SECTION 1. SHORT TITLE; ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Tax Cuts and Jobs Act’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; etc. 
TITLE I—TAX REFORM FOR INDIVIDUALS 
Subtitle A—Simplification and Reform of Rates, Standard Deduction, and 
Exemptions 
Sec. 1001. Reduction and simplification of individual income tax rates. 
Sec. 1002. Enhancement of standard deduction. 
Sec. 1003. Repeal of deduction for personal exemptions. 
Sec. 1004. Maximum rate on business income of individuals. 
Sec. 1005. Conforming amendments related to simplification of individual in-
come tax rates. 
Subtitle B—Simplification and Reform of Family and Individual Tax Credits 
Sec. 1101. Enhancement of child tax credit and new family tax credit. 
Sec. 1102. Repeal of nonrefundable credits. 
Sec. 1103. Refundable credit program integrity. 
Sec. 1104. Procedures to reduce improper claims of earned income credit. 
Sec. 1105. Certain income disallowed for purposes of the earned income tax 
credit. 
Subtitle C—Simplification and Reform of Education Incentives 
Sec. 1201. American opportunity tax credit. 
Sec. 1202. Consolidation of education savings rules. 
Sec. 1203. Reforms to discharge of certain student loan indebtedness. 
Sec. 1204. Repeal of other provisions relating to education. 
Sec. 1205. Rollovers between qualified tuition programs and qualified ABLE 
programs. 
Subtitle D—Simplification and Reform of Deductions
Sec. 1301. Repeal of overall limitation on itemized deductions. 
Sec. 1302. Mortgage interest. 
Sec. 1303. Repeal of deduction for certain taxes not paid or accrued in a trade 
or business. 
Sec. 1304. Repeal of deduction for personal casualty losses. 
Sec. 1305. Limitation on wagering losses. 
Sec. 1306. Charitable contributions. 
Sec. 1307. Repeal of deduction for tax preparation expenses. 
Sec. 1308. Repeal of medical expense deduction. 
Sec. 1309. Repeal of deduction for alimony payments. 
Sec. 1310. Repeal of deduction for moving expenses. 
Sec. 1311. Termination of deduction and exclusions for contributions to medical 
savings accounts. 
Sec. 1312. Denial of deduction for expenses attributable to the trade or busi-
ness of being an employee. 
Subtitle E—Simplification and Reform of Exclusions and Taxable 
Compensation 
Sec. 1401. Limitation on exclusion for employer-provided housing. 
Sec. 1402. Exclusion of gain from sale of a principal residence. 
Sec. 1403. Repeal of exclusion, etc., for employee achievement awards. 
Sec. 1404. Sunset of exclusion for dependent care assistance programs. 
Sec. 1405. Repeal of exclusion for qualified moving expense reimbursement. 
Sec. 1406. Repeal of exclusion for adoption assistance programs. 
Subtitle F—Simplification and Reform of Savings, Pensions, Retirement 
Sec. 1501. Repeal of special rule permitting recharacterization of Roth IRA 
contributions as traditional IRA contributions. 
Sec. 1502. Reduction in minimum age for allowable in-service distributions. 
Sec. 1503. Modification of rules governing hardship distributions. 
Sec. 1504. Modification of rules relating to hardship withdrawals from cash or 
deferred arrangements. 
Sec. 1505. Extended rollover period for the rollover of plan loan offset amounts 
in certain cases. 
Sec. 1506. Modification of nondiscrimination rules to protect older, longer serv-
ice participants. 
Subtitle G—Estate, Gift, and Generation-skipping Transfer Taxes 
Sec. 1601. Increase in credit against estate, gift, and generation-skipping trans-
fer tax. 
Sec. 1602. Repeal of estate and generation-skipping transfer taxes. 
TITLE II—ALTERNATIVE MINIMUM TAX REPEAL 
Sec. 2001. Repeal of alternative minimum tax. 
TITLE III—BUSINESS TAX REFORM 
Subtitle A—Tax Rates 
Sec. 3001. Reduction in corporate tax rate. 
Subtitle B—Cost Recovery 
Sec. 3101. Increased expensing.
Subtitle C—Small Business Reforms 
Sec. 3201. Expansion of section 179 expensing. 
Sec. 3202. Small business accounting method reform and simplification. 
Sec. 3203. Small business exception from limitation on deduction of business 
interest. 
Sec. 3204. Modification of treatment of S corporation conversions to C corpora-
tions. 
Subtitle D—Reform of Business-related Exclusions, Deductions, etc. 
Sec. 3301. Interest. 
Sec. 3302. Modification of net operating loss deduction. 
Sec. 3303. Like-kind exchanges of real property. 
Sec. 3304. Revision of treatment of contributions to capital. 
Sec. 3305. Repeal of deduction for local lobbying expenses. 
Sec. 3306. Repeal of deduction for income attributable to domestic production 
activities. 
Sec. 3307. Entertainment, etc. expenses. 
Sec. 3308. Unrelated business taxable income increased by amount of certain 
fringe benefit expenses for which deduction is disallowed. 
Sec. 3309. Limitation on deduction for FDIC premiums. 
Sec. 3310. Repeal of rollover of publicly traded securities gain into specialized 
small business investment companies. 
Sec. 3311. Certain self-created property not treated as a capital asset. 
Sec. 3312. Repeal of special rule for sale or exchange of patents. 
Sec. 3313. Repeal of technical termination of partnerships. 
Sec. 3314. Recharacterization of certain gains in the case of partnership profits 
interests held in connection with performance of investment 
services. 
Sec. 3315. Amortization of research and experimental expenditures. 
Sec. 3316. Uniform treatment of expenses in contingency fee cases. 
Subtitle E—Reform of Business Credits 
Sec. 3401. Repeal of credit for clinical testing expenses for certain drugs for 
rare diseases or conditions. 
Sec. 3402. Repeal of employer-provided child care credit. 
Sec. 3403. Repeal of rehabilitation credit. 
Sec. 3404. Repeal of work opportunity tax credit. 
Sec. 3405. Repeal of deduction for certain unused business credits. 
Sec. 3406. Termination of new markets tax credit. 
Sec. 3407. Repeal of credit for expenditures to provide access to disabled indi-
viduals. 
Sec. 3408. Modification of credit for portion of employer social security taxes 
paid with respect to employee tips. 
Subtitle F—Energy Credits 
Sec. 3501. Modifications to credit for electricity produced from certain renew-
able resources. 
Sec. 3502. Modification of the energy investment tax credit. 
Sec. 3503. Extension and phaseout of residential energy efficient property. 
Sec. 3504. Repeal of enhanced oil recovery credit. 
Sec. 3505. Repeal of credit for producing oil and gas from marginal wells. 
Sec. 3506. Modifications of credit for production from advanced nuclear power 
facilities.
Subtitle G—Bond Reforms 
Sec. 3601. Termination of private activity bonds. 
Sec. 3602. Repeal of advance refunding bonds. 
Sec. 3603. Repeal of tax credit bonds. 
Sec. 3604. No tax exempt bonds for professional stadiums. 
Subtitle H—Insurance 
Sec. 3701. Net operating losses of life insurance companies. 
Sec. 3702. Repeal of small life insurance company deduction. 
Sec. 3703. Surtax on life insurance company taxable income. 
Sec. 3704. Adjustment for change in computing reserves. 
Sec. 3705. Repeal of special rule for distributions to shareholders from pre- 
1984 policyholders surplus account. 
Sec. 3706. Modification of proration rules for property and casualty insurance 
companies. 
Sec. 3707. Modification of discounting rules for property and casualty insur-
ance companies. 
Sec. 3708. Repeal of special estimated tax payments. 
Subtitle I—Compensation 
Sec. 3801. Modification of limitation on excessive employee remuneration. 
Sec. 3802. Excise tax on excess tax-exempt organization executive compensa-
tion. 
Sec. 3803. Treatment of qualified equity grants. 
TITLE IV—TAXATION OF FOREIGN INCOME AND FOREIGN 
PERSONS 
Subtitle A—Establishment of Participation Exemption System for Taxation of 
Foreign Income 
Sec. 4001. Deduction for foreign-source portion of dividends received by domes-
tic corporations from specified 10-percent owned foreign cor-
porations. 
Sec. 4002. Application of participation exemption to investments in United 
States property. 
Sec. 4003. Limitation on losses with respect to specified 10-percent owned for-
eign corporations. 
Sec. 4004. Treatment of deferred foreign income upon transition to participa-
tion exemption system of taxation. 
Subtitle B—Modifications Related to Foreign Tax Credit System 
Sec. 4101. Repeal of section 902 indirect foreign tax credits; determination of 
section 960 credit on current year basis. 
Sec. 4102. Source of income from sales of inventory determined solely on basis 
of production activities. 
Subtitle C—Modification of Subpart F Provisions 
Sec. 4201. Repeal of inclusion based on withdrawal of previously excluded sub-
part F income from qualified investment. 
Sec. 4202. Repeal of treatment of foreign base company oil related income as 
subpart F income.
Sec. 4203. Inflation adjustment of de minimis exception for foreign base com-
pany income. 
Sec. 4204. Look-thru rule for related controlled foreign corporations made per-
manent. 
Sec. 4205. Modification of stock attribution rules for determining status as a 
controlled foreign corporation. 
Sec. 4206. Elimination of requirement that corporation must be controlled for 
30 days before subpart F inclusions apply. 
Subtitle D—Prevention of Base Erosion 
Sec. 4301. Current year inclusion by United States shareholders with foreign 
high returns. 
Sec. 4302. Limitation on deduction of interest by domestic corporations which 
are members of an international financial reporting group. 
Sec. 4303. Excise tax on certain payments from domestic corporations to re-
lated foreign corporations; election to treat such payments as 
effectively connected income. 
Subtitle E—Provisions Related to Possessions of the United States 
Sec. 4401. Extension of deduction allowable with respect to income attributable 
to domestic production activities in Puerto Rico. 
Sec. 4402. Extension of temporary increase in limit on cover over of rum excise 
taxes to Puerto Rico and the Virgin Islands. 
Sec. 4403. Extension of American Samoa economic development credit. 
Subtitle F—Other International Reforms 
Sec. 4501. Restriction on insurance business exception to passive foreign invest-
ment company rules. 
TITLE V—EXEMPT ORGANIZATIONS 
Subtitle A—Unrelated Business Income Tax 
Sec. 5001. Clarification of unrelated business income tax treatment of entities 
treated as exempt from taxation under section 501(a). 
Sec. 5002. Exclusion of research income limited to publicly available research. 
Subtitle B—Excise Taxes 
Sec. 5101. Simplification of excise tax on private foundation investment income. 
Sec. 5102. Private operating foundation requirements relating to operation of 
art museum. 
Sec. 5103. Excise tax based on investment income of private colleges and uni-
versities. 
Sec. 5104. Exception from private foundation excess business holding tax for 
independently-operated philanthropic business holdings. 
Subtitle C—Requirements for Organizations Exempt From Tax 
Sec. 5201. 501(c)(3) organizations permitted to make statements relating to 
political campaign in ordinary course of activities. 
Sec. 5202. Additional reporting requirements for donor advised fund sponsoring 
organizations.
TITLE I—TAX REFORM FOR 
INDIVIDUALS 
Subtitle A—Simplification and Re-
form of Rates, Standard Deduc-
tion, and Exemptions 
SEC. 1001. REDUCTION AND SIMPLIFICATION OF INDI-
VIDUAL INCOME TAX RATES. 
(a) IN GENERAL.—Section 1 is amended by striking 
subsection (i) and by striking all that precedes subsection 
(h) and inserting the following: 
‘‘SEC. 1. TAX IMPOSED. 
‘‘(a) IN GENERAL.—There is hereby imposed on the 
income of every individual a tax equal to the sum of— 
‘‘(1) 12 PERCENT BRACKET.—12 percent of so 
much of the taxable income as does not exceed the 
25-percent bracket threshold amount, 
‘‘(2) 25 PERCENT BRACKET.—25 percent of so 
much of the taxable income as exceeds the 25-per-
cent bracket threshold amount but does not exceed 
the 35-percent bracket threshold amount, plus 
‘‘(3) 35 PERCENT BRACKET.—35 percent of so 
much of taxable income as exceeds the 35-percent 
bracket threshold amount but does not exceed the 
39.6 percent bracket threshold amount.
‘‘(4) 39.6 PERCENT BRACKET.—39.6 percent of 
so much of taxable income as exceeds the 39.6-per-
cent bracket threshold amount. 
‘‘(b) BRACKET THRESHOLD AMOUNTS.—For pur-
poses of this section— 
‘‘(1) 
25-PERCENT
BRACKET
THRESHOLD 
AMOUNT.—The term ‘25-percent bracket threshold 
amount’ means— 
‘‘(A) in the case of a joint return or sur-
viving spouse, $90,000, 
‘‘(B) in the case of an individual who is 
the head of a household (as defined in section 
2(b)), $67,500, 
‘‘(C) in the case of any other individual 
(other than an estate or trust), an amount 
equal to 1⁄2 of the amount in effect for the tax-
able year under subparagraph (A), and 
‘‘(D) in the case of an estate or trust, 
$2,550. 
‘‘(2) 
35-PERCENT
BRACKET
THRESHOLD 
AMOUNT.—The term ‘35-percent bracket threshold 
amount’ means— 
‘‘(A) in the case of a joint return or sur-
viving spouse, $260,000,
‘‘(B) in the case of a married individual fil-
ing a separate return, an amount equal to 1⁄2 
of the amount in effect for the taxable year 
under subparagraph (A), and 
‘‘(C) in the case of any other individual 
(other than an estate or trust), $200,000, and 
‘‘(D) in the case of an estate or trust, 
$9,150. 
‘‘(3) 
39.6-PERCENT
BRACKET
THRESHOLD 
AMOUNT.—The term ‘39.6-percent bracket threshold 
amount’ means— 
‘‘(A) in the case of a joint return or sur-
viving spouse, $1,000,000, 
‘‘(B) in the case of any other individual 
(other than an estate or trust), an amount 
equal to 1⁄2 of the amount in effect for the tax-
able year under subparagraph (A), and 
‘‘(C) in the case of an estate or trust, 
$12,500. 
‘‘(c) INFLATION ADJUSTMENT.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning after 2018, each dollar amount in 
subsections (b) and (e)(3) (other than any amount 
determined by reference to such a dollar amount) 
shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under this subsection for the calendar 
year in which the taxable year begins by sub-
stituting ‘2017’ for ‘2016’ in paragraph 
(2)(A)(ii). 
If any increase determined under the preceding sen-
tence is not a multiple of $100, such increase shall 
be rounded to the next lowest multiple of $100. 
‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur-
poses of this subsection— 
‘‘(A) IN GENERAL.—The cost-of-living ad-
justment for any calendar year is the percent-
age (if any) by which— 
‘‘(i) the C-CPI-U for the preceding 
calendar year, exceeds 
‘‘(ii) the normalized CPI for calendar 
year 2016. 
‘‘(B) SPECIAL
RULE
FOR
ADJUSTMENTS 
WITH A BASE YEAR AFTER 2016.—For purposes 
of any provision which provides for the substi-
tution of a year after 2016 for ‘2016’ in sub-
paragraph (A)(ii), subparagraph (A) shall be 
applied by substituting ‘C-CPI-U’ for ‘normal-
ized CPI’ in clause (ii).
‘‘(3) NORMALIZED CPI.—For purposes of this 
subsection, the normalized CPI for any calendar 
year is the product of— 
‘‘(A) the CPI for such calendar year, mul-
tiplied by 
‘‘(B) the C-CPI-U transition multiple. 
‘‘(4) C-CPI-U TRANSITION
MULTIPLE.—For 
purposes of this subsection, the term ‘C-CPI-U tran-
sition multiple’ means the amount obtained by divid-
ing— 
‘‘(A) the C-CPI-U for calendar year 2016, 
by 
‘‘(B) the CPI for calendar year 2016. 
‘‘(5) C-CPI-U.—For purposes of this sub-
section— 
‘‘(A) IN GENERAL.—The term ‘C-CPI-U’ 
means the Chained Consumer Price Index for 
All Urban Consumers (as published by the Bu-
reau of Labor Statistics of the Department of 
Labor). The values of the Chained Consumer 
Price Index for All Urban Consumers taken 
into account for purposes of determining the 
cost-of-living adjustment for any calendar year 
under this subsection shall be the latest values 
so published as of the date on which such Bu-
reau publishes the initial value of the Chained 
Consumer Price Index for All Urban Con-
sumers for the month of August for the pre-
ceding calendar year. 
‘‘(B) DETERMINATION
FOR
CALENDAR 
YEAR.—The C-CPI-U for any calendar year is 
the average of the C-CPI-U as of the close of 
the 12-month period ending on August 31 of 
such calendar year. 
‘‘(6) CPI.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘Consumer 
Price Index’ means the last Consumer Price 
Index for All Urban Consumers published by 
the Department of Labor. For purposes of the 
preceding sentence, the revision of the Con-
sumer Price Index which is most consistent 
with the Consumer Price Index for calendar 
year 1986 shall be used. 
‘‘(B) DETERMINATION
FOR
CALENDAR 
YEAR.—The CPI for any calendar year is the 
average of the Consumer Price Index as of the 
close of the 12-month period ending on August 
31 of such calendar year. 
‘‘(d) SPECIAL RULES FOR CERTAIN CHILDREN WITH 
UNEARNED INCOME.—
‘‘(1) IN GENERAL.—In the case of any child to 
whom this subsection applies for any taxable year— 
‘‘(A) the 25-percent bracket threshold 
amount shall not be more than the taxable in-
come of such child for the taxable year reduced 
by the net unearned income of such child, and 
‘‘(B) the 35-percent bracket threshold 
amount shall not be more than the sum of— 
‘‘(i) the taxable income of such child 
for the taxable year reduced by the net un-
earned income of such child, plus 
‘‘(ii) the dollar amount in effect under 
subsection (b)(2)(D) for the taxable year. 
‘‘(C) the 39.6-percent bracket threshold 
amount shall not be more than the sum of— 
‘‘(i) the taxable income of such child 
for the taxable year reduced by the net un-
earned income of such child, plus 
‘‘(ii) the dollar amount in effect under 
subsection (b)(3)(C). 
‘‘(2) CHILD TO WHOM SUBSECTION APPLIES.— 
This subsection shall apply to any child for any tax-
able year if— 
‘‘(A) such child—
‘‘(i) has not attained age 18 before 
the close of the taxable year, or 
‘‘(ii) has attained age 18 before the 
close of the taxable year and is described 
in paragraph (3), 
‘‘(B) either parent of such child is alive at 
the close of the taxable year, and 
‘‘(C) such child does not file a joint return 
for the taxable year. 
‘‘(3) CERTAIN CHILDREN WHOSE EARNED IN-
COME
DOES
NOT
EXCEED
ONE-HALF
OF
INDI-
VIDUAL’S
SUPPORT.—A child is described in this 
paragraph if— 
‘‘(A) such child— 
‘‘(i) has not attained age 19 before 
the close of the taxable year, or 
‘‘(ii) is a student (within the meaning 
of section 7706(f)(2)) who has not attained 
age 24 before the close of the taxable year, 
and 
‘‘(B) such child’s earned income (as de-
fined in section 911(d)(2)) for such taxable 
year does not exceed one-half of the amount of 
the individual’s support (within the meaning of 
section 7706(c)(1)(D) after the application of
section 7706(f)(5) (without regard to subpara-
graph (A) thereof)) for such taxable year. 
‘‘(4) NET UNEARNED INCOME.—For purposes 
of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘net un-
earned income’ means the excess of— 
‘‘(i) the portion of the adjusted gross 
income for the taxable year which is not 
attributable to earned income (as defined 
in section 911(d)(2)), over 
‘‘(ii) the sum of— 
‘‘(I) the amount in effect for the 
taxable year under section 63(c)(2)(A) 
(relating to limitation on standard de-
duction in the case of certain depend-
ents), plus 
‘‘(II) The greater of the amount 
described in subclause (I) or, if the 
child itemizes his deductions for the 
taxable year, the amount of the 
itemized deductions allowed by this 
chapter for the taxable year which are 
directly connected with the production 
of the portion of adjusted gross in-
come referred to in clause (i).
‘‘(B) LIMITATION BASED ON TAXABLE IN-
COME.—The amount of the net unearned in-
come for any taxable year shall not exceed the 
individual’s taxable income for such taxable 
year. 
‘‘(e) PHASEOUT OF 12-PERCENT RATE.— 
‘‘(1) IN GENERAL.—The amount of tax imposed 
by this section (determined without regard to this 
subsection) shall be increased by 6 percent of the ex-
cess (if any) of— 
‘‘(A) adjusted gross income, over 
‘‘(B) the applicable dollar amount. 
‘‘(2) LIMITATION.—The increase determined 
under paragraph (1) with respect to any taxpayer 
for any taxable year shall not exceed 27.6 percent of 
the lesser of— 
‘‘(A) the taxpayer’s taxable income for 
such taxable year, or 
‘‘(B) the 25-percent bracket threshold 
amount in effect with respect to the taxpayer 
for such taxable year. 
‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur-
poses of this subsection, the term ‘applicable dollar 
amount’ means—
‘‘(A) in the case of a joint return or a sur-
viving spouse, $1,200,000, 
‘‘(B) in the case of a married individual fil-
ing a separate return, an amount equal to 1⁄2 
of the amount in effect for the taxable year 
under subparagraph (A), and 
‘‘(C) in the case of any other individual, 
$1,000,000. 
‘‘(4) ESTATES
AND
TRUSTS.—Paragraph (1) 
shall not apply in the case of an estate or trust.’’. 
(b) APPLICATION OF CURRENT INCOME TAX BRACK-
ETS TO CAPITAL GAINS BRACKETS.— 
(1) IN GENERAL.— 
(A) 0-PERCENT
CAPITAL
GAINS
BRACK-
ET.—Section 1(h)(1) is amended by striking 
‘‘which would (without regard to this para-
graph) be taxed at a rate below 25 percent’’ in 
subparagraph (B)(i) and inserting ‘‘below the 
15-percent rate threshold’’. 
(B) 15-PERCENT CAPITAL GAINS BRACK-
ET.—Section 1(h)(1)(C)(ii)(I) is amended by 
striking ‘‘which would (without regard to this 
paragraph) be taxed at a rate below 39.6 per-
cent’’ and inserting ‘‘below the 20-percent rate 
threshold’’.
(2) RATE
THRESHOLDS
DEFINED.—Section 
1(h) is amended by adding at the end the following 
new paragraph: 
‘‘(12) RATE THRESHOLDS DEFINED.—For pur-
poses of this subsection— 
‘‘(A) 15-PERCENT
RATE
THRESHOLD.— 
The 15-percent rate threshold shall be— 
‘‘(i) in the case of a joint return or 
surviving spouse, $77,200 (1⁄2 such amount 
in the case of a married individual filing a 
separate return), 
‘‘(ii) in the case of an individual who 
is the head of a household (as defined in 
section 2(b)), $51,700, 
‘‘(iii) in the case of any other indi-
vidual (other than an estate or trust), an 
amount equal to 1⁄2 of the amount in effect 
for the taxable year under clause (i), and 
‘‘(iv) in the case of an estate or trust, 
$2,600. 
‘‘(B) 20-PERCENT
RATE
THRESHOLD.— 
The 20-percent rate threshold shall be— 
‘‘(i) in the case of a joint return or 
surviving 
spouse, 
$479,000 
(1⁄2
such
amount in the case of a married individual 
filing a separate return), 
‘‘(ii) in the case of an individual who 
is the head of a household (as defined in 
section 2(b)), $452,400, 
‘‘(iii) in the case of any other indi-
vidual (other than an estate or trust), 
$425,800, and 
‘‘(iv) in the case of an estate or trust, 
$12,700. 
‘‘(C) INFLATION
ADJUSTMENT.—In the 
case of any taxable year beginning after 2018, 
each of the dollar amounts in subparagraphs 
(A) and (B) shall be increased by an amount 
equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under subsection (c)(2)(A) for 
the calendar year in which the taxable year 
begins, determined by substituting ‘cal-
endar year 2017’ for ‘calendar year 2016’ 
in clause (ii) thereof.’’. 
(c) APPLICATION OF SECTION 15.— 
(1) IN GENERAL.—Subsection (a) of section 15 
is amended by striking ‘‘by this chapter’’ and insert-
ing ‘‘by section 11 (or by reference to any such 
rates)’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 15 is amended by striking sub-
sections (d) and (f) and by redesignating sub-
section (e) as subsection (d). 
(B) Section 15(d), as redesignated by sub-
paragraph (A), is amended by striking ‘‘section 
1 or 11(b)’’ and inserting ‘‘section 11(b)’’. 
(C) Section 6013(c) is amended by striking 
‘‘sections 15, 443, and 7851(a)(1)(A)’’ and in-
serting ‘‘sections 443 and 7851(a)(1)(A)’’. 
(3) APPLICATION TO THIS ACT.—Section 15 of 
the Internal Revenue Code of 1986 shall not apply 
to any change in a rate of tax imposed by chapter 
1 of such Code which occurs by reason of any 
amendment made by this Act (other than the 
amendments made by section 3001). 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2017. 
(2) SUBSECTION (c).—The amendments made 
by subsection (c) shall take effect on the date of the 
enactment of this Act.
SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION. 
(a) INCREASE IN STANDARD DEDUCTION.—Section 
63(c) is amended to read as follows: 
‘‘(c) STANDARD DEDUCTION.—For purposes of this 
subtitle— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘standard deduc-
tion’ means— 
‘‘(A) $24,400, in the case of a joint return 
(or a surviving spouse (as defined in section 
2(a)), 
‘‘(B) three-quarters of the amount in effect 
under subparagraph (A) for the taxable year, in 
the case of the head of a household (as defined 
in section 2(b)), and 
‘‘(C) one-half of the amount in effect 
under subparagraph (A) for the taxable year, in 
any other case. 
