348 
† HR 1 EAS 
paragraph (1) shall be determined in the same 
manner as under section 245A(c).’’. 
(d) TREATMENT OF FOREIGN BRANCH LOSSES TRANS-
FERRED TO SPECIFIED 10-PERCENT OWNED FOREIGN COR-
PORATIONS.— 
(1) IN GENERAL.—Part II of subchapter B of 
chapter 1 is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANS-
FERRED TO SPECIFIED 10-PERCENT OWNED 
FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—If a domestic corporation trans-
fers substantially all of the assets of a foreign branch (with-
in 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 de-
fined in section 245A) with respect to which it is a United 
States shareholder after such transfer, such domestic cor-
poration shall include in gross income for the taxable year 
which includes such transfer an amount equal to the trans-
ferred loss amount with respect to such transfer. 
‘‘(b) LIMITATION
AND CARRYFORWARD BASED
ON 
FOREIGN-SOURCE DIVIDENDS RECEIVED.— 
‘‘(1) IN GENERAL.—The amount included in the 
gross income of the taxpayer under subsection (a) for
349 
† HR 1 EAS 
any taxable year shall not exceed the amount allowed 
as a deduction under section 245A for such taxable 
year (taking into account dividends received from all 
specified 10-percent owned foreign corporations with 
respect to which the taxpayer is a United States 
shareholder). 
‘‘(2) AMOUNTS
NOT
INCLUDED
CARRIED
FOR-
WARD.—Any amount not included in gross income for 
any taxable year by reason of paragraph (1) shall, 
subject to the application of paragraph (1) to the suc-
ceeding taxable year, be included in gross income for 
the succeeding taxable year. 
‘‘(c) 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
350 
† HR 1 EAS 
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. 
‘‘(d) 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 ac-
count under subsection (c)(2)(B)). 
‘‘(e) SOURCE OF INCOME.—Amounts included in gross 
income under this section shall be treated as derived from 
sources within the United States. 
‘‘(f) BASIS ADJUSTMENTS.—Consistent with such reg-
ulations 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 for-
eign 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 sec-
tion.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions 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.’’.
351 
† HR 1 EAS 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to transfers after De-
cember 31, 2017. 
(e) REPEAL OF ACTIVE TRADE OR BUSINESS EXCEP-
TION 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), re-
spectively. 
(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 
(B) by striking ‘‘PARAGRAPHS (2) AND (3)’’ 
in the heading and inserting ‘‘PARAGRAPH (2)’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to transfers after De-
cember 31, 2017. 
SEC. 14103. TREATMENT OF DEFERRED FOREIGN INCOME 
UPON TRANSITION TO PARTICIPATION EX-
EMPTION SYSTEM OF TAXATION. 
(a) IN GENERAL.—Section 965 is amended to read as 
follows:
352 
† HR 1 EAS 
‘‘SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME 
UPON TRANSITION TO PARTICIPATION EX-
EMPTION SYSTEM OF TAXATION. 
‘‘(a) TREATMENT OF DEFERRED FOREIGN INCOME AS 
SUBPART F INCOME.—In the case of the last taxable year 
of a deferred income corporation which begins before Janu-
ary 1, 2018, the subpart F income of such foreign corpora-
tion (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 Novem-
ber 9, 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 IN-
COME OF UNITED STATES SHAREHOLDERS OF SPECIFIED 
FOREIGN CORPORATIONS 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 sub-
section (a) as such United States shareholder’s pro
353 
† HR 1 EAS 
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 para-
graph (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 shareholder 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 in-
come corporation, bears to 
‘‘(B) the aggregate of such United States 
shareholder’s pro rata share of the accumulated 
post-1986 deferred foreign 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 ‘aggre-
gate foreign E&P deficit’ means, with re-
354 
† HR 1 EAS 
spect to any United States shareholder, the 
lesser of— 
‘‘(I) the aggregate of such share-
holder’s pro rata shares of the specified 
E&P deficits of the E&P deficit foreign 
corporations of such shareholder, 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 deter-
mines— 
‘‘(I) the amount of the specified 
E&P deficit which is to be taken into 
account for each E&P deficit corpora-
tion with respect to the taxpayer, and 
‘‘(II) in the case of an E&P def-
icit 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,
355 
† HR 1 EAS 
including the qualified activities to 
which such portion is attributable. 
‘‘(B) E&P DEFICIT
FOREIGN
CORPORA-
TION.—The term ‘E&P deficit foreign corpora-
tion’ means, with respect to any taxpayer, any 
specified foreign corporation with respect to 
which such taxpayer is a United States share-
holder, if— 
‘‘(i) such specified foreign corporation 
has a deficit in post-1986 earnings and 
profits, and 
‘‘(ii) as of November 9, 2017— 
‘‘(I) such corporation was a speci-
fied foreign corporation, and 
‘‘(II) such taxpayer was a United 
States shareholder 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 PREVIOUSLY TAXED INCOME WHEN 
DISTRIBUTED.—For purposes of applying section
356 
† HR 1 EAS 
959 in any taxable year beginning after Decem-
ber 31, 2017, with respect to any United States 
shareholder of a deferred foreign income corpora-
tion, an amount equal to such shareholder’s re-
duction 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 section 
951(a). 
