965 
tricity investment credit under section 48E(a) 
with respect to such property. 
‘‘(B) APPLICABLE
PAYMENT.—For pur-
poses of this paragraph, the term ‘applicable 
payment’ means, with respect to any taxable 
year, a payment or payments described in sub-
clause (I) or (II) of section 48E(d)(6)(B)(ii). 
‘‘(C) SPECIFIED
TAXPAYER.—For pur-
poses of this paragraph, the term ‘specified tax-
payer’ means any taxpayer who has been al-
lowed a credit under section 48E(a) for any 
taxable year beginning after the date which is 
2 years after the date of enactment of this 
paragraph.’’, 
(C) in paragraph (5), as redesignated by 
subparagraph (A), by striking ‘‘or any applica-
ble transaction to which paragraph (3)(A) ap-
plies,’’ and inserting ‘‘any applicable trans-
action to which paragraph (3)(A) applies, or 
any applicable payment to which paragraph 
(4)(A) applies,’’, and 
(D) in paragraph (7), as redesignated by 
subparagraph (A), by striking ‘‘or (3)’’ and in-
serting ‘‘(3), or (4)’’. 
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(c) REPEAL OF TRANSFERABILITY.—Section 6418, 
as amended by section 112008, is amended— 
(1) in subsection (f)(1)(A), by striking clause 
(xi), and 
(2) in subsection (g)(3), by striking ‘‘clauses 
(ix) through (xi)’’ and inserting ‘‘clause (ix) or (x)’’. 
(d) CONFORMING AMENDMENTS.—Section 48E(h)(4) 
is amended— 
(1) in subparagraph (C), by striking ‘‘December 
31 of the applicable year (as defined in section 
45Y(d)(3))’’ and inserting ‘‘December 31, 2031’’, 
(2) in subparagraph (D), by striking ‘‘the third 
calendar year following the applicable year (as de-
fined in section 45Y(d)(3))’’ and inserting ‘‘2031’’, 
and 
(3) in subparagraph (E)(i), by striking ‘‘after 
the date that is 4 years after the date of the alloca-
tion with respect to the facility of which such prop-
erty is a part’’ and inserting ‘‘the earlier of— 
‘‘(I) the date that is 4 years after 
the date of the allocation with respect 
to the facility of which such property 
is a part, or 
‘‘(II) December 31, 2031.’’. 
(e) EFFECTIVE DATES.— 
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(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years beginning after the date 
of enactment of this Act. 
(2) OTHER
PROVISIONS.—The amendments 
made by subsection (c) shall apply to facilities and 
energy storage technology for which construction be-
gins after the date that is 2 years after the date of 
enactment of this Act. 
SEC. 112010. REPEAL OF TRANSFERABILITY OF CLEAN 
FUEL PRODUCTION CREDIT. 
(a) IN GENERAL.—Section 6418(f)(1)(A), as amend-
ed by sections 112008 and 112009, is amended by striking 
clause (viii). 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to fuel produced after December 
31, 2027. 
SEC. 112011. RESTRICTIONS ON CARBON OXIDE SEQUES-
TRATION CREDIT. 
(a) RESTRICTIONS RELATING TO PROHIBITED FOR-
EIGN ENTITIES.—Section 45Q(f) is amended by adding 
at the end the following new paragraph: 
‘‘(10) RESTRICTIONS
RELATING
TO
PROHIB-
ITED FOREIGN ENTITIES.— 
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968 
‘‘(A) IN GENERAL.—No credit determined 
under subsection (a) shall be allowed under sec-
tion 38 for any taxable year beginning after the 
date of enactment of this paragraph if the tax-
payer is a specified foreign entity (as defined in 
section 7701(a)(51)(B)). 
‘‘(B) OTHER PROHIBITED FOREIGN ENTI-
TIES.—No credit determined under subsection 
(a) shall be allowed under section 38 for any 
taxable year beginning after the date which is 
2 years after the date of enactment of this 
paragraph if the taxpayer is a foreign-influ-
enced 
entity 
(as 
defined 
in 
section 
7701(a)(51)(D)).’’. 
(b) 
REPEAL
OF
TRANSFERABILITY.—Section 
6418(f)(1), as amended by sections 112008, 112009, and 
112010, is amended— 
(1) in subparagraph (A), by striking clause (iii), 
and 
(2) in subparagraph (B)— 
(A) in the matter preceding clause (i), by 
striking ‘‘clause (ii), (iii), or (v)’’ and inserting 
‘‘clause (ii) or (v)’’, and 
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(B) in clause (ii), by striking ‘‘(or, in the 
case’’ and all that follows through ‘‘at such fa-
cility)’’. 
(c) EFFECTIVE DATES.— 
(1) RESTRICTIONS RELATING TO PROHIBITED 
FOREIGN
ENTITIES.—The amendments made by 
subsection (a) shall apply to taxable years beginning 
after the date of enactment of this Act. 
(2) 
REPEAL
OF
TRANSFERABILITY.—The 
amendments made by subsection (b) shall apply to 
carbon capture equipment the construction of which 
begins after the date that is 2 years after the date 
of enactment of this Act. 
SEC. 112012. PHASE-OUT AND RESTRICTIONS ON ZERO- 
EMISSION NUCLEAR POWER PRODUCTION 
CREDIT. 
