113 HR 1 IH: Tax Reform Act of 2014
U.S. House of Representatives
2014-12-10
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.
(a)This Act may be cited as the Tax Reform Act of 2014
.
(b)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)The table of contents of this Act is as follows:
Sec. 1. Short title; etc.
Title I—Tax Reform for Individuals
Subtitle A—Individual income tax rate reform
Sec. 1001. Simplification of individual income tax rates.
Sec. 1002. Deduction for adjusted net capital gain.
Sec. 1003. Conforming amendments related to simplification of individual income tax rates.
Subtitle B—Simplification of tax benefits for families
Sec. 1101. Standard deduction.
Sec. 1102. Increase and expansion of child tax credit.
Sec. 1103. Modification of earned income tax credit.
Sec. 1104. Repeal of deduction for personal exemptions.
Subtitle C—Simplification of education incentives
Sec. 1201. American opportunity tax credit.
Sec. 1202. Expansion of Pell Grant exclusion from gross income.
Sec. 1203. Repeal of exclusion of income from United States savings bonds used to pay higher
education tuition and fees.
Sec. 1204. Repeal of deduction for interest on education loans.
Sec. 1205. Repeal of deduction for qualified tuition and related expenses.
Sec. 1206. No new contributions to Coverdell education savings accounts.
Sec. 1207. Repeal of exclusion for discharge of student loan indebtedness.
Sec. 1208. Repeal of exclusion for qualified tuition reductions.
Sec. 1209. Repeal of exclusion for education assistance programs.
Sec. 1210. Repeal of exception to 10-percent penalty for higher education expenses.
Subtitle D—Repeal of certain credits for individuals
Sec. 1301. Repeal of dependent care credit.
Sec. 1302. Repeal of credit for adoption expenses.
Sec. 1303. Repeal of credit for nonbusiness energy property.
Sec. 1304. Repeal of credit for residential energy efficient property.
Sec. 1305. Repeal of credit for qualified electric vehicles.
Sec. 1306. Repeal of alternative motor vehicle credit.
Sec. 1307. Repeal of alternative fuel vehicle refueling property credit.
Sec. 1308. Repeal of credit for new qualified plug-in electric drive motor vehicles.
Sec. 1309. Repeal of credit for health insurance costs of eligible individuals.
Sec. 1310. Repeal of first-time homebuyer credit.
Subtitle E—Deductions, exclusions, and certain other provisions
Sec. 1401. Exclusion of gain from sale of a principal residence.
Sec. 1402. Mortgage interest.
Sec. 1403. Charitable contributions.
Sec. 1404. Denial of deduction for expenses attributable to the trade or business of being an
employee.
Sec. 1405. Repeal of deduction for taxes not paid or accrued in a trade or business.
Sec. 1406. Repeal of deduction for personal casualty losses.
Sec. 1407. Limitation on wagering losses.
Sec. 1408. Repeal of deduction for tax preparation expenses.
Sec. 1409. Repeal of deduction for medical expenses.
Sec. 1410. Repeal of disqualification of expenses for over-the-counter drugs under certain accounts
and arrangements.
Sec. 1411. Repeal of deduction for alimony payments and corresponding inclusion in gross income.
Sec. 1412. Repeal of deduction for moving expenses.
Sec. 1413. Termination of deduction and exclusions for contributions to medical savings accounts.
Sec. 1414. Repeal of 2-percent floor on miscellaneous itemized deductions.
Sec. 1415. Repeal of overall limitation on itemized deductions.
Sec. 1416. Deduction for amortizable bond premium allowed in determining adjusted gross income.
Sec. 1417. Repeal of exclusion, etc., for employee achievement awards.
Sec. 1418. Clarification of special rule for certain governmental plans.
Sec. 1419. Limitation on exclusion for employer-provided housing.
Sec. 1420. Fringe benefits.
Sec. 1421. Repeal of exclusion of net unrealized appreciation in employer securities.
Sec. 1422. Consistent basis reporting between estate and person acquiring property from decedent.
Subtitle F—Employment tax modifications
Sec. 1501. Modifications of deduction for Social Security taxes in computing net earnings from
self-employment.
Sec. 1502. Determination of net earnings from self-employment.
Sec. 1503. Repeal of exemption from FICA taxes for certain foreign workers.
Sec. 1504. Repeal of exemption from FICA taxes for certain students.
Sec. 1505. Override of Treasury guidance providing that certain employer-provided supplemental
unemployment benefits are not subject to employment taxes.
Sec. 1506. Certified professional employer organizations.
Subtitle G—Pensions and Retirement
Part 1—Individual Retirement Plans
Sec. 1601. Elimination of income limits on contributions to Roth IRAs.
Sec. 1602. No new contributions to traditional IRAs.
Sec. 1603. Inflation adjustment for Roth IRA contributions.
Sec. 1604. Repeal of special rule permitting recharacterization of Roth IRA contributions as
traditional IRA contributions.
Sec. 1605. Repeal of exception to 10-percent penalty for first home purchases.
Part 2—Employer-Provided Plans
Sec. 1611. Termination for new SEPs.
Sec. 1612. Termination for new SIMPLE 401(k)s.
Sec. 1613. Rules related to designated Roth contributions.
Sec. 1614. Modifications of required distribution rules for pension plans.
Sec. 1615. Reduction in minimum age for allowable in-service distributions.
Sec. 1616. Modification of rules governing hardship distributions.
Sec. 1617. Extended rollover period for the rollover of plan loan offset amounts in certain cases.
Sec. 1618. Coordination of contribution limitations for 403(b) plans and governmental 457(b) plans.
Sec. 1619. Application of 10-percent early distribution tax to governmental 457 plans.
Sec. 1620. Inflation adjustments for qualified plan benefit and contribution limitations.
Sec. 1621. Inflation adjustments for qualified plan elective deferral limitations.
Sec. 1622. Inflation adjustments for SIMPLE retirement accounts.
Sec. 1623. Inflation adjustments for catch-up contributions for certain employer plans.
Sec. 1624. Inflation adjustments for governmental and tax-exempt organization plans.
Subtitle H—Certain provisions related to members of Indian tribes
Sec. 1701. Indian general welfare benefits.
Sec. 1702. Tribal Advisory Committee.
Sec. 1703. Other relief for Indian tribes.
Title II—Alternative Minimum Tax Repeal
Sec. 2001. Repeal of alternative minimum tax.
Title III—Business Tax Reform
Subtitle A—Tax Rates
Sec. 3001. 25-percent corporate tax rate.
Subtitle B—Reform of business-Related exclusions and deductions
Sec. 3101. Revision of treatment of contributions to capital.
Sec. 3102. Repeal of deduction for local lobbying expenses.
Sec. 3103. Expenditures for repairs in connection with casualty losses.
Sec. 3104. Reform of accelerated cost recovery system.
Sec. 3105. Repeal of amortization of pollution control facilities.
Sec. 3106. Net operating loss deduction.
Sec. 3107. Circulation expenditures.
Sec. 3108. Amortization of research and experimental expenditures.
Sec. 3109. Repeal of deductions for soil and water conservation expenditures and endangered species
recovery expenditures.
Sec. 3110. Amortization of certain advertising expenses.
Sec. 3111. Expensing certain depreciable business assets for small business.
Sec. 3112. Repeal of election to expense certain refineries.
Sec. 3113. Repeal of deduction for energy efficient commercial buildings.
Sec. 3114. Repeal of election to expense advanced mine safety equipment.
Sec. 3115. Repeal of deduction for expenditures by farmers for fertilizer, etc.
Sec. 3116. Repeal of special treatment of certain qualified film and television productions.
Sec. 3117. Repeal of special rules for recoveries of damages of antitrust violations, etc.
Sec. 3118. Treatment of reforestation expenditures.
Sec. 3119. 20-year amortization of goodwill and certain other intangibles.
Sec. 3120. Treatment of environmental remediation costs.
Sec. 3121. Repeal of expensing of qualified disaster expenses.
Sec. 3122. Phaseout and repeal of deduction for income attributable to domestic production
activities.
Sec. 3123. Unification of deduction for organizational expenditures.
Sec. 3124. Prevention of arbitrage of deductible interest expense and tax-exempt interest income.
Sec. 3125. Prevention of transfer of certain losses from tax indifferent parties.
Sec. 3126. Entertainment, etc. expenses.
Sec. 3127. Repeal of limitation on corporate acquisition indebtedness.
Sec. 3128. Denial of deductions and credits for expenditures in illegal businesses.
Sec. 3129. Limitation on deduction for FDIC premiums.
Sec. 3130. Repeal of percentage depletion.
Sec. 3131. Repeal of passive activity exception for working interests in oil and gas property.
Sec. 3132. Repeal of special rules for gain or loss on timber, coal, or domestic iron ore.
Sec. 3133. Repeal of like-kind exchanges.
Sec. 3134. Restriction on trade or business property treated as similar or related in service to
involuntarily converted property in disaster areas.
Sec. 3135. Repeal of rollover of publicly traded securities gain into specialized small business
investment companies.
Sec. 3136. Termination of special rules for gain from certain small business stock.
Sec. 3137. Certain self-created property not treated as a capital asset.
Sec. 3138. Repeal of special rule for sale or exchange of patents.
Sec. 3139. Depreciation recapture on gain from disposition of certain depreciable realty.
Sec. 3140. Common deduction conforming amendments.
Subtitle C—Reform of business credits
Sec. 3201. Repeal of credit for alcohol, etc., used as fuel.
Sec. 3202. Repeal of credit for biodiesel and renewable diesel used as fuel.
Sec. 3203. Research credit modified and made permanent.
Sec. 3204. Low-income housing tax credit.
Sec. 3205. Repeal of enhanced oil recovery credit.
Sec. 3206. Phaseout and repeal of credit for electricity produced from certain renewable resources.
Sec. 3207. Repeal of Indian employment credit.
Sec. 3208. Repeal of credit for portion of employer Social Security taxes paid with respect to
employee cash tips.
Sec. 3209. Repeal of credit for clinical testing expenses for certain drugs for rare diseases or
conditions.
Sec. 3210. Repeal of credit for small employer pension plan startup costs.
Sec. 3211. Repeal of employer-provided child care credit.
Sec. 3212. Repeal of railroad track maintenance credit.
Sec. 3213. Repeal of credit for production of low sulfur diesel fuel.
Sec. 3214. Repeal of credit for producing oil and gas from marginal wells.
Sec. 3215. Repeal of credit for production from advanced nuclear power facilities.
Sec. 3216. Repeal of credit for producing fuel from a nonconventional source.
Sec. 3217. Repeal of new energy efficient home credit.
Sec. 3218. Repeal of energy efficient appliance credit.
Sec. 3219. Repeal of mine rescue team training credit.
Sec. 3220. Repeal of agricultural chemicals security credit.
Sec. 3221. Repeal of credit for carbon dioxide sequestration.
Sec. 3222. Repeal of credit for employee health insurance expenses of small employers.
Sec. 3223. Repeal of rehabilitation credit.
Sec. 3224. Repeal of energy credit.
Sec. 3225. Repeal of qualifying advanced coal project credit.
Sec. 3226. Repeal of qualifying gasification project credit.
Sec. 3227. Repeal of qualifying advanced energy project credit.
Sec. 3228. Repeal of qualifying therapeutic discovery project credit.
Sec. 3229. Repeal of work opportunity tax credit.
Sec. 3230. Repeal of deduction for certain unused business credits.
Subtitle D—Accounting methods
Sec. 3301. Limitation on use of cash method of accounting.
Sec. 3302. Rules for determining whether taxpayer has adopted a method of accounting.
Sec. 3303. Certain special rules for taxable year of inclusion.
Sec. 3304. Installment sales.
Sec. 3305. Repeal of special rule for prepaid subscription income.
Sec. 3306. Repeal of special rule for prepaid dues income of certain membership organizations.
Sec. 3307. Repeal of special rule for magazines, paperbacks, and records returned after close of
the taxable year.
Sec. 3308. Modification of rules for long-term contracts.
Sec. 3309. Nuclear decommissioning reserve funds.
Sec. 3310. Repeal of last-in, first-out method of inventory.
Sec. 3311. Repeal of lower of cost or market method of inventory.
Sec. 3312. Modification of rules for capitalization and inclusion in inventory costs of certain
expenses.
Sec. 3313. Modification of income forecast method.
Sec. 3314. Repeal of averaging of farm income.
Sec. 3315. Treatment of patent or trademark infringement awards.
Sec. 3316. Repeal of redundant rules with respect to carrying charges.
Sec. 3317. Repeal of recurring item exception for spudding of oil or gas wells.
Subtitle E—Financial Instruments
Part 1—Derivatives and hedges
Sec. 3401. Treatment of certain derivatives.
Sec. 3402. Modification of certain rules related to hedges.
Part 2—Treatment of debt instruments
Sec. 3411. Current inclusion in income of market discount.
Sec. 3412. Treatment of certain exchanges of debt instruments.
Sec. 3413. Coordination with rules for inclusion not later than for financial accounting purposes.
Sec. 3414. Rules regarding certain government debt.
Part 3—Certain rules for determining gain and loss
Sec. 3421. Cost basis of specified securities determined without regard to identification.
Sec. 3422. Wash sales by related parties.
Sec. 3423. Nonrecognition for derivative transactions by a corporation with respect to its stock.
Part 4—Tax favored bonds
Sec. 3431. Termination of private activity bonds.
Sec. 3432. Termination of credit for interest on certain home mortgages.
Sec. 3433. Repeal of advance refunding bonds.
Sec. 3434. Repeal of tax credit bond rules.
Subtitle F—Insurance reforms
Sec. 3501. Exception to pro rata interest expense disallowance for corporate-owned life insurance
restricted to 20-percent owners.
Sec. 3502. Net operating losses of life insurance companies.
Sec. 3503. Repeal of small life insurance company deduction.
Sec. 3504. Computation of life insurance tax reserves.
Sec. 3505. Adjustment for change in computing reserves.
Sec. 3506. Modification of rules for life insurance proration for purposes of determining the
dividends received deduction.
Sec. 3507. Repeal of special rule for distributions to shareholders from pre-1984 policyholders
surplus account.
Sec. 3508. Modification of proration rules for property and casualty insurance companies.
Sec. 3509. Repeal of special treatment of Blue Cross and Blue Shield organizations, etc.
Sec. 3510. Modification of discounting rules for property and casualty insurance companies.
Sec. 3511. Repeal of special estimated tax payments.
Sec. 3512. Capitalization of certain policy acquisition expenses.
Sec. 3513. Tax reporting for life settlement transactions.
Sec. 3514. Clarification of tax basis of life insurance contracts.
Sec. 3515. Exception to transfer for valuable consideration rules.
Subtitle G—Pass-Thru and certain other entities
Part 1—S Corporations
Sec. 3601. Reduced recognition period for built-in gains made permanent.
Sec. 3602. Modifications to S corporation passive investment income rules.
Sec. 3603. Expansion of qualifying beneficiaries of an electing small business trust.
Sec. 3604. Charitable contribution deduction for electing small business trusts.
Sec. 3605. Permanent rule regarding basis adjustment to stock of S corporations making charitable
contributions of property.
Sec. 3606. Extension of time for making S corporation elections.
Sec. 3607. Relocation of C corporation definition.
Part 2—Partnerships
Sec. 3611. Repeal of rules relating to guaranteed payments and liquidating distributions.
Sec. 3612. Mandatory adjustments to basis of partnership property in case of transfer of
partnership interests.
Sec. 3613. Mandatory adjustments to basis of undistributed partnership property.
Sec. 3614. Corresponding adjustments to basis of properties held by partnership where partnership
basis adjusted.
Sec. 3615. Charitable contributions and foreign taxes taken into account in determining limitation
on allowance of partner’s share of loss.
Sec. 3616. Revisions related to unrealized receivables and inventory items.
Sec. 3617. Repeal of time limitation on taxing precontribution gain.
Sec. 3618. Partnership interests created by gift.
Sec. 3619. Repeal of technical termination.
Sec. 3620. Publicly traded partnership exception restricted to mining and natural resources
partnerships.
Sec. 3621. Ordinary income treatment in the case of partnership interests held in connection with
performance of services.
Sec. 3622. Partnership audits and adjustments.
Part 3—REITs and RICs
Sec. 3631. Prevention of tax-free spinoffs involving REITs.
Sec. 3632. Extension of period for prevention of REIT election following revocation or termination.
Sec. 3633. Certain short-life property not treated as real property for purposes of REIT
provisions.
Sec. 3634. Repeal of special rules for timber held by REITs.
Sec. 3635. Limitation on fixed percentage rent and interest exceptions for REIT income tests.
Sec. 3636. Repeal of preferential dividend rule for publicly offered REITs.
Sec. 3637. Authority for alternative remedies to address certain REIT distribution failures.
Sec. 3638. Limitations on designation of dividends by REITs.
Sec. 3639. Non-REIT earnings and profits required to be distributed by REIT in cash.
Sec. 3640. Debt instruments of publicly offered REITs and mortgages treated as real estate assets.
Sec. 3641. Asset and income test clarification regarding ancillary personal property.
Sec. 3642. Hedging provisions.
Sec. 3643. Modification of REIT earnings and profits calculation to avoid duplicate taxation.
Sec. 3644. Reduction in percentage limitation on assets of REIT which may be taxable REIT
subsidiaries.
Sec. 3645. Treatment of certain services provided by taxable REIT subsidiaries.
Sec. 3646. Study relating to taxable REIT subsidiaries.
Sec. 3647. C corporation election to become, or transfer assets to, a RIC or REIT.
Sec. 3648. Interests in RICs and REITs not excluded from definition of United States real property
interests.
Sec. 3649. Dividends derived from RICs and REITs ineligible for deduction for United States source
portion of dividends from certain foreign corporations.
Part 4—Personal holding companies
Sec. 3661. Exclusion of dividends from controlled foreign corporations from the definition of
personal holding company income for purposes of the personal holding
company rules.
Subtitle H—Taxation of foreign persons
Sec. 3701. Prevention of avoidance of tax through reinsurance with non-taxed affiliates.
Sec. 3702. Taxation of passenger cruise gross income of foreign corporations and nonresident alien
individuals.
Sec. 3703. Restriction on insurance business exception to passive foreign investment company rules.
Sec. 3704. Modification of limitation on earnings stripping.
Sec. 3705. Limitation on treaty benefits for certain deductible payments.
Subtitle I—Provisions related to compensation
Part 1—Executive 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.
Sec. 3804. Denial of deduction as research expenditure for stock transferred pursuant to an
incentive stock option.
Part 2—Worker classification
Sec. 3811. Determination of worker classification.
Subtitle J—Zones and Short-Term Regional Benefits
Sec. 3821. Repeal of provisions relating to Empowerment Zones and Enterprise Communities.
Sec. 3822. Repeal of DC Zone provisions.
Sec. 3823. Repeal of provisions relating to renewal communities.
Sec. 3824. Repeal of various short-term regional benefits.
Title IV—Participation exemption system for the taxation of foreign income
Subtitle A—Establishment of exemption system
Sec. 4001. Deduction for dividends received by domestic corporations from certain foreign
corporations.
Sec. 4002. Limitation on losses with respect to specified 10-percent owned foreign corporations.
Sec. 4003. Treatment of deferred foreign income upon transition to participation exemption system
of taxation.
Sec. 4004. Look-thru rule for related controlled foreign corporations made permanent.
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. Foreign tax credit limitation applied by allocating only directly allocable deductions
to foreign source income.
Sec. 4103. Passive category income expanded to include other mobile income.
Sec. 4104. Source of income from sales of inventory determined solely on basis of production
activities.
Subtitle C—Rules related to passive and mobile income
Part 1—Modification of subpart F provisions
Sec. 4201. Subpart F income to only include low-taxed foreign income.
Sec. 4202. Foreign base company sales income.
Sec. 4203. Inflation adjustment of de minimis exception for foreign base company income.
Sec. 4204. Active financing exception extended with limitation for low-taxed foreign income.
Sec. 4205. Repeal of inclusion based on withdrawal of previously excluded subpart F income from
qualified investment.
Part 2—Prevention of base erosion
Sec. 4211. Foreign intangible income subject to taxation at reduced rate; intangible income treated
as subpart F income.
Sec. 4212. Denial of deduction for interest expense of United States shareholders which are members
of worldwide affiliated groups with excess domestic indebtedness.
Title V—Tax Exempt Entities
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. Name and logo royalties treated as unrelated business taxable income.
Sec. 5003. Unrelated business taxable income separately computed for each trade or business
activity.
Sec. 5004. Exclusion of research income limited to publicly available research.
Sec. 5005. Parity of charitable contribution limitation between trusts and corporations.
Sec. 5006. Increased specific deduction.
Sec. 5007. Repeal of exclusion of gain or loss from disposition of distressed property.
Sec. 5008. Qualified sponsorship payments.
Subtitle B—Penalties
Sec. 5101. Increase in information return penalties.
Sec. 5102. Manager-level accuracy-related penalty on underpayment of unrelated business income tax.
Subtitle C—Excise Taxes
Sec. 5201. Modification of intermediate sanctions.
Sec. 5202. Modification of taxes on self-dealing.
Sec. 5203. Excise tax on failure to distribute within 5 years contribution to donor advised fund.
Sec. 5204. Simplification of excise tax on private foundation investment income.
Sec. 5205. Repeal of exception for private operating foundation failure to distribute income.
Sec. 5206. Excise tax based on investment income of private colleges and universities.
Subtitle D—Requirements for Organizations Exempt From Tax
Sec. 5301. Repeal of tax-exempt status for professional sports leagues.
Sec. 5302. Repeal of exemption from tax for certain insurance companies and co-op health insurance
issuers.
Sec. 5303. In-State requirement for workmen’s compensation insurance organization.
Sec. 5304. Repeal of Type II and Type III supporting organizations.
Title VI—Tax administration and compliance
Subtitle A—IRS Investigation-Related Reforms
Sec. 6001. Organizations required to notify Secretary of intent to operate as 501(c)(4).
Sec. 6002. Declaratory judgments for 501(c)(4) organizations.
Sec. 6003. Restriction on donation reporting for certain 501(c)(4) organizations.
Sec. 6004. Mandatory electronic filing for annual returns of exempt organizations.
Sec. 6005. Duty to ensure that IRS employees are familiar with and act in accord with certain
taxpayer rights.
Sec. 6006. Termination of employment of IRS employees for taking official actions for political
purposes.
Sec. 6007. Release of information regarding the status of certain investigations.
Sec. 6008. Review of IRS examination selection procedures.
Sec. 6009. IRS employees prohibited from using personal email accounts for official business.
Sec. 6010. Moratorium on IRS conferences.
Sec. 6011. Applicable standard for determinations of whether an organization is operated
exclusively for the promotion of social welfare.
Subtitle B—Taxpayer Protection and Service Reforms
Sec. 6101. Extension of IRS authority to require truncated Social Security numbers on Form W–2.
Sec. 6102. Free electronic filing.
Sec. 6103. Pre-populated returns prohibited.
Sec. 6104. Form 1040SR for seniors.
Sec. 6105. Increased refund and credit threshold for Joint Committee on Taxation review of C
corporation return.
Subtitle C—Tax return due date simplification
Sec. 6201. Due dates for returns of partnerships, S corporations, and C corporations.
Sec. 6202. Modification of due dates by regulation.
Sec. 6203. Corporations permitted statutory automatic 6-month extension of income tax returns.
Subtitle D—Compliance Reforms
Sec. 6301. Penalty for failure to file.
Sec. 6302. Penalty for failure to file correct information returns and provide payee statements.
Sec. 6303. Clarification of 6-year statute of limitations in case of overstatement of basis.
Sec. 6304. Reform of rules related to qualified tax collection contracts.
Sec. 6305. 100 percent continuous levy on payments to Medicare providers and suppliers.
Sec. 6306. Treatment of refundable credits for purposes of certain penalties.
Title VII—Excise taxes
Sec. 7001. Repeal of medical device excise tax.
Sec. 7002. Modifications relating to oil spill liability trust fund.
Sec. 7003. Modification relating to inland waterways trust fund financing rate.
Sec. 7004. Excise tax on systemically important financial institutions.
Sec. 7005. Clarification of orphan drug exception to annual fee on branded prescription
pharmaceutical manufacturers and importers.
Title VIII—Deadwood and technical provisions
Subtitle A—Repeal of Deadwood
Sec. 8001. Repeal of Puerto Rico economic activity credit.
Sec. 8002. Repeal of making work pay credit.
Sec. 8003. General business credit.
Sec. 8004. Environmental tax.
Sec. 8005. Annuities; certain proceeds of endowment and life insurance contracts.
Sec. 8006. Unemployment compensation.
Sec. 8007. Flexible spending arrangements.
Sec. 8008. Certain combat zone compensation of members of the armed forces.
Sec. 8009. Qualified group legal services plans.
Sec. 8010. Certain reduced uniformed services retirement pay.
Sec. 8011. Great plains conservation program.
Sec. 8012. State legislators’ travel expenses away from home.
Sec. 8013. Treble damage payments under the antitrust law.
Sec. 8014. Phase-in of limitation on investment interest.
Sec. 8015. Charitable, etc., contributions and gifts.
Sec. 8016. Amortizable bond premium.
Sec. 8017. Repeal of deduction for clean-fuel vehicles and certain refueling property.
Sec. 8018. Repeal of deduction for capital costs incurred in complying with environmental
protection agency sulfur regulations.
Sec. 8019. Activities not engaged in for profit.
Sec. 8020. Dividends received on certain preferred stock; and dividends paid on certain preferred
stock of public utilities.
Sec. 8021. Acquisitions made to evade or avoid income tax.
Sec. 8022. Distributions of property.
Sec. 8023. Effect on earnings and profits.
Sec. 8024. Basis to corporations.
Sec. 8025. Tax credit employee stock ownership plans.
Sec. 8026. Employee stock purchase plans.
Sec. 8027. Transition rules.
Sec. 8028. Limitation on deductions for certain farming.
Sec. 8029. Deductions limited to amount at risk.
Sec. 8030. Passive activity losses and credits limited.
Sec. 8031. Adjustments required by changes in method of accounting.
Sec. 8032. Exemption from tax on corporations, certain trusts, etc.
Sec. 8033. Requirements for exemption.
Sec. 8034. Repeal of special treatment for religious broadcasting company.
Sec. 8035. Repeal of exclusion of gain or loss from disposition of brownfield property.
Sec. 8036. Accumulated taxable income.
Sec. 8037. Certain provisions related to depletion.
Sec. 8038. Amounts received by surviving annuitant under joint and survivor annuity contract.
Sec. 8039. Income taxes of members of armed forces on death.
Sec. 8040. Special rules for computing reserves.
Sec. 8041. Insurance company taxable income.
Sec. 8042. Capitalization of certain policy acquisition expenses.
Sec. 8043. Repeal of provision on expatriation to avoid tax.
Sec. 8044. Repeal of certain transition rules on income from sources without United States.
Sec. 8045. Repeal of Puerto Rico and possession tax credit.
Sec. 8046. Basis of property acquired from decedent.
Sec. 8047. Property on which lessee has made improvements.
Sec. 8048. Involuntary conversion.
Sec. 8049. Property acquired during affiliation.
Sec. 8050. Repeal of special holding period rules for certain commodity futures transactions.
Sec. 8051. Holding period of property.
Sec. 8052. Property used in the trade or business and involuntary conversions.
Sec. 8053. Sale of patents.
Sec. 8054. Gain from disposition of farmland.
Sec. 8055. Transition rules related to the treatment of amounts received on retirement or sale or
exchange of debt instruments.
Sec. 8056. Certain rules with respect to debt instruments issued before July 2, 1982.
Sec. 8057. Certain rules with respect to stripped bonds purchased before July 2, 1982.
Sec. 8058. Amount and method of adjustment.
Sec. 8059. Old-age, survivors, and disability insurance.
Sec. 8060. Hospital insurance.
Sec. 8061. Ministers, members of religious orders, and christian science practitioners.
Sec. 8062. Affiliated group defined.
Sec. 8063. Credit for state death taxes.
Sec. 8064. Family-owned business interest.
Sec. 8065. Property within the united states.
Sec. 8066. Repeal of deadwood provisions relating to employment taxes.
Sec. 8067. Luxury passenger automobiles.
Sec. 8068. Transportation by air.
Sec. 8069. Taxes on failure to distribute income.
Sec. 8070. Taxes on taxable expenditures.
Sec. 8071. Definitions and special rules.
Sec. 8072. Returns.
Sec. 8073. Information returns.
Sec. 8074. Abatements.
Sec. 8075. Failure by corporation to pay estimated income tax.
Sec. 8076. Repeal of 2008 recovery rebates.
Sec. 8077. Repeal of advance payment of portion of increased child credit for 2003.
Sec. 8078. Repeal of provisions related to COBRA premium assistance.
Sec. 8079. Retirement.
Sec. 8080. Annuities to surviving spouses and dependent children of judges.
Sec. 8081. Merchant marine capital construction funds.
Sec. 8082. Valuation tables.
Sec. 8083. Definition of employee.
Sec. 8084. Effective date.
Subtitle B—Conforming Amendments Related to Multiple Sections
Sec. 8101. Conforming amendments related to multiple sections.
<enum>I</enum><header>Tax Reform for Individuals</header>
<subtitle id="H6BACCE6EC9E0418EB2B150FA10EBAD34"><enum>A</enum><header>Individual income tax rate reform</header>
<section display-inline="no-display-inline" id="HB4BB4E5C426741A6A646022A9E55EB92" section-type="subsequent-section"><enum>1001.</enum><header>Simplification of individual income tax rates</header>
<subsection id="HD670564D54444B719A5946653ED16C32"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 1 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H08C8B0F4BCFE421A8E1C61594BF34498" style="OLC">
<section id="HE81B4C667BA84ECF983F11A513CDDFA1"><enum>1.</enum><header>Tax imposed</header>
<subsection id="H845C3CB0A3D24519AFB613B8C6973099"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">There is hereby imposed on the income of every individual a tax equal to the sum of—</text>
<paragraph id="HE3D62906DE6946DFB07240E6450B2823"><enum>(1)</enum><header>10 percent bracket</header><text>10 percent of so much of the taxable income as does not exceed the 25-percent bracket threshold
amount,</text>
</paragraph><paragraph id="HEE5C8D9706E9458CB561165BA46F8145"><enum>(2)</enum><header>25 percent bracket</header><text>25 percent of so much of the taxable income as exceeds the 25-percent bracket threshold amount,
plus</text>
</paragraph><paragraph id="H70CB633E2E4D4C91A09273066BA2E5E6"><enum>(3)</enum><header>35 percent bracket</header><text>10 percent of so much of the modified adjusted gross income (as defined in section 2) as exceeds
the 35-percent bracket threshold amount.</text>
</paragraph></subsection><subsection id="HF4BC0D92F36347B8BE67E0B6033948C7"><enum>(b)</enum><header>Bracket threshold amounts</header><text>For purposes of this section—</text>
<paragraph id="H82F194EBB5C644CE882EE2EE3DEBDE58"><enum>(1)</enum><header>25-percent bracket threshold amount</header><text>The term <quote>25-percent bracket threshold amount</quote> means—</text>
<subparagraph id="HEBEA7540900E4C8086139989C5AD1C61"><enum>(A)</enum><text display-inline="yes-display-inline">in the case of a joint return or surviving spouse, $71,200,</text>
</subparagraph><subparagraph id="HB67B5261ACF24B73ABA2D9B3D9E3E8F7"><enum>(B)</enum><text>in the case of any other individual (other than an estate or trust), one-half of the dollar amount
in effect under subparagraph (A), and</text>
</subparagraph><subparagraph id="H64825C8AE9BC4FED8B71EBD5171D48E0"><enum>(C)</enum><text>in the case of an estate or trust, zero.</text>
</subparagraph></paragraph><paragraph id="H492340A822DD463499F123B901BE655D"><enum>(2)</enum><header>35-percent bracket threshold amount</header><text>The term <quote>35-percent bracket threshold amount</quote> means—</text>
<subparagraph id="HFB529CDEE4854CAC8BE277F15831EE1F"><enum>(A)</enum><text display-inline="yes-display-inline">in the case of a joint return or surviving spouse, $450,000,</text>
</subparagraph><subparagraph id="H708D6E878AB3407590782EAF7B9C56BC"><enum>(B)</enum><text>in the case of any other individual (other than an estate or trust), $400,000, and</text>
</subparagraph><subparagraph id="HF057324201504B7E83C6F1B3D7FC7E8A"><enum>(C)</enum><text>in the case of an estate or trust, $12,000.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="H05DAB385E10648FD8DE638851BD17BD0"><enum>(c)</enum><header>Inflation adjustment</header>
<paragraph commented="no" id="HBBE0D2A261C148608E0E38A482CDB90F"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any taxable year beginning after 2014, each dollar amount in subsections (b)(1)(A),
(b)(2)(A), (b)(2)(B), (b)(2)(C), (e)(3)(A), and (e)(3)(B) shall be
increased by an amount equal to—</text>
<subparagraph commented="no" id="H89397119DAFB47CE897F2C2DBAADEA98"><enum>(A)</enum><text>such dollar amount, multiplied by</text>
</subparagraph><subparagraph commented="no" id="H7A3911F451B54C7EA53065BFD4C18248"><enum>(B)</enum><text>the cost-of-living adjustment determined under this subsection for the calendar year in which the
taxable year begins.</text></subparagraph><continuation-text continuation-text-level="paragraph">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.</continuation-text></paragraph><paragraph commented="no" id="HC4903B06466D44EEA6597558A7DEED48"><enum>(2)</enum><header>Cost-of-living adjustment</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="HA8D7E91FD73D4914AA79A3EA665B17AA"><enum>(A)</enum><header>In general</header><text>The cost-of-living adjustment for any calendar year is the percentage (if any) by which—</text>
<clause commented="no" id="H896C3A23CBAA4982ACF9F6750FECCB7D"><enum>(i)</enum><text>the C-CPI-U for the preceding calendar year, exceeds</text>
</clause><clause commented="no" id="H79C6302AE8FF40419B052B5214D32591"><enum>(ii)</enum><text>the normalized CPI for calendar year 2012.</text>
</clause></subparagraph><subparagraph id="H74B74D663DFD406F90CD615F13C619C9"><enum>(B)</enum><header>Special rule for adjustments with a base year after 2012</header><text display-inline="yes-display-inline">For purposes of any provision which provides for the substitution of a year after 2012 for <quote>2012</quote> in subparagraph (A)(ii), subparagraph (A) shall be applied by substituting <quote>C-CPI-U</quote> for <quote>normalized CPI</quote> in clause (ii).</text>
</subparagraph></paragraph><paragraph commented="no" id="H64E7596D2A2A400EA1105FB894440270"><enum>(3)</enum><header>Normalized CPI</header><text>For purposes of this subsection, the normalized CPI for any calendar year is the product of—</text>
<subparagraph commented="no" id="H985CBD9B3C724DFAAC7439827EB1B02B"><enum>(A)</enum><text>the CPI for such calendar year, multiplied by</text>
</subparagraph><subparagraph commented="no" id="HAF0D8E6F674A43B7B258DEB96D4B81E7"><enum>(B)</enum><text>the C-CPI-U transition multiple.</text>
</subparagraph></paragraph><paragraph commented="no" id="HFFA43409E96A4CB7A44EEEFCB51E009D"><enum>(4)</enum><header>C-CPI-U transition multiple</header><text>For purposes of this subsection, the term <quote>C-CPI-U transition multiple</quote> means the amount obtained by dividing—</text>
<subparagraph commented="no" id="H914E3D87275F46F4B65BFA11B6248C9D"><enum>(A)</enum><text>the C-CPI-U for calendar year 2013, by</text>
</subparagraph><subparagraph commented="no" id="H7CC485BFBE9948E588C67C90D64B2359"><enum>(B)</enum><text>the CPI for calendar year 2013.</text>
</subparagraph></paragraph><paragraph commented="no" id="HA63A7F96BC4E4DA295C121D33A1BB66F"><enum>(5)</enum><header>C-CPI-U</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph commented="no" id="HB0EE9BEAF91D41CC8710017423FCC7A1"><enum>(A)</enum><header>In general</header><text>The term <quote>C-CPI-U</quote> 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.</text>
</subparagraph><subparagraph commented="no" id="HA129FE9BB7F64102BE415DA18A25E3CE"><enum>(B)</enum><header>Determination for calendar year</header><text>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.</text>
</subparagraph></paragraph><paragraph commented="no" id="H56A8F509197248F7B6EE024E07382D87"><enum>(6)</enum><header>CPI</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph commented="no" id="H22A121FCE7B0448B9B1D932B3DF9B0CA"><enum>(A)</enum><header>In general</header><text>The term <quote>Consumer Price Index</quote> 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.</text>
</subparagraph><subparagraph commented="no" id="HE8BE1D9302D445BFA3D1AD415FB0997B"><enum>(B)</enum><header>Determination for calendar year</header><text>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.</text>
</subparagraph></paragraph></subsection><subsection id="H84E55E27FB484E729F071B50F226E1A6"><enum>(d)</enum><header>Special rules for certain children with unearned income</header>
<paragraph id="H3D63CF2B06F34A71AEA483A93D679930"><enum>(1)</enum><header>In general</header><text>In the case of any child to whom this subsection applies for any taxable year—</text>
<subparagraph id="H9AFD94DD37C24AD4907E030696ADC40A"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="H7A898F5D1A6D417A9516A1F5B7FE26E4"><enum>(B)</enum><text>the 35-percent bracket threshold amount shall not be more than the sum of—</text>
<clause id="H005FBA36D7E74E6A8BAA3446D8529B36"><enum>(i)</enum><text>the taxable income of such child for the taxable year reduced by the net unearned income of such
child, plus</text>
</clause><clause id="H54150AFAB04B4627B9A7DC321C74758C"><enum>(ii)</enum><text>the dollar amount in effect under subsection (b)(2)(C) for the taxable year.</text>
</clause></subparagraph></paragraph><paragraph id="HE312F85C3C12436AB51E57072A7AED47"><enum>(2)</enum><header>Child to whom subsection applies</header><text>This subsection shall apply to any child for any taxable year if—</text>
<subparagraph id="HFF2EFCE17EF04853B212E5CD084CD649"><enum>(A)</enum><text>such child—</text>
<clause id="HB9A92D0E2A1C4349B2329F4845DE6FFC"><enum>(i)</enum><text>has not attained age 18 before the close of the taxable year, or</text>
</clause><clause id="HF7DC487E6B2C4EB4A981BBE98FC1CC3A"><enum>(ii)</enum><text>has attained age 18 before the close of the taxable year and is described in paragraph (3),</text>
</clause></subparagraph><subparagraph id="HF47D22B5F56D4FA3A2F9B0B640E46E9A"><enum>(B)</enum><text>either parent of such child is alive at the close of the taxable year, and</text>
</subparagraph><subparagraph id="H1B56E4B3C1CB43EABC91FD3755A35DBB"><enum>(C)</enum><text>such child does not file a joint return for the taxable year.</text>
</subparagraph></paragraph><paragraph id="H2008D67C7F73467EA0267FB4F73FFE71"><enum>(3)</enum><header>Certain children whose earned income does not exceed one-half of individual’s support</header><text>A child is described in this paragraph if—</text>
<subparagraph id="H04FAAAAA7A9F4AF48AE078EDEE173873"><enum>(A)</enum><text>such child—</text>
<clause id="H1D0D6D412C424522AAF98051F1FECCFA"><enum>(i)</enum><text>has not attained age 19 before the close of the taxable year, or</text>
</clause><clause id="H6B9F5748102345388BC34D572836F4B1"><enum>(ii)</enum><text>is a student (within the meaning of section 7705(f)(2)) who has not attained age 24 before the
close of the taxable year, and</text>
</clause></subparagraph><subparagraph id="H8D8E9797E8B84C1B861D8FB0A871811C"><enum>(B)</enum><text>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 7705(c)(1)(D) after the application of section 7705(f)(5) (without
regard to subparagraph (A) thereof)) for such taxable year.</text>
</subparagraph></paragraph><paragraph id="HEF11FA0C4C084B76985F8C90BBCFEE36"><enum>(4)</enum><header>Net unearned income</header><text>For purposes of this subsection—</text>
<subparagraph id="H1BD7A053F8624815AE235BDBB54FAC89"><enum>(A)</enum><header>In general</header><text>The term <quote>net unearned income</quote> means the excess of—</text>
<clause id="H426E410FEFFE45EB91AF62727663122F"><enum>(i)</enum><text>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</text>
</clause><clause id="HFB0175B39D7245D1B81514C2814899E4"><enum>(ii)</enum><text>the sum of—</text>
<subclause id="HA3B15E4400B54AA0A6B76ACA16EDD512"><enum>(I)</enum><text display-inline="yes-display-inline">the amount in effect for the taxable year under section 63(c)(4)(A) (relating to limitation on
standard deduction in the case of certain dependents), plus</text>
</subclause><subclause id="HBF0130AB332B44D99437ED18D8C6B9CA"><enum>(II)</enum><text>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).</text>
</subclause></clause></subparagraph><subparagraph id="HD0AE03557F0F419C886D0C29386F5A14"><enum>(B)</enum><header>Limitation based on taxable income</header><text>The amount of the net unearned income for any taxable year shall not exceed the individual’s
taxable income for such taxable year.</text>
</subparagraph></paragraph></subsection><subsection id="HD1E44B9ED25B4AE0BAC1C6EC2D63A791"><enum>(e)</enum><header>Phaseout of 10-Percent rate</header>
<paragraph id="H6743705C3AD8460E9E55E1B362489E19"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The amount of tax imposed by this section (determined without regard to this subsection) shall be
increased by 5 percent of the excess (if any) of—</text>
<subparagraph id="H50AD3FDEE2964FC6B240C63DA4F778BB"><enum>(A)</enum><text>modified adjusted gross income, over</text>
</subparagraph><subparagraph id="HDD295B37A4BE4D83824B531AEC00858F"><enum>(B)</enum><text>the applicable dollar amount.</text>
</subparagraph></paragraph><paragraph id="H57DBB23B31BB406C861C7B78E77B1102"><enum>(2)</enum><header>Limitation</header><text>The increase determined under paragraph (1) with respect to any taxpayer for any taxable year shall
not exceed 15 percent of the lesser of—</text>
<subparagraph id="HF4BA3A6FDA2B46C397919CF94890655E"><enum>(A)</enum><text>the taxpayer’s taxable income for such taxable year, or</text>
</subparagraph><subparagraph id="H5D2E215A6477442F999E2BDC2694D008"><enum>(B)</enum><text>the 25-percent bracket threshold amount in effect with respect to the taxpayer for such taxable
year.</text>
</subparagraph></paragraph><paragraph id="H5BBB3829E4044FA2B9229D8C60414C38"><enum>(3)</enum><header>Applicable dollar amount</header><text>For purposes of this subsection, the term <quote>applicable dollar amount</quote> means—</text>
<subparagraph display-inline="no-display-inline" id="H26C170931975424BBDF2432C3013B95A"><enum>(A)</enum><text display-inline="yes-display-inline">in the case of a joint return or a surviving spouse, $300,000,</text>
</subparagraph><subparagraph id="HD130C62D384D41D4A2E3A67216D18C23"><enum>(B)</enum><text>in the case of any other individual, $250,000.</text>
</subparagraph></paragraph><paragraph id="H0F551F989AA34444A8D6CBFB91142005"><enum>(4)</enum><header>Estates and trusts</header><text>Paragraph (1) shall not apply in the case of an estate or trust.</text>
</paragraph></subsection><subsection id="H8074E0A297FE47C5BC1CA839F5EE1AC9"><enum>(f)</enum><header>Determination of highest rate</header><text>For purposes of any provision of law which refers to the highest rate of tax specified in this
section (or any subsection of this section), such highest rate shall be
treated as being 35 percent.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H800DB063CA0C47FAA8C3F8078DD6A0DC"><enum>(b)</enum><header>Modified adjusted gross income</header><text>Section 2 is amended by striking subsection (b), by redesignating subsections (c), (d), and (e), as
subsections (d), (e), and (f), respectively, and by inserting after
subsection (a) the following new subsections:</text>
<quoted-block display-inline="no-display-inline" id="H73D97178B2C14687998D20142D19A4D5" style="OLC">
<subsection id="H94F99D5EAC894510B862CBA31D23DA8D"><enum>(b)</enum><header>Modified adjusted gross income</header><text>For purposes of section 1—</text>
<paragraph id="HF6144FF54B494EBA85D6C46DC35C6480"><enum>(1)</enum><header>In general</header><text>The term <quote>modified adjusted gross income</quote> means adjusted gross income—</text>
<subparagraph id="HA1C86799F1074BF7B464EC3EC3A5493D"><enum>(A)</enum><text>increased by—</text>
<clause id="H02EACBB658C446FFB132D5325D4FD333"><enum>(i)</enum><text>any amount excluded from gross income under sections 911, 931, and 933,</text>
</clause><clause id="HD4BE4734127A4DD58A2E06DEEBB36B04"><enum>(ii)</enum><text>the excess (if any) of—</text>
<subclause id="H26505194DD794763A68675FEB02B120A"><enum>(I)</enum><text>amounts of interest received or accrued by the taxpayer during the taxable year which are exempt
from tax, over</text>
</subclause><subclause commented="no" id="H0021828D5435454F95C04C0888880F19"><enum>(II)</enum><text>amounts disallowed as a deduction by reason of section 163(d)(1)(A) or 171(a)(2),</text>
</subclause></clause><clause id="H5FD3D14D0EA345738DA9EABED0A2C480"><enum>(iii)</enum><text display-inline="yes-display-inline">any exclusion from gross income with respect to the cost described in section 6051(a)(14) (without
regard to subparagraphs (A) and (B) thereof),</text>
</clause><clause id="HA4639F89DFFB40CB8C69C69C464F2A88"><enum>(iv)</enum><text>any deduction allowable under section 162(l) (relating to special rules for health insurance costs
of self-employed individuals),</text>
</clause><clause commented="no" id="HBD16275BD78047DCA95BCA41A4BDB9FC"><enum>(v)</enum><text>any annual addition (as defined in section 415(c)(2)) to a defined contribution plan which is not
includible in, or which is deductible from, the gross income of the
individual for the taxable year,</text>
</clause><clause id="H11528F73019B48358784A57BB3261CB1"><enum>(vi)</enum><text>any deduction allowable under section 223, and</text>
</clause><clause id="H1D8368EF92524E109D9C5FFE22814221"><enum>(vii)</enum><text>the excess (if any) of—</text>
<subclause id="H1444217E32174085AB1C2CD504E2813F"><enum>(I)</enum><text>the social security benefits of the individual for the taxable year (as defined in section 86(d)),
over</text>
</subclause><subclause id="H601E53B2BF0842A7A0F1E4E54B3D62E7"><enum>(II)</enum><text>the amount included in the gross income of such individual for such taxable year under section 86,
and</text>
</subclause></clause></subparagraph><subparagraph id="HEABAD7EC865C4CD5A5FBC0F9524AFB48"><enum>(B)</enum><text>decreased by—</text>
<clause id="H67F3B58A961E459797885328149E31D6"><enum>(i)</enum><text>any deduction allowed under section 170 (and in the case of an estate or trust, any deduction
allowed under section 642(c)), and</text>
</clause><clause id="HD795569A3FAF4073ABD160EE43CDC58E"><enum>(ii)</enum><text>qualified domestic manufacturing income.</text>
</clause></subparagraph></paragraph><paragraph id="HC10B806EEAEF4B6681C44511166C448D"><enum>(2)</enum><header>Determination of adjusted gross income in case of estates and trusts</header><text display-inline="yes-display-inline">For purposes of this subsection, the adjusted gross income of an estate or trust shall be computed
in the same manner as in the case of an individual, except that—</text>
<subparagraph id="H27EF7B6EFEB24A8BA8473B0445CBE1C8"><enum>(A)</enum><text>the deductions for costs which are paid or incurred in connection with the administration of the
estate or trust and which would not have been incurred if the property
were not held in such trust or estate, and</text>
</subparagraph><subparagraph id="HEEE28A8AFD414520A51FC80572460751"><enum>(B)</enum><text>the deductions allowable under sections 642(b), 651, and 661,</text></subparagraph><continuation-text continuation-text-level="paragraph">shall be treated as allowable in arriving at adjusted gross income. Under regulations, appropriate
adjustments shall be made in the application of part I of subchapter J of
this chapter to take into account the application of this paragraph.</continuation-text></paragraph></subsection><subsection id="HB89057422CFD40F9A6F0559E0B5DF2F6"><enum>(c)</enum><header>Qualified domestic manufacturing income</header>
<paragraph id="H71FF704E2DB64C4DB0E2F1E3E9CDCBA4"><enum>(1)</enum><header>In general</header><text>For purposes of subsection (b), the term <quote>qualified domestic manufacturing income</quote> for any taxable year means an amount equal to the excess (if any) of—</text>
<subparagraph id="H90F5428BCE004A6C9B0DBC4A9F5775C3"><enum>(A)</enum><text>the taxpayer’s domestic manufacturing gross receipts for such taxable year, over</text>
</subparagraph><subparagraph id="H2DAA3BB9557E4E89A1B9E278F18C0641"><enum>(B)</enum><text>the sum of—</text>
<clause id="H88B8B66FE91C48B2B76FD804B6433C26"><enum>(i)</enum><text>the cost of goods sold that are allocable to such receipts, and</text>
</clause><clause id="H26E1D4BFFC7948238912342F78C0F121"><enum>(ii)</enum><text>other expenses, losses, or deductions, which are properly allocable to such receipts.</text>
</clause></subparagraph></paragraph><paragraph id="H8700299DEE0740BD9090078C5CDE780E"><enum>(2)</enum><header>Allocation method</header><text>The Secretary shall prescribe rules for the proper allocation of items described in paragraph (1)
for purposes of determining qualified domestic manufacturing income. Such
rules shall provide for the proper allocation of items whether or not such
items are directly allocable to domestic manufacturing gross receipts.</text>
</paragraph><paragraph id="HA947F916E4B54ED795C318BA1CA4D414"><enum>(3)</enum><header>Special rules for determining costs</header>
<subparagraph id="H823B3623E5DF40828879CCEC90EE67CA"><enum>(A)</enum><header>In general</header><text>For purposes of determining costs under clause (i) of paragraph (1)(B), any item or service brought
into the United States shall be treated as acquired by purchase, and its
cost shall be treated as not less than its value immediately after it
entered the United States. A similar rule shall apply in determining the
adjusted basis of leased or rented property where the lease or rental
gives rise to domestic manufacturing gross receipts.</text>
</subparagraph><subparagraph id="H71D156F6BF374D93B08B2C4BDAD9317E"><enum>(B)</enum><header>Exports for further manufacture</header><text>In the case of any property described in subparagraph (A) that had been exported by the taxpayer
for further manufacture, the increase in cost or adjusted basis under
subparagraph (A) shall not exceed the difference between the value of the
property when exported and the value of the property when brought back
into the United States after the further manufacture.</text>
</subparagraph></paragraph><paragraph id="HCFBA0800F8E044299658763F67386B30"><enum>(4)</enum><header>Domestic manufacturing gross receipts</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="H50EA82E6467E46B3899E7CB14DCB486F"><enum>(A)</enum><header>In general</header><text>The term <quote>domestic manufacturing gross receipts</quote> means the gross receipts of the taxpayer which are derived from—</text>
<clause id="H7CDC121BB01B429B8639CD2727145A26"><enum>(i)</enum><text>any lease, rental, license, sale, exchange, or other disposition of tangible personal property
which was manufactured, produced, grown, or extracted by the taxpayer in
whole or in significant part within the United States, or</text>
</clause><clause id="H8824231550384B56846030A263D097E7"><enum>(ii)</enum><text>in the case of a taxpayer engaged in the active conduct of a construction trade or business,
construction of real property performed in the United States by the
taxpayer in the ordinary course of such trade or business if such real
property is placed in service after December 31, 2014.</text>
</clause></subparagraph><subparagraph id="H9CF5ED69B94A4EE59670561DE9E2F21C"><enum>(B)</enum><header>Exceptions</header><text>Such term shall not include gross receipts of the taxpayer which are derived from—</text>
<clause id="HEB20FC4317DE4650AE0ACEFF8AEAC4BC"><enum>(i)</enum><text>the sale of food and beverages prepared by the taxpayer at a retail establishment,</text>
</clause><clause id="H476CB41E44E24ECA94693D43F8CA5260"><enum>(ii)</enum><text>the transmission or distribution of electricity, natural gas, or potable water, and</text>
</clause><clause id="HC26333C0054D407BB4D8D76BB92D9B53"><enum>(iii)</enum><text>the lease, rental, license, sale, exchange, or other disposition of land.</text>
</clause></subparagraph><subparagraph id="HD624EA513B9D4C2A80FCE5190BFF9E55"><enum>(C)</enum><header>Special rule for certain government contracts</header><text>Gross receipts derived from the manufacture or production of any property described in subparagraph
(A)(i) shall be treated as meeting the requirements of subparagraph (A)(i)
if—</text>
<clause id="H095E715D68AD4928AC518A351111FAF9"><enum>(i)</enum><text>such property is manufactured or produced by the taxpayer pursuant to a contract with the Federal
Government, and</text>
</clause><clause id="H86311F1D90A044E1A498EAC2029EC630"><enum>(ii)</enum><text>the Federal Acquisition Regulation requires that title or risk of loss with respect to such
property be transferred to the Federal Government before the manufacture
or production of such property is complete.</text>
</clause></subparagraph><subparagraph id="H951A951D105C420393850E60C0FB6795"><enum>(D)</enum><header>Treatment of activities in Puerto Rico</header><text display-inline="yes-display-inline">In the case of any taxpayer with gross receipts for any taxable year from sources within the
Commonwealth of Puerto Rico, if all of such receipts are taxable under
section 1 for such taxable year, then this paragraph shall be applied by
treating each reference in subparagraph (A) to the United States as
including the Commonwealth of Puerto Rico.</text>
</subparagraph><subparagraph id="HA9B9B773DB2A4A5EB46D3E76C7AD35CB"><enum>(E)</enum><header>Tangible personal property</header><text>The term <quote>tangible personal property</quote> shall not include computer software or any property described in paragraph (3) or (4) of section
168(f).</text>
</subparagraph><subparagraph id="HBB2F971269E049B58A69748E0A02ABD8"><enum>(F)</enum><header>Related persons</header>
<clause id="H283C0272CA144F9EBEAD65631E014E73"><enum>(i)</enum><header>In general</header><text>The term <quote>domestic manufacturing gross receipts</quote> shall not include any gross receipts of the taxpayer derived from property leased, licensed, or
rented by the taxpayer for use by any related person.</text>
</clause><clause id="HBFFB41FA41014BD4833B03865AC9C084"><enum>(ii)</enum><header>Related person</header><text>For purposes of clause (i), a person shall be treated as related to another person if such persons
are treated as a single employer under subsection (a) or (b) of section 52
or subsection (m) or (o) of section 414, except that determinations under
subsections (a) and (b) of section 52 shall be made without regard to
section 1563(b).</text>
</clause></subparagraph></paragraph><paragraph commented="no" id="H1190702D07B34A2298AFEE7B4E8C209C"><enum>(5)</enum><header>Certain income not qualified</header>
<subparagraph id="H6281BDAC4DEE429381CF3EE209AA8FFE"><enum>(A)</enum><header>Net earnings from self employment</header><text display-inline="yes-display-inline">Domestic manufacturing gross receipts shall not include any amount which is properly allocable to
the taxpayer’s net earnings from self employment (determined after any
reduction provided under section 1402(m)).</text>
</subparagraph><subparagraph id="H2D972C97441045539FF98C9E56AF21D9"><enum>(B)</enum><header>Certain accounting method adjustments</header><text>Domestic manufacturing gross receipts shall not include any amount attributable to—</text>
<clause id="H4C77744C76834616A33815FD8159C830"><enum>(i)</enum><text>a qualified change in method of accounting (as defined in section 3301(d)(2) of the <short-title>Tax Reform Act of 2014</short-title>), or</text>
</clause><clause id="HFA92608A713B47009397DF1DB1BCA639"><enum>(ii)</enum><text>any other change in method of accounting which is required by the amendments made by such Act.</text>
</clause></subparagraph></paragraph><paragraph id="HB00854B590D24A8698DB73BF2ABAAAD2"><enum>(6)</enum><header>Application of section to pass-through entities</header>
<subparagraph id="H582D4380930544C5A3E80647E4096B9A"><enum>(A)</enum><header>Partnerships and s corporations</header><text>Except as provided in subparagraph (B), in the case of a partnership or S corporation, each partner
or shareholder shall take into account such person’s allocable share of
each item described in subparagraph (A) or (B) of paragraph (1)
(determined without regard to whether the items described in such
subparagraph (A) exceed the items described in such subparagraph (B)).</text>
</subparagraph><subparagraph id="HB5F0180C5C0A45B8A6506316E9E14B04"><enum>(B)</enum><header>Publicly traded partnerships</header><text>In the case of a publicly traded partnership described in section 7704(c), each partner shall not
take into account any allocable share of any item referred to in
subparagraph (A).</text>
</subparagraph><subparagraph id="H501AD85C359A4AFB8F4D06B4FEB47F5F"><enum>(C)</enum><header>Trusts and estates</header><text>In the case of a trust or estate, the items referred to in subparagraph (A) (as determined therein)
shall be apportioned between the beneficiaries and the fiduciary (and
among the beneficiaries) under regulations prescribed by the Secretary.</text>
</subparagraph></paragraph><paragraph id="H9F65F924001A437AA407FE58FA62DCC0"><enum>(7)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate
to carry out the purposes of this section, including regulations or other
guidance—</text>
<subparagraph id="H810404B119CA45CEA3A1A13FF7723EA8"><enum>(A)</enum><text>which prevent more than 1 taxpayer from taking into account the same qualified domestic
manufacturing income, and</text>
</subparagraph><subparagraph id="HA18C7D4C25F4449DBCF09A48427FAAB6"><enum>(B)</enum><text>which require or restrict the allocation of items under paragraph (6) and require such reporting
for purposes of carrying out such paragraph as the Secretary determines
appropriate.</text>
</subparagraph></paragraph><paragraph id="H9BC780A22DD64548A999B8EDF577E708"><enum>(8)</enum><header>Phase-in of exclusion</header><text>In the case of any taxable year beginning before January 1, 2017, the term <quote>qualified domestic manufacturing income</quote> shall be an amount equal to the product of the qualified domestic manufacturing income determined
without regard to this paragraph, multiplied by—</text>
<subparagraph id="H8E95074ED87248D6BE50D5ED267671ED"><enum>(A)</enum><text>in the case of any taxable year beginning in 2015, 33 percent, and</text>
</subparagraph><subparagraph id="H010859D1C5D84388ADF9C8802782610C"><enum>(B)</enum><text>in the case of any taxable year beginning in 2016, 67 percent.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD0315906310F4BCE95F5225872A875C8"><enum>(c)</enum><header>Application of section 15</header>
<paragraph id="HA6A164D37C3B43D2947C77CA59BEA39E"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (a) of section 15 is amended by striking <quote>this chapter</quote> and inserting <quote>section 11</quote>.</text>
</paragraph><paragraph id="HEC263FE8CEDA4813AAD8146D0BCE809F"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="HBBB10AEEFAE74BE69DA9AB460F10642A"><enum>(A)</enum><text>Section 15 is amended by striking subsections (d) and (f) and by redesignating subsection (e) as
subsection (d).</text>
</subparagraph><subparagraph id="H558066180A454FC9873A2E5D66D16238"><enum>(B)</enum><text>Section 15(d), as redesignated by subparagraph (A), is amended by striking <quote>section 1 or 11(b)</quote> and inserting <quote>section 11(b)</quote>.</text>
</subparagraph><subparagraph id="H9BB78F75BC8041A8A453DA3760334D52"><enum>(C)</enum><text>Subchapter A of chapter 1 is amended—</text>
<clause id="H3A8E4969CF4F4472BF76E1D4EEAA1DA5"><enum>(i)</enum><text>by redesignating section 12 as section 13,</text>
</clause><clause id="HC1925B4551CD4F6C9CB5F537FCF67E05"><enum>(ii)</enum><text>by redesignating section 15 (as amended by this subsection) as section 12 and moving such section
from part III of such subchapter to after section 11 in part II of such
subchapter,</text>
</clause><clause id="H54F0CB157CFD46029737E76AC3573E66"><enum>(iii)</enum><text>by striking part III, and</text>
</clause><clause id="H2183DFB9794442E6A766AB14754A7678"><enum>(iv)</enum><text>by amending the table of sections for part II of such subchapter by redesignating the item relating
to section 12 as an item relating to section 13 and by inserting after the
item relating to section 11 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H2910B1094D94469BA2D396C49C376E88" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 12. Effect of changes.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="H9C9BD11FCA9D4DE0B4E7575F0C377C52"><enum>(D)</enum><text>Section 6013(c) is amended by striking <quote>sections 15, 443, and 7851(a)(1)(A)</quote> and inserting <quote>sections 443 and 7851(a)(1)(A)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H8AF45F234A9049269892F78303E745B3"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H2284AAFAB68A45EAB87B03DD49909010"><enum>1002.</enum><header>Deduction for adjusted net capital gain</header>
<subsection id="H4041074FFDC146DC97F2BDF259F5D012"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1, as amended by section 3105, is amended by inserting after
section 168 the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H170C5199584D4FC1BC388F5180B18D43" style="OLC">
<section id="H7CE3E8C88DED41BFA9931588FF2CE340"><enum>169.</enum><header>Adjusted net capital gain</header>
<subsection id="H7C741CBC79C8409F8984C2448138A23B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">If for any taxable year a taxpayer other than a corporation has an adjusted net capital gain, 40
percent of the amount of the adjusted net capital gain shall be allowed as
a deduction from gross income.</text>
</subsection><subsection id="HAE60D9A9D0834167AE8F43DA3A2BF530"><enum>(b)</enum><header>Adjusted net capital gain</header><text>For purposes of this section, the term <quote>adjusted net capital gain</quote> means the sum of—</text>
<paragraph id="HEFB78736A78E4D7294D0B9D9CC599D84"><enum>(1)</enum><text>net capital gain reduced (but not below zero) by the net collectibles gain, plus</text>
</paragraph><paragraph id="HD3FAE98914374C40B60B04A6146D6095"><enum>(2)</enum><text>qualified dividend income.</text>
</paragraph></subsection><subsection id="H2DFC7052332F4D9DB0B93F3746A1870B"><enum>(c)</enum><header>Net capital gain reduced by amounts taken into account as investment income</header><text display-inline="yes-display-inline">For purposes of this section, the net capital gain for any taxable year shall be reduced (but not
below zero) by the amount which the taxpayer takes into account as
investment income under section 163(d)(4)(B)(iii).</text>
</subsection><subsection id="HB8C09FE5E45C43D9B10511C7FBC080B5"><enum>(d)</enum><header>Net collectibles gain</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H2110101189FC4345BF505B62C2B0B6A8"><enum>(1)</enum><header>In general</header><text>The term <quote>net collectibles gain</quote> means the excess (if any) of—</text>
<subparagraph id="H0D8A3FC30EAA438A87A8085931B09A68"><enum>(A)</enum><text>collectibles gain, over</text>
</subparagraph><subparagraph id="H7BCD6C3171AE44EAA753A209A45B06F5"><enum>(B)</enum><text>collectibles loss.</text>
</subparagraph></paragraph><paragraph id="H6F2F0C88BA144EDFAD9DB941B3E8D418"><enum>(2)</enum><header>Collectibles gain and loss</header><text>The terms <quote>collectibles gain</quote> and <quote>collectibles loss</quote> mean gain or loss (respectively) from the sale or exchange of a collectible (as defined in section
408(m) without regard to paragraph (3) thereof) which is a capital asset
held for more than 1 year but only to the extent such gain is taken into
account in computing gross income and such loss is taken into account in
computing taxable income.</text>
</paragraph><paragraph id="H6C6E91DE81044E55B65ED81ACC6A1C8E"><enum>(3)</enum><header>Partnerships, etc</header><text>For purposes of paragraph (2), any gain from the sale of an interest in a partnership, S
corporation, or trust which is attributable to unrealized appreciation in
the value of collectibles shall be treated as gain from the sale or
exchange of a collectible. Rules similar to the rules of section 751 shall
apply for purposes of the preceding sentence.</text>
</paragraph></subsection><subsection id="HF359703CB7CE450A9BE2BC6BE67EC3FD"><enum>(e)</enum><header>Qualified dividend income</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="HEA8888AAA31F4709BE296D35EE6A13B0"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>qualified dividend income</quote> means dividends received during the taxable year from—</text>
<subparagraph id="H379599D11D224C679CFABFE124B536E7"><enum>(A)</enum><text>domestic corporations, and</text>
</subparagraph><subparagraph id="H71ECAC1C9A1D4B2EB62226DA16365DA7"><enum>(B)</enum><text>qualified foreign corporations.</text>
</subparagraph></paragraph><paragraph id="H77AD4DCBF0A94A048CA6A88D199A0886"><enum>(2)</enum><header>Certain dividends excluded</header><text>Such term shall not include—</text>
<subparagraph id="HA52C1E2217A74BBE8D3E3853D42B7BC7"><enum>(A)</enum><text>any dividend from a corporation which for the taxable year of the corporation in which the
distribution is made, or the preceding taxable year, is a corporation
exempt from tax under section 501 or 521,</text>
</subparagraph><subparagraph id="H9A59B183A81E49F88D6B1FE9BAABCE9B"><enum>(B)</enum><text>any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by
mutual savings banks, etc.), and</text>
</subparagraph><subparagraph id="H2048FD496DAB4401819FD1A211B3E8CA"><enum>(C)</enum><text>any dividend described in section 404(k).</text>
</subparagraph></paragraph><paragraph id="H6222D4BA61A54A2BB7B36881E2DF719D"><enum>(3)</enum><header>Coordination with section <enum-in-header>246(c)</enum-in-header></header><text>Such term shall not include any dividend on any share of stock—</text>
<subparagraph id="HD192E8BCAD4E4957864F301D2564954D"><enum>(A)</enum><text>with respect to which the holding period requirements of section 246(c) are not met (determined
without regard to paragraph (5) of section 246(c) and by substituting in
section 246(c) <quote>60 days</quote> for <quote>45 days</quote> each place it appears and by substituting <quote>121-day period</quote> for <quote>91-day period</quote>), or</text>
</subparagraph><subparagraph id="HC3BB44379A044BEE8B7CD34EA43696BE"><enum>(B)</enum><text>to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or
otherwise) to make related payments with respect to positions in
substantially similar or related property.</text>
</subparagraph></paragraph><paragraph id="H79E112314DB94302AE44E74FD7DC3CBD"><enum>(4)</enum><header>Qualified foreign corporations</header>
<subparagraph id="H6514456F834042AF915044D23E242E2B"><enum>(A)</enum><header>In general</header><text>Except as otherwise provided in this subparagraph, the term <quote>qualified foreign corporation</quote> means any foreign corporation if—</text>
<clause id="H4113C7CE8CCE4C239A570871B4D7A4C3"><enum>(i)</enum><text>such corporation is incorporated in a possession of the United States, or</text>
</clause><clause id="H7A105F23400B49D5ACCADD8F06716A78"><enum>(ii)</enum><text display-inline="yes-display-inline">such corporation is eligible as a qualified resident for all of the benefits provided under a
comprehensive income tax treaty with the United States which the Secretary
determines is satisfactory for purposes of this paragraph and which
includes an exchange of information program.</text>
</clause></subparagraph><subparagraph id="HF7B32CE6D1EE4F5EAFFC7EB3EAAE89D6"><enum>(B)</enum><header>Dividends on stock readily tradable on United States securities market</header><text>A foreign corporation not otherwise treated as a qualified foreign corporation under subparagraph
(A) shall be so treated with respect to any dividend paid by such
corporation if the stock with respect to which such dividend is paid is
readily tradable on an established securities market in the United States.</text>
</subparagraph><subparagraph id="HEE665FB52504449A9C1FCAAC1EC17FE7"><enum>(C)</enum><header>Exclusion of dividends of certain foreign corporations</header><text>The term <quote>qualified foreign corporation</quote> shall not include any foreign corporation which for the taxable year of the corporation in which
the dividend was paid, or the preceding taxable year, is a passive foreign
investment company (as defined in section 1297).</text>
</subparagraph></paragraph><paragraph id="H66390F3A6C9D41D786B9B18FF6D37453"><enum>(5)</enum><header>Treatment of dividends from regulated investment companies and real estate investment trusts</header><text>A dividend received from a regulated investment company or a real estate investment trust shall be
subject to the limitations prescribed in sections 854 and 857.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H66BF062477A24A2EA7721F1B0D3DA950"><enum>(b)</enum><header>Deduction allowed whether or not individual itemizes deductions</header><text>Section 62(a) is amended by inserting after paragraph (7) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H1D4961C50E1B4889ADE21516D7EBE877" style="OLC">
<paragraph id="H306B153132BD4ADDBB138BD910C8B446"><enum>(8)</enum><header>Adjusted net capital gain</header><text display-inline="yes-display-inline">The deduction allowed by section 169.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HE3DA2904F0CD4EA1AD7EEBA5F6D34BD9"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H66BFED36FB034124BA795DAC7EC936E8"><enum>1003.</enum><header>Conforming amendments related to simplification of individual income tax rates</header>
<subsection id="H9D9FE297424940199BED5BC288ACFDAC"><enum>(a)</enum><header>Amendments related to modification of inflation adjustment</header>
<paragraph id="HB1137EAF2503493088FF59E73C71596A"><enum>(1)</enum><text>Section 25B(b)(3)(B) is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2005</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by
substituting <quote>calendar year 2005</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph commented="no" id="H3B9165755F25436990C9F8F7085D8592"><enum>(2)</enum><text>Subclause (II) of section 36B(b)(3)(A)(ii) is amended by striking <quote>consumer price index</quote> and inserting <quote>C-CPI-U (as defined in section 1(c))</quote>.</text>
</paragraph><paragraph id="H7311C7B872044CBFBD3718870F7C44B3"><enum>(3)</enum><text>Section 41(e)(5)(C) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HAF8CF5651D5545A086DAA48D8B9877F3" style="OLC">
<subparagraph id="H1988B4928889481A80379D197EE4A1B3"><enum>(C)</enum><header>Cost-of-living adjustment defined</header>
<clause id="H51263C136CA845A19D1E25E32A12E288"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">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 <quote>calendar year 1987</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text>
</clause><clause id="H7AFAD6EE6CB64F16BE9BE5D2A6898ECB"><enum>(ii)</enum><header>Special rule where base period ends in a calendar year other than 1983 or 1984</header><text>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.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HF364C84EFF5F4219AD1D2ADD8AE289D7"><enum>(4)</enum><text>Section 125(i)(2) is amended—</text>
<subparagraph id="H0FDD5CCAE7664D1B9ED4253878512368"><enum>(A)</enum><text>by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins by substituting <quote>calendar year 2012</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> in subparagraph (B) and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins</quote>, and</text>
</subparagraph><subparagraph id="HAA4CF6FD64604BF9AD28E290B763AF3F"><enum>(B)</enum><text>by striking <quote>$50</quote> both places it appears in the last sentence and inserting <quote>$100</quote>.</text>
</subparagraph></paragraph><paragraph id="HB85DECB22965442F9B1F81025712C9B9"><enum>(5)</enum><text>Section 137(f) is amended—</text>
<subparagraph id="H5DF5830C112A491FB2107AD75AFC31B6"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting <quote>calendar year 2001</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> in paragraph (2) and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by
substituting <quote>calendar year 2001</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>, and</text>
</subparagraph><subparagraph id="HD32D592E13934ED1B7925359C88D4272"><enum>(B)</enum><text>in the last sentence thereof—</text>
<clause id="HD9EBEDC8AADA4A5B8F12470713E9B2F8"><enum>(i)</enum><text>by striking <quote>$10</quote> the first place it appears and inserting <quote>$100</quote>, and</text>
</clause><clause id="HC6445B7CAEA346F58F4D0D9588218481"><enum>(ii)</enum><text>by striking <quote>nearest multiple of $10</quote> and inserting <quote>next lowest multiple of $100</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="HB7534BA5CEE44DDDBDC876C34D0756D0"><enum>(6)</enum><text>Section 162(o)(3) is amended by inserting <quote>as in effect before enactment of the <short-title>Tax Reform Act of 2014</short-title></quote> after <quote>section 1(f)(5)</quote>.</text>
</paragraph><paragraph id="H15BA56F0959048A48906070ACDC17E93"><enum>(7)</enum><text display-inline="yes-display-inline">Section 220(g)(2) is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins by substituting <quote>calendar year 1997</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by
substituting <quote>calendar year 1997</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="HE4B538C068BF454A845CA85B46AC3EF9"><enum>(8)</enum><text display-inline="yes-display-inline">Section 223(g)(1) is amended by striking all that follows subparagraph (A) and inserting the
following:</text>
<quoted-block display-inline="no-display-inline" id="HAA30FE57F0FD4537801D3F46B3A2D0AB" style="OLC">
<subparagraph id="H7B90D7BC712F4D5DB6E8CA245A361FEE"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which
the taxable year begins, determined—</text>
<clause id="H5B42032D78264B52BC928EA36D1182FF"><enum>(i)</enum><text>by substituting for <quote>calendar year 2012</quote> in clause (ii) thereof—</text>
<subclause id="HF588C4E81EFD4FAFB85C2E6A3A137821"><enum>(I)</enum><text>except as provided in clause (ii), <quote>calendar year 1997</quote>, and</text>
</subclause><subclause id="H35C7CADF2E3141A1B5B36E58BF176821"><enum>(II)</enum><text>in the case of each dollar amount in subsection (c)(2)(A), <quote>calendar year 2003</quote>, and</text>
</subclause></clause><clause id="H7C055064D8AD4A9E9FBFEBDE59BAC6E5"><enum>(ii)</enum><text>by substituting <quote>March 31</quote> for <quote>August 31</quote> in paragraphs (5)(B) and (6)(B) of section 1(c).</text></clause><continuation-text continuation-text-level="subparagraph">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.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H6EAD09BF378E4798896CD942937DC3DF"><enum>(9)</enum><text display-inline="yes-display-inline">Section 430(c)(7)(D)(vii)(II) is amended by striking <quote>section 1(f)(3) for the calendar year, determined by substituting <quote>calendar year 2009</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year, determined by substituting <quote>calendar year 2009</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H8873108E260C41F4881B8135B1228BE8"><enum>(10)</enum><text display-inline="yes-display-inline">Section 512(d)(2)(B) is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, by substituting <quote>calendar year 1994</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote>and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by
substituting <quote>calendar year 1994</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H26C41F70B17240A0A2ADEE119953D151"><enum>(11)</enum><text display-inline="yes-display-inline">Section 513(h)(2)(C)(ii) is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins by substituting <quote>calendar year 1987</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by
substituting <quote>calendar year 1987</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H1B1B06F47D9440AAB249333663728961"><enum>(12)</enum><text display-inline="yes-display-inline">Section 877A(a)(3)(B)(i)(II) is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, by substituting <quote>calendar year 2007</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by
substituting <quote>calendar year 2007</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H13D58AE7D6A54D92AC2DA439E65CEF5E"><enum>(13)</enum><text display-inline="yes-display-inline">Section 911(b)(2)(D)(ii)(II) is amended by striking <quote>section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting <quote>2004</quote> for <quote>1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year in which the taxable year begins, determined by
substituting <quote>calendar year 2004</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H70B2C4720FEB491B9CC14F35807AD62A"><enum>(14)</enum><text>Section 1274A(d)(2) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HDF04FD6C41E94E38A8A7965CA2284F28" style="OLC">
<paragraph id="HE4D72EE71B8A4BF19F54877362360A45"><enum>(2)</enum><header>Inflation adjustment</header>
<subparagraph id="H7A32E39F8F7C44F9B9727A24526DAF0C"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any debt instrument arising out of a sale or exchange during any calendar year after
2014, each adjusted dollar amount shall be increased by an amount equal
to—</text>
<clause id="H37FFB1D10C5E494E854029BDE73A569E"><enum>(i)</enum><text>such adjusted dollar amount, multiplied by</text>
</clause><clause id="H63AFC8954C9045CBBAD730CC2ADDBF03"><enum>(ii)</enum><text display-inline="yes-display-inline">the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year,
determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text>
</clause></subparagraph><subparagraph id="HC28E14806CEE4B6A9D25340634BD366A"><enum>(B)</enum><header>Adjusted dollar amounts</header><text>For purposes of this paragraph, the term <quote>adjusted dollar amount</quote> means the dollar amounts in subsections (b) and (c), in each case as in effect for calendar year
2014.</text>
</subparagraph><subparagraph id="H5DEE7D8384E54C9597AF040E66E9C6CF"><enum>(C)</enum><header>Rounding</header><text>Any increase under subparagraph (A) shall be rounded to the nearest multiple of $100.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H457225E86F4D428A8D3EA56778E1AD8C"><enum>(15)</enum><text>Section 2010(c)(3)(B)(ii) is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 2010</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 2010</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H6393CD1921604848AFF220D6DA0E80DD"><enum>(16)</enum><text display-inline="yes-display-inline">Section 2032A(a)(3)(B) is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 1997</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 1997</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="HC29958CB18774696A64325A6F0433D63"><enum>(17)</enum><text display-inline="yes-display-inline">Section 2503(b)(2)(B) is amended by striking <quote>section 1(f)(3) for such calendar year by substituting <quote>calendar year 1997</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year, determined by substituting <quote>calendar year 1997</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H4ED2549F6B7849C983AA914ABC1BD300"><enum>(18)</enum><text display-inline="yes-display-inline">Section 4161(b)(2)(C)(i)(II) is amended by striking <quote>section 1(f)(3) for such calendar year, determined by substituting <quote>2004</quote> for <quote>1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 2004</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H1EE80C1C9EDD40D79D8DB6FE5A7BDF93"><enum>(19)</enum><text display-inline="yes-display-inline">Section 4261(e)(4)(A)(ii) is amended by striking <quote>section 1(f)(3) for such calendar year by substituting the year before the last nonindexed year for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting the year before the last
nonindexed year for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph commented="no" id="H38CD6489C95B4DE78308EAD2F235BE2B"><enum>(20)</enum><text>Section 4980I(b)(3)(C)(v)(II) is amended</text>
<subparagraph commented="no" id="HA1E7ACEFFFC64C89B93165E0782401B8"><enum>(A)</enum><text>by striking <quote>section 1(f)(3)</quote> and inserting <quote>section 1(c)(2)(A)</quote>,</text>
</subparagraph><subparagraph id="HD2638DA9C22D47CEB1EB128337E8855A"><enum>(B)</enum><text>by striking <quote>subparagraph (B)</quote> and inserting <quote>clause (ii)</quote>, and</text>
</subparagraph><subparagraph commented="no" id="H1E59AB9B63E94CFF80504068DBC6BA68"><enum>(C)</enum><text>by striking <quote>1992</quote> and inserting <quote>2012</quote>.</text>
</subparagraph></paragraph><paragraph id="H4FFC3E2F2C60468A8D5B982186F2B82C"><enum>(21)</enum><text>Section 5000A(c)(3)(D)(ii) is amended—</text>
<subparagraph id="HD781BE4998654CE6BBBBDD309498CF46"><enum>(A)</enum><text>by striking <quote>section 1(f)(3)</quote> and inserting <quote>section 1(c)(2)(A)</quote>,</text>
</subparagraph><subparagraph id="H3032AA5B29E14305B92FA186288341DD"><enum>(B)</enum><text>by striking <quote>subparagraph (B)</quote> and inserting <quote>clause (ii)</quote>, and</text>
</subparagraph><subparagraph id="HBEE05C2047F84C61B4B3BA2BAF692355"><enum>(C)</enum><text>by striking <quote>1992</quote> and inserting <quote>2012</quote>.</text>
</subparagraph></paragraph><paragraph id="HD7BC77CCFEF344EABCD3C1C902CD043F"><enum>(22)</enum><text display-inline="yes-display-inline">Section 6039F(d) is amended by striking <quote>section 1(f)(3), except that subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A), except that clause (ii) thereof </quote>.</text>
</paragraph><paragraph id="H5B59DD8ED70D47C48BCA7EDF9C9C5512"><enum>(23)</enum><text display-inline="yes-display-inline">Section 6323(i)(4)(B) is amended by striking <quote>section 1(f)(3) for the calendar year, determined by substituting <quote>calendar year 1996</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for the calendar year, determined by substituting <quote>calendar year 1996</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H87B8E1FE841C4D0995AB13846296C386"><enum>(24)</enum><text display-inline="yes-display-inline">Section 6334(g)(1)(B) is amended by striking <quote>section 1(f)(3) for such calendar year, by substituting <quote>calendar year 1998</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 1999</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="H732222C275A449C897F58432C7935EBD"><enum>(25)</enum><text>Section 6721(f)(1) is amended—</text>
<subparagraph id="HD598B648BE114F748ABF7FFC4E633447"><enum>(A)</enum><text>by striking <quote>section 1(f)(3)</quote> and inserting <quote>section 1(c)(2)(A)</quote>,</text>
</subparagraph><subparagraph id="H0E9BE2F23F554A95A87B86090D5436A3"><enum>(B)</enum><text>by striking <quote>subparagraph (B)</quote> and inserting <quote>clause (ii)</quote>, and</text>
</subparagraph><subparagraph id="HC9FA245A91F84EEABC0A07A74F939BC5"><enum>(C)</enum><text>by striking <quote>1992</quote> and inserting <quote>2012</quote>.</text>
</subparagraph></paragraph><paragraph id="HAA3EDAF30BB547D89D3964879824FC3D"><enum>(26)</enum><text>Section 6722(f)(1) is amended—</text>
<subparagraph id="HA849D81C7F394586AB352B0AA63B8C78"><enum>(A)</enum><text>by striking <quote>section 1(f)(3)</quote> and inserting <quote>section 1(c)(2)(A)</quote>,</text>
</subparagraph><subparagraph id="HCCDBD39A677F432A845BF80729EEE426"><enum>(B)</enum><text>by striking <quote>subparagraph (B)</quote> and inserting <quote>clause (ii)</quote>, and</text>
</subparagraph><subparagraph id="H3B19C17F24294D83B69612648AED834A"><enum>(C)</enum><text>by striking <quote>1992</quote> and inserting <quote>2012</quote>.</text>
</subparagraph></paragraph><paragraph id="HFC1E6EB49FCF4DAFA7029BF520838C95"><enum>(27)</enum><text display-inline="yes-display-inline">Section 7430(c)(1) is amended by striking <quote>section 1(f)(3) for such calendar year, by substituting <quote>calendar year 1995</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof</quote> in the flush text at the end and inserting <quote>section 1(c)(2)(A) for such calendar year, determined by substituting <quote>calendar year 1995</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof</quote>.</text>
</paragraph><paragraph id="HAD8D486C68244C4F8B2F93B803CEEE73"><enum>(28)</enum><text>Section 7872(g)(5) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HC44336252AD041548BFD47D42CFA30F0" style="OLC">
<paragraph id="H72B27F1C181B4D4BB79539A1CA440DA9"><enum>(5)</enum><header>Inflation adjustment</header>
<subparagraph id="HC666376C08E844F184AB20E790737EB9"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any loan made during any calendar year after 2014 to which paragraph (1) applies,
the adjusted dollar amount shall be increased by an amount equal to—</text>
<clause id="H1279D75700894776A711D97FD60385F7"><enum>(i)</enum><text>such adjusted dollar amount, multiplied by</text>
</clause><clause id="H53D2BB6D6606494CB76EAD84494F6824"><enum>(ii)</enum><text display-inline="yes-display-inline">the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year,
determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text>
</clause></subparagraph><subparagraph id="HA3320D92019E4AD79EC8764937C4F49D"><enum>(B)</enum><header>Adjusted dollar amount</header><text>For purposes of this paragraph, the term <quote>adjusted dollar amount</quote> means the dollar amount in paragraph (2) as in effect for calendar year 2014.</text>
</subparagraph><subparagraph id="H0EEB4963A3854AD29C07A0FA954BC93E"><enum>(C)</enum><header>Rounding</header><text>Any increase under subparagraph (A) shall be rounded to the nearest multiple of $100.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H0D685D4038E34F6091C273B4861C38A5"><enum>(b)</enum><header>Amendments related to deduction for adjusted net capital gain</header>
<paragraph id="H43CE1AEAB1B14028B341FFD5435D555E"><enum>(1)</enum><text display-inline="yes-display-inline">Section 163(d)(4)(B) is amended by striking <quote>section 1(h)(11)(B)</quote> and inserting <quote>section 169(e)</quote>.</text>
</paragraph><paragraph id="H493FF01EFDF942458417D631C33AF3B5"><enum>(2)</enum><text>Section 172(d)(2)(B) is amended by inserting <quote>the deduction allowable under section 169 and</quote> before <quote>the exclusion</quote>.</text>
</paragraph><paragraph id="HA7F5BA02551B4EA99A6CEFD3B9259E36"><enum>(3)</enum><text>Section 301(f)(4) is amended by striking <quote>section 1(h)(11)</quote> and inserting <quote>section 169(e)</quote>.</text>
</paragraph><paragraph id="H6A391ACC701A4033866003A85E4EADA1"><enum>(4)</enum><text>Section 306(a)(1)(D) is amended by striking <quote>section 1(h)(11)</quote> and inserting <quote>section 169(e)</quote>.</text>
</paragraph><paragraph id="HE069586BD0A2461B9518231C29CF63C7"><enum>(5)</enum><text>The last sentence of section 453A(c)(3) is amended by striking <quote>capital gain</quote> and all that follows and inserting <quote>capital gain, the deduction under section 169 shall be taken into account.</quote>.</text>
</paragraph><paragraph id="H4FB446E30DAA4C5997D08EB7CC4F24ED"><enum>(6)</enum><text>Sections 531 and 541 are each amended by striking <quote>20 percent</quote> and inserting <quote>21 percent</quote>.</text>
</paragraph><paragraph id="HCB5C69A41B4B4EE9BD83CFEF3EA12206"><enum>(7)</enum><text>Section 584(c) is amended by striking <quote>and to which section 1(h)(11) applies</quote> in the last sentence and inserting <quote>which is qualified dividend income (as defined in section 169(e)) in the hands of such common trust
fund</quote>.</text>
</paragraph><paragraph id="H8B5F61BC730741EB82F9B01198E0086B"><enum>(8)</enum><text>Section 641(c)(2)(C) (prior to redesignation by title II) is amended by adding at the end the
following new clause:</text>
<quoted-block display-inline="no-display-inline" id="H41E572E8438F4C4CAF33E718B708BF96" style="OLC">
<clause id="H1187FD67019746D8BAFD51D4E5EFC532"><enum>(v)</enum><text display-inline="yes-display-inline">The deduction allowed by section 169.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H41C391AF530841B1AB39DDDB4F6B0C3F"><enum>(9)</enum><text>The first sentence of section 642(c)(4) is amended by striking <quote>consists of</quote> and all that follows and inserting <quote>consists of long-term capital gain or gain described in section 1202(a), proper adjustments shall
be made for any deduction allowable to the trust or estate under section
169 and for any exclusion allowable under section 1202.</quote>.</text>
</paragraph><paragraph id="HEA4CC96A630248F5BA993D2490661856"><enum>(10)</enum><text>The last sentence of section 643(a)(3) is amended to read as follows: <quote>The deduction under section 169 and the exclusion under section 1202 shall not be taken into
account.</quote>.</text>
</paragraph><paragraph id="HC71DCB7D081E4D59ADF37D072045BFEF"><enum>(11)</enum><text>Section 691(c)(4) is amended by striking <quote>1(h)</quote> and inserting <quote>169</quote>.</text>
</paragraph><paragraph id="H996D1CA5CE994E33B87100D18592C625"><enum>(12)</enum><text>Section 702(a)(5) is amended by striking <quote>section 1(h)(11)</quote> and inserting <quote>section 169</quote>.</text>
</paragraph><paragraph id="HC8EEAFC8E31B4B3EAB0C720FBA1754E5"><enum>(13)</enum><text>Section 854 is amended—</text>
<subparagraph id="HE77FFC26E91C455F9FEBA1F23B0A9B53"><enum>(A)</enum><text>by striking <quote>section 1(h)(11) (relating to maximum rate of tax on dividends)</quote> in subsection (a) and inserting <quote>section 169 (relating to adjusted net capital gain)</quote>,</text>
</subparagraph><subparagraph id="H37A786C959BC4177BBD27F3109F6A818"><enum>(B)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">Maximum rate under section <enum-in-header>1(h)</enum-in-header></header-in-text></quote> in the heading of subsection (b)(1)(B) and inserting <quote><header-in-text level="subparagraph" style="OLC"></header-in-text><header-in-text level="subparagraph" style="OLC">Determination of adjusted net capital gain</header-in-text></quote>, and</text>
</subparagraph><subparagraph id="H9A08A7A9C6624B1B8049ECC2B6A97072"><enum>(C)</enum><text>by striking <quote>section 1(h)(11)(B)</quote> in subsection (b)(4) and inserting <quote>section 169(e)</quote>.</text>
</subparagraph></paragraph><paragraph id="H81B63BBAD11E47B2B023BC536E1649DD"><enum>(14)</enum><text>Section 857(c)(2) is amended—</text>
<subparagraph id="H49EC70233872430098CB7F710DACD09A"><enum>(A)</enum><text>by striking <quote>section 1(h)(11)(B)</quote> in subparagraph (D) and inserting <quote>section 169(e)</quote>, and</text>
</subparagraph><subparagraph id="H74D607B5C1E3443288C23DCF6F74205E"><enum>(B)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">Section <enum-in-header>1(h)(11)</enum-in-header></header-in-text></quote> in the heading and inserting <quote><header-in-text level="paragraph" style="OLC">Section <enum-in-header>169(e)</enum-in-header></header-in-text></quote>.</text>
</subparagraph></paragraph><paragraph id="HE7F7FE34E9A14A0E903C93D4D38F2761"><enum>(15)</enum><text>Section 904(b) is amended—</text>
<subparagraph id="H2D70EE2B7997495A98CF89B2F1297CA7"><enum>(A)</enum><text>by amending paragraph (2) to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H7FFECBD5BD48428F9964E38E71EA4CD9" style="OLC">
<paragraph id="HF1B1DFDC32384EB98631A2DF29CBB12E"><enum>(2)</enum><header>Capital gains</header><text display-inline="yes-display-inline">For purposes of this section, taxable income from sources outside the United States shall include
gain from the sale or exchange of capital assets (including gain so
treated under section 1231) only to the extent of the lesser of—</text>
<subparagraph id="HCE509B38E99E4C99AB45417FAAE832C7"><enum>(A)</enum><text>capital gain net income from sources without the United States, or</text>
</subparagraph><subparagraph id="HEDD2D06202D64B27B85BFEAAFB18A747"><enum>(B)</enum><text>capital gain net income.</text></subparagraph></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HDF4DD3806E594A0D86E8D99A2C928928"><enum>(B)</enum><text>by striking paragraph (3).</text>
</subparagraph></paragraph><paragraph id="HF8B8E30CEB574414AC0A15015623121C"><enum>(16)</enum><text>Section 1260(a) is amended by striking <quote>long-term capital gain</quote> the first place such term appears and all that follows and inserting <quote>long-term capital gain, such gain shall be treated as ordinary income to the extent such gain
exceeds the net underlying long-term capital gain.</quote>.</text>
</paragraph><paragraph id="H6122D157B15C4A6F9AFC534F0A49FB76"><enum>(17)</enum><text>Section 1411(c)(1)(B) is amended by inserting <quote>(other than section 169)</quote> after <quote>this subtitle</quote>.</text>
</paragraph><paragraph id="H7A64E25EAD8644A9892D29B41C634EC4"><enum>(18)</enum><text>Section 4985(a)(1) is amended by striking <quote>the rate of tax specified in section 1(h)(1)(C)</quote> and inserting <quote>21 percent</quote>.</text>
</paragraph><paragraph id="H870CABA980EA4949B881CEC6B6BF94CD"><enum>(19)</enum><text>Section 7518(g)(6)(A) is amended by striking all that follows clause (i) and inserting the
following:</text>
<quoted-block display-inline="no-display-inline" id="HFE48317E6D1446D098C4016A6DBE1F56" style="OLC">
<clause id="H3C3A1A8A51F343469AD130ADF67CA0F7"><enum>(ii)</enum><text display-inline="yes-display-inline">by increasing the tax imposed by chapter 1 by the product of the amount of such withdrawal,
multiplied by—</text>
<subclause id="H4F7E81DC5EBA42E29E2B027E781415CE"><enum>(I)</enum><text>in the case of a taxpayer other than a corporation, 60 percent of the highest rate of tax specified
in section 1, and</text>
</subclause><subclause id="HC515F415C6AF48FCBC16C132A2C28BB2"><enum>(II)</enum><text>in the case of a corporation, the highest rate of tax specified in section 11.</text></subclause></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HEEB6BF3A59D3494495C2A5B11C4EE5AB"><enum>(20)</enum><text><external-xref legal-doc="usc" parsable-cite="usc/46/53511">Section 53511(f)</external-xref> of title 46, United States Code, is amended by—</text>
<subparagraph id="HBB85CFFC9A6D4175BD0744B2C33EF269"><enum>(A)</enum><text>by amending paragraph (1)(B) to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HE0D3FF8BCD6E49A18974076103CF9990" style="USC">
<subparagraph id="HB704F81594624BCF9872BC6C68FA738B"><enum>(B)</enum><text display-inline="yes-display-inline">increasing the tax imposed by chapter 1 of such Code by the product of the amount of such
withdrawal, multiplied by—</text>
<clause id="H6BDE7F16E0D44006A50EE8AB6D306024"><enum>(i)</enum><text>in the case of a taxpayer other than a corporation, the highest rate of tax specified in section 1
(60 percent of such highest rate in the case of so much of such withdrawal
as is made from the capital gain account), and</text>
</clause><clause id="HDD843F39B6A34287A6E2348A297A64A3"><enum>(ii)</enum><text display-inline="yes-display-inline">in the case of a corporation, the highest rate of tax specified in section 11.</text></clause></subparagraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HB563050B365D40A599234A2C08373BA0"><enum>(B)</enum><text>by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3),
respectively.</text>
</subparagraph></paragraph><paragraph id="H70473369EC9D44FCAB61F4821E057846"><enum>(21)</enum><text display-inline="yes-display-inline">The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the
item relating to section 168 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H29CCEB2CD26B4B4299A8CFF521307D40" style="OLC">
<toc container-level="quoted-block-container" idref="H170C5199584D4FC1BC388F5180B18D43" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H7CE3E8C88DED41BFA9931588FF2CE340" level="section">Sec. 169. Adjusted net capital gain.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H00421704A10540C195EB4D66D3E92D5B"><enum>(c)</enum><header>Other conforming amendments</header>
<paragraph id="H07A9FDA7FA7F4A6B9E0D52E02F526B6B"><enum>(1)</enum><text>Section 25B(b)(2) is amended by striking <quote>In the case of—</quote> and all that follows through <quote>any taxpayer not described in paragraph (1) or subparagraph (A),</quote> and inserting <quote>In the case of any taxpayer not described in paragraph (1),</quote>.</text>
</paragraph><paragraph commented="no" id="HB04522D0C8794D7C8EF26382E6AF5E7F"><enum>(2)</enum><text>Section 36B(b)(3)(B)(ii)(I)(aa) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H8CDC01B3A860493E88D9C27D2C2C9F12" style="OLC">
<item id="HEAFF7856713444398426F747CA70F545"><enum>(aa)</enum><text display-inline="yes-display-inline">who is described in section 1(b)(1)(B) and who does not have any dependents for the taxable year,</text></item><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HE4D1C484D7AF4E38B08A9CE3F2BA1295"><enum>(3)</enum><text>Section 486B(b)(1) is amended—</text>
<subparagraph id="H57EC411C12034FE4A526E2411D3FE8DC"><enum>(A)</enum><text>by striking <quote>maximum rate in effect</quote> and inserting <quote>highest rate specified</quote>, and</text>
</subparagraph><subparagraph id="HBFD8F34B3E9542A0BACB717F990F51A0"><enum>(B)</enum><text>by striking <quote>section 1(e)</quote> and inserting <quote>section 1</quote>.</text>
</subparagraph></paragraph><paragraph id="HE265AD7AD7474418B11C832FC2AAE518"><enum>(4)</enum><text>Section 511(b)(1) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H44E81D3057EE42B3A0F78C4C9B3364FA" style="OLC">
<paragraph id="HD24018B9FF49497BA5924F2733528E40"><enum>(1)</enum><header>Imposition of tax</header><text display-inline="yes-display-inline">There is hereby imposed for each taxable year on the unrelated business taxable income of every
trust described in paragraph (2) a tax computed as provided in section 1.
