IB 
Union Calendar No. 302 
115TH CONGRESS 
1ST SESSION 
H. R. 1 
[Report No. 115–409] 
To provide for reconciliation pursuant to title II of the concurrent resolution 
on the budget for fiscal year 2018. 
IN THE HOUSE OF REPRESENTATIVES 
NOVEMBER 2, 2017 
Mr. BRADY of Texas (for himself, Mr. RYAN of Wisconsin, Mr. SAM JOHNSON 
of Texas, Mr. NUNES, Mr. TIBERI, Mr. REICHERT, Mr. ROSKAM, Mr. 
BUCHANAN, Mr. SMITH of Nebraska, Ms. JENKINS of Kansas, Mr. PAUL-
SEN, Mr. MARCHANT, Mrs. BLACK, Mr. REED, Mr. KELLY of Pennsyl-
vania, Mr. RENACCI, Mr. MEEHAN, Mrs. NOEM, Mr. HOLDING, Mr. 
SMITH of Missouri, Mr. RICE of South Carolina, Mr. SCHWEIKERT, Mrs. 
WALORSKI, Mr. CURBELO of Florida, and Mr. BISHOP of Michigan) in-
troduced the following bill; which was referred to the Committee on Ways 
and Means 
NOVEMBER 13, 2017 
Reported with amendments, committed to the Committee of the Whole House 
on the State of the Union, and ordered to be printed 
[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on November 2, 2017] 
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A BILL 
To provide for reconciliation pursuant to title II of the 
concurrent resolution on the budget for fiscal year 2018. 
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Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; ETC. 
(a) SHORT TITLE.—This Act may be cited as the ‘‘Tax 
Cuts and Jobs Act’’. 
(b) AMENDMENT OF 1986 CODE.—Except as otherwise 
expressly provided, whenever in this Act an amendment or 
repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be consid-
ered to be made to a section or other provision of the Inter-
nal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; etc. 
TITLE I—TAX REFORM FOR INDIVIDUALS 
Subtitle A—Simplification and Reform of Rates, Standard Deduction, and 
Exemptions 
Sec. 1001. Reduction and simplification of individual income tax rates. 
Sec. 1002. Enhancement of standard deduction. 
Sec. 1003. Repeal of deduction for personal exemptions. 
Sec. 1004. Maximum rate on business income of individuals. 
Sec. 1005. Conforming amendments related to simplification of individual income 
tax rates. 
Subtitle B—Simplification and Reform of Family and Individual Tax Credits 
Sec. 1101. Enhancement of child tax credit and new family tax credit. 
Sec. 1102. Repeal of nonrefundable credits. 
Sec. 1103. Refundable credit program integrity. 
Sec. 1104. Procedures to reduce improper claims of earned income credit. 
Sec. 1105. Certain income disallowed for purposes of the earned income tax cred-
it. 
Subtitle C—Simplification and Reform of Education Incentives 
Sec. 1201. American opportunity tax credit. 
Sec. 1202. Consolidation of education savings rules. 
Sec. 1203. Reforms to discharge of certain student loan indebtedness. 
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Sec. 1204. Repeal of other provisions relating to education. 
Sec. 1205. Rollovers between qualified tuition programs and qualified ABLE pro-
grams. 
Subtitle D—Simplification and Reform of Deductions 
Sec. 1301. Repeal of overall limitation on itemized deductions. 
Sec. 1302. Mortgage interest. 
Sec. 1303. Repeal of deduction for certain taxes not paid or accrued in a trade 
or business. 
Sec. 1304. Repeal of deduction for personal casualty losses. 
Sec. 1305. Limitation on wagering losses. 
Sec. 1306. Charitable contributions. 
Sec. 1307. Repeal of deduction for tax preparation expenses. 
Sec. 1308. Repeal of medical expense deduction. 
Sec. 1309. Repeal of deduction for alimony payments. 
Sec. 1310. Repeal of deduction for moving expenses. 
Sec. 1311. Termination of deduction and exclusions for contributions to medical 
savings accounts. 
Sec. 1312. Denial of deduction for expenses attributable to the trade or business 
of being an employee. 
Subtitle E—Simplification and Reform of Exclusions and Taxable 
Compensation 
Sec. 1401. Limitation on exclusion for employer-provided housing. 
Sec. 1402. Exclusion of gain from sale of a principal residence. 
Sec. 1403. Repeal of exclusion, etc., for employee achievement awards. 
Sec. 1404. Sunset of exclusion for dependent care assistance programs. 
Sec. 1405. Repeal of exclusion for qualified moving expense reimbursement. 
Sec. 1406. Repeal of exclusion for adoption assistance programs. 
Subtitle F—Simplification and Reform of Savings, Pensions, Retirement 
Sec. 1501. Repeal of special rule permitting recharacterization of Roth IRA con-
tributions as traditional IRA contributions. 
Sec. 1502. Reduction in minimum age for allowable in-service distributions. 
Sec. 1503. Modification of rules governing hardship distributions. 
Sec. 1504. Modification of rules relating to hardship withdrawals from cash or 
deferred arrangements. 
Sec. 1505. Extended rollover period for the rollover of plan loan offset amounts 
in certain cases. 
Sec. 1506. Modification of nondiscrimination rules to protect older, longer service 
participants. 
Subtitle G—Estate, Gift, and Generation-skipping Transfer Taxes 
Sec. 1601. Increase in credit against estate, gift, and generation-skipping transfer 
tax. 
Sec. 1602. Repeal of estate and generation-skipping transfer taxes. 
TITLE II—ALTERNATIVE MINIMUM TAX REPEAL 
Sec. 2001. Repeal of alternative minimum tax. 
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TITLE III—BUSINESS TAX REFORM 
Subtitle A—Tax Rates 
Sec. 3001. Reduction in corporate tax rate. 
Subtitle B—Cost Recovery 
Sec. 3101. Increased expensing. 
Subtitle C—Small Business Reforms 
Sec. 3201. Expansion of section 179 expensing. 
Sec. 3202. Small business accounting method reform and simplification. 
Sec. 3203. Small business exception from limitation on deduction of business in-
terest. 
Sec. 3204. Modification of treatment of S corporation conversions to C corpora-
tions. 
Subtitle D—Reform of Business-related Exclusions, Deductions, etc. 
Sec. 3301. Interest. 
Sec. 3302. Modification of net operating loss deduction. 
Sec. 3303. Like-kind exchanges of real property. 
Sec. 3304. Revision of treatment of contributions to capital. 
Sec. 3305. Repeal of deduction for local lobbying expenses. 
Sec. 3306. Repeal of deduction for income attributable to domestic production ac-
tivities. 
Sec. 3307. Entertainment, etc. expenses. 
Sec. 3308. Unrelated business taxable income increased by amount of certain 
fringe benefit expenses for which deduction is disallowed. 
Sec. 3309. Limitation on deduction for FDIC premiums. 
Sec. 3310. Repeal of rollover of publicly traded securities gain into specialized 
small business investment companies. 
Sec. 3311. Certain self-created property not treated as a capital asset. 
Sec. 3312. Repeal of special rule for sale or exchange of patents. 
Sec. 3313. Repeal of technical termination of partnerships. 
Sec. 3314. Recharacterization of certain gains in the case of partnership profits 
interests held in connection with performance of investment serv-
ices. 
Sec. 3315. Amortization of research and experimental expenditures. 
Sec. 3316. Uniform treatment of expenses in contingency fee cases. 
Subtitle E—Reform of Business Credits 
Sec. 3401. Repeal of credit for clinical testing expenses for certain drugs for rare 
diseases or conditions. 
Sec. 3402. Repeal of employer-provided child care credit. 
Sec. 3403. Repeal of rehabilitation credit. 
Sec. 3404. Repeal of work opportunity tax credit. 
Sec. 3405. Repeal of deduction for certain unused business credits. 
Sec. 3406. Termination of new markets tax credit. 
Sec. 3407. Repeal of credit for expenditures to provide access to disabled individ-
uals. 
Sec. 3408. Modification of credit for portion of employer social security taxes 
paid with respect to employee tips. 
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Subtitle F—Energy Credits 
Sec. 3501. Modifications to credit for electricity produced from certain renewable 
resources. 
Sec. 3502. Modification of the energy investment tax credit. 
Sec. 3503. Extension and phaseout of residential energy efficient property. 
Sec. 3504. Repeal of enhanced oil recovery credit. 
Sec. 3505. Repeal of credit for producing oil and gas from marginal wells. 
Sec. 3506. Modifications of credit for production from advanced nuclear power fa-
cilities. 
Subtitle G—Bond Reforms 
Sec. 3601. Termination of private activity bonds. 
Sec. 3602. Repeal of advance refunding bonds. 
Sec. 3603. Repeal of tax credit bonds. 
Sec. 3604. No tax exempt bonds for professional stadiums. 
Subtitle H—Insurance 
Sec. 3701. Net operating losses of life insurance companies. 
Sec. 3702. Repeal of small life insurance company deduction. 
Sec. 3703. Surtax on life insurance company taxable income. 
Sec. 3704. Adjustment for change in computing reserves. 
Sec. 3705. Repeal of special rule for distributions to shareholders from pre-1984 
policyholders surplus account. 
Sec. 3706. Modification of proration rules for property and casualty insurance 
companies. 
Sec. 3707. Modification of discounting rules for property and casualty insurance 
companies. 
Sec. 3708. Repeal of special estimated tax payments. 
Subtitle I—Compensation 
Sec. 3801. Modification of limitation on excessive employee remuneration. 
Sec. 3802. Excise tax on excess tax-exempt organization executive compensation. 
Sec. 3803. Treatment of qualified equity grants. 
TITLE IV—TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS 
Subtitle A—Establishment of Participation Exemption System for Taxation of 
Foreign Income 
Sec. 4001. Deduction for foreign-source portion of dividends received by domestic 
corporations from specified 10-percent owned foreign corpora-
tions. 
Sec. 4002. Application of participation exemption to investments in United 
States property. 
Sec. 4003. Limitation on losses with respect to specified 10-percent owned foreign 
corporations. 
Sec. 4004. Treatment of deferred foreign income upon transition to participation 
exemption system of taxation. 
Subtitle B—Modifications Related to Foreign Tax Credit System 
Sec. 4101. Repeal of section 902 indirect foreign tax credits; determination of sec-
tion 960 credit on current year basis. 
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Sec. 4102. Source of income from sales of inventory determined solely on basis 
of production activities. 
Subtitle C—Modification of Subpart F Provisions 
Sec. 4201. Repeal of inclusion based on withdrawal of previously excluded sub-
part F income from qualified investment. 
Sec. 4202. Repeal of treatment of foreign base company oil related income as sub-
part F income. 
Sec. 4203. Inflation adjustment of de minimis exception for foreign base company 
income. 
Sec. 4204. Look-thru rule for related controlled foreign corporations made perma-
nent. 
Sec. 4205. Modification of stock attribution rules for determining status as a con-
trolled foreign corporation. 
Sec. 4206. Elimination of requirement that corporation must be controlled for 30 
days before subpart F inclusions apply. 
Subtitle D—Prevention of Base Erosion 
Sec. 4301. Current year inclusion by United States shareholders with foreign high 
returns. 
Sec. 4302. Limitation on deduction of interest by domestic corporations which are 
members of an international financial reporting group. 
Sec. 4303. Excise tax on certain payments from domestic corporations to related 
foreign corporations; election to treat such payments as effec-
tively connected income. 
Subtitle E—Provisions Related to Possessions of the United States 
Sec. 4401. Extension of deduction allowable with respect to income attributable 
to domestic production activities in Puerto Rico. 
Sec. 4402. Extension of temporary increase in limit on cover over of rum excise 
taxes to Puerto Rico and the Virgin Islands. 
Sec. 4403. Extension of American Samoa economic development credit. 
Subtitle F—Other International Reforms 
Sec. 4501. Restriction on insurance business exception to passive foreign invest-
ment company rules. 
TITLE V—EXEMPT ORGANIZATIONS 
Subtitle A—Unrelated Business Income Tax 
Sec. 5001. Clarification of unrelated business income tax treatment of entities 
treated as exempt from taxation under section 501(a). 
Sec. 5002. Exclusion of research income limited to publicly available research. 
Subtitle B—Excise Taxes 
Sec. 5101. Simplification of excise tax on private foundation investment income. 
Sec. 5102. Private operating foundation requirements relating to operation of art 
museum. 
Sec. 5103. Excise tax based on investment income of private colleges and univer-
sities. 
Sec. 5104. Exception from private foundation excess business holding tax for 
independently-operated philanthropic business holdings. 
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mined by reference to such a dollar amount) shall be 
increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under this subsection for the calendar 
year in which the taxable year begins by sub-
stituting 
‘2017’ 
for 
‘2016’ 
in 
paragraph 
(2)(A)(ii). 
If any increase determined under the preceding sen-
tence is not a multiple of $100, such increase shall be 
rounded to the next lowest multiple of $100. 
‘‘(2) COST-OF-LIVING
ADJUSTMENT.—For pur-
poses of this subsection— 
‘‘(A) IN GENERAL.—The cost-of-living ad-
justment for any calendar year is the percentage 
(if any) by which— 
‘‘(i) the C-CPI-U for the preceding cal-
endar year, exceeds 
‘‘(ii) the normalized CPI for calendar 
year 2016. 
‘‘(B) SPECIAL
RULE
FOR
ADJUSTMENTS 
WITH A BASE YEAR AFTER 2016.—For purposes 
of any provision which provides for the substi-
tution of a year after 2016 for ‘2016’ in sub-
paragraph (A)(ii), subparagraph (A) shall be 
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applied by substituting ‘C-CPI-U’ for ‘normal-
ized CPI’ in clause (ii). 
‘‘(3) NORMALIZED
CPI.—For purposes of this 
subsection, the normalized CPI for any calendar year 
is the product of— 
‘‘(A) the CPI for such calendar year, multi-
plied by 
‘‘(B) the C-CPI-U transition multiple. 
‘‘(4) C-CPI-U TRANSITION MULTIPLE.—For pur-
poses of this subsection, the term ‘C-CPI-U transition 
multiple’ means the amount obtained by dividing— 
‘‘(A) the C-CPI-U for calendar year 2016, 
by 
‘‘(B) the CPI for calendar year 2016. 
‘‘(5) C-CPI-U.—For purposes of this sub-
section— 
‘‘(A) IN
GENERAL.—The term ‘C-CPI-U’ 
means the Chained Consumer Price Index for All 
Urban Consumers (as published by the Bureau of 
Labor Statistics of the Department of Labor). 
The values of the Chained Consumer Price Index 
for All Urban Consumers taken into account for 
purposes of determining the cost-of-living adjust-
ment for any calendar year under this subsection 
shall be the latest values so published as of the 
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date on which such Bureau publishes the initial 
value of the Chained Consumer Price Index for 
All Urban Consumers for the month of August 
for the preceding calendar year. 
‘‘(B) 
DETERMINATION
FOR
CALENDAR 
YEAR.—The C-CPI-U for any calendar year is 
the average of the C-CPI-U as of the close of the 
12-month period ending on August 31 of such 
calendar year. 
‘‘(6) CPI.—For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘Consumer 
Price Index’ means the last Consumer Price 
Index for All Urban Consumers published by the 
Department of Labor. For purposes of the pre-
ceding sentence, the revision of the Consumer 
Price Index which is most consistent with the 
Consumer Price Index for calendar year 1986 
shall be used. 
‘‘(B) 
DETERMINATION
FOR
CALENDAR 
YEAR.—The CPI for any calendar year is the av-
erage of the Consumer Price Index as of the close 
of the 12-month period ending on August 31 of 
such calendar year. 
‘‘(d) SPECIAL RULES FOR CERTAIN CHILDREN WITH 
UNEARNED INCOME.— 
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‘‘(1) IN GENERAL.—In the case of any child to 
whom this subsection applies for any taxable year— 
‘‘(A) 
the 
25-percent 
bracket 
threshold 
amount shall not be more than the taxable in-
come of such child for the taxable year reduced 
by the net unearned income of such child, and 
‘‘(B) 
the 
35-percent 
bracket 
threshold 
amount shall not be more than the sum of— 
‘‘(i) the taxable income of such child 
for the taxable year reduced by the net un-
earned income of such child, plus 
‘‘(ii) the dollar amount in effect under 
subsection (b)(2)(D) for the taxable year. 
‘‘(C) the 39.6-percent bracket threshold 
amount shall not be more than the sum of— 
‘‘(i) the taxable income of such child 
for the taxable year reduced by the net un-
earned income of such child, plus 
‘‘(ii) the dollar amount in effect under 
subsection (b)(3)(C). 
‘‘(2) CHILD TO WHOM SUBSECTION APPLIES.— 
This subsection shall apply to any child for any tax-
able year if— 
‘‘(A) such child— 
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‘‘(i) has not attained age 18 before the 
close of the taxable year, or 
‘‘(ii) has attained age 18 before the 
close of the taxable year and is described in 
paragraph (3), 
‘‘(B) either parent of such child is alive at 
the close of the taxable year, and 
‘‘(C) such child does not file a joint return 
for the taxable year. 
‘‘(3) CERTAIN
CHILDREN
WHOSE
EARNED
IN-
COME DOES NOT EXCEED ONE-HALF OF INDIVIDUAL’S 
SUPPORT.—A child is described in this paragraph 
if— 
‘‘(A) such child— 
‘‘(i) has not attained age 19 before the 
close of the taxable year, or 
‘‘(ii) is a student (within the meaning 
of section 7706(f)(2)) who has not attained 
age 24 before the close of the taxable year, 
and 
‘‘(B) such child’s earned income (as defined 
in section 911(d)(2)) for such taxable year does 
not exceed one-half of the amount of the individ-
ual’s support (within the meaning of section 
7706(c)(1)(D) after the application of section 
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7706(f)(5) (without regard to subparagraph (A) 
thereof)) for such taxable year. 
‘‘(4) NET UNEARNED INCOME.—For purposes of 
this subsection— 
‘‘(A) IN GENERAL.—The term ‘net unearned 
income’ means the excess of— 
‘‘(i) the portion of the adjusted gross 
income for the taxable year which is not at-
tributable to earned income (as defined in 
section 911(d)(2)), over 
‘‘(ii) the sum of— 
‘‘(I) the amount in effect for the 
taxable year under section 63(c)(2)(A) 
(relating to limitation on standard de-
duction in the case of certain depend-
ents), plus 
‘‘(II) The greater of the amount 
described in subclause (I) or, if the 
child itemizes his deductions for the 
taxable year, the amount of the 
itemized deductions allowed by this 
chapter for the taxable year which are 
directly connected with the production 
of the portion of adjusted gross income 
referred to in clause (i). 
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‘‘(B) LIMITATION BASED ON TAXABLE IN-
COME.—The amount of the net unearned income 
for any taxable year shall not exceed the individ-
ual’s taxable income for such taxable year. 
‘‘(e) PHASEOUT OF 12-PERCENT RATE.— 
‘‘(1) IN GENERAL.—The amount of tax imposed 
by this section (determined without regard to this 
subsection) shall be increased by 6 percent of the ex-
cess (if any) of— 
‘‘(A) adjusted gross income, over 
‘‘(B) the applicable dollar amount. 
‘‘(2) 
LIMITATION.—The 
increase 
determined 
under paragraph (1) with respect to any taxpayer for 
any taxable year shall not exceed 27.6 percent of the 
lesser of— 
‘‘(A) the taxpayer’s taxable income for such 
taxable year, or 
‘‘(B) 
the 
25-percent 
bracket 
threshold 
amount in effect with respect to the taxpayer for 
such taxable year. 
‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur-
poses of this subsection, the term ‘applicable dollar 
amount’ means— 
‘‘(A) in the case of a joint return or a sur-
viving spouse, $1,200,000, 
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in the case of a married individual filing a 
separate return), 
‘‘(ii) in the case of an individual who 
is the head of a household (as defined in sec-
tion 2(b)), $452,400, 
‘‘(iii) in the case of any other indi-
vidual (other than an estate or trust), 
$425,800, and 
‘‘(iv) in the case of an estate or trust, 
$12,700. 
‘‘(C) INFLATION ADJUSTMENT.—In the case 
of any taxable year beginning after 2018, each of 
the dollar amounts in subparagraphs (A) and 
(B) shall be increased by an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under subsection (c)(2)(A) for the 
calendar year in which the taxable year be-
gins, determined by substituting ‘calendar 
year 2017’ for ‘calendar year 2016’ in 
clause (ii) thereof.’’. 
(c) APPLICATION OF SECTION 15.— 
(1) IN GENERAL.—Subsection (a) of section 15 is 
amended by striking ‘‘by this chapter’’ and inserting 
‘‘by section 11 (or by reference to any such rates)’’. 
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(2) CONFORMING AMENDMENTS.— 
(A) Section 15 is amended by striking sub-
sections (d) and (f) and by redesignating sub-
section (e) as subsection (d). 
(B) Section 15(d), as redesignated by sub-
paragraph (A), is amended by striking ‘‘section 
1 or 11(b)’’ and inserting ‘‘section 11(b)’’. 
(C) Section 6013(c) is amended by striking 
‘‘sections 15, 443, and 7851(a)(1)(A)’’ and in-
serting ‘‘sections 443 and 7851(a)(1)(A)’’. 
(3) APPLICATION TO THIS ACT.—Section 15 of 
the Internal Revenue Code of 1986 shall not apply to 
any change in a rate of tax imposed by chapter 1 of 
such Code which occurs by reason of any amendment 
made by this Act (other than the amendments made 
by section 3001). 
(d) EFFECTIVE DATE.— 
(1) IN
GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2017. 
(2) SUBSECTION (c).—The amendments made by 
subsection (c) shall take effect on the date of the enact-
ment of this Act. 
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SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION. 
(a) INCREASE
IN STANDARD DEDUCTION.—Section 
63(c) is amended to read as follows: 
‘‘(c) STANDARD DEDUCTION.—For purposes of this 
subtitle— 
‘‘(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the term ‘standard deduction’ 
means— 
‘‘(A) $24,400, in the case of a joint return 
(or a surviving spouse (as defined in section 
2(a)), 
‘‘(B) three-quarters of the amount in effect 
under subparagraph (A) for the taxable year, in 
the case of the head of a household (as defined in 
section 2(b)), and 
‘‘(C) one-half of the amount in effect under 
subparagraph (A) for the taxable year, in any 
other case. 
‘‘(2) LIMITATION ON STANDARD DEDUCTION IN 
THE CASE OF CERTAIN DEPENDENTS.—In the case of 
an individual who is a dependent of another taxpayer 
for a taxable year beginning in the calendar year in 
which the individual’s taxable year begins, the stand-
ard deduction applicable to such individual for such 
individual’s taxable year shall not exceed the greater 
of— 
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‘‘(A) $500, or 
‘‘(B) the sum of $250 and such individual’s 
earned income (within the means of section 32). 