(a) PHASE-OUT.—Section 45U(e) is amended to read 
as follows: 
‘‘(e) CREDIT PHASE-OUT.— 
‘‘(1) IN GENERAL.—For any taxable year be-
ginning after December 31, 2028, the amount of the 
zero-emission nuclear power production credit under 
subsection (a) for such taxable year shall be equal 
to the product of— 
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970 
‘‘(A) the amount of the credit determined 
under subsection (a) without regard to this sub-
section, multiplied by 
‘‘(B) the phase-out percentage under para-
graph (2). 
‘‘(2) PHASE-OUT PERCENTAGE.—The phase-out 
percentage under this paragraph is equal to— 
‘‘(A) for any taxable year beginning in cal-
endar year 2029, 80 percent, 
‘‘(B) for any taxable year beginning in cal-
endar year 2030, 60 percent, 
‘‘(C) for any taxable year beginning in cal-
endar year 2031, 40 percent, and 
‘‘(D) for any taxable year beginning after 
December 31, 2031, 0 percent.’’. 
(b) RESTRICTIONS RELATING TO PROHIBITED FOR-
EIGN ENTITIES.—Section 45U(c) is amended by adding 
at the end the following new paragraph: 
‘‘(3) RESTRICTIONS RELATING TO PROHIBITED 
FOREIGN ENTITIES.— 
‘‘(A) IN GENERAL.—No credit determined 
under subsection (a) shall be allowed under sec-
tion 38 for any taxable year beginning after the 
date of enactment of this paragraph if the tax-
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971 
payer is a specified foreign entity (as defined in 
section 7701(a)(51)(B)). 
‘‘(B) OTHER PROHIBITED FOREIGN ENTI-
TIES.—No credit determined under subsection 
(a) shall be allowed under section 38 for any 
taxable year beginning after the date which is 
2 years after the date of enactment of this 
paragraph if the taxpayer is a foreign-influ-
enced 
entity 
(as 
defined 
in 
section 
7701(a)(51)(D)).’’. 
(c) 
REPEAL
OF
TRANSFERABILITY.—Section 
6418(f)(1)(A), as amended by section 112008, 112009, 
112010, and 112011, is amended by striking clause (iv). 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years beginning after the date 
of enactment of this Act. 
(2) 
REPEAL
OF
TRANSFERABILITY.—The 
amendment made by subsection (c) shall apply to 
electricity produced and sold after December 31, 
2027. 
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972 
SEC. 112013. TERMINATION OF CLEAN HYDROGEN PRODUC-
TION CREDIT. 
(a) TERMINATION.—Section 45V(c)(3)(C) is amend-
ed by striking ‘‘January 1, 2033’’ and inserting ‘‘January 
1, 2026’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to facilities the construction of 
which begins after December 31, 2025. 
SEC. 112014. PHASE-OUT AND RESTRICTIONS ON AD-
VANCED 
MANUFACTURING 
PRODUCTION 
CREDIT. 
(a) PHASE-OUT.—Section 45X(b)(3) is amended— 
(1) in subparagraph (B)— 
(A) in clause (ii), by adding ‘‘and’’ at the 
end, 
(B) in clause (iii), by striking ‘‘during cal-
endar year 2032, 25 percent,’’ and inserting 
‘‘after December 31, 2031, 0 percent.’’, and 
(C) by striking clause (iv), and 
(2) by striking subparagraph (C) and inserting 
the following: 
‘‘(C) TERMINATION
FOR
WIND
ENERGY 
COMPONENTS.—This section shall not apply to 
wind energy components sold after December 
31, 2027.’’. 
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973 
(b) RESTRICTIONS RELATING TO PROHIBITED FOR-
EIGN ENTITIES.—Section 45X is amended— 
(1) in subsection (c)(1), by adding at the end 
the following new subparagraph: 
‘‘(C) MATERIAL
ASSISTANCE
FROM
PRO-
HIBITED FOREIGN ENTITIES.—In the case of 
taxable years beginning after the date which is 
2 years after the date of enactment of this sub-
paragraph, the term ‘eligible component’ shall 
not include any property which— 
‘‘(i) includes any material assistance 
from a prohibited foreign entity (as defined 
in section 7701(a)(52)), or 
‘‘(ii) is produced subject to a licensing 
agreement with a prohibited foreign entity 
(as defined in section 7701(a)(51)) for 
which the value of such agreement is in ex-
cess of $1,000,000.’’, and 
(2) in subsection (d), by adding at the end the 
following new paragraph: 
‘‘(5) RESTRICTIONS RELATING TO PROHIBITED 
FOREIGN ENTITIES.— 
‘‘(A) IN GENERAL.—No credit determined 
under subsection (a) shall be allowed under sec-
tion 38 for any taxable year beginning after the 
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974 
date of enactment of this paragraph if the tax-
payer is a specified foreign entity (as defined in 
section 7701(a)(51)(B)). 
‘‘(B) OTHER PROHIBITED FOREIGN ENTI-
TIES.—No credit determined under subsection 
(a) shall be allowed under section 38 for any 
taxable year beginning after the date which is 
2 years after the date of enactment of this 
paragraph if the taxpayer is a foreign-influ-
enced 
entity 
(as 
defined 
in 
section 
7701(a)(51)(D)). 
