H. R. 1—41 
(11) Section 11(d) is amended by striking ‘‘the taxes 
imposed by subsection (a) and section 55’’ and inserting ‘‘the 
tax imposed by subsection (a)’’. 
(12) Section 12 is amended by striking paragraph (7). 
(13) Section 168(k) is amended by striking paragraph (4). 
(14) Section 882(a)(1) is amended by striking ‘‘, 55,’’. 
(15) Section 962(a)(1) is amended by striking ‘‘sections 11 
and 55’’ and inserting ‘‘section 11’’. 
(16) Section 1561(a) is amended— 
(A) by inserting ‘‘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), and 
(B) by striking the last sentence. 
(17) Section 6425(c)(1)(A) is amended to read as follows: 
‘‘(A) the tax imposed by section 11 or 1201(a), or sub-
chapter L of chapter 1, whichever is applicable, over’’. 
(18) Section 6655(e)(2) is amended by striking ‘‘and alter-
native minimum taxable income’’ each place it appears in sub-
paragraphs (A) and (B)(i). 
(19) Section 6655(g)(1)(A) is amended by inserting ‘‘plus’’ 
at the end of clause (i), by striking clause (ii), and by redesig-
nating clause (iii) as clause (ii). 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 12002. CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY OF 
CORPORATIONS. 
(a) CREDITS TREATED AS REFUNDABLE.—Section 53 is amended 
by adding at the end the following new subsection: 
‘‘(e) PORTION OF CREDIT TREATED AS REFUNDABLE.— 
‘‘(1) IN GENERAL.—In the case of any taxable year of a 
corporation beginning in 2018, 2019, 2020, or 2021, the limita-
tion under subsection (c) shall be increased by the AMT refund-
able 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 percent in the case of a taxable 
year beginning in 2021) of the excess (if any) of— 
‘‘(A) the minimum tax credit determined under sub-
section (b) for the taxable year, over 
‘‘(B) the minimum tax credit allowed under subsection 
(a) for such year (before the application of this subsection 
for such year). 
‘‘(3) CREDIT REFUNDABLE.—For purposes of this title (other 
than this section), the credit allowed by reason of this sub-
section shall be treated as a credit allowed under subpart 
C (and not this subpart). 
‘‘(4) SHORT TAXABLE YEARS.—In the case of any taxable 
year of less than 365 days, the AMT refundable credit amount 
determined under paragraph (2) with respect to such taxable 
year shall be the amount which bears the same ratio to such 
amount determined without regard to this paragraph as the 
number of days in such taxable year bears to 365.’’. 
(b) TREATMENT OF REFERENCES.—Section 53(d) is amended by 
adding at the end the following new paragraph: 
‘‘(3) AMT TERM REFERENCES.—In the case of a corporation, 
any references in this subsection to section 55, 56, or 57 shall
H. R. 1—42 
be treated as a reference to such section as in effect before 
the amendments made by Tax Cuts and Jobs Act.’’. 
(c) 
CONFORMING
AMENDMENT.—Section 
1374(b)(3)(B) 
is 
amended by striking the last sentence thereof. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
(2) CONFORMING AMENDMENT.—The amendment made by 
subsection (c) shall apply to taxable years beginning after 
December 31, 2021. 
SEC. 12003. INCREASED EXEMPTION FOR INDIVIDUALS. 
(a) IN GENERAL.—Section 55(d), as amended by the preceding 
provisions of this Act, is amended by adding at the end the following 
new paragraph: 
‘‘(4) SPECIAL RULE FOR TAXABLE YEARS BEGINNING AFTER 
2017 AND BEFORE 2026.— 
‘‘(A) IN
GENERAL.—In the case of any taxable year 
beginning after December 31, 2017, and before January 
1, 2026— 
‘‘(i) paragraph (1) shall be applied— 
‘‘(I) by substituting ‘$109,400’ for ‘$78,750’ in 
subparagraph (A), and 
‘‘(II) by substituting ‘$70,300’ for ‘$50,600’ in 
subparagraph (B), and 
‘‘(ii) paragraph (2) shall be applied— 
‘‘(I) by substituting ‘$1,000,000’ for ‘$150,000’ 
in subparagraph (A), 
‘‘(II) by substituting ‘50 percent of the dollar 
amount applicable under subparagraph (A)’ for 
‘$112,500’ in subparagraph (B), and 
‘‘(III) in the case of a taxpayer described in 
paragraph (1)(D), without regard to the substi-
tution under subclause (I). 
‘‘(B) INFLATION ADJUSTMENT.— 
‘‘(i) IN GENERAL.—In the case of any taxable year 
beginning in a calendar year after 2018, the amounts 
described in clause (ii) shall each be increased by an 
amount equal to— 
‘‘(I) such dollar amount, multiplied by 
‘‘(II) the cost-of-living adjustment determined 
under section 1(f)(3) for the calendar year in which 
the taxable year begins, determined by sub-
stituting ‘calendar year 2017’ for ‘calendar year 
2016’ in subparagraph (A)(ii) thereof. 
‘‘(ii) AMOUNTS DESCRIBED.—The amounts described 
in this clause are the $109,400 amount in subpara-
graph (A)(i)(I), the $70,300 amount in subparagraph 
(A)(i)(II), and the $1,000,000 amount in subparagraph 
(A)(ii)(I). 
‘‘(iii) ROUNDING.—Any increased amount deter-
mined under clause (i) shall be rounded to the nearest 
multiple of $100. 
‘‘(iv) 
COORDINATION
WITH
CURRENT
ADJUST-
MENTS.—In the case of any taxable year to which 
subparagraph (A) applies, no adjustment shall be made 
under paragraph (3) to any of the numbers which
H. R. 1—43 
are substituted under subparagraph (A) and adjusted 
under this subparagraph.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
Subtitle C—Business-related Provisions 
PART I—CORPORATE PROVISIONS 
SEC. 13001. 21-PERCENT CORPORATE TAX RATE. 
(a) IN GENERAL.—Subsection (b) of section 11 is amended to 
read as follows: 
‘‘(b) AMOUNT
OF TAX.—The amount of the tax imposed by 
subsection (a) shall be 21 percent of taxable income.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) The following sections are each amended by striking 
‘‘section 11(b)(1)’’ and inserting ‘‘section 11(b)’’: 
(A) Section 280C(c)(3)(B)(ii)(II). 
(B) Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e). 
(C) Section 7874(e)(1)(B). 
(2)(A) Part I of subchapter P of chapter 1 is amended 
by striking section 1201 (and by striking the item relating 
to such section in the table of sections for such part). 
(B) Section 12 is amended by striking paragraphs (4) and 
(6), and by redesignating paragraph (5) as paragraph (4). 
(C) Section 453A(c)(3) is amended by striking ‘‘or 1201 
(whichever is appropriate)’’. 
(D) Section 527(b) is amended— 
(i) by striking paragraph (2), and 
(ii) by striking all that precedes ‘‘is hereby imposed’’ 
and inserting: 
‘‘(b) TAX IMPOSED.—A tax’’. 
(E) Sections 594(a) is amended by striking ‘‘taxes imposed 
by section 11 or 1201(a)’’ and inserting ‘‘tax imposed by section 
11’’. 
(F) Section 691(c)(4) is amended by striking ‘‘1201,’’. 
(G) Section 801(a) is amended— 
(i) by striking paragraph (2), and 
(ii) by striking all that precedes ‘‘is hereby imposed’’ 
and inserting: 
‘‘(a) TAX IMPOSED.—A tax’’. 
(H) Section 831(e) is amended by striking paragraph (1) 
and by redesignating paragraphs (2) and (3) as paragraphs 
(1) and (2), respectively. 
(I) Sections 832(c)(5) and 834(b)(1)(D) are each amended 
by striking ‘‘sec. 1201 and following,’’. 
(J) Section 852(b)(3)(A) is amended by striking ‘‘section 
1201(a)’’ and inserting ‘‘section 11(b)’’. 
(K) Section 857(b)(3) is amended— 
(i) by striking subparagraph (A) and redesignating sub-
paragraphs (B) through (F) as subparagraphs (A) through 
(E), respectively, 
(ii) in subparagraph (C), as so redesignated— 
(I) by striking ‘‘subparagraph (A)(ii)’’ in clause (i) 
thereof and inserting ‘‘paragraph (1)’’,
H. R. 1—44 
(II) by striking ‘‘the tax imposed by subparagraph 
(A)(ii)’’ in clauses (ii) and (iv) thereof and inserting 
‘‘the tax imposed by paragraph (1) on undistributed 
capital gain’’, 
(iii) in subparagraph (E), as so redesignated, by 
striking ‘‘subparagraph (B) or (D)’’ and inserting ‘‘subpara-
graph (A) or (C)’’, and 
(iv) by adding at the end the following new subpara-
graph: 
‘‘(F) UNDISTRIBUTED CAPITAL GAIN.—For purposes of 
this paragraph, the term ‘undistributed capital gain’ means 
the excess of the net capital gain over the deduction for 
dividends paid (as defined in section 561) determined with 
reference to capital gain dividends only.’’. 
(L) Section 882(a)(1), as amended by section 12001, is fur-
ther amended by striking ‘‘or 1201(a)’’. 
(M) Section 904(b) is amended— 
(i) by striking ‘‘or 1201(a)’’ in paragraph (2)(C), 
(ii) by striking paragraph (3)(D) and inserting the fol-
lowing: 
‘‘(D) CAPITAL GAIN RATE DIFFERENTIAL.—There is a cap-
ital gain rate differential for any year if subsection (h) 
of section 1 applies to such taxable year.’’, and 
(iii) by striking paragraph (3)(E) and inserting the 
following: 
‘‘(E) RATE DIFFERENTIAL PORTION.—The rate differen-
tial portion of foreign source net capital gain, net capital 
gain, or the excess of net capital gain from sources within 
the United States over net capital gain, as the case may 
be, is the same proportion of such amount as— 
‘‘(i) the excess of— 
‘‘(I) the highest rate of tax set forth in sub-
section (a), (b), (c), (d), or (e) of section 1 (whichever 
applies), over 
‘‘(II) the alternative rate of tax determined 
under section 1(h), bears to 
‘‘(ii) that rate referred to in subclause (I).’’. 
(N) Section 1374(b) is amended by striking paragraph (4). 
(O) Section 1381(b) is amended by striking ‘‘taxes imposed 
by section 11 or 1201’’ and inserting ‘‘tax imposed by section 
11’’. 
(P) Sections 6425(c)(1)(A), as amended by section 12001, 
and 6655(g)(1)(A)(i) are each amended by striking ‘‘or 1201(a),’’. 
(Q) Section 7518(g)(6)(A) is amended by striking ‘‘or 
1201(a)’’. 
(3)(A) Section 1445(e)(1) is amended— 
(i) by striking ‘‘35 percent’’ and inserting ‘‘the highest 
rate of tax in effect for the taxable year under section 
11(b)’’, and 
(ii) by striking ‘‘of the gain’’ and inserting ‘‘multiplied 
by the gain’’. 
(B) Section 1445(e)(2) is amended by striking ‘‘35 percent 
of the amount’’ and inserting ‘‘the highest rate of tax in effect 
for the taxable year under section 11(b) multiplied by the 
amount’’. 
(C) Section 1445(e)(6) is amended—
H. R. 1—45 
(i) by striking ‘‘35 percent’’ and inserting ‘‘the highest 
rate of tax in effect for the taxable year under section 
11(b)’’, and 
(ii) by striking ‘‘of the amount’’ and inserting ‘‘multi-
plied by the amount’’. 
(D) Section 1446(b)(2)(B) is amended by striking ‘‘section 
11(b)(1)’’ and inserting ‘‘section 11(b)’’. 
(4) Section 852(b)(1) is amended by striking the last sen-
tence. 
(5)(A) Part I of subchapter B of chapter 5 is amended 
by striking section 1551 (and by striking the item relating 
to such section in the table of sections for such part). 
(B) Section 535(c)(5) is amended to read as follows: 
‘‘(5) CROSS REFERENCE.—For limitation on credit provided 
in paragraph (2) or (3) in the case of certain controlled corpora-
tions, see section 1561.’’. 
(6)(A) Section 1561, as amended by section 12001, is 
amended to read as follows: 
‘‘SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE 
CASE OF CERTAIN CONTROLLED CORPORATIONS. 
‘‘(a) IN GENERAL.—The component members of a controlled 
group of corporations on a December 31 shall, for their taxable 
years which include such December 31, be limited for purposes 
of this subtitle to one $250,000 ($150,000 if any component member 
is a corporation described in section 535(c)(2)(B)) amount for pur-
poses of computing the accumulated earnings credit under section 
535(c)(2) and (3). Such amount shall be divided equally among 
the component members of such group on such December 31 unless 
the Secretary prescribes regulations permitting an unequal alloca-
tion of such amount. 
‘‘(b) CERTAIN SHORT TAXABLE YEARS.—If a corporation has a 
short taxable year which does not include a December 31 and 
is a component member of a controlled group of corporations with 
respect to such taxable year, then for purposes of this subtitle, 
the amount to be used in computing the accumulated earnings 
credit under section 535(c)(2) and (3) of such corporation for such 
taxable year shall be the amount specified in subsection (a) with 
respect to such group, divided by the number of corporations which 
are component members of such group on the last day of such 
taxable year. For purposes of the preceding sentence, section 1563(b) 
shall be applied as if such last day were substituted for December 
31.’’. 
(B) The table of sections for part II of subchapter 
B of chapter 5 is amended by striking the item relating 
to section 1561 and inserting the following new item: 
‘‘Sec. 1561. Limitation on accumulated earnings credit in the case of certain con-
trolled corporations.’’. 
(7) Section 7518(g)(6)(A) is amended— 
(A) by striking ‘‘With respect to the portion’’ and 
inserting ‘‘In the case of a taxpayer other than a corpora-
tion, with respect to the portion’’, and 
(B) by striking ‘‘(34 percent in the case of a corpora-
tion)’’. 
(c) EFFECTIVE DATE.—
H. R. 1—46 
(1) IN GENERAL.—Except as otherwise provided in this sub-
section, the amendments made by subsections (a) and (b) shall 
apply to taxable years beginning after December 31, 2017. 
(2) WITHHOLDING.—The amendments made by subsection 
(b)(3) shall apply to distributions made after December 31, 
2017. 
(3) CERTAIN TRANSFERS.—The amendments made by sub-
section (b)(6) shall apply to transfers made after December 
31, 2017. 
(d) NORMALIZATION REQUIREMENTS.— 
(1) IN GENERAL.—A normalization method of accounting 
shall not be treated as being used with respect to any public 
utility property for purposes of section 167 or 168 of the Internal 
Revenue Code of 1986 if the taxpayer, in computing its cost 
of service for ratemaking purposes and reflecting operating 
results in its regulated books of account, reduces the excess 
tax reserve more rapidly or to a greater extent than such 
reserve would be reduced under the average rate assumption 
method. 
(2) ALTERNATIVE METHOD FOR CERTAIN TAXPAYERS.—If, as 
of the first day of the taxable year that includes the date 
of enactment of this Act— 
(A) the taxpayer was required by a regulatory agency 
to compute depreciation for public utility property on the 
basis of an average life or composite rate method, and 
(B) the taxpayer’s books and underlying records did 
not contain the vintage account data necessary to apply 
the average rate assumption method, 
the taxpayer will be treated as using a normalization method 
of accounting if, with respect to such jurisdiction, the taxpayer 
uses the alternative method for public utility property that 
is subject to the regulatory authority of that jurisdiction. 
(3) DEFINITIONS.—For purposes of this subsection— 
(A) EXCESS
TAX
RESERVE.—The term ‘‘excess tax 
reserve’’ means the excess of— 
(i) the reserve for deferred taxes (as described in 
section 168(i)(9)(A)(ii) of the Internal Revenue Code 
of 1986) as of the day before the corporate rate reduc-
tions provided in the amendments made by this section 
take effect, over 
(ii) the amount which would be the balance in 
such reserve if the amount of such reserve were deter-
mined by assuming that the corporate rate reductions 
provided in this Act were in effect for all prior periods. 
(B) AVERAGE RATE ASSUMPTION METHOD.—The average 
rate assumption method is the method under which the 
excess in the reserve for deferred taxes is reduced over 
the remaining lives of the property as used in its regulated 
books of account which gave rise to the reserve for deferred 
taxes. Under such method, during the time period in which 
the timing differences for the property reverse, the amount 
of the adjustment to the reserve for the deferred taxes 
is calculated by multiplying— 
(i) the ratio of the aggregate deferred taxes for 
the property to the aggregate timing differences for 
the property as of the beginning of the period in ques-
tion, by
H. R. 1—47 
(ii) the amount of the timing differences which 
reverse during such period. 
(C) ALTERNATIVE METHOD.—The ‘‘alternative method’’ 
is the method in which the taxpayer— 
(i) computes the excess tax reserve on all public 
utility property included in the plant account on the 
basis of the weighted average life or composite rate 
used to compute depreciation for regulatory purposes, 
and 
(ii) reduces the excess tax reserve ratably over 
the remaining regulatory life of the property. 
(4) TAX INCREASED FOR NORMALIZATION VIOLATION.—If, for 
any taxable year ending after the date of the enactment of 
this Act, the taxpayer does not use a normalization method 
of accounting for the corporate rate reductions provided in 
the amendments made by this section— 
(A) the taxpayer’s tax for the taxable year shall be 
increased by the amount by which it reduces its excess 
tax reserve more rapidly than permitted under a normaliza-
tion method of accounting, and 
(B) such taxpayer shall not be treated as using a 
normalization method of accounting for purposes of sub-
sections (f)(2) and (i)(9)(C) of section 168 of the Internal 
Revenue Code of 1986. 
SEC. 13002. REDUCTION IN DIVIDEND RECEIVED DEDUCTIONS TO 
REFLECT LOWER CORPORATE INCOME TAX RATES. 
(a) DIVIDENDS RECEIVED BY CORPORATIONS.— 
(1) IN GENERAL.—Section 243(a)(1) is amended by striking 
‘‘70 percent’’ and inserting ‘‘50 percent’’. 
(2) DIVIDENDS FROM 20-PERCENT OWNED CORPORATIONS.— 
Section 243(c)(1) is amended— 
(A) by striking ‘‘80 percent’’ and inserting ‘‘65 percent’’, 
and 
(B) by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’. 
(3) CONFORMING
AMENDMENT.—The heading for section 
243(c) is amended by striking ‘‘RETENTION OF 80-PERCENT DIVI-
DEND
RECEIVED
DEDUCTION’’ 
and 
inserting 
‘‘INCREASED 
PERCENTAGE’’. 
(b) DIVIDENDS RECEIVED FROM FSC.—Section 245(c)(1)(B) is 
amended— 
(1) by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’, 
and 
(2) by striking ‘‘80 percent’’ and inserting ‘‘65 percent’’. 
(c) LIMITATION ON AGGREGATE AMOUNT OF DEDUCTIONS.—Sec-
tion 246(b)(3) is amended— 
(1) by striking ‘‘80 percent’’ in subparagraph (A) and 
inserting ‘‘65 percent’’, and 
(2) by striking ‘‘70 percent’’ in subparagraph (B) and 
inserting ‘‘50 percent’’. 
(d) REDUCTION
IN DEDUCTION WHERE PORTFOLIO STOCK IS 
DEBT-FINANCED.—Section 246A(a)(1) is amended— 
(1) by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’, 
and 
(2) by striking ‘‘80 percent’’ and inserting ‘‘65 percent’’. 
(e) INCOME FROM SOURCES WITHIN THE UNITED STATES.—Sec-
tion 861(a)(2) is amended—
H. R. 1—48 
(1) by striking ‘‘100/70th’’ and inserting ‘‘100/50th’’ in 
subparagraph (B), and 
(2) in the flush sentence at the end— 
(A) by striking ‘‘100/80th’’ and inserting ‘‘100/65th’’, 
and 
(B) by striking ‘‘100/70th’’ and inserting ‘‘100/50th’’. 
(f) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
PART II—SMALL BUSINESS REFORMS 
SEC. 13101. MODIFICATIONS OF RULES FOR EXPENSING DEPRECIABLE 
BUSINESS ASSETS. 
(a) INCREASE IN LIMITATION.— 
(1) DOLLAR LIMITATION.—Section 179(b)(1) is amended by 
striking ‘‘$500,000’’ and inserting ‘‘$1,000,000’’. 
(2) 
REDUCTION
IN
LIMITATION.—Section 
179(b)(2) 
is 
amended by striking ‘‘$2,000,000’’ and inserting ‘‘$2,500,000’’. 
(3) INFLATION ADJUSTMENTS.— 
(A) 
IN
GENERAL.—Subparagraph 
(A) 
of 
section 
179(b)(6), as amended by section 11002(d), is amended— 
(i) by striking ‘‘2015’’ and inserting ‘‘2018’’, and 
(ii) in clause (ii), by striking ‘‘calendar year 2014’’ 
and inserting ‘‘calendar year 2017’’. 
(B) SPORT
UTILITY
VEHICLES.—Section 179(b)(6) is 
amended— 
(i) in subparagraph (A), by striking ‘‘paragraphs 
(1) and (2)’’ and inserting ‘‘paragraphs (1), (2), and 
(5)(A)’’, and 
(ii) in subparagraph (B), by inserting ‘‘($100 in 
the case of any increase in the amount under para-
graph (5)(A))’’ after ‘‘$10,000’’. 
(b) SECTION 179 PROPERTY TO INCLUDE QUALIFIED REAL PROP-
ERTY.— 
(1) IN
GENERAL.—Subparagraph (B) of section 179(d)(1) 
is amended to read as follows: 
‘‘(B) which is— 
‘‘(i) section 1245 property (as defined in section 
1245(a)(3)), or 
‘‘(ii) at the election of the taxpayer, qualified real 
property (as defined in subsection (f)), and’’. 
(2) QUALIFIED REAL PROPERTY DEFINED.—Subsection (f) of 
section 179 is amended to read as follows: 
‘‘(f) QUALIFIED REAL PROPERTY.—For purposes of this section, 
the term ‘qualified real property’ means— 
‘‘(1) any qualified improvement property described in sec-
tion 168(e)(6), and 
‘‘(2) any of the following improvements to nonresidential 
real property placed in service after the date such property 
was first placed in service: 
‘‘(A) Roofs. 
‘‘(B) Heating, ventilation, and air-conditioning prop-
erty. 
‘‘(C) Fire protection and alarm systems. 
‘‘(D) Security systems.’’.
H. R. 1—49 
(c) REPEAL OF EXCLUSION FOR CERTAIN PROPERTY.—The last 
sentence of section 179(d)(1) is amended by inserting ‘‘(other than 
paragraph (2) thereof)’’ after ‘‘section 50(b)’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to property placed in service in taxable years beginning 
after December 31, 2017. 
SEC. 13102. SMALL BUSINESS ACCOUNTING METHOD REFORM AND SIM-
PLIFICATION. 
(a) MODIFICATION
OF
LIMITATION
ON
CASH
METHOD
OF 
ACCOUNTING.— 
(1) INCREASED LIMITATION.—So much of section 448(c) as 
precedes paragraph (2) is amended to read as follows: 
‘‘(c) GROSS RECEIPTS TEST.—For purposes of this section— 
‘‘(1) IN GENERAL.—A corporation or partnership meets the 
gross receipts test of this subsection for any taxable year if 
the average annual gross receipts of such entity for the 3- 
taxable-year period ending with the taxable year which pre-
cedes such taxable year does not exceed $25,000,000.’’. 
(2) APPLICATION OF EXCEPTION ON ANNUAL BASIS.—Section 
448(b)(3) is amended to read as follows: 
‘‘(3) ENTITIES WHICH MEET GROSS RECEIPTS TEST.—Para-
graphs (1) and (2) of subsection (a) shall not apply to any 
corporation or partnership for any taxable year if such entity 
(or any predecessor) meets the gross receipts test of subsection 
(c) for such taxable year.’’. 
(3) INFLATION ADJUSTMENT.—Section 448(c) is amended by 
adding at the end the following new paragraph: 
‘‘(4) ADJUSTMENT FOR INFLATION.—In the case of any tax-
able year beginning after December 31, 2018, the dollar amount 
in paragraph (1) shall be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment determined under 
section 1(f)(3) for the calendar year in which the taxable 
year begins, by substituting ‘calendar year 2017’ for ‘cal-
endar year 2016’ in subparagraph (A)(ii) thereof. 
If any amount as increased under the preceding sentence is 
not a multiple of $1,000,000, such amount shall be rounded 
to the nearest multiple of $1,000,000.’’. 
