SEC. 254. REPEAL OF DEDUCTION OF TUITION AND RE-
LATED EXPENSES. 
Effective for amounts paid after the date of the en-
actment of this Act, section 222 is repealed. 
SEC. 255. REPEAL OF GROSS INCOME EXCLUSION FOR 
UNITED STATES SAVINGS BONDS USED TO 
PAY HIGHER EDUCATION EXPENSES. 
Effective for taxable years beginning after the date 
of the enactment of this Act, section 135 is repealed. 
SEC. 256. ELIMINATION OF PERSONAL EXEMPTION FOR 
STUDENTS AGE 19 AND OLDER. 
(a) IN GENERAL.—Subparagraph (A) of section 
152(c)(3) is amended— 
(1) by striking clause (ii), 
(2) by striking ‘‘, or’’ at the end of clause (i) 
and inserting a period, and 
(3) by striking ‘‘child and’’ and all that follows 
through ‘‘(i) has not attained’’ and inserting ‘‘child 
and has not attained’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 257. ELIMINATION OF ABOVE THE LINE DEDUCTION 
FOR CERTAIN EXPENSES OF ELEMENTARY 
AND SECONDARY SCHOOL TEACHERS. 
(a) IN GENERAL.—Paragraph (2) of section 62(a) is 
amended by striking subparagraph (D) and by redesig-
nating subparagraph (E) as subparagraph (D). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 62 is amended by striking sub-
section (d) and redesignating subsection (e) as sub-
section (d). 
(2) Paragraph (20) of section 62(a) is amended 
by striking ‘‘subsection (e)’’ and inserting ‘‘sub-
section (d)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
the date of the enactment of this Act. 
SEC. 258. ELIMINATION OF GROSS INCOME EXCLUSION FOR 
DISCHARGE OF CERTAIN STUDENT LOAN 
DEBT. 
Section 108 is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(5) TERMINATION.—This subsection shall not 
apply to discharges of indebtedness after the date of 
the enactment of the Implementation of Simpson- 
Bowles Spending Reductions Act of 2012.’’. 
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SEC. 259. REPEAL OF EXCLUSION FROM GROSS INCOME 
FOR RENTAL VALUE OF PARSONAGES. 
Effective for taxable years beginning after the date 
of the enactment of this Act, section 107 is repealed. 
SEC. 260. REPEAL OF EXCLUSION FROM GROSS INCOME 
FOR BENEFITS PROVIDED TO VOLUNTEER 
FIREFIGHTERS AND EMERGENCY MEDICAL 
RESPONDERS. 
Effective for taxable years beginning after the date 
of the enactment of this Act, section 139B is repealed. 
SEC. 261. REPEAL OF SPECIAL TREATMENT OF BLUE 
CROSS AND BLUE SHIELD ORGANIZATIONS, 
ETC. 
Effective for taxable years beginning after the date 
of the enactment of this Act, section 833 is repealed. 
SEC. 262. SENSE OF THE HOUSE REGARDING A TERRI-
TORIAL TAX SYSTEM. 
It is the sense of the House that the Committee on 
Ways and Means of the House of Representatives should 
report legislation that will transition the United States to 
a territorial tax system. 
SEC. 263. TEMPORARY DIVIDENDS RECEIVED DEDUCTION 
ALLOWED FOR 2011 OR 2012. 
(a) ELECTION.—Subsection (f) of section 965 of the 
Internal Revenue Code of 1986 (relating to election) is 
amended to read as follows: 
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‘‘(f) ELECTION.—The taxpayer may elect to apply 
this section to— 
‘‘(1) the taxpayer’s last taxable year which be-
gins before the date of the enactment of this sub-
section, or 
‘‘(2) the taxpayer’s first taxable year which be-
gins during the 1-year period beginning on such 
date. 
Such election may be made for a taxable year only if made 
on or before the due date (including extensions) for filing 
the return of tax for such taxable year.’’. 
(b) LIMITATION.—Paragraph (1) of section 965(b) of 
such Code is amended to read as follows: 
‘‘(1) IN GENERAL.—The amount of dividends 
taken into account under subsection (a) shall not ex-
ceed the sum of the current and accumulated earn-
ings and profits described in section 959(c)(3) for 
the year a deduction is claimed under subsection (a), 
without diminution by reason of any distributions 
made during the election year, for all controlled for-
eign corporations of the United States shareholder.’’. 
