H. R. 1—115 
investment income which are not intended or available 
for the use or benefit of the educational institution shall 
not be taken into account. 
‘‘(2) RELATED
ORGANIZATION.—For purposes of this sub-
section, the term ‘related organization’ means, with respect 
to an educational institution, any organization which— 
‘‘(A) controls, or is controlled by, such institution, 
‘‘(B) is controlled by 1 or more persons which also 
control such institution, or 
‘‘(C) is a supported organization (as defined in section 
509(f)(3)), or an organization described in section 509(a)(3), 
during the taxable year with respect to such institution.’’. 
(b) CLERICAL
AMENDMENT.—The table of subchapters for 
chapter 42 is amended by adding at the end the following new 
item: 
‘‘SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE COLLEGES 
AND UNIVERSITIES’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 2017. 
SEC. 13702. UNRELATED BUSINESS TAXABLE INCOME SEPARATELY 
COMPUTED FOR EACH TRADE OR BUSINESS ACTIVITY. 
(a) IN GENERAL.—Subsection (a) of section 512 is amended 
by adding at the end the following new paragraph: 
‘‘(6) SPECIAL
RULE
FOR
ORGANIZATION
WITH
MORE
THAN 
1 UNRELATED TRADE OR BUSINESS.—In the case of any organiza-
tion with more than 1 unrelated trade or business— 
‘‘(A) unrelated business taxable income, including for 
purposes of determining any net operating loss deduction, 
shall be computed separately with respect to each such 
trade or business and without regard to subsection (b)(12), 
‘‘(B) the unrelated business taxable income of such 
organization shall be the sum of the unrelated business 
taxable income so computed with respect to each such 
trade or business, less a specific deduction under subsection 
(b)(12), and 
‘‘(C) for purposes of subparagraph (B), unrelated busi-
ness taxable income with respect to any such trade or 
business shall not be less than zero.’’. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except to the extent provided in para-
graph (2), the amendment made by this section shall apply 
to taxable years beginning after December 31, 2017. 
(2) CARRYOVERS OF NET OPERATING LOSSES.—If any net 
operating loss arising in a taxable year beginning before 
January 1, 2018, is carried over to a taxable year beginning 
on or after such date— 
(A) subparagraph (A) of section 512(a)(6) of the Internal 
Revenue Code of 1986, as added by this Act, shall not 
apply to such net operating loss, and 
(B) the unrelated business taxable income of the 
organization, after the application of subparagraph (B) of 
such section, shall be reduced by the amount of such net 
operating loss.
H. R. 1—116 
SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY 
AMOUNT OF CERTAIN FRINGE BENEFIT EXPENSES FOR 
WHICH DEDUCTION IS DISALLOWED. 
(a) IN GENERAL.—Section 512(a), as amended by this Act, is 
further amended by adding at the end the following new paragraph: 
‘‘(7) INCREASE IN UNRELATED BUSINESS TAXABLE INCOME 
BY DISALLOWED FRINGE.—Unrelated business taxable income 
of an organization shall be increased by any amount for which 
a deduction is not allowable under this chapter by reason 
of section 274 and which is paid or incurred by such organiza-
tion for any qualified transportation fringe (as defined in section 
132(f)), any parking facility used in connection with qualified 
parking (as defined in section 132(f)(5)(C)), or any on-premises 
athletic facility (as defined in section 132(j)(4)(B)). The pre-
ceding sentence shall not apply to the extent the amount paid 
or incurred is directly connected with an unrelated trade or 
business which is regularly carried on by the organization. 
The Secretary shall issue such regulations or other guidance 
as may be necessary or appropriate to carry out the purposes 
of this paragraph, including regulations or other guidance pro-
viding for the appropriate allocation of depreciation and other 
costs with respect to facilities used for parking or for on- 
premises athletic facilities.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to amounts paid or incurred after December 31, 2017. 
SEC. 13704. REPEAL OF DEDUCTION FOR AMOUNTS PAID IN EXCHANGE 
FOR COLLEGE ATHLETIC EVENT SEATING RIGHTS. 
(a) IN GENERAL.—Section 170(l) is amended— 
(1) by striking paragraph (1) and inserting the following: 
‘‘(1) IN GENERAL.—No deduction shall be allowed under 
this section for any amount described in paragraph (2).’’, and 
(2) in paragraph (2)(B), by striking ‘‘such amount would 
be allowable as a deduction under this section but for the 
fact that’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to contributions made in taxable years beginning after 
December 31, 2017. 
SEC. 13705. REPEAL OF SUBSTANTIATION EXCEPTION IN CASE OF CON-
TRIBUTIONS REPORTED BY DONEE. 
(a) IN GENERAL.—Section 170(f)(8) is amended by striking 
subparagraph (D) and by redesignating subparagraph (E) as 
subparagraph (D). 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to contributions made in taxable years beginning after 
December 31, 2016. 
PART IX—OTHER PROVISIONS 
Subpart A—Craft Beverage Modernization and 
Tax Reform 
SEC. 13801. PRODUCTION PERIOD FOR BEER, WINE, AND DISTILLED 
SPIRITS. 
(a) IN GENERAL.—Section 263A(f) is amended— 
(1) by redesignating paragraph (4) as paragraph (5), and
H. R. 1—117 
(2) by inserting after paragraph (3) the following new para-
graph: 
‘‘(4) EXEMPTION FOR AGING PROCESS OF BEER, WINE, AND 
DISTILLED SPIRITS.— 
‘‘(A) IN GENERAL.—For purposes of this subsection, the 
production period shall not include the aging period for— 
‘‘(i) beer (as defined in section 5052(a)), 
‘‘(ii) wine (as described in section 5041(a)), or 
‘‘(iii) distilled spirits (as defined in section 
5002(a)(8)), except such spirits that are unfit for use 
for beverage purposes. 
‘‘(B) TERMINATION.—This paragraph shall not apply 
to interest costs paid or accrued after December 31, 2019.’’. 
(b) CONFORMING AMENDMENT.—Paragraph (5)(B)(ii) of section 
263A(f), as redesignated by this section, is amended by inserting 
‘‘except as provided in paragraph (4),’’ before ‘‘ending on the date’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to interest costs paid or accrued in calendar years 
beginning after December 31, 2017. 
SEC. 13802. REDUCED RATE OF EXCISE TAX ON BEER. 
(a) IN GENERAL.—Paragraph (1) of section 5051(a) is amended 
to read as follows: 
‘‘(1) IN GENERAL.— 
‘‘(A) IMPOSITION OF TAX.—A tax is hereby imposed on 
all beer brewed or produced, and removed for consumption 
or sale, within the United States, or imported into the 
United States. Except as provided in paragraph (2), the 
rate of such tax shall be the amount determined under 
this paragraph. 
‘‘(B) RATE.—Except as provided in subparagraph (C), 
the rate of tax shall be $18 for per barrel. 
‘‘(C) SPECIAL RULE.—In the case of beer removed after 
December 31, 2017, and before January 1, 2020, the rate 
of tax shall be— 
‘‘(i) $16 on the first 6,000,000 barrels of beer— 
‘‘(I) brewed by the brewer and removed during 
the calendar year for consumption or sale, or 
‘‘(II) imported by the importer into the United 
States during the calendar year, and 
‘‘(ii) $18 on any barrels of beer to which clause 
(i) does not apply. 
‘‘(D) BARREL.—For purposes of this section, a barrel 
shall contain not more than 31 gallons of beer, and any 
tax imposed under this section shall be applied at a like 
rate for any other quantity or for fractional parts of a 
barrel.’’. 
(b) REDUCED RATE
FOR CERTAIN DOMESTIC PRODUCTION.— 
Subparagraph (A) of section 5051(a)(2) is amended— 
(1) in the heading, by striking ‘‘$7 A BARREL’’, and 
(2) by inserting ‘‘($3.50 in the case of beer removed after 
December 31, 2017, and before January 1, 2020)’’ after ‘‘$7’’. 
(c) APPLICATION OF REDUCED TAX RATE FOR FOREIGN MANUFAC-
TURERS
AND
IMPORTERS.—Subsection (a) of section 5051 is 
amended— 
(1) in subparagraph (C)(i)(II) of paragraph (1), as amended 
by subsection (a), by inserting ‘‘but only if the importer is
H. R. 1—118 
an electing importer under paragraph (4) and the barrels have 
been assigned to the importer pursuant to such paragraph’’ 
after ‘‘during the calendar year’’, and 
(2) by adding at the end the following new paragraph: 
‘‘(4) REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND 
IMPORTERS.— 
‘‘(A) IN GENERAL.—In the case of any barrels of beer 
which have been brewed or produced outside of the United 
States and imported into the United States, the rate of 
tax applicable under clause (i) of paragraph (1)(C) (referred 
to in this paragraph as the ‘reduced tax rate’) may be 
assigned by the brewer (provided that the brewer makes 
an election described in subparagraph (B)(ii)) to any 
electing importer of such barrels pursuant to the require-
ments established by the Secretary under subparagraph 
(B). 
‘‘(B) ASSIGNMENT.—The Secretary shall, through such 
rules, regulations, and procedures as are determined appro-
priate, establish procedures for assignment of the reduced 
tax rate provided under this paragraph, which shall 
include— 
‘‘(i) a limitation to ensure that the number of bar-
rels of beer for which the reduced tax rate has been 
assigned by a brewer— 
‘‘(I) to any importer does not exceed the 
number of barrels of beer brewed or produced by 
such brewer during the calendar year which were 
imported into the United States by such importer, 
and 
‘‘(II) to all importers does not exceed the 
6,000,000 barrels to which the reduced tax rate 
applies, 
‘‘(ii) procedures that allow the election of a brewer 
to assign and an importer to receive the reduced tax 
rate provided under this paragraph, 
‘‘(iii) requirements that the brewer provide any 
information as the Secretary determines necessary and 
appropriate for purposes of carrying out this para-
graph, and 
‘‘(iv) procedures that allow for revocation of eligi-
bility of the brewer and the importer for the reduced 
tax rate provided under this paragraph in the case 
of any erroneous or fraudulent information provided 
under clause (iii) which the Secretary deems to be 
material to qualifying for such reduced rate. 
‘‘(C) CONTROLLED GROUP.—For purposes of this section, 
any importer making an election described in subparagraph 
(B)(ii) shall be deemed to be a member of the controlled 
group of the brewer, as described under paragraph (5).’’. 
(d) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.—Sub-
section (a) of section 5051, as amended by this section, is amended— 
(1) in paragraph (2)— 
(A) by striking subparagraph (B), and 
(B) by redesignating subparagraph (C) as subpara-
graph (B), and 
(2) by adding at the end the following new paragraph: 
‘‘(5) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.—
H. R. 1—119 
‘‘(A) IN GENERAL.—Except as provided in subparagraph 
(B), in the case of a controlled group, the 6,000,000 barrel 
quantity specified in paragraph (1)(C)(i) and the 2,000,000 
barrel quantity specified in paragraph (2)(A) shall be 
applied to the controlled group, and the 6,000,000 barrel 
quantity specified in paragraph (1)(C)(i) and the 60,000 
barrel quantity specified in paragraph (2)(A) shall be appor-
tioned among the brewers who are members of such group 
in such manner as the Secretary or their delegate shall 
by regulations prescribe. For purposes of the preceding 
sentence, the term ‘controlled group’ has the meaning 
assigned to it by subsection (a) of section 1563, except 
that for such purposes the phrase ‘more than 50 percent’ 
shall be substituted for the phrase ‘at least 80 percent’ 
in each place it appears in such subsection. Under regula-
tions prescribed by the Secretary, principles similar to the 
principles of the preceding two sentences shall be applied 
to a group of brewers under common control where one 
or more of the brewers is not a corporation. 
‘‘(B) FOREIGN MANUFACTURERS AND IMPORTERS.—For 
purposes of paragraph (4), in the case of a controlled group, 
the 6,000,000 barrel quantity specified in paragraph 
(1)(C)(i) shall be applied to the controlled group and appor-
tioned among the members of such group in such manner 
as the Secretary shall by regulations prescribe. For pur-
poses of the preceding sentence, the term ‘controlled group’ 
has the meaning given such term under subparagraph 
(A). Under regulations prescribed by the Secretary, prin-
ciples similar to the principles of the preceding two sen-
tences shall be applied to a group of brewers under common 
control where one or more of the brewers is not a corpora-
tion. 
‘‘(C) SINGLE TAXPAYER.—Pursuant to rules issued by 
the Secretary, two or more entities (whether or not under 
common control) that produce beer marketed under a 
similar brand, license, franchise, or other arrangement 
shall be treated as a single taxpayer for purposes of the 
application of this subsection.’’. 
(e) EFFECTIVE DATE.—The amendments made by this section 
shall apply to beer removed after December 31, 2017. 
SEC. 13803. TRANSFER OF BEER BETWEEN BONDED FACILITIES. 
(a) IN GENERAL.—Section 5414 is amended— 
(1) by striking ‘‘Beer may be removed’’ and inserting ‘‘(a) 
IN GENERAL.—Beer may be removed’’, and 
(2) by adding at the end the following: 
‘‘(b) TRANSFER OF BEER BETWEEN BONDED FACILITIES.— 
‘‘(1) IN GENERAL.—Beer may be removed from one bonded 
brewery to another bonded brewery, without payment of tax, 
and may be mingled with beer at the receiving brewery, subject 
to such conditions, including payment of the tax, and in such 
containers, as the Secretary by regulations shall prescribe, 
which shall include— 
‘‘(A) any removal from one brewery to another brewery 
belonging to the same brewer, 
‘‘(B) any removal from a brewery owned by one corpora-
tion to a brewery owned by another corporation when—
H. R. 1—120 
‘‘(i) one such corporation owns the controlling 
interest in the other such corporation, or 
‘‘(ii) the controlling interest in each such corpora-
tion is owned by the same person or persons, and 
‘‘(C) any removal from one brewery to another brewery 
when— 
‘‘(i) the proprietors of transferring and receiving 
premises are independent of each other and neither 
has a proprietary interest, directly or indirectly, in 
the business of the other, and 
‘‘(ii) the transferor has divested itself of all interest 
in the beer so transferred and the transferee has 
accepted responsibility for payment of the tax. 
‘‘(2) TRANSFER OF LIABILITY FOR TAX.—For purposes of para-
graph (1)(C), such relief from liability shall be effective from 
the time of removal from the transferor’s bonded premises, 
or from the time of divestment of interest, whichever is later. 
‘‘(3) TERMINATION.—This subsection shall not apply to any 
calendar quarter beginning after December 31, 2019.’’. 
(b) REMOVAL FROM BREWERY BY PIPELINE.—Section 5412 is 
amended by inserting ‘‘pursuant to section 5414 or’’ before ‘‘by 
pipeline’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to any calendar quarters beginning after December 
31, 2017. 
SEC. 13804. REDUCED RATE OF EXCISE TAX ON CERTAIN WINE. 
(a) IN GENERAL.—Section 5041(c) is amended by adding at 
the end the following new paragraph: 
‘‘(8) SPECIAL RULE FOR 2018 AND 2019.— 
‘‘(A) IN GENERAL.—In the case of wine removed after 
December 31, 2017, and before January 1, 2020, paragraphs 
(1) and (2) shall not apply and there shall be allowed 
as a credit against any tax imposed by this title (other 
than chapters 2, 21, and 22) an amount equal to the 
sum of— 
‘‘(i) $1 per wine gallon on the first 30,000 wine 
gallons of wine, plus 
‘‘(ii) 90 cents per wine gallon on the first 100,000 
wine gallons of wine to which clause (i) does not apply, 
plus 
‘‘(iii) 53.5 cents per wine gallon on the first 620,000 
wine gallons of wine to which clauses (i) and (ii) do 
not apply, 
which are produced by the producer and removed during 
the calendar year for consumption or sale, or which are 
imported by the importer into the United States during 
the calendar year. 
‘‘(B) ADJUSTMENT OF CREDIT FOR HARD CIDER.—In the 
case of wine described in subsection (b)(6), subparagraph 
(A) of this paragraph shall be applied— 
‘‘(i) in clause (i) of such subparagraph, by sub-
stituting ‘6.2 cents’ for ‘$1’, 
‘‘(ii) in clause (ii) of such subparagraph, by sub-
stituting ‘5.6 cents’ for ‘90 cents’, and 
‘‘(iii) in clause (iii) of such subparagraph, by sub-
stituting ‘3.3 cents’ for ‘53.5 cents’.’’,
H. R. 1—121 
(b) CONTROLLED GROUP AND SINGLE TAXPAYER RULES.—Para-
graph (4) of section 5041(c) is amended by striking ‘‘section 
5051(a)(2)(B)’’ and inserting ‘‘section 5051(a)(5)’’. 