(4) COORDINATION WITH SECTION 481.—Section 448(d)(7) is 
amended to read as follows: 
‘‘(7) COORDINATION
WITH
SECTION
481.—Any change in 
method of accounting made pursuant to this section shall be 
treated for purposes of section 481 as initiated by the taxpayer 
and made with the consent of the Secretary.’’. 
(5) APPLICATION OF EXCEPTION TO CORPORATIONS ENGAGED 
IN FARMING.— 
(A) IN GENERAL.—Section 447(c) is amended— 
(i) by inserting ‘‘for any taxable year’’ after ‘‘not 
being a corporation’’ in the matter preceding paragraph 
(1), and 
(ii) by amending paragraph (2) to read as follows: 
‘‘(2) a corporation which meets the gross receipts test of 
section 448(c) for such taxable year.’’. 
(B) COORDINATION WITH SECTION 481.—Section 447(f) 
is amended to read as follows:
H. R. 1—50 
‘‘(f) COORDINATION WITH SECTION 481.—Any change in method 
of accounting made pursuant to this section shall be treated for 
purposes of section 481 as initiated by the taxpayer and made 
with the consent of the Secretary.’’. 
(C) 
CONFORMING
AMENDMENTS.—Section 
447 
is 
amended— 
(i) by striking subsections (d), (e), (h), and (i), 
and 
(ii) by redesignating subsections (f) and (g) (as 
amended by subparagraph (B)) as subsections (d) and 
(e), respectively. 
(b) EXEMPTION FROM UNICAP REQUIREMENTS.— 
(1) IN GENERAL.—Section 263A is amended by redesignating 
subsection (i) as subsection (j) and by inserting after subsection 
(h) the following new subsection: 
‘‘(i) EXEMPTION FOR CERTAIN SMALL BUSINESSES.— 
‘‘(1) IN GENERAL.—In the case of any taxpayer (other than 
a tax shelter prohibited from using the cash receipts and 
disbursements method of accounting under section 448(a)(3)) 
which meets the gross receipts test of section 448(c) for any 
taxable year, this section shall not apply with respect to such 
taxpayer for such taxable year. 
‘‘(2) APPLICATION OF GROSS RECEIPTS TEST TO INDIVIDUALS, 
ETC.— In the case of any taxpayer which is not a corporation 
or a partnership, the gross receipts test of section 448(c) shall 
be applied in the same manner as if each trade or business 
of such taxpayer were a corporation or partnership. 
‘‘(3) COORDINATION
WITH
SECTION
481.—Any change in 
method of accounting made pursuant to this subsection shall 
be treated for purposes of section 481 as initiated by the tax-
payer and made with the consent of the Secretary.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
263A(b)(2) 
is 
amended to read as follows: 
‘‘(2) PROPERTY ACQUIRED FOR RESALE.—Real or personal 
property described in section 1221(a)(1) which is acquired by 
the taxpayer for resale.’’. 
(c) EXEMPTION FROM INVENTORIES.—Section 471 is amended 
by redesignating subsection (c) as subsection (d) and by inserting 
after subsection (b) the following new subsection: 
‘‘(c) EXEMPTION FOR CERTAIN SMALL BUSINESSES.— 
‘‘(1) IN GENERAL.—In the case of any taxpayer (other than 
a tax shelter prohibited from using the cash receipts and 
disbursements method of accounting under section 448(a)(3)) 
which meets the gross receipts test of section 448(c) for any 
taxable year— 
‘‘(A) subsection (a) shall not apply with respect to such 
taxpayer for such taxable year, and 
‘‘(B) the taxpayer’s method of accounting for inventory 
for such taxable year shall not be treated as failing to 
clearly reflect income if such method either— 
‘‘(i) treats inventory as non-incidental materials 
and supplies, or 
‘‘(ii) conforms to such taxpayer’s method of 
accounting reflected in an applicable financial state-
ment of the taxpayer with respect to such taxable 
year or, if the taxpayer does not have any applicable 
financial statement with respect to such taxable year,
H. R. 1—51 
the books and records of the taxpayer prepared in 
accordance with the taxpayer’s accounting procedures. 
‘‘(2) APPLICABLE FINANCIAL STATEMENT.—For purposes of 
this subsection, the term ‘applicable financial statement’ has 
the meaning given the term in section 451(b)(3). 
‘‘(3) APPLICATION OF GROSS RECEIPTS TEST TO INDIVIDUALS, 
ETC.—In the case of any taxpayer which is not a corporation 
or a partnership, the gross receipts test of section 448(c) shall 
be applied in the same manner as if each trade or business 
of such taxpayer were a corporation or partnership. 
‘‘(4) COORDINATION
WITH
SECTION
481.—Any change in 
method of accounting made pursuant to this subsection shall 
be treated for purposes of section 481 as initiated by the tax-
payer and made with the consent of the Secretary.’’. 
(d) EXEMPTION FROM PERCENTAGE COMPLETION FOR LONG-TERM 
CONTRACTS.— 
(1) IN GENERAL.—Section 460(e)(1)(B) is amended— 
(A) by inserting ‘‘(other than a tax shelter prohibited 
from using the cash receipts and disbursements method 
of accounting under section 448(a)(3))’’ after ‘‘taxpayer’’ in 
the matter preceding clause (i), and 
(B) by amending clause (ii) to read as follows: 
‘‘(ii) who meets the gross receipts test of section 
448(c) for the taxable year in which such contract 
is entered into.’’. 
(2) CONFORMING AMENDMENTS.—Section 460(e) is amended 
by striking paragraphs (2) and (3), by redesignating paragraphs 
(4), (5), and (6) as paragraphs (3), (4), and (5), respectively, 
and by inserting after paragraph (1) the following new para-
graph: 
‘‘(2) RULES RELATED TO GROSS RECEIPTS TEST.— 
‘‘(A) APPLICATION OF GROSS RECEIPTS TEST TO INDIVID-
UALS, ETC.— For purposes of paragraph (1)(B)(ii), in the 
case of any taxpayer which is not a corporation or a part-
nership, the gross receipts test of section 448(c) shall be 
applied in the same manner as if each trade or business 
of such taxpayer were a corporation or partnership. 
‘‘(B) COORDINATION WITH SECTION 481.—Any change in 
method of accounting made pursuant to paragraph (1)(B)(ii) 
shall be treated as initiated by the taxpayer and made 
with the consent of the Secretary. Such change shall be 
effected on a cut-off basis for all similarly classified con-
tracts entered into on or after the year of change.’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided in this sub-
section, the amendments made by this section shall apply to 
taxable years beginning after December 31, 2017. 
(2) PRESERVATION
OF
SUSPENSE
ACCOUNT
RULES
WITH 
RESPECT TO ANY EXISTING SUSPENSE ACCOUNTS.—So much of 
the amendments made by subsection (a)(5)(C) as relate to sec-
tion 447(i) of the Internal Revenue Code of 1986 shall not 
apply with respect to any suspense account established under 
such section before the date of the enactment of this Act. 
(3) EXEMPTION FROM PERCENTAGE COMPLETION FOR LONG- 
TERM CONTRACTS.—The amendments made by subsection (d) 
shall apply to contracts entered into after December 31, 2017, 
in taxable years ending after such date.
H. R. 1—52 
PART III—COST RECOVERY AND ACCOUNTING 
METHODS 
Subpart A—Cost Recovery 
SEC. 13201. TEMPORARY 100-PERCENT EXPENSING FOR CERTAIN BUSI-
NESS ASSETS. 
(a) INCREASED EXPENSING.— 
(1) IN GENERAL.—Section 168(k) is amended— 
(A) in paragraph (1)(A), by striking ‘‘50 percent’’ and 
inserting ‘‘the applicable percentage’’, and 
(B) in paragraph (5)(A)(i), by striking ‘‘50 percent’’ 
and inserting ‘‘the applicable percentage’’. 
(2) APPLICABLE
PERCENTAGE.—Paragraph (6) of section 
168(k) is amended to read as follows: 
‘‘(6) APPLICABLE PERCENTAGE.—For purposes of this sub-
section— 
‘‘(A) IN
GENERAL.—Except as otherwise provided in 
this paragraph, the term ‘applicable percentage’ means— 
‘‘(i) in the case of property placed in service after 
September 27, 2017, and before January 1, 2023, 100 
percent, 
‘‘(ii) in the case of property placed in service after 
December 31, 2022, and before January 1, 2024, 80 
percent, 
‘‘(iii) in the case of property placed in service after 
December 31, 2023, and before January 1, 2025, 60 
percent, 
‘‘(iv) in the case of property placed in service after 
December 31, 2024, and before January 1, 2026, 40 
percent, and 
‘‘(v) in the case of property placed in service after 
December 31, 2025, and before January 1, 2027, 20 
percent. 
‘‘(B) RULE FOR PROPERTY WITH LONGER PRODUCTION 
PERIODS.—In the case of property described in subpara-
graph (B) or (C) of paragraph (2), the term ‘applicable 
percentage’ means— 
‘‘(i) in the case of property placed in service after 
September 27, 2017, and before January 1, 2024, 100 
percent, 
‘‘(ii) in the case of property placed in service after 
December 31, 2023, and before January 1, 2025, 80 
percent, 
‘‘(iii) in the case of property placed in service after 
December 31, 2024, and before January 1, 2026, 60 
percent, 
‘‘(iv) in the case of property placed in service after 
December 31, 2025, and before January 1, 2027, 40 
percent, and 
‘‘(v) in the case of property placed in service after 
December 31, 2026, and before January 1, 2028, 20 
percent. 
‘‘(C) RULE FOR PLANTS BEARING FRUITS AND NUTS.— 
In the case of a specified plant described in paragraph 
(5), the term ‘applicable percentage’ means—
H. R. 1—53 
‘‘(i) in the case of a plant which is planted or 
grafted after September 27, 2017, and before January 
1, 2023, 100 percent, 
‘‘(ii) in the case of a plant which is planted or 
grafted after December 31, 2022, and before January 
1, 2024, 80 percent, 
‘‘(iii) in the case of a plant which is planted or 
grafted after December 31, 2023, and before January 
1, 2025, 60 percent, 
‘‘(iv) in the case of a plant which is planted or 
grafted after December 31, 2024, and before January 
1, 2026, 40 percent, and 
‘‘(v) in the case of a plant which is planted or 
grafted after December 31, 2025, and before January 
1, 2027, 20 percent.’’. 
(3) CONFORMING AMENDMENT.— 
(A) Paragraph (5) of section 168(k) is amended by 
striking subparagraph (F). 
(B) Section 168(k) is amended by adding at the end 
the following new paragraph: 
‘‘(8) PHASE
DOWN.—In the case of qualified property 
acquired by the taxpayer before September 28, 2017, and placed 
in service by the taxpayer after September 27, 2017, paragraph 
(6) shall be applied by substituting for each percentage 
therein— 
‘‘(A) ‘50 percent’ in the case of— 
‘‘(i) property placed in service before January 1, 
2018, and 
‘‘(ii) property described in subparagraph (B) or (C) 
of paragraph (2) which is placed in service in 2018, 
‘‘(B) ‘40 percent’ in the case of— 
‘‘(i) property placed in service in 2018 (other than 
property described in subparagraph (B) or (C) of para-
graph (2)), and 
‘‘(ii) property described in subparagraph (B) or (C) 
of paragraph (2) which is placed in service in 2019, 
‘‘(C) ‘30 percent’ in the case of— 
‘‘(i) property placed in service in 2019 (other than 
property described in subparagraph (B) or (C) of para-
graph (2)), and 
‘‘(ii) property described in subparagraph (B) or (C) 
of paragraph (2) which is placed in service in 2020, 
and 
‘‘(D) ‘0 percent’ in the case of— 
‘‘(i) property placed in service after 2019 (other 
than property described in subparagraph (B) or (C) 
of paragraph (2)), and 
‘‘(ii) property described in subparagraph (B) or (C) 
of paragraph (2) which is placed in service after 2020.’’. 
(b) EXTENSION.— 
(1) IN GENERAL.—Section 168(k) is amended— 
(A) in paragraph (2)— 
(i) in subparagraph (A)(iii), clauses (i)(III) and (ii) 
of subparagraph (B), and subparagraph (E)(i), by 
striking ‘‘January 1, 2020’’ each place it appears and 
inserting ‘‘January 1, 2027’’, and 
(ii) in subparagraph (B)—
H. R. 1—54 
(I) in clause (i)(II), by striking ‘‘January 1, 
2021’’ and inserting ‘‘January 1, 2028’’, and 
(II) in the heading of clause (ii), by striking 
‘‘PRE-JANUARY 1, 2020’’ and inserting ‘‘PRE-JANUARY 
1, 2027’’, and 
(B) in paragraph (5)(A), by striking ‘‘January 1, 2020’’ 
and inserting ‘‘January 1, 2027’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Clause (ii) of section 460(c)(6)(B) is amended by 
striking ‘‘January 1, 2020 (January 1, 2021’’ and inserting 
‘‘January 1, 2027 (January 1, 2028’’. 
(B) The heading of section 168(k) is amended by 
striking ‘‘ACQUIRED
AFTER
DECEMBER
31, 2007, AND 
BEFORE JANUARY 1, 2020’’. 
(c) APPLICATION TO USED PROPERTY.— 
(1) IN GENERAL.—Section 168(k)(2)(A)(ii) is amended to read 
as follows: 
‘‘(ii) the original use of which begins with the 
taxpayer or the acquisition of which by the taxpayer 
meets the requirements of clause (ii) of subparagraph 
(E), and’’. 
(2) ACQUISITION REQUIREMENTS.—Section 168(k)(2)(E)(ii) is 
amended to read as follows: 
‘‘(ii) ACQUISITION REQUIREMENTS.—An acquisition 
of property meets the requirements of this clause if— 
‘‘(I) such property was not used by the tax-
payer at any time prior to such acquisition, and 
‘‘(II) the acquisition of such property meets 
the requirements of paragraphs (2)(A), (2)(B), 
(2)(C), and (3) of section 179(d).’’, 
(3) ANTI-ABUSE
RULES.—Section 168(k)(2)(E) is further 
amended by amending clause (iii)(I) to read as follows: 
‘‘(I) property is used by a lessor of such prop-
erty and such use is the lessor’s first use of such 
property,’’. 
(d) EXCEPTION
FOR CERTAIN PROPERTY.—Section 168(k), as 
amended by this section, is amended by adding at the end the 
following new paragraph: 
‘‘(9) EXCEPTION FOR CERTAIN PROPERTY.—The term ‘quali-
fied property’ shall not include— 
‘‘(A) any property which is primarily used in a trade 
or business described in clause (iv) of section 163(j)(7)(A), 
or 
‘‘(B) any property used in a trade or business that 
has had floor plan financing indebtedness (as defined in 
paragraph (9) of section 163(j)), if the floor plan financing 
interest related to such indebtedness was taken into 
account under paragraph (1)(C) of such section.’’. 
(e) SPECIAL RULE.—Section 168(k), as amended by this section, 
is amended by adding at the end the following new paragraph: 
‘‘(10) SPECIAL
RULE
FOR
PROPERTY
PLACED
IN
SERVICE 
DURING CERTAIN PERIODS.— 
‘‘(A) IN GENERAL.—In the case of qualified property 
placed in service by the taxpayer during the first taxable 
year ending after September 27, 2017, if the taxpayer 
elects to have this paragraph apply for such taxable year,
H. R. 1—55 
paragraphs (1)(A) and (5)(A)(i) shall be applied by sub-
stituting ‘50 percent’ for ‘the applicable percentage’. 
‘‘(B) FORM OF ELECTION.—Any election under this para-
graph shall be made at such time and in such form and 
manner as the Secretary may prescribe.’’. 
(f) COORDINATION WITH SECTION 280F.—Clause (iii) of section 
168(k)(2)(F) is amended by striking ‘‘placed in service by the tax-
payer after December 31, 2017’’ and inserting ‘‘acquired by the 
taxpayer before September 28, 2017, and placed in service by the 
taxpayer after September 27, 2017’’. 
(g) QUALIFIED FILM
AND TELEVISION
AND LIVE THEATRICAL 
PRODUCTIONS.— 
(1) IN
GENERAL.—Clause (i) of section 168(k)(2)(A), as 
amended by section 13204, is amended— 
(A) in subclause (II), by striking ‘‘or’’, 
(B) in subclause (III), by adding ‘‘or’’ after the comma, 
and 
(C) by adding at the end the following: 
‘‘(IV) which is a qualified film or television produc-
tion (as defined in subsection (d) of section 181) for 
which a deduction would have been allowable under 
section 181 without regard to subsections (a)(2) and 
(g) of such section or this subsection, or 
‘‘(V) which is a qualified live theatrical production 
(as defined in subsection (e) of section 181) for which 
a deduction would have been allowable under section 
181 without regard to subsections (a)(2) and (g) of 
such section or this subsection,’’. 
(2) PRODUCTION PLACED IN SERVICE.—Paragraph (2) of sec-
tion 168(k) is amended by adding at the end the following: 
‘‘(H) PRODUCTION PLACED IN SERVICE.—For purposes 
of subparagraph (A)— 
‘‘(i) a qualified film or television production shall 
be considered to be placed in service at the time of 
initial release or broadcast, and 
‘‘(ii) a qualified live theatrical production shall be 
considered to be placed in service at the time of the 
initial live staged performance.’’. 
(h) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as provided by paragraph (2), 
the amendments made by this section shall apply to property 
which— 
(A) is acquired after September 27, 2017, and 
(B) is placed in service after such date. 
For purposes of the preceding sentence, property shall not 
be treated as acquired after the date on which a written binding 
contract is entered into for such acquisition. 
(2) SPECIFIED PLANTS.—The amendments made by this sec-
tion shall apply to specified plants planted or grafted after 
September 27, 2017. 
SEC. 13202. MODIFICATIONS TO DEPRECIATION LIMITATIONS ON 
LUXURY AUTOMOBILES AND PERSONAL USE PROPERTY. 
(a) LUXURY AUTOMOBILES.— 
(1) IN GENERAL.—280F(a)(1)(A) is amended— 
(A) in clause (i), by striking ‘‘$2,560’’ and inserting 
‘‘$10,000’’,
H. R. 1—56 
(B) in clause (ii), by striking ‘‘$4,100’’ and inserting 
‘‘$16,000’’, 
(C) in clause (iii), by striking ‘‘$2,450’’ and inserting 
‘‘$9,600’’, and 
(D) in clause (iv), by striking ‘‘$1,475’’ and inserting 
‘‘$5,760’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Clause (ii) of section 280F(a)(1)(B) is amended by 
striking ‘‘$1,475’’ in the text and heading and inserting 
‘‘$5,760’’. 
(B) Paragraph (7) of section 280F(d) is amended— 
(i) in subparagraph (A), by striking ‘‘1988’’ and 
inserting ‘‘2018’’, and 
(ii) in subparagraph (B)(i)(II), by striking ‘‘1987’’ 
and inserting ‘‘2017’’. 
(b) REMOVAL OF COMPUTER EQUIPMENT FROM LISTED PROP-
ERTY.— 
(1) IN GENERAL.—Section 280F(d)(4)(A) is amended— 
(A) by inserting ‘‘and’’ at the end of clause (iii), 
(B) by striking clause (iv), and 
(C) by redesignating clause (v) as clause (iv). 
(2) 
CONFORMING
AMENDMENT.—Section 
280F(d)(4) 
is 
amended by striking subparagraph (B) and by redesignating 
subparagraph (C) as subparagraph (B). 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to property placed in service after December 31, 2017, 
in taxable years ending after such date. 
SEC. 13203. MODIFICATIONS OF TREATMENT OF CERTAIN FARM PROP-
ERTY. 
(a) TREATMENT OF CERTAIN FARM PROPERTY AS 5-YEAR PROP-
ERTY.—Clause (vii) of section 168(e)(3)(B) is amended by striking 
‘‘after December 31, 2008, and which is placed in service before 
January 1, 2010’’ and inserting ‘‘after December 31, 2017’’. 
(b) REPEAL OF REQUIRED USE OF 150-PERCENT DECLINING BAL-
ANCE METHOD.—Section 168(b)(2) is amended by striking subpara-
graph (B) and by redesignating subparagraphs (C) and (D) as sub-
paragraphs (B) and (C), respectively. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to property placed in service after December 31, 2017, 
in taxable years ending after such date. 
SEC. 13204. APPLICABLE RECOVERY PERIOD FOR REAL PROPERTY. 
(a) IMPROVEMENTS TO REAL PROPERTY.— 
(1) ELIMINATION OF QUALIFIED LEASEHOLD IMPROVEMENT, 
QUALIFIED RESTAURANT, AND QUALIFIED RETAIL IMPROVEMENT 
PROPERTY.—Subsection (e) of section 168 is amended— 
(A) in subparagraph (E) of paragraph (3)— 
(i) by striking clauses (iv), (v), and (ix), 
(ii) in clause (vii), by inserting ‘‘and’’ at the end, 
(iii) in clause (viii), by striking ‘‘, and’’ and 
inserting a period, and 
(iv) by redesignating clauses (vi), (vii), and (viii), 
as so amended, as clauses (iv), (v), and (vi), respec-
tively, and 
(B) by striking paragraphs (6), (7), and (8).
H. R. 1—58 
‘‘(A) IN GENERAL.—The term ‘qualified improvement 
property’ means any improvement to an interior portion 
of a building which is nonresidential real property if such 
improvement is placed in service after the date such 
building was first placed in service. 
‘‘(B) CERTAIN
IMPROVEMENTS
NOT
INCLUDED.—Such 
term shall not include any improvement for which the 
expenditure is attributable to— 
‘‘(i) the enlargement of the building, 
‘‘(ii) any elevator or escalator, or 
‘‘(iii) the internal structural framework of the 
building.’’, and 
(ii) in subsection (k), by striking paragraph (3). 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to property placed 
in service after December 31, 2017. 
(2) AMENDMENTS
RELATED
TO
ELECTING
REAL
PROPERTY 
TRADE
OR
BUSINESS.—The amendments made by subsection 
(a)(3)(A) shall apply to taxable years beginning after December 
31, 2017. 
SEC. 13205. USE OF ALTERNATIVE DEPRECIATION SYSTEM FOR 
ELECTING FARMING BUSINESSES. 
(a) IN GENERAL.—Section 168(g)(1), as amended by section 
13204, is amended by striking ‘‘and’’ at the end of subparagraph 
(E), by inserting ‘‘and’’ at the end of subparagraph (F), and by 
inserting after subparagraph (F) the following new subparagraph: 
‘‘(G) any property with a recovery period of 10 years 
or more which is held by an electing farming business 
(as defined in section 163(j)(7)(C)),’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13206. AMORTIZATION OF RESEARCH AND EXPERIMENTAL 
EXPENDITURES. 
(a) IN GENERAL.—Section 174 is amended to read as follows: 
‘‘SEC. 
174. 
AMORTIZATION 
OF 
RESEARCH 
AND 
EXPERIMENTAL 
EXPENDITURES. 
‘‘(a) IN GENERAL.—In the case of a taxpayer’s specified research 
or experimental expenditures for any taxable year— 
‘‘(1) except as provided in paragraph (2), no deduction shall 
be allowed for such expenditures, and 
‘‘(2) the taxpayer shall— 
‘‘(A) charge such expenditures to capital account, and 
‘‘(B) be allowed an amortization deduction of such 
expenditures ratably over the 5-year period (15-year period 
in the case of any specified research or experimental 
expenditures which are attributable to foreign research 
(within the meaning of section 41(d)(4)(F))) beginning with 
the midpoint of the taxable year in which such expenditures 
are paid or incurred. 
‘‘(b) SPECIFIED RESEARCH OR EXPERIMENTAL EXPENDITURES.— 
For purposes of this section, the term ‘specified research or experi-
mental expenditures’ means, with respect to any taxable year, 
research or experimental expenditures which are paid or incurred
H. R. 1—59 
by the taxpayer during such taxable year in connection with the 
taxpayer’s trade or business. 
‘‘(c) SPECIAL RULES.— 
‘‘(1) LAND AND OTHER PROPERTY.—This section shall not 
apply to any expenditure for the acquisition or improvement 
of land, or for the acquisition or improvement of property to 
be used in connection with the research or experimentation 
and of a character which is subject to the allowance under 
section 167 (relating to allowance for depreciation, etc.) or sec-
tion 611 (relating to allowance for depletion); but for purposes 
of this section allowances under section 167, and allowances 
under section 611, shall be considered as expenditures. 
‘‘(2) EXPLORATION EXPENDITURES.—This section shall not 
apply to any expenditure paid or incurred for the purpose 
of ascertaining the existence, location, extent, or quality of 
any deposit of ore or other mineral (including oil and gas). 
