 loss amount with respect to such transfer. 


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1 ‘‘(b) TRANSFERRED LOSS AMOUNT.—For purposes 

2 of this section, the term ‘transferred loss amount’ means, 

3 with respect to any transfer of substantially all of the as4 sets of a foreign branch, the excess (if any) of— 

5 ‘‘(1) the sum of losses— 

6 ‘‘(A) which were incurred by the foreign 

7 branch after December 31, 2017, and before 

8 the transfer, and 

9 ‘‘(B) with respect to which a deduction was 

10 allowed to the taxpayer, over 

11 ‘‘(2) the sum of— 

12 ‘‘(A) any taxable income of such branch 

13 for a taxable year after the taxable year in 

14 which the loss was incurred and through the 

15 close of the taxable year of the transfer, and 

16 ‘‘(B) any amount which is recognized 

17 under section 904(f)(3) on account of the trans18 fer. 

19 ‘‘(c) REDUCTION FOR RECOGNIZED GAINS.— 

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

21 not described in section 367(a)(3)(C), the trans22 ferred loss amount shall be reduced (but not below 

23 zero) by the amount of gain recognized by the tax24 payer on account of the transfer (other than 


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1 amounts taken into account under subsection 

2 (c)(2)(B)). 

3 ‘‘(2) COORDINATION WITH RECOGNITION

4 UNDER SECTION 367.—In the case of a transfer de5 scribed in section 367(a)(3)(C), the transferred loss 

6 amount shall not exceed the excess (if any) of— 

7 ‘‘(A) the excess of the amount described in 

8 section 367(a)(3)(C)(i) over the amount de9 scribed in section 367(a)(3)(C)(ii) with respect 

10 to such transfer, over 

11 ‘‘(B) the amount of gain recognized under 

12 section 367(a)(3)(C) with respect to such trans13 fer. 

14 ‘‘(d) SOURCE OF INCOME.—Amounts included in 

15 gross income under this section shall be treated as derived 

16 from sources within the United States. 

17 ‘‘(e) BASIS ADJUSTMENTS.—Consistent with such 

18 regulations or other guidance as the Secretary may pre19 scribe, proper adjustments shall be made in the adjusted 

20 basis of the taxpayer’s stock in the specified 10-percent 

21 owned foreign corporation to which the transfer is made, 

22 and in the transferee’s adjusted basis in the property 

23 transferred, to reflect amounts included in gross income 

24 under this section.’’. 


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1 (2) AMOUNTS RECOGNIZED UNDER SECTION 367

2 ON TRANSFER OF FOREIGN BRANCH WITH PRE3 VIOUSLY DEDUCTED LOSSES TREATED AS UNITED

4 STATES SOURCE.—Section 367(a)(3)(C) is amended 

5 by striking ‘‘outside’’ in the last sentence and insert6 ing ‘‘within’’. 

7 (3) CLERICAL AMENDMENT.—The table of sec8 tions for part II of subchapter B of chapter 1 is 

9 amended by adding at the end the following new 

10 item: 

‘‘Sec. 91. Certain foreign branch losses transferred to specified 10-percent 

owned foreign corporations.’’. 

11 (4) EFFECTIVE DATE.—The amendments made 

12 by this subsection shall apply to transfers after De13 cember 31, 2017. 

14 SEC. 4004. TREATMENT OF DEFERRED FOREIGN INCOME 

15 UPON TRANSITION TO PARTICIPATION EX16 EMPTION SYSTEM OF TAXATION. 

17 (a) IN GENERAL.—Section 965 is amended to read 

18 as follows: 

19 ‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME 

20 UPON TRANSITION TO PARTICIPATION EX21 EMPTION SYSTEM OF TAXATION. 

22 ‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME

23 AS SUBPART F INCOME.—In the case of the last taxable 

24 year of a deferred foreign income corporation which begins 


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1 before January 1, 2018, the subpart F income of such 

2 foreign corporation (as otherwise determined for such tax3 able year under section 952) shall be increased by the 

4 greater of— 

5 ‘‘(1) the accumulated post-1986 deferred for6 eign income of such corporation determined as of 

7 November 2, 2017, or 

8 ‘‘(2) the accumulated post-1986 deferred for9 eign income of such corporation determined as of 

10 December 31, 2017. 

11 ‘‘(b) REDUCTION IN AMOUNTS INCLUDED IN GROSS

12 INCOME OF UNITED STATES SHAREHOLDERS OF SPECI13 FIED FOREIGN CORPORATIONS WITH DEFICITS IN EARN14 INGS AND PROFITS.— 

15 ‘‘(1) IN GENERAL.—In the case of a taxpayer 

16 which is a United States shareholder with respect to 

17 at least one deferred foreign income corporation and 

18 at least one E&P deficit foreign corporation, the 

19 amount which would (but for this subsection) be 

20 taken into account under section 951(a)(1) by rea21 son of subsection (a) as such United States share22 holder’s pro rata share of the subpart F income of 

23 each deferred foreign income corporation shall be re24 duced (but not below zero) by the amount of such 

25 United States shareholder’s aggregate foreign E&P 


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1 deficit which is allocated under paragraph (2) to 

2 such deferred foreign income corporation. 

3 ‘‘(2) ALLOCATION OF AGGREGATE FOREIGN E&P

4 DEFICIT.—The aggregate foreign E&P deficit of any 

5 United States shareholder shall be allocated among 

6 the deferred foreign income corporations of such 

7 United States shareholder in an amount which bears 

8 the same proportion to such aggregate as— 

9 ‘‘(A) such United States shareholder’s pro 

10 rata share of the accumulated post-1986 de11 ferred foreign income of each such deferred for12 eign income corporation, bears to 

13 ‘‘(B) the aggregate of such United States 

14 shareholder’s pro rata share of the accumulated 

15 post-1986 deferred foreign income of all de16 ferred foreign income corporations of such 

17 United States shareholder. 

18 ‘‘(3) DEFINITIONS RELATED TO E&P DEFI19 CITS.—For purposes of this subsection— 

20 ‘‘(A) AGGREGATE FOREIGN E&P DEF21 ICIT.—The term ‘aggregate foreign E&P deficit’ 

22 means, with respect to any United States share23 holder, the aggregate of such shareholder’s pro 

24 rata shares of the specified E&P deficits of the 


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1 E&P deficit foreign corporations of such share2 holder. 

3 ‘‘(B) E&P DEFICIT FOREIGN CORPORA4 TION.—The term ‘E&P deficit foreign corpora5 tion’ means, with respect to any taxpayer, any 

6 specified foreign corporation with respect to 

7 which such taxpayer is a United States share8 holder, if— 

9 ‘‘(i) such specified foreign corporation 

10 has a deficit in post-1986 earnings and 

11 profits, and 

12 ‘‘(ii) as of November 2, 2017— 

13 ‘‘(I) such corporation was a spec14 ified foreign corporation, and 

15 ‘‘(II) such taxpayer was a United 

16 States shareholder of such corpora17 tion. 

18 ‘‘(C) SPECIFIED E&P DEFICIT.—The term 

19 ‘specified E&P deficit’ means, with respect to 

20 any E&P deficit foreign corporation, the 

21 amount of the deficit referred to in subpara22 graph (B). 

23 ‘‘(4) NETTING AMONG UNITED STATES SHARE24 HOLDERS IN SAME AFFILIATED GROUP.— 


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1 ‘‘(A) IN GENERAL.—In the case of any af2 filiated group which includes at least one E&P 

3 net surplus shareholder and one E&P net def4 icit shareholder, the amount which would (but 

5 for this paragraph) be taken into account under 

6 section 951(a)(1) by reason of subsection (a) by 

7 each such E&P net surplus shareholder shall be 

8 reduced (but not below zero) by such share9 holder’s applicable share of the affiliated 

10 group’s aggregate unused E&P deficit. 

11 ‘‘(B) E&P NET SURPLUS SHARE12 HOLDER.—For purposes of this paragraph, the 

13 term ‘E&P net surplus shareholder’ means any 

14 United States shareholder which would (deter15 mined without regard to this paragraph) take 

16 into account an amount greater than zero 

17 under section 951(a)(1) by reason of subsection 

18 (a). 

19 ‘‘(C) E&P NET DEFICIT SHAREHOLDER.— 

20 For purposes of this paragraph, the term ‘E&P 

21 net deficit shareholder’ means any United 

22 States shareholder if— 

23 ‘‘(i) the aggregate foreign E&P deficit 

24 with respect to such shareholder (as de25 fined in paragraph (3)(A)), exceeds 


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1 ‘‘(ii) the amount which would (but for 

2 this subsection) be taken into account by 

3 such shareholder under section 951(a)(1) 

4 by reason of subsection (a). 

5 ‘‘(D) AGGREGATE UNUSED E&P DEFICIT.— 

6 For purposes of this paragraph— 

7 ‘‘(i) IN GENERAL.—The term ‘aggre8 gate unused E&P deficit’ means, with re9 spect to any affiliated group, the lesser 

10 of— 

11 ‘‘(I) the sum of the excesses de12 scribed in subparagraph (C), deter13 mined with respect to each E&P net 

14 deficit shareholder in such group, or 

15 ‘‘(II) the amount determined 

16 under subparagraph (E)(ii). 

17 ‘‘(ii) REDUCTION WITH RESPECT TO

18 E&P NET DEFICIT SHAREHOLDERS WHICH

19 ARE NOT WHOLLY OWNED BY THE AFFILI20 ATED GROUP.—If the group ownership per21 centage of any E&P net deficit shareholder 

22 is less than 100 percent, the amount of the 

23 excess described in subparagraph (C) 

24 which is taken into account under clause 

25 (i)(I) with respect to such E&P net deficit 


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1 shareholder shall be such group ownership 

2 percentage of such amount. 

3 ‘‘(E) APPLICABLE SHARE.—For purposes 

4 of this paragraph, the term ‘applicable share’ 

5 means, with respect to any E&P net surplus 

6 shareholder in any affiliated group, the amount 

7 which bears the same proportion to such 

8 group’s aggregate unused E&P deficit as— 

9 ‘‘(i) the product of— 

10 ‘‘(I) such shareholder’s group 

11 ownership percentage, multiplied by 

12 ‘‘(II) the amount which would 

13 (but for this paragraph) be taken into 

14 account under section 951(a)(1) by 

15 reason of subsection (a) by such 

16 shareholder, bears to 

17 ‘‘(ii) the aggregate amount deter18 mined under clause (i) with respect to all 

19 E&P net surplus shareholders in such 

20 group. 

21 ‘‘(F) GROUP OWNERSHIP PERCENTAGE.— 

22 For purposes of this paragraph, the term 

23 ‘group ownership percentage’ means, with re24 spect to any United States shareholder in any 

25 affiliated group, the percentage of the value of 


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1 the stock of such United States shareholder 

2 which is held by other includible corporations in 

3 such affiliated group. Notwithstanding the pre4 ceding sentence, the group ownership percent5 age of the common parent of the affiliated 

6 group is 100 percent. Any term used in this 

7 subparagraph which is also used in section 

8 1504 shall have the same meaning as when 

9 used in such section. 

10 ‘‘(c) APPLICATION OF PARTICIPATION EXEMPTION

11 TO INCLUDED INCOME.— 

12 ‘‘(1) IN GENERAL.—In the case of a United 

13 States shareholder of a deferred foreign income cor14 poration, there shall be allowed as a deduction for 

15 the taxable year in which an amount is included in 

16 the gross income of such United States shareholder 

17 under section 951(a)(1) by reason of this section an 

18 amount equal to the sum of— 

19 ‘‘(A) the United States shareholder’s 7 

20 percent rate equivalent percentage of the excess 

21 (if any) of— 

22 ‘‘(i) the amount so included as gross 

23 income, over 


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1 ‘‘(ii) the amount of such United 

2 States shareholder’s aggregate foreign cash 

3 position, plus 

4 ‘‘(B) the United States shareholder’s 14 

5 percent rate equivalent percentage of so much 

6 of the amount described in subparagraph (A)(ii) 

7 as does not exceed the amount described in sub8 paragraph (A)(i). 

9 ‘‘(2) 7 AND 14 PERCENT RATE EQUIVALENT

10 PERCENTAGES.—For purposes of this subsection— 

11 ‘‘(A) 7 PERCENT RATE EQUIVALENT PER12 CENTAGE.—The term ‘7 percent rate equivalent 

13 percentage’ means, with respect to any United 

14 States shareholder for any taxable year, the 

15 percentage which would result in the amount to 

16 which such percentage applies being subject to 

17 a 7 percent rate of tax determined by only tak18 ing into account a deduction equal to such per19 centage of such amount and the highest rate of 

20 tax specified in section 11 for such taxable 

21 year. In the case of any taxable year of a 

22 United States shareholder to which section 15 

23 applies, the highest rate of tax under section 11 

24 before the effective date of the change in rates 

25 and the highest rate of tax under section 11 


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1 after the effective date of such change shall 

2 each be taken into account under the preceding 

3 sentence in the same proportions as the portion 

4 of such taxable year which is before and after 

5 such effective date, respectively. 

6 ‘‘(B) 14 PERCENT RATE EQUIVALENT PER7 CENTAGE.—The term ‘14 percent rate equiva8 lent percentage’ means, with respect to any 

9 United States shareholder for any taxable year, 

10 the percentage determined under subparagraph 

11 (A) applied by substituting ‘14 percent rate of 

12 tax’ for ‘7 percent rate of tax’. 

13 ‘‘(3) AGGREGATE FOREIGN CASH POSITION.— 

14 For purposes of this subsection— 

15 ‘‘(A) IN GENERAL.—The term ‘aggregate 

16 foreign cash position’ means, with respect to 

17 any United States shareholder, one-third of the 

18 sum of— 

19 ‘‘(i) the aggregate of such United 

20 States shareholder’s pro rata share of the 

21 cash position of each specified foreign cor22 poration of such United States shareholder 

23 determined as of November 2, 2017, 

24 ‘‘(ii) the aggregate described in clause 

25 (i) determined as of the close of the last 


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1 taxable year of each such specified foreign 

2 corporation which ends before November 2, 

3 2017, and 

4 ‘‘(iii) the aggregate described in 

5 clause (i) determined as of the close of the 

6 taxable year of each such specified foreign 

7 corporation which precedes the taxable 

8 year referred to in clause (ii). 

9 In the case of any foreign corporation which did 

10 not exist as of the determination date described 

11 in clause (ii) or (iii), this subparagraph shall be 

12 applied separately to such foreign corporation 

13 by not taking into account such clause and by 

14 substituting ‘one-half (100 percent in the case 

15 that both clauses (ii) and (iii) are disregarded)’ 

16 for ‘one-third’. 

17 ‘‘(B) CASH POSITION.—For purposes of 

18 this paragraph, the cash position of any speci19 fied foreign corporation is the sum of— 

20 ‘‘(i) cash held by such foreign cor21 poration, 

22 ‘‘(ii) the net accounts receivable of 

23 such foreign corporation, plus 

24 ‘‘(iii) the fair market value of the fol25 lowing assets held by such corporation: 


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1 ‘‘(I) Actively traded personal 

2 property for which there is an estab3 lished financial market. 