(c) ALLOWANCE OF CREDIT FOR FOREIGN MANUFACTURERS AND 
IMPORTERS.—Subsection (c) of section 5041, as amended by sub-
section (a), is amended— 
(1) in subparagraph (A) of paragraph (8), by inserting ‘‘but 
only if the importer is an electing importer under paragraph 
(9) and the wine gallons of wine have been assigned to the 
importer pursuant to such paragraph’’ after ‘‘into the United 
States during the calendar year’’, and 
(2) by adding at the end the following new paragraph: 
‘‘(9) ALLOWANCE OF CREDIT FOR FOREIGN MANUFACTURERS 
AND IMPORTERS.— 
‘‘(A) IN
GENERAL.—In the case of any wine gallons 
of wine which have been produced outside of the United 
States and imported into the United States, the credit 
allowable under paragraph (8) (referred to in this para-
graph as the ‘tax credit’) may be assigned by the person 
who produced such wine (referred to in this paragraph 
as the ‘foreign producer’), provided that such person makes 
an election described in subparagraph (B)(ii), to any 
electing importer of such wine gallons pursuant to the 
requirements established by the Secretary under subpara-
graph (B). 
‘‘(B) ASSIGNMENT.—The Secretary shall, through such 
rules, regulations, and procedures as are determined appro-
priate, establish procedures for assignment of the tax credit 
provided under this paragraph, which shall include— 
‘‘(i) a limitation to ensure that the number of wine 
gallons of wine for which the tax credit has been 
assigned by a foreign producer— 
‘‘(I) to any importer does not exceed the 
number of wine gallons of wine produced by such 
foreign producer during the calendar year which 
were imported into the United States by such 
importer, and 
‘‘(II) to all importers does not exceed the 
750,000 wine gallons of wine to which the tax 
credit applies, 
‘‘(ii) procedures that allow the election of a foreign 
producer to assign and an importer to receive the tax 
credit provided under this paragraph, 
‘‘(iii) requirements that the foreign producer pro-
vide any information as the Secretary determines nec-
essary and appropriate for purposes of carrying out 
this paragraph, and 
‘‘(iv) procedures that allow for revocation of eligi-
bility of the foreign producer and the importer for 
the tax credit provided under this paragraph in the 
case of any erroneous or fraudulent information pro-
vided under clause (iii) which the Secretary deems 
to be material to qualifying for such credit. 
‘‘(C) CONTROLLED GROUP.—For purposes of this section, 
any importer making an election described in subparagraph 
(B)(ii) shall be deemed to be a member of the controlled
H. R. 1—122 
group of the foreign producer, as described under paragraph 
(4).’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to wine removed after December 31, 2017. 
SEC. 13805. ADJUSTMENT OF ALCOHOL CONTENT LEVEL FOR APPLICA-
TION OF EXCISE TAX RATES. 
(a) IN GENERAL.—Paragraphs (1) and (2) of section 5041(b) 
are each amended by inserting ‘‘(16 percent in the case of wine 
removed after December 31, 2017, and before January 1, 2020’’ 
after ‘‘14 percent’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to wine removed after December 31, 2017. 
SEC. 13806. DEFINITION OF MEAD AND LOW ALCOHOL BY VOLUME 
WINE. 
(a) IN GENERAL.—Section 5041 is amended— 
(1) in subsection (a), by striking ‘‘Still wines’’ and inserting 
‘‘Subject to subsection (h), still wines’’, and 
(2) by adding at the end the following new subsection: 
‘‘(h) MEAD AND LOW ALCOHOL BY VOLUME WINE.— 
‘‘(1) IN
GENERAL.—For purposes of subsections (a) and 
(b)(1), mead and low alcohol by volume wine shall be deemed 
to be still wines containing not more than 16 percent of alcohol 
by volume. 
‘‘(2) DEFINITIONS.— 
‘‘(A) MEAD.—For purposes of this section, the term 
‘mead’ means a wine— 
‘‘(i) containing not more than 0.64 gram of carbon 
dioxide per hundred milliliters of wine, except that 
the Secretary shall by regulations prescribe such toler-
ances to this limitation as may be reasonably necessary 
in good commercial practice, 
‘‘(ii) which is derived solely from honey and water, 
‘‘(iii) which contains no fruit product or fruit fla-
voring, and 
‘‘(iv) which contains less than 8.5 percent alcohol 
by volume. 
‘‘(B) LOW ALCOHOL BY VOLUME WINE.—For purposes 
of this section, the term ‘low alcohol by volume wine’ means 
a wine— 
‘‘(i) containing not more than 0.64 gram of carbon 
dioxide per hundred milliliters of wine, except that 
the Secretary shall by regulations prescribe such toler-
ances to this limitation as may be reasonably necessary 
in good commercial practice, 
‘‘(ii) which is derived— 
‘‘(I) primarily from grapes, or 
‘‘(II) from grape juice concentrate and water, 
‘‘(iii) which contains no fruit product or fruit fla-
voring other than grape, and 
‘‘(iv) which contains less than 8.5 percent alcohol 
by volume. 
‘‘(3) TERMINATION.—This subsection shall not apply to wine 
removed after December 31, 2019.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to wine removed after December 31, 2017.
H. R. 1—123 
SEC. 13807. REDUCED RATE OF EXCISE TAX ON CERTAIN DISTILLED 
SPIRITS. 
(a) IN GENERAL.—Section 5001 is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection 
(b) the following new subsection: 
‘‘(c) REDUCED RATE FOR 2018 AND 2019.— 
‘‘(1) IN GENERAL.—In the case of a distilled spirits oper-
ation, the otherwise applicable tax rate under subsection (a)(1) 
shall be— 
‘‘(A) $2.70 per proof gallon on the first 100,000 proof 
gallons of distilled spirits, and 
‘‘(B) $13.34 per proof gallon on the first 22,130,000 
of proof gallons of distilled spirits to which subparagraph 
(A) does not apply, 
which have been distilled or processed by such operation and 
removed during the calendar year for consumption or sale, 
or which have been imported by the importer into the United 
States during the calendar year. 
‘‘(2) CONTROLLED GROUPS.— 
‘‘(A) IN GENERAL.—In the case of a controlled group, 
the proof gallon quantities specified under subparagraphs 
(A) and (B) of paragraph (1) shall be applied to such group 
and apportioned among the members of such group in 
such manner as the Secretary or their delegate shall by 
regulations prescribe. 
‘‘(B) DEFINITION.—For purposes of subparagraph (A), 
the term ‘controlled group’ shall have the meaning given 
such term by subsection (a) of section 1563, except that 
‘more than 50 percent’ shall be substituted for ‘at least 
80 percent’ each place it appears in such subsection. 
‘‘(C) RULES
FOR
NON-CORPORATIONS.—Under regula-
tions prescribed by the Secretary, principles similar to the 
principles of subparagraphs (A) and (B) shall be applied 
to a group under common control where one or more of 
the persons is not a corporation. 
‘‘(D) SINGLE TAXPAYER.—Pursuant to rules issued by 
the Secretary, two or more entities (whether or not under 
common control) that produce distilled spirits marketed 
under a similar brand, license, franchise, or other arrange-
ment shall be treated as a single taxpayer for purposes 
of the application of this subsection. 
‘‘(3) TERMINATION.—This subsection shall not apply to dis-
tilled spirits removed after December 31, 2019.’’. 
(b) CONFORMING AMENDMENT.—Section 7652(f)(2) is amended 
by striking ‘‘section 5001(a)(1)’’ and inserting ‘‘subsection (a)(1) of 
section 5001, determined as if subsection (c)(1) of such section 
did not apply’’. 
(c) APPLICATION OF REDUCED TAX RATE FOR FOREIGN MANUFAC-
TURERS AND IMPORTERS.—Subsection (c) of section 5001, as added 
by subsection (a), is amended— 
(1) in paragraph (1), by inserting ‘‘but only if the importer 
is an electing importer under paragraph (3) and the proof 
gallons of distilled spirits have been assigned to the importer 
pursuant to such paragraph’’ after ‘‘into the United States 
during the calendar year’’, and 
(2) by redesignating paragraph (3) as paragraph (4) and 
by inserting after paragraph (2) the following new paragraph:
H. R. 1—124 
‘‘(3) REDUCED TAX RATE FOR FOREIGN MANUFACTURERS AND 
IMPORTERS.— 
‘‘(A) IN GENERAL.—In the case of any proof gallons 
of distilled spirits which have been produced outside of 
the United States and imported into the United States, 
the rate of tax applicable under paragraph (1) (referred 
to in this paragraph as the ‘reduced tax rate’) may be 
assigned by the distilled spirits operation (provided that 
such operation makes an election described in subpara-
graph (B)(ii)) to any electing importer of such proof gallons 
pursuant to the requirements established by the Secretary 
under subparagraph (B). 
‘‘(B) ASSIGNMENT.—The Secretary shall, through such 
rules, regulations, and procedures as are determined appro-
priate, establish procedures for assignment of the reduced 
tax rate provided under this paragraph, which shall 
include— 
‘‘(i) a limitation to ensure that the number of proof 
gallons of distilled spirits for which the reduced tax 
rate has been assigned by a distilled spirits operation— 
‘‘(I) to any importer does not exceed the 
number of proof gallons produced by such oper-
ation during the calendar year which were 
imported into the United States by such importer, 
and 
‘‘(II) to all importers does not exceed the 
22,230,000 proof gallons of distilled spirits to which 
the reduced tax rate applies, 
‘‘(ii) procedures that allow the election of a distilled 
spirits operation to assign and an importer to receive 
the reduced tax rate provided under this paragraph, 
‘‘(iii) requirements that the distilled spirits oper-
ation provide any information as the Secretary deter-
mines necessary and appropriate for purposes of car-
rying out this paragraph, and 
‘‘(iv) procedures that allow for revocation of eligi-
bility of the distilled spirits operation and the importer 
for the reduced tax rate provided under this paragraph 
in the case of any erroneous or fraudulent information 
provided under clause (iii) which the Secretary deems 
to be material to qualifying for such reduced rate. 
‘‘(C) CONTROLLED GROUP.— 
‘‘(i) IN GENERAL.—For purposes of this section, any 
importer making an election described in subparagraph 
(B)(ii) shall be deemed to be a member of the controlled 
group of the distilled spirits operation, as described 
under paragraph (2). 
‘‘(ii) APPORTIONMENT.—For purposes of this para-
graph, in the case of a controlled group, rules similar 
to section 5051(a)(5)(B) shall apply.’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to distilled spirits removed after December 31, 2017. 
SEC. 13808. BULK DISTILLED SPIRITS. 
(a) IN GENERAL.—Section 5212 is amended by adding at the 
end the following sentence: ‘‘In the case of distilled spirits trans-
ferred in bond after December 31, 2017, and before January 1,
H. R. 1—125 
2020, this section shall be applied without regard to whether dis-
tilled spirits are bulk distilled spirits.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply distilled spirits transferred in bond after December 
31, 2017. 
Subpart B—Miscellaneous Provisions 
SEC. 13821. MODIFICATION OF TAX TREATMENT OF ALASKA NATIVE 
CORPORATIONS AND SETTLEMENT TRUSTS. 
(a) EXCLUSION FOR ANCSA PAYMENTS ASSIGNED TO ALASKA 
NATIVE SETTLEMENT TRUSTS.— 
(1) IN GENERAL.—Part III of subchapter B of chapter 1 
is amended by inserting before section 140 the following new 
section: 
‘‘SEC. 139G. ASSIGNMENTS TO ALASKA NATIVE SETTLEMENT TRUSTS. 
‘‘(a) IN GENERAL.—In the case of a Native Corporation, gross 
income shall not include the value of any payments that would 
otherwise be made, or treated as being made, to such Native Cor-
poration pursuant to, or as required by, any provision of the Alaska 
Native Claims Settlement Act (43 U.S.C. 1601 et seq.), including 
any payment that would otherwise be made to a Village Corporation 
pursuant to section 7(j) of the Alaska Native Claims Settlement 
Act (43 U.S.C. 1606(j)), provided that any such payments— 
‘‘(1) are assigned in writing to a Settlement Trust, and 
‘‘(2) were not received by such Native Corporation prior 
to the assignment described in paragraph (1). 
‘‘(b) INCLUSION IN GROSS INCOME.—In the case of a Settlement 
Trust which has been assigned payments described in subsection 
(a), gross income shall include such payments when received by 
such Settlement Trust pursuant to the assignment and shall have 
the same character as if such payments were received by the 
Native Corporation. 
‘‘(c) AMOUNT AND SCOPE OF ASSIGNMENT.—The amount and 
scope of any assignment under subsection (a) shall be described 
with reasonable particularity and may either be in a percentage 
of one or more such payments or in a fixed dollar amount. 
‘‘(d) DURATION
OF ASSIGNMENT; REVOCABILITY.—Any assign-
ment under subsection (a) shall specify— 
‘‘(1) a duration either in perpetuity or for a period of 
time, and 
‘‘(2) whether such assignment is revocable. 
‘‘(e) PROHIBITION ON DEDUCTION.—Notwithstanding section 247, 
no deduction shall be allowed to a Native Corporation for purposes 
of any amounts described in subsection (a). 
‘‘(f) DEFINITIONS.—For purposes of this section, the terms 
‘Native Corporation’ and ‘Settlement Trust’ have the same meaning 
given such terms under section 646(h).’’. 
(2) CONFORMING AMENDMENT.—The table of sections for 
part III of subchapter B of chapter 1 is amended by inserting 
before the item relating to section 140 the following new item: 
‘‘Sec. 139G. Assignments to Alaska Native Settlement Trusts.’’. 
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to taxable years beginning after December 
31, 2016.
H. R. 1—126 
(b) DEDUCTION OF CONTRIBUTIONS TO ALASKA NATIVE SETTLE-
MENT TRUSTS.— 
(1) IN
GENERAL.—Part VIII of subchapter B of chapter 
1 is amended by inserting before section 248 the following 
new section: 
‘‘SEC. 247. CONTRIBUTIONS TO ALASKA NATIVE SETTLEMENT TRUSTS. 
‘‘(a) IN GENERAL.—In the case of a Native Corporation, there 
shall be allowed a deduction for any contributions made by such 
Native Corporation to a Settlement Trust (regardless of whether 
an election under section 646 is in effect for such Settlement Trust) 
for which the Native Corporation has made an annual election 
under subsection (e). 
‘‘(b) AMOUNT OF DEDUCTION.—The amount of the deduction 
under subsection (a) shall be equal to— 
‘‘(1) in the case of a cash contribution (regardless of the 
method of payment, including currency, coins, money order, 
or check), the amount of such contribution, or 
‘‘(2) in the case of a contribution not described in paragraph 
(1), the lesser of— 
‘‘(A) the Native Corporation’s adjusted basis in the 
property contributed, or 
‘‘(B) the fair market value of the property contributed. 
‘‘(c) LIMITATION AND CARRYOVER.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), the deduction 
allowed under subsection (a) for any taxable year shall not 
exceed the taxable income (as determined without regard to 
such deduction) of the Native Corporation for the taxable year 
in which the contribution was made. 
‘‘(2) CARRYOVER.—If the aggregate amount of contributions 
described in subsection (a) for any taxable year exceeds the 
limitation under paragraph (1), such excess shall be treated 
as a contribution described in subsection (a) in each of the 
15 succeeding years in order of time. 
‘‘(d) DEFINITIONS.—For purposes of this section, the terms 
‘Native Corporation’ and ‘Settlement Trust’ have the same meaning 
given such terms under section 646(h). 
‘‘(e) MANNER OF MAKING ELECTION.— 
‘‘(1) IN GENERAL.—For each taxable year, a Native Corpora-
tion may elect to have this section apply for such taxable 
year on the income tax return or an amendment or supplement 
to the return of the Native Corporation, with such election 
to have effect solely for such taxable year. 
‘‘(2) REVOCATION.—Any election made by a Native Corpora-
tion pursuant to this subsection may be revoked pursuant 
to a timely filed amendment or supplement to the income 
tax return of such Native Corporation. 
‘‘(f) ADDITIONAL RULES.— 
‘‘(1) EARNINGS
AND
PROFITS.—Notwithstanding section 
646(d)(2), in the case of a Native Corporation which claims 
a deduction under this section for any taxable year, the earnings 
and profits of such Native Corporation for such taxable year 
shall be reduced by the amount of such deduction. 