‘‘(3) SOFTWARE DEVELOPMENT.—For purposes of this sec-
tion, any amount paid or incurred in connection with the 
development of any software shall be treated as a research 
or experimental expenditure. 
‘‘(d) TREATMENT UPON DISPOSITION, RETIREMENT, OR ABANDON-
MENT.—If any property with respect to which specified research 
or experimental expenditures are paid or incurred is disposed, 
retired, or abandoned during the period during which such expendi-
tures are allowed as an amortization deduction under this section, 
no deduction shall be allowed with respect to such expenditures 
on account of such disposition, retirement, or abandonment and 
such amortization deduction shall continue with respect to such 
expenditures.’’. 
(b) CHANGE IN METHOD OF ACCOUNTING.—The amendments 
made by subsection (a) shall be treated as a change in method 
of accounting for purposes of section 481 of the Internal Revenue 
Code of 1986 and— 
(1) such change shall be treated as initiated by the tax-
payer, 
(2) such change shall be treated as made with the consent 
of the Secretary, and 
(3) such change shall be applied only on a cut-off basis 
for any research or experimental expenditures paid or incurred 
in taxable years beginning after December 31, 2021, and no 
adjustments under section 481(a) shall be made. 
(c) CLERICAL AMENDMENT.—The table of sections for part VI 
of subchapter B of chapter 1 is amended by striking the item 
relating to section 174 and inserting the following new item: 
‘‘Sec. 174. Amortization of research and experimental expenditures.’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Section 41(d)(1)(A) is amended by striking ‘‘expenses 
under section 174’’ and inserting ‘‘specified research or experi-
mental expenditures under section 174’’. 
(2) Subsection (c) of section 280C is amended— 
(A) by striking paragraph (1) and inserting the fol-
lowing: 
‘‘(1) IN GENERAL.—If— 
‘‘(A) the amount of the credit determined for the taxable 
year under section 41(a)(1), exceeds
H. R. 1—60 
‘‘(B) the amount allowable as a deduction for such 
taxable year for qualified research expenses or basic 
research expenses, 
the amount chargeable to capital account for the taxable year 
for such expenses shall be reduced by the amount of such 
excess.’’, 
(B) by striking paragraph (2), 
(C) by redesignating paragraphs (3) (as amended by 
this Act) and (4) as paragraphs (2) and (3), respectively, 
and 
(D) in paragraph (2), as redesignated by subparagraph 
(C), by striking ‘‘paragraphs (1) and (2)’’ and inserting 
‘‘paragraph (1)’’. 
(e) EFFECTIVE DATE.—The amendments made by this section 
shall apply to amounts paid or incurred in taxable years beginning 
after December 31, 2021. 
SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANTING CITRUS 
PLANTS LOST BY REASON OF CASUALTY. 
(a) IN GENERAL.—Section 263A(d)(2) is amended by adding 
at the end the following new subparagraph: 
‘‘(C) SPECIAL TEMPORARY RULE FOR CITRUS PLANTS LOST 
BY REASON OF CASUALTY.— 
‘‘(i) IN GENERAL.—In the case of the replanting 
of citrus plants, subparagraph (A) shall apply to 
amounts paid or incurred by a person (other than 
the taxpayer described in subparagraph (A)) if— 
‘‘(I) the taxpayer described in subparagraph 
(A) has an equity interest of not less than 50 
percent in the replanted citrus plants at all times 
during the taxable year in which such amounts 
were paid or incurred and such other person holds 
any part of the remaining equity interest, or 
‘‘(II) such other person acquired the entirety 
of such taxpayer’s equity interest in the land on 
which the lost or damaged citrus plants were 
located at the time of such loss or damage, and 
the replanting is on such land. 
‘‘(ii) TERMINATION.—Clause (i) shall not apply to 
any cost paid or incurred after the date which is 10 
years after the date of the enactment of the Tax Cuts 
and Jobs Act.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to costs paid or incurred after the date of the enactment 
of this Act. 
Subpart B—Accounting Methods 
SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR OF INCLU-
SION. 
(a) INCLUSION NOT LATER THAN FOR FINANCIAL ACCOUNTING 
PURPOSES.—Section 451 is amended by redesignating subsections 
(b) through (i) as subsections (c) through (j), respectively, and by 
inserting after subsection (a) the following new subsection: 
‘‘(b) INCLUSION NOT LATER THAN FOR FINANCIAL ACCOUNTING 
PURPOSES.—
H. R. 1—61 
‘‘(1) INCOME
TAKEN
INTO
ACCOUNT
IN
FINANCIAL
STATE-
MENT.— 
‘‘(A) IN GENERAL.—In the case of a taxpayer the taxable 
income of which is computed under an accrual method 
of accounting, the all events test with respect to any item 
of gross income (or portion thereof) shall not be treated 
as met any later than when such item (or portion thereof) 
is taken into account as revenue in— 
‘‘(i) an applicable financial statement of the tax-
payer, or 
‘‘(ii) such other financial statement as the Sec-
retary may specify for purposes of this subsection. 
‘‘(B) EXCEPTION.—This paragraph shall not apply to— 
‘‘(i) a taxpayer which does not have a financial 
statement described in clause (i) or (ii) of subparagraph 
(A) for a taxable year, or 
‘‘(ii) any item of gross income in connection with 
a mortgage servicing contract. 
‘‘(C) ALL EVENTS TEST.—For purposes of this section, 
the all events test is met with respect to any item of 
gross income if all the events have occurred which fix 
the right to receive such income and the amount of such 
income can be determined with reasonable accuracy. 
‘‘(2) 
COORDINATION
WITH
SPECIAL
METHODS
OF 
ACCOUNTING.—Paragraph (1) shall not apply with respect to 
any item of gross income for which the taxpayer uses a special 
method of accounting provided under any other provision of 
this chapter, other than any provision of part V of subchapter 
P (except as provided in clause (ii) of paragraph (1)(B)). 
‘‘(3) APPLICABLE FINANCIAL STATEMENT.—For purposes of 
this subsection, the term ‘applicable financial statement’ 
means— 
‘‘(A) a financial statement which is certified as being 
prepared in accordance with generally accepted accounting 
principles and which is— 
‘‘(i) a 10–K (or successor form), or annual state-
ment to shareholders, required to be filed by the tax-
payer with the United States Securities and Exchange 
Commission, 
‘‘(ii) an audited financial statement of the taxpayer 
which is used for— 
‘‘(I) credit purposes, 
‘‘(II) reporting to shareholders, partners, or 
other proprietors, or to beneficiaries, or 
‘‘(III) any other substantial nontax purpose, 
but only if there is no statement of the taxpayer 
described in clause (i), or 
‘‘(iii) filed by the taxpayer with any other Federal 
agency for purposes other than Federal tax purposes, 
but only if there is no statement of the taxpayer 
described in clause (i) or (ii), 
‘‘(B) a financial statement which is made on the basis 
of international financial reporting standards and is filed 
by the taxpayer with an agency of a foreign government 
which is equivalent to the United States Securities and 
Exchange Commission and which has reporting standards 
not less stringent than the standards required by such
H. R. 1—62 
Commission, but only if there is no statement of the tax-
payer described in subparagraph (A), or 
‘‘(C) a financial statement filed by the taxpayer with 
any other regulatory or governmental body specified by 
the Secretary, but only if there is no statement of the 
taxpayer described in subparagraph (A) or (B). 
‘‘(4) ALLOCATION OF TRANSACTION PRICE.—For purposes of 
this subsection, in the case of a contract which contains multiple 
performance obligations, the allocation of the transaction price 
to each performance obligation shall be equal to the amount 
allocated to each performance obligation for purposes of 
including such item in revenue in the applicable financial state-
ment of the taxpayer. 
‘‘(5) GROUP OF ENTITIES.—For purposes of paragraph (1), 
if the financial results of a taxpayer are reported on the 
applicable financial statement (as defined in paragraph (3)) 
for a group of entities, such statement shall be treated as 
the applicable financial statement of the taxpayer.’’. 
(b) TREATMENT
OF
ADVANCE
PAYMENTS.—Section 451, as 
amended by subsection (a), is amended by redesignating subsections 
(c) through (j) as subsections (d) through (k), respectively, and 
by inserting after subsection (b) the following new subsection: 
‘‘(c) TREATMENT OF ADVANCE PAYMENTS.— 
‘‘(1) IN
GENERAL.—A taxpayer which computes taxable 
income under the accrual method of accounting, and receives 
any advance payment during the taxable year, shall— 
‘‘(A) except as provided in subparagraph (B), include 
such advance payment in gross income for such taxable 
year, or 
‘‘(B) if the taxpayer elects the application of this 
subparagraph with respect to the category of advance pay-
ments to which such advance payment belongs, the tax-
payer shall— 
‘‘(i) to the extent that any portion of such advance 
payment is required under subsection (b) to be included 
in gross income in the taxable year in which such 
payment is received, so include such portion, and 
‘‘(ii) include the remaining portion of such advance 
payment in gross income in the taxable year following 
the taxable year in which such payment is received. 
‘‘(2) ELECTION.— 
‘‘(A) IN
GENERAL.—Except as otherwise provided in 
this paragraph, the election under paragraph (1)(B) shall 
be made at such time, in such form and manner, and 
with respect to such categories of advance payments, as 
the Secretary may provide. 
‘‘(B) PERIOD TO WHICH ELECTION APPLIES.—An election 
under paragraph (1)(B) shall be effective for the taxable 
year with respect to which it is first made and for all 
subsequent taxable years, unless the taxpayer secures the 
consent of the Secretary to revoke such election. For pur-
poses of this title, the computation of taxable income under 
an election made under paragraph (1)(B) shall be treated 
as a method of accounting. 
‘‘(3) TAXPAYERS CEASING TO EXIST.—Except as otherwise 
provided by the Secretary, the election under paragraph (1)(B) 
shall not apply with respect to advance payments received
H. R. 1—63 
by the taxpayer during a taxable year if such taxpayer ceases 
to exist during (or with the close of) such taxable year. 
‘‘(4) ADVANCE PAYMENT.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘advance payment’ means 
any payment— 
‘‘(i) the full inclusion of which in the gross income 
of the taxpayer for the taxable year of receipt is a 
permissible method of accounting under this section 
(determined without regard to this subsection), 
‘‘(ii) any portion of which is included in revenue 
by the taxpayer in a financial statement described 
in clause (i) or (ii) of subsection (b)(1)(A) for a subse-
quent taxable year, and 
‘‘(iii) which is for goods, services, or such other 
items as may be identified by the Secretary for pur-
poses of this clause. 
‘‘(B) EXCLUSIONS.—Except as otherwise provided by 
the Secretary, such term shall not include— 
‘‘(i) rent, 
‘‘(ii) insurance premiums governed by subchapter 
L, 
‘‘(iii) 
payments 
with 
respect 
to 
financial 
instruments, 
‘‘(iv) payments with respect to warranty or guar-
antee contracts under which a third party is the pri-
mary obligor, 
‘‘(v) payments subject to section 871(a), 881, 1441, 
or 1442, 
‘‘(vi) payments in property to which section 83 
applies, and 
‘‘(vii) any other payment identified by the Sec-
retary for purposes of this subparagraph. 
‘‘(C) RECEIPT.—For purposes of this subsection, an item 
of gross income is received by the taxpayer if it is actually 
or constructively received, or if it is due and payable to 
the taxpayer. 
‘‘(D) ALLOCATION
OF
TRANSACTION
PRICE.—For pur-
poses of this subsection, rules similar to subsection (b)(4) 
shall apply.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
(d) COORDINATION WITH SECTION 481.— 
(1) IN GENERAL.—In the case of any qualified change in 
method of accounting for the taxpayer’s first taxable year begin-
ning after December 31, 2017— 
(A) such change shall be treated as initiated by the 
taxpayer, and 
(B) such change shall be treated as made with the 
consent of the Secretary of the Treasury. 
(2) QUALIFIED CHANGE IN METHOD OF ACCOUNTING.—For 
purposes of this subsection, the term ‘‘qualified change in 
method of accounting’’ means any change in method of 
accounting which— 
(A) is required by the amendments made by this sec-
tion, or
H. R. 1—64 
(B) was prohibited under the Internal Revenue Code 
of 1986 prior to such amendments and is permitted under 
such Code after such amendments. 
(e) SPECIAL RULES FOR ORIGINAL ISSUE DISCOUNT.—Notwith-
standing subsection (c), in the case of income from a debt instrument 
having original issue discount— 
(1) the amendments made by this section shall apply to 
taxable years beginning after December 31, 2018, and 
(2) the period for taking into account any adjustments 
under section 481 by reason of a qualified change in method 
of accounting (as defined in subsection (d)) shall be 6 years. 
PART IV—BUSINESS-RELATED EXCLUSIONS 
AND DEDUCTIONS 
SEC. 13301. LIMITATION ON DEDUCTION FOR INTEREST. 
(a) IN GENERAL.—Section 163(j) is amended to read as follows: 
‘‘(j) LIMITATION ON BUSINESS INTEREST.— 
‘‘(1) IN
GENERAL.—The amount allowed as a deduction 
under this chapter for any taxable year for business interest 
shall not exceed the sum of— 
‘‘(A) the business interest income of such taxpayer 
for such taxable year, 
‘‘(B) 30 percent of the adjusted taxable income of such 
taxpayer for such taxable year, plus 
‘‘(C) the floor plan financing interest of such taxpayer 
for such taxable year. 
The amount determined under subparagraph (B) shall not be 
less than zero. 
‘‘(2) CARRYFORWARD OF DISALLOWED BUSINESS INTEREST.— 
The amount of any business interest not allowed as a deduction 
for any taxable year by reason of paragraph (1) shall be treated 
as business interest paid or accrued in the succeeding taxable 
year. 
‘‘(3) EXEMPTION FOR CERTAIN SMALL BUSINESSES.—In the 
case of any taxpayer (other than a tax shelter prohibited from 
using the cash receipts and disbursements method of accounting 
under section 448(a)(3)) which meets the gross receipts test 
of section 448(c) for any taxable year, paragraph (1) shall 
not apply to such taxpayer for such taxable year. In the case 
of any taxpayer which is not a corporation or a partnership, 
the gross receipts test of section 448(c) shall be applied in 
the same manner as if such taxpayer were a corporation or 
partnership. 
‘‘(4) APPLICATION TO PARTNERSHIPS, ETC.— 
‘‘(A) IN GENERAL.—In the case of any partnership— 
‘‘(i) this subsection shall be applied at the partner-
ship level and any deduction for business interest shall 
be taken into account in determining the non-sepa-
rately stated taxable income or loss of the partnership, 
and 
‘‘(ii) the adjusted taxable income of each partner 
of such partnership— 
‘‘(I) shall be determined without regard to such 
partner’s distributive share of any items of income, 
gain, deduction, or loss of such partnership, and
H. R. 1—65 
‘‘(II) shall be increased by such partner’s 
distributive share of such partnership’s excess tax-
able income. 
For purposes of clause (ii)(II), a partner’s distributive 
share of partnership excess taxable income shall be 
determined in the same manner as the partner’s 
distributive share of nonseparately stated taxable 
income or loss of the partnership. 
‘‘(B) SPECIAL RULES FOR CARRYFORWARDS.— 
‘‘(i) IN
GENERAL.—The amount of any business 
interest not allowed as a deduction to a partnership 
for any taxable year by reason of paragraph (1) for 
any taxable year— 
‘‘(I) shall not be treated under paragraph (2) 
as business interest paid or accrued by the partner-
ship in the succeeding taxable year, and 
‘‘(II) shall, subject to clause (ii), be treated 
as excess business interest which is allocated to 
each partner in the same manner as the non- 
separately stated taxable income or loss of the 
partnership. 
‘‘(ii) TREATMENT
OF
EXCESS
BUSINESS
INTEREST 
ALLOCATED
TO
PARTNERS.—If a partner is allocated 
any excess business interest from a partnership under 
clause (i) for any taxable year— 
‘‘(I) such excess business interest shall be 
treated as business interest paid or accrued by 
the partner in the next succeeding taxable year 
in which the partner is allocated excess taxable 
income from such partnership, but only to the 
extent of such excess taxable income, and 
‘‘(II) any portion of such excess business 
interest remaining after the application of sub-
clause (I) shall, subject to the limitations of sub-
clause (I), be treated as business interest paid 
or accrued in succeeding taxable years. 
For purposes of applying this paragraph, excess taxable 
income allocated to a partner from a partnership for 
any taxable year shall not be taken into account under 
paragraph (1)(A) with respect to any business interest 
other than excess business interest from the partner-
ship until all such excess business interest for such 
taxable year and all preceding taxable years has been 
treated as paid or accrued under clause (ii). 
‘‘(iii) BASIS ADJUSTMENTS.— 
‘‘(I) IN
GENERAL.—The adjusted basis of a 
partner in a partnership interest shall be reduced 
(but not below zero) by the amount of excess busi-
ness interest allocated to the partner under clause 
(i)(II). 
‘‘(II) SPECIAL
RULE
FOR
DISPOSITIONS.—If a 
partner disposes of a partnership interest, the 
adjusted basis of the partner in the partnership 
interest shall be increased immediately before the 
disposition by the amount of the excess (if any) 
of the amount of the basis reduction under sub-
clause (I) over the portion of any excess business
H. R. 1—66 
interest allocated to the partner under clause (i)(II) 
which has previously been treated under clause 
(ii) as business interest paid or accrued by the 
partner. The preceding sentence shall also apply 
to transfers of the partnership interest (including 
by reason of death) in a transaction in which gain 
is not recognized in whole or in part. No deduction 
shall be allowed to the transferor or transferee 
under this chapter for any excess business interest 
resulting in a basis increase under this subclause. 
‘‘(C) EXCESS TAXABLE INCOME.—The term ‘excess tax-
able income’ means, with respect to any partnership, the 
amount which bears the same ratio to the partnership’s 
adjusted taxable income as— 
‘‘(i) the excess (if any) of— 
‘‘(I) the amount determined for the partnership 
under paragraph (1)(B), over 
‘‘(II) the amount (if any) by which the business 
interest of the partnership, reduced by the floor 
plan financing interest, exceeds the business 
interest income of the partnership, bears to 
‘‘(ii) the amount determined for the partnership 
under paragraph (1)(B). 
‘‘(D) APPLICATION TO S CORPORATIONS.—Rules similar 
to the rules of subparagraphs (A) and (C) shall apply with 
respect to any S corporation and its shareholders. 
‘‘(5) BUSINESS INTEREST.—For purposes of this subsection, 
the term ‘business interest’ means any interest paid or accrued 
on indebtedness properly allocable to a trade or business. Such 
term shall not include investment interest (within the meaning 
of subsection (d)). 
‘‘(6) BUSINESS INTEREST INCOME.—For purposes of this sub-
section, the term ‘business interest income’ means the amount 
of interest includible in the gross income of the taxpayer for 
the taxable year which is properly allocable to a trade or 
business. Such term shall not include investment income 
(within the meaning of subsection (d)). 
‘‘(7) TRADE OR BUSINESS.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘trade or business’ shall 
not include— 
‘‘(i) the trade or business of performing services 
as an employee, 
‘‘(ii) any electing real property trade or business, 
‘‘(iii) any electing farming business, or 
‘‘(iv) the trade or business of the furnishing or 
sale of— 
‘‘(I) electrical energy, water, or sewage disposal 
services, 
‘‘(II) gas or steam through a local distribution 
system, or 
‘‘(III) transportation of gas or steam by pipe-
line, 
if the rates for such furnishing or sale, as the case 
may be, have been established or approved by a State 
or political subdivision thereof, by any agency or 
instrumentality of the United States, by a public 
service or public utility commission or other similar
H. R. 1—67 
body of any State or political subdivision thereof, or 
by the governing or ratemaking body of an electric 
cooperative. 
‘‘(B) ELECTING REAL PROPERTY TRADE OR BUSINESS.— 
For purposes of this paragraph, the term ‘electing real 
property trade or business’ means any trade or business 
which is described in section 469(c)(7)(C) and which makes 
an election under this subparagraph. Any such election 
shall be made at such time and in such manner as the 
Secretary shall prescribe, and, once made, shall be irrev-
ocable. 
‘‘(C) ELECTING
FARMING
BUSINESS.—For purposes of 
this paragraph, the term ‘electing farming business’ 
means— 
‘‘(i) a farming business (as defined in section 
263A(e)(4)) which makes an election under this 
subparagraph, or 
‘‘(ii) any trade or business of a specified agricul-
tural or horticultural cooperative (as defined in section 
199A(g)(2)) with respect to which the cooperative 
makes an election under this subparagraph. 
Any such election shall be made at such time and in 
such manner as the Secretary shall prescribe, and, once 
made, shall be irrevocable. 
‘‘(8) ADJUSTED TAXABLE INCOME.—For purposes of this sub-
section, the term ‘adjusted taxable income’ means the taxable 
income of the taxpayer— 
‘‘(A) computed without regard to— 
‘‘(i) any item of income, gain, deduction, or loss 
which is not properly allocable to a trade or business, 
‘‘(ii) any business interest or business interest 
income, 
‘‘(iii) the amount of any net operating loss deduc-
tion under section 172, 
‘‘(iv) the amount of any deduction allowed under 
section 199A, and 
‘‘(v) in the case of taxable years beginning before 
January 1, 2022, any deduction allowable for deprecia-
tion, amortization, or depletion, and 
‘‘(B) computed with such other adjustments as provided 
by the Secretary. 
‘‘(9) FLOOR PLAN FINANCING INTEREST DEFINED.—For pur-
poses of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘floor plan financing 
interest’ means interest paid or accrued on floor plan 
financing indebtedness. 
‘‘(B) FLOOR PLAN FINANCING INDEBTEDNESS.—The term 
‘floor plan financing indebtedness’ means indebtedness— 
‘‘(i) used to finance the acquisition of motor vehicles 
held for sale or lease, and 
‘‘(ii) secured by the inventory so acquired. 
‘‘(C) MOTOR VEHICLE.—The term ‘motor vehicle’ means 
a motor vehicle that is any of the following: 
‘‘(i) Any self-propelled vehicle designed for trans-
porting persons or property on a public street, highway, 
or road. 
‘‘(ii) A boat.
H. R. 1—68 
‘‘(iii) Farm machinery or equipment. 
‘‘(10) CROSS REFERENCES.— 
‘‘(A) For requirement that an electing real property 
trade or business use the alternative depreciation system, 
see section 168(g)(1)(F). 
‘‘(B) For requirement that an electing farming business 
use the alternative depreciation system, see section 
168(g)(1)(G).’’. 
(b) TREATMENT OF CARRYFORWARD OF DISALLOWED BUSINESS 
INTEREST IN CERTAIN CORPORATE ACQUISITIONS.— 
(1) IN GENERAL.—Section 381(c) is amended by inserting 
after paragraph (19) the following new paragraph: 
‘‘(20) CARRYFORWARD OF DISALLOWED BUSINESS INTEREST.— 
The carryover of disallowed business interest described in sec-
tion 163(j)(2) to taxable years ending after the date of distribu-
tion or transfer.’’. 
(2) APPLICATION OF LIMITATION.—Section 382(d) is amended 
by adding at the end the following new paragraph: 
‘‘(3) APPLICATION
TO
CARRYFORWARD
OF
DISALLOWED 
INTEREST.—The term ‘pre-change loss’ shall include any carry-
over of disallowed interest described in section 163(j)(2) under 
rules similar to the rules of paragraph (1).’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
382(k)(1) 
is 
amended by inserting after the first sentence the following: 
‘‘Such term shall include any corporation entitled to use a 
carryforward of disallowed interest described in section 
381(c)(20).’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13302. MODIFICATION OF NET OPERATING LOSS DEDUCTION. 
(a) LIMITATION ON DEDUCTION.— 
(1) IN GENERAL.—Section 172(a) is amended to read as 
follows: 
‘‘(a) DEDUCTION ALLOWED.—There shall be allowed as a deduc-
tion for the taxable year an amount equal to the lesser of— 
‘‘(1) the aggregate of the net operating loss carryovers 
to such year, plus the net operating loss carrybacks to such 
year, or 
‘‘(2) 80 percent of taxable income computed without regard 
to the deduction allowable under this section. 
For purposes of this subtitle, the term ‘net operating loss deduction’ 
means the deduction allowed by this subsection.’’. 