4 ‘‘(II) Commercial paper, certifi5 cates of deposit, the securities of the 

6 Federal government and of any State 

7 or foreign government. 

8 ‘‘(III) Any foreign currency. 

9 ‘‘(IV) Any obligation with a term 

10 of less than one year. 

11 ‘‘(V) Any asset which the Sec12 retary identifies as being economically 

13 equivalent to any asset described in 

14 this subparagraph. 

15 ‘‘(C) NET ACCOUNTS RECEIVABLE.—For 

16 purposes of this paragraph, the term ‘net ac17 counts receivable’ means, with respect to any 

18 specified foreign corporation, the excess (if any) 

19 of— 

20 ‘‘(i) such corporation’s accounts re21 ceivable, over 

22 ‘‘(ii) such corporation’s accounts pay23 able (determined consistent with the rules 

24 of section 461). 


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1 ‘‘(D) PREVENTION OF DOUBLE COUNT2 ING.— 

3 ‘‘(i) IN GENERAL.—The applicable 

4 percentage of each specified cash position 

5 of a specified foreign corporation shall not 

6 be taken into account by— 

7 ‘‘(I) the United States share8 holder referred to in clause (ii) with 

9 respect to such position, or 

10 ‘‘(II) any United States share11 holder which is an includible corpora12 tion in the same affiliated group as 

13 such United States shareholder re14 ferred to in clause (ii). 

15 ‘‘(ii) SPECIFIED CASH POSITION.—For 

16 purposes of this subparagraph, the term 

17 ‘specified cash position’ means— 

18 ‘‘(I) amounts described in sub19 paragraph (B)(ii) to the extent such 

20 amounts are receivable from another 

21 specified foreign corporation with re22 spect to any United States share23 holder, 

24 ‘‘(II) amounts described in sub25 paragraph (B)(iii)(I) to the extent 


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1 such amounts consist of an equity in2 terest in another specified foreign cor3 poration with respect to any United 

4 States shareholder, and 

5 ‘‘(III) amounts described in sub6 paragraph (B)(iii)(IV) to the extent 

7 that another specified foreign corpora8 tion with respect to any United States 

9 shareholder is obligated to repay such 

10 amount. 

11 ‘‘(iii) APPLICABLE PERCENTAGE.— 

12 For purposes of this subparagraph, the 

13 term ‘applicable percentage’ means— 

14 ‘‘(I) with respect to each speci15 fied cash position described in sub16 clause (I) or (III) of clause (ii), the 

17 pro rata share of the United States 

18 shareholder referred to in clause (ii) 

19 with respect to the specified foreign 

20 corporation referred to in such clause, 

21 and 

22 ‘‘(II) with respect to each speci23 fied cash position described in clause 

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1 cent) of the United States share2 holder’s pro rata share of the cash po3 sition of the specified foreign corpora4 tion referred to in such clause divided 

5 by the amount of such specified cash 

6 position. 

7 For purposes of this subparagraph, a sepa8 rate applicable percentage shall be deter9 mined under each of subclauses (I) and 

10 (II) with respect to each specified foreign 

11 corporation referred to in clause (ii) with 

12 respect to which a specified cash position 

13 is determined for the specified foreign cor14 poration referred to in clause (i). 

15 ‘‘(iv) REDUCTION WITH RESPECT TO

16 AFFILIATED GROUP MEMBERS NOT WHOL17 LY OWNED BY THE AFFILIATED GROUP.— 

18 For purposes of clause (i)(II), in the case 

19 of an includible corporation the group own20 ership percentage of which is less than 100 

21 percent (as determined under subsection 

22 (b)(4)(F)), the amount not take into ac23 count by reason of such clause shall be the 

24 group ownership percentage of such 


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1 amount (determined without regard to this 

2 clause). 

3 ‘‘(E) CERTAIN BLOCKED ASSETS NOT

4 TAKEN INTO ACCOUNT.—A cash position of a 

5 specified foreign corporation shall not be taken 

6 into account under subparagraph (A) if such 

7 position could not (as of the date that it would 

8 otherwise have been taken into account under 

9 clause (i), (ii), or (iii) of subparagraph (A)) 

10 have been distributed by such specified foreign 

11 corporation to United States shareholders of 

12 such specified foreign corporation because of 

13 currency or other restrictions or limitations im14 posed under the laws of any foreign country 

15 (within the meaning of section 964(b)). 

16 ‘‘(F) CASH POSITIONS OF CERTAIN NON17 CORPORATE ENTITIES TAKEN INTO ACCOUNT.— 

18 An entity (other than a domestic corporation) 

19 shall be treated as a specified foreign corpora20 tion of a United States shareholder for pur21 poses of determining such United States share22 holder’s aggregate foreign cash position if any 

23 interest in such entity is held by a specified for24 eign corporation of such United States share25 holder (determined after application of this subVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00359 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 paragraph) and such entity would be a specified 

2 foreign corporation of such United States 

3 shareholder if such entity were a foreign cor4 poration. 

5 ‘‘(G) TIME OF CERTAIN DETERMINA6 TIONS.—For purposes of this paragraph, the 

7 determination of whether a person is a United 

8 States shareholder, whether a person is a speci9 fied foreign corporation, and the pro rata share 

10 of a United States shareholder with respect to 

11 a specified foreign corporation, shall be deter12 mined as of the end of the taxable year de13 scribed in subsection (a). 

14 ‘‘(H) ANTI-ABUSE.—If the Secretary de15 termines that the principal purpose of any 

16 transaction was to reduce the aggregate foreign 

17 cash position taken into account under this sub18 section, such transaction shall be disregarded 

19 for purposes of this subsection. 

20 ‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; 

21 ACCUMULATED POST-1986 DEFERRED FOREIGN IN22 COME.—For purposes of this section— 

23 ‘‘(1) DEFERRED FOREIGN INCOME CORPORA24 TION.—The term ‘deferred foreign income corpora25 tion’ means, with respect to any United States 


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1 shareholder, any specified foreign corporation of 

2 such United States shareholder which has accumu3 lated post-1986 deferred foreign income (as of the 

4 date referred to in paragraph (1) or (2) of sub5 section (a), whichever is applicable with respect to 

6 such foreign corporation) greater than zero. 

7 ‘‘(2) ACCUMULATED POST-1986 DEFERRED FOR8 EIGN INCOME.—The term ‘accumulated post-1986 

9 deferred foreign income’ means the post-1986 earn10 ings and profits except to the extent such earnings— 

11 ‘‘(A) are attributable to income of the 

12 specified foreign corporation which is effectively 

13 connected with the conduct of a trade or busi14 ness within the United States and subject to 

15 tax under this chapter, or 

16 ‘‘(B) if distributed, would be excluded from 

17 the gross income of a United States shareholder 

18 under section 959. 

19 To the extent provided in regulations or other guid20 ance prescribed by the Secretary, in the case of any 

21 controlled foreign corporation which has share22 holders which are not United States shareholders, 

23 accumulated post-1986 deferred foreign income shall 

24 be appropriately reduced by amounts which would be 


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1 described in subparagraph (B) if such shareholders 

2 were United States shareholders. 

3 ‘‘(3) POST-1986 EARNINGS AND PROFITS.—The 

4 term ‘post-1986 earnings and profits’ means the 

5 earnings and profits of the foreign corporation (com6 puted in accordance with sections 964(a) and 986) 

7 accumulated in taxable years beginning after Decem8 ber 31, 1986, and determined— 

9 ‘‘(A) as of the date referred to in para10 graph (1) or (2) of subsection (a), whichever is 

11 applicable with respect to such foreign corpora12 tion, 

13 ‘‘(B) without diminution by reason of divi14 dends distributed during the taxable year end15 ing with or including such date, and 

16 ‘‘(C) increased by the amount of any quali17 fied deficit (within the meaning of section 

18 952(c)(1)(B)(ii)) arising before January 1, 

19 2018, which is treated as a qualified deficit 

20 (within the meaning of such section as amended 

21 by the Tax Cuts and Jobs Act) for purposes of 

22 such foreign corporation’s first taxable year be23 ginning after December 31, 2017. 

24 ‘‘(e) SPECIFIED FOREIGN CORPORATION.— 


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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the term ‘specified foreign corporation’ 

3 means— 

4 ‘‘(A) any controlled foreign corporation, 

5 and 

6 ‘‘(B) any foreign corporation with respect 

7 to which one or more domestic corporations is 

8 a United States shareholder (determined with9 out regard to section 958(b)(4)). 

10 ‘‘(2) APPLICATION TO CERTAIN FOREIGN COR11 PORATIONS.—For purposes of sections 951 and 961, 

12 a foreign corporation described in paragraph (1)(B) 

13 shall be treated as a controlled foreign corporation 

14 solely for purposes of taking into account the sub15 part F income of such corporation under subsection 

16 (a) (and for purposes of applying subsection (f)). 

17 ‘‘(3) EXCEPTION FOR PASSIVE FOREIGN IN18 VESTMENT COMPANIES.—The term ‘specified foreign 

19 corporation’ shall not include any passive foreign in20 vestment company (within the meaning of subpart D 

21 of part VI of subchapter P) that is not a controlled 

22 foreign corporation. 

23 ‘‘(f) DETERMINATIONS OF PRO RATA SHARE.—For 

24 purposes of this section, the determination of any United 

25 States shareholder’s pro rata share of any amount with 


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1 respect to any specified foreign corporation shall be deter2 mined under rules similar to the rules of section 951(a)(2) 

3 by treating such amount in the same manner as subpart 

4 F income (and by treating such specified foreign corpora5 tion as a controlled foreign corporation). 

6 ‘‘(g) DISALLOWANCE OF FOREIGN TAX CREDIT, 

7 ETC.— 

8 ‘‘(1) IN GENERAL.—No credit shall be allowed 

9 under section 901 for the applicable percentage of 

10 any taxes paid or accrued (or treated as paid or ac11 crued) with respect to any amount for which a de12 duction is allowed under this section. 

13 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

14 of this subsection, the term ‘applicable percentage’ 

15 means the amount (expressed as a percentage) equal 

16 to the sum of— 

17 ‘‘(A) 80 percent of the ratio of— 

18 ‘‘(i) the excess to which subsection 

19 (c)(1)(A) applies, divided by 

20 ‘‘(ii) the sum of such excess plus the 

21 amount to which subsection (c)(1)(B) ap22 plies, plus 

23 ‘‘(B) 60 percent of the ratio of— 

24 ‘‘(i) the amount to which subsection 

25 (c)(1)(B) applies, divided by 


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1 ‘‘(ii) the sum described in subpara2 graph (A)(ii). 

3 ‘‘(3) DENIAL OF DEDUCTION.—No deduction 

4 shall be allowed under this chapter for any tax for 

5 which credit is not allowable under section 901 by 

6 reason of paragraph (1) (determined by treating the 

7 taxpayer as having elected the benefits of subpart A 

8 of part III of subchapter N). 

9 ‘‘(4) COORDINATION WITH SECTION 78.—With 

10 respect to the taxes treated as paid or accrued by a 

11 domestic corporation with respect to amounts which 

12 are includible in gross income of such domestic cor13 poration by reason of this section, section 78 shall 

14 apply only to so much of such taxes as bears the 

15 same proportion to the amount of such taxes as— 

16 ‘‘(A) the excess of— 

17 ‘‘(i) the amounts which are includible 

18 in gross income of such domestic corpora19 tion by reason of this section, over 

20 ‘‘(ii) the deduction allowable under 

21 subsection (c) with respect to such 

22 amounts, bears to 

23 ‘‘(B) such amounts. 

24 ‘‘(5) EXTENSION OF FOREIGN TAX CREDIT CAR25 RYOVER PERIOD.—With respect to any taxes paid or 


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1 accrued (or treated as paid or accrued) with respect 

2 to any amount for which a deduction is allowed 

3 under this section, section 904(c) shall be applied by 

4 substituting ‘first 20 succeeding taxable years’ for 

5 ‘first 10 succeeding taxable years’. 

6 ‘‘(h) ELECTION TO PAY LIABILITY IN INSTALL7 MENTS.— 

8 ‘‘(1) IN GENERAL.—In the case of a United 

9 States shareholder of a deferred foreign income cor10 poration, such United States shareholder may elect 

11 to pay the net tax liability under this section in 8 

12 equal installments. 

13 ‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.— 

14 If an election is made under paragraph (1), the first 

15 installment shall be paid on the due date (deter16 mined without regard to any extension of time for 

17 filing the return) for the return of tax for the tax18 able year described in subsection (a) and each suc19 ceeding installment shall be paid on the due date (as 

20 so determined) for the return of tax for the taxable 

21 year following the taxable year with respect to which 

22 the preceding installment was made. 

23 ‘‘(3) ACCELERATION OF PAYMENT.—If there is 

24 an addition to tax for failure to timely pay any in25 stallment required under this subsection, a liquidaVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00366 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 tion or sale of substantially all the assets of the tax2 payer (including in a title 11 or similar case), a ces3 sation of business by the taxpayer, or any similar 

4 circumstance, then the unpaid portion of all remain5 ing installments shall be due on the date of such 

6 event (or in the case of a title 11 or similar case, 

7 the day before the petition is filed). The preceding 

8 sentence shall not apply to the sale of substantially 

9 all the assets of a taxpayer to a buyer if such buyer 

10 enters into an agreement with the Secretary under 

11 which such buyer is liable for the remaining install12 ments due under this subsection in the same manner 

13 as if such buyer were the taxpayer. 

14 ‘‘(4) PRORATION OF DEFICIENCY TO INSTALL15 MENTS.—If an election is made under paragraph (1) 

16 to pay the net tax liability under this section in in17 stallments and a deficiency has been assessed with 

18 respect to such net tax liability, the deficiency shall 

19 be prorated to the installments payable under para20 graph (1). The part of the deficiency so prorated to 

21 any installment the date for payment of which has 

22 not arrived shall be collected at the same time as, 

23 and as a part of, such installment. The part of the 

24 deficiency so prorated to any installment the date 

25 for payment of which has arrived shall be paid upon 


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1 notice and demand from the Secretary. This sub2 section shall not apply if the deficiency is due to 

3 negligence, to intentional disregard of rules and reg4 ulations, or to fraud with intent to evade tax. 

5 ‘‘(5) ELECTION.—Any election under paragraph 

6 (1) shall be made not later than the due date for the 

7 return of tax for the taxable year described in sub8 section (a) and shall be made in such manner as the 

9 Secretary may provide. 

10 ‘‘(6) NET TAX LIABILITY UNDER THIS SEC11 TION.—For purposes of this subsection— 

12 ‘‘(A) IN GENERAL.—The net tax liability 

13 under this section with respect to any United 

14 States shareholder is the excess (if any) of— 

15 ‘‘(i) such taxpayer’s net income tax 

16 for the taxable year in which an amount is 

17 included in the gross income of such 

18 United States shareholder under section 

19 951(a)(1) by reason of this section, over 

20 ‘‘(ii) such taxpayer’s net income tax 

21 for such taxable year determined— 

22 ‘‘(I) without regard to this sec23 tion, and 

24 ‘‘(II) without regard to any in25 come, deduction, or credit, properly 


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1 attributable to a dividend received by 

2 such United States shareholder from 

3 any deferred foreign income corpora4 tion. 

