2146 
(e) RULES FOR ALLOCATION OF CERTAIN DEDUC-
TIONS TO FOREIGN SOURCE GLOBAL INTANGIBLE LOW- 
TAXED INCOME FOR PURPOSES OF FOREIGN TAX CREDIT 
LIMITATION.—Section 904(b), as amended by the pre-
ceding provisions of this Act, is amended by adding at the 
end the following new paragraph: 
‘‘(4) DEDUCTIONS TREATED AS ALLOCABLE TO 
FOREIGN SOURCE GLOBAL INTANGIBLE LOW-TAXED 
INCOME.—In the case of a domestic corporation and 
solely for purposes of the application of subsection 
(a) with respect to amounts described in subsection 
(d)(1)(A), the taxpayer’s taxable income from 
sources without the United States shall be deter-
mined by— 
‘‘(A) allocating any deduction allowed 
under section 250 to such income, and 
‘‘(B) by treating any expense of such do-
mestic corporation as not allocable to such in-
come.’’. 
(f) TREATMENT
OF
CERTAIN
ASSET
DISPOSI-
TIONS.—Section 904(b), as amended by the preceding pro-
visions of this Act, is amended by adding at the end the 
following new paragraph: 
‘‘(5) TREATMENT OF CERTAIN ASSET DISPOSI-
TIONS.— 
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‘‘(A) IN GENERAL.—Except as otherwise 
provided by the Secretary, in the case of any 
covered asset disposition, the principles of sec-
tion 338(h)(16) shall apply in determining the 
source and character of any item for purposes 
of this part. 
‘‘(B) COVERED ASSET DISPOSITION.—For 
purposes of this paragraph, the term ‘covered 
asset 
disposition’ 
means 
any 
transaction 
which— 
‘‘(i) is treated as a disposition of as-
sets for purposes of subchapter N of this 
chapter, and 
‘‘(ii) is treated as a disposition of 
stock of a corporation (or is disregarded) 
for purposes of the tax laws of the relevant 
foreign country or possession of the United 
States. 
‘‘(C) REGULATIONS.—The Secretary shall 
issue such regulations or other guidance as is 
necessary or appropriate to carry out, or to the 
prevent the avoidance of, the purposes of this 
paragraph.’’. 
(g) REDETERMINATION OF FOREIGN TAXES AND RE-
LATED CLAIMS.— 
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(1) IN GENERAL.—Section 905(c)(1) is amend-
ed by striking ‘‘or’’ at the end of subparagraph (B) 
and by inserting after subparagraph (C) the fol-
lowing new subparagraphs: 
‘‘(D) the taxpayer makes a timely change 
in its choice to claim a credit or deduction for 
taxes paid or accrued, or 
‘‘(E) there is any other change in the 
amount, or treatment, of taxes, which affects 
the taxpayer’s tax liability under this chapter.’’. 
(2) MODIFICATION
TO
TIME
FOR
CLAIMING 
CREDIT OR DEDUCTION.—Section 901(a) is amended 
by striking the second sentence and inserting the fol-
lowing: ‘‘The choice to claim a credit for such 
amounts may be made at any time before the expira-
tion 
of 
the 
period 
prescribed 
by 
section 
6511(d)(3)(A), and the choice to claim a deduction 
in lieu of a credit may be made at any time before 
the expiration of the period prescribed by section 
6511(a), for making a claim for refund or credit of 
the tax imposed by this chapter for such taxable 
year, or such later period prescribed by section 
6511(c) if the period is extended by agreement.’’. 
(3) MODIFICATION TO SPECIAL PERIOD OF LIM-
ITATION.—Section 6511(d)(3)(A) is amended— 
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(A) by inserting ‘‘change in the liability 
for’’ before ‘‘any taxes paid or accrued’’, 
(B) by striking ‘‘actually paid’’ and insert-
ing ‘‘paid (or deemed paid under section 960)’’, 
and 
(C) by inserting ‘‘CHANGE IN THE LIABIL-
ITY FOR’’ before ‘‘FOREIGN TAXES’’ in the head-
ing thereof. 
(h) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2021. 
(2) MODIFICATION
OF
FOREIGN
TAX
CREDIT 
CARRYBACK AND CARRYFORWARD.—Except as other-
wise provided in paragraph (3), the amendments 
made by subsection (c) shall apply to taxes paid or 
accrued in taxable years beginning after December 
31, 2021. 
(3) CERTAIN
MODIFICATIONS.—The amend-
ment made by subsection (c)(4)(B) shall apply to 
taxable years of foreign corporations beginning after 
December 31, 2017, and to taxable years of United 
States shareholders in which or with which such tax-
able years of foreign corporations end. 
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(4) REDETERMINATION
OF
FOREIGN
TAXES 
AND RELATED CLAIMS.—The amendments made by 
subsection (g) shall take effect on the date which is 
60 days after the date of the enactment of this Act. 
(i) REGULATIONS.—The Secretary shall prescribe 
rules providing for the application of subsection (e) of sec-
tion 904 of the Internal Revenue Code of 1986, as added 
by this section, to any amounts carried over under sub-
section (c) of such section from a taxable year with respect 
to which such subsection (e) did not apply to a taxable 
year with respect to which such subsection (e) does apply. 
SEC. 138125. FOREIGN OIL AND GAS EXTRACTION INCOME 
AND FOREIGN OIL RELATED INCOME TO IN-
CLUDE OIL SHALE AND TAR SANDS. 
(a) IN GENERAL.—Paragraphs (1)(A) and (2)(A) of 
section 907(c) are each amended by inserting ‘‘(or oil 
shale or tar sands)’’ after ‘‘oil or gas wells’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2021, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
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SEC. 138126. MODIFICATIONS TO INCLUSION OF GLOBAL IN-
TANGIBLE LOW-TAXED INCOME. 
(a) COUNTRY-BY-COUNTRY APPLICATION
OF SEC-
TION BASED ON CFC TAXABLE UNITS.—Section 951A is 
amended by adding at the end the following new sub-
section: 
‘‘(g) COUNTRY-BY-COUNTRY APPLICATION OF SEC-
TION BASED ON CFC TAXABLE UNITS.— 
‘‘(1) IN GENERAL.—If any CFC taxable unit of 
a United States shareholder is a tax resident of a 
country which is different from the country with re-
spect to which any other CFC taxable unit of such 
United States shareholder is a tax resident— 
‘‘(A) such shareholder’s global intangible 
low-taxed income for purposes of subsection (a) 
shall be the sum of the amounts of global intan-
gible low-taxed income determined separately 
with respect to each country with respect to 
which any CFC taxable unit of such share-
holder is a tax resident, and 
‘‘(B) for purposes of determining such sep-
arate amounts of global intangible low-taxed in-
come— 
‘‘(i) any reference in subsection (b), 
(c), or (d) to a controlled foreign corpora-
tion of such shareholder shall be treated as 
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reference to a CFC taxable unit of such 
shareholder, and 
‘‘(ii) net CFC tested income, net 
deemed tangible income return, qualified 
business asset investment, interest expense 
described in subsection (b)(2)(B), and such 
other items and amounts as the Secretary 
may provide, shall be determined sepa-
rately with respect to each such country by 
determining such amounts with respect to 
each CFC taxable unit of such shareholder 
which is a tax resident of such country. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) CFC 
TAXABLE
UNIT.—The term 
‘CFC taxable unit’ means any taxable unit de-
scribed clause (ii), (iii), or (iv) of section 
904(e)(2)(B) (determined without regard to the 
references to the taxpayer in clauses (iii) and 
(iv) of such section). 
‘‘(B) APPLICATION
OF
OTHER
DEFINI-
TIONS.—Terms used in this subsection which 
are also used in section 904(e) shall have the 
same meaning as when used in such section. 
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‘‘(3) SPECIAL
RULES.—For purposes of this 
subsection— 
‘‘(A) APPLICATION OF CERTAIN RULES.— 
Except as otherwise provided by the Secretary, 
rules similar to the rules of section 904(e) shall 
apply. 
‘‘(B) ALLOCATION OF GLOBAL INTANGIBLE 
LOW-TAXED INCOME TO CONTROLLED FOREIGN 
CORPORATIONS.—Except as otherwise provided 
by the Secretary, subsection (f)(2) shall be ap-
plied separately with respect to each CFC tax-
able unit.’’. 
(b) REGULATORY AUTHORITY.— 
(1) IN GENERAL.—Section 951A, as amended 
by subsection (a), is amended by adding at the end 
the following new subsection: 
‘‘(h) REGULATIONS.—The Secretary shall issue such 
regulations or other guidance as may be necessary or ap-
propriate to carry out, or prevent the avoidance of, the 
purposes of this section, including regulations or guidance 
which provide for— 
‘‘(1) the treatment of property if such property 
is transferred, or held, temporarily, 
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‘‘(2) the treatment of property if the avoidance 
of the purposes of this section is a factor in the 
transfer or holding of such property, and 
‘‘(3) appropriate adjustments to the basis of 
stock and other ownership interests, and to earnings 
and profits, to reflect tested losses.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
951A(d) is amended by striking paragraph (4). 
(3) ADDITIONAL
REGULATORY
AUTHORITY.— 
Section 951A(h), as added by paragraph (1), is 
amended by striking ‘‘and’’ at the end of paragraph 
(2), by striking the period at the end of paragraph 
(3) and inserting a comma, and by adding at the 
end the following new paragraphs: 
‘‘(4) rules similar to the rules provided under 
the regulations or guidance issued under section 
904(e)(5), 
‘‘(5) appropriate basis adjustments, and 
‘‘(6) appropriate adjustment to made, and ap-
propriate tax attributes and records to be main-
tained, separately with respect to CFC taxable 
units.’’. 
(c) CARRYOVER OF NET CFC TESTED LOSS.— 
(1) IN GENERAL.—Section 951A(c) is amended 
by adding at the end the following new paragraph: 
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‘‘(3) CARRYOVER OF NET CFC TESTED LOSS.— 
‘‘(A) IN
GENERAL.—If the amount de-
scribed in paragraph (1)(B) with respect to any 
United States shareholder for any taxable year 
of such United States shareholder (determined 
after the application of this paragraph) exceeds 
the amount described in paragraph (1)(A) with 
respect to such shareholder of such taxable 
year, the amount otherwise described in para-
graph (1)(B) with respect to such shareholder 
for the succeeding taxable year shall be in-
creased by the amount of such excess. 
‘‘(B) PROPER
ADJUSTMENT
IN
ALLOCA-
TIONS OF GLOBAL INTANGIBLE LOW-TAXED IN-
COME
TO
CONTROLLED
FOREIGN
CORPORA-
TIONS.—Proper adjustments shall be made in 
the application of subsection (f)(2)(B) to take 
into account any decrease in global intangible 
low-taxed income by reason of the application of 
subparagraph (A).’’. 
(2) COORDINATION
WITH
COUNTRY-BY-COUN-
TRY
APPLICATION.—Section 951A(g)(1)(B)(ii), as 
added by subsection (a), is amended by inserting 
‘‘any 
increase 
determined 
under 
subsection 
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(c)(3)(A),’’ after ‘‘interest expense described in sub-
section (b)(2)(B),’’. 
(3) APPLICATION OF RULES WITH RESPECT TO 
OWNERSHIP CHANGES.—Section 382(d) is amended 
by adding at the end the following new paragraph: 
‘‘(4) APPLICATION TO CARRYOVER OF NET CFC 
TESTED LOSS.—The term ‘pre-change loss’ shall in-
clude any excess carried over under section 
951A(c)(3) under rules similar to the rules of para-
graph (1).’’. 
(d) REDUCTION IN NET DEEMED TANGIBLE INCOME 
RETURN FOR PURPOSES OF DETERMINING GLOBAL IN-
TANGIBLE LOW-TAXED INCOME.— 
(1) IN
GENERAL.—Section 951A(b)(2)(A) is 
amended by striking ‘‘10 percent’’ and inserting ‘‘5 
percent’’. 
(2) APPLICATION TO ASSETS LOCATED IN POS-
SESSIONS
OF
THE
UNITED
STATES.—Section 
951A(b) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(3) APPLICATION TO ASSETS LOCATED IN POS-
SESSIONS OF THE UNITED STATES.—In the case of 
any specified tangible property located in a posses-
sion of the United States, paragraph (2)(A) and 
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subsection (d) shall be applied by substituting ‘10 
percent’ for ‘5 percent’ in paragraph (2)(A).’’. 
(e) INCLUSION OF FOREIGN OIL AND GAS EXTRAC-
TION INCOME IN DETERMINING TESTED INCOME AND 
LOSS.—Section 951A(c)(2)(A) is amended by inserting 
‘‘and’’ at the end of subclause (III), by striking ‘‘and’’ 
at the end of subclause (IV) and inserting ‘‘over’’, and 
by striking subclause (V). 
(f) COORDINATION WITH OTHER PROVISIONS.—Sec-
tion 951A(f)(1) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(C) 
TREATMENT
OF
CERTAIN
REF-
ERENCES.—Except as otherwise provided by the 
Secretary, references to section 951 or section 
951(a) in sections 959, 961, 962 and such 
other sections as the Secretary may identify 
shall include references to section 951A or sec-
tion 951A(a), respectively.’’. 
(g) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years of foreign 
corporations beginning after December 31, 2021, 
and to taxable years of United States shareholders 
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in which or with which such taxable years of foreign 
corporations end. 
(2) CERTAIN
RELATED
MODIFICATIONS.—The 
amendments made by subsections (b)(1), (b)(2), and 
(f) shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to 
taxable years of United States shareholders in which 
or with which such taxable years of foreign corpora-
tions end. 
SEC. 138127. MODIFICATIONS TO DETERMINATION OF 
DEEMED PAID CREDIT FOR TAXES PROPERLY 
ATTRIBUTABLE TO TESTED INCOME. 
(a) INCREASE IN DEEMED PAID CREDIT.—Section 
960(d)(1) is amended by striking ‘‘80 percent’’ and insert-
ing ‘‘95 percent (100 percent in the case of tested foreign 
income taxes paid or accrued to a possession of the United 
States)’’. 
(b) INCLUSION OF TAXES PROPERLY ATTRIBUTABLE 
TO TESTED LOSS.—Section 960(d)(3) is amended to read 
as follows: 
‘‘(3) TESTED
FOREIGN
INCOME
TAXES.—For 
purposes of paragraph (1), the term ‘tested foreign 
income taxes’ means, with respect to any domestic 
corporation which is a United States shareholder of 
a controlled foreign corporation, such shareholder’s 
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pro rata share (as determined under section 
951A(e)(1)) of— 
‘‘(A) the foreign income taxes (within the 
meaning of section 904(d)(2)(F)) which are 
properly attributable to amounts taken into ac-
count in determining tested income or tested 
loss under section 951A(b)(2), and 
‘‘(B) solely to the extent provided in regu-
lations prescribed by the Secretary, the foreign 
income taxes (as so defined) paid or accrued by 
a foreign corporation (other than such con-
trolled foreign corporation) which owns, directly 
or indirectly, 80 percent or more (by vote or 
value) of the stock in such domestic corporation 
but only if— 
‘‘(i) such foreign income taxes are 
properly attributable to amounts of such 
controlled foreign corporation taken into 
account in determining tested income or 
tested loss under section 951A(b)(2), and 
‘‘(ii) no credit is allowed, in whole or 
in part, for such foreign taxes in any for-
eign jurisdiction.’’. 
(c) APPLICATION OF FOREIGN TAX CREDIT LIMITA-
TION TO AMOUNTS INCLUDED UNDER SECTION 78.— 
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(1) Section 904(d)(2) is amended by redesig-
nating subparagraph (K) as subparagraph (L) and 
by inserting after subparagraph (J) the following 
new subparagraph: 
‘‘(K) AMOUNTS INCLUDIBLE UNDER SEC-
TION 78.—Any amount includible in gross in-
come under section 78 shall be treated as in-
come in the same separate category as the re-
lated foreign taxes deemed paid.’’. 
(2) Section 904(d)(3)(G) is amended by strik-
ing the second sentence and inserting the following: 
‘‘Any amount included in gross income under section 
78 shall not be treated as a dividend.’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years of foreign corporations 
beginning after December 31, 2021, and to taxable 
years of United States shareholders in which or with 
which such taxable years of foreign corporations 
end. 
(2) APPLICATION
OF
FOREIGN
TAX
CREDIT 
LIMITATION TO AMOUNTS INCLUDED UNDER SEC-
TION 78.—The amendments made by subsection (c) 
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2161 
shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 138128. DEDUCTION FOR FOREIGN SOURCE PORTION 
OF DIVIDENDS LIMITED TO CONTROLLED 
FOREIGN CORPORATIONS, ETC. 
(a) IN GENERAL.—Section 245A is amended— 
(1) in subsections (a), (c)(1), and (c)(2), by 
striking ‘‘specified 10-percent owned foreign cor-
poration’’ each place it appears and inserting ‘‘con-
trolled foreign corporation’’, and 
(2) by striking subsection (b). 
(b) MODIFICATIONS RELATED TO DETERMINATION 
OF STATUS
AS
A CONTROLLED FOREIGN CORPORA-
TION.— 
(1) Subpart F of part III of subchapter N of 
chapter 1 is amended by inserting after section 
951A the following new section: 
‘‘SEC. 951B. AMOUNTS INCLUDED IN GROSS INCOME OF 
FOREIGN 
CONTROLLED 
UNITED 
STATES 
SHAREHOLDERS. 
‘‘(a) IN GENERAL.—In the case of any foreign con-
trolled United States shareholder of a foreign controlled 
foreign corporation— 
‘‘(1) this subpart (other than sections 951A, 
951(b), 957, and 965) shall be applied with respect 
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2162 
to such shareholder (separately from, and in addi-
tion to, the application of this subpart without re-
gard to this section)— 
‘‘(A) by substituting ‘foreign controlled 
United States shareholder’ for ‘United States 
shareholder’ each place it appears therein, and 
‘‘(B) by substituting ‘foreign controlled 
foreign corporation’ for ‘controlled foreign cor-
poration’ each place it appears therein, and 
‘‘(2) sections 951A and 965 shall be applied 
with respect to such shareholder — 
‘‘(A) by treating each reference to ‘United 
States shareholder’ in such sections as includ-
ing a reference to such shareholder, and 
‘‘(B) by treating each reference to ‘con-
trolled foreign corporation’ in such sections as 
including a reference to such foreign controlled 
foreign corporation. 
‘‘(b) 
FOREIGN
CONTROLLED
UNITED
STATES 
SHAREHOLDER.—For purposes of this section, the term 
‘foreign controlled United States shareholder’ means, with 
respect to any foreign corporation, any United States per-
son which would be a United States shareholder with re-
spect to such foreign corporation if— 
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2163 
‘‘(1) section 951(b) were applied by substituting 
‘more than 50 percent’ for ‘10 percent or more’, and 
‘‘(2) section 958(b) were applied without regard 
to paragraph (4) thereof. 
‘‘(c) FOREIGN CONTROLLED FOREIGN CORPORA-
TION.—For purposes of this section, the term ‘foreign con-
trolled foreign corporation’ means a foreign corporation, 
other than a controlled foreign corporation, which would 
be a controlled foreign corporation if section 957(a) were 
applied— 
‘‘(1) by substituting ‘foreign controlled United 
States shareholders’ for ‘United States share-
holders’, and 
‘‘(2) by substituting ‘section 958(b) (other than 
paragraph (4) thereof)’ for ‘section 958(b)’. 
‘‘(d) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the purposes of this section, 
including regulations or other guidance— 
‘‘(1) to treat a foreign controlled United States 
shareholder or a foreign controlled foreign corpora-
tion as a United States shareholder or as a con-
trolled foreign corporation, respectively, for purposes 
of provisions of this title other than this subpart, 
and 
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‘‘(2) to prevent the avoidance of the purposes of 
this section.’’. 
(2) Section 957(a) is amended to read as fol-
lows: 
‘‘(a) CONTROLLED FOREIGN CORPORATION.—For 
purposes of this title— 
‘‘(1) IN GENERAL.—The term ‘controlled for-
eign corporation’ means any foreign corporation if 
more than 50 percent of— 
‘‘(A) the total combined voting power of all 
classes of stock of such corporation entitled to 
vote, or 
‘‘(B) the total value of the stock of such 
corporation, 
is owned (within the meaning of section 958(a)), or 
is considered as owned by applying the rules of own-
ership of section 958(b), by United States share-
holders on any day during the taxable year of such 
foreign corporation. 
‘‘(2) ELECTION
TO
TREAT
A
FOREIGN
COR-
PORATION AS A CONTROLLED FOREIGN CORPORA-
TION FOR CERTAIN PURPOSES.— 
‘‘(A) IN GENERAL.—In the case of a for-
eign corporation with respect to which an elec-
tion is in effect under this paragraph, such for-
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eign corporation shall be treated as controlled 
foreign corporation with respect to all United 
States shareholders of such foreign corporation. 
‘‘(B) EXCEPTIONS.—Notwithstanding sub-
paragraph (A), such foreign corporation shall 
not be treated as a controlled foreign corpora-
tion for purposes of section 951B(c) or for any 
other purpose if the Secretary determines that 
treatment of such foreign corporation as a con-
trolled foreign corporation for such purpose 
would be inconsistent with the purposes of this 
subchapter. 
‘‘(C) ELECTION.— 
‘‘(i) BY
WHOM.—An election under 
subparagraph (A) shall be effective only if 
made by the foreign corporation and by all 
United States shareholders of such foreign 
corporation (determined as of the time of 
such election by such foreign corporation). 
‘‘(ii) WITH RESPECT TO WHOM.—Any 
election under this paragraph, once effec-
tive, shall apply to such foreign corporation 
and to all United States shareholders of 
such foreign corporation (including any 
person who becomes a United States 
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shareholder of such foreign corporation 
after such election takes effect). 
‘‘(iii) TIME, MANNER, ETC.—The elec-
tion under this paragraph shall be made at 
such time and in such manner as the Sec-
retary may provide and, once effective, 
may be revoked only with the consent of 
the Secretary. 
‘‘(D) REGULATIONS.—The Secretary shall 
issue such regulations or other guidance as may 
be necessary or appropriate to carry out the 
purposes of this paragraph, including regula-
tions or other guidance for the application of 
this paragraph to an acquisition of assets de-
scribed in section 381(a) from any corporation 
with respect to which an election under this 
paragraph applies.’’. 
