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as in effect before its repeal) by the taxpayer at 
all times after December 31, 2017, and 
(B) with respect to which the 24-month 
period selected by the taxpayer under section 
47(c)(1)(C) of such Code begins not later than 
the end of the 180-day period beginning on the 
date of the enactment of this Act, 
the amendments made by this section shall apply to 
such expenditures paid or incurred after the end of 
the taxable year in which the 24-month period re-
ferred to in subparagraph (B) ends. 
SEC. 3404. REPEAL OF WORK OPPORTUNITY TAX CREDIT. 
(a) IN GENERAL.—Subpart F of part IV of sub-
chapter A of chapter 1 is amended by striking section 51 
(and by striking the item relating to such section in the 
table of sections for such subpart). 
(b) CLERICAL AMENDMENT.—The heading of such 
subpart F (and the item relating to such subpart in the 
table of subparts for part IV of subchapter A of chapter 
1) are each amended by striking ‘‘Rules for Computing 
Work Opportunity Credit’’ and inserting ‘‘Special Rules’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred to 
individuals who begin work for the employer after Decem-
ber 31, 2017. 
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HR 1 PCS 
SEC. 3405. REPEAL OF DEDUCTION FOR CERTAIN UNUSED 
BUSINESS CREDITS. 
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 is amended by striking section 196 (and by striking 
the item relating to such section in the table of sections 
for such part). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 3406. TERMINATION OF NEW MARKETS TAX CREDIT. 
(a) IN GENERAL.—Section 45D(f) is amended— 
(1) by striking ‘‘2019’’ in paragraph (1)(G) and 
inserting ‘‘2017’’, and 
(2) by striking ‘‘2024’’ in paragraph (3) and in-
serting ‘‘2022’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years beginning after 
December 31, 2017. 
SEC. 3407. REPEAL OF CREDIT FOR EXPENDITURES TO 
PROVIDE ACCESS TO DISABLED INDIVID-
UALS. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 is amended by striking section 44 
(and by striking the item relating to such section in the 
table of sections for such subpart). 
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HR 1 PCS 
(b) CONFORMING AMENDMENT.—Section 38(b) is 
amended by striking paragraph (7). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 3408. MODIFICATION OF CREDIT FOR PORTION OF EM-
PLOYER SOCIAL SECURITY TAXES PAID WITH 
RESPECT TO EMPLOYEE TIPS. 
(a) CREDIT DETERMINED WITH RESPECT TO MIN-
IMUM WAGE AS IN EFFECT.—Section 45B(b)(1)(B) is 
amended by striking ‘‘as in effect on January 1, 2007, 
and’’. 
(b) INFORMATION RETURN REQUIREMENT.—Section 
45B is amended by redesignating subsections (c) and (d) 
as subsections (d) and (e), respectively, and by inserting 
after subsection (b) the following new subsection: 
‘‘(c) INFORMATION RETURN REQUIREMENT.— 
‘‘(1) IN GENERAL.—No credit shall be deter-
mined under subsection (a) with respect to any food 
or beverage establishment of any taxpayer for any 
taxable year unless such taxpayer has, with respect 
to the calendar year which ends in or with such tax-
able year— 
‘‘(A) made a report to the Secretary show-
ing the information described in section 
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6053(c)(1) with respect to such food or bev-
erage establishment, and 
‘‘(B) furnished written statements to each 
employee of such food or beverage establish-
ment showing the information described in sec-
tion 6053(c)(2). 
‘‘(2) ALLOCATION OF 10 PERCENT OF GROSS 
RECEIPTS.—For purposes of determining the infor-
mation referred to in subparagraphs (A) and (B), 
section 6053(c)(3)(A)(i) shall be applied by sub-
stituting ‘10 percent’ for ‘8 percent’. For purposes 
of section 6053(c)(5), any reference to section 
6053(c)(3)(B) contained therein shall be treated as 
including a reference to this paragraph. 
‘‘(3) FOOD OR BEVERAGE ESTABLISHMENT.— 
For purposes of this subsection, the term ‘food or 
beverage establishment’ means any trade or business 
(or portion thereof) which would be a large food or 
beverage establishment (as defined in section 
6053(c)(4)) if such section were applied without re-
gard to subparagraph (C) thereof.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
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Subtitle F—Energy Credits 
SEC. 3501. MODIFICATIONS TO CREDIT FOR ELECTRICITY 
PRODUCED FROM CERTAIN RENEWABLE RE-
SOURCES. 
(a) TERMINATION OF INFLATION ADJUSTMENT.— 
Section 45(b)(2) is amended— 
(1) by striking ‘‘The 1.5 cent amount’’ and in-
serting the following: 
‘‘(A) 
IN
GENERAL.—The 
1.5 
cent 
amount’’, and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(B) TERMINATION.—Subparagraph (A) 
shall not apply with respect to any electricity or 
refined coal produced at a facility the construc-
tion of which begins after the date of the enact-
ment of this subparagraph.’’. 
(b) SPECIAL RULE FOR DETERMINATION OF BEGIN-
NING OF CONSTRUCTION.—Section 45(e) is amended by 
adding at the end the following new paragraph: 
‘‘(12) SPECIAL RULE FOR DETERMINING BE-
GINNING OF CONSTRUCTION.—For purposes of sub-
section (d), the construction of any facility, modi-
fication, improvement, addition, or other property 
shall not be treated as beginning before any date un-
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less there is a continuous program of construction 
which begins before such date and ends on the date 
that such property is placed in service.’’. 
(c) EFFECTIVE DATES.— 
(1) TERMINATION
OF
INFLATION
ADJUST-
MENT.—The amendments made by subsection (a) 
shall apply to taxable years ending after the date of 
the enactment of this Act. 
(2) SPECIAL
RULE
FOR
DETERMINATION
OF 
BEGINNING
OF
CONSTRUCTION.—The amendment 
made by subsection (b) shall apply to taxable years 
beginning before, on, or after the date of the enact-
ment of this Act. 
SEC. 3502. MODIFICATION OF THE ENERGY INVESTMENT 
TAX CREDIT. 
(a) EXTENSION OF SOLAR ENERGY PROPERTY.— 
Section 48(a)(3)(A)(ii) is amended by striking ‘‘periods 
ending before January 1, 2017’’ and inserting ‘‘property 
the construction 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’’. 
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HR 1 PCS 
(c) EXTENSION
OF
QUALIFIED
MICROTURBINE 
PROPERTY.—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 
SYSTEM 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 be-
fore January 1, 2022’’. 
(e) EXTENSION OF QUALIFIED SMALL WIND EN-
ERGY 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 
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.— 
Section 48(a) is amended by adding at the end the fol-
lowing new paragraph: 
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HR 1 PCS 
‘‘(7) PHASEOUT
FOR
QUALIFIED
FUEL
CELL 
PROPERTY
AND
QUALIFIED
SMALL
WIND
ENERGY 
PROPERTY.— 
‘‘(A) IN GENERAL.—In the case of quali-
fied fuel cell property or qualified small wind 
energy property, the construction of which be-
gins before January 1, 2022, the energy per-
centage determined under paragraph (2) shall 
be equal to— 
‘‘(i) in the case of any property the 
construction of which begins after Decem-
ber 31, 2019, and before January 1, 2021, 
26 percent, and 
‘‘(ii) in the case of any property the 
construction of which begins after Decem-
ber 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-
struction of which begins before January 1, 
2022, and which is not placed in service before 
January 1, 2024, the energy percentage deter-
mined under paragraph (2) shall be equal to 10 
percent.’’. 
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(h) PHASEOUT FOR FIBER-OPTIC SOLAR ENERGY 
PROPERTY.—Subparagraphs (A) and (B) of section 
48(a)(6) are each amended by inserting ‘‘or (3)(A)(ii)’’ 
after ‘‘paragraph (3)(A)(i)’’. 
(i) TERMINATION OF SOLAR ENERGY PROPERTY.— 
Section 48(a)(3)(A)(i) is amended by inserting ‘‘, the con-
struction of which begins before January 1, 2028, and’’ 
after ‘‘equipment’’. 
(j) TERMINATION OF GEOTHERMAL ENERGY PROP-
ERTY.—Section 48(a)(3)(A)(iii) is amended by inserting 
‘‘, the construction of which begins before January 1, 
2028, and’’ after ‘‘equipment’’. 
(k) SPECIAL RULE FOR DETERMINATION OF BEGIN-
NING OF CONSTRUCTION.—Section 48(c) is amended by 
adding at the end the following new paragraph: 
‘‘(5) SPECIAL RULE FOR DETERMINING BEGIN-
NING OF CONSTRUCTION.—The construction of any 
facility, modification, improvement, addition, or 
other property shall not be treated as beginning be-
fore any date unless there is a continuous program 
of construction which begins before such date and 
ends on the date that such property is placed in 
service.’’. 
(l) EFFECTIVE DATE.— 
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(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to periods after December 
31, 2016, under rules similar to the rules of section 
48(m) of the Internal Revenue Code of 1986 (as in 
effect on the day before the date of the enactment 
of the Revenue Reconciliation Act of 1990). 
(2) EXTENSION
OF
COMBINED
HEAT
AND 
POWER SYSTEM PROPERTY.—The amendment made 
by subsection (d) shall apply to property placed in 
service after December 31, 2016. 
(3) PHASEOUTS
AND
TERMINATIONS.—The 
amendments made by subsections (g), (h), (i), and 
(j) shall take effect on the date of the enactment of 
this Act. 
(4) SPECIAL
RULE
FOR
DETERMINATION
OF 
BEGINNING
OF
CONSTRUCTION.—The amendment 
made by subsection (k) shall apply to taxable years 
beginning before, on, or after the date of the enact-
ment of this Act. 
SEC. 3503. EXTENSION AND PHASEOUT OF RESIDENTIAL 
ENERGY EFFICIENT PROPERTY. 
(a) EXTENSION.—Section 25D(h) is amended by 
striking ‘‘December 31, 2016 (December 31, 2021, in the 
case of any qualified solar electric property expenditures 
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and qualified solar water heating property expenditures)’’ 
and inserting ‘‘December 31, 2021’’. 
(b) PHASEOUT.— 
(1) IN GENERAL.—Paragraphs (3), (4), and (5) 
of section 25D(a) are amended by striking ‘‘30 per-
cent’’ each place it appears and inserting ‘‘the appli-
cable percentage’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
25D(g) of such Code is amended by striking ‘‘para-
graphs (1) and (2) of’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
December 31, 2016. 
SEC. 3504. REPEAL OF ENHANCED OIL RECOVERY CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 is amended by striking section 43 
(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 (6). 
(2) Section 6501(m) is amended by striking 
‘‘43,’’. 
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HR 1 PCS 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 3505. REPEAL OF CREDIT FOR PRODUCING OIL AND 
GAS FROM MARGINAL WELLS. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 is amended by striking section 45I 
(and by striking the item relating to such section in the 
table of sections for such subpart). 
(b) CONFORMING AMENDMENT.—Section 38(b) is 
amended by striking paragraph (19). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 3506. MODIFICATIONS OF CREDIT FOR PRODUCTION 
FROM ADVANCED NUCLEAR POWER FACILI-
TIES. 
(a) 
TREATMENT
OF
UNUTILIZED
LIMITATION 
AMOUNTS.—Section 45J(b) is amended— 
(1) in paragraph (4), by inserting ‘‘or any 
amendment to’’ after ‘‘enactment of’’; and 
(2) by adding at the end the following new 
paragraph: 
‘‘(5) ALLOCATION
OF
UNUTILIZED
LIMITA-
TION.— 
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‘‘(A) IN
GENERAL.—Any unutilized na-
tional megawatt capacity limitation shall be al-
located by the Secretary under paragraph (3) 
as rapidly as is practicable after December 31, 
2020— 
‘‘(i) first to facilities placed in service 
on or before such date to the extent that 
such facilities did not receive an allocation 
equal to their full nameplate capacity; and 
‘‘(ii) then to facilities placed in service 
after such date in the order in which such 
facilities are placed in service. 
‘‘(B) UNUTILIZED
NATIONAL
MEGAWATT 
CAPACITY
LIMITATION.—The term ‘unutilized 
national megawatt capacity limitation’ means 
the excess (if any) of— 
‘‘(i) 6,000 megawatts, over 
‘‘(ii) the aggregate amount of national 
megawatt capacity limitation allocated by 
the Secretary before January 1, 2021, re-
duced by any amount of such limitation 
which was allocated to a facility which was 
not placed in service before such date. 
‘‘(C) COORDINATION WITH OTHER PROVI-
SIONS.—In the case of any unutilized national 
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megawatt capacity limitation allocated by the 
Secretary pursuant to this paragraph— 
‘‘(i) such allocation shall be treated 
for purposes of this section in the same 
manner as an allocation of national mega-
watt capacity limitation; and 
‘‘(ii) subsection (d)(1)(B) shall not 
apply to any facility which receives such al-
location.’’. 
(b) TRANSFER OF CREDIT BY CERTAIN PUBLIC EN-
TITIES.— 
(1) IN GENERAL.—Section 45J is amended— 
(A) by redesignating subsection (e) as sub-
section (f); and 
(B) by inserting after subsection (d) the 
following new subsection: 
‘‘(e) TRANSFER OF CREDIT BY CERTAIN PUBLIC EN-
TITIES.— 
‘‘(1) IN GENERAL.—If, with respect to a credit 
under subsection (a) for any taxable year— 
‘‘(A) the taxpayer would be a qualified 
public entity; and 
‘‘(B) such entity elects the application of 
this paragraph for such taxable year with re-
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spect to all (or any portion specified in such 
election) of such credit, 
the eligible project partner specified in such election 
(and not the qualified public entity) shall be treated 
as the taxpayer for purposes of this title with re-
spect to such credit (or such portion thereof). 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) QUALIFIED
PUBLIC
ENTITY.—The 
term ‘qualified public entity’ means— 
‘‘(i) a Federal, State, or local govern-
ment entity, or any political subdivision, 
agency, or instrumentality thereof; 
‘‘(ii) a mutual or cooperative electric 
company described in section 501(c)(12) or 
section 1381(a)(2); or 
‘‘(iii) a not-for-profit electric utility 
which has or had received a loan or loan 
guarantee under the Rural Electrification 
Act of 1936. 
‘‘(B) ELIGIBLE PROJECT PARTNER.—The 
term ‘eligible project partner’ means— 
‘‘(i) any person responsible for, or 
participating in, the design or construction 
of the advanced nuclear power facility to 
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which the credit under subsection (a) re-
lates; 
‘‘(ii) any person who participates in 
the provision of the nuclear steam supply 
system to the advanced nuclear power fa-
cility to which the credit under subsection 
(a) relates; 
‘‘(iii) any person who participates in 
the provision of nuclear fuel to the ad-
vanced nuclear power facility to which the 
credit under subsection (a) relates; or 
‘‘(iv) any person who has an owner-
ship interest in such facility. 
‘‘(3) SPECIAL RULES.— 
‘‘(A) APPLICATION TO PARTNERSHIPS.—In 
the case of a credit under subsection (a) which 
is determined at the partnership level— 
‘‘(i) for purposes of paragraph (1)(A), 
a qualified public entity shall be treated as 
the taxpayer with respect to such entity’s 
distributive share of such credit; and 
‘‘(ii) the term ‘eligible project partner’ 
shall include any partner of the partner-
ship. 
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‘‘(B) TAXABLE
YEAR
IN
WHICH
CREDIT 
TAKEN
INTO
ACCOUNT.—In the case of any 
credit (or portion thereof) with respect to which 
an election is made under paragraph (1), such 
credit shall be taken into account in the first 
taxable year of the eligible project partner end-
ing with, or after, the qualified public entity’s 
taxable year with respect to which the credit 
was determined. 
‘‘(C) TREATMENT
OF
TRANSFER
UNDER 
PRIVATE USE RULES.—For purposes of section 
141(b)(1), any benefit derived by an eligible 
project partner in connection with an election 
under this subsection shall not be taken into ac-
count as a private business use.’’. 
(2) SPECIAL RULE FOR PROCEEDS OF TRANS-
FERS
FOR
MUTUAL
OR
COOPERATIVE
ELECTRIC 
COMPANIES.—Section 501(c)(12) of such Code is 
amended by adding at the end the following new 
subparagraph: 
‘‘(I) In the case of a mutual or cooperative 
electric company described in this paragraph or 
an organization described in section 1381(a)(2), 
income received or accrued in connection with 
an election under section 45J(e)(1) shall be 
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treated as an amount collected from members 
for the sole purpose of meeting losses and ex-
penses.’’. 
(c) EFFECTIVE DATES.— 
(1) TREATMENT
OF
UNUTILIZED
LIMITATION 
AMOUNTS.—The amendment made by subsection (a) 
shall take effect on the date of the enactment of this 
Act. 