‘‘(3) CERTAIN INDIVIDUALS, ETC., NOT ELIGIBLE 
FOR STANDARD DEDUCTION.—In the case of— 
‘‘(A) a married individual filing a separate 
return where either spouse itemizes deductions, 
‘‘(B) a nonresident alien individual, 
‘‘(C) an individual making a return under 
section 443(a)(1) for a period of less than 12 
months on account of a change in his annual ac-
counting period, or 
‘‘(D) an estate or trust, common trust fund, 
or partnership, 
the standard deduction shall be zero. 
‘‘(4) UNMARRIED INDIVIDUAL.—For purposes of 
this section, the term ‘unmarried individual’ means 
any individual who— 
‘‘(A) is not married as of the close of the 
taxable year (as determined by applying section 
7703), 
‘‘(B) is not a surviving spouse (as defined 
in section 2(a)) for the taxable year, and 
‘‘(C) is not a dependent of another taxpayer 
for a taxable year beginning in the calendar 
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year in which the individual’s taxable year be-
gins. 
‘‘(5) INFLATION ADJUSTMENTS.— 
‘‘(A) STANDARD DEDUCTION AMOUNT.—In 
the case of any taxable year beginning after 
2019, the dollar amount in paragraph (1)(A) 
shall be increased by an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(c)(2)(A) for the 
calendar year in which the taxable year be-
gins, determined by substituting ‘calendar 
year 2018’ for ‘calendar year 2016’ in 
clause (ii) thereof. 
‘‘(B) LIMITATION AMOUNT IN CASE OF CER-
TAIN DEPENDENTS.—In the case of any taxable 
year beginning after 2017, each of the dollar 
amounts in paragraph (2) shall be increased by 
an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii)(I) in the case of the dollar 
amount in paragraph (2)(A), under section 
1(c)(2)(A) for the calendar year in which 
the taxable year begins determined by sub-
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stituting ‘calendar year 1987’ for ‘calendar 
year 2016’ in clause (ii) thereof, and 
‘‘(II) in the case of the dollar amount 
in 
paragraph 
(2)(B), 
under 
section 
1(c)(2)(A) for the calendar year in which 
the taxable year begins determined by sub-
stituting ‘calendar year 1997’ for ‘calendar 
year 2016’ in clause (ii) thereof. 
If any increase determined under this paragraph is 
not a multiple of $100, such increase shall be rounded 
to the next lowest multiple of $100.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 63(b) is amended by striking ‘‘, 
minus—’’ and all that follows and inserting ‘‘minus 
the standard deduction’’. 
(2) Section 63 is amended by striking sub-
sections (f) and (g). 
(3) Section 1398(c) is amended— 
(A) by striking ‘‘BASIC’’ in the heading 
thereof, 
(B) by striking ‘‘BASIC STANDARD’’ in the 
heading of paragraph (3) and inserting ‘‘STAND-
ARD’’, and 
(C) by striking ‘‘basic’’ in paragraph (3). 
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(4) Section 3402(m)(3) is amended by striking 
‘‘(including the additional standard deduction under 
section 63(c)(3) for the aged and blind)’’. 
(5) Section 6014(b)(4) is amended by striking 
‘‘section 63(c)(5)’’ and inserting ‘‘section 63(c)(2)’’. 
(c) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1003. REPEAL OF DEDUCTION FOR PERSONAL EXEMP-
TIONS. 
(a) IN GENERAL.—Part V of subchapter B of chapter 
1 is hereby repealed. 
(b) DEFINITION OF DEPENDENT RETAINED.—Section 
152, prior to repeal by subsection (a), is hereby redesignated 
as section 7706 and moved to the end of chapter 79. 
(c) APPLICATION TO ESTATES AND TRUSTS.—Sub-
section (b) of section 642 is amended— 
(1) by striking paragraph (2)(C), 
(2) by striking paragraph (3), and 
(3) by striking ‘‘DEDUCTION FOR PERSONAL EX-
EMPTION’’ in the heading thereof and inserting 
‘‘BASIC DEDUCTION’’. 
(d) APPLICATION TO NONRESIDENT ALIENS.—Section 
873(b) is amended by striking paragraph (3). 
(e) MODIFICATION OF WAGE WITHHOLDING RULES.— 
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(1) IN GENERAL.—Section 3402(a) is amended 
by striking paragraph (2). 
(2) CONFORMING AMENDMENT.—Section 3402(a) 
is amended— 
(A) by redesignating subparagraphs (A) 
and (B) of paragraph (1) as paragraphs (1) and 
(2) and moving such redesignated paragraphs 2 
ems to the left, and 
(B) by striking all that precedes ‘‘otherwise 
provided in this section’’ and inserting the fol-
lowing: 
‘‘(a) REQUIREMENT OF WITHHOLDING.—Except as’’. 
(3) 
NUMBER
OF
EXEMPTIONS.—Section 
3402(f)(1) is amended— 
(A) in subparagraph (A), by striking ‘‘an 
individual described in section 151(d)(2)’’ and 
inserting ‘‘a dependent of any other taxpayer’’, 
and 
(B) in subparagraph (C), by striking ‘‘with 
respect to whom, on the basis of facts existing at 
the beginning of such day, there may reasonably 
be expected to be allowable an exemption under 
section 151(c)’’ and inserting ‘‘who, on the basis 
of facts existing at the beginning of such day, is 
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reasonably expected to be a dependent of the em-
ployee’’. 
(f) MODIFICATION OF RETURN REQUIREMENT.— 
(1) IN
GENERAL.—Paragraph (1) of section 
6012(a) is amended to read as follows: 
‘‘(1) Every individual who has gross income for 
the taxable year, except that a return shall not be re-
quired of— 
‘‘(A) an individual who is not married (de-
termined by applying section 7703) and who has 
gross income for the taxable year which does not 
exceed the standard deduction applicable to such 
individual for such taxable year under section 
63, or 
‘‘(B) an individual entitled to make a joint 
return if— 
‘‘(i) the gross income of such indi-
vidual, when combined with the gross in-
come of such individual’s spouse, for the 
taxable year does not exceed the standard 
deduction which would be applicable to the 
taxpayer for such taxable year under section 
63 if such individual and such individual’s 
spouse made a joint return, 
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‘‘(ii) such individual and such individ-
ual’s spouse have the same household as 
their home at the close of the taxable year, 
‘‘(iii) such individual’s spouse does not 
make a separate return, and 
‘‘(iv) neither such individual nor such 
individual’s spouse is an individual de-
scribed in section 63(c)(2) who has income 
(other than earned income) in excess of the 
amount 
in 
effect 
under 
section 
63(c)(2)(A).’’. 
(2) BANKRUPTCY ESTATES.—Paragraph (8) of 
section 6012(a) is amended by striking ‘‘the sum of 
the exemption amount plus the basic standard deduc-
tion under section 63(c)(2)(D)’’ and inserting ‘‘the 
standard 
deduction 
in 
effect 
under 
section 
63(c)(1)(B)’’. 
(g) CONFORMING AMENDMENTS.— 
(1) Section 2(a)(1)(B) is amended by striking ‘‘a 
dependent’’ and all that follows through ‘‘section 151’’ 
and inserting ‘‘a dependent who (within the meaning 
of section 7706, determined without regard to sub-
sections (b)(1), (b)(2) and (d)(1)(B) thereof) is a son, 
stepson, daughter, or stepdaughter of the taxpayer’’. 
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(2) Section 36B(b)(2)(A) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(3) Section 36B(b)(3)(B) is amended by striking 
‘‘unless a deduction is allowed under section 151 for 
the taxable year with respect to a dependent’’ in the 
flush matter at the end and inserting ‘‘unless the tax-
payer has a dependent for the taxable year’’. 
(4) Section 36B(c)(1)(D) is amended by striking 
‘‘with respect to whom a deduction under section 151 
is allowable to another taxpayer’’ and inserting ‘‘who 
is a dependent of another taxpayer’’. 
(5) Section 36B(d)(1) is amended by striking 
‘‘equal to the number of individuals for whom the tax-
payer is allowed a deduction under section 151 (relat-
ing to allowance of deduction for personal exemp-
tions) for the taxable year’’ and inserting ‘‘the sum 
of 1 (2 in the case of a joint return) plus the number 
of the taxpayer’s dependents for the taxable year’’. 
(6) Section 36B(e)(1) is amended by striking ‘‘1 
or more individuals for whom a taxpayer is allowed 
a deduction under section 151 (relating to allowance 
of deduction for personal exemptions) for the taxable 
year (including the taxpayer or his spouse)’’ and in-
serting ‘‘1 or more of the taxpayer, the taxpayer’s 
spouse, or any dependent of the taxpayer’’. 
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(7) Section 42(i)(3)(D)(ii)(I) is amended— 
(A) by striking ‘‘section 152’’ and inserting 
‘‘section 7706’’, and 
(B) by striking the period at the end and 
inserting a comma. 
(8) Section 72(t)(2)(D)(i)(III) is amended by 
striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 
(9) Section 72(t)(7)(A)(iii) is amended by strik-
ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 
7706(f)(1)’’. 
(10) Section 105(b) is amended— 
(A) by striking ‘‘as defined in section 152’’ 
and inserting ‘‘as defined in section 7706’’, 
(B) by striking ‘‘section 152(f)(1)’’ and in-
serting ‘‘section 7706(f)(1)’’ and 
(C) by striking ‘‘section 152(e)’’ and insert-
ing ‘‘section 7706(e)’’. 
(11) Section 105(c)(1) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(12) Section 125(e)(1)(D) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(13) Section 132(h)(2)(B) is amended— 
(A) by striking ‘‘section 152(f)(1)’’ and in-
serting ‘‘section 7706(f)(1)’’, and 
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(B) by striking ‘‘section 152(e)’’ and insert-
ing ‘‘section 7706(e)’’. 
(14) Section 139D(c)(5) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(15) Section 162(l)(1)(D) is amended by striking 
‘‘section 
152(f)(1)’’ 
and 
inserting 
‘‘section 
7706(f)(1)’’. 
(16) Section 170(g)(1) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(17) Section 170(g)(3) is amended by striking 
‘‘section 
152(d)(2)’’ 
and 
inserting 
‘‘section 
7706(d)(2)’’. 
(18) Section 172(d) is amended by striking 
paragraph (3). 
(19) Section 220(b)(6) is amended by striking 
‘‘with respect to whom a deduction under section 151 
is allowable to’’ and inserting ‘‘who is a dependent 
of’’. 
(20) Section 220(d)(2)(A) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(21) Section 223(b)(6) is amended by striking 
‘‘with respect to whom a deduction under section 151 
is allowable to’’ and inserting ‘‘who is a dependent 
of’’. 
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(22) Section 223(d)(2)(A) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(23) Section 401(h) is amended by striking ‘‘sec-
tion 152(f)(1)’’ in the last sentence and inserting 
‘‘section 7706(f)(1)’’. 
(24) Section 402(l)(4)(D) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(25) Section 409A(a)(2)(B)(ii)(I) is amended by 
striking ‘‘section 152(a)’’ and inserting ‘‘section 
7706(a)’’. 
(26) Section 501(c)(9) is amended by striking 
‘‘section 
152(f)(1)’’ 
and 
inserting 
‘‘section 
7706(f)(1)’’. 
(27) Section 529(e)(2)(B) is amended by striking 
‘‘section 
152(d)(2)’’ 
and 
inserting 
‘‘section 
7706(d)(2)’’. 
(28) Section 703(a)(2) is amended by striking 
subparagraph (A) and by redesignating subpara-
graphs (B) through (F) as subparagraphs (A) through 
(E), respectively. 
(29) Section 874 is amended by striking sub-
section (b) and by redesignating subsection (c) as sub-
section (b). 
(30) Section 891 is amended by striking ‘‘under 
section 151 and’’. 
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(31) Section 904(b) is amended by striking para-
graph (1). 
(32) Section 931(b)(1) is amended by striking 
‘‘(other than the deduction under section 151, relating 
to personal exemptions)’’. 
(33) Section 933 is amended— 
(A) by striking ‘‘(other than the deduction 
under section 151, relating to personal exemp-
tions)’’ in paragraph (1), and 
(B) by striking ‘‘(other than the deduction 
for personal exemptions under section 151)’’ in 
paragraph (2). 
(34) Section 1212(b)(2)(B)(ii) is amended to 
read as follows: 
‘‘(ii) in the case of an estate or trust, 
the deduction allowed for such year under 
section 642(b).’’. 
(35) Section 1361(c)(1)(C) is amended by strik-
ing ‘‘section 152(f)(1)(C)’’ and inserting ‘‘section 
7706(f)(1)(C)’’. 
(36) Section 1402(a) is amended by striking 
paragraph (7). 
(37) Section 2032A(c)(7)(D) is amended by 
striking ‘‘section 152(f)(2)’’ and inserting ‘‘section 
7706(f)(2)’’. 
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(38) Section 3402(m)(1) is amended by striking 
‘‘other than the deductions referred to in section 151 
and’’. 
(39) Section 3402(r)(2) is amended by striking 
‘‘the sum of—’’ and all that follows and inserting 
‘‘the standard deduction in effect under section 
63(c)(1)(B).’’. 
(40) Section 5000A(b)(3)(A) is amended by 
striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 
(41) Section 5000A(c)(4)(A) is amended by strik-
ing ‘‘the number of individuals for whom the tax-
payer is allowed a deduction under section 151 (relat-
ing to allowance of deduction for personal exemp-
tions) for the taxable year’’ and inserting ‘‘the sum 
of 1 (2 in the case of a joint return) plus the number 
of the taxpayer’s dependents for the taxable year’’. 
(42) Section 6013(b)(3)(A) is amended— 
(A) by striking ‘‘had less than the exemp-
tion amount of gross income’’ in clause (ii) and 
inserting ‘‘had no gross income’’, 
(B) by striking ‘‘had gross income of the ex-
emption amount or more’’ in clause (iii) and in-
serting ‘‘had any gross income’’, and 
(C) by striking the flush language following 
clause (iii). 
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(43) Section 6103(l)(21)(A)(iii) is amended to 
read as follows: 
‘‘(iii) the number of the taxpayer’s de-
pendents,’’. 
(44) Section 6213(g)(2) is amended by striking 
subparagraph (H). 
(45) Section 6334(d)(2) is amended to read as 
follows: 
‘‘(2) EXEMPT AMOUNT.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘exempt amount’ means an 
amount equal to— 
‘‘(i) the standard deduction, divided by 
‘‘(ii) 52. 
‘‘(B) VERIFIED
STATEMENT.—Unless the 
taxpayer submits to the Secretary a written and 
properly verified statement specifying the facts 
necessary to determine the proper amount under 
subparagraph (A), subparagraph (A) shall be ap-
plied as if the taxpayer were a married indi-
vidual filing a separate return with no depend-
ents.’’. 
(46) Section 7702B(f)(2)(C)(iii) is amended by 
striking ‘‘section 152(d)(2)’’ and inserting ‘‘section 
7706(d)(2)’’. 
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(47) Section 7703(a) is amended by striking 
‘‘part V of subchapter B of chapter 1 and’’. 
(48) Section 7703(b)(1) is amended by striking 
‘‘section 152(f)(1)’’ and all that follows and inserting 
‘‘section 7706(f)(1),’’. 
(49) Section 7706(a), as redesignated by this sec-
tion, is amended by striking ‘‘this subtitle’’ and in-
serting ‘‘subtitle A’’. 
(50)(A) Section 7706(d)(1)(B), as redesignated 
by this section, is amended by striking ‘‘the exemp-
tion amount (as defined in section 151(d))’’ and in-
serting ‘‘$4,150’’. 
(B) Section 7706(d), as redesignated by this sec-
tion, is amended by adding at the end the following 
new paragraph: 
‘‘(6) INFLATION
ADJUSTMENT.—In the case of 
any calendar year beginning after 2018, the $4,150 
amount in paragraph (1)(B) shall be increased by an 
amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(c)(2)(A) for such calendar 
year, determined by substituting ‘calendar year 
2017’ for ‘calendar year 2016’ in clause (ii) 
thereof. 
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If any increase determined under the preceding sen-
tence is not a multiple of $100, such increase shall be 
rounded to the next lowest multiple of $100.’’. 
(51) The table of sections for chapter 79 is 
amended by adding at the end the following new item: 
‘‘Sec. 7706. Dependent defined.’’. 
(h) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1004. MAXIMUM RATE ON BUSINESS INCOME OF INDI-
VIDUALS. 
(a) IN GENERAL.—Part I of subchapter A of chapter 
1 is amended by inserting after section 3 the following new 
section: 
‘‘SEC. 4. 25 PERCENT MAXIMUM RATE ON BUSINESS INCOME 
OF INDIVIDUALS. 
‘‘(a) REDUCTION IN TAX TO ACHIEVE 25 PERCENT 
MAXIMUM RATE.—The tax imposed by section 1 shall be 
reduced by the sum of— 
‘‘(1) 10 percent of the lesser of— 
‘‘(A) qualified business income, or 
‘‘(B) the excess (if any) of— 
‘‘(i) taxable income reduced by net 
capital 
gain 
(as 
defined 
in 
section 
1(h)(11)(A)), over 
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‘‘(ii) the maximum dollar amount for 
the 25-percent rate bracket which applies to 
the taxpayer under section 1 for the taxable 
year, and 
‘‘(2) 4.6 percent of the excess (if any) of— 
‘‘(A) the lesser of— 
‘‘(i) qualified business income, or 
‘‘(ii) the excess (if any) determined 
under paragraph (1)(B), over 
‘‘(B) the excess of— 
‘‘(i) the maximum dollar amount for 
the 35-percent rate bracket which applies to 
the taxpayer under section 1 for the taxable 
year, over 
‘‘(ii) the maximum dollar amount for 
the 25-percent rate bracket which applies to 
the taxpayer under section 1 for the taxable 
year. 
‘‘(b) QUALIFIED BUSINESS INCOME.—For purposes of 
this section, the term ‘qualified business income’ means the 
excess (if any) of— 
‘‘(1) the sum of— 
‘‘(A) 100 percent of any net business income 
derived from any passive business activity, plus 
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‘‘(B) the capital percentage of any net busi-
ness income derived from any active business ac-
tivity, over 
‘‘(2) the sum of— 
‘‘(A) 100 percent of any net business loss 
derived from any passive business activity, 
‘‘(B) except as provided in subsection 
(e)(3)(A), 30 percent of any net business loss de-
rived from any active business activity, plus 
‘‘(C) any carryover business loss determined 
for the preceding taxable year. 
‘‘(c) DETERMINATION OF NET BUSINESS INCOME OR 
LOSS.—For purposes of this section— 
‘‘(1) IN GENERAL.—Net business income or loss 
shall be determined with respect to any business ac-
tivity by appropriately netting items of income, gain, 
deduction, and loss with respect to such business ac-
tivity. 
‘‘(2) WAGES, ETC.—Any wages (as defined in 
section 3401), payments described in subsection (a) or 
(c) of section 707, or directors’ fees received by the 
taxpayer which are properly attributable to any busi-
ness activity shall be taken into account under para-
graph (1) as an item of income with respect to such 
business activity. 
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‘‘(3) EXCEPTION FOR CERTAIN INVESTMENT-RE-
LATED ITEMS.—There shall not be taken into account 
under paragraph (1)— 
‘‘(A) any item of short-term capital gain, 
short-term capital loss, long-term capital gain, 
or long-term capital loss, 
‘‘(B) any dividend, income equivalent to a 
dividend, or payment in lieu of dividends de-
scribed in section 954(c)(1)(G), 
‘‘(C) any interest income other than interest 
income which is properly allocable to a trade or 
business, 
‘‘(D) any item of gain or loss described in 
subparagraph (C) or (D) of section 954(c)(1) 
(applied by substituting ‘business activity’ for 
‘controlled foreign corporation’), 
‘‘(E) any item of income, gain, deduction, 
or loss taken into account under section 
954(c)(1)(F) (determined without regard to 
clause (ii) thereof and other than items attrib-
utable to notional principal contracts entered 
into in transactions qualifying under section 
1221(a)(7)), 
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‘‘(F) any amount received from an annuity 
which is not received in connection with the 
trade or business of the business activity, and 
‘‘(G) any item of deduction or loss properly 
allocable to an amount described in any of the 
preceding subparagraphs. 
‘‘(4) APPLICATION OF RESTRICTIONS APPLICABLE 
TO DETERMINING TAXABLE INCOME.—Net business in-
come or loss shall be appropriately adjusted so as 
only to take into account any amount of income, 
gain, deduction, or loss to the extent such amount af-
fects the determination of taxable income for the tax-
able year. 
‘‘(5) CARRYOVER BUSINESS LOSS.—For purposes 
of subsection (b)(2)(C), the carryover business loss de-
termined for any taxable year is the excess (if any) 
of the sum described in subsection (b)(2) over the sum 
described in subsection (b)(1) for such taxable year. 
‘‘(d) PASSIVE AND ACTIVE BUSINESS ACTIVITY.—For 
purposes of this section— 
‘‘(1) PASSIVE
BUSINESS
ACTIVITY.—The term 
‘passive business activity’ means any passive activity 
as defined in section 469(c) determined without re-
gard to paragraphs (3) and (6)(B) thereof. 
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‘‘(2) ACTIVE BUSINESS ACTIVITY.—The term ‘ac-
tive business activity’ means any business activity 
which is not a passive business activity. 
‘‘(3) BUSINESS
ACTIVITY.—The term ‘business 
activity’ means any activity (within the meaning of 
section 469) which involves the conduct of any trade 
or business. 
‘‘(e) CAPITAL PERCENTAGE.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—Except as otherwise provided 
in this section, the term ‘capital percentage’ means 30 
percent. 
‘‘(2) INCREASED PERCENTAGE FOR CAPITAL-IN-
TENSIVE BUSINESS ACTIVITIES.—In the case of a tax-
payer who elects the application of this paragraph 
with respect to any active business activity (other 
than a specified service activity), the capital percent-
age shall be equal to the applicable percentage (as de-
fined in subsection (f)) for each taxable year with re-
spect to which such election applies. Any election 
made under this paragraph shall apply to the taxable 
year for which such election is made and each of the 
4 subsequent taxable years. Such election shall be 
made not later than the due date (including exten-
sions) for the return of tax for the taxable year for 
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‘‘(C) SPECIFIED
SERVICE
ACTIVITY.—The 
term ‘specified service activity’ means any activ-
ity involving the performance of services de-
scribed in section 1202(e)(3)(A), including in-
vesting, trading, or dealing in securities (as de-
fined in section 475(c)(2)), partnership interests, 
or commodities (as defined in section 475(e)(2)). 