(2) COORDINATION OF LIMITATION WITH CARRYBACKS AND 
CARRYOVERS.—Section 172(b)(2) is amended by striking ‘‘shall 
be computed—’’ and all that follows and inserting ‘‘shall— 
‘‘(A) be computed with the modifications specified in 
subsection (d) other than paragraphs (1), (4), and (5) 
thereof, and by determining the amount of the net oper-
ating loss deduction without regard to the net operating 
loss for the loss year or for any taxable year thereafter, 
‘‘(B) not be considered to be less than zero, and 
‘‘(C) not exceed the amount determined under sub-
section (a)(2) for such prior taxable year.’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
172(d)(6) 
is 
amended by striking ‘‘and’’ at the end of subparagraph (A), 
by striking the period at the end of subparagraph (B) and
H. R. 1—69 
inserting ‘‘; and’’, and by adding at the end the following new 
subparagraph: 
‘‘(C) subsection (a)(2) shall be applied by substituting 
‘real estate investment trust taxable income (as defined 
in section 857(b)(2) but without regard to the deduction 
for dividends paid (as defined in section 561))’ for ‘taxable 
income’.’’. 
(b) REPEAL OF NET OPERATING LOSS CARRYBACK; INDEFINITE 
CARRYFORWARD.— 
(1) IN GENERAL.—Section 172(b)(1)(A) is amended— 
(A) by striking ‘‘shall be a net operating loss carryback 
to each of the 2 taxable years’’ in clause (i) and inserting 
‘‘except as otherwise provided in this paragraph, shall not 
be a net operating loss carryback to any taxable year’’, 
and 
(B) by striking ‘‘to each of the 20 taxable years’’ in 
clause (ii) and inserting ‘‘to each taxable year’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
172(b)(1) 
is 
amended by striking subparagraphs (B) through (F). 
(c) TREATMENT OF FARMING LOSSES.— 
(1) ALLOWANCE
OF
CARRYBACKS.—Section 172(b)(1), as 
amended by subsection (b)(2), is amended by adding at the 
end the following new subparagraph: 
‘‘(B) FARMING LOSSES.— 
‘‘(i) IN GENERAL.—In the case of any portion of 
a net operating loss for the taxable year which is 
a farming loss with respect to the taxpayer, such loss 
shall be a net operating loss carryback to each of 
the 2 taxable years preceding the taxable year of such 
loss. 
‘‘(ii) FARMING LOSS.—For purposes of this section, 
the term ‘farming loss’ means the lesser of— 
‘‘(I) the amount which would be the net oper-
ating loss for the taxable year if only income and 
deductions attributable to farming businesses (as 
defined in section 263A(e)(4)) are taken into 
account, or 
‘‘(II) the amount of the net operating loss for 
such taxable year. 
‘‘(iii) COORDINATION WITH PARAGRAPH (2).—For pur-
poses of applying paragraph (2), a farming loss for 
any taxable year shall be treated as a separate net 
operating loss for such taxable year to be taken into 
account after the remaining portion of the net oper-
ating loss for such taxable year. 
‘‘(iv) ELECTION.—Any taxpayer entitled to a 2-year 
carryback under clause (i) from any loss year may 
elect not to have such clause apply to such loss year. 
Such election shall be made in such manner as pre-
scribed by the Secretary and shall be made by the 
due date (including extensions of time) for filing the 
taxpayer’s return for the taxable year of the net oper-
ating loss. Such election, once made for any taxable 
year, shall be irrevocable for such taxable year.’’. 
(2) CONFORMING AMENDMENTS.—
H. R. 1—70 
(A) Section 172 is amended by striking subsections 
(f), (g), and (h), and by redesignating subsection (i) as 
subsection (f). 
(B) Section 537(b)(4) is amended by inserting ‘‘(as in 
effect before the date of enactment of the Tax Cuts and 
Jobs Act)’’ after ‘‘as defined in section 172(f)’’. 
(d) TREATMENT OF CERTAIN INSURANCE LOSSES.— 
(1) TREATMENT OF CARRYFORWARDS AND CARRYBACKS.—Sec-
tion 172(b)(1), as amended by subsections (b)(2) and (c)(1), 
is amended by adding at the end the following new subpara-
graph: 
‘‘(C) INSURANCE COMPANIES.—In the case of an insur-
ance company (as defined in section 816(a)) other than 
a life insurance company, the net operating loss for any 
taxable year— 
‘‘(i) shall be a net operating loss carryback to each 
of the 2 taxable years preceding the taxable year of 
such loss, and 
‘‘(ii) shall be a net operating loss carryover to 
each of the 20 taxable years following the taxable 
year of the loss.’’. 
(2) EXEMPTION FROM LIMITATION.—Section 172, as amended 
by subsection (c)(2)(A), is amended by redesignating subsection 
(f) as subsection (g) and inserting after subsection (e) the fol-
lowing new subsection: 
‘‘(f) SPECIAL RULE FOR INSURANCE COMPANIES.—In the case 
of an insurance company (as defined in section 816(a)) other than 
a life insurance company— 
‘‘(1) the amount of the deduction allowed under subsection 
(a) shall be the aggregate of the net operating loss carryovers 
to such year, plus the net operating loss carrybacks to such 
year, and 
‘‘(2) subparagraph (C) of subsection (b)(2) shall not apply.’’. 
(e) EFFECTIVE DATE.— 
(1) NET
OPERATING
LOSS
LIMITATION.—The amendments 
made by subsections (a) and (d)(2) shall apply to losses arising 
in taxable years beginning after December 31, 2017. 
(2) CARRYFORWARDS AND CARRYBACKS.—The amendments 
made by subsections (b), (c), and (d)(1) shall apply to net 
operating losses arising in taxable years ending after December 
31, 2017. 
SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY. 
(a) IN GENERAL.—Section 1031(a)(1) is amended by striking 
‘‘property’’ each place it appears and inserting ‘‘real property’’. 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Paragraph (2) of section 1031(a) is amended to read 
as follows: 
‘‘(2) EXCEPTION FOR REAL PROPERTY HELD FOR SALE.—This 
subsection shall not apply to any exchange of real property 
held primarily for sale.’’. 
(B) Section 1031 is amended by striking subsection (i). 
(2) Section 1031 is amended by striking subsection (e). 
(3) Section 1031, as amended by paragraph (2), is amended 
by inserting after subsection (d) the following new subsection: 
‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.—For purposes of 
this section, an interest in a partnership which has in effect a
H. R. 1—71 
valid election under section 761(a) to be excluded from the applica-
tion of all of subchapter K shall be treated as an interest in 
each of the assets of such partnership and not as an interest 
in a partnership.’’. 
(4) Section 1031(h) is amended to read as follows: 
‘‘(h) SPECIAL RULES FOR FOREIGN REAL PROPERTY.—Real prop-
erty located in the United States and real property located outside 
the United States are not property of a like kind.’’. 
(5) The heading of section 1031 is amended by striking 
‘‘PROPERTY’’ and inserting ‘‘REAL PROPERTY’’. 
(6) The table of sections for part III of subchapter O of 
chapter 1 is amended by striking the item relating to section 
1031 and inserting the following new item: 
‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided in this sub-
section, the amendments made by this section shall apply to 
exchanges completed after December 31, 2017. 
(2) TRANSITION RULE.—The amendments made by this sec-
tion shall not apply to any exchange if— 
(A) the property disposed of by the taxpayer in the 
exchange is disposed of on or before December 31, 2017, 
or 
(B) the property received by the taxpayer in the 
exchange is received on or before December 31, 2017. 
SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF EXPENSES 
FOR FRINGE BENEFITS. 
(a) NO DEDUCTION ALLOWED FOR ENTERTAINMENT EXPENSES.— 
(1) IN GENERAL.—Section 274(a) is amended— 
(A) in paragraph (1)(A), by striking ‘‘unless’’ and all 
that follows through ‘‘trade or business,’’, 
(B) by striking the flush sentence at the end of para-
graph (1), and 
(C) by striking paragraph (2)(C). 
(2) CONFORMING AMENDMENTS.— 
(A) Section 274(d) is amended— 
(i) by striking paragraph (2) and redesignating 
paragraphs (3) and (4) as paragraphs (2) and (3), 
respectively, and 
(ii) in the flush text following paragraph (3) (as 
so redesignated)— 
(I) by striking ‘‘, entertainment, amusement, 
recreation, or use of the facility or property,’’ in 
item (B), and 
(II) by striking ‘‘(D) the business relationship 
to the taxpayer of persons entertained, using the 
facility or property, or receiving the gift’’ and 
inserting ‘‘(D) the business relationship to the tax-
payer of the person receiving the benefit’’, 
(B) Section 274 is amended by striking subsection (l). 
(C) Section 274(n) is amended by striking ‘‘AND ENTER-
TAINMENT’’ in the heading. 
(D) Section 274(n)(1) is amended to read as follows: 
‘‘(1) IN GENERAL.—The amount allowable as a deduction 
under this chapter for any expense for food or beverages shall
H. R. 1—72 
not exceed 50 percent of the amount of such expense which 
would (but for this paragraph) be allowable as a deduction 
under this chapter.’’. 
(E) Section 274(n)(2) is amended— 
(i) in subparagraph (B), by striking ‘‘in the case 
of an expense for food or beverages,’’, 
(ii) by striking subparagraph (C) and redesignating 
subparagraphs (D) and (E) as subparagraphs (C) and 
(D), respectively, 
(iii) by striking ‘‘of subparagraph (E)’’ the last sen-
tence and inserting ‘‘of subparagraph (D)’’, and 
(iv) by striking ‘‘in subparagraph (D)’’ in the last 
sentence and inserting ‘‘in subparagraph (C)’’. 
(F) Clause (iv) of section 7701(b)(5)(A) is amended to 
read as follows: 
‘‘(iv) a professional athlete who is temporarily in 
the United States to compete in a sports event— 
‘‘(I) which is organized for the primary purpose 
of benefiting an organization which is described 
in section 501(c)(3) and exempt from tax under 
section 501(a), 
‘‘(II) all of the net proceeds of which are 
contributed to such organization, and, 
‘‘(III) which utilizes volunteers for substan-
tially all of the work performed in carrying out 
such event.’’. 
(b) ONLY 50 PERCENT OF EXPENSES FOR MEALS PROVIDED ON 
OR NEAR BUSINESS PREMISES ALLOWED AS DEDUCTION.—Paragraph 
(2) of section 274(n), as amended by subsection (a), is amended— 
(1) by striking subparagraph (B), 
(2) by redesignating subparagraphs (C) and (D) as subpara-
graphs (B) and (C), respectively, 
(3) by striking ‘‘of subparagraph (D)’’ in the last sentence 
and inserting ‘‘of subparagraph (C)’’, and 
(4) by striking ‘‘in subparagraph (C)’’ in the last sentence 
and inserting ‘‘in subparagraph (B)’’. 
(c) TREATMENT OF TRANSPORTATION BENEFITS.—Section 274, 
as amended by subsection (a), is amended— 
(1) in subsection (a)— 
(A) in the heading, by striking ‘‘OR RECREATION’’ and 
inserting ‘‘RECREATION, OR QUALIFIED TRANSPORTATION 
FRINGES’’, and 
(B) by adding at the end the following new paragraph: 
‘‘(4) QUALIFIED
TRANSPORTATION
FRINGES.—No deduction 
shall be allowed under this chapter for the expense of any 
qualified transportation fringe (as defined in section 132(f)) 
provided to an employee of the taxpayer.’’, and 
(2) by inserting after subsection (k) the following new sub-
section: 
‘‘(l) TRANSPORTATION AND COMMUTING BENEFITS.— 
‘‘(1) IN GENERAL.—No deduction shall be allowed under 
this chapter for any expense incurred for providing any 
transportation, or any payment or reimbursement, to an 
employee of the taxpayer in connection with travel between 
the employee’s residence and place of employment, except as 
necessary for ensuring the safety of the employee.
H. R. 1—73 
‘‘(2) EXCEPTION.—In the case of any qualified bicycle com-
muting reimbursement (as described in section 132(f)(5)(F)), 
this subsection shall not apply for any amounts paid or incurred 
after December 31, 2017, and before January 1, 2026.’’. 
(d) ELIMINATION OF DEDUCTION FOR MEALS PROVIDED AT CON-
VENIENCE OF EMPLOYER.—Section 274, as amended by subsection 
(c), is amended— 
(1) by redesignating subsection (o) as subsection (p), and 
(2) by inserting after subsection (n) the following new sub-
section: 
‘‘(o) MEALS PROVIDED
AT CONVENIENCE
OF EMPLOYER.—No 
deduction shall be allowed under this chapter for— 
‘‘(1) any expense for the operation of a facility described 
in section 132(e)(2), and any expense for food or beverages, 
including under section 132(e)(1), associated with such facility, 
or 
‘‘(2) any expense for meals described in section 119(a).’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to amounts 
incurred or paid after December 31, 2017. 
(2) EFFECTIVE DATE FOR ELIMINATION OF DEDUCTION FOR 
MEALS PROVIDED AT CONVENIENCE OF EMPLOYER.—The amend-
ments made by subsection (d) shall apply to amounts incurred 
or paid after December 31, 2025. 
SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO 
DOMESTIC PRODUCTION ACTIVITIES. 
(a) IN GENERAL.—Part VI of subchapter B of chapter 1 is 
amended by striking section 199 (and by striking the item relating 
to such section in the table of sections for such part). 
(b) CONFORMING AMENDMENTS.— 
(1) 
Sections 
74(d)(2)(B), 
86(b)(2)(A), 
135(c)(4)(A), 
137(b)(3)(A), 
219(g)(3)(A)(ii), 
221(b)(2)(C), 
222(b)(2)(C), 
246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking 
‘‘199,’’. 
(2) Section 170(b)(2)(D), as amended by subtitle A, is 
amended by striking clause (iv), and by redesignating clauses 
(v) and (vi) as clauses (iv) and (v). 
(3) Section 172(d) is amended by striking paragraph (7). 
(4) Section 613(a), as amended by section 11011, is 
amended by striking ‘‘and without the deduction under section 
199’’. 
(5) Section 613A(d)(1), as amended by section 11011, is 
amended by striking subparagraph (B) and by redesignating 
subparagraphs (C), (D), (E), and (F) as subparagraphs (B), 
(C), (D), and (E), respectively. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, 
AND OTHER AMOUNTS. 
(a) DENIAL OF DEDUCTION.— 
(1) IN GENERAL.—Subsection (f) of section 162 is amended 
to read as follows: 
‘‘(f) FINES, PENALTIES, AND OTHER AMOUNTS.— 
‘‘(1) IN GENERAL.—Except as provided in the following para-
graphs of this subsection, no deduction otherwise allowable
H. R. 1—74 
shall be allowed under this chapter for any amount paid or 
incurred (whether by suit, agreement, or otherwise) to, or at 
the direction of, a government or governmental entity in rela-
tion to the violation of any law or the investigation or inquiry 
by such government or entity into the potential violation of 
any law. 
‘‘(2) EXCEPTION FOR AMOUNTS CONSTITUTING RESTITUTION 
OR PAID TO COME INTO COMPLIANCE WITH LAW.— 
‘‘(A) IN GENERAL.—Paragraph (1) shall not apply to 
any amount that— 
‘‘(i) the taxpayer establishes— 
‘‘(I) constitutes restitution (including remedi-
ation of property) for damage or harm which was 
or may be caused by the violation of any law 
or the potential violation of any law, or 
‘‘(II) is paid to come into compliance with any 
law which was violated or otherwise involved in 
the investigation or inquiry described in paragraph 
(1), 
‘‘(ii) is identified as restitution or as an amount 
paid to come into compliance with such law, as the 
case may be, in the court order or settlement agree-
ment, and 
‘‘(iii) in the case of any amount of restitution for 
failure to pay any tax imposed under this title in 
the same manner as if such amount were such tax, 
would have been allowed as a deduction under this 
chapter if it had been timely paid. 
The identification under clause (ii) alone shall not be suffi-
cient to make the establishment required under clause 
(i). 
‘‘(B) LIMITATION.—Subparagraph (A) shall not apply 
to any amount paid or incurred as reimbursement to the 
government or entity for the costs of any investigation 
or litigation. 
‘‘(3) EXCEPTION FOR AMOUNTS PAID OR INCURRED AS THE 
RESULT OF CERTAIN COURT ORDERS.—Paragraph (1) shall not 
apply to any amount paid or incurred by reason of any order 
of a court in a suit in which no government or governmental 
entity is a party. 
‘‘(4) EXCEPTION FOR TAXES DUE.—Paragraph (1) shall not 
apply to any amount paid or incurred as taxes due. 
‘‘(5) TREATMENT
OF
CERTAIN
NONGOVERNMENTAL
REGU-
LATORY
ENTITIES.—For purposes of this subsection, the fol-
lowing nongovernmental entities shall be treated as govern-
mental entities: 
‘‘(A) Any nongovernmental entity which exercises self- 
regulatory powers (including imposing sanctions) in connec-
tion with a qualified board or exchange (as defined in 
section 1256(g)(7)). 
‘‘(B) To the extent provided in regulations, any non-
governmental entity which exercises self-regulatory powers 
(including imposing sanctions) as part of performing an 
essential governmental function.’’. 
(2) EFFECTIVE DATE.—The amendment made by this sub-
section shall apply to amounts paid or incurred on or after
H. R. 1—75 
the date of the enactment of this Act, except that such amend-
ments shall not apply to amounts paid or incurred under any 
binding order or agreement entered into before such date. Such 
exception shall not apply to an order or agreement requiring 
court approval unless the approval was obtained before such 
date. 
(b) REPORTING OF DEDUCTIBLE AMOUNTS.— 
(1) IN GENERAL.—Subpart B of part III of subchapter A 
of chapter 61 is amended by inserting after section 6050W 
the following new section: 
‘‘SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN FINES, PEN-
ALTIES, AND OTHER AMOUNTS. 
‘‘(a) REQUIREMENT OF REPORTING.— 
‘‘(1) IN GENERAL.—The appropriate official of any govern-
ment or any entity described in section 162(f)(5) which is 
involved in a suit or agreement described in paragraph (2) 
shall make a return in such form as determined by the Sec-
retary setting forth— 
‘‘(A) the amount required to be paid as a result of 
the suit or agreement to which paragraph (1) of section 
162(f) applies, 
‘‘(B) any amount required to be paid as a result of 
the suit or agreement which constitutes restitution or 
remediation of property, and 
‘‘(C) any amount required to be paid as a result of 
the suit or agreement for the purpose of coming into compli-
ance with any law which was violated or involved in the 
investigation or inquiry. 
‘‘(2) SUIT OR AGREEMENT DESCRIBED.— 
‘‘(A) IN GENERAL.—A suit or agreement is described 
in this paragraph if— 
‘‘(i) it is— 
‘‘(I) a suit with respect to a violation of any 
law over which the government or entity has 
authority and with respect to which there has 
been a court order, or 
‘‘(II) an agreement which is entered into with 
respect to a violation of any law over which the 
government or entity has authority, or with respect 
to an investigation or inquiry by the government 
or entity into the potential violation of any law 
over which such government or entity has 
authority, and 
‘‘(ii) the aggregate amount involved in all court 
orders and agreements with respect to the violation, 
investigation, or inquiry is $600 or more. 
‘‘(B) ADJUSTMENT OF REPORTING THRESHOLD.—The Sec-
retary shall adjust the $600 amount in subparagraph (A)(ii) 
as necessary in order to ensure the efficient administration 
of the internal revenue laws. 
‘‘(3) TIME OF FILING.—The return required under this sub-
section shall be filed at the time the agreement is entered 
into, as determined by the Secretary. 
‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVIDUALS INVOLVED 
IN
THE SETTLEMENT.—Every person required to make a return
H. R. 1—76 
under subsection (a) shall furnish to each person who is a party 
to the suit or agreement a written statement showing— 
‘‘(1) the name of the government or entity, and 
‘‘(2) the information supplied to the Secretary under sub-
section (a)(1). 
The written statement required under the preceding sentence shall 
be furnished to the person at the same time the government or 
entity provides the Secretary with the information required under 
subsection (a). 
‘‘(c) APPROPRIATE OFFICIAL DEFINED.—For purposes of this sec-
tion, the term ‘appropriate official’ means the officer or employee 
having control of the suit, investigation, or inquiry or the person 
appropriately designated for purposes of this section.’’. 
(2) CONFORMING AMENDMENT.—The table of sections for 
subpart B of part III of subchapter A of chapter 61 is amended 
by inserting after the item relating to section 6050W the fol-
lowing new item: 
‘‘Sec. 6050X. Information with respect to certain fines, penalties, and other 
amounts.’’. 
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to amounts paid or incurred on or after 
the date of the enactment of this Act, except that such amend-
ments shall not apply to amounts paid or incurred under any 
binding order or agreement entered into before such date. Such 
exception shall not apply to an order or agreement requiring 
court approval unless the approval was obtained before such 
date. 
SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO 
NONDISCLOSURE AGREEMENTS PAID IN CONNECTION 
WITH SEXUAL HARASSMENT OR SEXUAL ABUSE. 
(a) DENIAL OF DEDUCTION.—Section 162 is amended by redesig-
nating subsection (q) as subsection (r) and by inserting after sub-
section (p) the following new subsection: 
‘‘(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL 
ABUSE.—No deduction shall be allowed under this chapter for— 
‘‘(1) any settlement or payment related to sexual harass-
ment or sexual abuse if such settlement or payment is subject 
to a nondisclosure agreement, or 
‘‘(2) attorney’s fees related to such a settlement or pay-
ment.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to amounts paid or incurred after the date of the 
enactment of this Act. 
SEC. 13308. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES. 
(a) IN GENERAL.—Section 162(e) is amended by striking para-
graphs (2) and (7) and by redesignating paragraphs (3), (4), (5), 
(6), and (8) as paragraphs (2), (3), (4), (5), and (6), respectively. 
(b) CONFORMING
AMENDMENT.—Section 6033(e)(1)(B)(ii) is 
amended by striking ‘‘section 162(e)(5)(B)(ii)’’ and inserting ‘‘section 
162(e)(4)(B)(ii)’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to amounts paid or incurred on or after the date of 
the enactment of this Act.
H. R. 1—77 
SEC. 13309. RECHARACTERIZATION OF CERTAIN GAINS IN THE CASE 
OF 
PARTNERSHIP 
PROFITS 
INTERESTS 
HELD 
IN 
CONNECTION WITH PERFORMANCE OF INVESTMENT 
SERVICES. 
(a) IN GENERAL.—Part IV of subchapter O of chapter 1 is 
amended— 
(1) by redesignating section 1061 as section 1062, and 
(2) by inserting after section 1060 the following new section: 
‘‘SEC. 1061. PARTNERSHIP INTERESTS HELD IN CONNECTION WITH 
PERFORMANCE OF SERVICES. 
‘‘(a) IN
GENERAL.—If one or more applicable partnership 
interests are held by a taxpayer at any time during the taxable 
year, the excess (if any) of— 
‘‘(1) the taxpayer’s net long-term capital gain with respect 
to such interests for such taxable year, over 
‘‘(2) the taxpayer’s net long-term capital gain with respect 
to such interests for such taxable year computed by applying 
paragraphs (3) and (4) of sections 1222 by substituting ‘3 years’ 
for ‘1 year’, 
shall be treated as short-term capital gain, notwithstanding section 
83 or any election in effect under section 83(b). 
‘‘(b) SPECIAL RULE.—To the extent provided by the Secretary, 
subsection (a) shall not apply to income or gain attributable to 
any asset not held for portfolio investment on behalf of third party 
investors. 
‘‘(c) APPLICABLE PARTNERSHIP INTEREST.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—Except as provided in this paragraph 
or paragraph (4), the term ‘applicable partnership interest’ 
means any interest in a partnership which, directly or 
indirectly, is transferred to (or is held by) the taxpayer in 
connection with the performance of substantial services by the 
taxpayer, or any other related person, in any applicable trade 
or business. The previous sentence shall not apply to an interest 
held by a person who is employed by another entity that is 
conducting a trade or business (other than an applicable trade 
or business) and only provides services to such other entity. 
‘‘(2) APPLICABLE TRADE OR BUSINESS.—The term ‘applicable 
trade or business’ means any activity conducted on a regular, 
continuous, and substantial basis which, regardless of whether 
the activity is conducted in one or more entities, consists, 
in whole or in part, of— 
‘‘(A) raising or returning capital, and 
‘‘(B) either— 
‘‘(i) investing in (or disposing of) specified assets 
(or identifying specified assets for such investing or 
disposition), or 
‘‘(ii) developing specified assets. 
‘‘(3) SPECIFIED ASSET.—The term ‘specified asset’ means 
securities (as defined in section 475(c)(2) without regard to 
the last sentence thereof), commodities (as defined in section 
475(e)(2)), real estate held for rental or investment, cash or 
cash equivalents, options or derivative contracts with respect 
to any of the foregoing, and an interest in a partnership to 
the extent of the partnership’s proportionate interest in any 
of the foregoing.