(3) Section 958(b) is amended— 
(A) by inserting after paragraph (3) the 
following: 
‘‘(4) Subparagraphs (A), (B), and (C) of sec-
tion 318(a)(3) shall not be applied so as to consider 
a United States person as owning stock which is 
owned by a person who is not a United States per-
son.’’, and 
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(B) by striking ‘‘Paragraph (1)’’ in the 
last sentence and inserting ‘‘Paragraphs (1) 
and (4)’’. 
(4) The table of sections for subpart F of part 
III of subchapter N of chapter 1 is amended by in-
serting after the item relating to section 951A the 
following new item: 
‘‘Sec. 951B. Amounts included in gross income of foreign controlled United 
States shareholders.’’. 
(c) CERTAIN OTHER MODIFICATIONS.— 
(1) Section 245A(b)(1) is amended by striking 
‘‘with respect to such corporation’’. 
(2) Section 245A(e)(4) is amended by striking 
‘‘an amount received’’ and all that follows through 
‘‘for which the controlled foreign corporation re-
ceived a deduction’’ and inserting ‘‘any dividend re-
ceived from a controlled foreign corporation for 
which such controlled foreign corporation received a 
deduction’’. 
(3) Section 245A(e)(1) is amended— 
(A) by striking ‘‘any dividend’’ and insert-
ing ‘‘any hybrid dividend’’, and 
(B) by striking ‘‘if the dividend is a hybrid 
dividend’’. 
(4) Section 245A(g) is amended to read as fol-
lows: 
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‘‘(g) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the provisions of this section, 
including regulations or other guidance for— 
‘‘(1) the treatment of United States share-
holders owning stock of a controlled foreign corpora-
tion through a partnership, and 
‘‘(2) the denial of all or a portion of the deduc-
tion under this section with respect to dividends re-
ceived from foreign corporations in situations in 
which— 
‘‘(A) any portion of the dividend is out of 
earnings and profits arising from dispositions to 
related parties which— 
‘‘(i) are not made in the ordinary 
course of a trade or business, and 
‘‘(ii) are made on or after January 1, 
2018, and during a taxable year to which 
section 951A did not apply, or 
‘‘(B) a transfer or issuance of stock on or 
after January 1, 2018, results in a reduction in 
the United States shareholder’s pro rata share 
of a controlled foreign corporation’s subpart F 
income or tested income (as defined in section 
951A).’’. 
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(5) Section 246(b)(1) is amended to read as fol-
lows: 
‘‘(1) GENERAL RULE.—Except as provided in 
paragraph (2), the aggregate amount of the deduc-
tions allowed by section 243(a)(1) and subsection (a) 
and (b) of section 245 shall not exceed the percent-
age determined under paragraph (3) of the taxable 
income computed without regard to the deductions 
allowed by section 172, section 243(a)(1), sub-
sections (a) and (b) of section 245, and section 250, 
without regard to any adjustment under section 
1059, and without regard to any capital loss 
carryback to the taxable year under section 
1212(a)(1).’’. 
(6) Section 246(c)(1) is amended by striking 
‘‘section 243’’ and all that follows through ‘‘245A’’ 
and inserting ‘‘section 243, 245, or 245A’’. 
(7) For purposes of section 78 of the Internal 
Revenue Code of 1986, as in effect on the day before 
the enactment of Public Law 115-97, with respect to 
taxable years of foreign corporations beginning be-
fore January 1, 2018, and ending after December 
31, 2017, any reference to section 245 of such Code 
shall be treated as including a reference to section 
245A of such Code (as added by such Public Law). 
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(d) EFFECTIVE DATES.— 
(1) IN
GENERAL.—The amendment made by 
subsection (a) shall apply to distributions made after 
the date of the enactment of this Act. 
(2) MODIFICATIONS RELATED TO DETERMINA-
TION OF STATUS AS A CONTROLLED FOREIGN COR-
PORATION.—The amendments made by subsection 
(b) shall apply to— 
(A) the last taxable year of foreign cor-
porations beginning before January 1, 2018, 
and each subsequent taxable year of such for-
eign corporations, and 
(B) taxable years of United States persons 
in which or with which such taxable years of 
foreign corporations end. 
(3) CERTAIN
OTHER
MODIFICATIONS.—The 
amendments made by subsection (c) shall apply to 
distributions made after December 31, 2017. 
SEC. 138129. LIMITATION ON FOREIGN BASE COMPANY 
SALES AND SERVICES INCOME. 
(a) FOREIGN BASE COMPANY SALES INCOME.—Sec-
tion 954(d)(2) is amended to read as follows: 
‘‘(2) LIMITATION.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘related person’ shall not 
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include any person unless such person is a tax-
able unit (within the meaning of section 904(e)) 
which is a tax resident of the United States. 
‘‘(B) REGULATIONS.—The Secretary shall 
issue such regulations or other guidance as may 
be necessary or appropriate to carry out the 
purposes of this paragraph, including regula-
tions or other guidance providing for the proper 
application of subparagraph (A) in the case of 
a series of transactions in which a person de-
scribed in subparagraph (A) is a party.’’. 
(b) FOREIGN BASE COMPANY SERVICES INCOME.— 
Section 954(e)(1)(A) is amended by striking ‘‘subsection 
(d)(3)’’ and inserting ‘‘subsection (d)’’. 
(c) CERTAIN OTHER MODIFICATIONS.— 
(1)(A) Section 951(a)(1) is amended— 
(i) by striking ‘‘the last day’’ in the matter 
preceding subparagraph (A) and inserting ‘‘any 
day’’, 
(ii) by striking ‘‘his’’ each place it appears 
and inserting ‘‘such shareholder’s’’, and 
(iii) by inserting ‘‘if such shareholder owns 
(within the meaning of section 958(a)) stock of 
such foreign corporation as of the close of the 
last relevant day of such foreign corporation’s 
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taxable year,’’ before ‘‘the amount’’ in subpara-
graph (B). 
(B) Section 951(a) is amended by striking 
paragraph (2) and inserting the following new para-
graphs: 
‘‘(2) PRO
RATA
SHARE
OF
SUBPART
F
IN-
COME.—In the case of any United States share-
holder with respect to a foreign corporation, the pro 
rata share referred to in paragraph (1)(A) is the 
sum of— 
‘‘(A) if such shareholder owns (within the 
meaning of section 958(a)) stock of such for-
eign corporation as of the close of the last rel-
evant day of such foreign corporation’s taxable 
year, such shareholder’s general pro rata share 
determined under paragraph (3), plus 
‘‘(B) if such shareholder owns (within the 
meaning of section 958(a)) stock of such for-
eign corporation during such taxable year but 
does not own (within the meaning of section 
958(a)) such stock as of the close of such last 
relevant day, such shareholder’s nontaxed cur-
rent dividend share determined under para-
graph (4). 
‘‘(3) GENERAL PRO RATA SHARE.— 
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‘‘(A) IN
GENERAL.—In the case of any 
United States shareholder with respect to a for-
eign corporation, the general pro rata share de-
termined under this paragraph is the excess (if 
any) of— 
‘‘(i) the pro rata current earnings per-
centage of the amount which bears the 
same ratio to such corporation’s subpart F 
income for the taxable year (reduced by 
the aggregate nontaxed current dividend 
shares determined under paragraph (4) 
with respect to such shareholder or any 
other United States shareholder) as the 
part of such year during which such cor-
poration is a controlled foreign corporation 
bears to the entire year, over 
‘‘(ii) the lesser of— 
‘‘(I) the amount of any pre-hold-
ing period dividends with respect to 
stock of such foreign corporation 
which such shareholder owns (within 
the meaning of section 958(a)) as of 
the close of the last relevant day of 
such foreign corporation’s taxable 
year, or 
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‘‘(II) the amount which bears the 
same ratio to the subpart F income of 
such corporation for the taxable year 
(reduced by the aggregate nontaxed 
current dividend shares determined 
under paragraph (4) with respect to 
such shareholder or any other United 
States shareholder) as the part of 
such year during which such share-
holder did not own (within the mean-
ing of section 958(a)) such stock 
bears to the entire year. 
‘‘(B) PRO RATA CURRENT EARNINGS PER-
CENTAGE.—For 
purposes 
of 
subparagraph 
(A)(i), the term ‘pro rata current earnings per-
centage’ means, in the case of any United 
States shareholder with respect to a foreign cor-
poration for any taxable year of such foreign 
corporation, the ratio (expressed as a percent-
age) of— 
‘‘(i) the amount which would have 
been distributed with respect to the stock 
which such shareholder owns (within the 
meaning of section 958(a)) in such cor-
poration if on the last relevant day of such 
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taxable year it had distributed its earnings 
and profits for such taxable year (com-
puted as of the close of such taxable year 
without diminution by reason of any dis-
tributions made during such taxable year), 
divided by 
‘‘(ii) such corporation’s earnings and 
profits for such taxable year (as so com-
puted). 
‘‘(C) PRE-HOLDING PERIOD DIVIDENDS.— 
For purposes of subparagraph (A)(ii)(I), the 
term ‘pre-holding period dividends’ means, in 
the case of any United States shareholder with 
respect to a foreign corporation for any taxable 
year of such foreign corporation, dividends 
which are— 
‘‘(i) made out of such corporation’s 
earnings and profits for the taxable year 
(other than nontaxed current dividends as 
defined in paragraph (4)(C)), and 
‘‘(ii) received— 
‘‘(I) by any other United States 
person with respect to stock of such 
foreign corporation which such share-
holder owns (within the meaning of 
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section 958(a)) as of the close of the 
last relevant day of such foreign cor-
poration’s taxable year, and 
‘‘(II) while such foreign corpora-
tion was a controlled foreign corpora-
tion and before such shareholder 
owned (within the meaning of section 
958(a)) such stock. 
‘‘(4) NONTAXED CURRENT DIVIDEND SHARE.— 
‘‘(A) IN
GENERAL.—In the case of any 
United States shareholder with respect to a for-
eign corporation, the nontaxed current dividend 
share determined under this paragraph is the 
nontaxed current dividend percentage of the 
subpart F income of such foreign corporation 
for the taxable year. 
‘‘(B) NONTAXED CURRENT DIVIDEND PER-
CENTAGE.—For purposes of this paragraph, the 
term ‘nontaxed current dividend percentage’ 
means, in the case of any United States share-
holder with respect to a foreign corporation for 
any taxable year of such foreign corporation, 
the ratio (expressed as a percentage) of— 
‘‘(i) the amount of nontaxed current 
dividends with respect to such taxable year 
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received with respect to the stock of such 
foreign corporation which such shareholder 
owns (within the meaning of section 
958(a)) at the time of the dividend on a 
day in which such corporation is a con-
trolled foreign corporation, divided by 
‘‘(ii) such foreign corporation’s earn-
ings and profits for such taxable year 
(computed as of the close of such taxable 
year without diminution by reason of any 
distributions made during such taxable 
year). 
‘‘(C) NONTAXED CURRENT DIVIDENDS.— 
For purposes of this paragraph, the term 
‘nontaxed current dividends’ means the portion 
of any amount received with respect to stock to 
the extent such amount (without regard to 
amounts included in the gross income of a 
United States shareholder for the taxable year 
by reason of this subpart)— 
‘‘(i) would result in a dividend out of 
the corporation’s earnings and profits for 
the taxable year (including a dividend 
under section 1248 attributable to earn-
ings and profits for the taxable year), and 
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‘‘(ii) either— 
‘‘(I) would give rise to a deduc-
tion under section 245A(a), or 
‘‘(II) in the case of a dividend 
paid directly or indirectly to a con-
trolled foreign corporation with re-
spect to stock owned by the share-
holder within the meaning of section 
958(a)(2), would not result in subpart 
F income with respect to such con-
trolled foreign corporation by reason 
of subsection (b)(4), (c)(3), or (c)(6) 
of section 954. 
Any amount treated as the foreign-source 
portion of a dividend under section 
245A(g) shall be treated as nontaxed cur-
rent dividends for purposes of this para-
graph. 
‘‘(5) LAST RELEVANT DAY OF TAXABLE YEAR 
OF
A
CONTROLLED
FOREIGN
CORPORATION.—For 
purposes of this subsection, the term ‘last relevant 
day’ means, with respect to any taxable year of a 
foreign corporation, the last day of such taxable year 
on which such corporation is a controlled foreign 
corporation. 
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‘‘(6) REGULATIONS.—The Secretary may pre-
scribe such regulations or other guidance as may be 
necessary or appropriate to carry out the purposes 
of this subsection, including regulations or other 
guidance— 
‘‘(A) to treat a partnership as an aggre-
gate of its partners, 
‘‘(B) to provide rules allowing a foreign 
corporation to close its taxable year upon a 
change in ownership, and 
‘‘(C) to treat a distribution followed by an 
issuance of stock to a shareholder not subject 
to tax under this chapter in the same manner 
as an acquisition of stock.’’. 
(C) Section 951A(e)(1) is amended by striking 
‘‘determined under the rules of section 951(a)(2) in 
the same manner as such section applies to subpart 
F income’’ and inserting ‘‘determined under rules 
similar to the rules of section 951(a)(2)’’. 
(D) Section 951A(e)(2) is amended to read as 
follows: 
‘‘(2) TREATMENT AS UNITED STATES SHARE-
HOLDER.—A person shall be treated as a United 
States shareholder of a controlled foreign corpora-
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tion for any taxable year of such person if such per-
son— 
‘‘(A) is a United States shareholder of 
such foreign corporation on any day in such 
taxable year, and 
‘‘(B) owns (within the meaning of section 
958(a)) stock in such foreign corporation on 
any day in such taxable year which is part of 
a taxable year of such foreign corporation with 
respect to which such foreign corporation is a 
controlled foreign corporation.’’. 
(E) Section 953(c)(5)(A)(i) is amended— 
(i) in subclause (I), by adding ‘‘and’’ at 
the end, 
(ii) in subclause (II)— 
(I) by striking ‘‘on the last day of the 
taxable year’’ and inserting ‘‘during the 
taxable year’’, and 
(II) by striking ‘‘and’’ at the end and 
inserting ‘‘or’’, and 
(iii) by striking subclause (III). 
(2) Section 78 is amended by striking ‘‘, (b),’’. 
(d) CERTAIN RELATED PROSPECTIVE MODIFICA-
TIONS.—Section 961(c) is amended— 
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(1) by striking ‘‘BASIS ADJUSTMENTS IN’’ in 
the heading of such subsection and inserting ‘‘AP-
PLICATION OF RULES TO’’, and 
(2) by striking ‘‘then adjustments similar to’’ 
and all that follows in such subsection and inserting 
‘‘then rules similar to the rules of subsections (a) 
and (b) shall apply to— 
‘‘(1) such stock, 
‘‘(2) stock in any other controlled foreign cor-
poration by reason of which the United States share-
holder is considered under section 958(a)(2) as own-
ing the stock described in paragraph (1), and 
‘‘(3) property by reason of which the United 
States shareholder is considered as owning stock de-
scribed in paragraph (1) or (2). 
The preceding sentence shall not apply with respect to any 
stock or property to which subsection (a) or (b) applies.’’. 
(e) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years of foreign 
corporations beginning after December 31, 2021, 
and to taxable years of United States shareholders 
in which or with which such taxable years of foreign 
corporations end. 
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(2) CERTAIN OTHER MODIFICATIONS.— 
(A) The amendments made by subsection 
(c)(1) shall apply to distributions made after 
December 31, 2017. 
(B) The amendment made by subsection 
(c)(2) apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and 
to taxable years of United States shareholders 
in which or with which such taxable years of 
foreign corporations end. 
Subpart D—Inbound International Provisions 
SEC. 138131. MODIFICATIONS TO BASE EROSION AND ANTI- 
ABUSE TAX. 
(a) MODIFICATIONS
TO BASE EROSION MINIMUM 
TAX AMOUNT.— 
(1) 
MODIFICATION
OF
RATES.—Section 
59A(b)(1)(A) is amended by striking ‘‘10 percent (5 
percent in the case of taxable years beginning in cal-
endar year 2018)’’ and inserting ‘‘the applicable per-
centage’’. 
(2) BASE EROSION MINIMUM TAX AMOUNT DE-
TERMINED WITHOUT REGARD TO CREDITS.—Section 
59A(b)(1)(B) is amended to read as follows: 
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‘‘(B) an amount equal to the regular tax li-
ability (as defined in section 26(b)) of the tax-
payer for the taxable year.’’. 
(3) 
APPLICABLE
PERCENTAGE.—Section 
59A(b)(2) is amended to read as follows: 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of this subsection, the term applicable percentage 
means— 
‘‘(A) in the case of any taxable year begin-
ning after December 31, 2021, and before Jan-
uary 1, 2024, 10 percent, 
‘‘(B) in the case of any taxable year begin-
ning after December 31, 2023, and before Jan-
uary 1, 2026, 12.5 percent, and 
‘‘(C) in the case of any taxable year begin-
ning after December 31, 2025, 15 percent.’’. 
(4) TAXPAYERS SUBJECT TO RULES FOR BANKS 
AND SECURITIES DEALERS.—Section 59A(b)(3)(B) 
is amended to read as follows: 
‘‘(B) TAXPAYER DESCRIBED.—A taxpayer 
is described in this subparagraph if such tax-
payer is— 
‘‘(i) a bank (as defined in section 
585(a)(2)), 
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‘‘(ii) a securities dealer registered 
under section 15(a) of the Securities Ex-
change Act of 1934, or 
‘‘(iii) a member of an affiliated group 
(as defined in section 1504(a)(1), deter-
mined 
without 
regard 
to 
section 
1504(b)(3)) which includes any person de-
scribed in clause (i) or (ii).’’. 
(5) GENERAL
BUSINESS
CREDIT
ALLOWED 
AGAINST
BASE
EROSION
AND
ANTI-ABUSE
TAX.— 
Section 38(c)(1) is amended by striking ‘‘the tax im-
posed by section 55’’ and inserting ‘‘the taxes im-
posed by sections 55 and 59A’’. 
(6) CONFORMING AMENDMENTS.— 
(A) Section 59A(b)(3)(A) is amended by 
striking ‘‘paragraphs (1)(A) and (2)(A) shall 
each’’ and inserting ‘‘paragraph (2) shall’’. 
(B) Section 59A(b) is amended by striking 
paragraph (4). 
(b) MODIFICATION OF RULES FOR DETERMINING 
MODIFIED TAXABLE INCOME.— 
(1) IN GENERAL.—Section 59A(c) is amended 
to read as follows: 
‘‘(c) MODIFIED TAXABLE INCOME.—For purposes of 
this section— 
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‘‘(1) IN GENERAL.—The term ‘modified taxable 
income’ means the taxable income of the taxpayer 
computed under this chapter for the taxable year 
with the following adjustments: 
‘‘(A) BASE EROSION TAX BENEFITS.—Any 
base erosion tax benefit shall be determined 
without regard to any base erosion payment de-
scribed in paragraphs (1) through (4) of sub-
section (d), including for purposes of deter-
mining the adjusted basis of property described 
in subsection (d)(2). 
‘‘(B) BASE EROSION BASIS ADJUSTMENTS 
WITH
RESPECT
TO
COST
OF
GOODS
SOLD.— 
Cost of goods sold shall be determined without 
regard to any base erosion payment described 
in subparagraph (A) or (B) of subsection 
(d)(5). 
‘‘(C) NET OPERATING LOSSES.—The net 
operating loss deduction for the taxable year 
under section 172 shall be applied— 
‘‘(i) by substituting ‘modified taxable 
income’ for ‘taxable income’ in subsection 
(a)(2)(B)(ii)(I) thereof, 
‘‘(ii) by determining any net operating 
loss arising in any taxable year beginning 
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after December 31, 2021, without regard 
to any deduction which is a base erosion 
tax benefit (determined with respect to 
each such taxable year), and 
‘‘(iii) by making appropriate adjust-
ments in the application of subsection 
(b)(2) thereof to take into account clause 
(i) of this subparagraph as though such 
clause applied with respect to taxable years 
beginning after December 31, 2021 (but 
by applying section 172(e) for purposes of 
determining the amount of modified tax-
able income). 
‘‘(D) APPLICATION
OF
CERTAIN
OTHER 
ADJUSTMENTS.—Except as otherwise provided 
by the Secretary, rules similar to the rules of 
subsections (g) and (h) of section 59 shall 
apply. 
‘‘(2) BASE EROSION TAX BENEFIT.—The term 
‘base erosion tax benefit’ means— 
‘‘(A) any deduction allowed under this 
chapter for the taxable year with respect to any 
base erosion payment described in subsection 
(d)(1), 
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‘‘(B) in the case of a base erosion payment 
described in subsection (d)(2), any deduction al-
lowed under this chapter for the taxable year 
for depreciation (or amortization in lieu of de-
preciation) with respect to the property ac-
quired with such payment, 
‘‘(C) in the case of a base erosion payment 
described in subsection (d)(3)— 
‘‘(i) any reduction under section 
803(a)(1)(B) in the gross amount of pre-
miums and other consideration on insur-
ance and annuity contracts for premiums 
and other consideration arising out of in-
demnity insurance, and 
‘‘(ii) any deduction under section 
832(b)(4)(A) from the amount of gross 
premiums written on insurance contracts 
during the taxable year for premiums paid 
for reinsurance, and 
‘‘(D) in the case of a base erosion payment 
described in subsection (d)(4), any reduction in 
gross receipts with respect to such payment in 
computing gross income of the taxpayer for the 
taxable year for purposes of this chapter.’’. 
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(2) CERTAIN PAYMENTS WITH RESPECT TO IN-
VENTORY TREATED AS BASE EROSION PAYMENTS.— 
Section 59A(d) is amended by redesignating para-
graph (5) as paragraph (6) and by inserting after 
paragraph (4) the following new paragraph: 
‘‘(5) CERTAIN PAYMENTS WITH RESPECT TO IN-
VENTORY.— 
‘‘(A) INDIRECT
COSTS
INCLUDED
IN
IN-
VENTORY UNDER SECTION 263A.—Such term 
shall also include any amount paid or accrued 
by the taxpayer to a foreign person which is a 
related party of the taxpayer if such amount is 
described in paragraph (2)(B) of section 
263A(a) and required to be included in inven-
tory costs of the taxpayer under paragraph 
(1)(A) of such section. 
