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† HR 1 EAS 
(2) such change shall be treated as made with the 
consent of the Secretary, and 
(3) such change shall be applied only on a cut- 
off basis for any research or experimental expendi-
tures paid or incurred in taxable years beginning 
after December 31, 2025, and no adjustments under 
section 481(a) shall be made. 
(c) CLERICAL AMENDMENT.—The table of sections for 
part VI of subchapter B of chapter 1 is amended by striking 
the item relating to section 174 and inserting the following 
new item: 
‘‘Sec. 174. Amortization of research and experimental expenditures.’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Section 41(d)(1)(A) is amended by striking 
‘‘expenses under section 174’’ and inserting ‘‘specified 
research or experimental expenditures under section 
174’’. 
(2) Subsection (c) of section 280C is amended— 
(A) by striking paragraph (1) and inserting 
the following: 
‘‘(1) IN GENERAL.—If— 
‘‘(A) the amount of the credit determined 
for the taxable year under section 41(a)(1), ex-
ceeds
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† HR 1 EAS 
‘‘(B) the amount allowable as a deduction 
for such taxable year for qualified research ex-
penses or basic research expenses, 
the amount chargeable to capital account for the tax-
able year for such expenses shall be reduced by the 
amount of such excess.’’, 
(B) by striking paragraph (2), 
(C) by redesignating paragraphs (3) (as 
amended by this Act) and (4) as paragraphs (2) 
and (3), respectively, and 
(D) in paragraph (2), as redesignated by 
subparagraph (C), by striking ‘‘paragraphs (1) 
and (2)’’ and inserting ‘‘paragraph (1)’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to amounts paid or incurred in taxable 
years beginning after December 31, 2025. 
SEC. 13207. EXPENSING OF CERTAIN COSTS OF REPLANT-
ING CITRUS PLANTS LOST BY REASON OF 
CASUALTY. 
(a) IN GENERAL.—Section 263A(d)(2) is amended by 
adding at the end the following new subparagraph: 
‘‘(C) SPECIAL TEMPORARY RULE FOR CIT-
RUS PLANTS LOST BY REASON OF CASUALTY.— 
‘‘(i) IN GENERAL.—In the case of the 
replanting of citrus plants, subparagraph
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† HR 1 EAS 
(A) shall apply to amounts paid or in-
curred by a person (other than the taxpayer 
described in subparagraph (A)) if— 
‘‘(I) the taxpayer described in 
subparagraph (A) has an equity inter-
est of not less than 50 percent in the 
replanted citrus plants at all times 
during the taxable year in which such 
amounts were paid or incurred and 
such other person holds any part of the 
remaining equity interest, or 
‘‘(II) such other person acquired 
the entirety of such taxpayer’s equity 
interest in the land on which the lost 
or damaged citrus plants were located 
at the time of such loss or damage, and 
the replanting is on such land. 
‘‘(ii) TERMINATION.—Clause (i) shall 
not apply to any cost paid or incurred after 
the date which is 10 years after the date of 
the enactment of the Tax Cuts and Jobs 
Act.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to costs paid or incurred after the date 
of the enactment of this Act.
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† HR 1 EAS 
Subpart B—Accounting Methods 
SEC. 13221. CERTAIN SPECIAL RULES FOR TAXABLE YEAR 
OF INCLUSION. 
(a) INCLUSION NOT LATER THAN FOR FINANCIAL AC-
COUNTING PURPOSES.—Section 451 is amended by redesig-
nating subsections (b) through (i) as subsections (c) through 
(j), respectively, and by inserting after subsection (a) the 
following new subsection: 
‘‘(b) INCLUSION NOT LATER THAN FOR FINANCIAL AC-
COUNTING PURPOSES.— 
‘‘(1) INCOME TAKEN INTO ACCOUNT IN FINANCIAL 
STATEMENT.— 
‘‘(A) IN GENERAL.—In the case of a tax-
payer the taxable income of which is computed 
under an accrual method of accounting, the all 
events test with respect to any item of gross in-
come (or portion thereof) shall not be treated as 
met any later than when such item (or portion 
thereof) is taken into account as revenue in— 
‘‘(i) an applicable financial statement 
of the taxpayer, or 
‘‘(ii) such other financial statement as 
the Secretary may specify for purposes of 
this subsection. 
‘‘(B) EXCEPTION.—This paragraph shall 
not apply to—
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† HR 1 EAS 
‘‘(i) a taxpayer which does not have a 
financial statement described in clause (i) 
or (ii) of subparagraph (A) for a taxable 
year, or 
‘‘(ii) any item of gross income in con-
nection with a mortgage servicing contract. 
‘‘(C) ALL EVENTS TEST.—For purposes of 
this section, the all events test is met with respect 
to any item of gross income if all the events have 
occurred which fix the right to receive such in-
come and the amount of such income can be de-
termined with reasonable accuracy. 
‘‘(2) COORDINATION WITH SPECIAL METHODS OF 
ACCOUNTING.—Paragraph (1) shall not apply with 
respect to any item of gross income for which the tax-
payer uses a special method of accounting provided 
under any other provision of this chapter, other than 
any provision of part V of subchapter P (except as 
provided in clause (ii) of paragraph (1)(B)). 
‘‘(3) APPLICABLE FINANCIAL STATEMENT.—For 
purposes of this subsection, the term ‘applicable fi-
nancial statement’ means— 
‘‘(A) a financial statement which is cer-
tified as being prepared in accordance with gen-
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† HR 1 EAS 
statement may be treated as the applicable financial 
statement of the taxpayer.’’. 
