349 
‘‘(6) NET
TAX
LIABILITY
UNDER
THIS
SEC-
TION.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The net tax liability 
under this section with respect to any United 
States shareholder is the excess (if any) of— 
‘‘(i) such taxpayer’s net income tax 
for the taxable year in which an amount is 
included in the gross income of such 
United States shareholder under section 
951(a)(1) by reason of this section, over 
‘‘(ii) such taxpayer’s net income tax 
for such taxable year determined— 
‘‘(I) without regard to this sec-
tion, and 
‘‘(II) without regard to any in-
come, deduction, or credit, properly 
attributable to a dividend received by 
such United States shareholder from 
any deferred foreign income corpora-
tion. 
‘‘(B) NET INCOME TAX.—The term ‘net 
income tax’ means the regular tax liability re-
duced by the credits allowed under subparts A, 
B, and D of part IV of subchapter A. 
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‘‘(i) SPECIAL RULES FOR S CORPORATION SHARE-
HOLDERS.— 
‘‘(1) IN GENERAL.—In the case of any S cor-
poration which is a United States shareholder of a 
deferred foreign income corporation, each share-
holder of such S corporation may elect to defer pay-
ment of such shareholder’s net tax liability under 
this section with respect to such S corporation until 
the shareholder’s taxable year which includes the 
triggering event with respect to such liability. Any 
net tax liability payment of which is deferred under 
the preceding sentence shall be assessed on the re-
turn as an addition to tax in the shareholder’s tax-
able year which includes such triggering event. 
‘‘(2) TRIGGERING EVENT.— 
‘‘(A) IN
GENERAL.—In the case of any 
shareholder’s net tax liability under this section 
with respect to any S corporation, the trig-
gering event with respect to such liability is 
whichever of the following occurs first: 
‘‘(i) Such corporation ceases to be an 
S corporation (determined as of the first 
day of the first taxable year that such cor-
poration is not an S corporation). 
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351 
‘‘(ii) A liquidation or sale of substan-
tially all the assets of such S corporation 
(including in a title 11 or similar case), a 
cessation of business by such S corpora-
tion, such S corporation ceases to exist, or 
any similar circumstance. 
‘‘(iii) A transfer of any share of stock 
in such S corporation by the taxpayer (in-
cluding by reason of death, or otherwise). 
‘‘(B) PARTIAL TRANSFERS OF STOCK.—In 
the case of a transfer of less than all of the tax-
payer’s shares of stock in the S corporation, 
such transfer shall only be a triggering event 
with respect to so much of the taxpayer’s net 
tax liability under this section with respect to 
such S corporation as is properly allocable to 
such stock. 
‘‘(C) TRANSFER OF LIABILITY.—A trans-
fer described in clause (iii) shall not be treated 
as a triggering event if the transferee enters 
into an agreement with the Secretary under 
which such transferee is liable for net tax liabil-
ity with respect to such stock in the same man-
ner as if such transferee were the taxpayer. 
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352 
‘‘(3) NET TAX LIABILITY.—A shareholder’s net 
tax liability under this section with respect to any S 
corporation is the net tax liability under this section 
which would be determined under subsection (h)(6) 
if the only subpart F income taken into account by 
such shareholder by reason of this section were allo-
cations from such S corporation. 
‘‘(4) ELECTION TO PAY DEFERRED LIABILITY 
IN INSTALLMENTS.—In the case of a taxpayer which 
elects to defer payment under paragraph (1)— 
‘‘(A) subsection (h) shall be applied sepa-
rately with respect to the liability to which such 
election applies, 
‘‘(B) an election under subsection (h) with 
respect to such liability shall be treated as time-
ly made if made not later than the due date for 
the return of tax for the taxable year in which 
the triggering event with respect to such liabil-
ity occurs, 
‘‘(C) the first installment under subsection 
(h) with respect to such liability shall be paid 
not later than such due date (but determined 
without regard to any extension of time for fil-
ing the return), and 
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353 
‘‘(D) if the triggering event with respect to 
any net tax liability is described in paragraph 
(2)(A)(ii), an election under subsection (h) with 
respect to such liability may be made only with 
the consent of the Secretary. 
‘‘(5) JOINT AND SEVERAL LIABILITY OF S COR-
PORATION.—If any shareholder of an S corporation 
elects to defer payment under paragraph (1), such 
S corporation shall be jointly and severally liable for 
such payment and any penalty, addition to tax, or 
additional amount attributable thereto. 
‘‘(6) EXTENSION OF LIMITATION ON COLLEC-
TION.—Notwithstanding any other provision of law, 
any limitation on the time period for the collection 
of a liability deferred under this subsection shall not 
be treated as beginning before the date of the trig-
gering event with respect to such liability. 
‘‘(7) ANNUAL REPORTING OF NET TAX LIABIL-
ITY.— 
‘‘(A) IN GENERAL.—Any shareholder of an 
S corporation which makes an election under 
paragraph (1) shall report the amount of such 
shareholder’s deferred net tax liability on such 
shareholder’s return of tax for the taxable year 
for which such election is made and on the re-
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354 
turn of tax for each taxable year thereafter 
until such amount has been fully assessed on 
such returns. 
‘‘(B) DEFERRED
NET
TAX
LIABILITY.— 
For purposes of this paragraph, the term ‘de-
ferred net tax liability’ means, with respect to 
any taxable year, the amount of net tax liability 
payment of which has been deferred under 
paragraph (1) and which has not been assessed 
on a return of tax for any prior taxable year. 
‘‘(C) FAILURE TO REPORT.—In the case of 
any failure to report any amount required to be 
reported under subparagraph (A) with respect 
to any taxable year before the due date for the 
return of tax for such taxable year, there shall 
be assessed on such return as an addition to 
tax 5 percent of such amount. 
‘‘(8) ELECTION.—Any election under paragraph 
(1)— 
‘‘(A) shall be made by the shareholder of 
the S corporation not later than the due date 
for such shareholder’s return of tax for the tax-
able year which includes the close of the taxable 
year of such S corporation in which the amount 
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355 
described in subsection (a) is taken into ac-
count, and 
‘‘(B) shall be made in such manner as the 
Secretary may provide. 
‘‘(j) REPORTING BY S CORPORATION.—Each S cor-
poration which is a United States shareholder of a de-
ferred foreign income corporation shall report in its return 
of tax under section 6037(a) the amount includible in its 
gross income for such taxable year by reason of this sec-
tion and the amount of the deduction allowable by sub-
section (c). Any copy provided to a shareholder under sec-
tion 6037(b) shall include a statement of such share-
holder’s pro rata share of such amounts. 
‘‘(k) INCLUSION OF DEFERRED FOREIGN INCOME 
UNDER THIS SECTION NOT TO TRIGGER RECAPTURE OF 
OVERALL FOREIGN LOSS, ETC.—For purposes of sections 
904(f)(1) and 907(c)(4), in the case of a United States 
shareholder of a deferred foreign income corporation, such 
United States shareholder’s taxable income from sources 
without the United States and combined foreign oil and 
gas income shall be determined without regard to this sec-
tion. 
‘‘(l) REGULATIONS.—The Secretary may prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the provisions of this section.’’. 
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356 
(b) CLERICAL AMENDMENT.—The table of section 
for subpart F of part III of subchapter N of chapter 1 
is amended by striking the item relating to section 965 
and inserting the following: 
‘‘Sec. 965. Treatment of deferred foreign income upon transition to 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. 
(a) REPEAL OF SECTION 902 INDIRECT FOREIGN 
TAX CREDITS.—Subpart A of part III of subchapter N 
of chapter 1 is amended by striking section 902. 
(b) DETERMINATION OF SECTION 960 CREDIT ON 
CURRENT YEAR BASIS.—Section 960 is amended— 
(1) by striking subsection (c), by redesignating 
subsection (b) as subsection (c), by striking all that 
precedes subsection (c) (as so redesignated) and in-
serting the following: 
‘‘SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLU-
SIONS. 
‘‘(a) IN GENERAL.—For purposes of this subpart, if 
there is included in the gross income of a domestic cor-
poration any item of income under section 951(a)(1) with 
respect to any controlled foreign corporation with respect 
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357 
to which such domestic corporation is a United States 
shareholder, such domestic corporation shall be deemed to 
have paid so much of such foreign corporation’s foreign 
income taxes as are properly attributable to such item of 
income. 
‘‘(b) SPECIAL RULES
FOR DISTRIBUTIONS FROM 
PREVIOUSLY TAXED EARNINGS AND PROFITS.—For pur-
poses of this subpart— 
‘‘(1) IN GENERAL.—If any portion of a dis-
tribution from a controlled foreign corporation to a 
domestic corporation which is a United States share-
holder with respect to such controlled foreign cor-
poration is excluded from gross income under section 
959(a), such domestic corporation shall be deemed 
to have paid so much of such foreign corporation’s 
foreign income taxes as— 
‘‘(A) are properly attributable to such por-
tion, and 
‘‘(B) have not been deemed to have to been 
paid by such domestic corporation under this 
section for the taxable year or any prior taxable 
year. 
‘‘(2) TIERED CONTROLLED FOREIGN CORPORA-
TIONS.—If section 959(b) applies to any portion of 
a distribution from a controlled foreign corporation 
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358 
to another controlled foreign corporation, such con-
trolled foreign corporation shall be deemed to have 
paid so much of such other controlled foreign cor-
poration’s foreign income taxes as— 
‘‘(A) are properly attributable to such por-
tion, and 
‘‘(B) have not been deemed to have been 
paid by a domestic corporation under this sec-
tion for the taxable year or any prior taxable 
year.’’, 
(2) and by adding after subsection (c) (as so re-
designated) the following new subsections: 
‘‘(d) FOREIGN INCOME TAXES.—The term ‘foreign 
income taxes’ means any income, war profits, or excess 
profits taxes paid or accrued to any foreign country or 
possession of the United States. 
‘‘(e) REGULATIONS.—The Secretary may prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the provisions of this section.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 78 is amended to read as follows: 
‘‘SEC. 78. GROSS UP FOR DEEMED PAID FOREIGN TAX 
CREDIT. 
‘‘If a domestic corporation chooses to have the bene-
fits of subpart A of part III of subchapter N (relating 
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359 
to foreign tax credit) for any taxable year, an amount 
equal to the taxes deemed to be paid by such corporation 
under subsections (a) and (b) of section 960 for such tax-
able year shall be treated for purposes of this title (other 
than sections 959, 960, and 961) as an item of income 
required to be included in the gross income of such domes-
tic corporation under section 951(a) for such taxable 
year.’’. 
