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HR 1 PCS 
‘‘(i) with respect to any international 
financial reporting group for any reporting 
year, the excess of— 
‘‘(I) the aggregate amount of in-
terest 
expense 
reported 
in 
such 
group’s consolidated financial state-
ments for such taxable year, over 
‘‘(II) the aggregate amount of in-
terest income reported in such group’s 
consolidated financial statements for 
such taxable year, and 
‘‘(ii) with respect to any domestic cor-
poration for any reporting year, the excess 
of— 
‘‘(I) the amount of interest ex-
pense of such corporation reported in 
the books and records of the inter-
national financial reporting group 
which are used in preparing such 
group’s consolidated financial state-
ments for such taxable year, over 
‘‘(II) the amount of interest in-
come of such corporation reported in 
such books and records. 
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‘‘(C) ALLOCABLE
SHARE
OF
REPORTED 
NET INTEREST EXPENSE.—With respect to any 
domestic corporation which is a member of any 
international financial reporting group, such 
corporation’s allocable share of such group’s re-
ported net interest expense for any reporting 
year is the portion of such expense which bears 
the same ratio to such expense as— 
‘‘(i) the EBITDA of such corporation 
for such reporting year, bears to 
‘‘(ii) the EBITDA of such group for 
such reporting year. 
‘‘(D) EBITDA.— 
‘‘(i) 
IN
GENERAL.—The 
term 
‘EBITDA’ means, with respect to any re-
porting year, earnings before interest, 
taxes, depreciation, and amortization— 
‘‘(I) as determined in the inter-
national financial reporting group’s 
consolidated financial statements for 
such year, or 
‘‘(II) for purposes of subpara-
graph (A)(i), as determined in the 
books and records of the international 
financial reporting group which are 
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used in preparing such statements if 
not determined in such statements. 
‘‘(ii) TREATMENT
OF
DISREGARDED 
ENTITIES.—The EBITDA of any domestic 
corporation shall not fail to include the 
EBITDA of any entity which is dis-
regarded for purposes of this chapter. 
‘‘(iii) TREATMENT
OF
INTRA-GROUP 
DISTRIBUTIONS.—The EBITDA of any do-
mestic corporation shall be determined 
without regard to any distribution received 
by such corporation from any other mem-
ber of the international financial reporting 
group. 
‘‘(E) SPECIAL RULES FOR NON-POSITIVE 
EBITDA.— 
‘‘(i) NON-POSITIVE GROUP EBITDA.— 
In the case of any international financial 
reporting group the EBITDA of which is 
zero or less, paragraph (1) shall not apply 
to any member of such group the EBITDA 
of which is above zero. 
‘‘(ii) 
NON-POSITIVE
ENTITY 
EBITDA.—In the case of any group mem-
ber the EBITDA of which is zero or less, 
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paragraph (1) shall be applied without re-
gard to subparagraph (A) thereof. 
‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 
For purposes of this subsection, the term ‘consoli-
dated financial statement’ means any consolidated 
financial statement described in paragraph (2)(A)(ii) 
if such statement is— 
‘‘(A) a financial statement which is cer-
tified as being prepared in accordance with gen-
erally accepted accounting principles, inter-
national financial reporting standards, or any 
other comparable method of accounting identi-
fied by the Secretary, and which is— 
‘‘(i) a 10-K (or successor form), or 
annual statement to shareholders, required 
to be filed with the United States Securi-
ties and Exchange Commission, 
‘‘(ii) an audited financial statement 
which is used for— 
‘‘(I) credit purposes, 
‘‘(II) reporting to shareholders, 
partners, or other proprietors, or to 
beneficiaries, or 
‘‘(III) 
any 
other 
substantial 
nontax purpose, 
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but only if there is no statement described 
in clause (i), or 
‘‘(iii) filed with any other Federal or 
State agency for nontax purposes, but only 
if there is no statement described in clause 
(i) or (ii), or 
‘‘(B) a financial statement which— 
‘‘(i) is used for a purpose described in 
subclause (I), (II), or (III) of subpara-
graph (A)(ii), or 
‘‘(ii) filed with any regulatory or gov-
ernmental body (whether domestic or for-
eign) specified by the Secretary, 
but only if there is no statement described in 
subparagraph (A). 
‘‘(5) REPORTING YEAR.—For purposes of this 
subsection, the term ‘reporting year’ means, with re-
spect to any international financial reporting group, 
the year with respect to which the consolidated fi-
nancial statements are prepared. 
‘‘(6) APPLICATION TO CERTAIN ENTITIES.— 
‘‘(A) PARTNERSHIPS.—Except as other-
wise provided by the Secretary in paragraph 
(7), this subsection shall apply to any partner-
ship which is a member of any international fi-
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nancial reporting group under rules similar to 
the rules of section 163(j)(3). 