(2) TRANSFER OF CREDIT BY CERTAIN PUBLIC 
ENTITIES.—The amendments made by subsection 
(b) shall apply to taxable years beginning after the 
date of the enactment of this Act. 
Subtitle G—Bond Reforms 
SEC. 3601. TERMINATION OF PRIVATE ACTIVITY BONDS. 
(a) IN GENERAL.—Paragraph (1) of section 103(b) 
is amended— 
(1) by striking ‘‘which is not a qualified bond 
(within the meaning of section 141)’’, and 
(2) by striking ‘‘WHICH IS NOT A QUALIFIED 
BOND’’ in the heading thereof. 
(b) CONFORMING AMENDMENTS.— 
(1) Subpart A of part IV of subchapter B of 
chapter 1 is amended by striking sections 142, 143, 
144, 145, 146, and 147 (and by striking each of the 
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items relating to such sections in the table of sec-
tions for such subpart). 
(2) Section 25 is amended by adding at the end 
the following new subsection: 
‘‘(j) COORDINATION WITH REPEAL OF PRIVATE AC-
TIVITY BONDS.—Any reference to section 143, 144, or 
146 shall be treated as a reference to such section as in 
effect before its repeal by the Tax Cuts and Jobs Act.’’. 
(3) Section 26(b)(2) is amended by striking 
subparagraph (D). 
(4) Section 141(b) is amended by striking para-
graphs (5) and (9). 
(5) Section 141(d) is amended by striking para-
graph (5). 
(6) Section 141 is amended by striking sub-
section (e). 
(7) Section 148(f)(4) is amended— 
(A) by striking ‘‘(determined in accordance 
with section 147(b)(2)(A))’’ in the flush matter 
following subparagraph (A)(ii) and inserting 
‘‘(determined by taking into account the respec-
tive issue prices of the bonds issued as part of 
the issue)’’, and 
(B) by striking the last sentence of sub-
paragraph (D)(v). 
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(8) Clause (iv) of section 148(f)(4)(C) is 
amended to read as follows: 
‘‘(iv) 
CONSTRUCTION
ISSUE.—For 
purposes of this subparagraph— 
‘‘(I) IN
GENERAL.—The term 
‘construction issue’ means any issue if 
at least 75 percent of the available 
construction proceeds of such issue 
are to be used for construction ex-
penditures. 
‘‘(II) CONSTRUCTION.—The term 
‘construction’ includes reconstruction 
and rehabilitation.’’. 
(9) Section 149(b)(3) is amended by striking 
subparagraph (C). 
(10) Section 149(e)(2) is amended— 
(A) by striking subparagraphs (C), (D), 
and (F) and by redesignating subparagraphs 
(E) and (G) as subparagraphs (C) and (D), re-
spectively, and 
(B) by striking the second sentence. 
(11) Section 149(f)(6) is amended— 
(A) by striking subparagraph (B), and 
(B) by striking ‘‘For purposes of this sub-
section’’ and all that follows through ‘‘The 
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term’’ and inserting the following: ‘‘For pur-
poses of this subsection, the term’’. 
(12) Section 150(e)(3) is amended to read as 
follows: 
‘‘(3) PUBLIC
APPROVAL
REQUIREMENT.—A 
bond shall not be treated as part of an issue which 
meets the requirements of paragraph (1) unless such 
bond satisfies the requirements of section 147(f)(2) 
(as in effect before its repeal by the Tax Cuts and 
Jobs Act).’’. 
(13) Section 269A(b)(3) is amended by striking 
‘‘144(a)(3)’’ and inserting ‘‘414(n)(6)(A)’’. 
(14) Section 414(m)(5) is amended by striking 
‘‘section 
144(a)(3)’’ 
and 
inserting 
‘‘subsection 
(n)(6)(A)’’. 
(15) Section 414(n)(6)(A) is amended to read 
as follows: 
‘‘(A) RELATED PERSONS.—A person is a 
related person to another person if— 
‘‘(i) the relationship between such per-
sons would result in a disallowance of 
losses under section 267 or 707(b), or 
‘‘(ii) such persons are members of the 
same controlled group of corporations (as 
defined in section 1563(a), except that 
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‘more than 50 percent’ shall be substituted 
for ‘at least 80 percent’ each place it ap-
pears therein).’’. 
(16) Section 6045(e)(4)(B) is amended by in-
serting ‘‘(as in effect before its repeal by the Tax 
Cuts and Jobs Act)’’ after ‘‘section 143(m)(3)’’. 
(17) Section 6654(f)(1) is amended by inserting 
‘‘(as in effect before its repeal by the Tax Cuts and 
Jobs Act)’’ after ‘‘section 143(m)’’. 
(18) Section 7871(c) is amended— 
(A) by striking paragraphs (2) and (3), 
and 
(B) by striking ‘‘TAX-EXEMPT BONDS.—’’ 
and all that follows through ‘‘Subsection (a) of 
section 103’’ and inserting the following: ‘‘TAX- 
EXEMPT
BONDS.—Subsection (a) of section 
103’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after December 
31, 2017. 
SEC. 3602. REPEAL OF ADVANCE REFUNDING BONDS. 
(a) IN GENERAL.—Paragraph (1) of section 149(d) 
is amended by striking ‘‘as part of an issue described in 
paragraph (2), (3), or (4).’’ and inserting ‘‘to advance re-
fund another bond.’’. 
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(b) CONFORMING AMENDMENTS.— 
(1) Section 149(d) is amended by striking para-
graphs (2), (3), (4), and (6) and by redesignating 
paragraphs (5) and (7) as paragraphs (2) and (3). 
(2) Section 148(f)(4)(C) is amended by striking 
clause (xiv) and by redesignating clauses (xv) to 
(xvii) as clauses (xiv) to (xvi). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to advance refunding bonds issued 
after December 31, 2017. 
SEC. 3603. REPEAL OF TAX CREDIT BONDS. 
(a) IN GENERAL.—Part IV of subchapter A of chap-
ter 1 is amended by striking subparts H, I, and J (and 
by striking the items relating to such subparts in the table 
of subparts for such part). 
(b) PAYMENTS TO ISSUERS.—Subchapter B of chap-
ter 65 is amended by striking section 6431 (and by strik-
ing the item relating to such section in the table of sec-
tions for such subchapter). 
(c) CONFORMING AMENDMENTS.— 
(1) Part IV of subchapter U of chapter 1 is 
amended by striking section 1397E (and by striking 
the item relating to such section in the table of sec-
tions for such part). 
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(2) Section 54(l)(3)(B) is amended by inserting 
‘‘(as in effect before its repeal by the Tax Cuts and 
Jobs Act)’’ after ‘‘section 1397E(I)’’. 
(3) Section 6211(b)(4)(A) is amended by strik-
ing ‘‘, and 6431’’ and inserting ‘‘and’’ before 
‘‘36B’’. 
(4) Section 6401(b)(1) is amended by striking 
‘‘G, H, I, and J’’ and inserting ‘‘and G’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after December 
31, 2017. 
SEC. 3604. NO TAX EXEMPT BONDS FOR PROFESSIONAL 
STADIUMS. 
(a) IN GENERAL.—Section 103(b), as amended by 
this Act, is further amended by adding at the end the fol-
lowing new paragraph: 
‘‘(4) PROFESSIONAL STADIUM BOND.—Any pro-
fessional stadium bond.’’. 
(b) PROFESSIONAL STADIUM BOND DEFINED.—Sub-
section (c) of section 103 is amended by adding at the 
end the following new paragraph: 
‘‘(3) PROFESSIONAL
STADIUM
BOND.—The 
term ‘professional stadium bond’ means any bond 
issued as part of an issue any proceeds of which are 
used to finance or refinance capital expenditures al-
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locable to a facility (or appurtenant real property) 
which, during at least 5 days during any calendar 
year, is used as a stadium or arena for professional 
sports exhibitions, games, or training.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after November 
2, 2017. 
Subtitle H—Insurance 
SEC. 3701. NET OPERATING LOSSES OF LIFE INSURANCE 
COMPANIES. 
(a) IN GENERAL.—Section 805(b) is amended by 
striking paragraph (4) and by redesignating paragraph 
(5) as paragraph (4). 
(b) CONFORMING AMENDMENTS.— 
(1) Part I of subchapter L of chapter 1 is 
amended by striking section 810 (and by striking 
the item relating to such section in the table of sec-
tions for such part). 
(2) Part III of subchapter L of chapter 1 is 
amended by striking section 844 (and by striking 
the item relating to such section in the table of sec-
tions for such part). 
(3) Section 381 is amended by striking sub-
section (d). 
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(4) Section 805(a)(4)(B)(ii) is amended to read 
as follows: 
‘‘(ii) the deduction allowed under sec-
tion 172,’’. 
(5) Section 805(a) is amended by striking para-
graph (5). 
(6) Section 953(b)(1)(B) is amended to read as 
follows: 
‘‘(B) So much of section 805(a)(8) as re-
lates to the deduction allowed under section 
172.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to losses arising in taxable years 
beginning after December 31, 2017. 
SEC. 3702. REPEAL OF SMALL LIFE INSURANCE COMPANY 
DEDUCTION. 
(a) IN GENERAL.—Part I of subchapter L of chapter 
1 is amended by striking section 806 (and by striking the 
item relating to such section in the table of sections for 
such part). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 453B(e) is amended— 
(A) by striking ‘‘(as defined in section 
806(b)(3))’’ in paragraph (2)(B), and 
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(B) by adding at the end the following new 
paragraph: 
‘‘(3) NONINSURANCE BUSINESS.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘noninsurance business’ 
means any activity which is not an insurance 
business. 
‘‘(B) CERTAIN ACTIVITIES TREATED AS IN-
SURANCE BUSINESSES.—For purposes of sub-
paragraph (A), any activity which is not an in-
surance business shall be treated as an insur-
ance business if— 
‘‘(i) it is of a type traditionally carried 
on by life insurance companies for invest-
ment purposes, but only if the carrying on 
of such activity (other than in the case of 
real estate) does not constitute the active 
conduct of a trade or business, or 
‘‘(ii) it involves the performance of ad-
ministrative services in connection with 
plans providing life insurance, pension, or 
accident and health benefits.’’. 
(2) Section 465(c)(7)(D)(v)(II) is amended by 
striking ‘‘section 806(b)(3)’’ and inserting ‘‘section 
453B(e)(3)’’. 
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(3) Section 801(a)(2) is amended by striking 
subparagraph (C). 
(4) Section 804 is amended by striking 
‘‘means—’’ and all that follows and inserting 
‘‘means the general deductions provided in section 
805.’’. 
(5) Section 805(a)(4)(B), as amended by sec-
tion 3701, is amended by striking clause (i) and by 
redesignating clauses (ii), (iii), and (iv) as clauses 
(i), (ii), and (iii), respectively. 
(6) Section 805(b)(2)(A) is amended by strik-
ing clause (iii) and by redesignating clauses (iv) and 
(v) as clauses (iii) and (iv), respectively. 
(7) Section 842(c) is amended by striking para-
graph (1) and by redesignating paragraphs (2) and 
(3) as paragraphs (1) and (2), respectively. 
(8) Section 953(b)(1), as amended by section 
3701, is amended by striking subparagraph (A) and 
by redesignating subparagraphs (B) and (C) as sub-
paragraphs (A) and (B), respectively. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
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SEC. 3703. SURTAX ON LIFE INSURANCE COMPANY TAX-
ABLE INCOME. 
(a) IN GENERAL.—Section 801(a)(1) is amended— 
(1) by striking ‘‘consist of a tax’’ and insert 
‘‘consist of the sum of— 
‘‘(A) a tax’’, and 
(2) by striking the period at the end and insert-
ing ‘‘, and’’, and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(B) a tax equal to 8 percent of the life in-
surance company taxable income.’’. 
SEC. 3704. ADJUSTMENT FOR CHANGE IN COMPUTING RE-
SERVES. 
(a) IN GENERAL.—Paragraph (1) of section 807(f) 
is amended to read as follows: 
‘‘(1) TREATMENT AS CHANGE IN METHOD OF 
ACCOUNTING.—If the basis for determining any item 
referred to in subsection (c) as of the close of any 
taxable year differs from the basis for such deter-
mination as of the close of the preceding taxable 
year, then so much of the difference between— 
‘‘(A) the amount of the item at the close 
of the taxable year, computed on the new basis, 
and 
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‘‘(B) the amount of the item at the close 
of the taxable year, computed on the old basis, 
as is attributable to contracts issued before the tax-
able year shall be taken into account under section 
481 as adjustments attributable to a change in 
method of accounting initiated by the taxpayer and 
made with the consent of the Secretary.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 3705. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS 
TO SHAREHOLDERS FROM PRE-1984 POLICY-
HOLDERS SURPLUS ACCOUNT. 
(a) IN GENERAL.—Subpart D of part I of subchapter 
L is amended by striking section 815 (and by striking the 
item relating to such section in the table of sections for 
such subpart). 
(b) CONFORMING
AMENDMENT.—Section 801 is 
amended by striking subsection (c). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
(d) PHASED INCLUSION OF REMAINING BALANCE OF 
POLICYHOLDERS SURPLUS ACCOUNTS.—In the case of 
any stock life insurance company which has a balance (de-
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termined as of the close of such company’s last taxable 
year beginning before January 1, 2018) in an existing pol-
icyholders surplus account (as defined in section 815 of 
the Internal Revenue Code of 1986, as in effect before 
its repeal), the tax imposed by section 801 of such Code 
for the first 8 taxable years beginning after December 31, 
2017, shall be the amount which would be imposed by 
such section for such year on the sum of— 
(1) life insurance company taxable income for 
such year (within the meaning of such section 801 
but not less than zero), plus 
(2) 1⁄8 of such balance. 
SEC. 3706. MODIFICATION OF PRORATION RULES FOR 
PROPERTY AND CASUALTY INSURANCE COM-
PANIES. 
(a) IN GENERAL.—Section 832(b)(5)(B) is amended 
by striking ‘‘15 percent’’ and inserting ‘‘26.25 percent’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
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SEC. 3707. MODIFICATION OF DISCOUNTING RULES FOR 
PROPERTY AND CASUALTY INSURANCE COM-
PANIES. 
(a) MODIFICATION OF RATE OF INTEREST USED TO 
DISCOUNT UNPAID LOSSES.—Paragraph (2) of section 
846(c) is amended to read as follows: 
‘‘(2) DETERMINATION OF ANNUAL RATE.—The 
annual rate determined by the Secretary under this 
paragraph for any calendar year shall be a rate de-
termined on the basis of the corporate bond yield 
curve (as defined in section 430(h)(2)(D)(i)).’’. 
(b) MODIFICATION OF COMPUTATIONAL RULES FOR 
LOSS PAYMENT PATTERNS.—Section 846(d)(3) is amend-
ed by striking subparagraphs (B) through (G) and insert-
ing the following new subparagraphs: 
‘‘(B) TREATMENT OF CERTAIN LOSSES.— 
Losses which would have been treated as paid 
in the last year of the period applicable under 
subparagraph (A)(i) or (A)(ii) shall be treated 
as paid in the following manner: 
‘‘(i) 3-YEAR
LOSS
PAYMENT
PAT-
TERN.— 
‘‘(I) IN
GENERAL.—The period 
taken into account under subpara-
graph (A)(i) shall be extended to the 
extent required under subclause (II). 
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‘‘(II) COMPUTATION OF EXTEN-
SION.—The amount of losses which 
would have been treated as paid in the 
3d year after the accident year shall 
be treated as paid in such 3d year 
and each subsequent year in an 
amount equal to the average of the 
losses treated as paid in the 1st and 
2d years after the accident year (or, if 
lesser, the portion of the unpaid losses 
not theretofore taken into account). 
To the extent such unpaid losses have 
not been treated as paid before the 
18th year after the accident year, they 
shall be treated as paid in such 18th 
year. 
‘‘(ii) 10-YEAR
LOSS
PAYMENT
PAT-
TERN.— 
‘‘(I) IN
GENERAL.—The period 
taken into account under subpara-
graph (A)(ii) shall be extended to the 
extent required under subclause (II). 
‘‘(II) COMPUTATION OF EXTEN-
SION.—The amount of losses which 
would have been treated as paid in the 
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10th year after the accident year shall 
be treated as paid in such 10th year 
and each subsequent year in an 
amount equal to the amount of the 
average of the losses treated as paid 
in the 7th, 8th, and 9th years after 
the accident year (or, if lesser, the 
portion of the unpaid losses not there-
tofore taken into account). To the ex-
tent such unpaid losses have not been 
treated as paid before the 25th year 
after the accident year, they shall be 
treated as paid in such 25th year.’’. 