‘‘(B) CERTAIN INDIRECT COSTS OF FOR-
EIGN RELATED PARTIES.—Such term shall also 
include so much of any amount paid or accrued 
by the taxpayer to a foreign person which is a 
related party of the taxpayer in connection with 
the acquisition by the taxpayer from such for-
eign person of property which is inventory in 
the hands of the taxpayer as exceeds the sum 
of— 
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‘‘(i) the direct costs of such property 
in the hands of such foreign person, plus 
‘‘(ii) so much of the costs described in 
section 263A(a)(2)(B) with respect to such 
property in the hands of such foreign per-
son as the taxpayer demonstrates to the 
satisfaction of the Secretary are attrib-
utable to amounts— 
‘‘(I) paid or accrued by such for-
eign person to a United States person 
or a person which is not a related 
party of the taxpayer, or 
‘‘(II) otherwise subject to the tax 
imposed by this subtitle. 
‘‘(C) APPLICATION TO TIERED RELATED- 
PARTY TRANSACTIONS.—In the case of direct 
costs otherwise described in clause (i) of sub-
paragraph (B) which are paid or incurred by 
the foreign person referred to in such clause to 
another foreign person which is a related party 
of the taxpayer, such costs shall be taken into 
account under such clause only to the extent 
that the taxpayer demonstrates to the satisfac-
tion of the Secretary that such costs are attrib-
utable to amounts paid or accrued (directly or 
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indirectly) to a United States person or a per-
son which is not a related party of the tax-
payer. 
‘‘(D) SAFE HARBOR WITH RESPECT INDI-
RECT COSTS OF FOREIGN RELATED PARTIES.— 
In the case of a taxpayer which elects the appli-
cation of this subparagraph (at such time, in 
such manner, and with respect to such inven-
tory property, as the Secretary may provide), 
the amount described in subparagraph (B)(ii) 
with respect to such property shall be treated 
for purposes of this section as being equal to 20 
percent of the amount paid or incurred by the 
taxpayer to the related party of the taxpayer in 
connection with the acquisition of such prop-
erty.’’. 
(3) EXPANSION AND CONSOLIDATION OF RULES 
TO EXEMPT CERTAIN PAYMENTS FROM TREATMENT 
AS BASE EROSION PAYMENTS.— 
(A) IN GENERAL.—Section 59A is amend-
ed by redesignating subsection (i) as subsection 
(j) and by inserting after subsection (h) the fol-
lowing new subsection: 
‘‘(i) CERTAIN PAYMENT NOT TREATED AS BASE 
EROSION PAYMENTS.— 
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‘‘(1) EXCEPTION
FOR
PAYMENTS
ON
WHICH 
TAX IS IMPOSED.—An amount shall not be treated 
as a base erosion payment if tax is imposed by this 
subtitle with respect to such amount. The amount 
not treated as a base erosion payment by reason of 
the preceding sentence shall be determined under 
rules similar to the rules of section 163(j)(5) (as in 
effect before the date of the enactment of Public 
Law 115-97). 
‘‘(2) EXCEPTION FOR CERTAIN PAYMENTS SUB-
JECT TO SUFFICIENT FOREIGN TAX.— 
‘‘(A) IN GENERAL.—An amount shall not 
be treated as a base erosion payment if the tax-
payer establishes to the satisfaction of the Sec-
retary that such amount was subject to an ef-
fective rate of foreign income tax (as defined in 
section 904(d)(2)(F)) which is not less than the 
applicable percentage in effect under subsection 
(b)(2) for the taxable year in which such 
amount is paid or accrued. Except as otherwise 
provided by the Secretary under subparagraph 
(B), the effective rate of foreign income tax 
with respect to any amount may be established 
on the basis of applicable financial statements 
(as defined in section 451(b)(3)). 
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‘‘(B) REGULATIONS.—The Secretary shall 
issue such regulations or other guidance as may 
be necessary or appropriate to carry out the 
purposes of this paragraph, including regula-
tions or other guidance providing procedures for 
determining the effective rate of foreign income 
tax to which any amount is subject. Such proce-
dures may require that any transaction or se-
ries of transactions among multiple parties be 
recharacterized as one or more transactions di-
rectly among any 2 or more of such parties 
where the Secretary determines that such re-
characterization is appropriate to carry out, or 
prevent avoidance of, the purposes of this sec-
tion. 
‘‘(3) EXCEPTION FOR CERTAIN AMOUNTS WITH 
RESPECT
TO
SERVICES.—Subsections (d)(1) and 
(d)(5)(A) shall not apply to so much of any amount 
paid or accrued by a taxpayer for services as does 
not exceed the total services cost of such services. 
The preceding sentence shall not apply unless such 
services meet the requirements for eligibility for use 
of the services cost method under section 482 (deter-
mined without regard to the requirement that the 
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services not contribute significantly to fundamental 
risks of business success or failure).’’. 
(B) CONFORMING
AMENDMENT.—Section 
59A(d), as amended by paragraph (2), is 
amended by striking paragraph (6). 
(c) REPEAL OF EXEMPTION FROM BASE EROSION 
AND ANTI-ABUSE TAX FOR TAXPAYERS WITH LOW BASE 
EROSION PERCENTAGE.—Section 59A(e)(1)(C) is amend-
ed by inserting ‘‘in the case of any taxable year beginning 
before January 1, 2024,’’ before ‘‘the base erosion per-
centage’’. 
(d) OTHER MODIFICATIONS.— 
(1) Section 59A(h)(2)(B) is amended by strik-
ing ‘‘section 6038B(b)(2)’’ and inserting ‘‘section 
6038A(b)(2)’’. 
(2) Section 59A(j)(2), as redesignated by sub-
section (b), is amended by striking ‘‘subsection 
(g)(3)’’ and inserting ‘‘subsection (h)(3)’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
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Subpart E—Other Business Tax Provisions 
SEC. 138141. CREDIT FOR CLINICAL TESTING OF ORPHAN 
DRUGS LIMITED TO FIRST USE OR INDICA-
TION. 
(a) IN GENERAL.—Section 45C(b)(2)(B) is amended 
to read as follows: 
‘‘(B) TESTING
MUST
BE
RELATED
TO 
FIRST USE OR INDICATION FOR RARE DISEASE 
OR CONDITION.—Human clinical testing may be 
taken into account under subparagraph (A) 
only to the extent such testing is related to the 
first use or indication with respect to which a 
drug for a rare disease or condition is des-
ignated under section 526 of the Federal Food, 
Drug, and Cosmetic Act.’’. 
(b) ELIGIBLE TESTING MUST BE CONDUCTED BE-
FORE APPROVAL FOR ANY USE OR INDICATION.—Section 
45C(b)(2)(A)(ii)(II) is amended to read as follows: 
‘‘(II) before the first date on 
which an application (with respect to 
any use or indication with respect to 
any disease or condition) with respect 
to such drug is approved under sec-
tion 505(c) of such Act or, if the drug 
is a biological product, before the first 
date on which a license (with respect 
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to any use or indication with respect 
to any disease or condition) for such 
drug is issued under section 351(a) of 
the Public Health Service Act, and’’. 
(c) ELIGIBILITY OF BIOLOGICAL PRODUCTS.— 
(1) IN
GENERAL.—Section 45C(b)(2)(A)(i) is 
amended by inserting ‘‘or, if the drug is a biological 
product, section 351(a)(3) of the Public Health 
Service Act’’ before the comma at the end. 
(2) 
CONFORMING
AMENDMENT.—Section 
45C(b)(2)(A)(ii)(I) is amended by striking ‘‘such 
Act’’ and inserting ‘‘the Federal Food, Drug, and 
Cosmetic Act’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138142. MODIFICATIONS TO TREATMENT OF CERTAIN 
LOSSES. 
(a) LOSSES FROM CERTAIN CAPITAL ASSETS WHICH 
BECOME WORTHLESS.— 
(1) 
WHEN
TREATED
AS
LOSS.—Section 
165(g)(1) is amended by striking ‘‘on the last day 
of the taxable year’’ and inserting ‘‘at the time of 
the identifiable event establishing worthlessness’’. 
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(2) TREATMENT OF PARTNERSHIP INDEBTED-
NESS.—Section 165(g)(2)(C) is amended by insert-
ing ‘‘, by a partnership,’’ after ‘‘by a corporation’’. 
(3) TREATMENT OF PARTNERSHIP INTEREST.— 
Section 165 is amended by redesignating subsection 
(m) as subsection (n) and by inserting after sub-
section (l) the following new subsection: 
‘‘(m) WORTHLESS PARTNERSHIP INTEREST.—If any 
interest in a partnership becomes worthless during the 
taxable year, the loss resulting therefrom shall, for pur-
poses of this subtitle, be treated as a loss from the sale 
or exchange of the interest in the partnership, as provided 
in section 741, at the time of the identifiable event estab-
lishing worthlessness.’’. 
(b) DEFERRAL OF LOSSES IN CERTAIN CONTROLLED 
GROUP
CORPORATE
LIQUIDATIONS.—Section 267 is 
amended by adding at the end the following new sub-
section: 
‘‘(h) DEFERRAL
OF LOSSES
IN CERTAIN CON-
TROLLED GROUP LIQUIDATIONS.— 
‘‘(1) IN GENERAL.—In the case of two corpora-
tions described in subsection (b)(3), no loss shall be 
recognized on the stock or securities of the liqui-
dating corporation in a complete liquidation to which 
section 331 applies until the other corporation re-
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ceiving property distributed in such liquidation with 
respect to such stock or in exchange for such securi-
ties has disposed of substantially all property such 
other corporation received in such liquidation to one 
or more persons who are not related to such other 
corporation (within the meaning of subsection (b)(3) 
or section 707(b)(1)). 
‘‘(2) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as the Secretary 
determines is necessary or appropriate to carry out 
the purposes of this subsection, including to apply 
the principles of this subsection to liquidating cor-
poration stock or securities owned by a corporation 
indirectly through 1 or more partnerships.’’. 
(c) CROSS REFERENCE.—Section 331(c) is amend-
ed— 
(1) by striking ‘‘CROSS REFERENCE’’ and all 
that follows through ‘‘For general rule’’ and insert-
ing the following: ‘‘CROSS REFERENCE.— 
‘‘(1) For general rule’’, and 
(2) by adding at the end the following new 
paragraph: 
‘‘(2) For losses in controlled group liquidations, 
see section 267(h).’’. 
(d) EFFECTIVE DATE.— 
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(1) SUBSECTION (a).—The amendments made 
by this section shall apply to losses arising in taxable 
years beginning after December 31, 2021. 
(2) SUBSECTION (b).—The amendment made 
by subsection (b) shall apply to liquidations on or 
after the date of the enactment of this Act. 
SEC. 138143. ADJUSTED BASIS LIMITATION FOR DIVISIVE 
REORGANIZATION. 
(a) IN GENERAL.—Section 361 is amended by adding 
at the end the following new subsections: 
‘‘(d) ADJUSTED BASIS LIMITATION FOR DIVISIVE 
REORGANIZATIONS.— 
‘‘(1) IN GENERAL.—Except as provided para-
graph (2), in the case of a reorganization described 
in section 368(a)(1)(D) with respect to which stock 
or securities of the controlled corporation (within the 
meaning of section 355) are distributed by the dis-
tributing corporation (within the meaning of such 
section) in a transaction which qualifies under such 
section, subsection (b)(3) and subsection (c)(3) shall 
not apply to so much of the money and other prop-
erty transferred to creditors as equals an amount 
equal to the excess (if any) of— 
‘‘(A) the sum of— 
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‘‘(i) the total amount of the liabilities 
assumed (within the meaning of section 
357(c)) by the controlled corporation, 
‘‘(ii) in the case of subsection (b)(3), 
the total amount of money and the fair 
market value of other property (including 
stock described in section 354(a)(2)(C)) 
transferred to the creditors, and 
‘‘(iii) in the case of subsection (c)(3), 
the total principal amount of securities of 
the controlled corporation which is quali-
fied property (as defined in subsection 
(c)(2)(B)) transferred to the creditors, 
over 
‘‘(B) the total adjusted bases of the assets 
transferred by the distributing corporation to 
the controlled corporation. 
‘‘(2) EXCEPTION REGARDING CERTAIN STOCK 
OR
RIGHTS
TO
ACQUIRE
STOCK.—Paragraph (1) 
shall not apply to any stock (or right to acquire 
stock) described in subsection (c)(2)(B). 
‘‘(3) REGULATIONS.—The Secretary shall issue 
such regulations as may be necessary or appropriate 
to prevent avoidance of tax through abuse of sub-
section (b)(3), subsection (c)(3), or this subsection, 
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including to determine whether a disposition of prop-
erty or any other transaction is in connection with 
the reorganization or pursuant to the plan of reorga-
nization. 
‘‘(e) CROSS-REFERENCES.—For provisions providing 
for the inclusion of income or recognition of gain in certain 
distributions, see subsections (d), (e), (f), (g), and (h) of 
section 355.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 361(b)(3) is amended— 
(A) in the first sentence, by inserting ‘‘, 
and except as provided in subsection (d)’’ after 
‘‘paragraph (1)’’, and 
(B) by striking the second and third sen-
tences. 
(2) Section 361(c) is amended— 
(A) in paragraph (3), by inserting ‘‘, and 
except as provided in subsection (d)’’ after ‘‘this 
subsection’’, and 
(B) by striking paragraph (5). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to reorganizations occurring on or 
after the date of the enactment of this Act. 
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SEC. 138144. RENTS FROM PRISON FACILITIES NOT TREAT-
ED AS QUALIFIED INCOME FOR PURPOSES OF 
REIT INCOME TESTS. 
(a) IN GENERAL.—Section 856(d)(2) is amended by 
striking ‘‘and’’ at the end of subparagraph (B), by striking 
the period at the end of subparagraph (C) and inserting 
‘‘, and’’, and by adding at the end the following new sub-
paragraph: 
‘‘(D) any amount received or accrued, di-
rectly or indirectly, with respect to any real or 
personal property which is primarily used in 
connection with any correctional, detention, or 
penal facility.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138145. MODIFICATIONS TO EXEMPTION FOR PORT-
FOLIO INTEREST. 
(a) IN GENERAL.—Section 871(h)(3)(B)(i) is amend-
ed to read as follows: 
‘‘(i) in the case of an obligation issued 
by a corporation— 
‘‘(I) any person who owns 10 
percent or more of the total combined 
voting power of all classes of stock of 
such corporation entitled to vote, or 
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‘‘(II) any person who owns 10 
percent or more of the total value of 
the stock of such corporation, and’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to obligations issued after the date 
of the enactment of this Act. 
SEC. 138146. CERTAIN PARTNERSHIP INTEREST DERIVA-
TIVES. 
(a) IN GENERAL.—Section 871(m) is amended by 
adding at the end the following new paragraphs: 
‘‘(8) SPECIFIED
PARTNERSHIP
INTEREST
IN-
COME EQUIVALENT PAYMENTS.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, any payment made pursuant to a 
sale-repurchase transaction, or a specified no-
tional principal contract, that is determined by 
reference to any income or gain in respect of an 
interest in a specified partnership (or any other 
payment the Secretary determines to be sub-
stantially similar) shall be treated as a dividend 
equivalent. 
‘‘(B) SPECIFIED PARTNERSHIP.—For pur-
poses of this paragraph, the term ‘specified 
partnership’ means— 
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‘‘(i) any publicly-traded partnership 
(as defined in subsection (b) of section 
7704) which is not treated as a corpora-
tion under such section, or 
‘‘(ii) any other partnership as the Sec-
retary may by regulation prescribe. 
‘‘(C) EXCEPTIONS.— 
‘‘(i) EXCEPTED
CONTRACTS.—Sub-
paragraph (A) shall not apply to any con-
tract or transaction the Secretary deter-
mines does not have the potential for tax 
avoidance. 
‘‘(ii) CERTAIN INCOME.—Under such 
regulations as the Secretary shall pre-
scribe, there shall not be taken into ac-
count under subparagraph (A) any pay-
ment the income or gain from which would 
(but for this paragraph) be— 
‘‘(I) exempt from taxes under 
this subtitle, or 
‘‘(II) treated as income from 
sources without the United States if 
paid to a nonresident alien individual. 
‘‘(D) TREATMENT
OF
DEFINITIONS
AND 
SPECIAL RULES WITH RESPECT TO PARTNER-
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SHIPS.—For purposes of this paragraph, rules 
similar to the rules and definitions in para-
graphs (3), (4), (5), (6) and (7) shall apply to 
an interest in a specified partnership in a man-
ner similar to an underlying security, and to in-
come or gain in respect of an interest in a spec-
ified partnership in a manner similar to a divi-
dend. 
‘‘(9) OTHER RULES RELATING TO TREATMENT 
OF DIVIDEND EQUIVALENTS.— 
‘‘(A) IN GENERAL.—A dividend equivalent 
amount under this subsection shall be treated 
as a dividend paid by a domestic corporation. 
‘‘(B) RATE OF TAX FOR PUBLICLY TRADED 
PARTNERSHIP INCOME PAYMENTS.—In the case 
of a payment treated as a dividend equivalent 
pursuant to paragraph (8), the rate of tax im-
posed on any nonresident alien individual or 
foreign corporation with respect to such pay-
ment shall not be less than the rate that would 
be imposed had such individual or foreign cor-
poration, as the case may be, received a divi-
dend from a domestic corporation in which such 
individual or foreign corporation owned less 
than 1 percent (by vote or value) of the stock.’’. 
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(b) WITHHOLDING
OF
TAX
ON
NONRESIDENT 
ALIENS.—Section 1441 is amended by redesignating sub-
section (g) as subsection (h) and by inserting after sub-
section (f) the following new subsection: 
‘‘(g) DEEMED DIVIDEND EQUIVALENT PAYMENTS IN 
CASE OF CERTAIN PUBLICLY TRADED PARTNERSHIPS.— 
The Secretary may prescribe regulations, under rules simi-
lar to the rules of section 1446(f), to determine the man-
ner in which the amount of income and gain is determined 
for purposes of this section in the case of amounts treated 
as a dividend equivalent under section 871(m)(8).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to payments made on or after the 
date that is 180 days after the date of the enactment of 
this Act. 
SEC. 138147. ADJUSTMENTS TO EARNINGS AND PROFITS OF 
CONTROLLED FOREIGN CORPORATIONS. 
(a) IN GENERAL.—Section 312(n) is amended by 
adding at the end the following new paragraph: 
‘‘(9) SPECIAL RULES FOR CONTROLLED FOR-
EIGN CORPORATIONS.—Earnings and profits of any 
controlled foreign corporation shall be determined 
without regard to paragraphs (4), (5), and (6).’’. 
(b) CONFORMING AMENDMENT.—Section 952(c) is 
amended by striking paragraph (3). 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2021, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
SEC. 138148. CERTAIN DIVIDENDS FROM CONTROLLED FOR-
EIGN CORPORATIONS TO UNITED STATES 
SHAREHOLDERS 
TREATED 
AS 
EXTRAOR-
DINARY DIVIDENDS. 
(a) IN GENERAL.—Section 1059 is amended by re-
designating subsection (g) as subsection (h) and by insert-
ing after subsection (f) the following new subsection: 
‘‘(g) TREATMENT
OF CERTAIN DIVIDENDS FROM 
CONTROLLED
FOREIGN
CORPORATIONS
TO
UNITED 
STATES SHAREHOLDERS.— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided by the Secretary, any disqualified CFC divi-
dend shall be treated as an extraordinary dividend to 
which paragraph (1) and (2) of subsection (a) ap-
plies without regard to the period the taxpayer held 
the stock with respect to which such dividend is 
paid. 
‘‘(2) DISQUALIFIED CFC DIVIDEND.— For pur-
poses of this subsection, the term ‘disqualified CFC 
dividend’ means any dividend paid by a controlled 
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foreign corporation to a taxpayer which is a United 
States shareholder of such foreign corporation if— 
‘‘(A) such dividend is attributable to earn-
ings and profits which— 
‘‘(i) were earned by such controlled 
foreign corporation during a disqualified 
period, or 
‘‘(ii) are attributable to gain on prop-
erty which accrued during a disqualified 
period. 
‘‘(3) DISQUALIFIED PERIOD.—For purposes of 
this subsection, the term ‘disqualified period’ means, 
with respect to any dividend paid with respect to any 
stock of a controlled foreign corporation, any period 
during which— 
‘‘(A) such foreign corporation was not a 
controlled foreign corporation, or 
‘‘(B) such stock was not owned by a 
United States shareholder.’’. 
(b) REGULATIONS.—Section 1059(h), as redesig-
nated by subsection (a), is amended— 
(1) by striking ‘‘regulations’’ both places it ap-
pears and inserting ‘‘regulations or other guidance’’, 
and 
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(2) by striking ‘‘and’’ at the end of paragraph 
(1), by striking the period at the end of paragraph 
(2) and inserting ‘‘, and’’, and by adding at the end 
the following new paragraph: 
‘‘(3) providing for the coordination of sub-
section (g) with the other provisions of this chapter, 
including section 1248.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions made after the 
date of the enactment of this Act. 
SEC. 138149. MODIFICATION OF RULES FOR PARTNERSHIP 
INTERESTS HELD IN CONNECTION WITH THE 
PERFORMANCE OF SERVICES. 
(a) IN GENERAL.—Section 1061 is amended by strik-
ing subsections (a) and (b) and inserting the following new 
subsections: 
‘‘(a) IN GENERAL.—If one or more applicable part-
nership interests are held by a taxpayer at any time during 
the taxable year, the taxpayer’s net applicable partnership 
gain for such taxable year shall be treated as short-term 
capital gain. 
‘‘(b) NET APPLICABLE PARTNERSHIP GAIN.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘net applicable 
partnership gain’ means— 
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‘‘(A) the taxpayer’s net long-term capital 
gain determined by only taking into account 
gains and losses with respect to one or more ap-
plicable partnership interests described in sub-
section (a), and 
‘‘(B) any other amounts which are— 
‘‘(i) includible in the gross income of 
the taxpayer with respect to one or more 
such applicable partnership interests, and 
‘‘(ii) treated as capital gain or subject 
to tax at the rate applicable to capital 
gain. 
‘‘(2) HOLDING PERIOD EXCEPTION.— 
‘‘(A) IN GENERAL.—Net applicable part-
nership gain shall be determined without regard 
to any amount which is realized after the date 
that is 5 years after the latest of: 
‘‘(i) The date on which the taxpayer 
acquired substantially all of the applicable 
partnership interest with respect to which 
the amount is realized. 
‘‘(ii) The date on which the partner-
ship in which such applicable partnership 
interest is held acquired substantially all of 
the assets held by such partnership. 
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‘‘(iii) If the partnership described in 
clause (i) owns, directly or indirectly, inter-
ests in one or more other partnerships, the 
dates determined by applying rules similar 
to the rules in clauses (i) and (ii) in the 
case of each such other partnership. 