(b) TREATMENT
OF ADVANCE PAYMENTS.—Section 
451, as amended by subsection (a), is amended by redesig-
nating subsections (c) through (j) as subsections (d) through 
(k), respectively, and by inserting after subsection (b) the 
following new subsection: 
‘‘(c) TREATMENT OF ADVANCE PAYMENTS.— 
‘‘(1) IN GENERAL.—A taxpayer which computes 
taxable income under the accrual method of account-
ing, and receives any advance payment during the 
taxable year, shall— 
‘‘(A) except as provided in subparagraph 
(B), include such advance payment in gross in-
come for such taxable year, or 
‘‘(B) if the taxpayer elects the application 
of this subparagraph with respect to the category 
of advance payments to which such advance pay-
ment belongs, the taxpayer shall— 
‘‘(i) to the extent that any portion of 
such advance payment is required under 
subsection (b) to be included in gross in-
come in the taxable year in which such pay-
ment is received, so include such portion, 
and
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† HR 1 EAS 
‘‘(ii) include the remaining portion of 
such advance payment in gross income in 
the taxable year following the taxable year 
in which such payment is received. 
‘‘(2) ELECTION.— 
‘‘(A) IN
GENERAL.—Except as otherwise 
provided in this paragraph, the election under 
paragraph (1)(B) shall be made at such time, in 
such form and manner, and with respect to such 
categories of advance payments, as the Secretary 
may provide. 
‘‘(B) PERIOD
TO
WHICH
ELECTION
AP-
PLIES.—An election under paragraph (1)(B) 
shall be effective for the taxable year with respect 
to which it is first made and for all subsequent 
taxable years, unless the taxpayer secures the 
consent of the Secretary to revoke such election. 
For purposes of this title, the computation of 
taxable income under an election made under 
paragraph (1)(B) shall be treated as a method of 
accounting. 
‘‘(3) TAXPAYERS CEASING TO EXIST.—Except as 
otherwise provided by the Secretary, the election 
under paragraph (1)(B) shall not apply with respect 
to advance payments received by the taxpayer during
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† HR 1 EAS 
a taxable year if such taxpayer ceases to exist during 
(or with the close of) such taxable year. 
‘‘(4) ADVANCE PAYMENT.—For purposes of this 
subsection— 
‘‘(A) IN GENERAL.—The term ‘advance pay-
ment’ means any payment— 
‘‘(i) the full inclusion of which in the 
gross income of the taxpayer for the taxable 
year of receipt is a permissible method of 
accounting under this section (determined 
without regard to this subsection), 
‘‘(ii) any portion of which is included 
in revenue by the taxpayer in a financial 
statement described in clause (i) or (ii) of 
subsection (b)(1)(A) for a subsequent taxable 
year, and 
‘‘(iii) which is for goods, services, or 
such other items as may be identified by the 
Secretary for purposes of this clause. 
‘‘(B) EXCLUSIONS.—Except as otherwise 
provided by the Secretary, such term shall not 
include— 
‘‘(i) rent, 
‘‘(ii) insurance premiums governed by 
subchapter L,
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† HR 1 EAS 
‘‘(iii) payments with respect to finan-
cial instruments, 
‘‘(iv) payments with respect to war-
ranty or guarantee contracts under which a 
third party is the primary obligor, 
‘‘(v) 
payments 
subject 
to 
section 
871(a), 881, 1441, or 1442, 
‘‘(vi) payments in property to which 
section 83 applies, and 
‘‘(vii) any other payment identified by 
the Secretary for purposes of this subpara-
graph. 
‘‘(C) RECEIPT.—For purposes of this sub-
section, an item of gross income is received by 
the taxpayer if it is actually or constructively re-
ceived, or if it is due and payable to the tax-
payer. 
‘‘(D) 
ALLOCATION
OF
TRANSACTION 
PRICE.—For purposes of this subsection, rules 
similar to subsection (b)(4) shall apply.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
(d) COORDINATION WITH SECTION 481.—
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† HR 1 EAS 
(1) IN GENERAL.—In the case of any qualified 
change in method of accounting for the taxpayer’s 
first taxable year beginning after December 31, 
2017— 
(A) such change shall be treated as initiated 
by the taxpayer, and 
(B) such change shall be treated as made 
with the consent of the Secretary of the Treasury. 
(2) QUALIFIED
CHANGE
IN
METHOD
OF
AC-
COUNTING.—For purposes of this subsection, the term 
‘‘qualified change in method of accounting’’ means 
any change in method of accounting which— 
(A) is required by the amendments made by 
this section, or 
(B) was prohibited under the Internal Rev-
enue Code of 1986 prior to such amendments 
and is permitted under such Code after such 
amendments. 
(e) SPECIAL
RULES
FOR
ORIGINAL
ISSUE
DIS-
COUNT.—Notwithstanding subsection (c), in the case of in-
come from a debt instrument having original issue dis-
count— 
(1) the amendments made by this section shall 
apply to taxable years beginning after December 31, 
2018, and
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† HR 1 EAS 
duction, or loss of such partnership, 
and 
‘‘(II) shall be increased by such 
partner’s distributive share of such 
partnership’s excess taxable income. 
For purposes of clause (ii)(II), a partner’s 
distributive share of partnership excess tax-
able income shall be determined in the same 
manner as the partner’s distributive share 
of nonseparately stated taxable income or 
loss of the partnership. 