(2) Section 245(a)(10)(C) is amended by strik-
ing ‘‘sections 902, 907, and 960’’ and inserting 
‘‘sections 907 and 960’’. 
(3) Sections 535(b)(1) and 545(b)(1) are each 
amended by striking ‘‘section 902(a) or 960(a)(1)’’ 
and inserting ‘‘section 960’’. 
(4) Section 814(f)(1) is amended— 
(A) by striking subparagraph (B), and 
(B) by striking all that precedes ‘‘No in-
come’’ and inserting the following: 
‘‘(1) TREATMENT OF FOREIGN TAXES.—’’. 
(5) Section 865(h)(1)(B) is amended by strik-
ing ‘‘sections 902, 907, and 960’’ and inserting 
‘‘sections 907 and 960’’. 
(6) Section 901(a) is amended by striking ‘‘sec-
tions 902 and 960’’ and inserting ‘‘section 960’’. 
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360 
(7) Section 901(e)(2) is amended by striking 
‘‘but is not limited to—’’ and all that follows 
through ‘‘that portion’’ and inserting ‘‘but is not 
limited to, that portion’’. 
(8) Section 901(f) is amended by striking ‘‘sec-
tions 902 and 960’’ and inserting ‘‘section 960’’. 
(9) Section 901(j)(1)(A) is amended by striking 
‘‘902 or’’. 
(10) Section 901(j)(1)(B) is amended by strik-
ing ‘‘sections 902 and 960’’ and inserting ‘‘section 
960’’. 
(11) Section 901(k)(2) is amended by striking 
‘‘section 853, 902, or 960’’ and inserting ‘‘section 
853 or 960’’. 
(12) Section 901(k)(6) is amended by striking 
‘‘902 or’’. 
(13) Section 901(m)(1) is amended by striking 
‘‘relevant foreign assets—’’ and all that follows and 
inserting ‘‘relevant foreign assets shall not be taken 
into account in determining the credit allowed under 
subsection (a).’’. 
(14) Section 904(d)(1) is amended by striking 
‘‘sections 902, 907, and 960’’ and inserting ‘‘sec-
tions 907 and 960’’. 
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361 
(15) Section 904(d)(6)(A) is amended by strik-
ing ‘‘sections 902, 907, and 960’’ and inserting 
‘‘sections 907 and 960’’. 
(16) Section 904(h)(10)(A) is amended by 
striking ‘‘sections 902, 907, and 960’’ and inserting 
‘‘sections 907 and 960’’. 
(17) Section 904 is amended by striking sub-
section (k). 
(18) Section 905(c)(1) is amended by striking 
the last sentence. 
(19) Section 905(c)(2)(B)(i) is amended to read 
as follows: 
‘‘(i) shall be taken into account for 
the taxable year to which such taxes relate, 
and’’. 
(20) Section 906(a) is amended by striking ‘‘(or 
deemed, under section 902, paid or accrued during 
the taxable year)’’. 
(21) Section 906(b) is amended by striking 
paragraphs (4) and (5). 
(22) Section 907(b)(2)(B) is amended by strik-
ing ‘‘902 or’’. 
(23) Section 907(c)(3) is amended— 
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362 
(A) by striking subparagraph (A) and re-
designating subparagraphs (B) and (C) as sub-
paragraphs (A) and (B), respectively, and 
(B) by striking ‘‘section 960(a)’’ in sub-
paragraph (A) (as so redesignated) and insert-
ing ‘‘section 960’’. 
(24) Section 907(c)(5) is amended by striking 
‘‘902 or’’. 
(25) Section 907(f)(2)(B)(i) is amended by 
striking ‘‘902 or’’. 
(26) Section 908(a) is amended by striking 
‘‘902 or’’. 
(27) Section 909(b) is amended— 
(A) by striking ‘‘section 902 corporation’’ 
in the matter preceding paragraph (1) and in-
serting ‘‘10/50 corporation’’, 
(B) by striking ‘‘902 or’’ in paragraph (1), 
(C) by striking ‘‘by such section 902 cor-
poration’’ and all that follows in the matter fol-
lowing paragraph (2) and inserting ‘‘by such 
10/50 corporation or a domestic corporation 
which is a United States shareholder with re-
spect to such 10/50 corporation.’’, and 
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363 
(D) by striking ‘‘SECTION 902 CORPORA-
TIONS’’ in the heading thereof and inserting 
‘‘10/50 CORPORATIONS’’. 
(28) Section 909(d)(5) is amended to read as 
follows: 
‘‘(5) 10/50 CORPORATION.—The term ‘10/50 
corporation’ means any foreign corporation with re-
spect to which one or more domestic corporations is 
a United States shareholder.’’. 
(29) Section 958(a)(1) is amended by striking 
‘‘960(a)(1)’’ and inserting ‘‘960’’. 
(30) Section 959(d) is amended by striking 
‘‘Except as provided in section 960(a)(3), any’’ and 
inserting ‘‘Any’’. 
(31) Section 959(e) is amended by striking 
‘‘section 960(b)’’ and inserting ‘‘section 960(c)’’. 
(32) Section 1291(g)(2)(A) is amended by 
striking ‘‘any distribution—’’ and all that follows 
through ‘‘but only if’’ and inserting ‘‘any distribu-
tion, any withholding tax imposed with respect to 
such distribution, but only if’’. 
(33) Section 6038(c)(1)(B) is amended by 
striking ‘‘sections 902 (relating to foreign tax credit 
for corporate stockholder in foreign corporation) and 
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364 
960 (relating to special rules for foreign tax credit)’’ 
and inserting ‘‘section 960’’. 
(34) Section 6038(c)(4) is amended by striking 
subparagraph (C). 
(35) The table of sections for subpart A of part 
III of subchapter N of chapter 1 is amended by 
striking the item relating to section 902. 
(36) The table of sections for subpart F of part 
III of subchapter N of chapter 1 is amended by 
striking the item relating to section 960 and insert-
ing the following: 
‘‘Sec. 960. Deemed paid credit for subpart F inclusions.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 4102. SOURCE OF INCOME FROM SALES OF INVEN-
TORY DETERMINED SOLELY ON BASIS OF 
PRODUCTION ACTIVITIES. 
(a) IN GENERAL.—Section 863(b) is amended by 
adding at the end the following: ‘‘Gains, profits, and in-
come from the sale or exchange of inventory property de-
scribed in paragraph (2) shall be allocated and appor-
tioned between sources within and without the United 
States solely on the basis of the production activities with 
respect to the property.’’. 
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365 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
Subtitle C—Modification of 
Subpart F Provisions 
SEC. 4201. REPEAL OF INCLUSION BASED ON WITHDRAWAL 
OF PREVIOUSLY EXCLUDED SUBPART F IN-
COME FROM QUALIFIED INVESTMENT. 
(a) IN GENERAL.—Subpart F of part III of sub-
chapter N of chapter 1 is amended by striking section 955. 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Section 951(a)(1)(A) is amended to read 
as follows: 
‘‘(A) his pro rata share (determined under 
paragraph (2)) of the corporation’s subpart F 
income for such year, and’’. 
(B) Section 851(b)(3) is amended by striking 
‘‘section 951(a)(1)(A)(i)’’ in the flush language at 
the end and inserting ‘‘section 951(a)(1)(A)’’. 
(C) Section 952(c)(1)(B)(i) is amended by 
striking ‘‘section 951(a)(1)(A)(i)’’ and inserting 
‘‘section 951(a)(1)(A)’’. 
(D) Section 953(c)(1)(C) is amended by strik-
ing ‘‘section 951(a)(1)(A)(i)’’ and inserting ‘‘section 
951(a)(1)(A)’’. 
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366 
(2) Section 951(a) is amended by striking para-
graph (3). 
(3) Section 953(d)(4)(B)(iv)(II) is amended by 
striking ‘‘or amounts referred to in clause (ii) or (iii) 
of section 951(a)(1)(A)’’. 
(4) Section 964(b) is amended by striking ‘‘, 
955,’’. 
(5) Section 970 is amended by striking sub-
section (b). 
(6) The table of sections for subpart F of part 
III of subchapter N of chapter 1 is amended by 
striking the item relating to section 955. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
SEC. 4202. REPEAL OF TREATMENT OF FOREIGN BASE COM-
PANY OIL RELATED INCOME AS SUBPART F 
INCOME. 
(a) IN GENERAL.—Section 954(a) is amended by 
striking paragraph (5), by striking the comma at the end 
of paragraph (3) and inserting a period, and by inserting 
‘‘and’’ at the end of paragraph (2). 
(b) CONFORMING AMENDMENTS.— 
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367 
(1) Section 952(c)(1)(B)(iii) is amended by 
striking subclause (I) and by redesignating sub-
clauses (II) through (V) as subclauses (I) through 
(IV), respectively. 
(2) Section 954(b)(4) is amended by striking 
the last sentence. 
(3) Section 954(b)(5) is amended by striking 
‘‘the foreign base company services income, and the 
foreign base company oil related income’’ and insert-
ing ‘‘and the foreign base company services income’’. 
(4) Section 954(b) is amended by striking para-
graph (6). 
(5) Section 954 is amended by striking sub-
section (g). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
SEC. 4203. INFLATION ADJUSTMENT OF DE MINIMIS EXCEP-
TION FOR FOREIGN BASE COMPANY INCOME. 
(a) IN GENERAL.—Section 954(b)(3) is amended by 
adding at the end the following new subparagraph: 
‘‘(D) INFLATION
ADJUSTMENT.—In the 
case of any taxable year beginning after 2017, 
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368 
the dollar amount in subparagraph (A)(ii) 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. 
Any increase determined under the preceding 
sentence shall be rounded to the nearest mul-
tiple of $50,000.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
SEC. 4204. LOOK-THRU RULE FOR RELATED CONTROLLED 
FOREIGN 
CORPORATIONS 
MADE 
PERMA-
NENT. 
(a) IN GENERAL.—Paragraph (6) of section 954(c) 
is amended by striking subparagraph (C). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2019, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
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SEC. 4205. MODIFICATION OF STOCK ATTRIBUTION RULES 
FOR 
DETERMINING 
STATUS 
AS 
A 
CON-
TROLLED FOREIGN CORPORATION. 