‘‘(B) FOREIGN
CORPORATIONS
ENGAGED 
IN TRADE OR BUSINESS WITHIN THE UNITED 
STATES.—Except as otherwise provided by the 
Secretary in paragraph (8), any deduction for 
interest paid or accrued by a foreign corpora-
tion engaged in a trade or business within the 
United States shall be limited in a manner con-
sistent with the principles of this subsection. 
‘‘(C) CONSOLIDATED
GROUPS.—For pur-
poses of this subsection, the members of any 
group that file (or are required to file) a con-
solidated return with respect to the tax imposed 
by chapter 1 for a taxable year shall be treated 
as a single corporation. 
‘‘(7) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as are necessary 
or appropriate to carry out the purposes of this sub-
section.’’. 
(b) CARRYFORWARD OF DISALLOWED INTEREST.— 
(1) IN GENERAL.—Section 163(o) is amended 
to read as follows: 
‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN-
TEREST.—The amount of any interest not allowed as a 
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deduction for any taxable year by reason of subsection 
(j)(1) or (n)(1) (whichever imposes the lower limitation 
with respect to such taxable year) shall be treated as inter-
est (and as business interest for purposes of subsection 
(j)(1)) paid or accrued in the succeeding taxable year. In-
terest paid or accrued in any taxable year (determined 
without regard to the preceding sentence) shall not be car-
ried past the 5th taxable year following such taxable year, 
determined by treating interest as allowed as a deduction 
on a first-in, first-out basis.’’. 
(2) TREATMENT OF CARRYFORWARD OF DIS-
ALLOWED INTEREST IN CERTAIN CORPORATE ACQUI-
SITIONS.—For rules related to the carryforward of 
disallowed interest in certain corporate acquisitions, 
see the amendments made by section 3301(c). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 4303. EXCISE TAX ON CERTAIN PAYMENTS FROM DO-
MESTIC CORPORATIONS TO RELATED FOR-
EIGN CORPORATIONS; ELECTION TO TREAT 
SUCH 
PAYMENTS 
AS 
EFFECTIVELY 
CON-
NECTED INCOME. 
(a) EXCISE TAX ON CERTAIN AMOUNTS FROM DO-
MESTIC CORPORATIONS TO FOREIGN AFFILIATES.— 
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(1) IN GENERAL.—Chapter 36 is amended by 
adding at the end the following new subchapter: 
‘‘Subchapter E—Tax on Certain Amounts to 
Foreign Affiliates 
‘‘Sec. 4491. Imposition of tax on certain amounts from domestic corporations 
to foreign affiliates. 
‘‘SEC. 4491. IMPOSITION OF TAX ON CERTAIN AMOUNTS 
FROM DOMESTIC CORPORATIONS TO FOR-
EIGN AFFILIATES. 
‘‘(a) IN GENERAL.—There is hereby imposed on each 
specified amount paid or incurred by a domestic corpora-
tion to a foreign corporation which is a member of the 
same international financial reporting group as such do-
mestic corporation a tax equal to the highest rate of tax 
in effect under section 11 multiplied by such amount. 
‘‘(b) BY WHOM PAID.—The tax imposed by sub-
section (a) shall be paid by the domestic corporation de-
scribed in such subsection. 
‘‘(c) EXCEPTION FOR EFFECTIVELY CONNECTED IN-
COME.—Subsection (a) shall not apply to so much of any 
specified amount as is effectively connected with the con-
duct of a trade or business within the United States if 
such amount is subject to tax under chapter 1. In the case 
of any amount which is treated as effectively connected 
with the conduct of a trade or business within the United 
States by reason of section 882(g), the preceding sentence 
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shall apply to such amount only if the domestic corpora-
tion provides to the Secretary (at such time and in such 
form and manner as the Secretary may provide) a copy 
of the election made under section 882(g) by the foreign 
corporation referred to in subsection (a). 
‘‘(d) DEFINITIONS
AND SPECIAL RULES.—Terms 
used in this section that are also used in section 882(g) 
shall have the same meaning as when used in such section 
and rules similar to the rules of paragraphs (5) and (6) 
of such section shall apply for purposes of this section.’’. 
(2) DENIAL
OF
DEDUCTION
FOR
TAX
IM-
POSED.—Section 275(a) is amended by inserting 
after paragraph (6) the following new paragraph: 
‘‘(7) Taxes imposed by section 4491.’’. 
(3) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 36 is amended by adding at the 
end the following new item: 
‘‘SUBCHAPTER E. TAX ON CERTAIN AMOUNTS TO FOREIGN AFFILIATES.’’. 