‘‘(B) SHORTER HOLDING PERIOD IN CER-
TAIN
CIRCUMSTANCES.—Subparagraph 
(A) 
shall be applied by substituting ‘3 years’ for ‘5 
years’ in the case of— 
‘‘(i) a taxpayer (other than a trust or 
estate) with an adjusted gross income (de-
termined without regard to sections 911, 
931 and 933) of less than $400,000, and 
‘‘(ii) any income with respect to any 
applicable partnership interest that is at-
tributable to a real property trade or busi-
ness 
within 
the 
meaning 
of 
section 
469(c)(7)(C). 
‘‘(iii) The Secretary is directed to pro-
vide guidance regarding determination of 
the amount described in subsection (a) as 
applied in paragraph (1) hereof, and any 
necessary and appropriate reporting by any 
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partnership to carry out the purposes of 
this section. — 
‘‘(3) SECTION 83 TO NOT APPLY.—This section 
shall be applied without regard to section 83 and 
any election in effect under section 83(b). 
‘‘(4) SPECIAL RULE.—To the extent provided 
by the Secretary, subsection (a) shall not apply to 
income or gain attributable to any asset not held for 
portfolio investment on behalf of third party inves-
tors.’’. 
(b) MODIFICATIONS RELATED TO DEFINITION OF 
APPLICABLE PARTNERSHIP INTEREST.—Section 1061(c) 
is amended— 
(1) in paragraph (1), by striking ‘‘to such other 
entity’’ and inserting ‘‘with respect to a trade or 
business that is not an applicable trade or business’’, 
(2) in paragraph (3), by striking ‘‘an interest in 
a partnership to the extent of the partnership’s pro-
portionate interest in any of the foregoing’’ and in-
serting ‘‘except as otherwise provided by the Sec-
retary, an interest in a partnership if such partner-
ship has a direct or indirect interest in any of the 
foregoing’’, and 
(3) in paragraph (4)— 
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(A) by striking ‘‘The term’’ and inserting 
‘‘Except as otherwise provided by the Secretary, 
the term’’, and 
(B) in subparagraph (A), by striking ‘‘cor-
poration’’ and inserting ‘‘C corporation’’. 
(c) RECOGNITION OF GAIN ON TRANSFERS OF AP-
PLICABLE PARTNERSHIP INTERESTS
TO UNRELATED 
PARTIES.—Section 1061(d) is amended to read as follows: 
‘‘(d) TRANSFER OF APPLICABLE PARTNERSHIP IN-
TEREST.—If a taxpayer transfers any applicable partner-
ship interest, gain shall be recognized notwithstanding any 
other provision of this subtitle.’’. 
(d) REGULATIONS.—Section 1061(e) is amended by 
striking the period at the end and inserting the following: 
‘‘, including regulations or other guidance to— 
‘‘(1) to prevent the avoidance of the purposes of 
this section, including through the distribution of 
property by a partnership and through carry waiv-
ers, and 
‘‘(2) to provide for the application of this sec-
tion to financial instruments, contracts or interests 
in entities other than partnerships to the extent nec-
essary or appropriate to carry out the purposes of 
this section.’’. 
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(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138150. LIMITATION ON CERTAIN SPECIAL RULES FOR 
SECTION 1202 GAINS. 
(a) IN GENERAL.—Section 1202(a) is amended by 
adding at the end the following new paragraph: 
‘‘(5) 
LIMITATION
ON
CERTAIN
SPECIAL 
RULES.—In the case of the sale or exchange of 
qualified small business stock after September 13, 
2021, paragraphs (3) and (4) shall not apply to any 
taxpayer if— 
‘‘(A) the adjusted gross income of such 
taxpayer (determined without regard to this 
section and sections 911, 931, and 933) equals 
or exceeds $400,000, or 
‘‘(B) such taxpayer is a trust or estate.’’. 
(b) EFFECTIVE DATE.—Except as provided in sub-
section (c), the amendment made by this section shall 
apply to sales and exchanges on or after September 13, 
2021. 
(c) BINDING CONTRACT EXCEPTION.—The amend-
ment made by this section shall not apply to any sale or 
exchange which is made pursuant to written binding con-
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tract which was in effect on September 12, 2021, and is 
not modified in any material respect thereafter. 
SEC. 138151. CONSTRUCTIVE SALES. 
(a) APPLICATION
TO APPRECIATED DIGITAL AS-
SETS.— 
(1) 
IN
GENERAL.—Section 
1259(b)(1) 
is 
amended by inserting ‘‘digital asset,’’ after ‘‘debt in-
strument,’’. 
(2) 
DIGITAL
ASSET.—Section 
1259(d) 
is 
amended by adding at the end the following new 
paragraph: 
‘‘(3) DIGITAL ASSET.—Except as otherwise pro-
vided by the Secretary, the term ‘digital asset’ 
means any digital representation of value which is 
recorded on a cryptographically secured distributed 
ledger or any similar technology as specified by the 
Secretary.’’. 
(b) TREATMENT OF CERTAIN CONTRACTS.—Section 
1259(c)(1)(D) is amended by inserting ‘‘or enters into a 
contract to acquire’’ after ‘‘acquires’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
subsection (a) shall apply to constructive sales (de-
termined after the application of the amendment 
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made by subsection (b)) after the date of the enact-
ment of this Act. 
(2) TREATMENT
OF
CERTAIN
CONTRACTS.— 
The amendment made by subsection (b) shall apply 
to contracts entered into after the date of the enact-
ment of this Act. 
SEC. 138152. RULES RELATING TO COMMON CONTROL. 
(a) CLARIFICATION OF TRADE OR BUSINESS.—Sec-
tion 52(b) is amended by adding at the end the following 
new sentence: ‘‘For purposes of this subsection, the term 
‘trade or business’ includes any activity treated as a trade 
or business under paragraph (5) or (6) of section 469(c).’’ 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138153. WASH SALES BY RELATED PARTIES; WASH 
SALES OF SPECIFIED ASSETS. 
(a) APPLICATION OF WASH SALE RULES TO RE-
LATED PARTIES.—Section 1091(a) is amended by striking 
‘‘the taxpayer has acquired’’ and inserting ‘‘the taxpayer 
(or a related party) has acquired’’. 
(b) MODIFICATION OF BASIS ADJUSTMENT RULE TO 
PREVENT TRANSFER
OF LOSSES
TO RELATED PAR-
TIES.—Section 1091(d) is amended to read as follows: 
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‘‘(d) ADJUSTMENT
TO BASIS
IN CASE
OF WASH 
SALE.—If the taxpayer (or the taxpayer’s spouse) ac-
quires substantially identical specified assets during the 
period which— 
‘‘(1) begins 30 days before the disposition with 
respect to which a deduction was disallowed under 
subsection (a), and 
‘‘(2) ends with the close of the taxpayer’s first 
taxable year which begins after such disposition, 
the basis of such specified assets shall be increased by the 
amount of the deduction so disallowed (reduced by any 
amount of such deduction taken into account under this 
subsection to increase the basis of specified assets pre-
viously acquired).’’ 
(c) RELATED PARTY.—Section 1091 is amended by 
adding at the end the following new subsection: 
‘‘(g) RELATED PARTY.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—The term ‘related party’ 
means— 
‘‘(A) the taxpayer’s spouse, 
‘‘(B) any dependent of the taxpayer and 
any other taxpayer with respect to whom the 
taxpayer is a dependent, 
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‘‘(C) any individual, corporation, partner-
ship, trust, or estate which controls, or is con-
trolled by, (within the meaning of section 
954(d)(3)) the taxpayer or any individual de-
scribed in subparagraph (A) or (B) with respect 
to the taxpayer (or any combination thereof), 
‘‘(D) any individual retirement plan, Ar-
cher MSA (as defined in section 220(d)), or 
health savings account (as defined in section 
223(d)), of the taxpayer or of any individual de-
scribed in subparagraph (A) or (B) with respect 
to the taxpayer, 
‘‘(E) any account under a qualified tuition 
program described in section 529 or a Coverdell 
education savings account (as defined in section 
530(b)) if the taxpayer, or any individual de-
scribed in subparagraph (A) or (B) with respect 
to the taxpayer, is the designated beneficiary of 
such account or has the right to make any deci-
sion with respect to the investment of any 
amount in such account, and 
‘‘(F) any account under— 
‘‘(i) a plan described in section 
401(a), 
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‘‘(ii) an annuity plan described in sec-
tion 403(a), 
‘‘(iii) an annuity contract described in 
section 403(b), or 
‘‘(iv) an eligible deferred compensa-
tion plan described in section 457(b) and 
maintained by an employer described in 
section 457(e)(1)(A), 
if the taxpayer or any individual described in 
subparagraph (A) or (B) with respect to the 
taxpayer has the right to make any decision 
with respect to the investment of any amount in 
such account. 
‘‘(2) RULES FOR DETERMINING STATUS.— 
‘‘(A) RELATIONSHIPS
DETERMINED
AT 
TIME OF ACQUISITION.—Determinations under 
paragraph (1) shall be made as of the time of 
the purchase or exchange referred to in sub-
section (a) except that determinations under 
subparagraphs (A) and (B) of paragraph (1) 
shall be made for the taxable year which in-
cludes such purchase or exchange. 
‘‘(B) DETERMINATION OF MARITAL STA-
TUS.— 
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‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), marital status shall be 
determined under section 7703. 
‘‘(ii) SPECIAL RULE FOR MARRIED IN-
DIVIDUALS FILING SEPARATELY AND LIV-
ING APART.—A husband and wife who— 
‘‘(I) file separate returns for any 
taxable year, and 
‘‘(II) live apart at all times dur-
ing such taxable year, 
shall not be treated as married individuals. 
‘‘(3) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as may be nec-
essary to prevent the avoidance of the purposes of 
this subsection, including regulations which treat 
persons as related parties if such persons are formed 
or availed of to avoid the purposes of this sub-
section.’’. 
(d) WASH SALE RULES TO APPLY WITH RESPECT 
TO SPECIFIED ASSETS.— 
(1) SPECIFIED
ASSETS.—Section 1091, as 
amended by the preceding provisions of this section, 
is amended by adding at the end the following new 
subsection: 
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‘‘(h) SPECIFIED ASSET.—For purposes of this sec-
tion, the term ‘specified asset’ means any of the following: 
‘‘(1) Any security described in subparagraph 
(A), (B), (C), (D), or (E) of section 475(c)(2). 
‘‘(2) Any foreign currency. 
‘‘(3) Any commodity described in subparagraph 
(A), (B), or (C) of section 475(e)(2). 
‘‘(4) Any digital representation of value which 
is recorded on a cryptographically secured distrib-
uted ledger or any similar technology as specified by 
the Secretary. 
Such term shall, except as provided in regulations, include 
contracts or options to acquire or sell any specified as-
sets.’’. 
(2) CONFORMING AMENDMENTS.—Section 1091 
is amended— 
(A) by striking the last sentence of sub-
section (a), 
(B) by striking ‘‘stock or securities’’ each 
place it appears and inserting ‘‘specified as-
sets’’, and 
(C) by striking ‘‘shares of’’ each place it 
appears in subsections (a), (b), and (c). 
(e) EXCEPTION FOR BUSINESS NEEDS AND HEDG-
ING TRANSACTIONS.—Section 1091, as amended by the 
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preceding provisions of this section, is amended by adding 
at the end the following new subsection: 
‘‘(i) EXCEPTION FOR BUSINESS NEEDS AND HEDG-
ING TRANSACTIONS.—Except as provided in regulations 
prescribed by the Secretary, subsection (a) shall not apply 
in the case of any sale or other disposition— 
‘‘(1) of a foreign currency or commodity de-
scribed in subsection (h), and 
‘‘(2) which— 
‘‘(A) is directly related to the business 
needs of a trade or business of the taxpayer 
(other than the trade or business of trading for-
eign currencies or commodities described in 
subsection (h)), or 
‘‘(B) is part of a hedging transaction (as 
defined in section 1221(b)(2)).’’. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales and other dispositions 
after December 31, 2021. 
PART 2—TAX INCREASES FOR HIGH-INCOME 
INDIVIDUALS 
SEC. 138201. INCREASE IN TOP MARGINAL INDIVIDUAL IN-
COME TAX RATE. 
(a) RE-ESTABLISHMENT
OF 39.6 PERCENT RATE 
BRACKET.— 
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(1) MARRIED INDIVIDUALS FILING JOINT RE-
TURNS AND SURVIVING SPOUSES.—The table con-
tained in section 1(j)(2)(A) is amended by striking 
the last two rows and inserting the following: ‘‘ 
‘‘Over $400,000 but not over 
$450,000.
$91,379, plus 35% of the excess over 
$400,000 
Over $450,000 ...............................
$108,879, plus 39.6% of the excess 
over $450,000.’’. 
(2) HEADS OF HOUSEHOLDS.—The table con-
tained in section 1(j)(2)(B) is amended by striking 
the last two rows and inserting the following: ‘‘ 
‘‘Over $200,000 but not over 
$425,000.
$44,298, plus 35% of the excess over 
$200,000 
Over $425,000 ...............................
$123,048, plus 39.6% of the excess 
over $425,000.’’. 
(3) UNMARRIED
INDIVIDUALS
OTHER
THAN 
SURVIVING
SPOUSES
AND
HEADS
OF
HOUSE-
HOLDS.—The table contained in section 1(j)(2)(C) is 
amended by striking the last two rows and inserting 
the following: ‘‘ 
‘‘Over $200,000 but not over 
$400,000.
$45,689.50, plus 35% of the excess 
over $200,000 
Over $400,000 ...............................
$115,689.50, plus 39.6% of the ex-
cess over $400,000.’’. 
(4) MARRIED INDIVIDUALS FILING SEPARATE 
RETURNS.—The 
table 
contained 
in 
section 
1(j)(2)(D) is amended by striking the last two rows 
and inserting the following: ‘‘ 
‘‘Over $200,000 but not over 
$225,000.
$45,689.50, plus 35% of the excess 
over $200,000 
Over $225,000 ...............................
$54,439.50, plus 39.6% of the excess 
over $225,000.’’. 
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(5) ESTATES
AND
TRUSTS.—The table con-
tained in section 1(j)(2)(E) is amended by striking 
the last row and inserting the following: ‘‘ 
‘‘Over $12,500 ...............................
$3,011.50, plus 39.6% of the excess 
over $12,500.’’. 
(b) 
APPLICATION
OF
ADJUSTMENTS.—Section 
1(j)(3) is amended to read as follows: 
‘‘(3) ADJUSTMENTS.—For taxable years begin-
ning after December 31, 2021, the Secretary shall 
prescribe tables which shall apply in lieu of the ta-
bles contained in paragraph (2) in the same manner 
as under paragraphs (1) and (2) of subsection (f) 
(applied without regard to clauses (i) and (ii) of sub-
section (f)(2)(A), except that in prescribing such ta-
bles— 
‘‘(A) except as provided in subparagraph 
(B), subsection (f)(3) shall be applied by sub-
stituting ‘calendar year 2017’ for ‘calendar year 
2016’ in subparagraph (A)(ii) thereof, 
‘‘(B) in the case of adjustments to the dol-
lar amounts at which the 39.6 percent rate 
bracket begins (other than such dollar amount 
in paragraph (2)(E))— 
‘‘(i) no adjustment shall be made for 
taxable years beginning after December 
31, 2021, and before January 1, 2023, and 
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‘‘(ii) in the case of any taxable year 
beginning after December 31, 2022, sub-
section (f)(3) shall be applied by sub-
stituting ‘calendar year 2021’ for ‘calendar 
year 2016’, 
‘‘(C) subsection (f)(7)(B) shall apply to 
any unmarried individual other than a surviving 
spouse, and 
‘‘(D) subsection (f)(8) shall not apply.’’. 
(c) MODIFICATION TO 39.6 PERCENT RATE BRACK-
ET FOR HIGH-INCOME TAXPAYERS AFTER 2025.—Section 
1(i)(3) is amended to read as follows: 
‘‘(3) MODIFICATIONS TO 39.6 PERCENT RATE 
BRACKET.—In the case of taxable years beginning 
after December 31, 2025— 
‘‘(A) IN GENERAL.—The rate of tax under 
subsections (a), (b), (c), and (d) on a taxpayer’s 
taxable income in excess of the 39.6 percent 
rate bracket threshold shall be taxed at a rate 
of 39.6 percent. 
‘‘(B) 
39.6 
PERCENT
RATE
BRACKET 
THRESHOLD.—For purposes of this paragraph, 
the term ‘39.6 percent rate bracket threshold’ 
means— 
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‘‘(i) in the case any taxpayer de-
scribed in subsection (a), $450,000, 
‘‘(ii) in the case of any taxpayer de-
scribed in subsection (b), $425,000, 
‘‘(iii) in the case of any taxpayer de-
scribed in subsection (c), $400,000, and 
‘‘(iv) in the case of any taxpayer de-
scribed in subsection (d), $225,000. 
‘‘(C) INFLATION ADJUSTMENT.—For pur-
poses of this paragraph, with respect to taxable 
years beginning in calendar years after 2025, 
each of the dollar amounts in subparagraph (B) 
shall be adjusted in the same manner as under 
paragraph (1)(C)(i), except that subsection 
(f)(3)(A)(ii) shall be applied by substituting 
‘2021’ for ‘2016’.’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Section 1(j)(1) is amended by striking ‘‘De-
cember 31, 2017’’ and inserting ‘‘December 31, 
2021’’. 
(2) The heading of section 1(j) is amended by 
striking ‘‘2018’’ and inserting ‘‘2022’’. 
(3) The heading of section 1(i) is amended by 
striking ‘‘RATE REDUCTIONS’’ and inserting ‘‘MODI-
FICATIONS’’ 
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(4) Section 15(f) is amended by striking ‘‘rate 
reductions’’ and inserting ‘‘modifications’’. 
(e) SECTION 15 NOT TO APPLY.—For rules providing 
that section 15 of the Internal Revenue Code of 1986 does 
not apply to the amendments made by this section, see 
sections 1(j)(6) and 15(f) of the Internal Revenue Code 
of 1986. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138202. INCREASE IN CAPITAL GAINS RATE FOR CER-
TAIN HIGH INCOME INDIVIDUALS. 
(a) IN GENERAL.—Section 1(h)(1)(D) is amended by 
striking ‘‘20 percent’’ and inserting ‘‘25 percent’’. 
(b) RE-ALIGNMENT OF 25 PERCENT CAPITAL GAINS 
RATE THRESHOLD WITH 39.6 PERCENT INCOME TAX 
RATE THRESHOLD.—Section 1(j)(5) is amended— 
(1) by striking subparagraphs (A) and (B) and 
inserting the following new subparagraphs: 
‘‘(A) IN GENERAL.—Section 1(h)(1) shall 
be applied by substituting ‘below the maximum 
zero rate amount’ for ‘which would (without re-
gard to this paragraph) be taxed at a rate 
below 25 percent’ in subparagraph (B)(i). 
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‘‘(B) MAXIMUM ZERO RATE AMOUNT DE-
FINED.—For purposes of applying section 1(h) 
with the modifications described in subpara-
graph (A), the maximum zero rate amount shall 
be— 
‘‘(i) in the case of a joint return or 
surviving spouse, $77,200, 
‘‘(ii) in the case of an individual who 
is a head of household (as defined in sec-
tion 2(b)), $51,700, 
‘‘(iii) in the case of any other indi-
vidual (other than an estate or trust), an 
amount equal to 1⁄2 of the amount in effect 
for the taxable year under subclause (I), 
and 
‘‘(iv) in the case of an estate or trust, 
$2,600.’’, and 
(2) by striking ‘‘each of the dollar amounts in 
clauses (i) and (ii)’’ in subparagraph (C) and insert-
ing ‘‘each dollar amount in clause (i), (ii), or (iv)’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 55(b)(3) is amended by striking 
subparagraph (D) and redesignating subparagraph 
(E) as subparagraph (D). 
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(2) The following provisions are each amended 
by striking ‘‘20 percent’’ and inserting ‘‘25 per-
cent’’: 
(A) Section 531. 
(B) Section 541. 
(C) Section 1445(e)(1). 
(D) Section 1445(e)(6). 
(E) The second sentence of section 
7518(g)(6)(A). 
(3) Section 53511(f)(2) of title 46, United 
States Code, is amended to read as follows: 
‘‘(2) MAXIMUM TAX RATE.—For that portion of 
a nonqualified withdrawal made from the capital 
gain account during a taxable year to which section 
1(h) of such Code (26 U.S.C. 1(h)) applies, the tax 
rate used under paragraph (1)(B) may not exceed 
25 percent.’’. 
(d) SECTION 15 NOT TO APPLY.—The amendments 
made by this section shall not be treated as a change in 
a rate of tax for purposes of section 15 of the Internal 
Revenue Code of 1986. 
(e) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
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this section shall apply to taxable years ending after 
September 13, 2021. 
(2) RE-ALIGNMENT
OF
PERCENT
CAPITAL 
GAINS RATE THRESHOLD WITH 39.6 PERCENT IN-
COME
TAX
RATE
THRESHOLD.—The amendments 
made by subsection (b) shall apply to taxable years 
beginning after December 31, 2021. 
(3) WITHHOLDING UNDER SECTIONS 1445 AND 
1446.—The amendments made by subparagraphs 
(C) and (D) of subsection (c)(2) shall apply to dis-
positions after the date of the enactment of this Act. 
(f) TRANSITIONAL RULES
FOR TAXABLE YEARS 
WHICH INCLUDE SEPTEMBER 13, 2021.— 
(1) IN
GENERAL.—For purposes of applying 
section 1(h) of the Internal Revenue Code of 1986 
with respect to any taxable year which includes Sep-
tember 13, 2021, the amount determined under sub-
paragraph (D) of section 1(h)(1) of such Code shall 
be the sum of— 
(A) 20 percent of the lesser of— 
(i) the amount on which a tax is de-
termined under such subparagraph (D) 
(without regard to this subsection), or 
(ii) the amount (if any) of net capital 
gain determined by taking into account 
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only dividends, gains, and losses for the 
portion of the taxable year on or before 
September 13, 2021 (determined without 
regard to collectibles gain or loss, gain de-
scribed in section 1(h)(6)(A)(i) of such 
Code, and section 1202 gain), plus— 
(B) 25 percent of the excess (if any) of the 
amount described in subparagraph (A)(i) over 
the amount described in subparagraph (A)(ii). 