‘‘(B) 
SPECIAL
RULES
FOR 
CARRYFORWARDS.— 
‘‘(i) IN GENERAL.—The amount of any 
business interest not allowed as a deduction 
to a partnership for any taxable year by 
reason of paragraph (1) for any taxable 
year— 
‘‘(I) shall not be treated under 
paragraph (2) as business interest paid 
or accrued by the partnership in the 
succeeding taxable year, and 
‘‘(II) shall, subject to clause (ii), 
be treated as excess business interest 
which is allocated to each partner in
153 
† HR 1 EAS 
the same manner as the non-separately 
stated taxable income or loss of the 
partnership. 
‘‘(ii) TREATMENT
OF
EXCESS
BUSI-
NESS
INTEREST
ALLOCATED
TO
PART-
NERS.—If a partner is allocated any excess 
business interest from a partnership under 
clause (i) for any taxable year— 
‘‘(I) such excess business interest 
shall be treated as business interest 
paid or accrued by the partner in the 
next succeeding taxable year in which 
the partner is allocated excess taxable 
income from such partnership, but 
only to the extent of such excess taxable 
income, and 
‘‘(II) any portion of such excess 
business interest remaining after the 
application of subclause (I) shall, sub-
ject to the limitations of subclause (I), 
be treated as business interest paid or 
accrued in succeeding taxable years. 
For purposes of applying this paragraph, 
excess taxable income allocated to a partner 
from a partnership for any taxable year
154 
† HR 1 EAS 
shall not be taken into account under para-
graph (1)(A) with respect to any business 
interest other than excess business interest 
from the partnership until all such excess 
business interest for such taxable year and 
all preceding taxable years has been treated 
as paid or accrued under clause (ii). 
‘‘(iii) BASIS ADJUSTMENTS.— 
‘‘(I) IN GENERAL.—The adjusted 
basis of a partner in a partnership in-
terest shall be reduced (but not below 
zero) by the amount of excess business 
interest allocated to the partner under 
clause (i)(II). 
‘‘(II) SPECIAL RULE FOR DISPOSI-
TIONS.—If a partner disposes of a 
partnership interest, the adjusted basis 
of the partner in the partnership inter-
est shall be increased immediately be-
fore the disposition by the amount of 
the excess (if any) of the amount of the 
basis reduction under subclause (I) 
over the portion of any excess business 
interest allocated to the partner under 
clause (i)(II) which has previously
155 
† HR 1 EAS 
been treated under clause (ii) as busi-
ness interest paid or accrued by the 
partner. The preceding sentence shall 
also apply to transfers of the partner-
ship interest (including by reason of 
death) in a transaction in which gain 
is not recognized in whole or in part. 
No deduction shall be allowed to the 
transferor or transferee under this 
chapter for any excess business interest 
resulting in a basis increase under this 
subclause. 
‘‘(C) EXCESS TAXABLE INCOME.—The term 
‘excess taxable income’ means, with respect to 
any partnership, the amount which bears the 
same ratio to the partnership’s adjusted taxable 
income as— 
‘‘(i) the excess (if any) of— 
‘‘(I) the amount determined for 
the 
partnership 
under 
paragraph 
(1)(B), over 
‘‘(II) the amount (if any) by 
which the business interest of the part-
nership exceeds the business interest in-
come of the partnership, bears to
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† HR 1 EAS 
‘‘(ii) the amount determined for the 
partnership under paragraph (1)(B). 
‘‘(D) APPLICATION TO S CORPORATIONS.— 
Rules similar to the rules of subparagraphs (A) 
and (C) shall apply with respect to any S cor-
poration and its shareholders. 
‘‘(5) BUSINESS INTEREST.—For purposes of this 
subsection, the term ‘business interest’ means any in-
terest paid or accrued on indebtedness properly allo-
cable to a trade or business. Such term shall not in-
clude investment interest (within the meaning of sub-
section (d)). 
‘‘(6) BUSINESS
INTEREST
INCOME.—For pur-
poses of this subsection, the term ‘business interest in-
come’ means the amount of interest includible in the 
gross income of the taxpayer for the taxable year 
which is properly allocable to a trade or business. 
Such term shall not include investment income (with-
in the meaning of subsection (d)). 
‘‘(7) TRADE OR BUSINESS.—For purposes of this 
subsection— 
‘‘(A) IN
GENERAL.—The term ‘trade or 
business’ shall not include— 
‘‘(i) the trade or business of performing 
services as an employee,
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† HR 1 EAS 
‘‘(ii) any electing real property trade 
or business, 
‘‘(iii) any electing farming business, or 
‘‘(iv) the trade or business of the fur-
nishing or sale of— 
‘‘(I) electrical energy, water, or 
sewage disposal services, 
‘‘(II) gas or steam through a local 
distribution system, or 
‘‘(III) transportation of gas or 
steam by pipeline, 
if the rates for such furnishing or sale, as 
the case may be, have been established or 
approved by a State or political subdivision 
thereof, by any agency or instrumentality of 
the United States, by a public service or 
public utility commission or other similar 
body of any State or political subdivision 
thereof, or by the governing or ratemaking 
body of an electric cooperative. 
‘‘(B) ELECTING REAL PROPERTY TRADE OR 
BUSINESS.—For purposes of this paragraph, the 
term ‘electing real property trade or business’ 
means any trade or business which is described 
in section 469(c)(7)(C) and which makes an elec-
158 
† HR 1 EAS 
tion under this subparagraph. Any such election 
shall be made at such time and in such manner 
as the Secretary shall prescribe, and, once made, 
shall be irrevocable. 
