Title: An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.
Policy area: Taxation

Summary:
Tax Cuts and Jobs Act
This bill amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses.
With respect to individuals, the bill:
For businesses, the bill:
The bill also repeals or modifies several additional credits and deductions for individuals and businesses.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1 Introduced in House (IH)]

<DOC>






115th CONGRESS
  1st Session
                                 H. R. 1

 To provide for reconciliation pursuant to title II of the concurrent 
             resolution on the budget for fiscal year 2018.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            November 2, 2017

Mr. Brady of Texas (for himself, Mr. Ryan of Wisconsin, Mr. Sam Johnson 
    of Texas, Mr. Nunes, Mr. Tiberi, Mr. Reichert, Mr. Roskam, Mr. 
 Buchanan, Mr. Smith of Nebraska, Ms. Jenkins of Kansas, Mr. Paulsen, 
  Mr. Marchant, Mrs. Black, Mr. Reed, Mr. Kelly of Pennsylvania, Mr. 
Renacci, Mr. Meehan, Mrs. Noem, Mr. Holding, Mr. Smith of Missouri, Mr. 
 Rice of South Carolina, Mr. Schweikert, Mrs. Walorski, Mr. Curbelo of 
  Florida, and Mr. Bishop of Michigan) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To provide for reconciliation pursuant to title II of the concurrent 
             resolution on the budget for fiscal year 2018.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Tax Cuts and Jobs 
Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
                  TITLE I--TAX REFORM FOR INDIVIDUALS

Subtitle A--Simplification and Reform of Rates, Standard Deduction, and 
                               Exemptions

Sec. 1001. Reduction and simplification of individual income tax rates.
Sec. 1002. Enhancement of standard deduction.
Sec. 1003. Repeal of deduction for personal exemptions.
Sec. 1004. Maximum rate on business income of individuals.
Sec. 1005. Conforming amendments related to simplification of 
                            individual income tax rates.
  Subtitle B--Simplification and Reform of Family and Individual Tax 
                                Credits

Sec. 1101. Enhancement of child tax credit and new family tax credit.
Sec. 1102. Repeal of nonrefundable credits.
Sec. 1103. Refundable credit program integrity.
     Subtitle C--Simplification and Reform of Education Incentives

Sec. 1201. American opportunity tax credit.
Sec. 1202. Consolidation of education savings rules.
Sec. 1203. Reforms to discharge of certain student loan indebtedness.
Sec. 1204. Repeal of other provisions relating to education.
          Subtitle D--Simplification and Reform of Deductions

Sec. 1301. Repeal of overall limitation on itemized deductions.
Sec. 1302. Mortgage interest.
Sec. 1303. Repeal of deduction for certain taxes not paid or accrued in 
                            a trade or business.
Sec. 1304. Repeal of deduction for personal casualty losses.
Sec. 1305. Limitation on wagering losses.
Sec. 1306. Charitable contributions.
Sec. 1307. Repeal of deduction for tax preparation expenses.
Sec. 1308. Repeal of medical expense deduction.
Sec. 1309. Repeal of deduction for alimony payments.
Sec. 1310. Repeal of deduction for moving expenses.
Sec. 1311. Termination of deduction and exclusions for contributions to 
                            medical savings accounts.
Sec. 1312. Denial of deduction for expenses attributable to the trade 
                            or business of being an employee.
    Subtitle E--Simplification and Reform of Exclusions and Taxable 
                              Compensation

Sec. 1401. Limitation on exclusion for employer-provided housing.
Sec. 1402. Exclusion of gain from sale of a principal residence.
Sec. 1403. Repeal of exclusion, etc., for employee achievement awards.
Sec. 1404. Repeal of exclusion for dependent care assistance programs.
Sec. 1405. Repeal of exclusion for qualified moving expense 
                            reimbursement.
Sec. 1406. Repeal of exclusion for adoption assistance programs.
 Subtitle F--Simplification and Reform of Savings, Pensions, Retirement

Sec. 1501. Repeal of special rule permitting recharacterization of Roth 
                            IRA contributions as traditional IRA 
                            contributions.
Sec. 1502. Reduction in minimum age for allowable in-service 
                            distributions.
Sec. 1503. Modification of rules governing hardship distributions.
Sec. 1504. Modification of rules relating to hardship withdrawals from 
                            cash or deferred arrangements.
Sec. 1505. Extended rollover period for the rollover of plan loan 
                            offset amounts in certain cases.
Sec. 1506. Modification of nondiscrimination rules to protect older, 
                            longer service participants.
    Subtitle G--Estate, Gift, and Generation-skipping Transfer Taxes

Sec. 1601. Increase in credit against estate, gift, and generation-
                            skipping transfer tax.
Sec. 1602. Repeal of estate and generation-skipping transfer taxes.
                TITLE II--ALTERNATIVE MINIMUM TAX REPEAL

Sec. 2001. Repeal of alternative minimum tax.
                     TITLE III--BUSINESS TAX REFORM

                         Subtitle A--Tax Rates

Sec. 3001. Reduction in corporate tax rate.
                       Subtitle B--Cost Recovery

Sec. 3101. Increased expensing.
                   Subtitle C--Small Business Reforms

Sec. 3201. Expansion of section 179 expensing.
Sec. 3202. Small business accounting method reform and simplification.
Sec. 3203. Small business exception from limitation on deduction of 
                            business interest.
  Subtitle D--Reform of Business-related Exclusions, Deductions, etc.

Sec. 3301. Interest.
Sec. 3302. Modification of net operating loss deduction.
Sec. 3303. Like-kind exchanges of real property.
Sec. 3304. Revision of treatment of contributions to capital.
Sec. 3305. Repeal of deduction for local lobbying expenses.
Sec. 3306. Repeal of deduction for income attributable to domestic 
                            production activities.
Sec. 3307. Entertainment, etc. expenses.
Sec. 3308. Unrelated business taxable income increased by amount of 
                            certain fringe benefit expenses for which 
                            deduction is disallowed.
Sec. 3309. Limitation on deduction for FDIC premiums.
Sec. 3310. Repeal of rollover of publicly traded securities gain into 
                            specialized small business investment 
                            companies.
Sec. 3311. Certain self-created property not treated as a capital 
                            asset.
Sec. 3312. Repeal of special rule for sale or exchange of patents.
Sec. 3313. Repeal of technical termination of partnerships.
                 Subtitle E--Reform of Business Credits

Sec. 3401. Repeal of credit for clinical testing expenses for certain 
                            drugs for rare diseases or conditions.
Sec. 3402. Repeal of employer-provided child care credit.
Sec. 3403. Repeal of rehabilitation credit.
Sec. 3404. Repeal of work opportunity tax credit.
Sec. 3405. Repeal of deduction for certain unused business credits.
Sec. 3406. Termination of new markets tax credit.
Sec. 3407. Repeal of credit for expenditures to provide access to 
                            disabled individuals.
Sec. 3408. Modification of credit for portion of employer social 
                            security taxes paid with respect to 
                            employee tips.
                       Subtitle F--Energy Credits

Sec. 3501. Modifications to credit for electricity produced from 
                            certain renewable resources.
Sec. 3502. Modification of the energy investment tax credit.
Sec. 3503. Extension and phaseout of residential energy efficient 
                            property.
Sec. 3504. Repeal of enhanced oil recovery credit.
Sec. 3505. Repeal of credit for producing oil and gas from marginal 
                            wells.
Sec. 3506. Modifications of credit for production from advanced nuclear 
                            power facilities.
                        Subtitle G--Bond Reforms

Sec. 3601. Termination of private activity bonds.
Sec. 3602. Repeal of advance refunding bonds.
Sec. 3603. Repeal of tax credit bonds.
Sec. 3604. No tax exempt bonds for professional stadiums.
                         Subtitle H--Insurance

Sec. 3701. Net operating losses of life insurance companies.
Sec. 3702. Repeal of small life insurance company deduction.
Sec. 3703. Computation of life insurance tax reserves.
Sec. 3704. Adjustment for change in computing reserves.
Sec. 3705. Modification of rules for life insurance proration for 
                            purposes of determining the dividends 
                            received deduction.
Sec. 3706. Repeal of special rule for distributions to shareholders 
                            from pre-1984 policyholders surplus 
                            account.
Sec. 3707. Modification of proration rules for property and casualty 
                            insurance companies.
Sec. 3708. Modification of discounting rules for property and casualty 
                            insurance companies.
Sec. 3709. Repeal of special estimated tax payments.
Sec. 3710. Capitalization of certain policy acquisition expenses.
                        Subtitle I--Compensation

Sec. 3801. Nonqualified deferred compensation.
Sec. 3802. Modification of limitation on excessive employee 
                            remuneration.
Sec. 3803. Excise tax on excess tax-exempt organization executive 
                            compensation.
        TITLE IV--TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS

    Subtitle A--Establishment of Participation Exemption System for 
                       Taxation of Foreign Income

Sec. 4001. Deduction for foreign-source portion of dividends received 
                            by domestic corporations from specified 10-
                            percent owned foreign corporations.
Sec. 4002. Application of participation exemption to investments in 
                            United States property.
Sec. 4003. Limitation on losses with respect to specified 10-percent 
                            owned foreign corporations.
Sec. 4004. Treatment of deferred foreign income upon transition to 
                            participation exemption system of taxation.
     Subtitle B--Modifications Related to Foreign Tax Credit System

Sec. 4101. Repeal of section 902 indirect foreign tax credits; 
                            determination of section 960 credit on 
                            current year basis.
Sec. 4102. Source of income from sales of inventory determined solely 
                            on basis of production activities.
            Subtitle C--Modification of Subpart F Provisions

Sec. 4201. Repeal of inclusion based on withdrawal of previously 
                            excluded subpart F income from qualified 
                            investment.
Sec. 4202. Repeal of treatment of foreign base company oil related 
                            income as subpart F income.
Sec. 4203. Inflation adjustment of de minimis exception for foreign 
                            base company income.
Sec. 4204. Look-thru rule for related controlled foreign corporations 
                            made permanent.
Sec. 4205. Modification of stock attribution rules for determining 
                            status as a controlled foreign corporation.
Sec. 4206. Elimination of requirement that corporation must be 
                            controlled for 30 days before subpart F 
                            inclusions apply.
                 Subtitle D--Prevention of Base Erosion

Sec. 4301. Current year inclusion by United States shareholders with 
                            foreign high returns.
Sec. 4302. Limitation on deduction of interest by domestic corporations 
                            which are members of an international 
                            financial reporting group.
Sec. 4303. Excise tax on certain payments from domestic corporations to 
                            related foreign corporations; election to 
                            treat such payments as effectively 
                            connected income.
   Subtitle E--Provisions Related to Possessions of the United States

Sec. 4401. Extension of deduction allowable with respect to income 
                            attributable to domestic production 
                            activities in Puerto Rico.
Sec. 4402. Extension of temporary increase in limit on cover over of 
                            rum excise taxes to Puerto Rico and the 
                            Virgin Islands.
Sec. 4403. Extension of American Samoa economic development credit.
                Subtitle F--Other International Reforms

Sec. 4501. Restriction on insurance business exception to passive 
                            foreign investment company rules.
Sec. 4502. Limitation on treaty benefits for certain deductible 
                            payments.
                     TITLE V--EXEMPT ORGANIZATIONS

               Subtitle A--Unrelated Business Income Tax

Sec. 5001. Clarification of unrelated business income tax treatment of 
                            entities treated as exempt from taxation 
                            under section 501(a).
Sec. 5002. Exclusion of research income limited to publicly available 
                            research.
                        Subtitle B--Excise Taxes

Sec. 5101. Simplification of excise tax on private foundation 
                            investment income.
Sec. 5102. Private operating foundation requirements relating to 
                            operation of art museum.
Sec. 5103. Excise tax based on investment income of private colleges 
                            and universities.
Sec. 5104. Exception from private foundation excess business holding 
                            tax for independently-operated 
                            philanthropic business holdings.
       Subtitle C--Requirements for Organizations Exempt From Tax

Sec. 5201. Churches permitted to make statements relating to political 
                            campaign in ordinary course of religious 
                            services and activities.
Sec. 5202. Additional reporting requirements for donor advised fund 
                            sponsoring organizations.

                  TITLE I--TAX REFORM FOR INDIVIDUALS

Subtitle A--Simplification and Reform of Rates, Standard Deduction, and 
                               Exemptions

SEC. 1001. REDUCTION AND SIMPLIFICATION OF INDIVIDUAL INCOME TAX RATES.

    (a) In General.--Section 1 is amended by striking subsection (i) 
and by striking all that precedes subsection (h) and inserting the 
following:

``SEC. 1. TAX IMPOSED.

    ``(a) In General.--There is hereby imposed on the income of every 
individual a tax equal to the sum of--
            ``(1) 12 percent bracket.--12 percent of so much of the 
        taxable income as does not exceed the 25-percent bracket 
        threshold amount,
            ``(2) 25 percent bracket.--25 percent of so much of the 
        taxable income as exceeds the 25-percent bracket threshold 
        amount but does not exceed the 35-percent bracket threshold 
        amount, plus
            ``(3) 35 percent bracket.--35 percent of so much of taxable 
        income as exceeds the 35-percent bracket threshold amount but 
        does not exceed the 39.6 percent bracket threshold amount.
            ``(4) 39.6 percent bracket.--39.6 percent of so much of 
        taxable income as exceeds the 39.6-percent bracket threshold 
        amount.
    ``(b) Bracket Threshold Amounts.--For purposes of this section--
            ``(1) 25-percent bracket threshold amount.--The term `25-
        percent bracket threshold amount' means--
                    ``(A) in the case of a joint return or surviving 
                spouse, $90,000,
                    ``(B) in the case of an individual who is the head 
                of a household (as defined in section 2(b)), $67,500,
                    ``(C) in the case of any other individual (other 
                than an estate or trust), an amount equal to \1/2\ of 
                the amount in effect for the taxable year under 
                subparagraph (A), and
                    ``(D) in the case of an estate or trust, $2,550.
            ``(2) 35-percent bracket threshold amount.--The term `35-
        percent bracket threshold amount' means--
                    ``(A) in the case of a joint return or surviving 
                spouse, $260,000,
                    ``(B) in the case of a married individual filing a 
                separate return, an amount equal to \1/2\ of the amount 
                in effect for the taxable year under subparagraph (A),
                    ``(C) in the case of any other individual (other 
                than an estate or trust), $200,000, and
                    ``(D) in the case of an estate or trust, $9,150.
            ``(3) 39-percent bracket threshold amount.--The term `39.6-
        percent bracket threshold amount' means--
                    ``(A) in the case of a joint return or surviving 
                spouse, $1,000,000,
                    ``(B) in the case of any other individual (other 
                than an estate or trust), an amount equal to \1/2\ of 
                the amount in effect for the taxable year under 
                subparagraph (A), and
                    ``(C) in the case of an estate or trust, $12,500.
    ``(c) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2018, each dollar amount in subsection (b) 
        (other than any amount determined by reference to such a dollar 
        amount) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under this subsection for the calendar year in which 
                the taxable year begins by substituting `2017' for 
                `2016' in paragraph (2)(A)(ii).
        If any increase determined under the preceding sentence is not 
        a multiple of $100, such increase shall be rounded to the next 
        lowest multiple of $100.
            ``(2) Cost-of-living adjustment.--For purposes of this 
        subsection--
                    ``(A) In general.--The cost-of-living adjustment 
                for any calendar year is the percentage (if any) by 
                which--
                            ``(i) the C-CPI-U for the preceding 
                        calendar year, exceeds
                            ``(ii) the normalized CPI for calendar year 
                        2016.
                    ``(B) Special rule for adjustments with a base year 
                after 2016.--For purposes of any provision which 
                provides for the substitution of a year after 2016 for 
                `2016' in subparagraph (A)(ii), subparagraph (A) shall 
                be applied by substituting `C-CPI-U' for `normalized 
                CPI' in clause (ii).
            ``(3) Normalized cpi.--For purposes of this subsection, the 
        normalized CPI for any calendar year is the product of--
                    ``(A) the CPI for such calendar year, multiplied by
                    ``(B) the C-CPI-U transition multiple.
            ``(4) C-CPI-U transition multiple.--For purposes of this 
        subsection, the term `C-CPI-U transition multiple' means the 
        amount obtained by dividing--
                    ``(A) the C-CPI-U for calendar year 2016, by
                    ``(B) the CPI for calendar year 2016.
            ``(5) C-CPI-U.--For purposes of this subsection--
                    ``(A) In general.--The term `C-CPI-U' means the 
                Chained Consumer Price Index for All Urban Consumers 
                (as published by the Bureau of Labor Statistics of the 
                Department of Labor). The values of the Chained 
                Consumer Price Index for All Urban Consumers taken into 
                account for purposes of determining the cost-of-living 
                adjustment for any calendar year under this subsection 
                shall be the latest values so published as of the date 
                on which such Bureau publishes the initial value of the 
                Chained Consumer Price Index for All Urban Consumers 
                for the month of August for the preceding calendar 
                year.
                    ``(B) Determination for calendar year.--The C-CPI-U 
                for any calendar year is the average of the C-CPI-U as 
                of the close of the 12-month period ending on August 31 
                of such calendar year.
            ``(6) CPI.--For purposes of this subsection--
                    ``(A) In general.--The term `Consumer Price Index' 
                means the last Consumer Price Index for All Urban 
                Consumers published by the Department of Labor. For 
                purposes of the preceding sentence, the revision of the 
                Consumer Price Index which is most consistent with the 
                Consumer Price Index for calendar year 1986 shall be 
                used.
                    ``(B) Determination for calendar year.--The CPI for 
                any calendar year is the average of the Consumer Price 
                Index as of the close of the 12-month period ending on 
                August 31 of such calendar year.
            ``(7) Delay of adjustment based on c-cpi-u until 2023.--
        Notwithstanding any other provision of this title, any cost-of-
        living adjustment determined under this subsection (or by 
        reference to this subsection) shall be determined on the basis 
        of CPI rather than C-CPI-U with respect to periods before 
        January 1, 2023. Proper adjustments shall be made in the 
        application of this subsection to carry out the preceding 
        sentence.
    ``(d) Special Rules for Certain Children With Unearned Income.--
            ``(1) In general.--In the case of any child to whom this 
        subsection applies for any taxable year--
                    ``(A) the 25-percent bracket threshold amount shall 
                not be more than the taxable income of such child for 
                the taxable year reduced by the net unearned income of 
                such child, and
                    ``(B) the 35-percent bracket threshold amount shall 
                not be more than the sum of--
                            ``(i) the taxable income of such child for 
                        the taxable year reduced by the net unearned 
                        income of such child, plus
                            ``(ii) the dollar amount in effect under 
                        subsection (b)(2)(D) for the taxable year.
                    ``(C) the 39.6-percent bracket threshold amount 
                shall not be more than the sum of--
                            ``(i) the taxable income of such child for 
                        the taxable year reduced by the net unearned 
                        income of such child, plus
                            ``(ii) the dollar amount in effect under 
                        subsection (b)(3)(C).
            ``(2) Child to whom subsection applies.--This subsection 
        shall apply to any child for any taxable year if--
                    ``(A) such child--
                            ``(i) has not attained age 18 before the 
                        close of the taxable year, or
                            ``(ii) has attained age 18 before the close 
                        of the taxable year and is described in 
                        paragraph (3),
                    ``(B) either parent of such child is alive at the 
                close of the taxable year, and
                    ``(C) such child does not file a joint return for 
                the taxable year.
            ``(3) Certain children whose earned income does not exceed 
        one-half of individual's support.--A child is described in this 
        paragraph if--
                    ``(A) such child--
                            ``(i) has not attained age 19 before the 
                        close of the taxable year, or
                            ``(ii) is a student (within the meaning of 
                        section 7706(f)(2)) who has not attained age 24 
                        before the close of the taxable year, and
                    ``(B) such child's earned income (as defined in 
                section 911(d)(2)) for such taxable year does not 
                exceed one-half of the amount of the individual's 
                support (within the meaning of section 7706(c)(1)(D) 
                after the application of section 7706(f)(5) (without 
                regard to subparagraph (A) thereof)) for such taxable 
                year.
            ``(4) Net unearned income.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `net unearned income' 
                means the excess of--
                            ``(i) the portion of the adjusted gross 
                        income for the taxable year which is not 
                        attributable to earned income (as defined in 
                        section 911(d)(2)), over
                            ``(ii) the sum of--
                                    ``(I) the amount in effect for the 
                                taxable year under section 63(c)(2)(A) 
                                (relating to limitation on standard 
                                deduction in the case of certain 
                                dependents), plus
                                    ``(II) The greater of the amount 
                                described in subclause (I) or, if the 
                                child itemizes his deductions for the 
                                taxable year, the amount of the 
                                itemized deductions allowed by this 
                                chapter for the taxable year which are 
                                directly connected with the production 
                                of the portion of adjusted gross income 
                                referred to in clause (i).
                    ``(B) Limitation based on taxable income.--The 
                amount of the net unearned income for any taxable year 
                shall not exceed the individual's taxable income for 
                such taxable year.
    ``(e) Phaseout of 12-Percent Rate.--
            ``(1) In general.--The amount of tax imposed by this 
        section (determined without regard to this subsection) shall be 
        increased by 6 percent of the excess (if any) of--
                    ``(A) adjusted gross income, over
                    ``(B) the applicable dollar amount.
            ``(2) Limitation.--The increase determined under paragraph 
        (1) with respect to any taxpayer for any taxable year shall not 
        exceed 27.6 percent of the lesser of--
                    ``(A) the taxpayer's taxable income for such 
                taxable year, or
                    ``(B) the 25-percent bracket threshold amount in 
                effect with respect to the taxpayer for such taxable 
                year.
            ``(3) Applicable dollar amount.--For purposes of this 
        subsection, the term `applicable dollar amount' means--
                    ``(A) in the case of a joint return or a surviving 
                spouse, $1,200,000, and
                    ``(B) in the case of any other individual, 
                $1,000,000.
            ``(4) Estates and trusts.--Paragraph (1) shall not apply in 
        the case of an estate or trust.''.
    (b) Application of Current Income Tax Brackets to Capital Gains 
Brackets.--
            (1) In general.--
                    (A) 0-percent capital gains bracket.--Section 
                1(h)(1) is amended by striking ``which would (without 
                regard to this paragraph) be taxed at a rate below 25 
                percent'' in subparagraph (B)(i) and inserting ``below 
                the 15-percent rate threshold''.
                    (B) 15-percent capital gains bracket.--Section 
                1(h)(1)(C)(ii)(I) is amended by striking ``which would 
                (without regard to this paragraph) be taxed at a rate 
                below 39.6 percent'' and inserting ``below the 20-
                percent rate threshold''.
            (2) Rate thresholds defined.--Section 1(h) is amended by 
        adding at the end the following new paragraph:
            ``(12) Rate thresholds defined.--For purposes of this 
        subsection--
                    ``(A) 15-percent rate threshold.--The 15-percent 
                rate threshold shall be--
                            ``(i) in the case of a joint return or 
                        surviving spouse, $77,200 (\1/2\ such amount in 
                        the case of a married individual filing a 
                        separate return),
                            ``(ii) in the case of an individual who is 
                        the head of a household (as defined in section 
                        2(b)), $51,700,
                            ``(iii) in the case of any other individual 
                        (other than an estate or trust), an amount 
                        equal to \1/2\ of the amount in effect for the 
                        taxable year under clause (i), and
                            ``(iv) in the case of an estate or trust, 
                        $2,600.
                    ``(B) 20-percent rate threshold.--The 20-percent 
                rate threshold shall be--
                            ``(i) in the case of a joint return or 
                        surviving spouse, $479,000 (\1/2\ such amount 
                        in the case of a married individual filing a 
                        separate return),
                            ``(ii) in the case of an individual who is 
                        the head of a household (as defined in section 
                        2(b)), $452,400,
                            ``(iii) in the case of any other individual 
                        (other than an estate or trust), $425,800, and
                            ``(iv) in the case of an estate or trust, 
                        $12,700.
                    ``(C) Inflation adjustment.--In the case of any 
                taxable year beginning after 2018, each of the dollar 
                amounts in subparagraphs (A) and (B) shall be increased 
                by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under subsection (c)(2)(A) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2017' 
                        for `calendar year 2016' in clause (ii) 
                        thereof.''.
    (c) Application of Section 15.--
            (1) In general.--Subsection (a) of section 15 is amended by 
        striking ``by this chapter'' and inserting ``by section 11 (or 
        by reference to any such rates)''.
            (2) Conforming amendments.--
                    (A) Section 15 is amended by striking subsections 
                (d) and (f) and by redesignating subsection (e) as 
                subsection (d).
                    (B) Section 15(d), as redesignated by subparagraph 
                (A), is amended by striking ``section 1 or 11(b)'' and 
                inserting ``section 11(b)''.
                    (C) Section 6013(c) is amended by striking 
                ``sections 15, 443, and 7851(a)(1)(A)'' and inserting 
                ``sections 443 and 7851(a)(1)(A)''.
            (3) Application to this act.--Section 15 of the Internal 
        Revenue Code of 1986 shall not apply to any change in a rate of 
        tax imposed by chapter 1 of such Code which occurs by reason of 
        any amendment made by this Act (other than the amendments made 
        by section 3001).
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2017.
            (2) Subsection (c).--The amendments made by subsection (c) 
        shall take effect on the date of the enactment of this Act.

SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION.

    (a) Increase in Standard Deduction.--Section 63(c) is amended to 
read as follows:
    ``(c) Standard Deduction.--For purposes of this subtitle--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `standard deduction' means--
                    ``(A) $24,400, in the case of a joint return (or a 
                surviving spouse (as defined in section 2(a)),
                    ``(B) three-quarters of the amount in effect under 
                subparagraph (A) for the taxable year, in the case of 
                an unmarried individual with at least one qualifying 
                child (within the meaning of section 7706), and
                    ``(C) one-half of the amount in effect under 
                subparagraph (A) for the taxable year, in any other 
                case.
            ``(2) Limitation on standard deduction in the case of 
        certain dependents.--In the case of an individual who is a 
        dependent of another taxpayer for a taxable year beginning in 
        the calendar year in which the individual's taxable year 
        begins, the standard deduction applicable to such individual 
        for such individual's taxable year shall not exceed the greater 
        of--
                    ``(A) $500, or
                    ``(B) the sum of $250 and such individual's earned 
                income (within the means of section 32).
            ``(3) Certain individuals, etc., not eligible for standard 
        deduction.--In the case of--
                    ``(A) a married individual filing a separate return 
                where either spouse itemizes deductions,
                    ``(B) a nonresident alien individual,
                    ``(C) an individual making a return under section 
                443(a)(1) for a period of less than 12 months on 
                account of a change in his annual accounting period, or
                    ``(D) an estate or trust, common trust fund, or 
                partnership,
        the standard deduction shall be zero.
            ``(4) Unmarried individual.--For purposes of this section, 
        the term `unmarried individual' means any individual who--
                    ``(A) is not married as of the close of the taxable 
                year (as determined by applying section 7703),
                    ``(B) is not a surviving spouse (as defined in 
                section 2(a)) for the taxable year, and
                    ``(C) is not a dependent of another taxpayer for a 
                taxable year beginning in the calendar year in which 
                the individual's taxable year begins.
            ``(5) Inflation adjustments.--
                    ``(A) Standard deduction amount.--In the case of 
                any taxable year beginning after 2019, the dollar 
                amount in paragraph (1)(A) shall be increased by an 
                amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(c)(2)(A) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2018' 
                        for `calendar year 2016' in clause (ii) 
                        thereof.
                    ``(B) Limitation amount in case of certain 
                dependents.--In the case of any taxable year beginning 
                after 2017, each of the dollar amounts in paragraph (2) 
                shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii)(I) in the case of the dollar amount 
                        in paragraph (2)(A), under section 1(c)(2)(A) 
                        for the calendar year in which the taxable year 
                        begins determined by substituting `calendar 
                        year 1987' for `calendar year 2016' in clause 
                        (ii) thereof, and
                            ``(II) in the case of the dollar amount in 
                        paragraph (2)(B), under section 1(c)(2)(A) for 
                        the calendar year in which the taxable year 
                        begins determined by substituting `calendar 
                        year 1997' for `calendar year 2016' in clause 
                        (ii) thereof.
        If any increase determined under this paragraph is not a 
        multiple of $100, such increase shall be rounded to the next 
        lowest multiple of $100.''.
    (b) Conforming Amendments.--
            (1) Section 63(b) is amended by striking ``, minus--'' and 
        all that follows and inserting ``minus the standard 
        deduction''.
            (2) Section 63 is amended by striking subsections (f) and 
        (g).
            (3) Section 1398(c) is amended--
                    (A) by striking ``Basic'' in the heading thereof,
                    (B) by striking ``Basic standard'' in the heading 
                of paragraph (3) and inserting ``Standard'', and
                    (C) by striking ``basic'' in paragraph (3).
            (4) Section 3402(m)(3) is amended by striking ``(including 
        the additional standard deduction under section 63(c)(3) for 
        the aged and blind)''.
            (5) Section 6014(b)(4) is amended by striking ``section 
        63(c)(5)'' and inserting ``section 63(c)(2)''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 1003. REPEAL OF DEDUCTION FOR PERSONAL EXEMPTIONS.

    (a) In General.--Part V of subchapter B of chapter 1 is hereby 
repealed.
    (b) Definition of Dependent Retained.--Section 152, prior to repeal 
by subsection (a), is hereby redesignated as section 7706 and moved to 
the end of chapter 79.
    (c) Application to Estates and Trusts.--Subsection (b) of section 
642 is amended--
            (1) by striking paragraph (2)(C),
            (2) by striking paragraph (3), and
            (3) by striking ``Deduction for Personal Exemption'' in the 
        heading thereof and inserting ``Basic Deduction''.
    (d) Application to Nonresident Aliens.--Section 873(b) is amended 
by striking paragraph (3).
    (e) Modification of Wage Withholding Rules.--
            (1) In general.--Section 3402(a) is amended by striking 
        paragraph (2)
            (2) Conforming amendment.--Section 3402(a) is amended--
                    (A) by redesignating subparagraph (A) and (B) of 
                paragraph (1) as paragraphs (1) and (2) and moving such 
                redesignated paragraphs 2 ems to the left, and
                    (B) by striking all that precedes ``otherwise 
                provided in this section'' and inserting the following:
    ``(a) Requirement of Withholding.--Except as''.
            (3) Number of exemptions.--Section 3402(f)(1) is amended--
                    (A) in subparagraph (A), by striking ``an 
                individual described in section 151(d)(2)'' and 
                inserting ``a dependent of any other taxpayer'', and
                    (B) in subparagraph (C), by striking ``with respect 
                to whom, on the basis of facts existing at the 
                beginning of such day, there may reasonably be expected 
                to be allowable an exemption under section 151(c)'' and 
                inserting ``who, on the basis of facts existing at the 
                beginning of such day, is reasonably expected to be a 
                dependent of the employee''.
    (f) Modification of Return Requirement.--
            (1) In general.--Paragraph (1) of section 6012(a) is 
        amended to read as follows:
            ``(1) Every individual who has gross income for the taxable 
        year, except that a return shall not be required of--
                    ``(A) an individual who is not married (determined 
                by applying section 7703) and who has gross income for 
                the taxable year which does not exceed the standard 
                deduction applicable to such individual for such 
                taxable year under section 63, or
                    ``(B) an individual entitled to make a joint return 
                if--
                            ``(i) the gross income of such individual, 
                        when combined with the gross income of such 
                        individual's spouse, for the taxable year does 
                        not exceed the standard deduction which would 
                        be applicable to the taxpayer for such taxable 
                        year under section 63 if such individual and 
                        such individual's spouse made a joint return,
                            ``(ii) such individual and such 
                        individual's spouse have the same household as 
                        their home at the close of the taxable year,
                            ``(iii) such individual's spouse does not 
                        make a separate return, and
                            ``(iv) neither such individual nor such 
                        individual's spouse is an individual described 
                        in section 63(c)(2) who has income (other than 
                        earned income) in excess of the amount in 
                        effect under section 63(c)(2)(A).''.
            (2) Bankruptcy estates.--Paragraph (8) of section 6012(a) 
        is amended by striking ``the sum of the exemption amount plus 
        the basic standard deduction under section 63(c)(2)(D)'' and 
        inserting ``the standard deduction in effect under section 
        63(c)(1)(B)''.
    (g) Conforming Amendments.--
            (1) Section 2(a)(1)(B) is amended by striking ``a 
        dependent'' and all that follows through ``section 151'' and 
        inserting ``a dependent who (within the meaning of section 
        7706, determined without regard to subsections (b)(1), (b)(2) 
        and (d)(1)(B) thereof) is a son, stepson, daughter, or 
        stepdaughter of the taxpayer''.
            (2) Section 36B(b)(2)(A) is amended by striking ``section 
        152'' and inserting ``section 7706''.
            (3) Section 36B(b)(3)(B) is amended by striking ``unless a 
        deduction is allowed under section 151 for the taxable year 
        with respect to a dependent'' in the flush matter at the end 
        and inserting ``unless the taxpayer has a dependent for the 
        taxable year''.
            (4) Section 36B(c)(1)(D) is amended by striking ``with 
        respect to whom a deduction under section 151 is allowable to 
        another taxpayer'' and inserting ``who is a dependent of 
        another taxpayer''.
            (5) Section 36B(d)(1) is amended by striking ``equal to the 
        number of individuals for whom the taxpayer is allowed a 
        deduction under section 151 (relating to allowance of deduction 
        for personal exemptions) for the taxable year'' and inserting 
        ``the sum of 1 (2 in the case of a joint return) plus the 
        number of the taxpayer's dependents for the taxable year''.
            (6) Section 36B(e)(1) is amended by striking ``1 or more 
        individuals for whom a taxpayer is allowed a deduction under 
        section 151 (relating to allowance of deduction for personal 
        exemptions) for the taxable year (including the taxpayer or his 
        spouse)'' and inserting ``1 or more of the taxpayer, the 
        taxpayer's spouse, or any dependent of the taxpayer''.
            (7) Section 42(i)(3)(D)(ii)(I) is amended--
                    (A) by striking ``section 152'' and inserting 
                ``section 7706'', and
                    (B) by striking the period at the end and inserting 
                a comma.
            (8) Section 72(t)(2)(D)(i)(III) is amended by striking 
        ``section 152'' and inserting ``section 7706''.
            (9) Section 72(t)(7)(A)(iii) is amended by striking 
        ``section 152(f)(1)'' and inserting ``section 7706(f)(1)''.
            (10) Section 105(b) is amended--
                    (A) by striking ``as defined in section 152'' and 
                inserting ``as defined in section 7706'',
                    (B) by striking ``section 152(f)(1)'' and inserting 
                ``section 7706(f)(1)'' and
                    (C) by striking ``section 152(e)'' and inserting 
                ``section 7706(e)''.
            (11) Section 105(c)(1) is amended by striking ``section 
        152'' and inserting ``section 7706''.
            (12) Section 125(e)(1)(D) is amended by striking ``section 
        152'' and inserting ``section 7706''.
            (13) Section 132(h)(2)(B) is amended--
                    (A) by striking ``section 152(f)(1)'' and inserting 
                ``section 7706(f)(1)'', and
                    (B) by striking ``section 152(e)'' and inserting 
                ``section 7706(e)''.
            (14) Section 139D(c)(5) is amended by striking ``section 
        152'' and inserting ``section 7706''.
            (15) Section 162(l)(1)(D) is amended by striking ``section 
        152(f)(1)'' and inserting ``section 7706(f)(1)''.
            (16) Section 170(g)(1) is amended by striking ``section 
        152'' and inserting ``section 7706''.
            (17) Section 170(g)(3) is amended by striking ``section 
        152(d)(2)'' and inserting ``section 7706(d)(2)''.
            (18) Section 172(d) is amended by striking paragraph (3).
            (19) Section 220(b)(6) is amended by striking ``with 
        respect to whom a deduction under section 151 is allowable to'' 
        and inserting ``who is a dependent of''.
            (20) Section 220(d)(2)(A) is amended by striking ``section 
        152'' and inserting ``section 7706''.
            (21) Section 223(b)(6) is amended by striking ``with 
        respect to whom a deduction under section 151 is allowable to'' 
        and inserting ``who is a dependent of''.
            (22) Section 223(d)(2)(A) is amended by striking ``section 
        152'' and inserting ``section 7706''.
            (23) Section 401(h) is amended by striking ``section 
        152(f)(1)'' in the last sentence and inserting ``section 
        7706(f)(1)''.
            (24) Section 402(l)(4)(D) is amended by striking ``section 
        152'' and inserting ``section 7706''.
            (25) Section 409A(a)(2)(B)(ii)(I) is amended by striking 
        ``section 152(a)'' and inserting ``section 7706(a)''.
            (26) Section 501(c)(9) is amended by striking ``section 
        152(f)(1)'' and inserting ``section 7706(f)(1)''.
            (27) Section 529(e)(2)(B) is amended by striking ``section 
        152(d)(2)'' and inserting ``section 7706(d)(2)''.
            (28) Section 703(a)(2) is amended by striking subparagraph 
        (A) and by redesignating subparagraphs (B) through (F) as 
        subparagraphs (A) through (E), respectively.
            (29) Section 874 is amended by striking subsection (b) and 
        by redesignating subsection (c) as subsection (b).
            (30) Section 891 is amended by striking ``under section 151 
        and''.
            (31) Section 904(b) is amended by striking paragraph (1).
            (32) Section 931(b)(1) is amended by striking ``(other than 
        the deduction under section 151, relating to personal 
        exemptions)''.
            (33) Section 933 is amended--
                    (A) by striking ``(other than the deduction under 
                section 151, relating to personal exemptions)'' in 
                paragraph (1), and
                    (B) by striking ``(other than the deduction for 
                personal exemptions under section 151)'' in paragraph 
                (2).
            (34) Section 1212(b)(2)(B)(ii) is amended to read as 
        follows:
                            ``(ii) in the case of an estate or trust, 
                        the deduction allowed for such year under 
                        section 642(b).''.
            (35) Section 1361(c)(1)(C) is amended by striking ``section 
        152(f)(1)(C)'' and inserting ``section 7706(f)(1)(C)''.
            (36) Section 1402(a) is amended by striking paragraph (7).
            (37) Section 2032A(c)(7)(D) is amended by striking 
        ``section 152(f)(2)'' and inserting ``section 7706(f)(2)''.
            (38) Section 3402(m)(1) is amended by striking ``other than 
        the deductions referred to in section 151 and''.
            (39) Section 3402(r)(2) is amended by striking ``the sum 
        of--'' and all that follows and inserting ``the standard 
        deduction in effect under section 63(c)(1)(B).''.
            (40) Section 5000A(b)(3)(A) is amended by striking 
        ``section 152'' and inserting ``section 7706''.
            (41) Section 5000A(c)(4)(A) is amended by striking ``the 
        number of individuals for whom the taxpayer is allowed a 
        deduction under section 151 (relating to allowance of deduction 
        for personal exemptions) for the taxable year'' and inserting 
        ``the sum of 1 (2 in the case of a joint return) plus the 
        number of the taxpayer's dependents for the taxable year''.
            (42) Section 6013(b)(3)(A) is amended--
                    (A) by striking ``had less than the exemption 
                amount of gross income'' in clause (ii) and inserting 
                ``had no gross income'',
                    (B) by striking ``had gross income of the exemption 
                amount or more'' in clause (iii) and inserting ``had 
                any gross income'', and
                    (C) by striking the flush language following clause 
                (iii).
            (43) Section 6014(b)(4), as amended by the preceding 
        provisions of this Act, is amended by striking ``where the 
        taxpayer itemizes his deductions or''.
            (44) Section 6103(l)(21)(A)(iii) is amended to read as 
        follows:
                            ``(iii) the number of the taxpayer's 
                        dependents,''.
            (45) Section 6213(g)(2) is amended by striking subparagraph 
        (H).
            (46) Section 6334(d)(2) is amended to read as follows:
            ``(2) Exempt amount.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `exempt amount' means an amount equal to--
                            ``(i) the standard deduction, divided by
                            ``(ii) 52.
                    ``(B) Verified statement.--Unless the taxpayer 
                submits to the Secretary a written and properly 
                verified statement specifying the facts necessary to 
                determine the proper amount under subparagraph (A), 
                subparagraph (A) shall be applied as if the taxpayer 
                were a married individual filing a separate return with 
                no dependents.''.
            (47) Section 7702B(f)(2)(C)(iii) is amended by striking 
        ``section 152(d)(2)'' and inserting ``section 7706(d)(2)''.
            (48) Section 7703(a) is amended by striking ``part V of 
        subchapter B of chapter 1 and''.
            (49) Section 7703(b)(1) is amended by striking ``section 
        152(f)(1)'' and all that follows and inserting ``section 
        7706(f)(1),''.
            (50) Section 7706(a), as redesignated by this section, is 
        amended by striking ``this subtitle'' and inserting ``subtitle 
        A''.
            (51)(A) Section 7706(d)(1)(B), as redesignated by this 
        section, is amended by striking ``the exemption amount (as 
        defined in section 151(d))'' and inserting ``$4,150''.
            (B) Section 7706(d), as redesignated by this section, is 
        amended by adding at the end the following new paragraph:
            ``(6) Inflation adjustment.--In the case of any calendar 
        year beginning after 2018, the $4,150 amount in paragraph 
        (1)(B) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for such calendar year, 
                determined by substituting `calendar year 2017' for 
                `calendar year 2016' in clause (ii) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $100, such increase shall be rounded to the next 
        lowest multiple of $100.''.
            (52) The table of sections for chapter 79 is amended by 
        adding at the end the following new item:

``Sec. 7706. Dependent defined.''.
    (h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1004. MAXIMUM RATE ON BUSINESS INCOME OF INDIVIDUALS.

    (a) In General.--Part I of subchapter A of chapter 1 is amended by 
inserting after section 3 the following new section:

``SEC. 4. 25 PERCENT MAXIMUM RATE ON BUSINESS INCOME OF INDIVIDUALS.

