313 
† HR 1 EAS 
‘‘(2) GAIN OR LOSS.—No gain or loss shall be 
recognized by the Native Corporation with respect to 
a contribution of property for which a deduction is 
allowed under this section. 
‘‘(3) INCOME.—Subject to subsection (g), a Set-
tlement Trust shall include in income the amount of 
any deduction allowed under this section in the tax-
able year in which the Settlement Trust actually re-
ceives such contribution. 
‘‘(4) PERIOD.—The holding period under section 
1223 of the Settlement Trust shall include the period 
the property was held by the Native Corporation. 
‘‘(5) BASIS.—The basis that a Settlement Trust 
has for which a deduction is allowed under this sec-
tion shall be equal to the lesser of— 
‘‘(A) the adjusted basis of the Native Cor-
poration in such property immediately before 
such contribution, or 
‘‘(B) the fair market value of the property 
immediately before such contribution. 
‘‘(6) PROHIBITION.—No deduction shall be al-
lowed under this section with respect to any contribu-
tions made to a Settlement Trust which are in viola-
tion of subsection (a)(2) or (c)(2) of section 39 of the
314 
† HR 1 EAS 
Alaska Native Claims Settlement Act (43 U.S.C. 
1629e). 
‘‘(g) ELECTION BY SETTLEMENT TRUST TO DEFER IN-
COME RECOGNITION.— 
‘‘(1) IN GENERAL.—In the case of a contribution 
which consists of property other than cash, a Settle-
ment Trust may elect to defer recognition of any in-
come related to such property until the sale or ex-
change of such property, in whole or in part, by the 
Settlement Trust. 
‘‘(2) TREATMENT.—In the case of property de-
scribed in paragraph (1), any income or gain realized 
on the sale or exchange of such property shall be 
treated as— 
‘‘(A) for such amount of the income or gain 
as is equal to or less than the amount of income 
which would be included in income at the time 
of contribution under subsection (f)(3) but for the 
taxpayer’s election under this subsection, ordi-
nary income, and 
‘‘(B) for any amounts of the income or gain 
which are in excess of the amount of income 
which would be included in income at the time 
of contribution under subsection (f)(3) but for the 
taxpayer’s election under this subsection, having
315 
† HR 1 EAS 
the same character as if this subsection did not 
apply. 
‘‘(3) ELECTION.— 
‘‘(A) IN GENERAL.—For each taxable year, 
a Settlement Trust may elect to apply this sub-
section for any property described in paragraph 
(1) which was contributed during such year. Any 
property to which the election applies shall be 
identified and described with reasonable particu-
larity on the income tax return or an amend-
ment or supplement to the return of the Settle-
ment Trust, with such election to have effect sole-
ly for such taxable year. 
‘‘(B) REVOCATION.—Any election made by 
a Settlement Trust pursuant to this subsection 
may be revoked pursuant to a timely filed 
amendment or supplement to the income tax re-
turn of such Settlement Trust. 
‘‘(C) CERTAIN DISPOSITIONS.— 
‘‘(i) IN GENERAL.—In the case of any 
property for which an election is in effect 
under this subsection and which is disposed 
of within the first taxable year subsequent 
to the taxable year in which such property 
was contributed to the Settlement Trust—
316 
† HR 1 EAS 
‘‘(I) this section shall be applied 
as if the election under this subsection 
had not been made, 
‘‘(II) any income or gain which 
would have been included in the year 
of contribution under subsection (f)(3) 
but for the taxpayer’s election under 
this subsection shall be included in in-
come for the taxable year of such con-
tribution, and 
‘‘(III) the Settlement Trust shall 
pay any increase in tax resulting from 
such inclusion, including any applica-
ble interest, and increased by 10 per-
cent of the amount of such increase 
with interest. 
‘‘(ii) ASSESSMENT.—Notwithstanding 
section 6501(a), any amount described in 
subclause (III) of clause (i) may be assessed, 
or a proceeding in court with respect to 
such amount may be initiated without as-
sessment, within 4 years after the date on 
which the return making the election under 
this subsection for such property was filed.’’.
