175 
by reason of this subsection shall be treated as a cred-
it allowed under subpart C (and not this subpart). 
‘‘(4) SHORT
TAXABLE
YEARS.—In the case of 
any taxable year of less than 365 days, the AMT re-
fundable credit amount determined under paragraph 
(2) with respect to such taxable year shall be the 
amount which bears the same ratio to such amount 
determined without regard to this paragraph as the 
number of days in such taxable year bears to 365.’’. 
(3) 
TREATMENT
OF
REFERENCES.—Section 
53(d) is amended by adding at the end the following 
new paragraph: 
‘‘(3) AMT TERM REFERENCES.—Any references 
in this subsection to section 55, 56, or 57 shall be 
treated as a reference to such section as in effect be-
fore its repeal by the Tax Cuts and Jobs Act.’’. 
(c) CONFORMING AMENDMENTS RELATED
TO AMT 
REPEAL.— 
(1) Section 2(d) is amended by striking ‘‘sections 
1 and 55’’ and inserting ‘‘section 1’’. 
(2) Section 5(a) is amended by striking para-
graph (4). 
(3) Section 11(d) is amended by striking ‘‘the 
taxes imposed by subsection (a) and section 55’’ and 
inserting ‘‘the tax imposed by subsection (a)’’. 
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176 
(4) Section 12 is amended by striking paragraph 
(7). 
(5) Section 26(a) is amended to read as follows: 
‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The 
aggregate amount of credits allowed by this subpart for the 
taxable year shall not exceed the taxpayer’s regular tax li-
ability for the taxable year.’’. 
(6) Section 26(b)(2) is amended by striking sub-
paragraph (A). 
(7) Section 26 is amended by striking subsection 
(c). 
(8) Section 38(c) is amended— 
(A) by striking paragraphs (1) through (5), 
(B) by redesignating paragraph (6) as 
paragraph (2), 
(C) by inserting before paragraph (2) (as so 
redesignated) the following new paragraph: 
‘‘(1) IN
GENERAL.—The credit allowed under 
subsection (a) for any taxable year shall not exceed 
the excess (if any) of— 
‘‘(A) the sum of— 
‘‘(i) so much of the regular tax liabil-
ity as does not exceed $25,000, plus 
‘‘(ii) 75 percent of so much of the reg-
ular tax liability as exceeds $25,000, over 
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177 
‘‘(B) the sum of the credits allowable under 
subparts A and B of this part.’’, and 
(D) by striking ‘‘subparagraph (B) of para-
graph (1)’’ each place it appears in paragraph 
(2) (as so redesignated) and inserting ‘‘clauses 
(i) and (ii) of paragraph (1)(A)’’. 
(9) Section 39(a) is amended— 
(A) by striking ‘‘or the eligible small busi-
ness credits’’ in paragraph (3)(A), and 
(B) by striking paragraph (4). 
(10) Section 45D(g)(4)(B) is amended by strik-
ing ‘‘or for purposes of section 55’’. 
(11) Section 54(c)(1) is amended to read as fol-
lows: 
‘‘(1) regular tax liability (as defined in section 
26(b)), over’’. 
(12) Section 54A(c)(1)(A) is amended to read as 
follows: 
‘‘(A) regular tax liability (as defined in sec-
tion 26(b)), over’’. 
(13) Section 148(b)(3) is amended to read as fol-
lows: 
‘‘(3) TAX-EXEMPT BONDS NOT TREATED AS IN-
VESTMENT PROPERTY.—The term ‘investment prop-
erty’ does not include any tax-exempt bond.’’. 
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178 
(14) Section 168(k)(2) is amended by striking 
subparagraph (G). 
(15) Section 168(k) is amended by striking para-
graph (4). 
(16) Section 168(k)(5) is amended by striking 
subparagraph (E). 
(17) Section 168(m)(2)(B)(i) is amended by 
striking ‘‘(determined without regard to paragraph 
(4) thereof)’’. 
(18) Section 168(m)(2) is amended by striking 
subparagraph (D). 
(19) Section 173 is amended by striking sub-
section (b). 
(20) Section 263(c) is amended by striking ‘‘sec-
tion 59(e) or 291’’ and inserting ‘‘section 291’’. 
(21) Section 263A(c) is amended by striking 
paragraph (6) and by redesignating paragraph (7) 
(as amended) as paragraph (6). 
(22) Section 382(l) is amended by striking para-
graph (7) and by redesignating paragraph (8) as 
paragraph (7). 
(23) Section 443 is amended by striking sub-
section (d) and by redesignating subsection (e) as sub-
section (d). 
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179 
(24) Section 616 is amended by striking sub-
section (e). 
(25) Section 617 is amended by striking sub-
section (i). 
(26) Section 641(c) is amended— 
(A) in paragraph (2) by striking subpara-
graph (B) and by redesignating subparagraphs 
(C) and (D) as subparagraphs (B) and (C), re-
spectively, and 
(B) in paragraph (3), by striking ‘‘para-
graph 
(2)(C)’’ 
and 
inserting 
‘‘paragraph 
(2)(B)’’. 
(27) Subsections (b) and (c) of section 666 are 
each amended by striking ‘‘(other than the tax im-
posed by section 55)’’. 
(28) Section 848 is amended by striking sub-
section (i). 
(29) Section 860E(a) is amended by striking 
paragraph (4). 
(30) Section 871(b)(1) is amended by striking 
‘‘or 55’’. 
(31) Section 882(a)(1) is amended by striking 
‘‘55,’’. 
(32) Section 897(a) is amended to read as fol-
lows: 
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180 
‘‘(a) TREATMENT AS EFFECTIVELY CONNECTED WITH 
UNITED STATES TRADE OR BUSINESS.—For purposes of 
this title, gain or loss of a nonresident alien individual or 
a foreign corporation from the disposition of a United 
States real property interest shall be taken into account— 
‘‘(1) in the case of a nonresident alien indi-
vidual, under section 871(b)(1), or 
‘‘(2) in the case of a foreign corporation, under 
section 882(a)(1), 
as if the taxpayer were engaged in a trade or business with-
in the United States during the taxable year and as if such 
gain or loss were effectively connected with such trade or 
business.’’. 
(33) Section 904(k) is amended to read as fol-
lows: 
‘‘(k) CROSS REFERENCE.—For increase of limitation 
under subsection (a) for taxes paid with respect to amounts 
received which were included in the gross income of the tax-
payer for a prior taxable year as a United States share-
holder with respect to a controlled foreign corporation, see 
section 960(b).’’. 
(34) Section 911(f) is amended to read as fol-
lows: 
‘‘(f) DETERMINATION OF TAX LIABILITY.— 
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181 
‘‘(1) IN GENERAL.—If, for any taxable year, any 
amount is excluded from gross income of a taxpayer 
under subsection (a), then, notwithstanding section 1, 
if such taxpayer has taxable income for such taxable 
year, the tax imposed by section 1 for such taxable 
year shall be equal to the excess (if any) of— 
‘‘(A) the tax which would be imposed by 
section 1 for such taxable year if the taxpayer’s 
taxable income were increased by the amount ex-
cluded under subsection (a) for such taxable 
year, over 
‘‘(B) the tax which would be imposed by 
section 1 for such taxable year if the taxpayer’s 
taxable income were equal to the amount ex-
cluded under subsection (a) for such taxable 
year. 
For purposes of this paragraph, the amount excluded 
under subsection (a) shall be reduced by the aggregate 
amount of any deductions or exclusions disallowed 
under subsection (d)(6) with respect to such excluded 
amount. 
‘‘(2) TREATMENT OF CAPITAL GAIN EXCESS.— 
‘‘(A) IN
GENERAL.—In applying section 
1(h) for purposes of determining the tax under 
paragraph (1)(A) for any taxable year in which, 
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182 
without regard to this subsection, the taxpayer’s 
net capital gain exceeds taxable income (here-
after in this subparagraph referred to as the cap-
ital gain excess)— 
‘‘(i) the taxpayer’s net capital gain 
(determined without regard to section 
1(h)(11)) shall be reduced (but not below 
zero) by such capital gain excess, 
‘‘(ii) the taxpayer’s qualified dividend 
income shall be reduced by so much of such 
capital gain excess as exceeds the taxpayer’s 
net capital gain (determined without regard 
to section 1(h)(11) and the reduction under 
clause (i)), and 
‘‘(iii) 
adjusted 
net 
capital 
gain, 
unrecaptured section 1250 gain, and 28- 
percent rate gain shall each be determined 
after increasing the amount described in 
section 1(h)(4)(B) by such capital gain ex-
cess. 
‘‘(B) DEFINITIONS.—Terms used in this 
paragraph which are also used in section 1(h) 
shall have the respective meanings given such 
terms by section 1(h).’’. 
(35) Section 962(a)(1) is amended— 
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183 
(A) by striking ‘‘sections 1 and 55’’ and in-
serting ‘‘section 1’’, and 
(B) by striking ‘‘sections 11 and 55’’ and 
inserting ‘‘section 11’’. 
(36) Section 1016(a) is amended by striking 
paragraph (20). 
(37) Section 1202(a)(4) is amended by inserting 
‘‘and’’ at the end of subparagraph (A), by striking ‘‘, 
and’’ and inserting a period at the end of subpara-
graph (B), and by striking subparagraph (C). 
(38) Section 1374(b)(3)(B) is amended by strik-
ing the last sentence thereof. 
(39) Section 1561(a) is amended— 
(A) by inserting ‘‘and’’ at the end of para-
graph (1), by striking ‘‘, and’’ at the end of 
paragraph (2) and inserting a period, and by 
striking paragraph (3), and 
(B) by striking the last sentence. 
(40) Section 6015(d)(2)(B) is amended by strik-
ing ‘‘or 55’’. 
(41) Section 6211(b)(4)(A) is amended by 
striking‘‘, 168(k)(4)’’. 
(42) Section 6425(c)(1)(A) is amended to read as 
follows: 
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184 
‘‘(A) the tax imposed under section 11 or 
subchapter L of chapter 1, whichever is applica-
ble, over’’. 
(43) Section 6654(d)(2) is amended— 
(A) in clause (i) of subparagraph (B), by 
striking ‘‘, alternative minimum taxable in-
come,’’, and 
(B) in clause (i) of subparagraph (C), by 
striking ‘‘, alternative minimum taxable in-
come,’’. 
(44) Section 6655(e)(2)(B)(i) is amended by 
striking ‘‘The taxable income and alternative min-
imum taxable income shall’’ and inserting ‘‘Taxable 
income shall’’. 
(45) Section 6655(g)(1)(A) is amended by add-
ing ‘‘plus’’ at the end of clause (i), by striking clause 
(ii), and by redesignating clause (iii) as clause (ii). 
(46) Section 6662(e)(3)(C) is amended by strik-
ing ‘‘the regular tax (as defined in section 55(c))’’ 
and inserting ‘‘the regular tax liability (as defined in 
section 26(b))’’. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
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185 
tion shall apply to taxable years beginning after De-
cember 31, 2017. 
(2) PRIOR ELECTIONS WITH RESPECT TO CER-
TAIN TAX PREFERENCES.—So much of the amend-
ment made by subsection (a) as relates to the repeal 
of section 59(e) of the Internal Revenue Code of 1986 
shall apply to amounts paid or incurred after Decem-
ber 31, 2017. 
(3) TREATMENT
OF
NET
OPERATING
LOSS 
CARRYBACKS.—For purposes of section 56(d) of the 
Internal Revenue Code of 1986 (as in effect before its 
repeal), the amount of any net operating loss which 
may be carried back from a taxable year beginning 
after December 31, 2017, to taxable years beginning 
before January 1, 2018, shall be determined without 
regard to any adjustments under section 56(d)(2)(A) 
of such Code (as so in effect). 
TITLE III—BUSINESS TAX 
REFORM 
Subtitle A—Tax Rates 
SEC. 3001. REDUCTION IN CORPORATE TAX RATE. 
(a) IN GENERAL.—Section 11(b) is amended to read 
as follows: 
‘‘(b) AMOUNT OF TAX.— 
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186 
‘‘(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amount of the tax imposed by 
subsection (a) shall be 20 percent of taxable income. 
‘‘(2) SPECIAL
RULE
FOR
PERSONAL
SERVICE 
CORPORATIONS.— 
‘‘(A) IN GENERAL.—In the case of a per-
sonal service corporation (as defined in section 
448(d)(2)), the amount of the tax imposed by 
subsection (a) shall be 25 percent of taxable in-
come. 