‘‘(2) LIMITATION ON STANDARD DEDUCTION IN 
THE CASE OF CERTAIN DEPENDENTS.—In the case 
of an individual who is a dependent of another tax-
payer for a taxable year beginning in the calendar 
year in which the individual’s taxable year begins, 
the standard deduction applicable to such individual 
for such individual’s taxable year shall not exceed 
the greater of—
‘‘(A) $500, or 
‘‘(B) the sum of $250 and such individ-
ual’s earned income (within the means of sec-
tion 32). 
‘‘(3) CERTAIN INDIVIDUALS, ETC., NOT ELIGI-
BLE FOR STANDARD DEDUCTION.—In the case of— 
‘‘(A) a married individual filing a separate 
return where either spouse itemizes deductions, 
‘‘(B) a nonresident alien individual, 
‘‘(C) an individual making a return under 
section 443(a)(1) for a period of less than 12 
months on account of a change in his annual 
accounting period, or 
‘‘(D) an estate or trust, common trust 
fund, or partnership, 
the standard deduction shall be zero. 
‘‘(4) UNMARRIED
INDIVIDUAL.—For purposes 
of this section, the term ‘unmarried individual’ 
means any individual who— 
‘‘(A) is not married as of the close of the 
taxable year (as determined by applying section 
7703), 
‘‘(B) is not a surviving spouse (as defined 
in section 2(a)) for the taxable year, and
‘‘(C) is not a dependent of another tax-
payer for a taxable year beginning in the cal-
endar year in which the individual’s taxable 
year begins. 
‘‘(5) INFLATION ADJUSTMENTS.— 
‘‘(A) STANDARD DEDUCTION AMOUNT.—In 
the case of any taxable year beginning after 
2019, the dollar amount in paragraph (1)(A) 
shall be increased by an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(c)(2)(A) for the 
calendar year in which the taxable year be-
gins, determined by substituting ‘calendar 
year 2018’ for ‘calendar year 2016’ in 
clause (ii) thereof. 
‘‘(B) LIMITATION
AMOUNT
IN
CASE
OF 
CERTAIN
DEPENDENTS.—In the case of any 
taxable year beginning after 2017, each of the 
dollar amounts in paragraph (2) shall be in-
creased by an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii)(I) in the case of the dollar 
amount in paragraph (2)(A), under section 
1(c)(2)(A) for the calendar year in which
the taxable year begins determined by sub-
stituting ‘calendar year 1987’ for ‘calendar 
year 2016’ in clause (ii) thereof, and 
‘‘(II) in the case of the dollar amount 
in 
paragraph 
(2)(B), 
under 
section 
1(c)(2)(A) for the calendar year in which 
the taxable year begins determined by sub-
stituting ‘calendar year 1997’ for ‘calendar 
year 2016’ in clause (ii) thereof. 
If any increase determined under this paragraph is 
not a multiple of $100, such increase shall be round-
ed to the next lowest multiple of $100.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 63(b) is amended by striking ‘‘, 
minus—’’ and all that follows and inserting ‘‘minus 
the standard deduction’’. 
(2) Section 63 is amended by striking sub-
sections (f) and (g). 
(3) Section 1398(c) is amended— 
(A) by striking ‘‘BASIC’’ in the heading 
thereof, 
(B) by striking ‘‘BASIC STANDARD’’ in the 
heading 
of 
paragraph 
(3) 
and 
inserting 
‘‘STANDARD’’, and 
(C) by striking ‘‘basic’’ in paragraph (3).
(e) 
MODIFICATION
OF
WAGE
WITHHOLDING 
RULES.— 
(1) IN GENERAL.—Section 3402(a) is amended 
by striking paragraph (2). 
(2) 
CONFORMING
AMENDMENT.—Section 
3402(a) is amended— 
(A) by redesignating subparagraphs (A) 
and (B) of paragraph (1) as paragraphs (1) 
and (2) and moving such redesignated para-
graphs 2 ems to the left, and 
(B) by striking all that precedes ‘‘other-
wise provided in this section’’ and inserting the 
following: 
‘‘(a) REQUIREMENT OF WITHHOLDING.—Except as’’. 
(3) 
NUMBER
OF
EXEMPTIONS.—Section 
3402(f)(1) is amended— 
(A) in subparagraph (A), by striking ‘‘an 
individual described in section 151(d)(2)’’ and 
inserting ‘‘a dependent of any other taxpayer’’, 
and 
(B) in subparagraph (C), by striking ‘‘with 
respect to whom, on the basis of facts existing 
at the beginning of such day, there may reason-
ably be expected to be allowable an exemption 
under section 151(c)’’ and inserting ‘‘who, on
the basis of facts existing at the beginning of 
such day, is reasonably expected to be a de-
pendent of the employee’’. 
(f) MODIFICATION OF RETURN REQUIREMENT.— 
(1) IN
GENERAL.—Paragraph (1) of section 
6012(a) is amended to read as follows: 
‘‘(1) Every individual who has gross income for 
the taxable year, except that a return shall not be 
required of— 
‘‘(A) an individual who is not married (de-
termined by applying section 7703) and who 
has gross income for the taxable year which 
does not exceed the standard deduction applica-
ble to such individual for such taxable year 
under section 63, or 
‘‘(B) an individual entitled to make a joint 
return if— 
‘‘(i) the gross income of such indi-
vidual, when combined with the gross in-
come of such individual’s spouse, for the 
taxable year does not exceed the standard 
deduction which would be applicable to the 
taxpayer for such taxable year under sec-
tion 63 if such individual and such individ-
ual’s spouse made a joint return,
‘‘(ii) such individual and such individ-
ual’s spouse have the same household as 
their home at the close of the taxable year, 
‘‘(iii) such individual’s spouse does not 
make a separate return, and 
‘‘(iv) neither such individual nor such 
individual’s spouse is an individual de-
scribed in section 63(c)(2) who has income 
(other than earned income) in excess of the 
amount 
in 
effect 
under 
section 
63(c)(2)(A).’’. 
(2) BANKRUPTCY ESTATES.—Paragraph (8) of 
section 6012(a) is amended by striking ‘‘the sum of 
the exemption amount plus the basic standard de-
duction under section 63(c)(2)(D)’’ and inserting 
‘‘the standard deduction in effect under section 
63(c)(1)(B)’’. 
(g) CONFORMING AMENDMENTS.— 
(1) Section 2(a)(1)(B) is amended by striking 
‘‘a dependent’’ and all that follows through ‘‘section 
151’’ and inserting ‘‘a dependent who (within the 
meaning of section 7706, determined without regard 
to subsections (b)(1), (b)(2) and (d)(1)(B) thereof) 
is a son, stepson, daughter, or stepdaughter of the 
taxpayer’’.
(2) Section 36B(b)(2)(A) is amended by strik-
ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 
(3) Section 36B(b)(3)(B) is amended by strik-
ing ‘‘unless a deduction is allowed under section 151 
for the taxable year with respect to a dependent’’ in 
the flush matter at the end and inserting ‘‘unless 
the taxpayer has a dependent for the taxable year’’. 
(4) Section 36B(c)(1)(D) is amended by strik-
ing ‘‘with respect to whom a deduction under section 
151 is allowable to another taxpayer’’ and inserting 
‘‘who is a dependent of another taxpayer’’. 
(5) Section 36B(d)(1) is amended by striking 
‘‘equal to the number of individuals for whom the 
taxpayer is allowed a deduction under section 151 
(relating to allowance of deduction for personal ex-
emptions) for the taxable year’’ and inserting ‘‘the 
sum of 1 (2 in the case of a joint return) plus the 
number of the taxpayer’s dependents for the taxable 
year’’. 
(6) Section 36B(e)(1) is amended by striking 
‘‘1 or more individuals for whom a taxpayer is al-
lowed a deduction under section 151 (relating to al-
lowance of deduction for personal exemptions) for 
the taxable year (including the taxpayer or his 
spouse)’’ and inserting ‘‘1 or more of the taxpayer,
the taxpayer’s spouse, or any dependent of the tax-
payer’’. 
(7) Section 42(i)(3)(D)(ii)(I) is amended— 
(A) by striking ‘‘section 152’’ and insert-
ing ‘‘section 7706’’, and 
(B) by striking the period at the end and 
inserting a comma. 
(8) Section 72(t)(2)(D)(i)(III) is amended by 
striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 
(9) Section 72(t)(7)(A)(iii) is amended by strik-
ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 
7706(f)(1)’’. 
(10) Section 105(b) is amended— 
(A) by striking ‘‘as defined in section 152’’ 
and inserting ‘‘as defined in section 7706’’, 
(B) by striking ‘‘section 152(f)(1)’’ and in-
serting ‘‘section 7706(f)(1)’’ and 
(C) by striking ‘‘section 152(e)’’ and in-
serting ‘‘section 7706(e)’’. 
(11) Section 105(c)(1) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(12) Section 125(e)(1)(D) is amended by strik-
ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 
(13) Section 132(h)(2)(B) is amended—
(A) by striking ‘‘section 152(f)(1)’’ and in-
serting ‘‘section 7706(f)(1)’’, and 
(B) by striking ‘‘section 152(e)’’ and in-
serting ‘‘section 7706(e)’’. 
(14) Section 139D(c)(5) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(15) Section 162(l)(1)(D) is amended by strik-
ing ‘‘section 152(f)(1)’’ and inserting ‘‘section 
7706(f)(1)’’. 
(16) Section 170(g)(1) is amended by striking 
‘‘section 152’’ and inserting ‘‘section 7706’’. 
(17) Section 170(g)(3) is amended by striking 
‘‘section 
152(d)(2)’’ 
and 
inserting 
‘‘section 
7706(d)(2)’’. 
(18) Section 172(d) is amended by striking 
paragraph (3). 
(19) Section 220(b)(6) is amended by striking 
‘‘with respect to whom a deduction under section 
151 is allowable to’’ and inserting ‘‘who is a depend-
ent of’’. 
(20) Section 220(d)(2)(A) is amended by strik-
ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 
(21) Section 223(b)(6) is amended by striking 
‘‘with respect to whom a deduction under section
151 is allowable to’’ and inserting ‘‘who is a depend-
ent of’’. 
(22) Section 223(d)(2)(A) is amended by strik-
ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 
(23) Section 401(h) is amended by striking 
‘‘section 152(f)(1)’’ in the last sentence and insert-
ing ‘‘section 7706(f)(1)’’. 
(24) Section 402(l)(4)(D) is amended by strik-
ing ‘‘section 152’’ and inserting ‘‘section 7706’’. 
(25) Section 409A(a)(2)(B)(ii)(I) is amended 
by striking ‘‘section 152(a)’’ and inserting ‘‘section 
7706(a)’’. 
(26) Section 501(c)(9) is amended by striking 
‘‘section 
152(f)(1)’’ 
and 
inserting 
‘‘section 
7706(f)(1)’’. 
(27) Section 529(e)(2)(B) is amended by strik-
ing ‘‘section 152(d)(2)’’ and inserting ‘‘section 
7706(d)(2)’’. 
(28) Section 703(a)(2) is amended by striking 
subparagraph (A) and by redesignating subpara-
graphs (B) through (F) as subparagraphs (A) 
through (E), respectively. 
(29) Section 874 is amended by striking sub-
section (b) and by redesignating subsection (c) as 
subsection (b).
(30) Section 891 is amended by striking ‘‘under 
section 151 and’’. 
(31) Section 904(b) is amended by striking 
paragraph (1). 
(32) Section 931(b)(1) is amended by striking 
‘‘(other than the deduction under section 151, relat-
ing to personal exemptions)’’. 
(33) Section 933 is amended— 
(A) by striking ‘‘(other than the deduction 
under section 151, relating to personal exemp-
tions)’’ in paragraph (1), and 
(B) by striking ‘‘(other than the deduction 
for personal exemptions under section 151)’’ in 
paragraph (2). 
(34) Section 1212(b)(2)(B)(ii) is amended to 
read as follows: 
‘‘(ii) in the case of an estate or trust, 
the deduction allowed for such year under 
section 642(b).’’. 
(35) Section 1361(c)(1)(C) is amended by strik-
ing ‘‘section 152(f)(1)(C)’’ and inserting ‘‘section 
7706(f)(1)(C)’’. 
(36) Section 1402(a) is amended by striking 
paragraph (7).
(37) Section 2032A(c)(7)(D) is amended by 
striking ‘‘section 152(f)(2)’’ and inserting ‘‘section 
7706(f)(2)’’. 
(38) Section 3402(m)(1) is amended by striking 
‘‘other than the deductions referred to in section 
151 and’’. 
(39) Section 3402(r)(2) is amended by striking 
‘‘the sum of—’’ and all that follows and inserting 
‘‘the standard deduction in effect under section 
63(c)(1)(B).’’. 
(40) Section 5000A(b)(3)(A) is amended by 
striking ‘‘section 152’’ and inserting ‘‘section 7706’’. 
(41) Section 5000A(c)(4)(A) is amended by 
striking ‘‘the number of individuals for whom the 
taxpayer is allowed a deduction under section 151 
(relating to allowance of deduction for personal ex-
emptions) for the taxable year’’ and inserting ‘‘the 
sum of 1 (2 in the case of a joint return) plus the 
number of the taxpayer’s dependents for the taxable 
year’’. 
(42) Section 6013(b)(3)(A) is amended— 
(A) by striking ‘‘had less than the exemp-
tion amount of gross income’’ in clause (ii) and 
inserting ‘‘had no gross income’’,
(B) by striking ‘‘had gross income of the 
exemption amount or more’’ in clause (iii) and 
inserting ‘‘had any gross income’’, and 
(C) by striking the flush language fol-
lowing clause (iii). 
(43) Section 6103(l)(21)(A)(iii) is amended to 
read as follows: 
‘‘(iii) the number of the taxpayer’s de-
pendents,’’. 
(44) Section 6213(g)(2) is amended by striking 
subparagraph (H). 
(45) Section 6334(d)(2) is amended to read as 
follows: 
‘‘(2) EXEMPT AMOUNT.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘exempt amount’ means an 
amount equal to— 
‘‘(i) the standard deduction, divided 
by 
‘‘(ii) 52. 
‘‘(B) VERIFIED STATEMENT.—Unless the 
taxpayer submits to the Secretary a written and 
properly verified statement specifying the facts 
necessary to determine the proper amount 
under subparagraph (A), subparagraph (A)
shall be applied as if the taxpayer were a mar-
ried individual filing a separate return with no 
dependents.’’. 
(46) Section 7702B(f)(2)(C)(iii) is amended by 
striking ‘‘section 152(d)(2)’’ and inserting ‘‘section 
7706(d)(2)’’. 
(47) Section 7703(a) is amended by striking 
‘‘part V of subchapter B of chapter 1 and’’. 
(48) Section 7703(b)(1) is amended by striking 
‘‘section 152(f)(1)’’ and all that follows and insert-
ing ‘‘section 7706(f)(1),’’. 
(49) Section 7706(a), as redesignated by this 
section, is amended by striking ‘‘this subtitle’’ and 
inserting ‘‘subtitle A’’. 
(50)(A) Section 7706(d)(1)(B), as redesignated 
by this section, is amended by striking ‘‘the exemp-
tion amount (as defined in section 151(d))’’ and in-
serting ‘‘$4,150’’. 
(B) Section 7706(d), as redesignated by this 
section, is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(6) INFLATION ADJUSTMENT.—In the case of 
any calendar year beginning after 2018, the $4,150 
amount in paragraph (1)(B) shall be increased by an 
amount equal to—
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(c)(2)(A) for such cal-
endar year, determined by substituting ‘cal-
endar year 2017’ for ‘calendar year 2016’ in 
clause (ii) thereof. 
If any increase determined under the preceding sen-
tence is not a multiple of $100, such increase shall 
be rounded to the next lowest multiple of $100.’’. 
(51) The table of sections for chapter 79 is 
amended by adding at the end the following new 
item: 
‘‘Sec. 7706. Dependent defined.’’. 
(h) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1004. MAXIMUM RATE ON BUSINESS INCOME OF INDI-
VIDUALS. 
(a) IN GENERAL.—Part I of subchapter A of chapter 
1 is amended by inserting after section 3 the following 
new section: 
‘‘SEC. 4. 25 PERCENT MAXIMUM RATE ON BUSINESS IN-
COME OF INDIVIDUALS. 
‘‘(a) REDUCTION IN TAX TO ACHIEVE 25 PERCENT 
MAXIMUM RATE.—The tax imposed by section 1 shall be 
reduced by the sum of—
‘‘(1) 10 percent of the lesser of— 
‘‘(A) qualified business income, or 
‘‘(B) the excess (if any) of— 
‘‘(i) taxable income reduced by net 
capital 
gain 
(as 
defined 
in 
section 
1(h)(11)(A)), over 
‘‘(ii) the maximum dollar amount for 
the 25-percent rate bracket which applies 
to the taxpayer under section 1 for the 
taxable year, and 
‘‘(2) 4.6 percent of the excess (if any) of— 
‘‘(A) the lesser of— 
‘‘(i) qualified business income, or 
‘‘(ii) the excess (if any) determined 
under paragraph (1)(B), over 
‘‘(B) the excess of— 
‘‘(i) the maximum dollar amount for 
the 35-percent rate bracket which applies 
to the taxpayer under section 1 for the 
taxable year, over 
‘‘(ii) the maximum dollar amount for 
the 25-percent rate bracket which applies 
to the taxpayer under section 1 for the 
taxable year.
‘‘(b) QUALIFIED BUSINESS INCOME.—For purposes 
of this section, the term ‘qualified business income’ means 
the excess (if any) of— 
‘‘(1) the sum of— 
‘‘(A) 100 percent of any net business in-
come derived from any passive business activity, 
plus 
‘‘(B) the capital percentage of any net 
business income derived from any active busi-
ness activity, over 
‘‘(2) the sum of— 
‘‘(A) 100 percent of any net business loss 
derived from any passive business activity, 
‘‘(B) except as provided in subsection 
(e)(3)(A), 30 percent of any net business loss 
derived from any active business activity, plus 
‘‘(C) any carryover business loss deter-
mined for the preceding taxable year. 
‘‘(c) DETERMINATION OF NET BUSINESS INCOME OR 
LOSS.—For purposes of this section— 
‘‘(1) IN GENERAL.—Net business income or loss 
shall be determined with respect to any business ac-
tivity by appropriately netting items of income, gain, 
deduction, and loss with respect to such business ac-
tivity.
‘‘(2) WAGES, ETC.—Any wages (as defined in 
section 3401), payments described in subsection (a) 
or (c) of section 707, or directors’ fees received by 
the taxpayer which are properly attributable to any 
business activity shall be taken into account under 
paragraph (1) as an item of income with respect to 
such business activity. 
‘‘(3) EXCEPTION
FOR
CERTAIN
INVESTMENT- 
RELATED ITEMS.—There shall not be taken into ac-
count under paragraph (1)— 
‘‘(A) any item of short-term capital gain, 
short-term capital loss, long-term capital gain, 
or long-term capital loss, 
‘‘(B) any dividend, income equivalent to a 
dividend, or payment in lieu of dividends de-
scribed in section 954(c)(1)(G), 
‘‘(C) any interest income other than inter-
est income which is properly allocable to a trade 
or business, 
‘‘(D) any item of gain or loss described in 
subparagraph (C) or (D) of section 954(c)(1) 
(applied by substituting ‘business activity’ for 
‘controlled foreign corporation’), 
‘‘(E) any item of income, gain, deduction, 
or loss taken into account under section
954(c)(1)(F) (determined without regard to 
clause (ii) thereof and other than items attrib-
utable to notional principal contracts entered 
into in transactions qualifying under section 
1221(a)(7)), 
‘‘(F) any amount received from an annuity 
which is not received in connection with the 
trade or business of the business activity, and 
‘‘(G) any item of deduction or loss properly 
allocable to an amount described in any of the 
preceding subparagraphs. 
‘‘(4) APPLICATION OF RESTRICTIONS APPLICA-
BLE TO DETERMINING TAXABLE INCOME.—Net busi-
ness income or loss shall be appropriately adjusted 
so as only to take into account any amount of in-
come, gain, deduction, or loss to the extent such 
amount affects the determination of taxable income 
for the taxable year. 
‘‘(5) CARRYOVER
BUSINESS
LOSS.—For pur-
poses of subsection (b)(2)(C), the carryover business 
loss determined for any taxable year is the excess (if 
any) of the sum described in subsection (b)(2) over 
the sum described in subsection (b)(1) for such tax-
able year.
‘‘(d) PASSIVE AND ACTIVE BUSINESS ACTIVITY.— 
For purposes of this section— 
‘‘(1) PASSIVE BUSINESS ACTIVITY.—The term 
‘passive business activity’ means any passive activity 
as defined in section 469(c) determined without re-
gard to paragraphs (3) and (6)(B) thereof. 
‘‘(2) ACTIVE
BUSINESS
ACTIVITY.—The term 
‘active business activity’ means any business activity 
which is not a passive business activity. 
‘‘(3) BUSINESS ACTIVITY.—The term ‘business 
activity’ means any activity (within the meaning of 
section 469) which involves the conduct of any trade 
or business. 
‘‘(e) CAPITAL PERCENTAGE.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, the term ‘capital percentage’ 
means 30 percent. 
‘‘(2) INCREASED PERCENTAGE FOR CAPITAL-IN-
TENSIVE BUSINESS ACTIVITIES.—In the case of a 
taxpayer who elects the application of this paragraph 
with respect to any active business activity (other 
than a specified service activity), the capital percent-
age shall be equal to the applicable percentage (as 
defined in subsection (f)) for each taxable year with
respect to which such election applies. Any election 
made under this paragraph shall apply to the tax-
able year for which such election is made and each 
of the 4 subsequent taxable years. Such election 
shall be made not later than the due date (including 
extensions) for the return of tax for the taxable year 
for which such election is made, and, once made, 
may not be revoked. 
‘‘(3) TREATMENT OF SPECIFIED SERVICE AC-
TIVITIES.— 
‘‘(A) IN GENERAL.—In the case of any ac-
tive business activity which is a specified service 
activity— 
‘‘(i) the capital percentage shall be 0 
percent, and 
‘‘(ii) subsection (b)(2)(B) shall be ap-
plied by substituting ‘0 percent’ for ‘30 
percent’. 
‘‘(B) EXCEPTION FOR CAPITAL-INTENSIVE 
SPECIFIED SERVICE ACTIVITIES.—If— 
‘‘(i) the taxpayer elects the application 
of this subparagraph with respect to such 
activity for any taxable year, and 
‘‘(ii) the applicable percentage (as de-
fined in subsection (f)) with respect to
such activity for such taxable year is at 
least 10 percent, 
then subparagraph (A) shall not apply and the 
capital percentage with respect to such activity 
shall be equal to such applicable percentage. 
‘‘(C) SPECIFIED SERVICE ACTIVITY.—The 
term ‘specified service activity’ means any activ-
ity involving the performance of services de-
scribed in section 1202(e)(3)(A), including in-
vesting, trading, or dealing in securities (as de-
fined in section 475(c)(2)), partnership inter-
ests, or commodities (as defined in section 
475(e)(2)). 
‘‘(4) REDUCTION IN CAPITAL PERCENTAGE IN 
CERTAIN
CASES.—The capital percentage (deter-
mined after the application of paragraphs (2) and 
(3)) with respect to any active business activity shall 
not exceed 1 minus the quotient (not greater than 
1) of— 
‘‘(A) any amounts described in subsection 
(c)(2) which are taken into account in deter-
mining the net business income derived from 
such activity, divided by 
‘‘(B) such net business income.
‘‘(f) APPLICABLE PERCENTAGE.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘applicable per-
centage’ means, with respect to any active business 
activity for any taxable year, the quotient (not great-
er than 1) of— 
‘‘(A) the specified return on capital with 
respect to such activity for such taxable year, 
divided by 
‘‘(B) the taxpayer’s net business income 
derived from such activity for such taxable year. 
‘‘(2) SPECIFIED
RETURN
ON
CAPITAL.—The 
term ‘specified return on capital’ means, with re-
spect to any active business activity referred to in 
paragraph (1), the excess of— 
‘‘(A) the product of— 
‘‘(i) the deemed rate of return for the 
taxable year, multiplied by 
‘‘(ii) the asset balance with respect to 
such activity for such taxable year, over 
‘‘(B) an amount equal to the interest 
which is paid or accrued, and for which a de-
duction is allowed under this chapter, with re-
spect to such activity for such taxable year.
‘‘(3) DEEMED
RATE
OF
RETURN.—The term 
‘deemed rate of return’ means, with respect to any 
taxable year, the Federal short-term rate (deter-
mined under section 1274(d) for the month in which 
or with which such taxable year ends) plus 7 per-
centage points. 
‘‘(4) ASSET BALANCE.— 
‘‘(A) IN
GENERAL.—The asset balance 
with respect to any active business activity re-
ferred to in paragraph (1) for any taxable year 
equals the taxpayer’s adjusted basis of any 
property described in section 1221(a)(2) which 
is used in connection with such activity as of 
the end of the taxable year (determined without 
regard to sections 168(k) and 179). 
‘‘(B) APPLICATION
TO
ACTIVITIES
CAR-
RIED ON THROUGH PARTNERSHIPS AND S COR-
PORATIONS.—In the case of any active business 
activity carried on through a partnership or S 
corporation, the taxpayer shall take into ac-
count such taxpayer’s distributive or pro rata 
share (as the case may be) of the asset balance 
with respect to such activity as determined with 
respect to such partnership or S corporation 
under subparagraph (A) (applied by sub-
stituting ‘the partnership’s or S corporation’s 
adjusted basis’ for ‘the taxpayer’s adjusted 
basis’). 
‘‘(g) REDUCED RATE FOR SMALL BUSINESSES WITH 
NET ACTIVE BUSINESS INCOME.— 
‘‘(1) IN GENERAL.—The tax imposed by section 
1 shall be reduced by 3 percent of the excess (if any) 
of— 
‘‘(A) the least of— 
‘‘(i) qualified active business income, 
‘‘(ii) taxable income reduced by net 
capital 
gain 
(as 
defined 
in 
section 
1(h)(11)(A)), or 
‘‘(iii) the 9-percent bracket threshold 
amount, over 
‘‘(B) the excess (if any) of taxable income 
over the applicable threshold amount. 