320 
† HR 1 EAS 
paid by an aircraft owner for aircraft manage-
ment services related to— 
‘‘(i) maintenance and support of the 
aircraft owner’s aircraft, or 
‘‘(ii) flights on the aircraft owner’s air-
craft. 
‘‘(B) AIRCRAFT MANAGEMENT SERVICES.— 
For purposes of subparagraph (A), the term ‘air-
craft management services’ includes— 
‘‘(i) assisting an aircraft owner with 
administrative and support services, such 
as scheduling, flight planning, and weather 
forecasting, 
‘‘(ii) obtaining insurance, 
‘‘(iii) maintenance, storage and fueling 
of aircraft, 
‘‘(iv) hiring, training, and provision of 
pilots and crew, 
‘‘(v) establishing and complying with 
safety standards, and 
‘‘(vi) such other services as are nec-
essary to support flights operated by an air-
craft owner. 
‘‘(C) 
LESSEE
TREATED
AS
AIRCRAFT 
OWNER.—
321 
† HR 1 EAS 
‘‘(i) IN
GENERAL.—For purposes of 
this paragraph, the term ‘aircraft owner’ 
includes a person who leases the aircraft 
other than under a disqualified lease. 
‘‘(ii) DISQUALIFIED LEASE.—For pur-
poses of clause (i), the term ‘disqualified 
lease’ means a lease from a person pro-
viding aircraft management services with 
respect to such aircraft (or a related person 
(within 
the 
meaning 
of 
section 
465(b)(3)(C)) to the person providing such 
services), if such lease is for a term of 31 
days or less. 
‘‘(D) PRO RATA ALLOCATION.—In the case 
of amounts paid to any person which (but for 
this subsection) are subject to the tax imposed by 
subsection (a), a portion of which consists of 
amounts described in subparagraph (A), this 
paragraph shall apply on a pro rata basis only 
to the portion which consists of amounts de-
scribed in such subparagraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to amounts paid after the date of the 
enactment of this Act.
322 
† HR 1 EAS 
SEC. 13823. OPPORTUNITY ZONES. 
(a) IN GENERAL.—Chapter 1 is amended by adding 
at the end the following: 
‘‘Subchapter Z—Opportunity Zones 
‘‘Sec. 1400Z–1. Designation. 
‘‘Sec. 1400Z–2. Special rules for capital gains invested in opportunity zones. 
‘‘SEC. 1400Z–1. DESIGNATION. 
‘‘(a) QUALIFIED OPPORTUNITY ZONE DEFINED.—For 
the purposes of this subchapter, the term ‘qualified oppor-
tunity zone’ means a population census tract that is a low- 
income community that is designated as a qualified oppor-
tunity zone. 
‘‘(b) DESIGNATION.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), a population census tract that is a low-income 
community is designated as a qualified opportunity 
zone if— 
‘‘(A) not later than the end of the deter-
mination period, the governor of the State in 
which the tract is located— 
‘‘(i) nominates the tract for designa-
tion as a qualified opportunity zone, and 
‘‘(ii) notifies the Secretary in writing 
of such nomination, and 
‘‘(B) the Secretary certifies such nomina-
tion and designates such tract as a qualified op-
323 
† HR 1 EAS 
portunity zone before the end of the consideration 
period. 
‘‘(2) EXTENSION OF PERIODS.—A governor may 
request that the Secretary extend either the deter-
mination or consideration period, or both (determined 
without regard to this subparagraph), for an addi-
tional 30 days. 
‘‘(c) OTHER DEFINITIONS.—For purposes of this sub-
section— 
‘‘(1) LOW-INCOME
COMMUNITIES.—The term 
‘low-income community’ has the same meaning as 
when used in section 45D(e). 
‘‘(2) DEFINITION OF PERIODS.— 
‘‘(A) CONSIDERATION
PERIOD.—The term 
‘consideration period’ means the 30-day period 
beginning on the date on which the Secretary re-
ceives notice under subsection (b)(1)(A)(ii), as 
extended under subsection (b)(2). 
