1789 
person that owns (directly or indirectly) an in-
terest in such entity. 
‘‘(C) BRANCH.—Except as otherwise pro-
vided by the Secretary, the term ‘branch’ means 
a taxable presence of a tax resident in a coun-
try other than its country of residence as deter-
mined under such other country’s tax law. The 
Secretary shall provide regulations or other 
guidance applying such term to activities in a 
country that do not give rise to a taxable pres-
ence. 
‘‘(D) TREATMENT OF FISCALLY AUTONO-
MOUS
JURISDICTIONS.—Any fiscally autono-
mous jurisdiction shall be treated as a separate 
country. Any possession of the United States 
shall also be treated as a separate country. 
‘‘(E) 
POSSESSION
OF
THE
UNITED 
STATES.—The term ‘possession of the United 
States’ means each of American Samoa, the 
Commonwealth of the Northern Mariana Is-
lands, the Commonwealth of Puerto Rico, 
Guam, and the Virgin Islands. 
‘‘(4) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as may be nec-
essary or appropriate to carry out, or prevent avoid-
1790 
ance of, the purposes of this subsection, including 
regulations or other guidance— 
‘‘(A) providing for the application of this 
subsection to an entity or arrangement that is 
considered a tax resident of more than one 
country or of no country, 
‘‘(B) providing for the application of this 
subsection to hybrid entities or hybrid trans-
actions (as such terms are used for purposes of 
section 267A), pass-through entities, passive 
foreign investment companies, trusts, and other 
entities or arrangements not otherwise de-
scribed in this subsection, and 
‘‘(C) providing for the assignment of any 
item (including foreign taxes and deductions) to 
taxable units, including in the case of amounts 
not otherwise taken into account in determining 
taxable income under this chapter.’’. 
(2) APPLICATION
OF
SEPARATE
LIMITATION 
LOSSES
WITH
RESPECT
TO
GLOBAL
INTANGIBLE 
LOW-TAXED INCOME.— 
(A) IN GENERAL.—Section 904(f)(5)(B) is 
amended to read as follows: 
‘‘(B) ALLOCATION OF LOSSES.—Except as 
otherwise provided in this subparagraph, the
1791 
separate limitation losses for any taxable year 
(to the extent such losses do not exceed the sep-
arate limitation incomes for such year) shall be 
allocated among (and operate to reduce) such 
incomes on a proportionate basis. In the case of 
a separate limitation loss for any taxable year 
in any category other than subparagraph 
(d)(1)(A), the amount of such separate limita-
tion loss shall be allocated among (and operate 
to reduce) separate limitation income in any 
category other than income described in sub-
paragraph (d)(1)(A) on a proportionate basis 
(without regard to income described in subpara-
graph (d)(1)(A)). The remaining separate limi-
tation losses may reduce separate limitation in-
come described in subparagraph (d)(1)(A) only 
to the extent that the aggregate amount of such 
losses exceeds the aggregate amount of separate 
limitation incomes (other than income described 
in subparagraph (d)(1)(A)) for such taxable 
year.’’. 
(B) 
INCOME
CATEGORY.—Section 
904(f)(5)(E)(i) is amended to read as follows: 
‘‘(i) INCOME
CATEGORY.—The term 
‘income category’ means each category of
1792 
income with respect to which this section is 
required to be applied separately by reason 
of any provision of this title.’’. 
(C) SEPARATE LIMITATION LOSS.—Section 
904(f)(5)(E)(iii) is amended to read as follows: 
‘‘(iii) SEPARATE LIMITATION LOSS.— 
The term ‘separate limitation loss’ means, 
with respect to any income category, the 
amount by which the gross income from 
sources outside the United States is ex-
ceeded by the sum of the deductions prop-
erly allocated and apportioned thereto.’’. 
(b) REPEAL OF SEPARATE APPLICATION TO FOR-
EIGN BRANCH INCOME.— 
(1) IN GENERAL.—Section 904(d)(1) is amend-
ed by striking subparagraph (B) and redesignating 
subparagraphs (C) and (D) as subparagraph (B) 
and (C). 
(2) COORDINATION WITH DEDUCTION FOR FOR-
EIGN-DERIVED
INTANGIBLE
INCOME.—Section 
250(b)(3)(A) is amended— 
(A) by striking subclause (VI) of clause (i) 
and inserting the following new subclause: 
‘‘(VI) the income which is attrib-
utable to 1 or more branches (within
1793 
the meaning of section 904(e)(3)(C)) 
or pass-through entities (within the 
meaning of section 904(e)(3)(B)) in 1 
or more foreign countries, over’’, and 
(B) by adding at the end the following 
flush sentence: 
‘‘For purposes of clause (i)(VI), the amount of 
income attributable to a branch or pass-through 
entity shall be determined under rules estab-
lished by the Secretary.’’. 
(3) AMENDMENTS.— 
(A) Section 904(d)(2)(A)(ii) is amended by 
striking ‘‘, foreign branch income,’’. 
(B) Section 904(d)(2)(H) is amended to 
read as follows: 
‘‘(H) TREATMENT OF INCOME TAX BASE 
DIFFERENCES.—The Secretary shall issue regu-
lations or other guidance assigning to the prop-
er category of income any tax imposed under 
the law of a foreign country or possession of the 
United States on an amount which does not 
constitute income under United States tax prin-
ciples.’’. 
(C) Section 904(d)(2) is amended by strik-
ing subparagraph (J).
1794 
(c) MODIFICATION
OF
FOREIGN
TAX
CREDIT 
CARRYBACK AND CARRYFORWARD.— 
(1) REPEAL OF CARRYBACK.—Section 904(c) is 
amended— 
(A) by striking ‘‘in the first preceding tax-
able year, and’’, 
(B) by striking ‘‘preceding or’’ each place 
it appears, and 
(C) by striking ‘‘CARRYBACK AND’’ in the 
heading thereof. 
(2) APPLICATION TO LIMITATION ON FOREIGN 
OIL AND GAS TAXES.—Section 907(f)(1) is amended 
by striking ‘‘in the first preceding taxable year and’’. 
(3) APPLICATION OF CARRYFORWARD TO TAXES 
ON GLOBAL INTANGIBLE LOW-TAXED INCOME.— 
(A) IN
GENERAL.—Section 904(c) is 
amended by striking the last sentence. 
(B) 
TEMPORARY
LIMITATION
OF 
CARRYFORWARD TO 5 TAXABLE YEARS.—Sec-
tion 904(c), as amended by the preceding provi-
sions of this Act, is amended— 
(i) by striking ‘‘Any amount by which 
all taxes’’ and all that precedes it and in-
serting the following:
1795 
‘‘(c) CARRYBACK AND CARRYOVER OF EXCESS TAX 
PAID.— 
‘‘(1) IN GENERAL.—Any amount by which all 
taxes’’, and 
(ii) by adding at the end the following 
new paragraph: 
‘‘(2) 
TEMPORARY
LIMITATION
ON 
CARRYFORWARD OF TAXES ON GLOBAL INTANGIBLE 
LOW-TAXED INCOME.— 
‘‘(A) IN GENERAL.—In the case of taxes 
paid or accrued with respect to amounts de-
scribed in subsection (d)(1)(A), paragraph (1) 
shall be applied by substituting ‘5 succeeding 
taxable years’ for ‘10 succeeding taxable years’. 
‘‘(B) TERMINATION.—Subparagraph (A) 
shall not apply to any tax paid or accrued in a 
taxable year beginning after December 31, 
2030.’’. 
(d) TREATMENT
OF CERTAIN TAX-EXEMPT DIVI-
DENDS.— 
(1) CERTAIN TAX-EXEMPT DIVIDENDS TAKEN 
INTO ACCOUNT IN APPLYING LIMITATIONS ON FOR-
EIGN TAX CREDITS.—Section 904(b) is amended by 
striking paragraph (4).
1796 
(2) CERTAIN
TAX-EXEMPT
DIVIDENDS
NOT 
TAKEN
INTO
ACCOUNT
IN
ALLOCATING
INTEREST 
EXPENSE.—Section 864(e)(3) is amended by strik-
ing ‘‘or 245(a)’’ and inserting ‘‘, 245(a), or 245A’’. 
(e) RULES FOR ALLOCATION OF CERTAIN DEDUC-
TIONS TO FOREIGN SOURCE GLOBAL INTANGIBLE LOW- 
TAXED INCOME FOR PURPOSES OF FOREIGN TAX CREDIT 
LIMITATION.—Section 904(b), as amended by the pre-
ceding provisions of this Act, is amended by adding at the 
end the following new paragraph: 
‘‘(4) DEDUCTIONS TREATED AS ALLOCABLE TO 
FOREIGN SOURCE GLOBAL INTANGIBLE LOW-TAXED 
INCOME.—In the case of a domestic corporation and 
solely for purposes of the application of subsection 
(a) with respect to amounts described in subsection 
(d)(1)(A), the taxpayer’s taxable income from 
sources without the United States shall be deter-
mined— 
‘‘(A) by allocating and apportioning any 
deduction allowed under section 250(a)(2) (and 
any deduction allowed under section 164(a)(3) 
for taxes imposed on amounts described in sec-
tion 250(a)(2)) to such income, and 
‘‘(B) by allocating and apportioning any 
other deduction to such income only if the Sec-
1797 
retary determines that such deduction is di-
rectly allocable to such income. 
Any deduction which would (but for subparagraph 
(B)) have been allocated or apportioned to such in-
come shall only be allocated or apportioned to in-
come which is from sources within the United 
States.’’. 
(f) TREATMENT
OF
CERTAIN
ASSET
DISPOSI-
TIONS.—Section 904(b), as amended by the preceding pro-
visions of this Act, is amended by adding at the end the 
following new paragraph: 
‘‘(5) TREATMENT OF CERTAIN ASSET DISPOSI-
TIONS.— 
‘‘(A) IN GENERAL.—Except as otherwise 
provided by the Secretary, in the case of any 
covered asset disposition, the principles of sec-
tion 338(h)(16) shall apply in determining the 
source and character of any item for purposes 
of this part. 
‘‘(B) COVERED ASSET DISPOSITION.—For 
purposes of this paragraph, the term ‘covered 
asset 
disposition’ 
means 
any 
transaction 
which—
1798 
‘‘(i) is treated as a disposition of as-
sets under subchapter N of this chapter, 
and 
‘‘(ii) is treated as a disposition of 
stock of a corporation (or is disregarded) 
for purposes of the tax laws of a relevant 
foreign country or possession of the United 
States. 
‘‘(C) REGULATIONS.—The Secretary shall 
issue such regulations or other guidance as is 
necessary or appropriate to carry out, or to pre-
vent the avoidance of, the purposes of this 
paragraph.’’. 
(g) REDETERMINATION OF FOREIGN TAXES AND RE-
LATED CLAIMS.— 
(1) IN GENERAL.—Section 905(c) is amended— 
(A) in paragraph (1), by striking ‘‘or’’ at 
the end of subparagraph (B) and by inserting 
after subparagraph (C) the following new sub-
paragraphs: 
‘‘(D) the taxpayer makes a timely change 
in its choice to claim a credit or deduction for 
taxes paid or accrued, or
1799 
‘‘(E) there is any other change in the 
amount, or treatment, of taxes, which affects 
the taxpayer’s tax liability under this chapter,’’, 
(B) in paragraph (2)(B), by striking ‘‘Any 
such taxes’’ and inserting ‘‘Except as otherwise 
provided by the Secretary, any such taxes’’, and 
(C) by striking ‘‘ACCRUED’’ in the heading 
thereof. 
(2) MODIFICATION
TO
TIME
FOR
CLAIMING 
CREDIT OR DEDUCTION.—Section 901(a) is amended 
by striking the second sentence and inserting the fol-
lowing: ‘‘ Such choice for any taxable year may be 
made or changed at any time before the expiration 
of the applicable period prescribed by section 6511 
for making a claim for credit or refund of an over-
payment of the tax imposed by this chapter for such 
taxable year that is attributable to such amounts.’’. 
(3) MODIFICATION TO SPECIAL PERIOD OF LIM-
ITATION.—Section 6511(d)(3) is amended— 
(A) in subparagraph (A)— 
(i) by inserting ‘‘a change in the li-
ability for’’ before ‘‘any taxes paid or ac-
crued’’,
1800 
(ii) by striking ‘‘actually paid’’ and in-
serting ‘‘paid (or deemed paid under sec-
tion 960)’’, and 
(iii) by inserting ‘‘CHANGE IN THE LI-
ABILITY FOR’’ before ‘‘FOREIGN TAXES’’ in 
the heading thereof, and 
(B) in subparagraph (B), by striking ‘‘the 
allowance of a credit for the taxes’’ and insert-
ing ‘‘the allowance of an additional credit by 
reason of the change in liability for the taxes’’. 
(h) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2022. 
(2) MODIFICATION
OF
FOREIGN
TAX
CREDIT 
CARRYBACK
AND
CARRYFORWARD.—The amend-
ments made by subsection (c) shall apply to taxes 
paid or accrued in taxable years beginning after De-
cember 31, 2022. 
(3) TREATMENT OF CERTAIN ASSET DISPOSI-
TIONS.— 
(A) IN GENERAL.—The amendment made 
by subsection (f) shall apply to transactions 
after the date of the enactment of this Act.
1801 
(B) BINDING CONTRACT EXCEPTION.—The 
amendment made by subsection (f) shall not 
apply to any transaction which is made pursu-
ant to a written binding contract which was in 
effect on September 13, 2021, and is not modi-
fied in any material respect thereafter. 
(4) REDETERMINATION
OF
FOREIGN
TAXES 
AND RELATED CLAIMS.— 
(A) IN
GENERAL.—Except as otherwise 
provided in this paragraph, the amendments 
made by subsection (g) shall apply to taxes paid 
or accrued in taxable years beginning after De-
cember 31, 2021. 
(B) CERTAIN CHANGES.—The amendments 
made by subparagraphs (A) and (C) of sub-
section (g)(1) shall apply to changes that occur 
on or after the date which is 60 days after the 
date of the enactment of this Act. 
(C) MODIFICATION TO SPECIAL PERIOD OF 
LIMITATION.—The amendments made by sub-
section (g)(3) shall apply to taxes paid, accrued, 
or deemed paid in taxable years beginning after 
December 31, 2021. 
(i) REGULATIONS.—The Secretary shall issue regula-
tions or other guidance providing for the application of
1802 
subsections (d), (e), (f), and (g) of section 904 of the In-
ternal Revenue Code of 1986 (as amended by this section) 
with respect to amounts carried over under subsections 
(c), (f), or (g) from a taxable year with respect to which 
subsection (e) of such section does not apply to a taxable 
year with respect to which such subsection (e) does apply 
and from a taxable year with respect to which subsection 
(d)(1)(B) of such section (determined without regard to 
the amendments made by this section) applies to a taxable 
year with respect to which such section does not apply. 
SEC. 138125. FOREIGN OIL AND GAS EXTRACTION INCOME 
AND FOREIGN OIL RELATED INCOME TO IN-
CLUDE OIL SHALE AND TAR SANDS. 
(a) IN GENERAL.—Paragraphs (1)(A) and (2)(A) of 
section 907(c) are each amended by inserting ‘‘(or oil 
shale or tar sands)’’ after ‘‘oil or gas wells’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138126. MODIFICATIONS TO INCLUSION OF GLOBAL IN-
TANGIBLE LOW-TAXED INCOME. 
(a) COUNTRY-BY-COUNTRY APPLICATION
OF SEC-
TION BASED ON CFC TAXABLE UNITS.—Section 951A is 
amended by adding at the end the following new sub-
section:
1803 
‘‘(g) COUNTRY-BY-COUNTRY APPLICATION OF SEC-
TION BASED ON CFC TAXABLE UNITS.— 
‘‘(1) IN GENERAL.—If any CFC taxable unit of 
a United States shareholder is a tax resident of (or, 
in the case of a branch, is located in) a country 
which is different from the country with respect to 
which any other CFC taxable unit of such United 
States shareholder is a tax resident (or, in the case 
of a branch, is located in)— 
‘‘(A) such shareholder’s global intangible 
low-taxed income for purposes of subsection (a) 
shall be the sum of the amounts of global intan-
gible low-taxed income determined separately 
with respect to each such country, and 
‘‘(B) for purposes of determining such sep-
arate amounts of global intangible low-taxed in-
come— 
‘‘(i) except as otherwise provided by 
the Secretary, any reference in subsection 
(b), (c), or (d) to a controlled foreign cor-
poration of such shareholder shall be treat-
ed as reference to a CFC taxable unit of 
such shareholder, and 
‘‘(ii) net CFC tested income, net 
deemed tangible income return, qualified
1804 
business asset investment, interest expense 
described in subsection (b)(2)(B), and such 
other items and amounts as the Secretary 
may provide, shall be determined sepa-
rately with respect to each such country by 
determining such amounts with respect to 
the CFC taxable units of such shareholder 
which are a tax resident of such country. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) CFC 
TAXABLE
UNIT.—The term 
‘CFC taxable unit’ means any taxable unit de-
scribed in clause (ii), (iii), or (iv) of section 
904(e)(2)(B), determined— 
‘‘(i) by substituting ‘Each controlled 
foreign corporation’ for ‘Each foreign cor-
poration’ in clause (ii) of such section, and 
‘‘(ii) without regard to the references 
to the taxpayer in clauses (iii) and (iv) of 
such section. 
‘‘(B) APPLICATION
OF
OTHER
DEFINI-
TIONS.—Terms used in this subsection which 
are also used in section 904(e) shall have the 
same meaning as when used in section 904(e).
1805 
‘‘(3) SPECIAL
RULES.—For purposes of this 
subsection— 
‘‘(A) APPLICATION OF CERTAIN RULES.— 
Except as otherwise provided by the Secretary, 
rules similar to the rules of section 904(e) shall 
apply. 
‘‘(B) ALLOCATION OF GLOBAL INTANGIBLE 
LOW-TAXED INCOME TO CONTROLLED FOREIGN 
CORPORATIONS.—Except as otherwise provided 
by the Secretary, subsection (f)(2) shall be ap-
plied separately with respect to each CFC tax-
able unit.’’. 
(b) REGULATORY AUTHORITY.— 
(1) IN GENERAL.—Section 951A, as amended 
by subsection (a), is amended by adding at the end 
the following new subsection: 
‘‘(h) REGULATIONS.—The Secretary shall issue such 
regulations or other guidance as may be necessary or ap-
propriate to carry out, or prevent the avoidance of, the 
purposes of this section, including regulations or guidance 
which provide for— 
‘‘(1) the treatment of property if such property 
is transferred, or held, temporarily,
1806 
‘‘(2) the treatment of property if the avoidance 
of the purposes of this section is a factor in the 
transfer or holding of such property, 
‘‘(3) appropriate adjustments to the basis of 
stock and other ownership interests, and to earnings 
and profits, to reflect tested losses (whether or not 
taken into account in determining global intangible 
low-taxed income), 
‘‘(4) rules similar to the rules provided under 
the regulations or guidance issued under section 
904(e)(4), 
‘‘(5) other appropriate basis adjustments, 
‘‘(6) appropriate adjustments to be made, and 
appropriate tax attributes and records to be main-
tained, separately with respect to CFC taxable units, 
and 
‘‘(7) appropriate adjustments in determining 
tested income or tested loss if property is trans-
ferred between related parties or amounts are paid 
or accrued between related parties.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
951A(d) is amended— 
(A) by striking paragraph (4), and
1808 
into account any decrease in global intangible 
low-taxed income by reason of the application of 
subparagraph (A).’’. 
(2) COORDINATION
WITH
COUNTRY-BY-COUN-
TRY
APPLICATION.—Section 951A(g)(1)(B)(ii), as 
added by subsection (a), is amended by inserting 
‘‘any 
increase 
determined 
under 
subsection 
(c)(3)(A),’’ after ‘‘interest expense described in sub-
section (b)(2)(B),’’. 
(3) APPLICATION OF RULES WITH RESPECT TO 
OWNERSHIP CHANGES.—Section 382(d) is amended 
by adding at the end the following new paragraph: 
‘‘(4) APPLICATION TO CARRYOVER OF NET CFC 
TESTED LOSS.—The term ‘pre-change loss’ shall in-
clude any excess carried over under section 
951A(c)(3) under rules similar to the rules of para-
graph (1).’’. 
(d) REDUCTION IN NET DEEMED TANGIBLE INCOME 
RETURN FOR PURPOSES OF DETERMINING GLOBAL IN-
TANGIBLE LOW-TAXED INCOME.— 
(1) IN
GENERAL.—Section 951A(b)(2)(A) is 
amended by striking ‘‘10 percent’’ and inserting ‘‘5 
percent’’. 
(2) APPLICATION TO ASSETS LOCATED IN POS-
SESSIONS
OF
THE
UNITED
STATES.—Section
1809 
951A(b) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(3) APPLICATION TO ASSETS LOCATED IN POS-
SESSIONS OF THE UNITED STATES.—In the case of 
any specified tangible property located in a posses-
sion of the United States, paragraph (2)(A) and 
subsection (d) shall be applied by substituting ‘10 
percent’ for ‘5 percent’ in paragraph (2)(A).’’. 
(e) INCLUSION OF FOREIGN OIL AND GAS EXTRAC-
TION INCOME IN DETERMINING TESTED INCOME AND 
LOSS.—Section 951A(c)(2)(A)(i) is amended by inserting 
‘‘and’’ at the end of subclause (III), by striking ‘‘and’’ 
at the end of subclause (IV) and inserting ‘‘over’’, and 
by striking subclause (V). 
(f) COORDINATION WITH OTHER PROVISIONS.—Sec-
tion 951A(f)(1) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(C) 
TREATMENT
OF
CERTAIN
REF-
ERENCES.—Except as otherwise provided by the 
Secretary, references to section 951 or section 
951(a) in sections 959, 961, 962, and such 
other provisions as the Secretary may identify 
shall include references to section 951A or sec-
tion 951A(a), respectively.’’. 
(g) EFFECTIVE DATE.—
1810 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years of foreign 
corporations beginning after December 31, 2022, 
and to taxable years of United States shareholders 
in which or with which such taxable years of foreign 
corporations end. 
(2) REGULATORY AUTHORITY AND COORDINA-
TION WITH OTHER PROVISIONS.—The amendments 
made by subsections (b) and (f) shall apply to tax-
able years of foreign corporations beginning after 
the date of the enactment of this Act, and to taxable 
years of United States shareholders in which or with 
which such taxable years of foreign corporations 
end. 
(h) NO INFERENCE REGARDING CERTAIN MODIFICA-
TIONS.—The amendments made by subsections (b) and (f) 
shall not be construed to create any inference with respect 
to the proper application of any provision of the Internal 
Revenue Code of 1986 with respect to any taxable year 
beginning before the taxable years to which such amend-
ments apply.
1811 
SEC. 138127. MODIFICATIONS TO DETERMINATION OF 
DEEMED PAID CREDIT FOR TAXES PROPERLY 
ATTRIBUTABLE TO TESTED INCOME. 
(a) INCREASE IN DEEMED PAID CREDIT.—Section 
960(d)(1) is amended by striking ‘‘80 percent’’ and insert-
ing ‘‘95 percent (100 percent in the case of tested foreign 
income taxes paid or accrued to a possession of the United 
States)’’. 
(b) INCLUSION OF TAXES PROPERLY ATTRIBUTABLE 
TO TESTED LOSS.— 
(1) IN GENERAL.—Section 960(d)(3) is amend-
ed to read as follows: 
‘‘(3) TESTED
FOREIGN
INCOME
TAXES.—For 
purposes of paragraph (1), the term ‘tested foreign 
income taxes’ means, with respect to any domestic 
corporation which is a United States shareholder of 
a controlled foreign corporation— 
‘‘(A) the foreign income taxes paid or ac-
crued by such foreign corporation which are 
properly attributable to the tested income or 
tested loss of such foreign corporation taken 
into account by such domestic corporation 
under section 951A, and 
‘‘(B) solely to the extent provided in regu-
lations prescribed by the Secretary, the foreign 
income taxes (as so defined) paid or accrued by
1812 
a foreign corporation (other than a controlled 
foreign corporation) which owns, directly or in-
directly, 80 percent or more (by vote or value) 
of the stock in such domestic corporation but 
only if— 
‘‘(i) such foreign income taxes are 
properly attributable to amounts of such 
controlled foreign corporation taken into 
account in determining tested income or 
tested loss under section 951A(c)(2), and 
‘‘(ii) no credit is allowed, in whole or 
in part, for such foreign taxes in any for-
eign jurisdiction.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
960(d)(2)(B) is amended by striking ‘‘the aggregate 
amount described in section 951A(c)(1)(A)’’ and in-
serting ‘‘the net CFC tested income (as defined in 
section 951A(c)(1))’’. 
(c) APPLICATION OF FOREIGN TAX CREDIT LIMITA-
TION TO AMOUNTS INCLUDED UNDER SECTION 78.— 
(1) Section 904(d)(2) is amended by redesig-
nating subparagraph (K) as subparagraph (L) and 
by inserting after subparagraph (J) the following 
new subparagraph:
1813 
‘‘(K) AMOUNTS INCLUDIBLE UNDER SEC-
TION 78.—Any amount includible in gross in-
come under section 78 shall be treated as in-
come in the same separate category as the re-
lated foreign taxes deemed paid.’’. 
(2) Section 904(d)(3)(G) is amended by strik-
ing the second sentence and inserting the following: 
‘‘Any amount included in gross income under section 
78 shall not be treated as a dividend.’’. 