5 ‘‘(B) NET INCOME TAX.—The term ‘net 

6 income tax’ means the regular tax liability re7 duced by the credits allowed under subparts A, 

8 B, and D of part IV of subchapter A. 

9 ‘‘(i) SPECIAL RULES FOR S CORPORATION SHARE10 HOLDERS.— 

11 ‘‘(1) IN GENERAL.—In the case of any S cor12 poration which is a United States shareholder of a 

13 deferred foreign income corporation, each share14 holder of such S corporation may elect to defer pay15 ment of such shareholder’s net tax liability under 

16 this section with respect to such S corporation until 

17 the shareholder’s taxable year which includes the 

18 triggering event with respect to such liability. Any 

19 net tax liability payment of which is deferred under 

20 the preceding sentence shall be assessed on the re21 turn as an addition to tax in the shareholder’s tax22 able year which includes such triggering event. 

23 ‘‘(2) TRIGGERING EVENT.— 

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

25 shareholder’s net tax liability under this section 


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1 with respect to any S corporation, the trig2 gering event with respect to such liability is 

3 whichever of the following occurs first: 

4 ‘‘(i) Such corporation ceases to be an 

5 S corporation (determined as of the first 

6 day of the first taxable year that such cor7 poration is not an S corporation). 

8 ‘‘(ii) A liquidation or sale of substan9 tially all the assets of such S corporation 

10 (including in a title 11 or similar case), a 

11 cessation of business by such S corpora12 tion, such S corporation ceases to exist, or 

13 any similar circumstance. 

14 ‘‘(iii) A transfer of any share of stock 

15 in such S corporation by the taxpayer (in16 cluding by reason of death, or otherwise). 

17 ‘‘(B) PARTIAL TRANSFERS OF STOCK.—In 

18 the case of a transfer of less than all of the tax19 payer’s shares of stock in the S corporation, 

20 such transfer shall only be a triggering event 

21 with respect to so much of the taxpayer’s net 

22 tax liability under this section with respect to 

23 such S corporation as is properly allocable to 

24 such stock. 


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1 ‘‘(C) TRANSFER OF LIABILITY.—A trans2 fer described in clause (iii) shall not be treated 

3 as a triggering event if the transferee enters 

4 into an agreement with the Secretary under 

5 which such transferee is liable for net tax liabil6 ity with respect to such stock in the same man7 ner as if such transferee were the taxpayer. 

8 ‘‘(3) NET TAX LIABILITY.—A shareholder’s net 

9 tax liability under this section with respect to any S 

10 corporation is the net tax liability under this section 

11 which would be determined under subsection (h)(6) 

12 if the only subpart F income taken into account by 

13 such shareholder by reason of this section were allo14 cations from such S corporation. 

15 ‘‘(4) ELECTION TO PAY DEFERRED LIABILITY

16 IN INSTALLMENTS.—In the case of a taxpayer which 

17 elects to defer payment under paragraph (1)— 

18 ‘‘(A) subsection (h) shall be applied sepa19 rately with respect to the liability to which such 

20 election applies, 

21 ‘‘(B) an election under subsection (h) with 

22 respect to such liability shall be treated as time23 ly made if made not later than the due date for 

24 the return of tax for the taxable year in which 


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1 the triggering event with respect to such liabil2 ity occurs, 

3 ‘‘(C) the first installment under subsection 

4 (h) with respect to such liability shall be paid 

5 not later than such due date (but determined 

6 without regard to any extension of time for fil7 ing the return), and 

8 ‘‘(D) if the triggering event with respect to 

9 any net tax liability is described in paragraph 

10 (2)(A)(ii), an election under subsection (h) with 

11 respect to such liability may be made only with 

12 the consent of the Secretary. 

13 ‘‘(5) JOINT AND SEVERAL LIABILITY OF S COR14 PORATION.—If any shareholder of an S corporation 

15 elects to defer payment under paragraph (1), such 

16 S corporation shall be jointly and severally liable for 

17 such payment and any penalty, addition to tax, or 

18 additional amount attributable thereto. 

19 ‘‘(6) EXTENSION OF LIMITATION ON COLLEC20 TION.—Notwithstanding any other provision of law, 

21 any limitation on the time period for the collection 

22 of a liability deferred under this subsection shall not 

23 be treated as beginning before the date of the trig24 gering event with respect to such liability. 


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1 ‘‘(7) ANNUAL REPORTING OF NET TAX LIABIL2 ITY.— 

3 ‘‘(A) IN GENERAL.—Any shareholder of an 

4 S corporation which makes an election under 

5 paragraph (1) shall report the amount of such 

6 shareholder’s deferred net tax liability on such 

7 shareholder’s return of tax for the taxable year 

8 for which such election is made and on the re9 turn of tax for each taxable year thereafter 

10 until such amount has been fully assessed on 

11 such returns. 

12 ‘‘(B) DEFERRED NET TAX LIABILITY.— 

13 For purposes of this paragraph, the term ‘de14 ferred net tax liability’ means, with respect to 

15 any taxable year, the amount of net tax liability 

16 payment of which has been deferred under 

17 paragraph (1) and which has not been assessed 

18 on a return of tax for any prior taxable year. 

19 ‘‘(C) FAILURE TO REPORT.—In the case of 

20 any failure to report any amount required to be 

21 reported under subparagraph (A) with respect 

22 to any taxable year before the due date for the 

23 return of tax for such taxable year, there shall 

24 be assessed on such return as an addition to 

25 tax 5 percent of such amount. 


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1 ‘‘(8) ELECTION.—Any election under paragraph 

2 (1)— 

3 ‘‘(A) shall be made by the shareholder of 

4 the S corporation not later than the due date 

5 for such shareholder’s return of tax for the tax6 able year which includes the close of the taxable 

7 year of such S corporation in which the amount 

8 described in subsection (a) is taken into ac9 count, and 

10 ‘‘(B) shall be made in such manner as the 

11 Secretary may provide. 

12 ‘‘(j) REPORTING BY S CORPORATION.—Each S cor13 poration which is a United States shareholder of a de14 ferred foreign income corporation shall report in its return 

15 of tax under section 6037(a) the amount includible in its 

16 gross income for such taxable year by reason of this sec17 tion and the amount of the deduction allowable by sub18 section (c). Any copy provided to a shareholder under sec19 tion 6037(b) shall include a statement of such share20 holder’s pro rata share of such amounts. 

21 ‘‘(k) INCLUSION OF DEFERRED FOREIGN INCOME

22 UNDER THIS SECTION NOT TO TRIGGER RECAPTURE OF

23 OVERALL FOREIGN LOSS, ETC.—For purposes of sections 

24 904(f)(1) and 907(c)(4), in the case of a United States 

25 shareholder of a deferred foreign income corporation, such 


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1 United States shareholder’s taxable income from sources 

2 without the United States and combined foreign oil and 

3 gas income shall be determined without regard to this sec4 tion. 

5 ‘‘(l) REGULATIONS.—The Secretary may prescribe 

6 such regulations or other guidance as may be necessary 

7 or appropriate to carry out the provisions of this section.’’. 

8 (b) CLERICAL AMENDMENT.—The table of sections 

9 for subpart F of part III of subchapter N of chapter 1 

10 is amended by striking the item relating to section 965 

11 and inserting the following: 

‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation exemption system of taxation.’’. 

12 Subtitle B—Modifications Related 

13 to Foreign Tax Credit System 

14 SEC. 4101. REPEAL OF SECTION 902 INDIRECT FOREIGN 

15 TAX CREDITS; DETERMINATION OF SECTION 

16 960 CREDIT ON CURRENT YEAR BASIS. 

17 (a) REPEAL OF SECTION 902 INDIRECT FOREIGN

18 TAX CREDITS.—Subpart A of part III of subchapter N 

19 of chapter 1 is amended by striking section 902. 

20 (b) DETERMINATION OF SECTION 960 CREDIT ON

21 CURRENT YEAR BASIS.—Section 960 is amended— 

22 (1) by striking subsection (c), by redesignating 

23 subsection (b) as subsection (c), by striking all that 


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1 precedes subsection (c) (as so redesignated) and in2 serting the following: 

3 ‘‘SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLU4 SIONS. 

5 ‘‘(a) IN GENERAL.—For purposes of this subpart, if 

6 there is included in the gross income of a domestic cor7 poration any item of income under section 951(a)(1) with 

8 respect to any controlled foreign corporation with respect 

9 to which such domestic corporation is a United States 

10 shareholder, such domestic corporation shall be deemed to 

11 have paid so much of such foreign corporation’s foreign 

12 income taxes as are properly attributable to such item of 

13 income. 

14 ‘‘(b) SPECIAL RULES FOR DISTRIBUTIONS FROM

15 PREVIOUSLY TAXED EARNINGS AND PROFITS.—For pur16 poses of this subpart— 

17 ‘‘(1) IN GENERAL.—If any portion of a dis18 tribution from a controlled foreign corporation to a 

19 domestic corporation which is a United States share20 holder with respect to such controlled foreign cor21 poration is excluded from gross income under section 

22 959(a), such domestic corporation shall be deemed 

23 to have paid so much of such foreign corporation’s 

24 foreign income taxes as— 


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1 ‘‘(A) are properly attributable to such por2 tion, and 

3 ‘‘(B) have not been deemed to have 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 

9 a distribution from a controlled foreign corporation 

10 to another controlled foreign corporation, such con11 trolled foreign corporation shall be deemed to have 

12 paid so much of such other controlled foreign cor13 poration’s 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 the taxable year or any prior taxable 

19 year.’’, 

20 (2) and by adding after subsection (c) (as so re21 designated) the following new subsections: 

22 ‘‘(d) FOREIGN INCOME TAXES.—The term ‘foreign 

23 income taxes’ means any income, war profits, or excess 

24 profits taxes paid or accrued to any foreign country or 

25 possession of the United States. 


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1 ‘‘(e) REGULATIONS.—The Secretary may prescribe 

2 such regulations or other guidance as may be necessary 

3 or 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 

7 CREDIT. 

8 ‘‘If a domestic corporation chooses to have the bene9 fits of subpart A of part III of subchapter N (relating 

10 to foreign tax credit) for any taxable year, an amount 

11 equal to the taxes deemed to be paid by such corporation 

12 under subsections (a) and (b) of section 960 for such tax13 able year shall be treated for purposes of this title (other 

14 than sections 959, 960, and 961) as an item of income 

15 required to be included in the gross income of such domes16 tic corporation under section 951(a) for such taxable 

17 year.’’. 

18 (2) Section 245(a)(10)(C) is amended by strik19 ing ‘‘sections 902, 907, and 960’’ and inserting 

20 ‘‘sections 907 and 960’’. 

21 (3) Sections 535(b)(1) and 545(b)(1) are each 

22 amended by striking ‘‘section 902(a) or 960(a)(1)’’ 

23 and inserting ‘‘section 960’’. 

24 (4) Section 814(f)(1) is amended— 

25 (A) by striking subparagraph (B), and 


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1 (B) by striking all that precedes ‘‘No in2 come’’ and inserting the following: 

3 ‘‘(1) TREATMENT OF FOREIGN TAXES.—’’. 

4 (5) Section 865(h)(1)(B) is amended by strik5 ing ‘‘sections 902, 907, and 960’’ and inserting 

6 ‘‘sections 907 and 960’’. 

7 (6) Section 901(a) is amended by striking ‘‘sec8 tions 902 and 960’’ and inserting ‘‘section 960’’. 

9 (7) Section 901(e)(2) is amended by striking 

10 ‘‘but is not limited to—’’ and all that follows 

11 through ‘‘that portion’’ and inserting ‘‘but is not 

12 limited to, that portion’’. 

13 (8) Section 901(f) is amended by striking ‘‘sec14 tions 902 and 960’’ and inserting ‘‘section 960’’. 

15 (9) Section 901(j)(1)(A) is amended by striking 

16 ‘‘902 or’’. 

17 (10) Section 901(j)(1)(B) is amended by strik18 ing ‘‘sections 902 and 960’’ and inserting ‘‘section 

19 960’’. 

20 (11) Section 901(k)(2) is amended by striking 

21 ‘‘section 853, 902, or 960’’ and inserting ‘‘section 

22 853 or 960’’. 

23 (12) Section 901(k)(6) is amended by striking 

24 ‘‘902 or’’. 


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1 (13) Section 901(m)(1) is amended by striking 

2 ‘‘relevant foreign assets—’’ and all that follows and 

3 inserting ‘‘relevant foreign assets shall not be taken 

4 into account in determining the credit allowed under 

5 subsection (a).’’. 

6 (14) Section 904(d)(1) is amended by striking 

7 ‘‘sections 902, 907, and 960’’ and inserting ‘‘sec8 tions 907 and 960’’. 

9 (15) Section 904(d)(6)(A) is amended by strik10 ing ‘‘sections 902, 907, and 960’’ and inserting 

11 ‘‘sections 907 and 960’’. 

12 (16) Section 904(h)(10)(A) is amended by 

13 striking ‘‘sections 902, 907, and 960’’ and inserting 

14 ‘‘sections 907 and 960’’. 

15 (17) Section 904 is amended by striking sub16 section (k). 

17 (18) Section 905(c)(1) is amended by striking 

18 the last sentence. 

19 (19) Section 905(c)(2)(B)(i) is amended to read 

20 as follows: 

21 ‘‘(i) shall be taken into account for 

22 the taxable year to which such taxes relate, 

23 and’’. 


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1 (20) Section 906(a) is amended by striking ‘‘(or 

2 deemed, under section 902, paid or accrued during 

3 the taxable year)’’. 

4 (21) Section 906(b) is amended by striking 

5 paragraphs (4) and (5). 

6 (22) Section 907(b)(2)(B) is amended by strik7 ing ‘‘902 or’’. 

8 (23) Section 907(c)(3) is amended— 

9 (A) by striking subparagraph (A) and re10 designating subparagraphs (B) and (C) as sub11 paragraphs (A) and (B), respectively, and 

12 (B) by striking ‘‘section 960(a)’’ in sub13 paragraph (A) (as so redesignated) and insert14 ing ‘‘section 960’’. 

15 (24) Section 907(c)(5) is amended by striking 

16 ‘‘902 or’’. 

17 (25) Section 907(f)(2)(B)(i) is amended by 

18 striking ‘‘902 or’’. 

19 (26) Section 908(a) is amended by striking 

20 ‘‘902 or’’. 