‘‘(B) DETERMINATION PERIOD.—The term 
‘determination period’ means the 90-day period 
beginning on the date of the enactment of the 
Tax Cuts and Jobs Act, as extended under sub-
section (b)(2).
324 
† HR 1 EAS 
‘‘(3) STATE.—For purposes of this section, the 
term ‘State’ includes any possession of the United 
States. 
‘‘(d) NUMBER OF DESIGNATIONS.— 
‘‘(1) IN GENERAL.—Except as provided by para-
graph (2), the number of population census tracts in 
a State that may be designated as qualified oppor-
tunity zones under this section may not exceed 25 
percent of the number of low-income communities in 
the State. 
‘‘(2) EXCEPTION.—If the number of low-income 
communities in a State is less than 100, then a total 
of 25 of such tracts may be designated as qualified 
opportunity zones. 
‘‘(e) DESIGNATION
OF TRACTS CONTIGUOUS WITH 
LOW-INCOME COMMUNITIES.— 
‘‘(1) IN GENERAL.—A population census tract 
that is not a low-income community may be des-
ignated as a qualified opportunity zone under this 
section if— 
‘‘(A) the tract is contiguous with the low-in-
come community that is designated as a quali-
fied opportunity zone, and 
‘‘(B) the median family income of the tract 
does not exceed 125 percent of the median family
325 
† HR 1 EAS 
income of the low-income community with which 
the tract is contiguous. 
‘‘(2) LIMITATION.—Not more than 5 percent of 
the population census tracts designated in a State as 
a qualified opportunity zone may be designated under 
paragraph (1). 
‘‘(f) PERIOD FOR WHICH DESIGNATION IS IN EF-
FECT.—A designation as a qualified opportunity zone shall 
remain in effect for the period beginning on the date of the 
designation and ending at the close of the 10th calendar 
year beginning on or after such date of designation. 
‘‘SEC. 1400Z–2. SPECIAL RULES FOR CAPITAL GAINS IN-
VESTED IN OPPORTUNITY ZONES. 
‘‘(a) IN GENERAL.—In the case of gain from the sale 
to, or exchange with, an unrelated person of any property 
held by the taxpayer, at the election of the taxpayer— 
‘‘(1) gross income for the taxable year shall not 
include so much of such gain as does not exceed the 
aggregate amount invested by the taxpayer in a 
qualified opportunity fund during the 180-day period 
beginning on the date of such sale or exchange, 
‘‘(2) the amount of gain excluded by paragraph 
(1) shall be included in gross income as provided by 
subsection (b), and 
‘‘(3) subsection (c) shall apply.
326 
† HR 1 EAS 
No election may be made under the preceding sentence with 
respect to a sale or exchange if an election previously made 
with respect to such sale or exchange is in effect. 
‘‘(b) DEFERRAL OF GAIN INVESTED IN OPPORTUNITY 
ZONE PROPERTY.— 
‘‘(1) YEAR OF INCLUSION.—Gain to which sub-
section (a)(2) applies shall be included in income in 
the taxable year which includes the earlier of— 
‘‘(A) the date on which such investment is 
sold or exchanged, or 
‘‘(B) December 31, 2026. 
‘‘(2) AMOUNT INCLUDIBLE.— 
‘‘(A) IN GENERAL.—The amount of gain in-
cluded in gross income under subsection (a)(1) 
shall be the excess of— 
‘‘(i) the lesser of the amount of gain ex-
cluded under paragraph (1) or the fair 
market value of the property as determined 
as of the date described in paragraph (1), 
over 
‘‘(ii) the taxpayer’s basis in the invest-
ment. 
‘‘(B) DETERMINATION OF BASIS.— 
‘‘(i) IN GENERAL.—Except as otherwise 
provided in this clause or subsection (c), the
327 
† HR 1 EAS 
taxpayer’s basis in the investment shall be 
zero. 
‘‘(ii) INCREASE FOR GAIN RECOGNIZED 
UNDER SUBSECTION (a)(2).—The basis in 
the investment shall be increased by the 
amount of gain recognized by reason of sub-
section (a)(2) with respect to such property. 