    ``(a) Reduction in Tax To Achieve 25 Percent Maximum Rate.--The tax 
imposed by section 1 shall be reduced by the sum of--
            ``(1) 10 percent of the lesser of--
                    ``(A) qualified business income, or
                    ``(B) the excess (if any) of--
                            ``(i) taxable income reduced by net capital 
                        gain (as defined in section 1(h)(11)(A)), over
                            ``(ii) the maximum dollar amount for the 
                        25-percent rate bracket which applies to the 
                        taxpayer under section 1 for the taxable year, 
                        and
            ``(2) 4.6 percent of the excess (if any) of--
                    ``(A) the lesser of--
                            ``(i) qualified business income, or
                            ``(ii) the excess (if any) determined under 
                        paragraph (1)(B), over
                    ``(B) the excess of--
                            ``(i) the maximum dollar amount for the 35-
                        percent rate bracket which applies to the 
                        taxpayer under section 1 for the taxable year, 
                        over
                            ``(ii) the maximum dollar amount for the 
                        25-percent rate bracket which applies to the 
                        taxpayer under section 1 for the taxable year.
    ``(b) Qualified Business Income.--For purposes of this section, the 
term `qualified business income' means the excess (if any) of--
            ``(1) the sum of--
                    ``(A) 100 percent of any net business income 
                derived from any passive business activity, plus
                    ``(B) the capital percentage of any net business 
                income derived from any active business activity, over
            ``(2) the sum of--
                    ``(A) 100 percent of any net business loss derived 
                from any passive business activity,
                    ``(B) except as provided in subsection (e)(3)(A), 
                30 percent of any net business loss derived from any 
                active business activity, plus
                    ``(C) any carryover business loss determined for 
                the preceding taxable year.
    ``(c) Determination of Net Business Income or Loss.--For purposes 
of this section--
            ``(1) In general.--Net business income or loss shall be 
        determined with respect to any business activity by 
        appropriately netting items of income, gain, deduction, and 
        loss with respect to such business activity.
            ``(2) Wages, etc.--Any wages (as defined in section 3401), 
        payments described in subsection (a) or (c) of section 707, or 
        directors' fees received by the taxpayer which are properly 
        attributable to any business activity shall be taken into 
        account under paragraph (1) as an item of income with respect 
        to such business activity.
            ``(3) Exception for certain investment-related items.--
        There shall not be taken into account under paragraph (1)--
                    ``(A) any item of short-term capital gain, short-
                term capital loss, long-term capital gain, or long-term 
                capital loss,
                    ``(B) any dividend, income equivalent to a 
                dividend, or payment in lieu of dividends described in 
                section 954(c)(1)(G),
                    ``(C) any interest income other than interest 
                income which is properly allocable to a trade or 
                business,
                    ``(D) any item of gain or loss described in 
                subparagraph (C) or (D) of section 954(c)(1) (applied 
                by substituting `business activity' for `controlled 
                foreign corporation'),
                    ``(E) any item of income, gain, deduction, or loss 
                taken into account under section 954(c)(1)(F) 
                (determined without regard to clause (ii) thereof and 
                other than items attributable to notional principal 
                contracts entered into in transactions qualifying under 
                section 1221(a)(7)),
                    ``(F) any amount received from an annuity which is 
                not received in connection with the trade or business 
                of the business activity, and
                    ``(G) any item of deduction or loss properly 
                allocable to an amount described in any of the 
                preceding subparagraphs.
            ``(4) Application of restrictions applicable to determining 
        taxable income.--Net business income or loss shall be 
        appropriately adjusted so as only to take into account any 
        amount of income, gain, deduction, or loss to the extent such 
        amount affects the determination of taxable income for the 
        taxable year.
            ``(5) Carryover business loss.--For purposes of subsection 
        (b)(2)(C), the carryover business loss determined for any 
        taxable year is the excess (if any) of the sum described in 
        subsection (b)(2) over the sum described in subsection (b)(1) 
        for such taxable year.
    ``(d) Passive and Active Business Activity.--For purposes of this 
section--
            ``(1) Passive business activity.--The term `passive 
        business activity' means any passive activity as defined in 
        section 469(c) determined without regard to paragraphs (3) and 
        (6)(B) thereof.
            ``(2) Active business activity.--The term `active business 
        activity' means any business activity which is not a passive 
        business activity.
            ``(3) Business activity.--The term `business activity' 
        means any activity (within the meaning of section 469) which 
        involves the conduct of any trade or business.
    ``(e) Capital Percentage.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        section, the term `capital percentage' means 30 percent.
            ``(2) Increased percentage for capital-intensive business 
        activities.--In the case of a taxpayer who elects the 
        application of this paragraph with respect to any active 
        business activity (other than a specified service activity), 
        the capital percentage shall be equal to the applicable 
        percentage (as defined in subsection (f)) for each taxable year 
        with respect to which such election applies. Any election made 
        under this paragraph shall apply to the taxable year for which 
        such election is made and each of the 4 subsequent taxable 
        years. Such election shall be made not later than the due date 
        (including extensions) for the return of tax for the taxable 
        year for which such election is made, and, once made, may not 
        be revoked.
            ``(3) Treatment of specified service activities.--
                    ``(A) In general.--In the case of any active 
                business activity which is a specified service 
                activity--
                            ``(i) the capital percentage shall be 0 
                        percent, and
                            ``(ii) subsection (b)(2)(B) shall be 
                        applied by substituting `0 percent' for `30 
                        percent'.
                    ``(B) Exception for capital-intensive specified 
                service activities.--If--
                            ``(i) the taxpayer elects the application 
                        of this subparagraph with respect to such 
                        activity for any taxable year, and
                            ``(ii) the applicable percentage (as 
                        defined in subsection (f)) with respect to such 
                        activity for such taxable year is at least 10 
                        percent,
                then subparagraph (A) shall not apply and the capital 
                percentage with respect to such activity shall be equal 
                to such applicable percentage.
                    ``(C) Specified service activity.--The term 
                `specified service activity' means any activity 
                involving the performance of services described in 
                section 1202(e)(3)(A), including investing, trading, or 
                dealing in securities (as defined in section 
                475(c)(2)), partnership interests, or commodities (as 
                defined in section 475(e)(2)).
            ``(4) Reduction in capital percentage in certain cases.--
        The capital percentage (determined after the application of 
        paragraphs (2) and (3)) with respect to any active business 
        activity shall not exceed 1 minus the quotient (not greater 
        than 1) of--
                    ``(A) any amounts described in subsection (c)(2) 
                which are taken into account in determining the net 
                business income derived from such activity, divided by
                    ``(B) such net business income.
    ``(f) Applicable Percentage.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means, 
        with respect to any active business activity for any taxable 
        year, the quotient (not greater than 1) of--
                    ``(A) the specified return on capital with respect 
                to such activity for such taxable year, divided by
                    ``(B) the taxpayer's net business income derived 
                from such activity for such taxable year.
            ``(2) Specified return on capital.--The term `specified 
        return on capital' means, with respect to any active business 
        activity referred to in paragraph (1), the excess of--
                    ``(A) the product of--
                            ``(i) the deemed rate of return for the 
                        taxable year, multiplied by
                            ``(ii) the asset balance with respect to 
                        such activity for such taxable year, over
                    ``(B) an amount equal to the interest which is paid 
                or accrued, and for which a deduction is allowed under 
                this chapter, with respect to such activity for such 
                taxable year.
            ``(3) Deemed rate of return.--The term `deemed rate of 
        return' means, with respect to any taxable year, the Federal 
        short-term rate (determined under section 1274(d) for the month 
        in which or with which such taxable year ends) plus 7 
        percentage points.
            ``(4) Asset balance.--
                    ``(A) In general.--The asset balance with respect 
                to any active business activity referred to in 
                paragraph (1) for any taxable year equals the 
                taxpayer's adjusted basis of the property used in 
                connection with such activity as of the end of the 
                taxable year (determined without regard to sections 
                168(k) and 179).
                    ``(B) Application to activities carried on through 
                partnerships and s corporations.--In the case of any 
                active business activity carried on through a 
                partnership or S corporation, the taxpayer shall take 
                into account such taxpayer's distributive or pro rata 
                share (as the case may be) of the asset balance with 
                respect to such activity as determined under this 
                paragraph with respect to the partnership's or S 
                corporation's adjusted basis of the property used in 
                connection with such activity by the partnership or S 
                corporation.
    ``(g) Regulations.--The Secretary may issue such regulations or 
other guidance as may be necessary or appropriate to carry out the 
purposes of this section, including regulations or other guidance--
            ``(1) which ensures that no amount is taken into account 
        under subsection (f)(4) with respect to more than one activity, 
        and
            ``(2) which treats all specified service activities of the 
        taxpayer as a single business activity for purposes of this 
        section to the extent that such activities would be treated as 
        a single employer under subsection (a) or (b) of section 52 or 
        subsection (m) or (o) of section 414.
    ``(h) References.--Any reference in this title to section 1 shall 
be treated as including a reference to this section unless the context 
of such reference clearly indicates otherwise.''.
    (b) 25 Percent Rate for Certain Dividends of Real Estate Investment 
Trusts and Cooperatives.--Section 1(h) is amended by adding at the end 
the following new paragraph:
            ``(12) 25 percent rate for certain dividends of real estate 
        investment trusts and cooperatives.--
                    ``(A) In general.--For purposes of this subsection, 
                net capital gain (as defined in paragraph (11)) and 
                unrecaptured section 1250 gain (as defined in paragraph 
                (6)) shall each be increased by specified dividend 
                income.
                    ``(B) Specified dividend income.--For purposes of 
                this paragraph, the term `specified dividend income' 
                means--
                            ``(i) in the case of any dividend received 
                        from a real estate investment trust, the 
                        portion of such dividend which is neither--
                                    ``(I) a capital gain dividend (as 
                                defined in section 852(b)(3)), nor
                                    ``(II) taken into account in 
                                determining qualified dividend income 
                                (as defined in paragraph (11)), and
                            ``(ii) any dividend which is includible in 
                        gross income and which is received from an 
                        organization or corporation described in 
                        section 501(c)(12) or 1381(a).''.
    (c) Net Earnings From Self-Employment.--
            (1) Application to labor percentage of distributive and pro 
        rata shares.--Section 1402(a) is amended--
                    (A) by striking ``the gross income derived by an 
                individual from any trade or business carried on by 
                such individual, less the deductions allowed by this 
                subtitle which are attributable to such trade or 
                business, plus his distributive share (whether or not 
                distributed) of income or loss described in section 
                702(a)(8) from any trade or business carried on by a 
                partnership of which he is a member'' and inserting 
                ``the labor percentage of the gross income derived by 
                an individual from any trade or business carried on by 
                such individual, less the labor percentage of the 
                deductions allowed by this subtitle which are 
                attributable to such trade or business, plus the labor 
                percentage of such individual's distributive share 
                (whether or not distributed) of income or loss 
                described in section 702(a)(8) from any trade or 
                business carried on by a partnership of which such 
                individual is a member, plus the labor percentage of 
                such individual's pro rata share (whether or not 
                distributed) of nonseparately computed income or loss 
                (as defined in section 1366(a)(2)) from any trade or 
                business carried on by an S corporation in which such 
                individual is a shareholder'', and
                    (B) by striking ``and such distributive share of 
                partnership ordinary income or loss'' and inserting ``, 
                such distributive share of partnership ordinary income 
                or loss, and such pro rata share of S corporation 
                nonseparately computed income or loss''.
            (2) Labor percentage.--Section 1402 is amended by adding at 
        the end the following new subsection:
    ``(m) Labor Percentage.--
            ``(1) In general.--For purposes of this section, the term 
        `labor percentage' means, with respect to any income or loss, 
        the excess (expressed as a percentage) of 1 minus the capital 
        percentage (expressed as a decimal) with respect to such income 
        or loss.
            ``(2) Capital percentage.--For purposes of paragraph (1), 
        the term `capital percentage' means the percentage which 
        applied with respect to such income or loss under section 
        4(b)(1)(B).
            ``(3) Adjustment for s corporation wages.--For purposes of 
        this subsection, proper adjustment shall be made for wages paid 
        to the taxpayer with respect to any trade or business carried 
        on by an S corporation in which the taxpayer is a 
        shareholder.''.
            (3) Application to rental income.--Section 1402(a) is 
        amended by striking paragraph (1).
            (4) Application to limited partners.--Section 1402(a) is 
        amended by striking paragraph (13).
    (d) Clerical Amendment.--The table of sections for part I of 
subchapter A of chapter 1 is amended by inserting after the item 
relating to section 3 the following new item:

``Sec. 4. 25 percent maximum rate on business income of individuals.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
    (f) Transition Rule.--In the case of any taxable year which 
includes December 31, 2017, the amendment made by subsection (a) shall 
apply with respect to such taxable year adjusted--
            (1) so as to apply with respect to the rates of tax in 
        effect under section 1 of the Internal Revenue Code of 1986 
        with respect to such taxable year (and so as to achieve a 25 
        percent effective rate of tax on the business income 
        (determined without regard to paragraph (2)) in the same manner 
        as such amendment applies to taxable years beginning after such 
        date with respect to the rates of tax in effect for such 
        years), and
            (2) by reducing the amount of the reduction in tax (as 
        otherwise determined under paragraph (1)) by the amount which 
        bears the same proportion to the amount of such reduction as 
        the number of days in the taxable year which are before January 
        1, 2018, bears to the number of days in the entire taxable 
        year.

SEC. 1005. CONFORMING AMENDMENTS RELATED TO SIMPLIFICATION OF 
              INDIVIDUAL INCOME TAX RATES.

    (a) Amendments Related to Modification of Inflation Adjustment.--
            (1) Section 36B(b)(3)(A)(ii)(II) is amended by striking 
        ``consumer price index'' and inserting ``C-CPI-U (as defined in 
        section 1(c))''.
            (2) Section 41(e)(5)(C) is amended to read as follows:
                    ``(C) Cost-of-living adjustment defined.--
                            ``(i) In general.--The cost-of-living 
                        adjustment for any calendar year is the cost-
                        of-living adjustment for such calendar year 
                        determined under section 1(c)(2)(A), by 
                        substituting `calendar year 1987' for `calendar 
                        year 2016' in clause (ii) thereof.
                            ``(ii) Special rule where base period ends 
                        in a calendar year other than 1983 or 1984.--If 
                        the base period of any taxpayer does not end in 
                        1983 or 1984, clause (i) shall be applied by 
                        substituting the calendar year in which such 
                        base period ends for 1987.''.
            (3) Section 42(e)(3)(D)(ii) is amended by striking 
        ``section 1(f)(3) for such calendar year by substituting 
        `calendar year 2008' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for such 
        calendar year by substituting `calendar year 2008' for 
        `calendar year 2016' in clause (ii) thereof''.
            (4) Section 42(h)(3)(H)(i)(II) is amended by striking 
        ``section 1(f)(3) for such calendar year by substituting 
        `calendar year 2001' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for such 
        calendar year by substituting `calendar year 2001' for 
        `calendar year 2016' in clause (ii) thereof''.
            (5) Section 45R(d)(3)(B)(ii) is amended by striking 
        ``section 1(f)(3) for the calendar year, determined by 
        substituting `calendar year 2012' for `calendar year 1992' in 
        subparagraph (B) thereof'' and inserting ```section 1(c)(2)(A) 
        for such calendar year, determined by substituting ``calendar 
        year 2012'' for ``calendar year 2016'' in clause (ii) 
        thereof'''.
            (6) Section 125(i)(2) is amended--
                    (A) by striking ``section 1(f)(3) for the calendar 
                year in which the taxable year begins by substituting 
                `calendar year 2012' for `calendar year 1992' in 
                subparagraph (B) thereof'' in subparagraph (B) and 
                inserting ``section 1(c)(2)(A) for the calendar year in 
                which the taxable year begins'', and
                    (B) by striking ``$50'' both places it appears in 
                the last sentence and inserting ``$100''.
            (7) Section 162(o)(3) is amended by inserting ``as in 
        effect before enactment of the Tax Cuts and Jobs Act'' after 
        ``section 1(f)(5)''.
            (8) Section 220(g)(2) is amended by striking ``section 
        1(f)(3) for the calendar year in which the taxable year begins 
        by substituting `calendar year 1997' for `calendar year 1992' 
        in subparagraph (B) thereof'' and inserting ``section 
        1(c)(2)(A) for the calendar year in which the taxable year 
        begins, determined by substituting `calendar year 1997' for 
        `calendar year 2016' in clause (ii) thereof''.
            (9) Section 223(g)(1) is amended by striking all that 
        follows subparagraph (A) and inserting the following:
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for the calendar year in which 
                the taxable year begins, determined--
                            ``(i) by substituting for `calendar year 
                        2016' in clause (ii) thereof--
                                    ``(I) except as provided in clause 
                                (ii), `calendar year 1997', and
                                    ``(II) in the case of each dollar 
                                amount in subsection (c)(2)(A), 
                                `calendar year 2003', and
                            ``(ii) by substituting `March 31' for 
                        `August 31' in paragraphs (5)(B) and (6)(B) of 
                        section 1(c).
                The Secretary shall publish the dollar amounts as 
                adjusted under this subsection for taxable years 
                beginning in any calendar year no later than June 1 of 
                the preceding calendar year.''.
            (10) Section 430(c)(7)(D)(vii)(II) is amended by striking 
        ``section 1(f)(3) for the calendar year, determined by 
        substituting `calendar year 2009' for `calendar year 1992' in 
        subparagraph (B) thereof'' and inserting ``section 1(c)(2)(A) 
        for the calendar year, determined by substituting `calendar 
        year 2009' for `calendar year 2016' in clause (ii) thereof''.
            (11) Section 512(d)(2)(B) is amended by striking ``section 
        1(f)(3) for the calendar year in which the taxable year begins, 
        by substituting `calendar year 1994' for `calendar year 1992' 
        in subparagraph (B) thereof''and inserting ``section 1(c)(2)(A) 
        for the calendar year in which the taxable year begins, 
        determined by substituting `calendar year 1994' for `calendar 
        year 2016' in clause (ii) thereof''.
            (12) Section 513(h)(2)(C)(ii) is amended by striking 
        ``section 1(f)(3) for the calendar year in which the taxable 
        year begins by substituting `calendar year 1987' for `calendar 
        year 1992' in subparagraph (B) thereof'' and inserting 
        ``section 1(c)(2)(A) for the calendar year in which the taxable 
        year begins, determined by substituting `calendar year 1987' 
        for `calendar year 2016' in clause (ii) thereof''.
            (13) Section 831(b)(2)(D)(ii) is amended by striking 
        ``section 1(f)(3) for such calendar year by substituting 
        `calendar year 2013' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for such 
        calendar year by substituting `calendar year 2013' for 
        `calendar year 2016' in clause (ii) thereof''.
            (14) Section 877A(a)(3)(B)(i)(II) is amended by striking 
        ``section 1(f)(3) for the calendar year in which the taxable 
        year begins, by substituting `calendar year 2007' for `calendar 
        year 1992' in subparagraph (B) thereof'' and inserting 
        ``section 1(c)(2)(A) for the calendar year in which the taxable 
        year begins, determined by substituting `calendar year 2007' 
        for `calendar year 2016' in clause (ii) thereof''.
            (15) Section 911(b)(2)(D)(ii)(II) is amended by striking 
        ``section 1(f)(3) for the calendar year in which the taxable 
        year begins, determined by substituting `2004' for `1992' in 
        subparagraph (B) thereof'' and inserting ``section 1(c)(2)(A) 
        for the calendar year in which the taxable year begins, 
        determined by substituting `calendar year 2004' for `calendar 
        year 2016' in clause (ii) thereof''.
            (16) Section 1274A(d)(2) is amended to read as follows:
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of any debt 
                instrument arising out of a sale or exchange during any 
                calendar year after 2018, each adjusted dollar amount 
                shall be increased by an amount equal to--
                            ``(i) such adjusted dollar amount, 
                        multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(c)(2)(A) for such 
                        calendar year, determined by substituting 
                        `calendar year 2017' for `calendar year 2016' 
                        in clause (ii) thereof.
                    ``(B) Adjusted dollar amounts.--For purposes of 
                this paragraph, the term `adjusted dollar amount' means 
                the dollar amounts in subsections (b) and (c), in each 
                case as in effect for calendar year 2018.
                    ``(C) Rounding.--Any increase under subparagraph 
                (A) shall be rounded to the nearest multiple of 
                $100.''.
            (17) Section 2010(c)(3)(B)(ii) is amended by striking 
        ``section 1(f)(3) for such calendar year by substituting 
        `calendar year 2010' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for such 
        calendar year, determined by substituting `calendar year 2010' 
        for `calendar year 2016' in clause (ii) thereof''.
            (18) Section 2032A(a)(3)(B) is amended by striking 
        ``section 1(f)(3) for such calendar year by substituting 
        `calendar year 1997' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for such 
        calendar year, determined by substituting `calendar year 1997' 
        for `calendar year 2016' in clause (ii) thereof''.
            (19) Section 2503(b)(2)(B) is amended by striking ``section 
        1(f)(3) for such calendar year by substituting `calendar year 
        1997' for `calendar year 1992' in subparagraph (B) thereof'' 
        and inserting ``section 1(c)(2)(A) for the calendar year, 
        determined by substituting `calendar year 1997' for `calendar 
        year 2016' in clause (ii) thereof''.
            (20) Section 4161(b)(2)(C)(i)(II) is amended by striking 
        ``section 1(f)(3) for such calendar year, determined by 
        substituting `2004' for `1992' in subparagraph (B) thereof'' 
        and inserting ``section 1(c)(2)(A) for such calendar year, 
        determined by substituting `calendar year 2004' for `calendar 
        year 2016' in clause (ii) thereof''.
            (21) Section 4261(e)(4)(A)(ii) is amended by striking 
        ``section 1(f)(3) for such calendar year by substituting the 
        year before the last nonindexed year for `calendar year 1992' 
        in subparagraph (B) thereof'' and inserting ``section 
        1(c)(2)(A) for such calendar year, determined by substituting 
        the year before the last nonindexed year for `calendar year 
        2016' in clause (ii) thereof''.
            (22) Section 4980I(b)(3)(C)(v)(II) is amended
                    (A) by striking ``section 1(f)(3)'' and inserting 
                ``section 1(c)(2)(A)'',
                    (B) by striking ``subparagraph (B)'' and inserting 
                ``clause (ii)'', and
                    (C) by striking ``1992'' and inserting ``2016''.
            (23) Section 5000A(c)(3)(D)(ii) is amended--
                    (A) by striking ``section 1(f)(3)'' and inserting 
                ``section 1(c)(2)(A)'',
                    (B) by striking ``subparagraph (B)'' and inserting 
                ``clause (ii)'', and
                    (C) by striking ``1992'' and inserting ``2016''.
            (24) Section 6039F(d) is amended by striking ``section 
        1(f)(3), except that subparagraph (B) thereof'' and inserting 
        ``section 1(c)(2)(A), except that clause (ii) thereof''.
            (25) Section 6323(i)(4)(B) is amended by striking ``section 
        1(f)(3) for the calendar year, determined by substituting 
        `calendar year 1996' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for the 
        calendar year, determined by substituting `calendar year 1996' 
        for `calendar year 2016' in clause (ii) thereof''.
            (26) Section 6334(g)(1)(B) is amended by striking ``section 
        1(f)(3) for such calendar year, by substituting `calendar year 
        1998' for `calendar year 1992' in subparagraph (B) thereof'' 
        and inserting ``section 1(c)(2)(A) for such calendar year, 
        determined by substituting `calendar year 1999' for `calendar 
        year 2016' in clause (ii) thereof''.
            (27) Section 6601(j)(3)(B) is amended by striking ``section 
        1(f)(3) for such calendar year by substituting `calendar year 
        1997' for `calendar year 1992' in subparagraph (B) thereof'' 
        and inserting ``section 1(c)(2)(A) for such calendar year by 
        substituting `calendar year 1997' for `calendar year 2016' in 
        clause (ii) thereof''.
            (28) Section 6651(i)(1) is amended by striking ``section 
        1(f)(3) determined by substituting `calendar year 2013' for 
        `calendar year 1992' in subparagraph (B) thereof'' and 
        inserting ``section 1(c)(2)(A) determined by substituting 
        `calendar year 2013' for `calendar year 2016' in clause (ii) 
        thereof''.
            (29) Section 6721(f)(1) is amended--
                    (A) by striking ``section 1(f)(3)'' and inserting 
                ``section 1(c)(2)(A)'',
                    (B) by striking ``subparagraph (B)'' and inserting 
                ``clause (ii)'', and
                    (C) by striking ``1992'' and inserting ``2016''.
            (30) Section 6722(f)(1) is amended--
                    (A) by striking ``section 1(f)(3)'' and inserting 
                ``section 1(c)(2)(A)'',
                    (B) by striking ``subparagraph (B)'' and inserting 
                ``clause (ii)'', and
                    (C) by striking ``1992'' and inserting ``2016''.
            (31) Section 6652(c)(7)(A) is amended by striking ``section 
        1(f)(3) determined by substituting `calendar year 2013' for 
        `calendar year 1992' in subparagraph (B) thereof'' and 
        inserting ``section 1(c)(2)(A) determined by substituting 
        `calendar year 2013' for `calendar year 2016' in clause (ii) 
        thereof''.
            (32) Section 6695(h)(1) is amended by striking ``section 
        1(f)(3) determined by substituting `calendar year 2013' for 
        `calendar year 1992' in subparagraph (B) thereof'' and 
        inserting ``section 1(c)(2)(A) determined by substituting 
        `calendar year 2013' for `calendar year 2016' in clause (ii) 
        thereof''.
            (33) Section 6698(e)(1) is amended by striking `` section 
        1(f)(3) determined by substituting `calendar year 2013' for 
        `calendar year 1992' in subparagraph (B) thereof'' and 
        inserting ``section 1(c)(2)(A) determined by substituting 
        `calendar year 2013' for `calendar year 2016' in clause (ii) 
        thereof''.
            (34) Section 6699(e)(1) is amended by striking ``section 
        1(f)(3) determined by substituting `calendar year 2013' for 
        `calendar year 1992' in subparagraph (B) thereof'' and 
        inserting ``section 1(c)(2)(A) determined by substituting 
        `calendar year 2013' for `calendar year 2016' in clause (ii) 
        thereof''.
            (35) Section 7345(f)(2) is amended by striking ``section 
        1(f)(3) for the calendar year, determined by substituting 
        `calendar year 2015' for `calendar year 1992' in subparagraph 
        (B) thereof'' and inserting ``section 1(c)(2)(A) for the 
        calendar year, determined by substituting `calendar year 2015' 
        for `calendar year 2016' in clause (ii) thereof''.
            (36) Section 7430(c)(1) is amended by striking ``section 
        1(f)(3) for such calendar year, by substituting `calendar year 
        1995' for `calendar year 1992' in subparagraph (B) thereof'' in 
        the flush text at the end and inserting ``section 1(c)(2)(A) 
        for such calendar year, determined by substituting `calendar 
        year 1995' for `calendar year 2016' in clause (ii) thereof''.
            (37) Section 7872(g)(5) is amended to read as follows:
            ``(5) Inflation adjustment.--
                    ``(A) In general.--In the case of any loan made 
                during any calendar year after 2018 to which paragraph 
                (1) applies, the adjusted dollar amount shall be 
                increased by an amount equal to--
                            ``(i) such adjusted dollar amount, 
                        multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(c)(2)(A) for such 
                        calendar year, determined by substituting 
                        `calendar year 2017' for `calendar year 2016' 
                        in clause (ii) thereof.
                    ``(B) Adjusted dollar amount.--For purposes of this 
                paragraph, the term `adjusted dollar amount' means the 
                dollar amount in paragraph (2) as in effect for 
                calendar year 2018.
                    ``(C) Rounding.--Any increase under subparagraph 
                (A) shall be rounded to the nearest multiple of 
                $100.''.
    (b) Other Conforming Amendments.--
            (1) Section 36B(b)(3)(B)(ii)(I)(aa) is amended to read as 
        follows:
                                            ``(aa) who is described in 
                                        section 1(b)(1)(B) and who does 
                                        not have any dependents for the 
                                        taxable year,''.
            (2) Section 486B(b)(1) is amended--
                    (A) by striking ``maximum rate in effect'' and 
                inserting ``highest rate specified'', and
                    (B) by striking ``section 1(e)'' and inserting 
                ``section 1''.
            (3) Section 511(b)(1) is amended by striking ``section 
        1(e)'' and inserting ``section 1''.
            (4) Section 641(a) is amended by striking ``section 1(e) 
        shall apply to the taxable income'' and inserting ``section 1 
        shall apply to the taxable income''.
            (5) Section 641(c)(2)(A) is amended to read as follows:
                    ``(A) Except to the extent provided in section 
                1(h), the rate of tax shall be treated as being the 
                highest rate of tax set forth in section 1(a).''.
            (6) Section 646(b) is amended to read as follows:
    ``(b) Taxation of Income of Trust.--Except as provided in 
subsection (f)(1)(B)(ii), there is hereby imposed on the taxable income 
of an electing Settlement Trust a tax at the rate specified in section 
1(a)(1). Such tax shall be in lieu of the income tax otherwise imposed 
by this chapter on such income.''.
            (7) Section 685(c) is amended by striking ``Section 1(e)'' 
        and inserting ``Section 1''.
            (8) Section 904(b)(3)(E)(ii)(I) is amended by striking 
        ``set forth in subsection (a), (b), (c), (d), or (e) of section 
        1 (whichever applies)'' and inserting ``the highest rate of tax 
        specified in section 1''.
            (9) Section 1398(c)(2) is amended by striking ``subsection 
        (d) of''.
            (10) Section 3402(p)(1)(B) is amended by striking ``any 
        percentage applicable to any of the 3 lowest income brackets in 
        the table under section 1(c),'' and inserting ``12 percent, 25 
        percent,''.
            (11) Section 3402(q)(1) is amended by striking ``the 
        product of third lowest rate of tax applicable under section 
        1(c) and'' and inserting ``25 percent of''.
            (12) Section 3402(r)(3) is amended by striking ``the amount 
        of tax which would be imposed by section 1(c) (determined 
        without regard to any rate of tax in excess of the fourth 
        lowest rate of tax applicable under section 1(c)) on an amount 
        of taxable income equal to'' and inserting ``an amount equal to 
        the product of 25 percent multiplied by''.
            (13) Section 3406(a)(1) is amended by striking ``the 
        product of the fourth lowest rate of tax applicable under 
        section 1(c) and'' and inserting ``25 percent of''.
            (14) Section 6103(e)(1)(A)(iii) is amended by striking 
        ``section 1(g) (as in effect on the day before the enactment of 
        theTax Cuts and Jobs Act)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

  Subtitle B--Simplification and Reform of Family and Individual Tax 
                                Credits

SEC. 1101. ENHANCEMENT OF CHILD TAX CREDIT AND NEW FAMILY TAX CREDIT.

    (a) Increase in Credit Amount and Addition of Other Dependents.--
    (1) In General.--Section 24(a) is amended--
            (A) by striking ``qualifying child'' and inserting 
        ``dependent'',
            (B) by striking ``for which the taxpayer is allowed a 
        deduction under section 151'', and
            (C) by striking ``an amount equal to $1,000.'' and 
        inserting the following: ``an amount equal to--
            ``(1) in the case of a qualifying child, $1,600, and
            ``(2) for taxable years beginning before January 1, 2023, 
        in the case of the taxpayer (each spouse in the case of a joint 
        return) and any dependent to whom paragraph (1) does not apply, 
        $300.''.
    (2) Conforming Amendments.--
            (A) Section 24(c) is amended--
                    (i) by redesignating paragraphs (1) and (2) as 
                paragraphs (2) and (3), respectively,
                    (ii) by striking ``152(c)'' in paragraph (2) (as so 
                redesignated) and inserting ``7706(c)'',
                    (iii) by inserting before paragraph (2) (as so 
                redesignated) the following new paragraph:
            ``(1) Dependent.--
                    ``(A) In general.--The term `dependent' shall have 
                the meaning given such term by section 7706.
                    ``(B) Certain individuals not treated as 
                dependents.--In the case of an individual with respect 
                to whom a credit under this section is allowable to 
                another taxpayer for a taxable year beginning in the 
                calendar year in which the individual's taxable year 
                begins, the amount applicable to such individual under 
                subsection (a) for such individual's taxable year shall 
                be zero.'',
                    (iv) in paragraph (3) (as so redesignated)--
                            (I) by striking ``term `qualifying child''' 
                        and inserting ``terms `qualifying child' and 
                        `dependent''', and
                            (II) by striking ``152(b)(3)'' and 
                        inserting ``7706(b)(3)'', and
                    (v) in the heading by striking ``Qualifying'' and 
                inserting ``Dependent; Qualifying''
            (B) The heading for section 24 is amended by inserting 
        ``and family'' after ``child''.
            (C) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 is amended by striking the item 
        relating to section 24 and inserting the following new item:

``Sec. 24. Child and dependent tax credit.''.
    (b) Elimination of Marriage Penalty.--Section 24(b)(2) is amended--
    (1) by striking ``$110,000'' in subparagraph (A) and inserting 
``$230,000'',
    (2) by inserting ``and'' at the end of subparagraph (A),
    (3) by striking ``$75,000 in the case of an individual who is not 
married'' and all that follows through the period at the end and 
inserting ``one-half of the amount in effect under subparagraph (A) for 
the taxable year in the case of any other individual.''.
    (c) Credit Refundable up to $1,000 Per Child.--
    (1) In General.--Section 24(d)(1)(A) is amended by striking all 
that follows ``under this section'' and inserting the following: 
``determined--
                            ``(i) without regard to this subsection and 
                        the limitation under section 26(a),
                            ``(ii) without regard to subsection (a)(2), 
                        and
                            ``(iii) by substituting `$1,000' for 
                        `$1,600' in subsection (a)(1), or''.
    (2) Inflation Adjustment.--Section 24(d) is amended by inserting 
after paragraph (2) the following new paragraph:
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2017, the $1,000 amount 
        in paragraph (1)(A)(iii) shall be increased by an amount equal 
        to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment under section 
                1(c)(2)(A) for such calendar year.
        Any increase determined under the preceding sentence shall be 
        rounded to the next highest multiple of $100 and shall not 
        exceed the amount in effect under subsection (a)(2).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1102. REPEAL OF NONREFUNDABLE CREDITS.

    (a) Repeal of Section 22.--
            (1) In general.--Subpart A of part IV of subchapter A of 
        chapter 1 is amended by striking section 22 (and by striking 
        the item relating to such section in the table of sections for 
        such subpart).
            (2) Conforming amendment.--
                    (A) Section 86(f) is amended by striking paragraph 
                (1) and by redesignating paragraphs (2), (3), and (4) 
                as paragraphs (1), (2), and (3), respectively.
                    (B)(i) Subsections (c)(3)(B) and (d)(4)(A) of 
                section 7706, as redesignated by this Act, are each 
                amended by striking ``(as defined in section 
                22(e)(3)''.
                    (ii) Section 7706(f), as redesignated by this Act, 
                is amended by redesignating paragraph (7) as paragraph 
                (8) and by inserting after paragraph (6) the following 
                new paragraph:
            ``(7) Permanent and total disability defined.--An 
        individual is permanently and totally disabled if he is unable 
        to engage in any substantial gainful activity by reason of any 
        medically determinable physical or mental impairment which can 
        be expected to result in death or which has lasted or can be 
        expected to last for a continuous period of not less than 12 
        months. An individual shall not be considered to be permanently 
        and totally disabled unless he furnishes proof of the existence 
        thereof in such form and manner, and at such times, as the 
        Secretary may require.''.
                    (iii) Section 415(c)(3)(C)(i) is amended by 
                striking ``22(e)(3)'' and inserting ``7706(f)(7)''.
                    (iv) Section 422(c)(6) is amended by striking 
                ``22(e)(3)'' and inserting ``7706(f)(7)''.
    (b) Repeal of Section 23.--Subpart A of part IV of subchapter A of 
chapter 1 is amended by striking section 23 (and by striking the item 
relating to such section in the table of sections for such subpart).
    (c) Termination of Section 25.--Section 25, as amended by section 
3601, is amended by adding at the end the following new subsection:
    ``(k) Termination.--No credit shall be allowed under this section 
with respect to any mortgage credit certificate issued after December 
31, 2017.''.
    (d) Repeal of Section 30D.--
            (1) In general.--Subpart B of part IV of subchapter A of 
        chapter 1 is amended by striking section 30D (and by striking 
        the item relating to such section in the table of sections for 
        such subpart).
            (2) Conforming amendments.--
                    (A) Section 38(b) is amended by striking paragraph 
                (35).
                    (B) Section 1016(a) is amended by striking 
                paragraph (37).
                    (C) Section 6501(m) is amended by striking 
                ``30D(e)(4),''.
    (e) Effective Date.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to taxable 
        years beginning after December 31, 2017.
            (2) Subsection (c).--The amendment made by subsection (c) 
        shall apply to taxable years ending after December 31, 2017.
            (3) Subsection (d).--The amendments made by subsection (d) 
        shall apply to vehicles placed in service in taxable years 
        beginning after December 31, 2017.

SEC. 1103. REFUNDABLE CREDIT PROGRAM INTEGRITY.

    (a) Social Security Number Required To Claim the Refundable Portion 
of the Child Tax Credit.--
            (1) In general.--Section 24(d), as amended by the preceding 
        provisions of this Act, is amended by redesignating paragraph 
        (5) as paragraph (4) and by adding at the end the following new 
        paragraph:
            ``(5) Identification requirement.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any taxpayer for any taxable year unless the taxpayer 
                includes the taxpayer's social security number on the 
                return of tax for such taxable year.
                    ``(B) Joint returns.--In the case of a joint 
                return, the requirement of subparagraph (A) shall be 
                treated as met if the social security number of either 
                spouse is included on such return.
                    ``(C) Social security number.--For purposes of this 
                paragraph, the term `social security number' means a 
                social security number issued to an individual by the 
                Social Security Administration (but only if the social 
                security number is issued to a citizen of the United 
                States or pursuant to subclause (I) (or that portion of 
                subclause (III) that relates to subclause (I)) of 
                section 205(c)(2)(B)(i) of the Social Security Act).''.
            (2) Omissions treated as mathematical or clerical error.--
                    (A) In general.--Section 6213(g)(2)(I) is amended 
                to read as follows:
                    ``(I) an omission of a correct social security 
                number required under section 24(d)(5) (relating to 
                refundable portion of child tax credit), or a correct 
                TIN required under section 24(e) (relating to child tax 
                credit), to be included on a return,''.
            (3) Clerical amendment.--The heading for section 24(e) is 
        amended by striking ``Identification Requirements'' and 
        inserting ``General Identification Requirements''.
    (b) Social Security Number Must Be Provided.--
            (1) In general.--Section 25A(f)(1)(A), as amended by 
        section 1201 of this Act, is amended by striking ``taxpayer 
        identification number'' each place it appears and inserting 
        ``social security number''.
            (2) Omission treated as mathematical or clerical error.--
        Section 6213(g)(2)(J) is amended by striking ``TIN'' and 
        inserting ``social security number and employer identification 
        number''.
    (c) Individuals Prohibited From Engaging in Employment in United 
States Not Eligible for Earned Income Tax Credit.--Section 32(m) is 
amended--
            (1) by striking ``(other than:'' and all that follows 
        through ``of the Social Security Act)'', and
            (2) by inserting before the period at the end the 
        following: ``, but only if, in the case of subsection 
        (c)(1)(E), the social security number is issued to a citizen of 
        the United States or pursuant to subclause (I) (or that portion 
        of subclause (III) that relates to subclause (I)) of section 
        205(c)(2)(B)(i) of the Social Security Act''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

     Subtitle C--Simplification and Reform of Education Incentives

SEC. 1201. AMERICAN OPPORTUNITY TAX CREDIT.

    (a) In General.--Section 25A is amended to read as follows:

``SEC. 25A. AMERICAN OPPORTUNITY TAX CREDIT.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this chapter for the 
taxable year an amount equal to the sum of--
            ``(1) 100 percent of so much of the qualified tuition and 
        related expenses paid by the taxpayer during the taxable year 
        (for education furnished to any eligible student for whom an 
        election is in effect under this section for such taxable year 
        during any academic period beginning in such taxable year) as 
        does not exceed $2,000, plus
            ``(2) 25 percent of so much of such expenses so paid as 
        exceeds the dollar amount in effect under paragraph (1) but 
        does not exceed twice such dollar amount.
    ``(b) Portion of Credit Refundable.--40 percent of the credit 
allowable under subsection (a)(1) (determined without regard to this 
subsection and section 26(a) and after application of all other 
provisions of this section) shall be treated as a credit allowable 
under subpart C (and not under this part). The preceding sentence shall 
not apply to any taxpayer for any taxable year if such taxpayer is a 
child to whom section 1(d) applies for such taxable year.
    ``(c) Limitation Based on Modified Adjusted Gross Income.--
            ``(1) In general.--The amount allowable as a credit under 
        subsection (a) for any taxable year shall be reduced (but not 
        below zero) by an amount which bears the same ratio to the 
        amount so allowable (determined without regard to this 
        subsection and subsection (b) but after application of all 
        other provisions of this section) as--
                    ``(A) the excess of--
                            ``(i) the taxpayer's modified adjusted 
                        gross income for such taxable year, over
                            ``(ii) $80,000 (twice such amount in the 
                        case of a joint return), bears to
                    ``(B) $10,000 (twice such amount in the case of a 
                joint return).
            ``(2) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means the 
        adjusted gross income of the taxpayer for the taxable year 
        increased by any amount excluded from gross income under 
        section 911, 931, or 933.
    ``(d) Other Limitations.--
            ``(1) Credit allowed only for 5 taxable years.--An election 
        to have this section apply may not be made for any taxable year 
        if such an election (by the taxpayer or any other individual) 
        is in effect with respect to such student for any 5 prior 
        taxable years.
            ``(2) Credit allowed only for first 5 years of 
        postsecondary education.--
                    ``(A) In general.--No credit shall be allowed under 
                subsection (a) for a taxable year with respect to the 
                qualified tuition and related expenses of an eligible 
                student if the student has completed (before the 
                beginning of such taxable year) the first 5 years of 
                postsecondary education at an eligible educational 
                institution.
                    ``(B) Fifth year limitations.--In the case of an 
                eligible student with respect to whom an election has 
                been in effect for 4 preceding taxable years for 
                purposes of the fifth taxable year--
                            ``(i) the amount of the credit allowed 
                        under this section for the taxable year shall 
                        not exceed an amount equal to 50 percent of the 
                        credit otherwise determined with respect to 
                        such student under this section (without regard 
                        to this subparagraph), and
                            ``(ii) the amount of the credit determined 
                        under subsection (b) and allowable under 
                        subpart C shall not exceed an amount equal to 
                        40 percent of the amount determined with 
                        respect to such student under clause (i).
    ``(e) Definitions.--For purposes of this section--
            ``(1) Eligible student.--The term `eligible student' means, 
        with respect to any academic period, a student who--
                    ``(A) meets the requirements of section 484(a)(1) 
                of the Higher Education Act of 1965 (20 U.S.C. 
                1091(a)(1)), as in effect on August 5, 1997, and
                    ``(B) is carrying at least \1/2\ the normal full-
                time work load for the course of study the student is 
                pursuing.
            ``(2) Qualified tuition and related expenses.--
                    ``(A) In general.--The term `qualified tuition and 
                related expenses' means tuition, fees, and course 
                materials, required for enrollment or attendance of--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse, or
                            ``(iii) any dependent of the taxpayer,
                at an eligible educational institution for courses of 
                instruction of such individual at such institution.
                    ``(B) Exception for education involving sports, 
                etc.--Such term does not include expenses with respect 
                to any course or other education involving sports, 
                games, or hobbies, unless such course or other 
                education is part of the individual's degree program.
                    ``(C) Exception for nonacademic fees.--Such term 
                does not include student activity fees, athletic fees, 
                insurance expenses, or other expenses unrelated to an 
                individual's academic course of instruction.
            ``(3) Eligible educational institution.--The term `eligible 
        educational institution' means an institution--
                    ``(A) which is described in section 481 of the 
                Higher Education Act of 1965 (20 U.S.C. 1088), as in 
                effect on August 5, 1997, and
                    ``(B) which is eligible to participate in a program 
                under title IV of such Act.
    ``(f) Special Rules.--
            ``(1) Identification requirements.--
                    ``(A) Student.--No credit shall be allowed under 
                subsection (a) to a taxpayer with respect to the 
                qualified tuition and related expenses of an individual 
                unless the taxpayer includes the name and taxpayer 
                identification number of such individual on the return 
                of tax for the taxable year, and such taxpayer 
                identification number was issued on or before the due 
                date for filing such return.
                    ``(B) Taxpayer.--No credit shall be allowed under 
                this section if the identifying number of the taxpayer 
                was issued after the due date for filing the return for 
                the taxable year.
                    ``(C) Institution.--No credit shall be allowed 
                under this section unless the taxpayer includes the 
                employer identification number of any institution to 
                which qualified tuition and related expenses were paid 
                with respect to the individual.
            ``(2) Adjustment for certain scholarships, etc.--The amount 
        of qualified tuition and related expenses otherwise taken into 
        account under subsection (a) with respect to an individual for 
        an academic period shall be reduced (before the application of 
        subsection (c)) by the sum of any amounts paid for the benefit 
        of such individual which are allocable to such period as--
                    ``(A) a qualified scholarship which is excludable 
                from gross income under section 117,
                    ``(B) an educational assistance allowance under 
                chapter 30, 31, 32, 34, or 35 of title 38, United 
                States Code, or under chapter 1606 of title 10, United 
                States Code, and
                    ``(C) a payment (other than a gift, bequest, 
                devise, or inheritance within the meaning of section 
                102(a)) for such individual's educational expenses, or 
                attributable to such individual's enrollment at an 
                eligible educational institution, which is excludable 
                from gross income under any law of the United States.
            ``(3) Treatment of expenses paid by dependent.--If an 
        individual is a dependent of another taxpayer for a taxable 
        year beginning in the calendar year in which such individuals 
        taxable year begins--
                    ``(A) no credit shall be allowed under subsection 
                (a) to such individual for such individual's taxable 
                year, and
                    ``(B) qualified tuition and related expenses paid 
                by such individual during such individual's taxable 
                year shall be treated for purposes of this section as 
                paid by such other taxpayer.
            ``(4) Treatment of certain prepayments.--If qualified 
        tuition and related expenses are paid by the taxpayer during a 
        taxable year for an academic period which begins during the 
        first 3 months following such taxable year, such academic 
        period shall be treated for purposes of this section as 
        beginning during such taxable year.
            ``(5) Denial of double benefit.--No credit shall be allowed 
        under this section for any amount for which a deduction is 
        allowed under any other provision of this chapter.
            ``(6) No credit for married individuals filing separate 
        returns.--If the taxpayer is a married individual (within the 
        meaning of section 7703), this section shall apply only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(7) Nonresident aliens.--If the taxpayer is a nonresident 
        alien individual for any portion of the taxable year, this 
        section shall apply only if such individual is treated as a 
        resident alien of the United States for purposes of this 
        chapter by reason of an election under subsection (g) or (h) of 
        section 6013.
            ``(8) Restrictions on taxpayers who improperly claimed 
        credit in prior year.--
                    ``(A) Taxpayers making prior fraudulent or reckless 
                claims.--
                            ``(i) In general.--No credit shall be 
                        allowed under this section for any taxable year 
                        in the disallowance period.
                            ``(ii) Disallowance period.--For purposes 
                        of clause (i), the disallowance period is--
                                    ``(I) the period of 10 taxable 
                                years after the most recent taxable 
                                year for which there was a final 
                                determination that the taxpayer's claim 
                                of credit under this section was due to 
                                fraud, and
                                    ``(II) the period of 2 taxable 
                                years after the most recent taxable 
                                year for which there was a final 
                                determination that the taxpayer's claim 
                                of credit under this section was due to 
                                reckless or intentional disregard of 
                                rules and regulations (but not due to 
                                fraud).
                    ``(B) Taxpayers making improper prior claims.--In 
                the case of a taxpayer who is denied credit under this 
                section for any taxable year as a result of the 
                deficiency procedures under subchapter B of chapter 63, 
                no credit shall be allowed under this section for any 
                subsequent taxable year unless the taxpayer provides 
                such information as the Secretary may require to 
                demonstrate eligibility for such credit.
    ``(g) Inflation Adjustment.--
            ``(1) In general.--In the case of a taxable year beginning 
        after 2018, the $80,000 amount in subsection (c)(1)(A)(ii) 
        shall each be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2)(A) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2017' for `calendar year 2016' in clause 
                (ii) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $1,000, such amount shall be rounded 
        to the next lowest multiple of $1,000.
    ``(h) Regulations.--The Secretary may prescribe such regulations or 
other guidance as may be necessary or appropriate to carry out this 
section, including regulations providing for a recapture of the credit 
allowed under this section in cases where there is a refund in a 
subsequent taxable year of any amount which was taken into account in 
determining the amount of such credit.''.
    (b) Conforming Amendments.--
            (1) Section 72(t)(7)(B) is amended by striking ``section 
        25A(g)(2)'' and inserting ``section 25A(f)(2)''.
            (2) Section 529(c)(3)(B)(v)(I) is amended by striking 
        ``section 25A(g)(2)'' and inserting ``section 25A(f)(2)''.
            (3) Section 529(e)(3)(B)(i) is amended by striking 
        ``section 25A(b)(3)'' and inserting ``section 25A(d)''.
            (4) Section 530(d)(2)(C) is amended--
                    (A) by striking ``section 25A(g)(2)'' in clause 
                (i)(I) and inserting ``section 25A(f)(2)'', and
                    (B) by striking ``Hope and lifetime learning 
                credits'' in the heading and inserting ``American 
                opportunity tax credit''.
            (5) Section 530(d)(4)(B)(iii) is amended by striking 
        ``section 25A(g)(2)'' and inserting ``section 25A(d)(4)(B)''.
            (6) Section 6050S(e) is amended by striking ``subsection 
        (g)(2)'' and inserting ``subsection (f)(2)''.
            (7) Section 6211(b)(4)(A) is amended by striking 
        ``subsection (i)(6)'' and inserting ``subsection (b)''.
            (8) Section 6213(g)(2)(J) is amended by striking ``TIN 
        required under section 25A(g)(1)'' and inserting ``TIN, and 
        employer identification number, required under section 
        25A(f)(1)''.
            (9) Section 6213(g)(2)(Q) is amended to read as follows:
                    ``(Q) an omission of information required by 
                section 25A(f)(8)(B) or an entry on the return claiming 
                the credit determined under section 25A(a) for a 
                taxable year for which the credit is disallowed under 
                section 25A(f)(8)(A).''.
            (10) Section 1004(c) of division B of the American Recovery 
        and Reinvestment Tax Act of 2009 is amended--
                    (A) in paragraph (1)--
                            (i) by striking ``section 25A(i)(6)'' each 
                        place it appears and inserting ``section 
                        25A(b)'', and
                            (ii) by striking ``with respect to taxable 
                        years beginning after 2008 and before 2018'' 
                        each place it appears and inserting ``with 
                        respect to each taxable year'',
                    (B) in paragraph (2), by striking ``Section 
                25A(i)(6)'' and inserting ``Section 25A(b)'', and
                    (C) in paragraph (3)(C), by striking ``subsection 
                (i)(6)'' and inserting ``subsection (b)''.
            (11) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 is amended by striking the item 
        relating to section 25A and inserting the following new item:

``Sec. 25A. American opportunity tax credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1202. CONSOLIDATION OF EDUCATION SAVINGS RULES.