(c) REPEAL
OF HISTORICAL PAYMENT PATTERN 
ELECTION.—Section 846 is amended by striking sub-
section (e) and by redesignating subsections (f) and (g) 
as subsections (e) and (f), respectively. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
(e) TRANSITIONAL RULE.—For the first taxable year 
beginning after December 31, 2017— 
(1) the unpaid losses and the expenses unpaid 
(as defined in paragraphs (5)(B) and (6) of section 
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832(b) of the Internal Revenue Code of 1986) at the 
end of the preceding taxable year, and 
(2) the unpaid losses as defined in sections 
807(c)(2) and 805(a)(1) of such Code at the end of 
the preceding taxable year, 
shall be determined as if the amendments made by this 
section had applied to such unpaid losses and expenses 
unpaid in the preceding taxable year and by using the in-
terest rate and loss payment patterns applicable to acci-
dent years ending with calendar year 2018, and any ad-
justment shall be taken into account ratably in such first 
taxable year and the 7 succeeding taxable years. For sub-
sequent taxable years, such amendments shall be applied 
with respect to such unpaid losses and expenses unpaid 
by using the interest rate and loss payment patterns appli-
cable to accident years ending with calendar year 2018. 
SEC. 3708. REPEAL OF SPECIAL ESTIMATED TAX PAY-
MENTS. 
(a) IN GENERAL.—Part III of subchapter L of chap-
ter 1 is amended by striking section 847 (and by striking 
the item relating to such section in the table of sections 
for such part). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
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Subtitle I—Compensation 
SEC. 3801. MODIFICATION OF LIMITATION ON EXCESSIVE 
EMPLOYEE REMUNERATION. 
(a) REPEAL OF PERFORMANCE-BASED COMPENSA-
TION AND COMMISSION EXCEPTIONS FOR LIMITATION ON 
EXCESSIVE EMPLOYEE REMUNERATION.— 
(1) IN GENERAL.—Section 162(m)(4) is amend-
ed by striking subparagraphs (B) and (C) and by re-
designating subparagraphs (D), (E), (F), and (G) as 
subparagraphs (B), (C), (D), and (E), respectively. 
(2) CONFORMING AMENDMENTS.— 
(A) Paragraphs (5)(E) and (6)(D) of sec-
tion 162(m) are each amended by striking 
‘‘subparagraphs (B), (C), and (D)’’ and insert-
ing ‘‘subparagraph (B)’’. 
(B) Paragraphs (5)(G) and (6)(G) of sec-
tion 162(m) are each amended by striking ‘‘(F) 
and (G)’’ and inserting ‘‘(D) and (E)’’. 
(b) EXPANSION OF APPLICABLE EMPLOYER.—Sec-
tion 162(m)(2) is amended to read as follows: 
‘‘(2) PUBLICLY HELD CORPORATION.—For pur-
poses of this subsection, the term ‘publicly held cor-
poration’ means any corporation which is an issuer 
(as defined in section 3 of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c))— 
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‘‘(A) the securities of which are required to 
be registered under section 12 of such Act (15 
U.S.C. 78l), or 
‘‘(B) that is required to file reports under 
section 15(d) of such Act (15 U.S.C. 78o(d)).’’. 
(c) MODIFICATION OF DEFINITION OF COVERED EM-
PLOYEES.—Section 162(m)(3) is amended— 
(1) in subparagraph (A), by striking ‘‘as of the 
close of the taxable year, such employee is the chief 
executive officer of the taxpayer or is’’ and inserting 
‘‘such employee is the principal executive officer or 
principal financial officer of the taxpayer at any 
time during the taxable year, or was’’, 
(2) in subparagraph (B)— 
(A) by striking ‘‘4’’ and inserting ‘‘3’’, and 
(B) by striking ‘‘(other than the chief exec-
utive officer)’’ and inserting ‘‘(other than the 
principal executive officer or principal financial 
officer)’’, and 
(3) by striking ‘‘or’’ at the end of subparagraph 
(A), by striking the period at the end of subpara-
graph (B) and inserting ‘‘, or’’, and by adding at the 
end the following: 
‘‘(C) was a covered employee of the tax-
payer (or any predecessor) for any preceding 
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taxable year beginning after December 31, 
2016. 
Such term shall include any employee who would be 
described in subparagraph (B) if the reporting de-
scribed in such subparagraph were required as so 
described.’’. 
(d) SPECIAL RULE FOR REMUNERATION PAID TO 
BENEFICIARIES, ETC.—Section 162(m)(4), as amended by 
subsection (a), is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(F) SPECIAL RULE FOR REMUNERATION 
PAID TO BENEFICIARIES, ETC.—Remuneration 
shall not fail to be applicable employee remu-
neration merely because it is includible in the 
income of, or paid to, a person other than the 
covered employee, including after the death of 
the covered employee.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 3802. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZA-
TION EXECUTIVE COMPENSATION. 
(a) IN GENERAL.—Subchapter D of chapter 42 is 
amended by adding at the end the following new section: 
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‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION 
EXECUTIVE COMPENSATION. 
‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 
equal to 20 percent of the sum of— 
‘‘(1) so much of the remuneration paid (other 
than any excess parachute payment) by an applica-
ble tax-exempt organization for the taxable year with 
respect to employment of any covered employee in 
excess of $1,000,000, plus 
‘‘(2) any excess parachute payment paid by 
such an organization to any covered employee. 
‘‘(b) LIABILITY FOR TAX.—The employer shall be lia-
ble for the tax imposed under subsection (a). 
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) 
APPLICABLE
TAX-EXEMPT
ORGANIZA-
TION.—The term ‘applicable tax-exempt organiza-
tion’ means any organization that for the taxable 
year— 
‘‘(A) is exempt from taxation under section 
501(a), 
‘‘(B) is a farmers’ cooperative organization 
described in section 521(b)(1), 
‘‘(C) has income excluded from taxation 
under section 115(1), or 
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‘‘(D) is a political organization described in 
section 527(e)(1). 
‘‘(2) COVERED
EMPLOYEE.—For purposes of 
this section, the term ‘covered employee’ means any 
employee (including any former employee) of an ap-
plicable tax-exempt organization if the employee— 
‘‘(A) is one of the 5 highest compensated 
employees of the organization for the taxable 
year, or 
‘‘(B) was a covered employee of the organi-
zation (or any predecessor) for any preceding 
taxable year beginning after December 31, 
2016. 
‘‘(3) REMUNERATION.—For purposes of this 
section, the term ‘remuneration’ means wages (as 
defined in section 3401(a)), except that such term 
shall not include any designated Roth contribution 
(as defined in section 402A(c)). 
‘‘(4) REMUNERATION FROM RELATED ORGANI-
ZATIONS.— 
‘‘(A) IN
GENERAL.—Remuneration of a 
covered employee paid by an applicable tax-ex-
empt organization shall include any remunera-
tion paid with respect to employment of such 
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HR 1 PCS 
employee by any related person or governmental 
entity. 
‘‘(B) RELATED
ORGANIZATIONS.—A per-
son or governmental entity shall be treated as 
related to an applicable tax-exempt organization 
if such person or governmental entity— 
‘‘(i) controls, or is controlled by, the 
organization, 
‘‘(ii) is controlled by one or more per-
sons that control the organization, 
‘‘(iii) is a supported organization (as 
defined in section 509(f)(2)) during the 
taxable year with respect to the organiza-
tion, 
‘‘(iv) is a supporting organization de-
scribed in section 509(a)(3) during the 
taxable year with respect to the organiza-
tion, or 
‘‘(v) in the case of an organization 
that is a voluntary employees’ beneficiary 
association described in section 501(a)(9), 
establishes, maintains, or makes contribu-
tions to such voluntary employees’ bene-
ficiary association. 
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‘‘(C) LIABILITY FOR TAX.—In any case in 
which remuneration from more than one em-
ployer is taken into account under this para-
graph in determining the tax imposed by sub-
section (a), each such employer shall be liable 
for such tax in an amount which bears the 
same ratio to the total tax determined under 
subsection (a) with respect to such remunera-
tion as— 
‘‘(i) the amount of remuneration paid 
by such employer with respect to such em-
ployee, bears to 
‘‘(ii) the amount of remuneration paid 
by all such employers to such employee. 
‘‘(5) EXCESS PARACHUTE PAYMENT.—For pur-
poses determining the tax imposed by subsection 
(a)(2)— 
‘‘(A) IN
GENERAL.—The term ‘excess 
parachute payment’ means an amount equal to 
the excess of any parachute payment over the 
portion of the base amount allocated to such 
payment. 
‘‘(B) PARACHUTE
PAYMENT.—The term 
‘parachute payment’ means any payment in the 
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HR 1 PCS 
nature of compensation to (or for the benefit 
of) a covered employee if— 
‘‘(i) such payment is contingent on 
such employee’s separation from employ-
ment with the employer, and 
‘‘(ii) the aggregate present value of 
the payments in the nature of compensa-
tion to (or for the benefit of) such indi-
vidual which are contingent on such sepa-
ration equals or exceeds an amount equal 
to 3 times the base amount. 
Such term does not include any payment de-
scribed in section 280G(b)(6) (relating to ex-
emption for payments under qualified plans) or 
any payment made under or to an annuity con-
tract described in section 403(b) or a plan de-
scribed in section 457(b). 
‘‘(C) BASE AMOUNT.—Rules similar to the 
rules of 280G(b)(3) shall apply for purposes of 
determining the base amount. 
‘‘(D) PROPERTY
TRANSFERS; 
PRESENT 
VALUE.—Rules similar to the rules of para-
graphs (3) and (4) of section 280G(d) shall 
apply. 
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‘‘(6) COORDINATION WITH DEDUCTION LIMITA-
TION.—Remuneration the deduction for which is not 
allowed by reason of section 162(m) shall not be 
taken into account for purposes of this section. 
‘‘(d) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary to prevent avoidance 
of the purposes of this section through the performance 
of services other than as an employee.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for subchapter D of chapter 42 is amended by adding at 
the end the following new item: 
‘‘Sec. 4960. Tax on excess exempt organization executive compensation.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 3803. TREATMENT OF QUALIFIED EQUITY GRANTS. 
(a) IN GENERAL.— 
(1) ELECTION TO DEFER INCOME.—Section 83 
is amended by adding at the end the following new 
subsection: 
‘‘(i) QUALIFIED EQUITY GRANTS.— 
‘‘(1) IN GENERAL.—For purposes of this sub-
title, if qualified stock is transferred to a qualified 
employee who makes an election with respect to such 
stock under this subsection— 
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‘‘(A) except as provided in subparagraph 
(B), no amount shall be included in income 
under subsection (a) for the first taxable year 
in which the rights of the employee in such 
stock are transferable or are not subject to a 
substantial risk of forfeiture, whichever is appli-
cable, and 
‘‘(B) an amount equal to the amount 
which would be included in income of the em-
ployee under subsection (a) (determined without 
regard to this subsection) shall be included in 
income for the taxable year of the employee 
which includes the earliest of— 
‘‘(i) the first date such qualified stock 
becomes transferable (including transfer-
able to the employer), 
‘‘(ii) the date the employee first be-
comes an excluded employee, 
‘‘(iii) the first date on which any stock 
of the corporation which issued the quali-
fied stock becomes readily tradable on an 
established securities market (as deter-
mined by the Secretary, but not including 
any market unless such market is recog-
nized as an established securities market 
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by the Secretary for purposes of a provi-
sion of this title other than this sub-
section), 
‘‘(iv) the date that is 5 years after the 
first date the rights of the employee in 
such stock are transferable or are not sub-
ject to a substantial risk of forfeiture, 
whichever occurs earlier, or 
‘‘(v) the date on which the employee 
revokes (at such time and in such manner 
as the Secretary may provide) the election 
under this subsection with respect to such 
stock. 
‘‘(2) QUALIFIED STOCK.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘qualified stock’ means, 
with respect to any qualified employee, any 
stock in a corporation which is the employer of 
such employee, if— 
‘‘(i) such stock is received— 
‘‘(I) in connection with the exer-
cise of an option, or 
‘‘(II) in settlement of a restricted 
stock unit, and 
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HR 1 PCS 
‘‘(ii) such option or restricted stock 
unit was provided by the corporation— 
‘‘(I) in connection with the per-
formance of services as an employee, 
and 
‘‘(II) during a calendar year in 
which such corporation was an eligible 
corporation. 
‘‘(B) LIMITATION.—The term ‘qualified 
stock’ shall not include any stock if the em-
ployee may sell such stock to, or otherwise re-
ceive cash in lieu of stock from, the corporation 
at the time that the rights of the employee in 
such stock first become transferable or not sub-
ject to a substantial risk of forfeiture. 
‘‘(C) ELIGIBLE CORPORATION.—For pur-
poses of subparagraph (A)(ii)(II)— 
‘‘(i) IN GENERAL.—The term ‘eligible 
corporation’ means, with respect to any 
calendar year, any corporation if— 
‘‘(I) no stock of such corporation 
(or any predecessor of such corpora-
tion) is readily tradable on an estab-
lished securities market (as deter-
mined under paragraph (1)(B)(iii)) 
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during any preceding calendar year, 
and 
‘‘(II) such corporation has a writ-
ten plan under which, in such cal-
endar year, not less than 80 percent 
of all employees who provide services 
to such corporation in the United 
States (or any possession of the 
United States) are granted stock op-
tions, or restricted stock units, with 
the same rights and privileges to re-
ceive qualified stock. 
‘‘(ii) 
SAME
RIGHTS
AND
PRIVI-
LEGES.—For purposes of clause (i)(II)— 
‘‘(I) except as provided in sub-
clauses (II) and (III), the determina-
tion of rights and privileges with re-
spect to stock shall be determined in 
a similar manner as provided under 
section 423(b)(5), 
‘‘(II) employees shall not fail to 
be treated as having the same rights 
and privileges to receive qualified 
stock solely because the number of 
shares available to all employees is not 
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HR 1 PCS 
equal in amount, so long as the num-
ber of shares available to each em-
ployee is more than a de minimis 
amount, and 
‘‘(III) rights and privileges with 
respect to the exercise of an option 
shall not be treated as the same as 
rights and privileges with respect to 
the settlement of a restricted stock 
unit. 
‘‘(iii) EMPLOYEE.—For purposes of 
clause (i)(II), the term ‘employee’ shall not 
include any employee described in section 
4980E(d)(4) or any excluded employee. 
‘‘(iv) SPECIAL RULE FOR CALENDAR 
YEARS BEFORE 2018.—In the case of any 
calendar year beginning before January 1, 
2018, clause (i)(II) shall be applied with-
out regard to whether the rights and privi-
leges with respect to the qualified stock are 
the same. 
‘‘(3) QUALIFIED
EMPLOYEE; EXCLUDED
EM-
PLOYEE.—For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
employee’ means any individual who— 
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‘‘(i) is not an excluded employee, and 
‘‘(ii) agrees in the election made 
under this subsection to meet such require-
ments as determined by the Secretary to 
be necessary to ensure that the with-
holding requirements of the corporation 
under chapter 24 with respect to the quali-
fied stock are met. 
‘‘(B) EXCLUDED
EMPLOYEE.—The term 
‘excluded employee’ means, with respect to any 
corporation, any individual— 
‘‘(i) who was a 1-percent owner (with-
in the meaning of section 416(i)(1)(B)(ii)) 
at any time during the 10 preceding cal-
endar years, 
‘‘(ii) who is or has been at any prior 
time— 
‘‘(I) the chief executive officer of 
such corporation or an individual act-
ing in such a capacity, or 
‘‘(II) the chief financial officer of 
such corporation or an individual act-
ing in such a capacity, 
‘‘(iii) who bears a relationship de-
scribed in section 318(a)(1) to any indi-
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HR 1 PCS 
vidual described in subclause (I) or (II) of 
clause (ii), or 
‘‘(iv) who has been for any of the 10 
preceding taxable years one of the 4 high-
est compensated officers of such corpora-
tion determined with respect to each such 
taxable year on the basis of the share-
holder disclosure rules for compensation 
under the Securities Exchange Act of 1934 
(as if such rules applied to such corpora-
tion). 
‘‘(4) ELECTION.— 
‘‘(A) TIME FOR MAKING ELECTION.—An 
election with respect to qualified stock shall be 
made under this subsection no later than 30 
days after the first time the rights of the em-
ployee in such stock are transferable or are not 
subject to a substantial risk of forfeiture, 
whichever occurs earlier, and shall be made in 
a manner similar to the manner in which an 
election is made under subsection (b). 
‘‘(B) LIMITATIONS.—No election may be 
made under this section with respect to any 
qualified stock if— 
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‘‘(i) the qualified employee has made 
an election under subsection (b) with re-
spect to such qualified stock, 
‘‘(ii) any stock of the corporation 
which issued the qualified stock is readily 
tradable on an established securities mar-
ket 
(as 
determined 
under 
paragraph 
(1)(B)(iii)) at any time before the election 
is made, or 
‘‘(iii) such corporation purchased any 
of its outstanding stock in the calendar 
year preceding the calendar year which in-
cludes the first time the rights of the em-
ployee in such stock are transferable or are 
not subject to a substantial risk of for-
feiture, unless— 
‘‘(I) not less than 25 percent of 
the total dollar amount of the stock so 
purchased is deferral stock, and 
‘‘(II) the determination of which 
individuals from whom deferral stock 
is purchased is made on a reasonable 
basis. 