‘‘(2) PHASE-IN OF RATE REDUCTION.—In the 
case of any taxable year beginning before January 1, 
2022, paragraph (1) shall be applied by substituting 
for ‘3 percent’— 
‘‘(A) in the case of any taxable year begin-
ning after December 31, 2017, and before Jan-
uary 1, 2020, ‘1 percent’, and
‘‘(B) in the case of any taxable year begin-
ning after December 31, 2019, and before Jan-
uary 1, 2022, ‘2 percent’. 
‘‘(3) QUALIFIED ACTIVE BUSINESS INCOME.— 
For purposes of this subsection, the term ‘qualified 
active business income’ means the excess (if any) 
of— 
‘‘(A) any net business income derived from 
any active business activity, over 
‘‘(B) any net business loss derived from 
any active business activity. 
‘‘(4) 
9-PERCENT
BRACKET
THRESHOLD 
AMOUNT.—For purposes of this subsection, the term 
‘9-percent bracket threshold amount’ means— 
‘‘(A) in the case of a joint return or sur-
viving spouse, $75,000, 
‘‘(B) in the case of an individual who is 
the head of a household (as defined in section 
2(b)), 3⁄4 of the amount in effect for the taxable 
year under subparagraph (A), and 
‘‘(C) in the case of any other individual, 1⁄2 
of the amount in effect for the taxable year 
under subparagraph (A).
‘‘(5) APPLICABLE THRESHOLD AMOUNT.—For 
purposes of this subsection, the term ‘applicable 
threshold amount’ means— 
‘‘(A) in the case of a joint return or sur-
viving spouse, $150,000, 
‘‘(B) in the case of an individual who is 
the head of a household (as defined in section 
2(b)), 3⁄4 of the amount in effect for the taxable 
year under subparagraph (A), and 
‘‘(C) in the case of any other individual, 1⁄2 
of the amount in effect for the taxable year 
under subparagraph (A). 
‘‘(6) ESTATES
AND
TRUSTS.—Paragraph (1) 
shall not apply to any estate or trust. 
‘‘(7) INFLATION ADJUSTMENT.—In the case of 
any taxable year beginning after 2018, the dollar 
amounts in paragraphs (4)(A) and (5)(A) shall each 
be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under subsection (c)(2)(A) for the cal-
endar year in which the taxable year begins, de-
termined by substituting ‘calendar year 2017’ 
for ‘calendar year 2016’ in clause (ii) thereof.
If any increase determined under the preceding sen-
tence is not a multiple of $100, such increase shall 
be rounded to the next lowest multiple of $100. 
‘‘(h) REGULATIONS.—The Secretary may issue such 
regulations or other guidance as may be necessary or ap-
propriate to carry out the purposes of this section, includ-
ing regulations or other guidance— 
‘‘(1) which ensures that no amount is taken 
into account under subsection (f)(4) with respect to 
more than one activity, and 
‘‘(2) which treats all specified service activities 
of the taxpayer as a single business activity for pur-
poses of this section to the extent that such activi-
ties would be treated as a single employer under 
subsection (a) or (b) of section 52 or subsection (m) 
or (o) of section 414. 
‘‘(i) REFERENCES.—Any reference in this title to sec-
tion 1 shall be treated as including a reference to this sec-
tion unless the context of such reference clearly indicates 
otherwise.’’. 
(b) 25 PERCENT RATE FOR CERTAIN DIVIDENDS OF 
REAL ESTATE INVESTMENT TRUSTS
AND COOPERA-
TIVES.—Section 1(h), as amended by the preceding provi-
sions of this Act, is amended by adding at the end the 
following new paragraph:
‘‘(13) 25 PERCENT RATE FOR CERTAIN DIVI-
DENDS OF REAL ESTATE INVESTMENT TRUSTS AND 
COOPERATIVES.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, net capital gain (as defined in para-
graph (11)) and unrecaptured section 1250 
gain (as defined in paragraph (6)) shall each be 
increased by specified dividend income. 
‘‘(B) SPECIFIED DIVIDEND INCOME.—For 
purposes of this paragraph, the term ‘specified 
dividend income’ means— 
‘‘(i) in the case of any dividend re-
ceived from a real estate investment trust, 
the portion of such dividend which is nei-
ther— 
‘‘(I) a capital gain dividend (as 
defined in section 852(b)(3)), nor 
‘‘(II) taken into account in deter-
mining qualified dividend income (as 
defined in paragraph (11)), and 
‘‘(ii) any dividend which is includible 
in gross income and which is received from 
an organization or corporation described in 
section 501(c)(12) or 1381(a).’’.
(c) CLERICAL AMENDMENT.—The table of sections 
for part I of subchapter A of chapter 1 is amended by 
inserting after the item relating to section 3 the following 
new item: 
‘‘Sec. 4. 25 percent maximum rate on business income of individuals.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
(e) TRANSITION RULE.—In the case of any taxable 
year which includes December 31, 2017, the amendment 
made by subsection (a) shall apply with respect to such 
taxable year adjusted— 
(1) so as to apply with respect to the rates of 
tax in effect under section 1 of the Internal Revenue 
Code of 1986 with respect to such taxable year (and 
so as to achieve a 25 percent effective rate of tax 
on the business income (determined without regard 
to paragraph (2)) in the same manner as such 
amendment applies to taxable years beginning after 
such date with respect to the rates of tax in effect 
for such years), and 
(2) by reducing the amount of the reduction in 
tax (as otherwise determined under paragraph (1)) 
by the amount which bears the same proportion to 
the amount of such reduction as the number of days 
in the taxable year which are before January 1,
2018, bears to the number of days in the entire tax-
able year. 
SEC. 1005. CONFORMING AMENDMENTS RELATED TO SIM-
PLIFICATION OF INDIVIDUAL INCOME TAX 
RATES. 
(a) AMENDMENTS RELATED TO MODIFICATION OF 
INFLATION ADJUSTMENT.— 
(1) Section 32(b)(2)(B)(ii)(II) is amended by 
striking ‘‘section 1(f)(3) for the calendar year in 
which the taxable year begins determined by sub-
stituting ‘calendar year 2008’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for the calendar year in which 
the taxable year begins determined by substituting 
‘calendar year 2008’ for ‘calendar year 2016’ in 
clause (ii) thereof’’. 
(2) Section 32(j)(1)(B) is amended— 
(A) in the matter preceding clause (i), by 
striking ‘‘section 1(f)(3)’’ and inserting ‘‘section 
1(c)(2)(A)’’, 
(B) in clause (i), by striking ‘‘for ‘calendar 
year 1992’ in subparagraph (B) thereof’’ and 
inserting ‘‘for ‘calendar year 2016’ in clause (ii) 
thereof’’, and
(C) in clause (ii), by striking ‘‘for ‘calendar 
year 1992’ in subparagraph (B) of such section 
1’’ and inserting ‘‘for ‘calendar year 2016’ in 
clause (ii) thereof’’. 
(3) Section 36B(b)(3)(A)(ii)(II) is amended by 
striking ‘‘consumer price index’’ and inserting ‘‘C- 
CPI-U (as defined in section 1(c))’’. 
(4) Section 41(e)(5)(C) is amended to read as 
follows: 
‘‘(C) COST-OF-LIVING
ADJUSTMENT
DE-
FINED.— 
‘‘(i) IN GENERAL.—The cost-of-living 
adjustment for any calendar year is the 
cost-of-living adjustment for such calendar 
year determined under section 1(c)(2)(A), 
by substituting ‘calendar year 1987’ for 
‘calendar year 2016’ in clause (ii) thereof. 
‘‘(ii) SPECIAL RULE WHERE BASE PE-
RIOD ENDS IN A CALENDAR YEAR OTHER 
THAN 1983 OR 1984.—If the base period of 
any taxpayer does not end in 1983 or 
1984, clause (i) shall be applied by sub-
stituting the calendar year in which such 
base period ends for 1987.’’.
(5) Section 42(e)(3)(D)(ii) is amended by strik-
ing ‘‘section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 2008’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year by sub-
stituting ‘calendar year 2008’ for ‘calendar year 
2016’ in clause (ii) thereof’’. 
(6) Section 42(h)(3)(H)(i)(II) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting ‘calendar year 2001’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year by sub-
stituting ‘calendar year 2001’ for ‘calendar year 
2016’ in clause (ii) thereof’’. 
(7) Section 45R(d)(3)(B)(ii) is amended by 
striking ‘‘section 1(f)(3) for the calendar year, deter-
mined by substituting ‘calendar year 2012’ for ‘cal-
endar year 1992’ in subparagraph (B) thereof’’ and 
inserting ‘‘ ‘section 1(c)(2)(A) for such calendar 
year, determined by substituting ‘‘calendar year 
2012’’ for ‘‘calendar year 2016’’ in clause (ii) there-
of’ ’’. 
(8) Section 125(i)(2) is amended— 
(A) by striking ‘‘section 1(f)(3) for the cal-
endar year in which the taxable year begins by
substituting ‘calendar year 2012’ for ‘calendar 
year 1992’ in subparagraph (B) thereof’’ in 
subparagraph 
(B) 
and 
inserting 
‘‘section 
1(c)(2)(A) for the calendar year in which the 
taxable year begins’’, and 
(B) by striking ‘‘$50’’ both places it ap-
pears in the last sentence and inserting 
‘‘$100’’. 
(9) Section 162(o)(3) is amended by inserting 
‘‘as in effect before enactment of the Tax Cuts and 
Jobs Act’’ after ‘‘section 1(f)(5)’’. 
(10) Section 220(g)(2) is amended by striking 
‘‘section 1(f)(3) for the calendar year in which the 
taxable year begins by substituting ‘calendar year 
1997’ for ‘calendar year 1992’ in subparagraph (B) 
thereof’’ and inserting ‘‘section 1(c)(2)(A) for the 
calendar year in which the taxable year begins, de-
termined by substituting ‘calendar year 1997’ for 
‘calendar year 2016’ in clause (ii) thereof’’. 
(11) Section 223(g)(1) is amended by striking 
all that follows subparagraph (A) and inserting the 
following: 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(c)(2)(A) for the calendar
year in which the taxable year begins, deter-
mined— 
‘‘(i) by substituting for ‘calendar year 
2016’ in clause (ii) thereof— 
‘‘(I) except as provided in clause 
(ii), ‘calendar year 1997’, and 
‘‘(II) in the case of each dollar 
amount in subsection (c)(2)(A), ‘cal-
endar year 2003’, and 
‘‘(ii) by substituting ‘March 31’ for 
‘August 31’ in paragraphs (5)(B) and 
(6)(B) of section 1(c). 
The Secretary shall publish the dollar amounts 
as adjusted under this subsection for taxable 
years beginning in any calendar year no later 
than June 1 of the preceding calendar year.’’. 
(12) Section 430(c)(7)(D)(vii)(II) is amended 
by striking ‘‘section 1(f)(3) for the calendar year, 
determined by substituting ‘calendar year 2009’ for 
‘calendar year 1992’ in subparagraph (B) thereof’’ 
and inserting ‘‘section 1(c)(2)(A) for the calendar 
year, determined by substituting ‘calendar year 
2009’ for ‘calendar year 2016’ in clause (ii) there-
of’’.
(13) Section 512(d)(2)(B) is amended by strik-
ing ‘‘section 1(f)(3) for the calendar year in which 
the taxable year begins, by substituting ‘calendar 
year 1994’ for ‘calendar year 1992’ in subparagraph 
(B) thereof’’and inserting ‘‘section 1(c)(2)(A) for the 
calendar year in which the taxable year begins, de-
termined by substituting ‘calendar year 1994’ for 
‘calendar year 2016’ in clause (ii) thereof’’. 
(14) Section 513(h)(2)(C)(ii) is amended by 
striking ‘‘section 1(f)(3) for the calendar year in 
which the taxable year begins by substituting ‘cal-
endar year 1987’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof’’ and inserting ‘‘section 
1(c)(2)(A) for the calendar year in which the taxable 
year begins, determined by substituting ‘calendar 
year 1987’ for ‘calendar year 2016’ in clause (ii) 
thereof’’. 
(15) Section 831(b)(2)(D)(ii) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting ‘calendar year 2013’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year by sub-
stituting ‘calendar year 2013’ for ‘calendar year 
2016’ in clause (ii) thereof’’.
(16) Section 877A(a)(3)(B)(i)(II) is amended 
by striking ‘‘section 1(f)(3) for the calendar year in 
which the taxable year begins, by substituting ‘cal-
endar year 2007’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof’’ and inserting ‘‘section 
1(c)(2)(A) for the calendar year in which the taxable 
year begins, determined by substituting ‘calendar 
year 2007’ for ‘calendar year 2016’ in clause (ii) 
thereof’’. 
(17) Section 911(b)(2)(D)(ii)(II) is amended by 
striking ‘‘section 1(f)(3) for the calendar year in 
which the taxable year begins, determined by sub-
stituting ‘2004’ for ‘1992’ in subparagraph (B) 
thereof’’ and inserting ‘‘section 1(c)(2)(A) for the 
calendar year in which the taxable year begins, de-
termined by substituting ‘calendar year 2004’ for 
‘calendar year 2016’ in clause (ii) thereof’’. 
(18) Section 1274A(d)(2) is amended to read 
as follows: 
‘‘(2) INFLATION ADJUSTMENT.— 
‘‘(A) IN
GENERAL.—In the case of any 
debt instrument arising out of a sale or ex-
change during any calendar year after 2018, 
each adjusted dollar amount shall be increased 
by an amount equal to—
‘‘(i) such adjusted dollar amount, 
multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(c)(2)(A) for such 
calendar year, determined by substituting 
‘calendar year 2017’ for ‘calendar year 
2016’ in clause (ii) thereof. 
‘‘(B) ADJUSTED DOLLAR AMOUNTS.—For 
purposes of this paragraph, the term ‘adjusted 
dollar amount’ means the dollar amounts in 
subsections (b) and (c), in each case as in effect 
for calendar year 2018. 
‘‘(C) ROUNDING.—Any increase under sub-
paragraph (A) shall be rounded to the nearest 
multiple of $100.’’. 
(19) Section 2010(c)(3)(B)(ii) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting ‘calendar year 2010’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year, deter-
mined by substituting ‘calendar year 2010’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(20) Section 2032A(a)(3)(B) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting ‘calendar year 1997’ for ‘calendar year
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year, deter-
mined by substituting ‘calendar year 1997’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(21) Section 2503(b)(2)(B) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting ‘calendar year 1997’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for the calendar year, deter-
mined by substituting ‘calendar year 1997’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(22) Section 4161(b)(2)(C)(i)(II) is amended by 
striking ‘‘section 1(f)(3) for such calendar year, de-
termined by substituting ‘2004’ for ‘1992’ in sub-
paragraph (B) thereof’’ and inserting ‘‘section 
1(c)(2)(A) for such calendar year, determined by 
substituting ‘calendar year 2004’ for ‘calendar year 
2016’ in clause (ii) thereof’’. 
(23) Section 4261(e)(4)(A)(ii) is amended by 
striking ‘‘section 1(f)(3) for such calendar year by 
substituting the year before the last nonindexed year 
for ‘calendar year 1992’ in subparagraph (B) there-
of’’ and inserting ‘‘section 1(c)(2)(A) for such cal-
endar year, determined by substituting the year be-
fore the last nonindexed year for ‘calendar year 
2016’ in clause (ii) thereof’’. 
(24) Section 4980I(b)(3)(C)(v)(II) is amend-
ed— 
(A) by striking ‘‘section 1(f)(3)’’ and in-
serting ‘‘section 1(c)(2)(A)’’, 
(B) by striking ‘‘subparagraph (B)’’ and 
inserting ‘‘clause (ii)’’, and 
(C) by striking ‘‘1992’’ and inserting 
‘‘2016’’. 
(25) Section 5000A(c)(3)(D)(ii) is amended— 
(A) by striking ‘‘section 1(f)(3)’’ and in-
serting ‘‘section 1(c)(2)(A)’’, 
(B) by striking ‘‘subparagraph (B)’’ and 
inserting ‘‘clause (ii)’’, and 
(C) by striking ‘‘1992’’ and inserting 
‘‘2016’’. 
(26) Section 6039F(d) is amended by striking 
‘‘section 1(f)(3), except that subparagraph (B) 
thereof’’ and inserting ‘‘section 1(c)(2)(A), except 
that clause (ii) thereof’’. 
(27) Section 6323(i)(4)(B) is amended by strik-
ing ‘‘section 1(f)(3) for the calendar year, deter-
mined by substituting ‘calendar year 1996’ for ‘cal-
endar year 1992’ in subparagraph (B) thereof’’ and
inserting ‘‘section 1(c)(2)(A) for the calendar year, 
determined by substituting ‘calendar year 1996’ for 
‘calendar year 2016’ in clause (ii) thereof’’. 
(28) Section 6334(g)(1)(B) is amended by 
striking ‘‘section 1(f)(3) for such calendar year, by 
substituting ‘calendar year 1998’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year, deter-
mined by substituting ‘calendar year 1999’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(29) Section 6601(j)(3)(B) is amended by strik-
ing ‘‘section 1(f)(3) for such calendar year by sub-
stituting ‘calendar year 1997’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for such calendar year by sub-
stituting ‘calendar year 1997’ for ‘calendar year 
2016’ in clause (ii) thereof’’. 
(30) Section 6651(i)(1) is amended by striking 
‘‘section 1(f)(3) determined by substituting ‘calendar 
year 2013’ for ‘calendar year 1992’ in subparagraph 
(B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter-
mined by substituting ‘calendar year 2013’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(31) Section 6721(f)(1) is amended—
(A) by striking ‘‘section 1(f)(3)’’ and in-
serting ‘‘section 1(c)(2)(A)’’, 
(B) by striking ‘‘subparagraph (B)’’ and 
inserting ‘‘clause (ii)’’, and 
(C) by striking ‘‘1992’’ and inserting 
‘‘2016’’. 
(32) Section 6722(f)(1) is amended— 
(A) by striking ‘‘section 1(f)(3)’’ and in-
serting ‘‘section 1(c)(2)(A)’’, 
(B) by striking ‘‘subparagraph (B)’’ and 
inserting ‘‘clause (ii)’’, and 
(C) by striking ‘‘1992’’ and inserting 
‘‘2016’’. 
(33) Section 6652(c)(7)(A) is amended by strik-
ing ‘‘section 1(f)(3) determined by substituting ‘cal-
endar year 2013’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof’’ and inserting ‘‘section 
1(c)(2)(A) determined by substituting ‘calendar year 
2013’ for ‘calendar year 2016’ in clause (ii) there-
of’’. 
(34) Section 6695(h)(1) is amended by striking 
‘‘section 1(f)(3) determined by substituting ‘calendar 
year 2013’ for ‘calendar year 1992’ in subparagraph 
(B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter-
mined by substituting ‘calendar year 2013’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(35) Section 6698(e)(1) is amended by striking 
‘‘section 1(f)(3) determined by substituting ‘calendar 
year 2013’ for ‘calendar year 1992’ in subparagraph 
(B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter-
mined by substituting ‘calendar year 2013’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(36) Section 6699(e)(1) is amended by striking 
‘‘section 1(f)(3) determined by substituting ‘calendar 
year 2013’ for ‘calendar year 1992’ in subparagraph 
(B) thereof’’ and inserting ‘‘section 1(c)(2)(A) deter-
mined by substituting ‘calendar year 2013’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(37) Section 7345(f)(2) is amended by striking 
‘‘section 1(f)(3) for the calendar year, determined by 
substituting ‘calendar year 2015’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for the calendar year, deter-
mined by substituting ‘calendar year 2015’ for ‘cal-
endar year 2016’ in clause (ii) thereof’’. 
(38) Section 7430(c)(1) is amended by striking 
‘‘section 1(f)(3) for such calendar year, by sub-
stituting ‘calendar year 1995’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ in the flush text
at the end and inserting ‘‘section 1(c)(2)(A) for such 
calendar year, determined by substituting ‘calendar 
year 1995’ for ‘calendar year 2016’ in clause (ii) 
thereof’’. 
(39) Section 7872(g)(5) is amended to read as 
follows: 
‘‘(5) INFLATION ADJUSTMENT.— 
‘‘(A) IN
GENERAL.—In the case of any 
loan made during any calendar year after 2018 
to which paragraph (1) applies, the adjusted 
dollar amount shall be increased by an amount 
equal to— 
‘‘(i) such adjusted dollar amount, 
multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(c)(2)(A) for such 
calendar year, determined by substituting 
‘calendar year 2017’ for ‘calendar year 
2016’ in clause (ii) thereof. 
‘‘(B) ADJUSTED
DOLLAR
AMOUNT.—For 
purposes of this paragraph, the term ‘adjusted 
dollar amount’ means the dollar amount in 
paragraph (2) as in effect for calendar year 
2018.
‘‘(C) ROUNDING.—Any increase under sub-
paragraph (A) shall be rounded to the nearest 
multiple of $100.’’. 
(40) Section 219(b)(5)(C)(i)(II) is amended by 
striking ‘‘section 1(f)(3) for the calendar year in 
which the taxable year begins, determined by sub-
stituting ‘calendar year 2007’ for ‘calendar year 
1992’ in subparagraph (B) thereof’’ and inserting 
‘‘section 1(c)(2)(A) for the calendar year in which 
the taxable year begins, determined by substituting 
‘calendar year 2007’ for ‘calendar year 2016’ in 
clause (ii) thereof’’. 
(41) Section 219(g)(8)(B) is amended by strik-
ing ‘‘section 1(f)(3) for the calendar year in which 
the taxable year begins, determined by substituting 
‘calendar year 2005’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof’’ and inserting ‘‘section 
1(c)(2)(A) for the calendar year in which the taxable 
year begins, determined by substituting ‘calendar 
year 2005’ for ‘calendar year 2016’ in clause (ii) 
thereof’’. 
(b) OTHER CONFORMING AMENDMENTS.— 
(1) Section 36B(b)(3)(B)(ii)(I)(aa) is amended 
to read as follows:
‘‘(aa) who is described in 
section 1(b)(1)(B) and who does 
not have any dependents for the 
taxable year,’’. 
(2) Section 486B(b)(1) is amended— 
(A) by striking ‘‘maximum rate in effect’’ 
and inserting ‘‘highest rate specified’’, and 
(B) by striking ‘‘section 1(e)’’ and insert-
ing ‘‘section 1’’. 
(3) Section 511(b)(1) is amended by striking 
‘‘section 1(e)’’ and inserting ‘‘section 1’’. 
(4) Section 641(a) is amended by striking ‘‘sec-
tion 1(e) shall apply to the taxable income’’ and in-
serting ‘‘section 1 shall apply to the taxable in-
come’’. 
(5) Section 641(c)(2)(A) is amended to read as 
follows: 
‘‘(A) Except to the extent provided in sec-
tion 1(h), the rate of tax shall be treated as 
being the highest rate of tax set forth in section 
1(a).’’. 
(6) Section 646(b) is amended to read as fol-
lows: 
‘‘(b) TAXATION OF INCOME OF TRUST.—Except as 
provided in subsection (f)(1)(B)(ii), there is hereby im-
posed on the taxable income of an electing Settlement 
Trust a tax at the rate specified in section 1(a)(1). Such 
tax shall be in lieu of the income tax otherwise imposed 
by this chapter on such income.’’. 
(7) Section 685(c) is amended by striking ‘‘Sec-
tion 1(e)’’ and inserting ‘‘Section 1’’. 
(8) Section 904(b)(3)(E)(ii)(I) is amended by 
striking ‘‘set forth in subsection (a), (b), (c), (d), or 
(e) of section 1 (whichever applies)’’ and inserting 
‘‘the highest rate of tax specified in section 1’’. 
(9) Section 1398(c)(2) is amended by striking 
‘‘subsection (d) of’’. 
(10) Section 3402(p)(1)(B) is amended by 
striking ‘‘any percentage applicable to any of the 3 
lowest income brackets in the table under section 
1(c),’’ and inserting ‘‘12 percent, 25 percent,’’. 
(11) Section 3402(q)(1) is amended by striking 
‘‘the product of third lowest rate of tax applicable 
under section 1(c) and’’ and inserting ‘‘25 percent 
of’’. 
(12) Section 3402(r)(3) is amended by striking 
‘‘the amount of tax which would be imposed by sec-
tion 1(c) (determined without regard to any rate of 
tax in excess of the fourth lowest rate of tax applica-
ble under section 1(c)) on an amount of taxable in-
come equal to’’ and inserting ‘‘an amount equal to 
the product of 25 percent multiplied by’’. 
(13) Section 3406(a)(1) is amended by striking 
‘‘the product of the fourth lowest rate of tax applica-
ble under section 1(c) and’’ and inserting ‘‘25 per-
cent of’’. 
(14) Section 6103(e)(1)(A)(iii) is amended by 
inserting ‘‘(as in effect on the day before the date 
of the enactment of the Tax Cuts and Jobs Act)’’ 
after ‘‘section 1(g)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
Subtitle B—Simplification and Re-
form of Family and Individual 
Tax Credits 
SEC. 1101. ENHANCEMENT OF CHILD TAX CREDIT AND NEW 
FAMILY TAX CREDIT. 
(a) INCREASE IN CREDIT AMOUNT AND ADDITION OF 
OTHER DEPENDENTS.— 
(1) IN GENERAL.—Section 24(a) is amended to read 
as follows: 
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the sum of—
‘‘(1) with respect to each qualifying child of the 
taxpayer, $1,600, and 
‘‘(2) for taxable years beginning before January 
1, 2023, with respect to the taxpayer (each spouse 
in the case of a joint return) and each dependent of 
the taxpayer to whom paragraph (1) does not apply, 
$300.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 24(c) is amended— 
(i) by redesignating paragraphs (1) and 
(2) as paragraphs (2) and (3), respectively, 
(ii) by striking ‘‘152(c)’’ in paragraph (2) 
(as so redesignated) and inserting ‘‘7706(c)’’, 
(iii) by inserting before paragraph (2) (as 
so redesignated) the following new paragraph: 
‘‘(1) DEPENDENT.— 
‘‘(A) IN GENERAL.—The term ‘dependent’ 
shall have the meaning given such term by sec-
tion 7706. 