21 (27) Section 909(b) is amended— 

22 (A) by striking ‘‘section 902 corporation’’ 

23 in the matter preceding paragraph (1) and in24 serting ‘‘10/50 corporation’’, 

25 (B) by striking ‘‘902 or’’ in paragraph (1), 


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1 (C) by striking ‘‘by such section 902 cor2 poration’’ and all that follows in the matter fol3 lowing paragraph (2) and inserting ‘‘by such 

4 10/50 corporation or a domestic corporation 

5 which is a United States shareholder with re6 spect to such 10/50 corporation.’’, and 

7 (D) by striking ‘‘SECTION 902 CORPORA8 TIONS’’ in the heading thereof and inserting 

9 ‘‘10/50 CORPORATIONS’’. 

10 (28) Section 909(d)(5) is amended to read as 

11 follows: 

12 ‘‘(5) 10/50 CORPORATION.—The term ‘10/50 

13 corporation’ means any foreign corporation with re14 spect to which one or more domestic corporations is 

15 a United States shareholder.’’. 

16 (29) Section 958(a)(1) is amended by striking 

17 ‘‘960(a)(1)’’ and inserting ‘‘960’’. 

18 (30) Section 959(d) is amended by striking 

19 ‘‘Except as provided in section 960(a)(3), any’’ and 

20 inserting ‘‘Any’’. 

21 (31) Section 959(e) is amended by striking 

22 ‘‘section 960(b)’’ and inserting ‘‘section 960(c)’’. 

23 (32) Section 1291(g)(2)(A) is amended by 

24 striking ‘‘any distribution—’’ and all that follows 

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1 tion, any withholding tax imposed with respect to 

2 such distribution, but only if’’. 

3 (33) Section 6038(c)(1)(B) is amended by 

4 striking ‘‘sections 902 (relating to foreign tax credit 

5 for corporate stockholder in foreign corporation) and 

6 960 (relating to special rules for foreign tax credit)’’ 

7 and inserting ‘‘section 960’’. 

8 (34) Section 6038(c)(4) is amended by striking 

9 subparagraph (C). 

10 (35) The table of sections for subpart A of part 

11 III of subchapter N of chapter 1 is amended by 

12 striking the item relating to section 902. 

13 (36) The table of sections for subpart F of part 

14 III of subchapter N of chapter 1 is amended by 

15 striking the item relating to section 960 and insert16 ing the following: 

‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2017. 

20 SEC. 4102. SOURCE OF INCOME FROM SALES OF INVEN21 TORY DETERMINED SOLELY ON BASIS OF 

22 PRODUCTION ACTIVITIES. 

23 (a) IN GENERAL.—Section 863(b) is amended by 

24 adding at the end the following: ‘‘Gains, profits, and in25 come from the sale or exchange of inventory property deVerDate Sep 11 2014 22:51 Nov 28, 2017 Jkt 079200 PO 00000 Frm 00383 Fmt 6652 Sfmt 6201 E:\BILLS\H1.PCS H1

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1 scribed in paragraph (2) shall be allocated and appor2 tioned between sources within and without the United 

3 States solely on the basis of the production activities with 

4 respect to the property.’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2017. 

8 Subtitle C—Modification of 

9 Subpart F Provisions 

10 SEC. 4201. REPEAL OF INCLUSION BASED ON WITHDRAWAL 

11 OF PREVIOUSLY EXCLUDED SUBPART F IN12 COME FROM QUALIFIED INVESTMENT. 

13 (a) IN GENERAL.—Subpart F of part III of sub14 chapter N of chapter 1 is amended by striking section 955. 

15 (b) CONFORMING AMENDMENTS.— 

16 (1)(A) Section 951(a)(1)(A) is amended to read 

17 as follows: 

18 ‘‘(A) his pro rata share (determined under 

19 paragraph (2)) of the corporation’s subpart F 

20 income for such year, and’’. 

21 (B) Section 851(b)(3) is amended by striking 

22 ‘‘section 951(a)(1)(A)(i)’’ in the flush language at 

23 the end and inserting ‘‘section 951(a)(1)(A)’’. 


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1 (C) Section 952(c)(1)(B)(i) is amended by 

2 striking ‘‘section 951(a)(1)(A)(i)’’ and inserting 

3 ‘‘section 951(a)(1)(A)’’. 

4 (D) Section 953(c)(1)(C) is amended by strik5 ing ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 

6 951(a)(1)(A)’’. 

7 (2) Section 951(a) is amended by striking para8 graph (3). 

9 (3) Section 953(d)(4)(B)(iv)(II) is amended by 

10 striking ‘‘or amounts referred to in clause (ii) or (iii) 

11 of section 951(a)(1)(A)’’. 

12 (4) Section 964(b) is amended by striking ‘‘, 

13 955,’’. 

14 (5) Section 970 is amended by striking sub15 section (b). 

16 (6) The table of sections for subpart F of part 

17 III of subchapter N of chapter 1 is amended by 

18 striking the item relating to section 955. 

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

20 this section shall apply to taxable years of foreign corpora21 tions beginning after December 31, 2017, and to taxable 

22 years of United States shareholders in which or with which 

23 such taxable years of foreign corporations end. 


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1 SEC. 4202. REPEAL OF TREATMENT OF FOREIGN BASE COM2 PANY OIL RELATED INCOME AS SUBPART F 

3 INCOME. 

4 (a) IN GENERAL.—Section 954(a) is amended by 

5 striking paragraph (5), by striking the comma at the end 

6 of paragraph (3) and inserting a period, and by inserting 

7 ‘‘and’’ at the end of paragraph (2). 

8 (b) CONFORMING AMENDMENTS.— 

9 (1) Section 952(c)(1)(B)(iii) is amended by 

10 striking subclause (I) and by redesignating sub11 clauses (II) through (V) as subclauses (I) through 

12 (IV), respectively. 

13 (2) Section 954(b)(4) is amended by striking 

14 the last sentence. 

15 (3) Section 954(b)(5) is amended by striking 

16 ‘‘the foreign base company services income, and the 

17 foreign base company oil related income’’ and insert18 ing ‘‘and the foreign base company services income’’. 

19 (4) Section 954(b) is amended by striking para20 graph (6). 

21 (5) Section 954 is amended by striking sub22 section (g). 

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

24 this section shall apply to taxable years of foreign corpora25 tions beginning after December 31, 2017, and to taxable 


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1 years of United States shareholders in which or with which 

2 such taxable years of foreign corporations end. 

3 SEC. 4203. INFLATION ADJUSTMENT OF DE MINIMIS EXCEP4 TION FOR FOREIGN BASE COMPANY INCOME. 

5 (a) IN GENERAL.—Section 954(b)(3) is amended by 

6 adding at the end the following new subparagraph: 

7 ‘‘(D) INFLATION ADJUSTMENT.—In the 

8 case of any taxable year beginning after 2017, 

9 the dollar amount in subparagraph (A)(ii) shall 

10 be increased by an amount equal to— 

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

12 ‘‘(ii) the cost-of-living adjustment de13 termined under section 1(c)(2)(A) for the 

14 calendar year in which the taxable year be15 gins. 

16 Any increase determined under the preceding 

17 sentence shall be rounded to the nearest mul18 tiple of $50,000.’’. 

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

20 this section shall apply to taxable years of foreign corpora21 tions beginning after December 31, 2017, and to taxable 

22 years of United States shareholders in which or with which 

23 such taxable years of foreign corporations end. 


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1 SEC. 4204. LOOK-THRU RULE FOR RELATED CONTROLLED 

2 FOREIGN CORPORATIONS MADE PERMA3 NENT. 

4 (a) IN GENERAL.—Paragraph (6) of section 954(c) 

5 is amended by striking subparagraph (C). 

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

7 this section shall apply to taxable years of foreign corpora8 tions beginning after December 31, 2019, and to taxable 

9 years of United States shareholders in which or with which 

10 such taxable years of foreign corporations end. 

11 SEC. 4205. MODIFICATION OF STOCK ATTRIBUTION RULES 

12 FOR DETERMINING STATUS AS A CON13 TROLLED FOREIGN CORPORATION. 

14 (a) IN GENERAL.—Section 958(b) is amended— 

15 (1) by striking paragraph (4), and 

16 (2) by striking ‘‘Paragraphs (1) and (4)’’ in the 

17 last sentence and inserting ‘‘Paragraph (1)’’. 

18 (b) APPLICATION OF CERTAIN REPORTING REQUIRE19 MENTS.—Section 6038(e)(2) is amended by striking ‘‘ex20 cept that—’’ and all that follows through ‘‘in applying 

21 subparagraph (C)’’ and inserting ‘‘except that in applying 

22 subparagraph (C)’’. 

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

24 this section shall apply to taxable years of foreign corpora25 tions beginning after December 31, 2017, and to taxable 


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1 years of United States shareholders in which or with which 

2 such taxable years of foreign corporations end. 

3 SEC. 4206. ELIMINATION OF REQUIREMENT THAT COR4 PORATION MUST BE CONTROLLED FOR 30 

5 DAYS BEFORE SUBPART F INCLUSIONS 

6 APPLY. 

7 (a) IN GENERAL.—Section 951(a)(1) is amended by 

8 striking ‘‘for an uninterrupted period of 30 days or more’’ 

9 and inserting ‘‘at any time’’. 

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

11 this section shall apply to taxable years of foreign corpora12 tions beginning after December 31, 2017, and to taxable 

13 years of United States shareholders with or within which 

14 such taxable years of foreign corporations end. 

15 Subtitle D—Prevention of Base 

16 Erosion 

17 SEC. 4301. CURRENT YEAR INCLUSION BY UNITED STATES 

18 SHAREHOLDERS WITH FOREIGN HIGH RE19 TURNS. 

20 (a) IN GENERAL.—Subpart F of part III of sub21 chapter N of chapter 1 is amended by inserting after sec22 tion 951 the following new section: 


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1 ‘‘SEC. 951A. FOREIGN HIGH RETURN AMOUNT INCLUDED IN 

2 GROSS INCOME OF UNITED STATES SHARE3 HOLDERS. 

4 ‘‘(a) IN GENERAL.—Each person who is a United 

5 States shareholder of any controlled foreign corporation 

6 for any taxable year of such United States shareholder 

7 shall include in gross income for such taxable year 50 per8 cent of such shareholder’s foreign high return amount for 

9 such taxable year. 

10 ‘‘(b) FOREIGN HIGH RETURN AMOUNT.—For pur11 poses of this section— 

12 ‘‘(1) IN GENERAL.—The term ‘foreign high re13 turn amount’ means, with respect to any United 

14 States shareholder for any taxable year of such 

15 United States shareholder, the excess (if any) of— 

16 ‘‘(A) such shareholder’s net CFC tested in17 come for such taxable year, over 

18 ‘‘(B) the excess (if any) of— 

19 ‘‘(i) the applicable percentage of the 

20 aggregate of such shareholder’s pro rata 

21 share of the qualified business asset invest22 ment of each controlled foreign corporation 

23 with respect to which such shareholder is 

24 a United States shareholder for such tax25 able year (determined for each taxable year 

26 of each such controlled foreign corporation 


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1 which ends in or with such taxable year of 

2 such United States shareholder), over 

3 ‘‘(ii) the amount of interest expense 

4 taken into account under subsection 

5 (c)(2)(A)(ii) in determining the share6 holder’s net CFC tested income for the 

7 taxable year. 

8 ‘‘(2) APPLICABLE PERCENTAGE.—The term 

9 ‘applicable percentage’ means, with respect to any 

10 taxable year, the Federal short-term rate (deter11 mined under section 1274(d) for the month in which 

12 or with which such taxable year ends) plus 7 per13 centage points. 

14 ‘‘(c) NET CFC TESTED INCOME.—For purposes of 

15 this section— 

16 ‘‘(1) IN GENERAL.—The term ‘net CFC tested 

17 income’ means, with respect to any United States 

18 shareholder for any taxable year of such United 

19 States shareholder, the excess (if any) of— 

20 ‘‘(A) the aggregate of such shareholder’s 

21 pro rata share of the tested income of each con22 trolled foreign corporation with respect to which 

23 such shareholder is a United States shareholder 

24 for such taxable year of such United States 

25 shareholder (determined for each taxable year 


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1 of such controlled foreign corporation which 

2 ends in or with such taxable year of such 

3 United States shareholder), over 

4 ‘‘(B) the aggregate of such shareholder’s 

5 pro rata share of the tested loss of each con6 trolled foreign corporation with respect to which 

7 such shareholder is a United States shareholder 

8 for such taxable year of such United States 

9 shareholder (determined for each taxable year 

10 of such controlled foreign corporation which 

11 ends in or with such taxable year of such 

12 United States shareholder). 

13 ‘‘(2) TESTED INCOME; TESTED LOSS.—For pur14 poses of this section— 

15 ‘‘(A) TESTED INCOME.—The term ‘tested 

16 income’ means, with respect to any controlled 

17 foreign corporation for any taxable year of such 

18 controlled foreign corporation, the excess (if 

19 any) of— 

20 ‘‘(i) the gross income of such corpora21 tion determined without regard to— 

22 ‘‘(I) any item of income which is 

23 effectively connected with the conduct 

24 by such corporation of a trade or 


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1 business within the United States if 

2 subject to tax under this chapter, 

3 ‘‘(II) any gross income taken into 

4 account in determining the subpart F 

5 income of such corporation, 

6 ‘‘(III) except as otherwise pro7 vided by the Secretary, any amount 

8 excluded from the foreign personal 

9 holding company income (as defined 

10 in section 954) of such corporation by 

11 reason of section 954(c)(6) but only 

12 to the extent that any deduction al13 lowable for the payment or accrual of 

14 such amount does not result in a re15 duction in the foreign high return 

16 amount of any United States share17 holder (determined without regard to 

18 this subclause), 

19 ‘‘(IV) any gross income excluded 

20 from the foreign personal holding 

21 company income (as defined in section 

22 954) of such corporation by reason of 

23 subsection (c)(2)(C), (h), or (i) of sec24 tion 954, 


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1 ‘‘(V) any gross income excluded 

2 from the insurance income (as defined 

3 in section 953) of such corporation by 

4 reason of section 953(a)(2), 

5 ‘‘(VI) any gross income excluded 

6 from foreign base company income (as 

7 defined in section 954) or insurance 

8 income (as defined in section 953) of 

9 such corporation by reason of section 

10 954(b)(4), 

11 ‘‘(VII) any dividend received 

12 from a related person (as defined in 

13 section 954(d)(3)), and 

14 ‘‘(VIII) any commodities gross 

15 income 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) (or which would be so properly 

20 allocable if such corporation had such 

21 gross income). 

22 ‘‘(B) TESTED LOSS.—The term ‘tested 

23 loss’ means, with respect to any controlled for24 eign corporation for any taxable year of such 

25 controlled foreign corporation, the excess (if 


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1 any) of the amount described in subparagraph 

2 (A)(ii) over the amount described in subpara3 graph (A)(i). 