‘‘(2) GAIN OR LOSS.—No gain or loss shall be recognized 
by the Native Corporation with respect to a contribution of 
property for which a deduction is allowed under this section.
H. R. 1—127 
‘‘(3) INCOME.—Subject to subsection (g), a Settlement Trust 
shall include in income the amount of any deduction allowed 
under this section in the taxable year in which the Settlement 
Trust actually receives such contribution. 
‘‘(4) PERIOD.—The holding period under section 1223 of 
the Settlement Trust shall include the period the property 
was held by the Native Corporation. 
‘‘(5) BASIS.—The basis that a Settlement Trust has for 
which a deduction is allowed under this section shall be equal 
to the lesser of— 
‘‘(A) the adjusted basis of the Native Corporation in 
such property immediately before such contribution, or 
‘‘(B) the fair market value of the property immediately 
before such contribution. 
‘‘(6) PROHIBITION.—No deduction shall be allowed under 
this section with respect to any contributions made to a Settle-
ment Trust which are in violation of subsection (a)(2) or (c)(2) 
of section 39 of the Alaska Native Claims Settlement Act (43 
U.S.C. 1629e). 
‘‘(g) ELECTION BY SETTLEMENT TRUST TO DEFER INCOME REC-
OGNITION.— 
‘‘(1) IN GENERAL.—In the case of a contribution which con-
sists of property other than cash, a Settlement Trust may 
elect to defer recognition of any income related to such property 
until the sale or exchange of such property, in whole or in 
part, by the Settlement Trust. 
‘‘(2) TREATMENT.—In the case of property described in para-
graph (1), any income or gain realized on the sale or exchange 
of such property shall be treated as— 
‘‘(A) for such amount of the income or gain as is equal 
to or less than the amount of income which would be 
included in income at the time of contribution under sub-
section (f)(3) but for the taxpayer’s election under this 
subsection, ordinary income, and 
‘‘(B) for any amounts of the income or gain which 
are in excess of the amount of income which would be 
included in income at the time of contribution under sub-
section (f)(3) but for the taxpayer’s election under this 
subsection, having the same character as if this subsection 
did not apply. 
‘‘(3) ELECTION.— 
‘‘(A) IN GENERAL.—For each taxable year, a Settlement 
Trust may elect to apply this subsection for any property 
described in paragraph (1) which was contributed during 
such year. Any property to which the election applies shall 
be identified and described with reasonable particularity 
on the income tax return or an amendment or supplement 
to the return of the Settlement Trust, with such election 
to have effect solely for such taxable year. 
‘‘(B) REVOCATION.—Any election made by a Settlement 
Trust pursuant to this subsection may be revoked pursuant 
to a timely filed amendment or supplement to the income 
tax return of such Settlement Trust. 
‘‘(C) CERTAIN DISPOSITIONS.— 
‘‘(i) IN GENERAL.—In the case of any property for 
which an election is in effect under this subsection 
and which is disposed of within the first taxable year
H. R. 1—128 
subsequent to the taxable year in which such property 
was contributed to the Settlement Trust— 
‘‘(I) this section shall be applied as if the elec-
tion under this subsection had not been made, 
‘‘(II) any income or gain which would have 
been included in the year of contribution under 
subsection (f)(3) but for the taxpayer’s election 
under this subsection shall be included in income 
for the taxable year of such contribution, and 
‘‘(III) the Settlement Trust shall pay any 
increase in tax resulting from such inclusion, 
including any applicable interest, and increased 
by 10 percent of the amount of such increase with 
interest. 
‘‘(ii) 
ASSESSMENT.—Notwithstanding 
section 
6501(a), any amount described in subclause (III) of 
clause (i) may be assessed, or a proceeding in court 
with respect to such amount may be initiated without 
assessment, within 4 years after the date on which 
the return making the election under this subsection 
for such property was filed.’’. 
(2) CONFORMING AMENDMENT.—The table of sections for 
part VIII of subchapter B of chapter 1 is amended by inserting 
before the item relating to section 248 the following new item: 
‘‘Sec. 247. Contributions to Alaska Native Settlement Trusts.’’. 
(3) EFFECTIVE DATE.— 
(A) IN GENERAL.—The amendments made by this sub-
section shall apply to taxable years for which the period 
of limitation on refund or credit under section 6511 of 
the Internal Revenue Code of 1986 has not expired. 
(B) ONE-YEAR WAIVER OF STATUTE OF LIMITATIONS.— 
If the period of limitation on a credit or refund resulting 
from the amendments made by paragraph (1) expires before 
the end of the 1-year period beginning on the date of 
the enactment of this Act, refund or credit of such overpay-
ment (to the extent attributable to such amendments) may, 
nevertheless, be made or allowed if claim therefor is filed 
before the close of such 1-year period. 
(c) INFORMATION REPORTING FOR DEDUCTIBLE CONTRIBUTIONS 
TO ALASKA NATIVE SETTLEMENT TRUSTS.— 
(1) IN GENERAL.—Section 6039H is amended— 
(A) in the heading, by striking ‘‘SPONSORING’’, and 
(B) by adding at the end the following new subsection: 
‘‘(e) DEDUCTIBLE CONTRIBUTIONS BY NATIVE CORPORATIONS TO 
ALASKA NATIVE SETTLEMENT TRUSTS.— 
‘‘(1) IN GENERAL.—Any Native Corporation (as defined in 
subsection (m) of section 3 of the Alaska Native Claims Settle-
ment Act (43 U.S.C. 1602(m))) which has made a contribution 
to a Settlement Trust (as defined in subsection (t) of such 
section) to which an election under subsection (e) of section 
247 applies shall provide such Settlement Trust with a state-
ment regarding such election not later than January 31 of 
the calendar year subsequent to the calendar year in which 
the contribution was made. 
‘‘(2) CONTENT OF STATEMENT.—The statement described in 
paragraph (1) shall include—
H. R. 1—129 
‘‘(A) the total amount of contributions to which the 
election under subsection (e) of section 247 applies, 
‘‘(B) for each contribution, whether such contribution 
was in cash, 
‘‘(C) for each contribution which consists of property 
other than cash, the date that such property was acquired 
by the Native Corporation and the adjusted basis and 
fair market value of such property on the date such prop-
erty was contributed to the Settlement Trust, 
‘‘(D) the date on which each contribution was made 
to the Settlement Trust, and 
‘‘(E) such information as the Secretary determines to 
be necessary or appropriate for the identification of each 
contribution and the accurate inclusion of income relating 
to such contributions by the Settlement Trust.’’. 
(2) CONFORMING AMENDMENT.—The item relating to section 
6039H in the table of sections for subpart A of part III of 
subchapter A of chapter 61 is amended to read as follows: 
‘‘Sec. 6039H. Information With Respect to Alaska Native Settlement Trusts and 
Native Corporations.’’. 
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to taxable years beginning after December 
31, 2016. 
SEC. 13822. AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES. 
(a) IN GENERAL.—Subsection (e) of section 4261 is amended 
by adding at the end the following new paragraph: 
‘‘(5) AMOUNTS PAID FOR AIRCRAFT MANAGEMENT SERVICES.— 
‘‘(A) IN GENERAL.—No tax shall be imposed by this 
section or section 4271 on any amounts paid by an aircraft 
owner for aircraft management services related to— 
‘‘(i) maintenance and support of the aircraft 
owner’s aircraft, or 
‘‘(ii) flights on the aircraft owner’s aircraft. 
‘‘(B) AIRCRAFT MANAGEMENT SERVICES.—For purposes 
of subparagraph (A), the term ‘aircraft management serv-
ices’ includes— 
‘‘(i) assisting an aircraft owner with administrative 
and support services, such as scheduling, flight plan-
ning, and weather forecasting, 
‘‘(ii) obtaining insurance, 
‘‘(iii) maintenance, storage and fueling of aircraft, 
‘‘(iv) hiring, training, and provision of pilots and 
crew, 
‘‘(v) establishing and complying with safety stand-
ards, and 
‘‘(vi) such other services as are necessary to sup-
port flights operated by an aircraft owner. 
‘‘(C) LESSEE TREATED AS AIRCRAFT OWNER.— 
‘‘(i) IN GENERAL.—For purposes of this paragraph, 
the term ‘aircraft owner’ includes a person who leases 
the aircraft other than under a disqualified lease. 
‘‘(ii) DISQUALIFIED LEASE.—For purposes of clause 
(i), the term ‘disqualified lease’ means a lease from 
a person providing aircraft management services with 
respect to such aircraft (or a related person (within
H. R. 1—130 
the meaning of section 465(b)(3)(C)) to the person pro-
viding such services), if such lease is for a term of 
31 days or less. 
‘‘(D) PRO RATA ALLOCATION.—In the case of amounts 
paid to any person which (but for this subsection) are 
subject to the tax imposed by subsection (a), a portion 
of which consists of amounts described in subparagraph 
(A), this paragraph shall apply on a pro rata basis only 
to the portion which consists of amounts described in such 
subparagraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to amounts paid after the date of the enactment of 
this Act. 
SEC. 13823. OPPORTUNITY ZONES. 
(a) IN GENERAL.—Chapter 1 is amended by adding at the 
end the following: 
‘‘Subchapter Z—Opportunity Zones 
‘‘Sec. 1400Z–1. Designation. 
‘‘Sec. 1400Z–2. Special rules for capital gains invested in opportunity zones. 
‘‘SEC. 1400Z–1. DESIGNATION. 
‘‘(a) QUALIFIED OPPORTUNITY ZONE DEFINED.—For the purposes 
of this subchapter, the term ‘qualified opportunity zone’ means 
a population census tract that is a low-income community that 
is designated as a qualified opportunity zone. 
‘‘(b) DESIGNATION.— 
‘‘(1) IN GENERAL.—For purposes of subsection (a), a popu-
lation census tract that is a low-income community is des-
ignated as a qualified opportunity zone if— 
‘‘(A) not later than the end of the determination period, 
the chief executive officer of the State in which the tract 
is located— 
‘‘(i) nominates the tract for designation as a quali-
fied opportunity zone, and 
‘‘(ii) notifies the Secretary in writing of such 
nomination, and 
‘‘(B) the Secretary certifies such nomination and des-
ignates such tract as a qualified opportunity zone before 
the end of the consideration period. 
‘‘(2) EXTENSION OF PERIODS.—A chief executive officer of 
a State may request that the Secretary extend either the deter-
mination or consideration period, or both (determined without 
regard to this subparagraph), for an additional 30 days. 
‘‘(c) OTHER DEFINITIONS.—For purposes of this subsection— 
‘‘(1) LOW-INCOME
COMMUNITIES.—The term ‘low-income 
community’ has the same meaning as when used in section 
45D(e). 
‘‘(2) DEFINITION OF PERIODS.— 
‘‘(A) CONSIDERATION PERIOD.—The term ‘consideration 
period’ means the 30-day period beginning on the date 
on which the Secretary receives notice under subsection 
(b)(1)(A)(ii), as extended under subsection (b)(2). 
‘‘(B) DETERMINATION PERIOD.—The term ‘determination 
period’ means the 90-day period beginning on the date
H. R. 1—131 
of the enactment of the Tax Cuts and Jobs Act, as extended 
under subsection (b)(2). 
‘‘(3) STATE.—For purposes of this section, the term ‘State’ 
includes any possession of the United States. 
‘‘(d) NUMBER OF DESIGNATIONS.— 
‘‘(1) IN GENERAL.—Except as provided by paragraph (2), 
the number of population census tracts in a State that may 
be designated as qualified opportunity zones under this section 
may not exceed 25 percent of the number of low-income commu-
nities in the State. 
‘‘(2) EXCEPTION.—If the number of low-income communities 
in a State is less than 100, then a total of 25 of such tracts 
may be designated as qualified opportunity zones. 
‘‘(e) DESIGNATION OF TRACTS CONTIGUOUS WITH LOW-INCOME 
COMMUNITIES.— 
‘‘(1) IN GENERAL.—A population census tract that is not 
a low-income community may be designated as a qualified 
opportunity zone under this section if— 
‘‘(A) the tract is contiguous with the low-income 
community that is designated as a qualified opportunity 
zone, and 
‘‘(B) the median family income of the tract does not 
exceed 125 percent of the median family income of the 
low-income community with which the tract is contiguous. 
‘‘(2) LIMITATION.—Not more than 5 percent of the popu-
lation census tracts designated in a State as a qualified oppor-
tunity zone may be designated under paragraph (1). 
‘‘(f) PERIOD FOR WHICH DESIGNATION IS IN EFFECT.—A designa-
tion as a qualified opportunity zone shall remain in effect for 
the period beginning on the date of the designation and ending 
at the close of the 10th calendar year beginning on or after such 
date of designation. 
‘‘SEC. 1400Z–2. SPECIAL RULES FOR CAPITAL GAINS INVESTED IN 
OPPORTUNITY ZONES. 
‘‘(a) IN GENERAL.— 
‘‘(1) TREATMENT OF GAINS.—In the case of gain from the 
sale to, or exchange with, an unrelated person of any property 
held by the taxpayer, at the election of the taxpayer— 
‘‘(A) gross income for the taxable year shall not include 
so much of such gain as does not exceed the aggregate 
amount invested by the taxpayer in a qualified opportunity 
fund during the 180-day period beginning on the date of 
such sale or exchange, 
‘‘(B) the amount of gain excluded by subparagraph 
(A) shall be included in gross income as provided by sub-
section (b), and 
‘‘(C) subsection (c) shall apply. 
‘‘(2) ELECTION.—No election may be made under paragraph 
(1)— 
‘‘(A) with respect to a sale or exchange if an election 
previously made with respect to such sale or exchange 
is in effect, or 
‘‘(B) with respect to any sale or exchange after 
December 31, 2026. 
‘‘(b) DEFERRAL OF GAIN INVESTED IN OPPORTUNITY ZONE PROP-
ERTY.—
H. R. 1—132 
‘‘(1) YEAR
OF
INCLUSION.—Gain to which subsection 
(a)(1)(B) applies shall be included in income in the taxable 
year which includes the earlier of— 
‘‘(A) the date on which such investment is sold or 
exchanged, or 
‘‘(B) December 31, 2026. 
‘‘(2) AMOUNT INCLUDIBLE.— 
‘‘(A) IN
GENERAL.—The amount of gain included in 
gross income under subsection (a)(1)(A) shall be the excess 
of— 
‘‘(i) the lesser of the amount of gain excluded under 
paragraph (1) or the fair market value of the invest-
ment as determined as of the date described in para-
graph (1), over 
‘‘(ii) the taxpayer’s basis in the investment. 
‘‘(B) DETERMINATION OF BASIS.— 
‘‘(i) IN
GENERAL.—Except as otherwise provided 
in this clause or subsection (c), the taxpayer’s basis 
in the investment shall be zero. 
‘‘(ii) INCREASE FOR GAIN RECOGNIZED UNDER SUB-
SECTION (a)(1)(B).—The basis in the investment shall 
be increased by the amount of gain recognized by rea-
son of subsection (a)(1)(B) with respect to such prop-
erty. 
‘‘(iii) INVESTMENTS HELD FOR 5 YEARS.—In the case 
of any investment held for at least 5 years, the basis 
of such investment shall be increased by an amount 
equal to 10 percent of the amount of gain deferred 
by reason of subsection (a)(1)(A). 
‘‘(iv) INVESTMENTS HELD FOR 7 YEARS.—In the case 
of any investment held by the taxpayer for at least 
7 years, in addition to any adjustment made under 
clause (iii), the basis of such property shall be increased 
by an amount equal to 5 percent of the amount of 
gain deferred by reason of subsection (a)(1)(A). 
‘‘(c) SPECIAL RULE FOR INVESTMENTS HELD FOR AT LEAST 10 
YEARS.—In the case of any investment held by the taxpayer for 
at least 10 years and with respect to which the taxpayer makes 
an election under this clause, the basis of such property shall 
be equal to the fair market value of such investment on the date 
that the investment is sold or exchanged. 
‘‘(d) QUALIFIED OPPORTUNITY FUND.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—The term ‘qualified opportunity fund’ 
means any investment vehicle which is organized as a corpora-
tion or a partnership for the purpose of investing in qualified 
opportunity zone property (other than another qualified oppor-
tunity fund) that holds at least 90 percent of its assets in 
qualified opportunity zone property, determined by the average 
of the percentage of qualified opportunity zone property held 
in the fund as measured— 
‘‘(A) on the last day of the first 6-month period of 
the taxable year of the fund, and 
‘‘(B) on the last day of the taxable year of the fund. 