(a) IN GENERAL.—Section 958(b) is amended— 
(1) by striking paragraph (4), and 
(2) by striking ‘‘Paragraphs (1) and (4)’’ in the 
last sentence and inserting ‘‘Paragraph (1)’’. 
(b) APPLICATION OF CERTAIN REPORTING REQUIRE-
MENTS.—Section 6038(e)(2) is amended by striking ‘‘ex-
cept that—’’ and all that follows through ‘‘in applying 
subparagraph (C)’’ and inserting ‘‘except that in applying 
subparagraph (C)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
SEC. 4206. ELIMINATION OF REQUIREMENT THAT COR-
PORATION MUST BE CONTROLLED FOR 30 
DAYS 
BEFORE 
SUBPART 
F 
INCLUSIONS 
APPLY. 
(a) IN GENERAL.—Section 951(a)(1) is amended by 
striking ‘‘for an uninterrupted period of 30 days or more’’ 
and inserting ‘‘at any time’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years of foreign corpora-
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tions beginning after December 31, 2017, and to taxable 
years of United States shareholders with or within which 
such taxable years of foreign corporations end. 
Subtitle D—Prevention of Base 
Erosion 
SEC. 4301. CURRENT YEAR INCLUSION BY UNITED STATES 
SHAREHOLDERS WITH FOREIGN HIGH RE-
TURNS. 
(a) IN GENERAL.—Subpart F of part III of sub-
chapter N of chapter 1 is amended by inserting after sec-
tion 951 the following new section: 
‘‘SEC. 951A. FOREIGN HIGH RETURN AMOUNT INCLUDED IN 
GROSS INCOME OF UNITED STATES SHARE-
HOLDERS. 
‘‘(a) IN GENERAL.—Each person who is a United 
States shareholder of any controlled foreign corporation 
for any taxable year of such United States shareholder 
shall include in gross income for such taxable year 50 per-
cent of such shareholder’s foreign high return amount for 
such taxable year. 
‘‘(b) FOREIGN HIGH RETURN AMOUNT.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘foreign high re-
turn amount’ means, with respect to any United 
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States shareholder for any taxable year of such 
United States shareholder, the excess (if any) of— 
‘‘(A) such shareholder’s net CFC tested in-
come for such taxable year, over 
‘‘(B) the excess (if any) of— 
‘‘(i) the applicable percentage of the 
aggregate of such shareholder’s pro rata 
share of the qualified business asset invest-
ment of each controlled foreign corporation 
with respect to which such shareholder is 
a United States shareholder for such tax-
able year (determined for each taxable year 
of each such controlled foreign corporation 
which ends in or with such taxable year of 
such United States shareholder), over 
‘‘(ii) the amount of interest expense 
taken 
into 
account 
under 
subsection 
(c)(2)(A)(ii) in determining the share-
holder’s net CFC tested income for the 
taxable year. 
‘‘(2) APPLICABLE
PERCENTAGE.—The term 
‘applicable percentage’ means, with respect to any 
taxable year, the Federal short-term rate (deter-
mined under section 1274(d) for the month in which 
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or with which such taxable year ends) plus 7 per-
centage points. 
‘‘(c) NET CFC TESTED INCOME.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘net CFC tested 
income’ means, with respect to any United States 
shareholder for any taxable year of such United 
States shareholder, the excess (if any) of— 
‘‘(A) the aggregate of such shareholder’s 
pro rata share of the tested income of each con-
trolled foreign corporation with respect to which 
such shareholder is a United States shareholder 
for such taxable year of such United States 
shareholder (determined for each taxable year 
of such controlled foreign corporation which 
ends in or with such taxable year of such 
United States shareholder), over 
‘‘(B) the aggregate of such shareholder’s 
pro rata share of the tested loss of each con-
trolled foreign corporation with respect to which 
such shareholder is a United States shareholder 
for such taxable year of such United States 
shareholder (determined for each taxable year 
of such controlled foreign corporation which 
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ends in or with such taxable year of such 
United States shareholder). 
‘‘(2) TESTED INCOME; TESTED LOSS.—For pur-
poses of this section— 
‘‘(A) TESTED INCOME.—The term ‘tested 
income’ means, with respect to any controlled 
foreign corporation for any taxable year of such 
controlled foreign corporation, the excess (if 
any) of— 
‘‘(i) the gross income of such corpora-
tion determined without regard to— 
‘‘(I) any item of income which is 
effectively connected with the conduct 
by such corporation of a trade or 
business within the United States if 
subject to tax under this chapter, 
‘‘(II) any gross income taken into 
account in determining the subpart F 
income of such corporation, 
‘‘(III) except as otherwise pro-
vided by the Secretary, any amount 
excluded from the foreign personal 
holding company income (as defined 
in section 954) of such corporation by 
reason of section 954(c)(6) but only 
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to the extent that any deduction al-
lowable for the payment or accrual of 
such amount does not result in a re-
duction in the foreign high return 
amount of any United States share-
holder (determined without regard to 
this subclause), 
‘‘(IV) any gross income excluded 
from the foreign personal holding 
company income (as defined in section 
954) of such corporation by reason of 
subsection (h) or (i) of section 954, 
‘‘(V) any gross income excluded 
from the insurance income (as defined 
in section 953) of such corporation by 
reason of section 953(a)(2), 
‘‘(VI) any gross income excluded 
from foreign base company income (as 
defined in section 954) or insurance 
income (as defined in section 953) of 
such corporation by reason of section 
954(b)(4), 
‘‘(VII) 
any 
dividend 
received 
from a related person (as defined in 
section 954(d)(3)), and 
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‘‘(VIII) any commodities gross 
income of such corporation, over 
‘‘(ii) the deductions (including taxes) 
properly allocable to such gross income 
under rules similar to the rules of section 
954(b)(5) (or which would be so properly 
allocable if such corporation had such 
gross income). 
‘‘(B) TESTED
LOSS.—The term ‘tested 
loss’ means, with respect to any controlled for-
eign corporation for any taxable year of such 
controlled foreign corporation, the excess (if 
any) of the amount described in subparagraph 
(A)(ii) over the amount described in subpara-
graph (A)(i). 
‘‘(d) QUALIFIED BUSINESS ASSET INVESTMENT.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified busi-
ness asset investment’ means, with respect to any 
controlled foreign corporation for any taxable year of 
such controlled foreign corporation, the aggregate of 
the corporation’s adjusted bases (determined as of 
the close of such taxable year and after any adjust-
ments with respect to such taxable year) in specified 
tangible property— 
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‘‘(A) used in a trade or business of the 
corporation, and 
‘‘(B) of a type with respect to which a de-
duction is allowable under section 168. 
‘‘(2) SPECIFIED
TANGIBLE
PROPERTY.—The 
term ‘specified tangible property’ means any tangible 
property to the extent such property is used in the 
production of tested income or tested loss. 
‘‘(3) PARTNERSHIP PROPERTY.—For purposes 
of this subsection, if a controlled foreign corporation 
holds an interest in a partnership at the close of 
such taxable year of the controlled foreign corpora-
tion, such controlled foreign corporation shall take 
into account under paragraph (1) the controlled for-
eign corporation’s distributive share of the aggregate 
of the partnership’s adjusted bases (determined as 
of such date in the hands of the partnership) in tan-
gible property held by such partnership to the extent 
such property— 
‘‘(A) is used in the trade or business of the 
partnership, and 
‘‘(B) is used in the production of tested in-
come or tested loss (determined with respect to 
such controlled foreign corporation’s distribu-
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377 
tive share of income or loss with respect to such 
property). 
For purposes of this paragraph, the controlled for-
eign corporation’s distributive share of the adjusted 
basis of any property shall be the controlled foreign 
corporation’s distributive share of income and loss 
with respect to such property. 
‘‘(4) DETERMINATION OF ADJUSTED BASIS.— 
For purposes of this subsection, the adjusted basis 
in any property shall be determined without regard 
to any provision of this title (or any other provision 
of law) which is enacted after the date of the enact-
ment of this section. 
‘‘(5) REGULATIONS.—The Secretary shall issue 
such regulations or other guidance as the Secretary 
determines appropriate to prevent the avoidance of 
the purposes of this subsection, including regulations 
or other guidance which provide for the treatment of 
property if— 
‘‘(A) such property is transferred, or held, 
temporarily, or 
‘‘(B) the avoidance of the purposes of this 
paragraph is a factor in the transfer or holding 
of such property. 
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‘‘(e) COMMODITIES GROSS INCOME.—For purposes 
of this section— 
‘‘(1) COMMODITIES GROSS INCOME.—The term 
‘commodities gross income’ means, with respect to 
any corporation, the gross income of such corpora-
tion from the disposition of commodities which are 
produced or extracted by such corporation. 
‘‘(2) 
COMMODITY.—The 
term 
‘commodity’ 
means 
any 
commodity 
described 
in 
section 
475(e)(2)(A) or section 475(e)(2)(D) (determined 
without regard to clause (i) thereof and by sub-
stituting ‘a commodity described in subparagraph 
(A)’ for ‘such a commodity’ in clause (ii) thereof). 
‘‘(f) TAXABLE YEARS FOR WHICH PERSONS ARE 
TREATED AS UNITED STATES SHAREHOLDERS OF CON-
TROLLED FOREIGN CORPORATIONS.—For purposes of 
this section— 
‘‘(1) IN
GENERAL.—A United States share-
holder of a controlled foreign corporation shall be 
treated as a United States shareholder of such con-
trolled foreign corporation for any taxable year of 
such United States shareholder if— 
‘‘(A) a taxable year of such controlled for-
eign corporation ends in or with such taxable 
year of such person, and 
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‘‘(B) such person owns (within the mean-
ing of section 958(a)) stock in such controlled 
foreign corporation on the last day, in such tax-
able year of such foreign corporation, on which 
the foreign corporation is a controlled foreign 
corporation. 
‘‘(2) TREATMENT AS A CONTROLLED FOREIGN 
CORPORATION.—Except for purposes of paragraph 
(1)(B) and the application of section 951(a)(2) to 
this section pursuant to subsection (g), a foreign 
corporation shall be treated as a controlled foreign 
corporation for any taxable year of such foreign cor-
poration if such foreign corporation is a controlled 
foreign corporation at any time during such taxable 
year. 
‘‘(g) DETERMINATION OF PRO RATA SHARE.—For 
purposes of this section, the pro rata shares referred to 
in 
subsections 
(b)(2), 
(c)(1)(A), 
(c)(1)(B), 
and 
(c)(2)(B)(ii), respectively, shall be determined under the 
rules of section 951(a)(2) in the same manner as such sec-
tion applies to subpart F income. 