‘‘(C) PAYMENTS TO PROHIBITED FOREIGN 
ENTITIES.— 
‘‘(i) IN GENERAL.—If, for any taxable 
year beginning after the date that is 2 
years after the date of the enactment of 
this paragraph, a taxpayer is described in 
clause (ii) for such taxable year with re-
spect to any eligible component category, 
no credit shall be determined under sub-
section (a) for eligible components in such 
eligible component category for such tax-
able year. 
‘‘(ii) TAXPAYER DESCRIBED.—A tax-
payer is described in this clause for a tax-
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975 
able year with respect to any eligible com-
ponent category if such taxpayer— 
‘‘(I) makes a payment of divi-
dends, interest, compensation for serv-
ices, rentals or royalties, guarantees 
or any other fixed, determinable, an-
nual, or periodic amount to a prohib-
ited foreign entity (as defined in sec-
tion 7701(a)(51)) in an amount which 
is equal to or greater than 5 percent 
of the total of such payments made by 
such taxpayer during such taxable 
year which are related to the produc-
tion of eligible components included 
within such eligible component cat-
egory, or 
‘‘(II) makes payments described 
in subclause (I) to more than 1 pro-
hibited foreign entity (as so defined) 
in an amount which, in the aggregate, 
is equal to or greater than 15 percent 
of such payments made by such tax-
payer during such taxable year which 
are related to the production of eligi-
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976 
ble components included within such 
eligible component category. 
‘‘(iii) ELIGIBLE
COMPONENT
CAT-
EGORY.—For purposes of this subpara-
graph, the term ‘eligible component cat-
egory’ means eligible components which 
are included within each respective clause 
under subsection (c)(1)(A).’’. 
(c) REPEAL OF TRANSFERABILITY.—Section 6418, 
as amended by sections 112008, 112009, 112010, 
112011, and 112012 is amended— 
(1) in subsection (f)(1)— 
(A) in subparagraph (A)— 
(i) by striking clause (vi), and 
(ii) by redesignating clauses (v), (ix), 
and (x) as clauses (iii), (iv), and (v), re-
spectively, and 
(B) in subparagraph (B), by striking 
‘‘clause (ii) or (v)’’ and inserting ‘‘clause (ii) or 
(iii)’’, and 
(2) in subsection (g)(3), by striking ‘‘clause (ix) 
or (x)’’ and inserting ‘‘clause (iv) or (v)’’. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
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977 
shall apply to taxable years beginning after the date 
of enactment of this Act. 
(2) 
REPEAL
OF
TRANSFERABILITY.—The 
amendments made by subsection (c) shall apply to 
components sold after December 31, 2027. 
SEC. 112015. PHASE-OUT OF CREDIT FOR CERTAIN ENERGY 
PROPERTY. 
(a) PHASE-OUT.—Section 48(a) is amended— 
(1) in paragraph (3)(vii), by striking ‘‘the con-
struction of which begins before January 1, 2035’’ 
and inserting ‘‘the construction of which begins be-
fore January 1, 2032’’, and 
(2) by striking paragraph (7) and inserting the 
following new paragraph: 
‘‘(7) PHASE-OUT FOR CERTAIN ENERGY PROP-
ERTY.—In the case of any energy property described 
in clause (vii) of paragraph (3)(A), the energy per-
centage determined under paragraph (2) shall be 
equal to— 
‘‘(A) in the case of any property the con-
struction of which begins before January 1, 
2030, and which is placed in service after De-
cember 31, 2021, 6 percent, 
‘‘(B) in the case of any property the con-
struction of which begins after December 31, 
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978 
2029, and before January 1, 2031, 5.2 percent, 
and 
‘‘(C) in the case of any property the con-
struction of which begins after December 31, 
2030, and before January 1, 2032, 4.4 per-
cent.’’. 
(b) RESTRICTIONS RELATING TO PROHIBITED FOR-
EIGN ENTITIES.—Section 48(a) is amended by redesig-
nating paragraph (16) as paragraph (17) and by inserting 
after paragraph (15) the following new paragraph: 
‘‘(16) RESTRICTIONS
RELATING
TO
PROHIB-
ITED FOREIGN ENTITIES.— 
‘‘(A) IN GENERAL.—No credit determined 
under this subsection for energy property de-
scribed in paragraph (3)(A)(vii) shall be allowed 
under section 38 for any taxable year beginning 
after the date of enactment of this paragraph 
if the taxpayer is a specified foreign entity (as 
defined in section 7701(a)(51)(B)). 
‘‘(B) OTHER PROHIBITED FOREIGN ENTI-
TIES.—No credit determined under this sub-
section for energy property described in para-
graph (3)(A)(vii) shall be allowed under section 
38 for any taxable year beginning after the date 
which is 2 years after the date of enactment of 
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979 
this paragraph if the taxpayer is a foreign-influ-
enced 
entity 
(as 
defined 
in 
section 
7701(a)(51)(D)).’’. 
(c) 
REPEAL
OF
TRANSFERABILITY.—Section 
6418(f)(1)(A)(iv), as redesignated by section 112014, is 
amended by inserting ‘‘(except so much of the credit as 
is determined under paragraph (3)(A)(vii) of such sec-
tion)’’ after ‘‘section 48’’. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years beginning after the date 
of the enactment of this Act. 