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HR 1 PCS 
‘‘(C) DEFINITIONS
AND
SPECIAL
RULES 
RELATED TO LIMITATION ON STOCK REDEMP-
TIONS.— 
‘‘(i) DEFERRAL
STOCK.—For pur-
poses of this paragraph, the term ‘deferral 
stock’ means stock with respect to which 
an election is in effect under this sub-
section. 
‘‘(ii) DEFERRAL
STOCK
WITH
RE-
SPECT
TO
ANY
INDIVIDUAL
NOT
TAKEN 
INTO ACCOUNT IF INDIVIDUAL HOLDS DE-
FERRAL STOCK WITH LONGER DEFERRAL 
PERIOD.—Stock purchased by a corpora-
tion from any individual shall not be treat-
ed as deferral stock for purposes of clause 
(iii) if such individual (immediately after 
such purchase) holds any deferral stock 
with respect to which an election has been 
in effect under this subsection for a longer 
period than the election with respect to the 
stock so purchased. 
‘‘(iii) 
PURCHASE
OF
ALL
OUT-
STANDING
DEFERRAL
STOCK.—The re-
quirements of subclauses (I) and (II) of 
subparagraph (B)(iii) shall be treated as 
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HR 1 PCS 
met if the stock so purchased includes all 
of the corporation’s outstanding deferral 
stock. 
‘‘(iv) REPORTING.—Any corporation 
which has outstanding deferral stock as of 
the beginning of any calendar year and 
which purchases any of its outstanding 
stock during such calendar year shall in-
clude on its return of tax for the taxable 
year in which, or with which, such calendar 
year ends the total dollar amount of its 
outstanding stock so purchased during 
such calendar year and such other infor-
mation as the Secretary may require for 
purposes of administering this paragraph. 
‘‘(5) CONTROLLED GROUPS.—For purposes of 
this subsection, all corporations which are members 
of the same controlled group of corporations (as de-
fined in section 1563(a)) shall be treated as one cor-
poration. 
‘‘(6) NOTICE REQUIREMENT.—Any corporation 
that transfers qualified stock to a qualified employee 
shall, at the time that (or a reasonable period be-
fore) an amount attributable to such stock would 
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HR 1 PCS 
(but for this subsection) first be includible in the 
gross income of such employee— 
‘‘(A) certify to such employee that such 
stock is qualified stock, and 
‘‘(B) notify such employee— 
‘‘(i) that the employee may elect to 
defer income on such stock under this sub-
section, and 
‘‘(ii) that, if the employee makes such 
an election— 
‘‘(I) the amount of income recog-
nized at the end of the deferral period 
will be based on the value of the stock 
at the time at which the rights of the 
employee in such stock first become 
transferable or not subject to substan-
tial risk of forfeiture, notwithstanding 
whether the value of the stock has de-
clined during the deferral period, 
‘‘(II) the amount of such income 
recognized at the end of the deferral 
period will be subject to withholding 
under section 3401(i) at the rate de-
termined under section 3402(t), and 
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HR 1 PCS 
‘‘(III) the responsibilities of the 
employee (as determined by the Sec-
retary under paragraph (3)(A)(ii)) 
with respect to such withholding. 
‘‘(7) RESTRICTED STOCK UNITS.—This section 
(other than this subsection), including any election 
under subsection (b), shall not apply to restricted 
stock units.’’. 
(2) DEDUCTION BY EMPLOYER.—Subsection (h) 
of section 83 is amended by striking ‘‘or (d)(2)’’ and 
inserting ‘‘(d)(2), or (i)’’. 
(b) WITHHOLDING.— 
(1) TIME OF WITHHOLDING.—Section 3401 is 
amended by adding at the end the following new 
subsection: 
‘‘(i) QUALIFIED STOCK FOR WHICH AN ELECTION IS 
IN EFFECT UNDER SECTION 83(i).—For purposes of sub-
section (a), qualified stock (as defined in section 83(i)) 
with respect to which an election is made under section 
83(i) shall be treated as wages— 
‘‘(1) received on the earliest date described in 
section 83(i)(1)(B), and 
‘‘(2) in an amount equal to the amount in-
cluded in income under section 83 for the taxable 
year which includes such date.’’. 
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HR 1 PCS 
(2) AMOUNT OF WITHHOLDING.—Section 3402 
is amended by adding at the end the following new 
subsection: 
‘‘(t) 
RATE
OF
WITHHOLDING
FOR
CERTAIN 
STOCK.—In the case of any qualified stock (as defined in 
section 83(i)) with respect to which an election is made 
under section 83(i)— 
‘‘(1) the rate of tax under subsection (a) shall 
not be less than the maximum rate of tax in effect 
under section 1, and 
‘‘(2) such stock shall be treated for purposes of 
section 3501(b) in the same manner as a non-cash 
fringe benefit.’’. 
(c) COORDINATION WITH OTHER DEFERRED COM-
PENSATION RULES.— 
(1) ELECTION TO APPLY DEFERRAL TO STATU-
TORY OPTIONS.— 
(A) INCENTIVE STOCK OPTIONS.—Section 
422(b) is amended by adding at the end the fol-
lowing: ‘‘Such term shall not include any option 
if an election is made under section 83(i) with 
respect to the stock received in connection with 
the exercise of such option.’’. 
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HR 1 PCS 
(B) 
EMPLOYEE
STOCK
PURCHASE 
PLANS.—Section 423(a) is amended by adding 
at the end the following flush sentence: 
‘‘The preceding sentence shall not apply to any share of 
stock with respect to which an election is made under sec-
tion 83(i).’’. 
(2) EXCLUSION
FROM
DEFINITION
OF
NON-
QUALIFIED DEFERRED COMPENSATION PLAN.—Sub-
section (d) of section 409A is amended by adding at 
the end the following new paragraph: 
‘‘(7) TREATMENT OF QUALIFIED STOCK.—An 
arrangement under which an employee may receive 
qualified stock (as defined in section 83(i)(2)) shall 
not be treated as a nonqualified deferred compensa-
tion plan solely because of an employee’s election, or 
ability to make an election, to defer recognition of 
income under section 83(i).’’. 
(d) INFORMATION REPORTING.—Section 6051(a) is 
amended by striking ‘‘and’’ at the end of paragraph (13), 
by striking the period at the end of paragraph (14) and 
inserting a comma, and by inserting after paragraph (14) 
the following new paragraphs: 
‘‘(15) the amount excludable from gross income 
under subparagraph (A) of section 83(i)(1), 
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‘‘(16) the amount includible in gross income 
under subparagraph (B) of section 83(i)(1) with re-
spect to an event described in such subparagraph 
which occurs in such calendar year, and 
‘‘(17) the aggregate amount of income which is 
being deferred pursuant to elections under section 
83(i), determined as of the close of the calendar 
year.’’. 
(e) PENALTY FOR FAILURE OF EMPLOYER TO PRO-
VIDE NOTICE OF TAX CONSEQUENCES.—Section 6652 is 
amended by adding at the end the following new sub-
section: 
‘‘(o) FAILURE TO PROVIDE NOTICE UNDER SECTION 
83(i).—In the case of each failure to provide a notice as 
required by section 83(i)(6), at the time prescribed there-
for, unless it is shown that such failure is due to reason-
able cause and not to willful neglect, there shall be paid, 
on notice and demand of the Secretary and in the same 
manner as tax, by the person failing to provide such no-
tice, an amount equal to $100 for each such failure, but 
the total amount imposed on such person for all such fail-
ures during any calendar year shall not exceed $50,000.’’. 
(f) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
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shall apply to stock attributable to options exercised, 
or restricted stock units settled, after December 31, 
2017. 
(2) REQUIREMENT TO PROVIDE NOTICE.—The 
amendments made by subsection (e) shall apply to 
failures after December 31, 2017. 
(g) TRANSITION RULE.—Until such time as the Sec-
retary (or the Secretary’s delegate) issue regulations or 
other guidance for purposes of implementing the require-
ments of paragraph (2)(C)(i)(II) of section 83(i) of the 
Internal Revenue Code of 1986 (as added by this section), 
or the requirements of paragraph (6) of such section, a 
corporation shall be treated as being in compliance with 
such requirements (respectively) if such corporation com-
plies with a reasonable good faith interpretation of such 
requirements. 
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HR 1 PCS 
TITLE IV—TAXATION OF FOR-
EIGN INCOME AND FOREIGN 
PERSONS 
Subtitle A—Establishment of Par-
ticipation Exemption System for 
Taxation of Foreign Income 
SEC. 4001. DEDUCTION FOR FOREIGN-SOURCE PORTION OF 
DIVIDENDS RECEIVED BY DOMESTIC COR-
PORATIONS FROM SPECIFIED 10-PERCENT 
OWNED FOREIGN CORPORATIONS. 
(a) IN GENERAL.—Part VIII of subchapter B of 
chapter 1 is amended by inserting after section 245 the 
following new section: 
‘‘SEC. 245A. DEDUCTION FOR FOREIGN-SOURCE PORTION 
OF DIVIDENDS RECEIVED BY DOMESTIC COR-
PORATIONS FROM SPECIFIED 10-PERCENT 
OWNED FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—In the case of any dividend re-
ceived from a specified 10-percent owned foreign corpora-
tion by a domestic corporation which is a United States 
shareholder with respect to such foreign corporation, there 
shall be allowed as a deduction an amount equal to the 
foreign-source portion of such dividend. 
‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN COR-
PORATION.—For purposes of this section, the term ‘speci-
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fied 10-percent owned foreign corporation’ means any for-
eign corporation with respect to which any domestic cor-
poration is a United States shareholder. Such term shall 
not include any passive foreign investment company (with-
in the meaning of subpart D of part VI of subchapter P) 
that is not a controlled foreign corporation. 
‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The foreign-source portion 
of any dividend is an amount which bears the same 
ratio to such dividend as— 
‘‘(A) the post-1986 undistributed foreign 
earnings of the specified 10-percent owned for-
eign corporation, bears to 
‘‘(B) the total post-1986 undistributed 
earnings of such foreign corporation. 
‘‘(2) POST-1986
UNDISTRIBUTED
EARNINGS.— 
The term ‘post-1986 undistributed earnings’ means 
the amount of the earnings and profits of the speci-
fied 10-percent owned foreign corporation (computed 
in accordance with sections 964(a) and 986) accu-
mulated in taxable years beginning after December 
31, 1986— 
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‘‘(A) as of the close of the taxable year of 
the specified 10-percent owned foreign corpora-
tion in which the dividend is distributed, and 
‘‘(B) without diminution by reason of divi-
dends distributed during such taxable year. 
‘‘(3) 
POST-1986
UNDISTRIBUTED
FOREIGN 
EARNINGS.—The term ‘post-1986 undistributed for-
eign earnings’ means the portion of the post-1986 
undistributed earnings which is attributable to nei-
ther— 
‘‘(A) income described in subparagraph (A) 
of section 245(a)(5), nor 
‘‘(B) dividends described in subparagraph 
(B) of such section (determined without regard 
to section 245(a)(12)). 
‘‘(4) TREATMENT
OF
DISTRIBUTIONS
FROM 
EARNINGS BEFORE 1987.— 
‘‘(A) IN GENERAL.—In the case of any div-
idend paid out of earnings and profits of the 
specified 10-percent owned foreign corporation 
(computed in accordance with sections 964(a) 
and 986) accumulated in taxable years begin-
ning before January 1, 1987— 
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HR 1 PCS 
‘‘(i) paragraphs (1), (2), and (3) shall 
be applied without regard to the phrase 
‘post-1986’ each place it appears, and 
‘‘(ii) paragraph (2) shall be applied by 
substituting ‘after the date specified in sec-
tion 316(a)(1)’ for ‘in taxable years begin-
ning after December 31, 1986’. 
‘‘(B) DIVIDENDS
PAID
FIRST
OUT
OF 
POST-1986 EARNINGS.—Dividends shall be treat-
ed as paid out of post-1986 undistributed earn-
ings to the extent thereof. 
‘‘(5) TREATMENT OF CERTAIN DIVIDENDS IN 
EXCESS OF UNDISTRIBUTED EARNINGS.—In the case 
of any dividend from the specified 10-percent owned 
foreign corporation which is in excess of undistrib-
uted earnings (as determined under paragraph (2) 
after taking into account the modifications described 
in clauses (i) and (ii) of paragraph (4)(A)), the for-
eign-source portion of such dividend is an amount 
which bears the same ratio to such dividend as— 
‘‘(A) the portion of the earnings and prof-
its described in subparagraph (B) which is at-
tributable to neither income described in para-
graph (3)(A) nor dividends described in para-
graph (3)(B), bears to 
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‘‘(B) the earnings and profits of such cor-
poration for the taxable year in which such dis-
tribution is made (computed as of the close of 
the taxable year without diminution by reason 
of any distributions made during the taxable 
year). 
‘‘(d) DISALLOWANCE
OF FOREIGN TAX CREDIT, 
ETC.— 
‘‘(1) IN GENERAL.—No credit shall be allowed 
under section 901 for any taxes paid or accrued (or 
treated as paid or accrued) with respect to any divi-
dend for which a deduction is allowed under this sec-
tion. 
‘‘(2) DENIAL
OF
DEDUCTION.—No deduction 
shall be allowed under this chapter for any tax for 
which credit is not allowable under section 901 by 
reason of paragraph (1) (determined by treating the 
taxpayer as having elected the benefits of subpart A 
of part III of subchapter N). 
‘‘(e) REGULATIONS.—The Secretary may prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the provisions of this section.’’. 
(b) APPLICATION OF HOLDING PERIOD REQUIRE-
MENT.—Section 246(c) is amended— 
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(1) by striking ‘‘or 245’’ in paragraph (1) and 
inserting ‘‘245, or 245A’’, and 
(2) by adding at the end the following new 
paragraph: 
‘‘(5) SPECIAL
RULES
FOR
FOREIGN
SOURCE 
PORTION OF DIVIDENDS RECEIVED FROM SPECIFIED 
10-PERCENT OWNED FOREIGN CORPORATIONS.— 
‘‘(A) 6-MONTH HOLDING PERIOD REQUIRE-
MENT.—For purposes of section 245A— 
‘‘(i) paragraph (1)(A) shall be ap-
plied— 
‘‘(I) by substituting ‘180 days’ 
for ‘45 days’each place it appears, and 
‘‘(II) by substituting ‘361-day pe-
riod’ for ‘91-day period’, and 
‘‘(ii) paragraph (2) shall not apply. 
‘‘(B) STATUS MUST BE MAINTAINED DUR-
ING HOLDING PERIOD.—For purposes of apply-
ing paragraph (1) with respect to section 245A, 
the taxpayer shall be treated as holding the 
stock referred to in paragraph (1) for any pe-
riod only if— 
‘‘(i) the specified 10-percent owned 
foreign corporation referred to in section 
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245A(a) is a specified 10-percent owned 
foreign corporation for such period, and 
‘‘(ii) the taxpayer is a United States 
shareholder with respect to such specified 
10-percent owned foreign corporation for 
such period.’’. 
(c) APPLICATION OF RULES GENERALLY APPLICA-
BLE TO DEDUCTIONS FOR DIVIDENDS RECEIVED.— 
(1) TREATMENT OF DIVIDENDS FROM CERTAIN 
CORPORATIONS.—Section 246(a)(1) is amended by 
striking ‘‘and 245’’ and inserting ‘‘245, and 245A’’. 
(2) COORDINATION WITH SECTION 1059.—Sec-
tion 1059(b)(2)(B) is amended by striking ‘‘or 245’’ 
and inserting ‘‘245, or 245A’’. 
(d) COORDINATION WITH FOREIGN TAX CREDIT 
LIMITATION.—Section 904(b) is amended by adding at 
the end the following new paragraph: 
‘‘(5) TREATMENT OF DIVIDENDS FOR WHICH 
DEDUCTION IS ALLOWED UNDER SECTION 245A.— 
For purposes of subsection (a), in the case of a 
United States shareholder with respect to a specified 
10-percent owned foreign corporation, such share-
holder’s taxable income from sources without the 
United States (and entire taxable income) shall be 
determined without regard to— 
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‘‘(A) the foreign-source portion of any divi-
dend received from such foreign corporation, 
and 
‘‘(B) any deductions properly allocable or 
apportioned to— 
‘‘(i) income (other than subpart F in-
come (as defined in section 952) and for-
eign high return amounts (as defined in 
section 951A(b)) with respect to stock of 
such specified 10-percent owned foreign 
corporation, or 
‘‘(ii) such stock (to the extent income 
with respect to such stock is other than 
subpart F income (as so defined) or for-
eign high return amounts (as so defined)). 