    (a) No New Contributions to Coverdell Education Savings Account.--
Section 530(b)(1)(A) is amended to read as follows:
                    ``(A) Except in the case of rollover contributions, 
                no contribution will be accepted after December 31, 
                2017.''.
    (b) Limited Distribution Allowed for Elementary and Secondary 
Tuition.--
            (1) In general.--Section 529(c) is amended by adding at the 
        end the following new paragraph:
            ``(7) Treatment of elementary and secondary tuition.--Any 
        reference in this subsection to the term `qualified higher 
        education expense' shall include a reference to expenses for 
        tuition in connection with enrollment at an elementary or 
        secondary school.''.
            (2) Limitation.--Section 529(e)(3)(A) is amended by adding 
        at the end the following: ``The amount of cash distributions 
        from all qualified tuition programs described in subsection 
        (b)(1)(A)(ii) with respect to a beneficiary during any taxable 
        year, shall, in the aggregate, include not more than $10,000 in 
        expenses for tuition incurred during the taxable year in 
        connection with the enrollment or attendance of the beneficiary 
        as an elementary or secondary school student at a public, 
        private, or religious school.''.
    (c) Rollovers to Qualified Tuition Programs Permitted.--Section 
530(d)(5) is amended by inserting ``, or into (by purchase or 
contribution) a qualified tuition program (as defined in section 
529),'' after ``into another Coverdell education savings account''.
    (d) Distributions From Qualified Tuition Programs for Certain 
Expenses Associated With Registered Apprenticeship Programs.--Section 
529(e)(3) is amended by adding at the end the following new 
subparagraph:
                    ``(C) Certain expenses associated with registered 
                apprenticeship programs.--The term `qualified higher 
                education expenses' shall include books, supplies, and 
                equipment required for the enrollment or attendance of 
                a designated beneficiary in an apprenticeship program 
                registered and certified with the Secretary of Labor 
                under section 1 of the National Apprenticeship Act (29 
                U.S.C. 50).''.
    (e) Unborn Children Allowed as Account Beneficiaries.--Section 
529(e) is amended by adding at the end the following new paragraph:
            ``(6) Treatment of unborn children.--
                    ``(A) In general.--Nothing shall prevent an unborn 
                child from being treated as a designated beneficiary or 
                an individual under this section.
                    ``(B) Unborn child.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `unborn child' 
                        means a child in utero.
                            ``(ii) Child in utero.--The term `child in 
                        utero' means a member of the species homo 
                        sapiens, at any stage of development, who is 
                        carried in the womb.''.
    (f) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        contributions made after December 31, 2017.
            (2) Rollovers to qualified tuition programs.--The 
        amendments made by subsection (b) shall apply to distributions 
        after December 31, 2017.

SEC. 1203. REFORMS TO DISCHARGE OF CERTAIN STUDENT LOAN INDEBTEDNESS.

    (a) Treatment of Student Loans Discharged on Account of Death or 
Disability.--Section 108(f) is amended by adding at the end the 
following new paragraph:
            ``(5) Discharges on account of death or disability.--
                    ``(A) In general.--In the case of an individual, 
                gross income does not include any amount which (but for 
                this subsection) would be includible in gross income by 
                reasons of the discharge (in whole or in part) of any 
                loan described in subparagraph (B) if such discharge 
                was--
                            ``(i) pursuant to subsection (a) or (d) of 
                        section 437 of the Higher Education Act of 1965 
                        or the parallel benefit under part D of title 
                        IV of such Act (relating to the repayment of 
                        loan liability),
                            ``(ii) pursuant to section 464(c)(1)(F) of 
                        such Act, or
                            ``(iii) otherwise discharged on account of 
                        the death or total and permanent disability of 
                        the student.
                    ``(B) Loans described.--A loan is described in this 
                subparagraph if such loan is--
                            ``(i) a student loan (as defined in 
                        paragraph (2)), or
                            ``(ii) a private education loan (as defined 
                        in section 140(7) of the Consumer Credit 
                        Protection Act (15 U.S.C. 1650(7))).''.
    (b) Exclusion From Gross Income for Payments Made Under Indian 
Health Service Loan Repayment Program.--
            (1) In general.--Section 108(f)(4) is amended by inserting 
        ``under section 108 of the Indian Health Care Improvement 
        Act,'' after ``338I of such Act,''.
            (2) Clerical amendment.--The heading for section 108(f)(4) 
        is amended by striking ``and certain'' and inserting ``, indian 
        health service loan repayment program, and certain''.
    (c) Effective Dates.--
            (1) Subsection (a).--The amendment made by subsection 
        (a)(1) shall apply to discharges of indebtedness after December 
        31, 2017.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to amounts received in taxable years beginning 
        after December 31, 2017.

SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO EDUCATION.

    (a) In General.--Subchapter B of chapter 1 is amended--
            (1) in part VII by striking sections 221 and 222 (and by 
        striking the items relating to such sections in the table of 
        sections for such part),
            (2) in part VII by striking sections 135 and 127 (and by 
        striking the items relating to such sections in the table of 
        sections for such part), and
            (3) by striking subsection (d) of section 117.
    (b) Conforming Amendment Relating to Section 221.--
            (1) Section 62(a) is amended by striking paragraph (17).
            (2) Section 163(h)(2) is amended by striking subparagraph 
        (F).
            (3) Section 6050S(a) is amended--
                    (A) by inserting ``or'' at the end of paragraph 
                (1),
                    (B) by striking ``or'' at the end of paragraph (2), 
                and
                    (C) by striking paragraph (3).
            (4) Section 6050S(e) is amended by striking all that 
        follows ``thereof)'' and inserting a period.
    (c) Conforming Amendment Relating to Section 222.--Section 62(a) is 
amended by striking paragraph (18).
    (d) Conforming Amendments Relating to Section 127.--
            (1) Section 125(f)(1) is amended by striking ``127,''.
            (2) Section 132(j)(8) is amended by striking ``which are 
        not excludable from gross income under section 127''.
            (3) Section 414(n)(3)(C) is amended by striking ``127,''.
            (4) Section 414(t)(2) is amended by striking ``127,''.
            (5) Section 3121(a)(18) is amended by striking ``127,''.
            (6) Section 3231(e) is amended by striking paragraph (6).
            (7) Section 3306(b)(13) is amended by ``127,''.
            (8) Section 3401(a)(18) is amended by striking ``127,''.
            (9) Section 6039D(d)(1) is amended by striking ``, 127''.
    (e) Conforming Amendments Relating to Section 117(d).--
            (1) Section 117(c)(1) is amended--
                    (A) by striking ``subsections (a) and (d)'' and 
                inserting ``subsection (a)'', and
                    (B) by striking ``or qualified tuition reduction''.
            (2) Section 414(n)(3)(C) is amended by striking 
        ``117(d),''.
            (3) Section 414(t)(2) is amended by striking ``117(d),''.
    (f) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2017.
            (2) Amendments relating to section 117(d).--The amendments 
        made by subsections (a)(3) and (e) shall apply to amounts paid 
        or incurred after December 31, 2017.

          Subtitle D--Simplification and Reform of Deductions

SEC. 1301. REPEAL OF OVERALL LIMITATION ON ITEMIZED DEDUCTIONS.

    (a) In General.--Part 1 of subchapter B of chapter 1 is amended by 
striking section 68 (and the item relating to such section in the table 
of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1302. MORTGAGE INTEREST.

    (a) Modification of Limitations.--
            (1) In general.--Section 163(h)(3) is amended to read as 
        follows:
            ``(3) Qualified residence interest.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified residence 
                interest' means any interest which is paid or accrued 
                during the taxable year on indebtedness which--
                            ``(i) is incurred in acquiring, 
                        constructing, or substantially improving any 
                        qualified residence (determined as of the time 
                        the interest is accrued) of the taxpayer, and
                            ``(ii) is secured by such residence.
                Such term also includes interest on any indebtedness 
                secured by such residence resulting from the 
                refinancing of indebtedness meeting the requirements of 
                the preceding sentence (or this sentence); but only to 
                the extent the amount of the indebtedness resulting 
                from such refinancing does not exceed the amount of the 
                refinanced indebtedness.
                    ``(B) Limitation.--
                            ``(i) In general.--The aggregate amount of 
                        indebtedness taken into account under 
                        subparagraph (A) for any period shall not 
                        exceed $500,000 (half of such amount in the 
                        case of a married individual filing a separate 
                        return).
                    ``(C) Treatment of indebtedness incurred on or 
                before november 2, 2017.--
                            ``(i) In general.--In the case of any pre-
                        November 2, 2017, indebtedness, this paragraph 
                        shall apply as in effect immediately before the 
                        enactment of the Tax Cuts and Jobs Act.
                            ``(ii) Pre-november 2, 2017, 
                        indebtedness.--For purposes of this 
                        subparagraph, the term `pre-November 2, 2017, 
                        indebtedness' means--
                                    ``(I) any principal residence 
                                acquisition indebtedness which was 
                                incurred on or before November 2, 2017, 
                                or
                                    ``(II) any principal residence 
                                acquisition indebtedness which is 
                                incurred after November 2, 2017, to 
                                refinance indebtedness described in 
                                clause (i) (or refinanced indebtedness 
                                meeting the requirements of this 
                                clause) to the extent (immediately 
                                after the refinancing) the principal 
                                amount of the indebtedness resulting 
                                from the refinancing does not exceed 
                                the principal amount of the refinanced 
                                indebtedness (immediately before the 
                                refinancing).
                            ``(iii) Limitation on period of 
                        refinancing.--clause (ii)(II) shall not apply 
                        to any indebtedness after--
                                    ``(I) the expiration of the term of 
                                the original indebtedness, or
                                    ``(II) if the principal of such 
                                original indebtedness is not amortized 
                                over its term, the expiration of the 
                                term of the 1st refinancing of such 
                                indebtedness (or if earlier, the date 
                                which is 30 years after the date of 
                                such 1st refinancing).
                            ``(iv) Binding contract exception.--In the 
                        case of a taxpayer who enters into a written 
                        binding contract before November 2, 2017, to 
                        close on the purchase of a principal residence 
                        before January 1, 2018, and who purchases such 
                        residence before April 1, 2018, subparagraphs 
                        (A) and (B) shall be applied by substituting 
                        `April 1, 2018' for `November 2, 2017'.''.
            (2) Conforming amendments.--
                    (A) Section 108(h)(2) is by striking ``for 
                `$1,000,000 ($500,000' in clause (ii) thereof'' and 
                inserting ``for `$500,000 ($250,000' in paragraph 
                (2)(A), and `$1,000,000' for `$500,000' in paragraph 
                (2)(B), thereof''
                    (B) Section 163(h) is amended--
                            (i) by striking subparagraphs (E) and (F) 
                        in paragraph (4), and
                            (ii) by striking paragraph (5).
    (b) Taxpayers Limited to 1 Qualified Residence.--Section 
163(h)(4)(A)(i) is amended to read as follows:
                            ``(i) In general.--The term `qualified 
                        residence' means the principal residence 
                        (within the meaning of section 121) of the 
                        taxpayer. Rules similar to the rules of 
                        paragraph (3)(C) shall apply for purposes of 
                        the preceding sentence.''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to interest paid or accrued in taxable years beginning 
        after December 31, 2017, with respect to indebtedness incurred 
        before, on, or after such date.
            (2) Treatment of grandfathered indebtedness.--For 
        application of the amendments made by this section to 
        grandfathered indebtedness, see paragraph (3)(C), and the 
        second sentence of paragraph (4)(A)(i), of section 163(h) of 
        the Internal Revenue Code of 1986, as amended by this section.

SEC. 1303. REPEAL OF DEDUCTION FOR CERTAIN TAXES NOT PAID OR ACCRUED IN 
              A TRADE OR BUSINESS.

    (a) In General.--Section 164(b)(5) is amended to read as follows:
            ``(5) Limitation in case of individuals.--In the case of a 
        taxpayer other than a corporation--
                    ``(A) foreign real property taxes (other than taxes 
                which are paid or accrued in carrying on a trade or 
                business or an activity described in section 212) shall 
                not be taken into account under subsection (a)(1),
                    ``(B) the aggregate amount of taxes (other than 
                taxes which are paid or accrued in carrying on a trade 
                or business or an activity described in section 212) 
                taken into account under subsection (a)(1) and for any 
                taxable year shall not exceed $10,000 ($5,000 in the 
                case of a married individual filing a separate return),
                    ``(C) subsection (a)(2) shall only apply to taxes 
                which are paid or accrued in carrying on a trade or 
                business or an activity described in section 212, and
                    ``(D) subsection (a)(3) shall not apply to State 
                and local taxes.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1304. REPEAL OF DEDUCTION FOR PERSONAL CASUALTY LOSSES.

    (a) In General.--Section 165(c) is amended by inserting ``and'' at 
the end of paragraph (1), by striking ``; and'' at the end of paragraph 
(2) and inserting a period, and by striking paragraph (3).
    (b) Conforming Amendments.--
            (1) Section 165(h) is amended to read as follows:
    ``(h) Special Rule Where Personal Casualty Gains Exceed Personal 
Casualty Losses.--
            ``(1) In general.--If the personal casualty gains for any 
        taxable year exceed the personal casualty losses for such 
        taxable year--
                    ``(A) all such gains shall be treated as gains from 
                sales or exchanges of capital assets, and
                    ``(B) all such losses shall be treated as losses 
                from sales or exchanges of capital assets.
            ``(2) Definitions of personal casualty gain and personal 
        casualty loss.--For purposes of this subsection--
                    ``(A) Personal casualty loss.--The term `personal 
                casualty loss' means any loss of property not connected 
                with a trade or business or a transaction entered into 
                for profit, if such loss arises from fire, storm, 
                shipwreck, or other casualty, or from theft.
                    ``(B) Personal casualty gain.--The term `personal 
                casualty gain' means the recognized gain from any 
                involuntary conversion of property which is described 
                in subparagraph (A) arising from fire, storm, 
                shipwreck, or other casualty, or from theft.''.
            (2) Subsection (i) of section 165 is amended--
                    (A) in paragraph (1)--
                            (i) by striking ``(as defined by clause 
                        (ii) of subsection (h)(3)(C))'', and
                            (ii) by striking ``(as defined by clause 
                        (i) of such subsection)'',
                    (B) by striking ``(as defined by subsection 
                (h)(3)(C)(i)'' in paragraph (4), and
                    (C) by adding at the end the following new 
                paragraph:
            ``(5) Federally declared disaster.--For purposes of this 
        subsection--
                    ``(A) Federally declared disaster.--The term 
                `federally declared disaster' means any disaster 
                subsequently determined by the President of the United 
                States to warrant assistance by the Federal Government 
                under the Robert T. Stafford Disaster Relief and 
                Emergency Assistance Act.
                    ``(B) Disaster area.--The term `disaster area' 
                means the area so determined to warrant such 
                assistance.''.
            (3) Section 165 is amended by striking subsection (k).
            (4)(A) Section 165(l)(1) is amended by striking ``a loss 
        described in subsection (c)(3)'' and inserting ``an ordinary 
        loss described in subsection (c)(2)''.
            (B) Section 165(l) is amended--
                    (i) by striking paragraph (5),
                    (ii) by redesignating paragraphs (2), (3), and (4) 
                as paragraphs (3), (4), and (5), respectively, and
                    (iii) by inserting after paragraph (1) the 
                following new paragraph:
            ``(2) Limitations.--
                    ``(A) Deposit may not be federally insured.--No 
                election may be made under paragraph (1) with respect 
                to any loss on a deposit in a qualified financial 
                institution if part or all of such deposit is insured 
                under Federal law.
                    ``(B) Dollar limitation.--With respect to each 
                financial institution, the aggregate amount of losses 
                attributable to deposits in such financial institution 
                to which an election under paragraph (1) may be made by 
                the taxpayer for any taxable year shall not exceed 
                $20,000 ($10,000 in the case of a separate return by a 
                married individual). The limitation of the preceding 
                sentence shall be reduced by the amount of any 
                insurance proceeds under any State law which can 
                reasonably be expected to be received with respect to 
                losses on deposits in such institution.''.
            (5) Section 172(b)(1)(E)(ii), prior to amendment under 
        title III, is amended by striking subclause (I) and by 
        redesignating subclauses (II) and (III) as subclauses (I) and 
        (II), respectively
            (6) Section 172(d)(4)(C) is amended by striking ``paragraph 
        (2) or (3) of section 165(c)'' and inserting ``section 
        165(c)(2)''.
            (7) Section 274(f) is amended by striking ``Casualty 
        Losses,'' in the heading thereof.
            (8) Section 280A(b) is amended by striking ``Casualty 
        Losses,'' in the heading thereof.
            (9) Section 873(b), as amended by the preceding provisions 
        of this Act, is amended by striking paragraph (1) and by 
        redesignating paragraphs (2) and (3) as paragraphs (1) and (2), 
        respectively.
            (10) Section 504(b) of the Disaster Tax Relief and Airport 
        and Airway Extension Act of 2017 is amended by adding at the 
        end the following new paragraph:
            ``(4) Coordination with tax reform.--This subsection shall 
        be applied without regard to the amendments made by section 
        1306 of the Tax Cuts and Jobs Act.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1305. LIMITATION ON WAGERING LOSSES.

    (a) In General.--Section 165(d) is amended by adding at the end the 
following: ``For purposes of the preceding sentence, the term `losses 
from wagering transactions' includes any deduction otherwise allowable 
under this chapter incurred in carrying on any wagering transaction.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1306. CHARITABLE CONTRIBUTIONS.

    (a) Increased Limitation for Cash Contributions.--
            (1) In general.--Section 170(b)(1) is amended by 
        redesignating subparagraph (G) as subparagraph (H) and by 
        inserting after subparagraph (F) the following new 
        subparagraph:
                    ``(G) Increased limitation for cash 
                contributions.--
                            ``(i) In general.--In the case of any 
                        contribution of cash to an organization 
                        described in subparagraph (A), the total amount 
                        of such contributions which may be taken into 
                        account under subsection (a) for any taxable 
                        year shall not exceed 60 percent of the 
                        taxpayer's contribution base for such year.
                            ``(ii) Carryover.--If the aggregate amount 
                        of contributions described in clause (i) 
                        exceeds the applicable limitation under clause 
                        (i), such excess shall be treated (in a manner 
                        consistent with the rules of subsection (d)(1)) 
                        as a charitable contribution to which clause 
                        (i) applies in each of the 5 succeeding years 
                        in order of time.
                            ``(iii) Coordination with subparagraphs (A) 
                        and (B).--
                                    ``(I) In general.--Contributions 
                                taken into account under this 
                                subparagraph shall not be taken into 
                                account under subparagraph (A).
                                    ``(II) Limitation reduction.--
                                Subparagraphs (A) and (B) shall be 
                                applied by reducing (but not below 
                                zero) the aggregate contribution 
                                limitation allowed for the taxable year 
                                under each such subparagraph by the 
                                aggregate contributions allowed under 
                                this subparagraph for such taxable 
                                year.''.
    (b) Denial of Deduction for College Athletic Event Seating 
Rights.--Section 170(l)(1) is amended to read as follows:
            ``(1) In general.--No deduction shall be allowed under this 
        section for any amount described in paragraph (2).''.
    (c) Charitable Mileage Rate Adjusted for Inflation.--Section 170(i) 
is amended by striking ``shall be 14 cents per mile'' and inserting 
``shall be a rate which takes into account the variable cost of 
operating an automobile''.
    (d) Repeal of Substantiation Exception in Case of Contributions 
Reported by Donee.--Section 170(f)(8) is amended by striking 
subparagraph (D) and by redesignating subparagraph (E) as subparagraph 
(D).
    (e) Effective Date.--The amendments made by this section shall 
apply to contributions made in taxable years beginning after December 
31, 2017.

SEC. 1307. REPEAL OF DEDUCTION FOR TAX PREPARATION EXPENSES.

    (a) In General.--Section 212 is amended by adding ``or'' at the end 
of paragraph (1), by striking ``; or'' at the end of paragraph (2) and 
inserting a period, and by striking paragraph (3).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1308. REPEAL OF MEDICAL EXPENSE DEDUCTION.

    (a) In General.--Part VII of subchapter B is amended by striking by 
striking section 213 (and by striking the item relating to such section 
in the table of section for such subpart).
    (b) Conforming Amendments.--
            (1)(A) Section 105(f) is amended to read as follows:
    ``(f) Medical Care.--For purposes of this section--
            ``(1) In general.--The term `medical care' means amounts 
        paid--
                    ``(A) for the diagnosis, cure, mitigation, 
                treatment, or prevention of disease, or for the purpose 
                of affecting any structure or function of the body,
                    ``(B) for transportation primarily for and 
                essential to medical care referred to in subparagraph 
                (A),
                    ``(C) for qualified long-term care services (as 
                defined in section 7702B(c)), or
                    ``(D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the Social 
                Security Act, relating to supplementary medical 
                insurance for the aged) covering medical care referred 
                to in subparagraphs (A) and (B) or for any qualified 
                long-term care insurance contract (as defined in 
                section 7702B(b)).
        In the case of a qualified long-term care insurance contract 
        (as defined in section 7702B(b)), only eligible long-term care 
        premiums (as defined in paragraph (7)) shall be taken into 
        account under subparagraph (D).
            ``(2) Amounts paid for certain lodging away from home 
        treated as paid for medical care.--Amounts paid for lodging 
        (not lavish or extravagant under the circumstances) while away 
        from home primarily for and essential to medical care referred 
        to in paragraph (1)(A) shall be treated as amounts paid for 
        medical care if--
                    ``(A) the medical care referred to in paragraph 
                (1)(A) is provided by a physician in a licensed 
                hospital (or in a medical care facility which is 
                related to, or the equivalent of, a licensed hospital), 
                and
                    ``(B) there is no significant element of personal 
                pleasure, recreation, or vacation in the travel away 
                from home.
        The amount taken into account under the preceding sentence 
        shall not exceed $50 for each night for each individual.
            ``(3) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r) of the Social Security 
        Act (42 U.S.C. 1395x(r)).
            ``(4) Contracts covering other than medical care.--In the 
        case of an insurance contract under which amounts are payable 
        for other than medical care referred to in subparagraphs (A), 
        (B) and (C) of paragraph (1)--
                    ``(A) no amount shall be treated as paid for 
                insurance to which paragraph (1)(D) applies unless the 
                charge for such insurance is either separately stated 
                in the contract, or furnished to the policyholder by 
                the insurance company in a separate statement,
                    ``(B) the amount taken into account as the amount 
                paid for such insurance shall not exceed such charge, 
                and
                    ``(C) no amount shall be treated as paid for such 
                insurance if the amount specified in the contract (or 
                furnished to the policyholder by the insurance company 
                in a separate statement) as the charge for such 
                insurance is unreasonably large in relation to the 
                total charges under the contract.
            ``(5) Certain pre-paid contracts.--Subject to the 
        limitations of paragraph (4), premiums paid during the taxable 
        year by a taxpayer before he attains the age of 65 for 
        insurance covering medical care (within the meaning of 
        subparagraphs (A), (B), and (C) of paragraph (1)) for the 
        taxpayer, his spouse, or a dependent after the taxpayer attains 
        the age of 65 shall be treated as expenses paid during the 
        taxable year for insurance which constitutes medical care if 
        premiums for such insurance are payable (on a level payment 
        basis) under the contract for a period of 10 years or more or 
        until the year in which the taxpayer attains the age of 65 (but 
        in no case for a period of less than 5 years).
            ``(6) Cosmetic surgery.--
                    ``(A) In general.--The term `medical care' does not 
                include cosmetic surgery or other similar procedures, 
                unless the surgery or procedure is necessary to 
                ameliorate a deformity arising from, or directly 
                related to, a congenital abnormality, a personal injury 
                resulting from an accident or trauma, or disfiguring 
                disease.
                    ``(B) Cosmetic surgery defined .--For purposes of 
                this paragraph, the term `cosmetic surgery' means any 
                procedure which is directed at improving the patient's 
                appearance and does not meaningfully promote the proper 
                function of the body or prevent or treat illness or 
                disease.
            ``(7) Eligible long-term care premiums.--
                    ``(A) In general.--For purposes of this section, 
                the term `eligible long-term care premiums' means the 
                amount paid during a taxable year for any qualified 
                long-term care insurance contract (as defined in 
                section 7702B(b)) covering an individual, to the extent 
                such amount does not exceed the limitation determined 
                under the following table:

------------------------------------------------------------------------
``In the case of an individual with
an attained age before the close of           The limitation is:
        the taxable year of:
------------------------------------------------------------------------
40 or less                           $200
More than 40 but not more than 50    $375
More than 50 but not more than 60    $750
More than 60 but not more than 70    $2,000
More than 70                         $2,500
------------------------------------------------------------------------

                    ``(B) Indexing.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning after 1997, each dollar 
                        amount in subparagraph (A) shall be increased 
                        by the medical care cost adjustment of such 
                        amount for such calendar year. Any increase 
                        determined under the preceding sentence shall 
                        be rounded to the nearest multiple of $10.
                            ``(ii) Medical care cost adjustment.--For 
                        purposes of clause (i), the medical care cost 
                        adjustment for any calendar year is the 
                        adjustment prescribed by the Secretary, in 
                        consultation with the Secretary of Health and 
                        Human Services, for purposes of such clause. To 
                        the extent that CPI (as defined section 1(c)), 
                        or any component thereof, is taken into account 
                        in determining such adjustment, such adjustment 
                        shall be determined by taking into account C-
                        CPI-U (as so defined), or the corresponding 
                        component thereof, in lieu of such CPI (or 
                        component thereof), but only with respect to 
                        the portion of such adjustment which relates to 
                        periods after December 31, 2017.
            ``(8) Certain payments to relatives treated as not paid for 
        medical care.--An amount paid for a qualified long-term care 
        service (as defined in section 7702B(c)) provided to an 
        individual shall be treated as not paid for medical care if 
        such service is provided--
                    ``(A) by the spouse of the individual or by a 
                relative (directly or through a partnership, 
                corporation, or other entity) unless the service is 
                provided by a licensed professional with respect to 
                such service, or
                    ``(B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) or 
                707(b)) to the individual.
        For purposes of this paragraph, the term `relative' means an 
        individual bearing a relationship to the individual which is 
        described in any of subparagraphs (A) through (G) of section 
        7706(d)(2). This paragraph shall not apply for purposes of 
        subsection (b) with respect to reimbursements through 
        insurance.''.
            (B) Section 72(t)(2)(D)(i)(III) is amended by striking 
        ``section 213(d)(1)(D)'' and inserting ``section 
        105(f)(1)(D)''.
            (C) Section 104(a) is amended by striking ``section 
        213(d)(1)'' in the last sentence and inserting ``section 
        105(f)(1)''.
            (D) Section 105(b) is amended by striking ``section 
        213(d)'' and inserting ``section 105(f)''.
            (E) Section 139D is amended by striking ``section 213'' and 
        inserting ``section 223''.
            (F) Section 162(l)(2) is amended by striking ``section 
        213(d)(10)'' and inserting ``section 105(f)(7)''.
            (G) Section 220(d)(2)(A) is amended by striking ``section 
        213(d)'' and inserting ``section 105(f)''.
            (H) Section 223(d)(2)(A) is amended by striking ``section 
        213(d)'' and inserting ``section 105(f)''.
            (I) Section 419A(f)(2) is amended by striking ``section 
        213(d)'' and inserting ``section 105(f)''.
            (J) Section 501(c)(26)(A) is amended by striking ``section 
        213(d)'' and inserting ``section 105(f)''.
            (K) Section 2503(e) is amended by striking ``section 
        213(d)'' and inserting ``section 105(f)''.
            (L) Section 4980B(c)(4)(B)(i)(I) is amended by striking 
        ``section 213(d)'' and inserting ``section 105(f)''.
            (M) Section 6041(f) is amended by striking ``section 
        213(d)'' and inserting ``section 105(f)''.
            (N) Section 7702B(a)(2) is amended by striking ``section 
        213(d)'' and inserting ``section 105(f)''.
            (O) Section 7702B(a)(4) is amended by striking ``section 
        213(d)(1)(D)'' and inserting ``section 105(f)(1)(D)''.
            (P) Section 7702B(d)(5) is amended by striking ``section 
        213(d)(10)'' and inserting ``section 105(f)(7)''.
            (Q) Section 9832(d)(3) is amended by striking ``section 
        213(d)'' and inserting ``section 105(f)''.
            (2) Section 72(t)(2)(B) is amended to read as follows:
                    ``(B) Medical expenses.--Distributions made to an 
                individual (other than distributions described in 
                subparagraph (A), (C), or (D) to the extent such 
                distributions do not exceed the excess of--
                            ``(i) the expenses paid by the taxpayer 
                        during the taxable year, not compensated for by 
                        insurance or otherwise, for medical care (as 
                        defined in 105(f)) of the taxpayer, his spouse, 
                        or a dependent (as defined in section 7706, 
                        determined without regard to subsections 
                        (b)(1), (b)(2), and (d)(1)(B) thereof), over
                            ``(ii) 10 percent of the taxpayer's 
                        adjusted gross income.''.
            (3) Section 162(l) is amended by striking paragraph (3).
            (4) Section 402(l) is amended by striking paragraph (7) and 
        redesignating paragraph (8) as paragraph (7).
            (5) Section 220(f) is amended by striking paragraph (6).
            (6) Section 223(f) is amended by striking paragraph (6).
            (7) Section 7702B(e) is amended by striking paragraph (2).
            (8) Section 7706(f)(7), as redesignated by this Act, is 
        amended by striking ``sections 105(b), 132(h)(2)(B), and 
        213(d)(5)'' and inserting ``sections 105(b) and 132(h)(2)(B)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.

    (a) In General.--Part VII of subchapter B is amended by striking by 
striking section 215 (and by striking the item relating to such section 
in the table of section for such subpart).
    (b) Conforming Amendments.--
            (1) Amendments relating to section 215.--
                    (A) Corresponding repeal of provisions providing 
                for inclusion of alimony in gross income.--
                            (i) Subsection (a) of section 61 is amended 
                        by striking paragraph (8) and by redesignating 
                        paragraphs (9) through (15) as paragraphs (8) 
                        through (14), respectively.
                            (ii) Part II of subchapter B of chapter 1 
                        is amended by striking section 71 (and by 
                        striking the item relating to such section in 
                        the table of sections for such part).
                            (iii) Subpart F of part I of subchapter J 
                        of chapter 1 is amended by striking section 682 
                        (and by striking the item relating to such 
                        section in the table of sections for such 
                        subpart).
                    (B) Related to repeal of section 215.--
                            (i) Section 62(a) is amended by striking 
                        paragraph (10).
                            (ii) Section 3402(m)(1) is amended by 
                        striking ``(other than paragraph (10) 
                        thereof)''.
                    (C) Related to repeal of section 71.--
                            (i) Section 121(d)(3) is amended--
                                    (I) by striking ``(as defined in 
                                section 71(b)(2))'' in subparagraph 
                                (B), and
                                    (II) by adding at the end the 
                                following new subparagraph:
                    ``(C) Divorce or separation instrument.--For 
                purposes of this paragraph, the term `divorce or 
                separation instrument' means--
                            ``(i) a decree of divorce or separate 
                        maintenance or a written instrument incident to 
                        such a decree,
                            ``(ii) a written separation agreement, or
                            ``(iii) a decree (not described in clause 
                        (i)) requiring a spouse to make payments for 
                        the support or maintenance of the other 
                        spouse.''.
                            (ii) Section 220(f)(7) is amended by 
                        striking ``subparagraph (A) of section 
                        71(b)(2)'' and inserting ``clause (i) of 
                        section 121(d)(3)(C)''.
                            (iii) Section 223(f)(7) is amended by 
                        striking ``subparagraph (A) of section 
                        71(b)(2)'' and inserting ``clause (i) of 
                        section 121(d)(3)(C)''.
                            (iv) Section 382(l)(3)(B)(iii) is amended 
                        by striking ``section 71(b)(2)'' and inserting 
                        ``section 121(d)(3)(C)''.
                            (v) Section 408(d)(6) is amended by 
                        striking ``subparagraph (A) of section 
                        71(b)(2)'' and inserting ``clause (i) of 
                        section 121(d)(3)(C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to--
            (1) any divorce or separation instrument (as defined in 
        section 71(b)(2) of the Internal Revenue Code of 1986 as in 
        effect before the date of the enactment of this Act) executed 
        after December 31, 2017, and
            (2) any divorce or separation instrument (as so defined) 
        executed on or before such date and modified after such date if 
        the modification expressly provides that the amendments made by 
        this section apply to such modification.

SEC. 1310. REPEAL OF DEDUCTION FOR MOVING EXPENSES.

    (a) In General.--Part VII of subchapter B is amended by striking by 
striking section 217 (and by striking the item relating to such section 
in the table of section for such subpart).
    (b) Conforming Amendments.--
            (1) Section 62(a) is amended by striking paragraph (15).
            (2) Section 274(m)(3) is amended by striking ``(other than 
        section 217)''.
            (3) Section 3121(a) is amended by striking paragraph (11).
            (4) Section 3306(b) is amended by striking paragraph (9).
            (5) Section 3401(a) is amended by striking paragraph (15).
            (6) Section 7872(f) is amended by striking paragraph (11).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1311. TERMINATION OF DEDUCTION AND EXCLUSIONS FOR CONTRIBUTIONS TO 
              MEDICAL SAVINGS ACCOUNTS.

    (a) Termination of Income Tax Deduction.--Section 220 is amended by 
adding at the end the following new subsection:
    ``(k) Termination.--No deduction shall be allowed under subsection 
(a) with respect to any taxable year beginning after December 31, 
2017.''.
    (b) Termination of Exclusion for Employer-Provided Contributions.--
Section 106 is amended by striking subsection (b).
    (c) Conforming Amendments.--
            (1) Section 62(a) is amended by striking paragraph (16).
            (2) Section 106(d) is amended by striking paragraph (2), by 
        redesignating paragraph (3) as paragraph (6), and by inserting 
        after paragraph (1) the following new paragraphs:
            ``(2) No constructive receipt.--No amount shall be included 
        in the gross income of any employee solely because the employee 
        may choose between the contributions referred to in paragraph 
        (1) and employer contributions to another health plan of the 
        employer.
            ``(3) Special rule for deduction of employer 
        contributions.--Any employer contribution to a health savings 
        account (as so defined), if otherwise allowable as a deduction 
        under this chapter, shall be allowed only for the taxable year 
        in which paid.
            ``(4) Employer health savings account contribution required 
        to be shown on return.--Every individual required to file a 
        return under section 6012 for the taxable year shall include on 
        such return the aggregate amount contributed by employers to 
        the health savings accounts (as so defined) of such individual 
        or such individual's spouse for such taxable year.
            ``(5) Health savings account contributions not part of 
        cobra coverage.--Paragraph (1) shall not apply for purposes of 
        section 4980B.''.
            (3) Section 223(b)(4) is amended by striking subparagraph 
        (A), by redesignating subparagraphs (B) and (C) as 
        subparagraphs (A) and (B), respectively, and by striking the 
        second sentence thereof.
            (4) Section 223(b)(5) is amended by striking ``under 
        paragraph (3))'' and all that follows through ``shall be 
        divided equally between them'' and inserting the following: 
        ``under paragraph (3)) shall be divided equally between the 
        spouses''.
            (5) Section 223(c) is amended by striking paragraph (5).
            (6) Section 3231(e) is amended by striking paragraph (10).
            (7) Section 3306(b) is amended by striking paragraph (17).
            (8) Section 3401(a) is amended by striking paragraph (21).
            (9) Chapter 43 is amended by striking section 4980E (and by 
        striking the item relating to such section in the table of 
        sections for such chapter).
            (10) Section 4980G is amended to read as follows:

``SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COMPARABLE HEALTH SAVINGS 
              ACCOUNT CONTRIBUTIONS.

    ``(a) In General.--In the case of an employer who makes a 
contribution to the health savings account of any employee during a 
calendar year, there is hereby imposed a tax on the failure of such 
employer to meet the requirements of subsection (d) for such calendar 
year.
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) on any failure for any calendar year is the amount equal to 35 
percent of the aggregate amount contributed by the employer to health 
savings accounts of employees for taxable years of such employees 
ending with or within such calendar year.
    ``(c) Waiver by Secretary.--In the case of a failure which is due 
to reasonable cause and not to willful neglect, the Secretary may waive 
part or all of the tax imposed by subsection (a) to the extent that the 
payment of such tax would be excessive relative to the failure 
involved.
    ``(d) Employer Required To Make Comparable Health Savings Account 
Contributions for All Participating Employees.--
            ``(1) In general.--An employer meets the requirements of 
        this subsection for any calendar year if the employer makes 
        available comparable contributions to the health savings 
        accounts of all comparable participating employees for each 
        coverage period during such calendar year.
            ``(2) Comparable contributions.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `comparable contributions' means 
                contributions--
                            ``(i) which are the same amount, or
                            ``(ii) which are the same percentage of the 
                        annual deductible limit under the high 
                        deductible health plan covering the employees.
                    ``(B) Part-year employees.--In the case of an 
                employee who is employed by the employer for only a 
                portion of the calendar year, a contribution to the 
                health savings account of such employee shall be 
                treated as comparable if it is an amount which bears 
                the same ratio to the comparable amount (determined 
                without regard to this subparagraph) as such portion 
                bears to the entire calendar year.
            ``(3) Comparable participating employees.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `comparable participating employees' means all 
                employees--
                            ``(i) who are eligible individuals covered 
                        under any high deductible health plan of the 
                        employer, and
                            ``(ii) who have the same category of 
                        coverage.
                    ``(B) Categories of coverage.--For purposes of 
                subparagraph (B), the categories of coverage are self-
                only and family coverage.
            ``(4) Part-time employees.--
                    ``(A) In general .--Paragraph (3) shall be applied 
                separately with respect to part-time employees and 
                other employees.
                    ``(B) Part-time employee.--For purposes of 
                subparagraph (A), the term `part-time employee' means 
                any employee who is customarily employed for fewer than 
                30 hours per week.
            ``(5) Special rule for non-highly compensated employees.--
        For purposes of applying this section to a contribution to a 
        health savings account of an employee who is not a highly 
        compensated employee (as defined in section 414(q)), highly 
        compensated employees shall not be treated as comparable 
        participating employees.
    ``(e) Controlled Groups.--For purposes of this section, all persons 
treated as a single employer under subsection (b), (c), (m), or (o) of 
section 414 shall be treated as 1 employer.
    ``(f) Definitions.--Terms used in this section which are also used 
in section 223 have the respective meanings given such terms in section 
223.
    ``(g) Regulations.--The Secretary shall issue regulations to carry 
out the purposes of this section.''.
            (11) Section 6051(a) is amended by striking paragraph (11).
            (12) Section 6051(a)(14)(A) is amended by striking 
        ``paragraphs (11) and (12)'' and inserting ``paragraph (12)''.
    (d) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 1312. DENIAL OF DEDUCTION FOR EXPENSES ATTRIBUTABLE TO THE TRADE 
              OR BUSINESS OF BEING AN EMPLOYEE.

    (a) In General.--Part IX of subchapter B of chapter 1 is amended by 
inserting after the item relating to section 262 the following new 
item:

``SEC. 262A. EXPENSES ATTRIBUTABLE TO BEING AN EMPLOYEE.

    ``(a) In General.--Except as otherwise provided in this section, no 
deduction shall be allowed with respect to any trade or business of the 
taxpayer which consists of the performance of services by the taxpayer 
as an employee.
    ``(b) Exception for Above-the-Line Deductions.--Subsection (a) 
shall not apply to any deduction allowable (determined without regard 
to subsection (a)) in determining adjusted gross income.''.
    (b) Repeal of Certain Above-the-Line Trade and Business Deductions 
of Employees.--
            (1) In general.--Section 62(a)(2) is amended--
                    (A) by striking subparagraphs (B), (C), and (D), 
                and
                    (B) by redesignating subparagraph (E) as 
                subparagraph (B).
            (2) Conforming amendments.--
                    (A) Section 62 is amended by striking subsections 
                (b) and (d) and by redesignating subsections (c) and 
                (e) as subsections (b) and (c), respectively.
                    (B) Section 62(a)(20) is amended by striking 
                ``subsection (e)'' and inserting ``subsection (c)''.
    (c) Continued Exclusion of Working Condition Fringe Benefits.--
Section 132(d) is amended by inserting ``(determined without regard to 
section 262A)'' after ``section 162''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

    Subtitle E--Simplification and Reform of Exclusions and Taxable 
                              Compensation

SEC. 1401. LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED HOUSING.