(2) 
REPEAL
OF
TRANSFERABILITY.—The 
amendments made by subsection (c) shall apply to 
property the construction of which begins after the 
date that is 2 years after the date of enactment of 
this Act. 
SEC. 112016. INCOME FROM HYDROGEN STORAGE, CARBON 
CAPTURE ADDED TO QUALIFYING INCOME OF 
CERTAIN PUBLICLY TRADED PARTNERSHIPS 
TREATED AS CORPORATIONS. 
(a) IN GENERAL.—Section 7704(d)(1)(E) is amend-
ed— 
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(1) by striking ‘‘income and gains derived from 
the exploration’’ and inserting ‘‘income and gains 
derived from— 
‘‘(i) the exploration’’, 
(2) 
by 
inserting 
‘‘or’’ 
before 
‘‘industrial 
source’’, and 
(3) by striking ‘‘, or the transportation or stor-
age’’ and all that follows and inserting the following: 
‘‘(ii) the transportation or storage 
of— 
‘‘(I) any fuel described in sub-
section (b), (c), (d), (e), or (k) of sec-
tion 6426, or any alcohol fuel defined 
in section 6426(b)(4)(A) or any bio-
diesel fuel as defined in section 
40A(d)(1) or sustainable aviation fuel 
as defined in section 40B(d)(1), or 
‘‘(II) liquified hydrogen or com-
pressed hydrogen, or 
‘‘(iii) in the case of a qualified facility 
(as defined in section 45Q(d), without re-
gard to any date by which construction of 
the facility is required to begin) not less 
than 50 percent of the total carbon oxide 
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production of which is qualified carbon 
oxide (as defined in section 45Q(c))— 
‘‘(I) the generation, availability 
for such generation, or storage of elec-
tric power at such facility, or 
‘‘(II) the capture of carbon diox-
ide by such facility,’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2025. 
SEC. 112017. LIMITATION ON AMORTIZATION OF CERTAIN 
SPORTS FRANCHISES. 
(a) IN GENERAL.—Section 197 is amended by redes-
ignating subsection (g) as subsection (h) and by inserting 
after subsection (f) the following new subsection: 
‘‘(g) LIMITATION ON AMORTIZATION OF CERTAIN 
SPORTS FRANCHISES.— 
‘‘(1) IN GENERAL.—In the case of a specified 
sports franchise intangible, subsection (a) shall be 
applied by substituting ‘50 percent of the adjusted 
basis’ for ‘the adjusted basis’. 
‘‘(2) SPECIFIED
SPORTS
FRANCHISE
INTAN-
GIBLE.—For purposes of this subsection, the term 
‘specified sports franchise intangible’ means any am-
ortizable section 197 intangible which is— 
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982 
‘‘(A) a franchise to engage in professional 
football, basketball, baseball, hockey, soccer, or 
other professional sport, or 
‘‘(B) acquired in connection with such a 
franchise.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property acquired after the date 
of the enactment of this Act. 
SEC. 112018. LIMITATION ON INDIVIDUAL DEDUCTIONS FOR 
CERTAIN STATE AND LOCAL TAXES, ETC. 
(a) IN GENERAL.—Section 275 is amended by redes-
ignating subsection (b) as subsection (c) and by inserting 
after subsection (a) the following new subsection: 
‘‘(b) LIMITATION ON INDIVIDUAL DEDUCTIONS FOR 
CERTAIN STATE AND LOCAL TAXES, ETC.— 
‘‘(1) LIMITATION.— 
‘‘(A) IN GENERAL.—In the case of an indi-
vidual, no deduction shall be allowed for— 
‘‘(i) any disallowed foreign real prop-
erty taxes, and 
‘‘(ii) any specified taxes to the extent 
that such taxes for such taxable year in 
the aggregate exceed— 
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‘‘(I) $15,000, in the case of a 
married individual filing a separate 
return, and 
‘‘(II) $30,000, in the case of any 
other taxpayer. 
‘‘(B) PHASEDOWN BASED ON MODFIED AD-
JUSTED GROSS INCOME.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the $15,000 amount in 
subparagraph (A)(ii)(I) and the $30,000 
amount in subparagraph (A)(ii)(II) shall 
each be reduced by 20 percent of the ex-
cess (if any) of the taxpayer’s modified ad-
justed gross income over— 
‘‘(I) $200,000, in the case of a 
married individual filing a separate 
return, and 
‘‘(II) $400,000, in the case of 
any other taxpayer. 
‘‘(ii) LIMITATION
ON
REDUCTION.— 
The reduction under clause (i) shall not re-
sult in— 
‘‘(I) the dollar amount in effect 
under subparagraph (A)(ii)(I) being 
less than $5,000, or 
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984 
‘‘(II) the dollar amount in effect 
under subparagraph (A)(ii)(II) being 
less than $10,000. 
‘‘(C) MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of this paragraph, the 
term ‘modified adjusted gross income’ means 
adjusted gross income increased by any amount 
excluded from gross income under section 911, 
931, or 933. 