‘‘(2) QUALIFIED OPPORTUNITY ZONE PROPERTY.— 
‘‘(A) IN GENERAL.—The term ‘qualified opportunity zone 
property’ means property which is—
H. R. 1—133 
‘‘(i) qualified opportunity zone stock, 
‘‘(ii) 
qualified 
opportunity 
zone 
partnership 
interest, or 
‘‘(iii) qualified opportunity zone business property. 
‘‘(B) QUALIFIED OPPORTUNITY ZONE STOCK.— 
‘‘(i) IN
GENERAL.—Except as provided in clause 
(ii), the term ‘qualified opportunity zone stock’ means 
any stock in a domestic corporation if— 
‘‘(I) such stock is acquired by the qualified 
opportunity fund after December 31, 2017, at its 
original issue (directly or through an underwriter) 
from the corporation solely in exchange for cash, 
‘‘(II) as of the time such stock was issued, 
such corporation was a qualified opportunity zone 
business (or, in the case of a new corporation, 
such corporation was being organized for purposes 
of being a qualified opportunity zone business), 
and 
‘‘(III) during substantially all of the qualified 
opportunity fund’s holding period for such stock, 
such corporation qualified as a qualified oppor-
tunity zone business. 
‘‘(ii) REDEMPTIONS.—A rule similar to the rule of 
section 1202(c)(3) shall apply for purposes of this para-
graph. 
‘‘(C) 
QUALIFIED
OPPORTUNITY
ZONE
PARTNERSHIP 
INTEREST.—The term ‘qualified opportunity zone partner-
ship interest’ means any capital or profits interest in a 
domestic partnership if— 
‘‘(i) such interest is acquired by the qualified oppor-
tunity fund after December 31, 2017, from the partner-
ship solely in exchange for cash, 
‘‘(ii) as of the time such interest was acquired, 
such partnership was a qualified opportunity zone busi-
ness (or, in the case of a new partnership, such partner-
ship was being organized for purposes of being a quali-
fied opportunity zone business), and 
‘‘(iii) during substantially all of the qualified oppor-
tunity fund’s holding period for such interest, such 
partnership qualified as a qualified opportunity zone 
business. 
‘‘(D) QUALIFIED
OPPORTUNITY
ZONE
BUSINESS
PROP-
ERTY.— 
‘‘(i) IN GENERAL.—The term ‘qualified opportunity 
zone business property’ means tangible property used 
in a trade or business of the qualified opportunity 
fund if— 
‘‘(I) such property was acquired by the quali-
fied opportunity fund by purchase (as defined in 
section 179(d)(2)) after December 31, 2017, 
‘‘(II) the original use of such property in the 
qualified opportunity zone commences with the 
qualified opportunity fund or the qualified oppor-
tunity fund substantially improves the property, 
and
H. R. 1—134 
‘‘(III) during substantially all of the qualified 
opportunity fund’s holding period for such prop-
erty, substantially all of the use of such property 
was in a qualified opportunity zone. 
‘‘(ii) SUBSTANTIAL IMPROVEMENT.—For purposes of 
subparagraph (A)(ii), property shall be treated as 
substantially improved by the qualified opportunity 
fund only if, during any 30-month period beginning 
after the date of acquisition of such property, additions 
to basis with respect to such property in the hands 
of the qualified opportunity fund exceed an amount 
equal to the adjusted basis of such property at the 
beginning of such 30-month period in the hands of 
the qualified opportunity fund. 
‘‘(iii) RELATED PARTY.—For purposes of subpara-
graph (A)(i), the related person rule of section 179(d)(2) 
shall be applied pursuant to paragraph (8) of this 
subsection in lieu of the application of such rule in 
section 179(d)(2)(A). 
‘‘(3) QUALIFIED OPPORTUNITY ZONE BUSINESS.— 
‘‘(A) IN GENERAL.—The term ‘qualified opportunity zone 
business’ means a trade or business— 
‘‘(i) in which substantially all of the tangible prop-
erty owned or leased by the taxpayer is qualified oppor-
tunity zone business property (determined by sub-
stituting ‘qualified opportunity zone business’ for 
‘qualified opportunity fund’ each place it appears in 
paragraph (2)(D)), 
‘‘(ii) which satisfies the requirements of paragraphs 
(2), (4), and (8) of section 1397C(b), and 
‘‘(iii) which is not described in section 144(c)(6)(B). 
‘‘(B) SPECIAL RULE.—For purposes of subparagraph (A), 
tangible property that ceases to be a qualified opportunity 
zone business property shall continue to be treated as 
a qualified opportunity zone business property for the lesser 
of— 
‘‘(i) 5 years after the date on which such tangible 
property ceases to be so qualified, or 
‘‘(ii) the date on which such tangible property is 
no longer held by the qualified opportunity zone busi-
ness. 
‘‘(e) APPLICABLE RULES.— 
‘‘(1) TREATMENT OF INVESTMENTS WITH MIXED FUNDS.—In 
the case of any investment in a qualified opportunity fund 
only a portion of which consists of investments of gain to 
which an election under subsection (a) is in effect— 
‘‘(A) such investment shall be treated as 2 separate 
investments, consisting of— 
‘‘(i) one investment that only includes amounts 
to which the election under subsection (a) applies, and 
‘‘(ii) a separate investment consisting of other 
amounts, and 
‘‘(B) subsections (a), (b), and (c) shall only apply to 
the investment described in subparagraph (A)(i). 
‘‘(2) RELATED PERSONS.—For purposes of this section, per-
sons are related to each other if such persons are described
H. R. 1—135 
in section 267(b) or 707(b)(1), determined by substituting ‘20 
percent’ for ‘50 percent’ each place it occurs in such sections. 
‘‘(3) DECEDENTS.—In the case of a decedent, amounts recog-
nized under this section shall, if not properly includible in 
the gross income of the decedent, be includible in gross income 
as provided by section 691. 
‘‘(4) REGULATIONS.—The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out 
the purposes of this section, including— 
‘‘(A) rules for the certification of qualified opportunity 
funds for the purposes of this section, 
‘‘(B) rules to ensure a qualified opportunity fund has 
a reasonable period of time to reinvest the return of capital 
from investments in qualified opportunity zone stock and 
qualified opportunity zone partnership interests, and to 
reinvest proceeds received from the sale or disposition of 
qualified opportunity zone property, and 
‘‘(C) rules to prevent abuse. 
‘‘(f) FAILURE OF QUALIFIED OPPORTUNITY FUND TO MAINTAIN 
INVESTMENT STANDARD.— 
‘‘(1) IN GENERAL.—If a qualified opportunity fund fails to 
meet the 90-percent requirement of subsection (c)(1), the quali-
fied opportunity fund shall pay a penalty for each month it 
fails to meet the requirement in an amount equal to the product 
of— 
‘‘(A) the excess of— 
‘‘(i) the amount equal to 90 percent of its aggregate 
assets, over 
‘‘(ii) the aggregate amount of qualified opportunity 
zone property held by the fund, multiplied by 
‘‘(B) the underpayment rate established under section 
6621(a)(2) for such month. 
‘‘(2) SPECIAL RULE FOR PARTNERSHIPS.—In the case that 
the qualified opportunity fund is a partnership, the penalty 
imposed by paragraph (1) shall be taken into account propor-
tionately as part of the distributive share of each partner 
of the partnership. 
‘‘(3) REASONABLE CAUSE EXCEPTION.—No penalty shall be 
imposed under this subsection with respect to any failure if 
it is shown that such failure is due to reasonable cause.’’. 
(b) BASIS
ADJUSTMENTS.—Section 1016(a) is amended by 
striking ‘‘and’’ at the end of paragraph (36), by striking the period 
at the end of paragraph (37) and inserting ‘‘, and’’, and by inserting 
after paragraph (37) the following: 
‘‘(38) to the extent provided in subsections (b)(2) and (c) 
of section 1400Z–2.’’. 
(c) CLERICAL
AMENDMENT.—The table of subchapters for 
chapter 1 is amended by adding at the end the following new 
item: 
‘‘SUBCHAPTER Z. OPPORTUNITY ZONES’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall take effect on the date of the enactment of this Act.
H. R. 1—136 
Subtitle D—International Tax Provisions 
PART I—OUTBOUND TRANSACTIONS 
Subpart A—Establishment of Participation 
Exemption System for Taxation of Foreign Income 
SEC. 14101. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVI-
DENDS RECEIVED BY DOMESTIC CORPORATIONS FROM 
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORA-
TIONS. 
(a) IN GENERAL.—Part VIII of subchapter B of chapter 1 is 
amended by inserting after section 245 the following new section: 
‘‘SEC. 245A. DEDUCTION FOR FOREIGN SOURCE-PORTION OF DIVI-
DENDS RECEIVED BY DOMESTIC CORPORATIONS FROM 
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORA-
TIONS. 
‘‘(a) IN GENERAL.—In the case of any dividend received from 
a specified 10-percent owned foreign corporation by a domestic 
corporation which is a United States shareholder with respect to 
such foreign corporation, there shall be allowed as a deduction 
an amount equal to the foreign-source portion of such dividend. 
‘‘(b) SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATION.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘specified 10-percent owned 
foreign corporation’ means any foreign corporation with respect 
to which any domestic corporation is a United States share-
holder with respect to such corporation. 
‘‘(2) EXCLUSION OF PASSIVE FOREIGN INVESTMENT COMPA-
NIES.—Such term shall not include any corporation which is 
a passive foreign investment company (as defined in section 
1297) with respect to the shareholder and which is not a 
controlled foreign corporation. 
‘‘(c) FOREIGN-SOURCE PORTION.—For purposes of this section— 
‘‘(1) IN GENERAL.—The foreign-source portion of any divi-
dend from a specified 10-percent owned foreign corporation 
is an amount which bears the same ratio to such dividend 
as— 
‘‘(A) the undistributed foreign earnings of the specified 
10-percent owned foreign corporation, bears to 
‘‘(B) the total undistributed earnings of such foreign 
corporation. 
‘‘(2) UNDISTRIBUTED
EARNINGS.—The term ‘undistributed 
earnings’ means the amount of the earnings and profits of 
the specified 10-percent owned foreign corporation (computed 
in accordance with sections 964(a) and 986)— 
‘‘(A) as of the close of the taxable year of the specified 
10-percent owned foreign corporation in which the dividend 
is distributed, and 
‘‘(B) without diminution by reason of dividends distrib-
uted during such taxable year. 
‘‘(3) UNDISTRIBUTED FOREIGN EARNINGS.—The term ‘undis-
tributed foreign earnings’ means the portion of the undistrib-
uted earnings which is attributable to neither—
H. R. 1—137 
‘‘(A) income described in subparagraph (A) of section 
245(a)(5), nor 
‘‘(B) dividends described in subparagraph (B) of such 
section (determined without regard to section 245(a)(12)). 
‘‘(d) DISALLOWANCE OF FOREIGN TAX CREDIT, ETC.— 
‘‘(1) IN GENERAL.—No credit shall be allowed under section 
901 for any taxes paid or accrued (or treated as paid or accrued) 
with respect to any dividend for which a deduction is allowed 
under this section. 
‘‘(2) DENIAL OF DEDUCTION.—No deduction shall be allowed 
under this chapter for any tax for which credit is not allowable 
under section 901 by reason of paragraph (1) (determined by 
treating the taxpayer as having elected the benefits of subpart 
A of part III of subchapter N). 
‘‘(e) SPECIAL RULES FOR HYBRID DIVIDENDS.— 
‘‘(1) IN GENERAL.—Subsection (a) shall not apply to any 
dividend received by a United States shareholder from a con-
trolled foreign corporation if the dividend is a hybrid dividend. 
‘‘(2) HYBRID DIVIDENDS OF TIERED CORPORATIONS.—If a con-
trolled foreign corporation with respect to which a domestic 
corporation is a United States shareholder receives a hybrid 
dividend from any other controlled foreign corporation with 
respect to which such domestic corporation is also a United 
States shareholder, then, notwithstanding any other provision 
of this title— 
‘‘(A) the hybrid dividend shall be treated for purposes 
of section 951(a)(1)(A) as subpart F income of the receiving 
controlled foreign corporation for the taxable year of the 
controlled foreign corporation in which the dividend was 
received, and 
‘‘(B) the United States shareholder shall include in 
gross income an amount equal to the shareholder’s pro 
rata share (determined in the same manner as under sec-
tion 951(a)(2)) of the subpart F income described in 
subparagraph (A). 
‘‘(3) DENIAL OF FOREIGN TAX CREDIT, ETC.—The rules of 
subsection (d) shall apply to any hybrid dividend received by, 
or any amount included under paragraph (2) in the gross income 
of, a United States shareholder. 
‘‘(4) HYBRID DIVIDEND.—The term ‘hybrid dividend’ means 
an amount received from a controlled foreign corporation— 
‘‘(A) for which a deduction would be allowed under 
subsection (a) but for this subsection, and 
‘‘(B) for which the controlled foreign corporation 
received a deduction (or other tax benefit) with respect 
to any income, war profits, or excess profits taxes imposed 
by any foreign country or possession of the United States. 
‘‘(f) SPECIAL RULE
FOR PURGING DISTRIBUTIONS
OF PASSIVE 
FOREIGN INVESTMENT COMPANIES.—Any amount which is treated 
as a dividend under section 1291(d)(2)(B) shall not be treated as 
a dividend for purposes of this section. 
‘‘(g) REGULATIONS.—The Secretary shall prescribe such regula-
tions or other guidance as may be necessary or appropriate to 
carry out the provisions of this section, including regulations for 
the treatment of United States shareholders owning stock of a 
specified 10 percent owned foreign corporation through a partner-
ship.’’.
H. R. 1—138 
(b) APPLICATION
OF HOLDING PERIOD REQUIREMENT.—Sub-
section (c) of section 246 is amended— 
(1) by striking ‘‘or 245’’ in paragraph (1) and inserting 
‘‘245, or 245A’’, and 
(2) by adding at the end the following new paragraph: 
‘‘(5) SPECIAL RULES FOR FOREIGN SOURCE PORTION OF DIVI-
DENDS RECEIVED FROM SPECIFIED 10-PERCENT OWNED FOREIGN 
CORPORATIONS.— 
‘‘(A) 1-YEAR HOLDING PERIOD REQUIREMENT.—For pur-
poses of section 245A— 
‘‘(i) paragraph (1)(A) shall be applied— 
‘‘(I) by substituting ‘365 days’ for ‘45 days’ 
each place it appears, and 
‘‘(II) by substituting ‘731-day period’ for ‘91- 
day period’, and 
‘‘(ii) paragraph (2) shall not apply. 
‘‘(B) STATUS
MUST
BE
MAINTAINED
DURING
HOLDING 
PERIOD.—For purposes of applying paragraph (1) with 
respect to section 245A, the taxpayer shall be treated as 
holding the stock referred to in paragraph (1) for any 
period only if— 
‘‘(i) the specified 10-percent owned foreign corpora-
tion referred to in section 245A(a) is a specified 10- 
percent owned foreign corporation at all times during 
such period, and 
‘‘(ii) the taxpayer is a United States shareholder 
with respect to such specified 10-percent owned foreign 
corporation at all times during such period.’’. 
(c) APPLICATION OF RULES GENERALLY APPLICABLE TO DEDUC-
TIONS FOR DIVIDENDS RECEIVED.— 
(1) TREATMENT
OF
DIVIDENDS
FROM
CERTAIN
CORPORA-
TIONS.—Paragraph (1) of section 246(a) is amended by striking 
‘‘and 245’’ and inserting ‘‘245, and 245A’’. 
(2) COORDINATION WITH SECTION 1059.—Subparagraph (B) 
of section 1059(b)(2) is amended by striking ‘‘or 245’’ and 
inserting ‘‘245, or 245A’’. 