‘‘(B) REFERENCES TO CORPORATE RATE.— 
Any reference to the rate imposed under this sec-
tion or to the highest rate in effect under this 
section (or any similar reference) shall be deter-
mined without regard to the rate imposed with 
respect to personal service corporations (as so de-
fined).’’. 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Part I of subchapter P of chapter 1 is 
amended by striking section 1201 (and by striking the 
item relating to such section in the table of sections 
for such part). 
(B) Section 12 is amended by striking para-
graph (4). 
(C) Section 527(b) is amended— 
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187 
(i) by striking paragraph (2), and 
(ii) by striking all that precedes ‘‘is hereby 
imposed’’ and inserting: 
‘‘(b) TAX IMPOSED.—A tax’’. 
(D) Section 594(a) is amended by striking 
‘‘taxes imposed by section 11 or 1201(a)’’ and insert-
ing ‘‘tax imposed by section 11’’. 
(E) Section 691(c)(4) is amended by striking 
‘‘1201,’’. 
(F) Section 801(a) is amended— 
(i) by striking paragraph (2), and 
(ii) by striking all that precedes ‘‘is hereby 
imposed’’ and inserting: 
‘‘(a) TAX IMPOSED.—A tax’’. 
(G) Section 831(e) is amended by striking para-
graph (1) and by redesignating paragraphs (2) and 
(3) as paragraphs (1) and (2), respectively. 
(H) Sections 832(c)(5) and 834(b)(1)(D) are 
each amended by striking ‘‘sec. 1201 and following,’’. 
(I) Section 852(b)(3)(A) is amended by striking 
‘‘section 1201(a)’’ and inserting ‘‘section 11(b)(1)’’. 
(J) Section 857(b)(3) is amended— 
(i) by striking subparagraph (A) and redes-
ignating subparagraphs (B) through (F) as sub-
paragraphs (A) through (E), respectively, 
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188 
(ii) in subparagraph (C), as so redesig-
nated— 
(I) by striking ‘‘subparagraph (A)(ii)’’ 
in clause (i) thereof and inserting ‘‘para-
graph (1)’’, 
(II) by striking ‘‘the tax imposed by 
subparagraph (A)(ii)’’ in clauses (ii) and 
(iv) thereof and inserting ‘‘the tax imposed 
by paragraph (1) on undistributed capital 
gain’’, 
(iii) in subparagraph (E), as so redesig-
nated, by striking ‘‘subparagraph (B) or (D)’’ 
and inserting ‘‘subparagraph (A) or (C)’’, and 
(iv) by adding at the end the following new 
subparagraph: 
‘‘(F) UNDISTRIBUTED CAPITAL GAIN.—For 
purposes of this paragraph, the term ‘undistrib-
uted capital gain’ means the excess of the net 
capital gain over the deduction for dividends 
paid (as defined in section 561) determined with 
reference to capital gain dividends only.’’. 
(K) Section 882(a)(1) is amended by striking ‘‘, 
or 1201(a)’’. 
(L) Section 1374(b) is amended by striking 
paragraph (4). 
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189 
(M) Section 1381(b) is amended by striking 
‘‘taxes imposed by section 11 or 1201’’ and inserting 
‘‘tax imposed by section 11’’. 
(N) Section 6655(g)(1)(A)(i) is amended by 
striking ‘‘or 1201(a),’’. 
(O) Section 7518(g)(6)(A) is amended by strik-
ing ‘‘or 1201(a)’’. 
(2) Section 1445(e)(1) is amended by striking 
‘‘35 percent (or, to the extent provided in regulations, 
20 percent)’’ and inserting ‘‘20 percent’’. 
(3) Section 1445(e)(2) is amended by striking 
‘‘35 percent’’ and inserting ‘‘20 percent’’. 
(4) Section 1445(e)(6) is amended by striking 
‘‘35 percent (or, to the extent provided in regulations, 
20 percent)’’ and inserting ‘‘20 percent’’. 
(5)(A) Part I of subchapter B of chapter 5 is 
amended by striking section 1551 (and by striking the 
item relating to such section in the table of sections 
for such part). 
(B) Section 12 is amended by striking para-
graph (6). 
(C) Section 535(c)(5) is amended to read as fol-
lows: 
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190 
‘‘(5) CROSS
REFERENCE.—For limitation on 
credit provided in paragraph (2) or (3) in the case 
of certain controlled corporations, see section 1561.’’. 
(6)(A) Section 1561, as amended by the pre-
ceding provisions of this Act, is amended to read as 
follows: 
‘‘SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS 
CREDIT IN THE CASE OF CERTAIN CON-
TROLLED CORPORATIONS. 
‘‘(a) IN GENERAL.—The component members of a con-
trolled group of corporations on a December 31 shall, for 
their taxable years which include such December 31, be lim-
ited for purposes of this subtitle to one $250,000 ($150,000 
if any component member is a corporation described in sec-
tion 535(c)(2)(B)) amount for purposes of computing the 
accumulated earnings credit under section 535(c)(2) and 
(3). Such amount shall be divided equally among the com-
ponent members of such group on such December 31 unless 
the Secretary prescribes regulations permitting an unequal 
allocation of such amount. 
‘‘(b) CERTAIN SHORT TAXABLE YEARS.—If a corpora-
tion has a short taxable year which does not include a De-
cember 31 and is a component member of a controlled group 
of corporations with respect to such taxable year, then for 
purposes of this subtitle, the amount to be used in com-
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191 
puting the accumulated earnings credit under section 
535(c)(2) and (3) of such corporation for such taxable year 
shall be the amount specified in subsection (a) with respect 
to such group, divided by the number of corporations which 
are component members of such group on the last day of 
such taxable year. For purposes of the preceding sentence, 
section 1563(b) shall be applied as if such last day were 
substituted for December 31.’’. 
(B) The table of sections for part II of sub-
chapter B of chapter 5 is amended by striking the 
item relating to section 1561 and inserting the fol-
lowing new item: 
‘‘Sec. 1561. Limitation on accumulated earnings credit in the case of certain con-
trolled corporations.’’. 
(7) Section 7518(g)(6)(A) is amended— 
(A) by striking ‘‘With respect to the por-
tion’’ and inserting ‘‘In the case of a taxpayer 
other than a corporation, with respect to the por-
tion’’, and 
(B) by striking ‘‘(34 percent in the case of 
a corporation)’’. 
(c) REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS 
TO REFLECT LOWER CORPORATE INCOME TAX RATES.— 
(1) DIVIDENDS RECEIVED BY CORPORATIONS.— 
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192 
(A) IN
GENERAL.—Section 243(a)(1) is 
amended by striking ‘‘70 percent’’ and inserting 
‘‘50 percent’’. 
(B) DIVIDENDS FROM 20-PERCENT OWNED 
CORPORATIONS.—Section 243(c)(1) is amend-
ed— 
(i) by striking ‘‘80 percent’’ and in-
serting ‘‘65 percent’’, and 
(ii) by striking ‘‘70 percent’’ and in-
serting ‘‘50 percent’’. 
(C) CONFORMING AMENDMENT.—The head-
ing for section 243(c) is amended by striking 
‘‘RETENTION
OF
80-PERCENT
DIVIDEND
RE-
CEIVED DEDUCTION’’ and inserting ‘‘INCREASED 
PERCENTAGE’’. 
(2) DIVIDENDS RECEIVED FROM FSC.—Section 
245(c)(1)(B) is amended— 
(A) by striking ‘‘70 percent’’ and inserting 
‘‘50 percent’’, and 
(B) by striking ‘‘80 percent’’ and inserting 
‘‘65 percent’’. 
(3) LIMITATION ON AGGREGATE AMOUNT OF DE-
DUCTIONS.—Section 246(b)(3) is amended— 
(A) by striking ‘‘80 percent’’ in subpara-
graph (A) and inserting ‘‘65 percent’’, and 
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193 
(B) by striking ‘‘70 percent’’ in subpara-
graph (B) and inserting ‘‘50 percent’’. 
(4) REDUCTION
IN
DEDUCTION
WHERE
PORT-
FOLIO
STOCK
IS
DEBT-FINANCED.—Section 
246A(a)(1) is amended— 
(A) by striking ‘‘70 percent’’ and inserting 
‘‘50 percent’’, and 
(B) by striking ‘‘80 percent’’ and inserting 
‘‘65 percent’’. 
(5) INCOME FROM SOURCES WITHIN THE UNITED 
STATES.—Section 861(a)(2) is amended— 
(A) by striking ‘‘100/70th’’ and inserting 
‘‘100/50th’’ in subparagraph (B), and 
(B) in the flush sentence at the end— 
(i) by striking ‘‘100/80th’’ and insert-
ing ‘‘100/65th’’, and 
(ii) by striking ‘‘100/70th’’ and insert-
ing ‘‘100/50th’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to taxable years beginning after De-
cember 31, 2017. 
(2) CERTAIN
CONFORMING
AMENDMENTS.—The 
amendments made by paragraphs (2), (3), and (4) of 
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194 
subsection (b) shall apply to distributions after De-
cember 31, 2017. 
(e) NORMALIZATION REQUIREMENTS.— 
(1) IN GENERAL.—A normalization method of 
accounting shall not be treated as being used with re-
spect to any public utility property for purposes of 
section 167 or 168 of the Internal Revenue Code of 
1986 if the taxpayer, in computing its cost of service 
for ratemaking purposes and reflecting operating re-
sults in its regulated books of account, reduces the ex-
cess tax reserve more rapidly or to a greater extent 
than such reserve would be reduced under the average 
rate assumption method. 
(2) ALTERNATIVE METHOD FOR CERTAIN TAX-
PAYERS.—If, as of the first day of the taxable year 
that includes the date of enactment of this Act— 
(A) the taxpayer was required by a regu-
latory agency to compute depreciation for public 
utility property on the basis of an average life 
or composite rate method, and 
(B) the taxpayer’s books and underlying 
records did not contain the vintage account data 
necessary to apply the average rate assumption 
method, 
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the taxpayer will be treated as using a normalization 
method of accounting if, with respect to such jurisdic-
tion, the taxpayer uses the alternative method for 
public utility property that is subject to the regu-
latory authority of that jurisdiction. 
(3) DEFINITIONS.—For purposes of this sub-
section— 
(A) EXCESS TAX RESERVE.—The term ‘‘ex-
cess tax reserve’’ means the excess of— 
(i) the reserve for deferred taxes (as de-
scribed in section 168(i)(9)(A)(ii) of the In-
ternal Revenue Code of 1986 as in effect on 
the day before the date of the enactment of 
this Act), over 
(ii) the amount which would be the 
balance in such reserve if the amount of 
such reserve were determined by assuming 
that the corporate rate reductions provided 
in this Act were in effect for all prior peri-
ods. 
(B) AVERAGE
RATE
ASSUMPTION
METH-
OD.—The average rate assumption method is the 
method under which the excess in the reserve for 
deferred taxes is reduced over the remaining lives 
of the property as used in its regulated books of 
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196 
account which gave rise to the reserve for de-
ferred taxes. Under such method, if timing dif-
ferences for the property reverse, the amount of 
the adjustment to the reserve for the deferred 
taxes is calculated by multiplying— 
(i) the ratio of the aggregate deferred 
taxes for the property to the aggregate tim-
ing differences for the property as of the be-
ginning of the period in question, by 
(ii) the amount of the timing dif-
ferences which reverse during such period. 
(C) ALTERNATIVE
METHOD.—The ‘‘alter-
native method’’ is the method in which the tax-
payer— 
(i) computes the excess tax reserve on 
all public utility property included in the 
plant account on the basis of the weighted 
average life or composite rate used to com-
pute depreciation for regulatory purposes, 
and 
(ii) reduces the excess tax reserve rat-
ably over the remaining regulatory life of 
the property. 
(4) TAX INCREASED FOR NORMALIZATION VIOLA-
TION.—If, for any taxable year ending after the date 
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of the enactment of this Act, the taxpayer does not use 
a normalization method of accounting, the taxpayer’s 
tax for the taxable year shall be increased by the 
amount by which it reduces its excess tax reserve 
more rapidly than permitted under a normalization 
method of accounting. 
Subtitle B—Cost Recovery 
SEC. 3101. INCREASED EXPENSING. 
(a) 100 PERCENT EXPENSING.—Section 168(k)(1)(A) 
is amended by striking ‘‘50 percent’’ and inserting ‘‘100 
percent’’. 