In making such computation for purposes of this section, the terms <quote>taxable income</quote> and <quote>modified adjusted gross income</quote> as used in section 1 shall both be read as <quote>unrelated business taxable income</quote> as defined in section 512.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H9938893DB0C54DE3B6BE17E6027FEB76"><enum>(5)</enum><text display-inline="yes-display-inline">Section 641(a) is amended by striking <quote>section 1(e) shall apply to the taxable income</quote> and inserting <quote>section 1 shall apply to the income</quote>.</text>
</paragraph><paragraph id="H9BC654F5C2064AE8A48A9B925B390C4C"><enum>(6)</enum><text>Section 641(c)(2)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HB598A647B3314C69BE81805FE51E8441" style="OLC">
<subparagraph id="HE594001B67D142D79C3CA4251583DE57"><enum>(A)</enum><text display-inline="yes-display-inline">The dollar amount in effect under section 1(b)(2)(C) shall be treated as being zero.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HEE4C434CB17C4266803385B8F1FE68BB"><enum>(7)</enum><text>Section 646(b) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H2B032B3458FA4E58AAE8083C2D6A876B" style="OLC">
<subsection id="H85210A0ED4E04175B838D999D8BFD110"><enum>(b)</enum><header>Taxation of income of trust</header><text display-inline="yes-display-inline">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.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H4F4E81240DB142668614137C3CF8FFCD"><enum>(8)</enum><text>Section 685(c) is amended by striking <quote>Section 1(e)</quote> and inserting <quote>Section 1</quote>.</text>
</paragraph><paragraph id="HCE7888AB762A46FCB62334D1627A8094"><enum>(9)</enum><text>Section 1398(c) is amended by striking paragraphs (1) and (2), by redesignating paragraph (3) as
paragraph (2), and by inserting before paragraph (2) as so redesignated
the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HDF2EAFBB603047ADAB38BD6D77971240" style="OLC">
<paragraph id="HFC5BE3D192374597B81A2BE9F0554905"><enum>(1)</enum><header>Computation and payment of tax</header><text display-inline="yes-display-inline">Except as otherwise provided in this section or part I of subchapter A, the taxable income and
modified adjusted gross income of the estate shall be computed in the same
manner as for an individual. The tax shall be computed under section 1 and
shall be paid by the trustee.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H88ED755D5C6A46F68F18846E69E56327"><enum>(10)</enum><text>Section 3402(p)(1)(B) is amended by striking <quote>any percentage applicable to any of the 3 lowest income brackets in the table under section 1(c),</quote> and inserting <quote>10 percent, 25 percent, 35 percent,</quote>.</text>
</paragraph><paragraph id="H12D116CA41DC4ED0A34FCC3262529CC9"><enum>(11)</enum><text>Section 3402(q)(1) is amended by striking <quote>the third lowest rate of tax applicable under section 1(c)</quote> and inserting <quote>the highest rate of tax specified in section 1</quote>.</text>
</paragraph><paragraph id="HCF5FBDE909D747CFBFA9A3548A332BB4"><enum>(12)</enum><text>Section 3402(r)(3) is amended by striking <quote>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</quote> and inserting <quote>an amount equal to the product of the highest rate of tax specified in section 1 multiplied by</quote>.</text>
</paragraph><paragraph id="H6F5C5E0F98944BE4AC2ECD5E03836031"><enum>(13)</enum><text>Section 3406(a)(1) is amended by striking <quote>the fourth lowest rate of tax applicable under section 1(c)</quote> and inserting <quote>the highest rate of tax specified in section 1</quote>.</text>
</paragraph><paragraph id="H58AEB7B9FCB64D4BB0FCA5B4D51DF83D"><enum>(14)</enum><text>Section 6103(e)(1)(A)(iii) is amended by striking <quote>section 1(g)</quote> and inserting <quote>section 1(d)</quote>.</text>
</paragraph></subsection><subsection id="H43FB01EDF23944E8B1686CADC72477C7"><enum>(d)</enum><header>Withholding from supplemental wage payments</header>
<paragraph id="HF81FA152A6674D7B8ABAFF93D8757518"><enum>(1)</enum><header>In general</header><text>If an employer elects under Treasury Regulation section 31.3402(g)–1 to determine the amount to be
deducted and withheld from any supplemental wage payment by using a flat
percentage rate, the rate to be used in determining such amount shall not
be less than 35 percent.</text>
</paragraph><paragraph id="H671A200881A3426EB4C3C4F316B3E2DB"><enum>(2)</enum><header>Repeal of superceded provision</header><text>The American Jobs Creation Act of 2004 is amended by striking section 904.</text>
</paragraph></subsection><subsection id="HAB2FE69904D447B59761182F274D33D2"><enum>(e)</enum><header>Effective date</header>
<paragraph id="H86A10008CD3B4910B30A48DDCC9BB02A"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="H73C9AA6B1D8647A5A768AD59CD63B520"><enum>(2)</enum><header>Withholding from supplemental wage payments</header><text>The provisions of, and amendments made by, subsection (d) shall apply to payments made after
December 31, 2014.</text>
</paragraph></subsection></section></subtitle><subtitle id="HBD477E7E66894020A9D027BE0754A3F3"><enum>B</enum><header>Simplification of tax benefits for families</header>
<section id="H9150EB9D598D438DA01B2BC944E1D0CE"><enum>1101.</enum><header>Standard deduction</header>
<subsection id="HF68564C4E3BA4AD9B8297A63728F556F"><enum>(a)</enum><header>Increase in standard deduction</header><text display-inline="yes-display-inline">Subsection (c) of section 63 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H7C309F79ED98417992502BD7BECDAE86" style="OLC">
<subsection id="H43BF11FFE861487D8A4A56C3EEADD789"><enum>(c)</enum><header>Standard deduction</header><text display-inline="yes-display-inline">For purposes of this subtitle—</text>
<paragraph id="HADBE62C3793642339B927DAA679B1F40"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the term <quote>standard deduction</quote> means—</text>
<subparagraph id="HCEFC56D16E7C40C7AF1E6F0E6844E972"><enum>(A)</enum><text>$22,000, in the case of a joint return, and</text>
</subparagraph><subparagraph id="H70001949376E4727A15165E184E5668E"><enum>(B)</enum><text>one-half of the amount in effect under subparagraph (A) for the taxable year, in any other case.</text>
</subparagraph></paragraph><paragraph id="HD6CB0067A1AC45C7A17DCC579299545A"><enum>(2)</enum><header>Phaseout of standard deduction</header><text>The amount of the standard deduction determined under this subsection (without regard to this
paragraph and after the application of paragraph (4)) shall be reduced
(but not below zero) by an amount equal to 20 percent of the excess (if
any) of—</text>
<subparagraph id="HD19E0AF844E04740B4D68140A15D8E08"><enum>(A)</enum><text>the taxpayer’s modified adjusted gross income (as defined in section 2(b)) for the taxable year,
over</text>
</subparagraph><subparagraph id="HC3C258F0D84B4457ABFB383C9B5F1CEF"><enum>(B)</enum>
<clause commented="no" display-inline="yes-display-inline" id="H166BD6C5FBD349079FE16B957215736A"><enum>(i)</enum><text>the joint return standard deduction phaseout threshold for the taxable year, in the case of a
taxpayer described in paragraph (1)(A), and</text>
</clause><clause id="H87CA980B069749D39DF5CE8CABFC54D3" indent="up1"><enum>(ii)</enum><text>the non-joint return standard deduction phaseout threshold for the taxable year, in any other case.</text>
</clause></subparagraph></paragraph><paragraph id="H2378C7A9D84A44A5BEF3C55FA5997879"><enum>(3)</enum><header>Standard deduction phaseout thresholds</header>
<subparagraph id="H43B74BEFDE9746DA85201B0283DA2930"><enum>(A)</enum><header>Joint return standard deduction phaseout threshold</header><text>The term <quote>joint return standard deduction phaseout threshold</quote> means, with respect to any taxable year—</text>
<clause id="H50D395EE25AB4038BF6B02BFE403E65F"><enum>(i)</enum><text>the dollar amount in effect under section 1(e)(3)(A) for such taxable year, plus</text>
</clause><clause id="HFE15601B63DA4D14A6CBA06F0A9597A0"><enum>(ii)</enum><text>the product of—</text>
<subclause id="H75810DC0B4324B3DB586848E4BF5F9DE"><enum>(I)</enum><text>the dollar amount in effect under section 1(b)(1)(A) for such taxable year, multiplied by</text>
</subclause><subclause id="H8D9D39B341A84ADAA9717EECA61836B7"><enum>(II)</enum><text>3.</text>
</subclause></clause></subparagraph><subparagraph id="HA6F7DF4DD158484A8CE16D598832DDF3"><enum>(B)</enum><header>Non-joint return standard deduction phaseout threshold</header><text>The term <quote>non-joint return standard deduction phaseout threshold</quote> means, with respect to any taxable year—</text>
<clause id="HB98D90D36AA14F49A64CEDBDB8963005"><enum>(i)</enum><text>the dollar amount in effect under section 1(e)(3)(B) for such taxable year, plus</text>
</clause><clause id="H6A2140E8B7EF4EFFB7BDD2CAD6604A9C"><enum>(ii)</enum><text>the product of—</text>
<subclause id="H8039D1C07EAC4C31B6BC8649492198C1"><enum>(I)</enum><text>the dollar amount in effect under section 1(b)(1)(B) for such taxable year, multiplied by</text>
</subclause><subclause id="H1B48E28401D54269BDFC5225398564EC"><enum>(II)</enum><text>3.</text>
</subclause></clause></subparagraph></paragraph><paragraph id="H6CA3C3C575534DFA9E6B51F23DC29903"><enum>(4)</enum><header>Limitation on standard deduction in the case of certain dependents</header><text>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—</text>
<subparagraph id="HFCF88898C7844D7B821AFD86167EF031"><enum>(A)</enum><text>$500, or</text>
</subparagraph><subparagraph id="H2C1C611C92AE40C5B923B92ED08C9AE7"><enum>(B)</enum><text>the sum of $250 and such individual’s earned income (as defined in section 24(d)(2)).</text>
</subparagraph></paragraph><paragraph id="H8BC3B596B8624D0599E8D9F214EA2D29"><enum>(5)</enum><header>Certain individuals, etc., not eligible for standard deduction</header><text>In the case of—</text>
<subparagraph id="HF5F7695923214C1C99824829A3DED25A"><enum>(A)</enum><text>a married individual filing a separate return where such individual’s spouse elects to itemize
deductions,</text>
</subparagraph><subparagraph id="H962327276A1348FA9368651664D930C2"><enum>(B)</enum><text>a nonresident alien individual,</text>
</subparagraph><subparagraph id="HE76245ACF681452A9696467809408BD3"><enum>(C)</enum><text>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</text>
</subparagraph><subparagraph id="HE850F5D9E1E34C83AF470589FE77019C"><enum>(D)</enum><text>an estate or trust, common trust fund, or partnership,</text></subparagraph><continuation-text continuation-text-level="paragraph">the standard deduction shall be zero.</continuation-text></paragraph><paragraph id="H21C6CB451B1D4E0C95FF6FD78D6C76A3"><enum>(6)</enum><header>Inflation adjustments</header><text>In the case of any taxable year beginning after 2014, each of the dollar amounts in paragraphs
(1)(A) and (4) shall be increased by an amount equal to—</text>
<subparagraph id="H2C8F83148E8441638CB40CC6F4A653E5"><enum>(A)</enum><text>such dollar amount, multiplied by</text>
</subparagraph><subparagraph id="H6FD3D240A0234610A60C6756FD077E55"><enum>(B)</enum><text>the cost-of-living adjustment determined—</text>
<clause id="H4CE9B2B707F34896BC905068E953B071"><enum>(i)</enum><text>in the case of the dollar amount in paragraph (1)(A), under section 1(c)(2)(A) for the calendar
year in which the taxable year begins,</text>
</clause><clause id="H30D9E18D5796441C840EBAE3BCC67C3C"><enum>(ii)</enum><text display-inline="yes-display-inline">in the case of the dollar amount in paragraph (4)(A), under section 1(c)(2)(A) for the calendar
year in which the taxable year begins determined by substituting <quote>calendar year 1987</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof, and</text>
</clause><clause id="HC0D20133B9FC45ABA94B84655B0894C4"><enum>(iii)</enum><text display-inline="yes-display-inline">in the case of the dollar amount in paragraph (4)(B), under section 1(c)(2)(A) for the calendar
year in which the taxable year begins determined by substituting <quote>calendar year 1997</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text></clause></subparagraph><continuation-text continuation-text-level="paragraph">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.</continuation-text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H50C2E1DA360C4B0F9FA01E1C0AA2F396"><enum>(b)</enum><header>Additional deduction for unmarried individuals with at least one qualifying child</header>
<paragraph id="HF3B210662E3F40ED8929981FC87483CF"><enum>(1)</enum><header>In general</header><text>Part VII of subchapter B of chapter 1 is amended by redesignating section 224 as section 225 and by
inserting after section 223 the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H61F417B1C8D54F2FAC11223D3CA69019" style="OLC">
<section id="H055DEF9E6CAD487E80DF8243B4483A73"><enum>224.</enum><header>Deduction for unmarried individuals with at least one qualifying child</header>
<subsection id="H76E08F4F2CDC4227AA9E93596C1299A2"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of an unmarried individual with at least one qualifying child (within the meaning of
section 7705), there shall be allowed as a deduction an amount equal to
$5,500.</text>
</subsection><subsection id="H61965FFCA933425394CA21912383DCCD"><enum>(b)</enum><header>Phaseout of deduction</header><text>The amount of the deduction determined under subsection (a) (without regard to this subsection)
shall be reduced (but not below zero) by an amount equal to the excess (if
any) of—</text>
<paragraph id="H6885E08AE26A4E079C08B7479E64C821"><enum>(1)</enum><text>the taxpayer’s adjusted gross income (determined without regard to this section) for the taxable
year, over</text>
</paragraph><paragraph id="HC50DE74CE8E84D9BBE04F826504965DD"><enum>(2)</enum><text>$30,000.</text>
</paragraph></subsection><subsection id="HEC44734262734FA7AD09B63949AA28F3"><enum>(c)</enum><header>Unmarried individual</header><text>For purposes of this section, the term <quote>unmarried individual</quote> means any individual who—</text>
<paragraph id="H56DDC23EAEA34D0C977B144287D7A5AD"><enum>(1)</enum><text>is not married as of the close of the taxable year (as determined by applying section 7703),</text>
</paragraph><paragraph id="H535E0454B9C94C7B9A6F08DB0AE441C5"><enum>(2)</enum><text>is not a surviving spouse (as defined in section 2(a)) for the taxable year, and</text>
</paragraph><paragraph commented="no" id="H4A49ED6A44644B29A011CABBB6557ED2"><enum>(3)</enum><text display-inline="yes-display-inline">is not a dependent of another taxpayer for a taxable year beginning in the calendar year in which
the individual’s taxable year begins.</text>
</paragraph></subsection><subsection id="HC7478A1572154F5EA4C46EAA91FD5A8E"><enum>(d)</enum><header>Inflation adjustments</header>
<paragraph id="HE53FBB609B454904A11013066C2C8B60"><enum>(1)</enum><header>Deduction amount</header><text>In the case of any taxable year beginning after 2014, the dollar amount in subsection (a) shall be
increased by an amount equal to—</text>
<subparagraph id="HEEB2FDC0D047488D8526A06625EC5A16"><enum>(A)</enum><text>such dollar amount, multiplied by</text>
</subparagraph><subparagraph id="H63FC4157856049C9AAD15DAF8F1F6E1F"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which
the taxable year begins.</text>
</subparagraph></paragraph><paragraph id="HAD9EBDCD7AD7463AB430B31F484C1650"><enum>(2)</enum><header>Phaseout threshold</header><text display-inline="yes-display-inline">In the case of any taxable year beginning after 2015, the dollar amount in subsection (b)(2) shall
be increased by an amount equal to—</text>
<subparagraph id="HC6925CE76FC940BD86ACDB2B6FBE865C"><enum>(A)</enum><text>such dollar amount, multiplied by</text>
</subparagraph><subparagraph id="HCEEB4C4B25874205AA21A1A62E329B56"><enum>(B)</enum><text>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 <quote>calendar year 2014</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text>
</subparagraph></paragraph><paragraph id="H766C3C3DACFD419099F1B7C801D132FB"><enum>(3)</enum><header>Rounding</header><text>If any increase determined under paragraph (1) or (2) is not a multiple of $100, such increase
shall be rounded to the next lowest multiple of $100.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HAF9F8FD4B2BE4A5D8923452212D792CF"><enum>(2)</enum><header>Deduction allowed whether or not taxpayer itemizes deductions</header><text>Section 62(a) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H3E5DB155223E484DA61D153E747A51A4" style="OLC">
<paragraph id="H5CAD2F5980864BEEB7541E6D9C49914B"><enum>(22)</enum><header>Deduction for unmarried individuals with at least one qualifying child</header><text display-inline="yes-display-inline">The deduction allowed by section 224.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H624830051A22439780FC72D133965216"><enum>(c)</enum><header>Application of standard deduction phaseout to itemized deductions</header><text>Subsection (f) of section 63 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H42083CCAF85D4CAD8DCE74D66807C431" style="OLC">
<subsection id="HC63EE37870E24C57898CC23309C7B7D9"><enum>(f)</enum><header>Application of phaseout of standard deduction to itemized deductions</header>
<paragraph id="H4B4A8C14C3054D65BC9D8082BC26F423"><enum>(1)</enum><header>In general</header><text>In the case of an individual whose modified adjusted gross income (as defined in section 2(b))
exceeds the amount in effect under subsection (c)(2)(B) with respect to
the taxpayer for the taxable year, the amount of the itemized deductions
otherwise allowable for the taxable year shall be reduced by the lesser
of—</text>
<subparagraph id="H9527D87BCEF64ED2AD5C853501110F0C"><enum>(A)</enum><text>20 percent of the excess described in subsection (c)(2) with respect to such taxpayer for such
taxable year, or</text>
</subparagraph><subparagraph id="H7379F4FD046246E9B888FD6333369766"><enum>(B)</enum><text>the amount of the taxpayer’s standard deduction for such taxable year (determined without regard to
subsection (c)(2) and without regard to any election to itemize
deductions).</text>
</subparagraph></paragraph><paragraph id="HE797F301308442E2A18F8FD2DA1A322D"><enum>(2)</enum><header>Coordination with other limitations</header><text>This subsection shall be applied after the application of any other limitation on the allowance of
any itemized deduction.</text>
</paragraph><paragraph id="H638BDE4ADA8541488693A709431E5D62"><enum>(3)</enum><header>Exception for estates and trusts</header><text>This subsection shall not apply to any estate or trust.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HB659551A5FFB42A08A8FF89B1907D95A"><enum>(d)</enum><header>Conforming amendments</header>
<paragraph id="H33A4E93F020C400E96EF3C70506FB7D6"><enum>(1)</enum><text>Sections 86(b)(2)(A) and 137(b)(3)(A) are each amended by inserting <quote>224,</quote> before <quote>911,</quote>.</text>
</paragraph><paragraph id="H00B6AAEE2509443BBD310C9639D19C5B"><enum>(2)</enum><text>Section 199(d)(2)(B) is amended by inserting <quote>section 224 and</quote> before <quote>this section</quote>.</text>
</paragraph><paragraph id="H7A96C5DB31584469BF0E67799959DB18"><enum>(3)</enum><text>Section 469(i)(3)(F)(iii) is amended by inserting <quote>and 224</quote> after <quote>219,</quote>.</text>
</paragraph><paragraph id="H98176F3D57824F498E42D4F8B4E8F112"><enum>(4)</enum><text>Section 1398(c), as amended by section 1003(c), is amended—</text>
<subparagraph id="H41F43846D86549719FD72C401360B1C8"><enum>(A)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">Basic</header-in-text></quote> in the heading thereof,</text>
</subparagraph><subparagraph id="HF01054384EDD47FCBE182F54E0D0B3AE"><enum>(B)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">Basic standard</header-in-text></quote> in the heading of paragraph (2) and inserting <quote><header-in-text level="paragraph" style="OLC">Standard</header-in-text></quote>, and</text>
</subparagraph><subparagraph id="H89B45F9331EA4C128A0EC7197F36DC3E"><enum>(C)</enum><text>by striking <quote>basic</quote> in paragraph (2).</text>
</subparagraph></paragraph><paragraph id="H72E12C28E0C84CE6AB008890291B387A"><enum>(5)</enum><text>Section 3402(m)(3) is amended by striking <quote>(including the additional standard deduction under section 63(c)(3) for the aged and blind)</quote>.</text>
</paragraph><paragraph id="H9405C3AA63B940FAA69788D2E44E466C"><enum>(6)</enum><text>Section 6014(b)(4) is amended by striking <quote>section 63(c)(5)</quote> and inserting <quote>section 63(c)(4)</quote>.</text>
</paragraph><paragraph id="H0EB4EC9F92F048F2A463D6F1A7D91995"><enum>(7)</enum><text display-inline="yes-display-inline">The table of sections for part VII of subchapter B of chapter 1 is amended by redesignating the
item relating to section 224 as an item relating to section 225 and by
inserting after the item relating to section 223 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H49E2B24FB04343F7815996847C67816A" style="OLC">
<toc container-level="quoted-block-container" idref="H61F417B1C8D54F2FAC11223D3CA69019" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H055DEF9E6CAD487E80DF8243B4483A73" level="section">Sec. 224. Deduction for unmarried individuals with at least one qualifying child.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H6D921E3F82DB4ECC8FA95DBE8682D542"><enum>(e)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HF0241D6D482743A2AA10FE9F69772C4F"><enum>1102.</enum><header>Increase and expansion of child tax credit</header>
<subsection id="HA2D9EAD7CF8649F7A020AF546A67D8FE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 24 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H9303E32EE7C8410482B0BC9C1EC8F27C" style="OLC">
<section id="H67365C8103E146CAAB1764D05EFC2739"><enum>24.</enum><header>Child and dependent tax credit</header>
<subsection id="H0789CFD281254A20B26EB258782E44CF"><enum>(a)</enum><header>Allowance of credit</header><text>There shall be allowed as a credit against the tax imposed by this chapter for the taxable year
with respect to each dependent of the taxpayer an amount equal to $500
($1,500 in the case of a qualifying child).</text>
</subsection><subsection id="H78174B2364364275B903B7C576668F83"><enum>(b)</enum><header>Phaseout of credit</header>
<paragraph id="HB02020EDA1B5480C8CCCEF2E0D29E087"><enum>(1)</enum><header>In general</header><text>The credit allowed under subsection (a) (determined without regard to this subsection) shall be
reduced (but not below zero) by 5 percent of the excess (if any) of—</text>
<subparagraph id="H04B191D1575B4D22AD2E11FD5B52DB3D"><enum>(A)</enum><text>the taxpayer’s modified adjusted gross income (as defined in section 2(b)), over</text>
</subparagraph><subparagraph id="H5F5EEBEC9685445C956AEFD40EB72E49"><enum>(B)</enum>
<clause commented="no" display-inline="yes-display-inline" id="H82778704828A4A4CB671ADE95B8DCD40"><enum>(i)</enum><text>the joint return child credit phaseout threshold, in the case of a joint return or a surviving
spouse (as defined in section 2(a)), or</text>
</clause><clause id="HACA613B41F5745A99166083E8235498E" indent="up1"><enum>(ii)</enum><text>the non-joint return child credit phaseout threshold, in any other case.</text>
</clause></subparagraph></paragraph><paragraph id="HFB37068A89A243CF859E12129B1BFE43"><enum>(2)</enum><header>Joint return child credit phaseout threshold</header><text>For purposes of this section, the term <quote>joint return child credit phaseout threshold</quote> means, with respect to any taxable year, the sum of—</text>
<subparagraph id="H50D666416D81471FA951C6D923507DD4"><enum>(A)</enum><text display-inline="yes-display-inline">the joint return standard deduction phaseout threshold (as defined in section 63(c)(3)(A)), plus</text>
</subparagraph><subparagraph id="HECAAD099A9F94E279D71F656475FF198"><enum>(B)</enum><text>an amount equal to—</text>
<clause id="HF9E79C27689646AB801F39A50C50ACBF"><enum>(i)</enum><text>the dollar amount in effect under section 63(c)(1)(A) for such taxable year, divided by</text>
</clause><clause id="H0FCABCADE5B34694BBC164CB8E14B5B6"><enum>(ii)</enum><text>0.2.</text>
</clause></subparagraph></paragraph><paragraph id="H0EA5FF66B14A4902BF812B4845ED9575"><enum>(3)</enum><header>Non-joint return child credit phaseout threshold</header><text>For purposes of this section, the term <quote>non-joint return child credit phaseout threshold</quote> means, with respect to any taxable year, the sum of—</text>
<subparagraph id="H568DE7BC00AF4AF8996F513580545D95"><enum>(A)</enum><text display-inline="yes-display-inline">the non-joint return standard deduction phaseout threshold (as defined in section 63(c)(3)(B)),
plus</text>
</subparagraph><subparagraph id="HB4D514EC81CA4A1ABAB7D61A8BAE4DFD"><enum>(B)</enum><text>an amount equal to—</text>
<clause id="HA5BD6B8422CB4720ABD476D55E339FB0"><enum>(i)</enum><text>the dollar amount in effect under section 63(c)(1)(B) for such taxable year, divided by</text>
</clause><clause id="HAD702BA6671543B88BE95D9FE34BA41B"><enum>(ii)</enum><text>0.2.</text>
</clause></subparagraph></paragraph></subsection><subsection id="H879AE5A2CD784910A26EE426065695E3"><enum>(c)</enum><header>Qualifying child</header><text>For purposes of this section—</text>
<paragraph id="HBB39401E839546CF816444CBA731992C"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the term <quote>qualifying child</quote> has the meaning given such term by section 7705.</text>
</paragraph><paragraph id="H3147CFD1321C43B1898F9EAE6CAFE068"><enum>(2)</enum><header>Exception for certain noncitizens</header><text>The term <quote>qualifying child</quote> shall not include any individual who would not be a dependent if subparagraph (A) of section
7705(b)(3) were applied without regard to all that follows <quote>resident of the United States</quote>.</text>
</paragraph></subsection><subsection commented="no" id="HF7437632D3384A7B90A06712E7D3284D"><enum>(d)</enum><header>Portion of credit refundable</header>
<paragraph commented="no" id="H9FE7265753474538A6AD21417A3990F2"><enum>(1)</enum><header>In general</header><text>The aggregate credits allowed under subpart C shall be increased by the lesser of—</text>
<subparagraph commented="no" id="H99470FC816D346FB8F74964A923E2E65"><enum>(A)</enum><text>the credit which would be allowed under this section without regard to this subsection and the
limitation under section 26(a), or</text>
</subparagraph><subparagraph commented="no" id="HDD438C5CCF314D52927D5ABFDDFF59BB"><enum>(B)</enum><text>the amount by which the aggregate amount of credits allowed under the subpart (determined without
regard to this subsection) would increase if the limitation under section
26(a) were increased by 25 percent of the taxpayer’s earned income for the
taxable year.</text></subparagraph><continuation-text commented="no" continuation-text-level="paragraph">The amount of the credit allowed under this subsection shall not be treated as a credit allowed
under this subpart and shall reduce the amount of credit otherwise
allowable under subsection (a) without regard to section 26(a).</continuation-text></paragraph><paragraph id="H42D3A05A7C7A4B2C863B0262D2D37E07"><enum>(2)</enum><header>Earned income</header><text>For purposes of this subsection—</text>
<subparagraph id="HB007B995223748ACA604A13E9881FACE"><enum>(A)</enum><header>In general</header><text>The term <quote>earned income</quote> means—</text>
<clause id="HB4CFD8F90CF94E40835BDD270B707A3E"><enum>(i)</enum><text>the taxpayer’s wages, salaries, tips, and other employee compensation, but only if such amounts are
includible in gross income for the taxable year, plus</text>
</clause><clause id="H7EA15C70092A469CB2C676A945AA397D"><enum>(ii)</enum><text>the taxpayer’s net earnings from self-employment for the taxable year (within the meaning of
section 1402(a)) determined with regard to the deduction allowed to the
taxpayer by section 164(f).</text>
</clause></subparagraph><subparagraph id="HFBB7F7314B664D16B814B568B1C4BECC"><enum>(B)</enum><header>Special rules</header><text>For purposes of subparagraph (A)—</text>
<clause id="H5FC44BBC3FA541D7A9341F9318A9FCC0"><enum>(i)</enum><text display-inline="yes-display-inline">the earned income of an individual shall be computed without regard to any community property laws,</text>
</clause><clause id="H522A7F940C7D4FF385E9235781685E95"><enum>(ii)</enum><text>no amount received as a pension or annuity shall be taken into account,</text>
</clause><clause id="HEF453EE9EC2642789B26BE86416D5202"><enum>(iii)</enum><text>no amount to which section 871(a) applies (relating to income of nonresident alien individuals not
connected with United States business) shall be taken into account,</text>
</clause><clause id="H54771DDE5AE948B4B383E0ADAAB7E3B3"><enum>(iv)</enum><text>no amount received for services provided by an individual while the individual is an inmate at a
penal institution shall be taken into account,</text>
</clause><clause id="HCB69321DD0004396BB5F9906F01BB340"><enum>(v)</enum><text>no amount described in subparagraph (A) received for service performed in work activities as
defined in paragraph (4) or (7) of section 407(d) of the Social Security
Act to which the taxpayer is assigned under any State program under part A
of title IV of such Act shall be taken into account, but only to the
extent such amount is subsidized under such State program, and</text>
</clause><clause id="HD1CC33AAB0424B82B3C621E314EB8601"><enum>(vi)</enum><text>amounts excluded from gross income by reason of section 112 shall be taken into account as earned
income.</text>
</clause></subparagraph><subparagraph id="H2D100507E0CC4FCC8E5A273E6792BDA8"><enum>(C)</enum><header>Special rule for taxable years beginning before 2018</header><text>In the case of any taxable year beginning before January 1, 2018, the earned income of the taxpayer
taken into account under paragraph (1) shall be reduced (but not below
zero) by $3,000.</text>
</subparagraph></paragraph><paragraph id="H4AEF378F75F148C0922DFFAB51387E70"><enum>(3)</enum><header>Exception for taxpayers excluding foreign earned income</header><text>Paragraph (1) shall not apply to any taxpayer for any taxable year if such taxpayer elects to
exclude any amount from gross income under section 911 for such taxable
year.</text>
</paragraph></subsection><subsection id="HA37381D08B42442CA7DD9D880CDDC422"><enum>(e)</enum><header>Inflation adjustment</header><text>In the case of any taxable year beginning after 2014, each dollar amount in subsection (a) shall be
increased by an amount equal to—</text>
<paragraph id="H76AE2BF436B24F7FBE6D659FA1F1976C"><enum>(1)</enum><text>such dollar amount, multiplied by</text>
</paragraph><paragraph id="H08FA9DF1D3C448178BF99BC8A05ED0D8"><enum>(2)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which
the taxable year begins.</text></paragraph><continuation-text continuation-text-level="subsection">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.</continuation-text></subsection><subsection id="HB086AA7C998644B88541DE0F6A7D4F91"><enum>(f)</enum><header>Identification requirements</header>
<paragraph id="H53F14E523200455E8DEC9624FA8AB134"><enum>(1)</enum><header>In general</header><text>No credit shall be allowed under this section to a taxpayer with respect to any dependent unless
the taxpayer includes the name and taxpayer identification number of such
dependent on the return of tax for the taxable year.</text>
</paragraph><paragraph id="HF1FEBA29BBF147BD88C5673F1020E3F3"><enum>(2)</enum><header>Additional identification requirement with respect to refundable credit</header>
<subparagraph id="H9171C46944284572939A007DEA64C806"><enum>(A)</enum><header>In general</header><text>Subsection (d) 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.</text>
</subparagraph><subparagraph id="HC188EC6ABAE14EFEAC8316DAC0763016"><enum>(B)</enum><header>Joint returns</header><text>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.</text>
</subparagraph></paragraph></subsection><subsection id="HD79100D94386463A98139184D34852A6"><enum>(g)</enum><header>Taxable year must be full taxable year</header><text>Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall
be allowable under this section in the case of a taxable year covering a
period of less than 12 months.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HE4549DC8207F44F589279F62C7361CC0"><enum>(b)</enum><header>Omission of identification information treated as mathematical or clerical error</header><text>Subparagraph (I) of section 6213(g)(2) of such Code is amended to read as follows:</text>
<quoted-block id="HABE5C8B4D6EF46E08BD8F4F231FA54A8" style="OLC">
<subparagraph commented="no" id="H0F929667096C46C884C12A93B6E13618"><enum>(I)</enum><text>an omission of a correct TIN under section 24(f)(1) (relating to the child and dependent tax
credit), or a correct Social Security number under section 24(f)(2)
(relating to the refundable portion of child and dependent tax credit), to
be included on a return,</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H2820DBA3169D4F429C222CEBAE3E5731"><enum>(c)</enum><header>Application of rule for short taxable years</header><text>Section 443(c) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H1C24159F2F1F462F850EDFCB3D0BEA9B" style="OLC">
<subsection id="HE347F4AD5E864D95BA7ABCFF90FBCA0E"><enum>(c)</enum><header>Adjustment in child and dependent tax credit</header><text display-inline="yes-display-inline">If a return is made for a short period by reason of subsection (a)(1) and if the tax is not
computed under subsection (b)(2), then the credit allowed under section 24
shall be reduced to an amount which bears the same ratio to the full
amount of such credit as the number of months in the short period bears to
12.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H9F13E827B6694A97BE0E9C215232FAD1"><enum>(d)</enum><header>Clerical amendment</header><text>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:</text>
<quoted-block display-inline="no-display-inline" id="H6508B9C1CE4846F9BC3F80CFA7941DFC" style="OLC">
<toc container-level="quoted-block-container" idref="H9303E32EE7C8410482B0BC9C1EC8F27C" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H67365C8103E146CAAB1764D05EFC2739" level="section">Sec. 24. Child and dependent tax credit.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H9753001D62A24D6B891A2090BCFDD6D6"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HD8603EE20D5D478387053400E7B4AAB8"><enum>1103.</enum><header>Modification of earned income tax credit</header>
<subsection commented="no" id="H539513491CDE4C1487D75D5C1969C532"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 32 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HCF3E9BA3CE564710B9F991ADC8750F3B" style="OLC">
<section commented="no" id="HA611529FD5A44E1D8B3CC3E270519DF3"><enum>32.</enum><header>Earned income</header>
<subsection id="HD4D283B725B94D008519A8752DDC76AA"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of an individual who is an eligible individual for any taxable year, there shall be
allowed as a credit against the tax imposed by this subtitle for such
taxable year an amount equal to the taxpayer’s employment-related taxes
for such taxable year.</text>
</subsection><subsection id="HDA4AB5D5CF9A47C390F2F07DF45B56F8"><enum>(b)</enum><header>Limitations</header>
<paragraph id="HBC1A693157DF4717A75E94FA7389554F"><enum>(1)</enum><header>Dollar limitation</header><text>The credit allowed under subsection (a) shall not exceed—</text>
<subparagraph id="H954967BBC2C6439C972E95E47DD03923"><enum>(A)</enum><text>in the case of a taxpayer with 2 or more qualifying children, $3,000 ($4,000 in the case of a joint
return), and</text>
</subparagraph><subparagraph id="H6DC31BD6435A46AE99CFFBCE18C37ED8"><enum>(B)</enum><text>in the case of a taxpayer with 1 qualifying child, $2,400.</text>
</subparagraph></paragraph><paragraph id="H2F0669536F004C1395AE61EAB8630EEC"><enum>(2)</enum><header>Phase-out of credit</header><text>The credit allowed under subsection (a) (determined after application of paragraph (1)) shall be
reduced (but not below zero) by the sum of—</text>
<subparagraph id="H2F60E1542F0E4740AF1D84B9270046D8"><enum>(A)</enum><text>19 percent of so much of the taxpayer’s adjusted gross income (reduced by the amount of any excess
described in subparagraph (B)) as exceeds $20,000 ($27,000 in the case of
a joint return), plus</text>
</subparagraph><subparagraph id="H48B51B5057A84C8BB5B2DA4D2D2A10BE"><enum>(B)</enum><text>so much of the taxpayer’s investment income for the taxable year as exceeds $3,300.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="H5E086585EC4E456DB9CB85BA0CDBE2BC"><enum>(c)</enum><header>Definitions</header><text>For purposes of this section—</text>
<paragraph commented="no" id="H2F3FDCDDAC554F4986C83AC4EB172E81"><enum>(1)</enum><header>Eligible individual</header>
<subparagraph commented="no" id="H98E7DEA76D094442A3D1951E67B89F77"><enum>(A)</enum><header>In general</header><text>The term <quote>eligible individual</quote> means any individual who has a qualifying child for the taxable year.</text>
</subparagraph><subparagraph commented="no" id="H58AE022340244EA69D1E20156FC3A835"><enum>(B)</enum><header>Qualifying child ineligible</header><text>If an individual is the qualifying child of a taxpayer for any taxable year of such taxpayer
beginning in a calendar year, such individual shall not be treated as an
eligible individual for any taxable year of such individual beginning in
such calendar year.</text>
</subparagraph><subparagraph commented="no" id="H301EA6FF39554D39B9F3D94A506D5552"><enum>(C)</enum><header>Exception for individual claiming benefits under section 911</header><text>The term <quote>eligible individual</quote> does not include any individual who claims the benefits of section 911 (relating to citizens or
residents living abroad) for the taxable year.</text>
</subparagraph><subparagraph commented="no" id="H1E5970A6062040A48F9106CFD540E50A"><enum>(D)</enum><header>Limitation on eligibility of nonresident aliens</header><text>The term <quote>eligible individual</quote> shall not include any individual who is a nonresident alien individual for any portion of the
taxable year unless such individual is treated for such taxable year as a
resident of the United States for purposes of this chapter by reason of an
election under subsection (g) or (h) of section 6013.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HDC2850886D914981BF7791AEFC4E6171"><enum>(2)</enum><header>Employment-related taxes</header><text>The term <quote>employment-related taxes</quote> means, with respect to any taxpayer for any taxable year, the sum of—</text>
<subparagraph id="HA14D29D5676E44C693C42DFCD77430F7"><enum>(A)</enum><text>any tax imposed under sections 3101 or 3111 on the wages (as defined in section 3121(a)) received
by the taxpayer during the calendar year in which the taxable year begins,</text>
</subparagraph><subparagraph id="HB2707BBE0C2B4BB8827F46F587C73679"><enum>(B)</enum><text>any tax imposed under sections 3201(a), 3211(a), or 3221(a) on the compensation (as defined in
section 3231(e)) received by the taxpayer during the calendar year in
which the taxable year begins, and</text>
</subparagraph><subparagraph id="H47F355B3276640CC93F7330CBE18E70F"><enum>(C)</enum><text>any tax imposed under section 1401 on the self-employment income of the taxpayer for the taxable
year.</text>
</subparagraph></paragraph><paragraph commented="no" id="HEA087ACE4D1F42F180C4FCBC53D8D089"><enum>(3)</enum><header>Qualifying child</header>
<subparagraph commented="no" id="H8186FF66275045CBAA992DFB593341AC"><enum>(A)</enum><header>In general</header><text>The term <quote>qualifying child</quote> means a qualifying child of the taxpayer (within the meaning of section 7705, determined without
regard to subsections (c)(1)(D) and (e) thereof).</text>
</subparagraph><subparagraph commented="no" id="H04DD0EF03CC746B897C7409FC510A130"><enum>(B)</enum><header>Place of abode</header><text>For purposes of subparagraph (A), the requirements of section 7705(c)(1)(B) shall be met only if
the principal place of abode is in the United States.</text>
</subparagraph><subparagraph commented="no" id="HBA7FE69AB72F40FAB725487ABDB77CA8"><enum>(C)</enum><header>Treatment of military personnel stationed outside the United States</header><text>For purposes of subparagraph (B), the principal place of abode of a member of the Armed Forces of
the United States shall be treated as in the United States during any
period during which such member is stationed outside the United States
while serving on extended active duty with the Armed Forces of the United
States. For purposes of the preceding sentence, the term <quote>extended active duty</quote> means any period of active duty pursuant to a call or order to such duty for a period in excess of
90 days or for an indefinite period.</text>
</subparagraph></paragraph><paragraph commented="no" id="H8159EE9123544EBAA054F2CA69036FFD"><enum>(4)</enum><header>Investment income</header><text>For purposes of paragraph (1), the term <quote>investment income</quote> means—</text>
<subparagraph commented="no" id="H5DAB451150FD4B798399B2113235C89C"><enum>(A)</enum><text>interest or dividends to the extent includible in gross income for the taxable year,</text>
</subparagraph><subparagraph commented="no" id="HEE15E6D151774C14B7DE09C6E046460E"><enum>(B)</enum><text>interest received or accrued during the taxable year which is exempt from tax imposed by this
chapter,</text>
</subparagraph><subparagraph commented="no" id="H0E59058E9537461F9168C1CED478CE95"><enum>(C)</enum><text>the excess (if any) of—</text>
<clause commented="no" id="HC47C4D5512DE4B078DF8CF3AABF0FBDD"><enum>(i)</enum><text>gross income from rents or royalties not derived in the ordinary course of a trade or business,
over</text>
</clause><clause commented="no" id="HB55AA36BA7C34FDAA8EA5D4531B08BF7"><enum>(ii)</enum><text>the sum of—</text>
<subclause commented="no" id="H9AEEFD2EB10D4FAF83C86C37B5FE733D"><enum>(I)</enum><text>the deductions (other than interest) which are clearly and directly allocable to such gross income,
plus</text>
</subclause><subclause commented="no" id="H82722CDEFEA64C19AFDBBD6E5F22D996"><enum>(II)</enum><text>interest deductions properly allocable to such gross income,</text>
</subclause></clause></subparagraph><subparagraph commented="no" id="H2663F4232B174CAFB81F875852812825"><enum>(D)</enum><text>the capital gain net income (as defined in section 1222) of the taxpayer for such taxable year, and</text>
</subparagraph><subparagraph commented="no" id="HBBE6F3CC9ECF4935BE3DD12C5A97C5F8"><enum>(E)</enum><text>the excess (if any) of—</text>
<clause commented="no" id="HE625920F6C8D4D559DF49B947C83654F"><enum>(i)</enum><text>the aggregate income from all passive activities for the taxable year (determined without regard to
any amount with respect to which a tax described in subsection (c)(2) is
imposed or an amount described in a preceding subparagraph), over</text>
</clause><clause commented="no" id="HDC6FAF37D0F64CAE82913245FD89D2E1"><enum>(ii)</enum><text>the aggregate losses from all passive activities for the taxable year (as so determined).</text></clause><continuation-text commented="no" continuation-text-level="subparagraph">For purposes of subparagraph (E), the term <quote>passive activity</quote> has the meaning given such term by section 469.</continuation-text></subparagraph></paragraph></subsection><subsection commented="no" id="H0EA9E70131114D5BB9A224617AAB5E3E"><enum>(d)</enum><header>Identification requirements</header>
<paragraph id="H7C54D234028A47C1A35FD84AD46FC6DC"><enum>(1)</enum><header>In general</header><text>No credit shall be allowed under this section unless the taxpayer includes on the return of tax for
the taxable year—</text>
<subparagraph commented="no" id="H42E3D317D3494FA181A5712D6880B171"><enum>(A)</enum><text>the taxpayer’s Social Security number, and</text>
</subparagraph><subparagraph id="H62DBC60BED874A8FAD76CC5AD8B1AEA7"><enum>(B)</enum><text>the name, age, and Social Security number of each qualifying child taken into account under
subsection (b)(1).</text>
</subparagraph></paragraph><paragraph id="H23216E4324484241834CD30E94AA83A7"><enum>(2)</enum><header>Joint returns</header><text>In the case of a joint return, the requirement of paragraph (1)(A) shall be treated as met if the
Social Security number of either spouse is included on such return.</text>
</paragraph><paragraph commented="no" id="H239B085830F945CB919916E7EC7D8DDA"><enum>(3)</enum><header>Other methods of providing children’s information</header><text>The Secretary may prescribe other methods for providing the information described in paragraph
(1)(B).</text>
</paragraph></subsection><subsection commented="no" id="HF96E92A834B74116A0DCA537A4B6FF31"><enum>(e)</enum><header>Restrictions on taxpayers who improperly claimed credit in prior year</header>
<paragraph commented="no" id="H045CA9F820024C5D8E12611D744DC027"><enum>(1)</enum><header>Taxpayers making prior fraudulent or reckless claims</header>
<subparagraph commented="no" id="HA31E8D9BC11E4BC08AB4E4AB4F7D1805"><enum>(A)</enum><header>In general</header><text>No credit shall be allowed under this section for any taxable year in the disallowance period.</text>
</subparagraph><subparagraph commented="no" id="H672C73B4FF4D48F6B7933419389DCC58"><enum>(B)</enum><header>Disallowance period</header><text>For purposes of paragraph (1), the disallowance period is—</text>
<clause commented="no" id="H987F3FAABFA7459491D3344E04F2C17F"><enum>(i)</enum><text>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</text>
</clause><clause commented="no" id="HFB9B7304318B4E32BB7EF04BC5A29778"><enum>(ii)</enum><text>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).</text>
</clause></subparagraph></paragraph><paragraph commented="no" id="HF3570ACECEE04A67806742FE524F7892"><enum>(2)</enum><header>Taxpayers making improper prior claims</header><text>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.</text>
</paragraph></subsection><subsection id="H85DD7CE8A447471AAB108DB82EAC32F2"><enum>(f)</enum><header>Other special rules</header><text>For purposes of this section—</text>
<paragraph commented="no" id="H79A0444C2411436A89119416D00ECA6A"><enum>(1)</enum><header>Married individuals</header><text>In the case of an individual who is married (within the meaning of section 7703), this section
shall apply only if a joint return is filed for the taxable year under
section 6013.</text>
</paragraph><paragraph commented="no" id="H36342F5D92554FCDB33DB07D9100073C"><enum>(2)</enum><header>Taxable year must be full taxable year</header><text>Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall
be allowable under this section in the case of a taxable year covering a
period of less than 12 months.</text>
</paragraph><paragraph commented="no" id="HA0EDD829DE0B4B4DBEFC9353E8C32CC5"><enum>(3)</enum><header>Coordination with certain means-tested programs</header><text>For purposes of—</text>
<subparagraph commented="no" id="H6D83AF0519744860BA2182B6F2BA9E4F"><enum>(A)</enum><text>the United States Housing Act of 1937,</text>
</subparagraph><subparagraph commented="no" id="H8F923F5E14C74888903023342FA33356"><enum>(B)</enum><text>title V of the Housing Act of 1949,</text>
</subparagraph><subparagraph commented="no" id="H7BFC6958F47248AAA90533188CE3031E"><enum>(C)</enum><text>section 101 of the Housing and Urban Development Act of 1965,</text>
</subparagraph><subparagraph commented="no" id="HDC951377551F40C3B41B32975755E8C6"><enum>(D)</enum><text>sections 221(d)(3), 235, and 236 of the National Housing Act, and</text>
</subparagraph><subparagraph commented="no" id="H10FC249430DB4BDCAA25BF209928BE48"><enum>(E)</enum><text>the Food and Nutrition Act of 2008,</text></subparagraph><continuation-text continuation-text-level="paragraph">any refund made to an individual (or the spouse of an individual) by reason of this section, and
any payment made to such individual (or such spouse) by an employer under
section 3507, shall not be treated as income (and shall not be taken into
account in determining resources for the month of its receipt and the
following month).</continuation-text></paragraph><paragraph commented="no" id="H686B938ADE5A401EA41928C5BD302BCC"><enum>(4)</enum><header>Coordination with payroll tax credits</header><text>The credit allowed under subsection (a) with respect to any taxpayer for any taxable year shall be
reduced by the sum of the credits allowed under sections 3103 and 3203
with respect to such taxpayer for such taxable year.</text>
</paragraph></subsection><subsection id="HEBA4DD4E3BCD4095A9E089434E91CBF2"><enum>(g)</enum><header>Application to certain individuals without qualifying children</header><text display-inline="yes-display-inline">For purposes of this section and sections 3103 and 3203—</text>
<paragraph id="H2ADEF6181796409A91683CE9CC2C0C00"><enum>(1)</enum><header>In general</header><text>In the case of an individual described in paragraph (2)—</text>
<subparagraph id="H3D9520BA20F945C9B432ED826A9E3006"><enum>(A)</enum><text>such individual shall be treated as an eligible individual,</text>
</subparagraph><subparagraph id="H6A19AA21C6EC421B9462DA3E0130CD3B"><enum>(B)</enum><text display-inline="yes-display-inline">notwithstanding subsection (i), the dollar limitation applicable to such individual under
subsection (b)(1) shall be $100 (twice such amount in the case of a joint
return),</text>
</subparagraph><subparagraph id="H7018C95BD2804B87A1A32653918CE43E"><enum>(C)</enum><text>subsection (b)(2)(A) shall be applied by substituting <quote>$8,000 ($13,000</quote> for <quote>$20,000 ($27,000</quote>, and</text>
</subparagraph><subparagraph id="H37FDD67F68B64AD69BFCF0FF009FF28A"><enum>(D)</enum><text>subsection (i)(1) shall not apply and the employment-related taxes with respect to such individual
for any taxable year shall not exceed the sum of—</text>
<clause id="HA1C5A7253FF5477B96FE5B4F2AE4EA58"><enum>(i)</enum><text>any tax imposed under section 3101 on the wages (as defined in section 3121(a)) received by the
taxpayer during the calendar year in which the taxable year begins,</text>
</clause><clause id="H7C0B87F0115A4E618CC1E345DBBEEE9A"><enum>(ii)</enum><text display-inline="yes-display-inline">any tax imposed under sections 3201(a) (and so much of the tax imposed by section 3211(a) as is
attributable to the rates of tax under subsections (a) and (b) of section
3101) on the compensation (as defined in section 3231(e)) received by the
taxpayer during the calendar year in which the taxable year begins, and</text>
</clause><clause id="HE6B24CED0D7947F18A31F4A4DC77607C"><enum>(iii)</enum><text>50 percent of any tax imposed under section 1401 on the self-employment income of the taxpayer for
the taxable year.</text>
</clause></subparagraph></paragraph><paragraph id="H42CB5576D06841ACBF55AFF60AAB507B"><enum>(2)</enum><header>Individual to whom subsection applies</header><text>An individual is described in this paragraph for any taxable year if—</text>
<subparagraph id="H47984AAE0E3E4A84844B8128F31AE385"><enum>(A)</enum><text>such individual does not have a qualifying child for the taxable year,</text>
</subparagraph><subparagraph id="H2F3A83E9A34B4C85A5AC37A88326185C"><enum>(B)</enum><text display-inline="yes-display-inline">such individual’s principal place of abode is in the United States for more than one-half of such
taxable year,</text>
</subparagraph><subparagraph id="HEE5346733AC94F8A8031314C29A60BD7"><enum>(C)</enum><text>such individual (or, if the individual is married (within the meaning of section 7703), either the
individual or the individual’s spouse) has attained age 25 but not
attained age 65 before the close of the taxable year, and</text>
</subparagraph><subparagraph id="H020FEB89B286486F8B0A13CB950300D3"><enum>(D)</enum><text>such individual is not a dependent of another taxpayer for any taxable year beginning in the same
calendar year as such taxable year.</text>
</subparagraph></paragraph></subsection><subsection id="H5DF564B24F7340FBA77470490C15C28D"><enum>(h)</enum><header>Inflation adjustment</header><text>In the case of any taxable year beginning after 2014, both dollar amounts in subsection (b)(1)(A),
the dollar amount in subsection (b)(1)(B), both dollar amounts in
subsection (b)(2)(A), the dollar amount in subsection (b)(2)(B), the $100
amount in subsection (g)(1)(B), the $8,000 and $13,000 amounts in
subsection (g)(1)(C), the $4,000 amount in subsection (i)(2), and the
$3,000 amount in subsection (i)(3), shall each be increased by an amount
equal to—</text>
<paragraph id="H8076D331DB3242908139691E5BCBC07C"><enum>(1)</enum><text>such dollar amount, multiplied by</text>
</paragraph><paragraph id="H97D40FFEBB254FC7A0DDE062FBF84B5D"><enum>(2)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which
the taxable year begins.</text></paragraph><continuation-text continuation-text-level="subsection">If any increase determined under the preceding sentence is not a multiple of $100 ($10 in the case
of the $100 amount in subsection (g)(1)(B)), such increase shall be
rounded to the next lowest multiple of $100 ($10 in the case of the $100
amount in subsection (g)(1)(B)).</continuation-text></subsection><subsection id="H7A723E8E7EA7413E84DD91696673E457"><enum>(i)</enum><header>Special rules for taxable years beginning before 2018</header><text>In the case of any taxable year beginning before January 1, 2018—</text>
<paragraph id="H3E4BD604BB0B437A9D61ECBE7DC05341"><enum>(1)</enum><text>subsection (a) shall be applied by substituting <quote>200 percent of the taxpayer’s employment-related taxes</quote> for <quote>the taxpayer’s employment-related taxes</quote>,</text>
</paragraph><paragraph id="H741C49E1853E4894A3CF51928763EF82"><enum>(2)</enum><text>subsection (b)(1)(A) shall be applied by substituting <quote>$4,000</quote> for <quote>$3,000 ($4,000 in the case of a joint return)</quote>, and</text>
</paragraph><paragraph id="H6E2BDCEE5E5445EBBEEFB8B09B4495AC"><enum>(3)</enum><text>subsection (b)(1)(B) shall be applied by substituting <quote>$3,000</quote> for <quote>$2,400</quote>.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H13BB0CD0A94B491AB385BB51DEC6C65A"><enum>(b)</enum><header>Credit allowed against payroll taxes</header>
<paragraph commented="no" id="HF03AA6FC3C2E490481EECF0B101502A2"><enum>(1)</enum><header>FICA tax</header><text>Subchapter A of chapter 21 is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HD20322B73A964FB4A97DDF16401E02EB" style="OLC">
<section commented="no" id="H0B57387307324399921B2BF50350F387"><enum>3103.</enum><header>Credit against tax</header>
<subsection id="H3EDEC28A47894C00942D256395882D83"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of an individual who is allowed a credit under section 32 (determined without regard to
subsection (f)(4) thereof) for a taxable year, there shall be allowed as a
credit against the tax imposed by section 3101 with respect to wages
received by such individual during the calendar year ending with or within
such taxable year the lesser of—</text>
<paragraph commented="no" id="H4C472DAAE4C6427A8A050ADC0DE50BF6"><enum>(1)</enum><text>the amount of tax so imposed, or</text>
</paragraph><paragraph commented="no" id="H0B412033E2AE4C94800E07BB2A166EF3"><enum>(2)</enum><text>the amount of the credit allowed under section 32 (as so determined) for such taxable year.</text>
</paragraph></subsection><subsection id="H75E850D9ABFF43368EEAE641D5A22CEB"><enum>(b)</enum><header>Application of credit</header><text>The credit determined under subsection (a) shall be taken into account under this title in the same
manner as a credit or refund to which the taxpayer is entitled under
section 6413(c)(1). Such credit shall not be taken into account for
purposes of determining any amount deducted and withheld under section
3102.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H4E8D2B5FC5B647E98ADA9C1BD17BBCB4"><enum>(2)</enum><header>Railroad retirement tax</header><text>Subchapter A of chapter 22 is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H7B174CA6DA5B4135909AA301FE6FF0D7" style="OLC">
<section commented="no" id="H103CE8ED3CF444AFA357F86D459A5CD1"><enum>3203.</enum><header>Credit against tax</header>
<subsection id="H4AAD594AADB241D094D2244BEF79FF61"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of an individual who is allowed a credit under section 32 (determined without regard to
subsection (f)(4) thereof) for a taxable year, there shall be allowed as a
credit against the tax imposed by section 3201(a) (and so much of the tax
imposed by section 3211(a) as is attributable to the rates of tax under
subsections (a) and (b) of section 3101) with respect to compensation
received by such individual during the calendar year ending with or within
such taxable year the lesser of—</text>
<paragraph commented="no" id="H3A05B4268C0546DC831F78DA17BCC64B"><enum>(1)</enum><text>the amount of tax so imposed, or</text>
</paragraph><paragraph commented="no" id="HCD2A2DA13C954B64B585CE2E301BCADC"><enum>(2)</enum><text>the excess of—</text>
<subparagraph id="H36B884A9BFA64EF6B019280FFA84C00D"><enum>(A)</enum><text>the amount of the credit allowed under section 32 (as so determined) for such taxable year, over</text>
</subparagraph><subparagraph id="HD88A363A874F493084AA2103492BABD7"><enum>(B)</enum><text>the amount of the credit allowed under section 3103.</text>
</subparagraph></paragraph></subsection><subsection id="H1EB1F2A884284715A9C909F4F539E9F4"><enum>(b)</enum><header>Application of credit</header><text>The credit determined under subsection (a) shall be taken into account under this title in the same
manner as a credit or refund to which the taxpayer is entitled under
section 6413(c)(1). Such credit shall not be taken into account for
purposes of determining any amount deducted and withheld under section
3202.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H4891EF8B8DA041D8A8C471198E0C658E"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="HE437009B0269480EB622688FE1DC1147"><enum>(1)</enum><text display-inline="yes-display-inline">Section 86(f)(2) is amended by striking <quote>section 32(c)(2)</quote> and inserting <quote>section 24(d)(2)</quote>.</text>
</paragraph><paragraph id="H09441532F8044B88932B4385CF07ABBE"><enum>(2)</enum><text>Section 129(e)(2) is amended by striking <quote>section 32(c)(2)</quote> and inserting <quote>section 24(d)(2)</quote></text>
</paragraph><paragraph id="H820E1A15F33641F0A19030E3B2154216"><enum>(3)</enum><text>Section 6051(a)(10) is amended by striking <quote>for purposes of section 32 (relating to earned income credit)</quote> and inserting <quote>under section 24(d)(2)</quote>.</text>
</paragraph><paragraph id="HE670F1B842EC4793B4D0A85D89B2E821"><enum>(4)</enum><text>Section 6211(b)(4)(A) is amended by inserting <quote>(determined without regard to subsection (f)(4) thereof)</quote> after <quote>32</quote>.</text>
</paragraph><paragraph id="HC7375363620D4484BF648263DFFB9B01"><enum>(5)</enum><text>Section 6213(g)(2)(F) is amended by striking <quote>taxpayer identification number</quote> and inserting <quote>Social Security number</quote>.</text>
</paragraph><paragraph id="HC5F7F5A06E0B45CAB54BC009449A2263"><enum>(6)</enum><text>Section 6213(g)(2)(G) is amended by striking <quote>with respect to</quote> and all that follows and inserting <quote>with respect to the tax imposed under section 1401 (relating to self-employment tax) to the extent
such tax has not been paid,</quote>.</text>
</paragraph><paragraph id="HD49449C8642642F2B5A1F6914689335D"><enum>(7)</enum><text>Section 6213(g)(2)(K) is amended by striking <quote>section 32(k)(2)</quote> and inserting <quote>section 32(e)(2)</quote>.</text>
</paragraph><paragraph id="HDDE45C3FEB0F476C88AB6B0238B853B2"><enum>(8)</enum><text>Section 7705(f)(6)(B), as redesignated by this Act, is amended by striking clause (iv), by striking <quote>, and</quote> at the end of clause (iii) and inserting a period, and by inserting <quote>and</quote> at the end of clause (ii).</text>
</paragraph><paragraph commented="no" id="H49722A27FD1E4F749CD256365CECC23F"><enum>(9)</enum><text display-inline="yes-display-inline">The table of sections for subchapter A of chapter 21 is amended by adding at the end the following
new item:</text>
<quoted-block display-inline="no-display-inline" id="HA0C2DCED1CB6442A9806B97427D00EDF" style="OLC">
<toc container-level="quoted-block-container" idref="HD20322B73A964FB4A97DDF16401E02EB" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H0B57387307324399921B2BF50350F387" level="section">Sec. 3103. Credit against tax.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="HCD9A2BD0407F49D288BFCA082E0B8F00"><enum>(10)</enum><text display-inline="yes-display-inline">The table of sections for subchapter A of chapter 22 is amended by adding at the end the following
new item:</text>
<quoted-block display-inline="no-display-inline" id="H7CE8B51F379942EB9F2CB5B03B550203" style="OLC">
<toc container-level="quoted-block-container" idref="H7B174CA6DA5B4135909AA301FE6FF0D7" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H103CE8ED3CF444AFA357F86D459A5CD1" level="section">Sec. 3203. Credit against tax.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H297B0D39A3434812BF54C1A9D52E0EA5"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection><subsection id="HD282A947D91349BB97B885B7A71F1FB2"><enum>(e)</enum><header>Treatment of taxpayers who improperly claimed credit in prior years</header><text>A claim of credit under <external-xref legal-doc="usc" parsable-cite="usc/26/32">section 32</external-xref> of the Internal Revenue Code of 1986 (as in effect before the
amendments made by this section) shall not fail to be taken into account
under subsection (e) of such section (as amended by this section) merely
because such claim is for a taxable year beginning before January 1, 2015.</text>
</subsection><subsection id="H913601DF92C74386BD2198F255EA659F"><enum>(f)</enum><header>Treasury report on making credit advanceable</header><text>Not later than the date which is 180 days after the date of the enactment of this Act, the
Secretary of the Treasury (or the Secretary’s designee) shall submit a
report to Congress making recommendations regarding the best method for
providing for advance payment of the credits established by the amendments
made by this section. The recommendations in such report shall seek to—</text>
<paragraph id="HFB9373F59C7A45D98134DD5ADE6AC986"><enum>(1)</enum><text>provide for the payment of such credits to taxpayers as promptly as is feasible, including on a
weekly, biweekly, or monthly basis, and</text>
</paragraph><paragraph id="HFEC101E3DB5F4674A1D947D751D8FDC2"><enum>(2)</enum><text display-inline="yes-display-inline">minimize any administrative burdens on employers and the Internal Revenue Service.</text>
</paragraph></subsection></section><section id="H698F0A1106224C4299C23830C0970FF5"><enum>1104.</enum><header>Repeal of deduction for personal exemptions</header>
<subsection id="HFD69616216BB4FCBA761BB3D3F9C936D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part V of subchapter B of chapter 1 is hereby repealed.</text>
</subsection><subsection id="HB3933932E0464593A53C827D436588FC"><enum>(b)</enum><header>Definition of dependent retained</header>
<paragraph id="H27D5DC1593AC42A7A7DF1EF5FABE1FC2"><enum>(1)</enum><header>In general</header><text>Section 152, prior to repeal by subsection (a), is hereby redesignated as section 7705 and moved to
the end of chapter 79.</text>
</paragraph><paragraph id="HA9383B3FD94E4B2986009985D795AA34"><enum>(2)</enum><header>Modification of age requirements</header><text>Section 7705(c)(3)(A), as redesignated by paragraph (1), is amended by striking <quote>as a qualifying child and—</quote> and all that follows and inserting <quote>is a qualifying child and has not attained the age of 18 as of the close of the calendar year in
which the taxable year of the taxpayer begins.</quote>.</text>
</paragraph></subsection><subsection commented="no" id="HF3BD7BF3B5DB432EBC972C151247A01D"><enum>(c)</enum><header>Application to estates and trusts</header><text>Subsection (b) of section 642 is amended—</text>
<paragraph id="H5E9AFCF4BC7944D3B46DF11B7BD11118"><enum>(1)</enum><text>by striking paragraph (2)(C),</text>
</paragraph><paragraph id="HDE08639DE3EE445698EC71481B2E94C3"><enum>(2)</enum><text>by striking paragraph (3), and</text>
</paragraph><paragraph id="H3C0A9E0F157A49F68E7D7D03A51F6F82"><enum>(3)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">Deduction for personal exemption</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text level="subsection" style="OLC">Basic deduction</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="H0582711ACD054187B7F10131B4ED83D6"><enum>(d)</enum><header>Application to nonresident aliens</header><text>Section 873(b) is amended by striking paragraph (3).</text>
</subsection><subsection id="HFCFF3D5EBF5B4AF9B9EE5B212317AF18"><enum>(e)</enum><header>Modification of wage withholding rules</header>
<paragraph id="H4D9C85365C1D4E3D9A7AA0B4FAD92BF5"><enum>(1)</enum><header>In general</header><text>Section 3402(a)(2) is amended by striking <quote>the amount of one personal exemption provided in section 151(b)</quote> and inserting <quote>$3,900</quote>.</text>
</paragraph><paragraph id="HCFB3DA0BEE534329BDA6162B12388136"><enum>(2)</enum><header>Inflation adjustment</header><text>Section 3402(a) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H0149902A48D24F459941150F71D42C94" style="OLC">
<paragraph id="H05F53CAACBF141949510320D0CB1278F"><enum>(3)</enum><header>Inflation adjustment</header><text>In the case of any calendar year beginning after 2014, the $3,900 amount in paragraph (2) shall be
increased by an amount equal to—</text>
<subparagraph id="H1BC1C6875FD54EBFAFA103777F7F4799"><enum>(A)</enum><text>such dollar amount, multiplied by</text>
</subparagraph><subparagraph id="H05162602C522485AB894FC1E28ECD629"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year.</text></subparagraph><continuation-text continuation-text-level="paragraph">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.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HF7AE9CCA43DF415B847A4EAAACEBDF15"><enum>(3)</enum><header>Number of exemptions</header><text>Section 3402(f)(1) is amended—</text>
<subparagraph id="HA69B176D9F82409A8A428B54641DC5B6"><enum>(A)</enum><text>in subparagraph (A), by striking <quote>an individual described in section 151(d)(2)</quote> and inserting <quote>a dependent of any other taxpayer</quote>, and</text>
</subparagraph><subparagraph id="HCC4CF60E02BB4AB89224F2040B5CF351"><enum>(B)</enum><text>in subparagraph (C), by striking <quote>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)</quote> and inserting <quote>who, on the basis of facts existing at the beginning of such day, is reasonably expected to be a
dependent of the employee</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H2274D6669F304D1789C6F3DF8D8C1BF3"><enum>(f)</enum><header>Modification of return requirement</header>
<paragraph id="H8D61CED980A24B14A446092FE1F64CCE"><enum>(1)</enum><header>In general</header><text>Paragraph (1) of section 6012(a) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H295AB0106EE94126B35504D891151023" style="OLC">
<paragraph id="HE56EDDD4565A47348B427990520ED696"><enum>(1)</enum><text>Every individual who has gross income for the taxable year, except that a return shall not be
required of—</text>
<subparagraph id="H114A79E4019F44B48250FCD64BA98F59"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="H512771EC45E84C0F94FC803E25E980E8"><enum>(B)</enum><text>an individual entitled to make a joint return if—</text>
<clause id="H3954A2E6560A42EBA3D6DE32CEF376D5"><enum>(i)</enum><text>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,</text>
</clause><clause id="H11BC24B890C84478AAE413ADA996CB94"><enum>(ii)</enum><text>such individual and such individual’s spouse have the same household as their home at the close of
the taxable year,</text>
</clause><clause id="HC076D9858A7B4B54AA2415793B4B1996"><enum>(iii)</enum><text>such individual’s spouse does not make a separate return, and</text>
</clause><clause id="H8F1BAFD4267645E98BA5E873AC34B2B6"><enum>(iv)</enum><text>neither such individual nor such individual’s spouse is an individual described in section 63(c)(4)
who has income (other than earned income) in excess of the amount in
effect under section 63(c)(4)(A).</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HA6DDD398BBBE4219AFBF3B62E8006D5A"><enum>(2)</enum><header>Bankruptcy estates</header><text>Paragraph (8) of section 6012(a) is amended by striking <quote>the sum of the exemption amount plus the basic standard deduction under section 63(c)(2)(D)</quote> and inserting <quote>the standard deduction in effect under section 63(c)(1)(B)</quote>.</text>
</paragraph></subsection><subsection id="HFA7127104B50417FB93EC953C669EA36"><enum>(g)</enum><header>Conforming amendments</header>
<paragraph id="HF9886E436EE54BF992ECAF87BF0280AA"><enum>(1)</enum><text>Section 2(a)(1)(B) is amended by striking <quote>a dependent</quote> and all that follows through <quote>section 151</quote> and inserting <quote>a dependent who (within the meaning of section 7705, determined without regard to subsections
(b)(1), (b)(2) and (d)(1)(B) thereof) is a son, stepson, daughter, or
stepdaughter of the taxpayer</quote>.</text>
</paragraph><paragraph id="H07F48D1CBAC84993A80D0C1843CD7133"><enum>(2)</enum><text>Section 36B(b)(2)(A) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="H34A15E723F7F4BDC8B9F62274D5D868A"><enum>(3)</enum><text>Section 36B(b)(3)(B) is amended by striking <quote>unless a deduction is allowed under section 151 for the taxable year with respect to a dependent</quote> in the flush matter at the end and inserting <quote>unless the taxpayer has a dependent for the taxable year</quote>.</text>
</paragraph><paragraph id="H91A793D33D7045C69B01A2076B4E1F41"><enum>(4)</enum><text>Section 36B(c)(1)(D) is amended by striking <quote>with respect to whom a deduction under section 151 is allowable to another taxpayer</quote> and inserting <quote>who is a dependent of another taxpayer</quote>.</text>
</paragraph><paragraph id="H1DA18EB843FD4703AC3446BD83969DCC"><enum>(5)</enum><text>Section 36B(d)(1) is amended by striking <quote>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</quote> and inserting <quote>the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the
taxable year</quote>.</text>
</paragraph><paragraph id="H4D0BBBA15CE74F14923CA4C97BC59FD1"><enum>(6)</enum><text>Section 36B(e)(1) is amended by striking <quote>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)</quote> and inserting <quote>1 or more of the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer</quote>.</text>
</paragraph><paragraph id="H20B924A5F55943D1B979D286A348FFC3"><enum>(7)</enum><text>Section 42(i)(3)(D)(ii)(I) is amended—</text>
<subparagraph id="H094FC6A1AC4D46969A977C7DFB57D0F0"><enum>(A)</enum><text>by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>, and</text>
</subparagraph><subparagraph id="H134A4BBF5F4D4934B57A2EDA9F586EC6"><enum>(B)</enum><text>by striking the period at the end and inserting a comma.</text>
</subparagraph></paragraph><paragraph id="HA931802EA53C442D93E156F277C177E6"><enum>(8)</enum><text>Section 63(b) is amended by striking <quote>minus—</quote> and all that follows and inserting <quote>minus the standard deduction.</quote>.</text>
</paragraph><paragraph id="HC46A6F77DF0347A1BB8060C1414C0E19"><enum>(9)</enum><text>Section 63(d) is amended by striking <quote>other than—</quote> and all that follows and inserting <quote>other than the deductions allowable in arriving at adjusted gross income.</quote>.</text>
</paragraph><paragraph id="H578119C69DD540808588A8F73014592B"><enum>(10)</enum><text>Section 72(t)(2)(D)(i)(III) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="H1567CE14A32A4B25B2BB18B7C6A8DFAC"><enum>(11)</enum><text>Section 72(t)(7)(A)(iii) is amended by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7705(f)(1)</quote>.</text>
</paragraph><paragraph id="H9500E8B835E54C4F871EFA8C9A740F4B"><enum>(12)</enum><text>Section 105(b) is amended—</text>
<subparagraph id="HA6721036C84F4580B779870E92C248A7"><enum>(A)</enum><text>by striking <quote>as defined in section 152</quote> and inserting <quote>as defined in section 7705</quote>,</text>
</subparagraph><subparagraph id="HFBA0C880764743F2AE3C87D27C786370"><enum>(B)</enum><text>by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7705(f)(1)</quote> and</text>
</subparagraph><subparagraph id="H597042FB1CC2436BB773A5AD88142492"><enum>(C)</enum><text>by striking <quote>section 152(e)</quote> and inserting <quote>section 7705(e)</quote>.</text>
</subparagraph></paragraph><paragraph id="H67B90E5B80EF40618880E1DA98EA1389"><enum>(13)</enum><text>Section 105(c)(1) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="H8E147E3AE2AF40CF9CCEC6760DBB50DB"><enum>(14)</enum><text>Section 125(e)(1)(D) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="H6790CC821AF5427C92A76CA13DBC45CF"><enum>(15)</enum><text>Section 129(c) is amended—</text>
<subparagraph id="HBBA899042D8641628273AEFF8AE5B900"><enum>(A)</enum><text>by striking <quote>with respect to whom, for such taxable year, a deduction is allowable under section 151(c)
(relating to personal exemptions for dependents) to</quote> in paragraph (1) and inserting <quote>who is a dependent of</quote>, and</text>
</subparagraph><subparagraph id="HB8118790B4934C85A6B892565EED2244"><enum>(B)</enum><text>by striking <quote>section 152(f)(1)</quote> in paragraph (2) and inserting <quote>section 7705(f)(1)</quote>.</text>
</subparagraph></paragraph><paragraph id="H47C4EC4CC215462C829150FDBB8E65BD"><enum>(16)</enum><text>Section 132(h)(2)(B) is amended—</text>
<subparagraph id="HE46B6699B27744168B1B5C0300C3AD0F"><enum>(A)</enum><text>by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7705(f)(1)</quote>, and</text>
</subparagraph><subparagraph id="H89C2209252E944298B7CD58724C2A460"><enum>(B)</enum><text>by striking <quote>section 152(e)</quote> and inserting <quote>section 7705(e)</quote>.</text>
</subparagraph></paragraph><paragraph id="H91E9C5A5960C4EA59612AEDBE88B1BCC"><enum>(17)</enum><text display-inline="yes-display-inline">Section 139D(c)(5) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="H6290E8D5C1F24968A31B62F1409F4117"><enum>(18)</enum><text display-inline="yes-display-inline">Section 162(l)(1)(D) is amended by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7705(f)(1)</quote>.</text>
</paragraph><paragraph id="H7489177DA4C149C9A50A34304F7C96B9"><enum>(19)</enum><text>Section 170(g)(1) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="H1A435F633EF64FCC91560B031508CA9B"><enum>(20)</enum><text>Section 170(g)(3) is amended by striking <quote>section 152(d)(2)</quote> and inserting <quote>section 7705(d)(2)</quote>.</text>
</paragraph><paragraph id="HA2317BEC836A4AD38B132979356E5E94"><enum>(21)</enum><text>Section 172(d) is amended by striking paragraph (3).</text>
</paragraph><paragraph id="H3F23E740B049484CA1118CB83267AD1E"><enum>(22)</enum><text>Section 220(b)(6) is amended by striking <quote>with respect to whom a deduction under section 151 is allowable to</quote> and inserting <quote>who is a dependent of</quote>.</text>
</paragraph><paragraph commented="no" id="HB8B08131ADD54791A43065A01EC460A6"><enum>(23)</enum><text display-inline="yes-display-inline">Section 220(d)(2)(A) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="HEC7DCCC5932E4CE39B207E2E2BFB6EA5"><enum>(24)</enum><text>Section 223(b)(6) is amended by striking <quote>with respect to whom a deduction under section 151 is allowable to</quote> and inserting <quote>who is a dependent of</quote>.</text>
</paragraph><paragraph id="H1F46EE58C98946B0923386D557916839"><enum>(25)</enum><text display-inline="yes-display-inline">Section 223(d)(2)(A) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="HA507301BC1B04D20A49D815920F372AF"><enum>(26)</enum><text display-inline="yes-display-inline">Section 401(h) is amended by striking <quote>section 152(f)(1)</quote> in the last sentence and inserting <quote>section 7705(f)(1)</quote>.</text>
</paragraph><paragraph id="H12FE478E9D5A46B38D65C2A02408F29B"><enum>(27)</enum><text>Section 402(l)(4)(D) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="H78376993B5144D7F9133C87EEB26EFC8"><enum>(28)</enum><text>Section 409A(a)(2)(B)(ii)(I) is amended by striking <quote>section 152(a)</quote> and inserting <quote>section 7705(a)</quote>.</text>
</paragraph><paragraph id="HAD2F3E9103F0422E834862DEB42B19D9"><enum>(29)</enum><text display-inline="yes-display-inline">Section 501(c)(9) is amended by striking <quote>section 152(f)(1)</quote> and inserting <quote>section 7705(f)(1)</quote>.</text>
</paragraph><paragraph id="H1F8E7D63B41043FD9C5CC2E6E28B74DD"><enum>(30)</enum><text>Section 529(e)(2)(B) is amended by striking <quote>section 152(d)(2)</quote> and inserting <quote>section 7705(d)(2)</quote>.</text>
</paragraph><paragraph id="H8D2DC66136B14A21A8F770E4555BBA9D"><enum>(31)</enum><text>Section 703(a)(2) is amended by striking subparagraph (A) and by redesignating subparagraphs (B)
through (F) as subparagraphs (A) through (E), respectively.</text>
</paragraph><paragraph id="H9B44C66C24D748D5BFE3F23B6A2E22D4"><enum>(32)</enum><text>Section 874 is amended by striking subsection (b) and by redesignating subsection (c) as subsection
(b).</text>
</paragraph><paragraph id="HC252CB0354F341EF99952235CBBDE068"><enum>(33)</enum><text>Section 891 is amended by striking <quote>under section 151 and</quote>.</text>
</paragraph><paragraph id="H29452FC0B46C4F73B1DD0AB73440D387"><enum>(34)</enum><text>Section 904(b) is amended by striking paragraph (1).</text>
</paragraph><paragraph id="HBBB45C604F4C4BF89D8D7637A30F76F1"><enum>(35)</enum><text>Section 931(b)(1) is amended by striking <quote>(other than the deduction under section 151, relating to personal exemptions)</quote>.</text>
</paragraph><paragraph id="HD90E743BB09840558B339A1D71E07F36"><enum>(36)</enum><text display-inline="yes-display-inline">Section 933 is amended—</text>
<subparagraph id="H18251519F35C4D84A5C4FC2E8EB59E16"><enum>(A)</enum><text>by striking <quote>(other than the deduction under section 151, relating to personal exemptions)</quote> in paragraph (1), and</text>
</subparagraph><subparagraph id="HC79B82CE0BDF49DEA81B387008120971"><enum>(B)</enum><text>by striking <quote>(other than the deduction for personal exemptions under section 151)</quote> in paragraph (2).</text>
</subparagraph></paragraph><paragraph id="H1307703697B443DA9E7D7CD41B340AB6"><enum>(37)</enum><text>Section 1212(b)(2)(B)(ii) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HF93CAD986C9E492CAD1F00584E808B18" style="OLC">
<clause id="HFB2C13E4DBD2411FA0BAAA7FFBC32928"><enum>(ii)</enum><text display-inline="yes-display-inline">in the case of an estate or trust, the deduction allowed for such year under section 642(b).</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H340B62A56D774064AE506748B689AC2D"><enum>(38)</enum><text display-inline="yes-display-inline">Section 1361(c)(1)(C) is amended by striking <quote>section 152(f)(1)(C)</quote> and inserting <quote>section 7705(f)(1)(C)</quote>.</text>
</paragraph><paragraph id="H178FCE59BBDE49EC9C41BC95406C11D0"><enum>(39)</enum><text display-inline="yes-display-inline">Section 1402(a) is amended by striking paragraph (7).</text>
</paragraph><paragraph id="H4D0C270C78B24B63A38B3AA5A5B40A85"><enum>(40)</enum><text display-inline="yes-display-inline">Section 2032A(c)(7)(D) is amended by striking <quote>section 152(f)(2)</quote> and inserting <quote>section 7705(f)(2)</quote>.</text>
</paragraph><paragraph id="H7BA7381B79F841A8951AF62925B8425B"><enum>(41)</enum><text>Section 3402(m)(1) is amended by striking <quote>other than the deductions referred to in section 151 and</quote>.</text>
</paragraph><paragraph id="H777BB39A27C54F8CAFA932D77E0DA868"><enum>(42)</enum><text>Section 3402(r)(2) is amended by striking <quote>the sum of—</quote> and all that follows and inserting <quote>the standard deduction in effect under section 63(c)(1)(B).</quote>.</text>
</paragraph><paragraph id="H385DD40163904B7AAB9C714CCBE52B8C"><enum>(43)</enum><text display-inline="yes-display-inline">Section 5000A(b)(3)(A) is amended by striking <quote>section 152</quote> and inserting <quote>section 7705</quote>.</text>
</paragraph><paragraph id="H9CEF219BB16B46DA9ECE0BA6D3E2F68E"><enum>(44)</enum><text display-inline="yes-display-inline">Section 5000A(c)(4)(A) is amended by striking <quote>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</quote> and inserting <quote>the sum of 1 (2 in the case of a joint return) plus the number of the taxpayer’s dependents for the
taxable year</quote>.</text>
</paragraph><paragraph id="H1E8AB4BB7A914D2788D4CB0E994C8966"><enum>(45)</enum><text>Section 6013(b)(3)(A) is amended—</text>
<subparagraph id="H24A8D71773654543B86A26744BABA20E"><enum>(A)</enum><text>by striking <quote>had less than the exemption amount of gross income</quote> in clause (ii) and inserting <quote>had no gross income</quote>,</text>
</subparagraph><subparagraph id="H4F3DEDC2DB894417B3709ADEA3BDA0F6"><enum>(B)</enum><text>by striking <quote>had gross income of the exemption amount or more</quote> in clause (iii) and inserting <quote>had any gross income</quote>, and</text>
</subparagraph><subparagraph id="H51C9355C00534224A600B7B4702461DB"><enum>(C)</enum><text>by striking the flush language following clause (iii).</text>
</subparagraph></paragraph><paragraph id="H73A30BFA02A845239F01D6143E1AC421"><enum>(46)</enum><text>Section 6103(l)(21)(A)(iii) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H00138D577A374D0ABC8F6DFDC4054656" style="OLC">
<clause id="HB3478646080A4AD3802481E177E195F6"><enum>(iii)</enum><text display-inline="yes-display-inline">the number of the taxpayer’s dependents,</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HD7EEBAF21BBA4E679687C7E3EAF35E4E"><enum>(47)</enum><text>Section 6213(g)(2) is amended by striking subparagraph (H).</text>
</paragraph><paragraph id="H111B4DBC56BF468489DDC99E6D4F1702"><enum>(48)</enum><text>Section 6334(d)(2) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H98DEAAC983084351AC7655BCB704D36E" style="OLC">
<paragraph id="H17D094764FEC4093B2E1CFFFF848566E"><enum>(2)</enum><header>Exempt amount</header>
<subparagraph id="H1B0C9B60062A4B4B854823C464ED4EF0"><enum>(A)</enum><header>In general</header><text>For purposes of paragraph (1), the term <quote>exempt amount</quote> means an amount equal to—</text>
<clause id="H29460F6BE80D4BA391B25AA4D3E3B84C"><enum>(i)</enum><text>the sum of the standard deduction and the personal exemption amount, divided by</text>
</clause><clause id="H417E083A51764AFAACC2AACD3F63D5DF"><enum>(ii)</enum><text>52.</text>
</clause></subparagraph><subparagraph id="H1D4B407529BD4B58845459B0B5A81E2F"><enum>(B)</enum><header>Personal exemption amount</header><text>For purposes of subparagraph (A), the personal exemption amount is $3,900 multiplied by the number
of the taxpayer’s dependents for the taxable year in which the levy
occurs.</text>
</subparagraph><subparagraph id="H52E4D82F7AC74A369C446FF36CA64665"><enum>(C)</enum><header>Inflation adjustment</header><text>In the case of any taxable year beginning after 2014, the $3,900 amount in subparagraph (B) shall
be increased by an amount equal to—</text>
<clause id="H88452AE9FEEF4B98AD7381F77271C1D1"><enum>(i)</enum><text>such dollar amount, multiplied by</text>
</clause><clause id="H249FD5DCF79548409EECFE92F29CF3F6"><enum>(ii)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which
the taxable year begins.</text></clause><continuation-text continuation-text-level="subparagraph">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.</continuation-text></subparagraph><subparagraph id="H15285E156E4C46D391364615B588CEB9"><enum>(D)</enum><header>Verified statement</header><text>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.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H238DA49761C243B0AE687B78EA273179"><enum>(49)</enum><text display-inline="yes-display-inline">Section 7702B(f)(2)(C)(iii) is amended by striking <quote>section 152(d)(2)</quote> and inserting <quote>section 7705(d)(2)</quote>.</text>
</paragraph><paragraph id="H3468B8CF1DE54C65A31523004A4CFB9F"><enum>(50)</enum><text>Section 7703(a) is amended by striking <quote>part V of subchapter B of chapter 1 and</quote>.</text>
</paragraph><paragraph id="H516FB50F8C3B429A80D5EDCF7B118637"><enum>(51)</enum><text>Section 7703(b)(1) is amended by striking <quote>section 152(f)(1)</quote> and all that follows and inserting <quote>section 7705(f)(1),</quote>.</text>
</paragraph><paragraph id="HFB32601F60294C0A950AD917167CB7DD"><enum>(52)</enum><text>Section 7705(a), as redesignated by this section, is amended by striking <quote>this subtitle</quote> and inserting <quote>subtitle A</quote>.</text>
</paragraph><paragraph id="HD2E66F0CE74A4ACB80DFC49AF900710E"><enum>(53)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H2BE7A7093CC84E9A8CE79433ABC4CDD1"><enum>(A)</enum><text>Section 7705(d)(1)(B), as redesignated by this section, is amended by striking <quote>the exemption amount (as defined in section 151(d))</quote> and inserting <quote>$3,900</quote>.</text>
</subparagraph><subparagraph id="HCF8DC1BB279144C9B53A13D287D0C3BC" indent="up1"><enum>(B)</enum><text>Section 7705(d), as redesignated by this section, is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H2A2546CBB8F849B1A4EF706871B1496F" style="OLC">
<paragraph id="HB922A407F43740D1A6A8D86170223074"><enum>(6)</enum><header>Inflation adjustment</header><text>In the case of any calendar year beginning after 2014, the $3,900 amount in paragraph (1)(B) shall
be increased by an amount equal to—</text>
<subparagraph id="H3F4E1A0650C74A97B52154F25CFD492D"><enum>(A)</enum><text>such dollar amount, multiplied by</text>
</subparagraph><subparagraph id="H5DB333D1595A4C5586990F4E5B566A16"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year.</text></subparagraph><continuation-text continuation-text-level="paragraph">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.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H6EDFB2209F894388BD0F25C245344617"><enum>(54)</enum><text>The table of sections for chapter 79 is amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H41D2A2791A2344B0B7FCDFB7BE469837" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 7705. Dependent defined.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HEB04B9F33CF94FF1A95D4D001D81C3F3"><enum>(h)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="H11F2EDF7040B4EC4B4FC7DA82C55A3FB"><enum>C</enum><header>Simplification of education incentives</header>
<section id="HE2D0211C0463497FBC1017F9C4913285" section-type="subsequent-section"><enum>1201.</enum><header>American opportunity tax credit</header>
<subsection id="H9C4E6F723C5745EAA8583A8450E10053"><enum>(a)</enum><header>In general</header><text>Section 25A is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H1926882223B74B5BB5E9E3377C412E22" style="OLC">
<section id="HD5EF56BEBDF14D39914EA71A42A90E19"><enum>25A.</enum><header>American opportunity tax credit</header>
<subsection id="H96DF5388061842908B9B90DF820503F5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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—</text>
<paragraph id="H57141A517A674C1BB48B56FC94D21148"><enum>(1)</enum><text display-inline="yes-display-inline">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</text>
</paragraph><paragraph id="HB32521E8DCDE434DA1F4DF2C38036990"><enum>(2)</enum><text>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.</text>
</paragraph></subsection><subsection id="H31CF2BA4470A43118E14FD9083E4E3AD"><enum>(b)</enum><header>Portion of credit refundable</header><text>So much of the credit allowable under subsection (a) (determined without regard to this subsection
and section 26(a) and after application of all other provisions of this
section) as does not exceed $1,500 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.</text>
</subsection><subsection id="HB232EC2034044315A23046524358AB8E"><enum>(c)</enum><header>Limitation based on modified adjusted gross income</header>
<paragraph id="H26D92DC49EEE43CE93B0CA3150080AF2"><enum>(1)</enum><header>In general</header><text>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—</text>
<subparagraph id="H35F90746FB36488EBF191FB7A9ECF930"><enum>(A)</enum><text>the excess of—</text>
<clause id="HC2A929D0355545BAB812F1CFCC28C6A8"><enum>(i)</enum><text>the taxpayer’s modified adjusted gross income for such taxable year, over</text>
</clause><clause id="H870F0C086F014F49B09B0AEFA8757359"><enum>(ii)</enum><text>$43,000 (twice such amount in the case of a joint return), bears to</text>
</clause></subparagraph><subparagraph id="H70CDCC0B9BA441FDBC6F921BCFDBBC0D"><enum>(B)</enum><text>$20,000 (twice such amount in the case of a joint return).</text>
</subparagraph></paragraph><paragraph id="H2A83078D182D4BA3BB7D0BA05D0EDFC3"><enum>(2)</enum><header>Modified adjusted gross income</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>modified adjusted gross income</quote> 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.</text>
</paragraph></subsection><subsection id="H8E492795CAE543B49A764CB28D8DF81B"><enum>(d)</enum><header>Other limitations</header>
<paragraph id="H19B776C77F3A456BA1D19C9A276686F1"><enum>(1)</enum><header>Credit allowed only for 4 taxable years</header><text display-inline="yes-display-inline">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 4 prior taxable years.</text>
</paragraph><paragraph id="H4FA31102CFF24AF0974FC82EC2D9CEC2"><enum>(2)</enum><header>Credit allowed only for first 4 years of postsecondary education</header><text display-inline="yes-display-inline">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 4 years of
postsecondary education at an eligible educational institution.</text>
</paragraph></subsection><subsection id="HF65A7945B64940769F661EDDB1D115B4"><enum>(e)</enum><header>Definitions</header><text>For purposes of this section—</text>
<paragraph id="HF353E8BAD7D94357B23109BEB4885467"><enum>(1)</enum><header>Eligible student</header><text display-inline="yes-display-inline">The term <quote>eligible student</quote> means, with respect to any academic period, a student who—</text>
<subparagraph id="H3BCE50A99F4645A492A018F9DD351B42"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="H55DE696FE7894D4F800D2B580F083661"><enum>(B)</enum><text>is carrying at least <fraction>1/2</fraction> the normal full-time work load for the course of study the student is
pursuing.</text>
</subparagraph></paragraph><paragraph id="HD353F946CB114581B0E088FFB02DD5A8"><enum>(2)</enum><header>Qualified tuition and related expenses</header>
<subparagraph id="HD2B086B98B8A497AB5B32FE11F9290B8"><enum>(A)</enum><header>In general</header><text>The term <quote>qualified tuition and related expenses</quote> means tuition, fees, and course materials, required for enrollment or attendance of—</text>
<clause id="HAFA42DC652DD440FB6556F8D137A66F5"><enum>(i)</enum><text>the taxpayer,</text>
</clause><clause id="HB69A1AD41FD941E0A3E5E6711FD28EBE"><enum>(ii)</enum><text>the taxpayer’s spouse, or</text>
</clause><clause id="HE1B89CC72BFD4BAA8B1B5822F0C24BF3"><enum>(iii)</enum><text display-inline="yes-display-inline">any dependent of the taxpayer,</text></clause><continuation-text continuation-text-level="subparagraph">at an eligible educational institution for courses of instruction of such individual at such
institution.</continuation-text></subparagraph><subparagraph id="H9F9CF504D99C48F593C36A9CCEC0B4CB"><enum>(B)</enum><header>Exception for education involving sports, etc</header><text display-inline="yes-display-inline">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.</text>
</subparagraph><subparagraph id="H9BC0C27B6C2F43ACBDAAAEC5FFA225D7"><enum>(C)</enum><header>Exception for nonacademic fees</header><text display-inline="yes-display-inline">Such term does not include student activity fees, athletic fees, insurance expenses, or other
expenses unrelated to an individual's academic course of instruction.</text>
</subparagraph></paragraph><paragraph id="H3DB1F666173F418EAD7D09D7C5DC725E"><enum>(3)</enum><header>Eligible educational institution</header><text>The term <quote>eligible educational institution</quote> means an institution—</text>
<subparagraph id="HFB4BC6CBCC8F494986F5C120468B076D"><enum>(A)</enum><text display-inline="yes-display-inline">which is described in section 481 of the Higher Education Act of 1965 (<external-xref legal-doc="usc" parsable-cite="usc/20/1088">20 U.S.C. 1088</external-xref>), as in
effect on August 5, 1997, and</text>
</subparagraph><subparagraph id="H4A92EF35E0DB42E48DED3404777EC5C2"><enum>(B)</enum><text>which is eligible to participate in a program under title IV of such Act.</text>
</subparagraph></paragraph></subsection><subsection id="H5252AF650C314AA0A5A94A11D669AAF8"><enum>(f)</enum><header>Special rules</header>
<paragraph id="H98EFE7ECC3CA4160B4267DFBF374D302"><enum>(1)</enum><header>Identification requirement</header><text display-inline="yes-display-inline">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, and the
employer identification number of any institution to which such expenses
were paid, on the return of tax for the taxable year.</text>
</paragraph><paragraph id="HDC1A3509B1C84AF8B073F094F7CD54D7"><enum>(2)</enum><header>Adjustment for certain scholarships, etc</header>
<subparagraph id="H41D094362346410785AC95207AEB5554"><enum>(A)</enum><header>In general</header><text>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—</text>
<clause id="H61B728E69BEC4356AB0BF677804EA3C4"><enum>(i)</enum><text display-inline="yes-display-inline">a qualified scholarship which is excludable from gross income under section 117,</text>
</clause><clause id="HCCCC765DB33D4061A85EEEFECDD22ED1"><enum>(ii)</enum><text>an educational assistance allowance under chapter 30, 31, 32, 34, or 35 of title 38, United States
Code, or under <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/10/1606">chapter 1606</external-xref> of title 10, United States Code, and</text>
</clause><clause id="HA4315CC350574B5697DF2654E00E6AE4"><enum>(iii)</enum><text>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.</text>
</clause></subparagraph><subparagraph id="H6869B89AAE804D08836B07383A0D3DCD"><enum>(B)</enum><header>Coordination with Pell Grants not used for qualified tuition and related expenses</header><text display-inline="yes-display-inline">For purposes of subparagraph (A), the amount of any Federal Pell Grant under section 401 of the
Higher Education Act of 1965 (<external-xref legal-doc="usc" parsable-cite="usc/20/1070a">20 U.S.C. 1070a</external-xref>) shall be reduced (but not
below zero) by the amount of expenses (other than qualified tuition and
related expenses) which are taken into account in determining the cost of
attendance (as defined in section 472 of the Higher Education Act of 1965,
as in effect on the date of the enactment of this paragraph) of such
individual at an eligible educational institution for the academic period
for which the credit under this section is being determined.</text>
</subparagraph></paragraph><paragraph id="H85EB8E2D81A441969F83CA49AC0B116E"><enum>(3)</enum><header>Treatment of expenses paid by dependent</header><text display-inline="yes-display-inline">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—</text>
<subparagraph id="H12493AF3FB8F4A729241B0F504322E1B"><enum>(A)</enum><text>no credit shall be allowed under subsection (a) to such individual for such individual’s taxable
year, and</text>
</subparagraph><subparagraph id="H2665FF22A8FE44EEA358818F7CE71147"><enum>(B)</enum><text>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.</text>
</subparagraph></paragraph><paragraph id="H646D0FBE24F844ECBF8D3BADB28B0FA5"><enum>(4)</enum><header>Treatment of certain prepayments</header><text>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.</text>
</paragraph><paragraph id="HD3F23597D5404A7AADC158DE499F24F5"><enum>(5)</enum><header>Denial of double benefit</header><text>No credit shall be allowed under this section for any amount for which a deduction is allowed under
any other provision of this chapter.</text>
</paragraph><paragraph id="H3C8AFE6676344710B1B86C08273506AC"><enum>(6)</enum><header>No credit for married individuals filing separate returns</header><text>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.</text>
</paragraph><paragraph id="H8496031925074247A0B1EB5AD36ED83E"><enum>(7)</enum><header>Nonresident aliens</header><text>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.</text>
</paragraph></subsection><subsection id="H383D1B84BDED41929EF7D047F15D6B2A"><enum>(g)</enum><header>Inflation adjustment</header>
<paragraph id="H8D6A48261A3544AF99864C776D1D3F64"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxable year beginning after 2018, the $2,000 amount in subsection (a)(1), the
$1,500 amount in subsection (b), and the $43,000 amount in subsection
(c)(1)(A)(ii) shall each be increased by an amount equal to—</text>
<subparagraph id="HC7B5DF31902D499985420647C67D38CA"><enum>(A)</enum><text>such dollar amount, multiplied by</text>
</subparagraph><subparagraph id="H681C9D453A814E7E851D6192278EF676"><enum>(B)</enum><text>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 <quote>calendar year 2017</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text>
</subparagraph></paragraph><paragraph id="HE7D1F076ECF44D15AAE21CF08A4B4FF1"><enum>(2)</enum><header>Rounding</header><text>If any amount as adjusted under paragraph (1) is not a multiple of $100 ($1,000 in the case of the
amount in subsection (c)(1)(A)(ii)), such amount shall be rounded to the
next lowest multiple of $100 ($1,000 in the case of the amount in
subsection (c)(1)(A)(ii)).</text>
</paragraph></subsection><subsection id="HDFF7C10138264EBC8FDAE10B85D35F76"><enum>(h)</enum><header>Regulations</header><text display-inline="yes-display-inline">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.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H8F6B0E0A85A54AB9B96C178516197602"><enum>(b)</enum><header>Requirement To report tuition paid rather than tuition billed</header><text>Section 6050S(b)(2)(B)(i) is amended by striking <quote>or the aggregate amount billed</quote>.</text>
</subsection><subsection id="HEDF7D4BC870648C5821C00EA70953DBA"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="HD66814E3DD574F42A31D650CC375CC1C"><enum>(1)</enum><text>Section 72(t)(7)(B) of such Code is amended by striking <quote>section 25A(g)(2)</quote> and inserting <quote>section 25A(f)(2)</quote>.</text>
</paragraph><paragraph id="H303335B5048148B8BD01AB775D72B36D"><enum>(2)</enum><text display-inline="yes-display-inline">Section 529(c)(3)(B)(v)(I) of such Code is amended by striking <quote>section 25A(g)(2)</quote> and inserting <quote>section 25A(f)(2)</quote>.</text>
</paragraph><paragraph id="H83E4D57F821A49F4A40B1C3C07D1E215"><enum>(3)</enum><text display-inline="yes-display-inline">Section 529(e)(3)(B)(i) of such Code is amended by striking <quote>section 25A(b)(3)</quote> and inserting <quote>section 25A(d)</quote>.</text>
</paragraph><paragraph id="H2F708558F031423D91D678A8AAF525C6"><enum>(4)</enum><text display-inline="yes-display-inline">Section 530(d)(2)(C) of such Code is amended—</text>
<subparagraph id="H8FC3404CD00D42F68875D5B08D671127"><enum>(A)</enum><text>by striking <quote>section 25A(g)(2)</quote> in clause (i)(I) and inserting <quote>section 25A(f)(2)</quote>, and</text>
</subparagraph><subparagraph id="HEB0DCE77D61744CA8FFA7586D5A5ACDA"><enum>(B)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">Hope and Lifetime Learning credits</header-in-text></quote> in the heading and inserting <quote><header-in-text level="subparagraph" style="OLC">American opportunity tax credit</header-in-text></quote>.</text>
</subparagraph></paragraph><paragraph id="HF35B1C8293B04AE0A9D77B4F04B6A664"><enum>(5)</enum><text display-inline="yes-display-inline">Section 530(d)(4)(B)(iii) of such Code is amended by striking <quote>section 25A(g)(2)</quote> and inserting <quote>section 25A(d)(4)(B)</quote>.</text>
</paragraph><paragraph id="H9AE18837C4894828BECDB194D3359AD2"><enum>(6)</enum><text display-inline="yes-display-inline">Section 6050S(e) of such Code is amended by striking <quote>subsection (g)(2)</quote> and inserting <quote>subsection (f)(2)</quote>.</text>
</paragraph><paragraph id="H58EE08818F464B4EB92A8FA11D13703E"><enum>(7)</enum><text display-inline="yes-display-inline">Section 6211(b)(4)(A) of such Code is amended by striking <quote>subsection (i)(6)</quote> and inserting <quote>subsection (b)</quote>.</text>
</paragraph><paragraph id="H3CB1B50B378347EC8383B3E4CC16759E"><enum>(8)</enum><text display-inline="yes-display-inline">Section 6213(g)(2)(J) of such Code is amended by striking <quote>TIN required under section 25A(g)(1)</quote> and inserting <quote>TIN, and employer identification number, required under section 25A(f)(1)</quote>.</text>
</paragraph><paragraph id="H604720A398E24DB193F2D98A803E1E79"><enum>(9)</enum><text>Section 1004(c) of division B of the American Recovery and Reinvestment Tax Act of 2009 is amended—</text>
<subparagraph id="HC89E8DC21E4D4FA58434467D5B1AB7BE"><enum>(A)</enum><text>in paragraph (1)—</text>
<clause id="H8FDDB220AD894EB286122CCD4B638982"><enum>(i)</enum><text>by striking <quote>section 25A(i)(6)</quote> each place it appears and inserting <quote>section 25A(b)</quote>, and</text>
</clause><clause id="H7BB430637CD14F16905B1B1609F44E6C"><enum>(ii)</enum><text>by striking <quote>with respect to taxable years beginning after 2008 and before 2018</quote> each place it appears and inserting <quote>with respect to each taxable year</quote>,</text>
</clause></subparagraph><subparagraph id="H6E7262E91EAD49A8B16CECF0BD5978F5"><enum>(B)</enum><text>in paragraph (2), by striking <quote>Section 25A(i)(6)</quote> and inserting <quote>Section 25A(b)</quote>, and</text>
</subparagraph><subparagraph id="HCD9090C4D8D049939F563885BF3CDC63"><enum>(C)</enum><text>in paragraph (3)(C), by striking <quote>subsection (i)(6)</quote> and inserting <quote>subsection (b)</quote>.</text>
</subparagraph></paragraph><paragraph id="H2D5DCD2BA1CF4BE28CF40915B38E0955"><enum>(10)</enum><text>The table of sections for subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue
Code of 1986 is amended by striking the item relating to section 25A and
inserting the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HEB1AC29E209E4F8A8C2D1C31A8BCC532" style="OLC">
<toc container-level="quoted-block-container" idref="H1926882223B74B5BB5E9E3377C412E22" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HD5EF56BEBDF14D39914EA71A42A90E19" level="section">Sec. 25A. American opportunity tax credit.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H254033EAF14E4EE6A142AEC8C870699F"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section display-inline="no-display-inline" id="H3393FD02D53748A19F94C73F70431687" section-type="subsequent-section"><enum>1202.</enum><header>Expansion of Pell Grant exclusion from gross income</header>
<subsection id="HBD93A31652974040887BE770CDD6A6F1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of <external-xref legal-doc="usc" parsable-cite="usc/26/117">section 117(b)</external-xref> of the Internal Revenue Code of 1986 is amended—</text>
<paragraph id="H894F902855634A918E850B0C408E2647"><enum>(1)</enum><text>by striking the period at the end and inserting <quote>, or</quote>,</text>
</paragraph><paragraph id="H9134B2CD15C049E3AD41419A34C50CBB"><enum>(2)</enum><text>by striking <quote>received by an individual as a scholarship</quote> and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="H9273B689C7F54CF39DE8545ACC12858E" style="OLC"><text>received by an individual—</text><subparagraph id="HBDF98706F1264AB58BFCB0907D0491DE"><enum>(A)</enum><text display-inline="yes-display-inline">as a scholarship</text></subparagraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</paragraph><paragraph id="HAA938C0A84BE43BEBEA94CC942DD9725"><enum>(3)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HF2DB3FA082F248D29FF78F4989622FEB" style="OLC">
<subparagraph id="H35A471840A3D4BD99A736E68AE5FF95D"><enum>(B)</enum><text display-inline="yes-display-inline">as a Federal Pell Grant under section 401 of the Higher Education Act of 1965 (<external-xref legal-doc="usc" parsable-cite="usc/20/1070a">20 U.S.C. 1070a</external-xref>).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HECB83D475D0441CDBEDDD679B1FDAF47"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H37F6E04CF493479CAD77CE57A177DFB0"><enum>1203.</enum><header>Repeal of exclusion of income from United States savings bonds used to pay higher education tuition
and fees</header>
<subsection id="H8EDEA517E0DE4F619CD86DAEB6107083"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part III of subchapter B of chapter 1 is amended by striking section 135 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H962D04BCB674430A9D1A629B9CB3F4D6"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HEBC3C67D04F54387B0AB181010946919"><enum>1204.</enum><header>Repeal of deduction for interest on education loans</header>
<subsection id="HAFF722CD33B244CB9D6812548BD36C58"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VII of subchapter B of chapter 1 is amended by striking section 221 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H001BB4044B9649308AFB1A89069DBEA5"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 62(a) is amended by striking paragraph (17).</text>
</subsection><subsection id="H1443F9788FB647C5A40CC9001677F0C9"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H60648EA149B24D019ED775D41A285BA7"><enum>1205.</enum><header>Repeal of deduction for qualified tuition and related expenses</header>
<subsection id="HE6C49D52437546549296CA406C5B1278"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VII of subchapter B of chapter 1 is amended by striking section 222 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="HE612D3FBBB0340CF8309ABF8836EABC2"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 62(a) is amended by striking paragraph (18).</text>
</subsection><subsection id="H0B981C80D585452D8133198707DB79AE"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2013.</text>
</subsection></section><section id="H6A20EDD6B3F947A38AAA8B36A1ADDEEC"><enum>1206.</enum><header>No new contributions to Coverdell education savings accounts</header>
<subsection id="HE66878F344CD41D0ABA99FE31FE46562"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 530(b)(1)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H5C383290D2BE4AE99D54CFB799FD328F" style="OLC">
<subparagraph id="H8FA654323B634823AC79D114548730A2"><enum>(A)</enum><text display-inline="yes-display-inline">Except in the case of rollover contributions, no contribution will be accepted after December 31,
2014.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H025A4691A33A42C29A2D99CAC497AB6F"><enum>(b)</enum><header>Rollovers to qualified tuition programs permitted</header><text>Section 530(d)(5) is amended by inserting <quote>, or into (by purchase or contribution) a qualified tuition program (as defined in section 529),</quote> after <quote>into another Coverdell education savings account</quote>.</text>
</subsection><subsection id="H05487867D2104482863CDAD7E21D0CE4"><enum>(c)</enum><header>Effective dates</header>
<paragraph id="H52AA1B4543344F8DB3810D6D9DDC15E1"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this subsection, the amendments made by this section shall apply to
contributions made after December 31, 2014.</text>
</paragraph><paragraph id="H88C390C4EA894CC98EA6785A82BAF003"><enum>(2)</enum><header>Rollovers to qualified tuition programs</header><text>The amendments made by subsection (b) shall apply to distributions after December 31, 2014.</text>
</paragraph></subsection></section><section id="H35A068424BC24ABA947E3C524EEC25A6"><enum>1207.</enum><header>Repeal of exclusion for discharge of student loan indebtedness</header>
<subsection id="H30CDE0DA84584821B15D9D3E46617932"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 108 is amended by striking subsection (f).</text>
</subsection><subsection id="H1007C4DD6E5D4A4AA1DBC8188FCFF261"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HFC3E1DC80103478BAE9FD37E0F657090"><enum>(1)</enum><text display-inline="yes-display-inline">Section 3121(a)(20) is amended by striking <quote>108(f)(4),</quote>.</text>
</paragraph><paragraph id="H16A7CC3E15E147FBA17B6CECBDBA0B83"><enum>(2)</enum><text>Section 209(a)(17) of the Social Security Act is amended by striking <quote>108(f)(4),</quote>.</text>
</paragraph><paragraph id="H60BA2454813D40758DED445EB41AAEFF"><enum>(3)</enum><text>Section 3231(e)(5) is amended by striking <quote>108(f)(4),</quote>.</text>
</paragraph><paragraph id="H6CC3DA9DB1064502A343EA3449A0A08B"><enum>(4)</enum><text display-inline="yes-display-inline">Section 3306(b)(16) is amended by striking <quote>108(f)(4),</quote>.</text>
</paragraph><paragraph id="H9D3AE2A0508E414C8BA2771B9F12C846"><enum>(5)</enum><text display-inline="yes-display-inline">Section 3401(a)(19) is amended by striking <quote>108(f)(4),</quote>.</text>
</paragraph></subsection><subsection id="HDD462E1F7B4441FE887DB9317A842A24"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts discharged after December 31, 2014.</text>
</subsection></section><section id="H889DA9D6F84142C89B5EDCAF5916A0FC"><enum>1208.</enum><header>Repeal of exclusion for qualified tuition reductions</header>
<subsection id="H5E0E4865AF964803837CF22B2125D436"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 117 is amended by striking subsection (d).</text>
</subsection><subsection id="H204FD9B6EF294926B7CE610B723B0BD7"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HCD4226CAD10043088DD671084358F32C"><enum>(1)</enum><text display-inline="yes-display-inline">Section 117(c)(1) is amended—</text>
<subparagraph id="H8A09C010AA48474B98965D5EFAAF1CD1"><enum>(A)</enum><text>by striking <quote>subsections (a) and (d)</quote> and inserting <quote>subsection (a)</quote>, and</text>
</subparagraph><subparagraph id="H083EC2844E144C518924E927F6DF1F50"><enum>(B)</enum><text>by striking <quote>or qualified tuition reduction</quote>.</text>
</subparagraph></paragraph><paragraph id="H05F3C5D4AB0F4BBD9A5A5C965598319F"><enum>(2)</enum><text>Section 414(n)(3)(C) is amended by striking <quote>117(d),</quote>.</text>
</paragraph><paragraph id="H052E32E54E1745568B3ABD485036F337"><enum>(3)</enum><text>Section 414(t)(2) is amended by striking <quote>117(d),</quote>.</text>
</paragraph></subsection><subsection id="H8D544E9CD41D460EA91060D4DA74247C"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H2CB3BDD186574424B773594169C48596"><enum>1209.</enum><header>Repeal of exclusion for education assistance programs</header>
<subsection id="HDF6DC87778CB413B92C28156C610F028"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part III of subchapter B of chapter 1 is amended by striking section 127 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="HD06DA46100134F3499ED8604645EF452"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H7B8E06C9794540C198467D08B959FA3E"><enum>(1)</enum><text display-inline="yes-display-inline">Section 125(f)(1) is amended by striking <quote>127,</quote>.</text>
</paragraph><paragraph id="HE73E4BFC70D142F9ABEFA1E4D3F9D772"><enum>(2)</enum><text>Section 132(j)(8) is amended by striking <quote>which are not excludable from gross income under section 127</quote>.</text>
</paragraph><paragraph id="HFD0194509BF340B896A134BE35CBC8A8"><enum>(3)</enum><text>Section 137(c) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H3AE713BAAACF4DAFBAC7857B854308E9" style="OLC">
<subsection id="H26DA3CB31DBB483586E57048D9CF11AB"><enum>(c)</enum><header>Adoption assistance program</header>
<paragraph id="HE8AB9A9FD5B14127975E0B904F48520B"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this section, an adoption assistance program is a separate written plan of an
employer for the exclusive benefit of such employer’s employees under
which the employer provides such employees with adoption assistance.
Except as provided in paragraph (6), such program must meet the
requirements of paragraphs (2), (3), and (4).</text>
</paragraph><paragraph id="HE46E2013503245E1A7FB0C95A1E9DCCB"><enum>(2)</enum><header>Eligibility</header><text display-inline="yes-display-inline">The program shall benefit employees who qualify under a classification set up by the employer and
found by the Secretary not to be discriminatory in favor of employees who
are highly compensated employees (within the meaning of section 414(q)) or
their dependents. For purposes of this paragraph, there shall be excluded
from consideration employees not included in the program who are included
in a unit of employees covered by an agreement which the Secretary of
Labor finds to be a collective bargaining agreement between employee
representatives and one or more employers, if there is evidence that
adoption assistance benefits were the subject of good faith bargaining
between such employee representatives and such employer or employers.</text>
</paragraph><paragraph id="H62BB3E9B524440ED99C32F763D2E0BC3"><enum>(3)</enum><header>Principal shareholders or owners</header><text>Not more than 5 percent of the amounts paid or incurred by the employer for adoption assistance
during the year may be provided for the class of individuals who are
shareholders or owners (or their spouses or dependents), each of whom (on
any day of the year) owns more than 5 percent of the stock or of the
capital or profits interest in the employer.</text>
</paragraph><paragraph id="H4CD52764365E4501A175399FF75CA5E7"><enum>(4)</enum><header>Notification of employees</header><text>Reasonable notification of the availability and terms of the program must be provided to eligible
employees.</text>
</paragraph><paragraph id="HE2023745ACFB4E4595F17AF2E4AAFEA5"><enum>(5)</enum><header>No funding required</header><text>A program referred to in paragraph (1) is not required to be funded.</text>
</paragraph><paragraph id="HD91C1392E748419788E263FEBEE072AD"><enum>(6)</enum><header>Certain Federal programs</header><text display-inline="yes-display-inline">An adoption reimbursement program operated under <external-xref legal-doc="usc" parsable-cite="usc/10/1052">section 1052</external-xref> of title 10, United States Code
(relating to armed forces) or <external-xref legal-doc="usc" parsable-cite="usc/14/514">section 514</external-xref> of title 14, United States Code
(relating to members of the Coast Guard) shall be treated as an adoption
assistance program for purposes of this section.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HD0CDEECFCEC24CF6A72C9963E2108A26"><enum>(4)</enum><text>Section 414(n)(3)(C) is amended by striking <quote>127,</quote>.</text>
</paragraph><paragraph id="H6EC7C3B9BFE34B019E697320E89E0978"><enum>(5)</enum><text>Section 414(t)(2) is amended by striking <quote>127,</quote>.</text>
</paragraph><paragraph id="H9F884A774877498AAC3E99FA3933548A"><enum>(6)</enum><text>Section 3121(a)(18) is amended by striking <quote>127,</quote>.</text>
</paragraph><paragraph id="H1B1DE6D81E004ACD84D1538BAF47EFFD"><enum>(7)</enum><text>Section 209(a)(15) of the Social Security Act is amended by striking <quote>127 or</quote>.</text>
</paragraph><paragraph id="HA8C95E7C8D254B82B98522048E4FB766"><enum>(8)</enum><text>Section 3231(e) is amended by striking paragraph (6).</text>
</paragraph><paragraph id="HABF5B0B74E0B45EBAACD39D993F5DE86"><enum>(9)</enum><text>Section 3306(b)(13) is amended by striking <quote>127,</quote>.</text>
</paragraph><paragraph id="HCDBC218CDA98452BBAFCD1F894635671"><enum>(10)</enum><text>Section 3401(a)(18) is amended by striking <quote>127,</quote>.</text>
</paragraph><paragraph id="HEB27248631484895805E5E0E44E5E104"><enum>(11)</enum><text>Section 6039D(d)(1) is amended by striking <quote>127,</quote>.</text>
</paragraph></subsection><subsection id="H5E8636AFFC1843ABAA45AD798CC13B9D"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31,
2014.</text>
</subsection></section><section id="HFECC92B40A0C442DB970F7A7C1987C11"><enum>1210.</enum><header>Repeal of exception to 10-percent penalty for higher education expenses</header>
<subsection id="HCBD6BCF5F9EE4DFCA9645E70005BC4E5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 72(t)(2) is amended by striking subparagraph (E).</text>
</subsection><subsection id="H463AB9561CE9497C9A5A13E69122E2AD"><enum>(b)</enum><header>Conforming amendment</header><text>Section 72(t) is amended by striking paragraph (7).</text>
</subsection><subsection id="HB0C0ECED1FD243EAAB379911B517AC3C"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to distributions after December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="H90395F22FCDB4851B06C9247EBF6C617"><enum>D</enum><header>Repeal of certain credits for individuals</header>
<section id="HDD46B0BB4F3849E7BED9BC921A2344B6"><enum>1301.</enum><header>Repeal of dependent care credit</header>
<subsection id="H094748AD809B4908A9C684F623149DE9"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart A of part IV of subchapter A of chapter 1 is amended by striking section 21 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection commented="no" id="H076EF8738D9A4853976CA05B6876225B"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph commented="no" id="H15877A31B8734315B25CF727B7551AB7"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HF394F8FF4F0A4603A6D76FF1F9DABC14"><enum>(A)</enum><text>Section 129(a)(2) is amended by striking subparagraph (C).</text>
</subparagraph><subparagraph id="HE7050032E36F4D7BB7CDA92BFD138E7C" indent="up1"><enum>(B)</enum><text>Section 129(e) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HD0B1C8E2F031421889BAB651D45A69A4" style="OLC">
<paragraph id="HB87036D7089546ACABE75C25FDFDF880"><enum>(10)</enum><header>Marital status</header><text display-inline="yes-display-inline">Rules similar to the rules of subsections (a) and (b) of section 7703 shall apply for purposes of
this section.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H5FB32839CDC74342890C981623F3D283"><enum>(2)</enum><text>Section 129(e)(1) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H3A874617A19C4A7ABEE4C4D18DD28262" style="OLC">
<paragraph id="HC967AE0EB05E402C96D686263C1ACDF9"><enum>(1)</enum><header>Dependent care assistance</header>
<subparagraph id="HACC3D0EC2FBF4EC4B9BB5D76558C24DF"><enum>(A)</enum><header>In general</header><text>The term <quote>dependent care assistance</quote> means employment-related expenses and the provision of services which constitute
employment-related expenses.</text>
</subparagraph><subparagraph id="H5943EEE6AF8C4C5F973CB5A731CF3BA4"><enum>(B)</enum><header>Employment-related expenses</header><text display-inline="yes-display-inline">The term <quote>employment-related expenses</quote> means amounts paid for the following expenses, but only if such expenses are incurred to enable
the employee to be gainfully employed for any period for which there are 1
or more qualifying individuals with respect to the employee:</text>
<clause id="H88D711E77F1E4B4D863DC7726F5EF169"><enum>(i)</enum><text>expenses for household services, and</text>
</clause><clause id="H8AA29C8852484D598359D4F8B958E715"><enum>(ii)</enum><text>expenses for the care of a qualifying individual.</text></clause><continuation-text continuation-text-level="subparagraph">Such term shall not include any amount paid for services outside the employee’s household at a
camp where the qualifying individual stays overnight.</continuation-text></subparagraph><subparagraph id="HB981D3BAFDAD495480695705DE3A94FA"><enum>(C)</enum><header>Exception</header><text>Employment-related expenses described in subparagraph (A) which are incurred for services outside
the employee’s household shall be taken into account only if incurred for
the care of—</text>
<clause id="H071F3EE142D8456989DB0AC06952635E"><enum>(i)</enum><text>a qualifying individual described in subparagraph (D)(i), or</text>
</clause><clause id="HF2C40393A1104010B452A1917EFC17B0"><enum>(ii)</enum><text>a qualifying individual (not described in subparagraph (D)(i)) who regularly spends at least 8
hours each day in the employee’s household.</text>
</clause></subparagraph><subparagraph id="HD3A11822FE46461DA3B334AC2E771002"><enum>(D)</enum><header>Qualifying individual</header><text display-inline="yes-display-inline">The term <quote>qualifying individual</quote> means—</text>
<clause id="HFC2490B4AF1A4FB0AE2B807DB0F82BAA"><enum>(i)</enum><text>a dependent of the taxpayer (as defined in section 7705(a)(1)) who has not attained age 13,</text>
</clause><clause id="H8E13A4B606DD4A8AB6840B5F41D54E4A"><enum>(ii)</enum><text>a dependent of the taxpayer (as defined in section 7705, determined without regard to subsections
(b)(1), (b)(2), and (d)(1)(B)) who is physically or mentally incapable of
caring for himself or herself and who has the same principal place of
abode as the taxpayer for more than one-half of such taxable year, or</text>
</clause><clause id="H3BF1D27E04374898AD0F94F6FA960546"><enum>(iii)</enum><text>the spouse of the taxpayer, if the spouse is physically or mentally incapable of caring for himself
or herself and who has the same principal place of abode as the taxpayer
for more than one-half of such taxable year.</text>
</clause></subparagraph><subparagraph id="H9BA3185D3A1245ADA3D856F414409386"><enum>(E)</enum><header> Dependent care centers</header><text>Employment-related expenses described in subparagraph (A) which are incurred for services provided
outside the employee’s household by a dependent care center shall be taken
into account only if—</text>
<clause id="H480E0EE7AA194AB3BF69F3D4F8EFBCFB"><enum>(i)</enum><text>such center complies with all applicable laws and regulations of a State or unit of local
government, and</text>
</clause><clause id="HF2CCBAE126B04B7DB05715C4DF88D27A"><enum>(ii)</enum><text>the requirements of subparagraph (B) are met.</text>
</clause></subparagraph><subparagraph id="H4BA1604CAC294C1992B5C6CDD3517E6F"><enum>(F)</enum><header>Dependent care center defined</header><text>For purposes of this paragraph, the term <quote>dependent care center</quote> means any facility which—</text>
<clause id="H441F67586CB94D0F9489BB8022816A66"><enum>(i)</enum><text>provides care for more than six individuals (other than individuals who reside at the facility),
and</text>
</clause><clause id="H5651E9A3BD414AB2A380E1C64A5EA2E3"><enum>(ii)</enum><text>receives a fee, payment, or grant for providing services for any of the individuals (regardless of
whether such facility is operated for profit).</text>
</clause></subparagraph><subparagraph id="H0F58A39E6CFE4C8C8F47D0253DFFF227"><enum>(G)</enum><header>Place of abode</header><text display-inline="yes-display-inline">For purposes of this paragraph, an individual shall not be treated as having the same principal
place of abode as the taxpayer if at any time during the taxable year of
the taxpayer the relationship between the individual and the taxpayer is
in violation of local law.</text>
</subparagraph><subparagraph id="HA0808A574B3E432381B970313E8BDB44"><enum>(H)</enum><header>Special dependency test in case of divorced parents, etc.</header><text>If—</text>
<clause id="H94F3B433AD6943EC9693607D3F73738E"><enum>(i)</enum><text>section 7705(e) applies to any child with respect to any calendar year, and</text>
</clause><clause id="H9E00F30B2C284E5D8F4224B8C41B423D"><enum>(ii)</enum><text>such child is under the age of 13 or is physically or mentally incapable of caring for himself, in
the case of any taxable year beginning in such calendar year,</text></clause><continuation-text continuation-text-level="subparagraph">such child shall be treated as a qualifying individual described in clause (i) or (ii) of
subparagraph (D) (whichever is appropriate) with respect to the custodial
parent (as defined in section 7705(e)(4)(A)), and shall not be treated as
a qualifying individual with respect to the noncustodial parent.</continuation-text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H943B1F161DDC4E2CA68BD1F9DEB79AA1"><enum>(3)</enum><text>Section 6213(g)(2)(L) is amended by striking <quote>21,</quote>.</text>
</paragraph></subsection><subsection id="H43B105D26CFF4765A3DE573E49EEA938"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H7C118474B5334DCBBD75224495F0F87A"><enum>1302.</enum><header>Repeal of credit for adoption expenses</header>
<subsection id="HC511D54FFFD845BDA23B275C1E77A273"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection commented="no" id="HB4CF5805F615470BAD8204751AFDFE20"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H2333238C7A834B44B8D63B0AE5CDBBF3"><enum>(1)</enum><text>Section 137 is amended by striking subsections (d) and (e).</text>
</paragraph><paragraph id="H1C2292BD2E5242B3860EE4CF064B05D7"><enum>(2)</enum><text>Subsections (d) and (e) of section 23 (prior to being stricken by subsection (a)) are each moved to
section 137 (after amendment by paragraph (1)) and inserted after
subsection (c) as new subsections (d) and (e), respectively.</text>
</paragraph><paragraph id="H9E8C1B8087AD44588DF541142F21CCA9"><enum>(3)</enum><text>Section 137(d)(1)(D), as amended by paragraphs (1) and (2), is amended by inserting <quote>(determined without regard to reimbursements under this section)</quote> before the period at the end.</text>
</paragraph><paragraph id="H9964FCA71D8845F1A605674F163D2878"><enum>(4)</enum><text>Section 137(e), as amended by paragraphs (1) and (2), is amended by striking <quote>(as defined in section 217(h)(3))</quote> and inserting <quote>(or any possession of the United States)</quote>.</text>
</paragraph><paragraph id="H4952EC6DD5C84905A6587C973D62F490"><enum>(5)</enum><text>Section 137 is amended by redesignating subsection (f) as subsection (h), and by inserting before
subsection (h) (as so redesignated) the following new subsections:</text>
<quoted-block display-inline="no-display-inline" id="H2F5E3FC5D6284434B808AB65B75F3BE9" style="OLC">
<subsection id="H8818D45242B841B9BE8F2A044F2DB6F2"><enum>(f)</enum><header>Filing requirements</header>
<paragraph id="H6EC1D9B3EFA248C6987C5A97D42CBEEE"><enum>(1)</enum><header>Married couples must file joint return</header>
<subparagraph id="H4814F1B5342440ACB03B1BE7D0A796AD"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">If the taxpayer is married at the close of the taxable year, subsection (a) shall apply to the
taxpayer only if the taxpayer and the taxpayer’s spouse file a joint
return for the taxable year.</text>
</subparagraph><subparagraph id="H226A6E717C654A9CBC177F520CBF1A9C"><enum>(B)</enum><header>Marital status</header><text display-inline="yes-display-inline">Rules similar to the rules of subsections (a) and (b) of section 7703 shall apply for purposes of
this section.</text>
</subparagraph></paragraph><paragraph id="H5CDCA66D01B34413B26771ABB3EDC8D8"><enum>(2)</enum><header>Taxpayer must include TIN</header>
<subparagraph id="HD72F376D6B1C405B80D32F76295EBCD7"><enum>(A)</enum><header>In general</header><text>Subsection (a) shall apply with respect to any child only if the taxpayer includes (if known) the
name, age, and TIN of such child on the return of tax for the taxable
year.</text>
</subparagraph><subparagraph id="HB77F90B946754BEFB02184B0CC03D113"><enum>(B)</enum><header>Other methods</header><text display-inline="yes-display-inline">The Secretary may, in lieu of the information referred to in subparagraph (A), require other
information meeting the purposes of subparagraph (A), including
identification of an agent assisting with the adoption.</text>
</subparagraph></paragraph></subsection><subsection id="HC469E0B577A740948425DE4353FFC325"><enum>(g)</enum><header>Basis adjustments</header><text>For purposes of this subtitle, if the amount of any expenditure with respect to any property is
excluded from gross income under this section, the increase in the basis
of such property which would (but for this subsection) result from such
expenditure shall be reduced by the amount of such expenditure which is so
excluded.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H5C4F87D2A0BF46D8986362656870F6A9"><enum>(6)</enum><text>Section 1016(a)(26) is amended by striking <quote>sections 23(g) and 137(e)</quote> and inserting <quote>section 137(g)</quote>.</text>
</paragraph></subsection><subsection commented="no" id="H62E20B215F2248D6846832BA07C15694"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H82892B0B4DD54F419F79131434C23188"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31,
2014.</text>
</paragraph><paragraph id="H5822A9F079964A53892AB8DC870EB926"><enum>(2)</enum><header>Special needs adoptions</header><text display-inline="yes-display-inline">For purposes of paragraph (1), any amount treated as paid by the taxpayer under section 23(a)(3) of
the Internal Revenue Code of 1986 (as in effect before its repeal by
subsection (a)) shall be treated as paid on the date that the adoption
referred to in such section becomes final.</text>
</paragraph></subsection></section><section id="H00710A9A592D4E629AB09B17D78017DE"><enum>1303.</enum><header>Repeal of credit for nonbusiness energy property</header>
<subsection id="HF9B778FD169443E796B8670C5CAF2327"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart A of part IV of subchapter A of chapter 1 is amended by striking section 25C (and by
striking the item relating to such section in the table of sections of
such subpart).</text>
</subsection><subsection id="HDCF28573B83146F1B18EA0A19FB4ED2D"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 1016(a) is amended by striking paragraph (33).</text>
</subsection><subsection id="H60D2E67B43DC4027A146B3E60F454D5C"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to property placed in service after December 31,
2013.</text>
</subsection></section><section id="H14DB40A9AFDF414DB9316F2943EBF37F"><enum>1304.</enum><header>Repeal of credit for residential energy efficient property</header>
<subsection id="HFE93C65F104F45429F3D2C8B7495A2A1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart A of part IV of subchapter A of chapter 1 is amended by striking section 25D (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="HD37F93F6FF5D492D979FB21397183ED6"><enum>(b)</enum><header>Conforming amendment</header><text>Section 1016(a) is amended by striking paragraph (34).</text>
</subsection><subsection id="HEAF6EC487790411E82198D24680211A4"><enum>(c)</enum><header>Effective date</header><text>The amendment made by this section shall apply to property placed in service after December 31,
2014.</text>
</subsection></section><section id="HDF5CB7D12EFF439DB7F8C679E419364C"><enum>1305.</enum><header>Repeal of credit for qualified electric vehicles</header>
<subsection id="H5BCD0B24139D437785C96F80C51AA00F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30 (and by
striking the item relating to such section in the table of sections of
such subpart).</text>
</subsection><subsection id="HA1E5A2DD1AB64D2A8ECE6C47820A242F"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H65AEDA62650F4FA2B3B2A35CE70DAA04"><enum>(1)</enum><text>Section 1016(a) is amended by striking paragraph (25).</text>
</paragraph><paragraph id="H3D4EAA01906F4DFEBA22C780C7002924"><enum>(2)</enum><text>Section 6501(m) is amended by striking <quote>section 30(e)(6),</quote>.</text>
</paragraph></subsection><subsection id="H5EA7910756CD4781A47932AD5DAB9E0A"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to vehicles acquired after December 31, 2011.</text>
</subsection></section><section id="H13467D8C7B584E4C9072AC9C068D550B"><enum>1306.</enum><header>Repeal of alternative motor vehicle credit</header>
<subsection id="H38AA072AA1A34CCB9A5A7A492250B65C"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30B (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="HE8FDEC415B284BE3AA04F442A1AFE0DE"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HAAC2B1DAA6D34D3CA5FEF686814C86C1"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (25).</text>
</paragraph><paragraph id="HA96DAEBCCC2C4A4382E7CA09CE6D0585"><enum>(2)</enum><text>Section 1016(a) is amended by striking paragraph (35).</text>
</paragraph><paragraph id="H171357D477C7409EAACF07FDCF052A8F"><enum>(3)</enum><text>Section 6501(m) is amended by striking <quote>30B(h)(9),</quote>.</text>
</paragraph></subsection><subsection id="H7D25FAF8F45940C0A54C1FE54A0B9260"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to property purchased after December 31, 2014.</text>
</subsection></section><section id="H6577DDB4054E49919034776B373B6624"><enum>1307.</enum><header>Repeal of alternative fuel vehicle refueling property credit</header>
<subsection id="HB238FE47746F4C67A0E3FCB91709AB54"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30C (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H1F9B35CBF4D646D197069C69365DEFDC"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H2BD27732BFF04FC18CBCAF569B872CB1"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (26).</text>
</paragraph><paragraph id="HBA2075836F7C4B9698A1082FDF342915"><enum>(2)</enum><text>Section 1016(a) is amended by striking paragraph (36).</text>
</paragraph><paragraph id="H0D63914835354F90BD5A790A0F0EB9C9"><enum>(3)</enum><text>Section 6501(m) is amended by striking <quote>30C(e)(5),</quote>.</text>
</paragraph></subsection><subsection id="H183712AB20484A91A7AEBB7C2CFC155B"><enum>(c)</enum><header>Effective date</header><text>The amendment made by this section shall apply to property placed in service after December 31,
2014.</text>
</subsection></section><section id="H4601B6AB91034CAE9D9FDB66C53D4BBE"><enum>1308.</enum><header>Repeal of credit for new qualified plug-in electric drive motor vehicles</header>
<subsection id="HE8C4823A1EB942B88D5606151177939D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection commented="no" id="HB3EC32BB7A794F93879D3453BA3E3718"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H5E5E5BE059204AD2B08C77CF1DF0E6FC"><enum>(1)</enum><text>Section 38(b) is amended by striking paragraph (35).</text>
</paragraph><paragraph id="H468E17A542674BD0B55153AD5DEE3270"><enum>(2)</enum><text>Section 1016(a) is amended by striking paragraph (37).</text>
</paragraph><paragraph id="H74EB2270A6824568ACCE1A5BB03B3ADC"><enum>(3)</enum><text>Section 6501(m) is amended by striking <quote>30D(e)(4),</quote>.</text>
</paragraph></subsection><subsection id="H44EAC27423BA4DB5873F4FF131CC0FEE"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to vehicles acquired after December 31, 2014.</text>
</subsection></section><section id="H86C33B32702A4EDA8A03239314102270"><enum>1309.</enum><header>Repeal of credit for health insurance costs of eligible individuals</header>
<subsection id="H285A3F65B002442596A318A1BC68FCA7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart C of part IV of subchapter A of chapter 1 is amended by striking section 35 (and by
striking the item relating to such section in the table of sections of
such subpart).</text>
</subsection><subsection id="HA09A4BC5CA1945A190368039438F2A20"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HDE5156DA18834A03A997501025EBAD47"><enum>(1)</enum><text>Chapter 77 is amended by striking section 7527 (and by striking the item relating to such section
in the table of sections of such chapter).</text>
</paragraph><paragraph id="HB0B83BA42D96419FA1F7DB5B793BC773"><enum>(2)</enum><text>Section 4980B(f)(5)(C)(iv)(II) is amended by inserting <quote>as in effect before its repeal</quote> after <quote>section 35(c)</quote>.</text>
</paragraph><paragraph id="HDECEC9DF95FD426496E6E8DAAEB82E8A"><enum>(3)</enum><text>Section 6211(b)(4)(A) is amended by striking <quote>35,</quote>.</text>
</paragraph></subsection><subsection id="H4FD55A4B2B72420581A6106059504510"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to months beginning after December 31, 2013.</text>
</subsection></section><section id="HB998F1D1B54C4E47AB2D8BC79D723B10"><enum>1310.</enum><header>Repeal of first-time homebuyer credit</header>
<subsection id="H8A62A5495B6849888B6F6518133DF90F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart C of part IV of subchapter A of chapter 1 is amended by striking section 36 (and by
striking the item relating to such section in the table of sections of
such subpart).</text>
</subsection><subsection id="H79BC0A1FAA3749EAAEC1BAC556CFBE07"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H4578C18ECB7D40FE8934F78ED2145673"><enum>(1)</enum><text display-inline="yes-display-inline">Section 26(b)(2) is amended by striking subparagraph (W).</text>
</paragraph><paragraph id="H7F1F1F8B4F304FB184BF40FAB67BB646"><enum>(2)</enum><text>Section 1400C(e) is amended by striking paragraph (4).</text>
</paragraph><paragraph id="HD865372E6B4A4ED4B4FF42820C0D990D"><enum>(3)</enum><text>Section 6211(b)(4)(A) is amended by striking <quote>36,</quote>.</text>
</paragraph><paragraph id="HD0F960293AED4D0BBFDE7A017B452122"><enum>(4)</enum><text>Section 6213(g)(2) is amended by striking subparagraphs (O) and (P).</text>
</paragraph></subsection><subsection id="HFE450D8444AB49F68960C0625B35BCE7"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to residences purchased after June 30, 2011.</text>
</subsection></section></subtitle><subtitle id="H5DFD9F4951C64678A24B5A9D2F9FCED1"><enum>E</enum><header>Deductions, exclusions, and certain other provisions</header>
<section id="H68652DDCA2264298B3EAB28AD18631AD"><enum>1401.</enum><header>Exclusion of gain from sale of a principal residence</header>
<subsection id="H96D107FD797E4643B18053B40E810F83"><enum>(a)</enum><header>Requirement that residence be principal residence for 5 years during 8-Year period</header><text display-inline="yes-display-inline">Subsection (a) of section 121 is amended—</text>
<paragraph id="H49E17DF295F34125A8D9630C3850F34E"><enum>(1)</enum><text>by striking <quote>5-year period</quote> and inserting <quote>8-year period</quote>, and</text>
</paragraph><paragraph id="H8F4BF9C697384BF4B46A842900343EB9"><enum>(2)</enum><text>by striking <quote>2 years</quote> and inserting <quote>5 years</quote>.</text>
</paragraph></subsection><subsection id="HCFD191C1E468410EAE7147F8FAA975DE"><enum>(b)</enum><header>Application to only 1 sale or exchange every 5 years</header><text>Paragraph (3) of section 121(b) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HEA6E0CE3124A4B05BC9502CF32A3DB3C" style="OLC">
<paragraph id="H5A26765275A845B58FFC7E07739BB1AD"><enum>(3)</enum><header>Application to only 1 sale or exchange every 5 years</header><text display-inline="yes-display-inline">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.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC3A06AFF2B1A4E4DBC27253A10C6635F"><enum>(c)</enum><header>Phaseout based on modified adjusted gross income</header><text>Section 121 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H0AFE8173CBE748798E0762F0C53F83A4" style="OLC">
<subsection id="HD1694B6B12794309BB1F1002B4204B6D"><enum>(h)</enum><header>Phaseout based on modified adjusted gross income</header>
<paragraph id="H62CA3FA874A9436EA968D57DB2B8FBDA"><enum>(1)</enum><header>In general</header><text>If the modified adjusted gross income of the taxpayer for the taxable year 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.</text>
</paragraph><paragraph id="H25CA01FCD6FE4567BDD90BE9D84E396C"><enum>(2)</enum><header>Modified adjusted gross income</header><text>For purposes of this subsection, the term <quote>modified adjusted gross income</quote> has the meaning given such term by section 2 determined after the application of this section but
without regard to this subsection.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H2EB220FAC46040549110110B908D4F5D"><enum>(d)</enum><header>Conforming amendments</header>
<paragraph id="H566A7BEB0CA545A194D9DD117912C5A5"><enum>(1)</enum><text>The last paragraph of section 121(b) (relating to exclusion of gain allocated to nonqualified use)
is redesignated as paragraph (5).</text>
</paragraph><paragraph id="H3A82E96E6EBC45DCA352916003FFD0D3"><enum>(2)</enum><text>The following provisions of section 121 are each amended by striking <quote>5-year period</quote> each place it appears therein and inserting <quote>8-year period</quote>:</text>
<subparagraph id="H207D9680716948ABAA181DD998D39C92"><enum>(A)</enum><text>Subsection (b)(5)(C)(ii)(I) (as redesignated by paragraph (1)).</text>
</subparagraph><subparagraph id="HA19B03300B1242269ACEFA490D18B0DB"><enum>(B)</enum><text>Subsection (c)(1)(B)(i)(I).</text>
</subparagraph><subparagraph id="H7047B7885985464FB4AAAE6F342B62E9"><enum>(C)</enum><text>Subsection (d)(7)(B).</text>
</subparagraph><subparagraph id="H0D7228AFF238443ABFF7F46B2D63A7D6"><enum>(D)</enum><text>Subparagraphs (A) and (B) of subsection (d)(9).</text>
</subparagraph><subparagraph id="H81EDA04A2DFE402E8BCD2BC3A90FE591"><enum>(E)</enum><text>Subsection (d)(10)</text>
</subparagraph><subparagraph id="H249303EF5CB74FAB9C1D5C6E49B34EC7"><enum>(F)</enum><text>Subsection (d)(12)(A).</text>
</subparagraph></paragraph><paragraph id="H55C6BCEC8967409AADC686F909FFFF34"><enum>(3)</enum><text>Section 121(c)(1)(B)(ii) is amended by striking <quote>2 years</quote> and inserting <quote>5 years</quote>:</text>
</paragraph></subsection><subsection id="H1D1608B5D5AD4EE3AAF0962F5D5C3320"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to sales and exchanges after December 31, 2014.</text>
</subsection></section><section id="HEA4548FD948F498BB631EB798EBF5C70"><enum>1402.</enum><header>Mortgage interest</header>
<subsection id="H8376018387B44DCE958AFDE485858755"><enum>(a)</enum><header>Modification of limitations</header>
<paragraph id="H28E2A7E140F74FC49B3DA5D3FB1A2DD6"><enum>(1)</enum><header>In general</header><text>Paragraph (3) of section 163(h) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HA1CB01148608432087F4AD4F013525F9" style="OLC">
<paragraph id="H2D67631E317B4FDF9EC81531B0BD8F6B"><enum>(3)</enum><header>Qualified residence interest</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="H27FB3CC4F6624F5A87224CFEB7A34AD4"><enum>(A)</enum><header>In general</header><text>The term <quote>qualified residence interest</quote> means any interest which is paid or accrued during the taxable year on indebtedness which—</text>
<clause id="HFD784ECD95ED4A08AB53FEE27AAADE2E"><enum>(i)</enum><text>is incurred in acquiring, constructing, or substantially improving any qualified residence
(determined as of the time the interest is accrued) of the taxpayer, and</text>
</clause><clause id="HBD34799EFCA44419B1AA6E849054DAD9"><enum>(ii)</enum><text>is secured by such residence.</text></clause><continuation-text continuation-text-level="subparagraph">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.</continuation-text></subparagraph><subparagraph id="H32156239386A47768524143553F58487"><enum>(B)</enum><header>Limitation</header>
<clause id="H0473069CF22D4AD087D150CFE12E2C7F"><enum>(i)</enum><header>In general</header><text>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).</text>
</clause><clause id="HF3BDC309FA3343CC9C4302A5E6683E12"><enum>(ii)</enum><header>Phase-in of decreased limitation</header><text>For purposes of applying clause (i) with respect to any indebtedness incurred during a calendar
year after 2014 and before 2018, the $500,000 amount in clause (i) shall
be increased by the phase-in amount determined in accordance with the
following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="1" frame="topbot" line-rules="hor-ver" rowsep="0" rule-weights="4.4.4.0.0.0" table-template-name="Generic: 2 text, 1st longer" table-type="">
<tgroup cols="2" grid-typeface="1.1" no-carding="1" rowsep="0" thead-tbody-ldg-size="10.10.12"><colspec coldef="txt" colname="column1" colwidth="217pts" min-data-value="200" rowsep="0"></colspec><colspec coldef="txt-no-ldr" colname="column2" colsep="1" colwidth="108pts" min-data-value="100"></colspec><thead>
<row><entry align="center" colname="column1" morerows="0" namest="column1" rowsep="1">In the case of indebtedness incurred during:</entry><entry align="center" colname="column2" morerows="0" namest="column2" rowsep="1">The phase-in amount is:</entry></row></thead>
<tbody>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2015</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">$375,000</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2016</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">$250,000</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2017</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">$125,000</entry></row></tbody></tgroup></table>
</clause><clause id="H9C7C3E818855404EBE28E02A5806E408"><enum>(iii)</enum><header>Treatment of refinancings of indebtedness incurred during phase-in period</header><text>In the case of any indebtedness which is incurred to refinance indebtedness to which clause (ii)
applies (or to which this clause applies), such refinanced indebtedness
shall be treated for purposes of clause (ii) as incurred on the date that
the original indebtedness was incurred to the extent the amount of the
indebtedness resulting from such refinancing does not exceed the amount of
the refinanced indebtedness.</text>
</clause></subparagraph><subparagraph id="H22EDC6FD238C499E8E05B83C4E9161C6"><enum>(C)</enum><header>Treatment of indebtedness incurred before January 1, 2015</header>
<clause id="HBABB075654214F2895A0FF3C0C5BADC4"><enum>(i)</enum><header>In general</header><text>In the case of any pre-January 1, 2015, indebtedness, this paragraph shall apply as in effect
immediately before the enactment of the <short-title>Tax Reform Act of 2014</short-title>.</text>
</clause><clause id="H783072629A6347569B877EE11782DAFE"><enum>(ii)</enum><header>Reduction in dollar limitation</header><text display-inline="yes-display-inline">The limitation of subparagraph (B) (after application of clause (ii) thereof) shall be reduced (but
not below zero) by the aggregate amount of outstanding pre-January 1,
2015, indebtedness of the taxpayer with respect to which interest is
allowable as a deduction by reason of this subparagraph.</text>
</clause><clause id="H6C63329DDFC141DFA559AA3CCA8611FA"><enum>(iii)</enum><header>Pre-January 1, 2015, indebtedness</header><text>For purposes of this subparagraph, the term <quote>pre-January 1, 2015, indebtedness</quote> means—</text>
<subclause id="H1987169DBB6C407CA682AF910231B71F"><enum>(I)</enum><text display-inline="yes-display-inline">any indebtedness incurred before January 1, 2015, and</text>
</subclause><subclause id="HEE825AE5B9294243BAD978A62A4A36DC"><enum>(II)</enum><text display-inline="yes-display-inline">any indebtedness incurred on or after such date to refinance indebtedness described in subclause
(I) (or refinanced indebtedness meeting the requirements of this
subclause) to the extent the amount of the indebtedness resulting from
such refinancing does not exceed the amount of the refinanced
indebtedness.</text>
</subclause></clause></subparagraph><subparagraph id="H8BC81F1A2B4D44D0B2EE134EEA333FFD"><enum>(D)</enum><header>Limitation on period of refinancing</header><text>Subparagraphs (B)(iii) and (C)(iii)(II) shall not apply to any indebtedness after—</text>
<clause id="H92F30B9091754B21AABD154154F27896"><enum>(i)</enum><text>the expiration of the term of the original indebtedness, or</text>
</clause><clause id="H49DD9FB4B4EA498A8B4C342573A405DF"><enum>(ii)</enum><text>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).</text>
</clause></subparagraph><subparagraph id="H6C36AAA4455F4914864BCDDCC4BC4CE2"><enum>(E)</enum><header>Coordination with certain exclusions</header><text>The amount otherwise treated as qualified residence interest (determined without regard to this
subparagraph) with respect to any residence of the taxpayer for any
taxable year shall be reduced by the sum of the amounts excludable from
the gross income of such taxpayer under sections 107 and 119 with respect
to such residence.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HEF26FD9D533F4B299C41E72FA06C0A3A"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="H76D3A5582C6D43A3BDB85713B5DA1396"><enum>(A)</enum><text>Section 108(h)(2) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H35566B2709414C4FA2ED1D99EC8BB884" style="OLC">
<paragraph id="H11C8D3202EDD4A4FBAB713158D423151"><enum>(2)</enum><header>Qualified principal residence indebtedness</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>qualified principal residence indebtedness</quote> means indebtedness described in section 163(h)(3) applied without regard to clauses (ii) and (iii)
of subparagraph (B) thereof and by substituting <quote>$2,000,000</quote> for <quote>$500,000</quote> in subparagraph (B)(i) thereof.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H9756A7A532054E36BCB365A1DEF6846C"><enum>(B)</enum><text>Section 163(h) is amended—</text>
<clause id="HC63F0DA3FE36455C80339DDD43ECE0A7"><enum>(i)</enum><text>by striking subparagraph (E) in paragraph (3),</text>
</clause><clause id="HBA8F53A55B3448BBBDE3604433C1B93C"><enum>(ii)</enum><text>by striking subparagraphs (E) and (F) in paragraph (4), and</text>
</clause><clause id="H897A243E2F6D4E1DB4362BFD7E3AC062"><enum>(iii)</enum><text>by striking paragraph (5).</text>
</clause></subparagraph><subparagraph id="HF5082EA839BD4FF7950DD9CEEB724E04"><enum>(C)</enum><text>Section 265(a)(6) is amended—</text>
<clause id="H35BC8979878040899D179EB6F4DF3CC5"><enum>(i)</enum><text>by striking <quote>an amount as—</quote> and all that follows and inserting <quote>an amount as a military housing allowance.</quote>, and</text>
</clause><clause id="HC95156C4060646AA9A8F7DD606E814EF"><enum>(ii)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">parsonage and</header-in-text></quote> in the heading thereof.</text>
</clause></subparagraph></paragraph></subsection><subsection id="HA7C1A0FFA9D341C5B7EECC9CBA440F77"><enum>(b)</enum><header>Modification of reporting requirements</header>
<paragraph id="H1A130403AAEB4ED2B946CEB32AF977B6"><enum>(1)</enum><header>Information return requirements</header><text display-inline="yes-display-inline">Paragraph (2) of section 6050H(b) is amended by striking <quote>and</quote> at the end of subparagraph (C), by redesignating subparagraph (D) as subparagraph (F) and by
inserting after subparagraph (C) the following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="HF2B3AD2E00C845228872058A55F2CDB8" style="OLC">
<subparagraph id="H6339B737BBC14E19ADEB82D08F6B5646"><enum>(D)</enum><text display-inline="yes-display-inline">the amount of outstanding principal on the mortgage as of the beginning of such calendar year,</text>
</subparagraph><subparagraph id="H32D38FB176E0413AB663DEF8040B04A4"><enum>(E)</enum><text>the date of the origination of the mortgage, and</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H5609EFFF2EDA4B6BA9DC94A09C1288BC"><enum>(2)</enum><header>Statements to individuals</header><text>Paragraph (2) of section 6050H(d) is amended by striking <quote>subsection (b)(2)(C)</quote> and inserting <quote>subparagraphs (C), (D), and (E) of subsection (b)(2)</quote>.</text>
</paragraph></subsection><subsection id="H312908519249402B8CA7C73F25D87279"><enum>(c)</enum><header>Effective dates</header>
<paragraph id="H8FDD99886DF24B3586FEFD763EF10BD4"><enum>(1)</enum><header>Modification of limitations</header>
<subparagraph id="H1D6929E0593047CAB3A020556583B7F4"><enum>(A)</enum><header>In general</header><text>The amendments made by subsection (a) shall apply to interest paid or accrued in taxable years
beginning after December 31, 2014, with respect to indebtedness incurred
before, on, or after such date.</text>
</subparagraph><subparagraph id="HF1D399A5DB064F039138DC835AEF0420"><enum>(B)</enum><header>Treatment of grandfathered indebtedness</header><text>For application of the amendments made by subsection (a) to grandfathered indebtedness, see section
163(h)(3)(C) of the Internal Revenue Code of 1986 as amended by this
section.</text>
</subparagraph></paragraph><paragraph id="HD524D2DA188C497FA923CF1C21B77C2C"><enum>(2)</enum><header>Modification of reporting requirements</header><text>The amendments made by subsection (b) shall apply to returns and statements for calendar years
after December 31, 2014.</text>
</paragraph></subsection></section><section id="H03433269FC384AB68AC4915E0487ABAE"><enum>1403.</enum><header>Charitable contributions</header>
<subsection id="H640D925132514232B08DE05A7322E8E8"><enum>(a)</enum><header>2 percent floor on charitable deduction for individuals</header><text display-inline="yes-display-inline">Paragraph (3) of section 170(b) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HDFF93D9276C24EE2823AD97221A18944" style="OLC">
<paragraph id="HC6ABBD1D93FA427BAB636BDCC7F1C679"><enum>(3)</enum><header>2 percent floor on charitable deduction for individuals</header><text display-inline="yes-display-inline">The amount of charitable contributions taken into account under this section as made by any
individual during a taxable year (determined without regard to subsection
(d)) shall be reduced by 2 percent of the taxpayer’s contribution base for
such taxable year. Such reduction shall apply—</text>
<subparagraph id="HD9DD39379C434AF5B8E36E08E7221B11"><enum>(A)</enum><text>first, to charitable contributions to which paragraph (1)(B) applies to the extent thereof,</text>
</subparagraph><subparagraph commented="no" id="H363C6885489D4D23AD8898AD9D23A817"><enum>(B)</enum><text>second, to charitable contributions to which paragraph (1)(C) applies to the extent thereof, and</text>
</subparagraph><subparagraph id="H7D76DDB7F1D4402DBE54F861919B2A8B"><enum>(C)</enum><text>third, to charitable contributions to which paragraph (1)(A) applies to the extent thereof.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC680A6EBA9B146FCBA8BF62FA2E3D687"><enum>(b)</enum><header>Extension of time for making charitable contributions</header><text display-inline="yes-display-inline">Subsection (a) of section 170 is amended by redesignating paragraphs (2) and (3) as paragraphs (3)
and (4), respectively, and by inserting after paragraph (1) the following
new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H721D6E4002CA497E80C2C1680C028F4A" style="OLC">
<paragraph id="HA33C2643A70B4588A000E89973CA4DB6"><enum>(2)</enum><header>Treatment of charitable contributions made by individuals before due date of return</header><text display-inline="yes-display-inline">If any charitable contribution is made by an individual after the close of a taxable year but not
later than the due date (determined without regard to extensions) for the
return of tax for such taxable year, then the taxpayer may elect to treat
such charitable contribution as made in such taxable year. Such election
may be made only at the time of the filing of such return of tax and shall
be signified in such manner as the Secretary may provide.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HE7651B1950E645F49952543BCC1145AE"><enum>(c)</enum><header>Deduction for contributions of property generally limited to adjusted basis</header>
<paragraph id="HD274AF021DE9441EB65183067215F078"><enum>(1)</enum><header>In general</header><text>Subsection (e) of section 170 is amended—</text>
<subparagraph id="H5FE03AFB5D4A4832B88C45860931ED59"><enum>(A)</enum><text>by striking paragraphs (1) and (6),</text>
</subparagraph><subparagraph id="H9C59D1EE06DA45C3AD46217482D915FE"><enum>(B)</enum><text>by redesignating paragraphs (2), (3), (4), and (5) as paragraphs (3), (4), (5), and (6),
respectively, and</text>
</subparagraph><subparagraph id="HCD25B40AE7D742EF9E9E9B3A7FFBD786"><enum>(C)</enum><text>by inserting before paragraph (3) (as so redesignated) the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="HBDA273037EA64D37BC7F02ED288D1FAA" style="OLC">
<paragraph id="H9241D654E82A46BDA4C566C42A7117C4"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except in the case of property to which paragraph (2) applies, the amount of any charitable
contribution of property otherwise taken into account under this section
shall be reduced by the amount of gain which would have been realized if
the property contributed had been sold by the taxpayer for its fair market
value (determined at the time of such contribution).</text>
</paragraph><paragraph id="H0C61A7813F8E484C90DFBD29957A7223"><enum>(2)</enum><header>Special rule for certain property</header>
<subparagraph id="HA206E1B2763A4171BF82796EA19038AB"><enum>(A)</enum><header>In general</header><text>In the case of property to which this paragraph applies, the amount of any charitable contribution
of property otherwise taken into account under this section shall be
reduced by the amount of gain which would not have been long-term capital
gain if the property contributed had been sold by the taxpayer at its fair
market value (determined at the time of such contribution).</text>
</subparagraph><subparagraph id="HDC15F0B0F05B421C8567743DFF49CCCE"><enum>(B)</enum><header>Property to which this paragraph applies</header><text>This paragraph shall apply to—</text>
<clause id="H20C92CDF27354764BBEE6DD1CC7787E6"><enum>(i)</enum><text>any contribution of tangible personal property if the use of such property by the donee is related
to the purpose or function constituting the basis for its exemption under
section 501 (or, in the case of a governmental unit, to any purpose or
function described in subsection (c)),</text>
</clause><clause id="H2D6430BDD65D4AD3979B80A02F8B081E"><enum>(ii)</enum><text>any qualified conservation contribution (as defined in subsection (h)(1)),</text>
</clause><clause id="H26B7FBB30AA043F2A726AA93038BF919"><enum>(iii)</enum><text>any qualified contribution (as defined in paragraph (4)(A)),</text>
</clause><clause id="H2CD677644A564FDB84D06C18253A73C1"><enum>(iv)</enum><text>any qualified research contribution (as defined in paragraph (5)(B)), and</text>
</clause><clause id="HF35E1881E2C74BC5803CC257E7159183"><enum>(v)</enum><text>any qualified appreciated stock (as defined in subsection (e)(6)).</text>
</clause></subparagraph><subparagraph id="H88009EDF8A4D4B86BB9C4E8F31256946"><enum>(C)</enum><header>Special rules for determining long-term capital gain</header>
<clause id="HA0F1D9C61A434D24A127F987EFFEF290"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of applying this paragraph (other than in the case of gain to which section 1245(a),
1250(a), 1252(a), or 1254(a) applies), property which is property used in
the trade or business (as defined in section 1231(b)) shall be treated as
a capital asset.</text>
</clause><clause id="H99EE83D9D6984E1497D232DB47E241E1"><enum>(ii)</enum><header>Contributions of stock in S corporations</header><text>For purposes of applying this paragraph in the case of a charitable contribution of stock in an S
corporation, rules similar to the rules of section 751 shall apply in
determining whether gain on such stock would have been long-term capital
gain if such stock were sold by the taxpayer.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H4B00AE3ADBD949979460D7970AD3A725"><enum>(2)</enum><header>Repeal of special rules for food and book inventory</header><text>Paragraph (4) of section 170(e), as redesignated by paragraph (1), is amended by striking
subparagraphs (C) and (D) and by redesignating subparagraph (E) as
subparagraph (C).</text>
</paragraph><paragraph id="H8E87F3EDCEF84263870D9F1D0DF81AD3"><enum>(3)</enum><header>Conforming amendments</header>
<subparagraph id="HA9E7FCF7F93A4563BD3197B91B3556E4"><enum>(A)</enum><text>Section 170(e)(3), as redesignated by paragraph (1), is amended by striking <quote>paragraph (1)</quote> and inserting <quote>paragraphs (1) and (2)</quote>.</text>
</subparagraph><subparagraph id="H39591A39A437479EAE390F92E8F095A4"><enum>(B)</enum><text>Paragraphs (4) and (5) of section 170(e), as redesignated by paragraph (1), are each amended by
striking <quote>paragraph (1)(A)</quote> each place it appears and inserting <quote>paragraph (2)(A)</quote>.</text>
</subparagraph><subparagraph id="H74E89C15E2B647F78F140E8512EEBA58"><enum>(C)</enum><text>Section 170(e)(6), as redesignated by paragraph (1), is amended—</text>
<clause id="HF39AAC1EAAEB439286ECF6D924189340"><enum>(i)</enum><text>by striking all that precedes <quote>for purposes of this paragraph</quote> in subparagraph (B) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H7115DA71ABBF4CD9A7447C8ADFF9FFB2" style="OLC">
<paragraph id="HD5C612F84E7140C09548ADA1E9D3F716"><enum>(6)</enum><header>Qualified appreciated stock</header>
<subparagraph id="H6A156CD7BF6E44378615A672BD07EDB7"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in subparagraph (B),</text></subparagraph></paragraph><after-quoted-block>,</after-quoted-block></quoted-block>
</clause><clause id="HAA313A974972469FA8A863C8A0D08609"><enum>(ii)</enum><text>by redesignating subparagraph (C) as subparagraph (B), and</text>
</clause><clause id="HB68FED54FEF448419913EC8097C1CE7E"><enum>(iii)</enum><text>by striking <quote>in a contribution to which paragraph (1)(B)(ii) applies (determined without regard to this
paragraph)</quote> in subparagraph (B) as so redesignated.</text>
</clause></subparagraph></paragraph></subsection><subsection id="H6BBBD0A804CF4D8C916CB88418461B5B"><enum>(d)</enum><header>Modification of income based contribution limitations</header>
<paragraph id="H83BAA467FF9242AEA5ABEE302E65415E"><enum>(1)</enum><header>In general</header><text>Section 170(b)(1) is amended—</text>
<subparagraph id="H64237DB1F3D044F68DEDB33EF5191A31"><enum>(A)</enum><text>by striking <quote>30 percent</quote> in subparagraph (B)(i) and inserting <quote>25 percent</quote>, and</text>
</subparagraph><subparagraph id="HA220DCD05D66473F9490A62F70E14A97"><enum>(B)</enum><text>by striking <quote>50 percent</quote> and inserting <quote>40 percent</quote> in—</text>
<clause id="H04D5D337657346E199CABA788AAD6278"><enum>(i)</enum><text>the flush matter at the end of subparagraph (A),</text>
</clause><clause id="HA1FA7362D5BE4E3B86E23D735972D1E1"><enum>(ii)</enum><text>subparagraph (B)(ii), and</text>
</clause><clause id="H632EF3D1347149398F2708532B154259"><enum>(iii)</enum><text>clauses (i), (iv)(I), and (v) of subparagraph (C) (as redesignated by paragraph (2)).</text>
</clause></subparagraph></paragraph><paragraph id="HF3597281331943C982BF9FB5CE453EC2"><enum>(2)</enum><header>Repeal of special limitations for certain capital gain property</header>
<subparagraph id="H5B7A7CDC40854B6083CADD44953BE853"><enum>(A)</enum><header>In general</header><text>Paragraph (1) of section 170(b) is amended by striking subparagraphs (C) and (D) and by
redesignating subparagraphs (E), (F), and (G) as subparagraphs (C), (D),
and (E), respectively.</text>
</subparagraph><subparagraph id="H515DA17C82B94BD8AEC46856F63411A3"><enum>(B)</enum><header>Conforming amendments</header>
<clause id="H6ED4523C42E6431DAB8DC1C858B3BE21"><enum>(i)</enum><text>Section 170(b)(1)(A)(vii) is amended by striking <quote>subparagraph (F)</quote> and inserting <quote>subparagraph (D)</quote></text>
</clause><clause id="HB67A0834901A432A8890B83B06DB3822"><enum>(ii)</enum><text>Section 170(b)(1)(B)(ii) is amended by striking <quote>(determined without regard to subparagraph (C))</quote>.</text>
</clause><clause id="H4BD0803E7E7443AEA262E7DF5EA8EADF"><enum>(iii)</enum><text>Section 170(b)(1)(C)(iii), as redesignated by paragraph (1), is amended by striking <quote>subparagraph (A), (B), (C) or (D)</quote> and inserting <quote>subparagraph (A) or (B)</quote>.</text>
</clause><clause id="H5289782E978B4916AB95DD6336F7C860"><enum>(iv)</enum><text>Section 170(b)(2)(B)(i)(I) is amended by striking <quote>paragraph (1)(E)(v)</quote> and inserting <quote>paragraph (1)(C)(v)</quote>.</text>
</clause><clause id="HB373B649E00D4C85BF9150A4D1C4ABFB"><enum>(v)</enum><text>Section 545(b)(2) is amended by striking <quote>(D), and (E)</quote> and inserting <quote>and (C)</quote>.</text>
</clause></subparagraph></paragraph></subsection><subsection id="H63310EFC5AC048BAA62504F40AA9E3A8"><enum>(e)</enum><header>Qualified conservation contributions</header>
<paragraph id="H3416163DF62D409B9551C877C9DF1C94"><enum>(1)</enum><header>Rules made permanent</header>
<subparagraph id="H561F6BB64EAB4CFEAB6EE75DA18B3845"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraph (C) of section 170(b)(1), as redesignated by subsection (d), is amended by striking
clause (vi).</text>
</subparagraph><subparagraph id="H4DCE5EE6EA3E4A508E7B1EA01F9028FF"><enum>(B)</enum><header>Corporate farmers and ranchers</header><text>Subparagraph (B) of section 170(b)(2) is amended by striking clause (iii).</text>
</subparagraph></paragraph><paragraph id="HBB207DDCAF334EA8A46D4B3A79BED0DA"><enum>(2)</enum><header>Treatment of golf course easements</header><text>Subsection (h) of section 170 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H88E4CCBC150F487C86FDAFE8D0E9A09A" style="OLC">
<paragraph id="H476FD3AF97874CF886153AD42248E625"><enum>(7)</enum><header>Special rule with respect to golf courses</header><text display-inline="yes-display-inline">An interest in real property shall not be treated as a qualified real property interest for
purposes of this subsection if (at the time of the contribution of such
interest) such property is, or is reasonably expected to be, used as a
golf course.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H6100CA1748584AB4B8B31921D84D9B7C"><enum>(3)</enum><header>Conforming amendments</header>
<subparagraph id="H0359160AC8AB4002B572D128A00CDBAB"><enum>(A)</enum><text>Section 170(b)(1)(C)(iv)(II), as redesignated by subsection (d), is amended by striking <quote>made after the date of the enactment of this subparagraph</quote>.</text>
</subparagraph><subparagraph id="H314ED44ED7344E9BB28044A63EE2EE1C"><enum>(B)</enum><text>Section 170(b)(2)(B)(i)(II) is amended by striking <quote>, in the case of contributions made after the date of the enactment of this subparagraph,</quote>.</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="H41B5C1BB81264DEBA2CB7058CA6FE99E"><enum>(f)</enum><header>Repeal of special rule for college athletic event seating rights</header><text display-inline="yes-display-inline">Section 170 is amended by striking subsection (l).</text>
</subsection><subsection id="H5E38437C25154365AC73E7FF1D4C2886"><enum>(g)</enum><header>Repeal of special rule treating donee income from intellectual property as an additional charitable
contribution</header>
<paragraph id="H9A9632EC525D4D50B323939F41222C86"><enum>(1)</enum><header>In general</header><text>Section 170 is amended by striking subsection (m).</text>
</paragraph><paragraph id="HBBA1701AE5064E6B890BB81A5DDA604D"><enum>(2)</enum><header>Conforming amendments</header><text>Section 6050L is amended—</text>
<subparagraph id="H9397F8756FB24B099C6C73589640DFBA"><enum>(A)</enum><text>by striking subsection (b) and redesignating subsection (c) as subsection (b), and</text>
</subparagraph><subparagraph id="H445DE59C527D4FAF9CF7C7A2DD3C2E7E"><enum>(B)</enum><text>by striking <quote>or (b)</quote> in subsection (b) (as redesignated by subparagraph (A)).</text>
</subparagraph></paragraph></subsection><subsection id="H76CBE4197AD14DE2AB6A7E0D2FEA8804"><enum>(h)</enum><header>Effective date</header>
<paragraph id="HE9FB0B67EC6D418D82F5FBAC278AB711"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to
contributions made in taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="HAAC846E2AB004552BB7D5909312F8350"><enum>(2)</enum><header>Qualified conservation contributions</header><text display-inline="yes-display-inline">The amendments made by subsection (e) shall apply to contributions made in taxable years beginning
after December 31, 2013.</text>
</paragraph></subsection></section><section id="HD014952B5725413AAF29BA60AADB9B80"><enum>1404.</enum><header>Denial of deduction for expenses attributable to the trade or business of being an employee</header>
<subsection id="H8D3944BCD9F24B02B1BEB7B754B914A5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part IX of subchapter B of chapter 1 is amended by inserting after the item relating to section 262
the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H504EC9AAD8A44C7EA895A6AE805BCF8E" style="OLC">
<section id="H4D2730032C0443FDB2216B321CF2044D"><enum>262A.</enum><header>Expenses attributable to being an employee</header>
<subsection id="HAD0D8BFE48724D50BFB910F891962DD2"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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.</text>
</subsection><subsection id="H9300215EF8B64FB7A5F9A9DD46B15C52"><enum>(b)</enum><header>Exception for above-the-Line deductions</header><text>Subsection (a) shall not apply to any deduction allowable (determined without regard to subsection
(a)) in determining adjusted gross income.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HE1FF4F72B46E4F2C92021229DDB65817"><enum>(b)</enum><header>Repeal of certain above-the-Line trade and business deductions of employees</header>
<paragraph id="H36462E56B96C4CF6BFFA15B8EF0AB533"><enum>(1)</enum><header>In general</header><text>Paragraph (2) of section 62(a) is amended—</text>
<subparagraph id="H41B1BA635322481EAF61C5CE644CD7F9"><enum>(A)</enum><text>by striking subparagraphs (B), (C), and (D), and</text>
</subparagraph><subparagraph id="HB31A2D7DB4374E7DAC088F6B958B307C"><enum>(B)</enum><text>by redesignating subparagraph (E) as subparagraph (B).</text>
</subparagraph></paragraph><paragraph id="H24D1F31FE14647DE96AC88DE3973C301"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="HD686A98775D9466784FF6A4E99B1F1CB"><enum>(A)</enum><text>Section 62 is amended by striking subsections (b) and (d) and by redesignating subsections (c) and
(e) as subsections (b) and (c), respectively.</text>
</subparagraph><subparagraph id="H35F73F7F9E8A4A30ADC6E27BCE416E85"><enum>(B)</enum><text>Section 62(a)(20) is amended by striking <quote>subsection (e)</quote> and inserting <quote>subsection (c)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="HC7C70575EEBA4ECD97CDA533BEF65C11"><enum>(c)</enum><header>Continued exclusion of working condition fringe benefits</header><text>Section 132(d) is amended by inserting <quote>(determined without regard to section 262A)</quote> after <quote>section 162</quote>.</text>
</subsection><subsection id="H3FD454ECD54247ABA0B9883083033B9A"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H6FC5A504A25047AFB6E5E4ADA16587CC"><enum>1405.</enum><header>Repeal of deduction for taxes not paid or accrued in a trade or business</header>
<subsection id="H61E21DBE4D664EDCB01A73F3CDFA70B4"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (b) of section 164 is amended by striking paragraphs (5) and (6) and inserting the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H0FAE673844F94C7BA723B6F809C79C7E" style="OLC">
<paragraph id="H1A5B0F1A6D984D38B195AF47F2810F77"><enum>(5)</enum><header>Limitation in case of individuals</header><text display-inline="yes-display-inline">In the case of a taxpayer other than a corporation—</text>
<subparagraph id="HD5BD4480A63248FEA4306EF88BEE279C"><enum>(A)</enum><text>paragraphs (1) and (2) of subsection (a) 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</text>
</subparagraph><subparagraph id="HC85347E717434FA3BA721935FDCD9711"><enum>(B)</enum><text>paragraph (3) of subsection (a) shall not apply to State and local taxes.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD67AA0611E7540D1AD9CDCA065E80660"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H0DB02DAF56824FA99C97CF3CBB72E823"><enum>(1)</enum><text>Section 164(a) is amended by striking paragraph (6).</text>
</paragraph><paragraph id="HAEEBF70706EF4A3E8A49783D40B905F2"><enum>(2)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H65ED320AFF1E474E989BDEED4A5B1FBB"><enum>(A)</enum><text display-inline="yes-display-inline">Section 216(a) is amended by striking <quote>proportionate share of—</quote> and all that follows and inserting</text>
<quoted-block display-inline="yes-display-inline" id="H6B5AD956FEBD40D1B380C379093DC54A" style="OLC"><text>proportionate share of the interest allowable as a deduction to the corporation under section 163
which is paid or incurred by the corporation on its indebtedness
contracted—</text><paragraph id="H4E4263E7F3884081A7202B5883C529C7"><enum>(1)</enum><text display-inline="yes-display-inline">in the acquisition, construction, alteration, rehabilitation, or maintenance of the houses or
apartment building, or</text>
</paragraph><paragraph id="HF3382A7AFFA741AFAA549E2632F3779C"><enum>(2)</enum><text>in the acquisition of the land on which the houses (or apartment building) are situated.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HA57671959E9842B1B569C35B48424F10" indent="up1"><enum>(B)</enum><text>Section 216(b)(3)(B)(i) is amended—</text>
<clause id="HFFB791EEC3D942959DB57D681B777E2B"><enum>(i)</enum><text>by striking <quote>a share of such corporation’s real estate taxes described in subsection (a)(1) or</quote> in subclause (I), and</text>
</clause><clause id="H767B36913F044ACD9126C070A180F7F1"><enum>(ii)</enum><text>by striking <quote>of such taxes, or of such interest,</quote> in subclause (II) and inserting <quote>of such interest</quote>.</text>
</clause></subparagraph><subparagraph id="H384761FAC8AB463095CEB3971E60095A" indent="up1"><enum>(C)</enum><text>Section 216(d) is amended by striking <quote>subsections (a)(1) and (a)(2)</quote> and inserting <quote>subsection (a)</quote>.</text>
</subparagraph></paragraph><paragraph id="H60A1071A3A1D4A8E9E09A2C40E7B9AA0"><enum>(3)</enum><text>Section 274(f) is amended by striking <quote><header-in-text level="subsection" style="OLC">taxes,</header-in-text></quote> in the heading thereof.</text>
</paragraph><paragraph id="HF8CAB57FAD204401BC4337ABE1BBE642"><enum>(4)</enum><text>Section 280A(b) is amended by striking <quote><header-in-text level="subsection" style="OLC">taxes,</header-in-text></quote> in the heading thereof.</text>
</paragraph><paragraph id="HA182A5BDBAA744B2AC9B21E2ECF6950D"><enum>(5)</enum><text>Section 911(c)(3)(A)(ii) is amended—</text>
<subparagraph id="H1D6F2ECC95754BE88902EB9DC7C67ED6"><enum>(A)</enum><text>by striking <quote>and taxes</quote>, and</text>
</subparagraph><subparagraph id="H865FF9E041FA41F98A2938D11E030505"><enum>(B)</enum><text>by striking <quote>or 164</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H62C38E2DC616454CAF9E3DE666E7E41A"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HCC960954AAFF44E5B5386DC8734B0E31"><enum>1406.</enum><header>Repeal of deduction for personal casualty losses</header>
<subsection id="HAA52DD0F2C7141878E9050DDA526F5B3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (c) of section 165 is amended by inserting <quote>and</quote> at the end of paragraph (1), by striking <quote>; and</quote> at the end of paragraph (2) and inserting a period, and by striking paragraph (3).</text>
</subsection><subsection id="H7CA8965CDEC046019C577B3FB73A3D47"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H6A3DFBCC42684A28902DB1B765C4D9D6"><enum>(1)</enum><text>Section 165 is amended by striking subsections (h) and (k).</text>
</paragraph><paragraph id="HEF89A0CC54D84F6AA352D134828E2A8E"><enum>(2)</enum><text>Subsection (i) of section 165 is amended—</text>
<subparagraph id="H14FD8D95DA4A4FB694FA53369DE722CD"><enum>(A)</enum><text display-inline="yes-display-inline">in paragraph (1)—</text>
<clause id="H482628CD8CC14D18AE425223C767ACCE"><enum>(i)</enum><text>by striking <quote>(as defined by clause (ii) of subsection (h)(3)(C))</quote>, and</text>
</clause><clause id="H6AA6EF5BD63B4DB3A84B51EE05E4D30C"><enum>(ii)</enum><text>by striking <quote>(as defined by clause (i) of such subsection)</quote>,</text>
</clause></subparagraph><subparagraph id="H1D0A29851335423EA5610F1DE785B45F"><enum>(B)</enum><text>by striking <quote>(as defined by subsection (h)(3)(C)(i)</quote> in paragraph (4), and</text>
</subparagraph><subparagraph id="H1313014D52EF4CB2ADAC516E13232465"><enum>(C)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H0BD1BB27E58845FCB1C2EA37A1AEB608" style="OLC">
<paragraph id="H344B1DF88C0B4BAF86A0C98D6D964E90"><enum>(5)</enum><header>Federally declared disaster</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="HD64B4C5B65104A748ACDBB97F47AF254"><enum>(A)</enum><header>Federally declared disaster</header><text display-inline="yes-display-inline">The term <quote>federally declared disaster</quote> 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.</text>
</subparagraph><subparagraph id="H2AF2F7C1330C4318B326A58AC0359693"><enum>(B)</enum><header>Disaster area</header><text>The term <quote>disaster area</quote> means the area so determined to warrant such assistance.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="HDF3B9596D96545939DD1B978785C553C"><enum>(3)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H00D1E97935DB46F187C7C6EBFA28CE70"><enum>(A)</enum><text>Section 165(l)(1) is amended by striking <quote>a loss described in subsection (c)(3)</quote> and inserting <quote>an ordinary loss described in subsection (c)(2)</quote>.</text>
</subparagraph><subparagraph id="H1B00CB41BBBD4CCCAB3EF4385897E331" indent="up1"><enum>(B)</enum><text>Section 165(l) is amended—</text>
<clause id="H32D9B5B01B4B40FC9F4D8E8003A700EF"><enum>(i)</enum><text>by striking paragraph (5),</text>
</clause><clause id="H25BE0AA0C38A402080577D63F570FD48"><enum>(ii)</enum><text>by redesignating paragraphs (2), (3), and (4) as paragraphs (3), (4), and (5), respectively, and</text>
</clause><clause id="H0D8FE178A1634024B40F6FF27AEADE40"><enum>(iii)</enum><text>by inserting after paragraph (1) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HEEEEFA5E06F542CE8BC0C072D75085F9" style="OLC">
<paragraph id="H247CA54A64724342A8D593BC6C950D02"><enum>(2)</enum><header>Limitations</header>
<subparagraph id="HFA98E131F38E408198F3E1BB1F3268C9"><enum>(A)</enum><header>Deposit may not be federally insured</header><text display-inline="yes-display-inline">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.</text>
</subparagraph><subparagraph id="H22CA30BAAB534915AD0EB045CA5B4B79"><enum>(B)</enum><header>Dollar limitation</header><text>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.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph></paragraph><paragraph id="H544E3C0C426D4FCD963A3476E3D09363"><enum>(4)</enum><text>Section 172(b)(1)(F)(ii), prior to redesignation under title III, is amended—</text>
<subparagraph id="H01DC24A9717B429287DE72EB8149A5C3"><enum>(A)</enum><text>by striking subclause (I) and by redesignating subclauses (II) and (III) as subclauses (I) and
(II), respectively, and</text>
</subparagraph><subparagraph id="HD14F1AAAFBFC49209821AB27702A43B7"><enum>(B)</enum><text>by striking <quote>subsection (h)(3)(C)(i)</quote> and inserting <quote>section 165(i)(5)</quote>.</text>
</subparagraph></paragraph><paragraph id="H021438646969450D97152DFB84CFD29A"><enum>(5)</enum><text>Section 172(d)(4)(C) is amended by striking <quote>paragraph (2) or (3) of section 165(c)</quote> and inserting <quote>section 165(c)(2)</quote>.</text>
</paragraph><paragraph id="H5B02417039684793B1BFF02E5F267CA7"><enum>(6)</enum><text>Section 274(f) is amended by striking <quote><header-in-text level="subsection" style="OLC">casualty losses,</header-in-text></quote> in the heading thereof.</text>
</paragraph><paragraph id="H1663FC5332CD4CFE93FDDFE965387B4B"><enum>(7)</enum><text>Section 280A(b) is amended by striking <quote><header-in-text level="subsection" style="OLC">casualty losses,</header-in-text></quote> in the heading thereof.</text>
</paragraph><paragraph id="HEA012B68C1D94FEBB4946F152802A31E"><enum>(8)</enum><text>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.</text>
</paragraph></subsection><subsection id="H3B4C62A6A96A4FDEA4493221B51636AF"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HA6BB689EB11C4DC2AA63BB239E3ED6BC"><enum>1407.</enum><header>Limitation on wagering losses</header>
<subsection id="H06AE7B3D1DC74B2599E2AC5E6097531A"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 165(d) is amended by adding at the end the following: <quote>For purposes of the preceding sentence, the term <quote>losses from wagering transactions</quote> includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering
transaction.</quote>.</text>
</subsection><subsection id="H2669E63BF9DB4E8FB563169B4BC8FAA5"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H84955670090C4A02816820A0734B1B5B"><enum>1408.</enum><header>Repeal of deduction for tax preparation expenses</header>
<subsection id="HCA0EF5EB04E14F0683870B4E791001E7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 212 is amended by adding <quote>or</quote> at the end of paragraph (1), by striking <quote>; or</quote> at the end of paragraph (2) and inserting a period, and by striking paragraph (3).</text>
</subsection><subsection id="H7E5656C3F4674084968457B87320CB6C"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H30F4D8E828644582BC0D341D800EC307"><enum>1409.</enum><header>Repeal of deduction for medical expenses</header>
<subsection id="HE2ABBA3CB23A4BD4A1F2AE262D2A6206"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VII of subchapter B of chapter 1 is amended by striking section 213 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="HCD6CAE12006A4A11B6E0B117DF300B4C"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H9EB6263FE206433898979FB6ACB9E23F"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H378F17233E544EC0A168AB3ECD3EC56F"><enum>(A)</enum><text>Section 223 is amended by redesignating subsections (e), (f), (g), and (h) as subsections (f), (g),
(h), and (i), respectively, and by inserting after subsection (d) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HB708795C940C402D85F276F904E38FCF" style="OLC">
<subsection id="H7362C6B1AFB041589EEA1E380DDB945F"><enum>(e)</enum><header>Medical care</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H75C9D553B9CD48E086FA36F163C0AA1B"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>medical care</quote> means amounts paid—</text>
<subparagraph id="H1B014C8453834D7D9969E7DD24855C73"><enum>(A)</enum><text>for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of
affecting any structure or function of the body,</text>
</subparagraph><subparagraph id="H7B0B04563EA94472B9AF6BD3E0818EF2"><enum>(B)</enum><text>for transportation primarily for and essential to medical care referred to in subparagraph (A),</text>
</subparagraph><subparagraph id="H0185A6DBF6B7417FBD423D03A00935A6"><enum>(C)</enum><text>for qualified long-term care services (as defined in section 7702B(c)), or</text>
</subparagraph><subparagraph id="HCC243CBAA69D42AAB5A36171A521FC22"><enum>(D)</enum><text>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)).</text></subparagraph><continuation-text continuation-text-level="paragraph">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).</continuation-text></paragraph><paragraph id="HB6AAD5A3C2D044CE91DBFC3790C66839"><enum>(2)</enum><header>Amounts paid for certain lodging away from home treated as paid for medical care</header><text display-inline="yes-display-inline">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—</text>
<subparagraph id="HFACF9716622B48528B33A982499FF054"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="HF5B585703FF746DB8FA9867B4AA22E87"><enum>(B)</enum><text>there is no significant element of personal pleasure, recreation, or vacation in the travel away
from home.</text></subparagraph><continuation-text continuation-text-level="paragraph">The amount taken into account under the preceding sentence shall not exceed $50 for each night for
each individual.</continuation-text></paragraph><paragraph id="H3494A0DD82CB46A4B70C986FBE536C05"><enum>(3)</enum><header>Physician</header><text display-inline="yes-display-inline">The term <quote>physician</quote> has the meaning given to such term by section 1861(r) of the Social Security Act (42 U.S.C.