‘‘(iii) INVESTMENTS
HELD
FOR
YEARS.—In the case of any investment held 
for at least 5 years, the basis of such invest-
ment shall be increased by an amount equal 
to 10 percent of the amount of gain deferred 
by reason of subsection (a)(1). 
‘‘(iv) 
INVESTMENTS
HELD
FOR
YEARS.—In the case of any investment held 
by the taxpayer for at least 7 years, in ad-
dition to any adjustment made under clause 
(iii), the basis of such property shall be in-
creased by an amount equal to 5 percent of 
the amount of gain deferred by reason of 
subsection (a)(1). 
‘‘(c) SPECIAL RULE FOR INVESTMENTS HELD FOR AT 
LEAST 10 YEARS.—In the case of any investment held by 
the taxpayer for at least 10 years and with respect to which 
the taxpayer makes an election under this clause, the basis
328 
† HR 1 EAS 
of such property shall be equal to the fair market value of 
such investment on the date that the investment is sold or 
exchanged. 
‘‘(d) QUALIFIED OPPORTUNITY FUND.—For purposes 
of this section— 
‘‘(1) QUALIFIED OPPORTUNITY FUND.—The term 
‘qualified opportunity fund’ means any investment 
vehicle which is organized as a corporation or a part-
nership for the purpose of investing in qualified op-
portunity zone property (other than another qualified 
opportunity fund) that holds at least 90 percent of its 
assets in qualified opportunity zone property, deter-
mined— 
‘‘(A) on the last day of the first 6-month pe-
riod of the taxable year of the fund, and 
‘‘(B) on the last day of the taxable year of 
the fund. 
‘‘(2) QUALIFIED
OPPORTUNITY
ZONE
PROP-
ERTY.— 
‘‘(A) IN GENERAL.—The term ‘qualified op-
portunity zone property’ means property which 
is— 
‘‘(i) qualified opportunity zone stock, 
‘‘(ii) qualified opportunity zone part-
nership interest, or
329 
† HR 1 EAS 
‘‘(iii) qualified opportunity zone busi-
ness property. 
‘‘(B) 
QUALIFIED
OPPORTUNITY
ZONE 
STOCK.— 
‘‘(i) IN GENERAL.—Except as provided 
in clause (ii), the term ‘qualified oppor-
tunity zone stock’ means any stock in a do-
mestic corporation if— 
‘‘(I) such stock is acquired by the 
taxpayer after December 31, 2017, at 
its original issue (directly or through 
an underwriter) from the corporation 
solely in exchange for cash, 
‘‘(II) as of the time such stock was 
issued, such corporation was a quali-
fied opportunity zone business (or, in 
the case of a new corporation, such cor-
poration was being organized for pur-
poses of being a qualified opportunity 
zone business), and 
‘‘(III) during substantially all of 
the taxpayer’s holding period for such 
stock, such corporation qualified as a 
qualified opportunity zone business.
330 
† HR 1 EAS 
‘‘(ii) REDEMPTIONS.—A rule similar 
to the rule of section 1202(c)(3) shall apply 
for purposes of this paragraph. 
‘‘(C) QUALIFIED OPPORTUNITY ZONE PART-
NERSHIP INTEREST.—The term ‘qualified oppor-
tunity zone partnership interest’ means any cap-
ital or profits interest in a domestic partnership 
if— 
‘‘(i) such interest is acquired by the 
taxpayer after December 31, 2017, from the 
partnership solely in exchange for cash, 
‘‘(ii) as of the time such interest was 
acquired, such partnership was a qualified 
opportunity zone business (or, in the case of 
a new partnership, such partnership was 
being organized for purposes of being a 
qualified opportunity zone business), and 
‘‘(iii) during substantially all of the 
taxpayer’s holding period for such interest, 
such partnership qualified as a qualified 
opportunity zone business. 