(d) COORDINATION WITH FOREIGN TAX CREDIT LIMITATION.— 
Subsection (b) of section 904 is amended by adding at the end 
the following new paragraph: 
‘‘(5) TREATMENT OF DIVIDENDS FOR WHICH DEDUCTION IS 
ALLOWED UNDER SECTION 245A.—For purposes of subsection (a), 
in the case of a domestic corporation which is a United States 
shareholder with respect to a specified 10-percent owned foreign 
corporation, such shareholder’s taxable income from sources 
without the United States (and entire taxable income) shall 
be determined without regard to— 
‘‘(A) the foreign-source portion of any dividend received 
from such foreign corporation, and 
‘‘(B) any deductions properly allocable or apportioned 
to— 
‘‘(i) income (other than amounts includible under 
section 951(a)(1) or 951A(a)) with respect to stock of 
such specified 10-percent owned foreign corporation, 
or 
‘‘(ii) such stock to the extent income with respect 
to such stock is other than amounts includible under 
section 951(a)(1) or 951A(a).
H. R. 1—139 
Any term which is used in section 245A and in this paragraph 
shall have the same meaning for purposes of this paragraph 
as when used in such section.’’. 
(e) CONFORMING AMENDMENTS.— 
(1) Subsection (b) of section 951 is amended by striking 
‘‘subpart’’ and inserting ‘‘title’’. 
(2) Subsection (a) of section 957 is amended by striking 
‘‘subpart’’ in the matter preceding paragraph (1) and inserting 
‘‘title’’. 
(3) The table of sections for part VIII of subchapter B 
of chapter 1 is amended by inserting after the item relating 
to section 245 the following new item: 
‘‘Sec. 245A. Deduction for foreign source-portion of dividends received by domestic 
corporations from certain 10-percent owned foreign corporations.’’. 
(f) EFFECTIVE DATE.—The amendments made by this section 
shall apply to distributions made after (and, in the case of the 
amendments made by subsection (d), deductions with respect to 
taxable years ending after) December 31, 2017. 
SEC. 14102. SPECIAL RULES RELATING TO SALES OR TRANSFERS 
INVOLVING SPECIFIED 10-PERCENT OWNED FOREIGN 
CORPORATIONS. 
(a) SALES BY UNITED STATES PERSONS OF STOCK.— 
(1) IN GENERAL.—Section 1248 is amended by redesignating 
subsection (j) as subsection (k) and by inserting after subsection 
(i) the following new subsection: 
‘‘(j) COORDINATION WITH DIVIDENDS RECEIVED DEDUCTION.— 
In the case of the sale or exchange by a domestic corporation 
of stock in a foreign corporation held for 1 year or more, any 
amount received by the domestic corporation which is treated as 
a dividend by reason of this section shall be treated as a dividend 
for purposes of applying section 245A.’’. 
(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to sales or exchanges after December 31, 
2017. 
(b) BASIS IN SPECIFIED 10-PERCENT OWNED FOREIGN CORPORA-
TION REDUCED BY NONTAXED PORTION OF DIVIDEND FOR PURPOSES 
OF DETERMINING LOSS.— 
(1) IN GENERAL.—Section 961 is amended by adding at 
the end the following new subsection: 
‘‘(d) BASIS IN SPECIFIED 10-PERCENT OWNED FOREIGN CORPORA-
TION REDUCED BY NONTAXED PORTION OF DIVIDEND FOR PURPOSES 
OF DETERMINING LOSS.—If a domestic corporation received a divi-
dend from a specified 10-percent owned foreign corporation (as 
defined in section 245A) in any taxable year, solely for purposes 
of determining loss on any disposition of stock of such foreign 
corporation in such taxable year or any subsequent taxable year, 
the basis of such domestic corporation in such stock shall be reduced 
(but not below zero) by the amount of any deduction allowable 
to such domestic corporation under section 245A with respect to 
such stock except to the extent such basis was reduced under 
section 1059 by reason of a dividend for which such a deduction 
was allowable.’’. 
(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to distributions made after December 31, 
2017. 
(c) SALE BY A CFC OF A LOWER TIER CFC.—
H. R. 1—140 
(1) IN GENERAL.—Section 964(e) is amended by adding at 
the end the following new paragraph: 
‘‘(4) COORDINATION
WITH
DIVIDENDS
RECEIVED
DEDUC-
TION.— 
‘‘(A) IN GENERAL.—If, for any taxable year of a con-
trolled foreign corporation beginning after December 31, 
2017, any amount is treated as a dividend under paragraph 
(1) by reason of a sale or exchange by the controlled foreign 
corporation of stock in another foreign corporation held 
for 1 year or more, then, notwithstanding any other provi-
sion of this title— 
‘‘(i) the foreign-source portion of such dividend 
shall be treated for purposes of section 951(a)(1)(A) 
as subpart F income of the selling controlled foreign 
corporation for such taxable year, 
‘‘(ii) a United States shareholder with respect to 
the selling controlled foreign corporation shall include 
in gross income for the taxable year of the shareholder 
with or within which such taxable year of the controlled 
foreign corporation ends an amount equal to the share-
holder’s pro rata share (determined in the same 
manner as under section 951(a)(2)) of the amount 
treated as subpart F income under clause (i), and 
‘‘(iii) the deduction under section 245A(a) shall 
be allowable to the United States shareholder with 
respect to the subpart F income included in gross 
income under clause (ii) in the same manner as if 
such subpart F income were a dividend received by 
the shareholder from the selling controlled foreign cor-
poration. 
‘‘(B) APPLICATION OF BASIS OR SIMILAR ADJUSTMENT.— 
For purposes of this title, in the case of a sale or exchange 
by a controlled foreign corporation of stock in another for-
eign corporation in a taxable year of the selling controlled 
foreign corporation beginning after December 31, 2017, 
rules similar to the rules of section 961(d) shall apply. 
‘‘(C) FOREIGN-SOURCE PORTION.—For purposes of this 
paragraph, the foreign-source portion of any amount 
treated as a dividend under paragraph (1) shall be deter-
mined in the same manner as under section 245A(c).’’. 
(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to sales or exchanges after December 31, 
2017. 
(d) TREATMENT OF FOREIGN BRANCH LOSSES TRANSFERRED TO 
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS.— 
(1) IN
GENERAL.—Part II of subchapter B of chapter 1 
is amended by adding at the end the following new section: 
‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANSFERRED TO 
SPECIFIED 10-PERCENT OWNED FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—If a domestic corporation transfers substan-
tially all of the assets of a foreign branch (within the meaning 
of section 367(a)(3)(C), as in effect before the date of the enactment 
of the Tax Cuts and Jobs Act) to a specified 10-percent owned 
foreign corporation (as defined in section 245A) with respect to 
which it is a United States shareholder after such transfer, such 
domestic corporation shall include in gross income for the taxable
H. R. 1—141 
year which includes such transfer an amount equal to the trans-
ferred loss amount with respect to such transfer. 
‘‘(b) TRANSFERRED LOSS AMOUNT.—For purposes of this section, 
the term ‘transferred loss amount’ means, with respect to any 
transfer of substantially all of the assets of a foreign branch, the 
excess (if any) of— 
‘‘(1) the sum of losses— 
‘‘(A) which were incurred by the foreign branch after 
December 31, 2017, and before the transfer, and 
‘‘(B) with respect to which a deduction was allowed 
to the taxpayer, over 
‘‘(2) the sum of— 
‘‘(A) any taxable income of such branch for a taxable 
year after the taxable year in which the loss was incurred 
and through the close of the taxable year of the transfer, 
and 
‘‘(B) any amount which is recognized under section 
904(f)(3) on account of the transfer. 
‘‘(c) REDUCTION FOR RECOGNIZED GAINS.—The transferred loss 
amount shall be reduced (but not below zero) by the amount of 
gain recognized by the taxpayer on account of the transfer (other 
than amounts taken into account under subsection (b)(2)(B)). 
‘‘(d) SOURCE OF INCOME.—Amounts included in gross income 
under this section shall be treated as derived from sources within 
the United States. 
‘‘(e) BASIS ADJUSTMENTS.—Consistent with such regulations or 
other guidance as the Secretary shall prescribe, proper adjustments 
shall be made in the adjusted basis of the taxpayer’s stock in 
the specified 10-percent owned foreign corporation to which the 
transfer is made, and in the transferee’s adjusted basis in the 
property transferred, to reflect amounts included in gross income 
under this section.’’. 
(2) CLERICAL AMENDMENT.—The table of sections for part 
II of subchapter B of chapter 1 is amended by adding at 
the end the following new item: 
‘‘Sec. 91. Certain foreign branch losses transferred to specified 10-percent owned 
foreign corporations.’’. 
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to transfers after December 31, 2017. 
(4) TRANSITION
RULE.—The amount of gain taken into 
account under section 91(c) of the Internal Revenue Code of 
1986, as added by this subsection, shall be reduced by the 
amount of gain which would be recognized under section 
367(a)(3)(C) (determined without regard to the amendments 
made by subsection (e)) with respect to losses incurred before 
January 1, 2018. 
(e) REPEAL OF ACTIVE TRADE OR BUSINESS EXCEPTION UNDER 
SECTION 367.— 
(1) IN GENERAL.—Section 367(a) is amended by striking 
paragraph (3) and redesignating paragraphs (4), (5), and (6) 
as paragraphs (3), (4), and (5), respectively. 
(2) CONFORMING
AMENDMENTS.—Section 367(a)(4), as 
redesignated by paragraph (1), is amended— 
(A) by striking ‘‘Paragraphs (2) and (3)’’ and inserting 
‘‘Paragraph (2)’’, and
H. R. 1—142 
(B) by striking ‘‘PARAGRAPHS (2) AND (3)’’ in the heading 
and inserting ‘‘PARAGRAPH (2)’’. 
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to transfers after December 31, 2017. 
SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME UPON 
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF 
TAXATION. 
(a) IN GENERAL.—Section 965 is amended to read as follows: 
‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON 
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF 
TAXATION. 
‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME AS SUBPART 
F INCOME.—In the case of the last taxable year of a deferred 
foreign income corporation which begins before January 1, 2018, 
the subpart F income of such foreign corporation (as otherwise 
determined for such taxable year under section 952) shall be 
increased by the greater of— 
‘‘(1) the accumulated post-1986 deferred foreign income 
of such corporation determined as of November 2, 2017, or 
‘‘(2) the accumulated post-1986 deferred foreign income 
of such corporation determined as of December 31, 2017. 
‘‘(b) REDUCTION IN AMOUNTS INCLUDED IN GROSS INCOME OF 
UNITED STATES SHAREHOLDERS OF SPECIFIED FOREIGN CORPORA-
TIONS WITH DEFICITS IN EARNINGS AND PROFITS.— 
‘‘(1) IN GENERAL.—In the case of a taxpayer which is a 
United States shareholder with respect to at least one deferred 
foreign income corporation and at least one E&P deficit foreign 
corporation, the amount which would (but for this subsection) 
be taken into account under section 951(a)(1) by reason of 
subsection (a) as such United States shareholder’s pro rata 
share of the subpart F income of each deferred foreign income 
corporation shall be reduced by the amount of such United 
States shareholder’s aggregate foreign E&P deficit which is 
allocated under paragraph (2) to such deferred foreign income 
corporation. 
‘‘(2) ALLOCATION OF AGGREGATE FOREIGN E&P DEFICIT.— 
The aggregate foreign E&P deficit of any United States share-
holder shall be allocated among the deferred foreign income 
corporations of such United States shareholder in an amount 
which bears the same proportion to such aggregate as— 
‘‘(A) such United States shareholder’s pro rata share 
of the accumulated post-1986 deferred foreign income of 
each such deferred foreign income corporation, bears to 
‘‘(B) the aggregate of such United States shareholder’s 
pro rata share of the accumulated post-1986 deferred for-
eign income of all deferred foreign income corporations 
of such United States shareholder. 
‘‘(3) DEFINITIONS RELATED TO E&P DEFICITS.—For purposes 
of this subsection— 
‘‘(A) AGGREGATE FOREIGN E&P DEFICIT.— 
‘‘(i) IN GENERAL.—The term ‘aggregate foreign E&P 
deficit’ means, with respect to any United States share-
holder, the lesser of— 
‘‘(I) the aggregate of such shareholder’s pro 
rata shares of the specified E&P deficits of the
H. R. 1—143 
E&P deficit foreign corporations of such share-
holder, or 
‘‘(II) the amount determined under paragraph 
(2)(B). 
‘‘(ii) ALLOCATION
OF
DEFICIT.—If the amount 
described in clause (i)(II) is less than the amount 
described in clause (i)(I), then the shareholder shall 
designate, in such form and manner as the Secretary 
determines— 
‘‘(I) the amount of the specified E&P deficit 
which is to be taken into account for each E&P 
deficit corporation with respect to the taxpayer, 
and 
‘‘(II) in the case of an E&P deficit corporation 
which has a qualified deficit (as defined in section 
952), the portion (if any) of the deficit taken into 
account under subclause (I) which is attributable 
to a qualified deficit, including the qualified activi-
ties to which such portion is attributable. 
‘‘(B) E&P DEFICIT FOREIGN CORPORATION.—The term 
‘E&P deficit foreign corporation’ means, with respect to 
any taxpayer, any specified foreign corporation with respect 
to which such taxpayer is a United States shareholder, 
if, as of November 2, 2017— 
‘‘(i) such specified foreign corporation has a deficit 
in post-1986 earnings and profits, 
‘‘(ii) such corporation was a specified foreign cor-
poration, and 
‘‘(iii) such taxpayer was a United States share-
holder of such corporation. 
‘‘(C) SPECIFIED E&P DEFICIT.—The term ‘specified E&P 
deficit’ means, with respect to any E&P deficit foreign 
corporation, the amount of the deficit referred to in 
subparagraph (B). 
‘‘(4) TREATMENT
OF
EARNINGS
AND
PROFITS
IN
FUTURE 
YEARS.— 
‘‘(A) REDUCED EARNINGS AND PROFITS TREATED AS PRE-
VIOUSLY TAXED INCOME WHEN DISTRIBUTED.—For purposes 
of applying section 959 in any taxable year beginning with 
the taxable year described in subsection (a), with respect 
to any United States shareholder of a deferred foreign 
income corporation, an amount equal to such shareholder’s 
reduction under paragraph (1) which is allocated to such 
deferred foreign income corporation under this subsection 
shall be treated as an amount which was included in the 
gross income of such United States shareholder under sec-
tion 951(a). 
‘‘(B) E&P DEFICITS.—For purposes of this title, with 
respect to any taxable year beginning with the taxable 
year described in subsection (a), a United States share-
holder’s pro rata share of the earnings and profits of any 
E&P deficit foreign corporation under this subsection shall 
be increased by the amount of the specified E&P deficit 
of such corporation taken into account by such shareholder 
under paragraph (1), and, for purposes of section 952, such 
increase shall be attributable to the same activity to which 
the deficit so taken into account was attributable.
H. R. 1—144 
‘‘(5) NETTING
AMONG
UNITED
STATES
SHAREHOLDERS
IN 
SAME AFFILIATED GROUP.— 
‘‘(A) IN GENERAL.—In the case of any affiliated group 
which includes at least one E&P net surplus shareholder 
and one E&P net deficit shareholder, the amount which 
would (but for this paragraph) be taken into account under 
section 951(a)(1) by reason of subsection (a) by each such 
E&P net surplus shareholder shall be reduced (but not 
below zero) by such shareholder’s applicable share of the 
affiliated group’s aggregate unused E&P deficit. 
‘‘(B) E&P NET SURPLUS SHAREHOLDER.—For purposes 
of this paragraph, the term ‘E&P net surplus shareholder’ 
means any United States shareholder which would (deter-
mined without regard to this paragraph) take into account 
an amount greater than zero under section 951(a)(1) by 
reason of subsection (a). 
‘‘(C) E&P NET DEFICIT SHAREHOLDER.—For purposes 
of this paragraph, the term ‘E&P net deficit shareholder’ 
means any United States shareholder if— 
‘‘(i) the aggregate foreign E&P deficit with respect 
to such shareholder (as defined in paragraph (3)(A) 
without regard to clause (i)(II) thereof), exceeds 
‘‘(ii) the amount which would (but for this sub-
section) be taken into account by such shareholder 
under section 951(a)(1) by reason of subsection (a). 
‘‘(D) AGGREGATE UNUSED E&P DEFICIT.—For purposes 
of this paragraph— 
‘‘(i) IN
GENERAL.—The term ‘aggregate unused 
E&P deficit’ means, with respect to any affiliated 
group, the lesser of— 
‘‘(I) the sum of the excesses described in 
subparagraph (C), determined with respect to each 
E&P net deficit shareholder in such group, or 
‘‘(II) the amount determined under subpara-
graph (E)(ii). 