‘‘(h) COORDINATION WITH SUBPART F.— 
‘‘(1) TREATMENT AS SUBPART F INCOME FOR 
CERTAIN PURPOSES.—Except as otherwise provided 
by the Secretary any foreign high return amount in-
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380 
cluded in gross income under subsection (a) shall be 
treated in the same manner as an amount included 
under section 951(a)(1)(A) for purposes of applying 
sections 
168(h)(2)(B), 
535(b)(10), 
851(b), 
904(h)(1), 959, 961, 962(c), 962(d), 993(a)(1)(E), 
996(f)(1), 1248(b)(1), 1248(d)(1), 6501(e)(1)(C), 
6654(d)(2)(D), and 6655(e)(4). 
‘‘(2) ENTIRE FOREIGN HIGH RETURN AMOUNT 
TAKEN INTO ACCOUNT FOR PURPOSES OF CERTAIN 
SECTIONS.—For purposes of applying paragraph (1) 
with respect to sections 168(h)(2)(B), 851(b), 959, 
961, 962(c), 962(d), 1248(b)(1), and 1248(d)(1), 
the foreign high return amount included in gross in-
come under subsection (a) shall be determined by 
substituting ‘100 percent’ for ‘50 percent’ in such 
subsection. 
‘‘(3) ALLOCATION OF FOREIGN HIGH RETURN 
AMOUNT
TO
CONTROLLED
FOREIGN
CORPORA-
TIONS.—For purposes of the sections referred to in 
paragraph (1), with respect to any controlled foreign 
corporation any pro rata amount from which is 
taken into account in determining the foreign high 
return amount included in gross income of a United 
States shareholder under subsection (a), the portion 
of such foreign high return amount which is treated 
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as being with respect to such controlled foreign cor-
poration is— 
‘‘(A) in the case of a controlled foreign 
corporation with tested loss, zero, and 
‘‘(B) in the case of a controlled foreign 
corporation with tested income, the portion of 
such foreign high return amount which bears 
the same ratio to such foreign high return 
amount as— 
‘‘(i) such United States shareholder’s 
pro rata amount of the tested income of 
such controlled foreign corporation, bears 
to 
‘‘(ii) the aggregate amount deter-
mined under subsection (c)(1)(A) with re-
spect to such United States shareholder. 
‘‘(4) COORDINATION WITH SUBPART F TO DENY 
DOUBLE BENEFIT OF LOSSES.—In the case of any 
United States shareholder of any controlled foreign 
corporation, the amount included in gross income 
under section 951(a)(1)(A) shall be determined by 
increasing the earnings and profits of such con-
trolled foreign corporation (solely for purposes of de-
termining such amount) by an amount that bears 
the same ratio (not greater than 1) to such share-
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holder’s pro rata share of the tested loss of such 
controlled foreign corporation as— 
‘‘(A) the aggregate amount determined 
under subsection (c)(1)(A) with respect to such 
shareholder, bears to 
‘‘(B) the aggregate amount determined 
under subsection (c)(1)(B) with respect to such 
shareholder.’’. 
(b) FOREIGN TAX CREDIT.— 
(1) APPLICATION OF DEEMED PAID FOREIGN 
TAX CREDIT.—Section 960, as amended by the pre-
ceding provisions of this Act, is amended by redesig-
nating subsections (d) and (e) as subsections (e) and 
(f), respectively, and by inserting after subsection (c) 
the following new subsection: 
‘‘(d) DEEMED PAID CREDIT FOR TAXES PROPERLY 
ATTRIBUTABLE TO TESTED INCOME.— 
‘‘(1) IN GENERAL.—For purposes of this sub-
part, if any amount is includible in the gross income 
of a domestic corporation under section 951A, such 
domestic corporation shall be deemed to have paid 
foreign income taxes equal to 80 percent of— 
‘‘(A) such domestic corporation’s foreign 
high return percentage, multiplied by 
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383 
‘‘(B) the aggregate tested foreign income 
taxes paid or accrued by controlled foreign cor-
porations with respect to which such domestic 
corporation is a United States shareholder. 
‘‘(2) FOREIGN HIGH RETURN PERCENTAGE.— 
For purposes of paragraph (1), the term ‘foreign 
high return percentage’ means, with respect to any 
domestic corporation, the ratio (expressed as a per-
centage) of— 
‘‘(A) such corporation’s foreign high return 
amount (as defined in section 951A(b)), divided 
by 
‘‘(B) the aggregate amount determined 
under section 951A(c)(1)(A) with respect to 
such corporation. 
‘‘(3) TESTED
FOREIGN
INCOME
TAXES.—For 
purposes of paragraph (1), the term ‘tested foreign 
income taxes’ means, with respect to any domestic 
corporation which is a United States shareholder of 
a controlled foreign corporation, the foreign income 
taxes paid or accrued by such foreign corporation 
which are properly attributable to gross income de-
scribed in section 951A(c)(2)(A)(i).’’. 
(2) APPLICATION
OF
FOREIGN
TAX
CREDIT 
LIMITATION.— 
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384 
(A) SEPARATE
BASKET
FOR
FOREIGN 
HIGH RETURN AMOUNT.—Section 904(d)(1) is 
amended by redesignating subparagraphs (A) 
and (B) as subparagraphs (B) and (C), respec-
tively, and by inserting before subparagraph 
(B) (as so redesignated) the following new sub-
paragraph: 
‘‘(A) any amount includible in gross in-
come under section 951A,’’. 
(B) NO CARRYOVER OF EXCESS TAXES.— 
Section 904(c) is amended by adding at the end 
the following: ‘‘This subsection shall not apply 
to taxes paid or accrued with respect to 
amounts described in subsection (d)(1)(A).’’ 
(3) GROSS UP FOR DEEMED PAID FOREIGN TAX 
CREDIT.—Section 78, as amended by the preceding 
provisions of this Act, is amended— 
(A) by striking ‘‘any taxable year, an 
amount’’ and inserting ‘‘any taxable year— 
‘‘(1) an amount’’, and 
(B) by striking the period at the end and 
inserting ‘‘, and 
‘‘(2) an amount equal to the taxes deemed to 
be paid by such corporation under section 960(d) for 
such taxable year (determined by substituting ‘100 
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percent’ for ‘80 percent’ in such section) shall be 
treated for purposes of this title (other than sections 
959, 960, and 961) as an increase in the foreign 
high return amount of such domestic corporation 
under section 951A for such taxable year.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 170(b)(2)(D) is amended by strik-
ing ‘‘computed without regard to’’ and all that fol-
lows and inserting ‘‘computed— 
‘‘(i) without regard to— 
‘‘(I) this section, 
‘‘(II) part VIII (except section 
248), 
‘‘(III) any net operating loss 
carryback to the taxable year under 
section 172, 
‘‘(IV) any capital loss carryback 
to the taxable year under section 
1212(a)(1), and 
‘‘(ii) by substituting ‘100 percent’ for 
‘50 percent’ in section 951A(a).’’. 
(2) Section 246(b)(1) is amended by— 
(A) striking ‘‘and without regard to’’ and 
inserting ‘‘without regard to’’, and 
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386 
(B) by striking the period at the end and 
inserting ‘‘, and by substituting ‘100 percent’ 
for ‘50 percent’ in section 951A(a).’’. 
(3) Section 469(i)(3)(F) is amended by striking 
‘‘determined without regard to’’ and all that follows 
and inserting ‘‘determined— 
‘‘(i) without regard to— 
‘‘(I) any amount includible in 
gross income under section 86, 
‘‘(II) the amounts allowable as a 
deduction under section 219, and 
‘‘(III) any passive activity loss or 
any loss allowable by reason of sub-
section (c)(7), and 
‘‘(ii) by substituting ‘100 percent’ for 
‘50 percent’ in section 951A(a).’’. 
(4) Section 856(c)(2) is amended by striking 
‘‘and’’ at the end of subparagraph (H), by adding 
‘‘and’’ at the end of subparagraph (I), and by insert-
ing after subparagraph (I) the following new sub-
paragraph: 
‘‘(J) amounts includible in gross income 
under section 951A(a);’’. 
(5) Section 856(c)(3)(D) is amended by strik-
ing ‘‘dividends or other distributions on, and gain’’ 
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and inserting ‘‘dividends, other distributions on, 
amounts includible in gross income under section 
951A(a) with respect to, and gain’’. 
(6) The table of sections for subpart F of part 
III of subchapter N of chapter 1 is amended by in-
serting after the item relating to section 951 the fol-
lowing new item: 
‘‘Sec. 951A. Foreign high return amount included in gross income of United 
States shareholders.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years of foreign corpora-
tions beginning after December 31, 2017, and to taxable 
years of United States shareholders in which or with which 
such taxable years of foreign corporations end. 
SEC. 4302. LIMITATION ON DEDUCTION OF INTEREST BY 
DOMESTIC CORPORATIONS WHICH ARE MEM-
BERS OF AN INTERNATIONAL FINANCIAL RE-
PORTING GROUP. 
(a) IN GENERAL.—Section 163 is amended by redes-
ignating subsection (n) as subsection (p) and by inserting 
after subsection (m) the following new subsection: 
‘‘(n) LIMITATION ON DEDUCTION OF INTEREST BY 
DOMESTIC CORPORATIONS
IN INTERNATIONAL FINAN-
CIAL REPORTING GROUPS.— 
‘‘(1) IN GENERAL.—In the case of any domestic 
corporation which is a member of any international 
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388 
financial reporting group, the deduction under this 
chapter for interest paid or accrued during the tax-
able year shall not exceed the sum of— 
‘‘(A) the allowable percentage of 110 per-
cent of the excess (if any) of— 
‘‘(i) the amount of such interest so 
paid or accrued, over 
‘‘(ii) the amount described in subpara-
graph (B), plus 
‘‘(B) the amount of interest includible in 
gross income of such corporation for such tax-
able year. 
‘‘(2) INTERNATIONAL
FINANCIAL
REPORTING 
GROUP.— 
‘‘(A) For purposes of this subsection, the 
term ‘international financial reporting group’ 
means, with respect to any reporting year, any 
group of entities which— 
‘‘(i) includes— 
‘‘(I) at least one foreign corpora-
tion engaged in a trade or business 
within the United States, or 
‘‘(II) at least one domestic cor-
poration and one foreign corporation, 
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‘‘(ii) prepares consolidated financial 
statements with respect to such year, and 
‘‘(iii) reports in such statements aver-
age annual gross receipts (determined in 
the aggregate with respect to all entities 
which are part of such group) for the 3-re-
porting-year period ending with such re-
porting year in excess of $100,000,000. 