‘‘(D) QUALIFIED OPPORTUNITY ZONE BUSI-
NESS PROPERTY.— 
‘‘(i) IN GENERAL.—The term ‘qualified 
opportunity zone business property’ means
331 
† HR 1 EAS 
tangible property used in a trade or busi-
ness of the taxpayer if— 
‘‘(I) such property was acquired 
by the taxpayer by purchase (as de-
fined in section 179(d)(2)) after De-
cember 31, 2017, 
‘‘(II) the original use of such 
property in the qualified opportunity 
zone commences with the taxpayer or 
the taxpayer substantially improves 
the property, and 
‘‘(III) during substantially all of 
the taxpayer’s holding period for such 
property, substantially all of the use of 
such property was in a qualified op-
portunity zone. 
‘‘(ii) SUBSTANTIAL
IMPROVEMENT.— 
For purposes of subparagraph (A)(ii), prop-
erty shall be treated as substantially im-
proved by the taxpayer only if, during any 
30-month period beginning after the date of 
acquisition of such property, additions to 
basis with respect to such property in the 
hands of the taxpayer exceed an amount 
equal to the adjusted basis of such property
332 
† HR 1 EAS 
at the beginning of such 30-month period in 
the hands of the taxpayer. 
‘‘(iii) RELATED PARTY.—For purposes 
of subparagraph (A)(i), the related person 
rule of section 179(d)(2) shall be applied 
pursuant to paragraph (8) of this sub-
section in lieu of the application of such 
rule in section 179(d)(2)(A). 
‘‘(3) QUALIFIED
OPPORTUNITY
ZONE
BUSI-
NESS.— 
‘‘(A) IN GENERAL.—The term ‘qualified op-
portunity zone business’ means a trade or busi-
ness— 
‘‘(i) in which substantially all of the 
tangible property owned or leased by the 
taxpayer is qualified opportunity zone busi-
ness property, 
‘‘(ii) which satisfies the requirements of 
paragraphs (2), (4), and (8) of section 
1397C(b), and 
‘‘(iii) which is not described in section 
144(c)(6)(B). 
‘‘(B) SPECIAL RULE.—For purposes of sub-
paragraph (A), tangible property that ceases to 
be a qualified opportunity zone business prop-
333 
† HR 1 EAS 
erty shall continue to be treated as a qualified 
opportunity zone business property for the lesser 
of— 
‘‘(i) 5 years after the date on which 
such tangible property ceases to be so quali-
fied, or 
‘‘(ii) the date on which such tangible 
property is no longer held by the qualified 
opportunity zone business. 
‘‘(e) APPLICABLE RULES.— 
‘‘(1) TREATMENT OF INVESTMENTS WITH MIXED 
FUNDS.—In the case of any investment in a qualified 
opportunity fund only a portion of which consists of 
investments of gain to which an election under sub-
section (a)(1) is in effect— 
‘‘(A) such investment shall be treated as 2 
separate investments, consisting of— 
‘‘(i) one investment that only includes 
amounts to which the election under sub-
section (a)(1) applies, and 
‘‘(ii) a separate investment consisting 
of other amounts, and 
‘‘(B) subsections (a), (b), and (c) shall only 
apply to the investment described in subpara-
graph (A)(i).
334 
† HR 1 EAS 
‘‘(2) RELATED PERSONS.—For purposes of this 
section, persons are related to each other if such per-
sons are described in section 267(b) or 707(b)(1), de-
termined by substituting ‘20 percent’ for ‘50 percent’ 
each place it occurs in such sections. 
‘‘(3) DECEDENTS.—In the case of a decedent, 
amounts recognized under this section shall, if not 
properly includible in the gross income of the dece-
dent, be includible in gross income as provided by sec-
tion 691. 
‘‘(4) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary or appro-
priate to carry out the purposes of this section, in-
cluding— 
‘‘(A) rules for the certification of qualified 
opportunity funds for the purposes of this sec-
tion, and 
‘‘(B) rules to prevent abuse. 