1395x(r)).</text>
</paragraph><paragraph id="H80466D3BFC8F4C06A8F862881DE4D43C"><enum>(4)</enum><header>Contracts covering other than medical care</header><text display-inline="yes-display-inline">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)—</text>
<subparagraph id="H9EE916F769AF4C01B447B4733F92D9F0"><enum>(A)</enum><text>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,</text>
</subparagraph><subparagraph id="H2CB4A84ADF4F4027952603F9AB2AE9D7"><enum>(B)</enum><text>the amount taken into account as the amount paid for such insurance shall not exceed such charge,
and</text>
</subparagraph><subparagraph id="H734DAB308E5642829E2AFBBCDD6D4BDA"><enum>(C)</enum><text>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.</text>
</subparagraph></paragraph><paragraph id="H355852D8E58340B1BF81885263FD470D"><enum>(5)</enum><header>Certain pre-paid contracts</header><text>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).</text>
</paragraph><paragraph id="H464B629F45AC4083B7932564A2CC3612"><enum>(6)</enum><header>Cosmetic surgery</header>
<subparagraph id="H8E64A5215F674BEB9CEE8DBC0ABCB316"><enum>(A)</enum><header>In general</header><text>The term <quote>medical care</quote> 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.</text>
</subparagraph><subparagraph id="HB505C9C6C9B447BB836BAE12B46B3896"><enum>(B)</enum><header>Cosmetic surgery defined </header><text>For purposes of this paragraph, the term <quote>cosmetic surgery</quote> 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.</text>
</subparagraph></paragraph><paragraph id="H861DE78CA6EA44538AA137527F5F7032"><enum>(7)</enum><header>Eligible long-term care premiums</header>
<subparagraph id="H4A71C5A1651B400F82999DBDC6B13FE9"><enum>(A)</enum><header>In general</header><text>For purposes of this section, the term <quote>eligible long-term care premiums</quote> 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:</text>
<table line-rules="all-gen">
<tgroup cols="2"><colspec coldef="txt-no-ldr" colname="col1" min-data-value="1"></colspec><colspec coldef="txt-no-ldr" colname="col2" min-data-value="1"></colspec><thead>
<row><entry>In the case of an individual with an attained age before the close of the taxable year of:</entry><entry>The limitation is:</entry></row></thead>
<tbody>
<row><entry>40 or less</entry><entry>$200</entry></row>
<row><entry>More than 40 but not more than 50</entry><entry>$375</entry></row>
<row><entry>More than 50 but not more than 60</entry><entry>$750</entry></row>
<row><entry>More than 60 but not more than 70</entry><entry>$2,000</entry></row>
<row><entry>More than 70</entry><entry>$2,500</entry></row></tbody></tgroup></table>
</subparagraph><subparagraph id="H8330CF62575B43A3B1FA5CD974F156A5"><enum>(B)</enum><header>Indexing</header>
<clause id="HED2824653866405B885E38D6E7043A37"><enum>(i)</enum><header>In general</header><text>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.</text>
</clause><clause id="HEEC19BC72D6744F28BCDA184516F8B72"><enum>(ii)</enum><header>Medical care cost adjustment</header><text>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, 2014.</text>
</clause></subparagraph></paragraph><paragraph id="H632B8FA999B84EE498290FC98050EF86"><enum>(8)</enum><header>Certain payments to relatives treated as not paid for medical care</header><text>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—</text>
<subparagraph id="HE8D7F20207824BD19B11412586287D03"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="H017FE1B629804F48BDD03125F91E6904"><enum>(B)</enum><text>by a corporation or partnership which is related (within the meaning of section 267(b) or 707(b))
to the individual.</text></subparagraph><continuation-text continuation-text-level="paragraph">For purposes of this paragraph, the term <quote>relative</quote> means an individual bearing a relationship to the individual which is described in any of
subparagraphs (A) through (G) of section 7705(d)(2). This paragraph shall
not apply for purposes of section 105(b) with respect to reimbursements
through insurance.</continuation-text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H4E83EB154C494237A570AE1399359781" indent="up1"><enum>(B)</enum><text>Section 72(t)(2)(D)(i)(III) is amended by striking <quote>section 213(d)(1)(D)</quote> and inserting <quote>section 223(e)(1)(D)</quote>.</text>
</subparagraph><subparagraph id="H06580C8288FF48A6A3A49098811B9B7B" indent="up1"><enum>(C)</enum><text>Section 104(a) is amended by striking <quote>section 213(d)(1)</quote> in the last sentence and inserting <quote>section 223(e)(1)</quote>.</text>
</subparagraph><subparagraph id="H69BA2903FD124986BBB0811FD82328D3" indent="up1"><enum>(D)</enum><text>Section 105(b) is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 223(e)</quote>.</text>
</subparagraph><subparagraph id="HC960B1E7598C40B2A20B20B32FD80A96" indent="up1"><enum>(E)</enum><text>Section 139D is amended by striking <quote>section 213</quote> and inserting <quote>section 223</quote>.</text>
</subparagraph><subparagraph id="HA48512B34CCE4B7BA3641F782FECB912" indent="up1"><enum>(F)</enum><text>Section 162(l)(2) is amended by striking <quote>section 213(d)(10)</quote> and inserting <quote>section 223(e)(7)</quote>.</text>
</subparagraph><subparagraph id="H605D145C04B949A5AC03F58531D22160" indent="up1"><enum>(G)</enum><text>Section 220(d)(2)(A) is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 223(e)</quote>.</text>
</subparagraph><subparagraph id="H404AA24A1A2A433FA2FCB7DD4250AF60" indent="up1"><enum>(H)</enum><text>Section 223(d)(2)(A) is amended by striking <quote>section 213(d)</quote> and inserting <quote>subsection (e))</quote>.</text>
</subparagraph><subparagraph id="H681D1D9775F94577B52D9F482F2AE00C" indent="up1"><enum>(I)</enum><text>Section 419A(f)(2) is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 223(e)</quote>.</text>
</subparagraph><subparagraph id="HDBB1EE36BA4C441FBD6C22DF9AA5EF86" indent="up1"><enum>(J)</enum><text>Section 501(c)(26)(A) is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 223(e)</quote>.</text>
</subparagraph><subparagraph id="HA921D0B992084FF6BD96D83A15987D49" indent="up1"><enum>(K)</enum><text>Section 2503(e) is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 223(e)</quote>.</text>
</subparagraph><subparagraph id="HB27464522B4E4AE8AF731026160AA854" indent="up1"><enum>(L)</enum><text>Section 4980B(c)(4)(B)(i)(I) is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 223(e)</quote>.</text>
</subparagraph><subparagraph id="H2190F0A067E145C1911D63AAE431017F" indent="up1"><enum>(M)</enum><text>Section 6041(f) is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 223(e)</quote>.</text>
</subparagraph><subparagraph id="HB601AE1523974B24B9CBF623567D5EC6" indent="up1"><enum>(N)</enum><text>Section 7702B(a)(2) is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 223(e)</quote>.</text>
</subparagraph><subparagraph id="H6B9F34A31A304A30A567EC649D9D2561" indent="up1"><enum>(O)</enum><text>Section 7702B(a)(4) is amended by striking <quote>section 213(d)(1)(D)</quote> and inserting <quote>section 223(e)(1)(D)</quote>.</text>
</subparagraph><subparagraph id="H149463591CC840F59AFCD41959C78296" indent="up1"><enum>(P)</enum><text>Section 7702B(d)(5) is amended by striking <quote>section 213(d)(10)</quote> and inserting <quote>section 223(e)(7)</quote>.</text>
</subparagraph><subparagraph id="H9C639D85145145FFA178B248CCDFA5E9" indent="up1"><enum>(Q)</enum><text>Section 9832(d)(3) is amended by striking <quote>section 213(d)</quote> and inserting <quote>section 223(e)</quote>.</text>
</subparagraph></paragraph><paragraph id="H6AC124A579034350A363A8FFDC2C2C36"><enum>(2)</enum><text>Section 72(t)(2)(B) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HAB85515461F047918A1D8F7425723193" style="OLC">
<subparagraph id="H3709B517858241168BACCE2AE3E421DF"><enum>(B)</enum><header>Medical expenses</header><text display-inline="yes-display-inline">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—</text>
<clause id="HA226CD980F94456CBF61496AECDAC44D"><enum>(i)</enum><text>the expenses paid by the taxpayer during the taxable year, not compensated for by insurance or
otherwise, for medical care (as defined in 223(e)) of the taxpayer, his
spouse, or a dependent (as defined in section 7705, determined without
regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), over</text>
</clause><clause id="H99DDBE5806364AA68CB530D732071B36"><enum>(ii)</enum><text>10 percent of the taxpayer’s adjusted gross income.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H0E61017D2BEF4C80B93BF181F6E3300B"><enum>(3)</enum><text>Section 105 is amended by striking subsection (f).</text>
</paragraph><paragraph id="H13A6A802DAC14E6E9DC763AED205D531"><enum>(4)</enum><text>Section 162(l) is amended by striking paragraph (3).</text>
</paragraph><paragraph id="HEC7715889E96446B8E4FCF076F2FBE51"><enum>(5)</enum><text>Section 402(l) is amended by striking paragraph (7) and redesignating paragraph (8) as paragraph
(7).</text>
</paragraph><paragraph id="H1264897DA4DC4C609680648A2EF64696"><enum>(6)</enum><text>Section 220(f) is amended by striking paragraph (6).</text>
</paragraph><paragraph id="H8AF45E9D9DC04958A734ACF6C1B5F3D6"><enum>(7)</enum><text>Section 223(f) is amended by striking paragraph (6).</text>
</paragraph><paragraph id="HF085DB7525B747EC9C87383C877A40B7"><enum>(8)</enum><text>Section 7702B(e) is amended by striking paragraph (2).</text>
</paragraph><paragraph id="H444EED72C29549719863B7766CE6E041"><enum>(9)</enum><text>Section 7705(f)(7), as redesignated by this Act, is amended by striking <quote>sections 105(b), 132(h)(2)(B), and 213(d)(5)</quote> and inserting <quote>sections 105(b) and 132(h)(2)(B)</quote>.</text>
</paragraph></subsection><subsection id="H293356F4C136498593414B864ADF6631"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HF7E0E4F7F6734DCFBE125E570B317EF9"><enum>1410.</enum><header>Repeal of disqualification of expenses for over-the-counter drugs under certain accounts and
arrangements</header>
<subsection id="H38E27177261D47F882453F1120893450"><enum>(a)</enum><header>HSAs</header><text display-inline="yes-display-inline">Subparagraph (A) of section 223(d)(2) is amended by striking the last sentence.</text>
</subsection><subsection commented="no" id="H9AD303CCAEED4059853109D9BB87CF30"><enum>(b)</enum><header>Archer MSAs</header><text>Subparagraph (A) of section 220(d)(2) is amended by striking the last sentence.</text>
</subsection><subsection id="HC26EA96727904A50BEC92BE15F242D7F"><enum>(c)</enum><header>Health flexible spending arrangements and health reimbursement arrangements</header><text>Section 106 is amended by striking subsection (f).</text>
</subsection><subsection id="HED698EFDD9884F019999B486FC8A13B6"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to expenses incurred after December 31, 2014.</text>
</subsection></section><section id="H038420ECC27544DC97A5D0516BDEE6B1"><enum>1411.</enum><header>Repeal of deduction for alimony payments and corresponding inclusion in gross income</header>
<subsection id="HFDA02930F72A4B588EAE5FBF2AD7B876"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VII of subchapter B of chapter 1 is amended by striking section 215 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="HD1FB7E5C1D2A4620BEE60B3E3CC903FB"><enum>(b)</enum><header>Corresponding repeal of provisions providing for inclusion of alimony in gross income</header>
<paragraph id="H0589F42A5E1A45F0B0FCE38C0FC6F5CA"><enum>(1)</enum><text>Subsection (a) of section 61 is amended by striking paragraph (8) and by redesignating paragraphs
(9) through (15) as paragraphs (8) through (14), respectively.</text>
</paragraph><paragraph id="HD965893E06234BA7A9C42B0CBD233112"><enum>(2)</enum><text>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).</text>
</paragraph><paragraph id="H51A2E17742CB41AF82B4816C373A51DB"><enum>(3)</enum><text>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).</text>
</paragraph></subsection><subsection id="H2BAA85283B504601B6E28D96586B9B98"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H73FFE49B7AD34C6287233DC88FBA82CA"><enum>(1)</enum><header>Related to repeal of section 215</header>
<subparagraph id="H907DFC15597A4017B5326D8709E49E90"><enum>(A)</enum><text display-inline="yes-display-inline">Section 62(a) is amended by striking paragraph (10).</text>
</subparagraph><subparagraph id="H2A02CEFCF5DB48D380946EDACCA8816B"><enum>(B)</enum><text>Section 3402(m)(1) is amended by striking <quote>(other than paragraph (10) thereof)</quote>.</text>
</subparagraph></paragraph><paragraph id="HA3477CB177F946348BE6B2DEBFA900F6"><enum>(2)</enum><header>Related to repeal of section 71</header>
<subparagraph id="H5DA75CA858D1433B8A114F434A13F364"><enum>(A)</enum><text>Section 121(d)(3) is amended—</text>
<clause id="H7126B45759E5459F9B692F682259E786"><enum>(i)</enum><text>by striking <quote>(as defined in section 71(b)(2))</quote> in subparagraph (B), and</text>
</clause><clause id="H222F55E6322648D7A62AF4396EDD1C61"><enum>(ii)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H34A8AEEAB642457C9AF878928A88ADC1" style="OLC">
<subparagraph id="H364F08DCA1F3473D99163C9557183484"><enum>(C)</enum><header>Divorce or separation instrument</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>divorce or separation instrument</quote> means—</text>
<clause id="H0C1B0F4DED8C49059A34C98C4B9A2654"><enum>(i)</enum><text display-inline="yes-display-inline">a decree of divorce or separate maintenance or a written instrument incident to such a decree,</text>
</clause><clause id="H59C87C7ACD894E4DB9D2325189CD0E0B"><enum>(ii)</enum><text>a written separation agreement, or</text>
</clause><clause id="H253737870E9445008B88D76C51D47229"><enum>(iii)</enum><text>a decree (not described in clause (i)) requiring a spouse to make payments for the support or
maintenance of the other spouse.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="HC2EA0E447F304224873DE8BB908F68A4"><enum>(B)</enum><text display-inline="yes-display-inline">Section 220(f)(7) is amended by striking <quote>subparagraph (A) of section 71(b)(2)</quote> and inserting <quote>clause (i) of section 121(d)(3)(C)</quote>.</text>
</subparagraph><subparagraph id="HCF1201DD20E54F4BBC853758806F91F2"><enum>(C)</enum><text display-inline="yes-display-inline">Section 223(f)(7) is amended by striking <quote>subparagraph (A) of section 71(b)(2)</quote> and inserting <quote>clause (i) of section 121(d)(3)(C)</quote>.</text>
</subparagraph><subparagraph id="HCDA502AB44F24EB98EDF044DC844975D"><enum>(D)</enum><text display-inline="yes-display-inline">Section 382(l)(3)(B)(iii) is amended by striking <quote>section 71(b)(2)</quote> and inserting <quote>section 121(d)(3)(C)</quote>.</text>
</subparagraph><subparagraph id="H0880DE6CC7D14210A6D26B586F79C39C"><enum>(E)</enum><text display-inline="yes-display-inline">Section 408(d)(6) is amended by striking <quote>subparagraph (A) of section 71(b)(2)</quote> and inserting <quote>clause (i) of section 121(d)(3)(C)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H471FA77D1A6B4C46844BAE3129D16A64"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to—</text>
<paragraph id="HF95D9704B95F4EFEADD5BE2263B17C41"><enum>(1)</enum><text>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, 2014, and</text>
</paragraph><paragraph id="H4050B71921F14023A29BDB3AFE97F741"><enum>(2)</enum><text>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.</text>
</paragraph></subsection></section><section id="H57515A70C56440DEA335092803A7E6C1"><enum>1412.</enum><header>Repeal of deduction for moving expenses</header>
<subsection id="H9E4183C1CEC040378D2F52372CEC022F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VII of subchapter B of chapter 1 is amended by striking section 217 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H067EC2C1E9884DDD90F9CE355EA3614E"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H30FD2CDE29A444C286D80BA3E7EAA99B"><enum>(1)</enum><text>Section 62(a) is amended by striking paragraph (15).</text>
</paragraph><paragraph id="H131E6AFF02724EDF829CBEA6FC996853"><enum>(2)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HAD0ABDB0A33B4C3C833808B0A7425540"><enum>(A)</enum><text>Section 132(a) is amended by striking paragraph (6).</text>
</subparagraph><subparagraph id="H32F20D6520514CC487B280FCEA6C7929" indent="up1"><enum>(B)</enum><text>Section 82 is amended by striking <quote>Except as provided in section 132(a)(6), there</quote> and inserting <quote>There</quote>.</text>
</subparagraph></paragraph><paragraph id="H67D742842B604B0AAD020F2795AE2C4C"><enum>(3)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H2BEF3C401C144451BDBA288F8B165595"><enum>(A)</enum><text>Section 132 is amended by striking subsection (g).</text>
</subparagraph><subparagraph id="H01E43DFE140B438B802647F21FE00DEA" indent="up1"><enum>(B)</enum><text>Section 132(l) is amended by striking by striking <quote>subsections (e) and (g)</quote> and inserting <quote>subsection (e)</quote>.</text>
</subparagraph></paragraph><paragraph id="H9CFE844E567A4CCE8A9930C8C0358D32"><enum>(4)</enum><text>Section 274(m)(3) is amended by striking <quote>(other than section 217)</quote>.</text>
</paragraph><paragraph id="H38635CFA75B142CD9D4EA6FC517B42D7"><enum>(5)</enum><text>Section 3121(a) is amended by striking paragraph (11).</text>
</paragraph><paragraph id="H7DC422605E1C409E882397AC3217C6B7"><enum>(6)</enum><text>Section 209(a) of the Social Security Act is amended by striking paragraph (9).</text>
</paragraph><paragraph id="HC7F0FEC790EE4DE5BA04DEF81F30D136"><enum>(7)</enum><text>Section 3306(b) is amended by striking paragraph (9).</text>
</paragraph><paragraph id="HA352A2ECED244B63B5E7736F17F26124"><enum>(8)</enum><text>Section 3401(a) is amended by striking paragraph (15).</text>
</paragraph><paragraph id="H8AB0A277263A4E0C80D4318C35743B7C"><enum>(9)</enum><text>Section 7872(f) is amended by striking paragraph (11).</text>
</paragraph></subsection><subsection id="H37A45737FB52478FB76B26ECE73098F0"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section commented="no" id="HECAFF6D92474417EAE07826D99C0069C"><enum>1413.</enum><header>Termination of deduction and exclusions for contributions to medical savings accounts</header>
<subsection commented="no" id="HDEA29D93C5EA4D148CEC18BD7EC91BA9"><enum>(a)</enum><header>Termination of income tax deduction</header><text display-inline="yes-display-inline">Section 220 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HE9D65ED178EF4F8D805BF60D0071FCB4" style="OLC">
<subsection id="HA0B2964F2D5A4289B203DAA2A5744C2D"><enum>(k)</enum><header>Termination</header><text display-inline="yes-display-inline">No deduction shall be allowed under subsection (a) with respect to any taxable year beginning after
December 31, 2014.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H103E61B5EF3343AFA8BC75854CE5913B"><enum>(b)</enum><header>Termination of exclusion for employer-Provided contributions</header><text>Section 106 is amended by striking subsection (b).</text>
</subsection><subsection id="H5D9FBBE567D74AED8D27DFD14F2D773D"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="HDB7DD88FE90E42F6AD087D2AB1438594"><enum>(1)</enum><text display-inline="yes-display-inline">Section 62(a) is amended by striking paragraph (16).</text>
</paragraph><paragraph id="H576F3548AFAA44EC86ECDFB59628BD5F"><enum>(2)</enum><text>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:</text>
<quoted-block display-inline="no-display-inline" id="H97C5F427B1454FB3BD449B0D13BCB5DE" style="OLC">
<paragraph id="HB642226DA1EA41D2A9DE624842C023E4"><enum>(2)</enum><header>No constructive receipt</header><text display-inline="yes-display-inline">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.</text>
</paragraph><paragraph id="H4900BED4EBB449D38A0C9C5E5C03294F"><enum>(3)</enum><header>Special rule for deduction of employer contributions</header><text>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.</text>
</paragraph><paragraph id="H03E6E47048824692B11B0B89A8628255"><enum>(4)</enum><header>Employer health savings account contribution required to be shown on return</header><text>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.</text>
</paragraph><paragraph id="H1D8659303FDF43279A263BCC8F896449"><enum>(5)</enum><header>Health savings account contributions not part of COBRA coverage</header><text>Paragraph (1) shall not apply for purposes of section 4980B.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H42C7194EBDD94A169C270222C143C1D1"><enum>(3)</enum><text>Section 223(b)(4) is amended by striking subparagraph (A) and by redesignating subparagraphs (B)
and (C) as subparagraphs (A) and (B), respectively.</text>
</paragraph><paragraph id="H7F8790B0275F4280B86B50378FB90F5B"><enum>(4)</enum><text>Section 3231(e) is amended by striking paragraph (10) and by redesignating paragraphs (11) and (12)
as paragraphs (10) and (11), respectively.</text>
</paragraph><paragraph id="H12323D8235744D5994B3CE58EFA879A5"><enum>(5)</enum><text>Section 3306(b) is amended by striking paragraph (17).</text>
</paragraph><paragraph id="HF59744C5117C49F9B08D8E2DDF253862"><enum>(6)</enum><text>Section 3401(a) is amended by striking paragraph (21).</text>
</paragraph><paragraph id="HE78BFF870A5948EDAA624C188E404311"><enum>(7)</enum><text>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).</text>
</paragraph><paragraph id="HACB2FEB304DA405495E97B47C6C52DFC"><enum>(8)</enum><text>Section 4980G is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H59D9413073F848958DC47E6E7A4C63C6" style="OLC">
<section id="H220C61E5AFF347469DCEC8FE25F6367C"><enum>4980G.</enum><header>Failure of employer to make comparable health savings account contributions</header>
<subsection id="H353A2DFDC8334D25A7B02A4D81FA57BE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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.</text>
</subsection><subsection id="H71C510B6F6D24C7EAB3CC4E27960CD44"><enum>(b)</enum><header>Amount of tax</header><text>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.</text>
</subsection><subsection id="HD76BE7AA741242F5956C7E859C91771C"><enum>(c)</enum><header>Waiver by Secretary</header><text>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.</text>
</subsection><subsection id="HD9946A967BFC4F74BA596EB6A9F7F2A0"><enum>(d)</enum><header>Employer required To make comparable health savings account contributions for all participating
employees</header>
<paragraph id="H1BE5F213C64F4EF2A16B1691C3CFF3FC"><enum>(1)</enum><header>In general</header><text>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.</text>
</paragraph><paragraph id="HC19CDA6A568141D79B766AB1A1C6AC34"><enum>(2)</enum><header>Comparable contributions</header>
<subparagraph id="HDB90F09F6C33433DB5C2689A18FACAF6"><enum>(A)</enum><header>In general</header><text>For purposes of paragraph (1), the term <quote>comparable contributions</quote> means contributions—</text>
<clause id="H0760777A0CF04D33BA0D4C3CCC893B37"><enum>(i)</enum><text>which are the same amount, or</text>
</clause><clause id="HAF68FA2DD31B4D45ACBFACBB8013DE1E"><enum>(ii)</enum><text>which are the same percentage of the annual deductible limit under the high deductible health plan
covering the employees.</text>
</clause></subparagraph><subparagraph id="H6A2FEA8665B2459EA4C5942706A08A39"><enum>(B)</enum><header>Part-year employees</header><text>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.</text>
</subparagraph></paragraph><paragraph id="HAD53DD4879074AECAB9A71C4B952EC08"><enum>(3)</enum><header>Comparable participating employees</header>
<subparagraph id="H6BF7D50D60794D7098394F039C551785"><enum>(A)</enum><header>In general</header><text>For purposes of paragraph (1), the term <quote>comparable participating employees</quote> means all employees—</text>
<clause id="H3CA72F208423474A8395D0C122DAEFDD"><enum>(i)</enum><text>who are eligible individuals covered under any high deductible health plan of the employer, and</text>
</clause><clause id="H43C049C380D440B6BDFC91C3EBCED3FB"><enum>(ii)</enum><text>who have the same category of coverage.</text>
</clause></subparagraph><subparagraph id="H3EB473AAFB8A4884966BDD2F9DFC679B"><enum>(B)</enum><header>Categories of coverage</header><text>For purposes of subparagraph (B), the categories of coverage are self-only and family coverage.</text>
</subparagraph></paragraph><paragraph id="H7AF4F6BC1F0D4560AAA21DFFC829E897"><enum>(4)</enum><header>Part-time employees</header>
<subparagraph id="HC97E020B1ADE40A78D51A008DBA1B204"><enum>(A)</enum><header>In general </header><text>Paragraph (3) shall be applied separately with respect to part-time employees and other employees.</text>
</subparagraph><subparagraph id="H8C07BEA480734FFD8C26E0E19597E864"><enum>(B)</enum><header>Part-time employee</header><text>For purposes of subparagraph (A), the term <quote>part-time employee</quote> means any employee who is customarily employed for fewer than 30 hours per week.</text>
</subparagraph></paragraph><paragraph id="H0FC6A3F36EEB4B6B92A9CEE50C395F9E"><enum>(5)</enum><header>Special rule for non-highly compensated employees</header><text display-inline="yes-display-inline">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.</text>
</paragraph></subsection><subsection id="H5D49F81A69BD4544B9FE0401422A36B2"><enum>(e)</enum><header>Controlled groups</header><text>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.</text>
</subsection><subsection id="H7ED4FF6F62544ECF9C060520E50BB66B"><enum>(f)</enum><header>Definitions</header><text>Terms used in this section which are also used in section 223 have the respective meanings given
such terms in section 223.</text>
</subsection><subsection id="H97717A89F8774091ABEADF4F6724A896"><enum>(g)</enum><header>Regulations</header><text>The Secretary shall issue regulations to carry out the purposes of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H65EFFBF251A64D33899AAD548F3E496A"><enum>(9)</enum><text>Section 6051(a) is amended by striking paragraph (11).</text>
</paragraph><paragraph id="H52AC716BD71E4560B8C9FA74435B3B1E"><enum>(10)</enum><text>Section 6051(a)(14)(A) is amended by striking <quote>paragraphs (11) and (12)</quote> and inserting <quote>paragraph (12)</quote>.</text>
</paragraph></subsection><subsection commented="no" id="H5F3CD049F21949B59BA48531CFA31C2B"><enum>(d)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H76D211A1AB1547DE9D653DCD31443378"><enum>1414.</enum><header>Repeal of 2-percent floor on miscellaneous itemized deductions</header>
<subsection id="H2A42413B54F54478AB667F71D34A2CC6"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part 1 of subchapter B of chapter 1 is amended by striking section 67 (and the item relating to
such section in the table of sections for such part).</text>
</subsection><subsection id="HB4F455137DB14CB3B0E6AB36149C684C"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HEEAD025E5A3A4AAD803D8DB309FFE7A7"><enum>(1)</enum><text>Section 642(b)(2)(C)(i)(II) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H0F63118E3F7C4A4A92AE24D9DC760FFF" style="OLC">
<subclause id="H33C951B55D3A42D18AB1761D71043C5A"><enum>(II)</enum><text display-inline="yes-display-inline">by determining the adjusted gross income of the trust under the rules of section 2(b)(2) (without
the reference to section 642(b)).</text></subclause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HFD2031D6AC86457CB2D10CE5291686F7"><enum>(2)</enum><text>Section 162(o) is amended by striking paragraph (2).</text>
</paragraph><paragraph id="HD7CA61DFDB474C0E9140EF0122FD0B49"><enum>(3)</enum><text>Section 302(b)(5) is amended by striking <quote>section 67(c)(2)(B)</quote> and inserting <quote>section 562(c)(2)</quote>.</text>
</paragraph><paragraph id="HD120AC7A84E0479FB9E32170E897930C"><enum>(4)</enum><text>Section 562(c) is amended—</text>
<subparagraph id="HCCBAC723271142FCBF27C5D51EFE3427"><enum>(A)</enum><text>by striking <quote>(as defined in section 67(c)(2)(B))</quote>,</text>
</subparagraph><subparagraph id="H2F0F8C776BDB4A449D6B0E8CD0AEEB18"><enum>(B)</enum><text>by striking <quote>(as so defined)</quote>,</text>
</subparagraph><subparagraph id="H04AA01E6CDF744A496C4FA9CEEBB32F8"><enum>(C)</enum><text display-inline="yes-display-inline">by striking <quote>Except in the case of</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="HA618E49EE17C4491998DEF913C34C53C" style="OLC">
<paragraph id="HADB25D69E70247B79AB2305C82FFEB45"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except in the case of</text></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H01AC876DA3E1497381577DF286ACDD17"><enum>(D)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HD220B2BF175F47C79CFA1C21B9A13E3A" style="OLC">
<paragraph id="H823DAFEDF66043B292AE228F366CB274"><enum>(2)</enum><header>Publicly offered regulated investment company</header><text>For purposes of this subsection—</text>
<subparagraph id="HA9B9394A890843C1B6CD20F54052F16B"><enum>(A)</enum><header>In general</header><text>The term <quote>publicly offered regulated investment company</quote> means a regulated investment company the shares of which are—</text>
<clause id="H68CAC382CE314B8E88A4A53CB6E6A2E1"><enum>(i)</enum><text>continuously offered pursuant to a public offering (within the meaning of section 4 of the
Securities Act of 1933, as amended (15 U.S.C. 77a to 77aa)),</text>
</clause><clause id="H19F08C83D8FA439EB4FA739E1A73706E"><enum>(ii)</enum><text>regularly traded on an established securities market, or</text>
</clause><clause id="H90AC92B244B544DD906F4931D61DFA72"><enum>(iii)</enum><text>held by or for no fewer than 500 persons at all times during the taxable year.</text>
</clause></subparagraph><subparagraph id="H643A0123C3D14DD28FCB58B005E4FFA5"><enum>(B)</enum><header>Secretary may reduce 500 person requirement</header><text>The Secretary may by regulation decrease the minimum shareholder requirement of clause (i)(III) in
the case of regulated investment companies which experience a loss of
shareholders through net redemptions of their shares.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H1677ED0BFAEC45DC897215E7BF3E8C78"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H2568705852CD49E5B3F2157ABD7F2381"><enum>1415.</enum><header>Repeal of overall limitation on itemized deductions</header>
<subsection id="HCA9E027BD0484C19BD7DCBB939EF6CD3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H2978426FD62D4B15B57B250E2533DA5F"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H93EC302C4F3247FB9E013E2A0CFC9C93"><enum>1416.</enum><header>Deduction for amortizable bond premium allowed in determining adjusted gross income</header>
<subsection id="H1FDE79E910D04FB6A12F0770EC7E2377"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (a) of section 62, as amended by section 1411, is amended by inserting after paragraph
(9) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HBE9FEBC990444851A119B1E33BEEA9AF" style="OLC">
<paragraph id="H348AF2CE844645C99CED961992EA6FE3"><enum>(10)</enum><header>Amortizable bond premium</header><text display-inline="yes-display-inline">The deduction allowed under section 171(a)(1).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H94014FDA6B3949EFBD1F7ED3C933C929"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H24ED07D4C31143CAAF3A1A36E32816D1"><enum>1417.</enum><header>Repeal of exclusion, etc., for employee achievement awards</header>
<subsection id="HFB183F6AD1714F9B8771BF1E258EBCAB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 74 is amended by striking subsection (c).</text>
</subsection><subsection id="H491AA8730BC044BEA0C6F4C2F2E98E3A"><enum>(b)</enum><header>Repeal of limitation on deduction</header><text>Section 274 is amended by striking subsection (j).</text>
</subsection><subsection id="H95E26AA01D514281926FBAE7C33A5666"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H8FD6304973DB466787ABAA827ADF5FED"><enum>(1)</enum><text display-inline="yes-display-inline">Section 102(c)(2) is amended by striking the first sentence.</text>
</paragraph><paragraph id="H45DD8B2263EA47C6A923B7FA63435EBA"><enum>(2)</enum><text>Section 414(n)(3)(C) is amended by striking <quote>274(j),</quote>.</text>
</paragraph><paragraph id="H13570CADF34645B1BE7070C45BF0A4BD"><enum>(3)</enum><text>Section 414(t)(2) is amended by striking <quote>274(j),</quote>.</text>
</paragraph><paragraph id="H5A580135E92B4B1795AB4076E3621A60"><enum>(4)</enum><text>Section 3121(a)(20) is amended by striking <quote>74(c),</quote>.</text>
</paragraph><paragraph id="H274DDBACFEAE421F962866135792BD94"><enum>(5)</enum><text>Section 209(a)(17) of the Social Security Act is amended by striking <quote>74(c),</quote>.</text>
</paragraph><paragraph id="H8D6E26FBCECC4CA788EC03108774BC23"><enum>(6)</enum><text>Section 3231(e)(5) is amended by striking <quote>74(c),</quote>.</text>
</paragraph><paragraph id="H02FF1CCE1C0A4DE5B03826016241FB5E"><enum>(7)</enum><text display-inline="yes-display-inline">Section 3306(b)(16) is amended by striking <quote>74(c),</quote>.</text>
</paragraph><paragraph id="HEFBCAC2C53FA41ADB3E4CC326EDC153F"><enum>(8)</enum><text display-inline="yes-display-inline">Section 3401(a)(19) is amended by striking <quote>74(c),</quote>.</text>
</paragraph></subsection><subsection id="H2B9F52B4904C4AD7899A3B8F7069046B"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section display-inline="no-display-inline" id="H2EF6E8E863AF48B7B6466C9204EBC6D9" section-type="subsequent-section"><enum>1418.</enum><header>Clarification of special rule for certain governmental plans</header>
<subsection id="HAD147D401083415199B78D9DF77097A4"><enum>(a)</enum><header>Treatment of beneficiaries</header><text>Section 105(j)(1) is amended—</text>
<paragraph id="H962B10D6F3744BF9BB020101818E96F5"><enum>(1)</enum><text>by striking <quote>the taxpayer</quote> and inserting <quote>an employee, spouse, dependent (as defined for purposes of subsection (b)), or child (as so
defined)</quote>, and</text>
</paragraph><paragraph id="HA4FFE7F20E8A4C7FB8EAC532EA330193"><enum>(2)</enum><text>by striking <quote>deceased plan participant’s beneficiary</quote> and inserting <quote>deceased employee’s beneficiary who is not a surviving spouse, dependent (as so defined), or child
(as so defined)</quote>.</text>
</paragraph></subsection><subsection id="HFA6FD7820CA345969D183974CBFF4993"><enum>(b)</enum><header>Application to political subdivisions of States</header><text>Section 105(j)(2) is amended—</text>
<paragraph id="H2C89E717907C4999B72E998786A7A222"><enum>(1)</enum><text>by inserting <quote>or established by or on behalf of a State or political subdivision thereof </quote> after <quote>public retirement system</quote>, and</text>
</paragraph><paragraph id="HF79E4E8C02CD4519AD65611601DC072F"><enum>(2)</enum><text>by inserting <quote>or 501(c)(9)</quote> after <quote>section 115</quote> in subparagraph (B) thereof.</text>
</paragraph></subsection><subsection id="HD259E07F457B4EC28F09DCD6843E5032"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to payments after the date of the enactment of this
Act.</text>
</subsection></section><section id="HAFEA5479C9154065B547FC9FEA2FED83"><enum>1419.</enum><header>Limitation on exclusion for employer-provided housing</header>
<subsection id="HB1AA490DC39A45CDABE55D8FA5A7C4F0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 119 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H9BE3D5B27C2E418A924D2C0E49D30118" style="OLC">
<subsection id="HEFA02231BFE545B49DD4CFD665725FC7"><enum>(e)</enum><header>Limitation on exclusion of lodging</header>
<paragraph id="H7C9CAD8CCED342188564F8D0C91BD509"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</paragraph><paragraph id="H02864593D8024C60BA27FD5457F33093"><enum>(2)</enum><header>Limitation to 1 home</header><text display-inline="yes-display-inline">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.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H862B8B44C51943D2A8196F2C7EA53A35"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HDDC8522DD506478FAE8EA604CBE5E0FA"><enum>1420.</enum><header>Fringe benefits</header>
<subsection id="H8F07991937A346B48B11037480A24125"><enum>(a)</enum><header>Repeal of special rule for air transportation by parent of employee</header><text display-inline="yes-display-inline">Subsection (h) of section 132 is amended by striking paragraph (3).</text>
</subsection><subsection id="H34CE0C131A67474A8BDD79A4BF743A9F"><enum>(b)</enum><header>Transportation and parking</header>
<paragraph id="H5269C898B7424BE1AFA69ECC17F27943"><enum>(1)</enum><header>Freeze at current levels</header>
<subparagraph id="H71426C3B43AA417097268631438AD61E"><enum>(A)</enum><header>In general</header><text>Paragraph (2) of section 132(f) is amended—</text>
<clause id="H370CA818B555499587F69AC67F401DA2"><enum>(i)</enum><text>in subparagraph (A) by striking <quote>$100</quote> and inserting <quote>$130</quote>, and</text>
</clause><clause id="HD43DBE74E53E46C5B96DB21F3871A5DA"><enum>(ii)</enum><text>in subparagraph (B) by striking <quote>$175</quote> and inserting <quote>$250</quote>.</text>
</clause></subparagraph><subparagraph id="H706BFCDD676C4633B13D2F4FF9FC2E56"><enum>(B)</enum><header>Inflation adjustment</header><text>Subsection (f) of such section is amended by striking paragraph (6) and redesignating paragraph (7)
as paragraph (6).</text>
</subparagraph></paragraph><paragraph id="H1FF0574B605749DBA159FFD7A0233494"><enum>(2)</enum><header>Repeal of bicycle benefit</header>
<subparagraph id="H53CC644EB4694790A71D0A1832D582FC"><enum>(A)</enum><header>In general</header><text>Paragraph (1) of section 132(f) is amended by striking subparagraph (D).</text>
</subparagraph><subparagraph id="H067C776185674DAD9EC8DDAB71980498"><enum>(B)</enum><header>Conforming amendments</header>
<clause id="HC850123A833C43EBB4E23E32235698F3"><enum>(i)</enum><text>Section 132(f)(2) is amended by inserting <quote>and</quote> at the end of subparagraph (A), by striking <quote>and</quote> at the end of subparagraph (B) and inserting a period, and by striking subparagraph (C).</text>
</clause><clause id="HE756D4DC24284399B409FF44ABE9C56F"><enum>(ii)</enum><text>Section 132(f)(4) is amended by striking <quote>(other than a qualified bicycle commuting reimbursement)</quote>.</text>
</clause><clause id="H0A815B32E55C4BC5A1BAE12750A80CE0"><enum>(iii)</enum><text>Section 132(f)(5) is amended by striking subparagraph (F).</text>
</clause></subparagraph></paragraph></subsection><subsection id="H8BAE2FCB6BA54E73BAA3D6E8EC0B0984"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section display-inline="no-display-inline" id="H5BAE62A59F534EC597CD01746233D7BA" section-type="subsequent-section"><enum>1421.</enum><header>Repeal of exclusion of net unrealized appreciation in employer securities</header>
<subsection id="HD57FB054E73E4A8694D08447CC066C2A"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 402(e) is amended by striking paragraph (4).</text>
</subsection><subsection id="H5EF304E0461E45ECA08DF511606BE777"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HA1E0212C7E3B4BE880C75E264B69DE5A"><enum>(1)</enum><text>Section 401(k)(10) is amended by striking subparagraph (B) and inserting the following new
subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="H58FCF4C4DA6E4D9AB14CC31236129CF5" style="OLC">
<subparagraph id="H7C10B99CE95F41E38DD48B3F7044CA88"><enum>(B)</enum><header>Distributions must be lump sum distributions</header><text display-inline="yes-display-inline">A termination shall not be treated as described in subparagraph (A) with respect to any employee
unless the employee receives a lump sum distribution by reason of the
termination.</text>
</subparagraph><subparagraph id="H88AF6BEEADD04FE39D3E1D349333B713"><enum>(C)</enum><header>Lump-sum distribution defined</header><text>For purposes of this paragraph—</text>
<clause id="HD2A3E6F128CA4E9AA52FC97BE97F2D60"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>lump sum distribution</quote> means the distribution or payment within one taxable year of the recipient of the balance to the
credit of an employee which becomes payable to the recipient from a trust
which forms a part of a plan described in section 401(a) and which is
exempt from tax under section 501 or from a plan described in section
403(a). Such term includes a distribution of an annuity contract from—</text>
<subclause id="H14243D8026724A4397E9D83ECF84B818"><enum>(I)</enum><text>a trust which forms a part of a plan described in section 401(a) and which is exempt from tax under
section 501(a), or</text>
</subclause><subclause id="H0BBD187BC47242A38412D0AD446BAB0F"><enum>(II)</enum><text>an annuity plan described in section 403(a).</text></subclause><continuation-text continuation-text-level="clause">For purposes of this clause, a distribution to two or more trusts shall be treated as a
distribution to one recipient.</continuation-text></clause><clause id="H756D42607B4A4EBF8601543D58360E6C"><enum>(ii)</enum><header>Aggregation of certain trusts and plans</header><text>For purposes of determining the balance to the credit of an employee under clause (i)—</text>
<subclause id="H66817666A38A402D989A68BD48E28861"><enum>(I)</enum><text>all trusts which are part of a plan shall be treated as a single trust, all pension plans
maintained by the employer shall be treated as a single plan, all
profit-sharing plans maintained by the employer shall be treated as a
single plan, and all stock bonus plans maintained by the employer shall be
treated as a single plan, and</text>
</subclause><subclause id="H42A6E943F88E45C28557CE6E0E0C8CE2"><enum>(II)</enum><text>trusts which are not qualified trusts under section 401(a) and annuity contracts which do not
satisfy the requirements of section 404(a)(2) shall not be taken into
account.</text>
</subclause></clause><clause id="H9A525A137F7840C1973F8C6C4C5CD850"><enum>(iii)</enum><header>Community property laws</header><text>The provisions of this subparagraph shall be applied without regard to community property laws.</text>
</clause><clause id="H352D13EA1303490CBC7E901D1BD3C313"><enum>(iv)</enum><header>Balance to credit of employee not to include amounts payable under qualified domestic relations
order</header><text>The balance to the credit of an employee shall not include any amount payable to an alternate payee
under a qualified domestic relations order (within the meaning of section
414(p)).</text>
</clause><clause id="HF65637382D5F4B1AB7A63D0A454C8273"><enum>(v)</enum><header>Transfers to cost-of-living arrangement not treated as distribution</header><text>The balance to the credit of an employee under a defined contribution plan shall not include any
amount transferred from such defined contribution plan to a qualified
cost-of-living arrangement (within the meaning of section 415(k)(2)) under
a defined benefit plan. (vii)</text>
</clause><clause id="H85E681E90D40466A8C8966F8E775B508"><enum>(vi)</enum><header>Lump-sum distributions of alternate payees</header><text>If any distribution or payment of the balance to the credit of an employee would be treated as a
lump-sum distribution, then, for purposes of this paragraph, the payment
under a qualified domestic relations order (within the meaning of section
414(p)) of the balance to the credit of an alternate payee who is the
spouse or former spouse of the employee shall be treated as a lump-sum
distribution. For purposes of this clause, the balance to the credit of
the alternate payee shall not include any amount payable to the employee.</text>
</clause><clause id="HC7F6572DDBB448E38686B35AC6560C38"><enum>(vii)</enum><header>Exclusion of accumulate deductible employee contributions</header><text>For purposes of this subparagraph, the balance to the credit of the employee does not include the
accumulated deductible employee contributions under the plan (within the
meaning of section 72(o)(5)).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H57CF416E8B4F437E8227576BDA6D8B6F"><enum>(2)</enum><text>Section 3405(e) is amended by striking paragraph (8).</text>
</paragraph></subsection><subsection id="H2EB6136E78CB483DA77C661C282F3393"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to distributions after December 31, 2014.</text>
</subsection></section><section id="H0CE499F1B94C43F4BB186DA7C3F10668"><enum>1422.</enum><header>Consistent basis reporting between estate and person acquiring property from decedent</header>
<subsection id="H2821BBC3499D44EAAF1202883FF87A13"><enum>(a)</enum><header>Property acquired from a decedent</header><text>Section 1014 is amended by adding at the end the following new subsection:</text>
<quoted-block id="HEED445D4749D4D73A5A59D963214FA5E" style="OLC">
<subsection id="H05F98229474D4DDDADD5D2FC191AEB75"><enum>(f)</enum><header>Basis must be consistent with estate tax return</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H6C719F0020704663BC8A63CD98771151"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The basis of any property to which subsection (a) applies shall not exceed—</text>
<subparagraph id="HC7220B1E56F34630AB59E025A0EDEA46"><enum>(A)</enum><text>in the case of property the final value of which has been determined for purposes of the tax
imposed by chapter 11 on the estate of such decedent, such value, and</text>
</subparagraph><subparagraph id="HE781C9A253464B528BA34A048A72566E"><enum>(B)</enum><text>in the case of property not described in subparagraph (A) and with respect to which a statement has
been furnished under section 6035(a) identifying the value of such
property, such value.</text>
</subparagraph></paragraph><paragraph id="H800F47AE2DB049D3B440D95F197CD192"><enum>(2)</enum><header>Exception</header><text>Paragraph (1) shall only apply to any property whose inclusion in the decedent’s estate increased
the liability for the tax imposed by chapter 11 (reduced by credits
allowable against such tax) on such estate.</text>
</paragraph><paragraph id="HFDFFDFD0ACA54A1A894AE83231F802CA"><enum>(3)</enum><header>Regulations</header><text>The Secretary may by regulations provide exceptions to the application of this subsection.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBE7C66E2A95B4CA6869520D6B6414D71"><enum>(b)</enum><header>Information reporting</header>
<paragraph id="HC8571AB16A4541F6A5CD5A53F1688185"><enum>(1)</enum><header>In general</header><text>Subpart A of part III of subchapter A of chapter 61 is amended by inserting after section 6034A the
following new section:</text>
<quoted-block id="HFB717FC183E54F5098BB376083EE312C" style="OLC">
<section id="H7A1B7A33E86344B6AF6E65FCF4E388BC"><enum>6035.</enum><header>Basis information to persons acquiring property from decedent</header>
<subsection id="H4C2DDDED31E94A40A31BCE189E6623FA"><enum>(a)</enum><header>Information with respect to property acquired from decedents</header>
<paragraph id="HC628CA71EC3C45E3A4B2034DCC3AB080"><enum>(1)</enum><header>In general</header><text>The executor of any estate required to file a return under section 6018(a) shall furnish to the
Secretary and to each person acquiring any interest in property included
in the decedent’s gross estate for Federal estate tax purposes a statement
identifying the value of each interest in such property as reported on
such return and such other information with respect to such interest as
the Secretary may prescribe.</text>
</paragraph><paragraph id="H2CEB8887C46B4FD0B0EB2A500DE74A2A"><enum>(2)</enum><header>Statements by beneficiaries</header><text>Each person required to file a return under section 6018(b) shall furnish to the Secretary and to
each other person who holds a legal or beneficial interest in the property
to which such return relates a statement identifying the information
described in paragraph (1).</text>
</paragraph><paragraph id="H35AC7BD5226D47CAB78C7A3740E9F943"><enum>(3)</enum><header>Time for furnishing statement</header>
<subparagraph id="H9B990A314BF4422FA6E7A7EFCE2BD13F"><enum>(A)</enum><header>In general</header><text>Each statement required to be furnished under paragraph (1) or (2) shall be furnished at such time
as the Secretary may prescribe, but in no case at a time later than the
earlier of—</text>
<clause id="H3C6B7A742BAC4356AE904026E2183700"><enum>(i)</enum><text>the date which is 30 days after the date on which the return under section 6018 was required to be
filed (including extensions, if any), or</text>
</clause><clause id="HE9C94E7883C74B2CB7CB99BD7E718694"><enum>(ii)</enum><text>the date which is 30 days after the date such return is filed.</text>
</clause></subparagraph><subparagraph id="H7F59E4B1D4B14BC2B357B4FF9052D346"><enum>(B)</enum><header>Adjustments</header><text>In any case in which there is an adjustment to the information required to be included on a
statement filed under paragraph (1) or (2) after such statement has been
filed, a supplemental statement under such paragraph shall be filed not
later than the date which is 30 days after such adjustment is made.</text>
</subparagraph></paragraph></subsection><subsection id="HED8167FF59AE4EFF9214C2BC5A40E174"><enum>(b)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations as necessary to carry out this section, including
regulations relating to—</text>
<paragraph id="H1D272126F6454B97A2C672CDCBB9D763"><enum>(1)</enum><text>the application of this section to property with regard to which no estate tax return is required
to be filed, and</text>
</paragraph><paragraph id="H06409396E0CF4B88AD000028927A590B"><enum>(2)</enum><text>situations in which the surviving joint tenant or other recipient may have better information than
the executor regarding the basis or fair market value of the property.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HDF5105E51F3F46E7B167A9C1C2862FBF"><enum>(2)</enum><header>Penalty for failure to file</header>
<subparagraph id="HC98633E35DCA47B7BC9046E3D51B8C41"><enum>(A)</enum><header>Return</header><text>Section 6724(d)(1) is amended by striking <quote>and</quote> at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and
inserting <quote>, and</quote>, and by adding at the end the following new subparagraph:</text>
<quoted-block id="H97122B3B788B48768E38288D8F3122CE" style="OLC">
<subparagraph id="HD8F57A6B909E43B58B98D3C7B56584AE"><enum>(D)</enum><text>any statement required to be filed with the Secretary under section 6035.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H3D51D457E44940EB82AA601A68DA7333"><enum>(B)</enum><header>Statement</header><text>Section 6724(d)(2) is amended by striking <quote>or</quote> at the end of subparagraph (GG), by striking the period at the end of subparagraph (HH) and
inserting <quote>, or</quote>, and by adding at the end the following new subparagraph:</text>
<quoted-block id="H25AB3B0D341C49328E613F4387679128" style="OLC">
<subparagraph id="H7A8C71E10B02430E92663BE7AAAACE75"><enum>(II)</enum><text>section 6035 (other than a statement described in paragraph (1)(D)).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="HF0639D3CE2A54C349714E7FBE6EED6DB"><enum>(3)</enum><header>Clerical amendment</header><text>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 6034A the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HF8A7D6E3369942F08F9EF08602FDAB74" style="OLC">
<toc container-level="quoted-block-container" idref="HFB717FC183E54F5098BB376083EE312C" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H7A1B7A33E86344B6AF6E65FCF4E388BC" level="section">Sec. 6035. Basis information to persons acquiring property from decedent.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H21E3759020D7449587E118AC442979A4"><enum>(c)</enum><header>Penalty for inconsistent reporting</header>
<paragraph id="HF6526A2C4F8E4C5DB436D8AF1DE981C2"><enum>(1)</enum><header>In general</header><text>Subsection (b) of section 6662 is amended by inserting after paragraph (7) the following new
paragraph:</text>
<quoted-block id="H9F5E77E561CA47688822E5448F0F3C02" style="OLC">
<paragraph id="H6CACFE4BD2774F79A3671335B24CC56F"><enum>(8)</enum><text>Any inconsistent estate basis.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HE1AB368A57AB4C1595ED2EB2E0A53A36"><enum>(2)</enum><header>Inconsistent basis reporting</header><text>Section 6662 is amended by adding at the end the following new subsection:</text>
<quoted-block id="H5BD4599B1DCE4EDA9B5CB56C4EE6CBFC" style="OLC">
<subsection id="HC895819B68FB4C2F91F10970069BE9AB"><enum>(k)</enum><header>Inconsistent estate basis reporting</header><text>For purposes of this section, the term <quote>inconsistent estate basis</quote> means the portion of the understatement which is attributable to in the case of property acquired
from a decedent, a basis determination with respect to such property which
is not consistent with the value of such property as determined under
section 1014(f).</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H2C61A3C38FE34D548A988037BCDD556A"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to transfers for which an estate tax return is
filed after the date of the enactment of this Act.</text>
</subsection></section></subtitle><subtitle id="HA006CD683B2746D09DA0B10B1983BAE8"><enum>F</enum><header>Employment tax modifications</header>
<section id="HC925DDAD14B54A289698C52CAE653D0F"><enum>1501.</enum><header>Modifications of deduction for Social Security taxes in computing net earnings from self-employment</header>
<subsection id="H5AC1BBFDBD974304B6CB4A191C3986D7"><enum>(a)</enum><header>In general</header><text>Paragraph (12) of section 1402(a) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HE8E71455E0A741FAB285CEF371ADF4A7" style="OLC">
<paragraph id="HD631BB2ECADE4F6A970BC51A66235C13"><enum>(12)</enum><text>in lieu of the deduction allowable under section 164(f) (relating to deduction for one-half of
self-employment taxes), there shall be allowed as a deduction an amount
equal to the sum of—</text>
<subparagraph id="H7697C9DE34094FEC9AAAD2D1294E0F2E"><enum>(A)</enum><text>7.1064 percent of so much of the individual’s net earnings from self-employment for the taxable
year (determined without regard to this paragraph) as does not exceed an
amount equal to the product of 1.0765 and the excess (if any) of—</text>
<clause id="H19A318DDD8444874B21436D2650E8903"><enum>(i)</enum><text>the contribution and benefit base (as determined under section 230 of the Social Security Act) in
effect for the calendar year in which the taxable year begins, over</text>
</clause><clause id="H5F428DB5F438466ABB7FF762D64D4402"><enum>(ii)</enum><text>the wages (within the meaning of subsection (b)(1)) paid to the individual during such taxable
year, plus</text>
</clause></subparagraph><subparagraph id="HCF690681F3B946BCB49D0028580C3270"><enum>(B)</enum><text>1.4293 percent of the excess (if any) of the individual’s net earnings from self-employment for the
taxable year (determined without regard to this paragraph) over the amount
of such net earnings taken into account under subparagraph (A);</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC00DB324E76341DFADF1ECD67874FCEB"><enum>(b)</enum><header>Coordination with benefits</header><text>Paragraph (11) of section 211(a) of the Social Security Act is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H4479CEB5F85D4BDF90C5261308F468F0" style="OLC">
<paragraph id="H852C9863CC934704A070727CF64DC4BF"><enum>(11)</enum><text>in lieu of the deduction allowable under <external-xref legal-doc="usc" parsable-cite="usc/26/164">section 164(f)</external-xref> of the Internal Revenue Code of 1986
(relating to deduction for one-half of self-employment taxes), there shall
be allowed as a deduction an amount equal to the sum of—</text>
<subparagraph id="H3744451A0F1C4146BD19C9361D844FBB"><enum>(A)</enum><text>7.1064 percent of so much of the individual's net-earnings from self-employment for the taxable
year (determined without regard to this paragraph) as does not exceed an
amount equal to the product of 1.0765 and the excess (if any) of—</text>
<clause id="H5E715C18FE124F089F30C9A30AD45C27"><enum>(i)</enum><text>the contribution and benefit base (as determined under section 230) in effect for the calendar year
in which the taxable year begins,</text>
</clause><clause id="HDF5D4B6388764004ABF3EA42ADF00B03"><enum>(ii)</enum><text>the wages (within the meaning of <external-xref legal-doc="usc" parsable-cite="usc/26/1402">section 1402(b)(1)</external-xref> of the Internal Revenue Code of 1986) paid to
the individual during such taxable year, plus</text>
</clause></subparagraph><subparagraph id="HF9CA91EFA5E84CF080EE19161F0D60E6"><enum>(B)</enum><text>1.4293 percent of the excess (if any) of such net earnings over the amount of such net earnings
taken into account under subparagraph (A);</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC7035BB792004B55B8C076BF81F92D5E"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HF5B933A6697740518872B97573E69745"><enum>1502.</enum><header>Determination of net earnings from self-employment</header>
<subsection id="HFBD8EE07841242CBA637D4C941F0A7FB"><enum>(a)</enum><header>Pro rata share of S corporation items included as net earnings from self-Employment</header>
<paragraph id="H506266C1BBE543808C4310635B0B0D9C"><enum>(1)</enum><header>In general</header><text>Section 1402(a) is amended by inserting <quote>, plus (notwithstanding subsection (c)(2)) his pro rata share 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 he is a shareholder</quote> before <quote>; except that</quote> in the matter preceding paragraph (1).</text>
</paragraph><paragraph id="H491D99E0A1BE4A588D69A868541DA717"><enum>(2)</enum><header>Application of adjustments</header><text>Section 1402(a) is amended by inserting <quote>and such pro rata share of S corporation nonseparately computed income or loss</quote> after <quote>such distributive share of partnership ordinary income or loss</quote> in the matter preceding paragraph (1).</text>
</paragraph><paragraph id="H1D7CD355C5E04A41821ABF43C224F1C3"><enum>(3)</enum><header>Conforming amendments</header><text>Section 211(a) of the Social Security Act is amended in the matter preceding paragraph (1)—</text>
<subparagraph id="HCDDD34F83048467199BCF646A5649580"><enum>(A)</enum><text display-inline="yes-display-inline">by inserting <quote>, plus (notwithstanding subsection (c)(2)) his pro rata share of nonseparately computed income or
loss (as defined in section 1366(a)(2) of the Internal Revenue Code of
1986)from any trade or business carried on by an S corporation in which he
is a shareholder</quote> before <quote>; except that</quote>, and</text>
</subparagraph><subparagraph id="H4F2E36876C0E456E9E0C2FE984C2467C"><enum>(B)</enum><text display-inline="yes-display-inline">by inserting <quote>and such pro rata share of S corporation nonseparately computed income or loss</quote> after <quote>such distributive share of partnership ordinary income or loss</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H3B35581F69FD4BC2A6405468C74F29A8"><enum>(b)</enum><header>Repeal of exception for limited partners</header>
<paragraph id="H4343759FF1A44C93B8B94F44069A5470"><enum>(1)</enum><header>In general</header><text>Section 1402(a) is amended by striking paragraph (13).</text>
</paragraph><paragraph id="HB4F543FEA76A47B99201C96CBA55704D"><enum>(2)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 211(a) of the Social Security Act is amended by striking paragraph (12).</text>
</paragraph></subsection><subsection id="H58232F7FF02F45ACB65353215C0099BE"><enum>(c)</enum><header>Deduction for return on invested capital</header>
<paragraph id="H732635C27B474D5DA070B9CBB2829122"><enum>(1)</enum><header>In general</header><text>Section 1402 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H4F237E117B8A4B66A1DE7C7B90AC9A4E" style="OLC">
<subsection id="H7A54BBC2B7A340F2832C2CD063752D38"><enum>(m)</enum><header>Deduction for return on invested capital</header>
<paragraph id="HC517422A853A4125A342171897B3AC12"><enum>(1)</enum><header>In general</header><text>An individual’s net earnings from self-employment shall be reduced (but not below zero) by the
lesser of—</text>
<subparagraph id="HE510EB9B316944D894ED45865F8AEB88"><enum>(A)</enum><text>30 percent of the sum of—</text>
<clause id="HCC4203C69B7044E784D95C81EAF70FF1"><enum>(i)</enum><text>such individual’s pass-through net earnings from self-employment, and</text>
</clause><clause id="H45A9E864665642AA937026D975C7337B"><enum>(ii)</enum><text display-inline="yes-display-inline">such individual’s wages (as defined in section 3121) paid with respect to any trade or business
carried on by an S corporation in which he is a shareholder, or</text>
</clause></subparagraph><subparagraph id="H135167E0770A42AAB1287E442CBBB73B"><enum>(B)</enum><text>such individual’s pass-through net earnings from self-employment.</text>
</subparagraph></paragraph><paragraph id="H506E6887B61A4F7183038446387BBDDA"><enum>(2)</enum><header>Pass-through net earnings from self-employment</header><text>For purposes of this subsection, the term <quote>pass-through net earnings from self-employment</quote> means net earnings from self-employment (as computed under subsection (a) without regard to this
subsection) determined without regard to any trade or business carried on
by the individual.</text>
</paragraph><paragraph id="HD4EDCD9DB1534C14827DC450D1C1D6A2"><enum>(3)</enum><header>100 percent deduction where no material participation</header>
<subparagraph id="HE546623799564154A999987C8D7543BB"><enum>(A)</enum><header>In general</header><text>If an individual does not have material participation with respect to an entity (as determined
under subparagraph (B)), in lieu of the reduction provided under paragraph
(1) such individual’s net earnings from self-employment shall be reduced
(but not below zero) by the sum of—</text>
<clause id="H985613CEF1DF433E99AD417E61EBB78E"><enum>(i)</enum><text>the reduction determined under paragraph (1) applied—</text>
<subclause id="H4B960A16B2E048DDB746C83399B21936"><enum>(I)</enum><text>by substituting <quote>100 percent</quote> for <quote>30 percent</quote> in subparagraph (A) thereof, and</text>
</subclause><subclause id="H08CF085B9AF547DE90B6435C4505518F"><enum>(II)</enum><text>by determining pass-through net earnings from self-employment by only taking into account
distributive and pro rata shares from non-participation entities, and</text>
</subclause><subclause id="HE17A12DEC03A4200A5A8375989CCD4DF"><enum>(III)</enum><text>by only taking into account under subparagraph (A)(ii) thereof wages paid with respect to trades or
businesses carried on by S corporations which are non-participation
entities, plus</text>
</subclause></clause><clause id="H42283D6A35084B91916A2EFA99AFB34E"><enum>(ii)</enum><text>the reduction determined under paragraph (1) applied—</text>
<subclause id="HE798A9D7FE284D9DA18B27290CBBF63D"><enum>(I)</enum><text>by determining pass-through net earnings from self-employment by not taking into account any
distributive or pro rata share from a non-participation entity, and</text>
</subclause><subclause id="H3FE2FB05AF084C7A99F5AB75304D5CB2"><enum>(II)</enum><text>by not taking into account under subparagraph (A)(ii) thereof any wages paid with respect to trades
or businesses carried on by an S corporation which is a non-participation
entity.</text>
</subclause></clause></subparagraph><subparagraph id="H2538FC19B57C486BB9DCF6FA298BDF1F"><enum>(B)</enum><header>Material participation</header><text>For purposes of this paragraph—</text>
<clause id="HB350D73CB520480891894FA7933E178F"><enum>(i)</enum><header>In general</header><text>An individual does not have material participation with respect to an entity (hereafter referred to
as the top-tier entity) if such individual demonstrates to the
satisfaction of the Secretary that such individual—</text>
<subclause id="H46A75CEC456E44CDBB07D59A10B7FAEE"><enum>(I)</enum><text>does not materially participate (as determined under section 469(h) without regard to paragraph (2)
thereof) in any activity carried on by such top-tier entity, and</text>
</subclause><subclause id="H385542B8AB764CB9B319973AE14E763D"><enum>(II)</enum><text>does not materially participate (as so determined) in any activity carried on by any entity in
which such top-tier entity holds (directly or indirectly) any interest.</text>
</subclause></clause><clause id="H928B6CAD5A1F44E3B0B46A23D4228C73"><enum>(ii)</enum><header>Family attribution</header><text display-inline="yes-display-inline">For purposes of applying clause (i), the participation of any individual in any activity shall also
be treated as performed by such individual’s spouse and the lineal
descendants of such individual and such individual’s spouse.</text>
</clause></subparagraph><subparagraph id="HB3731626E86F45F5A3C3A2C249097633"><enum>(C)</enum><header>Non-participation entity</header><text>For purposes of this paragraph, the term <quote>non-participation entity</quote> means, with respect to any individual, any entity with respect to which such individual does not
have material participation (as determined under subparagraph (B)).</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HFB8C33FDAAFB4FF1B0D806A412270795"><enum>(2)</enum><header>Conforming amendment</header><text>Section 211 of the Social Security Act is amended by adding at the end the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="H102A8B731804448CAA245D5121D9B949" style="OLC">
<subsection id="H64479626EBCB412BAAF3635AEBC0BE62"><enum>(l)</enum><header>Deduction for return on invested capital</header>
<paragraph id="H22816645F0B2441991CD6AAD706E62D3"><enum>(1)</enum><header>In general</header><text>An individual’s net earnings from self-employment shall be reduced (but not below zero) by the
lesser of—</text>
<subparagraph id="H3274FFEAFBAB4629AB22C5253D3117B1"><enum>(A)</enum><text>30 percent of the sum of—</text>
<clause id="H4693EFF868624071B35268786D285857"><enum>(i)</enum><text>such individual’s pass-through net earnings from self-employment, and</text>
</clause><clause id="HDDD1099ED673429E911562689329B5AC"><enum>(ii)</enum><text display-inline="yes-display-inline">such individual’s wages (as defined in section 209) paid with respect to any trade or business
carried on by an S corporation in which he is a shareholder, or</text>
</clause></subparagraph><subparagraph id="H627543BCB6464AFC9542A3F9C28CDF79"><enum>(B)</enum><text>such individual’s pass-through net earnings from self-employment.</text>
</subparagraph></paragraph><paragraph id="H2300C6EBEDFD4400BB5752994A6F4B5D"><enum>(2)</enum><header>Pass-through net earnings from self-employment</header><text>For purposes of this subsection, the term <quote>pass-through net earnings from self-employment</quote> means net earnings from self-employment (as computed under subsection (a) without regard to this
subsection) determined without regard to any trade or business carried on
by the individual.</text>
</paragraph><paragraph id="HF7824FE647664D04B548A06838F9E636"><enum>(3)</enum><header>100 percent deduction where no material participation</header>
<subparagraph id="H72D589F36AB64998B63D95151BCDA8FE"><enum>(A)</enum><header>In general</header><text>If an individual does not have material participation with respect to an entity (as determined
under subparagraph (B)), in lieu of the reduction provided under paragraph
(1) such individual’s net earnings from self-employment shall be reduced
(but not below zero) by the sum of—</text>
<clause id="H44D4971366E14743B94A1CEF553157DB"><enum>(i)</enum><text>the reduction determined under paragraph (1) applied—</text>
<subclause id="H3495033F371446ABBB1C6262C139D083"><enum>(I)</enum><text>by substituting <quote>100 percent</quote> for <quote>30 percent</quote> in subparagraph (A) thereof, and</text>
</subclause><subclause id="H31F486D9C4364253A434B62FCEB703D0"><enum>(II)</enum><text>by determining pass-through net earnings from self-employment by only taking into account
distributive and pro rata shares from non-participation entities, and</text>
</subclause><subclause id="HAAE12014169349F7AA07108884014C2E"><enum>(III)</enum><text>by only taking into account under subparagraph (A)(ii) thereof wages paid with respect to trades or
businesses carried on by S corporations which are non-participation
entities, plus</text>
</subclause></clause><clause id="HF71F92DB46304608B71B0CDBB679FA83"><enum>(ii)</enum><text>the reduction determined under paragraph (1) applied—</text>
<subclause id="H80208BA075D1410DAFEE2F197277BDD9"><enum>(I)</enum><text>by determining pass-through net earnings from self-employment by not taking into account any
distributive or pro rata share from a nonparticipation entity, and</text>
</subclause><subclause id="H5A4D0E4399C849C4B623FADB8B422A5D"><enum>(II)</enum><text>by not taking into account under subparagraph (A)(ii) thereof any wages paid with respect to trades
or businesses carried on by an S corporation which is a nonparticipation
entity.</text>
</subclause></clause></subparagraph><subparagraph id="H9756E46981594F969ADA7F6D2B55A1E5"><enum>(B)</enum><header>Material participation</header><text>For purposes of this paragraph—</text>
<clause id="H8C7F1B7F00EE4230B0883D1875C1A5E9"><enum>(i)</enum><header>In general</header><text>An individual does not have material participation with respect to an entity (hereafter referred to
as the top-tier entity) if such individual demonstrates to the
satisfaction of the Secretary of the Treasury under section 1402(m) of the
Internal Revenue Code of 1986 that such individual—</text>
<subclause id="HFEAC252B14CA43B1AD009A2FDDD2D381"><enum>(I)</enum><text>does not materially participate (as determined under section 469(h) of the Internal Revenue Code of
1986 without regard to paragraph (2) thereof) in any activity carried on
by such top-tier entity, and</text>
</subclause><subclause id="H6EF8E149FCBA4E4084F96989A47C5519"><enum>(II)</enum><text>does not materially participate (as so determined) in any activity carried on by any entity in
which such top-tier entity holds (directly or indirectly) any interest.</text>
</subclause></clause><clause id="HFB82D16F74A54E8F9FD6BC982AD1A23C"><enum>(ii)</enum><header>Family attribution</header><text display-inline="yes-display-inline">For purposes of applying clause (i), the participation of any individual in any activity shall also
be treated as performed by such individual’s spouse and the lineal
descendants of such individual and such individual’s spouse.</text>
</clause></subparagraph><subparagraph id="HADF456AF85E448C380FB95F068B16689"><enum>(C)</enum><header>Nonparticipation entity</header><text>For purposes of this paragraph, the term <quote>nonparticipation entity</quote> means, with respect to any individual, any entity with respect to which such individual does not
have material participation (as determined under subparagraph (B)).</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HDADFB7372A3E458398163B2C2D2B2F07"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H5F83E778CA764A30A9A017E322B62977"><enum>1503.</enum><header>Repeal of exemption from FICA taxes for certain foreign workers</header>
<subsection id="HF2715ADB1CC944D6B56641C087F22BF1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (b) of section 3121 is amended by striking paragraphs (1) and (19).</text>
</subsection><subsection id="H459FB800BBC845D996C887059CE19548"><enum>(b)</enum><header>Coordination with benefits</header><text display-inline="yes-display-inline">Subsection (a) of section 210 of the Social Security Act is amended by striking paragraphs (1) and
(19).</text>
</subsection><subsection id="HE7001567605C4A57B4D1151098DBA393"><enum>(c)</enum><header>Railroad retirement tax</header><text>Paragraph (1) of section 3231(e) is amended by striking the third sentence.</text>
</subsection><subsection id="HE09D2BC1197F498B9A77F389CBA38D73"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to remuneration received for services performed
after December 31, 2014.</text>
</subsection></section><section id="H0F37AA2068064C4FA87E25C28A2873F2"><enum>1504.</enum><header>Repeal of exemption from FICA taxes for certain students</header>
<subsection id="HD43A5BB51A314101BE47B423BC9F225B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (10) of section 3121(b) is amended—</text>
<paragraph id="HD2916AA66B394CAB91126BB265730D5A"><enum>(1)</enum><text>by inserting <quote>during any calendar year</quote> after <quote>service performed</quote> in the matter preceding subparagraph (A), and</text>
</paragraph><paragraph id="HF1BCD02893824F42B9EB3ABB6B53187A"><enum>(2)</enum><text>by inserting <quote>, and the remuneration paid by the employer with respect to such service during such calendar year
is less than the dollar amount in effect under section 213(d) of the
Social Security Act (relating to amount required for a quarter of
coverage) with respect to such year</quote> before the semicolon at the end.</text>
</paragraph></subsection><subsection id="H62FED9BF3A514ADFB1CBC04BF3F24586"><enum>(b)</enum><header>College clubs, fraternities, and sororities</header><text>Paragraph (2) of section 3121(b) is amended—</text>
<paragraph id="H49F1B8A81F1A49BEAAF5D61B73207D83"><enum>(1)</enum><text>by inserting <quote>during any calendar year</quote> after <quote>domestic service performed</quote>, and</text>
</paragraph><paragraph id="H6F830F543E434BB8B0692DD3401FE2EC"><enum>(2)</enum><text>by inserting <quote>, if the remuneration paid by the employer with respect to such service during such calendar year
is less than the dollar amount in effect under section 213(d) of the
Social Security Act (relating to amount required for a quarter of
coverage) with respect to such year</quote> before the semicolon at the end.</text>
</paragraph></subsection><subsection id="H70352AF209134D1FA1BF1CC000963EBE"><enum>(c)</enum><header>Deduction of tax from wages</header><text>Subsection (a) of section 3102 is amended by inserting <quote>; and an employer who in any calendar year pays to an employee remuneration to which paragraph (2)
or (10) of section 3121(b) is applicable may deduct an amount equivalent
to such tax from any such payment of remuneration, even though at the time
of payment the total amount of such remuneration paid to the employee by
the employer in the calendar year is less than the dollar amount in effect
under section 213(d) of the Social Security Act with respect to such year</quote> before the period at the end.</text>
</subsection><subsection id="HDF701A187ADA44E9988335A3AA8C992B"><enum>(d)</enum><header>Coordination with benefits</header>
<paragraph id="HB9F26E00EEDB4B98A1C6BC620BF915B9"><enum>(1)</enum><text display-inline="yes-display-inline">Paragraph (10) of section 210(a) of the Social Security Act is amended—</text>
<subparagraph id="HA9F2445AFEE3495BB29CBD8F28B01A29"><enum>(A)</enum><text>by inserting <quote>during any calendar year</quote> after <quote>Service performed</quote> in the matter preceding subparagraph (A), and</text>
</subparagraph><subparagraph id="H51AB869BC76E46F4ACB6B34A6B2C54FA"><enum>(B)</enum><text>by inserting <quote>, and the remuneration paid by the employer with respect to such service during such calendar year
is less than the dollar amount in effect under section 213(d) (relating to
amount required for a quarter of coverage) with respect to such year</quote> before the semicolon at the end.</text>
</subparagraph></paragraph><paragraph id="H6E7B48230E9142C8A0CC390ECA78A0A4"><enum>(2)</enum><text>Paragraph (2) of section 210(a) of the Social Security Act is amended—</text>
<subparagraph id="H7D39C59AE27B489C9BA15D883F6EF726"><enum>(A)</enum><text>by inserting <quote>during any calendar year</quote> after <quote>Domestic service performed</quote>, and</text>
</subparagraph><subparagraph id="H96824C9C47FC4DDC873BB4B774BC6AB4"><enum>(B)</enum><text>by inserting <quote>, if the remuneration paid by the employer with respect to such service during such calendar year
is less than the dollar amount in effect under section 213(d) (relating to
amount required for a quarter of coverage) with respect to such year</quote> before the semicolon at the end.</text>
</subparagraph></paragraph></subsection><subsection id="H2661B672C87D498D89E498B7B2948D2B"><enum>(e)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to remuneration received for services performed
after December 31, 2014.</text>
</subsection></section><section id="H472B52936C8543419F14B0682F0DF96F"><enum>1505.</enum><header>Override of Treasury guidance providing that certain employer-provided supplemental unemployment
benefits are not subject to employment taxes</header>
<subsection id="HEA6F3C0EB6E14B86BDF7E900B9B7845B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Effective with respect to amounts paid after December 31, 2014—</text>
<paragraph id="H1237CBFA244D4B6285391E6FD2328697"><enum>(1)</enum><text>Revenue Ruling 56–249,</text>
</paragraph><paragraph id="H7136E03909064F96885E530A1499DF26"><enum>(2)</enum><text>Revenue Ruling 58–128,</text>
</paragraph><paragraph id="H3AEE062690C249238AA4AB9E1532D47B"><enum>(3)</enum><text>Revenue Ruling 60–330,</text>
</paragraph><paragraph id="H8483C5969F4B40FA98C276201A25FB8D"><enum>(4)</enum><text>so much of the holding of Revenue Ruling 77–347 as relates to Plan (1) and Plan (2),</text>
</paragraph><paragraph id="H6BECE48CED95475EB1762BA0564822D2"><enum>(5)</enum><text>Revenue Ruling 90–72, and</text>
</paragraph><paragraph id="H82969F4D9A7E4545BE1751D1AB977D93"><enum>(6)</enum><text>any other ruling, regulation, or other guidance provided by the Secretary of the Treasury, or his
designee, to the extent that such ruling, regulation, or guidance provides
that any payment made by an employer by reason of involuntary termination
of employment shall not be treated as wages or compensation for purposes
of any provision of the Internal Revenue Code of 1986,</text></paragraph><continuation-text continuation-text-level="subsection">shall be null and void. The preceding sentence shall not apply to the extent a ruling, regulation,
or other guidance implements a statutory exception to wages or
compensation.</continuation-text></subsection><subsection id="H82D09BBAA9AD4F4B9709493E5744C4E1"><enum>(b)</enum><header>Repeal of withholding requirement</header>
<paragraph id="HF07F11FA67774A9283AFC923BF618D74"><enum>(1)</enum><header>In general</header><text>Section 3402(o)(1) is amended by striking subparagraph (A) and by redesignating subparagraphs (B)
and (C) as subparagraphs (A) and (B), respectively.</text>
</paragraph><paragraph id="HA58354A0AB314F528717A78CD2A6310D"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="HD2E74DE03CFA43A49FA76C141E2E0AF1"><enum>(A)</enum><text>Section 3402(o)(2) is amended by striking subparagraph (A) and by redesignating subparagraphs (B)
and (C) as subparagraphs (A) and (B), respectively.</text>
</subparagraph><subparagraph id="HA6E90295A05145DCA8E682DDCEB423D7"><enum>(B)</enum><text>Section 3402(o)(5)(A) is amended by striking <quote>paragraph (1)(C)</quote> and inserting <quote>paragraph (1)(B)</quote>.</text>
</subparagraph></paragraph><paragraph id="H7886ECE651D34C8984B9EA2B79671FE2"><enum>(3)</enum><header>Effective date</header>
<subparagraph id="H78269D742F0F4FB0BD287CA1577CD1FC"><enum>(A)</enum><header>In general</header><text>The amendments made by this subsection shall apply to amounts paid after December 31, 2013.</text>
</subparagraph><subparagraph id="HD9511FCC5BF34CC08F32D2CD551E0561"><enum>(B)</enum><header>No inference</header><text display-inline="yes-display-inline">No amendment made by this subsection shall be construed to create any inference with respect to any
amounts paid before January 1, 2014.</text>
</subparagraph></paragraph></subsection></section><section id="H54C285D390654DC59A0E86FD4911E0D2"><enum>1506.</enum><header>Certified professional employer organizations</header>
<subsection id="H3D6189DD08064971800FAD8F8827178F"><enum>(a)</enum><header>Employment taxes</header><text>Chapter 25 is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H16A7BB2C12444A108C19386B542F2178" style="OLC">
<section id="H39D6D27F5009474AAC99110F962168F3"><enum>3511.</enum><header>Certified professional employer organizations</header>
<subsection id="HD020FD0ACA1F455DB6D8CBC20EDBEAD7"><enum>(a)</enum><header>General rules</header><text>For purposes of the taxes and other obligations imposed by this subtitle—</text>
<paragraph id="HAD31F3BA8DD3459E9756EADEF6BFC95A"><enum>(1)</enum><text>a certified professional employer organization shall be treated as the employer (and no other
person shall be treated as the employer) of any work site employee
performing services for any customer of such organization, but only with
respect to remuneration remitted by such organization to such work site
employee, and</text>
</paragraph><paragraph id="H7891D417C2D64B4FBECBA0103EDF09D8"><enum>(2)</enum><text>the exemptions, exclusions, definitions, and other rules which are based on type of employer and
which would (but for paragraph (1)) apply shall apply with respect to such
taxes imposed on such remuneration.</text>
</paragraph></subsection><subsection id="H68E797E4137F428294A6BA5B7F263268"><enum>(b)</enum><header>Successor employer status</header><text>For purposes of sections 3121(a)(1), 3231(e)(2)(C), and 3306(b)(1)—</text>
<paragraph id="H551532EC27134CE0B5AEAC186750136C"><enum>(1)</enum><text>a certified professional employer organization entering into a service contract with a customer
with respect to a work site employee shall be treated as a successor
employer and the customer shall be treated as a predecessor employer
during the term of such service contract, and</text>
</paragraph><paragraph id="HEA7EE268DEE549659965D09E8B05851E"><enum>(2)</enum><text>a customer whose service contract with a certified professional employer organization is terminated
with respect to a work site employee shall be treated as a successor
employer and the certified professional employer organization shall be
treated as a predecessor employer.</text>
</paragraph></subsection><subsection id="H842FCDEA8AC447388B2FCEDCD0A6C86E"><enum>(c)</enum><header>Liability of certified professional employer organization</header><text>Solely for purposes of its liability for the taxes and other obligations imposed by this subtitle—</text>
<paragraph id="HC2D53A66EBC5418F813C6D8A7A02D513"><enum>(1)</enum><text>a certified professional employer organization shall be treated as the employer of any work site
employee (other than a person described in subsection (e)) who is
performing services covered by a contract meeting the requirements of
section 7706(e)(2), but only with respect to remuneration remitted by such
organization to such individual, and</text>
</paragraph><paragraph id="H0320D3F309F94C55880337910A0E103A"><enum>(2)</enum><text>exemptions, exclusions, definitions, and other rules which are based on type of employer and which
would (but for paragraph (1)) apply shall apply with respect to such taxes
imposed on such remuneration.</text>
</paragraph></subsection><subsection id="HD724A1DCFE6744458AB9A05CCC47526A"><enum>(d)</enum><header>Special rule for related party</header><text>This section shall not apply in the case of a customer which bears a relationship to a certified
professional employer organization described in section 267(b) or 707(b).
For purposes of the preceding sentence, such sections shall be applied by
substituting <quote>10 percent</quote> for <quote>50 percent</quote>.</text>
</subsection><subsection id="H20708F3C80044650B9A64E796162ED85"><enum>(e)</enum><header>Special rule for certain individuals</header><text>For purposes of the taxes imposed under this subtitle, an individual with net earnings from
self-employment derived from the customer’s trade or business (including a
partner in a partnership that is a customer), is not a work site employee
with respect to remuneration paid by a certified professional employer
organization.</text>
</subsection><subsection id="HEDD9D148894A468A91DF3403FD4F9498"><enum>(f)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the
purposes of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF6CE12499BB44014AF3E7B8E4ADDF0D5"><enum>(b)</enum><header>Certified professional employer organization defined</header><text display-inline="yes-display-inline">Chapter 79, as amended by the preceding provisions of this Act, is amended by adding at the end the
following new section:</text>
<quoted-block display-inline="no-display-inline" id="H8259A2D2125A4CB589C0AD7F5F77EEF5" style="OLC">
<section id="H6E8E8BFF35304A639EC54E1C78520916"><enum>7706.</enum><header>Certified professional employer organizations</header>
<subsection id="H1D99863562744256ABE20BD1A2846D42"><enum>(a)</enum><header>In general</header><text>For purposes of this title, the term <term>certified professional employer organization</term> means a person who applies to be treated as a certified professional employer organization for
purposes of section 3511 and who has been certified by the Secretary as
meeting the requirements of subsection (b).</text>
</subsection><subsection id="HFD180CC4F3FE4881A175A80E58505860"><enum>(b)</enum><header>Certification requirements</header><text>A person meets the requirements of this subsection if such person—</text>
<paragraph id="H2C281ECCCEE1419EB01D393172392398"><enum>(1)</enum><text>demonstrates that such person (and any owner, officer, and such other persons as may be specified
in regulations) meets such requirements as the Secretary shall establish
with respect to tax status, background, experience, business location, and
annual financial audits,</text>
</paragraph><paragraph id="H3726D63A37F34CD489FF318F7FC62A00"><enum>(2)</enum><text>agrees that it will satisfy the bond and independent financial review requirements of subsections
(c) on an ongoing basis,</text>
</paragraph><paragraph id="HCFBDDF4A08B0486C807EC84B306F1B9B"><enum>(3)</enum><text>agrees that it will satisfy such reporting obligations as may be imposed by the Secretary,</text>
</paragraph><paragraph id="H254B5E51F5624848BAA18DD9BBA21D66"><enum>(4)</enum><text>computes its taxable income using an accrual method of accounting unless the Secretary approves
another method,</text>
</paragraph><paragraph id="H80804E1A43934613ADE33EF136EFFA8E"><enum>(5)</enum><text>agrees to verify on such periodic basis as the Secretary may prescribe that it continues to meet
the requirements of this subsection, and</text>
</paragraph><paragraph id="HA8B1DACE9B4D4B7898EC2A6CD7BE41DD"><enum>(6)</enum><text>agrees to notify the Secretary in writing, within such time as the of Secretary may prescribe, of
any change that materially affects the continuing accuracy of any
agreement or information which was previously made or provided.</text>
</paragraph></subsection><subsection id="H16D8DD87C77E4C37BE8DC05C813BABBC"><enum>(c)</enum><header>Bond and independent financial review</header>
<paragraph id="H0AC0C69048A14AB897BF20ADC35DC873"><enum>(1)</enum><header>In general</header><text>An organization meets the requirements of this paragraph if such organization—</text>
<subparagraph id="HFA573E2F53EC44C6863ABF8601922AA4"><enum>(A)</enum><text>meets the bond requirements of paragraph (2), and</text>
</subparagraph><subparagraph id="HFA4B7E79F3334C969DD78FC0B5D34AED"><enum>(B)</enum><text>meets the independent financial review requirements of paragraph (3).</text>
</subparagraph></paragraph><paragraph id="H29C16931C5B243D19DF40EA2B248D961"><enum>(2)</enum><header>Bond</header>
<subparagraph id="HAF02662714C94D0DA6C2B873DF51B99E"><enum>(A)</enum><header>In general</header><text>A certified professional employer organization meets the requirements of this paragraph if the
organization has posted a bond for the payment of taxes under subtitle C
(in a form acceptable to the Secretary) that is in an amount at least
equal to the amount specified in subparagraph (B).</text>
</subparagraph><subparagraph id="HAD30DE6804EC4273A0DE867B129AF6D6"><enum>(B)</enum><header>Amount of bond</header>
<clause id="H18447EA9547B49C0B92AC355F5A95B5B"><enum>(i)</enum><header>In general</header><text>For the period April 1 of any calendar year through March 31 of the following calendar year, the
amount of the bond required is equal to the greater of—</text>
<subclause id="HDC080381F80D47BF9D564F48D8898F18"><enum>(I)</enum><text display-inline="yes-display-inline">5 percent of the organization’s liability under section 3511 for taxes imposed by subtitle C during
the preceding calendar year (but not to exceed $1,000,000), or</text>
</subclause><subclause id="H092511B81E8E435EB277A16F71181EE0"><enum>(II)</enum><text>$50,000.</text>
</subclause></clause><clause id="HFCA1FA0E21864D598844CF4F84CA5F8A"><enum>(ii)</enum><header>Special rule for newly created professional employer organizations</header><text>During the first three full calendar years that an organization is in existence, subclause (I) of
clause (i) shall not apply. For this purpose—</text>
<subclause id="HE1CFF8DE32E140A7974F6D6C6D314DC4"><enum>(I)</enum><text>under rules provided by the Secretary, an organization is treated as in existence as of the date
that such organization began providing services to any customer which were
comparable to the services being provided with respect to work site
employees, regardless of whether such date occurred before or after the
organization is certified under subsection (b), and</text>
</subclause><subclause id="HFB56D0935257463090F4CE396FC38411"><enum>(II)</enum><text display-inline="yes-display-inline">an organization with liability under section 3511 for taxes imposed by subtitle C during the
preceding calendar year in excess of $5,000,000 shall no longer be
described in this clause (ii) as of April 1 of the year following such
calendar year.</text>
</subclause></clause></subparagraph></paragraph><paragraph id="HF8B9335245E840B79BBB242AC11997BB"><enum>(3)</enum><header>Independent financial review requirements</header><text>A certified professional employer organization meets the requirements of this paragraph if such
organization—</text>
<subparagraph id="H07836B798B9F4263A895E69E74077608"><enum>(A)</enum><text>has, as of the most recent audit date, caused to be prepared and provided to the Secretary (in such
manner as the Secretary may prescribe) an opinion of an independent
certified public accountant as to whether the certified professional
employer organization’s financial statements are presented fairly in
accordance with generally accepted accounting principles, and</text>
</subparagraph><subparagraph id="HF787B896526644BF886B15F48ACDD018"><enum>(B)</enum><text>provides to the Secretary an assertion regarding Federal employment tax payments and an examination
level attestation on such assertion from an independent certified public
accountant not later than the last day of the second month beginning after
the end of each calendar quarter. Such assertion shall state that the
organization has withheld and made deposits of all taxes imposed by
chapters 21, 22, and 24 of the Internal Revenue Code in accordance with
regulations imposed by the Secretary for such calendar quarter and such
examination level attestation shall state that such assertion is fairly
stated, in all material respects.</text>
</subparagraph></paragraph><paragraph id="H978102C6CC6549E9AE262011CA5E9442"><enum>(4)</enum><header>Controlled group rules</header><text>For purposes of the requirements of paragraphs (2) and (3), all professional employer organizations
that are members of a controlled group within the meaning of sections
414(b) and (c) shall be treated as a single organization.</text>
</paragraph><paragraph id="H10BAB6E0AD3F460FA817F783DF811B58"><enum>(5)</enum><header>Failure to file assertion and attestation</header><text>If the certified professional employer organization fails to file the assertion and attestation
required by paragraph (3) with respect to any calendar quarter, then the
requirements of paragraph (3) with respect to such failure shall be
treated as not satisfied for the period beginning on the due date for such
attestation.</text>
</paragraph><paragraph id="H27D8F4A987CF47E1B4B3260B094BB93B"><enum>(6)</enum><header>Audit date</header><text>For purposes of paragraph (3)(A), the audit date shall be six months after the completion of the
organization’s fiscal year.</text>
</paragraph></subsection><subsection id="H1674E657D5944CC7B85D490280701283"><enum>(d)</enum><header>Suspension and revocation authority</header><text>The Secretary may suspend or revoke a certification of any person under subsection (b) for purposes
of section 3511 if the Secretary determines that such person is not
satisfying the agreements or requirements of subsections (b) or (c), or
fails to satisfy applicable accounting, reporting, payment, or deposit
requirements.</text>
</subsection><subsection id="HA9C4C6CECDAE4B6789373154D53C98F4"><enum>(e)</enum><header>Work site employee</header><text>For purposes of this title—</text>
<paragraph id="HC17D587093434657B44563FC0461575E"><enum>(1)</enum><header>In general</header><text>The term <term>work site employee</term> means, with respect to a certified professional employer organization, an individual who—</text>
<subparagraph id="HB9B0DC78FDD84282A19BE454614AAC6E"><enum>(A)</enum><text>performs services for a customer pursuant to a contract which is between such customer and the
certified professional employer organization and which meets the
requirements of paragraph (2), and</text>
</subparagraph><subparagraph id="HDC2E27325EB1494681B3FE7158AD7B2E"><enum>(B)</enum><text>performs services at a work site meeting the requirements of paragraph (3).</text>
</subparagraph></paragraph><paragraph id="H9DB00844C1B64679ADEEF8B2AC7B4A01"><enum>(2)</enum><header>Service contract requirements</header><text>A contract meets the requirements of this paragraph with respect to an individual performing
services for a customer if such contract is in writing and provides that
the certified professional employer organization shall—</text>
<subparagraph id="H4E748D43F7E74D498E37FA93A81A7D2D"><enum>(A)</enum><text>assume responsibility for payment of wages to the individual, without regard to the receipt or
adequacy of payment from the customer for such services,</text>
</subparagraph><subparagraph id="H1994463B636D43E79AE1268FC81CA1CD"><enum>(B)</enum><text>assume responsibility for reporting, withholding, and paying any applicable taxes under subtitle C,
with respect to the individual’s wages, without regard to the receipt or
adequacy of payment from the customer for such services,</text>
</subparagraph><subparagraph id="H9D0499C094234EBCABE0EC3D7D38CAA2"><enum>(C)</enum><text>assume responsibility for any employee benefits which the service contract may require the
certified professional employer organization to provide, without regard to
the receipt or adequacy of payment from the customer for such services,</text>
</subparagraph><subparagraph id="H1D1F0B25FDD84E47B96B087CD1778462"><enum>(D)</enum><text>assume responsibility for hiring, firing and for recruiting workers in addition to the customer’s
responsibility for recruiting, hiring, and firing workers,</text>
</subparagraph><subparagraph id="HBBF15BDAFC1C41E597DACA38EFE15052"><enum>(E)</enum><text>maintain employee records relating to the individual, and</text>
</subparagraph><subparagraph id="H92E53F675C3E4CD4AC9739ABB2B29FF6"><enum>(F)</enum><text>agree to be treated as a certified professional employer organization for purposes of section 3511
with respect to such individual.</text>
</subparagraph></paragraph><paragraph id="H934190BABAC247C6BDCDFAE7B029313B"><enum>(3)</enum><header>Work site coverage requirement</header><text>The requirements of this paragraph are met with respect to an individual if at least 85 percent of
the individuals performing services for the customer at the work site
where such individual performs services are subject to 1 or more contracts
with the certified professional employer organization which meet the
requirements of paragraph (2) (but not taking into account those
individuals who are excluded employees within the meaning of section
414(q)(5)).</text>
</paragraph></subsection><subsection id="H58A6A504FD6C4AD9B1FB9234ECF8171C"><enum>(f)</enum><header>Determination of employment status</header><text>Except to the extent necessary for purposes of section 3511, nothing in this section shall be
construed to affect the determination of who is an employee or employer
for purposes of this title.</text>
</subsection><subsection id="H7D95C35E4B9F45DA877A8325216CB517"><enum>(g)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the
purposes of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF827BFB419944AC38F5B297A70BDDB85"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H76D6A395FA8840849BF7492B6472A1D9"><enum>(1)</enum><text>Section 3302 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H0DDB1CFA22F042DA93F4B7F67E550484" style="OLC">
<subsection id="H7C39D1FA878640E284587A5F72212145"><enum>(h)</enum><header>Treatment of certified professional employer organizations</header><text display-inline="yes-display-inline">If a certified professional employer organization (as defined in section 7706), or a customer of
such organization, makes a contribution to the State’s unemployment fund
with respect to a work site employee, such organization shall be eligible
for the credits available under this section with respect to such
contribution.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H22F74704455946E0BBBDB1D9CA2B992C"><enum>(2)</enum><text>Section 3303(a) is amended—</text>
<subparagraph id="HE0CD6D2EBB4E43B6AF80D12628BA8C32"><enum>(A)</enum><text>by striking the period at the end of paragraph (3) and inserting <quote>; and</quote> and by inserting after paragraph (3) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H1042A8D1425B4E948E874149A0979270" style="OLC">
<paragraph id="HEADA987ED49B481090351072376AD846"><enum>(4)</enum><text display-inline="yes-display-inline">if the taxpayer is a certified professional employer organization (as defined in section 7706) that
is treated as the employer under section 3511, such certified professional
employer organization is permitted to collect and remit, in accordance
with paragraphs (1), (2), and (3), contributions during the taxable year
to the State unemployment fund with respect to a work site employee.</text></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HF599C83CF5924689917D81B858EE5F28" indent="up1"><enum>(B)</enum><text>in the last sentence—</text>
<clause id="HAE040B74D1BA44739F3E90EFA48F6FCE"><enum>(i)</enum><text>by striking <quote>paragraphs (1), (2), and (3)</quote> and inserting <quote>paragraphs (1), (2), (3), and (4)</quote>, and</text>
</clause><clause id="H478C1AD3FCF84779883E75747EC64AE3"><enum>(ii)</enum><text>by striking <quote>paragraph (1), (2), or (3)</quote> and inserting <quote>paragraph (1), (2), (3), or (4)</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="H6774851F58E74BBA84348CD05E0AA58F"><enum>(3)</enum><text>Section 6053(c) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H319062EE704242F7BC19E857E52232FB" style="OLC">
<paragraph id="H400F5E4A92FF4955836F3D0553856408"><enum>(8)</enum><header>Certified professional employer organizations</header><text display-inline="yes-display-inline">For purposes of any report required by this subsection, in the case of a certified professional
employer organization that is treated, under section 3511, as the employer
of a work site employee, the customer with respect to whom a work site
employee performs services shall be the employer for purposes of reporting
under this section and the certified professional employer organization
shall furnish to the customer any information necessary to complete such
reporting no later than such time as the Secretary shall prescribe.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H3D24C4E4D07F49BB8EFBD561FCCE20E3"><enum>(d)</enum><header>Clerical amendments</header>
<paragraph display-inline="no-display-inline" id="H59079D948533492C87AA38B035A8F715"><enum>(1)</enum><text>The table of sections for chapter 25 is amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H53D7131FAB3E418F84D26C9D5A97F130" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 3511. Certified professional employer organizations.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H509697EFC39C4A279BC268F5C21CD35C"><enum>(2)</enum><text display-inline="yes-display-inline">The table of sections for chapter 79, as amended by the preceding provisions of this Act, is
amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H21CDEA6E36A74657ABE3240B7E3D96BF" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 7706. Certified professional employer organizations.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H816812DD76C6469FB61C5DBA9EDA77B1"><enum>(e)</enum><header>Reporting requirements and obligations</header><text display-inline="yes-display-inline">The Secretary of the Treasury shall develop such reporting and recordkeeping rules, regulations,
and procedures as the Secretary determines necessary or appropriate to
ensure compliance with the amendments made by this section with respect to
entities applying for certification as certified professional employer
organizations or entities that have been so certified. Such rules shall be
designed in a manner which streamlines, to the extent possible, the
application of requirements of such amendments, the exchange of
information between a certified professional employer organization and its
customers, and the reporting and recordkeeping obligations of the
certified professional employer organization.</text>
</subsection><subsection id="HA0B36069B4E9446A8B0AD2AEADA6DE8A"><enum>(f)</enum><header>User fees</header><text display-inline="yes-display-inline">Subsection (b) of section 7528 is amended by adding at the end thereof the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HA56B533F448542DA869899934F137203" style="OLC">
<paragraph id="HCFB189126134498CBE498F359160258F"><enum>(4)</enum><header>Certified professional employer organizations</header><text display-inline="yes-display-inline">The fee charged under the program in connection with the certification by the Secretary of a
professional employer organization under section 7706 shall be an annual
fee not to exceed $1,000 per year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA385A085933049889F48FA7C9EE705F6"><enum>(g)</enum><header>Effective dates</header>
<paragraph id="HD73E3B1D1D4E470C8DD2BCC4B908457A"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply with respect to wages for services performed on or
after January 1 of the first calendar year beginning more than 12 months
after the date of the enactment of this Act.</text>
</paragraph><paragraph id="HC2360269ED3D42C39B50471A5780FE26"><enum>(2)</enum><header>Certification program</header><text>The Secretary of the Treasury shall establish the certification program described in section
7706(b) of the Internal Revenue Code of 1986, as added by this section,
not later than 6 months before the effective date determined under
paragraph (1).</text>
</paragraph></subsection><subsection id="H7C8552C9696C49BA846F398258F182D8"><enum>(h)</enum><header>No inference</header><text>Nothing contained in this section or the amendments made by this section shall be construed to
create any inference with respect to the determination of who is an
employee or employer—</text>
<paragraph id="HCD61EAE4A17644C9A48CB16B688479B3"><enum>(1)</enum><text>for Federal tax purposes (other than the purposes set forth in the amendments made by this
section), or</text>
</paragraph><paragraph id="H3ADE3317A6AB492199C0C7449E7DA714"><enum>(2)</enum><text>for purposes of any other provision of law.</text>
</paragraph></subsection></section></subtitle><subtitle id="H74AC32B68ED542F195F0085069A3EDF0"><enum>G</enum><header>Pensions and Retirement</header>
<part id="H71CD7A1AD3B54678A4B66E01C5D07634"><enum>1</enum><header>Individual Retirement Plans</header>
<section id="HB25FC4A5B6354F038DB65C7D5047D608"><enum>1601.</enum><header>Elimination of income limits on contributions to Roth IRA<enum-in-header>s</enum-in-header></header>
<subsection id="H0BAE27564578430AB3C736AD7CB09831"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (c) of section 408A is amended by striking paragraph (3).</text>
</subsection><subsection id="HCB0F6CD616C9496D89BAF7A5A3A5C9E4"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H8A01B10FAA694FE3B6F586C20CFE5A07"><enum>1602.</enum><header>No new contributions to traditional IRA<enum-in-header>s</enum-in-header></header>
<subsection id="HB4728A85F60143D090F8CFF0219A9752"><enum>(a)</enum><header>In general</header>
<paragraph id="H5CFB2575508E484FA3D155F8E0FCC470"><enum>(1)</enum><header>Individual retirement accounts</header><text>Paragraph (1) of section 408(a) is amended by striking <quote>in excess of the amount</quote> and all that follows through the end and inserting the following: <quote>unless it is a contribution under a simplified employee pension described in subsection (k) not in
excess of the amount of the limitation in effect for such taxable year
under section 415(c)(1)(A), a contribution to a simple retirement account
described in subsection (p) not in excess of the amount described in
section 408(p)(8) for such taxable year, or a contribution to a Roth IRA
described in section 408A not in excess of the amount in effect for the
taxable year with respect to such individual under section
408A(c)(1)(A)(i).</quote>.</text>
</paragraph><paragraph id="HA5069EEFA2144AFF8845E83DC8E848D4"><enum>(2)</enum><header>Individual retirement annuities</header>
<subparagraph id="H5EB7400DB02841078C6CBBD196663C2D"><enum>(A)</enum><header>In general</header><text>Subparagraph (B) of section 408(b)(2) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H738A79B0823C483FB45BFF59C52B862F" style="OLC">
<subparagraph id="H2B80C33E54FF4F058E8676C6DCA26B24"><enum>(B)</enum><text display-inline="yes-display-inline">any amount paid as a premium on behalf of any individual for a taxable year would meet the
requirements of subsection (a)(1) if it were paid as a contribution to an
individual retirement account, and</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HDF54CEC1D16840BA864A6154F2D4949C"><enum>(B)</enum><header>Endowment contract requirement</header><text>The last sentence of section 408(b) is amended by striking <quote>the dollar amount in effect under section 219(b)(1)(A)</quote> and inserting <quote>the amounts described in paragraph (2)(B)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H1BBB6146EEAE4BFF9E56D73771A88F59"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H360083870C044187BCC6C93FF466DFB2"><enum>(1)</enum><header>Amendments relating to deductibility</header>
<subparagraph id="HB8A54BAAF04A463C9561DFFC0D741D68"><enum>(A)</enum><text>Section 219(a) is amended by striking <quote>equal to the qualified retirement contributions of the individual</quote> and inserting <quote>equal to the amounts contributed on behalf of the individual to a plan described in section
501(c)(18)</quote>.</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="HABA361F0922140D4993ECE312699386F"><enum>(B)</enum><text>Section 219(b) is amended—</text>
<clause display-inline="no-display-inline" id="H10014F33B17544D28C24FC7F7E295F1B"><enum>(i)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">Maximum amount of deduction</header-in-text></quote> and all that follows through <quote>Notwithstanding paragraph (1), the amount allowable as a deduction</quote> and inserting <quote><header-in-text level="subsection" style="OLC">Maximum amount of deduction.</header-in-text>—The amount allowable as a deduction</quote>, and</text>
</clause><clause display-inline="no-display-inline" id="H028C96F5F93648ABA806BB912ED933B2"><enum>(ii)</enum><text>by striking paragraphs (4) and (5).</text>
</clause></subparagraph><subparagraph id="H7EC469BBE97A4506AAFE3E0477879785"><enum>(C)</enum><text>Section 219 is amended by striking subsections (c), (d), (e), (g), and (h) and by redesignating
subsection (f) as subsection (c).</text>
</subparagraph><subparagraph id="HB327875BEE0F4208853EDB2ACD1946F4"><enum>(D)</enum><text>Section 219(c), as so redesignated, is amended—</text>
<clause id="H412A884CC4424E5082C0624CEB975660"><enum>(i)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">Other definitions and special rules</header-in-text></quote> and inserting <quote><header-in-text level="subsection" style="OLC">Special rules</header-in-text></quote>,</text>
</clause><clause id="H49789A2A5B8F4461BF142D3449668250"><enum>(ii)</enum><text>by striking paragraphs (1), (3), (4), (5), (6), (7), and (8), and</text>
</clause><clause id="HAF81789953BF4912BF645037B6050219"><enum>(iii)</enum><text>by inserting before paragraph (2) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HEBD2D22077AC472391E7C205BBAEFE5F" style="OLC">
<paragraph id="HA8A30358D9714F4296752A59267445D9"><enum>(1)</enum><header>Beneficiary must be under age <enum-in-header>70</enum-in-header><fraction>1/2</fraction></header><text display-inline="yes-display-inline">No deduction shall be allowed under this section with respect to any amount contributed on behalf
of an individual to a plan described in section 501(c)(18) if such
individual has attained age 70<fraction>1/2</fraction> before the close of such individual’s taxable year for which the contribution was made.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="H9653EAB0B03244B49FD94B39BFB05F65"><enum>(E)</enum><text>Section 4973(b)(2)(C) is amended by striking <quote>(determined without regard to section 219(f)(6))</quote>.</text>
</subparagraph></paragraph><paragraph id="H05F195D5CC604D6290DDF2A2440598DC"><enum>(2)</enum><header>Amendments relating to Roth IRA contribution limits</header>
<subparagraph id="H9BADF4B042834D8EA9907F7CBF742478"><enum>(A)</enum><text display-inline="yes-display-inline">Section 408A(c), as amended by this Act, is amended—</text>
<clause id="HD4AB2F1F74D04FBFAA26A1457662AECA"><enum>(i)</enum><text>by striking paragraphs (1) and (2) and inserting the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="H2665A36B878C497E92E62C0F3D1C4EF5" style="OLC">
<paragraph id="H5A045374C5184E359E367366FDFC3572"><enum>(1)</enum><header>Maximum contribution</header>
<subparagraph id="H3A8EDDDFBADB4E7E89D0876B6F965749"><enum>(A)</enum><header>In general</header><text>The aggregate amount of contributions for any taxable year to all Roth IRAs maintained for the
benefit of an individual shall not exceed the lesser of—</text>
<clause id="HCB88A86BBB2F42A9A53BA0E2B50AC456"><enum>(i)</enum><text>$5,500, or</text>
</clause><clause id="H5303145455F6402F85E55E8D862008E4"><enum>(ii)</enum><text>an amount equal to the compensation includible in the individual’s gross income for such taxable
year.</text>
</clause></subparagraph><subparagraph id="H1611A8C59EBA4558AA54EB54D99D439F"><enum>(B)</enum><header>Catch-up contributions for individuals <enum-in-header>50</enum-in-header> or older</header><text display-inline="yes-display-inline">In the case of an individual who has attained the age of 50 before the close of the taxable year,
the amount in effect under subparagraph (A)(i) for such taxable year shall
be increased by $1,000.</text>
</subparagraph></paragraph><paragraph id="HBE9CC6767F8542DB9C3303386ED62EFD"><enum>(2)</enum><header>Special rule for certain married individuals</header><text display-inline="yes-display-inline">In the case of an individual to whom this paragraph applies for the taxable year, the limitation of
paragraph (1) shall be equal to the lesser of—</text>
<subparagraph id="HCC6F345D96B34038AF9179E872BFFA37"><enum>(A)</enum><text>the dollar amount in effect under paragraph (1)(A)(i) for the taxable year, or</text>
</subparagraph><subparagraph id="HA22DC277DD3B4CC597712FA627AE8DE0"><enum>(B)</enum><text>the sum of—</text>
<clause id="H18FCD8BBCC0F49A18A65316B62D1B11C"><enum>(i)</enum><text>the compensation includible in such individual’s gross income for the taxable year, plus</text>
</clause><clause id="HC6D152ABB20A4093BA977BEDB8F7E129"><enum>(ii)</enum><text>the compensation includible in the gross income of such individual’s spouse for the taxable year
reduced by—</text>
<subclause commented="no" id="HB8F2E66B8CF14BDAB944C4F43A657CA0"><enum>(I)</enum><text>the amount allowed as a deduction under section 219(a) to such spouse for such taxable year,</text>
</subclause><subclause id="HE365A9C1B8A44DCF9B341493661B87BB"><enum>(II)</enum><text>the amount of any contribution on behalf of such spouse to a Roth IRA for such taxable year.</text>
</subclause></clause></subparagraph></paragraph><paragraph id="HF97A79E28D8B4F83B921266BDC083577"><enum>(3)</enum><header>Individuals to whom paragraph <enum-in-header>(2)</enum-in-header> applies</header><text>Paragraph (2) shall apply to any individual if—</text>
<subparagraph id="HA6105F44BE05403D85761276CABA9586"><enum>(A)</enum><text>such individual files a joint return for the taxable year, and</text>
</subparagraph><subparagraph id="H52D9DBDDD1714CAEA9F1DD5928BDC31A"><enum>(B)</enum><text>the amount of compensation (if any) includible in such individual’s gross income for the taxable
year is less than the compensation includible in the gross income of such
individual's spouse for the taxable year.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause><clause id="H1036844BD2C14588A15EA92EA4AA3E53"><enum>(ii)</enum><text display-inline="yes-display-inline">by striking <quote>paragraph (2)</quote> in paragraph (6) and inserting <quote>paragraph (1)</quote>,</text>
</clause><clause id="H2BA58D09782643CD9D94DE8B638A79DC"><enum>(iii)</enum><text display-inline="yes-display-inline">by striking <quote>the rule of section 219(f)(3) shall apply</quote> in paragraph (7) and inserting the following: <quote>a taxpayer shall be deemed to have made a contribution to a Roth IRA on the last day of the
preceding taxable year if the contribution is made on account of such
taxable year and is made not later than the time prescribed by law for
filing the return for such taxable year (not including extensions thereof)</quote>, and</text>
</clause><clause id="H6E92E88FFA0C40EDA0B710D801B19FB2"><enum>(iv)</enum><text>by adding at the end the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="HF797FCDDCA7D4595A95F59292D73F759" style="OLC">
<paragraph id="H50F86AF330D74CDAA42D0164640F9A4B"><enum>(8)</enum><header>Compensation</header><text>For purposes of this section, the term <quote>compensation</quote> includes earned income (as defined in section 401(c)(2)). The term <quote>compensation</quote> does not include any amount received as a pension or annuity and does not include any amount
received as deferred compensation. For purposes of this paragraph, section
401(c)(2) shall be applied as if the term trade or business for purposes
of section 1402 included service described in subsection (c)(6) thereof.