‘‘(B) CERTAIN INDIVIDUALS NOT TREATED 
AS DEPENDENTS.—In the case of an individual 
with respect to whom a credit under this section 
is allowable to another taxpayer for a taxable 
year beginning in the calendar year in which 
the individual’s taxable year begins, the amount
applicable to such individual under subsection 
(a) for such individual’s taxable year shall be 
zero.’’, 
(iv) in paragraph (3) (as so redesig-
nated)— 
(I) by striking ‘‘term ‘qualifying 
child’ ’’ and inserting ‘‘terms ‘qualifying 
child’ and ‘dependent’ ’’, and 
(II) by striking ‘‘152(b)(3)’’ and in-
serting ‘‘7706(b)(3)’’, and 
(v) in the heading by striking ‘‘QUALI-
FYING’’ and inserting ‘‘DEPENDENT; QUALI-
FYING’’. 
(B) The heading for section 24 is amended by 
inserting ‘‘AND FAMILY’’ after ‘‘CHILD’’. 
(C) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by 
striking the item relating to section 24 and inserting 
the following new item: 
‘‘Sec. 24. Child and family tax credit.’’. 
(b) ELIMINATION OF MARRIAGE PENALTY.—Section 
24(b)(2) is amended— 
(1) by striking ‘‘$110,000’’ in subparagraph (A) and 
inserting ‘‘$230,000’’, 
(2) by inserting ‘‘and’’ at the end of subparagraph 
(A),
(3) by striking ‘‘$75,000 in the case of an individual 
who is not married’’ and all that follows through the pe-
riod at the end and inserting ‘‘one-half of the amount in 
effect under subparagraph (A) for the taxable year in the 
case of any other individual.’’. 
(c) CREDIT
REFUNDABLE
UP
TO
$1,000 PER 
CHILD.— 
(1) IN GENERAL.—Section 24(d)(1)(A) is amended 
by striking all that follows ‘‘under this section’’ and insert-
ing the following: ‘‘determined— 
‘‘(i) without regard to this subsection 
and the limitation under section 26(a), 
‘‘(ii) without regard to subsection 
(a)(2), and 
‘‘(iii) by substituting ‘$1,000’ for 
‘$1,600’ in subsection (a)(1), or’’. 
(2) INFLATION
ADJUSTMENT.—Section 24(d) is 
amended by inserting after paragraph (2) the following 
new paragraph: 
‘‘(3) INFLATION ADJUSTMENT.—In the case of 
any taxable year beginning in a calendar year after 
2017, the $1,000 amount in paragraph (1)(A)(iii) 
shall be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment under 
section 1(c)(2)(A) for such calendar year. 
Any increase determined under the preceding sen-
tence shall be rounded to the next highest multiple 
of $100 and shall not exceed the amount in effect 
under subsection (a)(2).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1102. REPEAL OF NONREFUNDABLE CREDITS. 
(a) REPEAL OF SECTION 22.— 
(1) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by striking sec-
tion 22 (and by striking the item relating to such 
section in the table of sections for such subpart). 
(2) CONFORMING AMENDMENT.— 
(A) Section 86(f) is amended by striking 
paragraph (1) and by redesignating paragraphs 
(2), (3), and (4) as paragraphs (1), (2), and 
(3), respectively. 
(B)(i) Subsections (c)(3)(B) and (d)(4)(A) 
of section 7706, as redesignated by this Act, 
are each amended by striking ‘‘(as defined in 
section 22(e)(3)’’.
(ii) Section 7706(f), as redesignated by 
this Act, is amended by redesignating para-
graph (7) as paragraph (8) and by inserting 
after paragraph (6) the following new para-
graph: 
‘‘(7) PERMANENT AND TOTAL DISABILITY DE-
FINED.—An individual is permanently and totally 
disabled if he is unable to engage in any substantial 
gainful activity by reason of any medically deter-
minable physical or mental impairment which can be 
expected to result in death or which has lasted or 
can be expected to last for a continuous period of 
not less than 12 months. An individual shall not be 
considered to be permanently and totally disabled 
unless he furnishes proof of the existence thereof in 
such form and manner, and at such times, as the 
Secretary may require.’’. 
(iii) Section 415(c)(3)(C)(i) is amended by 
striking ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 
(iv) Section 422(c)(6) is amended by strik-
ing ‘‘22(e)(3)’’ and inserting ‘‘7706(f)(7)’’. 
(b) TERMINATION OF SECTION 25.—Section 25, as 
amended by section 3601, is amended by adding at the 
end the following new subsection:
‘‘(k) TERMINATION.—No credit shall be allowed 
under this section with respect to any mortgage credit cer-
tificate issued after December 31, 2017.’’. 
(c) REPEAL OF SECTION 30D.— 
(1) IN GENERAL.—Subpart B of part IV of 
subchapter A of chapter 1 is amended by striking 
section 30D (and by striking the item relating to 
such section in the table of sections for such sub-
part). 
(2) CONFORMING AMENDMENTS.— 
(A) Section 38(b) is amended by striking 
paragraph (35). 
(B) Section 1016(a) is amended by strik-
ing paragraph (37). 
(C) Section 6501(m) is amended by strik-
ing ‘‘30D(e)(4),’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), the amendments made by this 
section shall apply to taxable years beginning after 
December 31, 2017. 
(2) SUBSECTION (b).—The amendment made 
by subsection (c) shall apply to taxable years ending 
after December 31, 2017.
(3) SUBSECTION (c).—The amendments made 
by subsection (d) shall apply to vehicles placed in 
service in taxable years beginning after December 
31, 2017. 
SEC. 1103. REFUNDABLE CREDIT PROGRAM INTEGRITY. 
(a) IDENTIFICATION REQUIREMENTS
FOR CHILD 
AND FAMILY TAX CREDIT.— 
(1) IN GENERAL.—Section 24(e) is amended to 
read as follows: 
‘‘(e) IDENTIFICATION REQUIREMENTS.— 
‘‘(1) 
REQUIREMENTS
FOR
QUALIFYING 
CHILD.—No credit shall be allowed under this sec-
tion to a taxpayer with respect to any qualifying 
child unless the taxpayer includes the name and so-
cial security number of such qualifying child on the 
return of tax for the taxable year. The preceding 
sentence shall not prevent a qualifying child from 
being treated as a dependent described in subsection 
(a)(2). 
‘‘(2) 
OTHER
IDENTIFICATION
REQUIRE-
MENTS.—No credit shall be allowed under this sec-
tion with respect to any individual unless the tax-
payer identification number of such individual is in-
cluded on the return of tax for the taxable year and
such identifying number was issued before the due 
date for filing the return for the taxable year. 
‘‘(3) SOCIAL
SECURITY
NUMBER.—For pur-
poses of this subsection, the term ‘social security 
number’ means a social security number issued by 
the Social Security Administration (but only if the 
social security number is issued to a citizen of the 
United States or pursuant to subclause (I) (or that 
portion of subclause (III) that relates to subclause 
(I)) of section 205(c)(2)(B)(i) of the Social Security 
Act)).’’. 
(2) OMISSIONS TREATED AS MATHEMATICAL OR 
CLERICAL ERROR.— 
(A) IN
GENERAL.—Section 6213(g)(2)(I) 
is amended to read as follows: 
‘‘(I) an omission of a correct social secu-
rity number, or a correct TIN, required under 
section 24(e) (relating to child tax credit), to be 
included on a return,’’. 
(b) SOCIAL SECURITY NUMBER MUST BE PRO-
VIDED.— 
(1) IN
GENERAL.—Section 25A(f)(1)(A), as 
amended by section 1201 of this Act, is amended by 
striking ‘‘taxpayer identification number’’ each place 
it appears and inserting ‘‘social security number’’.
(2) OMISSION TREATED AS MATHEMATICAL OR 
CLERICAL ERROR.—Section 6213(g)(2)(J) is amend-
ed by striking ‘‘TIN’’ and inserting ‘‘social security 
number and employer identification number’’. 
(c) INDIVIDUALS PROHIBITED FROM ENGAGING IN 
EMPLOYMENT IN UNITED STATES NOT ELIGIBLE FOR 
EARNED INCOME TAX CREDIT.—Section 32(m) is amend-
ed— 
(1) by striking ‘‘(other than:’’ and all that fol-
lows through ‘‘of the Social Security Act)’’, and 
(2) by inserting before the period at the end the 
following: ‘‘, but only if, in the case of subsection 
(c)(1)(E), the social security number is issued to a 
citizen of the United States or pursuant to subclause 
(I) (or that portion of subclause (III) that relates to 
subclause (I)) of section 205(c)(2)(B)(i) of the So-
cial Security Act’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1104. PROCEDURES TO REDUCE IMPROPER CLAIMS 
OF EARNED INCOME CREDIT. 
(a) CLARIFICATION REGARDING DETERMINATION OF 
SELF-EMPLOYMENT INCOME WHICH IS TREATED
AS 
EARNED INCOME.—Section 32(c)(2)(B) is amended by
striking ‘‘and’’ at the end of clause (v), by striking the 
period at the end of clause (vi) and inserting ‘‘, and’’, and 
by adding at the end the following new clause: 
‘‘(vii) in determining the taxpayer’s 
net earnings from self-employment under 
subparagraph (A)(ii) there shall not fail to 
be taken into account any deduction which 
is allowable to the taxpayer under this sub-
title.’’. 
(b) REQUIRED QUARTERLY REPORTING OF WAGES 
OF EMPLOYEES.—Section 6011 is amended by adding at 
the end the following new subsection: 
‘‘(i) EMPLOYER REPORTING OF WAGES.—Every per-
son required to deduct and withhold from an employee a 
tax under section 3101 or 3402 shall include on each re-
turn or statement submitted with respect to such tax, the 
name and address of such employee and the amount of 
wages for such employee on which such tax was with-
held.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years ending after the date of 
the enactment of this Act.
(2) REPORTING.—The Secretary of the Treas-
ury, or his designee, may delay the application of the 
amendment made by subsection (b) for such period 
as such Secretary (or designee) determines to be 
reasonable to allow persons adequate time to modify 
electronic (or other) systems to permit such person 
to comply with the requirements of such amend-
ment. 
SEC. 1105. CERTAIN INCOME DISALLOWED FOR PURPOSES 
OF THE EARNED INCOME TAX CREDIT. 
(a) SUBSTANTIATION REQUIREMENT.—Section 32 is 
amended by adding at the end the following new sub-
section: 
‘‘(n) INCONSISTENT INCOME REPORTING.—If the 
earned income of a taxpayer claimed on a return for pur-
poses of this section is not substantiated by statements 
or returns under sections 6051, 6052, 6041(a), or 6050W 
with respect to such taxpayer, the Secretary may require 
such taxpayer to provide books and records to substantiate 
such income, including for the purpose of preventing 
fraud.’’. 
(b) EXCLUSION
OF UNSUBSTANTIATED AMOUNT 
FROM EARNED INCOME.—Section 32(c)(2) is amended by 
adding at the end the following new subparagraph:
‘‘(C) EXCLUSION.—In the case of a tax-
payer with respect to which there is an incon-
sistency described in subsection (n) who fails to 
substantiate such inconsistency to the satisfac-
tion of the Secretary, the term ‘earned income’ 
shall not include amounts to the extent of such 
inconsistency.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
Subtitle C—Simplification and 
Reform of Education Incentives 
SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT. 
(a) IN GENERAL.—Section 25A is amended to read 
as follows: 
‘‘SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT. 
‘‘(a) IN GENERAL.—In the case of an individual, 
there shall be allowed as a credit against the tax imposed 
by this chapter for the taxable year an amount equal to 
the sum of— 
‘‘(1) 100 percent of so much of the qualified 
tuition and related expenses paid by the taxpayer 
during the taxable year (for education furnished to 
any eligible student for whom an election is in effect 
under this section for such taxable year during any
academic period beginning in such taxable year) as 
does not exceed $2,000, plus 
‘‘(2) 25 percent of so much of such expenses so 
paid as exceeds the dollar amount in effect under 
paragraph (1) but does not exceed twice such dollar 
amount. 
‘‘(b) PORTION OF CREDIT REFUNDABLE.—40 per-
cent of the credit allowable under subsection (a)(1) (deter-
mined without regard to this subsection and section 26(a) 
and after application of all other provisions of this section) 
shall be treated as a credit allowable under subpart C (and 
not under this part). The preceding sentence shall not 
apply to any taxpayer for any taxable year if such tax-
payer is a child to whom section 1(d) applies for such tax-
able year. 
‘‘(c) LIMITATION BASED ON MODIFIED ADJUSTED 
GROSS INCOME.— 
‘‘(1) IN GENERAL.—The amount allowable as a 
credit under subsection (a) for any taxable year shall 
be reduced (but not below zero) by an amount which 
bears the same ratio to the amount so allowable (de-
termined without regard to this subsection and sub-
section (b) but after application of all other provi-
sions of this section) as— 
‘‘(A) the excess of—
‘‘(i) the taxpayer’s modified adjusted 
gross income for such taxable year, over 
‘‘(ii) $80,000 (twice such amount in 
the case of a joint return), bears to 
‘‘(B) $10,000 (twice such amount in the 
case of a joint return). 
‘‘(2) MODIFIED
ADJUSTED
GROSS
INCOME.— 
For purposes of this subsection, the term ‘modified 
adjusted gross income’ means the adjusted gross in-
come of the taxpayer for the taxable year increased 
by any amount excluded from gross income under 
section 911, 931, or 933. 
‘‘(d) OTHER LIMITATIONS.— 
‘‘(1) CREDIT ALLOWED ONLY FOR 5 TAXABLE 
YEARS.—An election to have this section apply may 
not be made for any taxable year if such an election 
(by the taxpayer or any other individual) is in effect 
with respect to such student for any 5 prior taxable 
years. 
‘‘(2) CREDIT
ALLOWED
ONLY
FOR
FIRST
YEARS OF POSTSECONDARY EDUCATION.— 
‘‘(A) IN GENERAL.—No credit shall be al-
lowed under subsection (a) for a taxable year 
with respect to the qualified tuition and related 
expenses of an eligible student if the student
has completed (before the beginning of such 
taxable year) the first 5 years of postsecondary 
education at an eligible educational institution. 
‘‘(B) FIFTH YEAR LIMITATIONS.—In the 
case of an eligible student with respect to whom 
an election has been in effect for 4 preceding 
taxable years for purposes of the fifth taxable 
year— 
‘‘(i) the amount of the credit allowed 
under this section for the taxable year 
shall not exceed an amount equal to 50 
percent of the credit otherwise determined 
with respect to such student under this 
section (without regard to this subpara-
graph), and 
‘‘(ii) the amount of the credit deter-
mined under subsection (b) and allowable 
under subpart C shall not exceed an 
amount equal to 40 percent of the amount 
determined with respect to such student 
under clause (i). 
‘‘(e) DEFINITIONS.—For purposes of this section— 
‘‘(1) ELIGIBLE STUDENT.— The term ‘eligible 
student’ means, with respect to any academic period, 
a student who—
‘‘(A) meets the requirements of section 
484(a)(1) of the Higher Education Act of 1965 
(20 U.S.C. 1091(a)(1)), as in effect on August 
5, 1997, and 
‘‘(B) is carrying at least 1⁄2 the normal 
full-time work load for the course of study the 
student is pursuing. 
‘‘(2) QUALIFIED
TUITION
AND
RELATED
EX-
PENSES.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
tuition and related expenses’ means tuition, 
fees, and course materials, required for enroll-
ment or attendance of— 
‘‘(i) the taxpayer, 
‘‘(ii) the taxpayer’s spouse, or 
‘‘(iii) any dependent of the taxpayer, 
at an eligible educational institution for courses 
of instruction of such individual at such institu-
tion. 
‘‘(B) EXCEPTION FOR EDUCATION INVOLV-
ING SPORTS, ETC.—Such term does not include 
expenses with respect to any course or other 
education involving sports, games, or hobbies, 
unless such course or other education is part of 
the individual’s degree program.
‘‘(C) 
EXCEPTION
FOR
NONACADEMIC 
FEES.—Such term does not include student ac-
tivity fees, athletic fees, insurance expenses, or 
other expenses unrelated to an individual’s aca-
demic course of instruction. 
‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.— 
The term ‘eligible educational institution’ means an 
institution— 
‘‘(A) which is described in section 481 of 
the Higher Education Act of 1965 (20 U.S.C. 
1088), as in effect on August 5, 1997, and 
‘‘(B) which is eligible to participate in a 
program under title IV of such Act. 
‘‘(f) SPECIAL RULES.— 
‘‘(1) IDENTIFICATION REQUIREMENTS.— 
‘‘(A) STUDENT.—No credit shall be al-
lowed under subsection (a) to a taxpayer with 
respect to the qualified tuition and related ex-
penses of an individual unless the taxpayer in-
cludes the name and taxpayer identification 
number of such individual on the return of tax 
for the taxable year, and such taxpayer identi-
fication number was issued on or before the due 
date for filing such return.
‘‘(B) TAXPAYER.—No credit shall be al-
lowed under this section if the identifying num-
ber of the taxpayer was issued after the due 
date for filing the return for the taxable year. 
‘‘(C) INSTITUTION.—No credit shall be al-
lowed under this section unless the taxpayer in-
cludes the employer identification number of 
any institution to which qualified tuition and 
related expenses were paid with respect to the 
individual. 
‘‘(2) ADJUSTMENT
FOR
CERTAIN
SCHOLAR-
SHIPS, ETC.—The amount of qualified tuition and 
related expenses otherwise taken into account under 
subsection (a) with respect to an individual for an 
academic period shall be reduced (before the applica-
tion of subsection (c)) by the sum of any amounts 
paid for the benefit of such individual which are allo-
cable to such period as— 
‘‘(A) a qualified scholarship which is ex-
cludable from gross income under section 117, 
‘‘(B) an educational assistance allowance 
under chapter 30, 31, 32, 34, or 35 of title 38, 
United States Code, or under chapter 1606 of 
title 10, United States Code, and
‘‘(C) a payment (other than a gift, be-
quest, devise, or inheritance within the meaning 
of section 102(a)) for such individual’s edu-
cational expenses, or attributable to such indi-
vidual’s enrollment at an eligible educational in-
stitution, which is excludable from gross income 
under any law of the United States. 
‘‘(3) TREATMENT OF EXPENSES PAID BY DE-
PENDENT.—If an individual is a dependent of an-
other taxpayer for a taxable year beginning in the 
calendar year in which such individuals taxable year 
begins— 
‘‘(A) no credit shall be allowed under sub-
section (a) to such individual for such individ-
ual’s taxable year, and 
‘‘(B) qualified tuition and related expenses 
paid by such individual during such individual’s 
taxable year shall be treated for purposes of 
this section as paid by such other taxpayer. 
‘‘(4) 
TREATMENT
OF
CERTAIN
PREPAY-
MENTS.—If qualified tuition and related expenses 
are paid by the taxpayer during a taxable year for 
an academic period which begins during the first 3 
months following such taxable year, such academic
period shall be treated for purposes of this section 
as beginning during such taxable year. 
‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit 
shall be allowed under this section for any amount 
for which a deduction is allowed under any other 
provision of this chapter. 
‘‘(6) NO
CREDIT
FOR
MARRIED
INDIVIDUALS 
FILING SEPARATE RETURNS.—If the taxpayer is a 
married individual (within the meaning of section 
7703), this section shall apply only if the taxpayer 
and the taxpayer’s spouse file a joint return for the 
taxable year. 
‘‘(7) NONRESIDENT ALIENS.—If the taxpayer is 
a nonresident alien individual for any portion of the 
taxable year, this section shall apply only if such in-
dividual is treated as a resident alien of the United 
States for purposes of this chapter by reason of an 
election under subsection (g) or (h) of section 6013. 
‘‘(8) RESTRICTIONS ON TAXPAYERS WHO IM-
PROPERLY CLAIMED CREDIT IN PRIOR YEAR.— 
‘‘(A) TAXPAYERS MAKING PRIOR FRAUDU-
LENT OR RECKLESS CLAIMS.— 
‘‘(i) IN GENERAL.—No credit shall be 
allowed under this section for any taxable 
year in the disallowance period.
‘‘(ii) DISALLOWANCE
PERIOD.—For 
purposes of clause (i), the disallowance pe-
riod is— 
‘‘(I) the period of 10 taxable 
years after the most recent taxable 
year for which there was a final deter-
mination that the taxpayer’s claim of 
credit under this section was due to 
fraud, and 
‘‘(II) the period of 2 taxable 
years after the most recent taxable 
year for which there was a final deter-
mination that the taxpayer’s claim of 
credit under this section was due to 
reckless or intentional disregard of 
rules and regulations (but not due to 
fraud). 
‘‘(B) 
TAXPAYERS
MAKING
IMPROPER 
PRIOR CLAIMS.—In the case of a taxpayer who 
is denied credit under this section for any tax-
able year as a result of the deficiency proce-
dures under subchapter B of chapter 63, no 
credit shall be allowed under this section for 
any subsequent taxable year unless the taxpayer 
provides such information as the Secretary may
require to demonstrate eligibility for such cred-
it. 
‘‘(g) INFLATION ADJUSTMENT.— 
‘‘(1) IN GENERAL.—In the case of a taxable 
year beginning after 2018, the $80,000 amount in 
subsection (c)(1)(A)(ii) shall each be increased by an 
amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(c)(2)(A) for the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2017’ for 
‘calendar year 2016’ in clause (ii) thereof. 
‘‘(2) ROUNDING.—If any amount as adjusted 
under paragraph (1) is not a multiple of $1,000, 
such amount shall be rounded to the next lowest 
multiple of $1,000. 
‘‘(h) REGULATIONS.—The Secretary may prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out this section, including regula-
tions providing for a recapture of the credit allowed under 
this section in cases where there is a refund in a subse-
quent taxable year of any amount which was taken into 
account in determining the amount of such credit.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 72(t)(7)(B) is amended by striking 
‘‘section 
25A(g)(2)’’ 
and 
inserting 
‘‘section 
25A(f)(2)’’. 
(2) Section 529(c)(3)(B)(v)(I) is amended by 
striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 
25A(f)(2)’’. 
(3) Section 529(e)(3)(B)(i) is amended by strik-
ing ‘‘section 25A(b)(3)’’ and inserting ‘‘section 
25A(d)’’. 
(4) Section 530(d)(2)(C) is amended— 
(A) by striking ‘‘section 25A(g)(2)’’ in 
clause (i)(I) and inserting ‘‘section 25A(f)(2)’’, 
and 
(B) by striking ‘‘HOPE
AND
LIFETIME 
LEARNING CREDITS’’ in the heading and insert-
ing ‘‘AMERICAN OPPORTUNITY TAX CREDIT’’. 
(5) Section 530(d)(4)(B)(iii) is amended by 
striking ‘‘section 25A(g)(2)’’ and inserting ‘‘section 
25A(d)(4)(B)’’. 
(6) Section 6050S(e) is amended by striking 
‘‘subsection 
(g)(2)’’ 
and 
inserting 
‘‘subsection 
(f)(2)’’. 
(7) Section 6211(b)(4)(A) is amended by strik-
ing ‘‘subsection (i)(6)’’ and inserting ‘‘subsection 
(b)’’.
(8) Section 6213(g)(2)(J) is amended by strik-
ing ‘‘TIN required under section 25A(g)(1)’’ and in-
serting ‘‘TIN, and employer identification number, 
required under section 25A(f)(1)’’. 
(9) Section 6213(g)(2)(Q) is amended to read 
as follows: 
‘‘(Q) an omission of information required 
by section 25A(f)(8)(B) or an entry on the re-
turn claiming the credit determined under sec-
tion 25A(a) for a taxable year for which the 
credit 
is 
disallowed 
under 
section 
25A(f)(8)(A).’’. 
(10) Section 1004(c) of division B of the Amer-
ican Recovery and Reinvestment Tax Act of 2009 is 
amended— 
(A) in paragraph (1)— 
(i) by striking ‘‘section 25A(i)(6)’’ 
each place it appears and inserting ‘‘sec-
tion 25A(b)’’, and 
(ii) by striking ‘‘with respect to tax-
able years beginning after 2008 and before 
2018’’ each place it appears and inserting 
‘‘with respect to each taxable year’’, 
(B) in paragraph (2), by striking ‘‘Section 
25A(i)(6)’’ and inserting ‘‘Section 25A(b)’’, and
(C) in paragraph (3)(C), by striking ‘‘sub-
section (i)(6)’’ and inserting ‘‘subsection (b)’’. 
(11) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by 
striking the item relating to section 25A and insert-
ing the following new item: 
‘‘Sec. 25A. American opportunity tax credit.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 
1202. 
CONSOLIDATION 
OF 
EDUCATION 
SAVINGS 
RULES. 
(a) NO NEW CONTRIBUTIONS TO COVERDELL EDU-
CATION SAVINGS ACCOUNT.—Section 530(b)(1)(A) is 
amended to read as follows: 
‘‘(A) Except in the case of rollover con-
tributions, no contribution will be accepted after 
December 31, 2017.’’. 
(b) LIMITED DISTRIBUTION ALLOWED FOR ELEMEN-
TARY AND SECONDARY TUITION.— 
(1) IN GENERAL.—Section 529(c) is amended 
by adding at the end the following new paragraph: 
‘‘(7) TREATMENT OF ELEMENTARY AND SEC-
ONDARY TUITION.—Any reference in this subsection 
to the term ‘qualified higher education expense’ shall 
include a reference to expenses for tuition in connec-
tion with enrollment at an elementary or secondary 
school.’’. 
(2) 
LIMITATION.—Section 
529(e)(3)(A) 
is 
amended by adding at the end the following: ‘‘The 
amount of cash distributions from all qualified tui-
tion programs described in subsection (b)(1)(A)(ii) 
with respect to a beneficiary during any taxable 
year, shall, in the aggregate, include not more than 
$10,000 in expenses for tuition incurred during the 
taxable year in connection with the enrollment or at-
tendance of the beneficiary as an elementary or sec-
ondary school student at a public, private, or reli-
gious school.’’. 