‘‘(C) ELECTING
FARMING
BUSINESS.—For 
purposes of this paragraph, the term ‘electing 
farming business’ means— 
‘‘(i) a farming business (as defined in 
section 263A(e)(4)) which makes an election 
under this subparagraph, or 
‘‘(ii) any trade or business of a speci-
fied agricultural or horticultural coopera-
tive (as defined in section 199A(g)(2)) with 
respect to which the cooperative makes an 
election under this subparagraph. 
Any such election shall be made at such time 
and in such manner as the Secretary shall pre-
scribe, and, once made, shall be irrevocable. 
‘‘(8) ADJUSTED
TAXABLE
INCOME.—For pur-
poses of this subsection, the term ‘adjusted taxable in-
come’ means the taxable income of the taxpayer— 
‘‘(A) computed without regard to— 
‘‘(i) any item of income, gain, deduc-
tion, or loss which is not properly allocable 
to a trade or business,
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† HR 1 EAS 
‘‘(ii) any business interest or business 
interest income, 
‘‘(iii) the amount of any net operating 
loss deduction under section 172, and 
‘‘(iv) the amount of any deduction al-
lowed under section 199 or 199A, and 
‘‘(B) computed with such other adjustments 
as provided by the Secretary. 
‘‘(9) CROSS REFERENCES.— 
‘‘(A) For requirement that an electing real 
property trade or business use the alternative de-
preciation system, see section 168(g)(1)(F). 
‘‘(B) For requirement that an electing farm-
ing business use the alternative depreciation sys-
tem, see section 168(g)(1)(G).’’. 
(b) TREATMENT OF CARRYFORWARD OF DISALLOWED 
BUSINESS INTEREST IN CERTAIN CORPORATE ACQUISI-
TIONS.— 
(1) IN GENERAL.—Section 381(c) is amended by 
inserting after paragraph (19) the following new 
paragraph: 
‘‘(20) CARRYFORWARD
OF
DISALLOWED
BUSI-
NESS INTEREST.—The carryover of disallowed busi-
ness interest described in section 163(j)(2) to taxable
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† HR 1 EAS 
years ending after the date of distribution or trans-
fer.’’. 
(2) 
APPLICATION
OF
LIMITATION.—Section 
382(d) is amended by adding at the end the following 
new paragraph: 
‘‘(3) APPLICATION TO CARRYFORWARD OF DIS-
ALLOWED
INTEREST.—The term ‘pre-change loss’ 
shall include any carryover of disallowed interest de-
scribed in section 163(n) under rules similar to the 
rules of paragraph (1).’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
382(k)(1) is amended by inserting after the first sen-
tence the following: ‘‘Such term shall include any cor-
poration entitled to use a carryforward of disallowed 
interest described in section 381(c)(20).’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 13302. MODIFICATION OF NET OPERATING LOSS DE-
DUCTION. 
(a) LIMITATION ON DEDUCTION.— 
(1) IN GENERAL.—Section 172(a) is amended to 
read as follows:
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† HR 1 EAS 
‘‘(a) DEDUCTION ALLOWED.—There shall be allowed 
as a deduction for the taxable year an amount equal to the 
lesser of— 
‘‘(1) the aggregate of the net operating loss 
carryovers to such year, plus the net operating loss 
carrybacks to such year, or 
‘‘(2) 90 percent (80 percent in the case of taxable 
years beginning after December 31, 2022) of taxable 
income computed without regard to the deduction al-
lowable under this section. 
For purposes of this subtitle, the term ‘net operating loss 
deduction’ means the deduction allowed by this subsection.’’. 
(2) 
COORDINATION
OF
LIMITATION
WITH 
CARRYBACKS AND CARRYOVERS.—Section 172(b)(2) is 
amended by striking ‘‘shall be computed—’’ and all 
that follows and inserting ‘‘shall— 
‘‘(A) be computed with the modifications 
specified in subsection (d) other than paragraphs 
(1), (4), and (5) thereof, and by determining the 
amount of the net operating loss deduction with-
out regard to the net operating loss for the loss 
year or for any taxable year thereafter, 
‘‘(B) not be considered to be less than zero, 
and
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† HR 1 EAS 
‘‘(C) not exceed the amount determined 
under subsection (a)(2) for such prior taxable 
year.’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
172(d)(6) is amended by striking ‘‘and’’ at the end of 
subparagraph (A), by striking the period at the end 
of subparagraph (B) and inserting ‘‘; and’’, and by 
adding at the end the following new subparagraph: 
‘‘(C) subsection (a)(2) shall be applied by 
substituting ‘real estate investment trust taxable 
income (as defined in section 857(b)(2) but with-
out regard to the deduction for dividends paid 
(as defined in section 561))’ for ‘taxable in-
come’.’’. 
(b) REPEAL OF NET OPERATING LOSS CARRYBACK; 
INDEFINITE CARRYFORWARD.— 
(1) 
IN
GENERAL.—Section 
172(b)(1)(A) 
is 
amended— 
(A) by striking ‘‘shall be a net operating 
loss carryback to each of the 2 taxable years’’ in 
clause (i) and inserting ‘‘except as otherwise pro-
vided in this paragraph, shall not be a net oper-
ating loss carryback to any taxable year’’, and
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† HR 1 EAS 
(B) by striking ‘‘to each of the 20 taxable 
years’’ in clause (ii) and inserting ‘‘to each tax-
able year’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
172(b)(1) is amended by striking subparagraphs (B) 
through (F). 