H. R. 1—78 
‘‘(4) 
EXCEPTIONS.—The 
term 
‘applicable 
partnership 
interest’ shall not include— 
‘‘(A) any interest in a partnership directly or indirectly 
held by a corporation, or 
‘‘(B) any capital interest in the partnership which pro-
vides the taxpayer with a right to share in partnership 
capital commensurate with— 
‘‘(i) the amount of capital contributed (determined 
at the time of receipt of such partnership interest), 
or 
‘‘(ii) the value of such interest subject to tax under 
section 83 upon the receipt or vesting of such interest. 
‘‘(5) THIRD
PARTY
INVESTOR.—The term ‘third party 
investor’ means a person who— 
‘‘(A) holds an interest in the partnership which does 
not constitute property held in connection with an 
applicable trade or business; and 
‘‘(B) is not (and has not been) actively engaged, and 
is (and was) not related to a person so engaged, in (directly 
or indirectly) providing substantial services described in 
paragraph (1) for such partnership or any applicable trade 
or business. 
‘‘(d) TRANSFER
OF
APPLICABLE
PARTNERSHIP
INTEREST
TO 
RELATED PERSON.— 
‘‘(1) IN GENERAL.—If a taxpayer transfers any applicable 
partnership interest, directly or indirectly, to a person related 
to the taxpayer, the taxpayer shall include in gross income 
(as short term capital gain) the excess (if any) of— 
‘‘(A) so much of the taxpayer’s long-term capital gains 
with respect to such interest for such taxable year attrib-
utable to the sale or exchange of any asset held for not 
more than 3 years as is allocable to such interest, over 
‘‘(B) any amount treated as short term capital gain 
under subsection (a) with respect to the transfer of such 
interest. 
‘‘(2) RELATED
PERSON.—For purposes of this paragraph, 
a person is related to the taxpayer if— 
‘‘(A) the person is a member of the taxpayer’s family 
within the meaning of section 318(a)(1), or 
‘‘(B) the person performed a service within the current 
calendar year or the preceding three calendar years in 
any applicable trade or business in which or for which 
the taxpayer performed a service. 
‘‘(e) REPORTING.—The Secretary shall require such reporting 
(at the time and in the manner prescribed by the Secretary) as 
is necessary to carry out the purposes of this section. 
‘‘(f) REGULATIONS.—The Secretary shall issue such regulations 
or other guidance as is necessary or appropriate to carry out the 
purposes of this section’’. 
(b) CLERICAL AMENDMENT.—The table of sections for part IV 
of subchapter O of chapter 1 is amended by striking the item 
relating to 1061 and inserting the following new items: 
‘‘Sec. 1061. Partnership interests held in connection with performance of services. 
‘‘Sec. 1062. Cross references.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017.
H. R. 1—79 
SEC. 13310. PROHIBITION ON CASH, GIFT CARDS, AND OTHER NON- 
TANGIBLE 
PERSONAL 
PROPERTY 
AS 
EMPLOYEE 
ACHIEVEMENT AWARDS. 
(a) IN GENERAL.—Subparagraph (A) of section 274(j)(3) is 
amended— 
(1) by striking ‘‘The term’’ and inserting the following: 
‘‘(i) IN GENERAL.—The term’’. 
(2) by redesignating clauses (i), (ii), and (iii) as subclauses 
(I), (II), and (III), respectively, and conforming the margins 
accordingly, and 
(3) by adding at the end the following new clause: 
‘‘(ii) TANGIBLE PERSONAL PROPERTY.—For purposes 
of clause (i), the term ‘tangible personal property’ shall 
not include— 
‘‘(I) cash, cash equivalents, gift cards, gift cou-
pons, or gift certificates (other than arrangements 
conferring only the right to select and receive tan-
gible personal property from a limited array of 
such items pre-selected or pre-approved by the 
employer), or 
‘‘(II) vacations, meals, lodging, tickets to the-
ater or sporting events, stocks, bonds, other securi-
ties, and other similar items.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to amounts paid or incurred after December 31, 2017. 
SEC. 13311. ELIMINATION OF DEDUCTION FOR LIVING EXPENSES 
INCURRED BY MEMBERS OF CONGRESS. 
(a) IN GENERAL.—Subsection (a) of section 162 is amended 
in the matter following paragraph (3) by striking ‘‘in excess of 
$3,000’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years beginning after the date of the enact-
ment of this Act. 
SEC. 13312. CERTAIN CONTRIBUTIONS BY GOVERNMENTAL ENTITIES 
NOT TREATED AS CONTRIBUTIONS TO CAPITAL. 
(a) IN GENERAL.—Section 118 is amended— 
(1) by striking subsections (b), (c), and (d), 
(2) by redesignating subsection (e) as subsection (d), and 
(3) by inserting after subsection (a) the following new sub-
sections: 
‘‘(b) EXCEPTIONS.—For purposes of subsection (a), the term ‘con-
tribution to the capital of the taxpayer’ does not include— 
‘‘(1) any contribution in aid of construction or any other 
contribution as a customer or potential customer, and 
‘‘(2) any contribution by any governmental entity or civic 
group (other than a contribution made by a shareholder as 
such). 
‘‘(c) REGULATIONS.—The Secretary shall issue such regulations 
or other guidance as may be necessary or appropriate to carry 
out this section, including regulations or other guidance for deter-
mining whether any contribution constitutes a contribution in aid 
of construction.’’. 
(b) EFFECTIVE DATE.—
H. R. 1—80 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to contributions 
made after the date of enactment of this Act. 
(2) EXCEPTION.—The amendments made by this section 
shall not apply to any contribution, made after the date of 
enactment of this Act by a governmental entity, which is made 
pursuant to a master development plan that has been approved 
prior to such date by a governmental entity. 
SEC. 13313. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES 
GAIN INTO SPECIALIZED SMALL BUSINESS INVESTMENT 
COMPANIES. 
(a) IN GENERAL.—Part III of subchapter O of chapter 1 is 
amended by striking section 1044 (and by striking the item relating 
to such section in the table of sections of such part). 
(b) 
CONFORMING
AMENDMENTS.—Section 
1016(a)(23) 
is 
amended— 
(1) by striking ‘‘1044,’’, and 
(2) by striking ‘‘1044(d),’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to sales after December 31, 2017. 
SEC. 13314. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A 
CAPITAL ASSET. 
(a) PATENTS, ETC.—Section 1221(a)(3) is amended by inserting 
‘‘a patent, invention, model or design (whether or not patented), 
a secret formula or process,’’ before ‘‘a copyright’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
1231(b)(1)(C) 
is 
amended by inserting ‘‘a patent, invention, model or design (whether 
or not patented), a secret formula or process,’’ before ‘‘a copyright’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to dispositions after December 31, 2017. 
PART V—BUSINESS CREDITS 
SEC. 13401. MODIFICATION OF ORPHAN DRUG CREDIT. 
(a) CREDIT RATE.—Subsection (a) of section 45C is amended 
by striking ‘‘50 percent’’ and inserting ‘‘25 percent’’. 
(b) ELECTION OF REDUCED CREDIT.—Subsection (b) of section 
280C is amended by redesignating paragraph (3) as paragraph 
(4) and by inserting after paragraph (2) the following new para-
graph: 
‘‘(3) ELECTION OF REDUCED CREDIT.— 
‘‘(A) IN
GENERAL.—In the case of any taxable year 
for which an election is made under this paragraph— 
‘‘(i) paragraphs (1) and (2) shall not apply, and 
‘‘(ii) the amount of the credit under section 45C(a) 
shall be the amount determined under subparagraph 
(B). 
‘‘(B) AMOUNT
OF
REDUCED
CREDIT.—The amount of 
credit determined under this subparagraph for any taxable 
year shall be the amount equal to the excess of— 
‘‘(i) the amount of credit determined under section 
45C(a) without regard to this paragraph, over 
‘‘(ii) the product of— 
‘‘(I) the amount described in clause (i), and 
‘‘(II) the maximum rate of tax under section 
11(b).
H. R. 1—81 
‘‘(C) ELECTION.—An election under this paragraph for 
any taxable year shall be made not later than the time 
for filing the return of tax for such year (including exten-
sions), shall be made on such return, and shall be made 
in such manner as the Secretary shall prescribe. Such 
an election, once made, shall be irrevocable.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13402. REHABILITATION CREDIT LIMITED TO CERTIFIED HIS-
TORIC STRUCTURES. 
(a) IN GENERAL.—Subsection (a) of section 47 is amended to 
read as follows: 
‘‘(a) GENERAL RULE.— 
‘‘(1) IN GENERAL.—For purposes of section 46, for any tax-
able year during the 5-year period beginning in the taxable 
year in which a qualified rehabilitated building is placed in 
service, the rehabilitation credit for such year is an amount 
equal to the ratable share for such year. 
‘‘(2) RATABLE SHARE.—For purposes of paragraph (1), the 
ratable share for any taxable year during the period described 
in such paragraph is the amount equal to 20 percent of the 
qualified rehabilitation expenditures with respect to the quali-
fied rehabilitated building, as allocated ratably to each year 
during such period.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 47(c) is amended— 
(A) in paragraph (1)— 
(i) in subparagraph (A), by amending clause (iii) 
to read as follows: 
‘‘(iii) such building is a certified historic structure, 
and’’, 
(ii) by striking subparagraph (B), and 
(iii) by redesignating subparagraphs (C) and (D) 
as subparagraphs (B) and (C), respectively, and 
(B) in paragraph (2)(B), by amending clause (iv) to 
read as follows: 
‘‘(iv) 
CERTIFIED
HISTORIC
STRUCTURE.—Any 
expenditure attributable to the rehabilitation of a 
qualified rehabilitated building unless the rehabilita-
tion is a certified rehabilitation (within the meaning 
of subparagraph (C)).’’. 
(2) Paragraph (4) of section 145(d) is amended— 
(A) by striking ‘‘of section 47(c)(1)(C)’’ each place it 
appears and inserting ‘‘of section 47(c)(1)(B)’’, and 
(B) by striking ‘‘section 47(c)(1)(C)(i)’’ and inserting 
‘‘section 47(c)(1)(B)(i)’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to amounts paid 
or incurred after December 31, 2017. 
(2) TRANSITION RULE.—In the case of qualified rehabilita-
tion expenditures with respect to any building— 
(A) owned or leased by the taxpayer during the entirety 
of the period after December 31, 2017, and 
(B) with respect to which the 24-month period selected 
by the taxpayer under clause (i) of section 47(c)(1)(B) of
H. R. 1—82 
the Internal Revenue Code (as amended by subsection (b)), 
or the 60-month period applicable under clause (ii) of such 
section, begins not later than 180 days after the date 
of the enactment of this Act, 
the amendments made by this section shall apply to such 
expenditures paid or incurred after the end of the taxable 
year in which the 24-month period, or the 60-month period, 
referred to in subparagraph (B) ends. 
SEC. 13403. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL 
LEAVE. 
(a) IN GENERAL.— 
(1) ALLOWANCE OF CREDIT.—Subpart D of part IV of sub-
chapter A of chapter 1 is amended by adding at the end the 
following new section: 
‘‘SEC. 45S. EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE. 
‘‘(a) ESTABLISHMENT OF CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of section 38, in the case 
of an eligible employer, the paid family and medical leave 
credit is an amount equal to the applicable percentage of the 
amount of wages paid to qualifying employees during any period 
in which such employees are on family and medical leave. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes of paragraph 
(1), the term ‘applicable percentage’ means 12.5 percent 
increased (but not above 25 percent) by 0.25 percentage points 
for each percentage point by which the rate of payment (as 
described under subsection (c)(1)(B)) exceeds 50 percent. 
‘‘(b) LIMITATION.— 
‘‘(1) IN GENERAL.—The credit allowed under subsection (a) 
with respect to any employee for any taxable year shall not 
exceed an amount equal to the product of the normal hourly 
wage rate of such employee for each hour (or fraction thereof) 
of actual services performed for the employer and the number 
of hours (or fraction thereof) for which family and medical 
leave is taken. 
‘‘(2) NON-HOURLY WAGE RATE.—For purposes of paragraph 
(1), in the case of any employee who is not paid on an hourly 
wage rate, the wages of such employee shall be prorated to 
an hourly wage rate under regulations established by the Sec-
retary. 
‘‘(3) MAXIMUM AMOUNT OF LEAVE SUBJECT TO CREDIT.— 
The amount of family and medical leave that may be taken 
into account with respect to any employee under subsection 
(a) for any taxable year shall not exceed 12 weeks. 
‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘eligible employer’ means any 
employer who has in place a written policy that meets the 
following requirements: 
‘‘(A) The policy provides— 
‘‘(i) in the case of a qualifying employee who is 
not a part-time employee (as defined in section 
4980E(d)(4)(B)), not less than 2 weeks of annual paid 
family and medical leave, and 
‘‘(ii) in the case of a qualifying employee who is 
a part-time employee, an amount of annual paid family 
and medical leave that is not less than an amount 
which bears the same ratio to the amount of annual
H. R. 1—83 
paid family and medical leave that is provided to a 
qualifying employee described in clause (i) as— 
‘‘(I) the number of hours the employee is 
expected to work during any week, bears to 
‘‘(II) the number of hours an equivalent quali-
fying employee described in clause (i) is expected 
to work during the week. 
‘‘(B) The policy requires that the rate of payment under 
the program is not less than 50 percent of the wages 
normally paid to such employee for services performed 
for the employer. 
‘‘(2) SPECIAL RULE FOR CERTAIN EMPLOYERS.— 
‘‘(A) IN GENERAL.—An added employer shall not be 
treated as an eligible employer unless such employer pro-
vides paid family and medical leave in compliance with 
a written policy which ensures that the employer— 
‘‘(i) will not interfere with, restrain, or deny the 
exercise of or the attempt to exercise, any right pro-
vided under the policy, and 
‘‘(ii) will not discharge or in any other manner 
discriminate against any individual for opposing any 
practice prohibited by the policy. 
‘‘(B) ADDED
EMPLOYER; ADDED
EMPLOYEE.—For pur-
poses of this paragraph— 
‘‘(i) ADDED EMPLOYEE.—The term ‘added employee’ 
means a qualifying employee who is not covered by 
title I of the Family and Medical Leave Act of 1993, 
as amended. 
‘‘(ii) ADDED EMPLOYER.—The term ‘added employer’ 
means an eligible employer (determined without regard 
to this paragraph), whether or not covered by that 
title I, who offers paid family and medical leave to 
added employees. 
‘‘(3) AGGREGATION RULE.—All persons which are treated 
as a single employer under subsections (a) and (b) of section 
52 shall be treated as a single taxpayer. 
‘‘(4) TREATMENT OF BENEFITS MANDATED OR PAID FOR BY 
STATE OR LOCAL GOVERNMENTS.—For purposes of this section, 
any leave which is paid by a State or local government or 
required by State or local law shall not be taken into account 
in determining the amount of paid family and medical leave 
provided by the employer. 
‘‘(5) NO INFERENCE.—Nothing in this subsection shall be 
construed as subjecting an employer to any penalty, liability, 
or other consequence (other than ineligibility for the credit 
allowed by reason of subsection (a) or recapturing the benefit 
of such credit) for failure to comply with the requirements 
of this subsection. 
‘‘(d) QUALIFYING EMPLOYEES.—For purposes of this section, the 
term ‘qualifying employee’ means any employee (as defined in sec-
tion 3(e) of the Fair Labor Standards Act of 1938, as amended) 
who— 
‘‘(1) has been employed by the employer for 1 year or 
more, and 
‘‘(2) for the preceding year, had compensation not in excess 
of an amount equal to 60 percent of the amount applicable 
for such year under clause (i) of section 414(q)(1)(B).
H. R. 1—84 
‘‘(e) FAMILY AND MEDICAL LEAVE.— 
‘‘(1) IN GENERAL.—Except as provided in paragraph (2), 
for purposes of this section, the term ‘family and medical leave’ 
means leave for any 1 or more of the purposes described under 
subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or 
paragraph (3), of section 102(a) of the Family and Medical 
Leave Act of 1993, as amended, whether the leave is provided 
under that Act or by a policy of the employer. 
‘‘(2) EXCLUSION.—If an employer provides paid leave as 
vacation leave, personal leave, or medical or sick leave (other 
than leave specifically for 1 or more of the purposes referred 
to in paragraph (1)), that paid leave shall not be considered 
to be family and medical leave under paragraph (1). 
‘‘(3) DEFINITIONS.—In this subsection, the terms ‘vacation 
leave’, ‘personal leave’, and ‘medical or sick leave’ mean those 
3 types of leave, within the meaning of section 102(d)(2) of 
that Act. 
‘‘(f) DETERMINATIONS MADE BY SECRETARY OF TREASURY.—For 
purposes of this section, any determination as to whether an 
employer or an employee satisfies the applicable requirements for 
an eligible employer (as described in subsection (c)) or qualifying 
employee (as described in subsection (d)), respectively, shall be 
made by the Secretary based on such information, to be provided 
by the employer, as the Secretary determines to be necessary or 
appropriate. 
‘‘(g) WAGES.—For purposes of this section, the term ‘wages’ 
has the meaning given such term by subsection (b) of section 
3306 (determined without regard to any dollar limitation contained 
in such section). Such term shall not include any amount taken 
into account for purposes of determining any other credit allowed 
under this subpart. 
‘‘(h) ELECTION TO HAVE CREDIT NOT APPLY.— 
‘‘(1) IN GENERAL.—A taxpayer may elect to have this section 
not apply for any taxable year. 
‘‘(2) OTHER RULES.—Rules similar to the rules of para-
graphs (2) and (3) of section 51(j) shall apply for purposes 
of this subsection. 
‘‘(i) TERMINATION.—This section shall not apply to wages paid 
in taxable years beginning after December 31, 2019.’’. 
(b) CREDIT PART OF GENERAL BUSINESS CREDIT.—Section 38(b) 
is amended by striking ‘‘plus’’ at the end of paragraph (35), by 
striking the period at the end of paragraph (36) and inserting 
‘‘, plus’’, and by adding at the end the following new paragraph: 
‘‘(37) in the case of an eligible employer (as defined in 
section 45S(c)), the paid family and medical leave credit deter-
mined under section 45S(a).’’. 
(c) CREDIT ALLOWED AGAINST AMT.—Subparagraph (B) of sec-
tion 38(c)(4) is amended by redesignating clauses (ix) through (xi) 
as clauses (x) through (xii), respectively, and by inserting after 
clause (viii) the following new clause: 
‘‘(ix) the credit determined under section 45S,’’. 
(d) CONFORMING AMENDMENTS.— 
(1) DENIAL
OF
DOUBLE
BENEFIT.—Section 280C(a) is 
amended by inserting ‘‘45S(a),’’ after ‘‘45P(a),’’. 
(2) ELECTION TO HAVE CREDIT NOT APPLY.—Section 6501(m) 
is amended by inserting ‘‘45S(h),’’ after ‘‘45H(g),’’.
H. R. 1—85 
(3) CLERICAL AMENDMENT.—The table of sections for sub-
part D of part IV of subchapter A of chapter 1 is amended 
by adding at the end the following new item: 
‘‘Sec. 45S. Employer credit for paid family and medical leave.’’. 
(e) EFFECTIVE DATE.—The amendments made by this section 
shall apply to wages paid in taxable years beginning after December 
31, 2017. 
SEC. 13404. REPEAL OF TAX CREDIT BONDS. 
(a) IN GENERAL.—Part IV of subchapter A of chapter 1 is 
amended by striking subparts H, I, and J (and by striking the 
items relating to such subparts in the table of subparts for such 
part). 
(b) PAYMENTS
TO ISSUERS.—Subchapter B of chapter 65 is 
amended by striking section 6431 (and by striking the item relating 
to such section in the table of sections for such subchapter). 
(c) CONFORMING AMENDMENTS.— 
(1) Part IV of subchapter U of chapter 1 is amended by 
striking section 1397E (and by striking the item relating to 
such section in the table of sections for such part). 
(2) Section 54(l)(3)(B) is amended by inserting ‘‘(as in effect 
before its repeal by the Tax Cuts and Jobs Act)’’ after ‘‘section 
1397E(I)’’. 
(3) Section 6211(b)(4)(A) is amended by striking ‘‘, and 
6431’’ and inserting ‘‘and’’ before ‘‘36B’’. 
(4) Section 6401(b)(1) is amended by striking ‘‘G, H, I, 
and J’’ and inserting ‘‘and G’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to bonds issued after December 31, 2017. 
PART VI—PROVISIONS RELATED TO SPECIFIC 
ENTITIES AND INDUSTRIES 
Subpart A—Partnership Provisions 
SEC. 13501. TREATMENT OF GAIN OR LOSS OF FOREIGN PERSONS 
FROM SALE OR EXCHANGE OF INTERESTS IN PARTNER-
SHIPS ENGAGED IN TRADE OR BUSINESS WITHIN THE 
UNITED STATES. 
(a) AMOUNT TREATED AS EFFECTIVELY CONNECTED.— 
(1) IN GENERAL.—Section 864(c) is amended by adding at 
the end the following: 
‘‘(8) GAIN OR LOSS OF FOREIGN PERSONS FROM SALE OR 
EXCHANGE OF CERTAIN PARTNERSHIP INTERESTS.— 
‘‘(A) IN GENERAL.—Notwithstanding any other provi-
sion of this subtitle, if a nonresident alien individual or 
foreign corporation owns, directly or indirectly, an interest 
in a partnership which is engaged in any trade or business 
within the United States, gain or loss on the sale or 
exchange of all (or any portion of) such interest shall be 
treated as effectively connected with the conduct of such 
trade or business to the extent such gain or loss does 
not exceed the amount determined under subparagraph 
(B).
H. R. 1—86 
‘‘(B) AMOUNT TREATED AS EFFECTIVELY CONNECTED.— 
The amount determined under this subparagraph with 
respect to any partnership interest sold or exchanged— 
‘‘(i) in the case of any gain on the sale or exchange 
of the partnership interest, is— 
‘‘(I) the portion of the partner’s distributive 
share of the amount of gain which would have 
been effectively connected with the conduct of a 
trade or business within the United States if the 
partnership had sold all of its assets at their fair 
market value as of the date of the sale or exchange 
of such interest, or 
‘‘(II) zero if no gain on such deemed sale would 
have been so effectively connected, and 
‘‘(ii) in the case of any loss on the sale or exchange 
of the partnership interest, is— 
‘‘(I) the portion of the partner’s distributive 
share of the amount of loss on the deemed sale 
described in clause (i)(I) which would have been 
so effectively connected, or 
‘‘(II) zero if no loss on such deemed sale would 
be have been so effectively connected. 
For purposes of this subparagraph, a partner’s distribu-
tive share of gain or loss on the deemed sale shall 
be determined in the same manner as such partner’s 
distributive share of the non-separately stated taxable 
income or loss of such partnership. 
‘‘(C) COORDINATION WITH UNITED STATES REAL PROP-
ERTY INTERESTS.—If a partnership described in subpara-
graph (A) holds any United States real property interest 
(as defined in section 897(c)) at the time of the sale or 
exchange of the partnership interest, then the gain or 
loss treated as effectively connected income under subpara-
graph (A) shall be reduced by the amount so treated with 
respect to such United States real property interest under 
section 897. 
‘‘(D) SALE OR EXCHANGE.—For purposes of this para-
graph, the term ‘sale or exchange’ means any sale, 
exchange, or other disposition. 
‘‘(E) SECRETARIAL
AUTHORITY.—The Secretary shall 
prescribe such regulations or other guidance as the Sec-
retary determines appropriate for the application of this 
paragraph, including with respect to exchanges described 
in section 332, 351, 354, 355, 356, or 361.’’. 
(2) 
CONFORMING
AMENDMENTS.—Section 
864(c)(1) 
is 
amended— 
(A) by striking ‘‘and (7)’’ in subparagraph (A), and 
inserting ‘‘(7), and (8)’’, and 
(B) by striking ‘‘or (7)’’ in subparagraph (B), and 
inserting ‘‘(7), or (8)’’. 
(b) WITHHOLDING REQUIREMENTS.—Section 1446 is amended 
by redesignating subsection (f) as subsection (g) and by inserting 
after subsection (e) the following: 
‘‘(f) SPECIAL RULES
FOR WITHHOLDING
ON DISPOSITIONS
OF 
PARTNERSHIP INTERESTS.— 
‘‘(1) IN GENERAL.—Except as provided in this subsection, 
if any portion of the gain (if any) on any disposition of an
H. R. 1—87 
interest in a partnership would be treated under section 
864(c)(8) as effectively connected with the conduct of a trade 
or business within the United States, the transferee shall be 
required to deduct and withhold a tax equal to 10 percent 
of the amount realized on the disposition. 