(c) ROLLOVERS TO QUALIFIED TUITION PROGRAMS 
PERMITTED.—Section 530(d)(5) is amended by inserting 
‘‘, or into (by purchase or contribution) a qualified tuition 
program (as defined in section 529),’’ after ‘‘into another 
Coverdell education savings account’’. 
(d) DISTRIBUTIONS FROM QUALIFIED TUITION PRO-
GRAMS FOR CERTAIN EXPENSES ASSOCIATED WITH REG-
ISTERED
APPRENTICESHIP
PROGRAMS.—Section 
529(e)(3) is amended by adding at the end the following 
new subparagraph: 
‘‘(C) CERTAIN
EXPENSES
ASSOCIATED 
WITH
REGISTERED
APPRENTICESHIP
PRO-
GRAMS.—The term ‘qualified higher education 
expenses’ shall include books, supplies, and 
equipment required for the enrollment or at-
tendance of a designated beneficiary in an ap-
prenticeship program registered and certified 
with the Secretary of Labor under section 1 of 
the National Apprenticeship Act (29 U.S.C. 
50).’’. 
(e) UNBORN CHILDREN ALLOWED
AS ACCOUNT 
BENEFICIARIES.—Section 529(e) is amended by adding at 
the end the following new paragraph: 
‘‘(6) TREATMENT OF UNBORN CHILDREN.— 
‘‘(A) IN GENERAL.—Nothing shall prevent 
an unborn child from being treated as a des-
ignated beneficiary or an individual under this 
section. 
‘‘(B) UNBORN
CHILD.—For purposes of 
this paragraph— 
‘‘(i) IN GENERAL.—The term ‘unborn 
child’ means a child in utero. 
‘‘(ii) CHILD
IN
UTERO.—The term 
‘child in utero’ means a member of the 
species homo sapiens, at any stage of de-
velopment, who is carried in the womb.’’. 
(f) EFFECTIVE DATES.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to contributions made after 
December 31, 2017. 
(2) ROLLOVERS TO QUALIFIED TUITION PRO-
GRAMS.—The amendments made by subsection (b) 
shall apply to distributions after December 31, 
2017. 
SEC. 1203. REFORMS TO DISCHARGE OF CERTAIN STUDENT 
LOAN INDEBTEDNESS. 
(a) TREATMENT OF STUDENT LOANS DISCHARGED 
ON ACCOUNT OF DEATH OR DISABILITY.—Section 108(f) 
is amended by adding at the end the following new para-
graph: 
‘‘(5) DISCHARGES ON ACCOUNT OF DEATH OR 
DISABILITY.— 
‘‘(A) IN GENERAL.—In the case of an indi-
vidual, gross income does not include any 
amount which (but for this subsection) would 
be includible in gross income by reasons of the 
discharge (in whole or in part) of any loan de-
scribed in subparagraph (B) if such discharge 
was— 
‘‘(i) pursuant to subsection (a) or (d) 
of section 437 of the Higher Education
Act of 1965 or the parallel benefit under 
part D of title IV of such Act (relating to 
the repayment of loan liability), 
‘‘(ii) pursuant to section 464(c)(1)(F) 
of such Act, or 
‘‘(iii) otherwise discharged on account 
of the death or total and permanent dis-
ability of the student. 
‘‘(B) LOANS DESCRIBED.—A loan is de-
scribed in this subparagraph if such loan is— 
‘‘(i) a student loan (as defined in 
paragraph (2)), or 
‘‘(ii) a private education loan (as de-
fined in section 140(7) of the Consumer 
Credit 
Protection 
Act 
(15 
U.S.C. 
1650(7))).’’. 
(b) EXCLUSION FROM GROSS INCOME
FOR PAY-
MENTS MADE UNDER INDIAN HEALTH SERVICE LOAN 
REPAYMENT PROGRAM.— 
(1) IN GENERAL.—Section 108(f)(4) is amend-
ed by inserting ‘‘under section 108 of the Indian 
Health Care Improvement Act,’’ after ‘‘338I of such 
Act,’’. 
(2) CLERICAL AMENDMENT.—The heading for 
section 108(f)(4) is amended by striking ‘‘AND CER-
100 
TAIN’’ and inserting ‘‘, INDIAN
HEALTH
SERVICE 
LOAN REPAYMENT PROGRAM, AND CERTAIN’’. 
(c) EFFECTIVE DATES.— 
(1) SUBSECTION (a).—The amendment made 
by subsection (a)(1) shall apply to discharges of in-
debtedness after December 31, 2017. 
(2) SUBSECTION (b).—The amendments made 
by subsection (b) shall apply to amounts received in 
taxable years beginning after December 31, 2017. 
SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO 
EDUCATION. 
(a) IN GENERAL.—Subchapter B of chapter 1 is 
amended— 
(1) in part VII by striking sections 221 and 
222 (and by striking the items relating to such sec-
tions in the table of sections for such part), 
(2) in part VII by striking sections 135 and 
127 (and by striking the items relating to such sec-
tions in the table of sections for such part), and 
(3) by striking subsection (d) of section 117. 
(b) CONFORMING AMENDMENT RELATING TO SEC-
TION 221.— 
(1) Section 62(a) is amended by striking para-
graph (17).
101 
(2) Section 74(d) is amended by striking 
‘‘221,’’. 
(3) Section 86(b)(2)(A) is amended by striking 
‘‘221,’’. 
(4) Section 219(g)(3)(A)(ii) is amended by 
striking ‘‘221,’’. 
(5) Section 163(h)(2) is amended by striking 
subparagraph (F). 
(6) Section 6050S(a) is amended— 
(A) by inserting ‘‘or’’ at the end of para-
graph (1), 
(B) by striking ‘‘or’’ at the end of para-
graph (2), and 
(C) by striking paragraph (3). 
(7) Section 6050S(e) is amended by striking all 
that follows ‘‘thereof)’’ and inserting a period. 
(c) CONFORMING AMENDMENTS RELATED TO SEC-
TION 222.— 
(1) Section 62(a) is amended by striking para-
graph (18). 
(2) Section 74(d)(2)(B) is amended by striking 
‘‘222,’’. 
(3) Section 86(b)(2)(A) is amended by striking 
‘‘222,’’.
102 
(4) Section 219(g)(3)(A)(ii) is amended by 
striking ‘‘222,’’. 
(d) CONFORMING AMENDMENTS RELATING TO SEC-
TION 127.— 
(1) Section 125(f)(1) is amended by striking 
‘‘127,’’. 
(2) Section 132(j)(8) is amended by striking 
‘‘which are not excludable from gross income under 
section 127’’. 
(3) Section 414(n)(3)(C) is amended by strik-
ing ‘‘127,’’. 
(4) Section 414(t)(2) is amended by striking 
‘‘127,’’. 
(5) Section 3121(a)(18) is amended by striking 
‘‘127,’’. 
(6) Section 3231(e) is amended by striking 
paragraph (6). 
(7) Section 3306(b)(13) is amended by ‘‘127,’’. 
(8) Section 3401(a)(18) is amended by striking 
‘‘127,’’. 
(9) Section 6039D(d)(1) is amended by striking 
‘‘, 127’’. 
(e) CONFORMING AMENDMENTS RELATING TO SEC-
TION 117(d).— 
(1) Section 117(c)(1) is amended—
103 
(A) by striking ‘‘subsections (a) and (d)’’ 
and inserting ‘‘subsection (a)’’, and 
(B) by striking ‘‘or qualified tuition reduc-
tion’’. 
(2) Section 414(n)(3)(C) is amended by strik-
ing ‘‘117(d),’’. 
(3) Section 414(t)(2) is amended by striking 
‘‘117(d),’’. 
(f) CONFORMING AMENDMENTS RELATED TO SEC-
TION 135.— 
(1) Section 74(d)(2)(B) is amended by striking 
‘‘135,’’. 
(2) Section 86(b)(2)(A) is amended by striking 
‘‘135,’’. 
(3) Section 219(g)(3)(A)(ii) is amended by 
striking ‘‘135,’’. 
(g) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2017. 
(2) AMENDMENTS
RELATING
TO
SECTION 
117(d).—The amendments made by subsections 
(a)(3) and (e) shall apply to amounts paid or in-
curred after December 31, 2017.
104 
SEC. 1205. ROLLOVERS BETWEEN QUALIFIED TUITION PRO-
GRAMS AND QUALIFIED ABLE PROGRAMS. 
(a) ROLLOVERS FROM QUALIFIED TUITION PRO-
GRAMS
TO
QUALIFIED
ABLE PROGRAMS.—Section 
529(c)(3)(C)(i) is amended by striking ‘‘or’’ at the end 
of subclause (I), by striking the period at the end of sub-
clause (II) and inserting ‘‘, or’’, and by adding at the end 
the following new subclause: 
‘‘(III) to an ABLE account (as 
defined in section 529A(e)(6)) of the 
designated beneficiary or a member of 
the family of the designated bene-
ficiary. 
Subclause (III) shall not apply to so much 
of a distribution which, when added to all 
other contributions made to the ABLE ac-
count for the taxable year, exceeds the lim-
itation under section 529A(b)(2)(B).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions after December 31, 
2017.
105 
Subtitle D—Simplification and 
Reform of Deductions 
SEC. 1301. REPEAL OF OVERALL LIMITATION ON ITEMIZED 
DEDUCTIONS. 
(a) IN GENERAL.—Part 1 of subchapter B of chapter 
1 is amended by striking section 68 (and the item relating 
to such section in the table of sections for such part). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1302. MORTGAGE INTEREST. 
(a) MODIFICATION OF LIMITATIONS.— 
(1) IN GENERAL.—Section 163(h)(3) is amend-
ed to read as follows: 
‘‘(3) QUALIFIED
RESIDENCE
INTEREST.—For 
purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
residence interest’ means any interest which is 
paid or accrued during the taxable year on in-
debtedness which— 
‘‘(i) is incurred in acquiring, con-
structing, or substantially improving any 
qualified residence (determined as of the 
time the interest is accrued) of the tax-
payer, and
106 
‘‘(ii) is secured by such residence. 
Such term also includes interest on any indebt-
edness secured by such residence resulting from 
the refinancing of indebtedness meeting the re-
quirements of the preceding sentence (or this 
sentence); but only to the extent the amount of 
the indebtedness resulting from such refi-
nancing does not exceed the amount of the refi-
nanced indebtedness. 
‘‘(B) LIMITATION.—The aggregate amount 
of indebtedness taken into account under sub-
paragraph (A) for any period shall not exceed 
$500,000 (half of such amount in the case of 
a married individual filing a separate return). 
‘‘(C) TREATMENT OF INDEBTEDNESS IN-
CURRED ON OR BEFORE NOVEMBER 2, 2017.— 
‘‘(i) IN GENERAL.—In the case of any 
pre-November 2, 2017, indebtedness, this 
paragraph shall apply as in effect imme-
diately before the enactment of the Tax 
Cuts and Jobs Act. 
‘‘(ii) PRE-NOVEMBER 2, 2017, INDEBT-
EDNESS.—For purposes of this subpara-
graph, the term ‘pre-November 2, 2017, 
indebtedness’ means—
107 
‘‘(I) any principal residence ac-
quisition indebtedness which was in-
curred on or before November 2, 
2017, or 
‘‘(II) any principal residence ac-
quisition indebtedness which is in-
curred after November 2, 2017, to re-
finance 
indebtedness 
described 
in 
clause (i) (or refinanced indebtedness 
meeting the requirements of this 
clause) to the extent (immediately 
after the refinancing) the principal 
amount of the indebtedness resulting 
from the refinancing does not exceed 
the principal amount of the refinanced 
indebtedness (immediately before the 
refinancing). 
‘‘(iii) LIMITATION ON PERIOD OF RE-
FINANCING.—clause (ii)(II) shall not apply 
to any indebtedness after— 
‘‘(I) the expiration of the term of 
the original indebtedness, or 
‘‘(II) if the principal of such 
original indebtedness is not amortized 
over its term, the expiration of the
108 
term of the 1st refinancing of such in-
debtedness (or if earlier, the date 
which is 30 years after the date of 
such 1st refinancing). 
‘‘(iv) BINDING
CONTRACT
EXCEP-
TION.—In the case of a taxpayer who en-
ters into a written binding contract before 
November 2, 2017, to close on the pur-
chase of a principal residence before Janu-
ary 1, 2018, and who purchases such resi-
dence before April 1, 2018, subparagraphs 
(A) and (B) shall be applied by sub-
stituting ‘April 1, 2018’ for ‘November 2, 
2017’.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 108(h)(2) is by striking ‘‘for 
‘$1,000,000 ($500,000’ in clause (ii) thereof’’ 
and inserting ‘‘for ‘$500,000 ($250,000’ in 
paragraph 
(2)(A), 
and 
‘$1,000,000’ 
for 
‘$500,000’ in paragraph (2)(B), thereof’’. 
(B) Section 163(h) is amended by striking 
subparagraphs (E) and (F) in paragraph (4). 
(b) TAXPAYERS LIMITED TO 1 QUALIFIED RESI-
DENCE.—Section 163(h)(4)(A)(i) is amended to read as 
follows:
109 
‘‘(i) IN GENERAL.—The term ‘quali-
fied residence’ means the principal resi-
dence (within the meaning of section 121) 
of the taxpayer.’’. 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to interest paid or accrued 
in taxable years beginning after December 31, 2017, 
with respect to indebtedness incurred before, on, or 
after such date. 
(2) TREATMENT OF GRANDFATHERED INDEBT-
EDNESS.—For application of the amendments made 
by this section to grandfathered indebtedness, see 
paragraph (3)(C) of section 163(h) of the Internal 
Revenue Code of 1986, as amended by this section. 
SEC. 1303. REPEAL OF DEDUCTION FOR CERTAIN TAXES 
NOT PAID OR ACCRUED IN A TRADE OR BUSI-
NESS. 
(a) IN GENERAL.—Section 164(b)(5) is amended to 
read as follows: 
‘‘(5) LIMITATION IN CASE OF INDIVIDUALS.—In 
the case of a taxpayer other than a corporation— 
‘‘(A) foreign real property taxes (other 
than taxes which are paid or accrued in car-
rying on a trade or business or an activity de-
110 
scribed in section 212) shall not be taken into 
account under subsection (a)(1), 
‘‘(B) the aggregate amount of taxes (other 
than taxes which are paid or accrued in car-
rying on a trade or business or an activity de-
scribed in section 212) taken into account 
under subsection (a)(1) for any taxable year 
shall not exceed $10,000 ($5,000 in the case of 
a married individual filing a separate return), 
‘‘(C) subsection (a)(2) shall only apply to 
taxes which are paid or accrued in carrying on 
a trade or business or an activity described in 
section 212, and 
‘‘(D) subsection (a)(3) shall not apply to 
State and local taxes.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1304. REPEAL OF DEDUCTION FOR PERSONAL CAS-
UALTY LOSSES. 
(a) IN GENERAL.—Section 165(c) is amended by in-
serting ‘‘and’’ at the end of paragraph (1), by striking 
‘‘; and’’ at the end of paragraph (2) and inserting a pe-
riod, and by striking paragraph (3). 
(b) CONFORMING AMENDMENTS.—
111 
(1) Section 165(h) is amended to read as fol-
lows: 
‘‘(h) SPECIAL RULE WHERE PERSONAL CASUALTY 
GAINS EXCEED PERSONAL CASUALTY LOSSES.— 
‘‘(1) IN
GENERAL.—If the personal casualty 
gains for any taxable year exceed the personal cas-
ualty losses for such taxable year— 
‘‘(A) all such gains shall be treated as 
gains from sales or exchanges of capital assets, 
and 
‘‘(B) all such losses shall be treated as 
losses from sales or exchanges of capital assets. 
‘‘(2) DEFINITIONS
OF
PERSONAL
CASUALTY 
GAIN
AND
PERSONAL
CASUALTY
LOSS.—For pur-
poses of this subsection— 
‘‘(A) PERSONAL
CASUALTY
LOSS.—The 
term ‘personal casualty loss’ means any loss of 
property not connected with a trade or business 
or a transaction entered into for profit, if such 
loss arises from fire, storm, shipwreck, or other 
casualty, or from theft. 
‘‘(B) PERSONAL
CASUALTY
GAIN.—The 
term ‘personal casualty gain’ means the recog-
nized gain from any involuntary conversion of 
property which is described in subparagraph
112 
(A) arising from fire, storm, shipwreck, or other 
casualty, or from theft.’’. 
(2) Section 165 is amended by striking sub-
section (k). 
(3)(A) Section 165(l)(1) is amended by striking 
‘‘a loss described in subsection (c)(3)’’ and inserting 
‘‘an ordinary loss described in subsection (c)(2)’’. 
(B) Section 165(l) is amended— 
(i) by striking paragraph (5), 
(ii) by redesignating paragraphs (2), (3), 
and (4) as paragraphs (3), (4), and (5), respec-
tively, and 
(iii) by inserting after paragraph (1) the 
following new paragraph: 
‘‘(2) LIMITATIONS.— 
‘‘(A) DEPOSIT MAY NOT BE FEDERALLY 
INSURED.—No election may be made under 
paragraph (1) with respect to any loss on a de-
posit in a qualified financial institution if part 
or all of such deposit is insured under Federal 
law. 
‘‘(B) DOLLAR LIMITATION.—With respect 
to each financial institution, the aggregate 
amount of losses attributable to deposits in 
such financial institution to which an election
113 
under paragraph (1) may be made by the tax-
payer for any taxable year shall not exceed 
$20,000 ($10,000 in the case of a separate re-
turn by a married individual). The limitation of 
the preceding sentence shall be reduced by the 
amount of any insurance proceeds under any 
State law which can reasonably be expected to 
be received with respect to losses on deposits in 
such institution.’’. 
(4) Section 172(b)(1)(E)(ii), prior to amend-
ment under title III, is amended by striking sub-
clause (I) and by redesignating subclauses (II) and 
(III) as subclauses (I) and (II), respectively. 
(5) Section 172(d)(4)(C) is amended by strik-
ing ‘‘paragraph (2) or (3) of section 165(c)’’ and in-
serting ‘‘section 165(c)(2)’’. 
(6) Section 274(f) is amended by striking 
‘‘CASUALTY LOSSES,’’ in the heading thereof. 
(7) Section 280A(b) is amended by striking 
‘‘CASUALTY LOSSES,’’ in the heading thereof. 
(8) Section 873(b), as amended by the pre-
ceding provisions of this Act, is amended by striking 
paragraph (1) and by redesignating paragraphs (2) 
and (3) as paragraphs (1) and (2), respectively.
114 
(9) Section 504(b) of the Disaster Tax Relief 
and Airport and Airway Extension Act of 2017 is 
amended by adding at the end the following new 
paragraph: 
‘‘(4) COORDINATION WITH TAX REFORM.—This 
subsection shall be applied without regard to the 
amendments made by section 1304 of the Tax Cuts 
and Jobs Act.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1305. LIMITATION ON WAGERING LOSSES. 
(a) IN GENERAL.—Section 165(d) is amended by 
adding at the end the following: ‘‘For purposes of the pre-
ceding sentence, the term ‘losses from wagering trans-
actions’ includes any deduction otherwise allowable under 
this chapter incurred in carrying on any wagering trans-
action.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1306. CHARITABLE CONTRIBUTIONS. 
(a) INCREASED LIMITATION FOR CASH CONTRIBU-
TIONS.—Section 170(b)(1) is amended by redesignating
115 
subparagraph (G) as subparagraph (H) and by inserting 
after subparagraph (F) the following new subparagraph: 
‘‘(G) INCREASED
LIMITATION
FOR
CASH 
CONTRIBUTIONS.— 
‘‘(i) IN GENERAL.—In the case of any 
contribution of cash to an organization de-
scribed in subparagraph (A), the total 
amount of such contributions which may 
be taken into account under subsection (a) 
for any taxable year shall not exceed 60 
percent of the taxpayer’s contribution base 
for such year. 
‘‘(ii) CARRYOVER.—If the aggregate 
amount of contributions described in clause 
(i) exceeds the applicable limitation under 
clause (i), such excess shall be treated (in 
a manner consistent with the rules of sub-
section (d)(1)) as a charitable contribution 
to which clause (i) applies in each of the 
5 succeeding years in order of time. 
‘‘(iii) COORDINATION WITH SUBPARA-
GRAPHS (A) AND (B).— 
‘‘(I) 
IN
GENERAL.—Contribu-
tions taken into account under this
116 
subparagraph shall not be taken into 
account under subparagraph (A). 
‘‘(II) LIMITATION REDUCTION.— 
Subparagraphs (A) and (B) shall be 
applied by reducing (but not below 
zero) the aggregate contribution limi-
tation allowed for the taxable year 
under each such subparagraph by the 
aggregate contributions allowed under 
this subparagraph for such taxable 
year.’’. 
(b) DENIAL
OF DEDUCTION
FOR COLLEGE ATH-
LETIC EVENT SEATING RIGHTS.—Section 170(l)(1) is 
amended to read as follows: 
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed under this section for any amount described in 
paragraph (2).’’. 
(c) CHARITABLE MILEAGE RATE ADJUSTED FOR IN-
FLATION.—Section 170(i) is amended by striking ‘‘shall 
be 14 cents per mile’’ and inserting ‘‘shall be a rate which 
takes into account the variable cost of operating an auto-
mobile’’. 
(d) REPEAL
OF SUBSTANTIATION EXCEPTION
IN 
CASE OF CONTRIBUTIONS REPORTED BY DONEE.—Sec-
tion 170(f)(8) is amended by striking subparagraph (D)
117 
and by redesignating subparagraph (E) as subparagraph 
(D). 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contributions made in taxable 
years beginning after December 31, 2017. 
SEC. 1307. REPEAL OF DEDUCTION FOR TAX PREPARATION 
EXPENSES. 
(a) IN GENERAL.—Section 212 is amended by adding 
‘‘or’’ at the end of paragraph (1), by striking ‘‘; or’’ at 
the end of paragraph (2) and inserting a period, and by 
striking paragraph (3). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1308. REPEAL OF MEDICAL EXPENSE DEDUCTION. 
(a) IN GENERAL.—Part VII of subchapter B is 
amended by striking by striking section 213 (and by strik-
ing the item relating to such section in the table of sec-
tions for such subpart). 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Section 105(f) is amended to read as fol-
lows: 
‘‘(f) MEDICAL CARE.—For purposes of this section— 
‘‘(1) IN
GENERAL.—The term ‘medical care’ 
means amounts paid—
118 
‘‘(A) for the diagnosis, cure, mitigation, 
treatment, or prevention of disease, or for the 
purpose of affecting any structure or function 
of the body, 
‘‘(B) for transportation primarily for and 
essential to medical care referred to in subpara-
graph (A), 
‘‘(C) for qualified long-term care services 
(as defined in section 7702B(c)), or 
‘‘(D) for insurance (including amounts 
paid as premiums under part B of title XVIII 
of the Social Security Act, relating to supple-
mentary medical insurance for the aged) cov-
ering medical care referred to in subparagraphs 
(A) and (B) or for any qualified long-term care 
insurance contract (as defined in section 
7702B(b)). 
In the case of a qualified long-term care insurance 
contract (as defined in section 7702B(b)), only eligi-
ble long-term care premiums (as defined in para-
graph (7)) shall be taken into account under sub-
paragraph (D). 
‘‘(2) AMOUNTS
PAID
FOR
CERTAIN
LODGING 
AWAY FROM HOME TREATED AS PAID FOR MEDICAL 
CARE.—Amounts paid for lodging (not lavish or ex-
119 
travagant under the circumstances) while away from 
home primarily for and essential to medical care re-
ferred to in paragraph (1)(A) shall be treated as 
amounts paid for medical care if— 
‘‘(A) the medical care referred to in para-
graph (1)(A) is provided by a physician in a li-
censed hospital (or in a medical care facility 
which is related to, or the equivalent of, a li-
censed hospital), and 
‘‘(B) there is no significant element of per-
sonal pleasure, recreation, or vacation in the 
travel away from home. 
The amount taken into account under the preceding 
sentence shall not exceed $50 for each night for each 
individual. 
‘‘(3) PHYSICIAN.—The term ‘physician’ has the 
meaning given to such term by section 1861(r) of 
the Social Security Act (42 U.S.C. 1395x(r)). 
‘‘(4) CONTRACTS COVERING OTHER THAN MED-
ICAL CARE.—In the case of an insurance contract 
under which amounts are payable for other than 
medical care referred to in subparagraphs (A), (B) 
and (C) of paragraph (1)— 
‘‘(A) no amount shall be treated as paid 
for insurance to which paragraph (1)(D) applies
121 
tract for a period of 10 years or more or until the 
year in which the taxpayer attains the age of 65 
(but in no case for a period of less than 5 years). 
‘‘(6) COSMETIC SURGERY.— 
‘‘(A) IN
GENERAL.—The term ‘medical 
care’ does not include cosmetic surgery or other 
similar procedures, unless the surgery or proce-
dure is necessary to ameliorate a deformity 
arising from, or directly related to, a congenital 
abnormality, a personal injury resulting from 
an accident or trauma, or disfiguring disease. 
‘‘(B) COSMETIC SURGERY DEFINED .—For 
purposes of this paragraph, the term ‘cosmetic 
surgery’ means any procedure which is directed 
at improving the patient’s appearance and does 
not meaningfully promote the proper function 
of the body or prevent or treat illness or dis-
ease. 