(c) TREATMENT OF FARMING LOSSES.— 
(1) 
ALLOWANCE
OF
CARRYBACKS.—Section 
172(b)(1), as amended by subsection (b)(2), is amend-
ed by adding at the end the following new subpara-
graph: 
‘‘(B) FARMING LOSSES.— 
‘‘(i) IN GENERAL.—In the case of any 
portion of a net operating loss for the tax-
able year which is a farming loss with re-
spect to the taxpayer, such loss shall be a 
net operating loss carryback to each of the 
2 taxable years preceding the taxable year 
of such loss. 
‘‘(ii) FARMING LOSS.—For purposes of 
this section, the term ‘farming loss’ means 
the lesser of— 
‘‘(I) the amount which would be 
the net operating loss for the taxable 
year if only income and deductions at-
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† HR 1 EAS 
tributable to farming businesses (as de-
fined in section 263A(e)(4)) are taken 
into account, or 
‘‘(II) the amount of the net oper-
ating loss for such taxable year. 
‘‘(iii) 
COORDINATION
WITH
PARA-
GRAPH (2).—For purposes of applying para-
graph (2), a farming loss for any taxable 
year shall be treated as a separate net oper-
ating loss for such taxable year to be taken 
into account after the remaining portion of 
the net operating loss for such taxable year. 
‘‘(iv) ELECTION.—Any taxpayer enti-
tled to a 2-year carryback under clause (i) 
from any loss year may elect not to have 
such clause apply to such loss year. Such 
election shall be made in such manner as 
prescribed by the Secretary and shall be 
made by the due date (including extensions 
of time) for filing the taxpayer’s return for 
the taxable year of the net operating loss. 
Such election, once made for any taxable 
year, shall be irrevocable for such taxable 
year.’’. 
(2) CONFORMING AMENDMENTS.—
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† HR 1 EAS 
serting after subsection (e) the following new sub-
section: 
‘‘(f) SPECIAL RULE FOR INSURANCE COMPANIES.—In 
the case of an insurance company (as defined in section 
816(a)) other than a life insurance company— 
‘‘(1) the amount of the deduction allowed under 
subsection (a) shall be the aggregate of the net oper-
ating loss carryovers to such year, plus the net oper-
ating loss carrybacks to such year, and 
‘‘(2) subparagraph (C) of subsection (b)(2) shall 
not apply.’’. 
(e) EFFECTIVE DATE.— 
(1) NET
OPERATING
LOSS
LIMITATION.—The 
amendments made by subsections (a) and (d)(2) shall 
apply to losses arising in taxable years beginning 
after December 31, 2017. 
(2) CARRYFORWARDS
AND
CARRYBACKS.—The 
amendments made by subsections (b), (c), and (d)(1) 
shall apply to net operating losses arising in taxable 
years ending after December 31, 2017. 
SEC. 13303. LIKE-KIND EXCHANGES OF REAL PROPERTY. 
(a) IN GENERAL.—Section 1031(a)(1) is amended by 
striking ‘‘property’’ each place it appears and inserting 
‘‘real property’’. 
(b) CONFORMING AMENDMENTS.—
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† HR 1 EAS 
(1)(A) Paragraph (2) of section 1031(a) is 
amended to read as follows: 
‘‘(2) EXCEPTION FOR REAL PROPERTY HELD FOR 
SALE.—This subsection shall not apply to any ex-
change of real property held primarily for sale.’’. 
(B) Section 1031 is amended by striking sub-
section (i). 
(2) Section 1031 is amended by striking sub-
section (e). 
(3) Section 1031, as amended by paragraph (2), 
is amended by inserting after subsection (d) the fol-
lowing new subsection: 
‘‘(e) APPLICATION TO CERTAIN PARTNERSHIPS.—For 
purposes of this section, an interest in a partnership which 
has in effect a valid election under section 761(a) to be ex-
cluded from the application of all of subchapter K shall be 
treated as an interest in each of the assets of such partner-
ship and not as an interest in a partnership.’’. 
(4) Section 1031(h) is amended to read as fol-
lows: 
‘‘(h) SPECIAL RULES
FOR FOREIGN REAL PROP-
ERTY.—Real property located in the United States and real 
property located outside the United States are not property 
of a like kind.’’.
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† HR 1 EAS 
(5) The heading of section 1031 is amended by 
striking ‘‘PROPERTY’’ and inserting ‘‘REAL PROP-
ERTY’’. 
(6) The table of sections for part III of sub-
chapter O of chapter 1 is amended by striking the 
item relating to section 1031 and inserting the fol-
lowing new item: 
‘‘Sec. 1031. Exchange of real property held for productive use or investment.’’. 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to exchanges completed after Decem-
ber 31, 2017. 
(2) TRANSITION RULE.—The amendments made 
by this section shall not apply to any exchange if— 
(A) the property disposed of by the taxpayer 
in the exchange is disposed of on or before De-
cember 31 2017, or 
(B) the property received by the taxpayer in 
the exchange is received on or before December 
31, 2017. 
SEC. 13304. LIMITATION ON DEDUCTION BY EMPLOYERS OF 
EXPENSES FOR FRINGE BENEFITS. 