(b) EXTENSION THROUGH JANUARY 1, 2023.—Section 
168(k)(2) is amended— 
(1) in subparagraph (A)(iii), by striking ‘‘Janu-
ary 1, 2020’’ and inserting ‘‘January 1, 2023’’, 
(2) in subparagraph (B)(i)(II), by striking 
‘‘January 1, 2021’’ and inserting ‘‘January 1, 2024’’, 
(3) in subparagraph (B)(i)(III), by striking 
‘‘January 1, 2020’’ and inserting ‘‘January 1, 2023’’, 
(4) in subparagraph (B)(ii), by striking ‘‘Janu-
ary 1, 2020’’ in each place it appears and inserting 
‘‘January 1, 2023’’, and 
(5) in subparagraph (E)(i), by striking ‘‘Janu-
ary 1, 2020’’ and replacing it with ‘‘January 1, 
2023’’. 
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198 
(c) APPLICATION TO USED PROPERTY.— 
(1) IN
GENERAL.—Section 168(k)(2)(A)(ii) is 
amended to read as follows: 
‘‘(ii) the original use of which begins 
with the taxpayer or the acquisition of 
which by the taxpayer meets the require-
ments of clause (ii) of subparagraph (E), 
and’’. 
(2) 
ACQUISITION
REQUIREMENTS.—Section 
168(k)(2)(E)(ii) is amended to read as follows: 
‘‘(ii) ACQUISITION
REQUIREMENTS.— 
An acquisition of property meets the re-
quirements of this clause if— 
‘‘(I) such property was not used 
by the taxpayer at any time prior to 
such acquisition, and 
‘‘(II) the acquisition of such prop-
erty meets the requirements of para-
graphs (2)(A), (2)(B), (2)(C), and (3) 
of section 179(d).’’, 
(3) ANTI-ABUSE
RULES.—Section 168(k)(2)(E) 
is further amended by amending clause (iii)(I) to 
read as follows: 
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‘‘(I) property is used by a lessor 
of such property and such use is the 
lessor’s first use of such property,’’. 
(d) EXCEPTION
FOR CERTAIN TRADES
AND BUSI-
NESSES NOT SUBJECT TO LIMITATION ON INTEREST EX-
PENSE.—Section 168(k)(2), as amended by section 2001, is 
amended by inserting after subparagraph (F) the following 
new subparagraph: 
‘‘(G) EXCEPTION FOR PROPERTY OF CER-
TAIN BUSINESSES NOT SUBJECT TO LIMITATION 
ON
INTEREST
EXPENSE.—The term ‘qualified 
property’ shall not include any property used 
in— 
‘‘(i) a trade or business described in 
subparagraph 
(B) 
or 
(C) 
of 
section 
163(j)(7), or 
‘‘(ii) a trade or business that has had 
floor plan financing indebtedness (as de-
fined in paragraph (9) of section 163(j)), if 
the floor plan financing interest related to 
such indebtedness was taken into account 
under paragraph (1)(C) of such section.’’. 
(e) COORDINATION WITH SECTION 280F.—Section 
168(k)(2)(F) is amended— 
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(1) by striking ‘‘$8,000’’ in clauses (i) and (iii) 
and inserting ‘‘$16,000’’, and 
(2) in clause (iii)— 
(A) by striking ‘‘placed in service by the 
taxpayer after December 31, 2017’’ and inserting 
‘‘acquired by the taxpayer before September 28, 
2017, and placed in service by the taxpayer after 
September 27, 2017’’, and 
(B) by redesignating subclauses (I) and (II) 
as subclauses (II) and (III) respectively, and in-
serting before clause (II), as so redesignated, the 
following new subclause: 
‘‘(I) in the case of a passenger 
automobile placed in service before 
January 1, 2018, ‘$8,000’,’’. 
(f) CONFORMING AMENDMENTS.— 
(1) Section 168(k)(2)(B)(i)(III), as amended, is 
amended by inserting ‘‘binding’’ before ‘‘contract’’. 
(2) Section 168(k)(5) is amended by— 
(A) by striking ‘‘January 1, 2020’’ in sub-
paragraph (A) and inserting ‘‘January 1, 
2023’’, 
(B) by striking ‘‘50 percent’’ in subpara-
graph (A)(i) and inserting ‘‘100 percent’’, and 
(C) by striking subparagraph (F). 
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201 
(3) Section 168(k)(6) is amended to read as fol-
lows: 
‘‘(6) PHASE
DOWN.—In the case of qualified 
property acquired by the taxpayer before September 
28, 2017, and placed in service by the taxpayer after 
September 27, 2017, paragraph (1)(A) shall be ap-
plied by substituting for ‘100 percent’— 
‘‘(A) ‘50 percent’ in the case of— 
‘‘(i) property placed in service before 
January 1, 2018, and 
‘‘(ii) property described in subpara-
graph (B) or (C) of paragraph (2) which is 
placed in service in 2018, 
‘‘(B) ‘40 percent’ in the case of— 
‘‘(i) property placed in service in 2018 
(other than property described in subpara-
graph (B) or (C) of paragraph (2)), and 
‘‘(ii) property described in subpara-
graph (B) or (C) of paragraph (2) which is 
placed in service in 2019, and 
‘‘(C) ‘30 percent’ in the case of— 
‘‘(i) property placed in service in 2019 
(other than property described in subpara-
graph (B) or (C) of paragraph (2)), and 
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202 
‘‘(ii) property described in subpara-
graph (B) or (C) of paragraph (2) which is 
placed in service in 2020.’’. 
(4) The heading of section 168(k) is amended by 
striking ‘‘SPECIAL ALLOWANCE FOR CERTAIN PROP-
ERTY ACQUIRED AFTER DECEMBER 31, 2007, AND 
BEFORE JANUARY 1, 2020’’ and inserting ‘‘FULL EX-
PENSING OF CERTAIN PROPERTY’’. 
(5) Section 460(c)(6)(B)(ii) is amended by strik-
ing ‘‘January 1, 2020 (January 1, 2021 in the case 
of property described in section 168(k)(2)(B))’’ and 
inserting ‘‘January 1, 2023 (January 1, 2024 in the 
case of property described in section 168(k)(2)(B))’’. 
(g) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except at provided by para-
graph (2), the amendments made by this section shall 
apply to property which— 
(A) is acquired after September 27, 2017, 
and 
(B) is placed in service after such date. 
For purposes of the preceding sentence, property shall 
not be treated as acquired after the date on which a 
written binding contract is entered into for such ac-
quisition. 
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203 
(2) SPECIFIED PLANTS.—The amendments made 
by subsection (f)(2) shall apply to specified plants 
planted or grafted after September 27, 2017. 
(3) TRANSITION RULE.—In the case of any tax-
payer’s first taxable year ending after September 27, 
2017, the taxpayer may elect (at such time and in 
such form and manner as the Secretary of the Treas-
ury, or his designee, may provide) to apply section 
168 of the Internal Revenue Code of 1986 without re-
gard to the amendments made by this section. 
(4) LIMITATION
ON
NET
OPERATING
LOSS 
CARRYBACKS ATTRIBUTABLE TO FULL EXPENSING.— 
In the case of any taxable year which includes any 
portion of the period beginning on September 28, 
2017, and ending on December 31, 2017, the amount 
of any net operating loss for such taxable year which 
may be treated as a net operating loss carryback (in-
cluding any such carryback attributable to any speci-
fied liability loss under section 172(b)(1)(C), any cor-
porate equity reduction interest loss under section 
172(b)(1)(D), 
any 
eligible 
loss 
under 
section 
172(b)(1)(E), and any farming loss under section 
172(b)(1)(F)) shall be determined without regard to 
the amendments made by this section. For purposes 
of this paragraph, terms which are used in section 
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204 
172 of the Internal Revenue Code of 1986 (determined 
without regard to the amendments made by section 
3302) shall have the same meaning as when used in 
such section. 
Subtitle C—Small Business Reforms 
SEC. 3201. EXPANSION OF SECTION 179 EXPENSING. 
(a) INCREASED DOLLAR LIMITATIONS.— 
(1) IN GENERAL.—Section 179(b) is amended— 
(A) by inserting ‘‘($5,000,000, in the case of 
taxable years beginning before January 1, 
2023)’’ after ‘‘$500,000’’ in paragraph (1), and 
(B) by inserting ‘‘($20,000,000, in the case 
of taxable years beginning before January 1, 
2023)’’ after ‘‘$2,000,000’’ in paragraph (2). 
(2) INFLATION ADJUSTMENT.—Section 179(b)(6) 
is amended to read as follows: 
‘‘(6) INFLATION ADJUSTMENT.— 
‘‘(A) IN GENERAL.—In the case of a taxable 
year beginning after 2015 (2018 in the case of 
the $5,000,000 and $20,000,000 amounts in sub-
section (b)), each dollar amount in subsection (b) 
shall be increased by an amount equal to such 
dollar amount multiplied by— 
‘‘(i) in the case of the $500,000 and 
$2,000,000 amounts in subsection (b), the 
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cost-of-living adjustment determined under 
section 1(c)(2) for the calendar year in 
which the taxable year begins, determined 
by substituting ‘calendar year 2014’ for 
‘calendar year 2016’ in subparagraph 
(A)(ii) thereof, and 
‘‘(ii) in the case of the $5,000,000 and 
$20,000,000 amounts in subsection (b), the 
cost-of-living adjustment determined under 
section 1(c)(2) for the calendar year in 
which the taxable year begins, determined 
by substituting ‘calendar year 2017’ for 
‘calendar year 2016’ in subparagraph 
(A)(ii) thereof. 
‘‘(B) ROUNDING.—The amount of any in-
crease under subparagraph (A) shall be rounded 
to the nearest multiple of $10,000 ($100,000 in 
the case of the $5,000,000 and $20,000,000 
amounts in subsection (b)).’’. 
(b) APPLICATION TO QUALIFIED ENERGY EFFICIENT 
HEATING AND AIR-CONDITIONING PROPERTY.— 
(1) IN GENERAL.—Section 179(f)(2) is amended 
by striking ‘‘and’’ at the end of subparagraph (B), by 
striking the period at the end of subparagraph (C) 
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206 
and inserting ‘‘, and’’, and by adding at the end the 
following new subparagraph: 
‘‘(D) qualified energy efficient heating and 
air-conditioning property.’’. 
(2) QUALIFIED ENERGY EFFICIENT HEATING AND 
AIR-CONDITIONING
PROPERTY.—Section 
179(f) 
is 
amended by adding at the end the following new 
paragraph: 
‘‘(3) QUALIFIED
ENERGY
EFFICIENT
HEATING 
AND AIR-CONDITIONING PROPERTY.—For purposes of 
this subsection— 
‘‘(A) IN GENERAL.—The term ‘qualified en-
ergy efficient heating and air-conditioning prop-
erty’ means any section 1250 property— 
‘‘(i) with respect to which depreciation 
(or amortization in lieu of depreciation) is 
allowable, 
‘‘(ii) which is installed as part of a 
building’s heating, cooling, ventilation, or 
hot water system, and 
‘‘(iii) which is within the scope of 
Standard 90.1–2007 or any successor stand-
ard. 
‘‘(B) 
STANDARD
90.1–2007.—The 
term 
‘Standard 90.1–2007’ means Standard 90.1– 
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2007 of the American Society of Heating, Refrig-
erating and Air-Conditioning Engineers and the 
Illuminating Engineering Society of North 
America (as in effect on the day before the date 
of the adoption of Standard 90.1–2010 of such 
Societies).’’. 
(c) EFFECTIVE DATE.— 
(1) 
INCREASED
DOLLAR
LIMITATIONS.—The 
amendments made by subsection (a) shall apply to 
taxable years beginning after December 31, 2017. 
(2) APPLICATION TO QUALIFIED ENERGY EFFI-
CIENT HEATING AND AIR-CONDITIONING PROPERTY.— 
The amendments made by subsection (b) shall apply 
to property acquired and placed in service after No-
vember 2, 2017. For purposes of the preceding sen-
tence, property shall not be treated as acquired after 
the date on which a written binding contract is en-
tered into for such acquisition. 
SEC. 3202. SMALL BUSINESS ACCOUNTING METHOD RE-
FORM AND SIMPLIFICATION. 
(a) MODIFICATION OF LIMITATION ON CASH METHOD 
OF ACCOUNTING.— 
(1) INCREASED LIMITATION.—So much of section 
448(c) as precedes paragraph (2) is amended to read 
as follows: 
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‘‘(c) GROSS RECEIPTS TEST.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—A corporation or partnership 
meets the gross receipts test of this subsection for any 
taxable year if the average annual gross receipts of 
such entity for the 3-taxable-year period ending with 
the taxable year which precedes such taxable year does 
not exceed $25,000,000.’’. 
(2) APPLICATION
OF
EXCEPTION
ON
ANNUAL 
BASIS.—Section 448(b)(3) is amended to read as fol-
lows: 
‘‘(3) ENTITIES WHICH MEET GROSS RECEIPTS 
TEST.—Paragraphs (1) and (2) of subsection (a) shall 
not apply to any corporation or partnership for any 
taxable year if such entity (or any predecessor) meets 
the gross receipts test of subsection (c) for such taxable 
year.’’. 