The term compensation includes any differential wage payment (as defined
in section 3401(h)(2)).</text>
</paragraph><paragraph id="H23A8796C2F624AC0A74D4418A265B5E0"><enum>(9)</enum><header>Married individuals</header><text display-inline="yes-display-inline">The limitation under this subsection shall be computed separately for each individual, and this
section shall be applied without regard to any community property laws.</text>
</paragraph><paragraph id="H82BD92D20C0944FDBB08D1A66193E9A3"><enum>(10)</enum><header>Special rule for compensation earned by members of Armed Forces for services in combat zone</header><text>For purposes of paragraphs (1)(A)(ii) and (2), the amount of compensation includible in an
individual’s gross income shall be determined without regard to section
112.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="H66FB9F74583E477697842CE482769246"><enum>(B)</enum><text>Section 408A(d)(3)(A) is amended—</text>
<clause id="HC2BB9E053A884F89A03E682088EA4EEB"><enum>(i)</enum><text>by inserting <quote>and</quote> at the end of clause (i),</text>
</clause><clause id="HEE453D7048884B039FD2BED0F5C65164"><enum>(ii)</enum><text>by striking <quote>, and</quote> at the end of clause (ii) and inserting a period,</text>
</clause><clause id="H606650A400D04ECD9C4FD65B6C13DD3B"><enum>(iii)</enum><text>by striking clause (iii), and</text>
</clause><clause id="H579EFBC0C54B4583A1EBA7ACA74D800F"><enum>(iv)</enum><text>by striking the last sentence.</text>
</clause></subparagraph></paragraph><paragraph commented="no" id="H46971D1F93BD47E39BBC41068B58F73E"><enum>(3)</enum><header>Amendments relating to traditional IRAs</header>
<subparagraph commented="no" id="HAC3D5AE7F7374E68881798DE3956B034"><enum>(A)</enum><text>Section 408(d)(4) is amended—</text>
<clause commented="no" id="H5E6A710EA6C34A53A6038F8884F02F3D"><enum>(i)</enum><text>by striking subparagraph (B) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H48BD95766BFD45C790277A50EC0FFC57" style="OLC">
<subparagraph commented="no" id="H419EC1D6E80942F7870994AD6E081434"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of simplified employee pension, such contribution is not excluded from gross income
under section 402(h),</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause><clause commented="no" id="HA474A1A02DEA44D8A54118490F550598"><enum>(ii)</enum><text>by adding at the end the following: <quote>This paragraph shall not apply to any contribution to a simple retirement account.</quote>.</text>
</clause></subparagraph><subparagraph id="HA35336E59C0542A6B9952A7B590684AC"><enum>(B)</enum><text>Section 408(d)(5)(A) is amended—</text>
<clause id="H2C9E08EBE9FD40ED9A30AED505EC9DBA"><enum>(i)</enum><text>by striking <quote>in effect under section 219(b)(1)(A)</quote> and inserting <quote>in effect with respect to the taxpayer for the taxable year under section 408A(c)(1)(A)(i)</quote>,</text>
</clause><clause id="H702A63AD7D15426B8BD85FFB890B9661"><enum>(ii)</enum><text>by striking <quote>the amount allowable as a deduction</quote> and all that follows through <quote>such excess contribution.</quote> and inserting <quote>the amount that may be contributed under section 408A(c)(1) for the taxable year for which the
contribution was made if such distribution is received after the date
described in paragraph (4).</quote>,</text>
</clause><clause id="H9B56176903F74C90A6F11A799E3324CE"><enum>(iii)</enum><text>by adding at the end of subparagraph (A) the following: <quote>This paragraph shall not apply to any contribution to a simple retirement account.</quote>, and</text>
</clause><clause id="H4FC515696127468C91CCDC69104586ED"><enum>(iv)</enum><text>by striking the last sentence.</text>
</clause></subparagraph><subparagraph commented="no" id="HB56BFB4FA51148B4AFF23238F8F4D8E5"><enum>(C)</enum><text>Section 408 is amended by striking subsection (o).</text>
</subparagraph></paragraph><paragraph id="H77F0DD6238F340D196BC573A18E7F80E"><enum>(4)</enum><header>Amendments relating to simple retirement accounts</header>
<subparagraph id="H8E5101E94DDD4569941F12F785E99BC8"><enum>(A)</enum><text>Section 408(p)(2)(D)(ii) is amended by striking <quote>means a plan, contract</quote> and all that follows through the period at the end and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="HA60F4A1C1D7D41F5A302DA5F2F7C9E36" style="OLC"><text>means—</text><subclause id="H1D76F7C2843146C78D103F4DE7F2ED2E"><enum>(I)</enum><text display-inline="yes-display-inline">a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),</text>
</subclause><subclause id="H79C4253237704634828490D43903B90A"><enum>(II)</enum><text>an annuity plan described in section 403(a),</text>
</subclause><subclause id="H9644AAE57DEB4E8BA17385E42303A3AB"><enum>(III)</enum><text display-inline="yes-display-inline">an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer
described in section 457(e)(1)(A)),</text>
</subclause><subclause id="H81391F74A92E4D279703E0B6441134DB"><enum>(IV)</enum><text>an annuity contract described in section 403(b),</text>
</subclause><subclause id="H7729E9712B03421D9DE9C877F0DF3C59"><enum>(V)</enum><text>a simplified employee pension (within the meaning of section 408(k)),</text>
</subclause><subclause id="H081ED1ADE4CB4BDE85F059F74284306A"><enum>(VI)</enum><text>any simple retirement account (within the meaning of section 408(p)), or</text>
</subclause><subclause id="H54C79B767D5846DE856ED61EB2451468"><enum>(VII)</enum><text>a trust described in section 501(c)(18).</text></subclause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HA11FEAFC127544228665DDAEAEB2AA92"><enum>(B)</enum><text display-inline="yes-display-inline">Section 408(p)(8) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HF6D202CABE5246A7ACD050D24EC7C661" style="OLC">
<paragraph id="H9206C31509084E86A8A6A1ABB89C315F"><enum>(8)</enum><header>Coordination with maximum limitation under subsection <enum-in-header>(a)</enum-in-header></header><text display-inline="yes-display-inline">In the case of a simple retirement account, for purposes of subsections (a)(1) and (b)(2),
contributions may not exceed the sum of—</text>
<subparagraph id="HFD3DC284D6624822BCCCE9C6E32A4505"><enum>(A)</enum><text>the dollar amount in effect under paragraph (2)(A)(ii), and</text>
</subparagraph><subparagraph id="H94DF4E95693E422F9F5AF6BA1885AA43"><enum>(B)</enum><text>the employer contribution required under subparagraph (A)(iii) or (B)(i) of paragraph (2),
whichever is applicable.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="HC61009859E4A4DEE8113472095DEC027"><enum>(5)</enum><header>Amendments relating to SEPs</header><text>Section 408 is amended by striking subsection (j).</text>
</paragraph><paragraph id="H0713C2A271AC4750B904AFECD61AD813"><enum>(6)</enum><header>Amendments relating to excise tax on excess contributions</header>
<subparagraph id="H44B79298324049619A46C4003D38283E"><enum>(A)</enum><header>Traditional IRAs</header><text>Subsection (b) of section 4973 is amended—</text>
<clause id="H3DE0F73061FE42A1A1833A2EFCA115C9"><enum>(i)</enum><text>by striking paragraph (1) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H441CADAEE04A4B1BA4D9FA75C1D5DC05" style="OLC">
<paragraph id="H20502FA2686040768DA45BDD80FC8DFF"><enum>(1)</enum><text display-inline="yes-display-inline">the amounts contributed for the taxable year to the accounts or for the annuities or bonds (other
than any contributions to a Roth IRA) which are not permitted
contributions under subsection (a)(1) or (b)(2) of section 408, and</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause><clause id="HE1BB15E89B0B4184A58CF46A380B12AF"><enum>(ii)</enum><text>in paragraph (2)(C), by striking <quote>the maximum amount allowable</quote> and all that follows through <quote>without regard to section 219(f)(6))</quote> and inserting <quote>the permitted contributions under subsection (a)(1) or (b)(2) of section 408 for the taxable year
over the amount contributed</quote>, and</text>
</clause><clause id="HF8708018A56242879220A68441CD4C4A"><enum>(iii)</enum><text>by striking the last sentence and inserting the following: <quote>Paragraph (2) shall be determined separately with respect to any simplified employee pension
(within the meaning of section 408(k)) and any simple retirement account
(within the meaning of section 408(p)).</quote>.</text>
</clause></subparagraph><subparagraph id="H0EC551D161384138901435461D2E78A7"><enum>(B)</enum><header>Roth IRAs</header><text>Section 4973(f) is amended by striking <quote>sections 408A(c)(2) and (c)(3)</quote> each place it appears and inserting <quote>section 408A(c)(1)</quote>.</text>
</subparagraph></paragraph><paragraph id="H049C4826E2D14864A69C9CFB71D9FDD0"><enum>(7)</enum><header>Amendments relating to saver’s credit</header><text>Section 25B(d)(1)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H79F30EBA86A3472FA47F454998011CD9" style="OLC">
<subparagraph id="H8B708CC1AF574E27866CFE9EBDA6E11A"><enum>(A)</enum><text display-inline="yes-display-inline">the amounts—</text>
<clause id="H866D62BBB1724B348244A8C0C9FA9921"><enum>(i)</enum><text>paid in cash for the taxable year by or on behalf of an individual to all Roth IRAs maintained for
such individual’s benefit, and</text>
</clause><clause id="HC837D44BC6A147B1A2B2760AF618FA99"><enum>(ii)</enum><text>contributed on behalf of the individual to a plan described in section 501(c)(18),</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H865BFE650B484FA8A1360BA61758A441"><enum>(8)</enum><header>Other conforming amendments</header>
<subparagraph id="HAC326EAC07F749B1B43B1DD723523E09"><enum>(A)</enum><text display-inline="yes-display-inline">Section 86(f)(3) is amended by striking <quote>219(f)(1)</quote> and inserting <quote>section 408A(c)(8)</quote>.</text>
</subparagraph><subparagraph id="H8B119689D5504220B452BF156615DB1F"><enum>(B)</enum><text display-inline="yes-display-inline">Section 132(m)(3) is amended by striking <quote>section 219(g)(5)</quote> and inserting <quote>section 408(p)(2)(D)(ii)</quote>.</text>
</subparagraph><subparagraph id="H5623826A2BCF42219D37B80FB66067F9"><enum>(C)</enum>
<clause commented="no" display-inline="yes-display-inline" id="H66A9DE7411C046308F5A69C28472A6B8"><enum>(i)</enum><text>Section 223(d) is amended—</text>
<subclause id="HF46AEE9F3E8B4E9282894D55D8F83CD0" indent="up1"><enum>(I)</enum><text>by redesignating paragraph (4) as paragraph (7),</text>
</subclause><subclause id="H0D76F47FE7D7437D9B3359481AFA771C" indent="up1"><enum>(II)</enum><text>by inserting after paragraph (3) the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="HBBCB1FA1B4A343BDB3A1764060694827" style="OLC">
<paragraph id="H865E76BFFB2049DEA05456C25045C792"><enum>(4)</enum><header>Recontributed amounts</header><text display-inline="yes-display-inline">No deduction shall be allowed under this section with respect to a rollover contribution described
in subsection (f)(5).</text>
</paragraph><paragraph id="HF09EDC64B8D44F9DA17FD07B0B18B87B"><enum>(5)</enum><header>Time when contributions deemed made</header><text>For purposes of this section, a taxpayer shall be deemed to have made a contribution to a health
savings account on the last day of the preceding taxable year if the
contribution is made on account of such taxable year and is made not later
than the time prescribed by law for filing the return for such taxable
year (not including extensions thereof).</text>
</paragraph><paragraph id="H6B93D21359CB486CA2328B528A7A0EF1"><enum>(6)</enum><header>Employer payments</header><text>Except as provided in section 106(d), for purposes of this title, any amount paid by an employer to
a health savings account shall be treated as payment of compensation to
the employee (other than a self-employed individual who is an employee
within the meaning of section 401(c)(1)) includible in his gross income in
the taxable year for which the amount was contributed, whether or not a
deduction for such payment is allowable under this section to the
employee.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subclause></clause><clause id="H65B1AA512A7941A7AC0EC5AB08CE31C4" indent="up1"><enum>(ii)</enum><text>Section 223(d)(7), as so redesignated, is amended by striking subparagraphs (A), (B), and (C), and
redesignating subparagraphs (D) and (E) as subparagraphs (A) and (B),
respectively.</text>
</clause></subparagraph><subparagraph id="H211ABD6A7E4D4E36BC05E052E670EC08"><enum>(D)</enum><text>Section 409A(d)(2)(A) is amended by striking <quote>subparagraph (A) or (B) of section 219(g)(5) (without regard to subparagraph (A)(iii))</quote> and inserting <quote>section 408(p)(2)(D)(ii) (without regard to subclause (III) thereof)</quote>.</text>
</subparagraph><subparagraph id="HEC3B66D6436B45999CEC364B4D5C1839"><enum>(E)</enum><text>Section 501(c)(18)(D)(i) is amended by striking <quote>section 219(b)(3)</quote> and inserting <quote>section 219(a)</quote>.</text>
</subparagraph><subparagraph id="H8CD2FABBE6C14F21AB79F9F521F3289A"><enum>(F)</enum><text>Section 877A(d)(4)(A) is amended by striking <quote>section 219(g)(5)</quote> and inserting <quote>408(p)(2)(D)(ii)</quote>.</text>
</subparagraph><subparagraph id="H8D48136FDE704A2E9AC1B0FF4DC5D44D"><enum>(G)</enum><text>Section 6652 is amended by striking subsection (g).</text>
</subparagraph></paragraph></subsection><subsection id="HCBD9EB6D477A46BBA114B228AE80E473"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H60C41B4DBBF4482BBFC003961721193C"><enum>1603.</enum><header>Inflation adjustment for Roth IRA contributions</header>
<subsection id="HFB8120F0D8F54C8198A21C0EDF70D6CE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (c) of section 408A, as amended by this Act, is amended by adding at the end the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HF59308B45931498F9F711BD2BA2B786D" style="OLC">
<paragraph id="HC7D85DC0B6B141A7B212FE01FDAB02AC"><enum>(11)</enum><header>Cost-of-living adjustment</header><text>In the case of any taxable year beginning after 2023, the dollar amount in paragraph (1)(A)(i)
shall be increased by an amount equal to—</text>
<subparagraph id="HD08F155CE8674D36A7DDD826C4124412"><enum>(A)</enum><text>such dollar amount, multiplied by</text>
</subparagraph><subparagraph id="H7478799DB14546E5B2096F66D4881649"><enum>(B)</enum><text>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 <quote>calendar year 2022</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text></subparagraph><continuation-text continuation-text-level="paragraph">If any increase determined under the preceding sentence is not a multiple of $500, such increase
shall be rounded to the next lowest multiple of $500.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H3D42CCF01C734FE3AEE5DE94D8E99C56"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H0D3B8F5B0A084226ABD4230370328C37"><enum>1604.</enum><header>Repeal of special rule permitting recharacterization of Roth IRA contributions as traditional IRA
contributions</header>
<subsection id="HA44959FA628845E3AA5A568C0CE8616E"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 408A(d) is amended by striking paragraph (6) and by redesignating paragraph (7) as
paragraph (6).</text>
</subsection><subsection id="H948B638585CC409D960B4383F2C3941B"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HA767066398DE447EB1B044CE5B93D6F4"><enum>1605.</enum><header>Repeal of exception to 10-percent penalty for first home purchases</header>
<subsection id="H917B745910CB499E90E18CFC164302C3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 72(t)(2) is amended by striking subparagraph (F).</text>
</subsection><subsection id="H8D8FC2CFD9D44977B3A30F7517C33B5D"><enum>(b)</enum><header>Roth IRAs</header><text>Subparagraph (A) of section 408A(d)(2) is amended by inserting <quote>or</quote> at the end of clause (ii), and by striking <quote>, or</quote> at the end of clause (iii) and inserting a period, and by striking clause (iv).</text>
</subsection><subsection id="HB8BBF0F699AA46978EB4E12974690C2F"><enum>(c)</enum><header>Conforming amendment</header>
<paragraph id="HC0A10C94B57A457DA4DC6CBF690E54C1"><enum>(1)</enum><text>Section 72(t) is amended by striking paragraph (8).</text>
</paragraph><paragraph id="HA503291603BD464D8268022A52F124C9"><enum>(2)</enum><text>Section 408A(d), as amended by this Act, is amended by striking paragraph (5) and by redesignating
paragraph (6) as paragraph (5).</text>
</paragraph></subsection><subsection id="H74F4CD0EC0B14B299DB26CD9A0DFE1BA"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to distributions after December 31, 2014.</text>
</subsection></section></part><part id="HB94043B5C3EA4EA3AA622F123BACBF26"><enum>2</enum><header>Employer-Provided Plans</header>
<section id="H98376BEAC310453DBA8609FACBFDAF01"><enum>1611.</enum><header>Termination for new SEPs</header>
<subsection id="H124D8E26D72D441FB6786A3E937911E5"><enum>(a)</enum><header>In general</header>
<paragraph id="H69DC43118FC0417F9E0D0F75EA5FE52B"><enum>(1)</enum><text>Section 408(k) is amended by redesignating paragraph (9) as paragraph (10) and by inserting after
paragraph (8) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HE9EB4D485FEA4632BA4232243ACC769A" style="OLC">
<paragraph id="H3E005F42976C47EA83FE1150526C2968"><enum>(9)</enum><header>Termination</header><text display-inline="yes-display-inline">This subsection shall not apply to years beginning after December 31, 2014. The preceding sentence
shall not apply to any simplified employee pension of an employer if such
simplified employee pension, and the terms thereof, meet the requirements
of this subsection on and after such date.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HD951FD2920EB448D862C865E776F63FB"><enum>(2)</enum><text>Section 402(h) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H67B8D29165CF4670812B9E7A4F3C5D3D" style="OLC">
<paragraph id="H1E285DF0BA174DF199DD8E9A35FDFC89"><enum>(4)</enum><header>Termination</header><text display-inline="yes-display-inline">This subsection shall not apply to any simplified employee pension the arrangement for which is
established after December 31, 2014.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H3FF922CD088C484AA7805F47CBA1FE94"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HBA88791CB903400193C20276A81C82CF"><enum>1612.</enum><header>Termination for new SIMPLE <enum-in-header>401(k)s</enum-in-header></header>
<subsection id="H2A2902AE565B455B9CCE5CFA9EC433A6"><enum>(a)</enum><header>Amendments relating to SIMPLE <enum-in-header>401(k)</enum-in-header>s</header><text>Section 401(k)(11) is amended by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H53FEAA6D54254826BE57D5D50898EA53" style="OLC">
<subparagraph id="H12C51A04FA5545B3A503ADED7E534A38"><enum>(E)</enum><header>Termination</header><text>This paragraph shall apply to a cash or deferred arrangement for any plan year beginning after
December 31, 2014, only if such arrangement meets the requirements of this
paragraph for the last plan year beginning before January 1, 2015, and for
each plan year thereafter.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0419D10651D9466AB06FB3E1EB40B254"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to plan years beginning after December 31, 2014.</text>
</subsection></section><section id="HBF0733F682FE4E4381084C02AD61FE5B"><enum>1613.</enum><header>Rules related to designated Roth contributions</header>
<subsection id="H31EEF6BDEF0B4289B61D98E098C16E2F"><enum>(a)</enum><header>Applicable retirement plans which permit elective deferrals required To accept designated Roth
contributions</header>
<paragraph id="H9430AB0C63EC41BBA2E8B4CEA79F0577"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (30) of section 401(a) is amended—</text>
<subparagraph id="H02A035A549E34C4CA06624BCDB03D6ED"><enum>(A)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">deferrals.—</header-in-text></quote> and all that follows through <quote>In the case of a trust</quote> and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="H35CD6E690AA740C598B334EB3A1FC23D" style="OLC"><text><header-in-text level="paragraph" style="OLC">deferrals.—</header-in-text></text><subparagraph id="H0DCE2C6A5BE54A3DB40709646BF720FC"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a trust</text></subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H5B7F366E4D364244B045631D036C2A78"><enum>(B)</enum><text>by striking <quote>unless the plan provides that</quote> and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="H740BFA57276B498982F739B2CBD2D266" style="OLC"><text>unless the plan—</text><clause id="H976794ED5FC24BBE8AFEDFF2182EDB88"><enum>(i)</enum><text display-inline="yes-display-inline">provides that</text></clause><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HB581369F51F7434984A421A078DE55F2"><enum>(C)</enum><text>by striking the period at the end and inserting <quote>, and</quote>, and</text>
</subparagraph><subparagraph id="H92A5BA25FCE3459A98FD2FBC53D99FF8"><enum>(D)</enum><text>by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="H0D476AA0A3EE495E9AB87BCE498B776C" style="OLC">
<clause id="H3D99820868754AEDA25D5EF7116E87E4"><enum>(ii)</enum><text display-inline="yes-display-inline">except as provided in subparagraph (B), includes a qualified Roth contribution program (as defined
in section 402A(b)).</text>
</clause><subparagraph id="HBD5A25CC0F8D4C84BA61B4A33FF7F485"><enum>(B)</enum><header>Exception for certain small plans</header><text>Subparagraph (A)(ii) shall not apply to any plan of an eligible employer (as defined in section
408(p)(2)(C)).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph commented="no" id="H5F7639FAEC3249A2AE78053DECBFBA2B"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph commented="no" id="H5ED2B4E6784E4F749D5BBBA7F65C8252"><enum>(A)</enum><text>Section 402A(b)(1) is amended by striking all that follows <quote>designated Roth contributions</quote> and inserting a period.</text>
</subparagraph><subparagraph commented="no" id="H9D89B5B82BD043BDB2EC3E4A114FDB3B"><enum>(B)</enum><text>The heading of section 402A (and the item relating to such section in the table of sections for
part I of subchapter D of chapter 1) is amended by striking <quote><header-in-text level="section" style="OLC">Optional treatment of elective deferrals as Roth contributions</header-in-text></quote> and inserting <quote><header-in-text level="section" style="OLC">Designated Roth contributions</header-in-text></quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H114FC22C1E4A4A3AAF12D4E2898AB108"><enum>(b)</enum><header>Restriction on portion of elective deferral limitation which may apply to traditional elective
deferrals</header>
<paragraph id="HE5EE86905266413A982023D72DD72C35"><enum>(1)</enum><header>In general</header><text>Subparagraph (A) of section 402(g)(1) is amended by striking <quote>the applicable dollar amount</quote> and inserting <quote>50 percent (100 percent in the case of elective deferrals with respect to any plan of an eligible
employer (as defined in section 408(p)(2)(C)) of the applicable dollar
amount</quote>.</text>
</paragraph><paragraph id="HEB38B8097438400D910DCC25BC13AA1D"><enum>(2)</enum><header>Government <enum-in-header>457(b)</enum-in-header> plans</header>
<subparagraph id="HC33EC3611D4F45C293E3D7F5ED850DD9"><enum>(A)</enum><header>In general</header><text>Subsection (b) of section 457 is amended by striking <quote>and</quote> at the end of paragraph (5), by redesignating paragraph (6) as paragraph (7), and by inserting
after paragraph (5) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HC2D2AC98866A4DD29062AD9D7B58152B" style="OLC">
<paragraph id="HBF7C44BC4D6E465ABD027E51300B893B"><enum>(6)</enum><text display-inline="yes-display-inline">which, in the case of a plan maintained by an employer described in subsection (e)(1)(A), meets
requirements similar to the requirements of section 401(a)(30), and</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H2915FB7D81764D4C9BD5384FEB882279"><enum>(B)</enum><header>Conforming amendment</header><text>Section 402(g)(1)(A) is amended by inserting <quote>and section 457(a)(1)</quote> after <quote>(h)(1)(B)</quote>.</text>
</subparagraph><subparagraph id="H8A5E363B5CAF477AB29B75A25D3DBF4E"><enum>(C)</enum><header>Cross-reference</header><text>For treatment of amounts deferred under an eligible compensation plan of a governmental employer as
elective deferrals, see section 1618(b)(1) of this Act.</text>
</subparagraph></paragraph><paragraph id="HD520F399084F4E4287FFC5B547B33135"><enum>(3)</enum><header>Roth elective deferrals permitted to extent of full limitation amount</header>
<subparagraph id="H5EB44970C5A44D728031FF4AF21704A1"><enum>(A)</enum><header>In general</header><text>Section 402A(c)(2)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HFBC49CAB924849C18A0E8995E5C06E29" style="OLC">
<subparagraph id="H504A06EBDCF54E5DB3C44341E1BF862B"><enum>(A)</enum><text display-inline="yes-display-inline">the applicable dollar amount in effect under section 402(g)(1)(B) with respect to the employee for
the taxable year, over</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H710AE4F2DEB74D64B59D3417F6118340"><enum>(B)</enum><header>Conforming amendments</header>
<clause id="H0DF955642D354C7787A532054C08F2B0"><enum>(i)</enum><text display-inline="yes-display-inline">Section 401(a)(30) is amended—</text>
<subclause id="H2C8FE3D42E354643A28B86FF638316B3"><enum>(I)</enum><text>by inserting <quote>(including contributions treated as elective deferrals under section 402A(a)(1))</quote> after <quote>section 402(g)(3)</quote>, and</text>
</subclause><subclause id="HF8822F34D9CE4C709AD90223058B9533"><enum>(II)</enum><text display-inline="yes-display-inline">by striking <quote>section 402(g)(1)(A)</quote> and inserting <quote>section 402(g)(1)(B), and that the amount of elective deferrals not included in gross income may
not exceed the amount of the limitation in effect under section
402(g)(1)(A),</quote>.</text>
</subclause></clause><clause id="H9A93B412080C47CABFAF39895093473D"><enum>(ii)</enum><text>Section 402(g)(1)(C) is amended—</text>
<subclause id="H91634E070AD741768ED74F82EB0FF532"><enum>(I)</enum><text>by striking <quote>In addition to subparagraph (A)</quote> and inserting <quote>For purposes of subparagraph (A)</quote>.</text>
</subclause><subclause id="H375F801280C84DF0AA2595138D5EE512"><enum>(II)</enum><text>by striking <quote>gross income shall not include</quote> and all that follows through <quote>does not exceed</quote> and inserting <quote>the applicable dollar amount in effect for the taxable year under subparagraph (B) shall be
increased by</quote>.</text>
</subclause></clause><clause id="H2C578B03AB714639A384F3C7A50F09CF"><enum>(iii)</enum>
<subclause commented="no" display-inline="yes-display-inline" id="H0A54DE8D755E4DD4B1F97A592354FB52"><enum>(I)</enum><text>So much of section 402(g)(2)(A) as precedes clause (i) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H950254FC49E04E179F81432CBD75A358" style="OLC">
<subparagraph id="HC3137294095741BD80D2F60D19391FF7"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">If an individual’s aggregate elective deferrals for a taxable year exceed the applicable dollar
amount under paragraph (1) (hereinafter in this paragraph referred to as <quote>excess total deferrals</quote>) or if an individual’s aggregate elective deferrals (disregarding designated Roth contributions
and simple Roth contributions) exceed the amount excludable under
paragraph (1)(A) (hereinafter in this paragraph referred to as <quote>excess non-Roth deferrals</quote>)—</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subclause><subclause id="H5D2EF1A97DD841E68E211C11D545F66B" indent="up1"><enum>(II)</enum><text>Section 402(g)(2)(A)(i) is amended by striking <quote>such excess deferrals</quote> and inserting <quote>such excess total deferrals or excess non-Roth deferrals</quote>.</text>
</subclause><subclause id="H0631FC487EFE436A966AFB5A2A0C8F41" indent="up1"><enum>(III)</enum><text>Section 402(g)(2)(C)(ii) is amended by striking <quote>the excess deferral</quote> and inserting <quote>the excess total deferral or excess non-Roth deferral</quote>.</text>
</subclause><subclause id="H6EC0C6A244F24B62B131BEFB5B973F1F" indent="up1"><enum>(IV)</enum><text>Section 402A(d)(2)(C) is amended by striking <quote>excess deferral</quote> and inserting <quote>excess total deferral</quote>.</text>
</subclause><subclause id="H8F7D31A240194E8A8B931D05AC79D80D" indent="up1"><enum>(V)</enum><text>Section 402A(d)(3) is amended by striking <quote>excess deferral</quote> each place it appears and inserting <quote>excess total deferral</quote>.</text>
</subclause><subclause id="H7AF443F4516B4DAA93C51B245E3CFA9D" indent="up1"><enum>(VI)</enum><text>Section 402(g)(1)(A) is amended by striking the second sentence.</text>
</subclause></clause><clause id="HA2B027BF12954322AF8E113592EE54E2"><enum>(iv)</enum><text>Section 402A(c)(1)(A) is amended by striking <quote>without regard to this section</quote> and inserting <quote>(determined without regard to this section and section 402(g))</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="H3F246E2C79154489973D6D85E729BDE2"><enum>(4)</enum><header>Reporting by employers</header><text>Section 6051(a)(8) is amended by inserting after <quote>(as defined in section 402A)</quote> the following: <quote>, and the type of plan under which amounts are deferred or contributed</quote>.</text>
</paragraph></subsection><subsection id="H72528FE0260E4E5D9C995E4CCA647626"><enum>(c)</enum><header>SIMPLE Roth retirement accounts permitted</header>
<paragraph id="HA94D4067DC8943DDBC435641D1A6B60B"><enum>(1)</enum><header>In general</header><text>Subsection (p) of section 408 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H18F907C645FD44E09F4DBD4567F4FB75" style="OLC">
<paragraph id="H84000225D5E44E349FAF0BA9A96A9D63"><enum>(11)</enum><header>Roth contributions</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<subparagraph id="H23D49607EF544C37ABDA7D11BAA37E88"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">If a qualified salary reduction arrangement with respect to a simple retirement account includes a
simple Roth contribution program, any simple Roth contribution made by an
employer pursuant to such program shall be treated as an elective employer
contribution, except that such contribution shall be paid to a Roth IRA
and shall not be excludable from gross income.</text>
</subparagraph><subparagraph id="H5BC4E7C1D97D4345B46CA2506947ED93"><enum>(B)</enum><header>Simple Roth contribution program</header><text>The term <quote>simple Roth contribution program</quote> means a program under which an employee may elect to make simple Roth contributions.</text>
</subparagraph><subparagraph id="H079C8AA73A3C413ABA3A613AC5B731F3"><enum>(C)</enum><header>Simple Roth contribution</header><text>The term <quote>simple Roth contribution</quote> means any elective employer contribution which—</text>
<clause id="H654A24638D9949CFB7866DC86DA2A4DA"><enum>(i)</enum><text>is excludable from gross income of an employee without regard to this paragraph, and</text>
</clause><clause id="HB10A90BA488443F2BE2D6EE6CA9A8521"><enum>(ii)</enum><text>the employee designates (at such time and in such manner as the Secretary may prescribe) as not
being so excludable.</text>
</clause></subparagraph><subparagraph id="H205E1271D0FF41EAA99AF5AC7EE74773"><enum>(D)</enum><header>Limitation</header><text display-inline="yes-display-inline">In the case of an eligible employer which elects the application of this subparagraph with respect
to the simple retirement accounts established pursuant to a qualified
salary reduction arrangement of such employer, notwithstanding paragraph
(2)(E), the applicable dollar amount for purposes of paragraph (2)(A)(ii),
shall be equal to—</text>
<clause id="H762560A009D14AEBA17FCF5D46BE559B"><enum>(i)</enum><text>in the case of any such account which is not designated as a Roth IRA, 50 percent of the applicable
dollar amount in effect under section 402(g)(1)(B) for the taxable year,
and</text>
</clause><clause id="HEE95B2E9E44F49D4932BFBE55FD19032"><enum>(ii)</enum><text>in the case of any such account which is designated as a Roth IRA, the excess (if any) of—</text>
<subclause id="H299A960F3A2A4158AC7101BAAF714837"><enum>(I)</enum><text>the applicable dollar amount in effect under section 402(g)(1)(B) for the taxable year, over</text>
</subclause><subclause id="HA06A9A8B459A42EE94727E86B85D9FAD"><enum>(II)</enum><text>the aggregate amount of elective employer contributions to any account described in clause (i).</text></subclause></clause><continuation-text continuation-text-level="subparagraph">In the case of a simple retirement account with respect to which the application of this
subparagraph is elected, the employer shall not be treated as an eligible
employer for purposes of section 402(g)(1)(A), and the applicable dollar
amount with respect to any eligible participant (as defined in section
414(v)) shall, notwithstanding section 414(v)(2)(B)(ii), be determined by
reference to section 402(g)(1)(C).</continuation-text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H1561EA81F7C84BB8AA980C9B226FA79D"><enum>(2)</enum><header>Coordination with maximum Roth limitation</header><text display-inline="yes-display-inline">Subsection (c) of section 408A, as amended by this Act, is amended by adding at the end the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H18B3C4F0EA354407AFA111843CE5B388" style="OLC">
<paragraph id="H467371D0C8B449578A071FBE20C25EB7"><enum>(12)</enum><header>Increase in maximum limitation for SIMPLE Roth</header><text display-inline="yes-display-inline">In the case of any simple retirement account, subparagraphs (A)(i) and (B) of paragraph (1) shall
be applied by disregarding any contributions made to a simple retirement
account and any qualified rollover contributions.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HC2E053A7D68740389CD44D0B5B46F487"><enum>(3)</enum><header>Conforming amendments</header>
<subparagraph id="H6FCBD648378D4D409DAB7E4494E89E40"><enum>(A)</enum><text>Section 408A(f)(1) is amended by striking <quote>or a simple retirement account</quote>.</text>
</subparagraph><subparagraph id="H3355BD7402A141DABA1F8E7EB85B5803"><enum>(B)</enum><text>Section 6051(a)(8), as amended by this Act, is amended by inserting after <quote>(as defined in section 402A)</quote> the following: <quote>and simple Roth contributions (as defined in section 408(p)(11)(C))</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="HA8620F2D40B545B98E1326E1C2496D4C"><enum>(d)</enum><header>Effective date</header>
<paragraph id="H9A31F88534B54941AC77F83541CEBC71"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall apply to plan years
and taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="H52542D5922634B208E0F7BBB51DB1FCA"><enum>(2)</enum><header>Subsection <enum-in-header>(c)</enum-in-header></header><text>The amendments made by subsection (c) shall apply to calendar years beginning after December 31,
2014.</text>
</paragraph></subsection></section><section commented="no" id="H2A5364F331034C6094DD7D8E667B7B42"><enum>1614.</enum><header>Modifications of required distribution rules for pension plans</header>
<subsection commented="no" id="H6D2C2FBC3D84483FB3B5A9FBDE5574A7"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/401">Section 401(a)(9)(B)</external-xref> of the Internal Revenue Code of 1986 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HE0900A9E080B469288AAE98E3F4D3A90" style="OLC">
<subparagraph commented="no" display-inline="no-display-inline" id="H1A05C5A8F0764BE383FC69890E30F66A"><enum>(B)</enum><header>Required distributions where employee dies before entire interest is distributed</header>
<clause commented="no" id="H6AAAD103EF3E4373AE4A896F9CA8E7CC"><enum>(i)</enum><header>5-year general rule</header><text>A trust shall not constitute a qualified trust under this section unless the plan provides that, if
an employee dies before the distribution of the employee's interest
(whether or not such distribution has begun in accordance with
subparagraph (A)), the entire interest of the employee will be distributed
within 5 years after the death of such employee.</text>
</clause><clause commented="no" id="H171A85C23C06492688EEFB0C01A29F41"><enum>(ii)</enum><header>Exception for eligible designated beneficiaries</header><text>If—</text>
<subclause commented="no" id="HD8045817B68D4D6087CCCE17FD3090A8"><enum>(I)</enum><text>any portion of the employee's interest is payable to (or for the benefit of) an eligible designated
beneficiary,</text>
</subclause><subclause commented="no" id="H30178426A0314D178D78ADD7F33F3AB9"><enum>(II)</enum><text>such portion will be distributed (in accordance with regulations) over the life of such eligible
designated beneficiary (or over a period not extending beyond the life
expectancy of such beneficiary), and</text>
</subclause><subclause commented="no" id="H4D774A9676D640409D4AD0429DA314A4"><enum>(III)</enum><text>such distributions begin not later than 1 year after the date of the employee's death or such later
date as the Secretary may by regulations prescribe,</text></subclause><continuation-text commented="no" continuation-text-level="clause">then, for purposes of clause (i) and except as provided in clause (iv) or subparagraph (E)(iii),
the portion referred to in subclause (I) shall be treated as distributed
on the date on which such distributions begin.</continuation-text></clause><clause commented="no" id="H4262440D7EB34BBDB1F467B757C4E85A"><enum>(iii)</enum><header>Special rule for surviving spouse of employee</header><text>If the eligible designated beneficiary referred to in clause (ii)(I) is the surviving spouse of the
employee—</text>
<subclause commented="no" id="HB89386C4E90C438A839AECBE951AA5F6"><enum>(I)</enum><text>the date on which the distributions are required to begin under clause (ii)(III) shall not be
earlier than the date on which the employee would have attained age 70<fraction>1/2</fraction>,
and</text>
</subclause><subclause commented="no" id="H45C18061959240C3BB106BCD296C0045"><enum>(II)</enum><text>if the surviving spouse dies before the distributions to such spouse begin, this subparagraph shall
be applied as if the surviving spouse were the employee.</text>
</subclause></clause><clause commented="no" id="HDABB4443A58F4CACA79FFFE11386ED76"><enum>(iv)</enum><header>Rules upon death of eligible designated beneficiary</header><text>If an eligible designated beneficiary dies before the portion of an employee's interest described
in clause (ii) is entirely distributed, clause (ii) shall not apply to any
beneficiary of such eligible designated beneficiary and the remainder of
such portion shall be distributed within 5 years after the death of such
beneficiary.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H440FEDED036E455E9C46C7FA63DE2C21"><enum>(b)</enum><header>Definition of eligible designated beneficiary</header><text>Section 401(a)(9)(E) of such Code is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HA90F44B62E4448A296E0B4A3FEBC2949" style="OLC">
<subparagraph commented="no" id="H9CCC9D73FA7C4412B56A51B4274EBAAB"><enum>(E)</enum><header>Definitions and rules relating to designated beneficiary</header><text>For purposes of this paragraph—</text>
<clause commented="no" id="HA9F07B8884A645FBA11E4BD5F901D6CD"><enum>(i)</enum><header>Designated beneficiary</header><text>The term <quote>designated beneficiary</quote> means any individual designated as a beneficiary by the employee.</text>
</clause><clause commented="no" id="HF4B6F7296B9E4B9EB5C40D9FAB19902C"><enum>(ii)</enum><header>Eligible designated beneficiary</header><text>The term <quote>eligible designated beneficiary</quote> means, with respect to any employee, any designated beneficiary who, as of the date of death of
the employee, is—</text>
<subclause commented="no" id="HF77C772646B441D0A918AF833C85CD4D"><enum>(I)</enum><text>the surviving spouse of the employee,</text>
</subclause><subclause commented="no" id="H4601AAFAF38846F1A76A8BD0EB683000"><enum>(II)</enum><text>subject to clause (iii), a child of the employee who has not attained age 22,</text>
</subclause><subclause commented="no" id="H6D66C7A573D448C6858E0D92879F99D3"><enum>(III)</enum><text>disabled (within the meaning of section 72(m)(7)),</text>
</subclause><subclause commented="no" id="HB99C237563EE4278B6F64901A6F7BBC6"><enum>(IV)</enum><text>a chronically ill individual (within the meaning of section 7702B(c)(2), except that the
requirements of subparagraph (A)(i) thereof shall only be treated as met
if there is a certification that, as of such date, the period of inability
described in such subparagraph with respect to the individual is an
indefinite one that is reasonably expected to be lengthy in nature), or</text>
</subclause><subclause commented="no" id="HDD3AF7D612BA4AABA3FA0008EE75A8C9"><enum>(V)</enum><text>an individual not described in any of the preceding subparagraphs who is not more than 10 years
younger than the employee.</text>
</subclause></clause><clause commented="no" id="H72A32D23A8B8436BB8B4895A75E14F88"><enum>(iii)</enum><header>Special rule for children</header><text>Subject to subparagraph (F), an individual described in clause (ii)(II) shall cease to be an
eligible designated beneficiary as of the date the individual attains age
22 and the requirement of subparagraph (B)(i) shall not be treated as met
with respect to any remaining portion of an employee’s interest payable to
the individual unless such portion is distributed within 5 years after
such date.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HF6BAF587D85E4CB2A447CE0E1E1947DA"><enum>(c)</enum><header>Required beginning date</header><text>Section 401(a)(9)(C) of such Code is amended by adding at the end the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="HECB25E9D627C4018B17D909E06C3FDF6" style="OLC">
<clause commented="no" id="HE3530907FCE243A7B4936EEB45495060"><enum>(v)</enum><header>Employees becoming 5-percent owners after age 70<fraction>1/2</fraction></header><text>If an employee becomes a 5-percent owner (as defined in section 416) with respect to a plan year
ending in a calendar year after the calendar year in which the employee
attains age 70<fraction>1/2</fraction>, then clause (i)(II) shall be applied by substituting the calendar year in which the employee
became such an owner for the calendar year in which the employee retires.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H1471F94D2C52497FAF28771A3AE04D8C"><enum>(d)</enum><header>Effective dates</header>
<paragraph commented="no" id="HA1EB474811C444BCB6669837E8075C3F"><enum>(1)</enum><header>In general</header><text>Except as provided in this subsection, the amendments made by this section shall apply to
distributions with respect to employees who die after December 31, 2014.</text>
</paragraph><paragraph commented="no" id="HADDB557C29074EA7B213E12268B3E638"><enum>(2)</enum><header>Required beginning date</header><text>The amendment made by subsection (c) shall apply to employees becoming a 5-percent owner with
respect to plan years ending in calendar years beginning before, on, or
after the date of the enactment of this Act, except that—</text>
<subparagraph commented="no" id="HB377DCC2CAFC45269AC7653CBC754126"><enum>(A)</enum><text>if, without regard to such amendment, an employee’s required beginning date occurs before April 1,
2015, such amendment shall not result in an earlier required beginning
date for such employee, and</text>
</subparagraph><subparagraph commented="no" id="HC9E11C7D135F4B56BC7AC8446C832AB7"><enum>(B)</enum><text>if, solely by reason of such amendment, an employee’s required beginning date would occur before
April 1, 2015, such employee's required beginning date shall occur on
April 1, 2015.</text>
</subparagraph></paragraph><paragraph commented="no" id="H6ED8E1985E444087B9228C4FF7763A51"><enum>(3)</enum><header>Exception for certain beneficiaries</header><text>If a designated beneficiary of an employee who dies before January 1, 2015, dies after December 31,
2014—</text>
<subparagraph commented="no" id="H9F35A15B882544ADA095A236F731DF45"><enum>(A)</enum><text>the amendments made by this section shall apply to any beneficiary of such designated beneficiary,
and</text>
</subparagraph><subparagraph commented="no" id="HD3CC90C060EB46768A82E9A9959F6A40"><enum>(B)</enum><text>the designated beneficiary shall be treated as an eligible designated beneficiary for purposes of
applying section 401(a)(9)(B)(iv) of such Code (as in effect after the
amendments made by this section).</text>
</subparagraph></paragraph><paragraph commented="no" id="HA5261EC372F74E60867C36DD0AE921F7"><enum>(4)</enum><header>Exception for certain existing annuity contracts</header>
<subparagraph commented="no" id="H252AA799E63A47C7B1605744E75BC2D0"><enum>(A)</enum><header>In general</header><text>The amendments made by this section shall not apply to a qualified annuity which is a binding
annuity contract in effect on the date of the enactment of this Act and at
all times thereafter.</text>
</subparagraph><subparagraph commented="no" id="HC2C28191DA874AF4B5AE4959068EAE15"><enum>(B)</enum><header>Qualified annuity contract</header><text>For purposes of this paragraph, the term <term>qualified annuity</term> means, with respect to an employee, an annuity—</text>
<clause commented="no" id="H9BE1B835BBBB4CD195C3839008BC7BEF"><enum>(i)</enum><text>which is a commercial annuity (as defined in section 3405(e)(6) of such Code) or payable by a
defined benefit plan,</text>
</clause><clause commented="no" id="HFCAC9343296B440387F0C903077DED2E"><enum>(ii)</enum><text>under which the annuity payments are substantially equal periodic payments (not less frequently
than annually) over the lives of such employee and a designated
beneficiary (or over a period not extending beyond the life expectancy of
such employee or the life expectancy of such employee and a designated
beneficiary) in accordance with the regulations described in section
401(a)(9)(A)(ii) of such Code (as in effect before such amendments) and
which meets the other requirements of this section 401(a)(9) of such Code
(as so in effect) with respect to such payments, and</text>
</clause><clause commented="no" id="HA484079F94AA4F5CBC659588800A7CD5"><enum>(iii)</enum><text>with respect to which—</text>
<subclause commented="no" id="H00CF1B2EC7B94BDCA127CA6D1A8B0C6F"><enum>(I)</enum><text>annuity payments to the employee have begun before January 1, 2015, and the employee has made an
irrevocable election before such date as to the method and amount of the
annuity payments to the employee or any designated beneficiaries, or</text>
</subclause><subclause commented="no" id="HC62F5A3DDCA44A25B7CCE0338C543755"><enum>(II)</enum><text>if subclause (I) does not apply, the employee has made an irrevocable election before the date of
the enactment of this Act as to the method and amount of the annuity
payments to the employee or any designated beneficiaries.</text>
</subclause></clause></subparagraph></paragraph></subsection></section><section id="H2A16C2EB592E450C811FA135E09B048F"><enum>1615.</enum><header>Reduction in minimum age for allowable in-service distributions</header>
<subsection id="H27EB0419E3CA4723A85CAC3B471140A8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 401(a)(36) is amended by striking <quote>age 62</quote> and inserting <quote>age 59<fraction>1/2</fraction></quote>.</text>
</subsection><subsection id="H0C3CEA714D0642BE98DEFC5E5A0F1774"><enum>(b)</enum><header>Application to governmental section <enum-in-header>457(b)</enum-in-header> plans</header><text display-inline="yes-display-inline">Clause (i) of section 457(d)(1)(A) is amended by inserting <quote>(in the case of a plan maintained by an employer described in subsection (e)(1)(A), age 59<fraction>1/2</fraction>)</quote> before the comma at the end.</text>
</subsection><subsection id="HD1EE487BF0B8414BBD36D05C7543618D"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to distributions made after December 31, 2014.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="H5D05BDEBCDFD4EB7B9E272DB2BB1389C"><enum>1616.</enum><header>Modification of rules governing hardship distributions</header>
<subsection id="H4B5432B22D5140FDAAA31280450515BC"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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—</text>
<paragraph commented="no" display-inline="no-display-inline" id="H3BAA5C3D08AF467EB06E8708275361A1"><enum>(1)</enum><text display-inline="yes-display-inline">delete the 6-month prohibition on contributions imposed by paragraph (2) thereof, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HA7CC94D2CF8046DC93F422FBF269EEF3"><enum>(2)</enum><text>to 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.</text>
</paragraph></subsection><subsection id="H77D50395DF1D438681BA5D99648102E0"><enum>(b)</enum><header>Effective date</header><text>The revised regulations under this section shall apply to plan years beginning after December 31,
2014.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="H0DB4332C1FA14849BC79DF09FEE7A77C"><enum>1617.</enum><header>Extended rollover period for the rollover of plan loan offset amounts in certain cases</header>
<subsection commented="no" display-inline="no-display-inline" id="H32F717E5BE884BA88995CB95FBB5198B"><enum>(a)</enum><header>In general</header><text>Paragraph (3) of section 402(c) is amended by adding at the end the following new subparagraph:</text>
<quoted-block act-name="" id="HBA058EAA48F34DFEBA6A3A98373C32F5" style="OLC">
<subparagraph id="H383F115FAC7F413BA0D4EAE3AAB5C2C9"><enum>(C)</enum><header>Rollover of certain plan loan offset amounts</header>
<clause id="HEC5ECF147C274D1F8EBD7B6B7FAAEC65"><enum>(i)</enum><header>In general</header><text>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.</text>
</clause><clause id="HF78E222781C9481B82E790D23311C45E"><enum>(ii)</enum><header>Qualified plan loan offset amount</header><text>For purposes of this subparagraph, the term <term>qualified plan loan offset amount</term> 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—</text>
<subclause commented="no" display-inline="no-display-inline" id="HA4E2CC4A77C24592AF1D09577288062A"><enum>(I)</enum><text>the termination of the qualified employer plan, or</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="H15DF26A6DE9E4FD5BFFF9729FD39DC8C"><enum>(II)</enum><text>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).</text>
</subclause></clause><clause commented="no" display-inline="no-display-inline" id="HF682B2B643474051A6BEA10D243BF918"><enum>(iii)</enum><header>Plan loan offset amount</header><text>For purposes of clause (ii), the term <term>plan loan offset amount</term> means the amount by which the participant's accrued benefit under the plan is reduced in order to
repay a loan from the plan.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H455BA9B3D88E42D78B0815CB9F911E50"><enum>(iv)</enum><header>Limitation</header><text>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).</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H7B77790EDA894C34BE7950351543BB61"><enum>(v)</enum><header display-inline="yes-display-inline">Qualified employer plan</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <term>qualified employer plan</term> has the meaning given such term by section 72(p)(4).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H17EC47E513F6472AAB7CCDD89D320366"><enum>(b)</enum><header>Conforming amendment</header><text>Subparagraph (A) of section 402(c)(3) is amended by striking <quote>subparagraph (B)</quote> and inserting <quote>subparagraphs (B) and (C)</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H49B1070D3A3540D0B96EF406FAD65900"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HD1D0B0897B704125B5A5F66CA7C2A908"><enum>1618.</enum><header>Coordination of contribution limitations for <enum-in-header>403(b)</enum-in-header> plans and governmental <enum-in-header>457(b)</enum-in-header> plans</header>
<subsection id="HD1D9E25595A14B85A79D89F27644A170"><enum>(a)</enum><header><enum-in-header>403(b)</enum-in-header> plans</header>
<paragraph id="H386BF1C2424249F2994723D4C11DA089"><enum>(1)</enum><header>Elimination of special catch-up rule</header><text display-inline="yes-display-inline">Subsection (g) of section 402 is amended by striking paragraph (7) and by redesignating paragraph
(8) as paragraph (7).</text>
</paragraph><paragraph id="H500BF55F2FD24EACA010E399522537DD"><enum>(2)</enum><header>Elimination of post termination non-elective contributions</header><text>Subsection (b) of section 403 is amended—</text>
<subparagraph id="HCA5999BA41BD4281B6E08246142A439D"><enum>(A)</enum><text>in paragraph (3), by striking <quote>for the most recent period</quote> and all that follows through <quote>more than five years</quote>, and</text>
</subparagraph><subparagraph id="HDE3343203B63401484809BBFBB9779E5"><enum>(B)</enum><text>by striking paragraph (4).</text>
</subparagraph></paragraph><paragraph id="H85637F2DC72A4B09BF09DB234EA23BE5"><enum>(3)</enum><header>Elimination of increased contribution limit for church plans</header><text>Subsection (c) of section 415 is amended by striking paragraph (7).</text>
</paragraph><paragraph id="H18E0329A671F432AB31D6A5E6CE23338"><enum>(4)</enum><header>Elimination of separate <enum-in-header>415(c)</enum-in-header> limits</header><text>Paragraph (4) of section 415(k) is amended by striking <quote>each employer with respect to which the participant has the control required</quote> and inserting <quote>the employer and each employer which is part of a controlled group or under common control</quote>.</text>
</paragraph></subsection><subsection id="H473155AEF35C40B892E3B2CC710595FD"><enum>(b)</enum><header><enum-in-header>457(b)</enum-in-header> plans</header>
<paragraph id="H3490EA600EA04087ACA5E5E4E33E8772"><enum>(1)</enum><header>Elimination of separate deferral limit</header><text>Paragraph (3) of section 402(g) is amended by striking <quote>and</quote> at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and
inserting <quote>, and</quote>, and by inserting after subparagraph (D) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H2A08107511AE434A9E314FB627230729" style="OLC">
<subparagraph id="H408E3220DA8A4ECDB177A484F88189F1"><enum>(E)</enum><text display-inline="yes-display-inline">any amount deferred under an eligible deferred compensation plan (as defined in section 457(b)) of
an eligible employer described in section 457(e)(1)(A).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H9CE6BD7EB49E4A979C7D29A42AF80BE2"><enum>(2)</enum><header>Taken into account under limitation for defined contribution plans</header>
<subparagraph id="HB97245A87F614A71B81DCCF07CE8AD3F"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (2) of section 415(a) is amended by striking <quote>or</quote> at the end of subparagraph (B), by inserting <quote>or</quote> at the end of subparagraph (C), and by inserting after subparagraph (C) the following new
subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H765358F65F29474BB38376122A479153" style="OLC">
<subparagraph id="H1E743D11A854416690C2FF0DCD356CBE"><enum>(D)</enum><text display-inline="yes-display-inline">an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer
described in section 457(e)(1)(A),</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HB20F8F97AE5249C3A245D09425909B58"><enum>(B)</enum><header>Definition</header><text>Paragraph (1) of section 415(k) is amended by striking <quote>or</quote> at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and
inserting <quote>, or</quote>, and by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HDA1CDE685A9A486FB36B205A810BF8FF" style="OLC">
<subparagraph id="H9834A2957DB24107AD3F78976F138406"><enum>(E)</enum><text display-inline="yes-display-inline">an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer
described in section 457(e)(1)(A).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H77C3FF8D432F439C973C0EC09FAE2943"><enum>(3)</enum><header>Elimination of special catch-up rule</header><text>Paragraph (3) of section 457(b) is amended by inserting <quote>, in the case of an eligible employer described in subsection (e)(1)(B),</quote> after <quote>which</quote>.</text>
</paragraph></subsection><subsection id="H67CE9492FB404118B844E17C8BD76E07"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H022CB4A2983B4B2DB4E4A2BBE509677B"><enum>(1)</enum><text>Section 25B(d)(1)(B) is amended—</text>
<subparagraph id="HB3B6D25E895A45DF8BD4B58C9D5B9A6E"><enum>(A)</enum><text>by striking clause (ii), and</text>
</subparagraph><subparagraph id="H1CA3472194CE41CB823D6AB50B3A53F2"><enum>(B)</enum><text>by striking <quote>the amount of—</quote> and all that follows through <quote>any elective deferrals</quote> and inserting the following: <quote>the amount of any elective deferrals</quote>.</text>
</subparagraph></paragraph><paragraph id="H2C2FB728F02249BBA45C1BB62B5DA292"><enum>(2)</enum><text>Section 402A(e)(2) is amended—</text>
<subparagraph id="HDF3D5DE2A57144EAAE30D3DC2DA84D7B"><enum>(A)</enum><text>by striking <quote>, and</quote> and all that follows and inserting a period, and</text>
</subparagraph><subparagraph id="H75D9622055284F03A80D8E6D7C1FC4B0"><enum>(B)</enum><text>by striking <quote>means—</quote> and all that follows through <quote>any elective deferral described in subparagraph (A) or (C)</quote> and inserting the following: <quote>means any elective deferral described in (A), (C), or (E)</quote>.</text>
</subparagraph></paragraph><paragraph id="HFF638BAECD274C6F94786C226E4D82C9"><enum>(3)</enum><text>Section 457(e) is amended by striking paragraph (18).</text>
</paragraph><paragraph id="H0481404A30CB49A8A375CAE15BE5AE5F"><enum>(4)</enum><text display-inline="yes-display-inline">Section 414(u)(2)(C) is amended by inserting <quote>by an eligible employer described in section 457(e)(1)(B)</quote> after <quote>(as defined in section 457(b))</quote>.</text>
</paragraph><paragraph id="HFA70248746454DE8838DB5A75D463A27"><enum>(5)</enum><text>Section 414(v)(2)(D) is amended—</text>
<subparagraph id="H0056FDBAC0F44BFFB5FC0A35427BF877"><enum>(A)</enum><text>by striking <quote>clauses (i), (ii), and (iv) of</quote>, and</text>
</subparagraph><subparagraph id="H18BC1322D8DC4251A2526834405F080F"><enum>(B)</enum><text>by striking <quote>, and plans described in clause (iii)</quote> and all that follows through the end and inserting a period.</text>
</subparagraph></paragraph><paragraph id="HDB77A7DA33C4494292897AF4D966DE82"><enum>(6)</enum><text>Section 414(v)(3)(A)(i) is amended by striking <quote>(determined without regard to section 457(b)(3))</quote>.</text>
</paragraph><paragraph id="HCFEEBE2B7F194FD493E7BA07C9F44EFA"><enum>(7)</enum><text>Section 414(v)(6)(B) is amended by striking <quote>subsection (u)(2)(C)</quote> and inserting <quote>section 402(g)(3)</quote>.</text>
</paragraph><paragraph commented="no" id="H98ED976958B4441EAC74FCCAC18FA6B4"><enum>(8)</enum><text>Section 414(v)(6) is amended by striking subparagraph (C).</text>
</paragraph></subsection><subsection commented="no" id="H5B58879EB5EB4040887093C8ABFF794B"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to plan years and taxable years beginning after
December 31, 2014.</text>
</subsection></section><section id="H04FF7F79131D46F0819E06E94399B29D"><enum>1619.</enum><header>Application of 10-percent early distribution tax to governmental <enum-in-header>457</enum-in-header> plans</header>
<subsection id="H2913E123A81C408FA9FB243303B90DBF"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of section 72(t) is amended by inserting <quote>or an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer
described in section 457(e)(1)(A),</quote> after <quote>section 4974(c)),</quote>.</text>
</subsection><subsection id="HAD9C379A2C2D47AFB97D656BB7280BBE"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to withdrawals on or after February 26, 2014.</text>
</subsection></section><section id="HFBBE690C1E5A457B86405D8C179AD936"><enum>1620.</enum><header>Inflation adjustments for qualified plan benefit and contribution limitations</header>
<subsection id="HA51E0C2B41A043ADBC892C0E2BC469D1"><enum>(a)</enum><header>Defined benefit plans</header>
<paragraph id="H701B73700DFF4666A69C37033131753B"><enum>(1)</enum><header>Current limit</header><text display-inline="yes-display-inline">Subparagraph (A) of section 415(b)(1) is amended by striking <quote>$160,000</quote> and inserting <quote>$210,000</quote>.</text>
</paragraph><paragraph id="HA5F393FDED3C491888A2C6735A8D9D80"><enum>(2)</enum><header>Inflation adjustment</header><text display-inline="yes-display-inline">Section 415(d) is amended—</text>
<subparagraph id="H3F4F76956F1D4C08985968EE7A828DA6"><enum>(A)</enum><text>in paragraph (1)(A)—</text>
<clause id="H157F059A356E4B37B638C2E9E3941210"><enum>(i)</enum><text>by striking <quote>$160,000</quote> and inserting <quote>$210,000</quote>, and</text>
</clause><clause id="HC764B59926064651BA5C9C4F59AE6FF9"><enum>(ii)</enum><text>by inserting <quote>for calendar years beginning after 2023</quote> after <quote>subsection (b)(1)(A)</quote>,</text>
</clause></subparagraph><subparagraph id="H216319A8A2D744D9B1F8620492757A30"><enum>(B)</enum><text>paragraph (3)(A), by striking <quote>July 1, 2001</quote> and inserting <quote>July 1, 2022</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H229D1E14093C4DEAA3DE68A673ED9FD4"><enum>(b)</enum><header>Defined contribution plans</header>
<paragraph id="H88307AE09A9C4D349D8D299A2EF7DAE1"><enum>(1)</enum><header>Current limit</header><text display-inline="yes-display-inline">Subparagraph (A) of section 415(c)(1) is amended by striking <quote>$40,000</quote> and inserting <quote>$52,000</quote>.</text>
</paragraph><paragraph id="H2AFF4D0CB7A44073AEE6D4A6C4D989E2"><enum>(2)</enum><header>Inflation adjustment</header><text display-inline="yes-display-inline">Subsection (d) of section 415 is amended—</text>
<subparagraph id="H45509AD34FD04EAFBC6B23A9CCD7A641"><enum>(A)</enum><text>in paragraph (1)(C)—</text>
<clause id="H8E9FE43F105842F89187ED0F0BBE17A0"><enum>(i)</enum><text>by striking <quote>$40,000</quote> and inserting <quote>$52,000</quote>,</text>
</clause><clause id="HA3F66248A5C647C8A394F4559666B728"><enum>(ii)</enum><text>by inserting <quote>for calendar years beginning after 2023</quote> after <quote>subsection (c)(1)(A)</quote>,</text>
</clause></subparagraph><subparagraph id="H4CC98E785DAD412F8E799F5F5C0A15CA"><enum>(B)</enum><text>in paragraph (3)(D), by striking <quote>July 1, 2001</quote> and inserting <quote>July 1, 2022</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H1E9910C7DFB54B6E932AD55DEE329792"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H2EFC3FBA4E6B45EAB69C2C97DAC4173F"><enum>(1)</enum><text display-inline="yes-display-inline">Section 415(b)(2) is amended by striking <quote>$160,000</quote> each place it appears in subparagraphs (C) and (D) and inserting <quote>$210,000</quote>.</text>
</paragraph><paragraph id="H49E50714D5624DDB9603C5B15FDDA7AB"><enum>(2)</enum><text>Section 415(b) is amended by striking <quote>$160,000</quote> in the fourth sentence of paragraph (7) and inserting <quote>$210,000</quote>.</text>
</paragraph><paragraph id="H756C1BF629534A52AFCD746D0A87576F"><enum>(3)</enum><text>The headings for subparagraphs (C) and (D) of section 415(b)(2) are each amended by striking <quote><header-in-text level="subparagraph" style="OLC">$160,000</header-in-text></quote> and inserting <quote><header-in-text level="subparagraph" style="OLC">$210,000</header-in-text></quote>.</text>
</paragraph><paragraph id="H989DB9EDC0A14B6F9C52E5BE3863A498"><enum>(4)</enum><text>The heading for subparagraph (A) of section 415(d)(3) is amended by striking <quote><header-in-text level="subparagraph" style="OLC">$160,000</header-in-text></quote> and inserting <quote><header-in-text level="subparagraph" style="OLC">$210,000</header-in-text></quote>.</text>
</paragraph><paragraph id="HA7AE0DDB0CF6436E98D7A0288EEC3ABD"><enum>(5)</enum><text display-inline="yes-display-inline">The heading for subparagraph (D) of section 415(d)(3) is amended by striking <quote><header-in-text level="subparagraph" style="OLC">$40,000</header-in-text></quote> and inserting <quote><header-in-text level="subparagraph" style="OLC">$52,000</header-in-text></quote>.</text>
</paragraph><paragraph id="H716D57BA9B954B4B9E59838A58A2E8AB"><enum>(6)</enum><text>The heading for subparagraph (A) of section 415(d)(4) is amended by striking <quote><header-in-text level="subparagraph" style="OLC">$160,000</header-in-text></quote> and inserting <quote><header-in-text level="subparagraph" style="OLC">$210,000</header-in-text></quote>.</text>
</paragraph><paragraph id="H2D5EFD6E8341444C8B926BFC5CE74BA0"><enum>(7)</enum><text display-inline="yes-display-inline">The heading for subparagraph (B) of section 415(d)(4) is amended by striking <quote><header-in-text level="subparagraph" style="OLC">$40,000</header-in-text></quote> and inserting <quote><header-in-text level="subparagraph" style="OLC">$52,000</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="H30F72664767149BB906665AAE41DCF91"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to years ending with or within a calendar year
beginning after 2014.</text>
</subsection></section><section id="H76F8FA2B48844809820F6B4B0C05BD51"><enum>1621.</enum><header>Inflation adjustments for qualified plan elective deferral limitations</header>
<subsection id="H0A1440E3BDEE4DE0B39406CCE8078047"><enum>(a)</enum><header>Current limit</header><text display-inline="yes-display-inline">Subparagraph (B) of section 402(g)(1) is amended by striking <quote>shall be</quote> and all that follows and inserting <quote>is $17,500.</quote></text>
</subsection><subsection id="HFF8BFA29ACE044D38E03917A2C2892C0"><enum>(b)</enum><header>Inflation adjustment</header><text display-inline="yes-display-inline">Paragraph (4) of section 402(g) is amended—</text>
<paragraph id="H15449CE5CA194ECFBE2326BD255F8633"><enum>(1)</enum><text>by striking <quote>December 31, 2006</quote> and inserting <quote>December 31, 2023</quote>,</text>
</paragraph><paragraph id="HAA3896607B1B43E3B4FF03D4DFD1D731"><enum>(2)</enum><text>by striking <quote>$15,000</quote> and inserting <quote>$17,500</quote>, and</text>
</paragraph><paragraph id="H37A235A6EB0D4486B69363EC44949BFF"><enum>(3)</enum><text>by striking <quote>2005</quote> and inserting <quote>2022</quote>.</text>
</paragraph></subsection><subsection id="HC154F8A479984FD4A85FA69565F8408F"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to plan years and taxable years beginning after
December 31, 2014.</text>
</subsection></section><section id="HCDD41A4F91B849EA859A75FA92682DBD"><enum>1622.</enum><header>Inflation adjustments for SIMPLE retirement accounts</header>
<subsection id="HEEC2189FBBEB493A9AEB203B128EC0DF"><enum>(a)</enum><header>Current limit</header><text display-inline="yes-display-inline">Clause (i) of section 408(p)(2)(E) is amended by striking <quote>shall be</quote> and all that follows and inserting <quote>shall be $12,000</quote>.</text>
</subsection><subsection id="H3F8EE2288080455A92BB51F33B805533"><enum>(b)</enum><header>Inflation adjustment</header><text display-inline="yes-display-inline">Clause (ii) of section 408(p)(2)(E) is amended—</text>
<paragraph id="HF3605335FB674EB99429FC7E06AEA92D"><enum>(1)</enum><text>by striking <quote>December 31, 2005</quote> and inserting <quote>December 31, 2023</quote>,</text>
</paragraph><paragraph id="HC59D6E99DAB4480590DAFECA9A7849BC"><enum>(2)</enum><text>by striking <quote>$10,000</quote> and inserting <quote>$12,000</quote>,</text>
</paragraph><paragraph id="H0ADBD0C3FC7440249EB8ACF5CD3F5D54"><enum>(3)</enum><text>by striking <quote>2004</quote> and inserting <quote>2022</quote>.</text>
</paragraph></subsection><subsection id="H770421A18EBA499588A318F2F49D6FE3"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to calendar years beginning after 2014.</text>
</subsection></section><section id="H317D282A936040AF95B6DBDDBD30C6DF"><enum>1623.</enum><header>Inflation adjustments for catch-up contributions for certain employer plans</header>
<subsection id="HC7E75C34BBAD483589378DA7D799A26B"><enum>(a)</enum><header>Current limit</header>
<paragraph id="HAB34C306D16E4B37A383D611793EA6EE"><enum>(1)</enum><header>Plans other than simple <enum-in-header>401(k)</enum-in-header> and simple retirement accounts</header><text display-inline="yes-display-inline">Clause (i) of section 414(v)(2)(B) is amended by striking <quote>determined in accordance with the following table</quote> and all that follows through the period at the end and inserting <quote>$5,500.</quote>.</text>
</paragraph><paragraph id="H18928454A6F14C16BB2751915EAE21D3"><enum>(2)</enum><header>Simple <enum-in-header>401(k)</enum-in-header> and simple retirement accounts</header><text>Clause (ii) of section 414(v)(2)(B) is amended by striking <quote>determined in accordance with the following table</quote> and all that follows through the period at the end and inserting <quote>$2,500.</quote>.</text>
</paragraph></subsection><subsection id="H3FEA72D25CBB4FADA9178604AF16E7FD"><enum>(b)</enum><header>Inflation adjustment</header><text display-inline="yes-display-inline">Subparagraph (C) of section 414(v)(2) is amended—</text>
<paragraph id="H6D662AAC9EC3409CA0391F8BE52A5258"><enum>(1)</enum><text>by striking <quote>December 31, 2006</quote> and inserting <quote>December 31, 2023</quote>,</text>
</paragraph><paragraph id="HEB62461CECB44565A1B2F3DB217772A7"><enum>(2)</enum><text>by striking <quote>$5,000</quote> and inserting <quote>$5,500</quote>, and</text>
</paragraph><paragraph id="H67667765CB0B471A8549FA7C196B490B"><enum>(3)</enum><text>by striking <quote>2005</quote> and inserting <quote>2022</quote>.</text>
</paragraph></subsection><subsection id="H6904370C07DF4BC58FF669591038BCA9"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H9921D637570F4B839E6D0677727AFF20"><enum>1624.</enum><header>Inflation adjustments for governmental and tax-exempt organization plans</header>
<subsection id="HE803B88F1E9144B8BF986A942FEDA4A2"><enum>(a)</enum><header>Current limit</header><text display-inline="yes-display-inline">Subparagraph (A) of section 457(b)(2) is amended by striking <quote>the applicable dollar amount</quote> and inserting <quote>$17,500</quote>.</text>
</subsection><subsection id="HCD46222BF570482EBA17F1D29EBEB542"><enum>(b)</enum><header>Inflation adjustment</header><text>Paragraph (15) of section 457(e) is amended—</text>
<paragraph id="H621365CEFF8D4BCBACADC08B4DC9BEF7"><enum>(1)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">Applicable dollar amount.—</header-in-text></quote> and all that follows through <quote><header-in-text level="subparagraph" style="OLC">Cost-of-living adjustments.—</header-in-text>In the case of taxable years beginning after December 31, 2006</quote> and inserting the following: <quote><header-in-text level="paragraph" style="OLC">Cost-of-living adjustments.—</header-in-text>In the case of taxable years beginning after December 31, 2023</quote>,</text>
</paragraph><paragraph id="HC0C3F1FF52314E5E900EF20DCBD55A6F"><enum>(2)</enum><text>by striking <quote>the $15,000 amount under subparagraph (A)</quote> and inserting <quote>the $17,500 amount under subsection (b)(2)(A)</quote>, and</text>
</paragraph><paragraph id="HF6B074CA92FE4F6791446EE193A3456A"><enum>(3)</enum><text display-inline="yes-display-inline">by striking <quote>2005</quote> and inserting <quote>2022</quote>.</text>
</paragraph></subsection><subsection id="H3F133815B41C457D92673608FB4E514E"><enum>(c)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 457(f)(4)(A) is amended by striking <quote>twice the applicable dollar limit determined under subsection (e)(15)</quote> and inserting <quote>twice the amount in effect under subsection (b)(2)(A)</quote>.</text>
</subsection><subsection id="HC63DA65208FA40A69B6A8E3BD0465927"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></part></subtitle><subtitle id="H4B9A56CEBE16415CAFC40ACB6E9F7871"><enum>H</enum><header>Certain provisions related to members of Indian tribes</header>
<section id="HC20DD86A8A8E4266A5AA4C37DFF699FE"><enum>1701.</enum><header>Indian general welfare benefits</header>
<subsection id="H7B8CBE96E5BB49EDAFEA155F500F6D68"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part III of subchapter B of chapter 1 is amended by inserting before section 140 the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="H54346BF829674CA391C362EB61D80F54" style="OLC">
<section id="HCE10A62D242E477DBC271BE08455268B"><enum>139E.</enum><header>Indian general welfare benefits</header>
<subsection id="H4539807BEF6547249228C8DC8FBD54EE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Gross income does not include the value of any Indian general welfare benefit.</text>
</subsection><subsection id="H80D9B1A253434C3D9BB29F934B7F4BFC"><enum>(b)</enum><header>Indian general welfare benefit</header><text>For purposes of this section, the term <quote>Indian general welfare benefit</quote> includes any payment made or services provided to or on behalf of a member of an Indian tribe (or
any spouse or dependent of such a member) pursuant to an Indian tribal
government program, but only if—</text>
<paragraph id="HEE05E8BD120D4151B7E7ED32AA57F0AF"><enum>(1)</enum><text>the program is administered under specified written guidelines and does not discriminate in favor
of members of the governing body of the tribe, and</text>
</paragraph><paragraph id="H84B75A4FD3F947948D4553C336DC1CAD"><enum>(2)</enum><text>the benefits provided under such program—</text>
<subparagraph id="HA9D71EEBCF5E43DF9CFDE321560BEC21"><enum>(A)</enum><text>are available to any tribal member who meets such guidelines,</text>
</subparagraph><subparagraph id="HF198A442DB3F433DA579D70CA7CDF433"><enum>(B)</enum><text>are for the promotion of general welfare,</text>
</subparagraph><subparagraph id="HF1C977CA38954BC1A233C1BE4166027A"><enum>(C)</enum><text>are not lavish or extravagant, and</text>
</subparagraph><subparagraph id="H8E63C858080944E0831B9CA56B1AB2DC"><enum>(D)</enum><text display-inline="yes-display-inline">are not compensation for services.</text>
</subparagraph></paragraph></subsection><subsection id="H3B3F2656853A4FCB8E46A62520A0F8CC"><enum>(c)</enum><header>Definitions and special rules</header><text>For purposes of this section—</text>
<paragraph id="H0518A869156B490F83067C40BE5951C0"><enum>(1)</enum><header>Indian tribal government</header><text>For purposes of this section, the term <quote>Indian tribal government</quote> includes any agencies or instrumentalities of an Indian tribal government and any Alaska Native
regional or village corporation, as defined in, or established pursuant
to, the Alaska Native Claims Settlement Act (<external-xref legal-doc="usc" parsable-cite="usc/43/1601">43 U.S.C. 1601</external-xref>, et seq.).</text>
</paragraph><paragraph id="HF1947F14D8994C54A96798ABAB24A46A"><enum>(2)</enum><header>Dependent</header><text>The term <quote>dependent</quote> has the meaning given such term by section 7705, determined without regard to subsections (b)(1),
(b)(2), and (d)(1)(B).</text>
</paragraph><paragraph id="H55472DED9E9B4B9D9E6B2AE650019876"><enum>(3)</enum><header>Lavish or extravagant</header><text display-inline="yes-display-inline">The Secretary shall, in consultation with the Tribal Advisory Committee (as established under
section 1702 of the <short-title>Tax Reform Act of 2014</short-title>), establish guidelines for what constitutes lavish or extravagant benefits with respect to Indian
tribal government programs.</text>
</paragraph><paragraph id="H1E80F5D8AAB943DC9585DEE1C86DA789"><enum>(4)</enum><header>Establishment of tribal government program</header><text>A program shall not fail to be treated as an Indian tribal government program solely by reason of
the program being established by tribal custom or government practice.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H49E2792840F74700A10E00D7032AD181"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">The table of sections for part III of subchapter B of chapter 1 is amended by inserting before the
item relating to section 140 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H568309D8DB6F43D2B26B8FF987E82181" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 139E. Indian general welfare benefits.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H1001D90FDA49441CB315AF044A5298E3"><enum>(c)</enum><header>Effective date</header>
<paragraph id="HD7D4C0D2443542848EC1D9859E7A3713"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years for which the period of limitation
on refund or credit under section 6511 of the Internal Revenue Code of
1986 has not expired.</text>
</paragraph><paragraph id="HFFE7A13106B94F1FB49E5185B812CD51"><enum>(2)</enum><header>One-year waiver of statute of limitations</header><text display-inline="yes-display-inline">If the period of limitation on a credit or refund resulting from the amendments made by subsection
(a) expires before the end of the 1-year period beginning on the date of
the enactment of this Act, refund or credit of such overpayment (to the
extent attributable to such amendments) may, nevertheless, be made or
allowed if claim therefor is filed before the close of such 1-year period.</text>
</paragraph></subsection></section><section id="HA50B5EE76CD04E6EA3B461277808BC9C"><enum>1702.</enum><header>Tribal Advisory Committee</header>
<subsection id="HC9F03C3D36A343338C80543C7E7E69A2"><enum>(a)</enum><header>Establishment</header><text>The Secretary of the Treasury shall establish a Tribal Advisory Committee (hereinafter in this
subsection referred to as the <quote>Committee</quote>).</text>
</subsection><subsection id="HDFD27FA0A0984E8FA95999B36D0BB095"><enum>(b)</enum><header>Duties</header>
<paragraph id="HC4918C7247A048ECA436C1147B3E6FF1"><enum>(1)</enum><header>Implementation</header><text display-inline="yes-display-inline">The Committee shall advise the Secretary on matters relating to the taxation of Indians.</text>
</paragraph><paragraph id="HF7AAB1EC4D644871A4E1F70662764E00"><enum>(2)</enum><header>Education and training</header><text display-inline="yes-display-inline">The Secretary shall, in consultation with the Committee, establish and require—</text>
<subparagraph id="H3B3ED2DD81264825B670C90D220D72AA"><enum>(A)</enum><text>training and education for internal revenue field agents who administer and enforce internal
revenue laws with respect to Indian tribes on Federal Indian law and the
Federal Government’s unique legal treaty and trust relationship with
Indian tribal governments, and</text>
</subparagraph><subparagraph id="HE9C362D3A8C244EA880AFABA7E8BD058"><enum>(B)</enum><text>training of such internal revenue field agents, and provision of training and technical assistance
to tribal financial officers, about implementation of this Act and the
amendments made thereby.</text>
</subparagraph></paragraph></subsection><subsection id="H395CB4E3FB9844209EE2483DAB626056"><enum>(c)</enum><header>Membership</header>
<paragraph id="H7A106AC99E1C498E90CEA6396A0D62B2"><enum>(1)</enum><header>In general</header><text>The Committee shall be composed of 7 members appointed as follows:</text>
<subparagraph id="HEB56A348DE6E478BB5C9EA6F875EA141"><enum>(A)</enum><text>Three members appointed by the Secretary of the Treasury.</text>
</subparagraph><subparagraph id="H58676E65CB93434F9FD63543B7E43DDF"><enum>(B)</enum><text>One member appointed by the Chairman, and one member appointed by the Ranking Member, of the
Committee on Ways and Means of the House of Representatives.</text>
</subparagraph><subparagraph id="H9EE1695F71CA486A9C27CC9374B73032"><enum>(C)</enum><text>One member appointed by the Chairman, and one member appointed by the Ranking Member, of the
Committee on Finance of the Senate.</text>
</subparagraph></paragraph><paragraph id="H034C45C489994600BF690663FCA93F6E"><enum>(2)</enum><header>Term</header>
<subparagraph id="HB153209CBEBC4FDCAA23268AE618C4AE"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in subparagraph (B), each member’s term shall be 4 years.</text>
</subparagraph><subparagraph id="HF62B697A843B4390B180C8437C2C1611"><enum>(B)</enum><header>Initial staggering</header><text>The first appointments made by the Secretary under paragraph (1)(A) shall be for a term of 2 years.</text>
</subparagraph></paragraph></subsection></section><section id="H853E59199E6748C284A4247DBEFC14E0"><enum>1703.</enum><header>Other relief for Indian tribes</header>
<subsection id="H82B290DF6BFA4FD3ACE45E53CFC47601"><enum>(a)</enum><header>Waiver of penalties and interest</header><text display-inline="yes-display-inline">The Secretary of the Treasury may waive any interest and penalties imposed under the Internal
Revenue Code of 1986 on any Indian tribal government or member of an
Indian tribe (or any spouse or dependent of such a member) to the extent
such interest and penalties relate to excluding a payment or benefit from
gross income under the general welfare exclusion.</text>
</subsection><subsection id="H50FCFA682D3C4692A7DF235FB0CC3EDE"><enum>(b)</enum><header>Definitions</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="HD83D569400BE4F3A9D63188E54D11D4B"><enum>(1)</enum><header>Indian tribal government</header><text>The term <quote>Indian tribal government</quote> shall have the meaning given such term by section 139E of such Code, as added by this Act.</text>
</paragraph><paragraph id="HCDB0014A0F884FE98F7A085E34E90783"><enum>(2)</enum><header>Indian tribe</header><text>The term <quote>Indian tribe</quote> shall have the meaning given such term by section 139D(c)(1) of such Code, as amended by this Act.</text>
</paragraph></subsection></section></subtitle><enum>II</enum><header>Alternative Minimum Tax Repeal</header>
<section id="H6B0A3F0D49244B5A9014EB9B679E9AB1"><enum>2001.</enum><header>Repeal of alternative minimum tax</header>
<subsection commented="no" id="HCEDB75CA0EE64387A50EC42EEA104943"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="HF6836EE6265E46C88044C0A1F39ADFDB"><enum>(b)</enum><header>Credit for prior year minimum tax liability</header>
<paragraph id="HE097B5CE08324781A4EEE5A2BA08E90A"><enum>(1)</enum><header>Limitation</header><text>Subsection (c) of section 53 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H7D5AC8D8C7FB4F75B47978C45E94FBF8" style="OLC">
<subsection id="HBBE5E579023F4EA38703DA962D2376FC"><enum>(c)</enum><header>Limitation</header><text>The credit allowed 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.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H694D5ADF7A5E4836A27A560E74A7AE45"><enum>(2)</enum><header>Credits treated as refundable</header><text>Subsection (e) of section 53 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H4C21D55BA4464FA4B132B7D00F8AE966" style="OLC">
<subsection id="HA964C6335749494CBC58794CB43F6EF6"><enum>(e)</enum><header>Portion of credit treated as refundable</header>
<paragraph id="HF00E31C587574D58A45813B6275EF6DB"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any taxable year beginning in 2016, 2017, 2018, or 2019, the limitation under
subsection (c) shall be increased by the AMT refundable credit amount for
such year.</text>
</paragraph><paragraph id="H4B22C3B3984446A88EE33EF2BD1F994B"><enum>(2)</enum><header>AMT refundable credit amount</header><text>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 2019) of the
excess (if any) of—</text>
<subparagraph id="HDC0568E64D3F466BB9DC2C65D195B3B3"><enum>(A)</enum><text>the minimum tax credit determined under subsection (b) for the taxable year, over</text>
</subparagraph><subparagraph id="HA761F4B603DB4E988227C169BC871A85"><enum>(B)</enum><text>the minimum tax credit allowed under subsection (a) for such year (before the application of this
subsection for such year).</text>
</subparagraph></paragraph><paragraph id="H38BC3082DB554DCEB8E8273FBD4E7EC9"><enum>(3)</enum><header>Credit refundable</header><text>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).</text>
</paragraph><paragraph id="HFC431913410540408D499C246B5AE1A8"><enum>(4)</enum><header>Short taxable years</header><text>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.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H375E43432EBE43EDB65B1080BFF65772"><enum>(3)</enum><header>Treatment of references</header><text>Section 53(d) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HA68F319C301043EB99FFEF5D711DFAC4" style="OLC">
<paragraph id="H4B241B967B8940B3A8010DC8CD57D94A"><enum>(3)</enum><header>AMT term references</header><text display-inline="yes-display-inline">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 <short-title>Tax Reform Act of 2014</short-title>.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H34EAC083FF1B40A199A002AA8CE80232"><enum>(4)</enum><header>Repeal of special rules with respect to treatment of incentive stock options</header><text>Section 53 is amended by striking subsection (f).</text>
</paragraph></subsection><subsection commented="no" id="HE4BD500D125842A69FF378DE3C6CC406"><enum>(c)</enum><header>Conforming amendments related to AMT repeal</header>
<paragraph commented="no" id="H3C3F54663897409AAAA158F70DD88CF8"><enum>(1)</enum><text>Section 2(e), as redesignated by section 1001, is amended by striking <quote>sections 1 and 55</quote> and inserting <quote>section 1</quote>.</text>
</paragraph><paragraph commented="no" id="H4AD61C0B8CB14090A0C690686B8F57C3"><enum>(2)</enum><text>Section 5(a) is amended by striking paragraph (4).</text>
</paragraph><paragraph commented="no" id="HD49C3449FF5244D7AE857BE473647FD4"><enum>(3)</enum><text>Section 11(d) is amended by striking <quote>the taxes imposed by subsection (a) and section 55</quote> and inserting <quote>the tax imposed by subsection (a)</quote>.</text>
</paragraph><paragraph commented="no" id="HFEF3CBF6966249DEBFF0BF0389993DF1"><enum>(4)</enum><text>Section 13, as redesignated by title I, is amended by striking paragraph (7).</text>
</paragraph><paragraph commented="no" id="H13BC564678C0450DB750CE68DD703647"><enum>(5)</enum><text>Section 26(a) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HDB8143C6BD434193BA6E5E5DFE6A1292" style="OLC">
<subsection commented="no" id="HE3C7F8AA64734750B31476ADBE15641F"><enum>(a)</enum><header>Limitation based on amount of tax</header><text display-inline="yes-display-inline">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.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H91D1860679734116885F5CB342172FD8"><enum>(6)</enum><text>Section 26(b)(2) is amended by striking subparagraph (A).</text>
</paragraph><paragraph commented="no" id="H7BA77F00FB7044B8B623251E0F8CDA91"><enum>(7)</enum><text>Section 26 is amended by striking subsection (c).</text>
</paragraph><paragraph commented="no" id="HD9713CD1F9DC4017960063AE6A225FD6"><enum>(8)</enum><text>Section 38(c) is amended—</text>
<subparagraph commented="no" id="H236581C55F23451DA583C344134D1864"><enum>(A)</enum><text>by striking paragraphs (1) through (5),</text>
</subparagraph><subparagraph commented="no" id="HD79E4B2976F74C4C92265E1C4E6FA531"><enum>(B)</enum><text>by redesignating paragraph (6) as paragraph (2),</text>
</subparagraph><subparagraph commented="no" id="H01977DBA5F8B40DEB8B6FDEF0817D289"><enum>(C)</enum><text>by inserting before paragraph (2) (as so redesignated) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H9289BBD9550D4315AB20240612A84EA2" style="OLC">
<paragraph commented="no" id="H3C867A0E9C734824B550CC04617298C4"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The credit allowed under subsection (a) for any taxable year shall not exceed the excess of—</text>
<subparagraph commented="no" id="H5979057951F94E9D877EB6744159044F"><enum>(A)</enum><text>the sum of—</text>
<clause commented="no" id="H9B6156D4B320417D92E717BA068E45F5"><enum>(i)</enum><text>so much of the regular tax liability as does not exceed $25,000, plus</text>
</clause><clause commented="no" id="HE276FB569EC74D92BC5D3BFBA3FBA539"><enum>(ii)</enum><text>75 percent of so much of the regular tax liability as exceeds $25,000, over</text>
</clause></subparagraph><subparagraph commented="no" id="H5376510EDBD246CCB30728ED230C2385"><enum>(B)</enum><text>the sum of the credits allowable under subparts A and B of this part.</text></subparagraph></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</subparagraph><subparagraph commented="no" id="H3D3AA23D4EC24AD3B4AD4DC70C7F015C"><enum>(D)</enum><text>by striking <quote>subparagraph (B) of paragraph (1)</quote> each place it appears in paragraph (2) (as so redesignated) and inserting <quote>clauses (i) and (ii) of paragraph (1)(A)</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H5C34EC2EB1D1498C90751A5E0E8AF5A5"><enum>(9)</enum><text>Section 45D(g)(4)(B) is amended by striking <quote>or for purposes of section 55</quote>.</text>
</paragraph><paragraph commented="no" id="H30B94C1F32F5476182BEDFE77F97681B"><enum>(10)</enum><text>Section 54(c)(1) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HCEDE66F369D7437593D558BE484479F7" style="OLC">
<paragraph commented="no" id="H6E07B1BB165D455C979261A2DDFE8043"><enum>(1)</enum><text display-inline="yes-display-inline">regular tax liability (as defined in section 26(b)), over</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="HB8F55865986A4CCDB38BA5E3268AF915"><enum>(11)</enum><text>Section 54A(c)(1)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H952D188988944BD290718DB6BD4F4CCB" style="OLC">
<subparagraph commented="no" id="HEF64E374B034498BA152035A59BC166A"><enum>(A)</enum><text display-inline="yes-display-inline">regular tax liability (as defined in section 26(b)), over</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="HC45F014C2D42404A8B655C7BBE1FCF22"><enum>(12)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HC7FB74A39D6C48E3B37C55D19D7F4681"><enum>(A)</enum><text>Section 108(b)(2) is amended by striking subparagraph (C) and by redesignating subparagraphs (D)
through (G) as subparagraphs (C) through (F), respectively.</text>
</subparagraph><subparagraph commented="no" id="H96C48BE8607846F1B3931C32BF2439BA" indent="up1"><enum>(B)</enum><text>Section 108(b)(3)(B) is amended—</text>
<clause commented="no" id="HA030D1FF91E4422EA118EC732D62DCCD"><enum>(i)</enum><text>by striking <quote>subparagraphs (B), (C), and (G)</quote> and inserting <quote>subparagraphs (B) and (F) of paragraph (2)</quote>, and</text>
</clause><clause commented="no" id="H3111DADD767C455787095230C1E01870"><enum>(ii)</enum><text>by striking <quote>subparagraph (F)</quote> and inserting <quote>paragraph (2)(E)</quote>.</text>
</clause></subparagraph><subparagraph commented="no" id="HC54D1279216D4635BCF591867C8B0E20" indent="up1"><enum>(C)</enum><text>Section 108(b)(4)(B) is amended by striking <quote>subparagraph (A) or (D)</quote> in the heading and text thereof and inserting <quote>subparagraph (A) or (C)</quote>.</text>
</subparagraph><subparagraph commented="no" id="H25DF8350B2FF447C93E42CC4616459B1" indent="up1"><enum>(D)</enum><text>Section 108(b)(4)(C) is amended by striking <quote>subparagraphs (B) and (G)</quote> in the heading and text thereof and inserting <quote>subparagraphs (B) and (F)</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H192F3A15E7BD45208764F8C132A106E2"><enum>(13)</enum><text>Section 168(k)(2) is amended by striking subparagraph (G).</text>
</paragraph><paragraph commented="no" id="HC4A1AC7E471E49FF91358D7458C8AB1C"><enum>(14)</enum><text>Section 173 is amended by striking subsection (b).</text>
</paragraph><paragraph commented="no" id="H2D15FD32FCF340F79F42030838940F5F"><enum>(15)</enum><text>Section 174(f) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H98FAA1064BC5407995FD750524963B99" style="OLC">
<subsection commented="no" id="H44CA552FEB9B4665BE05AE60B3F6B271"><enum>(f)</enum><header>Cross reference</header><text display-inline="yes-display-inline">For adjustments to basis of property for amounts allowed as deductions as deferred expenses under
subsection (b), see section 1016(a)(14).</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="HB810D386687D4949919F03D0202E09F6"><enum>(16)</enum><text>Section 263A(c) is amended by striking paragraph (6).</text>
</paragraph><paragraph commented="no" id="HF6EBB9505DAA493B944CA8AFFE7C5F7E"><enum>(17)</enum><text>Section 382(l) is amended by striking paragraph (7) and by redesignating paragraph (8) as paragraph
(7).</text>
</paragraph><paragraph commented="no" id="H18508517DAAF4BECA274232C3645906C"><enum>(18)</enum><text>Section 443 (relating to returns for a period of less than 12 months) adjustment in computing
minimum tax and tax preferences) is amended by striking subsection (d) and
by redesignating subsection (e) as subsection (d).</text>
</paragraph><paragraph commented="no" id="H69E80158CA784113B290C9081F5FB1B7"><enum>(19)</enum><text>Section 641(c) is amended—</text>
<subparagraph commented="no" id="HD30CFCC1CE7B43548ED59E1E3F32C6E4"><enum>(A)</enum><text>in paragraph (2) by striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively, and</text>
</subparagraph><subparagraph commented="no" id="H3B86ECD9D28440738E9810AA86F88A8F"><enum>(B)</enum><text>in paragraph (3), by striking <quote>paragraph (2)(C)</quote> and inserting <quote>paragraph (2)(B)</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H08FDFC4FC0FA4446A692D05BAE3C2BBD"><enum>(20)</enum><text>Subsections (b) and (c) of section 666 are each amended by striking <quote>(other than the tax imposed by section 55)</quote>.</text>
</paragraph><paragraph commented="no" id="HB2D0C9DDD52846A89B9C9B88CF480D33"><enum>(21)</enum><text>Section 815(c)(2) is amended by striking the last sentence.</text>
</paragraph><paragraph commented="no" id="H1EB1E80BB7F340CA84E4963DB7773122"><enum>(22)</enum><text>Section 847 is amended—</text>
<subparagraph commented="no" id="HF4865349B8374584A1F8F978345F27D0"><enum>(A)</enum><text>by striking the last sentence of paragraph (9), and</text>
</subparagraph><subparagraph commented="no" id="H02BF2156F9264B7BA350FC3E2B1AD9CB"><enum>(B)</enum><text>in paragraph (10), by inserting <quote>and</quote> at the end of subparagraph (A), by striking subparagraph (B), and by redesignating subparagraph
(C) as subparagraph (B).</text>
</subparagraph></paragraph><paragraph commented="no" id="H256D3850E1D84FC69CAAD83442604045"><enum>(23)</enum><text>Section 848 is amended by striking subsection (i) and by redesignating subsection (j) as subsection
(i).</text>
</paragraph><paragraph commented="no" id="HB0B25915F48042BF932B9B055934B90A"><enum>(24)</enum><text>Section 860E(a) is amended by striking paragraph (4).</text>
</paragraph><paragraph commented="no" id="HD5A3E38FA0464F2BB1EF0A7813CF03EB"><enum>(25)</enum><text>Section 871(b)(1) is amended by striking <quote>or 55</quote>.</text>
</paragraph><paragraph commented="no" id="H420D41E46B0C41398C36D679FD98E95A"><enum>(26)</enum><text>Section 882(a)(1) is amended by striking <quote>55,</quote>.</text>
</paragraph><paragraph commented="no" id="HC7CE44118F9E4F949352DD6204B360DF"><enum>(27)</enum><text>Section 897(a) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HB2E80E490BDC418D8620843B9D44700A" style="OLC">
<subsection commented="no" id="H3643008B988944379DCA2D9036156676"><enum>(a)</enum><header>Treatment as effectively connected with united states trade or business</header><text display-inline="yes-display-inline">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—</text>
<paragraph commented="no" id="H88E1095CBFCF489F88B8E5B5D84D598B"><enum>(1)</enum><text>in the case of a nonresident alien individual, under section 871(b)(1), or</text>
</paragraph><paragraph commented="no" id="H85CA0F9520124D408766E3221D5A98E7"><enum>(2)</enum><text>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.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H4ACC2C69C5ED4BBC87257C02FFB06780"><enum>(28)</enum><text>Section 904(k) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HD83B043EFB0D4C219A558DC9E5B91379" style="OLC">
<subsection commented="no" id="H467A53137DF741D692D098A61E19F9D7"><enum>(k)</enum><header>Cross reference</header><text display-inline="yes-display-inline">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).</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H91D2AA63410C4F30B95B9258FD781E7B"><enum>(29)</enum><text>Section 911(f) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HCE6BEBD7A88A40C9AC8F6ADFA29268CF" style="OLC">
<subsection commented="no" id="H112247B0154B482E879F5B284DC49CCB"><enum>(f)</enum><header>Determination of tax liability</header><text display-inline="yes-display-inline">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—</text>
<paragraph commented="no" id="H4990FB5862D94DBB83AD23D5DDB9F41A"><enum>(1)</enum><text>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</text>
</paragraph><paragraph commented="no" id="HDCB11C3FD83B4529A8F2E2E65712FC45"><enum>(2)</enum><text>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.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H29DD5A9CE684431E9E5751E884EF9DD4"><enum>(30)</enum><text>Section 962(a)(1) is amended—</text>
<subparagraph commented="no" id="HEBCD962636614B83988217ED3F35E974"><enum>(A)</enum><text>by striking <quote>sections 1 and 55</quote> and inserting <quote>section 1</quote>, and</text>
</subparagraph><subparagraph commented="no" id="H52C417C6D2644B26B75518BE2E8808D5"><enum>(B)</enum><text>by striking <quote>sections 11 and 55</quote> and inserting <quote>section 11</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H3BFCFCB7E8A04D0DB04C00C9C377BF03"><enum>(31)</enum><text>Section 1016(a) is amended by striking paragraph (20).</text>
</paragraph><paragraph id="H9E0693839F074A2DA4EB2ADB249DC3B6"><enum>(32)</enum><text>Section 1202(a)(4) is amended by inserting <quote>and</quote> at the end of subparagraph (A), by striking <quote>, and</quote> and inserting a period at the end of subparagraph (B), and by striking subparagraph (C).</text>
</paragraph><paragraph commented="no" id="H682957774BBB4A5E9FBDB453F9303290"><enum>(33)</enum><text>Section 1374(b)(3)(B) is amended by striking the last sentence thereof.</text>
</paragraph><paragraph commented="no" id="H3A153E40A45D4D9DA5BA2582234A4A73"><enum>(34)</enum><text>Section 1397E(c)(1) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HC181075E9C454EBF95C8818FBBE54404" style="OLC">
<paragraph commented="no" id="H83AE21D4B6774BC7A862F1420313C78E"><enum>(1)</enum><text display-inline="yes-display-inline">regular tax liability (as defined in section 26(b), over</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="HD163F8F4ADD04A318A94A49BF4F551E3"><enum>(35)</enum><text>Section 1561(a) is amended—</text>
<subparagraph id="H5DC5BD9BA4F745A58376BA630D1FCB8B"><enum>(A)</enum><text>by inserting <quote>and</quote> at the end of paragraph (1), by striking the comma at the end of paragraph (2) and inserting a
period, and by striking paragraphs (3) and (4), and</text>
</subparagraph><subparagraph id="HCEF221746C5F4BA4A40BDE63DC58EAB1"><enum>(B)</enum><text>by striking the last sentence.</text>
</subparagraph></paragraph><paragraph commented="no" id="H7CCB288D210742FBAD64BC551B7AD715"><enum>(36)</enum><text>Section 6015(d)(2)(B) is amended by striking <quote>or 55</quote>.</text>
</paragraph><paragraph commented="no" id="HDBE43DD7C5D24EA080E875011DFCCEF3"><enum>(37)</enum><text>Section 6425(c)(1)(A) is amended—</text>
<subparagraph commented="no" id="HDD4C7256574A4809BA0E519745422CB5"><enum>(A)</enum><text>by adding <quote>plus</quote> at the end of clause (i), and</text>
</subparagraph><subparagraph commented="no" id="H3B90622F1E4F4DA2A5518AF076E0E6FE"><enum>(B)</enum><text>by striking clause (ii) and by redesignating clause (iii) as clause (ii).</text>
</subparagraph></paragraph><paragraph commented="no" id="HBE9CF34B127B431B985A70570AB810C5"><enum>(38)</enum><text>Section 6654(d)(2) is amended—</text>
<subparagraph commented="no" id="H26378863F8944562908CF4CE98C37611"><enum>(A)</enum><text>in clause (i) of subparagraph (B), by striking <quote>, alternative minimum taxable income,</quote>, and</text>
</subparagraph><subparagraph commented="no" id="H0E51AB791D2740A68F164366789EBCC7"><enum>(B)</enum><text>in clause (i) of subparagraph (C), by striking <quote>, alternative minimum taxable income,</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H354740C5787B4DAF9353E8642E13C874"><enum>(39)</enum><text>Section 6655(e)(2)(B) is amended—</text>
<subparagraph commented="no" id="H8D9AF7FA70BB48D0A5396331750CD4C4"><enum>(A)</enum><text>by striking <quote>The taxable income, alternative minimum taxable income, and modified alternative taxable income
shall</quote> and inserting <quote>Taxable income shall</quote>, and</text>
</subparagraph><subparagraph commented="no" id="H0BD70DD8A2364A4A96CEFF2D76CE379C"><enum>(B)</enum><text>by striking clause (iii).</text>
</subparagraph></paragraph><paragraph commented="no" id="H4FCB7FA9B7664E37A24EAA2DF634DF69"><enum>(40)</enum><text>Section 6655(g)(1)(A) is amended—</text>
<subparagraph commented="no" id="H07DC8FB15E154E6A8689B8DA35FE9444"><enum>(A)</enum><text>by striking clause (ii), and</text>
</subparagraph><subparagraph commented="no" id="HF6C5EBD0CA3A4A0493BABDF1ADF1B94D"><enum>(B)</enum><text>by redesignating clauses (iii) and (iv) as clauses (ii) and (iii), respectively.</text>
</subparagraph></paragraph><paragraph commented="no" id="HF4C1B9B197FD486599B3F3EF829328B8"><enum>(41)</enum><text>Section 6662(e)(3)(C) is amended by striking <quote>the regular tax (as defined in section 55(c))</quote> and inserting <quote>the regular tax liability (as defined in section 26(b))</quote>.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="HE425F9F9018B46D4859C6CA6506C5787"><enum>(d)</enum><header>Effective dates</header>
<paragraph id="HD3DF6AC4954E470DA8D5E798601C9D46"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="H0CD9E22EB6E64144B3BEA554071F2386"><enum>(2)</enum><header>Prior elections with respect to certain tax preferences</header><text>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, 2014.</text>
</paragraph><paragraph id="HEE0A7DC563534A7E94D9D0728904BA09"><enum>(3)</enum><header>Treatment of net operating loss carrybacks</header><text>For purposes of <external-xref legal-doc="usc" parsable-cite="usc/26/56">section 56(d)</external-xref> 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, 2014, to taxable years
beginning before January 1, 2015, shall be determined without regard to
any adjustments under section 56(d)(2)(A) of such Code (as so in effect).</text>
</paragraph></subsection></section><enum>III</enum><header>Business Tax Reform</header>
<subtitle id="H7531C35264E445E69C6534EE33A03D7C"><enum>A</enum><header>Tax Rates</header>
<section commented="no" id="H6C60176F6D2B44699FACAAEFA4AA3AD5"><enum>3001.</enum><header>25-percent corporate tax rate</header>
<subsection commented="no" id="H377560EE4CCD458988C2197D7E3C058F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (b) of section 11 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HA420B883618E4C9DA317D6A226D6AF0F" style="OLC">
<subsection commented="no" id="H447CC2CAE9C940BF86F08DC1BF4F0F1B"><enum>(b)</enum><header>Amount of tax</header>
<paragraph commented="no" id="H459CE69F1C534348BB859E85CAA69EB1"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in paragraph (2), the amount of the tax imposed by subsection (a) shall be 25
percent of taxable income.</text>
</paragraph><paragraph commented="no" id="H45C0EAA3138447A4B85AFF9C5D0B1211"><enum>(2)</enum><header>Phase-in for taxable years beginning before 2019</header>
<subparagraph commented="no" id="H177B4EF498424FA7A6FA660FD9E79F33"><enum>(A)</enum><header>In general</header><text>In the case of taxable years beginning before 2019, the amount of tax imposed by subsection (a)
shall be the sum of—</text>
<clause commented="no" id="H3269AED56791475B9447A82735700545"><enum>(i)</enum><text>25 percent of so much of the taxable income as does not exceed $75,000, and</text>
</clause><clause commented="no" id="H7CCDDA0677494F829E63050A08D1123F"><enum>(ii)</enum><text>the applicable percentage of so much of taxable income as exceeds $75,000.</text>
</clause></subparagraph><subparagraph commented="no" id="HFA3D0B52AFBB423C86E911A2348FE68E"><enum>(B)</enum><header>Applicable percentage</header><text>For purposes of this paragraph, the applicable percentage shall be determined in accordance with
the following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="0" frame="none" line-rules="no-gen" rowsep="0" rule-weights="0.0.0.0.0.0" table-template-name="Tax (No Calculation)" table-type="Leaderwork">
<tgroup cols="2" rowsep="0"><colspec coldef="txt" colname="column1" colwidth="275pts" min-data-value="55"></colspec><colspec align="justify" coldef="fig" colname="column2" colsep="0" colwidth="50pts" min-data-value="9"></colspec><thead>
<row><entry align="left" colname="column1" morerows="0" namest="column1" rowsep="0"><bold>In the case of taxable years beginning during calendar year</bold></entry><entry align="right" colname="column2" morerows="0" namest="column2" rowsep="0"><bold>The applicable percentage is:</bold></entry></row></thead>
<tbody>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2015</entry><entry align="right" colname="column2" rowsep="0">33%</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2016</entry><entry align="right" colname="column2" rowsep="0">31%</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2017</entry><entry align="right" colname="column2" rowsep="0">29%</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2018</entry><entry align="right" colname="column2" rowsep="0">27%</entry></row></tbody></tgroup></table></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HC00DDF2733DD4DF7B827C0550896DF44"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph commented="no" id="H54F901D7F0674E4C849EEF616AD567EF"><enum>(1)</enum><text>Paragraphs (2)(B) and (6)(A)(ii) of section 860E(e) are each amended by striking <quote>section 11(b)(1)</quote> and inserting <quote>section 11(b)</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H1166E39064754C279768F4A6262387E9"><enum>(2)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HCFBF31738F264941BC28109CE1663A58"><enum>(A)</enum><text>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).</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HD1429763685248849B3BC754A1BD7234" indent="up1"><enum>(B)</enum><text>Section 13, as amended and redesignated by the preceding provisions of this Act, is amended by
striking paragraphs (4) and (6), and by redesignating paragraph (5) as
paragraph (4).</text>
</subparagraph><subparagraph commented="no" id="H6770C2F8D4864C67A237ED62DEDECDD8" indent="up1"><enum>(C)</enum><text>Section 527(b) is amended—</text>
<clause commented="no" id="H861F1A49C8624A67A535C6EBB65A960C"><enum>(i)</enum><text>by striking paragraph (2), and</text>
</clause><clause commented="no" id="H8FD2CBB8BE5A45E39EBCF4F530A8AF4A"><enum>(ii)</enum><text>by striking all that precedes <quote>is hereby imposed</quote> and inserting:</text>
<quoted-block display-inline="no-display-inline" id="H4387E46D95F2454E9608A98EC9BB30EC" style="OLC">
<subsection commented="no" id="H6D091027ACFB42E792347EE40DAB04E2"><enum>(b)</enum><header>Tax imposed</header><text display-inline="yes-display-inline">A tax</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph commented="no" id="H585051B77A1942108B0FEE8C0AB0C386" indent="up1"><enum>(D)</enum><text display-inline="yes-display-inline">Sections 594(a) is amended by striking <quote>taxes imposed by section 11 or 1201(a)</quote> and inserting <quote>tax imposed by section 11</quote>.</text>
</subparagraph><subparagraph commented="no" id="H1196E49AB9E843B585895D8EE8BDCCA0" indent="up1"><enum>(E)</enum><text>Section 691(c)(4) is amended by striking <quote>1201,</quote>.</text>
</subparagraph><subparagraph commented="no" id="HC60172017CEF4D7384A5A20DD7A55F27" indent="up1"><enum>(F)</enum><text>Section 801(a) is amended—</text>
<clause commented="no" id="H6F115937781543F1A70E6D39F328F0CF"><enum>(i)</enum><text>by striking paragraph (2), and</text>
</clause><clause commented="no" id="HBB671E0D6E564143AB1E6085DB0E04DC"><enum>(ii)</enum><text>by striking all that precedes <quote>is hereby imposed</quote> and inserting:</text>
<quoted-block display-inline="no-display-inline" id="H52A3D466E51C47EEA69CD27BE2496178" style="OLC">
<subsection commented="no" id="H2AF4F200D93D422ABEB743C01DF84EF1"><enum>(a)</enum><header>Tax imposed</header><text display-inline="yes-display-inline">A tax</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph commented="no" id="HD0B80E54FBF34FB4A5111CE02374E4A0" indent="up1"><enum>(G)</enum><text>Section 831(d) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as
paragraphs (1) and (2), respectively.</text>
</subparagraph><subparagraph commented="no" id="H8F858E3ED1CF4085BDAC432CA9E0BF13" indent="up1"><enum>(H)</enum><text>Sections 832(c)(5) and 834(b)(1)(D) are each amended by striking <quote>sec. 1201 and following,</quote>.</text>
</subparagraph><subparagraph commented="no" id="HEEBC0E21E7B54B0786AC2CB18063DAB2" indent="up1"><enum>(I)</enum><text>Section 852(b)(3)(A) is amended by striking <quote>section 1201(a)</quote> and inserting <quote>section 11(b)</quote>.</text>
</subparagraph><subparagraph id="HE743B828BDC84F3A825F3D41089CCCFE" indent="up1"><enum>(J)</enum><text>Section 857(b)(3) is amended—</text>
<clause id="H3EBCD0BF5BE442B395558052CB730716"><enum>(i)</enum><text>by striking subparagraph (A) and redesignating subparagraphs (B) through (F) as subparagraphs (A)
through (E), respectively,</text>
</clause><clause id="HB288739BC3B34CFAB107B8E7AE319B8C"><enum>(ii)</enum><text>in subparagraph (C), as so redesignated—</text>
<subclause id="HC93EBE87D9654C2A8EEAA3F1D7B8E588"><enum>(I)</enum><text>by striking <quote>subparagraph (A)(ii)</quote> in clause (i) thereof and inserting <quote>paragraph (1)</quote>,</text>
</subclause><subclause id="H3C716E1E3B634A65B89015E637FC648B"><enum>(II)</enum><text>by striking <quote>the tax imposed by subparagraph (A)(ii)</quote> in clauses (ii) and (iv) thereof and inserting <quote>the tax imposed by paragraph (1) on undistributed capital gain</quote>,</text>
</subclause></clause><clause id="H446277594FE14388995FF639192E1EA1"><enum>(iii)</enum><text>in subparagraph (E), as so redesignated, by striking <quote>subparagraph (B) or (D)</quote> and inserting <quote>subparagraph (A) or (C)</quote>, and</text>
</clause><clause id="H6154CDEA69A14DC3BA6D04E256702649"><enum>(iv)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HBF3B793438F64C09A007648C4A4434F0" style="OLC">
<subparagraph id="H14909CD5ACBB4041A6C211DC88A8CE97"><enum>(F)</enum><header>Undistributed capital gain</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>undistributed capital gain</quote> 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.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph commented="no" id="H9E04C704A5B74F38A61779E0280107CA" indent="up1"><enum>(K)</enum><text>Section 882(a)(1) is amended by striking <quote>, or 1201(a)</quote>.</text>
</subparagraph><subparagraph commented="no" id="HA4B5255086DB4652A9ED646B616EA766" indent="up1"><enum>(L)</enum><text>Section 1374(b) is amended by striking paragraph (4).</text>
</subparagraph><subparagraph commented="no" id="H1439DC96139E44C3AA8E89FA9FDC4307" indent="up1"><enum>(M)</enum><text>Section 1381(b) is amended by striking <quote>taxes imposed by section 11 or 1201</quote> and inserting <quote>tax imposed by section 11</quote>.</text>
</subparagraph><subparagraph commented="no" id="HFDDDBED70C33420A9F271F7C715366A9" indent="up1"><enum>(N)</enum><text display-inline="yes-display-inline">Sections 6425(c)(1)(A)(i) and 6655(g)(1)(A)(i) are each amended by striking <quote>or 1201(a),</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="HD083F38DA1E6455F9DED4D3151921901"><enum>(3)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H496911FDC8784C7DAD36C2616BEDA8F4"><enum>(A)</enum><text>Section 1445(e)(1) is amended—</text>
<clause commented="no" id="HE9D0570231754031BB96A709518AFCDE" indent="up1"><enum>(i)</enum><text>by striking <quote>35 percent</quote> and inserting <quote>the highest rate of tax in effect for the taxable year under section 11(b)</quote>, and</text>
</clause><clause commented="no" id="H129F640F712A47968D7C05A27B858E74" indent="up1"><enum>(ii)</enum><text>by striking <quote>of the gain</quote> and inserting <quote>multiplied by the gain</quote>.</text>
</clause></subparagraph><subparagraph commented="no" id="H3FC48B1752DE4DF2A5BC5E1B7A12478E" indent="up1"><enum>(B)</enum><text>Section 1445(e)(2) is amended by striking <quote>35 percent of the amount</quote> and inserting <quote>the highest rate of tax in effect for the taxable year under section 11(b) multiplied by the amount</quote>.</text>
</subparagraph><subparagraph commented="no" id="HB8455FADDA594095BA60BE89CDD437FB" indent="up1"><enum>(C)</enum><text>Section 1445(e)(6) is amended—</text>
<clause commented="no" id="H521EF839B2DF4FE0AE2258AA2850F1CF"><enum>(i)</enum><text>by striking <quote>35 percent</quote> and inserting <quote>the highest rate of tax in effect for the taxable year under section 11(b)</quote>, and</text>
</clause><clause commented="no" id="HC703F15995AE46BA905139385A2F6E09"><enum>(ii)</enum><text>by striking <quote>of the amount</quote> and inserting <quote>multiplied by the amount</quote>.</text>
</clause></subparagraph><subparagraph commented="no" id="HDF28AE60DD904E0DB089161B684D4A99" indent="up1"><enum>(D)</enum><text>Section 1446(b)(2)(B) is amended by striking <quote>section 11(b)(1)</quote> and inserting <quote>section 11(b)</quote>.</text>
</subparagraph></paragraph><paragraph id="HA1ABDF587DC04843AEFEBDB712914719"><enum>(4)</enum><text>Section 852(b)(1) is amended by striking the last sentence.</text>
</paragraph><paragraph commented="no" id="H567F25DF428D40A89C1F7C3A223F3B93"><enum>(5)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H2D978627F445475D8ACF6B2B709ED603"><enum>(A)</enum><text>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).</text>
</subparagraph><subparagraph id="HA55EB744343B45EFA9001C6935F91A64" indent="up1"><enum>(B)</enum><text>Section 535(c)(5) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HB59F849295134F9AB26808CD70A12BB8" style="OLC">
<paragraph id="HA5ED8F4665504A8C85D8A81EAE1D66C5"><enum>(5)</enum><header>Cross reference</header><text display-inline="yes-display-inline">For limitation on credit provided in paragraph (2) or (3) in the case of certain controlled
corporations, see section 1561.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph commented="no" id="HE8AE8A8A5EE44672BE37FE8DCC54010E"><enum>(6)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H496875E4F7BF428CA4F04888634DD792"><enum>(A)</enum><text>Section 1561, as amended by the preceding provisions of this Act, is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H84AEFF8E20704ACFB0FAD47D8D993096" style="OLC">
<section commented="no" id="H1F3BCB9BD0CC4817B1640B25C0E9987E"><enum>1561.</enum><header>Limitation on accumulated earnings credit in the case of certain controlled corporations</header>
<subsection commented="no" id="H7A61331882E94039A2A7E288B290121D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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.</text>
</subsection><subsection commented="no" id="H99EE969550CE47B2973818D7A2A7932A"><enum>(b)</enum><header>Certain short taxable years</header><text>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.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph commented="no" id="HEB5CAF129A9F4D64B70BD44961146A5D" indent="up1"><enum>(B)</enum><text>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:</text>
<quoted-block display-inline="no-display-inline" id="H5AB8D9C2218D4C60959F5008E302FFA4" style="OLC">
<toc container-level="quoted-block-container" idref="H84AEFF8E20704ACFB0FAD47D8D993096" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H1F3BCB9BD0CC4817B1640B25C0E9987E" level="section">Sec. 1561. Limitation on accumulated earnings credit in the case of certain controlled
corporations.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph commented="no" id="H7BE4A448CCF24225926EDCA12997DD94"><enum>(7)</enum><text>Section 7874(e)(1)(B) is amended by striking <quote>section 11(b)(1)</quote> and inserting <quote>section 11(b)</quote>.</text>
</paragraph></subsection><subsection commented="no" id="HAB4528DC0D2A44C184068C34D10E42F2"><enum>(c)</enum><header>Effective date</header>
<paragraph commented="no" id="H07A74D273B2746439CFD8D52CDA50B6F"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph commented="no" id="HD621B1A7AC644FC591964EAEFE0BAACE"><enum>(2)</enum><header>Withholding</header><text>The amendments made by subsection (b)(3) shall apply to distributions made after December 31, 2014.</text>
</paragraph><paragraph commented="no" id="HBD225AB8C4804A78932EFE156EB7270C"><enum>(3)</enum><header>Certain transfers</header><text>The amendments made by subsection (b)(5) shall apply to transfers made after December 31, 2018.</text>
</paragraph><paragraph commented="no" id="H3FF332CE364C4E4F8BD3808C5CD642E6"><enum>(4)</enum><header>Certain other amendments related to single rate of tax</header><text>The amendments made by paragraphs (4) and (6) of subsection (b) shall apply to taxable years
beginning after December 31, 2018.</text>
</paragraph></subsection></section></subtitle><subtitle id="H304FA6B9721645359BEB17221B0E29BB"><enum>B</enum><header>Reform of business-Related exclusions and deductions</header>
<section id="H927291E92B584951B6AA17A277CC554E"><enum>3101.</enum><header>Revision of treatment of contributions to capital</header>
<subsection id="H28202014C5F34EC685D1C3085D2C5554"><enum>(a)</enum><header>Inclusion of contributions to capital</header><text display-inline="yes-display-inline">Part II of subchapter B of chapter 1 is amended by inserting after section 75 the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="HB0A81179500340EE816D6F5214385C4B" style="OLC">
<section id="H84F1F633EFB4434CAA8B7CB192D6BA09"><enum>76.</enum><header>Contributions to capital</header>
<subsection id="H740F3C2583314FAABF473C8DB963CD38"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Gross income includes—</text>
<paragraph id="H6D0BF6BEAB154B2BA9F655B3D0F5916D"><enum>(1)</enum><text>any contribution to the capital of any entity, and</text>
</paragraph><paragraph id="H4D8AB64A583A42D48BBAA349FA30D489"><enum>(2)</enum><text>any premium received by such entity with respect to any option on any interest in such entity.</text>
</paragraph></subsection><subsection id="H9FBAD494059A402B993375E1D7F5D8D5"><enum>(b)</enum><header>Treatment of contributions in exchange for stock, etc</header>
<paragraph id="HBC889E6E42554093BFDB2DB74B062605"><enum>(1)</enum><header>In general</header><text>In the case of any contribution of money or other property to a corporation in exchange for stock
of such corporation—</text>
<subparagraph id="HDCE2E65843E44F6F827B41F67187ED8C"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="H4590C4F14FCF4E939A45CCFD4AD6BDD2"><enum>(B)</enum><text>no gain or loss shall be recognized to such corporation upon the issuance of such stock.</text>
</subparagraph></paragraph><paragraph id="HF61EAC988DD644B9A8919DBDBA9B3DAD"><enum>(2)</enum><header>Treatment limited to value of stock</header><text>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.</text>
</paragraph><paragraph id="HC49983F01D7748C990E77296F1FBD7AA"><enum>(3)</enum><header>Application to entities other than corporations</header><text>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.</text>
</paragraph></subsection><subsection id="HEF7D8B8961884B5D8B944E57DF688E98"><enum>(c)</enum><header>Treasury stock treated as stock</header><text>Any reference in this section to stock shall be treated as including a reference to treasury stock.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H1ABE7B7890A342A8BEEA31561E696230"><enum>(b)</enum><header>Basis of corporation in contributed property</header>
<paragraph id="HB18468258B2544EC87265AD75AF08FC3"><enum>(1)</enum><header>Contributions to capital</header><text>Subsection (c) of section 362 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HFB8F38BFDCC8433ABB95DA1D2E6BE077" style="OLC">
<subsection id="H5301A07B659F49378F7EF02620ACB3D0"><enum>(c)</enum><header>Contributions to capital</header><text display-inline="yes-display-inline">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—</text>
<paragraph id="HF72470CB19DB4EEB97A412DC4CD47A02"><enum>(1)</enum><text>the basis determined in the hands of the transferor, increased by the amount of gain recognized to
the transferor on such transfer, or</text>
</paragraph><paragraph id="H29ECA63430B7444FAA25E5E0956AB584"><enum>(2)</enum><text>the amount included in gross income by such corporation under section 76 with respect to such
contribution.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HF9FB08271F2743A984E2FE131AC292D1"><enum>(2)</enum><header>Contributions in exchange for stock</header><text>Paragraph (2) of section 362(a) is amended by striking <quote>contribution to capital</quote> and inserting <quote>contribution in exchange for stock of such corporation (determined under rules similar to the rules
of paragraphs (2) and (3) of section 76(b))</quote>.</text>
</paragraph></subsection><subsection id="HB337C3F70F914B7E822F9491C31642EA"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="HB5250616E7CB4550A9F1DABEE6EB971A"><enum>(1)</enum><text display-inline="yes-display-inline">Section 108(e) is amended by striking paragraph (6).</text>
</paragraph><paragraph id="HA228F6E4E36B4B1F9E45C4854AB9E17D"><enum>(2)</enum><text>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).</text>
</paragraph><paragraph id="H1FCB1AA33DD1474AB19742BAAD3913FD"><enum>(3)</enum><text>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:</text>
<quoted-block display-inline="no-display-inline" id="HC535902E0A5440328C08184CE906A913" style="OLC">
<toc container-level="quoted-block-container" idref="HB0A81179500340EE816D6F5214385C4B" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H84F1F633EFB4434CAA8B7CB192D6BA09" level="section">Sec. 76. Contributions to capital.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H31BDBABE9A8D490D9D8255D4F57F5199"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to contributions made, and transactions entered
into, after the date of the enactment of this Act.</text>
</subsection></section><section id="H57CB3A01AE164A348C6424B1F0FCF8F6"><enum>3102.</enum><header>Repeal of deduction for local lobbying expenses</header>
<subsection id="H1853469B13BC40F7987F76EC97A870DB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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.</text>
</subsection><subsection id="H47E08E0A29834BBBA4EB7E903A081248"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 6033(e)(1)(B)(ii) is amended by striking <quote>section 162(e)(5)(B)(ii)</quote> and inserting <quote>section 162(e)(4)(B)(ii)</quote>.</text>
</subsection><subsection id="H7AA3CF7EB6EE4CEF8E1DF213670964C0"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31,
2014.</text>
</subsection></section><section id="H832B18C3CCBF48D08BC55EECCC58CDDC"><enum>3103.</enum><header>Expenditures for repairs in connection with casualty losses</header>
<subsection id="H977E58C44D764D29BAE1620FBFF1D3A9"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 165, as amended by the preceding provisions of this Act, is amended by inserting after
subsection (g) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HFB4087ECE7E24CD2A93FB3815B42C366" style="OLC">
<subsection id="H7559D44767F4452F959CE826C4992BF7"><enum>(h)</enum><header>Special rule for casualty losses</header>
<paragraph id="H552676E7C33448C58BCC3AF990201EC1"><enum>(1)</enum><header>Expenditures for repairs in connection with casualty losses</header><text display-inline="yes-display-inline">If a deduction is allowable under this section for any casualty loss with respect to any property,
any expenditure made for any repair of damage to such property in
connection with such casualty loss shall be treated as a permanent
improvement made to increase the value of such property for purposes of
section 263(a)(1).</text>
</paragraph><paragraph id="H327D809715CF4296AC370DEC21CC8D2E"><enum>(2)</enum><header>Election to expense repair in lieu of deducting casualty loss</header><text>If the taxpayer elects the application of this paragraph with respect to any property with respect
to which there is a casualty loss, no deduction shall be allowable under
this section for the casualty loss with respect to such property and
paragraph (1) shall not apply to expenditures made for repair of damage to
such property in connection with such casualty loss. Any election under
this paragraph shall be made not later than the due date for the return of
tax (including extensions) for the taxable year in which the casualty loss
occurs and, once made, may be revoked only with the consent of the
Secretary.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H94D8155A733647E9884B83C426506262"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to losses sustained after December 31, 2014.</text>
</subsection></section><section id="HC4611605A11E4048BEE5ADC23207BBC2"><enum>3104.</enum><header>Reform of accelerated cost recovery system</header>
<subsection id="H2B41D15F24384DE8A218CE38D7FCF43A"><enum>(a)</enum><header>Applicable depreciation method</header><text display-inline="yes-display-inline">Subsection (b) of section 168 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H12872F8A3B7A438A8446A80C6FEC25CE" style="OLC">
<subsection id="H70310D7461224470A31AA7A769A30614"><enum>(b)</enum><header>Applicable depreciation method</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H0A49C4EC0AFC49C1802BC55B72E1CAF2"><enum>(1)</enum><header>In general</header><text>The applicable depreciation method is the straight line method.</text>
</paragraph><paragraph id="H2D1D1C0C5BF04EDD82D02315B1ED0955"><enum>(2)</enum><header>Salvage value treated as zero</header><text>Salvage value shall be treated as zero.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H2FEE8B3E3E2F49D38EC4921327E3DC76"><enum>(b)</enum><header>Applicable recovery period</header><text display-inline="yes-display-inline">Subsection (c) of section 168 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H0E63AC1EF1E340CAB9C67E11BEFFEEA9" style="OLC">
<subsection id="H9CC7801205C24D28BFA32EF743A372A3"><enum>(c)</enum><header>Applicable recovery period</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H2E450BEBBC8E451BB2D74B29C2390480"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the applicable recovery period for any property is the class
life of such property.</text>
</paragraph><paragraph id="H2B80E3D52D404783BD1F5EE10B92416E"><enum>(2)</enum><header>Special rules for determining class life of certain property</header>
<subparagraph id="HEA01414F0AEF489E9142639BEE632A91"><enum>(A)</enum><header>Property with no class life</header><text display-inline="yes-display-inline">In the case of personal property with no class life, the recovery period is 12 years.</text>
</subparagraph><subparagraph id="HFAA53583CB5C4260BFAC6874A518CBEF"><enum>(B)</enum><header>Certain horses</header><text>In the case of any race horse, and any horse other than a race horse which is more than 12 years
old at the time it is placed in service, 3 years.</text>
</subparagraph><subparagraph id="H2C4E912D0B034F0BADCE9EE303DE1D02"><enum>(C)</enum><header>Semi-Conductor manufacturing equipment</header><text>In the case of any semi-conductor manufacturing equipment, the recovery period is 5 years.</text>
</subparagraph><subparagraph id="H993ABC663B1C4776A55B45D88A5F0694"><enum>(D)</enum><header>Qualified technological equipment</header><text>In the case of any qualified technological equipment, the recovery period is 5 years.</text>
</subparagraph><subparagraph id="H2D1AC680083F4C1FB6F7F18C6C27BE2A"><enum>(E)</enum><header>Automobile or light general purpose truck</header><text>In the case of any automobile or light general purpose truck, the recovery period is 5 years.</text>
</subparagraph><subparagraph id="H9B967596A12E437FA7D60153505FAE2D"><enum>(F)</enum><header>Qualified rent-to-own property</header><text>In the case of any qualified rent-to-own property, the recovery period is 9 years.</text>
</subparagraph><subparagraph id="H2C8CE7BCBE54454DA05A6C766C560037"><enum>(G)</enum><header>Certain telephone switching equipment</header><text>In the case of any computer-based telephone central office switching equipment, the recovery period
is 9.5 years.</text>
</subparagraph><subparagraph id="H98CC93AA04484EA1BA937E32CAAB7B96"><enum>(H)</enum><header>Railroad track</header><text>In the case of any railroad track, the recovery period is 10 years.</text>
</subparagraph><subparagraph id="H4AB3D55E89C544A7889E0694A7E15EA3"><enum>(I)</enum><header>Smart electric distribution property</header><text>In the case of qualified smart electric meters and qualified smart electric grid systems, the
recovery period is 10 years.</text>
</subparagraph><subparagraph id="H6B90E33AD69343B5A191511269DE775B"><enum>(J)</enum><header>Airplanes</header><text display-inline="yes-display-inline">In the case of any fixed-wing aircraft (including any fixed-wing airframe or engine), the recovery
period is 12 years.</text>
</subparagraph><subparagraph id="HC7DB54B3FE4F48FF99F28F83B8B12507"><enum>(K)</enum><header>Natural gas gathering line</header><text>In the case of any natural gas gathering line, the recovery period is 14 years.</text>
</subparagraph><subparagraph id="HEC8EDC2E791340CB8677A1F851972289"><enum>(L)</enum><header>Tree or vine bearing fruit or nuts</header><text display-inline="yes-display-inline">In the case of any tree or vine bearing fruit or nuts, the recovery period is 20 years.</text>
</subparagraph><subparagraph id="HFA02923D59394C83B7B045D4B58CB9DA"><enum>(M)</enum><header>Telephone distribution plant</header><text display-inline="yes-display-inline">In the case of any telephone distribution plant and comparable equipment used for 2-way exchange of
voice and data communications by cable, the recovery period is 24 years.</text>
</subparagraph><subparagraph id="HF35DE01AD5E14D7690F25025B65F1B60"><enum>(N)</enum><header>Real property</header><text>In the case of nonresidential real property, residential rental property, and any section 1245
property (as defined in section 1245(a)(3)) which is real property with no
class life, the recovery period is 40 years.</text>
</subparagraph><subparagraph id="HFF5DF359D803434BA2F0A7BD04FFC52E"><enum>(O)</enum><header>Water treatment and utility property</header><text display-inline="yes-display-inline">In the case of any municipal wastewater treatment plant or water utility property, the recovery
period is 50 years.</text>
</subparagraph><subparagraph id="H23D8AFE67AA14097B70458B65815F36D"><enum>(P)</enum><header>Clearing and grading improvements; tunnel bore</header><text>In the case of any clearing and grading land improvements or tunnel bore, the recovery period is 50
years.</text>
</subparagraph><subparagraph id="H5B5604DB52E44A23856DA0BA73AB58A3"><enum>(Q)</enum><header>Tax-exempt use property subject to lease</header><text>In the case of any tax-exempt use property subject to a lease, the recovery period used for
purposes of paragraph (2) shall (notwithstanding any other subparagraph of
this paragraph) in no event be less than 125 percent of the lease term.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H510E5A9334A9496AA9E0194B945BDA24"><enum>(c)</enum><header>Neutral cost recovery system</header><text display-inline="yes-display-inline">Section 168, as amended by subsection (f), is amended by adding at the end the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="HAFCA19715C264B61B94C485C07A5F4C9" style="OLC">
<subsection id="HD438E987D04543EFB31C09ACE0C3F0E9"><enum>(i)</enum><header>Neutral cost recovery system</header>
<paragraph id="H1E36A7935BDA45F386327B84DE9CC1B9"><enum>(1)</enum><header>In general</header><text>In the case of any property (to which this section applies) placed in service by the taxpayer in a
taxable year for which such taxpayer has elected the application of this
subsection, the deduction determined under subsection (a) with respect to
such property for any taxable year shall be increased by an amount equal
to the product of—</text>
<subparagraph id="HE03E0D68FBD44A8AA8C6AF6CD123457E"><enum>(A)</enum><text>the modified adjusted basis of such property determined as of the close of such taxable year
(determined without regard to this subsection but after taking all other
adjustments for such taxable year into account), multiplied by</text>
</subparagraph><subparagraph id="H0CD4B8A31E1248F0864BE0AECE4BAC8B"><enum>(B)</enum><text>the inflation adjustment percentage for the calendar year in which such taxable year begins.</text>
</subparagraph></paragraph><paragraph id="H68C92519F4D843A997ED4CB5A46CF2D5"><enum>(2)</enum><header>Modified adjusted basis</header><text>For purposes of this subsection, the term <quote>modified adjusted basis</quote> means, with respect to any property, the adjusted basis which would be determined with respect to
such property if this subsection never applied to such property.</text>
</paragraph><paragraph id="H93CF8E5B63EE433495B2A97E1252BD5B"><enum>(3)</enum><header>Inflation adjustment percentage</header><text>For purposes of this subsection, the term <quote>inflation adjustment percentage</quote> means, with respect to any calendar year, the cost-of-living adjustment which would be determined
under section 1(c)(2)(A) for such calendar year if clause (ii) thereof
were applied by substituting <quote>the C-CPI-U for the calendar year preceding the calendar year referred to in clause (i)</quote> for <quote>the normalized CPI for calendar year 2012</quote>.</text>
</paragraph><paragraph id="H3DB7A3319EDB47C8ADD116784D9CDADC"><enum>(4)</enum><header>Increase for first taxable year reduced to take into account placed in service convention</header><text>In the case of the taxable year in which any property is placed in service, the increase determined
under paragraph (1) with respect to such property shall be equal to—</text>
<subparagraph id="H87FF8CE751D44A48B3CC6D2722BDB4FB"><enum>(A)</enum><text>in the case of any property to which subsection (d)(3) applies, <fraction>1/8</fraction> of the amount of such increase determined without regard to this paragraph, and</text>
</subparagraph><subparagraph id="HF4586748501645698C6C0EA074CADF72"><enum>(B)</enum><text>in the case of any other property, <fraction>1/2</fraction> of the amount of such increase determined without regard to this paragraph.</text>
</subparagraph></paragraph><paragraph id="H78265164988145EFBA5B5AB64799CD0F"><enum>(5)</enum><header>Overall depreciation allowance not to exceed basis</header><text>The deduction determined under subsection (a) (after any increase determined under this subsection)
with respect to any property for any taxable year shall not exceed the
adjusted basis of such property determined as of the beginning of such
taxable year.</text>
</paragraph><paragraph id="H81AB7484C8184949AB5F566F6B59AE85"><enum>(6)</enum><header>Certain property excluded</header><text>Paragraph (1) shall not apply to any specified property used outside the United States or to any
property described in subsection (d)(2).</text>
</paragraph><paragraph id="HE1D390BED9094D6D9DC67F4DF746F973"><enum>(7)</enum><header>Election</header>
<subparagraph id="H09F194C6108F4F3488A90ED558CC78A9"><enum>(A)</enum><header>In general</header><text>An election under paragraph (1) for any taxable year shall be made not later than the due date
(including extensions) for the return of tax for such taxable year. Such
election, once made, shall be irrevocable. Such election shall apply with
respect to all property placed in service during the taxable for which
made (and shall apply for subsequent taxable years but only with respect
to such property).</text>
</subparagraph><subparagraph id="H33A9F1117DF7454CAB581C5073B5FE99"><enum>(B)</enum><header>Taxpayer engaged in more than one business</header><text>A taxpayer engaged in more than one trade or business may make separate elections under paragraph
(1) with respect to each such trade or business.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HCC81567C40014C3E91F7F15B253B0B50"><enum>(d)</enum><header>Application of mid-Month convention</header>
<paragraph id="HE1A1862617EA442D9D529A3DF01FBC66"><enum>(1)</enum><header>In general</header><text>Subparagraphs (A), (B) and (C) of section 168(d)(2) are amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H7E31F868A59A45E5BD72E04F313B8F30" style="OLC">
<subparagraph id="HEE745B35B85F41F1A5D8D5CC83391734"><enum>(A)</enum><text display-inline="yes-display-inline">real property,</text>
</subparagraph><subparagraph id="HE6590F81A1BE47009065DEB930ED8816"><enum>(B)</enum><text>water treatment and utility property, and</text>
</subparagraph><subparagraph id="HC37089EA973C4FF387B0E46AABC1A11E"><enum>(C)</enum><text display-inline="yes-display-inline">any clearing and grading land improvements or tunnel bore,</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HCF4BDAE85E8C40D886BB7D6204659F38"><enum>(2)</enum><header>Conforming amendment</header><text>Clause (i) of section 168(d)(3)(B) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H6B5CE6E0C77F4EA49156B144529F1E3D" style="OLC">
<clause id="HE7BCBED8A3AE43618AA68425E2E76204"><enum>(i)</enum><text display-inline="yes-display-inline">any property described in paragraph (2),</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HF564786413FE4E429B31D5AE60FE48B3"><enum>(e)</enum><header>Definitions</header><text>Subsection (e) of section 168 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H8DE9F7D5C7694E35B4B75964ED4B7288" style="OLC">
<subsection id="HF031C9E5CCDB46DE86F32E81295D12A3"><enum>(e)</enum><header>Definitions</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H4F2C66A2A7784A89B3371530AFDE73E8"><enum>(1)</enum><header>Class life</header>
<subparagraph id="HEFBD874B8216424C85F7A02AD8DC1458"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in this section, the term <quote>class life</quote> means the class life (if any) which would be applicable with respect to any property as of January
1, 1986, under subsection (m) of section 167 (determined without regard to
paragraph (4) and as if the taxpayer had made an election under such
subsection). The reference in this paragraph to subsection (m) of section
167 shall be treated as a reference to such subsection as in effect on the
day before the date of the enactment of the Revenue Reconciliation Act of
1990.</text>
</subparagraph><subparagraph id="H8AAB3F53F599477F87C71EF865C34670"><enum>(B)</enum><header>Secretarial authority to modify Rev. Proc. 87–56</header>
<clause id="H275351191A8C489D8BCAA876720701D0"><enum>(i)</enum><header>In general</header><text>The Secretary, through the Office of Tax Analysis and in consultation with the Bureau of Economic
Analysis of the Department of Commerce, shall—</text>
<subclause id="H4D97DB910CCA418FA07E60D4B49A231E"><enum>(I)</enum><text>determine, and develop a schedule of, the economic depreciation of the major categories of
depreciable property (other than property with a specified class life
under subsection (c)(2)) to approximate constant straight-line
depreciation, and</text>
</subclause><subclause id="H20E329217D924E1685F8D240AD8423B1"><enum>(II)</enum><text>develop recommendations regarding the proper economic depreciation for property with a specified
class life under subsection (c)(2).</text>
</subclause></clause><clause id="H396CB4CBA7FA46949A2DA433DE2885E3"><enum>(ii)</enum><header>Report</header><text>Not later than December 31, 2017, the Secretary shall submit to the Committee on Ways and Means of
the House of Representatives and the Committee on Finance of the Senate—</text>
<subclause id="H92D2A1012DCF4C8383DFDECB5E33A1C8"><enum>(I)</enum><text>the schedule developed under clause (i)(I), and</text>
</subclause><subclause id="HDA7FA22972574B40938BCE869F6ECC10"><enum>(II)</enum><text>the recommendations developed under clause (i)(II).</text></subclause><continuation-text continuation-text-level="clause">The schedule developed under clause (i)(I) shall take effect with respect to property placed in
service after the later of December 31, 2017, or the end of the first
calendar year ending after the calendar year during which such schedule is
submitted.</continuation-text></clause></subparagraph></paragraph><paragraph id="H7B5811A0A6C64A0BA012CB77F8E06E4C"><enum>(2)</enum><header>Residential rental property</header>
<subparagraph id="H8839FD2F435242FA81F1AE7473B176F0"><enum>(A)</enum><header>In general</header><text>The term <quote>residential rental property</quote> means any building or structure if 80 percent or more of the gross rental income from such
building or structure for the taxable year is rental income from dwelling
units.</text>
</subparagraph><subparagraph id="H493141F21FB84A448342564E3F944D38"><enum>(B)</enum><header>Dwelling unit</header><text>For purposes of subparagraph (A)—</text>
<clause id="H88A3403AB7304BD89E2B5B683D3A540D"><enum>(i)</enum><text>the term <quote>dwelling unit</quote> means a house or apartment used to provide living accommodations in a building or structure, but
does not include a unit in a hotel, motel, or other establishment more
than one-half of the units in which are used on a transient basis, and</text>
</clause><clause id="H19254BABBAC0499BAEB8E9E5BE297F78"><enum>(ii)</enum><text>if any portion of the building or structure is occupied by the taxpayer, the gross rental income
from such building or structure shall include the rental value of the
portion so occupied.</text>
</clause></subparagraph></paragraph><paragraph id="H15D70CCACA5546B1AD56DF08C6533AF8"><enum>(3)</enum><header>Nonresidential real property</header><text>The term <quote>nonresidential real property</quote> means section 1250 property which is not—</text>
<subparagraph id="HB0423DD9333F46AB94D8FA51D122E4A5"><enum>(A)</enum><text>residential rental property, or</text>
</subparagraph><subparagraph id="H07B0C94EEAA1413FA877D707383B0A3E"><enum>(B)</enum><text>property with a class life of less than 27.5 years.</text>
</subparagraph></paragraph><paragraph id="HF5F8482E7602407D963F7D2C73D78221"><enum>(4)</enum><header>Water utility property</header><text>The term <quote>water utility property</quote> means property—</text>
<subparagraph id="H4B06FC8D3C8349F8BE72BF8C6B5A60F5"><enum>(A)</enum><text>which is an integral part of the gathering, treatment, or commercial distribution of water, and</text>
</subparagraph><subparagraph id="H29B53364CAB9434088D367E7A88338DE"><enum>(B)</enum><text>any municipal sewer.</text>
</subparagraph></paragraph><paragraph id="H830620A8BDC840B9988600663E091CA4"><enum>(5)</enum><header>Qualified rent-to-own property</header>
<subparagraph id="H2FAF5C2CE1EB44D594B1B259D8830EBB"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>qualified rent-to-own property</quote> means any property held by a rent-to-own dealer for purposes of being subject to a rent-to-own
contract.</text>
</subparagraph><subparagraph id="H96B2FB8EB2F54AD4982FB33DE8C02E49"><enum>(B)</enum><header>Rent-to-own dealer</header><text>The term <quote>rent-to-own dealer</quote> means a person that, in the ordinary course of business, regularly enters into rent-to-own
contracts with customers for the use of consumer property, if a
substantial portion of those contracts terminate and the property is
returned to such person before the receipt of all payments required to
transfer ownership of the property from such person to the customer.</text>
</subparagraph><subparagraph id="H10F1868B86F041229279AA66DBF0497D"><enum>(C)</enum><header>Consumer property</header><text>The term <quote>consumer property</quote> means tangible personal property of a type generally used within the home for personal use.</text>
</subparagraph><subparagraph id="HE68F850E6A084B7AB94C230BFB2AB378"><enum>(D)</enum><header>Rent-to-own contract</header><text>The term <quote>rent-to-own contract</quote> means any lease for the use of consumer property between a rent-to-own dealer and a customer who
is an individual which—</text>
<clause id="H63C65998A05A4BA7996F1B98E83C9758"><enum>(i)</enum><text>is titled <quote>Rent-to-Own Agreement</quote> or <quote>Lease Agreement with Ownership Option</quote>, or uses other similar language,</text>
</clause><clause id="H424BD69F825D4EABA7A57838547D2DFE"><enum>(ii)</enum><text>provides for level (or decreasing where no payment is less than 40 percent of the largest payment),
regular periodic payments (for a payment period which is a week or month),</text>
</clause><clause id="H1BAFDD60A42C4FB599B5880E5EA40EDE"><enum>(iii)</enum><text>provides that legal title to such property remains with the rent-to-own dealer until the customer
makes all the payments described in clause (ii) or early purchase payments
required under the contract to acquire legal title to the item of
property,</text>
</clause><clause id="H27DAFC01431949B18BDE549059346ADD"><enum>(iv)</enum><text>provides a beginning date and a maximum period of time for which the contract may be in effect that
does not exceed 156 weeks or 36 months from such beginning date (including
renewals or options to extend),</text>
</clause><clause id="H43DD9A38E6BE4B4196BBEFB84DAA5DA5"><enum>(v)</enum><text>provides for payments within the 156-week or 36-month period that, in the aggregate, generally
exceed the normal retail price of the consumer property plus interest,</text>
</clause><clause id="H5780F879F7734347B6C8B7BA6C64D300"><enum>(vi)</enum><text>provides for payments under the contract that, in the aggregate, do not exceed $10,000 per item of
consumer property,</text>
</clause><clause id="H835E89B203D441F58B5F25F6DF526D6F"><enum>(vii)</enum><text>provides that the customer does not have any legal obligation to make all the payments referred to
in clause (ii) set forth under the contract, and that at the end of each
payment period the customer may either continue to use the consumer
property by making the payment for the next payment period or return such
property to the rent-to-own dealer in good working order, in which case
the customer does not incur any further obligations under the contract and
is not entitled to a return of any payments previously made under the
contract, and</text>
</clause><clause id="H89FB31D4D21D4E8B95905040E5BE0995"><enum>(viii)</enum><text>provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, encumber, or
otherwise dispose of the consumer property until all the payments stated
in the contract have been made.</text>
</clause></subparagraph></paragraph><paragraph id="H1994071FD6F14692B3568007D4870982"><enum>(6)</enum><header>Qualified technological equipment</header>
<subparagraph id="HA34D66554A9745F6AB0C7E5AF73ADE4F"><enum>(A)</enum><header>In general</header><text>The term <quote>qualified technological equipment</quote> means—</text>
<clause id="HDB3FE5A2A8714514B212629D41A0C42F"><enum>(i)</enum><text>any computer or peripheral equipment,</text>
</clause><clause id="H1B8D7841BA8840F08CACA72F7223B5A0"><enum>(ii)</enum><text>any high technology telephone station equipment installed on the customer’s premises, and</text>
</clause><clause id="H5A3AA64CCFE64D378A33DFE5059769A8"><enum>(iii)</enum><text>any high technology medical equipment.</text>
</clause></subparagraph><subparagraph id="HACE3993C0FB940D5B2A7B601D94A0DB5"><enum>(B)</enum><header>Computer or peripheral equipment defined</header><text>For purposes of this paragraph—</text>
<clause id="HA2FA0049200743E183855698FBEEAA81"><enum>(i)</enum><header>In general</header><text>The term <quote>computer or peripheral equipment</quote> means—</text>
<subclause id="H5DAD9BA5CCD144468DCD8650EF70E649"><enum>(I)</enum><text>any computer, and</text>
</subclause><subclause id="HEF52CD1FE9BE482F85F178448CFB2FE3"><enum>(II)</enum><text>any related peripheral equipment.</text>
</subclause></clause><clause id="H7B79D2CCCC4F4AD6A25339CBFE142D1E"><enum>(ii)</enum><header>Computer</header><text>The term <quote>computer</quote> means a programmable electronically activated device which—</text>
<subclause id="HC70A9BD1E39B4276B4204206580D2A36"><enum>(I)</enum><text>is capable of accepting information, applying prescribed processes to the information, and
supplying the results of these processes with or without human
intervention, and</text>
</subclause><subclause id="H97C33C92DA06410BBFD4AC4D1115C744"><enum>(II)</enum><text>consists of a central processing unit containing extensive storage, logic, arithmetic, and control
capabilities.</text>
</subclause></clause></subparagraph><subparagraph id="HFC0EE1C173154A0FA65D7BF51E2D8306"><enum>(C)</enum><header>High technology medical equipment</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>high technology medical equipment</quote> means any electronic, electromechanical, or computer-based high technology equipment used in the
screening, monitoring, observation, diagnosis, or treatment of patients in
a laboratory, medical, or hospital environment.</text>
</subparagraph></paragraph><paragraph id="HE99CCC2AA9AA4878A4E99C91B779240C"><enum>(7)</enum><header>Natural gas gathering line</header><text display-inline="yes-display-inline">The term <quote>natural gas gathering line</quote> means—</text>
<subparagraph id="H6A5FA153428D4A7189A56906FAA0E086"><enum>(A)</enum><text>the pipe, equipment, and appurtenances determined to be a gathering line by the Federal Energy
Regulatory Commission, and</text>
</subparagraph><subparagraph id="H26D0940736D94747AC235FBBF4B53D98"><enum>(B)</enum><text>the pipe, equipment, and appurtenances used to deliver natural gas from the wellhead or a
commonpoint to the point at which such gas first reaches—</text>
<clause id="HF65E9CD018B94E9ABA61E417B2DFB4C5"><enum>(i)</enum><text>a gas processing plant,</text>
</clause><clause id="HA36A0F9489454F72A077FE6ACB985964"><enum>(ii)</enum><text>an interconnection with a transmission pipeline for which a certificate as an interstate
transmission pipeline has been issued by the Federal Energy Regulatory
Commission,</text>
</clause><clause id="H20E401835A36427B89C6F84E9DD7997F"><enum>(iii)</enum><text>an interconnection with an intrastate transmission pipeline, or</text>
</clause><clause id="HF60DF881815D49048D35D4953E5F8861"><enum>(iv)</enum><text>a direct interconnection with a local distribution company, a gas storage facility, or an
industrial consumer.</text>
</clause></subparagraph></paragraph><paragraph id="H31FB5965D3DE47FEB156DC919EF7AE56"><enum>(8)</enum><header>Qualified smart electric meters</header>
<subparagraph id="HEC7D370C8001411A876B9C884A24264B"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>qualified smart electric meter</quote> means any smart electric meter which—</text>
<clause id="H8D59DE46DE914D7EA686C59450AAE530"><enum>(i)</enum><text display-inline="yes-display-inline">is placed in service by a taxpayer that is a supplier of electric energy or a provider of electric
energy services, and</text>
</clause><clause id="H88BD1A3C6A3E4E3AB1E9098352B31DE6"><enum>(ii)</enum><text>does not have a class life (determined without regard to subsection (c)) of less than 10 years.</text>
</clause></subparagraph><subparagraph id="HB6DA455BC8EA446983C3FF82E7E4B1C9"><enum>(B)</enum><header>Smart electric meter</header><text>For purposes of subparagraph (A), the term <quote>smart electric meter</quote> means any time-based meter and related communication equipment which is capable of being used by
the taxpayer as part of a system that—</text>
<clause id="HCE874E60F54E4A84ACCE6A786F5BFB9F"><enum>(i)</enum><text>measures and records electricity usage data on a time-differentiated basis in at least 24 separate
time segments per day,</text>
</clause><clause id="H73465382047849E7B118F532B65CCB90"><enum>(ii)</enum><text>provides for the exchange of information between supplier or provider and the customer’s electric
meter in support of time-based rates or other forms of demand response,</text>
</clause><clause id="H62DD746FB9464AC39DEC12DB06861FF3"><enum>(iii)</enum><text>provides data to such supplier or provider so that the supplier or provider can provide energy
usage information to customers electronically, and</text>
</clause><clause id="H3A4C7D513FB34BDDB534B36FE6217C07"><enum>(iv)</enum><text>provides net metering.</text>
</clause></subparagraph></paragraph><paragraph id="H2F422E067FFD4B90A9AE60D6E76C8292"><enum>(9)</enum><header>Qualified smart electric grid systems</header>
<subparagraph id="H228F454C26B34159926EAA4BDE5B9652"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>qualified smart electric grid system</quote> means any smart grid property which—</text>
<clause id="HBF797336368F41E6AD5A279BD2BC44C7"><enum>(i)</enum><text>is used as part of a system for electric distribution grid communications, monitoring, and
management placed in service by a taxpayer who is a supplier of electric
energy or a provider of electric energy services, and</text>
</clause><clause id="H071239C976594D7A960A3CFCC82214C8"><enum>(ii)</enum><text>does not have a class life (determined without regard to subsection (c)) of less than 10 years.</text>
</clause></subparagraph><subparagraph id="H3A14A0657AEA42A294EDEDCD40E0339D"><enum>(B)</enum><header>Smart grid property</header><text>For the purposes of subparagraph (A), the term <quote>smart grid property</quote> means electronics and related equipment that is capable of—</text>
<clause id="HAFC93F1594684237BE3CDB4ADD67A26D"><enum>(i)</enum><text>sensing, collecting, and monitoring data of or from all portions of a utility’s electric
distribution grid,</text>
</clause><clause id="H37B3AB4A2BF045D59B26E68C44836254"><enum>(ii)</enum><text>providing real-time, two-way communications to monitor or manage such grid, and</text>
</clause><clause id="H74F90266FAB74BB8AC7128FBEBCFD61D"><enum>(iii)</enum><text>providing real time analysis of and event prediction based upon collected data that can be used to
improve electric distribution system reliability, quality, and
performance.</text>
</clause></subparagraph></paragraph><paragraph id="HEF23DECDC0DD4B0B934AFA5CE459CDFA"><enum>(10)</enum><header>Specified property used outside the United States</header>
<subparagraph id="H17C1D9A4BA6E48758A25BF07A931EF83"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>specified property used outside the United States</quote> means—</text>
<clause id="HB938E617C1284B3B8BE058C6CF1C03DB"><enum>(i)</enum><text>any aircraft which is registered by the Administrator of the Federal Aviation Agency and which is
operated to and from the United States or is operated under contract with
the United States,</text>
</clause><clause id="H675736718C794007B4C6EAFA31F04D21"><enum>(ii)</enum><text>rolling stock which is used within and without the United States and which is—</text>
<subclause id="HABDD1E06955A44AFB61F70EB015B4F30"><enum>(I)</enum><text>of a rail carrier subject to part A of subtitle IV of title 49, or</text>
</subclause><subclause id="HF15F2BDE57644741A225C7B417811E63"><enum>(II)</enum><text>of a United States person (other than a corporation described in subclause (I)) but only if the
rolling stock is not leased to one or more foreign persons for periods
aggregating more than 12 months in any 24-month period,</text>
</subclause></clause><clause id="H013D98726B0148CEA95E9408E3684E45"><enum>(iii)</enum><text>any vessel documented under the laws of the United States which is operated in the foreign or
domestic commerce of the United States,</text>
</clause><clause id="H9DF8100F200A4E7B851D52D578839BA2"><enum>(iv)</enum><text>any motor vehicle of a United States person (as defined in section 7701(a)(30)) which is operated
to and from the United States,</text>
</clause><clause id="H1CF58475E8D4412B8219E4B3E9E512F5"><enum>(v)</enum><text>any container of a United States person which is used in the transportation of property to and from
the United States,</text>
</clause><clause id="H33CA15E980D046849912242D51AD3CB7"><enum>(vi)</enum><text>any property (other than a vessel or an aircraft) of a United States person which is used for the
purpose of exploring for, developing, removing, or transporting resources
from the outer Continental Shelf (within the meaning of section 2 of the
Outer Continental Shelf Lands Act, as amended and supplemented (43 U.S.C.