4 ‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.— 

5 For purposes of this section— 

6 ‘‘(1) IN GENERAL.—The term ‘qualified busi7 ness asset investment’ means, with respect to any 

8 controlled foreign corporation for any taxable year of 

9 such controlled foreign corporation, the aggregate of 

10 the corporation’s adjusted bases (determined as of 

11 the close of such taxable year and after any adjust12 ments with respect to such taxable year) in specified 

13 tangible property— 

14 ‘‘(A) used in a trade or business of the 

15 corporation, and 

16 ‘‘(B) of a type with respect to which a de17 duction is allowable under section 168. 

18 ‘‘(2) SPECIFIED TANGIBLE PROPERTY.—The 

19 term ‘specified tangible property’ means any tangible 

20 property to the extent such property is used in the 

21 production of tested income or tested loss. 

22 ‘‘(3) PARTNERSHIP PROPERTY.—For purposes 

23 of this subsection, if a controlled foreign corporation 

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1 tion, such controlled foreign corporation shall take 

2 into account under paragraph (1) the controlled for3 eign corporation’s distributive share of the aggregate 

4 of the partnership’s adjusted bases (determined as 

5 of such date in the hands of the partnership) in tan6 gible property held by such partnership to the extent 

7 such property— 

8 ‘‘(A) is used in the trade or business of the 

9 partnership, 

10 ‘‘(B) is of a type with respect to which a 

11 deduction is allowable under section 168, and 

12 ‘‘(C) is used in the production of tested in13 come or tested loss (determined with respect to 

14 such controlled foreign corporation’s distribu15 tive share of income or loss with respect to such 

16 property). 

17 For purposes of this paragraph, the controlled for18 eign corporation’s distributive share of the adjusted 

19 basis of any property shall be the controlled foreign 

20 corporation’s distributive share of income and loss 

21 with respect to such property. 

22 ‘‘(4) DETERMINATION OF ADJUSTED BASIS.— 

23 For purposes of this subsection, the adjusted basis 

24 in any property shall be determined without regard 

25 to any provision of this title (or any other provision 


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1 of law) which is enacted after the date of the enact2 ment of this section. 

3 ‘‘(5) REGULATIONS.—The Secretary shall issue 

4 such regulations or other guidance as the Secretary 

5 determines appropriate to prevent the avoidance of 

6 the purposes of this subsection, including regulations 

7 or other guidance which provide for the treatment of 

8 property if— 

9 ‘‘(A) such property is transferred, or held, 

10 temporarily, or 

11 ‘‘(B) the avoidance of the purposes of this 

12 paragraph is a factor in the transfer or holding 

13 of such property. 

14 ‘‘(e) COMMODITIES GROSS INCOME.—For purposes 

15 of this section— 

16 ‘‘(1) COMMODITIES GROSS INCOME.—The term 

17 ‘commodities gross income’ means, with respect to 

18 any corporation— 

19 ‘‘(A) gross income of such corporation 

20 from the disposition of commodities which are 

21 produced or extracted by such corporation (or a 

22 partnership in which such corporation is a part23 ner), and 


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1 ‘‘(B) gross income of such corporation 

2 from the disposition of property which gives rise 

3 to income described in subparagraph (A). 

4 ‘‘(2) COMMODITY.—The term ‘commodity’ 

5 means any commodity described in section 

6 475(e)(2)(A) or section 475(e)(2)(D) (determined 

7 without regard to clause (i) thereof and by sub8 stituting ‘a commodity described in subparagraph 

9 (A)’ for ‘such a commodity’ in clause (ii) thereof). 

10 ‘‘(f) TAXABLE YEARS FOR WHICH PERSONS ARE

11 TREATED AS UNITED STATES SHAREHOLDERS OF CON12 TROLLED FOREIGN CORPORATIONS.—For purposes of 

13 this section— 

14 ‘‘(1) IN GENERAL.—A United States share15 holder of a controlled foreign corporation shall be 

16 treated as a United States shareholder of such con17 trolled foreign corporation for any taxable year of 

18 such United States shareholder if— 

19 ‘‘(A) a taxable year of such controlled for20 eign corporation ends in or with such taxable 

21 year of such person, and 

22 ‘‘(B) such person owns (within the mean23 ing of section 958(a)) stock in such controlled 

24 foreign corporation on the last day, in such tax25 able year of such foreign corporation, on which 


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1 the foreign corporation is a controlled foreign 

2 corporation. 

3 ‘‘(2) TREATMENT AS A CONTROLLED FOREIGN

4 CORPORATION.—Except for purposes of paragraph 

5 (1)(B) and the application of section 951(a)(2) to 

6 this section pursuant to subsection (g), a foreign 

7 corporation shall be treated as a controlled foreign 

8 corporation for any taxable year of such foreign cor9 poration if such foreign corporation is a controlled 

10 foreign corporation at any time during such taxable 

11 year. 

12 ‘‘(g) DETERMINATION OF PRO RATA SHARE.—For 

13 purposes of this section, pro rata shares shall be deter14 mined under the rules of section 951(a)(2) in the same 

15 manner as such section applies to subpart F income. 

16 ‘‘(h) COORDINATION WITH SUBPART F.— 

17 ‘‘(1) TREATMENT AS SUBPART F INCOME FOR

18 CERTAIN PURPOSES.—Except as otherwise provided 

19 by the Secretary any foreign high return amount in20 cluded in gross income under subsection (a) shall be 

21 treated in the same manner as an amount included 

22 under section 951(a)(1)(A) for purposes of applying 

23 sections 168(h)(2)(B), 535(b)(10), 851(b), 

24 904(h)(1), 959, 961, 962, 993(a)(1)(E), 996(f)(1), 


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1 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 

2 6654(d)(2)(D), and 6655(e)(4). 

3 ‘‘(2) ENTIRE FOREIGN HIGH RETURN AMOUNT

4 TAKEN INTO ACCOUNT FOR PURPOSES OF CERTAIN

5 SECTIONS.—For purposes of applying paragraph (1) 

6 with respect to sections 168(h)(2)(B), 851(b), 959, 

7 961, 962, 1248(b)(1), and 1248(d)(1), the foreign 

8 high return amount included in gross income under 

9 subsection (a) shall be determined by substituting 

10 ‘100 percent’ for ‘50 percent’ in such subsection. 

11 ‘‘(3) ALLOCATION OF FOREIGN HIGH RETURN

12 AMOUNT TO CONTROLLED FOREIGN CORPORA13 TIONS.—For purposes of the sections referred to in 

14 paragraph (1), with respect to any controlled foreign 

15 corporation any pro rata amount from which is 

16 taken into account in determining the foreign high 

17 return amount included in gross income of a United 

18 States shareholder under subsection (a), the portion 

19 of such foreign high return amount which is treated 

20 as being with respect to such controlled foreign cor21 poration is— 

22 ‘‘(A) in the case of a controlled foreign 

23 corporation with tested loss, zero, and 

24 ‘‘(B) in the case of a controlled foreign 

25 corporation with tested income, the portion of 


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1 such foreign high return amount which bears 

2 the same ratio to such foreign high return 

3 amount as— 

4 ‘‘(i) such United States shareholder’s 

5 pro rata amount of the tested income of 

6 such controlled foreign corporation, bears 

7 to 

8 ‘‘(ii) the aggregate amount deter9 mined under subsection (c)(1)(A) with re10 spect to such United States shareholder. 

11 ‘‘(4) COORDINATION WITH SUBPART F TO DENY

12 DOUBLE BENEFIT OF LOSSES.—In the case of any 

13 United States shareholder of any controlled foreign 

14 corporation, the amount included in gross income 

15 under section 951(a)(1)(A) shall be determined by 

16 increasing the earnings and profits of such con17 trolled foreign corporation (solely for purposes of de18 termining such amount) by an amount that bears 

19 the same ratio (not greater than 1) to such share20 holder’s pro rata share of the tested loss of such 

21 controlled foreign corporation as— 

22 ‘‘(A) the aggregate amount determined 

23 under subsection (c)(1)(A) with respect to such 

24 shareholder, bears to 


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1 ‘‘(B) the aggregate amount determined 

2 under subsection (c)(1)(B) with respect to such 

3 shareholder.’’. 

4 (b) FOREIGN TAX CREDIT.— 

5 (1) APPLICATION OF DEEMED PAID FOREIGN

6 TAX CREDIT.—Section 960, as amended by the pre7 ceding provisions of this Act, is amended by redesig8 nating subsections (d) and (e) as subsections (e) and 

9 (f), respectively, and by inserting after subsection (c) 

10 the following new subsection: 

11 ‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY

12 ATTRIBUTABLE TO TESTED INCOME.— 

13 ‘‘(1) IN GENERAL.—For purposes of this sub14 part, if any amount is includible in the gross income 

15 of a domestic corporation under section 951A, such 

16 domestic corporation shall be deemed to have paid 

17 foreign income taxes equal to 80 percent of— 

18 ‘‘(A) such domestic corporation’s foreign 

19 high return percentage, multiplied by 

20 ‘‘(B) the aggregate tested foreign income 

21 taxes paid or accrued by controlled foreign cor22 porations with respect to which such domestic 

23 corporation is a United States shareholder. 

24 ‘‘(2) FOREIGN HIGH RETURN PERCENTAGE.— 

25 For purposes of paragraph (1), the term ‘foreign 


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1 high return percentage’ means, with respect to any 

2 domestic corporation, the ratio (expressed as a per3 centage) of— 

4 ‘‘(A) such corporation’s foreign high return 

5 amount (as defined in section 951A(b)), divided 

6 by 

7 ‘‘(B) the aggregate amount determined 

8 under section 951A(c)(1)(A) with respect to 

9 such corporation. 

10 ‘‘(3) TESTED FOREIGN INCOME TAXES.—For 

11 purposes of paragraph (1), the term ‘tested foreign 

12 income taxes’ means, with respect to any domestic 

13 corporation which is a United States shareholder of 

14 a controlled foreign corporation, the foreign income 

15 taxes paid or accrued by such foreign corporation 

16 which are properly attributable to gross income de17 scribed in section 951A(c)(2)(A)(i).’’. 

18 (2) APPLICATION OF FOREIGN TAX CREDIT

19 LIMITATION.— 

20 (A) SEPARATE BASKET FOR FOREIGN

21 HIGH RETURN AMOUNT.—Section 904(d)(1) is 

22 amended by redesignating subparagraphs (A) 

23 and (B) as subparagraphs (B) and (C), respec24 tively, and by inserting before subparagraph 


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1 (B) (as so redesignated) the following new sub2 paragraph: 

3 ‘‘(A) any amount includible in gross in4 come under section 951A,’’. 

5 (B) NO CARRYOVER OF EXCESS TAXES.— 

6 Section 904(c) is amended by adding at the end 

7 the following: ‘‘This subsection shall not apply 

8 to taxes paid or accrued with respect to 

9 amounts described in subsection (d)(1)(A).’’ 

10 (3) GROSS UP FOR DEEMED PAID FOREIGN TAX

11 CREDIT.—Section 78, as amended by the preceding 

12 provisions of this Act, is amended— 

13 (A) by striking ‘‘any taxable year, an 

14 amount’’ and inserting ‘‘any taxable year— 

15 ‘‘(1) an amount’’, and 

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

17 inserting ‘‘, and 

18 ‘‘(2) an amount equal to the taxes deemed to 

19 be paid by such corporation under section 960(d) for 

20 such taxable year (determined by substituting ‘100 

21 percent’ for ‘80 percent’ in such section) shall be 

22 treated for purposes of this title (other than sections 

23 959, 960, and 961) as an increase in the foreign 

24 high return amount of such domestic corporation 

25 under section 951A for such taxable year.’’. 


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1 (c) CONFORMING AMENDMENTS.— 

2 (1) Section 170(b)(2)(D) is amended by strik3 ing ‘‘computed without regard to’’ and all that fol4 lows and inserting ‘‘computed— 

5 ‘‘(i) without regard to— 

6 ‘‘(I) this section, 

7 ‘‘(II) part VIII (except section 

8 248), 

9 ‘‘(III) any net operating loss 

10 carryback to the taxable year under 

11 section 172, 

12 ‘‘(IV) any capital loss carryback 

13 to the taxable year under section 

14 1212(a)(1), and 

15 ‘‘(ii) by substituting ‘100 percent’ for 

16 ‘50 percent’ in section 951A(a).’’. 

17 (2) Section 246(b)(1) is amended by— 

18 (A) striking ‘‘and without regard to’’ and 

19 inserting ‘‘without regard to’’, and 

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

21 inserting ‘‘, and by substituting ‘100 percent’ 

22 for ‘50 percent’ in section 951A(a).’’. 

23 (3) Section 469(i)(3)(F) is amended by striking 

24 ‘‘determined without regard to’’ and all that follows 

25 and inserting ‘‘determined— 


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1 ‘‘(i) without regard to— 

2 ‘‘(I) any amount includible in 

3 gross income under section 86, 

4 ‘‘(II) the amounts allowable as a 

5 deduction under section 219, and 

6 ‘‘(III) any passive activity loss or 

7 any loss allowable by reason of sub8 section (c)(7), and 

9 ‘‘(ii) by substituting ‘100 percent’ for 

10 ‘50 percent’ in section 951A(a).’’. 

11 (4) Section 856(c)(2) is amended by striking 

12 ‘‘and’’ at the end of subparagraph (H), by adding 

13 ‘‘and’’ at the end of subparagraph (I), and by insert14 ing after subparagraph (I) the following new sub15 paragraph: 

16 ‘‘(J) amounts includible in gross income 

17 under section 951A(a);’’. 

18 (5) Section 856(c)(3)(D) is amended by strik19 ing ‘‘dividends or other distributions on, and gain’’ 

20 and inserting ‘‘dividends, other distributions on, 

21 amounts includible in gross income under section 

22 951A(a) with respect to, and gain’’. 

23 (6) The table of sections for subpart F of part 

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1 serting after the item relating to section 951 the fol2 lowing new item: 

‘‘Sec. 951A. Foreign high return amount included in gross income of United 

States shareholders.’’. 

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

4 this section shall apply to taxable years of foreign corpora5 tions beginning after December 31, 2017, and to taxable 

6 years of United States shareholders in which or with which 

7 such taxable years of foreign corporations end. 

8 SEC. 4302. LIMITATION ON DEDUCTION OF INTEREST BY 

9 DOMESTIC CORPORATIONS WHICH ARE MEM10 BERS OF AN INTERNATIONAL FINANCIAL RE11 PORTING GROUP. 

12 (a) IN GENERAL.—Section 163 is amended by redes13 ignating subsection (n) as subsection (p) and by inserting 

14 after subsection (m) the following new subsection: 

15 ‘‘(n) LIMITATION ON DEDUCTION OF INTEREST BY

16 DOMESTIC CORPORATIONS IN INTERNATIONAL FINAN17 CIAL REPORTING GROUPS.— 

18 ‘‘(1) IN GENERAL.—In the case of any domestic 

19 corporation which is a member of any international 

20 financial reporting group, the deduction under this 

21 chapter for interest paid or accrued during the tax22 able year shall not exceed the sum of— 

23 ‘‘(A) the allowable percentage of 110 per24 cent of the excess (if any) of — 


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1 ‘‘(i) the amount of such interest so 

2 paid or accrued, over 

3 ‘‘(ii) the amount described in subpara4 graph (B), plus 

5 ‘‘(B) the amount of interest includible in 

6 gross income of such corporation for such tax7 able year. 