(3) INFLATION ADJUSTMENT.—Section 448(c) is 
amended by adding at the end the following new 
paragraph: 
‘‘(4) ADJUSTMENT FOR INFLATION.—In the case 
of any taxable year beginning after December 31, 
2018, the dollar amount in paragraph (1) shall be in-
creased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
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209 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(c)(2) for the calendar 
year in which the taxable year begins, by sub-
stituting ‘calendar year 2017’ for ‘calendar year 
2016’ in subparagraph (A)(ii) thereof. 
If any amount as increased under the preceding sen-
tence is not a multiple of $1,000,000, such amount 
shall be rounded to the nearest multiple of 
$1,000,000.’’. 
(4) COORDINATION WITH SECTION 481.—Section 
448(d)(7) is amended to read as follows: 
‘‘(7) COORDINATION
WITH
SECTION
481.—Any 
change in method of accounting made pursuant to 
this section shall be treated for purposes of section 481 
as initiated by the taxpayer and made with the con-
sent of the Secretary.’’. 
(5) APPLICATION OF EXCEPTION TO CORPORA-
TIONS ENGAGED IN FARMING.— 
(A) IN GENERAL.—Section 447(c) is amend-
ed— 
(i) by inserting ‘‘for any taxable year’’ 
after ‘‘not being a corporation’’ in the mat-
ter preceding paragraph (1), and 
(ii) by amending paragraph (2) to 
read as follows: 
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210 
‘‘(2) a corporation which meets the gross receipts 
test of section 448(c) for such taxable year.’’. 
(B) COORDINATION
WITH
SECTION
481.— 
Section 447(f) is amended to read as follows: 
‘‘(f) COORDINATION WITH SECTION 481.—Any change 
in method of accounting made pursuant to this section shall 
be treated for purposes of section 481 as initiated by the 
taxpayer and made with the consent of the Secretary.’’. 
(C) CONFORMING
AMENDMENTS.—Section 
447 is amended— 
(i) by striking subsections (d), (e), (h), 
and (i), and 
(ii) by redesignating subsections (f) 
and (g) (as amended by subparagraph (B)) 
as subsections (d) and (e), respectively. 
(b) EXEMPTION FROM UNICAP REQUIREMENTS.— 
(1) IN GENERAL.—Section 263A is amended by 
redesignating subsection (i) as subsection (j) and by 
inserting after subsection (h) the following new sub-
section: 
‘‘(i) EXEMPTION FOR CERTAIN SMALL BUSINESSES.— 
‘‘(1) IN GENERAL.—In the case of any taxpayer 
(other than a tax shelter prohibited from using the 
cash receipts and disbursements method of accounting 
under section 448(a)(3)) which meets the gross re-
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211 
ceipts test of section 448(c) for any taxable year, this 
section shall not apply with respect to such taxpayer 
for such taxable year. 
‘‘(2) APPLICATION OF GROSS RECEIPTS TEST TO 
INDIVIDUALS, ETC.—In the case of any taxpayer 
which is not a corporation or a partnership, the gross 
receipts test of section 448(c) shall be applied in the 
same manner as if each trade or business of such tax-
payer were a corporation or partnership. 
‘‘(3) COORDINATION
WITH
SECTION
481.—Any 
change in method of accounting made pursuant to 
this subsection shall be treated for purposes of section 
481 as initiated by the taxpayer and made with the 
consent of the Secretary.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
263A(b)(2) is amended to read as follows: 
‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real 
or personal property described in section 1221(a)(1) 
which is acquired by the taxpayer for resale.’’. 
(c) EXEMPTION FROM INVENTORIES.—Section 471 is 
amended by redesignating subsection (c) as subsection (d) 
and by inserting after subsection (b) the following new sub-
section: 
‘‘(c) EXEMPTION FOR CERTAIN SMALL BUSINESSES.— 
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‘‘(1) IN GENERAL.—In the case of any taxpayer 
(other than a tax shelter prohibited from using the 
cash receipts and disbursements method of accounting 
under section 448(a)(3)) which meets the gross re-
ceipts test of section 448(c) for any taxable year— 
‘‘(A) subsection (a) shall not apply with re-
spect to such taxpayer for such taxable year, and 
‘‘(B) the taxpayer’s method of accounting 
for inventory for such taxable year shall not be 
treated as failing to clearly reflect income if such 
method either— 
‘‘(i) treats inventory as non-incidental 
materials and supplies, or 
‘‘(ii) conforms to such taxpayer’s meth-
od of accounting reflected in an applicable 
financial statement of the taxpayer with re-
spect to such taxable year or, if the tax-
payer does not have any applicable finan-
cial statement with respect to such taxable 
year, the books and records of the taxpayer 
prepared in accordance with the taxpayer’s 
accounting procedures. 
‘‘(2) APPLICABLE FINANCIAL STATEMENT.—For 
purposes of this subsection, the term ‘applicable fi-
nancial statement’ means— 
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213 
‘‘(A) a financial statement which is cer-
tified as being prepared in accordance with gen-
erally accepted accounting principles and which 
is— 
‘‘(i) a 10-K (or successor form), or an-
nual statement to shareholders, required to 
be filed by the taxpayer with the United 
States Securities and Exchange Commis-
sion, 
‘‘(ii) an audited financial statement of 
the taxpayer which is used for— 
‘‘(I) credit purposes, 
‘‘(II) reporting to shareholders, 
partners, or other proprietors, or to 
beneficiaries, or 
‘‘(III) 
any 
other 
substantial 
nontax purpose, 
but only if there is no statement of the tax-
payer described in clause (i), or 
‘‘(iii) filed by the taxpayer with any 
other Federal or State agency for nontax 
purposes, but only if there is no statement 
of the taxpayer described in clause (i) or 
(ii), or 
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214 
‘‘(B) a financial statement of the taxpayer 
which— 
‘‘(i) is used for a purpose described in 
subclause (I), (II), or (III) of subparagraph 
(A)(ii), or 
‘‘(ii) filed by the taxpayer with any 
regulatory or governmental body (whether 
domestic or foreign) specified by the Sec-
retary, 
but only if there is no statement of the taxpayer 
described in subparagraph (A). 
‘‘(3) APPLICATION OF GROSS RECEIPTS TEST TO 
INDIVIDUALS, ETC.—In the case of any taxpayer 
which is not a corporation or a partnership, the gross 
receipts test of section 448(c) shall be applied in the 
same manner as if each trade or business of such tax-
payer were a corporation or partnership. 
‘‘(4) COORDINATION
WITH
SECTION
481.—Any 
change in method of accounting made pursuant to 
this subsection shall be treated for purposes of section 
481 as initiated by the taxpayer and made with the 
consent of the Secretary.’’. 
(d) EXEMPTION FROM PERCENTAGE COMPLETION FOR 
LONG-TERM CONTRACTS.— 
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215 
(1) 
IN
GENERAL.—Section 
460(e)(1)(B) 
is 
amended— 
(A) by inserting ‘‘(other than a tax shelter 
prohibited from using the cash receipts and dis-
bursements method of accounting under section 
448(a)(3))’’ after ‘‘taxpayer’’ in the matter pre-
ceding clause (i), and 
(B) by amending clause (ii) to read as fol-
lows: 
‘‘(ii) who meets the gross receipts test 
of section 448(c) for the taxable year in 
which such contract is entered into.’’. 
(2) CONFORMING AMENDMENTS.—Section 460(e) 
is amended by striking paragraphs (2) and (3), by re-
designating paragraphs (4), (5), and (6) as para-
graphs (3), (4), and (5), respectively, and by insert-
ing after paragraph (1) the following new paragraph: 
‘‘(2) RULES
RELATED
TO
GROSS
RECEIPTS 
TEST.— 
‘‘(A) APPLICATION
OF
GROSS
RECEIPTS 
TEST
TO
INDIVIDUALS, ETC.—For purposes of 
paragraph (1)(B)(ii), in the case of any tax-
payer which is not a corporation or a partner-
ship, the gross receipts test of section 448(c) shall 
be applied in the same manner as if each trade 
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or business of such taxpayer were a corporation 
or partnership. 
‘‘(B) COORDINATION WITH SECTION 481.— 
Any change in method of accounting made pur-
suant to paragraph (1)(B)(ii) shall be treated as 
initiated by the taxpayer and made with the 
consent of the Secretary. Such change shall be ef-
fected on a cut-off basis for all similarly classi-
fied contracts entered into on or after the year 
of change.’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to taxable years beginning after De-
cember 31, 2017. 
(2) PRESERVATION
OF
SUSPENSE
ACCOUNT 
RULES WITH RESPECT TO ANY EXISTING SUSPENSE 
ACCOUNTS.—So much of the amendments made by 
subsection (a)(5)(C) as relate to section 447(i) of the 
Internal Revenue Code of 1986 shall not apply with 
respect to any suspense account established under 
such section before the date of the enactment of this 
Act. 
(3) EXEMPTION FROM PERCENTAGE COMPLETION 
FOR LONG-TERM CONTRACTS.—The amendments made 
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by subsection (d) shall apply to contracts entered into 
after December 31, 2017, in taxable years ending 
after such date. 
SEC. 3203. SMALL BUSINESS EXCEPTION FROM LIMITATION 
ON DEDUCTION OF BUSINESS INTEREST. 
(a) IN GENERAL.—Section 163(j)(2), as amended by 
section 3301, is amended to read as follows: 
‘‘(2) EXEMPTION
FOR
CERTAIN
SMALL
BUSI-
NESSES.—In the case of any taxpayer (other than a 
tax shelter prohibited from using the cash receipts 
and disbursements method of accounting under sec-
tion 448(a)(3)) which meets the gross receipts test of 
section 448(c) for any taxable year, paragraph (1) 
shall not apply to such taxpayer for such taxable 
year. In the case of any taxpayer which is not a cor-
poration or a partnership, the gross receipts test of 
section 448(c) shall be applied in the same manner as 
if such taxpayer were a corporation or partnership.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 3204. MODIFICATION OF TREATMENT OF S CORPORA-
TION CONVERSIONS TO C CORPORATIONS. 
(a) ADJUSTMENTS ATTRIBUTABLE
TO CONVERSION 
FROM S CORPORATION TO C CORPORATION.—Section 481 
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218 
is amended by adding at the end the following new sub-
section: 
‘‘(d) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION 
FROM S CORPORATION TO C CORPORATION.— 
‘‘(1) IN GENERAL.—In the case of an eligible ter-
minated S corporation, any adjustment required by 
subsection (a)(2) which is attributable to such cor-
poration’s 
revocation 
described 
in 
paragraph 
(2)(A)(ii) shall be taken into account ratably during 
the 6-taxable year period beginning with the year of 
change. 
‘‘(2) ELIGIBLE TERMINATED S CORPORATION.— 
For purposes of this subsection, the term ‘eligible ter-
minated S corporation’ means any C corporation— 
‘‘(A) which— 
‘‘(i) was an S corporation on the day 
before the date of the enactment of the Tax 
Cuts and Jobs Act, and 
‘‘(ii) during the 2-year period begin-
ning on the date of such enactment makes 
a revocation of its election under section 
1362(a), and 
‘‘(B) the owners of the stock of which, deter-
mined on the date such revocation is made, are 
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the same owners (and in identical proportions) 
as on the date of such enactment.’’. 
(b) CASH DISTRIBUTIONS FOLLOWING POST-TERMI-
NATION TRANSITION PERIOD FROM S CORPORATION STA-
TUS.—Section 1371 is amended by adding at the end the 
following new subsection: 
‘‘(f) CASH DISTRIBUTIONS FOLLOWING POST-TERMI-
NATION TRANSITION PERIOD.—In the case of a distribution 
of money by an eligible terminated S corporation (as de-
fined in section 481(d)) after the post-termination transi-
tion period, the accumulated adjustments account shall be 
allocated to such distribution, and the distribution shall be 
chargeable to accumulated earnings and profits, in the same 
ratio as the amount of such accumulated adjustments ac-
count bears to the amount of such accumulated earnings 
and profits.’’. 
Subtitle D—Reform of Business- 
related Exclusions, Deductions, etc. 
SEC. 3301. INTEREST. 
(a) IN GENERAL.—Section 163(j) is amended to read 
as follows: 
‘‘(j) LIMITATION ON BUSINESS INTEREST.— 
‘‘(1) IN GENERAL.—In the case of any taxpayer 
for any taxable year, the amount allowed as a deduc-
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tion under this chapter for business interest shall not 
exceed the sum of— 
‘‘(A) the business interest income of such 
taxpayer for such taxable year, 
‘‘(B) 30 percent of the adjusted taxable in-
come of such taxpayer for such taxable year, plus 
‘‘(C) the floor plan financing interest of 
such taxpayer for such taxable year. 