(a) NO DEDUCTION ALLOWED FOR ENTERTAINMENT 
EXPENSES.— 
(1) IN GENERAL.—Section 274(a) is amended—
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† HR 1 EAS 
(A) in paragraph (1)(A), by striking ‘‘un-
less’’ and all that follows through ‘‘trade or busi-
ness,’’, 
(B) by striking the flush sentence at the end 
of paragraph (1), and 
(C) by striking paragraph (2)(C). 
(2) CONFORMING AMENDMENTS.— 
(A) Section 274(d) is amended— 
(i) by striking paragraph (2) and re-
designating paragraphs (3) and (4) as 
paragraphs (2) and (3), respectively, and 
(ii) in the flush text following para-
graph (3) (as so redesignated)— 
(I) by striking ‘‘, entertainment, 
amusement, recreation, or use of the fa-
cility or property,’’ in item (B), and 
(II) by striking ‘‘(D) the business 
relationship to the taxpayer of persons 
entertained, using the facility or prop-
erty, or receiving the gift’’ and insert-
ing ‘‘(D) the business relationship to 
the taxpayer of the person receiving the 
benefit’’, 
(B) Section 274 is amended by striking sub-
section (l).
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† HR 1 EAS 
(C) Section 274(n) is amended by striking 
‘‘AND ENTERTAINMENT’’ in the heading. 
(D) Section 274(n)(1) is amended to read 
as follows: 
‘‘(1) IN GENERAL.—The amount allowable as a 
deduction under this chapter for any expense for food 
or beverages shall not exceed 50 percent of the amount 
of such expense which would (but for this paragraph) 
be allowable as a deduction under this chapter.’’. 
(E) Section 274(n)(2) is amended— 
(i) in subparagraph (B), by striking 
‘‘in the case of an expense for food or bev-
erages,’’, 
(ii) by striking subparagraph (C) and 
redesignating subparagraphs (D) and (E) 
as subparagraphs (C) and (D), respectively, 
(iii) by striking ‘‘of subparagraph (E)’’ 
the last sentence and inserting ‘‘of subpara-
graph (D)’’, and 
(iv) by striking ‘‘in subparagraph (D)’’ 
in the last sentence and inserting ‘‘in sub-
paragraph (C)’’. 
(F) Clause (iv) of section 7701(b)(5)(A) is 
amended to read as follows:
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† HR 1 EAS 
‘‘(iv) a professional athlete who is tem-
porarily in the United States to compete in 
a sports event— 
‘‘(I) which is organized for the 
primary purpose of benefiting an orga-
nization which is described in section 
501(c)(3) and exempt from tax under 
section 501(a), 
‘‘(II) all of the net proceeds of 
which are contributed to such organi-
zation, and, 
‘‘(III) which utilizes volunteers for 
substantially all of the work performed 
in carrying out such event.’’. 
(b) ONLY 50 PERCENT OF EXPENSES FOR MEALS PRO-
VIDED ON OR NEAR BUSINESS PREMISES ALLOWED AS DE-
DUCTION.—Paragraph (2) of section 274(n), as amended by 
subsection (a), is amended— 
(1) by striking subparagraph (B), 
(2) by redesignating subparagraphs (C) and (D) 
as subparagraphs (B) and (C), respectively, 
(3) by striking ‘‘of subparagraph (D)’’ in the last 
sentence and inserting ‘‘of subparagraph (C)’’, and 
(4) by striking ‘‘in subparagraph (C)’’ in the 
last sentence and inserting ‘‘in subparagraph (B)’’.
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† HR 1 EAS 
(c) TREATMENT
OF TRANSPORTATION BENEFITS.— 
Section 274, as amended by subsection (a), is amended— 
(1) in subsection (a)— 
(A) in the heading, by striking ‘‘OR RECRE-
ATION’’ and inserting ‘‘RECREATION, OR QUALI-
FIED TRANSPORTATION FRINGES’’, and 
(B) by adding at the end the following new 
paragraph: 
‘‘(4) QUALIFIED TRANSPORTATION FRINGES.—No 
deduction shall be allowed under this chapter for the 
expense of any qualified transportation fringe (as de-
fined in section 132(f)) provided to an employee of the 
taxpayer.’’, and 
(2) by inserting after subsection (k) the following 
new subsection: 
‘‘(l) TRANSPORTATION AND COMMUTING BENEFITS.— 
No deduction shall be allowed under this chapter for any 
expense incurred for providing any transportation, or any 
payment or reimbursement, to an employee of the taxpayer 
in connection with travel between the employee’s residence 
and place of employment, except as necessary for ensuring 
the safety of the employee.’’. 
(d) ELIMINATION OF DEDUCTION FOR MEALS PRO-
VIDED AT CONVENIENCE OF EMPLOYER.—Section 274, as 
amended by subsection (c), is amended—
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† HR 1 EAS 
(1) by redesignating subsection (o) as subsection 
(p), and 
(2) by inserting after subsection (n) the following 
new subsection: 
‘‘(o) MEALS PROVIDED
AT CONVENIENCE
OF EM-
PLOYER.—No deduction shall be allowed under this chapter 
for— 
‘‘(1) any expense for the operation of a facility 
described in section 132(e)(2), and any expense for 
food or beverages, including under section 132(e)(1), 
associated with such facility, or 
‘‘(2) any expense for meals described in section 
119(a).’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
apply to amounts incurred or paid after December 
31, 2017. 
(2) EFFECTIVE DATE FOR ELIMINATION OF DE-
DUCTION FOR MEALS PROVIDED AT CONVENIENCE OF 
EMPLOYER.—The amendments made by subsection (d) 
shall apply to amounts incurred or paid after Decem-
ber 31, 2025.