1331)),</text>
</clause><clause id="H7CA7058480F342C4A573D5D48D09BEFD"><enum>(vii)</enum><text>any property which is owned by a domestic corporation or by a United States citizen (other than a
citizen entitled to the benefits of section 931 or 933) and which is used
predominantly in a possession of the United States by such a corporation,
or such a citizen, or by a corporation created or organized in, or under
the law of, a possession of the United States,</text>
</clause><clause id="H41A7D22F7792423F8CB71830AA5CFF98"><enum>(viii)</enum><text>any communications satellite (as defined in section 103(3) of the Communications Satellite Act of
1962, <external-xref legal-doc="usc" parsable-cite="usc/47/702">47 U.S.C. 702(3)</external-xref>), or any interest therein, of a United States
person,</text>
</clause><clause id="HFFAD5EE1CD01456388D6B02A7A7FD726"><enum>(ix)</enum><text>any cable, or any interest therein, of a domestic corporation engaged in furnishing telephone
service to which section 168(e)(10)(C) applies (or of a wholly owned
domestic subsidiary of such a corporation), if such cable is part of a
submarine cable system which constitutes part of a communication link
exclusively between the United States and one or more foreign countries,</text>
</clause><clause id="H2BF50ABBAFEC4FB9B3D95C1F62C6841A"><enum>(x)</enum><text>any property (other than a vessel or an aircraft) of a United States person which is used in
international or territorial waters within the northern portion of the
Western Hemisphere for the purpose of exploring for, developing, removing,
or transporting resources from ocean waters or deposits under such waters,</text>
</clause><clause id="HFB46E58343C84ABEA9763A58B1922627"><enum>(xi)</enum><text>any property described in section 48(l)(3)(A)(ix) (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990) which is owned by a
United States person and which is used in international or territorial
waters to generate energy for use in the United States, and</text>
</clause><clause id="H5E86E3D02C8A4573BCA95ACDDDDB6D74"><enum>(xii)</enum><text>any satellite (not described in clause (viii)) or other spacecraft (or any interest therein) held
by a United States person if such satellite or other spacecraft was
launched from within the United States.</text>
</clause></subparagraph><subparagraph id="HFC15681D6CC84AC39D0CF3CC0835A57C"><enum>(B)</enum><header>Northern portion of the Western Hemisphere</header><text>For purposes of subparagraph (A)(x), the term <quote>northern portion of the Western Hemisphere</quote> means the area lying west of the 30th meridian west of Greenwich, east of the international
dateline, and north of the Equator, but not including any foreign country
which is a country of South America.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0EAAE92650A1404099B98903AAD6931B"><enum>(f)</enum><header>Conforming amendments</header>
<paragraph id="H1BA07B20C33B46D8A6C42FBE0CC382F5"><enum>(1)</enum><header>Amendments to section <enum-in-header>168</enum-in-header></header>
<subparagraph id="HC6227E85380840C18FBF466F4E01BA19"><enum>(A)</enum><text>Section 168 is amended by striking subsections (g), (j), (k), (l), (m), and (n), and by
redesignating subsections (h) and (i) as subsections (g) and (h),
respectively.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HC7A59A31DAEE4024A879FAAD3E64AD73"><enum>(B)</enum><text>Section 168(h), as redesignated by subparagraph (A), is amended—</text>
<clause id="HEDE6885DD4634B13B1A24ED86EBF5210"><enum>(i)</enum><text>by striking paragraphs (1), (2), (11), (12), (13), (14), (15), (16), (17), (18), and (19) and by
redesignating paragraphs (3) through (10) as paragraphs (1) through (8),
respectively, and</text>
</clause><clause id="H0D25AD0EFE634E4A86AA45D2BD622F2F"><enum>(ii)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">Definitions and</header-in-text></quote> in the heading thereof.</text>
</clause></subparagraph><subparagraph id="H4B08E02593F14A29B3C603C25BE919C4"><enum>(C)</enum><text>Section 168(h)(8), as redesignated by subparagraphs (A) and (B), is moved to the end of section
168(e) (as amended by subsection (e)) and redesignated as paragraph (11).</text>
</subparagraph></paragraph><paragraph id="HAB3F4C2AC2644457B37E16F312C01402"><enum>(2)</enum><header>Other conforming amendments</header>
<subparagraph id="HC0E2226A7F1B46468287A4F57203F2CB"><enum>(A)</enum><text>Section 50(b)(4) is amended—</text>
<clause id="HDD2437C4881A4E0B9065F5C0BD3573BB"><enum>(i)</enum><text>in subparagraph (A)(ii)—</text>
<subclause id="H1294CE13D78349339CD1976CF1A44DF2"><enum>(I)</enum><text>by striking <quote>section 168(h)(2)(C)</quote> and inserting <quote>section 168(g)(2)(C)</quote>,</text>
</subclause><subclause id="H17223922469B49129602AA819118AA2E"><enum>(II)</enum><text>by striking <quote>section 168(h)(2)(A)(iii)</quote> and inserting <quote>section 168(g)(2)(A)(iii)</quote>, and</text>
</subclause><subclause id="HA20301DA20144115834F9A833C8596A6"><enum>(III)</enum><text>by striking <quote>section 168(h)(2)(B)</quote> and inserting <quote>section 168(g)(2)(B)</quote>,</text>
</subclause></clause><clause id="H3680AD60FC4D44D0BFFB52B6D632C012"><enum>(ii)</enum><text>in subparagraph (B), by striking <quote>section 168(i)(3)</quote> and inserting <quote>section 168(h)(1)</quote>, and</text>
</clause><clause id="HA43F7CE9887F40F290D620F0B07466FE"><enum>(iii)</enum><text>in subparagraphs (D) and (E), by striking <quote>section 168(h)</quote> each place it appears and inserting <quote>section 168(g)</quote>.</text>
</clause></subparagraph><subparagraph id="HDFD5147C018945C9AA4DC9842876B12E"><enum>(B)</enum>
<clause commented="no" display-inline="yes-display-inline" id="H2C6CB788321A43D3BF5B13856303865C"><enum>(i)</enum><text>Section 50(b)(1)(B) is amended by striking <quote>any property described in section 168(g)(4)</quote> and inserting <quote>any specified property used outside the United States (as defined in section 168(e)(10)</quote>.</text>
</clause><clause id="H2834AF90F00543ACB9C46E784497BF3C" indent="up1"><enum>(ii)</enum><text>Section 865(c)(3)(B) is amended by striking <quote>property of a kind described in section 168(g)(4)</quote> and inserting <quote>specified property used outside the United States (as defined in section 168(e)(10)</quote>.</text>
</clause></subparagraph><subparagraph id="H35A52819F7E3401295B62544EDA423E6"><enum>(C)</enum><text>Section 179(e)(2) is amended by inserting <quote>as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title></quote> after <quote>section 168(n)(2)</quote>.</text>
</subparagraph><subparagraph id="HB38CC46E977847E89AD1910A21C608B3"><enum>(D)</enum><text>Section 179(f), as amended by section 3111, is amended—</text>
<clause id="H358A2821881649E7AC8155B87177705C"><enum>(i)</enum><text>by striking paragraph (2), and</text>
</clause><clause id="H8A0AE15B95354FD1B9B5466B505947F4"><enum>(ii)</enum><text>by inserting after paragraph (1) the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="H307CAC0C0CCE485EA98C37711BFA0756" style="OLC">
<paragraph id="HE7C37439C9E14A25B3B0F3CA692E0DD5"><enum>(2)</enum><header>Qualified real property</header><text>For purposes of this subsection, the term <quote>qualified real property</quote> means qualified leasehold improvement property, qualified restaurant property, and qualified
retail improvement property.</text>
</paragraph><paragraph commented="no" id="H9525CAFAF61645439A0FAD20372C770E"><enum>(3)</enum><header>Qualified leasehold improvement property</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="HB8BD09814B844BE0BCB3121AA1AAD0B6"><enum>(A)</enum><header>In general</header><text>The term <quote>qualified leasehold improvement property</quote> means any improvement to an interior portion of a building which is nonresidential real property
if—</text>
<clause commented="no" id="H8BAEDA80E19C48EEB572653A00F14145"><enum>(i)</enum><text>such improvement is made under or pursuant to a lease (as defined in section 168(g)(7))—</text>
<subclause commented="no" id="H3A0B39ED708348AC90962407D965395A"><enum>(I)</enum><text>by the lessee (or any sublessee) of such portion, or</text>
</subclause><subclause commented="no" id="H24A117B5D7B04FF890C301AF95D962AB"><enum>(II)</enum><text>by the lessor of such portion,</text>
</subclause></clause><clause commented="no" id="H440258E07A5D40DB85C5329D52A7B363"><enum>(ii)</enum><text>such portion is to be occupied exclusively by the lessee (or any sublessee) of such portion, and</text>
</clause><clause commented="no" id="H19E93B70AD8F4E78B6B7A914E1E130E5"><enum>(iii)</enum><text>such improvement is placed in service more than 3 years after the date the building was first
placed in service.</text>
</clause></subparagraph><subparagraph commented="no" id="HFF735988DC8C43D8B6AE454F76E2A668"><enum>(B)</enum><header>Certain improvements not included</header><text>Such term shall not include any improvement for which the expenditure is attributable to—</text>
<clause commented="no" id="HE47406937B5A4A42952AB39F02290C5A"><enum>(i)</enum><text>the enlargement of the building,</text>
</clause><clause commented="no" id="H8F3EAA3ACEED40BA9415047570DC7EB7"><enum>(ii)</enum><text>any elevator or escalator,</text>
</clause><clause commented="no" id="H46FFE788C77B40F78732BBEC4EFEC972"><enum>(iii)</enum><text>any structural component benefitting a common area, and</text>
</clause><clause id="H7F737DFAFBD840B9AC550C01ABD7AE92"><enum>(iv)</enum><text>the internal structural framework of the building.</text>
</clause></subparagraph><subparagraph id="HB79BCA45283740C389FE44DD14C6D455"><enum>(C)</enum><header>Definitions and special rules</header><text>For purposes of this paragraph—</text>
<clause id="HF4259502A4444D86A9A752639A8FD560"><enum>(i)</enum><header>Commitment to lease treated as lease</header><text>A commitment to enter into a lease shall be treated as a lease, and the parties to such commitment
shall be treated as lessor and lessee, respectively.</text>
</clause><clause id="HC88AC1659E094551AA9447DB8F03D11B"><enum>(ii)</enum><header>Related persons</header><text>A lease between related persons shall not be considered a lease. For purposes of the preceding
sentence, the term <quote>related persons</quote> means—</text>
<subclause id="HBDDBB2EE7BA942EF9E1EBC43057D0306"><enum>(I)</enum><text>members of an affiliated group (as defined in section 1504), and</text>
</subclause><subclause id="HB4C06DA300944C83AD3B39D78CE14023"><enum>(II)</enum><text>persons having a relationship described in subsection (b) of section 267; except that, for purposes
of this subclause, the phrase <quote>80 percent or more</quote> shall be substituted for the phrase <quote>more than 50 percent</quote> each place it appears in such subsection.</text>
</subclause></clause></subparagraph><subparagraph commented="no" id="H0C20E0895D3A4833A430A415485A7CCB"><enum>(D)</enum><header>Improvements made by lessor</header><text display-inline="yes-display-inline">In the case of an improvement made by the person who was the lessor of such improvement when such
improvement was placed in service, such improvement shall be qualified
leasehold improvement property (if at all) only so long as such
improvement is held by such person.</text>
</subparagraph><subparagraph commented="no" id="HAA423C2ED92A42D298BA29127D516EBF"><enum>(E)</enum><header>Exception for changes in form of business</header><text display-inline="yes-display-inline">Property shall not cease to be qualified leasehold improvement property by reason of—</text>
<clause commented="no" id="H0999E29A515F4478BB340D905C81D071"><enum>(i)</enum><text>death,</text>
</clause><clause commented="no" id="H537E85765583418E90C31BA89CD568DF"><enum>(ii)</enum><text display-inline="yes-display-inline">a transaction to which section 381(a) applies,</text>
</clause><clause commented="no" id="HA41576465A7541C7932FEF809492573E"><enum>(iii)</enum><text display-inline="yes-display-inline">a mere change in the form of conducting the trade or business so long as the property is retained
in such trade or business as qualified leasehold improvement property and
the taxpayer retains a substantial interest in such trade or business,</text>
</clause><clause commented="no" id="HD4A51CE57D2944F696CAD940616AC2A5"><enum>(iv)</enum><text display-inline="yes-display-inline">the acquisition of such property in an exchange described in section 1031 (as in effect before its
repeal by the <short-title>Tax Reform Act of 2014</short-title>), 1033, or 1038 to the extent that the basis of such property includes an amount representing the
adjusted basis of other property owned by the taxpayer or a related
person, or</text>
</clause><clause commented="no" id="HAC87D2815DC145DC948DFF0B2455B3A0"><enum>(v)</enum><text display-inline="yes-display-inline">the acquisition of such property by the taxpayer in a transaction described in section 332, 351,
361, 721, or 731 (or the acquisition of such property by the taxpayer from
the transferee or acquiring corporation in a transaction described in such
section), to the extent that the basis of the property in the hands of the
taxpayer is determined by reference to its basis in the hands of the
transferor or distributor.</text>
</clause></subparagraph></paragraph><paragraph id="H4D1746F7364A4ED0B9C75F65875854DE"><enum>(4)</enum><header>Qualified restaurant property</header><text>For purposes of this subsection, the term <quote>qualified restaurant property</quote> means any section 1250 property which is—</text>
<subparagraph id="H756B29DC55654133BAB1BDAB933D662A"><enum>(A)</enum><text>a building, or</text>
</subparagraph><subparagraph id="HE6628F86C76548A59740F20F03306E33"><enum>(B)</enum><text>an improvement to a building,</text></subparagraph><continuation-text continuation-text-level="paragraph">if more than 50 percent of the building’s square footage is devoted to preparation of, and seating
for on-premises consumption of, prepared meals.</continuation-text></paragraph><paragraph id="H1F7A9E2758F642788CE168CA1C02E5AD"><enum>(5)</enum><header>Qualified retail improvement property</header>
<subparagraph id="H2FD7B99F1AB14B7FAED3242625DC12CE"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>qualified retail improvement property</quote> means any improvement to an interior portion of a building which is nonresidential real property
if—</text>
<clause id="HFEA073CC089647A4B9433D9805A8431E"><enum>(i)</enum><text>such portion is open to the general public and is used in the retail trade or business of selling
tangible personal property to the general public, and</text>
</clause><clause id="H0F83074F24024DDBAAF1A55E7E03F5A5"><enum>(ii)</enum><text>such improvement is placed in service more than 3 years after the date the building was first
placed in service.</text>
</clause></subparagraph><subparagraph id="H4AA4B1EF389C48C8B7F8F4388C310709"><enum>(B)</enum><header>Improvements made by owner</header><text display-inline="yes-display-inline">In the case of an improvement made by the owner of such improvement, such improvement shall be
qualified retail improvement property (if at all) only so long as such
improvement is held by such owner. Rules similar to the rules under
paragraph (3)(E) shall apply for purposes of the preceding sentence.</text>
</subparagraph><subparagraph id="HCCFF15646CF94752BC354EF48F6E235B"><enum>(C)</enum><header>Certain improvements not included</header><text display-inline="yes-display-inline">Such term shall not include any improvement for which the expenditure is attributable to—</text>
<clause id="HA0069A8C42A94553BEC5BACFC04C358B"><enum>(i)</enum><text display-inline="yes-display-inline">the enlargement of the building,</text>
</clause><clause id="H8B4AFBB0B299455ABCF59120033B6AB3"><enum>(ii)</enum><text>any elevator or escalator,</text>
</clause><clause id="H208A38B4413D4283882B7402E2E7DD1B"><enum>(iii)</enum><text>any structural component benefitting a common area, or</text>
</clause><clause id="H12997B93F6AD41B9975727F24C3B3546"><enum>(iv)</enum><text>the internal structural framework of the building.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph commented="no" id="H0218D4A9C1704F26BDFA1070B11D26E6"><enum>(E)</enum><text>Section 280F(b) is amended—</text>
<clause id="H0F85A57E3A5848948BD04F06497B087A"><enum>(i)</enum><text>by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
respectively, and</text>
</clause><clause id="HCCB4984D14B541BD94ADF248962A7ADF"><enum>(ii)</enum><text>by striking <quote>, and the depreciation deduction</quote> and all that follows through <quote>alternative depreciation system)</quote> in paragraph (1) (as redesignated by clause (i)).</text>
</clause></subparagraph><subparagraph id="HFDF8CB60795E4ECEBC061A56EA22483C"><enum>(F)</enum><text>Section 280F(d)(4)(A)(iv) is amended by striking <quote>section 168(i)(2)(B)</quote> and inserting <quote>section 168(e)(6)(B)</quote>.</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="HB1355B982667424095F73C65C8272DAF"><enum>(G)</enum><text display-inline="yes-display-inline">Section 312(k)(3) is amended by striking <quote><header-in-text level="paragraph" style="OLC">Exception for tangible property</header-in-text></quote> and all that follows through <quote>For purposes of computing the earnings and profits</quote> and inserting <quote><header-in-text level="paragraph" style="OLC">Exception for certain tangible property.—</header-in-text>For purposes of computing the earnings and profits</quote>.</text>
</subparagraph><subparagraph id="HB21A292DC56B407DBCF0F17D817B8FE0"><enum>(H)</enum><text>Section 460(c) is amended by striking paragraph (6).</text>
</subparagraph><subparagraph id="HFDDA4CFE6AA749E39543055426E2CE49"><enum>(I)</enum><text>Section 460(d)(2) is amended by striking <quote>section 168(h)(2)(D)</quote> and inserting <quote>section 168(g)(2)(D)</quote>.</text>
</subparagraph><subparagraph id="H4FE445ADACD1433981415281C1907CD3"><enum>(J)</enum><text>Section 460(e)(6) is amended by striking <quote>section 168(e)(2)(A)(ii)</quote> each place it appears and inserting <quote>section 168(e)(2)(B)</quote>.</text>
</subparagraph><subparagraph id="H8982AF787173465791A05EA3CC7825F4"><enum>(K)</enum>
<clause commented="no" display-inline="yes-display-inline" id="H7977ECF86C16434AB9FF20C346824F79"><enum>(i)</enum><text>Subparagraphs (A) and (C) of section 470(c)(2) are each amended by striking <quote>section 168(h)</quote> and inserting <quote>section 168(g).</quote></text>
</clause><clause id="HF320CB7EDF304AE79A5FFBC47AD4F9B9" indent="up1"><enum>(ii)</enum><text>Section 470(c)(2)(B) is amended by striking <quote>section 168(h)(6)</quote> and inserting <quote>section 168(g)(6)</quote>.</text>
</clause></subparagraph><subparagraph id="HC108199B491844AEB10FCB68B6425075"><enum>(L)</enum><text>Section 512(b)(17)(B)(ii)(I) is amended by striking <quote>section 168(h)(4)(B)</quote> and inserting <quote>section 168(g)(4)(B)</quote>.</text>
</subparagraph><subparagraph id="HE8AEF8E6690646E79E3F1E16DF485F25"><enum>(M)</enum><text>Section 514(c)(9)(B)(vi)(II) is amended by striking <quote>section 168(h)(6)</quote> and inserting <quote>section 168(g)(6)</quote>.</text>
</subparagraph><subparagraph id="H49F0B0518FC54EF395E19CE4842C64E9"><enum>(N)</enum><text>Section 527(i)(3)(D) is amended by striking <quote>section 168(h)(4)</quote> and inserting <quote>section 168(g)(4)</quote>.</text>
</subparagraph><subparagraph id="HB44858236B4D45B3911E5D7F3AB3CD4E"><enum>(O)</enum><text>The second sentence of section 860E(e)(5) is amended by striking <quote>section 168(h)(2)(D)</quote> and inserting <quote>section 168(g)(2)(D)</quote>.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H0703ABCF3294481E93E0A9512F28EE42"><enum>(P)</enum><text>Section 1245(a) is amended—</text>
<clause id="HC9CE71A376444D5EA8009F2951B5D23F"><enum>(i)</enum><text>in paragraph (3)(D), by striking <quote>section 168(i)(13)</quote> and inserting <quote>paragraph (4)</quote>, and</text>
</clause><clause id="H5E89D541253E439E9525EFF8E87FD7C5"><enum>(ii)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H845C145E148D47DB9E54634B7C640FD0" style="OLC">
<paragraph commented="no" id="HF46987D9A5AA451FAAD38C377C492DB8"><enum>(4)</enum><header>Single purpose agricultural or horticultural structure</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph commented="no" id="H666571AEDF5A4EC689BAEC0199BF8CFC"><enum>(A)</enum><header>In general</header><text>The term <quote>single purpose agricultural or horticultural structure</quote> means—</text>
<clause commented="no" id="H3B482BA328D84CFCAE66FC9ECE18C1E4"><enum>(i)</enum><text>a single purpose livestock structure, and</text>
</clause><clause commented="no" id="H14F7F5CEC3F44DB4B123E16163AC1D5D"><enum>(ii)</enum><text>a single purpose horticultural structure.</text>
</clause></subparagraph><subparagraph commented="no" id="HFC08738525A74A168AC6A8421B4B6C60"><enum>(B)</enum><header>Definitions</header><text>For purposes of this paragraph—</text>
<clause commented="no" id="HFD15BE6FAE834E90A3E4C200F7DBBB3E"><enum>(i)</enum><header>Single purpose livestock structure</header><text>The term <quote>single purpose livestock structure</quote> means any enclosure or structure specifically designed, constructed, and used—</text>
<subclause commented="no" id="HD1E4BB2F1CF94EB3832D21020F6B83F0"><enum>(I)</enum><text>for housing, raising, and feeding a particular type of livestock and their produce, and</text>
</subclause><subclause commented="no" id="H46BF744BD5B2495BA4A7D11B0991D5ED"><enum>(II)</enum><text>for housing the equipment (including any replacements) necessary for the housing, raising, and
feeding referred to in subclause (I).</text>
</subclause></clause><clause commented="no" id="HA5F266C22BCD4F5F8A8FB49BDEF00CBF"><enum>(ii)</enum><header>Single purpose horticultural structure</header><text>The term <quote>single purpose horticultural structure</quote> means—</text>
<subclause commented="no" id="H0162954DE4F94149BA3EA392DEC94A7A"><enum>(I)</enum><text>a greenhouse specifically designed, constructed, and used for the commercial production of plants,
and</text>
</subclause><subclause commented="no" id="HC4677B579CB9415F97D7B253D17C6D26"><enum>(II)</enum><text>a structure specifically designed, constructed, and used for the commercial production of
mushrooms.</text>
</subclause></clause><clause commented="no" id="H5CC1DD7C5AFD43EC8186787DAE2FC516"><enum>(iii)</enum><header>Structures which include work space</header><text>An enclosure or structure which provides work space shall be treated as a single purpose
agricultural or horticultural structure only if such work space is solely
for—</text>
<subclause commented="no" id="H066A44FE577A48D4913CA8E1A8C4AD65"><enum>(I)</enum><text>the stocking, caring for, or collecting of livestock or plants (as the case may be) or their
produce,</text>
</subclause><subclause commented="no" id="HB663E39BF4FE4E7898795554CD62EE3B"><enum>(II)</enum><text>the maintenance of the enclosure or structure, and</text>
</subclause><subclause commented="no" id="H3B8A48376C284136A65203376FA59224"><enum>(III)</enum><text>the maintenance or replacement of the equipment or stock enclosed or housed therein.</text>
</subclause></clause><clause commented="no" id="H791195C751004F75AD5B8739CC41B108"><enum>(iv)</enum><header>Livestock</header><text>The term “livestock” includes poultry.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="HFDBEA8A19E104FC4BDC73A005050BD8B"><enum>(Q)</enum><text>Section 1245(a)(3)(F) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HC0097B9ACBF74B5FA585943ECC3FA31E" style="OLC">
<subparagraph id="H02493DD907A14A11868CB34CA04BB8A2"><enum>(F)</enum><text display-inline="yes-display-inline">any clearing and grading land improvements or tunnel bore (within the meaning of section
168(c)(2)(P)).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H0D280DE8007C4FEDB0341720076235F3"><enum>(R)</enum><text>Section 6050V(d)(3) is amended by striking <quote>section 168(h)(2)(A)(iv)</quote> and inserting <quote>section 168(g)(2)(A)(iv)</quote>.</text>
</subparagraph><subparagraph id="HA016701A0B734B34B0E136935A33690B"><enum>(S)</enum><text>Section 6211(b)(4)(A) is amended by striking <quote>168(k)(4),</quote>.</text>
</subparagraph><subparagraph id="HD9EF68B471774F7A845E363F84E8A973"><enum>(T)</enum><text>The second sentence of section 7701(e)(4)(A) is amended by striking <quote>section 168(h)</quote> and inserting <quote>section 168(g)</quote>.</text>
</subparagraph><subparagraph id="HE73CC7963C8B4DE098B9C6D47F2CC03F"><enum>(U)</enum><text display-inline="yes-display-inline">Section 7871(f)(3) is amended—</text>
<clause id="H5A19EF0D9F9B4124B636AAE7365DC78C"><enum>(i)</enum><text>by striking <quote>(as defined in section 168(j)(6))</quote> in subparagraph (B)(ii), and</text>
</clause><clause id="H914B76197DEE4831803F3A47B16C7654"><enum>(ii)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H284EC851D541408DB90B0EDFF6945D4E" style="OLC">
<subparagraph id="H830000154D1C4653B0EEF0A3E3CB003E"><enum>(D)</enum><header>Indian reservation</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>Indian reservation</quote> means a reservation, as defined in—</text>
<clause id="HB4AE36CFCEFB4F2086F798305F2DF013"><enum>(i)</enum><text>section 3(d) of the Indian Financing Act of 1974 (<external-xref legal-doc="usc" parsable-cite="usc/25/1452">25 U.S.C. 1452(d)</external-xref>), or</text>
</clause><clause id="H8A1CD3BDBD254D018551D778FB33BCC6"><enum>(ii)</enum><text>section 4(10) of the Indian Child Welfare Act of 1978 (<external-xref legal-doc="usc" parsable-cite="usc/25/1903">25 U.S.C. 1903(10)</external-xref>).</text></clause><continuation-text continuation-text-level="subparagraph">For purposes of the preceding sentence, such section 3(d) shall be applied by treating the term <quote>former Indian reservations in Oklahoma</quote> as including only lands which are within the jurisdictional area of an Oklahoma Indian tribe (as
determined by the Secretary of the Interior) and are recognized by such
Secretary as eligible for trust land status under 25 CFR Part 151 (as in
effect on August 5, 1997).</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph></paragraph></subsection><subsection id="H242A1A69B9B041E38E7E48BF22742AF5"><enum>(g)</enum><header>Normalization requirements</header>
<paragraph id="H59F85E55C58A4A44801106179910E984"><enum>(1)</enum><header>In general</header><text>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.</text>
</paragraph><paragraph id="H88574C12F1FE46E59118C1F4E41733BA"><enum>(2)</enum><header>Alternative Method for Certain Taxpayers</header><text>If, as of the first day of the taxable year that includes the date of enactment of this Act—</text>
<subparagraph id="H108095E88E9740F2987342C55F7BC350"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="HAFE18DB72987429992EA3D6A277B1691"><enum>(B)</enum><text>the taxpayer’s books and underlying records did not contain the vintage account data necessary to
apply the average rate assumption method,</text></subparagraph><continuation-text continuation-text-level="paragraph">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.</continuation-text></paragraph><paragraph id="H74E16E4EFD034831BA4E87D5FBF376C6"><enum>(3)</enum><header>Definitions</header><text>For purposes of this subsection—</text>
<subparagraph id="H7950C8E56ECD4CC8A8BDD118D47AD3F8"><enum>(A)</enum><header>Excess tax reserve</header><text>The term <quote>excess tax reserve</quote> means the excess of—</text>
<clause id="H3B16B996E5C84AFA9A7900AE0267B9C1"><enum>(i)</enum><text>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</text>
</clause><clause id="H8412A57A7D7E4F6291EB599F7B6AFA6A"><enum>(ii)</enum><text>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.</text>
</clause></subparagraph><subparagraph id="H5AC6A2EFBD474CD8887ED66875FA76F3"><enum>(B)</enum><header>Average rate assumption method</header><text>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—</text>
<clause id="H51C9E85DB0A84073913C6F030D65ACBF"><enum>(i)</enum><text>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</text>
</clause><clause id="HFEA13B1286E6435AB9814457EEC00DBA"><enum>(ii)</enum><text>the amount of the timing differences which reverse during such period.</text>
</clause></subparagraph><subparagraph id="H86E035DED0CC4A13A9325B6159E661C8"><enum>(C)</enum><header>Alternative method</header><text display-inline="yes-display-inline">The <quote>alternative method</quote> is the method in which the taxpayer—</text>
<clause id="HD44E6C6256A84E58968945CBAA87315D"><enum>(i)</enum><text>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</text>
</clause><clause id="H8D4039116EE6428B8FCC5BDD9DD4DF56"><enum>(ii)</enum><text>reduces the excess tax reserve ratably over the remaining regulatory life of the property.</text>
</clause></subparagraph></paragraph><paragraph id="H9697421162554B2DAA9262D68254C2EA"><enum>(4)</enum><header>Tax increased for normalization violation</header><text>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.</text>
</paragraph></subsection><subsection id="H70999F9142A9496EA361F9608727FC15"><enum>(h)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to property placed in service after December 31,
2016.</text>
</subsection></section><section id="HCCE6EAA4BA89443EBE0153EE2F39747B"><enum>3105.</enum><header>Repeal of amortization of pollution control facilities</header>
<subsection id="H3E3D227210E34CA9B4900BCE35C902B2"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 169 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H778B3B00BCA34DDAB97407A1D3C90869"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H7F82F1A9CBCA438E885AD4C4E9255960"><enum>(1)</enum><text>Section 642(f) is amended by striking <quote>the deductions for amortization provided by sections 169 and 197</quote> and inserting <quote>the deduction for amortization provided by section 197</quote>.</text>
</paragraph><paragraph id="H99AFDFE31E954908BD22B266677ADF2E"><enum>(2)</enum><text>Section 1250(b)(3) is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>169</quote>.</text>
</paragraph></subsection><subsection id="H273EC37C8EB2459E855612E9C6561A26"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to facilities placed in service after December 31,
2014.</text>
</subsection></section><section id="H4DDFAA3053EE4966A09C4EFFE59A8FCA"><enum>3106.</enum><header>Net operating loss deduction</header>
<subsection id="HBA167ADFB3FD4969B6FB6F4E9EC0813E"><enum>(a)</enum><header>Limitation on net operating losses of corporations</header>
<paragraph id="HBBFE62DDBCB7470AB48F94C654791711"><enum>(1)</enum><header>In general</header><text>Section 172(a) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H06C438217EBF4507B7FEB770AC270632" style="OLC">
<subsection id="H8752624AD5114244A6CB2E3014B3501C"><enum>(a)</enum><header>Deduction allowed</header>
<paragraph id="H269BBB5EA1B1433CA55517FDCC2027A6"><enum>(1)</enum><header>In general</header><text>There shall be allowed as a deduction for the taxable year an amount equal to the aggregate of—</text>
<subparagraph id="HC5A283A0B6064C4FB02B834F04D18663"><enum>(A)</enum><text>the net operating loss carryovers to such year, plus</text>
</subparagraph><subparagraph id="H4C2A883FF0434DADB6C5A7ABBA6992CE"><enum>(B)</enum><text>the net operating loss carrybacks to such year.</text>
</subparagraph></paragraph><paragraph id="H86EE3D95D36644C787DD1FDE0F051F62"><enum>(2)</enum><header>Limitation in case of corporations</header><text>In the case of a corporation—</text>
<subparagraph id="H5582780949BB4D6884783C288149771D"><enum>(A)</enum><text>the deduction allowed under paragraph (1) for the taxable year shall not exceed 90 percent of the
taxable income for such year computed without regard to the deduction
allowable under this section, and</text>
</subparagraph><subparagraph id="H959945F112AC484189E4B88608654AEB"><enum>(B)</enum><text>appropriate adjustments in the application of subsection (b)(2) shall be made to take into account
the limitation of subparagraph (A).</text>
</subparagraph></paragraph><paragraph id="H720361D4B12A44838BBCC8C86C36CCDD"><enum>(3)</enum><header>Net operating loss deduction defined</header><text>For purposes of this subtitle, the term <quote>net operating loss deduction</quote> means the deduction allowed by this subsection.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HA00C3CA55B8A4F70A4A61DC68836EA5A"><enum>(2)</enum><header>Coordination with limitation on deduction for charitable contributions</header>
<subparagraph id="HB8D2B4D3810747038A61385AA43E5810"><enum>(A)</enum><header>In general</header><text>Section 170(b)(2)(C) is amended by redesignating clauses (iv) and (v) as clauses (v) and (vi),
respectively, and by inserting after clause (iii) the following new
clause:</text>
<quoted-block display-inline="no-display-inline" id="H081958D7F3D94992BC61DE964C182F3F" style="OLC">
<clause id="H84A457184DDE43AB8C79CC4E8D91159F"><enum>(iv)</enum><text display-inline="yes-display-inline">the limitation imposed under section 172(a)(2)(A),</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H1B4247D020314F60BAE10558652DA043"><enum>(B)</enum><header>Life insurance companies</header><text>Section 805(b)(2)(A) is amended by redesignating clauses (ii) through (v) as clauses (iii) through
(vi), respectively, and by inserting after clause (i) the following new
clause:</text>
<quoted-block display-inline="no-display-inline" id="H79EAEA594D834127AC9A412C9BEFEC44" style="OLC">
<clause id="H66B405E33BBB48468331E5C61F340719"><enum>(ii)</enum><text display-inline="yes-display-inline">the limitation imposed under section 172(a)(2)(A),</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H564BF5A829514DDFA417F3825707BC5E"><enum>(b)</enum><header>Repeal of special carryback provisions</header>
<paragraph id="HAEED056E3D0149AE99258A39CCE73AE9"><enum>(1)</enum><header>In general</header><text>Section 172(b)(1) is amended by striking subparagraphs (C), (D), (E), (G), (H), (I), and (J) and by
redesignating subparagraph (F) as subparagraph (C).</text>
</paragraph><paragraph id="H880A7BF345DD4A93AA87503EF3B9533D"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="HBD2B62E3C53148739A7788126E83EC70"><enum>(A)</enum><text display-inline="yes-display-inline">Section 172(b)(1)(C), as redesignated by paragraph (1), is amended—</text>
<clause id="H154933BAA0E54F1B822C0E34C14D805B"><enum>(i)</enum><text>in clause (ii), by striking the last sentence, and</text>
</clause><clause id="HA8793F291DB64A44A32B3C6863565D80"><enum>(ii)</enum><text>in clause (iv), by striking <quote>in a manner similar to the manner in which a specified liability loss is treated</quote> and inserting <quote>as a separate net operating loss for such taxable year to be taken into account after the remaining
portion of the net operating loss for such taxable year</quote>.</text>
</clause></subparagraph><subparagraph id="H1F49E88F93574026BF0385456450CC60"><enum>(B)</enum><text>Section 172 is amended by striking subsections (f), (g), (h), (i), and (j) and by redesignating
subsection (k) as subsection (f).</text>
</subparagraph></paragraph></subsection><subsection id="HC95396986B1F445B95461EBA0B93F9F4"><enum>(c)</enum><header>Effective dates</header>
<paragraph id="HDCF047B2EC6949AB9F738269DB3C144A"><enum>(1)</enum><header>Limitation on NOLs of corporations</header><text>The amendments made by subsection (a) shall apply to—</text>
<subparagraph id="H689068ED3F554A3D802A71937F2863B5"><enum>(A)</enum><text>taxable years beginning after December 31, 2014, and</text>
</subparagraph><subparagraph id="H141578141F22445B97603D89B79E0AA4"><enum>(B)</enum><text>to carrybacks of losses arising in taxable years beginning after December 31, 2014, to taxable
years beginning on or before such date.</text>
</subparagraph></paragraph><paragraph id="H7DBD5EBB4653486F8D4927C3E12C6E98"><enum>(2)</enum><header>Repeal of special carrybacks</header>
<subparagraph id="H23ABFE6A46ED4C3494506626D81910DC"><enum>(A)</enum><header>In general</header><text>Except as otherwise provided in this paragraph, the amendments made by subsection (b) shall apply
to losses arising in taxable years beginning after December 31, 2014.</text>
</subparagraph><subparagraph id="H717D1B4052FB4EDAA9832FDDB131B210"><enum>(B)</enum><header>Expired provisions</header><text>So much of the amendments made by subsection (b) as relate to striking subparagraphs (D), (H), (I),
and (J) of <external-xref legal-doc="usc" parsable-cite="usc/26/172">section 172(b)(1)</external-xref> of the Internal Revenue Code of 1986 shall
take effect on the date of the enactment of this Act.</text>
</subparagraph></paragraph></subsection></section><section id="H9F6E2F3C980D41768E5E0E3ACA5A8679"><enum>3107.</enum><header>Circulation expenditures</header>
<subsection id="HB507E37DBF374391AF7FD434609D4204"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 173 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H807C811311D644938EA57B541A4BA0F1" style="OLC">
<section id="H5B4A34CA3748461192AAC2A5C85560D2"><enum>173.</enum><header>Circulation expenditures</header>
<subsection id="HE03B78542F604FA48A459692DB4F4F00"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxpayer’s specified circulation expenditures—</text>
<paragraph id="HAA8AE2A0BAFF48EA9AE3653603359B08"><enum>(1)</enum><text>except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and</text>
</paragraph><paragraph id="HBB337D7F7BD343239D96728CB0DFC655"><enum>(2)</enum><text>the taxpayer shall—</text>
<subparagraph id="HE0A31333BCDC4834A4AB99E982B22FAC"><enum>(A)</enum><text>charge such expenditures to capital account, and</text>
</subparagraph><subparagraph id="H60B0FDAD4EA84ADCB98BD5C73C2FB98F"><enum>(B)</enum><text display-inline="yes-display-inline">be allowed an amortization deduction of such expenditures ratably over the 36-month period
beginning with the midpoint of the month in which such expenditures are
paid or incurred.</text>
</subparagraph></paragraph></subsection><subsection id="H1D03B59BF24C497383125DA24754C8F4"><enum>(b)</enum><header>Specified circulation expenditures</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>specified circulation expenditures</quote> means all expenditures (other than expenditures for the purchase of land or depreciable property
or for the acquisition of circulation through the purchase of any part of
the business of another publisher of a newspaper, magazine, or other
periodical) to establish, maintain, or increase the circulation of a
newspaper, magazine, or other periodical.</text>
</subsection><subsection id="H00A1B06185F14B6985751C4E6551E170"><enum>(c)</enum><header>Treatment upon abandonment</header><text>If any property with respect to which specified circulation expenditures are paid or incurred is
disposed, retired, or abandoned during the period during which such
expenditures are allowed as an amortization deduction under this section,
no deduction shall be allowed with respect to such expenditures on account
of such disposition, retirement, or abandonment and such amortization
deduction shall continue with respect to such expenditures.</text>
</subsection><subsection id="H372E533B1DB64E22B9752C8C55392F87"><enum>(d)</enum><header>Phase-In for taxable years beginning before 2019</header>
<paragraph id="H1F4C0CE488CE403E9DF7D975829C445A"><enum>(1)</enum><header>In general</header><text>In the case of specified circulation expenditures paid or incurred in taxable years beginning
before 2019—</text>
<subparagraph id="H4C3405DADE9B48808B8EDCD6348AAB7C"><enum>(A)</enum><text>notwithstanding subsection (a), the applicable percentage of such expenditures shall be allowed as
a deduction for the taxable year in which paid or incurred, and</text>
</subparagraph><subparagraph id="H1D55004673254B5DA9AE29231404BE42"><enum>(B)</enum><text>subsection (a) shall apply to the remainder of such expenditures.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H4C2F0934265147379470E3F42B8E4A98"><enum>(2)</enum><header>Applicable percentage</header><text display-inline="yes-display-inline">For purposes of paragraph (1), the applicable percentage shall be determined in accordance with the
following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="0" frame="none" line-rules="no-gen" rowsep="0" rule-weights="0.0.0.0.0.0" table-template-name="Tax (No Calculation)" table-type="Leaderwork">
<tgroup cols="2" rowsep="0"><colspec coldef="txt" colname="column1" colwidth="275pts" min-data-value="55"></colspec><colspec align="justify" coldef="fig" colname="column2" colsep="0" colwidth="50pts" min-data-value="9"></colspec><thead>
<row><entry align="left" colname="column1" morerows="0" namest="column1" rowsep="0"><bold>In the case of taxable years beginning in:</bold></entry><entry align="right" colname="column2" morerows="0" namest="column2" rowsep="0"><bold>The applicable percentage is:</bold></entry></row></thead>
<tbody>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2016</entry><entry align="right" colname="column2" rowsep="0">75%</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2017</entry><entry align="right" colname="column2" rowsep="0">50%</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2018</entry><entry align="right" colname="column2" rowsep="0">25%</entry></row></tbody></tgroup></table>
</paragraph><paragraph id="H09C2F88773B743679604B6F55D44A707"><enum>(3)</enum><header>Election out of phase-in</header><text>The taxpayer may elect, at such time and in such form and manner as the Secretary shall prescribe,
for paragraph (1) not to apply for all taxable years beginning before
2019. Such election, once made, shall be irrevocable.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0BD5F87AD8EF43678762B63A9FDD8DD3"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2015.</text>
</subsection></section><section id="H315E8212F9DD4795BDFE00700B133FE5"><enum>3108.</enum><header>Amortization of research and experimental expenditures</header>
<subsection id="H6B24FE346F894F5A952FB70F68AF546F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 174 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H9E706C4377F74B46867EBFF71EF98522" style="OLC">
<section id="H85E6FCDB76DB43349817C74E84805203"><enum>174.</enum><header>Amortization of research and experimental expenditures</header>
<subsection id="H6AD6518127DF4703ABEF72A851A3771D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxpayer’s specified research or experimental expenditures for any taxable year—</text>
<paragraph id="H106CF6DAF8424DB3ADF80A216C78ACF4"><enum>(1)</enum><text>except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and</text>
</paragraph><paragraph id="H11571E7FD157496583C80F9557047DF0"><enum>(2)</enum><text>the taxpayer shall—</text>
<subparagraph id="HA1D7BC6C09F64DB48A464DAE8F990E17"><enum>(A)</enum><text>charge such expenditures to capital account, and</text>
</subparagraph><subparagraph id="H652BB1FE99DD4E989EED0C370329E0C0"><enum>(B)</enum><text display-inline="yes-display-inline">be allowed an amortization deduction of such expenditures ratably over the 5-year period (15-year
period in the case of any specified research or experimental expenditures
which are attributable to foreign research (within the meaning of section
41(d)(4)(F))) beginning with the midpoint of the taxable year in which
such expenditures are paid or incurred.</text>
</subparagraph></paragraph></subsection><subsection id="HAB53E8A0BF194661ACFC236E3BC4DC7D"><enum>(b)</enum><header>Specified research or experimental expenditures</header><text>For purposes of this section, the term <quote>specified research or experimental expenditures</quote> means, with respect to any taxable year, research or experimental expenditures which are paid or
incurred by the taxpayer during such taxable year in connection with the
taxpayer’s trade or business.</text>
</subsection><subsection id="H95A121F08795450B8BEEE88C10A9C7DB"><enum>(c)</enum><header>Special rules</header>
<paragraph id="HCC0F8416662C497E9CBC9C43CAC624EA"><enum>(1)</enum><header>Land and other property</header><text display-inline="yes-display-inline">This section shall not apply to any expenditure for the acquisition or improvement of land, or for
the acquisition or improvement of property to be used in connection with
the research or experimentation and of a character which is subject to the
allowance under section 167 (relating to allowance for depreciation, etc.)
or section 611 (relating to allowance for depletion); but for purposes of
this section allowances under section 167, and allowances under section
611, shall be considered as expenditures.</text>
</paragraph><paragraph id="H7BBEC8F5897C435C8405EC678668CC11"><enum>(2)</enum><header>Exploration expenditures</header><text display-inline="yes-display-inline">This section shall not apply to any expenditure paid or incurred for the purpose of ascertaining
the existence, location, extent, or quality of any deposit of ore or other
mineral (including oil and gas).</text>
</paragraph><paragraph id="H8DF931A79A0E419BB8D654CCCE711994"><enum>(3)</enum><header>Software development</header><text>For purposes of this section, any amount paid or incurred in connection with the development of any
software shall be treated as a research or experimental expenditure.</text>
</paragraph></subsection><subsection id="H8D57C246B6C8442681A42C10CD9837AA"><enum>(d)</enum><header>Treatment upon disposition, retirement, or abandonment</header><text display-inline="yes-display-inline">If any property with respect to which specified research or experimental expenditures are paid or
incurred is disposed, retired, or abandoned during the period during which
such expenditures are allowed as an amortization deduction under this
section, no deduction shall be allowed with respect to such expenditures
on account of such disposition, retirement, or abandonment and such
amortization deduction shall continue with respect to such expenditures.</text>
</subsection><subsection id="H65D2BBC99B504203AC8DF37742F42BC0"><enum>(e)</enum><header>Special rules for expenditures for domestic research during taxable years beginning before 2021</header>
<paragraph id="H858CBFEB12414944918AD7541996E17C"><enum>(1)</enum><header>In general</header><text>In the case of domestic research or experimental expenditures paid or incurred during any taxable
year beginning before 2021—</text>
<subparagraph id="HBAB852DEF2E54B6281EFEFC1D0BD5DD6"><enum>(A)</enum><text display-inline="yes-display-inline">notwithstanding subsection (a), the applicable percentage of such expenditures shall be allowed as
a deduction in the taxable year in which paid or incurred, and</text>
</subparagraph><subparagraph id="HA371416042FA49F6AE56BCCBBD8C397B"><enum>(B)</enum><text>subsection (a) shall apply to the remainder of such expenditures by substituting the applicable
period for <quote>the 5-year period</quote>.</text>
</subparagraph></paragraph><paragraph id="H8C271E59F8BC4CB39CE0E50DA2AEB98D"><enum>(2)</enum><header>Domestic research or experimental expenditures</header><text>For purposes of this subsection, the term <quote>domestic research or experimental expenditures</quote> means any expenditures—</text>
<subparagraph id="HB1C451BB5F6F494785AC4051DD6C3990"><enum>(A)</enum><text>to which subsection (a) applies (determined without regard to this subsection), and</text>
</subparagraph><subparagraph id="HCA91F9BD31CE41F3AD3F1AE7455F0390"><enum>(B)</enum><text display-inline="yes-display-inline">which are not attributable to foreign research (within the meaning of section 41(d)(4)(F)).</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H949C26FAE6504F6FBEF70128DF457CEE"><enum>(3)</enum><header>Applicable percentage</header><text display-inline="yes-display-inline">For purposes of this subsection, the applicable percentage shall be determined in accordance with
the following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="0" frame="none" line-rules="no-gen" rowsep="0" rule-weights="0.0.0.0.0.0" table-template-name="Tax (No Calculation)" table-type="Leaderwork">
<tgroup cols="2" rowsep="0"><colspec coldef="txt" colname="column1" colwidth="275pts" min-data-value="55"></colspec><colspec align="justify" coldef="fig" colname="column2" colsep="0" colwidth="50pts" min-data-value="9"></colspec><thead>
<row><entry align="left" colname="column1" morerows="0" namest="column1" rowsep="0"><bold>In the case of taxable years beginning in:</bold></entry><entry align="right" colname="column2" morerows="0" namest="column2" rowsep="0"><bold>The applicable percentage is:</bold></entry></row></thead>
<tbody>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2015</entry><entry align="right" colname="column2" rowsep="0">60%</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2016 or 2017</entry><entry align="right" colname="column2" rowsep="0">40%</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2018, 2019, or 2020</entry><entry align="right" colname="column2" rowsep="0">20%</entry></row></tbody></tgroup></table>
</paragraph><paragraph id="H252CF62C5DA24E268E27BB5D6C1C6823"><enum>(4)</enum><header>Applicable period</header><text>For purposes of this subsection, the applicable period shall be determined in accordance with the
following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="0" frame="none" line-rules="no-gen" rowsep="0" rule-weights="0.0.0.0.0.0" table-template-name="Tax (No Calculation)" table-type="Leaderwork">
<tgroup cols="2" rowsep="0"><colspec coldef="txt" colname="column1" colwidth="275pts" min-data-value="55"></colspec><colspec align="justify" coldef="fig" colname="column2" colsep="0" colwidth="50pts" min-data-value="9"></colspec><thead>
<row><entry align="left" colname="column1" morerows="0" namest="column1" rowsep="0"><bold>In the case of taxable years beginning in:</bold></entry><entry align="right" colname="column2" morerows="0" namest="column2" rowsep="0"><bold>The applicable period is the:</bold></entry></row></thead>
<tbody>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2015</entry><entry align="right" colname="column2" rowsep="0">2-year period</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2016 or 2017</entry><entry align="right" colname="column2" rowsep="0">3-year period</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2018, 2019, or 2020</entry><entry align="right" colname="column2" rowsep="0">4-year period</entry></row></tbody></tgroup></table>
</paragraph><paragraph id="H36737A8F868945D68518E3FDF8BCE585"><enum>(5)</enum><header>Election out of phase-in</header><text display-inline="yes-display-inline">The taxpayer may elect, at such time and in such form and manner as the Secretary shall prescribe,
for paragraph (1) not to apply to all domestic research or experimental
expenditures of the taxpayer for any taxable years beginning before 2021.
Such election, once made, shall be irrevocable.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA917249B19D5430B9D2BEE2D5CE1287C"><enum>(b)</enum><header>Clerical amendment</header><text>The table of sections for part VI of subchapter B of chapter 1 is amended by striking the item
relating to section 174 and inserting the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H16526325750A48578DA84C6C65CFD4F9" style="OLC">
<toc container-level="quoted-block-container" idref="H9E706C4377F74B46867EBFF71EF98522" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H85E6FCDB76DB43349817C74E84805203" level="section">Sec. 174. Amortization of research and experimental expenditures.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC205409E64A746679A7F526E397DACB8"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2014.</text>
</subsection></section><section id="HF6072429418C491F9FB865E15C367593"><enum>3109.</enum><header>Repeal of deductions for soil and water conservation expenditures and endangered species recovery
expenditures</header>
<subsection id="H2E65788E9A084969817F989D0D0F8905"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 175 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H753EA20B123147A09604D4D99FF92212"><enum>(b)</enum><header>Conforming amendments</header><text display-inline="yes-display-inline">Paragraphs (1)(A) and (2) of section 1252(a) are each amended by striking <quote>relating to soil and water conservation expenditures</quote> and inserting <quote>as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title></quote>.</text>
</subsection><subsection id="HE9077EB8F95248D59959CD5A71D8E529"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H7001ED67DE3043B68E0965156AD43265"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31,
2014.</text>
</paragraph><paragraph id="H9BBB6A5D1D2D4CB2BA8337ACE31E13F3"><enum>(2)</enum><header>Assessments treated as paid or incurred</header><text>In the case of any amount paid or incurred before December 31, 2014, and treated as paid or
incurred in any succeeding taxable year by reason of section 175(f) of the
Internal Revenue Code of 1986 (as in effect on the day before the date of
the enactment of this Act), paragraph (1) shall not apply.</text>
</paragraph></subsection></section><section id="H3D2EA041520242E4B8CC48DE6F757E9F"><enum>3110.</enum><header>Amortization of certain advertising expenses</header>
<subsection id="HB3AE7C33EB654991B1DBE8C30CA4556B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by inserting after section 176 the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="HDCBEDDAF74154583A1F50BA75A0C576D" style="OLC">
<section id="H5B9994EC77AD457392728B43E2BADBD2"><enum>177.</enum><header>Amortization of certain advertising expenses</header>
<subsection id="HE07A0014BF994796B40D477F5FD78B99"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxpayer’s amortizable advertising expenses for any taxable year—</text>
<paragraph id="H71AB4B8866F54FB19626D6893316EBD2"><enum>(1)</enum><text>except as provided in paragraph (2), no deduction shall be allowed for such expenses, and</text>
</paragraph><paragraph id="H146F166F2D0945C4869E22F4CBE680A7"><enum>(2)</enum><text>the taxpayer shall—</text>
<subparagraph id="H8C5781A7288143B4B26FE3D4B7EAE329"><enum>(A)</enum><text>charge such expenses to capital account, and</text>
</subparagraph><subparagraph id="H2876D4B1DAD04AF78104FA3BEDF88ED9"><enum>(B)</enum><text display-inline="yes-display-inline">be allowed an amortization deduction of such expenses ratably over the 10-year period beginning
with the midpoint of the taxable year in which such expenses are paid or
incurred.</text>
</subparagraph></paragraph></subsection><subsection id="HDC05F1A7155449BF939E66A69729D39C"><enum>(b)</enum><header>Exemption</header>
<paragraph id="H5D6A09AB6E5243AAA377EE78676CB63A"><enum>(1)</enum><header>In general</header><text>So much of the taxpayer’s otherwise deductible advertising expenses for any taxable year as do not
exceed $1,000,000 shall not be taken into account in determining such
taxpayer’s amortizable advertising expenses for such taxable year.</text>
</paragraph><paragraph id="H9529D2D32EC74145BBF20C48D56FE1A4"><enum>(2)</enum><header>Phaseout of exemption</header><text>In the case of a taxpayer whose otherwise deductible advertising expenses for any taxable year
exceed $1,500,000, the dollar amount in effect under paragraph (1) with
respect to such taxpayer for such taxable year shall be reduced (but not
below zero) by twice such excess.</text>
</paragraph><paragraph id="H855AA000D15144C0B73E46EE500E89C4"><enum>(3)</enum><header>Aggregation; short taxable years</header><text>For purposes of this subsection, rules similar to the rules of paragraphs (2) and (3)(B) of section
448(b) shall apply.</text>
</paragraph></subsection><subsection id="HCC4CC460AC524990BCFD224749CE00B1"><enum>(c)</enum><header>Amortizable advertising expenses</header>
<paragraph id="HE324DCD4B1CE472E9E99DAE5E1BACC50"><enum>(1)</enum><header>In general</header><text>For purposes of this section, the term <quote>amortizable advertising expenses</quote> means, with respect to any taxpayer for any taxable year, the applicable percentage of the
taxpayer’s otherwise deductible advertising expenses for such taxable
year.</text>
</paragraph><paragraph id="HCF797AD559734B7EA63680B2E2925AC9"><enum>(2)</enum><header>Applicable percentage</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>applicable percentage</quote> means (with respect to the taxpayer’s otherwise deductible advertising expenses for any taxable
year) the percentage determined in accordance with the following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="1" frame="topbot" line-rules="hor-ver" rowsep="0" rule-weights="4.4.4.0.0.0" table-template-name="Generic: 2 text, even cols" table-type="">
<tgroup cols="2" grid-typeface="1.1" rowsep="0" thead-tbody-ldg-size="10.10.12"><colspec coldef="txt" colname="column1" colwidth="163pts" min-data-value="150" rowsep="0"></colspec><colspec coldef="txt-no-ldr" colname="column2" colsep="1" colwidth="163pts" min-data-value="150" rowsep="0"></colspec><thead>
<row><entry align="center" colname="column1" morerows="0" namest="column1" rowsep="1">For taxable years beginning in:</entry><entry align="center" colname="column2" morerows="0" namest="column2" rowsep="1">The applicable percentage is:</entry></row></thead>
<tbody>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2015</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">20 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2016</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">30 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2017</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">40 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2018 or thereafter</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">50 percent.</entry></row></tbody></tgroup></table>
</paragraph><paragraph id="H6965F642FFDB4F6C80F7F94E018C1072"><enum>(3)</enum><header>Election out of phase-in</header><text display-inline="yes-display-inline">The taxpayer may elect, at such time and in such form and manner as the Secretary shall prescribe,
to treat the applicable percentage as being equal to 50 percent for all
taxable years beginning before 2018. Such election, once made, shall be
irrevocable.</text>
</paragraph></subsection><subsection id="H9642796752AB4EA79637D3CDCE663A9E"><enum>(d)</enum><header>Otherwise deductible advertising expenses</header><text>For purposes of this section—</text>
<paragraph id="HFE2D8E7DA2244107AD10B93CDF4F970F"><enum>(1)</enum><header>In general</header><text>The term <quote>otherwise deductible advertising expenses</quote> means, with respect to any taxpayer for any taxable year, the deductions which would (but for this
section) be allowable to the taxpayer for such taxable year with respect
to specified advertising expenses.</text>
</paragraph><paragraph id="H30B2CC749A7A4265B7C5A2BFE44C10E7"><enum>(2)</enum><header>Specified advertising expenses</header><text>The term <quote>specified advertising expenses</quote> means any amount paid or incurred for the development, production, or placement (including any
form of transmission, broadcast, publication, display, or distribution) of
any communication to the general public (or portions thereof) which is
intended to promote the taxpayer or a trade or business of the taxpayer
(or any service, facility, or product provided pursuant to such trade or
business).</text>
</paragraph><paragraph id="HBC43F49FD77C41DCBF7B7E07583F5BD2"><enum>(3)</enum><header>Exceptions</header><text display-inline="yes-display-inline">The term <quote>specified advertising expenses</quote> shall not include—</text>
<subparagraph id="H428F0FED54204FB2B4A9350570BE882A"><enum>(A)</enum><header>Certain wages</header><text display-inline="yes-display-inline">Wages paid or incurred to any employee unless the services rendered by such employee are primarily
related to—</text>
<clause id="H9204B39489CA4B5BA7336A5D4FEC3F24"><enum>(i)</enum><text>an activity described in paragraph (2) (other than the direct sale of goods or services to
customers of the taxpayer), or</text>
</clause><clause id="H690ADFFFF6DC4D0C8F26E4AC4B18DBF2"><enum>(ii)</enum><text>the direct supervision of employees rendering services primarily related to such an activity.</text>
</clause></subparagraph><subparagraph id="H63EB80D1375540A69E14CF825CC2FBC9"><enum>(B)</enum><header>Depreciation of tangible property</header><text>In the case of any tangible property, any amount for which a deduction is allowed for depreciation
under section 167.</text>
</subparagraph><subparagraph id="H29D390FB12654766AD10A6C9CD332F36"><enum>(C)</enum><header>Amortizable section 197 intangibles</header><text>Any amount for which a deduction is allowed for amortization under section 197.</text>
</subparagraph><subparagraph id="H91B5B3170C1C45D0AF251F66A42AC50E"><enum>(D)</enum><header>Discounts, etc</header><text>Any discount, coupon, rebate, slotting allowance, sample, prize, loyalty reward point, or any item
determined by the Secretary to be similar to any of the foregoing (other
than any amount paid or incurred to promote any of the foregoing).</text>
</subparagraph><subparagraph id="H2C67AA9C370D48C7A696DF1503699DD8"><enum>(E)</enum><header>Certain communications on taxpayer’s property</header><text>Any amount paid or incurred with respect to any communication appearing on tangible property of the
taxpayer which—</text>
<clause id="HBC621ED3993B4565AE5CF2926FA959DE"><enum>(i)</enum><text>is of a character subject to the allowance for depreciation, or</text>
</clause><clause id="H6834C84929DB4BE3A30672CEB233F0F9"><enum>(ii)</enum><text>is properly treated as inventory for purposes of section 471.</text>
</clause></subparagraph><subparagraph id="HA19E3A3C3E5B458C89A163C97B522F43"><enum>(F)</enum><header>Creation of logos, trade names, etc</header><text>Any amount paid or incurred for the creation of any logo, trademark, or trade name.</text>
</subparagraph><subparagraph id="H2F4010539314459AAAD9331053BD033B"><enum>(G)</enum><header>Package design</header><text>Any amount to which section 263A(i) applies.</text>
</subparagraph><subparagraph id="H0531FEE5207440018822F7A6EA1B500C"><enum>(H)</enum><header>Marketing research</header><text display-inline="yes-display-inline">Any amount paid or incurred for marketing research.</text>
</subparagraph><subparagraph id="HB875DF788905464981BF91D5228FBBD1"><enum>(I)</enum><header>Business meals</header><text display-inline="yes-display-inline">Any amount paid or incurred for meals.</text>
</subparagraph><subparagraph id="H2726D9E00C5A48999086901708869CF4"><enum>(J)</enum><header>Qualified sponsorship payments</header><text>Any amount paid or incurred as a qualified sponsorship payment (as defined in section 513(i)(2))
with respect to an organization subject to the tax imposed by section 511.</text>
</subparagraph></paragraph></subsection><subsection id="H3FDBD8EA322A4A38B43AB47866DAE9C7"><enum>(e)</enum><header>Treatment upon abandonment</header><text>If any property with respect to which specified advertising expenses are paid or incurred is
disposed, retired, or abandoned during the period during which such
expenses are allowed as an amortization deduction under this section, no
deduction shall be allowed with respect such expenses on account of such
disposition, retirement, or abandonment and such amortization deduction
shall continue with respect to such expenses.</text>
</subsection><subsection id="H8FA7D6953CCA40A7BF7DEA99B1D7C7F8"><enum>(f)</enum><header>Inflation adjustment</header>
<paragraph id="H0ECB6AB6E5184EA6B7B52F7D4C1C1C17"><enum>(1)</enum><header>In general</header><text>In the case of any taxable year beginning after 2015, each of the dollar amounts in subsection (b)
shall be increased by an amount equal to—</text>
<subparagraph id="HC92A7798685B437E9E1AD3BC6D56BB56"><enum>(A)</enum><text>such dollar amount, multiplied by</text>
</subparagraph><subparagraph id="H1FB20C8EA9D04923B184F8ED0654A8D3"><enum>(B)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year,
determined by substituting <quote>calendar year 2014</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text>
</subparagraph></paragraph><paragraph id="H372FDD5A32734B28AD98637D438999CB"><enum>(2)</enum><header>Rounding</header><text display-inline="yes-display-inline">The amount of any increase under paragraph (1) shall be rounded to the nearest multiple of $10,000.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HAF32C2B3E0CE40289CB5473F3A06E303"><enum>(b)</enum><header>Capitalization of package design expenses</header><text>Section 263A is amended by redesignating subsection (i) as subsection (j) and by inserting after
subsection (h) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HABB7B4D36C2D4BC6A876F67274F80D8F" style="OLC">
<subsection id="HF85D850FDBFA4C5292B1C16C3446B138"><enum>(i)</enum><header>Capitalization of package design expenses</header><text display-inline="yes-display-inline">For purposes of this section, in the case of any amount paid or incurred for package design, such
amounts shall be treated as an indirect cost described in subsection
(a)(2)(B) with respect to packages which utilize such design.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD3FB8CA3869848ACA5DECE6221FF4F4C"><enum>(c)</enum><header>Clerical amendment</header><text>The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the
item relating to section 176 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H43CD91E06898494B9508F2BC059CBBAD" style="OLC">
<toc container-level="quoted-block-container" idref="HDCBEDDAF74154583A1F50BA75A0C576D" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H5B9994EC77AD457392728B43E2BADBD2" level="section">Sec. 177. Amortization of certain advertising expenses.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H65C86EEB7BB64BABB94D068E0E106703"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2014.</text>
</subsection></section><section id="H86BD10CE940047DEB0FD6194AF73C4EE"><enum>3111.</enum><header>Expensing certain depreciable business assets for small business</header>
<subsection id="H606A86BFCCFA4AC58DB9D476A47BE1EE"><enum>(a)</enum><header>In general</header>
<paragraph id="HDF6C938644094847A881DABE593FD534"><enum>(1)</enum><header>Dollar limitation</header><text>Paragraph (1) of section 179(b) is amended by striking <quote>shall not exceed—</quote> and all that follows and inserting <quote>shall not exceed $250,000.</quote>.</text>
</paragraph><paragraph id="HFF8E6F72ECC64C13AEC201C19F6222A0"><enum>(2)</enum><header>Reduction in limitation</header><text>Paragraph (2) of section 179(b) is amended by striking <quote>exceeds—</quote> and all that follows and inserting <quote>exceeds $800,000.</quote>.</text>
</paragraph></subsection><subsection id="H6F9E1E02353B4102885D1E9D824FDFFD"><enum>(b)</enum><header>Computer software</header><text display-inline="yes-display-inline">Clause (ii) of section 179(d)(1)(A) is amended by striking <quote>to which section 167 applies, and which is placed in service in a taxable year beginning after 2002
and before 2014</quote> and inserting <quote>and to which section 167 applies</quote>.</text>
</subsection><subsection id="H22543DE6F797433FA5F043172B33053D"><enum>(c)</enum><header>Election</header><text>Paragraph (2) of section 179(c) is amended—</text>
<paragraph id="H8595C73E76EB471EBCA5A0E981F3FBE9"><enum>(1)</enum><text>by striking <quote>may not be revoked</quote> and all that follows through <quote>and before 2014</quote>, and</text>
</paragraph><paragraph id="HF6156AE444F34BA5A0AC3B245676E87E"><enum>(2)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">irrevocable</header-in-text></quote> in the heading thereof.</text>
</paragraph></subsection><subsection id="H77E4B71FD9234D3390FD089172E9161D"><enum>(d)</enum><header>Air conditioning and heating units</header><text>Paragraph (1) of section 179(d) is amended by striking <quote>and shall not include air conditioning or heating units</quote>.</text>
</subsection><subsection id="H9DD1777B0748432794B460D55CD4659D"><enum>(e)</enum><header>Qualified real property</header><text display-inline="yes-display-inline">Section 179(f) is amended—</text>
<paragraph id="H675613514F5D400A8B665F3CF67765BE"><enum>(1)</enum><text>by striking <quote>beginning in 2010, 2011, 2012, or 2013</quote> in paragraph (1), and</text>
</paragraph><paragraph id="H4AE79DA200BB4164B86F03B312BCFCD9"><enum>(2)</enum><text>by striking paragraphs (3) and (4).</text>
</paragraph></subsection><subsection id="HBB11BF8A5BD84637AC3CE74F755839FE"><enum>(f)</enum><header>Inflation adjustment</header><text>Subsection (b) of section 179 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H370245C7053540A3A7468A2B0D66E03B" style="OLC">
<paragraph id="H546481AFEE044D26BE7607FC326AC3A9"><enum>(6)</enum><header>Inflation adjustment</header>
<subparagraph id="H4BA5E1DC636E48B7AE72B10525C5BFFC"><enum>(A)</enum><header>In general</header><text>In the case of any taxable year beginning after 2014, the dollar amounts in paragraphs (1) and (2)
shall each be increased by an amount equal to—</text>
<clause id="H443D004CC8CA4FF59FC6B69A8F506465"><enum>(i)</enum><text>such dollar amount, multiplied by</text>
</clause><clause id="HE59DD614693440CBB91066C4833CF5CC"><enum>(ii)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year,
determined by substituting <quote>calendar year 2013</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text>
</clause></subparagraph><subparagraph id="H8FC2006B87B7476A9D7BAEAB693E5056"><enum>(B)</enum><header>Rounding</header><text display-inline="yes-display-inline">The amount of any increase under subparagraph (A) shall be rounded to the nearest multiple of
$10,000.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HEC99D566E08A45F48918A4E184ADBDCE"><enum>(g)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2013.</text>
</subsection></section><section id="H7C23977927164BA1A5AF16605066712F"><enum>3112.</enum><header>Repeal of election to expense certain refineries</header>
<subsection id="H23DA1AA8B84E49E0B52A6AA91EFACF2D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 179C (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="HAFAC462B398A453DBF399144270B7165"><enum>(b)</enum><header>Conforming amendment</header><text>Section 312(k)(3), as amended by the preceding provisions of this Act, is amended by striking <quote>, 179C</quote> each place it appears.</text>
</subsection><subsection id="H5504AF7742D6485FA0BA4D67B87EFFA3"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to property placed in service after December 31,
2013.</text>
</subsection></section><section id="HB43C69C4702041FE9437142379B5D4A5"><enum>3113.</enum><header>Repeal of deduction for energy efficient commercial buildings</header>
<subsection id="HDA6F13C797A94FCAAC97CB2F67D2BCA1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 179D (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="HD9BF1E5C1948499092F3FBB2F9A5B0D6"><enum>(b)</enum><header>Conforming amendment</header>
<paragraph id="H82D3BFFE96274BDBB387A35A99285C44"><enum>(1)</enum><text>Section 1016(a) is amended by striking paragraph (31).</text>
</paragraph><paragraph id="H222F31EC85F2408BAC3901A993E0B8B8"><enum>(2)</enum><text>Section 312(k)(3), as amended by the preceding provisions of this Act, is amended by striking <quote>, 179D</quote> each place it appears.</text>
</paragraph></subsection><subsection id="HAC75215991F54A68A6F5B2EA348B8414"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to property placed in service after December 31,
2013.</text>
</subsection></section><section id="HE8864794E25E4E14B8D0BAA9BD9055DB"><enum>3114.</enum><header>Repeal of election to expense advanced mine safety equipment</header>
<subsection id="HBA4B1BAEAE76431C9DF2824091ACC077"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 179E (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H4C9569D483354246901F2C5AE438572D"><enum>(b)</enum><header>Conforming amendment</header><text>Section 312(k)(3), as amended by the preceding provisions of this Act, is amended—</text>
<paragraph id="H46840BE65C1A4C1C9B62C62317866579"><enum>(1)</enum><text>by striking <quote>, or 179E, as the case may be</quote>, and</text>
</paragraph><paragraph id="H43B3EA2CD97745CDA79CD550667AF8BC"><enum>(2)</enum><text>by striking <quote>, or 179E</quote> each place it appears.</text>
</paragraph></subsection><subsection id="HA5D068B37607460E8F2BF2160A38A8DD"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to property placed in service after December 31,
2013.</text>
</subsection></section><section id="H0309B45923FF4B398BC2BC2950A733AE"><enum>3115.</enum><header>Repeal of deduction for expenditures by farmers for fertilizer, etc</header>
<subsection id="H2A1D2B5A3E3046CB9728177D8E9F736F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 180 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="HA8605D883EBC44B9BEF01011CDDC38CA"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to expenses paid or incurred in taxable years
beginning after December 31, 2014.</text>
</subsection></section><section id="H580A358A5F4045319837303531288C17"><enum>3116.</enum><header>Repeal of special treatment of certain qualified film and television productions</header>
<subsection id="HA05B603D80BF4AD1B22B9605EFF82AB0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 181 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H622E4C18A7F54A4184F8DBC21A24080C"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to productions commencing after December 31, 2013.</text>
</subsection></section><section id="HB20D27F8DB06461AA9B89815E9EE35D8"><enum>3117.</enum><header>Repeal of special rules for recoveries of damages of antitrust violations, etc</header>
<subsection id="HE2EAEB037E39482E9499404513FB0C50"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 186 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H0F8BB35FA1994B288683A1C8CCC23B38"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H5BBE3029D3DD4A87BE010731B2D23051"><enum>3118.</enum><header>Treatment of reforestation expenditures</header>
<subsection id="H30862B33EB41497DA1C34C2DA3769635"><enum>(a)</enum><header>Elimination of expensing election</header><text display-inline="yes-display-inline">Section 194 is amended by striking subsections (a) and (b), by redesignating subsection (c) and (d)
as subsections (b) and (c), respectively, and by inserting before
subsection (b) (as so redesignated) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H70A10EAD87D0498EB20B95027863DD8F" style="OLC">
<subsection id="HEA23CA7C75464905A3C04E70C0DCD695"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxpayer’s qualified reforestation expenditures for any taxable year—</text>
<paragraph id="HF1A07C28603B44168C109B1D7B307C56"><enum>(1)</enum><text>except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and</text>
</paragraph><paragraph id="HD8F8BE9A71B74911A2B77A12A09DAA7A"><enum>(2)</enum><text>the taxpayer shall—</text>
<subparagraph id="HE4C8831A43D44838A06C80779AE7D8D1"><enum>(A)</enum><text>charge such expenditures to capital account, and</text>
</subparagraph><subparagraph id="HC69A677230124787AC8FD76FC6D44B9D"><enum>(B)</enum><text display-inline="yes-display-inline">be allowed an amortization deduction of such expenditures ratably over the 7-year period beginning
with the midpoint of the taxable year in which such expenditures are paid
or incurred.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC69C093E58E0429F9A3868A897034025"><enum>(b)</enum><header>Qualified reforestation expenditures</header><text>Section 194(b), as redesignated by subsection (a), is amended by striking paragraph (2), by
redesignating paragraph (1) as paragraph (2), and by inserting before
paragraph (2) (as so redesignated the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H1471DBB3F61A4575B3A51AAFEA678B91" style="OLC">
<paragraph id="H1AB521E34530462BAE35A7CF39A43E64"><enum>(1)</enum><header>Qualified reforestation expenditures</header><text display-inline="yes-display-inline">The term <quote>qualified reforestation expenditures</quote> means, with respect to any taxable year, the reforestation expenditures paid or incurred by the
taxpayer during such taxable year with respect to qualified timber
property.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HB58DEF9208134651B6155562B710678B"><enum>(c)</enum><header>Qualified timber property limited to ornamental trees</header><text>Section 194(b)(2), as redesignated by subsections (a) and (b), is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H7D6A80A72E6C4C899E67B7D322314EA9" style="OLC">
<paragraph id="HEFBAD1391BE74184B32C5A693118A172"><enum>(2)</enum><header>Qualified timber property</header><text display-inline="yes-display-inline">The term <quote>qualified timber property</quote> means a woodlot or other site located in the United States which—</text>
<subparagraph id="HBB7C9EEB1EA5493895915956D4CB1012"><enum>(A)</enum><text>will contain evergreen trees in significant commercial quantities which are reasonably expected to
be more than 6 years old at the time severed from the roots, and</text>
</subparagraph><subparagraph id="H9221DCB784E149FAA57086AA6C447649"><enum>(B)</enum><text>is held by the taxpayer for the planting, cultivating, caring for, and cutting of such trees for
sale for ornamental purposes.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HEF0E0CA009814B789D8DEB860D6F7D14"><enum>(d)</enum><header>Determination of recomputed basis</header><text>Section 1245(b) is amended by striking paragraph (7).</text>
</subsection><subsection id="HE685ACB1F7A049EDA53C7D698A1FD72C"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to expenditures paid or incurred in taxable years
beginning after December 31, 2014.</text>
</subsection></section><section id="H004B32296BFC4B70A136190B62B12AF0"><enum>3119.</enum><header>20-year amortization of goodwill and certain other intangibles</header>
<subsection id="HD771DE763CD643F5887326C9B79C6174"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (a) of section 197 is amended by striking <quote>15-year period</quote> and inserting <quote>20-year period</quote>.</text>
</subsection><subsection id="HF003FB4CE45444D68C0AD2CB517F1A43"><enum>(b)</enum><header>Mortgage servicing rights</header><text display-inline="yes-display-inline">Subsection (e) of section 197 is amended by striking paragraph (6) and by redesignating paragraph
(7) as paragraph (6).</text>
</subsection><subsection id="H905770D797CA4D9CA197B53A6FC684EB"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H1FE91CC55661426D900B8B522C9F34A8"><enum>(1)</enum><text>Clause (i) of section 197(e)(4)(D) is amended by striking <quote>15 years</quote> and inserting <quote>20 years</quote>.</text>
</paragraph><paragraph id="HD8FA463999734317BD785EF7ADBA7267"><enum>(2)</enum><text>Section 167(f) is amended by striking paragraph (3).</text>
</paragraph></subsection><subsection id="H8249CA4F10F04AF9B0F4877625C9CF45"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to property acquired after December 31, 2014.</text>
</subsection></section><section id="HC558D7DDD26045ECB7D4413FD5B12849"><enum>3120.</enum><header>Treatment of environmental remediation costs</header>
<subsection id="HE27F3382C8AE493D9246E1C395B20A82"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (a) of section 198 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H2B1A496825B64695995C815A8AE0217D" style="OLC">
<subsection id="H1DDA5F18D3774D72861DB3F87694D9A1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxpayer’s qualified environmental remediation expenditures for any taxable year—</text>
<paragraph id="HE348F4E029F448F19565F4C7CA128A8D"><enum>(1)</enum><text>except as provided in paragraph (2), no deduction shall be allowed for such expenditures, and</text>
</paragraph><paragraph id="H29CBA09F77D44230BBFD53CC0429B381"><enum>(2)</enum><text>the taxpayer shall—</text>
<subparagraph id="H9F5501E27A0E4051BDB81D7EA280B968"><enum>(A)</enum><text>charge such expenditures to capital account, and</text>
</subparagraph><subparagraph id="HDAF4F9757F9446DDA36110E6966195EB"><enum>(B)</enum><text display-inline="yes-display-inline">be allowed an amortization deduction of such expenditures ratably over the 40-year period beginning
with the midpoint of the taxable year in which such expenditures are paid
or incurred.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H9E0D5309BCB44D459F776BD1C3F0EFBA"><enum>(b)</enum><header>Made permanent</header><text>Section 198 is amended by striking subsection (h).</text>
</subsection><subsection id="H025E18C957E44BD69995E52E1F35E66C"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="HE4A29178EC4A454E9A89934FCE2DF438"><enum>(1)</enum><text>Section 198, as amended by subsection (b), is amended by striking subsection (f) and by
redesignating subsection (g) as subsection (f).</text>
</paragraph><paragraph id="HEDA2ED31394A4F1CA223CAD8D740BAFF"><enum>(2)</enum><text>Section 198 (and the item relating to such section in the table of sections for part VI of
subchapter B of chapter 1) is amended by striking <quote><header-in-text level="section" style="OLC">Expensing</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text level="section" style="OLC">Amortization</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="HE993120FC5904DC1B29584BECF1CA64F"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to expenditures paid or incurred after December 31,
2014.</text>
</subsection></section><section id="H627F84C663014E48BBD17E7ABDAD119D"><enum>3121.</enum><header>Repeal of expensing of qualified disaster expenses</header>
<subsection id="H8A12278D12034D6598DFBA5989ADA279"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 198A (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H8778D9CB32E4460A974964A1A960555C"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31,
2014.</text>
</subsection></section><section id="HD01500301EB3465791642A6C8505B2FE"><enum>3122.</enum><header>Phaseout and repeal of deduction for income attributable to domestic production activities</header>
<subsection id="H20496F1F2DC446C4A9049138168065C1"><enum>(a)</enum><header>Phaseout</header>
<paragraph id="H1FEA4232F4DF4D1EAF4CFC0911DC0710"><enum>(1)</enum><header>In general</header><text>Subsection (a) of section 199 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HDDC5492BF905453EA7630944A9310619" style="OLC">
<paragraph id="H970EE30878294B2EB90F7DC0DA14187C"><enum>(3)</enum><header>Phaseout</header><text display-inline="yes-display-inline">In the case of any taxable year beginning after 2014, paragraph (1) shall be applied by
substituting for the percentage contained therein the phaseout percentage
determined under the following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="0" frame="none" line-rules="no-gen" rowsep="0" rule-weights="0.0.0.0.0.0" table-template-name="Tax (No Calculation)" table-type="Leaderwork">
<tgroup cols="2" rowsep="0"><colspec coldef="txt" colname="column1" colwidth="275pts" min-data-value="55"></colspec><colspec align="justify" coldef="fig" colname="column2" colsep="0" colwidth="50pts" min-data-value="9"></colspec><thead>
<row><entry align="left" colname="column1" morerows="0" namest="column1" rowsep="0"><bold>For taxable years beginning in:</bold></entry><entry align="right" colname="column2" morerows="0" namest="column2" rowsep="0"><bold>The phaseout percentage is:</bold></entry></row></thead>
<tbody>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2015</entry><entry align="right" colname="column2" rowsep="0">6%</entry></row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">2016</entry><entry align="right" colname="column2" rowsep="0">3%</entry></row></tbody></tgroup></table></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H8601205FA72D488297F7CA8AAFE72807"><enum>(2)</enum><header>Coordination with oil related qualified production activities income</header><text>Section 199(d) is amended by striking paragraph (9).</text>
</paragraph><paragraph id="H1FEDA9BBC134413F8633046253D16B69"><enum>(3)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to taxable years beginning after December 31,
2014.</text>
</paragraph></subsection><subsection id="HBC0A091208544B6D8D93CA5AD0D953A6"><enum>(b)</enum><header>Repeal</header>
<paragraph id="H2F699A737219497EA21805624EBA1398"><enum>(1)</enum><header>In general</header><text>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).</text>
</paragraph><paragraph id="H4608284BFE9B49E2A294F0DD77781185"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="H8F87AAF6CC5B44CE9351A62200A7D14F"><enum>(A)</enum><text>Sections 86(b)(2)(A), 137(b)(3)(A), 246(b)(1), and 469(i)(3)(F)(iii) are each amended by striking <quote>199,</quote>.</text>
</subparagraph><subparagraph id="H44CF9AEDC4B84F6F84B7AF4A9E40E24C"><enum>(B)</enum><text>Section 163(j)(6)(A)(i), as amended by the preceding provisions of this Act, is amended by striking
subclause (III) and by redesignating subclauses (IV) and (V) as subclauses
(III) and (IV), respectively.</text>
</subparagraph><subparagraph id="H4EA105ADBC324A99A34CA5A79A8354C7"><enum>(C)</enum><text>Section 170(b)(2)(C), as amended by the preceding provisions of this Act, is amended by striking
clause (v), by redesignating clause (vi) as clause (v), and by inserting <quote>and</quote> at the end of clause (iv).</text>
</subparagraph><subparagraph id="H5CD8BF1C83214D2AB84BFF8D068F349E"><enum>(D)</enum><text>Section 172(d) is amended by striking paragraph (7).</text>
</subparagraph><subparagraph id="H4B48763A460A42CDAB2D60A777A21341"><enum>(E)</enum><text>Section 1402(a) is amended by adding <quote>and</quote> at the end of paragraph (15) and by striking paragraph (16).</text>
</subparagraph></paragraph><paragraph id="H1888C5F4705C4DA2848D7E3391C7449F"><enum>(3)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this subsection shall apply to taxable years beginning after December 31,
2016.</text>
</paragraph></subsection></section><section id="HE2103F7B8E2B4EE1B3D65F3D6F8D4180"><enum>3123.</enum><header>Unification of deduction for organizational expenditures</header>
<subsection id="H54FAC667746C4B4592B86C715F0FEFF5"><enum>(a)</enum><header>In general</header><text>Subsections (a) and (b) of section 195 is amended by inserting <quote>and organizational</quote> after <quote>start-up</quote> each place it appears.</text>
</subsection><subsection id="HF4FA4265B65E4F86A859E1404071A7AB"><enum>(b)</enum><header>Organizational expenditures</header><text>Subsection (c) of section 195 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H9B73C0446C8740EFBF1DDFF856B52CB2" style="OLC">
<paragraph id="H24E4AA2D5F4043BABC8F571CB9349EA8"><enum>(3)</enum><header>Organizational expenditures</header><text display-inline="yes-display-inline">The term <quote>organizational expenditures</quote> means any expenditure which—</text>
<subparagraph id="H91AC4C4CE7E747B9B939F6084E462571"><enum>(A)</enum><text>is incident to the creation of a corporation or a partnership,</text>
</subparagraph><subparagraph id="H0BCE70B8620F4D81A5B4F946D4B6B223"><enum>(B)</enum><text>is chargeable to capital account, and</text>
</subparagraph><subparagraph id="HD12E1C849EE141F68E0A907AB38A8A8B"><enum>(C)</enum><text>is of a character which, if expended incident to the creation of a corporation or a partnership
having a limited life, would be amortizable over such life.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H198C82B4A5074AD2A79F8FAB05F9D40A"><enum>(c)</enum><header>Dollar amounts</header><text display-inline="yes-display-inline">Clause (ii) of section 195(b)(1)(A) is amended—</text>
<paragraph id="H1ECFC0CEAC0647F9858F5466F2691A72"><enum>(1)</enum><text>by striking <quote>$5,000</quote> and inserting <quote>$10,000</quote>, and</text>
</paragraph><paragraph id="H9DAA18A9AD9B4DE188631920E756A247"><enum>(2)</enum><text>by striking <quote>$50,000</quote> and inserting <quote>$60,000</quote>.</text>
</paragraph></subsection><subsection id="H2CCDFB096229452C8DEAE84D01551348"><enum>(d)</enum><header>Mid-Year convention</header><text>Subparagraph (B) of section 195(b)(1), as amended by subsection (a), is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H96C293F7A31A4305AA3CF6BA3299845C" style="OLC">
<subparagraph id="HC2FB25F5F9464E449A1AB5195BB7C4B0"><enum>(B)</enum><text display-inline="yes-display-inline">the remainder of such start-up and organizational expenditures shall be charged to capital account
and allowed as an amortization deduction determined by amortizing such
expenditures ratably over the 15-year period beginning with the midpoint
of the taxable year in which the active trade or business begins.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA82FFEDA67C34FEA8C93F154583A99F8"><enum>(e)</enum><header>Conforming amendments</header>
<paragraph id="H6F5318EA18D14C5AA654B8FAF7A7E1F7"><enum>(1)</enum><text>Section 195(b)(1) is amended—</text>
<subparagraph id="HC1DF4CFF7759400A8DC0C112344181A7"><enum>(A)</enum><text>by inserting <quote>(or, in the case of a partnership, the partnership elects)</quote> after <quote>If a taxpayer elects</quote>, and</text>
</subparagraph><subparagraph id="H6D8380DC23B949E9BB9EE1877F832B88"><enum>(B)</enum><text>by inserting <quote>(or the partnership, as the case may be)</quote> after <quote>the taxpayer</quote> in subparagraph (A).</text>
</subparagraph></paragraph><paragraph id="HABCC30C4C9A4462CADD34F31044B8ECE"><enum>(2)</enum><text>Section 195(b)(2) is amended—</text>
<subparagraph id="HC5AA1A1A06D842B5B073994421E0BCC5"><enum>(A)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">amortization period.—</header-in-text>In any case</quote> and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="H57180D7755D9495A81C2E2467EE5652E" style="OLC"><text><header-in-text level="paragraph" style="OLC">amortization period.—</header-in-text></text><subparagraph id="H9E1841EAED6B4277B26DDBE48163C01A"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In any case</text></subparagraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H7B669CA2752240759331BEF345D70DE6"><enum>(B)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H8572FC21060D4F9BB856E92CB7F7830C" style="OLC">
<subparagraph id="HC91B09849A4F44EFB880E50F9C7BDD4B"><enum>(B)</enum><header>Special partnership rule</header><text display-inline="yes-display-inline">In the case of a partnership, subparagraph (A) shall be applied at the partnership level.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="HD6AFD2B089D64AC0A2C89DCE841EBC5A"><enum>(3)</enum><text>Section 195(b) is amended by striking paragraph (3).</text>
</paragraph><paragraph id="H9C4ED05F25BC4368853728928D235A8E"><enum>(4)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HF6F12B204C814A4FBD35F0F03B61243D"><enum>(A)</enum><text>Part VIII of subchapter B of chapter 1 is amended by striking section 248 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subparagraph><subparagraph id="HB120181B4F9E41A098F42B3C4CAA7999" indent="up1"><enum>(B)</enum><text>Section 170(b)(2)(C)(ii) is amended by striking <quote>(except section 248)</quote>.</text>
</subparagraph><subparagraph id="HC0AC01EA86814678820B306AB498E8C4" indent="up1"><enum>(C)</enum><text>Section 312(n)(3) is amended by striking <quote>Sections 173 and 248</quote> and inserting <quote>Section 173</quote>.</text>
</subparagraph><subparagraph id="HBF9C7D697CBE4DF2A9846B871EF1CBC4" indent="up1"><enum>(D)</enum><text>Section 535(b)(3) is amended by striking <quote>(except section 248)</quote>.</text>
</subparagraph><subparagraph id="H3405B1009EA844A9BD8D552FBC770A55" indent="up1"><enum>(E)</enum><text>Section 545(b)(3) is amended by striking <quote>(except section 248)</quote>.</text>
</subparagraph><subparagraph id="HDD8C99F52CF54461B00B157022A2CD9F" indent="up1"><enum>(F)</enum><text>Section 834(c)(7) is amended by striking <quote>(except section 248)</quote>.</text>
</subparagraph><subparagraph id="H405C24C85FFF48EA8D7A938E6C5E7E3C" indent="up1"><enum>(G)</enum><text>Section 852(b)(2)(C) is amended by striking <quote>(except section 248)</quote>.</text>
</subparagraph><subparagraph id="H2DA349D606034947A2FA3EBF2A72E09A" indent="up1"><enum>(H)</enum><text>Section 857(b)(2)(A) is amended by striking <quote>(except section 248)</quote>.</text>
</subparagraph><subparagraph id="H1B833D2235D8412DA74590F863F58AAA" indent="up1"><enum>(I)</enum><text>Section 1363(b) is amended by inserting <quote>and</quote> at the end of paragraph (2), by striking paragraph (3), and by redesignating paragraph (4) as
paragraph (3).</text>
</subparagraph><subparagraph id="HFC74FB9E6A364E7DB6A4F7EF38D84FC7" indent="up1"><enum>(J)</enum><text>Section 1375(b)(1)(B)(i) is amended by striking <quote>(other than the deduction allowed by section 248, relating to organization expenditures)</quote>.</text>
</subparagraph></paragraph><paragraph id="H36FF40BAF34242C594738B4FA06560CE"><enum>(5)</enum><text>Part I of subchapter K of chapter 1 is amended by striking section 709 (and by striking the item
relating to such section in the table of sections for such part).</text>
</paragraph><paragraph id="H5E646F493AC841CD8379161F719E2F42"><enum>(6)</enum><text>The heading of section 195 (and the item relating to such section in the table of sections for part
VI of subchapter B of chapter 1) are each amended by inserting <quote>and organizational</quote> after <quote>Start-up</quote>.</text>
</paragraph></subsection><subsection id="H967CDD55705343E6A04C0FE31EE08259"><enum>(f)</enum><header>Effective date</header><text>The amendments made by this section shall apply to expenses paid or incurred in taxable years
beginning after December 31, 2014.</text>
</subsection></section><section id="H4C2B2F756D87467E95367C58E97246F8"><enum>3124.</enum><header>Prevention of arbitrage of deductible interest expense and tax-exempt interest income</header>
<subsection id="H8A011A6BEEA94715BF820D1FDD7179B2"><enum>(a)</enum><header>Pro rata allocation rules applicable to financial institutions modified and made applicable to all
C corporations</header>
<paragraph id="H1A77F83D03874672A90F67E4940CB222"><enum>(1)</enum><header>Application to corporations</header><text>So much of section 265(b) as precedes paragraph (3) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H62977EF42F8E4820A2C56D2677A71E75" style="OLC">
<subsection id="H14CFE614D50A40C18A8D24DA879AA1AE"><enum>(b)</enum><header>Pro rata allocation of interest expense of corporations and financial institutions to tax-Exempt
interest</header>
<paragraph id="HD7C7A3C86A4B4EBDBB35D44BC145CE2E"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a C corporation or a financial institution, no deduction shall be allowed for that
portion of the taxpayer’s interest expense which is allocable to
tax-exempt interest.</text>
</paragraph><paragraph id="H9B5208AD19A24DCC9ED0FF86FADAF8D9"><enum>(2)</enum><header>Allocation</header><text>For purposes of paragraph (1), the portion of the taxpayer’s interest expense which is allocable to
tax-exempt interest is an amount which bears the same ratio to such
interest expense as—</text>
<subparagraph id="H61CF865EE22B4A9593EA7E76E7699899"><enum>(A)</enum><text>the taxpayer’s average adjusted bases (within the meaning of section 1016) of tax-exempt
obligations acquired on or after February 26, 2014 (August 7, 1986, in the
case of a financial institution), bears to</text>
</subparagraph><subparagraph id="H85D7463460744E1D8E4A859147A4DCD9"><enum>(B)</enum><text>such average adjusted bases for all assets of the taxpayer.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HF7393F633CCB4C0395DA593362C38BDE"><enum>(2)</enum><header>Repeal of exceptions</header><text>Section 265(b) is amended by striking paragraphs (3) and (7).</text>
</paragraph></subsection><subsection id="H6E6425CB51234EEE8F8FD147FC88C692"><enum>(b)</enum><header>Limitation on investment interest</header>
<paragraph id="H5845D6DB83BA43AE88CDA86982B29384"><enum>(1)</enum><header>In general</header><text>Section 163(d)(1) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HBBC69346BAA24BF1A7BBF0FD1151158F" style="OLC">
<paragraph id="H8DC627C3E6CE476194284FFD438BA47D"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a taxpayer other than a corporation, the amount allowed as a deduction under this
chapter for investment interest for any taxable year—</text>
<subparagraph id="H25952A5C0AE144DCB6A3057C5BEBF2CE"><enum>(A)</enum><text>shall be reduced by the amount of tax-exempt interest received by the taxpayer during such taxable
year, and</text>
</subparagraph><subparagraph id="H2CB3F4BE229D46608BBC66D7ACF37DEA"><enum>(B)</enum><text>shall not (after any reduction under subparagraph (A)) exceed the net investment income of the
taxpayer for such taxable year.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HB1A648CA044C4F1FAC409E02AEC93F88"><enum>(2)</enum><header>Reductions for tax-exempt interest not carried forward</header><text>Section 163(d)(2) is amended by striking <quote>paragraph (1)</quote> and inserting <quote>paragraph (1)(B)</quote>.</text>
</paragraph><paragraph id="H03345DB2F70A44B69AF5148747454E5E"><enum>(3)</enum><header>Clarification that property held for investment includes property producing tax-exempt interest</header><text>Section 163(d)(5)(A) is amended by striking <quote>and</quote> at the end of clause (i), by striking the period at the end of clause (ii)(II) and inserting <quote>, and</quote>, and by adding at the end the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="H642A53C791F04E7CA92A7CF7EFA57400" style="OLC">
<clause id="HA592F2385C5441BCBFA72FE96467477B"><enum>(iii)</enum><text display-inline="yes-display-inline">any property held for the production of tax-exempt interest (including any shares of stock of a
regulated investment company which during the taxable year of the holder
thereof distributes exempt-interest dividends).</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HD153ED4C4220498F871293AD9B0B4400"><enum>(4)</enum><header>Coordination with section 265</header>
<subparagraph id="H2040270D49E74AFB97BB632C0AC4716F"><enum>(A)</enum><header>In general</header><text>Section 265(a) is amended by—</text>
<clause id="HECA4F141155B4246BE9B2F074C7D76B8"><enum>(i)</enum><text>striking paragraph (2) and inserting the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H3F4DDEA80DF94A2B886BB9D2F5CC8E1A" style="OLC">
<paragraph id="H2C143E10AE8347B49F64CD4F090FD0D3"><enum>(2)</enum><header>Interest</header>
<subparagraph id="H5D95BAF6947D41818A23E736802D8C90"><enum>(A)</enum><header>Corporations and financial institutions</header><text display-inline="yes-display-inline">For pro rata allocation rules in the case of corporations and financial institutions, see
subsection (b).</text>
</subparagraph><subparagraph id="H52F01EE9CBD54B56B3D799A5D33FF42E"><enum>(B)</enum><header>Other taxpayers</header><text>For limitation on investment interest in the case of other taxpayers, see section 163(d).</text></subparagraph></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</clause><clause id="H3BB2BF1D67E54602835060D681854B8D"><enum>(ii)</enum><text>by striking paragraphs (4) and (5) and by redesignating paragraph (6) as paragraph (4).</text>
</clause></subparagraph><subparagraph id="H73698A6C3DC646319EAECD04C5D2F780"><enum>(B)</enum><header>Conforming amendments</header>
<clause id="H27A17ACCE832464AB9EE54A2A6B21018"><enum>(i)</enum><text>Section 265(b), as amended by subsection (a), is amended by inserting after paragraph (2) the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H7020C32AB2FA4317BD91CDCEF198A73E" style="OLC">
<paragraph id="H782821A13CD34F01AF69FA48D00EF7E4"><enum>(3)</enum><header>Special rules for short sales</header>
<subparagraph id="H8A3489FDA33E416F86544AB942771A2C"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this subsection, interest includes any amount paid or incurred—</text>
<clause id="H08CE9D66F27E43FB83262052CEB1E72C"><enum>(i)</enum><text>by any person making a short sale in connection with personal property used in such short sale, or</text>
</clause><clause id="H08FA9431CC344BD0B39C454C2BF48C8F"><enum>(ii)</enum><text>by any other person for the use of any collateral with respect to such short sale.</text>
</clause></subparagraph><subparagraph id="HC76D943CA46C46FCBB81BB6513B23910"><enum>(B)</enum><header>Exception where no return on cash collateral </header><text>If—</text>
<clause id="H699F8621F03B4EA29BA1C0760619DF4C"><enum>(i)</enum><text>the taxpayer provides cash as collateral for any short sale, and</text>
</clause><clause id="HE5B4C90CB44543438C068B55332458FA"><enum>(ii)</enum><text>the taxpayer receives no material earnings on such cash during the period of the sale,</text></clause><continuation-text continuation-text-level="subparagraph">subparagraph (A)(i) shall not apply to such short sale.</continuation-text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause><clause id="HA92F426576B94DAAA7BECDC83B6EA836"><enum>(ii)</enum><text>Section 265(b)(6) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HB929E9C8DB3E44C5A207F5F8BD662D2B" style="OLC">
<paragraph id="H6443A5F9AB954CB881688685BA9D493E"><enum>(6)</enum><header>Coordination with section 263A</header><text display-inline="yes-display-inline">This section shall be applied before the application of section 263A (relating to capitalization of
certain expenses where taxpayer produces property).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause><clause id="HC3089AA6BA384CA9B37A2A55788EA725"><enum>(iii)</enum><text>Section 163(n)(2) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H50DC8E13A72B4ADABBD9F586A18108E3" style="OLC">
<paragraph id="H7F10D51FB52B4063A9E251136110A88E"><enum>(2)</enum><text display-inline="yes-display-inline">For disallowance of deduction for interest relating to tax-exempt income, see sections 163(d) and
265(b)</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph></paragraph></subsection><subsection id="HFCBDFBFCB3BE438D899D8FE53D019D5A"><enum>(c)</enum><header>Effective dates</header>
<paragraph id="HF95C2AD5D7654B59B2C6E0D6918A54E1"><enum>(1)</enum><header>Application of pro rata allocation rules</header>
<subparagraph id="HE6DF03ADC54E44808AC2A23F0468A3BC"><enum>(A)</enum><header>Application to C corporations</header><text>The amendments made by subsection (a)(1) shall apply to taxable years ending on or after February
26, 2014.</text>
</subparagraph><subparagraph id="H0C14A131EE9F493CB6686B4837D15B4A"><enum>(B)</enum><header>Repeal of exceptions</header><text>The amendments made by subsection (a)(2) shall apply to obligations issued on or after February 26,
2014.</text>
</subparagraph></paragraph><paragraph id="H272CB9664EFF44B5A2843FE085ACF1F4"><enum>(2)</enum><header>Limitation on investment interest</header><text>The amendments made by subsection (b) shall apply to taxable years beginning after December 31,
2014.</text>
</paragraph></subsection></section><section id="H0267DD8CF59944ECAAE30258BF0F40F8"><enum>3125.</enum><header>Prevention of transfer of certain losses from tax indifferent parties</header>
<subsection id="HD6A0542B532C476CB9A8875F7B31DB5A"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 267(d) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H72914345633B420FAA4836172A2A1068" style="OLC">
<subsection id="HDB8E6392D84044A39719B11DE7E1BA2B"><enum>(d)</enum><header>Amount of gain where loss previously disallowed</header>
<paragraph id="H3DFB61B78A7C408DA7509635A6C3290D"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">If—</text>
<subparagraph id="H5249C672C8F74BAA8EF6364E8F7A207B"><enum>(A)</enum><text display-inline="yes-display-inline">in the case of a sale or exchange of property to the taxpayer a loss sustained by the transferor is
not allowable to the transferor as a deduction by reason of subsection
(a)(1), and</text>
</subparagraph><subparagraph id="H247789BD34434A9487243AC6DEE7A8B8"><enum>(B)</enum><text>the taxpayer sells or otherwise disposes of such property (or of other property the basis of which
in the taxpayer’s hands is determined directly or indirectly by reference
to such property) at a gain,</text></subparagraph><continuation-text continuation-text-level="paragraph">then such gain shall be recognized only to the extent that it exceeds so much of such loss as is
properly allocable to the property sold or otherwise disposed of by the
taxpayer.</continuation-text></paragraph><paragraph id="H6F907CB5D8D7408180AD434735B1FD32"><enum>(2)</enum><header>Exception for wash sales</header><text>Paragraph (1) shall not apply if the loss sustained by the transferor is not allowable to the
transferor as a deduction by reason of section 1091 (relating to wash
sales).</text>
</paragraph><paragraph id="HFFA5A3CE039948B7AFFA1A286DA1C67B"><enum>(3)</enum><header>Exception for transfers from tax indifferent parties</header><text>Paragraph (1) shall not apply to the extent any loss sustained by the transferor (if allowed) would
not be taken into account in determining a tax imposed under section 1 or
11 or a tax computed as provided by either of such sections.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H922F7CB9F8594A2BA81F9DAF0D11E48C"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to sales and exchanges after December 31, 2014.</text>
</subsection></section><section id="HE398FE5D56C543409C002260819E26AD" section-type="subsequent-section"><enum>3126.</enum><header>Entertainment, etc. expenses</header>
<subsection id="HB2FB1DB8606E40EAA3F9BF89FA8E5903"><enum>(a)</enum><header>Denial of deduction</header><text display-inline="yes-display-inline">Subsection (a) of section 274 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HB43EB72B9CFC40BAB14332ABE15A055B" style="OLC">
<subsection id="HE51D4E45AC824200A44EEBDB3607299D"><enum>(a)</enum><header>Entertainment, amusement, or recreation</header>
<paragraph id="H88717FF720824AF88C1FB3BC9E37E567"><enum>(1)</enum><header>In general</header><text>No deduction otherwise allowable under this chapter shall be allowed for amounts paid or incurred
for any of the following items:</text>
<subparagraph id="H6E00E0D832294A229AF8B3BC57DAF314"><enum>(A)</enum><header>Activity</header><text>With respect to an activity which is of a type generally considered to constitute entertainment,
amusement, or recreation.</text>
</subparagraph><subparagraph id="HF1267B5CD59547A5B68C3FC7F0AE39BC"><enum>(B)</enum><header>Membership dues</header><text>With respect to membership in any club organized for business, pleasure, recreation or other social
purposes.</text>
</subparagraph><subparagraph id="H3A0E844E06284C098DC08A88F565C976"><enum>(C)</enum><header>Amenity</header><text display-inline="yes-display-inline">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.</text>
</subparagraph><subparagraph id="H69102078B1F6476BA58059926E126143"><enum>(D)</enum><header>Facility</header><text>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).</text>
</subparagraph><subparagraph commented="no" id="H4438187B30784941BD9DF3A9B3D38DFC"><enum>(E)</enum><header>Qualified transportation fringe and parking facility</header><text display-inline="yes-display-inline">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)).</text>
</subparagraph></paragraph><paragraph id="H9559FCAAADCC414E88409E1FE96172DA"><enum>(2)</enum><header>Special rules</header><text>For purposes of applying paragraph (1), an activity described in section 212 shall be treated as a
trade or business.</text>
</paragraph><paragraph id="HBC929A4D46564C3FBDF3032EE9BD3A48"><enum>(3)</enum><header>Regulations</header><text display-inline="yes-display-inline">Under the regulations prescribed to carry out this section, the Secretary shall include
regulations—</text>
<subparagraph id="HB38DACCF2E85471EBD8164FF7556F2E2"><enum>(A)</enum><text>defining entertainment, amenities, recreation, amusement, and facilities for purposes of this
subsection,</text>
</subparagraph><subparagraph id="HF8D1A038962E40D08FA3DBD3BC4C20D4"><enum>(B)</enum><text>providing for the appropriate allocation of depreciation and other costs with respect to facilities
used for parking, and</text>
</subparagraph><subparagraph id="HB79C1FA685F2481CBDFBC52B35757770"><enum>(C)</enum><text>specifying arrangements a primary purpose of which is the avoidance of this subsection.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H39457EAA359248A783CB257BEB57E1A6"><enum>(b)</enum><header>Exception for certain expenses includible in income of recipient</header>
<paragraph id="HFB0A349BAE2C4712A4892DFCFE3B70CD"><enum>(1)</enum><header>Expenses treated as compensation</header><text>Paragraph (2) of section 274(e) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H268EB5C481C340B4B34849219CFD558E" style="OLC">
<paragraph id="H1DB3B5C2741D491DAD2AE4E917903627"><enum>(2)</enum><header>Expenses treated as compensation</header><text>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).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H640442FFF8C54DEAA582BFA7DC822662"><enum>(2)</enum><header>Expenses includible in income of persons who are not employees</header><text>Paragraph (9) of section 274(e) is amended by striking <quote>to the extent that the expenses</quote> and inserting <quote>to the extent that the expenses do not exceed the amount of the expenses that</quote>.</text>
</paragraph></subsection><subsection id="H152E20EC2BAA4062AD8B66A4C7D0E057"><enum>(c)</enum><header>Exceptions for reimbursed expenses</header><text>Paragraph (3) of section 274(e) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HA0E8991DEC9A486ABAD2240A5B751429" style="OLC">
<paragraph id="H16BD1FF7DECB4D62909D733F134BBFDC"><enum>(3)</enum><header>Reimbursed expenses</header>
<subparagraph id="HF9665D859A064E5E9EAB34E4917E5618"><enum>(A)</enum><header>In general</header><text>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—</text>
<clause id="H8455744DA2DE4333818FE1CB00EC3373"><enum>(i)</enum><text>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</text>
</clause><clause id="HDA6AD279C07A4A5B8F5FD23E620AB4CE"><enum>(ii)</enum><text>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.</text>
</clause></subparagraph><subparagraph id="H4C3162130E2C48C0AE6D9B54BA1349AE"><enum>(B)</enum><header>Exception</header><text display-inline="yes-display-inline">Except as provided by the Secretary, subparagraph (A) shall not apply—</text>
<clause id="H506B05C9D240431187DF77BF30C236E3"><enum>(i)</enum><text display-inline="yes-display-inline">in the case of an arrangement in which the person other than the employer is an entity described in
section 168(g)(2)(A), or</text>
</clause><clause id="H3194F2668B0742B1B9C8185C8EBD2620"><enum>(ii)</enum><text>to any other arrangement designated by the Secretary as having the effect of avoiding the
limitation under subparagraph (A).</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H10B41F9C32284BA183F3DE48D4BFEAD6"><enum>(d)</enum><header>50-Percent limitation on meals and entertainment expenses</header><text>Subsection (n) of section 274 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HBE52B6F93CF7499E890AF6B59FCFBA2B" style="OLC">
<subsection id="HF8A429AF485D4A929148257CA1601F50"><enum>(n)</enum><header>Limitation on certain expenses</header>
<paragraph id="HDCAB786E38B0454CB32CA628A887C08B"><enum>(1)</enum><header>In general</header><text>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.</text>
</paragraph><paragraph id="H015AD1F8F231413699BA28AB97BCAA40"><enum>(2)</enum><header>Exceptions</header><text>Paragraph (1) shall not apply to any expense if—</text>
<subparagraph id="HA6CFB22CFC414348893A1E78A1E4687D"><enum>(A)</enum><text>such expense is described in paragraph (2), (3), (6), (7), or (8) of subsection (e),</text>
</subparagraph><subparagraph id="H6C07CDE0DE614748AAD5AD34F2B9D985"><enum>(B)</enum><text display-inline="yes-display-inline">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</text>
</subparagraph><subparagraph id="H94BF1C674D6646049C2FCFE3FDDF33AF"><enum>(C)</enum><text>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.</text>
</subparagraph></paragraph><paragraph id="HE1C784DE986945E09E0471C085F57EA2"><enum>(3)</enum><header>Special rule for individuals subject to Federal hours of service</header><text>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 <quote>80 percent</quote> for <quote>50 percent</quote>.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HFC392612894C4A88B6D1A0CF05A6D5D3"><enum>(e)</enum><header>Conforming amendments</header>
<paragraph id="H88D17811CB954609AB5E412B32A48EA4"><enum>(1)</enum><text>Section 274(d) is amended—</text>
<subparagraph id="HAE58BAFFE3AE466D8B90C80C9F7584C6"><enum>(A)</enum><text>by striking paragraph (2) and redesignating paragraphs (3) and (4) as paragraphs (2) and (3),
respectively, and</text>
</subparagraph><subparagraph id="HBAFAD882F5534B5B981930F2ADEB0FFA"><enum>(B)</enum><text>in the flush material following paragraph (3) (as so redesignated)—</text>
<clause id="HF760573C8EA84136B51FA721DD97E618"><enum>(i)</enum><text>by striking <quote>, entertainment, amusement, recreation, or</quote> in item (B), and</text>
</clause><clause id="H5588CEAA15B9407A8ECDDAF42C1F63D8"><enum>(ii)</enum><text>by striking <quote>(D) the business relationship to the taxpayer of persons entertained, using the facility or
property, or receiving the gift</quote> and inserting <quote>(D) the business relationship to the taxpayer of the person receiving the benefit</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="H42D13102AFE8404C842E66FDAD0BB93A"><enum>(2)</enum><text>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.</text>
</paragraph><paragraph id="HAB6E5978A1044571BD3CF33C5A9336C4"><enum>(3)</enum><text display-inline="yes-display-inline">Section 274(k)(2)(A) is amended by striking <quote>(4), (7), (8), or (9)</quote> and inserting <quote>(6), (7), or (8)</quote>.</text>
</paragraph><paragraph id="HE82C377B7EB643E1984D126E8125342E"><enum>(4)</enum><text>Section 274 is amended by striking subsection (l).</text>
</paragraph><paragraph id="H0BE0975C4ADE46069B59CB4C10EB1EB4"><enum>(5)</enum><text>Section 274(m)(1)(B)(ii) is amended by striking <quote>(4), (7), (8), or (9)</quote> and inserting <quote>(6), (7), or (8)</quote>.</text>
</paragraph></subsection><subsection id="H5276C825D22C45F68FEDCD7662F7504A"><enum>(f)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31,
2014.</text>
</subsection></section><section id="H71ADFA3E90174B569497D698D8518CCB"><enum>3127.</enum><header>Repeal of limitation on corporate acquisition indebtedness</header>
<subsection id="HA7D5109737884BEBB07FE08A27F11455"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part IX of subchapter B of chapter 1 is amended by striking section 279 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H20188C5767524818BFF2A518B2D6A927"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to interest paid or incurred with respect to
indebtedness incurred after December 31, 2014.</text>
</subsection></section><section id="HB0F2D89476F4402C926EFBC245BEF805"><enum>3128.</enum><header>Denial of deductions and credits for expenditures in illegal businesses</header>
<subsection id="HFD4BE0DAFF624BB8BA76A8A91943E75A"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 280E is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HD4E40231401F4ED7ACAC7A60014EFFAF" style="OLC">
<section id="HB720E7AD3C984172B190F0B7BBFF63F0"><enum>280E.</enum><header>Expenditures in connection with illegal businesses</header><text display-inline="no-display-inline">No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in
carrying on any trade or business if—</text>
<paragraph id="H8B8E88555BD84C0C905C728E2F246C11"><enum>(1)</enum><text display-inline="yes-display-inline">such trade or business (or the activities which comprise such trade or business) consists of
trafficking in controlled substances (within the meaning of schedule I and
II of the Controlled Substances Act) which is prohibited by Federal law or
the law of any State in which such trade or business is conducted, or</text>
</paragraph><paragraph id="HB480CDB12A9D4FBA940AE03FCC0152D9"><enum>(2)</enum><text display-inline="yes-display-inline">the carrying out of such trade or business is a felony under Federal law or the law of any State in
which such trade or business is conducted.</text></paragraph></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0145E58716FF414B9D64BFE93A5B99D1"><enum>(b)</enum><header>Clerical amendment</header><text>The table of sections for part IX of subchapter B of chapter 1 is amended by striking the item
relating to section 280E and inserting the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HB8030C20E95A46CBB1186A31A4FB4D94" style="OLC">
<toc container-level="quoted-block-container" idref="HD4E40231401F4ED7ACAC7A60014EFFAF" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HB720E7AD3C984172B190F0B7BBFF63F0" level="section">Sec. 280E. Expenditures in connection with illegal businesses.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC746233F383F44A89E9CC7F550EF1B16"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after the date of the
enactment of this Act in taxable years ending after the date of the
enactment of this Act.</text>
</subsection></section><section id="HAE860F87CC9E47DC9424021517C78DD2"><enum>3129.</enum><header>Limitation on deduction for FDIC premiums</header>
<subsection id="H59127D33252443CEB8DE5FCE770DC9F3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after
subsection (p) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H5CC0CD4654134333993446B68E36CBB3" style="OLC">
<subsection id="HB27F3D4B2E714760A67631BA76695610"><enum>(q)</enum><header>Disallowance of FDIC premiums paid by certain large financial institutions</header>
<paragraph id="H75FBF606CC3E486487C556FC0C3B4327"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">No deduction shall be allowed for the applicable percentage of any FDIC premium paid or incurred by
the taxpayer.</text>
</paragraph><paragraph id="H9F7E398DF9EA499F82E6EF1F14E19226"><enum>(2)</enum><header>Exception for small institutions</header><text display-inline="yes-display-inline">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.</text>
</paragraph><paragraph id="HDED8DDD531A64C15BE010503C54E4E68"><enum>(3)</enum><header>Applicable percentage</header><text>For purposes of this subsection, the term <quote>applicable percentage</quote> means, with respect to any taxpayer for any taxable year, the ratio (expressed as a percentage but
not greater than 100 percent) which—</text>
<subparagraph id="HABF1FA8256374F2D94BD84250F798879"><enum>(A)</enum><text>the excess of—</text>
<clause id="HB611634E8CA641B2BA3F80E8F4BC76AB"><enum>(i)</enum><text>the total consolidated assets of such taxpayer (determined as of the close of such taxable year),
over</text>
</clause><clause id="HE5DAC1680D354D2EA3354DA18A3CBC75"><enum>(ii)</enum><text>$10,000,000,000, bears to</text>
</clause></subparagraph><subparagraph id="HD8E3A08F29324928A438136393210519"><enum>(B)</enum><text>$40,000,000,000.</text>
</subparagraph></paragraph><paragraph id="HE65906118D65442092B78EFD9E95A04F"><enum>(4)</enum><header>FDIC premiums</header><text>For purposes of this subsection, the term <quote>FDIC premium</quote> means any assessment imposed under section 7(b) of the Federal Deposit Insurance Act (12 U.S.C.