The amount determined under subparagraph (B) 
(after any increases in such amount under paragraph 
(3)(A)(iii)) shall not be less than zero. 
‘‘(2) EXEMPTION
FOR
CERTAIN
SMALL
BUSI-
NESSES.—For exemption for certain small businesses, 
see the amendment made by section 3203 of the Tax 
Cuts and Jobs Act. 
‘‘(3) APPLICATION TO PARTNERSHIPS, ETC.— 
‘‘(A) IN GENERAL.—In the case of any part-
nership— 
‘‘(i) this subsection shall be applied at 
the partnership level and any deduction for 
business interest shall be taken into account 
in determining the non-separately stated 
taxable income or loss of the partnership, 
‘‘(ii) the adjusted taxable income of 
each partner of such partnership shall be 
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determined without regard to such partner’s 
distributive share of the non-separately stat-
ed taxable income or loss of such partner-
ship, and 
‘‘(iii) the amount determined under 
paragraph (1)(B) with respect to each part-
ner of such partnership shall be increased 
by such partner’s distributive share of such 
partnership’s excess amount. 
‘‘(B) EXCESS
AMOUNT.—The term ‘excess 
amount’ means, with respect to any partnership, 
the excess (if any) of— 
‘‘(i) 30 percent of the adjusted taxable 
income of the partnership, over 
‘‘(ii) the amount (if any) by which the 
business interest of the partnership, reduced 
by floor plan financing interest, exceeds the 
business interest income of the partnership. 
‘‘(C) APPLICATION TO S CORPORATIONS.— 
Rules similar to the rules of subparagraphs (A) 
and (B) shall apply with respect to any S cor-
poration and its shareholders. 
‘‘(4) BUSINESS INTEREST.—For purposes of this 
subsection, the term ‘business interest’ means any in-
terest paid or accrued on indebtedness properly allo-
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cable to a trade or business. Such term shall not in-
clude investment interest (within the meaning of sub-
section (d)). 
‘‘(5) BUSINESS
INTEREST
INCOME.—For pur-
poses of this subsection, the term ‘business interest in-
come’ means the amount of interest includible in the 
gross income of the taxpayer for the taxable year 
which is properly allocable to a trade or business. 
Such term shall not include investment income (with-
in the meaning of subsection (d)). 
‘‘(6) ADJUSTED
TAXABLE
INCOME.—For pur-
poses of this subsection, the term ‘adjusted taxable in-
come’ means the taxable income of the taxpayer— 
‘‘(A) computed without regard to— 
‘‘(i) any item of income, gain, deduc-
tion, or loss which is not properly allocable 
to a trade or business, 
‘‘(ii) any business interest or business 
interest income, 
‘‘(iii) the amount of any net operating 
loss deduction under section 172, and 
‘‘(iv) any deduction allowable for de-
preciation, amortization, or depletion, and 
‘‘(B) computed with such other adjustments 
as the Secretary may provide. 
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‘‘(7) TRADE OR BUSINESS.—For purposes of this 
subsection, the term ‘trade or business’ shall not in-
clude— 
‘‘(A) the trade or business of performing 
services as an employee, 
‘‘(B) a real property trade or business (as 
such term is defined in section 469(c)(7)(C)), or 
‘‘(C) the trade or business of the furnishing 
or sale of— 
‘‘(i) electrical energy, water, or sewage 
disposal services, 
‘‘(ii) gas or steam through a local dis-
tribution system, or 
‘‘(iii) transportation of gas or steam 
by pipeline, 
if the rates for such furnishing or sale, as the 
case may be, have been established or approved 
by a State or political subdivision thereof, by 
any agency or instrumentality of the United 
States, or by a public service or public utility 
commission or other similar body of any State 
or political subdivision thereof. 
‘‘(8) CARRYFORWARD
OF
DISALLOWED
INTER-
EST.—For carryforward of interest disallowed under 
paragraph (1), see subsection (o). 
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‘‘(9) FLOOR
PLAN
FINANCING
INTEREST
DE-
FINED.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘floor plan fi-
nancing interest’ means interest paid or accrued 
on floor plan financing indebtedness. 
‘‘(B) FLOOR
PLAN
FINANCING
INDEBTED-
NESS.—The term ‘floor plan financing indebted-
ness’ means indebtedness— 
‘‘(i) used to finance the acquisition of 
motor vehicles held for sale to retail cus-
tomers, and 
‘‘(ii) secured by the inventory so ac-
quired. 
‘‘(C) MOTOR
VEHICLE.—The term ‘motor 
vehicle’ means a motor vehicle that is any of the 
following: 
‘‘(i) An automobile. 
‘‘(ii) A truck. 
‘‘(iii) A recreational vehicle. 
‘‘(iv) A motorcycle. 
‘‘(v) A boat. 
‘‘(vi) Farm machinery or equipment. 
‘‘(vii) 
Construction 
machinery 
or 
equipment.’’. 
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(b) CARRYFORWARD OF DISALLOWED BUSINESS IN-
TEREST.—Section 163, after amendment by section 4302(a) 
and before amendment by section 4302(b), is amended by 
inserting after subsection (n) the following new subsection: 
‘‘(o) CARRYFORWARD OF DISALLOWED BUSINESS IN-
TEREST.—The amount of any business interest not allowed 
as a deduction for any taxable year by reason of subsection 
(j) shall be treated as business interest paid or accrued in 
the succeeding taxable year. Business interest paid or ac-
crued in any taxable year (determined without regard to 
the preceding sentence) shall not be carried past the 5th tax-
able year following such taxable year, determined by treat-
ing business interest as allowed as a deduction on a first- 
in, first-out basis.’’. 
(c) TREATMENT OF CARRYFORWARD OF DISALLOWED 
BUSINESS INTEREST IN CERTAIN CORPORATE ACQUISI-
TIONS.— 
(1) IN GENERAL.—Section 381(c) is amended by 
inserting after paragraph (19) the following new 
paragraph: 
‘‘(20) CARRYFORWARD OF DISALLOWED INTER-
EST.—The carryover of disallowed interest described 
in section 163(o) to taxable years ending after the 
date of distribution or transfer.’’. 
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(2) 
APPLICATION
OF
LIMITATION.—Section 
382(d) is amended by adding at the end the following 
new paragraph: 
‘‘(3) APPLICATION TO CARRYFORWARD OF DIS-
ALLOWED
INTEREST.—The term ‘pre-change loss’ 
shall include any carryover of disallowed interest de-
scribed in section 163(o) under rules similar to the 
rules of paragraph (1).’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
382(k)(1) is amended by inserting after the first sen-
tence the following: ‘‘Such term shall include any cor-
poration entitled to use a carryforward of disallowed 
interest described in section 381(c)(20).’’ 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 3302. MODIFICATION OF NET OPERATING LOSS DE-
DUCTION. 
(a) INDEFINITE CARRYFORWARD OF NET OPERATING 
LOSSES.—Section 172(b)(1)(A)(ii) is amended by striking 
‘‘to each of the 20 taxable years’’ and inserting ‘‘to each 
taxable year’’. 
(b) REPEAL OF NET OPERATING LOSS CARRYBACKS 
OTHER THAN 1-YEAR CARRYBACK OF ELIGIBLE DISASTER 
LOSSES.— 
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(1) IN
GENERAL.—Section 172(b)(1)(A)(i) is 
amended to read as follows: 
‘‘(i) in the case of any portion of a net 
operating loss for the taxable year which is 
an eligible disaster loss with respect to the 
taxpayer, shall be a net operating loss 
carryback to the taxable year preceding the 
taxable year of such loss, and’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 172(b)(1) is amended by strik-
ing subparagraphs (B) through (F) and insert-
ing the following: 
‘‘(B) ELIGIBLE DISASTER LOSS.— 
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A)(i), the term ‘eligible dis-
aster loss’ means— 
‘‘(I) in the case of a taxpayer 
which is a small business, net oper-
ating losses attributable to federally de-
clared disasters (as defined by section 
165(i)(5)), and 
‘‘(II) in the case of a taxpayer en-
gaged in the trade or business of farm-
ing, net operating losses attributable to 
such federally declared disasters. 
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‘‘(ii) SMALL BUSINESS.—For purposes 
of this subparagraph, the term ‘small busi-
ness’ means a corporation or partnership 
which meets the gross receipts test of section 
448(c) 
(determined 
by 
substituting 
‘$5,000,000’ for ‘$25,000,000’ each place it 
appears therein) for the taxable year in 
which the loss arose (or, in the case of a sole 
proprietorship, which would meet such test 
if such proprietorship were a corporation). 
‘‘(iii) TRADE OR BUSINESS OF FARM-
ING.—For purposes of this subparagraph, 
the trade or business of farming shall in-
clude the trade or business of— 
‘‘(I) operating a nursery or sod 
farm, or 
‘‘(II) the raising or harvesting of 
trees bearing fruit, nuts, or other crops, 
or ornamental trees. 
For purposes of subclause (II), an evergreen 
tree which is more than 6 years old at the 
time severed from the roots shall not be 
treated as an ornamental tree.’’. 
(B) Section 172 is amended by striking sub-
sections (f), (g), and (h). 
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(c) LIMITATION OF NET OPERATING LOSS TO 90 PER-
CENT OF TAXABLE INCOME.— 
(1) IN GENERAL.—Section 172(a) is amended to 
read as follows: 
‘‘(a) DEDUCTION ALLOWED.—There shall be allowed 
as a deduction for the taxable year an amount equal to the 
lesser of— 
‘‘(1) the aggregate of the net operating loss 
carryovers to such year, plus the net operating loss 
carrybacks to such year, or 
‘‘(2) 90 percent of taxable income computed 
without regard to the deduction allowable under this 
section. 
For purposes of this subtitle, the term ‘net operating loss 
deduction’ means the deduction allowed by this subsection.’’. 
(2) 
COORDINATION
OF
LIMITATION
WITH 
CARRYBACKS AND CARRYOVERS.—Section 172(b)(2) is 
amended by striking ‘‘shall be computed—’’ and all 
that follows and inserting ‘‘shall— 
‘‘(A) be computed with the modifications 
specified in subsection (d) other than paragraphs 
(1), (4), and (5) thereof, and by determining the 
amount of the net operating loss deduction with-
out regard to the net operating loss for the loss 
year or for any taxable year thereafter, 
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230 
‘‘(B) not be considered to be less than zero, 
and 
‘‘(C) not exceed the amount determined 
under subsection (a)(2) for such prior taxable 
year.’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
172(d)(6) is amended by striking ‘‘and’’ at the end of 
subparagraph (A), by striking the period at the end 
of subparagraph (B) and inserting ‘‘; and’’, and by 
adding at the end the following new subparagraph: 
‘‘(C) subsection (a)(2) shall be applied by 
substituting ‘real estate investment trust taxable 
income (as defined in section 857(b)(2) but with-
out regard to the deduction for dividends paid 
(as defined in section 561))’ for ‘taxable in-
come’.’’. 
(d) ANNUAL INCREASE OF INDEFINITE CARRYOVER 
AMOUNTS.—Section 172(b) is amended by redesignating 
paragraph (3) as paragraph (4) and by inserting after 
paragraph (2) the following new paragraph: 
‘‘(3) ANNUAL INCREASE OF INDEFINITE CARRY-
OVER AMOUNTS.—For purposes of paragraph (2)— 
‘‘(A) the amount of any indefinite net oper-
ating loss which is carried to the next succeeding 
taxable year after the loss year (within the 
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231 
meaning of paragraph (2)) shall be increased by 
an amount equal to— 
‘‘(i) the amount of the loss which may 
be so carried over to such succeeding taxable 
year (determined without regard to this 
paragraph), multiplied by 
‘‘(ii) the sum of— 
‘‘(I) the annual Federal short- 
term rate (determined under section 
1274(d)) for the last month ending be-
fore the beginning of such taxable year, 
plus 
‘‘(II) 4 percentage points, and 
‘‘(B) the amount of any indefinite net oper-
ating loss which is carried to any succeeding 
taxable year (after such next succeeding taxable 
year) shall be an amount equal to— 
‘‘(i) the excess of— 
‘‘(I) the amount of the loss carried 
to the prior taxable year (after any in-
crease under this paragraph with re-
spect to such amount), over 
‘‘(II) the amount by which such 
loss was reduced under paragraph (2) 
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by reason of the taxable income for 
such prior taxable year, multiplied by 
‘‘(ii) a percentage equal to 100 percent 
plus the percentage determined under sub-
paragraph (A)(ii) with respect to such suc-
ceeding taxable year. 