‘‘(ii) REDUCTION WITH RESPECT TO E&P NET DEFICIT 
SHAREHOLDERS WHICH ARE NOT WHOLLY OWNED BY THE 
AFFILIATED GROUP.—If the group ownership percentage 
of any E&P net deficit shareholder is less than 100 
percent, the amount of the excess described in subpara-
graph (C) which is taken into account under clause 
(i)(I) with respect to such E&P net deficit shareholder 
shall be such group ownership percentage of such 
amount. 
‘‘(E) APPLICABLE SHARE.—For purposes of this para-
graph, the term ‘applicable share’ means, with respect to 
any E&P net surplus shareholder in any affiliated group, 
the amount which bears the same proportion to such 
group’s aggregate unused E&P deficit as— 
‘‘(i) the product of— 
‘‘(I) 
such 
shareholder’s 
group 
ownership 
percentage, multiplied by 
‘‘(II) the amount which would (but for this 
paragraph) be taken into account under section 
951(a)(1) by reason of subsection (a) by such share-
holder, bears to
H. R. 1—145 
‘‘(ii) the aggregate amount determined under 
clause (i) with respect to all E&P net surplus share-
holders in such group. 
‘‘(F) GROUP OWNERSHIP PERCENTAGE.—For purposes of 
this paragraph, the term ‘group ownership percentage’ 
means, with respect to any United States shareholder in 
any affiliated group, the percentage of the value of the 
stock of such United States shareholder which is held 
by other includible corporations in such affiliated group. 
Notwithstanding the preceding sentence, the group owner-
ship percentage of the common parent of the affiliated 
group is 100 percent. Any term used in this subparagraph 
which is also used in section 1504 shall have the same 
meaning as when used in such section. 
‘‘(c) APPLICATION OF PARTICIPATION EXEMPTION TO INCLUDED 
INCOME.— 
‘‘(1) IN GENERAL.—In the case of a United States share-
holder of a deferred foreign income corporation, there shall 
be allowed as a deduction for the taxable year in which an 
amount is included in the gross income of such United States 
shareholder under section 951(a)(1) by reason of this section 
an amount equal to the sum of— 
‘‘(A) the United States shareholder’s 8 percent rate 
equivalent percentage of the excess (if any) of— 
‘‘(i) the amount so included as gross income, over 
‘‘(ii) the amount of such United States share-
holder’s aggregate foreign cash position, plus 
‘‘(B) the United States shareholder’s 15.5 percent rate 
equivalent percentage of so much of the amount described 
in subparagraph (A)(ii) as does not exceed the amount 
described in subparagraph (A)(i). 
‘‘(2) 8 AND 15.5 PERCENT RATE EQUIVALENT PERCENTAGES.— 
For purposes of this subsection— 
‘‘(A) 8 PERCENT RATE EQUIVALENT PERCENTAGE.—The 
term ‘8 percent rate equivalent percentage’ means, with 
respect to any United States shareholder for any taxable 
year, the percentage which would result in the amount 
to which such percentage applies being subject to a 8 
percent rate of tax determined by only taking into account 
a deduction equal to such percentage of such amount and 
the highest rate of tax specified in section 11 for such 
taxable year. In the case of any taxable year of a United 
States shareholder to which section 15 applies, the highest 
rate of tax under section 11 before the effective date of 
the change in rates and the highest rate of tax under 
section 11 after the effective date of such change shall 
each be taken into account under the preceding sentence 
in the same proportions as the portion of such taxable 
year which is before and after such effective date, respec-
tively. 
‘‘(B) 15.5 PERCENT RATE EQUIVALENT PERCENTAGE.— 
The term ‘15.5 percent rate equivalent percentage’ means, 
with respect to any United States shareholder for any 
taxable year, the percentage determined under subpara-
graph (A) applied by substituting ‘15.5 percent rate of 
tax’ for ‘8 percent rate of tax’.
H. R. 1—146 
‘‘(3) AGGREGATE FOREIGN CASH POSITION.—For purposes of 
this subsection— 
‘‘(A) IN GENERAL.—The term ‘aggregate foreign cash 
position’ means, with respect to any United States share-
holder, the greater of— 
‘‘(i) the aggregate of such United States share-
holder’s pro rata share of the cash position of each 
specified foreign corporation of such United States 
shareholder determined as of the close of the last tax-
able year of such specified foreign corporation which 
begins before January 1, 2018, or 
‘‘(ii) one half of the sum of— 
‘‘(I) the aggregate described in clause (i) deter-
mined as of the close of the last taxable year 
of each such specified foreign corporation which 
ends before November 2, 2017, plus 
‘‘(II) the aggregate described in clause (i) deter-
mined as of the close of the taxable year of each 
such specified foreign corporation which precedes 
the taxable year referred to in subclause (I). 
‘‘(B) CASH POSITION.—For purposes of this paragraph, 
the cash position of any specified foreign corporation is 
the sum of— 
‘‘(i) cash held by such foreign corporation, 
‘‘(ii) the net accounts receivable of such foreign 
corporation, plus 
‘‘(iii) the fair market value of the following assets 
held by such corporation: 
‘‘(I) Personal property which is of a type that 
is actively traded and for which there is an estab-
lished financial market. 
‘‘(II) Commercial paper, certificates of deposit, 
the securities of the Federal government and of 
any State or foreign government. 
‘‘(III) Any foreign currency. 
‘‘(IV) Any obligation with a term of less than 
one year. 
‘‘(V) Any asset which the Secretary identifies 
as being economically equivalent to any asset 
described in this subparagraph. 
‘‘(C) NET ACCOUNTS RECEIVABLE.—For purposes of this 
paragraph, the term ‘net accounts receivable’ means, with 
respect to any specified foreign corporation, the excess (if 
any) of— 
‘‘(i) such corporation’s accounts receivable, over 
‘‘(ii) such corporation’s accounts payable (deter-
mined consistent with the rules of section 461). 
‘‘(D) PREVENTION OF DOUBLE COUNTING.—Cash posi-
tions of a specified foreign corporation described in clause 
(ii), (iii)(I), or (iii)(IV) of subparagraph (B) shall not be 
taken into account by a United States shareholder under 
subparagraph (A) to the extent that such United States 
shareholder demonstrates to the satisfaction of the Sec-
retary that such amount is so taken into account by such 
United States shareholder with respect to another specified 
foreign corporation.
H. R. 1—147 
‘‘(E) CASH POSITIONS OF CERTAIN NON-CORPORATE ENTI-
TIES TAKEN INTO ACCOUNT.—An entity (other than a cor-
poration) shall be treated as a specified foreign corporation 
of a United States shareholder for purposes of determining 
such United States shareholder’s aggregate foreign cash 
position if any interest in such entity is held by a specified 
foreign corporation of such United States shareholder 
(determined after application of this subparagraph) and 
such entity would be a specified foreign corporation of 
such United States shareholder if such entity were a foreign 
corporation. 
‘‘(F) ANTI-ABUSE.—If the Secretary determines that a 
principal purpose of any transaction was to reduce the 
aggregate foreign cash position taken into account under 
this subsection, such transaction shall be disregarded for 
purposes of this subsection. 
‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; ACCUMULATED 
POST-1986 DEFERRED FOREIGN INCOME.—For purposes of this sec-
tion— 
‘‘(1) DEFERRED FOREIGN INCOME CORPORATION.—The term 
‘deferred foreign income corporation’ means, with respect to 
any United States shareholder, any specified foreign corporation 
of such United States shareholder which has accumulated post- 
1986 deferred foreign income (as of the date referred to in 
paragraph (1) or (2) of subsection (a)) greater than zero. 
‘‘(2) ACCUMULATED POST-1986 DEFERRED FOREIGN INCOME.— 
The term ‘accumulated post-1986 deferred foreign income’ 
means the post-1986 earnings and profits except to the extent 
such earnings— 
‘‘(A) are attributable to income of the specified foreign 
corporation which is effectively connected with the conduct 
of a trade or business within the United States and subject 
to tax under this chapter, or 
‘‘(B) in the case of a controlled foreign corporation, 
if distributed, would be excluded from the gross income 
of a United States shareholder under section 959. 
To the extent provided in regulations or other guidance pre-
scribed by the Secretary, in the case of any controlled foreign 
corporation which has shareholders which are not United States 
shareholders, accumulated post-1986 deferred foreign income 
shall be appropriately reduced by amounts which would be 
described in subparagraph (B) if such shareholders were United 
States shareholders. 
‘‘(3) POST-1986 EARNINGS AND PROFITS.—The term ‘post-1986 
earnings and profits’ means the earnings and profits of the 
foreign corporation (computed in accordance with sections 
964(a) and 986, and by only taking into account periods when 
the foreign corporation was a specified foreign corporation) 
accumulated in taxable years beginning after December 31, 
1986, and determined— 
‘‘(A) as of the date referred to in paragraph (1) or 
(2) of subsection (a), whichever is applicable with respect 
to such foreign corporation, and 
‘‘(B) without diminution by reason of dividends distrib-
uted during the taxable year described in subsection (a) 
other than dividends distributed to another specified for-
eign corporation.
H. R. 1—148 
‘‘(e) SPECIFIED FOREIGN CORPORATION.— 
‘‘(1) IN GENERAL.—For purposes of this section, the term 
‘specified foreign corporation’ means— 
‘‘(A) any controlled foreign corporation, and 
‘‘(B) any foreign corporation with respect to which one 
or more domestic corporations is a United States share-
holder. 
‘‘(2) APPLICATION TO CERTAIN FOREIGN CORPORATIONS.—For 
purposes of sections 951 and 961, a foreign corporation 
described in paragraph (1)(B) shall be treated as a controlled 
foreign corporation solely for purposes of taking into account 
the subpart F income of such corporation under subsection 
(a) (and for purposes of applying subsection (f)). 
‘‘(3) EXCLUSION OF PASSIVE FOREIGN INVESTMENT COMPA-
NIES.—Such term shall not include any corporation which is 
a passive foreign investment company (as defined in section 
1297) with respect to the shareholder and which is not a 
controlled foreign corporation. 
‘‘(f) DETERMINATIONS OF PRO RATA SHARE.— 
‘‘(1) IN GENERAL.—For purposes of this section, the deter-
mination of any United States shareholder’s pro rata share 
of any amount with respect to any specified foreign corporation 
shall be determined under rules similar to the rules of section 
951(a)(2) by treating such amount in the same manner as 
subpart F income (and by treating such specified foreign cor-
poration as a controlled foreign corporation). 
‘‘(2) SPECIAL RULES.—The portion which is included in the 
income of a United States shareholder under section 951(a)(1) 
by reason of subsection (a) which is equal to the deduction 
allowed under subsection (c) by reason of such inclusion— 
‘‘(A) shall be treated as income exempt from tax for 
purposes of sections 705(a)(1)(B) and 1367(a)(1)(A), and 
‘‘(B) shall not be treated as income exempt from tax 
for purposes of determining whether an adjustment shall 
be made to an accumulated adjustment account under sec-
tion 1368(e)(1)(A). 
‘‘(g) DISALLOWANCE OF FOREIGN TAX CREDIT, ETC.— 
‘‘(1) IN GENERAL.—No credit shall be allowed under section 
901 for the applicable percentage of any taxes paid or accrued 
(or treated as paid or accrued) with respect to any amount 
for which a deduction is allowed under this section. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes of this sub-
section, the term ‘applicable percentage’ means the amount 
(expressed as a percentage) equal to the sum of— 
‘‘(A) 0.771 multiplied by the ratio of— 
‘‘(i) the excess to which subsection (c)(1)(A) applies, 
divided by 
‘‘(ii) the sum of such excess plus the amount to 
which subsection (c)(1)(B) applies, plus 
‘‘(B) 0.557 multiplied by the ratio of— 
‘‘(i) the amount to which subsection (c)(1)(B) 
applies, divided by 
‘‘(ii) the sum described in subparagraph (A)(ii). 
‘‘(3) DENIAL OF DEDUCTION.—No deduction shall be allowed 
under this chapter for any tax for which credit is not allowable 
under section 901 by reason of paragraph (1) (determined by
H. R. 1—149 
treating the taxpayer as having elected the benefits of subpart 
A of part III of subchapter N). 
‘‘(4) COORDINATION WITH SECTION 78.—With respect to the 
taxes treated as paid or accrued by a domestic corporation 
with respect to amounts which are includible in gross income 
of such domestic corporation by reason of this section, section 
78 shall apply only to so much of such taxes as bears the 
same proportion to the amount of such taxes as— 
‘‘(A) the excess of— 
‘‘(i) the amounts which are includible in gross 
income of such domestic corporation by reason of this 
section, over 
‘‘(ii) the deduction allowable under subsection (c) 
with respect to such amounts, bears to 
‘‘(B) such amounts. 
‘‘(h) ELECTION TO PAY LIABILITY IN INSTALLMENTS.— 
‘‘(1) IN GENERAL.—In the case of a United States share-
holder of a deferred foreign income corporation, such United 
States shareholder may elect to pay the net tax liability under 
this section in 8 installments of the following amounts: 
‘‘(A) 8 percent of the net tax liability in the case of 
each of the first 5 of such installments, 
‘‘(B) 15 percent of the net tax liability in the case 
of the 6th such installment, 
‘‘(C) 20 percent of the net tax liability in the case 
of the 7th such installment, and 
‘‘(D) 25 percent of the net tax liability in the case 
of the 8th such installment. 
‘‘(2) DATE FOR PAYMENT OF INSTALLMENTS.—If an election 
is made under paragraph (1), the first installment shall be 
paid on the due date (determined without regard to any exten-
sion of time for filing the return) for the return of tax for 
the taxable year described in subsection (a) and each succeeding 
installment shall be paid on the due date (as so determined) 
for the return of tax for the taxable year following the taxable 
year with respect to which the preceding installment was made. 
‘‘(3) ACCELERATION OF PAYMENT.—If there is an addition 
to tax for failure to timely pay any installment required under 
this subsection, a liquidation or sale of substantially all the 
assets of the taxpayer (including in a title 11 or similar case), 
a cessation of business by the taxpayer, or any similar cir-
cumstance, then the unpaid portion of all remaining install-
ments shall be due on the date of such event (or in the case 
of a title 11 or similar case, the day before the petition is 
filed). The preceding sentence shall not apply to the sale of 
substantially all the assets of a taxpayer to a buyer if such 
buyer enters into an agreement with the Secretary under which 
such buyer is liable for the remaining installments due under 
this subsection in the same manner as if such buyer were 
the taxpayer. 
‘‘(4) PRORATION OF DEFICIENCY TO INSTALLMENTS.—If an 
election is made under paragraph (1) to pay the net tax liability 
under this section in installments and a deficiency has been 
assessed with respect to such net tax liability, the deficiency 
shall be prorated to the installments payable under paragraph 
(1). The part of the deficiency so prorated to any installment 
the date for payment of which has not arrived shall be collected
H. R. 1—150 
at the same time as, and as a part of, such installment. The 
part of the deficiency so prorated to any installment the date 
for payment of which has arrived shall be paid upon notice 
and demand from the Secretary. This subsection shall not apply 
if the deficiency is due to negligence, to intentional disregard 
of rules and regulations, or to fraud with intent to evade 
tax. 
‘‘(5) ELECTION.—Any election under paragraph (1) shall 
be made not later than the due date for the return of tax 
for the taxable year described in subsection (a) and shall be 
made in such manner as the Secretary shall provide. 
‘‘(6) NET TAX LIABILITY UNDER THIS SECTION.—For purposes 
of this subsection— 
‘‘(A) IN GENERAL.—The net tax liability under this sec-
tion with respect to any United States shareholder is the 
excess (if any) of— 
‘‘(i) such taxpayer’s net income tax for the taxable 
year in which an amount is included in the gross 
income of such United States shareholder under section 
951(a)(1) by reason of this section, over 
‘‘(ii) such taxpayer’s net income tax for such tax-
able year determined— 
‘‘(I) without regard to this section, and 
‘‘(II) without regard to any income or deduction 
properly attributable to a dividend received by 
such United States shareholder from any deferred 
foreign income corporation. 
‘‘(B) NET
INCOME
TAX.—The term ‘net income tax’ 
means the regular tax liability reduced by the credits 
allowed under subparts A, B, and D of part IV of subchapter 
A. 
‘‘(i) SPECIAL RULES FOR S CORPORATION SHAREHOLDERS.— 
‘‘(1) IN GENERAL.—In the case of any S corporation which 
is a United States shareholder of a deferred foreign income 
corporation, each shareholder of such S corporation may elect 
to defer payment of such shareholder’s net tax liability under 
this section with respect to such S corporation until the share-
holder’s taxable year which includes the triggering event with 
respect to such liability. Any net tax liability payment of which 
is deferred under the preceding sentence shall be assessed 
on the return of tax as an addition to tax in the shareholder’s 
taxable year which includes such triggering event. 