‘‘(4) REDUCTION
IN
CAPITAL
PERCENTAGE
IN 
CERTAIN CASES.—The capital percentage (determined 
after the application of paragraphs (2) and (3)) with 
respect to any active business activity shall not exceed 
1 minus the quotient (not greater than 1) of— 
‘‘(A) any amounts described in subsection 
(c)(2) which are taken into account in deter-
mining the net business income derived from 
such activity, divided by 
‘‘(B) such net business income. 
‘‘(f) APPLICABLE PERCENTAGE.—For purposes of this 
section— 
‘‘(1) IN
GENERAL.—The term ‘applicable per-
centage’ means, with respect to any active business 
activity for any taxable year, the quotient (not great-
er than 1) of— 
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‘‘(A) the specified return on capital with re-
spect to such activity for such taxable year, di-
vided by 
‘‘(B) the taxpayer’s net business income de-
rived from such activity for such taxable year. 
‘‘(2) SPECIFIED RETURN ON CAPITAL.—The term 
‘specified return on capital’ means, with respect to 
any active business activity referred to in paragraph 
(1), the excess of— 
‘‘(A) the product of— 
‘‘(i) the deemed rate of return for the 
taxable year, multiplied by 
‘‘(ii) the asset balance with respect to 
such activity for such taxable year, over 
‘‘(B) an amount equal to the interest which 
is paid or accrued, and for which a deduction is 
allowed under this chapter, with respect to such 
activity for such taxable year. 
‘‘(3) DEEMED
RATE
OF
RETURN.—The term 
‘deemed rate of return’ means, with respect to any 
taxable year, the Federal short-term rate (determined 
under section 1274(d) for the month in which or with 
which such taxable year ends) plus 7 percentage 
points. 
‘‘(4) ASSET BALANCE.— 
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‘‘(A) IN GENERAL.—The asset balance with 
respect to any active business activity referred to 
in paragraph (1) for any taxable year equals the 
taxpayer’s adjusted basis of any property de-
scribed in section 1221(a)(2) which is used in 
connection with such activity as of the end of the 
taxable year (determined without regard to sec-
tions 168(k) and 179). 
‘‘(B) APPLICATION TO ACTIVITIES CARRIED 
ON THROUGH PARTNERSHIPS AND S CORPORA-
TIONS.—In the case of any active business activ-
ity carried on through a partnership or S cor-
poration, the taxpayer shall take into account 
such taxpayer’s distributive or pro rata share (as 
the case may be) of the asset balance with respect 
to such activity as determined with respect to 
such partnership or S corporation under sub-
paragraph (A) (applied by substituting ‘the 
partnership’s or S corporation’s adjusted basis’ 
for ‘the taxpayer’s adjusted basis’). 
‘‘(g) REDUCED RATE FOR SMALL BUSINESSES WITH 
NET ACTIVE BUSINESS INCOME.— 
‘‘(1) IN GENERAL.—The tax imposed by section 
1 shall be reduced by 3 percent of the excess (if any) 
of— 
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‘‘(A) the least of— 
‘‘(i) qualified active business income, 
‘‘(ii) taxable income reduced by net 
capital 
gain 
(as 
defined 
in 
section 
1(h)(11)(A)), or 
‘‘(iii) the 9-percent bracket threshold 
amount, over 
‘‘(B) the excess (if any) of taxable income 
over the applicable threshold amount. 
‘‘(2) PHASE-IN
OF
RATE
REDUCTION.—In the 
case of any taxable year beginning before January 1, 
2022, paragraph (1) shall be applied by substituting 
for ‘3 percent’— 
‘‘(A) in the case of any taxable year begin-
ning after December 31, 2017, and before Janu-
ary 1, 2020, ‘1 percent’, and 
‘‘(B) in the case of any taxable year begin-
ning after December 31, 2019, and before Janu-
ary 1, 2022, ‘2 percent’. 
‘‘(3) QUALIFIED ACTIVE BUSINESS INCOME.—For 
purposes of this subsection, the term ‘qualified active 
business income’ means the excess (if any) of— 
‘‘(A) any net business income derived from 
any active business activity, over 
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‘‘(B) any net business loss derived from any 
active business activity. 
‘‘(4) 
9-PERCENT
BRACKET
THRESHOLD 
AMOUNT.—For purposes of this subsection, the term 
‘9-percent bracket threshold amount’ means— 
‘‘(A) in the case of a joint return or sur-
viving spouse, $75,000, 
‘‘(B) in the case of an individual who is the 
head of a household (as defined in section 2(b)), 
3⁄4 of the amount in effect for the taxable year 
under subparagraph (A), and 
‘‘(C) in the case of any other individual, 1⁄2 
of the amount in effect for the taxable year under 
subparagraph (A). 
‘‘(5) APPLICABLE
THRESHOLD
AMOUNT.—For 
purposes of this subsection, the term ‘applicable 
threshold amount’ means— 
‘‘(A) in the case of a joint return or sur-
viving spouse, $150,000, 
‘‘(B) in the case of an individual who is the 
head of a household (as defined in section 2(b)), 
3⁄4 of the amount in effect for the taxable year 
under subparagraph (A), and 
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‘‘(C) in the case of any other individual, 1⁄2 
of the amount in effect for the taxable year under 
subparagraph (A). 
‘‘(6) ESTATES
AND
TRUSTS.—Paragraph (1) 
shall not apply to any estate or trust. 
‘‘(7) INFLATION
ADJUSTMENT.—In the case of 
any taxable year beginning after 2018, the dollar 
amounts in paragraphs (4)(A) and (5)(A) shall each 
be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under subsection (c)(2)(A) for the cal-
endar year in which the taxable year begins, de-
termined by substituting ‘calendar year 2017’ for 
‘calendar year 2016’ in clause (ii) thereof. 
If any increase determined under the preceding sen-
tence is not a multiple of $100, such increase shall be 
rounded to the next lowest multiple of $100. 
‘‘(h) REGULATIONS.—The Secretary may issue such 
regulations or other guidance as may be necessary or appro-
priate to carry out the purposes of this section, including 
regulations or other guidance— 
‘‘(1) which ensures that no amount is taken into 
account under subsection (f)(4) with respect to more 
than one activity, and 
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‘‘(2) which treats all specified service activities of 
the taxpayer as a single business activity for purposes 
of this section to the extent that such activities would 
be treated as a single employer under subsection (a) 
or (b) of section 52 or subsection (m) or (o) of section 
414. 
‘‘(i) REFERENCES.—Any reference in this title to sec-
tion 1 shall be treated as including a reference to this sec-
tion unless the context of such reference clearly indicates 
otherwise.’’. 
(b) 25 PERCENT RATE FOR CERTAIN DIVIDENDS OF 
REAL ESTATE INVESTMENT TRUSTS AND COOPERATIVES.— 
Section 1(h), as amended by the preceding provisions of this 
Act, is amended by adding at the end the following new 
paragraph: 
‘‘(13) 25 PERCENT
RATE
FOR
CERTAIN
DIVI-
DENDS OF REAL ESTATE INVESTMENT TRUSTS AND 
COOPERATIVES.— 
‘‘(A) IN
GENERAL.—For purposes of this 
subsection, net capital gain (as defined in para-
graph (11)) and unrecaptured section 1250 gain 
(as defined in paragraph (6)) shall each be in-
creased by specified dividend income. 
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‘‘(B) SPECIFIED
DIVIDEND
INCOME.—For 
purposes of this paragraph, the term ‘specified 
dividend income’ means— 
‘‘(i) in the case of any dividend re-
ceived from a real estate investment trust, 
the portion of such dividend which is nei-
ther— 
‘‘(I) a capital gain dividend (as 
defined in section 852(b)(3)), nor 
‘‘(II) taken into account in deter-
mining qualified dividend income (as 
defined in paragraph (11)), and 
‘‘(ii) any dividend which is includible 
in gross income and which is received from 
an organization or corporation described in 
section 501(c)(12) or 1381(a).’’. 
(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 3 the following new item: 
‘‘Sec. 4. 25 percent maximum rate on business income of individuals.’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
(e) TRANSITION RULE.—In the case of any taxable 
year which includes December 31, 2017, the amendment 
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made by subsection (a) shall apply with respect to such tax-
able year adjusted— 
(1) so as to apply with respect to the rates of tax 
in effect under section 1 of the Internal Revenue Code 
of 1986 with respect to such taxable year (and so as 
to achieve a 25 percent effective rate of tax on the 
business income (determined without regard to para-
graph (2)) in the same manner as such amendment 
applies to taxable years beginning after such date 
with respect to the rates of tax in effect for such 
years), and 
(2) by reducing the amount of the reduction in 
tax (as otherwise determined under paragraph (1)) by 
the amount which bears the same proportion to the 
amount of such reduction as the number of days in 
the taxable year which are before January 1, 2018, 
bears to the number of days in the entire taxable 
year. 
SEC. 1005. CONFORMING AMENDMENTS RELATED TO SIM-
PLIFICATION OF INDIVIDUAL INCOME TAX 
RATES. 
(a) AMENDMENTS RELATED TO MODIFICATION OF IN-
FLATION ADJUSTMENT.— 
(1) Section 32(b)(2)(B)(ii)(II) is amended by 
striking ‘‘section 1(f)(3) for the calendar year in 
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which the taxable year begins determined by sub-
stituting ‘calendar year 2008’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for the calendar year in which the 
taxable year begins determined by substituting ‘cal-
endar year 2008’ for ‘calendar year 2016’ in clause 
(ii) thereof’’. 
(2) Section 32(j)(1)(B) is amended— 
(A) in the matter preceding clause (i), by 
striking ‘‘section 1(f)(3)’’ and inserting ‘‘section 
1(c)(2)(A)’’, 
(B) in clause (i), by striking ‘‘for ‘calendar 
year 1992’ in subparagraph (B) thereof’’ and in-
serting ‘‘for ‘calendar year 2016’ in clause (ii) 
thereof’’, and 
(C) in clause (ii), by striking ‘‘for ‘calendar 
year 1992’ in subparagraph (B) of such section 
1’’ and inserting ‘‘for ‘calendar year 2016’ in 
clause (ii) thereof’’. 
(3) Section 36B(b)(3)(A)(ii)(II) is amended by 
striking ‘‘consumer price index’’ and inserting ‘‘C- 
CPI-U (as defined in section 1(c))’’. 
(4) Section 41(e)(5)(C) is amended to read as 
follows: 
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‘‘(C) COST-OF-LIVING
ADJUSTMENT
DE-
FINED.— 
‘‘(i) IN
GENERAL.—The cost-of-living 
adjustment for any calendar year is the 
cost-of-living adjustment for such calendar 
year determined under section 1(c)(2)(A), 
by substituting ‘calendar year 1987’ for 
‘calendar year 2016’ in clause (ii) thereof. 
‘‘(ii) SPECIAL RULE WHERE BASE PE-
RIOD ENDS IN A CALENDAR YEAR OTHER 
THAN 1983 OR 1984.—If the base period of 
any taxpayer does not end in 1983 or 1984, 
clause (i) shall be applied by substituting 
the calendar year in which such base period 
ends for 1987.’’. 
(5) Section 42(e)(3)(D)(ii) is amended by strik-
ing ‘‘section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 2008’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year by sub-
stituting ‘calendar year 2008’ for ‘calendar year 
2016’ in clause (ii) thereof’’. 
(6) Section 42(h)(3)(H)(i)(II) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting ‘calendar year 2001’ for ‘calendar year 
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gins, determined by substituting ‘calendar year 1987’ 
for ‘calendar year 2016’ in clause (ii) thereof’’. 
(15) Section 831(b)(2)(D)(ii) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting ‘calendar year 2013’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year by sub-
stituting ‘calendar year 2013’ for ‘calendar year 
2016’ in clause (ii) thereof’’. 
(16) Section 877A(a)(3)(B)(i)(II) is amended by 
striking ‘‘section 1(f)(3) for the calendar year in 
which the taxable year begins, by substituting ‘cal-
endar year 2007’ for ‘calendar year 1992’ in subpara-
graph (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) 
for the calendar year in which the taxable year be-
gins, determined by substituting ‘calendar year 2007’ 
for ‘calendar year 2016’ in clause (ii) thereof’’. 
(17) Section 911(b)(2)(D)(ii)(II) is amended by 
striking ‘‘section 1(f)(3) for the calendar year in 
which the taxable year begins, determined by sub-
stituting ‘2004’ for ‘1992’ in subparagraph (B) there-
of’’ and inserting ‘‘section 1(c)(2)(A) for the calendar 
year in which the taxable year begins, determined by 
substituting ‘calendar year 2004’ for ‘calendar year 
2016’ in clause (ii) thereof’’. 
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(18) Section 1274A(d)(2) is amended to read as 
follows: 
‘‘(2) INFLATION ADJUSTMENT.— 
‘‘(A) IN GENERAL.—In the case of any debt 
instrument arising out of a sale or exchange dur-
ing any calendar year after 2018, each adjusted 
dollar amount shall be increased by an amount 
equal to— 
‘‘(i) such adjusted dollar amount, mul-
tiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(c)(2)(A) for such 
calendar year, determined by substituting 
‘calendar year 2017’ for ‘calendar year 
2016’ in clause (ii) thereof. 
‘‘(B) ADJUSTED
DOLLAR
AMOUNTS.—For 
purposes of this paragraph, the term ‘adjusted 
dollar amount’ means the dollar amounts in sub-
sections (b) and (c), in each case as in effect for 
calendar year 2018. 
‘‘(C) ROUNDING.—Any increase under sub-
paragraph (A) shall be rounded to the nearest 
multiple of $100.’’. 
(19) Section 2010(c)(3)(B)(ii) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
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substituting ‘calendar year 2010’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year, determined 
by substituting ‘calendar year 2010’ for ‘calendar 
year 2016’ in clause (ii) thereof’’. 
(20) Section 2032A(a)(3)(B) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting ‘calendar year 1997’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year, determined 
by substituting ‘calendar year 1997’ for ‘calendar 
year 2016’ in clause (ii) thereof’’. 
(21) Section 2503(b)(2)(B) is amended by strik-
ing ‘‘section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 1997’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for the calendar year, determined 
by substituting ‘calendar year 1997’ for ‘calendar 
year 2016’ in clause (ii) thereof’’. 
(22) Section 4161(b)(2)(C)(i)(II) is amended by 
striking ‘‘section 1(f)(3) for such calendar year, deter-
mined by substituting ‘2004’ for ‘1992’ in subpara-
graph (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) 
for such calendar year, determined by substituting 
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‘calendar year 2004’ for ‘calendar year 2016’ in 
clause (ii) thereof’’. 
(23) Section 4261(e)(4)(A)(ii) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting the year before the last nonindexed year 
for ‘calendar year 1992’ in subparagraph (B) thereof’’ 
and inserting ‘‘section 1(c)(2)(A) for such calendar 
year, determined by substituting the year before the 
last nonindexed year for ‘calendar year 2016’ in 
clause (ii) thereof’’. 
(24) Section 4980I(b)(3)(C)(v)(II) is amended— 
(A) by striking ‘‘section 1(f)(3)’’ and insert-
ing ‘‘section 1(c)(2)(A)’’, 
(B) by striking ‘‘subparagraph (B)’’ and in-
serting ‘‘clause (ii)’’, and 
(C) by striking ‘‘1992’’ and inserting 
‘‘2016’’. 
(25) Section 5000A(c)(3)(D)(ii) is amended— 
(A) by striking ‘‘section 1(f)(3)’’ and insert-
ing ‘‘section 1(c)(2)(A)’’, 
(B) by striking ‘‘subparagraph (B)’’ and in-
serting ‘‘clause (ii)’’, and 
(C) by striking ‘‘1992’’ and inserting 
‘‘2016’’. 
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(26) Section 6039F(d) is amended by striking 
‘‘section 1(f)(3), except that subparagraph (B) there-
of’’ and inserting ‘‘section 1(c)(2)(A), except that 
clause (ii) thereof’’. 
(27) Section 6323(i)(4)(B) is amended by strik-
ing ‘‘section 1(f)(3) for the calendar year, determined 
by substituting ‘calendar year 1996’ for ‘calendar 
year 1992’ in subparagraph (B) thereof’’ and insert-
ing ‘‘section 1(c)(2)(A) for the calendar year, deter-
mined by substituting ‘calendar year 1996’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(28) Section 6334(g)(1)(B) is amended by strik-
ing ‘‘section 1(f)(3) for such calendar year, by sub-
stituting ‘calendar year 1998’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year, determined 
by substituting ‘calendar year 1999’ for ‘calendar 
year 2016’ in clause (ii) thereof’’. 
(29) Section 6601(j)(3)(B) is amended by strik-
ing ‘‘section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 1997’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year by sub-
stituting ‘calendar year 1997’ for ‘calendar year 
2016’ in clause (ii) thereof’’. 
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(30) Section 6651(i)(1) is amended by striking 
‘‘section 1(f)(3) determined by substituting ‘calendar 
year 2013’ for ‘calendar year 1992’ in subparagraph 
(B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter-
mined by substituting ‘calendar year 2013’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(31) Section 6721(f)(1) is amended— 
(A) by striking ‘‘section 1(f)(3)’’ and insert-
ing ‘‘section 1(c)(2)(A)’’, 
(B) by striking ‘‘subparagraph (B)’’ and in-
serting ‘‘clause (ii)’’, and 
(C) by striking ‘‘1992’’ and inserting 
‘‘2016’’. 
(32) Section 6722(f)(1) is amended— 
(A) by striking ‘‘section 1(f)(3)’’ and insert-
ing ‘‘section 1(c)(2)(A)’’, 
(B) by striking ‘‘subparagraph (B)’’ and in-
serting ‘‘clause (ii)’’, and 
(C) by striking ‘‘1992’’ and inserting 
‘‘2016’’. 
(33) Section 6652(c)(7)(A) is amended by strik-
ing ‘‘section 1(f)(3) determined by substituting ‘cal-
endar year 2013’ for ‘calendar year 1992’ in subpara-
graph (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) 
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determined by substituting ‘calendar year 2013’ for 
‘calendar year 2016’ in clause (ii) thereof’’. 
(34) Section 6695(h)(1) is amended by striking 
‘‘section 1(f)(3) determined by substituting ‘calendar 
year 2013’ for ‘calendar year 1992’ in subparagraph 
(B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter-
mined by substituting ‘calendar year 2013’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(35) Section 6698(e)(1) is amended by striking 
‘‘section 1(f)(3) determined by substituting ‘calendar 
year 2013’ for ‘calendar year 1992’ in subparagraph 
(B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter-
mined by substituting ‘calendar year 2013’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(36) Section 6699(e)(1) is amended by striking 
‘‘section 1(f)(3) determined by substituting ‘calendar 
year 2013’ for ‘calendar year 1992’ in subparagraph 
(B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter-
mined by substituting ‘calendar year 2013’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(37) Section 7345(f)(2) is amended by striking 
‘‘section 1(f)(3) for the calendar year, determined by 
substituting ‘calendar year 2015’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for the calendar year, determined 
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by substituting ‘calendar year 2015’ for ‘calendar 
year 2016’ in clause (ii) thereof’’. 
(38) Section 7430(c)(1) is amended by striking 
‘‘section 1(f)(3) for such calendar year, by sub-
stituting ‘calendar year 1995’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ in the flush text 
at the end and inserting ‘‘section 1(c)(2)(A) for such 
calendar year, determined by substituting ‘calendar 
year 1995’ for ‘calendar year 2016’ in clause (ii) 
thereof’’. 
(39) Section 7872(g)(5) is amended to read as 
follows: 
‘‘(5) INFLATION ADJUSTMENT.— 
‘‘(A) IN GENERAL.—In the case of any loan 
made during any calendar year after 2018 to 
which paragraph (1) applies, the adjusted dollar 
amount shall be increased by an amount equal 
to— 
‘‘(i) such adjusted dollar amount, mul-
tiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(c)(2)(A) for such 
calendar year, determined by substituting 
‘calendar year 2017’ for ‘calendar year 
2016’ in clause (ii) thereof. 
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‘‘(B) ADJUSTED
DOLLAR
AMOUNT.—For 
purposes of this paragraph, the term ‘adjusted 
dollar amount’ means the dollar amount in 
paragraph (2) as in effect for calendar year 
2018. 
‘‘(C) ROUNDING.—Any increase under sub-
paragraph (A) shall be rounded to the nearest 
multiple of $100.’’. 
(40) Section 219(b)(5)(C)(i)(II) is amended by 
striking ‘‘section 1(f)(3) for the calendar year in 
which the taxable year begins, determined by sub-
stituting ‘calendar year 2007’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for the calendar year in which the 
taxable year begins, determined by substituting ‘cal-
endar year 2007’ for ‘calendar year 2016’ in clause 
(ii) thereof’’. 
(41) Section 219(g)(8)(B) is amended by striking 
‘‘section 1(f)(3) for the calendar year in which the 
taxable year begins, determined by substituting ‘cal-
endar year 2005’ for ‘calendar year 1992’ in subpara-
graph (B) thereof’’ and inserting ‘‘section 1(c)(2)(A) 
for the calendar year in which the taxable year be-
gins, determined by substituting ‘calendar year 2005’ 
for ‘calendar year 2016’ in clause (ii) thereof’’. 
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(b) OTHER CONFORMING AMENDMENTS.— 
(1) Section 36B(b)(3)(B)(ii)(I)(aa) is amended 
to read as follows: 
‘‘(aa) who is described in sec-
tion 1(b)(1)(B) and who does not 
have any dependents for the tax-
able year,’’. 
(2) Section 486B(b)(1) is amended— 
(A) by striking ‘‘maximum rate in effect’’ 
and inserting ‘‘highest rate specified’’, and 
(B) by striking ‘‘section 1(e)’’ and inserting 
‘‘section 1’’. 
(3) Section 511(b)(1) is amended by striking 
‘‘section 1(e)’’ and inserting ‘‘section 1’’. 
(4) Section 641(a) is amended by striking ‘‘sec-
tion 1(e) shall apply to the taxable income’’ and in-
serting ‘‘section 1 shall apply to the taxable income’’. 
(5) Section 641(c)(2)(A) is amended to read as 
follows: 
‘‘(A) Except to the extent provided in sec-
tion 1(h), the rate of tax shall be treated as being 
the highest rate of tax set forth in section 1(a).’’. 
(6) Section 646(b) is amended to read as follows: 
‘‘(b) TAXATION OF INCOME OF TRUST.—Except as pro-
vided in subsection (f)(1)(B)(ii), there is hereby imposed on 
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the taxable income of an electing Settlement Trust a tax 
at the rate specified in section 1(a)(1). Such tax shall be 
in lieu of the income tax otherwise imposed by this chapter 
on such income.’’. 