Any term which is used in section 245A and in this 
paragraph shall have the same meaning for purposes 
of this paragraph as when used in such section.’’. 
(e) CONFORMING AMENDMENTS.— 
(1) Section 245(a)(4) is amended by striking 
‘‘section 
902(c)(1)’’ 
and 
inserting 
‘‘section 
245A(c)(2) applied by substituting ‘qualified 10-per-
cent owned foreign corporation’ for ‘specified 10-per-
cent owned foreign corporation’ each place it ap-
pears’’. 
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(2) Section 951(b) is amended by striking ‘‘sub-
part’’ and inserting ‘‘title’’. 
(3) Section 957(a) is amended by striking ‘‘sub-
part’’ in the matter preceding paragraph (1) and in-
serting ‘‘title’’. 
(4) The table of sections for part VIII of sub-
chapter B of chapter 1 is amended by inserting after 
section 245 the following new item: 
‘‘Sec. 245A. Deduction for foreign-source portion of dividends received by do-
mestic corporations from specified 10-percent owned foreign 
corporations.’’. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions made after (and, 
in the case of the amendments made by subsection (d), 
deductions with respect to taxable years ending after) De-
cember 31, 2017. 
SEC. 4002. APPLICATION OF PARTICIPATION EXEMPTION 
TO INVESTMENTS IN UNITED STATES PROP-
ERTY. 
(a) IN GENERAL.—Section 956(a) is amended in the 
matter preceding paragraph (1) by inserting ‘‘(other than 
a corporation)’’ after ‘‘United States shareholder’’. 
(b) 
REGULATORY
AUTHORITY
TO
PREVENT 
ABUSE.—Section 956(e) is amended by striking ‘‘includ-
ing regulations to prevent’’ and inserting ‘‘including regu-
lations— 
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‘‘(1) to address United States shareholders that 
are partnerships with corporate partners, and 
‘‘(2) to prevent’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017. 
SEC. 4003. LIMITATION ON LOSSES WITH RESPECT TO 
SPECIFIED 
10-PERCENT 
OWNED 
FOREIGN 
CORPORATIONS. 
(a) BASIS IN SPECIFIED 10-PERCENT OWNED FOR-
EIGN CORPORATION REDUCED BY NONTAXED PORTION 
OF DIVIDEND FOR PURPOSES OF DETERMINING LOSS.— 
(1) IN GENERAL.—Section 961 is amended by 
adding at the end the following new subsection: 
‘‘(d) BASIS IN SPECIFIED 10-PERCENT OWNED FOR-
EIGN CORPORATION REDUCED BY NONTAXED PORTION 
OF DIVIDEND FOR PURPOSES OF DETERMINING LOSS.— 
If a domestic corporation received a dividend from a speci-
fied 10-percent owned foreign corporation (as defined in 
section 245A) in any taxable year, solely for purposes of 
determining loss on any disposition of stock of such for-
eign corporation in such taxable year or any subsequent 
taxable year, the basis of such domestic corporation in 
such stock shall be reduced (but not below zero) by the 
amount of any deduction allowable to such domestic cor-
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poration under section 245A with respect to such stock 
except to the extent such basis was reduced under section 
1059 by reason of a dividend for which such a deduction 
was allowable.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to distributions made 
after December 31, 2017. 
(b) TREATMENT
OF
FOREIGN
BRANCH
LOSSES 
TRANSFERRED TO SPECIFIED 10-PERCENT OWNED FOR-
EIGN CORPORATIONS.— 
(1) IN GENERAL.—Part II of subchapter B of 
chapter 1 is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANS-
FERRED TO SPECIFIED 10-PERCENT OWNED 
FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—If a domestic corporation trans-
fers substantially all of the assets of a foreign branch 
(within the meaning of section 367(a)(3)(C)) to a specified 
10-percent owned foreign corporation (as defined in sec-
tion 245A) with respect to which it is a United States 
shareholder after such transfer, such domestic corporation 
shall include in gross income for the taxable year which 
includes such transfer an amount equal to the transferred 
loss amount with respect to such transfer. 
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‘‘(b) TRANSFERRED LOSS AMOUNT.—For purposes 
of this section, the term ‘transferred loss amount’ means, 
with respect to any transfer of substantially all of the as-
sets of a foreign branch, the excess (if any) of— 
‘‘(1) the sum of losses— 
‘‘(A) which were incurred by the foreign 
branch after December 31, 2017, and before 
the transfer, and 
‘‘(B) with respect to which a deduction was 
allowed to the taxpayer, over 
‘‘(2) the sum of— 
‘‘(A) any taxable income of such branch 
for a taxable year after the taxable year in 
which the loss was incurred and through the 
close of the taxable year of the transfer, and 
‘‘(B) any amount which is recognized 
under section 904(f)(3) on account of the trans-
fer. 
‘‘(c) REDUCTION FOR RECOGNIZED GAINS.— 
‘‘(1) IN GENERAL.—In the case of a transfer 
not described in section 367(a)(3)(C), the trans-
ferred loss amount shall be reduced (but not below 
zero) by the amount of gain recognized by the tax-
payer on account of the transfer (other than 
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amounts taken into account under subsection 
(c)(2)(B)). 
‘‘(2) 
COORDINATION
WITH
RECOGNITION 
UNDER SECTION 367.—In the case of a transfer de-
scribed in section 367(a)(3)(C), the transferred loss 
amount shall not exceed the excess (if any) of— 
‘‘(A) the excess of the amount described in 
section 367(a)(3)(C)(i) over the amount de-
scribed in section 367(a)(3)(C)(ii) with respect 
to such transfer, over 
‘‘(B) the amount of gain recognized under 
section 367(a)(3)(C) with respect to such trans-
fer. 
‘‘(d) SOURCE
OF INCOME.—Amounts included in 
gross income under this section shall be treated as derived 
from sources within the United States. 
‘‘(e) BASIS ADJUSTMENTS.—Consistent with such 
regulations or other guidance as the Secretary may pre-
scribe, proper adjustments shall be made in the adjusted 
basis of the taxpayer’s stock in the specified 10-percent 
owned foreign corporation to which the transfer is made, 
and in the transferee’s adjusted basis in the property 
transferred, to reflect amounts included in gross income 
under this section.’’. 
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(2) AMOUNTS RECOGNIZED UNDER SECTION 367 
ON
TRANSFER
OF
FOREIGN
BRANCH
WITH
PRE-
VIOUSLY DEDUCTED LOSSES TREATED AS UNITED 
STATES SOURCE.—Section 367(a)(3)(C) is amended 
by striking ‘‘outside’’ in the last sentence and insert-
ing ‘‘within’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions for part II of subchapter B of chapter 1 is 
amended by adding at the end the following new 
item: 
‘‘Sec. 91. Certain foreign branch losses transferred to specified 10-percent 
owned foreign corporations.’’. 
(4) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to transfers after De-
cember 31, 2017. 
SEC. 4004. TREATMENT OF DEFERRED FOREIGN INCOME 
UPON TRANSITION TO PARTICIPATION EX-
EMPTION SYSTEM OF TAXATION. 
(a) IN GENERAL.—Section 965 is amended to read 
as follows: 
‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME 
UPON TRANSITION TO PARTICIPATION EX-
EMPTION SYSTEM OF TAXATION. 
‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME 
AS SUBPART F INCOME.—In the case of the last taxable 
year of a deferred foreign income corporation which begins 
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before January 1, 2018, the subpart F income of such 
foreign corporation (as otherwise determined for such tax-
able year under section 952) shall be increased by the 
greater of— 
‘‘(1) the accumulated post-1986 deferred for-
eign income of such corporation determined as of 
November 2, 2017, or 
‘‘(2) the accumulated post-1986 deferred for-
eign income of such corporation determined as of 
December 31, 2017. 
‘‘(b) REDUCTION IN AMOUNTS INCLUDED IN GROSS 
INCOME OF UNITED STATES SHAREHOLDERS OF SPECI-
FIED FOREIGN CORPORATIONS WITH DEFICITS IN EARN-
INGS AND PROFITS.— 
‘‘(1) IN GENERAL.—In the case of a taxpayer 
which is a United States shareholder with respect to 
at least one deferred foreign income corporation and 
at least one E&P deficit foreign corporation, the 
amount which would (but for this subsection) be 
taken into account under section 951(a)(1) by rea-
son of subsection (a) as such United States share-
holder’s pro rata share of the subpart F income of 
each deferred foreign income corporation shall be re-
duced (but not below zero) by the amount of such 
United States shareholder’s aggregate foreign E&P 
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HR 1 PCS 
deficit which is allocated under paragraph (2) to 
such deferred foreign income corporation. 
‘‘(2) ALLOCATION OF AGGREGATE FOREIGN E&P 
DEFICIT.—The aggregate foreign E&P deficit of any 
United States shareholder shall be allocated among 
the deferred foreign income corporations of such 
United States shareholder in an amount which bears 
the same proportion to such aggregate as— 
‘‘(A) such United States shareholder’s pro 
rata share of the accumulated post-1986 de-
ferred foreign income of each such deferred for-
eign income corporation, bears to 
‘‘(B) the aggregate of such United States 
shareholder’s pro rata share of the accumulated 
post-1986 deferred foreign income of all de-
ferred foreign income corporations of such 
United States shareholder. 
‘‘(3) DEFINITIONS
RELATED
TO
E&P
DEFI-
CITS.—For purposes of this subsection— 
‘‘(A) AGGREGATE
FOREIGN
E&P
DEF-
ICIT.—The term ‘aggregate foreign E&P deficit’ 
means, with respect to any United States share-
holder, the aggregate of such shareholder’s pro 
rata shares of the specified E&P deficits of the 
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E&P deficit foreign corporations of such share-
holder. 
‘‘(B) E&P DEFICIT
FOREIGN
CORPORA-
TION.—The term ‘E&P deficit foreign corpora-
tion’ means, with respect to any taxpayer, any 
specified foreign corporation with respect to 
which such taxpayer is a United States share-
holder, if— 
‘‘(i) such specified foreign corporation 
has a deficit in post-1986 earnings and 
profits, and 
‘‘(ii) as of November 2, 2017— 
‘‘(I) such corporation was a spec-
ified foreign corporation, and 
‘‘(II) such taxpayer was a United 
States shareholder of such corpora-
tion. 
‘‘(C) SPECIFIED E&P DEFICIT.—The term 
‘specified E&P deficit’ means, with respect to 
any E&P deficit foreign corporation, the 
amount of the deficit referred to in subpara-
graph (B). 
‘‘(4) NETTING AMONG UNITED STATES SHARE-
HOLDERS IN SAME AFFILIATED GROUP.— 
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‘‘(A) IN GENERAL.—In the case of any af-
filiated group which includes at least one E&P 
net surplus shareholder and one E&P net def-
icit shareholder, the amount which would (but 
for this paragraph) be taken into account under 
section 951(a)(1) by reason of subsection (a) by 
each such E&P net surplus shareholder shall be 
reduced (but not below zero) by such share-
holder’s applicable share of the affiliated 
group’s aggregate unused E&P deficit. 
‘‘(B) 
E&P 
NET
SURPLUS
SHARE-
HOLDER.—For purposes of this paragraph, the 
term ‘E&P net surplus shareholder’ means any 
United States shareholder which would (deter-
mined without regard to this paragraph) take 
into account an amount greater than zero 
under section 951(a)(1) by reason of subsection 
(a). 
‘‘(C) E&P NET DEFICIT SHAREHOLDER.— 
For purposes of this paragraph, the term ‘E&P 
net deficit shareholder’ means any United 
States shareholder if— 
‘‘(i) the aggregate foreign E&P deficit 
with respect to such shareholder (as de-
fined in paragraph (3)(A)), exceeds 
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‘‘(ii) the amount which would (but for 
this subsection) be taken into account by 
such shareholder under section 951(a)(1) 
by reason of subsection (a). 
‘‘(D) AGGREGATE UNUSED E&P DEFICIT.— 
For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘aggre-
gate unused E&P deficit’ means, with re-
spect to any affiliated group, the lesser 
of— 
‘‘(I) the sum of the excesses de-
scribed in subparagraph (C), deter-
mined with respect to each E&P net 
deficit shareholder in such group, or 
‘‘(II) the amount determined 
under subparagraph (E)(ii). 
‘‘(ii) REDUCTION WITH RESPECT TO 
E&P NET DEFICIT SHAREHOLDERS WHICH 
ARE NOT WHOLLY OWNED BY THE AFFILI-
ATED GROUP.—If the group ownership per-
centage of any E&P net deficit shareholder 
is less than 100 percent, the amount of the 
excess described in subparagraph (C) 
which is taken into account under clause 
(i)(I) with respect to such E&P net deficit 
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shareholder shall be such group ownership 
percentage of such amount. 
‘‘(E) APPLICABLE SHARE.—For purposes 
of this paragraph, the term ‘applicable share’ 
means, with respect to any E&P net surplus 
shareholder in any affiliated group, the amount 
which bears the same proportion to such 
group’s aggregate unused E&P deficit as— 
‘‘(i) the product of— 
‘‘(I) such shareholder’s group 
ownership percentage, multiplied by 
‘‘(II) the amount which would 
(but for this paragraph) be taken into 
account under section 951(a)(1) by 
reason of subsection (a) by such 
shareholder, bears to 
‘‘(ii) the aggregate amount deter-
mined under clause (i) with respect to all 
E&P net surplus shareholders in such 
group. 
‘‘(F) GROUP OWNERSHIP PERCENTAGE.— 
For purposes of this paragraph, the term 
‘group ownership percentage’ means, with re-
spect to any United States shareholder in any 
affiliated group, the percentage of the value of 
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the stock of such United States shareholder 
which is held by other includible corporations in 
such affiliated group. Notwithstanding the pre-
ceding sentence, the group ownership percent-
age of the common parent of the affiliated 
group is 100 percent. Any term used in this 
subparagraph which is also used in section 
1504 shall have the same meaning as when 
used in such section. 
‘‘(c) APPLICATION OF PARTICIPATION EXEMPTION 
TO INCLUDED INCOME.— 
‘‘(1) IN GENERAL.—In the case of a United 
States shareholder of a deferred foreign income cor-
poration, there shall be allowed as a deduction for 
the taxable year in which an amount is included in 
the gross income of such United States shareholder 
under section 951(a)(1) by reason of this section an 
amount equal to the sum of— 
‘‘(A) the United States shareholder’s 7 
percent rate equivalent percentage of the excess 
(if any) of— 
‘‘(i) the amount so included as gross 
income, over 
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‘‘(ii) the amount of such United 
States shareholder’s aggregate foreign cash 
position, plus 
‘‘(B) the United States shareholder’s 14 
percent rate equivalent percentage of so much 
of the amount described in subparagraph (A)(ii) 
as does not exceed the amount described in sub-
paragraph (A)(i). 
‘‘(2) 7 AND
PERCENT
RATE
EQUIVALENT 
PERCENTAGES.—For purposes of this subsection— 
‘‘(A) 7 PERCENT RATE EQUIVALENT PER-
CENTAGE.—The term ‘7 percent rate equivalent 
percentage’ means, with respect to any United 
States shareholder for any taxable year, the 
percentage which would result in the amount to 
which such percentage applies being subject to 
a 7 percent rate of tax determined by only tak-
ing into account a deduction equal to such per-
centage of such amount and the highest rate of 
tax specified in section 11 for such taxable 
year. In the case of any taxable year of a 
United States shareholder to which section 15 
applies, the highest rate of tax under section 11 
before the effective date of the change in rates 
and the highest rate of tax under section 11 
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after the effective date of such change shall 
each be taken into account under the preceding 
sentence in the same proportions as the portion 
of such taxable year which is before and after 
such effective date, respectively. 
‘‘(B) 14 PERCENT RATE EQUIVALENT PER-
CENTAGE.—The term ‘14 percent rate equiva-
lent percentage’ means, with respect to any 
United States shareholder for any taxable year, 
the percentage determined under subparagraph 
(A) applied by substituting ‘14 percent rate of 
tax’ for ‘7 percent rate of tax’. 
‘‘(3) AGGREGATE FOREIGN CASH POSITION.— 
For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘aggregate 
foreign cash position’ means, with respect to 
any United States shareholder, one-third of the 
sum of— 
‘‘(i) the aggregate of such United 
States shareholder’s pro rata share of the 
cash position of each specified foreign cor-
poration of such United States shareholder 
determined as of November 2, 2017, 
‘‘(ii) the aggregate described in clause 
(i) determined as of the close of the last 
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taxable year of each such specified foreign 
corporation which ends before November 2, 
2017, and 
‘‘(iii) the aggregate described in 
clause (i) determined as of the close of the 
taxable year of each such specified foreign 
corporation which precedes the taxable 
year referred to in clause (ii). 