‘‘(7) ELIGIBLE LONG-TERM CARE PREMIUMS.— 
‘‘(A) IN GENERAL.—For purposes of this 
section, the term ‘eligible long-term care pre-
miums’ means the amount paid during a tax-
able year for any qualified long-term care insur-
ance contract (as defined in section 7702B(b)) 
covering an individual, to the extent such
122 
amount does not exceed the limitation deter-
mined under the following table: 
‘‘In the case of an individual with an 
attained age before the close of the 
taxable year of: 
The limitation is: 
40 or less 
$200 
More than 40 but not more than 50 
$375 
More than 50 but not more than 60 
$750 
More than 60 but not more than 70 
$2,000 
More than 70 
$2,500 
‘‘(B) INDEXING.— 
‘‘(i) IN GENERAL.—In the case of any 
taxable year beginning after 1997, each 
dollar amount in subparagraph (A) shall 
be increased by the medical care cost ad-
justment of such amount for such calendar 
year. Any increase determined under the 
preceding sentence shall be rounded to the 
nearest multiple of $10. 
‘‘(ii) MEDICAL
CARE
COST
ADJUST-
MENT.—For purposes of clause (i), the 
medical care cost adjustment for any cal-
endar year is the adjustment prescribed by 
the Secretary, in consultation with the Sec-
retary of Health and Human Services, for 
purposes of such clause. To the extent that 
CPI (as defined section 1(c)), or any com-
ponent thereof, is taken into account in de-
termining such adjustment, such adjust-
123 
ment shall be determined by taking into 
account C-CPI-U (as so defined), or the 
corresponding component thereof, in lieu of 
such CPI (or component thereof), but only 
with respect to the portion of such adjust-
ment which relates to periods after Decem-
ber 31, 2017. 
‘‘(8) 
CERTAIN
PAYMENTS
TO
RELATIVES 
TREATED AS NOT PAID FOR MEDICAL CARE.—An 
amount paid for a qualified long-term care service 
(as defined in section 7702B(c)) provided to an indi-
vidual shall be treated as not paid for medical care 
if such service is provided— 
‘‘(A) by the spouse of the individual or by 
a relative (directly or through a partnership, 
corporation, or other entity) unless the service 
is provided by a licensed professional with re-
spect to such service, or 
‘‘(B) by a corporation or partnership which 
is related (within the meaning of section 267(b) 
or 707(b)) to the individual. 
For purposes of this paragraph, the term ‘relative’ 
means an individual bearing a relationship to the in-
dividual which is described in any of subparagraphs 
(A) through (G) of section 7706(d)(2). This para-
124 
graph shall not apply for purposes of subsection (b) 
with respect to reimbursements through insurance.’’. 
(B) Section 72(t)(2)(D)(i)(III) is amended by 
striking ‘‘section 213(d)(1)(D)’’ and inserting ‘‘sec-
tion 105(f)(1)(D)’’. 
(C) Section 104(a) is amended by striking ‘‘sec-
tion 213(d)(1)’’ in the last sentence and inserting 
‘‘section 105(f)(1)’’. 
(D) Section 105(b) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(E) Section 139D is amended by striking ‘‘sec-
tion 213’’ and inserting ‘‘section 223’’. 
(F) Section 162(l)(2) is amended by striking 
‘‘section 
213(d)(10)’’ 
and 
inserting 
‘‘section 
105(f)(7)’’. 
(G) Section 220(d)(2)(A) is amended by strik-
ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(H) Section 223(d)(2)(A) is amended by strik-
ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(I) Section 419A(f)(2) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(J) Section 501(c)(26)(A) is amended by strik-
ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(K) Section 2503(e) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’.
125 
(L) Section 4980B(c)(4)(B)(i)(I) is amended by 
striking ‘‘section 213(d)’’ and inserting ‘‘section 
105(f)’’. 
(M) Section 6041(f) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(N) Section 7702B(a)(2) is amended by strik-
ing ‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(O) Section 7702B(a)(4) is amended by strik-
ing ‘‘section 213(d)(1)(D)’’ and inserting ‘‘section 
105(f)(1)(D)’’. 
(P) Section 7702B(d)(5) is amended by striking 
‘‘section 
213(d)(10)’’ 
and 
inserting 
‘‘section 
105(f)(7)’’. 
(Q) Section 9832(d)(3) is amended by striking 
‘‘section 213(d)’’ and inserting ‘‘section 105(f)’’. 
(2) Section 72(t)(2)(B) is amended to read as 
follows: 
‘‘(B) MEDICAL
EXPENSES.—Distributions 
made to an individual (other than distributions 
described in subparagraph (A), (C), or (D) to 
the extent such distributions do not exceed the 
excess of— 
‘‘(i) the expenses paid by the taxpayer 
during the taxable year, not compensated 
for by insurance or otherwise, for medical
126 
care (as defined in 105(f)) of the taxpayer, 
his spouse, or a dependent (as defined in 
section 7706, determined without regard to 
subsections (b)(1), (b)(2), and (d)(1)(B) 
thereof), over 
‘‘(ii) 10 percent of the taxpayer’s ad-
justed gross income.’’. 
(3) Section 162(l) is amended by striking para-
graph (3). 
(4) Section 402(l) is amended by striking para-
graph (7) and redesignating paragraph (8) as para-
graph (7). 
(5) Section 220(f) is amended by striking para-
graph (6). 
(6) Section 223(f) is amended by striking para-
graph (6). 
(7) Section 7702B(e) is amended by striking 
paragraph (2). 
(8) Section 7706(f)(7), as redesignated by this 
Act, is amended by striking ‘‘sections 105(b), 
132(h)(2)(B), and 213(d)(5)’’ and inserting ‘‘sec-
tions 105(b) and 132(h)(2)(B)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017.
127 
SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAY-
MENTS. 
(a) IN GENERAL.—Part VII of subchapter B is 
amended by striking by striking section 215 (and by strik-
ing the item relating to such section in the table of sec-
tions for such subpart). 
(b) CONFORMING AMENDMENTS.— 
(1) CORRESPONDING
REPEAL
OF
PROVISIONS 
PROVIDING FOR INCLUSION OF ALIMONY IN GROSS 
INCOME.— 
(A) Subsection (a) of section 61 is amend-
ed by striking paragraph (8) and by redesig-
nating paragraphs (9) through (15) as para-
graphs (8) through (14), respectively. 
(B) Part II of subchapter B of chapter 1 
is amended by striking section 71 (and by strik-
ing the item relating to such section in the 
table of sections for such part). 
(C) Subpart F of part I of subchapter J 
of chapter 1 is amended by striking section 682 
(and by striking the item relating to such sec-
tion in the table of sections for such subpart). 
(2) RELATED TO REPEAL OF SECTION 215.— 
(A) Section 62(a) is amended by striking 
paragraph (10).
128 
(B) Section 3402(m)(1) is amended by 
striking ‘‘(other than paragraph (10) thereof)’’. 
(3) RELATED TO REPEAL OF SECTION 71.— 
(A) Section 121(d)(3) is amended— 
(i) by striking ‘‘(as defined in section 
71(b)(2))’’ in subparagraph (B), and 
(ii) by adding at the end the following 
new subparagraph: 
‘‘(C) DIVORCE
OR
SEPARATION
INSTRU-
MENT.—For purposes of this paragraph, the 
term 
‘divorce 
or 
separation 
instrument’ 
means— 
‘‘(i) a decree of divorce or separate 
maintenance or a written instrument inci-
dent to such a decree, 
‘‘(ii) a written separation agreement, 
or 
‘‘(iii) a decree (not described in clause 
(i)) requiring a spouse to make payments 
for the support or maintenance of the 
other spouse.’’. 
(B) Section 220(f)(7) is amended by strik-
ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 
inserting ‘‘clause (i) of section 121(d)(3)(C)’’.
129 
(C) Section 223(f)(7) is amended by strik-
ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 
inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 
(D) Section 382(l)(3)(B)(iii) is amended 
by striking ‘‘section 71(b)(2)’’ and inserting 
‘‘section 121(d)(3)(C)’’. 
(E) Section 408(d)(6) is amended by strik-
ing ‘‘subparagraph (A) of section 71(b)(2)’’ and 
inserting ‘‘clause (i) of section 121(d)(3)(C)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to— 
(1) any divorce or separation instrument (as de-
fined in section 71(b)(2) of the Internal Revenue 
Code of 1986 as in effect before the date of the en-
actment of this Act) executed after December 31, 
2017, and 
(2) any divorce or separation instrument (as so 
defined) executed on or before such date and modi-
fied after such date if the modification expressly 
provides that the amendments made by this section 
apply to such modification. 
SEC. 1310. REPEAL OF DEDUCTION FOR MOVING EX-
PENSES. 
(a) IN GENERAL.—Part VII of subchapter B is 
amended by striking by striking section 217 (and by strik-
130 
ing the item relating to such section in the table of sec-
tions for such subpart). 
(b) RETENTION OF MOVING EXPENSES FOR MEM-
BERS OF ARMED FORCES.—Section 134(b) is amended by 
adding at the end the following new paragraph: 
‘‘(7) MOVING EXPENSES.—The term ‘qualified 
military benefit’ includes any benefit described in 
section 217(g) (as in effect before the enactment of 
the Tax Cuts And Jobs Act).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 62(a) is amended by striking para-
graph (15). 
(2) Section 274(m)(3) is amended by striking 
‘‘(other than section 217)’’. 
(3) Section 3121(a) is amended by striking 
paragraph (11). 
(4) Section 3306(b) is amended by striking 
paragraph (9). 
(5) Section 3401(a) is amended by striking 
paragraph (15). 
(6) Section 7872(f) is amended by striking 
paragraph (11). 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017.
131 
SEC. 1311. TERMINATION OF DEDUCTION AND EXCLUSIONS 
FOR CONTRIBUTIONS TO MEDICAL SAVINGS 
ACCOUNTS. 
(a) TERMINATION OF INCOME TAX DEDUCTION.— 
Section 220 is amended by adding at the end the following 
new subsection: 
‘‘(k) TERMINATION.—No deduction shall be allowed 
under subsection (a) with respect to any taxable year be-
ginning after December 31, 2017.’’. 
(b) TERMINATION OF EXCLUSION FOR EMPLOYER- 
PROVIDED CONTRIBUTIONS.—Section 106 is amended by 
striking subsection (b). 
(c) CONFORMING AMENDMENTS.— 
(1) Section 62(a) is amended by striking para-
graph (16). 
(2) Section 106(d) is amended by striking para-
graph (2), by redesignating paragraph (3) as para-
graph (6), and by inserting after paragraph (1) the 
following new paragraphs: 
‘‘(2) NO CONSTRUCTIVE RECEIPT.—No amount 
shall be included in the gross income of any em-
ployee solely because the employee may choose be-
tween the contributions referred to in paragraph (1) 
and employer contributions to another health plan of 
the employer.
132 
‘‘(3) SPECIAL RULE FOR DEDUCTION OF EM-
PLOYER CONTRIBUTIONS.—Any employer contribu-
tion to a health savings account (as so defined), if 
otherwise allowable as a deduction under this chap-
ter, shall be allowed only for the taxable year in 
which paid. 
‘‘(4) EMPLOYER
HEALTH
SAVINGS
ACCOUNT 
CONTRIBUTION
REQUIRED
TO
BE
SHOWN
ON
RE-
TURN.—Every individual required to file a return 
under section 6012 for the taxable year shall include 
on such return the aggregate amount contributed by 
employers to the health savings accounts (as so de-
fined) of such individual or such individual’s spouse 
for such taxable year. 
‘‘(5) HEALTH
SAVINGS
ACCOUNT
CONTRIBU-
TIONS NOT PART OF COBRA COVERAGE.—Paragraph 
(1) shall not apply for purposes of section 4980B.’’. 
(3) Section 223(b)(4) is amended by striking 
subparagraph (A), by redesignating subparagraphs 
(B) and (C) as subparagraphs (A) and (B), respec-
tively, and by striking the second sentence thereof. 
(4) Section 223(b)(5) is amended by striking 
‘‘under paragraph (3))’’ and all that follows through 
‘‘shall be divided equally between them’’ and insert-
133 
ing the following: ‘‘under paragraph (3)) shall be di-
vided equally between the spouses’’. 
(5) Section 223(c) is amended by striking para-
graph (5). 
(6) Section 3231(e) is amended by striking 
paragraph (10). 
(7) Section 3306(b) is amended by striking 
paragraph (17). 
(8) Section 3401(a) is amended by striking 
paragraph (21). 
(9) Chapter 43 is amended by striking section 
4980E (and by striking the item relating to such 
section in the table of sections for such chapter). 
(10) Section 4980G is amended to read as fol-
lows: 
‘‘SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COM-
PARABLE HEALTH SAVINGS ACCOUNT CON-
TRIBUTIONS. 
‘‘(a) IN GENERAL.—In the case of an employer who 
makes a contribution to the health savings account of any 
employee during a calendar year, there is hereby imposed 
a tax on the failure of such employer to meet the require-
ments of subsection (d) for such calendar year. 
‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed by subsection (a) on any failure for any calendar
134 
year is the amount equal to 35 percent of the aggregate 
amount contributed by the employer to health savings ac-
counts of employees for taxable years of such employees 
ending with or within such calendar year. 
‘‘(c) WAIVER BY SECRETARY.—In the case of a fail-
ure which is due to reasonable cause and not to willful 
neglect, the Secretary may waive part or all of the tax 
imposed by subsection (a) to the extent that the payment 
of such tax would be excessive relative to the failure in-
volved. 
‘‘(d) EMPLOYER REQUIRED TO MAKE COMPARABLE 
HEALTH SAVINGS ACCOUNT CONTRIBUTIONS FOR ALL 
PARTICIPATING EMPLOYEES.— 
‘‘(1) IN GENERAL.—An employer meets the re-
quirements of this subsection for any calendar year 
if the employer makes available comparable con-
tributions to the health savings accounts of all com-
parable participating employees for each coverage 
period during such calendar year. 
‘‘(2) COMPARABLE CONTRIBUTIONS.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘comparable contributions’ 
means contributions— 
‘‘(i) which are the same amount, or
135 
‘‘(ii) which are the same percentage of 
the annual deductible limit under the high 
deductible health plan covering the employ-
ees. 
‘‘(B) PART-YEAR
EMPLOYEES.—In the 
case of an employee who is employed by the em-
ployer for only a portion of the calendar year, 
a contribution to the health savings account of 
such employee shall be treated as comparable if 
it is an amount which bears the same ratio to 
the comparable amount (determined without re-
gard to this subparagraph) as such portion 
bears to the entire calendar year. 
‘‘(3) COMPARABLE
PARTICIPATING
EMPLOY-
EES.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘comparable participating 
employees’ means all employees— 
‘‘(i) who are eligible individuals cov-
ered under any high deductible health plan 
of the employer, and 
‘‘(ii) who have the same category of 
coverage.
136 
‘‘(B) CATEGORIES
OF
COVERAGE.—For 
purposes of subparagraph (B), the categories of 
coverage are self-only and family coverage. 
‘‘(4) PART-TIME EMPLOYEES.— 
‘‘(A) IN GENERAL .—Paragraph (3) shall 
be applied separately with respect to part-time 
employees and other employees. 
‘‘(B) PART-TIME
EMPLOYEE.—For pur-
poses of subparagraph (A), the term ‘part-time 
employee’ means any employee who is custom-
arily employed for fewer than 30 hours per 
week. 
‘‘(5) SPECIAL
RULE
FOR
NON-HIGHLY
COM-
PENSATED EMPLOYEES.—For purposes of applying 
this section to a contribution to a health savings ac-
count of an employee who is not a highly com-
pensated employee (as defined in section 414(q)), 
highly compensated employees shall not be treated 
as comparable participating employees. 
‘‘(e) CONTROLLED GROUPS.—For purposes of this 
section, all persons treated as a single employer under sub-
section (b), (c), (m), or (o) of section 414 shall be treated 
as 1 employer.
137 
‘‘(f) DEFINITIONS.—Terms used in this section which 
are also used in section 223 have the respective meanings 
given such terms in section 223. 
‘‘(g) REGULATIONS.—The Secretary shall issue regu-
lations to carry out the purposes of this section.’’. 
(11) Section 6051(a) is amended by striking 
paragraph (11). 
(12) Section 6051(a)(14)(A) is amended by 
striking ‘‘paragraphs (11) and (12)’’ and inserting 
‘‘paragraph (12)’’. 
(d) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1312. DENIAL OF DEDUCTION FOR EXPENSES ATTRIB-
UTABLE TO THE TRADE OR BUSINESS OF 
BEING AN EMPLOYEE. 
(a) IN GENERAL.—Part IX of subchapter B of chap-
ter 1 is amended by inserting after the item relating to 
section 262 the following new item: 
‘‘SEC. 262A. EXPENSES ATTRIBUTABLE TO BEING AN EM-
PLOYEE. 
‘‘(a) IN GENERAL.—Except as otherwise provided in 
this section, no deduction shall be allowed with respect to 
any trade or business of the taxpayer which consists of
138 
the performance of services by the taxpayer as an em-
ployee. 
‘‘(b) EXCEPTION
FOR
ABOVE-THE-LINE
DEDUC-
TIONS.—Subsection (a) shall not apply to any deduction 
allowable (determined without regard to subsection (a)) in 
determining adjusted gross income.’’. 
(b) REPEAL OF CERTAIN ABOVE-THE-LINE TRADE 
AND BUSINESS DEDUCTIONS OF EMPLOYEES.— 
(1) IN GENERAL.—Section 62(a)(2) is amend-
ed— 
(A) by striking subparagraphs (B), (C), 
and (D), and 
(B) by redesignating subparagraph (E) as 
subparagraph (B). 
(2) CONFORMING AMENDMENTS.— 
(A) Section 62 is amended by striking sub-
sections (b) and (d) and by redesignating sub-
sections (c) and (e) as subsections (b) and (c), 
respectively. 
(B) Section 62(a)(20) is amended by strik-
ing ‘‘subsection (e)’’ and inserting ‘‘subsection 
(c)’’. 
(c) CONTINUED EXCLUSION OF WORKING CONDI-
TION FRINGE BENEFITS.—Section 132(d) is amended by
139 
inserting ‘‘(determined without regard to section 262A)’’ 
after ‘‘section 162’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
Subtitle E—Simplification and Re-
form of Exclusions and Taxable 
Compensation 
SEC. 1401. LIMITATION ON EXCLUSION FOR EMPLOYER- 
PROVIDED HOUSING. 
(a) IN GENERAL.—Section 119 is amended by adding 
at the end the following new subsection: 
‘‘(e) LIMITATION ON EXCLUSION OF LODGING.— 
‘‘(1) IN GENERAL.—The aggregate amount ex-
cluded from gross income of the taxpayer under sub-
sections (a) and (d) with respect to lodging for any 
taxable year shall not exceed $50,000 (half such 
amount in the case of a married individual filing a 
separate return). 
‘‘(2) LIMITATION TO 1 HOME.—Subsections (a) 
and (d) (separately and in combination) shall not 
apply with respect to more than 1 residence of the 
taxpayer at any given time. In the case of a joint re-
turn, the preceding sentence shall apply separately 
to each spouse for any period during which each
140 
spouse resides separate from the other spouse in a 
residence which is provided in connection with the 
employment of each spouse, respectively. 
‘‘(3) LIMITATION FOR HIGHLY COMPENSATED 
EMPLOYEES.— 
‘‘(A) REDUCED
FOR
EXCESS
COMPENSA-
TION.—In the case of an individual whose com-
pensation for the taxable year exceeds the 
amount in effect under section 414(q)(1)(B)(i) 
for the calendar in which such taxable year be-
gins, the $50,000 amount under paragraph (1) 
shall be reduced (but not below zero) by an 
amount equal to 50 percent of such excess. For 
purposes of the preceding sentence, the term 
‘compensation’ means wages (as defined in sec-
tion 3121(a) (without regard to the contribu-
tion and benefit base limitation in section 
3121(a)(1)). 
‘‘(B) EXCLUSION DENIED FOR 5-PERCENT 
OWNERS.—In the case of an individual who is 
a 5-percent owner (as defined in section 
416(i)(1)(B)(i)) of the employer at any time 
during the taxable year, the amount under 
paragraph (1) shall be zero.’’.
141 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRIN-
CIPAL RESIDENCE. 
(a) REQUIREMENT THAT RESIDENCE BE PRINCIPAL 
RESIDENCE FOR 5 YEARS DURING 8-YEAR PERIOD.— 
Subsection (a) of section 121 is amended— 
(1) by striking ‘‘5-year period’’ and inserting 
‘‘8-year period’’, and 
(2) by striking ‘‘2 years’’ and inserting ‘‘5 
years’’. 
(b) APPLICATION TO ONLY 1 SALE OR EXCHANGE 
EVERY 5 YEARS.—Paragraph (3) of section 121(b) is 
amended to read as follows: 
‘‘(3) APPLICATION
TO
ONLY
SALE
OR
EX-
CHANGE EVERY 5 YEARS.—Subsection (a) shall not 
apply to any sale or exchange by the taxpayer if, 
during the 5-year period ending on the date of such 
sale or exchange, there was any other sale or ex-
change by the taxpayer to which subsection (a) ap-
plied.’’. 
(c) PHASEOUT BASED
ON MODIFIED ADJUSTED 
GROSS INCOME.—Section 121 is amended by adding at 
the end the following new subsection:
142 
‘‘(h) PHASEOUT BASED ON MODIFIED ADJUSTED 
GROSS INCOME.— 
‘‘(1) IN GENERAL.—If the average modified ad-
justed gross income of the taxpayer for the taxable 
year and the 2 preceding taxable years exceeds 
$250,000 (twice such amount in the case of a joint 
return), the amount which would (but for this sub-
section) be excluded from gross income under sub-
section (a) for such taxable year shall be reduced 
(but not below zero) by the amount of such excess. 
‘‘(2) MODIFIED
ADJUSTED
GROSS
INCOME.— 
For purposes of this subsection, the term ‘modified 
adjusted gross income’ means, with respect to any 
taxable year, adjusted gross income determined after 
application of this section (but without regard to 
subsection (b)(1) and this subsection). 
‘‘(3) SPECIAL RULE FOR JOINT RETURNS.—In 
the case of a joint return, the average modified ad-
justed gross income of the taxpayer shall be deter-
mined without regard to any taxable year with re-
spect to which the taxpayer did not file a joint re-
turn.’’. 
(d) CONFORMING AMENDMENTS.—
143 
(1) The following provisions of section 121 are 
each amended by striking ‘‘5-year period’’ each place 
it appears therein and inserting ‘‘8-year period’’: 
(A) Subsection (b)(5)(C)(ii)(I). 
(B) Subsection (c)(1)(B)(i)(I). 
(C) Subsection (d)(7)(B). 
(D) Subparagraphs (A) and (B) of sub-
section (d)(9). 
(E) Subsection (d)(10). 
(F) Subsection (d)(12)(A). 
(2) Section 121(c)(1)(B)(ii) is amended by 
striking ‘‘2 years’’ and inserting ‘‘5 years’’: 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales and exchanges after De-
cember 31, 2017. 
SEC. 1403. REPEAL OF EXCLUSION, ETC., FOR EMPLOYEE 
ACHIEVEMENT AWARDS. 
(a) IN GENERAL.—Section 74 is amended by striking 
subsection (c). 
(b) REPEAL OF LIMITATION ON DEDUCTION.—Sec-
tion 274 is amended by striking subsection (j). 
(c) CONFORMING AMENDMENTS.— 
(1) Section 102(c)(2) is amended by striking 
the first sentence.
144 
(2) Section 414(n)(3)(C) is amended by strik-
ing ‘‘274(j),’’. 
(3) Section 414(t)(2) is amended by striking 
‘‘274(j),’’. 
(4) Section 3121(a)(20) is amended by striking 
‘‘74(c)’’. 
(5) Section 3231(e)(5) is amended by striking 
‘‘74(c),’’. 
(6) Section 3306(b)(16) is amended by striking 
‘‘74(c),’’. 
(7) Section 3401(a)(19) is amended by striking 
‘‘74(c),’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1404. SUNSET OF EXCLUSION FOR DEPENDENT CARE 
ASSISTANCE PROGRAMS. 
(a) IN GENERAL.—Section 129 is amended by adding 
at the end the following new subsection: 
‘‘(f) TERMINATION.—Subsection (a) shall not apply 
to taxable years beginning after December 31, 2022.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act.
145 
SEC. 1405. REPEAL OF EXCLUSION FOR QUALIFIED MOVING 
EXPENSE REIMBURSEMENT. 
(a) IN GENERAL.—Section 132(a) is amended by 
striking paragraph (6). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 82 is amended by striking ‘‘Except 
as provided in section 132(a)(6), there’’ and insert-
ing ‘‘There’’. 
(2) Section 132 is amended by striking sub-
section (g). 
(3) Section 132(l) is amended by striking by 
striking ‘‘subsections (e) and (g)’’ and inserting 
‘‘subsection (e)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1406. REPEAL OF EXCLUSION FOR ADOPTION ASSIST-
ANCE PROGRAMS. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 is amended by striking section 137 (and by striking 
the item relating to such section in the table of sections 
for such part). 
(b) CONFORMING AMENDMENTS.— 
(1) 
Sections 
414(n)(3)(C), 
414(t)(2), 
74(d)(2)(B), 86(b)(2)(A), 219(g)(3)(A)(ii) are each 
amended by striking ‘‘, 137’’.
146 
(2) Section 1016(a), as amended by the pre-
ceding provision of this Act, is amended by striking 
paragraph (26). 
(3) Section 6039D(d)(1), as amended by the 
preceding provisions of this Act, is amended— 
(A) by striking ‘‘, or 137’’, and 
(B) by inserting ‘‘or’’ before ‘‘125’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
Subtitle F—Simplification and Re-
form of Savings, Pensions, Re-
tirement 
SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE-
CHARACTERIZATION 
OF 
ROTH 
IRA 
CON-
TRIBUTIONS 
AS 
TRADITIONAL 
IRA 
CON-
TRIBUTIONS. 
(a) IN GENERAL.—Section 408A(d) is amended by 
striking paragraph (6) and by redesignating paragraph 
(7) as paragraph (6). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017.
147 
SEC. 1502. REDUCTION IN MINIMUM AGE FOR ALLOWABLE 
IN-SERVICE DISTRIBUTIONS. 
(a) IN GENERAL.—Section 401(a)(36) is amended by 
striking ‘‘age 62’’ and inserting ‘‘age 59 1⁄2’’. 