(b) ELECTION TO TREAT CERTAIN PAYMENTS FROM 
DOMESTIC CORPORATIONS TO RELATED FOREIGN COR-
PORATIONS AS EFFECTIVELY CONNECTED INCOME.—Sec-
tion 882 is amended by adding at the end the following 
new subsection: 
‘‘(g) ELECTION
TO TREAT CERTAIN PAYMENTS 
FROM DOMESTIC CORPORATIONS TO RELATED FOREIGN 
CORPORATIONS AS EFFECTIVELY CONNECTED INCOME.— 
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‘‘(1) IN GENERAL.—In the case of any specified 
amount paid or incurred by a domestic corporation 
to a foreign corporation which is a member of the 
same international financial reporting group as such 
domestic corporation and which has elected to be 
subject to the provisions of this subsection— 
‘‘(A) such amount shall be taken into ac-
count (other than for purposes of sections 245, 
245A, and 881) in the taxable year of such for-
eign corporation during which such amount is 
paid or incurred as if— 
‘‘(i) such foreign corporation were en-
gaged in a trade or business within the 
United States, 
‘‘(ii) such foreign corporation had a 
permanent establishment in the United 
States during the taxable year, and 
‘‘(iii) such payment were effectively 
connected with the conduct of a trade or 
business within the United States and were 
attributable to such permanent establish-
ment, 
‘‘(B) for purposes of subsection (c)(1)(A), 
no deduction shall be allowed with respect to 
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such amount and such subsection shall be ap-
plied without regard to such amount, and 
‘‘(C) the foreign corporation shall be al-
lowed a deduction (for the taxable year referred 
to in subparagraph (A)) equal to the deemed 
expenses with respect to such amount. 
‘‘(2) SPECIFIED
AMOUNT.—For purposes of 
this subsection— 
‘‘(A) IN
GENERAL.—The term ‘specified 
amount’ means any amount which is, with re-
spect to the payor, allowable as a deduction or 
includible in costs of goods sold, inventory, or 
the basis of a depreciable or amortizable asset. 
‘‘(B) EXCEPTIONS.—The term ‘specified 
amount’ shall not include— 
‘‘(i) interest, 
‘‘(ii) any amount paid or incurred for 
the acquisition of any security described in 
section 475(c)(2) (determined without re-
gard to the last sentence thereof) or any 
commodity described in section 475(e)(2), 
‘‘(iii) except as provided in subpara-
graph (C), any amount with respect to 
which tax is imposed under section 881(a), 
and 
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‘‘(iv) in the case of a payor which has 
elected to use a services cost method for 
purposes of section 482, any amount paid 
or incurred for services if such amount is 
the total services cost with no markup. 
‘‘(C) AMOUNTS NOT TREATED AS EFFEC-
TIVELY
CONNECTED
TO
EXTENT
OF
GROSS- 
BASIS TAX.—Subparagraph (B)(iii) shall only 
apply to so much of any specified amount as 
bears the proportion to such amount as— 
‘‘(i) the rate of tax imposed under 
section 881(a) with respect to such 
amount, bears to 
‘‘(ii) 30 percent. 
‘‘(3) DEEMED EXPENSES.— 
‘‘(A) IN GENERAL.—The deemed expenses 
with respect to any specified amount received 
by a foreign corporation during any reporting 
year is the amount of expenses such that the 
net income ratio of such foreign corporation 
with respect to such amount (taking into ac-
count only such specified amount and such 
deemed expenses) is equal to the net income 
ratio of the international financial reporting 
group determined for such reporting year with 
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respect to the product line to which the speci-
fied amount relates. 
‘‘(B) NET INCOME RATIO.—For purposes 
of this paragraph, the term ‘net income ratio’ 
means the ratio of— 
‘‘(i) net income determined without 
regard to interest income, interest expense, 
and income taxes, divided by 
‘‘(ii) revenues. 
‘‘(C) 
METHOD
OF
DETERMINATION.— 
Amounts described in subparagraph (B) shall 
be determined with respect to the international 
financial reporting group on the basis of the 
consolidated financial statements referred to in 
paragraph (4)(A)(i) and the books and records 
of the members of the international financial 
reporting group which are used in preparing 
such statements, taking into account only reve-
nues and expenses of the members of such 
group (other than the members of such group 
which are (or are treated as) a domestic cor-
poration for purposes of this subsection) derived 
from, or incurred with respect to— 
‘‘(i) persons who are not members of 
such group, and 
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‘‘(ii) members of such group which 
are (or are treated as) a domestic corpora-
tion for purposes of this subsection. 
‘‘(4) INTERNATIONAL
FINANCIAL
REPORTING 
GROUP.—For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘inter-
national financial reporting group’ means any 
group of entities, with respect to any specified 
amount, if such amount is paid or incurred dur-
ing a reporting year of such group with respect 
to which— 
‘‘(i) such group prepares consolidated 
financial statements (within the meaning 
of section 163(n)(4)) with respect to such 
year, and 
‘‘(ii) the average annual aggregate 
payment amount of such group for the 3- 
reporting-year period ending with such re-
porting year exceeds $100,000,000. 
‘‘(B) 
ANNUAL
AGGREGATE
PAYMENT 
AMOUNT.—The term ‘annual aggregate pay-
ment amount’ means, with respect to any re-
porting year of the group referred to in sub-
paragraph 
(A)(i), 
the 
aggregate 
specified 
amounts to which paragraph (1) applies (or 
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would apply if such group were an international 
financial reporting group). 