8 ‘‘(2) INTERNATIONAL FINANCIAL REPORTING

9 GROUP.— 

10 ‘‘(A) For purposes of this subsection, the 

11 term ‘international financial reporting group’ 

12 means, with respect to any reporting year, any 

13 group of entities which— 

14 ‘‘(i) includes— 

15 ‘‘(I) at least one foreign corpora16 tion engaged in a trade or business 

17 within the United States, or 

18 ‘‘(II) at least one domestic cor19 poration and one foreign corporation, 

20 ‘‘(ii) prepares consolidated financial 

21 statements with respect to such year, and 

22 ‘‘(iii) reports in such statements aver23 age annual gross receipts (determined in 

24 the aggregate with respect to all entities 

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1 porting-year period ending with such re2 porting year in excess of $100,000,000. 

3 ‘‘(B) RULES RELATING TO DETERMINA4 TION OF AVERAGE GROSS RECEIPTS.—For pur5 poses of subparagraph (A)(iii), rules similar to 

6 the rules of section 448(c)(3) shall apply. 

7 ‘‘(3) ALLOWABLE PERCENTAGE.—For purposes 

8 of this subsection— 

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

10 percentage’ means, with respect to any domestic 

11 corporation for any taxable year, the ratio (ex12 pressed as a percentage and not greater than 

13 100 percent) of— 

14 ‘‘(i) such corporation’s allocable share 

15 of the international financial reporting 

16 group’s reported net interest expense for 

17 the reporting year of such group which 

18 ends in or with such taxable year of such 

19 corporation, over 

20 ‘‘(ii) such corporation’s reported net 

21 interest expense for such reporting year of 

22 such group. 

23 ‘‘(B) REPORTED NET INTEREST EX24 PENSE.—The term ‘reported net interest ex25 pense’ means— 


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1 ‘‘(i) with respect to any international 

2 financial reporting group for any reporting 

3 year, the excess of— 

4 ‘‘(I) the aggregate amount of in5 terest expense reported in such 

6 group’s consolidated financial state7 ments for such taxable year, over 

8 ‘‘(II) the aggregate amount of in9 terest income reported in such group’s 

10 consolidated financial statements for 

11 such taxable year, and 

12 ‘‘(ii) with respect to any domestic cor13 poration for any reporting year, the excess 

14 of— 

15 ‘‘(I) the amount of interest ex16 pense of such corporation reported in 

17 the books and records of the inter18 national financial reporting group 

19 which are used in preparing such 

20 group’s consolidated financial state21 ments for such taxable year, over 

22 ‘‘(II) the amount of interest in23 come of such corporation reported in 

24 such books and records. 


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1 ‘‘(C) ALLOCABLE SHARE OF REPORTED

2 NET INTEREST EXPENSE.—With respect to any 

3 domestic corporation which is a member of any 

4 international financial reporting group, such 

5 corporation’s allocable share of such group’s re6 ported net interest expense for any reporting 

7 year is the portion of such expense which bears 

8 the same ratio to such expense as— 

9 ‘‘(i) the EBITDA of such corporation 

10 for such reporting year, bears to 

11 ‘‘(ii) the EBITDA of such group for 

12 such reporting year. 

13 ‘‘(D) EBITDA.— 

14 ‘‘(i) IN GENERAL.—The term 

15 ‘EBITDA’ means, with respect to any re16 porting year, earnings before interest, 

17 taxes, depreciation, and amortization— 

18 ‘‘(I) as determined in the inter19 national financial reporting group’s 

20 consolidated financial statements for 

21 such year, or 

22 ‘‘(II) for purposes of subpara23 graph (A)(i), as determined in the 

24 books and records of the international 

25 financial reporting group which are 


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1 used in preparing such statements if 

2 not determined in such statements. 

3 ‘‘(ii) TREATMENT OF DISREGARDED

4 ENTITIES.—The EBITDA of any domestic 

5 corporation shall not fail to include the 

6 EBITDA of any entity which is dis7 regarded for purposes of this chapter. 

8 ‘‘(iii) TREATMENT OF INTRA-GROUP

9 DISTRIBUTIONS.—The EBITDA of any do10 mestic corporation shall be determined 

11 without regard to any distribution received 

12 by such corporation from any other mem13 ber of the international financial reporting 

14 group. 

15 ‘‘(E) SPECIAL RULES FOR NON-POSITIVE

16 EBITDA.— 

17 ‘‘(i) NON-POSITIVE GROUP EBITDA.— 

18 In the case of any international financial 

19 reporting group the EBITDA of which is 

20 zero or less, paragraph (1) shall not apply 

21 to any member of such group the EBITDA 

22 of which is above zero. 

23 ‘‘(ii) NON-POSITIVE ENTITY

24 EBITDA.—In the case of any group mem25 ber the EBITDA of which is zero or less, 


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1 paragraph (1) shall be applied without re2 gard to subparagraph (A) thereof. 

3 ‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 

4 For purposes of this subsection, the term ‘consoli5 dated financial statement’ means any consolidated 

6 financial statement described in paragraph (2)(A)(ii) 

7 if such statement is— 

8 ‘‘(A) a financial statement which is cer9 tified as being prepared in accordance with gen10 erally accepted accounting principles, inter11 national financial reporting standards, or any 

12 other comparable method of accounting identi13 fied by the Secretary, and which is— 

14 ‘‘(i) a 10-K (or successor form), or 

15 annual statement to shareholders, required 

16 to be filed with the United States Securi17 ties and Exchange Commission, 

18 ‘‘(ii) an audited financial statement 

19 which is used for— 

20 ‘‘(I) credit purposes, 

21 ‘‘(II) reporting to shareholders, 

22 partners, or other proprietors, or to 

23 beneficiaries, or 

24 ‘‘(III) any other substantial 

25 nontax purpose, 


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1 but only if there is no statement described 

2 in clause (i), or 

3 ‘‘(iii) filed with any other Federal or 

4 State agency for nontax purposes, but only 

5 if there is no statement described in clause 

6 (i) or (ii), or 

7 ‘‘(B) a financial statement which— 

8 ‘‘(i) is used for a purpose described in 

9 subclause (I), (II), or (III) of subpara10 graph (A)(ii), or 

11 ‘‘(ii) filed with any regulatory or gov12 ernmental body (whether domestic or for13 eign) specified by the Secretary, 

14 but only if there is no statement described in 

15 subparagraph (A). 

16 ‘‘(5) REPORTING YEAR.—For purposes of this 

17 subsection, the term ‘reporting year’ means, with re18 spect to any international financial reporting group, 

19 the year with respect to which the consolidated fi20 nancial statements are prepared. 

21 ‘‘(6) APPLICATION TO CERTAIN ENTITIES.— 

22 ‘‘(A) PARTNERSHIPS.—Except as other23 wise provided by the Secretary in paragraph 

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1 nancial reporting group under rules similar to 

2 the rules of section 163(j)(3). 

3 ‘‘(B) FOREIGN CORPORATIONS ENGAGED

4 IN TRADE OR BUSINESS WITHIN THE UNITED

5 STATES.—Except as otherwise provided by the 

6 Secretary in paragraph (8), any deduction for 

7 interest paid or accrued by a foreign corpora8 tion engaged in a trade or business within the 

9 United States shall be limited in a manner con10 sistent with the principles of this subsection. 

11 ‘‘(C) CONSOLIDATED GROUPS.—For pur12 poses of this subsection, the members of any 

13 group that file (or are required to file) a con14 solidated return with respect to the tax imposed 

15 by chapter 1 for a taxable year shall be treated 

16 as a single corporation. 

17 ‘‘(7) REGULATIONS.—The Secretary may issue 

18 such regulations or other guidance as are necessary 

19 or appropriate to carry out the purposes of this sub20 section.’’. 

21 (b) CARRYFORWARD OF DISALLOWED INTEREST.— 

22 (1) IN GENERAL.—Section 163(o) is amended 

23 to read as follows: 

24 ‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN25 TEREST.—The amount of any interest not allowed as a 


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1 deduction for any taxable year by reason of subsection 

2 (j)(1) or (n)(1) (whichever imposes the lower limitation 

3 with respect to such taxable year) shall be treated as inter4 est (and as business interest for purposes of subsection 

5 (j)(1)) paid or accrued in the succeeding taxable year. In6 terest paid or accrued in any taxable year (determined 

7 without regard to the preceding sentence) shall not be car8 ried past the 5th taxable year following such taxable year, 

9 determined by treating interest as allowed as a deduction 

10 on a first-in, first-out basis.’’. 

11 (2) TREATMENT OF CARRYFORWARD OF DIS12 ALLOWED INTEREST IN CERTAIN CORPORATE ACQUI13 SITIONS.—For rules related to the carryforward of 

14 disallowed interest in certain corporate acquisitions, 

15 see the amendments made by section 3301(c). 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2017. 

19 SEC. 4303. EXCISE TAX ON CERTAIN PAYMENTS FROM DO20 MESTIC CORPORATIONS TO RELATED FOR21 EIGN CORPORATIONS; ELECTION TO TREAT 

22 SUCH PAYMENTS AS EFFECTIVELY CON23 NECTED INCOME. 

24 (a) EXCISE TAX ON CERTAIN AMOUNTS FROM DO25 MESTIC CORPORATIONS TO FOREIGN AFFILIATES.— 


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1 (1) IN GENERAL.—Chapter 36 is amended by 

2 adding at the end the following new subchapter: 

3 ‘‘Subchapter E—Tax on Certain Amounts to 

4 Foreign Affiliates 

‘‘Sec. 4491. Imposition of tax on certain amounts from domestic corporations 

to foreign affiliates. 

5 ‘‘SEC. 4491. IMPOSITION OF TAX ON CERTAIN AMOUNTS 

6 FROM DOMESTIC CORPORATIONS TO FOR7 EIGN AFFILIATES. 

8 ‘‘(a) IN GENERAL.—There is hereby imposed on each 

9 specified amount paid or incurred by a domestic corpora10 tion to a foreign corporation which is a member of the 

11 same international financial reporting group as such do12 mestic corporation a tax equal to the highest rate of tax 

13 in effect under section 11 multiplied by such amount. 

14 ‘‘(b) BY WHOM PAID.—The tax imposed by sub15 section (a) shall be paid by the domestic corporation de16 scribed in such subsection. 

17 ‘‘(c) EXCEPTION FOR EFFECTIVELY CONNECTED IN18 COME.—Subsection (a) shall not apply to so much of any 

19 specified amount as is effectively connected with the con20 duct of a trade or business within the United States if 

21 such amount is subject to tax under chapter 1. In the case 

22 of any amount which is treated as effectively connected 

23 with the conduct of a trade or business within the United 

24 States by reason of section 882(g), the preceding sentence 


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1 shall apply to such amount only if the domestic corpora2 tion provides to the Secretary (at such time and in such 

3 form and manner as the Secretary may provide) a copy 

4 of the election made under section 882(g) by the foreign 

5 corporation referred to in subsection (a). 

6 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—Terms 

7 used in this section that are also used in section 882(g) 

8 shall have the same meaning as when used in such section 

9 and rules similar to the rules of paragraphs (5) and (6) 

10 of such section shall apply for purposes of this section.’’. 

11 (2) DENIAL OF DEDUCTION FOR TAX IM12 POSED.—Section 275(a) is amended by inserting 

13 after paragraph (6) the following new paragraph: 

14 ‘‘(7) Taxes imposed by section 4491.’’. 

15 (3) CLERICAL AMENDMENT.—The table of sub16 chapters for chapter 36 is amended by adding at the 

17 end the following new item: 

‘‘SUBCHAPTER E. TAX ON CERTAIN AMOUNTS TO FOREIGN AFFILIATES.’’. 

18 (b) ELECTION TO TREAT CERTAIN PAYMENTS FROM

19 DOMESTIC CORPORATIONS TO RELATED FOREIGN COR20 PORATIONS AS EFFECTIVELY CONNECTED INCOME.—Sec21 tion 882 is amended by adding at the end the following 

22 new subsection: 

23 ‘‘(g) ELECTION TO TREAT CERTAIN PAYMENTS

24 FROM DOMESTIC CORPORATIONS TO RELATED FOREIGN

25 CORPORATIONS AS EFFECTIVELY CONNECTED INCOME.— 


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

2 amount paid or incurred by a domestic corporation 

3 to a foreign corporation which is a member of the 

4 same international financial reporting group as such 

5 domestic corporation and which has elected to be 

6 subject to the provisions of this subsection— 

7 ‘‘(A) such amount shall be taken into ac8 count (other than for purposes of sections 245, 

9 245A, and 881) in the taxable year of such for10 eign corporation during which such amount is 

11 paid or incurred as if— 

12 ‘‘(i) such foreign corporation were en13 gaged in a trade or business within the 

14 United States, 

15 ‘‘(ii) such foreign corporation had a 

16 permanent establishment in the United 

17 States during the taxable year, and 

18 ‘‘(iii) such payment were effectively 

19 connected with the conduct of a trade or 

20 business within the United States and were 

21 attributable to such permanent establish22 ment, 

23 ‘‘(B) for purposes of subsection (c)(1)(A), 

24 no deduction shall be allowed with respect to 


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1 such amount and such subsection shall be ap2 plied without regard to such amount, and 

3 ‘‘(C) the foreign corporation shall be al4 lowed a deduction (for the taxable year referred 

5 to in subparagraph (A)) equal to the deemed 

6 expenses with respect to such amount. 

7 ‘‘(2) SPECIFIED AMOUNT.—For purposes of 

8 this subsection— 

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

10 amount’ means any amount which is, with re11 spect to the payor, allowable as a deduction or 

12 includible in costs of goods sold, inventory, or 

13 the basis of a depreciable or amortizable asset. 

14 ‘‘(B) EXCEPTIONS.—The term ‘specified 

15 amount’ shall not include— 

16 ‘‘(i) interest, 

17 ‘‘(ii) any amount paid or incurred for 

18 the acquisition of any security described in 

19 section 475(c)(2) (determined without re20 gard to the last sentence thereof) or any 

21 commodity described in section 475(e)(2), 

22 ‘‘(iii) except as provided in subpara23 graph (C), any amount with respect to 

24 which tax is imposed under section 881(a), 

25 and 


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1 ‘‘(iv) in the case of a payor which has 

2 elected to use a services cost method for 

3 purposes of section 482, any amount paid 

4 or incurred for services if such amount is 

5 the total services cost with no markup. 