For purposes of the preceding sentence, the term 
‘indefinite net operating loss’ means any net op-
erating loss arising in a taxable year beginning 
after December 31, 2017.’’. 
(e) EFFECTIVE DATE.— 
(1) CARRYFORWARDS
AND
CARRYBACKS.—The 
amendments made by subsections (a) and (b) shall 
apply to net operating losses arising in taxable years 
beginning after December 31, 2017. 
(2) NET OPERATING LOSS LIMITED TO 90 PER-
CENT OF TAXABLE INCOME.—The amendments made 
by subsection (c) shall apply to taxable years begin-
ning after December 31, 2017. 
(3) 
ANNUAL
INCREASE
IN
CARRYOVER 
AMOUNTS.—The amendments made by subsection (d) 
shall apply to amounts carried to taxable years begin-
ning after December 31, 2017. 
(4) 
SPECIAL
RULE
FOR
NET
DISASTER 
LOSSES.—Notwithstanding 
paragraph 
(1), 
the 
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amendments made by subsection (b) shall not apply 
to the portion of the net operating loss for any taxable 
year which is a net disaster loss to which section 
504(b) of the Disaster Tax Relief and Airport and 
Airway Extension Act of 2017 applies. 
SEC. 3303. LIKE-KIND EXCHANGES OF REAL PROPERTY. 
(a) IN GENERAL.—Section 1031(a)(1) is amended by 
striking ‘‘property’’ each place it appears and inserting 
‘‘real property’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 1031(a) is amended 
to read as follows: 
‘‘(2) EXCEPTION FOR REAL PROPERTY HELD FOR 
SALE.—This subsection shall not apply to any ex-
change of real property held primarily for sale.’’. 
(2) Section 1031 is amended by striking sub-
sections (e) and (i). 
(3) Section 1031, as amended by paragraph (2), 
is amended by inserting after subsection (d) the fol-
lowing new subsection: 
‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.—For 
purposes of this section, an interest in a partnership which 
has in effect a valid election under section 761(a) to be ex-
cluded from the application of all of subchapter K shall be 
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234 
treated as an interest in each of the assets of such partner-
ship and not as an interest in a partnership.’’. 
(4) Section 1031(h) is amended to read as fol-
lows: 
‘‘(h) SPECIAL RULES
FOR FOREIGN REAL PROP-
ERTY.—Real property located in the United States and real 
property located outside the United States are not property 
of a like kind.’’. 
(5) The heading of section 1031 is amended by 
striking ‘‘PROPERTY’’ and inserting ‘‘REAL PROP-
ERTY’’. 
(6) The table of sections for part III of sub-
chapter O of chapter 1 is amended by striking the 
item relating to section 1031 and inserting the fol-
lowing new item: 
‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to exchanges completed after Decem-
ber 31, 2017. 
(2) TRANSITION RULE.—The amendments made 
by this section shall not apply to any exchange if— 
(A) the property disposed of by the taxpayer 
in the exchange is disposed of on or before De-
cember 31 2017, or 
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(B) the property received by the taxpayer in 
the exchange is received on or before December 
31, 2017. 
SEC. 3304. REVISION OF TREATMENT OF CONTRIBUTIONS 
TO CAPITAL. 
(a) INCLUSION OF CONTRIBUTIONS TO CAPITAL.—Part 
II of subchapter B of chapter 1 is amended by inserting 
after section 75 the following new section: 
‘‘SEC. 76. CONTRIBUTIONS TO CAPITAL. 
‘‘(a) IN GENERAL.—Gross income includes any con-
tribution to the capital of any entity. 
‘‘(b) TREATMENT OF CONTRIBUTIONS IN EXCHANGE 
FOR STOCK, ETC.— 
‘‘(1) IN GENERAL.—In the case of any contribu-
tion of money or other property to a corporation in 
exchange for stock of such corporation— 
‘‘(A) such contribution shall not be treated 
for purposes of subsection (a) as a contribution 
to the capital of such corporation (and shall not 
be includible in the gross income of such corpora-
tion), and 
‘‘(B) no gain or loss shall be recognized to 
such corporation upon the issuance of such stock. 
‘‘(2) 
TREATMENT
LIMITED
TO
VALUE
OF 
STOCK.—For purposes of this subsection, a contribu-
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tion of money or other property to a corporation shall 
be treated as being in exchange for stock of such cor-
poration only to the extent that the fair market value 
of such money and other property does not exceed the 
fair market value of such stock. 
‘‘(3) APPLICATION
TO
ENTITIES
OTHER
THAN 
CORPORATIONS.—In the case of any entity other than 
a corporation, rules similar to the rules of paragraphs 
(1) and (2) shall apply in the case of any contribu-
tion of money or other property to such entity in ex-
change for any interest in such entity. 
‘‘(c) TREASURY STOCK TREATED AS STOCK.—Any ref-
erence in this section to stock shall be treated as including 
a reference to treasury stock.’’. 
(b) BASIS OF CORPORATION IN CONTRIBUTED PROP-
ERTY.— 
(1) CONTRIBUTIONS TO CAPITAL.—Subsection (c) 
of section 362 is amended to read as follows: 
‘‘(c) CONTRIBUTIONS TO CAPITAL.—If property other 
than money is transferred to a corporation as a contribu-
tion to the capital of such corporation (within the meaning 
of section 76) then the basis of such property shall be the 
greater of— 
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‘‘(1) the basis determined in the hands of the 
transferor, increased by the amount of gain recog-
nized to the transferor on such transfer, or 
‘‘(2) the amount included in gross income by 
such corporation under section 76 with respect to such 
contribution.’’. 
(2) CONTRIBUTIONS IN EXCHANGE FOR STOCK.— 
Paragraph (2) of section 362(a) is amended by strik-
ing ‘‘contribution to capital’’ and inserting ‘‘con-
tribution in exchange for stock of such corporation 
(determined under rules similar to the rules of para-
graphs (2) and (3) of section 76(b))’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 108(e) is amended by striking para-
graph (6). 
(2) Part III of subchapter B of chapter 1 is 
amended by striking section 118 (and by striking the 
item relating to such section in the table of sections 
for such part). 
(3) The table of sections for part II of subchapter 
B of chapter 1 is amended by inserting after the item 
relating to section 75 the following new item: 
‘‘Sec. 76. Contributions to capital.’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to contributions made, and transactions 
entered into, after the date of the enactment of this Act. 
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SEC. 3305. REPEAL OF DEDUCTION FOR LOCAL LOBBYING 
EXPENSES. 
(a) IN GENERAL.—Section 162(e) is amended by strik-
ing paragraphs (2) and (7) and by redesignating para-
graphs (3), (4), (5), (6), and (8) as paragraphs (2), (3), 
(4), (5), and (6), respectively. 
(b) 
CONFORMING
AMENDMENT.—Section 
6033(e)(1)(B)(ii) 
is 
amended 
by 
striking 
‘‘section 
162(e)(5)(B)(ii)’’ and inserting ‘‘section 162(e)(4)(B)(ii)’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to amounts paid or incurred after De-
cember 31, 2017. 
SEC. 3306. REPEAL OF DEDUCTION FOR INCOME ATTRIB-
UTABLE TO DOMESTIC PRODUCTION ACTIVI-
TIES. 
(a) IN GENERAL.—Part VI of subchapter B of chapter 
1 is amended by striking section 199 (and by striking the 
item relating to such section in the table of sections for such 
part). 
(b) CONFORMING AMENDMENTS.— 
(1) 
Sections 
74(d)(2)(B), 
86(b)(2)(A), 
137(b)(3)(A), 219(g)(3)(A)(ii), and 246(b)(1) are each 
amended by striking ‘‘199,’’. 
(2) Section 170(b)(2)(D), as amended by the pre-
ceding provisions of this Act, is amended by striking 
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clause (iv), by redesignating clause (v) as clause (iv), 
and by inserting ‘‘and’’ at the end of clause (iii). 
(3) Section 172(d) is amended by striking para-
graph (7). 
(4) Section 613(a) is amended by striking ‘‘and 
without the deduction under section 199’’. 
(5) Section 613A(d)(1) is amended by striking 
subparagraph (B) and by redesignating subpara-
graphs (C), (D), and (E) as subparagraphs (B), (C), 
and (D), respectively. 
(6) Section 1402(a) is amended by adding ‘‘and’’ 
at the end of paragraph (15) and by striking para-
graph (16). 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 3307. ENTERTAINMENT, ETC. EXPENSES. 
(a) DENIAL OF DEDUCTION.—Subsection (a) of section 
274 is amended to read as follows: 
‘‘(a) ENTERTAINMENT, AMUSEMENT, RECREATION, 
AND OTHER FRINGE BENEFITS .— 
‘‘(1) IN GENERAL.—No deduction otherwise al-
lowable under this chapter shall be allowed for 
amounts paid or incurred for any of the following 
items: 
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‘‘(A) ACTIVITY.—With respect to an activity 
which is of a type generally considered to con-
stitute entertainment, amusement, or recreation. 
‘‘(B) MEMBERSHIP DUES.—With respect to 
membership in any club organized for business, 
pleasure, recreation or other social purposes. 
‘‘(C) AMENITY.—With respect to a de mini-
mis fringe (as defined in section 132(e)(1)) that 
is primarily personal in nature and involving 
property or services that are not directly related 
to the taxpayer’s trade or business. 
‘‘(D) FACILITY.—With respect to a facility 
or portion thereof used in connection with an ac-
tivity referred to in subparagraph (A), member-
ship dues or similar amounts referred to in sub-
paragraph (B), or an amenity referred to in sub-
paragraph (C). 
‘‘(E) QUALIFIED TRANSPORTATION FRINGE 
AND PARKING FACILITY.—Which is a qualified 
transportation fringe (as defined in section 
132(f)) or which is a parking facility used in 
connection with qualified parking (as defined in 
section 132(f)(5)(C)). 
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‘‘(F) ON-PREMISES ATHLETIC FACILITY.— 
Which is an on-premises athletic facility as de-
fined in section 132(j)(4)(B). 
‘‘(2) SPECIAL RULES.—For purposes of applying 
paragraph (1), an activity described in section 212 
shall be treated as a trade or business. 
‘‘(3) REGULATIONS.—Under the regulations pre-
scribed to carry out this section, the Secretary shall 
include regulations— 
‘‘(A) defining entertainment, amenities, 
recreation, amusement, and facilities for pur-
poses of this subsection, 
‘‘(B) providing for the appropriate alloca-
tion of depreciation and other costs with respect 
to facilities used for parking or for on-premises 
athletic facilities, and 
‘‘(C) specifying arrangements a primary 
purpose of which is the avoidance of this sub-
section.’’. 
(b) EXCEPTION FOR CERTAIN EXPENSES INCLUDIBLE 
IN INCOME OF RECIPIENT.— 
(1) EXPENSES
TREATED
AS
COMPENSATION.— 
Paragraph (2) of section 274(e) is amended to read 
as follows: 
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‘‘(2) EXPENSES TREATED AS COMPENSATION.— 
Expenses for goods, services, and facilities, to the ex-
tent that the expenses do not exceed the amount of the 
expenses which are treated by the taxpayer, with re-
spect to the recipient of the entertainment, amuse-
ment, or recreation, as compensation to an employee 
on the taxpayer’s return of tax under this chapter 
and as wages to such employee for purposes of chapter 
24 (relating to withholding of income tax at source on 
wages).’’. 
(2) EXPENSES INCLUDIBLE IN INCOME OF PER-
SONS WHO ARE NOT EMPLOYEES.—Paragraph (9) of 
section 274(e) is amended by striking ‘‘to the extent 
that the expenses’’ and inserting ‘‘to the extent that 
the expenses do not exceed the amount of the expenses 
that’’. 
(c) EXCEPTIONS
FOR
REIMBURSED
EXPENSES.— 
Paragraph (3) of section 274(e) is amended to read as fol-
lows: 
‘‘(3) REIMBURSED EXPENSES.— 
‘‘(A) IN GENERAL.—Expenses paid or in-
curred by the taxpayer, in connection with the 
performance by him of services for another per-
son (whether or not such other person is the tax-
payer’s employer), under a reimbursement or 
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243 
other expense allowance arrangement with such 
other person, but this paragraph shall apply— 
‘‘(i) where the services are performed 
for an employer, only if the employer has 
not treated such expenses in the manner 
provided in paragraph (2), or 
‘‘(ii) where the services are performed 
for a person other than an employer, only 
if the taxpayer accounts (to the extent pro-
vided by subsection (d)) to such person. 