‘‘(2) EXCEPTION IF NONFOREIGN AFFIDAVIT FURNISHED.— 
‘‘(A) IN
GENERAL.—No person shall be required to 
deduct and withhold any amount under paragraph (1) with 
respect to any disposition if the transferor furnishes to 
the transferee an affidavit by the transferor stating, under 
penalty of perjury, the transferor’s United States taxpayer 
identification number and that the transferor is not a for-
eign person. 
‘‘(B) FALSE
AFFIDAVIT.—Subparagraph (A) shall not 
apply to any disposition if— 
‘‘(i) the transferee has actual knowledge that the 
affidavit is false, or the transferee receives a notice 
(as described in section 1445(d)) from a transferor’s 
agent or transferee’s agent that such affidavit or state-
ment is false, or 
‘‘(ii) the Secretary by regulations requires the 
transferee to furnish a copy of such affidavit or state-
ment to the Secretary and the transferee fails to fur-
nish a copy of such affidavit or statement to the Sec-
retary at such time and in such manner as required 
by such regulations. 
‘‘(C) RULES FOR AGENTS.—The rules of section 1445(d) 
shall apply to a transferor’s agent or transferee’s agent 
with respect to any affidavit described in subparagraph 
(A) in the same manner as such rules apply with respect 
to the disposition of a United States real property interest 
under such section. 
‘‘(3) AUTHORITY
OF
SECRETARY
TO
PRESCRIBE
REDUCED 
AMOUNT.—At the request of the transferor or transferee, the 
Secretary may prescribe a reduced amount to be withheld under 
this section if the Secretary determines that to substitute such 
reduced amount will not jeopardize the collection of the tax 
imposed under this title with respect to gain treated under 
section 864(c)(8) as effectively connected with the conduct of 
a trade or business with in the United States. 
‘‘(4) PARTNERSHIP TO WITHHOLD AMOUNTS NOT WITHHELD 
BY
THE
TRANSFEREE.—If a transferee fails to withhold any 
amount required to be withheld under paragraph (1), the part-
nership shall be required to deduct and withhold from distribu-
tions to the transferee a tax in an amount equal to the amount 
the transferee failed to withhold (plus interest under this title 
on such amount). 
‘‘(5) DEFINITIONS.—Any term used in this subsection which 
is also used under section 1445 shall have the same meaning 
as when used in such section. 
‘‘(6) REGULATIONS.—The Secretary shall prescribe such 
regulations or other guidance as may be necessary to carry 
out the purposes of this subsection, including regulations pro-
viding for exceptions from the provisions of this subsection.’’. 
(c) EFFECTIVE DATES.—
H. R. 1—88 
(1) SUBSECTION (a).—The amendments made by subsection 
(a) shall apply to sales, exchanges, and dispositions on or after 
November 27, 2017. 
(2) SUBSECTION (b).—The amendment made by subsection 
(b) shall apply to sales, exchanges, and dispositions after 
December 31, 2017. 
SEC. 13502. MODIFY DEFINITION OF SUBSTANTIAL BUILT-IN LOSS IN 
THE CASE OF TRANSFER OF PARTNERSHIP INTEREST. 
(a) IN GENERAL.—Paragraph (1) of section 743(d) is to read 
as follows: 
‘‘(1) IN GENERAL.—For purposes of this section, a partner-
ship has a substantial built-in loss with respect to a transfer 
of an interest in the partnership if— 
‘‘(A) the partnership’s adjusted basis in the partnership 
property exceeds by more than $250,000 the fair market 
value of such property, or 
‘‘(B) the transferee partner would be allocated a loss 
of more than $250,000 if the partnership assets were sold 
for cash equal to their fair market value immediately after 
such transfer.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to transfers of partnership interests after December 
31, 2017. 
SEC. 13503. CHARITABLE CONTRIBUTIONS AND FOREIGN TAXES TAKEN 
INTO 
ACCOUNT 
IN 
DETERMINING 
LIMITATION 
ON 
ALLOWANCE OF PARTNER’S SHARE OF LOSS. 
(a) IN GENERAL.—Subsection (d) of section 704 is amended— 
(1) by striking ‘‘A partner’s distributive share’’ and inserting 
the following: 
‘‘(1) IN GENERAL.—A partner’s distributive share’’, 
(2) by striking ‘‘Any excess of such loss’’ and inserting 
the following: 
‘‘(2) CARRYOVER.—Any excess of such loss’’, and 
(3) by adding at the end the following new paragraph: 
‘‘(3) SPECIAL RULES.— 
‘‘(A) IN GENERAL.—In determining the amount of any 
loss under paragraph (1), there shall be taken into account 
the partner’s distributive share of amounts described in 
paragraphs (4) and (6) of section 702(a). 
‘‘(B) EXCEPTION.—In the case of a charitable contribu-
tion of property whose fair market value exceeds its 
adjusted basis, subparagraph (A) shall not apply to the 
extent of the partner’s distributive share of such excess.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to partnership taxable years beginning after December 
31, 2017. 
SEC. 13504. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS. 
(a) IN GENERAL.—Paragraph (1) of section 708(b) is amended— 
(1) by striking ‘‘, or’’ at the end of subparagraph (A) and 
all that follows and inserting a period, and 
(2) by striking ‘‘only if—’’ and all that follows through 
‘‘no part of any business’’ and inserting the following: ‘‘only 
if no part of any business’’. 
(b) CONFORMING AMENDMENT.—
H. R. 1—89 
(1) Section 168(i)(7)(B) is amended by striking the second 
sentence. 
(2) Section 743(e) is amended by striking paragraph (4) 
and redesignating paragraphs (5), (6), and (7) as paragraphs 
(4), (5), and (6). 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to partnership taxable years beginning after December 
31, 2017. 
Subpart B—Insurance Reforms 
SEC. 13511. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES. 
(a) IN GENERAL.—Section 805(b) is amended by striking para-
graph (4) and by redesignating paragraph (5) as paragraph (4). 
(b) CONFORMING AMENDMENTS.— 
(1) Part I of subchapter L of chapter 1 is amended by 
striking section 810 (and by striking the item relating to such 
section in the table of sections for such part). 
(2)(A) Part III of subchapter L of chapter 1 is amended 
by striking section 844 (and by striking the item relating to 
such section in the table of sections for such part). 
(B) Section 831(b)(3) is amended by striking ‘‘except as 
provided in section 844,’’ 
(3) Section 381 is amended by striking subsection (d). 
(4) Section 805(a)(4)(B)(ii) is amended to read as follows: 
‘‘(ii) the deduction allowed under section 172,’’. 
(5) Section 805(a) is amended by striking paragraph (5). 
(6) Section 805(b)(2)(A)(iv) is amended to read as follows: 
‘‘(iv) any net operating loss carryback to the tax-
able year under section 172, and’’. 
(7) Section 953(b)(1)(B) is amended to read as follows: 
‘‘(B) So much of section 805(a)(8) as relates to the 
deduction allowed under section 172.’’. 
(8) Section 1351(i)(3) is amended by striking ‘‘or the oper-
ations loss deduction under section 810,’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to losses arising in taxable years beginning after 
December 31, 2017. 
SEC. 13512. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUC-
TION. 
(a) IN GENERAL.—Part I of subchapter L of chapter 1 is 
amended by striking section 806 (and by striking the item relating 
to such section in the table of sections for such part). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 453B(e) is amended— 
(A) by striking ‘‘(as defined in section 806(b)(3))’’ in 
paragraph (2)(B), and 
(B) by adding at the end the following new paragraph: 
‘‘(3) NONINSURANCE BUSINESS.— 
‘‘(A) IN GENERAL.—For purposes of this subsection, the 
term ‘noninsurance business’ means any activity which 
is not an insurance business. 
‘‘(B) CERTAIN
ACTIVITIES
TREATED
AS
INSURANCE 
BUSINESSES.—For purposes of subparagraph (A), any 
activity which is not an insurance business shall be treated 
as an insurance business if—
H. R. 1—90 
‘‘(i) it is of a type traditionally carried on by life 
insurance companies for investment purposes, but only 
if the carrying on of such activity (other than in the 
case of real estate) does not constitute the active con-
duct of a trade or business, or 
‘‘(ii) it involves the performance of administrative 
services in connection with plans providing life insur-
ance, pension, or accident and health benefits.’’. 
(2) Section 465(c)(7)(D)(v)(II) is amended by striking ‘‘sec-
tion 806(b)(3)’’ and inserting ‘‘section 453B(e)(3)’’. 
(3) Section 801(a)(2) is amended by striking subparagraph 
(C). 
(4) Section 804 is amended by striking ‘‘means—’’ and 
all that follows and inserting ‘‘means the general deductions 
provided in section 805.’’. 
(5) Section 805(a)(4)(B), as amended by this Act, is amended 
by striking clause (i) and by redesignating clauses (ii), (iii), 
and (iv) as clauses (i), (ii), and (iii), respectively. 
(6) Section 805(b)(2)(A), as amended by this Act, is amended 
by striking clause (iii) and by redesignating clauses (iv) and 
(v) as clauses (iii) and (iv), respectively. 
(7) Section 842(c) is amended by striking paragraph (1) 
and by redesignating paragraphs (2) and (3) as paragraphs 
(1) and (2), respectively. 
(8) Section 953(b)(1), as amended by section 13511, is 
amended by striking subparagraph (A) and by redesignating 
subparagraphs (B) and (C) as subparagraphs (A) and (B), 
respectively. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13513. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES. 
(a) IN GENERAL.—Paragraph (1) of section 807(f) is amended 
to read as follows: 
‘‘(1) TREATMENT AS CHANGE IN METHOD OF ACCOUNTING.— 
If the basis for determining any item referred to in subsection 
(c) as of the close of any taxable year differs from the basis 
for such determination as of the close of the preceding taxable 
year, then so much of the difference between— 
‘‘(A) the amount of the item at the close of the taxable 
year, computed on the new basis, and 
‘‘(B) the amount of the item at the close of the taxable 
year, computed on the old basis, 
as is attributable to contracts issued before the taxable year 
shall be taken into account under section 481 as adjustments 
attributable to a change in method of accounting initiated by 
the taxpayer and made with the consent of the Secretary.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO SHARE-
HOLDERS FROM PRE-1984 POLICYHOLDERS SURPLUS 
ACCOUNT. 
(a) IN GENERAL.—Subpart D of part I of subchapter L is 
amended by striking section 815 (and by striking the item relating 
to such section in the table of sections for such subpart). 
(b) CONFORMING AMENDMENT.—Section 801 is amended by 
striking subsection (c).
H. R. 1—91 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
(d) PHASED INCLUSION
OF REMAINING BALANCE
OF POLICY-
HOLDERS SURPLUS ACCOUNTS.—In the case of any stock life insur-
ance company which has a balance (determined as of the close 
of such company’s last taxable year beginning before January 1, 
2018) in an existing policyholders surplus account (as defined in 
section 815 of the Internal Revenue Code of 1986, as in effect 
before its repeal), the tax imposed by section 801 of such Code 
for the first 8 taxable years beginning after December 31, 2017, 
shall be the amount which would be imposed by such section 
for such year on the sum of— 
(1) life insurance company taxable income for such year 
(within the meaning of such section 801 but not less than 
zero), plus 
(2) 1⁄8 of such balance. 
SEC. 13515. MODIFICATION OF PRORATION RULES FOR PROPERTY AND 
CASUALTY INSURANCE COMPANIES. 
(a) IN GENERAL.—Section 832(b)(5)(B) is amended— 
(1) by striking ‘‘15 percent’’ and inserting ‘‘the applicable 
percentage’’, and 
(2) by inserting at the end the following new sentence: 
‘‘For purposes of this subparagraph, the applicable percentage 
is 5.25 percent divided by the highest rate in effect under 
section 11(b).’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13516. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS. 
(a) IN GENERAL.—Part III of subchapter L of chapter 1 is 
amended by striking section 847 (and by striking the item relating 
to such section in the table of sections for such part). 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13517. COMPUTATION OF LIFE INSURANCE TAX RESERVES. 
(a) IN GENERAL.— 
(1) APPROPRIATE RATE OF INTEREST.—The second sentence 
of section 807(c) is amended to read as follows: ‘‘For purposes 
of paragraph (3), the appropriate rate of interest is the highest 
rate or rates permitted to be used to discount the obligations 
by the National Association of Insurance Commissioners as 
of the date the reserve is determined.’’. 
(2) METHOD OF COMPUTING RESERVES.—Section 807(d) is 
amended— 
(A) by striking paragraphs (1), (2), (4), and (5), 
(B) by redesignating paragraph (6) as paragraph (4), 
(C) by inserting before paragraph (3) the following 
new paragraphs: 
‘‘(1) DETERMINATION OF RESERVE.— 
‘‘(A) IN
GENERAL.—For purposes of this part (other 
than section 816), the amount of the life insurance reserves 
for any contract (other than a contract to which subpara-
graph (B) applies) shall be the greater of— 
‘‘(i) the net surrender value of such contract, or 
‘‘(ii) 92.81 percent of the reserve determined under 
paragraph (2).
H. R. 1—92 
‘‘(B) VARIABLE CONTRACTS.—For purposes of this part 
(other than section 816), the amount of the life insurance 
reserves for a variable contract shall be equal to the sum 
of— 
‘‘(i) the greater of— 
‘‘(I) the net surrender value of such contract, 
or 
‘‘(II) the portion of the reserve that is sepa-
rately accounted for under section 817, plus 
‘‘(ii) 92.81 percent of the excess (if any) of the 
reserve determined under paragraph (2) over the 
amount in clause (i). 
‘‘(C) STATUTORY CAP.—In no event shall the reserves 
determined under subparagraphs (A) or (B) for any contract 
as of any time exceed the amount which would be taken 
into account with respect to such contract as of such time 
in determining statutory reserves (as defined in paragraph 
(4)). 
‘‘(D) NO
DOUBLE
COUNTING.—In no event shall any 
amount or item be taken into account more than once 
in determining any reserve under this subchapter. 
‘‘(2) AMOUNT
OF
RESERVE.—The amount of the reserve 
determined under this paragraph with respect to any contract 
shall be determined by using the tax reserve method applicable 
to such contract.’’. 
(D) by striking ‘‘(other than a qualified long-term care 
insurance contract, as defined in section 7702B(b)), a 2- 
year full preliminary term method’’ in paragraph (3)(A)(iii) 
and inserting ‘‘, the reserve method prescribed by the 
National Association of Insurance Commissioners which 
covers such contract as of the date the reserve is deter-
mined’’, 
(E) by striking ‘‘(as of the date of issuance)’’ in para-
graph (3)(A)(iv)(I) and inserting ‘‘(as of the date the reserve 
is determined)’’, 
(F) by striking ‘‘as of the date of the issuance of’’ 
in paragraph (3)(A)(iv)(II) and inserting ‘‘as of the date 
the reserve is determined for’’, 
(G) by striking ‘‘in effect on the date of the issuance 
of the contract’’ in paragraph (3)(B)(i) and inserting 
‘‘applicable to the contract and in effect as of the date 
the reserve is determined’’, and 
(H) by striking ‘‘in effect on the date of the issuance 
of the contract’’ in paragraph (3)(B)(ii) and inserting 
‘‘applicable to the contract and in effect as of the date 
the reserve is determined’’. 
(3) SPECIAL RULES.—Section 807(e) is amended— 
(A) by striking paragraphs (2) and (5), 
(B) by redesignating paragraphs (3), (4), (6), and (7) 
as paragraphs (2), (3), (4), and (5), respectively, 
(C) by amending paragraph (2) (as so redesignated) 
to read as follows: 
‘‘(2) QUALIFIED SUPPLEMENTAL BENEFITS.— 
‘‘(A) QUALIFIED
SUPPLEMENTAL
BENEFITS
TREATED 
SEPARATELY.—For purposes of this part, the amount of 
the life insurance reserve for any qualified supplemental
H. R. 1—93 
benefit shall be computed separately as though such benefit 
were under a separate contract. 
‘‘(B) QUALIFIED SUPPLEMENTAL BENEFIT.—For purposes 
of this paragraph, the term ‘qualified supplemental benefit’ 
means any supplemental benefit described in subparagraph 
(C) if— 
‘‘(i) there is a separately identified premium or 
charge for such benefit, and 
‘‘(ii) any net surrender value under the contract 
attributable to any other benefit is not available to 
fund such benefit. 
‘‘(C) SUPPLEMENTAL BENEFITS.—For purposes of this 
paragraph, the supplemental benefits described in this 
subparagraph are any— 
‘‘(i) guaranteed insurability, 
‘‘(ii) accidental death or disability benefit, 
‘‘(iii) convertibility, 
‘‘(iv) disability waiver benefit, or 
‘‘(v) other benefit prescribed by regulations, 
which is supplemental to a contract for which there is 
a reserve described in subsection (c).’’, and 
(D) by adding at the end the following new paragraph: 
‘‘(6) REPORTING
RULES.—The Secretary shall require 
reporting (at such time and in such manner as the Secretary 
shall prescribe) with respect to the opening balance and closing 
balance of reserves and with respect to the method of computing 
reserves for purposes of determining income.’’. 
(4) DEFINITION
OF
LIFE
INSURANCE
CONTRACT.—Section 
7702 is amended— 
(A) by striking clause (i) of subsection (c)(3)(B) and 
inserting the following: 
‘‘(i) reasonable mortality charges which meet the 
requirements prescribed in regulations to be promul-
gated by the Secretary or that do not exceed the mor-
tality charges specified in the prevailing commis-
sioners’ standard tables as defined in subsection 
(f)(10),’’ and 
(B) by adding at the end of subsection (f) the following 
new paragraph: 
‘‘(10) PREVAILING COMMISSIONERS’ STANDARD TABLES.—For 
purposes of subsection (c)(3)(B)(i), the term ‘prevailing commis-
sioners’ standard tables’ means the most recent commissioners’ 
standard tables prescribed by the National Association of Insur-
ance Commissioners which are permitted to be used in com-
puting reserves for that type of contract under the insurance 
laws of at least 26 States when the contract was issued. If 
the prevailing commissioners’ standard tables as of the begin-
ning of any calendar year (hereinafter in this paragraph 
referred to as the ‘year of change’) are different from the pre-
vailing commissioners’ standard tables as of the beginning of 
the preceding calendar year, the issuer may use the prevailing 
commissioners’ standard tables as of the beginning of the pre-
ceding calendar year with respect to any contract issued after 
the change and before the close of the 3-year period beginning 
on the first day of the year of change.’’. 
(b) CONFORMING AMENDMENTS.—
H. R. 1—94 
(1) Section 808 is amended by adding at the end the fol-
lowing new subsection: 
‘‘(g) PREVAILING STATE ASSUMED INTEREST RATE.—For purposes 
of this subchapter— 
‘‘(1) IN
GENERAL.—The term ‘prevailing State assumed 
interest rate’ means, with respect to any contract, the highest 
assumed interest rate permitted to be used in computing life 
insurance reserves for insurance contracts or annuity contracts 
(as the case may be) under the insurance laws of at least 
26 States. For purposes of the preceding sentence, the effect 
of nonforfeiture laws of a State on interest rates for reserves 
shall not be taken into account. 
‘‘(2) WHEN
RATE
DETERMINED.—The prevailing State 
assumed interest rate with respect to any contract shall be 
determined as of the beginning of the calendar year in which 
the contract was issued.’’. 
(2) Paragraph (1) of section 811(d) is amended by striking 
‘‘the greater of the prevailing State assumed interest rate or 
applicable Federal interest rate in effect under section 807’’ 
and inserting ‘‘the interest rate in effect under section 808(g)’’. 
(3) Subparagraph (A) of section 846(f)(6) is amended by 
striking ‘‘except that’’ and all that follows and inserting ‘‘except 
that the limitation of subsection (a)(3) shall apply, and’’. 
(4) Section 848(e)(1)(B)(iii) is amended by striking 
‘‘807(e)(4)’’ and inserting ‘‘807(e)(3)’’. 
(5) Subparagraph (B) of section 954(i)(5) is amended by 
striking ‘‘shall be substituted for the prevailing State assumed 
interest rate,’’ and inserting ‘‘shall apply,’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
(2) TRANSITION RULE.—For the first taxable year beginning 
after December 31, 2017, the reserve with respect to any con-
tract (as determined under section 807(d) of the Internal Rev-
enue Code of 1986) at the end of the preceding taxable year 
shall be determined as if the amendments made by this section 
had applied to such reserve in such preceding taxable year. 
(3) TRANSITION RELIEF.— 
(A) IN GENERAL.—If— 
(i) the reserve determined under section 807(d) 
of the Internal Revenue Code of 1986 (determined after 
application of paragraph (2)) with respect to any con-
tract as of the close of the year preceding the first 
taxable year beginning after December 31, 2017, differs 
from 
(ii) the reserve which would have been determined 
with respect to such contract as of the close of such 
taxable year under such section determined without 
regard to paragraph (2), 
then the difference between the amount of the reserve 
described in clause (i) and the amount of the reserve 
described in clause (ii) shall be taken into account under 
the method provided in subparagraph (B). 
(B) METHOD.—The method provided in this subpara-
graph is as follows:
H. R. 1—95 
(i) If the amount determined under subparagraph 
(A)(i) exceeds the amount determined under subpara-
graph (A)(ii), 1/8 of such excess shall be taken into 
account, for each of the 8 succeeding taxable years, 
as a deduction under section 805(a)(2) or 832(c)(4) of 
such Code, as applicable. 
(ii) If the amount determined under subparagraph 
(A)(ii) exceeds the amount determined under subpara-
graph (A)(i), 1/8 of such excess shall be included in 
gross income, for each of the 8 succeeding taxable 
years, under section 803(a)(2) or 832(b)(1)(C) of such 
Code, as applicable. 
SEC. 13518. MODIFICATION OF RULES FOR LIFE INSURANCE PRORA-
TION FOR PURPOSES OF DETERMINING THE DIVIDENDS 
RECEIVED DEDUCTION. 
(a) IN GENERAL.—Section 812 is amended to read as follows: 
‘‘SEC. 812. DEFINITION OF COMPANY’S SHARE AND POLICYHOLDER’S 
SHARE. 
‘‘(a) COMPANY’S SHARE.—For purposes of section 805(a)(4), the 
term ‘company’s share’ means, with respect to any taxable year 
beginning after December 31, 2017, 70 percent. 
‘‘(b) POLICYHOLDER’S SHARE.—For purposes of section 807, the 
term ‘policyholder’s share’ means, with respect to any taxable year 
beginning after December 31, 2017, 30 percent.’’. 
(b) CONFORMING AMENDMENT.—Section 817A(e)(2) is amended 
by striking ‘‘, 807(d)(2)(B), and 812’’ and inserting ‘‘and 807(d)(2)(B)’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION 
EXPENSES. 
(a) IN GENERAL.— 
(1) Section 848(a)(2) is amended by striking ‘‘120-month’’ 
and inserting ‘‘180-month’’. 
(2) Section 848(c)(1) is amended by striking ‘‘1.75 percent’’ 
and inserting ‘‘2.09 percent’’. 
(3) Section 848(c)(2) is amended by striking ‘‘2.05 percent’’ 
and inserting ‘‘2.45 percent’’. 
(4) Section 848(c)(3) is amended by striking ‘‘7.7 percent’’ 
and inserting ‘‘9.2 percent’’. 
(b) CONFORMING AMENDMENTS.—Section 848(b)(1) is amended 
by striking ‘‘120-month’’ and inserting ‘‘180-month’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by this section 
shall apply to net premiums for taxable years beginning after 
December 31, 2017. 
(2) TRANSITION RULE.—Specified policy acquisition expenses 
first required to be capitalized in a taxable year beginning 
before January 1, 2018, will continue to be allowed as a deduc-
tion ratably over the 120-month period beginning with the 
first month in the second half of such taxable year. 
SEC. 13520. TAX REPORTING FOR LIFE SETTLEMENT TRANSACTIONS. 
(a) IN GENERAL.—Subpart B of part III of subchapter A of 
chapter 61, as amended by section 13306, is amended by adding 
at the end the following new section:
H. R. 1—96 
‘‘SEC. 6050Y. RETURNS RELATING TO CERTAIN LIFE INSURANCE CON-
TRACT TRANSACTIONS. 
‘‘(a) REQUIREMENT OF REPORTING OF CERTAIN PAYMENTS.— 
‘‘(1) IN GENERAL.—Every person who acquires a life insur-
ance contract or any interest in a life insurance contract in 
a reportable policy sale during any taxable year shall make 
a return for such taxable year (at such time and in such 
manner as the Secretary shall prescribe) setting forth— 
‘‘(A) the name, address, and TIN of such person, 
‘‘(B) the name, address, and TIN of each recipient 
of payment in the reportable policy sale, 
‘‘(C) the date of such sale, 
‘‘(D) the name of the issuer of the life insurance con-
tract sold and the policy number of such contract, and 
‘‘(E) the amount of each payment. 