(c) FAILURE TO MAINTAIN EMPLOYMENT LEV-
ELS.—Paragraph (4) of section 965(b) of such Code (re-
lating to limitations) is amended to read as follows: 
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‘‘(4) REDUCTION IN BENEFITS FOR FAILURE 
TO MAINTAIN EMPLOYMENT LEVELS.— 
‘‘(A) IN GENERAL.—If, during the period 
consisting of the calendar month in which the 
taxpayer first receives a distribution described 
in subsection (a)(1) and the succeeding 23 cal-
endar months, the taxpayer does not maintain 
an average employment level at least equal to 
the taxpayer’s prior average employment, an 
additional amount equal to $25,000 multiplied 
by the number of employees by which the tax-
payer’s average employment level during such 
period falls below the prior average employment 
(but not exceeding the aggregate amount al-
lowed as a deduction pursuant to subsection 
(a)(1)) shall be taken into income by the tax-
payer during the taxable year that includes the 
final day of such period. 
‘‘(B) AVERAGE
EMPLOYMENT
LEVEL.— 
For purposes of this paragraph, the taxpayer’s 
average employment level for a period shall be 
the average number of full-time United States 
employees of the taxpayer, measured at the end 
of each month during the period. 
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‘‘(C) PRIOR AVERAGE EMPLOYMENT.—For 
purposes of this paragraph, the taxpayer’s 
‘prior average employment’ shall be the average 
number of full-time United States employees of 
the taxpayer during the period consisting of the 
24 calendar months immediately preceding the 
calendar month in which the taxpayer first re-
ceives a distribution described in subsection 
(a)(1). 
‘‘(D) FULL-TIME
UNITED
STATES
EM-
PLOYEE.—For purposes of this paragraph— 
‘‘(i) IN
GENERAL.—The term ‘full- 
time United States employee’ means an in-
dividual who provides services in the 
United States as a full-time employee, 
based on the employer’s standards and 
practices; except that regardless of the em-
ployer’s classification of the employee, an 
employee whose normal schedule is 40 
hours or more per week is considered a 
full-time employee. 
‘‘(ii) EXCEPTION
FOR
CHANGES
IN 
OWNERSHIP OF TRADES OR BUSINESSES.— 
Such term does not include— 
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‘‘For purposes of this paragraph, taxable years shall not 
include any year for which an election under section 965 
was in effect.’’. 
(f) INDEBTEDNESS DETERMINATION DATE.—Sub-
paragraph (B) of section 965(b)(3) of such Code is 
amended by striking ‘‘October 3, 2004’’ and inserting 
‘‘January 19, 2011’’. 
(g) CONFORMING AMENDMENTS.— 
(1) Subsection 965(c) of such Code, as amend-
ed by subsection (e), is amended by striking para-
graph (1) and redesignating paragraphs (2), (3), 
(4), and (5) as paragraphs (1), (2), (3), and (4), re-
spectively. 
(2) Paragraph 965(c)(4) of such Code, as re-
designated by paragraph (1), is amended to read as 
follows: 
‘‘(4) CONTROLLED GROUPS.—All United States 
shareholders which are members of an affiliated 
group filing a consolidated return under section 
1501 shall be treated as one United States share-
holder.’’. 
(h) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending on or after 
the date of the enactment of this Act. 
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Subtitle C—Phaseout of Tax 
Expenditures 
SEC. 271. FIVE-YEAR PHASEOUT OF CERTAIN TAX EXPENDI-
TURES. 
(a) IN GENERAL.—Effective for taxable years begin-
ning after December 31, 2012, the amount allowable as 
a credit, exclusion from gross income, exemption from tax-
ation, or deduction for the taxable year under the tax pro-
visions specified in subsection (c) (determined without re-
gard to this section) shall be reduced by the applicable 
percentage of the amount so allowable. 
(b) APPLICABLE PERCENTAGE.—For purposes if this 
section, the applicable percentage shall be determined in 
accordance with the following table: 
In the case of taxable years 
beginning in: 
The applicable percentage 
shall be: 
2013 .............................................................................................
2014 .............................................................................................
2015 .............................................................................................
2016 .............................................................................................
2017 and thereafter .....................................................................
100. 
(c) SPECIFIED PROVISIONS.—For purposes of this 
section, the tax provisions specified in this subsection are 
as follows: 
(1) Section 911 of the Internal Revenue Code 
of 1986 (relating to citizens or residents of the 
United States living abroad). 
(2) Section 912 of such Code (relating to ex-
emption for certain allowances). 
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(3) Section 41 of such Code (relating to credit 
for increasing research activities). 
(4) Section 631(c) of such Code (relating to 
disposal of coal or domestic iron ore with a retained 
economic interest). 
(5) Section 451(i) of such Code (relating to 
special rule for sales or dispositions to implement 
Federal Energy Regulatory Commission or State 
Electric Restructuring Policy). 
(6) Section 613 of such Code (relating to per-
centage depletion) in the case of nonfuel minerals. 
(7) Section 631(a) of such Code (relating to 
election to consider cutting as sale or exchange). 
(8) Section 512(b)(19) of such Code (relating 
to treatment of gain or loss on sale or exchange of 
certain brownfield sites). 