‘‘(2) DISALLOWED
FOREIGN
REAL
PROPERTY 
TAX.—For purposes of this subsection, the term 
‘disallowed foreign real property tax’ means any tax 
which— 
‘‘(A) is a foreign real property tax de-
scribed in section 164(a)(1) or 216(a)(1), and 
‘‘(B) is not an excepted tax. 
‘‘(3) SPECIFIED
TAX.—For purposes of this 
subsection, the term ‘specified tax’ means— 
‘‘(A) any tax which— 
‘‘(i) is described in paragraph (1), (2), 
or (3) of section 164(a), section 164(b)(5), 
or section 216(a)(1), and 
‘‘(ii) is not an excepted tax or a dis-
allowed foreign real property tax, and 
‘‘(B) any substitute payment. 
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‘‘(4) EXCEPTED
TAX.—For purposes of this 
subsection— 
‘‘(A) IN
GENERAL.—The term ‘excepted 
tax’ means— 
‘‘(i) any foreign tax described in sec-
tion 164(a)(3), 
‘‘(ii) any tax described in section 
164(a)(3) which is paid or accrued by a 
qualifying entity with respect to carrying 
on a qualified trade or business (as defined 
in section 199A(d), without regard to sec-
tion 199A(b)(3)), and 
‘‘(iii) any tax described in paragraph 
(1) or (2) of section 164(a), or section 
216(a)(1), which is paid or accrued in car-
rying on a trade or business or an activity 
described in section 212. 
‘‘(B) QUALIFYING ENTITY.—For purposes 
of subparagraph (A), the term ‘qualifying enti-
ty’ means any partnership or S corporation 
with gross receipts for the taxable year (within 
the meaning of section 448(c)) if at least 75 
percent of such gross receipts are derived in a 
qualified trade or business (as defined in sec-
tion 
199A(d), 
without 
regard 
to 
section 
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986 
199A(b)(3)). For purposes of the preceding 
sentence, the gross receipts of all trades or 
businesses which are under common control 
(within the meaning of section 52(b)) with any 
trade or business of the partnership or S cor-
poration shall be taken into account as gross 
receipts of the entity. 
‘‘(5) SUBSTITUTE PAYMENT.—For purposes of 
this subsection— 
‘‘(A) IN GENERAL.—The term ‘substitute 
payment’ means any amount (other than a tax 
described in paragraph (3)(A)) paid, incurred, 
or accrued to any entity referred to in section 
164(b)(2) if, under the laws of one or more en-
tities referred to in section 164(b)(2), one or 
more persons would (if the assumptions de-
scribed in subparagraphs (B) and (C) applied) 
be entitled to specified tax benefits the aggre-
gate dollar value of which equals or exceeds 25 
percent of such amount. 
‘‘(B) ASSUMPTION
REGARDING
DOLLAR 
VALUE OF TAX BENEFITS.—The assumption de-
scribed in this subparagraph is that the dollar 
value of a specified tax benefit is— 
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987 
‘‘(i) in the case of a credit or refund, 
the amount of such credit or refund, 
‘‘(ii) in the case of a deduction or ex-
clusion, 15 percent of the amount of such 
deduction or exclusion, and 
‘‘(iii) in any other case, an amount 
determined in such manner as the Sec-
retary may provide consistent with the 
principles of clauses (i) and (ii). 
‘‘(C) ASSUMPTION REGARDING STATUS OF 
PARTNERS OR SHAREHOLDERS.—The assump-
tion described in this subparagraph is, in the 
case of any amount referred to in subparagraph 
(A) which is paid, incurred, or accrued by a 
partnership or S corporation, that all of the 
partners or shareholders of such partnership or 
S corporation, respectively, are individuals who 
are residents of the jurisdiction of the entity or 
entities providing the specified tax benefits (and 
possess such other characteristics as the laws of 
such entities may require for entitlement to 
such benefits). 
‘‘(D) SPECIFIED TAX BENEFIT.—For pur-
poses of subparagraph (A), the term ‘specified 
tax benefit’ means any benefit which— 
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988 
‘‘(i) is determined with respect to the 
amount referred to in subparagraph (A), 
and 
‘‘(ii) is allowed against, or determined 
by reference to, a tax described in para-
graph (3)(A). 
‘‘(E) EXCEPTION
FOR
NON-DEDUCTIBLE 
PAYMENTS.—To the extent that a deduction for 
an amount described in subparagraph (A) is 
not allowed under this chapter (determined 
without regard to this subsection, section 
170(b)(1), section 703(a), section 704(d), and 
section 1363(b)), the term ‘substitute payment’ 
shall not include such amount. 
‘‘(F) EXCEPTION
FOR
CERTAIN
WITH-
HOLDING
TAXES.—To the extent provided in 
regulations issued by the Secretary, the term 
‘substitute payment’ shall not include an 
amount withheld on behalf of another person if 
all of such amount is included in the gross in-
come of such person (determined under this 
chapter). 
‘‘(6) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as may be nec-
essary or appropriate to carry out the purposes of 
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989 
this subsection, including regulations or other guid-
ance— 
‘‘(A) to treat as a tax described in para-
graph (3) of section 164(a) any tax that is, in 
substance, based on general tax principles, de-
scribed in such paragraph, 
‘‘(B) to treat as a substitute payment any 
amount that, in substance, substitutes for a 
specified tax, 
‘‘(C) to provide for the proper allocation, 
for purposes of paragraph (4)(A)(ii), of taxes 
described in section 164(a)(3) between trades 
or business described in section 199A(d)(1) and 
trades or business not so described, and 
‘‘(D) to otherwise prevent the avoidance of 
the purposes of this subsection.’’. 