‘‘(C) APPLICATION OF CERTAIN RULES.— 
Rules similar to the rules of subparagraphs (A), 
(B), and (D) of section 448(c)(3) shall apply 
for purposes of this paragraph. 
‘‘(5) TREATMENT
OF
PARTNERSHIPS.—Any 
specified amount paid, incurred, or received by a 
partnership which is a member of any international 
financial reporting group (and any amount treated 
as paid, incurred, or received by a partnership under 
this paragraph) shall be treated for purposes of this 
subsection as amounts paid, incurred, or received, 
respectively, by each partner of such partnership in 
an amount equal to such partner’s distributive share 
of the items of income, gain, deduction, or loss to 
which such amounts relate. 
‘‘(6) TREATMENT OF AMOUNTS IN CONNECTION 
WITH UNITED STATES TRADE OR BUSINESS.—Any 
specified amount paid, incurred, or received by a for-
eign corporation in connection with the conduct of a 
trade or business within the United States (other 
than a trade or business it is deemed to conduct 
pursuant to this subsection) shall be treated for pur-
poses of this subsection as an amount paid, in-
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curred, or received, respectively, by a domestic cor-
poration. For purposes of the preceding sentence, a 
foreign corporation shall be deemed to pay, incur, 
and receive amounts with respect to a trade or busi-
ness it conducts within the United States (other 
than a trade or business it is deemed to conduct 
pursuant to this subsection) to the extent such for-
eign corporation would be treated as paying, incur-
ring, or receiving such amounts from such trade or 
business if such trade or business were a domestic 
corporation. 
‘‘(7) JOINT AND SEVERAL LIABILITY OF MEM-
BERS
OF
INTERNAL
FINANCIAL
REPORTING 
GROUP.—In the case of any underpayment with re-
spect to any taxable year of a foreign corporation 
which is a member of an international financial ac-
counting group, each domestic corporation which is 
a member of such group at any time during such 
taxable year shall be jointly and severally liable 
for— 
‘‘(A) so much of such underpayment as 
does not exceed the excess (if any) of such un-
derpayment over the amount of such under-
payment determined without regard to this sub-
section, and 
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‘‘(B) any penalty, addition to tax, or addi-
tional amount attributable to the amount de-
scribed in subparagraph (A). 
‘‘(8) FOREIGN
TAX
CREDIT
ALLOWED.—The 
credit allowed under section 906(a) with respect to 
amounts taken into account in income under para-
graph (1)(A) shall be limited to 80 percent of the 
amount of taxes paid or accrued and determined 
without regard to section 906(b)(1). 
‘‘(9) ELECTION.—Any election under paragraph 
(1)— 
‘‘(A) shall be made at such time and in 
such form and manner as the Secretary may 
provide, and 
‘‘(B) shall apply for the taxable year for 
which made and all subsequent taxable years 
unless revoked with the consent of the Sec-
retary. 
‘‘(10) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as are necessary 
or appropriate to carry out the purposes of this sub-
section, including regulations or other guidance— 
‘‘(A) to provide for the proper determina-
tion of product lines, and 
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‘‘(B) to prevent the avoidance of the pur-
poses of this subsection through the use of con-
duit transactions or by other means.’’. 
(c) REPORTING REQUIREMENTS.— 
(1) REPORTING BY FOREIGN CORPORATION.— 
Section 6038C(b) is amended to read as follows: 
‘‘(b) REQUIRED INFORMATION.— 
‘‘(1) IN GENERAL.—The information described 
in this subsection is— 
‘‘(A) the information described in section 
6038A(b), and 
‘‘(B) such other information as the Sec-
retary may prescribe by regulations relating to 
any item not directly connected with a trans-
action for which information is required under 
subparagraph (A). 
‘‘(2) CERTAIN PAYMENTS FROM RELATED DO-
MESTIC CORPORATIONS.— 
‘‘(A) IN GENERAL.—In the case of any re-
porting corporation that receives during the 
taxable year any amount to which section 
882(g)(1) applies, the information described in 
this subsection shall include, with respect to 
each member of the international financial re-
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porting group from which any such amount is 
received— 
‘‘(i) the name and taxpayer identifica-
tion number of such member, 
‘‘(ii) the aggregate amounts received 
from such member, 
‘‘(iii) the product lines to which such 
amounts relate, the aggregate amounts re-
lating to each such product line, and the 
net income ratio for each such product line 
(determined under section 882(g)(3)(B) 
with respect to the international financial 
reporting group), and 
‘‘(iv) a summary of any changes in fi-
nancial accounting methods that affect the 
computation of any net income ratio de-
scribed in clause (iii). 
‘‘(B) DEFINITIONS AND SPECIAL RULES.— 
Terms used in this paragraph that are also 
used in section 882(g) shall have the same 
meaning as when used in such section and rules 
similar to the rules of paragraphs (5) and (6) 
of such section shall apply for purposes of this 
paragraph.’’. 