(9) Section 501(c)(14) of such Code (relating to 
credit unions without capital stock organized and op-
erated for mutual purposes and without profit) and 
section 122 of the Federal Credit Union Act. 
(10) The exclusion from gross income of income 
on life insurance contracts (as determined under sec-
tion 7702(g) of the Internal Revenue Code of 1986). 
(11) Section 103(a) of such Code, to the extent 
the interest is attributable to a qualified mortgage 
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bond (as defined in section 143(a) of such Code), a 
qualified veterans’ mortgage bond (as defined is sec-
tion 143(b) of such Code), or an issue described in 
section 142(a)(7) of such Code. 
(12) Section 199 of such Code (relating to in-
clude attributable to domestic production activities). 
(13) Section 181 of such Code (relating to 
treatment of certain qualified film and television 
productions). 
(14) Section 7518 of such Code (relating to tax 
incentives relating to merchant marine capital con-
struction funds) and chapter 535 of title 46, United 
States Code. 
(15) Section 132(a)(5) of such Code (relating 
to qualified transportation fringe) to the extent at-
tributable to a transit pass (as defined in section 
132(f)(5) of such Code) or qualified parking (as so 
defined). 
(16) Section 45G(a) of such Code (relating to 
railroad track maintenance credit). 
(17) Section 46(a) of such Code (relating to re-
habilitation credit). 
(18) Section 45D of such Code (relating to new 
markets tax credit). 
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(19) Section 131 of such Code (relating to cer-
tain foster care payments). 
(20) Section 213 of such Code (relating to med-
ical, dental, etc., payments). 
(21) Section 36B of such Code (relating to re-
fundable credit for coverage under a qualified health 
plan). 
(22) Section 45R of such Code (relating to em-
ployee health insurance expenses of small employ-
ers). 
(23) Section 45C of such Code (relating to clin-
ical testing expenses for certain drugs for rare dis-
eases or conditions). 
(24) Section 35 of such Code (relating to health 
insurance costs of eligible individuals). 
(25) Means-tested payments otherwise exclud-
able under the general welfare doctrine. 
(26) Section 79 of such Code (relating to 
group-term life insurance purchased for employees). 
(27) Section 106 of such Code (relating to con-
tributions by employer to accident and health plans) 
to the extent attributable to employer provided cov-
erage under an accident or disability insurance plan. 
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(28) Section 165 of such Code (relating to 
losses) to the extent the loss is described in section 
165(c)(3) of such Code. 
(29) Section 164(a)(1) of such Code (relating 
to real property taxes) to the extent not attributable 
to real property used in a trade or business or the 
principal residence of the taxpayer (within the mean-
ing of section 121 of such Code). 
Subtitle D—Special Status 
SEC. 381. TERMINATION OF QUALIFIED ENERGY CON-
SERVATION BONDS. 
Subsection (a) of section 54D is amended by striking 
‘‘and’’ at the end of paragraph (2), by striking the period 
at the end of paragraph (3) and inserting ‘‘, and’’, and 
by adding at the end the following new paragraph: 
‘‘(4) the bond is issued before the date of the 
enactment of the Implementation of Simpson-Bowles 
Spending Reductions Act of 2012.’’. 
SEC. 382. TERMINATION OF NEW CLEAN RENEWABLE EN-
ERGY BONDS. 
Subsection (a) of section 54C is amended by striking 
‘‘and’’ at the end of paragraph (2), by striking the period 
at the end of paragraph (3) and inserting ‘‘, and’’, and 
by adding at the end the following new paragraph: 
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‘‘(4) the bond is issued before the date of the 
enactment of the Implementation of Simpson-Bowles 
Spending Reductions Act of 2012.’’. 
SEC. 383. TERMINATION OF EXEMPT FACILITY BOND 
TREATMENT 
FOR 
WATER, 
SEWAGE, 
AND 
SOLID WASTE FACILITIES. 
(a) IN GENERAL.—Subsection (a) of section 142 is 
amended by striking paragraphs (4), (5), and (6). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after the date of 
the enactment of this Act. 
SEC. 384. TERMINATION OF EXPENSING AND AMORTIZA-
TION OF REFORESTATION EXPENDITURES 
AND 
EXPENSING 
OF 
TIMBER-GROWING 
COSTS. 
(a) REFORESTATION EXPENDITURES.—Section 194 
is amended by adding at the end the following new sub-
section: 
‘‘(e) TERMINATION.—This section shall not apply to 
amount paid or incurred after the date of the enactment 
of the Implementation of Simpson-Bowles Spending Re-
ductions Act of 2012.’’. 
(b) EXPENSING OF TIMBER GROWING COSTS.—Sub-
section (c) of section 263A is amended by striking para-
graph (5). 