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† HR 1 EAS 
SEC. 13305. REPEAL OF DEDUCTION FOR INCOME ATTRIB-
UTABLE TO DOMESTIC PRODUCTION ACTIVI-
TIES. 
(a) REPEAL.— 
(1) TAXPAYERS OTHER THAN CORPORATIONS.— 
Section 199 is amended by adding at the end the fol-
lowing new subsection: 
‘‘(e) PARTIAL TERMINATION FOR TAXPAYERS OTHER 
THAN CORPORATIONS.—In the case of a taxpayer other 
than a C corporation, this section shall not apply to any 
taxable year beginning after December 31, 2017.’’. 
(2) CERTAIN
SPECIAL
RULES
FOR
COOPERA-
TIVES.—Section 199(d)(3) is amended by adding at 
the end the following new subparagraph: 
‘‘(G) 
PARTIAL
TERMINATION.—Subpara-
graphs (A) and (B) shall not apply to any tax-
able year beginning after December 31, 2017.’’. 
(3) TOTAL REPEAL.—Part VI of subchapter B of 
chapter 1, as amended by paragraphs (1) and (2), is 
amended by striking section 199 (and by striking the 
item relating to such section in the table of sections 
for such part). 
(b) CONFORMING AMENDMENTS.— 
(1) 
Sections 
74(d)(2)(B), 
86(b)(2)(A), 
135(c)(4)(A), 
137(b)(3)(A), 
219(g)(3)(A)(ii), 
221(b)(2)(C), 
222(b)(2)(C), 
246(b)(1), 
and
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† HR 1 EAS 
469(i)(3)(F)(iii) are each amended by striking 
‘‘199,’’. 
(2) Section 170(b)(2)(D), as amended by section 
11011, is amended by striking clause (iv) and by re-
designating clauses (v) and (vi) as redesignating 
clauses (iv) as clause (v), respectively. 
(3) Section 172(d) is amended by striking para-
graph (7). 
(4) Section 613(a) is amended by striking ‘‘and 
without the deduction under section 199’’. 
(5) Section 613A(d)(1) is amended by striking 
subparagraph (B) and by redesignating subpara-
graphs (C), (D), and (E) as subparagraphs (B), (C), 
and (D). 
(c) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
apply to taxable years beginning after December 31, 
2018. 
(2) EARLIER TERMINATION FOR CERTAIN TAX-
PAYERS.—The amendment made by paragraphs (1) 
and (2) of subsection (a) shall apply to taxable years 
beginning after December 31, 2017.
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† HR 1 EAS 
SEC. 13306. DENIAL OF DEDUCTION FOR CERTAIN FINES, 
PENALTIES, AND OTHER AMOUNTS. 
(a) DENIAL OF DEDUCTION.— 
(1) IN GENERAL.—Subsection (f) of section 162 
is amended to read as follows: 
‘‘(f) FINES, PENALTIES, AND OTHER AMOUNTS.— 
‘‘(1) IN GENERAL.—Except as provided in the 
following paragraphs of this subsection, no deduction 
otherwise allowable shall be allowed under this chap-
ter for any amount paid or incurred (whether by suit, 
agreement, or otherwise) to, or at the direction of, a 
government or governmental entity in relation to the 
violation of any law or the investigation or inquiry 
by such government or entity into the potential viola-
tion of any law. 
‘‘(2) EXCEPTION
FOR
AMOUNTS
CONSTITUTING 
RESTITUTION OR PAID TO COME INTO COMPLIANCE 
WITH LAW.— 
‘‘(A) IN
GENERAL.—Paragraph (1) shall 
not apply to any amount that— 
‘‘(i) the taxpayer establishes— 
‘‘(I) constitutes restitution (in-
cluding remediation of property) for 
damage or harm which was or may be 
caused by the violation of any law or 
the potential violation of any law, or
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† HR 1 EAS 
‘‘(II) is paid to come into compli-
ance with any law which was violated 
or otherwise involved in the investiga-
tion or inquiry described in paragraph 
(1), 
‘‘(ii) is identified as restitution or as 
an amount paid to come into compliance 
with such law, as the case may be, in the 
court order or settlement agreement, and 
‘‘(iii) in the case of any amount of res-
titution for failure to pay any tax imposed 
under this title in the same manner as if 
such amount were such tax, would have 
been allowed as a deduction under this 
chapter if it had been timely paid. 
The identification under clause (ii) alone shall 
not be sufficient to make the establishment re-
quired under clause (i). 
‘‘(B) LIMITATION.—Subparagraph (A) shall 
not apply to any amount paid or incurred as re-
imbursement to the government or entity for the 
costs of any investigation or litigation. 
‘‘(3) EXCEPTION
FOR
AMOUNTS
PAID
OR
IN-
CURRED
AS
THE
RESULT
OF
CERTAIN
COURT
OR-
DERS.—Paragraph (1) shall not apply to any
178 
† HR 1 EAS 
amount paid or incurred by reason of any order of 
a court in a suit in which no government or govern-
mental entity is a party. 
‘‘(4) EXCEPTION FOR TAXES DUE.—Paragraph 
(1) shall not apply to any amount paid or incurred 
as taxes due. 
‘‘(5) TREATMENT
OF
CERTAIN
NONGOVERN-
MENTAL
REGULATORY
ENTITIES.—For purposes of 
this subsection, the following nongovernmental entities 
shall be treated as governmental entities: 
‘‘(A) Any nongovernmental entity which ex-
ercises self-regulatory powers (including impos-
ing sanctions) in connection with a qualified 
board or exchange (as defined in section 
1256(g)(7)). 