    (a) In General.--Section 119 is amended by adding at the end the 
following new subsection:
    ``(e) Limitation on Exclusion of Lodging.--
            ``(1) In general.--The aggregate amount excluded from gross 
        income of the taxpayer under subsections (a) and (d) with 
        respect to lodging for any taxable year shall not exceed 
        $50,000 (half such amount in the case of a married individual 
        filing a separate return).
            ``(2) Limitation to 1 home.--Subsections (a) and (d) 
        (separately and in combination) shall not apply with respect to 
        more than 1 residence of the taxpayer at any given time. In the 
        case of a joint return, the preceding sentence shall apply 
        separately to each spouse for any period during which each 
        spouse resides separate from the other spouse in a residence 
        which is provided in connection with the employment of each 
        spouse, respectively.
            ``(3) Limitation for highly compensated employees.--
                    ``(A) Reduced for excess compensation.--In the case 
                of an individual whose compensation for the taxable 
                year exceeds the amount in effect under section 
                414(q)(1)(B)(i) for the calendar in which such taxable 
                year begins, the $50,000 amount under paragraph (1) 
                shall be reduced (but not below zero) by an amount 
                equal to 50 percent of such excess. For purposes of the 
                preceding sentence, the term `compensation' means wages 
                (as defined in section 3121(a) (without regard to the 
                contribution and benefit base limitation in section 
                3121(a)(1)).
                    ``(B) Exclusion denied for 5-percent owners.--In 
                the case of an individual who is a 5-percent owner (as 
                defined in section 416(i)(1)(B)(i)) of the employer at 
                any time during the taxable year, the amount under 
                paragraph (1) shall be zero.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 1402. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE.

    (a) Requirement That Residence Be Principal Residence for 5 Years 
During 8-Year Period.--Subsection (a) of section 121 is amended--
            (1) by striking ``5-year period'' and inserting ``8-year 
        period'', and
            (2) by striking ``2 years'' and inserting ``5 years''.
    (b) Application to Only 1 Sale or Exchange Every 5 Years.--
Paragraph (3) of section 121(b) is amended to read as follows:
            ``(3) Application to only 1 sale or exchange every 5 
        years.--Subsection (a) shall not apply to any sale or exchange 
        by the taxpayer if, during the 5-year period ending on the date 
        of such sale or exchange, there was any other sale or exchange 
        by the taxpayer to which subsection (a) applied.''.
    (c) Phaseout Based on Modified Adjusted Gross Income.--Section 121 
is amended by adding at the end the following new subsection:
    ``(h) Phaseout Based on Modified Adjusted Gross Income.--
            ``(1) In general.--If the average modified adjusted gross 
        income of the taxpayer for the taxable year and the 2 preceding 
        taxable years exceeds $250,000 (twice such amount in the case 
        of a joint return), the amount which would (but for this 
        subsection) be excluded from gross income under subsection (a) 
        for such taxable year shall be reduced (but not below zero) by 
        the amount of such excess.
            ``(2) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means, 
        with respect to any taxable year, adjusted gross income 
        determined after application of this section (but without 
        regard to subsection (b)(1) and this subsection).
            ``(3) Special rule for joint returns.--In the case of a 
        joint return, the average modified adjusted gross income of the 
        taxpayer shall be determined without regard to any taxable year 
        with respect to which the taxpayer did not file a joint 
        return.''.
    (d) Conforming Amendments.--
            (1) The last paragraph of section 121(b) (relating to 
        exclusion of gain allocated to nonqualified use) is 
        redesignated as paragraph (5).
            (2) The following provisions of section 121 are each 
        amended by striking ``5-year period'' each place it appears 
        therein and inserting ``8-year period'':
                    (A) Subsection (b)(5)(C)(ii)(I) (as redesignated by 
                paragraph (1)).
                    (B) Subsection (c)(1)(B)(i)(I).
                    (C) Subsection (d)(7)(B).
                    (D) Subparagraphs (A) and (B) of subsection (d)(9).
                    (E) Subsection (d)(10)
                    (F) Subsection (d)(12)(A).
            (3) Section 121(c)(1)(B)(ii) is amended by striking ``2 
        years'' and inserting ``5 years'':
    (e) Effective Date.--The amendments made by this section shall 
apply to sales and exchanges after December 31, 2017.

SEC. 1403. REPEAL OF EXCLUSION, ETC., FOR EMPLOYEE ACHIEVEMENT AWARDS.

    (a) In General.--Section 74 is amended by striking subsection (c).
    (b) Repeal of Limitation on Deduction.--Section 274 is amended by 
striking subsection (j).
    (c) Conforming Amendments.--
            (1) Section 102(c)(2) is amended by striking the first 
        sentence.
            (2) Section 414(n)(3)(C) is amended by striking 
        ``274(j),''.
            (3) Section 414(t)(2) is amended by striking ``274(j),''.
            (4) Section 3121(a)(20) is amended by striking ``74(c)''.
            (5) Section 3231(e)(5) is amended by striking ``74(c),''.
            (6) Section 3306(b)(16) is amended by striking ``74(c),''.
            (7) Section 3401(a)(19) is amended by striking ``74(c),''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1404. REPEAL OF EXCLUSION FOR DEPENDENT CARE ASSISTANCE PROGRAMS.

    (a) In General.--Part III of subchapter B of chapter 1 is amended 
by striking section 129 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendments.--
            (1) Section 414(n)(3)(C) is amended by striking ``, 129''.
            (2) Section 414(r)(1) is amended by striking ``sections 
        129(d)(8) and'' and inserting ``section''.
            (3) Section 414(t)(2) is amended by striking ``, 129''.
            (4) Section 125(j)(6) is amended--
                    (A) by inserting ``or'' before ``section 105(h)'', 
                and
                    (B) by striking ``, or paragraph (2), (3), (4), or 
                (8) of section 129(d)''.
            (5) Section 3121(a)(18) is amended by striking ``129,''.
            (6) Section 3306(b)(13) is amended by striking ``129,''.
            (7) Section 3401(a)(18) is amended by striking ``129,''.
            (8) Section 6039D(d)(1) is amended by striking ``, 129''.
            (9) Section 6051(a) is amended by striking paragraph (9).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1405. REPEAL OF EXCLUSION FOR QUALIFIED MOVING EXPENSE 
              REIMBURSEMENT.

    (a) In General.--Section 132(a) is amended by striking paragraph 
(6).
    (b) Conforming Amendments.--
            (1) Section 82 is amended by striking ``Except as provided 
        in section 132(a)(6), there'' and inserting ``There''.
            (2) Section 132 is amended by striking subsection (g).
            (3) Section 132(l) is amended by striking by striking 
        ``subsections (e) and (g)'' and inserting ``subsection (e)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1406. REPEAL OF EXCLUSION FOR ADOPTION ASSISTANCE PROGRAMS.

    (a) In General.--Part III of subchapter B of chapter 1 is amended 
by striking section 137 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Conforming Amendments.--
            (1) Sections 414(n)(3)(C), 414(t)(2), 74(d)(2)(B), 
        86(b)(2)(A), 219(g)(3)(A)(ii) are each amended by striking ``, 
        137''.
            (2) Section 1016(a), as amended by the preceding provision 
        of this Act, is amended by striking paragraph (26).
            (3) Section 6039D(d)(1), as amended by the preceding 
        provisions of this Act, is amended--
                    (A) by striking ``, or 137'', and
                    (B) by inserting ``or'' before ``125''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

 Subtitle F--Simplification and Reform of Savings, Pensions, Retirement

SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RECHARACTERIZATION OF ROTH 
              IRA CONTRIBUTIONS AS TRADITIONAL IRA CONTRIBUTIONS.

    (a) In General.--Section 408A(d) is amended by striking paragraph 
(6) and by redesignating paragraph (7) as paragraph (6).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1502. REDUCTION IN MINIMUM AGE FOR ALLOWABLE IN-SERVICE 
              DISTRIBUTIONS.

    (a) In General.--Section 401(a)(36) is amended by striking ``age 
62'' and inserting ``age 59 \1/2\''.
    (b) Application to Governmental Section 457(b) Plans.--Clause (i) 
of section 457(d)(1)(A) is amended by inserting ``(in the case of a 
plan maintained by an employer described in subsection (e)(1)(A), age 
59 \1/2\)'' before the comma at the end.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2017.

SEC. 1503. MODIFICATION OF RULES GOVERNING HARDSHIP DISTRIBUTIONS.

    (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of the Treasury shall modify 
Treasury Regulation section 1.401(k)-1(d)(3)(iv)(E) to--
            (1) delete the 6-month prohibition on contributions imposed 
        by paragraph (2) thereof, and
            (2) make any other modifications necessary to carry out the 
        purposes of section 401(k)(2)(B)(i)(IV) of the Internal Revenue 
        Code of 1986.
    (b) Effective Date.--The revised regulations under this section 
shall apply to plan years beginning after December 31, 2017.

SEC. 1504. MODIFICATION OF RULES RELATING TO HARDSHIP WITHDRAWALS FROM 
              CASH OR DEFERRED ARRANGEMENTS.

    (a) In General.--Section 401(k) is amended by adding at the end the 
following:
            ``(14) Special rules relating to hardship withdrawals.--For 
        purposes of paragraph (2)(B)(i)(IV)--
                    ``(A) Amounts which may be withdrawn.--The 
                following amounts may be distributed upon hardship of 
                the employee:
                            ``(i) Contributions to a profit-sharing or 
                        stock bonus plan to which section 402(e)(3) 
                        applies.
                            ``(ii) Qualified nonelective contributions 
                        (as defined in subsection (m)(4)(C)).
                            ``(iii) Qualified matching contributions 
                        described in paragraph (3)(D)(ii)(I).
                            ``(iv) Earnings on any contributions 
                        described in clause (i), (ii), or (iii).
                    ``(B) No requirement to take available loan.--A 
                distribution shall not be treated as failing to be made 
                upon the hardship of an employee solely because the 
                employee does not take any available loan under the 
                plan.".''.
    (b) Conforming Amendment.--Section 401(k)(2)(B)(i)(IV) is amended 
to read as follows:
                                    ``(IV) subject to the provisions of 
                                paragraph (14), upon hardship of the 
                                employee, or".''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2017.

SEC. 1505. EXTENDED ROLLOVER PERIOD FOR THE ROLLOVER OF PLAN LOAN 
              OFFSET AMOUNTS IN CERTAIN CASES.

    (a) In General.--Paragraph (3) of section 402(c) is amended by 
adding at the end the following new subparagraph:
                    ``(C) Rollover of certain plan loan offset 
                amounts.--
                            ``(i) In general.--In the case of a 
                        qualified plan loan offset amount, paragraph 
                        (1) shall not apply to any transfer of such 
                        amount made after the due date (including 
                        extensions) for filing the return of tax for 
                        the taxable year in which such amount is 
                        treated as distributed from a qualified 
                        employer plan.
                            ``(ii) Qualified plan loan offset amount.--
                        For purposes of this subparagraph, the term 
                        `qualified plan loan offset amount' means a 
                        plan loan offset amount which is treated as 
                        distributed from a qualified employer plan to a 
                        participant or beneficiary solely by reason 
                        of--
                                    ``(I) the termination of the 
                                qualified employer plan, or
                                    ``(II) the failure to meet the 
                                repayment terms of the loan from such 
                                plan because of the separation from 
                                service of the participant (whether due 
                                to layoff, cessation of business, 
                                termination of employment, or 
                                otherwise).
                            ``(iii) Plan loan offset amount.--For 
                        purposes of clause (ii), the term `plan loan 
                        offset amount' means the amount by which the 
                        participant's accrued benefit under the plan is 
                        reduced in order to repay a loan from the plan.
                            ``(iv) Limitation.--This subparagraph shall 
                        not apply to any plan loan offset amount unless 
                        such plan loan offset amount relates to a loan 
                        to which section 72(p)(1) does not apply by 
                        reason of section 72(p)(2).
                            ``(v) Qualified employer plan.--For 
                        purposes of this subsection, the term 
                        `qualified employer plan' has the meaning given 
                        such term by section 72(p)(4).''.
    (b) Conforming Amendment.--Subparagraph (A) of section 402(c)(3) is 
amended by striking ``subparagraph (B)'' and inserting ``subparagraphs 
(B) and (C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 1506. MODIFICATION OF NONDISCRIMINATION RULES TO PROTECT OLDER, 
              LONGER SERVICE PARTICIPANTS.

    (a) In General.--Section 401 is amended--
            (1) by redesignating subsection (o) as subsection (p), and
            (2) by inserting after subsection (n) the following new 
        subsection:
    ``(o) Special Rules for Applying Nondiscrimination Rules To Protect 
Older, Longer Service and Grandfathered Participants.--
            ``(1) Testing of defined benefit plans with closed classes 
        of participants.--
                    ``(A) Benefits, rights, or features provided to 
                closed classes.--A defined benefit plan which provides 
                benefits, rights, or features to a closed class of 
                participants shall not fail to satisfy the requirements 
                of subsection (a)(4) by reason of the composition of 
                such closed class or the benefits, rights, or features 
                provided to such closed class, if--
                            ``(i) for the plan year as of which the 
                        class closes and the 2 succeeding plan years, 
                        such benefits, rights, and features satisfy the 
                        requirements of subsection (a)(4) (without 
                        regard to this subparagraph but taking into 
                        account the rules of subparagraph (I)),
                            ``(ii) after the date as of which the class 
                        was closed, any plan amendment which modifies 
                        the closed class or the benefits, rights, and 
                        features provided to such closed class does not 
                        discriminate significantly in favor of highly 
                        compensated employees, and
                            ``(iii) the class was closed before April 
                        5, 2017, or the plan is described in 
                        subparagraph (C).
                    ``(B) Aggregate testing with defined contribution 
                plans permitted on a benefits basis.--
                            ``(i) In general.--For purposes of 
                        determining compliance with subsection (a)(4) 
                        and section 410(b), a defined benefit plan 
                        described in clause (iii) may be aggregated and 
                        tested on a benefits basis with 1 or more 
                        defined contribution plans, including with the 
                        portion of 1 or more defined contribution plans 
                        which--
                                    ``(I) provides matching 
                                contributions (as defined in subsection 
                                (m)(4)(A)),
                                    ``(II) provides annuity contracts 
                                described in section 403(b) which are 
                                purchased with matching contributions 
                                or nonelective contributions, or
                                    ``(III) consists of an employee 
                                stock ownership plan (within the 
                                meaning of section 4975(e)(7)) or a tax 
                                credit employee stock ownership plan 
                                (within the meaning of section 409(a)).
                            ``(ii) Special rules for matching 
                        contributions.--For purposes of clause (i), if 
                        a defined benefit plan is aggregated with a 
                        portion of a defined contribution plan 
                        providing matching contributions--
                                    ``(I) such defined benefit plan 
                                must also be aggregated with any 
                                portion of such defined contribution 
                                plan which provides elective deferrals 
                                described in subparagraph (A) or (C) of 
                                section 402(g)(3), and
                                    ``(II) such matching contributions 
                                shall be treated in the same manner as 
                                nonelective contributions, including 
                                for purposes of applying the rules of 
                                subsection (l).
                            ``(iii) Plans described.--A defined benefit 
                        plan is described in this clause if--
                                    ``(I) the plan provides benefits to 
                                a closed class of participants,
                                    ``(II) for the plan year as of 
                                which the class closes and the 2 
                                succeeding plan years, the plan 
                                satisfies the requirements of section 
                                410(b) and subsection (a)(4) (without 
                                regard to this subparagraph but taking 
                                into account the rules of subparagraph 
                                (I)),
                                    ``(III) after the date as of which 
                                the class was closed, any plan 
                                amendment which modifies the closed 
                                class or the benefits provided to such 
                                closed class does not discriminate 
                                significantly in favor of highly 
                                compensated employees, and
                                    ``(IV) the class was closed before 
                                April 5, 2017, or the plan is described 
                                in subparagraph (C).
                    ``(C) Plans described.--A plan is described in this 
                subparagraph if, taking into account any predecessor 
                plan--
                            ``(i) such plan has been in effect for at 
                        least 5 years as of the date the class is 
                        closed, and
                            ``(ii) during the 5-year period preceding 
                        the date the class is closed, there has not 
                        been a substantial increase in the coverage or 
                        value of the benefits, rights, or features 
                        described in subparagraph (A) or in the 
                        coverage or benefits under the plan described 
                        in subparagraph (B)(iii) (whichever is 
                        applicable).
                    ``(D) Determination of substantial increase for 
                benefits, rights, and features.--In applying 
                subparagraph (C)(ii) for purposes of subparagraph 
                (A)(iii), a plan shall be treated as having had a 
                substantial increase in coverage or value of the 
                benefits, rights, or features described in subparagraph 
                (A) during the applicable 5-year period only if, during 
                such period--
                            ``(i) the number of participants covered by 
                        such benefits, rights, or features on the date 
                        such period ends is more than 50 percent 
                        greater than the number of such participants on 
                        the first day of the plan year in which such 
                        period began, or
                            ``(ii) such benefits, rights, and features 
                        have been modified by 1 or more plan amendments 
                        in such a way that, as of the date the class is 
                        closed, the value of such benefits, rights, and 
                        features to the closed class as a whole is 
                        substantially greater than the value as of the 
                        first day of such 5-year period, solely as a 
                        result of such amendments.
                    ``(E) Determination of substantial increase for 
                aggregate testing on benefits basis.--In applying 
                subparagraph (C)(ii) for purposes of subparagraph 
                (B)(iii)(IV), a plan shall be treated as having had a 
                substantial increase in coverage or benefits during the 
                applicable 5-year period only if, during such period--
                            ``(i) the number of participants 
                        benefitting under the plan on the date such 
                        period ends is more than 50 percent greater 
                        than the number of such participants on the 
                        first day of the plan year in which such period 
                        began, or
                            ``(ii) the average benefit provided to such 
                        participants on the date such period ends is 
                        more than 50 percent greater than the average 
                        benefit provided on the first day of the plan 
                        year in which such period began.
                    ``(F) Certain employees disregarded.--For purposes 
                of subparagraphs (D) and (E), any increase in coverage 
                or value or in coverage or benefits, whichever is 
                applicable, which is attributable to such coverage and 
                value or coverage and benefits provided to employees--
                            ``(i) who became participants as a result 
                        of a merger, acquisition, or similar event 
                        which occurred during the 7-year period 
                        preceding the date the class is closed, or
                            ``(ii) who became participants by reason of 
                        a merger of the plan with another plan which 
                        had been in effect for at least 5 years as of 
                        the date of the merger,
                shall be disregarded, except that clause (ii) shall 
                apply for purposes of subparagraph (D) only if, under 
                the merger, the benefits, rights, or features under 1 
                plan are conformed to the benefits, rights, or features 
                of the other plan prospectively.
                    ``(G) Rules relating to average benefit.--For 
                purposes of subparagraph (E)--
                            ``(i) the average benefit provided to 
                        participants under the plan will be treated as 
                        having remained the same between the 2 dates 
                        described in subparagraph (E)(ii) if the 
                        benefit formula applicable to such participants 
                        has not changed between such dates, and
                            ``(ii) if the benefit formula applicable to 
                        1 or more participants under the plan has 
                        changed between such 2 dates, then the average 
                        benefit under the plan shall be considered to 
                        have increased by more than 50 percent only 
                        if--
                                    ``(I) the total amount determined 
                                under section 430(b)(1)(A)(i) for all 
                                participants benefitting under the plan 
                                for the plan year in which the 5-year 
                                period described in subparagraph (E) 
                                ends, exceeds
                                    ``(II) the total amount determined 
                                under section 430(b)(1)(A)(i) for all 
                                such participants for such plan year, 
                                by using the benefit formula in effect 
                                for each such participant for the first 
                                plan year in such 5-year period, by 
                                more than 50 percent.
                        In the case of a CSEC plan (as defined in 
                        section 414(y)), the normal cost of the plan 
                        (as determined under section 433(j)(1)(B)) 
                        shall be used in lieu of the amount determined 
                        under section 430(b)(1)(A)(i).
                    ``(H) Treatment as single plan.--For purposes of 
                subparagraphs (E) and (G), a plan described in section 
                413(c) shall be treated as a single plan rather than as 
                separate plans maintained by each participating 
                employer.
                    ``(I) Special rules.--For purposes of subparagraphs 
                (A)(i) and (B)(iii)(II), the following rules shall 
                apply:
                            ``(i) In applying section 410(b)(6)(C), the 
                        closing of the class of participants shall not 
                        be treated as a significant change in coverage 
                        under section 410(b)(6)(C)(i)(II).
                            ``(ii) 2 or more plans shall not fail to be 
                        eligible to be aggregated and treated as a 
                        single plan solely by reason of having 
                        different plan years.
                            ``(iii) Changes in the employee population 
                        shall be disregarded to the extent attributable 
                        to individuals who become employees or cease to 
                        be employees, after the date the class is 
                        closed, by reason of a merger, acquisition, 
                        divestiture, or similar event.
                            ``(iv) Aggregation and all other testing 
                        methodologies otherwise applicable under 
                        subsection (a)(4) and section 410(b) may be 
                        taken into account.
                The rule of clause (ii) shall also apply for purposes 
                of determining whether plans to which subparagraph 
                (B)(i) applies may be aggregated and treated as 1 plan 
                for purposes of determining whether such plans meet the 
                requirements of subsection (a)(4) and section 410(b).
                    ``(J) Spun-off plans.--For purposes of this 
                paragraph, if a portion of a defined benefit plan 
                described in subparagraph (A) or (B)(iii) is spun off 
                to another employer and the spun-off plan continues to 
                satisfy the requirements of--
                            ``(i) subparagraph (A)(i) or (B)(iii)(II), 
                        whichever is applicable, if the original plan 
                        was still within the 3-year period described in 
                        such subparagraph at the time of the spin off, 
                        and
                            ``(ii) subparagraph (A)(ii) or 
                        (B)(iii)(III), whichever is applicable,
                the treatment under subparagraph (A) or (B) of the 
                spun-off plan shall continue with respect to such other 
                employer.
            ``(2) Testing of defined contribution plans.--
                    ``(A) Testing on a benefits basis.--A defined 
                contribution plan shall be permitted to be tested on a 
                benefits basis if--
                            ``(i) such defined contribution plan 
                        provides make-whole contributions to a closed 
                        class of participants whose accruals under a 
                        defined benefit plan have been reduced or 
                        eliminated,
                            ``(ii) for the plan year of the defined 
                        contribution plan as of which the class 
                        eligible to receive such make-whole 
                        contributions closes and the 2 succeeding plan 
                        years, such closed class of participants 
                        satisfies the requirements of section 
                        410(b)(2)(A)(i) (determined by applying the 
                        rules of paragraph (1)(I)),
                            ``(iii) after the date as of which the 
                        class was closed, any plan amendment to the 
                        defined contribution plan which modifies the 
                        closed class or the allocations, benefits, 
                        rights, and features provided to such closed 
                        class does not discriminate significantly in 
                        favor of highly compensated employees, and
                            ``(iv) the class was closed before April 5, 
                        2017, or the defined benefit plan under clause 
                        (i) is described in paragraph (1)(C) (as 
                        applied for purposes of paragraph 
                        (1)(B)(iii)(IV)).
                    ``(B) Aggregation with plans including matching 
                contributions.--
                            ``(i) In general.--With respect to 1 or 
                        more defined contribution plans described in 
                        subparagraph (A), for purposes of determining 
                        compliance with subsection (a)(4) and section 
                        410(b), the portion of such plans which 
                        provides make-whole contributions or other 
                        nonelective contributions may be aggregated and 
                        tested on a benefits basis with the portion of 
                        1 or more other defined contribution plans 
                        which--
                                    ``(I) provides matching 
                                contributions (as defined in subsection 
                                (m)(4)(A)),
                                    ``(II) provides annuity contracts 
                                described in section 403(b) which are 
                                purchased with matching contributions 
                                or nonelective contributions, or
                                    ``(III) consists of an employee 
                                stock ownership plan (within the 
                                meaning of section 4975(e)(7)) or a tax 
                                credit employee stock ownership plan 
                                (within the meaning of section 409(a)).
                            ``(ii) Special rules for matching 
                        contributions.--Rules similar to the rules of 
                        paragraph (1)(B)(ii) shall apply for purposes 
                        of clause (i).
                    ``(C) Special rules for testing defined 
                contribution plan features providing matching 
                contributions to certain older, longer service 
                participants.--In the case of a defined contribution 
                plan which provides benefits, rights, or features to a 
                closed class of participants whose accruals under a 
                defined benefit plan have been reduced or eliminated, 
                the plan shall not fail to satisfy the requirements of 
                subsection (a)(4) solely by reason of the composition 
                of the closed class or the benefits, rights, or 
                features provided to such closed class if the defined 
                contribution plan and defined benefit plan otherwise 
                meet the requirements of subparagraph (A) but for the 
                fact that the make-whole contributions under the 
                defined contribution plan are made in whole or in part 
                through matching contributions.
                    ``(D) Spun-off plans.--For purposes of this 
                paragraph, if a portion of a defined contribution plan 
                described in subparagraph (A) or (C) is spun off to 
                another employer, the treatment under subparagraph (A) 
                or (C) of the spun-off plan shall continue with respect 
                to the other employer if such plan continues to comply 
                with the requirements of clauses (ii) (if the original 
                plan was still within the 3-year period described in 
                such clause at the time of the spin off) and (iii) of 
                subparagraph (A), as determined for purposes of 
                subparagraph (A) or (C), whichever is applicable.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Make-whole contributions.--Except as 
                otherwise provided in paragraph (2)(C), the term `make-
                whole contributions' means nonelective allocations for 
                each employee in the class which are reasonably 
                calculated, in a consistent manner, to replace some or 
                all of the retirement benefits which the employee would 
                have received under the defined benefit plan and any 
                other plan or qualified cash or deferred arrangement 
                under subsection (k)(2) if no change had been made to 
                such defined benefit plan and such other plan or 
                arrangement. For purposes of the preceding sentence, 
                consistency shall not be required with respect to 
                employees who were subject to different benefit 
                formulas under the defined benefit plan.
                    ``(B) References to closed class of participants.--
                References to a closed class of participants and 
                similar references to a closed class shall include 
                arrangements under which 1 or more classes of 
                participants are closed, except that 1 or more classes 
                of participants closed on different dates shall not be 
                aggregated for purposes of determining the date any 
                such class was closed.
                    ``(C) Highly compensated employee.--The term 
                `highly compensated employee' has the meaning given 
                such term in section 414(q).".''.
    (b) Participation Requirements.--Paragraph (26) of section 401(a) 
is amended by adding at the end the following new subparagraph:
                    ``(I) Protected participants.--
                            ``(i) In general.--A plan shall be deemed 
                        to satisfy the requirements of subparagraph (A) 
                        if--
                                    ``(I) the plan is amended--
                                            ``(aa) to cease all benefit 
                                        accruals, or
                                            ``(bb) to provide future 
                                        benefit accruals only to a 
                                        closed class of participants,
                                    ``(II) the plan satisfies 
                                subparagraph (A) (without regard to 
                                this subparagraph) as of the effective 
                                date of the amendment, and
                                    ``(III) the amendment was adopted 
                                before April 5, 2017, or the plan is 
                                described in clause (ii).
                            ``(ii) Plans described.--A plan is 
                        described in this clause if the plan would be 
                        described in subsection (o)(1)(C), as applied 
                        for purposes of subsection (o)(1)(B)(iii)(IV) 
                        and by treating the effective date of the 
                        amendment as the date the class was closed for 
                        purposes of subsection (o)(1)(C).
                            ``(iii) Special rules.--For purposes of 
                        clause (i)(II), in applying section 
                        410(b)(6)(C), the amendments described in 
                        clause (i) shall not be treated as a 
                        significant change in coverage under section 
                        410(b)(6)(C)(i)(II).
                            ``(iv) Spun-off plans.--For purposes of 
                        this subparagraph, if a portion of a plan 
                        described in clause (i) is spun off to another 
                        employer, the treatment under clause (i) of the 
                        spun-off plan shall continue with respect to 
                        the other employer.''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on the date 
        of the enactment of this Act, without regard to whether any 
        plan modifications referred to in such amendments are adopted 
        or effective before, on, or after such date of enactment.
            (2) Special rules.--
                    (A) Election of earlier application.--At the 
                election of the plan sponsor, the amendments made by 
                this section shall apply to plan years beginning after 
                December 31, 2013.
                    (B) Closed classes of participants.--For purposes 
                of paragraphs (1)(A)(iii), (1)(B)(iii)(IV), and 
                (2)(A)(iv) of section 401(o) of the Internal Revenue 
                Code of 1986 (as added by this section), a closed class 
                of participants shall be treated as being closed before 
                April 5, 2017, if the plan sponsor's intention to 
                create such closed class is reflected in formal written 
                documents and communicated to participants before such 
                date.
                    (C) Certain post-enactment plan amendments.--A plan 
                shall not be treated as failing to be eligible for the 
                application of section 401(o)(1)(A), 401(o)(1)(B)(iii), 
                or 401(a)(26) of such Code (as added by this section) 
                to such plan solely because in the case of--
                            (i) such section 401(o)(1)(A), the plan was 
                        amended before the date of the enactment of 
                        this Act to eliminate 1 or more benefits, 
                        rights, or features, and is further amended 
                        after such date of enactment to provide such 
                        previously eliminated benefits, rights, or 
                        features to a closed class of participants, or
                            (ii) such section 401(o)(1)(B)(iii) or 
                        section 401(a)(26), the plan was amended before 
                        the date of the enactment of this Act to cease 
                        all benefit accruals, and is further amended 
                        after such date of enactment to provide benefit 
                        accruals to a closed class of participants. Any 
                        such section shall only apply if the plan 
                        otherwise meets the requirements of such 
                        section and in applying such section, the date 
                        the class of participants is closed shall be 
                        the effective date of the later amendment.

    Subtitle G--Estate, Gift, and Generation-skipping Transfer Taxes

SEC. 1601. INCREASE IN CREDIT AGAINST ESTATE, GIFT, AND GENERATION-
              SKIPPING TRANSFER TAX.

    (a) In General.--Section 2010(c)(3) is amended by striking 
``$5,000,000'' and inserting ``$10,000,000''.
    (b) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, generation-skipping transfers, and 
gifts made, after December 31, 2017.

SEC. 1602. REPEAL OF ESTATE AND GENERATION-SKIPPING TRANSFER TAXES.

    (a) Estate Tax Repeal.--
            (1) In general.--Subchapter C of chapter 11 is amended by 
        adding at the end the following new section:

``SEC. 2210. TERMINATION.

    ``(a) In General.--Except as provided in subsection (b), this 
chapter shall not apply to the estates of decedents dying after 
December 31, 2023.
    ``(b) Certain Distributions From Qualified Domestic Trusts.--In 
applying section 2056A with respect to the surviving spouse of a 
decedent dying on or before December 31, 2023--
            ``(1) section 2056A(b)(1)(A) shall not apply to 
        distributions made after the 10-year period beginning on such 
        date, and
            ``(2) section 2056A(b)(1)(B) shall not apply after such 
        date.''.
            (2) Conforming amendments.--Section 1014(b) is amended--
                    (A) in paragraph (6), by striking ``was includible 
                in determining'' and all that follows through the end 
                and inserting ``was includible (or would have been 
                includible without regard to section 2210) in 
                determining the value of the decedent's gross estate 
                under chapter 11 of subtitle B'',
                    (B) in paragraph (9), by striking ``required to be 
                included'' through ``Code of 1939'' and inserting 
                ``required to be included (or would have been required 
                to be included without regard to section 2210) in 
                determining the value of the decedent's gross estate 
                under chapter 11 of subtitle B'', and
                    (C) in paragraph (10), by striking ``Property 
                includible in the gross estate'' and inserting 
                ``Property includible (or which would have been 
                includible without regard to section 2210) in the gross 
                estate''.
            (3) Clerical amendment.--The table of sections for 
        subchapter C of chapter 11 is amended by adding at the end the 
        following new item:

``Sec. 2210. Termination.''.
    (b) Generation-Skipping Transfer Tax Repeal.--
            (1) In general.--Subchapter G of chapter 13 of subtitle B 
        of such Code is amended by adding at the end the following new 
        section:

``SEC. 2664. TERMINATION.

    ``This chapter shall not apply to generation-skipping transfers 
after December 31, 2023.''.
            (2) Clerical amendment.--The table of sections for 
        subchapter G of chapter 13 of such Code is amended by adding at 
        the end the following new item:

``Sec. 2664. Termination.''.
    (c) Conforming Amendments Related to Gift Tax.--
            (1) Computation of gift tax.--Section 2502 is amended by 
        adding at the end the following new subsection:
    ``(d) Gifts Made After 2023.--
            ``(1) In general.--In the case of a gift made after 
        December 31, 2023, subsection (a) shall be applied by 
        substituting `subsection (d)(2)' for `section 2001(c)' and 
        `such subsection' for `such section'.
            ``(2) Rate schedule.--


``If the amount with respect to which    The tentative tax is:
 the tentative tax to be computed is:.
Not over $10,000.......................  18% of such amount.
Over $10,000 but not over $20,000......  $1,800, plus 20% of the excess
                                          over $10,000.
Over $20,000 but not over $40,000......  $3,800, plus 22% of the excess
                                          over $20,000.
Over $40,000 but not over $60,000......  $8,200, plus 24% of the excess
                                          over $40,000.
Over $60,000 but not over $80,000......  $13,000, plus 26% of the excess
                                          over $60,000.
Over $80,000 but not over $100,000.....  $18,200, plus 28% of the excess
                                          over $80,000.
Over $100,000 but not over $150,000....  $23,800, plus 30% of the excess
                                          over $100,000.
Over $150,000 but not over $250,000....  $38,800, plus 32% of the excess
                                          of $150,000.
Over $250,000 but not over $500,000....  $70,800, plus 34% of the excess
                                          over $250,000.
Over $500,000..........................  $155,800, plus 35% of the
                                          excess of $500,000.''.
 

            (2) Lifetime gift exemption.--Section 2505 is amended by 
        adding at the end the following new subsection:
    ``(d) Gifts Made After 2023.--
            ``(1) In general.--In the case of a gift made after 
        December 31, 2023, subsection (a)(1) shall be applied by 
        substituting `the amount of the tentative tax which would be 
        determined under the rate schedule set forth in section 
        2502(a)(2) if the amount with respect to which such tentative 
        tax is to be computed were $10,000,000' for `the applicable 
        credit amount in effect under section 2010(c) which would apply 
        if the donor died as of the end of the calendar year'.
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of any calendar year 
                after 2023, the dollar amount in subsection (a)(1) 
                (after application of this subsection) shall be 
                increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for such 
                        calendar year by substituting `calendar year 
                        2011' for `calendar year 1992' in subparagraph 
                        (B) thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                paragraph (1) is not a multiple of $10,000, such amount 
                shall be rounded to the nearest multiple of $10,000.''.
            (3) Other conforming amendments related to gift tax.--
        Section 2801 is amended by adding at the end the following new 
        subsection: striking and inserting ``section 2502(a)(2)''
    ``(g) Gifts Received After 2023.--In the case of a gift received 
after December 31, 2023, subsection (a)(1) shall be applied by 
substituting `section 2502(a)(2)' for `section 2001(c) as in effect on 
the date of such receipt'.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, generation-skipping transfers, and 
gifts made, after December 31, 2023.

                TITLE II--ALTERNATIVE MINIMUM TAX REPEAL

SEC. 2001. REPEAL OF ALTERNATIVE MINIMUM TAX.

    (a) In General.--Subchapter A of chapter 1 is amended by striking 
part VI (and by striking the item relating to such part in the table of 
parts for subchapter A).
    (b) Credit for Prior Year Minimum Tax Liability.--
            (1) Limitation.--Subsection (c) of section 53 is amended to 
        read as follows:
    ``(c) Limitation.--The credit allowable under subsection (a) shall 
not exceed the regular tax liability of the taxpayer reduced by the sum 
of the credits allowed under subparts A, B, and D.''.
            (2) Credits treated as refundable.--Section 53 is amended 
        by adding at the end the following new subsection:
    ``(e) Portion of Credit Treated as Refundable.--
            ``(1) In general.--In the case of any taxable year 
        beginning in 2019, 2020, 2021, or 2022, the limitation under 
        subsection (c) shall be increased by the AMT refundable credit 
        amount for such year.
            ``(2) AMT refundable credit amount.--For purposes of 
        paragraph (1), the AMT refundable credit amount is an amount 
        equal to 50 percent (100 percent in the case of a taxable year 
        beginning in 2022) of the excess (if any) of--
                    ``(A) the minimum tax credit determined under 
                subsection (b) for the taxable year, over
                    ``(B) the minimum tax credit allowed under 
                subsection (a) for such year (before the application of 
                this subsection for such year).
            ``(3) Credit refundable.--For purposes of this title (other 
        than this section), the credit allowed by reason of this 
        subsection shall be treated as a credit allowed under subpart C 
        (and not this subpart).
            ``(4) Short taxable years.--In the case of any taxable year 
        of less than 365 days, the AMT refundable credit amount 
        determined under paragraph (2) with respect to such taxable 
        year shall be the amount which bears the same ratio to such 
        amount determined without regard to this paragraph as the 
        number of days in such taxable year bears to 365.''.
            (3) Treatment of references.--Section 53(d) is amended by 
        adding at the end the following new paragraph:
            ``(3) AMT term references.--Any references in this 
        subsection to section 55, 56, or 57 shall be treated as a 
        reference to such section as in effect before its repeal by the 
        Tax Cuts and Jobs Act.''.
    (c) Conforming Amendments Related to AMT Repeal.--
            (1) Section 2(d) is amended by striking ``sections 1 and 
        55'' and inserting ``section 1''.
            (2) Section 5(a) is amended by striking paragraph (4).
            (3) Section 11(d) is amended by striking ``the taxes 
        imposed by subsection (a) and section 55'' and inserting ``the 
        tax imposed by subsection (a)''.
            (4) Section 12 is amended by striking paragraph (7).
            (5) Section 26(a) is amended to read as follows:
    ``(a) Limitation Based on Amount of Tax.--The aggregate amount of 
credits allowed by this subpart for the taxable year shall not exceed 
the taxpayer's regular tax liability for the taxable year.''.
            (6) Section 26(b)(2) is amended by striking subparagraph 
        (A).
            (7) Section 26 is amended by striking subsection (c).
            (8) Section 38(c) is amended--
                    (A) by striking paragraphs (1) through (5),
                    (B) by redesignating paragraph (6) as paragraph 
                (2),
                    (C) by inserting before paragraph (2) (as so 
                redesignated) the following new paragraph:
            ``(1) In general.--The credit allowed under subsection (a) 
        for any taxable year shall not exceed the excess (if any) of--
                    ``(A) the sum of--
                            ``(i) so much of the regular tax liability 
                        as does not exceed $25,000, plus
                            ``(ii) 75 percent of so much of the regular 
                        tax liability as exceeds $25,000, over
                    ``(B) the sum of the credits allowable under 
                subparts A and B of this part.'', and
                    (D) by striking ``subparagraph (B) of paragraph 
                (1)'' each place it appears in paragraph (2) (as so 
                redesignated) and inserting ``clauses (i) and (ii) of 
                paragraph (1)(A)''.
            (9) Section 39(a) is amended--
                    (A) by striking ``or the eligible small business 
                credits'' in paragraph (3)(A), and
                    (B) by striking paragraph (4).
            (10) Section 45D(g)(4)(B) is amended by striking ``or for 
        purposes of section 55''.
            (11) Section 54(c)(1) is amended to read as follows:
            ``(1) regular tax liability (as defined in section 26(b)), 
        over''.
            (12) Section 54A(c)(1)(A) is amended to read as follows:
                    ``(A) regular tax liability (as defined in section 
                26(b)), over''.
            (13) Section 148(b)(3) is amended to read as follows:
            ``(3) Tax-exempt bonds not treated as investment 
        property.--The term `investment property' does not include any 
        tax-exempt bond.''.
            (14) Section 168(k)(2) is amended by striking subparagraph 
        (G).
            (15) Section 168(k) is amended by striking paragraph (4).
            (16) Section 168(k)(5) is amended by striking subparagraph 
        (E).
            (17) Section 168(m)(2)(B)(i) is amended by striking 
        ``(determined without regard to paragraph (4) thereof)''.
            (18) Section 168(m)(2) is amended by striking subparagraph 
        (D).
            (19) Section 173 is amended by striking subsection (b).
            (20) Section 174(f) is amended to read as follows:
    ``(f) Cross Reference.--For adjustments to basis of property for 
amounts allowed as deductions as deferred expenses under subsection 
(b), see section 1016(a)(14).''.
            (21) Section 263(c) is amended by striking ``section 59(e) 
        or 291'' and inserting ``section 291''.
            (22) Section 263A(c) is amended by striking paragraph (6) 
        and by redesignating paragraph (7) (as amended) as paragraph 
        (6).
            (23) Section 382(l) is amended by striking paragraph (7) 
        and by redesignating paragraph (8) as paragraph (7).
            (24) Section 443 is amended by striking subsection (d) and 
        by redesignating subsection (e) as subsection (d).
            (25) Section 616 is amended by striking subsection (e).
            (26) Section 617 is amended by striking subsection (i).
            (27) Section 641(c) is amended--
                    (A) in paragraph (2) by striking subparagraph (B) 
                and by redesignating subparagraphs (C) and (D) as 
                subparagraphs (B) and (C), respectively, and
                    (B) in paragraph (3), by striking ``paragraph 
                (2)(C)'' and inserting ``paragraph (2)(B)''.
            (28) Subsections (b) and (c) of section 666 are each 
        amended by striking ``(other than the tax imposed by section 
        55)''.
            (29) Section 848 is amended by striking subsection (i).
            (30) Section 860E(a) is amended by striking paragraph (4).
            (31) Section 871(b)(1) is amended by striking ``or 55''.
            (32) Section 882(a)(1) is amended by striking ``55,''.
            (33) Section 897(a) is amended to read as follows:
    ``(a) Treatment as Effectively Connected With United States Trade 
or Business.--For purposes of this title, gain or loss of a nonresident 
alien individual or a foreign corporation from the disposition of a 
United States real property interest shall be taken into account--
            ``(1) in the case of a nonresident alien individual, under 
        section 871(b)(1), or
            ``(2) in the case of a foreign corporation, under section 
        882(a)(1),
as if the taxpayer were engaged in a trade or business within the 
United States during the taxable year and as if such gain or loss were 
effectively connected with such trade or business.''.
            (34) Section 904(k) is amended to read as follows:
    ``(k) Cross Reference.--For increase of limitation under subsection 
(a) for taxes paid with respect to amounts received which were included 
in the gross income of the taxpayer for a prior taxable year as a 
United States shareholder with respect to a controlled foreign 
corporation, see section 960(b).''.
            (35) Section 911(f) is amended to read as follows:
    ``(f) Determination of Tax Liability.--
            ``(1) In general.--If, for any taxable year, any amount is 
        excluded from gross income of a taxpayer under subsection (a), 
        then, notwithstanding section 1, if such taxpayer has taxable 
        income for such taxable year, the tax imposed by section 1 for 
        such taxable year shall be equal to the excess (if any) of--
                    ``(A) the tax which would be imposed by section 1 
                for such taxable year if the taxpayer's taxable income 
                were increased by the amount excluded under subsection 
                (a) for such taxable year, over
                    ``(B) the tax which would be imposed by section 1 
                for such taxable year if the taxpayer's taxable income 
                were equal to the amount excluded under subsection (a) 
                for such taxable year.
        For purposes of this paragraph, the amount excluded under 
        subsection (a) shall be reduced by the aggregate amount of any 
        deductions or exclusions disallowed under subsection (d)(6) 
        with respect to such excluded amount.
            ``(2) Treatment of capital gain excess.--
                    ``(A) In general.--In applying section 1(h) for 
                purposes of determining the tax under paragraph (1)(A) 
                for any taxable year in which, without regard to this 
                subsection, the taxpayer's net capital gain exceeds 
                taxable income (hereafter in this subparagraph referred 
                to as the capital gain excess)--
                            ``(i) the taxpayer's net capital gain 
                        (determined without regard to section 1(h)(11)) 
                        shall be reduced (but not below zero) by such 
                        capital gain excess,
                            ``(ii) the taxpayer's qualified dividend 
                        income shall be reduced by so much of such 
                        capital gain excess as exceeds the taxpayer's 
                        net capital gain (determined without regard to 
                        section 1(h)(11) and the reduction under clause 
                        (i)), and
                            ``(iii) adjusted net capital gain, 
                        unrecaptured section 1250 gain, and 28-percent 
                        rate gain shall each be determined after 
                        increasing the amount described in section 
                        1(h)(4)(B) by such capital gain excess.
                    ``(B) Definitions.--Terms used in this paragraph 
                which are also used in section 1(h) shall have the 
                respective meanings given such terms by section 
                1(h).''.
            (36) Section 962(a)(1) is amended--
                    (A) by striking ``sections 1 and 55'' and inserting 
                ``section 1'', and
                    (B) by striking ``sections 11 and 55'' and 
                inserting ``section 11''.
            (37) Section 1016(a) is amended by striking paragraph (20).
            (38) Section 1202(a)(4) is amended by inserting ``and'' at 
        the end of subparagraph (A), by striking ``, and'' and 
        inserting a period at the end of subparagraph (B), and by 
        striking subparagraph (C).
            (39) Section 1374(b)(3)(B) is amended by striking the last 
        sentence thereof.
            (40) Section 1561(a) is amended--
                    (A) by inserting ``and'' at the end of paragraph 
                (1), by striking ``, and'' at the end of paragraph (2) 
                and inserting a period, and by striking paragraph (3), 
                and
                    (B) by striking the last sentence.
            (41) Section 6015(d)(2)(B) is amended by striking ``or 
        55''.
            (42) Section 6211(b)(4)(A) is amended by striking``, 
        168(k)(4)''.
            (43) Section 6425(c)(1)(A) is amended to read as follows:
                    ``(A) the tax imposed under section 11 or 
                subchapter L of chapter 1, whichever is applicable, 
                over''.
            (44) Section 6654(d)(2) is amended--
                    (A) in clause (i) of subparagraph (B), by striking 
                ``, alternative minimum taxable income,'', and
                    (B) in clause (i) of subparagraph (C), by striking 
                ``, alternative minimum taxable income,''.
            (45) Section 6655(e)(2)(B)(i) is amended by striking ``The 
        taxable income and alternative minimum taxable income shall'' 
        and inserting ``Taxable income shall''.
            (46) Section 6655(g)(1)(A) is amended by adding ``plus'' at 
        the end of clause (i), by striking clause (ii), and by 
        redesignating clause (iii) as clause (ii).
            (47) Section 6662(e)(3)(C) is amended by striking ``the 
        regular tax (as defined in section 55(c))'' and inserting ``the 
        regular tax liability (as defined in section 26(b))''.
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2017.
            (2) Prior elections with respect to certain tax 
        preferences.--So much of the amendment made by subsection (a) 
        as relates to the repeal of section 59(e) of the Internal 
        Revenue Code of 1986 shall apply to amounts paid or incurred 
        after December 31, 2017.
            (3) Treatment of net operating loss carrybacks.--For 
        purposes of section 56(d) of the Internal Revenue Code of 1986 
        (as in effect before its repeal), the amount of any net 
        operating loss which may be carried back from a taxable year 
        beginning after December 31, 2017, to taxable years beginning 
        before January 1, 2018, shall be determined without regard to 
        any adjustments under section 56(d)(2)(A) of such Code (as so 
        in effect).