(b) STATE
AND LOCAL INCOME TAXES PAID
BY 
PARTNERSHIPS AND S CORPORATIONS TAKEN INTO AC-
COUNT
SEPARATELY
BY
PARTNERS
AND
SHARE-
HOLDERS.— 
(1) IN GENERAL.—Section 702(a)(6) is amend-
ed to read as follows: 
‘‘(6)(A) taxes, described in section 901, paid or 
accrued to foreign countries, 
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990 
‘‘(B) taxes, described in section 901, paid or ac-
crued to possessions of the United States, 
‘‘(C) specified taxes (within the meaning of sec-
tion 275(b)), other than taxes described in subpara-
graph (B), and 
‘‘(D) taxes described in section 275(b)(2),’’. 
(2) TREATMENT OF SUBSTITUTE PAYMENTS.— 
Section 702 is amended by redesignating subsection 
(d) as subsection (e) and by inserting after sub-
section (c) the following new subsection: 
‘‘(d) TREATMENT OF SUBSTITUTE PAYMENTS.—Any 
substitute payment (as defined in section 275(b)(5)) shall 
be taken into account under subsection (a)(6)(C) and not 
under any other paragraph of subsection (a).’’. 
(3) DISALLOWANCE OF DEDUCTION TO PART-
NERSHIPS.—Section 703(a)(2)(B) is amended to 
read as follows: 
‘‘(B) any deduction under this chapter 
with respect to taxes or payments described in 
section 702(a)(6),’’. 
(4) S CORPORATIONS.—For corresponding pro-
visions related to S corporations which apply by rea-
son of the amendments made by paragraphs (1) 
through (3), see sections 1366(a)(1) and 1363(b)(2) 
of the Internal Revenue Code of 1986. 
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991 
(5) ALLOWABLE
SALT
DEDUCTIONS
TAKEN 
INTO ACCOUNT FOR PURPOSES OF LIMITATION ON 
PARTNERSHIP
LOSSES.—Section 
704(d)(3) 
is 
amended by striking subparagraph (A), by redesig-
nating subparagraph (B) as subparagraph (C), and 
by inserting before subparagraph (C) (as so redesig-
nated) the following new subparagraphs: 
‘‘(A) IN
GENERAL.—In determining the 
amount of any loss under paragraph (1), there 
shall be taken into account— 
‘‘(i) the partner’s distributive share of 
amounts described in paragraphs (4) and 
(6)(A) of section 702(a), 
‘‘(ii) if the taxpayer chooses to take to 
any extent the benefits of section 901, the 
partner’s distributive share of amounts de-
scribed in section 702(a)(6)(B), and 
‘‘(iii) the amount by which the deduc-
tions allowed under this chapter (deter-
mined without regard to this subsection) to 
the partner would decrease if the partner’s 
distributive share of amounts described in 
section 702(a)(6)(C) were not taken into 
account. 
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992 
‘‘(B) TREATMENT OF POSSESSION TAXES 
IN
EVENT
PARTNER
DOES
NOT
ELECT
THE 
FOREIGN TAX CREDIT.—In the case of a tax-
payer not described in subparagraph (A)(ii), 
subparagraph (A)(iii) shall be applied by sub-
stituting ‘subparagraphs (B) and (C) of section 
702(a)(6)’ for ‘section 702(a)(6)(C)’.’’. 
(6) 
CONFORMING
AMENDMENT.—Section 
56(b)(1)(A)(ii) is amended by inserting ‘‘or for any 
substitute 
payment 
(as 
defined 
in 
section 
275(b)(5))’’ before the period at the end. 
(c) ADDITION TO TAX FOR STATE AND LOCAL TAX 
ALLOCATION MISMATCH.— 
(1) IN GENERAL.—Part I of subchapter A of 
chapter 68 is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 6659. STATE AND LOCAL TAX ALLOCATION MIS-
MATCH. 
‘‘(a) IN GENERAL.—In the case of any covered indi-
vidual, there shall be added to the tax imposed under sec-
tion 1 for the taxable year an amount equal to the product 
of— 
‘‘(1) the highest rate of tax in effect under such 
section for such taxable year, multiplied by 
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993 
‘‘(2) the sum of the State and local tax alloca-
tion mismatches for such taxable year with respect 
to each partnership specified tax payment with re-
spect to which such individual is a covered indi-
vidual. 
‘‘(b) COVERED INDIVIDUAL.—For purposes of this 
section, the term ‘covered individual’ means, with respect 
to any partnership specified tax payment, any individual 
(or estate or trust) who— 
‘‘(1) is entitled (directly or indirectly) to one or 
more specified tax benefits with respect to such pay-
ment, and 
‘‘(2) takes into account (directly or indirectly) 
any item of income, gain, deduction, loss, or credit 
of the partnership which made such payment. 