(d) DISALLOWANCE OF FOREIGN TAX CREDIT WITH 
RESPECT
TO DISTRIBUTIONS
OF PREVIOUSLY TAXED 
GLOBAL
INTANGIBLE
LOW-TAXED
INCOME.—Section 
960(d) is amended by adding at the end the following new 
paragraph: 
‘‘(4) DISALLOWANCE OF FOREIGN TAX CREDIT 
WITH RESPECT TO DISTRIBUTIONS OF PREVIOUSLY 
TAXED GLOBAL INTANGIBLE LOW-TAXED INCOME.— 
No credit shall be allowed under section 901 for 20 
percent of any foreign income taxes paid or accrued 
(or deemed paid under section 960(b)(1)) with re-
spect to any amount excluded from gross income 
under section 959(a) by reason of an inclusion in 
gross income under section 951A(a).’’. 
(e) MODIFICATION OF DISALLOWANCE OF FOREIGN 
TAX CREDIT RESPECT
TO DISTRIBUTIONS
OF PRE-
1814 
VIOUSLY TAXED GLOBAL INTANGIBLE LOW-TAXED IN-
COME.—Section 960(d)(4), as added by subsection (d), is 
amended by striking ‘‘20 percent’’ and inserting ‘‘5 per-
cent’’. 
(f) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years of foreign 
corporations beginning after December 31, 2022, 
and to taxable years of United States shareholders 
in which or with which such taxable years of foreign 
corporations end. 
(2) SUBSECTIONS
(c)
AND
(d).—The amend-
ments made by subsections (c) and (d) shall apply 
to taxable years of foreign corporations beginning 
after the date of the enactment of this Act, and to 
taxable years of United States shareholders in which 
or with which such taxable years of foreign corpora-
tions end. 
(g) NO INFERENCE REGARDING CERTAIN MODIFICA-
TIONS.—The amendments made by subsections (c) and 
(d) shall not be construed to create any inference with re-
spect to the proper application of any provision of the In-
ternal Revenue Code of 1986 with respect to any taxable
1815 
year beginning before the taxable years to which such 
amendments apply. 
SEC. 138128. DEDUCTION FOR FOREIGN SOURCE PORTION 
OF DIVIDENDS LIMITED TO CONTROLLED 
FOREIGN CORPORATIONS, ETC. 
(a) IN GENERAL.—Section 245A is amended— 
(1) in subsections (a), (c)(1), and (c)(2), by 
striking ‘‘specified 10-percent owned foreign cor-
poration’’ each place it appears and inserting ‘‘con-
trolled foreign corporation’’, and 
(2) by striking subsection (b). 
(b) MODIFICATIONS RELATED TO DETERMINATION 
OF STATUS
AS
A CONTROLLED FOREIGN CORPORA-
TION.— 
(1) Subpart F of part III of subchapter N of 
chapter 1 is amended by inserting after section 
951A the following new section: 
‘‘SEC. 951B. AMOUNTS INCLUDED IN GROSS INCOME OF 
FOREIGN 
CONTROLLED 
UNITED 
STATES 
SHAREHOLDERS. 
‘‘(a) IN GENERAL.—In the case of any foreign con-
trolled United States shareholder of a foreign controlled 
foreign corporation— 
‘‘(1) this subpart (other than sections 951A, 
951(b), and 957) shall be applied with respect to
1816 
such shareholder (separately from, and in addition 
to, the application of this subpart without regard to 
this section)— 
‘‘(A) by substituting ‘foreign controlled 
United States shareholder’ for ‘United States 
shareholder’ each place it appears therein, and 
‘‘(B) by substituting ‘foreign controlled 
foreign corporation’ for ‘controlled foreign cor-
poration’ each place it appears therein, and 
‘‘(2) section 951A shall be applied with respect 
to such shareholder — 
‘‘(A) by treating each reference to ‘United 
States shareholder’ in such sections as includ-
ing a reference to such shareholder, and 
‘‘(B) by treating each reference to ‘con-
trolled foreign corporation’ in such sections as 
including a reference to such foreign controlled 
foreign corporation. 
‘‘(b) 
FOREIGN
CONTROLLED
UNITED
STATES 
SHAREHOLDER.—For purposes of this section, the term 
‘foreign controlled United States shareholder’ means, with 
respect to any foreign corporation, any United States per-
son which would be a United States shareholder with re-
spect to such foreign corporation if—
1817 
‘‘(1) section 951(b) were applied by substituting 
‘more than 50 percent’ for ‘10 percent or more’, and 
‘‘(2) section 958(b) were applied without regard 
to paragraph (4) thereof. 
‘‘(c) FOREIGN CONTROLLED FOREIGN CORPORA-
TION.—For purposes of this section, the term ‘foreign con-
trolled foreign corporation’ means a foreign corporation, 
other than a controlled foreign corporation, which would 
be a controlled foreign corporation if section 957(a)(1) 
were applied— 
‘‘(1) by substituting ‘foreign controlled United 
States shareholders’ for ‘United States share-
holders’, and 
‘‘(2) by substituting ‘section 958(b) (other than 
paragraph (4) thereof)’ for ‘section 958(b)’. 
‘‘(d) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the purposes of this section, 
including regulations or other guidance— 
‘‘(1) to treat a foreign controlled United States 
shareholder or a foreign controlled foreign corpora-
tion as a United States shareholder or as a con-
trolled foreign corporation, respectively, for purposes 
of provisions of this title other than this subpart, 
and
1818 
‘‘(2) to prevent the avoidance of the purposes of 
this section.’’. 
(2) Section 957(a) is amended to read as fol-
lows: 
‘‘(a) CONTROLLED FOREIGN CORPORATION.—For 
purposes of this title— 
‘‘(1) IN GENERAL.—The term ‘controlled for-
eign corporation’ means any foreign corporation if 
more than 50 percent of— 
‘‘(A) the total combined voting power of all 
classes of stock of such corporation entitled to 
vote, or 
‘‘(B) the total value of the stock of such 
corporation, 
is owned (within the meaning of section 958(a)), or 
is considered as owned by applying the rules of own-
ership of section 958(b), by United States share-
holders on any day during the taxable year of such 
foreign corporation. 
‘‘(2) ELECTION
TO
TREAT
A
FOREIGN
COR-
PORATION AS A CONTROLLED FOREIGN CORPORA-
TION FOR CERTAIN PURPOSES.— 
‘‘(A) IN GENERAL.—In the case of a for-
eign corporation with respect to which an elec-
tion is in effect under this paragraph, such for-
1819 
eign corporation shall be treated as a controlled 
foreign corporation for purposes of this title. 
‘‘(B) EXCEPTIONS.—Notwithstanding any 
other provision of this paragraph, a foreign cor-
poration shall not be treated as a controlled for-
eign corporation by reason of this paragraph 
for purposes of any provision of this title if the 
Secretary determines that treatment of such 
foreign corporation as a controlled foreign cor-
poration for purposes of such provision would 
be inconsistent with the purposes of this sub-
chapter. 
‘‘(C) ELECTION.— 
‘‘(i) BY
WHOM.—An election under 
subparagraph (A) shall be effective only if 
made by the foreign corporation and by all 
United States shareholders of such foreign 
corporation (determined as of the time of 
such election by such foreign corporation). 
‘‘(ii) WITH RESPECT TO WHOM.—Any 
election under this paragraph, once effec-
tive, shall apply to such foreign corporation 
and to all United States shareholders of 
such foreign corporation (including any 
person who becomes a United States
1820 
shareholder of such foreign corporation 
after such election takes effect). 
‘‘(iii) TIME, MANNER, ETC.—The elec-
tion under this paragraph shall be made at 
such time and in such manner as the Sec-
retary may provide and, once effective, 
may be revoked only with the consent of 
the Secretary. 
‘‘(D) REGULATIONS.—The Secretary shall 
issue such regulations or other guidance as may 
be necessary or appropriate to carry out the 
purposes of this paragraph, including regula-
tions or other guidance for the application of 
this paragraph to an acquisition described in 
section 381(a) with respect to any corporation 
to which an election under this paragraph ap-
plies.’’. 
(3) Section 958(b) is amended— 
(A) by inserting after paragraph (3) the 
following: 
‘‘(4) Subparagraphs (A), (B), and (C) of sec-
tion 318(a)(3) shall not be applied so as to consider 
a United States person as owning stock which is 
owned by a person who is not a United States per-
son.’’, and
1821 
(B) by striking ‘‘Paragraph (1)’’ in the 
last sentence and inserting ‘‘Paragraphs (1) 
and (4)’’. 
(4) Section 959(b) is amended— 
(A) by striking ‘‘the earnings and profits 
of a controlled foreign corporation’’ and insert-
ing ‘‘the earnings and profits of a foreign cor-
poration’’, 
(B) by striking ‘‘another controlled foreign 
corporation’’ and inserting ‘‘a controlled foreign 
corporation’’, 
(C) by striking ‘‘such other controlled for-
eign corporation’’ and inserting ‘‘such con-
trolled foreign corporation’’, and 
(D) by striking ‘‘of such United States 
shareholder in the controlled foreign corpora-
tion’’ and inserting ‘‘of such United States 
shareholder in the foreign corporation’’. 
(5) The table of sections for subpart F of part 
III of subchapter N of chapter 1 is amended by in-
serting after the item relating to section 951A the 
following new item: 
‘‘Sec. 951B. Amounts included in gross income of foreign controlled United 
States shareholders.’’. 
(c) CERTAIN OTHER MODIFICATIONS.—
1822 
(1) Section 245A(e)(4) is amended by striking 
‘‘an amount received’’ and all that follows through 
‘‘for which the controlled foreign corporation re-
ceived a deduction’’ and inserting ‘‘any dividend re-
ceived from a controlled foreign corporation for 
which such controlled foreign corporation received a 
deduction’’. 
(2) Section 245A(g) is amended to read as fol-
lows: 
‘‘(g) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the purposes of this section, 
including regulations or other guidance for— 
‘‘(1) the treatment of United States share-
holders owning stock of a controlled foreign corpora-
tion through a partnership, and 
‘‘(2) the denial of all or a portion of the deduc-
tion under this section with respect to dividends re-
ceived from foreign corporations in situations in 
which— 
‘‘(A) any portion of the dividend is out of 
earnings and profits arising from transactions 
with related parties which— 
‘‘(i) do not occur in the ordinary 
course of a trade or business, and
1823 
‘‘(ii) occur on or after January 1, 
2018, and during a taxable year to which 
section 951A did not apply, or 
‘‘(B) a transfer or issuance of stock on or 
after January 1, 2018, results in a reduction in 
a United States shareholder’s pro rata share of 
a controlled foreign corporation’s subpart F in-
come or tested income (as defined in section 
951A).’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Section 91 is amended— 
(A) in subsection (a), by striking ‘‘specified 
10-percent owned foreign corporation (as de-
fined in section 245A)’’ and inserting ‘‘con-
trolled foreign corporation’’, and 
(B) in subsection (e), by striking ‘‘specified 
10-percent owned foreign corporation’’ and in-
serting ‘‘controlled foreign corporation’’. 
(2)(A) The heading of section 245A is amended 
by striking ‘‘SPECIFIED
10-PERCENT
OWNED 
FOREIGN CORPORATIONS’’ and inserting ‘‘CON-
TROLLED FOREIGN CORPORATIONS’’. 
(B) The item relating to section 245A in the 
table of sections for part VIII of subchapter B of 
chapter 1 is amended by striking ‘‘specified 10-per-
1824 
cent owned foreign corporations’’ and inserting 
‘‘controlled foreign corporations’’. 
(3) Section 246(c)(5) is amended— 
(A) in subparagraph (B), by striking 
‘‘specified 10-percent owned foreign corpora-
tion’’ each place it appears and inserting ‘‘con-
trolled foreign corporation’’, and 
(B) by striking ‘‘SPECIFIED
10-PERCENT 
OWNED FOREIGN CORPORATION’’ in the heading 
and inserting ‘‘CONTROLLED
FOREIGN
COR-
PORATION’’. 
(4) Section 904 is amended— 
(A) in subsection (b)(4), by striking ‘‘spec-
ified 10-percent owned foreign corporation’’ 
both places it appears and inserting ‘‘controlled 
foreign corporation’’, and 
(B) in subsection (d)(2)(E)— 
(i) in clause (i)(I), by striking ‘‘(as 
defined in section 245A(b))’’, and 
(ii) by redesignating clause (ii) as 
clause (iii) and by inserting after clause (i) 
the following new clause: 
‘‘(ii) SPECIFIED 10-PERCENT OWNED 
FOREIGN CORPORATION.—For purposes of 
this subparagraph—
1825 
‘‘(I) IN
GENERAL.—The term 
‘specified 10-percent owned foreign 
corporation’ means any foreign cor-
poration with respect to which any do-
mestic corporation is a United States 
shareholder with respect to such cor-
poration. 
‘‘(II) EXCLUSION
OF
PASSIVE 
FOREIGN INVESTMENT COMPANIES.— 
Such term shall not include any cor-
poration which is a passive foreign in-
vestment company (as defined in sec-
tion 1297) with respect to the share-
holder and which is not a controlled 
foreign corporation.’’. 
(5) Section 909(b) is amended by striking ‘‘(as 
defined in section 245A(b) without regard to para-
graph (2) thereof)’’ and inserting ‘‘(as defined in 
section 904(d)(2)(E)(ii) without regard to subclause 
(II) thereof)’’. 
(6) Section 961(d) is amended— 
(A) by striking ‘‘specified 10-percent 
owned foreign corporation (as defined in section 
245A)’’ and inserting ‘‘controlled foreign cor-
poration’’, and
1826 
(B) by striking ‘‘SPECIFIED 10-PERCENT 
OWNED FOREIGN CORPORATION’’ in the head-
ing and inserting ‘‘CONTROLLED
FOREIGN 
CORPORATION’’. 
(e) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to distributions made after 
the date of the enactment of this Act. 
(2) MODIFICATIONS RELATED TO DETERMINA-
TION OF STATUS AS A CONTROLLED FOREIGN COR-
PORATION.—The amendments made by subsection 
(b) shall apply to taxable years of foreign corpora-
tions beginning after the date of the enactment of 
this Act, and taxable years of United States persons 
in which or with which such taxable years of foreign 
corporations end. 
(f) NO INFERENCE REGARDING CERTAIN MODIFICA-
TIONS.—The amendments made by subsections (b)(1), 
(b)(3), (b)(5), and (c) shall not be construed to create any 
inference with respect to the proper application of any pro-
vision of the Internal Revenue Code of 1986 with respect 
to distributions made, or taxable years beginning, respec-
tively, before the distributions or taxable years, respec-
tively, to which such amendments apply.
1827 
SEC. 138129. LIMITATION ON FOREIGN BASE COMPANY 
SALES AND SERVICES INCOME. 
(a) FOREIGN BASE COMPANY SALES INCOME.— 
(1) IN GENERAL.—Section 954(d)(2) is amend-
ed to read as follows: 
‘‘(2) LIMITATION AND REGULATORY AUTHOR-
ITY.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘related person’ shall not 
include any person unless such person is— 
‘‘(i) a taxable unit which is a tax resi-
dent of (or, in the case of a branch, is lo-
cated in) the United States, or 
‘‘(ii) is subject to tax under this chap-
ter by reason of such person’s activities in 
the United States. 
‘‘(B) REGULATIONS.—The Secretary shall 
issue such regulations or other guidance as may 
be necessary or appropriate to carry out the 
purposes of this subsection (and subsection (e)), 
including— 
‘‘(i) regulations or other guidance pro-
viding for the proper application of sub-
paragraph (A) in the case of a transaction 
(or series of transactions) in which a per-
1828 
son described in subparagraph (A) is a 
party, and 
‘‘(ii) regulations or other guidance 
providing that a pass-through entity or 
branch held directly or indirectly by a con-
trolled foreign corporation (whether tax 
resident or located inside or outside the 
country in which the controlled foreign cor-
poration is a tax resident) shall be treated 
as a wholly owned subsidiary of the con-
trolled foreign corporation. 
‘‘(C) CERTAIN TERMS.—Any term used in 
this subsection or subsection (e) which is also 
used in section 904(e) shall have the same 
meaning as when used in such section.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
954(d)(1)(A) is amended by striking ‘‘under the 
laws of which the controlled foreign corporation is 
created or organized’’ and inserting ‘‘in which the 
controlled foreign corporation is a tax resident’’. 
(b) FOREIGN BASE COMPANY SERVICES INCOME.— 
(1) IN
GENERAL.—Section 954(e)(1)(A) is 
amended by striking ‘‘subsection (d)(3)’’ and insert-
ing ‘‘subsection (d)’’.
1829 
(2) 
CONFORMING
AMENDMENT.—Section 
954(e)(1)(B) is amended by striking ‘‘under the 
laws of which the controlled foreign corporation is 
created or organized’’ and inserting ‘‘in which the 
controlled foreign corporation is a tax resident’’. 
(c) CERTAIN OTHER MODIFICATIONS.— 
(1) Section 78 is amended by striking ‘‘, (b),’’. 
(2)(A) Section 951(a) is amended to read as 
follows: 
‘‘(a) AMOUNTS INCLUDED.— 
‘‘(1) IN GENERAL.—If a foreign corporation is 
a controlled foreign corporation on any day during 
a taxable year, every person who is a United States 
shareholder of such corporation, and who owns 
(within the meaning of section 958(a)) stock in such 
corporation on any such day, shall include in such 
shareholder’s gross income for such shareholder’s 
taxable year in which or with which such taxable 
year of such corporation ends— 
‘‘(A) his pro rata share (determined under 
paragraph (2)) of the corporation’s subpart F 
income for such year, and 
‘‘(B) if such shareholder owns (within the 
meaning of section 958(a)) stock of such for-
eign corporation as of the close of the last rel-
1830 
evant day of such foreign corporation’s taxable 
year, the amount determined under section 956 
with respect to such shareholder for such year 
(but only to the extent not excluded from gross 
income under section 959(a)(2)). 
‘‘(2) PRO
RATA
SHARE
OF
SUBPART
F
IN-
COME.—In the case of any United States share-
holder with respect to a foreign corporation, the pro 
rata share referred to in paragraph (1)(A) is the 
sum of— 
‘‘(A) if such shareholder owns (within the 
meaning of section 958(a)) stock of such for-
eign corporation as of the close of the last rel-
evant day of such foreign corporation’s taxable 
year, such shareholder’s general pro rata share 
determined under paragraph (3), plus 
‘‘(B) if such shareholder owns (within the 
meaning of section 958(a)) stock of such for-
eign corporation during such taxable year but 
does not own (within the meaning of section 
958(a)) such stock as of the close of such last 
relevant day, such shareholder’s nontaxed cur-
rent dividend share determined under para-
graph (4). 
‘‘(3) GENERAL PRO RATA SHARE.—
1831 
‘‘(A) IN
GENERAL.—In the case of any 
United States shareholder with respect to a for-
eign corporation, the general pro rata share de-
termined under this paragraph is the excess (if 
any) of— 
‘‘(i) the pro rata current earnings per-
centage of the amount which bears the 
same ratio to such corporation’s subpart F 
income for the taxable year (reduced by 
the aggregate nontaxed current dividend 
shares determined under paragraph (4) 
with respect to such shareholder or any 
other United States shareholder) as the 
part of such year during which such cor-
poration is a controlled foreign corporation 
bears to the entire year, over 
‘‘(ii) the lesser of— 
‘‘(I) the amount of any pre-hold-
ing period dividends with respect to 
stock of such foreign corporation 
which such shareholder owns (within 
the meaning of section 958(a)) as of 
the close of the last relevant day of 
such foreign corporation’s taxable 
year, or
1832 
‘‘(II) the amount which bears the 
same ratio to the subpart F income of 
such corporation for the taxable year 
(reduced by the aggregate nontaxed 
current dividend shares determined 
under paragraph (4) with respect to 
such shareholder or any other United 
States shareholder) as the part of 
such year during which such share-
holder did not own (within the mean-
ing of section 958(a)) such stock 
bears to the entire year. 
‘‘(B) PRO RATA CURRENT EARNINGS PER-
CENTAGE.—For 
purposes 
of 
subparagraph 
(A)(i), the term ‘pro rata current earnings per-
centage’ means, in the case of any United 
States shareholder with respect to a foreign cor-
poration for any taxable year of such foreign 
corporation, the ratio (expressed as a percent-
age) of— 
‘‘(i) the amount which would have 
been distributed with respect to the stock 
which such shareholder owns (within the 
meaning of section 958(a)) in such cor-
poration if on the last relevant day of such
1833 
taxable year it had distributed its earnings 
and profits for such taxable year (com-
puted as of the close of such taxable year 
without diminution by reason of any dis-
tributions made during such taxable year), 
divided by 
‘‘(ii) such corporation’s earnings and 
profits for such taxable year (as so com-
puted). 
‘‘(C) PRE-HOLDING PERIOD DIVIDENDS.— 
For purposes of subparagraph (A)(ii)(I), the 
term ‘pre-holding period dividends’ means, in 
the case of any United States shareholder with 
respect to a foreign corporation for any taxable 
year of such foreign corporation, dividends 
which are— 
‘‘(i) made out of such corporation’s 
earnings and profits for the taxable year 
(other than nontaxed current dividends as 
defined in paragraph (4)(C)), and 
‘‘(ii) received— 
‘‘(I) by any other United States 
person with respect to stock of such 
foreign corporation which such share-
holder owns (within the meaning of
1834 
section 958(a)) as of the close of the 
last relevant day of such foreign cor-
poration’s taxable year, and 
‘‘(II) while such foreign corpora-
tion was a controlled foreign corpora-
tion and before such shareholder 
owned (within the meaning of section 
958(a)) such stock. 
‘‘(4) NONTAXED CURRENT DIVIDEND SHARE.— 
‘‘(A) IN
GENERAL.—In the case of any 
United States shareholder with respect to a for-
eign corporation, the nontaxed current dividend 
share determined under this paragraph is the 
nontaxed current dividend percentage of the 
subpart F income of such foreign corporation 
for the taxable year. 
‘‘(B) NONTAXED CURRENT DIVIDEND PER-
CENTAGE.—For purposes of this paragraph, the 
term ‘nontaxed current dividend percentage’ 
means, in the case of any United States share-
holder with respect to a foreign corporation for 
any taxable year of such foreign corporation, 
the ratio (expressed as a percentage) of— 
‘‘(i) the amount of nontaxed current 
dividends with respect to such taxable year
1835 
received with respect to the stock of such 
foreign corporation which such shareholder 
owns (within the meaning of section 
958(a)) at the time of the dividend on a 
day in which such corporation is a con-
trolled foreign corporation, divided by 
‘‘(ii) such foreign corporation’s earn-
ings and profits for such taxable year 
(computed as of the close of such taxable 
year without diminution by reason of any 
distributions made during such taxable 
year). 
‘‘(C) NONTAXED CURRENT DIVIDENDS.— 
For purposes of this paragraph, the term 
‘nontaxed current dividends’ means the portion 
of any amount received with respect to stock to 
the extent such amount (without regard to 
amounts included in the gross income of a 
United States shareholder for the taxable year 
by reason of this subpart)— 
‘‘(i) would result in a dividend out of 
the corporation’s earnings and profits for 
the taxable year (including a dividend 
under section 1248 attributable to earn-
ings and profits for the taxable year), and
1836 
‘‘(ii) either— 
‘‘(I) would give rise to a deduc-
tion under section 245A(a), or 
‘‘(II) in the case of a dividend 
paid directly or indirectly to a con-
trolled foreign corporation with re-
spect to stock owned by the share-
holder within the meaning of section 
958(a)(2), would not result in subpart 
F income with respect to such con-
trolled foreign corporation by reason 
of subsection (b)(4), (c)(3), or (c)(6) 
of section 954. 
‘‘(5) LAST RELEVANT DAY OF TAXABLE YEAR 
OF
A
CONTROLLED
FOREIGN
CORPORATION.—For 
purposes of this subsection, the term ‘last relevant 
day’ means, with respect to any taxable year of a 
foreign corporation, the last day of such taxable year 
on which such corporation is a controlled foreign 
corporation. 
‘‘(6) REGULATIONS.—The Secretary may pre-
scribe such regulations or other guidance as may be 
necessary or appropriate to carry out the purposes 
of this subsection, including regulations or other 
guidance—
1837 
‘‘(A) to treat a partnership as an aggre-
gate of its partners, 
‘‘(B) to provide rules allowing a foreign 
corporation to close its taxable year upon a 
change in ownership, and 
‘‘(C) to treat a distribution followed by an 
issuance of stock to a shareholder not subject 
to tax under this chapter in the same manner 
as an acquisition of stock.’’. 
(B) Section 951A(a) is amended to read as fol-
lows: 
‘‘(a) IN GENERAL.—If a foreign corporation is a con-
trolled foreign corporation on any day during a taxable 
year, every person who is a United States shareholder of 
such corporation, and who owns (within the meaning of 
section 958(a)) stock in such corporation on any such day, 
shall include in such shareholder’s gross income for such 
shareholder’s taxable year in which or with which such 
taxable year of such corporation ends, such shareholder’s 
global intangible low-taxed income for such taxable year.’’. 
(C) Section 951A(e) is amended to read as fol-
lows: 
‘‘(e) DETERMINATION OF PRO RATA SHARES.—For 
purposes of this section, the pro rata shares referred to 
in subsections (b), (c)(1)(A), and (c)(1)(B), respectively,
1838 
shall be determined under rules similar to the rules of sec-
tion 951(a)(2) and shall be taken into account in the tax-
able year of the United States shareholder in which or 
with which the taxable year of the controlled foreign cor-
poration ends.’’. 
(D) Section 953(c)(5)(A)(i) is amended— 
(i) in subclause (I), by adding ‘‘and’’ at 
the end, 
(ii) in subclause (II)— 
(I) by striking ‘‘on the last day of the 
taxable year’’ and inserting ‘‘during the 
taxable year’’, and 
(II) by striking ‘‘and’’ at the end and 
inserting ‘‘or’’, and 
(iii) by striking subclause (III). 
(3) Section 959 is amended by adding at the 
end the following: 
‘‘(g) REGULATIONS.—The Secretary shall issue such 
regulations or other guidance as may be necessary or ap-
propriate to carry out the purposes of this section.’’. 