                     TITLE III--BUSINESS TAX REFORM

                         Subtitle A--Tax Rates

SEC. 3001. REDUCTION IN CORPORATE TAX RATE.

    (a) In General.--Section 11(b) is amended to read as follows:
    ``(b) Amount of Tax.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the amount of the tax imposed by subsection (a) 
        shall be 20 percent of taxable income.
            ``(2) Special rule for personal service corporations.--
                    ``(A) In general.--In the case of a personal 
                service corporation (as defined in section 448(d)(2)), 
                the amount of the tax imposed by subsection (a) shall 
                be 25 percent of taxable income.
                    ``(B) References to corporate rate.--Any reference 
                to the rate imposed under this section or to the 
                highest rate in effect under this section (or any 
                similar reference) shall be determined without regard 
                to the rate imposed with respect to personal service 
                corporations (as so defined).''.
    (b) Conforming Amendments.--
            (1)(A) Part I of subchapter P of chapter 1 is amended by 
        striking section 1201 (and by striking the item relating to 
        such section in the table of sections for such part).
            (B) Section 12 is amended by striking paragraph (4).
            (C) Section 527(b) is amended--
                    (i) by striking paragraph (2), and
                    (ii) by striking all that precedes ``is hereby 
                imposed'' and inserting:
    ``(b) Tax Imposed.--A tax''.
            (D) Section 594(a) is amended by striking ``taxes imposed 
        by section 11 or 1201(a)'' and inserting ``tax imposed by 
        section 11''.
            (E) Section 691(c)(4) is amended by striking ``1201,''.
            (F) Section 801(a) is amended--
                    (i) by striking paragraph (2), and
                    (ii) by striking all that precedes ``is hereby 
                imposed'' and inserting:
    ``(a) Tax Imposed.--A tax''.
            (G) Section 831(e) is amended by striking paragraph (1) and 
        by redesignating paragraphs (2) and (3) as paragraphs (1) and 
        (2), respectively.
            (H) Sections 832(c)(5) and 834(b)(1)(D) are each amended by 
        striking ``sec. 1201 and following,''.
            (I) Section 852(b)(3)(A) is amended by striking ``section 
        1201(a)'' and inserting ``section 11(b)(1)''.
            (J) Section 857(b)(3) is amended--
                    (i) by striking subparagraph (A) and redesignating 
                subparagraphs (B) through (F) as subparagraphs (A) 
                through (E), respectively,
                    (ii) in subparagraph (C), as so redesignated--
                            (I) by striking ``subparagraph (A)(ii)'' in 
                        clause (i) thereof and inserting ``paragraph 
                        (1)'',
                            (II) by striking ``the tax imposed by 
                        subparagraph (A)(ii)'' in clauses (ii) and (iv) 
                        thereof and inserting ``the tax imposed by 
                        paragraph (1) on undistributed capital gain'',
                    (iii) in subparagraph (E), as so redesignated, by 
                striking ``subparagraph (B) or (D)'' and inserting 
                ``subparagraph (A) or (C)'', and
                    (iv) by adding at the end the following new 
                subparagraph:
                    ``(F) Undistributed capital gain.--For purposes of 
                this paragraph, the term `undistributed capital gain' 
                means the excess of the net capital gain over the 
                deduction for dividends paid (as defined in section 
                561) determined with reference to capital gain 
                dividends only.''.
            (K) Section 882(a)(1) is amended by striking ``, or 
        1201(a)''.
            (L) Section 1374(b) is amended by striking paragraph (4).
            (M) Section 1381(b) is amended by striking ``taxes imposed 
        by section 11 or 1201'' and inserting ``tax imposed by section 
        11''.
            (N) Section 6655(g)(1)(A)(i) is amended by striking ``or 
        1201(a),''.
            (O) Section 7518(g)(6)(A) is amended by striking ``or 
        1201(a)''.
            (2) Section 1445(e)(1) is amended by striking ``35 percent 
        (or, to the extent provided in regulations, 20 percent)'' and 
        inserting ``20 percent''.
            (3) Section 1445(e)(2) is amended by striking ``35 
        percent'' and inserting ``20 percent''.
            (4) Section 1445(e)(6) is amended by striking ``35 percent 
        (or, to the extent provided in regulations, 20 percent)'' and 
        inserting ``20 percent''.
            (5)(A) Part I of subchapter B of chapter 5 is amended by 
        striking section 1551 (and by striking the item relating to 
        such section in the table of sections for such part).
            (B) Section 12 is amended by striking paragraph (6).
            (C) Section 535(c)(5) is amended to read as follows:
            ``(5) Cross reference.--For limitation on credit provided 
        in paragraph (2) or (3) in the case of certain controlled 
        corporations, see section 1561.''.
            (6)(A) Section 1561, as amended by the preceding provisions 
        of this Act, is amended to read as follows:

``SEC. 1561. LIMITATION ON ACCUMULATED EARNINGS CREDIT IN THE CASE OF 
              CERTAIN CONTROLLED CORPORATIONS.

    ``(a) In General.--The component members of a controlled group of 
corporations on a December 31 shall, for their taxable years which 
include such December 31, be limited for purposes of this subtitle to 
one $250,000 ($150,000 if any component member is a corporation 
described in section 535(c)(2)(B)) amount for purposes of computing the 
accumulated earnings credit under section 535(c)(2) and (3). Such 
amount shall be divided equally among the component members of such 
group on such December 31 unless the Secretary prescribes regulations 
permitting an unequal allocation of such amount.
    ``(b) Certain Short Taxable Years.--If a corporation has a short 
taxable year which does not include a December 31 and is a component 
member of a controlled group of corporations with respect to such 
taxable year, then for purposes of this subtitle, the amount to be used 
in computing the accumulated earnings credit under section 535(c)(2) 
and (3) of such corporation for such taxable year shall be the amount 
specified in subsection (a) with respect to such group, divided by the 
number of corporations which are component members of such group on the 
last day of such taxable year. For purposes of the preceding sentence, 
section 1563(b) shall be applied as if such last day were substituted 
for December 31.''.
            (B) The table of sections for part II of subchapter B of 
        chapter 5 is amended by striking the item relating to section 
        1561 and inserting the following new item:

``Sec. 1561. Limitation on accumulated earnings credit in the case of 
                            certain controlled corporations.''.
            (7) Section 7518(g)(6)(A) is amended--
                    (A) by striking ``With respect to the portion'' and 
                inserting ``In the case of a taxpayer other than a 
                corporation, with respect to the portion'', and
                    (B) by striking ``(34 percent in the case of a 
                corporation)''.
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2017.
            (2) Certain conforming amendments.--The amendments made by 
        paragraphs (2), (3), and (4) of subsection (b) shall apply to 
        distributions after December 31, 2017.
    (d) Normalization Requirements.--
            (1) In general.--A normalization method of accounting shall 
        not be treated as being used with respect to any public utility 
        property for purposes of section 167 or 168 of the Internal 
        Revenue Code of 1986 if the taxpayer, in computing its cost of 
        service for ratemaking purposes and reflecting operating 
        results in its regulated books of account, reduces the excess 
        tax reserve more rapidly or to a greater extent than such 
        reserve would be reduced under the average rate assumption 
        method.
            (2) Alternative method for certain taxpayers.--If, as of 
        the first day of the taxable year that includes the date of 
        enactment of this Act--
                    (A) the taxpayer was required by a regulatory 
                agency to compute depreciation for public utility 
                property on the basis of an average life or composite 
                rate method, and
                    (B) the taxpayer's books and underlying records did 
                not contain the vintage account data necessary to apply 
                the average rate assumption method,
        the taxpayer will be treated as using a normalization method of 
        accounting if, with respect to such jurisdiction, the taxpayer 
        uses the alternative method for public utility property that is 
        subject to the regulatory authority of that jurisdiction.
            (3) Definitions.--For purposes of this subsection--
                    (A) Excess tax reserve.--The term ``excess tax 
                reserve'' means the excess of--
                            (i) the reserve for deferred taxes (as 
                        described in section 168(i)(9)(A)(ii) of the 
                        Internal Revenue Code of 1986 as in effect on 
                        the day before the date of the enactment of 
                        this Act), over
                            (ii) the amount which would be the balance 
                        in such reserve if the amount of such reserve 
                        were determined by assuming that the corporate 
                        rate reductions provided in this Act were in 
                        effect for all prior periods.
                    (B) Average rate assumption method.--The average 
                rate assumption method is the method under which the 
                excess in the reserve for deferred taxes is reduced 
                over the remaining lives of the property as used in its 
                regulated books of account which gave rise to the 
                reserve for deferred taxes. Under such method, if 
                timing differences for the property reverse, the amount 
                of the adjustment to the reserve for the deferred taxes 
                is calculated by multiplying--
                            (i) the ratio of the aggregate deferred 
                        taxes for the property to the aggregate timing 
                        differences for the property as of the 
                        beginning of the period in question, by
                            (ii) the amount of the timing differences 
                        which reverse during such period.
                    (C) Alternative method.--The ``alternative method'' 
                is the method in which the taxpayer--
                            (i) computes the excess tax reserve on all 
                        public utility property included in the plant 
                        account on the basis of the weighted average 
                        life or composite rate used to compute 
                        depreciation for regulatory purposes, and
                            (ii) reduces the excess tax reserve ratably 
                        over the remaining regulatory life of the 
                        property.
            (4) Tax increased for normalization violation.--If, for any 
        taxable year ending after the date of the enactment of this 
        Act, the taxpayer does not use a normalization method of 
        accounting, the taxpayer's tax for the taxable year shall be 
        increased by the amount by which it reduces its excess tax 
        reserve more rapidly than permitted under a normalization 
        method of accounting.

                       Subtitle B--Cost Recovery

SEC. 3101. INCREASED EXPENSING.

    (a) 100 Percent Expensing.--Section 168(k)(1)(A) is amended by 
striking ``50 percent'' and inserting ``100 percent''.
    (b) Extension Through January 1, 2023.--Section 168(k)(2) is 
amended--
            (1) in subparagraph (A)(iii), by striking ``January 1, 
        2020'' and inserting ``January 1, 2023'',
            (2) in subparagraph (B)(i)(II), by striking ``January 1, 
        2021'' and inserting ``January 1, 2024'',
            (3) in subparagraph (B)(i)(III), by striking ``January 1, 
        2020'' and inserting ``January 1, 2023'',
            (4) in subparagraph (B)(ii), by striking ``January 1, 
        2020'' in each place it appears and inserting ``January 1, 
        2023'', and
            (5) in subparagraph (E)(i), by striking ``January 1, 2020'' 
        and replacing it with ``January 1, 2023''.
    (c) Application to Used Property.--
            (1) In general.--Section 168(k)(2)(A)(ii) is amended to 
        read as follows:
                            ``(ii) the original use of which begins 
                        with the taxpayer or the acquisition of which 
                        by the taxpayer meets the requirements of 
                        clause (ii) of subparagraph (E), and''.
            (2) Acquisition requirements.--Section 168(k)(2)(E)(ii) is 
        amended to read as follows:
                            ``(ii) Acquisition requirements.--An 
                        acquisition of property meets the requirements 
                        of this clause if--
                                    ``(I) such property was not used by 
                                the taxpayer at any time prior to such 
                                acquisition, and
                                    ``(II) the acquisition of such 
                                property meets the requirements of 
                                paragraphs (2)(A), (2)(B), (2)(C), and 
                                (3) of section 179(d).'',
            (3) Anti-abuse rules.--Section 168(k)(2)(E) is further 
        amended by amending clause (iii)(I) to read as follows:
                                    ``(I) property is used by a lessor 
                                of such property and such use is the 
                                lessor's first use of such property,''.
    (d) Exception for Certain Trades and Businesses Not Subject to 
Limitation on Interest Expense.--Section 168(k)(2), as amended by 
section 2001, is amended by inserting after subparagraph (F) the 
following new subparagraph:
                    ``(G) Exception for certain property of real 
                property businesses and regulated utilities.--The term 
                `qualified property' shall not include any property 
                used in a trade or business described in subparagraph 
                (B) or (C) of section 163(j)(7).''.
    (e) Coordination With Section 280F.--Section 168(k)(2)(F) is 
amended--
            (1) by striking ``$8,000'' in clauses (i) and (iii) and 
        inserting ``$16,000'', and
            (2) in clause (iii)--
                    (A) by striking ``placed in service by the taxpayer 
                after December 31, 2017'' and inserting ``acquired by 
                the taxpayer before September 28, 2017, and placed in 
                service by the taxpayer after September 27, 2017'', and
                    (B) by redesignating subclauses (I) and (II) as 
                subclauses (II) and (III) respectively, and inserting 
                before clause (II), as so redesignated, the following 
                new subclause:
                                    ``(I) in the case of a passenger 
                                automobile placed in service before 
                                January 1, 2018, `$8,000',''.
    (f) Conforming Amendments.--
            (1) Section (k)(2)(B)(i)(III), as amended, is amended by 
        inserting ``binding'' before ``contract''.
            (2) Section 168(k)(5) is amended by--
                    (A) by striking ``January 1, 2020'' in subparagraph 
                (A) and inserting ``January 1, 2023'',
                    (B) by striking ``50 percent'' in subparagraph 
                (A)(i) and inserting ``100 percent'', and
                    (C) by striking subparagraph (F).
            (3) Section 168(k)(6) is amended to read as follows:
            ``(6) Phase down.--In the case of qualified property 
        acquired by the taxpayer before September 28, 2017, and placed 
        in service by the taxpayer after September 27, 2017, paragraph 
        (1)(A) shall be applied by substituting for `100 percent'--
                    ``(A) `50 percent' in the case of--
                            ``(i) property placed in service before 
                        January 1, 2018, and
                            ``(ii) property described in subparagraph 
                        (B) or (C) of paragraph (2) which is placed in 
                        service in 2018,
                    ``(B) `40 percent' in the case of--
                            ``(i) property placed in service in 2018 
                        (other than property described in subparagraph 
                        (B) or (C) of paragraph (2)), and
                            ``(ii) property described in subparagraph 
                        (B) or (C) of paragraph (2) which is placed in 
                        service in 2019, and
                    ``(C) `30 percent' in the case of--
                            ``(i) property placed in service in 2019 
                        (other than property described in subparagraph 
                        (B) or (C) of paragraph (2)), and
                            ``(ii) property described in subparagraph 
                        (B) or (C) of paragraph (2) which is placed in 
                        service in 2020.''.
            (4) The heading of section 168(k) is amended by striking 
        ``Special Allowance for Certain Property Acquired After 
        December 31, 2007, and Before January 1, 2020'' and inserting 
        ``Full Expensing of Certain Property''.
            (5) Section 460(c)(6)(B)(ii) is amended by striking 
        ``January 1, 2020 (January 1, 2021 in the case of property 
        described in section 168(k)(2)(B))'' and inserting ``January 1, 
        2023 (January 1, 2024 in the case of property described in 
        section 168(k)(2)(B))''.
    (g) Effective Date.--
            (1) In general.--Except at provided by paragraph (2), the 
        amendments made by this section shall apply to property which--
                    (A) is acquired after September 27, 2017, and
                    (B) is placed in service after such date.
        For purposes of the preceding sentence, property shall not be 
        treated as acquired after the date on which a written binding 
        contract is entered into for such acquisition.
            (2) Specified plants.--The amendments made by subsection 
        (f)(2) shall apply to specified plants planted or grafted after 
        September 27, 2017.
            (3) Transition rule.--In the case of any taxpayer's first 
        taxable year ending after September 27, 2017, the taxpayer may 
        elect (at such time and in such form and manner as the 
        Secretary of the Treasury, or his designee, may provide) to 
        apply section 168 of the Internal Revenue Code of 1986 without 
        regard to the amendments made by this section.
            (4) Limitation on net operating loss carrybacks 
        attributable to full expensing.--In the case of any taxable 
        year which includes any portion of the period beginning on 
        September 28, 2017, and ending on December 31, 2017, the amount 
        of any net operating loss for such taxable year which may be 
        treated as a net operating loss carryback (including any such 
        carryback attributable to any specified liability loss under 
        section 172(b)(1)(C), any corporate equity reduction interest 
        loss under section 172(b)(1)(D), any eligible loss under 
        section 172(b)(1)(E), and any farming loss under section 
        172(b)(1)(F)) shall be determined without regard to the 
        amendments made by this section. For purposes of this 
        paragraph, terms which are used in section 172 of the Internal 
        Revenue Code of 1986 (determined without regard to the 
        amendments made by section 3302) shall have the same meaning as 
        when used in such section.

                   Subtitle C--Small Business Reforms

SEC. 3201. EXPANSION OF SECTION 179 EXPENSING.

    (a) Increased Dollar Limitations.--
            (1) In general.--Section 179(b) is amended--
                    (A) by inserting ``($5,000,000, in the case of 
                taxable years beginning before January 1, 2023)'' after 
                ``$500,000'' in paragraph (1), and
                    (B) by inserting ``($20,000,000, in the case of 
                taxable years beginning before January 1, 2023)'' after 
                ``$2,000,000'' in paragraph (2).
            (2) Inflation adjustment.--Section 179(b)(6) is amended to 
        read as follows:
            ``(6) Inflation adjustment.--
                    ``(A) In general.--In the case of a taxable year 
                beginning after 2015 (2018 in the case of the 
                $5,000,000 and $20,000,000 amounts in subsection (b)), 
                each dollar amount in subsection (b) shall be increased 
                by an amount equal to such dollar amount multiplied 
                by--
                            ``(i) in the case of the $500,000 and 
                        $2,000,000 amounts in subsection (b), the cost-
                        of-living adjustment determined under section 
                        1(c)(2) for the calendar year in which the 
                        taxable year begins, determined by substituting 
                        `calendar year 2014' for `calendar year 2016' 
                        in subparagraph (A)(ii) thereof, and
                            ``(ii) in the case of the $5,000,000 and 
                        $20,000,000 amounts in subsection (b), the 
                        cost-of-living adjustment determined under 
                        section 1(c)(2) for the calendar year in which 
                        the taxable year begins, determined by 
                        substituting `calendar year 2017' for `calendar 
                        year 2016' in subparagraph (A)(ii) thereof.
                    ``(B) Rounding.--The amount of any increase under 
                subparagraph (A) shall be rounded to the nearest 
                multiple of $10,000 ($100,000 in the case of the 
                $5,000,000 and $20,000,000 amounts in subsection 
                (b)).''.
    (b) Application to Qualified Energy Efficient Heating and Air-
Conditioning Property.--
            (1) In general.--Section 179(f)(2) is amended by striking 
        ``and'' at the end of subparagraph (B), by striking the period 
        at the end of subparagraph (C) and inserting ``, and'', and by 
        adding at the end the following new subparagraph:
                    ``(D) qualified energy efficient heating and air-
                conditioning property.''.
            (2) Qualified energy efficient heating and air-conditioning 
        property.--Section 179(f) is amended by adding at the end the 
        following new paragraph:
            ``(3) Qualified energy efficient heating and air-
        conditioning property.--For purposes of this subsection--
                    ``(A) In general.--The term `qualified energy 
                efficient heating and air-conditioning property' means 
                any section 1250 property--
                            ``(i) with respect to which depreciation 
                        (or amortization in lieu of depreciation) is 
                        allowable,
                            ``(ii) which is installed as part of a 
                        building's heating, cooling, ventilation, or 
                        hot water system, and
                            ``(iii) which is within the scope of 
                        Standard 90.1-2007 or any successor standard.
                    ``(B) Standard 90.1-2007.--The term `Standard 90.1-
                2007' means Standard 90.1-2007 of the American Society 
                of Heating, Refrigerating and Air-Conditioning 
                Engineers and the Illuminating Engineering Society of 
                North America (as in effect on the day before the date 
                of the adoption of Standard 90.1-2010 of such 
                Societies).''.
    (c) Effective Date.--
            (1) Increased dollar limitations.--The amendments made by 
        subsection (a) shall apply to taxable years beginning after 
        December 31, 2017.
            (2) Application to qualified energy efficient heating and 
        air-conditioning property.--The amendments made by subsection 
        (b) shall apply to property acquired and placed in service 
        after November 2, 2017. For purposes of the preceding sentence, 
        property shall not be treated as acquired after the date on 
        which a written binding contract is entered into for such 
        acquisition.

SEC. 3202. SMALL BUSINESS ACCOUNTING METHOD REFORM AND SIMPLIFICATION.

    (a) Modification of Limitation on Cash Method of Accounting.--
            (1) Increased limitation.--So much of section 448(c) as 
        precedes paragraph (2) is amended to read as follows:
    ``(c) Gross Receipts Test.--For purposes of this section--
            ``(1) In general.--A corporation or partnership meets the 
        gross receipts test of this subsection for any taxable year if 
        the average annual gross receipts of such entity for the 3-
        taxable-year period ending with the taxable year which precedes 
        such taxable year does not exceed $25,000,000.''.
            (2) Application of exception on annual basis.--Section 
        448(b)(3) is amended to read as follows:
            ``(3) Entities which meet gross receipts test.--Paragraphs 
        (1) and (2) of subsection (a) shall not apply to any 
        corporation or partnership for any taxable year if such entity 
        (or any predecessor) meets the gross receipts test of 
        subsection (c) for such taxable year.''.
            (3) Inflation adjustment.--Section 448(c) is amended by 
        adding at the end the following new paragraph:
            ``(4) Adjustment for inflation.--In the case of any taxable 
        year beginning after December 31, 2018, the dollar amount in 
        paragraph (1) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(c)(2) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                2017' for `calendar year 2016' in subparagraph (A)(ii) 
                thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $1,000,000, such amount shall be rounded to the 
        nearest multiple of $1,000,000.''.
            (4) Coordination with section 481.--Section 448(d)(7) is 
        amended to read as follows:
            ``(7) Coordination with section 481.--Any change in method 
        of accounting made pursuant to this section shall be treated 
        for purposes of section 481 as initiated by the taxpayer and 
        made with the consent of the Secretary.''.
            (5) Application of exception to corporations engaged in 
        farming.--
                    (A) In general.--Section 447(c) is amended--
                            (i) by inserting ``for any taxable year'' 
                        after ``not being a corporation'' in the matter 
                        preceding paragraph (1), and
                            (ii) by amending paragraph (2) to read as 
                        follows:
            ``(2) a corporation which meets the gross receipts test of 
        section 448(c) for such taxable year.''.
                    (B) Coordination with section 481.--Section 447(f) 
                is amended to read as follows:
    ``(f) Coordination With Section 481.--Any change in method of 
accounting made pursuant to this section shall be treated for purposes 
of section 481 as initiated by the taxpayer and made with the consent 
of the Secretary.''.
                    (C) Conforming amendments.--Section 447 is 
                amended--
                            (i) by striking subsections (d), (e), (h), 
                        and (i), and
                            (ii) by redesignating subsections (f) and 
                        (g) (as amended by subparagraph (B)) as 
                        subsections (d) and (e), respectively.
    (b) Exemption From UNICAP Requirements.--
            (1) In general.--Section 263A is amended by redesignating 
        subsection (i) as subsection (j) and by inserting after 
        subsection (h) the following new subsection:
    ``(i) Exemption for Certain Small Businesses.--
            ``(1) In general.--In the case of any taxpayer (other than 
        a tax shelter prohibited from using the cash receipts and 
        disbursements method of accounting under section 448(a)(3)) 
        which meets the gross receipts test of section 448(c) for any 
        taxable year, this section shall not apply with respect to such 
        taxpayer for such taxable year.
            ``(2) Application of gross receipts test to individuals, 
        etc.--In the case of any taxpayer which is not a corporation or 
        a partnership, the gross receipts test of section 448(c) shall 
        be applied in the same manner as if each trade or business of 
        such taxpayer were a corporation or partnership.
            ``(3) Coordination with section 481.--Any change in method 
        of accounting made pursuant to this subsection shall be treated 
        for purposes of section 481 as initiated by the taxpayer and 
        made with the consent of the Secretary.''.
            (2) Conforming amendment.--Section 263A(b)(2) is amended to 
        read as follows:
            ``(2) Property acquired for resale.--Real or personal 
        property described in section 1221(a)(1) which is acquired by 
        the taxpayer for resale.''.
    (c) Exemption From Inventories.--Section 471 is amended by 
redesignating subsection (c) as subsection (d) and by inserting after 
subsection (b) the following new subsection:
    ``(c) Exemption for Certain Small Businesses.--
            ``(1) In general.--In the case of any taxpayer (other than 
        a tax shelter prohibited from using the cash receipts and 
        disbursements method of accounting under section 448(a)(3)) 
        which meets the gross receipts test of section 448(c) for any 
        taxable year--
                    ``(A) subsection (a) shall not apply with respect 
                to such taxpayer for such taxable year, and
                    ``(B) the taxpayer's method of accounting for 
                inventory for such taxable year shall not be treated as 
                failing to clearly reflect income if such method 
                either--
                            ``(i) treats inventory as non-incidental 
                        materials and supplies, or
                            ``(ii) conforms to such taxpayer's method 
                        of accounting reflected in an applicable 
                        financial statement of the taxpayer with 
                        respect to such taxable year or, if the 
                        taxpayer does not have any applicable financial 
                        statement with respect to such taxable year, 
                        the books and records of the taxpayer prepared 
                        in accordance with the taxpayer's accounting 
                        procedures.
            ``(2) Applicable financial statement.--For purposes of this 
        subsection, the term `applicable financial statement' means--
                    ``(A) a financial statement which is certified as 
                being prepared in accordance with generally accepted 
                accounting principles and which is--
                            ``(i) a 10-K (or successor form), or annual 
                        statement to shareholders, required to be filed 
                        by the taxpayer with the United States 
                        Securities and Exchange Commission,
                            ``(ii) an audited financial statement of 
                        the taxpayer which is used for--
                                    ``(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 of the 
                        taxpayer described in clause (i), or
                            ``(iii) filed by the taxpayer with any 
                        other Federal or State agency for nontax 
                        purposes, but only if there is no statement of 
                        the taxpayer described in clause (i) or (ii), 
                        or
                    ``(B) a financial statement of the taxpayer which--
                            ``(i) is used for a purpose described in 
                        subclause (I), (II), or (III) of subparagraph 
                        (A)(ii), or
                            ``(ii) filed by the taxpayer with any 
                        regulatory or governmental body (whether 
                        domestic or foreign) specified by the 
                        Secretary,
                but only if there is no statement of the taxpayer 
                described in subparagraph (A).
            ``(3) Application of gross receipts test to individuals, 
        etc.--In the case of any taxpayer which is not a corporation or 
        a partnership, the gross receipts test of section 448(c) shall 
        be applied in the same manner as if each trade or business of 
        such taxpayer were a corporation or partnership.
            ``(4) Coordination with section 481.--Any change in method 
        of accounting made pursuant to this subsection shall be treated 
        for purposes of section 481 as initiated by the taxpayer and 
        made with the consent of the Secretary.''.
    (d) Exemption From Percentage Completion for Long-Term Contracts.--
            (1) In general.--Section 460(e)(1)(B) is amended--
                    (A) by inserting ``(other than a tax shelter 
                prohibited from using the cash receipts and 
                disbursements method of accounting under section 
                448(a)(3))'' after ``taxpayer'' in the matter preceding 
                clause (i), and
                    (B) by amending clause (ii) to read as follows:
                            ``(ii) who meets the gross receipts test of 
                        section 448(c) for the taxable year in which 
                        such contract is entered into.''.
            (2) Conforming amendments.--Section 460(e) is amended by 
        striking paragraphs (2) and (3), by redesignating paragraphs 
        (4), (5), and (6) as paragraphs (3), (4), and (5), 
        respectively, and by inserting after paragraph (1) the 
        following new paragraph:
            ``(2) Rules related to gross receipts test.--
                    ``(A) Application of gross receipts test to 
                individuals, etc.--For purposes of paragraph 
                (1)(B)(ii), in the case of any taxpayer which is not a 
                corporation or a partnership, the gross receipts test 
                of section 448(c) shall be applied in the same manner 
                as if each trade or business of such taxpayer were a 
                corporation or partnership.
                    ``(B) Coordination with section 481.--Any change in 
                method of accounting made pursuant to paragraph 
                (1)(B)(ii) shall be treated as initiated by the 
                taxpayer and made with the consent of the Secretary. 
                Such change shall be effected on a cut-off basis for 
                all similarly classified contracts entered into on or 
                after the year of change.''.
    (e) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2017.
            (2) Preservation of suspense account rules with respect to 
        any existing suspense accounts.--So much of the amendments made 
        by subsection (a)(5)(C) as relate to section 447(i) of the 
        Internal Revenue Code of 1986 shall not apply with respect to 
        any suspense account established under such section before the 
        date of the enactment of this Act.
            (3) Exemption from percentage completion for long-term 
        contracts.--The amendments made by subsection (d) shall apply 
        to contracts entered into after December 31, 2017, in taxable 
        years ending after such date.

SEC. 3203. SMALL BUSINESS EXCEPTION FROM LIMITATION ON DEDUCTION OF 
              BUSINESS INTEREST.

    (a) In General.--Section 163(j)(2), as amended by section 3301, is 
amended to read as follows:
            ``(2) Exemption for certain small businesses.--In the case 
        of any taxpayer (other than a tax shelter prohibited from using 
        the cash receipts and disbursements method of accounting under 
        section 448(a)(3)) which meets the gross receipts test of 
        section 448(c) for any taxable year, paragraph (1) shall not 
        apply to such taxpayer for such taxable year. In the case of 
        any taxpayer which is not a corporation or a partnership, the 
        gross receipts test of section 448(c) shall be applied in the 
        same manner as if such taxpayer were a corporation or 
        partnership.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

  Subtitle D--Reform of Business-related Exclusions, Deductions, etc.

SEC. 3301. INTEREST.

    (a) In General.--Section 163(j) is amended to read as follows:
    ``(j) Limitation on Business Interest.--
            ``(1) In general.--In the case of any taxpayer for any 
        taxable year, the amount allowed as a deduction under this 
        chapter for business interest shall not exceed the sum of--
                    ``(A) the business interest income of such taxpayer 
                for such taxable year, plus
                    ``(B) 30 percent of the adjusted taxable income of 
                such taxpayer for such taxable year.
        The amount determined under subparagraph (B) (after any 
        increases in such amount under paragraph (3)(A)(iii)) shall not 
        be less than zero.
            ``(2) Exemption for certain small businesses.--For 
        exemption for certain small businesses, see the amendment made 
        by section 3204 of the Tax Cuts and Jobs Act.
            ``(3) Application to partnerships, etc.--
                    ``(A) In general.--In the case of any partnership--
                            ``(i) this subsection shall be applied at 
                        the partnership level and any deduction for 
                        business interest shall be taken into account 
                        in determining the non-separately stated 
                        taxable income or loss of the partnership,
                            ``(ii) the adjusted taxable income of each 
                        partner of such partnership shall be determined 
                        without regard to such partner's distributive 
                        share of the non-separately stated taxable 
                        income or loss of such partnership, and
                            ``(iii) the amount determined under 
                        paragraph (1)(B) with respect to each partner 
                        of such partnership shall be increased by such 
                        partner's distributive share of such 
                        partnership's excess amount.
                    ``(B) Excess amount.--The term `excess amount' 
                means, with respect to any partnership, the excess (if 
                any) of--
                            ``(i) 30 percent of the adjusted taxable 
                        income of the partnership, over
                            ``(ii) the amount (if any) by which the 
                        business interest of the partnership exceeds 
                        the business interest income of the 
                        partnership.
                    ``(C) Application to s corporations.--Rules similar 
                to the rules of subparagraphs (A) and (B) shall apply 
                with respect to any S corporation and its shareholders.
            ``(4) Business interest.--For purposes of this subsection, 
        the term `business interest' means any interest paid or accrued 
        on indebtedness properly allocable to a trade or business. Such 
        term shall not include investment interest (within the meaning 
        of subsection (d)).
            ``(5) Business interest income.--For purposes of this 
        subsection, the term `business interest income' 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 (within the meaning of subsection (d)).
            ``(6) Adjusted taxable income.--For purposes of this 
        subsection, the term `adjusted taxable income' means the 
        taxable income of the taxpayer--
                    ``(A) computed without regard to--
                            ``(i) any item of income, gain, deduction, 
                        or loss which is not properly allocable to a 
                        trade or business,
                            ``(ii) any business interest or business 
                        interest income,
                            ``(iii) the amount of any net operating 
                        loss deduction under section 172, and
                            ``(iv) any deduction allowable for 
                        depreciation, amortization, or depletion, and
                    ``(B) computed with such other adjustments as the 
                Secretary may provide.
            ``(7) Trade or business.--For purposes of this subsection, 
        the term `trade or business' shall not include--
                    ``(A) the trade or business of performing services 
                as an employee,
                    ``(B) a real property trade or business (as such 
                term is defined in section 469(c)(7)(C)), or
                    ``(C) the trade or business of the furnishing 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, or
                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, or by a public 
                service or public utility commission or other similar 
                body of any State or political subdivision thereof.
            ``(8) Carryforward of disallowed interest.--For 
        carryforward of interest disallowed under paragraph (1), see 
        subsection (o).''.
    (b) Carryforward of Disallowed Business Interest.--Section 163, 
after amendment by section 4302(a) and before amendment by section 
4302(b), is amended by inserting after subsection (n) the following new 
subsection:
    ``(o) Carryforward of Disallowed Business Interest.--The amount of 
any business interest not allowed as a deduction for any taxable year 
by reason of subsection (j) shall be treated as business interest paid 
or accrued in the succeeding taxable year. Business interest paid or 
accrued in any taxable year (determined without regard to the preceding 
sentence) shall not be carried past the 5th taxable year following such 
taxable year, determined by treating business interest as allowed as a 
deduction on a first-in, first-out basis.''.
    (c) Treatment of Carryforward of Disallowed Business Interest in 
Certain Corporate Acquisitions.--
            (1) In general.--Section 381(c) is amended by inserting 
        after paragraph (19) the following new paragraph:
            ``(20) Carryforward of disallowed interest.--The carryover 
        of disallowed interest described in section 163(o) to taxable 
        years ending after the date of distribution or transfer.''.
            (2) Application of limitation.--Section 382(d) is amended 
        by adding at the end the following new paragraph:
            ``(3) Application to carryforward of disallowed interest.--
        The term `pre-change loss' shall include any carryover of 
        disallowed interest described in section 163(o) under rules 
        similar to the rules of paragraph (1).''.
            (3) Conforming amendment.--Section 382(k)(1) is amended by 
        inserting after the first sentence the following: ``Such term 
        shall include any corporation entitled to use a carryforward of 
        disallowed interest described in section 381(c)(20).''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3302. MODIFICATION OF NET OPERATING LOSS DEDUCTION.

    (a) Indefinite Carryforward of Net Operating Losses.--Section 
172(b)(1)(A)(ii) is amended by striking ``to each of the 20 taxable 
years'' and inserting ``to each taxable year''.
    (b) Repeal of Net Operating Loss Carrybacks Other Than 1-Year 
Carryback of Eligible Disaster Losses.--
            (1) In general.--Section 172(b)(1)(A)(i) is amended to read 
        as follows:
                            ``(i) in the case of any portion of a net 
                        operating loss for the taxable year which is an 
                        eligible disaster loss with respect to the 
                        taxpayer, shall be a net operating loss 
                        carryback to the taxable year preceding the 
                        taxable year of such loss, and''.
            (2) Conforming amendments.--
                    (A) Section 172(b)(1) is amended by striking 
                subparagraphs (B) through (F) and inserting the 
                following:
                    ``(B) Eligible disaster loss.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A)(i), the term `eligible 
                        disaster loss' means--
                                    ``(I) in the case of a taxpayer 
                                which is a small business, net 
                                operating losses attributable to 
                                federally declared disasters (as 
                                defined by section 165(i)(5)), and
                                    ``(II) in the case of a taxpayer 
                                engaged in the trade or business of 
                                farming, net operating losses 
                                attributable to such federally declared 
                                disasters.
                            ``(ii) Small business.--For purposes of 
                        this subparagraph, the term `small business' 
                        means a corporation or partnership which meets 
                        the gross receipts test of section 448(c) 
                        (determined by substituting `$5,000,000' for 
                        `$25,000,000' each place it appears therein) 
                        for the taxable year in which the loss arose 
                        (or, in the case of a sole proprietorship, 
                        which would meet such test if such 
                        proprietorship were a corporation).
                            ``(iii) Trade or business of farming.--For 
                        purposes of this subparagraph, the trade or 
                        business of farming shall include the trade or 
                        business of--
                                    ``(I) operating a nursery or sod 
                                farm, or
                                    ``(II) the raising or harvesting of 
                                trees bearing fruit, nuts, or other 
                                crops, or ornamental trees.
                        For purposes of subclause (II), an evergreen 
                        tree which is more than 6 years old at the time 
                        severed from the roots shall not be treated as 
                        an ornamental tree.''.
                    (B) Section 172 is amended by striking subsections 
                (f), (g), and (h).
    (c) Limitation of Net Operating Loss to 90 Percent of Taxable 
Income.--
            (1) In general.--Section 172(a) is amended to read as 
        follows:
    ``(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 of taxable income computed without regard 
        to the deduction allowable 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 without 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
                    ``(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 without 
                regard to the deduction for dividends paid (as defined 
                in section 561))' for `taxable income'.''.
    (d) Annual Increase of Indefinite Carryover Amounts.--Section 
172(b) is amended by redesignating paragraph (3) as paragraph (4) and 
by inserting after paragraph (2) the following new paragraph:
            ``(3) Annual increase of indefinite carryover amounts.--For 
        purposes of paragraph (2)--
                    ``(A) the amount of any indefinite net operating 
                loss which is carried to the next succeeding taxable 
                year after the loss year (within the meaning of 
                paragraph (2)) shall be increased by an amount equal 
                to--
                            ``(i) the amount of the loss which may be 
                        so carried over to such succeeding taxable year 
                        (determined without regard to this paragraph), 
                        multiplied by
                            ``(ii) the sum of--
                                    ``(I) the annual Federal short-term 
                                rate (determined under section 1274(d)) 
                                for the last month ending before the 
                                beginning of such taxable year, plus
                                    ``(II) 4 percentage points, and
                    ``(B) the amount of any indefinite net operating 
                loss which is carried to any succeeding taxable year 
                (after such next succeeding taxable year) shall be an 
                amount equal to--
                            ``(i) the excess of--
                                    ``(I) the amount of the loss 
                                carried to the prior taxable year 
                                (after any increase under this 
                                paragraph with respect to such amount), 
                                over
                                    ``(II) the amount by which such 
                                loss was reduced under paragraph (2) by 
                                reason of the taxable income for such 
                                prior taxable year, multiplied by
                            ``(ii) a percentage equal to 100 percent 
                        plus the percentage determined under 
                        subparagraph (A)(ii) with respect to such 
                        succeeding taxable year.
                For purposes of the preceding sentence, the term 
                `indefinite net operating loss' means any net operating 
                loss arising in a taxable year beginning after December 
                31, 2017.''.
    (e) Effective Date.--
            (1) Carryforwards and carrybacks.--The amendments made by 
        subsections (a) and (b) shall apply to net operating losses 
        arising in taxable years beginning after December 31, 2017.
            (2) Net operating loss limited to 90 percent of taxable 
        income.--The amendments made by subsection (c) shall apply to 
        taxable years beginning after December 31, 2017.
            (3) Annual increase in carryover amounts.--The amendments 
        made by subsection (d) shall apply to amounts carried to 
        taxable years beginning after December 31, 2017.
            (4) Special rule for net disaster losses.--Notwithstanding 
        paragraph (1), the amendments made by subsection (b) shall not 
        apply to the portion of the net operating loss for any taxable 
        year which is a net disaster loss to which section 504(b) of 
        the Disaster Tax Relief and Airport and Airway Extension Act of 
        2017 applies.

SEC. 3303. 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.--
            (1) 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 exchange of real property 
        held primarily for sale.''.
            (2) Section 1031 is amended by striking subsections (e) and 
        (i).
            (3) Section 1031, as amended by paragraph (2), is amended 
        by inserting after subsection (d) the following 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 excluded from the application of 
all of subchapter K shall be treated as an interest in each of the 
assets of such partnership and not as an interest in a partnership.''.
            (4) Section 1031(h) is amended to read as follows:
    ``(h) Special Rules for Foreign Real Property.--Real property 
located in the United States and real property located outside the 
United States are not property of a like kind.''.
            (5) The heading of section 1031 is amended by striking 
        ``property'' and inserting ``real property''.
            (6) The table of sections for part III of subchapter O of 
        chapter 1 is amended by striking the item relating to section 
        1031 and inserting the following 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 section shall apply to 
        exchanges completed after December 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 December 31 2017, 
                or
                    (B) the property received by the taxpayer in the 
                exchange is received on or before December 31, 2017.

SEC. 3304. REVISION OF TREATMENT OF CONTRIBUTIONS TO CAPITAL.

    (a) Inclusion of Contributions to Capital.--Part II of subchapter B 
of chapter 1 is amended by inserting after section 75 the following new 
section:

``SEC. 76. CONTRIBUTIONS TO CAPITAL.