(b) APPLICATION
TO
GOVERNMENTAL
SECTION 
457(b) PLANS.—Clause (i) of section 457(d)(1)(A) is 
amended by inserting ‘‘(in the case of a plan maintained 
by an employer described in subsection (e)(1)(A), age 59 
1⁄2)’’ before the comma at the end. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2017. 
SEC. 1503. MODIFICATION OF RULES GOVERNING HARD-
SHIP DISTRIBUTIONS. 
(a) IN GENERAL.—Not later than 1 year after the 
date of the enactment of this Act, the Secretary of the 
Treasury shall modify Treasury Regulation section 
1.401(k)–1(d)(3)(iv)(E) to— 
(1) delete the 6-month prohibition on contribu-
tions imposed by paragraph (2) thereof, and 
(2) make any other modifications necessary to 
carry 
out 
the 
purposes 
of 
section 
401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 
1986.
148 
(b) EFFECTIVE
DATE.—The revised regulations 
under this section shall apply to plan years beginning after 
December 31, 2017. 
SEC. 1504. MODIFICATION OF RULES RELATING TO HARD-
SHIP WITHDRAWALS FROM CASH OR DE-
FERRED ARRANGEMENTS. 
(a) IN GENERAL.—Section 401(k) is amended by 
adding at the end the following: 
‘‘(14) SPECIAL RULES RELATING TO HARDSHIP 
WITHDRAWALS.—For 
purposes 
of 
paragraph 
(2)(B)(i)(IV)— 
‘‘(A) AMOUNTS
WHICH
MAY
BE
WITH-
DRAWN.—The following amounts may be dis-
tributed upon hardship of the employee: 
‘‘(i) Contributions to a profit-sharing 
or stock bonus plan to which section 
402(e)(3) applies. 
‘‘(ii) Qualified nonelective contribu-
tions (as defined in subsection (m)(4)(C)). 
‘‘(iii) Qualified matching contributions 
described in paragraph (3)(D)(ii)(I). 
‘‘(iv) Earnings on any contributions 
described in clause (i), (ii), or (iii). 
‘‘(B) NO REQUIREMENT TO TAKE AVAIL-
ABLE LOAN.—A distribution shall not be treat-
149 
ed as failing to be made upon the hardship of 
an employee solely because the employee does 
not take any available loan under the plan.″.’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
401(k)(2)(B)(i)(IV) is amended to read as follows: 
‘‘(IV) subject to the provisions of 
paragraph (14), upon hardship of the 
employee, or″.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2017. 
SEC. 1505. EXTENDED ROLLOVER PERIOD FOR THE ROLL-
OVER OF PLAN LOAN OFFSET AMOUNTS IN 
CERTAIN CASES. 
(a) IN GENERAL.—Paragraph (3) of section 402(c) 
is amended by adding at the end the following new sub-
paragraph: 
‘‘(C) ROLLOVER OF CERTAIN PLAN LOAN 
OFFSET AMOUNTS.— 
‘‘(i) IN GENERAL.—In the case of a 
qualified plan loan offset amount, para-
graph (1) shall not apply to any transfer 
of such amount made after the due date 
(including extensions) for filing the return 
of tax for the taxable year in which such
150 
amount is treated as distributed from a 
qualified employer plan. 
‘‘(ii) QUALIFIED PLAN LOAN OFFSET 
AMOUNT.—For purposes of this subpara-
graph, the term ‘qualified plan loan offset 
amount’ means a plan loan offset amount 
which is treated as distributed from a 
qualified employer plan to a participant or 
beneficiary solely by reason of— 
‘‘(I) the termination of the quali-
fied employer plan, or 
‘‘(II) the failure to meet the re-
payment terms of the loan from such 
plan because of the separation from 
service of the participant (whether 
due to layoff, cessation of business, 
termination of employment, or other-
wise). 
‘‘(iii) PLAN LOAN OFFSET AMOUNT.— 
For purposes of clause (ii), the term ‘plan 
loan offset amount’ means the amount by 
which the participant’s accrued benefit 
under the plan is reduced in order to repay 
a loan from the plan.
151 
‘‘(iv) 
LIMITATION.—This 
subpara-
graph shall not apply to any plan loan off-
set amount unless such plan loan offset 
amount relates to a loan to which section 
72(p)(1) does not apply by reason of sec-
tion 72(p)(2). 
‘‘(v) QUALIFIED EMPLOYER PLAN.— 
For purposes of this subsection, the term 
‘qualified employer plan’ has the meaning 
given such term by section 72(p)(4).’’. 
(b) CONFORMING AMENDMENT.—Subparagraph (A) 
of section 402(c)(3) is amended by striking ‘‘subpara-
graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 1506. MODIFICATION OF NONDISCRIMINATION RULES 
TO PROTECT OLDER, LONGER SERVICE PAR-
TICIPANTS. 
(a) IN GENERAL.—Section 401 is amended— 
(1) by redesignating subsection (o) as sub-
section (p), and 
(2) by inserting after subsection (n) the fol-
lowing new subsection:
152 
‘‘(o) 
SPECIAL
RULES
FOR
APPLYING
NON-
DISCRIMINATION RULES TO PROTECT OLDER, LONGER 
SERVICE AND GRANDFATHERED PARTICIPANTS.— 
‘‘(1) TESTING
OF
DEFINED
BENEFIT
PLANS 
WITH CLOSED CLASSES OF PARTICIPANTS.— 
‘‘(A) BENEFITS, RIGHTS, OR
FEATURES 
PROVIDED
TO
CLOSED
CLASSES.—A defined 
benefit plan which provides benefits, rights, or 
features to a closed class of participants shall 
not fail to satisfy the requirements of sub-
section (a)(4) by reason of the composition of 
such closed class or the benefits, rights, or fea-
tures provided to such closed class, if— 
‘‘(i) for the plan year as of which the 
class closes and the 2 succeeding plan 
years, such benefits, rights, and features 
satisfy the requirements of subsection 
(a)(4) (without regard to this subpara-
graph but taking into account the rules of 
subparagraph (I)), 
‘‘(ii) after the date as of which the 
class was closed, any plan amendment 
which modifies the closed class or the ben-
efits, rights, and features provided to such 
closed class does not discriminate signifi-
153 
cantly in favor of highly compensated em-
ployees, and 
‘‘(iii) the class was closed before April 
5, 2017, or the plan is described in sub-
paragraph (C). 
‘‘(B) AGGREGATE TESTING WITH DEFINED 
CONTRIBUTION PLANS PERMITTED ON A BENE-
FITS BASIS.— 
‘‘(i) IN
GENERAL.—For purposes of 
determining compliance with subsection 
(a)(4) and section 410(b), a defined benefit 
plan described in clause (iii) may be aggre-
gated and tested on a benefits basis with 
1 or more defined contribution plans, in-
cluding with the portion of 1 or more de-
fined contribution plans which— 
‘‘(I) provides matching contribu-
tions 
(as 
defined 
in 
subsection 
(m)(4)(A)), 
‘‘(II) provides annuity contracts 
described in section 403(b) which are 
purchased with matching contribu-
tions or nonelective contributions, or 
‘‘(III) consists of an employee 
stock ownership plan (within the
154 
meaning of section 4975(e)(7)) or a 
tax credit employee stock ownership 
plan (within the meaning of section 
409(a)). 
‘‘(ii) SPECIAL RULES FOR MATCHING 
CONTRIBUTIONS.—For purposes of clause 
(i), if a defined benefit plan is aggregated 
with a portion of a defined contribution 
plan providing matching contributions— 
‘‘(I) such defined benefit plan 
must also be aggregated with any por-
tion of such defined contribution plan 
which provides elective deferrals de-
scribed in subparagraph (A) or (C) of 
section 402(g)(3), and 
‘‘(II) such matching contribu-
tions shall be treated in the same 
manner as nonelective contributions, 
including for purposes of applying the 
rules of subsection (l). 
‘‘(iii) PLANS DESCRIBED.—A defined 
benefit plan is described in this clause if— 
‘‘(I) the plan provides benefits to 
a closed class of participants,
155 
‘‘(II) for the plan year as of 
which the class closes and the 2 suc-
ceeding plan years, the plan satisfies 
the requirements of section 410(b) 
and subsection (a)(4) (without regard 
to this subparagraph but taking into 
account the rules of subparagraph 
(I)), 
‘‘(III) after the date as of which 
the class was closed, any plan amend-
ment which modifies the closed class 
or the benefits provided to such closed 
class does not discriminate signifi-
cantly in favor of highly compensated 
employees, and 
‘‘(IV) the class was closed before 
April 5, 2017, or the plan is described 
in subparagraph (C). 
‘‘(C) PLANS DESCRIBED.—A plan is de-
scribed in this subparagraph if, taking into ac-
count any predecessor plan— 
‘‘(i) such plan has been in effect for 
at least 5 years as of the date the class is 
closed, and
156 
‘‘(ii) during the 5-year period pre-
ceding the date the class is closed, there 
has not been a substantial increase in the 
coverage or value of the benefits, rights, or 
features described in subparagraph (A) or 
in the coverage or benefits under the plan 
described in subparagraph (B)(iii) (which-
ever is applicable). 
‘‘(D) DETERMINATION
OF
SUBSTANTIAL 
INCREASE FOR BENEFITS, RIGHTS, AND FEA-
TURES.—In applying subparagraph (C)(ii) for 
purposes of subparagraph (A)(iii), a plan shall 
be treated as having had a substantial increase 
in coverage or value of the benefits, rights, or 
features described in subparagraph (A) during 
the applicable 5-year period only if, during such 
period— 
‘‘(i) the number of participants cov-
ered by such benefits, rights, or features 
on the date such period ends is more than 
50 percent greater than the number of 
such participants on the first day of the 
plan year in which such period began, or 
‘‘(ii) such benefits, rights, and fea-
tures have been modified by 1 or more
157 
plan amendments in such a way that, as of 
the date the class is closed, the value of 
such benefits, rights, and features to the 
closed class as a whole is substantially 
greater than the value as of the first day 
of such 5-year period, solely as a result of 
such amendments. 
‘‘(E) DETERMINATION
OF
SUBSTANTIAL 
INCREASE FOR AGGREGATE TESTING ON BENE-
FITS BASIS.—In applying subparagraph (C)(ii) 
for purposes of subparagraph (B)(iii)(IV), a 
plan shall be treated as having had a substan-
tial increase in coverage or benefits during the 
applicable 5-year period only if, during such pe-
riod— 
‘‘(i) the number of participants bene-
fitting under the plan on the date such pe-
riod ends is more than 50 percent greater 
than the number of such participants on 
the first day of the plan year in which such 
period began, or 
‘‘(ii) the average benefit provided to 
such participants on the date such period 
ends is more than 50 percent greater than 
the average benefit provided on the first
158 
day of the plan year in which such period 
began. 
‘‘(F) 
CERTAIN
EMPLOYEES
DIS-
REGARDED.—For purposes of subparagraphs 
(D) and (E), any increase in coverage or value 
or in coverage or benefits, whichever is applica-
ble, which is attributable to such coverage and 
value or coverage and benefits provided to em-
ployees— 
‘‘(i) who became participants as a re-
sult of a merger, acquisition, or similar 
event which occurred during the 7-year pe-
riod preceding the date the class is closed, 
or 
‘‘(ii) who became participants by rea-
son of a merger of the plan with another 
plan which had been in effect for at least 
5 years as of the date of the merger, 
shall be disregarded, except that clause (ii) 
shall apply for purposes of subparagraph (D) 
only if, under the merger, the benefits, rights, 
or features under 1 plan are conformed to the 
benefits, rights, or features of the other plan 
prospectively.
159 
‘‘(G) RULES RELATING TO AVERAGE BEN-
EFIT.—For purposes of subparagraph (E)— 
‘‘(i) the average benefit provided to 
participants under the plan will be treated 
as having remained the same between the 
2 dates described in subparagraph (E)(ii) 
if the benefit formula applicable to such 
participants has not changed between such 
dates, and 
‘‘(ii) if the benefit formula applicable 
to 1 or more participants under the plan 
has changed between such 2 dates, then 
the average benefit under the plan shall be 
considered to have increased by more than 
50 percent only if— 
‘‘(I) the total amount determined 
under section 430(b)(1)(A)(i) for all 
participants benefitting under the 
plan for the plan year in which the 5- 
year period described in subparagraph 
(E) ends, exceeds 
‘‘(II) the total amount deter-
mined under section 430(b)(1)(A)(i) 
for all such participants for such plan 
year, by using the benefit formula in
160 
effect for each such participant for 
the first plan year in such 5-year pe-
riod, by more than 50 percent. 
In the case of a CSEC plan (as defined in 
section 414(y)), the normal cost of the 
plan 
(as 
determined 
under 
section 
433(j)(1)(B)) shall be used in lieu of the 
amount 
determined 
under 
section 
430(b)(1)(A)(i). 
‘‘(H) TREATMENT AS SINGLE PLAN.—For 
purposes of subparagraphs (E) and (G), a plan 
described in section 413(c) shall be treated as 
a single plan rather than as separate plans 
maintained by each participating employer. 
‘‘(I) SPECIAL
RULES.—For purposes of 
subparagraphs (A)(i) and (B)(iii)(II), the fol-
lowing rules shall apply: 
‘‘(i) In applying section 410(b)(6)(C), 
the closing of the class of participants shall 
not be treated as a significant change in 
coverage under section 410(b)(6)(C)(i)(II). 
‘‘(ii) 2 or more plans shall not fail to 
be eligible to be aggregated and treated as 
a single plan solely by reason of having dif-
ferent plan years.
161 
‘‘(iii) Changes in the employee popu-
lation shall be disregarded to the extent at-
tributable to individuals who become em-
ployees or cease to be employees, after the 
date the class is closed, by reason of a 
merger, acquisition, divestiture, or similar 
event. 
‘‘(iv) Aggregation and all other testing 
methodologies otherwise applicable under 
subsection (a)(4) and section 410(b) may 
be taken into account. 
The rule of clause (ii) shall also apply for pur-
poses of determining whether plans to which 
subparagraph (B)(i) applies may be aggregated 
and treated as 1 plan for purposes of deter-
mining whether such plans meet the require-
ments of subsection (a)(4) and section 410(b). 
‘‘(J) SPUN-OFF PLANS.—For purposes of 
this paragraph, if a portion of a defined benefit 
plan described in subparagraph (A) or (B)(iii) 
is spun off to another employer and the spun- 
off plan continues to satisfy the requirements 
of— 
‘‘(i) 
subparagraph 
(A)(i) 
or 
(B)(iii)(II), whichever is applicable, if the
162 
original plan was still within the 3-year pe-
riod described in such subparagraph at the 
time of the spin off, and 
‘‘(ii) 
subparagraph 
(A)(ii) 
or 
(B)(iii)(III), whichever is applicable, 
the treatment under subparagraph (A) or (B) 
of the spun-off plan shall continue with respect 
to such other employer. 
‘‘(2) TESTING
OF
DEFINED
CONTRIBUTION 
PLANS.— 
‘‘(A) TESTING ON A BENEFITS BASIS.—A 
defined contribution plan shall be permitted to 
be tested on a benefits basis if— 
‘‘(i) such defined contribution plan 
provides make-whole contributions to a 
closed class of participants whose accruals 
under a defined benefit plan have been re-
duced or eliminated, 
‘‘(ii) for the plan year of the defined 
contribution plan as of which the class eli-
gible to receive such make-whole contribu-
tions closes and the 2 succeeding plan 
years, such closed class of participants sat-
isfies 
the 
requirements 
of 
section
163 
410(b)(2)(A)(i) (determined by applying 
the rules of paragraph (1)(I)), 
‘‘(iii) after the date as of which the 
class was closed, any plan amendment to 
the defined contribution plan which modi-
fies the closed class or the allocations, ben-
efits, rights, and features provided to such 
closed class does not discriminate signifi-
cantly in favor of highly compensated em-
ployees, and 
‘‘(iv) the class was closed before April 
5, 2017, or the defined benefit plan under 
clause (i) is described in paragraph (1)(C) 
(as applied for purposes of paragraph 
(1)(B)(iii)(IV)). 
‘‘(B) AGGREGATION WITH PLANS INCLUD-
ING MATCHING CONTRIBUTIONS.— 
‘‘(i) IN GENERAL.—With respect to 1 
or more defined contribution plans de-
scribed in subparagraph (A), for purposes 
of determining compliance with subsection 
(a)(4) and section 410(b), the portion of 
such plans which provides make-whole con-
tributions or other nonelective contribu-
tions may be aggregated and tested on a
164 
benefits basis with the portion of 1 or 
more other defined contribution plans 
which— 
‘‘(I) provides matching contribu-
tions 
(as 
defined 
in 
subsection 
(m)(4)(A)), 
‘‘(II) provides annuity contracts 
described in section 403(b) which are 
purchased with matching contribu-
tions or nonelective contributions, or 
‘‘(III) consists of an employee 
stock ownership plan (within the 
meaning of section 4975(e)(7)) or a 
tax credit employee stock ownership 
plan (within the meaning of section 
409(a)). 
‘‘(ii) SPECIAL RULES FOR MATCHING 
CONTRIBUTIONS.—Rules similar to the 
rules of paragraph (1)(B)(ii) shall apply 
for purposes of clause (i). 
‘‘(C) SPECIAL
RULES
FOR
TESTING
DE-
FINED
CONTRIBUTION
PLAN
FEATURES
PRO-
VIDING MATCHING CONTRIBUTIONS TO CERTAIN 
OLDER, LONGER
SERVICE
PARTICIPANTS.—In 
the case of a defined contribution plan which
166 
mined for purposes of subparagraph (A) or (C), 
whichever is applicable. 
‘‘(3) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) MAKE-WHOLE CONTRIBUTIONS.—Ex-
cept as otherwise provided in paragraph (2)(C), 
the term ‘make-whole contributions’ means non-
elective allocations for each employee in the 
class which are reasonably calculated, in a con-
sistent manner, to replace some or all of the re-
tirement benefits which the employee would 
have received under the defined benefit plan 
and any other plan or qualified cash or deferred 
arrangement under subsection (k)(2) if no 
change had been made to such defined benefit 
plan and such other plan or arrangement. For 
purposes of the preceding sentence, consistency 
shall not be required with respect to employees 
who were subject to different benefit formulas 
under the defined benefit plan. 
‘‘(B) REFERENCES TO CLOSED CLASS OF 
PARTICIPANTS.—References to a closed class of 
participants and similar references to a closed 
class shall include arrangements under which 1 
or more classes of participants are closed, ex-
167 
cept that 1 or more classes of participants 
closed on different dates shall not be aggre-
gated for purposes of determining the date any 
such class was closed. 
‘‘(C) HIGHLY COMPENSATED EMPLOYEE.— 
The term ‘highly compensated employee’ has 
the meaning given such term in section 
414(q).″.’’. 
(b) 
PARTICIPATION
REQUIREMENTS.—Paragraph 
(26) of section 401(a) is amended by adding at the end 
the following new subparagraph: 
‘‘(I) PROTECTED PARTICIPANTS.— 
‘‘(i) IN
GENERAL.—A plan shall be 
deemed to satisfy the requirements of sub-
paragraph (A) if— 
‘‘(I) the plan is amended— 
‘‘(aa) to cease all benefit ac-
cruals, or 
‘‘(bb) to provide future ben-
efit accruals only to a closed 
class of participants, 
‘‘(II) the plan satisfies subpara-
graph (A) (without regard to this sub-
paragraph) as of the effective date of 
the amendment, and
168 
‘‘(III) the amendment was adopt-
ed before April 5, 2017, or the plan is 
described in clause (ii). 
‘‘(ii) PLANS DESCRIBED.—A plan is 
described in this clause if the plan would 
be described in subsection (o)(1)(C), as ap-
plied 
for 
purposes 
of 
subsection 
(o)(1)(B)(iii)(IV) and by treating the effec-
tive date of the amendment as the date the 
class was closed for purposes of subsection 
(o)(1)(C). 
‘‘(iii) SPECIAL RULES.—For purposes 
of clause (i)(II), in applying section 
410(b)(6)(C), the amendments described in 
clause (i) shall not be treated as a signifi-
cant change in coverage under section 
410(b)(6)(C)(i)(II). 
‘‘(iv) SPUN-OFF
PLANS.—For pur-
poses of this subparagraph, if a portion of 
a plan described in clause (i) is spun off to 
another employer, the treatment under 
clause (i) of the spun-off plan shall con-
tinue with respect to the other employer.’’. 
(c) EFFECTIVE DATE.—
169 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall take effect on the date of the enactment of this 
Act, without regard to whether any plan modifica-
tions referred to in such amendments are adopted or 
effective before, on, or after such date of enactment. 
(2) SPECIAL RULES.— 
(A) ELECTION
OF
EARLIER
APPLICA-
TION.—At the election of the plan sponsor, the 
amendments made by this section shall apply to 
plan years beginning after December 31, 2013. 
(B) CLOSED CLASSES OF PARTICIPANTS.— 
For 
purposes 
of 
paragraphs 
(1)(A)(iii), 
(1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) 
of the Internal Revenue Code of 1986 (as added 
by this section), a closed class of participants 
shall be treated as being closed before April 5, 
2017, if the plan sponsor’s intention to create 
such closed class is reflected in formal written 
documents and communicated to participants 
before such date. 
(C) 
CERTAIN
POST-ENACTMENT
PLAN 
AMENDMENTS.—A plan shall not be treated as 
failing to be eligible for the application of sec-
tion 
401(o)(1)(A), 
401(o)(1)(B)(iii), 
or
170 
401(a)(26) of such Code (as added by this sec-
tion) to such plan solely because in the case 
of— 
(i) such section 401(o)(1)(A), the plan 
was amended before the date of the enact-
ment of this Act to eliminate 1 or more 
benefits, rights, or features, and is further 
amended after such date of enactment to 
provide such previously eliminated benefits, 
rights, or features to a closed class of par-
ticipants, or 
(ii) such section 401(o)(1)(B)(iii) or 
section 401(a)(26), the plan was amended 
before the date of the enactment of this 
Act to cease all benefit accruals, and is 
further amended after such date of enact-
ment to provide benefit accruals to a closed 
class of participants. Any such section 
shall only apply if the plan otherwise meets 
the requirements of such section and in ap-
plying such section, the date the class of 
participants is closed shall be the effective 
date of the later amendment.
171 
Subtitle G—Estate, Gift, and Gen-
eration-skipping Transfer Taxes 
SEC. 1601. INCREASE IN CREDIT AGAINST ESTATE, GIFT, 
AND GENERATION-SKIPPING TRANSFER TAX. 
(a) IN GENERAL.—Section 2010(c)(3) is amended by 
striking ‘‘$5,000,000’’ and inserting ‘‘$10,000,000’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to estates of decedents dying, gen-
eration-skipping transfers, and gifts made, after Decem-
ber 31, 2017. 
SEC. 1602. REPEAL OF ESTATE AND GENERATION-SKIPPING 
TRANSFER TAXES. 
(a) ESTATE TAX REPEAL.— 
(1) IN GENERAL.—Subchapter C of chapter 11 
is amended by adding at the end the following new 
section: 
‘‘SEC. 2210. TERMINATION. 
‘‘(a) IN GENERAL.—Except as provided in subsection 
(b), this chapter shall not apply to the estates of decedents 
dying after December 31, 2024. 
‘‘(b) CERTAIN DISTRIBUTIONS FROM QUALIFIED 
DOMESTIC TRUSTS.—In applying section 2056A with re-
spect to the surviving spouse of a decedent dying on or 
before December 31, 2024—
172 
‘‘(1) section 2056A(b)(1)(A) shall not apply to 
distributions made after the 10-year period begin-
ning on such date, and 
‘‘(2) section 2056A(b)(1)(B) shall not apply 
after such date.’’. 
(2) 
CONFORMING
AMENDMENTS.—Section 
1014(b) is amended— 
(A) in paragraph (6), by striking ‘‘was in-
cludible in determining’’ and all that follows 
through the end and inserting ‘‘was includible 
(or would have been includible without regard 
to section 2210) in determining the value of the 
decedent’s gross estate under chapter 11 of 
subtitle B’’ , 
(B) in paragraph (9), by striking ‘‘required 
to be included’’ through ‘‘Code of 1939’’ and 
inserting ‘‘required to be included (or would 
have been required to be included without re-
gard to section 2210) in determining the value 
of the decedent’s gross estate under chapter 11 
of subtitle B’’, and 
(C) in paragraph (10), by striking ‘‘Prop-
erty includible in the gross estate’’ and insert-
ing ‘‘Property includible (or which would have
173 
been includible without regard to section 2210) 
in the gross estate’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subchapter C of chapter 11 is amended by 
adding at the end the following new item: 
‘‘Sec. 2210. Termination.’’. 
(b) GENERATION-SKIPPING
TRANSFER
TAX
RE-
PEAL.— 
(1) IN GENERAL.—Subchapter G of chapter 13 
of subtitle B of such Code is amended by adding at 
the end the following new section: 
‘‘SEC. 2664. TERMINATION. 
‘‘This chapter shall not apply to generation-skipping 
transfers after December 31, 2024.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subchapter G of chapter 13 of such Code 
is amended by adding at the end the following new 
item: 
‘‘Sec. 2664. Termination.’’. 
(c) CONFORMING AMENDMENTS RELATED TO GIFT 
TAX.— 
(1) COMPUTATION OF GIFT TAX.—Section 2502 
is amended by adding at the end the following new 
subsection: 
‘‘(d) GIFTS MADE AFTER 2024.—
174 
‘‘(1) IN GENERAL.—In the case of a gift made 
after December 31, 2024, subsection (a) shall be ap-
plied by substituting ‘subsection (d)(2)’ for ‘section 
2001(c)’ and ‘such subsection’ for ‘such section’. 
‘‘(2) RATE SCHEDULE.— 
‘‘If the amount with respect to which the 
tentative tax to be computed is:.
The tentative tax 
is: 
Not over $10,000 ...........................................................
18% of such amount. 
Over $10,000 but not over $20,000 ..............................