(7) Section 685(c) is amended by striking ‘‘Sec-
tion 1(e)’’ and inserting ‘‘Section 1’’. 
(8) Section 904(b)(3)(E)(ii)(I) is amended by 
striking ‘‘set forth in subsection (a), (b), (c), (d), or 
(e) of section 1 (whichever applies)’’ and inserting 
‘‘the highest rate of tax specified in section 1’’. 
(9) Section 1398(c)(2) is amended by striking 
‘‘subsection (d) of’’. 
(10) Section 3402(p)(1)(B) is amended by strik-
ing ‘‘any percentage applicable to any of the 3 lowest 
income brackets in the table under section 1(c),’’ and 
inserting ‘‘12 percent, 25 percent,’’. 
(11) Section 3402(q)(1) is amended by striking 
‘‘the product of third lowest rate of tax applicable 
under section 1(c) and’’ and inserting ‘‘25 percent 
of’’. 
(12) Section 3402(r)(3) is amended by striking 
‘‘the amount of tax which would be imposed by sec-
tion 1(c) (determined without regard to any rate of 
tax in excess of the fourth lowest rate of tax applica-
ble under section 1(c)) on an amount of taxable in-
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come equal to’’ and inserting ‘‘an amount equal to the 
product of 25 percent multiplied by’’. 
(13) Section 3406(a)(1) is amended by striking 
‘‘the product of the fourth lowest rate of tax applica-
ble under section 1(c) and’’ and inserting ‘‘25 percent 
of’’. 
(14) Section 6103(e)(1)(A)(iii) is amended by 
inserting ‘‘(as in effect on the day before the date of 
the enactment of the Tax Cuts and Jobs Act)’’ after 
‘‘section 1(g)’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
Subtitle B—Simplification and Re-
form of Family and Individual 
Tax Credits 
SEC. 1101. ENHANCEMENT OF CHILD TAX CREDIT AND NEW 
FAMILY TAX CREDIT. 
(a) INCREASE IN CREDIT AMOUNT AND ADDITION OF 
OTHER DEPENDENTS.— 
(1) IN GENERAL.—Section 24(a) is amended to read 
as follows: 
‘‘(a) ALLOWANCE OF CREDIT.—There shall be allowed 
as a credit against the tax imposed by this chapter for the 
taxable year an amount equal to the sum of— 
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‘‘(1) with respect to each qualifying child of the 
taxpayer, $1,600, and 
‘‘(2) for taxable years beginning before January 
1, 2023, with respect to the taxpayer (each spouse in 
the case of a joint return) and each dependent of the 
taxpayer to whom paragraph (1) does not apply, 
$300.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 24(c) is amended— 
(i) by redesignating paragraphs (1) and (2) 
as paragraphs (2) and (3), respectively, 
(ii) by striking ‘‘152(c)’’ in paragraph (2) 
(as so redesignated) and inserting ‘‘7706(c)’’, 
(iii) by inserting before paragraph (2) (as 
so redesignated) the following new paragraph: 
‘‘(1) DEPENDENT.— 
‘‘(A) IN GENERAL.—The term ‘dependent’ 
shall have the meaning given such term by sec-
tion 7706. 
‘‘(B) CERTAIN INDIVIDUALS NOT TREATED 
AS DEPENDENTS.—In the case of an individual 
with respect to whom a credit under this section 
is allowable to another taxpayer for a taxable 
year beginning in the calendar year in which the 
individual’s taxable year begins, the amount ap-
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plicable to such individual under subsection (a) 
for such individual’s taxable year shall be zero.’’, 
(iv) in paragraph (3) (as so redesignated)— 
(I) by striking ‘‘term ‘qualifying 
child’ ’’ and inserting ‘‘terms ‘qualifying 
child’ and ‘dependent’ ’’, and 
(II) by striking ‘‘152(b)(3)’’ and in-
serting ‘‘7706(b)(3)’’, and 
(v) in the heading by striking ‘‘QUALI-
FYING’’ and inserting ‘‘DEPENDENT; QUALI-
FYING’’. 
(B) The heading for section 24 is amended by 
inserting ‘‘AND FAMILY’’ after ‘‘CHILD’’. 
(C) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by strik-
ing the item relating to section 24 and inserting the 
following new item: 
‘‘Sec. 24. Child and family tax credit.’’. 
(b) ELIMINATION OF MARRIAGE PENALTY.—Section 
24(b)(2) is amended— 
(1) by striking ‘‘$110,000’’ in subparagraph (A) and 
inserting ‘‘$230,000’’, 
(2) by inserting ‘‘and’’ at the end of subparagraph (A), 
(3) by striking ‘‘$75,000 in the case of an individual 
who is not married’’ and all that follows through the period 
at the end and inserting ‘‘one-half of the amount in effect 
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under subparagraph (A) for the taxable year in the case 
of any other individual.’’. 
(c) CREDIT REFUNDABLE UP TO $1,000 PER CHILD.— 
(1) IN GENERAL.—Section 24(d)(1)(A) is amended by 
striking all that follows ‘‘under this section’’ and inserting 
the following: ‘‘determined— 
‘‘(i) without regard to this subsection 
and the limitation under section 26(a), 
‘‘(ii) without regard to subsection 
(a)(2), and 
‘‘(iii) by substituting ‘$1,000’ for 
‘$1,600’ in subsection (a)(1), or’’. 
(2) INFLATION
ADJUSTMENT.—Section 24(d) is 
amended by inserting after paragraph (2) the following new 
paragraph: 
‘‘(3) INFLATION
ADJUSTMENT.—In the case of 
any taxable year beginning in a calendar year after 
2017, the $1,000 amount in paragraph (1)(A)(iii) 
shall be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment under sec-
tion 1(c)(2)(A) for such calendar year. 
Any increase determined under the preceding sentence 
shall be rounded to the next highest multiple of $100 
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and shall not exceed the amount in effect under sub-
section (a)(2).’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1102. REPEAL OF NONREFUNDABLE CREDITS. 
(a) REPEAL OF SECTION 22.— 
(1) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by striking section 
22 (and by striking the item relating to such section 
in the table of sections for such subpart). 
(2) CONFORMING AMENDMENT.— 
(A) Section 86(f) is amended by striking 
paragraph (1) and by redesignating paragraphs 
(2), (3), and (4) as paragraphs (1), (2), and (3), 
respectively. 
(B)(i) Subsections (c)(3)(B) and (d)(4)(A) 
of section 7706, as redesignated by this Act, are 
each amended by striking ‘‘(as defined in section 
22(e)(3)’’. 
(ii) Section 7706(f), as redesignated by this 
Act, is amended by redesignating paragraph (7) 
as paragraph (8) and by inserting after para-
graph (6) the following new paragraph: 
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‘‘(7) PERMANENT
AND
TOTAL
DISABILITY
DE-
FINED.—An individual is permanently and totally 
disabled if he is unable to engage in any substantial 
gainful activity by reason of any medically deter-
minable physical or mental impairment which can be 
expected to result in death or which has lasted or can 
be expected to last for a continuous period of not less 
than 12 months. An individual shall not be consid-
ered to be permanently and totally disabled unless he 
furnishes proof of the existence thereof in such form 
and manner, and at such times, as the Secretary may 
require.’’. 
(iii) Section 415(c)(3)(C)(i) is amended by 
striking ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 
(iv) Section 422(c)(6) is amended by strik-
ing ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 
(b) TERMINATION OF SECTION 25.—Section 25, as 
amended by section 3601, is amended by adding at the end 
the following new subsection: 
‘‘(k) TERMINATION.—No credit shall be allowed under 
this section with respect to any mortgage credit certificate 
issued after December 31, 2017.’’. 
(c) REPEAL OF SECTION 30D.— 
(1) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 is amended by striking section 
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30D (and by striking the item relating to such section 
in the table of sections for such subpart). 
(2) CONFORMING AMENDMENTS.— 
(A) Section 38(b) is amended by striking 
paragraph (35). 
(B) Section 1016(a) is amended by striking 
paragraph (37). 
(C) Section 6501(m) is amended by striking 
‘‘30D(e)(4),’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), the amendments made by this sec-
tion shall apply to taxable years beginning after De-
cember 31, 2017. 
(2) SUBSECTION (b).—The amendment made by 
subsection (c) shall apply to taxable years ending 
after December 31, 2017. 
(3) SUBSECTION (c).—The amendments made by 
subsection (d) shall apply to vehicles placed in service 
in taxable years beginning after December 31, 2017. 
SEC. 1103. REFUNDABLE CREDIT PROGRAM INTEGRITY. 
(a) IDENTIFICATION REQUIREMENTS FOR CHILD AND 
FAMILY TAX CREDIT.— 
(1) IN GENERAL.—Section 24(e) is amended to 
read as follows: 
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‘‘(e) IDENTIFICATION REQUIREMENTS.— 
‘‘(1) REQUIREMENTS FOR QUALIFYING CHILD.— 
No credit shall be allowed under this section to a tax-
payer with respect to any qualifying child unless the 
taxpayer includes the name and social security num-
ber of such qualifying child on the return of tax for 
the taxable year. The preceding sentence shall not pre-
vent a qualifying child from being treated as a de-
pendent described in subsection (a)(2). 
‘‘(2) OTHER IDENTIFICATION REQUIREMENTS.— 
No credit shall be allowed under this section with re-
spect to any individual unless the taxpayer identi-
fication number of such individual is included on the 
return of tax for the taxable year and such identi-
fying number was issued before the due date for filing 
the return for the taxable year. 
‘‘(3) SOCIAL SECURITY NUMBER.—For purposes 
of this subsection, the term ‘social security number’ 
means a social security number issued by the Social 
Security Administration (but only if the social secu-
rity number is issued to a citizen of the United States 
or pursuant to subclause (I) (or that portion of sub-
clause (III) that relates to subclause (I)) of section 
205(c)(2)(B)(i) of the Social Security Act)).’’. 
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(2) OMISSIONS TREATED AS MATHEMATICAL OR 
CLERICAL ERROR.— 
(A) IN GENERAL.—Section 6213(g)(2)(I) is 
amended to read as follows: 
‘‘(I) an omission of a correct social security 
number, or a correct TIN, required under section 
24(e) (relating to child tax credit), to be included 
on a return,’’. 
(b) SOCIAL
SECURITY
NUMBER
MUST
BE
PRO-
VIDED.— 
(1) IN
GENERAL.—Section 25A(f)(1)(A), as 
amended by section 1201 of this Act, is amended by 
striking ‘‘taxpayer identification number’’ each place 
it appears and inserting ‘‘social security number’’. 
(2) OMISSION TREATED AS MATHEMATICAL OR 
CLERICAL ERROR.—Section 6213(g)(2)(J) is amended 
by striking ‘‘TIN’’ and inserting ‘‘social security 
number and employer identification number’’. 
(c) INDIVIDUALS PROHIBITED FROM ENGAGING
IN 
EMPLOYMENT
IN UNITED STATES NOT ELIGIBLE
FOR 
EARNED INCOME TAX CREDIT.—Section 32(m) is amend-
ed— 
(1) by striking ‘‘(other than:’’ and all that fol-
lows through ‘‘of the Social Security Act)’’, and 
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(2) by inserting before the period at the end the 
following: ‘‘, but only if, in the case of subsection 
(c)(1)(E), the social security number is issued to a 
citizen of the United States or pursuant to subclause 
(I) (or that portion of subclause (III) that relates to 
subclause (I)) of section 205(c)(2)(B)(i) of the Social 
Security Act’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1104. PROCEDURES TO REDUCE IMPROPER CLAIMS OF 
EARNED INCOME CREDIT. 
(a) CLARIFICATION REGARDING DETERMINATION OF 
SELF-EMPLOYMENT
INCOME
WHICH
IS
TREATED
AS 
EARNED INCOME.—Section 32(c)(2)(B) is amended by 
striking ‘‘and’’ at the end of clause (v), by striking the pe-
riod at the end of clause (vi) and inserting ‘‘, and’’, and 
by adding at the end the following new clause: 
‘‘(vii) in determining the taxpayer’s 
net earnings from self-employment under 
subparagraph (A)(ii) there shall not fail to 
be taken into account any deduction which 
is allowable to the taxpayer under this sub-
title.’’. 
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(b) REQUIRED QUARTERLY REPORTING OF WAGES OF 
EMPLOYEES.—Section 6011 is amended by adding at the 
end the following new subsection: 
‘‘(i) EMPLOYER REPORTING OF WAGES.—Every per-
son required to deduct and withhold from an employee a 
tax under section 3101 or 3402 shall include on each return 
or statement submitted with respect to such tax, the name 
and address of such employee and the amount of wages for 
such employee on which such tax was withheld.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
apply to taxable years ending after the date of the en-
actment of this Act. 
(2) REPORTING.—The Secretary of the Treasury, 
or his designee, may delay the application of the 
amendment made by subsection (b) for such period as 
such Secretary (or designee) determines to be reason-
able to allow persons adequate time to modify elec-
tronic (or other) systems to permit such person to 
comply with the requirements of such amendment. 
SEC. 1105. CERTAIN INCOME DISALLOWED FOR PURPOSES 
OF THE EARNED INCOME TAX CREDIT. 
(a) SUBSTANTIATION REQUIREMENT.—Section 32 is 
amended by adding at the end the following new subsection: 
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‘‘(n) INCONSISTENT
INCOME
REPORTING.—If the 
earned income of a taxpayer claimed on a return for pur-
poses of this section is not substantiated by statements or 
returns under sections 6051, 6052, 6041(a), or 6050W with 
respect to such taxpayer, the Secretary may require such 
taxpayer to provide books and records to substantiate such 
income, including for the purpose of preventing fraud.’’. 
(b) EXCLUSION OF UNSUBSTANTIATED AMOUNT FROM 
EARNED INCOME.—Section 32(c)(2) is amended by adding 
at the end the following new subparagraph: 
‘‘(C) EXCLUSION.—In the case of a tax-
payer with respect to which there is an inconsist-
ency described in subsection (n) who fails to sub-
stantiate such inconsistency to the satisfaction of 
the Secretary, the term ‘earned income’ shall not 
include amounts to the extent of such inconsist-
ency.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years ending after the date 
of the enactment of this Act. 
Subtitle C—Simplification and 
Reform of Education Incentives 
SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT. 
(a) IN GENERAL.—Section 25A is amended to read as 
follows: 
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‘‘SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT. 
‘‘(a) IN GENERAL.—In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this 
chapter for the taxable year an amount equal to the sum 
of— 
‘‘(1) 100 percent of so much of the qualified tui-
tion and related expenses paid by the taxpayer dur-
ing the taxable year (for education furnished to any 
eligible student for whom an election is in effect under 
this section for such taxable year during any aca-
demic period beginning in such taxable year) as does 
not exceed $2,000, plus 
‘‘(2) 25 percent of so much of such expenses so 
paid as exceeds the dollar amount in effect under 
paragraph (1) but does not exceed twice such dollar 
amount. 
‘‘(b) PORTION OF CREDIT REFUNDABLE.—40 percent 
of the credit allowable under subsection (a)(1) (determined 
without regard to this subsection and section 26(a) and 
after application of all other provisions of this section) shall 
be treated as a credit allowable under subpart C (and not 
under this part). The preceding sentence shall not apply 
to any taxpayer for any taxable year if such taxpayer is 
a child to whom section 1(d) applies for such taxable year. 
‘‘(c) LIMITATION BASED
ON MODIFIED ADJUSTED 
GROSS INCOME.— 
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‘‘(1) IN GENERAL.—The amount allowable as a 
credit under subsection (a) for any taxable year shall 
be reduced (but not below zero) by an amount which 
bears the same ratio to the amount so allowable (de-
termined without regard to this subsection and sub-
section (b) but after application of all other provi-
sions of this section) as— 
‘‘(A) the excess of— 
‘‘(i) the taxpayer’s modified adjusted 
gross income for such taxable year, over 
‘‘(ii) $80,000 (twice such amount in 
the case of a joint return), bears to 
‘‘(B) $10,000 (twice such amount in the 
case of a joint return). 
‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—For 
purposes of this subsection, the term ‘modified ad-
justed gross income’ means the adjusted gross income 
of the taxpayer for the taxable year increased by any 
amount excluded from gross income under section 
911, 931, or 933. 
‘‘(d) OTHER LIMITATIONS.— 
‘‘(1) CREDIT
ALLOWED
ONLY
FOR
TAXABLE 
YEARS.—An election to have this section apply may 
not be made for any taxable year if such an election 
(by the taxpayer or any other individual) is in effect 
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with respect to such student for any 5 prior taxable 
years. 
‘‘(2) CREDIT ALLOWED ONLY FOR FIRST 5 YEARS 
OF POSTSECONDARY EDUCATION.— 
‘‘(A) IN GENERAL.—No credit shall be al-
lowed under subsection (a) for a taxable year 
with respect to the qualified tuition and related 
expenses of an eligible student if the student has 
completed (before the beginning of such taxable 
year) the first 5 years of postsecondary education 
at an eligible educational institution. 
‘‘(B) FIFTH
YEAR
LIMITATIONS.—In the 
case of an eligible student with respect to whom 
an election has been in effect for 4 preceding tax-
able years for purposes of the fifth taxable 
year— 
‘‘(i) the amount of the credit allowed 
under this section for the taxable year shall 
not exceed an amount equal to 50 percent of 
the credit otherwise determined with respect 
to such student under this section (without 
regard to this subparagraph), and 
‘‘(ii) the amount of the credit deter-
mined under subsection (b) and allowable 
under subpart C shall not exceed an amount 
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equal to 40 percent of the amount deter-
mined with respect to such student under 
clause (i). 
‘‘(e) DEFINITIONS.—For purposes of this section— 
‘‘(1) ELIGIBLE
STUDENT.—The term ‘eligible 
student’ means, with respect to any academic period, 
a student who— 
‘‘(A) meets the requirements of section 
484(a)(1) of the Higher Education Act of 1965 
(20 U.S.C. 1091(a)(1)), as in effect on August 5, 
1997, and 
‘‘(B) is carrying at least 1⁄2 the normal full- 
time work load for the course of study the stu-
dent is pursuing. 
‘‘(2) QUALIFIED
TUITION
AND
RELATED
EX-
PENSES.— 
‘‘(A) IN GENERAL.—The term ‘qualified tui-
tion and related expenses’ means tuition, fees, 
and course materials, required for enrollment or 
attendance of— 
‘‘(i) the taxpayer, 
‘‘(ii) the taxpayer’s spouse, or 
‘‘(iii) any dependent of the taxpayer, 
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at an eligible educational institution for courses 
of instruction of such individual at such institu-
tion. 
‘‘(B) EXCEPTION FOR EDUCATION INVOLV-
ING SPORTS, ETC.—Such term does not include 
expenses with respect to any course or other edu-
cation involving sports, games, or hobbies, unless 
such course or other education is part of the in-
dividual’s degree program. 
‘‘(C) 
EXCEPTION
FOR
NONACADEMIC 
FEES.—Such term does not include student ac-
tivity fees, athletic fees, insurance expenses, or 
other expenses unrelated to an individual’s aca-
demic course of instruction. 
‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.—The 
term ‘eligible educational institution’ means an insti-
tution— 
‘‘(A) which is described in section 481 of the 
Higher Education Act of 1965 (20 U.S.C. 1088), 
as in effect on August 5, 1997, and 
‘‘(B) which is eligible to participate in a 
program under title IV of such Act. 
‘‘(f) SPECIAL RULES.— 
‘‘(1) IDENTIFICATION REQUIREMENTS.— 
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‘‘(A) STUDENT.—No credit shall be allowed 
under subsection (a) to a taxpayer with respect 
to the qualified tuition and related expenses of 
an individual unless the taxpayer includes the 
name and taxpayer identification number of 
such individual on the return of tax for the tax-
able year, and such taxpayer identification num-
ber was issued on or before the due date for filing 
such return. 
‘‘(B) TAXPAYER.—No credit shall be allowed 
under this section if the identifying number of 
the taxpayer was issued after the due date for fil-
ing the return for the taxable year. 
‘‘(C) INSTITUTION.—No credit shall be al-
lowed under this section unless the taxpayer in-
cludes the employer identification number of any 
institution to which qualified tuition and related 
expenses were paid with respect to the indi-
vidual. 
‘‘(2) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS, 
ETC.—The amount of qualified tuition and related ex-
penses otherwise taken into account under subsection 
(a) with respect to an individual for an academic pe-
riod shall be reduced (before the application of sub-
section (c)) by the sum of any amounts paid for the 
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benefit of such individual which are allocable to such 
period as— 
‘‘(A) a qualified scholarship which is ex-
cludable from gross income under section 117, 
‘‘(B) an educational assistance allowance 
under chapter 30, 31, 32, 34, or 35 of title 38, 
United States Code, or under chapter 1606 of 
title 10, United States Code, and 
‘‘(C) a payment (other than a gift, bequest, 
devise, or inheritance within the meaning of sec-
tion 102(a)) for such individual’s educational ex-
penses, or attributable to such individual’s en-
rollment at an eligible educational institution, 
which is excludable from gross income under any 
law of the United States. 
‘‘(3) TREATMENT
OF
EXPENSES
PAID
BY
DE-
PENDENT.—If an individual is a dependent of an-
other taxpayer for a taxable year beginning in the 
calendar year in which such individuals taxable year 
begins— 
‘‘(A) no credit shall be allowed under sub-
section (a) to such individual for such individ-
ual’s taxable year, and 
‘‘(B) qualified tuition and related expenses 
paid by such individual during such individ-
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ual’s taxable year shall be treated for purposes of 
this section as paid by such other taxpayer. 
‘‘(4) TREATMENT OF CERTAIN PREPAYMENTS.—If 
qualified tuition and related expenses are paid by the 
taxpayer during a taxable year for an academic pe-
riod which begins during the first 3 months following 
such taxable year, such academic period shall be 
treated for purposes of this section as beginning dur-
ing such taxable year. 
‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit 
shall be allowed under this section for any amount for 
which a deduction is allowed under any other provi-
sion of this chapter. 
‘‘(6) NO CREDIT FOR MARRIED INDIVIDUALS FIL-
ING SEPARATE RETURNS.—If the taxpayer is a mar-
ried individual (within the meaning of section 7703), 
this section shall apply only if the taxpayer and the 
taxpayer’s spouse file a joint return for the taxable 
year. 
‘‘(7) NONRESIDENT ALIENS.—If the taxpayer is 
a nonresident alien individual for any portion of the 
taxable year, this section shall apply only if such in-
dividual is treated as a resident alien of the United 
States for purposes of this chapter by reason of an 
election under subsection (g) or (h) of section 6013. 