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(2) REPORTING
BY
DOMESTIC
GROUP
MEM-
BERS.— 
(A) IN GENERAL .—Subpart A of part III 
of subchapter A of chapter 61 is amended by 
inserting after section 6038D the following new 
section: 
‘‘SEC. 6038E. INFORMATION WITH RESPECT TO CERTAIN 
PAYMENTS FROM DOMESTIC CORPORATIONS 
TO RELATED FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—In the case of any domestic cor-
poration which pays or incurs any amount to which section 
882(g)(1) applies, such person shall— 
‘‘(1) make a return according to the forms and 
regulations prescribed the Secretary, setting forth 
the information described in subsection (b), and 
‘‘(2) maintain (at the location, in the manner, 
and to the extent prescribed in regulations) such 
records as may be appropriate to determine liability 
for tax pursuant to paragraphs (1) and (7) of sec-
tion 882(g). 
‘‘(b) REQUIRED INFORMATION.—The information de-
scribed in this subsection is— 
‘‘(1) the name and taxpayer identification num-
ber of the common parent of the international finan-
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cial reporting group in which such domestic corpora-
tion is a member, and 
‘‘(2) with respect to any person who receives an 
amount described in subsection (a) from such do-
mestic corporation— 
‘‘(A) the name and taxpayer identification 
number of such person, 
‘‘(B) the aggregate amounts received by 
such person, 
‘‘(C) the product lines to which such 
amounts relate, the aggregate amounts relating 
to each such product line, and the net income 
ratio for each such product line (determined 
under section 882(g)(3)(B) with respect to the 
international financial reporting group), and 
‘‘(D) a summary of any changes in finan-
cial accounting methods that affect the com-
putation of any net income ratios described in 
subparagraph (C). 
‘‘(c) DEFINITIONS
AND SPECIAL RULES.—Terms 
used in this paragraph that are also used in section 882(g) 
shall have the same meaning as when used in such section 
and rules similar to the rules of paragraphs (5) and (6) 
of such section shall apply for purposes of this para-
graph.’’. 
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(B) CLERICAL AMENDMENT.—The table of 
sections for subpart A of part III of subchapter 
A of chapter 61 is amended by inserting after 
the item relating to section 6038D the following 
new item: 
‘‘Sec. 6038E. Information with respect to certain payments from domestic cor-
porations to related foreign corporations.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
December 31, 2018. 
Subtitle E—Provisions Related to 
Possessions of the United States 
SEC. 4401. EXTENSION OF DEDUCTION ALLOWABLE WITH 
RESPECT TO INCOME ATTRIBUTABLE TO DO-
MESTIC PRODUCTION ACTIVITIES IN PUERTO 
RICO. 
(a) IN GENERAL.—Section 199(d)(8)(C), prior to its 
repeal by this Act, is amended— 
(1) by striking ‘‘first 11 taxable years’’ and in-
serting ‘‘first 12 taxable years’’, and 
(2) by striking ‘‘January 1, 2017’’ and insert-
ing ‘‘January 1, 2018’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2016. 
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SEC. 4402. EXTENSION OF TEMPORARY INCREASE IN LIMIT 
ON COVER OVER OF RUM EXCISE TAXES TO 
PUERTO RICO AND THE VIRGIN ISLANDS. 
(a) IN GENERAL.—Section 7652(f)(1) is amended by 
striking ‘‘January 1, 2017’’ and inserting ‘‘January 1, 
2023’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distilled spirits brought into the 
United States after December 31, 2016. 
SEC. 4403. EXTENSION OF AMERICAN SAMOA ECONOMIC 
DEVELOPMENT CREDIT. 
(a) IN GENERAL.—Section 119(d) of division A of 
the Tax Relief and Health Care Act of 2006 is amended— 
(1) by striking ‘‘January 1, 2017’’ each place 
it appears and inserting ‘‘January 1, 2023’’, 
(2) by striking ‘‘first 11 taxable years’’ in para-
graph (1) and inserting ‘‘first 17 taxable years’’, 
and 
(3) by striking ‘‘first 5 taxable years’’ in para-
graph (2) and inserting ‘‘first 11 taxable years’’. 
(b) TREATMENT OF CERTAIN REFERENCES.—Sec-
tion 119(e) of division A of the Tax Relief and Health 
Care Act of 2006 is amended by adding at the end the 
following: ‘‘References in this subsection to section 199 
of the Internal Revenue Code of 1986 shall be treated as 
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references to such section as in effect before its repeal by 
the Tax Cuts and Jobs Act.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2016. 
Subtitle F—Other International 
Reforms 
SEC. 4501. RESTRICTION ON INSURANCE BUSINESS EXCEP-
TION TO PASSIVE FOREIGN INVESTMENT 
COMPANY RULES. 
(a) IN GENERAL.—Section 1297(b)(2)(B) is amend-
ed to read as follows: 
‘‘(B) derived in the active conduct of an in-
surance business by a qualifying insurance cor-
poration (as defined in subsection (f)),’’. 