6 ‘‘(C) AMOUNTS NOT TREATED AS EFFEC7 TIVELY CONNECTED TO EXTENT OF GROSS8 BASIS TAX.—Subparagraph (B)(iii) shall only 

9 apply to so much of any specified amount as 

10 bears the proportion to such amount as— 

11 ‘‘(i) the rate of tax imposed under 

12 section 881(a) with respect to such 

13 amount, bears to 

14 ‘‘(ii) 30 percent. 

15 ‘‘(3) DEEMED EXPENSES.— 

16 ‘‘(A) IN GENERAL.—The deemed expenses 

17 with respect to any specified amount received 

18 by a foreign corporation during any reporting 

19 year is the amount of expenses such that the 

20 net income ratio of such foreign corporation 

21 with respect to such amount (taking into ac22 count only such specified amount and such 

23 deemed expenses) is equal to the net income 

24 ratio of the international financial reporting 

25 group determined for such reporting year with 


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1 respect to the product line to which the speci2 fied amount relates. 

3 ‘‘(B) NET INCOME RATIO.—For purposes 

4 of this paragraph, the term ‘net income ratio’ 

5 means the ratio of— 

6 ‘‘(i) net income determined without 

7 regard to interest income, interest expense, 

8 and income taxes, divided by 

9 ‘‘(ii) revenues. 

10 ‘‘(C) METHOD OF DETERMINATION.— 

11 Amounts described in subparagraph (B) shall 

12 be determined with respect to the international 

13 financial reporting group on the basis of the 

14 consolidated financial statements referred to in 

15 paragraph (4)(A)(i) and the books and records 

16 of the members of the international financial 

17 reporting group which are used in preparing 

18 such statements, taking into account only reve19 nues and expenses of the members of such 

20 group (other than the members of such group 

21 which are (or are treated as) a domestic cor22 poration for purposes of this subsection) derived 

23 from, or incurred with respect to— 

24 ‘‘(i) persons who are not members of 

25 such group, and 


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1 ‘‘(ii) members of such group which 

2 are (or are treated as) a domestic corpora3 tion for purposes of this subsection. 

4 ‘‘(4) INTERNATIONAL FINANCIAL REPORTING

5 GROUP.—For purposes of this subsection— 

6 ‘‘(A) IN GENERAL.—The term ‘inter7 national financial reporting group’ means any 

8 group of entities, with respect to any specified 

9 amount, if such amount is paid or incurred dur10 ing a reporting year of such group with respect 

11 to which— 

12 ‘‘(i) such group prepares consolidated 

13 financial statements (within the meaning 

14 of section 163(n)(4)) with respect to such 

15 year, and 

16 ‘‘(ii) the average annual aggregate 

17 payment amount of such group for the 3- 

18 reporting-year period ending with such re19 porting year exceeds $100,000,000. 

20 ‘‘(B) ANNUAL AGGREGATE PAYMENT

21 AMOUNT.—The term ‘annual aggregate pay22 ment amount’ means, with respect to any re23 porting year of the group referred to in sub24 paragraph (A)(i), the aggregate specified 

25 amounts to which paragraph (1) applies (or 


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1 would apply if such group were an international 

2 financial reporting group). 

3 ‘‘(C) APPLICATION OF CERTAIN RULES.— 

4 Rules similar to the rules of subparagraphs (A), 

5 (B), and (D) of section 448(c)(3) shall apply 

6 for purposes of this paragraph. 

7 ‘‘(5) TREATMENT OF PARTNERSHIPS.—Any 

8 specified amount paid, incurred, or received by a 

9 partnership which is a member of any international 

10 financial reporting group (and any amount treated 

11 as paid, incurred, or received by a partnership under 

12 this paragraph) shall be treated for purposes of this 

13 subsection as amounts paid, incurred, or received, 

14 respectively, by each partner of such partnership in 

15 an amount equal to such partner’s distributive share 

16 of the items of income, gain, deduction, or loss to 

17 which such amounts relate. 

18 ‘‘(6) TREATMENT OF AMOUNTS IN CONNECTION

19 WITH UNITED STATES TRADE OR BUSINESS.—Any 

20 specified amount paid, incurred, or received by a for21 eign corporation in connection with the conduct of a 

22 trade or business within the United States (other 

23 than a trade or business it is deemed to conduct 

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1 curred, or received, respectively, by a domestic cor2 poration. For purposes of the preceding sentence, a 

3 foreign corporation shall be deemed to pay, incur, 

4 and receive amounts with respect to a trade or busi5 ness it conducts within the United States (other 

6 than a trade or business it is deemed to conduct 

7 pursuant to this subsection) to the extent such for8 eign corporation would be treated as paying, incur9 ring, or receiving such amounts from such trade or 

10 business if such trade or business were a domestic 

11 corporation. 

12 ‘‘(7) JOINT AND SEVERAL LIABILITY OF MEM13 BERS OF INTERNAL FINANCIAL REPORTING

14 GROUP.—In the case of any underpayment with re15 spect to any taxable year of a foreign corporation 

16 which is a member of an international financial ac17 counting group, each domestic corporation which is 

18 a member of such group at any time during such 

19 taxable year shall be jointly and severally liable 

20 for— 

21 ‘‘(A) so much of such underpayment as 

22 does not exceed the excess (if any) of such un23 derpayment over the amount of such under24 payment determined without regard to this sub25 section, and 


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1 ‘‘(B) any penalty, addition to tax, or addi2 tional amount attributable to the amount de3 scribed in subparagraph (A). 

4 ‘‘(8) FOREIGN TAX CREDIT ALLOWED.—The 

5 credit allowed under section 906(a) with respect to 

6 amounts taken into account in income under para7 graph (1)(A) shall be limited to 80 percent of the 

8 amount of taxes paid or accrued and determined 

9 without regard to section 906(b)(1). 

10 ‘‘(9) ELECTION.—Any election under paragraph 

11 (1)— 

12 ‘‘(A) shall be made at such time and in 

13 such form and manner as the Secretary may 

14 provide, and 

15 ‘‘(B) shall apply for the taxable year for 

16 which made and all subsequent taxable years 

17 unless revoked with the consent of the Sec18 retary. 

19 ‘‘(10) REGULATIONS.—The Secretary may issue 

20 such regulations or other guidance as are necessary 

21 or appropriate to carry out the purposes of this sub22 section, including regulations or other guidance— 

23 ‘‘(A) to provide for the proper determina24 tion of product lines, and 


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1 ‘‘(B) to prevent the avoidance of the pur2 poses of this subsection through the use of con3 duit transactions or by other means.’’. 

4 (c) REPORTING REQUIREMENTS.— 

5 (1) REPORTING BY FOREIGN CORPORATION.— 

6 Section 6038C(b) is amended to read as follows: 

7 ‘‘(b) REQUIRED INFORMATION.— 

8 ‘‘(1) IN GENERAL.—The information described 

9 in this subsection is— 

10 ‘‘(A) the information described in section 

11 6038A(b), and 

12 ‘‘(B) such other information as the Sec13 retary may prescribe by regulations relating to 

14 any item not directly connected with a trans15 action for which information is required under 

16 subparagraph (A). 

17 ‘‘(2) CERTAIN PAYMENTS FROM RELATED DO18 MESTIC CORPORATIONS.— 

19 ‘‘(A) IN GENERAL.—In the case of any re20 porting corporation that receives during the 

21 taxable year any amount to which section 

22 882(g)(1) applies, the information described in 

23 this subsection shall include, with respect to 

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1 porting group from which any such amount is 

2 received— 

3 ‘‘(i) the name and taxpayer identifica4 tion number of such member, 

5 ‘‘(ii) the aggregate amounts received 

6 from such member, 

7 ‘‘(iii) the product lines to which such 

8 amounts relate, the aggregate amounts re9 lating to each such product line, and the 

10 net income ratio for each such product line 

11 (determined under section 882(g)(3)(B) 

12 with respect to the international financial 

13 reporting group), and 

14 ‘‘(iv) a summary of any changes in fi15 nancial accounting methods that affect the 

16 computation of any net income ratio de17 scribed in clause (iii). 

18 ‘‘(B) DEFINITIONS AND SPECIAL RULES.— 

19 Terms used in this paragraph that are also 

20 used in section 882(g) shall have the same 

21 meaning as when used in such section and rules 

22 similar to the rules of paragraphs (5) and (6) 

23 of such section shall apply for purposes of this 

24 paragraph.’’. 


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1 (2) REPORTING BY DOMESTIC GROUP MEM2 BERS.— 

3 (A) IN GENERAL .—Subpart A of part III 

4 of subchapter A of chapter 61 is amended by 

5 inserting after section 6038D the following new 

6 section: 

7 ‘‘SEC. 6038E. INFORMATION WITH RESPECT TO CERTAIN 

8 PAYMENTS FROM DOMESTIC CORPORATIONS 

9 TO RELATED FOREIGN CORPORATIONS. 

10 ‘‘(a) IN GENERAL.—In the case of any domestic cor11 poration which pays or incurs any amount to which section 

12 882(g)(1) applies, such person shall— 

13 ‘‘(1) make a return according to the forms and 

14 regulations prescribed the Secretary, setting forth 

15 the information described in subsection (b), and 

16 ‘‘(2) maintain (at the location, in the manner, 

17 and to the extent prescribed in regulations) such 

18 records as may be appropriate to determine liability 

19 for tax pursuant to paragraphs (1) and (7) of sec20 tion 882(g). 

21 ‘‘(b) REQUIRED INFORMATION.—The information de22 scribed in this subsection is— 

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1 cial reporting group in which such domestic corpora2 tion is a member, and 

3 ‘‘(2) with respect to any person who receives an 

4 amount described in subsection (a) from such do5 mestic corporation— 

6 ‘‘(A) the name and taxpayer identification 

7 number of such person, 

8 ‘‘(B) the aggregate amounts received by 

9 such person, 

10 ‘‘(C) the product lines to which such 

11 amounts relate, the aggregate amounts relating 

12 to each such product line, and the net income 

13 ratio for each such product line (determined 

14 under section 882(g)(3)(B) with respect to the 

15 international financial reporting group), and 

16 ‘‘(D) a summary of any changes in finan17 cial accounting methods that affect the com18 putation of any net income ratios described in 

19 subparagraph (C). 

20 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—Terms 

21 used in this paragraph that are also used in section 882(g) 

22 shall have the same meaning as when used in such section 

23 and rules similar to the rules of paragraphs (5) and (6) 

24 of such section shall apply for purposes of this para25 graph.’’. 


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1 (B) CLERICAL AMENDMENT.—The table of 

2 sections for subpart A of part III of subchapter 

3 A of chapter 61 is amended by inserting after 

4 the item relating to section 6038D the following 

5 new item: 

‘‘Sec. 6038E. Information with respect to certain payments from domestic corporations to related foreign corporations.’’. 

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

7 this section shall apply to amounts paid or incurred after 

8 December 31, 2018. 

9 Subtitle E—Provisions Related to 

10 Possessions of the United States 

11 SEC. 4401. EXTENSION OF DEDUCTION ALLOWABLE WITH 

12 RESPECT TO INCOME ATTRIBUTABLE TO DO13 MESTIC PRODUCTION ACTIVITIES IN PUERTO 

14 RICO. 

15 (a) IN GENERAL.—Section 199(d)(8)(C), prior to its 

16 repeal by this Act, is amended— 

17 (1) by striking ‘‘first 11 taxable years’’ and in18 serting ‘‘first 12 taxable years’’, and 

19 (2) by striking ‘‘January 1, 2017’’ and insert20 ing ‘‘January 1, 2018’’. 

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2016. 


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1 SEC. 4402. EXTENSION OF TEMPORARY INCREASE IN LIMIT 

2 ON COVER OVER OF RUM EXCISE TAXES TO 

3 PUERTO RICO AND THE VIRGIN ISLANDS. 

4 (a) IN GENERAL.—Section 7652(f)(1) is amended by 

5 striking ‘‘January 1, 2017’’ and inserting ‘‘January 1, 

6 2023’’. 

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

8 this section shall apply to distilled spirits brought into the 

9 United States after December 31, 2016. 

10 SEC. 4403. EXTENSION OF AMERICAN SAMOA ECONOMIC 

11 DEVELOPMENT CREDIT. 

12 (a) IN GENERAL.—Section 119(d) of division A of 

13 the Tax Relief and Health Care Act of 2006 is amended— 

14 (1) by striking ‘‘January 1, 2017’’ each place 

15 it appears and inserting ‘‘January 1, 2023’’, 

16 (2) by striking ‘‘first 11 taxable years’’ in para17 graph (1) and inserting ‘‘first 17 taxable years’’, 

18 and 

19 (3) by striking ‘‘first 5 taxable years’’ in para20 graph (2) and inserting ‘‘first 11 taxable years’’. 

21 (b) TREATMENT OF CERTAIN REFERENCES.—Sec22 tion 119(e) of division A of the Tax Relief and Health 

23 Care Act of 2006 is amended by adding at the end the 

24 following: ‘‘References in this subsection to section 199 

25 of the Internal Revenue Code of 1986 shall be treated as 


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1 references to such section as in effect before its repeal by 

2 the Tax Cuts and Jobs Act.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2016. 

6 Subtitle F—Other International 

7 Reforms 

8 SEC. 4501. RESTRICTION ON INSURANCE BUSINESS EXCEP9 TION TO PASSIVE FOREIGN INVESTMENT 

10 COMPANY RULES. 

11 (a) IN GENERAL.—Section 1297(b)(2)(B) is amend12 ed to read as follows: 

13 ‘‘(B) derived in the active conduct of an in14 surance business by a qualifying insurance cor15 poration (as defined in subsection (f)),’’. 

16 (b) QUALIFYING INSURANCE CORPORATION DE17 FINED.—Section 1297 is amended by adding at the end 

18 the following new subsection: 

19 ‘‘(f) QUALIFYING INSURANCE CORPORATION.—For 

20 purposes of subsection (b)(2)(B)— 

21 ‘‘(1) IN GENERAL.—The term ‘qualifying insur22 ance corporation’ means, with respect to any taxable 

23 year, a foreign corporation— 


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1 ‘‘(A) which would be subject to tax under 

2 subchapter L if such corporation were a domes3 tic corporation, and 

4 ‘‘(B) the applicable insurance liabilities of 

5 which constitute more than 25 percent of its 

6 total assets, determined on the basis of such li7 abilities and assets as reported on the corpora8 tion’s applicable financial statement for the last 

9 year ending with or within the taxable year. 

10 ‘‘(2) ALTERNATIVE FACTS AND CIR11 CUMSTANCES TEST FOR CERTAIN CORPORATIONS.— 

12 If a corporation fails to qualify as a qualified insur13 ance corporation under paragraph (1) solely because 

14 the percentage determined under paragraph (1)(B) 

15 is 25 percent or less, a United States person that 

16 owns stock in such corporation may elect to treat 

17 such stock as stock of a qualifying insurance cor18 poration if— 

19 ‘‘(A) the percentage so determined for the 

20 corporation is at least 10 percent, and 

21 ‘‘(B) under regulations provided by the 

22 Secretary, based on the applicable facts and cir23 cumstances— 

24 ‘‘(i) the corporation is predominantly 

25 engaged in an insurance business, and 


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1 ‘‘(ii) such failure is due solely to run2 off-related or rating-related circumstances 

3 involving such insurance business. 