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‘‘(8) RESTRICTIONS ON TAXPAYERS WHO IMPROP-
ERLY CLAIMED CREDIT IN PRIOR YEAR.— 
‘‘(A) TAXPAYERS MAKING PRIOR FRAUDU-
LENT OR RECKLESS CLAIMS.— 
‘‘(i) IN GENERAL.—No credit shall be 
allowed under this section for any taxable 
year in the disallowance period. 
‘‘(ii) 
DISALLOWANCE
PERIOD.—For 
purposes of clause (i), the disallowance pe-
riod is— 
‘‘(I) the period of 10 taxable years 
after the most recent taxable year for 
which there was a final determination 
that the taxpayer’s claim of credit 
under this section was due to fraud, 
and 
‘‘(II) the period of 2 taxable years 
after the most recent taxable year for 
which there was a final determination 
that the taxpayer’s claim of credit 
under this section was due to reckless 
or intentional disregard of rules and 
regulations (but not due to fraud). 
‘‘(B) TAXPAYERS MAKING IMPROPER PRIOR 
CLAIMS.—In the case of a taxpayer who is de-
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nied credit under this section for any taxable 
year as a result of the deficiency procedures 
under subchapter B of chapter 63, no credit shall 
be allowed under this section for any subsequent 
taxable year unless the taxpayer provides such 
information as the Secretary may require to 
demonstrate eligibility for such credit. 
‘‘(g) INFLATION ADJUSTMENT.— 
‘‘(1) IN GENERAL.—In the case of a taxable year 
beginning after 2018, the $80,000 amount in sub-
section (c)(1)(A)(ii) shall each be increased by an 
amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(c)(2)(A) for the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2017’ for 
‘calendar year 2016’ in clause (ii) thereof. 
‘‘(2) ROUNDING.—If any amount as adjusted 
under paragraph (1) is not a multiple of $1,000, such 
amount shall be rounded to the next lowest multiple 
of $1,000. 
‘‘(h) REGULATIONS.—The Secretary may prescribe 
such regulations or other guidance as may be necessary or 
appropriate to carry out this section, including regulations 
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providing for a recapture of the credit allowed under this 
section in cases where there is a refund in a subsequent 
taxable year of any amount which was taken into account 
in determining the amount of such credit.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 72(t)(7)(B) is amended by striking 
‘‘section 25A(g)(2)’’ and inserting ‘‘section 25A(f)(2)’’. 
(2) Section 529(c)(3)(B)(v)(I) is amended by 
striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 
25A(f)(2)’’. 
(3) Section 529(e)(3)(B)(i) is amended by strik-
ing ‘‘section 25A(b)(3)’’ and inserting ‘‘section 
25A(d)’’. 
(4) Section 530(d)(2)(C) is amended— 
(A) by striking ‘‘section 25A(g)(2)’’ in 
clause (i)(I) and inserting ‘‘section 25A(f)(2)’’, 
and 
(B) by striking ‘‘HOPE
AND
LIFETIME 
LEARNING CREDITS’’ in the heading and insert-
ing ‘‘AMERICAN OPPORTUNITY TAX CREDIT’’. 
(5) Section 530(d)(4)(B)(iii) is amended by 
striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 
25A(d)(4)(B)’’. 
(6) Section 6050S(e) is amended by striking 
‘‘subsection (g)(2)’’ and inserting ‘‘subsection (f)(2)’’. 
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(7) Section 6211(b)(4)(A) is amended by striking 
‘‘subsection (i)(6)’’ and inserting ‘‘subsection (b)’’. 
(8) Section 6213(g)(2)(J) is amended by striking 
‘‘TIN required under section 25A(g)(1)’’ and inserting 
‘‘TIN, and employer identification number, required 
under section 25A(f)(1)’’. 
(9) Section 6213(g)(2)(Q) is amended to read as 
follows: 
‘‘(Q) an omission of information required 
by section 25A(f)(8)(B) or an entry on the re-
turn claiming the credit determined under sec-
tion 25A(a) for a taxable year for which the 
credit is disallowed under section 25A(f)(8)(A).’’. 
(10) Section 1004(c) of division B of the Amer-
ican Recovery and Reinvestment Tax Act of 2009 is 
amended— 
(A) in paragraph (1)— 
(i) by striking ‘‘section 25A(i)(6)’’ each 
place it appears and inserting ‘‘section 
25A(b)’’, and 
(ii) by striking ‘‘with respect to taxable 
years beginning after 2008 and before 
2018’’ each place it appears and inserting 
‘‘with respect to each taxable year’’, 
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(B) in paragraph (2), by striking ‘‘Section 
25A(i)(6)’’ and inserting ‘‘Section 25A(b)’’, and 
(C) in paragraph (3)(C), by striking ‘‘sub-
section (i)(6)’’ and inserting ‘‘subsection (b)’’. 
(11) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by strik-
ing the item relating to section 25A and inserting the 
following new item: 
‘‘Sec. 25A. American opportunity tax credit.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 
1202. 
CONSOLIDATION 
OF 
EDUCATION 
SAVINGS 
RULES. 
(a) NO NEW CONTRIBUTIONS TO COVERDELL EDU-
CATION
SAVINGS
ACCOUNT.—Section 530(b)(1)(A) is 
amended to read as follows: 
‘‘(A) Except in the case of rollover contribu-
tions, no contribution will be accepted after De-
cember 31, 2017.’’. 
(b) LIMITED DISTRIBUTION ALLOWED FOR ELEMEN-
TARY AND SECONDARY TUITION.— 
(1) IN GENERAL.—Section 529(c) is amended by 
adding at the end the following new paragraph: 
‘‘(7) TREATMENT
OF
ELEMENTARY
AND
SEC-
ONDARY TUITION.—Any reference in this subsection to 
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the term ‘qualified higher education expense’ shall in-
clude a reference to expenses for tuition in connection 
with enrollment at an elementary or secondary 
school.’’. 
(2) 
LIMITATION.—Section 
529(e)(3)(A) 
is 
amended by adding at the end the following: ‘‘The 
amount of cash distributions from all qualified tui-
tion programs described in subsection (b)(1)(A)(ii) 
with respect to a beneficiary during any taxable year, 
shall, in the aggregate, include not more than $10,000 
in expenses for tuition incurred during the taxable 
year in connection with the enrollment or attendance 
of the beneficiary as an elementary or secondary 
school student at a public, private, or religious 
school.’’. 
(c) ROLLOVERS TO QUALIFIED TUITION PROGRAMS 
PERMITTED.—Section 530(d)(5) is amended by inserting ‘‘, 
or into (by purchase or contribution) a qualified tuition 
program (as defined in section 529),’’ after ‘‘into another 
Coverdell education savings account’’. 
(d) DISTRIBUTIONS FROM QUALIFIED TUITION PRO-
GRAMS FOR CERTAIN EXPENSES ASSOCIATED WITH REG-
ISTERED APPRENTICESHIP PROGRAMS.—Section 529(e)(3) 
is amended by adding at the end the following new subpara-
graph: 
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‘‘(C) CERTAIN EXPENSES ASSOCIATED WITH 
REGISTERED APPRENTICESHIP PROGRAMS.—The 
term ‘qualified higher education expenses’ shall 
include books, supplies, and equipment required 
for the enrollment or attendance of a designated 
beneficiary in an apprenticeship program reg-
istered and certified with the Secretary of Labor 
under section 1 of the National Apprenticeship 
Act (29 U.S.C. 50).’’. 
(e) UNBORN CHILDREN ALLOWED AS ACCOUNT BENE-
FICIARIES.—Section 529(e) is amended by adding at the 
end the following new paragraph: 
‘‘(6) TREATMENT OF UNBORN CHILDREN.— 
‘‘(A) IN GENERAL.—Nothing shall prevent 
an unborn child from being treated as a des-
ignated beneficiary or an individual under this 
section. 
‘‘(B) UNBORN CHILD.—For purposes of this 
paragraph— 
‘‘(i) IN GENERAL.—The term ‘unborn 
child’ means a child in utero. 
‘‘(ii) CHILD
IN
UTERO.—The term 
‘child in utero’ means a member of the spe-
cies homo sapiens, at any stage of develop-
ment, who is carried in the womb.’’. 
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(f) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to contributions made after December 
31, 2017. 
(2) ROLLOVERS
TO
QUALIFIED
TUITION
PRO-
GRAMS.—The amendments made by subsection (b) 
shall apply to distributions after December 31, 2017. 
SEC. 1203. REFORMS TO DISCHARGE OF CERTAIN STUDENT 
LOAN INDEBTEDNESS. 
(a) TREATMENT OF STUDENT LOANS DISCHARGED ON 
ACCOUNT OF DEATH OR DISABILITY.—Section 108(f) is 
amended by adding at the end the following new paragraph: 
‘‘(5) DISCHARGES ON ACCOUNT OF DEATH OR 
DISABILITY.— 
‘‘(A) IN GENERAL.—In the case of an indi-
vidual, gross income does not include any 
amount which (but for this subsection) would be 
includible in gross income by reasons of the dis-
charge (in whole or in part) of any loan de-
scribed in subparagraph (B) if such discharge 
was— 
‘‘(i) pursuant to subsection (a) or (d) 
of section 437 of the Higher Education Act 
of 1965 or the parallel benefit under part D 
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of title IV of such Act (relating to the re-
payment of loan liability), 
‘‘(ii) pursuant to section 464(c)(1)(F) 
of such Act, or 
‘‘(iii) otherwise discharged on account 
of the death or total and permanent dis-
ability of the student. 
‘‘(B) LOANS
DESCRIBED.—A loan is de-
scribed in this subparagraph if such loan is— 
‘‘(i) a student loan (as defined in 
paragraph (2)), or 
‘‘(ii) a private education loan (as de-
fined in section 140(7) of the Consumer 
Credit 
Protection 
Act 
(15 
U.S.C. 
1650(7))).’’. 
(b) EXCLUSION FROM GROSS INCOME FOR PAYMENTS 
MADE UNDER INDIAN HEALTH SERVICE LOAN REPAYMENT 
PROGRAM.— 
(1) IN GENERAL.—Section 108(f)(4) is amended 
by inserting ‘‘under section 108 of the Indian Health 
Care Improvement Act,’’ after ‘‘338I of such Act,’’. 
(2) CLERICAL
AMENDMENT.—The heading for 
section 108(f)(4) is amended by striking ‘‘AND CER-
TAIN’’ and inserting ‘‘, INDIAN
HEALTH
SERVICE 
LOAN REPAYMENT PROGRAM, AND CERTAIN’’. 
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(c) EFFECTIVE DATES.— 
(1) SUBSECTION (a).—The amendment made by 
subsection (a)(1) shall apply to discharges of indebt-
edness after December 31, 2017. 
(2) SUBSECTION (b).—The amendments made by 
subsection (b) shall apply to amounts received in tax-
able years beginning after December 31, 2017. 
SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO 
EDUCATION. 
(a) IN GENERAL.—Subchapter B of chapter 1 is 
amended— 
(1) in part VII by striking sections 221 and 222 
(and by striking the items relating to such sections in 
the table of sections for such part), 
(2) in part VII by striking sections 135 and 127 
(and by striking the items relating to such sections in 
the table of sections for such part), and 
(3) by striking subsection (d) of section 117. 
(b) CONFORMING AMENDMENT RELATING TO SECTION 
221.— 
(1) Section 62(a) is amended by striking para-
graph (17). 
(2) Section 74(d) is amended by striking ‘‘221,’’. 
(3) Section 86(b)(2)(A) is amended by striking 
‘‘221,’’. 
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100 
(4) Section 219(g)(3)(A)(ii) is amended by strik-
ing ‘‘221,’’. 
(5) Section 163(h)(2) is amended by striking 
subparagraph (F). 
(6) Section 6050S(a) is amended— 
(A) by inserting ‘‘or’’ at the end of para-
graph (1), 
(B) by striking ‘‘or’’ at the end of para-
graph (2), and 
(C) by striking paragraph (3). 
(7) Section 6050S(e) is amended by striking all 
that follows ‘‘thereof)’’ and inserting a period. 
(c) CONFORMING AMENDMENTS RELATED TO SECTION 
222.— 
(1) Section 62(a) is amended by striking para-
graph (18). 
(2) Section 74(d)(2)(B) is amended by striking 
‘‘222,’’. 
(3) Section 86(b)(2)(A) is amended by striking 
‘‘222,’’. 
(4) Section 219(g)(3)(A)(ii) is amended by strik-
ing ‘‘222,’’. 
(d) CONFORMING AMENDMENTS RELATING TO SEC-
TION 127.— 
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101 
(1) Section 125(f)(1) is amended by striking 
‘‘127,’’. 
(2) Section 132(j)(8) is amended by striking 
‘‘which are not excludable from gross income under 
section 127’’. 
(3) Section 414(n)(3)(C) is amended by striking 
‘‘127,’’. 
(4) Section 414(t)(2) is amended by striking 
‘‘127,’’. 
(5) Section 3121(a)(18) is amended by striking 
‘‘127,’’. 
(6) Section 3231(e) is amended by striking para-
graph (6). 
(7) Section 3306(b)(13) is amended by ‘‘127,’’. 
(8) Section 3401(a)(18) is amended by striking 
‘‘127,’’. 
(9) Section 6039D(d)(1) is amended by striking 
‘‘, 127’’. 
(e) CONFORMING AMENDMENTS RELATING TO SECTION 
117(d).— 
(1) Section 117(c)(1) is amended— 
(A) by striking ‘‘subsections (a) and (d)’’ 
and inserting ‘‘subsection (a)’’, and 
(B) by striking ‘‘or qualified tuition reduc-
tion’’. 
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102 
(2) Section 414(n)(3)(C) is amended by striking 
‘‘117(d),’’. 
(3) Section 414(t)(2) is amended by striking 
‘‘117(d),’’. 
(f) CONFORMING AMENDMENTS RELATED TO SECTION 
135.— 
(1) Section 74(d)(2)(B) is amended by striking 
‘‘135,’’. 
(2) Section 86(b)(2)(A) is amended by striking 
‘‘135,’’. 
(3) Section 219(g)(3)(A)(ii) is amended by strik-
ing ‘‘135,’’. 
(g) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to taxable years beginning after De-
cember 31, 2017. 
(2) 
AMENDMENTS
RELATING
TO
SECTION 
117(d).—The amendments made by subsections (a)(3) 
and (e) shall apply to amounts paid or incurred after 
December 31, 2017. 
SEC. 1205. ROLLOVERS BETWEEN QUALIFIED TUITION PRO-
GRAMS AND QUALIFIED ABLE PROGRAMS. 
(a) ROLLOVERS FROM QUALIFIED TUITION PROGRAMS 
TO QUALIFIED ABLE PROGRAMS.—Section 529(c)(3)(C)(i) 
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103 
is amended by striking ‘‘or’’ at the end of subclause (I), 
by striking the period at the end of subclause (II) and in-
serting ‘‘, or’’, and by adding at the end the following new 
subclause: 
‘‘(III) to an ABLE account (as 
defined in section 529A(e)(6)) of the 
designated beneficiary or a member of 
the family of the designated bene-
ficiary. 
Subclause (III) shall not apply to so much 
of a distribution which, when added to all 
other contributions made to the ABLE ac-
count for the taxable year, exceeds the limi-
tation under section 529A(b)(2)(B).’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to distributions after December 31, 2017. 
Subtitle D—Simplification and 
Reform of Deductions 
SEC. 1301. REPEAL OF OVERALL LIMITATION ON ITEMIZED 
DEDUCTIONS. 
(a) IN GENERAL.—Part 1 of subchapter B of chapter 
1 is amended by striking section 68 (and the item relating 
to such section in the table of sections for such part). 
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104 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1302. MORTGAGE INTEREST. 
(a) MODIFICATION OF LIMITATIONS.— 
(1) IN GENERAL.—Section 163(h)(3) is amended 
to read as follows: 
‘‘(3) QUALIFIED
RESIDENCE
INTEREST.—For 
purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘qualified res-
idence interest’ means any interest which is paid 
or accrued during the taxable year on indebted-
ness which— 
‘‘(i) is incurred in acquiring, con-
structing, or substantially improving any 
qualified residence (determined as of the 
time the interest is accrued) of the taxpayer, 
and 
‘‘(ii) is secured by such residence. 
Such term also includes interest on any indebt-
edness secured by such residence resulting from 
the refinancing of indebtedness meeting the re-
quirements of the preceding sentence (or this sen-
tence); but only to the extent the amount of the 
indebtedness resulting from such refinancing does 
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105 
not exceed the amount of the refinanced indebted-
ness. 
‘‘(B) LIMITATION.—The aggregate amount 
of indebtedness taken into account under sub-
paragraph (A) for any period shall not exceed 
$500,000 (half of such amount in the case of a 
married individual filing a separate return). 
‘‘(C) TREATMENT
OF
INDEBTEDNESS
IN-
CURRED ON OR BEFORE NOVEMBER 2, 2017.— 
‘‘(i) IN GENERAL.—In the case of any 
pre-November 2, 2017, indebtedness, this 
paragraph shall apply as in effect imme-
diately before the enactment of the Tax Cuts 
and Jobs Act. 
‘‘(ii) PRE-NOVEMBER 2, 2017, INDEBT-
EDNESS.—For purposes of this subpara-
graph, the term ‘pre-November 2, 2017, in-
debtedness’ means— 
‘‘(I) any principal residence ac-
quisition indebtedness which was in-
curred on or before November 2, 2017, 
or 
‘‘(II) any principal residence ac-
quisition indebtedness which is in-
curred after November 2, 2017, to refi-
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nance indebtedness described in clause 
(i) (or refinanced indebtedness meeting 
the requirements of this clause) to the 
extent (immediately after the refi-
nancing) the principal amount of the 
indebtedness resulting from the refi-
nancing does not exceed the principal 
amount of the refinanced indebtedness 
(immediately before the refinancing). 
‘‘(iii) LIMITATION ON PERIOD OF REFI-
NANCING.—clause (ii)(II) shall not apply to 
any indebtedness after— 
‘‘(I) the expiration of the term of 
the original indebtedness, or 
‘‘(II) if the principal of such 
original indebtedness is not amortized 
over its term, the expiration of the 
term of the 1st refinancing of such in-
debtedness (or if earlier, the date which 
is 30 years after the date of such 1st 
refinancing). 
‘‘(iv) 
BINDING
CONTRACT
EXCEP-
TION.—In the case of a taxpayer who enters 
into a written binding contract before No-
vember 2, 2017, to close on the purchase of 
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a principal residence before January 1, 
2018, and who purchases such residence be-
fore April 1, 2018, subparagraphs (A) and 
(B) shall be applied by substituting ‘April 
1, 2018’ for ‘November 2, 2017’.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 108(h)(2) is by striking ‘‘for 
‘$1,000,000 ($500,000’ in clause (ii) thereof’’ and 
inserting ‘‘for ‘$500,000 ($250,000’ in paragraph 
(2)(A), and ‘$1,000,000’ for ‘$500,000’ in para-
graph (2)(B), thereof’’. 
(B) Section 163(h) is amended by striking 
subparagraphs (E) and (F) in paragraph (4). 
(b) TAXPAYERS LIMITED
TO 1 QUALIFIED RESI-
DENCE.—Section 163(h)(4)(A)(i) is amended to read as fol-
lows: 
‘‘(i) IN GENERAL.—The term ‘qualified 
residence’ means the principal residence 
(within the meaning of section 121) of the 
taxpayer.’’. 
(c) EFFECTIVE DATES.— 
(1) IN
GENERAL.—The amendments made by 
this section shall apply to interest paid or accrued in 
taxable years beginning after December 31, 2017, 
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108 
with respect to indebtedness incurred before, on, or 
after such date. 
(2) TREATMENT OF GRANDFATHERED INDEBTED-
NESS.—For application of the amendments made by 
this section to grandfathered indebtedness, see para-
graph (3)(C) of section 163(h) of the Internal Revenue 
Code of 1986, as amended by this section. 
SEC. 1303. REPEAL OF DEDUCTION FOR CERTAIN TAXES 
NOT PAID OR ACCRUED IN A TRADE OR BUSI-
NESS. 
(a) IN GENERAL.—Section 164(b)(5) is amended to 
read as follows: 
‘‘(5) LIMITATION IN CASE OF INDIVIDUALS.—In 
the case of a taxpayer other than a corporation— 
‘‘(A) foreign real property taxes (other than 
taxes which are paid or accrued in carrying on 
a trade or business or an activity described in 
section 212) shall not be taken into account 
under subsection (a)(1), 
‘‘(B) the aggregate amount of taxes (other 
than taxes which are paid or accrued in car-
rying on a trade or business or an activity de-
scribed in section 212) taken into account under 
subsection (a)(1) for any taxable year shall not 
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exceed $10,000 ($5,000 in the case of a married 
individual filing a separate return), 
‘‘(C) subsection (a)(2) shall only apply to 
taxes which are paid or accrued in carrying on 
a trade or business or an activity described in 
section 212, and 
‘‘(D) subsection (a)(3) shall not apply to 
State and local taxes.’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1304. REPEAL OF DEDUCTION FOR PERSONAL CAS-
UALTY LOSSES. 
(a) IN GENERAL.—Section 165(c) is amended by in-
serting ‘‘and’’ at the end of paragraph (1), by striking ‘‘; 
and’’ at the end of paragraph (2) and inserting a period, 
and by striking paragraph (3). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 165(h) is amended to read as follows: 
‘‘(h) SPECIAL RULE WHERE PERSONAL CASUALTY 
GAINS EXCEED PERSONAL CASUALTY LOSSES.— 
‘‘(1) IN
GENERAL.—If the personal casualty 
gains for any taxable year exceed the personal cas-
ualty losses for such taxable year— 
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‘‘(A) all such gains shall be treated as gains 
from sales or exchanges of capital assets, and 
‘‘(B) all such losses shall be treated as losses 
from sales or exchanges of capital assets. 
‘‘(2) DEFINITIONS OF PERSONAL CASUALTY GAIN 
AND
PERSONAL
CASUALTY
LOSS.—For purposes of 
this subsection— 
‘‘(A) PERSONAL CASUALTY LOSS.—The term 
‘personal casualty loss’ means any loss of prop-
erty not connected with a trade or business or a 
transaction entered into for profit, if such loss 
arises from fire, storm, shipwreck, or other cas-
ualty, or from theft. 
‘‘(B) PERSONAL CASUALTY GAIN.—The term 
‘personal casualty gain’ means the recognized 
gain from any involuntary conversion of prop-
erty which is described in subparagraph (A) 
arising from fire, storm, shipwreck, or other cas-
ualty, or from theft.’’. 