    ``(a) In General.--Gross income includes any contribution to the 
capital of any entity.
    ``(b) Treatment of Contributions in Exchange for Stock, etc.--
            ``(1) In general.--In the case of any contribution of money 
        or other property to a corporation in exchange for stock of 
        such corporation--
                    ``(A) such contribution shall not be treated for 
                purposes of subsection (a) as a contribution to the 
                capital of such corporation (and shall not be 
                includible in the gross income of such corporation), 
                and
                    ``(B) no gain or loss shall be recognized to such 
                corporation upon the issuance of such stock.
            ``(2) Treatment limited to value of stock.--For purposes of 
        this subsection, a contribution of money or other property to a 
        corporation shall be treated as being in exchange for stock of 
        such corporation only to the extent that the fair market value 
        of such money and other property does not exceed the fair 
        market value of such stock.
            ``(3) Application to entities other than corporations.--In 
        the case of any entity other than a corporation, rules similar 
        to the rules of paragraphs (1) and (2) shall apply in the case 
        of any contribution of money or other property to such entity 
        in exchange for any interest in such entity.
    ``(c) Treasury Stock Treated as Stock.--Any reference in this 
section to stock shall be treated as including a reference to treasury 
stock.''.
    (b) Basis of Corporation in Contributed Property.--
            (1) Contributions to capital.--Subsection (c) of section 
        362 is amended to read as follows:
    ``(c) Contributions to Capital.--If property other than money is 
transferred to a corporation as a contribution to the capital of such 
corporation (within the meaning of section 76) then the basis of such 
property shall be the greater of--
            ``(1) the basis determined in the hands of the transferor, 
        increased by the amount of gain recognized to the transferor on 
        such transfer, or
            ``(2) the amount included in gross income by such 
        corporation under section 76 with respect to such 
        contribution.''.
            (2) Contributions in exchange for stock.--Paragraph (2) of 
        section 362(a) is amended by striking ``contribution to 
        capital'' and inserting ``contribution in exchange for stock of 
        such corporation (determined under rules similar to the rules 
        of paragraphs (2) and (3) of section 76(b))''.
    (c) Conforming Amendments.--
            (1) Section 108(e) is amended by striking paragraph (6).
            (2) Part III of subchapter B of chapter 1 is amended by 
        striking section 118 (and by striking the item relating to such 
        section in the table of sections for such part).
            (3) The table of sections for part II of subchapter B of 
        chapter 1 is amended by inserting after the item relating to 
        section 75 the following new item:

``Sec. 76. Contributions to capital.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to contributions made, and transactions entered into, after the 
date of the enactment of this Act.

SEC. 3305. REPEAL OF DEDUCTION FOR LOCAL LOBBYING EXPENSES.

    (a) In General.--Section 162(e) is amended by striking paragraphs 
(2) and (7) and by redesignating paragraphs (3), (4), (5), (6), and (8) 
as paragraphs (2), (3), (4), (5), and (6), respectively.
    (b) Conforming Amendment.--Section 6033(e)(1)(B)(ii) is amended by 
striking ``section 162(e)(5)(B)(ii)'' and inserting ``section 
162(e)(4)(B)(ii)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2017.

SEC. 3306. REPEAL OF DEDUCTION FOR INCOME ATTRIBUTABLE TO DOMESTIC 
              PRODUCTION ACTIVITIES.

    (a) In General.--Part VI of subchapter B of chapter 1 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), 137(b)(3)(A), and 
        246(b)(1) are each amended by striking ``199,''.
            (2) Section 170(b)(2)(D), as amended by the preceding 
        provisions of this Act, is amended by striking clause (iv), by 
        redesignating clause (v) as clause (iv), and by inserting 
        ``and'' at the end of clause (iii).
            (3) Section 172(d) is amended by striking paragraph (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 subparagraphs (C), (D), and (E) as 
        subparagraphs (B), (C), and (D), respectively.
            (6) Section 1402(a) is amended by adding ``and'' at the end 
        of paragraph (15) and by striking paragraph (16).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3307. ENTERTAINMENT, ETC. EXPENSES.

    (a) Denial of Deduction.--Subsection (a) of section 274 is amended 
to read as follows:
    ``(a) Entertainment, Amusement, Recreation, and Other Fringe 
Benefits .--
            ``(1) In general.--No deduction otherwise allowable under 
        this chapter shall be allowed for amounts paid or incurred for 
        any of the following items:
                    ``(A) Activity.--With respect to an activity which 
                is of a type generally considered to constitute 
                entertainment, amusement, or recreation.
                    ``(B) Membership dues.--With respect to membership 
                in any club organized for business, pleasure, 
                recreation or other social purposes.
                    ``(C) Amenity.--With respect to a de minimis fringe 
                (as defined in section 132(e)(1)) that is primarily 
                personal in nature and involving property or services 
                that are not directly related to the taxpayer's trade 
                or business.
                    ``(D) Facility.--With respect to a facility or 
                portion thereof used in connection with an activity 
                referred to in subparagraph (A), membership dues or 
                similar amounts referred to in subparagraph (B), or an 
                amenity referred to in subparagraph (C).
                    ``(E) Qualified transportation fringe and parking 
                facility.--Which is a qualified transportation fringe 
                (as defined in section 132(f)) or which is a parking 
                facility used in connection with qualified parking (as 
                defined in section 132(f)(5)(C)).
                    ``(F) On-premises athletic facility.--Which is an 
                on-premises athletic facility as defined in section 
                132(j)(4)(B).
            ``(2) Special rules.--For purposes of applying paragraph 
        (1), an activity described in section 212 shall be treated as a 
        trade or business.
            ``(3) Regulations.--Under the regulations prescribed to 
        carry out this section, the Secretary shall include 
        regulations--
                    ``(A) defining entertainment, amenities, 
                recreation, amusement, and facilities for purposes of 
                this subsection,
                    ``(B) providing for the appropriate allocation of 
                depreciation and other costs with respect to facilities 
                used for parking or for on-premises athletic 
                facilities, and
                    ``(C) specifying arrangements a primary purpose of 
                which is the avoidance of this subsection.''.
    (b) Exception for Certain Expenses Includible in Income of 
Recipient.--
            (1) Expenses treated as compensation.--Paragraph (2) of 
        section 274(e) is amended to read as follows:
            ``(2) Expenses treated as compensation.--Expenses for 
        goods, services, and facilities, to the extent that the 
        expenses do not exceed the amount of the expenses which are 
        treated by the taxpayer, with respect to the recipient of the 
        entertainment, amusement, or recreation, as compensation to an 
        employee on the taxpayer's return of tax under this chapter and 
        as wages to such employee for purposes of chapter 24 (relating 
        to withholding of income tax at source on wages).''.
            (2) Expenses includible in income of persons who are not 
        employees.--Paragraph (9) of section 274(e) is amended by 
        striking ``to the extent that the expenses'' and inserting ``to 
        the extent that the expenses do not exceed the amount of the 
        expenses that''.
    (c) Exceptions for Reimbursed Expenses.--Paragraph (3) of section 
274(e) is amended to read as follows:
            ``(3) Reimbursed expenses.--
                    ``(A) In general.--Expenses paid or incurred by the 
                taxpayer, in connection with the performance by him of 
                services for another person (whether or not such other 
                person is the taxpayer's employer), under a 
                reimbursement or other expense allowance arrangement 
                with such other person, but this paragraph shall 
                apply--
                            ``(i) where the services are performed for 
                        an employer, only if the employer has not 
                        treated such expenses in the manner provided in 
                        paragraph (2), or
                            ``(ii) where the services are performed for 
                        a person other than an employer, only if the 
                        taxpayer accounts (to the extent provided by 
                        subsection (d)) to such person.
                    ``(B) Exception.--Except as provided by the 
                Secretary, subparagraph (A) shall not apply--
                            ``(i) in the case of an arrangement in 
                        which the person other than the employer is an 
                        entity described in section 168(h)(2)(A), or
                            ``(ii) to any other arrangement designated 
                        by the Secretary as having the effect of 
                        avoiding the limitation under subparagraph 
                        (A).''.
    (d) 50 Percent Limitation on Meals and Entertainment Expenses.--
Subsection (n) of section 274 is amended to read as follows:
    ``(n) Limitation on Certain Expenses.--
            ``(1) In general.--The amount allowable as a deduction 
        under this chapter for any expense for food or beverages 
        (pursuant to subsection (e)(1)) or business meals (pursuant to 
        subsection (k)(1)) shall not exceed 50 percent of the amount of 
        such expense or item which would (but for this paragraph) be 
        allowable as a deduction under this chapter.
            ``(2) Exceptions.--Paragraph (1) shall not apply to any 
        expense if--
                    ``(A) such expense is described in paragraph (2), 
                (3), (6), (7), or (8) of subsection (e),
                    ``(B) in the case of an expense for food or 
                beverages, such expense is excludable from the gross 
                income of the recipient under section 132 by reason of 
                subsection (e) thereof (relating to de minimis fringes) 
                or under section 119 (relating to meals and lodging 
                furnished for convenience of employer), or
                    ``(C) in the case of an employer who pays or 
                reimburses moving expenses of an employee, such 
                expenses are includible in the income of the employee 
                under section 82.
            ``(3) Special rule for individuals subject to federal hours 
        of service.--In the case of any expenses for food or beverages 
        consumed while away from home (within the meaning of section 
        162(a)(2)) by an individual during, or incident to, the period 
        of duty subject to the hours of service limitations of the 
        Department of Transportation, paragraph (1) shall be applied by 
        substituting `80 percent' for `50 percent'.''.
    (e) Conforming Amendments.--
            (1) Section 274(d) is amended--
                    (A) by striking paragraph (2) and redesignating 
                paragraphs (3) and (4) as paragraphs (2) and (3), 
                respectively, and
                    (B) in the flush material following paragraph (3) 
                (as so redesignated)--
                            (i) by striking ``, entertainment, 
                        amusement, recreation, or'' in item (B), and
                            (ii) by striking ``(D) the business 
                        relationship to the taxpayer of persons 
                        entertained, using the facility or property, or 
                        receiving the gift'' and inserting ``(D) the 
                        business relationship to the taxpayer of the 
                        person receiving the benefit''.
            (2) Section 274(e) is amended by striking paragraph (4) and 
        redesignating paragraphs (5), (6), (7), (8), and (9) as 
        paragraphs (4), (5), (6), (7), and (8), respectively.
            (3) Section 274(k)(2)(A) is amended by striking ``(4), (7), 
        (8), or (9)'' and inserting ``(6), (7), or (8)''.
            (4) Section 274 is amended by striking subsection (l).
            (5) Section 274(m)(1)(B)(ii) is amended by striking ``(4), 
        (7), (8), or (9)'' and inserting ``(6), (7), or (8)''.
    (f) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2017.

SEC. 3308. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY AMOUNT OF 
              CERTAIN FRINGE BENEFIT EXPENSES FOR WHICH DEDUCTION IS 
              DISALLOWED.

    (a) In General.--Section 512(a) is amended by adding at the end the 
following new paragraph:
            ``(6) Increase in unrelated business taxable income by 
        disallowed fringe.--Unrelated business taxable income of an 
        organization shall be increased by any amount for which a 
        deduction is not allowable under this chapter by reason of 
        section 274 and which is paid or incurred by such organization 
        for any qualified transportation fringe (as defined in section 
        132(f)), any parking facility used in connection with qualified 
        parking (as defined in section 132(f)(5)(C)), or any on-
        premises athletic facility (as defined in section 
        132(j)(4)(B)). The preceding sentence shall not apply to the 
        extent the amount paid or incurred is directly connected with 
        an unrelated trade or business which is regularly carried on by 
        the organization. The Secretary may issue such regulations or 
        other guidance as may be necessary or appropriate to carry out 
        the purposes of this paragraph, including regulations or other 
        guidance providing for the appropriate allocation of 
        depreciation and other costs with respect to facilities used 
        for parking or for on-premises athletic facilities.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred after December 31, 2017.

SEC. 3309. LIMITATION ON DEDUCTION FOR FDIC PREMIUMS.

    (a) In General.--Section 162 is amended by redesignating subsection 
(q) as subsection (r) and by inserting after subsection (p) the 
following new subsection:
    ``(q) Disallowance of FDIC Premiums Paid by Certain Large Financial 
Institutions.--
            ``(1) In general.--No deduction shall be allowed for the 
        applicable percentage of any FDIC premium paid or incurred by 
        the taxpayer.
            ``(2) Exception for small institutions.--Paragraph (1) 
        shall not apply to any taxpayer for any taxable year if the 
        total consolidated assets of such taxpayer (determined as of 
        the close of such taxable year) do not exceed $10,000,000,000.
            ``(3) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means, with 
        respect to any taxpayer for any taxable year, the ratio 
        (expressed as a percentage but not greater than 100 percent) 
        which--
                    ``(A) the excess of--
                            ``(i) the total consolidated assets of such 
                        taxpayer (determined as of the close of such 
                        taxable year), over
                            ``(ii) $10,000,000,000, bears to
                    ``(B) $40,000,000,000.
            ``(4) FDIC premiums.--For purposes of this subsection, the 
        term `FDIC premium' means any assessment imposed under section 
        7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)).
            ``(5) Total consolidated assets.--For purposes of this 
        subsection, the term `total consolidated assets' has the 
        meaning given such term under section 165 of the Dodd-Frank 
        Wall Street Reform and Consumer Protection Act (12 U.S.C. 
        5365).
            ``(6) Aggregation rule.--
                    ``(A) In general.--Members of an expanded 
                affiliated group shall be treated as a single taxpayer 
                for purposes of applying this subsection.
                    ``(B) Expanded affiliated group.--For purposes of 
                this paragraph, the term `expanded affiliated group' 
                means an affiliated group as defined in section 
                1504(a), determined--
                            ``(i) by substituting `more than 50 
                        percent' for `at least 80 percent' each place 
                        it appears, and
                            ``(ii) without regard to paragraphs (2) and 
                        (3) of section 1504(b).
                A partnership or any other entity (other than a 
                corporation) shall be treated as a member of an 
                expanded affiliated group if such entity is controlled 
                (within the meaning of section 954(d)(3)) by members of 
                such group (including any entity treated as a member of 
                such group by reason of this sentence).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3310. REPEAL OF ROLLOVER OF PUBLICLY TRADED SECURITIES GAIN INTO 
              SPECIALIZED SMALL BUSINESS INVESTMENT COMPANIES.

    (a) In General.--Part III of subchapter O of chapter 1 is amended 
by striking section 1044 (and by striking the item relating to such 
section in the table of sections of such part).
    (b) Conforming Amendments.--Section 1016(a)(23) is amended--
            (1) by striking ``1044,'', and
            (2) by striking ``1044(d),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales after December 31, 2017.

SEC. 3311. CERTAIN SELF-CREATED PROPERTY NOT TREATED AS A CAPITAL 
              ASSET.

    (a) Patents, etc.--Section 1221(a)(3) is amended by inserting ``a 
patent, invention, model or design (whether or not patented), a secret 
formula or process,'' before ``a copyright''.
    (b) Self-Created Musical Works.--Section 1221(b) is amended by 
striking paragraph (3) and redesignating paragraph (4) as paragraph 
(3).
    (c) Conforming Amendments.--
            (1) Section 170(e)(1)(A) is amended by striking 
        ``(determined without regard to section 1221(b)(3))''.
            (2) Section 1231(b)(1)(C) is amended by inserting ``a 
        patent, invention, model or design (whether or not patented), a 
        secret formula or process,'' before ``a copyright''.
    (d) Effective Date.--The amendments made by this section shall 
apply to dispositions after December 31, 2017.

SEC. 3312. REPEAL OF SPECIAL RULE FOR SALE OR EXCHANGE OF PATENTS.

    (a) In General.--Part IV of subchapter P of chapter 1 is amended by 
striking section 1235 (and by striking the item relating to such 
section in the table of sections of such part).
    (b) Conforming Amendments.--
            (1) Section 483(d) is amended by striking paragraph (4).
            (2) Section 901(l)(5) is amended by striking ``without 
        regard to section 1235 or any similar rule'' and inserting 
        ``without regard to any provision which treats a disposition as 
        a sale or exchange of a capital asset held for more than 1 year 
        or any similar provision''.
            (3) Section 1274(c)(3) is amended by striking subparagraph 
        (E) and redesignating subparagraph (F) as subparagraph (E).
    (c) Effective Date.--The amendments made by this section shall 
apply to dispositions after December 31, 2017.

SEC. 3313. REPEAL OF TECHNICAL TERMINATION OF PARTNERSHIPS.

    (a) In General.--Paragraph (1) of section 708(b) is amended--
            (1) by striking ``, or'' at the end of subparagraph (A) and 
        all that follows and inserting a period, and
            (2) by striking ``only if--'' and all that follows through 
        ``no part of any business'' and inserting the following: ``only 
        if no part of any business''.
    (b) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 2017.

                 Subtitle E--Reform of Business Credits

SEC. 3401. REPEAL OF CREDIT FOR CLINICAL TESTING EXPENSES FOR CERTAIN 
              DRUGS FOR RARE DISEASES OR CONDITIONS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45C (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (12).
            (2) Section 280C is amended by striking subsection (b).
            (3) Section 6501(m) is amended by striking ``45C(d)(4),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2017.

SEC. 3402. REPEAL OF EMPLOYER-PROVIDED CHILD CARE CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45F (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (15).
            (2) Section 1016(a) is amended by striking paragraph (28).
    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 2017.
            (2) Basis adjustments.--The amendment made by subsection 
        (b)(2) shall apply to credits determined for taxable years 
        beginning after December 31, 2017.

SEC. 3403. REPEAL OF REHABILITATION CREDIT.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
is amended by striking section 47 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 170(f)(14)(A) is amended by inserting ``(as in 
        effect before its repeal by the Tax Cuts and Jobs Act)'' after 
        ``section 47''.
            (2) Section 170(h)(4) is amended--
                    (A) by striking ``(as defined in section 
                47(c)(3)(B))'' in subparagraph (C)(ii), and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(D) Registered historic district.--The term 
                `registered historic district' means--
                            ``(i) any district listed in the National 
                        Register, and
                            ``(ii) any district--
                                    ``(I) which is designated under a 
                                statute of the appropriate State or 
                                local government, if such statute is 
                                certified by the Secretary of the 
                                Interior to the Secretary as containing 
                                criteria which will substantially 
                                achieve the purpose of preserving and 
                                rehabilitating buildings of historic 
                                significance to the district, and
                                    ``(II) which is certified by the 
                                Secretary of the Interior to the 
                                Secretary as meeting substantially all 
                                of the requirements for the listing of 
                                districts in the National Register.''.
            (3) Section 469(i)(3) is amended by striking subparagraph 
        (B).
            (4) Section 469(i)(6)(B) is amended--
                    (A) by striking ``in the case of--'' and all that 
                follows and inserting ``in the case of any credit 
                determined under section 42 for any taxable year.'', 
                and
                    (B) by striking ``, rehabilitation credit,'' in the 
                heading thereof.
            (5) Section 469(k)(1) is amended by striking ``, or any 
        rehabilitation credit determined under section 47,''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to amounts paid or 
        incurred after December 31, 2017.
            (2) Transition rule.--In the case of qualified 
        rehabilitation expenditures (within the meaning of section 47 
        of the Internal Revenue Code of 1986 as in effect before its 
        repeal) with respect to any building--
                    (A) owned or leased (as permitted by section 47 of 
                the Internal Revenue Code of 1986 as in effect before 
                its repeal) by the taxpayer at all times after December 
                31, 2017, and
                    (B) with respect to which the 24-month period 
                selected by the taxpayer under section 47(c)(1)(C) of 
                such Code begins not later than the end of the 180-day 
                period beginning on the date of the enactment of this 
                Act,
        the amendments made by this section shall apply to such 
        expenditures paid or incurred after the end of the taxable year 
        in which the 24-month period referred to in subparagraph (B) 
        ends.

SEC. 3404. REPEAL OF WORK OPPORTUNITY TAX CREDIT.

    (a) In General.--Subpart F of part IV of subchapter A of chapter 1 
is amended by striking section 51 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Clerical Amendment.--The heading of such subpart F (and the 
item relating to such subpart in the table of subparts for part IV of 
subchapter A of chapter 1) are each amended by striking ``Rules for 
Computing Work Opportunity Credit'' and inserting ``Special Rules''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred to individuals who begin work for the 
employer after December 31, 2017.

SEC. 3405. REPEAL OF DEDUCTION FOR CERTAIN UNUSED BUSINESS CREDITS.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
striking section 196 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3406. TERMINATION OF NEW MARKETS TAX CREDIT.

    (a) In General.--Section 45D(f) is amended--
            (1) by striking ``2019'' in paragraph (1)(G) and inserting 
        ``2017'', and
            (2) by striking ``2024'' in paragraph (3) and inserting 
        ``2022''.
    (b) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2017.

SEC. 3407. REPEAL OF CREDIT FOR EXPENDITURES TO PROVIDE ACCESS TO 
              DISABLED INDIVIDUALS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 44 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 38(b) is amended by striking 
paragraph (7).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3408. MODIFICATION OF CREDIT FOR PORTION OF EMPLOYER SOCIAL 
              SECURITY TAXES PAID WITH RESPECT TO EMPLOYEE TIPS.

    (a) Credit Determined With Respect to Minimum Wage as in Effect.--
Section 45B(b)(1)(B) is amended by striking ``as in effect on January 
1, 2007, and''.
    (b) Information Return Requirement.--Section 45B is amended by 
redesignating subsections (c) and (d) as subsections (d) and (e), 
respectively, and by inserting after subsection (b) the following new 
subsection:
    ``(c) Information Return Requirement.--
            ``(1) In general.--No credit shall be determined under 
        subsection (a) with respect to any food or beverage 
        establishment of any taxpayer for any taxable year unless such 
        taxpayer has, with respect to the calendar year which ends in 
        or with such taxable year--
                    ``(A) made a report to the Secretary showing the 
                information described in section 6053(c)(1) with 
                respect to such food or beverage establishment, and
                    ``(B) furnished written statements to each employee 
                of such food or beverage establishment showing the 
                information described in section 6053(c)(2).
            ``(2) Allocation of 10 percent of gross receipts.--For 
        purposes of determining the information referred to in 
        subparagraphs (A) and (B), section 6053(c)(3)(A)(i) shall be 
        applied by substituting `10 percent' for `8 percent'. For 
        purposes of section 6053(c)(5), any reference to section 
        6053(c)(3)(B) contained therein shall be treated as including a 
        reference to this paragraph.
            ``(3) Food or beverage establishment.--For purposes of this 
        subsection, the term `food or beverage establishment' means any 
        trade or business (or portion thereof) which would be a large 
        food or beverage establishment (as defined in section 
        6053(c)(4)) if such section were applied without regard to 
        subparagraph (C) thereof.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

                       Subtitle F--Energy Credits

SEC. 3501. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED FROM 
              CERTAIN RENEWABLE RESOURCES.

    (a) Termination of Inflation Adjustment.--Section 45(b)(2) is 
amended--
            (1) by striking ``The 1.5 cent amount'' and inserting the 
        following:
                    ``(A) In general.--The 1.5 cent amount'', and
            (2) by adding at the end the following new subparagraph:
                    ``(B) Termination.--Subparagraph (A) shall not 
                apply with respect to any electricity or refined coal 
                produced at a facility the construction of which begins 
                after the date of the enactment of this 
                subparagraph.''.
    (b) Special Rule for Determination of Beginning of Construction.--
Section 45(e) is amended by adding at the end the following new 
paragraph:
            ``(12) Special rule for determining beginning of 
        construction.--For purposes of subsection (d), the construction 
        of any facility, modification, improvement, addition, or other 
        property shall not be treated as beginning before any date 
        unless there is a continuous program of construction which 
        begins before such date and ends on the date that such property 
        is placed in service.''.
    (c) Effective Dates.--
            (1) Termination of inflation adjustment.--The amendments 
        made by subsection (a) shall apply to taxable years ending 
        after the date of the enactment of this Act.
            (2) Special rule for determination of beginning of 
        construction.--The amendment made by subsection (b) shall apply 
        to taxable years beginning before, on, or after the date of the 
        enactment of this Act.

SEC. 3502. MODIFICATION OF THE ENERGY INVESTMENT TAX CREDIT.

    (a) Extension of Solar Energy Property.--Section 48(a)(3)(A)(ii) is 
amended by striking ``periods ending before January 1, 2017'' and 
inserting ``property the construction of which begins before January 1, 
2022''.
    (b) Extension of Qualified Fuel Cell Property.--Section 48(c)(1)(D) 
is amended by striking ``for any period after December 31, 2016'' and 
inserting ``the construction of which does not begin before January 1, 
2022''.
    (c) Extension of Qualified Microturbine Property.--Section 
48(c)(2)(D) is amended by striking ``for any period after December 31, 
2016'' and inserting ``the construction of which does not begin before 
January 1, 2022''.
    (d) Extension of Combined Heat and Power System Property.--Section 
48(c)(3)(A)(iv) is amended by striking ``which is placed in service 
before January 1, 2017'' and inserting ``the construction of which 
begins before January 1, 2022''.
    (e) Extension of Qualified Small Wind Energy Property.--Section 
48(c)(4)(C) is amended by striking ``for any period after December 31, 
2016'' and inserting ``the construction of which does not begin before 
January 1, 2022''.
    (f) Extension of Thermal Energy Property.--Section 48(a)(3)(A)(vii) 
is amended by striking ``periods ending before January 1, 2017'' and 
inserting ``property the construction of which begins before January 1, 
2022''.
    (g) Phaseout of 30 Percent Credit Rate for Fuel Cell and Small Wind 
Energy Property.--Section 48(a) is amended by adding at the end the 
following new paragraph:
            ``(7) Phaseout for qualified fuel cell property and 
        qualified small wind energy property.--
                    ``(A) In general.--In the case of qualified fuel 
                cell property or qualified small wind energy property, 
                the construction of which begins before January 1, 
                2022, the energy percentage determined under paragraph 
                (2) shall be equal to--
                            ``(i) in the case of any property the 
                        construction of which begins after December 31, 
                        2019, and before January 1, 2021, 26 percent, 
                        and
                            ``(ii) in the case of any property the 
                        construction of which begins after December 31, 
                        2020, and before January 1, 2022, 22 percent.
                    ``(B) Placed in service deadline.--In the case of 
                any qualified fuel cell property or qualified small 
                wind energy property, the construction of which begins 
                before January 1, 2022, and which is not placed in 
                service before January 1, 2024, the energy percentage 
                determined under paragraph (2) shall be equal to 10 
                percent.''.
    (h) Phaseout for Fiber-Optic Solar Energy Property.--Subparagraphs 
(A) and (B) of section 48(a)(6) are each amended by inserting ``or 
(3)(A)(ii)'' after ``paragraph (3)(A)(i)''.
    (i) Termination of Solar Energy Property.--Section 48(a)(3)(A)(i) 
is amended by inserting ``, the construction of which begins before 
January 1, 2028, and'' after ``equipment''.
    (j) Termination of Geothermal Energy Property.--Section 
48(a)(3)(A)(iii) is amended by inserting ``, the construction of which 
begins before January 1, 2028, and'' after ``equipment''.
    (k) Special Rule for Determination of Beginning of Construction.--
Section 48(c) is amended by adding at the end the following new 
paragraph:
            ``(5) Special rule for determining beginning of 
        construction.--The construction of any facility, modification, 
        improvement, addition, or other property shall not be treated 
        as beginning before any date unless there is a continuous 
        program of construction which begins before such date and ends 
        on the date that such property is placed in service.''.
    (l) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        periods after December 31, 2016, under rules similar to the 
        rules of section 48(m) of the Internal Revenue Code of 1986 (as 
        in effect on the day before the date of the enactment of the 
        Revenue Reconciliation Act of 1990).
            (2) Extension of combined heat and power system property.--
        The amendment made by subsection (d) shall apply to property 
        placed in service after December 31, 2016.
            (3) Phaseouts and terminations.--The amendments made by 
        subsections (g), (h), (i), and (j) shall take effect on the 
        date of the enactment of this Act.
            (4) Special rule for determination of beginning of 
        construction.--The amendment made by subsection (k) shall apply 
        to taxable years beginning before, on, or after the date of the 
        enactment of this Act.

SEC. 3503. EXTENSION AND PHASEOUT OF RESIDENTIAL ENERGY EFFICIENT 
              PROPERTY.

    (a) Extension.--Section 25D(h) is amended by striking ``December 
31, 2016 (December 31, 2021, in the case of any qualified solar 
electric property expenditures and qualified solar water heating 
property expenditures)'' and inserting ``December 31, 2021''.
    (b) Phaseout.--
            (1) In general.--Paragraphs (3), (4), and (5) of section 
        25D(a) are amended by striking ``30 percent'' each place it 
        appears and inserting ``the applicable percentage''.
            (2) Conforming amendment.--Section 25D(g) of such Code is 
        amended by striking ``paragraphs (1) and (2) of''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2016.

SEC. 3504. REPEAL OF ENHANCED OIL RECOVERY CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 43 (and by striking the item relating to 
such section in the table of sections for such subpart).
    (b) Conforming Amendments.--
            (1) Section 38(b) is amended by striking paragraph (6).
            (2) Section 6501(m) is amended by striking ``43,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3505. REPEAL OF CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL 
              WELLS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by striking section 45I (and by striking the item relating 
to such section in the table of sections for such subpart).
    (b) Conforming Amendment.--Section 38(b) is amended by striking 
paragraph (19).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3506. MODIFICATIONS OF CREDIT FOR PRODUCTION FROM ADVANCED NUCLEAR 
              POWER FACILITIES.

    (a) Treatment of Unutilized Limitation Amounts.--Section 45J(b) is 
amended--
            (1) in paragraph (4), by inserting ``or any amendment to'' 
        after ``enactment of''; and
            (2) by adding at the end the following new paragraph:
            ``(5) Allocation of unutilized limitation.--
                    ``(A) In general.--Any unutilized national megawatt 
                capacity limitation shall be allocated by the Secretary 
                under paragraph (3) as rapidly as is practicable after 
                December 31, 2020--
                            ``(i) first to facilities placed in service 
                        on or before such date to the extent that such 
                        facilities did not receive an allocation equal 
                        to their full nameplate capacity; and
                            ``(ii) then to facilities placed in service 
                        after such date in the order in which such 
                        facilities are placed in service.
                    ``(B) Unutilized national megawatt capacity 
                limitation.--The term `unutilized national megawatt 
                capacity limitation' means the excess (if any) of--
                            ``(i) 6,000 megawatts, over
                            ``(ii) the aggregate amount of national 
                        megawatt capacity limitation allocated by the 
                        Secretary before January 1, 2021, reduced by 
                        any amount of such limitation which was 
                        allocated to a facility which was not placed in 
                        service before such date.
                    ``(C) Coordination with other provisions.--In the 
                case of any unutilized national megawatt capacity 
                limitation allocated by the Secretary pursuant to this 
                paragraph--
                            ``(i) such allocation shall be treated for 
                        purposes of this section in the same manner as 
                        an allocation of national megawatt capacity 
                        limitation; and
                            ``(ii) subsection (d)(1)(B) shall not apply 
                        to any facility which receives such 
                        allocation.''.
    (b) Transfer of Credit by Certain Public Entities.--
            (1) In general.--Section 45J is amended--
                    (A) by redesignating subsection (e) as subsection 
                (f); and
                    (B) by inserting after subsection (d) the following 
                new subsection:
    ``(e) Transfer of Credit by Certain Public Entities.--
            ``(1) In general.--If, with respect to a credit under 
        subsection (a) for any taxable year--
                    ``(A) the taxpayer would be a qualified public 
                entity; and
                    ``(B) such entity elects the application of this 
                paragraph for such taxable year with respect to all (or 
                any portion specified in such election) of such credit,
        the eligible project partner specified in such election (and 
        not the qualified public entity) shall be treated as the 
        taxpayer for purposes of this title with respect to such credit 
        (or such portion thereof).
            ``(2) Definitions.--For purposes of this subsection--
                    ``(A) Qualified public entity.--The term `qualified 
                public entity' means--
                            ``(i) a Federal, State, or local government 
                        entity, or any political subdivision, agency, 
                        or instrumentality thereof;
                            ``(ii) a mutual or cooperative electric 
                        company described in section 501(c)(12) or 
                        section 1381(a)(2); or
                            ``(iii) a not-for-profit electric utility 
                        which has or had received a loan or loan 
                        guarantee under the Rural Electrification Act 
                        of 1936.
                    ``(B) Eligible project partner.--The term `eligible 
                project partner' means--
                            ``(i) any person responsible for, or 
                        participating in, the design or construction of 
                        the advanced nuclear power facility to which 
                        the credit under subsection (a) relates;
                            ``(ii) any person who participates in the 
                        provision of the nuclear steam supply system to 
                        the advanced nuclear power facility to which 
                        the credit under subsection (a) relates;
                            ``(iii) any person who participates in the 
                        provision of nuclear fuel to the advanced 
                        nuclear power facility to which the credit 
                        under subsection (a) relates; or
                            ``(iv) any person who has an ownership 
                        interest in such facility.
            ``(3) Special rules.--
                    ``(A) Application to partnerships.--In the case of 
                a credit under subsection (a) which is determined at 
                the partnership level--
                            ``(i) for purposes of paragraph (1)(A), a 
                        qualified public entity shall be treated as the 
                        taxpayer with respect to such entity's 
                        distributive share of such credit; and
                            ``(ii) the term `eligible project partner' 
                        shall include any partner of the partnership.
                    ``(B) Taxable year in which credit taken into 
                account.--In the case of any credit (or portion 
                thereof) with respect to which an election is made 
                under paragraph (1), such credit shall be taken into 
                account in the first taxable year of the eligible 
                project partner ending with, or after, the qualified 
                public entity's taxable year with respect to which the 
                credit was determined.
                    ``(C) Treatment of transfer under private use 
                rules.--For purposes of section 141(b)(1), any benefit 
                derived by an eligible project partner in connection 
                with an election under this subsection shall not be 
                taken into account as a private business use.''.
            (2) Special rule for proceeds of transfers for mutual or 
        cooperative electric companies.--Section 501(c)(12) of such 
        Code is amended by adding at the end the following new 
        subparagraph:
                    ``(I) In the case of a mutual or cooperative 
                electric company described in this paragraph or an 
                organization described in section 1381(a)(2), income 
                received or accrued in connection with an election 
                under section 45J(e)(1) shall be treated as an amount 
                collected from members for the sole purpose of meeting 
                losses and expenses.''.
    (c) Effective Dates.--
            (1) Treatment of unutilized limitation amounts.--The 
        amendment made by subsection (a) shall take effect on the date 
        of the enactment of this Act.
            (2) Transfer of credit by certain public entities.--The 
        amendments made by subsection (b) shall apply to taxable years 
        beginning after the date of the enactment of this Act.

                        Subtitle G--Bond Reforms

SEC. 3601. TERMINATION OF PRIVATE ACTIVITY BONDS.

    (a) In General.--Paragraph (1) of section 103(b) is amended--
            (1) by striking ``which is not a qualified bond (within the 
        meaning of section 141)'', and
            (2) by striking ``which is not a qualified bond'' in the 
        heading thereof.
    (b) Conforming Amendments.--
            (1) Subpart A of part IV of subchapter B of chapter 1 is 
        amended by striking sections 142, 143, 144, 145, 146, and 147 
        (and by striking each of the items relating to such sections in 
        the table of sections for such subpart).
            (2) Section 25 is amended by adding at the end the 
        following new subsection:
    ``(j) Coordination With Repeal of Private Activity Bonds.--Any 
reference to section 143, 144, or 146 shall be treated as a reference 
to such section as in effect before its repeal by the Tax Cuts and Jobs 
Act.''.
            (3) Section 26(b)(2) is amended by striking subparagraph 
        (D).
            (4) Section 141(b) is amended by striking paragraphs (5) 
        and (9).
            (5) Section 141(d) is amended by striking paragraph (5).
            (6) Section 141 is amended by striking subsection (e).
            (7) Section 148(f)(4) is amended--
                    (A) by striking ``(determined in accordance with 
                section 147(b)(2)(A))'' in the flush matter following 
                subparagraph (A)(ii) and inserting ``(determined by 
                taking into account the respective issue prices of the 
                bonds issued as part of the issue)'', and
                    (B) by striking the last sentence of subparagraph 
                (D)(v).
            (8) Clause (iv) of section 148(f)(4)(C) is amended to read 
        as follows:
                            ``(iv) Construction issue.--For purposes of 
                        this subparagraph--
                                    ``(I) In general.--The term 
                                `construction issue' means any issue if 
                                at least 75 percent of the available 
                                construction proceeds of such issue are 
                                to be used for construction 
                                expenditures.
                                    ``(II) Construction.--The term 
                                `construction' includes reconstruction 
                                and rehabilitation''.
            (9) Section 149(b)(3) is amended by striking subparagraph 
        (C).
            (10) Section 149(e)(2) is amended--
                    (A) by striking subparagraphs (C), (D), and (F) and 
                by redesignating subparagraphs (E) and (G) as 
                subparagraphs (C) and (D), respectively, and
                    (B) by striking the second sentence.
            (11) Section 149(f)(6) is amended--
                    (A) by striking subparagraph (B), and
                    (B) by striking ``For purposes of this subsection'' 
                and all that follows through ``The term'' and inserting 
                the following: ``For purposes of this subsection, the 
                term''.
            (12) Section 150(e)(3) is amended to read as follows:
            ``(3) Public approval requirement.--A bond shall not be 
        treated as part of an issue which meets the requirements of 
        paragraph (1) unless such bond satisfies the requirements of 
        section 147(f)(2) (as in effect before its repeal by the Tax 
        Cuts and Jobs Act).''.
            (13) Section 269A(b)(3) is amended by striking 
        ``144(a)(3)'' and inserting ``414(n)(6)(A)''.
            (14) Section 414(m)(5) is amended by striking ``section 
        144(a)(3)'' and inserting ``subsection (n)(6)(A)''.
            (15) Section 414(n)(6)(A) is amended to read as follows:
                    ``(A) Related persons.--A person is a related 
                person to another person if--
                            ``(i) the relationship between such persons 
                        would result in a disallowance of losses under 
                        section 267 or 707(b), or
                            ``(ii) such persons are members of the same 
                        controlled group of corporations (as defined in 
                        section 1563(a), except that `more than 50 
                        percent' shall be substituted for `at least 80 
                        percent' each place it appears therein).''.
            (16) Section 6045(e)(4)(B) is amended by inserting ``(as in 
        effect before its repeal by the Tax Cuts and Jobs Act)'' after 
        ``section 143(m)(3)''.
            (17) Section 6654(f)(1) is amended by inserting ``(as in 
        effect before its repeal by the Tax Cuts and Jobs Act)'' after 
        ``section 143(m)''.
            (18) Section 7871(c) is amended--
                    (A) by striking paragraphs (2) and (3), and
                    (B) by striking ``Tax-exempt Bonds.--'' and all 
                that follows through ``Subsection (a) of section 103'' 
                and inserting the following: ``Tax-exempt Bonds.--
                Subsection (a) of section 103''.
    (c) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 2017.

SEC. 3602. REPEAL OF ADVANCE REFUNDING BONDS.

    (a) In General.--Paragraph (1) of section 149(d) is amended by 
striking ``as part of an issue described in paragraph (2), (3), or 
(4).'' and inserting ``to advance refund another bond.''.
    (b) Conforming Amendments.--
            (1) Section 149(d) is amended by striking paragraphs (2), 
        (3), (4), and (6) and by redesignating paragraphs (5) and (7) 
        as paragraphs (2) and (3).
            (2) Section 148(f)(4)(C) is amended by striking clause 
        (xiv) and by redesignating clauses (xv) to (xvii) as clauses 
        (xiv) to (xvi).
    (c) Effective Date.--The amendments made by this section shall 
apply to advance refunding bonds issued after December 31, 2017.

SEC. 3603. REPEAL OF TAX CREDIT BONDS.

    (a) In General.--Part IV of subchapter A of chapter 1 is amended by 
striking subparts H, I, and J (and by striking the items relating to 
such subparts in the table of subparts for such part).
    (b) Payments to Issuers.--Subchapter B of chapter 65 is amended by 
striking section 6431 (and by striking the item relating to such 
section in the table of sections for such subchapter).
    (c) Conforming Amendments.--
            (1) Part IV of subchapter U of chapter 1 is amended by 
        striking section 1397E (and by striking the item relating to 
        such section in the table of sections for such part).
            (2) Section 54(l)(3)(B) is amended by inserting ``(as in 
        effect before its repeal by the Tax Cuts and Jobs Act)'' after 
        ``section 1397E(I)''.
            (3) Section 6211(b)(4)(A) is amended by striking ``, and 
        6431'' and inserting ``and'' before ``36B''.
            (4) Section 6401(b)(1) is amended by striking ``G, H, I, 
        and J'' and inserting ``and G''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after December 31, 2017.

SEC. 3604. NO TAX EXEMPT BONDS FOR PROFESSIONAL STADIUMS.

    (a) In General.--Section 103(b), as amended by this Act, is further 
amended by adding at the end the following new paragraph:
            ``(4) Professional stadium bond.--Any professional stadium 
        bond.''.
    (b) Professional Stadium Bond Defined.--Subsection (c) of section 
103 is amended by adding at the end the following new paragraph:
            ``(3) Professional stadium bond.--The term `professional 
        stadium bond' means any bond issued as part of an issue any 
        proceeds of which are used to finance or refinance capital 
        expenditures allocable to a facility (or appurtenant real 
        property) which, during at least 5 days during any calendar 
        year, is used as a stadium or arena for professional sports 
        exhibitions, games, or training.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to bonds issued after November 2, 2017.

                         Subtitle H--Insurance

SEC. 3701. NET OPERATING LOSSES OF LIFE INSURANCE COMPANIES.

    (a) In General.--Section 805(b) is amended by striking paragraph 
(4) and by redesignating paragraph (5) as paragraph (4).
    (b) Conforming Amendments.--
            (1) Part I of subchapter L of chapter 1 is amended by 
        striking section 810 (and by striking the item relating to such 
        section in the table of sections for such part).
            (2) Part III of subchapter L of chapter 1 is amended by 
        striking section 844 (and by striking the item relating to such 
        section in the table of sections for such part).
            (3) Section 381 is amended by striking subsection (d).
            (4) Section 805(a)(4)(B)(ii) is amended to read as follows:
                            ``(ii) the deduction allowed under section 
                        172,''.
            (5) Section 805(a) is amended by striking paragraph (5).
            (6) Section 953(b)(1)(B) is amended to read as follows:
                    ``(B) So much of section 805(a)(8) as relates to 
                the deduction allowed under section 172.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to losses arising in taxable years beginning after December 31, 
2017.

SEC. 3702. REPEAL OF SMALL LIFE INSURANCE COMPANY DEDUCTION.

    (a) In General.--Part I of subchapter L of chapter 1 is amended by 
striking section 806 (and by striking the item relating to such section 
in the table of sections for such part).
    (b) Conforming Amendments.--
            (1) Section 453B(e) is amended--
                    (A) by striking ``(as defined in section 
                806(b)(3))'' in paragraph (2)(B), and
                    (B) by adding at the end the following new 
                paragraph:
            ``(3) Noninsurance business.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `noninsurance business' means any activity 
                which is not an insurance business.
                    ``(B) Certain activities treated as insurance 
                businesses.--For purposes of subparagraph (A), any 
                activity which is not an insurance business shall be 
                treated as an insurance business if--
                            ``(i) it is of a type traditionally carried 
                        on by life insurance companies for investment 
                        purposes, but only if the carrying on of such 
                        activity (other than in the case of real 
                        estate) does not constitute the active conduct 
                        of a trade or business, or
                            ``(ii) it involves the performance of 
                        administrative services in connection with 
                        plans providing life insurance, pension, or 
                        accident and health benefits.''.
            (2) Section 465(c)(7)(D)(v)(II) is amended by striking 
        ``section 806(b)(3)'' and inserting ``section 453B(e)(3)''.
            (3) Section 801(a)(2) is amended by striking subparagraph 
        (C).
            (4) Section 804 is amended by striking ``means--'' and all 
        that follows and inserting ``means the general deductions 
        provided in section 805.''.
            (5) Section 805(a)(4)(B), as amended by section 3701, is 
        amended by striking clause (i) and by redesignating clauses 
        (ii), (iii), and (iv) as clauses (i), (ii), and (iii), 
        respectively.
            (6) Section 805(b)(2)(A) is amended by striking clause 
        (iii) and by redesignating clauses (iv) and (v) as clauses 
        (iii) and (iv), respectively.
            (7) Section 842(c) is amended by striking paragraph (1) and 
        by redesignating paragraphs (2) and (3) as paragraphs (1) and 
        (2), respectively.
            (8) Section 953(b)(1), as amended by section 3701, is 
        amended by striking subparagraph (A) and by redesignating 
        subparagraphs (B) and (C) as subparagraphs (A) and (B), 
        respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3703. COMPUTATION OF LIFE INSURANCE TAX RESERVES.