In the case of any foreign corporation which did 
not exist as of the determination date described 
in clause (ii) or (iii), this subparagraph shall be 
applied separately to such foreign corporation 
by not taking into account such clause and by 
substituting ‘one-half (100 percent in the case 
that both clauses (ii) and (iii) are disregarded)’ 
for ‘one-third’. 
‘‘(B) CASH
POSITION.—For purposes of 
this paragraph, the cash position of any speci-
fied foreign corporation is the sum of— 
‘‘(i) cash held by such foreign cor-
poration, 
‘‘(ii) the net accounts receivable of 
such foreign corporation, plus 
‘‘(iii) the fair market value of the fol-
lowing assets held by such corporation: 
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‘‘(I) Actively traded personal 
property for which there is an estab-
lished financial market. 
‘‘(II) Commercial paper, certifi-
cates of deposit, the securities of the 
Federal government and of any State 
or foreign government. 
‘‘(III) Any foreign currency. 
‘‘(IV) Any obligation with a term 
of less than one year. 
‘‘(V) Any asset which the Sec-
retary identifies as being economically 
equivalent to any asset described in 
this subparagraph. 
‘‘(C) NET
ACCOUNTS
RECEIVABLE.—For 
purposes of this paragraph, the term ‘net ac-
counts receivable’ means, with respect to any 
specified foreign corporation, the excess (if any) 
of— 
‘‘(i) such corporation’s accounts re-
ceivable, over 
‘‘(ii) such corporation’s accounts pay-
able (determined consistent with the rules 
of section 461). 
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‘‘(D) PREVENTION
OF
DOUBLE
COUNT-
ING.— 
‘‘(i) IN
GENERAL.—The applicable 
percentage of each specified cash position 
of a specified foreign corporation shall not 
be taken into account by— 
‘‘(I) the United States share-
holder referred to in clause (ii) with 
respect to such position, or 
‘‘(II) any United States share-
holder which is an includible corpora-
tion in the same affiliated group as 
such United States shareholder re-
ferred to in clause (ii). 
‘‘(ii) SPECIFIED CASH POSITION.—For 
purposes of this subparagraph, the term 
‘specified cash position’ means— 
‘‘(I) amounts described in sub-
paragraph (B)(ii) to the extent such 
amounts are receivable from another 
specified foreign corporation with re-
spect to any United States share-
holder, 
‘‘(II) amounts described in sub-
paragraph (B)(iii)(I) to the extent 
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such amounts consist of an equity in-
terest in another specified foreign cor-
poration with respect to any United 
States shareholder, and 
‘‘(III) amounts described in sub-
paragraph (B)(iii)(IV) to the extent 
that another specified foreign corpora-
tion with respect to any United States 
shareholder is obligated to repay such 
amount. 
‘‘(iii) APPLICABLE
PERCENTAGE.— 
For purposes of this subparagraph, the 
term ‘applicable percentage’ means— 
‘‘(I) with respect to each speci-
fied cash position described in sub-
clause (I) or (III) of clause (ii), the 
pro rata share of the United States 
shareholder referred to in clause (ii) 
with respect to the specified foreign 
corporation referred to in such clause, 
and 
‘‘(II) with respect to each speci-
fied cash position described in clause 
(ii)(II), the ratio (expressed as a per-
centage and not in excess of 100 per-
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cent) of the United States share-
holder’s pro rata share of the cash po-
sition of the specified foreign corpora-
tion referred to in such clause divided 
by the amount of such specified cash 
position. 
For purposes of this subparagraph, a sepa-
rate applicable percentage shall be deter-
mined under each of subclauses (I) and 
(II) with respect to each specified foreign 
corporation referred to in clause (ii) with 
respect to which a specified cash position 
is determined for the specified foreign cor-
poration referred to in clause (i). 
‘‘(iv) REDUCTION WITH RESPECT TO 
AFFILIATED GROUP MEMBERS NOT WHOL-
LY OWNED BY THE AFFILIATED GROUP.— 
For purposes of clause (i)(II), in the case 
of an includible corporation the group own-
ership percentage of which is less than 100 
percent (as determined under subsection 
(b)(4)(F)), the amount not take into ac-
count by reason of such clause shall be the 
group 
ownership 
percentage 
of 
such 
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amount (determined without regard to this 
clause). 
‘‘(E) CERTAIN
BLOCKED
ASSETS
NOT 
TAKEN INTO ACCOUNT.—A cash position of a 
specified foreign corporation shall not be taken 
into account under subparagraph (A) if such 
position could not (as of the date that it would 
otherwise have been taken into account under 
clause (i), (ii), or (iii) of subparagraph (A)) 
have been distributed by such specified foreign 
corporation to United States shareholders of 
such specified foreign corporation because of 
currency or other restrictions or limitations im-
posed under the laws of any foreign country 
(within the meaning of section 964(b)). 
‘‘(F) CASH POSITIONS OF CERTAIN NON- 
CORPORATE ENTITIES TAKEN INTO ACCOUNT.— 
An entity (other than a domestic corporation) 
shall be treated as a specified foreign corpora-
tion of a United States shareholder for pur-
poses of determining such United States share-
holder’s aggregate foreign cash position if any 
interest in such entity is held by a specified for-
eign corporation of such United States share-
holder (determined after application of this sub-
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paragraph) and such entity would be a specified 
foreign corporation of such United States 
shareholder if such entity were a foreign cor-
poration. 
‘‘(G) TIME
OF
CERTAIN
DETERMINA-
TIONS.—For purposes of this paragraph, the 
determination of whether a person is a United 
States shareholder, whether a person is a speci-
fied foreign corporation, and the pro rata share 
of a United States shareholder with respect to 
a specified foreign corporation, shall be deter-
mined as of the end of the taxable year de-
scribed in subsection (a). 
‘‘(H) ANTI-ABUSE.—If the Secretary de-
termines that the principal purpose of any 
transaction was to reduce the aggregate foreign 
cash position taken into account under this sub-
section, such transaction shall be disregarded 
for purposes of this subsection. 
‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; 
ACCUMULATED
POST-1986 DEFERRED
FOREIGN
IN-
COME.—For purposes of this section— 
‘‘(1) DEFERRED
FOREIGN
INCOME
CORPORA-
TION.—The term ‘deferred foreign income corpora-
tion’ means, with respect to any United States 
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shareholder, any specified foreign corporation of 
such United States shareholder which has accumu-
lated post-1986 deferred foreign income (as of the 
date referred to in paragraph (1) or (2) of sub-
section (a), whichever is applicable with respect to 
such foreign corporation) greater than zero. 
‘‘(2) ACCUMULATED POST-1986 DEFERRED FOR-
EIGN
INCOME.—The term ‘accumulated post-1986 
deferred foreign income’ means the post-1986 earn-
ings and profits except to the extent such earnings— 
‘‘(A) are attributable to income of the 
specified foreign corporation which is effectively 
connected with the conduct of a trade or busi-
ness within the United States and subject to 
tax under this chapter, or 
‘‘(B) if distributed, would be excluded from 
the gross income of a United States shareholder 
under section 959. 
To the extent provided in regulations or other guid-
ance prescribed by the Secretary, in the case of any 
controlled foreign corporation which has share-
holders which are not United States shareholders, 
accumulated post-1986 deferred foreign income shall 
be appropriately reduced by amounts which would be 
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described in subparagraph (B) if such shareholders 
were United States shareholders. 
‘‘(3) POST-1986 EARNINGS AND PROFITS.—The 
term ‘post-1986 earnings and profits’ means the 
earnings and profits of the foreign corporation (com-
puted in accordance with sections 964(a) and 986) 
accumulated in taxable years beginning after Decem-
ber 31, 1986, and determined— 
‘‘(A) as of the date referred to in para-
graph (1) or (2) of subsection (a), whichever is 
applicable with respect to such foreign corpora-
tion, 
‘‘(B) without diminution by reason of divi-
dends distributed during the taxable year end-
ing with or including such date, and 
‘‘(C) increased by the amount of any quali-
fied deficit (within the meaning of section 
952(c)(1)(B)(ii)) arising before January 1, 
2018, which is treated as a qualified deficit 
(within the meaning of such section as amended 
by the Tax Cuts and Jobs Act) for purposes of 
such foreign corporation’s first taxable year be-
ginning after December 31, 2017. 
‘‘(e) SPECIFIED FOREIGN CORPORATION.— 
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‘‘(1) IN GENERAL.—For purposes of this sec-
tion, 
the 
term 
‘specified 
foreign 
corporation’ 
means— 
‘‘(A) any controlled foreign corporation, 
and 
‘‘(B) any foreign corporation with respect 
to which one or more domestic corporations is 
a United States shareholder (determined with-
out regard to section 958(b)(4)). 
‘‘(2) APPLICATION TO CERTAIN FOREIGN COR-
PORATIONS.—For purposes of sections 951 and 961, 
a foreign corporation described in paragraph (1)(B) 
shall be treated as a controlled foreign corporation 
solely for purposes of taking into account the sub-
part F income of such corporation under subsection 
(a) (and for purposes of applying subsection (f)). 
‘‘(3) EXCEPTION
FOR
PASSIVE
FOREIGN
IN-
VESTMENT COMPANIES.—The term ‘specified foreign 
corporation’ shall not include any passive foreign in-
vestment company (within the meaning of subpart D 
of part VI of subchapter P) that is not a controlled 
foreign corporation. 
‘‘(f) DETERMINATIONS OF PRO RATA SHARE.—For 
purposes of this section, the determination of any United 
States shareholder’s pro rata share of any amount with 
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respect to any specified foreign corporation shall be deter-
mined under rules similar to the rules of section 951(a)(2) 
by treating such amount in the same manner as subpart 
F income (and by treating such specified foreign corpora-
tion as a controlled foreign corporation). 
‘‘(g) DISALLOWANCE
OF FOREIGN TAX CREDIT, 
ETC.— 
‘‘(1) IN GENERAL.—No credit shall be allowed 
under section 901 for the applicable percentage of 
any taxes paid or accrued (or treated as paid or ac-
crued) with respect to any amount for which a de-
duction is allowed under this section. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of this subsection, the term ‘applicable percentage’ 
means the amount (expressed as a percentage) equal 
to the sum of— 
‘‘(A) 80 percent of the ratio of— 
‘‘(i) the excess to which subsection 
(c)(1)(A) applies, divided by 
‘‘(ii) the sum of such excess plus the 
amount to which subsection (c)(1)(B) ap-
plies, plus 
‘‘(B) 60 percent of the ratio of— 
‘‘(i) the amount to which subsection 
(c)(1)(B) applies, divided by 
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‘‘(ii) the sum described in subpara-
graph (A)(ii). 
‘‘(3) DENIAL
OF
DEDUCTION.—No deduction 
shall be allowed under this chapter for any tax for 
which credit is not allowable under section 901 by 
reason of paragraph (1) (determined by treating the 
taxpayer as having elected the benefits of subpart A 
of part III of subchapter N). 
‘‘(4) COORDINATION WITH SECTION 78.—With 
respect to the taxes treated as paid or accrued by a 
domestic corporation with respect to amounts which 
are includible in gross income of such domestic cor-
poration by reason of this section, section 78 shall 
apply only to so much of such taxes as bears the 
same proportion to the amount of such taxes as— 
‘‘(A) the excess of— 
‘‘(i) the amounts which are includible 
in gross income of such domestic corpora-
tion by reason of this section, over 
‘‘(ii) the deduction allowable under 
subsection 
(c) 
with 
respect 
to 
such 
amounts, bears to 
‘‘(B) such amounts. 
‘‘(5) EXTENSION OF FOREIGN TAX CREDIT CAR-
RYOVER PERIOD.—With respect to any taxes paid or 
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accrued (or treated as paid or accrued) with respect 
to any amount for which a deduction is allowed 
under this section, section 904(c) shall be applied by 
substituting ‘first 20 succeeding taxable years’ for 
‘first 10 succeeding taxable years’. 
‘‘(h) ELECTION
TO PAY LIABILITY
IN INSTALL-
MENTS.— 
‘‘(1) IN GENERAL.—In the case of a United 
States shareholder of a deferred foreign income cor-
poration, such United States shareholder may elect 
to pay the net tax liability under this section in 8 
equal installments. 
‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.— 
If an election is made under paragraph (1), the first 
installment shall be paid on the due date (deter-
mined without regard to any extension of time for 
filing the return) for the return of tax for the tax-
able year described in subsection (a) and each suc-
ceeding installment shall be paid on the due date (as 
so determined) for the return of tax for the taxable 
year following the taxable year with respect to which 
the preceding installment was made. 
‘‘(3) ACCELERATION OF PAYMENT.—If there is 
an addition to tax for failure to timely pay any in-
stallment required under this subsection, a liquida-
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tion or sale of substantially all the assets of the tax-
payer (including in a title 11 or similar case), a ces-
sation of business by the taxpayer, or any similar 
circumstance, then the unpaid portion of all remain-
ing installments shall be due on the date of such 
event (or in the case of a title 11 or similar case, 
the day before the petition is filed). The preceding 
sentence shall not apply to the sale of substantially 
all the assets of a taxpayer to a buyer if such buyer 
enters into an agreement with the Secretary under 
which such buyer is liable for the remaining install-
ments due under this subsection in the same manner 
as if such buyer were the taxpayer. 
‘‘(4) PRORATION OF DEFICIENCY TO INSTALL-
MENTS.—If an election is made under paragraph (1) 
to pay the net tax liability under this section in in-
stallments and a deficiency has been assessed with 
respect to such net tax liability, the deficiency shall 
be prorated to the installments payable under para-
graph (1). The part of the deficiency so prorated to 
any installment the date for payment of which has 
not arrived shall be collected at the same time as, 
and as a part of, such installment. The part of the 
deficiency so prorated to any installment the date 
for payment of which has arrived shall be paid upon 
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notice and demand from the Secretary. This sub-
section shall not apply if the deficiency is due to 
negligence, to intentional disregard of rules and reg-
ulations, or to fraud with intent to evade tax. 
‘‘(5) ELECTION.—Any election under paragraph 
(1) shall be made not later than the due date for the 
return of tax for the taxable year described in sub-
section (a) and shall be made in such manner as the 
Secretary may provide. 
‘‘(6) NET
TAX
LIABILITY
UNDER
THIS
SEC-
TION.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The net tax liability 
under this section with respect to any United 
States shareholder is the excess (if any) of— 
‘‘(i) such taxpayer’s net income tax 
for the taxable year in which an amount is 
included in the gross income of such 
United States shareholder under section 
951(a)(1) by reason of this section, over 
‘‘(ii) such taxpayer’s net income tax 
for such taxable year determined— 
‘‘(I) without regard to this sec-
tion, and 
‘‘(II) without regard to any in-
come, deduction, or credit, properly 
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attributable to a dividend received by 
such United States shareholder from 
any deferred foreign income corpora-
tion. 
‘‘(B) NET INCOME TAX.—The term ‘net 
income tax’ means the regular tax liability re-
duced by the credits allowed under subparts A, 
B, and D of part IV of subchapter A. 
‘‘(i) SPECIAL RULES FOR S CORPORATION SHARE-
HOLDERS.— 
‘‘(1) IN GENERAL.—In the case of any S cor-
poration which is a United States shareholder of a 
deferred foreign income corporation, each share-
holder of such S corporation may elect to defer pay-
ment of such shareholder’s net tax liability under 
this section with respect to such S corporation until 
the shareholder’s taxable year which includes the 
triggering event with respect to such liability. Any 
net tax liability payment of which is deferred under 
the preceding sentence shall be assessed on the re-
turn as an addition to tax in the shareholder’s tax-
able year which includes such triggering event. 
‘‘(2) TRIGGERING EVENT.— 
‘‘(A) IN
GENERAL.—In the case of any 
shareholder’s net tax liability under this section 
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with respect to any S corporation, the trig-
gering event with respect to such liability is 
whichever of the following occurs first: 
‘‘(i) Such corporation ceases to be an 
S corporation (determined as of the first 
day of the first taxable year that such cor-
poration is not an S corporation). 
‘‘(ii) A liquidation or sale of substan-
tially all the assets of such S corporation 
(including in a title 11 or similar case), a 
cessation of business by such S corpora-
tion, such S corporation ceases to exist, or 
any similar circumstance. 
‘‘(iii) A transfer of any share of stock 
in such S corporation by the taxpayer (in-
cluding by reason of death, or otherwise). 
‘‘(B) PARTIAL TRANSFERS OF STOCK.—In 
the case of a transfer of less than all of the tax-
payer’s shares of stock in the S corporation, 
such transfer shall only be a triggering event 
with respect to so much of the taxpayer’s net 
tax liability under this section with respect to 
such S corporation as is properly allocable to 
such stock. 