‘‘(f) FAILURE OF QUALIFIED OPPORTUNITY FUND TO 
MAINTAIN INVESTMENT STANDARD.— 
‘‘(1) IN GENERAL.—If a qualified opportunity 
fund fails to meet the 90-percent requirement of sub-
section (c)(1), the qualified opportunity fund shall 
pay a penalty for each month it fails to meet the re-
quirement in an amount equal to the product of—
335 
† HR 1 EAS 
‘‘(A) the excess of— 
‘‘(i) the amount equal to 90 percent of 
its aggregate assets, over 
‘‘(ii) the aggregate amount of qualified 
opportunity zone property held by the fund, 
multiplied by 
‘‘(B) the underpayment rate established 
under section 6621(a)(2) for such month. 
‘‘(2) SPECIAL RULE FOR PARTNERSHIPS.—In the 
case that the qualified opportunity fund is a partner-
ship, the penalty imposed by paragraph (1) shall be 
taken into account proportionately as part of the dis-
tributive share of each partner of the partnership. 
‘‘(3) REASONABLE CAUSE EXCEPTION.—No pen-
alty shall be imposed under this subsection with re-
spect to any failure if it is shown that such failure 
is due to reasonable cause.’’. 
(b) BASIS ADJUSTMENTS.—Section 1016(a) is amend-
ed by striking ‘‘and’’ at the end of paragraph (36), by strik-
ing the period at the end of paragraph (37) and inserting 
‘‘, and’’, and by inserting after paragraph (37) the fol-
lowing: 
‘‘(38) to the extent provided in subsections (b)(2) 
and (c) of section 1400Z–2.’’.
336 
† HR 1 EAS 
(c) CLERICAL AMENDMENT.—The table of subchapters 
for chapter 1 is amended by adding at the end the following 
new item: 
‘‘SUBCHAPTER Z. OPPORTUNITY ZONES’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall take effect on the date of the enactment of this 
Act. 
Subtitle D—International Tax 
Provisions 
PART I—OUTBOUND TRANSACTIONS 
Subpart A—Establishment of Participation 
Exemption System for Taxation of Foreign Income 
SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION 
OF DIVIDENDS RECEIVED BY DOMESTIC COR-
PORATIONS FROM SPECIFIED 10-PERCENT 
OWNED FOREIGN CORPORATIONS. 
(a) IN GENERAL.—Part VIII of subchapter B of chap-
ter 1 is amended by inserting after section 245 the following 
new section: 
‘‘SEC. 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION 
OF DIVIDENDS RECEIVED BY DOMESTIC COR-
PORATIONS FROM SPECIFIED 10-PERCENT 
OWNED FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—In the case of any dividend re-
ceived from a specified 10-percent owned foreign corpora-
tion by a domestic corporation which is a United States
337 
† HR 1 EAS 
shareholder with respect to such foreign corporation, there 
shall be allowed as a deduction an amount equal to the for-
eign-source portion of such dividend. 
‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN COR-
PORATION.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘specified 10-per-
cent owned foreign corporation’ means any foreign 
corporation with respect to which any domestic cor-
poration is a United States shareholder with respect 
to such corporation. 
‘‘(2) EXCLUSION OF PASSIVE FOREIGN INVEST-
MENT COMPANIES.—Such term shall not include any 
corporation which is a passive foreign investment 
company (as defined in section 1297) with respect to 
the shareholder and which is not a controlled foreign 
corporation. 
‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—The foreign-source portion of 
any dividend from a specified 10-percent owned for-
eign corporation is an amount which bears the same 
ratio to such dividend as— 
‘‘(A) the undistributed foreign earnings of 
the specified 10-percent owned foreign corpora-
tion, bears to
341 
† HR 1 EAS 
shall not be treated as a dividend for purposes of this sec-
tion. 
‘‘(g) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary or 
appropriate to carry out the provisions of this section, in-
cluding regulations for the treatment of United States 
shareholders owning stock of a specified 10 percent owned 
foreign corporation through a partnership.’’. 