1817(b)).</text>
</paragraph><paragraph id="H204AB5D8EA754665B30712587EBE6001"><enum>(5)</enum><header>Total consolidated assets</header><text>For purposes of this subsection, the term <quote>total consolidated assets</quote> has the meaning given such term under section 165 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (<external-xref legal-doc="usc" parsable-cite="usc/12/5365">12 U.S.C. 5365</external-xref>).</text>
</paragraph><paragraph id="HBB550AA7CD0A42ACAD23ECA853CD89D4"><enum>(6)</enum><header>Aggregation rule</header>
<subparagraph id="H6D1BF07041D44677B4A3078E07BBDCFD"><enum>(A)</enum><header>In general</header><text>Members of an expanded affiliated group shall be treated as a single taxpayer for purposes of
applying this subsection.</text>
</subparagraph><subparagraph id="H86B3325234A549FE9A91465C3DD10312"><enum>(B)</enum><header>Expanded affiliated group</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>expanded affiliated group</quote> means an affiliated group as defined in section 1504(a), determined—</text>
<clause id="HD89792C91BE34E2A81EEAC91A9192A45"><enum>(i)</enum><text>by substituting <quote>more than 50 percent</quote> for <quote>at least 80 percent</quote> each place it appears, and</text>
</clause><clause id="H416B30FA1E9B4895BE801958B0FC2A13"><enum>(ii)</enum><text display-inline="yes-display-inline">without regard to paragraphs (2) and (3) of section 1504(b).</text></clause><continuation-text continuation-text-level="subparagraph">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).</continuation-text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF9A46C1620B746D6B353C921CDF18FC9"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H5903E9864449421B889CC82CC772BDF2"><enum>3130.</enum><header>Repeal of percentage depletion</header>
<subsection id="HF5C7827A1BAA4328934E69BC697D10FD"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part I of subchapter I of chapter 1 is amended by striking sections 613 and 613A (and by striking
the items relating to such sections in the table of sections for such
part).</text>
</subsection><subsection id="H4AC10F285E2242D1B1558E20E10EF647"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H5EB9E9A8F6644A40818D141B9B2F9DAA"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HC084B0951BA0419D9CC50276B4B2E4F1"><enum>(A)</enum><text>Such part is amended by redesignating section 614 as section 613 (and, in the table of sections for
such part, by redesignating the item relating to section 614 as an item
relating to section 613).</text>
</subparagraph><subparagraph id="H132C378BBDD94837B2ECCCF1F71C8C67" indent="up1"><enum>(B)</enum><text>Clauses (iv) and (v) of section 465(c)(2)(A) are each amended by striking <quote>section 614</quote> and inserting <quote>section 613</quote>.</text>
</subparagraph><subparagraph id="HA51ADCE55D854B5C98B373E6792CFF0B" indent="up1"><enum>(C)</enum><text>Section 1016(e) is amended by striking <quote>section 614</quote> and inserting <quote>section 613</quote>.</text>
</subparagraph><subparagraph id="HFC687C3239F34D939427B69BAB11B354" indent="up1"><enum>(D)</enum><text>Section 1254(a)(3) is amended by striking <quote>section 614</quote> and inserting <quote>section 613</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H659567F56CB94FF9B4E97EF3A9C44B5E"><enum>(2)</enum><text>Section 45(c)(4) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HE7A3381740CD4248A7391201D80D4AF3" style="OLC">
<paragraph id="HC1E3398D0D124C0AB7D0172014DA2F17"><enum>(4)</enum><header>Geothermal energy</header>
<subparagraph id="H6FED5577D77D439ABAC4DECB01EE3C4C"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>geothermal energy</quote> means energy derived from a geothermal deposit.</text>
</subparagraph><subparagraph id="H31C9717ADE5144A9A336A2E466E776FE"><enum>(B)</enum><header>Geothermal deposit</header><text>The term <quote>geothermal deposit</quote> means a geothermal reservoir consisting of natural heat which is stored in rocks or in an aqueous
liquid or vapor (whether or not under pressure).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HF4D2DDC861194B74BEEE1840A9DD5614"><enum>(3)</enum><text>Section 48(a)(3)(A)(iii) is amended by striking <quote>section 613(e)(2)</quote> and inserting <quote>section 45(c)(4)(B)</quote></text>
</paragraph><paragraph id="H210A4998254E4B43A8D1D56B05CB0509"><enum>(4)</enum><text display-inline="yes-display-inline">Section 381(c) is amended by striking paragraph (18).</text>
</paragraph><paragraph id="HF376A917F8E6436B98CB91DFB8A392CE"><enum>(5)</enum><text>Section 465(c)(1)(E) is amended by striking <quote>section 613(e)(2)</quote> and inserting <quote>section 45(c)(4)(B)</quote>.</text>
</paragraph><paragraph id="H07AC071266A645DA9337DA6FCB9C19BF"><enum>(6)</enum><text>Section 468(d)(3) is amended by striking <quote>section 614</quote> and inserting <quote>section 613</quote>.</text>
</paragraph><paragraph id="H8B76B47755BF403A906FD6710F697388"><enum>(7)</enum><text display-inline="yes-display-inline">Section 611(a) is amended by striking the second sentence.</text>
</paragraph><paragraph id="H2F299598FE8A4F1E89FE027ADB5D0BE8"><enum>(8)</enum><text>Section 613(d), as redesignated by paragraph (1), is amended by striking <quote>includes only</quote> and all that follows and inserting <quote>includes only an interest burdened by the costs of production.</quote>.</text>
</paragraph><paragraph commented="no" id="HD35FFE746A0341938A7691124E4D3942"><enum>(9)</enum><text>Section 636(a) is amended by striking <quote>(for purposes of section 613)</quote>.</text>
</paragraph><paragraph id="HBDF0BCE6BA1E40D3A9A3F0039082B555"><enum>(10)</enum><text>Section 636(d) is amended by striking <quote>section 614(a)</quote> and inserting <quote>section 613(a)</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H590DD82EF1CB4AC9BDA7FA525595E529"><enum>(11)</enum><text display-inline="yes-display-inline">Section 705(a) is amended—</text>
<subparagraph commented="no" id="H9D7167FD3F2347B0905FA24E1414AAC3"><enum>(A)</enum><text>in paragraph (1), by adding <quote>and</quote> at the end of subparagraph (A), by striking <quote>; and</quote> at the end of subparagraph (B) and inserting a period, and by striking subparagraph (C),</text>
</subparagraph><subparagraph commented="no" id="H7E921075C5AF435D8D8B1784D4D4841D"><enum>(B)</enum><text>in paragraph (2), by striking <quote>; and</quote> at the end of subparagraph (B) and inserting a period, and</text>
</subparagraph><subparagraph commented="no" id="H81B012FCDFBA43068A2C0F173769B986"><enum>(C)</enum><text>by striking paragraph (3).</text>
</subparagraph></paragraph><paragraph id="HC085F96FFBFB404A930921B1835D9DD1"><enum>(12)</enum><text>Section 901(e)(1)(A) is amended by striking <quote>(or, if smaller</quote> and all that follows through <quote>under section 613)</quote>.</text>
</paragraph><paragraph commented="no" id="HC45A50B6DADD42B183222AFCCD3117BC"><enum>(13)</enum><text>Section 993(c)(2)(C) is amended by inserting <quote>(as each such section was in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>section 613 or 613A</quote>.</text>
</paragraph><paragraph id="H9ADC0875999C410C8D5B82FC0F5AE295"><enum>(14)</enum><text>Section 1202(e)(3)(D) is amended by inserting <quote>(as each such section was in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>section 613 or 613A</quote>.</text>
</paragraph><paragraph commented="no" id="HB686B9301CDA42DAA2CF51DC7969C3E9"><enum>(15)</enum><text>Section 1367(a) is amended—</text>
<subparagraph commented="no" id="H73C5E68CF11349F0B77DC6613254B403"><enum>(A)</enum><text>in paragraph (1), by adding <quote>and</quote> at the end of subparagraph (A), by striking <quote>, and</quote> at the end of subparagraph (B) and inserting a period, and by striking subparagraph (C), and</text>
</subparagraph><subparagraph commented="no" id="HCFBF35C53D1B4CF5A2C4C67637CDEA87"><enum>(B)</enum><text>in paragraph (2), by adding <quote>and</quote> at the end of subparagraph (C), by striking <quote>, and</quote> at the end of subparagraph (D) and inserting a period, and by striking subparagraph (E).</text>
</subparagraph></paragraph><paragraph id="H4639A9C19957439490E72C54A7D29913"><enum>(16)</enum><text>Section 1446(c) is amended by striking paragraph (2) and by redesignating paragraph (3) as
paragraph (2).</text>
</paragraph><paragraph id="H0DA4FBC218A841ED8187FAE26473751D"><enum>(17)</enum><text>Section 4612(a)(7) is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>section 613</quote>.</text>
</paragraph><paragraph id="H23D05DC32AA64A628DAA7EA60FB37FA8"><enum>(18)</enum><text>Section 4940(c)(3)(B) is amended—</text>
<subparagraph id="H9ED8069D67924B9C8C19044B9FD80430"><enum>(A)</enum><text>by striking clause (ii), and</text>
</subparagraph><subparagraph id="HBAC99BCD71184E00A690C3C49CA5011A"><enum>(B)</enum><text>by striking all that precedes <quote>The deduction provided</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H8870C12840B840D6AE1A3A1E7D04B0D1" style="OLC">
<subparagraph id="H4C0FEBD266664828AEDBE88BC4E76037"><enum>(B)</enum><header>Modifications</header><text display-inline="yes-display-inline">For purposes of subparagraph (A), the deduction provided</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="HF5757BDA493E4313B609B197DC0FF6FB"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H87FEA7AD4602450A86483FDD3F8E353C"><enum>3131.</enum><header>Repeal of passive activity exception for working interests in oil and gas property</header>
<subsection id="H58362F9A33F14AB4B4E7C4F978AA521B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (c) of section 469 is amended by striking paragraph (3).</text>
</subsection><subsection id="H474DEAA328E74C8593E94081417476A2"><enum>(b)</enum><header>Conforming amendments</header><text display-inline="yes-display-inline">Section 469 is amended—</text>
<paragraph id="HC5959E90EF9747CD83CC1E440B7AEF0C"><enum>(1)</enum><text>by striking paragraph (4) and by redesignating paragraphs (5), (6), and (7) as paragraphs (3), (4),
and (5), respectively, and</text>
</paragraph><paragraph id="H36D0960D6C804BE5B28E7328B2811DAC"><enum>(2)</enum><text display-inline="yes-display-inline">in paragraph (2)—</text>
<subparagraph id="H5588FE73F85448928187B1D0D2746BCF"><enum>(A)</enum><text>by striking <quote>paragraph (7)</quote> and inserting <quote>paragraph (5)</quote>, and</text>
</subparagraph><subparagraph id="HD286E1A9457E4C3D8289D9DE74BFE793"><enum>(B)</enum><text>by inserting <quote>, without regard to whether or not the taxpayer materially participates in the activity</quote> before the period at the end.</text>
</subparagraph></paragraph></subsection><subsection id="H0D4CDB01E3FC41D7BEBA6766968008AF"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31,
2014.</text>
</subsection></section><section id="H8833400C40174D55A7069C96807B5B73"><enum>3132.</enum><header>Repeal of special rules for gain or loss on timber, coal, or domestic iron ore</header>
<subsection id="H0434587FB3504E52B52FCA868C9A5E99"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter I of chapter 1 is amended by striking part III (and by striking the item relating to
such part in the table of parts for such subchapter).</text>
</subsection><subsection id="H2DB0067827624B00A45314A4066D864A"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H9C31B309E1D24AD1BF417CFA6B4E46B8"><enum>(1)</enum><text display-inline="yes-display-inline">Section 512(b)(5) is amended by striking the last sentence.</text>
</paragraph><paragraph id="H7CA09B8E8F6D4B1DAF0602C2D931D69B"><enum>(2)</enum><text>Section 871(a)(1)(B) is amended by striking <quote>gains described in section 631(b) or (c), and</quote>.</text>
</paragraph><paragraph id="H98FC92D0B643426388FD0D395AA2B31B"><enum>(3)</enum><text>Section 871(d)(1)(A) is amended—</text>
<subparagraph id="H82AEECFD3C1D4ED08364E8DB763821FB"><enum>(A)</enum><text>by striking <quote>, (ii) rents</quote> and inserting <quote>and (ii) rents</quote>, and</text>
</subparagraph><subparagraph id="H2043C0F038A44B5D8A6034CCF1ECA02C"><enum>(B)</enum><text>by striking <quote>, and (iii) gains described in section 631(b) or (c)</quote>.</text>
</subparagraph></paragraph><paragraph id="H8666F34880E54F129A642CDB31F1EC74"><enum>(4)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HD0270266C341494DAABB17269974E4B9"><enum>(A)</enum><text>Section 881(a) is amended by striking paragraph (2) and by redesignating paragraphs (3) and (4) as
paragraphs (2) and (3), respectively.</text>
</subparagraph><subparagraph id="HB6CF7ED095184A5B988C20A147183B76" indent="up1"><enum>(B)</enum><text>Section 1442(a) is amended—</text>
<clause id="HCA27BA4358464467A9A118EFC2BE013C"><enum>(i)</enum><text>by striking <quote>881(a)(3) and (4)</quote> and inserting <quote>881(a)(2) and (3)</quote>,</text>
</clause><clause id="H558D9394FAB0485C9DF42B60A5BBA226"><enum>(ii)</enum><text>by striking <quote>881(a)(3),</quote> and inserting <quote>881(a)(2),</quote>, and</text>
</clause><clause id="H5AD941360246437E90BA31755C13A30F"><enum>(iii)</enum><text>by striking <quote>881(a)(4)</quote> and inserting <quote>881(a)(3)</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="H0DC3791295DC45F2982D6203D0C7D841"><enum>(5)</enum><text>Section 882(d)(1)(A) is amended—</text>
<subparagraph id="H018CF862B30D4C6D92D467B8D08F562B"><enum>(A)</enum><text>by striking <quote>, (ii) rents</quote> and inserting <quote>and (ii) rents</quote>, and</text>
</subparagraph><subparagraph id="HA0B1A541F33F406085F3CF82322FBC29"><enum>(B)</enum><text>by striking <quote>, and (iii) gains described in section 631(b) or (c)</quote>.</text>
</subparagraph></paragraph><paragraph id="H53A090A0671345AABA8E8BAA66EA3C9B"><enum>(6)</enum><text>Section 1231(b) is amended by striking paragraph (2).</text>
</paragraph><paragraph id="HDFA4C2CF49044542A76C8C7CFC0C1B82"><enum>(7)</enum><text>Section 1402(a)(3) is amended by inserting <quote>or</quote> at the end of subparagraph (A) and by striking subparagraph (B) and redesignating subparagraph (C)
as subparagraph (B).</text>
</paragraph><paragraph id="HB221DF91FA144F0AADF792780DBDAE30"><enum>(8)</enum><text>Section 1441 is amended—</text>
<subparagraph id="H8AF5A59CD7E8425CA280D4108CC887C1"><enum>(A)</enum><text>in subsection (b), by striking <quote>, gains described in section 631(b) or (c)</quote>, and</text>
</subparagraph><subparagraph id="H17F5D88BEF0141E88591351388E340E8"><enum>(B)</enum><text>in subsection (c)(5), by striking <quote>gains described in section 631(b) or (c), gains subject to tax under section 871(a)(1)(D),</quote> and inserting <quote>gains subject to tax under section 871(a)(1)(D)</quote>.</text>
</subparagraph></paragraph><paragraph id="H01063E67FBF04CC2A43DEBABD1EEBFDC"><enum>(9)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HDD55CB79C12347F4977B5216261A5644"><enum>(A)</enum><text>Part IX of subchapter B of chapter 1 is amended by striking section 272 (and by striking the item
relating to such section in the table of sections for such subpart).</text>
</subparagraph><subparagraph id="HC6A1321A844742AEBCF9C14A91A892D8" indent="up1"><enum>(B)</enum><text>Section 1016(a) is amended by striking paragraph (15).</text>
</subparagraph></paragraph></subsection><subsection id="HE4CB72FB58E44A98B7A484E71AF92734"><enum>(c)</enum><header>Effective date</header>
<paragraph id="HFE4378BE86B54470977F74BDE206A3B3"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="HEF953D57EB2D4C9CB8C7C3A7E4F69C13"><enum>(2)</enum><header>Basis adjustments</header><text>The amendment made by subsection (b)(9)(B) shall apply to deductions determined for taxable years
beginning after December 31, 2014.</text>
</paragraph></subsection></section><section id="H2D545AECA5394931BD2CE82DA2FA2B30"><enum>3133.</enum><header>Repeal of like-kind exchanges</header>
<subsection id="H5A66BB22469A4D56A670201CB0636604"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part III of subchapter O of chapter 1 is amended by striking section 1031 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H4EDBCD8C946446B29338792FD1CC660B"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HAF062198492547758FEDE25B198B0D37"><enum>(1)</enum><text>Section 121(d)(10) is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>section 1031</quote>.</text>
</paragraph><paragraph id="H296F295BE5E34FAA8A12A5C8D6BF2821"><enum>(2)</enum><text>Section 197(f)(2)(B)(i) is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>1031</quote>.</text>
</paragraph><paragraph id="HDD476CF6C8F04BDB898A8AF1016A0EDC"><enum>(3)</enum><text>Section 453(f) is amended by striking paragraph (6).</text>
</paragraph><paragraph id="H778B1995B2434F419226BE124E067725"><enum>(4)</enum><text display-inline="yes-display-inline">Section 470(e)(4) is amended—</text>
<subparagraph display-inline="no-display-inline" id="HE1123423F3454652B27CAC9DDE50E156"><enum>(A)</enum><text>by striking <quote>Sections 1031(a) and</quote> in subparagraph (A) and inserting <quote>Section</quote>,</text>
<clause id="HA2CBA84676C54A22BE93F951CF10CEA1" indent="up1"><enum>(i)</enum><text>by striking <quote>1031 or</quote> in subparagraph (B), and</text>
</clause><clause id="HAFB5A7A849B040C69A24DE3F4CBE0EA7" indent="up1"><enum>(ii)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">sections 1031 and</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text level="paragraph" style="OLC">section</header-in-text></quote>.</text>
</clause></subparagraph></paragraph><paragraph id="H59E7B44163284A7187F359715E53ABB9"><enum>(5)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HB49ED9CDA47846CAB0E9CA69C2912B45"><enum>(A)</enum><text>Section 501(c)(12)(C)(v) is amended by striking <quote>asset exchange or conversion transaction</quote> and inserting <quote>specified involuntary conversion</quote>.</text>
</subparagraph><subparagraph id="HFFA7C031A8F94FA89B84597BECE016B2" indent="up1"><enum>(B)</enum><text>Section 501(c)(12)(G) is amended—</text>
<clause id="HD91AD0EE51AD42B4ACF47FF22114C165"><enum>(i)</enum><text>by striking <quote>asset exchange or conversion transaction</quote> and inserting <quote>specified involuntary conversion</quote>,</text>
</clause><clause id="H37569F27FDB6479FB0893BA0683F616D"><enum>(ii)</enum><text>by striking <quote>voluntary exchange or</quote>, and</text>
</clause><clause id="HDD8718C432FB4E3CBA1C7872E16E8552"><enum>(iii)</enum><text>by striking <quote>1031 or</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="HEEFBE2ACE3724D58B0C2B56D8AF0A4FC"><enum>(6)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H8A07488B77744A9B841FDB35E1E3298E"><enum>(A)</enum><text>Section 704(c) is amended by striking paragraph (2) and by redesignating paragraph (3) as paragraph
(2).</text>
</subparagraph><subparagraph id="H83117E1BB29B4592BAC4AA4BBFAA8B71" indent="up1"><enum>(B)</enum><text>Section 704(c)(2), as so redesignated, is amended by striking <quote>or (2)</quote>.</text>
</subparagraph></paragraph><paragraph id="HA8DA2684B7714148903EB8168E3F1996"><enum>(7)</enum><text>Section 857(e)(2) is amended by striking subparagraph (B) and by redesignating subparagraphs (C)
and (D) as subparagraphs (B) and (C), respectively.</text>
</paragraph><paragraph id="HA4470938F1394CDA94E278D0F19F2E25"><enum>(8)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HE2EE7AAAEF8149A988E386697A2191F5"><enum>(A)</enum><text>Section 1035 is amended by striking subsection (d) and inserting the following new subsections:</text>
<quoted-block display-inline="no-display-inline" id="H5B7602199C7842BAA65B8AEE79B53702" style="OLC">
<subsection id="H448655F40B874DD3B4363DE1D2CD18A9"><enum>(d)</enum><header>Gain from exchanges not solely in kind</header><text display-inline="yes-display-inline">If an exchange would be within the provisions of subsection (a), of section 1036(a), or of section
1037(a), if it were not for the fact that the property received in
exchange consists not only of property permitted by such provisions to be
received without the recognition of gain, but also of other property or
money, then the gain, if any, to the recipient shall be recognized, but in
an amount not in excess of the sum of such money and the fair market value
of such other property.</text>
</subsection><subsection id="HB50BD840AAAC4492A96E213851417451"><enum>(e)</enum><header>Loss from exchanges not solely in kind</header><text>If an exchange would be within the provisions of subsection (a), of section 1036(a), or of section
1037(a), if it were not for the fact that the property received in
exchange consists not only of property permitted by such provisions to be
received without the recognition of gain or loss, but also of other
property or money, then no loss from the exchange shall be recognized.</text>
</subsection><subsection id="HBD57407E10B14B739F1BAB0EFD1CAD01"><enum>(f)</enum><header>Basis</header><text display-inline="yes-display-inline">If property was acquired on an exchange described in this section, section 1036(a), or section
1037(a), then the basis shall be the same as that of the property
exchanged, decreased in the amount of any money received by the taxpayer
and increased in the amount of gain or decreased in the amount of loss to
the taxpayer that was recognized on such exchange. If the property so
acquired consisted in part of the type of property permitted by this
section, section 1036(a), or section 1037(a), to be received without the
recognition of gain or loss, and in part of other property, the basis
provided in this subsection shall be allocated between the properties
(other than money) received, and for the purpose of the allocation there
shall be assigned to such other property an amount equivalent to its fair
market value at the date of the exchange. For purposes of this section and
section 1036(a), where as part of the consideration to the taxpayer
another party to the exchange assumed (as determined under section 357(d))
a liability of the taxpayer, such assumption shall be considered as money
received by the taxpayer on the exchange.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H611F41161AC242E38ACB89A0800A25AD" indent="up1"><enum>(B)</enum><text>Section 1036(c) is amended—</text>
<clause id="H036147A61FDF49E2B183DB9B6550CC76"><enum>(i)</enum><text>in paragraph (1), by striking <quote>subsections (b) and (c) of section 1031</quote> and inserting <quote>subsections (d) and (e) of section 1035</quote>, and</text>
</clause><clause id="H6A1E6A63B0D6426D90BEBE82F974E5F5"><enum>(ii)</enum><text>in paragraph (2), by striking <quote>subsection (d) of section 1031</quote> and inserting <quote>subsection (f) of section 1035</quote>.</text>
</clause></subparagraph><subparagraph id="HA5D354A398354E5E99C0FA3ACDD95C54" indent="up1"><enum>(C)</enum><text>Section 1037(c) is amended—</text>
<clause id="HCED6F1A487C4451693CA6342D20E2310"><enum>(i)</enum><text>in paragraph (1), by striking <quote>subsections (b) and (c) of section 1031</quote> and inserting <quote>subsections (d) and (e) of section 1035</quote>, and</text>
</clause><clause id="H27F0A2BA335E48FBB4DF24B317414004"><enum>(ii)</enum><text>in paragraph (2), by striking <quote>subsection (d) of section 1031</quote> and inserting <quote>subsection (f) of section 1035</quote>.</text>
</clause></subparagraph><subparagraph id="H5AE97B338B51467281DA86FD6AC82C7C" indent="up1"><enum>(D)</enum><text>Section 83(g) is amended by striking <quote>section 1031</quote> and inserting <quote>section 1035</quote>.</text>
</subparagraph><subparagraph id="HA75783FE8D2B4CB0B22CD8C96302E7C0" indent="up1"><enum>(E)</enum><text>Section 424(b) is amended by striking <quote>section 1031</quote> and inserting <quote>section 1035</quote>.</text>
</subparagraph><subparagraph id="HA57DBC497AFB4E26AC40B71343781F78" indent="up1"><enum>(F)</enum><text>Section 424(c)(1)(B) is amended by striking <quote>section 1031</quote> and inserting <quote>section 1035</quote>.</text>
</subparagraph></paragraph><paragraph id="H49B87381DAFE4F8696520EF3BAC1ED1B"><enum>(9)</enum><text>Section 1060(c) is amended by striking the second sentence thereof.</text>
</paragraph><paragraph id="H57665B847B62470C8548378E29F87ECB"><enum>(10)</enum><text>Section 1245(b)(4) is amended—</text>
<subparagraph id="H8BEA0DA888B649378C867A5D3FFD3BD7"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote><header-in-text level="paragraph" style="OLC">Like kind exchanges; involuntary</header-in-text></quote> and inserting <quote><header-in-text level="paragraph" style="OLC">Involuntary</header-in-text></quote>, and</text>
</subparagraph><subparagraph id="H45D3585C804640D6BFB3A25AD67512FA"><enum>(B)</enum><text>by striking <quote>1031 or</quote>.</text>
</subparagraph></paragraph><paragraph id="H669F56DF76814131AC981AABC9B3D7BF"><enum>(11)</enum><text>Section 1250(d)(4) is amended—</text>
<subparagraph id="H0BF782A238624F0B98F873286A4F88A3"><enum>(A)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">Like kind exchanges; involuntary</header-in-text></quote> and inserting <quote><header-in-text level="paragraph" style="OLC">Involuntary</header-in-text></quote>,</text>
</subparagraph><subparagraph id="H67013E5A858B47EAA51CE8BD8DFED520"><enum>(B)</enum><text>by striking <quote>1031 or</quote> in subparagraph (A), and</text>
</subparagraph><subparagraph id="H46AF7FD0277F4B4EA09B76A3D5ABF23F"><enum>(C)</enum><text>by striking <quote>1031 or</quote> in subparagraph (E).</text>
</subparagraph></paragraph><paragraph id="HD3816E2999DB40AB956538C6958DF1CC"><enum>(12)</enum><text display-inline="yes-display-inline">Section 2032A(e)(14)(C) is amended—</text>
<subparagraph id="HEF620E3CBC3A4F0FB8E8D2123F6D07AC"><enum>(A)</enum><text>in clause (i)(I), by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>section 1031</quote>, and</text>
</subparagraph><subparagraph id="H5A311DDFA63A4DAC81667AD6FD162D0A"><enum>(B)</enum><text>in clause (ii)(I), by inserting <quote>(as so in effect)</quote> after <quote>section 1031</quote>.</text>
</subparagraph></paragraph><paragraph id="HC3B8FD6FFCFC416F9F26713F1353E1A9"><enum>(13)</enum><text>Section 4940(c)(4) is amended by striking subparagraph (D).</text>
</paragraph></subsection><subsection id="H1375293FD4D44515AC8E21A3ED767F44"><enum>(c)</enum><header>Effective date</header>
<paragraph id="HDD7F486280C14CADABB9181923814473"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to transfers after December 31, 2014.</text>
</paragraph><paragraph id="HFE7AD9B8C50A4B1B8CD1FACCB5E4F078"><enum>(2)</enum><header>Exception for transfers pursuant to binding contracts</header><text>Notwithstanding paragraph (1), the amendments made by this section shall not apply to any transfer
if—</text>
<subparagraph id="H64EF361110CE43329CB5567BF4961A51"><enum>(A)</enum><text>such transfer is pursuant to a written binding contract entered into before January 1, 2015, and</text>
</subparagraph><subparagraph id="H76B24003176A4E07BC31382C0358DB9E"><enum>(B)</enum><text>the exchange of which such transfer is a part is completed before January 1, 2017.</text>
</subparagraph></paragraph></subsection></section><section id="H935666216DBD4821958BAA957B0FED0F"><enum>3134.</enum><header>Restriction on trade or business property treated as similar or related in service to involuntarily
converted property in disaster areas</header>
<subsection id="H2D140ED7166F4F20910F9300BD749AAD"><enum>(a)</enum><header>Class life of replacement property not To exceed converted property</header><text display-inline="yes-display-inline">Section 1033(h)(2) is amended by inserting <quote>if the class life of such tangible property does not exceed the class life of the property so
converted</quote> before the period at the end.</text>
</subsection><subsection id="H66658141428D4BD48B933BF4C0C45E64"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to disasters declared after December 31, 2014.</text>
</subsection></section><section id="H6B45381DB60F4C8793A149A195EBE863"><enum>3135.</enum><header>Repeal of rollover of publicly traded securities gain into specialized small business investment
companies</header>
<subsection id="H207D1661A8D24D77B73E9BC8E77682BE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H2A7248F55E4A453283585A0B577229C3"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HDF884328415B45FD8204AAA48AF116D8"><enum>(1)</enum><text>Section 45D(c)(2)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HC9B6D1007DB24B70856A5B965FCF0BE4" style="OLC">
<subparagraph id="H6C51190D8474477FAABD26C07C7261E5"><enum>(A)</enum><text display-inline="yes-display-inline">any partnership or corporation which is licensed by the Small Business Administration under section
301(d) of the Small Business Investment Act of 1958 (as in effect on May
13, 1993), and</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HA23F450D3FD94954A8202A20DC1A6BEC"><enum>(2)</enum><text>Section 1016(a)(23) is amended—</text>
<subparagraph id="HA5CFBE11B7924FD487434644083DC73A"><enum>(A)</enum><text>by striking <quote>1044,</quote>, and</text>
</subparagraph><subparagraph id="H3311B45D2AAA4B4A936E3334532C3191"><enum>(B)</enum><text>by striking <quote>1044(d),</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H90A2018A84964B509669F61A6E61168C"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to sales after December 31, 2014.</text>
</subsection></section><section id="H3C19B4C9DEBD4BE2AF7C8440AB03828D"><enum>3136.</enum><header>Termination of special rules for gain from certain small business stock</header>
<subsection id="H8F5F244999344EEBAD9BC4F43E6311AC"><enum>(a)</enum><header>Termination of partial exclusion</header><text display-inline="yes-display-inline">Section 1202 is amended—</text>
<paragraph id="H225161E9054649F1BFF50ABAE9ED5EEA"><enum>(1)</enum><text>by inserting <quote>and before the date of the enactment of the <short-title>Tax Reform Act of 2014</short-title></quote> after <quote>Revenue Reconciliation Act of 1993</quote> in subsection (c)(1), and</text>
</paragraph><paragraph id="HD337F734E99A4780AD205151408A9C70"><enum>(2)</enum><text>by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HCEC8BB9CBE9746A4B01397E9C282778F" style="OLC">
<subsection id="H11D773B05CE54265BD7AE829572DA612"><enum>(l)</enum><header>Termination</header><text display-inline="yes-display-inline">For termination with respect to qualified small business stock issued after the date of the
enactment of the <short-title>Tax Reform Act of 2014</short-title>, see subsection (c)(1).</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H243835CCC2C84D2FB69B6E895040DF8C"><enum>(b)</enum><header>Repeal of rollover rules</header>
<paragraph id="HA08F8CDCED0C44CFBD50177E0E5024FA"><enum>(1)</enum><header>In general</header><text>Part III of subchapter O of chapter 1 is amended by striking section 1045 (and by striking the item
relating to such section in the table of sections of such part).</text>
</paragraph><paragraph id="H3A81FDB718464C31BF21972379CDCEDF"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="H1E663C05AD214B388A8E080E6ED7E589"><enum>(A)</enum><text>Section 1016(a)(23) is amended—</text>
<clause id="H9AEC68EF871B4947ADB57ADFAD9BB973"><enum>(i)</enum><text>by striking <quote>1045,</quote>, and</text>
</clause><clause id="H9B861D73415C4DD1A79E3C5B7D5B2A4D"><enum>(ii)</enum><text>by striking <quote>1045(b)(3),</quote>.</text>
</clause></subparagraph><subparagraph id="HE18B2BBD507E486CAEC90A00A99C1A3D"><enum>(B)</enum><text>Section 1223 is amended by striking paragraph (13).</text>
</subparagraph></paragraph></subsection><subsection id="HEE6015505C894ABA9D39FE281084A4E4"><enum>(c)</enum><header>Effective dates</header>
<paragraph id="H3354327386F049F98A503D56D2BEE207"><enum>(1)</enum><header>Termination of partial exclusion</header><text>The amendments made by subsection (a) shall apply to sales and exchanges after the date of the
enactment of this Act.</text>
</paragraph><paragraph id="HC754F8BDAA4947F28331AB60DFB95D09"><enum>(2)</enum><header>Repeal of rollover rules</header>
<subparagraph id="HCD9B5C9C38394EC7AF24AEABAFAFDC7D"><enum>(A)</enum><header>In general</header><text>Except as provided in subparagraph (B), the amendments made by subsection (b) shall apply to sales
after the date of the enactment of this Act.</text>
</subparagraph><subparagraph id="H60EEA7F597D24574811FC53D5FE9D9B6"><enum>(B)</enum><header>Savings provision</header><text>The amendments made by subsection (b)(2) shall not apply with respect to property the acquisition
of which was before the date of the enactment of this Act.</text>
</subparagraph></paragraph></subsection></section><section id="H5493D59AC0FE4AA99A60F10E5EC1BCF1"><enum>3137.</enum><header>Certain self-created property not treated as a capital asset</header>
<subsection id="H613B26178A8C4D3580ED46AF4A9BE28B"><enum>(a)</enum><header>Patents, etc</header><text display-inline="yes-display-inline">Section 1221(a)(3) is amended by inserting <quote>a patent, invention, model or design (whether or not patented), a secret formula or process,</quote> before <quote>a copyright</quote>.</text>
</subsection><subsection id="H283766942E5D404DA984E7F1B94BBC3A"><enum>(b)</enum><header>Self-Created musical works</header><text>Section 1221(b) is amended by striking paragraph (3).</text>
</subsection><subsection id="H0986B3DC60E047539CD2A1F086107898"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to dispositions after December 31, 2014.</text>
</subsection></section><section id="H40EA4115C89F4E4AAF6B307310B0F6EA"><enum>3138.</enum><header>Repeal of special rule for sale or exchange of patents</header>
<subsection id="HA15A943A492B46D9A1A3C9462A2EB888"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H6CB5C00BF89F4FA4B3F4981F79868CFE"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HD66BBCAA836744898B8066DF7BDD9D4A"><enum>(1)</enum><text display-inline="yes-display-inline">Section 483(d) is amended by striking paragraph (4).</text>
</paragraph><paragraph id="H79DCD151450B46C99E6A2764A90985E0"><enum>(2)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H7226584F82B34F2FA5FC20425644B71F"><enum>(A)</enum><text>Section 871(a)(1), as amended by the preceding provisions of this Act, is amended by striking
subparagraph (B) and by redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively.</text>
</subparagraph><subparagraph id="H857781FECD02474198CDD6B3B17CB5DD" indent="up1"><enum>(B)</enum><text>Section 871(g)(3) is amended by striking <quote>(a)(1)(C)</quote> and inserting <quote>(a)(1)(B)</quote>.</text>
</subparagraph><subparagraph id="HF64B30E0B0E34461A546E094BE466415" indent="up1"><enum>(C)</enum><text>Subsections (h)(1) and (i)(1) of section 871 are each amended by striking <quote>(1)(C)</quote> and inserting <quote>(1)(B)</quote>.</text>
</subparagraph><subparagraph id="HD57E733CF4414677BEB85442A5793C60" indent="up1"><enum>(D)</enum><text>Section 1441, as amended by the preceding provisions of this Act, is amended—</text>
<clause id="H24B474D011AD4BD08F93A84AA8C1B179"><enum>(i)</enum><text>in subsections (b) and (c)(8), by striking <quote>871(a)(1)(C)</quote> and inserting <quote>871(a)(1)(B)</quote>, and</text>
</clause><clause id="H39C38BC664924FFE9101D677986C0086"><enum>(ii)</enum><text>in subsections (b) and (c)(5), by striking <quote>871(a)(1)(D)</quote> and inserting <quote>871(a)(1)(C)</quote>.</text>
</clause></subparagraph><subparagraph id="H2AFA2B0EA62E46AABFFB989E20753446" indent="up1"><enum>(E)</enum><text>Section 1442(a), as amended by the preceding provisions of this Act, is amended—</text>
<clause id="H38F7A5B5BBB740AEA3B5B7C32DE6809A"><enum>(i)</enum><text>by striking <quote>871(a)(1)(C) and (D)</quote> and inserting <quote>871(a)(1)(B) and (C)</quote>, and</text>
</clause><clause id="H170EA220943C4BB59D2D5616F77F92D5"><enum>(ii)</enum><text>by striking <quote>871(a)(1)(D)</quote> and inserting <quote>871(a)(1)(C)</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="HC5926ACCEFAE416C9A844974054DABE7"><enum>(3)</enum><text>Section 901(l)(5) is amended by striking <quote>without regard to section 1235 or any similar rule</quote> and inserting <quote>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</quote>.</text>
</paragraph><paragraph id="H812C6376DE91408996E638FE42CE457F"><enum>(4)</enum><text>Section 1274(c)(3) is amended by striking subparagraph (E) and redesignating subparagraph (F) as
subparagraph (E).</text>
</paragraph><paragraph id="H9F1159C3C91F4C0597FD8E24D714661E"><enum>(5)</enum><text>Subsections (b) and (c)(5) of section 1441, as amended by the preceding provisions of this Act, are
each amended by striking <quote>gains subject to tax under section 871(a)(1)(C), and gains on transfers described in section 1235
made on or before October 4, 1966</quote> and inserting <quote>and gains subject to tax under section 871(a)(1)(C)</quote>.</text>
</paragraph></subsection><subsection id="H9C24A7B37EEB47E3B82848C9FA5B0CE6"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to dispositions after December 31, 2014.</text>
</subsection></section><section commented="no" id="H145A2FE71B574CD0881CEC8237680F35"><enum>3139.</enum><header>Depreciation recapture on gain from disposition of certain depreciable realty</header>
<subsection commented="no" id="H62383736A0544A6BA7DD8E75899864C9"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (a) of section 1250 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H4D0979571BAA43EAB1A138F4DB9352FD" style="OLC">
<subsection commented="no" id="H44DCA663704D48E9AC710F337F06230D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this section, if section 1250 property is disposed of after
December 31, 2014, the amount of gain with respect to such property which
is treated as ordinary income shall be an amount equal to the lesser of—</text>
<paragraph commented="no" id="H1C49B90A53AE41EDAE1990D298646459"><enum>(1)</enum><text display-inline="yes-display-inline">the sum of—</text>
<subparagraph commented="no" id="H6D59CB25FE094BABA234801B57DBF5C6"><enum>(A)</enum><text>the amount of additional depreciation attributable to periods before January 1, 2015, in respect of
such property, and</text>
</subparagraph><subparagraph commented="no" id="H89DFA95E555C48FBB027BACE6B869C39"><enum>(B)</enum><text>the amount of depreciation adjustments attributable to periods after December 31, 2014, in respect
of such property, or</text>
</subparagraph></paragraph><paragraph commented="no" id="HE5918A2A224A4D38BEC44F625BAE11BE"><enum>(2)</enum><text>the excess of the amount realized (or, in the case of a disposition other than a sale, exchange, or
involuntary conversion, the fair market value of such property), over the
adjusted basis of such property.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HE1F8930EE980428CBFE9EAA08AC80F07"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph commented="no" id="H4CA1AC6C8EBA4F6294F713D80B3E65CB"><enum>(1)</enum><text>Section 267(e)(5)(D)(i) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HDDD91ED985C24C73B0FDE5DD14BAE309" style="OLC">
<clause id="H417226F2F5CC48E78149BF1334B78D5B"><enum>(i)</enum><text display-inline="yes-display-inline">any interest in—</text>
<subclause id="H4598E9B1459C4A5DBCF58F89C9BBB480"><enum>(I)</enum><text display-inline="yes-display-inline">any section 1250 property with respect to which a mortgage is insured under section 221(d)(3) or
236 of the National Housing Act, or housing financed or assisted by direct
loan or tax abatement under similar provisions of State or local laws and
with respect to which the owner is subject to the restrictions described
in section 1039(b)(1)(B) (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990),</text>
</subclause><subclause id="H9511360F45134FBC9D6FE5A5867FAA49"><enum>(II)</enum><text display-inline="yes-display-inline">dwelling units which, on the average, were held for occupancy by families or individuals eligible
to receive subsidies under section 8 of the United States Housing Act of
1937, as amended, or under the provisions of State or local law
authorizing similar levels of subsidy for lower-income families,</text>
</subclause><subclause id="HD94A1B61A4CC469B9D24FB7C87662422"><enum>(III)</enum><text display-inline="yes-display-inline">any section 1250 property with respect to which a depreciation deduction for rehabilitation
expenditures was allowed under section 167(k), or</text>
</subclause><subclause id="H2CD97F0743B1443EA171D0C577D6DA6B"><enum>(IV)</enum><text display-inline="yes-display-inline">any section 1250 property with respect to which a loan is made or insured under title V of the
Housing Act of 1949, and</text></subclause></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HA41AB0DBEFDF4F2A881EEE5F3E6AB07D"><enum>(2)</enum><text>Section 1250(b) is amended by striking paragraph (4) and by redesignating paragraph (5) as
paragraph (4).</text>
</paragraph><paragraph id="H293885326B6F47CC978949C716CF6D26"><enum>(3)</enum><text>Section 1250(c) is amended by striking <quote>For purposes of this section</quote> and inserting <quote>For purposes of this title</quote></text>
</paragraph><paragraph commented="no" id="HC8E6CDAD41B140BA829587272B683612"><enum>(4)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HBB791F5FDFC54142BA9C00B9B7A0B392"><enum>(A)</enum><text>Section 1250(d)(5)(B)(i) is amended by striking <quote>and the applicable percentage for the property had been 100 percent</quote>.</text>
</subparagraph><subparagraph commented="no" id="HD8E70363B14E4060B0D85A70EA959801" indent="up1"><enum>(B)</enum><text>Section 1250(d)(5)(B)(ii) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H49ED1F0DACBB4E578816C7AB1ABB6E9D" style="OLC">
<clause commented="no" id="H8294B1A4A8C946769B270A6AE979BDFD"><enum>(ii)</enum><text display-inline="yes-display-inline">the amount of such gain (if any) to which section 751(b) applied.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph commented="no" id="H6185865FEA0B4B84906B61131D35BDF0"><enum>(5)</enum><text>Section 1250(d) is amended by striking paragraph (7).</text>
</paragraph><paragraph commented="no" id="H214FA80DF08642C3B966CFF1880C941C"><enum>(6)</enum><text>Section 1250 is amended by striking subsections (e) and (f) and by redesignating subsections (g)
and (h) as subsections (e) and (f), respectively.</text>
</paragraph></subsection><subsection commented="no" id="H027895569EF54FE98785702BABE625D7"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to dispositions after December 31, 2014.</text>
</subsection></section><section id="H0D581A4EE3D5471686376B9F780982CF"><enum>3140.</enum><header>Common deduction conforming amendments</header>
<subsection id="HB896C8AB74C04196A4C35777857F1CEB"><enum>(a)</enum><header>In general</header>
<paragraph id="HDBE9B90959274695B9E339AD408327BA"><enum>(1)</enum><text display-inline="yes-display-inline">Section 1245(a)(2)(C) is amended by striking <quote>section 179,</quote> and all that follows through <quote>or 194</quote> and inserting <quote>section 179 or (as in effect before repeal by the <short-title>Tax Reform Act of 2014</short-title>) section 179A, 179B, 179C, 179D, 179E, 181, 190, 193, or 194,</quote></text>
</paragraph><paragraph id="HC561B4A9517B42D1B472E4582DA2809C"><enum>(2)</enum><text>Section 1245(a)(3)(C) is amended by striking <quote>section 169</quote> and all that follows through <quote>or 194</quote> and inserting <quote>section 179, 185, 188 (as in effect before its repeal by the Revenue Reconciliation Act of 1990),
or (as in effect before repeal by the <short-title>Tax Reform Act of 2014</short-title>) section 169, 179A, 179B, 179C, 179D, 179E, 190, 193, or 194</quote>.</text>
</paragraph><paragraph commented="no" id="HE966E882867D4608AEB7425E9C4064E5"><enum>(3)</enum><text>Section 263(a)(1) is amended by striking subparagraphs (C), (D), (F), (H), (I), (J), (K), and (L)
and by redesignating subparagraphs (E) and (G) as subparagraphs (C) and
(D), respectively.</text>
</paragraph><paragraph id="HD5A9E42ABD4A43FB8B8F89868147B647"><enum>(4)</enum><text>Section 280C, as amended by the preceding provisions of this Act, is amended by redesignating
subsections (c) and (g) as subsections (b) and (c), respectively.</text>
</paragraph></subsection><subsection commented="no" id="H5FB38D4E21974F4D999CC8DAD2F21EF0"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">Each portion of each amendment made by this section shall take effect as if included in the
provision of this subtitle to which such portion relates.</text>
</subsection></section></subtitle><subtitle id="H1BDDFF6CD1454B9EB00F327F8FEE4459"><enum>C</enum><header>Reform of business credits</header>
<section id="HFB4449D02BA6498BA403F08B65BC7C23"><enum>3201.</enum><header>Repeal of credit for alcohol, etc., used as fuel</header>
<subsection id="H65CE70CB2F9744DA8B746A8D3C06BD40"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 40 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H4059234C604F487E9E2FA55C1D51769C"><enum>(b)</enum><header>Repeal of corresponding excise tax credits</header>
<paragraph id="H689925E55A4E4D13A3609154F100CB26"><enum>(1)</enum><header>Credit</header><text display-inline="yes-display-inline">Subchapter B of chapter 65 is amended by striking section 6426 (and by striking the item relating
to such section in the table of sections for such subchapter).</text>
</paragraph><paragraph id="H210AE91DF0734D72B638182282CA2646"><enum>(2)</enum><header>Payment</header><text>Section 6427 is amended by striking subsection (e).</text>
</paragraph></subsection><subsection commented="no" id="H09A4595C729445C882BD5BF4FA83AF1E"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H4210F84C71C0447682F9D8662785E608"><enum>(1)</enum><text>Section 38(b) is amended by striking paragraph (3).</text>
</paragraph><paragraph id="HA9395EDE024E44F58116A2020C6FB5A5"><enum>(2)</enum><text>Section 6416(a)(4)(C) is amended—</text>
<subparagraph id="H4D5667133C1D41B7B4160BE36BE5993A"><enum>(A)</enum><text>by striking <quote>section 6427(i)(4)</quote> and inserting <quote>section 6427(i)(3)</quote>, and</text>
</subparagraph><subparagraph id="HAADAA2D096A047719363B544795D0B7A"><enum>(B)</enum><text>by striking <quote>section 6427(i)(3)(B)</quote> and inserting <quote>subparagraph (B) thereof</quote>.</text>
</subparagraph></paragraph><paragraph id="H317E1EDFDDE24D6EAD1ACE4AA5ADA42B"><enum>(3)</enum><text>Section 6427(i) is amended by striking paragraph (3) and by redesignating paragraph (4) as
paragraph (3).</text>
</paragraph><paragraph id="H6D8E59AB48CF47FBABE0713E5459D0E0"><enum>(4)</enum><text>Section 6427(i)(3), as redesignated by paragraph (2), is amended—</text>
<subparagraph id="H1F183381F5F34EFEAFF56810D0958296"><enum>(A)</enum><text>by striking the sentence at the end of subparagraph (A),</text>
</subparagraph><subparagraph id="H04A521C657104C07965BF924D6964DBF"><enum>(B)</enum><text>by redesignating subparagraph (B) as subparagraph (C), and</text>
</subparagraph><subparagraph id="HE01516732F45456EADC4F86672FDE981"><enum>(C)</enum><text>by inserting after subparagraph (A) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HDCE58959809048F39A4A5539E5E58252" style="OLC">
<subparagraph id="H17D931127BE54BE9AA0F3688C136CC25"><enum>(B)</enum><header>Payment of claim</header><text display-inline="yes-display-inline">Notwithstanding subsection (l)(1), if the Secretary has not paid pursuant to a claim filed under
subsection (b)(4), (l)(4)(C)(ii), or (l)(5) within 45 days of the date of
the filing of such claim (20 days in the case of an electronic claim), the
claim shall be paid with interest from such date determined by using the
overpayment rate and method under section 6621.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H104FBA6D9474485A88A7D7BF7D452026"><enum>(5)</enum><text display-inline="yes-display-inline">Subpart B of part III of subchapter A of chapter 32 is amended by striking section 4104 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</paragraph><paragraph id="HE0B6879E30FA4C3D9CE6453174D22260"><enum>(6)</enum><text>Section 6501(m) is amended by striking <quote>40(f),</quote>.</text>
</paragraph><paragraph id="H242709CB72764589BA22791B864DD9BB"><enum>(7)</enum><text>Section 9503(b)(1) is amended by striking the second sentence.</text>
</paragraph></subsection><subsection id="H6F3AAF9AD29F40D281E3B41DAFA2DBB4"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to fuels sold or used after December 31, 2013.</text>
</subsection></section><section id="H0BDAA33EC6F84C1C8EC12DF189D0F698"><enum>3202.</enum><header>Repeal of credit for biodiesel and renewable diesel used as fuel</header>
<subsection id="H31C1BB85D2244100B663AE07B9F1B942"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 40A (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H15CA743BFDED4B5CB7484AC959F29744"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H73696295F0BD4D0B969D19A153C44FCB"><enum>(1)</enum><text>Section 38(b) is amended by striking paragraph (17).</text>
</paragraph><paragraph id="H5F6E74B4F4734E35905FB90FFD662041"><enum>(2)</enum><text>Part II of subchapter B of chapter 1 is amended by striking section 87 (and by striking the item
relating to such section in the table of sections for such subpart).</text>
</paragraph><paragraph id="H5265916508F24DB3878E669EBE91B48A"><enum>(3)</enum><text>Section 4101(a)(1) is amended by striking <quote>, every person producing</quote> and all that follows through <quote>section 40(b)(6)(E))</quote>.</text>
</paragraph></subsection><subsection id="H643222F409754E1E8023215D7DEDBF6F"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to fuels sold or used after December 31, 2013.</text>
</subsection></section><section commented="no" id="H2CE9CA23BB714447B007AF2B3DADA2C6"><enum>3203.</enum><header>Research credit modified and made permanent</header>
<subsection commented="no" id="HB9456239033342BCB0EAEE4C75FA76EA"><enum>(a)</enum><header>Permanent simplification of incremental research credit and elimination of credit for energy
research consortium payments</header>
<paragraph commented="no" id="H25A74F13E47D49E0983E52A7260BAC91"><enum>(1)</enum><header>In general</header><text>Subsection (a) of section 41 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H1D50BDB1A4874AB4968D67F74CBBB591" style="OLC">
<subsection commented="no" id="H0C80FDA2BAD242FAB0DDB63672F7A7A4"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of section 38, the research credit determined under this section for the taxable year
shall be an amount equal to the sum of—</text>
<paragraph commented="no" id="H83A1E7DD75584EDAB22F2BA2E13D8C79"><enum>(1)</enum><text>15 percent of so much of the qualified research expenses for the taxable year as exceeds 50 percent
of the average qualified research expenses for the 3 taxable years
preceding the taxable year for which the credit is being determined, plus</text>
</paragraph><paragraph commented="no" id="H3A6E31C312DA4B60BA8323F5C6B0FD38"><enum>(2)</enum><text display-inline="yes-display-inline">15 percent of so much of the basic research payments for the taxable year as exceeds 50 percent of
the average basic research payments for the 3 taxable years preceding the
taxable year for which the credit is being determined.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H20B8F81018B94AB79BB4ED5C85933319"><enum>(2)</enum><header>Repeal of termination</header><text>Section 41 is amended by striking subsection (h).</text>
</paragraph><paragraph commented="no" id="H6459E71CBC5F4B5D90D747BD19FFE311"><enum>(3)</enum><header>Conforming amendments</header>
<subparagraph commented="no" id="HB78DEF75A783499ABDA366C32FC7B408"><enum>(A)</enum><text>Subsection (c) of section 41 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HD0354C629B864D31B0E5D30255BACD74" style="OLC">
<subsection commented="no" id="H78588A5DB4C74DC6A9295AFCB3FDED40"><enum>(c)</enum><header>Determination of average research expenses for prior years</header>
<paragraph id="H4E7A5589EB3747E7A7D447B276980758"><enum>(1)</enum><header>Special rule in case of no qualified research expenditures in any of 3 preceding taxable years</header><text display-inline="yes-display-inline">In any case in which the taxpayer has no qualified research expenses in any one of the 3 taxable
years preceding the taxable year for which the credit is being determined,
the amount determined under subsection (a)(1) for such taxable year shall
be equal to 10 percent of the qualified research expenses for the taxable
year.</text>
</paragraph><paragraph id="H11B51F8A620A47C9A591A1AB1B83E86A"><enum>(2)</enum><header>Consistent treatment of expenses</header>
<subparagraph id="H354D3E2CE4714154A7B43FD95B9FCE36"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Notwithstanding whether the period for filing a claim for credit or refund has expired for any
taxable year taken into account in determining the average qualified
research expenses, or average basic research payments, taken into account
under subsection (a), the qualified research expenses and basic research
payments taken into account in determining such averages shall be
determined on a basis consistent with the determination of qualified
research expenses and basic research payments, respectively, for the
credit year.</text>
</subparagraph><subparagraph id="HFDB6F63620F34C9F9D5BC58711BEADB4"><enum>(B)</enum><header>Prevention of distortions</header><text>The Secretary may prescribe regulations to prevent distortions in calculating a taxpayer’s
qualified research expenses or basic research payments caused by a change
in accounting methods used by such taxpayer between the current year and a
year taken into account in determining the average qualified research
expenses or average basic research payments taken into account under
subsection (a).</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H4331C19EE0D34291809827F5D20E083E"><enum>(B)</enum><text>Section 41(e) is amended—</text>
<clause id="HA9B9F6111F6E4A36BB99F96D024B2E77"><enum>(i)</enum><text>by striking all that precedes paragraph (6) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="HD32F2224C00D4E3F9BB0B53B1A52DACC" style="OLC">
<subsection id="HE4B2CACF34BA441BB5CAC0C427442E84"><enum>(e)</enum><header>Basic research payments</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H227D4A331E3D4683B03A6688A8D93321"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>basic research payment</quote> means, with respect to any taxable year, any amount paid in cash during such taxable year by a
corporation to any qualified organization for basic research but only if—</text>
<subparagraph id="H9F7F036EF47E4A50827D51F8C970411B"><enum>(A)</enum><text>such payment is pursuant to a written agreement between such corporation and such qualified
organization, and</text>
</subparagraph><subparagraph id="H23E16F1C58434D1082928B7B3BD10E9E"><enum>(B)</enum><text>such basic research is to be performed by such qualified organization.</text>
</subparagraph></paragraph><paragraph id="HB64083CF3B7B46FD83F64D804DD1573D"><enum>(2)</enum><header>Exception to requirement that research be performed by the organization</header><text display-inline="yes-display-inline">In the case of a qualified organization described in subparagraph (C) or (D) of paragraph (3),
subparagraph (B) of paragraph (1) shall not apply.</text></paragraph></subsection><after-quoted-block>,</after-quoted-block></quoted-block>
</clause><clause id="H62893426FEF1473E8ED84E2ADC0F4B9E"><enum>(ii)</enum><text>by redesignating paragraphs (6) and (7) as paragraphs (3) and (4), respectively, and</text>
</clause><clause id="HDDCCE7206F8A4C048BF06614B7DB56C1"><enum>(iii)</enum><text>in paragraph (4) as so redesignated, by striking subparagraphs (B) and (C) and by redesignating
subparagraphs (D) and (E) as subparagraphs (B) and (C), respectively.</text>
</clause></subparagraph><subparagraph commented="no" id="HC71B35318F244F6B8A8A368A7D2A34C3"><enum>(C)</enum>
<clause commented="no" display-inline="yes-display-inline" id="HA86A4C056953454C828BB011B7CB7A92"><enum>(i)</enum><text>Section 41(f)(1) is amended by striking <quote>, basic research payments, and amounts paid or incurred to energy research consortiums,</quote> in subparagraphs (A)(ii) and (B)(ii) and inserting <quote>and basic research payments</quote>.</text>
</clause><clause commented="no" id="H99D58EA45ACD4E38B7C672EF86CD8179" indent="up1"><enum>(ii)</enum><text>Section 41(f) is amended by striking paragraph (6).</text>
</clause></subparagraph></paragraph><paragraph commented="no" id="HA7EAC3A3203E4524A0815829CA98599B"><enum>(4)</enum><header>Effective date</header>
<subparagraph commented="no" id="H5E72FFBBD3754B1E955A0DCD68D5C8E5"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in subparagraph (B), the amendments made by this subsection shall apply to
taxable years beginning after December 31, 2013.</text>
</subparagraph><subparagraph commented="no" id="H2D1BEA4286A24A1BBE33666E41531ADF"><enum>(B)</enum><header>Paragraph <enum-in-header>(2)</enum-in-header></header><text>The amendment made by paragraph (2) shall apply to amounts paid or incurred after December 31,
2013.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="H455262FDD4FD4D189DCA2FAEC73601D8"><enum>(b)</enum><header>Other reforms</header>
<paragraph commented="no" id="HD4208E00C0F44AFB9653EE2F1D21571A"><enum>(1)</enum><header>Elimination of credit for computer software</header><text display-inline="yes-display-inline">Subparagraph (E) of section 41(d)(4) is amended—</text>
<subparagraph commented="no" id="HC7ED8753988F4C909087AAE1549B3D9E"><enum>(A)</enum><text>by striking <quote>Except to the extent provided in regulations, any research</quote> and inserting <quote>Any research</quote>, and</text>
</subparagraph><subparagraph commented="no" id="HE4C1E16228AF416DA34EE55EF93705F1"><enum>(B)</enum><text>by striking <quote>which is developed by</quote> and all that follows through the end and inserting a period.</text>
</subparagraph></paragraph><paragraph commented="no" id="HAF26FDD520BE4A1BA29EEE559B624512"><enum>(2)</enum><header>Elimination of increased credit for amounts paid to certain entities</header><text display-inline="yes-display-inline">Paragraph (3) of section 41(b) is amended by striking subparagraphs (C) and (D).</text>
</paragraph><paragraph commented="no" id="HAD3ED46955134031A862AC50C3C03C1D"><enum>(3)</enum><header>Elimination of credit for supplies</header><text display-inline="yes-display-inline">Subparagraph (A) of section 41(b)(2) is amended by inserting <quote>and</quote> at the end of clause (i), by striking clause (ii), and by redesignating clause (iii) as clause
(ii).</text>
</paragraph><paragraph id="HB1D82D2111A24C33A4D284B52AABA815"><enum>(4)</enum><header>Elimination of election of reduced credit</header><text>Section 280C(c) is amended by striking paragraphs (3) and (4).</text>
</paragraph><paragraph commented="no" id="HA419A19292164176A4936DF26580C580"><enum>(5)</enum><header>Conforming amendments</header>
<subparagraph commented="no" id="H8D1F4D7F82B54F8EACC28CCA684A00E1"><enum>(A)</enum><text>The second sentence of section 41(b)(2)(A) is amended by striking <quote>Clause (iii)</quote> and inserting <quote>Clause (ii)</quote>.</text>
</subparagraph><subparagraph commented="no" id="HFB4B4608E992444DA4F78F7964DF3748"><enum>(B)</enum><text>Section 41(b)(2) is amended by striking subparagraph (C) and by redesignating subparagraph (D) as
subparagraph (C).</text>
</subparagraph><subparagraph commented="no" id="HFDF3ADC22593442E9DCDE95EC1ED42CD"><enum>(C)</enum><text>Section 41(d)(2)(B) is amended by striking <quote>, computer software</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H75B699572DAC44E8A15E17842F282190"><enum>(6)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to taxable years beginning after December 31,
2013.</text>
</paragraph></subsection></section><section id="H75C4C381B72E43BDB20FC1FCEEBE95EB"><enum>3204.</enum><header>Low-income housing tax credit</header>
<subsection id="H886CE9ED42A34519BE721E25A93545F8"><enum>(a)</enum><header>Reform of limitation and allocation rules</header>
<paragraph id="HD16F7EE4E80044BBA55854A1F9C0417E"><enum>(1)</enum><header>Allocations of eligible basis amounts rather than credit amounts; elimination of national
reallocations</header><text>Subsection (h) of section 42 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HA7BCB97ED0BF4F4B9E2B2199CD5499F9" style="OLC">
<subsection id="H5270C19B42284AAEAF6EF4687E319AB2"><enum>(h)</enum><header>Limitation on qualified basis with respect to projects located in a State</header>
<paragraph id="H2312BD30DC5347FABE63086E281D0B93"><enum>(1)</enum><header>Qualified basis may not exceed limitation amount allocated to building</header>
<subparagraph id="HF86903F0CF654D718CBA91DF74C67978"><enum>(A)</enum><header>In general</header><text>The qualified basis of any building which is taken into account under subsection (a) for any
taxable year shall not exceed the limitation amount allocated to such
building under this subsection.</text>
</subparagraph><subparagraph id="HF0CA3528346A47F0B63A305302FAE59E"><enum>(B)</enum><header>Time for making allocation</header><text>Except in the case of an allocation which meets the requirements of subparagraph (C), (D), (E), or
(F), an allocation shall be taken into account under subparagraph (A) only
if it is made not later than the close of the calendar year in which the
building is placed in service.</text>
</subparagraph><subparagraph id="H8D277C9D70AE40B580048B32722A1F73"><enum>(C)</enum><header>Exception where binding commitment</header><text>An allocation meets the requirements of this subparagraph if there is a binding commitment (not
later than the close of the calendar year in which the building is placed
in service) by the housing credit agency to allocate a specified
limitation amount to such building beginning in a specified later taxable
year.</text>
</subparagraph><subparagraph id="H31F9C895FE104D038FB7B79E24DB4E6D"><enum>(D)</enum><header>Exception where increase in qualified basis</header>
<clause id="H6507B8A36097482298B9A09C91A35D0E"><enum>(i)</enum><header>In general</header><text>An allocation meets the requirements of this subparagraph if such allocation is made not later than
the close of the calendar year in which ends the taxable year to which it
will 1st apply but only to the extent the amount of such allocation does
not exceed the limitation under clause (ii).</text>
</clause><clause id="H5CA348FF0CCD4590AEEE4D9340558C24"><enum>(ii)</enum><header>Limitation</header><text>The limitation under this clause is the excess of—</text>
<subclause id="HAC91F0E3F02842ABA6BA3BF061E29F4C"><enum>(I)</enum><text>the qualified basis of such building as of the close of the 1st taxable year to which such
allocation will apply, over</text>
</subclause><subclause id="HAB96532E62D8476AB9C0D0A72C7DF75B"><enum>(II)</enum><text>the qualified basis of such building as of the close of the 1st taxable year to which the most
recent prior allocation with respect to such building applied.</text>
</subclause></clause><clause id="HFBEEF084D46049F69819810896AE493B"><enum>(iii)</enum><header>Housing credit basis limitation reduced by full allocation</header><text>Notwithstanding clause (i), the full amount of the allocation shall be taken into account under
paragraph (2).</text>
</clause></subparagraph><subparagraph id="H20ECA04CB5444624B09BB84806BC13D8"><enum>(E)</enum><header>Exception where 10 percent of cost incurred</header>
<clause id="H4B641CBC2EB248B2A078E63681138022"><enum>(i)</enum><header>In general</header><text>An allocation meets the requirements of this subparagraph if such allocation is made with respect
to a qualified building which is placed in service not later than the
close of the second calendar year following the calendar year in which the
allocation is made.</text>
</clause><clause id="HE8184EE85C5B480993DA57201D0E7652"><enum>(ii)</enum><header>Qualified building</header><text>For purposes of clause (i), the term <quote>qualified building</quote> means any building which is part of a project if the taxpayer's basis in such project (as of the
date which is 1 year after the date that the allocation was made) is more
than 10 percent of the taxpayer's reasonably expected basis in such
project (as of the close of the second calendar year referred to in clause
(i)). Such term does not include any existing building unless a credit is
allowable under subsection (e) for rehabilitation expenditures paid or
incurred by the taxpayer with respect to such building for a taxable year
ending during the second calendar year referred to in clause (i) or the
prior taxable year.</text>
</clause></subparagraph><subparagraph id="H52499623E94743D9892BC9F8CE102248"><enum>(F)</enum><header>Allocation of credit on a project basis</header>
<clause id="HD03AB2C4F67344529074CAFB6188072A"><enum>(i)</enum><header>In general</header><text>In the case of a project which includes (or will include) more than 1 building, an allocation meets
the requirements of this subparagraph if—</text>
<subclause id="H25189D5221EC4C3CBF1826517B999564"><enum>(I)</enum><text>the allocation is made to the project for a calendar year during the project period,</text>
</subclause><subclause id="HB34D88CCF2BC4AB5B7912FD8E7058431"><enum>(II)</enum><text>the allocation only applies to buildings placed in service during or after the calendar year for
which the allocation is made, and</text>
</subclause><subclause id="H6138C386C5E84996A531BCB25460E646"><enum>(III)</enum><text>the portion of such allocation which is allocated to any building in such project is specified not
later than the close of the calendar year in which the building is placed
in service.</text>
</subclause></clause><clause id="H5754C9E276DE42AEAE2732B4CE8CFB0E"><enum>(ii)</enum><header>Project period</header><text>For purposes of clause (i), the term <quote>project period</quote> means the period—</text>
<subclause id="HCE29DBC6B3424C7F865E2B3BCB3CAA63"><enum>(I)</enum><text>beginning with the 1st calendar year for which an allocation may be made for the 1st building
placed in service as part of such project, and</text>
</subclause><subclause id="H02270DFBD90A444E8B1BD68376A70101"><enum>(II)</enum><text>ending with the calendar year the last building is placed in service as part of such project.</text>
</subclause></clause></subparagraph></paragraph><paragraph id="H8F4A9DA257E34FD989AF90E684260BBB"><enum>(2)</enum><header>Allocated limitation amount to apply to all taxable years ending during or after allocation year</header><text>Any limitation amount allocated to any building for any calendar year—</text>
<subparagraph id="H55920A4BACDE45CDBA30D6BF96FE8F0D"><enum>(A)</enum><text>shall apply to such building for all taxable years in the compliance period ending during or after
such calendar year, and</text>
</subparagraph><subparagraph id="HC142DE20E54B4DF6A07D8D499561F669"><enum>(B)</enum><text>shall reduce the aggregate limitation amount of the allocating agency only for such calendar year.</text>
</subparagraph></paragraph><paragraph id="H755E1BB195A146498EF03957A33B5AB4"><enum>(3)</enum><header>Limitation amount for agencies</header>
<subparagraph id="H6BBA633B0767445C9FFF0A553CC848A1"><enum>(A)</enum><header>In general</header><text>The limitation amount which a housing credit agency may allocate for any calendar year is the
portion of the State limitation allocated under this paragraph for such
calendar year to such agency.</text>
</subparagraph><subparagraph id="HD21F88A0D97749889E0F6854AC11B871"><enum>(B)</enum><header>State limitation initially allocated to State housing credit agencies</header><text>Except as provided in subparagraph (F), the State limitation for each calendar year shall be
allocated to the housing credit agency of such State. If there is more
than 1 housing credit agency of a State, all such agencies shall be
treated as a single agency.</text>
</subparagraph><subparagraph id="H838F787C027942AEBFE0509A675449B8"><enum>(C)</enum><header>State limitation</header><text>The State limitation applicable to any State for any calendar year shall be an amount equal to the
sum of—</text>
<clause id="H8CCBA66B99DC425CACB46D45AB57E157"><enum>(i)</enum><text>the unused State limitation (if any) of such State for the preceding calendar year,</text>
</clause><clause id="H35A6AF6A2941474290A895A6B4FCEB26"><enum>(ii)</enum><text>the greater of—</text>
<subclause id="HDB46E26B442D4717A8F8D38F29D5F99F"><enum>(I)</enum><text>$31.20 multiplied by the State population, or</text>
</subclause><subclause id="HB41917C5D0944B37BA9C35296F008EAF"><enum>(II)</enum><text>$36,300,000, plus</text>
</subclause></clause><clause id="H5AD332B2CDCB4A879EB5D24A22187906"><enum>(iii)</enum><text>the amount of State limitation returned in the calendar year.</text>
</clause></subparagraph><subparagraph id="HC77CE03C5EAC48599D49E3802C0DE506"><enum>(D)</enum><header>Unused State limitation</header><text display-inline="yes-display-inline">For purposes of subparagraph (C)(i), the unused State limitation for any calendar year is the
excess (if any) of the sum of the amounts described in clauses (ii) and
(iii) of subparagraph (C) over the aggregate limitation amount allocated
for such year.</text>
</subparagraph><subparagraph id="H1280385DC8FD4E3E8D731EBA71E6F1A9"><enum>(E)</enum><header>State limitation returned in the calendar year</header><text>For purposes of subparagraph (C)(iii), the amount of State limitation returned in the calendar year
equals the limitation amount previously allocated within the State to any
project—</text>
<clause id="H609AC9734C9741CEBAA16157E27F25B0"><enum>(i)</enum><text>which fails to meet the 10 percent test under paragraph (1)(E)(ii) on a date after the close of the
calendar year in which the allocation was made,</text>
</clause><clause id="HE473952F0E104219A0C38ECACB8DDA91"><enum>(ii)</enum><text>which does not become a qualified low-income housing project within the period required by this
section or the terms of the allocation, or</text>
</clause><clause id="HE668F70C7B6341CF946EF66AF2FE46FD"><enum>(iii)</enum><text>with respect to which an allocation is cancelled by mutual consent of the housing credit agency and
the allocation recipient.</text>
</clause></subparagraph><subparagraph id="H92725E89441E4ADDB54ED9AF4A77B826"><enum>(F)</enum><header>State may provide for different allocation</header><text>For purposes of this paragraph, a State may by law provide (or a Governor of a State may proclaim)
a different formula for allocating the State limitation among the State
housing credit agencies in such State.</text>
</subparagraph><subparagraph id="H507B4F8D8F704A0EB08EC3A76371765C"><enum>(G)</enum><header>Population</header><text display-inline="yes-display-inline">For purposes of this paragraph, determinations of the population of any State shall be made with
respect to any calendar year on the basis of the most recent census
estimate of the resident population of such State released by the Bureau
of Census before the beginning of such calendar year.</text>
</subparagraph><subparagraph id="H3E182D8F938143599D3BEA2510223E06"><enum>(H)</enum><header>Cost-of-living adjustment</header>
<clause id="H2CBD2B663CBF4D078B0FB432D96E3CF7"><enum>(i)</enum><header>In general</header><text>In the case of a calendar year after 2015, the dollar amounts in subparagraph (C)(ii) shall each be
increased by an amount equal to—</text>
<subclause id="H529E9B269E6D4A9292FDEF25646891CB"><enum>(I)</enum><text>such dollar amount, multiplied by</text>
</subclause><subclause id="H7AF9C32B1D024CA59BAD770B68BCFE14"><enum>(II)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year,
determined by substituting <quote>calendar year 2014</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text>
</subclause></clause><clause id="H71B5D2CF57194E158CE61541B7A03657"><enum>(ii)</enum><header>Rounding</header>
<subclause id="HD55710887B6B403F880A4D586E893E34"><enum>(I)</enum><text>In the case of the dollar amount in subparagraph (C)(ii)(I), any increase under clause (i) which is
not a multiple of 20 cents shall be rounded to the next lowest multiple of
20 cents.</text>
</subclause><subclause id="H902DFC059B864CF68E8CFCAC7686D888"><enum>(II)</enum><text>In the case of the dollar amount in subparagraph (C)(ii)(II), any increase under clause (i) which
is not a multiple of $100,000 shall be rounded to the next lowest multiple
of $100,000.</text>
</subclause></clause></subparagraph></paragraph><paragraph id="HE581E8A7D9B54EB9950D2EC4BD6E38A7"><enum>(4)</enum><header>Portion of State limitation set-aside for certain projects involving qualified nonprofit
organizations</header>
<subparagraph id="HD391A6D819934CEEB70BCAF774CEB8B3"><enum>(A)</enum><header>In general</header><text>Not more than 90 percent of the State limitation for any State for any calendar year shall be
allocated to projects other than qualified low-income housing projects
described in subparagraph (B).</text>
</subparagraph><subparagraph id="H1874B7DE993C4F7AA6A2BA147A9D2E66"><enum>(B)</enum><header>Projects involving qualified nonprofit organizations</header><text>For purposes of subparagraph (A), a qualified low-income housing project is described in this
subparagraph if a qualified nonprofit organization is to own an interest
in the project (directly or through a partnership) and materially
participate (within the meaning of section 469(h)) in the development and
operation of the project throughout the credit period.</text>
</subparagraph><subparagraph id="H5768AFF6DD994057B05087F6731E5446"><enum>(C)</enum><header>Qualified nonprofit organization</header><text>For purposes of this paragraph, the term <quote>qualified nonprofit organization</quote> means any organization if—</text>
<clause id="H8A23D58171464BB2927221E93353A437"><enum>(i)</enum><text>such organization is described in paragraph (3) or (4) of section 501(c) and is exempt from tax
under section 501(a),</text>
</clause><clause id="HA8736CD8F1AF4C828DEE2BC18D9747FC"><enum>(ii)</enum><text>such organization is determined by the State housing credit agency not to be affiliated with or
controlled by a for-profit organization; and</text>
</clause><clause id="HA9C17201ED8748C8A4BCD5FEC7197DA2"><enum>(iii)</enum><text>1 of the exempt purposes of such organization includes the fostering of low-income housing.</text>
</clause></subparagraph><subparagraph id="H9454EF3DAF734D3790346356B66ECD5A"><enum>(D)</enum><header>Treatment of certain subsidiaries</header>
<clause id="HB640506D3DA64EF9B106AB385ABF08A9"><enum>(i)</enum><header>In general</header><text>For purposes of this paragraph, a qualified nonprofit organization shall be treated as satisfying
the ownership and material participation test of subparagraph (B) if any
qualified corporation in which such organization holds stock satisfies
such test.</text>
</clause><clause id="H807895146AAB451A86B9BC3AD7486CA3"><enum>(ii)</enum><header>Qualified corporation</header><text>For purposes of clause (i), the term <quote>qualified corporation</quote> means any corporation if 100 percent of the stock of such corporation is held by 1 or more
qualified nonprofit organizations at all times during the period such
corporation is in existence.</text>
</clause></subparagraph><subparagraph id="H64B3108A71134B11B17566B5A27D2FE9"><enum>(E)</enum><header>State may not override set-aside</header><text>Nothing in subparagraph (F) of paragraph (3) shall be construed to permit a State not to comply
with subparagraph (A) of this paragraph.</text>
</subparagraph></paragraph><paragraph id="HE37228D9E231436E904456615A133CC4"><enum>(5)</enum><header>Buildings eligible for credit only if minimum long-term commitment to low-income housing</header>
<subparagraph id="H3F4EB40264FF47F495A74120BD3CB4F5"><enum>(A)</enum><header>In general</header><text>No credit shall be allowed by reason of this section with respect to any building for the taxable
year unless an extended low-income housing commitment is in effect as of
the end of such taxable year.</text>
</subparagraph><subparagraph id="H2E47D6BCED8246989328953E37514F49"><enum>(B)</enum><header>Extended low-income housing commitment</header><text>For purposes of this paragraph, the term <quote>extended low-income housing commitment</quote> means any agreement between the taxpayer and the housing credit agency—</text>
<clause id="H6098864E24DF403588971AF97530D730"><enum>(i)</enum><text>which requires that the applicable fraction (as defined in subsection (c)(1)) for the building for
each taxable year in the extended use period will not be less than the
applicable fraction specified in such agreement and which prohibits the
actions described in subclauses (I) and (II) of subparagraph (E)(ii),</text>
</clause><clause id="H0E84329F55DD474EBA492BFF5C6D7C65"><enum>(ii)</enum><text>which allows individuals who meet the income limitation applicable to the building under subsection
(g) (whether prospective, present, or former occupants of the building)
the right to enforce in any State court the requirement and prohibitions
of clause (i),</text>
</clause><clause id="H38BFFDD4FB944ED497EBC989B67A25EB"><enum>(iii)</enum><text>which prohibits the disposition to any person of any portion of the building to which such
agreement applies unless all of the building to which such agreement
applies is disposed of to such person,</text>
</clause><clause id="H44D1B0C7AB2F4936931D3DFD8D24FEE8"><enum>(iv)</enum><text>which prohibits the refusal to lease to a holder of a voucher or certificate of eligibility under
section 8 of the United States Housing Act of 1937 because of the status
of the prospective tenant as such a holder,</text>
</clause><clause id="H75B1B5758AC848439F7DA39C9E9DECE7"><enum>(v)</enum><text>which is binding on all successors of the taxpayer, and</text>
</clause><clause id="H4CDFBE705ADF435585360D2DF120FB3E"><enum>(vi)</enum><text>which, with respect to the property, is recorded pursuant to State law as a restrictive covenant.</text>
</clause></subparagraph><subparagraph id="HC2DAE956AD5E4636A40B1E44CE75E3C5"><enum>(C)</enum><header>Allocation of limitation amount may not exceed amount necessary to support commitment</header><text display-inline="yes-display-inline">The limitation amount allocated to any building may not exceed the amount necessary to support the
applicable fraction specified in the extended low-income housing
commitment for such building.</text>
</subparagraph><subparagraph id="H0164CA60A0A84A4385483719FCC21700"><enum>(D)</enum><header>Extended use period</header><text>For purposes of this paragraph, the term <quote>extended use period</quote> means the period—</text>
<clause id="H5E5C10F5BD9D42E1B7CE3920A77168ED"><enum>(i)</enum><text>beginning on the 1st day in the credit period on which such building is part of a qualified
low-income housing project, and</text>
</clause><clause id="H885909CD196244689C6D13B70532A003"><enum>(ii)</enum><text>ending on the later of—</text>
<subclause id="HD35771FF62114C1DB0D52058B7D44D5B"><enum>(I)</enum><text>the date specified by such agency in such agreement, or</text>
</subclause><subclause id="HD146DB7552134E428EBCE429CDD75183"><enum>(II)</enum><text>the date which is 15 years after the close of the credit period.</text>
</subclause></clause></subparagraph><subparagraph id="HF515F3A2B6B94A6093F255FFCFF4B588"><enum>(E)</enum><header>Exceptions if foreclosure or if no buyer willing to maintain low-income status</header>
<clause id="H6830F64922484B5EA1DB1D4F10D05346"><enum>(i)</enum><header>In general</header><text>The extended use period for any building shall terminate—</text>
<subclause id="H248AFDADE5254F41BE0487BBA72E6400"><enum>(I)</enum><text>on the date the building is acquired by foreclosure (or instrument in lieu of foreclosure) unless
the Secretary determines that such acquisition is part of an arrangement
with the taxpayer a purpose of which is to terminate such period, or</text>
</subclause><subclause id="HD6C3E373C9964D4590F55E74CEBEF841"><enum>(II)</enum><text>on the last day of the period specified in subparagraph (I) if the housing credit agency is unable
to present during such period a qualified contract for the acquisition of
the low-income portion of the building by any person who will continue to
operate such portion as a qualified low-income building.</text></subclause><continuation-text continuation-text-level="clause">Subclause (II) shall not apply to the extent more stringent requirements are provided in the
agreement or in State law.</continuation-text></clause><clause id="H582B940F72CF4D3C87CDB2499F7857C3"><enum>(ii)</enum><header>Eviction, etc., of existing low-income tenants not permitted</header><text>The termination of an extended use period under clause (i) shall not be construed to permit before
the close of the 3-year period following such termination—</text>
<subclause id="H4FA8514F92C44CCF810F9E782C2DB2EB"><enum>(I)</enum><text>the eviction or the termination of tenancy (other than for good cause) of an existing tenant of any
low-income unit, or</text>
</subclause><subclause id="H348FBD7185EF4121822B3EC5F4F7571B"><enum>(II)</enum><text>any increase in the gross rent with respect to such unit not otherwise permitted under this
section.</text>
</subclause></clause></subparagraph><subparagraph id="HFDCBB0ED844F42A289D1F7BA3972B9C9"><enum>(F)</enum><header>Qualified contract</header><text>For purposes of subparagraph (E), the term <quote>qualified contract</quote> means a bona fide contract to acquire (within a reasonable period after the contract is entered
into) the nonlow-income portion of the building for fair market value and
the low-income portion of the building for an amount not less than the
applicable fraction (specified in the extended low-income housing
commitment) of—</text>
<clause id="H2F67C727E39E44BA8717BD925BAA7E57"><enum>(i)</enum><text>the sum of—</text>
<subclause id="HC725A9D78D3C48118FB7AAE93267AB8F"><enum>(I)</enum><text>the outstanding indebtedness secured by, or with respect to, the building,</text>
</subclause><subclause id="H74A8139B610E4D2293C833C7D0DD145B"><enum>(II)</enum><text>the adjusted investor equity in the building, plus</text>
</subclause><subclause id="H970156B430AF44D4BD1F13F8F636F238"><enum>(III)</enum><text>other capital contributions not reflected in the amounts described in subclause (I) or (II),
reduced by</text>
</subclause></clause><clause id="HC19746A79AB347909A9B86A1406FEC02"><enum>(ii)</enum><text>cash distributions from (or available for distribution from) the project.</text></clause><continuation-text continuation-text-level="subparagraph">The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this
paragraph, including regulations to prevent the manipulation of the amount
determined under the preceding sentence.</continuation-text></subparagraph><subparagraph id="HB92AE77F01E045B39D58FB5C110ED2D7"><enum>(G)</enum><header>Adjusted investor equity</header>
<clause id="H70FEE69542C54A3899A2EA8DB6EA73DE"><enum>(i)</enum><header>In general</header><text>For purposes of subparagraph (F), the term <quote>adjusted investor equity</quote> means, with respect to any calendar year, the aggregate amount of cash taxpayers invested with
respect to the project increased by the amount equal to—</text>
<subclause id="HF22F6333FEAB41C495ACA222D7EADDDA"><enum>(I)</enum><text>such amount, multiplied by</text>
</subclause><subclause id="H8F012C6779924FB29F11C9CC608ACC12"><enum>(II)</enum><text>the cost-of-living adjustment for such calendar year, determined under section 1(c)(2)(A) by
substituting the base calendar year for <quote>calendar year 2012</quote> in clause (ii) thereof.</text></subclause><continuation-text continuation-text-level="clause">An amount shall be taken into account as an investment in the project only to the extent there was
an obligation to invest such amount as of the beginning of the credit
period and to the extent such amount is reflected in the adjusted basis of
the project.</continuation-text></clause><clause id="HB4B6CF2D27D8436FADCDF3EBA48313F1"><enum>(ii)</enum><header>Cost-of-living increases in excess of 5 percent not taken into account</header><text>Under regulations prescribed by the Secretary, if the C-CPI-U for any calendar year (within the
meaning of section 1(c)) exceeds the C-CPI-U for the preceding calendar
year by more than 5 percent, the C-CPI-U for the base calendar year shall
be increased such that such excess shall never be taken into account under
clause (i).</text>
</clause><clause id="HCE3E3759D23C4589A5B9AA6ABC5383C4"><enum>(iii)</enum><header>Base calendar year</header><text>For purposes of this subparagraph, the term <quote>base calendar year</quote> means the calendar year with or within which the 1st taxable year of the credit period ends.</text>
</clause></subparagraph><subparagraph id="HB068151BF5634C34938A66632D0D5A94"><enum>(H)</enum><header>Low-income portion</header><text>For purposes of this paragraph, the low-income portion of a building is the portion of such
building equal to the applicable fraction specified in the extended
low-income housing commitment for the building.</text>
</subparagraph><subparagraph id="H6AD858CEDA7E4BA89515C119B4F6D879"><enum>(I)</enum><header>Period for finding buyer</header><text>The period referred to in this subparagraph is the 1-year period beginning on the date (after the
14th year of the credit period) the taxpayer submits a written request to
the housing credit agency to find a person to acquire the taxpayer’s
interest in the low-income portion of the building.</text>
</subparagraph><subparagraph id="H166D64294A844720973BAEA42A9A38CC"><enum>(J)</enum><header>Effect of noncompliance</header><text>If, during a taxable year, there is a determination that an extended low-income housing agreement
was not in effect as of the beginning of such year, such determination
shall not apply to any period before such year and subparagraph (A) shall
be applied without regard to such determination if the failure is
corrected within 1 year from the date of the determination.</text>
</subparagraph><subparagraph id="HF6ACE6F3A396424DA928B951C700E50E"><enum>(K)</enum><header>Projects which consist of more than 1 building</header><text>The application of this paragraph to projects which consist of more than 1 building shall be made
under regulations prescribed by the Secretary.</text>
</subparagraph></paragraph><paragraph id="HC81AE9D7B2BC4561AB41DD8C27CFC04C"><enum>(6)</enum><header>Special rules</header>
<subparagraph id="H7833B2D07BC54DD7ACF158AD5010F0A9"><enum>(A)</enum><header>Building must be located within jurisdiction of credit agency</header><text>A housing credit agency may allocate its limitation amount only to buildings located in the
jurisdiction of the governmental unit of which such agency is a part.</text>
</subparagraph><subparagraph id="HEBE9F2D468D943C8A5D8CCCCC1BF5B68"><enum>(B)</enum><header>Agency allocations in excess of limit</header><text>If the limitation amounts allocated by a housing credit agency for any calendar year exceed the
portion of the State limitation allocated to such agency for such calendar
year, the limitation amounts so allocated shall be reduced (to the extent
of such excess) for buildings in the reverse of the order in which the
allocations of such amounts were made.</text>
</subparagraph><subparagraph id="H8ED265E1A8D84650A1F0605FD6E4AFB7"><enum>(C)</enum><header>Credit reduced if credit is less than credit which would be allowable without regard to placed in
service convention, etc</header>
<clause id="H94FA925591744BDCA6723FD590630669"><enum>(i)</enum><header>In general</header><text>The amount of the credit determined under this section with respect to any building shall not
exceed the clause (ii) percentage of the amount of the credit which would
(but for this subparagraph) be determined under this section with respect
to such building.</text>
</clause><clause id="H44BE71F667304CF9A0CFD42A420518BD"><enum>(ii)</enum><header>Determination of percentage</header><text>For purposes of clause (i), the clause (ii) percentage with respect to any building is the
percentage which—</text>
<subclause id="HDFC8850B955140ACB5F363B015A918EB"><enum>(I)</enum><text>the credit amount which would be determined under this section with respect to the building if the
limitation amount allocated to such building were equal to the qualified
basis of such building, bears to</text>
</subclause><subclause id="H9FACDEA45F2D4E43B7F5B372AFE458F0"><enum>(II)</enum><text>the credit amount determined in accordance with clause (iii).</text>
</subclause></clause><clause id="H91CBD7E89891417EAFCBC6FC62DFB3EF"><enum>(iii)</enum><header>Determination of credit amount</header><text>The credit amount determined in accordance with this clause is the amount of the credit which would
(but for this subparagraph) be determined under this section with respect
to the building if this section were applied without regard to subsection
(f)(2)(A).</text>
</clause></subparagraph></paragraph><paragraph id="H4CBDF00CE7704103B73E773D98E6083E"><enum>(7)</enum><header>Other definitions</header><text>For purposes of this subsection—</text>
<subparagraph id="H902575442B45430DA93D9CC1AA18A1E2"><enum>(A)</enum><header>Housing credit agency</header><text>The term <quote>housing credit agency</quote> means any agency authorized to carry out this subsection.</text>
</subparagraph><subparagraph id="H8BFF7CF2EDD54F6F9CE26589E3F233B3"><enum>(B)</enum><header>Possessions treated as States</header><text>The term <quote>State</quote> includes a possession of the United States.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HC4D5BF1B2FAD44B5A4ECC6BFA3D1C3F1"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="HD188BAB98A0F419481DBD64D1BB3F2DD"><enum>(A)</enum><text>Section 42(f) is amended by striking paragraph (3).</text>
</subparagraph><subparagraph id="HE15C9B815D474BC3B3AC3F56E8D2D740"><enum>(B)</enum><text>Section 42(i)(3)(B)(iii)(II) is amended by striking <quote>subsection (h)(5)</quote> and inserting <quote>subsection (h)(4)</quote>.</text>
</subparagraph><subparagraph id="H36F2237E5BCC42F6B8EC5C96527A3AEB"><enum>(C)</enum><text>Section 42(i)(7)(A) is amended by striking <quote>subsection (h)(5)(C)</quote> and inserting <quote>subsection (h)(4)(C)</quote>.</text>
</subparagraph><subparagraph id="H1FA6A22BDA6C446A95C3C8F34B35B79D"><enum>(D)</enum><text>Section 42(i)(8) is amended by striking the last sentence.</text>
</subparagraph><subparagraph id="HCAF96B1BCFD2410BAC51044A900F7F5D"><enum>(E)</enum><text>Section 42(i) is amended by striking paragraph (9).</text>
</subparagraph><subparagraph id="H9401DE3F4F19495797EE897962CA1EC0"><enum>(F)</enum><text>Section 42(k)(2)(A) is amended by striking <quote>subsection (h)(5)</quote> and inserting <quote>subsection (h)(4)</quote>.</text>
</subparagraph><subparagraph id="HE5BAC306B20F4E10953F9E213561C630"><enum>(G)</enum><text>Section 42(l)(3) is amended by striking <quote>housing credit amount</quote> both places it appears and inserting <quote>limitation amount</quote>.</text>
</subparagraph><subparagraph id="H7C4BBA2C166042D5B067BAC520D6B985"><enum>(H)</enum><text>Section 42(m)(1)(A) is amended by striking <quote>housing credit dollar amount</quote> both places it appears and inserting <quote>limitation amount</quote>.</text>
</subparagraph><subparagraph id="HEB44129F5C5D4AADA8CC2B76B0898AC2"><enum>(I)</enum><text>Section 42(m)(1)(B)(ii) is amended by striking <quote>housing credit dollar amounts</quote> and inserting <quote>limitation amounts</quote>.</text>
</subparagraph><subparagraph id="H9FBDD7B0EE5846D5A302BEC913FB4028"><enum>(J)</enum><text>Section 42(m)(1) is amended by striking subparagraph (D).</text>
</subparagraph><subparagraph id="H97EFBF96A2A24C24A66A0F5150C04A65"><enum>(K)</enum><text>Subparagraphs (A), (B)(iii), (C)(i)(I), and (C)(i)(II) of section 42(m)(2) are each amended by
striking <quote>housing credit dollar amount</quote> and inserting <quote>limitation amount</quote>.</text>
</subparagraph><subparagraph id="HD4856B689A4C429397538B8D88B28B2E"><enum>(L)</enum><text>Section 42(m)(2) is amended by striking subparagraph (D).</text>
</subparagraph></paragraph></subsection><subsection id="H76BCA02B018F4E30B5C431F9A7F07E77"><enum>(b)</enum><header>15-Year credit period</header>
<paragraph id="HD7F6E957F9714B7EAE66A4478CD399A1"><enum>(1)</enum><header>In general</header><text>Section 42(f)(1) is amended by striking <quote>10 taxable years</quote> and inserting <quote>15 taxable years</quote>.</text>
</paragraph><paragraph id="H034FEE07C449471A9D843ACF970CD717"><enum>(2)</enum><header>Repeal of recapture</header><text>Section 42 is amended by striking subsection (j).</text>
</paragraph><paragraph id="H8EB60390FB6B4CEB846B524566DC4E4B"><enum>(3)</enum><header>Conforming amendments</header>
<subparagraph id="H571018B43E3A437990C48C12DFCB2696"><enum>(A)</enum><text display-inline="yes-display-inline">Section 42(d)(7) is amended—</text>
<clause id="H7F1E097D23BB44888632025CAB5197C4"><enum>(i)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">compliance period</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text level="paragraph" style="OLC">credit period</header-in-text></quote>, and</text>
</clause><clause id="H044B2CB1F6434FB0A07AFB04C816803B"><enum>(ii)</enum><text>by striking <quote>compliance period</quote> in subparagraph (B)(ii) and inserting <quote>credit period</quote>.</text>
</clause></subparagraph><subparagraph id="HA63E4BA0A5604E24A1BB40D0C779704E"><enum>(B)</enum><text>Section 42(f)(4) is amended by striking the last sentence thereof.</text>
</subparagraph><subparagraph id="H715AF50B8ADB4C39A03CE8DD1AAAE311"><enum>(C)</enum><text>Section 42(i) is amended by striking paragraph (1).</text>
</subparagraph><subparagraph id="H3E4E2672CFEA404AA4DDA3B316E12DAD"><enum>(D)</enum><text>Section 42(i)(6) is amended by striking <quote>and any increase in tax under subsection (j)</quote>.</text>
</subparagraph><subparagraph id="H57D3812F5152408690D920A04B1A7A7B"><enum>(E)</enum><text>Section 42(k)(4)(C) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HB0F493307FA7421393A7C1807E8076AB" style="OLC">
<subparagraph id="H6F56DE0F30F84D4485058BDA84F031BB"><enum>(C)</enum><header>Special rules</header>
<clause id="H5B88C90809C54D41A73138B0E0866AB4"><enum>(i)</enum><header>Tax benefit rule</header><text display-inline="yes-display-inline">The tax for the taxable year shall be increased under subparagraph (A) only with respect to credits
allowed by reason of this section which were used to reduce tax liability.
In the case of credits not so used to reduce tax liability, the
carryforwards and carrybacks under section 39 shall be appropriately
adjusted.</text>
</clause><clause id="HEBA672939B1F498FA3B58ADC261AADE9"><enum>(ii)</enum><header>No credits against tax</header><text display-inline="yes-display-inline">Any increase in tax under this paragraph shall not be treated as a tax imposed by this chapter for
purposes of determining the amount of any credit under this chapter.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H54AF52087F4D41CDA3D57485C0D7E1AF"><enum>(c)</enum><header>Determination of applicable percentage</header>
<paragraph id="H173C4209990947C58F46F16355504341"><enum>(1)</enum><header>Elimination of 30 percent credit; modification of discount rate</header><text display-inline="yes-display-inline">Subsection (b) of section 42 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HF06A8EB5790C4C4BBA27CE94FB5F007A" style="OLC">
<subsection id="H9BA087F305134E6A810FF077601D3EE7"><enum>(b)</enum><header>Applicable percentage</header>
<paragraph id="H70E07306587D4A72B8CB2A55EA9D7CB5"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>applicable percentage</quote> means with respect to any building, the appropriate percentage prescribed by the Secretary for the
earlier of—</text>
<subparagraph id="H0D52415B3AF64B808C39ED39BE74A6A3"><enum>(A)</enum><text>the month in which such building is placed in service, or</text>
</subparagraph><subparagraph id="HC9BC944939104A3BB9DFE859E381C715"><enum>(B)</enum><text>at the election of the taxpayer, the month in which the taxpayer and the housing credit agency
enter into an agreement with respect to such building (which is binding on
such agency, the taxpayer, and all successors in interest) as to the
limitation amount to be allocated to such building.</text></subparagraph><continuation-text continuation-text-level="paragraph">A month may be elected under subparagraph (B) only if the election is made not later than the 5th
day after the close of such month. Such an election, once made, shall be
irrevocable.</continuation-text></paragraph><paragraph id="H21DA3EFDB78A4EB0A2625D7A87D84D00"><enum>(2)</enum><header>Method of prescribing percentages</header><text display-inline="yes-display-inline">The percentages prescribed by the Secretary for any month shall be percentages which will yield
over a 15-year period amounts of credit under subsection (a) which have a
present value equal to 70 percent of the qualified basis of the building.</text>
</paragraph><paragraph id="H1F3EEC861D9E40B3BDDB5BA79D9470EF"><enum>(3)</enum><header>Method of discounting</header>
<subparagraph id="H613BA21C223A41D2807255877B842D9A"><enum>(A)</enum><header>In general</header><text>The present value under paragraph (2) shall be determined—</text>
<clause id="H1B8ECA67B5EF4DDABA55F1AD38C12B5E"><enum>(i)</enum><text>as of the last day of the 1st year of the 15-year period referred to in paragraph (2),</text>
</clause><clause id="H0F2201B480AC4B2EADE93F8F3F22335A"><enum>(ii)</enum><text>by using a discount rate equal to the applicable discount percentage of the average of the annual
Federal mid-term rate and the annual Federal long-term rate applicable
under section 1274(d)(1) to the month applicable under subparagraph (A) or
(B) of paragraph (1) and compounded annually, and</text>
</clause><clause id="H33F32C710B3A47BFBD8D2675AC5FBBC9"><enum>(iii)</enum><text>by assuming that the credit allowable under this section for any year is received on the last day
of such year.</text>
</clause></subparagraph><subparagraph id="H5438C177CC464C52B596C15DBB9AEA02"><enum>(B)</enum><header>Applicable discount percentage</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>applicable discount percentage</quote> means, with respect to any month referred to in subparagraph (A)(ii) the number of percentage
points by which 100 percent exceeds the highest rate of tax in effect
under section 11 for a taxable year which begins in such month.</text>
</subparagraph></paragraph><paragraph id="H138DF699B8EE4131825BA6356B482442"><enum>(4)</enum><header>Cross reference</header><text display-inline="yes-display-inline">For treatment of certain rehabilitation expenditures as separate new buildings, see subsection (e).</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H6FF581892D154449B987494F73D00B25"><enum>(2)</enum><header>Existing and Federally subsidized buildings ineligible for credit</header><text>Section 42(d) is amended—</text>
<subparagraph id="H2F75F61F128E48EF98A9D7BF5D34F193"><enum>(A)</enum><text>by striking paragraphs (1), (2), and (6), and redesignating paragraphs (3), (4), (5), and (7) as
paragraphs (2), (3), (4), and (5), respectively, and</text>
</subparagraph><subparagraph id="H41972AB1CCC841BFA66FD8146FC6F5BF"><enum>(B)</enum><text>by inserting before paragraph (2) (as so redesignated) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H7DEA21173F074B7FBF03DC1660AF2406" style="OLC">
<paragraph id="H2841AC97C18F4DA5921A7C5C27D773CD"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The eligible basis of any building is—</text>
<subparagraph id="H2B158CA4AF014124848A6515B07E45E0"><enum>(A)</enum><text>in the case a new building which is not Federally subsidized for the taxable year, its adjusted
basis as of the close of the 1st taxable year of the credit period, and</text>
</subparagraph><subparagraph id="HEC1D02559AAD4D76A43EF49C0CC27921"><enum>(B)</enum><text>zero in any other case.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H1CBFEF21754A41E0920D347B7AB58594"><enum>(3)</enum><header>Conforming amendments</header>
<subparagraph id="H4416583B9DEB4B3BBC724AAE9ECD659A"><enum>(A)</enum><text>Section 42(e) is amended—</text>
<clause id="HF317D21F076B4FB78E80E1714A431377"><enum>(i)</enum><text>in paragraph (2)(B), by striking <quote>paragraph (3) or (4)</quote> and inserting <quote>paragraph (2) or (3)</quote>.</text>
</clause><clause id="HDEF916319CFD435CB4BD05FD5438CDAC"><enum>(ii)</enum><text>in paragraph (3), by striking subparagraph (B) and redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively,</text>
</clause><clause id="HA75FF8FEDF554641A74013EE3EB2B427"><enum>(iii)</enum><text>in paragraph (4), by striking the last sentence thereof, and</text>
</clause><clause id="H1EEA00B7BD044BFAB318351E9A196BEA"><enum>(iv)</enum><text>by striking paragraph (5) and redesignating paragraph (6) as paragraph (5).</text>
</clause></subparagraph><subparagraph id="H458C2A5AFD90413E89E1F1B43D84C12D"><enum>(B)</enum><text>Section 42(f) is amended by striking paragraph (5).</text>
</subparagraph><subparagraph id="H81B87CB0DD314EC5B9EC2ABE8AE9BEB3"><enum>(C)</enum><text>Section 42(i)(2)(A) is amended by striking <quote>for purposes of subsection (b)(1),</quote>.</text>
</subparagraph><subparagraph id="HA26E2E4596AF4073BB8A3A7D486520D5"><enum>(D)</enum><text>Section 42(i)(3) is amended—</text>
<clause id="H975CF6930C764E48BC2E7B290FE9BDD0"><enum>(i)</enum><text>by striking <quote>(as defined in subsection (d)(2)(D)(iii))</quote> in subparagraph (C)(ii) and inserting <quote>(within the meaning of subparagraph (F))</quote>, and</text>
</clause><clause id="H91B5D2DF1E414C32B730A04CFFD8F0AC"><enum>(ii)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HDE2E788E133340A0868F979CDE2AF980" style="OLC">
<subparagraph id="HC37A526398E44D8EA7B52796FF441DD2"><enum>(F)</enum><header>Related person</header><text display-inline="yes-display-inline">For purposes of subparagraph (C), a person (hereinafter in this subparagraph referred to as the <quote>related person</quote>) is related to any person if the related person bears a relationship to such person specified in
section 267(b) or 707(b)(1), or the related person and such person are
engaged in trades or businesses under common control (within the meaning
of subsections (a) and (b) of section 52).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="HC71A5D6D5F3640B091A62ED73743D144"><enum>(E)</enum><text>Section 42(i) is amended by striking paragraph (5).</text>
</subparagraph><subparagraph id="H6588BB16E7E84D0F8594C7BBED7B9323"><enum>(F)</enum><text>Section 42(k)(2)(B) is amended by striking <quote>, except that</quote> and all that follows and inserting a period.</text>
</subparagraph></paragraph></subsection><subsection id="HE9C1D3A02A0F45A79B1E9BE35376B93C"><enum>(d)</enum><header>Repeal of special rules for buildings in high cost and difficult development areas</header>
<paragraph id="HB79C9769F4934441844D5EB31AEFEA1E"><enum>(1)</enum><header>In general</header><text>Paragraph (4) of section 42(d), as redesignated by subsection (c)(2), is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H8B9E86259AFD4FD0B0B06700B610FBA1" style="OLC">
<paragraph id="HF038EE1655E040B8B69B0C8535DDE091"><enum>(4)</enum><header>Federal grants not taken into account in determining eligible basis</header><text display-inline="yes-display-inline">The eligible basis of a building shall not include any costs financed with the proceeds of a
federally funded grant.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HDA120E1787F842C3AE80FDC443430AD8"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="HCBFA2900ED944CE98E8DF1073EBDC0B0"><enum>(A)</enum><text>Paragraph (3) of section 42(d), as redesignated by subsection (c)(2), is amended—</text>
<clause id="H4DD81162BE584DEC8BB056394A62AAC2"><enum>(i)</enum><text>by striking <quote>(as defined in paragraph (5)(C))</quote> in subparagraph (C)(i), and</text>
</clause><clause id="H28ABE86B3FF64120B416DB391574F9C5"><enum>(ii)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H035C5DD7380E415F8884A0E578F36C65" style="OLC">
<subparagraph id="H641D6CE4CD71419894575A921FC5800B"><enum>(E)</enum><header>Qualified census tract</header><text display-inline="yes-display-inline">For purposes of this paragraph—</text>
<clause id="H8BD1A6AA383F4B7F8CC063B72ADD534A"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>qualified census tract</quote> means any census tract which is designated by the Secretary of Housing and Urban Development and,
for the most recent year for which census data are available on household
income in such tract, either in which 50 percent or more of the households
have an income which is less than 60 percent of the area median gross
income for such year or which has a poverty rate of at least 25 percent.
If the Secretary of Housing and Urban Development determines that
sufficient data for any period are not available to apply this
subparagraph on the basis of census tracts, such Secretary shall apply
this subparagraph for such period on the basis of enumeration districts.</text>
</clause><clause id="HF12B890779FF4C42883D633A56662A3D"><enum>(ii)</enum><header>Limit on MSA's designated</header><text>The portion of a metropolitan statistical area which may be designated for purposes of this
subparagraph shall not exceed an area having 20 percent of the population
of such metropolitan statistical area.</text>
</clause><clause id="HFB37F36CA7ED47F490F8F4DE8A2E2A98"><enum>(iii)</enum><header>Determination of areas</header><text>For purposes of this subparagraph, each metropolitan statistical area shall be treated as a
separate area and all nonmetropolitan areas in a State shall be treated as
1 area.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="H7C6314A67FB449CD986774D67AA46174"><enum>(B)</enum><text>Clause (i) of section 42(d)(5)(A), as redesignated by subsection (c)(2), is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H4C8DCFCA88D14C4DAAD64900B0446FCC" style="OLC">
<clause id="H47D6A97372294678A8A5E090A356B4D8"><enum>(i)</enum><text display-inline="yes-display-inline">such building shall be treated as a new building, but</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="HF45E884282D84535A1F92494AC440960"><enum>(e)</enum><header>Repeal of certain exceptions to rules against preferential treatment</header><text>Section 42(g)(9) is amended—</text>
<paragraph id="HEAA8C1EF866B42628874D2750AC72A91"><enum>(1)</enum><text>by adding <quote>or</quote> at the end of subparagraph (A), and</text>
</paragraph><paragraph id="HF19AEDEE6BCB4A17B0A8568CFC84EACA"><enum>(2)</enum><text>by striking subparagraphs (B) and (C) and inserting the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HB314C40C62E64438B40BDBD2A4D52A00" style="OLC">
<subparagraph id="H9F23403BB7E74270AB8F871B158B54B4"><enum>(B)</enum><text display-inline="yes-display-inline">who are veterans (as defined in <external-xref legal-doc="usc" parsable-cite="usc/38/101">section 101</external-xref> of title 38, United States Code).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H4A946D855F4648D5B63AD047E13191AF"><enum>(f)</enum><header>Modification of selection criteria</header><text>Section 42(m)(1)(C) is amended—</text>
<paragraph id="HE9889A5C2AE54510A27AB17E9B6FE933"><enum>(1)</enum><text>by adding <quote>and</quote> at the end of clause (vii),</text>
</paragraph><paragraph id="H66A5BBA23055405AA45882FA0EF3868B"><enum>(2)</enum><text>by striking the comma at the end of clause (viii) and inserting a period, and</text>
</paragraph><paragraph id="HF10AF9BDD99C405287D722AB1964F692"><enum>(3)</enum><text>by striking clauses (ix) and (x).</text>
</paragraph></subsection><subsection id="HAF0038C82C804CDEB6B77E517042E654"><enum>(g)</enum><header>Effective date</header>
<paragraph id="H49559ECFEAF44518B458DD0A168CFC58"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply with respect to State limitation amounts determined
for calendar years after 2014 (and to determinations with respect to
allocations of such limitation amounts).</text>
</paragraph><paragraph commented="no" id="H0840B61A26E64B4080952CCEBE851E4B"><enum>(2)</enum><header>Transition rule</header><text>For purposes of determining the State limitation amount for calendar year 2015 under section
42(h)(3)(C) of the Internal Revenue Code of 1986, as amended by this
section, the amount described in clause (i) of such section shall be
treated as being equal to the quotient of—</text>
<subparagraph commented="no" id="H9AA0FB832A604C5B93D48491E05DB14E"><enum>(A)</enum><text>the amount which would be described in section 42(h)(3)(C)(i) of such Code (determined without
regard to the amendments made by this section), divided by</text>
</subparagraph><subparagraph commented="no" id="H57346A097B42449C9D1E67290F0CA361"><enum>(B)</enum><text display-inline="yes-display-inline">the applicable percentage determined under section 42(b)(1)(B)(i) for December 2014 (determined
without regard to the amendments made by this section).</text>
</subparagraph></paragraph></subsection></section><section id="H833A8C3CD58E43E688321B0AD3735638"><enum>3205.</enum><header>Repeal of enhanced oil recovery credit</header>
<subsection id="HB4978AC5364241F680B510B163D68EEB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="HC133EE644F2B4CD6A38F46DE3BCACA11"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HA13D66854F494DDFABD71E9EFFC5B253"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (6).</text>
</paragraph><paragraph id="HF1E5AA31AADE4C118650B7D537FF80DD"><enum>(2)</enum><text>Section 6501(m) is amended by striking <quote>43,</quote>.</text>
</paragraph></subsection><subsection id="H5E6161DA822C465DAEEAEFE67024E179"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall take effect on the date of the enactment of this Act.</text>
</subsection></section><section id="HB4A20E46B8D345DEB87E11B2DE459312"><enum>3206.</enum><header>Phaseout and repeal of credit for electricity produced from certain renewable resources</header>
<subsection id="H91A694B3A1414060BADB52430D151012"><enum>(a)</enum><header>Reduction of credit and phaseout amounts</header>
<paragraph id="HC7BB8873914B4B2B910DCADBA76A3862"><enum>(1)</enum><header>In general</header><text>Section 45(b) is amended by striking paragraph (2).</text>
</paragraph><paragraph id="HEF6A9E3F13E148E8BE28C498C0C53E12"><enum>(2)</enum><header>Conforming amendments</header><text>Section 45(e)(2) is amended—</text>
<subparagraph id="H32F172C445C14CCC88A9BB14AF641F92"><enum>(A)</enum><text>by striking <quote>the inflation adjustment factor and</quote> in subparagraph (A), and</text>
</subparagraph><subparagraph id="HBCCDFFCE8B2D4680979E48AFC8AD1F50"><enum>(B)</enum><text>by striking subparagraph (B) and redesignating subparagraph (C) as subparagraph (B).</text>
</subparagraph></paragraph><paragraph id="H3A9EDBBF24C747E287E364CAE5480F95"><enum>(3)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to electricity, and refined coal, produced and
sold after December 31, 2014.</text>
</paragraph></subsection><subsection id="HEF063F7313864177B25EFE8D8186EB76"><enum>(b)</enum><header>Special rule for determining beginning of construction</header>
<paragraph id="H7A7DE106A54140F199FFB8A7376B7252"><enum>(1)</enum><header>In general</header><text>Section 45(e) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H34F5FAB02DEA4DA0AC79F44077EF5958" style="OLC">
<paragraph id="HEF0BC12CCD104F46A11741E3B994CF5F"><enum>(12)</enum><header>Special rule for determining beginning of construction</header><text display-inline="yes-display-inline">For purposes of subsection (d) and section 48(a)(5), 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.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HE65B7F18C03C493281378DCCE73A7AB9"><enum>(2)</enum><header>Effective date</header><text>The amendment made by this subsection shall apply to taxable years beginning before, on, or after
the date of the enactment of this Act.</text>
</paragraph></subsection><subsection id="H24D5059F1CF94241856D1E547F221F46"><enum>(c)</enum><header>Repeal of credit</header>
<paragraph id="HB6928382D9A041CB89622E0ED432E155"><enum>(1)</enum><header>In general</header><text>Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</paragraph><paragraph id="HD8FFED0A0FA2465AA769CA475AAA6C9C"><enum>(2)</enum><header>Conforming amendment</header><text>Section 38(b) is amended by striking paragraph (8).</text>
</paragraph><paragraph id="H8300500BD2054318A3371E1F659FF543"><enum>(3)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to electricity, and refined coal, produced and
sold after December 31, 2024.</text>
</paragraph></subsection></section><section id="HBFC65C1884564EB497C86031B275DCA6"><enum>3207.</enum><header>Repeal of Indian employment credit</header>
<subsection id="HAEB27D8C533F4C97BDBD0CE02279E720"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45A (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H69B9CF264469463AB21B88CB6F40EE88"><enum>(b)</enum><header>Conforming amendment</header>
<paragraph id="H790877E38B0B4A099E9F7D1E036FFEE7"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (10).</text>
</paragraph><paragraph id="H1C8D24C62A884BEF94E29935545AA777"><enum>(2)</enum><text>Section 139D(c)(1) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HE8E116FD4528449587B06C77ABF8CDB4" style="OLC">
<paragraph id="HCE2B8251ADEE4DEE80A0136B48FE6B5F"><enum>(1)</enum><header>Indian tribe</header><text display-inline="yes-display-inline">The term <quote>Indian tribe</quote> means any Indian tribe, band, nation, pueblo, or other organized group or community, including any
Alaska Native village or regional or village corporation, as defined in,
or established pursuant to, the Alaska Native Claims Settlement Act (43
U.S.C. 1601 et seq.) which is recognized as eligible for the special
programs and services provided by the United States to Indians because of
their status as Indians.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HE8BC7731F1414C2D8748BDBFC9028752"><enum>(3)</enum><text>Section 280C(a) is amended by striking <quote>45A,</quote>.</text>
</paragraph><paragraph id="H62602FB3923F4859BA90B906884E9282"><enum>(4)</enum><text>Section 5000A(e)(3) is amended by striking <quote>section 45A(c)(6)</quote> and inserting <quote>section 139D(c)(1)</quote>.</text>
</paragraph></subsection><subsection id="H537BC4A0EEE947AC95A7DAA701E50E1E"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2013.</text>
</subsection></section><section id="H8733347BF9C54C99BADE559632C03E4F"><enum>3208.</enum><header>Repeal of credit for portion of employer Social Security taxes paid with respect to employee cash
tips</header>
<subsection id="H9A1CFD590999454BAA137997660E1690"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45B (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H8C5F9C2E17B1461DB52FBBB7728CD9FF"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HD55887B47A594A7FB1ABE06F25AA301F"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (11).</text>
</paragraph><paragraph id="H1F3AFC1B51234E6C8ED90391C8CBFBBE"><enum>(2)</enum><text>Section 6501(m) is amended by striking <quote>45B,</quote>.</text>
</paragraph></subsection><subsection id="H1F44EF86FEC34E359A693D1BF87B1DF0"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply with respect to tips received for services
performed after December 31, 2014.</text>
</subsection></section><section id="HB2795F99AE9C43B69EFE95A204DC080C"><enum>3209.</enum><header>Repeal of credit for clinical testing expenses for certain drugs for rare diseases or conditions</header>
<subsection id="HFC73F1B85D64458CA27D732722E60D6A"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H81BDE945834743689C1F8B852E116B15"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H5E01288A80654AD3B553C0ABCBED7060"><enum>(1)</enum><text>Section 38(b) is amended by striking paragraph (12).</text>
</paragraph><paragraph id="H1E8CD336239348979B16DEF796A4AB64"><enum>(2)</enum><text display-inline="yes-display-inline">Section 280C is amended by striking subsection (b).</text>
</paragraph><paragraph id="H0241FBE70BB247AFB9AB086CFF6B6E53"><enum>(3)</enum><text>Section 6501(m) is amended by striking <quote>45C(d)(4),</quote>.</text>
</paragraph></subsection><subsection id="HF8B4FE5A5006495292725FFC6A4286AA"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2014.</text>
</subsection></section><section id="HEC5FA2D885B74228BA2D15EA6F36EC5A"><enum>3210.</enum><header>Repeal of credit for small employer pension plan startup costs</header>
<subsection id="HDDE348ED7377434AA5B46D7D9490A376"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45E (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H903B750456874E0C9CDB5927E88076FC"><enum>(b)</enum><header>Conforming amendments</header><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (14).</text>
</subsection><subsection id="HDBCCE93CEB62408A9DEA365AA6D14181"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to costs paid or incurred after December 31, 2014,
with respect to qualified employer plans first effective after such date.</text>
</subsection></section><section id="H8B8D3DCC618B4B288C6CBC462EDBB44A"><enum>3211.</enum><header>Repeal of employer-provided child care credit</header>
<subsection id="HF790FEBC3AB444BFA68B4A655D99AD2F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H31DEABB4A6BA44C89DD38213FB7701A4"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HB00C69F151F2406F9ECA1158E794596D"><enum>(1)</enum><text>Section 38(b) is amended by striking paragraph (15).</text>
</paragraph><paragraph id="H99A4F1CCD3CA459CAE3CC89B9C60956E"><enum>(2)</enum><text display-inline="yes-display-inline">Section 1016(a) is amended by striking paragraph (28).</text>
</paragraph></subsection><subsection id="HF4A9E6B6674A408B80E5164EEF460976"><enum>(c)</enum><header>Effective date</header>
<paragraph id="HE3BCC5A3AE1E4371848FA519771CC889"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="H2C798B769ED04A19AED83AC300EF90FF"><enum>(2)</enum><header>Basis adjustments</header><text>The amendment made by subsection (b)(2) shall apply to credits determined for taxable years
beginning after December 31, 2014.</text>
</paragraph></subsection></section><section id="H3252DBC085EC48978EB5382346E5CB89"><enum>3212.</enum><header>Repeal of railroad track maintenance credit</header>
<subsection id="H11D992B259064B0DB74665506C5515B7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45G (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="HE1CDB7F071F147CFA4BC66789994A6AA"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HBF0EA096386C4F5FA9C94D4C9896EA0A"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (16).</text>
</paragraph><paragraph id="H7396DA6109A149C09BDDF0DA102E843B"><enum>(2)</enum><text>Section 1016(a) is amended by striking paragraph (29).</text>
</paragraph></subsection><subsection id="HBBE5B61A04444CB08A3D27B285329E5F"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H90541C253154489C810312C19A153835"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2013.</text>
</paragraph><paragraph id="H63AD57E717A8413C8BA090EBDF267D1C"><enum>(2)</enum><header>Basis adjustments</header><text>The amendment made by subsection (b)(2) shall apply to credits determined for taxable years
beginning after December 31, 2013.</text>
</paragraph></subsection></section><section id="HD6AB2CA6C2864216920E1196F8E03C5E"><enum>3213.</enum><header>Repeal of credit for production of low sulfur diesel fuel</header>
<subsection id="H420A65E10C1C47ADA76F93615CD4BEBE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45H (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="HDBBF273EB83C4B5FB5C742727BD9DB09"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H3318A655F48443929B92AF5C4C2656F8"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (18).</text>
</paragraph><paragraph id="H3A4E61E87CAF427D82CA5F5A5E326B69"><enum>(2)</enum><text>Section 280C is amended by striking subsection (d).</text>
</paragraph><paragraph id="HE30EEF96674B47D782135E0C39EA85F6"><enum>(3)</enum><text>Section 6501(m) is amended by striking <quote>45H(g),</quote>.</text>
</paragraph><paragraph id="H922545A3EE2745FBB70410521BC7C914"><enum>(4)</enum><text>Section 6720A is amended—</text>
<subparagraph id="H8A4EE8C4DE684F3990CE39D6804961A8"><enum>(A)</enum><text>by striking <quote>(as defined in section 45H(c)(3))</quote> in subsection (a), and</text>
</subparagraph><subparagraph id="H7B4A6E5E5AB74B5FB4D52D6D696D3BEB"><enum>(B)</enum><text>by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H2FD9A8D5E421448E99A048EF4A634614" style="OLC">
<subsection id="H4BBC0843BFEB49E6808A2787DDB1FA16"><enum>(c)</enum><header>Applicable EPA regulations</header><text display-inline="yes-display-inline">The term <quote>applicable EPA regulations</quote> means the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="HF926C12B572140C2B818EB4522B6004E"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to expenses paid or incurred in taxable years
beginning after December 31, 2014.</text>
</subsection></section><section id="H7AC5ED5DC3BF455B898579A5FD9734E6"><enum>3214.</enum><header>Repeal of credit for producing oil and gas from marginal wells</header>
<subsection id="H6DC853F2B7654BD3A4196945A61FE616"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H7AB07681CF7442A9B82687E06CDEB5DB"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (19).</text>
</subsection><subsection id="H65BCD4964AFE48C59021D3A7C8726346"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H986F5B356CCF42FD89EC2A5221FE5617"><enum>3215.</enum><header>Repeal of credit for production from advanced nuclear power facilities</header>
<subsection id="H513C5784E1D247EE90D132066AC6E187"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45J (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H135D68E1996E45668905E48B41D5F731"><enum>(b)</enum><header>Conforming amendment</header><text>Section 38(b) is amended by striking paragraph (21).</text>
</subsection><subsection id="H2E8F1C47AB834EE687DD76ADA5996A10"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to electricity produced and sold after December 31,
2014.</text>
</subsection></section><section id="H55BFAC4FBC2F4A15843672A4608B39D4"><enum>3216.</enum><header>Repeal of credit for producing fuel from a nonconventional source</header>
<subsection id="HD30F4AD24C52405CB3FFCB5CA01835AD"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45K (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H7899EE5EBBC44C369EAA09D73FECCC4E"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H890A121B940F4D0D83F92B4BBB898229"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (22).</text>
</paragraph><paragraph id="H42BDC5DC892843219796FCF27F6221F9"><enum>(2)</enum><text>Section 45(e)(9) is amended—</text>
<subparagraph id="HE3064EFA0B814250AE7C4FB02F0FCD5F"><enum>(A)</enum><text>in subparagraph (A)—</text>
<clause id="H89640C99D9A74B608ECDFB74CA8163D7"><enum>(i)</enum><text>by inserting <quote>, as in effect before its repeal</quote> after <quote>within the meaning of section 45K</quote>, and</text>
</clause><clause id="HF386050EE26B436DA6845B1048F0D3B2"><enum>(ii)</enum><text>by inserting <quote>(as in effect before its repeal)</quote> after <quote>under section 45K</quote>, and</text>
</clause></subparagraph><subparagraph id="H483BD75F1713401BB484DD9A35F3A6D5"><enum>(B)</enum><text>in subparagraph (B), by inserting <quote>(as in effect before its repeal)</quote> after <quote>section 45K</quote>.</text>
</subparagraph></paragraph><paragraph id="HF8FC559B9F744B239502A4A5EFC0DDCB"><enum>(3)</enum><text>Section 4041(a)(2) is amended—</text>
<subparagraph id="HA088426B42E14FAEB43EE2329D0EC460"><enum>(A)</enum><text>by striking <quote>(as defined in section 45K(c)(3))</quote> in subparagraph (B)(ii), and</text>
</subparagraph><subparagraph id="HB523AE3BA4904D48A3E6A4FCE992D751"><enum>(B)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H63F449A128284D7D9EEFEE6F59794BAE" style="OLC">
<subparagraph id="H4A0C8A4535564259A09F8F396A57DDB2"><enum>(C)</enum><header>Biomass</header><text display-inline="yes-display-inline">The term “biomass” means any organic material other than—</text>
<clause id="HC78D7CD31A1A449AABA3951F2810056D"><enum>(i)</enum><text>oil and natural gas (or any product thereof), and</text>
</clause><clause id="H7AE7B70D9F9B45DBB91BC6C7F8C5481A"><enum>(ii)</enum><text>coal (including lignite) or any product thereof.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H9B8A152C6A7B492988344CD3A9C8657B"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to fuel produced and sold after December 31, 2013.</text>
</subsection></section><section id="HC141F2D1157A4B1D992CEB21F77F3C87"><enum>3217.</enum><header>Repeal of new energy efficient home credit</header>
<subsection id="H529FEC70C2044ACCB2BFEC6E35B254AD"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45L (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="HBACEB1DEF1754BABB959AB17F1F07F82"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H978E9DB5F16E458C98D60B9CD482DB20"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (23).</text>
</paragraph><paragraph id="H80835F13050A4AC5B196EF9414476735"><enum>(2)</enum><text>Section 1016(a) is amended by striking paragraph (32).</text>
</paragraph></subsection><subsection id="HCA70C8B8CC3440E3B5D87A22AA3D1FF9"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to homes acquired after December 31, 2013.</text>
</subsection></section><section id="H56474DE65AC145518090B9C9739F14CB"><enum>3218.</enum><header>Repeal of energy efficient appliance credit</header>
<subsection id="H309B0B18A05048EEA2582DA52273F15B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45M (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H92A754FC0D9B446D87EAD908666EB97A"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (24).</text>
</subsection><subsection id="H1AEA5E4D74BA428F899E41C6CFF0009F"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to appliances produced after December 31, 2013.</text>
</subsection></section><section id="HFD125D92574148E48950A275FF1BB548"><enum>3219.</enum><header>Repeal of mine rescue team training credit</header>
<subsection id="H104F209E08A74721B5E7AF2B02FEC044"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45N (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H1792ADFE3A504849BE152A71445C625B"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H173349DA374F4E99A76B0CF4987450C1"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (31).</text>
</paragraph><paragraph id="HAC5F0421364C4DC1919D8316B853A584"><enum>(2)</enum><text>Section 280C is amended by striking subsection (e).</text>
</paragraph></subsection><subsection id="H456C76CD06864B8E9BB9280C2F0E6878"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2013.</text>
</subsection></section><section id="H17B85F4634DD41E69C5AD0FE9FFE8544"><enum>3220.</enum><header>Repeal of agricultural chemicals security credit</header>
<subsection id="H542B1AF6E78E46CFAEF98E9388E8D8D5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45O (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H79CBE5EF4AEC42E18E7F4780AB2128DA"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H4D31581205714A1491BFBB8EDD1C719B"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (32).</text>
</paragraph><paragraph id="HF269CDF9501A4925A7C4BB2F4AD71754"><enum>(2)</enum><text>Section 280C is amended by striking subsection (f).</text>
</paragraph></subsection><subsection id="H9EBF5DA8D73D45909DF7401F7D1AC515"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31,
2012.</text>
</subsection></section><section id="H4A29474348774227898F47CE6DE859C8"><enum>3221.</enum><header>Repeal of credit for carbon dioxide sequestration</header>
<subsection id="H92ED52F1152B40F48B73A08A207C0208"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45Q (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H9A3C898222D84C899A2940828B97A8BB"><enum>(b)</enum><header>Conforming amendment</header><text>Section 38(b) is amended by striking paragraph (34).</text>
</subsection><subsection id="H19B75A9D50784BB884A2DA1D2CB176D5"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to credits determined for taxable years beginning
after December 31, 2014.</text>
</subsection></section><section id="H748B654423244497B3987875300DE61C"><enum>3222.</enum><header>Repeal of credit for employee health insurance expenses of small employers</header>
<subsection id="HF26601EFA0B145FDB781F922DE9B7AC2"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part IV of subchapter A of chapter 1 is amended by striking section 45R (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="HC8D51DEA75B646F2ABA9E08B29079D76"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HC19C4EE7AAC24C7B9D0137C447008758"><enum>(1)</enum><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraph (36).</text>
</paragraph><paragraph id="H7AE6FE1FAEC7410DA25735FBC14E3162"><enum>(2)</enum><text>Section 280C is amended by striking subsection (h).</text>
</paragraph><paragraph id="HC136F717E0E249EBBACB5B7494A0300E"><enum>(3)</enum><text>Section 6055(b)(2) is amended by inserting <quote>and</quote> at the end of subparagraph (A), by striking <quote>, and</quote> at the end of subparagraph (B) and inserting a period, and by striking subparagraph (C).</text>
</paragraph></subsection><subsection id="HFD9EC31FEF6D437FAB8C0C93E52996FD"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to amounts paid or incurred for taxable years
beginning after December 31, 2014.</text>
</subsection></section><section id="HB30A351061EA4D7B9C58A10924B8CFAD"><enum>3223.</enum><header>Repeal of rehabilitation credit</header>
<subsection id="H23A6F68B27914BF184F6C68873BB547D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="HBED73BACBB614A8E9A551521BE82A039"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H2B641ED6057E476AB0365B152A3CDCC5"><enum>(1)</enum><text>Section 170(f)(14)(A) is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>section 47</quote>.</text>
</paragraph><paragraph id="H2FA73526687240A8A5E5ADD2D4846CB1"><enum>(2)</enum><text>Section 170(h)(4) is amended—</text>
<subparagraph id="H81647FFCAFD84AEC8E6FBB1C81F10901"><enum>(A)</enum><text>by striking <quote>(as defined in section 47(c)(3)(B))</quote> in subparagraph (C)(ii), and</text>
</subparagraph><subparagraph id="HA669E60798AA4735AB9385FF20851663"><enum>(B)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H3A3960CDEBB9436C8A056FF041760E16" style="OLC">
<subparagraph id="H924B4FD7C524485B98FC670987D28169"><enum>(D)</enum><header>Registered historic district</header><text display-inline="yes-display-inline">The term <quote>registered historic district</quote> means—</text>
<clause id="H67EAB81C87B0429D8D5542C4177FF976"><enum>(i)</enum><text>any district listed in the National Register, and</text>
</clause><clause id="HAF6DAE05107E440787AB9017BDB559A7"><enum>(ii)</enum><text>any district—</text>
<subclause id="H34230E41533C445C8A216D2A1F7CA0D5"><enum>(I)</enum><text>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</text>
</subclause><subclause id="HF345620E3FF14D108377C5D6E845C958"><enum>(II)</enum><text>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.</text></subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="HFE0D4F36A2174A49B72719CA423FE484"><enum>(3)</enum><text>Section 469(i)(3) is amended by striking subparagraph (B).</text>
</paragraph><paragraph id="HA9DFD691714847F1BF115EDFE3B0ECAB"><enum>(4)</enum><text>Section 469(i)(6)(B) is amended—</text>
<subparagraph id="H1D3B13B76E664BECBDDE462FF2BCA176"><enum>(A)</enum><text>by striking <quote>in the case of—</quote> and all that follows and inserting <quote>in the case of any credit determined under section 42 for any taxable year.</quote>, and</text>
</subparagraph><subparagraph id="H5776D636EA3A4E8DADA518EB079263C6"><enum>(B)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">, rehabilitation credit,</header-in-text></quote> in the heading thereof.</text>
</subparagraph></paragraph><paragraph id="H9EEAF1D7B60240408867BA087DE8CE14"><enum>(5)</enum><text>Section 469(k)(1) is amended by striking <quote>, or any rehabilitation credit determined under section 47,</quote>.</text>
</paragraph></subsection><subsection id="H99DD325AF377426CBCA1D8BFA00CF2DB"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H57335AF9AF274C418AF3C80BAADF85C4"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall apply to amounts
paid after December 31, 2014.</text>
</paragraph><paragraph id="H870181B68F66466BA2AE5301205F7EE5"><enum>(2)</enum><header>Transition rule</header><text display-inline="yes-display-inline">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—</text>
<subparagraph id="HB8966A8FB592474FB9ED9C21DC83C4B2"><enum>(A)</enum><text>acquired by the taxpayer before January 1, 2015, and</text>
</subparagraph><subparagraph id="HBBD15BF40C4540BA8922F1F318D519D6"><enum>(B)</enum><text>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 January 1, 2015,</text></subparagraph><continuation-text continuation-text-level="paragraph">the amendments made by this section shall apply to amounts paid after December 31, 2016.</continuation-text></paragraph></subsection></section><section id="H2BD53E12EEEA4FFAB752E592DD5A417D"><enum>3224.</enum><header>Repeal of energy credit</header>
<subsection id="H07AFDE508BBD4AF0B0C484E672EA6EE0"><enum>(a)</enum><header>Termination</header><text display-inline="yes-display-inline">Section 48 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HE4F397CE5EE14F7E98EB985B13AA7391" style="OLC">
<subsection id="H9680BD68918E45E0924252E49BDCC7DB"><enum>(e)</enum><header>Application of section</header><text display-inline="yes-display-inline">This section shall not apply to any energy property placed in service after December 31, 2016.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H96A490D1B2604EB0A4F5A95454AA9869"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph display-inline="no-display-inline" id="H8195031602E84807A2958847EAA77748"><enum>(1)</enum><text>Paragraph (2)(A)(i)(II), and clauses (ii) and (vii) of paragraph (3)(A), of section 48(a) are each
amended by striking <quote>but only with respect to periods ending before January 1, 2017</quote>.</text>
</paragraph><paragraph display-inline="no-display-inline" id="H33F2ABB047474375879EBA163B8D6AA5"><enum>(2)</enum><text>Paragraph (1) of section 48(c) is amended by striking subparagraph (D).</text>
</paragraph><paragraph display-inline="no-display-inline" id="H4EA38BEB525B45CE9B51EA2760037C3B"><enum>(3)</enum><text>Paragraph (2) of section 48(c) is amended by striking subparagraph (D).</text>
</paragraph><paragraph display-inline="no-display-inline" id="HE182028357344A03B8E39299A15DCC22"><enum>(4)</enum><text>Subparagraph (A) of section 48(c)(3) is amended by inserting <quote>and</quote> at the end of clause (ii), by striking <quote>, and</quote> at the end of clause (iii) and inserting a period, and by striking clause (iv).</text>
</paragraph><paragraph display-inline="no-display-inline" id="H241436CDAD5F4B93A88B22F6C7F36C17"><enum>(5)</enum><text>Paragraph (4) of section 48(c) is amended by striking subparagraph (C).</text>
</paragraph></subsection><subsection id="HC74AC1EC17C9472891E8EA02E857F0C0"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to property placed in service after December 31,
2016.</text>
</subsection></section><section id="H374E935D671D4ACFA39DC2A928CBA2C9"><enum>3225.</enum><header>Repeal of qualifying advanced coal project credit</header>
<subsection id="H4DBE2003ECBE4D0B8C4B25185BA2B376"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart E of part IV of subchapter A of chapter 1 is amended by striking section 48A (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="HE380CC5F959E4B15B17CEFE84BFAAFAA"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to allocations and reallocations after December 31,
2014.</text>
</subsection></section><section id="H5319C99FFBE541B194D6782462C6C182"><enum>3226.</enum><header>Repeal of qualifying gasification project credit</header>
<subsection id="HE2BA5630F4194D89A27815E2D1DDA3BE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart E of part IV of subchapter A of chapter 1 is amended by striking section 48B (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H92B94EDD523B4905A2B1BDEECC4E07E1"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to allocations and reallocations after December 31,
2014.</text>
</subsection></section><section id="H2668E72B514846C4A87A46D71CCE4804"><enum>3227.</enum><header>Repeal of qualifying advanced energy project credit</header>
<subsection id="H616711A3D11D4D7DAC18C913F23FFF6E"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart E of part IV of subchapter A of chapter 1 is amended by striking section 48C (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="HAAF7364AD4D54DF78080F55DC784E779"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to allocations and reallocations after December 31,
2014.</text>
</subsection></section><section id="H319FCCEAF2764A408AFE22032F8447B9"><enum>3228.</enum><header>Repeal of qualifying therapeutic discovery project credit</header>
<subsection id="H85B6DEB521A14ABABC9102F48BBF6DCC"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart E of part IV of subchapter A of chapter 1 is amended by striking section 48D (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="HB060121FFFE3494EA671AC7DED9A9500"><enum>(b)</enum><header>Conforming amendments</header><text display-inline="yes-display-inline">Section 280C is amended by striking the second subsection (g) (as added by the Patient Protection
and Affordable Care Act).</text>
</subsection><subsection commented="no" id="HD20A5977D7C2444AB9DD04BA2EF5B4CC"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to allocations and reallocations after December 31,
2014.</text>
</subsection></section><section id="HE877E0E00D8F474EA862E3C8ED735B76"><enum>3229.</enum><header>Repeal of work opportunity tax credit</header>
<subsection id="HD2695E28BD274AAC8462F5E6989C52C2"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H87EC9C971B864C8985E0954216B37768"><enum>(b)</enum><header>Clerical amendment</header><text>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 <quote>Rules for Computing Work Opportunity Credit</quote> and inserting <quote>Special Rules</quote>.</text>
</subsection><subsection id="HBB92A8EF4EA4495DA63D715D1A42D5F9"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred to individuals who
begin work for the employer after December 31, 2013.</text>
</subsection></section><section id="H8B932D6F2D664965A5C5876F295CA6A3"><enum>3230.</enum><header>Repeal of deduction for certain unused business credits</header>
<subsection id="H4E5BCB0BCCC34E219E4D44775AE95DE8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H5EF08E043C4B4CD08F023B170D0128C8"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="HF33DB51FA6B242E59CAAC50B7889153B"><enum>D</enum><header>Accounting methods</header>
<section id="HB1C43226C5A64B7F9BE184C7EF4B3CA5"><enum>3301.</enum><header>Limitation on use of cash method of accounting</header>
<subsection id="H6D71BA2D35D149838270A598E2B02096"><enum>(a)</enum><header>In general</header><text>Section 448 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HAC67A4A97CD1484381B701BFAC622E53" style="OLC">
<section id="HFFBD8AC5E0A94791AD0FB0EBA5DD9286"><enum>448.</enum><header>Limitation on use of cash method of accounting</header>
<subsection id="HD72B4048037B4C7AAC0D7F7ABEE8D4D8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">The cash receipts and disbursements method of accounting may only be used by—</text>
<paragraph id="HEBA7D0D356C940848C649D8F44BF979D"><enum>(1)</enum><text>a natural person,</text>
</paragraph><paragraph id="H2A53B8B1058D440CA7A49320E2B94B18"><enum>(2)</enum><text>a farming business, and</text>
</paragraph><paragraph id="HFB94C57268D64739A1FB5BFAAC2AE9C0"><enum>(3)</enum><text>any other entity which meets the gross receipts test of subsection (b) for the taxable year.</text></paragraph><continuation-text continuation-text-level="subsection">Such method may not be used by a tax shelter (as defined in subsection (d)).</continuation-text></subsection><subsection id="HF77F0A7C953649E18583088493B7A04A"><enum>(b)</enum><header>Gross receipts test</header><text>For purposes of this section—</text>
<paragraph id="HDC23FA4160CA4E60804BA0E583E53265"><enum>(1)</enum><header>In general</header><text>An entity 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
$10,000,000.</text>
</paragraph><paragraph id="HAE71FE70F33C43B7B440EFB22D9F43D6"><enum>(2)</enum><header>Aggregation rules</header><text display-inline="yes-display-inline">All persons treated as a single employer under subsection (a) or (b) of section 52 or subsection
(m) or (o) of section 414 shall be treated as one entity for purposes of
paragraph (1).</text>
</paragraph><paragraph id="HF0BACF430B6A42618E8CD1214157BAE9"><enum>(3)</enum><header>Special rules</header><text>For purposes of this subsection—</text>
<subparagraph id="H53B72445E9CE45A39AB049D90E985994"><enum>(A)</enum><header>Not in existence for entire 3-year period</header><text display-inline="yes-display-inline">If the entity was not in existence for the entire 3-year period referred to in paragraph (1), such
paragraph shall be applied on the basis of the period during which such
entity (or trade or business) was in existence.</text>
</subparagraph><subparagraph id="H3BFF6F2C7DED40AABA216DA3C4A02826"><enum>(B)</enum><header>Short taxable years</header><text>Gross receipts for any taxable year of less than 12 months shall be annualized by multiplying the
gross receipts for the short period by 12 and dividing the result by the
number of months in the short period.</text>
</subparagraph><subparagraph id="H25CFA24AA73940E3A665608FCF90112A"><enum>(C)</enum><header>Gross receipts</header><text>Gross receipts for any taxable year shall be reduced by returns and allowances made during such
year.</text>
</subparagraph><subparagraph id="H3B796E942D4B496CAF4C29B5D56347AE"><enum>(D)</enum><header>Treatment of predecessors</header><text>Any reference in this subsection to an entity shall include a reference to any predecessor of such
entity.</text>
</subparagraph></paragraph></subsection><subsection id="H3718145A60C94C6EAEF3BE2A6E136F19"><enum>(c)</enum><header>Farming business</header><text>For purposes of this section—</text>
<paragraph id="HB2826EA5113941DD97D29225E853A0ED"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>farming business</quote> means the trade or business of farming.</text>
</paragraph><paragraph id="H298EB704B0B24E7CBE038C4F80A0AB1C"><enum>(2)</enum><header>Certain trades and businesses included</header>
<subparagraph id="H77C9240E8F584605AFA20F82E929D357"><enum>(A)</enum><header>In general</header><text>The term <quote>farming business</quote> shall include the trade or business of—</text>
<clause id="H41B0FAA97EDB443B8EA6DF9CD07600D3"><enum>(i)</enum><text>operating a nursery or sod farm, or</text>
</clause><clause id="HE8747510950343B48BB6B0804C7C39F6"><enum>(ii)</enum><text>the raising or harvesting of trees bearing fruit, nuts, or other crops, or ornamental trees.</text>
</clause></subparagraph><subparagraph id="HEA51A76833AB4D098BC873041CAF1E5A"><enum>(B)</enum><header>Certain evergreen trees not treated as ornamental</header><text>For purposes of subparagraph (A)(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.</text>
</subparagraph></paragraph></subsection><subsection id="HBD166AF85079400780C96E17B973C0F6"><enum>(d)</enum><header>Tax shelter defined</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>tax shelter</quote> has the meaning given such term by section 461(i)(2) (determined after application of paragraph
(3) thereof). An S corporation shall not be treated as a tax shelter for
purposes of this section merely by reason of being required to file a
notice of exemption from registration with a State agency described in
section 461(i)(2)(A), but only if there is a requirement applicable to all
corporations offering securities for sale in the State that to be exempt
from such registration the corporation must file such a notice.</text>
</subsection><subsection id="H70C0AD8C5545458EA114CC92B7A27EDF"><enum>(e)</enum><header>Special rules</header><text>For purposes of this section—</text>
<paragraph id="HC43477FB5F584EC2A7AC3EA578FF6AE0"><enum>(1)</enum><header>Coordination with section 481</header><text display-inline="yes-display-inline">In the case of any person required by this section to change its method of accounting for any
taxable year—</text>
<subparagraph id="H3D4C4836BC864AE19C9310DA593876B8"><enum>(A)</enum><text>such change shall be treated as initiated by such person, and</text>
</subparagraph><subparagraph id="H81A13A5AE1D243A2B172BCC5BF18D242"><enum>(B)</enum><text>such change shall be treated as made with the consent of the Secretary.</text>
</subparagraph></paragraph><paragraph id="HC1B57B98A8C44240A1818A6DA567E142"><enum>(2)</enum><header>Use of related parties, etc</header><text>The Secretary shall prescribe such regulations as may be necessary to prevent the use of related
parties, pass-thru entities, or intermediaries to avoid the application of
this section.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HEA52F0F586D540BEBC0D59D780E1FFB1"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H1A27141674B64A6CACC6E10234E69041"><enum>(1)</enum><text>Section 446(c)(1) is amended by inserting <quote>to the extent provided in section 448,</quote> before <quote>the cash receipts</quote>.</text>
</paragraph><paragraph id="H771682FF44024EEF9D45B2A0E5902964"><enum>(2)</enum><text>Section 451 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H8353B5EE596D49788C56A5AB3D35AC1C" style="OLC">
<subsection id="HDF9F6D4E8CCB4B599330A0EA26FBE131"><enum>(j)</enum><header>Special rule for losses of certain service providers on accrual method of accounting</header>
<paragraph id="H3F3D6AB215424019AD7EB9D01205DBB3"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any person using an accrual method of accounting with respect to amounts to be
received for the performance of services by such person, such person shall
not be required to accrue any portion of such amounts which (on the basis
of such person’s experience) will not be collected if such services are in
the fields of health, law, engineering, architecture, accounting,
actuarial science, performing arts, consulting, or any other field
identified by the Secretary for purposes of this subsection.</text>
</paragraph><paragraph id="H78CB4F6FD612495C840F2C67646AB6A1"><enum>(2)</enum><header>Exception</header><text>Paragraph (1) shall not apply to any amount if interest is required to be paid on such amount or
there is any penalty for failure to timely pay such amount.</text>
</paragraph><paragraph id="H3BDBC8DDE64D43DD85A3E05D070EB9AD"><enum>(3)</enum><header>Regulations</header><text>The Secretary shall prescribe regulations to permit taxpayers to determine amounts referred to in
paragraph (1) using computations or formulas which, based on experience,
accurately reflect the amount of income that will not be collected by such
person. A taxpayer may adopt, or request consent of the Secretary to
change to, a computation or formula that clearly reflects the taxpayer’s
experience. A request under the preceding sentence shall be approved if
such computation or formula clearly reflects the taxpayer’s experience.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H7922DD5147FB4254BFC48EB54A351785"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection><subsection id="HA6F37F2E6E5842648354F26EF0FB9D50"><enum>(d)</enum><header>Change in method of accounting</header>
<paragraph id="H782EE56566C7478D8E71F5886B077F63"><enum>(1)</enum><header>In general</header><text>In the case of any qualified change in method of accounting for the taxpayer’s first taxable year
beginning after December 31, 2014—</text>
<subparagraph id="H24F7B14BEC66414BBC0FAC6E984B26C1"><enum>(A)</enum><text>such change shall be treated as initiated by the taxpayer,</text>
</subparagraph><subparagraph id="H7C5DC78A8779436F8B740374DC4A0E27"><enum>(B)</enum><text>such change shall be treated as made with the consent of the Secretary of the Treasury, and</text>
</subparagraph><subparagraph id="H0009EE792B3543CA9A78A709A60482B9"><enum>(C)</enum><text>if the net amount of the adjustments required to be taken into account by the taxpayer under
<external-xref legal-doc="usc" parsable-cite="usc/26/481">section 481</external-xref> of the Internal Revenue Code of 1986 by reason of such change
is positive—</text>
<clause id="HF131B5933D93416D8285A87240826CAE"><enum>(i)</enum><text>such amount shall be taken into account during the 4-taxable year period beginning with the earlier
of the taxpayer’s elected taxable year or the taxpayer’s first taxable
year beginning after December 31, 2018, as follows:</text>
<subclause id="HFCD4FA1820DB489CBF084EF1DC3FCF96"><enum>(I)</enum><text>10 percent of such amount in the first taxable year in such period,</text>
</subclause><subclause id="H88ED051AC155453E9908EF3486B082D0"><enum>(II)</enum><text>15 percent of such amount in the second taxable year in such period,</text>
</subclause><subclause id="H39B21DAA84344DFC8C42D711A8001308"><enum>(III)</enum><text>25 percent of such amount in the third taxable year in such period, and</text>
</subclause><subclause id="H8F8DA3CC8C9C4CA2A21D99857ABAF4D9"><enum>(IV)</enum><text>50 percent of such amount in the fourth taxable year in such period, and</text>
</subclause></clause><clause id="HD1F6E5434B5E471995AA41991749BBED"><enum>(ii)</enum><text>for purposes of applying the regulations and other guidance issued under such section (including
any provisions which require accelerated inclusion), the period beginning
with the taxpayer’s first taxable year beginning after December 31 2014,
and ending with the taxable year before the first taxable year referred to
in clause (i) shall not fail to be taken into account as part of the
period of the adjustment merely because such amount is not otherwise taken
into account under clause (i) during such period.</text>
</clause></subparagraph></paragraph><paragraph id="H830348AFA55C427BA10FBFA42C3A9A92"><enum>(2)</enum><header>Qualified change in method of accounting</header><text>For purposes of this subsection, the term <quote>qualified change in method of accounting</quote> means any change in method of accounting which—</text>
<subparagraph id="H26FAB3511B1B495D9C36C9F2FD5D1D69"><enum>(A)</enum><text>is required by the amendments made by this section, or</text>
</subparagraph><subparagraph id="H243E29BF8B284C378D91F4E474AE487A"><enum>(B)</enum><text>was prohibited under the Internal Revenue Code of 1986 prior to such amendments and is permitted
under such Code after such amendments.</text>
</subparagraph></paragraph><paragraph id="H70FB22453AF9407A9AB211BA704B8BBB"><enum>(3)</enum><header>Elected taxable year</header><text>For purposes of this subsection, the term <quote>elected taxable year</quote> means such taxable year as the taxpayer may elect (at such time and in such form and manner as the
Secretary may provide) which begins after December 31, 2014, and is before
the taxpayer’s second taxable year beginning after December 31, 2018.</text>
</paragraph></subsection></section><section id="H0BC2B72C43B248B6BFF85ADDB7354344"><enum>3302.</enum><header>Rules for determining whether taxpayer has adopted a method of accounting</header>
<subsection id="H2CD9F19B0A3F44A8AA1D3504EFCDEDFB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 446 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HA39213CD1AFA47AEB68CAB8C00EB234D" style="OLC">
<subsection id="H4AE4E5CC1E944FC6B962AB4A37DCC4AB"><enum>(g)</enum><header>Rules for treating accounting method as adopted by taxpayer</header><text display-inline="yes-display-inline">If the taxpayer uses a method of accounting with respect to any item on any return of tax—</text>