(2) Section 165 is amended by striking sub-
section (k). 
(3)(A) Section 165(l)(1) is amended by striking 
‘‘a loss described in subsection (c)(3)’’ and inserting 
‘‘an ordinary loss described in subsection (c)(2)’’. 
(B) Section 165(l) is amended— 
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(i) by striking paragraph (5), 
(ii) by redesignating paragraphs (2), (3), 
and (4) as paragraphs (3), (4), and (5), respec-
tively, and 
(iii) by inserting after paragraph (1) the 
following new paragraph: 
‘‘(2) LIMITATIONS.— 
‘‘(A) DEPOSIT MAY NOT BE FEDERALLY IN-
SURED.—No election may be made under para-
graph (1) with respect to any loss on a deposit 
in a qualified financial institution if part or all 
of such deposit is insured under Federal law. 
‘‘(B) DOLLAR LIMITATION.—With respect to 
each financial institution, the aggregate amount 
of losses attributable to deposits in such financial 
institution to which an election under paragraph 
(1) may be made by the taxpayer for any taxable 
year shall not exceed $20,000 ($10,000 in the 
case of a separate return by a married indi-
vidual). The limitation of the preceding sentence 
shall be reduced by the amount of any insurance 
proceeds under any State law which can reason-
ably be expected to be received with respect to 
losses on deposits in such institution.’’. 
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(4) Section 172(b)(1)(E)(ii), prior to amendment 
under title III, is amended by striking subclause (I) 
and by redesignating subclauses (II) and (III) as sub-
clauses (I) and (II), respectively. 
(5) Section 172(d)(4)(C) is amended by striking 
‘‘paragraph (2) or (3) of section 165(c)’’ and insert-
ing ‘‘section 165(c)(2)’’. 
(6) Section 274(f) is amended by striking ‘‘CAS-
UALTY LOSSES,’’ in the heading thereof. 
(7) Section 280A(b) is amended by striking 
‘‘CASUALTY LOSSES,’’ in the heading thereof. 
(8) Section 873(b), as amended by the preceding 
provisions of this Act, is amended by striking para-
graph (1) and by redesignating paragraphs (2) and 
(3) as paragraphs (1) and (2), respectively. 
(9) Section 504(b) of the Disaster Tax Relief and 
Airport and Airway Extension Act of 2017 is amend-
ed by adding at the end the following new paragraph: 
‘‘(4) COORDINATION WITH TAX REFORM.—This 
subsection shall be applied without regard to the 
amendments made by section 1304 of the Tax Cuts 
and Jobs Act.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
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SEC. 1305. LIMITATION ON WAGERING LOSSES. 
(a) IN GENERAL.—Section 165(d) is amended by add-
ing at the end the following: ‘‘For purposes of the preceding 
sentence, the term ‘losses from wagering transactions’ in-
cludes any deduction otherwise allowable under this chapter 
incurred in carrying on any wagering transaction.’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1306. CHARITABLE CONTRIBUTIONS. 
(a) INCREASED LIMITATION
FOR CASH CONTRIBU-
TIONS.—Section 170(b)(1) is amended by redesignating 
subparagraph (G) as subparagraph (H) and by inserting 
after subparagraph (F) the following new subparagraph: 
‘‘(G) INCREASED
LIMITATION
FOR
CASH 
CONTRIBUTIONS.— 
‘‘(i) IN GENERAL.—In the case of any 
contribution of cash to an organization de-
scribed in subparagraph (A), the total 
amount of such contributions which may be 
taken into account under subsection (a) for 
any taxable year shall not exceed 60 percent 
of the taxpayer’s contribution base for such 
year. 
‘‘(ii) CARRYOVER.—If the aggregate 
amount of contributions described in clause 
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(i) exceeds the applicable limitation under 
clause (i), such excess shall be treated (in a 
manner consistent with the rules of sub-
section (d)(1)) as a charitable contribution 
to which clause (i) applies in each of the 5 
succeeding years in order of time. 
‘‘(iii) COORDINATION WITH SUBPARA-
GRAPHS (A) AND (B).— 
‘‘(I) IN GENERAL.—Contributions 
taken into account under this subpara-
graph shall not be taken into account 
under subparagraph (A). 
‘‘(II) LIMITATION
REDUCTION.— 
Subparagraphs (A) and (B) shall be 
applied by reducing (but not below 
zero) the aggregate contribution limita-
tion allowed for the taxable year under 
each such subparagraph by the aggre-
gate contributions allowed under this 
subparagraph for such taxable year.’’. 
(b) DENIAL OF DEDUCTION FOR COLLEGE ATHLETIC 
EVENT SEATING RIGHTS.—Section 170(l)(1) is amended to 
read as follows: 
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‘‘(1) IN GENERAL.—No deduction shall be al-
lowed under this section for any amount described in 
paragraph (2).’’. 
(c) CHARITABLE MILEAGE RATE ADJUSTED FOR IN-
FLATION.—Section 170(i) is amended by striking ‘‘shall be 
14 cents per mile’’ and inserting ‘‘shall be a rate which 
takes into account the variable cost of operating an auto-
mobile’’. 
(d) REPEAL OF SUBSTANTIATION EXCEPTION IN CASE 
OF
CONTRIBUTIONS
REPORTED
BY
DONEE.—Section 
170(f)(8) is amended by striking subparagraph (D) and by 
redesignating subparagraph (E) as subparagraph (D). 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to contributions made in taxable years 
beginning after December 31, 2017. 
SEC. 1307. REPEAL OF DEDUCTION FOR TAX PREPARATION 
EXPENSES. 
(a) IN GENERAL.—Section 212 is amended by adding 
‘‘or’’ at the end of paragraph (1), by striking ‘‘; or’’ at the 
end of paragraph (2) and inserting a period, and by strik-
ing paragraph (3). 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
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SEC. 1308. REPEAL OF MEDICAL EXPENSE DEDUCTION. 
(a) IN GENERAL.—Part VII of subchapter B is amend-
ed by striking by striking section 213 (and by striking the 
item relating to such section in the table of sections for such 
subpart). 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Section 105(f) is amended to read as fol-
lows: 
‘‘(f) MEDICAL CARE.—For purposes of this section— 
‘‘(1) IN
GENERAL.—The term ‘medical care’ 
means amounts paid— 
‘‘(A) for the diagnosis, cure, mitigation, 
treatment, or prevention of disease, or for the 
purpose of affecting any structure or function of 
the body, 
‘‘(B) for transportation primarily for and 
essential to medical care referred to in subpara-
graph (A), 
‘‘(C) for qualified long-term care services 
(as defined in section 7702B(c)), or 
‘‘(D) for insurance (including amounts paid 
as premiums under part B of title XVIII of the 
Social Security Act, relating to supplementary 
medical insurance for the aged) covering medical 
care referred to in subparagraphs (A) and (B) or 
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for any qualified long-term care insurance con-
tract (as defined in section 7702B(b)). 
In the case of a qualified long-term care insurance 
contract (as defined in section 7702B(b)), only eligi-
ble long-term care premiums (as defined in para-
graph (7)) shall be taken into account under subpara-
graph (D). 
‘‘(2) AMOUNTS
PAID
FOR
CERTAIN
LODGING 
AWAY FROM HOME TREATED AS PAID FOR MEDICAL 
CARE.—Amounts paid for lodging (not lavish or ex-
travagant under the circumstances) while away from 
home primarily for and essential to medical care re-
ferred to in paragraph (1)(A) shall be treated as 
amounts paid for medical care if— 
‘‘(A) the medical care referred to in para-
graph (1)(A) is provided by a physician in a li-
censed hospital (or in a medical care facility 
which is related to, or the equivalent of, a li-
censed hospital), and 
‘‘(B) there is no significant element of per-
sonal pleasure, recreation, or vacation in the 
travel away from home. 
The amount taken into account under the preceding 
sentence shall not exceed $50 for each night for each 
individual. 
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118 
‘‘(3) PHYSICIAN.—The term ‘physician’ has the 
meaning given to such term by section 1861(r) of the 
Social Security Act (42 U.S.C. 1395x(r)). 
‘‘(4) CONTRACTS COVERING OTHER THAN MED-
ICAL CARE.—In the case of an insurance contract 
under which amounts are payable for other than med-
ical care referred to in subparagraphs (A), (B) and 
(C) of paragraph (1)— 
‘‘(A) no amount shall be treated as paid for 
insurance to which paragraph (1)(D) applies 
unless the charge for such insurance is either sep-
arately stated in the contract, or furnished to the 
policyholder by the insurance company in a sep-
arate statement, 
‘‘(B) the amount taken into account as the 
amount paid for such insurance shall not exceed 
such charge, and 
‘‘(C) no amount shall be treated as paid for 
such insurance if the amount specified in the 
contract (or furnished to the policyholder by the 
insurance company in a separate statement) as 
the charge for such insurance is unreasonably 
large in relation to the total charges under the 
contract. 
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‘‘(5) CERTAIN PRE-PAID CONTRACTS.—Subject to 
the limitations of paragraph (4), premiums paid dur-
ing the taxable year by a taxpayer before he attains 
the age of 65 for insurance covering medical care 
(within the meaning of subparagraphs (A), (B), and 
(C) of paragraph (1)) for the taxpayer, his spouse, or 
a dependent after the taxpayer attains the age of 65 
shall be treated as expenses paid during the taxable 
year for insurance which constitutes medical care if 
premiums for such insurance are payable (on a level 
payment basis) under the contract for a period of 10 
years or more or until the year in which the taxpayer 
attains the age of 65 (but in no case for a period of 
less than 5 years). 
‘‘(6) COSMETIC SURGERY.— 
‘‘(A) IN GENERAL.—The term ‘medical care’ 
does not include cosmetic surgery or other simi-
lar procedures, unless the surgery or procedure is 
necessary to ameliorate a deformity arising 
from, or directly related to, a congenital abnor-
mality, a personal injury resulting from an acci-
dent or trauma, or disfiguring disease. 
‘‘(B) COSMETIC SURGERY DEFINED .—For 
purposes of this paragraph, the term ‘cosmetic 
surgery’ means any procedure which is directed 
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at improving the patient’s appearance and does 
not meaningfully promote the proper function of 
the body or prevent or treat illness or disease. 
‘‘(7) ELIGIBLE LONG-TERM CARE PREMIUMS.— 
‘‘(A) IN
GENERAL.—For purposes of this 
section, the term ‘eligible long-term care pre-
miums’ means the amount paid during a taxable 
year for any qualified long-term care insurance 
contract (as defined in section 7702B(b)) cov-
ering an individual, to the extent such amount 
does not exceed the limitation determined under 
the following table: 
‘‘In the case of an individual with an 
attained age before the close of the tax-
able year of: 
The limitation is: 
40 or less 
$200 
More than 40 but not more than 50 
$375 
More than 50 but not more than 60 
$750 
More than 60 but not more than 70 
$2,000 
More than 70 
$2,500 
‘‘(B) INDEXING.— 
‘‘(i) IN GENERAL.—In the case of any 
taxable year beginning after 1997, each dol-
lar amount in subparagraph (A) shall be 
increased by the medical care cost adjust-
ment of such amount for such calendar 
year. Any increase determined under the 
preceding sentence shall be rounded to the 
nearest multiple of $10. 
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121 
‘‘(ii) MEDICAL
CARE
COST
ADJUST-
MENT.—For purposes of clause (i), the med-
ical care cost adjustment for any calendar 
year is the adjustment prescribed by the 
Secretary, in consultation with the Sec-
retary of Health and Human Services, for 
purposes of such clause. To the extent that 
CPI (as defined section 1(c)), or any com-
ponent thereof, is taken into account in de-
termining such adjustment, such adjustment 
shall be determined by taking into account 
C-CPI-U (as so defined), or the cor-
responding component thereof, in lieu of 
such CPI (or component thereof), but only 
with respect to the portion of such adjust-
ment which relates to periods after Decem-
ber 31, 2017. 
‘‘(8) CERTAIN PAYMENTS TO RELATIVES TREAT-
ED AS NOT PAID FOR MEDICAL CARE.—An amount 
paid for a qualified long-term care service (as defined 
in section 7702B(c)) provided to an individual shall 
be treated as not paid for medical care if such service 
is provided— 
‘‘(A) by the spouse of the individual or by 
a relative (directly or through a partnership, 
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122 
corporation, or other entity) unless the service is 
provided by a licensed professional with respect 
to such service, or 
‘‘(B) by a corporation or partnership which 
is related (within the meaning of section 267(b) 
or 707(b)) to the individual. 
For purposes of this paragraph, the term ‘relative’ 
means an individual bearing a relationship to the in-
dividual which is described in any of subparagraphs 
(A) through (G) of section 7706(d)(2). This para-
graph shall not apply for purposes of subsection (b) 
with respect to reimbursements through insurance.’’. 
(B) Section 72(t)(2)(D)(i)(III) is amended by 
striking ‘‘section 213(d)(1)(D)’’ and inserting ‘‘section 
105(f)(1)(D)’’. 
(C) Section 104(a) is amended by striking ‘‘sec-
tion 213(d)(1)’’ in the last sentence and inserting 
‘‘section 105(f)(1)’’. 
(D) Section 105(b) is amended by striking ‘‘sec-
tion 213(d)’’ and inserting ‘‘section 105(f)’’. 
(E) Section 139D is amended by striking ‘‘sec-
tion 213’’ and inserting ‘‘section 223’’. 
(F) Section 162(l)(2) is amended by striking 
‘‘section 
213(d)(10)’’ 
and 
inserting 
‘‘section 
105(f)(7)’’. 
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(G) Section 220(d)(2)(A) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(H) Section 223(d)(2)(A) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(I) Section 419A(f)(2) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(J) Section 501(c)(26)(A) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(K) Section 2503(e) is amended by striking ‘‘sec-
tion 213(d)’’ and inserting ‘‘section 105(f)’’. 
(L) Section 4980B(c)(4)(B)(i)(I) is amended by 
striking ‘‘section 213(d)’’ and inserting ‘‘section 
105(f)’’. 
(M) Section 6041(f) is amended by striking ‘‘sec-
tion 213(d)’’ and inserting ‘‘section 105(f)’’. 
(N) Section 7702B(a)(2) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(O) Section 7702B(a)(4) is amended by striking 
‘‘section 
213(d)(1)(D)’’ 
and 
inserting 
‘‘section 
105(f)(1)(D)’’. 
(P) Section 7702B(d)(5) is amended by striking 
‘‘section 
213(d)(10)’’ 
and 
inserting 
‘‘section 
105(f)(7)’’. 
(Q) Section 9832(d)(3) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
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(2) Section 72(t)(2)(B) is amended to read as 
follows: 
‘‘(B) MEDICAL
EXPENSES.—Distributions 
made to an individual (other than distributions 
described in subparagraph (A), (C), or (D) to the 
extent such distributions do not exceed the excess 
of— 
‘‘(i) the expenses paid by the taxpayer 
during the taxable year, not compensated 
for by insurance or otherwise, for medical 
care (as defined in 105(f)) of the taxpayer, 
his spouse, or a dependent (as defined in 
section 7706, determined without regard to 
subsections (b)(1), (b)(2), and (d)(1)(B) 
thereof), over 
‘‘(ii) 10 percent of the taxpayer’s ad-
justed gross income.’’. 
(3) Section 162(l) is amended by striking para-
graph (3). 
(4) Section 402(l) is amended by striking para-
graph (7) and redesignating paragraph (8) as para-
graph (7). 
(5) Section 220(f) is amended by striking para-
graph (6). 
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(6) Section 223(f) is amended by striking para-
graph (6). 
(7) Section 7702B(e) is amended by striking 
paragraph (2). 
(8) Section 7706(f)(7), as redesignated by this 
Act, is amended by striking ‘‘sections 105(b), 
132(h)(2)(B), and 213(d)(5)’’ and inserting ‘‘sections 
105(b) and 132(h)(2)(B)’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAY-
MENTS. 
(a) IN GENERAL.—Part VII of subchapter B is amend-
ed by striking by striking section 215 (and by striking the 
item relating to such section in the table of sections for such 
subpart). 
(b) CONFORMING AMENDMENTS.— 
(1) CORRESPONDING
REPEAL
OF
PROVISIONS 
PROVIDING FOR INCLUSION OF ALIMONY IN GROSS IN-
COME.— 
(A) Subsection (a) of section 61 is amended 
by striking paragraph (8) and by redesignating 
paragraphs (9) through (15) as paragraphs (8) 
through (14), respectively. 
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(B) Part II of subchapter B of chapter 1 is 
amended by striking section 71 (and by striking 
the item relating to such section in the table of 
sections for such part). 
(C) Subpart F of part I of subchapter J of 
chapter 1 is amended by striking section 682 
(and by striking the item relating to such section 
in the table of sections for such subpart). 
(2) RELATED TO REPEAL OF SECTION 215.— 
(A) Section 62(a) is amended by striking 
paragraph (10). 
(B) Section 3402(m)(1) is amended by 
striking ‘‘(other than paragraph (10) thereof)’’. 
(3) RELATED TO REPEAL OF SECTION 71.— 
(A) Section 121(d)(3) is amended— 
(i) by striking ‘‘(as defined in section 
71(b)(2))’’ in subparagraph (B), and 
(ii) by adding at the end the following 
new subparagraph: 
‘‘(C) DIVORCE
OR
SEPARATION
INSTRU-
MENT.—For purposes of this paragraph, the 
term ‘divorce or separation instrument’ means— 
‘‘(i) a decree of divorce or separate 
maintenance or a written instrument inci-
dent to such a decree, 
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127 
‘‘(ii) a written separation agreement, 
or 
‘‘(iii) a decree (not described in clause 
(i)) requiring a spouse to make payments 
for the support or maintenance of the other 
spouse.’’. 
(B) Section 220(f)(7) is amended by strik-
ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 
inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 
(C) Section 223(f)(7) is amended by strik-
ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 
inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 
(D) Section 382(l)(3)(B)(iii) is amended by 
striking ‘‘section 71(b)(2)’’ and inserting ‘‘sec-
tion 121(d)(3)(C)’’. 
(E) Section 408(d)(6) is amended by strik-
ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 
inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to— 
(1) any divorce or separation instrument (as de-
fined in section 71(b)(2) of the Internal Revenue Code 
of 1986 as in effect before the date of the enactment 
of this Act) executed after December 31, 2017, and 
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128 
(2) any divorce or separation instrument (as so 
defined) executed on or before such date and modified 
after such date if the modification expressly provides 
that the amendments made by this section apply to 
such modification. 
SEC. 1310. REPEAL OF DEDUCTION FOR MOVING EXPENSES. 
(a) IN GENERAL.—Part VII of subchapter B is amend-
ed by striking by striking section 217 (and by striking the 
item relating to such section in the table of sections for such 
subpart). 
(b) RETENTION OF MOVING EXPENSES FOR MEMBERS 
OF ARMED FORCES.—Section 134(b) is amended by adding 
at the end the following new paragraph: 
‘‘(7) MOVING
EXPENSES.—The term ‘qualified 
military benefit’ includes any benefit described in sec-
tion 217(g) (as in effect before the enactment of the 
Tax Cuts And Jobs Act).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 62(a) is amended by striking para-
graph (15). 
(2) Section 274(m)(3) is amended by striking 
‘‘(other than section 217)’’. 
(3) Section 3121(a) is amended by striking 
paragraph (11). 
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129 
(4) Section 3306(b) is amended by striking para-
graph (9). 
(5) Section 3401(a) is amended by striking 
paragraph (15). 
(6) Section 7872(f) is amended by striking para-
graph (11). 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1311. TERMINATION OF DEDUCTION AND EXCLUSIONS 
FOR CONTRIBUTIONS TO MEDICAL SAVINGS 
ACCOUNTS. 
(a) TERMINATION OF INCOME TAX DEDUCTION.—Sec-
tion 220 is amended by adding at the end the following 
new subsection: 
‘‘(k) TERMINATION.—No deduction shall be allowed 
under subsection (a) with respect to any taxable year begin-
ning after December 31, 2017.’’. 
(b) TERMINATION
OF EXCLUSION
FOR EMPLOYER- 
PROVIDED CONTRIBUTIONS.—Section 106 is amended by 
striking subsection (b). 
(c) CONFORMING AMENDMENTS.— 
(1) Section 62(a) is amended by striking para-
graph (16). 
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130 
(2) Section 106(d) is amended by striking para-
graph (2), by redesignating paragraph (3) as para-
graph (6), and by inserting after paragraph (1) the 
following new paragraphs: 
‘‘(2) NO CONSTRUCTIVE RECEIPT.—No amount 
shall be included in the gross income of any employee 
solely because the employee may choose between the 
contributions referred to in paragraph (1) and em-
ployer contributions to another health plan of the em-
ployer. 
‘‘(3) SPECIAL
RULE
FOR
DEDUCTION
OF
EM-
PLOYER CONTRIBUTIONS.—Any employer contribution 
to a health savings account (as so defined), if other-
wise allowable as a deduction under this chapter, 
shall be allowed only for the taxable year in which 
paid. 
‘‘(4) EMPLOYER HEALTH SAVINGS ACCOUNT CON-
TRIBUTION REQUIRED TO BE SHOWN ON RETURN.— 
Every individual required to file a return under sec-
tion 6012 for the taxable year shall include on such 
return the aggregate amount contributed by employers 
to the health savings accounts (as so defined) of such 
individual or such individual’s spouse for such tax-
able year. 
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131 
‘‘(5) HEALTH SAVINGS ACCOUNT CONTRIBUTIONS 
NOT
PART
OF
COBRA
COVERAGE.—Paragraph (1) 
shall not apply for purposes of section 4980B.’’. 
(3) Section 223(b)(4) is amended by striking 
subparagraph (A), by redesignating subparagraphs 
(B) and (C) as subparagraphs (A) and (B), respec-
tively, and by striking the second sentence thereof. 
(4) Section 223(b)(5) is amended by striking 
‘‘under paragraph (3))’’ and all that follows through 
‘‘shall be divided equally between them’’ and inserting 
the following: ‘‘under paragraph (3)) shall be divided 
equally between the spouses’’. 
(5) Section 223(c) is amended by striking para-
graph (5). 
(6) Section 3231(e) is amended by striking para-
graph (10). 
(7) Section 3306(b) is amended by striking para-
graph (17). 
(8) Section 3401(a) is amended by striking 
paragraph (21). 
(9) Chapter 43 is amended by striking section 
4980E (and by striking the item relating to such sec-
tion in the table of sections for such chapter). 
(10) Section 4980G is amended to read as fol-
lows: 
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132 
‘‘SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COM-
PARABLE HEALTH SAVINGS ACCOUNT CON-
TRIBUTIONS. 