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‘‘(C) TRANSFER OF LIABILITY.—A trans-
fer described in clause (iii) shall not be treated 
as a triggering event if the transferee enters 
into an agreement with the Secretary under 
which such transferee is liable for net tax liabil-
ity with respect to such stock in the same man-
ner as if such transferee were the taxpayer. 
‘‘(3) NET TAX LIABILITY.—A shareholder’s net 
tax liability under this section with respect to any S 
corporation is the net tax liability under this section 
which would be determined under subsection (h)(6) 
if the only subpart F income taken into account by 
such shareholder by reason of this section were allo-
cations from such S corporation. 
‘‘(4) ELECTION TO PAY DEFERRED LIABILITY 
IN INSTALLMENTS.—In the case of a taxpayer which 
elects to defer payment under paragraph (1)— 
‘‘(A) subsection (h) shall be applied sepa-
rately with respect to the liability to which such 
election applies, 
‘‘(B) an election under subsection (h) with 
respect to such liability shall be treated as time-
ly made if made not later than the due date for 
the return of tax for the taxable year in which 
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the triggering event with respect to such liabil-
ity occurs, 
‘‘(C) the first installment under subsection 
(h) with respect to such liability shall be paid 
not later than such due date (but determined 
without regard to any extension of time for fil-
ing the return), and 
‘‘(D) if the triggering event with respect to 
any net tax liability is described in paragraph 
(2)(A)(ii), an election under subsection (h) with 
respect to such liability may be made only with 
the consent of the Secretary. 
‘‘(5) JOINT AND SEVERAL LIABILITY OF S COR-
PORATION.—If any shareholder of an S corporation 
elects to defer payment under paragraph (1), such 
S corporation shall be jointly and severally liable for 
such payment and any penalty, addition to tax, or 
additional amount attributable thereto. 
‘‘(6) EXTENSION OF LIMITATION ON COLLEC-
TION.—Notwithstanding any other provision of law, 
any limitation on the time period for the collection 
of a liability deferred under this subsection shall not 
be treated as beginning before the date of the trig-
gering event with respect to such liability. 
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‘‘(7) ANNUAL REPORTING OF NET TAX LIABIL-
ITY.— 
‘‘(A) IN GENERAL.—Any shareholder of an 
S corporation which makes an election under 
paragraph (1) shall report the amount of such 
shareholder’s deferred net tax liability on such 
shareholder’s return of tax for the taxable year 
for which such election is made and on the re-
turn of tax for each taxable year thereafter 
until such amount has been fully assessed on 
such returns. 
‘‘(B) DEFERRED
NET
TAX
LIABILITY.— 
For purposes of this paragraph, the term ‘de-
ferred net tax liability’ means, with respect to 
any taxable year, the amount of net tax liability 
payment of which has been deferred under 
paragraph (1) and which has not been assessed 
on a return of tax for any prior taxable year. 
‘‘(C) FAILURE TO REPORT.—In the case of 
any failure to report any amount required to be 
reported under subparagraph (A) with respect 
to any taxable year before the due date for the 
return of tax for such taxable year, there shall 
be assessed on such return as an addition to 
tax 5 percent of such amount. 
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‘‘(8) ELECTION.—Any election under paragraph 
(1)— 
‘‘(A) shall be made by the shareholder of 
the S corporation not later than the due date 
for such shareholder’s return of tax for the tax-
able year which includes the close of the taxable 
year of such S corporation in which the amount 
described in subsection (a) is taken into ac-
count, and 
‘‘(B) shall be made in such manner as the 
Secretary may provide. 
‘‘(j) REPORTING BY S CORPORATION.—Each S cor-
poration which is a United States shareholder of a de-
ferred foreign income corporation shall report in its return 
of tax under section 6037(a) the amount includible in its 
gross income for such taxable year by reason of this sec-
tion and the amount of the deduction allowable by sub-
section (c). Any copy provided to a shareholder under sec-
tion 6037(b) shall include a statement of such share-
holder’s pro rata share of such amounts. 
‘‘(k) INCLUSION OF DEFERRED FOREIGN INCOME 
UNDER THIS SECTION NOT TO TRIGGER RECAPTURE OF 
OVERALL FOREIGN LOSS, ETC.—For purposes of sections 
904(f)(1) and 907(c)(4), in the case of a United States 
shareholder of a deferred foreign income corporation, such 
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United States shareholder’s taxable income from sources 
without the United States and combined foreign oil and 
gas income shall be determined without regard to this sec-
tion. 
‘‘(l) REGULATIONS.—The Secretary may prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the provisions of this section.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for subpart F of part III of subchapter N of chapter 1 
is amended by striking the item relating to section 965 
and inserting the following: 
‘‘Sec. 965. Treatment of deferred foreign income upon transition to participa-
tion exemption system of taxation.’’. 
Subtitle B—Modifications Related 
to Foreign Tax Credit System 
SEC. 4101. REPEAL OF SECTION 902 INDIRECT FOREIGN 
TAX CREDITS; DETERMINATION OF SECTION 
960 CREDIT ON CURRENT YEAR BASIS. 
(a) REPEAL OF SECTION 902 INDIRECT FOREIGN 
TAX CREDITS.—Subpart A of part III of subchapter N 
of chapter 1 is amended by striking section 902. 
(b) DETERMINATION OF SECTION 960 CREDIT ON 
CURRENT YEAR BASIS.—Section 960 is amended— 
(1) by striking subsection (c), by redesignating 
subsection (b) as subsection (c), by striking all that 
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precedes subsection (c) (as so redesignated) and in-
serting the following: 
‘‘SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLU-
SIONS. 
‘‘(a) IN GENERAL.—For purposes of this subpart, if 
there is included in the gross income of a domestic cor-
poration any item of income under section 951(a)(1) with 
respect to any controlled foreign corporation with respect 
to which such domestic corporation is a United States 
shareholder, such domestic corporation shall be deemed to 
have paid so much of such foreign corporation’s foreign 
income taxes as are properly attributable to such item of 
income. 
‘‘(b) SPECIAL RULES
FOR DISTRIBUTIONS FROM 
PREVIOUSLY TAXED EARNINGS AND PROFITS.—For pur-
poses of this subpart— 
‘‘(1) IN GENERAL.—If any portion of a dis-
tribution from a controlled foreign corporation to a 
domestic corporation which is a United States share-
holder with respect to such controlled foreign cor-
poration is excluded from gross income under section 
959(a), such domestic corporation shall be deemed 
to have paid so much of such foreign corporation’s 
foreign income taxes as— 
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‘‘(A) are properly attributable to such por-
tion, and 
‘‘(B) have not been deemed to have to been 
paid by such domestic corporation under this 
section for the taxable year or any prior taxable 
year. 
‘‘(2) TIERED CONTROLLED FOREIGN CORPORA-
TIONS.—If section 959(b) applies to any portion of 
a distribution from a controlled foreign corporation 
to another controlled foreign corporation, such con-
trolled foreign corporation shall be deemed to have 
paid so much of such other controlled foreign cor-
poration’s foreign income taxes as— 
‘‘(A) are properly attributable to such por-
tion, and 
‘‘(B) have not been deemed to have been 
paid by a domestic corporation under this sec-
tion for the taxable year or any prior taxable 
year.’’, 
(2) and by adding after subsection (c) (as so re-
designated) the following new subsections: 
‘‘(d) FOREIGN INCOME TAXES.—The term ‘foreign 
income taxes’ means any income, war profits, or excess 
profits taxes paid or accrued to any foreign country or 
possession of the United States. 
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‘‘(e) REGULATIONS.—The Secretary may prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the provisions of this section.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 78 is amended to read as follows: 
‘‘SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX 
CREDIT. 
‘‘If a domestic corporation chooses to have the bene-
fits of subpart A of part III of subchapter N (relating 
to foreign tax credit) for any taxable year, an amount 
equal to the taxes deemed to be paid by such corporation 
under subsections (a) and (b) of section 960 for such tax-
able year shall be treated for purposes of this title (other 
than sections 959, 960, and 961) as an item of income 
required to be included in the gross income of such domes-
tic corporation under section 951(a) for such taxable 
year.’’. 
(2) Section 245(a)(10)(C) is amended by strik-
ing ‘‘sections 902, 907, and 960’’ and inserting 
‘‘sections 907 and 960’’. 
(3) Sections 535(b)(1) and 545(b)(1) are each 
amended by striking ‘‘section 902(a) or 960(a)(1)’’ 
and inserting ‘‘section 960’’. 
(4) Section 814(f)(1) is amended— 
(A) by striking subparagraph (B), and 
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(B) by striking all that precedes ‘‘No in-
come’’ and inserting the following: 
‘‘(1) TREATMENT OF FOREIGN TAXES.—’’. 
(5) Section 865(h)(1)(B) is amended by strik-
ing ‘‘sections 902, 907, and 960’’ and inserting 
‘‘sections 907 and 960’’. 
(6) Section 901(a) is amended by striking ‘‘sec-
tions 902 and 960’’ and inserting ‘‘section 960’’. 
(7) Section 901(e)(2) is amended by striking 
‘‘but is not limited to—’’ and all that follows 
through ‘‘that portion’’ and inserting ‘‘but is not 
limited to, that portion’’. 
(8) Section 901(f) is amended by striking ‘‘sec-
tions 902 and 960’’ and inserting ‘‘section 960’’. 
(9) Section 901(j)(1)(A) is amended by striking 
‘‘902 or’’. 
(10) Section 901(j)(1)(B) is amended by strik-
ing ‘‘sections 902 and 960’’ and inserting ‘‘section 
960’’. 
(11) Section 901(k)(2) is amended by striking 
‘‘section 853, 902, or 960’’ and inserting ‘‘section 
853 or 960’’. 
(12) Section 901(k)(6) is amended by striking 
‘‘902 or’’. 
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(13) Section 901(m)(1) is amended by striking 
‘‘relevant foreign assets—’’ and all that follows and 
inserting ‘‘relevant foreign assets shall not be taken 
into account in determining the credit allowed under 
subsection (a).’’. 
(14) Section 904(d)(1) is amended by striking 
‘‘sections 902, 907, and 960’’ and inserting ‘‘sec-
tions 907 and 960’’. 
(15) Section 904(d)(6)(A) is amended by strik-
ing ‘‘sections 902, 907, and 960’’ and inserting 
‘‘sections 907 and 960’’. 
(16) Section 904(h)(10)(A) is amended by 
striking ‘‘sections 902, 907, and 960’’ and inserting 
‘‘sections 907 and 960’’. 
(17) Section 904 is amended by striking sub-
section (k). 
(18) Section 905(c)(1) is amended by striking 
the last sentence. 
(19) Section 905(c)(2)(B)(i) is amended to read 
as follows: 
‘‘(i) shall be taken into account for 
the taxable year to which such taxes relate, 
and’’. 
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(20) Section 906(a) is amended by striking ‘‘(or 
deemed, under section 902, paid or accrued during 
the taxable year)’’. 
(21) Section 906(b) is amended by striking 
paragraphs (4) and (5). 
(22) Section 907(b)(2)(B) is amended by strik-
ing ‘‘902 or’’. 
(23) Section 907(c)(3) is amended— 
(A) by striking subparagraph (A) and re-
designating subparagraphs (B) and (C) as sub-
paragraphs (A) and (B), respectively, and 
(B) by striking ‘‘section 960(a)’’ in sub-
paragraph (A) (as so redesignated) and insert-
ing ‘‘section 960’’. 
(24) Section 907(c)(5) is amended by striking 
‘‘902 or’’. 
(25) Section 907(f)(2)(B)(i) is amended by 
striking ‘‘902 or’’. 
(26) Section 908(a) is amended by striking 
‘‘902 or’’. 
(27) Section 909(b) is amended— 
(A) by striking ‘‘section 902 corporation’’ 
in the matter preceding paragraph (1) and in-
serting ‘‘10/50 corporation’’, 
(B) by striking ‘‘902 or’’ in paragraph (1), 
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(C) by striking ‘‘by such section 902 cor-
poration’’ and all that follows in the matter fol-
lowing paragraph (2) and inserting ‘‘by such 
10/50 corporation or a domestic corporation 
which is a United States shareholder with re-
spect to such 10/50 corporation.’’, and 
(D) by striking ‘‘SECTION 902 CORPORA-
TIONS’’ in the heading thereof and inserting 
‘‘10/50 CORPORATIONS’’. 
(28) Section 909(d)(5) is amended to read as 
follows: 
‘‘(5) 10/50 CORPORATION.—The term ‘10/50 
corporation’ means any foreign corporation with re-
spect to which one or more domestic corporations is 
a United States shareholder.’’. 
(29) Section 958(a)(1) is amended by striking 
‘‘960(a)(1)’’ and inserting ‘‘960’’. 
(30) Section 959(d) is amended by striking 
‘‘Except as provided in section 960(a)(3), any’’ and 
inserting ‘‘Any’’. 
(31) Section 959(e) is amended by striking 
‘‘section 960(b)’’ and inserting ‘‘section 960(c)’’. 
(32) Section 1291(g)(2)(A) is amended by 
striking ‘‘any distribution—’’ and all that follows 
through ‘‘but only if’’ and inserting ‘‘any distribu-
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tion, any withholding tax imposed with respect to 
such distribution, but only if’’. 
(33) Section 6038(c)(1)(B) is amended by 
striking ‘‘sections 902 (relating to foreign tax credit 
for corporate stockholder in foreign corporation) and 
960 (relating to special rules for foreign tax credit)’’ 
and inserting ‘‘section 960’’. 
(34) Section 6038(c)(4) is amended by striking 
subparagraph (C). 
(35) The table of sections for subpart A of part 
III of subchapter N of chapter 1 is amended by 
striking the item relating to section 902. 
(36) The table of sections for subpart F of part 
III of subchapter N of chapter 1 is amended by 
striking the item relating to section 960 and insert-
ing the following: 
‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 4102. SOURCE OF INCOME FROM SALES OF INVEN-
TORY DETERMINED SOLELY ON BASIS OF 
PRODUCTION ACTIVITIES. 
(a) IN GENERAL.—Section 863(b) is amended by 
adding at the end the following: ‘‘Gains, profits, and in-
come from the sale or exchange of inventory property de-
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scribed in paragraph (2) shall be allocated and appor-
tioned between sources within and without the United 
States solely on the basis of the production activities with 
respect to the property.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
Subtitle C—Modification of 
Subpart F Provisions 
SEC. 4201. REPEAL OF INCLUSION BASED ON WITHDRAWAL 
OF PREVIOUSLY EXCLUDED SUBPART F IN-
COME FROM QUALIFIED INVESTMENT. 
(a) IN GENERAL.—Subpart F of part III of sub-
chapter N of chapter 1 is amended by striking section 955. 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Section 951(a)(1)(A) is amended to read 
as follows: 
‘‘(A) his pro rata share (determined under 
paragraph (2)) of the corporation’s subpart F 
income for such year, and’’. 
(B) Section 851(b)(3) is amended by striking 
‘‘section 951(a)(1)(A)(i)’’ in the flush language at 
the end and inserting ‘‘section 951(a)(1)(A)’’. 
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HR 1 PCS 
(C) Section 952(c)(1)(B)(i) is amended by 
striking ‘‘section 951(a)(1)(A)(i)’’ and inserting 
‘‘section 951(a)(1)(A)’’. 
(D) Section 953(c)(1)(C) is amended by strik-
ing ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 
951(a)(1)(A)’’. 
(2) Section 951(a) is amended by striking para-
graph (3). 
(3) Section 953(d)(4)(B)(iv)(II) is amended by 
striking ‘‘or amounts referred to in clause (ii) or (iii) 
of section 951(a)(1)(A)’’. 
(4) Section 964(b) is amended by striking ‘‘, 
955,’’. 
(5) Section 970 is amended by striking sub-
section (b). 
(6) The table of sections for subpart F of part 
III of subchapter N of chapter 1 is amended by 
striking the item relating to section 955. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
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SEC. 4202. REPEAL OF TREATMENT OF FOREIGN BASE COM-
PANY OIL RELATED INCOME AS SUBPART F 
INCOME. 
(a) IN GENERAL.—Section 954(a) is amended by 
striking paragraph (5), by striking the comma at the end 
of paragraph (3) and inserting a period, and by inserting 
‘‘and’’ at the end of paragraph (2). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 952(c)(1)(B)(iii) is amended by 
striking subclause (I) and by redesignating sub-
clauses (II) through (V) as subclauses (I) through 
(IV), respectively. 
(2) Section 954(b)(4) is amended by striking 
the last sentence. 
(3) Section 954(b)(5) is amended by striking 
‘‘the foreign base company services income, and the 
foreign base company oil related income’’ and insert-
ing ‘‘and the foreign base company services income’’. 