‘‘(2) STATEMENT
TO
BE
FURNISHED
TO
PERSONS
WITH 
RESPECT TO WHOM INFORMATION IS REQUIRED.—Every person 
required to make a return under this subsection shall furnish 
to each person whose name is required to be set forth in 
such return a written statement showing— 
‘‘(A) the name, address, and phone number of the 
information contact of the person required to make such 
return, and 
‘‘(B) the information required to be shown on such 
return with respect to such person, except that in the 
case of an issuer of a life insurance contract, such statement 
is not required to include the information specified in para-
graph (1)(E). 
‘‘(b) REQUIREMENT OF REPORTING OF SELLER’S BASIS IN LIFE 
INSURANCE CONTRACTS.— 
‘‘(1) IN GENERAL.—Upon receipt of the statement required 
under subsection (a)(2) or upon notice of a transfer of a life 
insurance contract to a foreign person, each issuer of a life 
insurance contract shall make a return (at such time and 
in such manner as the Secretary shall prescribe) setting forth— 
‘‘(A) the name, address, and TIN of the seller who 
transfers any interest in such contract in such sale, 
‘‘(B) the investment in the contract (as defined in sec-
tion 72(e)(6)) with respect to such seller, and 
‘‘(C) the policy number of such contract. 
‘‘(2) STATEMENT
TO
BE
FURNISHED
TO
PERSONS
WITH 
RESPECT TO WHOM INFORMATION IS REQUIRED.—Every person 
required to make a return under this subsection shall furnish 
to each person whose name is required to be set forth in 
such return a written statement showing— 
‘‘(A) the name, address, and phone number of the 
information contact of the person required to make such 
return, and 
‘‘(B) the information required to be shown on such 
return with respect to each seller whose name is required 
to be set forth in such return. 
‘‘(c) REQUIREMENT OF REPORTING WITH RESPECT TO REPORT-
ABLE DEATH BENEFITS.— 
‘‘(1) IN
GENERAL.—Every person who makes a payment 
of reportable death benefits during any taxable year shall make 
a return for such taxable year (at such time and in such 
manner as the Secretary shall prescribe) setting forth—
H. R. 1—97 
‘‘(A) the name, address, and TIN of the person making 
such payment, 
‘‘(B) the name, address, and TIN of each recipient 
of such payment, 
‘‘(C) the date of each such payment, 
‘‘(D) the gross amount of each such payment, and 
‘‘(E) such person’s estimate of the investment in the 
contract (as defined in section 72(e)(6)) with respect to 
the buyer. 
‘‘(2) STATEMENT
TO
BE
FURNISHED
TO
PERSONS
WITH 
RESPECT TO WHOM INFORMATION IS REQUIRED.—Every person 
required to make a return under this subsection shall furnish 
to each person whose name is required to be set forth in 
such return a written statement showing— 
‘‘(A) the name, address, and phone number of the 
information contact of the person required to make such 
return, and 
‘‘(B) the information required to be shown on such 
return with respect to each recipient of payment whose 
name is required to be set forth in such return. 
‘‘(d) DEFINITIONS.—For purposes of this section: 
‘‘(1) PAYMENT.—The term ‘payment’ means, with respect 
to any reportable policy sale, the amount of cash and the 
fair market value of any consideration transferred in the sale. 
‘‘(2) REPORTABLE POLICY SALE.—The term ‘reportable policy 
sale’ has the meaning given such term in section 101(a)(3)(B). 
‘‘(3) ISSUER.—The term ‘issuer’ means any life insurance 
company that bears the risk with respect to a life insurance 
contract on the date any return or statement is required to 
be made under this section. 
‘‘(4) REPORTABLE DEATH BENEFITS.—The term ‘reportable 
death benefits’ means amounts paid by reason of the death 
of the insured under a life insurance contract that has been 
transferred in a reportable policy sale.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for subpart 
B of part III of subchapter A of chapter 61, as amended by section 
13306, is amended by inserting after the item relating to section 
6050X the following new item: 
‘‘Sec. 6050Y. Returns relating to certain life insurance contract transactions.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Subsection (d) of section 6724 is amended— 
(A) by striking ‘‘or’’ at the end of clause (xxiv) of para-
graph (1)(B), by striking ‘‘and’’ at the end of clause (xxv) 
of such paragraph and inserting ‘‘or’’, and by inserting 
after such clause (xxv) the following new clause: 
‘‘(xxvi) section 6050Y (relating to returns relating 
to certain life insurance contract transactions), and’’, 
and 
(B) by striking ‘‘or’’ at the end of subparagraph (HH) 
of paragraph (2), by striking the period at the end of 
subparagraph (II) of such paragraph and inserting ‘‘, or’’, 
and by inserting after such subparagraph (II) the following 
new subparagraph: 
‘‘(JJ) subsection (a)(2), (b)(2), or (c)(2) of section 6050Y 
(relating to returns relating to certain life insurance con-
tract transactions).’’.
H. R. 1—98 
(2) Section 6047 is amended— 
(A) by redesignating subsection (g) as subsection (h), 
(B) by inserting after subsection (f) the following new 
subsection: 
‘‘(g) INFORMATION RELATING
TO LIFE INSURANCE CONTRACT 
TRANSACTIONS.—This section shall not apply to any information 
which is required to be reported under section 6050Y.’’, and 
(C) by adding at the end of subsection (h), as so redesig-
nated, the following new paragraph: 
‘‘(4) For provisions requiring reporting of information 
relating to certain life insurance contract transactions, see sec-
tion 6050Y.’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to— 
(1) reportable policy sales (as defined in section 6050Y(d)(2) 
of the Internal Revenue Code of 1986 (as added by subsection 
(a)) after December 31, 2017, and 
(2) reportable death benefits (as defined in section 
6050Y(d)(4) of such Code (as added by subsection (a)) paid 
after December 31, 2017. 
SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE CON-
TRACTS. 
(a) CLARIFICATION WITH RESPECT
TO ADJUSTMENTS.—Para-
graph (1) of section 1016(a) is amended by striking subparagraph 
(A) and all that follows and inserting the following: 
‘‘(A) for— 
‘‘(i) taxes or other carrying charges described in 
section 266; or 
‘‘(ii) expenditures described in section 173 (relating 
to circulation expenditures), 
for which deductions have been taken by the taxpayer 
in determining taxable income for the taxable year or prior 
taxable years; or 
‘‘(B) for mortality, expense, or other reasonable charges 
incurred under an annuity or life insurance contract;’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to transactions entered into after August 25, 2009. 
SEC. 13522. EXCEPTION TO TRANSFER FOR VALUABLE CONSIDER-
ATION RULES. 
(a) IN GENERAL.—Subsection (a) of section 101 is amended 
by inserting after paragraph (2) the following new paragraph: 
‘‘(3) EXCEPTION TO VALUABLE CONSIDERATION RULES FOR 
COMMERCIAL TRANSFERS.— 
‘‘(A) IN GENERAL.—The second sentence of paragraph 
(2) shall not apply in the case of a transfer of a life 
insurance contract, or any interest therein, which is a 
reportable policy sale. 
‘‘(B) REPORTABLE POLICY SALE.—For purposes of this 
paragraph, the term ‘reportable policy sale’ means the 
acquisition of an interest in a life insurance contract, 
directly or indirectly, if the acquirer has no substantial 
family, business, or financial relationship with the insured 
apart from the acquirer’s interest in such life insurance 
contract. For purposes of the preceding sentence, the term 
‘indirectly’ applies to the acquisition of an interest in a
H. R. 1—99 
partnership, trust, or other entity that holds an interest 
in the life insurance contract.’’. 
(b) CONFORMING AMENDMENT.—Paragraph (1) of section 101(a) 
is amended by striking ‘‘paragraph (2)’’ and inserting ‘‘paragraphs 
(2) and (3)’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to transfers after December 31, 2017. 
SEC. 13523. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY 
AND CASUALTY INSURANCE COMPANIES. 
(a) MODIFICATION OF RATE OF INTEREST USED TO DISCOUNT 
UNPAID LOSSES.—Paragraph (2) of section 846(c) is amended to 
read as follows: 
‘‘(2) DETERMINATION OF ANNUAL RATE.—The annual rate 
determined by the Secretary under this paragraph for any 
calendar year shall be a rate determined on the basis of the 
corporate bond yield curve (as defined in section 430(h)(2)(D)(i), 
determined by substituting ‘60-month period’ for ‘24-month 
period’ therein).’’. 
(b) MODIFICATION OF COMPUTATIONAL RULES FOR LOSS PAY-
MENT PATTERNS.—Section 846(d)(3) is amended by striking subpara-
graphs (B) through (G) and inserting the following new subpara-
graph: 
‘‘(B) TREATMENT OF CERTAIN LOSSES.— 
‘‘(i) 3-YEAR LOSS PAYMENT PATTERN.—In the case 
of any line of business not described in subparagraph 
(A)(ii), losses paid after the 1st year following the 
accident year shall be treated as paid equally in the 
2nd and 3rd year following the accident year. 
‘‘(ii) 10-YEAR LOSS PAYMENT PATTERN.— 
‘‘(I) IN
GENERAL.—The period taken into 
account under subparagraph (A)(ii) shall be 
extended to the extent required under subclause 
(II). 
‘‘(II) 
COMPUTATION
OF
EXTENSION.—The 
amount of losses which would have been treated 
as paid in the 10th year after the accident year 
shall be treated as paid in such 10th year and 
each subsequent year in an amount equal to the 
amount of the average of the losses treated as 
paid in the 7th, 8th, and 9th years after the 
accident year (or, if lesser, the portion of the 
unpaid losses not theretofore taken into account). 
To the extent such unpaid losses have not been 
treated as paid before the 24th year after the 
accident year, they shall be treated as paid in 
such 24th year.’’. 
(c) REPEAL OF HISTORICAL PAYMENT PATTERN ELECTION.—Sec-
tion 846, as amended by this Act, is amended by striking subsection 
(e) and by redesignating subsections (f) and (g) as subsections 
(e) and (f), respectively. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
(e) TRANSITIONAL RULE.—For the first taxable year beginning 
after December 31, 2017— 
(1) the unpaid losses and the expenses unpaid (as defined 
in paragraphs (5)(B) and (6) of section 832(b) of the Internal
H. R. 1—100 
Revenue Code of 1986) at the end of the preceding taxable 
year, and 
(2) the unpaid losses as defined in sections 807(c)(2) and 
805(a)(1) of such Code at the end of the preceding taxable 
year, 
shall be determined as if the amendments made by this section 
had applied to such unpaid losses and expenses unpaid in the 
preceding taxable year and by using the interest rate and loss 
payment patterns applicable to accident years ending with calendar 
year 2018, and any adjustment shall be taken into account ratably 
in such first taxable year and the 7 succeeding taxable years. 
For subsequent taxable years, such amendments shall be applied 
with respect to such unpaid losses and expenses unpaid by using 
the interest rate and loss payment patterns applicable to accident 
years ending with calendar year 2018. 
Subpart C—Banks and Financial Instruments 
SEC. 13531. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS. 
(a) IN GENERAL.—Section 162, as amended by sections 13307, 
is amended by redesignating subsection (r) as subsection (s) and 
by inserting after subsection (q) the following new subsection: 
‘‘(r) DISALLOWANCE OF FDIC PREMIUMS PAID BY CERTAIN LARGE 
FINANCIAL INSTITUTIONS.— 
‘‘(1) IN GENERAL.—No deduction shall be allowed for the 
applicable percentage of any FDIC premium paid or incurred 
by the taxpayer. 
‘‘(2) EXCEPTION FOR SMALL INSTITUTIONS.—Paragraph (1) 
shall not apply to any taxpayer for any taxable year if the 
total consolidated assets of such taxpayer (determined as of 
the close of such taxable year) do not exceed $10,000,000,000. 
‘‘(3) APPLICABLE PERCENTAGE.—For purposes of this sub-
section, the term ‘applicable percentage’ means, with respect 
to any taxpayer for any taxable year, the ratio (expressed 
as a percentage but not greater than 100 percent) which— 
‘‘(A) the excess of— 
‘‘(i) the total consolidated assets of such taxpayer 
(determined as of the close of such taxable year), over 
‘‘(ii) $10,000,000,000, bears to 
‘‘(B) $40,000,000,000. 
‘‘(4) FDIC PREMIUMS.—For purposes of this subsection, the 
term ‘FDIC premium’ means any assessment imposed under 
section 7(b) of the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)). 
‘‘(5) TOTAL CONSOLIDATED ASSETS.—For purposes of this 
subsection, the term ‘total consolidated assets’ has the meaning 
given such term under section 165 of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (12 U.S.C. 5365). 
‘‘(6) AGGREGATION RULE.— 
‘‘(A) IN GENERAL.—Members of an expanded affiliated 
group shall be treated as a single taxpayer for purposes 
of applying this subsection. 
‘‘(B) EXPANDED AFFILIATED GROUP.— 
‘‘(i) IN GENERAL.—For purposes of this paragraph, 
the term ‘expanded affiliated group’ means an affiliated 
group as defined in section 1504(a), determined—
H. R. 1—101 
‘‘(I) by substituting ‘more than 50 percent’ for 
‘at least 80 percent’ each place it appears, and 
‘‘(II) without regard to paragraphs (2) and (3) 
of section 1504(b). 
‘‘(ii) CONTROL
OF
NON-CORPORATE
ENTITIES.—A 
partnership or any other entity (other than a corpora-
tion) shall be treated as a member of an expanded 
affiliated group if such entity is controlled (within the 
meaning of section 954(d)(3)) by members of such group 
(including any entity treated as a member of such 
group by reason of this clause).’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13532. REPEAL OF ADVANCE REFUNDING BONDS. 
(a) IN GENERAL.—Paragraph (1) of section 149(d) is amended 
by striking ‘‘as part of an issue described in paragraph (2), (3), 
or (4).’’ and inserting ‘‘to advance refund another bond.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 149(d) is amended by striking paragraphs (2), 
(3), (4), and (6) and by redesignating paragraphs (5) and (7) 
as paragraphs (2) and (3). 
(2) Section 148(f)(4)(C) is amended by striking clause (xiv) 
and by redesignating clauses (xv) to (xvii) as clauses (xiv) 
to (xvi). 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to advance refunding bonds issued after December 31, 
2017. 
Subpart D—S Corporations 
SEC. 13541. EXPANSION OF QUALIFYING BENEFICIARIES OF AN 
ELECTING SMALL BUSINESS TRUST. 
(a) NO LOOK-THROUGH
FOR ELIGIBILITY PURPOSES.—Section 
1361(c)(2)(B)(v) is amended by adding at the end the following 
new sentence: ‘‘This clause shall not apply for purposes of subsection 
(b)(1)(C).’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect on January 1, 2018. 
SEC. 13542. CHARITABLE CONTRIBUTION DEDUCTION FOR ELECTING 
SMALL BUSINESS TRUSTS. 
(a) IN GENERAL.—Section 641(c)(2) is amended by inserting 
after subparagraph (D) the following new subparagraph: 
‘‘(E)(i) Section 642(c) shall not apply. 
‘‘(ii) For purposes of section 170(b)(1)(G), adjusted gross 
income shall be computed in the same manner as in the 
case of an individual, except that the deductions for costs 
which are paid or incurred in connection with the adminis-
tration of the trust and which would not have been incurred 
if the property were not held in such trust shall be treated 
as allowable in arriving at adjusted gross income.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years beginning after December 31, 2017.
H. R. 1—102 
SEC. 13543. MODIFICATION OF TREATMENT OF S CORPORATION 
CONVERSIONS TO C CORPORATIONS. 
(a) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION FROM S COR-
PORATION TO C CORPORATION.—Section 481 is amended by adding 
at the end the following new subsection: 
‘‘(d) ADJUSTMENTS ATTRIBUTABLE TO CONVERSION FROM S COR-
PORATION TO C CORPORATION.— 
‘‘(1) IN GENERAL.—In the case of an eligible terminated 
S corporation, any adjustment required by subsection (a)(2) 
which is attributable to such corporation’s revocation described 
in paragraph (2)(A)(ii) shall be taken into account ratably 
during the 6-taxable year period beginning with the year of 
change. 
‘‘(2) ELIGIBLE TERMINATED S CORPORATION.—For purposes 
of this subsection, the term ‘eligible terminated S corporation’ 
means any C corporation— 
‘‘(A) which— 
‘‘(i) was an S corporation on the day before the 
date of the enactment of the Tax Cuts and Jobs Act, 
and 
‘‘(ii) during the 2-year period beginning on the 
date of such enactment makes a revocation of its elec-
tion under section 1362(a), and 
‘‘(B) the owners of the stock of which, determined on 
the date such revocation is made, are the same owners 
(and in identical proportions) as on the date of such enact-
ment.’’. 
(b) CASH DISTRIBUTIONS FOLLOWING POST-TERMINATION TRANSI-
TION PERIOD FROM S CORPORATION STATUS.—Section 1371 is 
amended by adding at the end the following new subsection: 
‘‘(f) 
CASH
DISTRIBUTIONS
FOLLOWING
POST-TERMINATION 
TRANSITION PERIOD.—In the case of a distribution of money by 
an eligible terminated S corporation (as defined in section 481(d)) 
after the post-termination transition period, the accumulated adjust-
ments account shall be allocated to such distribution, and the 
distribution shall be chargeable to accumulated earnings and 
profits, in the same ratio as the amount of such accumulated 
adjustments account bears to the amount of such accumulated 
earnings and profits.’’. 
PART VII—EMPLOYMENT 
Subpart A—Compensation 
SEC. 13601. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE 
REMUNERATION. 
(a) REPEAL
OF
PERFORMANCE-BASED
COMPENSATION
AND 
COMMISSION EXCEPTIONS FOR LIMITATION ON EXCESSIVE EMPLOYEE 
REMUNERATION.— 
(1) IN
GENERAL.—Paragraph (4) of section 162(m) is 
amended by striking subparagraphs (B) and (C) and by redesig-
nating subparagraphs (D), (E), (F), and (G) as subparagraphs 
(B), (C), (D), and (E), respectively. 
(2) CONFORMING AMENDMENTS.— 
(A) Paragraphs (5)(E) and (6)(D) of section 162(m) are 
each amended by striking ‘‘subparagraphs (B), (C), and 
(D)’’ and inserting ‘‘subparagraph (B)’’.
H. R. 1—103 
(B) Paragraphs (5)(G) and (6)(G) of section 162(m) are 
each amended by striking ‘‘(F) and (G)’’ and inserting ‘‘(D) 
and (E)’’. 
(b) MODIFICATION OF DEFINITION OF COVERED EMPLOYEES.— 
Paragraph (3) of section 162(m) is amended— 
(1) in subparagraph (A), by striking ‘‘as of the close of 
the taxable year, such employee is the chief executive officer 
of the taxpayer or is’’ and inserting ‘‘such employee is the 
principal executive officer or principal financial officer of the 
taxpayer at any time during the taxable year, or was’’, 
(2) in subparagraph (B)— 
(A) by striking ‘‘4’’ and inserting ‘‘3’’, and 
(B) by striking ‘‘(other than the chief executive officer)’’ 
and inserting ‘‘(other than any individual described in 
subparagraph (A))’’, and 
(3) by striking ‘‘or’’ at the end of subparagraph (A), by 
striking the period at the end of subparagraph (B) and inserting 
‘‘, or’’, and by adding at the end the following: 
‘‘(C) was a covered employee of the taxpayer (or any 
predecessor) for any preceding taxable year beginning after 
December 31, 2016.’’. 
(c) EXPANSION OF APPLICABLE EMPLOYER.— 
(1) IN GENERAL.—Section 162(m)(2) is amended to read 
as follows: 
‘‘(2) PUBLICLY HELD CORPORATION.—For purposes of this 
subsection, the term ‘publicly held corporation’ means any cor-
poration which is an issuer (as defined in section 3 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c))— 
‘‘(A) the securities of which are required to be reg-
istered under section 12 of such Act (15 U.S.C. 78l), or 
‘‘(B) that is required to file reports under section 15(d) 
of such Act (15 U.S.C. 78o(d)).’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
162(m)(3), 
as 
amended by subsection (b), is amended by adding at the end 
the following flush sentence: 
‘‘Such term shall include any employee who would be 
described in subparagraph (B) if the reporting described in 
such subparagraph were required as so described.’’. 
(d) SPECIAL RULE FOR REMUNERATION PAID TO BENEFICIARIES, 
ETC.—Paragraph (4) of section 162(m), as amended by subsection 
(a), is amended by adding at the end the following new subpara-
graph: 
‘‘(F) SPECIAL RULE FOR REMUNERATION PAID TO BENE-
FICIARIES, 
ETC.—Remuneration shall not fail to be 
applicable employee remuneration merely because it is 
includible in the income of, or paid to, a person other 
than the covered employee, including after the death of 
the covered employee.’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to taxable years 
beginning after December 31, 2017. 
(2) EXCEPTION FOR BINDING CONTRACTS.—The amendments 
made by this section shall not apply to remuneration which 
is provided pursuant to a written binding contract which was 
in effect on November 2, 2017, and which was not modified 
in any material respect on or after such date.
H. R. 1—104 
SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION 
EXECUTIVE COMPENSATION. 
(a) IN GENERAL.—Subchapter D of chapter 42 is amended by 
adding at the end the following new section: 
‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE 
COMPENSATION. 
‘‘(a) TAX IMPOSED.—There is hereby imposed a tax equal to 
the product of the rate of tax under section 11 and the sum of— 
‘‘(1) so much of the remuneration paid (other than any 
excess parachute payment) by an applicable tax-exempt 
organization for the taxable year with respect to employment 
of any covered employee in excess of $1,000,000, plus 
‘‘(2) any excess parachute payment paid by such an 
organization to any covered employee. 
For purposes of the preceding sentence, remuneration shall be 
treated as paid when there is no substantial risk of forfeiture 
(within the meaning of section 457(f)(3)(B)) of the rights to such 
remuneration. 
‘‘(b) LIABILITY FOR TAX.—The employer shall be liable for the 
tax imposed under subsection (a). 
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For purposes of this 
section— 
‘‘(1) APPLICABLE
TAX-EXEMPT
ORGANIZATION.—The term 
‘applicable tax-exempt organization’ means any organization 
which for the taxable year— 
‘‘(A) is exempt from taxation under section 501(a), 
‘‘(B) is a farmers’ cooperative organization described 
in section 521(b)(1), 
‘‘(C) has income excluded from taxation under section 
115(1), or 
‘‘(D) is a political organization described in section 
527(e)(1). 
‘‘(2) COVERED EMPLOYEE.—For purposes of this section, the 
term ‘covered employee’ means any employee (including any 
former employee) of an applicable tax-exempt organization if 
the employee— 
‘‘(A) is one of the 5 highest compensated employees 
of the organization for the taxable year, or 
‘‘(B) was a covered employee of the organization (or 
any predecessor) for any preceding taxable year beginning 
after December 31, 2016. 
‘‘(3) REMUNERATION.—For purposes of this section: 
‘‘(A) IN
GENERAL.—The term ‘remuneration’ means 
wages (as defined in section 3401(a)), except that such 
term shall not include any designated Roth contribution 
(as defined in section 402A(c)) and shall include amounts 
required to be included in gross income under section 457(f). 
‘‘(B) EXCEPTION FOR REMUNERATION FOR MEDICAL SERV-
ICES.—The term ‘remuneration’ shall not include the por-
tion of any remuneration paid to a licensed medical profes-
sional (including a veterinarian) which is for the perform-
ance of medical or veterinary services by such professional. 
‘‘(4) REMUNERATION FROM RELATED ORGANIZATIONS.— 
‘‘(A) IN GENERAL.—Remuneration of a covered employee 
by an applicable tax-exempt organization shall include any
H. R. 1—105 
remuneration paid with respect to employment of such 
employee by any related person or governmental entity. 
‘‘(B) RELATED
ORGANIZATIONS.—A person or govern-
mental entity shall be treated as related to an applicable 
tax-exempt organization if such person or governmental 
entity— 
‘‘(i) controls, or is controlled by, the organization, 
‘‘(ii) is controlled by one or more persons which 
control the organization, 
‘‘(iii) is a supported organization (as defined in 
section 509(f)(3)) during the taxable year with respect 
to the organization, 
‘‘(iv) is a supporting organization described in sec-
tion 509(a)(3) during the taxable year with respect 
to the organization, or 
‘‘(v) in the case of an organization which is a 
voluntary employees’ beneficiary association described 
in section 501(c)(9), establishes, maintains, or makes 
contributions to such voluntary employees’ beneficiary 
association. 