‘‘(2) TRIGGERING EVENT.— 
‘‘(A) IN GENERAL.—In the case of any shareholder’s 
net tax liability under this section with respect to any 
S corporation, the triggering event with respect to such 
liability is whichever of the following occurs first: 
‘‘(i) Such corporation ceases to be an S corporation 
(determined as of the first day of the first taxable 
year that such corporation is not an S corporation). 
‘‘(ii) A liquidation or sale of substantially all the 
assets of such S corporation (including in a title 11 
or similar case), a cessation of business by such S 
corporation, such S corporation ceases to exist, or any 
similar circumstance.
H. R. 1—151 
‘‘(iii) A transfer of any share of stock in such 
S corporation by the taxpayer (including by reason 
of death, or otherwise). 
‘‘(B) PARTIAL
TRANSFERS
OF
STOCK.—In the case of 
a transfer of less than all of the taxpayer’s shares of stock 
in the S corporation, such transfer shall only be a triggering 
event with respect to so much of the taxpayer’s net tax 
liability under this section with respect to such S corpora-
tion as is properly allocable to such stock. 
‘‘(C) TRANSFER OF LIABILITY.—A transfer described in 
clause (iii) of subparagraph (A) shall not be treated as 
a triggering event if the transferee enters into an agree-
ment with the Secretary under which such transferee is 
liable for net tax liability with respect to such stock in 
the same manner as if such transferee were the taxpayer. 
‘‘(3) NET TAX LIABILITY.—A shareholder’s net tax liability 
under this section with respect to any S corporation is the 
net tax liability under this section which would be determined 
under subsection (h)(6) if the only subpart F income taken 
into account by such shareholder by reason of this section 
were allocations from such S corporation. 
‘‘(4) ELECTION
TO
PAY
DEFERRED
LIABILITY
IN
INSTALL-
MENTS.—In the case of a taxpayer which elects to defer payment 
under paragraph (1)— 
‘‘(A) subsection (h) shall be applied separately with 
respect to the liability to which such election applies, 
‘‘(B) an election under subsection (h) with respect to 
such liability shall be treated as timely made if made 
not later than the due date for the return of tax for the 
taxable year in which the triggering event with respect 
to such liability occurs, 
‘‘(C) the first installment under subsection (h) with 
respect to such liability shall be paid not later than such 
due date (but determined without regard to any extension 
of time for filing the return), and 
‘‘(D) if the triggering event with respect to any net 
tax liability is described in paragraph (2)(A)(ii), an election 
under subsection (h) with respect to such liability may 
be made only with the consent of the Secretary. 
‘‘(5) JOINT AND SEVERAL LIABILITY OF S CORPORATION.— 
If any shareholder of an S corporation elects to defer payment 
under paragraph (1), such S corporation shall be jointly and 
severally liable for such payment and any penalty, addition 
to tax, or additional amount attributable thereto. 
‘‘(6) EXTENSION
OF
LIMITATION
ON
COLLECTION.—Any 
limitation on the time period for the collection of a liability 
deferred under this subsection shall not be treated as beginning 
before the date of the triggering event with respect to such 
liability. 
‘‘(7) ANNUAL REPORTING OF NET TAX LIABILITY.— 
‘‘(A) IN GENERAL.—Any shareholder of an S corporation 
which makes an election under paragraph (1) shall report 
the amount of such shareholder’s deferred net tax liability 
on such shareholder’s return of tax for the taxable year 
for which such election is made and on the return of 
tax for each taxable year thereafter until such amount 
has been fully assessed on such returns.
H. R. 1—152 
‘‘(B) DEFERRED NET TAX LIABILITY.—For purposes of 
this paragraph, the term ‘deferred net tax liability’ means, 
with respect to any taxable year, the amount of net tax 
liability payment of which has been deferred under para-
graph (1) and which has not been assessed on a return 
of tax for any prior taxable year. 
‘‘(C) FAILURE TO REPORT.—In the case of any failure 
to report any amount required to be reported under 
subparagraph (A) with respect to any taxable year before 
the due date for the return of tax for such taxable year, 
there shall be assessed on such return as an addition 
to tax 5 percent of such amount. 
‘‘(8) ELECTION.—Any election under paragraph (1)— 
‘‘(A) shall be made by the shareholder of the S corpora-
tion not later than the due date for such shareholder’s 
return of tax for the taxable year which includes the close 
of the taxable year of such S corporation in which the 
amount described in subsection (a) is taken into account, 
and 
‘‘(B) shall be made in such manner as the Secretary 
shall provide. 
‘‘(j) REPORTING BY S CORPORATION.—Each S corporation which 
is a United States shareholder of a specified foreign corporation 
shall report in its return of tax under section 6037(a) the amount 
includible in its gross income for such taxable year by reason 
of this section and the amount of the deduction allowable by sub-
section (c). Any copy provided to a shareholder under section 6037(b) 
shall include a statement of such shareholder’s pro rata share 
of such amounts. 
‘‘(k) EXTENSION
OF LIMITATION
ON ASSESSMENT.—Notwith-
standing section 6501, the limitation on the time period for the 
assessment of the net tax liability under this section (as defined 
in subsection (h)(6)) shall not expire before the date that is 6 
years after the return for the taxable year described in such sub-
section was filed. 
‘‘(l) RECAPTURE FOR EXPATRIATED ENTITIES.— 
‘‘(1) IN GENERAL.—If a deduction is allowed under sub-
section (c) to a United States shareholder and such shareholder 
first becomes an expatriated entity at any time during the 
10-year period beginning on the date of the enactment of the 
Tax Cuts and Jobs Act (with respect to a surrogate foreign 
corporation which first becomes a surrogate foreign corporation 
during such period), then— 
‘‘(A) the tax imposed by this chapter shall be increased 
for the first taxable year in which such taxpayer becomes 
an expatriated entity by an amount equal to 35 percent 
of the amount of the deduction allowed under subsection 
(c), and 
‘‘(B) no credits shall be allowed against the increase 
in tax under subparagraph (A). 
‘‘(2) EXPATRIATED ENTITY.—For purposes of this subsection, 
the term ‘expatriated entity’ has the same meaning given such 
term under section 7874(a)(2), except that such term shall 
not include an entity if the surrogate foreign corporation with 
respect to the entity is treated as a domestic corporation under 
section 7874(b).
H. R. 1—153 
‘‘(3) SURROGATE FOREIGN CORPORATION.—For purposes of 
this subsection, the term ‘surrogate foreign corporation’ has 
the meaning given such term in section 7874(a)(2)(B). 
‘‘(m) SPECIAL RULES FOR UNITED STATES SHAREHOLDERS WHICH 
ARE REAL ESTATE INVESTMENT TRUSTS.— 
‘‘(1) IN GENERAL.—If a real estate investment trust is a 
United States shareholder in 1 or more deferred foreign income 
corporations— 
‘‘(A) any amount required to be taken into account 
under section 951(a)(1) by reason of this section shall not 
be taken into account as gross income of the real estate 
investment trust for purposes of applying paragraphs (2) 
and (3) of section 856(c) to any taxable year for which 
such amount is taken into account under section 951(a)(1), 
and 
‘‘(B) if the real estate investment trust elects the 
application of this subparagraph, notwithstanding sub-
section (a), any amount required to be taken into account 
under section 951(a)(1) by reason of this section shall, 
in lieu of the taxable year in which it would otherwise 
be included in gross income (for purposes of the computa-
tion of real estate investment trust taxable income under 
section 857(b)), be included in gross income as follows: 
‘‘(i) 8 percent of such amount in the case of each 
of the taxable years in the 5-taxable year period begin-
ning with the taxable year in which such amount would 
otherwise be included. 
‘‘(ii) 15 percent of such amount in the case of 
the 1st taxable year following such period. 
‘‘(iii) 20 percent of such amount in the case of 
the 2nd taxable year following such period. 
‘‘(iv) 25 percent of such amount in the case of 
the 3rd taxable year following such period. 
‘‘(2) RULES FOR TRUSTS ELECTING DEFERRED INCLUSION.— 
‘‘(A) ELECTION.—Any election under paragraph (1)(B) 
shall be made not later than the due date for the first 
taxable year in the 5-taxable year period described in clause 
(i) of paragraph (1)(B) and shall be made in such manner 
as the Secretary shall provide. 
‘‘(B) SPECIAL RULES.—If an election under paragraph 
(1)(B) is in effect with respect to any real estate investment 
trust, the following rules shall apply: 
‘‘(i) APPLICATION OF PARTICIPATION EXEMPTION.— 
For purposes of subsection (c)(1)— 
‘‘(I) the aggregate amount to which subpara-
graph (A) or (B) of subsection (c)(1) applies shall 
be determined without regard to the election, 
‘‘(II) each such aggregate amount shall be allo-
cated to each taxable year described in paragraph 
(1)(B) in the same proportion as the amount 
included in the gross income of such United States 
shareholder under section 951(a)(1) by reason of 
this section is allocated to each such taxable year. 
‘‘(III) NO INSTALLMENT PAYMENTS.—The real 
estate investment trust may not make an election 
under subsection (g) for any taxable year described 
in paragraph (1)(B).
H. R. 1—154 
‘‘(ii) ACCELERATION OF INCLUSION.—If there is a 
liquidation or sale of substantially all the assets of 
the real estate investment trust (including in a title 
11 or similar case), a cessation of business by such 
trust, or any similar circumstance, then any amount 
not yet included in gross income under paragraph 
(1)(B) shall be included in gross income as of the day 
before the date of the event and the unpaid portion 
of any tax liability with respect to such inclusion shall 
be due on the date of such event (or in the case of 
a title 11 or similar case, the day before the petition 
is filed). 
‘‘(n) ELECTION NOT TO APPLY NET OPERATING LOSS DEDUC-
TION.— 
‘‘(1) IN
GENERAL.—If a United States shareholder of a 
deferred foreign income corporation elects the application of 
this subsection for the taxable year described in subsection 
(a), then the amount described in paragraph (2) shall not be 
taken into account— 
‘‘(A) in determining the amount of the net operating 
loss deduction under section 172 of such shareholder for 
such taxable year, or 
‘‘(B) in determining the amount of taxable income for 
such taxable year which may be reduced by net operating 
loss carryovers or carrybacks to such taxable year under 
section 172. 
‘‘(2) AMOUNT DESCRIBED.—The amount described in this 
paragraph is the sum of— 
‘‘(A) the amount required to be taken into account 
under section 951(a)(1) by reason of this section (deter-
mined after the application of subsection (c)), plus 
‘‘(B) in the case of a domestic corporation which chooses 
to have the benefits of subpart A of part III of subchapter 
N for the taxable year, the taxes deemed to be paid by 
such corporation under subsections (a) and (b) of section 
960 for such taxable year with respect to the amount 
described in subparagraph (A) which are treated as a divi-
dends under section 78. 
‘‘(3) ELECTION.—Any election under this subsection shall 
be made not later than the due date (including extensions) 
for filing the return of tax for the taxable year and shall 
be made in such manner as the Secretary shall prescribe. 
‘‘(o) REGULATIONS.—The Secretary shall prescribe such regula-
tions or other guidance as may be necessary or appropriate to 
carry out the provisions of this section, including— 
‘‘(1) regulations or other guidance to provide appropriate 
basis adjustments, and 
‘‘(2) regulations or other guidance to prevent the avoidance 
of the purposes of this section, including through a reduction 
in earnings and profits, through changes in entity classification 
or accounting methods, or otherwise.’’.
H. R. 1—155 
(b) CLERICAL AMENDMENT.—The table of sections for subpart 
F of part III of subchapter N of chapter 1 is amended by striking 
the item relating to section 965 and inserting the following: 
‘‘Sec. 965. Treatment of deferred foreign income upon transition to participation ex-
emption system of taxation.’’. 
Subpart B—Rules Related to Passive and Mobile 
Income 
CHAPTER 1—TAXATION OF FOREIGN-DERIVED INTAN-
GIBLE INCOME AND GLOBAL INTANGIBLE LOW-TAXED 
INCOME 
SEC. 14201. CURRENT YEAR INCLUSION OF GLOBAL INTANGIBLE LOW- 
TAXED INCOME BY UNITED STATES SHAREHOLDERS. 
(a) IN GENERAL.—Subpart F of part III of subchapter N of 
chapter 1 is amended by inserting after section 951 the following 
new section: 
‘‘SEC. 951A. GLOBAL INTANGIBLE LOW-TAXED INCOME INCLUDED IN 
GROSS INCOME OF UNITED STATES SHAREHOLDERS. 
‘‘(a) IN GENERAL.—Each person who is a United States share-
holder of any controlled foreign corporation for any taxable year 
of such United States shareholder shall include in gross income 
such shareholder’s global intangible low-taxed income for such tax-
able year. 
‘‘(b) GLOBAL INTANGIBLE LOW-TAXED INCOME.—For purposes 
of this section— 
‘‘(1) IN GENERAL.—The term ‘global intangible low-taxed 
income’ means, with respect to any United States shareholder 
for any taxable year of such United States shareholder, the 
excess (if any) of— 
‘‘(A) such shareholder’s net CFC tested income for such 
taxable year, over 
‘‘(B) such shareholder’s net deemed tangible income 
return for such taxable year. 
‘‘(2) NET DEEMED TANGIBLE INCOME RETURN.—The term 
‘net deemed tangible income return’ means, with respect to 
any United States shareholder for any taxable year, the excess 
of— 
‘‘(A) 10 percent of the aggregate of such shareholder’s 
pro rata share of the qualified business asset investment 
of each controlled foreign corporation with respect to which 
such shareholder is a United States shareholder for such 
taxable year (determined for each taxable year of each 
such controlled foreign corporation which ends in or with 
such taxable year of such United States shareholder), over 
‘‘(B) the amount of interest expense taken into account 
under subsection (c)(2)(A)(ii) in determining the share-
holder’s net CFC tested income for the taxable year to 
the extent the interest income attributable to such expense 
is not taken into account in determining such shareholder’s 
net CFC tested income. 
‘‘(c) NET CFC TESTED INCOME.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘net CFC tested income’ means, 
with respect to any United States shareholder for any taxable
H. R. 1—156 
year of such United States shareholder, the excess (if any) 
of— 
‘‘(A) the aggregate of such shareholder’s pro rata share 
of the tested income of each controlled foreign corporation 
with respect to which such shareholder is a United States 
shareholder for such taxable year of such United States 
shareholder (determined for each taxable year of such con-
trolled foreign corporation which ends in or with such 
taxable year of such United States shareholder), over 
‘‘(B) the aggregate of such shareholder’s pro rata share 
of the tested loss of each controlled foreign corporation 
with respect to which such shareholder is a United States 
shareholder for such taxable year of such United States 
shareholder (determined for each taxable year of such con-
trolled foreign corporation which ends in or with such 
taxable year of such United States shareholder). 
‘‘(2) TESTED INCOME; TESTED LOSS.—For purposes of this 
section— 
‘‘(A) TESTED INCOME.—The term ‘tested income’ means, 
with respect to any controlled foreign corporation for any 
taxable year of such controlled foreign corporation, the 
excess (if any) of— 
‘‘(i) the gross income of such corporation deter-
mined without regard to— 
‘‘(I) any item of income described in section 
952(b), 
‘‘(II) any gross income taken into account in 
determining the subpart F income of such corpora-
tion, 
‘‘(III) any gross income excluded from the for-
eign base company income (as defined in section 
954) and the insurance income (as defined in sec-
tion 953) of such corporation by reason of section 
954(b)(4), 
‘‘(IV) any dividend received from a related per-
son (as defined in section 954(d)(3)), and 
‘‘(V) any foreign oil and gas extraction income 
(as defined in section 907(c)(1)) of such corporation, 
over 
‘‘(ii) the deductions (including taxes) properly allo-
cable to such gross income under rules similar to the 
rules of section 954(b)(5) (or to which such deductions 
would be allocable if there were such gross income). 
‘‘(B) TESTED LOSS.— 
‘‘(i) IN GENERAL.—The term ‘tested loss’ means, 
with respect to any controlled foreign corporation for 
any taxable year of such controlled foreign corporation, 
the excess (if any) of the amount described in subpara-
graph (A)(ii) over the amount described in subpara-
graph (A)(i). 