‘‘(B) RULES
RELATING
TO
DETERMINA-
TION OF AVERAGE GROSS RECEIPTS.—For pur-
poses of subparagraph (A)(iii), rules similar to 
the rules of section 448(c)(3) shall apply. 
‘‘(3) ALLOWABLE PERCENTAGE.—For purposes 
of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘allowable 
percentage’ means, with respect to any domestic 
corporation for any taxable year, the ratio (ex-
pressed as a percentage and not greater than 
100 percent) of— 
‘‘(i) such corporation’s allocable share 
of the international financial reporting 
group’s reported net interest expense for 
the reporting year of such group which 
ends in or with such taxable year of such 
corporation, over 
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‘‘(ii) such corporation’s reported net 
interest expense for such reporting year of 
such group. 
‘‘(B) 
REPORTED
NET
INTEREST
EX-
PENSE.—The term ‘reported net interest ex-
pense’ means— 
‘‘(i) with respect to any international 
financial reporting group for any reporting 
year, the excess of— 
‘‘(I) the aggregate amount of in-
terest 
expense 
reported 
in 
such 
group’s consolidated financial state-
ments for such taxable year, over 
‘‘(II) the aggregate amount of in-
terest income reported in such group’s 
consolidated financial statements for 
such taxable year, and 
‘‘(ii) with respect to any domestic cor-
poration for any reporting year, the excess 
of— 
‘‘(I) the amount of interest ex-
pense of such corporation reported in 
the books and records of the inter-
national financial reporting group 
which are used in preparing such 
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391 
group’s consolidated financial state-
ments for such taxable year, over 
‘‘(II) the amount of interest in-
come of such corporation reported in 
such books and records. 
‘‘(C) ALLOCABLE
SHARE
OF
REPORTED 
NET INTEREST EXPENSE.—With respect to any 
domestic corporation which is a member of any 
international financial reporting group, such 
corporation’s allocable share of such group’s re-
ported net interest expense for any reporting 
year is the portion of such expense which bears 
the same ratio to such expense as— 
‘‘(i) the EBITDA of such corporation 
for such reporting year, bears to 
‘‘(ii) the EBITDA of such group for 
such reporting year. 
‘‘(D) EBITDA.— 
‘‘(i) 
IN
GENERAL.—The 
term 
‘EBITDA’ means, with respect to any re-
porting year, earnings before interest, 
taxes, depreciation, and amortization— 
‘‘(I) as determined in the inter-
national financial reporting group’s 
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392 
consolidated financial statements for 
such year, or 
‘‘(II) for purposes of subpara-
graph (A)(i), as determined in the 
books and records of the international 
financial reporting group which are 
used in preparing such statements if 
not determined in such statements. 
‘‘(ii) TREATMENT
OF
DISREGARDED 
ENTITIES.—The EBITDA of any domestic 
corporation shall not fail to include the 
EBITDA of any entity which is dis-
regarded for purposes of this chapter. 
‘‘(iii) TREATMENT
OF
INTRA-GROUP 
DISTRIBUTIONS.—The EBITDA of any do-
mestic corporation shall be determined 
without regard to any distribution received 
by such corporation from any other mem-
ber of the international financial reporting 
group. 
‘‘(E) SPECIAL RULES FOR NON-POSITIVE 
EBITDA.— 
‘‘(i) NON-POSITIVE GROUP EBITDA.— 
In the case of any international financial 
reporting group the EBITDA of which is 
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393 
zero or less, paragraph (1) shall not apply 
to any member of such group the EBITDA 
of which is above zero. 
‘‘(ii) 
NON-POSITIVE
ENTITY 
EBITDA.—In the case of any group mem-
ber the EBITDA of which is zero or less, 
paragraph (1) shall be applied without re-
gard to subparagraph (A) thereof. 
‘‘(4) CONSOLIDATED FINANCIAL STATEMENT.— 
For purposes of this subsection, the term ‘consoli-
dated financial statement’ means any consolidated 
financial statement described in paragraph (2)(A)(ii) 
if such statement is— 
‘‘(A) a financial statement which is cer-
tified as being prepared in accordance with gen-
erally accepted accounting principles, inter-
national financial reporting standards, or any 
other comparable method of accounting identi-
fied by the Secretary, and which is— 
‘‘(i) a 10-K (or successor form), or 
annual statement to shareholders, required 
to be filed with the United States Securi-
ties and Exchange Commission, 
‘‘(ii) an audited financial statement 
which is used for— 
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394 
‘‘(I) credit purposes, 
‘‘(II) reporting to shareholders, 
partners, or other proprietors, or to 
beneficiaries, or 
‘‘(III) 
any 
other 
substantial 
nontax purpose, 
but only if there is no statement described 
in clause (i), or 
‘‘(iii) filed with any other Federal or 
State agency for nontax purposes, but only 
if there is no statement described in clause 
(i) or (ii), or 
‘‘(B) a financial statement which— 
‘‘(i) is used for a purpose described in 
subclause (I), (II), or (III) of subpara-
graph (A)(ii), or 
‘‘(ii) filed with any regulatory or gov-
ernmental body (whether domestic or for-
eign) specified by the Secretary, 
but only if there is no statement described in 
subparagraph (A). 
‘‘(5) REPORTING YEAR.—For purposes of this 
subsection, the term ‘reporting year’ means, with re-
spect to any international financial reporting group, 
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395 
the year with respect to which the consolidated fi-
nancial statements are prepared. 
‘‘(6) APPLICATION TO CERTAIN ENTITIES.— 
‘‘(A) PARTNERSHIPS.—Except as other-
wise provided by the Secretary in paragraph 
(8), this subsection shall apply to any partner-
ship which is a member of any international fi-
nancial reporting group under rules similar to 
the rules of section 163(j)(3). 
‘‘(B) FOREIGN
CORPORATIONS
ENGAGED 
IN TRADE OR BUSINESS WITHIN THE UNITED 
STATES.—Except as otherwise provided by the 
Secretary in paragraph (8), any deduction for 
interest paid or accrued by a foreign corpora-
tion engaged in a trade or business within the 
United States shall be limited in a manner con-
sistent with the principles of this subsection. 
‘‘(C) CONSOLIDATED
GROUPS.—For pur-
poses of this subsection, the members of any 
group that file (or are required to file) a con-
solidated return with respect to the tax imposed 
by chapter 1 for a taxable year shall be treated 
as a single corporation. 
‘‘(7) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as are necessary 
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396 
or appropriate to carry out the purposes of this sub-
section.’’. 
(b) CARRYFORWARD OF DISALLOWED INTEREST.— 
(1) IN GENERAL.—Section 163(o) is amended 
to read as follows: 
‘‘(o) CARRYFORWARD OF CERTAIN DISALLOWED IN-
TEREST.—The amount of any interest not allowed as a 
deduction for any taxable year by reason of subsection 
(j)(1) or (n)(1) (whichever imposes the lower limitation 
with respect to such taxable year) shall be treated as inter-
est (and as business interest for purposes of subsection 
(j)(1)) paid or accrued in the succeeding taxable year. In-
terest paid or accrued in any taxable year (determined 
without regard to the preceding sentence) shall not be car-
ried past the 5th taxable year following such taxable year, 
determined by treating interest as allowed as a deduction 
on a first-in, first-out basis.’’. 
(2) TREATMENT OF CARRYFORWARD OF DIS-
ALLOWED INTEREST IN CERTAIN CORPORATE ACQUI-
SITIONS.—For rules related to the carryforward of 
disallowed interest in certain corporate acquisitions, 
see the amendments made by section 3301(c). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
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397 
SEC. 4303. EXCISE TAX ON CERTAIN PAYMENTS FROM DO-
MESTIC CORPORATIONS TO RELATED FOR-
EIGN CORPORATIONS; ELECTION TO TREAT 
SUCH 
PAYMENTS 
AS 
EFFECTIVELY 
CON-
NECTED INCOME. 
(a) EXCISE TAX ON CERTAIN AMOUNTS FROM DO-
MESTIC CORPORATIONS TO FOREIGN AFFILIATES.— 
(1) IN GENERAL.—Chapter 36 is amended by 
adding at the end the following new subchapter: 
‘‘Subchapter E—Tax on Certain Amounts to 
Foreign Affiliates 
‘‘Sec. 4491. Imposition of tax on certain amounts from domestic corporations 
to foreign affiliates. 
‘‘SEC. 4491. IMPOSITION OF TAX ON CERTAIN AMOUNTS 
FROM DOMESTIC CORPORATIONS TO FOR-
EIGN AFFILIATES. 
‘‘(a) IN GENERAL.—There is hereby imposed on each 
specified amount paid or incurred by a domestic corpora-
tion to a foreign corporation which is a member of the 
same international financial reporting group as such do-
mestic corporation a tax equal to the highest rate of tax 
in effect under section 11 multiplied by such amount. 
‘‘(b) BY WHOM PAID.—The tax imposed by sub-
section (a) shall be paid by the domestic corporation de-
scribed in such subsection. 
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398 
‘‘(c) EXCEPTION FOR EFFECTIVELY CONNECTED IN-
COME.—Subsection (a) shall not apply to so much of any 
specified amount as is effectively connected with the con-
duct of a trade or business within the United States if 
such amount is subject to tax under chapter 1. In the case 
of any amount which is treated as effectively connected 
with the conduct of a trade or business within the United 
States by reason of section 882(g), the preceding sentence 
shall apply to such amount only if the domestic corpora-
tion provides to the Secretary (at such time and in such 
form and manner as the Secretary may provide) a copy 
of the election made under section 882(g) by the foreign 
corporation referred to in subsection (a). 
‘‘(d) DEFINITIONS
AND SPECIAL RULES.—Terms 
used in this section that are also used in section 882(g) 
shall have the same meaning as when used in such section 
and rules similar to the rules of paragraphs (5) and (6) 
of such section shall apply for purposes of this section.’’. 
(2) DENIAL
OF
DEDUCTION
FOR
TAX
IM-
POSED.—Section 275(a) is amended by inserting 
after paragraph (6) the following new paragraph: 
‘‘(7) Taxes imposed by section 4491.’’. 