(b) QUALIFYING
INSURANCE
CORPORATION
DE-
FINED.—Section 1297 is amended by adding at the end 
the following new subsection: 
‘‘(f) QUALIFYING INSURANCE CORPORATION.—For 
purposes of subsection (b)(2)(B)— 
‘‘(1) IN GENERAL.—The term ‘qualifying insur-
ance corporation’ means, with respect to any taxable 
year, a foreign corporation— 
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‘‘(A) which would be subject to tax under 
subchapter L if such corporation were a domes-
tic corporation, and 
‘‘(B) the applicable insurance liabilities of 
which constitute more than 25 percent of its 
total assets, determined on the basis of such li-
abilities and assets as reported on the corpora-
tion’s applicable financial statement for the last 
year ending with or within the taxable year. 
‘‘(2) 
ALTERNATIVE
FACTS
AND
CIR-
CUMSTANCES TEST FOR CERTAIN CORPORATIONS.— 
If a corporation fails to qualify as a qualified insur-
ance corporation under paragraph (1) solely because 
the percentage determined under paragraph (1)(B) 
is 25 percent or less, a United States person that 
owns stock in such corporation may elect to treat 
such stock as stock of a qualifying insurance cor-
poration if— 
‘‘(A) the percentage so determined for the 
corporation is at least 10 percent, and 
‘‘(B) under regulations provided by the 
Secretary, based on the applicable facts and cir-
cumstances— 
‘‘(i) the corporation is predominantly 
engaged in an insurance business, and 
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‘‘(ii) such failure is due solely to run-
off-related or rating-related circumstances 
involving such insurance business. 
‘‘(3) APPLICABLE
INSURANCE
LIABILITIES.— 
For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘applicable 
insurance liabilities’ means, with respect to any 
life or property and casualty insurance busi-
ness— 
‘‘(i) loss and loss adjustment ex-
penses, and 
‘‘(ii) reserves (other than deficiency, 
contingency, or unearned premium re-
serves) for life and health insurance risks 
and life and health insurance claims with 
respect to contracts providing coverage for 
mortality or morbidity risks. 
‘‘(B) LIMITATIONS ON AMOUNT OF LIABIL-
ITIES.—Any amount determined under clause 
(i) or (ii) of subparagraph (A) shall not exceed 
the lesser of such amount— 
‘‘(i) as reported to the applicable in-
surance regulatory body in the applicable 
financial statement described in paragraph 
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(4)(A) (or, if less, the amount required by 
applicable law or regulation), or 
‘‘(ii) as determined under regulations 
prescribed by the Secretary. 
‘‘(4) OTHER
DEFINITIONS
AND
RULES.—For 
purposes of this subsection— 
‘‘(A) 
APPLICABLE
FINANCIAL
STATE-
MENT.—The term ‘applicable financial state-
ment’ means a statement for financial reporting 
purposes which— 
‘‘(i) is made on the basis of generally 
accepted accounting principles, 
‘‘(ii) is made on the basis of inter-
national financial reporting standards, but 
only if there is no statement that meets 
the requirement of clause (i), or 
‘‘(iii) except as otherwise provided by 
the Secretary in regulations, is the annual 
statement which is required to be filed 
with the applicable insurance regulatory 
body, but only if there is no statement 
which meets the requirements of clause (i) 
or (ii). 
‘‘(B) 
APPLICABLE
INSURANCE
REGU-
LATORY BODY.—The term ‘applicable insurance 
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regulatory body’ means, with respect to any in-
surance business, the entity established by law 
to license, authorize, or regulate such business 
and to which the statement described in sub-
paragraph (A) is provided.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
TITLE V—EXEMPT 
ORGANIZATIONS 
Subtitle A—Unrelated Business 
Income Tax 
SEC. 5001. CLARIFICATION OF UNRELATED BUSINESS IN-
COME TAX TREATMENT OF ENTITIES TREAT-
ED AS EXEMPT FROM TAXATION UNDER SEC-
TION 501(a). 
(a) IN GENERAL.—Section 511 is amended by adding 
at the end the following new subsection: 
‘‘(d) ORGANIZATIONS AND TRUSTS EXEMPT FROM 
TAXATION
NOT
SOLELY
BY
REASON
OF
SECTION 
501(a).—For purposes of subsections (a)(2) and (b)(2), 
an organization or trust shall not fail to be treated as ex-
empt from taxation under this subtitle by reason of section 
501(a) solely because such organization is also so exempt, 
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or excludes amounts from gross income, by reason of any 
other provision of this title.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 5002. EXCLUSION OF RESEARCH INCOME LIMITED TO 
PUBLICLY AVAILABLE RESEARCH. 
(a) IN GENERAL.—Section 512(b)(9) is amended by 
striking ‘‘from research’’ and inserting ‘‘from such re-
search’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
Subtitle B—Excise Taxes 
SEC. 5101. SIMPLIFICATION OF EXCISE TAX ON PRIVATE 
FOUNDATION INVESTMENT INCOME. 