(2) SPECIAL RULE FOR BINDING CONTRACTS 
ENTERED INTO PRIOR TO SEPTEMBER 13, 2021.—For 
purposes of paragraph (1), a gain recognized in the 
taxable year that includes September 13, 2021, shall 
be treated as being with respect to the portion of 
such taxable year on or before such date if such gain 
arises from a transaction which occurs pursuant to 
a written binding contract entered into on or before 
such date (and which is not modified thereafter in 
any material respect). 
(3) ALTERNATIVE MINIMUM TAX.—Rules simi-
lar to the rules of paragraph (1) shall apply for pur-
poses of applying section 55(b)(3) of such Code. 
(4) APPLICATION TO PASS-THRU ENTITIES.—In 
applying this subsection with respect to any pass- 
thru entity, the determination of when dividends, 
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gains, and losses are properly taken into account 
shall be made at the entity level. 
(5) DEFINITIONS OF CERTAIN TERMS.—Terms 
used in this subsection which are also used in sec-
tion 1(h) of such Code shall have the respective 
meanings that such terms have in such section. 
SEC. 138203. APPLICATION OF NET INVESTMENT INCOME 
TAX TO TRADE OR BUSINESS INCOME OF 
CERTAIN HIGH INCOME INDIVIDUALS. 
(a) IN GENERAL.—Section 1411 is amended by add-
ing at the end the following new subsection: 
‘‘(f) APPLICATION TO CERTAIN HIGH INCOME INDI-
VIDUALS.— 
‘‘(1) IN GENERAL.—In the case of any indi-
vidual whose modified adjusted gross income for the 
taxable year exceeds the high income threshold 
amount, subsection (a)(1) shall be applied by sub-
stituting ‘the greater of specified net income or net 
investment income’ for ‘net investment income’ in 
subparagraph (A) thereof. 
‘‘(2) PHASE-IN OF INCREASE.—The increase in 
the tax imposed under subsection (a)(1) by reason of 
the application of paragraph (1) of this subsection 
shall not exceed the amount which bears the same 
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ratio to the amount of such increase (determined 
without regard to this paragraph) as— 
‘‘(A) the excess described in paragraph (1), 
bears to 
‘‘(B) $100,000 (1⁄2 such amount in the 
case of a married taxpayer (as defined in sec-
tion 7703) filing a separate return). 
‘‘(3) HIGH INCOME THRESHOLD AMOUNT.—For 
purposes of this subsection, the term ‘high income 
threshold amount’ means— 
‘‘(A) except as provided in subparagraph 
(B) or (C), $400,000, 
‘‘(B) in the case of a taxpayer making a 
joint return under section 6013 or a surviving 
spouse (as defined in section 2(a)), $500,000, 
and 
‘‘(C) in the case of a married taxpayer (as 
defined in section 7703) filing a separate re-
turn, 1⁄2 of the dollar amount determined under 
subparagraph (B). 
‘‘(4) SPECIFIED NET INCOME.—For purposes of 
this section, the term ‘specified net income’ means 
net investment income determined— 
‘‘(A) without regard to the phrase ‘other 
than such income which is derived in the ordi-
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nary course of a trade or business not described 
in paragraph (2),’ in subsection (c)(1)(A)(i), 
‘‘(B) without regard to the phrase ‘de-
scribed 
in 
paragraph 
(2)’ 
in 
subsection 
(c)(1)(A)(ii), 
‘‘(C) without regard to the phrase ‘other 
than property held in a trade or business not 
described in paragraph (2)’ in subsection 
(c)(1)(A)(iii), 
‘‘(D) without regard to paragraphs (2), 
(3), and (4) of subsection (c), and 
‘‘(E) by treating paragraphs (5) and (6) of 
section 469(c) as applying for purposes of sub-
section (c) of this section.’’. 
(b) APPLICATION TO TRUSTS AND ESTATES.—Sec-
tion 1411(a)(2)(A) is amended by striking ‘‘undistributed 
net investment income’’ and inserting ‘‘the greater of un-
distributed specified net income or undistributed net in-
vestment income’’. 
(c) CLARIFICATIONS WITH RESPECT
TO DETER-
MINATION OF NET INVESTMENT INCOME.— 
(1) WAGES SUBJECT TO FICA NOT TAKEN INTO 
ACCOUNT.—Section 1411(c)(6) is amended by in-
serting ‘‘or wages received with respect to employ-
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ment on which a tax is imposed under section 
3101(b)’’ before the period at the end. 
(2) NET OPERATING LOSSES NOT TAKEN INTO 
ACCOUNT.—Section 1411(c)(1)(B) is amended by in-
serting ‘‘(other than section 172)’’ after ‘‘this sub-
title’’. 
(3) INCLUSION
OF
CERTAIN
FOREIGN
IN-
COME.— 
(A) IN GENERAL.—Section 1411(c)(1)(A) 
is amended by striking ‘‘and’’ at the end of 
clause (ii), by striking ‘‘over’’ at the end of 
clause (iii) and inserting ‘‘and’’, and by adding 
at the end the following new clause: 
‘‘(iv) any amount includible in gross 
income under section 951, 951A, 1293, or 
1296, over’’. 
(B) PROPER
TREATMENT
OF
CERTAIN 
PREVIOUSLY TAXED INCOME.—Section 1411(c) 
is amended by adding at the end the following 
new paragraph: 
‘‘(7) CERTAIN PREVIOUSLY TAXED INCOME.— 
The Secretary shall issue regulations or other guid-
ance providing for the treatment of distributions of 
amounts previously included in gross income for pur-
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poses of chapter 1 but not previously subject to tax 
under this section.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
(e) TRANSITION RULE.—The regulations or other 
guidance issued by the Secretary under section 1411(c)(7) 
of the Internal Revenue Code of 1986 (as added by this 
section) shall include provisions which provide for the 
proper coordination and application of clauses (i) and (iv) 
of section 1411(c)(1)(A) with respect to— 
(1) taxable years beginning on or before De-
cember 31, 2021, and 
(2) taxable years beginning after such date. 
SEC. 138204. LIMITATION ON DEDUCTION OF QUALIFIED 
BUSINESS INCOME FOR CERTAIN HIGH IN-
COME INDIVIDUALS. 
(a) IN GENERAL.—Section 199A(a) is amended by 
striking ‘‘or’’ at the end of paragraph (1), by striking the 
period at the end of paragraph (2) and inserting ‘‘, or’’, 
and by adding at the end the following new paragraph: 
‘‘(3) the following amount: 
‘‘(A) $500,000 in the case of a joint return 
or surviving spouse (as defined in section 2(a)), 
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‘‘(B) $400,000 in the case of any taxpayer 
not described in subparagraph (A), (C), or (D), 
‘‘(C) $250,000 in the case of a married in-
dividual filing a separate return, or 
‘‘(D) $10,000 in the case of an estate or 
trust.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138205. LIMITATIONS ON EXCESS BUSINESS LOSSES 
OF NONCORPORATE TAXPAYERS. 
(a) LIMITATION MADE PERMANENT.— 
(1) IN GENERAL.—Section 461(l)(1) is amend-
ed to read as follows: 
‘‘(1) LIMITATION.—In the case of any taxpayer 
other than a corporation, any excess business loss of 
the taxpayer for the taxable year shall not be al-
lowed.’’. 
(2) CONFORMING AMENDMENT.—Section 461 is 
amended by striking subsection (j). 
(b) MODIFICATION OF CARRYOVER OF DISALLOWED 
LOSSES.—Section 461(l)(2) is amended to read as follows: 
‘‘(2) DISALLOWED LOSS CARRYOVER.—Any loss 
which is disallowed under paragraph (1) for any tax-
able year shall be treated (solely for purposes of this 
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chapter) as a deduction described in paragraph 
(3)(A)(i) for the next taxable year.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2020. 
SEC. 138206. SURCHARGE ON HIGH INCOME INDIVIDUALS, 
ESTATES, AND TRUSTS. 
(a) IN GENERAL.—Part I of subchapter A of chapter 
1 is amended by inserting after section 1 the following 
new section: 
‘‘SEC. 1A. SURCHARGE ON HIGH INCOME INDIVIDUALS, ES-
TATES, AND TRUSTS. 
‘‘(a) GENERAL RULE.—In the case of a taxpayer 
other than a corporation, there is hereby imposed (in addi-
tion to any other tax imposed by this subtitle) a tax equal 
to 3 percent of so much of the modified adjusted gross 
income of the taxpayer as exceeds— 
‘‘(1) $5,000,000, in the case of any taxpayer 
not described in paragraph (2) or (3), 
‘‘(2) $2,500,000, in the case of a married indi-
vidual filing a separate return, and 
‘‘(3) $100,000, in the case of an estate or trust. 
‘‘(b) MODIFIED ADJUSTED GROSS INCOME.—For 
purposes of this section, the term ‘modified adjusted gross 
income’ means adjusted gross income reduced by any de-
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duction (not taken into account in determining adjusted 
gross income) allowed for investment interest (as defined 
in section 163(d)). In the case of an estate or trust, ad-
justed gross income shall be determined as provided in sec-
tion 67(e). 
‘‘(c) SPECIAL RULES.— 
‘‘(1) NONRESIDENT ALIEN.—In the case of a 
nonresident alien individual, only amounts taken 
into account in connection with the tax imposed 
under section 871(b) shall be taken into account 
under this section. 
‘‘(2) 
CITIZENS
AND
RESIDENTS
LIVING 
ABROAD.—The dollar amount applicable to any tax-
payer under paragraph (1), (2), or (3) of subsection 
(a) (as the case may be) shall be decreased (but not 
below zero) by the excess (if any) of— 
‘‘(A) the amounts excluded from the tax-
payer’s gross income under section 911, over 
‘‘(B) the amounts of any deductions or ex-
clusions disallowed under section 911(d)(6) 
with respect to the amounts described in sub-
paragraph (A). 
‘‘(3) CHARITABLE
TRUSTS.—Subsection (a) 
shall not apply to a trust all the unexpired interests 
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in which are devoted to one or more of the purposes 
described in section 170(c)(2)(B). 
‘‘(4) NOT TREATED AS TAX IMPOSED BY THIS 
CHAPTER
FOR
CERTAIN
PURPOSES.—The tax im-
posed under this section shall not be treated as tax 
imposed by this chapter for purposes of determining 
the amount of any credit under this chapter or for 
purposes of section 55.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part I of subchapter A of chapter 1 is amended by 
inserting after the item relating to section 1 the following 
new item: 
‘‘Sec. 1A. Surcharge on high income individuals.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138207. TERMINATION OF TEMPORARY INCREASE IN 
UNIFIED CREDIT. 
(a) IN GENERAL.—Section 2010(c)(3) of the Internal 
Revenue Code of 1986 is amended by striking subpara-
graph (C). 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to estates of decedents dying and 
gifts made after December 31, 2021. 
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2240 
SEC. 138208. INCREASE IN LIMITATION ON ESTATE TAX 
VALUATION REDUCTION FOR CERTAIN REAL 
PROPERTY USED IN FARMING OR OTHER 
TRADES OR BUSINESSES. 
(a) IN GENERAL.—Section 2032A(a)(2) of the Inter-
nal Revenue Code of 1986 is amended by striking 
‘‘$750,000’’ and inserting ‘‘$11,700,000’’. 
(b) INFLATION ADJUSTMENT.—Section 2032A(a)(3) 
of such Code is amended— 
(1) by striking ‘‘$750,000’’ both places it ap-
pears and inserting ‘‘$11,700,000’’, 
(2) by striking ‘‘1998’’ in the matter preceding 
subparagraph (A) and inserting ‘‘2021’’, and 
(3) by striking ‘‘1997’’ in subparagraph (B) 
and inserting ‘‘2020’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to the estates of decedents dying 
after December 31, 2021. 
SEC. 138209. CERTAIN TAX RULES APPLICABLE TO GRANT-
OR TRUSTS. 
(a) APPLICATION OF TRANSFER TAXES.— 
(1) IN GENERAL.—Subtitle B of the Internal 
Revenue Code of 1986 is amended by adding at the 
end the following new chapter: 
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2241 
‘‘CHAPTER 16—SPECIAL RULES FOR 
GRANTOR TRUSTS 
‘‘Sec. 2901. Application of transfer taxes. 
‘‘SEC. 2901. APPLICATION OF TRANSFER TAXES. 
‘‘(a) IN GENERAL.—In the case of any portion of a 
trust with respect to which the grantor is the deemed 
owner— 
‘‘(1) the value of the gross estate of the de-
ceased deemed owner of such portion shall include 
all assets attributable to that portion at the time of 
the death of such owner, 
‘‘(2) any distribution (other than to the deemed 
owner or the deemed owner’s spouse) from such por-
tion to one or more beneficiaries during the life of 
the deemed owner of such portion (other than in dis-
charge of an obligation of the deemed owner) shall 
be treated as a transfer by gift for purposes of chap-
ter 12, 
‘‘(3) if at any time during the life of the 
deemed owner of such portion, such owner ceases to 
be treated as the owner of such portion under sub-
part E of part 1 of subchapter J of chapter 1, all 
assets attributable to such portion at such time shall 
be treated for purposes of chapter 12 as a transfer 
by gift made by the deemed owner, and 
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‘‘(4) proper adjustment shall be made with re-
spect to amounts so included in the gross estate, or 
treated as transferred by gift, pursuant to para-
graph (1), (2), or (3), as the case may be, to ac-
count for amounts treated previously as taxable gifts 
under chapter 12 with respect to previous transfers 
to the trust by the deemed owner. 
‘‘(b) EXCEPTIONS.—This section shall not apply to 
any trust that is includible in the gross estate of the 
deemed owner (without regard to subsection (a)(1)). 
‘‘(c) DEEMED OWNER DEFINED.—For purposes of 
this chapter, the term ‘deemed owner’ means any person 
who is treated as the owner of a portion of a trust under 
subpart E of part 1 of subchapter J of chapter 1.’’. 
(2) CROSS-REFERENCE.—Section 2511 of such 
Code is amended by adding at the end the following 
new subsection: 
‘‘(c) CROSS-REFERENCE.—For treatment of transfers 
to grantor trusts, see section 2901.’’. 
(3) CLERICAL
AMENDMENT.—The table of 
chapters for subtitle B of such Code is amended by 
adding at the end the following new item: 
‘‘CHAPTER 16. SPECIAL RULES FOR GRANTOR TRUSTS’’. 
(b) CERTAIN SALES TO GRANTOR TRUST.— 
(1) IN GENERAL.—Part IV of subchapter O of 
chapter 1 of such Code is amended by redesignating 
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section 1062 as section 1063 and inserting after sec-
tion 1061 the following new section: 
‘‘SEC. 1062. CERTAIN SALES BETWEEN GRANTOR TRUST 
AND DEEMED OWNER. 
‘‘(a) IN GENERAL.—In the case of any transfer of 
property between a trust and the a person who is the 
deemed owner of the trust (or portion thereof), such treat-
ment of the person as the owner of the trust shall be dis-
regarded in determining whether the transfer is a sale or 
exchange for purposes of this chapter. 
‘‘(b) EXCEPTION.—Subsection (a) shall not apply to 
any trust that is fully revocable by the deemed owner. 
‘‘(c) DEEMED OWNER.—For purposes of this section, 
the term ‘deemed owner’ means any person who is treated 
as the owner of a portion of a trust under subpart E of 
part 1 of subchapter J.’’. 
(2) RELATED TAXPAYERS.—Section 267(b) is 
amended by striking ‘‘or’’ at the end of paragraph 
(12), by striking the period at the end of paragraph 
(13) and inserting ‘‘; or’’, and by adding at the end 
the following new paragraph: 
‘‘(14) A grantor trust and the person treated as 
the owner of the trust (or portion thereof) under 
subpart E of part 1 of subchapter J of this chap-
ter.’’. 
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2244 
(3) CLERICAL AMENDMENT.—The table of sec-
tions for part IV of subchapter O of chapter 1 of 
such Code is amended by striking the item relating 
to section 1062 and inserting the following new 
items: 
‘‘Sec. 1062. Certain sales to grantor trusts. 
‘‘Sec. 1063. Cross references.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply— 
(1) to trusts created on or after the date of the 
enactment of this Act, and 
(2) to any portion of a trust established before 
the date of the enactment of this Act which is attrib-
utable to a contribution made on or after such date. 
SEC. 138210. VALUATION RULES FOR CERTAIN TRANSFERS 
OF NONBUSINESS ASSETS. 
(a) IN GENERAL.—Section 2031 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(d) as subsection (f) and by inserting after subsection (c) 
the following new subsections: 
‘‘(d) VALUATION RULES FOR CERTAIN TRANSFERS 
OF NONBUSINESS ASSETS.—For purposes of this chapter 
and chapter 12— 
‘‘(1) IN GENERAL.—In the case of the transfer 
of any interest in an entity other than an interest 
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which is actively traded (within the meaning of sec-
tion 1092)— 
‘‘(A) the value of any nonbusiness assets 
held by the entity with respect to such interest 
shall be determined as if the transferor had 
transferred such assets directly to the trans-
feree (and no valuation discount shall be al-
lowed with respect to such nonbusiness assets), 
and 
‘‘(B) such nonbusiness assets shall not be 
taken into account in determining the value of 
the interest in the entity. 
‘‘(2) NONBUSINESS ASSETS.—For purposes of 
this subsection— 
‘‘(A) IN
GENERAL.—The term ‘nonbusi-
ness asset’ means any passive asset which— 
‘‘(i) is held for the production or col-
lection of income, and 
‘‘(ii) is not used in the active conduct 
of a trade or business. 
‘‘(B) PASSIVE
ASSETS
USED
IN
ACTIVE 
CONDUCT OF TRADE OR BUSINESS.—Except as 
provided in subparagraph (C), a passive asset 
shall not be treated for purposes of subpara-
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graph (A) as used in the active conduct of a 
trade or business unless— 
‘‘(i) the asset is property described in 
paragraph (1) or (4) of section 1221(a) or 
is a hedge with respect to such property, 
or 
‘‘(ii) the asset is real property used in 
the active conduct of 1 or more real prop-
erty trades or businesses (within the mean-
ing of section 469(c)(7)(C)) in which the 
transferor materially participates and with 
respect to which the transferor meets the 
requirements of section 469(c)(7)(B)(ii). 
For purposes of clause (ii), material participa-
tion shall be determined under the rules of sec-
tion 469(h), except that section 469(h)(3) shall 
be applied without regard to the limitation to 
farming activity. 
‘‘(C) EXCEPTION
FOR
WORKING
CAP-
ITAL.—Any passive asset which is held as a 
part of the reasonably required working capital 
needs of a trade or business shall be treated as 
used in the active conduct of a trade or busi-
ness. 
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‘‘(3) PASSIVE
ASSET.—For purposes of this 
subsection, the term ‘passive asset’ means any— 
‘‘(A) cash or cash equivalents, 
‘‘(B) except to the extent provided by the 
Secretary, stock in a corporation or any other 
equity, profits, or capital interest in a partner-
ship, 
‘‘(C) evidence of indebtedness, option, for-
ward or futures contract, notional principal con-
tract, or derivative, 
‘‘(D) asset described in clause (iii), (iv), or 
(v) of section 351(e)(1)(B), 
‘‘(E) annuity, 
‘‘(F) real property, 
‘‘(G) asset (other than a patent, trade-
mark, or copyright) which produces royalty in-
come, 
‘‘(H) commodity, 
‘‘(I) collectible (within the meaning of sec-
tion 408(m)), 
‘‘(J) personal property (as defined in sec-
tion 1092(d)(1)) or position in personal prop-
erty 
(within 
the 
meaning 
of 
section 
1092(d)(2)), or 
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‘‘(K) other asset specified in regulations 
prescribed by the Secretary. 
‘‘(4) LOOK-THRU RULES.— 
‘‘(A) IN GENERAL.—If a passive asset of 
an entity consists of a 10-percent interest in 
any other entity, this subsection shall be ap-
plied by disregarding the 10-percent interest 
and by treating the entity as holding directly its 
ratable share of the assets of the other entity. 
This subparagraph shall be applied successively 
to any 10-percent interest of such other entity 
in any other entity. 
‘‘(B) 10-PERCENT
INTEREST.—The term 
‘10-percent interest’ means— 
‘‘(i) in the case of an interest in a cor-
poration, ownership of at least 10 percent 
(by vote or value) of the stock in such cor-
poration, 
‘‘(ii) in the case of an interest in a 
partnership, ownership of at least 10 per-
cent of the capital or profits interest in the 
partnership, and 
‘‘(iii) in any other case, ownership of 
at least 10 percent of the beneficial inter-
ests in the entity. 
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For purposes of the preceding sentence, the 
rules prescribed by section 318(a) shall apply. 
‘‘(5) COORDINATION WITH SUBSECTION (b).— 
Subsection (b) shall apply after the application of 
this subsection. 
‘‘(6) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as the Secretary 
determines is necessary or appropriate to carry out 
this subsection, including regulations or other guid-
ance to— 
‘‘(A) determine whether a passive asset is 
used in the active conduct of a trade or busi-
ness, in addition to the instances described in 
paragraph (2)(B), and 
‘‘(B) determine whether a passive asset is 
held as a part of the reasonably required work-
ing capital needs of a trade or business under 
paragraph (2)(C).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transfers after the date of the 
enactment of this Act. 
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PART 3—MODIFICATIONS OF RULES RELATING 
TO RETIREMENT PLANS 
Subpart A—Limitations on High-income Taxpayers 
With Large Retirement Account Balances 
SEC. 138301. CONTRIBUTION LIMIT FOR INDIVIDUAL RE-
TIREMENT PLANS OF HIGH-INCOME TAX-
PAYERS WITH LARGE ACCOUNT BALANCES. 
(a) CONTRIBUTION LIMIT.— 
(1) IN GENERAL.—Subpart A of part I of sub-
chapter D of chapter 1 is amended by adding at the 
end the following: 
‘‘SEC. 409B. CONTRIBUTION LIMIT ON INDIVIDUAL RETIRE-
MENT PLANS OF HIGH-INCOME TAXPAYERS 
WITH LARGE ACCOUNT BALANCES. 
‘‘(a) GENERAL RULE.—Notwithstanding any other 
provision of this title, in the case of an individual who is 
an applicable taxpayer for a taxable year, no annual addi-
tions which are allocable to such taxable year shall be 
made by, or on behalf of, such individual to any individual 
retirement plan to the extent such annual additions exceed 
the excess (if any) of— 
‘‘(1) the applicable dollar amount for such tax-
able year, over 
‘‘(2) the aggregate vested balances to the credit 
of the individual (whether as a participant, owner, or 
beneficiary) in all applicable retirement plans (deter-
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mined as of the close of the calendar year preceding 
the calendar year in which such taxable year begins). 