(4) Section 961(b)(1) is amended by inserting 
after the first sentence the following: ‘‘The Secretary 
shall prescribe such other reductions to basis as are 
necessary or appropriate to carry out the purposes 
of this section.’’.
1839 
(5) Section 961(c) is amended— 
(A) by striking ‘‘BASIS ADJUSTMENTS IN’’ 
in the heading of such subsection and inserting 
‘‘APPLICATION OF RULES TO’’, and 
(B) by striking ‘‘then adjustments similar 
to’’ and all that follows in such subsection and 
inserting ‘‘then rules similar to the rules of sub-
sections (a) and (b) shall apply to— 
‘‘(1) such stock, 
‘‘(2) stock in any other controlled foreign cor-
poration by reason of which the United States share-
holder is considered under section 958(a)(2) as own-
ing the stock described in paragraph (1), and 
‘‘(3) property by reason of which the United 
States shareholder is considered as owning stock de-
scribed in paragraph (1) or (2), 
but only for purposes of determining the amount included 
under section 951 in the gross income of such United 
States shareholder (or any other United States share-
holder who acquires from any person any portion of the 
interest of such United States shareholder by reason of 
which such shareholder was treated as owning such stock, 
but only to the extent of such portion, and subject to such 
proof of identity of such interest as the Secretary may pre-
scribe by regulations). The preceding sentence shall not
1840 
apply with respect to any stock or property to which sub-
section (a) or (b) applies.’’. 
(d) EFFECTIVE DATES.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2021, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
(e) NO INFERENCE REGARDING CERTAIN MODIFICA-
TIONS.—The amendments made by paragraphs (1) and 
(2) of subsection (c) shall not be construed to create any 
inference with respect to the proper application of any pro-
vision of the Internal Revenue Code of 1986 with respect 
to any taxable year beginning before the taxable years to 
which such amendments apply. 
Subpart D—Inbound International Provisions 
SEC. 138131. MODIFICATIONS TO BASE EROSION AND ANTI- 
ABUSE TAX. 
(a) MODIFICATIONS
TO BASE EROSION MINIMUM 
TAX AMOUNT.— 
(1) 
MODIFICATION
OF
RATES.—Section 
59A(b)(1)(A) is amended by striking ‘‘10 percent (5 
percent in the case of taxable years beginning in cal-
endar year 2018)’’ and inserting ‘‘the applicable per-
centage’’.
1841 
(2) BASE EROSION MINIMUM TAX AMOUNT DE-
TERMINED WITHOUT REGARD TO CREDITS.—Section 
59A(b)(1)(B) is amended to read as follows: 
‘‘(B) an amount equal to the regular tax li-
ability (as defined in section 26(b)) of the tax-
payer for the taxable year.’’. 
(3) 
APPLICABLE
PERCENTAGE.—Section 
59A(b)(2) is amended to read as follows: 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of this section, the term ‘applicable percentage’ 
means— 
‘‘(A) in the case of any taxable year begin-
ning after December 31, 2021, and before Jan-
uary 1, 2023, 10 percent, 
‘‘(B) in the case of any taxable year begin-
ning after December 31, 2022, and before Jan-
uary 1, 2024, 12.5 percent, 
‘‘(C) in the case of any taxable year begin-
ning after December 31, 2023, and before Jan-
uary 1, 2025, 15 percent, and 
‘‘(D) in the case of any taxable year begin-
ning after December 31, 2024, 18 percent.’’. 
(4) TAXPAYERS SUBJECT TO RULES FOR BANKS 
AND SECURITIES DEALERS.—Section 59A(b)(3)(B) 
is amended to read as follows:
1842 
‘‘(B) TAXPAYER DESCRIBED.—A taxpayer 
is described in this subparagraph if such tax-
payer is— 
‘‘(i) a bank (as defined in section 
585(a)(2)), 
‘‘(ii) a securities dealer registered 
under section 15(a) of the Securities Ex-
change Act of 1934, or 
‘‘(iii) a member of an affiliated group 
(as defined in section 1504(a)(1), deter-
mined 
without 
regard 
to 
section 
1504(b)(3)) which includes any person de-
scribed in clause (i) or (ii).’’. 
(5) TERMINATION
OF
INCREASED
RATE
FOR 
BANKS
AND
SECURITIES
DEALERS.—Section 
59A(b)(3) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(C) TERMINATION.—Subparagraph (A) 
shall not apply to any taxable year beginning 
after December 31, 2024.’’. 
(6) GENERAL
BUSINESS
CREDIT
ALLOWED 
AGAINST
BASE
EROSION
AND
ANTI-ABUSE
TAX.— 
Section 38(c)(1) is amended by striking ‘‘the tax im-
posed by section 55’’ and inserting ‘‘the taxes im-
posed by sections 55 and 59A’’.
1843 
(7) CONFORMING AMENDMENTS.— 
(A) Section 59A(b)(3)(A) is amended by 
striking ‘‘paragraphs (1)(A) and (2)(A) shall 
each’’ and inserting ‘‘paragraph (2) shall’’. 
(B) Section 59A(b) is amended by striking 
paragraph (4). 
(b) MODIFICATION OF RULES FOR DETERMINING 
MODIFIED TAXABLE INCOME.— 
(1) IN GENERAL.—Section 59A(c) is amended 
to read as follows: 
‘‘(c) MODIFIED TAXABLE INCOME.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘modified taxable 
income’ means the taxable income of the taxpayer 
computed under this chapter for the taxable year 
with the following adjustments: 
‘‘(A) BASE EROSION PAYMENTS.—Taxable 
income shall be determined without regard to 
any base erosion tax benefit, including for pur-
poses of determining the adjusted basis of prop-
erty described in subsection (d)(2). 
‘‘(B) ADJUSTMENTS
WITH
RESPECT
TO 
COST
OF
GOODS
SOLD.—Cost of goods sold 
shall be determined without regard to any base
1844 
erosion payment described in subparagraph (A) 
or (B) of subsection (d)(5). 
‘‘(C) NET OPERATING LOSSES.—The net 
operating loss deduction for the taxable year 
under section 172 shall be determined— 
‘‘(i) by substituting ‘modified taxable 
income (as determined under section 
59A(c)(1) without regard to subparagraph 
(C) thereof)’ for ‘taxable income’ in section 
172(a)(2)(B)(ii)(I), 
‘‘(ii) by determining any net operating 
loss arising in any taxable year beginning 
after December 31, 2021, without regard 
to any base erosion tax benefit (determined 
with respect to each such taxable year), 
and 
‘‘(iii) by making appropriate adjust-
ments 
in 
the 
application 
of 
section 
172(b)(2) to take into account clauses (i) 
and (ii) of this subparagraph. 
‘‘(D) APPLICATION
OF
CERTAIN
OTHER 
ADJUSTMENTS.—Except as otherwise provided 
by the Secretary, rules similar to the rules of 
subsections (g) and (h) of section 59 shall 
apply.
1845 
‘‘(2) BASE EROSION TAX BENEFIT.—The term 
‘base erosion tax benefit’ means— 
‘‘(A) any deduction allowed under this 
chapter for the taxable year with respect to any 
base erosion payment described in subsection 
(d)(1), 
‘‘(B) in the case of a base erosion payment 
described in subsection (d)(2), any deduction al-
lowed under this chapter for the taxable year 
for depreciation (or amortization in lieu of de-
preciation) with respect to property referred to 
in subparagraph (A) or (B) of such subsection 
to the extent of the amounts described in such 
subsection with respect to such property, 
‘‘(C) in the case of a base erosion payment 
described in subsection (d)(3)— 
‘‘(i) any reduction under section 
803(a)(1)(B) in the gross amount of pre-
miums and other consideration on insur-
ance and annuity contracts for premiums 
and other consideration arising out of in-
demnity insurance, and 
‘‘(ii) any deduction under section 
832(b)(4)(A) from the amount of gross 
premiums written on insurance contracts
1846 
during the taxable year for premiums paid 
for reinsurance, and 
‘‘(D) in the case of a base erosion payment 
described in subsection (d)(4), any reduction in 
gross receipts with respect to such payment in 
computing gross income of the taxpayer for the 
taxable year for purposes of this chapter.’’. 
(2) CERTAIN
PAYMENTS
WITH
RESPECT
TO 
PROPERTY PRODUCED BY THE TAXPAYER.—Section 
59A(d)(2) is amended to read as follows: 
‘‘(2) TREATMENT OF CERTAIN RELATED-PARTY 
PAYMENTS WITH RESPECT TO DEPRECIABLE PROP-
ERTY.—Such term shall also include any amount 
paid or accrued by the taxpayer to a foreign person 
which is a related party of the taxpayer in connec-
tion with— 
‘‘(A) the acquisition by the taxpayer from 
such person of property of a character subject 
to the allowance for depreciation (or amortiza-
tion in lieu of depreciation), or 
‘‘(B) property produced by the taxpayer 
that is of a character subject to the allowance 
for depreciation (or amortization in lieu of de-
preciation) if such amount is required to be
1847 
capitalized under section 263A, including pay-
ments in respect of indebtedness or services.’’. 
(3) CERTAIN PAYMENTS WITH RESPECT TO IN-
VENTORY TREATED AS BASE EROSION PAYMENTS.— 
Section 59A(d) is amended by redesignating para-
graph (5) as paragraph (6) and by inserting after 
paragraph (4) the following new paragraph: 
‘‘(5) CERTAIN PAYMENTS WITH RESPECT TO IN-
VENTORY.— 
‘‘(A) INDIRECT
COSTS
INCLUDED
IN
IN-
VENTORY UNDER SECTION 263A.—Such term 
shall also include any amount paid or incurred 
by the taxpayer to a foreign person which is a 
related party of the taxpayer if such amount is 
described in paragraph (2)(B) of section 
263A(a) and required to be included in inven-
tory costs of the taxpayer under paragraph 
(1)(A) of such section. Such term shall also in-
clude any amount paid or incurred by the tax-
payer to a foreign person which is a related 
party of the taxpayer if such amount is capital-
ized to the basis of property that is of a char-
acter subject to the allowance for depreciation 
(or amortization in lieu of depreciation), and 
the depreciation (or amortization in lieu of de-
1848 
preciation) is required to be included in inven-
tory costs of the taxpayer under section 
263A(a)(1)(A). 
‘‘(B) CERTAIN
COSTS
OF
FOREIGN
RE-
LATED PARTIES.—Such term shall also include 
so much of any amount which is paid or in-
curred by the taxpayer to a foreign person 
which is a related party of the taxpayer, is de-
scribed in paragraph (2)(A) of section 263A(a), 
and is required to be included in inventory costs 
of the taxpayer under paragraph (1)(A) of such 
section, as exceeds the sum of— 
‘‘(i) the direct costs of such property 
in the hands of such foreign person, plus 
‘‘(ii) so much of the costs described in 
section 263A(a)(2)(B) with respect to such 
property in the hands of such foreign per-
son as the taxpayer demonstrates to the 
satisfaction of the Secretary are attrib-
utable to amounts— 
‘‘(I) paid or incurred by such for-
eign person to a United States person 
or a person which is not a related 
party of the taxpayer, or
1849 
‘‘(II) otherwise subject to the tax 
imposed by this chapter. 
‘‘(C) APPLICATION
TO
RELATED-PARTY 
TRANSACTIONS.—In the case of direct costs 
otherwise described in clause (i) of subpara-
graph (B) which are paid or incurred by the 
foreign person referred to in such clause to an-
other foreign person which is a related party of 
the taxpayer, such costs shall be taken into ac-
count under such clause only to the extent that 
the taxpayer demonstrates to the satisfaction of 
the Secretary that such costs are attributable to 
amounts— 
‘‘(i) paid or incurred (directly or indi-
rectly) to a United States person or a per-
son which is not a related party of the tax-
payer, or 
‘‘(ii) otherwise subject to the tax im-
posed by this chapter. 
‘‘(D) SAFE HARBOR WITH RESPECT TO IN-
DIRECT
COSTS
OF
FOREIGN
RELATED
PAR-
TIES.—In the case of a taxpayer which elects 
the application of this subparagraph (at such 
time, in such manner, and with respect to such 
inventory property, as the Secretary may pro-
1850 
vide), the amount described in subparagraph 
(B)(ii) with respect to such property shall be 
treated for purposes of this section as being 
equal to 20 percent of the amount paid or in-
curred by the taxpayer to the related party of 
the taxpayer in connection with the acquisition 
of such property. 
‘‘(E) APPLICATION OF CERTAIN RULES.— 
Rules similar to the rules of subparagraphs (B) 
and (C) of subsection (i)(1) shall apply for pur-
poses of determining whether any amount is 
treated as subject to the tax imposed by this 
chapter for purposes of subparagraph (B) or 
(C) of this paragraph.’’. 
(4) EXPANSION AND CONSOLIDATION OF RULES 
TO EXEMPT CERTAIN PAYMENTS FROM TREATMENT 
AS BASE EROSION PAYMENTS.— 
(A) IN GENERAL.—Section 59A is amend-
ed by redesignating subsection (i) as subsection 
(j) and by inserting after subsection (h) the fol-
lowing new subsection: 
‘‘(i) CERTAIN PAYMENT NOT TREATED AS BASE 
EROSION PAYMENTS.— 
‘‘(1) EXCEPTION
FOR
PAYMENTS
ON
WHICH 
TAX IS IMPOSED.—
1851 
‘‘(A) IN GENERAL.—An amount shall not 
be treated as a base erosion payment if tax is 
(or was at the time of payment or accrual) im-
posed by this chapter with respect to such 
amount (other than by this section). 
‘‘(B) TREATMENT
OF
CERTAIN
DEDUC-
TIONS.—For purposes of subparagraph (A), tax 
shall be treated as imposed by this chapter 
without regard to any deduction allowed under 
part VIII of subchapter B. 
‘‘(C) APPLICATION OF CERTAIN RULES.— 
The amount not treated as a base erosion pay-
ment by reason of this paragraph shall be de-
termined under rules similar to the rules of sec-
tion 163(j)(5) (as in effect before the date of 
the enactment of Public Law 115-97). 
‘‘(2) EXCEPTION FOR CERTAIN PAYMENTS SUB-
JECT TO SUFFICIENT FOREIGN TAX.— 
‘‘(A) IN GENERAL.—An amount shall not 
be treated as a base erosion payment if the tax-
payer establishes to the satisfaction of the Sec-
retary that such amount was made to a foreign 
person which is a related party of the taxpayer 
that is subject to an effective rate of foreign in-
1852 
come tax (as defined in section 904(d)(2)(F)) 
which is not less than the lesser of— 
‘‘(i) 15 percent, or 
‘‘(ii) the applicable percentage in ef-
fect under subsection (b)(2) (determined 
without regard to subsection (b)(3)) for 
the taxable year in which such amount is 
paid or accrued. 
‘‘(B) CERTAIN
PAYMENTS
TO
RELATED 
PARTIES.—To the extent provided by the Sec-
retary in regulations, an amount paid to a for-
eign person which is a related party of the tax-
payer shall be treated as paid to another for-
eign person which is a related party of the tax-
payer if such second foreign person is subject to 
an effective rate of foreign income tax (as de-
fined in section 904(d)(2)(F)) which is less 
than the lesser of 15 percent or the percentage 
described in subparagraph (A)(ii), to the extent 
the amount so paid directly or indirectly funds 
a payment to such second foreign person. 
‘‘(C) DETERMINATION ON BASIS OF APPLI-
CABLE
FINANCIAL
STATEMENTS.—Except as 
otherwise provided by the Secretary under sub-
paragraph (D), the effective rate of foreign in-
1853 
come tax with respect to any amount may be 
established on the basis of applicable financial 
statements (as defined in section 451(b)(3)). 
‘‘(D) REGULATIONS.—The Secretary shall 
issue such regulations or other guidance as may 
be necessary or appropriate to carry out the 
purposes of this paragraph, including regula-
tions or other guidance providing procedures for 
determining the effective rate of foreign income 
tax to which any amount is subject. Such proce-
dures may require that any transaction or se-
ries of transactions among multiple parties be 
recharacterized as one or more transactions di-
rectly among any 2 or more of such parties 
where the Secretary determines that such re-
characterization is appropriate to carry out, or 
prevent avoidance of, the purposes of this sec-
tion. 
‘‘(3) EXCEPTION FOR CERTAIN AMOUNTS WITH 
RESPECT
TO
SERVICES.—Subsections (d)(1) and 
(d)(5)(A) shall not apply to so much of any amount 
paid or accrued by a taxpayer for services as does 
not exceed the total services cost of such services. 
The preceding sentence shall not apply unless such 
services meet the requirements for eligibility for use
1854 
of the services cost method under section 482 (deter-
mined without regard to the requirement that the 
services not contribute significantly to fundamental 
risks of business success or failure).’’. 
(B) CONFORMING
AMENDMENT.—Section 
59A(d), as amended by paragraph (2), is 
amended by striking paragraph (6). 
(c) TERMINATION OF EXEMPTION FROM BASE ERO-
SION AND ANTI-ABUSE TAX FOR TAXPAYERS WITH LOW 
BASE EROSION PERCENTAGE.—Section 59A(e)(1)(C) is 
amended by striking ‘‘the base erosion percentage (as de-
termined under subsection (c)(4))’’ and inserting ‘‘in the 
case of any taxable year beginning before January 1, 
2024, the base erosion percentage (as determined under 
subsection (c)(4) as in effect before the date of the enact-
ment of the Act enacted during the 117th Congress which 
is entitled ‘An Act to provide for reconciliation pursuant 
to title II of S. Con. Res. 14.’)’’. 
(d) TREATMENT OF APPLICABLE TAXPAYERS.—Sec-
tion 59A(e) is amended by adding at the end the following 
new paragraph: 
‘‘(4) CONTINUATION OF TREATMENT AS APPLI-
CABLE TAXPAYER.—If a taxpayer is an applicable 
taxpayer with respect to any taxable year beginning 
after December 31, 2021 (other than by reason of
1855 
this paragraph), such taxpayer (and any successor of 
such taxpayer) shall be an applicable taxpayer with 
respect to each of the 10 succeeding taxable years.’’. 
(e) OTHER MODIFICATIONS.— 
(1) Section 59A(b)(1) is amended by striking 
‘‘Except as provided in paragraphs (2) and (3), the’’ 
and inserting ‘‘The’’. 
(2) Section 59A(h)(2)(B) is amended by strik-
ing ‘‘section 6038B(b)(2)’’ and inserting ‘‘section 
6038A(b)(2)’’. 
(3) Section 59A(j)(2), as redesignated by sub-
section (b), is amended by striking ‘‘subsection 
(g)(3)’’ and inserting ‘‘subsection (h)(3)’’. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
Subpart E—Other Business Tax Provisions 
SEC. 138141. CREDIT FOR CLINICAL TESTING OF ORPHAN 
DRUGS LIMITED TO FIRST USE OR INDICA-
TION. 
(a) IN GENERAL.—Section 45C(b)(2)(B) is amended 
to read as follows: 
‘‘(B) TESTING
MUST
BE
RELATED
TO 
FIRST USE OR INDICATION FOR RARE DISEASE 
OR CONDITION.—Human clinical testing may be
1856 
taken into account under subparagraph (A) 
only to the extent such testing is related to the 
first use or indication with respect to which a 
drug for a rare disease or condition is des-
ignated under section 526 of the Federal Food, 
Drug, and Cosmetic Act.’’. 
(b) ELIGIBLE TESTING MUST BE CONDUCTED BE-
FORE APPROVAL FOR ANY USE OR INDICATION.—Section 
45C(b)(2)(A)(ii)(II) is amended to read as follows: 
‘‘(II) before the first date on 
which an application (with respect to 
any use or indication with respect to 
any disease or condition) with respect 
to such drug is approved under sec-
tion 505(c) of such Act or, if the drug 
is a biological product, before the first 
date on which a license (with respect 
to any use or indication with respect 
to any disease or condition) for such 
drug is issued under section 351(a) of 
the Public Health Service Act, and’’. 
(c) ELIGIBILITY OF BIOLOGICAL PRODUCTS.— 
(1) IN
GENERAL.—Section 45C(b)(2)(A)(i) is 
amended by inserting ‘‘or, if the drug is a biological
1857 
product, section 351(a)(3) of the Public Health 
Service Act’’ before the comma at the end. 
(2) 
CONFORMING
AMENDMENT.—Section 
45C(b)(2)(A)(ii)(I) is amended by striking ‘‘such 
Act’’ and inserting ‘‘the Federal Food, Drug, and 
Cosmetic Act’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138142. MODIFICATIONS TO TREATMENT OF CERTAIN 
LOSSES. 
(a) LOSSES FROM CERTAIN CAPITAL ASSETS WHICH 
BECOME WORTHLESS.— 
(1) 
WHEN
TREATED
AS
LOSS.—Section 
165(g)(1) is amended by striking ‘‘on the last day 
of the taxable year’’ and inserting ‘‘at the time of 
the identifiable event establishing worthlessness’’. 
(2) TREATMENT OF PARTNERSHIP INDEBTED-
NESS.—Section 165(g)(2)(C) is amended by insert-
ing ‘‘, by a partnership,’’ after ‘‘by a corporation’’. 
(3) TREATMENT
OF
ABANDONMENT.—Section 
165(g) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(4) TREATMENT
OF
ABANDONMENT.—For 
purposes of this subsection and subsection (m),
1858 
abandonment shall be treated as an identifiable 
event establishing worthlessness.’’. 
(4) TREATMENT OF PARTNERSHIP INTEREST.— 
Section 165 is amended by redesignating subsection 
(m) as subsection (n) and by inserting after sub-
section (l) the following new subsection: 
‘‘(m) WORTHLESS PARTNERSHIP INTEREST.—If any 
interest in a partnership becomes worthless during the 
taxable year, the loss resulting therefrom shall, for pur-
poses of this subtitle, be treated as a loss from the sale 
or exchange of the interest in the partnership at the time 
of the identifiable event establishing worthlessness.’’. 
(b) DEFERRAL OF LOSSES IN CERTAIN CONTROLLED 
GROUP
CORPORATE
LIQUIDATIONS.—Section 267 is 
amended by adding at the end the following new sub-
section: 
‘‘(h) DEFERRAL
OF LOSSES
IN CERTAIN CON-
TROLLED GROUP LIQUIDATIONS.— 
‘‘(1) IN GENERAL.—In the case of any specified 
controlled group liquidation, no loss shall be recog-
nized by any member of the controlled group on any 
stock or security of the liquidating corporation until 
all property received by members of the controlled 
group in connection with such liquidation has been 
transferred to one or more persons who are not re-
1859 
lated (within the meaning of subsection (b)(3) or 
section 707(b)(1)) to the member which received 
such property. 
‘‘(2) SPECIFIED CONTROLLED GROUP LIQUIDA-
TION.—For purposes of this subsection, the term 
‘specified controlled group liquidation’ means, with 
respect to any corporation which is a member of a 
controlled group— 
‘‘(A) one or more distributions in complete 
liquidation (within the meaning of section 346) 
of such corporation, 
‘‘(B) any other transfer (including any se-
ries of transfers) of property of such corpora-
tion if any stock or security of such corporation 
becomes worthless in connection with such 
transfer, and 
‘‘(C) any issuance of debt by such corpora-
tion to one or more persons who are related 
(within the meaning of subsection (b)(3) or sec-
tion 707(b)(1)) to such corporation if any stock 
or security of such corporation becomes worth-
less in connection with such issuance. 
‘‘(3) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as may be nec-
essary or appropriate to carry out the purposes of
1860 
this subsection, including to apply the principles of 
this subsection to liquidating corporation stock or 
securities owned by a corporation indirectly through 
1 or more partnerships.’’. 
(c) CROSS REFERENCE.—Section 331(c) is amend-
ed— 
(1) by striking ‘‘CROSS REFERENCE’’ and all 
that follows through ‘‘For general rule’’ and insert-
ing the following: ‘‘CROSS REFERENCE.— 
‘‘(1) For general rule’’, and 
(2) by adding at the end the following new 
paragraph: 
‘‘(2) For losses in controlled group liquidations, 
see section 267(h).’’. 
(d) EFFECTIVE DATE.— 
(1) SUBSECTION (a).—The amendments made 
by this section shall apply to losses arising in taxable 
years beginning after December 31, 2021. 
(2) SUBSECTION (b).—The amendment made 
by subsection (b) shall apply to liquidations on or 
after the date of the enactment of this Act. 
SEC. 138143. ADJUSTED BASIS LIMITATION FOR DIVISIVE 
REORGANIZATION. 
(a) IN GENERAL.—Section 361 is amended by adding 
at the end the following new subsections:
1861 
‘‘(d) ADJUSTED BASIS LIMITATION FOR DIVISIVE 
REORGANIZATIONS.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), in the case of a reorganization described 
in section 368(a)(1)(D) with respect to which stock 
or securities of the controlled corporation (within the 
meaning of section 355) are distributed by the dis-
tributing corporation (within the meaning of such 
section) in a transaction which qualifies under such 
section, subsections (b)(3) and (c)(3) shall not apply 
to so much of the amount described in clauses (ii) 
and (iii) of subparagraph (A) as does not exceed the 
excess (if any) of— 
‘‘(A) the sum of— 
‘‘(i) the total amount of the liabilities 
assumed (within the meaning of section 
357(c)) by the controlled corporation, and 
‘‘(ii) the total amount of money and 
the fair market value of other property 
transferred to the creditors, 
‘‘(iii) the fair market value of the 
stock described in section 354(a)(2)(C) 
and the total principal amount of obliga-
tions of the controlled corporation de-
scribed in subsection (c)(2)(B) which are
1862 
qualified property (as defined in subsection 
(c)(2)(B)) transferred to the creditors, 
over 
‘‘(B) the total adjusted bases of the assets 
transferred by the distributing corporation to 
the controlled corporation. 