‘‘(a) IN GENERAL.—In the case of an employer who 
makes a contribution to the health savings account of any 
employee during a calendar year, there is hereby imposed 
a tax on the failure of such employer to meet the require-
ments of subsection (d) for such calendar year. 
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) on any failure for any calendar 
year is the amount equal to 35 percent of the aggregate 
amount contributed by the employer to health savings ac-
counts of employees for taxable years of such employees end-
ing with or within such calendar year. 
‘‘(c) WAIVER BY SECRETARY.—In the case of a failure 
which is due to reasonable cause and not to willful neglect, 
the Secretary may waive part or all of the tax imposed by 
subsection (a) to the extent that the payment of such tax 
would be excessive relative to the failure involved. 
‘‘(d) EMPLOYER REQUIRED TO MAKE COMPARABLE 
HEALTH SAVINGS ACCOUNT CONTRIBUTIONS FOR ALL PAR-
TICIPATING EMPLOYEES.— 
‘‘(1) IN GENERAL.—An employer meets the re-
quirements of this subsection for any calendar year if 
the employer makes available comparable contribu-
tions to the health savings accounts of all comparable 
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133 
participating employees for each coverage period dur-
ing such calendar year. 
‘‘(2) COMPARABLE CONTRIBUTIONS.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘comparable contributions’ 
means contributions— 
‘‘(i) which are the same amount, or 
‘‘(ii) which are the same percentage of 
the annual deductible limit under the high 
deductible health plan covering the employ-
ees. 
‘‘(B) PART-YEAR EMPLOYEES.—In the case 
of an employee who is employed by the employer 
for only a portion of the calendar year, a con-
tribution to the health savings account of such 
employee shall be treated as comparable if it is 
an amount which bears the same ratio to the 
comparable amount (determined without regard 
to this subparagraph) as such portion bears to 
the entire calendar year. 
‘‘(3) 
COMPARABLE
PARTICIPATING
EMPLOY-
EES.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘comparable participating 
employees’ means all employees— 
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134 
‘‘(i) who are eligible individuals cov-
ered under any high deductible health plan 
of the employer, and 
‘‘(ii) who have the same category of 
coverage. 
‘‘(B) CATEGORIES OF COVERAGE.—For pur-
poses of subparagraph (B), the categories of cov-
erage are self-only and family coverage. 
‘‘(4) PART-TIME EMPLOYEES.— 
‘‘(A) IN GENERAL .—Paragraph (3) shall be 
applied separately with respect to part-time em-
ployees and other employees. 
‘‘(B) PART-TIME EMPLOYEE.—For purposes 
of subparagraph (A), the term ‘part-time em-
ployee’ means any employee who is customarily 
employed for fewer than 30 hours per week. 
‘‘(5) SPECIAL
RULE
FOR
NON-HIGHLY
COM-
PENSATED
EMPLOYEES.—For purposes of applying 
this section to a contribution to a health savings ac-
count of an employee who is not a highly com-
pensated employee (as defined in section 414(q)), 
highly compensated employees shall not be treated as 
comparable participating employees. 
‘‘(e) CONTROLLED GROUPS.—For purposes of this sec-
tion, all persons treated as a single employer under sub-
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135 
section (b), (c), (m), or (o) of section 414 shall be treated 
as 1 employer. 
‘‘(f) DEFINITIONS.—Terms used in this section which 
are also used in section 223 have the respective meanings 
given such terms in section 223. 
‘‘(g) REGULATIONS.—The Secretary shall issue regula-
tions to carry out the purposes of this section.’’. 
(11) Section 6051(a) is amended by striking 
paragraph (11). 
(12) Section 6051(a)(14)(A) is amended by strik-
ing ‘‘paragraphs (11) and (12)’’ and inserting ‘‘para-
graph (12)’’. 
(d) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1312. DENIAL OF DEDUCTION FOR EXPENSES ATTRIB-
UTABLE TO THE TRADE OR BUSINESS OF 
BEING AN EMPLOYEE. 
(a) IN GENERAL.—Part IX of subchapter B of chapter 
1 is amended by inserting after the item relating to section 
262 the following new item: 
‘‘SEC. 262A. EXPENSES ATTRIBUTABLE TO BEING AN EM-
PLOYEE. 
‘‘(a) IN GENERAL.—Except as otherwise provided in 
this section, no deduction shall be allowed with respect to 
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136 
any trade or business of the taxpayer which consists of the 
performance of services by the taxpayer as an employee. 
‘‘(b) EXCEPTION
FOR
ABOVE-THE-LINE
DEDUC-
TIONS.—Subsection (a) shall not apply to any deduction 
allowable (determined without regard to subsection (a)) in 
determining adjusted gross income.’’. 
(b) REPEAL OF CERTAIN ABOVE-THE-LINE TRADE AND 
BUSINESS DEDUCTIONS OF EMPLOYEES.— 
(1) IN GENERAL.—Section 62(a)(2) is amend-
ed— 
(A) by striking subparagraphs (B), (C), and 
(D), and 
(B) by redesignating subparagraph (E) as 
subparagraph (B). 
(2) CONFORMING AMENDMENTS.— 
(A) Section 62 is amended by striking sub-
sections (b) and (d) and by redesignating sub-
sections (c) and (e) as subsections (b) and (c), re-
spectively. 
(B) Section 62(a)(20) is amended by strik-
ing ‘‘subsection (e)’’ and inserting ‘‘subsection 
(c)’’. 
(c) CONTINUED EXCLUSION OF WORKING CONDITION 
FRINGE BENEFITS.—Section 132(d) is amended by insert-
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137 
ing ‘‘(determined without regard to section 262A)’’ after 
‘‘section 162’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
Subtitle E—Simplification and Re-
form of Exclusions and Taxable 
Compensation 
SEC. 1401. LIMITATION ON EXCLUSION FOR EMPLOYER- 
PROVIDED HOUSING. 
(a) IN GENERAL.—Section 119 is amended by adding 
at the end the following new subsection: 
‘‘(e) LIMITATION ON EXCLUSION OF LODGING.— 
‘‘(1) IN GENERAL.—The aggregate amount ex-
cluded from gross income of the taxpayer under sub-
sections (a) and (d) with respect to lodging for any 
taxable year shall not exceed $50,000 (half such 
amount in the case of a married individual filing a 
separate return). 
‘‘(2) LIMITATION TO 1 HOME.—Subsections (a) 
and (d) (separately and in combination) shall not 
apply with respect to more than 1 residence of the 
taxpayer at any given time. In the case of a joint re-
turn, the preceding sentence shall apply separately to 
each spouse for any period during which each spouse 
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138 
resides separate from the other spouse in a residence 
which is provided in connection with the employment 
of each spouse, respectively. 
‘‘(3) LIMITATION
FOR
HIGHLY
COMPENSATED 
EMPLOYEES.— 
‘‘(A) REDUCED
FOR
EXCESS
COMPENSA-
TION.—In the case of an individual whose com-
pensation for the taxable year exceeds the 
amount in effect under section 414(q)(1)(B)(i) 
for the calendar in which such taxable year be-
gins, the $50,000 amount under paragraph (1) 
shall be reduced (but not below zero) by an 
amount equal to 50 percent of such excess. For 
purposes of the preceding sentence, the term 
‘compensation’ means wages (as defined in sec-
tion 3121(a) (without regard to the contribution 
and 
benefit 
base 
limitation 
in 
section 
3121(a)(1)). 
‘‘(B) EXCLUSION
DENIED
FOR
5-PERCENT 
OWNERS.—In the case of an individual who is a 
5-percent 
owner 
(as 
defined 
in 
section 
416(i)(1)(B)(i)) of the employer at any time 
during the taxable year, the amount under para-
graph (1) shall be zero.’’. 
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139 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRIN-
CIPAL RESIDENCE. 
(a) REQUIREMENT THAT RESIDENCE BE PRINCIPAL 
RESIDENCE FOR 5 YEARS DURING 8-YEAR PERIOD.—Sub-
section (a) of section 121 is amended— 
(1) by striking ‘‘5-year period’’ and inserting 
‘‘8-year period’’, and 
(2) by striking ‘‘2 years’’ and inserting ‘‘5 
years’’. 
(b) APPLICATION TO ONLY 1 SALE OR EXCHANGE 
EVERY 5 YEARS.—Paragraph (3) of section 121(b) is 
amended to read as follows: 
‘‘(3) APPLICATION
TO
ONLY
SALE
OR
EX-
CHANGE EVERY 5 YEARS.—Subsection (a) shall not 
apply to any sale or exchange by the taxpayer if, dur-
ing the 5-year period ending on the date of such sale 
or exchange, there was any other sale or exchange by 
the taxpayer to which subsection (a) applied.’’. 
(c) PHASEOUT
BASED
ON
MODIFIED
ADJUSTED 
GROSS INCOME.—Section 121 is amended by adding at the 
end the following new subsection: 
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140 
‘‘(h) PHASEOUT BASED
ON MODIFIED ADJUSTED 
GROSS INCOME.— 
‘‘(1) IN GENERAL.—If the average modified ad-
justed gross income of the taxpayer for the taxable 
year and the 2 preceding taxable years exceeds 
$250,000 (twice such amount in the case of a joint re-
turn), the amount which would (but for this sub-
section) be excluded from gross income under sub-
section (a) for such taxable year shall be reduced (but 
not below zero) by the amount of such excess. 
‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—For 
purposes of this subsection, the term ‘modified ad-
justed gross income’ means, with respect to any tax-
able year, adjusted gross income determined after ap-
plication of this section (but without regard to sub-
section (b)(1) and this subsection). 
‘‘(3) SPECIAL RULE FOR JOINT RETURNS.—In 
the case of a joint return, the average modified ad-
justed gross income of the taxpayer shall be deter-
mined without regard to any taxable year with re-
spect to which the taxpayer did not file a joint re-
turn.’’. 
(d) CONFORMING AMENDMENTS.— 
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141 
(1) The following provisions of section 121 are 
each amended by striking ‘‘5-year period’’ each place 
it appears therein and inserting ‘‘8-year period’’: 
(A) Subsection (b)(5)(C)(ii)(I). 
(B) Subsection (c)(1)(B)(i)(I). 
(C) Subsection (d)(7)(B). 
(D) Subparagraphs (A) and (B) of sub-
section (d)(9). 
(E) Subsection (d)(10). 
(F) Subsection (d)(12)(A). 
(2) Section 121(c)(1)(B)(ii) is amended by strik-
ing ‘‘2 years’’ and inserting ‘‘5 years’’: 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to sales and exchanges after December 
31, 2017. 
SEC. 1403. REPEAL OF EXCLUSION, ETC., FOR EMPLOYEE 
ACHIEVEMENT AWARDS. 
(a) IN GENERAL.—Section 74 is amended by striking 
subsection (c). 
(b) REPEAL OF LIMITATION ON DEDUCTION.—Section 
274 is amended by striking subsection (j). 
(c) CONFORMING AMENDMENTS.— 
(1) Section 102(c)(2) is amended by striking the 
first sentence. 
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142 
(2) Section 414(n)(3)(C) is amended by striking 
‘‘274(j),’’. 
(3) Section 414(t)(2) is amended by striking 
‘‘274(j),’’. 
(4) Section 3121(a)(20) is amended by striking 
‘‘74(c)’’. 
(5) Section 3231(e)(5) is amended by striking 
‘‘74(c),’’. 
(6) Section 3306(b)(16) is amended by striking 
‘‘74(c),’’. 
(7) Section 3401(a)(19) is amended by striking 
‘‘74(c),’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1404. SUNSET OF EXCLUSION FOR DEPENDENT CARE 
ASSISTANCE PROGRAMS. 
(a) IN GENERAL.—Section 129 is amended by adding 
at the end the following new subsection: 
‘‘(f) TERMINATION.—Subsection (a) shall not apply to 
taxable years beginning after December 31, 2022.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall take effect on the date of the enactment of this 
Act. 
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143 
SEC. 1405. REPEAL OF EXCLUSION FOR QUALIFIED MOVING 
EXPENSE REIMBURSEMENT. 
(a) IN GENERAL.—Section 132(a) is amended by strik-
ing paragraph (6). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 82 is amended by striking ‘‘Except 
as provided in section 132(a)(6), there’’ and inserting 
‘‘There’’. 
(2) Section 132 is amended by striking sub-
section (g). 
(3) Section 132(l) is amended by striking by 
striking ‘‘subsections (e) and (g)’’ and inserting ‘‘sub-
section (e)’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1406. REPEAL OF EXCLUSION FOR ADOPTION ASSIST-
ANCE PROGRAMS. 
(a) IN GENERAL.—Part III of subchapter B of chapter 
1 is amended by striking section 137 (and by striking the 
item relating to such section in the table of sections for such 
part). 
(b) CONFORMING AMENDMENTS.— 
(1) Sections 414(n)(3)(C), 414(t)(2), 74(d)(2)(B), 
86(b)(2)(A), 219(g)(3)(A)(ii) are each amended by 
striking ‘‘, 137’’. 
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144 
(2) Section 1016(a), as amended by the pre-
ceding provision of this Act, is amended by striking 
paragraph (26). 
(3) Section 6039D(d)(1), as amended by the pre-
ceding provisions of this Act, is amended— 
(A) by striking ‘‘, or 137’’, and 
(B) by inserting ‘‘or’’ before ‘‘125’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
Subtitle F—Simplification and Re-
form of Savings, Pensions, Re-
tirement 
SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE-
CHARACTERIZATION 
OF 
ROTH 
IRA 
CON-
TRIBUTIONS AS TRADITIONAL IRA CONTRIBU-
TIONS. 
(a) IN GENERAL.—Section 408A(d) is amended by 
striking paragraph (6) and by redesignating paragraph (7) 
as paragraph (6). 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
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145 
SEC. 1502. REDUCTION IN MINIMUM AGE FOR ALLOWABLE 
IN-SERVICE DISTRIBUTIONS. 
(a) IN GENERAL.—Section 401(a)(36) is amended by 
striking ‘‘age 62’’ and inserting ‘‘age 59 1⁄2’’. 
(b) APPLICATION TO GOVERNMENTAL SECTION 457(b) 
PLANS.—Clause (i) of section 457(d)(1)(A) is amended by 
inserting ‘‘(in the case of a plan maintained by an em-
ployer described in subsection (e)(1)(A), age 59 1⁄2)’’ before 
the comma at the end. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to plan years beginning after December 
31, 2017. 
SEC. 1503. MODIFICATION OF RULES GOVERNING HARD-
SHIP DISTRIBUTIONS. 
(a) IN GENERAL.—Not later than 1 year after the date 
of the enactment of this Act, the Secretary of the Treasury 
shall modify Treasury Regulation section 1.401(k)– 
1(d)(3)(iv)(E) to— 
(1) delete the 6-month prohibition on contribu-
tions imposed by paragraph (2) thereof, and 
(2) make any other modifications necessary to 
carry out the purposes of section 401(k)(2)(B)(i)(IV) 
of the Internal Revenue Code of 1986. 
(b) EFFECTIVE DATE.—The revised regulations under 
this section shall apply to plan years beginning after De-
cember 31, 2017. 
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146 
SEC. 1504. MODIFICATION OF RULES RELATING TO HARD-
SHIP WITHDRAWALS FROM CASH OR DE-
FERRED ARRANGEMENTS. 
(a) IN GENERAL.—Section 401(k) is amended by add-
ing at the end the following: 
‘‘(14) SPECIAL RULES RELATING TO HARDSHIP 
WITHDRAWALS.—For 
purposes 
of 
paragraph 
(2)(B)(i)(IV)— 
‘‘(A) AMOUNTS
WHICH
MAY
BE
WITH-
DRAWN.—The following amounts may be distrib-
uted upon hardship of the employee: 
‘‘(i) Contributions to a profit-sharing 
or stock bonus plan to which section 
402(e)(3) applies. 
‘‘(ii) Qualified nonelective contribu-
tions (as defined in subsection (m)(4)(C)). 
‘‘(iii) Qualified matching contributions 
described in paragraph (3)(D)(ii)(I). 
‘‘(iv) Earnings on any contributions 
described in clause (i), (ii), or (iii). 
‘‘(B) NO
REQUIREMENT
TO
TAKE
AVAIL-
ABLE LOAN.—A distribution shall not be treated 
as failing to be made upon the hardship of an 
employee solely because the employee does not 
take any available loan under the plan.″.’’. 
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147 
(b) 
CONFORMING
AMENDMENT.—Section 
401(k)(2)(B)(i)(IV) is amended to read as follows: 
‘‘(IV) subject to the provisions of 
paragraph (14), upon hardship of the 
employee, or″.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to plan years beginning after December 
31, 2017. 
SEC. 1505. EXTENDED ROLLOVER PERIOD FOR THE ROLL-
OVER OF PLAN LOAN OFFSET AMOUNTS IN 
CERTAIN CASES. 
(a) IN GENERAL.—Paragraph (3) of section 402(c) is 
amended by adding at the end the following new subpara-
graph: 
‘‘(C) ROLLOVER
OF
CERTAIN
PLAN
LOAN 
OFFSET AMOUNTS.— 
‘‘(i) IN GENERAL.—In the case of a 
qualified plan loan offset amount, para-
graph (1) shall not apply to any transfer of 
such amount made after the due date (in-
cluding extensions) for filing the return of 
tax for the taxable year in which such 
amount is treated as distributed from a 
qualified employer plan. 
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148 
‘‘(ii) QUALIFIED
PLAN
LOAN
OFFSET 
AMOUNT.—For purposes of this subpara-
graph, the term ‘qualified plan loan offset 
amount’ means a plan loan offset amount 
which is treated as distributed from a 
qualified employer plan to a participant or 
beneficiary solely by reason of— 
‘‘(I) the termination of the quali-
fied employer plan, or 
‘‘(II) the failure to meet the re-
payment terms of the loan from such 
plan because of the separation from 
service of the participant (whether due 
to layoff, cessation of business, termi-
nation of employment, or otherwise). 
‘‘(iii) PLAN LOAN OFFSET AMOUNT.— 
For purposes of clause (ii), the term ‘plan 
loan offset amount’ means the amount by 
which the participant’s accrued benefit 
under the plan is reduced in order to repay 
a loan from the plan. 
‘‘(iv) LIMITATION.—This subparagraph 
shall not apply to any plan loan offset 
amount unless such plan loan offset amount 
relates to a loan to which section 72(p)(1) 
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149 
does not apply by reason of section 
72(p)(2). 
‘‘(v) QUALIFIED
EMPLOYER
PLAN.— 
For purposes of this subsection, the term 
‘qualified employer plan’ has the meaning 
given such term by section 72(p)(4).’’. 
(b) CONFORMING AMENDMENT.—Subparagraph (A) of 
section 402(c)(3) is amended by striking ‘‘subparagraph 
(B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 1506. MODIFICATION OF NONDISCRIMINATION RULES 
TO PROTECT OLDER, LONGER SERVICE PAR-
TICIPANTS. 
(a) IN GENERAL.—Section 401 is amended— 
(1) by redesignating subsection (o) as subsection 
(p), and 
(2) by inserting after subsection (n) the following 
new subsection: 
‘‘(o) SPECIAL RULES FOR APPLYING NONDISCRIMINA-
TION RULES TO PROTECT OLDER, LONGER SERVICE AND 
GRANDFATHERED PARTICIPANTS.— 
‘‘(1) TESTING OF DEFINED BENEFIT PLANS WITH 
CLOSED CLASSES OF PARTICIPANTS.— 
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150 
‘‘(A) BENEFITS, RIGHTS, OR
FEATURES 
PROVIDED TO CLOSED CLASSES.—A defined ben-
efit plan which provides benefits, rights, or fea-
tures to a closed class of participants shall not 
fail to satisfy the requirements of subsection 
(a)(4) by reason of the composition of such closed 
class or the benefits, rights, or features provided 
to such closed class, if— 
‘‘(i) for the plan year as of which the 
class closes and the 2 succeeding plan years, 
such benefits, rights, and features satisfy the 
requirements of subsection (a)(4) (without 
regard to this subparagraph but taking into 
account the rules of subparagraph (I)), 
‘‘(ii) after the date as of which the 
class was closed, any plan amendment 
which modifies the closed class or the bene-
fits, rights, and features provided to such 
closed class does not discriminate signifi-
cantly in favor of highly compensated em-
ployees, and 
‘‘(iii) the class was closed before April 
5, 2017, or the plan is described in sub-
paragraph (C). 
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151 
‘‘(B) AGGREGATE TESTING WITH DEFINED 
CONTRIBUTION PLANS PERMITTED ON A BENE-
FITS BASIS.— 
‘‘(i) IN GENERAL.—For purposes of de-
termining compliance with subsection (a)(4) 
and section 410(b), a defined benefit plan 
described in clause (iii) may be aggregated 
and tested on a benefits basis with 1 or 
more defined contribution plans, including 
with the portion of 1 or more defined con-
tribution plans which— 
‘‘(I) provides matching contribu-
tions 
(as 
defined 
in 
subsection 
(m)(4)(A)), 
‘‘(II) provides annuity contracts 
described in section 403(b) which are 
purchased with matching contributions 
or nonelective contributions, or 
‘‘(III) consists of an employee 
stock ownership plan (within the 
meaning of section 4975(e)(7)) or a tax 
credit employee stock ownership plan 
(within the meaning of section 409(a)). 
‘‘(ii) SPECIAL RULES FOR MATCHING 
CONTRIBUTIONS.—For purposes of clause 
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152 
(i), if a defined benefit plan is aggregated 
with a portion of a defined contribution 
plan providing matching contributions— 
‘‘(I) such defined benefit plan 
must also be aggregated with any por-
tion of such defined contribution plan 
which provides elective deferrals de-
scribed in subparagraph (A) or (C) of 
section 402(g)(3), and 
‘‘(II) such matching contributions 
shall be treated in the same manner as 
nonelective contributions, including for 
purposes of applying the rules of sub-
section (l). 
‘‘(iii) PLANS
DESCRIBED.—A defined 
benefit plan is described in this clause if— 
‘‘(I) the plan provides benefits to 
a closed class of participants, 
‘‘(II) for the plan year as of which 
the class closes and the 2 succeeding 
plan years, the plan satisfies the re-
quirements of section 410(b) and sub-
section (a)(4) (without regard to this 
subparagraph but taking into account 
the rules of subparagraph (I)), 
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153 
‘‘(III) after the date as of which 
the class was closed, any plan amend-
ment which modifies the closed class or 
the benefits provided to such closed 
class does not discriminate signifi-
cantly in favor of highly compensated 
employees, and 
‘‘(IV) the class was closed before 
April 5, 2017, or the plan is described 
in subparagraph (C). 