‘‘(c) STATE
AND LOCAL TAX ALLOCATION MIS-
MATCH.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘State and local 
tax allocation mismatch’ means, with respect to any 
partnership specified tax payment, the excess (if 
any) of— 
‘‘(A) the aggregate dollar value of the 
specified tax benefits of the covered individual 
with respect to such payment, over 
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994 
‘‘(B) the amount of such payment taken 
into account by such individual under section 
702(a) (without regard to sections 275(b) and 
704(d)). 
‘‘(2) TAXABLE YEAR OF INDIVIDUAL IN WHICH 
MISMATCH TAKEN INTO ACCOUNT.—In the case of 
any partnership specified tax payment paid, in-
curred, or accrued in any taxable year of the part-
nership, the State and local tax allocation mismatch 
determined under paragraph (1) with respect to 
such payment shall be taken into account under sub-
section (a) by the covered individual for the taxable 
year of such individual in which such individual 
takes into account the items referred to in sub-
section (b)(2) which are determined with respect to 
such partnership taxable year. 
‘‘(d) DETERMINATION OF DOLLAR VALUE OF SPECI-
FIED TAX BENEFITS.— 
‘‘(1) IN GENERAL.—Except in the case of a cov-
ered individual who elects the application of para-
graph (3) for any taxable year, the dollar value of 
any specified tax benefit shall be the sum of— 
‘‘(A) the aggregate increase in tax liability 
(and reduction in credit or refund) for taxes de-
scribed in section 275(b)(3)(A) for the taxable 
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995 
year and all prior taxable years that would re-
sult if such specified tax benefit were not taken 
into account with respect to such taxes, plus 
‘‘(B) the deemed value of any carryforward 
of such specified tax benefit (including any tax 
attribute derived from such benefit) to any sub-
sequent taxable year. 
‘‘(2) DEEMED VALUE OF CARRYFORWARDS.— 
For purposes of paragraph (1), the deemed value of 
any carryforward is— 
‘‘(A) in the case of a credit or refund, the 
amount of such credit or refund, 
‘‘(B) in the case of a deduction or exclu-
sion, the product of— 
‘‘(i) the highest rate of tax which may 
be imposed on individuals under the tax re-
ferred to in subsection (e)(3)(B) with re-
spect to the specified tax benefit, multi-
plied by 
‘‘(ii) the amount of such deduction or 
exclusion, and 
‘‘(C) in any other case, an amount deter-
mined in such manner as the Secretary may 
provide consistent with the principles of sub-
paragraphs (A) and (B). 
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996 
‘‘(3) ELECTION OF SIMPLIFIED METHOD.—In 
the case of a covered individual who elects the appli-
cation of this paragraph for any taxable year, the 
dollar value of any specified tax benefit shall be de-
termined under the assumptions described in section 
275(b)(5)(B). 
‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section— 
‘‘(1) 
PARTNERSHIP
SPECIFIED
TAX
PAY-
MENT.—The term ‘partnership specified tax pay-
ment’ means any specified tax paid, incurred, or ac-
crued by a partnership. 
‘‘(2) SPECIFIED TAX.—The term ‘specified tax’ 
has the meaning given such term by section 
275(b)(3). 
‘‘(3) SPECIFIED
TAX
BENEFIT.—The term 
‘specified tax benefit’ means any benefit which— 
‘‘(A) is determined with respect to a part-
nership specified tax payment, and 
‘‘(B) is allowed against, or determined by 
reference to, a tax described in section 
275(b)(3)(A). 
‘‘(f) REGULATIONS.—The Secretary shall issue such 
regulations or other guidance as may be necessary or ap-
propriate to carry out the purposes of this section, includ-
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997 
ing regulations or other guidance preventing avoidance of 
the addition to tax prescribed by this section through part-
nership allocations that achieve similar tax reductions as 
a State and local tax allocation mismatch.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part I of subchapter A of chapter 68 is 
amended by adding at the end the following new 
item: 
‘‘Sec. 6659. State and local tax allocation mismatch.’’. 
(d) LIMITATION ON CAPITALIZATION OF SPECIFIED 
TAXES.—Section 275, as amended by the preceding provi-
sions of this section, is amended by redesignating sub-
section (c) as subsection (d) and by inserting after sub-
section (b) the following new subsection: 
‘‘(c) LIMITATIONS ON CAPITALIZATION OF SPECI-
FIED TAXES.—Notwithstanding any other provision of 
this chapter, in the case of an individual, specified taxes 
(as defined in subsection (b)) shall not be treated as 
chargeable to capital account.’’. 
(e) REPORTING BY PARTNERSHIPS AND S CORPORA-
TIONS WITH RESPECT TO SPECIFIED SERVICE TRADE OR 
BUSINESS INCOME.— 
(1) PARTNERSHIPS.—Section 6031 is amended 
by adding at the end the following new subsection: 
‘‘(g) SPECIFIED SERVICE TRADE OR BUSINESS IN-
COME.—Returns required under subsection (a), and copies 
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998 
required to be furnished under subsection (b), shall in-
clude a statement of whether or not the partnership had 
any gross receipts (within the meaning of section 448(c)) 
from a trade or business described in subsection 
199A(d)(2).’’. 
(2) S CORPORATIONS.—Section 6037 is amend-
ed by adding at the end the following new sub-
section: 
‘‘(d) SPECIFIED SERVICE TRADE OR BUSINESS IN-
COME.—Returns required under subsection (a), and copies 
required to be furnished under subsection (b), shall in-
clude a statement of whether or not the S corporation had 
any gross receipts (within the meaning of section 448(c)) 
from a trade or business described in subsection 
199A(d)(2).’’. 