‘‘(B) E&P DEFICITS.—For purposes of this 
title, a United States shareholder’s pro rata 
share of the earnings and profits of any specified 
E&P deficit foreign corporation under this sub-
section shall be increased by the amount of the 
specified E&P deficit of such corporation taken 
into account by such shareholder under para-
graph (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 at-
tributable. 
‘‘(c) APPLICATION OF PARTICIPATION EXEMPTION TO 
INCLUDED INCOME.— 
‘‘(1) IN
GENERAL.—In the case of a United 
States shareholder of a deferred foreign income cor-
357 
† HR 1 EAS 
poration, 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) 78.6 percent of the excess (if any) of— 
‘‘(i) the amount so included as gross 
income, over 
‘‘(ii) the amount of such United States 
shareholder’s aggregate foreign cash posi-
tion, plus 
‘‘(B) 58.6 percent of so much of the amount 
described in subparagraph (A)(ii) as does not ex-
ceed the amount described in subparagraph 
(A)(i). 
‘‘(2) 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 shareholder, the greater of— 
‘‘(i) the aggregate of such United 
States shareholder’s pro rata share of the 
cash position of each specified foreign cor-
poration of such United States shareholder 
determined as of the close of the last taxable
358 
† HR 1 EAS 
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) determined as of the close of 
the last taxable year of each such speci-
fied foreign corporation which ends be-
fore November 9, 2017, plus 
‘‘(II) the aggregate described in 
clause (i) determined 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 for-
eign corporation is the sum of— 
‘‘(i) cash and foreign currency held by 
such foreign corporation, 
‘‘(ii) the net accounts receivable of such 
foreign corporation, plus 
‘‘(iii) the fair market value of the fol-
lowing assets held by such corporation: 
‘‘(I) Personal property which is of 
a type that is actively traded and for
359 
† HR 1 EAS 
which there is an established financial 
market (other than stock in the speci-
fied foreign corporation). 
‘‘(II) Commercial paper, certifi-
cates of deposit, the securities of the 
Federal government and of any State 
or foreign government. 
‘‘(III) Any obligation with a term 
of less than one year. 
‘‘(IV) Any asset which the Sec-
retary identifies as being economically 
equivalent to any asset described in 
this subparagraph. 
‘‘(C) NET
ACCOUNTS
RECEIVABLE.—For 
purposes of this paragraph, the term ‘net ac-
counts receivable’ means, with respect to any 
specified foreign corporation, the excess (if any) 
of— 
‘‘(i) such corporation’s accounts receiv-
able, over 
‘‘(ii) such corporation’s accounts pay-
able (determined consistent with the rules of 
section 461). 
‘‘(D) PREVENTION OF DOUBLE COUNTING.— 
Cash positions of a specified foreign corporation
360 
† HR 1 EAS 
described in clause (ii) or (iii)(III) of subpara-
graph (B) shall not be taken into account by a 
United States shareholder under subparagraph 
(A) to the extent that such United States share-
holder 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. 
‘‘(E) CASH
POSITIONS
OF
CERTAIN
NON- 
CORPORATE ENTITIES TAKEN INTO ACCOUNT.— 
An entity 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— 
‘‘(i) such entity is a foreign entity 
which would be a specified foreign corpora-
tion of such United States shareholder if 
such entity were a corporation, or 
‘‘(ii) any interest in such entity is held 
by a specified foreign corporation of such 
United States shareholder (determined after 
application of clause (i)) and such entity 
would be a specified foreign corporation of 
such United States shareholder if such enti-
ty were a foreign corporation.
361 
† HR 1 EAS 
‘‘(F) ANTI-ABUSE.—If the Secretary deter-
mines that a principal purpose of any trans-
action was to reduce the aggregate foreign cash 
position taken into account under this sub-
section, such transaction shall be disregarded for 
purposes of this subsection. 
‘‘(d) DEFERRED FOREIGN INCOME CORPORATION; AC-
CUMULATED POST-1986 DEFERRED FOREIGN INCOME.— 
For purposes of this section— 
‘‘(1) DEFERRED
FOREIGN
INCOME
CORPORA-
TION.—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 close of the taxable 
year referred to in subsection (a)) greater than zero. 
‘‘(2) ACCUMULATED POST-1986 DEFERRED FOR-
EIGN INCOME.—The term ‘accumulated post-1986 de-
ferred foreign income’ means the post-1986 earnings 
and profits except to the extent such earnings— 
‘‘(A) are attributable to income of the speci-
fied foreign corporation which is effectively con-
nected with the conduct of a trade or business 
within the United States and subject to tax 
under this chapter, or
364 
† HR 1 EAS 
‘‘(f) DETERMINATIONS OF PRO RATA SHARE.—For 
purposes of this section, the determination of any United 
States shareholder’s pro rata share of any amount with re-
spect to any specified foreign corporation shall be deter-
mined 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 corpora-
tion as a controlled foreign corporation). 