(4) Section 954(b) is amended by striking para-
graph (6). 
(5) Section 954 is amended by striking sub-
section (g). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
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years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
SEC. 4203. INFLATION ADJUSTMENT OF DE MINIMIS EXCEP-
TION FOR FOREIGN BASE COMPANY INCOME. 
(a) IN GENERAL.—Section 954(b)(3) is amended by 
adding at the end the following new subparagraph: 
‘‘(D) INFLATION
ADJUSTMENT.—In the 
case of any taxable year beginning after 2017, 
the dollar amount in subparagraph (A)(ii) shall 
be increased by an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(c)(2)(A) for the 
calendar year in which the taxable year be-
gins. 
Any increase determined under the preceding 
sentence shall be rounded to the nearest mul-
tiple of $50,000.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
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HR 1 PCS 
SEC. 4204. LOOK-THRU RULE FOR RELATED CONTROLLED 
FOREIGN 
CORPORATIONS 
MADE 
PERMA-
NENT. 
(a) IN GENERAL.—Paragraph (6) of section 954(c) 
is amended by striking subparagraph (C). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2019, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
SEC. 4205. MODIFICATION OF STOCK ATTRIBUTION RULES 
FOR 
DETERMINING 
STATUS 
AS 
A 
CON-
TROLLED FOREIGN CORPORATION. 
(a) IN GENERAL.—Section 958(b) is amended— 
(1) by striking paragraph (4), and 
(2) by striking ‘‘Paragraphs (1) and (4)’’ in the 
last sentence and inserting ‘‘Paragraph (1)’’. 
(b) APPLICATION OF CERTAIN REPORTING REQUIRE-
MENTS.—Section 6038(e)(2) is amended by striking ‘‘ex-
cept that—’’ and all that follows through ‘‘in applying 
subparagraph (C)’’ and inserting ‘‘except that in applying 
subparagraph (C)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
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years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
SEC. 4206. ELIMINATION OF REQUIREMENT THAT COR-
PORATION MUST BE CONTROLLED FOR 30 
DAYS 
BEFORE 
SUBPART 
F 
INCLUSIONS 
APPLY. 
(a) IN GENERAL.—Section 951(a)(1) is amended by 
striking ‘‘for an uninterrupted period of 30 days or more’’ 
and inserting ‘‘at any time’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
years of United States shareholders with or within which 
such taxable years of foreign corporations end. 
Subtitle D—Prevention of Base 
Erosion 
SEC. 4301. CURRENT YEAR INCLUSION BY UNITED STATES 
SHAREHOLDERS WITH FOREIGN HIGH RE-
TURNS. 
(a) IN GENERAL.—Subpart F of part III of sub-
chapter N of chapter 1 is amended by inserting after sec-
tion 951 the following new section: 
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‘‘SEC. 951A. FOREIGN HIGH RETURN AMOUNT INCLUDED IN 
GROSS INCOME OF UNITED STATES SHARE-
HOLDERS. 
‘‘(a) IN GENERAL.—Each person who is a United 
States shareholder of any controlled foreign corporation 
for any taxable year of such United States shareholder 
shall include in gross income for such taxable year 50 per-
cent of such shareholder’s foreign high return amount for 
such taxable year. 
‘‘(b) FOREIGN HIGH RETURN AMOUNT.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘foreign high re-
turn amount’ means, with respect to any United 
States shareholder for any taxable year of such 
United States shareholder, the excess (if any) of— 
‘‘(A) such shareholder’s net CFC tested in-
come for such taxable year, over 
‘‘(B) the excess (if any) of— 
‘‘(i) the applicable percentage of the 
aggregate of such shareholder’s pro rata 
share of the qualified business asset invest-
ment of each controlled foreign corporation 
with respect to which such shareholder is 
a United States shareholder for such tax-
able year (determined for each taxable year 
of each such controlled foreign corporation 
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which ends in or with such taxable year of 
such United States shareholder), over 
‘‘(ii) the amount of interest expense 
taken 
into 
account 
under 
subsection 
(c)(2)(A)(ii) in determining the share-
holder’s net CFC tested income for the 
taxable year. 
‘‘(2) APPLICABLE
PERCENTAGE.—The term 
‘applicable percentage’ means, with respect to any 
taxable year, the Federal short-term rate (deter-
mined under section 1274(d) for the month in which 
or with which such taxable year ends) plus 7 per-
centage points. 
‘‘(c) NET CFC TESTED INCOME.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘net CFC tested 
income’ means, with respect to any United States 
shareholder for any taxable year of such United 
States shareholder, the excess (if any) of— 
‘‘(A) the aggregate of such shareholder’s 
pro rata share of the tested income of each con-
trolled foreign corporation with respect to which 
such shareholder is a United States shareholder 
for such taxable year of such United States 
shareholder (determined for each taxable year 
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of such controlled foreign corporation which 
ends in or with such taxable year of such 
United States shareholder), over 
‘‘(B) the aggregate of such shareholder’s 
pro rata share of the tested loss of each con-
trolled foreign corporation with respect to which 
such shareholder is a United States shareholder 
for such taxable year of such United States 
shareholder (determined for each taxable year 
of such controlled foreign corporation which 
ends in or with such taxable year of such 
United States shareholder). 
‘‘(2) TESTED INCOME; TESTED LOSS.—For pur-
poses of this section— 
‘‘(A) TESTED INCOME.—The term ‘tested 
income’ means, with respect to any controlled 
foreign corporation for any taxable year of such 
controlled foreign corporation, the excess (if 
any) of— 
‘‘(i) the gross income of such corpora-
tion determined without regard to— 
‘‘(I) any item of income which is 
effectively connected with the conduct 
by such corporation of a trade or 
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business within the United States if 
subject to tax under this chapter, 
‘‘(II) any gross income taken into 
account in determining the subpart F 
income of such corporation, 
‘‘(III) except as otherwise pro-
vided by the Secretary, any amount 
excluded from the foreign personal 
holding company income (as defined 
in section 954) of such corporation by 
reason of section 954(c)(6) but only 
to the extent that any deduction al-
lowable for the payment or accrual of 
such amount does not result in a re-
duction in the foreign high return 
amount of any United States share-
holder (determined without regard to 
this subclause), 
‘‘(IV) any gross income excluded 
from the foreign personal holding 
company income (as defined in section 
954) of such corporation by reason of 
subsection (c)(2)(C), (h), or (i) of sec-
tion 954, 
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‘‘(V) any gross income excluded 
from the insurance income (as defined 
in section 953) of such corporation by 
reason of section 953(a)(2), 
‘‘(VI) any gross income excluded 
from foreign base company income (as 
defined in section 954) or insurance 
income (as defined in section 953) of 
such corporation by reason of section 
954(b)(4), 
‘‘(VII) 
any 
dividend 
received 
from a related person (as defined in 
section 954(d)(3)), and 
‘‘(VIII) any commodities gross 
income of such corporation, over 
‘‘(ii) the deductions (including taxes) 
properly allocable to such gross income 
under rules similar to the rules of section 
954(b)(5) (or which would be so properly 
allocable if such corporation had such 
gross income). 
‘‘(B) TESTED
LOSS.—The term ‘tested 
loss’ means, with respect to any controlled for-
eign corporation for any taxable year of such 
controlled foreign corporation, the excess (if 
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any) of the amount described in subparagraph 
(A)(ii) over the amount described in subpara-
graph (A)(i). 
‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified busi-
ness asset investment’ means, with respect to any 
controlled foreign corporation for any taxable year of 
such controlled foreign corporation, the aggregate of 
the corporation’s adjusted bases (determined as of 
the close of such taxable year and after any adjust-
ments with respect to such taxable year) in specified 
tangible property— 
‘‘(A) used in a trade or business of the 
corporation, and 
‘‘(B) of a type with respect to which a de-
duction is allowable under section 168. 
‘‘(2) SPECIFIED
TANGIBLE
PROPERTY.—The 
term ‘specified tangible property’ means any tangible 
property to the extent such property is used in the 
production of tested income or tested loss. 
‘‘(3) PARTNERSHIP PROPERTY.—For purposes 
of this subsection, if a controlled foreign corporation 
holds an interest in a partnership at the close of 
such taxable year of the controlled foreign corpora-
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tion, such controlled foreign corporation shall take 
into account under paragraph (1) the controlled for-
eign corporation’s distributive share of the aggregate 
of the partnership’s adjusted bases (determined as 
of such date in the hands of the partnership) in tan-
gible property held by such partnership to the extent 
such property— 
‘‘(A) is used in the trade or business of the 
partnership, 
‘‘(B) is of a type with respect to which a 
deduction is allowable under section 168, and 
‘‘(C) is used in the production of tested in-
come or tested loss (determined with respect to 
such controlled foreign corporation’s distribu-
tive share of income or loss with respect to such 
property). 
For purposes of this paragraph, the controlled for-
eign corporation’s distributive share of the adjusted 
basis of any property shall be the controlled foreign 
corporation’s distributive share of income and loss 
with respect to such property. 
‘‘(4) DETERMINATION OF ADJUSTED BASIS.— 
For purposes of this subsection, the adjusted basis 
in any property shall be determined without regard 
to any provision of this title (or any other provision 
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of law) which is enacted after the date of the enact-
ment of this section. 
‘‘(5) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as the Secretary 
determines appropriate to prevent the avoidance of 
the purposes of this subsection, including regulations 
or other guidance which provide for the treatment of 
property if— 
‘‘(A) such property is transferred, or held, 
temporarily, or 
‘‘(B) the avoidance of the purposes of this 
paragraph is a factor in the transfer or holding 
of such property. 
‘‘(e) COMMODITIES GROSS INCOME.—For purposes 
of this section— 
‘‘(1) COMMODITIES GROSS INCOME.—The term 
‘commodities gross income’ means, with respect to 
any corporation— 
‘‘(A) gross income of such corporation 
from the disposition of commodities which are 
produced or extracted by such corporation (or a 
partnership in which such corporation is a part-
ner), and 
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‘‘(B) gross income of such corporation 
from the disposition of property which gives rise 
to income described in subparagraph (A). 
‘‘(2) 
COMMODITY.—The 
term 
‘commodity’ 
means 
any 
commodity 
described 
in 
section 
475(e)(2)(A) or section 475(e)(2)(D) (determined 
without regard to clause (i) thereof and by sub-
stituting ‘a commodity described in subparagraph 
(A)’ for ‘such a commodity’ in clause (ii) thereof). 
‘‘(f) TAXABLE YEARS FOR WHICH PERSONS ARE 
TREATED AS UNITED STATES SHAREHOLDERS OF CON-
TROLLED FOREIGN CORPORATIONS.—For purposes of 
this section— 
‘‘(1) IN
GENERAL.—A United States share-
holder of a controlled foreign corporation shall be 
treated as a United States shareholder of such con-
trolled foreign corporation for any taxable year of 
such United States shareholder if— 
‘‘(A) a taxable year of such controlled for-
eign corporation ends in or with such taxable 
year of such person, and 
‘‘(B) such person owns (within the mean-
ing of section 958(a)) stock in such controlled 
foreign corporation on the last day, in such tax-
able year of such foreign corporation, on which 
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the foreign corporation is a controlled foreign 
corporation. 
‘‘(2) TREATMENT AS A CONTROLLED FOREIGN 
CORPORATION.—Except for purposes of paragraph 
(1)(B) and the application of section 951(a)(2) to 
this section pursuant to subsection (g), a foreign 
corporation shall be treated as a controlled foreign 
corporation for any taxable year of such foreign cor-
poration if such foreign corporation is a controlled 
foreign corporation at any time during such taxable 
year. 
‘‘(g) DETERMINATION OF PRO RATA SHARE.—For 
purposes of this section, pro rata shares shall be deter-
mined under the rules of section 951(a)(2) in the same 
manner as such section applies to subpart F income. 
‘‘(h) COORDINATION WITH SUBPART F.— 
‘‘(1) TREATMENT AS SUBPART F INCOME FOR 
CERTAIN PURPOSES.—Except as otherwise provided 
by the Secretary any foreign high return amount in-
cluded in gross income under subsection (a) shall be 
treated in the same manner as an amount included 
under section 951(a)(1)(A) for purposes of applying 
sections 
168(h)(2)(B), 
535(b)(10), 
851(b), 
904(h)(1), 959, 961, 962, 993(a)(1)(E), 996(f)(1), 
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1248(b)(1), 
1248(d)(1), 
6501(e)(1)(C), 
6654(d)(2)(D), and 6655(e)(4). 
‘‘(2) ENTIRE FOREIGN HIGH RETURN AMOUNT 
TAKEN INTO ACCOUNT FOR PURPOSES OF CERTAIN 
SECTIONS.—For purposes of applying paragraph (1) 
with respect to sections 168(h)(2)(B), 851(b), 959, 
961, 962, 1248(b)(1), and 1248(d)(1), the foreign 
high return amount included in gross income under 
subsection (a) shall be determined by substituting 
‘100 percent’ for ‘50 percent’ in such subsection. 
‘‘(3) ALLOCATION OF FOREIGN HIGH RETURN 
AMOUNT
TO
CONTROLLED
FOREIGN
CORPORA-
TIONS.—For purposes of the sections referred to in 
paragraph (1), with respect to any controlled foreign 
corporation any pro rata amount from which is 
taken into account in determining the foreign high 
return amount included in gross income of a United 
States shareholder under subsection (a), the portion 
of such foreign high return amount which is treated 
as being with respect to such controlled foreign cor-
poration is— 
‘‘(A) in the case of a controlled foreign 
corporation with tested loss, zero, and 
‘‘(B) in the case of a controlled foreign 
corporation with tested income, the portion of 
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such foreign high return amount which bears 
the same ratio to such foreign high return 
amount as— 
‘‘(i) such United States shareholder’s 
pro rata amount of the tested income of 
such controlled foreign corporation, bears 
to 
‘‘(ii) the aggregate amount deter-
mined under subsection (c)(1)(A) with re-
spect to such United States shareholder. 
‘‘(4) COORDINATION WITH SUBPART F TO DENY 
DOUBLE BENEFIT OF LOSSES.—In the case of any 
United States shareholder of any controlled foreign 
corporation, the amount included in gross income 
under section 951(a)(1)(A) shall be determined by 
increasing the earnings and profits of such con-
trolled foreign corporation (solely for purposes of de-
termining such amount) by an amount that bears 
the same ratio (not greater than 1) to such share-
holder’s pro rata share of the tested loss of such 
controlled foreign corporation as— 
‘‘(A) the aggregate amount determined 
under subsection (c)(1)(A) with respect to such 
shareholder, bears to 
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‘‘(B) the aggregate amount determined 
under subsection (c)(1)(B) with respect to such 
shareholder.’’. 
(b) FOREIGN TAX CREDIT.— 
(1) APPLICATION OF DEEMED PAID FOREIGN 
TAX CREDIT.—Section 960, as amended by the pre-
ceding provisions of this Act, is amended by redesig-
nating subsections (d) and (e) as subsections (e) and 
(f), respectively, and by inserting after subsection (c) 
the following new subsection: 
‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY 
ATTRIBUTABLE TO TESTED INCOME.— 
‘‘(1) IN GENERAL.—For purposes of this sub-
part, if any amount is includible in the gross income 
of a domestic corporation under section 951A, such 
domestic corporation shall be deemed to have paid 
foreign income taxes equal to 80 percent of— 
‘‘(A) such domestic corporation’s foreign 
high return percentage, multiplied by 
‘‘(B) the aggregate tested foreign income 
taxes paid or accrued by controlled foreign cor-
porations with respect to which such domestic 
corporation is a United States shareholder. 
‘‘(2) FOREIGN HIGH RETURN PERCENTAGE.— 
For purposes of paragraph (1), the term ‘foreign 
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high return percentage’ means, with respect to any 
domestic corporation, the ratio (expressed as a per-
centage) of— 
‘‘(A) such corporation’s foreign high return 
amount (as defined in section 951A(b)), divided 
by 
‘‘(B) the aggregate amount determined 
under section 951A(c)(1)(A) with respect to 
such corporation. 
‘‘(3) TESTED
FOREIGN
INCOME
TAXES.—For 
purposes of paragraph (1), the term ‘tested foreign 
income taxes’ means, with respect to any domestic 
corporation which is a United States shareholder of 
a controlled foreign corporation, the foreign income 
taxes paid or accrued by such foreign corporation 
which are properly attributable to gross income de-
scribed in section 951A(c)(2)(A)(i).’’. 
(2) APPLICATION
OF
FOREIGN
TAX
CREDIT 
LIMITATION.— 
(A) SEPARATE
BASKET
FOR
FOREIGN 
HIGH RETURN AMOUNT.—Section 904(d)(1) is 
amended by redesignating subparagraphs (A) 
and (B) as subparagraphs (B) and (C), respec-
tively, and by inserting before subparagraph 
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