4 ‘‘(3) APPLICABLE INSURANCE LIABILITIES.— 

5 For purposes of this subsection— 

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

7 insurance liabilities’ means, with respect to any 

8 life or property and casualty insurance busi9 ness— 

10 ‘‘(i) loss and loss adjustment ex11 penses, and 

12 ‘‘(ii) reserves (other than deficiency, 

13 contingency, or unearned premium re14 serves) for life and health insurance risks 

15 and life and health insurance claims with 

16 respect to contracts providing coverage for 

17 mortality or morbidity risks. 

18 ‘‘(B) LIMITATIONS ON AMOUNT OF LIABIL19 ITIES.—Any amount determined under clause 

20 (i) or (ii) of subparagraph (A) shall not exceed 

21 the lesser of such amount— 

22 ‘‘(i) as reported to the applicable in23 surance regulatory body in the applicable 

24 financial statement described in paragraph 


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1 (4)(A) (or, if less, the amount required by 

2 applicable law or regulation), or 

3 ‘‘(ii) as determined under regulations 

4 prescribed by the Secretary. 

5 ‘‘(4) OTHER DEFINITIONS AND RULES.—For 

6 purposes of this subsection— 

7 ‘‘(A) APPLICABLE FINANCIAL STATE8 MENT.—The term ‘applicable financial state9 ment’ means a statement for financial reporting 

10 purposes which— 

11 ‘‘(i) is made on the basis of generally 

12 accepted accounting principles, 

13 ‘‘(ii) is made on the basis of inter14 national financial reporting standards, but 

15 only if there is no statement that meets 

16 the requirement of clause (i), or 

17 ‘‘(iii) except as otherwise provided by 

18 the Secretary in regulations, is the annual 

19 statement which is required to be filed 

20 with the applicable insurance regulatory 

21 body, but only if there is no statement 

22 which meets the requirements of clause (i) 

23 or (ii). 

24 ‘‘(B) APPLICABLE INSURANCE REGU25 LATORY BODY.—The term ‘applicable insurance 


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1 regulatory body’ means, with respect to any in2 surance business, the entity established by law 

3 to license, authorize, or regulate such business 

4 and to which the statement described in sub5 paragraph (A) is provided.’’. 

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

7 this section shall apply to taxable years beginning after 

8 December 31, 2017. 

9 TITLE V—EXEMPT 

10 ORGANIZATIONS 

11 Subtitle A—Unrelated Business 

12 Income Tax 

13 SEC. 5001. CLARIFICATION OF UNRELATED BUSINESS IN14 COME TAX TREATMENT OF ENTITIES TREAT15 ED AS EXEMPT FROM TAXATION UNDER SEC16 TION 501(a). 

17 (a) IN GENERAL.—Section 511 is amended by adding 

18 at the end the following new subsection: 

19 ‘‘(d) ORGANIZATIONS AND TRUSTS EXEMPT FROM

20 TAXATION NOT SOLELY BY REASON OF SECTION

21 501(a).—For purposes of subsections (a)(2) and (b)(2), 

22 an organization or trust shall not fail to be treated as ex23 empt from taxation under this subtitle by reason of section 

24 501(a) solely because such organization is also so exempt, 


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1 or excludes amounts from gross income, by reason of any 

2 other provision of this title.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2017. 

6 SEC. 5002. EXCLUSION OF RESEARCH INCOME LIMITED TO 

7 PUBLICLY AVAILABLE RESEARCH. 

8 (a) IN GENERAL.—Section 512(b)(9) is amended by 

9 striking ‘‘from research’’ and inserting ‘‘from such re10 search’’. 

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

12 this section shall apply to taxable years beginning after 

13 December 31, 2017. 

14 Subtitle B—Excise Taxes 

15 SEC. 5101. SIMPLIFICATION OF EXCISE TAX ON PRIVATE 

16 FOUNDATION INVESTMENT INCOME. 

17 (a) RATE REDUCTION.—Section 4940(a) is amended 

18 by striking ‘‘2 percent’’ and inserting ‘‘1.4 percent’’. 

19 (b) REPEAL OF SPECIAL RULES FOR CERTAIN PRI20 VATE FOUNDATIONS.—Section 4940 is amended by strik21 ing subsection (e). 

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

23 this section shall apply to taxable years beginning after 

24 December 31, 2017. 


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1 SEC. 5102. PRIVATE OPERATING FOUNDATION REQUIRE2 MENTS RELATING TO OPERATION OF ART 

3 MUSEUM. 

4 (a) IN GENERAL.—Section 4942(j) is amended by 

5 adding at the end the following new paragraph: 

6 ‘‘(6) ORGANIZATION OPERATING ART MU7 SEUM.—For purposes of this section, the term ‘oper8 ating foundation’ shall not include an organization 

9 which operates an art museum as a substantial ac10 tivity unless such museum is open during normal 

11 business hours to the public for at least 1,000 hours 

12 during the taxable year.’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2017. 

16 SEC. 5103. EXCISE TAX BASED ON INVESTMENT INCOME OF 

17 PRIVATE COLLEGES AND UNIVERSITIES. 

18 (a) IN GENERAL.—Chapter 42 is amended by adding 

19 at the end the following new subchapter: 

20 ‘‘Subchapter H—Excise Tax Based on Invest21 ment Income of Private Colleges and Uni22 versities 

‘‘Sec. 4969. Excise tax based on investment income of private colleges and universities. 


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1 ‘‘SEC. 4969. EXCISE TAX BASED ON INVESTMENT INCOME 

2 OF PRIVATE COLLEGES AND UNIVERSITIES. 

3 ‘‘(a) TAX IMPOSED.—There is hereby imposed on 

4 each applicable educational institution for the taxable year 

5 a tax equal to 1.4 percent of the net investment income 

6 of such institution for the taxable year. 

7 ‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For 

8 purposes of this subchapter— 

9 ‘‘(1) IN GENERAL.—The term ‘applicable edu10 cational institution’ means an eligible educational in11 stitution (as defined in section 25A(e)(3))— 

12 ‘‘(A) which has at least 500 students dur13 ing the preceding taxable year, 

14 ‘‘(B) which is not described in the first 

15 sentence of section 511(a)(2)(B), and 

16 ‘‘(C) the aggregate fair market value of 

17 the assets of which at the end of the preceding 

18 taxable year (other than those assets which are 

19 used directly in carrying out the institution’s 

20 exempt purpose) is at least $250,000 per stu21 dent of the institution. 

22 ‘‘(2) STUDENTS.—For purposes of paragraph 

23 (1), the number of students of an institution shall 

24 be based on the daily average number of full-time 

25 students attending such institution (with part-time 


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1 students taken into account on a full-time student 

2 equivalent basis). 

3 ‘‘(c) NET INVESTMENT INCOME.—For purposes of 

4 this section, net investment income shall be determined 

5 under rules similar to the rules of section 4940(c). 

6 ‘‘(d) ASSETS AND NET INVESTMENT INCOME OF RE7 LATED ORGANIZATIONS.— 

8 ‘‘(1) IN GENERAL.—For purposes of sub9 sections (b)(1)(C) and (c), the assets and net invest10 ment income of any related organization shall be 

11 treated as the assets and net investment income of 

12 the eligible educational institution. 

13 ‘‘(2) RELATED ORGANIZATION.—For purposes 

14 of this subsection, the term ‘related organization’ 

15 means, with respect to an eligible educational insti16 tution, any organization which— 

17 ‘‘(A) controls, or is controlled by, such in18 stitution, 

19 ‘‘(B) is controlled by one or more persons 

20 that control such institution, or 

21 ‘‘(C) is a supported organization (as de22 fined in section 509(f)(3)), or an organization 

23 described in section 509(a)(3), during the tax24 able year with respect to such institution.’’. 


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1 (b) CLERICAL AMENDMENT.—The table of sub2 chapters for chapter 42 is amended by adding at the end 

3 the following new item: 

‘‘SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE

COLLEGES AND UNIVERSITIES’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2017. 

7 SEC. 5104. EXCEPTION FROM PRIVATE FOUNDATION EX8 CESS BUSINESS HOLDING TAX FOR INDE9 PENDENTLY-OPERATED PHILANTHROPIC 

10 BUSINESS HOLDINGS. 

11 (a) IN GENERAL.—Section 4943 is amended by add12 ing at the end the following new subsection: 

13 ‘‘(g) EXCEPTION FOR CERTAIN HOLDINGS LIMITED

14 TO INDEPENDENTLY-OPERATED PHILANTHROPIC BUSI15 NESS.— 

16 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

17 apply with respect to the holdings of a private foun18 dation in any business enterprise which for the tax19 able year meets— 

20 ‘‘(A) the ownership requirements of para21 graph (2), 

22 ‘‘(B) the all profits to charity distribution 

23 requirement of paragraph (3), and 


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1 ‘‘(C) the independent operation require2 ments of paragraph (4). 

3 ‘‘(2) OWNERSHIP.—The ownership require4 ments of this paragraph are met if— 

5 ‘‘(A) 100 percent of the voting stock in the 

6 business enterprise is held by the private foun7 dation at all times during the taxable year, and 

8 ‘‘(B) all the private foundation’s ownership 

9 interests in the business enterprise were ac10 quired not by purchase. 

11 ‘‘(3) ALL PROFITS TO CHARITY.— 

12 ‘‘(A) IN GENERAL.—The all profits to 

13 charity distribution requirement of this para14 graph is met if the business enterprise, not 

15 later than 120 days after the close of the tax16 able year, distributes an amount equal to its net 

17 operating income for such taxable year to the 

18 private foundation. 

19 ‘‘(B) NET OPERATING INCOME.—For pur20 poses of this paragraph, the net operating in21 come of any business enterprise for any taxable 

22 year is an amount equal to the gross income of 

23 the business enterprise for the taxable year, re24 duced by the sum of— 


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1 ‘‘(i) the deductions allowed by chapter 

2 1 for the taxable year which are directly 

3 connected with the production of such in4 come, 

5 ‘‘(ii) the tax imposed by chapter 1 on 

6 the business enterprise for the taxable 

7 year, and 

8 ‘‘(iii) an amount for a reasonable re9 serve for working capital and other busi10 ness needs of the business enterprise. 

11 ‘‘(4) INDEPENDENT OPERATION.—The inde12 pendent operation requirements of this paragraph 

13 are met if, at all times during the taxable year— 

14 ‘‘(A) no substantial contributor (as defined 

15 in section 4958(c)(3)(C)) to the private founda16 tion, or family member of such a contributor 

17 (determined under section 4958(f)(4)) is a di18 rector, officer, trustee, manager, employee, or 

19 contractor of the business enterprise (or an in20 dividual having powers or responsibilities simi21 lar to any of the foregoing), 

22 ‘‘(B) at least a majority of the board of di23 rectors of the private foundation are not— 

24 ‘‘(i) also directors or officers of the 

25 business enterprise, or 


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1 ‘‘(ii) members of the family (deter2 mined under section 4958(f)(4)) of a sub3 stantial contributor (as defined in section 

4 4958(c)(3)(C)) to the private foundation, 

5 and 

6 ‘‘(C) there is no loan outstanding from the 

7 business enterprise to a substantial contributor 

8 (as so defined) to the private foundation or a 

9 family member of such contributor (as so deter10 mined). 

11 ‘‘(5) CERTAIN DEEMED PRIVATE FOUNDATIONS

12 EXCLUDED.—This subsection shall not apply to— 

13 ‘‘(A) any fund or organization treated as a 

14 private foundation for purposes of this section 

15 by reason of subsection (e) or (f), 

16 ‘‘(B) any trust described in section 

17 4947(a)(1) (relating to charitable trusts), and 

18 ‘‘(C) any trust described in section 

19 4947(a)(2) (relating to split-interest trusts).’’. 

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2017. 


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1 Subtitle C—Requirements for 

2 Organizations Exempt From Tax 

3 SEC. 5201. 501(c)(3) ORGANIZATIONS PERMITTED TO MAKE 

4 STATEMENTS RELATING TO POLITICAL CAM5 PAIGN IN ORDINARY COURSE OF ACTIVITIES. 

6 (a) IN GENERAL.—Section 501 is amended by adding 

7 at the end the following new subsection: 

8 ‘‘(s) SPECIAL RULE RELATING TO POLITICAL CAM9 PAIGN STATEMENTS OF ORGANIZATIONS DESCRIBED IN

10 SUBSECTION (c)(3).— 

11 ‘‘(1) IN GENERAL.—For purposes of subsection 

12 (c)(3) and sections 170(c)(2), 2055, 2106, 2522, 

13 and 4955, an organization shall not fail to be treat14 ed as organized and operated exclusively for a pur15 pose described in subsection (c)(3), nor shall it be 

16 deemed to have participated in, or intervened in any 

17 political campaign on behalf of (or in opposition to) 

18 any candidate for public office, solely because of the 

19 content of any statement which— 

20 ‘‘(A) is made in the ordinary course of the 

21 organization’s regular and customary activities 

22 in carrying out its exempt purpose, and 

23 ‘‘(B) results in the organization incurring 

24 not more than de minimis incremental expenses. 


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1 ‘‘(2) TERMINATION.—Paragraph (1) shall not 

2 apply to taxable years beginning after December 31, 

3 2023.’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2018. 

7 SEC. 5202. ADDITIONAL REPORTING REQUIREMENTS FOR 

8 DONOR ADVISED FUND SPONSORING ORGA9 NIZATIONS. 

10 (a) IN GENERAL.—Section 6033(k) is amended by 

11 striking ‘‘and’’ at the end of paragraph (2), by striking 

12 the period at the end of paragraph (3), and by adding 

13 at the end the following new paragraphs: 

14 ‘‘(4) indicate the average amount of grants 

15 made from such funds during such taxable year (ex16 pressed as a percentage of the value of assets held 

17 in such funds at the beginning of such taxable year), 

18 and 

19 ‘‘(5) indicate whether the organization has a 

20 policy with respect to donor advised funds (as so de21 fined) for frequency and minimum level of distribu22 tions. 

23 Such organization shall include with such return a copy 

24 of any policy described in paragraph (5).’’. 


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

2 this section shall apply for returns filed for taxable years 

3 beginning after December 31, 2017. 

Passed the House of Representatives November 16, 

2017. 

Attest: KAREN L. HAAS, 

Clerk. 


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Calendar No. 266 

115TH CONGRESS 

1ST SESSION H. R. 1 

AN ACT 

To provide for reconciliation pursuant to titles II 

for fiscal year 2018. and V of the concurrent resolution on the budget 

NOVEMBER 28, 2017 

Read the second time and placed on the calendar 


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