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(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to expenses paid or incurred after 
the date of the enactment of this Act. 
SEC. 385. TERMINATION OF DEFERRAL OF GAIN ON SALES 
OF STOCK IN AGRICULTURAL REFINERS AND 
PROCESSORS TO ELIGIBLE FARM COOPERA-
TIVES. 
Subsection (g) of section 1042 is amended by adding 
at the end the following new paragraph: 
‘‘(5) TERMINATION.—This subsection shall not 
apply to any sales after the date of the enactment 
of the Implementation of Simpson-Bowles Spending 
Reductions Act of 2012.’’. 
SEC. 386. TERMINATION OF ELECTION TO EXPENSE CER-
TAIN DEPRECIABLE BUSINESS ASSETS. 
(a) IN GENERAL.—Subparagraph (D) of section 
179(b)(1) is amended by striking ‘‘$25,000’’ and inserting 
‘‘$0’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to property placed in service after 
December 31, 2012. 
SEC. 387. TERMINATION OF QUALIFIED SMALL ISSUE 
BONDS. 
Paragraph (1) of section 144(a) is amended by in-
serting ‘‘before the date of the enactment of the Imple-
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mentation of Simpson-Bowles Spending Reductions Act of 
2012’’ after ‘‘any bond issued’’. 
SEC. 388. TERMINATION OF EXEMPT FACILITY BOND 
TREATMENT FOR QUALIFIED HIGHWAY OR 
SURFACE FREIGHT TRANSFER FACILITIES. 
(a) IN GENERAL.—Subsection (a) of section 142 is 
amended by striking paragraph (15). 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to bonds issued after the date of 
the enactment of this Act. 
SEC. 389. TERMINATION OF EXEMPT FACILITY BOND 
TREATMENT FOR AIRPORTS, DOCKS, AND 
WHARVES. 
(a) IN GENERAL.—Subsection (a) of section 142 is 
amended by striking paragraphs (1) and (2). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after the date of 
the enactment of this Act. 
SEC. 390. TERMINATION OF TRIBAL ECONOMIC DEVELOP-
MENT BONDS. 
Subparagraph (A) of section 7871(f)(3) is amended 
by inserting ‘‘before the date of the enactment of the Im-
plementation of Simpson-Bowles Spending Reductions Act 
of 2012’’ after ‘‘any bond issued’’. 
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SEC. 391. TERMINATION OF EXCLUSION FROM GROSS IN-
COME OF UNITED STATES SAVINGS BONDS 
INTEREST USED TO PAY HIGHER EDUCATION 
EXPENSES. 
Subparagraph (A) of section 135(c)(1) is amended by 
inserting ‘‘and before the date of the enactment of the Im-
plementation of Simpson-Bowles Spending Reductions Act 
of 2012’’ after ‘‘December 31, 1989,’’. 
SEC. 392. TERMINATION OF QUALIFIED ZONE ACADEMY 
BONDS. 
Subsection (a) of section 54E is amended by striking 
‘‘and’’ at the end of paragraph (2), by striking the period 
at the end of paragraph (3), and inserting ‘‘, and’’, and 
by adding at the end the following new paragraph: 
‘‘(4) the bond is issued before the date of the 
enactment of the Implementation of Simpson-Bowles 
Spending Reductions Act of 2012.’’. 
SEC. 393. TERMINATION OF EXEMPT FACILITY BOND 
TREATMENT FOR QUALIFIED PUBLIC EDU-
CATIONAL FACILITIES. 
(a) IN GENERAL.—Subsection (a) of section 142 is 
amended by striking paragraph (13). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after the date of 
the enactment of this Act. 
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SEC. 394. TERMINATION OF HOSPITAL BONDS. 
(a) IN GENERAL.—Paragraph (1) of section 145(a) 
is amended by striking ‘‘or a governmental unit’’ and in-
serting ‘‘, or a governmental unit, other than a hospital’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 145 is amended by striking sub-
section (c) and by redesignating subsections (d) and 
(e) as subsections (c) and (d), respectively. 
(2) Subsection (b) of section 145 is amended by 
striking ‘‘nonhospital’’ each place it appears. 
(3) Paragraph (1) of section 145(b) is amended 
by striking ‘‘(other than a qualified hospital bond)’’. 
(4) Paragraph (2) of section 145(b) is amend-
ed— 
(A) by striking ‘‘other than a qualified hos-
pital bond’’ in subparagraph (B), and 
(B) by striking subparagraph (C). 
(5) The heading for subsection (b) of section 
145 is amended by striking ‘‘ON BONDS OTHER 
THAN HOSPITAL BONDS’’. 
(6) The heading for paragraph (2) of section 
145(b) is amended by striking ‘‘NONHOSPITAL’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after the date of 
the enactment of this Act. 
Æ 
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