‘‘(C) PLANS
DESCRIBED.—A plan is de-
scribed in this subparagraph if, taking into ac-
count any predecessor plan— 
‘‘(i) such plan has been in effect for at 
least 5 years as of the date the class is 
closed, and 
‘‘(ii) during the 5-year period pre-
ceding the date the class is closed, there has 
not been a substantial increase in the cov-
erage or value of the benefits, rights, or fea-
tures described in subparagraph (A) or in 
the coverage or benefits under the plan de-
scribed in subparagraph (B)(iii) (whichever 
is applicable). 
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154 
‘‘(D) DETERMINATION OF SUBSTANTIAL IN-
CREASE
FOR
BENEFITS, 
RIGHTS, 
AND
FEA-
TURES.—In applying subparagraph (C)(ii) for 
purposes of subparagraph (A)(iii), a plan shall 
be treated as having had a substantial increase 
in coverage or value of the benefits, rights, or fea-
tures described in subparagraph (A) during the 
applicable 5-year period only if, during such pe-
riod— 
‘‘(i) the number of participants covered 
by such benefits, rights, or features on the 
date such period ends is more than 50 per-
cent greater than the number of such par-
ticipants on the first day of the plan year 
in which such period began, or 
‘‘(ii) such benefits, rights, and features 
have been modified by 1 or more plan 
amendments in such a way that, as of the 
date the class is closed, the value of such 
benefits, rights, and features to the closed 
class as a whole is substantially greater 
than the value as of the first day of such 5- 
year period, solely as a result of such 
amendments. 
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155 
‘‘(E) DETERMINATION OF SUBSTANTIAL IN-
CREASE FOR AGGREGATE TESTING ON BENEFITS 
BASIS.—In applying subparagraph (C)(ii) for 
purposes of subparagraph (B)(iii)(IV), a plan 
shall be treated as having had a substantial in-
crease in coverage or benefits during the applica-
ble 5-year period only if, during such period— 
‘‘(i) the number of participants benefit-
ting under the plan on the date such period 
ends is more than 50 percent greater than 
the number of such participants on the first 
day of the plan year in which such period 
began, or 
‘‘(ii) the average benefit provided to 
such participants on the date such period 
ends is more than 50 percent greater than 
the average benefit provided on the first day 
of the plan year in which such period 
began. 
‘‘(F) 
CERTAIN
EMPLOYEES
DIS-
REGARDED.—For purposes of subparagraphs (D) 
and (E), any increase in coverage or value or in 
coverage or benefits, whichever is applicable, 
which is attributable to such coverage and value 
or coverage and benefits provided to employees— 
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156 
‘‘(i) who became participants as a re-
sult of a merger, acquisition, or similar 
event which occurred during the 7-year pe-
riod preceding the date the class is closed, or 
‘‘(ii) who became participants by rea-
son of a merger of the plan with another 
plan which had been in effect for at least 5 
years as of the date of the merger, 
shall be disregarded, except that clause (ii) shall 
apply for purposes of subparagraph (D) only if, 
under the merger, the benefits, rights, or features 
under 1 plan are conformed to the benefits, 
rights, or features of the other plan prospectively. 
‘‘(G) RULES RELATING TO AVERAGE BEN-
EFIT.—For purposes of subparagraph (E)— 
‘‘(i) the average benefit provided to 
participants under the plan will be treated 
as having remained the same between the 2 
dates described in subparagraph (E)(ii) if 
the benefit formula applicable to such par-
ticipants has not changed between such 
dates, and 
‘‘(ii) if the benefit formula applicable 
to 1 or more participants under the plan 
has changed between such 2 dates, then the 
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157 
average benefit under the plan shall be con-
sidered to have increased by more than 50 
percent only if— 
‘‘(I) the total amount determined 
under section 430(b)(1)(A)(i) for all 
participants benefitting under the plan 
for the plan year in which the 5-year 
period described in subparagraph (E) 
ends, exceeds 
‘‘(II) the total amount determined 
under section 430(b)(1)(A)(i) for all 
such participants for such plan year, 
by using the benefit formula in effect 
for each such participant for the first 
plan year in such 5-year period, by 
more than 50 percent. 
In the case of a CSEC plan (as defined in 
section 414(y)), the normal cost of the plan 
(as determined under section 433(j)(1)(B)) 
shall be used in lieu of the amount deter-
mined under section 430(b)(1)(A)(i). 
‘‘(H) TREATMENT
AS
SINGLE
PLAN.—For 
purposes of subparagraphs (E) and (G), a plan 
described in section 413(c) shall be treated as a 
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158 
single plan rather than as separate plans main-
tained by each participating employer. 
‘‘(I) SPECIAL RULES.—For purposes of sub-
paragraphs (A)(i) and (B)(iii)(II), the following 
rules shall apply: 
‘‘(i) In applying section 410(b)(6)(C), 
the closing of the class of participants shall 
not be treated as a significant change in 
coverage under section 410(b)(6)(C)(i)(II). 
‘‘(ii) 2 or more plans shall not fail to 
be eligible to be aggregated and treated as 
a single plan solely by reason of having dif-
ferent plan years. 
‘‘(iii) Changes in the employee popu-
lation shall be disregarded to the extent at-
tributable to individuals who become em-
ployees or cease to be employees, after the 
date the class is closed, by reason of a merg-
er, acquisition, divestiture, or similar event. 
‘‘(iv) Aggregation and all other testing 
methodologies otherwise applicable under 
subsection (a)(4) and section 410(b) may be 
taken into account. 
The rule of clause (ii) shall also apply for pur-
poses of determining whether plans to which sub-
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159 
paragraph (B)(i) applies may be aggregated and 
treated as 1 plan for purposes of determining 
whether such plans meet the requirements of sub-
section (a)(4) and section 410(b). 
‘‘(J) SPUN-OFF
PLANS.—For purposes of 
this paragraph, if a portion of a defined benefit 
plan described in subparagraph (A) or (B)(iii) 
is spun off to another employer and the spun-off 
plan continues to satisfy the requirements of— 
‘‘(i) 
subparagraph 
(A)(i) 
or 
(B)(iii)(II), whichever is applicable, if the 
original plan was still within the 3-year pe-
riod described in such subparagraph at the 
time of the spin off, and 
‘‘(ii) 
subparagraph 
(A)(ii) 
or 
(B)(iii)(III), whichever is applicable, 
the treatment under subparagraph (A) or (B) of 
the spun-off plan shall continue with respect to 
such other employer. 
‘‘(2) 
TESTING
OF
DEFINED
CONTRIBUTION 
PLANS.— 
‘‘(A) TESTING ON A BENEFITS BASIS.—A 
defined contribution plan shall be permitted to 
be tested on a benefits basis if— 
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160 
‘‘(i) such defined contribution plan 
provides make-whole contributions to a 
closed class of participants whose accruals 
under a defined benefit plan have been re-
duced or eliminated, 
‘‘(ii) for the plan year of the defined 
contribution plan as of which the class eli-
gible to receive such make-whole contribu-
tions closes and the 2 succeeding plan years, 
such closed class of participants satisfies the 
requirements of section 410(b)(2)(A)(i) (de-
termined by applying the rules of para-
graph (1)(I)), 
‘‘(iii) after the date as of which the 
class was closed, any plan amendment to 
the defined contribution plan which modi-
fies the closed class or the allocations, bene-
fits, rights, and features provided to such 
closed class does not discriminate signifi-
cantly in favor of highly compensated em-
ployees, and 
‘‘(iv) the class was closed before April 
5, 2017, or the defined benefit plan under 
clause (i) is described in paragraph (1)(C) 
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161 
(as applied for purposes of paragraph 
(1)(B)(iii)(IV)). 
‘‘(B) AGGREGATION WITH PLANS INCLUDING 
MATCHING CONTRIBUTIONS.— 
‘‘(i) IN GENERAL.—With respect to 1 
or more defined contribution plans de-
scribed in subparagraph (A), for purposes of 
determining compliance with subsection 
(a)(4) and section 410(b), the portion of 
such plans which provides make-whole con-
tributions or other nonelective contributions 
may be aggregated and tested on a benefits 
basis with the portion of 1 or more other de-
fined contribution plans which— 
‘‘(I) provides matching contribu-
tions 
(as 
defined 
in 
subsection 
(m)(4)(A)), 
‘‘(II) provides annuity contracts 
described in section 403(b) which are 
purchased with matching contributions 
or nonelective contributions, or 
‘‘(III) consists of an employee 
stock ownership plan (within the 
meaning of section 4975(e)(7)) or a tax 
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162 
credit employee stock ownership plan 
(within the meaning of section 409(a)). 
‘‘(ii) SPECIAL RULES FOR MATCHING 
CONTRIBUTIONS.—Rules similar to the rules 
of paragraph (1)(B)(ii) shall apply for pur-
poses of clause (i). 
‘‘(C) SPECIAL
RULES
FOR
TESTING
DE-
FINED
CONTRIBUTION
PLAN
FEATURES
PRO-
VIDING MATCHING CONTRIBUTIONS TO CERTAIN 
OLDER, LONGER SERVICE PARTICIPANTS.—In the 
case of a defined contribution plan which pro-
vides benefits, rights, or features to a closed class 
of participants whose accruals under a defined 
benefit plan have been reduced or eliminated, the 
plan shall not fail to satisfy the requirements of 
subsection (a)(4) solely by reason of the composi-
tion of the closed class or the benefits, rights, or 
features provided to such closed class if the de-
fined contribution plan and defined benefit plan 
otherwise meet the requirements of subparagraph 
(A) but for the fact that the make-whole con-
tributions under the defined contribution plan 
are made in whole or in part through matching 
contributions. 
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163 
‘‘(D) SPUN-OFF
PLANS.—For purposes of 
this paragraph, if a portion of a defined con-
tribution plan described in subparagraph (A) or 
(C) is spun off to another employer, the treat-
ment under subparagraph (A) or (C) of the 
spun-off plan shall continue with respect to the 
other employer if such plan continues to comply 
with the requirements of clauses (ii) (if the origi-
nal plan was still within the 3-year period de-
scribed in such clause at the time of the spin off) 
and (iii) of subparagraph (A), as determined for 
purposes of subparagraph (A) or (C), whichever 
is applicable. 
‘‘(3) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) MAKE-WHOLE
CONTRIBUTIONS.—Ex-
cept as otherwise provided in paragraph (2)(C), 
the term ‘make-whole contributions’ means non-
elective allocations for each employee in the class 
which are reasonably calculated, in a consistent 
manner, to replace some or all of the retirement 
benefits which the employee would have received 
under the defined benefit plan and any other 
plan or qualified cash or deferred arrangement 
under subsection (k)(2) if no change had been 
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164 
made to such defined benefit plan and such other 
plan or arrangement. For purposes of the pre-
ceding sentence, consistency shall not be required 
with respect to employees who were subject to dif-
ferent benefit formulas under the defined benefit 
plan. 
‘‘(B) REFERENCES
TO
CLOSED
CLASS
OF 
PARTICIPANTS.—References to a closed class of 
participants and similar references to a closed 
class shall include arrangements under which 1 
or more classes of participants are closed, except 
that 1 or more classes of participants closed on 
different dates shall not be aggregated for pur-
poses of determining the date any such class was 
closed. 
‘‘(C) HIGHLY COMPENSATED EMPLOYEE.— 
The term ‘highly compensated employee’ has the 
meaning given such term in section 414(q).″.’’. 
(b) PARTICIPATION REQUIREMENTS.—Paragraph (26) 
of section 401(a) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(I) PROTECTED PARTICIPANTS.— 
‘‘(i) IN
GENERAL.—A plan shall be 
deemed to satisfy the requirements of sub-
paragraph (A) if— 
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165 
‘‘(I) the plan is amended— 
‘‘(aa) to cease all benefit ac-
cruals, or 
‘‘(bb) to provide future ben-
efit accruals only to a closed class 
of participants, 
‘‘(II) the plan satisfies subpara-
graph (A) (without regard to this sub-
paragraph) as of the effective date of 
the amendment, and 
‘‘(III) the amendment was adopt-
ed before April 5, 2017, or the plan is 
described in clause (ii). 
‘‘(ii) PLANS
DESCRIBED.—A plan is 
described in this clause if the plan would be 
described in subsection (o)(1)(C), as applied 
for purposes of subsection (o)(1)(B)(iii)(IV) 
and by treating the effective date of the 
amendment as the date the class was closed 
for purposes of subsection (o)(1)(C). 
‘‘(iii) SPECIAL RULES.—For purposes 
of clause (i)(II), in applying section 
410(b)(6)(C), the amendments described in 
clause (i) shall not be treated as a signifi-
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166 
cant change in coverage under section 
410(b)(6)(C)(i)(II). 
‘‘(iv) SPUN-OFF PLANS.—For purposes 
of this subparagraph, if a portion of a plan 
described in clause (i) is spun off to another 
employer, the treatment under clause (i) of 
the spun-off plan shall continue with respect 
to the other employer.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
take effect on the date of the enactment of this Act, 
without regard to whether any plan modifications re-
ferred to in such amendments are adopted or effective 
before, on, or after such date of enactment. 
(2) SPECIAL RULES.— 
(A) ELECTION OF EARLIER APPLICATION.— 
At the election of the plan sponsor, the amend-
ments made by this section shall apply to plan 
years beginning after December 31, 2013. 
(B) CLOSED CLASSES OF PARTICIPANTS.— 
For 
purposes 
of 
paragraphs 
(1)(A)(iii), 
(1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) 
of the Internal Revenue Code of 1986 (as added 
by this section), a closed class of participants 
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167 
shall be treated as being closed before April 5, 
2017, if the plan sponsor’s intention to create 
such closed class is reflected in formal written 
documents and communicated to participants be-
fore such date. 
(C) 
CERTAIN
POST-ENACTMENT
PLAN 
AMENDMENTS.—A plan shall not be treated as 
failing to be eligible for the application of section 
401(o)(1)(A), 401(o)(1)(B)(iii), or 401(a)(26) of 
such Code (as added by this section) to such plan 
solely because in the case of— 
(i) such section 401(o)(1)(A), the plan 
was amended before the date of the enact-
ment of this Act to eliminate 1 or more ben-
efits, rights, or features, and is further 
amended after such date of enactment to 
provide such previously eliminated benefits, 
rights, or features to a closed class of par-
ticipants, or 
(ii) such section 401(o)(1)(B)(iii) or 
section 401(a)(26), the plan was amended 
before the date of the enactment of this Act 
to cease all benefit accruals, and is further 
amended after such date of enactment to 
provide benefit accruals to a closed class of 
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168 
participants. Any such section shall only 
apply if the plan otherwise meets the re-
quirements of such section and in applying 
such section, the date the class of partici-
pants is closed shall be the effective date of 
the later amendment. 
Subtitle G—Estate, Gift, and Gen-
eration-skipping Transfer Taxes 
SEC. 1601. INCREASE IN CREDIT AGAINST ESTATE, GIFT, 
AND GENERATION-SKIPPING TRANSFER TAX. 
(a) IN GENERAL.—Section 2010(c)(3) is amended by 
striking ‘‘$5,000,000’’ and inserting ‘‘$10,000,000’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to estates of decedents dying, generation- 
skipping transfers, and gifts made, after December 31, 
2017. 
SEC. 1602. REPEAL OF ESTATE AND GENERATION-SKIPPING 
TRANSFER TAXES. 
(a) ESTATE TAX REPEAL.— 
(1) IN GENERAL.—Subchapter C of chapter 11 is 
amended by adding at the end the following new sec-
tion: 
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‘‘SEC. 2210. TERMINATION. 
‘‘(a) IN GENERAL.—Except as provided in subsection 
(b), this chapter shall not apply to the estates of decedents 
dying after December 31, 2024. 
‘‘(b) CERTAIN DISTRIBUTIONS FROM QUALIFIED DO-
MESTIC TRUSTS.—In applying section 2056A with respect 
to the surviving spouse of a decedent dying on or before 
December 31, 2024— 
‘‘(1) section 2056A(b)(1)(A) shall not apply to 
distributions made after the 10-year period beginning 
on such date, and 
‘‘(2) section 2056A(b)(1)(B) shall not apply after 
such date.’’. 
(2) 
CONFORMING
AMENDMENTS.—Section 
1014(b) is amended— 
(A) in paragraph (6), by striking ‘‘was in-
cludible in determining’’ and all that follows 
through the end and inserting ‘‘was includible 
(or would have been includible without regard to 
section 2210) in determining the value of the de-
cedent’s gross estate under chapter 11 of subtitle 
B’’ , 
(B) in paragraph (9), by striking ‘‘required 
to be included’’ through ‘‘Code of 1939’’ and in-
serting ‘‘required to be included (or would have 
been required to be included without regard to 
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section 2210) in determining the value of the de-
cedent’s gross estate under chapter 11 of subtitle 
B’’, and 
(C) in paragraph (10), by striking ‘‘Prop-
erty includible in the gross estate’’ and inserting 
‘‘Property includible (or which would have been 
includible without regard to section 2210) in the 
gross estate’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subchapter C of chapter 11 is amended by 
adding at the end the following new item: 
‘‘Sec. 2210. Termination.’’. 
(b) GENERATION-SKIPPING TRANSFER TAX REPEAL.— 
(1) IN GENERAL.—Subchapter G of chapter 13 of 
subtitle B of such Code is amended by adding at the 
end the following new section: 
‘‘SEC. 2664. TERMINATION. 
‘‘This chapter shall not apply to generation-skipping 
transfers after December 31, 2024.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subchapter G of chapter 13 of such Code is 
amended by adding at the end the following new item: 
‘‘Sec. 2664. Termination.’’. 
(c) CONFORMING AMENDMENTS RELATED
TO GIFT 
TAX.— 
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171 
(1) COMPUTATION OF GIFT TAX.—Section 2502 
is amended by adding at the end the following new 
subsection: 
‘‘(d) GIFTS MADE AFTER 2024.— 
‘‘(1) IN GENERAL.—In the case of a gift made 
after December 31, 2024, subsection (a) shall be ap-
plied by substituting ‘subsection (d)(2)’ for ‘section 
2001(c)’ and ‘such subsection’ for ‘such section’. 
‘‘(2) RATE SCHEDULE.— 
‘‘If the amount with respect to which the 
tentative tax to be computed is:.
The tentative tax 
is: 
Not over $10,000 .................................................................
18% of such amount. 
Over $10,000 but not over $20,000 ...................................
$1,800, plus 20% of 
the excess over 
$10,000. 
Over $20,000 but not over $40,000 ...................................
$3,800, plus 22% of 
the excess over 
$20,000. 
Over $40,000 but not over $60,000 ...................................
$8,200, plus 24% of 
the excess over 
$40,000. 
Over $60,000 but not over $80,000 ...................................
$13,000, plus 26% of 
the excess over 
$60,000. 
Over $80,000 but not over $100,000 .................................
$18,200, plus 28% of 
the excess over 
$80,000. 
Over $100,000 but not over $150,000 ...............................
$23,800, plus 30% of 
the excess over 
$100,000. 
Over $150,000 but not over $250,000 ...............................
$38,800, plus 32% of 
the excess of 
$150,000. 
Over $250,000 but not over $500,000 ...............................
$70,800, plus 34% of 
the excess over 
$250,000. 
Over $500,000 .....................................................................
$155,800, plus 35% of 
the excess of 
$500,000.’’. 
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(2) LIFETIME GIFT EXEMPTION.—Section 2505 
is amended by adding at the end the following new 
subsection: 
‘‘(d) GIFTS MADE AFTER 2024.— 
‘‘(1) IN GENERAL.—In the case of a gift made 
after December 31, 2024, subsection (a)(1) shall be 
applied by substituting ‘the amount of the tentative 
tax which would be determined under the rate sched-
ule set forth in section 2502(a)(2) if the amount with 
respect to which such tentative tax is to be computed 
were $10,000,000’ for ‘the applicable credit amount in 
effect under section 2010(c) which would apply if the 
donor died as of the end of the calendar year’. 
‘‘(2) INFLATION ADJUSTMENT.— 
‘‘(A) IN GENERAL.—In the case of any cal-
endar year after 2024, the dollar amount in sub-
section (a)(1) (after application of this sub-
section) shall be increased by an amount equal 
to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(c)(2)(A) of such 
calendar year by substituting ‘calendar year 
2011’ for ‘calendar year 2016’ in clause (ii) 
thereof. 
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‘‘(B) ROUNDING.—If any amount as ad-
justed under paragraph (1) is not a multiple of 
$10,000, such amount shall be rounded to the 
nearest multiple of $10,000.’’. 
(3) OTHER CONFORMING AMENDMENTS RELATED 
TO GIFT TAX.—Section 2801 is amended by adding at 
the end the following new subsection: 
‘‘(g) GIFTS RECEIVED AFTER 2024.—In the case of a 
gift received after December 31, 2024, subsection (a)(1) shall 
be applied by substituting ‘section 2502(a)(2)’ for ‘section 
2001(c) as in effect on the date of such receipt’.’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to estates of decedents dying, generation- 
skipping transfers, and gifts made, after December 31, 
2024. 
TITLE II—ALTERNATIVE 
MINIMUM TAX REPEAL 
SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX. 
(a) IN GENERAL.—Subchapter A of chapter 1 is 
amended by striking part VI (and by striking the item re-
lating to such part in the table of parts for subchapter A). 
(b) CREDIT FOR PRIOR YEAR MINIMUM TAX LIABIL-
ITY.— 
(1) LIMITATION.—Subsection (c) of section 53 is 
amended to read as follows: 
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‘‘(c) LIMITATION.—The credit allowable under sub-
section (a) shall not exceed the regular tax liability of the 
taxpayer reduced by the sum of the credits allowed under 
subparts A, B, and D.’’. 
(2) CREDITS TREATED AS REFUNDABLE.—Sec-
tion 53 is amended by adding at the end the following 
new subsection: 
‘‘(e) PORTION
OF CREDIT TREATED
AS REFUND-
ABLE.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in 2019, 2020, 2021, or 2022, the lim-
itation under subsection (c) shall be increased by the 
AMT refundable credit amount for such year. 
‘‘(2) AMT REFUNDABLE CREDIT AMOUNT.—For 
purposes of paragraph (1), the AMT refundable credit 
amount is an amount equal to 50 percent (100 per-
cent in the case of a taxable year beginning in 2022) 
of the excess (if any) of— 
‘‘(A) the minimum tax credit determined 
under subsection (b) for the taxable year, over 
‘‘(B) the minimum tax credit allowed under 
subsection (a) for such year (before the applica-
tion of this subsection for such year). 
‘‘(3) CREDIT
REFUNDABLE.—For purposes of 
this title (other than this section), the credit allowed 
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