‘‘(ii) COORDINATION
WITH
SUBPART
F
TO
DENY 
DOUBLE BENEFIT OF LOSSES.—Section 952(c)(1)(A) shall 
be applied by increasing the earnings and profits of 
the controlled foreign corporation by the tested loss 
of such corporation. 
‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.—For purposes 
of this section—
H. R. 1—157 
‘‘(1) IN GENERAL.—The term ‘qualified business asset invest-
ment’ means, with respect to any controlled foreign corporation 
for any taxable year, the average of such corporation’s aggregate 
adjusted bases as of the close of each quarter of such taxable 
year in specified tangible property— 
‘‘(A) used in a trade or business of the corporation, 
and 
‘‘(B) of a type with respect to which a deduction is 
allowable under section 167. 
‘‘(2) SPECIFIED TANGIBLE PROPERTY.— 
‘‘(A) IN GENERAL.—The term ‘specified tangible prop-
erty’ means, except as provided in subparagraph (B), any 
tangible property used in the production of tested income. 
‘‘(B) DUAL USE PROPERTY.—In the case of property used 
both in the production of tested income and income which 
is not tested income, such property shall be treated as 
specified tangible property in the same proportion that 
the gross income described in subsection (c)(1)(A) produced 
with respect to such property bears to the total gross 
income produced with respect to such property. 
‘‘(3) DETERMINATION OF ADJUSTED BASIS.—For purposes of 
this subsection, notwithstanding any provision of this title (or 
any other provision of law) which is enacted after the date 
of the enactment of this section, the adjusted basis in any 
property shall be determined— 
‘‘(A) by using the alternative depreciation system under 
section 168(g), and 
‘‘(B) by allocating the depreciation deduction with 
respect to such property ratably to each day during the 
period in the taxable year to which such depreciation 
relates. 
‘‘(3) PARTNERSHIP
PROPERTY.—For purposes of this sub-
section, if a controlled foreign corporation holds an interest 
in a partnership at the close of such taxable year of the con-
trolled foreign corporation, such controlled foreign corporation 
shall take into account under paragraph (1) the controlled 
foreign corporation’s distributive share of the aggregate of the 
partnership’s adjusted bases (determined as of such date in 
the hands of the partnership) in tangible property held by 
such partnership to the extent such property— 
‘‘(A) is used in the trade or business of the partnership, 
‘‘(B) is of a type with respect to which a deduction 
is allowable under section 167, and 
‘‘(C) is used in the production of tested income (deter-
mined with respect to such controlled foreign corporation’s 
distributive share of income with respect to such property). 
For purposes of this paragraph, the controlled foreign corpora-
tion’s distributive share of the adjusted basis of any property 
shall be the controlled foreign corporation’s distributive share 
of income with respect to such property. 
‘‘(4) REGULATIONS.—The Secretary shall issue such regula-
tions or other guidance as the Secretary determines appropriate 
to prevent the avoidance of the purposes of this subsection, 
including regulations or other guidance which provide for the 
treatment of property if— 
‘‘(A) such property is transferred, or held, temporarily, 
or
H. R. 1—158 
‘‘(B) the avoidance of the purposes of this paragraph 
is a factor in the transfer or holding of such property. 
‘‘(e) DETERMINATION OF PRO RATA SHARE, ETC.—For purposes 
of this section— 
‘‘(1) IN GENERAL.—The pro rata shares referred to in sub-
sections (b), (c)(1)(A), and (c)(1)(B), respectively, shall be deter-
mined under the rules of section 951(a)(2) in the same manner 
as such section applies to subpart F income and shall be taken 
into account in the taxable year of the United States share-
holder in which or with which the taxable year of the controlled 
foreign corporation ends. 
‘‘(2) TREATMENT AS UNITED STATES SHAREHOLDER.—A per-
son shall be treated as a United States shareholder of a con-
trolled foreign corporation for any taxable year of such person 
only if such person owns (within the meaning of section 958(a)) 
stock in such foreign corporation on the last day in the taxable 
year of such foreign corporation on which such foreign corpora-
tion is a controlled foreign corporation. 
‘‘(3) TREATMENT AS CONTROLLED FOREIGN CORPORATION.— 
A foreign corporation shall be treated as a controlled foreign 
corporation for any taxable year if such foreign corporation 
is a controlled foreign corporation at any time during such 
taxable year. 
‘‘(f) TREATMENT
AS SUBPART F INCOME
FOR CERTAIN PUR-
POSES.— 
‘‘(1) IN GENERAL.— 
‘‘(A) APPLICATION.—Except as provided in subpara-
graph (B), any global intangible low-taxed income included 
in gross income under subsection (a) shall be treated in 
the same manner as an amount included under section 
951(a)(1)(A) for purposes of applying sections 168(h)(2)(B), 
535(b)(10), 851(b), 904(h)(1), 959, 961, 962, 993(a)(1)(E), 
996(f)(1), 
1248(b)(1), 
1248(d)(1), 
6501(e)(1)(C), 
6654(d)(2)(D), and 6655(e)(4). 
‘‘(B) EXCEPTION.—The Secretary shall provide rules for 
the application of subparagraph (A) to other provisions 
of this title in any case in which the determination of 
subpart F income is required to be made at the level 
of the controlled foreign corporation. 
‘‘(2) ALLOCATION OF GLOBAL INTANGIBLE LOW-TAXED INCOME 
TO CONTROLLED FOREIGN CORPORATIONS.—For purposes of the 
sections referred to in paragraph (1), with respect to any con-
trolled foreign corporation any pro rata amount from which 
is taken into account in determining the global intangible low- 
taxed income included in gross income of a United States 
shareholder under subsection (a), the portion of such global 
intangible low-taxed income which is treated as being with 
respect to such controlled foreign corporation is— 
‘‘(A) in the case of a controlled foreign corporation 
with no tested income, zero, and 
‘‘(B) in the case of a controlled foreign corporation 
with tested income, the portion of such global intangible 
low-taxed income which bears the same ratio to such global 
intangible low-taxed income as— 
‘‘(i) such United States shareholder’s pro rata 
amount of the tested income of such controlled foreign 
corporation, bears to
H. R. 1—159 
‘‘(ii) the aggregate amount described in subsection 
(c)(1)(A) with respect to such United States share-
holder.’’. 
(b) FOREIGN TAX CREDIT.— 
(1) APPLICATION OF DEEMED PAID FOREIGN TAX CREDIT.— 
Section 960 is amended adding at the end the following new 
subsection: 
‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY ATTRIBUTABLE 
TO TESTED INCOME.— 
‘‘(1) IN GENERAL.—For purposes of subpart A of this part, 
if any amount is includible in the gross income of a domestic 
corporation under section 951A, such domestic corporation shall 
be deemed to have paid foreign income taxes equal to 80 percent 
of the product of— 
‘‘(A) such domestic corporation’s inclusion percentage, 
multiplied by 
‘‘(B) the aggregate tested foreign income taxes paid 
or accrued by controlled foreign corporations. 
‘‘(2) INCLUSION PERCENTAGE.—For purposes of paragraph 
(1), the term ‘inclusion percentage’ means, with respect to any 
domestic corporation, the ratio (expressed as a percentage) 
of— 
‘‘(A) such corporation’s global intangible low-taxed 
income (as defined in section 951A(b)), divided by 
‘‘(B) the aggregate amount described in section 
951A(c)(1)(A) with respect to such corporation. 
‘‘(3) TESTED FOREIGN INCOME TAXES.—For purposes of para-
graph (1), the term ‘tested foreign income taxes’ means, with 
respect to any domestic corporation which is a United States 
shareholder of a controlled foreign corporation, the foreign 
income taxes paid or accrued by such foreign corporation which 
are properly attributable to the tested income of such foreign 
corporation taken into account by such domestic corporation 
under section 951A.’’. 
(2) APPLICATION OF FOREIGN TAX CREDIT LIMITATION.— 
(A) SEPARATE BASKET FOR GLOBAL INTANGIBLE LOW- 
TAXED INCOME.—Section 904(d)(1) is amended by redesig-
nating subparagraphs (A) and (B) as subparagraphs (B) 
and (C), respectively, and by inserting before subparagraph 
(B) (as so redesignated) the following new subparagraph: 
‘‘(A) any amount includible in gross income under sec-
tion 951A (other than passive category income),’’. 
(B) EXCLUSION
FROM
GENERAL
CATEGORY
INCOME.— 
Section 904(d)(2)(A)(ii) is amended by inserting ‘‘income 
described in paragraph (1)(A) and’’ before ‘‘passive category 
income’’. 
(C) NO CARRYOVER OR CARRYBACK OF EXCESS TAXES.— 
Section 904(c) is amended by adding at the end the fol-
lowing: ‘‘This subsection shall not apply to taxes paid or 
accrued with respect to amounts described in subsection 
(d)(1)(A).’’.
H. R. 1—160 
(c) CLERICAL AMENDMENT.—The table of sections for subpart 
F of part III of subchapter N of chapter 1 is amended by inserting 
after the item relating to section 951 the following new item: 
‘‘Sec. 951A. Global intangible low-taxed income included in gross income of United 
States shareholders.’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years of foreign corporations beginning after 
December 31, 2017, and to taxable years of United States share-
holders in which or with which such taxable years of foreign corpora-
tions end. 
SEC. 14202. DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME 
AND GLOBAL INTANGIBLE LOW-TAXED INCOME. 
(a) IN GENERAL.—Part VIII of subchapter B of chapter 1 is 
amended by adding at the end the following new section: 
‘‘SEC. 250. FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL 
INTANGIBLE LOW-TAXED INCOME. 
‘‘(a) ALLOWANCE OF DEDUCTION.— 
‘‘(1) IN GENERAL.—In the case of a domestic corporation 
for any taxable year, there shall be allowed as a deduction 
an amount equal to the sum of— 
‘‘(A) 37.5 percent of the foreign-derived intangible 
income of such domestic corporation for such taxable year, 
plus 
‘‘(B) 50 percent of— 
‘‘(i) the global intangible low-taxed income amount 
(if any) which is included in the gross income of such 
domestic corporation under section 951A for such tax-
able year, and 
‘‘(ii) the amount treated as a dividend received 
by such corporation under section 78 which is attrib-
utable to the amount described in clause (i). 
‘‘(2) LIMITATION BASED ON TAXABLE INCOME.— 
‘‘(A) IN GENERAL.—If, for any taxable year— 
‘‘(i) the sum of the foreign-derived intangible 
income and the global intangible low-taxed income 
amount otherwise taken into account by the domestic 
corporation under paragraph (1), exceeds 
‘‘(ii) the taxable income of the domestic corporation 
(determined without regard to this section), 
then the amount of the foreign-derived intangible income 
and the global intangible low-taxed income amount so 
taken into account shall be reduced as provided in subpara-
graph (B). 
‘‘(B) REDUCTION.—For purposes of subparagraph (A)— 
‘‘(i) foreign-derived intangible income shall be 
reduced by an amount which bears the same ratio 
to the excess described in subparagraph (A) as such 
foreign-derived intangible income bears to the sum 
described in subparagraph (A)(i), and 
‘‘(ii) the global intangible low-taxed income amount 
shall be reduced by the remainder of such excess. 
‘‘(3) REDUCTION IN DEDUCTION FOR TAXABLE YEARS AFTER 
2025.—In the case of any taxable year beginning after December 
31, 2025, paragraph (1) shall be applied by substituting—
H. R. 1—161 
‘‘(A) ‘21.875 percent’ for ‘37.5 percent’ in subparagraph 
(A), and 
‘‘(B) ‘37.5 percent’ for ‘50 percent’ in subparagraph 
(B). 
‘‘(b) FOREIGN-DERIVED INTANGIBLE INCOME.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The foreign-derived intangible income 
of any domestic corporation is the amount which bears the 
same ratio to the deemed intangible income of such corporation 
as— 
‘‘(A) the foreign-derived deduction eligible income of 
such corporation, bears to 
‘‘(B) the deduction eligible income of such corporation. 
‘‘(2) DEEMED
INTANGIBLE
INCOME.—For purposes of this 
subsection— 
‘‘(A) IN
GENERAL.—The term ‘deemed intangible 
income’ means the excess (if any) of— 
‘‘(i) the deduction eligible income of the domestic 
corporation, over 
‘‘(ii) the deemed tangible income return of the cor-
poration. 
‘‘(B) DEEMED
TANGIBLE
INCOME
RETURN.—The term 
‘deemed tangible income return’ means, with respect to 
any corporation, an amount equal to 10 percent of the 
corporation’s qualified business asset investment (as 
defined in section 951A(d), determined by substituting 
‘deduction eligible income’ for ‘tested income’ in paragraph 
(2) thereof and without regard to whether the corporation 
is a controlled foreign corporation). 
‘‘(3) DEDUCTION ELIGIBLE INCOME.— 
‘‘(A) IN GENERAL.—The term ‘deduction eligible income’ 
means, with respect to any domestic corporation, the excess 
(if any) of— 
‘‘(i) gross income of such corporation determined 
without regard to— 
‘‘(I) any amount included in the gross income 
of such corporation under section 951(a)(1), 
‘‘(II) the global intangible low-taxed income 
included in the gross income of such corporation 
under section 951A, 
‘‘(III) any financial services income (as defined 
in section 904(d)(2)(D)) of such corporation, 
‘‘(IV) any dividend received from a corporation 
which is a controlled foreign corporation of such 
domestic corporation, 
‘‘(V) any domestic oil and gas extraction 
income of such corporation, and 
‘‘(VI) any foreign branch income (as defined 
in section 904(d)(2)(J)), over 
‘‘(ii) the deductions (including taxes) properly allo-
cable to such gross income. 
‘‘(B) DOMESTIC OIL AND GAS EXTRACTION INCOME.—For 
purposes of subparagraph (A), the term ‘domestic oil and 
gas extraction income’ means income described in section 
907(c)(1), determined by substituting ‘within the United 
States’ for ‘without the United States’.
H. R. 1—162 
‘‘(4) FOREIGN-DERIVED DEDUCTION ELIGIBLE INCOME.—The 
term ‘foreign-derived deduction eligible income’ means, with 
respect to any taxpayer for any taxable year, any deduction 
eligible income of such taxpayer which is derived in connection 
with— 
‘‘(A) property— 
‘‘(i) which is sold by the taxpayer to any person 
who is not a United States person, and 
‘‘(ii) which the taxpayer establishes to the satisfac-
tion of the Secretary is for a foreign use, or 
‘‘(B) services provided by the taxpayer which the tax-
payer establishes to the satisfaction of the Secretary are 
provided to any person, or with respect to property, not 
located within the United States. 
‘‘(5) RULES RELATING TO FOREIGN USE PROPERTY OR SERV-
ICES.—For purposes of this subsection— 
‘‘(A) FOREIGN USE.—The term ‘foreign use’ means any 
use, consumption, or disposition which is not within the 
United States. 
‘‘(B) PROPERTY
OR
SERVICES
PROVIDED
TO
DOMESTIC 
INTERMEDIARIES.— 
‘‘(i) PROPERTY.—If a taxpayer sells property to 
another person (other than a related party) for further 
manufacture or other modification within the United 
States, such property shall not be treated as sold for 
a foreign use even if such other person subsequently 
uses such property for a foreign use. 
‘‘(ii) SERVICES.—If a taxpayer provides services to 
another person (other than a related party) located 
within the United States, such services shall not be 
treated as described in paragraph (4)(B) even if such 
other person uses such services in providing services 
which are so described. 
‘‘(C) SPECIAL RULES WITH RESPECT TO RELATED PARTY 
TRANSACTIONS.— 
‘‘(i) SALES TO RELATED PARTIES.—If property is sold 
to a related party who is not a United States person, 
such sale shall not be treated as for a foreign use 
unless— 
‘‘(I) such property is ultimately sold by a 
related party, or used by a related party in connec-
tion with property which is sold or the provision 
of services, to another person who is an unrelated 
party who is not a United States person, and 
‘‘(II) the taxpayer establishes to the satisfac-
tion of the Secretary that such property is for 
a foreign use. 
For purposes of this clause, a sale of property shall 
be treated as a sale of each of the components thereof. 
‘‘(ii) SERVICE PROVIDED TO RELATED PARTIES.—If 
a service is provided to a related party who is not 
located in the United States, such service shall not 
be treated described in subparagraph (A)(ii) unless the 
taxpayer established to the satisfaction of the Secretary 
that such service is not substantially similar to services 
provided by such related party to persons located 
within the United States.