    (a) In General.--Section 807 is amended by striking subsections 
(c), (d), and (e) and inserting the following new subsections:
    ``(c) Items Described.--The items described in this subsection are 
the reserves for future unaccrued claims defined in subsection (e) as 
determined by applying the method of computing the reserves in 
subsection (d).
    ``(d) Method of Computing Reserves for Purposes of Determining 
Income.--For purposes of this part (other than section 816), the amount 
of the reserves for future unaccrued claims shall be 76.5 percent of 
the amount of such reserves as defined in subsection (e).
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Reserves for future unaccrued claims.--The term 
        `reserves for future unaccrued claims' means--
                    ``(A) life insurance reserves (as defined in 
                section 816(b)) determined in accordance with the 
                method prescribed by the National Association of 
                Insurance Commissioners and reported by the taxpayer on 
                its annual statement for the calendar year that is the 
                taxable year,
                    ``(B) unpaid losses included in total reserves 
                under section 816(c)(2), and
                    ``(C) the amount (not included in subparagraph (A) 
                or (B)) of reserves solely for claims with respect to 
                insurance risks which are determined in accordance with 
                the method prescribed by the National Association of 
                Insurance Commissioners and reported by the taxpayer on 
                its annual statement for the calendar year that is the 
                taxable year,
        but not including any amount of asset adequacy reserves, 
        contingency reserves, unearned premium reserves, or any other 
        amount not constituting reserves for future unaccrued claims as 
        provided in guidance by the Secretary. For purposes of 
        subparagraph (B) and section 805(a)(1), the amount of the 
        unpaid losses (other than losses on life insurance contracts) 
        shall be the amount of the discounted unpaid losses as defined 
        in section 846.
            ``(2) Reporting rules.--The Secretary shall require 
        reporting (at such time and in such manner as the Secretary 
        shall prescribe) with respect to the opening balance and 
        closing balance of reserves and with respect to the method of 
        computing reserves for purposes of determining income.''.
    (b) Conforming Amendments.--
            (1) Section 808 is amended by adding at the end the 
        following new subsection:
    ``(g) Prevailing State Assumed Interest Rate.--For purposes of this 
subchapter--
            ``(1) In general.--The term `prevailing State assumed 
        interest rate' means, with respect to any contract, the highest 
        assumed interest rate permitted to be used in computing life 
        insurance reserves for insurance contracts or annuity contracts 
        (as the case may be) under the insurance laws of at least 26 
        States. For purposes of the preceding sentence, the effect of 
        nonforfeiture laws of a State on interest rates for reserves 
        shall not be taken into account.
            ``(2) When rate determined.--The prevailing State assumed 
        interest rate with respect to any contract shall be determined 
        as of the beginning of the calendar year in which the contract 
        was issued.''.
            (2) Paragraph (1) of section 811(d) is amended by striking 
        ``the greater of the prevailing State assumed interest rate or 
        applicable Federal interest rate in effect under section 807'' 
        and inserting ``the interest rate in effect under section 
        808(g)''.
            (3) Subparagraph (A) of section 846(f)(6) is amended by 
        striking ``except that'' and all that follows and inserting 
        ``except that the limitation of subsection (a)(3) shall apply, 
        and''.
            (4) Subparagraph (B) of section 954(i)(5) is amended by 
        striking ``shall apply, and''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2017.
            (2) Transition rule.--For the first taxable year beginning 
        after December 31, 2017, the reserve with respect to any 
        contract (as determined under section 807(d)(2) of the Internal 
        Revenue Code of 1986) at the end of the preceding taxable year 
        shall be determined as if the amendments made by this section 
        had applied to such reserve in such preceding taxable year.
            (3) Transition relief.--
                    (A) In general.--If--
                            (i) the reserve determined under section 
                        807(d)(2) of the Internal Revenue Code of 1986 
                        (determined without regard to the amendments 
                        made by this section) with respect to any 
                        contract as of the close of the year preceding 
                        the first taxable year beginning after December 
                        31, 2017, differs from
                            (ii) the reserve which would have been 
                        determined with respect to such contract as of 
                        the close of such taxable year under such 
                        section determined without regard to paragraph 
                        (2),
                then the difference between the amount of the reserve 
                described in clause (i) and the amount of the reserve 
                described in clause (ii) shall be taken into account 
                under the method provided in subparagraph (B).
                    (B) Method.--The method provided in this 
                subparagraph is as follows:
                            (i) if the amount determined under 
                        subparagraph (A)(i) exceeds the amount 
                        determined under subparagraph (A)(ii), \1/8\ of 
                        such excess shall be taken into account, for 
                        each of the 8 succeeding taxable years, as a 
                        deduction under section 805(a)(2) of such Code, 
                        or
                            (ii) if the amount determined under 
                        subparagraph (A)(ii) exceeds the amount 
                        determined under subparagraph (A)(i), \1/8\ of 
                        such excess shall be included in gross income, 
                        for each of the 8 succeeding taxable years, 
                        under section 803(a)(2) of such Code.

SEC. 3704. ADJUSTMENT FOR CHANGE IN COMPUTING RESERVES.

    (a) In General.--Paragraph (1) of section 807(f) is amended to read 
as follows:
            ``(1) Treatment as change in method of accounting.--If the 
        basis for determining any item referred to in subsection (c) as 
        of the close of any taxable year differs from the basis for 
        such determination as of the close of the preceding taxable 
        year, then so much of the difference between--
                    ``(A) the amount of the item at the close of the 
                taxable year, computed on the new basis, and
                    ``(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 accounting 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 December 31, 2017.

SEC. 3705. MODIFICATION OF RULES FOR LIFE INSURANCE PRORATION FOR 
              PURPOSES OF DETERMINING THE DIVIDENDS RECEIVED DEDUCTION.

    (a) In General.--Section 812 is amended to read as follows:

``SEC. 812. DEFINITION OF COMPANY'S SHARE AND POLICYHOLDER'S SHARE.

    ``(a) Company's Share.--For purposes of section 805(a)(4), the term 
`company's share' means, with respect to any taxable year beginning 
after December 31, 2017, 40 percent.
    ``(b) Policyholder's Share.--For purposes of section 807, the term 
`policyholder's share' means, with respect to any taxable year 
beginning after December 31, 2017, 60 percent.''.
    (b) Conforming Amendment.--Section 817A(e)(2) is amended by 
striking ``, 807(d)(2)(B), and 812'' and inserting ``and 
807(d)(2)(B)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3706. REPEAL OF SPECIAL RULE FOR DISTRIBUTIONS TO SHAREHOLDERS 
              FROM PRE-1984 POLICYHOLDERS 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 December 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 (determined as of the close of such company's last taxable year 
beginning before January 1, 2018) in an existing policyholders surplus 
account (as defined in section 815 of the Internal Revenue Code of 
1986, as in effect before its repeal), the tax imposed by section 801 
of such Code for the first 8 taxable years beginning after December 31, 
2017, shall be the amount which would be imposed by such section for 
such year on the sum of--
            (1) life insurance company taxable income for such year 
        (within the meaning of such section 801 but not less than 
        zero), plus
            (2) \1/8\ of such balance.

SEC. 3707. MODIFICATION OF PRORATION RULES FOR PROPERTY AND CASUALTY 
              INSURANCE COMPANIES.

    (a) In General.--Section 832(b)(5)(B) is amended by striking ``15 
percent'' and inserting ``26.25 percent''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2017.

SEC. 3708. MODIFICATION OF DISCOUNTING RULES FOR PROPERTY AND CASUALTY 
              INSURANCE COMPANIES.

    (a) Modification of Rate of Interest Used To Discount Unpaid 
Losses.--Paragraph (2) of section 846(c) is amended to read as follows:
            ``(2) Determination of annual rate.--The annual rate 
        determined by the Secretary under this paragraph for any 
        calendar year shall be a rate determined on the basis of the 
        corporate bond yield curve (as defined in section 
        430(h)(2)(D)(i)).''.
    (b) Modification of Computational Rules for Loss Payment 
Patterns.--Section 846(d)(3) is amended by striking subparagraphs (B) 
through (G) and inserting the following new subparagraphs:
                    ``(B) Treatment of certain losses.--Losses which 
                would have been treated as paid in the last year of the 
                period applicable under subparagraph (A)(i) or (A)(ii) 
                shall be treated as paid in the following manner:
                            ``(i) 3-year loss payment pattern.--
                                    ``(I) In general.--The period taken 
                                into account under subparagraph (A)(i) 
                                shall be extended to the extent 
                                required under subclause (II).
                                    ``(II) Computation of extension.--
                                The amount of losses which would have 
                                been treated as paid in the 3d year 
                                after the accident year shall be 
                                treated as paid in such 3d year and 
                                each subsequent year in an amount equal 
                                to the average of the losses treated as 
                                paid in the 1st and 2d years after the 
                                accident year (or, if lesser, the 
                                portion of the unpaid losses not 
                                theretofore taken into account). To the 
                                extent such unpaid losses have not been 
                                treated as paid before the 18th year 
                                after the accident year, they shall be 
                                treated as paid in such 18th year.
                            ``(ii) 10-year loss payment pattern.--
                                    ``(I) In general.--The period taken 
                                into account under subparagraph (A)(ii) 
                                shall be extended to the extent 
                                required under subclause (II).
                                    ``(II) Computation of extension.--
                                The amount of losses which would have 
                                been treated as paid in the 10th year 
                                after the accident year shall be 
                                treated as paid in such 10th year and 
                                each subsequent year in an amount equal 
                                to the amount of the average of the 
                                losses treated as paid in the 7th, 8th, 
                                and 9th years after the accident year 
                                (or, if lesser, the portion of the 
                                unpaid losses not theretofore taken 
                                into account). To the extent such 
                                unpaid losses have not been treated as 
                                paid before the 25th year after the 
                                accident year, they shall be treated as 
                                paid in such 25th year.''.
    (c) Repeal of Historical Payment Pattern Election.--Section 846 is 
amended by striking subsection (e) and by redesignating subsections (f) 
and (g) as subsections (e) and (f), respectively.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.
    (e) Transitional Rule.--For the first taxable year beginning after 
December 31, 2017--
            (1) the unpaid losses and the expenses unpaid (as defined 
        in paragraphs (5)(B) and (6) of section 832(b) of the Internal 
        Revenue Code of 1986) at the end of the preceding taxable year, 
        and
            (2) the unpaid losses as defined in sections 807(c)(2) and 
        805(a)(1) of such Code at the end of the preceding taxable 
        year,
shall be determined as if the amendments made by this section had 
applied to such unpaid losses and expenses unpaid in the preceding 
taxable year and by using the interest rate and loss payment patterns 
applicable to accident years ending with calendar year 2018, and any 
adjustment shall be taken into account ratably in such first taxable 
year and the 7 succeeding taxable years. For subsequent taxable years, 
such amendments shall be applied with respect to such unpaid losses and 
expenses unpaid by using the interest rate and loss payment patterns 
applicable to accident years ending with calendar year 2018.

SEC. 3709. REPEAL OF SPECIAL ESTIMATED TAX PAYMENTS.

    (a) In General.--Part III of subchapter L of chapter 1 is amended 
by striking section 847 (and by striking the item relating to such 
section in the table of sections for such part).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3710. CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.

    (a) In General.--Paragraph (1) of section 848(c) is amended by 
striking subparagraphs (A), (B), and (C) and inserting the following 
new subparagraphs:
                    ``(A) 4 percent of the net premiums for such 
                taxable year on specified insurance contracts which are 
                group contracts, and
                    ``(B) 11 percent of the net premiums for such 
                taxable year on specified insurance contracts not 
                described in subparagraph (A).''.
    (b) Group Contracts.--So much of paragraph (2) of section 848(e) as 
precedes subparagraph (A) thereof is amended to read as follows:
            ``(2) Group contract.--The term `group contract' means any 
        specified insurance contract--''.
    (c) Conforming Amendments.--Section 848(e) is amended by striking 
paragraphs (3) and (6) and by redesignating paragraphs (4) and (5) as 
paragraphs (3) and (4), respectively.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

                        Subtitle I--Compensation

SEC. 3801. NONQUALIFIED DEFERRED COMPENSATION.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
is amended by adding at the end the following new section:

``SEC. 409B. NONQUALIFIED DEFERRED COMPENSATION.

    ``(a) In General.--Any compensation which is deferred under a 
nonqualified deferred compensation plan shall be includible in the 
gross income of the person who performed the services to which such 
compensation relates when there is no substantial risk of forfeiture of 
the rights of such person to such compensation.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Substantial risk of forfeiture.--The rights of a 
        person to compensation shall be treated as subject to a 
        substantial risk of forfeiture only if such person's rights to 
        such compensation are conditioned upon the future performance 
        of substantial services by any person. Such rights shall not be 
        treated as subject to a substantial risk of forfeiture solely 
        by reason of a covenant not to compete or the occurrence of a 
        condition related to a purpose of the compensation other than 
        the future performance of services.
            ``(2) Nonqualified deferred compensation plan.--For 
        purposes of this section:
                    ``(A) Nonqualified deferred compensation plan.--The 
                term `nonqualified deferred compensation plan' means 
                any plan that provides for the deferral of 
                compensation, other than--
                            ``(i) a qualified employer plan,
                            ``(ii) any bona fide vacation leave, sick 
                        leave, compensatory time, disability pay, or 
                        death benefit plan, and
                            ``(iii) any other plan or arrangement 
                        designated by the Secretary consistent with the 
                        purposes of this section.
                    ``(B) Equity-based compensation.--The term 
                `nonqualified deferred compensation plan' shall include 
                any plan that provides--
                            ``(i) a right to compensation based on the 
                        value of, or appreciation in value of, a 
                        specified number of equity units of the service 
                        recipient, whether paid in cash or equity, or
                            ``(ii) stock appreciation rights or stock 
                        options.
                Such term shall not include that portion of any plan 
                which consists of a transfer of property described in 
                section 83 (other than stock options) or which consists 
                of a trust to which section 402(b) applies.
            ``(3) Qualified employer plan.--The term `qualified 
        employer plan' means any plan, contract, pension, account, or 
        trust described in section 408(p)(2)(D)(ii) or a simple 
        retirement account (within the meaning of section 408(p)).
            ``(4) Plan includes arrangements, etc.--The term `plan' 
        includes any agreement or arrangement, including an agreement 
        or arrangement that includes one person.
            ``(5) Exception.--Compensation shall not be treated as 
        deferred for purposes of this section if the service provider 
        receives payment of such compensation not later than 2 \1/2\ 
        months after the end of the taxable year of the service 
        recipient during which the right to the payment of such 
        compensation is no longer subject to a substantial risk of 
        forfeiture.
            ``(6) Treatment of earnings.--References to deferred 
        compensation shall be treated as including references to income 
        (whether actual or notional) attributable to such compensation 
        or such income.
            ``(7) Aggregation rules.--Except as provided by the 
        Secretary, rules similar to the rules of subsections (b) and 
        (c) of section 414 shall apply.
    ``(c) No Inference on Earlier Income Inclusion or Requirement of 
Later Inclusion.--Nothing in this section shall be construed to prevent 
the inclusion of amounts in gross income under any other provision of 
this chapter or any other rule of law earlier than the time provided in 
this section. Any amount included in gross income under this section 
shall not be required to be included in gross income under any other 
provision of this chapter or any other rule of law later than the time 
provided in this section.
    ``(d) Application to Existing Deferrals.--In the case of any amount 
deferred to which this section does not otherwise apply solely by 
reason of the fact that the amount is attributable to services 
performed before January 1, 2018, to the extent such amount is not 
includible in gross income in a taxable year beginning before 2026, 
such amounts shall be includible in gross income in the later of--
            ``(1) the last taxable year beginning before 2026, or
            ``(2) the taxable year in which there is no substantial 
        risk of forfeiture of the rights to such compensation.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations disregarding a substantial risk of 
forfeiture in cases where necessary to carry out the purposes of this 
section.''.
    (b) Reporting and Withholding Requirements.--
            (1) Wage withholding.--The flush sentence at the end of 
        section 3401(a) is amended by inserting ``or 409B'' after 
        ``409A''.
            (2) Withholding of tax on nonresident aliens.--Section 
        1441(c)(4) is amended by inserting ``(other than under a 
        nonqualified deferred compensation plan (within the meaning of 
        section 409B(b))'' after ``compensation for personal 
        services''.
            (3) Information reporting.--Section 6041(g) is amended--
                    (A) by inserting ``or 409B(b)'' after ``409A(d)'' 
                in paragraph (1), and
                    (B) by inserting ``or 409B'' after ``409A'' in 
                paragraph (2).
            (4) Receipts for employees.--Section 6051(a)(13), as 
        amended by the preceding provisions of this Act, is amended by 
        inserting ``or 409B(b)'' after ``409A(d)''.
    (c) Termination of Certain Other Nonqualified Deferred Compensation 
Rules.--
            (1) Nonqualified deferred compensation.--
                    (A) In general.--Subpart A of part I of subchapter 
                D of chapter 1 is amended by striking section 409A (and 
                by striking the item relating to such section in the 
                table of sections for such subpart).
                    (B) Conforming amendment.--Section 26(b)(2) is 
                amended by striking subparagraph (V).
            (2) 457(b) plans of tax exempt organizations.--Section 457 
        is amended by adding at the end the following new subsection:
    ``(h) Termination of Certain Plans.--
            ``(1) Tax-exempt organization plans.--This section shall 
        not apply to amounts deferred which are attributable to 
        services performed after December 31, 2017, under a plan 
        maintained by an employer described in subsection (e)(1)(B).
            ``(2) Ineligible deferred compensation plans.--Subsection 
        (f) shall not apply to amounts deferred which are attributable 
        to services performed after December 31, 2017.''.
            (3) Nonqualified deferred compensation from certain tax 
        indifferent parties.--
                    (A) In general.--Subpart B of part II of subchapter 
                E of chapter 1 is amended by striking section 457A (and 
                by striking the item relating to such section in the 
                table of sections for such subpart).
                    (B) Conforming amendment.--Section 26(b)(2) is 
                amended by striking subparagraph (X).
    (d) Clerical Amendment.--The table of sections for part I of 
subchapter D of chapter 1 is amended by adding at the end the following 
new item:

``Sec. 409B. Nonqualified deferred compensation.''.
    (e) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection and section 409B(d) of the Internal Revenue Code of 
        1986 (as added by this Act), the amendments made by this 
        section shall apply to amounts which are attributable to 
        services performed after December 31, 2017.
            (2) Accelerated payments.--No later than 120 days after the 
        date of the enactment of this Act, the Secretary shall issue 
        guidance providing a limited period of time during which a 
        nonqualified deferred compensation arrangement attributable to 
        services performed on or before December 31, 2017, may, without 
        violating the requirements of section 409A of the Internal 
        Revenue Code of 1986, be amended to conform the date of 
        distribution to the date the amounts are required to be 
        included in income.
            (3) Certain back-to-back arrangements.--If the taxpayer is 
        also a service recipient and maintains one or more nonqualified 
        deferred compensation arrangements for its service providers 
        under which any amount is attributable to services performed on 
        or before December 31, 2017, the guidance issued under 
        paragraph (3) shall permit such arrangements to be amended to 
        conform the dates of distribution under such arrangement to the 
        date amounts are required to be included in the income of such 
        taxpayer under this subsection.
            (4) Accelerated payment not treated as material 
        modification.--Any amendment to a nonqualified deferred 
        compensation arrangement made pursuant to paragraph (3) or (4) 
        shall not be treated as a material modification of the 
        arrangement for purposes of section 409A of the Internal 
        Revenue Code of 1986.

SEC. 3802. MODIFICATION OF LIMITATION ON EXCESSIVE EMPLOYEE 
              REMUNERATION.

    (a) Repeal of Performance-Based Compensation and Commission 
Exceptions for Limitation on Excessive Employee Remuneration.--
            (1) In general.--Section 162(m)(4) is amended by striking 
        subparagraphs (B) and (C) and by redesignating subparagraphs 
        (D), (E), (F), and (G) as subparagraphs (B), (C), (D), and (E), 
        respectively.
            (2) Conforming amendments.--
                    (A) Paragraphs (5)(E) and (6)(D) of section 162(m) 
                are each amended by striking ``subparagraphs (B), (C), 
                and (D)'' and inserting ``subparagraph (B)''.
                    (B) Paragraphs (5)(G) and (6)(G) of section 162(m) 
                are each amended by striking ``(F) and (G)'' and 
                inserting ``(D) and (E)''.
    (b) Expansion of Applicable Employer.--Section 162(m)(2) is amended 
to read as follows:
            ``(2) Publicly held corporation.--For purposes of this 
        subsection, the term `publicly held corporation' means any 
        corporation which is an issuer (as defined in section 3 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78c))--
                    ``(A) the securities of which are required to be 
                registered under section 12 of such Act (15 U.S.C. 
                78l), or
                    ``(B) that is required to file reports under 
                section 15(d) of such Act (15 U.S.C. 78o(d)).''.
    (c) Modification of Definition of Covered Employees.--Section 
162(m)(3) is amended--
            (1) in subparagraph (A), by striking ``as of the close of 
        the taxable year, such employee is the chief executive officer 
        of the taxpayer or is'' and inserting ``such employee is the 
        principal executive officer or principal financial officer of 
        the taxpayer at any time during the taxable year, or was'',
            (2) in subparagraph (B)--
                    (A) by striking ``4'' and inserting ``3'', and
                    (B) by striking ``(other than the chief executive 
                officer)'' and inserting ``(other than the principal 
                executive officer)'', and
            (3) by striking ``or'' at the end of subparagraph (A), by 
        striking the period at the end of subparagraph (B) and 
        inserting ``, or'', and by adding at the end the following:
                    ``(C) was a covered employee of the taxpayer (or 
                any predecessor) for any preceding taxable year 
                beginning after December 31, 2016.
        Such term shall include any employee who would be described in 
        subparagraph (B) if the reporting described in such 
        subparagraph were required as so described.''.
    (d) Special Rule for Remuneration Paid to Beneficiaries, etc.--
Section 162(m)(4), as amended by subsection (a), is amended by adding 
at the end the following new subparagraph:
                    ``(F) Special rule for remuneration paid to 
                beneficiaries, etc.--Remuneration shall not fail to be 
                applicable employee remuneration merely because it is 
                includible in the income of, or paid to, a person other 
                than the covered employee, including after the death of 
                the covered employee.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 3803. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE 
              COMPENSATION.

    (a) In General.--Subchapter D of chapter 42 is amended by adding at 
the end the following new section:

``SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION EXECUTIVE 
              COMPENSATION.

    ``(a) Tax Imposed.--There is hereby imposed a tax equal to 20 
percent of the sum of--
            ``(1) so much of the remuneration paid (other than any 
        excess parachute payment) by an applicable tax-exempt 
        organization for the taxable year with respect to employment of 
        any covered employee in excess of $1,000,000, plus
            ``(2) any excess parachute payment paid by such an 
        organization to any covered employee.
    ``(b) Liability for Tax.--The employer shall be liable for the tax 
imposed under subsection (a).
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable tax-exempt organization.--The term 
        `applicable tax-exempt organization' means any organization 
        that for the taxable year--
                    ``(A) is exempt from taxation under section 501(a),
                    ``(B) is a farmers' cooperative organization 
                described in section 521(b)(1),
                    ``(C) has income excluded from taxation under 
                section 115(1), or
                    ``(D) is a political organization described in 
                section 527(e)(1).
            ``(2) Covered employee.--For purposes of this section, the 
        term `covered employee' means any employee (including any 
        former employee) of an applicable tax-exempt organization if 
        the employee--
                    ``(A) is one of the 5 highest compensated employees 
                of the organization for the taxable year, or
                    ``(B) was a covered employee of the organization 
                (or any predecessor) for any preceding taxable year 
                beginning after December 31, 2016.
            ``(3) Remuneration.--For purposes of this section, the term 
        `remuneration' means wages (as defined in section 3401(a)), 
        except that such term shall not include any designated Roth 
        contribution (as defined in section 402A(c)).
            ``(4) Remuneration from related organizations.--
                    ``(A) In general.--Remuneration of a covered 
                employee paid by an applicable tax-exempt organization 
                shall include any remuneration paid with respect to 
                employment of such employee by any related person or 
                governmental entity.
                    ``(B) Related organizations.--A person or 
                governmental entity shall be treated as related to an 
                applicable tax-exempt organization if such person or 
                governmental entity--
                            ``(i) controls, or is controlled by, the 
                        organization,
                            ``(ii) is controlled by one or more persons 
                        that control the organization,
                            ``(iii) is a supported organization (as 
                        defined in section 509(f)(2)) during the 
                        taxable year with respect to the organization,
                            ``(iv) is a supporting organization 
                        described in section 509(a)(3) during the 
                        taxable year with respect to the organization, 
                        or
                            ``(v) in the case of an organization that 
                        is a voluntary employees' beneficiary 
                        association described in section 501(a)(9), 
                        establishes, maintains, or makes contributions 
                        to such voluntary employees' beneficiary 
                        association.
                    ``(C) Liability for tax.--In any case in which 
                remuneration from more than one employer is taken into 
                account under this paragraph in determining the tax 
                imposed by subsection (a), each such employer shall be 
                liable for such tax in an amount which bears the same 
                ratio to the total tax determined under subsection (a) 
                with respect to such remuneration as--
                            ``(i) the amount of remuneration paid by 
                        such employer with respect to such employee, 
                        bears to
                            ``(ii) the amount of remuneration paid by 
                        all such employers to such employee.
            ``(5) Excess parachute payment.--For purposes determining 
        the tax imposed by subsection (a)(2)--
                    ``(A) In general.--The term `excess parachute 
                payment' means an amount equal to the excess of any 
                parachute payment over the portion of the base amount 
                allocated to such payment.
                    ``(B) Parachute payment.--The term `parachute 
                payment' means any payment in the nature of 
                compensation to (or for the benefit of) a covered 
                employee if--
                            ``(i) such payment is contingent on such 
                        employee's separation from employment with the 
                        employer, and
                            ``(ii) the aggregate present value of the 
                        payments in the nature of compensation to (or 
                        for the benefit of) such individual which are 
                        contingent on such separation equals or exceeds 
                        an amount equal to 3 times the base amount.
                Such term does not include any payment described in 
                section 280G(b)(6) (relating to exemption for payments 
                under qualified plans) or any payment made under or to 
                an annuity contract described in section 403(b) or a 
                plan described in section 457(b).
                    ``(C) Base amount.--Rules similar to the rules of 
                280G(b)(3) shall apply for purposes of determining the 
                base amount.
                    ``(D) Property transfers; present value.--Rules 
                similar to the rules of paragraphs (3) and (4) of 
                section 280G(d) shall apply.
            ``(6) Coordination with deduction limitation.--Remuneration 
        the deduction for which is not allowed by reason of section 
        162(m) shall not be taken into account for purposes of this 
        section.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to prevent avoidance of the purposes of this 
section through the performance of services other than as an 
employee.''.
    (b) Clerical Amendment.--The table of sections for subchapter D of 
chapter 42 is amended by adding at the end the following new item:

``Sec. 4960. Tax on excess exempt organization executive 
                            compensation.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

        TITLE IV--TAXATION OF FOREIGN INCOME AND FOREIGN PERSONS

    Subtitle A--Establishment of Participation Exemption System for 
                       Taxation of Foreign Income

SEC. 4001. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS RECEIVED 
              BY DOMESTIC CORPORATIONS FROM SPECIFIED 10-PERCENT OWNED 
              FOREIGN CORPORATIONS.

    (a) In General.--Part VIII of subchapter B of chapter 1 is amended 
by inserting after section 245 the following new section:

``SEC. 245A. DEDUCTION FOR FOREIGN-SOURCE PORTION OF DIVIDENDS RECEIVED 
              BY DOMESTIC CORPORATIONS FROM SPECIFIED 10-PERCENT OWNED 
              FOREIGN CORPORATIONS.

    ``(a) In General.--In the case of any dividend received from a 
specified 10-percent owned foreign corporation by a domestic 
corporation which is a United States shareholder with respect to such 
foreign corporation, there shall be allowed as a deduction an amount 
equal to the foreign-source portion of such dividend.
    ``(b) Specified 10-Percent Owned Foreign Corporation.--For purposes 
of this section, the term `specified 10-percent owned foreign 
corporation' means any foreign corporation with respect to which any 
domestic corporation is a United States shareholder. Such term shall 
not include any passive foreign investment company (within the meaning 
of subpart D of part VI of subchapter P) that is not a controlled 
foreign corporation.
    ``(c) Foreign-Source Portion.--For purposes of this section--
            ``(1) In general.--The foreign-source portion of any 
        dividend is an amount which bears the same ratio to such 
        dividend as--
                    ``(A) the post-1986 undistributed foreign earnings 
                of the specified 10-percent owned foreign corporation, 
                bears to
                    ``(B) the total post-1986 undistributed earnings of 
                such foreign corporation.
            ``(2) Post-1986 undistributed earnings.--The term `post-
        1986 undistributed earnings' means the amount of the earnings 
        and profits of the specified 10-percent owned foreign 
        corporation (computed in accordance with sections 964(a) and 
        986) accumulated in taxable years beginning after December 31, 
        1986--
                    ``(A) as of the close of the taxable year of the 
                specified 10-percent owned foreign corporation in which 
                the dividend is distributed, and
                    ``(B) without diminution by reason of dividends 
                distributed during such taxable year.
            ``(3) Post-1986 undistributed foreign earnings.--The term 
        `post-1986 undistributed foreign earnings' means the portion of 
        the post-1986 undistributed earnings which is attributable to 
        neither--
                    ``(A) income described in subparagraph (A) of 
                section 245(a)(5), nor
                    ``(B) dividends described in subparagraph (B) of 
                such section (determined without regard to section 
                245(a)(12)).
            ``(4) Treatment of distributions from earnings before 
        1987.--
                    ``(A) In general.--In the case of any dividend paid 
                out of earnings and profits of the specified 10-percent 
                owned foreign corporation (computed in accordance with 
                sections 964(a) and 986) accumulated in taxable years 
                beginning before January 1, 1987--
                            ``(i) paragraphs (1), (2), and (3) shall be 
                        applied without regard to the phrase `post-
                        1986' each place it appears, and
                            ``(ii) paragraph (2) shall be applied by 
                        substituting `after the date specified in 
                        section 316(a)(1)' for `in taxable years 
                        beginning after December 31, 1986'.
                    ``(B) Dividends paid first out of post-1986 
                earnings.--Dividends shall be treated as paid out of 
                post-1986 undistributed earnings to the extent thereof.
            ``(5) Treatment of certain dividends in excess of 
        undistributed earnings.--In the case of any dividend from the 
        specified 10-percent owned foreign corporation which is in 
        excess of undistributed earnings (as determined under paragraph 
        (2) after taking into account the modifications described in 
        clauses (i) and (ii) of paragraph (4)(A)), the foreign-source 
        portion of such dividend is an amount which bears the same 
        ratio to such dividend as--
                    ``(A) the portion of the earnings and profits 
                described in subparagraph (B) which is attributable to 
                neither income described in paragraph (3)(A) nor 
                dividends described in paragraph (3)(B), bears to
                    ``(B) the earnings and profits of such corporation 
                for the taxable year in which such distribution is made 
                (computed as of the close of the taxable year without 
                diminution by reason of any distributions made during 
                the taxable year).
    ``(d) Disallowance of Foreign Tax Credit, etc.--
            ``(1) In general.--No credit shall be allowed under section 
        901 for any taxes paid or accrued (or treated as paid or 
        accrued) with respect to any dividend for which a deduction is 
        allowed under this section.
            ``(2) Denial of deduction.--No deduction shall be allowed 
        under this chapter for any tax for which credit is not 
        allowable under section 901 by reason of paragraph (1) 
        (determined by treating the taxpayer as having elected the 
        benefits of subpart A of part III of subchapter N).
    ``(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.''.
    (b) Application of Holding Period Requirement.--Section 246(c) is 
amended--
            (1) by striking ``or 245'' in paragraph (1) and inserting 
        ``245, or 245A'', and
            (2) by adding at the end the following new paragraph:
            ``(5) Special rules for foreign source portion of dividends 
        received from specified 10-percent owned foreign 
        corporations.--
                    ``(A) 6-month holding period requirement.--For 
                purposes of section 245A--
                            ``(i) paragraph (1)(A) shall be applied--
                                    ``(I) by substituting `180 days' 
                                for `45 days'each place it appears, and
                                    ``(II) by substituting `361-day 
                                period' for `91-day period', and
                            ``(ii) paragraph (2) shall not apply.
                    ``(B) Status must be maintained during holding 
                period.--For purposes of applying paragraph (1) with 
                respect to section 245A, the taxpayer shall be treated 
                as holding the stock referred to in paragraph (1) for 
                any period only if--
                            ``(i) the specified 10-percent owned 
                        foreign corporation referred to in section 
                        245A(a) is a specified 10-percent owned foreign 
                        corporation for such period, and
                            ``(ii) the taxpayer is a United States 
                        shareholder with respect to such specified 10-
                        percent owned foreign corporation for such 
                        period.''.
    (c) Application of Rules Generally Applicable to Deductions for 
Dividends Received.--
            (1) Treatment of dividends from certain corporations.--
        Section 246(a)(1) is amended by striking ``and 245'' and 
        inserting ``245, and 245A''.
            (2) Coordination with section 1059.--Section 1059(b)(2)(B) 
        is amended by striking ``or 245'' and inserting ``245, or 
        245A''.
    (d) Coordination With Foreign Tax Credit Limitation.--Section 
904(b) is amended by adding at the end the following new paragraph:
            ``(5) Treatment of dividends for which deduction is allowed 
        under section 245a.--For purposes of subsection (a), in the 
        case of a United States shareholder with respect to a specified 
        10-percent owned foreign corporation, such shareholder's 
        taxable income from sources without the United States (and 
        entire taxable income) shall be determined without regard to--
                    ``(A) the foreign-source portion of any dividend 
                received from such foreign corporation, and
                    ``(B) any deductions properly allocable or 
                apportioned to--
                            ``(i) income (other than subpart F income 
                        (as defined in section 952) and foreign high 
                        return amounts (as defined in section 951A(b)) 
                        with respect to stock of such specified 10-
                        percent owned foreign corporation, or
                            ``(ii) such stock (to the extent income 
                        with respect to such stock is other than 
                        subpart F income (as so defined) or foreign 
                        high return amounts (as so defined)).
        Any term which is used in section 245A and in this paragraph 
        shall have the same meaning for purposes of this paragraph as 
        when used in such section.''.
    (e) Conforming Amendments.--
            (1) Section 245(a)(4) is amended by striking ``section 
        902(c)(1)'' and inserting ``section 245A(c)(2) applied by 
        substituting `qualified 10-percent owned foreign corporation' 
        for `specified 10-percent owned foreign corporation' each place 
        it appears''.
            (2) Section 951(b) is amended by striking ``subpart'' and 
        inserting ``title''.
            (3) Section 957(a) is amended by striking ``subpart'' in 
        the matter preceding paragraph (1) and inserting ``title''.
            (4) The table of sections for part VIII of subchapter B of 
        chapter 1 is amended by inserting after section 245 the 
        following new item:

``Sec. 245A. Deduction for foreign-source portion of dividends received 
                            by domestic corporations from specified 10-
                            percent owned foreign corporations.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to distributions made after (and, in the case of the amendments 
made by subsection (d), deductions with respect to taxable years ending 
after) December 31, 2017.

SEC. 4002. APPLICATION OF PARTICIPATION EXEMPTION TO INVESTMENTS IN 
              UNITED STATES PROPERTY.

    (a) In General.--Section 956(a) is amended in the matter preceding 
paragraph (1) by inserting ``(other than a corporation)'' after 
``United States shareholder''.
    (b) Regulatory Authority To Prevent Abuse.--Section 956(e) is 
amended by striking ``including regulations to prevent'' and inserting 
``including regulations--
            ``(1) to address United States shareholders that are 
        partnerships with corporate partners, and
            ``(2) to prevent''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after December 
31, 2017.

SEC. 4003. LIMITATION ON LOSSES WITH RESPECT TO SPECIFIED 10-PERCENT 
              OWNED FOREIGN CORPORATIONS.

    (a) Basis in Specified 10-Percent Owned Foreign Corporation Reduced 
by Nontaxed Portion of Dividend for Purposes of Determining Loss.--
            (1) In general.--Section 961 is amended by adding at the 
        end the following new subsection:
    ``(d) Basis in Specified 10-Percent Owned Foreign Corporation 
Reduced by Nontaxed Portion of Dividend for Purposes of Determining 
Loss.--If a domestic corporation received a dividend from a specified 
10-percent owned foreign corporation (as defined in section 245A) in 
any taxable year, solely for purposes of determining loss on any 
disposition of stock of such foreign corporation in such taxable year 
or any subsequent taxable year, the basis of such domestic corporation 
in such stock shall be reduced (but not below zero) by the amount of 
any deduction allowable to such domestic corporation under section 245A 
with respect to such stock except to the extent such basis was reduced 
under section 1059 by reason of a dividend for which such a deduction 
was allowable.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to distributions made after December 31, 2017.
    (b) Treatment of Foreign Branch Losses Transferred to Specified 10-
Percent Owned Foreign Corporations.--
            (1) In general.--Part II of subchapter B of chapter 1 is 
        amended by adding at the end the following new section:

``SEC. 91. CERTAIN FOREIGN BRANCH LOSSES TRANSFERRED TO SPECIFIED 10-
              PERCENT OWNED FOREIGN CORPORATIONS.

    ``(a) In General.--If a domestic corporation transfers 
substantially all of the assets of a foreign branch (within the meaning 
of section 367(a)(3)(C)) to a specified 10-percent owned foreign 
corporation (as defined in section 245A) with respect to which it is a 
United States shareholder after such transfer, such domestic 
corporation shall include in gross income for the taxable year which 
includes such transfer an amount equal to the transferred loss amount 
with respect to such transfer.
    ``(b) Transferred Loss Amount.--For purposes of this section, the 
term `transferred loss amount' means, with respect to any transfer of 
substantially all of the assets of a foreign branch, the excess (if 
any) of--
            ``(1) the sum of losses--
                    ``(A) which were incurred by the foreign branch 
                after December 31, 2017, and before the transfer, and
                    ``(B) with respect to which a deduction was allowed 
                to the taxpayer, over
            ``(2) the sum of--
                    ``(A) any taxable income of such branch for a 
                taxable year after the taxable year in which the loss 
                was incurred and through the close of the taxable year 
                of the transfer, and
                    ``(B) any amount which is recognized under section 
                904(f)(3) on account of the transfer.
    ``(c) Reduction for Recognized Gains.--
            ``(1) In general.--In the case of a transfer not described 
        in section 367(a)(3)(C), the transferred loss amount shall be 
        reduced (but not below zero) by the amount of gain recognized 
        by the taxpayer on account of the transfer (other than amounts 
        taken into account under subsection (c)(2)(B)).
            ``(2) Coordination with recognition under section 367.--In 
        the case of a transfer described in section 367(a)(3)(C), the 
        transferred loss amount shall not exceed the excess (if any) 
        of--
                    ``(A) the excess of the amount described in section 
                367(a)(3)(C)(i) over the amount described in section 
                367(a)(3)(C)(ii) with respect to such transfer, over
                    ``(B) the amount of gain recognized under section 
                367(a)(3)(C) with respect to such transfer.
    ``(d) Source of Income.--Amounts included in gross income under 
this section shall be treated as derived from sources within the United 
States.
    ``(e) Basis Adjustments.--Consistent with such regulations or other 
guidance as the Secretary may prescribe, proper adjustments shall be 
made in the adjusted basis of the taxpayer's stock in the specified 10-
percent owned foreign corporation to which the transfer is made, and in 
the transferee's adjusted basis in the property transferred, to reflect 
amounts included in gross income under this section.''.
            (2) Amounts recognized under section 367 on transfer of 
        foreign branch with previously deducted losses treated as 
        united states source.--Section 367(a)(3)(C) is amended by 
        striking ``outside'' in the last sentence and inserting 
        ``within''.
            (3) Clerical amendment.--The table of sections for part II 
        of subchapter B of chapter 1 is amended by adding at the end 
        the following new item:

``Sec. 91. Certain foreign branch losses transferred to specified 10-
                            percent owned foreign corporations.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to transfers after December 31, 2017.

SEC. 4004. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO 
              PARTICIPATION EXEMPTION SYSTEM OF TAXATION.

    (a) In General.--Section 965 is amended to read as follows:

``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON TRANSITION TO 
              PARTICIPATION EXEMPTION SYSTEM OF TAXATION.