(a) RATE REDUCTION.—Section 4940(a) is amended 
by striking ‘‘2 percent’’ and inserting ‘‘1.4 percent’’. 
(b) REPEAL OF SPECIAL RULES FOR CERTAIN PRI-
VATE FOUNDATIONS.—Section 4940 is amended by strik-
ing subsection (e). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
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SEC. 5102. PRIVATE OPERATING FOUNDATION REQUIRE-
MENTS RELATING TO OPERATION OF ART 
MUSEUM. 
(a) IN GENERAL.—Section 4942(j) is amended by 
adding at the end the following new paragraph: 
‘‘(6) ORGANIZATION
OPERATING
ART
MU-
SEUM.—For purposes of this section, the term ‘oper-
ating foundation’ shall not include an organization 
which operates an art museum as a substantial ac-
tivity unless such museum is open during normal 
business hours to the public for at least 1,000 hours 
during the taxable year.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 5103. EXCISE TAX BASED ON INVESTMENT INCOME OF 
PRIVATE COLLEGES AND UNIVERSITIES. 
(a) IN GENERAL.—Chapter 42 is amended by adding 
at the end the following new subchapter: 
‘‘Subchapter H—Excise Tax Based on Invest-
ment Income of Private Colleges and Uni-
versities 
‘‘Sec. 4969. Excise tax based on investment income of private colleges and uni-
versities. 
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‘‘SEC. 4969. EXCISE TAX BASED ON INVESTMENT INCOME 
OF PRIVATE COLLEGES AND UNIVERSITIES. 
‘‘(a) TAX IMPOSED.—There is hereby imposed on 
each applicable educational institution for the taxable year 
a tax equal to 1.4 percent of the net investment income 
of such institution for the taxable year. 
‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For 
purposes of this subchapter— 
‘‘(1) IN GENERAL.—The term ‘applicable edu-
cational institution’ means an eligible educational in-
stitution (as defined in section 25A(e)(3))— 
‘‘(A) which has at least 500 students dur-
ing the preceding taxable year, 
‘‘(B) which is not described in the first 
sentence of section 511(a)(2)(B), and 
‘‘(C) the aggregate fair market value of 
the assets of which at the end of the preceding 
taxable year (other than those assets which are 
used directly in carrying out the institution’s 
exempt purpose) is at least $250,000 per stu-
dent of the institution. 
‘‘(2) STUDENTS.—For purposes of paragraph 
(1), the number of students of an institution shall 
be based on the daily average number of full-time 
students attending such institution (with part-time 
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students taken into account on a full-time student 
equivalent basis). 
‘‘(c) NET INVESTMENT INCOME.—For purposes of 
this section, net investment income shall be determined 
under rules similar to the rules of section 4940(c). 
‘‘(d) ASSETS AND NET INVESTMENT INCOME OF RE-
LATED ORGANIZATIONS.— 
‘‘(1) IN
GENERAL.—For purposes of sub-
sections (b)(1)(C) and (c), the assets and net invest-
ment income of any related organization shall be 
treated as the assets and net investment income of 
the eligible educational institution. 
‘‘(2) RELATED ORGANIZATION.—For purposes 
of this subsection, the term ‘related organization’ 
means, with respect to an eligible educational insti-
tution, any organization which— 
‘‘(A) controls, or is controlled by, such in-
stitution, 
‘‘(B) is controlled by one or more persons 
that control such institution, or 
‘‘(C) is a supported organization (as de-
fined in section 509(f)(3)), or an organization 
described in section 509(a)(3), during the tax-
able year with respect to such institution.’’. 
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(b) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 42 is amended by adding at the end 
the following new item: 
‘‘SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE 
COLLEGES AND UNIVERSITIES’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 5104. EXCEPTION FROM PRIVATE FOUNDATION EX-
CESS BUSINESS HOLDING TAX FOR INDE-
PENDENTLY-OPERATED 
PHILANTHROPIC 
BUSINESS HOLDINGS. 
(a) IN GENERAL.—Section 4943 is amended by add-
ing at the end the following new subsection: 
‘‘(g) EXCEPTION FOR CERTAIN HOLDINGS LIMITED 
TO INDEPENDENTLY-OPERATED PHILANTHROPIC BUSI-
NESS.— 
‘‘(1) IN
GENERAL.—Subsection (a) shall not 
apply with respect to the holdings of a private foun-
dation in any business enterprise which for the tax-
able year meets— 
‘‘(A) the ownership requirements of para-
graph (2), 
‘‘(B) the all profits to charity distribution 
requirement of paragraph (3), and 
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‘‘(C) the independent operation require-
ments of paragraph (4). 
‘‘(2) OWNERSHIP.—The ownership require-
ments of this paragraph are met if— 
‘‘(A) 100 percent of the voting stock in the 
business enterprise is held by the private foun-
dation at all times during the taxable year, and 
‘‘(B) all the private foundation’s ownership 
interests in the business enterprise were ac-
quired not by purchase. 