‘‘(B) To the extent provided in regulations, 
any nongovernmental entity which exercises self- 
regulatory powers (including imposing sanc-
tions) as part of performing an essential govern-
mental function.’’. 
(2) EFFECTIVE DATE.—The amendment made by 
this subsection shall apply to amounts paid or in-
curred on or after the date of the enactment of this 
Act, except that such amendments shall not apply to 
amounts paid or incurred under any binding order or
179 
† HR 1 EAS 
agreement entered into before such date. Such excep-
tion shall not apply to an order or agreement requir-
ing court approval unless the approval was obtained 
before such date. 
(b) REPORTING OF DEDUCTIBLE AMOUNTS.— 
(1) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 is amended by inserting after 
section 6050W the following new section: 
‘‘SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN 
FINES, PENALTIES, AND OTHER AMOUNTS. 
‘‘(a) REQUIREMENT OF REPORTING.— 
‘‘(1) IN GENERAL.—The appropriate official of 
any government or any entity described in section 
162(f)(5) which is involved in a suit or agreement de-
scribed in paragraph (2) shall make a return in such 
form as determined by the Secretary setting forth— 
‘‘(A) the amount required to be paid as a 
result of the suit or agreement to which para-
graph (1) of section 162(f) applies, 
‘‘(B) any amount required to be paid as a 
result of the suit or agreement which constitutes 
restitution or remediation of property, and 
‘‘(C) any amount required to be paid as a 
result of the suit or agreement for the purpose of 
coming into compliance with any law which was
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† HR 1 EAS 
violated or involved in the investigation or in-
quiry. 
‘‘(2) SUIT OR AGREEMENT DESCRIBED.— 
‘‘(A) IN GENERAL.—A suit or agreement is 
described in this paragraph if— 
‘‘(i) it is— 
‘‘(I) a suit with respect to a viola-
tion of any law over which the govern-
ment or entity has authority and with 
respect to which there has been a court 
order, or 
‘‘(II) an agreement which is en-
tered into with respect to a violation of 
any law over which the government or 
entity has authority, or with respect to 
an investigation or inquiry by the gov-
ernment or entity into the potential 
violation of any law over which such 
government or entity has authority, 
and 
‘‘(ii) the aggregate amount involved in 
all court orders and agreements with respect 
to the violation, investigation, or inquiry is 
$600 or more.
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† HR 1 EAS 
‘‘(B) ADJUSTMENT OF REPORTING THRESH-
OLD.—The Secretary shall adjust the $600 
amount in subparagraph (A)(ii) as necessary in 
order to ensure the efficient administration of the 
internal revenue laws. 
‘‘(3) TIME
OF
FILING.—The return required 
under this subsection shall be filed at the time the 
agreement is entered into, as determined by the Sec-
retary. 
‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVIDUALS 
INVOLVED IN THE SETTLEMENT.—Every person required to 
make a return under subsection (a) shall furnish to each 
person who is a party to the suit or agreement a written 
statement showing— 
‘‘(1) the name of the government or entity, and 
‘‘(2) the information supplied to the Secretary 
under subsection (a)(1). 
The written statement required under the preceding sen-
tence shall be furnished to the person at the same time the 
government or entity provides the Secretary with the infor-
mation required under subsection (a). 
‘‘(c) APPROPRIATE OFFICIAL DEFINED.—For purposes 
of this section, the term ‘appropriate official’ means the offi-
cer or employee having control of the suit, investigation,
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† HR 1 EAS 
or inquiry or the person appropriately designated for pur-
poses of this section.’’. 
(2) CONFORMING AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of 
chapter 61 is amended by inserting after the item re-
lating to section 6050W the following new item: 
‘‘Sec. 6050X. Information with respect to certain fines, penalties, and other 
amounts.’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to amounts paid or in-
curred on or after the date of the enactment of this 
Act, except that such amendments shall not apply to 
amounts paid or incurred under any binding order or 
agreement entered into before such date. Such excep-
tion shall not apply to an order or agreement requir-
ing court approval unless the approval was obtained 
before such date. 
SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS 
SUBJECT TO NONDISCLOSURE AGREEMENTS 
PAID IN CONNECTION WITH SEXUAL HARASS-
MENT OR SEXUAL ABUSE. 
(a) DENIAL OF DEDUCTION.—Section 162 is amended 
by redesignating subsection (q) as subsection (r) and by in-
serting after subsection (p) the following new subsection:
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† HR 1 EAS 
‘‘(B) the amount of the item at the close of 
the taxable year, computed on the old basis, 
as is attributable to contracts issued before the taxable 
year shall be taken into account under section 481 as 
adjustments attributable to a change in method of ac-
counting initiated by the taxpayer and made with the 
consent of the Secretary.’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 13514. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS 
TO SHAREHOLDERS FROM PRE-1984 POLICY-
HOLDERS SURPLUS ACCOUNT. 
(a) IN GENERAL.—Subpart D of part I of subchapter 
L is amended by striking section 815 (and by striking the 
item relating to such section in the table of sections for such 
subpart). 
(b) 
CONFORMING
AMENDMENT.—Section 
801 
is 
amended by striking subsection (c). 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
(d) PHASED INCLUSION OF REMAINING BALANCE OF 
POLICYHOLDERS SURPLUS ACCOUNTS.—In the case of any 
stock life insurance company which has a balance (deter-