‘‘(2) EXCEPTION REGARDING CERTAIN STOCK 
OR
RIGHTS
TO
ACQUIRE
STOCK.—Paragraph (1) 
shall not apply to any stock (or right to acquire 
stock) described in subsection (c)(2)(B). 
‘‘(3) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as may be nec-
essary or appropriate to carry out the purposes of 
this subsection and to prevent avoidance of tax 
through abuse or circumvention of subsection (b)(3), 
subsection (c)(3), or this subsection, including to de-
termine whether a disposition of property or any 
other transaction is in connection with the reorga-
nization or pursuant to the plan of reorganization. 
‘‘(e) CROSS-REFERENCES.—For provisions providing 
for the inclusion of income or recognition of gain in certain 
distributions, see subsections (d), (e), (f), (g), and (h) of 
section 355.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 361(b)(3) is amended—
1863 
(A) in the first sentence, by inserting ‘‘, 
and except as provided in subsection (d)’’ after 
‘‘paragraph (1)’’, and 
(B) by striking the second and third sen-
tences. 
(2) Section 361(c) is amended— 
(A) in paragraph (3), by inserting ‘‘, and 
except as provided in subsection (d)’’ after ‘‘this 
subsection’’, and 
(B) by striking paragraph (5). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to reorganizations occurring on or 
after the date of the enactment of this Act. 
(d) TRANSITION RULE.—The amendments made by 
this section shall not apply to any exchange pursuant to 
a transaction which is— 
(1) made pursuant to a written agreement 
which was binding on the date of the enactment of 
this Act, and at all times thereafter, 
(2) described in a ruling request submitted to 
the Internal Revenue Service on or before such date, 
or 
(3) described on or before such date in a public 
announcement or in a filing with the Securities and 
Exchange Commission.
1864 
SEC. 138144. RENTS FROM PRISON FACILITIES NOT TREAT-
ED AS QUALIFIED INCOME FOR PURPOSES OF 
REIT INCOME TESTS. 
(a) IN GENERAL.—Section 856(d)(2) is amended by 
striking ‘‘and’’ at the end of subparagraph (B), by striking 
the period at the end of subparagraph (C) and inserting 
‘‘, and’’, and by adding at the end the following new sub-
paragraph: 
‘‘(D) any amount received or accrued, di-
rectly or indirectly, with respect to any real or 
personal property which is primarily used in 
connection with any correctional, detention, or 
penal facility.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138145. MODIFICATIONS TO EXEMPTION FOR PORT-
FOLIO INTEREST. 
(a) IN GENERAL.—Section 871(h)(3)(B)(i) is amend-
ed to read as follows: 
‘‘(i) in the case of an obligation issued 
by a corporation— 
‘‘(I) any person who owns 10 
percent or more of the total combined 
voting power of all classes of stock of 
such corporation entitled to vote, or
1865 
‘‘(II) any person who owns 10 
percent or more of the total value of 
the stock of such corporation, and’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to obligations issued after the date 
of the enactment of this Act. 
SEC. 138146. CERTAIN PARTNERSHIP INTEREST DERIVA-
TIVES. 
(a) IN GENERAL.—Section 871(m) is amended by 
adding at the end the following new paragraph: 
‘‘(8) SPECIFIED
PARTNERSHIP
INTEREST
IN-
COME EQUIVALENT PAYMENTS.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, any payment made pursuant to a 
specified notional principal contract that (di-
rectly or indirectly) is contingent upon, or is de-
termined by reference to, any income or gain in 
respect of an interest in a specified partnership 
(or any other payment the Secretary determines 
to be substantially similar) shall be treated as 
a dividend equivalent. For purposes of the pre-
ceding sentence, income or gain includes any in-
come or gain from the deemed disposition of 
such interest as a result of the termination of, 
or payment with respect to, such contract (de-
1866 
termined in the same manner as under section 
864(c)(8) but without regard to subparagraph 
(C) thereof) and any income or gain described 
in subsection (a)(1) or section 881(a). 
‘‘(B) SPECIFIED PARTNERSHIP.—For pur-
poses of this paragraph, the term ‘specified 
partnership’ means— 
‘‘(i) any publicly traded partnership 
(as defined in section 7704(b)) which is 
not treated as a corporation under such 
section, or 
‘‘(ii) any other partnership as the Sec-
retary may by regulation prescribe. 
‘‘(C) EXCEPTIONS.— 
‘‘(i) CERTAIN
PAYMENTS.—Subpara-
graph (A) shall not apply to any payment 
the Secretary determines does not have the 
potential for tax avoidance. 
‘‘(ii) CERTAIN INCOME.—Under such 
regulations as the Secretary shall pre-
scribe, there shall not be taken into ac-
count under subparagraph (A) any pay-
ment to the extent determined by reference 
to income or gain in respect of an interest 
in a specified partnership which would be,
1867 
if earned by a nonresident alien individual 
or a foreign corporation— 
‘‘(I) exempt from tax under this 
chapter, or 
‘‘(II) from sources without the 
United States and not effectively con-
nected with the conduct of a trade or 
business within the United States. 
‘‘(D) TREATMENT
OF
DEFINITIONS
AND 
SPECIAL RULES WITH RESPECT TO PARTNER-
SHIPS.—For purposes of this paragraph, rules 
similar to the rules and definitions in para-
graphs (3), (4), (5), (6), and (7) shall apply to 
an interest in a specified partnership in a man-
ner similar to an underlying security, and to in-
come or gain in respect of an interest in a spec-
ified partnership in a manner similar to a divi-
dend. 
‘‘(E) REGULATIONS.—The Secretary shall 
issue such regulations or other guidance as the 
Secretary determines is necessary or appro-
priate to carry out the purposes of this para-
graph, including to apply this paragraph to 
payments determined under sale-repurchase 
agreements or securities lending transactions
1868 
with respect to interests in specified partner-
ships, to determine the amount of a distribution 
by a specified partnership that is income or 
gain of the partnership (including the portion 
thereof that is excepted under subparagraph 
(C)) in a manner consistent with section 
1441(g), and to require the provision of infor-
mation by specified partnerships necessary to 
determine such amount.’’. 
(b) WITHHOLDING
OF
TAX
ON
NONRESIDENT 
ALIENS.—Section 1441 is amended by redesignating sub-
section (g) as subsection (h) and by inserting after sub-
section (f) the following new subsection: 
‘‘(g) DIVIDEND EQUIVALENTS IN CASE OF CERTAIN 
SPECIFIED PARTNERSHIPS.—The Secretary may pre-
scribe regulations, under rules similar to the rules of sec-
tion 1446, to determine the amount of a payment in re-
spect of income and gain of a specified partnership (as 
defined in 871(m)(8)) which is a dividend equivalent.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to payments made after December 
31, 2022.
1869 
SEC. 138147. ADJUSTMENTS TO EARNINGS AND PROFITS OF 
CONTROLLED FOREIGN CORPORATIONS. 
(a) IN GENERAL.—Section 312(n) is amended by 
adding at the end the following new paragraph: 
‘‘(9) SPECIAL RULES FOR CONTROLLED FOR-
EIGN CORPORATIONS.—Earnings and profits of any 
controlled foreign corporation shall be determined 
without regard to paragraphs (4), (5), and (6).’’. 
(b) CONFORMING AMENDMENT.—Section 952(c) is 
amended by striking paragraph (3). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions ending after the date of the enactment of this Act, 
and to taxable years of United States shareholders in 
which or with which such taxable years of foreign corpora-
tions end. 
SEC. 138148. CERTAIN DIVIDENDS OF CONTROLLED FOR-
EIGN CORPORATIONS TREATED AS EXTRAOR-
DINARY DIVIDENDS. 
(a) IN GENERAL.—Section 1059 is amended by re-
designating subsection (g) as subsection (h) and by insert-
ing after subsection (f) the following new subsection: 
‘‘(g) TREATMENT OF CERTAIN DIVIDENDS OF CON-
TROLLED FOREIGN CORPORATIONS.— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided by the Secretary, any disqualified CFC divi-
1870 
dend shall be treated as an extraordinary dividend to 
which paragraphs (1) and (2) of subsection (a) 
apply without regard to the period the taxpayer held 
the stock with respect to which such dividend is 
paid. 
‘‘(2) DISQUALIFIED CFC DIVIDEND.— For pur-
poses of this subsection— 
‘‘(A) IN GENERAL.—The term ‘disqualified 
CFC dividend’ means any dividend paid by a 
controlled foreign corporation to the extent such 
dividend is attributable to earnings and profits 
which— 
‘‘(i) were earned during any period 
that such corporation was not a controlled 
foreign corporation, or 
‘‘(ii) are attributable to disqualified 
CFC dividends received by such controlled 
foreign corporation from another controlled 
foreign corporation. 
‘‘(B) APPLICATION TO CORPORATIONS NOT 
WHOLLY
OWNED
BY
UNITED
STATES
SHARE-
HOLDERS.—If not all of the stock of any con-
trolled foreign corporation is owned (within the 
meaning of section 958(a)) by one or more 
United States shareholders at the time that any
1871 
earnings and profits are earned, the portion of 
such earnings and profits which is properly at-
tributable to stock not so owned by United 
States shareholders shall be treated for pur-
poses of subparagraph (A) as earned during a 
period that such corporation was not a con-
trolled foreign corporation. 
‘‘(C) TREATMENT OF DOMESTIC PARTNER-
SHIPS AND CERTAIN TRUSTS.—For purposes of 
subparagraph (B)— 
‘‘(i) a domestic partnership shall not 
be treated as a United States shareholder, 
and 
‘‘(ii) to the extent provided by the 
Secretary in regulations or other guidance, 
a trust described in section 7701(a)(30)(E) 
shall not be treated as a United States 
shareholder. 
‘‘(D) SPECIAL
RULE
RELATED
TO
CON-
STRUCTIVE
OWNERSHIP.—In the case of the 
last taxable year of a foreign corporation begin-
ning before January 1, 2018, and each subse-
quent taxable year of such foreign corporation 
which begins before the date of the enactment 
of this subsection, if such foreign corporation
1872 
would not have been a controlled foreign cor-
poration for any such taxable year if section 
958(b)(4) (as applicable to taxable years begin-
ning after the date of the enactment of this 
subsection) had applied to such taxable year, 
such corporation shall not be treated as a con-
trolled foreign corporation for such taxable year 
for purposes of this subsection.’’. 
(b) REGULATIONS.—Section 1059(h), as redesig-
nated by subsection (a), is amended— 
(1) by striking ‘‘regulations’’ both places it ap-
pears and inserting ‘‘regulations or other guidance’’, 
and 
(2) by striking ‘‘and’’ at the end of paragraph 
(1), by striking the period at the end of paragraph 
(2) and inserting ‘‘, and’’, and by adding at the end 
the following new paragraph: 
‘‘(3) providing for the coordination of sub-
section (g) with the other provisions of this chapter, 
including section 1248.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to dividends paid (or amounts 
treated as dividends) after the date of the enactment of 
this Act.
1873 
SEC. 138149. LIMITATION ON CERTAIN SPECIAL RULES FOR 
SECTION 1202 GAINS. 
(a) IN GENERAL.—Section 1202(a) is amended by 
adding at the end the following new paragraph: 
‘‘(5) 
LIMITATION
ON
CERTAIN
SPECIAL 
RULES.—In the case of the sale or exchange of 
qualified small business stock after September 13, 
2021, paragraphs (3) and (4) shall not apply to any 
taxpayer if— 
‘‘(A) the adjusted gross income of such 
taxpayer (determined without regard to this 
section and sections 911, 931, and 933) equals 
or exceeds $400,000, or 
‘‘(B) such taxpayer is a trust or estate.’’. 
(b) EFFECTIVE DATE.—Except as provided in sub-
section (c), the amendment made by this section shall 
apply to sales and exchanges after September 13, 2021. 
(c) BINDING CONTRACT EXCEPTION.—The amend-
ment made by this section shall not apply to any sale or 
exchange which is made pursuant to a written binding 
contract which was in effect on September 13, 2021, and 
is not modified in any material respect thereafter. 
SEC. 138150. CONSTRUCTIVE SALES. 
(a) APPLICATION
TO APPRECIATED DIGITAL AS-
SETS.—
1874 
(1) 
IN
GENERAL.—Section 
1259(b)(1) 
is 
amended by inserting ‘‘digital asset,’’ after ‘‘debt in-
strument,’’. 
(2) EXCEPTION FOR SALES OF NONPUBLICLY 
TRADED PROPERTY.—Section 1259(c)(2) is amended 
by adding at the end the following: ‘‘A similar rule 
shall apply in the case of a contract for sale of any 
digital asset.’’. 
(3) 
DIGITAL
ASSET.—Section 
1259(d) 
is 
amended by adding at the end the following new 
paragraph: 
‘‘(3) DIGITAL ASSET.—Except as otherwise pro-
vided by the Secretary, the term ‘digital asset’ 
means any digital representation of value which is 
recorded on a cryptographically secured distributed 
ledger or any similar technology as specified by the 
Secretary.’’. 
(b) TREATMENT OF CERTAIN CONTRACTS.—Section 
1259(c)(1)(D) is amended by inserting ‘‘or enters into a 
contract to acquire’’ after ‘‘acquires’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
subsection (a) shall apply to constructive sales (de-
termined after the application of the amendment
1875 
made by subsection (b)) after the date of the enact-
ment of this Act. 
(2) TREATMENT
OF
CERTAIN
CONTRACTS.— 
The amendment made by subsection (b) shall apply 
to contracts entered into after the date of the enact-
ment of this Act. 
SEC. 138151. RULES RELATING TO COMMON CONTROL. 
(a) IN GENERAL.—Section 52 is amended by striking 
subsections (a) and (b) and inserting the following new 
subsections: 
‘‘(a) TREATMENT OF CONTROLLED GROUPS OF COR-
PORATIONS.— 
‘‘(1) IN GENERAL.—For purposes of this sub-
part, all employees of all corporations which are 
component members of the same controlled group of 
corporations shall be treated as employed by a single 
employer. In any such case, the credit (if any) deter-
mined under section 51(a) with respect to each such 
member shall be its proportionate share of the wages 
giving rise to such credit. 
‘‘(2) 
CONTROLLED
GROUP
OF
CORPORA-
TIONS.—For purposes of this subsection, the term 
‘controlled group of corporations’ has the meaning 
given to such term by section 1563(a), except that—
1876 
‘‘(A) ‘more than 50 percent’ shall be sub-
stituted for ‘at least 80 percent’ each place it 
appears in section 1563(a)(1), and 
‘‘(B) the determination shall be made with-
out regard to subsections (a)(4) and (e)(3)(C) 
of section 1563. 
‘‘(3) COMPONENT MEMBER.—For purposes of 
this subsection, the term ‘component member’ has 
the meaning given such term by section 1563(b), ex-
cept that the determination shall be made without 
regard to whether such member is an excluded mem-
ber (within the meaning of section 1563(b)(2)). 
‘‘(b) EMPLOYEES OF PARTNERSHIPS, PROPRIETOR-
SHIPS, ETC., WHICH ARE UNDER COMMON CONTROL.— 
For purposes of this subpart, under regulations prescribed 
by the Secretary— 
‘‘(1) all employees of trades or business (wheth-
er or not incorporated) which are under common 
control shall be treated as employed by a single em-
ployer, and 
‘‘(2) the credit (if any) determined under sec-
tion 51(a) with respect to each trade or business 
shall be its proportionate share of the wages giving 
rise to such credit.
1877 
The regulations prescribed under this subsection shall be 
based on principles similar to the principles which apply 
in the case of subsection (a). For purposes of this sub-
section, the term ‘trade or business’ includes any activity 
treated as a trade or business under paragraph (5) or (6) 
of section 469(c) (determined without regard to the phrase 
‘To the extent provided in regulations’ in such paragraph 
(6)).’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
1563(b)(2)(C) is amended to read as follows: 
‘‘(C) is a foreign corporation not engaged 
in a trade or business within the United 
States,’’. 
(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138152. MODIFICATION OF WASH SALE RULES. 
(a) IN GENERAL.—Section 1091 is amended to read 
as follows: 
‘‘SEC. 1091. LOSS FROM WASH SALES OF SPECIFIED ASSETS. 
‘‘(a) DISALLOWANCE OF LOSS DEDUCTION.—In the 
case of any loss claimed to have been sustained from any 
sale or disposition (including any termination) of specified 
assets where it appears that, within a period beginning 
30 days before the date of such sale or disposition and
1878 
ending 30 days after such date, the taxpayer (or related 
party) has acquired (by purchase or by an exchange on 
which the entire amount of gain or loss was recognized 
by law), or has entered into, or has entered into a contract 
or option so to acquire or a long notional principal con-
tract in respect of, substantially identical specified assets, 
then no deduction shall be allowed under section 165 un-
less the taxpayer is a dealer in specified assets and the 
loss is sustained in a transaction made in the ordinary 
course of such business. 
‘‘(b) AMOUNT OF SPECIFIED ASSETS DIFFERENT 
FROM AMOUNT
OF SPECIFIED ASSETS SOLD.—If the 
amount of specified assets acquired (or covered by the con-
tract or option to acquire or long notional principal con-
tract in respect of) is different from the amount of speci-
fied assets sold or otherwise disposed of, then the par-
ticular specified assets the acquisition of which (or the 
contract or option to acquire or long notional principal 
contract which) resulted in the nondeductibility of the loss 
shall be determined under regulations prescribed by the 
Secretary. 
‘‘(c) ADJUSTMENT
TO BASIS
IN CASE
OF WASH 
SALE.—If the taxpayer (or the taxpayer’s spouse) ac-
quires or enters into substantially identical specified assets 
during the period which—
1879 
‘‘(1) begins 30 days before the disposition with 
respect to which a deduction was disallowed under 
subsection (a), and 
‘‘(2) ends with the close of the taxpayer’s first 
taxable year which begins after such disposition, 
the basis of such specified assets shall be increased by the 
amount of the deduction so disallowed (reduced by any 
amount of such deduction taken into account under this 
subsection to increase the basis of specified assets pre-
viously acquired). 
‘‘(d) CERTAIN SHORT SALES OF SPECIFIED ASSETS 
AND CONTRACTS TO SELL.—Rules similar to the rules of 
subsection (a) shall apply to any loss realized on the clos-
ing of a short sale of (or the sale, exchange, or termination 
of a contract or option to sell or a short notional principal 
contract in respect of) specified assets if, within a period 
beginning 30 days before the date of such closing and end-
ing 30 days after such date— 
‘‘(1) substantially identical specified assets were 
sold or terminated by the taxpayer (or a related 
party), or 
‘‘(2) another short sale of (or contract or option 
to sell or short notional principal contract in respect 
of) substantially identical specified assets was en-
tered into by the taxpayer (or related party).
1880 
‘‘(e) CASH SETTLEMENT.—This section shall not fail 
to apply to a contract or option to acquire or sell specified 
assets solely by reason of the fact that the contract or 
option settles in (or could be settled in) cash or property 
other than such specified assets. 
‘‘(f) RELATED PARTY.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—The term ‘related party’ 
means— 
‘‘(A) the taxpayer’s spouse, 
‘‘(B) any dependent of the taxpayer and 
any other taxpayer with respect to whom the 
taxpayer is a dependent, 
‘‘(C) any individual, corporation, partner-
ship, trust, or estate which controls, or is con-
trolled by, (within the meaning of section 
954(d)(3)) the taxpayer or any individual de-
scribed in subparagraph (A) or (B) with respect 
to the taxpayer (or any combination thereof), 
‘‘(D) to the extent provided by the Sec-
retary in regulations or other guidance, any in-
dividual who bears a relationship to the tax-
payer described in section 267(b) if such tax-
payer is an individual,
1881 
‘‘(E) any individual retirement plan, Ar-
cher MSA (as defined in section 220(d)), or 
health savings account (as defined in section 
223(d)), of the taxpayer or of any individual de-
scribed in subparagraph (A) or (B) with respect 
to the taxpayer, 
‘‘(F) any account under a qualified tuition 
program described in section 529 or a Coverdell 
education savings account (as defined in section 
530(b)) if the taxpayer, or any individual de-
scribed in subparagraph (A) or (B) with respect 
to the taxpayer, is the designated beneficiary of 
such account or has the right to make any deci-
sion with respect to the investment of any 
amount in such account, and 
‘‘(G) any account under— 
‘‘(i) a plan described in section 
401(a), 
‘‘(ii) an annuity plan described in sec-
tion 403(a), 
‘‘(iii) an annuity contract described in 
section 403(b), or 
‘‘(iv) an eligible deferred compensa-
tion plan described in section 457(b) and
1882 
maintained by an employer described in 
section 457(e)(1)(A), 
if the taxpayer or any individual described in 
subparagraph (A) or (B) with respect to the 
taxpayer has the right to make any decision 
with respect to the investment of any amount in 
such account. 
‘‘(2) RULES FOR DETERMINING STATUS.— 
‘‘(A) RELATIONSHIPS
DETERMINED
AT 
TIME OF ACQUISITION.—Determinations under 
paragraph (1) shall be made as of the time of 
the purchase or exchange (or entering into a 
contract, option, or notional principal contract) 
referred to in subsection (a) except that deter-
minations under subparagraphs (A) and (B) of 
paragraph (1) shall be made for the taxable 
year which includes such purchase or exchange 
(or entering into). 
‘‘(B) DETERMINATION OF MARITAL STA-
TUS.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), marital status shall be 
determined under section 7703.
1883 
‘‘(ii) SPECIAL RULE FOR MARRIED IN-
DIVIDUALS FILING SEPARATELY AND LIV-
ING APART.—A husband and wife who— 
‘‘(I) file separate returns for any 
taxable year, and 
‘‘(II) live apart at all times dur-
ing such taxable year, 
shall not be treated as married individuals. 
‘‘(3) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as may be nec-
essary to prevent the avoidance of the purposes of 
this subsection, including regulations which treat 
persons as related parties if such persons are formed 
or availed of to avoid the purposes of this sub-
section. 
‘‘(g) SPECIFIED ASSET.—For purposes of this sec-
tion, the term ‘specified asset’ means any of the following: 
‘‘(1) Any security described in subparagraph 
(A), (B), (C), (D), or (E) of section 475(c)(2). 
‘‘(2) Any foreign currency. 
‘‘(3) Any commodity described in subparagraph 
(A), (B), or (C) of section 475(e)(2). 
‘‘(4) Except as otherwise provided by the Sec-
retary, any digital representation of value which is 
recorded on a cryptographically secured distributed
1884 
ledger or any similar technology as specified by the 
Secretary. 
Such term shall, except as provided in regulations, include 
contracts or options to acquire or sell, or notional principal 
contracts in respect of, any specified assets. 
‘‘(h) EXCEPTION FOR BUSINESS NEEDS AND HEDG-
ING TRANSACTIONS.—Except as provided in regulations 
prescribed by the Secretary, subsection (a) shall not apply 
in the case of any sale or other disposition— 
‘‘(1) of a foreign currency or commodity de-
scribed in subsection (h), and 
‘‘(2) which— 
‘‘(A) is directly related to the business 
needs of a trade or business of the taxpayer 
(other than the trade or business of trading for-
eign currencies or commodities described in 
subsection (h)), or 
‘‘(B) is part of a hedging transaction (as 
defined in section 1221(b)(2)).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 6045(g)(2)(B) is amended— 
(A) in clause (i)(I)— 
(i) by striking ‘‘security (other than 
stock’’ and inserting ‘‘covered security 
(other than stock’’, and
1885 
(ii) by striking ‘‘stock sold or trans-
ferred’’ and inserting ‘‘covered security 
sold or transferred’’, and 
(B) in clause (ii)— 
(i) by striking ‘‘stock or securities’’ 
and inserting ‘‘specified assets’’, and 
(ii) by striking ‘‘identical securities’’ 
and inserting ‘‘identical specified assets (as 
defined in section 1091(g))’’. 
(2) The table of sections for part VII of sub-
chapter O of chapter 1 is amended by striking the 
item relation to section 1091 and inserting the fol-
lowing new item: 
‘‘Sec. 1091. Loss from wash sales of specified assets.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales, dispositions, and termi-
nations after December 31, 2021. 
(d) NO INFERENCE.—Nothing in this section or the 
amendments made by this section shall be construed to 
create any inference with respect to the proper treatment 
of related parties under section 1091 of the Internal Rev-
enue Code of 1986 with respect to sales, dispositions, and 
terminations before January 1, 2022.
1886 
SEC. 138153. RESEARCH AND EXPERIMENTAL EXPENDI-
TURES. 
(a) IN GENERAL.—Section 13206 of Public Law 
115–97 is amended— 
(1) in subsection (b)(3), by striking ‘‘2021’’ 
and inserting ‘‘2025’’, and 
(2) in subsection (e), by striking ‘‘2021’’ and 
inserting ‘‘2025’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
PART 2—TAX INCREASES FOR HIGH-INCOME 
INDIVIDUALS 
SEC. 138201. APPLICATION OF NET INVESTMENT INCOME 
TAX TO TRADE OR BUSINESS INCOME OF 
CERTAIN HIGH INCOME INDIVIDUALS. 
(a) IN GENERAL.—Section 1411 is amended by add-
ing at the end the following new subsection: 
‘‘(f) APPLICATION TO CERTAIN HIGH INCOME INDI-
VIDUALS.— 
‘‘(1) IN GENERAL.—In the case of any indi-
vidual whose modified adjusted gross income for the 
taxable year exceeds the high income threshold 
amount, subsection (a)(1) shall be applied by sub-
stituting ‘the greater of specified net income or net
1887 
investment income’ for ‘net investment income’ in 
subparagraph (A) thereof. 