‘‘(B) EXCEPTION.—Except as provided by 
the Secretary, subparagraph (A) shall not 
apply— 
‘‘(i) in the case of an arrangement in 
which the person other than the employer is 
an entity described in section 168(h)(2)(A), 
or 
‘‘(ii) to any other arrangement des-
ignated by the Secretary as having the effect 
of avoiding the limitation under subpara-
graph (A).’’. 
(d) 50 PERCENT LIMITATION ON MEALS AND ENTER-
TAINMENT EXPENSES.—Subsection (n) of section 274 is 
amended to read as follows: 
‘‘(n) LIMITATION ON CERTAIN EXPENSES.— 
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‘‘(1) IN GENERAL.—The amount allowable as a 
deduction under this chapter for any expense for food 
or beverages (pursuant to subsection (e)(1)) or busi-
ness meals (pursuant to subsection (k)(1)) shall not 
exceed 50 percent of the amount of such expense or 
item which would (but for this paragraph) be allow-
able as a deduction under this chapter. 
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not 
apply to any expense if— 
‘‘(A) such expense is described in paragraph 
(2), (3), (6), (7), or (8) of subsection (e), 
‘‘(B) in the case of an expense for food or 
beverages, such expense is excludable from the 
gross income of the recipient under section 132 
by reason of subsection (e) thereof (relating to de 
minimis fringes) or under section 119 (relating 
to meals and lodging furnished for convenience of 
employer), or 
‘‘(C) in the case of an employer who pays 
or reimburses moving expenses of an employee, 
such expenses are includible in the income of the 
employee under section 82. 
‘‘(3) SPECIAL RULE FOR INDIVIDUALS SUBJECT 
TO FEDERAL HOURS OF SERVICE.—In the case of any 
expenses for food or beverages consumed while away 
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245 
from home (within the meaning of section 162(a)(2)) 
by an individual during, or incident to, the period of 
duty subject to the hours of service limitations of the 
Department of Transportation, paragraph (1) shall be 
applied by substituting ‘80 percent’ for ‘50 percent’.’’. 
(e) CONFORMING AMENDMENTS.— 
(1) Section 274(d) is amended— 
(A) by striking paragraph (2) and redesig-
nating paragraphs (3) and (4) as paragraphs 
(2) and (3), respectively, and 
(B) in the flush material following para-
graph (3) (as so redesignated)— 
(i) 
by 
striking 
‘‘, 
entertainment, 
amusement, recreation, or’’ in item (B), 
and 
(ii) by striking ‘‘(D) the business rela-
tionship to the taxpayer of persons enter-
tained, using the facility or property, or re-
ceiving the gift’’ and inserting ‘‘(D) the 
business relationship to the taxpayer of the 
person receiving the benefit’’. 
(2) Section 274(e) is amended by striking para-
graph (4) and redesignating paragraphs (5), (6), (7), 
(8), and (9) as paragraphs (4), (5), (6), (7), and (8), 
respectively. 
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(3) Section 274(k)(2)(A) is amended by striking 
‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), (7), or (8)’’. 
(4) Section 274 is amended by striking sub-
section (l). 
(5) Section 274(m)(1)(B)(ii) is amended by 
striking ‘‘(4), (7), (8), or (9)’’ and inserting ‘‘(6), (7), 
or (8)’’. 
(f) EFFECTIVE DATE.—The amendments made by this 
section shall apply to amounts paid or incurred after De-
cember 31, 2017. 
SEC. 3308. UNRELATED BUSINESS TAXABLE INCOME IN-
CREASED BY AMOUNT OF CERTAIN FRINGE 
BENEFIT EXPENSES FOR WHICH DEDUCTION 
IS DISALLOWED. 
(a) IN GENERAL.—Section 512(a) is amended by add-
ing at the end the following new paragraph: 
‘‘(6) INCREASE IN UNRELATED BUSINESS TAX-
ABLE
INCOME
BY
DISALLOWED
FRINGE.—Unrelated 
business taxable income of an organization shall be 
increased by any amount for which a deduction is not 
allowable under this chapter by reason of section 274 
and which is paid or incurred by such organization 
for any qualified transportation fringe (as defined in 
section 132(f)), any parking facility used in connec-
tion with qualified parking (as defined in section 
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247 
132(f)(5)(C)), or any on-premises athletic facility (as 
defined in section 132(j)(4)(B)). The preceding sen-
tence shall not apply to the extent the amount paid 
or incurred is directly connected with an unrelated 
trade or business which is regularly carried on by the 
organization. The Secretary may issue such regula-
tions or other guidance as may be necessary or appro-
priate to carry out the purposes of this paragraph, 
including regulations or other guidance providing for 
the appropriate allocation of depreciation and other 
costs with respect to facilities used for parking or for 
on-premises athletic facilities. 
’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to amounts paid or incurred after De-
cember 31, 2017. 
SEC. 3309. LIMITATION ON DEDUCTION FOR FDIC PRE-
MIUMS. 
(a) IN GENERAL.—Section 162 is amended by redesig-
nating subsection (q) as subsection (r) and by inserting 
after subsection (p) the following new subsection: 
‘‘(q) DISALLOWANCE OF FDIC PREMIUMS PAID BY 
CERTAIN LARGE FINANCIAL INSTITUTIONS.— 
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‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for the applicable percentage of any FDIC pre-
mium paid or incurred by the taxpayer. 
‘‘(2) EXCEPTION
FOR
SMALL
INSTITUTIONS.— 
Paragraph (1) shall not apply to any taxpayer for 
any taxable year if the total consolidated assets of 
such taxpayer (determined as of the close of such tax-
able year) do not exceed $10,000,000,000. 
‘‘(3) APPLICABLE
PERCENTAGE.—For purposes 
of this subsection, the term ‘applicable percentage’ 
means, with respect to any taxpayer for any taxable 
year, the ratio (expressed as a percentage but not 
greater than 100 percent) which— 
‘‘(A) the excess of— 
‘‘(i) the total consolidated assets of 
such taxpayer (determined as of the close of 
such taxable year), over 
‘‘(ii) $10,000,000,000, bears to 
‘‘(B) $40,000,000,000. 
‘‘(4) FDIC PREMIUMS.—For purposes of this 
subsection, the term ‘FDIC premium’ means any as-
sessment imposed under section 7(b) of the Federal 
Deposit Insurance Act (12 U.S.C. 1817(b)). 
‘‘(5) TOTAL CONSOLIDATED ASSETS.—For pur-
poses of this subsection, the term ‘total consolidated 
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249 
assets’ has the meaning given such term under section 
165 of the Dodd-Frank Wall Street Reform and Con-
sumer Protection Act (12 U.S.C. 5365). 
‘‘(6) AGGREGATION RULE.— 
‘‘(A) IN
GENERAL.—Members of an ex-
panded affiliated group shall be treated as a sin-
gle taxpayer for purposes of applying this sub-
section. 
‘‘(B) EXPANDED AFFILIATED GROUP.—For 
purposes of this paragraph, the term ‘expanded 
affiliated group’ means an affiliated group as 
defined in section 1504(a), determined— 
‘‘(i) by substituting ‘more than 50 per-
cent’ for ‘at least 80 percent’ each place it 
appears, and 
‘‘(ii) without regard to paragraphs (2) 
and (3) of section 1504(b). 
A partnership or any other entity (other than a 
corporation) shall be treated as a member of an 
expanded affiliated group if such entity is con-
trolled (within the meaning of section 954(d)(3)) 
by members of such group (including any entity 
treated as a member of such group by reason of 
this sentence).’’. 
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(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 3310. REPEAL OF ROLLOVER OF PUBLICLY TRADED SE-
CURITIES GAIN INTO SPECIALIZED SMALL 
BUSINESS INVESTMENT COMPANIES. 
(a) IN GENERAL.—Part III of subchapter O of chapter 
1 is amended by striking section 1044 (and by striking the 
item relating to such section in the table of sections of such 
part). 
(b) CONFORMING AMENDMENTS.—Section 1016(a)(23) 
is amended— 
(1) by striking ‘‘1044,’’, and 
(2) by striking ‘‘1044(d),’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to sales after December 31, 2017. 
SEC. 3311. CERTAIN SELF-CREATED PROPERTY NOT TREAT-
ED AS A CAPITAL ASSET. 
(a) PATENTS, ETC.—Section 1221(a)(3) is amended by 
inserting ‘‘a patent, invention, model or design (whether or 
not patented), a secret formula or process,’’ before ‘‘a copy-
right’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
1231(b)(1)(C) is amended by inserting ‘‘a patent, inven-
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251 
tion, model or design (whether or not patented), a secret 
formula or process,’’ before ‘‘a copyright’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to dispositions after December 31, 2017. 
SEC. 3312. REPEAL OF SPECIAL RULE FOR SALE OR EX-
CHANGE OF PATENTS. 
(a) IN GENERAL.—Part IV of subchapter P of chapter 
1 is amended by striking section 1235 (and by striking the 
item relating to such section in the table of sections of such 
part). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 483(d) is amended by striking para-
graph (4). 
(2) Section 901(l)(5) is amended by striking 
‘‘without regard to section 1235 or any similar rule’’ 
and inserting ‘‘without regard to any provision which 
treats a disposition as a sale or exchange of a capital 
asset held for more than 1 year or any similar provi-
sion’’. 
(3) Section 1274(c)(3) is amended by striking 
subparagraph (E) and redesignating subparagraph 
(F) as subparagraph (E). 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to dispositions after December 31, 2017. 
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SEC. 3313. REPEAL OF TECHNICAL TERMINATION OF PART-
NERSHIPS. 
(a) IN GENERAL.—Paragraph (1) of section 708(b) is 
amended— 
(1) by striking ‘‘, or’’ at the end of subparagraph 
(A) and all that follows and inserting a period, and 
(2) by striking ‘‘only if—’’ and all that follows 
through ‘‘no part of any business’’ and inserting the 
following: ‘‘only if no part of any business’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to partnership taxable years beginning 
after December 31, 2017. 
SEC. 3314. RECHARACTERIZATION OF CERTAIN GAINS IN 
THE CASE OF PARTNERSHIP PROFITS INTER-
ESTS HELD IN CONNECTION WITH PERFORM-
ANCE OF INVESTMENT SERVICES. 
(a) IN GENERAL.—Part IV of subchapter O of chapter 
1 is amended— 
(1) by redesignating section 1061 as section 
1062, and 
(2) by inserting after section 1060 the following 
new section: 
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‘‘SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNEC-
TION WITH PERFORMANCE OF SERVICES. 
‘‘(a) IN GENERAL.—If one or more applicable partner-
ship interests are held by a taxpayer at any time during 
the taxable year, the excess (if any) of— 
‘‘(1) the taxpayer’s net long-term capital gain 
with respect to such interests for such taxable year, 
over 
‘‘(2) the taxpayer’s net long-term capital gain 
with respect to such interests for such taxable year 
computed by applying paragraphs (3) and (4) of sec-
tions 1222 by substituting ‘3 years’ for ‘1 year’, 
shall be treated as short-term capital gain. 
‘‘(b) 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 investors. 
‘‘(c) APPLICABLE PARTNERSHIP INTEREST.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—Except as provided in this 
paragraph or paragraph (4), the term ‘applicable 
partnership interest’ means any interest in a partner-
ship which, directly or indirectly, is transferred to (or 
is held by) the taxpayer in connection with the per-
formance of substantial services by the taxpayer, or 
any other related person, in any applicable trade or 
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254 
business. The previous sentence shall not apply to an 
interest held by a person who is employed by another 
entity that is conducting a trade or business (other 
than an applicable trade or business) and only pro-
vides services to such other entity. 
‘‘(2) APPLICABLE
TRADE
OR
BUSINESS.—The 
term ‘applicable trade or business’ means any activ-
ity conducted on a regular, continuous, and substan-
tial basis which, regardless of whether the activity is 
conducted in one or more entities, consists, in whole 
or in part, of— 
‘‘(A) raising or returning capital, and 
‘‘(B) either— 
‘‘(i) investing in (or disposing of) spec-
ified assets (or identifying specified assets 
for such investing or disposition), or 
‘‘(ii) developing specified assets. 
‘‘(3) SPECIFIED
ASSET.—The term ‘specified 
asset’ means securities (as defined in section 475(c)(2) 
without regard to the last sentence thereof), commod-
ities (as defined in section 475(e)(2)), real estate held 
for rental or investment, cash or cash equivalents, op-
tions or derivative contracts with respect to any of the 
foregoing, and an interest in a partnership to the ex-
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tent of the partnership’s proportionate interest in any 
of the foregoing. 