    ``(a) Treatment of Deferred Foreign Income as Subpart F Income.--In 
the case of the last taxable year of a deferred foreign income 
corporation which begins before January 1, 2018, the subpart F income 
of such foreign corporation (as otherwise determined for such taxable 
year under section 952) shall be increased by the greater of--
            ``(1) the accumulated post-1986 deferred foreign income of 
        such corporation determined as of November 2, 2017, or
            ``(2) the accumulated post-1986 deferred foreign income of 
        such corporation determined as of December 31, 2017.
    ``(b) Reduction in Amounts Included in Gross Income of United 
States Shareholders of Specified Foreign Corporations With Deficits in 
Earnings and Profits.--
            ``(1) In general.--In the case of a taxpayer which is a 
        United States shareholder with respect to at least one deferred 
        foreign income corporation and at least one E&P deficit foreign 
        corporation, the amount which would (but for this subsection) 
        be taken into account under section 951(a)(1) by reason of 
        subsection (a) as such United States shareholder's pro rata 
        share of the subpart F income of each deferred foreign income 
        corporation shall be reduced (but not below zero) by the amount 
        of such United States shareholder's aggregate foreign E&P 
        deficit which is allocated under paragraph (2) to such deferred 
        foreign income corporation.
            ``(2) Allocation of aggregate foreign e&p deficit.--The 
        aggregate foreign E&P deficit of any United States shareholder 
        shall be allocated among the deferred foreign income 
        corporations of such United States shareholder in an amount 
        which bears the same proportion to such aggregate as--
                    ``(A) such United States shareholder's pro rata 
                share of the accumulated post-1986 deferred foreign 
                income of each such deferred foreign income 
                corporation, bears to
                    ``(B) the aggregate of such United States 
                shareholder's pro rata share of the accumulated post-
                1986 deferred foreign income of all deferred foreign 
                income corporations of such United States shareholder.
            ``(3) Definitions related to e&p deficits.--For purposes of 
        this subsection--
                    ``(A) Aggregate foreign e&p deficit.--The term 
                `aggregate foreign E&P deficit' means, with respect to 
                any United States shareholder, the aggregate of such 
                shareholder's pro rata shares of the specified E&P 
                deficits of the E&P deficit foreign corporations of 
                such shareholder.
                    ``(B) E&P deficit foreign corporation.--The term 
                `E&P deficit foreign corporation' means, with respect 
                to any taxpayer, any specified foreign corporation with 
                respect to which such taxpayer is a United States 
                shareholder, if--
                            ``(i) such specified foreign corporation 
                        has a deficit in post-1986 earnings and 
                        profits, and
                            ``(ii) as of November 2, 2017--
                                    ``(I) such corporation was a 
                                specified foreign corporation, and
                                    ``(II) such taxpayer was a United 
                                States shareholder of such corporation.
                    ``(C) Specified e&p deficit.--The term `specified 
                E&P deficit' means, with respect to any E&P deficit 
                foreign corporation, the amount of the deficit referred 
                to in subparagraph (B).
            ``(4) Netting among united states shareholders in same 
        affiliated group.--
                    ``(A) In general.--In the case of any affiliated 
                group which includes at least one E&P net surplus 
                shareholder and one E&P net deficit shareholder, the 
                amount which would (but for this paragraph) be taken 
                into account under section 951(a)(1) by reason of 
                subsection (a) by each such E&P net surplus shareholder 
                shall be reduced (but not below zero) by such 
                shareholder's applicable share of the affiliated 
                group's aggregate unused E&P deficit.
                    ``(B) E&P net surplus shareholder.--For purposes of 
                this paragraph, the term `E&P net surplus shareholder' 
                means any United States shareholder which would 
                (determined without regard to this paragraph) take into 
                account an amount greater than zero under section 
                951(a)(1) by reason of subsection (a).
                    ``(C) E&P net deficit shareholder.--For purposes of 
                this paragraph, the term `E&P net deficit shareholder' 
                means any United States shareholder if--
                            ``(i) the aggregate foreign E&P deficit 
                        with respect to such shareholder (as defined in 
                        paragraph (3)(A)), exceeds
                            ``(ii) the amount which would (but for this 
                        subsection) be taken into account by such 
                        shareholder under section 951(a)(1) by reason 
                        of subsection (a).
                    ``(D) Aggregate unused e&p deficit.--For purposes 
                of this paragraph--
                            ``(i) In general.--The term `aggregate 
                        unused E&P deficit' means, with respect to any 
                        affiliated group, the lesser of--
                                    ``(I) the sum of the excesses 
                                described in subparagraph (C), 
                                determined with respect to each E&P net 
                                deficit shareholder in such group, or
                                    ``(II) the amount determined under 
                                subparagraph (E)(ii).
                            ``(ii) Reduction with respect to e&p net 
                        deficit shareholders which are not wholly owned 
                        by the affiliated group.--If the group 
                        ownership percentage of any E&P net deficit 
                        shareholder is less than 100 percent, the 
                        amount of the excess described in subparagraph 
                        (C) which is taken into account under clause 
                        (i)(I) with respect to such E&P net deficit 
                        shareholder shall be such group ownership 
                        percentage of such amount.
                    ``(E) Applicable share.--For purposes of this 
                paragraph, the term `applicable share' means, with 
                respect to any E&P net surplus shareholder in any 
                affiliated group, the amount which bears the same 
                proportion to such group's aggregate unused E&P deficit 
                as--
                            ``(i) the product of--
                                    ``(I) such shareholder's group 
                                ownership percentage, multiplied by
                                    ``(II) the amount which would (but 
                                for this paragraph) be taken into 
                                account under section 951(a)(1) by 
                                reason of subsection (a) by such 
                                shareholder, bears to
                            ``(ii) the aggregate amount determined 
                        under clause (i) with respect to all E&P net 
                        surplus shareholders in such group.
                    ``(F) Group ownership percentage.--For purposes of 
                this paragraph, the term `group ownership percentage' 
                means, with respect to any United States shareholder in 
                any affiliated group, the percentage of the value of 
                the stock of such United States shareholder which is 
                held by other includible corporations in such 
                affiliated group. Notwithstanding the preceding 
                sentence, the group ownership percentage of the common 
                parent of the affiliated group is 100 percent. Any term 
                used in this subparagraph which is also used in section 
                1504 shall have the same meaning as when used in such 
                section.
    ``(c) Application of Participation Exemption to Included Income.--
            ``(1) In general.--In the case of a United States 
        shareholder of a deferred foreign income corporation, there 
        shall be allowed as a deduction for the taxable year in which 
        an amount is included in the gross income of such United States 
        shareholder under section 951(a)(1) by reason of this section 
        an amount equal to the sum of--
                    ``(A) the United States shareholder's 5 percent 
                rate equivalent percentage of the excess (if any) of--
                            ``(i) the amount so included as gross 
                        income, over
                            ``(ii) the amount of such United States 
                        shareholder's aggregate foreign cash position, 
                        plus
                    ``(B) the United States shareholder's 12 percent 
                rate equivalent percentage of so much of the amount 
                described in subparagraph (A)(ii) as does not exceed 
                the amount described in subparagraph (A)(i).
            ``(2) 5 and 12 percent rate equivalent percentages.--For 
        purposes of this subsection--
                    ``(A) 5 percent rate equivalent percentage.--The 
                term `5 percent rate equivalent percentage' means, with 
                respect to any United States shareholder for any 
                taxable year, the percentage which would result in the 
                amount to which such percentage applies being subject 
                to a 5 percent rate of tax determined by only taking 
                into account a deduction equal to such percentage of 
                such amount and the highest rate of tax specified in 
                section 11 for such taxable year. In the case of any 
                taxable year of a United States shareholder to which 
                section 15 applies, the highest rate of tax under 
                section 11 before the effective date of the change in 
                rates and the highest rate of tax under section 11 
                after the effective date of such change shall each be 
                taken into account under the preceding sentence in the 
                same proportions as the portion of such taxable year 
                which is before and after such effective date, 
                respectively.
                    ``(B) 12 percent rate equivalent percentage.--The 
                term `12 percent rate equivalent percentage' means, 
                with respect to any United States shareholder for any 
                taxable year, the percentage determined under 
                subparagraph (A) applied by substituting `12 percent 
                rate of tax' for `5 percent rate of tax'.
            ``(3) Aggregate foreign cash position.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `aggregate foreign cash 
                position' means, with respect to any United States 
                shareholder, one-third of the sum of--
                            ``(i) the aggregate of such United States 
                        shareholder's pro rata share of the cash 
                        position of each specified foreign corporation 
                        of such United States shareholder determined as 
                        of November 2, 2017,
                            ``(ii) the aggregate described in clause 
                        (i) determined as of the close of the last 
                        taxable year of each such specified foreign 
                        corporation which ends before November 2, 2017, 
                        and
                            ``(iii) the aggregate described in clause 
                        (i) determined as of the close of the taxable 
                        year of each such specified foreign corporation 
                        which precedes the taxable year referred to in 
                        clause (ii).
                In the case of any foreign corporation which did not 
                exist as of the determination date described in clause 
                (ii) or (iii), this subparagraph shall be applied 
                separately to such foreign corporation by not taking 
                into account such clause and by substituting `one-half 
                (100 percent in the case that both clauses (ii) and 
                (iii) are disregarded)' for `one-third'.
                    ``(B) Cash position.--For purposes of this 
                paragraph, the cash position of any specified foreign 
                corporation is the sum of--
                            ``(i) cash held by such foreign 
                        corporation,
                            ``(ii) the net accounts receivable of such 
                        foreign corporation, plus
                            ``(iii) the fair market value of the 
                        following assets held by such corporation:
                                    ``(I) Actively traded personal 
                                property for which there is an 
                                established financial market.
                                    ``(II) Commercial paper, 
                                certificates of deposit, the securities 
                                of the Federal government and of any 
                                State or foreign government.
                                    ``(III) Any foreign currency.
                                    ``(IV) Any obligation with a term 
                                of less than one year.
                                    ``(V) Any asset which the Secretary 
                                identifies as being economically 
                                equivalent to any asset described in 
                                this subparagraph.
                    ``(C) Net accounts receivable.--For purposes of 
                this paragraph, the term `net accounts receivable' 
                means, with respect to any specified foreign 
                corporation, the excess (if any) of--
                            ``(i) such corporation's accounts 
                        receivable, over
                            ``(ii) such corporation's accounts payable 
                        (determined consistent with the rules of 
                        section 461).
                    ``(D) Prevention of double counting.--
                            ``(i) In general.--The applicable 
                        percentage of each specified cash position of a 
                        specified foreign corporation shall not be 
                        taken into account by--
                                    ``(I) the United States shareholder 
                                referred to in clause (ii) with respect 
                                to such position, or
                                    ``(II) any United States 
                                shareholder which is an includible 
                                corporation in the same affiliated 
                                group as such United States shareholder 
                                referred to in clause (ii).
                            ``(ii) Specified cash position.--For 
                        purposes of this subparagraph, the term 
                        `specified cash position' means--
                                    ``(I) amounts described in 
                                subparagraph (B)(ii) to the extent such 
                                amounts are receivable from another 
                                specified foreign corporation with 
                                respect to any United States 
                                shareholder,
                                    ``(II) amounts described in 
                                subparagraph (B)(iii)(I) to the extent 
                                such amounts consist of an equity 
                                interest in another specified foreign 
                                corporation with respect to any United 
                                States shareholder, and
                                    ``(III) amounts described in 
                                subparagraph (B)(iii)(IV) to the extent 
                                that another specified foreign 
                                corporation with respect to any United 
                                States shareholder is obligated to 
                                repay such amount.
                            ``(iii) Applicable percentage.--For 
                        purposes of this subparagraph, the term 
                        `applicable percentage' means--
                                    ``(I) with respect to each 
                                specified cash position described in 
                                subclause (I) or (III) of clause (ii), 
                                the pro rata share of the United States 
                                shareholder referred to in clause (ii) 
                                with respect to the specified foreign 
                                corporation referred to in such clause, 
                                and
                                    ``(II) with respect to each 
                                specified cash position described in 
                                clause (ii)(II), the ratio (expressed 
                                as a percentage and not in excess of 
                                100 percent) of the United States 
                                shareholder's pro rata share of the 
                                cash position of the specified foreign 
                                corporation referred to in such clause 
                                divided by the amount of such specified 
                                cash position.
                        For purposes of this subparagraph, a separate 
                        applicable percentage shall be determined under 
                        each of subclauses (I) and (II) with respect to 
                        each specified foreign corporation referred to 
                        in clause (ii) with respect to which a 
                        specified cash position is determined for the 
                        specified foreign corporation referred to in 
                        clause (i).
                            ``(iv) Reduction with respect to affiliated 
                        group members not wholly owned by the 
                        affiliated group.--For purposes of clause 
                        (i)(II), in the case of an includible 
                        corporation the group ownership percentage of 
                        which is less than 100 percent (as determined 
                        under subsection (b)(4)(F)), the amount not 
                        take into account by reason of such clause 
                        shall be the group ownership percentage of such 
                        amount (determined without regard to this 
                        clause).
                    ``(E) Certain blocked assets not taken into 
                account.--A cash position of a specified foreign 
                corporation shall not be taken into account under 
                subparagraph (A) if such position could not (as of the 
                date that it would otherwise have been taken into 
                account under clause (i), (ii), or (iii) of 
                subparagraph (A)) have been distributed by such 
                specified foreign corporation to United States 
                shareholders of such specified foreign corporation 
                because of currency or other restrictions or 
                limitations imposed under the laws of any foreign 
                country (within the meaning of section 964(b)).
                    ``(F) Cash positions of certain non-corporate 
                entities taken into account.--An entity (other than a 
                domestic corporation) shall be treated as a specified 
                foreign corporation of a United States shareholder for 
                purposes of determining such United States 
                shareholder's aggregate foreign cash position if any 
                interest in such entity is held by a specified foreign 
                corporation of such United States shareholder 
                (determined after application of this subparagraph) and 
                such entity would be a specified foreign corporation of 
                such United States shareholder if such entity were a 
                foreign corporation
                    ``(G) Time of certain determinations.--For purposes 
                of this paragraph, the determination of whether a 
                person is a United States shareholder, whether a person 
                is a specified foreign corporation, and the pro rata 
                share of a United States shareholder with respect to a 
                specified foreign corporation, shall be determined as 
                of the end of the taxable year described in subsection 
                (a).
                    ``(H) Anti-abuse.--If the Secretary determines that 
                the principal purpose of any transaction was to reduce 
                the aggregate foreign cash position taken into account 
                under this subsection, such transaction shall be 
                disregarded for purposes of this subsection.
    ``(d) Deferred Foreign Income Corporation; Accumulated Post-1986 
Deferred Foreign Income.--For purposes of this section--
            ``(1) Deferred foreign income corporation.--The term 
        `deferred foreign income corporation' means, with respect to 
        any United States shareholder, any specified foreign 
        corporation of such United States shareholder which has 
        accumulated post-1986 deferred foreign income (as of the date 
        referred to in paragraph (1) or (2) of subsection (a), 
        whichever is applicable with respect to such foreign 
        corporation) greater than zero.
            ``(2) Accumulated post-1986 deferred foreign income.--The 
        term `accumulated post-1986 deferred foreign income' means the 
        post-1986 earnings and profits except to the extent such 
        earnings--
                    ``(A) are attributable to income of the specified 
                foreign corporation which is effectively connected with 
                the conduct of a trade or business within the United 
                States and subject to tax under this chapter, or
                    ``(B) if distributed, would be excluded from the 
                gross income of a United States shareholder under 
                section 959.
        To the extent provided in regulations or other guidance 
        prescribed by the Secretary, in the case of any controlled 
        foreign corporation which has shareholders which are not United 
        States shareholders, accumulated post-1986 deferred foreign 
        income shall be appropriately reduced by amounts which would be 
        described in subparagraph (B) if such shareholders were United 
        States shareholders.
            ``(3) Post-1986 earnings and profits.--The term `post-1986 
        earnings and profits' means the earnings and profits of the 
        foreign corporation (computed in accordance with sections 
        964(a) and 986) accumulated in taxable years beginning after 
        December 31, 1986, and determined--
                    ``(A) as of the date referred to in paragraph (1) 
                or (2) of subsection (a), whichever is applicable with 
                respect to such foreign corporation,
                    ``(B) without diminution by reason of dividends 
                distributed during the taxable year ending with or 
                including such date, and
                    ``(C) increased by the amount of any qualified 
                deficit (within the meaning of section 
                952(c)(1)(B)(ii)) arising before January 1, 2018, which 
                is treated as a qualified deficit (within the meaning 
                of such section as amended by the Tax Cuts and Jobs 
                Act) for purposes of such foreign corporation's first 
                taxable year beginning after December 31, 2017.
    ``(e) Specified Foreign Corporation.--
            ``(1) In general.--For purposes of this section, the term 
        `specified foreign corporation' means--
                    ``(A) any controlled foreign corporation, and
                    ``(B) any foreign corporation with respect to which 
                one or more domestic corporations is a United States 
                shareholder (determined without regard to section 
                958(b)(4)).
            ``(2) Application to certain foreign corporations.--For 
        purposes of sections 951 and 961, a foreign corporation 
        described in paragraph (1)(B) shall be treated as a controlled 
        foreign corporation solely for purposes of taking into account 
        the subpart F income of such corporation under subsection (a) 
        (and for purposes of applying subsection (f)).
            ``(3) Exception for passive foreign investment companies.--
        The term `specified foreign corporation' shall not include any 
        passive foreign investment company (within the meaning of 
        subpart D of part VI of subchapter P) that is not a controlled 
        foreign corporation.
    ``(f) Determinations of Pro Rata Share.--For purposes of this 
section, the determination of any United States shareholder's pro rata 
share of any amount with respect to any specified foreign corporation 
shall be determined under rules similar to the rules of section 
951(a)(2) by treating such amount in the same manner as subpart F 
income (and by treating such specified foreign corporation as a 
controlled foreign corporation).
    ``(g) Disallowance of Foreign Tax Credit, etc.--
            ``(1) In general.--No credit shall be allowed under section 
        901 for the applicable percentage of any taxes paid or accrued 
        (or treated as paid or accrued) with respect to any amount for 
        which a deduction is allowed under this section.
            ``(2) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means the amount 
        (expressed as a percentage) equal to the sum of--
                    ``(A) 85.7 percent of the ratio of--
                            ``(i) the excess to which subsection 
                        (c)(1)(A) applies, divided by
                            ``(ii) the sum of such excess plus the 
                        amount to which subsection (c)(1)(B) applies, 
                        plus
                    ``(B) 65.7 percent of the ratio of--
                            ``(i) the amount to which subsection 
                        (c)(1)(B) applies, divided by
                            ``(ii) the sum described in subparagraph 
                        (A)(ii).
            ``(3) Denial of deduction.--No deduction shall be allowed 
        under this chapter for any tax for which credit is not 
        allowable under section 901 by reason of paragraph (1) 
        (determined by treating the taxpayer as having elected the 
        benefits of subpart A of part III of subchapter N).
            ``(4) Coordination with section 78.--Section 78 shall not 
        apply to any tax for which credit is not allowable under 
        section 901 by reason of paragraph (1).
            ``(5) Extension of foreign tax credit carryover period.--
        With respect to any taxes paid or accrued (or treated as paid 
        or accrued) with respect to any amount for which a deduction is 
        allowed under this section, section 904(c) shall be applied by 
        substituting `first 20 succeeding taxable years' for `first 10 
        succeeding taxable years'.
    ``(h) Election To Pay Liability in Installments.--
            ``(1) In general.--In the case of a United States 
        shareholder of a deferred foreign income corporation, such 
        United States shareholder may elect to pay the net tax 
        liability under this section in 8 equal installments.
            ``(2) Date for payment of installments.--If an election is 
        made under paragraph (1), the first installment shall be paid 
        on the due date (determined without regard to any extension of 
        time for filing the return) for the return of tax for the 
        taxable year described in subsection (a) and each succeeding 
        installment shall be paid on the due date (as so determined) 
        for the return of tax for the taxable year following the 
        taxable year with respect to which the preceding installment 
        was made.
            ``(3) Acceleration of payment.--If there is an addition to 
        tax for failure to timely pay any installment required under 
        this subsection, a liquidation or sale of substantially all the 
        assets of the taxpayer (including in a title 11 or similar 
        case), a cessation of business by the taxpayer, or any similar 
        circumstance, then the unpaid portion of all remaining 
        installments shall be due on the date of such event (or in the 
        case of a title 11 or similar case, the day before the petition 
        is filed). The preceding sentence shall not apply to the sale 
        of substantially all the assets of a taxpayer to a buyer if 
        such buyer enters into an agreement with the Secretary under 
        which such buyer is liable for the remaining installments due 
        under this subsection in the same manner as if such buyer were 
        the taxpayer.
            ``(4) Proration of deficiency to installments.--If an 
        election is made under paragraph (1) to pay the net tax 
        liability under this section in installments and a deficiency 
        has been assessed with respect to such net tax liability, the 
        deficiency shall be prorated to the installments payable under 
        paragraph (1). The part of the deficiency so prorated to any 
        installment the date for payment of which has not arrived shall 
        be collected at the same time as, and as a part of, such 
        installment. The part of the deficiency so prorated to any 
        installment the date for payment of which has arrived shall be 
        paid upon notice and demand from the Secretary. This subsection 
        shall not apply if the deficiency is due to negligence, to 
        intentional disregard of rules and regulations, or to fraud 
        with intent to evade tax.
            ``(5) Election.--Any election under paragraph (1) shall be 
        made not later than the due date for the return of tax for the 
        taxable year described in subsection (a) and shall be made in 
        such manner as the Secretary may provide.
            ``(6) Net tax liability under this section.--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 
                                section, and
                                    ``(II) without regard to any 
                                income, deduction, or credit, properly 
                                attributable to a dividend received by 
                                such United States shareholder from any 
                                deferred foreign income corporation.
                    ``(B) Net income tax.--The term `net income tax' 
                means the regular tax liability reduced by the credits 
                allowed under subparts A, B, and D of part IV of 
                subchapter A.
    ``(i) Special Rules for S Corporation Shareholders.--
            ``(1) In general.--In the case of any S corporation which 
        is a United States shareholder of a deferred foreign income 
        corporation, each shareholder of such S corporation may elect 
        to defer payment of such shareholder's net tax liability under 
        this section with respect to such S corporation until the 
        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 return as an addition to tax in the 
        shareholder's taxable year which includes such triggering 
        event.
            ``(2) Triggering event.--
                    ``(A) In general.--In the case of any shareholder's 
                net tax liability under this section with respect to 
                any S corporation, the triggering event with respect to 
                such liability is whichever of the following occurs 
                first:
                            ``(i) Such corporation ceases to be an S 
                        corporation (determined as of the first day of 
                        the first taxable year that such corporation is 
                        not an S corporation).
                            ``(ii) A liquidation or sale of 
                        substantially all the assets of such S 
                        corporation (including in a title 11 or similar 
                        case), a cessation of business by such S 
                        corporation, such S corporation ceases to 
                        exist, or any similar circumstance.
                            ``(iii) A transfer of any share of stock in 
                        such S corporation by the taxpayer (including 
                        by reason of death, or otherwise).
                    ``(B) Partial transfers of stock.--In the case of a 
                transfer of less than all of the taxpayer'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 transfer 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 liability with respect to such stock in the 
                same manner as if such transferee were the taxpayer.
            ``(3) Net tax liability.--A shareholder's net tax liability 
        under this section with respect to any S corporation is the net 
        tax liability under this section which would be determined 
        under subsection (h)(6) if the only subpart F income taken into 
        account by such shareholder by reason of this section were 
        allocations from such S corporation.
            ``(4) Election to pay deferred liability in installments.--
        In the case of a taxpayer which elects to defer payment under 
        paragraph (1)--
                    ``(A) subsection (h) shall be applied separately 
                with respect to the liability to which such election 
                applies,
                    ``(B) an election under subsection (h) with respect 
                to such liability shall be treated as timely made if 
                made not later than the due date for the return of tax 
                for the taxable year in which the triggering event with 
                respect to such liability 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 filing the return), and
                    ``(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 corporation.--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 collection.--
        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 triggering event with respect to such 
        liability.
            ``(7) Annual reporting of net tax liability.--
                    ``(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 return 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 `deferred 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 taxable year which 
                includes the close of the taxable year of such S 
                corporation in which the amount described in subsection 
                (a) is taken into account, and
                    ``(B) shall be made in such manner as the Secretary 
                may provide.
    ``(j) Reporting by S Corporation.--Each S corporation which is a 
United States shareholder of a deferred 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 
section and the amount of the deduction allowable by subsection (c). 
Any copy provided to a shareholder under section 6037(b) shall include 
a statement of such shareholder's pro rata share of such amounts.
    ``(k) 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 section.
    ``(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.''.
    (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 
                            participation 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 inserting the following:

``SEC. 960. DEEMED PAID CREDIT FOR SUBPART F INCLUSIONS.

    ``(a) In General.--For purposes of this subpart, if there is 
included in the gross income of a domestic corporation any item of 
income under section 951(a)(1) with respect to any controlled foreign 
corporation with respect 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 purposes of this subpart--
            ``(1) In general.--If any portion of a distribution from a 
        controlled foreign corporation to a domestic corporation which 
        is a United States shareholder with respect to such controlled 
        foreign corporation 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 portion, 
                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 corporations.--If section 
        959(b) applies to any portion of a distribution from a 
        controlled foreign corporation to another controlled foreign 
        corporation, such controlled foreign corporation shall be 
        deemed to have paid so much of such other controlled foreign 
        corporation's foreign income taxes as--
                    ``(A) are properly attributable to such portion, 
                and
                    ``(B) have not been deemed to have been paid by a 
                domestic corporation under this section for the taxable 
                year or any prior taxable year.'',
            (2) and by adding after subsection (c) (as so redesignated) 
        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 benefits of subpart 
A of part III of subchapter N (relating 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 
taxable 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 domestic corporation under section 
951(a) for such taxable year.''.
            (2) Section 245(a)(10)(C) is amended by striking ``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 income'' and 
                inserting the following:
            ``(1) Treatment of foreign taxes.--''.
            (5) Section 865(h)(1)(B) is amended by striking ``sections 
        902, 907, and 960'' and inserting ``sections 907 and 960''.
            (6) Section 901(a) is amended by striking ``sections 902 
        and 960'' and inserting ``section 960''.
            (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 ``sections 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 striking ``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 ``sections 907 and 960''.
            (15) Section 904(d)(6)(A) is amended by striking ``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 subsection (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 striking ``902 
        or''.
            (23) Section 907(c)(3) is amended--
                    (A) by striking subparagraph (A) and redesignating 
                subparagraphs (B) and (C) as subparagraphs (A) and (B), 
                respectively, and
                    (B) by striking ``section 960(a)'' in subparagraph 
                (A) (as so redesignated) and inserting ``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 inserting ``10/50 
                corporation'',
                    (B) by striking ``902 or'' in paragraph (1),
                    (C) by striking ``by such section 902 corporation'' 
                and all that follows in the matter following paragraph 
                (2) and inserting ``by such 10/50 corporation or a 
                domestic corporation which is a United States 
                shareholder with respect to such 10/50 corporation.'', 
                and
                    (D) by striking ``Section 902 Corporations'' 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 respect 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 distribution, 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 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 inserting 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 INVENTORY 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 income from the sale or exchange of 
inventory property described in paragraph (2) shall be allocated and 
apportioned between sources within and without the United States solely 
on the basis of the production activities with respect to the 
property.''.
    (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 INCOME FROM QUALIFIED INVESTMENT.

    (a) In General.--Subpart F of part III of subchapter 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 striking ``section 
        951(a)(1)(A)(i)'' and inserting ``section 951(a)(1)(A)''.
            (2) Section 951(a) is amended by striking paragraph (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 subsection (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 corporations 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 COMPANY 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.--
            (1) Section 952(c)(1)(B)(iii) is amended by striking 
        subclause (I) and by redesignating subclauses (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 inserting ``and the foreign base company 
        services income''.
            (4) Section 954(b) is amended by striking paragraph (6).
            (5) Section 954 is amended by striking subsection (g).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations 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 EXCEPTION 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, 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 
                        determined under section 1(c)(2)(A) for the 
                        calendar year in which the taxable year begins.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $50,000.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations 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 PERMANENT.

    (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 corporations 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.

SEC. 4205. MODIFICATION OF STOCK ATTRIBUTION RULES FOR DETERMINING 
              STATUS AS A CONTROLLED 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 Requirements.--Section 
6038(e)(2) is amended by striking ``except 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 corporations 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 CORPORATION 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 corporations 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 RETURNS.

    (a) In General.--Subpart F of part III of subchapter N of chapter 1 
is amended by inserting after section 951 the following new section:

``SEC. 951A. FOREIGN HIGH RETURN AMOUNT INCLUDED IN GROSS INCOME OF 
              UNITED STATES SHAREHOLDERS.

    ``(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 percent of such shareholder's foreign high return 
amount for such taxable year.
    ``(b) Foreign High Return Amount.--For purposes of this section--
            ``(1) In general.--The term `foreign high return amount' 
        means, with respect to any United States shareholder for any 
        taxable year of such United States shareholder, the excess (if 
        any) of--
                    ``(A) such shareholder's net CFC tested income 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 investment of 
                        each controlled foreign corporation with 
                        respect to which such shareholder is a United 
                        States shareholder for such taxable 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 shareholder'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 (determined under section 1274(d) for 
        the month in which or with which such taxable year ends) plus 7 
        percentage 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 controlled 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 controlled 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).
            ``(2) Tested income; tested loss.--For purposes 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 corporation 
                        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 
                                provided 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 to 
                                the extent that any deduction allowable 
                                for the payment or accrual of such 
                                amount does not result in a reduction 
                                in the foreign high return amount of 
                                any United States shareholder 
                                (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
                                    ``(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 foreign 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 subparagraph (A)(i).
    ``(d) Qualified Business Asset Investment.--For purposes of this 
section--
            ``(1) In general.--The term `qualified business 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 
        adjustments with respect to such taxable year) in specified 
        tangible property--
                    ``(A) used in a trade or business of the 
                corporation, and
                    ``(B) of a type with respect to which a deduction 
                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 corporation, such controlled foreign 
        corporation shall take into account under paragraph (1) the 
        controlled foreign 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 tangible 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 income or 
                tested loss (determined with respect to such controlled 
                foreign corporation's distributive share of income or 
                loss with respect to such property).
        For purposes of this paragraph, the controlled foreign 
        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 enactment 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.
    ``(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 corporation 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 
        substituting `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 Controlled Foreign Corporations.--For purposes of this 
section--
            ``(1) In general.--A United States shareholder of a 
        controlled foreign corporation shall be treated as a United 
        States shareholder of such controlled foreign corporation for 
        any taxable year of such United States shareholder if--
                    ``(A) a taxable year of such controlled foreign 
                corporation ends in or with such taxable year of such 
                person, and
                    ``(B) such person owns (within the meaning of 
                section 958(a)) stock in such controlled foreign 
                corporation on the last day, in such taxable 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 corporation 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 section 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 included 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 income 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 corporations.--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 as being with respect to such controlled 
        foreign corporation 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 determined 
                        under subsection (c)(1)(A) with respect 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 controlled foreign 
        corporation (solely for purposes of determining such amount) by 
        an amount that bears the same ratio (not greater than 1) to 
        such shareholder'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 preceding provisions of this Act, is 
        amended by redesignating 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 subpart, 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
                    ``(B) the aggregate tested foreign income taxes 
                paid or accrued by controlled foreign corporations 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 percentage) 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 
        described in section 951A(c)(2)(A)(i).''.
            (2) Application of foreign tax credit limitation.--
                    (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), 
                respectively, and by inserting before subparagraph (B) 
                (as so redesignated) the following new subparagraph:
                    ``(A) any amount includible in gross income 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 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 striking ``computed 
        without regard to'' and all that follows 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
                    (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 
                                subsection (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 inserting after subparagraph (I) the 
        following new subparagraph:
                    ``(J) amounts includible in gross income under 
                section 951A(a);''.
            (5) Section 856(c)(3)(D) is amended by striking ``dividends 
        or other distributions on, and gain'' 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 inserting after the 
        item relating to section 951 the following 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 corporations 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 MEMBERS OF AN INTERNATIONAL FINANCIAL REPORTING 
              GROUP.

    (a) In General.--Section 163 is amended by redesignating 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 Financial Reporting Groups.--
            ``(1) In general.--In the case of any domestic corporation 
        which is a member of any international financial reporting 
        group, the deduction under this chapter for interest paid or 
        accrued during the taxable year shall not exceed the sum of--
                    ``(A) the allowable percentage of 110 percent of 
                the excess (if any) of--
                            ``(i) the amount of such interest so paid 
                        or accrued, over
                            ``(ii) the amount described in subparagraph 
                        (B), plus
                    ``(B) the amount of interest includible in gross 
                income of such corporation for such taxable 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 
                                corporation engaged in a trade or 
                                business within the United States, or
                                    ``(II) at least one domestic 
                                corporation and one foreign 
                                corporation,
                            ``(ii) prepares consolidated financial 
                        statements with respect to such year, and
                            ``(iii) reports in such statements average 
                        annual gross receipts (determined in the 
                        aggregate with respect to all entities which 
                        are part of such group) for the 3-reporting-
                        year period ending with such reporting year in 
                        excess of $100,000,000.
                    ``(B) Rules relating to determination of average 
                gross receipts.--For purposes 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 (expressed 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
                            ``(ii) such corporation's reported net 
                        interest expense for such reporting year of 
                        such group.
                    ``(B) Reported net interest expense.--The term 
                `reported net interest expense' means--
                            ``(i) with respect to any international 
                        financial reporting group for any reporting 
                        year, the excess of--
                                    ``(I) the aggregate amount of 
                                interest expense reported in such 
                                group's consolidated financial 
                                statements for such taxable year, over
                                    ``(II) the aggregate amount of 
                                interest income reported in such 
                                group's consolidated financial 
                                statements for such taxable year, and
                            ``(ii) with respect to any domestic 
                        corporation for any reporting year, the excess 
                        of--
                                    ``(I) the amount of interest 
                                expense of such corporation reported in 
                                the books and records of the 
                                international financial reporting group 
                                which are used in preparing such 
                                group's consolidated financial 
                                statements for such taxable year, over
                                    ``(II) the amount of interest 
                                income 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 reported 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 reporting year, earnings 
                        before interest, taxes, depreciation, and 
                        amortization--
                                    ``(I) as determined in the 
                                international financial reporting 
                                group's consolidated financial 
                                statements for such year, or
                                    ``(II) for purposes of subparagraph 
                                (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 disregarded for purposes of this 
                        chapter.
                            ``(iii) Treatment of intra-group 
                        distributions.--The EBITDA of any domestic 
                        corporation shall be determined without regard 
                        to any distribution received by such 
                        corporation from any other member 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 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 member the EBITDA of which is 
                        zero or less, paragraph (1) shall be applied 
                        without regard to subparagraph (A) thereof.
            ``(4) Consolidated financial statement.--For purposes of 
        this subsection, the term `consolidated financial statement' 
        means any consolidated financial statement described in 
        paragraph (2)(A)(ii) if such statement is--
                    ``(A) a financial statement which is certified as 
                being prepared in accordance with generally accepted 
                accounting principles, international financial 
                reporting standards, or any other comparable method of 
                accounting identified 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 Securities and Exchange 
                        Commission,
                            ``(ii) an audited financial statement which 
                        is used for--
                                    ``(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 subparagraph 
                        (A)(ii), or
                            ``(ii) filed with any regulatory or 
                        governmental body (whether domestic or foreign) 
                        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 respect to any international 
        financial reporting group, the year with respect to which the 
        consolidated financial statements are prepared.
            ``(6) Application to certain entities.--
                    ``(A) Partnerships.--Except as otherwise provided 
                by the Secretary in paragraph (8), this subsection 
                shall apply to any partnership which is a member of any 
                international financial 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 
                corporation engaged in a trade or business within the 
                United States shall be limited in a manner consistent 
                with the principles of this subsection.
                    ``(C) Consolidated groups.--For purposes of this 
                subsection, the members of any group that file (or are 
                required to file) a consolidated 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 or appropriate 
        to carry out the purposes of this subsection.''.
    (b) Carryforward of Disallowed Interest.--
            (1) In general.--Section 163(o) is amended to read as 
        follows:
    ``(o) Carryforward of Certain Disallowed Interest.--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 interest (and as 
business interest for purposes of subsection (j)(1)) paid or accrued in 
the succeeding taxable year. Interest paid or accrued in any taxable 
year (determined without regard to the preceding sentence) shall not be 
carried 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 disallowed interest in 
        certain corporate acquisitions.--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.

SEC. 4303. EXCISE TAX ON CERTAIN PAYMENTS FROM DOMESTIC CORPORATIONS TO 
              RELATED FOREIGN CORPORATIONS; ELECTION TO TREAT SUCH 
              PAYMENTS AS EFFECTIVELY CONNECTED INCOME.

    (a) Excise Tax on Certain Amounts From Domestic 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 FOREIGN AFFILIATES.

    ``(a) In General.--There is hereby imposed on each 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 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 subsection (a) shall be 
paid by the domestic corporation described in such subsection.
    ``(c) Exception for Effectively Connected Income.--Subsection (a) 
shall not apply to so much of any specified amount as is effectively 
connected with the conduct 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 corporation 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 imposed.--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 subchapters for 
        chapter 36 is amended by adding at the end the following new 
        item:

    ``subchapter e. tax on certain amounts to foreign affiliates.''.

    (b) Election To Treat Certain Payments From Domestic Corporations 
to Related Foreign Corporations as Effectively Connected Income.--
Section 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 account 
                (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 establishment in the United States during the 
                taxable year and as if such payment were effectively 
                connected with the conduct of a trade or business 
                within the United States and were attributable to such 
                permanent establishment,
                    ``(B) for purposes of subsection (c)(1)(A), no 
                deduction shall be allowed with respect to such amount 
                and such subsection shall be applied 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 respect 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 subparagraph 
                        (C), any amount with respect to which tax is 
                        imposed under section 881(a), and
                            ``(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 
                account only such deemed expenses) is equal to the net 
                income ratio of the international financial reporting 
                group determined for such reporting 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 
                members 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 `international 
                financial reporting group' means any group of entities, 
                with respect to any specified amount, if such amount is 
                paid or incurred during a reporting year of such group 
                with respect to which--
                            ``(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 reporting year exceeds 
                        $100,000,000.
                    ``(B) Annual aggregate payment amount.--The term 
                `annual aggregate payment amount' means, with respect 
                to any reporting year of the group referred to in 
                subparagraph (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 
        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 foreign 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 purposes of this 
        subsection as an amount paid, incurred, or received, 
        respectively, by a domestic corporation. For purposes of the 
        preceding sentence, a foreign corporation shall be deemed to 
        pay, incur, and receive amounts with respect to a trade or 
        business 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 foreign corporation would be 
        treated as paying, incurring, or receiving such amounts from 
        such trade or business if such trade or business were a 
        domestic corporation.
            ``(7) Joint and several liability of members of internal 
        financial reporting group.--In the case of any underpayment 
        with respect to any taxable year of a foreign corporation which 
        is a member of an international financial accounting 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 underpayment over 
                the amount of such underpayment determined without 
                regard to this subsection, and
                    ``(B) any penalty, addition to tax, or additional 
                amount attributable to the amount described in 
                subparagraph (A).
            ``(8) Disallowance of foreign tax credit, etc.--
                    ``(A) In general.--No credit shall be allowed under 
                section 901 for any taxes paid or accrued (or treated 
                as paid or accrued) with respect to any specified 
                amount to which paragraph (1) applies.
                    ``(B) Denial of deduction.--No deduction shall be 
                allowed under this chapter for any tax for which credit 
                is not allowable under section 901 by reason of 
                paragraph (1) (determined by treating the taxpayer as 
                having elected the benefits of subpart A of part III of 
                subchapter 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 subsection, including 
        regulations or other guidance--
                    ``(A) to provide for the proper determination of 
                product lines, and
                    ``(B) to prevent the avoidance of the purposes of 
                this subsection through the use of conduit transactions 
                or by other means.''.
    (c) Reporting Requirements.--
            (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 Secretary may 
                prescribe by regulations relating to any item not 
                directly connected with a transaction for which 
                information is required under subparagraph (A).
            ``(2) Certain payments from related domestic 
        corporations.--
                    ``(A) In general.--In the case of any reporting 
                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 reporting group from which any such amount is 
                received--
                            ``(i) the name and taxpayer identification 
                        number of such member,
                            ``(ii) the aggregate amounts received from 
                        such member,
                            ``(iii) 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
                            ``(iv) a summary of any changes in 
                        financial accounting methods that affect the 
                        computation of any net income ratio described 
                        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 members.--
                    (A) In general .--Subpart A of part III of 
                subchapter A of chapter 61 is amended by 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 corporation which 
pays or accrues any amount to which section 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 section 882(g).
    ``(b) Required Information.--The information described in this 
subsection is--
            ``(1) the name and taxpayer identification number of the 
        common parent of the international financial reporting group in 
        which such domestic corporation is a member, and
            ``(2) with respect to any person who receives an amount 
        described in subsection (a) from such domestic corporation--
                    ``(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 financial 
                accounting methods that affect the computation 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 
paragraph.''.
                    (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:

``Sec. 6038E. Information with respect to certain payments from 
                            domestic corporations 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 DOMESTIC 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 inserting 
        ``first 12 taxable years'', and
            (2) by striking ``January 1, 2017'' and inserting ``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''.
    (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 paragraph (1) 
        and inserting ``first 17 taxable years'', and
            (3) by striking ``first 5 taxable years'' in paragraph (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 EXCEPTION TO PASSIVE 
              FOREIGN INVESTMENT COMPANY RULES.

    (a) In General.--Section 1297(b)(2)(B) is amended to read as 
follows:
                    ``(B) derived in the active conduct of an insurance 
                business by a qualifying insurance corporation (as 
                defined in subsection (f)),''.
    (b) Qualifying Insurance Corporation Defined.--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 insurance 
        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 domestic 
                corporation, and
                    ``(B) the applicable insurance liabilities of which 
                constitute more than 25 percent of its total assets, 
                determined on the basis of such liabilities and assets 
                as reported on the corporation's applicable financial 
                statement for the last year ending with or within the 
                taxable year.
            ``(2) Alternative facts and circumstances test for certain 
        corporations.--If a corporation fails to qualify as a qualified 
        insurance corporation under paragraph (1) solely because the 
        percentage determined under paragraph (1)(B) 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 corporation 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 circumstances--
                            ``(i) the corporation is predominantly 
                        engaged in an insurance business, and
                            ``(ii) such failure is due solely to 
                        runoff-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 business--
                            ``(i) loss and loss adjustment expenses, 
                        and
                            ``(ii) reserves (other than deficiency, 
                        contingency, or unearned premium reserves) for 
                        life and health insurance risks and life and 
                        health insurance claims with respect to 
                        contracts providing coverage for mortality or 
                        morbidity risks.
                    ``(B) Limitations on amount of liabilities.--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 
                        insurance 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 statement.--The term 
                `applicable financial statement' 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 
                        international financial reporting standards, 
                        but 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 regulatory body.--The 
                term `applicable insurance regulatory body' means, with 
                respect to any insurance business, the entity 
                established by law to license, authorize, or regulate 
                such business and to which the statement described in 
                subparagraph (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 Certain Deductible 
Payments.--
            ``(1) In general.--In the case of any deductible related-
        party payment, any withholding tax imposed 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 parent corporation.
            ``(2) Deductible related-party payment.--For purposes of 
        this subsection, the term `deductible related-party payment' 
        means any payment made, directly or indirectly, by any person 
        to any other person if the payment is allowable as a deduction 
        under this chapter and both persons are members of the same 
        foreign controlled group of entities.
            ``(3) Foreign controlled group of entities.--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 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 
                controlled (within the meaning of section 954(d)(3)) by 
                members of such group (including 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 prescribe such 
        regulations or other guidance as are necessary or appropriate 
        to carry out the purposes of this subsection, including 
        regulations or other guidance which provide for--
                    ``(A) the treatment of two or more persons as 
                members of a foreign controlled group of entities if 
                such persons would be the common parent of such group 
                if treated as one corporation, and
                    ``(B) the treatment of any member of a foreign 
                controlled group of entities as the common 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 INCOME TAX TREATMENT OF 
              ENTITIES TREATED AS EXEMPT FROM TAXATION UNDER SECTION 
              501(A).

    (a) In General.--Section 511 is amended by adding at the end the 
following new subsection:
    ``(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 exempt 
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 research''.
    (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''.
    (b) Repeal of Special Rules for Certain Private Foundations.--
Section 4940 is amended by striking 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 REQUIREMENTS 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 museum.--For purposes of 
        this section, the term `operating foundation' shall not include 
        an organization which operates an art museum as a substantial 
        activity 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:

   ``Subchapter H--Excise Tax Based on Investment Income of Private 
                       Colleges and Universities

``Sec. 4969. Excise tax based on investment income of private colleges 
                            and universities.

``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 educational 
        institution' means an eligible educational institution (as 
        defined in section 25A(e)(3))--
                    ``(A) which has at least 500 students during 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 student of the institution.
            ``(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 subchapters 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 EXCESS BUSINESS HOLDING 
              TAX FOR INDEPENDENTLY-OPERATED PHILANTHROPIC BUSINESS 
              HOLDINGS.

    (a) In General.--Section 4943 is amended by adding at the end the 
following new subsection:
    ``(g) Exception for Certain Holdings Limited to Independently-
Operated Philanthropic Business.--
            ``(1) In general.--Subsection (a) shall not apply with 
        respect to the holdings of a private foundation in any business 
        enterprise which for the taxable year meets--
                    ``(A) the ownership requirements of paragraph (2),
                    ``(B) the all profits to charity distribution 
                requirement of paragraph (3), and
                    ``(C) the independent operation requirements of 
                paragraph (4).
            ``(2) Ownership.--The ownership requirements of this 
        paragraph are met if--
                    ``(A) 100 percent of the voting stock in the 
                business enterprise is held by the private foundation 
                at all times during the taxable year, and
                    ``(B) all the private foundation's ownership 
                interests in the business enterprise were acquired not 
                by purchase.
            ``(3) All profits to charity.--
                    ``(A) In general.--The all profits to charity 
                distribution requirement of this paragraph is met if 
                the business enterprise, not later than 120 days after 
                the close of the taxable year, distributes an amount 
                equal to its net operating income for such taxable year 
                to the private foundation.
                    ``(B) Net operating income.--For purposes of this 
                paragraph, the net operating income of any business 
                enterprise for any taxable year is an amount equal to 
                the gross income of the business enterprise for the 
                taxable year, reduced by the sum of--
                            ``(i) the deductions allowed by chapter 1 
                        for the taxable year which are directly 
                        connected with the production of such income,
                            ``(ii) the tax imposed by chapter 1 on the 
                        business enterprise for the taxable year, and
                            ``(iii) an amount for a reasonable reserve 
                        for working capital and other business needs of 
                        the business enterprise.
            ``(4) Independent operation.--The independent 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 foundation, or 
                family member of such a contributor (determined under 
                section 4958(f)(4)) is a director, officer, trustee, 
                manager, employee, or contractor of the business 
                enterprise (or an individual having powers or 
                responsibilities similar to any of the foregoing),
                    ``(B) at least a majority of the board of directors 
                of the private foundation are not--
                            ``(i) also directors or officers of the 
                        business enterprise, or
                            ``(ii) members of the family (determined 
                        under section 4958(f)(4)) of a substantial 
                        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 determined).
            ``(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
                    ``(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 ORDINARY 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 Campaign Statements of 
Churches, Integrated Auxiliaries, 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 intervened 
        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, teaching, dialectic, or other 
        presentation made during religious services or gatherings, but 
        only if the preparation and presentation of such content--
                    ``(A) is in the ordinary course of the 
                organization's regular and customary activities in 
                carrying out its exempt purpose, and
                    ``(B) results in the organization incurring not 
                more than de minimis incremental expenses.''.
    (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 ORGANIZATIONS.

    (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 (expressed as a percentage of 
        the value of assets held in such funds at the beginning of such 
        taxable year), and
            ``(5) indicate whether the organization has a policy with 
        respect to donor advised funds (as so defined) for frequency 
        and minimum level of distributions.
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.
                                 <all>