‘‘(3) ALL PROFITS TO CHARITY.— 
‘‘(A) IN
GENERAL.—The all profits to 
charity distribution requirement of this para-
graph is met if the business enterprise, not 
later than 120 days after the close of the tax-
able year, distributes an amount equal to its net 
operating income for such taxable year to the 
private foundation. 
‘‘(B) NET OPERATING INCOME.—For pur-
poses of this paragraph, the net operating in-
come of any business enterprise for any taxable 
year is an amount equal to the gross income of 
the business enterprise for the taxable year, re-
duced by the sum of— 
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‘‘(i) the deductions allowed by chapter 
1 for the taxable year which are directly 
connected with the production of such in-
come, 
‘‘(ii) the tax imposed by chapter 1 on 
the business enterprise for the taxable 
year, and 
‘‘(iii) an amount for a reasonable re-
serve for working capital and other busi-
ness needs of the business enterprise. 
‘‘(4) INDEPENDENT
OPERATION.—The inde-
pendent operation requirements of this paragraph 
are met if, at all times during the taxable year— 
‘‘(A) no substantial contributor (as defined 
in section 4958(c)(3)(C)) to the private founda-
tion, or family member of such a contributor 
(determined under section 4958(f)(4)) is a di-
rector, officer, trustee, manager, employee, or 
contractor of the business enterprise (or an in-
dividual having powers or responsibilities simi-
lar to any of the foregoing), 
‘‘(B) at least a majority of the board of di-
rectors of the private foundation are not— 
‘‘(i) also directors or officers of the 
business enterprise, or 
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‘‘(ii) members of the family (deter-
mined under section 4958(f)(4)) of a sub-
stantial contributor (as defined in section 
4958(c)(3)(C)) to the private foundation, 
and 
‘‘(C) there is no loan outstanding from the 
business enterprise to a substantial contributor 
(as so defined) to the private foundation or a 
family member of such contributor (as so deter-
mined). 
‘‘(5) CERTAIN DEEMED PRIVATE FOUNDATIONS 
EXCLUDED.—This subsection shall not apply to— 
‘‘(A) any fund or organization treated as a 
private foundation for purposes of this section 
by reason of subsection (e) or (f), 
‘‘(B) any trust described in section 
4947(a)(1) (relating to charitable trusts), and 
‘‘(C) any trust described in section 
4947(a)(2) (relating to split-interest trusts).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
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Subtitle C—Requirements for 
Organizations Exempt From Tax 
SEC. 5201. 501(c)(3) ORGANIZATIONS PERMITTED TO MAKE 
STATEMENTS RELATING TO POLITICAL CAM-
PAIGN IN ORDINARY COURSE OF ACTIVITIES. 
(a) IN GENERAL.—Section 501 is amended by adding 
at the end the following new subsection: 
‘‘(s) SPECIAL RULE RELATING TO POLITICAL CAM-
PAIGN STATEMENTS OF ORGANIZATIONS DESCRIBED IN 
SUBSECTION (c)(3).— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(c)(3) and sections 170(c)(2), 2055, 2106, 2522, 
and 4955, an organization shall not fail to be treat-
ed as organized and operated exclusively for a pur-
pose described in subsection (c)(3), nor shall it be 
deemed to have participated in, or intervened in any 
political campaign on behalf of (or in opposition to) 
any candidate for public office, solely because of the 
content of any statement which— 
‘‘(A) is made in the ordinary course of the 
organization’s regular and customary activities 
in carrying out its exempt purpose, and 
‘‘(B) results in the organization incurring 
not more than de minimis incremental expenses. 
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‘‘(2) TERMINATION.—Paragraph (1) shall not 
apply to taxable years beginning after December 31, 
2023.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2018. 
SEC. 5202. ADDITIONAL REPORTING REQUIREMENTS FOR 
DONOR ADVISED FUND SPONSORING ORGA-
NIZATIONS. 
(a) IN GENERAL.—Section 6033(k) is amended by 
striking ‘‘and’’ at the end of paragraph (2), by striking 
the period at the end of paragraph (3), and by adding 
at the end the following new paragraphs: 
‘‘(4) indicate the average amount of grants 
made from such funds during such taxable year (ex-
pressed as a percentage of the value of assets held 
in such funds at the beginning of such taxable year), 
and 
‘‘(5) indicate whether the organization has a 
policy with respect to donor advised funds (as so de-
fined) for frequency and minimum level of distribu-
tions. 
Such organization shall include with such return a copy 
of any policy described in paragraph (5).’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply for returns filed for taxable years 
beginning after December 31, 2017. 
Passed the House of Representatives November 16, 
2017. 
Attest: 
KAREN L. HAAS, 
Clerk. 
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Calendar No. 266 
115TH CONGRESS 
1ST SESSION 
H. R. 1 
AN ACT 
To provide for reconciliation pursuant to titles II 
and V of the concurrent resolution on the budget 
for fiscal year 2018. 
NOVEMBER 28, 2017 
Read the second time and placed on the calendar 
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