$1,800, plus 20% of 
the excess over 
$10,000. 
Over $20,000 but not over $40,000 ..............................
$3,800, plus 22% of 
the excess over 
$20,000. 
Over $40,000 but not over $60,000 ..............................
$8,200, plus 24% of 
the excess over 
$40,000. 
Over $60,000 but not over $80,000 ..............................
$13,000, plus 26% of 
the excess over 
$60,000. 
Over $80,000 but not over $100,000 ............................
$18,200, plus 28% of 
the excess over 
$80,000. 
Over $100,000 but not over $150,000 ..........................
$23,800, plus 30% of 
the excess over 
$100,000. 
Over $150,000 but not over $250,000 ..........................
$38,800, plus 32% of 
the excess of 
$150,000. 
Over $250,000 but not over $500,000 ..........................
$70,800, plus 34% of 
the excess over 
$250,000. 
Over $500,000 ...............................................................
$155,800, plus 35% of 
the excess of 
$500,000.’’. 
(2) LIFETIME GIFT EXEMPTION.—Section 2505 
is amended by adding at the end the following new 
subsection: 
‘‘(d) GIFTS MADE AFTER 2024.— 
‘‘(1) IN GENERAL.—In the case of a gift made 
after December 31, 2024, subsection (a)(1) shall be
175 
applied by substituting ‘the amount of the tentative 
tax which would be determined under the rate sched-
ule set forth in section 2502(a)(2) if the amount 
with respect to which such tentative tax is to be 
computed were $10,000,000’ for ‘the applicable 
credit amount in effect under section 2010(c) which 
would apply if the donor died as of the end of the 
calendar year’. 
‘‘(2) INFLATION ADJUSTMENT.— 
‘‘(A) IN GENERAL.—In the case of any cal-
endar year after 2024, the dollar amount in 
subsection (a)(1) (after application of this sub-
section) shall be increased by an amount equal 
to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(c)(2)(A) of such 
calendar year by substituting ‘calendar 
year 2011’ for ‘calendar year 2016’ in 
clause (ii) thereof. 
‘‘(B) ROUNDING.—If any amount as ad-
justed under paragraph (1) is not a multiple of 
$10,000, such amount shall be rounded to the 
nearest multiple of $10,000.’’.
176 
(3) OTHER
CONFORMING
AMENDMENTS
RE-
LATED TO GIFT TAX.—Section 2801 is amended by 
adding at the end the following new subsection: 
‘‘(g) GIFTS RECEIVED AFTER 2024.—In the case of 
a gift received after December 31, 2024, subsection (a)(1) 
shall be applied by substituting ‘section 2502(a)(2)’ for 
‘section 2001(c) as in effect on the date of such receipt’.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to estates of decedents dying, gen-
eration-skipping transfers, and gifts made, after Decem-
ber 31, 2024. 
TITLE II—ALTERNATIVE 
MINIMUM TAX REPEAL 
SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX. 
(a) IN GENERAL.—Subchapter A of chapter 1 is 
amended by striking part VI (and by striking the item 
relating to such part in the table of parts for subchapter 
A). 
(b) CREDIT FOR PRIOR YEAR MINIMUM TAX LIABIL-
ITY.— 
(1) LIMITATION.—Subsection (c) of section 53 
is amended to read as follows: 
‘‘(c) LIMITATION.—The credit allowable under sub-
section (a) shall not exceed the regular tax liability of the
177 
taxpayer reduced by the sum of the credits allowed under 
subparts A, B, and D.’’. 
(2) CREDITS TREATED AS REFUNDABLE.—Sec-
tion 53 is amended by adding at the end the fol-
lowing new subsection: 
‘‘(e) PORTION OF CREDIT TREATED AS REFUND-
ABLE.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in 2019, 2020, 2021, or 2022, the 
limitation under subsection (c) shall be increased by 
the AMT refundable credit amount for such year. 
‘‘(2) AMT REFUNDABLE
CREDIT
AMOUNT.— 
For purposes of paragraph (1), the AMT refundable 
credit amount is an amount equal to 50 percent 
(100 percent in the case of a taxable year beginning 
in 2022) of the excess (if any) of— 
‘‘(A) the minimum tax credit determined 
under subsection (b) for the taxable year, over 
‘‘(B) the minimum tax credit allowed 
under subsection (a) for such year (before the 
application of this subsection for such year). 
‘‘(3) CREDIT REFUNDABLE.—For purposes of 
this title (other than this section), the credit allowed 
by reason of this subsection shall be treated as a
178 
credit allowed under subpart C (and not this sub-
part). 
‘‘(4) SHORT TAXABLE YEARS.—In the case of 
any taxable year of less than 365 days, the AMT re-
fundable credit amount determined under paragraph 
(2) with respect to such taxable year shall be the 
amount which bears the same ratio to such amount 
determined without regard to this paragraph as the 
number of days in such taxable year bears to 365.’’. 
(3) TREATMENT
OF
REFERENCES.—Section 
53(d) is amended by adding at the end the following 
new paragraph: 
‘‘(3) AMT TERM REFERENCES.—Any references 
in this subsection to section 55, 56, or 57 shall be 
treated as a reference to such section as in effect be-
fore its repeal by the Tax Cuts and Jobs Act.’’. 
(c) CONFORMING AMENDMENTS RELATED TO AMT 
REPEAL.— 
(1) Section 2(d) is amended by striking ‘‘sec-
tions 1 and 55’’ and inserting ‘‘section 1’’. 
(2) Section 5(a) is amended by striking para-
graph (4). 
(3) Section 11(d) is amended by striking ‘‘the 
taxes imposed by subsection (a) and section 55’’ and 
inserting ‘‘the tax imposed by subsection (a)’’.
179 
(4) Section 12 is amended by striking para-
graph (7). 
(5) Section 26(a) is amended to read as follows: 
‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The 
aggregate amount of credits allowed by this subpart for 
the taxable year shall not exceed the taxpayer’s regular 
tax liability for the taxable year.’’. 
(6) Section 26(b)(2) is amended by striking 
subparagraph (A). 
(7) Section 26 is amended by striking sub-
section (c). 
(8) Section 38(c) is amended— 
(A) by striking paragraphs (1) through 
(5), 
(B) by redesignating paragraph (6) as 
paragraph (2), 
(C) by inserting before paragraph (2) (as 
so redesignated) the following new paragraph: 
‘‘(1) IN GENERAL.—The credit allowed under 
subsection (a) for any taxable year shall not exceed 
the excess (if any) of— 
‘‘(A) the sum of— 
‘‘(i) so much of the regular tax liabil-
ity as does not exceed $25,000, plus
180 
‘‘(ii) 75 percent of so much of the reg-
ular tax liability as exceeds $25,000, over 
‘‘(B) the sum of the credits allowable 
under subparts A and B of this part.’’, and 
(D) by striking ‘‘subparagraph (B) of 
paragraph (1)’’ each place it appears in para-
graph (2) (as so redesignated) and inserting 
‘‘clauses (i) and (ii) of paragraph (1)(A)’’. 
(9) Section 39(a) is amended— 
(A) by striking ‘‘or the eligible small busi-
ness credits’’ in paragraph (3)(A), and 
(B) by striking paragraph (4). 
(10) Section 45D(g)(4)(B) is amended by strik-
ing ‘‘or for purposes of section 55’’. 
(11) Section 54(c)(1) is amended to read as fol-
lows: 
‘‘(1) regular tax liability (as defined in section 
26(b)), over’’. 
(12) Section 54A(c)(1)(A) is amended to read 
as follows: 
‘‘(A) regular tax liability (as defined in 
section 26(b)), over’’. 
(13) Section 148(b)(3) is amended to read as 
follows:
181 
‘‘(3) TAX-EXEMPT BONDS NOT TREATED AS IN-
VESTMENT PROPERTY.—The term ‘investment prop-
erty’ does not include any tax-exempt bond.’’. 
(14) Section 168(k)(2) is amended by striking 
subparagraph (G). 
(15) Section 168(k) is amended by striking 
paragraph (4). 
(16) Section 168(k)(5) is amended by striking 
subparagraph (E). 
(17) Section 168(m)(2)(B)(i) is amended by 
striking ‘‘(determined without regard to paragraph 
(4) thereof)’’. 
(18) Section 168(m)(2) is amended by striking 
subparagraph (D). 
(19) Section 173 is amended by striking sub-
section (b). 
(20) Section 263(c) is amended by striking 
‘‘section 59(e) or 291’’ and inserting ‘‘section 291’’. 
(21) Section 263A(c) is amended by striking 
paragraph (6) and by redesignating paragraph (7) 
(as amended) as paragraph (6). 
(22) Section 382(l) is amended by striking 
paragraph (7) and by redesignating paragraph (8) 
as paragraph (7).
182 
(23) Section 443 is amended by striking sub-
section (d) and by redesignating subsection (e) as 
subsection (d). 
(24) Section 616 is amended by striking sub-
section (e). 
(25) Section 617 is amended by striking sub-
section (i). 
(26) Section 641(c) is amended— 
(A) in paragraph (2) by striking subpara-
graph (B) and by redesignating subparagraphs 
(C) and (D) as subparagraphs (B) and (C), re-
spectively, and 
(B) in paragraph (3), by striking ‘‘para-
graph 
(2)(C)’’ 
and 
inserting 
‘‘paragraph 
(2)(B)’’. 
(27) Subsections (b) and (c) of section 666 are 
each amended by striking ‘‘(other than the tax im-
posed by section 55)’’. 
(28) Section 848 is amended by striking sub-
section (i). 
(29) Section 860E(a) is amended by striking 
paragraph (4). 
(30) Section 871(b)(1) is amended by striking 
‘‘or 55’’.
183 
(31) Section 882(a)(1) is amended by striking 
‘‘55,’’. 
(32) Section 897(a) is amended to read as fol-
lows: 
‘‘(a) TREATMENT
AS EFFECTIVELY CONNECTED 
WITH UNITED STATES TRADE OR BUSINESS.—For pur-
poses of this title, gain or loss of a nonresident alien indi-
vidual or a foreign corporation from the disposition of a 
United States real property interest shall be taken into 
account— 
‘‘(1) in the case of a nonresident alien indi-
vidual, under section 871(b)(1), or 
‘‘(2) in the case of a foreign corporation, under 
section 882(a)(1), 
as if the taxpayer were engaged in a trade or business 
within the United States during the taxable year and as 
if such gain or loss were effectively connected with such 
trade or business.’’. 
(33) Section 904(k) is amended to read as fol-
lows: 
‘‘(k) CROSS REFERENCE.—For increase of limitation 
under subsection (a) for taxes paid with respect to 
amounts received which were included in the gross income 
of the taxpayer for a prior taxable year as a United States
184 
shareholder with respect to a controlled foreign corpora-
tion, see section 960(b).’’. 
(34) Section 911(f) is amended to read as fol-
lows: 
‘‘(f) DETERMINATION OF TAX LIABILITY.— 
‘‘(1) IN GENERAL.—If, for any taxable year, 
any amount is excluded from gross income of a tax-
payer under subsection (a), then, notwithstanding 
section 1, if such taxpayer has taxable income for 
such taxable year, the tax imposed by section 1 for 
such taxable year shall be equal to the excess (if 
any) of— 
‘‘(A) the tax which would be imposed by 
section 1 for such taxable year if the taxpayer’s 
taxable income were increased by the amount 
excluded under subsection (a) for such taxable 
year, over 
‘‘(B) the tax which would be imposed by 
section 1 for such taxable year if the taxpayer’s 
taxable income were equal to the amount ex-
cluded under subsection (a) for such taxable 
year. 
For purposes of this paragraph, the amount ex-
cluded under subsection (a) shall be reduced by the 
aggregate amount of any deductions or exclusions
185 
disallowed under subsection (d)(6) with respect to 
such excluded amount. 
‘‘(2) TREATMENT OF CAPITAL GAIN EXCESS.— 
‘‘(A) IN
GENERAL.—In applying section 
1(h) for purposes of determining the tax under 
paragraph (1)(A) for any taxable year in which, 
without regard to this subsection, the tax-
payer’s net capital gain exceeds taxable income 
(hereafter in this subparagraph referred to as 
the capital gain excess)— 
‘‘(i) the taxpayer’s net capital gain 
(determined without regard to section 
1(h)(11)) shall be reduced (but not below 
zero) by such capital gain excess, 
‘‘(ii) the taxpayer’s qualified dividend 
income shall be reduced by so much of 
such capital gain excess as exceeds the tax-
payer’s net capital gain (determined with-
out regard to section 1(h)(11) and the re-
duction under clause (i)), and 
‘‘(iii) 
adjusted 
net 
capital 
gain, 
unrecaptured section 1250 gain, and 28- 
percent rate gain shall each be determined 
after increasing the amount described in
186 
section 1(h)(4)(B) by such capital gain ex-
cess. 
‘‘(B) DEFINITIONS.—Terms used in this 
paragraph which are also used in section 1(h) 
shall have the respective meanings given such 
terms by section 1(h).’’. 
(35) Section 962(a)(1) is amended— 
(A) by striking ‘‘sections 1 and 55’’ and 
inserting ‘‘section 1’’, and 
(B) by striking ‘‘sections 11 and 55’’ and 
inserting ‘‘section 11’’. 
(36) Section 1016(a) is amended by striking 
paragraph (20). 
(37) Section 1202(a)(4) is amended by insert-
ing ‘‘and’’ at the end of subparagraph (A), by strik-
ing ‘‘, and’’ and inserting a period at the end of sub-
paragraph (B), and by striking subparagraph (C). 
(38) Section 1374(b)(3)(B) is amended by 
striking the last sentence thereof. 
(39) Section 1561(a) is amended— 
(A) by inserting ‘‘and’’ at the end of para-
graph (1), by striking ‘‘, and’’ at the end of 
paragraph (2) and inserting a period, and by 
striking paragraph (3), and 
(B) by striking the last sentence.
187 
(40) Section 6015(d)(2)(B) is amended by 
striking ‘‘or 55’’. 
(41) Section 6211(b)(4)(A) is amended by 
striking‘‘, 168(k)(4)’’. 
(42) Section 6425(c)(1)(A) is amended to read 
as follows: 
‘‘(A) the tax imposed under section 11 or 
subchapter L of chapter 1, whichever is applica-
ble, over’’. 
(43) Section 6654(d)(2) is amended— 
(A) in clause (i) of subparagraph (B), by 
striking ‘‘, alternative minimum taxable in-
come,’’, and 
(B) in clause (i) of subparagraph (C), by 
striking ‘‘, alternative minimum taxable in-
come,’’. 
(44) Section 6655(e)(2)(B)(i) is amended by 
striking ‘‘The taxable income and alternative min-
imum taxable income shall’’ and inserting ‘‘Taxable 
income shall’’. 
(45) Section 6655(g)(1)(A) is amended by add-
ing ‘‘plus’’ at the end of clause (i), by striking clause 
(ii), and by redesignating clause (iii) as clause (ii). 
(46) Section 6662(e)(3)(C) is amended by strik-
ing ‘‘the regular tax (as defined in section 55(c))’’
188 
and inserting ‘‘the regular tax liability (as defined in 
section 26(b))’’. 
(d) EFFECTIVE DATES.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2017. 
(2) PRIOR ELECTIONS WITH RESPECT TO CER-
TAIN TAX PREFERENCES.—So much of the amend-
ment made by subsection (a) as relates to the repeal 
of section 59(e) of the Internal Revenue Code of 
1986 shall apply to amounts paid or incurred after 
December 31, 2017. 
(3) TREATMENT
OF
NET
OPERATING
LOSS 
CARRYBACKS.—For purposes of section 56(d) of the 
Internal Revenue Code of 1986 (as in effect before 
its repeal), the amount of any net operating loss 
which may be carried back from a taxable year be-
ginning after December 31, 2017, to taxable years 
beginning before January 1, 2018, shall be deter-
mined without regard to any adjustments under sec-
tion 56(d)(2)(A) of such Code (as so in effect).
189 
TITLE III—BUSINESS TAX 
REFORM 
Subtitle A—Tax Rates 
SEC. 3001. REDUCTION IN CORPORATE TAX RATE. 
(a) IN GENERAL.—Section 11(b) is amended to read 
as follows: 
‘‘(b) AMOUNT OF TAX.— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the amount of the tax im-
posed by subsection (a) shall be 20 percent of tax-
able income. 
‘‘(2) SPECIAL RULE FOR PERSONAL SERVICE 
CORPORATIONS.— 
‘‘(A) IN GENERAL.—In the case of a per-
sonal service corporation (as defined in section 
448(d)(2)), the amount of the tax imposed by 
subsection (a) shall be 25 percent of taxable in-
come. 
‘‘(B) 
REFERENCES
TO
CORPORATE 
RATE.—Any reference to the rate imposed 
under this section or to the highest rate in ef-
fect under this section (or any similar ref-
erence) shall be determined without regard to 
the rate imposed with respect to personal serv-
ice corporations (as so defined).’’.
190 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Part I of subchapter P of chapter 1 is 
amended by striking section 1201 (and by striking 
the item relating to such section in the table of sec-
tions for such part). 
(B) Section 12 is amended by striking para-
graph (4). 
(C) Section 527(b) is amended— 
(i) by striking paragraph (2), and 
(ii) by striking all that precedes ‘‘is hereby 
imposed’’ and inserting: 
‘‘(b) TAX IMPOSED.—A tax’’. 
(D) Section 594(a) is amended by striking 
‘‘taxes imposed by section 11 or 1201(a)’’ and in-
serting ‘‘tax imposed by section 11’’. 
(E) Section 691(c)(4) is amended by striking 
‘‘1201,’’. 
(F) Section 801(a) is amended— 
(i) by striking paragraph (2), and 
(ii) by striking all that precedes ‘‘is hereby 
imposed’’ and inserting: 
‘‘(a) TAX IMPOSED.—A tax’’. 
(G) Section 831(e) is amended by striking para-
graph (1) and by redesignating paragraphs (2) and 
(3) as paragraphs (1) and (2), respectively.
191 
(H) Sections 832(c)(5) and 834(b)(1)(D) are 
each amended by striking ‘‘sec. 1201 and fol-
lowing,’’. 
(I) Section 852(b)(3)(A) is amended by striking 
‘‘section 1201(a)’’ and inserting ‘‘section 11(b)(1)’’. 
(J) Section 857(b)(3) is amended— 
(i) by striking subparagraph (A) and re-
designating subparagraphs (B) through (F) as 
subparagraphs (A) through (E), respectively, 
(ii) in subparagraph (C), as so redesig-
nated— 
(I) by striking ‘‘subparagraph (A)(ii)’’ 
in clause (i) thereof and inserting ‘‘para-
graph (1)’’, 
(II) by striking ‘‘the tax imposed by 
subparagraph (A)(ii)’’ in clauses (ii) and 
(iv) thereof and inserting ‘‘the tax imposed 
by paragraph (1) on undistributed capital 
gain’’, 
(iii) in subparagraph (E), as so redesig-
nated, by striking ‘‘subparagraph (B) or (D)’’ 
and inserting ‘‘subparagraph (A) or (C)’’, and 
(iv) by adding at the end the following new 
subparagraph:
192 
‘‘(F) UNDISTRIBUTED
CAPITAL
GAIN.— 
For purposes of this paragraph, the term ‘un-
distributed capital gain’ means the excess of the 
net capital gain over the deduction for divi-
dends paid (as defined in section 561) deter-
mined with reference to capital gain dividends 
only.’’. 
(K) Section 882(a)(1) is amended by striking ‘‘, 
or 1201(a)’’. 
(L) Section 1374(b) is amended by striking 
paragraph (4). 
(M) Section 1381(b) is amended by striking 
‘‘taxes imposed by section 11 or 1201’’ and inserting 
‘‘tax imposed by section 11’’. 
(N) Section 6655(g)(1)(A)(i) is amended by 
striking ‘‘or 1201(a),’’. 
(O) Section 7518(g)(6)(A) is amended by strik-
ing ‘‘or 1201(a)’’. 
(2) Section 1445(e)(1) is amended by striking 
‘‘35 percent (or, to the extent provided in regula-
tions, 20 percent)’’ and inserting ‘‘20 percent’’. 
(3) Section 1445(e)(2) is amended by striking 
‘‘35 percent’’ and inserting ‘‘20 percent’’.
193 
(4) Section 1445(e)(6) is amended by striking 
‘‘35 percent (or, to the extent provided in regula-
tions, 20 percent)’’ and inserting ‘‘20 percent’’. 
(5)(A) Part I of subchapter B of chapter 5 is 
amended by striking section 1551 (and by striking 
the item relating to such section in the table of sec-
tions for such part). 
(B) Section 12 is amended by striking para-
graph (6). 
(C) Section 535(c)(5) is amended to read as 
follows: 
‘‘(5) CROSS
REFERENCE.—For limitation on 
credit provided in paragraph (2) or (3) in the case 
of certain controlled corporations, see section 
1561.’’. 
(6)(A) Section 1561, as amended by the pre-
ceding provisions of this Act, is amended to read as 
follows: 
‘‘SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS 
CREDIT IN THE CASE OF CERTAIN CON-
TROLLED CORPORATIONS. 
‘‘(a) IN GENERAL.—The component members of a 
controlled group of corporations on a December 31 shall, 
for their taxable years which include such December 31, 
be limited for purposes of this subtitle to one $250,000
194 
($150,000 if any component member is a corporation de-
scribed in section 535(c)(2)(B)) amount for purposes of 
computing the accumulated earnings credit under section 
535(c)(2) and (3). Such amount shall be divided equally 
among the component members of such group on such De-
cember 31 unless the Secretary prescribes regulations per-
mitting an unequal allocation of such amount. 
‘‘(b) CERTAIN SHORT TAXABLE YEARS.—If a cor-
poration has a short taxable year which does not include 
a December 31 and is a component member of a controlled 
group of corporations with respect to such taxable year, 
then for purposes of this subtitle, the amount to be used 
in computing the accumulated earnings credit under sec-
tion 535(c)(2) and (3) of such corporation for such taxable 
year shall be the amount specified in subsection (a) with 
respect to such group, divided by the number of corpora-
tions which are component members of such group on the 
last day of such taxable year. For purposes of the pre-
ceding sentence, section 1563(b) shall be applied as if such 
last day were substituted for December 31.’’. 
(B) The table of sections for part II of sub-
chapter B of chapter 5 is amended by striking the 
item relating to section 1561 and inserting the fol-
lowing new item: 
‘‘Sec. 1561. Limitation on accumulated earnings credit in the case of certain 
controlled corporations.’’.
195 
(7) Section 7518(g)(6)(A) is amended— 
(A) by striking ‘‘With respect to the por-
tion’’ and inserting ‘‘In the case of a taxpayer 
other than a corporation, with respect to the 
portion’’, and 
(B) by striking ‘‘(34 percent in the case of 
a corporation)’’. 
(c) REDUCTION
IN DIVIDEND RECEIVED DEDUC-
TIONS TO REFLECT LOWER CORPORATE INCOME TAX 
RATES.— 
(1) DIVIDENDS RECEIVED BY CORPORATIONS.— 
(A) IN
GENERAL.—Section 243(a)(1) is 
amended by striking ‘‘70 percent’’ and inserting 
‘‘50 percent’’. 
(B) DIVIDENDS FROM 20-PERCENT OWNED 
CORPORATIONS.—Section 243(c)(1) is amend-
ed— 
(i) by striking ‘‘80 percent’’ and in-
serting ‘‘65 percent’’, and 
(ii) by striking ‘‘70 percent’’ and in-
serting ‘‘50 percent’’. 
(C) 
CONFORMING
AMENDMENT.—The 
heading for section 243(c) is amended by strik-
ing ‘‘RETENTION
OF 80-PERCENT DIVIDEND
196 
RECEIVED
DEDUCTION’’ and inserting ‘‘IN-
CREASED PERCENTAGE’’. 
(2) DIVIDENDS RECEIVED FROM FSC.—Section 
245(c)(1)(B) is amended— 
(A) by striking ‘‘70 percent’’ and inserting 
‘‘50 percent’’, and 
(B) by striking ‘‘80 percent’’ and inserting 
‘‘65 percent’’. 
(3) LIMITATION
ON
AGGREGATE
AMOUNT
OF 
DEDUCTIONS.—Section 246(b)(3) is amended— 
(A) by striking ‘‘80 percent’’ in subpara-
graph (A) and inserting ‘‘65 percent’’, and 
(B) by striking ‘‘70 percent’’ in subpara-
graph (B) and inserting ‘‘50 percent’’. 
(4) REDUCTION IN DEDUCTION WHERE PORT-
FOLIO
STOCK
IS
DEBT-FINANCED.—Section 
246A(a)(1) is amended— 
(A) by striking ‘‘70 percent’’ and inserting 
‘‘50 percent’’, and 
(B) by striking ‘‘80 percent’’ and inserting 
‘‘65 percent’’. 
(5) INCOME
FROM
SOURCES
WITHIN
THE 
UNITED STATES.—Section 861(a)(2) is amended— 
(A) by striking ‘‘100/70th’’ and inserting 
‘‘100/50th’’ in subparagraph (B), and
197 
(B) in the flush sentence at the end— 
(i) by striking ‘‘100/80th’’ and insert-
ing ‘‘100/65th’’, and 
(ii) by striking ‘‘100/70th’’ and insert-
ing ‘‘100/50th’’. 
(d) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2017. 
(2) CERTAIN CONFORMING AMENDMENTS.—The 
amendments made by paragraphs (2), (3), and (4) 
of subsection (b) shall apply to distributions after 
December 31, 2017. 
(e) NORMALIZATION REQUIREMENTS.— 
(1) IN GENERAL.—A normalization method of 
accounting shall not be treated as being used with 
respect to any public utility property for purposes of 
section 167 or 168 of the Internal Revenue Code of 
1986 if the taxpayer, in computing its cost of service 
for ratemaking purposes and reflecting operating re-
sults in its regulated books of account, reduces the 
excess tax reserve more rapidly or to a greater ex-
tent than such reserve would be reduced under the 
average rate assumption method.