(b) APPLICATION
OF HOLDING PERIOD REQUIRE-
MENT.—Subsection (c) of section 246 is amended— 
(1) by striking ‘‘or 245’’ in paragraph (1) and 
inserting ‘‘245, or 245A’’, and 
(2) by adding at the end the following new para-
graph: 
‘‘(5) SPECIAL RULES FOR FOREIGN SOURCE POR-
TION OF DIVIDENDS RECEIVED FROM SPECIFIED 10- 
PERCENT OWNED FOREIGN CORPORATIONS.— 
‘‘(A) 1-YEAR
HOLDING
PERIOD
REQUIRE-
MENT.—For purposes of section 245A— 
‘‘(i) paragraph (1)(A) shall be ap-
plied— 
‘‘(I) by substituting ‘365 days’ for 
‘45 days’ each place it appears, and 
‘‘(II) by substituting ‘731-day pe-
riod’ for ‘91-day period’, and
342 
† HR 1 EAS 
‘‘(ii) paragraph (2) shall not apply. 
‘‘(B) STATUS MUST BE MAINTAINED DURING 
HOLDING
PERIOD.—For purposes of applying 
paragraph (1) with respect to section 245A, the 
taxpayer shall be treated as holding the stock re-
ferred to in paragraph (1) for any period only 
if— 
‘‘(i) the specified 10-percent owned for-
eign corporation referred to in section 
245A(a) is a specified 10-percent owned for-
eign corporation at all times during such 
period, and 
‘‘(ii) the taxpayer is a United States 
shareholder with respect to such specified 
10-percent owned foreign corporation at all 
times during such period.’’. 
(c) APPLICATION OF RULES GENERALLY APPLICABLE 
TO DEDUCTIONS FOR DIVIDENDS RECEIVED.— 
(1) TREATMENT OF DIVIDENDS FROM CERTAIN 
CORPORATIONS.—Paragraph (1) of section 246(a) is 
amended by striking ‘‘and 245’’ and inserting ‘‘245, 
and 245A’’. 
(2) ASSETS GENERATING TAX-EXEMPT PORTION 
OF DIVIDEND NOT TAKEN INTO ACCOUNT IN ALLO-
CATING
AND
APPORTIONING
DEDUCTIBLE
EX-
343 
† HR 1 EAS 
PENSES.—Paragraph (3) of section 864(e) is amended 
by striking ‘‘or 245(a)’’ and inserting ‘‘, 245(a), or 
245A’’. 
(3) COORDINATION
WITH
SECTION
1059.—Sub-
paragraph (B) of section 1059(b)(2) is amended by 
striking ‘‘or 245’’ and inserting ‘‘245, or 245A’’. 
(d) COORDINATION WITH FOREIGN TAX CREDIT LIMI-
TATION.—Subsection (b) of section 904 is amended by add-
ing at the end the following new paragraph: 
‘‘(5) TREATMENT OF DIVIDENDS FOR WHICH DE-
DUCTION
IS
ALLOWED
UNDER
SECTION
245A.—For 
purposes of subsection (a), in the case of a domestic 
corporation which is a United States shareholder with 
respect to a specified 10-percent owned foreign cor-
poration, such domestic corporation’s taxable income 
from sources without the United States shall be deter-
mined without regard to— 
‘‘(A) the foreign-source portion of any divi-
dend received from such foreign corporation, and 
‘‘(B) any deductions properly allocable to 
such portion. 
Any term which is used in section 245A and in this 
paragraph shall have the same meaning for purposes 
of this paragraph as when used in such section.’’. 
(e) CONFORMING AMENDMENTS.—
344 
† HR 1 EAS 
(1) Subsection (b) of section 951 is amended by 
striking ‘‘subpart’’ and inserting ‘‘title’’. 
(2) Subsection (a) of section 957 is amended by 
striking ‘‘subpart’’ in the matter preceding paragraph 
(1) and inserting ‘‘title’’. 
(3) The table of sections for part VIII of sub-
chapter B of chapter 1 is amended by inserting after 
the item relating to section 245 the following new 
item: 
‘‘Sec. 245A. Dividends received by domestic corporations from certain foreign cor-
porations.’’. 