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) ANNUAL ADDITION.— 
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, the term ‘annual addition’ 
means any contribution to an individual retire-
ment plan. 
‘‘(B) CONTRIBUTIONS TO SEP AND SIMPLE 
PLANS.—In the case of any employer or em-
ployee contributions by, or on behalf of, an indi-
vidual to a simplified employee pension under 
section 408(k) or a simple retirement account 
under section 408(p)— 
‘‘(i) such contributions shall not be 
treated as annual additions for purposes of 
applying the limitation under subsection 
(a), but 
‘‘(ii) the excess described in sub-
section (a) shall be reduced by the amount 
of such contributions in applying such limi-
tation to other annual additions with re-
spect to such individual. 
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‘‘(C) 
ROLLOVER
CONTRIBUTIONS
DIS-
REGARDED.—A rollover contribution under sec-
tion 
402(c), 
402A(c)(3)(A), 
403(a)(4), 
403(b)(8), 
408(d)(3)(A), 
408A(e)(1), 
or 
457(e)(16) shall not be treated as an annual 
addition. 
‘‘(D) ACCOUNTS ACQUIRED BY DEATH OR 
DIVORCE OR SEPARATION.—The acquisition of 
an individual retirement plan (or the transfer to 
or contribution of amounts to an individual re-
tirement plan) by reason of— 
‘‘(i) the death of another individual, 
or 
‘‘(ii) divorce or separation (pursuant 
to section 408(d)(6)), 
shall not be treated as an annual addition. 
‘‘(2) APPLICABLE DOLLAR AMOUNT.—The term 
‘applicable dollar amount’ means $10,000,000. 
‘‘(3) APPLICABLE
RETIREMENT
PLAN.—The 
term ‘applicable retirement plan’ means— 
‘‘(A) a defined contribution plan to which 
section 401(a) or 403(a) applies, 
‘‘(B) an annuity contract under section 
403(b), 
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‘‘(C) an eligible deferred compensation 
plan described in section 457(b) which is main-
tained by an eligible employer described in sec-
tion 457(e)(1)(A), or 
‘‘(D) an individual retirement plan. 
‘‘(4) APPLICABLE TAXPAYER.— 
‘‘(A) IN GENERAL.—The term ‘applicable 
taxpayer’ means, with respect to any taxable 
year, a taxpayer whose adjusted taxable income 
for such taxable year exceeds the amount deter-
mined under subparagraph (B). 
‘‘(B) DOLLAR LIMIT.—The amount deter-
mined under this subparagraph for any taxable 
year is— 
‘‘(i) $400,000 for an individual who is 
a taxpayer not described in clause (ii) or 
(iii), 
‘‘(ii) $425,000 in the case of an indi-
vidual who is a head of household (as de-
fined in section 2(b)), and 
‘‘(iii) $450,000 in the case of an indi-
vidual who is a married individual filing a 
joint return or a surviving spouse (as de-
fined in section 2(a)). 
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‘‘(C) ADJUSTED TAXABLE INCOME.—The 
term ‘adjusted taxable income’ means taxable 
income determined without regard to— 
‘‘(i) any deduction for annual addi-
tions to individual retirement plans to 
which subsection (a) applies, and 
‘‘(ii) any increase in minimum re-
quired distributions by reason of section 
4974(e). 
‘‘(5) ADJUSTMENTS FOR INFLATION.— 
‘‘(A) IN
GENERAL.—In the case of any 
taxable year beginning after 2022, each of the 
dollar amounts under paragraph (2) and para-
graph (4)(B) shall be increased by an amount 
equal to the product of— 
‘‘(i) such dollar amount, and 
‘‘(ii) the cost-of-living adjustment 
under section 1(f)(3) for the calendar year 
in which such taxable year begins, deter-
mined by substituting ‘calendar year 2021’ 
for ‘calendar year 1992’ in subparagraph 
(B) thereof. 
‘‘(B) ROUNDING.—If any amount as ad-
justed under subparagraph (A) is not— 
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‘‘(i) in the case of the dollar amount 
under 
paragraph 
(2), 
a 
multiple 
of 
$250,000, such amount shall be rounded 
to the next lowest multiple of $250,000, 
and 
‘‘(ii) in the case of a dollar amount 
under paragraph (4), a multiple of $1,000, 
such amount shall be rounded to the next 
lowest multiple of $1,000. 
‘‘(c) REGULATIONS.—The Secretary shall prescribe 
such regulations and guidance as are necessary or appro-
priate to carry out the purposes of this section, including 
regulations or guidance that provide for the application 
of this section and section 4974(e) in the case of plans 
with a valuation date other than the last day of a calendar 
year.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) The table of contents for subpart A of 
part I of subchapter D of chapter 1 is amended 
by adding after the item relating to section 
409A the following new item: 
‘‘Sec. 409B. Contribution limit on individual retirement plans of high-income 
taxpayers with large account balances.’’. 
(B) Section 408(r) is amended by adding 
at the end the following new paragraph: 
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‘‘(3) For additional limitation on contributions 
to individual retirement plans with large account 
balances, see sections 402A(c)(3)(A) and 409B.’’. 
(b) EXCISE TAX ON EXCESS ANNUAL ADDITIONS.— 
(1) IN GENERAL.—Section 4973 is amended by 
adding at the end the following new subsection: 
‘‘(i) SPECIAL RULE FOR INDIVIDUAL RETIREMENT 
PLANS WITH EXCESS ANNUAL ADDITIONS.—For pur-
poses of this section, in the case of individual retirement 
plans, the term ‘excess contributions’ with respect to any 
taxable year means the sum of— 
‘‘(1) the excess of the annual additions (within 
the meaning of section 409B(b)(1)) to such plans 
over the limitation under section 409B(a) for such 
taxable year, reduced by the amount of any excess 
contributions determined under subsections (b) and 
(f), and 
‘‘(2) the lesser of— 
‘‘(A) the amount determined under this 
subsection for the preceding taxable year with 
respect to such plans, reduced by the aggregate 
distributions from such plans for the taxable 
year (including distributions required under sec-
tion 4974(e)) to the extent not contributed in 
a rollover contribution to another eligible retire-
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ment plan in accordance with section 402(c), 
402A(c)(3)(A), 
403(a)(4), 
403(b)(8), 
457(e)(16), 408(d)(3), or 408A(d)(3), or 
‘‘(B) the amount (if any) by which the 
amount determined under section 409B(a)(2) 
for the taxable year exceeds the applicable dol-
lar amount under section 409B(b)(2) for the 
taxable year.’’. 
(2) CONFORMING
AMENDMENTS.—Subsections 
(b) and (f) of section 4973 are each amended by in-
serting ‘‘, except as further provided in subsection 
(i)’’ after ‘‘For purposes of this section’’. 
(c) REPORTING REQUIREMENTS.—Section 6057(a) is 
amended by adding at the end the following: 
‘‘(3) ADDITIONAL
INFORMATION
REGARDING 
HIGH ACCOUNT BALANCES.— 
‘‘(A) IN GENERAL.—If, as of the close of 
any plan year, 1 or more participants in an ap-
plicable retirement plan (as defined in section 
409B(b)(3) without regard to subparagraph 
(D) thereof) have a vested account balance of at 
least $2,500,000, the plan administrator shall 
file a statement with the Secretary which in-
cludes— 
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‘‘(i) the name and identifying number 
of each such participant (without regard to 
whether such participant has separated 
from employment), and 
‘‘(ii) the amount to which each such 
participant is entitled. 
‘‘(B) INCLUSION IN REGISTRATION STATE-
MENT.—If both subparagraph (A) and para-
graph (1) apply to a plan, the plan adminis-
trator shall include the information required 
under subparagraph (A) in the registration 
statement under paragraph (1) rather than file 
a statement under subparagraph (A). 
‘‘(C) ADJUSTMENTS FOR INFLATION.—In 
the case of any plan year beginning after 2022, 
the $2,500,000 amount under subparagraph 
(A) shall be increased by an amount equal to 
the product of— 
‘‘(i) such dollar amount, and 
‘‘(ii) the cost-of-living adjustment 
under section 1(f)(3) for the calendar year 
in which such taxable year begins, deter-
mined by substituting ‘calendar year 2021’ 
for ‘calendar year 1992’ in subparagraph 
(B) thereof. 
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If the amount as adjusted under the preceding 
sentence is not a multiple of $250,000, such 
amount shall be rounded to the next lowest 
multiple of $250,000.’’. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
subsections (a) and (b) shall apply to taxable years 
beginning after December 31, 2021. 
(2) PLAN
REQUIREMENTS.—The amendments 
made by subsection (c) shall apply to plan years be-
ginning after December 31, 2021. 
SEC. 138302. INCREASE IN MINIMUM REQUIRED DISTRIBU-
TIONS FOR HIGH-INCOME TAXPAYERS WITH 
LARGE RETIREMENT ACCOUNT BALANCES. 
(a) IN GENERAL.—Section 4974 is amended by add-
ing at the end the following: 
‘‘(e) INCREASE IN MINIMUM REQUIRED DISTRIBU-
TIONS FOR HIGH-INCOME TAXPAYERS WITH LARGE AG-
GREGATE ACCOUNT BALANCES.— 
‘‘(1) IN GENERAL.—If this subsection applies to 
a payee who is an applicable taxpayer (as defined in 
section 409B(b)(4)) for a taxable year— 
‘‘(A) all qualified retirement plans and eli-
gible deferred compensation plans of the payee 
which are applicable retirement plans taken into 
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account in computing the excess described in 
paragraph (3)(A) shall be treated as 1 plan 
solely for purposes of applying this section to 
the increase in minimum required distributions 
for such taxable year determined under sub-
paragraph (B), and 
‘‘(B) the minimum required distributions 
under this section for all plans treated as 1 
plan under subparagraph (A) with respect to 
such payee for such taxable year shall be in-
creased by the excess (if any) of— 
‘‘(i) the sum of— 
‘‘(I) if paragraph (2) applies to 
such taxable year, the applicable Roth 
excess amount, plus 
‘‘(II) 50 percent of the excess de-
termined under paragraph (3)(A), re-
duced by the applicable Roth excess 
amount, over 
‘‘(ii) the sum of the minimum re-
quired distributions (determined without 
regard to this subsection) for all such 
plans. 
‘‘(2) APPLICABLE ROTH EXCESS AMOUNT.— 
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‘‘(A) 
APPLICATION.—For 
purposes 
of 
paragraph (1)(B)(i), this paragraph applies to a 
taxable year of a payee if the aggregate vested 
balances to the credit of the payee (whether as 
a participant, owner, or beneficiary) in all appli-
cable retirement plans (determined as of the 
close of the calendar year preceding the cal-
endar year in which the taxable year begins) ex-
ceed 200 percent of the applicable dollar 
amount for the calendar year in which the tax-
able year begins. 
‘‘(B) 
APPLICABLE
ROTH
EXCESS 
AMOUNT.—The applicable Roth excess amount 
for any taxable year to which this paragraph 
applies is an amount equal to the lesser of— 
‘‘(i) the excess determined under sub-
paragraph (A), or 
‘‘(ii) the aggregate balances to the 
credit of the payee (whether as a partici-
pant, owner, or beneficiary) in all Roth 
IRAs and designated Roth accounts (with-
in the meaning of section 402A) as of the 
time described in subparagraph (A). 
‘‘(3) 
APPLICATION.—This 
subsection 
shall 
apply to a payee for a taxable year— 
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‘‘(A) if the aggregate vested balances to 
the credit of the payee (whether as a partici-
pant, owner, or beneficiary) in all applicable re-
tirement plans (determined as of the close of 
the calendar year preceding the calendar year 
in which the taxable year begins) exceed the ap-
plicable dollar amount for the calendar year in 
which the taxable year begins, and 
‘‘(B) without regard to whether amounts 
with respect to the payee are otherwise required 
to be distributed under section 401(a)(9), 
403(b)(10), 408(a)(6), 408(b)(3), or 457(d)(2). 
‘‘(4) COORDINATION AND ALLOCATION.— 
‘‘(A) MINIMUM
DISTRIBUTION
REQUIRE-
MENTS.—If this subsection applies to a payee 
for any taxable year— 
‘‘(i) this section shall apply first to 
minimum required distributions deter-
mined without regard to this subsection 
and then to any increase in minimum re-
quired distributions by reason of this sub-
section, and 
‘‘(ii) nothing in this subsection shall 
be construed to affect the amount of any 
minimum required distribution determined 
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without regard to this subsection or the 
plan or plans from which it is required to 
be distributed from. 
‘‘(B) ALLOCATION OF INCREASE IN MIN-
IMUM REQUIRED DISTRIBUTIONS.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (ii) and (iii), the taxpayer 
may, in such form and manner as the Sec-
retary may prescribe, allocate any increase 
in minimum required distributions by rea-
son of this subsection to applicable retire-
ment plans treated as 1 plan under sub-
paragraph (A) in such manner as the tax-
payer chooses. 
‘‘(ii) ALLOCATION TO ROTH IRAS AND 
ACCOUNTS.—In the case of a taxable year 
to which paragraph (2) applies, the portion 
of any increase in minimum required dis-
tributions by reason of this subsection 
equal to the applicable Roth excess amount 
shall be allocated first to Roth IRAs and 
then to designated Roth accounts (within 
the meaning of section 402A) of the payee. 
‘‘(iii) SPECIAL RULES FOR EMPLOYEE 
STOCK OWNERSHIP PLANS.—If any payee 
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to which this subsection applies for any 
taxable year has account balances in 1 or 
more employee stock ownership plans (as 
defined in section 4975(e)(7)) any portion 
of which is invested in employer securities 
which are not readily tradable on an secu-
rities market, the increase in minimum re-
quired distributions by reason of this sub-
section shall be allocated— 
‘‘(I) first to all account balances 
(other than such portions) of the 
payee in all applicable retirement 
plans in the manner provided by this 
subparagraph (without regard to this 
clause), and 
‘‘(II) then to such portions in 
such manner as the taxpayer chooses. 
The Secretary shall prescribe regulations 
which provide that if any such increase is 
allocated to any such portion of an account 
balance for the first taxable year of the 
payee beginning in 2022, the payee may 
elect to have such portion distributed over 
a period of years not greater than the pe-
riod specified by the Secretary in such reg-
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ulations (and any distributions made in ac-
cordance with such election shall be treated 
for purposes of this section as made in 
such first taxable year). 
‘‘(5) DISTRIBUTIONS NOT ELIGIBLE FOR ROLL-
OVERS.—For purposes of determining whether a dis-
tribution is an eligible rollover distribution, any dis-
tribution from an applicable retirement plan which is 
attributable to any increase in minimum required 
distributions by reason of this subsection shall be 
treated as a distribution required under section 
401(a)(9), 403(b)(10), 408(a)(6), 408(b)(3), or 
457(d)(2), whichever is applicable. 
‘‘(6) DEFINITIONS.—For purposes of this sub-
section, any term used in this subsection which is 
also used in section 409B shall have the same mean-
ing as when such term is used in such section.’’. 
(b) SPECIAL RULES.— 
(1) DISTRIBUTION RIGHTS.— 
(A) QUALIFIED TRUSTS.—Section 401(a) 
is amended by inserting after paragraph (38) 
the following new paragraph: 
‘‘(39) IMMEDIATE
DISTRIBUTION
RIGHT.—A 
trust forming part of a defined contribution plan 
shall not constitute a qualified trust under this sec-
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tion unless an employee who certifies to the plan 
that the employee is a taxpayer who is subject to the 
distribution requirements of section 4974(e) may 
elect to receive a distribution from the employee’s 
account balance under the plan in such amount as 
the employee may elect, including any amounts at-
tributable to a qualified cash or deferred arrange-
ment (as defined in subsection (k)(2)).’’. 
(B) ANNUITY CONTRACTS.— 
(i) CUSTODIAL
ACCOUNTS.—Section 
403(b)(7)(A) is amended by adding at the 
end the following new flush sentence: 
‘‘Notwithstanding clause (i), the custodial ac-
count shall permit an employee who certifies 
that the employee is a taxpayer who is subject 
to the distribution requirements of section 
4974(e) to elect to receive a distribution from 
the employee’s custodial account in such 
amount as the employee may elect.’’. 
(ii) ANNUITY
CONTRACTS.—Section 
403(b)(11) is amended by adding at the 
end the following new sentence: ‘‘Notwith-
standing subparagraphs (A), (B), (C), and 
(D), the annuity contract shall permit an 
employee who certifies that the employee is 
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a taxpayer who is subject to the distribu-
tion requirements of section 4974(e) to 
elect to receive a distribution of contribu-
tions made pursuant to a salary reduction 
agreement (within the meaning of section 
402(g)(3)) from the employee’s annuity 
contract in such amount as the employee 
may elect.’’ 
(C) 
GOVERNMENTAL
PLANS.—Section 
457(d)(1) is amended by adding at the end the 
following new flush sentence: 
‘‘Notwithstanding subparagraph (A), an eligible de-
ferred compensation plan of an employer described 
in subsection (e)(1)(A) shall permit an employee who 
certifies that the employee is a taxpayer who is sub-
ject to the distribution requirements of section 
4974(e) to elect to receive a distribution from the 
plan in such amount as the employee may elect.’’. 
(2) EXCEPTION FROM 10 PERCENT ADDITIONAL 
TAX ON EARLY DISTRIBUTIONS.—Section 72(t)(2) is 
amended by adding at the end the following new 
subparagraph: 
‘‘(I) DISTRIBUTIONS
OF
EXCESS
BAL-
ANCES.—Distributions from an applicable re-
tirement plan (within the meaning of section 
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409B)) to the extent such distributions for the 
taxable year do not exceed the amount required 
to be distributed from such plan under section 
4974(e).’’. 
(3) WITHHOLDING.—Section 3405(b) is amend-
ed by adding at the end the following new para-
graph: 
‘‘(3) ADDITIONAL
WITHHOLDING
FOR
RE-
QUIRED DISTRIBUTIONS FROM HIGH BALANCE RE-
TIREMENT ACCOUNTS.— 
‘‘(A) IN GENERAL.—For purposes of this 
section, a distribution pursuant to section 
401(a)(39), 
the 
last 
sentence 
of 
section 
403(b)(7)(A), the last sentence of section 
403(b)(11), and the last sentence of section 
457(d)(1) shall be treated as a nonperiodic dis-
tribution, except that in applying this sub-
section to such distribution— 
‘‘(i) paragraph (1) shall be applied by 
substituting ‘35 percent’ for ‘10 percent’, 
and 
‘‘(ii) no election may be made under 
paragraph (2) with respect to such dis-
tribution. 
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‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply to any qualified distribution 
from a designated Roth account (within the 
meaning of section 402A).’’. 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
subsection (a) shall apply to taxable years beginning 
after December 31, 2021. 
(2) PLAN
REQUIREMENTS.—The amendments 
made by subsection (b) shall apply to plan years be-
ginning after December 31, 2021. 
(d) PROVISIONS
RELATING
TO
PLAN
AMEND-
MENTS.— 
(1) IN GENERAL.—If this subsection applies to 
any plan or contract amendment, such plan or con-
tract shall be treated as being operated in accord-
ance with the terms of the plan during the period 
described in paragraph (2)(B)(i). 
(2) AMENDMENTS TO WHICH SUBSECTION AP-
PLIES.— 
(A) IN
GENERAL.—This subsection shall 
apply to any amendment to any plan or annuity 
contract which is made— 
(i) pursuant to any amendment made 
by this section or pursuant to any regula-
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tion issued by the Secretary of the Treas-
ury under this section or such amend-
ments, and 
(ii) on or before the last day of the 
first plan year beginning after December 
31, 2022, or such later date as the Sec-
retary of the Treasury may prescribe. 
In the case of a governmental or collectively 
bargained plan to which subparagraph (B) or 
(C) of subsection (a)(4) applies, clause (ii) shall 
be applied by substituting the date which is 2 
years after the date otherwise applied under 
such clause. 
(B) CONDITIONS.—This subsection shall 
not apply to any amendment unless— 
(i) during the period— 
(I) beginning on the date the leg-
islative or regulatory amendment de-
scribed in paragraph (1)(A) takes ef-
fect (or in the case of a plan or con-
tract amendment not required by such 
legislative or regulatory amendment, 
the effective date specified in such 
amendment), and 
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(II) ending on the date described 
in subparagraph (A)(ii) (or, if earlier, 
the date the plan or contract amend-
ment is adopted), 
the plan or contract is operated as if such 
plan or contract amendment were in effect; 
and 
(ii) such plan or contract amendment 
applies retroactively for such period. 
Subpart B—Other Provisions Relating to Individual 
Retirement Plans 
SEC. 138311. TAX TREATMENT OF ROLLOVERS TO ROTH 
IRAS AND ACCOUNTS. 
(a) ROLLOVERS
AND CONVERSIONS LIMITED
TO 
TAXABLE AMOUNTS.— 
(1) ROTH IRAS.— 
(A) IN GENERAL.—Paragraph (1) of sec-
tion 408A(e) is amended by adding at the end 
the following new sentence: ‘‘A qualified rollover 
contribution shall not include any rollover con-
tribution from any eligible retirement plan de-
scribed in subparagraph (B) (other than from a 
designated Roth account (within the meaning of 
section 402A)) if any portion of the distribution 
from which such contribution is made would 
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(without regard to such contribution) be treated 
as not includible in gross income.’’ 
(B) CONVERSIONS.—Subparagraph (C) of 
section 408A(d)(3) is amended by adding at the 
end the following new sentence: ‘‘This subpara-
graph shall not apply if any portion of the plan 
being converted would be treated as not includ-
ible in gross income if distributed at the time 
of the conversion.’’ 
(2) DESIGNATED
ROTH
ACCOUNTS.—Section 
402A(c)(4)(B) is amended by inserting ‘‘, deter-
mined after the application of the last sentence of 
paragraph (1) thereof’’ after ‘‘section 408A(e)’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to distributions, trans-
fers, and contributions made after December 31, 
2021. 
(b) NO ROLLOVERS OR CONVERSIONS FOR HIGH-IN-
COME TAXPAYERS.— 
(1) ROTH IRAS.— 
(A) QUALIFIED
ROLLOVER
CONTRIBU-
TION.—Section 408A(e), as amended by sub-
section (a), is amended by adding at the end 
the following: 
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‘‘(3) HIGH-INCOME
TAXPAYERS
MAY
ONLY 
ROLLOVER FROM ROTH IRAS AND ACCOUNTS.—If— 
‘‘(A) a taxpayer is an applicable taxpayer 
(as defined in section 409B(b)(4)) for the tax-
able year in which a distribution is made, and 
‘‘(B) such distribution is contributed to a 
Roth IRA in a rollover contribution, 
such contribution shall be treated as a qualified roll-
over contribution under paragraph (1) only if it is 
made from another Roth IRA or from a designated 
Roth account (within the meaning of section 
402A).’’. 