‘‘(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 subsection, the term ‘applicable percentage’ 
means the amount (expressed as a percentage) equal 
to the sum of— 
‘‘(A) 0.786 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) ap-
plies, plus 
‘‘(B) 0.586 multiplied by the ratio of—
366 
† HR 1 EAS 
‘‘(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 in-
stallment shall be paid on the due date (determined 
without regard to any extension of time for filing the 
return) for the return of tax for the taxable year de-
scribed in subsection (a) and each succeeding install-
ment 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 in-
stallment was made. 
‘‘(3) ACCELERATION OF PAYMENT.—If there is 
an addition to tax for failure to timely pay any in-
stallment required under this subsection, a liquida-
tion or sale of substantially all the assets of the tax-
payer (including in a title 11 or similar case), a ces-
sation of business by the taxpayer, or any similar cir-
cumstance, then the unpaid portion of all remaining 
installments 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
367 
† HR 1 EAS 
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
INSTALL-
MENTS.—If an election is made under paragraph (1) 
to pay the net tax liability under this section in in-
stallments and a deficiency has been assessed with re-
spect 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 in-
stallment the date for payment of which has not ar-
rived shall be collected 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 inten-
tional 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 sub-
368 
† HR 1 EAS 
section (a) and shall be made in such manner as the 
Secretary shall provide. 
‘‘(6) NET
TAX
LIABILITY
UNDER
THIS
SEC-
TION.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The net tax liability 
under this section 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 in-
cluded 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 taxable year determined— 
‘‘(I) without regard to this sec-
tion, and 
‘‘(II) without regard to any in-
come or deduction properly attrib-
utable to a dividend received by such 
United States shareholder from any de-
ferred foreign income corporation. 
‘‘(B) NET INCOME TAX.—The term ‘net in-
come tax’ means the regular tax liability reduced 
by the credits allowed under subparts A, B, and 
D of part IV of subchapter A.
369 
† HR 1 EAS 
‘‘(i) SPECIAL RULES FOR S CORPORATION SHARE-
HOLDERS.— 
‘‘(1) IN GENERAL.—In the case of any S cor-
poration 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 li-
ability payment of which is deferred under the pre-
ceding 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 corpora-
tion is not an S corporation).
370 
† HR 1 EAS 
‘‘(ii) A liquidation or sale of substan-
tially 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. 
‘‘(iii) A transfer of any share of stock 
in such S corporation by the taxpayer (in-
cluding by reason of death, or otherwise). 
‘‘(B) PARTIAL TRANSFERS OF STOCK.—In 
the case of a transfer of less than all of the tax-
payer’s shares of stock in the S corporation, such 
transfer shall only be a triggering event with re-
spect to so much of the taxpayer’s net tax liabil-
ity under this section with respect to such S cor-
poration 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 agreement with the Sec-
retary 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 tax-
payer.
371 
† HR 1 EAS 
‘‘(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 
INSTALLMENTS.—In the case of a taxpayer which 
elects to defer payment under paragraph (1)— 
‘‘(A) subsection (h) shall be applied sepa-
rately 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 oc-
curs, 
‘‘(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
372 
† HR 1 EAS 
‘‘(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 COR-
PORATION.—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
COLLEC-
TION.—Any limitation on the time period for the col-
lection 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 LIABIL-
ITY.— 
‘‘(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 re-
turn of tax for each taxable year thereafter until
373 
† HR 1 EAS 
such amount has been fully assessed on such re-
turns. 
‘‘(B) DEFERRED NET TAX LIABILITY.—For 
purposes of this paragraph, the term ‘deferred 
net tax liability’ means, with respect to any tax-
able year, the amount of net tax liability pay-
ment 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 re-
turn 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 corporation 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 de-
scribed in subsection (a) is taken into account, 
and
374 
† HR 1 EAS 
‘‘(B) shall be made in such manner as the 
Secretary shall provide. 
‘‘(j) REPORTING BY S CORPORATION.—Each S cor-
poration 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 subsection (b). 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.— 
Notwithstanding 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 be-
fore the date that is 6 years after the return for the taxable 
year described in such subsection was filed. 
‘‘(l) RECAPTURE FOR EXPATRIATED ENTITIES.— 
‘‘(1) IN
GENERAL.—If a deduction is allowed 
under subsection (c) to a United States shareholder 
and such shareholder first becomes an expatriated en-
tity at any time during the 10-year period beginning 
on the date of the enactment of the Tax Cuts and Jobs 
Act, then—
375 
† HR 1 EAS 
‘‘(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 to the specified foreign cor-
poration 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 re-
spect to the entity is treated as a domestic corpora-
tion under section 7874(b). 
‘‘(m) SPECIAL RULES FOR UNITED STATES SHARE-
HOLDERS
WHICH
ARE
REAL
ESTATE
INVESTMENT 
TRUSTS.— 
‘‘(1) IN GENERAL.—If a real estate investment 
trust is a United States shareholder in 1 or more de-
ferred 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