(3) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 36 is amended by adding at the 
end the following new item: 
‘‘SUBCHAPTER E. TAX ON CERTAIN AMOUNTS TO FOREIGN AFFILIATES.’’. 
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399 
(b) ELECTION TO TREAT CERTAIN PAYMENTS FROM 
DOMESTIC CORPORATIONS TO RELATED FOREIGN COR-
PORATIONS AS EFFECTIVELY CONNECTED INCOME.—Sec-
tion 882 is amended by adding at the end the following 
new subsection: 
‘‘(g) ELECTION TO TREAT CERTAIN PAYMENTS 
FROM DOMESTIC CORPORATIONS TO RELATED FOREIGN 
CORPORATIONS AS EFFECTIVELY CONNECTED INCOME.— 
‘‘(1) IN GENERAL.—In the case of any specified 
amount paid or incurred by a domestic corporation 
to a foreign corporation which is a member of the 
same international financial reporting group as such 
domestic corporation and which has elected to be 
subject to the provisions of this subsection— 
‘‘(A) such amount shall be taken into ac-
count (other than for purposes of sections 245, 
245A, and 881) as if such foreign corporation 
were engaged in a trade or business within the 
United States and had a permanent establish-
ment in the United States during the taxable 
year and as if such payment were effectively 
connected with the conduct of a trade or busi-
ness within the United States and were attrib-
utable to such permanent establishment, 
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400 
‘‘(B) for purposes of subsection (c)(1)(A), 
no deduction shall be allowed with respect to 
such amount and such subsection shall be ap-
plied without regard to such amount, and 
‘‘(C) there shall be allowed as a deduction 
the deemed expenses with respect such amount. 
‘‘(2) SPECIFIED
AMOUNT.—For purposes of 
this subsection— 
‘‘(A) IN
GENERAL.—The term ‘specified 
amount’ means any amount which is, with re-
spect to the payor, allowable as a deduction or 
includible in costs of goods sold, inventory, or 
the basis of a depreciable or amortizable asset. 
‘‘(B) EXCEPTIONS.—The term ‘specified 
amount’ shall not include— 
‘‘(i) interest, 
‘‘(ii) any amount paid or incurred for 
the acquisition of any commodity described 
in 
section 
475(e)(2)(A) 
or 
section 
475(e)(2)(D) (determined without regard 
to subclause (i) thereof), 
‘‘(iii) except as provided in subpara-
graph (C), any amount with respect to 
which tax is imposed under section 881(a), 
and 
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401 
‘‘(iv) in the case of a payor which has 
elected to use a services cost method for 
purposes of section 482, any amount paid 
or incurred for services if such amount is 
the total services cost with no markup. 
‘‘(C) AMOUNTS TREATED AS EFFECTIVELY 
CONNECTED
TO
EXTENT
OF
GROSS-BASIS 
TAX.—Subparagraph (B)(iii) shall not apply to 
any specified amount to the extent of the same 
proportion of such amount as— 
‘‘(i) the rate of tax imposed under 
section 881(a) with respect to such 
amount, bears to 
‘‘(ii) 30 percent. 
‘‘(3) DEEMED EXPENSES.— 
‘‘(A) IN GENERAL.—The deemed expenses 
with respect to any specified amount received 
by a foreign corporation during any reporting 
year is the amount of expenses such that the 
net income ratio of such foreign corporation 
with respect to such amount (taking into ac-
count only such deemed expenses) is equal to 
the net income ratio of the international finan-
cial reporting group determined for such report-
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402 
ing year with respect to the product line to 
which the specified amount relates. 
‘‘(B) NET INCOME RATIO.—For purposes 
of this paragraph, the term ‘net income ratio’ 
means the ratio of— 
‘‘(i) net income determined without 
regard to interest income, interest expense, 
and income taxes, divided by 
‘‘(ii) revenues. 
‘‘(C) 
METHOD
OF
DETERMINATION.— 
Amounts described in subparagraph (B) shall 
be determined on the basis of the consolidated 
financial statements referred to in paragraph 
(5)(A)(i) and the book and records of the mem-
bers of the internal financial reporting group 
which are used in preparing such statements. 
‘‘(4) INTERNATIONAL
FINANCIAL
REPORTING 
GROUP.—For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘inter-
national financial reporting group’ means any 
group of entities, with respect to any specified 
amount, if such amount is paid or incurred dur-
ing a reporting year of such group with respect 
to which— 
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403 
‘‘(i) such group prepares consolidated 
financial statements (within the meaning 
of section 163(n)(4)) with respect to such 
year, and 
‘‘(ii) the average annual aggregate 
payment amount of such group for the 3- 
reporting-year period ending with such re-
porting year exceeds $100,000,000. 
‘‘(B) 
ANNUAL
AGGREGATE
PAYMENT 
AMOUNT.—The term ‘annual aggregate pay-
ment amount’ means, with respect to any re-
porting year of the group referred to in sub-
paragraph 
(A)(i), 
the 
aggregate 
specified 
amounts to which paragraph (1) applies (or 
would apply if such group were an international 
financial reporting group). 
‘‘(C) APPLICATION OF CERTAIN RULES.— 
Rules similar to the rules of subparagraphs (A), 
(B), and (D) of section 448(c)(3) shall apply 
for purposes of this paragraph. 
‘‘(5) TREATMENT
OF
PARTNERSHIPS.—Any 
specified amount paid, incurred, or received by a 
partnership which is a member of any international 
financial reporting group (and any amount treated 
as paid, incurred, or received by a partnership under 
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404 
this paragraph) shall be treated for purposes of this 
subsection as amounts paid, incurred, or received, 
respectively, by each partner of such partnership in 
an amount equal to such partner’s distributive share 
of the items of income, gain, deduction, or loss to 
which such amounts relate. 
‘‘(6) TREATMENT OF AMOUNTS IN CONNECTION 
WITH UNITED STATES TRADE OR BUSINESS.—Any 
specified amount paid, incurred, or received by a for-
eign corporation in connection with the conduct of a 
trade or business within the United States (other 
than a trade or business it is deemed to conduct 
pursuant to this subsection) shall be treated for pur-
poses of this subsection as an amount paid, in-
curred, or received, respectively, by a domestic cor-
poration. For purposes of the preceding sentence, a 
foreign corporation shall be deemed to pay, incur, 
and receive amounts with respect to a trade or busi-
ness it conducts within the United States (other 
than a trade or business it is deemed to conduct 
pursuant to this subsection) to the extent such for-
eign corporation would be treated as paying, incur-
ring, or receiving such amounts from such trade or 
business if such trade or business were a domestic 
corporation. 
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405 
‘‘(7) JOINT AND SEVERAL LIABILITY OF MEM-
BERS
OF
INTERNAL
FINANCIAL
REPORTING 
GROUP.—In the case of any underpayment with re-
spect to any taxable year of a foreign corporation 
which is a member of an international financial ac-
counting group, each domestic corporation which is 
a member of such group at any time during such 
taxable year shall be jointly and severally liable 
for— 
‘‘(A) so much of such underpayment as 
does not exceed the excess (if any) of such un-
derpayment over the amount of such under-
payment determined without regard to this sub-
section, and 
‘‘(B) any penalty, addition to tax, or addi-
tional amount attributable to the amount de-
scribed in subparagraph (A). 
‘‘(8) DISALLOWANCE OF FOREIGN TAX CREDIT, 
ETC.— 
‘‘(A) IN GENERAL.—No credit shall be al-
lowed under section 901 for any taxes paid or 
accrued (or treated as paid or accrued) with re-
spect to any specified amount to which para-
graph (1) applies. 
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406 
‘‘(B) DENIAL OF DEDUCTION.—No deduc-
tion shall be allowed under this chapter for any 
tax for which credit is not allowable under sec-
tion 901 by reason of paragraph (1) (deter-
mined by treating the taxpayer as having elect-
ed the benefits of subpart A of part III of sub-
chapter N). 
‘‘(9) RULES
RELATED
TO
ELECTION.—Any 
election under paragraph (1) shall— 
‘‘(A) be made at such time and in such 
form and manner as the Secretary may provide, 
and 
‘‘(B) apply for the taxable year for which 
made and all subsequent taxable years unless 
revoked with the consent of the Secretary. 
‘‘(10) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as are necessary 
or appropriate to carry out the purposes of this sub-
section, including regulations or other guidance— 
‘‘(A) to provide for the proper determina-
tion of product lines, and 
‘‘(B) to prevent the avoidance of the pur-
poses of this subsection through the use of con-
duit transactions or by other means.’’. 
(c) REPORTING REQUIREMENTS.— 
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407 
(1) REPORTING BY FOREIGN CORPORATION.— 
Section 6038C(b) is amended to read as follows: 
‘‘(b) REQUIRED INFORMATION.— 
‘‘(1) IN GENERAL.—The information described 
in this subsection is— 
‘‘(A) the information described in section 
6038A(b), and 
‘‘(B) such other information as the Sec-
retary may prescribe by regulations relating to 
any item not directly connected with a trans-
action for which information is required under 
subparagraph (A). 
‘‘(2) CERTAIN PAYMENTS FROM RELATED DO-
MESTIC CORPORATIONS.— 
‘‘(A) IN GENERAL.—In the case of any re-
porting corporation that receives during the 
taxable year any amount to which section 
882(g)(1) applies, the information described in 
this subsection shall include, with respect to 
each member of the international financial re-
porting group from which any such amount is 
received— 
‘‘(i) the name and taxpayer identifica-
tion number of such member, 
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408 
‘‘(ii) the aggregate amounts received 
from such member, 
‘‘(iii) the product lines to which such 
amounts relate, the aggregate amounts re-
lating to each such product line, and the 
net income ratio for each such product line 
(determined under section 882(g)(3)(B) 
with respect to the international financial 
reporting group), and 
‘‘(iv) a summary of any changes in fi-
nancial accounting methods that affect the 
computation of any net income ratio de-
scribed in clause (iii). 
‘‘(B) DEFINITIONS AND SPECIAL RULES.— 
Terms used in this paragraph that are also 
used in section 882(g) shall have the same 
meaning as when used in such section and rules 
similar to the rules of paragraphs (5) and (6) 
of such section shall apply for purposes of this 
paragraph.’’. 