(B) ELIMINATION
OF
CONVERSIONS.— 
Paragraph (3) of section 408A(d), as amended 
by subsection (a), is amended by adding at the 
end the following: 
‘‘(G) PARAGRAPH NOT TO APPLY TO HIGH- 
INCOME TAXPAYERS.—If a taxpayer is an appli-
cable 
taxpayer 
(as 
defined 
in 
section 
409B(b)(4)) for any taxable year, this para-
graph shall not apply to any distribution to 
which this paragraph otherwise applies (or to 
any conversion described in subparagraph (C)) 
which is made during such taxable year.’’. 
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(2) DESIGNATED ROTH ACCOUNTS.—Paragraph 
(4) of section 402A(c) is amended by adding at the 
end the following: 
‘‘(F) PARAGRAPH NOT TO APPLY TO HIGH- 
INCOME TAXPAYERS.—If a taxpayer is an appli-
cable 
taxpayer 
(as 
defined 
in 
section 
409B(b)(4)) for any taxable year, this para-
graph shall not apply to any distribution to 
which this paragraph otherwise applies and 
which is made during such taxable year.’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to distributions, trans-
fers, and contributions made in taxable years begin-
ning after December 31, 2031. 
SEC. 138312. PROHIBITION OF IRA INVESTMENTS CONDI-
TIONED ON ACCOUNT HOLDER’S STATUS. 
(a) IN GENERAL.—Subsection (a) of section 408 is 
amended by adding at the end the following new para-
graph: 
‘‘(7) No part of the trust funds will be invested 
in any security if the issuer of such security (or any 
other person specified by the Secretary) requires the 
individual on whose behalf the trust is maintained to 
make a representation to the issuer or such other 
person that such individual— 
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‘‘(A) has a specified minimum amount of 
income or assets, 
‘‘(B) has completed a specified minimum 
level of education, or 
‘‘(C) holds a specific license or creden-
tial.’’. 
(b) LOSS OF EXEMPTION OF ACCOUNT.—Paragraph 
(2) of section 408(e) is amended— 
(1) by striking ‘‘’’ each place it appears in sub-
paragraph (A) and inserting ‘‘maintained’’, 
(2) by redesignating subparagraph (B) as sub-
paragraph (C), 
(3) by inserting after subparagraph (A) the fol-
lowing new subparagraph: 
‘‘(B) PROHIBITED INVESTMENT.—If, dur-
ing any taxable year of the individual for whose 
benefit any individual retirement account is 
maintained, the investment of any part of the 
funds of such individual retirement account 
does not comply with subsection (a)(7), such 
account ceases to be an individual retirement 
account as of the first day of such taxable year. 
Rules similar to the rules of clauses (i) and (ii) 
of subparagraph (A) shall apply for purposes of 
this subparagraph.’’, 
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(4) by striking ‘‘WHERE EMPLOYEE ENGAGES 
IN PROHIBITED TRANSACTION’’ in the heading and 
inserting ‘‘IN CASE OF CERTAIN PROHIBITED TRANS-
ACTIONS AND INVESTMENTS’’, 
(5) by striking ‘‘IN GENERAL’’ in the heading of 
subparagraph (A) and inserting ‘‘EMPLOYEE
EN-
GAGING IN PROHIBITED TRANSACTION’’, and 
(6) by striking ‘‘(A)’’ in subparagraph (C), as 
so redesignated, and inserting ‘‘(A) or (B)’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Paragraph (1) of section 408(c) is amended 
by striking ‘‘(1) through (6)’’ and inserting ‘‘(1) 
through (7)’’. 
(2) Paragraph (3) of section 4975(c) is amend-
ed— 
(A) striking ‘‘’’ and inserting ‘‘main-
tained’’, 
(B) by striking ‘‘transaction’’ both places 
it appears and inserting ‘‘transaction or invest-
ment’’, and 
(C) by striking ‘‘section 408(e)(2)(A)’’ and 
inserting ‘‘subparagraph (A) or (B) of section 
408(e)(2)’’. 
(d) EFFECTIVE DATES.— 
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(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years beginning after Decem-
ber 31, 2021. 
(2) SPECIAL
RULE
FOR
EXISTING
INVEST-
MENTS.—If, on the date of the enactment of this 
Act, an individual retirement account holds an in-
vestment prohibited under section 408(a)(7) of the 
Internal Revenue Code of 1986 (as added by sub-
section (a)), the amendments made by this section 
shall apply to such investment for taxable years be-
ginning after December 31, 2023. 
SEC. 138313. STATUTE OF LIMITATIONS WITH RESPECT TO 
IRA NONCOMPLIANCE. 
(a) IN GENERAL.—Subsection (c) of section 6501 is 
amended by adding at the end the following new para-
graph: 
‘‘(13) NONCOMPLIANCE RELATING TO AN INDI-
VIDUAL RETIREMENT PLAN.— 
‘‘(A) MISREPORTING.—In the case of any 
substantial error (willful or otherwise) in the re-
porting on a return of any information relating 
to the valuation of investment assets with re-
spect to an individual retirement plan, the time 
for assessment of any tax imposed by this title 
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with respect to such plan shall not expire before 
the date which is 6 years after the return con-
taining such error was filed (whether or not 
such return was filed on or after the date pre-
scribed). 
‘‘(B) PROHIBITED
TRANSACTIONS.—The 
time for assessment of any tax imposed by sec-
tion 4975 shall not expire before the date which 
is 6 years after the return was filed (whether 
or not such return was filed on or after the 
date prescribed).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxes with respect to which the 
3-year period under section 6501(a) of the Internal Rev-
enue Code of 1986 (without regard to the amendment 
made by this section) ends after December 31, 2021. 
SEC. 138314. PROHIBITION OF INVESTMENT OF IRA ASSETS 
IN ENTITIES IN WHICH THE OWNER HAS A 
SUBSTANTIAL INTEREST. 
(a) IN GENERAL.—Subsection (a) of section 408, as 
amended by the preceding provisions of this Act, is amend-
ed by adding at the end the following new paragraph: 
‘‘(8) No part of the trust funds will be invested 
in a corporation, partnership or other unincor-
porated enterprise, or trust or estate if— 
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‘‘(A) in the case of an entity with respect 
to which interests described in clause (i), (ii), or 
(iii) are not readily tradable on an securities 
market, 10 percent or more of— 
‘‘(i) the combined voting power of all 
classes of stock entitled to vote or the total 
value of shares of all classes of stock of 
such corporation, 
‘‘(ii) the capital interest or profits in-
terest of such partnership or enterprise, or 
‘‘(iii) the beneficial interest of such 
trust or estate, 
is owned (directly or indirectly) or held by the 
individual on whose behalf the trust is main-
tained, or 
‘‘(B) the individual on whose behalf the 
trust is maintained is an officer or director (or 
an individual having powers or responsibilities 
similar to officers or directors) of such corpora-
tion, partnership, or other unincorporated en-
terprise. 
For purposes of subparagraph (A), the constructive 
ownership rules of paragraphs (4) and (5) of section 
4975(e) shall apply, and any asset or interest held 
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by the trust shall be treated as held by the indi-
vidual described in such subparagraph.’’. 
(b) LOSS OF EXEMPTION OF ACCOUNT.—Subpara-
graph (B) of section 408(e)(2), as added by this Act, is 
amended by striking ‘‘(a)(7)’’ and inserting ‘‘(a)(7) or 
(a)(8)’’. 
(c) CONFORMING AMENDMENT.—Paragraph (1) of 
section 408(c), as amended by the preceding provisions of 
this Act, is amended by striking ‘‘(1) through (7)’’ and 
inserting ‘‘(1) through (8)’’. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to investments made in taxable years be-
ginning after December 31, 2021. 
(2) SPECIAL
RULE
FOR
EXISTING
INVEST-
MENTS.—If, on the date of the enactment of this 
Act, an individual retirement account holds an in-
vestment prohibited under section 408(a)(8) of the 
Internal Revenue Code of 1986 (as added by sub-
section (a)), the amendments made by this section 
shall apply to such investment for taxable years be-
ginning after December 31, 2023. 
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SEC. 138315. IRA OWNERS TREATED AS DISQUALIFIED PER-
SONS 
FOR 
PURPOSES 
OF 
PROHIBITED 
TRANSACTION RULES. 
(a) IN GENERAL.—Paragraph (2) of section 4975(e) 
is amended— 
(1) by striking ‘‘or’’ at the end of subparagraph 
(H), 
(2) by striking the period at the end of sub-
paragraph (I) and inserting ‘‘; or’’, 
(3) by inserting after subparagraph (I) the fol-
lowing new subparagraph: 
‘‘(J) the individual for whose benefit a 
plan described in subparagraph (B) or (C) of 
paragraph (1) is maintained.’’, 
(4) by striking ‘‘or (E)’’ both places it appears 
in subparagraphs (F) and (G) and inserting ‘‘(E), or 
(J) (in the case of a plan described in subparagraph 
(B) or (C) of paragraph (1))’’, 
(5) by striking ‘‘or (G)’’ in subparagraph (I) 
and inserting ‘‘(G), or (J) (in the case of a plan de-
scribed in subparagraph (B) or (C) of paragraph 
(1))’’, and 
(6) by adding at the end the following: ‘‘For 
purposes of subparagraphs (G) and (I), any asset or 
interest held by a plan described in subparagraph 
(B) or (C) of paragraph (1) shall be treated as 
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owned by the individual described in subparagraph 
(J) with respect to such plan.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Subparagraph (A) of section 408(e)(2), as 
amended by the preceding provisions of this Act, is 
amended to read as follows: 
‘‘(A) EMPLOYEE
ENGAGING
IN
PROHIB-
ITED
TRANSACTION.—If, during any taxable 
year of the individual for whose benefit any in-
dividual retirement account is maintained, that 
individual engages in any transaction prohibited 
by section 4975 with respect to such account, 
such account ceases to be an individual retire-
ment account as of the first day of such taxable 
year. For purposes of this paragraph, the sepa-
rate account for the benefit of any individual 
within an individual retirement account main-
tained by an employer or association of employ-
ees is treated as a separate individual retire-
ment account.’’. 
(2) Subparagraph (B) of section 408(e)(2), as 
added by this Act, is amended by striking the last 
sentence. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transactions occurring after De-
cember 31, 2021. 
PART 4—FUNDING THE INTERNAL REVENUE 
SERVICE AND IMPROVING TAXPAYER COM-
PLIANCE 
SEC. 138401. FUNDING OF THE INTERNAL REVENUE SERV-
ICE. 
In addition to amounts otherwise available, there are 
appropriated for fiscal year 2022, out of any money in 
the Treasury not otherwise appropriated: 
(1) $78,935,000,000, to remain available until 
September 30, 2031, for necessary expenses for the 
Internal Revenue Service (IRS) for strengthening 
tax enforcement activities and increasing voluntary 
compliance, expanding audits and other enforcement 
activities, and modernizing information technology to 
effectively support enforcement activities, except that 
no use of these funds is intended to increase taxes 
on any taxpayer with taxable income below 
$400,000; 
(2) $410,000,000, to remain available until 
September 30, 2031, for necessary expenses for the 
Treasury Inspector General for Tax Administration 
to provide oversight of the IRS, including ensuring 
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that taxpayer privacy is protected and that no undue 
burden is imposed on small businesses from IRS en-
forcement activities; and 
(3) $157,000,000, to remain available until 
September 30, 2031, for the Tax Court for adjudi-
cating tax disputes. 
SEC. 138402. APPLICATION OF BACKUP WITHHOLDING 
WITH RESPECT TO THIRD PARTY NETWORK 
TRANSACTIONS. 
(a) IN GENERAL.—Section 3406(b) is amended by 
adding at the end the following new paragraph: 
‘‘(8) OTHER REPORTABLE PAYMENTS INCLUDE 
PAYMENTS IN SETTLEMENT OF THIRD PARTY NET-
WORK TRANSACTIONS ONLY WHERE AGGREGATE FOR 
CALENDAR YEAR IS $600 OR MORE.—Any payment in 
settlement of a third party network transaction re-
quired to be shown on a return required under sec-
tion 6050W which is made during any calendar year 
shall be treated as a reportable payment only if— 
‘‘(A) the aggregate amount of such pay-
ment and all previous such payments made by 
the third party settlement organization to the 
participating payee during such calendar year 
equals or exceeds $600, or 
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‘‘(B) the third party settlement organiza-
tion was required under section 6050W to file 
a return for the preceding calendar year with 
respect to payments to the participating 
payee.’’. 
(b) CONFORMING AMENDMENT.—Section 6050W(e) 
is amended by inserting ‘‘equal or’’ before ‘‘exceed $600’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years beginning after 
December 31, 2021. 
(d) TRANSITIONAL RULE FOR 2022.—In the case of 
payments made during calendar year 2022, section 
3406(b)(8)(A) of the Internal Revenue Code of 1986 (as 
added by this section) shall be applied by inserting ‘‘and 
the aggregate number of third party network transactions 
settled by the third party settlement organization with re-
spect to the participating payee during such calendar year 
exceeds 200’’ before the comma at the end. 
SEC. 138403. LIMITATION ON DEDUCTION FOR QUALIFIED 
CONSERVATION CONTRIBUTIONS MADE BY 
PASS-THROUGH ENTITIES, ETC. 
(a) IN GENERAL.—Section 170(h) is amended by 
adding at the end the following new paragraphs: 
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‘‘(7) LIMITATION ON DEDUCTION FOR QUALI-
FIED
CONSERVATION
CONTRIBUTIONS
MADE
BY 
PASS-THROUGH ENTITIES.— 
‘‘(A) IN GENERAL.—A contribution by a 
partnership (whether directly or as a distribu-
tive share of a contribution of another partner-
ship) shall not be treated as a qualified con-
servation contribution for purposes of this sec-
tion if the amount of such contribution exceeds 
2.5 times the sum of each partner’s relevant 
basis in such partnership. 
‘‘(B) RELEVANT BASIS.—For purposes of 
this paragraph— 
‘‘(i) IN GENERAL.—The term ‘relevant 
basis’ means, with respect to any partner, 
the portion of such partner’s modified 
basis in the partnership which is allocable 
(under rules similar to the rules of section 
755) to the portion of the real property 
with respect to which the contribution de-
scribed in subparagraph (A) is made. 
‘‘(ii) MODIFIED
BASIS.—The term 
‘modified basis’ means, with respect to any 
partner, such partner’s adjusted basis in 
the partnership as determined— 
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‘‘(I) immediately before the con-
tribution described in subparagraph 
(A), 
‘‘(II) without regard to section 
752, and 
‘‘(III) by the partnership after 
taking into account the adjustments 
described in subclauses (I) and (II) 
and such other adjustments as the 
Secretary may provide. 
‘‘(C) EXCEPTION
FOR
CONTRIBUTIONS 
OUTSIDE 3-YEAR HOLDING PERIOD.—Subpara-
graph (A) shall not apply to any contribution 
which is made at least 3 years after the latest 
of— 
‘‘(i) the last date on which the part-
nership that made such contribution ac-
quired any portion of the real property 
with respect to which such contribution is 
made, 
‘‘(ii) the last date on which any part-
ner in the partnership that made such con-
tribution acquired any interest in such 
partnership, and 
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‘‘(II) any individual who bears a 
relationship to such individual which 
is described in subparagraphs (A) 
through (G) of section 152(d)(2). 
‘‘(E) 
APPLICATION
TO
OTHER
PASS- 
THROUGH ENTITIES.—Except as may be other-
wise provided by the Secretary, the rules of this 
paragraph shall apply to S corporations and 
other pass-through entities in the same manner 
as such rules apply to partnerships. 
‘‘(F) REGULATIONS.—The Secretary shall 
prescribe such regulations or other guidance as 
may be necessary or appropriate to carry out 
the purposes of this paragraph, including regu-
lations or other guidance— 
‘‘(i) to require reporting, including re-
porting related to tiered partnerships and 
the modified basis of partners, and 
‘‘(ii) to prevent the avoidance of the 
purposes of this paragraph. 
‘‘(8) NOTICE OF CERTAIN FAILURES.— 
‘‘(A) IN GENERAL.—If a donor is found by 
the Secretary to have failed to meet the require-
ment that a qualified conservation contribution 
shall be granted and protected in perpetuity by 
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reason of defective language in the deed relat-
ing to property line adjustments or extinguish-
ment clauses, the donor shall have 90 days 
from the written notice by the Secretary to cor-
rect such failure, unless the Secretary can dem-
onstrate that the donor’s failure to meet those 
requirements was intentional. 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply to any reportable transaction or 
any contribution that is not treated as a quali-
fied conservation contribution by reason of 
paragraph (7).’’. 
(b) APPLICATION
OF
ACCURACY-RELATED
PEN-
ALTIES.— 
(1) IN GENERAL.—Section 6662(b) is amended 
by inserting after paragraph (9) the following new 
paragraph: 
‘‘(10) Any disallowance of a deduction by rea-
son of section 170(h)(7).’’. 
(2) 
TREATMENT
AS
GROSS
VALUATION 
MISSTATEMENT.—Section 6662(h)(2) is amended by 
striking ‘‘and’’ at the end of subparagraph (B), by 
striking the period at the end of subparagraph (C) 
and inserting ‘‘, and’’, and by adding at the end the 
following new subparagraph: 
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‘‘(D) any disallowance of a deduction de-
scribed in subsection (b)(10).’’. 
(3) NO REASONABLE CAUSE EXCEPTION.—Sec-
tion 6664(c)(2) is amended by inserting ‘‘or to any 
disallowance of a deduction described in section 
6662(b)(10)’’ before the period at the end. 
(4) APPROVAL
OF
ASSESSMENT
NOT
RE-
QUIRED.—Section 6751(b)(2)(A) is amended by 
striking ‘‘subsection (b)(9)’’ and inserting ‘‘para-
graph (9) or (10) of subsection (b)’’. 
(c) APPLICATION OF STATUTE OF LIMITATIONS ON 
ASSESSMENT AND COLLECTION.— 
(1) EXTENSION
FOR
CERTAIN
ADJUSTMENTS 
MADE UNDER PRIOR LAW.—In the case of any dis-
allowance of a deduction by reason of section 
170(h)(7) of the Internal Revenue Code of 1986 (as 
added by this section) or any penalty imposed under 
section 6662 of such Code with respect to such dis-
allowance, section 6229(d)(2) of such Code (as in ef-
fect before its repeal) shall be applied by sub-
stituting ‘‘2 years’’ for ‘‘1 year’’. 
(2) EXTENSION FOR LISTED TRANSACTIONS.— 
Any contribution described in section 170(h)(7)(A) 
of the Internal Revenue Code of 1986 (as added by 
this section) shall be treated for purposes of sections 
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6501(c)(10) and 6235(c)(6) of such Code as a 
transaction specifically identified by the Secretary on 
December 23, 2016, as a tax avoidance transaction 
for purposes of section 6011 of such Code. 
(d) APPLICATION TO CERTAIN TRANSACTIONS DIS-
ALLOWED UNDER OTHER PROVISIONS OF LAW.—In the 
case of any disallowance of a deduction under section 170 
of the Internal Revenue Code of 1986 with respect to a 
transaction described in Internal Revenue Service Notice 
2017–10 with respect to a taxable year ending before the 
date of the enactment of this Act, such disallowance shall 
be treated for purposes of section 6662(b)(10) of such 
Code (as added by this section) and subsection (c)(1) as 
being by reason of section 170(h)(7) of such Code (as 
added by this section). 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), the amendments made by this 
section shall apply to contributions made after De-
cember 23, 2016, in taxable years ending after such 
date. 
(2) NOTICE OF CERTAIN FAILURES.—So much 
of the amendment made by subsection (a) as relates 
to section 170(h)(8) of the Internal Revenue Code of 
1986, as added by such subsection, shall apply to— 
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(A) returns filed after the date of the en-
actment of this Act, and 
(B) returns filed on or before such date if 
the period specified in section 6501 for assess-
ment of the taxes with respect to which such re-
turn relates has not expired as of such date. 
(3) CERTIFIED HISTORIC STRUCTURES.—In the 
case of contributions the conservation purpose (as 
defined in section 170(h)(4) of the Internal Revenue 
Code of 1986) of which is the preservation of a cer-
tified historic structure (as defined in section 
170(h)(4)(C) of such Code), the amendments made 
by this section shall apply to contributions made in 
taxable years beginning after December 31, 2018. 
(4) NO INFERENCE.—No inference is intended 
as to the appropriate treatment of contributions 
made in taxable years ending on or before the date 
specified in paragraph (1) or (3), whichever is appli-
cable, or as to any activity not described in section 
170(h)(7) of the Internal Revenue Code of 1986, as 
added by this section. 
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SEC. 138404. MODIFICATION OF PROCEDURAL REQUIRE-
MENTS RELATING TO ASSESSMENT OF PEN-
ALTIES. 
(a) REPEAL OF APPROVAL REQUIREMENT.—Section 
6751, as amended by the preceding provision of this Act, 
is amended by striking subsection (b). 
(b) QUARTERLY CERTIFICATIONS OF COMPLIANCE 
WITH PROCEDURAL REQUIREMENTS.—Section 6751, as 
amended by subsection (a) of this section, is amended by 
inserting after subsection (a) the following new subsection: 
‘‘(b) QUARTERLY
CERTIFICATIONS
OF
COMPLI-
ANCE.—Each appropriate supervisor of employees of the 
Internal Revenue Service shall certify quarterly by letter 
to the Commissioner of Internal Revenue whether or not 
the requirements of subsection (a) have been met with re-
spect to notices of penalty issued by such employees.’’. 
(c) EFFECTIVE DATES.— 
(1) REPEAL
OF
APPROVAL
REQUIREMENT.— 
The amendment made by subsection (a) shall take 
effect as if included in section 3306 of the Internal 
Revenue Service Restructuring and Reform Act of 
1998. 
(2) QUARTERLY CERTIFICATIONS OF COMPLI-
ANCE
WITH
PROCEDURAL
REQUIREMENTS.—The 
amendment made by subsection (b) shall apply to 
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notices of penalty issued after the date of the enact-
ment of this Act. 
PART 5—OTHER PROVISIONS 
SEC. 138501. MODIFICATIONS TO LIMITATION ON DEDUC-
TION OF EXCESSIVE EMPLOYEE REMUNERA-
TION. 