‘‘(2) PHASE-IN OF INCREASE.—The increase in 
the tax imposed under subsection (a)(1) by reason of 
the application of paragraph (1) of this subsection 
shall not exceed the amount which bears the same 
ratio to the amount of such increase (determined 
without regard to this paragraph) as— 
‘‘(A) the excess described in paragraph (1), 
bears to 
‘‘(B) $100,000 (1⁄2 such amount in the 
case of a married taxpayer (as defined in sec-
tion 7703) filing a separate return). 
‘‘(3) HIGH INCOME THRESHOLD AMOUNT.—For 
purposes of this subsection, the term ‘high income 
threshold amount’ means— 
‘‘(A) except as provided in subparagraph 
(B) or (C), $400,000, 
‘‘(B) in the case of a taxpayer making a 
joint return under section 6013 or a surviving 
spouse (as defined in section 2(a)), $500,000, 
and 
‘‘(C) in the case of a married taxpayer (as 
defined in section 7703) filing a separate re-
1888 
turn, 1⁄2 of the dollar amount determined under 
subparagraph (B). 
‘‘(4) SPECIFIED NET INCOME.—For purposes of 
this section, the term ‘specified net income’ means 
net investment income determined— 
‘‘(A) without regard to the phrase ‘other 
than such income which is derived in the ordi-
nary course of a trade or business not described 
in paragraph (2),’ in subsection (c)(1)(A)(i), 
‘‘(B) without regard to the phrase ‘de-
scribed 
in 
paragraph 
(2)’ 
in 
subsection 
(c)(1)(A)(ii), 
‘‘(C) without regard to the phrase ‘other 
than property held in a trade or business not 
described in paragraph (2)’ in subsection 
(c)(1)(A)(iii), 
‘‘(D) without regard to paragraphs (2), 
(3), and (4) of subsection (c), and 
‘‘(E) by treating paragraphs (5) and (6) of 
section 469(c) (determined without regard to 
the phrase ‘To the extent provided in regula-
tions,’ in such paragraph (6)) as applying for 
purposes of subsection (c) of this section.’’. 
(b) APPLICATION TO TRUSTS AND ESTATES.—Sec-
tion 1411(a)(2)(A) is amended by striking ‘‘undistributed
1889 
net investment income’’ and inserting ‘‘the greater of un-
distributed specified net income or undistributed net in-
vestment income’’. 
(c) CLARIFICATIONS WITH RESPECT
TO DETER-
MINATION OF NET INVESTMENT INCOME.— 
(1) CERTAIN EXCEPTIONS.—Section 1411(c)(6) 
is amended to read as follows: 
‘‘(6) SPECIAL RULES.—Net investment income 
shall not include— 
‘‘(A) any item taken into account in deter-
mining self-employment income for such taxable 
year on which a tax is imposed by section 
1401(b), 
‘‘(B) wages received with respect to em-
ployment on which a tax is imposed under sec-
tion 3101(b) or 3201(a) (including amounts 
taken into account under section 3121(v)(2)), 
and 
‘‘(C) wages received from the performance 
of services earned outside the United States for 
a foreign employer.’’. 
(2) NET OPERATING LOSSES NOT TAKEN INTO 
ACCOUNT.—Section 1411(c)(1)(B) is amended by in-
serting ‘‘(other than section 172)’’ after ‘‘this sub-
title’’.
1890 
(3) INCLUSION
OF
CERTAIN
FOREIGN
IN-
COME.— 
(A) IN GENERAL.—Section 1411(c)(1)(A) 
is amended by striking ‘‘and’’ at the end of 
clause (ii), by striking ‘‘over’’ at the end of 
clause (iii) and inserting ‘‘and’’, and by adding 
at the end the following new clause: 
‘‘(iv) any amount includible in gross 
income under section 951, 951A, 1293, or 
1296, over’’. 
(B) PROPER
TREATMENT
OF
CERTAIN 
PREVIOUSLY TAXED INCOME.—Section 1411(c) 
is amended by adding at the end the following 
new paragraph: 
‘‘(7) CERTAIN PREVIOUSLY TAXED INCOME.— 
The Secretary shall issue regulations or other guid-
ance providing for the treatment of— 
‘‘(A) distributions of amounts previously 
included in gross income for purposes of chap-
ter 1 but not previously subject to tax under 
this section, and 
‘‘(B) distributions described in section 
962(d).’’.
1891 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
(e) TRANSITION RULE.—The regulations or other 
guidance issued by the Secretary under section 1411(c)(7) 
of the Internal Revenue Code of 1986 (as added by this 
section) shall include provisions which provide for the 
proper coordination and application of clauses (i) and (iv) 
of section 1411(c)(1)(A) with respect to— 
(1) taxable years beginning on or before De-
cember 31, 2021, and 
(2) taxable years beginning after such date. 
SEC. 138202. LIMITATIONS ON EXCESS BUSINESS LOSSES 
OF NONCORPORATE TAXPAYERS. 
(a) LIMITATION MADE PERMANENT.— 
(1) IN GENERAL.—Section 461(l)(1) is amend-
ed to read as follows: 
‘‘(1) LIMITATION.—In the case of any taxpayer 
other than a corporation, any excess business loss of 
the taxpayer for the taxable year shall not be al-
lowed.’’. 
(2) CONFORMING AMENDMENT.—Section 461 is 
amended by striking subsection (j). 
(b) MODIFICATION OF CARRYOVER OF DISALLOWED 
LOSSES.—Section 461(l)(2) is amended to read as follows:
1892 
‘‘(2) DISALLOWED LOSS CARRYOVER.—Any loss 
which is disallowed under paragraph (1) for any tax-
able year shall be treated (solely for purposes of this 
chapter) as a deduction described in paragraph 
(3)(A)(i) for the next taxable year.’’. 
(c) TREATMENT
OF UNUSED EXCESS BUSINESS 
LOSS CARRYOVERS
ON TERMINATION
OF ESTATE
OR 
TRUST.—Section 461(l) is amended by adding at the end 
the following new paragraph: 
‘‘(7) SPECIAL RULE FOR TERMINATION OF ES-
TATE OR TRUST.—If, on the termination of an es-
tate or trust, the estate or trust has an excess busi-
ness loss carryover, then such carryover or such ex-
cess shall be allowed as a deduction, in accordance 
with regulations prescribed by the Secretary, to the 
beneficiaries succeeding to the property of the estate 
or trust.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2020. 
SEC. 138203. SURCHARGE ON HIGH INCOME INDIVIDUALS, 
ESTATES, AND TRUSTS. 
(a) IN GENERAL.—Part I of subchapter A of chapter 
1 is amended by inserting after section 1 the following 
new section:
1893 
‘‘SEC. 1A. SURCHARGE ON HIGH INCOME INDIVIDUALS, ES-
TATES, AND TRUSTS. 
‘‘(a) GENERAL RULE.—In the case of a taxpayer 
other than a corporation, there is hereby imposed (in addi-
tion to any other tax imposed by this subtitle) a tax equal 
to the sum of— 
‘‘(1) 5 percent of so much of the modified ad-
justed gross income of the taxpayer as exceeds— 
‘‘(A) $10,000,000, in the case of any tax-
payer not described in subparagraph (B) or 
(C), 
‘‘(B) $5,000,000, in the case of a married 
individual filing a separate return, and 
‘‘(C) $200,000, in the case of an estate or 
trust, plus 
‘‘(2) 3 percent of so much of the modified ad-
justed gross income of the taxpayer as exceeds— 
‘‘(A) $25,000,000, in the case of any tax-
payer not described in subparagraph (B) or 
(C), 
‘‘(B) $12,500,000, in the case of a married 
individual filing a separate return, and 
‘‘(C) $500,000, in the case of an estate or 
trust. 
‘‘(b) MODIFIED ADJUSTED GROSS INCOME.—For 
purposes of this section, the term ‘modified adjusted gross
1894 
income’ means adjusted gross income reduced by any de-
duction (not taken into account in determining adjusted 
gross income) allowed for investment interest (as defined 
in section 163(d)) or business interest (as defined in sec-
tion 163(j)). In the case of an estate or trust, adjusted 
gross income shall be determined as provided in section 
67(e), and reduced by the amount allowed as a deduction 
under section 642(c). 
‘‘(c) SPECIAL RULES.— 
‘‘(1) NONRESIDENT ALIEN.—In the case of a 
nonresident alien individual (other than an indi-
vidual described in section 876(a) or 877(a)), only 
amounts taken into account in connection with the 
tax imposed under section 871(b) shall be taken into 
account under this section. 
‘‘(2) 
CITIZENS
AND
RESIDENTS
LIVING 
ABROAD.—Each dollar amount which is applicable to 
any taxpayer under subsection (a) shall be decreased 
(but not below zero) by the excess (if any) of— 
‘‘(A) the amounts excluded from the tax-
payer’s gross income under section 911, over 
‘‘(B) the amounts of any deductions or ex-
clusions disallowed under section 911(d)(6) 
with respect to the amounts described in sub-
paragraph (A).
1895 
‘‘(3) CHARITABLE
TRUSTS.—Subsection (a) 
shall not apply to a trust all the unexpired interests 
in which are devoted to one or more of the purposes 
described in section 170(c)(2)(B). 
‘‘(4) NOT TREATED AS TAX IMPOSED BY THIS 
CHAPTER
FOR
CERTAIN
PURPOSES.—The tax im-
posed under this section shall not be treated as tax 
imposed by this chapter for purposes of determining 
the amount of any credit under this chapter (other 
than sections 27 and 901) or for purposes of section 
55. 
‘‘(5) ELECTING SMALL BUSINESS TRUSTS.—For 
purposes of the determination of adjusted gross in-
come, section 641(c)(1)(A) shall not apply and all 
portions of any electing small business trust shall be 
treated as a single trust. 
‘‘(d) REGULATIONS.—The Secretary shall issue such 
regulations or other guidance as may be necessary or ap-
propriate to carry out the purposes of this section, includ-
ing regulations or other guidance to prevent the avoidance 
of the purposes of this section.’’. 
(b) COORDINATION WITH CERTAIN PROVISIONS.— 
(1) INTEREST ON CERTAIN DEFERRED TAX LI-
ABILITY.—Section 453A(c) is amended by redesig-
nating paragraph (6) as paragraph (7) and by in-
1896 
serting after paragraph (5) the following new para-
graph: 
‘‘(6) SURCHARGE
ON
HIGH
INCOME
INDIVID-
UALS TAKEN INTO ACCOUNT IN DETERMINING MAX-
IMUM RATE OF TAX.—For purposes of paragraph 
(3)(B), the maximum rate of tax in effect under sec-
tion 1 shall be treated as being equal to the sum of 
such rate and the rates in effect under paragraphs 
(1) and (2) of section 1A(a).’’. 
(2) ALIEN RESIDENTS OF PUERTO RICO, GUAM, 
AMERICAN SAMOA, OR THE NORTHERN MARIANA IS-
LANDS.—Section 876(a) is amended by striking sec-
tion 1 and inserting ‘‘sections 1 and 1A’’. 
(3) EXPATRIATION
TO
AVOID
TAX.—Section 
877(b) is amended by inserting ‘‘and section 1A’’ 
after ‘‘section 1 or 55’’. 
(4) LIMITATION ON FOREIGN TAX CREDIT.— 
(A) Section 904(b)(3)(E)(i)(I) is amended 
by inserting ‘‘increased by the sum of the rates 
set forth in paragraphs (1) and (2) of section 
1A(a)’’ after ‘‘(whichever applies)’’. 
(B) Section 904(d)(2)(F) is amended by 
adding at the end the following: ‘‘For purposes 
of the first sentence of this subparagraph, the 
highest rate of tax specified in section 1 shall
1897 
be treated as being equal to the sum of such 
rate and the rates in effect under paragraphs 
(1) and (2) of section 1A(a).’’. 
(5) ELECTION BY INDIVIDUALS TO BE SUBJECT 
TO TAX AT CORPORATE RATES.—Section 962(a)(1) 
is amended by inserting ‘‘, 1A,’’ after ‘‘sections 1’’. 
(6) INTEREST ON CERTAIN TAX DEFERRAL.— 
Section 1291(c)(2) is amended by adding at the end 
the following: ‘‘For purposes of the preceding sen-
tence, the highest rate of tax in effect under section 
1 shall be treated as being equal to the sum of such 
rate and the rates in effect under paragraphs (1) 
and (2) of section 1A(a).’’. 
(7) AVERAGING
OF
FARM
INCOME.—Section 
1301(a) is amended by striking ‘‘section 1’’ both 
places it appears and inserting ‘‘sections 1 and 1A’’. 
(8) TITLE
CASES.—Section 1398(c)(2) is 
amended by inserting ‘‘and tax shall be imposed 
under section 1A by treating the estate as a married 
individual filing a separate return’’ before the period 
at the end. 
(9) WITHHOLDING OF TAX ON FOREIGN PART-
NERS’ SHARE
OF
EFFECTIVELY
CONNECTED
IN-
COME.—Section 1446(b)(2) is amended by adding at 
the end the following flush sentence:
1898 
‘‘For purposes of subparagraph (A), the highest rate 
of tax in effect under section 1 shall be treated as 
being equal to the sum of such rate and the rates 
in effect under paragraphs (1) and (2) of section 
1A(a).’’. 
(10) RELIEF
FROM
JOINT
AND
SEVERAL
LI-
ABILITY ON JOINT RETURN.—Section 6015(d)(2)(B) 
is amended by inserting ‘‘, 1A,’’ after ‘‘section 1’’. 
(11) PARTNERSHIP ADJUSTMENTS.— 
(A) Section 6225(b)(1) is amended by add-
ing at the end the following flush sentence: 
‘‘For purposes of subparagraph (B), the highest rate 
of tax in effect under section 1 shall be treated as 
being equal to the sum of such rate and the rates 
in effect under paragraphs (1) and (2) of section 
1A(a).’’. 
(B) Section 6225(c)(4)(A) is amended— 
(i) by striking ‘‘subsection (b)(1)(A)’’ 
and inserting ‘‘subsection (b)(1)(B)’’, and 
(ii) by striking ‘‘or’’ at the end of 
clause (i), by adding ‘‘or’’ at the end of 
clause (ii), and by inserting after clause 
(ii) the following new clause: 
‘‘(iii) is not an individual subject to 
one or both of the rates of tax in effect
1899 
under paragraphs (1) and (2) of section 
1A(a),’’. 
(12) REQUIRED
PAYMENTS
FOR
ENTITIES 
ELECTING
NOT
TO
HAVE
REQUIRED
TAXABLE 
YEAR.—Section 7519(b) is amended by inserting 
‘‘and increased by the sum of the rates in effect 
under paragraphs (1) and (2) of section 1A(a)’’ be-
fore the period at the end. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part I of subchapter A of chapter 1 is amended by 
inserting after the item relating to section 1 the following 
new item: 
‘‘Sec. 1A. Surcharge on high income individuals.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
PART 3—MODIFICATIONS OF RULES RELATING 
TO RETIREMENT PLANS 
Subpart A—Limitations on High-income Taxpayers 
With Large Retirement Account Balances 
SEC. 138301. CONTRIBUTION LIMIT FOR INDIVIDUAL RE-
TIREMENT PLANS OF HIGH-INCOME TAX-
PAYERS WITH LARGE ACCOUNT BALANCES. 
(a) CONTRIBUTION LIMIT.—
1900 
(1) IN GENERAL.—Subpart A of part I of sub-
chapter D of chapter 1 is amended by adding at the 
end the following: 
‘‘SEC. 409B. CONTRIBUTION LIMIT ON INDIVIDUAL RETIRE-
MENT PLANS OF HIGH-INCOME TAXPAYERS 
WITH LARGE ACCOUNT BALANCES. 
‘‘(a) GENERAL RULE.—Notwithstanding any other 
provision of this title, in the case of an individual who is 
an applicable taxpayer for any taxable year, no annual ad-
ditions for such taxable year shall be made by, or on behalf 
of, such individual to any individual retirement plan to the 
extent such annual additions exceed the excess (if any) 
of— 
‘‘(1) the applicable dollar amount for such tax-
able year, over 
‘‘(2) the aggregate vested balances to the credit 
of the individual (whether as a participant, owner, or 
beneficiary) in all applicable retirement plans (deter-
mined as of the close of the calendar year preceding 
the calendar year in which such taxable year begins). 
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) ANNUAL ADDITION.— 
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, the term ‘annual addition’
1901 
means any contribution to an individual retire-
ment plan. 
‘‘(B) CONTRIBUTIONS TO SEP AND SIMPLE 
PLANS.—In the case of any employer or em-
ployee contributions by, or on behalf of, an indi-
vidual to a simplified employee pension under 
section 408(k) or a simple retirement account 
under section 408(p)— 
‘‘(i) such contributions shall not be 
treated as annual additions for purposes of 
applying the limitation under subsection 
(a), but 
‘‘(ii) the excess described in sub-
section (a) shall be reduced by the amount 
of such contributions in applying such limi-
tation to other annual additions with re-
spect to such individual. 
‘‘(C) 
ROLLOVER
CONTRIBUTIONS
DIS-
REGARDED.—A rollover contribution under sec-
tion 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 
457(e)(16) shall not be treated as an annual 
addition. 
‘‘(D) ACCOUNTS ACQUIRED BY DEATH OR 
DIVORCE OR SEPARATION.—The acquisition of 
an individual retirement plan (or the transfer to
1902 
or contribution of amounts to an individual re-
tirement plan) by reason of— 
‘‘(i) the death of another individual, 
or 
‘‘(ii) divorce or separation (pursuant 
to section 408(d)(6)), 
shall not be treated as an annual addition. 
‘‘(2) APPLICABLE DOLLAR AMOUNT.—The term 
‘applicable dollar amount’ means $10,000,000. 
‘‘(3) APPLICABLE
RETIREMENT
PLAN.—The 
term ‘applicable retirement plan’ means— 
‘‘(A) a defined contribution plan to which 
section 401(a) or 403(a) applies, 
‘‘(B) an annuity contract under section 
403(b), 
‘‘(C) an eligible deferred compensation 
plan described in section 457(b) which is main-
tained by an eligible employer described in sec-
tion 457(e)(1)(A), or 
‘‘(D) an individual retirement plan. 
‘‘(4) APPLICABLE TAXPAYER.— 
‘‘(A) IN GENERAL.—The term ‘applicable 
taxpayer’ means, with respect to any taxable 
year, a taxpayer whose modified adjusted gross
1903 
income for such taxable year exceeds the 
amount determined under subparagraph (B). 
‘‘(B) DOLLAR LIMIT.—The amount deter-
mined under this subparagraph for any taxable 
year is— 
‘‘(i) $400,000 for an individual who is 
a taxpayer not described in clause (ii) or 
(iii), 
‘‘(ii) $425,000 in the case of an indi-
vidual who is a head of household (as de-
fined in section 2(b)), and 
‘‘(iii) $450,000 in the case of an indi-
vidual who is a married individual filing a 
joint return or a surviving spouse (as de-
fined in section 2(a)). 
‘‘(C) MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of this paragraph, the 
term ‘modified adjusted gross income’ means 
adjusted gross income determined without re-
gard to sections 911, 931, and 933, without re-
gard to any deduction for annual additions to 
individual retirement plans to which subsection 
(a) applies, and without regard to any increase 
in minimum required distributions by reason of 
section 4974(e).
1904 
‘‘(5) ADJUSTMENTS FOR INFLATION.— 
‘‘(A) IN
GENERAL.—In the case of any 
taxable year beginning after 2029, the dollar 
amounts in paragraphs (2) and (4)(B) shall be 
increased by an amount equal to the product 
of— 
‘‘(i) such dollar amount, and 
‘‘(ii) the cost-of-living adjustment 
under section 1(f)(3) for the calendar year 
in which such taxable year begins, deter-
mined by substituting ‘calendar year 2028’ 
for ‘calendar year 2016’ in subparagraph 
(A)(ii) thereof. 
‘‘(B) ROUNDING.—If any amount as ad-
justed under subparagraph (A) is not— 
‘‘(i) in the case of the dollar amount 
under 
paragraph 
(2), 
a 
multiple 
of 
$250,000, such amount shall be rounded 
to the next lowest multiple of $250,000. 
‘‘(ii) in the case of a dollar amount 
under paragraph (4)(B), a multiple of 
$1,000, such amount shall be rounded to 
the next lowest multiple of $1,000. 
‘‘(c) REGULATIONS.—The Secretary shall prescribe 
such regulations and guidance as are necessary or appro-
1905 
priate to carry out the purposes of this section, including 
regulations or guidance that provide for the application 
of this section and section 4974(e) in the case of plans 
with a valuation date other than the last day of a calendar 
year.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) The table of contents for subpart A of 
part I of subchapter D of chapter 1 is amended 
by adding after the item relating to section 
409A the following new item: 
‘‘Sec. 409B. Contribution limit on individual retirement plans of high-income 
taxpayers with large account balances.’’. 
(B) Section 408(r) is amended by adding 
at the end the following new paragraph: 
‘‘(3) For additional limitations on contributions 
to individual retirement plans with large account 
balances, see sections 408A(e)(3) and 409B.’’. 
(b) EXCISE TAX ON EXCESS ANNUAL ADDITIONS.— 
(1) IN GENERAL.—Section 4973 is amended by 
adding at the end the following new subsection: 
‘‘(i) SPECIAL RULE FOR INDIVIDUAL RETIREMENT 
PLANS WITH EXCESS ANNUAL ADDITIONS.—For pur-
poses of this section, in the case of individual retirement 
plans, the term ‘excess contributions’, with respect to any 
taxable year, is increased by the sum of—
1906 
‘‘(1) the excess of the annual additions (within 
the meaning of section 409B(b)(1)) to such plans 
over the limitation under section 409B(a) for such 
taxable year, reduced by the amount of any excess 
contributions determined under subsections (b) and 
(f), and 
‘‘(2) the lesser of— 
‘‘(A) the amount determined under this 
subsection for the preceding taxable year with 
respect to such plans, reduced by the aggregate 
distributions from such plans for the taxable 
year (including distributions required under sec-
tion 4974(e)) to the extent not contributed in 
a rollover contribution to another eligible retire-
ment plan in accordance with section 402(c), 
403(a)(4), 
403(b)(8), 
408(d)(3), 
and 
457(e)(16), or 
‘‘(B) the amount (if any) by which the 
amount determined under section 409B(a)(2) 
for the taxable year exceeds the applicable dol-
lar amount under section 409B(b)(2) for the 
taxable year.’’. 
(2) CONFORMING
AMENDMENTS.—Subsections 
(b) and (f) of section 4973 are each amended by in-
1907 
serting ‘‘, except as further provided in subsection 
(i)’’ after ‘‘For purposes of this section’’. 
(c) REPORTING REQUIREMENTS.—Section 6057(a) is 
amended by adding at the end the following: 
‘‘(3) ADDITIONAL
INFORMATION
REGARDING 
HIGH ACCOUNT BALANCES.— 
‘‘(A) IN GENERAL.—If, as of the close of 
any plan year, 1 or more participants or bene-
ficiaries in an applicable retirement plan (as de-
fined in section 409B(b)(3) without regard to 
subparagraph (D) thereof) have a vested ac-
count balance of at least $2,500,000, the plan 
administrator shall file a statement with the 
Secretary, within the period described in para-
graph (1), which includes— 
‘‘(i) the name and identifying number 
of each such participant (without regard to 
whether such participant has separated 
from employment) or beneficiaries, 
‘‘(ii) the amount of the vested account 
balance of each such participant or bene-
ficiary, and 
‘‘(iii) a separate accounting of such 
vested account balances in designated Roth 
accounts (within the meaning of section
1908 
402A) and all other vested account bal-
ances. 
‘‘(B) INCLUSION IN REGISTRATION STATE-
MENT.—If both subparagraph (A) and para-
graph (1) apply to a plan, the plan adminis-
trator shall include the information required 
under subparagraph (A) in the registration 
statement under paragraph (1) rather than file 
a statement under subparagraph (A). 
‘‘(C) ADJUSTMENTS FOR INFLATION.—In 
the case of any plan year beginning after 2029, 
the $2,500,000 amount under subparagraph 
(A) shall be increased by an amount equal to 
the product of— 
‘‘(i) such dollar amount, and 
‘‘(ii) the cost-of-living adjustment 
under section 1(f)(3) for the calendar year 
in which such taxable year begins, deter-
mined by substituting ‘calendar year 2028’ 
for ‘calendar year 2016’ in subparagraph 
(A)(ii) thereof. 
If the amount as adjusted under the preceding 
sentence is not a multiple of $250,000, such 
amount shall be rounded to the next lowest 
multiple of $250,000.’’.
1909 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
subsections (a) and (b) shall apply to taxable years 
beginning after December 31, 2028. 
(2) PLAN
REQUIREMENTS.—The amendments 
made by subsection (c) shall apply to plan years be-
ginning after December 31, 2028. 
SEC. 138302. INCREASE IN MINIMUM REQUIRED DISTRIBU-
TIONS FOR HIGH-INCOME TAXPAYERS WITH 
LARGE RETIREMENT ACCOUNT BALANCES. 
(a) IN GENERAL.—Section 4974 is amended by add-
ing at the end the following: 
‘‘(e) INCREASE IN MINIMUM REQUIRED DISTRIBU-
TIONS FOR HIGH-INCOME TAXPAYERS WITH LARGE AG-
GREGATE ACCOUNT BALANCES.— 
‘‘(1) IN GENERAL.—If this subsection applies to 
a payee who is an applicable taxpayer (as defined in 
section 409B(b)(4)) for a taxable year— 
‘‘(A) all qualified retirement plans and eli-
gible deferred compensation plans of the payee 
which are applicable retirement plans taken into 
account in computing the excess described in 
paragraph (3)(A) shall be treated as 1 plan 
solely for purposes of applying this section to 
the increase in minimum required distributions
1910 
for such taxable year determined under sub-
paragraph (B), and 
‘‘(B) the minimum required distributions 
under this section for all plans treated as 1 
plan under subparagraph (A) with respect to 
such payee for such taxable year shall be in-
creased by the excess (if any) of— 
‘‘(i) the sum of— 
‘‘(I) if paragraph (2) applies to 
such taxable year, the applicable Roth 
excess amount, plus 
‘‘(II) 50 percent of the excess de-
termined under paragraph (3)(A), re-
duced by the applicable Roth excess 
amount, over 
‘‘(ii) the sum of the minimum re-
quired distributions (determined without 
regard to this subsection) for all such 
plans. 