<paragraph id="H240487EEF7C84FA98613903400173D30"><enum>(1)</enum><text>in the case of any method of accounting which the taxpayer is permitted to use with respect to such
item, such method shall be treated as having been adopted by the taxpayer
with respect to such item, and</text>
</paragraph><paragraph id="H93F4689B98E74530AA6ECE50B130679C"><enum>(2)</enum><text>in the case of any method of accounting which the taxpayer is not permitted to use with respect to
such item, such method shall be treated as having been adopted by the
taxpayer with respect to such item if the taxpayer used the same method
with respect to such item on the return of tax for the preceding taxable
year.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H76D8A18D7B1545DCBCE60010221C9E8D"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HC90C6E0003D74ACAB36F014FE06D13C8"><enum>3303.</enum><header>Certain special rules for taxable year of inclusion</header>
<subsection id="H0E8AA3F4DB6C4320B4A3BF0A1438093B"><enum>(a)</enum><header>Inclusion not later than for financial accounting purposes</header><text>Section 451 is amended by redesignating subsections (b) through (j) as subsection (c) through (k),
respectively, and by inserting after subsection (a) the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="H33473B5DDE704120AC3645E03CEBC787" style="OLC">
<subsection id="H06C9E0ED958845C6A7668A1B1167C7B6"><enum>(b)</enum><header>Inclusion not later than for financial accounting purposes</header>
<paragraph id="HEF14449098904CEAA6EDD331D3C93777"><enum>(1)</enum><header>In general</header><text>In the case of a taxpayer the taxable income of which is computed under the accrual method of
accounting, the amount of any portion of any item of income shall be
included in gross income not later than the taxable year with respect to
which such amount is taken into account as income in—</text>
<subparagraph id="H9685B5398A6E4181A25251B5A08F7D18"><enum>(A)</enum><text>an audited financial statement of the taxpayer described in section 1221(b)(3)(B), or</text>
</subparagraph><subparagraph id="H1861A19EA7784EDB9B0FD30AE540C4E6"><enum>(B)</enum><text>such other financial statement as the Secretary may specify for purposes of this subsection.</text>
</subparagraph></paragraph><paragraph id="HA758631E56814E91994E829D048CC1D5"><enum>(2)</enum><header>Coordination with special rules for long-term contracts</header><text>Paragraph (1) shall not apply with respect to any item of income to which section 460 applies.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H38D605A246A74FE28BAF99E2847A36AB"><enum>(b)</enum><header>Treatment of advance payments</header><text>Section 451, as amended by subsection (a), is amended by redesignating subsections (c) through (k)
as subsections (d) through (l), respectively, and by inserting after
subsection (b) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H620FFF677CD741FDB0C5DA41E8CDEEE4" style="OLC">
<subsection id="H6340CC43E43B46288478142F149DFB16"><enum>(c)</enum><header>Treatment of advance payments</header>
<paragraph id="H620D58AD6FD244F9AAE2916B9ECA5808"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">A taxpayer which computes taxable income under the accrual method of accounting, and receives any
advance payment during the taxable year, shall—</text>
<subparagraph id="H7B96F4C2871145C0B773111CAED4223F"><enum>(A)</enum><text>except as provided in subparagraph (B), include such advance payment in gross income for such
taxable year, or</text>
</subparagraph><subparagraph commented="no" id="HAEA2E12FEECA4762BE50367FEA718E42"><enum>(B)</enum><text display-inline="yes-display-inline">if the taxpayer elects the application of this subparagraph with respect to the category of advance
payments to which such advance payment belongs, the taxpayer shall—</text>
<clause id="H62B0C57F07D9453DB28F3923D6C66FF0"><enum>(i)</enum><text>to the extent that any portion of such advance payment is required under subsection (b) to be
included in gross income in the taxable year in which such payment is
received, so include such portion, and</text>
</clause><clause id="H2D3D61FAA4CC4DDFB187273444BB6A47"><enum>(ii)</enum><text>include the remaining portion of such advance payment in gross income in the taxable year following
the taxable year in which such payment is received.</text>
</clause></subparagraph></paragraph><paragraph id="H228D077529544F068E60144F161EB028"><enum>(2)</enum><header>Election</header>
<subparagraph commented="no" id="HCE7429920F73437D8457E4088AC1EA57"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this paragraph, the election under paragraph (1)(B) shall be made
at such time, in such form and manner, and with respect to such categories
of advance payments, as the Secretary may provide.</text>
</subparagraph><subparagraph id="H2DCDCED4A030410FB441FC2D3D2D88F0"><enum>(B)</enum><header>Period to which election applies</header><text display-inline="yes-display-inline">An election under paragraph (1)(B) shall be effective for the taxable year with respect to which it
is first made and for all subsequent taxable years, unless the taxpayer
secures the consent of the Secretary to revoke such election. For purposes
of this title, the computation of taxable income under an election made
under paragraph (1)(B) shall be treated as a method of accounting.</text>
</subparagraph></paragraph><paragraph id="HA48B668BF8A04F6EA94D261F6D0F50A1"><enum>(3)</enum><header>Advance payment</header><text>For purposes of this subsection—</text>
<subparagraph id="H1C5E4CDDE6FD4F5A887C88C62E77EB0B"><enum>(A)</enum><header>In general</header><text>The term <quote>advance payment</quote> means any payment—</text>
<clause id="H12AEA2980D7C4D2184C6F3B0FAC4A433"><enum>(i)</enum><text>the full inclusion of which in the gross income of the taxpayer for the taxable year of receipt is
a permissible method of accounting under this section (determined without
regard to this subsection), and</text>
</clause><clause id="H26D97F0172914289AE8B12323D8853ED"><enum>(ii)</enum><text>which is for goods, services, or such other items as may be identified by the Secretary for
purposes of this clause.</text>
</clause></subparagraph><subparagraph id="HA681901FD46C4C28AE03678A6BE9617E"><enum>(B)</enum><header>Exclusions</header><text>Except as otherwise provided by the Secretary, such term shall not include—</text>
<clause id="H2A21D77641394B7EBFD8E0A4A0CFA58F"><enum>(i)</enum><text>rent,</text>
</clause><clause id="H87FBF0C9974A462EB262D35E24822D57"><enum>(ii)</enum><text>insurance premiums,</text>
</clause><clause id="H10A475965ECA4F2194DC6B58C38F12A8"><enum>(iii)</enum><text>payments with respect to financial instruments,</text>
</clause><clause id="H7B23BD04EDA14B5CBB0F1545828B2D17"><enum>(iv)</enum><text>payments with respect to warranty or guarantee contracts under which a third party is the primary
obligor,</text>
</clause><clause id="H51AAF68532C54CA282066AB37729F5C7"><enum>(v)</enum><text>payments subject to section 871(a), 881, 1441, or 1442,</text>
</clause><clause id="H7C6A9CAC5E364C1E8CB0AEEC08DEE106"><enum>(vi)</enum><text>payments in property to which section 83 applies, and</text>
</clause><clause id="H903A71C4601946BFB0BFBD7F1DAAE313"><enum>(vii)</enum><text>any other payment identified by the Secretary for purposes of this subparagraph.</text></clause></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF04922642A084B1BA098B34ED5FD2423"><enum>(c)</enum><header>Crop insurance proceeds and disaster payments</header><text>Section 451, as amended by subsections (a) and (b), is amended by striking subsection (f).</text>
</subsection><subsection id="HFE798886D3B7417892989A597B13A21C"><enum>(d)</enum><header>Livestock sold on account of drought, flood, and other weather-Related conditions</header><text>Section 451, as amended by subsections (a) and (b), is amended by striking subsection (g).</text>
</subsection><subsection id="HD7DCA33D11A843B9AB147D1B01752B6B"><enum>(e)</enum><header>Sales or dispositions To implement Federal Energy Regulatory Commission or State electric
restructuring policy</header><text>Section 451, as amended by subsections (a) and (b), is amended by striking subsection (k).</text>
</subsection><subsection id="HFBC216335CAC46828F0A2AD7FFC22D1B"><enum>(f)</enum><header>Conforming amendments</header><text>Section 451, as amended by subsections (a), (b), (c), (d), and (e), is amended by redesignating
subsections (h), (i), (j), and (l) as subsections (f), (g), (h), and (i),
respectively.</text>
</subsection><subsection id="HD5D6786480CE4A5CB2A9FFC09EA9CF6D"><enum>(g)</enum><header>Effective dates</header>
<paragraph id="HFF50C9011E644DA0AFD5BDF61F9ECD18"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to
taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="H051D926D0B5441AEA5C816E389A5316D"><enum>(2)</enum><header>Crop insurance proceeds and disaster payments</header><text>—</text>
<subparagraph id="H0154E9F4674E4FDEB49A8F464E87E8AD"><enum>(A)</enum><header>In general</header><text>Except as provided in subparagraph (B), the amendments made by subsection (c) shall apply to
destruction and damage of crops occurring after December 31, 2014.</text>
</subparagraph><subparagraph id="HEFC616CF185840F8A754C56C88C5058C"><enum>(B)</enum><header>Inability to plant</header><text>In the case of inability to plant crops because of a natural disaster, the amendments made by
subsection (c) shall apply to natural disasters occurring after December
31, 2014.</text>
</subparagraph></paragraph><paragraph id="HC906357E61964B1C92E78C876F46F445"><enum>(3)</enum><header>Livestock</header><text>The amendments made by subsection (d) shall apply to sales and exchanges after December 31, 2014.</text>
</paragraph><paragraph id="HE6FD3460A7984F68999C21C0F05FB588"><enum>(4)</enum><header>Sales or dispositions to implement electric restructuring policy</header><text>The amendments made by subsection (e) shall apply to sales and dispositions after December 31,
2013.</text>
</paragraph><paragraph display-inline="no-display-inline" id="H22BCE2183F2D420686479CE3B77F220D"><enum>(5)</enum><header>Change in method of accounting</header><text display-inline="yes-display-inline">In the case of any taxpayer required by the amendments made by subsections (a) and (b) to change
its method of accounting for its first taxable year beginning after
December 31, 2014—</text>
<subparagraph id="H8E19FAF174394CADAE5FDFEF272F4FB3"><enum>(A)</enum><text>such change shall be treated as initiated by the taxpayer, and</text>
</subparagraph><subparagraph id="HD1B28EC2973E4CEEAB8A0B97C8D616B5"><enum>(B)</enum><text>such change shall be treated as made with the consent of the Secretary of the Treasury.</text>
</subparagraph></paragraph></subsection></section><section id="HA5E1C44F6E1B4E5AB1B569032D6840E1"><enum>3304.</enum><header>Installment sales</header>
<subsection id="H0AD5E427BE4F47F9827F6BD69EAD5BA9"><enum>(a)</enum><header>Repeal of exceptions to treatment as dealer dispositions</header><text display-inline="yes-display-inline">Section 453(l) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H47D535F30D6D44D49344A3CAD6D80AB0" style="OLC">
<subsection id="HC93CDAAE113849D89896E9D7BF27FABC"><enum>(l)</enum><header>Dealer dispositions</header><text display-inline="yes-display-inline">For purposes of subsection (b)(2)(A), the term <quote>dealer disposition</quote> means any of the following dispositions:</text>
<paragraph id="HC7B920D19B9A4AE7B356BE7F2454039D"><enum>(1)</enum><header>Personal property</header><text display-inline="yes-display-inline">Any disposition of personal property by a person who regularly sells or otherwise disposes of
personal property of the same type on the installment plan.</text>
</paragraph><paragraph id="HE172ABFA094C4DEBA60225BB2F138A4D"><enum>(2)</enum><header>Real property</header><text>Any disposition of real property which is held by the taxpayer for sale to customers in the
ordinary course of the taxpayer’s trade or business.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HDC53EBD3244D40BBB1F6811D40F0424B"><enum>(b)</enum><header>Modification of rules for nondealers</header>
<paragraph id="H022A6FB58593402FB5AD4D957EFC9A43"><enum>(1)</enum><header>Repeal of special rule for interest payments</header><text>Section 453A(b)(2) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HD8003CB5CB1A4B41BEECDA6EDCBF85E5" style="OLC">
<paragraph id="HB9C23815914E4BC6B0DDF59F95CC3068"><enum>(2)</enum><header>Interest payment exception for obligations not outstanding at close of taxable year</header><text display-inline="yes-display-inline">Subsection (a)(1) shall apply to an obligation described in paragraph (1) arising during any
taxable year only if such obligation is outstanding as of the close of
such taxable year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H58724B47AE9745A0B11DC8255A39DCD6"><enum>(2)</enum><header>Repeal of exception for farm property</header><text>Section 453A(b)(3) is amended—</text>
<subparagraph id="H2E81F9BF407E4A1A9F9FAB7EEA783DFC"><enum>(A)</enum><text>by striking <quote>from the disposition—</quote> and all that follows and inserting <quote>from the disposition by an individual of personal use property (within the meaning of section
1275(b)(3)).</quote>, and</text>
</subparagraph><subparagraph id="HD586C871D1E04E2F9F9F825AB843337A"><enum>(B)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">and farm</header-in-text></quote> in the heading.</text>
</subparagraph></paragraph><paragraph id="H374DF3AC6500404C9A1CE8DEA17A4DE5"><enum>(3)</enum><header>Repeal of special rule for timeshares and residential lots</header><text>Section 453A(b) is amended by striking paragraph (4) and by redesignating paragraph (5) as
paragraph (4).</text>
</paragraph><paragraph id="HCDB0C68B3DE74E128708313CB264064F"><enum>(4)</enum><header>Conforming amendment</header><text>Section 453A(c) is amended—</text>
<subparagraph id="H6ABB0E4AB07F4B83BE5072268232DAB0"><enum>(A)</enum><text>by striking <quote>the applicable percentage of</quote> in paragraph (2)(A), and</text>
</subparagraph><subparagraph id="HBF452EAD68D64007A6AA661FA6A434B6"><enum>(B)</enum><text>by striking paragraph (4) and by redesignating paragraphs (5) and (6) as paragraphs (4) and (5),
respectively.</text>
</subparagraph></paragraph></subsection><subsection id="H12924A6CD0E04A31852B910AB07767A9"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to sales and other dispositions after December 31,
2014.</text>
</subsection></section><section id="H5349375CFBF742CFABC1EAD7E90C89A5"><enum>3305.</enum><header>Repeal of special rule for prepaid subscription income</header>
<subsection id="HC8573A5C89A54F3D93D62649C5D50AB8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart B of part II of subchapter E of chapter 1 is amended by striking section 455 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H4B9FE50F50C343B0B3F75E688CD329B2"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to payments received after December 31, 2014.</text>
</subsection></section><section id="H067C8FDD0B9A40E9A3C03E7D94B9C269"><enum>3306.</enum><header>Repeal of special rule for prepaid dues income of certain membership organizations</header>
<subsection id="H44810D6440C447EA8EBD62C580AF2793"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart B of part II of subchapter E of chapter 1 is amended by striking section 456 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H10CC4097BFC848048A3D57C2B3AC8683"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 277(b)(2) is amended by inserting <quote>(as in effect before its repeal)</quote> after <quote>section 456(c)</quote>.</text>
</subsection><subsection id="H2DB529DDFA0C413F98258656DCE1CD89"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to payments received after December 31, 2014.</text>
</subsection></section><section id="HCD1B87C01ADE4E968A5B53B7557433B3"><enum>3307.</enum><header>Repeal of special rule for magazines, paperbacks, and records returned after close of the taxable
year</header>
<subsection id="HC7FE7B1F0A4B4B2985F9B11E950DC18F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart B of part II of subchapter E of chapter 1 is amended by striking section 458 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H5C49BF74673C420A8136D715C36FC0C2"><enum>(b)</enum><header>Effective date</header>
<paragraph id="HE1E20388AE354FD695459EAE50225ADD"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="H6CC8E29A833B46DA97763436152F4A97"><enum>(2)</enum><header>Change in method of accounting</header><text display-inline="yes-display-inline">In the case of any taxpayer required by the amendments made by this section to change its method of
accounting for its first taxable year beginning after December 31, 2014—</text>
<subparagraph id="H11163E79A1D0449C993291A04F1BBF2D"><enum>(A)</enum><text>such change shall be treated as initiated by the taxpayer, and</text>
</subparagraph><subparagraph id="H7B534549CCBC4B59B1F82A2AA5625DD7"><enum>(B)</enum><text>such change shall be treated as made with the consent of the Secretary of the Treasury.</text>
</subparagraph></paragraph></subsection></section><section id="HBB13C3893CD24CCCB2D0454ABC000A1C"><enum>3308.</enum><header>Modification of rules for long-term contracts</header>
<subsection id="HA8BA0026C2094037B8854B04149BC36E"><enum>(a)</enum><header>Repeal of exception for home construction contracts</header><text display-inline="yes-display-inline">Paragraph (1) of section 460(e) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H344149F028A54B6186847DF87D73C6BB" style="OLC">
<paragraph id="HB00284E4B7EB4BAF9A576F26357DFDD6"><enum>(1)</enum><header>Exception for certain construction contracts</header><text display-inline="yes-display-inline">Subsections (a), (b), and (c)(1) and (2) shall not apply to any construction contract entered into
by a taxpayer—</text>
<subparagraph id="HFAB1D2A1057D4B6385D538FC8BB6AD3A"><enum>(A)</enum><text>who estimates (at the time such contract is entered into) that such contract will be completed
within the 2-year period beginning on the contract commencement date of
such contract, and</text>
</subparagraph><subparagraph id="H2C53D56FAC1140B3B1A51047DDD8B8C1"><enum>(B)</enum><text>whose average annual gross receipts for the 3 taxable years preceding the taxable year in which
such contract is entered into do not exceed $10,000,000.</text></subparagraph><continuation-text continuation-text-level="paragraph">For purposes of this paragraph, rules similar to the rules of paragraphs (2) and (3) of section
448(b) shall apply.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HEC4D97255FFC499382E2C9AB80F3B7D8"><enum>(b)</enum><header>Repeal of special rule for other residential construction contracts</header><text>Section 460(e) is amended by striking paragraphs (5) and (6).</text>
</subsection><subsection id="HF396758D863243BEA04CF679AA5AA290"><enum>(c)</enum><header>Repeal of special rules for qualified ship contracts</header>
<paragraph id="H2EB5DF10CADB4AF6891F33F7C20B828E"><enum>(1)</enum><header>In general</header><text>Section 10203(b) of the Revenue Act of 1987 is amended by striking paragraph (2).</text>
</paragraph><paragraph id="H5050FFAC22CC4DE2B13F62DB6F513F11"><enum>(2)</enum><header>Qualified naval ship contracts</header><text>The American Jobs Creation Act of 2004 is amended by striking section 708.</text>
</paragraph></subsection><subsection id="HEF3906BEE76747C8861ABB4E65837A4E"><enum>(d)</enum><header>Conforming amendments</header><text>Section 460(e) is amended by striking paragraphs (2) and (3) and by redesignating paragraph (4) as
paragraph (2).</text>
</subsection><subsection id="HF0E74D330982492A8BC6FB266FD2DA5D"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to contracts entered into after December 31, 2014.</text>
</subsection></section><section id="H887BD54747DA4245B872290BB4E12F24"><enum>3309.</enum><header>Nuclear decommissioning reserve funds</header>
<subsection id="H84AA86ADBFA84E2C81B1236A4BDF181B"><enum>(a)</enum><header>Gross income on nuclear decommissioning reserve funds taxed at corporate rate</header><text display-inline="yes-display-inline">Section 468A(e)(2) is amended by striking <quote>at the rate of 20 percent</quote> and inserting <quote>at a rate equal to the maximum rate in effect for such taxable year under section 11</quote>.</text>
</subsection><subsection id="HAF2D449A56254D1DB9BB8CFDAB4B234D"><enum>(b)</enum><header>Income inclusion upon disqualified distribution</header><text>Section 468A(c)(1) is amended by striking <quote>and</quote> at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and
inserting <quote>, and</quote>, and by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H4F887514696348E6980EF6BCF4532747" style="OLC">
<subparagraph id="H3B3B4A8B07B44BC285D8ECCC37E1843E"><enum>(C)</enum><text display-inline="yes-display-inline">if any distribution is made from the Fund during such taxable year which is not used as provided in
subsection (e)(4), the balance of the Fund determined immediately before
such distribution.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H8268960434AD44EAA7A1C93015FA6A6D"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section display-inline="no-display-inline" id="H9D54809F626346919D078F87B244194D" section-type="subsequent-section"><enum>3310.</enum><header>Repeal of last-in, first-out method of inventory</header>
<subsection id="HF38D5F4733AE4932AB941C6CE6E664B3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 471 is amended by redesignating subsection (c) as subsection (d) and by inserting after
subsection (b) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HF57770498C1E46C1B171F8BC27D757CF" style="OLC">
<subsection id="HBCB95D9CD180488C9927E2A8925E8531"><enum>(c)</enum><header>Last-In, first-Out method not permissible</header><text display-inline="yes-display-inline">The last-in, first-out method of determining inventories shall in no event be treated as clearly
reflecting income.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H459CBA9110A94FC6B2FB4DA710D050CF"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H80340132C70440F28B5F81932C29A6F5"><enum>(1)</enum><text display-inline="yes-display-inline">Subpart D of part II of subchapter E of chapter 1 is amended by striking sections 472, 473, and 474
(and by striking the items relating to such sections in the table of
sections for such subpart).</text>
</paragraph><paragraph id="H6225D4AADCDA4229B823BF6AC80A7AF2"><enum>(2)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H5E2225D4B3924F659A0F25A4BBEE3102"><enum>(A)</enum><text>Section 312(n), as amended by the preceding provisions of this Act, is amended by striking
paragraph (3) and by redesignating paragraphs (4) through (7) as
paragraphs (3) through (6), respectively.</text>
</subparagraph><subparagraph id="H68AAC59A9F0249DF93B8F0F89246F6DD" indent="up1"><enum>(B)</enum><text>Section 312(n)(6), as amended by the preceding provisions of this Act, is amended—</text>
<clause id="H59EAC4FB78D642949B969C564D0CCB98"><enum>(i)</enum><text>by striking <quote>paragraphs (4) and (6)</quote> in subparagraph (A) and inserting <quote>paragraph (4)</quote>, and</text>
</clause><clause id="H34A650095AAB414EAADB188E39C3E01D"><enum>(ii)</enum><text>by striking <quote>paragraph (5)</quote> in subparagraph (B) and inserting <quote>paragraph (3)</quote>.</text>
</clause></subparagraph><subparagraph id="H9AFF2DE0549C485083BA58228E7AA570" indent="up1"><enum>(C)</enum><text>Section 301(e)(3), as amended by the preceding provisions of this Act, is amended—</text>
<clause id="HF85FBF5D736741E8B31C6669D96EC8D3"><enum>(i)</enum><text>by striking <quote>paragraph (6)</quote> and inserting <quote>paragraph (5)</quote>, and</text>
</clause><clause id="HD63191178F8E42ACABE4CBFEE5F0C0A0"><enum>(ii)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">section <enum-in-header>312(n)(6)</enum-in-header></header-in-text></quote> in the heading and inserting <quote><header-in-text level="paragraph" style="OLC">section <enum-in-header>312(n)(5)</enum-in-header></header-in-text></quote>.</text>
</clause></subparagraph><subparagraph id="HB4BAE2D01F9E4AA5A5C06863B259205F" indent="up1"><enum>(D)</enum><text>Section 952(c)(3), as amended by the preceding provisions of this Act, is amended by striking <quote>paragraphs (3), (4), and (5)</quote> and inserting <quote>paragraphs (2), (3), and (4)</quote>.</text>
</subparagraph><subparagraph id="H4A9462C783794536A110EA23773987CE" indent="up1"><enum>(E)</enum><text>Section 1293(e)(3), as amended by the preceding provisions of this Act, is amended by striking <quote>paragraphs (3), (4), and (5)</quote> and inserting <quote>paragraphs (2), (3), and (4)</quote>.</text>
</subparagraph><subparagraph id="H7EE47984F1C2429C95631EFC990799FD" indent="up1"><enum>(F)</enum><text>Section 1503(e)(2)(C), as amended by the preceding provisions of this Act, is amended—</text>
<clause id="HD790CA65A7954043AA17C71E4CA9DC16"><enum>(i)</enum><text>by striking <quote>paragraph (6)</quote> and inserting <quote>paragraph (5)</quote>, and</text>
</clause><clause id="H9898D5EAD21148459EA0A023C71B1062"><enum>(ii)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">section <enum-in-header>312(n)(6)</enum-in-header></header-in-text></quote> in the heading and inserting <quote><header-in-text level="paragraph" style="OLC">section <enum-in-header>312(n)(5)</enum-in-header></header-in-text></quote>.</text>
</clause></subparagraph></paragraph><paragraph id="H38F03EFA6B374C81B6C1AF24D991C319"><enum>(3)</enum><text>Section 1363 is amended by striking subsection (d).</text>
</paragraph></subsection><subsection id="HBF3CF21C0EE74855B72DC2BD00CAF0C8"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection><subsection id="HEBE4D408E14D48B3B6ACAA5A575D1626"><enum>(d)</enum><header>Change in method of accounting</header>
<paragraph id="H3F57DD7BC57E43169BC85BC0CD316666"><enum>(1)</enum><header>In general</header><text>In the case of any taxpayer required by the amendments made by this section to change its method of
accounting for its first taxable year beginning after December 31, 2014—</text>
<subparagraph id="H8954A11B661848438AA0CA723AA2DC44"><enum>(A)</enum><text>such change shall be treated as initiated by the taxpayer,</text>
</subparagraph><subparagraph id="H8A4DB387A6E34E1EB34A2B147BE0F324"><enum>(B)</enum><text>such change shall be treated as made with the consent of the Secretary of the Treasury, and</text>
</subparagraph><subparagraph id="H2C6248D8A6EB4F4AB2517A0E23A99644"><enum>(C)</enum><text>if the net amount of the adjustments required to be taken into account by the taxpayer under
<external-xref legal-doc="usc" parsable-cite="usc/26/481">section 481</external-xref> of the Internal Revenue Code of 1986 by reason of such change
is positive—</text>
<clause id="HC0A5F1BF6F234ADABD9B09F1E66E06D0"><enum>(i)</enum><text>such amount shall be taken into account during the 4-taxable year period beginning with the earlier
of the taxpayer’s elected taxable year or the taxpayer’s first taxable
year beginning after December 31, 2018, as follows:</text>
<subclause id="H3A39ECAF31244FAF99A4B505FE7999EB"><enum>(I)</enum><text>10 percent of such amount in the first taxable year in such period,</text>
</subclause><subclause id="H9D4709B2093E4DC5AC6E5DCA27124365"><enum>(II)</enum><text>15 percent of such amount in the second taxable year in such period,</text>
</subclause><subclause id="HC591010CF8DC4341B7C3F3E5C8A276A6"><enum>(III)</enum><text>25 percent of such amount in the third taxable year in such period, and</text>
</subclause><subclause id="H487953CD823D48C6A52790E0EBC01BED"><enum>(IV)</enum><text>50 percent of such amount in the fourth taxable year in such period, and</text>
</subclause></clause><clause id="H6CDA4CBD5990402FA1D004BBF5A4620E"><enum>(ii)</enum><text>for purposes of applying the regulations and other guidance issued under such section (including
any provisions which require accelerated inclusion), the period beginning
with the taxpayer’s first taxable year beginning after December 31 2014,
and ending with the taxable year before the first taxable year referred to
in clause (i) shall not fail to be taken into account as part of the
period of the adjustment merely because such amount is not otherwise taken
into account under clause (i) during such period.</text>
</clause></subparagraph></paragraph><paragraph id="H598BA7E52D4E46A497B294D537EA8C89"><enum>(2)</enum><header>Elected taxable year</header><text>For purposes of this subsection, the term <quote>elected taxable year</quote> means such taxable year as the taxpayer may elect (at such time and in such form and manner as the
Secretary may provide) which begins after December 31, 2014, and is before
the taxpayer’s second taxable year beginning after December 31, 2018.</text>
</paragraph><paragraph id="H60B7197CC8534F3CA023689B27A79DCA"><enum>(3)</enum><header>Reduction in amount of adjustment for closely-held entities</header>
<subparagraph id="H052292E34788426D97923D262C6C5EC1"><enum>(A)</enum><header>In general</header><text>In the case of any closely-held entity, paragraph (1)(C) shall be applied by treating any reference
to <quote>such amount </quote> as a reference to 20 percent (28 percent in the case of a C corporation) of such amount.</text>
</subparagraph><subparagraph id="H497238CCA2B24607AB4C73A006341ED9"><enum>(B)</enum><header>Closely-held entity</header><text>For purposes of this paragraph—</text>
<clause id="HACBC4A280D4945F0A6F2165162DDC206"><enum>(i)</enum><header>In general</header><text>The term <quote>closely-held entity</quote> means any domestic corporation or domestic partnership which—</text>
<subclause id="HBE54CB8F7CBB485F9095E3D9DBFA69DC"><enum>(I)</enum><text>is not an ineligible entity,</text>
</subclause><subclause id="H332A31E4DC9D4BB8AB0AF44970DAB0C6"><enum>(II)</enum><text>does not have more than 100 shareholders or partners (as the case may be), and</text>
</subclause><subclause id="HE7A085BF493E4519B2948B646A7AE4FA"><enum>(III)</enum><text>does not have as a shareholder or partner a person (other than an estate, a trust described in
<external-xref legal-doc="usc" parsable-cite="usc/26/1361">section 1361(c)(2)</external-xref> of the Internal Revenue Code of 1986, or an
organization described section 1361(c)(6) of such Code) who is not an
individual.</text>
</subclause></clause><clause id="H7ACA057494B848EDBAE16BD9730E4E5A"><enum>(ii)</enum><header>Certain subsidiaries</header><text display-inline="yes-display-inline">An entity shall not fail to be treated as a closely-held entity by reason of clause (i)(III) if all
of the interests in such entity are held by a single closely-held entity
(determined without regard to this clause) and individuals taken into
account under clause (i)(II) with respect to such entity. In the case of
tiered entities (other than the top tier entity), the preceding sentence
shall be applied—</text>
<subclause id="H3586CDA06B9F4D5F847CF56B984423C4"><enum>(I)</enum><text>by substituting <quote>(determined after application of this clause)</quote> for <quote>(determined without regard to this clause)</quote>, and</text>
</subclause><subclause id="HE1BDD706C995451BB6DEBA356C994473"><enum>(II)</enum><text>by substituting <quote>with respect to the top tier entity</quote> for <quote>with respect to such entity</quote>.</text>
</subclause></clause><clause id="H51EC8AF798ED400C9B38B0A8D008D9A0"><enum>(iii)</enum><header>Ineligible entity</header><text>The term <quote>ineligible entity</quote> means any entity described in <external-xref legal-doc="usc" parsable-cite="usc/26/1361">section 1361(b)(2)</external-xref> of the Internal Revenue Code of 1986 applied by
substituting <quote>corporation or partnership</quote> for <quote>corporation</quote> each place it appears.</text>
</clause><clause id="HD084B7971E964B0986CBEA062882CA75"><enum>(iv)</enum><header>Date of determination</header><text>The status of any entity as a closely-held entity shall be determined as of February 26, 2014.</text>
</clause><clause id="H41AC268EA79E4B0C85DF9886EC25A995"><enum>(v)</enum><header>Sole proprietors</header><text>An individual operating a trade or business shall be treated as a closely-held entity.</text>
</clause></subparagraph><subparagraph commented="no" id="H933FAAC425CA41289867C3FFF07DCEE6"><enum>(C)</enum><header>Certain transfers disregarded</header>
<clause commented="no" id="H44A0798B5D6242D7B51898E0A4C4F288"><enum>(i)</enum><header>In general</header><text>In the case of any specified inventory transfer, the adjustments referred to in paragraph (1)(C)
shall be determined—</text>
<subclause commented="no" id="H63B53FBF504A48FEAFEC5939BF509EEC"><enum>(I)</enum><text>with respect to the transferor, as though the property transferred continued to be held at all
times by such transferor, and</text>
</subclause><subclause commented="no" id="H30CF43B3DFC54FCF9B9B931A10A164D1"><enum>(II)</enum><text>with respect to the transferee, as though such property was never transferred to such transferee.</text>
</subclause></clause><clause commented="no" id="H12FB08B6DA394F4AB6AAFAC9AB831D92"><enum>(ii)</enum><header>Specified inventory transfer</header><text>The term <quote>specified inventory transfer</quote> means any transfer of property described in section 1221(a)(1) if—</text>
<subclause id="H8EA43A93ED4348E1BBDD82B67E295D85"><enum>(I)</enum><text>such transfer is to a closely-held entity from any person who is not a closely-held entity,</text>
</subclause><subclause id="H1E0A2E8373CC4611B6450EC0ADC03A6D"><enum>(II)</enum><text>such transfer is on or after February 26, 2014, and before the beginning of the transferor’s first
taxable year beginning after December 31, 2014, and</text>
</subclause><subclause id="HFBC2827430FC4E2AB2458B9866F7DAF7"><enum>(III)</enum><text>the basis of such property in the hands of the transferee immediately after such transfer is either
determined by reference to the basis of such property in the hands of the
transferor or is less than the fair market value of such property at the
time of such transfer.</text>
</subclause></clause></subparagraph></paragraph></subsection></section><section id="HB678CB91DEDE44E9AD814753821C9E8E"><enum>3311.</enum><header>Repeal of lower of cost or market method of inventory</header>
<subsection id="H891362B43C2F4F3E834D122E1C058E1B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 471, as amended by the preceding provisions of this Act, is amended by redesignating
subsection (d) as subsection (e) and by inserting after subsection (c) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HD09B913A8F344C1E90DFEDF585ECD883" style="OLC">
<subsection id="H75CBEC5BC1064C0FA4F0BBD03A40F94F"><enum>(d)</enum><header>Lower of cost or market method not permissible</header><text display-inline="yes-display-inline">The lower of cost or market method of determining inventories shall in no event be treated as
clearly reflecting income. For purposes of the preceding sentence, the
lower of cost or market shall include the lower of cost or bona fide net
selling price.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HFCDAB6C6261F41469BA37A88E3483CA7"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection><subsection id="HFF5BE6447D3F4FA0B469A4220D39F45F"><enum>(c)</enum><header>Change in method of accounting</header>
<paragraph id="H752E96BB69434B9CAB74473BBB082EEC"><enum>(1)</enum><header>In general</header><text>In the case of any taxpayer required by the amendments made by this section to change its method of
accounting for its first taxable year beginning after December 31, 2014—</text>
<subparagraph id="H782FFF95F915445BB67F09448F004B79"><enum>(A)</enum><text>such change shall be treated as initiated by the taxpayer,</text>
</subparagraph><subparagraph id="HDD9673E350964D9D8A9978BBA584A606"><enum>(B)</enum><text>such change shall be treated as made with the consent of the Secretary of the Treasury, and</text>
</subparagraph><subparagraph id="H80D0001E6A1F436E8929B6834B62CA8D"><enum>(C)</enum><text>if the net amount of the adjustments required to be taken into account by the taxpayer under
<external-xref legal-doc="usc" parsable-cite="usc/26/481">section 481</external-xref> of the Internal Revenue Code of 1986 by reason of such change
is positive—</text>
<clause id="H058FC0A314FF4167AC49D0D6239BC960"><enum>(i)</enum><text>such amount shall be taken into account during the 4-taxable year period beginning with the earlier
of the taxpayer’s elected taxable year or the taxpayer’s first taxable
year beginning after December 31, 2018, as follows:</text>
<subclause id="H54B83459DC3748D0A23C2361B265B65B"><enum>(I)</enum><text>10 percent of such amount in the first taxable year in such period,</text>
</subclause><subclause id="H3E5B8A326A924E448250D2835A0FB56E"><enum>(II)</enum><text>15 percent of such amount in the second taxable year in such period,</text>
</subclause><subclause id="HCD17E7F44AF947DE9A22B654914DFBC9"><enum>(III)</enum><text>25 percent of such amount in the third taxable year in such period, and</text>
</subclause><subclause id="HAF603187088F4E11885FA0732AB5FC9F"><enum>(IV)</enum><text>50 percent of such amount in the fourth taxable year in such period, and</text>
</subclause></clause><clause id="H1B11308B02F5430684DBF36C980C4BCB"><enum>(ii)</enum><text>for purposes of applying the regulations and other guidance issued under such section (including
any provisions which require accelerated inclusion), the period beginning
with the taxpayer’s first taxable year beginning after December 31 2014,
and ending with the taxable year before the first taxable year referred to
in clause (i) shall not fail to be taken into account as part of the
period of the adjustment merely because such amount is not otherwise taken
into account under clause (i) during such period.</text>
</clause></subparagraph></paragraph><paragraph id="HAF8CEDC64E45423689EE9F28DB7BD7B0"><enum>(2)</enum><header>Elected taxable year</header><text>For purposes of this subsection, the term <quote>elected taxable year</quote> means such taxable year as the taxpayer may elect (at such time and in such form and manner as the
Secretary may provide) which begins after December 31, 2014, and is before
the taxpayer’s second taxable year beginning after December 31, 2018.</text>
</paragraph></subsection></section><section id="H9992F997A1F940FDA7E4078E2B701AE0"><enum>3312.</enum><header>Modification of rules for capitalization and inclusion in inventory costs of certain expenses</header>
<subsection id="HB1F03A7906A54433B77F410C73B5A112"><enum>(a)</enum><header>$10,000,000 gross receipts exception To apply to property produced by the taxpayer</header><text display-inline="yes-display-inline">Section 263A(b) is amended by striking all that follows paragraph (1) and inserting the following
new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="HD01F2B69810948599966E999EA3504DE" style="OLC">
<paragraph id="HE0378EBEC8EA4C9796B822D6BD17ADE6"><enum>(2)</enum><header>Property acquired for resale</header><text display-inline="yes-display-inline">Real or personal property described in section 1221(a)(1) which is acquired by the taxpayer for
resale.</text>
</paragraph><paragraph id="HD06C9432136241F3905AEB58D52A5DA8"><enum>(3)</enum><header>Exception for taxpayer with gross receipts of $10,000,000 or less</header><text display-inline="yes-display-inline">This section shall not apply to any property produced or acquired by the taxpayer during any
taxable year if the average annual gross receipts of the taxpayer (or any
predecessor) for the 3-taxable year period ending with the taxable year
preceding such taxable year do not exceed $10,000,000. For purposes of
this paragraph, rules similar to the rules of paragraphs (2) and (3) of
section 448(b) shall apply.</text>
</paragraph><paragraph id="H1A8F50BB4478462394C87187B717B41C"><enum>(4)</enum><header>Films, sound recordings, books, etc</header><text>For purposes of this subsection, the term <quote>tangible personal property</quote> shall include a film, sound recording, video tape, book, or similar property.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HABB95C3EAE434EEC8744D30FEAD6AC09"><enum>(b)</enum><header>Repeal of exceptions for timber and certain ornamental trees</header><text>Section 263A(c) is amended by striking paragraph (5).</text>
</subsection><subsection id="H21EA9B0CC98A43B58A2BD07EE0CC99B6"><enum>(c)</enum><header>Repeal of exception for qualified creative expenses</header><text>Section 263A is amended by striking subsection (h).</text>
</subsection><subsection id="H309246B676D2412CA0D303D00B5E6C0F"><enum>(d)</enum><header>Effective date</header>
<paragraph id="H70A2B94D97F944E5837FBBD0B0CE8F95"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="HAFD51D370B694480B51E6459D82C4781"><enum>(2)</enum><header>Change in method of accounting</header><text display-inline="yes-display-inline">In the case of any taxpayer required by the amendments made by this section to change its method of
accounting for its first taxable year beginning after December 31, 2014—</text>
<subparagraph id="HA6AB298678224739974D717DEB1FB2E9"><enum>(A)</enum><text>such change shall be treated as initiated by the taxpayer, and</text>
</subparagraph><subparagraph id="HC1EFCCA1B7C24D72A801BAC3F008650D"><enum>(B)</enum><text>such change shall be treated as made with the consent of the Secretary of the Treasury.</text>
</subparagraph></paragraph></subsection></section><section id="H338F04150F264475A92DE5C89E12F73E"><enum>3313.</enum><header>Modification of income forecast method</header>
<subsection id="H5431F059E00D42A6AB05B35C9474ED4A"><enum>(a)</enum><header>Extension of forecast period</header>
<paragraph id="HC1AA17D9373B411C91C9F0B6D6C2EA19"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of section 167(g) is amended by striking <quote>10th</quote> each place it appears and inserting <quote>20th</quote>.</text>
</paragraph><paragraph id="HA03E7E2EAC724376B6410ABCC3151A39"><enum>(2)</enum><header>Modification of recomputation years</header><text>Paragraph (4) of section 167(g) is amended by striking <quote>the 3d and the 10th</quote> and inserting <quote>the 5th, 10th, 15th, and 20th</quote>.</text>
</paragraph></subsection><subsection id="HF22D6FA87B8D47139EDD785C99271C2E"><enum>(b)</enum><header>Modification of rules for treatment of participations and residuals</header><text display-inline="yes-display-inline">Paragraph (7) of section 167(g) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H7DC7855456034B82BE7E8FB7D3B80D5A" style="OLC">
<paragraph id="H0101010D9AE24B8EBCA091257A0DAC9B"><enum>(7)</enum><header>Treatment of participations and residuals</header>
<subparagraph id="HE4C77741A3EF4B3DB4A7C81ECCA1A30A"><enum>(A)</enum><header>In general</header><text>In the case of any participation or residual with respect to any property to which this subsection
applies (including any property to which section 168 applies by reason of
paragraph (8)), the taxpayer—</text>
<clause id="H72E7DA8967D9482A82F7E12CDAC767A9"><enum>(i)</enum><text>shall exclude such participation or residual from the adjusted basis of such property, and</text>
</clause><clause id="HE9EB0C880127405FB06C495FD24CBF08"><enum>(ii)</enum><text>shall be allowed a deduction for such participation or residual in the taxable year in which such
participation or residual is paid.</text>
</clause></subparagraph><subparagraph id="H9C6906FC5700452B92FAACA26BFE9267"><enum>(B)</enum><header>Participations and residuals</header><text>For purposes of this paragraph, the term <quote>participation or residual</quote> means, with respect to any property, any cost the amount of which by contract varies with the
amount of income earned in connection with such property.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HCB09A196C2A34FDD9E29D1D2F05C669B"><enum>(c)</enum><header>Election To utilize 20-Year straight line recovery</header><text>Subsection (g) of section 167 is amended by redesignating (8) as paragraph (9) and by inserting
after paragraph (7) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H9F114301AB634327A8E37A3CE2EAAEFF" style="OLC">
<paragraph id="H64D2BB73B7AF44D08D5980FC5857B7C9"><enum>(8)</enum><header>Election to utilize 20-year straight line recovery</header><text>If the taxpayer elects the application of this paragraph for any taxable year, the depreciation
deduction allowable with respect to any property placed in service by the
taxpayer during such taxable year which would otherwise be determined
under paragraph (1) shall be determined under section 168—</text>
<subparagraph id="HF4D2F0F0E04E4661893726A949987E04"><enum>(A)</enum><text>by treating the straight line method as the applicable depreciation method, and</text>
</subparagraph><subparagraph id="HB4EA99FCDE324B319F6BB99284B0E10B"><enum>(B)</enum><text>by treating 20 years as the applicable recovery period.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H645A6DF4D75247BDB2F7C8458D1A0FA1"><enum>(d)</enum><header>Repeal of special rules for certain musical works and copyrights</header><text>Subsection (g) of section 167, as amended by subsection (c), is amended by striking paragraph (9).</text>
</subsection><subsection id="H63AD55CDD45F46A4AA7A1453409AAE40"><enum>(e)</enum><header>Safe harbor amortization of certain intangible assets</header><text>Effective for property placed in service after December 31, 2014, the Secretary of the Treasury, or
the Secretary’s designee, shall revise Treasury Regulation section
1.167(a)–3(b) (and such regulation shall be applied) such that the safe
harbor amortization for certain intangible assets to which such regulation
applies shall allow the taxpayer to treat such asset as having a useful
life equal to 20 years (and not 15 years).</text>
</subsection><subsection id="H4483550700B544A38A5C0B411F723444"><enum>(f)</enum><header>Effective date</header><text>The amendments made by this section shall apply to property placed in service after December 31,
2014.</text>
</subsection></section><section id="HF1458A9B011C405DBA1800C8717D0422"><enum>3314.</enum><header>Repeal of averaging of farm income</header>
<subsection id="H340E52221A2B4F06AA54C3BD9ACBA1AB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter Q of chapter 1 is amended by striking part I (and by striking the item relating to such
part in the table of parts for such subchapter).</text>
</subsection><subsection id="HE77475AF63CE43299DB657C941B616DB"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section commented="no" id="HF7B2CB4041B3425F998F0C7160FEE591"><enum>3315.</enum><header>Treatment of patent or trademark infringement awards</header>
<subsection commented="no" id="H5D5E6E12E8B740ADB8AE0571B8E5ED0A"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part II of subchapter B of chapter 1 is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H3B653D95CEB24841AA84D0F0B4A0A5DA" style="OLC">
<section commented="no" id="H8FAFD4FDBD9D46078FE9EC38CA52F3EC"><enum>91.</enum><header>Patent or trademark infringement awards</header>
<subsection commented="no" id="H3259C2CBA7454252B97CBC6CF8FA8A59"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in subsection (b), any payment received for infringement of any patent or
trademark (whether by reason of judgment or settlement) shall be included
in gross income as ordinary income.</text>
</subsection><subsection commented="no" id="H49EE6E1FFC1347FE90BB22A7B1645F5B"><enum>(b)</enum><header>Impairment of capital</header><text>If the taxpayer demonstrates to the satisfaction of the Secretary that a payment described in
subsection (a) constitutes damages received by reason of the reduction in
value of property of the taxpayer caused by the infringement referred to
in subsection (a)—</text>
<paragraph commented="no" id="HA8767C26430845F59922D027050F88A9"><enum>(1)</enum><text>the taxpayer’s basis in such property shall be reduced (but not below zero) by the amount of such
payment, and</text>
</paragraph><paragraph commented="no" id="HDBA9BB3DF0284B25A6F1B06221143E71"><enum>(2)</enum><text>subsection (a) shall apply to so much of such payment as exceeds the amount of the reduction under
paragraph (1).</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H081D1C132EC341F18ADCF225C95B9645"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph commented="no" id="HF791EAE6BE0E46D7B5FA6A590939764A"><enum>(1)</enum><text display-inline="yes-display-inline">Section 1016(a) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H115D9D11BF4B4DF283DA3193FC68BF7D" style="OLC">
<paragraph commented="no" id="H5EF1AD009D3D447E91599B4F47793A20"><enum>(38)</enum><text display-inline="yes-display-inline">to the extent provided in section 91(b)(1),</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H6B01F6B3A2FF4F689D585116CB9D7E4C"><enum>(2)</enum><text display-inline="yes-display-inline">The table of sections for part II of subchapter B of chapter 1 is amended by adding at the end the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="HA00B21962CE04B4191D1D9CA7A25D684" style="OLC">
<toc container-level="quoted-block-container" idref="H3B653D95CEB24841AA84D0F0B4A0A5DA" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H8FAFD4FDBD9D46078FE9EC38CA52F3EC" level="section">Sec. 91. Patent or trademark infringement awards.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HEE9A873C963D4FF192F63F68E7725183"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to payments received pursuant to judgments and
settlements after December 31, 2014.</text>
</subsection></section><section id="HB8BEBDDB3A4E4A4B8815AF890B875BEC"><enum>3316.</enum><header>Repeal of redundant rules with respect to carrying charges</header>
<subsection id="H41D3BD902EC147E59D3D3B4DD54200D3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part IX of subchapter B of chapter 1 is amended by striking section 266 (and by striking the item
relating to such section in the table of sections for such subpart).</text>
</subsection><subsection id="HE0C3AC46AC894DC8B1198A4AF413C4CF"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HE0D80F5DEFE74029AF4271736A27FFBE"><enum>(1)</enum><text display-inline="yes-display-inline">Section 163(n) is amended by striking paragraph (3) and by redesignating paragraphs (4) and (5) as
paragraphs (3) and (4), respectively.</text>
</paragraph><paragraph id="H390811AD667143E29E6DF9E6B3323F33"><enum>(2)</enum><text>Section 1016(a)(1)(A)(i), as amended by section 3514, is amended by striking <quote>described in section 266</quote>.</text>
</paragraph></subsection><subsection id="HEF572117BDBE4583BF6384C0435C6DE4"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31,
2014.</text>
</subsection></section><section id="H2DDEA71DEB1A4972B0EAC50797896F0A"><enum>3317.</enum><header>Repeal of recurring item exception for spudding of oil or gas wells</header>
<subsection id="HAC311A4091CF473A8F17E298831B3EEB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 461(i) is amended by striking paragraph (2) and by redesignating paragraphs (3), (4), and
(5) as paragraphs (2), (3), and (4), respectively.</text>
</subsection><subsection id="H70B31E2505B0402CAACC50C6227B29F2"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="HADA57453A10A4EBDB69B5EA2D5E04ABA"><enum>E</enum><header>Financial Instruments</header>
<part id="H30484BC9EAAA438F802F3F0BFCDB908B"><enum>1</enum><header>Derivatives and hedges</header>
<section display-inline="no-display-inline" id="HB424FE9D382644D6BB705BEEB927035E" section-type="subsequent-section"><enum>3401.</enum><header>Treatment of certain derivatives</header>
<subsection id="H9DBCB12C1F0F474DB75A9E4B32B5D782"><enum>(a)</enum><header>In General</header><text>Subchapter E of chapter 1 is amended by adding at the end the following new part:</text>
<quoted-block display-inline="no-display-inline" id="HBB34A9BA04444004AE68067BAC0D276E" style="OLC">
<part id="HBB50E3E62A634B0F8DD82AA90E1A8D9A"><enum>IV</enum><header>Derivatives</header>
<toc container-level="part-container" idref="HBB50E3E62A634B0F8DD82AA90E1A8D9A" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H1B1947FDCAAD4E348246664802ADA253" level="section">Sec. 485. Treatment of certain derivatives.</toc-entry>
<toc-entry idref="HF87FF96EEF69464E9CBD26737B057D62" level="section">Sec. 486. Derivative defined.</toc-entry></toc>
<section id="H1B1947FDCAAD4E348246664802ADA253"><enum>485.</enum><header>Treatment of certain derivatives</header>
<subsection id="H9F2EBACB5D4D4242B885328A13C71B8C"><enum>(a)</enum><header>In general</header><text>For purposes of this subtitle—</text>
<paragraph id="H8A590B8007B645D2BC833B7D1B343AF9"><enum>(1)</enum><text>any derivative held by a taxpayer at the close of the taxable year shall be treated as sold for its
fair market value on the last business day of such taxable year (and any
gain or loss shall be taken into account for the taxable year), and</text>
</paragraph><paragraph id="H9DF10681DC604B7F9F6F8E9930AEB063"><enum>(2)</enum><text>proper adjustment shall be made in the amount of any gain or loss subsequently realized for gain or
loss taken into account by reason of paragraph (1).</text>
</paragraph></subsection><subsection id="H2AF4583197AE41E5A10E90D611ED3F5B"><enum>(b)</enum><header>Treatment as ordinary income or loss; allowance as net operating loss</header><text display-inline="yes-display-inline">All items of income, gain, loss, and deduction with respect to any derivative—</text>
<paragraph id="H10F42B105D5D4547AFCE542666D30275"><enum>(1)</enum><text>shall be treated as ordinary income or loss, and</text>
</paragraph><paragraph id="H814FD6828E344FBDBA5E5F726E08153A"><enum>(2)</enum><text>shall be treated for purposes of section 172(d)(4) as attributable to a trade or business of the
taxpayer.</text>
</paragraph></subsection><subsection id="HB07873598DC34DEFB8B97DC6249FDB7D"><enum>(c)</enum><header>Mark to market of certain offsetting positions</header>
<paragraph id="HAF20835F27FD43FF9ED673A03DBF8BE4"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any straddle which includes any derivative, subsections (a) and (b) shall apply to
all positions comprising such straddle in the same manner as such
subsections apply to such derivative.</text>
</paragraph><paragraph id="HE8E681250D11441189255E93C665B651"><enum>(2)</enum><header>Application to built-in gain positions</header>
<subparagraph id="H6E2F8D984BC240D6A85D2C10E7CDB867"><enum>(A)</enum><header>In general</header><text>In the case of any built-in gain position to which subsection (a) applies by reason of paragraph
(1)—</text>
<clause id="HBEF343B9C27C4028B9FDD92B5966D78D"><enum>(i)</enum><text display-inline="yes-display-inline">in addition to any other time at which such position is treated as sold under subsection (a)(1),
such position shall be treated as sold for its fair market value at the
time that the straddle is established with respect to such position,</text>
</clause><clause id="H17E2910E7A3144839556E3FCDE862FFB"><enum>(ii)</enum><text display-inline="yes-display-inline">proper adjustment shall be made in the amount of any gain or loss subsequently realized for gain
taken into account by reason of clause (i), and</text>
</clause><clause id="HFEE5AD5FB4EC474EA3449DCA1DF87FD4"><enum>(iii)</enum><text>subsection (b) shall not apply to any gain taken into account by reason of clause (i).</text>
</clause></subparagraph><subparagraph id="H8EABB43FAA4E495181B28A9D3FFAC408"><enum>(B)</enum><header>Built-in gain position</header><text>For purposes of this subsection, the term <quote>built-in gain position</quote> means any position (other than a derivative to which subsection (a) applies) with respect to which
a gain would be realized if such position were sold for its fair market
value at the time that the straddle is established with respect to such
position.</text>
</subparagraph><subparagraph id="H1DBB66D0BACB4622BBBA9C92AA324EF0"><enum>(C)</enum><header>Exception for straight debt</header><text>Subparagraph (A) shall not apply to any position with respect to debt if—</text>
<clause id="H45A0F5CD0C8E4B4CB2188B1197BEC392"><enum>(i)</enum><text>the interest payments (or other similar amounts) with respect to such position meet the
requirements of section 860G(a)(1)(B)(i), and</text>
</clause><clause id="H475ECEEEA42D4CBB83DC3A156BB25EFD"><enum>(ii)</enum><text>such position is not convertible (directly or indirectly) into stock of the issuer or any related
person.</text>
</clause></subparagraph><subparagraph id="H0112C98EBBFD4E60931BE7E28D64B57D"><enum>(D)</enum><header>Exception for straddles consisting of qualified covered call options and the optioned stock</header><text display-inline="yes-display-inline">Subparagraph (A) shall not apply to any position which is part of a straddle if—</text>
<clause id="H634740C83B62478E91A054919A55652F"><enum>(i)</enum><text>all the offsetting positions which are part of such straddle consist of 1 or more qualified covered
call options (as defined in paragraph (6)) and the stock to be purchased
from the taxpayer under such options, and</text>
</clause><clause id="HBFD30925C3E54EAFA628AEA214F788A8"><enum>(ii)</enum><text>such straddle is not part of a larger straddle.</text>
</clause></subparagraph></paragraph><paragraph id="H187C4CFFF180486B85D0152EAD620739"><enum>(3)</enum><header>Application to built-in loss positions</header>
<subparagraph id="H6D90ED53546546D6A7C3A36091B74850"><enum>(A)</enum><header>In general</header><text>In the case of any built-in loss position to which subsection (a) applies by reason of paragraph
(1), any gain or loss realized under subsection (a)(1) shall be properly
adjusted so as not to take into account the loss referred to in
subparagraph (B) with respect to such position.</text>
</subparagraph><subparagraph id="H02E124D7A2A448BEA54DDDB4F624BE41"><enum>(B)</enum><header>Built-in loss position</header><text>For purposes of subparagraph (A), the term <quote>built-in loss position</quote> means any position (other than a derivative to which subsection (a) applies) with respect to which
a loss would be realized if such position were sold for its fair market
value at the time that the straddle is established with respect to such
position.</text>
</subparagraph></paragraph><paragraph id="H3F4A0C3DF049402380FA3B5B0081BDB1"><enum>(4)</enum><header>Holding period of non-derivatives</header><text>For purposes of section 1222, in the case of any position to which subsection (a) applies by reason
of paragraph (1), the holding period of such position shall not include—</text>
<subparagraph id="H15F1DA0176EF41D780346807BCE17EDE"><enum>(A)</enum><text>the period during which subsection (a) applies to such position, and</text>
</subparagraph><subparagraph id="H25634F1213AE4D4C8CD302E57BA092BA"><enum>(B)</enum><text>in the case of a built-in gain position, the period before such position is treated as sold under
paragraph (2)(A).</text>
</subparagraph></paragraph><paragraph id="H3BAB6C5B4B634900BFD6BE6B51CFE251"><enum>(5)</enum><header>Straddle</header><text>For purposes of this section—</text>
<subparagraph id="H64718141E84E4A229EABBD68611B78BE"><enum>(A)</enum><text display-inline="yes-display-inline">the term <quote>straddle</quote> has the meaning given such term by section 1092(c) applied by treating all offsetting positions as
being with respect to personal property, and</text>
</subparagraph><subparagraph id="HE66BEC5ADBB44EA7AA4887F50A209DAE"><enum>(B)</enum><text>the term <quote>position</quote> includes any derivative.</text>
</subparagraph></paragraph><paragraph id="H21FE741CB0E14D41B51A15C4D4B62D44"><enum>(6)</enum><header>Qualified covered call options</header>
<subparagraph id="H46B741D76142490E9CC06E77CB1A0326"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of paragraph (2)(D), the term <quote>qualified covered call option</quote> means any option granted by the taxpayer to purchase stock held by the taxpayer (or stock acquired
by the taxpayer in connection with the granting of the option) but only
if—</text>
<clause id="H4C008CA605F34F7A98556622B7D5D150"><enum>(i)</enum><text>such option is traded on a national securities exchange which is registered with the Securities and
Exchange Commission or other market which the Secretary determines has
rules adequate to carry out the purposes of this paragraph,</text>
</clause><clause id="HCC03785220F04AF3AAFAA63520F1BD84"><enum>(ii)</enum><text>such option is granted—</text>
<subclause id="H907B949B6D094BA99D678B937896AE09"><enum>(I)</enum><text>more than 30 days before the day on which the option expires, and</text>
</subclause><subclause id="H4D11C124BFCD481AA779FDB9AC209842"><enum>(II)</enum><text>not more than 90 days before the day on which the option expires,</text>
</subclause></clause><clause id="H9A8652B83A5749C0B54DC46C68B1A8C1"><enum>(iii)</enum><text>such option is not granted by an options dealer (as defined in subparagraph (B)) in connection with
such dealer’s activity of dealing in options, and</text>
</clause><clause id="HF01EAFB6CB8642D5954767601229E204"><enum>(iv)</enum><text>gain or loss with respect to such option would not be ordinary income or loss if determined without
regard to this section.</text>
</clause></subparagraph><subparagraph id="H7FA216BD026B4EA7B2E7059F44695695"><enum>(B)</enum><header>Options dealer</header><text display-inline="yes-display-inline">For purposes of subparagraph (A), the term <quote>options dealer</quote> means—</text>
<clause id="H09C0FA02EE3A45A8B79C04184648A0E6"><enum>(i)</enum><text>any person registered with an appropriate national securities exchange as a market maker or
specialist in listed options, and</text>
</clause><clause id="HCCB1A62F65434CF3BB5B34FC45B5A8D3"><enum>(ii)</enum><text>to the extent provided by the Secretary consistent with the purposes of this paragraph, any person
whom the Secretary determines performs functions similar to the persons
described in clause (i).</text>
</clause></subparagraph><subparagraph id="H3407F81632C74F4ABE0D66511BA7AF9C"><enum>(C)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the
purposes of this paragraph and paragraph (2)(D). Such regulations may
include modifications to the provisions of this paragraph and paragraph
(2)(D) which are appropriate to take account of changes in the practices
of option exchanges or to prevent the use of options for tax avoidance
purposes.</text>
</subparagraph></paragraph></subsection><subsection id="HC9D1B30CF5F64AE9886230C4FBCE572B"><enum>(d)</enum><header>Terminations, etc</header>
<paragraph id="HBB79D2B279EB4DE58740AA7789434417"><enum>(1)</enum><header>In general</header><text>The rules of subsections (a) and (b) shall also apply to the termination (or transfer) during the
taxable year of the taxpayer’s obligation (or rights) with respect to a
derivative by offsetting, by taking or making delivery, by exercise or
being exercised, by assignment or being assigned, by lapse, by expiration,
by settlement, or otherwise.</text>
</paragraph><paragraph id="H250963ED6CD54B0085250E98C2BC21E3"><enum>(2)</enum><header>Mark to market of all positions in straddle if any position terminated or transferred</header><text>If paragraph (1) applies with respect to any position which is part of a straddle, the rules of
subsections (a) and (b) shall apply to every position which is part of
such straddle.</text>
</paragraph></subsection><subsection id="HE8F79AD532E2477FA11227A9D9CBD958"><enum>(e)</enum><header>Determination of fair market value</header><text>For purposes of this section—</text>
<paragraph id="H3AFFDA26851448CBAFF502A6DDD720FF"><enum>(1)</enum><header>Terminations, etc</header><text>For purposes of subsection (d), fair market value shall be determined at the time of the
termination (or transfer).</text>
</paragraph><paragraph id="HBDB6B20BF9124152877CCE4713138AD9"><enum>(2)</enum><header>Blockage factor not taken into account</header><text>To the extent provided in regulations prescribed by the Secretary, fair market value shall be
determined without regard to any premium or discount based on the
proportion of the total available trading units which are held.</text>
</paragraph></subsection><subsection id="H60B30306E99A456FBB4FA4FE7723C37E"><enum>(f)</enum><header>Coordination with certain rules</header><text>The rules of sections 263(g) and 263A shall not apply to any derivative or other position to which
subsection (a) applies, and section 1091 shall not apply (and section 1092
shall apply) to any loss recognized under subsection (a).</text>
</subsection></section><section id="HF87FF96EEF69464E9CBD26737B057D62"><enum>486.</enum><header>Derivative defined</header>
<subsection display-inline="no-display-inline" id="H1A2C58089A054A08A6108815C95829E9"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this part, except as otherwise provided in this section, the term <term>derivative</term> means any contract (including any option, forward contract, futures contract, short position,
swap, or similar contract) the value of which, or any payment or other
transfer with respect to which, is (directly or indirectly) determined by
reference to one or more of the following:</text>
<paragraph id="H71A18E94EE374524BE7391D5D83774B4"><enum>(1)</enum><text>Any share of stock in a corporation.</text>
</paragraph><paragraph id="HFE1D16FB5E0E4586B4C732D8FF8F3301"><enum>(2)</enum><text>Any partnership or beneficial ownership interest in a partnership or trust.</text>
</paragraph><paragraph id="H6F84770624CD47B3A81303A47A8CD76A"><enum>(3)</enum><text>Any evidence of indebtedness.</text>
</paragraph><paragraph id="H359CD53A9AA04B95AB569BC6D37C974B"><enum>(4)</enum><text>Except as provided in subsection (d), any real property.</text>
</paragraph><paragraph id="H0F3EFBABE6DC47D48B14E0FAAF635115"><enum>(5)</enum><text>Any commodity which is actively traded (within the meaning of section 1092(d)(1)).</text>
</paragraph><paragraph id="HFBCC09F90D7947C4BB7340B3F9CEE153"><enum>(6)</enum><text>Any currency.</text>
</paragraph><paragraph id="HA373E1A79AE44E97AB37B583D7FE988F"><enum>(7)</enum><text>Any rate, price, amount, index, formula, or algorithm.</text>
</paragraph><paragraph id="H928ACF8EFCAA4FE2B2D61C0DCCF785EB"><enum>(8)</enum><text>Any other item as the Secretary may prescribe.</text></paragraph><continuation-text continuation-text-level="subsection">Such term shall not include any item described in paragraphs (1) through (8).</continuation-text></subsection><subsection id="H2C307F32FA794CE9AF4EBB4501418346"><enum>(b)</enum><header>Exceptions</header>
<paragraph id="HDA3915E4F08F4C4D8F5106247D9E9986"><enum>(1)</enum><header>Certain real property</header>
<subparagraph id="H5D1DA005454D4ABD9602B38A60394D24"><enum>(A)</enum><header>In general</header><text>For purposes of subsection (a)(4), the term <quote>real property</quote> shall not include—</text>
<clause id="H54E93B2ED3AA48B4B120CCAAC99163EC"><enum>(i)</enum><text>a tract of real property (as defined in section 1237(c)), or</text>
</clause><clause id="HFCC5F5EDACB744C483A6C97C2210B5F8"><enum>(ii)</enum><text>any real property which would be property described in section 1221(a)(1) with respect to the
taxpayer if held directly by the taxpayer.</text>
</clause></subparagraph><subparagraph id="H6C5FA0B9BE774798A950FE8A215B0BBF"><enum>(B)</enum><header>Regulations</header><text>The Secretary shall prescribe regulations or other guidance under which multiple tracts of real
property may be treated as a single tract of real property for purposes of
subparagraph (A)(i) if the contract referred to in subsection (a) is of a
type which is designed to facilitate the acquisition or disposition of
such real property.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H1EDBCB961EF34E3A827521848A5B4E56"><enum>(2)</enum><header>Hedging transactions</header>
<subparagraph id="HA7E0FB3E20A74D22866D8F512038BE57"><enum>(A)</enum><header>In general</header><text>For purposes of this part, the term <quote>derivative</quote> shall not include any contract which is part of a hedging transaction (as defined in section
1221(b)).</text>
</subparagraph><subparagraph id="HD31653A9C3694C6686CDA1B5C75FFDE9"><enum>(B)</enum><header>Section 988 hedging transactions</header><text>For exception for section 988 hedging transactions, see section 988(d)(1).</text>
</subparagraph></paragraph><paragraph id="HE0FBC6C4BB0C4EDD933AC222582C7C2B"><enum>(3)</enum><header>Securities lending, sale-repurchase, and similar financing transactions</header><text display-inline="yes-display-inline">To the extent provided by the Secretary, for purposes of this part, the term <quote>derivative</quote> shall not include the right to the return of the same or substantially identical securities
transferred in a securities lending transaction, sale-repurchase
transaction, or similar financing transaction.</text>
</paragraph><paragraph id="HFDCCA53E62D54E898FD29B70DF491C76"><enum>(4)</enum><header>Options received in connection with the performance of services</header><text display-inline="yes-display-inline">For purposes of this part, the term <quote>derivative</quote> shall not include any option described in section 83(e)(3) received in connection with the
performance of services.</text>
</paragraph><paragraph id="HC7693FFEBAFA4511A2561E5003508FA5"><enum>(5)</enum><header>Insurance contracts, annuities, and endowments</header><text display-inline="yes-display-inline">For purposes of this part, the term <quote>derivative</quote> shall not include any insurance, annuity, or endowment contract issued by an insurance company to
which subchapter L applies (or issued by any foreign corporation to which
such subchapter would apply if such foreign corporation were a domestic
corporation).</text>
</paragraph><paragraph id="HFC3403CCB0D644D4A16BE6ABAEC8AD0B"><enum>(6)</enum><header>Derivatives with respect to stock of members of same worldwide affiliated group</header><text display-inline="yes-display-inline">For purposes of this part, the term <quote>derivative</quote> shall not include, and subsections (c) and (d)(2) of section 485 shall not apply to, any
derivative (determined without regard to this subsection) with respect to
stock issued by any member of the same worldwide affiliated group (as
defined in section 864(f)) in which the taxpayer is a member.</text>
</paragraph><paragraph id="H0A74B3208A0645CFB04C864E9D80A82E"><enum>(7)</enum><header>Commodities used in normal course of trade or business</header><text display-inline="yes-display-inline">For purposes of this part, the term <quote>derivative</quote> shall not include any contract with respect to any commodity if—</text>
<subparagraph id="H9348843F51D8473A990EB2B79F22C948"><enum>(A)</enum><text>such contract requires physical delivery with the option of cash settlement only in unusual and
exceptional circumstances, and</text>
</subparagraph><subparagraph id="HB3E18DB48F8E4C3BB23998D8B736D563"><enum>(B)</enum><text>such commodity is used (and is used in quantities with respect to which such derivative relates) in
the normal course of the taxpayer’s trade or business (or, in the case of
an individual, for personal consumption).</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="HE5A2456965E74F8480EA4EC5C9969CB2"><enum>(c)</enum><header>Contracts with embedded derivative components</header>
<paragraph id="H815346E7E8DE47689D46A85CC7F35F41"><enum>(1)</enum><header>In general</header><text>If a contract has derivative and nonderivative components, then each derivative component shall be
treated as a derivative for purposes of this part. If the derivative
component cannot be separately valued, then the entire contract shall be
treated as a derivative for purposes of this part.</text>
</paragraph><paragraph id="H3B2E56A1316A4034A349B0B0C3A00360"><enum>(2)</enum><header>Exception for certain embedded derivative components of debt instruments</header><text>A debt instrument shall not be treated as having a derivative component merely because—</text>
<subparagraph id="HC5DA0A7C66E94B25969513FFB88F4CCC"><enum>(A)</enum><text>such debt instrument is denominated in a nonfunctional currency (as defined in section
988(c)(1)(C)(ii)),</text>
</subparagraph><subparagraph id="HA31AC13EEA814192A75CAB51205D8718"><enum>(B)</enum><text>payments with respect to such debt instrument are determined by reference to the value of a
nonfunctional currency (as so defined), or</text>
</subparagraph><subparagraph id="H8E57E749E35443DFA19F6B33BBF9E33A"><enum>(C)</enum><text display-inline="yes-display-inline">such debt instrument is a convertible debt instrument, contingent payment debt instrument, a
variable rate debt instrument, an integrated debt instrument, an
investment unit, a debt instrument with alternative payment schedules, or
other debt instrument with respect to which the regulations under section
1275(d) apply.</text>
</subparagraph></paragraph></subsection><subsection id="HAF9F4F52194E4C31802C0A63E39ACCC8"><enum>(d)</enum><header>Treatment of American Depository Receipts and similar instruments</header><text>Except as otherwise provided by the Secretary, for purposes of this part, American depository
receipts (and similar instruments) with respect to shares of stock in
foreign corporations shall be treated as shares of stock in such foreign
corporations.</text></subsection></section></part><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H7003A045DE3542B9BE88580E8F5C7087"><enum>(b)</enum><header>Coordination with rules for dealers and traders</header>
<paragraph id="HA0F4598B1709499CA2029589828A09DC"><enum>(1)</enum><header>Derivatives not treated as securities</header><text>Section 475(c)(2) is amended—</text>
<subparagraph id="HC1CD1E7046EB4DE1B88AABE8F08F0ED7"><enum>(A)</enum><text>by adding <quote>and</quote> at the end of subparagraph (C),</text>
</subparagraph><subparagraph id="H07904B28FCEC48B99F57703AF02AD6F6"><enum>(B)</enum><text>by striking subparagraphs (D) and (E) and by redesignating subparagraph (F) as subparagraph (D),</text>
</subparagraph><subparagraph id="H38FFB4E2305B4E478D94DD66A57A2522"><enum>(C)</enum><text>by striking <quote>subparagraph (A), (B), (C), (D), or (E)</quote> in subparagraph (D)(i), as so redesignated, and inserting <quote>subparagraph (A), (B), or (C)</quote>, and</text>
</subparagraph><subparagraph id="H643359DAC57542CFAA08DDD1ABF86C38"><enum>(D)</enum><text>by amending the last sentence to read as follows: <quote>Such term shall not include any position to which section 485(a) applies.</quote></text>
</subparagraph></paragraph><paragraph id="HD5DC6561D622439893B6E76C5601753D"><enum>(2)</enum><header>Derivatives not treated as commodities</header><text>Section 475(e)(2) is amended—</text>
<subparagraph id="H538C336DB34441B2821B4D8B34DE4BAB"><enum>(A)</enum><text>by adding <quote>and</quote> at the end of subparagraph (A),</text>
</subparagraph><subparagraph id="H7057545E198D4B6983FE764ED15C7D54"><enum>(B)</enum><text>by striking subparagraphs (B) and (C) and by redesignating subparagraph (D) as subparagraph (B),
and</text>
</subparagraph><subparagraph id="H13C46C12EF9440E39A9D3827E7E77B52"><enum>(C)</enum><text>by striking <quote>subparagraph (A), (B) or (C)</quote> in subparagraph (B)(i), as so redesignated, and inserting <quote>subparagraph (A)</quote>.</text>
</subparagraph></paragraph><paragraph id="H524B646DF07740A889555DD3C9D46641"><enum>(3)</enum><header>Conforming amendments</header>
<subparagraph id="HEF11FB3DC6DE44C5B2FDAE6896C1416B"><enum>(A)</enum><text display-inline="yes-display-inline">Section 475(b) is amended by striking paragraph (4).</text>
</subparagraph><subparagraph id="H0FFC814387CF44FA8E12F76D18781158"><enum>(B)</enum><text>Section 475(d)(2)(B) is amended—</text>
<clause id="H9617CA6D5F6C47C7966E86C3D5D94E0B"><enum>(i)</enum><text>by striking <quote>subsection (c)(2)(F)(iii)</quote> and inserting <quote>subsection (c)(2)(D)(iii)</quote>, and</text>
</clause><clause id="H6607E479D7184927885055EE426E21D5"><enum>(ii)</enum><text>by striking <quote>subsection (c)(2)(F)</quote> and inserting <quote>subsection (c)(2)(D)</quote>.</text>
</clause></subparagraph><subparagraph id="H663A2D100CA44557B69BDFC11F9794A8"><enum>(C)</enum><text>Section 475(f)(1)(D) is amended by striking <quote>subsections (b)(4) and (d)</quote> and inserting <quote>subsection (d)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="HBE5C5281FB3A44B38FDEAF829936BD09"><enum>(c)</enum><header>Coordination with straddle rules</header>
<paragraph id="H52025AACCF6B4F1D8781CF3DB21ACE62"><enum>(1)</enum><header>In general</header><text>Section 1092(e) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HBBFECD9679424CB9A95B29682701EE76" style="OLC">
<subsection id="HA7DDBA6C716B4C92B15F0559A8AA3EF9"><enum>(e)</enum><header>Exception for hedging transactions and straddles with derivatives</header><text display-inline="yes-display-inline">This section shall not apply in the case of—</text>
<paragraph id="H30308C239FE84B75AA0AEAC255ED8CA1"><enum>(1)</enum><text>any hedging transaction (as defined in section 1221(b)), and</text>
</paragraph><paragraph id="H003B5A67269B4A158D57E31B762919A6"><enum>(2)</enum><text>any straddle (as defined in section 485) which includes any derivative (as defined in section 486).</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HCEC6E32D864F43FCB770087B87D5C675"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="H412A890A5BB549919563B12E43826D9E"><enum>(A)</enum><text>Section 263(g)(3) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H17A04ADFA5FB480C885987FAE0E86AFF" style="OLC">
<paragraph id="H21119E1A6E544C888D5580EBCCF2B622"><enum>(3)</enum><header>Exception for hedging transactions and straddles with derivatives</header><text display-inline="yes-display-inline">This subsection shall not apply in the case of—</text>
<subparagraph id="H09290354ECBF473DB7DD6B0EBCBFA726"><enum>(A)</enum><text>any hedging transaction (as defined in section 1221(b)), and</text>
</subparagraph><subparagraph id="H4020472BAE36470CA91F029DD8DEEEBF"><enum>(B)</enum><text>any straddle (as defined in section 485) which includes any derivative (as defined in section 486).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H03B8E79136FA4BF7AEC63EF7EA535E70"><enum>(B)</enum><text>Section 1092(b) is amended—</text>
<clause id="H2C64685763AF4C2EA518B3C856FFCF5C"><enum>(i)</enum><text>by striking paragraph (2), and</text>
</clause><clause id="H687C97EDA6C343A1940B0D6193D7B22E"><enum>(ii)</enum><text>by striking all that precedes <quote>The Secretary shall</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H01B88FDFF52C4779B0AA759DBC1E4DA1" style="OLC">
<subsection id="H5ECF21223A6E4F3D8ADE20E401B2EEC7"><enum>(b)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary shall</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="HB335D0C76BFB405AB82CB781FDF2E72D"><enum>(C)</enum><text>Section 1092(c) is amended by striking paragraph (4).</text>
</subparagraph><subparagraph id="HA02462DF8735479DBDFC6194FDFB9B7A"><enum>(D)</enum><text>Section 1092 is amended by striking subsection (f) and by redesignating subsection (g) as
subsection (f).</text>
</subparagraph></paragraph></subsection><subsection id="H8647254AFFC94387B72D320B4889A651"><enum>(d)</enum><header>Treatment of convertible debt instruments</header><text>The Secretary of the Treasury, or the Secretary’s designee, shall modify the regulations issued
under <external-xref legal-doc="usc" parsable-cite="usc/26/1275">section 1275(d)</external-xref> of the Internal Revenue Code of 1986 to provide that
convertible debt instruments are treated in a manner similar to contingent
payment debt instruments.</text>
</subsection><subsection id="H8DB04DAE2408433CAF734A92BDFFA221"><enum>(e)</enum><header>Repeal of certain other superceded rules for determining capital gains and losses</header>
<paragraph id="H06FE6BE628F348D3BE1B906160BD8378"><enum>(1)</enum><header>In general</header><text>Part IV of subchapter P of chapter 1 is amended by striking sections 1233, 1234, 1234A, 1234B,
1236, 1256, 1258, 1259, and 1260 (and by striking the items relating to
such sections in the table of sections for such part).</text>
</paragraph><paragraph commented="no" id="HA3A4AAA5C55A4AD786675A6EB48638FD"><enum>(2)</enum><header>Conforming amendments related to repeal of section 1233</header><text display-inline="yes-display-inline">Section 1092(b) is amended by inserting <quote>(as in effect before their repeal)</quote> after <quote>section 1233</quote>.</text>
</paragraph><paragraph commented="no" id="H19AC97C1AFF443958BF6C25263583203"><enum>(3)</enum><header>Conforming amendments related to repeal of section 1234</header><text>Section 6045(h)(2) is amended—</text>
<subparagraph commented="no" id="H25B16BF4B1E6491DBAD5AC26078670DF"><enum>(A)</enum><text>by striking <quote>(as defined in section 1234(b)(2)(A)</quote>, and</text>
</subparagraph><subparagraph commented="no" id="H8FA5997BC70E429690F3F86063754EE1"><enum>(B)</enum><text>by adding at the end the following: <quote>For purposes of the preceding sentence, the term <quote>closing transaction</quote> means any termination of the taxpayer’s obligation under an option in property other than through
the exercise or lapse of the option.</quote>.</text>
</subparagraph></paragraph><paragraph id="H4A63278BD6B0453DBB1CE50FB52540E2"><enum>(4)</enum><header>Conforming amendments related to repeal of section 1236</header>
<subparagraph display-inline="no-display-inline" id="H8469BA48992D4858ACF822CC1948F467"><enum>(A)</enum><text>Section 475(d)(3)(A) is amended by striking <quote>or section 1236(b)</quote>.</text>
</subparagraph><subparagraph id="HBE2563E6C73046B7907400D5C1D65198"><enum>(B)</enum><text>Section 512(b)(5) is amended by striking <quote>section 1236(c)</quote> and inserting <quote>section 1058(c)</quote>.</text>
</subparagraph><subparagraph id="HB132C663A556459E98AAE565F90DFBDC"><enum>(C)</enum><text>Section 1058 is amended—</text>
<clause id="H02FC678917924AC295536FA9A0D30CDA"><enum>(i)</enum><text>by striking <quote>(as defined in section 1236(c))</quote> in subsection (a), and</text>
</clause><clause id="H620632BCDEDC4D9DAAF62B7B7B7B7663"><enum>(ii)</enum><text>by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HEE84E1983BD042608164079F79E0955B" style="OLC">
<subsection id="HC1BCE5EE31F943DF8746E7C0433C8983"><enum>(c)</enum><header>Securities</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>security</quote> means any share of stock in any corporation, certificate of stock or interest in any corporation,
note, bond, debenture, or evidence of indebtedness, or any evidence of an
interest in or right to subscribe to or purchase any of the foregoing.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph></paragraph><paragraph id="H9A755124A484462D8AFEB32C43CA09E6"><enum>(5)</enum><header>Conforming amendments related to repeal of section 1256</header>
<subparagraph id="H6C14D6CCA70442738CFCEC37F3E0C305"><enum>(A)</enum><text display-inline="yes-display-inline">Section 461(i)(2)(B), as amended by the preceding provisions of this Act, is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H398F22A8C17E420DA8FA87C8CDD05D13" style="OLC">
<subparagraph id="H4ADD1BD6BC5F4B4C873AF1520AC75842"><enum>(B)</enum><text display-inline="yes-display-inline">any partnership or other entity (other than a corporation which is not an S corporation) if more
than 35 percent of the losses of such entity during the taxable year are
allocable to limited partners or limited entrepreneurs (within the meaning
of section 461(j)(4)), and</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H748D3D63EC964CCFA298D7D6C8249EAF"><enum>(B)</enum><text>Section 475(d)(1) is amended by striking <quote>sections 263(g), 263A, and 1256(a)</quote> and inserting <quote>sections 263(g) and 263A</quote>.</text>
</subparagraph><subparagraph id="H21A9F9A3401B46B98CD67A00C307F71B"><enum>(C)</enum><text>Section 988(c)(1) is amended by striking subparagraphs (D) and (E).</text>
</subparagraph><subparagraph id="H93EAFE49EAF14DDE9C50BBBF653B1972"><enum>(D)</enum><text>Section 1092(a)(3)(C)(ii)(II) is amended by striking <quote>section 1256(e)</quote> and inserting <quote>section 1221(b)</quote>.</text>
</subparagraph><subparagraph id="H84358E2FDDEE48639983E0AC38799C9D"><enum>(E)</enum><text>Section 1092(d) is amended by striking paragraphs (5) and (6) and by redesignating paragraphs (7)
and (8) as paragraphs (5) and (6), respectively.</text>
</subparagraph><subparagraph id="H8AA20B9FC0E840B08BE3F31CD768DC36"><enum>(F)</enum><text>Section 1212 is amended by striking subsection (c).</text>
</subparagraph><subparagraph id="HFA9C396AC7034B18AF423C11822FBC48"><enum>(G)</enum><text>Section 1223 is amended by striking paragraphs (7) and (14).</text>
</subparagraph><subparagraph id="H1B5FB06A67A64E199BCF9662248A5A09"><enum>(H)</enum><text>Section 1281(b)(1)(E) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HE92FCEE7C9F046288E09A874136CEBB4" style="OLC">
<subparagraph id="H21003CCA11D24289B0DFF32E9DEFB22A"><enum>(E)</enum><text display-inline="yes-display-inline">is a hedging transaction (as defined in section 1221(b)), or</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HDFAB8711A0E14878B1D6011479D9961F"><enum>(I)</enum><text>Section 1402 is amended by striking subsection (i).</text>
</subparagraph><subparagraph id="H217D5655867D4757BC7CCBD7C21DA31C"><enum>(J)</enum><text>Section 4982(e)(6)(B) is amended by striking <quote>sections 1256 and 1296</quote> and inserting <quote>sections 485 and 1296</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H3C86285193C24F6B89A92FA30D27A558"><enum>(6)</enum><header>Conforming amendments related to repeal of section 1259</header><text display-inline="yes-display-inline">Section 475(f)(1) is amended by striking subparagraph (C) and by redesignating subparagraph (D) as
subparagraph (C).</text>
</paragraph></subsection><subsection id="HC95BFCBB405C4ACE9ECFD1A04047DE26"><enum>(f)</enum><header>Other conforming amendments</header>
<paragraph id="H1B498BD2ACC4437D8D32FF44D6639A77"><enum>(1)</enum><text display-inline="yes-display-inline">Section 355(g)(2)(B)(i)(V) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H1BDBB21E36C544299FF96B5E72158DBB" style="OLC">
<subclause id="HE0075A6CD7314D5B8D55C432E8D094AD"><enum>(V)</enum><text display-inline="yes-display-inline">any derivative (as defined in section 486),</text></subclause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HA73E627F164E41D1933D56B9DCA341F5"><enum>(2)</enum><text>Section 856(n)(4) is amended by inserting <quote>or derivatives (as defined in section 486)</quote> after <quote>securities (as defined in section 475(c)(2))</quote>.</text>
</paragraph><paragraph id="H1D04D2DECC0446489426B6C7C92D4E54"><enum>(3)</enum><text>Section 857(e)(2)(B)(i), as amended by the preceding provisions of this Act, is amended by striking <quote>section 860E or 1272</quote> and inserting <quote>section 485, 860E, or 1272</quote>.</text>
</paragraph><paragraph id="HB3604434AA2A4AA995E8EDE7A0441DC0"><enum>(4)</enum><text>Section 988(d)(1) is amended—</text>
<subparagraph id="H959E996EB4CB48B4956BBE23EA9F3257"><enum>(A)</enum><text>by striking <quote>or 1256</quote> and inserting <quote>or 485</quote>, and</text>
</subparagraph><subparagraph id="HD756108E48F5482384E568CD1EF5B001"><enum>(B)</enum><text>by striking <quote>1092, and 1256</quote> and inserting <quote>485, and 1092</quote>.</text>
</subparagraph></paragraph><paragraph id="H3E017E65D2E442E09FB01F69A2642CB6"><enum>(5)</enum><text>Section 1091(e) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HCF433CFB27C4410798955E0DF39052D4" style="OLC">
<subsection id="HDAC7067AA4144C36AB0EA135A153490F"><enum>(e)</enum><header>Coordination with mark to market of derivatives</header><text display-inline="yes-display-inline">Notwithstanding any other provision of this section, a derivative (as defined in section 486) shall
not be treated as a security for purposes of this section.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HF34D6FEC56F546A98DC7E17A507B0C59"><enum>(6)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H56A5A7FA15474910A62BDB42EB877CAF"><enum>(A)</enum><text>Section 1221(a)(6) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H61601BA1CB9947C99C18EF810816FA5C" style="OLC">
<paragraph id="H848235F0F49740889EFEDEEA0A9F7104"><enum>(6)</enum><text display-inline="yes-display-inline">any derivative (as defined in section 486),</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HD9C39B3C432C4A73965512E13BE79EEC" indent="up1"><enum>(B)</enum><text>Section 1221(b) is amended by striking paragraph (1).</text>
</subparagraph></paragraph><paragraph id="HDD1A757E1237466FAEA3C331CB390CFF"><enum>(7)</enum><text>Section 4975(f)(11)(D) is amended by striking clauses (i) and (ii) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H7F59EB0D2FDF4A3FA3DB2208142F8573" style="OLC">
<clause id="H8AD9FA682E754159902A3120DBD4075E"><enum>(i)</enum><header>Security</header><text display-inline="yes-display-inline">The term <quote>security</quote> means any security described in section 475(c)(2) (without regard to subparagraph (D)(iii)
thereof) and any derivative with respect to such a security (within the
meaning of section 486).</text>
</clause><clause id="H0462693BEEEF4A64B28966DBFD40F7A7"><enum>(ii)</enum><header>Commodity</header><text>The term <quote>commodity</quote> means any commodity described in section 475(e)(2) (without regard to subparagraph (B)(iii)
thereof) and any derivative with respect to such a commodity (within the
meaning of section 486).</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H96601C216203417EA24C394B2CAD0C40"><enum>(8)</enum><text display-inline="yes-display-inline">The table of parts for subchapter E of chapter 1 is amended by adding at the end the following new
item:</text>
<quoted-block id="H96601C216203417EA24C394B2C5D0C40"><toc regeneration="no-regeneration">
<toc-entry level="part">Part IV. Derivatives</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H0888FFB5DA79407690ED92EE95B0F480"><enum>(g)</enum><header>Effective dates</header><text>The amendments made by this section shall apply to—</text>
<paragraph id="H2155D6F804674AF9A4989030472E8575"><enum>(1)</enum><text>taxable years ending after December 31, 2014, in the case of property acquired and positions
established after December 31, 2014, and</text>
</paragraph><paragraph id="HF4AE4B56448E4F30A20CD95318F55825"><enum>(2)</enum><text>taxable years ending after December 31, 2019, in the case of any other property or position.</text></paragraph><continuation-text continuation-text-level="subsection">For purposes of this subsection, any property acquired on or before December 31, 2014, which
becomes part of a straddle (as defined in section 485, as added by this
section) after such date shall be treated as a position established after
such date.</continuation-text></subsection></section><section id="H62ADBAB9A79A4C269A04BFA88ED45E27"><enum>3402.</enum><header>Modification of certain rules related to hedges</header>
<subsection id="H529E96AA9EE4440DBAD153E8FB0B4D4A"><enum>(a)</enum><header>Treatment of hedges identified for financial accounting purposes</header>
<paragraph id="HA5E3177DD5A941AABA1A651282D83C8A"><enum>(1)</enum><header>In general</header><text>Section 1221(b), as amended by the preceding provisions of this Act, is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HD39A404B07864E1DB92F48F411A173AE" style="OLC">
<subsection id="HCE7931944C364FC6B13292CD99F5A292"><enum>(b)</enum><header>Hedging transaction</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H4A690E646BCA42BCBAF530EFABEB4347"><enum>(1)</enum><header>In general</header><text>The term <quote>hedging transaction</quote> means any transaction described in paragraph (2) and identified under paragraph (3).</text>
</paragraph><paragraph id="H36158A1372CD49BFADB94F56B14DC4A8"><enum>(2)</enum><header>Transaction described</header><text display-inline="yes-display-inline">A transaction is described in this paragraph if such transaction is entered into by the taxpayer in
the normal course of the taxpayer’s trade or business primarily—</text>
<subparagraph id="H42E13134265F461A91BF1F9E9BC1C735"><enum>(A)</enum><text>to manage risk of price changes or currency fluctuations with respect to ordinary property which is
held or to be held by the taxpayer,</text>
</subparagraph><subparagraph id="HC1494D2CA98646C5A4CD404333149255"><enum>(B)</enum><text>to manage risk of interest rate or price changes or currency fluctuations with respect to
borrowings made or to be made, or ordinary obligations incurred or to be
incurred, by the taxpayer, or</text>
</subparagraph><subparagraph id="H2FCAA176FDD5406F85A6754F31C57BD3"><enum>(C)</enum><text>to manage such other risks as the Secretary may prescribe in regulations.</text>
</subparagraph></paragraph><paragraph id="HBFCDC1B369C34554A1591DD023960E81"><enum>(3)</enum><header>Identification</header><text display-inline="yes-display-inline">A transaction is identified under this paragraph if—</text>
<subparagraph id="HAE85A92384AA4FBD97E071063E521F8B"><enum>(A)</enum><text>such transaction is clearly identified as a hedging transaction for purposes of this paragraph
before the close of the day on which it was acquired, originated, or
entered into (or such other time as the Secretary may by regulations
prescribe), or</text>
</subparagraph><subparagraph id="HA3D1BFBBA79042919BE02C1C9FB288AB"><enum>(B)</enum><text>such transaction is treated as a hedging transaction (within the meaning of generally accepted
accounting principles) for purposes of an audited financial statement of
the taxpayer which—</text>
<clause id="H13D0A8BA27F74BEFA89584516B03D0CE"><enum>(i)</enum><text>is certified as being prepared in accordance with generally accepted accounting principles, and</text>
</clause><clause id="H99AA144978C74E2FB0D9EA4E83830978"><enum>(ii)</enum><text display-inline="yes-display-inline">is used for the purposes of a statement or report—</text>
<subclause id="HCE6E2D91B8C84790A8818F429283F5FC"><enum>(I)</enum><text>to shareholders, partners, or other proprietors, or to beneficiaries, or</text>
</subclause><subclause id="HD2CAB2368D0A48BAB3A8A80860BF4328"><enum>(II)</enum><text>for credit purposes.</text>
</subclause></clause></subparagraph></paragraph><paragraph id="H57BFDD3C156E41A9A1F348929A36C70E"><enum>(4)</enum><header>Treatment of nonidentification or improper identification of hedging transactions</header><text display-inline="yes-display-inline">The Secretary shall prescribe regulations to properly characterize any income, gain, expense, or
loss arising from a transaction—</text>
<subparagraph id="H527579C857B140C58A8978F069A9AD48"><enum>(A)</enum><text>which would be a hedging transaction if identified under paragraph (3), or</text>
</subparagraph><subparagraph id="H7F1C3084C05340FEBE3FE0A58DEAC258"><enum>(B)</enum><text>which is identified under paragraph (3) but is not a transaction described in paragraph (2).</text></subparagraph><continuation-text continuation-text-level="paragraph">In the case of a transaction identified under paragraph (3) solely by reason of paragraph (3)(B),
subparagraph (B) of this paragraph shall not apply with respect to such
transaction unless the taxpayer treats such transaction as a hedging
transaction for purposes of any provision of this title.</continuation-text></paragraph><paragraph id="H87C42681A3934FCF8404C50C200B42CC"><enum>(5)</enum><header>Bonds held by an insurance company</header><text display-inline="yes-display-inline">For purposes of paragraph (2)(A), in the case of an insurance company to which subchapter L
applies, any bond, debenture, note, certificate, or other evidence of
indebtedness held by the taxpayer shall be treated as ordinary property.</text>
</paragraph><paragraph id="H2E55953AB8D0442BA126FCD0B36E33E1"><enum>(6)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations as are appropriate to carryout the purposes of this
subsection and subsection (a)(7) in the case of transactions involving
related parties.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HDDD996EADB58483A8F4463A2453E49EA"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="H6D2B93B464004ED081A4BC1B2EEFD677"><enum>(A)</enum><text display-inline="yes-display-inline">Section 856(c)(5)(G)(i) is amended by striking <quote>(as defined in clause (ii) or (iii) of section 1221(b)(2)(A)) which is clearly identified pursuant
to section 1221(a)(7)</quote> and inserting <quote>(as defined in section 1221(b) (determined without regard to paragraph (2)(A) thereof)</quote>.</text>
</subparagraph><subparagraph id="HA9A263A1D9FD4D17ABB7EF62DA7CA904"><enum>(B)</enum><text>Section 954(c)(5)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HDD179D00B42543709EFAB4CEB80E989C" style="OLC">
<subparagraph id="HBA63C371EE7C4E48B27DB32589F06F96"><enum>(A)</enum><header>Commodity hedging transactions</header>
<clause id="HAF8645B1ECFD4F7FB05297B69866D031"><enum>(i)</enum><header>In general</header><text>For purposes of paragraph (1)(C)(i), the term <quote>commodity hedging transaction</quote> means any transaction with respect to a commodity if such transaction would be a hedging
transaction under section 1221(b) if—</text>
<subclause id="H374A94FFE401422BB88DED805ABE72BD"><enum>(I)</enum><text>the only transactions described in paragraph (2) thereof were transactions described in clause
(ii), and</text>
</subclause><subclause id="HAEB0F70F78FC4F7AAD3BC924840BBC64"><enum>(II)</enum><text>paragraphs (3) and (4) thereof were applied by substituting <quote>controlled foreign corporation</quote> for <quote>taxpayer</quote> each place it appears.</text>
</subclause></clause><clause id="H12848C61B7F74A51959429AABB4C405C"><enum>(ii)</enum><header>Transaction described</header><text display-inline="yes-display-inline">A transaction is described in this clause if such transaction is entered into by the controlled
foreign corporation in the normal course of the controlled foreign
corporation’s trade or business primarily—</text>
<subclause id="H2FFD4B9B9D5E43D2BF91DC4AAB68777F"><enum>(I)</enum><text>to manage risk of price changes or currency fluctuations with respect to ordinary property or
property described in section 1231(b) which is held or to be held by the
controlled foreign corporation, or</text>
</subclause><subclause id="HD6A4691C0F5445CC9E132F4CC92AA01A"><enum>(II)</enum><text>to manage such other risks as the Secretary may prescribe in regulations.</text></subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HDF30F1C0AC054B79988620E5AAE63AB7"><enum>(C)</enum><text>Section 1221(a)(7) is amended by striking <quote>which is clearly</quote> and all that follows through <quote>regulations prescribe)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H2BFB9665B89A46E0AA42CD8A15A63494"><enum>(b)</enum><header>Special rule for commodity hedging transactions involving related controlled foreign corporations</header><text>Section 954(c)(5)(A), as amended by subsection (a), is amended by adding at the end the following
new clause:</text>
<quoted-block display-inline="no-display-inline" id="HADC24876A48945B088A7D0C4F01D270E" style="OLC">
<clause id="H5D8C4F94E17E4C4B96E55C666E66ACEE"><enum>(iii)</enum><header>Application to related controlled foreign corporations</header>
<subclause id="HAF13F66646A74AEC905C47F7816CAB2C"><enum>(I)</enum><header>In general</header><text>In the case of qualified property, clause (ii)(I) shall be applied by substituting <quote>the controlled foreign corporation or another controlled foreign corporation which is a related
person (within the meaning of subsection (d)(3))</quote> for <quote>the controlled foreign corporation</quote>.</text>
</subclause><subclause id="H3D268751F5754FF69E11B74F8D847F7E"><enum>(II)</enum><header>Qualified property</header><text display-inline="yes-display-inline">For purposes of this clause, the term <quote>qualified property</quote> means ordinary property or property described in section 1231(b) (if disposed of at a gain) the
income from the disposition of which would be neither subpart F income nor
income treated as effectively connected with the conduct of a trade or
business in the United States.</text></subclause></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H06B642A0E35E483CBD5133AB6974EE64"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to transactions entered into after December 31,
2014.</text>
</subsection></section></part><part id="H90270072CA2C406A98DD42EBE71C00CC"><enum>2</enum><header>Treatment of debt instruments</header>
<section id="H04E9A6D47A2146569E78ED9CF016C758"><enum>3411.</enum><header>Current inclusion in income of market discount</header>
<subsection id="HA02AC32275C9478CB7FB0E23B0D6631B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart B of part V of subchapter P of chapter 1 is amended by redesignating section 1278 as
section 1279 and by inserting after section 1277 the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="HC55F0337BA9C4207A1A1E57A0EF23EC6" style="OLC">
<section id="H3F8695D4C901403E9E145FDB1079FC83"><enum>1278.</enum><header>Current inclusion in income of market discount on bonds acquired after 2014</header>
<subsection id="H7921C47E59454892B9F147EB42191CA6"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">There shall be included in the gross income of the holder of any market discount bond acquired
after December 31, 2014, an amount equal to the sum of the daily portions
of the market discount for each day during the taxable year on which such
holder held such bond.</text>
</subsection><subsection id="HBFF205263D774069A948300E1024DB51"><enum>(b)</enum><header>Determination of daily portions</header>
<paragraph id="H43F94FEA2E144E1EA2971A5910AB0A27"><enum>(1)</enum><header>In general</header><text>For purposes of subsection (a), the daily portion of the market discount on any market discount
bond shall be an amount equal to the daily portion of original issue
discount which would be includible in gross income under section 1272(a)
(determined without regard to paragraph (2) thereof) if such bond had
been—</text>
<subparagraph id="H1A94A6DA5693429F96FDD9E0449020F0"><enum>(A)</enum><text>originally issued on the date on which such bond was acquired by the taxpayer,</text>
</subparagraph><subparagraph id="H848E8D6B283A40928F3F1DBEE621DD10"><enum>(B)</enum><text>for an issue price equal to the basis of such bond immediately after such acquisition.</text>
</subparagraph></paragraph><paragraph id="H51D5D81328CB4853B2054251A051983C"><enum>(2)</enum><header>Coordination where bond has original issue discount</header><text>In the case of any bond having original issue discount, the daily portion determined under
paragraph (1) shall be reduced by the daily portion of original issue
discount includible in gross income under section 1272(a) (determined
without regard to paragraph (2) thereof) with respect to such bond.</text>
</paragraph><paragraph id="HAD26863E363F4700B3AB23B204B6295D"><enum>(3)</enum><header>Special rule where partial principal payments</header><text>In the case of a bond the principal of which may be paid in 2 or more payments, the daily portions
of market discount shall be determined under regulations prescribed by the
Secretary.</text>
</paragraph></subsection><subsection id="H7F99D29583FD4EEEB0D5337920DC9085"><enum>(c)</enum><header>Limitation</header>
<paragraph id="HBD1F4A509B244142BED5033154854E1A"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The amount of market discount allocable to any accrual period for purposes of determining the sum
of the daily portions under subsection (a) shall not exceed the excess (if
any) of—</text>
<subparagraph id="HBCF315C242BF4CCFB6B0883FA2601AA3"><enum>(A)</enum><text>the product of—</text>
<clause id="HB2475C5BF80D4D09A4C338D203AA500B"><enum>(i)</enum><text>the maximum accrual rate determined under paragraph (2), properly adjusted for the length of the
accrual period, multiplied by</text>
</clause><clause id="H134E7DEFC1E34435974682E04FFB92CB"><enum>(ii)</enum><text>the adjusted basis of such bond at the beginning of such accrual period, over</text>
</clause></subparagraph><subparagraph id="HBD0E9B1C28AF40C5B8F4930D9027057F"><enum>(B)</enum><text>the sum of the qualified stated interest and original issue discount allocable to such accrual
period.</text>
</subparagraph></paragraph><paragraph commented="no" id="H74430F70FE6E4E26AECBD16A72E0ED1D"><enum>(2)</enum><header>Maximum accrual rate</header><text>The maximum accrual rate determined under this paragraph with respect to any bond is the greater
of—</text>
<subparagraph commented="no" id="H5F1259CB60C74ADF88B3AAA3B07B227C"><enum>(A)</enum><text>such bonds’s yield to maturity (determined as of the date of the issuance of such bond) plus 5
percentage points, or</text>
</subparagraph><subparagraph commented="no" id="HFF0601B69BE64A70BAD8624211905F4A"><enum>(B)</enum><text>the applicable Federal rate for such bond (determined under section 1274(d) as of the date of the
acquisition of such bond and on the basis of the remaining term of such
bond as of such date) plus 10 percentage points.</text>
</subparagraph></paragraph><paragraph id="HA83B4335F6A64293AC90DD46452AF5FD"><enum>(3)</enum><header>Application to pools</header><text>In the case of debt instruments to which section 1272(a)(6) applies, rules similar to the rules of
such section shall apply for purposes of determining the daily portions of
market discount.</text>
</paragraph><paragraph id="HEE4D02DA0DE949368F607721207E7DA7"><enum>(4)</enum><header>Accrual period</header><text>For purposes of this subsection, the term <quote>accrual period</quote> has the meaning given such term in section 1272(a)(5).</text>
</paragraph></subsection><subsection id="HBD5CFF47BF004EBBB796E547DC6AD17A"><enum>(d)</enum><header>Special rules</header>
<paragraph id="H0FAF044A3EFC471499396626F04E1F33"><enum>(1)</enum><header>Accruals treated as interest</header><text display-inline="yes-display-inline">Except for purposes of sections 103, 871(a), 881, 1441, 1442, and 6049 (and such other provisions
as may be specified in regulations), any amount included in gross income
under this section shall be treated as interest for purposes of this
title.</text>
</paragraph><paragraph id="HEA484D7BD48E46C8A2B25C1AC911E888"><enum>(2)</enum><header>Basis adjustment</header><text>The basis of any market discount bond in the hands of the taxpayer shall be increased by the amount
included in gross income pursuant to this section.</text>
</paragraph><paragraph id="H0158B47E5E234D858EA4CE9CF9AE1AE3"><enum>(3)</enum><header>Treatment of loss on disposition</header><text>So much of any loss recognized by the taxpayer on the disposition of a market discount bond as does
not exceed the aggregate amounts included in the taxpayer’s gross income
under subsection (a) with respect to such bond shall be treated for
purposes of this title as an ordinary loss.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H390CDFCACF564E6BAAFB4A815D69810D"><enum>(b)</enum><header>Treatment of market discount on short-Term nongovernmental bonds</header>
<paragraph id="HF28B2C5D6A8245E2B6896AB776A8DC3E"><enum>(1)</enum><header>Accrual basis taxpayers, etc</header><text>Section 1283 is amended by striking subsection (c) and redesignating subsection (d) as subsection
(c).</text>
</paragraph><paragraph id="HF11D58BE8B1E4FA4860AA65270D6578E"><enum>(2)</enum><header>Other taxpayers</header>
<subparagraph id="HE80552B70EED4791AC8D466B2AA9F379"><enum>(A)</enum><text>Section 1271(a)(3) is amended—</text>
<clause id="H11AF47C68B5A44329265A3F4CEBBEAF3"><enum>(i)</enum><text>by striking all that precedes subparagraph (C) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="HF0B6DCE924194AE1B343BF142CD4FBC0" style="OLC">
<paragraph id="H391F14734B714B1292895E2EF0020D15"><enum>(3)</enum><header>Certain short-term obligations</header>
<subparagraph id="HBDBB745EB34241C5B3123938D61C9EF7"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">On the sale or exchange of any short-term obligation (as defined in section 1283(a)(1)), any gain
realized which does not exceed an amount equal to the ratable share of the
acquisition discount shall be treated as ordinary income.</text></subparagraph></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</clause><clause id="H0DA9EBC2110344D98BE2556211443AB2"><enum>(ii)</enum><text>by redesignating subparagraphs (C), (D), and (E) as subparagraphs (B), (C), and (D), respectively.</text>
</clause></subparagraph><subparagraph id="H3494959F876843D88F156B233487B103"><enum>(B)</enum><text display-inline="yes-display-inline">Section 1271(a) is amended by striking paragraph (4).</text>
</subparagraph><subparagraph id="H236ECC3E4BDE4CE48B0A022FAA1743C5"><enum>(C)</enum><text>Section 1283(c)(3), as redesignated by paragraph (1), is amended by striking <quote>paragraphs (3) and (4) of section 1271(a)</quote> and inserting <quote>section 1271(a)(3)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H58E61F7AF3F94B64B609E6248F071891"><enum>(c)</enum><header>Coordination with rules related To treating market discount as ordinary income upon disposition</header>
<paragraph id="H5E6F8848CFCC4D899EF0EAE54363A27E"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Section 1276 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H7C10E870F50543B4A0191A316FCDA424" style="OLC">
<subsection id="HC73A56C769574D99A05D9A535DCABA64"><enum>(e)</enum><header>Coordination with rules for current inclusion of market discount</header><text display-inline="yes-display-inline">This section shall not apply to any market discount bond to which section 1278 applies.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H9E61309B55354AD089D1C901F4A7AE1E"><enum>(2)</enum><header>Coordination with deferral of interest deduction</header><text display-inline="yes-display-inline">Section 1277 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H663B46E65AF5481390C64EF6DC52105C" style="OLC">
<subsection id="HE8838DC64ABD4B5CA77B8A8925E676B0"><enum>(d)</enum><header>Coordination with rules for current inclusion of market discount</header><text display-inline="yes-display-inline">This section shall not apply to any market discount bond to which section 1278 applies.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HB5BFD63DD1904982B92F4A8B1B948819"><enum>(3)</enum><header>Coordination with election to include market discount currently</header><text display-inline="yes-display-inline">Section 1279(b), as redesignated by subsection (a), is amended by adding at the end the following
new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H2FA06EF509EE441E890BEE6B2E24079D" style="OLC">
<paragraph id="H2BFDC2CA2DC84FEBA0604CFFBC0D8CC1"><enum>(5)</enum><header>Coordination with rules for current inclusion of market discount</header><text display-inline="yes-display-inline">This subsection shall not apply to any market discount bond to which section 1278 applies.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HBCC0C9809D3746708E7E3BC24BB10203"><enum>(d)</enum><header>Treatment of certain bonds held by partnerships</header>
<paragraph id="H884DC15D04D94540AE2AC1123FDFB92E"><enum>(1)</enum><header>Transfers of partnership interests</header><text>Section 1279(a), as redesignated by subsection (a), is amended by adding at the end the following
new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H4973A6A2EB2444AFBF5532649BA0EACD" style="OLC">
<paragraph id="H367A6AA808254A6F821CB2904017AFC3"><enum>(6)</enum><header>Transfers of partnership interests</header><text display-inline="yes-display-inline">In the case of a transfer described in section 743 of an interest in a partnership holding a bond,
the partnership shall be treated as acquiring the transferee partner’s
proportionate share of such bond at the time of such transfer.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HC740EB1560F14B0CA212FE3031DD834A"><enum>(2)</enum><header>Distribution of bonds by partnerships</header><text>Section 1279(a)(2), as redesignated by subsection (a), is amended by adding at the end the
following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HF6C046CDD0EC46C0A101645BE5FD1DFD" style="OLC">
<subparagraph id="HA8392D9E961640E8AA9842EBA90DF9FC"><enum>(D)</enum><header>Distribution by partnership</header><text display-inline="yes-display-inline">If the basis of the taxpayer in a bond is determined under section 734(a)(2) or (b), for purposes
of subparagraph (A)(ii), the basis of such bond shall not be less than its
fair market value immediately after its acquisition by the taxpayer.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H8C00CC5638ED4CE69B624C1B4165BAFD"><enum>(e)</enum><header>Modernization of certain definitions</header>
<paragraph id="H91A62E2699114ED6A9D37A0CA86A1EDE"><enum>(1)</enum><header>Repeal of superceded exception for market discount bonds acquired at issue</header><text display-inline="yes-display-inline">Section 1279(a)(1), as redesignated by subsection (a), is amended by striking subparagraph (D)</text>
</paragraph><paragraph commented="no" id="H14CCDDB8D1214FEAB2F97BEB36C99A8D"><enum>(2)</enum><header>Revised issue price</header><text>Section 1279(a)(4), as redesignated by subsection (a), is amended—</text>
<subparagraph commented="no" id="H2059EDFFF0BF49E18B12E9BB890F5328"><enum>(A)</enum><text>by redesignating subparagraphs (A) and (B) as clauses (i) and (ii) and by indenting such clauses
appropriately,</text>
</subparagraph><subparagraph commented="no" id="HC82C7D26D66141BEA9EFBDF40D5E3B9B"><enum>(B)</enum><text>by striking <quote>means the sum of—</quote> and inserting</text>
<quoted-block display-inline="yes-display-inline" id="H77EB2A4D2DBB4388834B5E47B3CC089B" style="OLC"><text>means the excess of—</text><subparagraph commented="no" id="HB249407892334BA19093AEB3451D8043"><enum>(A)</enum><text display-inline="yes-display-inline">the sum of—</text></subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph commented="no" id="HA8B8C108C8D441EF90F29BF618E454D3"><enum>(C)</enum><text>by striking the period at the end and inserting <quote>, over</quote>, and</text>
</subparagraph><subparagraph commented="no" id="H63CD16E10B134470A6298D5372C1D4C0"><enum>(D)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HD5A9F97009E4419AA544DAFCA6A55921" style="OLC">
<subparagraph commented="no" id="H6BACC022C2094D09BF979AC691031C7A"><enum>(B)</enum><text display-inline="yes-display-inline">the sum of—</text>
<clause commented="no" id="HEC697F8315BB4D7D8E61F5BF89EB4A6A"><enum>(i)</enum><text>any payments other than qualified stated interest made under the bond during periods before the
acquisition of the bond by the taxpayer, and</text>
</clause><clause commented="no" id="HDA09227942DD4BC68539CF2B51FB7BB2"><enum>(ii)</enum><text>any premium which has accrued during such periods (determined as if owned at all times by the
original holder).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph commented="no" id="HD0C1AFEF784C405B90C3D97C1C12A95A"><enum>(3)</enum><header>Redemption price </header>
<subparagraph id="HA98922D0548346CC9F50B569F8C3FB3F"><enum>(A)</enum><header>In general</header><text>Section 1273(a)(2) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HDBC84663F3E5427BBAF3EE96404D4332" style="OLC">
<paragraph commented="no" id="H9313F9314866404B9FAF04CF42563CBB"><enum>(2)</enum><header>Redemption price</header>
<subparagraph commented="no" id="H1745CAF1C1AA47D68BED7EBAF8E0DC69"><enum>(A)</enum><header>In general</header><text>The term <quote>redemption price</quote> means the sum of all payments provided by the debt instrument other than qualified stated
interest.</text>
</subparagraph><subparagraph commented="no" id="HF5EB14D074344CB08783AD83A93C0134"><enum>(B)</enum><header>Qualified stated interest</header><text display-inline="yes-display-inline">The term <quote>qualified stated interest</quote> means stated interest that is unconditionally payable in money and other property (other than a
debt instrument of the issuer) at least annually at a fixed rate (or to
the extent provided by regulations, at a variable rate).</text>
</subparagraph><subparagraph id="H642942593D354A7287C283FDECDE9D1C"><enum>(C)</enum><header>Basis adjustment</header><text>The basis of any debt instrument shall be reduced by the amount of any payment received other than
qualified stated interest.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H67210755C7B942D29C438F56CD6F8EBA"><enum>(B)</enum><header>Conforming amendments</header>
<clause id="H187F58DEDB29449B9D8221F5C3272E68"><enum>(i)</enum><text display-inline="yes-display-inline">Each of the following provisions is amended by striking <quote>stated redemption price at maturity</quote> and inserting <quote>redemption price</quote>:</text>
<subclause id="HF44BE6A94FB241F2BB1A0C26983AF8D6"><enum>(I)</enum><text display-inline="yes-display-inline">Section 1271(a)(3)(B) (as redesignated by subsection (b)).</text>
</subclause><subclause id="H42B9F8596D4B484F924D0FD3952CB147"><enum>(II)</enum><text>Section 1273(a)(1)(A).</text>
</subclause><subclause id="HECDA4151E323427A95C0EED9C7AA715E"><enum>(III)</enum><text>Section 1273(a)(3).</text>
</subclause><subclause id="HC7E198C337AC49FAB59C3C7318A68DF0"><enum>(IV)</enum><text>Section 1273(b)(4).</text>
</subclause><subclause id="HFCF6EB5845B94DDB8BB2C71DCBD57680"><enum>(V)</enum><text>Section 1274(c)(1)(A).</text>
</subclause><subclause id="HF690C1B1F291408CABC0FF44E6AA0A5B"><enum>(VI)</enum><text>Section 1279(a)(5) (as redesignated by subsection (a)).</text>
</subclause><subclause id="H13BEC992D7264FF6A4CF044C31F0370A"><enum>(VII)</enum><text>Section 1283(a)(2)(A).</text>
</subclause><subclause id="H8CD80E970901454D93F13D86BE9864CD"><enum>(VIII)</enum><text>Section 1286(a)(1).</text>
</subclause><subclause id="H5383BFFE7BF746CCBACF30A235A69F50"><enum>(IX)</enum><text>The heading and text of section 1286(e)(4).</text>
</subclause></clause><clause id="H61F00DA33A6047B99982FBCEC1A2D906"><enum>(ii)</enum><text>Section 108(e)(10)(B) is amended by striking <quote>stated</quote> both places it appears.</text>
</clause><clause id="HA881CB8DAB394766BA681CA9718DC45A"><enum>(iii)</enum><text>Section 1272(a)(6)(A)(i) is amended by striking <quote>stated</quote>.</text>
</clause><clause id="H3A0E7F10CC8F4E16ACB52370DA3427EF"><enum>(iv)</enum><text>Subparagraphs (A)(i) and (C) of section 1279(a)(2) (as redesignated by subsection (a)) are each
amended by striking <quote>the stated redemption price of the bond at maturity</quote> and inserting <quote>the redemption price of the bond</quote>.</text>
</clause><clause id="H262F04A7F2644F47BA426BD99021467D"><enum>(v)</enum><text>Section 1279(a)(2)(B) (as redesignated by subsection (a)) is amended by striking <quote>the stated redemption price of such bond at maturity</quote> and inserting <quote>the redemption price of such bond</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="H225683697EAF4A92BD7BF5E24E28AD3D"><enum>(4)</enum><header>Adjusted issue price</header><text>Section 1275(a) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H2D3B122C1F5E46C994F39C5020877129" style="OLC">
<paragraph id="H8BA770E2BDCC431CB159B9AE4115C679"><enum>(5)</enum><header>Adjusted issue price</header>
<subparagraph id="H4A7DC0D1040C4698A472767EFEFAD06A"><enum>(A)</enum><header>In general</header><text>For purposes of this part, the adjusted issue price of any debt instrument is its issue price—</text>
<clause id="H4E164C1FA52C49F1B05D93DE1B505EF4"><enum>(i)</enum><text display-inline="yes-display-inline">increased by the aggregate of the original issue discount includible in the gross income of all
holders for prior periods (determined without regard to paragraph (7) of
section 1272(a)), or, in the case of a tax-exempt obligation, the
aggregate amount which accrued in the manner provided by this subsection
(determined without regard to such paragraph (7)) for all prior periods,
and</text>
</clause><clause id="HA3A11C97E300451EA9E72D5344B456B2"><enum>(ii)</enum><text>reduced by the sum of—</text>
<subclause id="H8039AC4989434834892D435607819AB2"><enum>(I)</enum><text display-inline="yes-display-inline">any payments other than qualified stated interest previously made on the debt instrument, and</text>
</subclause><subclause id="H04C24028120D47F08E465B765C15E312"><enum>(II)</enum><text display-inline="yes-display-inline">in the case of a debt instrument which was issued with amortizable bond premium (as defined in
section 171(b)), the aggregate amount by which the basis of such
instrument would have been reduced under section 1016(a)(5) for prior
periods if the instrument had been held by the original holder at all
times.</text>
</subclause></clause></subparagraph><subparagraph id="HEF69949B94AA4E1496D9024EF8CA373F"><enum>(B)</enum><header>De minimis rule</header><text display-inline="yes-display-inline">The adjusted issue price of the issuer shall be properly adjusted to take into account that section
1273(a)(3) does not apply to the deduction under section 163 for original
issue discount.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HE941B3F4C7044790B9FDCE85D65B49EC"><enum>(5)</enum><header>Certain other terms</header><text>Paragraphs (3), (4), and (5) of section 1272(a) are amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H76D125CA31104F9993F4385CCC02C0E2" style="OLC">
<paragraph id="H3D0640DCC2CA44468BBA7AB99BFDEDF4"><enum>(3)</enum><header>Determination of daily portions</header><text display-inline="yes-display-inline">For purposes of paragraph (1), the daily portion of the original issue discount on any debt
instrument shall be determined by allocating to each day in any accrual
period its ratable share of the original issue discount allocable to such
accrual period. For purposes of the preceding sentence, the original issue
discount allocable to any accrual period is the excess (if any) of—</text>
<subparagraph id="H0CF8E39DFF2B469F90F762A0D199998E"><enum>(A)</enum><text>the product of—</text>
<clause id="HB37B124FE21248CF94E994D25C27BABE"><enum>(i)</enum><text display-inline="yes-display-inline">the adjusted issue price of the debt instrument at the beginning of such accrual period, multiplied
by</text>
</clause><clause id="HF3E0D17A166E42B9BE7675079B17CE1A"><enum>(ii)</enum><text display-inline="yes-display-inline">the yield to maturity of the debt instrument properly adjusted for the length of the accrual
period, over</text>
</clause></subparagraph><subparagraph id="H3B393F9561214803A8918D280DA7A1A1"><enum>(B)</enum><text display-inline="yes-display-inline">the amount of any qualified stated interest allocable to such accrual period.</text>
</subparagraph></paragraph><paragraph id="H8931FB17663B4ADAAF4DDE9C8B611FA8"><enum>(4)</enum><header>Yield to maturity</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>yield to maturity</quote> means the discount rate that, when used in computing the present value of all principal and
interest payments to be made under the debt instrument produces an amount
equal to the issue price of the debt instrument.</text>
</paragraph><paragraph id="HB57C78DB97B64AC7ADF2D2AF0BB5BF8D"><enum>(5)</enum><header>Accrual period</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>accrual period</quote> shall be determined under regulations prescribed by the Secretary, provided that an accrual period
shall in no event be longer than one year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" id="H8B0F0E2F3E5B4F4EA7FB0E1E19EE579F"><enum>(f)</enum><header>Broker reporting of includible discount on bonds</header>
<paragraph commented="no" id="H76972EA1DA1043BAB0D24AE42E6AA3CE"><enum>(1)</enum><header>In general</header><text>Section 6045 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H6F7DF46B765C48D89C4B074EAEB58120" style="OLC">
<subsection commented="no" id="H74C472C456984A4CBA7995DED48893A2"><enum>(i)</enum><header>Discount on bonds</header>
<paragraph commented="no" id="H175A806F48E84FF2AFE1E3D9A3D30183"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">If any customer of a broker holds a covered bond in an account with such broker at any time during
a calendar year—</text>
<subparagraph commented="no" id="H64BEBC80DFE94DA7AB5C067C4D861E49"><enum>(A)</enum><text>such broker shall file a return under subsection (a) for such calendar year, and</text>
</subparagraph><subparagraph commented="no" id="HD79BC81CC3544A52A6DF3E7A3CCB2541"><enum>(B)</enum><text>such return shall include with respect to each such covered bond—</text>
<clause commented="no" id="H4E09C625A4C44508A5A523579BFB7C81"><enum>(i)</enum><text>the amount (if any) includible in the gross income of such customer as original issue discount with
respect to such bond under section 1272 for periods during such calendar
year, and.</text>
</clause><clause commented="no" id="H6D6C949B487B4DE48AF5EB81AFEA2730"><enum>(ii)</enum><text>the amount (if any) includible in the gross income of such customer as market discount with respect
to such bond under section 1278(a) for periods during such calendar year.</text>
</clause></subparagraph></paragraph><paragraph commented="no" id="HD5D0AD9FAB5A4C4984DAB58A3C544BE5"><enum>(2)</enum><header>Covered bond</header><text>For purposes of this subsection, the term <quote>covered bond</quote> means any obligation to which section 1272 or 1278(a) applies if such obligation—</text>
<subparagraph commented="no" id="HF5CF20D6DB3F4BCB806DD3A7D4DCD8F2"><enum>(A)</enum><text>was acquired after December 31, 2014, through a transaction in the account in which such obligation
is held, or</text>
</subparagraph><subparagraph commented="no" id="HBFCB4F79750D46A897A774774F2F6A15"><enum>(B)</enum><text>was transferred to such account from an account in which such obligation was a covered bond, but
only if the broker received a statement under section 6045A with respect
to the transfer.</text>
</subparagraph></paragraph><paragraph commented="no" id="HE9115F647E664C658D09FF65BF55164C"><enum>(3)</enum><header>Statements to customers</header><text>The requirements of subsections (b) shall apply with respect to any return filed under subsection
(a) by reason of this subsection.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="HC64D6396B8584164951458583C385BD3"><enum>(2)</enum><header>Information required in connection with transfers of covered bonds to brokers</header><text>Subsection (a) of section 6045A is amended—</text>
<subparagraph commented="no" id="H08C30DB70C6349CE8581C86F5357F872"><enum>(A)</enum><text>by inserting <quote>or a covered bond (as defined in section 6045(i)(2))</quote> after <quote>covered security (as defined in section 6045(g)(3))</quote>, and</text>
</subparagraph><subparagraph commented="no" id="H7340A0DCCF134FC99A461A4B2BA49CCF"><enum>(B)</enum><text>by striking <quote>section 6045(g)</quote> and inserting <quote>subsections (g) and (i) of section 6045</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H968F828BDD114BEC9FE3BE31D66716D6"><enum>(3)</enum><header>Coordination with reporting by issuer of original issue discount</header><text>Paragraph (6) of section 6049(d) is amended by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H8DA0B6ECDD7F4966A3DB25C3B27CFCB9" style="OLC">
<subparagraph commented="no" id="H327F8E7AA1AB450EBD2B1F19D88FEA6F"><enum>(C)</enum><header>Prevention of double reporting</header><text display-inline="yes-display-inline">Except as otherwise provided by the Secretary, original issue discount with respect to any
obligation shall not be required to be reported under this section if such
original issue discount is required to be reported with respect to such
obligation under section 6045(i).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H9AA0705394CF4FADA25641B1EF1DE3F5"><enum>(g)</enum><header>Conforming amendments</header>
<paragraph id="H4FCF8AD2C5364510920482F65A6E2D03"><enum>(1)</enum><text>Section 857(e)(2)(B)(i), as amended by the preceding provisions of this Act, is amended by striking <quote>or 1272</quote> and inserting <quote>1272, or 1278</quote>.</text>
</paragraph><paragraph id="H516C83BA48904DA280F8F6A4E34E2278"><enum>(2)</enum><text>Section 1042(d) is amended by striking <quote>section 1278(a)(2)(A)(ii)</quote> in the matter following paragraph (2) and inserting <quote>section 1279(a)(2)(A)(ii)</quote>.</text>
</paragraph><paragraph id="HA0939E9D848248A4803A779451943918"><enum>(3)</enum><text>Section 1016(a), as amended by the preceding provisions of this Act, is amended by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HFC1FC910EF26440298900DABC40EB0FB" style="OLC">
<paragraph id="H684F9CBB586F486DBB3136137C496755"><enum>(39)</enum><text display-inline="yes-display-inline">in the case of any debt instrument, to extend provided in sections 1272(d)(1), 1273(a)(2)(C), and
1278(d)(2).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H36E20D597E494998BF6D97D35B169911"><enum>(4)</enum><text>Section 1276 is amended by inserting <quote><header-in-text level="section" style="OLC">on bonds not subject to current inclusion</header-in-text></quote> after <quote><header-in-text level="section" style="OLC">accrued market discount</header-in-text></quote> in the heading thereof.</text>
</paragraph><paragraph id="HDF7D3A7E83C94707A3DCAAF55E03F956"><enum>(5)</enum><text>Section 1277 is amended by inserting <quote><header-in-text level="section" style="OLC">on bonds not subject to current inclusion</header-in-text></quote> after <quote><header-in-text level="section" style="OLC">accrued market discount</header-in-text></quote> in the heading thereof.</text>
</paragraph><paragraph id="HE76A267922A04F37A8AF1B4007427873"><enum>(6)</enum><text>Section 1281 is amended by striking subsection (c).</text>
</paragraph><paragraph id="HB5B2DF4293134411AA3A599C4449DE32"><enum>(7)</enum><text>Section 1282 is amended by striking subsection (d).</text>
</paragraph><paragraph id="HE7852F6F9F3442C4BB6BE00737AEC40A"><enum>(8)</enum><text display-inline="yes-display-inline">The table of sections for subpart B of part V of subchapter P of chapter 1 is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="HB408773E7EE242D08F27CE09BE8A8D72" style="OLC">
<toc container-level="quoted-block-container" idref="HC55F0337BA9C4207A1A1E57A0EF23EC6" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry level="section">Sec. 1276. Disposition gain representing accrued market discount on bonds not subject to current
inclusion treated as ordinary income.</toc-entry>
<toc-entry level="section">Sec. 1277. Deferral of interest deduction allocable to accrued market discount on bonds not subject
to current inclusion.</toc-entry>
<toc-entry level="section">Sec. 1278. Current inclusion in income of market discount on bonds acquired after 2014.</toc-entry>
<toc-entry level="section">Sec. 1279. Definitions and special rules.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H2E09118F50394900BA86F756F68BB0EB"><enum>(h)</enum><header>Effective date</header>
<paragraph id="H808E8841EA0D48F18363C8C061671DE6"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall apply to obligations
acquired after December 31, 2014.</text>
</paragraph><paragraph id="HC213D7D2790E4C0BBAB3D985720A7EAB"><enum>(2)</enum><header>Modernization of terms</header><text>The amendments made by subsection (e) shall take effect on January 1, 2015.</text>
</paragraph></subsection></section><section display-inline="no-display-inline" id="HBE4727D573EC4FDE9FE8A5C98573EFCD" section-type="subsequent-section"><enum>3412.</enum><header>Treatment of certain exchanges of debt instruments</header>
<subsection id="HED4E8AE821584E43B2D331A76B01F17D"><enum>(a)</enum><header>Determination of issue price</header>
<paragraph id="HF13DBE888B574D3FB2406E065796DEFB"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart A of part V of subchapter P is amended by inserting after section 1274A the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="H4EF5CDF54B7546FBA4155AF1846F8FC3" style="OLC">
<section id="HBBB1A1ECE2AD44D182999CCE9189F29F"><enum>1274B.</enum><header>Determination of issue price in the case of an exchange of debt instruments</header>
<subsection id="H86376400E4C745FFB55EFCBF3AD2BC7E"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of an exchange (including by significant modification) by an issuer of a new debt
instrument for an existing debt instrument issued by the same issuer, the
issue price of the new debt instrument shall be the least of—</text>
<paragraph id="HA92015E265AB4045A99C386EB6B38D1C"><enum>(1)</enum><text>the adjusted issue price of the existing debt instrument,</text>
</paragraph><paragraph id="H304CCEF267F3445AA40DB676C06094AE"><enum>(2)</enum><text>the stated principal amount of the new debt instrument, or</text>
</paragraph><paragraph id="H294C2436EC114199B7B7B2E0BDFDA8EB"><enum>(3)</enum><text>the imputed principal amount of the new debt instrument.</text>
</paragraph></subsection><subsection id="HDC2E9C5877794E9881284AF7968D4EC5"><enum>(b)</enum><header>Applicable rate</header><text>The discount rate used to determine the imputed principal amount of the new debt instrument under
subsection (a)(3) shall be the lesser of—</text>
<paragraph id="H24C0E8E4056D40B08655E3FA0495DE30"><enum>(1)</enum><text>the applicable Federal rate determined under section 1274(d) with respect to the new debt
instrument, or</text>
</paragraph><paragraph id="H07C5AB1924084A8D9F2EEFF762A114FB"><enum>(2)</enum><text>the greater of—</text>
<subparagraph id="HE189D4D3F1564A7E97FB5FD36A5F3199"><enum>(A)</enum><text>the rate of qualified stated interest with respect to the existing debt instrument, or</text>
</subparagraph><subparagraph id="H00924176AE564EB08DAFA6561DC948FE"><enum>(B)</enum><text>the applicable Federal rate determined under section 1274(d) with respect to the existing debt
instrument.</text>
</subparagraph></paragraph></subsection><subsection id="H53619CAE0AF546E189A482832E2478B3"><enum>(c)</enum><header>Treatment of investment units</header><text display-inline="yes-display-inline">Rules similar to the rules of section 1273(c)(2) shall apply for purposes of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H976782FE9200434CB88BEFE0C2F52ADA"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="H50F3FD2ABF5E4CD2A522B484B508C881"><enum>(A)</enum><text>Section 108(e)(10)(B) is amended by striking <quote>and 1274</quote> and inserting <quote>, 1274, and 1274B</quote>.</text>
</subparagraph><subparagraph id="HC74D0A4FC013443F997961C145530E74"><enum>(B)</enum><text>Section 1274(c)(3), as amended by the preceding provisions of this Act, is amended by adding at the
end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HF5C4A02E52CA49CB850B9692AC3DBF5F" style="OLC">
<subparagraph id="H4EA5B989AF2B4A4CA141AABC96F2E0E2"><enum>(F)</enum><header>Certain modified debt</header><text display-inline="yes-display-inline">Any debt instrument the issue price of which is determined under section 1274B.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HC0E305ED908E4562BE6CC82E5DBDADBF"><enum>(C)</enum><text>The table of sections for subpart A of part V of subchapter P is amended by inserting after the
item relating to section 1274A the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HE7716C8662AF4AED993A5A077D074C2F" style="OLC">
<toc container-level="quoted-block-container" idref="H4EF5CDF54B7546FBA4155AF1846F8FC3" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HBBB1A1ECE2AD44D182999CCE9189F29F" level="section">Sec. 1274B. Determination of issue price in the case of an exchange of debt instruments.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H28C96CC036604A03A84456B9BA307FB8"><enum>(b)</enum><header>Nonrecognition of gain or loss by holder</header>
<paragraph id="HDC73E96075164246AF716D55ECE05B7C"><enum>(1)</enum><header>In general</header><text>Section 1037 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H29FE7DBBA7A849F7A87CF5C0A61B0FFC" style="OLC">
<section id="H9B8C0BB4D0CA4F5181B40008DAE948B3"><enum>1037.</enum><header>Certain exchanges of debt instruments</header>
<subsection id="HFC1933A79526443E91D02765EF8808FB"><enum>(a)</enum><header>Nonrecognition of gain or loss</header><text display-inline="yes-display-inline">No gain or loss shall be recognized to the holder of a debt instrument if such existing debt
instrument is exchanged solely for a new debt instrument (whether by
exchange or significant modification) issued by the same issuer.</text>
</subsection><subsection id="H02C073E4CFC34651A38E2D93B628DC2B"><enum>(b)</enum><header>Property attributable to accrued interest</header><text display-inline="yes-display-inline">Subsection (a) shall not apply to the extent that any property received is attributable to interest
which accrued on the existing debt instrument on or after the beginning of
the holder’s holding period of such instrument.</text>
</subsection><subsection id="H4EE068ECC57B406D97638EAC557931C3"><enum>(c)</enum><header>Limitation on gain recognition in case of exchange not solely for a new debt instrument</header><text>In the case of an exchange of a debt instrument to which section 1035(d) applies, the amount of
gain recognized shall not exceed the amount of gain which would have been
recognized if section 1274B did not apply.</text>
</subsection><subsection id="HC6EA3DCCC60642559EB2F008924D732C"><enum>(d)</enum><header>Cross references</header>
<paragraph id="HAB5525F7A16C40F8A8A3007651F11782"><enum>(1)</enum><text display-inline="yes-display-inline">For rules relating to securities exchanged or distributed in a reorganization, etc., see sections
354, 355, and 356.</text>
</paragraph><paragraph id="H03332F83AABD4072AE7BDA5A39FBEF10"><enum>(2)</enum><text>For rules relating to recognition of gain or loss where exchange was not made solely for another
debt instrument of the issuer, see subsections (d) and (e) of section
1035.</text>
</paragraph><paragraph id="H5C37DCD33FE24DF2950AD1BCDE2F63FD"><enum>(3)</enum><text>For rules relating to basis of obligations acquired in an exchange described in subsection (a), see
subsection (f) of section 1035.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HF537F6091F1D4A4C84C74C368DD0A7A9"><enum>(2)</enum><header>Clerical amendment</header><text>The table of sections for part III of subchapter O of chapter 1 is amended by striking the item
relating to section 1037 and inserting the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HE55D2381652C4D37A810388FBA423E58" style="OLC">
<toc container-level="quoted-block-container" idref="H29FE7DBBA7A849F7A87CF5C0A61B0FFC" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H9B8C0BB4D0CA4F5181B40008DAE948B3" level="section">Sec. 1037. Certain exchanges of debt instruments.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H0A87E3E20E51458FB41944881753B306"><enum>(c)</enum><header>Application to excess principal rules for corporate reorganizations</header>
<paragraph id="H858DF14407DC4F4880248AEACC9FC9D3"><enum>(1)</enum><header>Exchanges of securities in reorganizations</header>
<subparagraph id="H093D2215415347DFA43CDB1AEF5D4BAB"><enum>(A)</enum><header>In general</header><text>Section 354(a)(2)(A)(i) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H61906443CE604ABBBAD21BBADB01A03C" style="OLC">
<clause id="H7616E620122B4061A534DAAFC665C396"><enum>(i)</enum><text display-inline="yes-display-inline">the issue price of any such securities received exceeds the adjusted issue price of any such
securities surrendered, or</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H32128705FE9A4257B48B57299D2AE9B4"><enum>(B)</enum><header>Definitions</header><text>Section 354(a)(2) is amended by inserting after subparagraph (C) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HF80B4D94F17D4650AC980CF7FEFA8D62" style="OLC">
<subparagraph id="HA6B6AE44961B4831BABD6C5162B0B81F"><enum>(D)</enum><header>Definitions</header><text display-inline="yes-display-inline">For purposes of this paragraph—</text>
<clause id="HF235FD33219A4040AAF8C5EECD2812AE"><enum>(i)</enum><header>Issue price</header><text display-inline="yes-display-inline">The issue price of any security shall be determined under sections 1273, 1274, and 1274B.</text>
</clause><clause id="H8C9B201FFF3F41E4A1E2CBCE748608B6"><enum>(ii)</enum><header>Adjusted issue price</header><text>The adjusted issue price of any security shall be determined under section 1275(a)(5).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H0AEF40FD095940BDBDD30E331BCD09A5"><enum>(2)</enum><header>Section 355 transactions</header><text display-inline="yes-display-inline">Section 355(a)(3)(A)(i) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H4335BAC7FCB8430BB1B5693E67B90746" style="OLC">
<clause id="HB0BC97B7FCC249DD8445F56358F753FF"><enum>(i)</enum><text display-inline="yes-display-inline">the issue price (as defined in section 354(a)(2)(D)) of the securities in the controlled
corporation which are received exceeds the adjusted issue price (as so
defined) of the securities which are surrendered in connection with such
distribution, or</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H96A2A6EF326C4EB1BB2C7064426DFB04"><enum>(3)</enum><header>Section 356 transactions</header>
<subparagraph id="H220B940EDD614529922DBF39B36B35D1"><enum>(A)</enum><header>In general</header><text>Section 356(d)(2)(B)(ii) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HB70732670FE84DF6A7AF5A75992693E6" style="OLC">
<clause id="HEC7D7622E8D048EC9887AAEDA404DF78"><enum>(ii)</enum><text display-inline="yes-display-inline">the issue price (as defined in section 354(a)(2)(D)) of such securities received exceeds the
adjusted issue price (as so defined) of such securities surrendered,</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HF5ACFE3F7D934D799212008D0D8181A5"><enum>(B)</enum><header>Conforming amendments</header>
<clause id="H172AB84E412944438D6C721754D33309"><enum>(i)</enum><text>Section 356(d)(2)(B) is amended in the matter following clause (ii)—</text>
<subclause id="HD68CBA4B9D0641DB8AF337C8AD7C1B49"><enum>(I)</enum><text>by striking “the fair market value of such excess” and inserting “the amount of such excess”, and</text>
</subclause><subclause id="H62FA3F5C5D314F4E85B7CB1581BBA5B2"><enum>(II)</enum><text>by striking “the entire principal amount” and inserting “the entire issue price (as so defined)”.</text>
</subclause></clause><clause id="HF982D0FE52544BAB98723FAF09B4DFED"><enum>(ii)</enum><text>Section 356(d)(2)(C) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H4D329AFBA7B34B048CE5E2F74FF26BEF" style="OLC">
<subparagraph id="H5EA7DC69B5AB45B69795D4B98D322B2B"><enum>(C)</enum><header>Greater principal amount in section 355 transaction</header><text display-inline="yes-display-inline">If, in an exchange or distribution described in section 355, the issue price (as defined in section
354(a)(2)(D)) of the securities in the controlled corporation which are
received exceeds the adjusted issue price (as so defined) of the
securities in the distributing corporation which are surrendered, then,
with respect to such securities received, the term <quote>other property</quote> means only the amount of such excess.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph></paragraph></subsection><subsection id="H180387DD69D147989136D72A07F60F99"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to transactions after December 31, 2014.</text>
</subsection></section><section id="HA3EC26252BA642A59607AB0CB202DC29"><enum>3413.</enum><header>Coordination with rules for inclusion not later than for financial accounting purposes</header>
<subsection id="H93AAFF540E574DDCA88F580DC4EE93D7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 451(b), as amended by the preceding provisions of this Act, is amended by inserting
immediately after the heading thereof (and before paragraph (1) thereof)
the following: <quote>Notwithstanding any other provision of law (including part V of subchapter P)—</quote>.</text>
</subsection><subsection id="H05DF02754E994A09B8C5DC8532F0ACC0"><enum>(b)</enum><header>Effective date; change in method of accounting</header><text>The amendment made by subsection (a) shall be treated for purposes of section 3303(g) as though
such amendment were made by section 3303(a).</text>
</subsection></section><section id="HDBEEF7EB82944DB1B115D3C536DFF311"><enum>3414.</enum><header>Rules regarding certain government debt</header>
<subsection id="HB3398FCBB8F847F092B1126972E0F412"><enum>(a)</enum><header>Repeal of certain superceded rules</header><text display-inline="yes-display-inline">Subpart B of part II of subchapter E of chapter 1 is amended by striking section 454 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H0E0248706A184366B8FCD23BC03C0CBC"><enum>(b)</enum><header>Preservation of rules related to United States savings bonds</header><text>Subpart A of part V of subchapter P of chapter 1 is amended by inserting after section 1272 the
following new section:</text>
<quoted-block display-inline="no-display-inline" id="H72D1C165C9C846F78809EFAD1A1941EE" style="OLC">
<section id="H7F693EF739A3462EA830E152D7C4A121"><enum>1272A.</enum><header>United States savings bonds</header>
<subsection id="HBC8A7131DDEF4A35B5D1BC4533786E3E"><enum>(a)</enum><header>Election To include increase in redemption price in income</header><text display-inline="yes-display-inline">A taxpayer holding a United States savings bond may elect (on the taxpayer’s return for the taxable
year) to treat any increase in the redemption price as income received in
the taxable year. If any such election is made with respect to any such
obligation, it shall apply also to all such obligations owned by the
taxpayer at the beginning of the first taxable year to which it applies
and to all such obligations thereafter acquired by the taxpayer and shall
be binding for all subsequent taxable years, unless revoked with the
consent of the Secretary. In the case of any such obligations owned by the
taxpayer at the beginning of the first taxable year to which the
taxpayer’s election applies, the increase in the redemption price of such
obligations occurring between the date of acquisition and the first day of
such taxable year shall also be treated as income received in such taxable
year.</text>
</subsection><subsection id="H20E74C66475D4504AEE242A126714C93"><enum>(b)</enum><header>Treatment upon redemption or final maturity</header><text display-inline="yes-display-inline">The increase in redemption value of a United States savings bond (to the extent not previously
included in gross income) in excess of the adjusted basis of such bond
shall be included in gross income in the earlier of the taxable year in
which the bond is redeemed or in the taxable year of final maturity.</text>
</subsection><subsection id="H223AAACB3C4A479B979BA28668943FC5"><enum>(c)</enum><header>Cross references</header>
<paragraph id="H20337323C7634DB583ED439DF368E8A2"><enum>(1)</enum><text>For exception from current inclusion of original issue discount, see section 1272(a)(2)(B).</text>
</paragraph><paragraph id="H3B69963565224261BAEEF94BE080B113"><enum>(2)</enum><text>For exception from market discount rules, see section 1279(a)(1)(B)(iii).</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H3376F53BA48C4C22BAAC69876312FAA2"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="HADB2FC4696314529B9DBB7AEC29E9096"><enum>(1)</enum><text display-inline="yes-display-inline">Section 852(b)(2), as amended by the preceding provisions of this Act, is amended by striking
subparagraph (E) and redesignating subparagraphs (F) and (G) as
subparagraphs (E) and (F), respectively.</text>
</paragraph><paragraph id="H0D3C7398D36841EAA7743384AE0CB092"><enum>(2)</enum><text>Section 1283(c)(3), as amended by the preceding provisions of this Act, is amended by striking all
that precedes <quote>shall not apply</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H3CCF89FAC9E34469A0780A0455C19178" style="OLC">
<paragraph id="H9FBB055EABF64E0D8E34334DC3F5A45F"><enum>(3)</enum><header>Coordination with section 1271</header><text display-inline="yes-display-inline">Section 1271(a)(3)</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H4CB92C25778D40B7BDD945D257130D02"><enum>(3)</enum><text>Section 7871(a)(6) is amended by adding <quote>and</quote> at the end of subparagraph (A) and by striking subparagraph (C).</text>
</paragraph><paragraph id="HD9D439D7747740BB954D910770E1C7B3"><enum>(4)</enum><text display-inline="yes-display-inline">The table of sections for subpart A of part V of subchapter P of chapter 1 is amended by inserting
after the item relating to section 1272 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H789CEACBA94B4F9E85CF2ECFE1824528" style="OLC">
<toc container-level="quoted-block-container" idref="H72D1C165C9C846F78809EFAD1A1941EE" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H7F693EF739A3462EA830E152D7C4A121" level="section">Sec. 1272A. United States savings bonds.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H6D0B145D761C452F8D5F280B52AB00CD"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall take effect on the date of the enactment of this Act.</text>
</subsection></section></part><part id="H35546140AFAE44D1926558D6E61B8A19"><enum>3</enum><header>Certain rules for determining gain and loss</header>
<section id="HDC656F3764E541D7A23A9646E19DFFAF"><enum>3421.</enum><header>Cost basis of specified securities determined without regard to identification</header>
<subsection id="HD9DDE72CA7014079B87341397B5AE63E"><enum>(a)</enum><header>In general</header><text>Section 1012 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H805E61C532F34602B868A2675F117167" style="OLC">
<subsection id="H228179355F83446CB7524E7F4408D2F5"><enum>(e)</enum><header>Cost basis of specified securities determined without regard to identification</header><text display-inline="yes-display-inline">Except to the extent otherwise provided in this section or in regulations thereunder permitting the
use of an average basis method for determining cost, in the case of the
sale, exchange, or other disposition of a specified security (within the
meaning of section 6045(g)(3)(B)), the basis (and holding period) of such
security shall be determined on a first-in first-out basis.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H670996ECAE674DB6BA0A7FBC2C9037F4"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H2589703F020E4C5B89D2BD48C58BB323"><enum>(1)</enum><text display-inline="yes-display-inline">Section 1012(c)(1) is amended by striking <quote>the conventions prescribed by regulations under this section</quote> and inserting <quote>the method applicable for determining the cost of such security</quote>.</text>
</paragraph><paragraph id="HE344FC7FA33644EF93D559216579BB41"><enum>(2)</enum><text>Section 1012(c)(2)(A) is amended by striking <quote>section 1012</quote> and inserting <quote>this section (as in effect prior to the enactment of the <short-title>Tax Reform Act of 2014</short-title>)</quote>.</text>
</paragraph><paragraph id="H1702DDAFCD25490F82F68440A54E4D7B"><enum>(3)</enum><text>Section 6045(g)(2)(B)(i)(I) is amended by striking <quote>unless the customer notifies the broker by means of making an adequate identification of the stock
sold or transferred</quote>.</text>
</paragraph></subsection><subsection id="H5D263045674F4AA589AB719C8BF76FD5"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to sales, exchanges, and other dispositions after
December 31, 2014.</text>
</subsection></section><section id="HE0956B17E4F048B0BEC3DA635CB12A30"><enum>3422.</enum><header>Wash sales by related parties</header>
<subsection id="H3CECAD5091E346DBAC3E9EDEC23FE1F2"><enum>(a)</enum><header>Application of wash sale rules to related parties</header><text display-inline="yes-display-inline">Subsection (a) of section 1091 is amended by striking <quote>the taxpayer has acquired</quote> and inserting <quote>the taxpayer (or a related party) has acquired</quote>.</text>