(a) IN GENERAL.—Section 162(m) is amended by 
adding at the end the following new paragraph: 
‘‘(7) SPECIAL RULES RELATED TO LIMITATION 
ON
DEDUCTION
OF
EXCESSIVE
EMPLOYEE
REMU-
NERATION.— 
‘‘(A) AGGREGATION RULE.—A rule similar 
to the rule of paragraph (6)(C)(ii) shall apply 
for purposes of paragraph (1). 
‘‘(B) REGULATIONS.—The Secretary shall 
prescribe such regulations or other guidance as 
may be necessary or appropriate to carry out 
the purposes of paragraph (1), including regula-
tions or other guidance to prevent the avoidance 
of such purposes, including through the per-
formance of services other than as an employee 
or by providing compensation through a pass- 
through or other entity.’’. 
(b) ACCELERATION OF APPLICATION TO 5 HIGHEST 
COMPENSATED EMPLOYEES.—Section 162(m)(3)(C) is 
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amended by striking ‘‘December 31, 2026’’ and inserting 
‘‘December 31, 2021’’. 
(c) APPLICABLE EMPLOYEE REMUNERATION.—Sec-
tion 162(m)(4)(A) is amended— 
(1) by inserting ‘‘(including performance-based 
compensation, commissions, post-termination com-
pensation, and beneficiary payments)’’ after ‘‘remu-
neration for services’’, and 
(2) by inserting ‘‘and whether or not such re-
muneration is paid directly by the publicly held cor-
poration’’ after ‘‘whether or not during the taxable 
year’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138502. EXTENSION OF TAX TO FUND BLACK LUNG 
DISABILITY TRUST FUND. 
(a) IN GENERAL.—Section 4121(e)(2)(A) is amended 
by striking ‘‘December 31, 2021’’ and inserting ‘‘Decem-
ber 31, 2025’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to sales after December 31, 2021. 
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SEC. 138503. PROHIBITED TRANSACTIONS RELATING TO 
HOLDING DISC OR FSC IN INDIVIDUAL RE-
TIREMENT ACCOUNT. 
(a) IN GENERAL.—Section 4975(c)(1) is amended by 
striking ‘‘or’’ at the end of subparagraph (E), by striking 
the period at the end of subparagraph (F) and inserting 
‘‘; or’’, and by adding at the end the following new sub-
paragraph: 
‘‘(G) in the case of a DISC or FSC that 
receives any commission, or other payment, 
from an entity any stock or interest in which is 
owned by the individual for whose benefit an in-
dividual retirement account is maintained, hold-
ing of an interest in such DISC or FSC by the 
individual retirement account.’’. 
(b) SPECIAL
RULES
OF
APPLICATION.—Section 
4975(c) is amended by adding at the end the following 
new paragraph: 
‘‘(8) SPECIAL
RULES
OF
APPLICATION
FOR 
DISC AND FSC HOLDINGS.— 
‘‘(A) INDIRECT
HOLDING
OF DISC OR 
FSC.—For purposes of paragraph (1)(G), if an 
individual retirement account holds an interest 
in an entity that owns (directly or indirectly) an 
interest in a DISC or FSC, the account shall 
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be treated as holding an interest in such DISC 
or FSC. 
‘‘(B) CONSTRUCTIVE
OWNERSHIP.—For 
purposes of determining ownership of stock (or 
any other interest) in an entity under para-
graph (1)(G) and ownership of an interest in a 
DISC or FSC under subparagraph (A), the 
rules prescribed by section 318 for determining 
ownership shall apply, except that such section 
shall be applied by substituting ‘10 percent’ for 
‘50 percent’ each place it appears. 
‘‘(C) DISC AND FSC.—For purposes of 
his subsection, the terms ‘DISC’ and ‘FSC’ 
shall have the respective meanings given such 
terms by section 992(a)(1)) and section 922(a) 
(as in effect before its repeal by the FSC Re-
peal and Extraterritorial Income Exclusion Act 
of 2000).’’. 
(c) APPLICATION OF TAX TO TERMINATED INDI-
VIDUAL RETIREMENT ACCOUNTS.—Section 4975(c)(3) is 
amended by adding at the end the following: ‘‘The pre-
ceding sentence shall not apply in the case of a prohibited 
transaction described in paragraph (1)(G).’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to stock and other interests ac-
quired or held on or after December 31, 2021. 
SEC. 138504. INCREASE IN TAX ON CERTAIN TOBACCO 
PRODUCTS AND IMPOSITION OF TAX ON NIC-
OTINE. 
(a) INCREASING TAX ON CIGARETTES.— 
(1) SMALL CIGARETTES.—Section 5701(b)(1) is 
amended by striking ‘‘$50.33’’ and inserting 
‘‘$100.66’’. 
(2) LARGE CIGARETTES.—Section 5701(b)(2) is 
amended by striking ‘‘$105.69’’ and inserting 
‘‘$211.39’’. 
(b) TAX
PARITY
FOR
SMALL
CIGARS.—Section 
5701(a)(1) is amended by striking ‘‘$50.33’’ and inserting 
‘‘$100.66’’. 
(c) TAX
PARITY
FOR
LARGE
CIGARS.—Section 
5701(a)(2) is amended by striking ‘‘52.75 percent’’ and 
all that follows through the period and inserting ‘‘$49.56 
per pound and a proportionate tax at the like rate on all 
fractional parts of a pound but not less than 10.06 cents 
per cigar.’’. 
(d) TAX PARITY FOR SMOKELESS TOBACCO.— 
(1) Section 5701(e) is amended— 
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(A) in paragraph (1), by striking ‘‘$1.51’’ 
and inserting ‘‘$26.84’’, 
(B) in paragraph (2), by striking ‘‘50.33 
cents’’ and inserting ‘‘$10.70’’, and 
(C) by adding at the end the following new 
paragraph: 
‘‘(3) SMOKELESS TOBACCO SOLD IN DISCRETE 
SINGLE-USE
UNITS.—On discrete single-use units, 
$100 per thousand.’’. 
(2) Section 5702(m) is amended— 
(A) in paragraph (1), by striking ‘‘or chew-
ing tobacco’’ and inserting ‘‘, chewing tobacco, 
or discrete single-use unit’’, 
(B) in paragraphs (2) and (3), by inserting 
‘‘and that is not a discrete single-use unit’’ be-
fore the period at the end of each such para-
graph, and 
(C) by adding at the end the following new 
paragraph: 
‘‘(4) DISCRETE SINGLE-USE UNIT.—The term 
‘discrete single-use unit’ means any product con-
taining tobacco that— 
‘‘(A) is not intended to be smoked, and 
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‘‘(B) is in the form of a lozenge, tablet, 
pill, pouch, dissolvable strip, or other discrete 
single-use or single-dose unit.’’. 
(e) TAX
PARITY
FOR
PIPE
TOBACCO.—Section 
5701(f) is amended by striking ‘‘$2.8311 cents’’ and in-
serting ‘‘$49.56’’. 
(f) TAX PARITY FOR ROLL-YOUR-OWN TOBACCO.— 
Section 5701(g) is amended by striking ‘‘$24.78’’ and in-
serting ‘‘$49.56’’. 
(g) TAX PARITY
FOR ROLL-YOUR-OWN TOBACCO 
AND CERTAIN PROCESSED TOBACCO.—Section 5702(o) is 
amended by inserting ‘‘, and includes processed tobacco 
that is removed for delivery or delivered to a person other 
than a person with a permit provided under section 5713, 
but does not include removals of processed tobacco for ex-
portation’’ after ‘‘wrappers thereof’’. 
(h) IMPOSITION OF TAX ON NICOTINE FOR USE IN 
VAPING, ETC.— 
(1) IN GENERAL.—Section 5701 is amended by 
redesignating subsection (h) as subsection (i) and by 
inserting after subsection (g) the following new sub-
section: 
‘‘(h) NICOTINE.—On taxable nicotine, manufactured 
in or imported into the United States, there shall be im-
posed a tax equal to the dollar amount specified in section 
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5701(b)(1) per 1,810 milligrams of nicotine (and a pro-
portionate tax at the like rate on any fractional part there-
of).’’. 
(2) TAXABLE
NICOTINE.—Section 5702 is 
amended by adding at the end the following new 
subsection: 
‘‘(q) TAXABLE NICOTINE.— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘taxable nicotine’ 
means any nicotine which has been extracted, con-
centrated, or synthesized. 
‘‘(2) EXCEPTION FOR PRODUCTS APPROVED BY 
FOOD
AND
DRUG
ADMINISTRATION.—Such term 
shall not include any nicotine if the manufacturer or 
importer thereof demonstrates to the satisfaction of 
the Secretary of Health and Human Services that 
such nicotine will be used in— 
‘‘(A) a drug— 
‘‘(i) that is approved under section 
505 of the Federal Food, Drug, and Cos-
metic Act or licensed under section 351 of 
the Public Health Service Act; or 
‘‘(ii) for which an investigational use 
exemption has been authorized under sec-
tion 505(i) of the Federal Food, Drug, and 
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Cosmetic Act or under section 351(a) of 
the Public Health Service Act; or 
‘‘(B) a combination product (as described 
in section 503(g) of the Federal Food, Drug, 
and Cosmetic Act), the constituent parts of 
which were approved or cleared under section 
505, 510(k), or 515 of such Act. 
‘‘(3) COORDINATION WITH TAXATION OF OTHER 
TOBACCO
PRODUCTS.—Tobacco products meeting 
the definition of cigars, cigarettes, smokeless to-
bacco, pipe tobacco, and roll-your-own tobacco in 
this section shall be classified and taxed as such de-
spite any concentration of the nicotine inherent in 
those products or any addition of nicotine to those 
products during the manufacturing process. 
‘‘(4) REGULATIONS.—The Secretary shall pre-
scribe such regulations or other guidance as is nec-
essary or appropriate to carry out the purposes of 
this subsection, including regulations or other guid-
ance for coordinating the taxation of tobacco prod-
ucts and taxable nicotine to protect revenue and pre-
vent double taxation.’’. 
(3) TAXABLE
NICOTINE
TREATED
AS
A
TO-
BACCO PRODUCT.—Section 5702(c) is amended by 
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striking ‘‘and roll-your-own tobacco’’ and inserting 
‘‘roll-your-own tobacco, and taxable nicotine’’. 
(4) MANUFACTURER OF TAXABLE NICOTINE.— 
Section 5702, as amended by paragraph (2), is 
amended by adding at the end the following new 
subsection: 
‘‘(r) MANUFACTURER OF TAXABLE NICOTINE.— 
‘‘(1) IN GENERAL.—Any person who extracts, 
concentrates, or synthesizes nicotine shall be treated 
as a manufacturer of taxable nicotine (and as manu-
facturing such taxable nicotine). 
‘‘(2) APPLICATION
OF
RULES
RELATED
TO 
MANUFACTURERS
OF
TOBACCO
PRODUCTS.—Any 
reference to a manufacturer of tobacco products, or 
to manufacturing tobacco products, shall be treated 
as including a reference to a manufacturer of tax-
able nicotine, or to manufacturing taxable nicotine, 
respectively.’’. 
(j) REPEAL OF SPECIAL RULES FOR DETERMINING 
PRICE OF CIGARS.—Section 5702 is amended by striking 
subsection (l). 
(k) FLOOR STOCKS TAXES.— 
(1) IMPOSITION OF TAX.—On covered tobacco 
products, and cigarette papers and tubes, manufac-
tured in or imported into the United States which 
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are removed before the tax increase date and held on 
such date for sale by any person, there is hereby im-
posed a tax in an amount equal to the excess of— 
(A) the tax which would be imposed under 
section 5701 of the Internal Revenue Code of 
1986 on the article if the article had been re-
moved on such date, over 
(B) the prior tax (if any) imposed under 
section 5701 of such Code on such article. 
(2) COVERED TOBACCO PRODUCTS.—For pur-
poses of this subsection, the term ‘‘covered tobacco 
products’’ means any tobacco product other than— 
(A) cigars described in section 5701(a)(2) 
of the Internal Revenue Code of 1986, 
(B) discrete single-use units (as defined in 
section 5702(m)(4) of such Code, as amended 
by this section), and 
(C) taxable nicotine (as defined in section 
5702(q) of such Code, as amended by this sec-
tion). 
(3) CREDIT AGAINST TAX.—Each person shall 
be allowed as a credit against the taxes imposed by 
paragraph (1) an amount equal to the lesser of 
$1,000 or the amount of such taxes. For purposes 
of the preceding sentence, all persons treated as a 
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single employer under subsection (b), (c), (m), or (o) 
of section 414 of the Internal Revenue Code of 1986 
shall be treated as 1 person for purposes of this 
paragraph. 
(4) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.— 
(A) LIABILITY FOR TAX.—The person re-
ferred to in paragraph (1) shall be liable for the 
tax imposed by such paragraph. 
(B) METHOD OF PAYMENT.—The tax im-
posed by paragraph (1) shall be paid in such 
manner as the Secretary may provide. 
(5) ARTICLES IN FOREIGN TRADE ZONES.— 
(A) IN
GENERAL.—Notwithstanding the 
Act of June 18, 1934 (commonly known as the 
Foreign Trade Zone Act, 48 Stat. 998, 19 
U.S.C. 81a et seq.) or any other provision of 
law, any covered tobacco products, or cigarette 
papers and tubes, which are located in a foreign 
trade zone on the tax increase date, shall be 
subject to the tax imposed by paragraph (1) 
if— 
(i) internal revenue taxes have been 
determined, or customs duties liquidated, 
with respect to such article before such 
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date pursuant to a request made under the 
1st proviso of section 3(a) of such Act, or 
(ii) such article is held on such date 
under the supervision of an officer of the 
United States Customs and Border Protec-
tion of the Department of Homeland Secu-
rity pursuant to the 2d proviso of such sec-
tion 3(a). 
(6) TAX INCREASE DATE.—For purposes of this 
subsection, the term ‘‘tax increase date’’ means the 
first day of the first calendar quarter described in 
subsection (k)(1). 
(7) CERTAIN
OTHER
DEFINITIONS.—Terms 
used in this subsection which are also used in sec-
tion 5702 of the Internal Revenue Code of 1986 
shall have the same meaning as when used in such 
section. 
(l) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to articles removed in cal-
endar quarters beginning after the date of the enact-
ment of this Act. 
(2) DELAYED EFFECTIVE DATE FOR CERTAIN 
PRODUCTS.—The amendments made by subsections 
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(c), (d)(1)(C), (d)(2), and (h) shall apply to articles 
removed in calendar quarters beginning after the 
date which is 180 days after the date of the enact-
ment of this Act. 
(m) TRANSITION RULE FOR PERMIT AND BOND RE-
QUIREMENTS.—A person which is lawfully engaged in 
business as a manufacturer or importer of taxable nicotine 
(within the meaning of subchapter A of chapter 52 of the 
Internal Revenue Code of 1986, as amended by this sec-
tion) on the date of the enactment of this Act, first be-
comes subject to the requirements of subchapter B of 
chapter 52 of such Code by reason of the amendments 
made by this section, and submits an application under 
such subchapter B to engage in such business not later 
than 90 days after the date of the enactment of this Act, 
shall not be denied the right to carry on such business 
by reason of such requirements before final action on such 
application. 
SEC. 138505. CLARIFICATION OF RULES REGARDING TO-
BACCO DRAWBACK. 
(a) IN GENERAL.—Section 5706 is amended by add-
ing at the end the following: ‘‘Exemption from tax under 
section 5704 is drawback, and no further drawback shall 
be allowed based on merchandise that has not been subject 
to tax.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to drawback claims made on or 
after December 18, 2018. 
(c) NO INFERENCE.—Nothing contained in this sub-
section or the amendments made by this subsection shall 
be construed to create any inference with respect to any 
drawback claim made before December 18, 2018. 
SEC. 138506. TERMINATION OF EMPLOYER CREDIT FOR 
PAID FAMILY AND MEDICAL LEAVE. 
Section 45S(i) is amended by striking ‘‘December 31, 
2025’’ and inserting ‘‘December 31, 2023’’. 
SEC. 138507. CLARIFICATION OF TREATMENT OF DISC 
GAINS AND DISTRIBUTIONS OF CERTAIN 
FOREIGN SHAREHOLDERS. 
(a) IN GENERAL.—Section 996(g) of the Internal 
Revenue Code of 1986 is amended by striking ‘‘of such 
shareholder’’ and inserting ‘‘deemed to be had by such 
shareholder’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to gains and distributions after 
December 31, 2021. 
(c) APPLICATION
TO FOREIGN SALES CORPORA-
TIONS.—In the case of any distribution after December 
31, 2021, section 926(b)(1) of the Internal Revenue Code 
of 1986 (prior to its repeal by the FSC Repeal and 
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Extraterritorial Income Exclusion Act of 2000) shall be 
applied by substituting ‘‘deemed to be had by such share-
holder’’ for ‘‘of such shareholder’’. 
SEC. 138508. ACCESS TO SELF-EMPLOYMENT INCOME IN-
FORMATION FOR PAID LEAVE ADMINISTRA-
TION. 
Section 6103(l) of the Internal Revenue Code of 1986 
is amended by adding at the end the following new para-
graph: 
‘‘(23) DISCLOSURE
OF
CERTAIN
RETURN
IN-
FORMATION TO CARRY OUT PAID FAMILY AND MED-
ICAL LEAVE BENEFIT PROGRAM.— 
‘‘(A) IN GENERAL.—The Secretary shall, 
upon written request, disclose to officers and 
employees of the Department of the Treasury 
return information with respect to a taxpayer 
whose self-employment income is relevant in de-
termining eligibility for, or the correct amount 
of, a paid family and medical leave benefit 
under title XXII of the Social Security Act. 
Such information shall be limited to— 
‘‘(i) the taxpayer identity information 
with respect to the taxpayer, 
‘‘(ii) the self-employment income of 
the taxpayer, and 
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‘‘(iii) the taxable year to which such 
self-employment income relates. 
‘‘(B) RESTRICTION ON DISCLOSURE.—Re-
turn information disclosed under subparagraph 
(A) may be used by officers and employees of 
the Department of the Treasury solely for the 
purpose of administering the paid family and 
medical leave benefit program under title XXII 
of the Social Security Act. 
‘‘(C) SELF-EMPLOYMENT
INCOME.—For 
purposes of this paragraph, the term ‘self-em-
ployment income’ has the meaning given such 
term in section 1402(b) for purposes of the 
taxes imposed by section 1401(b).’’. 
SEC. 138509. TEMPORARY RULE TO ALLOW CERTAIN S COR-
PORATIONS TO REORGANIZE AS PARTNER-
SHIPS WITHOUT TAX. 
(a) IN GENERAL.—A qualified liquidation of an eligi-
ble S corporation shall be treated for purposes of the In-
ternal Revenue Code of 1986 in the same manner as if— 
(1) such liquidation were a complete liquidation 
described in section 332(b) of such Code, and 
(2) the domestic partnership referred to in sub-
section (c)(2) were a corporation which is an 80-per-
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cent distributee (within the meaning of section 
337(c) of such Code). 
(b) ELIGIBLE S CORPORATION.—For purposes of 
this section, the term ‘‘eligible S corporation’’ means any 
corporation (including any predecessor corporation) that 
was an S corporation on May 13, 1996, and at all times 
thereafter through the date on which the qualified liquida-
tion is completed. 
(c) QUALIFIED LIQUIDATION.—For purposes of this 
section, the term ‘‘qualified liquidation’’ means one or 
more transactions occurring during the 2-year period be-
ginning on December 31, 2021 if— 
(1) such transactions constitute the complete 
liquidation of an eligible S corporation, and 
(2) substantially all of the assets and liabilities 
of such eligible S corporation are, as a result of such 
transactions, transferred to a domestic partnership. 
(d) ELECTION.—This section shall apply to any 
qualified liquidation only if the eligible S corporation elects 
the application of this section in such manner as the Sec-
retary may require and not later than the due date for 
filing the return of tax under chapter 1 of such Code for 
the taxable year in which such liquidation is completed. 
(e) APPLICATION OF RESTRICTION ON SUBSECTION 
S CORPORATION ELECTIONS.—In the case of any quali-
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fied liquidation to which this section applies, the domestic 
partnership referred to in subsection (c)(2) shall not fail 
to be treated as a successor corporation of the eligible S 
corporation for purposes of section 1362(g) of such Code. 
(f) OTHER DEFINITIONS.—Terms used in this sec-
tion which are also used in the Internal Revenue Code of 
1986 shall have the same meaning as when used in such 
Code. 
(g) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out this section. 
SEC. 138510. TREATMENT OF CERTAIN QUALIFIED SOUND 
RECORDING PRODUCTIONS. 
(a) ELECTION TO TREAT COSTS AS EXPENSES.— 
Section 181(a)(1) is amended by striking ‘‘qualified film 
or television production, and any qualified live theatrical 
production,’’ and inserting ‘‘qualified film or television 
production, any qualified live theatrical production, and 
any qualified sound recording production’’. 
(b) DOLLAR
LIMITATION.—Section 181(a)(2) is 
amended by adding at the end the following new subpara-
graph: 
‘‘(C) QUALIFIED SOUND RECORDING PRO-
DUCTION.—Paragraph (1) shall not apply to so 
much of the aggregate cost of any qualified 
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sound recording production, or to so much of 
the aggregate, cumulative cost of all such quali-
fied sound recording productions in the taxable 
year, as exceeds $150,000.’’. 
(c) NO OTHER DEDUCTION OR AMORTIZATION DE-
DUCTION ALLOWABLE.—Section 181(b) is amended by 
striking ‘‘qualified film or television production or any 
qualified live theatrical production’’ and inserting ‘‘quali-
fied film or television production, any qualified live theat-
rical production, or any qualified sound recording produc-
tion’’. 
(d) ELECTION.—Section 181(c)(1) is amended by 
striking ‘‘qualified film or television production or any 
qualified live theatrical production’’ and inserting ‘‘quali-
fied film or television production, any qualified live theat-
rical production, or any qualified sound recording produc-
tion’’. 
(e) QUALIFIED SOUND RECORDING PRODUCTION 
DEFINED.—Section 181 is amended by redesignating sub-
sections (f) and (g) as subsections (g) and (h), respec-
tively, and by inserting after subsection (e) the following 
new subsection: 
‘‘(f) QUALIFIED SOUND RECORDING PRODUCTION.— 
For purposes of this section, the term ‘qualified sound re-
cording production’ means a sound recording (as defined 
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