‘‘(C) LIABILITY FOR TAX.—In any case in which remu-
neration from more than one employer is taken into account 
under this paragraph in determining the tax imposed by 
subsection (a), each such employer shall be liable for such 
tax in an amount which bears the same ratio to the total 
tax determined under subsection (a) with respect to such 
remuneration as— 
‘‘(i) the amount of remuneration paid by such 
employer with respect to such employee, bears to 
‘‘(ii) the amount of remuneration paid by all such 
employers to such employee. 
‘‘(5) EXCESS PARACHUTE PAYMENT.—For purposes of deter-
mining the tax imposed by subsection (a)(2)— 
‘‘(A) IN GENERAL.—The term ‘excess parachute pay-
ment’ means an amount equal to the excess of any para-
chute payment over the portion of the base amount allo-
cated to such payment. 
‘‘(B) PARACHUTE PAYMENT.—The term ‘parachute pay-
ment’ means any payment in the nature of compensation 
to (or for the benefit of) a covered employee if— 
‘‘(i) such payment is contingent on such employee’s 
separation from employment with the employer, and 
‘‘(ii) the aggregate present value of the payments 
in the nature of compensation to (or for the benefit 
of) such individual which are contingent on such sepa-
ration equals or exceeds an amount equal to 3 times 
the base amount. 
‘‘(C) EXCEPTION.—Such term does not include any pay-
ment— 
‘‘(i) described in section 280G(b)(6) (relating to 
exemption for payments under qualified plans), 
‘‘(ii) made under or to an annuity contract 
described in section 403(b) or a plan described in sec-
tion 457(b), 
‘‘(iii) to a licensed medical professional (including 
a veterinarian) to the extent that such payment is
H. R. 1—106 
for the performance of medical or veterinary services 
by such professional, or 
‘‘(iv) to an individual who is not a highly com-
pensated employee as defined in section 414(q). 
‘‘(D) BASE
AMOUNT.—Rules similar to the rules of 
280G(b)(3) shall apply for purposes of determining the base 
amount. 
‘‘(E) PROPERTY
TRANSFERS; PRESENT
VALUE.—Rules 
similar to the rules of paragraphs (3) and (4) of section 
280G(d) shall apply. 
‘‘(6) COORDINATION WITH DEDUCTION LIMITATION.—Remu-
neration the deduction for which is not allowed by reason 
of section 162(m) shall not be taken into account for purposes 
of this section. 
‘‘(d) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary to prevent avoidance of the tax under 
this section, including regulations to prevent avoidance of such 
tax through the performance of services other than as an employee 
or by providing compensation through a pass-through or other 
entity to avoid such tax.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for subchapter 
D of chapter 42 is amended by adding at the end the following 
new item: 
‘‘Sec. 4960. Tax on excess tax-exempt organization executive compensation.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS. 
(a) IN GENERAL.—Section 83 is amended by adding at the 
end the following new subsection: 
‘‘(i) QUALIFIED EQUITY GRANTS.— 
‘‘(1) IN GENERAL.—For purposes of this subtitle— 
‘‘(A) TIMING OF INCLUSION.—If qualified stock is trans-
ferred to a qualified employee who makes an election with 
respect to such stock under this subsection, subsection 
(a) shall be applied by including the amount determined 
under such subsection with respect to such stock in income 
of the employee in the taxable year determined under 
subparagraph (B) in lieu of the taxable year described 
in subsection (a). 
‘‘(B) TAXABLE
YEAR
DETERMINED.—The taxable year 
determined under this subparagraph is the taxable year 
of the employee which includes the earliest of— 
‘‘(i) the first date such qualified stock becomes 
transferable (including, solely for purposes of this 
clause, becoming transferable to the employer), 
‘‘(ii) the date the employee first becomes an 
excluded employee, 
‘‘(iii) the first date on which any stock of the cor-
poration which issued the qualified stock becomes 
readily tradable on an established securities market 
(as determined by the Secretary, but not including 
any market unless such market is recognized as an 
established securities market by the Secretary for pur-
poses of a provision of this title other than this sub-
section),
H. R. 1—107 
‘‘(iv) the date that is 5 years after the first date 
the rights of the employee in such stock are transfer-
able or are not subject to a substantial risk of for-
feiture, whichever occurs earlier, or 
‘‘(v) the date on which the employee revokes (at 
such time and in such manner as the Secretary pro-
vides) the election under this subsection with respect 
to such stock. 
‘‘(2) QUALIFIED STOCK.— 
‘‘(A) IN GENERAL.—For purposes of this subsection, the 
term ‘qualified stock’ means, with respect to any qualified 
employee, any stock in a corporation which is the employer 
of such employee, if— 
‘‘(i) such stock is received— 
‘‘(I) in connection with the exercise of an 
option, or 
‘‘(II) in settlement of a restricted stock unit, 
and 
‘‘(ii) such option or restricted stock unit was 
granted by the corporation— 
‘‘(I) in connection with the performance of serv-
ices as an employee, and 
‘‘(II) during a calendar year in which such 
corporation was an eligible corporation. 
‘‘(B) LIMITATION.—The term ‘qualified stock’ shall not 
include any stock if the employee may sell such stock 
to, or otherwise receive cash in lieu of stock from, the 
corporation at the time that the rights of the employee 
in such stock first become transferable or not subject to 
a substantial risk of forfeiture. 
‘‘(C) ELIGIBLE CORPORATION.—For purposes of subpara-
graph (A)(ii)(II)— 
‘‘(i) IN GENERAL.—The term ‘eligible corporation’ 
means, with respect to any calendar year, any corpora-
tion if— 
‘‘(I) no stock of such corporation (or any prede-
cessor of such corporation) is readily tradable on 
an established securities market (as determined 
under paragraph (1)(B)(iii)) during any preceding 
calendar year, and 
‘‘(II) such corporation has a written plan under 
which, in such calendar year, not less than 80 
percent of all employees who provide services to 
such corporation in the United States (or any 
possession of the United States) are granted stock 
options, or are granted restricted stock units, with 
the same rights and privileges to receive qualified 
stock. 
‘‘(ii) SAME RIGHTS AND PRIVILEGES.—For purposes 
of clause (i)(II)— 
‘‘(I) except as provided in subclauses (II) and 
(III), the determination of rights and privileges 
with respect to stock shall be made in a similar 
manner as under section 423(b)(5), 
‘‘(II) employees shall not fail to be treated 
as having the same rights and privileges to receive 
qualified stock solely because the number of shares
H. R. 1—108 
available to all employees is not equal in amount, 
so long as the number of shares available to each 
employee is more than a de minimis amount, and 
‘‘(III) rights and privileges with respect to the 
exercise of an option shall not be treated as the 
same as rights and privileges with respect to the 
settlement of a restricted stock unit. 
‘‘(iii) EMPLOYEE.—For purposes of clause (i)(II), the 
term ‘employee’ shall not include any employee 
described in section 4980E(d)(4) or any excluded 
employee. 
‘‘(iv) SPECIAL RULE FOR CALENDAR YEARS BEFORE 
2018.—In the case of any calendar year beginning before 
January 1, 2018, clause (i)(II) shall be applied without 
regard to whether the rights and privileges with 
respect to the qualified stock are the same. 
‘‘(3) QUALIFIED EMPLOYEE; EXCLUDED EMPLOYEE.—For pur-
poses of this subsection— 
‘‘(A) IN GENERAL.—The term ‘qualified employee’ means 
any individual who— 
‘‘(i) is not an excluded employee, and 
‘‘(ii) agrees in the election made under this sub-
section to meet such requirements as are determined 
by the Secretary to be necessary to ensure that the 
withholding requirements of the corporation under 
chapter 24 with respect to the qualified stock are met. 
‘‘(B) 
EXCLUDED
EMPLOYEE.—The 
term 
‘excluded 
employee’ means, with respect to any corporation, any indi-
vidual— 
‘‘(i) who is a 1-percent owner (within the meaning 
of section 416(i)(1)(B)(ii)) at any time during the cal-
endar year or who was such a 1 percent owner at 
any time during the 10 preceding calendar years, 
‘‘(ii) who is or has been at any prior time— 
‘‘(I) the chief executive officer of such corpora-
tion or an individual acting in such a capacity, 
or 
‘‘(II) the chief financial officer of such corpora-
tion or an individual acting in such a capacity, 
‘‘(iii) who bears a relationship described in section 
318(a)(1) to any individual described in subclause (I) 
or (II) of clause (ii), or 
‘‘(iv) who is one of the 4 highest compensated offi-
cers of such corporation for the taxable year, or was 
one of the 4 highest compensated officers of such cor-
poration for any of the 10 preceding taxable years, 
determined with respect to each such taxable year 
on the basis of the shareholder disclosure rules for 
compensation under the Securities Exchange Act of 
1934 (as if such rules applied to such corporation). 
‘‘(4) ELECTION.— 
‘‘(A) TIME FOR MAKING ELECTION.—An election with 
respect to qualified stock shall be made under this sub-
section no later than 30 days after the first date the rights 
of the employee in such stock are transferable or are not 
subject to a substantial risk of forfeiture, whichever occurs 
earlier, and shall be made in a manner similar to the
H. R. 1—109 
manner in which an election is made under subsection 
(b). 
‘‘(B) LIMITATIONS.—No election may be made under 
this section with respect to any qualified stock if— 
‘‘(i) the qualified employee has made an election 
under subsection (b) with respect to such qualified 
stock, 
‘‘(ii) any stock of the corporation which issued the 
qualified stock is readily tradable on an established 
securities market (as determined under paragraph 
(1)(B)(iii)) at any time before the election is made, 
or 
‘‘(iii) such corporation purchased any of its out-
standing stock in the calendar year preceding the cal-
endar year which includes the first date the rights 
of the employee in such stock are transferable or are 
not subject to a substantial risk of forfeiture, unless— 
‘‘(I) not less than 25 percent of the total dollar 
amount of the stock so purchased is deferral stock, 
and 
‘‘(II) the determination of which individuals 
from whom deferral stock is purchased is made 
on a reasonable basis. 
‘‘(C) DEFINITIONS
AND
SPECIAL
RULES
RELATED
TO 
LIMITATION ON STOCK REDEMPTIONS.— 
‘‘(i) DEFERRAL STOCK.—For purposes of this para-
graph, the term ‘deferral stock’ means stock with 
respect to which an election is in effect under this 
subsection. 
‘‘(ii) DEFERRAL STOCK WITH RESPECT TO ANY INDI-
VIDUAL NOT TAKEN INTO ACCOUNT IF INDIVIDUAL HOLDS 
DEFERRAL
STOCK
WITH
LONGER
DEFERRAL
PERIOD.— 
Stock purchased by a corporation from any individual 
shall not be treated as deferral stock for purposes 
of subparagraph (B)(iii) if such individual (immediately 
after such purchase) holds any deferral stock with 
respect to which an election has been in effect under 
this subsection for a longer period than the election 
with respect to the stock so purchased. 
‘‘(iii) PURCHASE
OF
ALL
OUTSTANDING
DEFERRAL 
STOCK.—The requirements of subclauses (I) and (II) 
of subparagraph (B)(iii) shall be treated as met if the 
stock so purchased includes all of the corporation’s 
outstanding deferral stock. 
‘‘(iv) REPORTING.—Any corporation which has out-
standing deferral stock as of the beginning of any 
calendar year and which purchases any of its out-
standing stock during such calendar year shall include 
on its return of tax for the taxable year in which, 
or with which, such calendar year ends the total dollar 
amount of its outstanding stock so purchased during 
such calendar year and such other information as the 
Secretary requires for purposes of administering this 
paragraph. 
‘‘(5) CONTROLLED GROUPS.—For purposes of this subsection, 
all persons treated as a single employer under section 414(b) 
shall be treated as 1 corporation.
H. R. 1—110 
‘‘(6) NOTICE REQUIREMENT.—Any corporation which trans-
fers qualified stock to a qualified employee shall, at the time 
that (or a reasonable period before) an amount attributable 
to such stock would (but for this subsection) first be includible 
in the gross income of such employee— 
‘‘(A) certify to such employee that such stock is quali-
fied stock, and 
‘‘(B) notify such employee— 
‘‘(i) that the employee may be eligible to elect 
to defer income on such stock under this subsection, 
and 
‘‘(ii) that, if the employee makes such an election— 
‘‘(I) the amount of income recognized at the 
end of the deferral period will be based on the 
value of the stock at the time at which the rights 
of the employee in such stock first become transfer-
able or not subject to substantial risk of forfeiture, 
notwithstanding whether the value of the stock 
has declined during the deferral period, 
‘‘(II) the amount of such income recognized 
at the end of the deferral period will be subject 
to withholding under section 3401(i) at the rate 
determined under section 3402(t), and 
‘‘(III) the responsibilities of the employee (as 
determined by the Secretary under paragraph 
(3)(A)(ii)) with respect to such withholding. 
‘‘(7) RESTRICTED STOCK UNITS.—This section (other than 
this subsection), including any election under subsection (b), 
shall not apply to restricted stock units.’’. 
(b) WITHHOLDING.— 
(1) TIME OF WITHHOLDING.—Section 3401 is amended by 
adding at the end the following new subsection: 
‘‘(i) QUALIFIED STOCK FOR WHICH AN ELECTION IS IN EFFECT 
UNDER SECTION 83(I).—For purposes of subsection (a), qualified 
stock (as defined in section 83(i)) with respect to which an election 
is made under section 83(i) shall be treated as wages— 
‘‘(1) received on the earliest date described in section 
83(i)(1)(B), and 
‘‘(2) in an amount equal to the amount included in income 
under section 83 for the taxable year which includes such 
date.’’. 
(2) AMOUNT OF WITHHOLDING.—Section 3402 is amended 
by adding at the end the following new subsection: 
‘‘(t) RATE OF WITHHOLDING FOR CERTAIN STOCK.—In the case 
of any qualified stock (as defined in section 83(i)(2)) with respect 
to which an election is made under section 83(i)— 
‘‘(1) the rate of tax under subsection (a) shall not be less 
than the maximum rate of tax in effect under section 1, and 
‘‘(2) such stock shall be treated for purposes of section 
3501(b) in the same manner as a non-cash fringe benefit.’’. 
(c) COORDINATION
WITH
OTHER
DEFERRED
COMPENSATION 
RULES.— 
(1) ELECTION TO APPLY DEFERRAL TO STATUTORY OPTIONS.— 
(A) INCENTIVE
STOCK
OPTIONS.—Section 422(b) is 
amended by adding at the end the following: ‘‘Such term 
shall not include any option if an election is made under
H. R. 1—111 
section 83(i) with respect to the stock received in connection 
with the exercise of such option.’’. 
(B) EMPLOYEE STOCK PURCHASE PLANS.—Section 423 
is amended— 
(i) in subsection (b)(5), by striking ‘‘and’’ before 
‘‘the plan’’ and by inserting ‘‘, and the rules of section 
83(i) shall apply in determining which employees have 
a right to make an election under such section’’ before 
the semicolon at the end, and 
(ii) by adding at the end the following new sub-
section: 
‘‘(d) COORDINATION
WITH
QUALIFIED
EQUITY
GRANTS.—An 
option for which an election is made under section 83(i) with respect 
to the stock received in connection with its exercise shall not be 
considered as granted pursuant an employee stock purchase plan.’’. 
(2) 
EXCLUSION
FROM
DEFINITION
OF
NONQUALIFIED 
DEFERRED COMPENSATION PLAN.—Subsection (d) of section 409A 
is amended by adding at the end the following new paragraph: 
‘‘(7) TREATMENT
OF
QUALIFIED
STOCK.—An arrangement 
under which an employee may receive qualified stock (as 
defined in section 83(i)(2)) shall not be treated as a nonqualified 
deferred compensation plan with respect to such employee 
solely because of such employee’s election, or ability to make 
an election, to defer recognition of income under section 83(i).’’. 
(d) INFORMATION REPORTING.—Section 6051(a) is amended by 
striking ‘‘and’’ at the end of paragraph (14)(B), by striking the 
period at the end of paragraph (15) and inserting a comma, and 
by inserting after paragraph (15) the following new paragraphs: 
‘‘(16) the amount includible in gross income under subpara-
graph (A) of section 83(i)(1) with respect to an event described 
in subparagraph (B) of such section which occurs in such cal-
endar year, and 
‘‘(17) the aggregate amount of income which is being 
deferred pursuant to elections under section 83(i), determined 
as of the close of the calendar year.’’. 
(e) PENALTY FOR FAILURE OF EMPLOYER TO PROVIDE NOTICE 
OF TAX CONSEQUENCES.—Section 6652 is amended by adding at 
the end the following new subsection: 
‘‘(p) FAILURE TO PROVIDE NOTICE UNDER SECTION 83(I).—In 
the case of each failure to provide a notice as required by section 
83(i)(6), at the time prescribed therefor, unless it is shown that 
such failure is due to reasonable cause and not to willful neglect, 
there shall be paid, on notice and demand of the Secretary and 
in the same manner as tax, by the person failing to provide such 
notice, an amount equal to $100 for each such failure, but the 
total amount imposed on such person for all such failures during 
any calendar year shall not exceed $50,000.’’. 
(f) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in paragraph (2), the 
amendments made by this section shall apply to stock attrib-
utable to options exercised, or restricted stock units settled, 
after December 31, 2017. 
(2) REQUIREMENT TO PROVIDE NOTICE.—The amendments 
made by subsection (e) shall apply to failures after December 
31, 2017. 
(g) TRANSITION RULE.—Until such time as the Secretary (or 
the Secretary’s delegate) issues regulations or other guidance for
H. R. 1—112 
purposes of implementing the requirements of paragraph (2)(C)(i)(II) 
of section 83(i) of the Internal Revenue Code of 1986 (as added 
by this section), or the requirements of paragraph (6) of such 
section, a corporation shall be treated as being in compliance with 
such requirements (respectively) if such corporation complies with 
a reasonable good faith interpretation of such requirements. 
SEC. 13604. INCREASE IN EXCISE TAX RATE FOR STOCK COMPENSA-
TION OF INSIDERS IN EXPATRIATED CORPORATIONS. 
(a) IN GENERAL.—Section 4985(a)(1) is amended by striking 
‘‘section 1(h)(1)(C)’’ and inserting ‘‘section 1(h)(1)(D)’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to corporations first becoming expatriated corporations 
(as defined in section 4985 of the Internal Revenue Code of 1986) 
after the date of enactment of this Act. 
Subpart B—Retirement Plans 
SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RECHARACTER-
IZATION OF ROTH CONVERSIONS. 
(a) IN GENERAL.—Section 408A(d)(6)(B) is amended by adding 
at the end the following new clause: 
‘‘(iii) CONVERSIONS.—Subparagraph (A) shall not 
apply in the case of a qualified rollover contribution 
to which subsection (d)(3) applies (including by reason 
of subparagraph (C) thereof).’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13612. MODIFICATION OF RULES APPLICABLE TO LENGTH OF 
SERVICE AWARD PLANS. 
(a) MAXIMUM
DEFERRAL
AMOUNT.—Clause (ii) of section 
457(e)(11)(B) is amended by striking ‘‘$3,000’’ and inserting 
‘‘$6,000’’. 
(b) COST OF LIVING ADJUSTMENT.—Subparagraph (B) of section 
457(e)(11) is amended by adding at the end the following: 
‘‘(iii) COST OF LIVING ADJUSTMENT.—In the case 
of taxable years beginning after December 31, 2017, 
the Secretary shall adjust the $6,000 amount under 
clause (ii) at the same time and in the same manner 
as under section 415(d), except that the base period 
shall be the calendar quarter beginning July 1, 2016, 
and any increase under this paragraph that is not 
a multiple of $500 shall be rounded to the next lowest 
multiple of $500.’’. 
(c) APPLICATION OF LIMITATION ON ACCRUALS.—Subparagraph 
(B) of section 457(e)(11), as amended by subsection (b), is amended 
by adding at the end the following: 
‘‘(iv) SPECIAL RULE FOR APPLICATION OF LIMITATION 
ON ACCRUALS FOR CERTAIN PLANS.—In the case of a 
plan described in subparagraph (A)(ii) which is a 
defined benefit plan (as defined in section 414(j)), the 
limitation under clause (ii) shall apply to the actuarial 
present value of the aggregate amount of length of 
service awards accruing with respect to any year of 
service. Such actuarial present value with respect to 
any year shall be calculated using reasonable actuarial 
assumptions and methods, assuming payment will be
H. R. 1—113 
made under the most valuable form of payment under 
the plan with payment commencing at the later of 
the earliest age at which unreduced benefits are pay-
able under the plan or the participant’s age at the 
time of the calculation.’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET 
AMOUNTS. 
(a) IN GENERAL.—Paragraph (3) of section 402(c) is amended 
by adding at the end the following new subparagraph: 
‘‘(C) ROLLOVER
OF
CERTAIN
PLAN
LOAN
OFFSET 
AMOUNTS.— 
‘‘(i) IN GENERAL.—In the case of a qualified plan 
loan offset amount, paragraph (1) shall not apply to 
any transfer of such amount made after the due date 
(including extensions) for filing the return of tax for 
the taxable year in which such amount is treated as 
distributed from a qualified employer plan. 
‘‘(ii) QUALIFIED PLAN LOAN OFFSET AMOUNT.—For 
purposes of this subparagraph, 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 qualified employer 
plan, or 
‘‘(II) the failure to meet the repayment terms 
of the loan from such plan because of the severance 
from employment of the participant. 
‘‘(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) 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 AMENDMENTS.—Section 402(c)(3) is amended— 
(1) by striking ‘‘TRANSFER MUST BE MADE WITHIN 60 DAYS 
OF RECEIPT’’ in the heading and inserting ‘‘TIME LIMIT ON TRANS-
FERS’’, and 
(2) by striking ‘‘subparagraph (B)’’ in subparagraph (A) 
and inserting ‘‘subparagraphs (B) and (C)’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to plan loan offset amounts which are treated as distrib-
uted in taxable years beginning after December 31, 2017.
H. R. 1—114 
PART VIII—EXEMPT ORGANIZATIONS 
SEC. 13701. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE 
COLLEGES AND UNIVERSITIES. 
(a) IN GENERAL.—Chapter 42 is amended by adding at the 
end the following new subchapter: 
‘‘Subchapter H—Excise Tax Based on Investment Income of 
Private Colleges and Universities 
‘‘Sec. 4968. Excise tax based on investment income of private colleges and univer-
sities. 
‘‘SEC. 4968. EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE 
COLLEGES AND UNIVERSITIES. 
‘‘(a) TAX IMPOSED.—There is hereby imposed on each applicable 
educational institution for the taxable year a tax equal to 1.4 
percent of the net investment income of such institution for the 
taxable year. 
‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For purposes of 
this subchapter— 
‘‘(1) IN GENERAL.—The term ‘applicable educational institu-
tion’ means an eligible educational institution (as defined in 
section 25A(f)(2))— 
‘‘(A) which had at least 500 students during the pre-
ceding taxable year, 
‘‘(B) more than 50 percent of the students of which 
are located in the United States, 
‘‘(C) which is not described in the first sentence of 
section 511(a)(2)(B) (relating to State colleges and univer-
sities), and 
‘‘(D) the aggregate fair market value of the assets 
of which at the end of the preceding taxable year (other 
than those assets which are used directly in carrying out 
the institution’s exempt purpose) is at least $500,000 per 
student of the institution. 
‘‘(2) STUDENTS.—For purposes of paragraph (1), the number 
of students of an institution (including for purposes of deter-
mining the number of students at a particular location) shall 
be based on the daily average number of full-time students 
attending such institution (with part-time students taken into 
account on a full-time student equivalent basis). 
‘‘(c) NET INVESTMENT INCOME.—For purposes of this section, 
net investment income shall be determined under rules similar 
to the rules of section 4940(c). 
‘‘(d) ASSETS
AND
NET
INVESTMENT
INCOME
OF
RELATED 
ORGANIZATIONS.— 
‘‘(1) IN GENERAL.—For purposes of subsections (b)(1)(C) and 
(c), assets and net investment income of any related organiza-
tion with respect to an educational institution shall be treated 
as assets and net investment income, respectively, of the edu-
cational institution, except that— 
‘‘(A) no such amount shall be taken into account with 
respect to more than 1 educational institution, and 
‘‘(B) unless such organization is controlled by such 
institution or is described in section 509(a)(3) with respect 
to such institution for the taxable year, assets and net