(2) REPORTING
BY
DOMESTIC
GROUP
MEM-
BERS.— 
(A) IN GENERAL .—Subpart A of part III 
of subchapter A of chapter 61 is amended by 
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409 
inserting after section 6038D the following new 
section: 
‘‘SEC. 6038E. INFORMATION WITH RESPECT TO CERTAIN 
PAYMENTS FROM DOMESTIC CORPORATIONS 
TO RELATED FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—In the case of any domestic cor-
poration which pays or accrues any amount to which sec-
tion 882(g)(1) applies, such person shall— 
‘‘(1) make a return according to the forms and 
regulations prescribed the Secretary, setting forth 
the information described in subsection (b), and 
‘‘(2) maintain (at the location, in the manner, 
and to the extent prescribed in regulations) such 
records as may be appropriate to determine liability 
for tax pursuant to paragraphs (1) and (7) of sec-
tion 882(g). 
‘‘(b) REQUIRED INFORMATION.—The information de-
scribed in this subsection is— 
‘‘(1) the name and taxpayer identification num-
ber of the common parent of the international finan-
cial reporting group in which such domestic corpora-
tion is a member, and 
‘‘(2) with respect to any person who receives an 
amount described in subsection (a) from such do-
mestic corporation— 
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410 
‘‘(A) the name and taxpayer identification 
number of such person, 
‘‘(B) the aggregate amounts received by 
such person, 
‘‘(C) the product lines to which such 
amounts relate, the aggregate amounts relating 
to each such product line, and the net income 
ratio for each such product line (determined 
under section 882(g)(3)(B) with respect to the 
international financial reporting group), and 
‘‘(D) a summary of any changes in finan-
cial accounting methods that affect the com-
putation of any net income ratios described in 
subparagraph (C). 
‘‘(c) DEFINITIONS
AND SPECIAL RULES.—Terms 
used in this paragraph that are also used in section 882(g) 
shall have the same meaning as when used in such section 
and rules similar to the rules of paragraphs (5) and (6) 
of such section shall apply for purposes of this para-
graph.’’. 
(B) CLERICAL AMENDMENT.—The table of 
sections for subpart A of part III of subchapter 
A of chapter 61 is amended by inserting after 
the item relating to section 6038D the following 
new item: 
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‘‘Sec. 6038E. Information with respect to certain payments from domestic cor-
porations to related foreign corporations.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or accrued after 
December 31, 2018. 
Subtitle E—Provisions Related to 
Possessions of the United States 
SEC. 4401. EXTENSION OF DEDUCTION ALLOWABLE WITH 
RESPECT TO INCOME ATTRIBUTABLE TO DO-
MESTIC PRODUCTION ACTIVITIES IN PUERTO 
RICO. 
(a) IN GENERAL.—Section 199(d)(8)(C), prior to its 
repeal by this Act, is amended— 
(1) by striking ‘‘first 11 taxable years’’ and in-
serting ‘‘first 12 taxable years’’, and 
(2) by striking ‘‘January 1, 2017’’ and insert-
ing ‘‘January 1, 2018’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2016. 
SEC. 4402. EXTENSION OF TEMPORARY INCREASE IN LIMIT 
ON COVER OVER OF RUM EXCISE TAXES TO 
PUERTO RICO AND THE VIRGIN ISLANDS. 
(a) IN GENERAL.—Section 7652(f)(1) is amended by 
striking ‘‘January 1, 2017’’ and inserting ‘‘January 1, 
2023’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distilled spirits brought into the 
United States after December 31, 2016. 
SEC. 4403. EXTENSION OF AMERICAN SAMOA ECONOMIC 
DEVELOPMENT CREDIT. 
(a) IN GENERAL.—Section 119(d) of division A of 
the Tax Relief and Health Care Act of 2006 is amended— 
(1) by striking ‘‘January 1, 2017’’ each place 
it appears and inserting ‘‘January 1, 2023’’, 
(2) by striking ‘‘first 11 taxable years’’ in para-
graph (1) and inserting ‘‘first 17 taxable years’’, 
and 
(3) by striking ‘‘first 5 taxable years’’ in para-
graph (2) and inserting ‘‘first 11 taxable years’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2016. 
Subtitle F—Other International 
Reforms 
SEC. 4501. RESTRICTION ON INSURANCE BUSINESS EXCEP-
TION TO PASSIVE FOREIGN INVESTMENT 
COMPANY RULES. 
(a) IN GENERAL.—Section 1297(b)(2)(B) is amend-
ed to read as follows: 
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‘‘(B) derived in the active conduct of an in-
surance business by a qualifying insurance cor-
poration (as defined in subsection (f)),’’. 
(b) QUALIFYING
INSURANCE
CORPORATION
DE-
FINED.—Section 1297 is amended by adding at the end 
the following new subsection: 
‘‘(f) QUALIFYING INSURANCE CORPORATION.—For 
purposes of subsection (b)(2)(B)— 
‘‘(1) IN GENERAL.—The term ‘qualifying insur-
ance corporation’ means, with respect to any taxable 
year, a foreign corporation— 
‘‘(A) which would be subject to tax under 
subchapter L if such corporation were a domes-
tic corporation, and 
‘‘(B) the applicable insurance liabilities of 
which constitute more than 25 percent of its 
total assets, determined on the basis of such li-
abilities and assets as reported on the corpora-
tion’s applicable financial statement for the last 
year ending with or within the taxable year. 
‘‘(2) 
ALTERNATIVE
FACTS
AND
CIR-
CUMSTANCES TEST FOR CERTAIN CORPORATIONS.— 
If a corporation fails to qualify as a qualified insur-
ance corporation under paragraph (1) solely because 
the percentage determined under paragraph (1)(B) 
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is 25 percent or less, a United States person that 
owns stock in such corporation may elect to treat 
such stock as stock of a qualifying insurance cor-
poration if— 
‘‘(A) the percentage so determined for the 
corporation is at least 10 percent, and 
‘‘(B) under regulations provided by the 
Secretary, based on the applicable facts and cir-
cumstances— 
‘‘(i) the corporation is predominantly 
engaged in an insurance business, and 
‘‘(ii) such failure is due solely to run-
off-related or rating-related circumstances 
involving such insurance business. 
‘‘(3) APPLICABLE
INSURANCE
LIABILITIES.— 
For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘applicable 
insurance liabilities’ means, with respect to any 
life or property and casualty insurance busi-
ness— 
‘‘(i) loss and loss adjustment ex-
penses, and 
‘‘(ii) reserves (other than deficiency, 
contingency, or unearned premium re-
serves) for life and health insurance risks 
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and life and health insurance claims with 
respect to contracts providing coverage for 
mortality or morbidity risks. 
‘‘(B) LIMITATIONS ON AMOUNT OF LIABIL-
ITIES.—Any amount determined under clause 
(i) or (ii) of subparagraph (A) shall not exceed 
the lesser of such amount— 
‘‘(i) as reported to the applicable in-
surance regulatory body in the applicable 
financial statement described in paragraph 
(4)(A) (or, if less, the amount required by 
applicable law or regulation), or 
‘‘(ii) as determined under regulations 
prescribed by the Secretary. 
‘‘(4) OTHER
DEFINITIONS
AND
RULES.—For 
purposes of this subsection— 
‘‘(A) 
APPLICABLE
FINANCIAL
STATE-
MENT.—The term ‘applicable financial state-
ment’ means a statement for financial reporting 
purposes which— 
‘‘(i) is made on the basis of generally 
accepted accounting principles, 
‘‘(ii) is made on the basis of inter-
national financial reporting standards, but 
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only if there is no statement that meets 
the requirement of clause (i), or 
‘‘(iii) except as otherwise provided by 
the Secretary in regulations, is the annual 
statement which is required to be filed 
with the applicable insurance regulatory 
body, but only if there is no statement 
which meets the requirements of clause (i) 
or (ii). 
‘‘(B) 
APPLICABLE
INSURANCE
REGU-
LATORY BODY.—The term ‘applicable insurance 
regulatory body’ means, with respect to any in-
surance business, the entity established by law 
to license, authorize, or regulate such business 
and to which the statement described in sub-
paragraph (A) is provided.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 4502. LIMITATION ON TREATY BENEFITS FOR CERTAIN 
DEDUCTIBLE PAYMENTS. 
(a) IN GENERAL.—Section 894 is amended by adding 
at the end the following new subsection: 
‘‘(d) LIMITATION ON TREATY BENEFITS FOR CER-
TAIN DEDUCTIBLE PAYMENTS.— 
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‘‘(1) IN GENERAL.—In the case of any deduct-
ible related-party payment, any withholding tax im-
posed under chapter 3 (and any tax imposed under 
subpart A or B of this part) with respect to such 
payment may not be reduced under any treaty of the 
United States unless any such withholding tax would 
be reduced under a treaty of the United States if 
such payment were made directly to the foreign par-
ent corporation. 
‘‘(2) 
DEDUCTIBLE
RELATED-PARTY
PAY-
MENT.—For purposes of this subsection, the term 
‘deductible related-party payment’ means any pay-
ment made, directly or indirectly, by any person to 
any other person if the payment is allowable as a de-
duction under this chapter and both persons are 
members of the same foreign controlled group of en-
tities. 
‘‘(3) FOREIGN CONTROLLED GROUP OF ENTI-
TIES.—For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘foreign 
controlled group of entities’ means a controlled 
group of entities the common parent of which 
is a foreign corporation. 
‘‘(B) CONTROLLED GROUP OF ENTITIES.— 
The term ‘controlled group of entities’ means a 
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controlled group of corporations as defined in 
section 1563(a)(1), except that— 
‘‘(i) ‘more than 50 percent’ shall be 
substituted for ‘at least 80 percent’ each 
place it appears therein, and 
‘‘(ii) the determination shall be made 
without regard to subsections (a)(4) and 
(b)(2) of section 1563. 
A partnership or any other entity (other than a 
corporation) shall be treated as a member of a 
controlled group of entities if such entity is con-
trolled 
(within 
the 
meaning 
of 
section 
954(d)(3)) by members of such group (includ-
ing any entity treated as a member of such 
group by reason of this sentence). 
‘‘(4) FOREIGN
PARENT
CORPORATION.—For 
purposes of this subsection, the term ‘foreign parent 
corporation’ means, with respect to any deductible 
related-party payment, the common parent of the 
foreign controlled group of entities referred to in 
paragraph (3)(A). 
‘‘(5) REGULATIONS.—The Secretary may pre-
scribe such regulations or other guidance as are nec-
essary or appropriate to carry out the purposes of 
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this subsection, including regulations or other guid-
ance which provide for— 
‘‘(A) the treatment of two or more persons 
as members of a foreign controlled group of en-
tities if such persons would be the common par-
ent of such group if treated as one corporation, 
and 
‘‘(B) the treatment of any member of a 
foreign controlled group of entities as the com-
mon parent of such group if such treatment is 
appropriate taking into account the economic 
relationships among such entities.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to payments made after the date 
of the enactment of this Act. 