‘‘(2) APPLICABLE ROTH EXCESS AMOUNT.— 
‘‘(A) 
APPLICATION.—For 
purposes 
of 
paragraph (1)(B)(i), this paragraph applies to a 
taxable year of a payee if the aggregate vested 
balances to the credit of the payee (whether as 
a participant, owner, or beneficiary) in all appli-
1911 
cable retirement plans (determined as of the 
close of the calendar year preceding the cal-
endar year in which the taxable year begins) ex-
ceed 200 percent of the applicable dollar 
amount for the calendar year in which the tax-
able year begins. 
‘‘(B) 
APPLICABLE
ROTH
EXCESS 
AMOUNT.—The applicable Roth excess amount 
for any taxable year to which this paragraph 
applies is an amount equal to the lesser of— 
‘‘(i) the excess determined under sub-
paragraph (A), or 
‘‘(ii) the aggregate balances to the 
credit of the payee (whether as a partici-
pant, owner, or beneficiary) in all Roth 
IRAs and designated Roth accounts (with-
in the meaning of section 402A) as of the 
time described in subparagraph (A). 
‘‘(3) 
APPLICATION.—This 
subsection 
shall 
apply to a payee for a taxable year— 
‘‘(A) if the aggregate vested balances to 
the credit of the payee (whether as a partici-
pant, owner, or beneficiary) in all applicable re-
tirement plans (determined as of the close of 
the calendar year preceding the calendar year
1912 
in which the taxable year begins) exceed the ap-
plicable dollar amount for the calendar year in 
which the taxable year begins, and 
‘‘(B) without regard to whether amounts 
with respect to the payee are otherwise required 
to be distributed under section 401(a)(9), 
403(b)(10), 408(a)(6), 408(b)(3), or 457(d)(2). 
‘‘(4) COORDINATION AND ALLOCATION.— 
‘‘(A) MINIMUM
DISTRIBUTION
REQUIRE-
MENTS.—If this subsection applies to a payee 
for any taxable year— 
‘‘(i) this section shall apply first to 
minimum required distributions deter-
mined without regard to this subsection 
and then to any increase in minimum re-
quired distributions by reason of this sub-
section, and 
‘‘(ii) nothing in this subsection shall 
be construed to affect the amount of any 
minimum required distribution determined 
without regard to this subsection or the 
plan or plans from which it is required to 
be distributed. 
‘‘(B) ALLOCATION OF INCREASE IN MIN-
IMUM REQUIRED DISTRIBUTIONS.—
1913 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (ii) and (iii), the taxpayer 
may, in such form and manner as the Sec-
retary may prescribe, allocate any increase 
in minimum required distributions by rea-
son of this subsection to applicable retire-
ment plans treated as 1 plan under sub-
paragraph (A) in such manner as the tax-
payer chooses. 
‘‘(ii) ALLOCATION TO ROTH IRAS AND 
ACCOUNTS.—In the case of a taxable year 
to which paragraph (2) applies, the portion 
of any increase in minimum required dis-
tributions by reason of this subsection 
equal to the applicable Roth excess amount 
shall be allocated first to Roth IRAs and 
then to designated Roth accounts (within 
the meaning of section 402A) of the payee. 
‘‘(iii) SPECIAL RULES FOR EMPLOYEE 
STOCK OWNERSHIP PLANS.— 
‘‘(I) IN GENERAL.—In the case 
of a payee to which this subsection 
applies for any taxable year who has 
account balances in 1 or more em-
ployee stock ownership plans (as de-
1914 
fined in section 4975(e)(7)) any por-
tion of which is invested in employer 
securities 
which 
are 
not 
readily 
tradable on an established securities 
market, the increase in minimum re-
quired distributions by reason of this 
subsection shall not be allocated to 
any such portion. 
‘‘(II) EXCEPTION FOR AMOUNTS 
ATTRIBUTABLE TO ROLLOVER.—Sub-
clause (I) shall not apply to so much 
of any account balance as is attrib-
utable to a rollover contribution after 
the date of the enactment of this sub-
section to the account in accordance 
with 
section 
402(c), 
403(a)(4), 
403(b)(8), 408(d)(3), or 457(e)(16). 
‘‘(5) DISTRIBUTIONS NOT ELIGIBLE FOR ROLL-
OVERS.—For purposes of determining whether a dis-
tribution is an eligible rollover distribution, any dis-
tribution from an applicable retirement plan which is 
attributable to any increase in minimum required 
distributions by reason of this subsection shall be 
treated as a distribution required under section
1915 
401(a)(9), 403(b)(10), 408(a)(6), 408(b)(3), or 
457(d)(2), whichever is applicable. 
‘‘(6) ROTH DISTRIBUTIONS TREATED AS QUALI-
FIED DISTRIBUTIONS.—In the case of any distribu-
tion from a Roth IRA, or designated Roth account 
(within the meaning of section 402A), of the payee 
by reason of the allocation of an increase in min-
imum required distributions under this subsection, 
such distribution shall be treated as a qualified dis-
tribution under section 408A(d)(2) or 402A(d)(2), 
as the case may be. 
‘‘(7) DEFINITIONS.—For purposes of this sub-
section, any term used in this subsection which is 
also used in section 409B shall have the same mean-
ing as when such term is used in such section.’’. 
(b) SPECIAL RULES.— 
(1) DISTRIBUTION RIGHTS.— 
(A) QUALIFIED TRUSTS.— 
(i) IN
GENERAL.—Section 401(a) is 
amended by inserting after paragraph (38) 
the following new paragraph: 
‘‘(39) IMMEDIATE
DISTRIBUTION
RIGHT.—A 
trust forming part of a defined contribution plan 
shall not constitute a qualified trust under this sec-
tion unless an employee who certifies to the plan
1916 
that the employee is a taxpayer who is subject to the 
distribution requirements of section 4974(e) may 
elect to receive a distribution from the employee’s 
account balance under the plan in such amount as 
the employee may elect, including any amounts at-
tributable to a qualified cash or deferred arrange-
ment (as defined in subsection (k)(2)). The pre-
ceding sentence shall not apply in the case of any 
portion of an account balance to which section 
4974(e)(4)(B)(iii)(I) applies.’’. 
(ii) APPLICATION TO EMPLOYEE’S AN-
NUITIES.—Section 404(a)(2) is amended 
by striking ‘‘and (37)’’ and inserting 
‘‘(37), and (39)’’. 
(B) ANNUITY CONTRACTS.— 
(i) CUSTODIAL
ACCOUNTS.—Section 
403(b)(7)(A) is amended by adding at the 
end the following new flush sentence: 
‘‘Notwithstanding clause (i), the custodial ac-
count shall permit an employee who certifies 
that the employee is a taxpayer who is subject 
to the distribution requirements of section 
4974(e) to elect to receive a distribution from 
the employee’s custodial account in such 
amount as the employee may elect.’’.
1917 
(ii) ANNUITY
CONTRACTS.—Section 
403(b)(11) is amended by adding at the 
end the following new sentence: ‘‘Notwith-
standing subparagraphs (A), (B), (C), and 
(D), the annuity contract shall permit an 
employee who certifies that the employee is 
a taxpayer who is subject to the distribu-
tion requirements of section 4974(e) to 
elect to receive a distribution of contribu-
tions made pursuant to a salary reduction 
agreement (within the meaning of section 
402(g)(3)) from the employee’s annuity 
contract in such amount as the employee 
may elect.’’ 
(C) 
GOVERNMENTAL
PLANS.—Section 
457(d)(1) is amended by adding at the end the 
following new flush sentence: 
‘‘Notwithstanding subparagraph (A), an eligible de-
ferred compensation plan of an employer described 
in subsection (e)(1)(A) shall permit a participant or 
beneficiary who certifies that the participant or ben-
eficiary is a taxpayer who is subject to the distribu-
tion requirements of section 4974(e) to elect to re-
ceive a distribution from the plan in such amount as 
the participant or beneficiary may elect.’’.
1918 
(2) EXCEPTION FROM 10 PERCENT ADDITIONAL 
TAX ON EARLY DISTRIBUTIONS.—Section 72(t)(2) is 
amended by adding at the end the following new 
subparagraph: 
‘‘(I) DISTRIBUTIONS
OF
EXCESS
BAL-
ANCES.—Distributions from an applicable re-
tirement plan (within the meaning of section 
409B)) to the extent such distributions for the 
taxable year do not exceed the amount required 
to be distributed from such plan under section 
4974(e).’’. 
(3) WITHHOLDING.—Section 3405(b) is amend-
ed by adding at the end the following new para-
graph: 
‘‘(3) ADDITIONAL
WITHHOLDING
FOR
RE-
QUIRED DISTRIBUTIONS FROM HIGH BALANCE RE-
TIREMENT ACCOUNTS.— 
‘‘(A) IN GENERAL.—For purposes of this 
section, a distribution pursuant to section 
401(a)(39), 
the 
last 
sentence 
of 
section 
403(b)(7)(A), the last sentence of section 
403(b)(11), and the last sentence of section 
457(d)(1) shall be treated as a nonperiodic dis-
tribution, except that in applying this sub-
section to such distribution—
1919 
‘‘(i) paragraph (1) shall be applied by 
substituting ‘35 percent’ for ‘10 percent’, 
and 
‘‘(ii) no election may be made under 
paragraph (2) with respect to such dis-
tribution. 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply to any qualified distribution 
from a designated Roth account (within the 
meaning of section 402A).’’. 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
subsection (a) shall apply to taxable years beginning 
after December 31, 2028. 
(2) PLAN
REQUIREMENTS.—The amendments 
made by subsection (b) shall apply to plan years be-
ginning after December 31, 2028. 
Subpart B—Other Provisions Relating to Individual 
Retirement Plans 
SEC. 138311. TAX TREATMENT OF ROLLOVERS TO ROTH 
IRAS AND ACCOUNTS. 
(a) ROLLOVERS
AND CONVERSIONS LIMITED
TO 
TAXABLE AMOUNTS.— 
(1) ROTH IRAS.—
1920 
(A) IN GENERAL.—Paragraph (1) of sec-
tion 408A(e) is amended by adding at the end 
the following new sentence: ‘‘A qualified rollover 
contribution shall not include any rollover con-
tribution from any eligible retirement plan de-
scribed in subparagraph (B) (other than from a 
designated Roth account (within the meaning of 
section 402A)) if any portion of the distribution 
from which such contribution is made would 
(without regard to such contribution) be treated 
as not includible in gross income.’’ 
(B) CONVERSIONS.—Subparagraph (C) of 
section 408A(d)(3) is amended by adding at the 
end the following new sentence: ‘‘This subpara-
graph shall not apply if any portion of the plan 
being converted would be treated as not includ-
ible in gross income if distributed at the time 
of the conversion.’’ 
(2) DESIGNATED
ROTH
ACCOUNTS.—Section 
402A(c)(4)(B) is amended by inserting ‘‘, deter-
mined after the application of the last sentence of 
paragraph (1) thereof’’ after ‘‘section 408A(e)’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to distributions, trans-
1921 
fers, and contributions made after December 31, 
2021. 
(b) NO ROLLOVERS OR CONVERSIONS FOR HIGH-IN-
COME TAXPAYERS.— 
(1) ROTH IRAS.— 
(A) QUALIFIED
ROLLOVER
CONTRIBU-
TION.—Section 408A(e), as amended by sub-
section (a), is amended by adding at the end 
the following: 
‘‘(3) HIGH-INCOME
TAXPAYERS
MAY
ONLY 
ROLLOVER FROM ROTH IRAS AND ACCOUNTS.—If— 
‘‘(A) a taxpayer is an applicable taxpayer 
(as defined in section 409B(b)(4)) for the tax-
able year in which a distribution is made, and 
‘‘(B) such distribution is contributed to a 
Roth IRA in a rollover contribution, 
such contribution shall be treated as a qualified roll-
over contribution under paragraph (1) only if it is 
made from another Roth IRA or from a designated 
Roth account (within the meaning of section 
402A).’’. 
(B) ELIMINATION
OF
CONVERSIONS.— 
Paragraph (3) of section 408A(d), as amended 
by subsection (a), is amended by adding at the 
end the following:
1922 
‘‘(G) PARAGRAPH NOT TO APPLY TO HIGH- 
INCOME TAXPAYERS.—If a taxpayer is an appli-
cable 
taxpayer 
(as 
defined 
in 
section 
409B(b)(4)) for any taxable year, this para-
graph shall not apply to any distribution to 
which this paragraph otherwise applies (or to 
any conversion described in subparagraph (C)) 
which is made during such taxable year.’’. 
(2) DESIGNATED ROTH ACCOUNTS.—Paragraph 
(4) of section 402A(c) is amended by adding at the 
end the following: 
‘‘(F) PARAGRAPH NOT TO APPLY TO HIGH- 
INCOME TAXPAYERS.—If a taxpayer is an appli-
cable 
taxpayer 
(as 
defined 
in 
section 
409B(b)(4)) for any taxable year, this para-
graph shall not apply to any distribution to 
which this paragraph otherwise applies and 
which is made during such taxable year.’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
409B(b)(4)(C), as added by this Act, is amended— 
(A) by striking ‘‘and without regard to’’ 
and inserting ‘‘without regard to’’, and 
(B) by inserting before the period at the 
end the following: ‘‘, and without regard to the 
inclusion in gross income of any converted or
1923 
contributed 
amount 
described 
in 
section 
408A(e)(3), 
408A(d)(3)(G), 
or 
402A(c)(4)(F).’’. 
(4) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to distributions, trans-
fers, and contributions made in taxable years begin-
ning after December 31, 2031. 
SEC. 138312. STATUTE OF LIMITATIONS WITH RESPECT TO 
IRA NONCOMPLIANCE. 
(a) IN GENERAL.—Subsection (c) of section 6501 is 
amended by adding at the end the following new para-
graph: 
‘‘(13) NONCOMPLIANCE RELATING TO AN INDI-
VIDUAL RETIREMENT PLAN.— 
‘‘(A) MISREPORTING.—In the case of any 
substantial error (willful or otherwise) in the re-
porting on a return of any information relating 
to the valuation of investment assets with re-
spect to an individual retirement plan, the time 
for assessment of any tax imposed by this title 
with respect to such plan shall not expire before 
the date which is 6 years after the return con-
taining such error was filed (whether or not 
such return was filed on or after the date pre-
scribed).
1924 
‘‘(B) PROHIBITED
TRANSACTIONS.—The 
time for assessment of any tax imposed by sec-
tion 4975 shall not expire before the date which 
is 6 years after the return was filed (whether 
or not such return was filed on or after the 
date prescribed).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxes with respect to which the 
3-year period under section 6501(a) of the Internal Rev-
enue Code of 1986 (without regard to the amendment 
made by this section) ends after December 31, 2021. 
SEC. 138313. IRA OWNERS TREATED AS DISQUALIFIED PER-
SONS 
FOR 
PURPOSES 
OF 
PROHIBITED 
TRANSACTION RULES. 
(a) IN GENERAL.—Paragraph (2) of section 4975(e) 
is amended— 
(1) by striking ‘‘or’’ at the end of subparagraph 
(H), 
(2) by striking the period at the end of sub-
paragraph (I) and inserting ‘‘; or’’, 
(3) by inserting after subparagraph (I) the fol-
lowing new subparagraph: 
‘‘(J) the individual for whose benefit a 
plan described in subparagraph (B) or (C) of 
paragraph (1) is maintained.’’,
1925 
(4) by striking ‘‘or (E)’’ both places it appears 
in subparagraphs (F) and (G) and inserting ‘‘(E), or 
(J) (in the case of a plan described in subparagraph 
(B) or (C) of paragraph (1))’’, 
(5) by striking ‘‘or (G)’’ in subparagraph (I) 
and inserting ‘‘(G), or (J) (in the case of a plan de-
scribed in subparagraph (B) or (C) of paragraph 
(1))’’, and 
(6) by adding at the end the following: ‘‘For 
purposes of subparagraphs (G) and (I), any asset or 
interest held by a plan described in subparagraph 
(B) or (C) of paragraph (1) shall be treated as 
owned by the individual described in subparagraph 
(J) with respect to such plan.’’. 
(b) CONFORMING AMENDMENT.—Subparagraph (A) 
of section 408(e)(2) is amended to read as follows: 
‘‘(A) EMPLOYEE
ENGAGING
IN
PROHIB-
ITED
TRANSACTION.—If, during any taxable 
year of the individual for whose benefit any in-
dividual retirement account is maintained, that 
individual engages in any transaction prohibited 
by section 4975 with respect to such account, 
such account ceases to be an individual retire-
ment account as of the first day of such taxable 
year. For purposes of this paragraph, the sepa-
1926 
rate account for the benefit of any individual 
within an individual retirement account main-
tained by an employer or association of employ-
ees is treated as a separate individual retire-
ment account.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transactions occurring after De-
cember 31, 2021. 
PART 4—FUNDING THE INTERNAL REVENUE 
SERVICE AND IMPROVING TAXPAYER COM-
PLIANCE 
SEC. 138401. ENHANCEMENT OF INTERNAL REVENUE SERV-
ICE RESOURCES. 
(a) APPROPRIATIONS.— 
(1) IN GENERAL.—The following sums are ap-
propriated, out of any money in the Treasury not 
otherwise appropriated, for the fiscal year ending 
September 30, 2022: 
(A) INTERNAL REVENUE SERVICE.— 
(i) IN GENERAL.— 
(I) TAXPAYER
SERVICES.—For 
necessary expenses of the Internal 
Revenue Service to provide taxpayer 
services, including pre-filing assistance 
and education, filing and account
1927 
services, taxpayer advocacy services, 
and other services as authorized by 5 
U.S.C. 3109, at such rates as may be 
determined 
by 
the 
Commissioner, 
$1,931,500,000, to remain available 
until September 30, 2031: Provided, 
That these amounts shall be in addi-
tion to amounts otherwise available 
for such purposes. 
(II) ENFORCEMENT.—For nec-
essary expenses for tax enforcement 
activities of the Internal Revenue 
Service to determine and collect owed 
taxes, to provide legal and litigation 
support, to conduct criminal investiga-
tions (including investigative tech-
nology), to provide digital asset moni-
toring and compliance activities, to 
enforce criminal statutes related to 
violations of internal revenue laws and 
other financial crimes, to purchase 
and hire passenger motor vehicles (31 
U.S.C. 1343(b)), and to provide other 
services as authorized by 5 U.S.C. 
3109, at such rates as may be deter-
1928 
mined 
by 
the 
Commissioner, 
$44,887,500,000, to remain available 
until September 30, 2031: Provided, 
That these amounts shall be in addi-
tion to amounts otherwise available 
for such purposes. 
(III) OPERATIONS
SUPPORT.— 
For necessary expenses of the Inter-
nal Revenue Service to support tax-
payer services and enforcement pro-
grams, including rent payments; fa-
cilities services; printing; postage; 
physical security; headquarters and 
other IRS-wide administration activi-
ties; research and statistics of income; 
telecommunications; information tech-
nology development, enhancement, op-
erations, maintenance, and security; 
the hire of passenger motor vehicles 
(31 U.S.C. 1343(b)); the operations of 
the Internal Revenue Service Over-
sight Board; and other services as au-
thorized by 5 U.S.C. 3109, at such 
rates as may be determined by the 
Commissioner, $27,376,300,000, to
1929 
remain available until September 30, 
2031: Provided, That these amounts 
shall be in addition to amounts other-
wise available for such purposes. 
(IV) BUSINESS
SYSTEMS
MOD-
ERNIZATION.—For necessary expenses 
of the Internal Revenue Service’s 
business systems modernization pro-
gram, including development of call-
back technology and other technology 
to provide a more personalized cus-
tomer service but not including the 
operation and maintenance of legacy 
systems, $4,750,700,000, to remain 
available until September 30, 2031: 
Provided, That these amounts shall be 
in addition to amounts otherwise 
available for such purposes. 
(ii) TASK FORCE TO DESIGN AN IRS- 
RUN FREE ‘‘DIRECT EFILE’’ TAX RETURN 
SYSTEM.—For necessary expenses of the 
Internal Revenue Service to deliver to Con-
gress, within nine months following the 
date of the enactment of this Act, a report 
on (I) the cost (including options for dif-
1930 
ferential coverage based on taxpayer ad-
justed gross income and return complexity) 
of developing and running a free direct 
efile tax return system, including costs to 
build and administer each release, with a 
focus on multi-lingual and mobile-friendly 
features and safeguards for taxpayer data; 
(II) taxpayer opinions, expectations, and 
level of trust, based on surveys, for such a 
free direct efile system; and (III) the opin-
ions of an independent third-party on the 
overall feasibility, approach, schedule, cost, 
organizational design, and Internal Rev-
enue Service capacity to deliver such a di-
rect efile tax return system, $15,000,000, 
to remain available until September 30, 
2022: Provided, That these amounts shall 
be in addition to amounts otherwise avail-
able for such purposes. 
(B) TREASURY INSPECTOR GENERAL FOR 
TAX ADMINISTRATION.—For necessary expenses 
of the Treasury Inspector General for Tax Ad-
ministration in carrying out the Inspector Gen-
eral Act of 1978, as amended, including pur-
chase and hire of passenger motor vehicles (31
1931 
U.S.C. 1343(b)); and services authorized by 5 
U.S.C. 3109, at such rates as may be deter-
mined by the Inspector General for Tax Admin-
istration, $403,000,000, to remain available 
until September 30, 2031: Provided, That these 
amounts shall be in addition to amounts other-
wise available for such purposes. 
(C) OFFICE
OF
TAX
POLICY.—For nec-
essary expenses of the Office of Tax Policy of 
the Department of the Treasury to carry out 
functions related to promulgating regulations 
under the Internal Revenue Code of 1986, 
$104,533,803, to remain available until Sep-
tember 30, 2031: Provided, That these amounts 
shall be in addition to amounts otherwise avail-
able for such purposes. 
(D) UNITED
STATES
TAX
COURT.—For 
necessary expenses of the United States Tax 
Court, including contract reporting and other 
services as authorized by 5 U.S.C. 3109; 
$153,000,000, to remain available until Sep-
tember 30, 2031: Provided, That these amounts 
shall be in addition to amounts otherwise avail-
able for such purposes. 
(2) MULTI-YEAR OPERATIONAL PLAN.—
1932 
(A) IN
GENERAL.—Not later than 6 
months after the date of the enactment of this 
Act, the Commissioner of Internal Revenue 
shall submit to Congress a plan detailing how 
the 
funds 
appropriated 
under 
paragraph 
(1)(A)(i) will be spent over the ten-year period 
ending with fiscal year 2031. 
(B) QUARTERLY UPDATES.— 
(i) IN GENERAL.—Not later than the 
last day of each calendar quarter beginning 
during the applicable period, the Commis-
sioner of Internal Revenue shall submit to 
Congress a report on the plan established 
under subparagraph (A), including— 
(I) any updates to the plan; 
(II) progress made in imple-
menting the plan; and 
(III) 
any 
changes 
in 
cir-
cumstances or challenges in imple-
menting the plan. 
(ii) APPLICABLE
PERIOD.—For pur-
poses of clause (i), the applicable period is 
the period beginning 1 year after the date 
the report under subparagraph (A) is due 
and ending on September 30, 2031.
1933 
(C) REDUCTION IN APPROPRIATION.— 
(i) IN GENERAL.—In the case of any 
failure to submit a plan required under 
subparagraph (A) or a report required 
under subparagraph (B) by the required 
date, the amounts made available under 
paragraph (1)(A)(i) shall be reduced by 
$100,000 for each day after such required 
date that report has not been submitted to 
Congress. 
(ii) REQUIRED DATE.—For purposes 
of clause (i), the required date is the date 
that is 60 days after the date the plan or 
report is required to be submitted under 
subparagraph (A) or (B), as the case may 
be. 
(3) NO
TAX
INCREASES
ON
CERTAIN
TAX-
PAYERS.—Nothing in this subsection is intended to 
increase taxes on any taxpayer with a taxable in-
come below $400,000. 
(b) PERSONNEL FLEXIBILITIES.—The Secretary of 
the Treasury (or the Secretary’s delegate) may use the 
funds made available under subsection (a)(1)(A), subject 
to such policies as the Secretary (or the Secretary’s dele-
gate) may establish, to take such personnel actions as the
1934 
Secretary (or the Secretary’s delegate) determines nec-
essary to administer the Internal Revenue Code of 1986, 
including— 
(1) utilizing direct hire authority to recruit and 
appoint qualified applicants, without regard to any 
notice or preference requirements, directly to posi-
tions in the competitive service; 
(2) in addition to the authority under section 
7812(1) of the Internal Revenue Code of 1986, ap-
pointing not more than 200 individuals to positions 
in the Internal Revenue Service under streamlined 
critical pay authority, except that— 
(A) the authority to offer streamlined crit-
ical pay under this paragraph shall expire on 
September 30, 2031; and 
(B) the positions for which streamlined 
critical pay is authorized under this paragraph 
may include positions critical to the purposes 
described in subclauses (I), (II), and (III) of 
subsection (a)(1)(A)(i); and 
(3) appointing, without approval of the Office 
of Personnel Management, not more than 300 indi-
viduals to critical pay positions in the Internal Rev-
enue Service for which—
1935 
(A) the rate of basic pay may not exceed 
the salary set in accordance with section 104 of 
title 3, United States Code; and 
(B) the total annual compensation paid to 
an employee in such a position, including allow-
ances, differentials, bonuses, awards, and simi-
lar cash payments, may not exceed the max-
imum amount of total annual compensation 
payable at the salary set in accordance with 
section 104 of title 3, United States Code. 