(f) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years of foreign corporations 
beginning after December 31, 2017, and to taxable years 
of United States shareholders in which or with which such 
taxable years of foreign corporations end. 
SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANS-
FERS 
INVOLVING 
SPECIFIED 
10-PERCENT 
OWNED FOREIGN CORPORATIONS. 
(a) SALES BY UNITED STATES PERSONS OF STOCK.— 
Section 1248 is amended by redesignating subsection (j) as 
subsection (k) and by inserting after subsection (i) the fol-
lowing new subsection: 
‘‘(j) COORDINATION WITH DIVIDENDS RECEIVED DE-
DUCTION.—In the case of the sale or exchange by a domestic 
corporation of stock in a foreign corporation held for 1 year
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or more, any amount received by the domestic corporation 
which is treated as a dividend by reason of this section shall 
be treated as a dividend for purposes of applying section 
245A.’’. 
(b) BASIS IN SPECIFIED 10-PERCENT OWNED FOREIGN 
CORPORATION REDUCED BY NONTAXED PORTION OF DIVI-
DEND FOR PURPOSES OF DETERMINING LOSS.— 
(1) IN GENERAL.—Section 961 is amended by 
adding at the end the following new subsection: 
‘‘(d) BASIS IN SPECIFIED 10-PERCENT OWNED FOR-
EIGN CORPORATION REDUCED BY NONTAXED PORTION OF 
DIVIDEND FOR PURPOSES OF DETERMINING LOSS.—If a 
domestic corporation receives a dividend from a specified 
10-percent owned foreign corporation (as defined in section 
245A) in any taxable year, solely for purposes of deter-
mining loss on any disposition of stock of such foreign cor-
poration in such taxable year or any subsequent taxable 
year, the basis of such domestic corporation in such stock 
shall be reduced (but not below zero) by the amount of any 
deduction allowable to such domestic corporation under sec-
tion 245A with respect to such stock.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to dividends received in 
taxable years beginning after December 31, 2017.
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(c) SALE BY A CFC OF A LOWER TIER CFC.—Section 
964(e) is amended by adding at the end the following new 
paragraph: 
‘‘(4) COORDINATION WITH DIVIDENDS RECEIVED 
DEDUCTION.— 
‘‘(A) IN GENERAL.—If, for any taxable year 
of a controlled foreign corporation beginning 
after December 31, 2017, any amount is treated 
as a dividend under paragraph (1) by reason of 
a sale or exchange by the controlled foreign cor-
poration of stock in another foreign corporation 
held for 1 year or more, then, notwithstanding 
any other provision of this title— 
‘‘(i) the foreign-source portion of such 
dividend shall be treated for purposes of sec-
tion 951(a)(1)(A) as subpart F income of 
the selling controlled foreign corporation for 
such taxable year, 
‘‘(ii) a United States shareholder with 
respect to the selling controlled foreign cor-
poration shall include in gross income for 
the taxable year of the shareholder with or 
within which such taxable year of the con-
trolled foreign corporation ends an amount 
equal to the shareholder’s pro rata share
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† HR 1 EAS 
(determined in the same manner as under 
section 951(a)(2)) of the amount treated as 
subpart F income under clause (i), and 
‘‘(iii) the deduction under section 
245A(a) shall be allowable to the United 
States shareholder with respect to the sub-
part F income included in gross income 
under clause (ii) in the same manner as if 
such subpart F income were a dividend re-
ceived by the shareholder from the selling 
controlled foreign corporation. 
‘‘(B) EFFECT OF LOSS ON EARNINGS AND 
PROFITS.—For purposes of this title, in the case 
of a sale or exchange by a controlled foreign cor-
poration of stock in another foreign corporation 
in a taxable year of the selling controlled foreign 
corporation beginning after December 31, 2017, 
to which this paragraph would apply if gain 
were recognized, the earnings and profits of the 
selling controlled foreign corporation shall not be 
reduced by reason of any loss from such sale or 
exchange. 
‘‘(C) FOREIGN-SOURCE PORTION.—For pur-
poses of this paragraph, the foreign-source por-
tion of any amount treated as a dividend under