‘‘(4) EXCEPTIONS.—The term ‘applicable part-
nership interest’ shall not include— 
‘‘(A) any interest in a partnership directly 
or indirectly held by a corporation, or 
‘‘(B) any capital interest in the partnership 
which provides the taxpayer with a right to 
share in partnership capital commensurate 
with— 
‘‘(i) the amount of capital contributed 
(determined at the time of receipt of such 
partnership interest), or 
‘‘(ii) the value of such interest subject 
to tax under section 83 upon the receipt or 
vesting of such interest. 
‘‘(5) THIRD PARTY INVESTOR.—The term ‘third 
party investor’ means a person who— 
‘‘(A) holds an interest in the partnership 
which does not constitute property held in con-
nection with an applicable trade or business; 
and 
‘‘(B) is not (and has not been) actively en-
gaged, and is (and was) not related to a person 
so engaged, in (directly or indirectly) providing 
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256 
substantial services described in paragraph (1) 
for such partnership or any applicable trade or 
business. 
‘‘(d) TRANSFER OF APPLICABLE PARTNERSHIP INTER-
EST TO RELATED PERSON.— 
‘‘(1) IN GENERAL.—If a taxpayer transfers any 
applicable partnership interest, directly or indirectly, 
to a person related to the taxpayer, the taxpayer shall 
include in gross income (as short term capital gain) 
the excess (if any) of— 
‘‘(A) so much of the taxpayer’s long-term 
capital gains with respect to such interest for 
such taxable year attributable to the sale or ex-
change of any asset held for not more than 3 
years as is allocable to such interest, over 
‘‘(B) any amount treated as short term cap-
ital gain under subsection (a) with respect to the 
transfer of such interest. 
‘‘(2) RELATED PERSON.—For purposes of this 
paragraph, a person is related to the taxpayer if— 
‘‘(A) the person is a member of the tax-
payer’s family within the meaning of section 
318(a)(1), or 
‘‘(B) the person performed a service within 
the current calendar year or the preceding three 
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257 
calendar years in any applicable trade or busi-
ness in which or for which the taxpayer per-
formed a service. 
‘‘(e) REPORTING.—The Secretary shall require such re-
porting (at the time and in the manner prescribed by the 
Secretary) as is necessary to carry out the purposes of this 
section. 
‘‘(f) REGULATIONS.—The Secretary shall issue such 
regulations or other guidance as is necessary or appropriate 
to carry out the purposes of this section’’. 
(b) COORDINATION WITH SECTION 83.—Subsection (e) 
of section 83 is amended by striking ‘‘or’’ at the end of 
paragraph (4), by striking the period at the end of para-
graph (5) and inserting ‘‘, or’’, and by adding at the end 
the following new paragraph: 
‘‘(6) a transfer of an applicable partnership in-
terest to which section 1061 applies.’’. 
(c) CLERICAL AMENDMENT.—The table of sections for 
part IV of subchapter O of chapter 1 is amended by striking 
the item relating to 1061 and inserting the following new 
items: 
‘‘Sec. 1061. Partnership interests held in connection with performance of services. 
‘‘Sec. 1062. Cross references.’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
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258 
SEC. 3315. AMORTIZATION OF RESEARCH AND EXPERI-
MENTAL EXPENDITURES. 
(a) IN GENERAL.—Section 174 is amended to read as 
follows: 
‘‘SEC. 174. AMORTIZATION OF RESEARCH AND EXPERI-
MENTAL EXPENDITURES. 
‘‘(a) IN GENERAL.—In the case of a taxpayer’s speci-
fied research or experimental expenditures for any taxable 
year— 
‘‘(1) except as provided in paragraph (2), no de-
duction shall be allowed for such expenditures, and 
‘‘(2) the taxpayer shall— 
‘‘(A) charge such expenditures to capital ac-
count, and 
‘‘(B) be allowed an amortization deduction 
of such expenditures ratably over the 5-year pe-
riod (15-year period in the case of any specified 
research or experimental expenditures which are 
attributable to foreign research (within the 
meaning of section 41(d)(4)(F))) beginning with 
the midpoint of the taxable year in which such 
expenditures are paid or incurred. 
‘‘(b) SPECIFIED RESEARCH OR EXPERIMENTAL EX-
PENDITURES.—For purposes of this section, the term ‘speci-
fied research or experimental expenditures’ means, with re-
spect to any taxable year, research or experimental expendi-
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259 
tures which are paid or incurred by the taxpayer during 
such taxable year in connection with the taxpayer’s trade 
or business. 
‘‘(c) SPECIAL RULES.— 
‘‘(1) LAND AND OTHER PROPERTY.—This section 
shall not apply to any expenditure for the acquisition 
or improvement of land, or for the acquisition or im-
provement of property to be used in connection with 
the research or experimentation and of a character 
which is subject to the allowance under section 167 
(relating to allowance for depreciation, etc.) or section 
611 (relating to allowance for depletion); but for pur-
poses of this section allowances under section 167, 
and allowances under section 611, shall be considered 
as expenditures. 
‘‘(2) EXPLORATION
EXPENDITURES.—This sec-
tion shall not apply to any expenditure paid or in-
curred for the purpose of ascertaining the existence, 
location, extent, or quality of any deposit of ore or 
other mineral (including oil and gas). 
‘‘(3) SOFTWARE
DEVELOPMENT.—For purposes 
of this section, any amount paid or incurred in con-
nection with the development of any software shall be 
treated as a research or experimental expenditure. 
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260 
‘‘(d) TREATMENT UPON DISPOSITION, RETIREMENT, 
OR ABANDONMENT.—If any property with respect to which 
specified research or experimental expenditures are paid or 
incurred is disposed, retired, or abandoned during the pe-
riod during which such expenditures are allowed as an am-
ortization deduction under this section, no deduction shall 
be allowed with respect to such expenditures on account of 
such disposition, retirement, or abandonment and such am-
ortization deduction shall continue with respect to such ex-
penditures.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for 
part VI of subchapter B of chapter 1 is amended by striking 
the item relating to section 174 and inserting the following 
new item: 
‘‘Sec. 174. Amortization of research and experimental expenditures.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to amounts paid or incurred in taxable 
years beginning after December 31, 2022. 
SEC. 3316. UNIFORM TREATMENT OF EXPENSES IN CONTIN-
GENCY FEE CASES. 
(a) IN GENERAL.—Section 162, as amended by the 
preceding provisions of this Act, is amended by redesig-
nating subsection (r) as subsection (s) and by inserting 
after subsection (q) the following new subsection: 
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‘‘(r) EXPENSES IN CONTINGENCY FEE CASES.—No de-
duction shall be allowed under subsection (a) to a taxpayer 
for any expense— 
‘‘(1) paid or incurred in the course of the trade 
or business of practicing law, and 
‘‘(2) resulting from a case for which the taxpayer 
is compensated primarily on a contingent basis, 
until such time as such contingency is resolved.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to expenses and costs paid or incurred 
in taxable years beginning after the date of the enactment 
of this Act. 
Subtitle E—Reform of Business 
Credits 
SEC. 3401. REPEAL OF CREDIT FOR CLINICAL TESTING EX-
PENSES FOR CERTAIN DRUGS FOR RARE DIS-
EASES OR CONDITIONS. 
(a) IN GENERAL.—Subpart D of part IV of subchapter 
A of chapter 1 is amended by striking section 45C (and 
by striking the item relating to such section in the table 
of sections for such subpart). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 38(b) is amended by striking para-
graph (12). 
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262 
(2) Section 280C is amended by striking sub-
section (b). 
(3) Section 6501(m) is amended by striking 
‘‘45C(d)(4),’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to amounts paid or incurred in taxable 
years beginning after December 31, 2017. 
SEC. 3402. REPEAL OF EMPLOYER-PROVIDED CHILD CARE 
CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of subchapter 
A of chapter 1 is amended by striking section 45F (and 
by striking the item relating to such section in the table 
of sections for such subpart). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 38(b) is amended by striking para-
graph (15). 
(2) Section 1016(a) is amended by striking 
paragraph (28). 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to taxable years beginning after De-
cember 31, 2017. 
(2) 
BASIS
ADJUSTMENTS.—The 
amendment 
made by subsection (b)(2) shall apply to credits deter-
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263 
mined for taxable years beginning after December 31, 
2017. 
SEC. 3403. REPEAL OF REHABILITATION CREDIT. 
(a) IN GENERAL.—Subpart E of part IV of subchapter 
A of chapter 1 is amended by striking section 47 (and by 
striking the item relating to such section in the table of sec-
tions for such subpart). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 170(f)(14)(A) is amended by insert-
ing ‘‘(as in effect before its repeal by the Tax Cuts 
and Jobs Act)’’ after ‘‘section 47’’. 
(2) Section 170(h)(4) is amended— 
(A) by striking ‘‘(as defined in section 
47(c)(3)(B))’’ in subparagraph (C)(ii), and 
(B) by adding at the end the following new 
subparagraph: 
‘‘(D) REGISTERED
HISTORIC
DISTRICT.— 
The term ‘registered historic district’ means— 
‘‘(i) any district listed in the National 
Register, and 
‘‘(ii) any district— 
‘‘(I) which is designated under a 
statute of the appropriate State or 
local government, if such statute is cer-
tified by the Secretary of the Interior 
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264 
to the Secretary as containing criteria 
which will substantially achieve the 
purpose of preserving and rehabili-
tating buildings of historic significance 
to the district, and 
‘‘(II) which is certified by the Sec-
retary of the Interior to the Secretary 
as meeting substantially all of the re-
quirements for the listing of districts 
in the National Register.’’. 
(3) Section 469(i)(3) is amended by striking sub-
paragraph (B). 
(4) Section 469(i)(6)(B) is amended— 
(A) by striking ‘‘in the case of—’’ and all 
that follows and inserting ‘‘in the case of any 
credit determined under section 42 for any tax-
able year.’’, and 
(B) by striking ‘‘, REHABILITATION CRED-
IT,’’ in the heading thereof. 
(5) Section 469(k)(1) is amended by striking ‘‘, 
or any rehabilitation credit determined under section 
47,’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
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before January 1, 2017’’ and inserting ‘‘property the con-
struction of which begins before January 1, 2022’’. 
(b) EXTENSION
OF QUALIFIED FUEL CELL PROP-
ERTY.—Section 48(c)(1)(D) is amended by striking ‘‘for 
any period after December 31, 2016’’ and inserting ‘‘the 
construction of which does not begin before January 1, 
2022’’. 
(c) EXTENSION OF QUALIFIED MICROTURBINE PROP-
ERTY.—Section 48(c)(2)(D) is amended by striking ‘‘for 
any period after December 31, 2016’’ and inserting ‘‘the 
construction of which does not begin before January 1, 
2022’’. 
(d) EXTENSION OF COMBINED HEAT AND POWER SYS-
TEM PROPERTY.—Section 48(c)(3)(A)(iv) is amended by 
striking ‘‘which is placed in service before January 1, 2017’’ 
and inserting ‘‘the construction of which begins before Jan-
uary 1, 2022’’. 
(e) EXTENSION OF QUALIFIED SMALL WIND ENERGY 
PROPERTY.—Section 48(c)(4)(C) is amended by striking 
‘‘for any period after December 31, 2016’’ and inserting 
‘‘the construction of which does not begin before January 
1, 2022’’. 
(f) EXTENSION OF THERMAL ENERGY PROPERTY.— 
Section 48(a)(3)(A)(vii) is amended by striking ‘‘periods 
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ending before January 1, 2017’’ and inserting ‘‘property 
the construction of which begins before January 1, 2022’’. 
(g) PHASEOUT OF 30 PERCENT CREDIT RATE FOR 
FUEL CELL AND SMALL WIND ENERGY PROPERTY.—Sec-
tion 48(a) is amended by adding at the end the following 
new paragraph: 
‘‘(7) PHASEOUT
FOR
QUALIFIED
FUEL
CELL 
PROPERTY
AND
QUALIFIED
SMALL
WIND
ENERGY 
PROPERTY.— 
‘‘(A) IN GENERAL.—In the case of qualified 
fuel cell property or qualified small wind energy 
property, the construction of which begins before 
January 1, 2022, the energy percentage deter-
mined under paragraph (2) shall be equal to— 
‘‘(i) in the case of any property the 
construction of which begins after December 
31, 2019, and before January 1, 2021, 26 
percent, and 
‘‘(ii) in the case of any property the 
construction of which begins after December 
31, 2020, and before January 1, 2022, 22 
percent. 
‘‘(B) PLACED IN SERVICE DEADLINE.—In 
the case of any qualified fuel cell property or 
qualified small wind energy property, the con-
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