SEC. 138402. APPLICATION OF BACKUP WITHHOLDING 
WITH RESPECT TO THIRD PARTY NETWORK 
TRANSACTIONS. 
(a) IN GENERAL.—Section 3406(b) is amended by 
adding at the end the following new paragraph: 
‘‘(8) OTHER REPORTABLE PAYMENTS INCLUDE 
PAYMENTS IN SETTLEMENT OF THIRD PARTY NET-
WORK TRANSACTIONS ONLY WHERE AGGREGATE FOR 
CALENDAR YEAR IS $600 OR MORE.—Any payment in 
settlement of a third party network transaction re-
quired to be shown on a return required under sec-
tion 6050W which is made during any calendar year 
shall be treated as a reportable payment only if— 
‘‘(A) the aggregate amount of such pay-
ment and all previous such payments made by
1936 
the third party settlement organization to the 
participating payee during such calendar year 
equals or exceeds $600, or 
‘‘(B) the third party settlement organiza-
tion was required under section 6050W to file 
a return for the preceding calendar year with 
respect to payments to the participating 
payee.’’. 
(b) CONFORMING AMENDMENT.—Section 6050W(e) 
is amended by inserting ‘‘equal or’’ before ‘‘exceed $600’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years beginning after 
December 31, 2021. 
(d) TRANSITIONAL RULE FOR 2022.—In the case of 
payments made during calendar year 2022, section 
3406(b)(8)(A) of the Internal Revenue Code of 1986 (as 
added by this section) shall be applied by inserting ‘‘and 
the aggregate number of third party network transactions 
settled by the third party settlement organization with re-
spect to the participating payee during such calendar year 
exceeds 200’’ before the comma at the end.
1937 
SEC. 138403. MODIFICATION OF PROCEDURAL REQUIRE-
MENTS RELATING TO ASSESSMENT OF PEN-
ALTIES. 
(a) REPEAL OF APPROVAL REQUIREMENT.—Section 
6751 is amended by striking subsection (b). 
(b) QUARTERLY CERTIFICATIONS OF COMPLIANCE 
WITH PROCEDURAL REQUIREMENTS.—Section 6751, as 
amended by subsection (a) of this section, is amended by 
inserting after subsection (a) the following new subsection: 
‘‘(b) QUARTERLY
CERTIFICATIONS
OF
COMPLI-
ANCE.—Each appropriate supervisor of employees of the 
Internal Revenue Service shall certify quarterly by letter 
to the Commissioner of Internal Revenue whether or not 
the requirements of subsection (a) and administrative poli-
cies intended to ensure voluntary compliance have been 
met with respect to notices of penalty issued by such em-
ployees.’’. 
(c) EFFECTIVE DATES.— 
(1) REPEAL
OF
APPROVAL
REQUIREMENT.— 
The amendment made by subsection (a) shall take 
effect as if included in section 3306 of the Internal 
Revenue Service Restructuring and Reform Act of 
1998. 
(2) QUARTERLY CERTIFICATIONS OF COMPLI-
ANCE
WITH
PROCEDURAL
REQUIREMENTS.—The 
amendment made by subsection (b) shall apply to
1938 
notices of penalty issued after the date of the enact-
ment of this Act. 
PART 5—OTHER PROVISIONS 
SEC. 138501. MODIFICATIONS TO LIMITATION ON DEDUC-
TION OF EXCESSIVE EMPLOYEE REMUNERA-
TION. 
(a) IN GENERAL.—Section 162(m) is amended by 
adding at the end the following new paragraph: 
‘‘(7) SPECIAL RULES RELATED TO LIMITATION 
ON
DEDUCTION
OF
EXCESSIVE
EMPLOYEE
REMU-
NERATION.— 
‘‘(A) AGGREGATION RULE.—A rule similar 
to the rule of paragraph (6)(C)(ii) shall apply 
for purposes of paragraph (1). 
‘‘(B) REGULATIONS.—The Secretary shall 
prescribe such regulations or other guidance as 
may be necessary or appropriate to carry out 
the purposes of paragraph (1), including regula-
tions or other guidance to prevent the avoidance 
of such purposes, including through the per-
formance of services other than as an employee 
or by providing compensation through a pass- 
through or other entity.’’. 
(b) APPLICABLE EMPLOYEE REMUNERATION.—Sec-
tion 162(m)(4)(A) is amended—
1939 
(1) by inserting ‘‘(including performance-based 
compensation, commissions, post-termination com-
pensation, and beneficiary payments)’’ after ‘‘remu-
neration for services’’, and 
(2) by inserting ‘‘and whether or not such re-
muneration is paid directly by the publicly held cor-
poration’’ after ‘‘whether or not during the taxable 
year’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138502. EXTENSION OF TAX TO FUND BLACK LUNG 
DISABILITY TRUST FUND. 
(a) IN GENERAL.—Section 4121(e)(2)(A) is amended 
by striking ‘‘December 31, 2021’’ and inserting ‘‘Decem-
ber 31, 2025’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to sales after December 31, 2021. 
SEC. 138503. PROHIBITED TRANSACTIONS RELATING TO 
HOLDING DISC OR FSC IN INDIVIDUAL RE-
TIREMENT ACCOUNT. 
(a) IN GENERAL.—Section 4975(c)(1) is amended by 
striking ‘‘or’’ at the end of subparagraph (E), by striking 
the period at the end of subparagraph (F) and inserting
1940 
‘‘; or’’, and by adding at the end the following new sub-
paragraph: 
‘‘(G) investment, at the direction of a dis-
qualified person, by an individual retirement ac-
count in an interest in a DISC or FSC that re-
ceives any commission, or other payment, from 
an entity any stock or interest in which is 
owned by the individual for whose benefit the 
account is maintained.’’. 
(b) SPECIAL
RULES
OF
APPLICATION.—Section 
4975(c) is amended by adding at the end the following 
new paragraph: 
‘‘(8) SPECIAL
RULES
OF
APPLICATION
FOR 
DISC AND FSC INVESTMENTS.— 
‘‘(A) INDIRECT
HOLDING
OF DISC OR 
FSC.—For purposes of paragraph (1)(G), in-
vestment by an individual retirement account in 
an interest in an entity that owns (directly or 
indirectly) an interest in a DISC or FSC shall 
be treated as investment by such account in an 
interest in such DISC or FSC. 
‘‘(B) CONSTRUCTIVE
OWNERSHIP.—For 
purposes of determining ownership of stock (or 
any other interest) in an entity under para-
graph (1)(G) and ownership of an interest in a
1941 
DISC or FSC under subparagraph (A), the 
rules prescribed by section 318 for determining 
ownership shall apply, except that such section 
shall be applied by substituting ‘10 percent’ for 
‘50 percent’ each place it appears. 
‘‘(C) DISC AND FSC.—For purposes of 
this subsection, the terms ‘DISC’ and ‘FSC’ 
shall have the respective meanings given such 
terms by section 992(a)(1)) and section 922(a) 
(as in effect before its repeal by the FSC Re-
peal and Extraterritorial Income Exclusion Act 
of 2000).’’. 
(c) APPLICATION OF TAX TO TERMINATED INDI-
VIDUAL RETIREMENT ACCOUNTS.—Section 4975(c)(3) is 
amended by adding at the end the following: ‘‘The pre-
ceding sentence shall not apply in the case of a prohibited 
transaction described in paragraph (1)(G).’’. 
(d) RELATED RULES FOR INDIVIDUAL RETIREMENT 
ACCOUNTS.— 
(1) IN GENERAL.—Section 408(a) is amended 
by inserting after paragraph (6) the following new 
paragraph: 
‘‘(7) No part of the trust funds will be invested 
in any interest in a DISC or a FSC that receives 
any commission, or other payment, from an entity
1942 
any stock or interest in which is owned by the indi-
vidual for whose benefit the trust is maintained. For 
purposes of the preceding sentence, the definitions 
and rules of section 4975(c)(8) shall apply.’’. 
(e) LOSS
OF EXEMPTION
OF ACCOUNT.—Section 
408(e)(2), as amended by the preceding provisions of this 
Act, is amended— 
(1) by redesignating subparagraph (B) as sub-
paragraph (C), 
(2) by inserting after subparagraph (A) the fol-
lowing new subparagraph: 
‘‘(B) PROHIBITED INVESTMENT.—If, dur-
ing any taxable year of the individual for whose 
benefit any individual retirement account is 
maintained, the investment of any part of the 
funds of such individual retirement account 
does not comply with subsection (a)(7), such 
account ceases to be an individual retirement 
account as of the first day of such taxable year. 
For purposes of this subparagraph, the sepa-
rate account for the benefit of any individual 
within an individual retirement account main-
tained by an employer or association of employ-
ees is treated as a separate individual retire-
ment account.’’,
1943 
(3) by striking ‘‘WHERE EMPLOYEE ENGAGES 
IN PROHIBITED TRANSACTION’’ in the heading and 
inserting ‘‘IN CASE OF CERTAIN PROHIBITED TRANS-
ACTIONS AND INVESTMENTS’’, 
(4) by striking ‘‘(A)’’ in subparagraph (C), as 
so redesignated, and inserting ‘‘(A) or (B)’’. 
(f) CONFORMING AMENDMENTS.— 
(1) Section 408(c)(1) is amended by striking 
‘‘(1) through (6)’’ and inserting ‘‘(1) through (7)’’. 
(2) Section 4975(c)(3) is amended— 
(A) striking ‘‘established’’ and inserting 
‘‘maintained’’, 
(B) by striking ‘‘transaction’’ both places 
it appears and inserting ‘‘transaction or invest-
ment’’, and 
(C) by striking ‘‘section 408(e)(2)(A)’’ and 
inserting ‘‘subparagraph (A) or (B) of section 
408(e)(2)’’. 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to stock and other interests ac-
quired or held on or after December 31, 2021.
1944 
SEC. 138504. CLARIFICATION OF TREATMENT OF DISC 
GAINS AND DISTRIBUTIONS OF CERTAIN 
FOREIGN SHAREHOLDERS. 
(a) IN GENERAL.—Section 996(g) is amended by 
striking ‘‘of such shareholder’’ and inserting ‘‘deemed to 
be had by such shareholder’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to gains and distributions after 
December 31, 2021. 
(c) APPLICATION
TO FOREIGN SALES CORPORA-
TIONS.—In the case of any distribution after December 
31, 2021, section 926(b)(1) of the Internal Revenue Code 
of 1986 (prior to its repeal by the FSC Repeal and 
Extraterritorial Income Exclusion Act of 2000) shall be 
applied by substituting ‘‘deemed to be had by such share-
holder’’ for ‘‘of such shareholder’’. 
(d) NO INFERENCE.—This section (and the amend-
ments made by this section) shall not be construed to cre-
ate any inference with respect to the proper application 
of any provision of the Internal Revenue Code of 1986 
with respect to gains and distributions before January 1, 
2022. 
SEC. 138505. TREATMENT OF CERTAIN QUALIFIED SOUND 
RECORDING PRODUCTIONS. 
(a) ELECTION TO TREAT COSTS AS EXPENSES.— 
Section 181(a)(1) is amended by striking ‘‘qualified film
1945 
or television production, and any qualified live theatrical 
production,’’ and inserting ‘‘qualified film or television 
production, any qualified live theatrical production, and 
any qualified sound recording production’’. 
(b) DOLLAR
LIMITATION.—Section 181(a)(2) is 
amended by adding at the end the following new subpara-
graph: 
‘‘(C) QUALIFIED SOUND RECORDING PRO-
DUCTION.—Paragraph (1) shall not apply to so 
much of the aggregate cost of any qualified 
sound recording production, or to so much of 
the aggregate, cumulative cost of all such quali-
fied sound recording productions in the taxable 
year, as exceeds $150,000.’’. 
(c) NO OTHER DEDUCTION OR AMORTIZATION DE-
DUCTION ALLOWABLE.—Section 181(b) is amended by 
striking ‘‘qualified film or television production or any 
qualified live theatrical production’’ and inserting ‘‘quali-
fied film or television production, any qualified live theat-
rical production, or any qualified sound recording produc-
tion’’. 
(d) ELECTION.—Section 181(c)(1) is amended by 
striking ‘‘qualified film or television production or any 
qualified live theatrical production’’ and inserting ‘‘quali-
fied film or television production, any qualified live theat-
1946 
rical production, or any qualified sound recording produc-
tion’’. 
(e) QUALIFIED SOUND RECORDING PRODUCTION 
DEFINED.—Section 181 is amended by redesignating sub-
sections (f) and (g) as subsections (g) and (h), respec-
tively, and by inserting after subsection (e) the following 
new subsection: 
‘‘(f) QUALIFIED SOUND RECORDING PRODUCTION.— 
For purposes of this section, the term ‘qualified sound re-
cording production’ means a sound recording (as defined 
in section 101 of title 17, United States Code) produced 
and recorded in the United States.’’. 
(f) TERMINATION.—Section 181(h) (as redesignated 
by subsection (e)) is amended by striking ‘‘or qualified live 
theatrical productions’’ and inserting ‘‘, qualified live the-
atrical productions, or qualified sound recording produc-
tions’’. 
(g) BONUS DEPRECIATION.— 
(1) QUALIFIED
SOUND
RECORDING
PRODUC-
TION
AS
QUALIFIED
PROPERTY.—Section 
168(k)(2)(A)(i) is amended— 
(A) by striking ‘‘or’’ at the end of sub-
clause (IV), by adding ‘‘or’’ at the end of sub-
clause (V), and by inserting after subclause (V) 
the following:
1947 
‘‘(VI) which is a qualified sound 
recording production (as defined in 
subsection (f) of section 181) for 
which a deduction would have been al-
lowable under section 181 without re-
gard to subsections (a)(2) and (h) of 
such section or this subsection,’’, and 
(B) in subclauses (IV) and (V) (as amend-
ed) by striking ‘‘without regard to subsections 
(a)(2) and (g)’’ both places it appears and in-
serting ‘‘without regard to subsections (a)(2) 
and (h)’’. 
(2) PRODUCTION PLACED IN SERVICE.—Section 
168(k)(2)(H) is amended by striking ‘‘and’’ at the 
end of clause (i), by striking the period at the end 
of clause (ii) and inserting ‘‘, and’’, and by adding 
after clause (ii) the following: 
‘‘(iii) a qualified sound recording pro-
duction shall be considered to be placed in 
service at the time of initial release or 
broadcast.’’. 
(h) CONFORMING AMENDMENTS.— 
(1) The heading for section 181 is amended to 
read as follows: ‘‘TREATMENT
OF
CERTAIN 
QUALIFIED PRODUCTIONS.’’.
1948 
(2) The table of sections for part VI of sub-
chapter B of chapter 1 is amended by striking the 
item relating to section 181 and inserting the fol-
lowing new item: 
‘‘Sec. 181. Treatment of certain qualified productions.’’. 
(i) EFFECTIVE DATE.—The amendments made by 
this section shall apply to productions commencing in tax-
able years ending after the date of the enactment of this 
Act. 
SEC. 138506. PAYMENT TO CERTAIN INDIVIDUALS WHO DYE 
FUEL. 
(a) IN GENERAL.—Subchapter B of chapter 65 is 
amended by adding at the end the following new sub-
section: 
‘‘SEC. 6433. DYED FUEL. 
‘‘(a) IN GENERAL.—If a person establishes to the 
satisfaction of the Secretary that such person meets the 
requirements of subsection (b) with respect to diesel fuel 
or kerosene, then the Secretary shall pay to such person 
an amount (without interest) equal to the tax described 
in subsection (b)(2)(A) with respect to such diesel fuel or 
kerosene. 
‘‘(b) REQUIREMENTS.— 
‘‘(1) IN
GENERAL.—A person meets the re-
quirements of this subsection with respect to diesel
1949 
fuel or kerosene if such person removes from a ter-
minal eligible indelibly dyed diesel fuel or kerosene. 
‘‘(2) ELIGIBLE INDELIBLY DYED DIESEL FUEL 
OR KEROSENE DEFINED.—The term ‘eligible indeli-
bly dyed diesel fuel or kerosene’ means diesel fuel or 
kerosene— 
‘‘(A) with respect to which a tax under sec-
tion 4081 was previously paid (and not credited 
or refunded), and 
‘‘(B) which is exempt from taxation under 
section 4082(a). 
‘‘(c) CROSS REFERENCE.—For civil penalty for ex-
cessive claims under this section, see section 6675.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 6206 is amended— 
(A) by striking ‘‘or 6427’’ each place it ap-
pears and inserting ‘‘6427, or 6433’’, and 
(B) by striking ‘‘6420 and 6421’’ and in-
serting ‘‘6420, 6421, and 6433’’. 
(2) Section 6430 is amended— 
(A) by striking ‘‘or’’ at the end of para-
graph (2), by striking the period at the end of 
paragraph (3) and inserting ‘‘or’’, and by add-
ing at the end the following new paragraph:
1950 
‘‘(4) which are removed as eligible indelibly 
dyed diesel fuel or kerosene under section 6433.’’. 
(3) Section 6675 is amended— 
(A) in subsection (a), by striking ‘‘or 6427 
(relating to fuels not used for taxable pur-
poses)’’ and inserting ‘‘6427 (relating to fuels 
not used for taxable purposes), or 6433 (relat-
ing to eligible indelibly dyed fuel)’’, and 
(B) in subsection (b)(1), by striking 
‘‘6421, or 6427,’’ and inserting ‘‘6421, 6427, 
or 6433’’. 
(4) The table of sections for subchapter B of 
chapter 65 is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 6433. Dyed fuel.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to eligible indelibly dyed diesel fuel 
or kerosene removed on or after the date that is 180 days 
after the date of the enactment of this section. 
SEC. 138507. TREATMENT OF FINANCIAL GUARANTY INSUR-
ANCE COMPANIES AS QUALIFYING INSUR-
ANCE CORPORATIONS UNDER PASSIVE FOR-
EIGN INVESTMENT COMPANY RULES. 
(a) IN GENERAL.—Section 1297(f)(3) is amended by 
adding at the end the following new subparagraph:
1951 
‘‘(C) SPECIAL
RULES
FOR
FINANCIAL 
GUARANTY INSURANCE COMPANIES.— 
‘‘(i) IN
GENERAL.—Notwithstanding 
subparagraphs (A)(ii) and (B), the applica-
ble insurance liabilities of a financial guar-
anty insurance company shall include its 
unearned premium reserves if— 
‘‘(I) such company is prohibited 
under generally accepted accounting 
principles from reporting on its appli-
cable financial statements reserves for 
losses and loss adjustment expenses 
with respect to a financial guaranty 
insurance or reinsurance contract ex-
cept to the extent that losses and loss 
adjustment expenses are expected to 
exceed the unearned premium reserves 
on the contract, 
‘‘(II) the applicable financial 
statement of such company reports fi-
nancial guaranty exposure of at least 
15-to-1 or State or local bond expo-
sure of at least 9-to-1 (8-to-1 in the 
case of a taxable year of such com-
1952 
pany which ends on or before Decem-
ber 31, 2018), and 
‘‘(III) such company includes in 
its insurance liabilities only its un-
earned premium reserves relating to 
insurance written or assumed that is 
within the single risk limits set forth 
in subsection (D) of section 4 of the 
Financial Guaranty Insurance Guide-
line (modified by using total share-
holder’s equity as reported on the ap-
plicable financial statement of the 
company rather than aggregate of the 
surplus to policyholders and contin-
gency reserves). 
‘‘(ii) APPLICATION
OF
ALTERNATIVE 
FACTS AND CIRCUMSTANCES TEST.—A fi-
nancial guaranty insurance company shall 
be treated as satisfying the requirements 
of paragraph (2)(B)(ii). 
‘‘(iii) FINANCIAL
GUARANTY
INSUR-
ANCE
COMPANY.—For purposes of this 
subparagraph, the term ‘financial guaranty 
insurance company’ means any insurance 
company the sole business of which is writ-
1953 
ing or reinsuring financial guaranty insur-
ance (as defined in subsection (A) of sec-
tion 1 of the Financial Guaranty Insurance 
Guideline) which is permitted under sub-
section (B) of section 4 of such Guideline. 
‘‘(iv) FINANCIAL
GUARANTY
EXPO-
SURE.—For purposes of this subpara-
graph, the term ‘financial guaranty expo-
sure’ means the ratio of— 
‘‘(I) the net debt service out-
standing insured or reinsured by the 
company that is within the single risk 
limits set forth in the Financial Guar-
anty Insurance Guideline (as reported 
on such company’s applicable financial 
statement), to 
‘‘(II) the company’s total assets 
(as so reported). 
‘‘(v) STATE OR LOCAL BOND EXPO-
SURE.—For purposes of this subpara-
graph, the term ‘State or local bond expo-
sure’ means the ratio of— 
‘‘(I) the net unpaid principal of 
State or local bonds (as defined in 
section 103(c)(1)) insured or rein-
1954 
sured by the company that is within 
the single risk limits set forth in the 
Financial Guaranty Insurance Guide-
line (as reported on such company’s 
applicable financial statement), to 
‘‘(II) the company’s total assets 
(as so reported).’’ 
‘‘(vi) FINANCIAL
GUARANTY
INSUR-
ANCE
GUIDELINE.—For purposes of this 
subparagraph— 
‘‘(I) IN
GENERAL.—The term 
‘Financial Guaranty Insurance Guide-
line’ means the October 2008 model 
regulation that was adopted by the 
National Association of Insurance 
Commissioners on December 4, 2007. 
‘‘(II) DETERMINATIONS MADE BY 
SECRETARY.—The determination of 
whether any provision of the Financial 
Guaranty Insurance Guideline has 
been satisfied shall be made by the 
Secretary.’’. 
(b) 
REPORTING
OF
CERTAIN
ITEMS.—Section 
1297(f)(4) is amended by adding at the end the following 
new subparagraph:
1955 
‘‘(C) CLARIFICATION THAT CERTAIN ITEMS 
ON
APPLICABLE
FINANCIAL
STATEMENT
BE 
SEPARATELY
REPORTED
WITH
RESPECT
TO 
CORPORATION.—An amount described in para-
graph (1)(B) or clause (i)(II), (i)(III), (iv)(I), 
(iv)(II), (v)(I), or (v)(II) of paragraph (3)(C) 
shall be treated as reported on an applicable fi-
nancial statement for purposes of this section 
if— 
‘‘(i) such amount is separately re-
ported on such statement with respect to 
the corporation referred to in paragraph 
(1), or 
‘‘(ii) such amount is separately deter-
mined for purposes of calculating an 
amount which is reported on such state-
ment. 
‘‘(D) AUTHORITY OF SECRETARY TO RE-
QUIRE REPORTING.— 
‘‘(i) 
IN
GENERAL.—Each 
United 
States person who owns an interest in a 
specified non-publicly traded foreign cor-
poration and who takes the position that 
such corporation is not a passive foreign 
investment company shall report to the
1956 
Secretary such information with respect to 
such corporation as the Secretary may re-
quire. 
‘‘(ii) SPECIFIED NON-PUBLICLY TRAD-
ED FOREIGN CORPORATION.—For purposes 
of this subparagraph, the term ‘specified 
non-publicly traded foreign corporation’ 
means any foreign corporation— 
‘‘(I) which would be a passive 
foreign investment company if sub-
section (b)(2)(B) did not apply, and 
‘‘(II) no interest in which is trad-
ed on an established securities mar-
ket.’’. 
(c) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall take effect as if included in section 
14501 of Public Law 115–97. 
(2) REPORTING.—The amendment made by 
subsection (b) shall apply to reports made after the 
date of the enactment of this Act.
1957 
SEC. 138508. EXTENSION OF PERIOD OF LIMITATION FOR 
CERTAIN LEGALLY MARRIED COUPLES. 
(a) IN GENERAL.—In the case of an individual first 
treated as married for purposes of the Internal Revenue 
Code of 1986 by the application of the holdings of Rev-
enue Ruling 2013–17— 
(1) if such individual filed a return (other than 
a joint return) for a taxable year ending before Sep-
tember 16, 2013, for which a joint return could have 
been made by the individual and the individual’s 
spouse but for the fact that such holdings were not 
effective at the time of filing, such return shall be 
treated as a separate return within the meaning of 
section 6013(b) of such Code and the time pre-
scribed by section 6013(b)(2)(A) of such Code for 
filing a joint return after filing a separate return 
shall not expire before the date prescribed by law 
(including extensions) for filing the return of tax for 
the taxable year that includes the date of the enact-
ment of this Act, and 
(2) in the case of a joint return filed pursuant 
to paragraph (1)— 
(A) the period of limitation prescribed by 
section 6511(a) of such Code for any such tax-
able year shall be extended until the date pre-
scribed by law (including extensions) for filing
1958 
the return of tax for the taxable year that in-
cludes the date of the enactment of this Act, 
and 
(B) section 6511(b)(2) of such Code shall 
not apply to any claim of credit or refund with 
respect to such return. 
(b) AMENDMENTS, ETC. RESTRICTED TO CHANGE IN 
MARITAL STATUS.—Subsection (a) shall apply only with 
respect to amendments to the return of tax, and claims 
for credit or refund, relating to a change in the marital 
status for purposes of the Internal Revenue Code of 1986 
of the individual. 
SEC. 138514. ALLOWANCE OF DEDUCTION FOR CERTAIN EX-
PENSES OF THE TRADE OR BUSINESS OF 
BEING AN EMPLOYEE. 