TITLE V—EXEMPT 
ORGANIZATIONS 
Subtitle A—Unrelated Business 
Income Tax 
SEC. 5001. CLARIFICATION OF UNRELATED BUSINESS IN-
COME TAX TREATMENT OF ENTITIES TREAT-
ED AS EXEMPT FROM TAXATION UNDER SEC-
TION 501(a). 
(a) IN GENERAL.—Section 511 is amended by adding 
at the end the following new subsection: 
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‘‘(d) ORGANIZATIONS AND TRUSTS EXEMPT FROM 
TAXATION
NOT
SOLELY
BY
REASON
OF
SECTION 
501(a).—For purposes of subsections (a)(2) and (b)(2), 
an organization or trust shall not fail to be treated as ex-
empt from taxation under this subtitle by reason of section 
501(a) solely because such organization is also so exempt, 
or excludes amounts from gross income, by reason of any 
other provision of this title.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 5002. EXCLUSION OF RESEARCH INCOME LIMITED TO 
PUBLICLY AVAILABLE RESEARCH. 
(a) IN GENERAL.—Section 512(b)(9) is amended by 
striking ‘‘from research’’ and inserting ‘‘from such re-
search’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
Subtitle B—Excise Taxes 
SEC. 5101. SIMPLIFICATION OF EXCISE TAX ON PRIVATE 
FOUNDATION INVESTMENT INCOME. 
(a) RATE REDUCTION.—Section 4940(a) is amended 
by striking ‘‘2 percent’’ and inserting ‘‘1.4 percent’’. 
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(b) REPEAL OF SPECIAL RULES FOR CERTAIN PRI-
VATE FOUNDATIONS.—Section 4940 is amended by strik-
ing subsection (e). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 5102. PRIVATE OPERATING FOUNDATION REQUIRE-
MENTS RELATING TO OPERATION OF ART 
MUSEUM. 
(a) IN GENERAL.—Section 4942(j) is amended by 
adding at the end the following new paragraph: 
‘‘(6) ORGANIZATION
OPERATING
ART
MU-
SEUM.—For purposes of this section, the term ‘oper-
ating foundation’ shall not include an organization 
which operates an art museum as a substantial ac-
tivity unless such museum is open during normal 
business hours to the public for at least 1,000 hours 
during the taxable year.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 5103. EXCISE TAX BASED ON INVESTMENT INCOME OF 
PRIVATE COLLEGES AND UNIVERSITIES. 
(a) IN GENERAL.—Chapter 42 is amended by adding 
at the end the following new subchapter: 
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‘‘Subchapter H—Excise Tax Based on Invest-
ment Income of Private Colleges and Uni-
versities 
‘‘Sec. 4969. Excise tax based on investment income of private colleges and uni-
versities. 
‘‘SEC. 4969. EXCISE TAX BASED ON INVESTMENT INCOME 
OF PRIVATE COLLEGES AND UNIVERSITIES. 
‘‘(a) TAX IMPOSED.—There is hereby imposed on 
each applicable educational institution for the taxable year 
a tax equal to 1.4 percent of the net investment income 
of such institution for the taxable year. 
‘‘(b) APPLICABLE EDUCATIONAL INSTITUTION.—For 
purposes of this subchapter— 
‘‘(1) IN GENERAL.—The term ‘applicable edu-
cational institution’ means an eligible educational in-
stitution (as defined in section 25A(e)(3))— 
‘‘(A) which has at least 500 students dur-
ing the preceding taxable year, 
‘‘(B) which is not described in the first 
sentence of section 511(a)(2)(B), and 
‘‘(C) the aggregate fair market value of 
the assets of which at the end of the preceding 
taxable year (other than those assets which are 
used directly in carrying out the institution’s 
exempt purpose) is at least $100,000 per stu-
dent of the institution. 
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‘‘(2) STUDENTS.—For purposes of paragraph 
(1), the number of students of an institution shall 
be based on the daily average number of full-time 
students attending such institution (with part-time 
students taken into account on a full-time student 
equivalent basis). 
‘‘(c) NET INVESTMENT INCOME.—For purposes of 
this section, net investment income shall be determined 
under rules similar to the rules of section 4940(c).’’. 
(b) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 42 is amended by adding at the end 
the following new item: 
‘‘SUBCHAPTER H—EXCISE TAX BASED ON INVESTMENT INCOME OF PRIVATE 
COLLEGES AND UNIVERSITIES’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
SEC. 5104. EXCEPTION FROM PRIVATE FOUNDATION EX-
CESS BUSINESS HOLDING TAX FOR INDE-
PENDENTLY-OPERATED 
PHILANTHROPIC 
BUSINESS HOLDINGS. 
(a) IN GENERAL.—Section 4943 is amended by add-
ing at the end the following new subsection: 
‘‘(g) EXCEPTION FOR CERTAIN HOLDINGS LIMITED 
TO INDEPENDENTLY-OPERATED PHILANTHROPIC BUSI-
NESS.— 
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‘‘(1) IN
GENERAL.—Subsection (a) shall not 
apply with respect to the holdings of a private foun-
dation in any business enterprise which for the tax-
able year meets— 
‘‘(A) the ownership requirements of para-
graph (2), 
‘‘(B) the all profits to charity distribution 
requirement of paragraph (3), and 
‘‘(C) the independent operation require-
ments of paragraph (4). 
‘‘(2) OWNERSHIP.—The ownership require-
ments of this paragraph are met if— 
‘‘(A) 100 percent of the voting stock in the 
business enterprise is held by the private foun-
dation at all times during the taxable year, and 
‘‘(B) all the private foundation’s ownership 
interests in the business enterprise were ac-
quired not by purchase. 
‘‘(3) ALL PROFITS TO CHARITY.— 
‘‘(A) IN
GENERAL.—The all profits to 
charity distribution requirement of this para-
graph is met if the business enterprise, not 
later than 120 days after the close of the tax-
able year, distributes an amount equal to its net 
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operating income for such taxable year to the 
private foundation. 
‘‘(B) NET OPERATING INCOME.—For pur-
poses of this paragraph, the net operating in-
come of any business enterprise for any taxable 
year is an amount equal to the gross income of 
the business enterprise for the taxable year, re-
duced by the sum of— 
‘‘(i) the deductions allowed by chapter 
1 for the taxable year which are directly 
connected with the production of such in-
come, 
‘‘(ii) the tax imposed by chapter 1 on 
the business enterprise for the taxable 
year, and 
‘‘(iii) an amount for a reasonable re-
serve for working capital and other busi-
ness needs of the business enterprise. 
‘‘(4) INDEPENDENT
OPERATION.—The inde-
pendent operation requirements of this paragraph 
are met if, at all times during the taxable year— 
‘‘(A) no substantial contributor (as defined 
in section 4958(c)(3)(C)) to the private founda-
tion, or family member of such a contributor 
(determined under section 4958(f)(4)) is a di-
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rector, officer, trustee, manager, employee, or 
contractor of the business enterprise (or an in-
dividual having powers or responsibilities simi-
lar to any of the foregoing), 
‘‘(B) at least a majority of the board of di-
rectors of the private foundation are not— 
‘‘(i) also directors or officers of the 
business enterprise, or 
‘‘(ii) members of the family (deter-
mined under section 4958(f)(4)) of a sub-
stantial contributor (as defined in section 
4958(c)(3)(C)) to the private foundation, 
and 
‘‘(C) there is no loan outstanding from the 
business enterprise to a substantial contributor 
(as so defined) to the private foundation or a 
family member of such contributor (as so deter-
mined). 
‘‘(5) CERTAIN DEEMED PRIVATE FOUNDATIONS 
EXCLUDED.—This subsection shall not apply to— 
‘‘(A) any fund or organization treated as a 
private foundation for purposes of this section 
by reason of subsection (e) or (f), 
‘‘(B) any trust described in section 
4947(a)(1) (relating to charitable trusts), and 
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‘‘(C) any trust described in section 
4947(a)(2) (relating to split-interest trusts).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2017. 
Subtitle C—Requirements for 
Organizations Exempt From Tax 
SEC. 5201. CHURCHES PERMITTED TO MAKE STATEMENTS 
RELATING TO POLITICAL CAMPAIGN IN ORDI-
NARY COURSE OF RELIGIOUS SERVICES AND 
ACTIVITIES. 
(a) IN GENERAL.—Section 501 is amended by adding 
at the end the following new subsection: 
‘‘(s) SPECIAL RULE RELATING TO POLITICAL CAM-
PAIGN STATEMENTS OF CHURCHES, INTEGRATED AUXIL-
IARIES, ETC.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(c)(3) and sections 170(c)(2), 2055, 2106, 2522, 
and 4955, an organization described in section 
508(c)(1)(A) shall not fail to be treated as organized 
and operated exclusively for a religious purpose, nor 
shall it be deemed to have participated in, or inter-
vened in any political campaign on behalf of (or in 
opposition to) any candidate for public office, solely 
because of the content of any homily, sermon, teach-
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ing, dialectic, or other presentation made during re-
ligious services or gatherings, but only if the prepa-
ration and presentation of such content— 
‘‘(A) is in the ordinary course of the orga-
nization’s regular and customary activities in 
carrying out its exempt purpose, and 
‘‘(B) results in the organization incurring 
not more than de minimis incremental ex-
penses.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
SEC. 5202. ADDITIONAL REPORTING REQUIREMENTS FOR 
DONOR ADVISED FUND SPONSORING ORGA-
NIZATIONS. 
(a) IN GENERAL.—Section 6033(k) is amended by 
striking ‘‘and’’ at the end of paragraph (2), by striking 
the period at the end of paragraph (3), and by adding 
at the end the following new paragraphs: 
‘‘(4) indicate the average amount of grants 
made from such funds during such taxable year (ex-
pressed as a percentage of the value of assets held 
in such funds at the beginning of such taxable year), 
and 
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‘‘(5) indicate whether the organization has a 
policy with respect to donor advised funds (as so de-
fined) for frequency and minimum level of distribu-
tions. 
Such organization shall include with such return a copy 
of any policy described in paragraph (5).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply for returns filed for taxable years 
beginning after December 31, 2017. 
Æ 
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