(f) CONFORMING AMENDMENT.—Section 164(b) is 
amended by striking paragraph (6). 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2025. 
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999 
SEC. 112019. EXCESSIVE EMPLOYEE REMUNERATION FROM 
CONTROLLED GROUP MEMBERS AND ALLO-
CATION OF DEDUCTION. 
(a) APPLICATION OF AGGREGATION RULES.—Section 
162(m) is amended by adding at the end the following new 
paragraph: 
‘‘(7) 
REMUNERATION
FROM
CONTROLLED 
GROUP MEMBERS.— 
‘‘(A) IN
GENERAL.—In the case of any 
publicly held corporation which is a member of 
a controlled group— 
‘‘(i) paragraph (1) shall be applied by 
substituting ‘specified covered employee’ 
for ‘covered employee’, and 
‘‘(ii) if any person which is a member 
of such controlled group (other than such 
publicly held corporation) provides applica-
ble employee remuneration to an individual 
who is a specified covered employee of such 
controlled group and the aggregate amount 
described in subparagraph (B)(ii) with re-
spect to such specified covered employee 
exceeds $1,000,000— 
‘‘(I) paragraph (1) shall apply to 
such person with respect to such re-
muneration, and 
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1000 
‘‘(II) paragraph (1) shall apply 
to such publicly held corporation and 
to each such related person by sub-
stituting 
‘the 
allocable 
limitation 
amount’ for ‘$1,000,000’. 
‘‘(B) ALLOCABLE LIMITATION AMOUNT.— 
For purposes of this paragraph, the term ‘allo-
cable limitation amount’ means, with respect to 
any member of the controlled group referred to 
in subparagraph (A) with respect to any speci-
fied covered employee of such controlled group, 
the amount which bears the same ratio to 
$1,000,000 as— 
‘‘(i) the amount of applicable em-
ployee remuneration provided by such 
member with respect to such specified cov-
ered employee, bears to 
‘‘(ii) the aggregate amount of applica-
ble employee remuneration provided by all 
such members with respect to such speci-
fied covered employee. 
‘‘(C) SPECIFIED
COVERED
EMPLOYEE.— 
For purposes of this paragraph, the term ‘spec-
ified covered employee’ means, with respect to 
any controlled group— 
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1001 
‘‘(i) any employee described in sub-
paragraph (A), (B), or (D) of paragraph 
(3), with respect to the publicly held cor-
poration which is a member of such con-
trolled group, and 
‘‘(ii) any employee who would be de-
scribed in subparagraph (C) of paragraph 
(3) if such subparagraph were applied by 
taking into account the employees of all 
members of the controlled group. 
‘‘(D) CONTROLLED GROUP.—For purposes 
of this paragraph, the term ‘controlled group’ 
means any group treated as a single employer 
under subsection (b), (c), (m), or (o) of section 
414.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2025. 
SEC. 112020. EXPANDING APPLICATION OF TAX ON EXCESS 
COMPENSATION WITHIN TAX-EXEMPT ORGA-
NIZATIONS. 
(a) IN GENERAL.—Section 4960(c)(2) is amended to 
read as follows: 
‘‘(2) COVERED
EMPLOYEE.—For purposes of 
this section, the term ‘covered employee’ means any 
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1002 
employee (including any former employee) of an ap-
plicable tax-exempt organization or any related per-
son or governmental entity.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2025. 
SEC. 112021. MODIFICATION OF EXCISE TAX ON INVEST-
MENT INCOME OF CERTAIN PRIVATE COL-
LEGES AND UNIVERSITIES. 
(a) IN GENERAL.—Section 4968 is amended to read 
as follows: 
‘‘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 the applicable percentage of the net invest-
ment income of such institution for the taxable year. 
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 
this section, the term ‘applicable percentage’ means— 
‘‘(1) 1.4 percent in the case of an institution 
with a student adjusted endowment in excess of 
$500,000, and not in excess of $750,000, 
‘‘(2) 7 percent in the case of an institution with 
a student adjusted endowment in excess of 
$750,000, and not in excess of $1,250,000, 
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1003 
‘‘(3) 14 percent in the case of an institution 
with a student adjusted endowment in excess of 
$1,250,000, and not in excess of $2,000,000, and 
‘‘(4) 21 percent in the case of an institution 
with a student adjusted endowment in excess of 
$2,000,000. 
‘‘(c) APPLICABLE EDUCATIONAL INSTITUTION.—For 
purposes of this subchapter— 
‘‘(1) IN GENERAL.—The term ‘applicable edu-
cational institution’ means an eligible educational in-
stitution (as defined in section 25A(f)(2))— 
‘‘(A) which had at least 500 tuition-paying 
students during the preceding taxable year, 
‘‘(B) more than 50 percent of the tuition- 
paying students of which are located in the 
United States, 
‘‘(C) which is not— 
‘‘(i) described in the first sentence of 
section 511(a)(2)(B) (relating to State col-
leges and universities), or 
‘‘(ii) a qualified religious institution, 
and 
‘‘(D) the student adjusted endowment of 
which is at least $500,000. 
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