(a) ABOVE-THE-LINE
DEDUCTION
FOR
UNION 
DUES.—Section 62(a)(2) is amended by adding at the end 
the following new subparagraph: 
‘‘(F) UNION DUES.—In the case of any taxable 
year beginning after December 31, 2021, and before 
January 1, 2026, the deductions allowed by section 
162 which are both— 
‘‘(A) not in excess of $250, and 
‘‘(B) attributable to a trade or business 
consisting of the performance of services by the
1959 
taxpayer as an employee if such deductions are 
for dues paid to a labor organization described 
in section 501(c)(5) and with respect to which 
such taxpayer remained a member through the 
end of the taxable year.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138515. TEMPORARY INCREASE IN EMPLOYER-PRO-
VIDED CHILD CARE CREDIT. 
(a) IN GENERAL.—Section 45F is amended by add-
ing at the end the following new subsection: 
‘‘(g) TEMPORARY INCREASE.—In the case of any tax-
able year beginning after December 31, 2021, and before 
January 1, 2026— 
‘‘(1) INCREASE
IN
PERCENTAGE
OF
CREDIT 
FOR QUALIFIED CHILD CARE EXPENDITURES.—Sub-
section (a)(1) shall be applied by substituting ‘50 
percent’ for ‘25 percent’. 
‘‘(2) INCREASE IN DOLLAR LIMITATION.—Sub-
section 
(b) 
shall 
be 
applied 
by 
substituting 
‘$500,000’ for ‘$150,000’. 
‘‘(3) PRESERVATION
OF
DOLLAR
LIMITATION 
ON QUALIFIED CHILD CARE RESOURCE AND REFER-
RAL
EXPENDITURES.—The aggregate amount of
1960 
qualified child care resource and referral expendi-
tures which may be taken into account under sub-
section (a)(2) for any taxable year shall not exceed 
$1,500,000.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138516. PAYROLL CREDIT FOR COMPENSATION OF 
LOCAL NEWS JOURNALISTS. 
(a) IN GENERAL.—Subchapter D of chapter 21 is 
amended by adding at the end the following new section: 
‘‘SEC. 3135. LOCAL NEWS JOURNALIST COMPENSATION 
CREDIT. 
‘‘(a) IN GENERAL.—In the case of an eligible local 
news journalist employer, there shall be allowed as a credit 
against the taxes imposed by section 3111(b) for each cal-
endar quarter an amount equal to the applicable percent-
age of wages paid by such employer to local news journal-
ists for such calendar quarter. 
‘‘(b) LIMITATIONS AND REFUNDABILITY.— 
‘‘(1) NUMBER OF LOCAL NEWS JOURNALISTS 
TAKEN INTO ACCOUNT.—The number of local news 
journalists which may be taken into account under 
subsection (a) with respect to any eligible local news
1961 
journalist employer for any calendar quarter shall 
not exceed 1,500. 
‘‘(2) WAGES
TAKEN
INTO
ACCOUNT.—The 
amount of wages paid with respect to any individual 
which may be taken into account under subsection 
(a) during any calendar quarter by the eligible local 
news journalist employer shall not exceed $12,500. 
‘‘(3) 
CREDIT
LIMITED
TO
EMPLOYMENT 
TAXES.—The credit allowed by subsection (a) with 
respect to any calendar quarter shall not exceed the 
taxes imposed by section 3111(b) on the wages paid 
with respect to the employment of all the employees 
of the eligible local news journalist employer for such 
calendar quarter. 
‘‘(4) REFUNDABILITY OF EXCESS CREDIT.—If 
the amount of the credit under subsection (a) ex-
ceeds the limitation of paragraph (3) for any cal-
endar quarter, such excess shall be treated as an 
overpayment that shall be refunded under sections 
6402(a) and 6413(b). 
‘‘(c) ELIGIBLE
LOCAL
NEWS
JOURNALIST
EM-
PLOYER.—For purposes of this section— 
‘‘(1) IN
GENERAL.—The term ‘eligible local 
news journalist employer’ means, with respect to any 
calendar quarter, any employer which—
1962 
‘‘(A) is— 
‘‘(i) an eligible local news organiza-
tion, or 
‘‘(ii) a qualifying broadcast station, 
and 
‘‘(B) employs local news journalists. 
‘‘(2) ELIGIBLE LOCAL NEWS ORGANIZATION.— 
The term ‘eligible local news organization’ means, 
with respect to any calendar quarter, any em-
ployer— 
‘‘(A) which publishes one or more quali-
fying publications during the calendar quarter, 
‘‘(B) which is not a disqualified organiza-
tion, and 
‘‘(C) which did not derive more than 50 
percent of its gross receipts for such calendar 
quarter from disqualified organizations. 
‘‘(3) QUALIFYING
BROADCAST
STATION.—The 
term ‘qualifying broadcast station’ means, with re-
spect to any calendar quarter, any employer— 
‘‘(A) which owns or operates a broadcast 
station (as defined in section 3 of the Commu-
nications Act of 1934), 
‘‘(B) which is not a disqualified organiza-
tion,
1963 
‘‘(C) which did not derive more than 50 
percent of its gross receipts for such calendar 
quarter from disqualified organizations, and 
‘‘(D) which discloses its ownership to the 
public at such times and in such manner as 
identified by the Secretary. 
‘‘(d) OTHER DEFINITIONS.—For purposes of this 
section— 
‘‘(1) APPLICABLE
PERCENTAGE.—The term 
‘applicable percentage’ means— 
‘‘(A) in the case of each of the first 4 cal-
endar quarters to which this section applies, 50 
percent, and 
‘‘(B) in the case of each calendar quarter 
thereafter, 30 percent. 
‘‘(2) LOCAL NEWS JOURNALIST.— 
‘‘(A) IN GENERAL.—The term ‘local news 
journalist’ means, with respect to any eligible 
local news journalist employer for any calendar 
quarter, any full-time employee (as defined in 
section 4980H(c)(4)) who— 
‘‘(i) provides qualified services for an 
average of not less than 30 hours per week 
for each week during which such employee 
is employed by the eligible local news jour-
1964 
nalist employer during the calendar quar-
ter, and 
‘‘(ii) resides within 50 miles of the 
local community with respect to the quali-
fying publication or qualifying broadcast 
station with respect to which the qualified 
services are provided. 
‘‘(B) QUALIFIED SERVICES.—For purposes 
of subparagraph (A)(ii), the term ‘qualified 
services’ means services— 
‘‘(i) which consist of gathering, pre-
paring, directing the recording of, pro-
ducing, collecting, photographing, record-
ing, writing, editing, reporting, presenting, 
or publishing original local community 
news for dissemination to the local commu-
nity, and 
‘‘(ii) which are provided with respect 
to— 
‘‘(I) a qualifying publication of 
an eligible local news organization, or 
‘‘(II) the local community of a 
qualifying broadcast station.
1965 
‘‘(3) QUALIFYING
PUBLICATION.—The term 
‘qualifying publication’ means, with respect to any 
calendar quarter, any print or digital publication— 
‘‘(A) the primary purpose of which is to 
serve a local community by providing local 
news, 
‘‘(B) which— 
‘‘(i) is published during the calendar 
quarter, and 
‘‘(ii) has been published during each 
of the 4 calendar quarters preceding such 
calendar quarter, 
‘‘(C) which is covered by media liability in-
surance for such calendar quarter, 
‘‘(D) which discloses its ownership to the 
public at such times and in such manner as 
identified by the Secretary, and 
‘‘(E) which receives services from not more 
than 1,500 persons during such calendar quar-
ter. 
‘‘(4) LOCAL COMMUNITY.—The term ‘local com-
munity’ means, with respect to any qualifying broad-
cast station or qualifying publication, a geographi-
cally contiguous area that does not exceed the 
boundaries of—
1966 
‘‘(A) in the case of a qualifying broadcast 
station, the area for which the qualifying broad-
cast station is licensed to serve by the Federal 
Communications Commission under section 307 
of the Communications Act of 1934, and 
‘‘(B) in the case of a qualifying publica-
tion— 
‘‘(i) the metropolitan or micropolitan 
statistical area, as defined by the Office of 
Management and Budget, in which the 
qualifying publication is primarily distrib-
uted, 
‘‘(ii) if such qualifying publication is 
not primarily distributed in a metropolitan 
or micropolitan statistical area, political 
subdivision of the State in which such 
qualifying publication is primarily distrib-
uted, or 
‘‘(iii) if such qualifying publication is 
not primarily distributed in a metropolitan 
or micropolitan statistical area or a polit-
ical subdivision of a State, the State in 
which such qualifying publication is pri-
marily distributed.
1967 
For purposes of subparagraph (B), in the case of a 
qualifying publication which is a digital publication, 
such qualifying publication shall be considered to be 
primarily distributed in the area where such publica-
tion is primarily consumed. 
‘‘(5) DISQUALIFIED ORGANIZATION.—The term 
‘disqualified organization’ means— 
‘‘(A) any organization described in section 
501(c)(4) and exempt from tax under section 
501(a), 
‘‘(B) any organization described in section 
527, and 
‘‘(C) any organization that is owned or 
controlled (directly or indirectly) by one or more 
organizations described in subparagraph (A) or 
(B). 
‘‘(6) GROSS RECEIPTS.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the term ‘gross receipts’ has 
the meaning given such term as used in section 
448(c). 
‘‘(B) TAX-EXEMPT
ORGANIZATIONS.—In 
the case of an organization which is described 
in section 501(c) and exempt from tax under 
section 501(a), any reference in this section to
1968 
gross receipts shall be treated as a reference to 
gross receipts within the meaning of section 
6033. 
‘‘(7) OTHER TERMS.—Any term used in this 
section which is also used in this chapter shall have 
the same meaning as when used in such chapter. 
‘‘(e) AGGREGATION RULE.—All persons treated as a 
single employer under subsection (a) or (b) of section 52, 
or subsection (m) or (o) of section 414, shall be treated 
as one employer for purposes of this section. 
‘‘(f) CERTAIN RULES TO APPLY.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion— 
‘‘(A) except as provided in paragraph (2), 
rules similar to the rules of section 51(i)(1) 
shall apply, and 
‘‘(B) rules similar to the rules of section 
280C(a) shall apply. 
‘‘(2) EXCEPTION.—Paragraph (1)(A) shall not 
apply with respect to any local news journalist of an 
eligible local news journalist employer which employs 
fewer than 15 local news journalists during the cal-
endar quarter. 
‘‘(g) CERTAIN GOVERNMENTAL EMPLOYERS.—
1969 
‘‘(1) IN GENERAL.—This credit shall not apply 
to the Government of the United States, the govern-
ment of any State or political subdivision thereof, or 
any agency or instrumentality of any of the fore-
going. 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to any public broadcasting entity (as defined 
in section 397(11) of the Communications Act of 
1934 (47 U.S.C. 397(11))). 
‘‘(h) ELECTION TO HAVE SECTION NOT APPLY.— 
This section shall not apply with respect to any eligible 
local news journalist employer for any calendar quarter 
if such employer elects (at such time and in such manner 
as the Secretary may prescribe) not to have this section 
apply. 
‘‘(i) SPECIAL RULES.— 
‘‘(1) EMPLOYEE
NOT
TAKEN
INTO
ACCOUNT 
MORE THAN ONCE.—An employee shall not be in-
cluded for purposes of this section for any period 
with respect to any employer if such employer is al-
lowed a credit under section 51 with respect to such 
employee for such period. 
‘‘(2) DENIAL
OF
DOUBLE
BENEFIT.—Any 
wages taken into account in determining the credit 
allowed under this section shall not be taken into ac-
1970 
count for purposes of determining the credit allowed 
under section 41, 45A, 45P, 45S, or 1396. 
‘‘(3) THIRD-PARTY
PAYORS.—Any credit al-
lowed under this section shall be treated as a credit 
described in section 3511(d)(2) of such Code. 
‘‘(j) TREATMENT OF DEPOSITS.—The Secretary shall 
waive any penalty under section 6656 for any failure to 
make a deposit of any taxes imposed under section 
3111(b) if the Secretary determines that such failure was 
due to the reasonable anticipation of the credit allowed 
under this section. 
‘‘(k) EXTENSION OF LIMITATION ON ASSESSMENT.— 
Notwithstanding section 6501, the limitation on the time 
period for the assessment of any amount attributable to 
a credit claimed under this section shall not expire before 
the date that is 5 years after the later of— 
‘‘(1) the date on which the original return 
which includes the calendar quarter with respect to 
which such credit is determined is filed, or 
‘‘(2) the date on which such return is treated 
as filed under section 6501(b)(2). 
‘‘(l) REGULATIONS AND GUIDANCE.—The Secretary 
shall issue such forms, instructions, regulations, and guid-
ance as are necessary—
1971 
‘‘(1) with respect to the application of the cred-
it under subsection (a) to third-party payors (includ-
ing professional employer organizations, certified 
professional employer organizations, or agents under 
section 3504), including regulations or guidance al-
lowing such payors to submit documentation nec-
essary to substantiate the eligible employer status of 
employers that use such payors, and 
‘‘(2) to prevent the avoidance of the purposes of 
the limitations under this section. 
Any forms, instructions, regulations, or other guidance de-
scribed in paragraph (1) shall require the customer to be 
responsible for the accounting of the credit and for any 
liability for improperly claimed credits and shall require 
the certified professional employer organization or other 
third-party payor to accurately report such tax credits 
based on the information provided by the customer. 
‘‘(m) APPLICATION.—This section shall only apply to 
wages paid in calendar quarters beginning after the date 
of the enactment of this section and beginning before the 
date that is 5 years after the first day of the first calendar 
quarter to which this section applies.’’. 
(b) REFUNDS.—Paragraph (2) of section 1324(b) of 
title 31, United States Code, is amended by inserting 
‘‘3135,’’ after ‘‘3134,’’.
1972 
(c) CLERICAL AMENDMENT.—The table of sections 
for subchapter D of chapter 21 is amended by adding at 
the end the following: 
‘‘Sec. 3135. Local news journalist compensation credit.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar quarters beginning 
after the date of the enactment of this Act. 
SEC. 138517. ABOVE-THE-LINE DEDUCTION FOR EMPLOYEE 
UNIFORMS. 
(a) IN GENERAL.—Section 62(a)(2), as amended by 
the preceding provision of this Act, is amended by adding 
at the end the following new subparagraph: 
‘‘(G) WORK CLOTHES AND UNIFORMS.—In 
the case of any taxable year beginning after De-
cember 31, 2021, and before January 1, 2025, 
the deductions allowed by section 162, not in 
excess of $250, which are attributable to a 
trade or business consisting of the performance 
of services by the taxpayer as an employee if 
such deductions are for uniforms or work cloth-
ing which are— 
‘‘(i) required to be worn as a condi-
tion of employment, and 
‘‘(ii) not suitable for everyday wear.’’.
1973 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138518. EXPENSES IN CONTINGENCY FEE CASES. 
(a) IN GENERAL.—Section 162 is amended by redes-
ignating subsection (s) as subsection (t) and by inserting 
after subsection (r) the following new subsection: 
‘‘(s) EXPENSES IN CONTINGENCY FEE CASES.—In 
the case of any amount paid or incurred in the ordinary 
course of the trade or business of practicing law the repay-
ment of which is contingent on a recovery by judgment 
or settlement in the action to which such amount relates— 
‘‘(1) the deduction under subsection (a) shall be 
determined by disregarding the possibility that such 
amount will be repaid, and 
‘‘(2) income attributable to any related recovery 
shall not be reduced by such amount.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid, incurred, or re-
ceived in taxable years beginning after the date of the en-
actment of this Act. 
SEC. 138519. INCREASE IN RESEARCH CREDIT AGAINST 
PAYROLL TAX FOR SMALL BUSINESSES. 
(a) IN GENERAL.—Clause (i) of section 41(h)(4)(B) 
is amended—
1974 
(1) by striking ‘‘AMOUNT.—The amount’’ and 
inserting ‘‘AMOUNT.— 
‘‘(I) 
IN
GENERAL.—The 
amount’’, and 
(2) by adding at the end the following new sub-
clause: 
‘‘(II) INCREASE.—In the case of 
taxable years beginning after Decem-
ber 31, 2021, the amount in subclause 
(I) shall be increased by $250,000.’’. 
(b) ALLOWANCE OF CREDIT.— 
(1) IN
GENERAL.—Paragraph (1) of section 
3111(f) is amended— 
(A) by striking ‘‘for a taxable year, there 
shall be allowed’’ and inserting ‘‘for a taxable 
year— 
‘‘(A) there shall be allowed’’, 
(B) by striking ‘‘equal to the’’ and insert-
ing ‘‘equal to so much of the’’, 
(C) by striking the period at the end and 
inserting ‘‘as does not exceed the limitation of 
subclause (I) of section 41(h)(4)(B)(i) (applied 
without regard to subclause (II) thereof), and’’, 
and
1975 
(D) by adding at the end the following new 
subparagraph: 
‘‘(B) there shall be allowed as a credit 
against the tax imposed by subsection (b) for 
the first calendar quarter which begins after the 
date on which the taxpayer files the return 
specified in section 41(h)(4)(A)(ii) an amount 
equal to so much of the payroll tax credit por-
tion determined under section 41(h)(2) as is 
not allowed as a credit under subparagraph 
(A).’’. 
(2) LIMITATION.—Paragraph (2) of section 
3111(f) is amended— 
(A) by striking ‘‘paragraph (1)’’ and in-
serting ‘‘paragraph (1)(A)’’, and 
(B) by inserting ‘‘, and the credit allowed 
by paragraph (1)(B) shall not exceed the tax 
imposed by subsection (b) for any calendar 
quarter,’’ after ‘‘calendar quarter’’. 
(3) CARRYOVER.—Paragraph (3) of section 
3111(f) is amended by striking ‘‘the credit’’ and in-
serting ‘‘any credit’’. 
(4) DEDUCTION ALLOWED.—Paragraph (4) of 
section 3111(f) is amended—
1976 
(A) by striking ‘‘credit’’ and inserting 
‘‘credits’’, and 
(B) by striking ‘‘subsection (a)’’ and in-
serting ‘‘subsection (a) or (b)’’. 
(c) AGGREGATION RULES.—Clause (ii) of section 
41(h)(5)(B) is amended by striking ‘‘the $250,000 
amount’’ and inserting ‘‘each of the $250,000 amounts’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 138520. IMPOSITION OF TAX ON NICOTINE. 
(a) IN GENERAL.—Section 5701 is amended by re-
designating subsection (h) as subsection (i) and by insert-
ing after subsection (g) the following new subsection: 
‘‘(h) NICOTINE.—On taxable nicotine, manufactured 
in or imported into the United States, there shall be im-
posed a tax equal to the dollar amount specified in section 
5701(b)(1) (or, if greater, $50.33) per 1,810 milligrams 
of nicotine (and a proportionate tax at the like rate on 
any fractional part thereof).’’. 
(b) TAXABLE NICOTINE.—Section 5702 is amended 
by adding at the end the following new subsection: 
‘‘(q) TAXABLE NICOTINE.— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘taxable nicotine’
1977 
means any nicotine which has been extracted, con-
centrated, or synthesized. 
‘‘(2) EXCEPTION FOR PRODUCTS APPROVED BY 
FOOD
AND
DRUG
ADMINISTRATION.—Such term 
shall not include any nicotine if the manufacturer or 
importer thereof demonstrates to the satisfaction of 
the Secretary of Health and Human Services that 
such nicotine will be used in— 
‘‘(A) a drug— 
‘‘(i) that is approved under section 
505 of the Federal Food, Drug, and Cos-
metic Act or licensed under section 351 of 
the Public Health Service Act; or 
‘‘(ii) for which an investigational use 
exemption has been authorized under sec-
tion 505(i) of the Federal Food, Drug, and 
Cosmetic Act or under section 351(a) of 
the Public Health Service Act; or 
‘‘(B) a combination product (as described 
in section 503(g) of the Federal Food, Drug, 
and Cosmetic Act), the constituent parts of 
which were approved or cleared under section 
505, 510(k), or 515 of such Act. 
‘‘(3) COORDINATION WITH TAXATION OF OTHER 
TOBACCO
PRODUCTS.—Tobacco products meeting
1978 
the definition of cigars, cigarettes, smokeless to-
bacco, pipe tobacco, and roll-your-own tobacco in 
this section shall be classified and taxed as such de-
spite any concentration of the nicotine inherent in 
those products or any addition of nicotine to those 
products during the manufacturing process. 
‘‘(4) REGULATIONS.—The Secretary shall pre-
scribe such regulations or other guidance as is nec-
essary or appropriate to carry out the purposes of 
this subsection, including regulations or other guid-
ance for coordinating the taxation of tobacco prod-
ucts and taxable nicotine to protect revenue and pre-
vent double taxation.’’. 
(c) TAXABLE NICOTINE TREATED AS A TOBACCO 
PRODUCT.—Section 5702(c) is amended by striking ‘‘and 
roll-your-own tobacco’’ and inserting ‘‘roll-your-own to-
bacco, and taxable nicotine’’. 
(d) MANUFACTURER OF TAXABLE NICOTINE.—Sec-
tion 5702, as amended by subsection (b), is amended by 
adding at the end the following new subsection: 
‘‘(r) MANUFACTURER OF TAXABLE NICOTINE.— 
‘‘(1) IN GENERAL.—Any person who extracts, 
concentrates, or synthesizes nicotine shall be treated 
as a manufacturer of taxable nicotine (and as manu-
facturing such taxable nicotine).
1979 
‘‘(2) APPLICATION
OF
RULES
RELATED
TO 
MANUFACTURERS
OF
TOBACCO
PRODUCTS.—Any 
reference to a manufacturer of tobacco products, or 
to manufacturing tobacco products, shall be treated 
as including a reference to a manufacturer of tax-
able nicotine, or to manufacturing taxable nicotine, 
respectively.’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to articles removed in cal-
endar quarters beginning after the date which is 180 
days after the date of the enactment of this Act. 
(2) TRANSITION RULE FOR PERMIT AND BOND 
REQUIREMENTS.—A person which is lawfully en-
gaged in business as a manufacturer or importer of 
taxable nicotine (within the meaning of subchapter 
A of chapter 52 of the Internal Revenue Code of 
1986, as amended by this section) on the date of the 
enactment of this Act, first becomes subject to the 
requirements of subchapter B of chapter 52 of such 
Code by reason of the amendments made by this 
section, and submits an application under such sub-
chapter B to engage in such business not later than 
90 days after the date of the enactment of this Act, 
shall not be denied the right to carry on such busi-
1980 
ness by reason of such requirements before final ac-
tion on such application. 
SEC. 138521. TERMINATION OF EMPLOYER CREDIT FOR 
PAID FAMILY AND MEDICAL LEAVE. 
Section 45S(i) is amended by striking ‘‘December 31, 
2025’’ and inserting ‘‘December 31, 2023’’. 
Subtitle I—Drug Pricing 
PART 1—LOWERING PRICES THROUGH DRUG 
PRICE NEGOTIATION 
SEC. 139001. PROVIDING FOR LOWER PRICES FOR CERTAIN 
HIGH-PRICED SINGLE SOURCE DRUGS. 
(a) PROGRAM TO LOWER PRICES
FOR CERTAIN 
HIGH-PRICED SINGLE SOURCE DRUGS.—Title XI of the 
Social Security Act is amended by adding after section 
1184 (42 U.S.C. 1320e–3) the following new part: 
‘‘PART E—PRICE NEGOTIATION PROGRAM TO 
LOWER PRICES FOR CERTAIN HIGH-PRICED 
SINGLE SOURCE DRUGS 
‘‘SEC. 1191. ESTABLISHMENT OF PROGRAM. 
‘‘(a) IN GENERAL.—The Secretary shall establish a 
Drug Price Negotiation Program (in this part referred to 
as the ‘program’). Under the program, with respect to 
each price applicability period, the Secretary shall— 
‘‘(1) publish a list of negotiation-eligible drugs 
and selected drugs in accordance with section 1192;
1981 
‘‘(2) enter into agreements with manufacturers 
of selected drugs with respect to such period, in ac-
cordance with section 1193; 
‘‘(3) negotiate and, if applicable, renegotiate 
maximum fair prices for such selected drugs, in ac-
cordance with section 1194; and 
‘‘(4) carry out the administrative duties de-
scribed in section 1196. 
‘‘(b) DEFINITIONS RELATING TO TIMING.—For pur-
poses of this part: 
‘‘(1) INITIAL PRICE APPLICABILITY YEAR.—The 
term ‘initial price applicability year’ means a year 
(beginning with 2025). 
‘‘(2) PRICE APPLICABILITY PERIOD.—The term 
‘price applicability period’ means, with respect to a 
qualifying single source drug, the period beginning 
with the first initial price applicability year with re-
spect to which such drug is a selected drug and end-
ing with the last year during which the drug is a se-
lected drug. 
‘‘(3) SELECTED
DRUG
PUBLICATION
DATE.— 
The term ‘selected drug publication date’ means, 
with respect to each initial price applicability year, 
February 1 of the year that begins 2 years prior to 
such year.
1982 
‘‘(4) NEGOTIATION PERIOD.—The term ‘nego-
tiation period’ means, with respect to an initial price 
applicability year with respect to a selected drug, the 
period— 
‘‘(A) beginning on the sooner of— 
‘‘(i) the date on which the manufac-
turer of the drug and the Secretary enter 
into an agreement under section 1193 with 
respect to such drug; or 
‘‘(ii) February 28 following the se-
lected drug publication date with respect to 
such selected drug; and 
‘‘(B) ending on November 1 of the year 
that begins 2 years prior to the initial price ap-
plicability year. 
‘‘(c) OTHER DEFINITIONS.—For purposes of this 
part: 
‘‘(1) MAXIMUM
FAIR
PRICE
ELIGIBLE
INDI-
VIDUAL.—The term ‘maximum fair price eligible in-
dividual’ means, with respect to a selected drug— 
‘‘(A) in the case such drug is dispensed to 
the individual at a pharmacy, by a mail order 
service, or by another dispenser, an individual 
who is enrolled under a prescription drug plan 
under part D of title XVIII or an MA–PD plan