</subsection><subsection id="H82B41E770F534FD7A499BCF8301E0F5C"><enum>(b)</enum><header>Modification of basis adjustment rule To prevent transfer of losses to related parties</header><text>Subsection (d) of section 1091 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H53EEA46A71564DFCB1967F80B89C2891" style="OLC">
<subsection id="H4D3028CCF99C4B439F8617A1E36AE28E"><enum>(d)</enum><header>Adjustment to basis in case of wash sale</header><text display-inline="yes-display-inline">If the taxpayer (or the taxpayer’s spouse) acquires substantially identical stock or securities
during the period which—</text>
<paragraph id="HC7CA6EAB86A5465F9A4F0F5B348A6A4B"><enum>(1)</enum><text>begins 30 days before the disposition with respect to which a deduction was disallowed under
subsection (a), and</text>
</paragraph><paragraph id="H56D04CB3E2BB428FBD15F4BA8F3A04CC"><enum>(2)</enum><text>ends with the close of the taxpayer’s first taxable year which begins after such disposition,</text></paragraph><continuation-text continuation-text-level="subsection">the basis of such stock or securities shall be increased by the amount of the deduction so
disallowed (reduced by any amount of such deduction taken into account
under this subsection to increase the basis of stock or securities
previously acquired).</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0E81BF278112413F83B0FA18FF65782D"><enum>(c)</enum><header>Related party</header><text>Section 1091 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H674E43473BA44B47AFD921EF2C6D1109" style="OLC">
<subsection id="H2DBACCBFBE004180BA116E432CD32DB8"><enum>(g)</enum><header>Related party</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H156E36DA16C0429A87A21A6C3EF905A2"><enum>(1)</enum><header>In general</header><text>The term <quote>related party</quote> means—</text>
<subparagraph id="H40422984EB414326862E3CFD2035C39D"><enum>(A)</enum><text>the taxpayer’s spouse,</text>
</subparagraph><subparagraph id="H79ADBB5010204A8F875D130F2EE8281D"><enum>(B)</enum><text>any dependent of the taxpayer and any other taxpayer with respect to whom the taxpayer is a
dependent,</text>
</subparagraph><subparagraph id="HE25A19176348474EAF18321A08BA6FDC"><enum>(C)</enum><text>any individual, corporation, partnership, trust, or estate which controls, or is controlled by,
(within the meaning of section 954(d)(3)) the taxpayer or any individual
described in subparagraph (A) or (B) with respect to the taxpayer (or any
combination thereof),</text>
</subparagraph><subparagraph id="H3D7849CEE2BF4030A4B7D760EE277674"><enum>(D)</enum><text>any individual retirement plan, Archer MSA (as defined in section 220(d)), or health savings
account (as defined in section 223(d)), of the taxpayer or of any
individual described in subparagraph (A) or (B) with respect to the
taxpayer,</text>
</subparagraph><subparagraph commented="no" id="H43DCE9E6BB294915B39B5B6925B41198"><enum>(E)</enum><text>any account under a qualified tuition program described in section 529 or a Coverdell education
savings account (as defined in section 530(b)) if the taxpayer, or any
individual described in subparagraph (A) or (B) with respect to the
taxpayer, is the designated beneficiary of such account or has the right
to make any decision with respect to the investment of any amount in such
account, and</text>
</subparagraph><subparagraph id="H182912F99F384C59BACF07AB4D5E1E02"><enum>(F)</enum><text>any account under—</text>
<clause id="H915474C0110447BC848A94C0F5E415BF"><enum>(i)</enum><text>a plan described in section 401(a),</text>
</clause><clause id="H1DE2E3E5BB65402D9E0F1F88ED7AF1FB"><enum>(ii)</enum><text>an annuity plan described in section 403(a),</text>
</clause><clause id="H02170022F8094584B1F7024A9EF2C0D3"><enum>(iii)</enum><text>an annuity contract described in section 403(b), or</text>
</clause><clause id="H39AA865278684D1EA102D27048D6FA37"><enum>(iv)</enum><text display-inline="yes-display-inline">an eligible deferred compensation plan described in section 457(b) and maintained by an employer
described in section 457(e)(1)(A),</text></clause><continuation-text continuation-text-level="subparagraph">if the taxpayer or any individual described in subparagraph (A) or (B) with respect to the
taxpayer has the right to make any decision with respect to the investment
of any amount in such account.</continuation-text></subparagraph></paragraph><paragraph id="HD032B63743B74CB396E1EF1F124200C6"><enum>(2)</enum><header>Rules for determining status</header>
<subparagraph id="HB1F4142222AF41FFBAEF3DC7E61A6026"><enum>(A)</enum><header>Relationships determined at time of acquisition</header><text>Determinations under paragraph (1) shall be made as of the time of the purchase or exchange
referred to in subsection (a) except that determinations under
subparagraphs (A) and (B) of paragraph (1) shall be made for the taxable
year which includes such purchase or exchange.</text>
</subparagraph><subparagraph id="H765F1A8157DA4EB88644007C63DF03DB"><enum>(B)</enum><header>Determination of marital status</header>
<clause id="H90B0BE40EC1B4C52A6ABEC1026A7D1DB"><enum>(i)</enum><header>In general</header><text>Except as provided in clause (ii), marital status shall be determined under section 7703.</text>
</clause><clause id="HD615F909AE5645FF9D97FC8487B4D6D0"><enum>(ii)</enum><header>Special rule for married individuals filing separately and living apart</header><text>A husband and wife who—</text>
<subclause id="HE50C86DC55A04B1FABE445DAF1DBCB69"><enum>(I)</enum><text>file separate returns for any taxable year, and</text>
</subclause><subclause id="H289C5C143E5B4826AE1286C36139A5AB"><enum>(II)</enum><text>live apart at all times during such taxable year,</text></subclause><continuation-text continuation-text-level="clause">shall not be treated as married individuals.</continuation-text></clause></subparagraph></paragraph><paragraph id="HD06E86C5A4DE4879A98A295F3F8339E0"><enum>(3)</enum><header>Regulations</header><text>The Secretary shall issue such regulations or other guidance as may be necessary to prevent the
avoidance of the purposes of this subsection, including regulations which
treat persons as related parties if such persons are formed or availed of
to avoid the purposes of this subsection.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H7962F804118F4FB1ABC1362F11E3BE1A"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to sales and other dispositions after December 31,
2014.</text>
</subsection></section><section id="H3EFAE79D5C654423BE49D86ABBED8F62"><enum>3423.</enum><header>Nonrecognition for derivative transactions by a corporation with respect to its stock</header>
<subsection id="HD55B6D809C5B4D27BCCA65BB7D8D9C30"><enum>(a)</enum><header>In general</header><text>Section 1032 is amended to read as follows:</text>
<quoted-block id="H82653866B58648C28244FE9F7620AE7F" style="OLC">
<section id="HBDC4F22C964742689FBCC4403840BAB4"><enum>1032.</enum><header>Derivative transactions by a corporation with respect to its stock</header>
<subsection id="H9E268E27BF514C338860285FE0D659F5"><enum>(a)</enum><header>In general</header><text>Except as otherwise provided in this section or section 76, section 1032 derivative items of a
corporation shall not be taken into account in determining such
corporation’s liability for tax under this subtitle.</text>
</subsection><subsection commented="no" id="H359768350F8443B289EA013216BFD511"><enum>(b)</enum><header>Income recognition on certain forward contracts</header>
<paragraph commented="no" id="H4DC2E15F4DD54D19AA8A8EAF4A561179"><enum>(1)</enum><header>In general</header><text>If—</text>
<subparagraph commented="no" id="H252771A9FEDA4732B015681BB58926C5"><enum>(A)</enum><text>a corporation acquires its stock, and</text>
</subparagraph><subparagraph commented="no" id="HCC0A720C7FF8482FA62ED67F4B0FFAEC"><enum>(B)</enum><text>such acquisition is part of a plan (or series of related transactions) pursuant to which the
corporation enters into a forward contract with respect to its stock,</text></subparagraph><continuation-text commented="no" continuation-text-level="paragraph">such corporation shall include amounts in income as if the excess of the amount to be received
under the forward contract over the fair market value of the stock as of
the date the corporation entered into the forward contract were original
issue discount on a debt instrument acquired on such date. The preceding
sentence shall apply only to the extent that the amount of stock involved
in the forward contract does not exceed the amount acquired as described
in subparagraph (A).</continuation-text></paragraph><paragraph commented="no" id="H295B3B512E174CEEA0BDB9D53FB84B31"><enum>(2)</enum><header>Plan presumed to exist</header><text>If a corporation enters into a forward contract with respect to its stock within the 60-day period
beginning on the date which is 30 days before the date that the
corporation acquires its stock, such acquisition shall be treated as
pursuant to a plan described in paragraph (1)(B) unless it is established
that entering into such contract and such acquisition are not pursuant to
a plan or series of related transactions.</text>
</paragraph></subsection><subsection id="H0460C63D30634E4FACC5205C0F07D9AC"><enum>(c)</enum><header>Section <enum-in-header>1032</enum-in-header> derivative items</header><text>For purposes of this section, the term <term>section 1032 derivative item</term> means any item of income, gain, loss, or deduction if—</text>
<paragraph id="H43FDACDFB1C04F809311BC19ED797061"><enum>(1)</enum><text>such item arises out of the rights or obligations under any derivative (as defined in section 486)
to the extent such derivative relates to the corporation’s stock (or is
attributable to any transfer or extinguishment of any such right or
obligation), or</text>
</paragraph><paragraph id="H34FF6297AF3B4B2E90293E0F0BEC0384"><enum>(2)</enum><text>such item arises under any other contract or position but only to the extent that such item
reflects (or is determined by reference to) changes in the value of such
stock or distributions thereon.</text></paragraph><continuation-text continuation-text-level="subsection">Such term shall not include any deduction with respect to which section 83(h) applies and shall not
include any deduction for any item which is in the nature of compensation
for services rendered. For purposes of this subparagraph, de minimis
relationships, as determined by the Secretary, shall be disregarded.</continuation-text></subsection><subsection id="H8312C51AA2B84BD8BE7EBDB983BBFF27"><enum>(d)</enum><header>Treasury stock treated as stock</header><text>Any reference in this section to stock shall be treated as including a reference to treasury stock.</text>
</subsection><subsection id="H2643330224254F5FA6087DBB59332187"><enum>(e)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations or other guidance as may be appropriate to carry out
the purposes of this section, including regulations or other guidance
which—</text>
<paragraph id="H8766E2CB0EA34E8389FF82B3170FA13F"><enum>(1)</enum><text>treat the portion of an instrument which is described in subsection (c)(1) separately from the
portion of such instrument which is not so described, and</text>
</paragraph><paragraph id="H4615406B1D6C476EB6379D87CD1C434E"><enum>(2)</enum><text>treat section 1032 derivative items as contributions to the capital of the corporation to the
extent that the application of this section would be inconsistent with the
purposes of section 76(b).</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H5C0DDC2A21E246E3BE915F0179E57CF9"><enum>(b)</enum><header>Clerical amendment</header><text>The item relating to section 1032 in the table of sections for part III of subchapter O of chapter
1 is amended to read as follows:</text>
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<toc container-level="quoted-block-container" idref="H82653866B58648C28244FE9F7620AE7F" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HBDC4F22C964742689FBCC4403840BAB4" level="section">Sec. 1032. Derivative transactions by a corporation with respect to its stock.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HE86320F4810C45B3B5173EB6D36B492F"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to transactions entered into after the date of the
enactment of this Act.</text>
</subsection></section></part><part id="HCEB36B2EF66A450AA0FF911CCD545E61"><enum>4</enum><header>Tax favored bonds</header>
<section id="H3BE77508CABC436B9BC6616323806D71" section-type="subsequent-section"><enum>3431.</enum><header>Termination of private activity bonds</header>
<subsection id="HD643F930FCF4400EB46BC2BA1E7F9458"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of section 103(b) is amended—</text>
<paragraph id="HEE9E018028DC46EBB0B1668AAD170994"><enum>(1)</enum><text>by striking <quote>which is not a qualified bond (within the meaning of section 141)</quote>, and</text>
</paragraph><paragraph id="HBD66496B68814EFEB72988C856435C59"><enum>(2)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">which is not a qualified bond</header-in-text></quote> in the heading thereof.</text>
</paragraph></subsection><subsection id="HE5F59BD29BAB4E0AB34B4B9F73AB0ECA"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H2006E7CEA26E431CBDB4EEF7F0005D24"><enum>(1)</enum><text display-inline="yes-display-inline">Section 141 is amended by striking subsection (e).</text>
</paragraph><paragraph id="H0C9FFA4B10AA4E63BCEF7B8AA6F367AB"><enum>(2)</enum><text display-inline="yes-display-inline">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).</text>
</paragraph><paragraph id="H4A1D227203B74529BB80EAA145F1B8A3"><enum>(3)</enum><text>Section 25 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H6D4B72E6C663458899E2A1A84CFAB15E" style="OLC">
<subsection id="H5AE596EAEA0043F3897807AB823FF0B7"><enum>(j)</enum><header>Coordination with repeal of private activity bonds</header><text display-inline="yes-display-inline">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 <short-title>Tax Reform Act of 2014</short-title>.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HEFFABF00FBD44F06A44D3844DAEDA22C"><enum>(4)</enum><text>Section 26(b)(2) is amended by striking subparagraph (D).</text>
</paragraph><paragraph id="H84B98A38507D42B996E1EBA5F14437BA"><enum>(5)</enum><text>Section 141(b) is amended by striking paragraphs (5) and (9) and by redesignating paragraphs (6),
(7), and (8) as paragraphs (5), (6), and (7), respectively.</text>
</paragraph><paragraph id="H9201CBE7B41344B4AE97C68675CC6C40"><enum>(6)</enum><text>Section 141(d) is amended by striking paragraph (5) and by redesignating paragraphs (6) and (7) as
paragraphs (5) and (6).</text>
</paragraph><paragraph id="HB9030EFA98164079A0763DE4E64D6DA7"><enum>(7)</enum><text>Section 148(b)(2)(E) is amended by striking <quote>in the case of a bond other than a private activity bond,</quote>.</text>
</paragraph><paragraph id="HC3BB762CD76940F8AF05D9DFF1488184"><enum>(8)</enum><text>Section 148(b)(3) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H7FB369F6577D4012BB1DB3B81C750252" style="OLC">
<paragraph id="H6CC88C1305874A12A5A3BFE140F24954"><enum>(3)</enum><header>Tax-exempt bonds not treated as investment property</header><text display-inline="yes-display-inline">The term <quote>investment property</quote> does not include any tax-exempt bond.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H68C8DC0A69C845298600B1905F56BB25"><enum>(9)</enum><text>Section 148(f)(3) is amended by striking <quote>or is a private activity bond</quote> in the fourth sentence.</text>
</paragraph><paragraph id="H46F0A5F56F004DF6A1C3704EB88528AB"><enum>(10)</enum><text>Section 148(f)(4) is amended—</text>
<subparagraph display-inline="no-display-inline" id="HA1CDC8FC1867404586BD444F56636479"><enum>(A)</enum><text>by striking <quote>(determined in accordance with section 147(b)(2)(A))</quote> in the flush matter following subparagraph (A)(ii),</text>
</subparagraph><subparagraph id="H3D5CE05B86F3407C90CAC7B7C307353B"><enum>(B)</enum><text>by striking the last sentence of subparagraph (D)(v), and</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="H15223923C44F4E80BDF44024BDB7AB8B"><enum>(C)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H8342D55D0A2B460D8FFEB87C1901E47E" style="OLC">
<subparagraph id="HB1BE2E0A5CAA442FA2037925BEBBD298"><enum>(E)</enum><header>Average maturity</header><text display-inline="yes-display-inline">For purposes of this paragraph, the average maturity of any issue shall be determined by taking
into account the respective issue prices of the bonds issued as part of
such issue.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H764C2B1EF8E4429BA4B6AA3F10C44C9F"><enum>(11)</enum><text display-inline="yes-display-inline">Section 148(f)(4)(A) is amended in the flush matter after clause (ii) by striking <quote>In the case of an issue no bond of which is a private activity bond, clause</quote> and inserting <quote>Clause</quote>.</text>
</paragraph><paragraph id="H1498D86C1E084C8582BEFE913036A719"><enum>(12)</enum><text>Section 148(f)(4)(B)(ii) is amended—</text>
<subparagraph id="H3F4E2398A9FF4EE6B2C29AB1B8D80710"><enum>(A)</enum><text>by striking subclause (II), and</text>
</subparagraph><subparagraph id="HFC1A7233E31B47DBAE9F4B714647F729"><enum>(B)</enum><text>by striking <quote><header-in-text level="clause" style="OLC">certain bonds.—</header-in-text></quote> and all that follows through <quote>issue described in subclause (II)</quote> and inserting <quote><header-in-text level="clause" style="OLC">certain bonds.—</header-in-text>In the case of an issue no bond of which is a tax or revenue anticipation bond</quote>.</text>
</subparagraph></paragraph><paragraph id="H73E849B4E5B349AAB9AF46AF4FB7DD8D"><enum>(13)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HAFCFEE938ED64ACF8F0F159C718A0CE5"><enum>(A)</enum><text>Section 148(f)(4)(C)(iv) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HD812D82332C24B329C87D1C59E8696BF" style="OLC">
<clause id="H21BC9A10817F4AEBBFAF2D28444E8E03"><enum>(iv)</enum><header>Construction issue</header><text display-inline="yes-display-inline">For purposes of this subparagraph, the term <quote>construction issue</quote> means any issue if at least 75 percent of the available construction proceeds of such issue are to
be used for construction expenditures with respect to property which is to
be owned by a governmental unit.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H2586D22982DE48A3A5018EEF399D4242"><enum>(B)</enum><text>Section 148(f)(4)(C) is amended by redesignating clauses (v) through (xvii) as clauses (viii)
through (xx), respectively, and by inserting after clause (iv) the
following new clauses:</text>
<quoted-block display-inline="no-display-inline" id="H946F83DF9EBA429F880FE0268B06ACBC" style="OLC">
<clause id="HB698161BAAC440B5A363932AF6ACB746"><enum>(v)</enum><header>Construction</header><text display-inline="yes-display-inline">For purposes of this subparagraph, the term <quote>construction</quote> includes reconstruction and rehabilitation.</text>
</clause><clause id="HD494C8BA1CC548398A0957E15865631C"><enum>(vi)</enum><header>Safe harbor for leases and management contracts</header><text>For purposes of this subparagraph, property leased by a governmental unit shall be treated as owned
by such governmental unit if—</text>
<subclause id="HA420F3901A1F4D8587E991243A10B8C4"><enum>(I)</enum><text>the lessee makes an irrevocable election (binding on the lessee and all successors in interest
under the lease) not to claim depreciation or an investment credit with
respect to such property,</text>
</subclause><subclause id="HBE654521BBE741D4906F75C99C3B60D7"><enum>(II)</enum><text>the lease term (as defined in section 168(h)(1)) is not more than 80 percent of the reasonably
expected economic life of the property, and</text>
</subclause><subclause id="HD3EE5BC7F34C4133BC7E1957A33EA003"><enum>(III)</enum><text>the lessee has no option to purchase the property other than at fair market value (as of the time
such option is exercised).</text>
</subclause></clause><clause id="H4747D17C70574CEBA27F9EDB0C34EB6C"><enum>(vii)</enum><header>Determination of economic life</header><text>For purposes of clause (vi), the reasonably expected economic life of any facility shall be
determined as of the later of—</text>
<subclause id="H4473065A31E549579717E4C64950824D"><enum>(I)</enum><text>the date on which the bonds are issued, or</text>
</subclause><subclause id="H73B16B46B4404F75B85485DD93EF6D80"><enum>(II)</enum><text>the date on which the facility is placed in service (or expected to be placed in service).</text></subclause></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H0C0E082FD4BF404CA41F4ED2DA5EC49A"><enum>(C)</enum><text>Section 148(f)(4)(D) is amended by striking <quote>subparagraph (C)(iv)</quote> each place it appears and inserting <quote>subparagraph (C)(v)</quote>.</text>
</subparagraph></paragraph><paragraph id="H41FF4AEE03F04A93BC42023EC789697B"><enum>(14)</enum><text>Section 148(f)(4)(D)(i) is amended—</text>
<subparagraph id="HF3ADB208244C42BD9280349958AFF14F"><enum>(A)</enum><text>by striking subclause (II),</text>
</subparagraph><subparagraph id="H87027CAF24D6403E8BA293443C0BF2D8"><enum>(B)</enum><text>by striking <quote>(other than private activity bonds)</quote> in subclause (IV), and</text>
</subparagraph><subparagraph id="H89731205ADEF4718953D7DBEC9B42450"><enum>(C)</enum><text>by redesignating subclauses (III) and (IV) (as amended by subparagraph (B)) as subclauses (II) and
(III).</text>
</subparagraph></paragraph><paragraph id="H47E3E7CF96DE487BB43C7463092914ED"><enum>(15)</enum><text>Section 148(f)(4)(D)(ii) is amended by striking <quote>subclause (IV)</quote> both places it appears and inserting <quote>subclause (III)</quote>.</text>
</paragraph><paragraph id="H9509B67F814E46EEA6FCD4E67C370FF8"><enum>(16)</enum><text display-inline="yes-display-inline">Section 148(f)(4)(D)(iii) is amended by striking <quote>subclause (IV)</quote> and inserting <quote>subclause (III)</quote>.</text>
</paragraph><paragraph id="HD0C18490FA5C41FDA0F6D6D15F4EA137"><enum>(17)</enum><text>Section 148(f)(4)(D)(iv)(II) is amended by striking <quote>clause (i)(IV)</quote> and inserting <quote>clause (i)(III)</quote>.</text>
</paragraph><paragraph id="H06EDA481D8134DBA91A0F9B1915D08C1"><enum>(18)</enum><text>Section 148(f)(4)(D)(vi) is amended by striking the last sentence.</text>
</paragraph><paragraph id="HC0022E75A3624BC6A5F9BFF4568BBC4D"><enum>(19)</enum><text>Section 148(f)(7) is amended by striking subparagraph (A) and by redesignating subparagraphs (B)
and (C) as subparagraphs (A) and (B).</text>
</paragraph><paragraph id="HA87385EF0F9445B89B0A1887D8DCE937"><enum>(20)</enum><text>Section 149(b)(3) is amended—</text>
<subparagraph id="HE38579CFEC664FE887FA21E0E2A72CD2"><enum>(A)</enum><text>by striking subparagraph (C) and by redesignating subparagraphs (D) and (E) as subparagraphs (C)
and (D), and</text>
</subparagraph><subparagraph id="HBD23CB098D7B40269938C80142210F11"><enum>(B)</enum><text>by striking <quote>subparagraph (E)</quote> in subparagraph (A)(iv) and inserting <quote>subparagraph (D)</quote>.</text>
</subparagraph></paragraph><paragraph id="H341B32DD06FB4D37B9B81860C47DA619"><enum>(21)</enum><text>Section 149(e)(2) is amended—</text>
<subparagraph id="H79F96BA9A4664776805B8D4477ED3A24"><enum>(A)</enum><text>by striking subparagraphs (C), (D), and (F) and by redesignating subparagraphs (E) and (G) as
subparagraphs (C) and (D), respectively, and</text>
</subparagraph><subparagraph id="HD3B3FB75B11440B9B1C32B85EE85E835"><enum>(B)</enum><text>by striking the second sentence.</text>
</subparagraph></paragraph><paragraph id="H30E037331BEF4E9DBE3D53EF40214623"><enum>(22)</enum><text>Section 149(f)(6) is amended—</text>
<subparagraph id="H8ABCAA6CAD5B4ECC85764EE4AD4BF5C1"><enum>(A)</enum><text>by striking subparagraph (B), and</text>
</subparagraph><subparagraph id="HF3935097A73D478F8FB73014EF45C138"><enum>(B)</enum><text>by striking <quote>For purposes of this subsection</quote> and all that follows through <quote>The term</quote> and inserting the following: <quote>For purposes of this subsection, the term</quote>.</text>
</subparagraph></paragraph><paragraph id="H155A582E4734431DB997F5B78E73C2DC"><enum>(23)</enum><text>Section 150 is amended by striking subsections (b) and (c) and by redesignating subsections (d) and
(e) as subsections (b) and (c), respectively.</text>
</paragraph><paragraph id="HDC484D2FE372493CB9B548621C273573"><enum>(24)</enum><text>Section 150(e)(3) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HE12C292288BF41D9823377D8C82F1A92" style="OLC">
<paragraph id="H75248287BFBB41CFA87D4B1C72742885"><enum>(3)</enum><header>Public approval requirement</header><text display-inline="yes-display-inline">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 <short-title>Tax Reform Act of 2014</short-title>).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H9DBBDE5CBE764341945FCA68102CA9E8"><enum>(25)</enum><text>Section 269A(b)(3) is amended by striking <quote>144(a)(3)</quote> and inserting <quote>414(n)(6)(A)</quote>.</text>
</paragraph><paragraph id="HFF44392654EF41A5A3E7D5236A9BDB0B"><enum>(26)</enum><text>Section 414(m)(5) is amended by striking <quote>section 144(a)(3)</quote> and inserting <quote>subsection (n)(6)(A)</quote>.</text>
</paragraph><paragraph id="H291D4FF04FE34704B6196148E82292D1"><enum>(27)</enum><text>Section 414(n)(6)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HC02978999F514F07A97BC463F01DDF71" style="OLC">
<subparagraph id="H1E8CD7878FFD4027AF08692210A6BAA8"><enum>(A)</enum><header>Related persons</header><text display-inline="yes-display-inline">A person is a related person to another person if—</text>
<clause id="H5AA456654E5D4B4185B8EF7D100AF93D"><enum>(i)</enum><text>the relationship between such persons would result in a disallowance of losses under section 267 or
707(b), or</text>
</clause><clause id="HBB7D8EF6D2C246318E0D50230BE84968"><enum>(ii)</enum><text>such persons are members of the same controlled group of corporations (as defined in section
1563(a), except that <quote>more than 50 percent</quote> shall be substituted for <quote>at least 80 percent</quote> each place it appears therein).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H902E847357394E74B60C48E4F0D11BCC"><enum>(28)</enum><text>Section 6045(e)(4)(B) is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>section 143(m)(3)</quote>.</text>
</paragraph><paragraph id="H8FCAD614F2F34890ADD2183B83AFF58F"><enum>(29)</enum><text>Section 6654(f)(1) is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>section 143(m)</quote>.</text>
</paragraph><paragraph id="H0D7E3F0EEC61451A9958B3C99E62B797"><enum>(30)</enum><text>Section 7871(c) is amended—</text>
<subparagraph id="HD56A1F41D30744D1B01EC14214460EFE"><enum>(A)</enum><text>by striking paragraphs (2) and (3), and</text>
</subparagraph><subparagraph id="H60BC8232B53E475CA7485DDCC4B5B06F"><enum>(B)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">tax-exempt bonds.—</header-in-text></quote> and all that follows through <quote>Subsection (a) of section 103</quote> and inserting the following: <quote><header-in-text level="subsection" style="OLC">tax-exempt bonds.—</header-in-text>Subsection (a) of section 103</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H24684067A8A7464CB949B36DF981C834"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to bonds issued after December 31, 2014.</text>
</subsection></section><section id="H9519C83623BD4A7F83A0A4D22C9B32F1"><enum>3432.</enum><header>Termination of credit for interest on certain home mortgages</header>
<subsection id="HB85FDF611BD6408080C138A2AD6E6CAF"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 25, as amended by the preceding provisions of this Act, is amended by adding at the end the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HF7A8A6C084F44301A6148A268402984A" style="OLC">
<subsection id="HDDD1F4142A7A4DD8BCB968C1700344C0"><enum>(k)</enum><header>Termination</header><text display-inline="yes-display-inline">No credit shall be allowed under this section with respect to any mortgage credit certificate
issued after December 31, 2014.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H8D93DCD928CE4BD1B46854416BE2F634"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years ending after December 31, 2014.</text>
</subsection></section><section id="H233501E998A349F8852031A88602588D"><enum>3433.</enum><header>Repeal of advance refunding bonds</header>
<subsection id="H553C84AB7DDA43E8BD8C7B8106D6139C"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of section 149(d) is amended by striking <quote>as part of an issue described in paragraph (2), (3), or (4).</quote> and inserting <quote>to advance refund a bond.</quote>.</text>
</subsection><subsection id="HF34D866E02BA4D32A859EBBF54002349"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HDDA2DED238994C4896CE1908FCDB0CC5"><enum>(1)</enum><text>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).</text>
</paragraph><paragraph id="HBA91946BE9234BE984129ED20E9A3E0B"><enum>(2)</enum><text>Section 148(f)(4)(C), as amended by the preceding provisions of this Act, is amended by striking
clause (xvii) and by redesignating clauses (xviii), (xix), and (xx) as
clauses (xvii), (xviii), and (xix), respectively.</text>
</paragraph></subsection><subsection id="H5E2F106B34364F22ABAE7FCBB34CC564"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to advance refunding bonds issued after December
31, 2014.</text>
</subsection></section><section id="H331FF96EB6C44F9B9EC7BE77E3542CA1"><enum>3434.</enum><header>Repeal of tax credit bond rules</header>
<subsection id="HC0B19CDA703545A3ACCFDCD511E4E356"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H23DC9B39ADFC43938BF7DC285A742277"><enum>(b)</enum><header>Payments to issuers</header><text>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).</text>
</subsection><subsection id="H9601088308914ACCBE1510E899BD2B05"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="HA030CD7DD2234B31AB39D2733A9C4AB2"><enum>(1)</enum><text>Section 6211(b)(4)(A) is amended by striking <quote>and 6431</quote>.</text>
</paragraph><paragraph id="HFA736FB8D5E24834B27278966BAFA087"><enum>(2)</enum><text display-inline="yes-display-inline">Section 6401(b)(1) is amended by striking <quote>G, H, I, and J</quote> and inserting <quote>and G</quote>.</text>
</paragraph></subsection><subsection id="H805637E512434AF4A29596E83BD80E69"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to bonds issued after the date of the enactment of
this Act.</text>
</subsection></section></part></subtitle><subtitle id="H6B2CB0965E6B4594921F8BB00FE68BF7"><enum>F</enum><header>Insurance reforms</header>
<section id="H6AE17BF729FF4586BCB5A66DAE2FA09A"><enum>3501.</enum><header>Exception to pro rata interest expense disallowance for corporate-owned life insurance restricted
to 20-percent owners</header>
<subsection id="H5C08B2DE80D44F719FEDE019E9511B0B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraph (A) of section 264(f)(4) is amended—</text>
<paragraph id="H62F54BE5B06D4BC5A2148205C0DD3219"><enum>(1)</enum><text>by striking <quote>policy or contract)—</quote> and all that follows through <quote>A policy or contract</quote> and inserting <quote>policy or contract) a 20-percent owner of such entity. A policy or contract</quote>, and</text>
</paragraph><paragraph id="H8C583DFEBE4845CD8C36504C251464D0"><enum>(2)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">, officers, directors, and employees</header-in-text></quote> in the heading.</text>
</paragraph></subsection><subsection id="H188BC81FE00E4C8FBD07EDBCF7799BB9"><enum>(b)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 264(f)(4) is amended by striking subparagraph (E).</text>
</subsection><subsection id="H915B12EFF24A4976A416619F58781058"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to contracts issued after December 31, 2014. For
purposes of the preceding sentence, any material increase in the death
benefit or other material change in the contract shall be treated as a new
contract.</text>
</subsection></section><section id="HC0BD94B737AB4319BF72B2CD132EB421"><enum>3502.</enum><header>Net operating losses of life insurance companies</header>
<subsection id="HD75EF2EA81784BBA91CEE52AEC9B14C5"><enum>(a)</enum><header>In general</header><text>Paragraph (5) of section 805(a) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H320A3094797B47CB91B09191FD4241C4" style="OLC">
<paragraph id="H030BDB2313834F59A23293C89A6651A9"><enum>(5)</enum><header>Net operating loss deduction</header><text display-inline="yes-display-inline">The deduction allowed under section 172, determined—</text>
<subparagraph id="H6F959FBF063C4897AE18D10940F28A77"><enum>(A)</enum><text>by treating the net operating loss for any taxable year as equal to the excess (if any) of—</text>
<clause id="HDD6A4CC2ADD94323AE3658AB5C7C7766"><enum>(i)</enum><text>the life insurance deductions for such taxable year, over</text>
</clause><clause id="H6F5735E79A994B16BC773A55D30A8447"><enum>(ii)</enum><text>the life insurance gross income for such taxable year, and</text>
</clause></subparagraph><subparagraph id="HE68FCD8E32944522B9E7D479BBDDD61A"><enum>(B)</enum><text>by applying subsection (d)(5) thereof with the modifications described in paragraph (4) of this
subsection.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H4451B57A24E44FAE854361D86EE9C811"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H2A527EDC70594B579D1505371CA4777E"><enum>(1)</enum><text>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).</text>
</paragraph><paragraph id="HE3BAE36677664864BD3A80E0B577701C"><enum>(2)</enum><text>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).</text>
</paragraph><paragraph id="HB1AA422E52254074BDC9FFC6444631DF"><enum>(3)</enum><text>Section 381 is amended by striking subsection (d).</text>
</paragraph><paragraph id="H44BB982CA906493FAA6E56E765B01D77"><enum>(4)</enum><text>Section 805(a)(4)(B)(i), as redesignated by the preceding provisions of this Act, is amended to
read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H5FA96F3F26274D7A8A17AE3251BD7144" style="OLC">
<clause id="HA3F5095FCB6E48839753BF80384FC2EA"><enum>(ii)</enum><text display-inline="yes-display-inline">the net operating loss deduction provided by paragraph (5),</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H3D83F7CB24BA4E14843FB2075ABBF691"><enum>(5)</enum><text>Section 805(b)(2)(A)(iii), as redesignated by the preceding provisions of this Act, is amended to
read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H16256812BAEE4A2A88B794701609CA7F" style="OLC">
<clause id="H014C122F5582480990CBA4AA1B91F390"><enum>(iv)</enum><text display-inline="yes-display-inline">any net operating loss carryback to the taxable year under section 172 (as applied pursuant to
subsection (a)(5)), and</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H70D59869691D4E75A88DD8CEA7A2D2E5"><enum>(6)</enum><text>Section 805(b) is amended by striking paragraph (4) and redesignating paragraph (5) as paragraph
(4).</text>
</paragraph><paragraph id="HAE1288D50E914C3F8073C049B38D5465"><enum>(7)</enum><text>Section 953(b)(1)(A), as redesignated by the preceding provisions of this Act, is amended by
striking <quote>operations</quote> and inserting <quote>net operating</quote>.</text>
</paragraph><paragraph id="H36AC9E10CBBF438D8C74F88E40C38D41"><enum>(8)</enum><text>Section 1351(i)(3) is amended by striking <quote>or the operations loss deduction under section 810,</quote>.</text>
</paragraph></subsection><subsection id="H35D9CE9669E748A9BD86F5B85EFCA06B"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to losses arising in taxable years beginning after
December 31, 2014.</text>
</subsection></section><section id="H03261F5FBD194EE6A98F62435CFD8997"><enum>3503.</enum><header>Repeal of small life insurance company deduction</header>
<subsection id="H15D3CA02DEC04D71B5F5FF26C99A74DD"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="HD0DBDE38A2994A00A27D44AEE476CA99"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HC689F1E3702D48C48AA4C0F664EBDB2C"><enum>(1)</enum><text display-inline="yes-display-inline">Section 453B(e) is amended—</text>
<subparagraph id="H99EA22F5AA484F67A5887D027696DAF4"><enum>(A)</enum><text>by striking <quote>(as defined in section 806(b)(3))</quote> in paragraph (2)(B), and</text>
</subparagraph><subparagraph id="H756141C378014B258C4BBC71AA0FCE6F"><enum>(B)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H59C19781A85D4637851368E4C37132B2" style="OLC">
<paragraph id="H5253B1E879FA43C09F7E082397047F9A"><enum>(3)</enum><header>Noninsurance business</header>
<subparagraph id="HC3B3D6464FEF40C788F943217E38E8FE"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>noninsurance business</quote> means any activity which is not an insurance business.</text>
</subparagraph><subparagraph id="H3EBC38AA7EBB49F582BFC965DBF5FEB0"><enum>(B)</enum><header>Certain activities treated as insurance businesses</header><text>For purposes of subparagraph (A), any activity which is not an insurance business shall be treated
as an insurance business if—</text>
<clause id="HCD9DD57D6729412083DC01C291A63E45"><enum>(i)</enum><text>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</text>
</clause><clause id="H325559E7E81C4C3EA1701B2FB9F22431"><enum>(ii)</enum><text>it involves the performance of administrative services in connection with plans providing life
insurance, pension, or accident and health benefits.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H094859C350254BE8BC5E6B1D680AD7B4"><enum>(2)</enum><text display-inline="yes-display-inline">Section 465(c)(7)(D)(v)(II) is amended by striking <quote>section 806(b)(3)</quote> and inserting <quote>section 453B(e)(3)</quote>.</text>
</paragraph><paragraph id="HE02262951B874CEEB316E995DBA32A0B"><enum>(3)</enum><text>Section 801(a)(2) is amended by striking subparagraph (C).</text>
</paragraph><paragraph id="H2625660A750849BEB14BA514F624F8FF"><enum>(4)</enum><text>Section 804 is amended by striking <quote>means—</quote> and all that follows and inserting <quote>means the general deductions provided in section 805.</quote>.</text>
</paragraph><paragraph id="HB0282B163AAA4AB2B3EF021E554D4F3A"><enum>(5)</enum><text>Section 805(a)(4)(B) is amended by striking clause (i) and by redesignating clauses (ii), (iii),
and (iv) as clauses (i), (ii), and (iii), respectively.</text>
</paragraph><paragraph id="H74574BA69C8D4392AFE11CB0403CD8A7"><enum>(6)</enum><text>Section 805(b)(2)(A) is amended by striking clause (iii) and by redesignating clauses (iv) and (v)
as clauses (iii) and (iv), respectively.</text>
</paragraph><paragraph id="H981F1D74BAD14D318A9CBFD96A59A798"><enum>(7)</enum><text>Section 815(c)(2)(A) is amended by inserting <quote>and</quote> at the end of clause (i), by striking clause (ii), and by redesignating clause (iii) as clause
(ii).</text>
</paragraph><paragraph id="H043912EE50B249599DAE864F115EC2D4"><enum>(8)</enum><text>Section 842(c) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as
paragraphs (1) and (2), respectively.</text>
</paragraph><paragraph id="H05D1216CBD154604940FED53009D40C2"><enum>(9)</enum><text>Section 953(b)(1) is amended by striking subparagraph (A) and by redesignating subparagraphs (B)
and (C) as subparagraphs (A) and (B), respectively.</text>
</paragraph></subsection><subsection id="H5B27F99030494025BE33357C0251C30D"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section display-inline="no-display-inline" id="HEE8F5F8FAED941C296B50BB458DBF4D4" section-type="subsequent-section"><enum>3504.</enum><header>Computation of life insurance tax reserves</header>
<subsection commented="no" display-inline="no-display-inline" id="HBCA691F9CCDB48D6B9630B37C85FAFE9"><enum>(a)</enum><header>In general</header><text>Subparagraph (B) of section 807(d)(2) is amended to read as follows:</text>
<quoted-block act-name="" id="H790A45DCAF4F464DAE9DCF11393B2440" style="OLC">
<subparagraph id="H889A246327B04C68ABB184AF5F133AF4"><enum>(B)</enum><text>an interest rate equal to the sum of—</text>
<clause id="HD84C9D8290BC4E23A60A92FD98A7D107"><enum>(i)</enum><text>the applicable Federal interest rate, plus</text>
</clause><clause id="H8C3697E0929947F7BD73064904464BA1"><enum>(ii)</enum><text>3.5 percentage points, and</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H21EF2FC5732641B3BE51608AE965BA88"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph commented="no" display-inline="no-display-inline" id="H9114338F6CF044CA88CC6529B29D99A5"><enum>(1)</enum><text>Paragraph (4) of section 807(d) is amended to read as follows:</text>
<quoted-block act-name="" id="H73D94716415445ED8D7274AB360CBA8F" style="OLC">
<paragraph id="HAC34616062A34B159845BB7F7BB8DFE1"><enum>(4)</enum><header>Applicable Federal interest rate</header>
<subparagraph id="H1CAF2B8F06BF4E8D91B77933C2F53E77"><enum>(A)</enum><header>In general</header><text>Except as provided in subparagraph (B), the term <term>applicable Federal interest rate</term> means the annual rate determined by the Secretary under subparagraph (C) for the calendar year in
which the contract was issued.</text>
</subparagraph><subparagraph id="H93E4BACB958E4D35AE5364C8281ECCD3"><enum>(B)</enum><header>Election to recompute Federal interest rate every 5 years</header><text>For purposes of this subsection—</text>
<clause id="H5A43214709F142C3ACBE66AB8885011F"><enum>(i)</enum><header>In general</header><text>In computing the amount of the reserve with respect to any contract to which an election under this
subparagraph applies for periods during any recomputation period, the
applicable Federal interest rate shall be the annual rate determined by
the Secretary under subparagraph (C) for the 1st year of such period. No
change in the applicable Federal interest rate shall be made under the
preceding sentence unless such change would equal or exceed <fraction>1/2</fraction> of 1 percentage point.</text>
</clause><clause id="H3D7F1691774E4CCB80EDFC06FE0796AD"><enum>(ii)</enum><header>Recomputation period</header><text>For purposes of clause (i), the term <term>recomputation period</term> means, with respect to any contract, the 5 calendar year period beginning with the 5th calendar
year beginning after the calendar year in which the contract was issued
(and each subsequent 5 calendar year period).</text>
</clause><clause id="H2B20DEACA1684C569F71584F386467E9"><enum>(iii)</enum><header>Election</header><text>An election under this subparagraph shall apply to all contracts issued during the calendar year
for which the election was made or during any subsequent calendar year
unless such election is revoked with the consent of the Secretary.</text>
</clause><clause id="H975C4C6113E44CC5B56FDE2CF5317FD6"><enum>(iv)</enum><header>Spread not available</header><text>Subsection (f) shall not apply to any adjustment required under this paragraph.</text>
</clause></subparagraph><subparagraph id="H8A1D89A766EE4DDBABAFEA7340292796"><enum>(C)</enum><header>Rate of interest</header>
<clause id="H175D3DC8BC324E27ACD78560DC32880F"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this paragraph, the rate of interest determined under this subparagraph shall be
the annual rate determined by the Secretary under clause (ii).</text>
</clause><clause id="H7A7067C41FB14A8B9E76B612298BC0CF"><enum>(ii)</enum><header>Determination of annual rate</header>
<subclause id="H67AE7DD192474F7CB649F5EE9C0CE399"><enum>(I)</enum><header>In general</header><text>The annual rate determined by the Secretary under this clause for any calendar year shall be a rate
equal to the average of the applicable Federal mid-term rates (as defined
in section 1274(d) but based on annual compounding) effective as of the
beginning of each of the calendar months in the test period.</text>
</subclause><subclause id="HEF943D133FC742D0A4E104456C9099DA"><enum>(II)</enum><header>Test period</header><text>For purposes of subclause (I), the test period is the most recent 60-calendar-month period ending
before the beginning of the calendar year for which the determination is
made.</text></subclause></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H3B6DDF4253F349CC8B0A7C561D825777"><enum>(2)</enum><text>The first sentence following paragraph (6) in section 807(c) is amended by striking <quote>the applicable Federal interest rate under subsection (d)(2)(B)(i), the prevailing State assumed
interest rate under subsection (d)(2)(B)(ii),</quote> and inserting <quote>the interest rate determined under subsection (d)(2)(B)</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H614661FBBA41414D8F082572E2BB12D5"><enum>(3)</enum><text>Section 808 is amended by adding at the end the following new subsection:</text>
<quoted-block act-name="" id="HA7C7D4C0F45E4ECABCC381B24AAE5354" style="OLC">
<subsection id="HE5B85D53568F4516BBB773F0F98DBC48"><enum>(g)</enum><header>Prevailing State assumed interest rate</header><text>For purposes of this subchapter—</text>
<paragraph id="H05AFECE72E0A4AFE8B83BA09AC580478"><enum>(1)</enum><header>In general</header><text>The term <term>prevailing State assumed interest rate</term> 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.</text>
</paragraph><paragraph id="H532E02AC92924E4CA34740BF8766ECD0"><enum>(2)</enum><header>When rate determined</header><text>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.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H03010039EABC42CBABDD454431C56FC9"><enum>(4)</enum><text>Paragraph (1) of section 811(d) is amended by striking <quote>the greater of the prevailing State assumed interest rate or applicable Federal interest rate in
effect under section 807</quote> and inserting <quote>the interest rate in effect under section 807(d)(2)(B)</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H0EB4729639BC41FF8C98AAF0B90B1E30"><enum>(5)</enum><text>Subparagraph (A) of section 846(f)(6) is amended by striking <quote>except that</quote> and all that follows and inserting <quote>except that the limitation of subsection (a)(3) shall apply in lieu of the limitation of the last
sentence of section 807(d)(1), and</quote>.</text>
</paragraph><paragraph id="HD9BC00C30F7B49AABA08ED48D0EA512B"><enum>(6)</enum><text>Subparagraph (B) of section 954(i)(5) is amended by striking <quote>shall be substituted for the prevailing State assumed interest rate</quote> and inserting <quote>shall, if higher, be substituted for the interest rate in effect under section 807(d)(2)(B)</quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HAC2DCE5159A94128A4B0530BFAB2FFE4"><enum>(c)</enum><header>Effective date</header>
<paragraph commented="no" display-inline="no-display-inline" id="HB1CD71B3DFCE48528BFF971D1A31A351"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H736FF4FFD77941B39875164C70FEAF49"><enum>(2)</enum><header>Transition rule</header><text>For the first taxable year beginning after December 31, 2014, 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 and by using the interest rate applicable to
such reserves under <external-xref legal-doc="usc" parsable-cite="usc/26/807">section 807(d)(2)</external-xref> of the Internal Revenue Code of 1986
for calendar year 2015. For subsequent taxable years, such amendments
shall be applied with respect to such reserve by using the interest rate
applicable under such section for calendar year 2015.</text>
</paragraph><paragraph id="H205C9176833C45E9874CAF6052AE1E00"><enum>(3)</enum><header>Transition relief</header>
<subparagraph id="H25C36E7F8ACF453D8544896EAACB3A9A"><enum>(A)</enum><header>In general</header><text>If—</text>
<clause id="H47AFAAD77D0542D29A52B9DD5FA7C295"><enum>(i)</enum><text>the reserve determined under <external-xref legal-doc="usc" parsable-cite="usc/26/807">section 807(d)(2)</external-xref> of the Internal Revenue Code of 1986 with respect to
any contract as of the close of the year preceding the first taxable year
beginning after December 31, 2014, differs from</text>
</clause><clause id="H9D3D3F297FE3408686C17B48B430FF24"><enum>(ii)</enum><text>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),</text></clause><continuation-text continuation-text-level="subparagraph">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).</continuation-text></subparagraph><subparagraph id="HA100E6801D7447CA970D283950F463BE"><enum>(B)</enum><header>Method</header><text>The method provided in this subparagraph is as follows:</text>
<clause id="H834EDA1A2FBD44428E15512ACCCAC822"><enum>(i)</enum><text>if the amount determined under subparagraph (A)(i) exceeds the amount determined under subparagraph
(A)(ii), <fraction>1/8</fraction> 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</text>
</clause><clause id="HFFB9C2BC53484FF6BEBE948273A98AD1"><enum>(ii)</enum><text>if the amount determined under subparagraph (A)(ii) exceeds the amount determined under
subparagraph (A)(i), <fraction>1/8</fraction> 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.</text>
</clause></subparagraph></paragraph></subsection></section><section id="HF2977BF4BC86452885B693948E36B739"><enum>3505.</enum><header>Adjustment for change in computing reserves</header>
<subsection id="HE6533B7456C545ADAA3C22312ED159A1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of section 807(f) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HA43EA30134034A50BE0ACDB5F7767272" style="OLC">
<paragraph id="HC78C476A0A0C4513A2F05A7299C0320C"><enum>(1)</enum><header>Treatment as change in method of accounting</header><text display-inline="yes-display-inline">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—</text>
<subparagraph id="HDB7641AA25184E45A09D668C4C385E39"><enum>(A)</enum><text>the amount of the item at the close of the taxable year, computed on the new basis, and</text>
</subparagraph><subparagraph id="H65A5FC5BB96E4253AD600A1414AF7426"><enum>(B)</enum><text>the amount of the item at the close of the taxable year, computed on the old basis,</text></subparagraph><continuation-text continuation-text-level="paragraph">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.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HCD0B4A8A7DD343BD85E120175AF14EE0"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H0B18AF7E0FD642F7839DBF885AAE28F1"><enum>3506.</enum><header>Modification of rules for life insurance proration for purposes of determining the dividends
received deduction</header>
<subsection id="HFFDBA69E85B5443E842DC30DBE43217B"><enum>(a)</enum><header>In general</header><text>Section 812 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H0B105F2A77C74D07856D7FEE19C36571" style="OLC">
<section display-inline="no-display-inline" id="H82774CFCCA854BEFB41D026140A3C0E1"><enum>812.</enum><header>Determination of company’s and policyholder’s share on account by account basis</header>
<subsection id="H91D20F75E9694EE7AB50C3271ECB51E7"><enum>(a)</enum><header>Determination on account by account basis</header><text display-inline="yes-display-inline">Sections 805(a)(4) and 807 shall be applied on an account by account basis.</text>
</subsection><subsection id="H899D040B188B48A58D081895E0AA7CD1"><enum>(b)</enum><header>Company’s share</header><text>For purposes of section 805(a)(4), the term <quote>company’s share</quote> means, with respect to any account for any taxable year, the ratio (expressed as a percentage) of—</text>
<paragraph id="H0FC22AF96B8744D6989C3693FC49CB00"><enum>(1)</enum><text>the excess of—</text>
<subparagraph id="HD6A377DF9AE74FF48E5C21ED3E5F1561"><enum>(A)</enum><text>the mean assets of such account for such taxable year, over</text>
</subparagraph><subparagraph id="HAB871604227D4E3D9DB640032AD48F55"><enum>(B)</enum><text>the mean reserves with respect to such account for such taxable year, divided by</text>
</subparagraph></paragraph><paragraph id="H2F1B5B82A102448CA850D70E779FAE6D"><enum>(2)</enum><text>the mean assets of such account for such taxable year.</text>
</paragraph></subsection><subsection id="H51C9132717674F2EB757C5895BBA9F2C"><enum>(c)</enum><header>Policyholder’s share</header><text>For purposes of section 807, the term <quote>policyholder’s share</quote> means, with respect to any account for any taxable year, the excess of 100 percent over the
percentage determined under paragraph (2).</text>
</subsection><subsection id="H639AC6375344448F9C0F592E810A8390"><enum>(d)</enum><header>Mean assets and mean reserves defined</header><text>For purposes of this subsection—</text>
<paragraph id="H0C23F79B19E34012A5FAA449D6DD27DE"><enum>(1)</enum><header>Mean assets</header><text>The term <quote>mean assets</quote> means, with respect to any account for any taxable year, 50 percent of the sum of—</text>
<subparagraph id="H4FC8C5BACBFB44E6854CA7ECBE77E9A9"><enum>(A)</enum><text>the fair market value of the assets of such account determined as of the beginning of such taxable
year, and</text>
</subparagraph><subparagraph id="HD952EAC623B84024AE44DFDD12D2915B"><enum>(B)</enum><text>the fair market value of the assets of such account determined as of the close of such taxable
year.</text>
</subparagraph></paragraph><paragraph id="H78463BF1671D45EA80046518FA973C01"><enum>(2)</enum><header>Mean reserves</header><text display-inline="yes-display-inline">The term <quote>mean reserves</quote> means, with respect to any account for any taxable year, 50 percent of the sum of—</text>
<subparagraph id="HAD77A67B8CCA480FA2DD0CD6DC6D2399"><enum>(A)</enum><text>the reserves with respect to such account as determined under section 807 as of the beginning of
such taxable year, and</text>
</subparagraph><subparagraph id="H07151619B78A4EE3AE02923B4C73B014"><enum>(B)</enum><text>the reserves with respect to such account as determined under section 807 as of the close of such
taxable year.</text>
</subparagraph></paragraph><paragraph id="HA39972DDC4E2483EB40A9FB325E217A4"><enum>(3)</enum><header>Certain dividends not taken into account</header><text>Dividends described in section 246(c) shall not be taken into account for purposes of determining
mean assets or mean reserves.</text>
</paragraph><paragraph id="H81560B234A8D44C888775970E20AC08B"><enum>(4)</enum><header>Fees and expenses not taken into account</header><text>Fees and expenses shall not be taken into account for purposes of determining mean assets or mean
reserves.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H10BCD79EADF148238CF81B93B87C2F42"><enum>(b)</enum><header>Conforming amendment</header><text>Section 817A(e)(2) is amended by striking <quote>, 807(d)(2)(B), and 812</quote> and inserting <quote>and 807(d)(2)(B)</quote></text>
</subsection><subsection id="H703085EE80F743079D9F44DA8E0C73F9"><enum>(c)</enum><header>Clerical amendment</header><text>The table of sections for subpart D of part I of subchapter L of chapter 1 is amended by striking
the item relating to section 812 and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H833C4D357B8C4B1C869AF3755CA20815" style="OLC">
<toc container-level="quoted-block-container" idref="H0B105F2A77C74D07856D7FEE19C36571" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H82774CFCCA854BEFB41D026140A3C0E1" level="section">Sec. 812. Determination of company’s and policyholder’s share on account by account basis.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HCFEECD39CE7A4CCB87D5F1EF6ECE1817"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HE2EE46E295654FB8AEDD7E65821C1F8A"><enum>3507.</enum><header>Repeal of special rule for distributions to shareholders from pre-1984 policyholders surplus
account</header>
<subsection id="H07263CA0CC564284959572288968EE17"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="HF4BA4A1F20E24768AB817E48A6087199"><enum>(b)</enum><header>Conforming amendment</header><text>Section 801 is amended by striking subsection (c).</text>
</subsection><subsection id="H54AD25EF85D3407B88DD10E895539365"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection><subsection id="HF1F29C49BABC4D5A8C6C6F498EE91252"><enum>(d)</enum><header>Phased inclusion of remaining balance of policyholders surplus accounts</header><text>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, 2015) 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, 2014, shall be the amount which would be
imposed by such section for such year on the sum of—</text>
<paragraph id="HB83591DD9DB6448E8376D170B2E61A69"><enum>(1)</enum><text>life insurance company taxable income for such year (within the meaning of such section 801 but not
less than zero), plus</text>
</paragraph><paragraph id="HFA5C3A77257E4107B64217FC76BCED0E"><enum>(2)</enum><text><fraction>1/8</fraction> of such balance.</text>
</paragraph></subsection></section><section commented="no" id="H019832D7255A4076A49465973F483243"><enum>3508.</enum><header>Modification of proration rules for property and casualty insurance companies</header>
<subsection commented="no" id="H20FAAB225AA24DA681FE99DB76A6084B"><enum>(a)</enum><header>In general</header><text>Section 832(b)(5)(B) is amended by striking <quote>15 percent</quote> and inserting <quote>the percentage determined under subparagraph (F))</quote>.</text>
</subsection><subsection commented="no" id="H9D67AADC7961407E8B601AD6CE5DC911"><enum>(b)</enum><header>Determination of percentage</header><text>Section 832(b)(5) is amended by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H16845B19E183455780F068B784563877" style="OLC">
<subparagraph commented="no" id="HAEF66EDC15264B689D3A89A2B4B67DFD"><enum>(F)</enum><header>Determination of percentage</header>
<clause commented="no" id="HC45D5560226A4C559CF786FE97BE380C"><enum>(i)</enum><header>In general</header><text>For purposes of subparagraph (B), the percentage determined under this subparagraph is the ratio
(expressed as a percentage) of—</text>
<subclause commented="no" id="H176505A32C9D4BEFBEDFB413C144908A"><enum>(I)</enum><text>the average adjusted bases (within the meaning of section 1016) of tax-exempt assets of the
company, to</text>
</subclause><subclause commented="no" id="H5455211F31EF48D0AE9A59C96A0E8373"><enum>(II)</enum><text>such average adjusted bases of all assets of the company.</text>
</subclause></clause><clause commented="no" id="HDDC0BF1DCB9D41498607188FE55965FA"><enum>(ii)</enum><header>Tax-exempt assets</header><text>For purposes of clause (i)(I), the term <term>tax-exempt assets</term> means assets of the type which give rise to income described in subparagraph (B).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H65E7BE666AFB4497A7AA55109AB40379"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HD904EA8A2DB34F0C8043EA64CCF2B556"><enum>3509.</enum><header>Repeal of special treatment of Blue Cross and Blue Shield organizations, etc</header>
<subsection id="HFB5FF3D3C8624A2F937857DF3F62D996"><enum>(a)</enum><header>Transitional repeal of special rules</header>
<paragraph id="HF1726F710AEE45769166258B6CA25B68"><enum>(1)</enum><header>In general</header><text>Section 833 is amended by striking subsection (b), by redesignating subsection (c) as subsection
(b), and by amending subsection (a) to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H51D53E7557454CDA82251680A53DC4B6" style="OLC">
<subsection id="HCD7EB828532541DA804B03E275305590"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">An organization to which this section applies shall be taxable under this part in the same manner
as if it were a stock insurance company.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H0FFECBF7ED4C472080AB5AF4F52A3290"><enum>(2)</enum><header>Tax status not dependent on medical loss ratio</header><text display-inline="yes-display-inline">Subsection (b) of section 833, as redesignated by subsection (a), is amended by striking paragraph
(5).</text>
</paragraph><paragraph id="H95B1016428084966B5C64BA0E142A4DB"><enum>(3)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to taxable years beginning after December 31,
2014.</text>
</paragraph></subsection><subsection id="HE170C10C33704E669736E3058BC7EABC"><enum>(b)</enum><header>Repeal of statutory treatment as a stock insurance company</header>
<paragraph id="H45275E81CC34437DA09CAC6B0B0A005B"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Part II of subchapter L of chapter is amended by striking section 833 (and by striking the item
relating to such section in the table of sections for such part).</text>
</paragraph><paragraph id="HF1EDADBF4F304F7A98436F2335C75B09"><enum>(2)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to taxable years beginning after December 31,
2016.</text>
</paragraph></subsection></section><section commented="no" id="H164E5A15CD12482AA2518FC680D4D6D4"><enum>3510.</enum><header>Modification of discounting rules for property and casualty insurance companies</header>
<subsection commented="no" id="H709DF81A5C2E49ADB64C0F193E295CF8"><enum>(a)</enum><header>Modification of rate of interest used To discount unpaid losses</header><text>Paragraph (2) of section 846(c) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HFDBF779796A64DD5BC617BCB3E3CD2D7" style="OLC">
<paragraph commented="no" id="HA0069CAF51A349A1B5357079B3CE25A3"><enum>(2)</enum><header>Determination of annual rate</header><text>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)).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H458DB044C8754F959187DE86E3041C84"><enum>(b)</enum><header>Modification of computational rules for loss payment patterns</header><text>Section 846(d)(3) is amended by striking subparagraphs (B) through (G) and inserting the following
new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="H804798C54D084FDBB40CB1C521E59F12" style="OLC">
<subparagraph commented="no" id="H737E2C2E369549E488024E603609101A"><enum>(B)</enum><header>Treatment of certain losses</header><text>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:</text>
<clause commented="no" id="H571E4D1441F34470B07835F777B6B84C"><enum>(i)</enum><header>3-year loss payment pattern</header>
<subclause commented="no" id="HF9CB5D31A0F84568A86CE792C95555B7"><enum>(I)</enum><header>In general</header><text>The period taken into account under subparagraph (A)(i) shall be extended to the extent required
under subclause (II).</text>
</subclause><subclause commented="no" id="H5617C2C0D8A647348A24BDA9B4B02F16"><enum>(II)</enum><header>Computation of extension</header><text>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 amount of the losses treated as paid in the 2d year
after the accident year (or, if lesser, the portion of the unpaid losses
not theretofore taken into account).</text>
</subclause></clause><clause commented="no" id="H6C6367CDC1354CF0B508CA442A636572"><enum>(ii)</enum><header>10-year loss payment pattern</header>
<subclause commented="no" id="H49561C894BC44213BEA4F8BCCC0A5D1A"><enum>(I)</enum><header>In general</header><text>The period taken into account under subparagraph (A)(ii) shall be extended to the extent required
under subclause (II).</text>
</subclause><subclause commented="no" id="H8AB62FB2FFDD4CB8A8C5881B535B031B"><enum>(II)</enum><header>Computation of extension</header><text>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 losses treated as paid in the 9th year
after the accident year (or, if lesser, the portion of the unpaid losses
not theretofore taken into account).</text>
</subclause></clause></subparagraph><subparagraph commented="no" id="H73E197DF2C154626810F29FD8B4B8A03"><enum>(C)</enum><header>Special rule for international and reinsurance lines of business</header><text>Except as otherwise provided by regulations, any determination made under subsection (a) with
respect to unpaid losses relating to the international or reinsurance
lines of business shall be made using, in lieu of the loss payment pattern
applicable to the respective lines of business, a pattern determined by
the Secretary under paragraphs (1) and (2) based on the combined losses
for all lines of business described in subparagraph (A)(ii).</text>
</subparagraph><subparagraph commented="no" id="HD8F2F6CDAFAE47C6A5DE46171EB0C88A"><enum>(D)</enum><header>Special rule for 2d or 9th year if negative or zero</header>
<clause commented="no" id="H416C18E62CD24D539E9EBEA24E5F8CF5"><enum>(i)</enum><header>3-year loss payment pattern</header><text>If the amount of the losses treated as paid in the 2d year after the accident year is zero or a
negative amount, subparagraph (B)(i)(II) shall be applied by substituting
the average of the losses treated as paid in the 1st and 2d years after
the accident year for the losses treated as paid in the 2d year after the
accident year.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H38971CF7449649E7B35F00AF2D1EEBB7"><enum>(ii)</enum><header display-inline="yes-display-inline">10-year loss payment pattern</header><text display-inline="yes-display-inline">If the amount of the losses treated as paid in the 9th year after the accident year is zero or a
negative amount, subparagraph (B)(ii)(II) shall be applied by substituting
the average of the losses treated as paid in the 7th, 8th, and 9th years
after the accident year for the losses treated as paid in the 9th year
after the accident year.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H98B257B8029A40F7ADED4676F851130B"><enum>(c)</enum><header>Repeal of historical payment pattern election</header><text>Section 846 is amended by striking subsection (e) and by redesignating subsections (f) and (g) as
subsections (e) and (f), respectively.</text>
</subsection><subsection commented="no" id="HD06A6397614C41ED83D834E2C106C5C7"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection><subsection commented="no" id="H4E26B08F3E794EA7B126FCDBBBC77D7E"><enum>(e)</enum><header>Transitional rule</header><text>For the first taxable year beginning after December 31, 2014—</text>
<paragraph commented="no" id="H7F3C750921474E3CAE38BD1027C711D2"><enum>(1)</enum><text>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</text>
</paragraph><paragraph commented="no" id="HD52598E4840B4F068B13340E8B5F612F"><enum>(2)</enum><text>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,</text></paragraph><continuation-text commented="no" continuation-text-level="subsection">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 2015, 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
2015.</continuation-text></subsection></section><section id="H00647295E58440D48CA3B544E56ACCFB"><enum>3511.</enum><header>Repeal of special estimated tax payments</header>
<subsection id="H33EFA97F30D349348EED266211E8E351"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection id="H113A70929F5F478CA5F5E67E7A032943"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H3654320A1F424C7AB511B2554C510B33"><enum>3512.</enum><header>Capitalization of certain policy acquisition expenses</header>
<subsection id="H634E8B7869174F52891033558B06958F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of section 848(c) is amended by striking subparagraphs (A), (B), and (C) and
inserting the following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="HDD1B703EF22A4478BF0BBCA210268F53" style="OLC">
<subparagraph id="H2E26DD1CF6B242ACA68594621907082B"><enum>(A)</enum><text display-inline="yes-display-inline">5 percent of the net premiums for such taxable year on specified insurance contracts which are
group contracts, and</text>
</subparagraph><subparagraph id="HB4B17F51DC7F46AFA9053A43BFF2FE44"><enum>(B)</enum><text>12 percent of the net premiums for such taxable year on specified insurance contracts not described
in subparagraph (A).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HE50363723A6F48BCAC9655F6D4B0B842"><enum>(b)</enum><header>Group contracts</header><text>So much of paragraph (2) of section 848(e) as precedes subparagraph (A) thereof is amended to read
as follows:</text>
<quoted-block display-inline="no-display-inline" id="H7F93D49568EC4198B0BF069E1B3C8CA1" style="OLC">
<paragraph id="H495183E3349941E3A9F1F5AC4F8F5316"><enum>(2)</enum><header>Group contract</header><text display-inline="yes-display-inline">The term <quote>group contract</quote> means any specified insurance contract—</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0EAA1788B80E4C4DB6842C3869BEB27B"><enum>(c)</enum><header>Conforming amendments</header><text>Section 848(e) is amended by striking paragraphs (3) and (6) and by redesignating paragraphs (4)
and (5) as paragraphs (3) and (4), respectively.</text>
</subsection><subsection id="HBA2EB3E937EC4CB88F99E6C592EC390A"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31,
2014.</text>
</subsection></section><section id="H3021445D834C41ACB36C606DA7434B9B" section-type="subsequent-section"><enum>3513.</enum><header>Tax reporting for life settlement transactions</header>
<subsection id="H6F788256224F4FB386644AD55D2A7CB6"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart B of part III of subchapter A of chapter 61 is amended by adding at the end the following
new section:</text>
<quoted-block display-inline="no-display-inline" id="H5B4ED971907D43C9BDFC1B61CA00A57C" style="OLC">
<section id="H3F70ECEFA1354196BD7923148A4E37BB"><enum>6050X.</enum><header>Returns relating to certain life insurance contract transactions</header>
<subsection id="H40CF4A9E5BDF49988D31CF964435E8DE"><enum>(a)</enum><header>Requirement of reporting of certain payments</header>
<paragraph id="H401F8036A1AF493C8BAB2A9E7C01182E"><enum>(1)</enum><header>In general</header><text>Every person who acquires a life insurance contract or any interest in a life insurance contract in
a reportable policy sale during any taxable year shall make a return for
such taxable year (at such time and in such manner as the Secretary shall
prescribe) setting forth—</text>
<subparagraph id="H71FFF910B55E48DABFA470B1F5DA66C5"><enum>(A)</enum><text>the name, address, and TIN of such person,</text>
</subparagraph><subparagraph id="H723D34CE206A49BDA647D097349AB4FE"><enum>(B)</enum><text>the name, address, and TIN of each recipient of payment in the reportable policy sale,</text>
</subparagraph><subparagraph id="HA75C97EB63A14B70BCC031E1A2F4C858"><enum>(C)</enum><text>the date of such sale,</text>
</subparagraph><subparagraph id="HEFA3E0B026AE44E79CF85389EAA65197"><enum>(D)</enum><text>the name of the issuer of the life insurance contract sold and the policy number of such contract,
and</text>
</subparagraph><subparagraph id="H9B048C67DBCF4F01AE672D60AA894503"><enum>(E)</enum><text>the amount of each payment.</text>
</subparagraph></paragraph><paragraph id="HFCB01B3C9F1540A19E907A1B05D574E9"><enum>(2)</enum><header>Statement to be furnished to persons with respect to whom information is required</header><text>Every person required to make a return under this subsection shall furnish to each person whose
name is required to be set forth in such return a written statement
showing—</text>
<subparagraph id="HC1EC3E3CC33F4424A7FE82A7CFCB1D3B"><enum>(A)</enum><text>the name, address, and phone number of the information contact of the person required to make such
return, and</text>
</subparagraph><subparagraph id="H471D5C8DB526408D85D1089625C7B05B"><enum>(B)</enum><text>the information required to be shown on such return with respect to such person, except that in the
case of an issuer of a life insurance contract, such statement is not
required to include the information specified in paragraph (1)(E).</text>
</subparagraph></paragraph></subsection><subsection id="H8AD7785FC3AE4297BA151147ACCCB35B"><enum>(b)</enum><header>Requirement of reporting of seller's basis in life insurance contracts</header>
<paragraph id="H004FDDFE6357468A86A3D3E7CE6075B5"><enum>(1)</enum><header>In general</header><text>Upon receipt of the statement required under subsection (a)(2) or upon notice of a transfer of a
life insurance contract to a foreign person, each issuer of a life
insurance contract shall make a return (at such time and in such manner as
the Secretary shall prescribe) setting forth—</text>
<subparagraph id="H2FF1702A32764E65BAF1A3F9E13AB046"><enum>(A)</enum><text>the name, address, and TIN of the seller who transfers any interest in such contract in such sale,</text>
</subparagraph><subparagraph id="HC74DC436D49A47D6BE2F935557A44331"><enum>(B)</enum><text>the investment in the contract (as defined in section 72(e)(6)) with respect to such seller, and</text>
</subparagraph><subparagraph id="HF390AB27DE0C433C8EFA9B92D09A58FD"><enum>(C)</enum><text>the policy number of such contract.</text>
</subparagraph></paragraph><paragraph id="H42FD1A3E2E0A49D8B74B6D38A733DE0B"><enum>(2)</enum><header>Statement to be furnished to persons with respect to whom information is required</header><text>Every person required to make a return under this subsection shall furnish to each person whose
name is required to be set forth in such return a written statement
showing—</text>
<subparagraph id="H65CA311B0EBC4FE384AF3AABA4671608"><enum>(A)</enum><text>the name, address, and phone number of the information contact of the person required to make such
return, and</text>
</subparagraph><subparagraph id="H3D50B9E0CF9E4D509688C816B892E043"><enum>(B)</enum><text>the information required to be shown on such return with respect to each seller whose name is
required to be set forth in such return.</text>
</subparagraph></paragraph></subsection><subsection id="HA978DC03F64C42A386F1C80AC8D25557"><enum>(c)</enum><header>Requirement of reporting with respect to reportable death benefits</header>
<paragraph id="H9974EB649E174EA2BEC02B0E40FE18F9"><enum>(1)</enum><header>In general</header><text>Every person who makes a payment of reportable death benefits during any taxable year shall make a
return for such taxable year (at such time and in such manner as the
Secretary shall prescribe) setting forth—</text>
<subparagraph id="H433F202A8B864959A8E047BBAFDF6FBC"><enum>(A)</enum><text>the name, address, and TIN of the person making such payment,</text>
</subparagraph><subparagraph id="H17698138B52C4C2182DF4D2B6666047F"><enum>(B)</enum><text>the name, address, and TIN of each recipient of such payment,</text>
</subparagraph><subparagraph id="H6C4B0BF020BB4D5A9178D5E8EE64024B"><enum>(C)</enum><text>the date of each such payment, and</text>
</subparagraph><subparagraph id="H10A06188071D44BF875FEB9C81FFC7EA"><enum>(D)</enum><text>the amount of each such payment.</text>
</subparagraph></paragraph><paragraph id="HB6D8832C7AF94B2093B6B5F6AB292516"><enum>(2)</enum><header>Statement to be furnished to persons with respect to whom information is required</header><text>Every person required to make a return under this subsection shall furnish to each person whose
name is required to be set forth in such return a written statement
showing—</text>
<subparagraph id="H5A08F82A4067488D9AD670FC5F9EB34B"><enum>(A)</enum><text>the name, address, and phone number of the information contact of the person required to make such
return, and</text>
</subparagraph><subparagraph id="HFC041CA2F56D43BE815DBD01896C46EF"><enum>(B)</enum><text>the information required to be shown on such return with respect to each recipient of payment whose
name is required to be set forth in such return.</text>
</subparagraph></paragraph></subsection><subsection id="HE19328566C5F4CD18BB6A78B02A60A97"><enum>(d)</enum><header>Definitions</header><text>For purposes of this section:</text>
<paragraph id="H54015E55637F4C8290A73B88A805BB54"><enum>(1)</enum><header>Payment</header><text>The term <term>payment</term> means the amount of cash and the fair market value of any consideration transferred in a
reportable policy sale.</text>
</paragraph><paragraph id="H6AFA65E3EA534CFBA537FCB7CD7369C6"><enum>(2)</enum><header>Reportable policy sale</header><text>The term <term>reportable policy sale</term> has the meaning given such term in section 101(a)(3)(B).</text>
</paragraph><paragraph id="H352246C4321D4C819F0E8DC7743AF615"><enum>(3)</enum><header>Issuer</header><text>The term <term>issuer</term> means any life insurance company that bears the risk with respect to a life insurance contract on
the date any return or statement is required to be made under this
section.</text>
</paragraph><paragraph id="H8A6A46D99C7E44708C2DD6520D362EAE"><enum>(4)</enum><header>Reportable death benefits</header><text>The term <term>reportable death benefits</term> means amounts paid by reason of the death of the insured under a life insurance contract that has
been transferred in a reportable policy sale.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF24945F46D924571829AA7FBD5BF4F67"><enum>(b)</enum><header>Clerical amendment</header><text>The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by
inserting after the item relating to section 6050W the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HEE4F5D93AE354C7DB79A1BDC965C4EDE" style="OLC">
<toc>
<toc-entry bold="off" level="section">Sec. 6050X. Returns relating to certain life insurance contract transactions.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBF40CD6BEB594B8F842E222B68640601"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="HF3AAE05371194EA09964AB577971E7BA"><enum>(1)</enum><text>Subsection (d) of section 6724 is amended—</text>
<subparagraph id="H70AD3941105D472194DF327F3AEFE496"><enum>(A)</enum><text>by striking <quote>or</quote> at the end of clause (xxiv) of paragraph (1)(B), by striking <quote>and</quote> at the end of clause (xxv) of such paragraph and inserting <quote>or</quote>, and by inserting after such clause (xxv) the following new clause:</text>
<quoted-block act-name="" id="HF6141FFE2DE8451F90019630A2BE4859" style="OLC">
<clause id="HFE30D78FD96F449AAE8ACE8219B75909"><enum>(xxvi)</enum><text>section 6050X (relating to returns relating to certain life insurance contract transactions), and</text></clause><after-quoted-block>, and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HB1927653E3C349279A963ED4DC48D2B9"><enum>(B)</enum><text>by striking <quote>or</quote> at the end of subparagraph (GG) of paragraph (2), by striking the period at the end of
subparagraph (HH) of such paragraph and inserting <quote>, or</quote>, and by inserting after such subparagraph (HH) the following new subparagraph:</text>
<quoted-block act-name="" id="H754E54DEFE43426886EA4BFEA7E56911" style="OLC">
<subparagraph id="H3E3B8F36AECF4050B4E26654E474F5EB"><enum>(II)</enum><text>subsection (a)(2), (b)(2), or (c)(2) of section 6050X (relating to returns relating to certain life
insurance contract transactions).</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H0D1AE1FAF0F74D758F2557E3EA1E2072"><enum>(2)</enum><text>Section 6047 is amended—</text>
<subparagraph id="H3213921DED57479BB5C4D14201D37D3D"><enum>(A)</enum><text>by redesignating subsection (g) as subsection (h),</text>
</subparagraph><subparagraph id="HC27CC0E303D84C77826D4856BF187A8D"><enum>(B)</enum><text>by inserting after subsection (f) the following new subsection:</text>
<quoted-block act-name="" id="H3DEE26B687794AC088B59D96068870DF" style="OLC">
<subsection id="HEF5DD4A0467B4BA69E941A4A6608A01C"><enum>(g)</enum><header>Information relating to life insurance contract transactions</header><text>This section shall not apply to any information which is required to be reported under section
6050X.</text></subsection><after-quoted-block>, and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HFE5B7411C02F43658C6EB77BEFFC7989"><enum>(C)</enum><text>by adding at the end of subsection (h), as so redesignated, the following new paragraph:</text>
<quoted-block act-name="" id="H07E342E1E07542F4ABB1CEC89B82C86A" style="OLC">
<paragraph id="H3350AD9832514F4CA132EEFAD4CCFEB2"><enum>(4)</enum><text>For provisions requiring reporting of information relating to certain life insurance contract
transactions, see section 6050X.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H032095777F774929AB0578E8EF2682C3"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to—</text>
<paragraph id="H688D5F9964D344DCB396786C82F7FF97"><enum>(1)</enum><text>reportable policy sales (as defined in <external-xref legal-doc="usc" parsable-cite="usc/26/6050X">section 6050X(d)(2)</external-xref> of the Internal Revenue Code of 1986 (as
added by subsection (a)) after December 31, 2014, and</text>
</paragraph><paragraph id="HBC09BA8A7799451388E810D63ED4E56D"><enum>(2)</enum><text display-inline="yes-display-inline">reportable death benefits (as defined in section 6050X(d)(4) of such Code (as added by subsection
(a)) paid after December 31, 2014.</text>
</paragraph></subsection></section><section id="HF31DB5258473483E9F0EE1112E81D7CA"><enum>3514.</enum><header>Clarification of tax basis of life insurance contracts</header>
<subsection id="HD66DC6C5A6F34EABAEA82EBCA4BFE8C6"><enum>(a)</enum><header>Clarification with respect to adjustments</header><text>Paragraph (1) of section 1016(a) is amended by striking subparagraph (A) and all that follows and
inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H1B8B9D5D62BA4FA4806802D784EBA013" style="OLC">
<subparagraph id="HD5856EEEACA645D39C44F1D7562ABD2A"><enum>(A)</enum><text>for—</text>
<clause id="H3C7F6CCB594D4E8F92863490FF97F966"><enum>(i)</enum><text>taxes or other carrying charges described in section 266; or</text>
</clause><clause id="H47FDCFB364754193AC6F68688FEDB4E9"><enum>(ii)</enum><text>expenditures described in section 173 (relating to circulation expenditures),</text></clause><continuation-text continuation-text-level="subparagraph">for which deductions have been taken by the taxpayer in determining taxable income for the taxable
year or prior taxable years; or</continuation-text></subparagraph><subparagraph id="H7FDF44C4FA84462A91CE90758C88627D"><enum>(B)</enum><text>for mortality, expense, or other reasonable charges incurred under an annuity or life insurance
contract;</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H1B868F455A54422CA7C40CD7E3A4BC59"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to transactions entered into after August 25, 2009.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="HA50E2664936C441591C7919B8E86D6DF"><enum>3515.</enum><header>Exception to transfer for valuable consideration rules</header>
<subsection commented="no" display-inline="no-display-inline" id="HDFD461E818454B0CAAC6D89D92085567"><enum>(a)</enum><header>In general</header><text>Subsection (a) of section 101 is amended by inserting after paragraph (2) the following new
paragraph:</text>
<quoted-block act-name="" id="H52DA2AC289624D44A59D05C41C8A17A3" style="OLC">
<paragraph id="H58C485E15202400186494A6B03BC626B"><enum>(3)</enum><header>Exception to valuable consideration rules for commercial transfers</header>
<subparagraph id="H13FFD07FA045456FBBA8ED521A3D890C"><enum>(A)</enum><header>In general</header><text>The second sentence of paragraph (2) shall not apply in the case of a transfer of a life insurance
contract, or any interest therein, which is a reportable policy sale.</text>
</subparagraph><subparagraph id="H2B631FC988524787BC9591AF9A8F37C1"><enum>(B)</enum><header>Reportable policy sale</header><text>For purposes of this paragraph, the term <term>reportable policy sale</term> means the acquisition of an interest in a life insurance contract, directly or indirectly, if the
acquirer has no substantial family, business, or financial relationship
with the insured apart from the acquirer's interest in such life insurance
contract. For purposes of the preceding sentence, the term <term>indirectly</term> applies to the acquisition of an interest in a partnership, trust, or other entity that holds an
interest in the life insurance contract.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HDD880C47FD144EA2A7C071B8519DF237"><enum>(b)</enum><header>Conforming amendment</header><text>Paragraph (1) of section 101(a) is amended by striking <quote>paragraph (2)</quote> and inserting <quote>paragraphs (2) and (3)</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H92AD635000504EAC80205A0032E70630"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to transfers after December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="HBD1DDD1A7E5F44EEB7F7052B507D8F9B"><enum>G</enum><header>Pass-Thru and certain other entities</header>
<part id="H41E6B3A720BE452B908948228310EDAC"><enum>1</enum><header>S Corporations</header>
<section commented="no" id="H89A3C01A5AB7403F814648BAE7325915"><enum>3601.</enum><header>Reduced recognition period for built-in gains made permanent</header>
<subsection commented="no" id="H19D1B7EA894D41A5B4716A8DB31A9D60"><enum>(a)</enum><header>In general</header><text>Paragraph (7) of section 1374(d) (relating to definitions and special rules) is amended to read as
follows:</text>
<quoted-block id="HC8B02ACF2E9645CBA32B38AC2BF3A53A" style="OLC">
<paragraph commented="no" id="H1793AA78727D41529B0494E52818AEF7"><enum>(7)</enum><header>Recognition period</header>
<subparagraph id="HC53B1C7546A24B559A37A89D3243BD72"><enum>(A)</enum><header>In general</header><text>The term <term>recognition period</term> means the 5-year period beginning with the 1st day of the 1st taxable year for which the
corporation was an S corporation. For purposes of applying this section to
any amount includible in income by reason of distributions to shareholders
pursuant to section 593(e), the preceding sentence shall be applied
without regard to the phrase <quote>5-year</quote>.</text>
</subparagraph><subparagraph id="H071E10CB599D48EC8675B8C2092023E2"><enum>(B)</enum><header>Installment sales</header><text>If an S corporation sells an asset and reports the income from the sale using the installment
method under section 453, the treatment of all payments received shall be
governed by the provisions of this paragraph applicable to the taxable
year in which such sale was made.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H7143F2396F4E4DA390509DEA43977A61"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to taxable years beginning after December 31, 2013.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="H94A4436308E74191A6E4E7B58831A71E" section-type="subsequent-section"><enum>3602.</enum><header>Modifications to S corporation passive investment income rules</header>
<subsection commented="no" id="H44BAA93C39B646D5A789EA87FF2AD5A1"><enum>(a)</enum><header>Increased percentage limit</header><text>Paragraph (2) of section 1375(a) is amended by striking <quote>25 percent</quote> and inserting <quote>60 percent</quote>.</text>
</subsection><subsection commented="no" id="H539B7F82712049F5BB7D516E5265C8F3"><enum>(b)</enum><header>Repeal of excessive passive income as a termination event</header><text display-inline="yes-display-inline">Section 1362(d) is amended by striking paragraph (3).</text>
</subsection><subsection commented="no" id="H92EA2DC2C3D343FAAE422C5D9F3FB4D5"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph commented="no" id="HB751D08356724E2DB8E4720F3D1E7D6C"><enum>(1)</enum><text>Subsection (b) of section 1375 is amended by striking paragraphs (3) and (4) and inserting the
following new paragraph:</text>
<quoted-block id="HFDE44B9AC697458CBA59D01DFFDA40CD" style="OLC">
<paragraph commented="no" id="HA674CD0A4A074E80A7EF8CC64119DB1F"><enum>(3)</enum><header>Passive investment income defined</header>
<subparagraph commented="no" id="H588BCA8879004234B08E2DFB97DA2081"><enum>(A)</enum><header>In general</header><text>Except as otherwise provided in this paragraph, the term <quote>passive investment income</quote> means gross receipts derived from royalties, rents, dividends, interest, and annuities.</text>
</subparagraph><subparagraph commented="no" id="HAFC1384E490A48288803B7928E55E8AC"><enum>(B)</enum><header>Exception for interest on notes from sales of inventory</header><text>The term <quote>passive investment income</quote> shall not include interest on any obligation acquired in the ordinary course of the corporation’s
trade or business from its sale of property described in section
1221(a)(1).</text>
</subparagraph><subparagraph commented="no" id="H61656C77D74446929936F5E859B26F73"><enum>(C)</enum><header>Treatment of certain lending or finance companies</header><text>If the S corporation meets the requirements of section 542(c)(6) for the taxable year, the term <quote>passive investment income</quote> shall not include gross receipts for the taxable year which are derived directly from the active
and regular conduct of a lending or finance business (as defined in
section 542(d)(1)).</text>
</subparagraph><subparagraph commented="no" id="H0F3B1C98F63D494291A27AD8E59EDDF0"><enum>(D)</enum><header>Treatment of certain dividends</header><text>If an S corporation holds stock in a C corporation meeting the requirements of section 1504(a)(2),
the term <quote>passive investment income</quote> shall not include dividends from such C corporation to the extent such dividends are attributable
to the earnings and profits of such C corporation derived from the active
conduct of a trade or business.</text>
</subparagraph><subparagraph commented="no" id="H4FF90DA2C83D48ED8601F3C587D43986"><enum>(E)</enum><header>Exception for banks, etc</header><text>In the case of a bank (as defined in section 581) or a depository institution holding company (as
defined in section 3(w)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1813(w)(1)), the term <quote>passive investment income</quote> shall not include—</text>
<clause commented="no" id="H6BB7468D8B704A8C85E98892A8483D7B"><enum>(i)</enum><text>interest income earned by such bank or company, or</text>
</clause><clause commented="no" id="HB0A71D5EB62445ADA297CC4ED1DD72F4"><enum>(ii)</enum><text>dividends on assets required to be held by such bank or company, including stock in the Federal
Reserve Bank, the Federal Home Loan Bank, or the Federal Agricultural
Mortgage Bank or participation certificates issued by a Federal
Intermediate Credit Bank.</text>
</clause></subparagraph><subparagraph commented="no" id="HDD1F311BE3C64928B29726F367B7674A"><enum>(F)</enum><header>Gross receipts from the sales of certain assets</header><text>For purposes of this paragraph—</text>
<clause commented="no" id="H4B051B3A14234CF29BEBC556513E0571"><enum>(i)</enum><header>Capital assets other than stock and securities</header><text>In the case of dispositions of capital assets (other than stock and securities), gross receipts
from such dispositions shall be taken into account only to the extent of
capital gain net income therefrom.</text>
</clause><clause commented="no" id="H72145B460A1546188B2E576C9B5E7E3A"><enum>(ii)</enum><header>Stock and securities</header><text>In the case of sales or exchanges of stock or securities, gross receipts shall be taken into
account only to the extent of the gain therefrom.</text>
</clause></subparagraph><subparagraph commented="no" id="H9C4CEEA75F074BD6823C79FE8B446DC4"><enum>(G)</enum><header>Coordination with section 1374</header><text>The amount of passive investment income shall be determined by not taking into account any
recognized built-in gain or loss of the S corporation for any taxable year
in the recognition period. Terms used in the preceding sentence shall have
the same respective meanings as when used in section 1374.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="HB6B07145B77840B1A368CE4E07C87BBF"><enum>(2)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HB3D8B2B0EC3747598240A3B7207763F1"><enum>(A)</enum><text>Subparagraph (J) of section 26(b)(2) is amended by striking <quote>25 percent</quote> and inserting <quote>60 percent</quote>.</text>
</subparagraph><subparagraph commented="no" id="HB8B58B915F4045C898CC5844748CF3AE" indent="up1"><enum>(B)</enum><text>Clause (i) of section 1375(b)(1)(A) is amended by striking <quote>25 percent</quote> and inserting <quote>60 percent</quote>.</text>
</subparagraph><subparagraph commented="no" id="HEB16E8C25F404BBCB6652E01663B0E0D" indent="up1"><enum>(C)</enum><text>The heading for section 1375 is amended by striking <quote><header-in-text level="section" style="OLC">25 percent</header-in-text></quote> and inserting <quote><header-in-text level="section" style="OLC">60 percent</header-in-text></quote>.</text>
</subparagraph><subparagraph commented="no" id="H17BE4A914DD446379F7A7AB7E48D00BF" indent="up1"><enum>(D)</enum><text>The item relating to section 1375 in the table of sections for part III of subchapter S of chapter
1 is amended by striking <quote>25 percent</quote> and inserting <quote>60 percent</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H5BBA5C1B55C5456CB6E8103D43451887"><enum>(3)</enum><text>Subparagraph (B) of section 1362(f)(1) is amended by striking <quote>paragraph (2) or (3) of subsection (d)</quote> and inserting <quote>subsection (d)(2)</quote>.</text>
</paragraph></subsection><subsection commented="no" id="H4131F2CE3FB84ABA909CEBC912D63E4C"><enum>(d)</enum><header>Effective Date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section commented="no" id="H43028A3F36674D128D527F240621C8BD"><enum>3603.</enum><header>Expansion of qualifying beneficiaries of an electing small business trust</header>
<subsection commented="no" id="HB7E6499BC98148E6B4C36DA99C766819"><enum>(a)</enum><header>No look-Through for eligibility purposes</header><text display-inline="yes-display-inline">Subparagraph (C) of section 1361(b)(1) is amended by inserting <quote>(determined without regard to subsection (c)(2)(B)(v))</quote> after <quote>shareholder</quote>.</text>
</subsection><subsection commented="no" id="HACA426F5016C40CEA58218A96D8175B7"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall take effect on January 1, 2015.</text>
</subsection></section><section commented="no" id="H5F46465BBF5D432FAC5D75926FF3E122"><enum>3604.</enum><header>Charitable contribution deduction for electing small business trusts</header>
<subsection commented="no" id="HAF0810CFA91A4D49B6E4357662992E10"><enum>(a)</enum><header>In general</header><text>Paragraph (2) of section 641(c), as amended by the preceding provisions of this Act, is amended by
inserting after subparagraph (C) the following new subparagraph:</text>
<quoted-block id="H51F50A36F1E847D6A737B0346484C1EF" style="OLC">
<subparagraph commented="no" id="HD89A4AD8209643F4BDD54985ED22A61F"><enum>(D)</enum>
<clause commented="no" display-inline="yes-display-inline" id="HEDF0F2CD32954E3184FE82DCA8C77FB3"><enum>(i)</enum><text>Section 642(c) shall not apply.</text>
</clause><clause commented="no" id="H6AFAD0DFB71E4146A5B0A33B9983949D" indent="up1"><enum>(ii)</enum><text>For purposes of section 170(b)(1)(E), adjusted gross income shall be computed in the same manner as
in the case of an individual, except that the deductions for costs which
are paid or incurred in connection with the administration of the trust
and which would not have been incurred if the property were not held in
such trust shall be treated as allowable in arriving at adjusted gross
income.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H192857709B0D4EDF99AB610AC89E7451"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section commented="no" id="H71481C4345AA4628812EA7B86C90C3EC"><enum>3605.</enum><header>Permanent rule regarding basis adjustment to stock of S corporations making charitable
contributions of property</header>
<subsection commented="no" id="HAC26713A3DE74B2EB9A7F418E0AD1468"><enum>(a)</enum><header>In general</header><text>Section 1367(a)(2) (relating to decreases in basis) is amended by striking the last sentence.</text>
</subsection><subsection commented="no" id="H02F322DFE9294C69B1A745E4469B5300"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to contributions made in taxable years beginning
after December 31, 2013.</text>
</subsection></section><section commented="no" id="HFC3A54B835E0446B87F4D404EDB104EA" section-type="subsequent-section"><enum>3606.</enum><header>Extension of time for making S corporation elections</header>
<subsection commented="no" id="H504A40EF2FF54C769F59053E7B016288"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (b) of section 1362 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H74CB1B8F8F3547DB8AE858F4D556A3AD" style="OLC">
<subsection commented="no" id="H6CC297E722FA43A18C281764E32EEC9B"><enum>(b)</enum><header>When made</header>
<paragraph commented="no" display-inline="no-display-inline" id="H1F9C437E36EA47DBBC67B3A266A0B229"><enum>(1)</enum><header>In general</header><text>An election under subsection (a) may be made by a small business corporation for any taxable year
not later than the due date for filing the return of the S corporation for
such taxable year (including extensions).</text>
</paragraph><paragraph commented="no" id="H39DD6D5A922443BF8E21F20B6D252D5A"><enum>(2)</enum><header>Certain elections treated as made for next taxable year</header><text>If—</text>
<subparagraph commented="no" id="H985D70E1F2CC4E758D789BB1B19FFEA6"><enum>(A)</enum><text display-inline="yes-display-inline">an election under subsection (a) is made for any taxable year within the period described in
paragraph (1), but</text>
</subparagraph><subparagraph commented="no" id="H3EB0CEDE76AE40FC8476820C66D0E148"><enum>(B)</enum><text display-inline="yes-display-inline">either—</text>
<clause commented="no" id="HA61948B5B36E43099783131A4E756C63"><enum>(i)</enum><text display-inline="yes-display-inline">on 1 or more days in such taxable year and before the day on which the election was made the
corporation did not meet the requirements of subsection (b) of section
1361, or</text>
</clause><clause commented="no" id="HAF8B29D2EEC34109954C2C6A042B301C"><enum>(ii)</enum><text>1 or more of the persons who held stock in the corporation during such taxable year and before the
election was made did not consent to the election,</text></clause><continuation-text commented="no" continuation-text-level="subparagraph">then such election shall be treated as made for the following taxable year.</continuation-text></subparagraph></paragraph><paragraph commented="no" id="HEF91BBE9864045E7BEF1A12A11A52A5F"><enum>(3)</enum><header>Authority to treat late elections, etc., as timely</header><text>If—</text>
<subparagraph commented="no" id="H5652BF097E354FBD8EED23694DE143CA"><enum>(A)</enum><text>an election under subsection (a) is made for any taxable year after the date prescribed by this
subsection for making such election for such taxable year or no such
election is made for any taxable year, and</text>
</subparagraph><subparagraph commented="no" id="H20826E9A69B8488E9702BC94F1BD27FD"><enum>(B)</enum><text>the Secretary determines that there was reasonable cause for the failure to timely make such
election,</text></subparagraph><continuation-text commented="no" continuation-text-level="paragraph">the Secretary may treat such an election as timely made for such taxable year.</continuation-text></paragraph><paragraph commented="no" id="H4E45F44661864BAEAC22F7201F141A02"><enum>(4)</enum><header>Election on timely filed returns</header><text>Except as otherwise provided by the Secretary, an election under subsection (a) for any taxable
year may be made on a timely filed return of the S corporation for such
taxable year.</text>
</paragraph><paragraph commented="no" id="H45663F54F15140469439A8DB86DA7530"><enum>(5)</enum><header>Secretarial authority</header><text>The Secretary may prescribe such regulations, rules, or other guidance as may be necessary or
appropriate for purposes of applying this subsection.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H320816088C904B68B0AED90DA31BAE4D"><enum>(b)</enum><header>Coordination with certain other provisions</header>
<paragraph id="HEA5ACAA91B804D45B2FA6D15F250ACEA"><enum>(1)</enum><header>Qualified subchapter S subsidiaries</header><text>Section 1361(b)(3)(B) is amended by adding at the end the following flush sentence:</text>
<quoted-block display-inline="no-display-inline" id="H8E29C771DD964F53ABA9C0C653BA59D9" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="subparagraph">Rules similar to the rules of section 1362(b) shall apply with respect to any election under clause
(ii).</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H9F11A69EF3284245BA3EF5A85DCC939C"><enum>(2)</enum><header>Qualified subchapter S trusts</header><text>Section 1361(d)(2) is amended by striking subparagraph (D).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HEE61D911BD264D6598C39BDBCB7EDCDE"><enum>(c)</enum><header>Revocations</header><text>Paragraph (1) of section 1362(d) is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="H958C267BEAE84CA493ED7C255C608462"><enum>(1)</enum><text>by striking <quote>subparagraph (D)</quote> in subparagraph (C) and inserting <quote>subparagraphs (D) and (E)</quote>, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H64B0A436018D42B99789E5B888919F81"><enum>(2)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H16144A28F53B410681E3D9D50D4BA9EA" style="OLC">
<subparagraph commented="no" id="HE760D60D339445E090DB4654FF59E50F"><enum>(E)</enum><header>Authority to treat late revocations as timely</header><text>If—</text>
<clause commented="no" id="H23B4603009604EFE86CBF5BB43B4BF75"><enum>(i)</enum><text>a revocation under subparagraph (A) is made for any taxable year after the date prescribed by this
paragraph for making such revocation for such taxable year or no such
revocation is made for any taxable year, and</text>
</clause><clause commented="no" id="HF3FBD8358398416FA978F7509270175E"><enum>(ii)</enum><text>the Secretary determines that there was reasonable cause for the failure to timely make such
revocation,</text></clause><continuation-text commented="no" continuation-text-level="subparagraph">the Secretary may treat such a revocation as timely made for such taxable year.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H565141E3735B494988587E229C069D70"><enum>(d)</enum><header>Effective date</header>
<paragraph id="H6273541EF4A148FA9AEEDC95D56F1692"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to
elections for taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="HB2DC05247C1F41B5999A7077ACB422CE"><enum>(2)</enum><header>Revocations</header><text>The amendments made by subsection (c) shall apply to revocations after December 31, 2014.</text>
</paragraph></subsection></section><section commented="no" id="HF4BA5CB3BA584AEAB4E9D27EF12CF051"><enum>3607.</enum><header>Relocation of C corporation definition</header>
<subsection commented="no" id="H11D0ED8FBFB74AE7A6DDF084FB6CE1C1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (a) of section 1361 is amended—</text>
<paragraph commented="no" id="H65147EF738E24F81836E216DF617C0D5"><enum>(1)</enum><text>by striking paragraph (2), and</text>
</paragraph><paragraph commented="no" id="H428E9847AFF64EDF886E1C86CB95666A"><enum>(2)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">S corporation defined.</header-in-text>—</quote> and all that follows through <quote>For purposes of this title, the term <quote>S corporation</quote> means</quote> and inserting the following: <quote><header-in-text level="subsection" style="OLC">In general.</header-in-text>—For purposes of this title, the term <quote>S corporation</quote> means</quote>.</text>
</paragraph></subsection><subsection commented="no" id="H9675E5AB66384990917EC1ADFDD7794B"><enum>(b)</enum><header>Conforming amendment</header><text>Section 7701(a)(3) is amended—</text>
<paragraph commented="no" id="H7F0648F7F84A4D26BE9C5B6F87187AD6"><enum>(1)</enum><text>by striking <quote><header-in-text level="paragraph" style="OLC">Corporation.</header-in-text>—The term <quote>corporation</quote> means</quote> and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="H3CF982BC6F864B8F93D5C436A4B270CB" style="OLC"><text><header-in-text level="paragraph" style="OLC">Corporations.—</header-in-text></text><subparagraph commented="no" id="H523CF7D42FD64D7987C09F3DA21B314B"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>corporation</quote> means</text></subparagraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="HC153A8FF793B4E39B6B728913693FE86"><enum>(2)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H7892B15B763741D4A70609FBF6739BFB" style="OLC">
<paragraph commented="no" id="H8C66062D079F4672B8C2E729E48C766F"><enum>(2)</enum><header>C corporations</header><text display-inline="yes-display-inline">The term <quote>C corporation</quote> means, with respect to any taxable year, a corporation which is not an S corporation for such
year.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" id="HE10B979D20B74F1C9DB8B58CD2706732"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall take effect on the date of the enactment of this Act.</text>
</subsection></section></part><part id="H5DB476931B6D4F68A15EE74AB3982104"><enum>2</enum><header>Partnerships</header>
<section id="H80F1FB26973F4C3B97E2A33131334776"><enum>3611.</enum><header>Repeal of rules relating to guaranteed payments and liquidating distributions</header>
<subsection id="HCD9E9383E94141A7835A9D0A4A54CF5D"><enum>(a)</enum><header>Payment to partner for services or use of capital</header>
<paragraph id="H57D99CE2F0154BABBC19EEB5645710B9"><enum>(1)</enum><header>In general</header><text>Section 707 is amended by striking subsection (c).</text>
</paragraph><paragraph id="H811DD2D4A82E465E851D33FBF8021DFD"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="H67BAB9F073C84F549BE1903A01411086"><enum>(A)</enum><text display-inline="yes-display-inline">Section 267(e) is amended by striking paragraph (4).</text>
</subparagraph><subparagraph id="H93FA41F85B7E45BEA5D57E5810263A5D"><enum>(B)</enum><text>Section 706(a) is amended by striking <quote>and 707(c)</quote>.</text>
</subparagraph><subparagraph id="H3F06269AB30348069C69F1441F9468A7"><enum>(C)</enum><text>Section 1402(a) is amended, in the matter following paragraph (17)—</text>
<clause id="H968CD7D5D1954973A8F65A5A2C412770"><enum>(i)</enum><text>by striking <quote>(after such gross income has been reduced by the sum of all payments to which section 707(c)
applies)</quote> in clauses (iii) and (iv), and</text>
</clause><clause id="HE4F3A347AC7D40759AA7AD984C911DD2"><enum>(ii)</enum><text>by striking <quote>(after such gross income has been so reduced)</quote> in clause (iv).</text>
</clause></subparagraph><subparagraph id="HB1016956AE5B4AD394605B64E2E7531E"><enum>(D)</enum><text>Section 2701(c)(1)(B) is amended by inserting <quote>or</quote> at the end of clause (i), by striking <quote>, or</quote> at the end of clause (ii) and inserting a period, and by striking clause (iii).</text>
</subparagraph><subparagraph id="HFF43DA88973D45C8B8FEF1227CE76A74"><enum>(E)</enum><text>Section 7519(d) is amended by striking paragraph (5).</text>
</subparagraph></paragraph><paragraph id="HBD2386ED6FBC466C9CF01889C7662DA6"><enum>(3)</enum><header>Effective dates</header>
<subparagraph id="HE4ADA0512191456A8992A74B6C6908E0"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this paragraph, the amendments made by this subsection shall apply
to partnership taxable years beginning after December 31, 2014.</text>
</subparagraph><subparagraph id="H25B7D51F6F93451CBD1905521EDC7C79"><enum>(B)</enum><header>Transfers</header><text>The amendment made by paragraph (2)(E) shall apply to transfers after December 31, 2014.</text>
</subparagraph></paragraph></subsection><subsection id="H1A31EA82F5A14389B28AF628166151A8"><enum>(b)</enum><header>Payments made in liquidation of retiring or deceased partner</header>
<paragraph id="H308B832D81C74E75BB7D3B17AC5439C6"><enum>(1)</enum><header>In general</header><text>Subpart B of part II of subchapter K of chapter 1 is amended by striking section 736 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</paragraph><paragraph id="H71FCD1DDB4E849B189FD8E213342BE73"><enum>(2)</enum><header>Retired partners and successors in interest of deceased partners treated as partners until
liquidation</header><text>Section 761(d) is amended by adding at the end the following: <quote>For purposes of this subchapter, any retired partner or a deceased partner’s successor in interest
shall be treated as a partner until the complete liquidation of such
interest.</quote></text>
</paragraph><paragraph id="H657F105253734D7FABB32D02735E73D9"><enum>(3)</enum><header>Conforming amendment</header>
<subparagraph id="H258FEF500EA44BC9BF3B9E81B5F2F6A8"><enum>(A)</enum><text>Section 357(c)(3)(A) is amended by striking <quote>payment of which either—</quote> and all that follows through <quote>then, for purposes of</quote> and inserting <quote>payment of which would give rise to a deduction, then, for purposes of</quote>.</text>
</subparagraph><subparagraph id="H57D504FAF85F4140B57105F58EB078BD"><enum>(B)</enum><text>Section 731(d) is amended—</text>
<clause id="H4D72F5711CF14A91B7AC02E1DAB2D5F9"><enum>(i)</enum><text>by striking <quote>section 736 (relating to payments to a retiring partner or a deceased partner’s successor in
interest),</quote>, and</text>
</clause><clause id="H5104A415F7F54A3D946BED0FCE2ED01C"><enum>(ii)</enum><text>by striking <quote>items), and</quote> and inserting <quote>items) and</quote>.</text>
</clause></subparagraph><subparagraph commented="no" id="H26296B68421146148D3688AC2D42C1C2"><enum>(C)</enum><text>Section 751(b)(2) is amended—</text>
<clause commented="no" id="H26E70FD5539942F293F4F91DDB7F9DF6"><enum>(i)</enum><text>by striking subparagraph (B), and</text>
</clause><clause commented="no" id="HCEF317AD44FD4A0693F8E4851F24EFA0"><enum>(ii)</enum><text>by striking <quote>shall not apply to—</quote> and all that follows through <quote>a distribution of property</quote> and inserting the following: <quote>shall not apply to a distribution of property</quote>.</text>
</clause></subparagraph><subparagraph id="H16E155F6FA9F4188B8A1E01E54526045"><enum>(D)</enum>
<clause commented="no" display-inline="yes-display-inline" id="H846BDA25C9214EC3BC31455DC6E50A87"><enum>(i)</enum><text>Section 753 is amended by striking <quote>The amount includible</quote> and all that follows and inserting <quote>For treatment of income in respect of a decedent, see section 691.</quote></text>
</clause><clause id="HF7CDAE3EB6074447A7D53376EC52DDAF" indent="up1"><enum>(ii)</enum><text>Section 691 is amended by striking subsection (e).</text>
</clause></subparagraph></paragraph><paragraph id="H210A336D7C214AA2A7B6243554B61CE0"><enum>(4)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to partners retiring or dying after December 31,
2014.</text>
</paragraph></subsection></section><section id="HA159C358781B49648A4DC8A5027662CC"><enum>3612.</enum><header>Mandatory adjustments to basis of partnership property in case of transfer of partnership interests</header>
<subsection id="HD70261B63A464DBB8396D683D1339F38"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 743 is amended—</text>
<paragraph id="HB461FB0F75EE4622B68D9E7C1DD95BA8"><enum>(1)</enum><text>by striking subsections (a), (c), (d), (e), and (f) and by redesignating subsection (b) as
subsection (a),</text>
</paragraph><paragraph id="HE8AE1E2B57BA4342A4257C6F6ECDE709"><enum>(2)</enum><text>in subsection (a) (as so redesignated) by striking <quote>with respect to which the election provided in section 754 is in effect or which has a substantial
built-in loss immediately after such transfer</quote>, and</text>
</paragraph><paragraph id="HCCA229711C1844D0823CEE8C6F2DB3FE"><enum>(3)</enum><text>by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HF42A4FD884BF4923977E4341A6B7363D" style="OLC">
<subsection commented="no" id="H4EE56E230F5C4FDC8F635EC9D4F5A4FE"><enum>(b)</enum><header>Allocation of basis</header>
<paragraph commented="no" id="HDEB8B7801CAE4D6E8E5DB41678B759FA"><enum>(1)</enum><header>General rule</header><text display-inline="yes-display-inline">Any increase or decrease in the adjusted basis of partnership property under subsection (a) shall,
except as provided in paragraph (2), be allocated—</text>
<subparagraph commented="no" id="HF382AFFF9EA64B049CEB1377A0E903E8"><enum>(A)</enum><text>in a manner which has the effect of reducing the difference between the fair market value and the
adjusted basis of partnership properties, or</text>
</subparagraph><subparagraph commented="no" id="H57990AC5F2EF42B6BB63B3D76070C08D"><enum>(B)</enum><text>in any other manner permitted by regulations prescribed by the Secretary.</text>
</subparagraph></paragraph><paragraph commented="no" id="H7117E70A882B4251990A37F0021DA00E"><enum>(2)</enum><header>Special rule</header><text>In applying the allocation rules provided in paragraph (1), increases or decreases in the adjusted
basis of partnership property arising from a transfer of an interest
attributable to property consisting of—</text>
<subparagraph commented="no" id="H13D35F080CC34AAFB563632CF0E77762"><enum>(A)</enum><text>capital assets and property described in section 1231(b), or</text>
</subparagraph><subparagraph commented="no" id="HB8B2E908B70B4F09B7D810E983BFA487"><enum>(B)</enum><text>any other property of the partnership,</text></subparagraph><continuation-text commented="no" continuation-text-level="paragraph">shall be allocated to partnership property of a like character except that the basis of any such
partnership property shall not be reduced below zero.</continuation-text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H9D63EB2AADFA4C40B9E85782517B42F1"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H096395DD0AB74DA0861F34CBCAA16820"><enum>(1)</enum><text>Section 704(c)(1) is amended—</text>
<subparagraph id="HB190871709DB43B5A96383AA36785C03"><enum>(A)</enum><text>by adding <quote>and</quote> at the end of subparagraph (A),</text>
</subparagraph><subparagraph id="H4F054370615F49A3ADFB2EF1777F2A2E"><enum>(B)</enum><text>by striking <quote>, and</quote> at the end of subparagraph (B) and inserting a period, and</text>
</subparagraph><subparagraph id="H4932C67DF57B4D97927F97DEC65B8F36"><enum>(C)</enum><text>by striking all that follows subparagraph (B).</text>
</subparagraph></paragraph><paragraph id="HC87138BD78C841CE939DBCDC352DE897"><enum>(2)</enum><text>Section 732 is amended by striking subsection (d) and by redesignating subsections (e) and (f) as
subsections (d) and (e), respectively.</text>
</paragraph><paragraph id="H90EB6B97EAC54BAC8D661E8E02ED8571"><enum>(3)</enum><text>Section 761(e)(2) is amended by striking <quote>optional</quote>.</text>
</paragraph><paragraph id="HCF6DEF600C7E42B28D74AF224AF83506"><enum>(4)</enum><text>Section 6031 is amended by striking subsection (f).</text>
</paragraph><paragraph id="H15DEAAC9C62B46C5AE0B2C7F08157CC7"><enum>(5)</enum><text display-inline="yes-display-inline">The heading for section 743 is amended to read as follows: <quote><header-in-text level="section" style="OLC">Adjustment to basis of partnership property.</header-in-text></quote></text>
</paragraph><paragraph id="HF6ADAF713D0F4F49A85053CA4CF63556"><enum>(6)</enum><text>The heading for subsection (a) (as redesignated by the preceding provisions of this Act) of section
743 is amended by striking <quote><header-in-text level="subsection" style="OLC">Adjustment to basis of partnership property</header-in-text></quote> and inserting <quote><header-in-text level="subsection" style="OLC">In general</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="HA9D13399341E4D3E816C974C35D2673A"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to transfers after December 31, 2014.</text>
</subsection></section><section id="H36123F56A11849F78103B39A47A5370E"><enum>3613.</enum><header>Mandatory adjustments to basis of undistributed partnership property</header>
<subsection id="H625E5CF95DF74D4198404D905787B6EF"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 734 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H0F2D67B92BFD4E54A5D686309CFEA682" style="OLC">
<section id="HBA5A1E14CD644C6A922FCE18A1685A15"><enum>734.</enum><header>Adjustment to basis of undistributed partnership property</header>
<subsection id="HC44F124321414A9B8D1D0F8C8C180C20"><enum>(a)</enum><header>In general</header><text>In the case of any distribution to a partner, the partnership shall adjust the basis of partnership
property such that each remaining partner’s net liquidation amount
immediately after such distribution is equal to such partner’s net
liquidation amount immediately before such distribution.</text>
</subsection><subsection id="HCB0793F2C2D44B62BCE3C8060DF30BF3"><enum>(b)</enum><header>Distributions other than in liquidation of a partner’s interest</header><text>In the case of any distribution to a partner other than in liquidation of such partner’s interest,
proper adjustment shall be made under subsection (a) with respect to such
partner to take into account—</text>
<paragraph id="HF842341A54F54273A718550D81E86365"><enum>(1)</enum><text>the amount of any gain recognized by such partner with respect to such distribution under section
731(a), and</text>
</paragraph><paragraph id="H0B1673950EB84DD797ACC6B4082C3A27"><enum>(2)</enum><text>the amount of any gain or loss which would be recognized by such partner if such partner sold the
property distributed at fair market value immediately after such
distribution.</text>
</paragraph></subsection><subsection id="HD44E550980C443FE987E03EAB0EFE8A0"><enum>(c)</enum><header>Net liquidation amount</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>net liquidation amount</quote> means, with respect to any partner, the net amount of gain or loss (if any) which would be taken
into account by the partner under section 702 if the partnership sold all
of its assets at fair market value (and no other amounts were taken into
account under such section).</text>
</subsection><subsection id="H8B50C5F52FF34918BE80DAB11B9FC3B1"><enum>(d)</enum><header>Allocation of basis</header>
<paragraph id="H652B85585EDB42298E75501EE8B88DF7"><enum>(1)</enum><header>Decreases in basis</header><text>Any decrease in the adjusted basis of partnership property which is required under this section—</text>
<subparagraph id="H4346023BCC10491CA925CA7E711377FD"><enum>(A)</enum><text>shall be made in accordance with paragraph (3) of section 732(c), and</text>
</subparagraph><subparagraph id="HACF895ECBEF140EA9D3A4368824373FD"><enum>(B)</enum><text>shall be made first with respect to property other than unrealized receivables (as defined in
section 751(c)) and inventory (as defined in section 751(d)) to the extent
thereof.</text></subparagraph><continuation-text continuation-text-level="paragraph">If any such decrease is prevented by the absence of sufficient adjusted basis of partnership
property, each partner shall recognize gain in the amount of such
partner’s distributive share of such prevented decrease. Such gain shall
be treated as gain from the sale of the partner’s partnership interest.</continuation-text></paragraph><paragraph id="H0DCFC420DFE64239BA65CEBFC0F62BA0"><enum>(2)</enum><header>Increases in basis</header><text>Any increase in the adjusted basis of partnership property which is required under this section—</text>
<subparagraph id="H487257770FA349AFB67B4533D0B1131F"><enum>(A)</enum><text>shall be made in accordance with paragraph (2) of section 732(c), and</text>
</subparagraph><subparagraph id="H5EB1A33C727C4A4BA12D5455B79E9009"><enum>(B)</enum><text display-inline="yes-display-inline">shall be made only with respect to property other than unrealized receivables (as defined in
section 751(c)) and inventory (as defined in section 751(d)).</text></subparagraph><continuation-text continuation-text-level="paragraph">If any such increase is prevented by the absence of property described in subparagraph (B), each
partners shall recognize a loss in the amount of such partner’s
distributive share of such prevented increase. Such loss shall be treated
as a loss from the sale of the partner’s partnership interest.</continuation-text></paragraph></subsection><subsection id="H6D48916FC8074206AAFDF749C19AEE8F"><enum>(e)</enum><header>No allocation of basis decrease to stock of corporate partner</header><text>In making an allocation under subsection (d) of any decrease in the adjusted basis of partnership
property required under subsection (a)—</text>
<paragraph id="H36C8EE62B18F46FFB3FEACF5389ACD59"><enum>(1)</enum><text>no allocation may be made to stock in a corporation (or any person related (within the meaning of
section 267(b) or 707(b)(1)) to such corporation) which is a partner in
the partnership, and</text>
</paragraph><paragraph id="H56E9E2F9380944E9AAE59A7CA4F5C19F"><enum>(2)</enum><text>any amount not allocable to stock by reason of paragraph (1) shall be allocated under subsection
(d) to other partnership property.</text></paragraph><continuation-text continuation-text-level="subsection">Gain shall be recognized by the partnership to the extent that the amount required to be allocated
to other partnership property under subsection (e)(2) exceeds the
aggregate adjusted basis of such other property immediately before the
allocation required by subsection (a).</continuation-text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HB9FED3C72C7C46EA9E3F6C110375AC7E"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph commented="no" id="H6681700855EE4E4FB71C0C741AD460D5"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HDDB08F8B86704C2E83AEFF17BC031DE4"><enum>(A)</enum><text>Subpart D of part II of subchapter K of chapter 1 is amended by striking sections 754 and 755 (and
by striking items relating to such sections in the table of sections of
such subpart).</text>
</subparagraph><subparagraph commented="no" id="H2CBF9B7067414AF984AFC64B26BB9815" indent="up1"><enum>(B)</enum><text>Clause (ii) of section 706(d)(2)(D) is amended by striking <quote>section 755</quote> and inserting <quote>section 743(b)</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H9F9FB4B4BB454638A4257E80A6B5ABD9"><enum>(2)</enum><text>Subsection (d) of section 1060 is amended—</text>
<subparagraph commented="no" id="HB8B539B707D445FF8FC7B358DBA6E7A5"><enum>(A)</enum><text>by striking <quote>section 755</quote> in paragraph (1) and inserting <quote>sections 734 and 743</quote>, and</text>
</subparagraph><subparagraph commented="no" id="H45E50DF3124C4944B3A4CC50D206E0D4"><enum>(B)</enum><text>by striking <quote>section 755</quote> in paragraph (2) and inserting <quote>section 734 or 743</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="HC12BE71D659541E8B2A25DA97E8508A6"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to distributions after December 31, 2014.</text>
</subsection></section><section id="H6BCEDAE8FDED4CBA86EFE817A31C080D"><enum>3614.</enum><header>Corresponding adjustments to basis of properties held by partnership where partnership basis
adjusted</header>
<subsection id="H2F9F4917504D4C8285094374F92C1508"><enum>(a)</enum><header>In general</header><text>Subpart B of part II of subchapter K of chapter 1, as amended by the preceding provisions of this
Act, is amended by inserting after section 735 the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HF8DF70917A8E4E52BDCA508F17A42EA7" style="OLC">
<section id="HF0C5277A81AB40579787E9B0BBAFB9F7"><enum>736.</enum><header>Corresponding adjustment to basis of properties held by lower-tier partnership in case of
upper-tier partnership basis adjustments</header>
<subsection id="HD19853F2B1A246EF8A25AB0C42C32F12"><enum>(a)</enum><header>Distributions by upper-Tier partnership</header><text>In the case of any distribution of property to a partner by an upper-tier partnership, if such
distribution results in an adjustment in the upper-tier partnership’s
adjusted basis in an interest in a lower-tier partnership under section
734, then such lower-tier partnership shall make a corresponding
adjustment to the adjusted basis of its partnership property.</text>
</subsection><subsection commented="no" id="H920917F6C2B141FB9A8E2BA993C1AC84"><enum>(b)</enum><header>Distributions of interests in lower-Tier partnership</header><text>In the case of any distribution of an interest in a lower-tier partnership by an upper-tier
partnership—</text>
<paragraph commented="no" id="H2BC04DFEA1A34555BFA85F863114277D"><enum>(1)</enum><text>if the adjusted basis of such interest in the hands of the upper-tier partnership (determined
immediately before such distribution) exceeds the adjusted basis of such
interest in the hands of the distributee partner (determined immediately
after such distribution), then such lower-tier partnership shall decrease
the adjusted basis of its partnership property by the amount of such
excess, or</text>
</paragraph><paragraph commented="no" id="HD4D818AFC26A47DBA9E714B075A000C2"><enum>(2)</enum><text>if the adjusted basis of such interest in the hands of the distributee partner (determined
immediately after such distribution) exceeds the adjusted basis of such
interest in the hands of the upper-tier partnership (determined
immediately before such distribution), then such lower-tier partnership
shall increase the adjusted basis of its partnership property by the
amount of such excess.</text>
</paragraph></subsection><subsection id="HAAD41FEE5AD04987A42F8560AC96406B"><enum>(c)</enum><header>Dispositions of interests in upper-Tier partnership</header><text>In the case of a disposition of an interest in an upper-tier partnership which holds an interest in
a lower-tier partnership, if there is an adjustment to the adjusted basis
of the lower-tier partnership under section 743, then such lower-tier
partnership shall make a corresponding adjustment to the adjusted basis of
its partnership property.</text>
</subsection><subsection id="HB9002318EF914E2D86766CB47F2B3B00"><enum>(d)</enum><header>Multi-Tiered partnerships</header><text>In the case of any adjustment under subsection (a), (b), or (c) in the adjusted basis of an
interest in another partnership, such other partnership shall make a
corresponding adjustment in the adjusted basis of its partnership
property.</text>
</subsection><subsection id="HF42BE261710C471F85B322D79C450783"><enum>(e)</enum><header>Allocation of basis; recognition of gain</header><text>In the case of any adjustment in the adjusted basis of partnership property—</text>
<paragraph id="H723BB72221B645AC8CC6B6C6F874CCAB"><enum>(1)</enum><text>under subsection (a), (b), (c), or (d), such adjustment shall be made only with respect to the
upper-tier partnership’s proportionate share (as determined under section
743(a)) of the adjusted basis of the lower-tier partnership’s property,</text>
</paragraph><paragraph id="H4E3C95EECDDB44ECB348CAA2A6A27605"><enum>(2)</enum><text>under subsection (a) or (b) (or so much of subsection (d) as relates to either such subsection),
rules similar to the rules of section 734(d) shall apply, and</text>
</paragraph><paragraph id="HD594BCF79AED410DB0F5208A42F9F0F5"><enum>(3)</enum><text>under subsection (c) (or so much of subsection (d) as relates to such subsection), rules similar to
the rules of section 743(b) shall apply.</text>
</paragraph></subsection><subsection id="HF9B46DA417CC4185ADE6B17F0EA18A70"><enum>(f)</enum><header>Reporting</header><text>In the case of any adjustment in the adjusted basis of partnership property by a lower-tier
partnership under this section by reason of a distribution by, or a
disposition of an interest in, an upper-tier partnership, such upper-tier
partnership shall furnish (in such manner as the Secretary shall
prescribe) to such lower-tier partnership such information as is necessary
to enable such lower-tier partnership to make such adjustment.</text>
</subsection><subsection id="H9AEA55AEFE48418C94D5FC2FBBAB058B"><enum>(g)</enum><header>Upper- and lower-Tier partnerships</header><text>For purposes of this section—</text>
<paragraph id="H0361F16840854D6386CB6C666BD799D7"><enum>(1)</enum><header>Upper-tier partnership</header><text>The term <quote>upper-tier partnership</quote> means a partnership owning an interest in another partnership.</text>
</paragraph><paragraph id="H1CC8A5DF112D4C4DA39649DAD0369EFD"><enum>(2)</enum><header>Lower-tier partnership</header><text>The term <quote>lower-tier partnership</quote> means the partnership referred to in paragraph (1) an interest in which is owned by the upper-tier
partnership.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H5BE9F57C9FBE40C9854E370B4517D57D"><enum>(b)</enum><header>Effective dates</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to distributions and transfers after December 31,
2014.</text>
</subsection></section><section id="H44114BA59EF141E0901C38E6DA50A4C4"><enum>3615.</enum><header>Charitable contributions and foreign taxes taken into account in determining limitation on
allowance of partner’s share of loss</header>
<subsection id="HC375B02F0B534C96825435642F1D96EF"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (d) of section 704 is amended—</text>
<paragraph id="H644260FFFC724D5BB9C8974D9D8F09E6"><enum>(1)</enum><text>by striking <quote>A partner’s distributive share</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="HAB6E6CB1C4C6488D944A66F0D0CC2AD2" style="OLC">
<paragraph id="H9564F02AB9274759AF52FC5897CB378B"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">A partner’s distributive share</text></paragraph><after-quoted-block>,</after-quoted-block></quoted-block>
</paragraph><paragraph id="HD11E9649B2F049F58EFAA8704B766AE3"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>Any excess of such loss</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="HBD94FCF3F1DE4A8199BF85D305CE61E1" style="OLC">
<paragraph id="H76B7B0CFDA004F88B499E74A37C4E75C"><enum>(2)</enum><header>Carryover</header><text display-inline="yes-display-inline">Any excess of such loss</text></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</paragraph><paragraph id="H3FE97A23E31545E18AA1599C1188DDA4"><enum>(3)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HD66E8DB314264593ADDEB6C6880631CA" style="OLC">
<paragraph id="H9F111F0A47C846E28B763F50835BD3D3"><enum>(3)</enum><header>Special rules</header><text display-inline="yes-display-inline">In determining the amount of any loss under paragraph (1), there shall be taken into account as a
deduction the partner’s distributive share of—</text>
<subparagraph id="H961C2D9D04BA420597739DDC2317DBCD"><enum>(A)</enum><text>the adjusted basis of charitable contributions described in paragraph (4) of section 702(a), and</text>
</subparagraph><subparagraph id="H13D8D134372F4CB38BB215DAA833138D"><enum>(B)</enum><text>the amount of taxes described in paragraph (6) of such section.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HB2F325F624F54B679138C0F46D931A20"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to partnership taxable years beginning after
December 31, 2014.</text>
</subsection></section><section id="HED157732282440D9B24B29C2E114FB16"><enum>3616.</enum><header>Revisions related to unrealized receivables and inventory items</header>
<subsection id="HF526A977484A4814A7A181BCED3029A3"><enum>(a)</enum><header>Repeal of requirement that inventory be substantially appreciated in certain partnership
distributions treated as sale or exchange</header>
<paragraph id="HE39395FAB0524F90B1D1A0BA2B80C491"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Clause (ii) of section 751(b)(1)(A) is amended by striking <quote>which have appreciated substantially in value</quote>.</text>
</paragraph><paragraph id="H1B628E55456B4EC7B5E93673E85255BA"><enum>(2)</enum><header>Conforming amendment</header><text>Section 751(b) is amended by striking paragraph (3).</text>
</paragraph><paragraph id="H4AD1265BB2B949DC95B550D3C0E36150"><enum>(3)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to distributions after December 31, 2014.</text>
</paragraph></subsection><subsection commented="no" id="H5ED4981DE5704272AB20DF1ADF6E5AD2"><enum>(b)</enum><header>Revision of regulations relating to treatment of unrealized receivables and inventory items</header><text>The Secretary of the Treasury shall revise regulations issued under section 751(b) of the Internal
Revenue Code of 1986 to take into account the partner’s share of income
and gain rather than the partner’s share of partnership assets.</text>
</subsection><subsection id="H882D7602E36E403E8210AC4E04CFFB69"><enum>(c)</enum><header>Simplification of definition of unrealized receivables</header>
<paragraph id="H0CC8351906454B639C89FB75D64EAB7C"><enum>(1)</enum><header>In general</header><text>Section 751(c) is amended by striking all that follows paragraph (2) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H974F4C98E63349B1874278D6468BFD5E" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="subsection">For purposes of this section and sections 731, 732, 734, and 741, such term also includes any
property other than inventory items, but only to the extent of the amount
which would be treated as ordinary income if (at the time of the
transaction described in the applicable section) such property had been
sold by the partnership for its fair market value.</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HD4D10FEDE7DB49F49151535A4C341E5E"><enum>(2)</enum><header>Effective date</header><text>The amendment made by this subsection shall apply to partnership taxable years beginning after
December 31, 2014.</text>
</paragraph></subsection></section><section id="HDD0EAEF2C5C1438895EA0401BDFA33FA"><enum>3617.</enum><header>Repeal of time limitation on taxing precontribution gain</header>
<subsection id="H9B894817A3714372926537D0E7C2BC9A"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraph (B) of section 704(c)(1) is amended by striking <quote>within 7 years of being contributed</quote>.</text>
</subsection><subsection id="HBA1D4128B89E45E1B9846B95034AD844"><enum>(b)</enum><header>Conforming amendment</header><text>Paragraph (1) of section 737(b) is amended by striking <quote>within 7 years of the distribution</quote>.</text>
</subsection><subsection id="HC2E5B10A16EE44D59BA3C9DB1CF28557"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to property contributed to a partnership after
December 31, 2014.</text>
</subsection></section><section id="HE6E3D05792ED45C39D01BDF01DDDB057"><enum>3618.</enum><header>Partnership interests created by gift</header>
<subsection id="HD1A11696B1DF4E85BCE80092801D3D23"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 761(b) is amended by adding at the end the following: <quote>In the case of a capital interest in a partnership in which capital is a material income-producing
factor, whether a person is a partner with respect to such interest shall
be determined without regard to whether such interest was derived by gift
from any other person.</quote>.</text>
</subsection><subsection id="H8E6F64472AE74B578D7752172156225F"><enum>(b)</enum><header>Conforming amendments</header><text display-inline="yes-display-inline">Section 704(e) is amended—</text>
<paragraph id="H864A2D149FB94A6499C7DD8B858902A0"><enum>(1)</enum><text display-inline="yes-display-inline">by striking paragraph (1) and by redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
respectively,</text>
</paragraph><paragraph id="HA04A7E66196247D8AA2A859B99C99D32"><enum>(2)</enum><text>by striking <quote>this section</quote> in paragraph (2) (as so redesignated) and inserting <quote>this subsection</quote>, and</text>
</paragraph><paragraph id="H1D6573AA85E54406A81EFDE656253C31"><enum>(3)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">Family partnerships</header-in-text></quote> in the heading and inserting <quote><header-in-text level="subsection" style="OLC">Partnership interests created by gift</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="HA75A1B9EE9A740BD887B2726EC9AF542"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to partnership taxable years beginning after
December 31, 2014.</text>
</subsection></section><section id="HB21FD1B201B34711ADA012085CC55BA2"><enum>3619.</enum><header>Repeal of technical termination</header>
<subsection id="H2B514E9BECEA4D7685C219DAE674A820"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of section 708(b) is amended—</text>
<paragraph id="HDCC523FE6EC746138AB53B1F3661440D"><enum>(1)</enum><text>by striking <quote>, or</quote> and all that follows and inserting a period, and</text>
</paragraph><paragraph id="HDEB9D84462D541E3ADAC8A425AB569FA"><enum>(2)</enum><text>by striking <quote>only if—</quote> and all that follows through <quote>no part of any business</quote> and inserting the following: <quote>only if no part of any business</quote>.</text>
</paragraph></subsection><subsection id="H04D7195E210D4C85BA0ABE0B9ED0F132"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to partnership taxable years beginning after
December 31, 2014.</text>
</subsection></section><section id="H20030B479CE145F2A19A987437B523B8"><enum>3620.</enum><header>Publicly traded partnership exception restricted to mining and natural resources partnerships</header>
<subsection id="HB8F1EEE298F245D09B2615C276B8DCD8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (d) of section 7704 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H3CEC4AE668154BFFAEE2C52CCBB7B1E7" style="OLC">
<subsection id="H84BC788A9BA14F9ABED3F2970FD6DEE6"><enum>(d)</enum><header>Qualifying income</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>qualifying income</quote> means—</text>
<paragraph id="HF1386BF1CDAA458FBC77E271BF068D84"><enum>(1)</enum><text display-inline="yes-display-inline">income and gains derived from the exploration, development, mining or production, processing,
refining, transportation (including pipelines transporting gas, oil, or
products thereof), or the marketing of any mineral or natural resource
(including geothermal energy and excluding fertilizer and timber) or
industrial source carbon dioxide, and</text>
</paragraph><paragraph id="H83AA37CAB5D34B698C00803A27645012"><enum>(2)</enum><text>any gain from the sale or disposition of a capital asset (or property described in section 1231(b))
held for the production of income described in paragraph (1).</text></paragraph><continuation-text continuation-text-level="subsection">For purposes of this subsection, the term <quote>mineral or natural resource</quote> means any product of a character with respect to which a deduction for depletion is allowable
under section 611 (other than minerals from sea water or the air (or
similar inexhaustible sources), soil, sod, dirt, turf, water, or mosses).</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection display-inline="no-display-inline" id="H293D772C6B854D30873D2DC752226D96"><enum>(b)</enum><header>Conforming amendments</header><text>Section 988(c)(1)(E) is amended—</text>
<paragraph id="H9C908C3D0A744325BE9B502E98784CB0"><enum>(1)</enum><text>by striking <quote>income or gains described in subparagraph (A), (B), or (G) of section 7704(d)(1)</quote> in clause (iii)(III) and inserting <quote>qualifying income or gains</quote>,</text>
</paragraph><paragraph id="H7EEEACE4EAA74BADB0E7DD0A59FC6B16"><enum>(2)</enum><text>by striking subclause (III) of clause (vi) and by redesignating subclause (IV) as subclause (III),</text>
</paragraph><paragraph id="H8AEE2223ED6743B7ACD67D39303BB1BF"><enum>(3)</enum><text>by redesignating clause (vi) (as amended by this subparagraph) as clause (viii), and</text>
</paragraph><paragraph id="H614AC10268184DC6A635C3B3F3FBCE8F"><enum>(4)</enum><text display-inline="yes-display-inline">by inserting after clause (v) the following new clauses:</text>
<quoted-block display-inline="no-display-inline" id="H3643493F1F364359B443049AE0AEF626" style="OLC">
<clause id="H4803BA64E7E24B8297E7F91C16C850DD"><enum>(vi)</enum><header>Qualifying income or gains</header><text display-inline="yes-display-inline">The term <quote>qualifying income or gains</quote> means—</text>
<subclause id="H6D1CB5F3EE8846A0A7E732BCC415869D"><enum>(I)</enum><text>interest,</text>
</subclause><subclause id="HB41BD983027444508727DD6F66681E4C"><enum>(II)</enum><text>dividends, and</text>
</subclause><subclause id="H108CBB4314CD4661BC661DD3292FF8C9"><enum>(III)</enum><text>in the case of a partnership described in the second sentence of section 7704(c)(3), income and
gains from commodities (not described in section 1221(a)(1)) or futures,
forwards, and options with respect to commodities.</text>
</subclause></clause><clause id="H789484C97C984CAE99A2537EA6AF302A"><enum>(vii)</enum><header>Inadvertent terminations</header><text>If—</text>
<subclause id="H1FF796BCB5904DB59354394DB66BA0D4"><enum>(I)</enum><text>A partnership fails to meet the gross income requirements of this subparagraph,</text>
</subclause><subclause id="H36214846C74C42DCB1076C1C810FA45B"><enum>(II)</enum><text>the Secretary determines that such failure was inadvertent,</text>
</subclause><subclause id="H6B648629104D44BC935CCB9CCAE94623"><enum>(III)</enum><text>no later than a reasonable time after the discovery of such failure, steps are taken so that such
partnership once more meets such gross income requirements, and</text>
</subclause><subclause id="HD2338782BF8840E884411EC9F86CDFD7"><enum>(IV)</enum><text>such partnership agrees to make such adjustments (including adjustments with respect to the
partners) or to pay such amounts as may be required by the Secretary with
respect to such period,</text></subclause><continuation-text continuation-text-level="clause">then, notwithstanding such failure, such entity shall be treated as continuing to meet such gross
income requirements for such period.</continuation-text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H05D9B9F3779343F098791316FE7AE50F"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2016.</text>
</subsection></section><section id="H90C086843EF24DCBA468201A7BA4BDFB" section-type="subsequent-section"><enum>3621.</enum><header>Ordinary income treatment in the case of partnership interests held in connection with performance
of services</header>
<subsection id="H76291A57CB59443E9960161AA888FA77"><enum>(a)</enum><header>In general</header><text>Part IV of subchapter O of chapter 1 is amended—</text>
<paragraph id="H128194CDF1324184A1276392ADC03A92"><enum>(1)</enum><text>by redesignating section 1061 as section 1062, and</text>
</paragraph><paragraph id="HED139097A3704B279C34974B1BF65F12"><enum>(2)</enum><text>by inserting after section 1060 the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H1BAE4CC0FB0E4077B0FBE1A0FCD2E176" style="OLC">
<section id="H7B4C9CFC83A74C4E962C5772E3B4D807"><enum>1061.</enum><header>Partnership interests held in connection with performance of services</header>
<subsection id="HC1D772C02D104B16A26AC3F77DA99F01"><enum>(a)</enum><header>In general</header><text>If one or more applicable partnership interests are held by a taxpayer at any time during the
taxable year, so much of—</text>
<paragraph id="HE7E0AE75CAD24224BD592489F0B051E2"><enum>(1)</enum><text>the taxpayer’s net capital gain with respect to such interests for such taxable year, as does not
exceed</text>
</paragraph><paragraph id="H9D2DAD83740645598B512BAA8D00BBAB"><enum>(2)</enum><text>the taxpayer’s recharacterization account balance for such taxable year,</text></paragraph><continuation-text continuation-text-level="subsection">shall be treated as ordinary income.</continuation-text></subsection><subsection id="H63F6BB8FED3149D8B1FB3713029370F3"><enum>(b)</enum><header>Net capital gain</header>
<paragraph id="HFEB73AF690E14A138E45D967CA597EBA"><enum>(1)</enum><header>In general</header><text>For purposes of subsection (a)(1), net capital gain shall be determined under section 1222, except
that such section shall be applied—</text>
<subparagraph id="H5AF094739BF14BAFB7C5BC86BE49CAE8"><enum>(A)</enum><text>without regard to the recharacterization of any item as ordinary income under this section,</text>
</subparagraph><subparagraph id="HF780214BFE4F4CB1A3DF16180AC98430"><enum>(B)</enum><text>by only taking into account items of gain and loss—</text>
<clause id="H2CEA051AD23E4CCC972458FB34375880"><enum>(i)</enum><text>taken into account by the taxpayer under section 702 with respect to any applicable partnership
interest,</text>
</clause><clause id="HE64229FE93094E1EB60603CD8EAB0200"><enum>(ii)</enum><text>recognized by the taxpayer on the disposition of any such interest, or</text>
</clause><clause id="HAFBD8CAC62F54FEA8EEAAF602D6B6449"><enum>(iii)</enum><text>recognized by the taxpayer under paragraph (4) on a distribution of property with respect to such
interest, and</text>
</clause></subparagraph><subparagraph id="HEDE22E65166B4E81ABDE5ABDE0B95717"><enum>(C)</enum><text>in the case of a taxable year for which section 1231 gains (as defined in section 1231(a)(3)(A))
exceed section 1231 losses (as defined in section 1231(a)(3)(B)), by
treating property which is taken into account in determining such gains
and losses as capital assets held for more than 1 year.</text>
</subparagraph></paragraph><paragraph id="HD9D54408570244B7B540F0D7970BC15E"><enum>(2)</enum><header>Allocation to items of gain</header><text>The amount treated as ordinary income under subsection (a) shall be allocated ratably among the
items of long-term capital gain taken into account in determining net
capital gain under paragraph (1).</text>
</paragraph><paragraph id="H50C420709B8E4C1D990A8F304C775E8F"><enum>(3)</enum><header>Recognition of gain on disposition of applicable partnership interests</header><text>Any gain on the disposition of any applicable partnership interest shall be recognized
notwithstanding any other provision of this title.</text>
</paragraph><paragraph id="H502F41044D474E14A3CC6ED3756409E2"><enum>(4)</enum><header>Recognition of gain on distributions of partnership property</header>
<subparagraph id="HC5150D08587449FEB4EF9466A0F12A1E"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any distribution of property by a partnership with respect to any applicable
partnership interest, the partner receiving such property shall recognize
gain equal to the excess (if any) of—</text>
<clause id="HCA9804657E7C4644A8932B52C136C5D5"><enum>(i)</enum><text>the fair market value of such property at the time of such distribution, over</text>
</clause><clause id="H201D8E4166114F20AC72B3FE228EB6B7"><enum>(ii)</enum><text>the adjusted basis of such property in the hands of such partner (determined without regard to
subparagraph (B)).</text>
</clause></subparagraph><subparagraph id="H117A6ECF588F47A19409C416A01294B6"><enum>(B)</enum><header>Adjustment of basis</header><text>In the case of a distribution to which subparagraph (A) applies, the basis of the distributed
property in the hands of the distributee partner shall be the amount
determined under subparagraph (A)(i).</text>
</subparagraph></paragraph></subsection><subsection id="H8C67697DE6C6486693645A1E549E6886"><enum>(c)</enum><header>Recharacterization account balance</header>
<paragraph id="H0FC6E5A705AB499F8D040409F0EEEA2A"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>recharacterization account balance</quote> means, with respect to any taxpayer for any taxable year, the excess (if any) of—</text>
<subparagraph id="H59463095762D4FDD9A0BC82046DC8A67"><enum>(A)</enum><text>the sum of—</text>
<clause id="H7780338A04C6429EA0BB6FE0F030DFA9"><enum>(i)</enum><text>the taxpayer’s aggregate annual recharacterization amounts with respect to applicable partnership
interests for such taxable year, plus</text>
</clause><clause id="HC52367D22A1149B6B65C2AFCE69CDEE9"><enum>(ii)</enum><text>the taxpayer’s recharacterization account balance for the taxable year preceding such taxable year,
over</text>
</clause></subparagraph><subparagraph id="H5F0532370B7F45A581EB426A86E2754A"><enum>(B)</enum><text>the sum of—</text>
<clause id="H0D580A7A127A44BAA0D3A95980B57451"><enum>(i)</enum><text>the taxpayer’s net ordinary income with respect to applicable partnership interests for such
taxable year (determined without regard to this section), plus</text>
</clause><clause id="HE4E48C7039E340939F8F2B691C6BDEDE"><enum>(ii)</enum><text>the amount treated as ordinary income of the taxpayer under this section for the taxable year
preceding such taxable year.</text>
</clause></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H8F7F664CDC5D41D3BB09C273A165B407"><enum>(2)</enum><header>Annual recharacterization amount</header><text>For purposes of this subsection—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HEEB197FD131F4FDD8175F74D479872EE"><enum>(A)</enum><header>In general</header><text>The term <term>annual recharacterization amount</term> means, with respect to any applicable partnership interest for any partnership taxable year, an
amount equal to the product of—</text>
<clause commented="no" display-inline="no-display-inline" id="H3FBF94E29A674ED6BE095EB788E9103D"><enum>(i)</enum><text>the specified rate determined under subparagraph (B) for the calendar year in which such taxable
year begins, multiplied by</text>
</clause><clause commented="no" display-inline="no-display-inline" id="HBF59443FC73742BF9C2FF6EA70027B18"><enum>(ii)</enum><text>the excess (if any) of—</text>
<subclause id="H683AABBCD83845FD8DBAA91A05BF3D47"><enum>(I)</enum><text>an amount equal to the applicable percentage of the partnership’s aggregate invested capital for
such taxable year, over</text>
</subclause><subclause id="H4CC53BAC0DFE4E63BED5789543D428F6"><enum>(II)</enum><text>the specified capital contribution of the partner with respect to the applicable partnership
interest for such taxable year.</text></subclause></clause><continuation-text continuation-text-level="subparagraph">If a taxpayer holds an applicable partnership interest for less than the entire taxable year, the
amount determined under the preceding sentence shall be ratably reduced.</continuation-text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H9D3F0D31E5704CEC985B24A6D2B867AB"><enum>(B)</enum><header>Specified rate</header><text>For purposes of subparagraph (A), the term <term>specified rate</term> means, with respect to any calendar year, a percentage equal to—</text>
<clause commented="no" display-inline="no-display-inline" id="H9D8AD540E0D3497394856781281C8B85"><enum>(i)</enum><text>the Federal long-term rate determined under section 1274(d)(1) for the last month of the calendar
year, plus</text>
</clause><clause commented="no" display-inline="no-display-inline" id="HAF4877FE65EE4329B304D2796F447F48"><enum>(ii)</enum><text>10 percentage points.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H4887FB10FD87483A9A4E87DF201AFF91"><enum>(C)</enum><header>Applicable percentage</header>
<clause commented="no" display-inline="no-display-inline" id="HAEB204B01BBB4C289899003A817C31AE"><enum>(i)</enum><header>In general</header><text>The term <term>applicable percentage</term> means, with respect to any applicable partnership interest, the highest percentage of profits of
the partnership that could be allocated with respect to such interest for
the taxable year (consistent with the partnership agreement and assuming
such facts and circumstances with respect to such taxable year as would
result in such highest percentage).</text>
</clause><clause commented="no" display-inline="no-display-inline" id="HBA7B1EB1CB9440ACAB2425DB9E256609"><enum>(ii)</enum><header>Secretarial authority</header><text>The Secretary shall prescribe rules for the determination of the applicable percentage in cases in
which the percentage of profits of a partnership that are to be allocated
with respect to an applicable partnership interest varies on the basis of
the aggregate amount of such profits. Such rules may provide a percentage
which may be used in lieu of the highest percentage determined under
clause (i) in cases where such other percentage is consistent with the
purposes of this section.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H2D2EFE9D131643C1ADA2F007102CAEC5"><enum>(D)</enum><header>Aggregate invested capital</header>
<clause id="H3F5819E9B9D242E5A8304CC6D7D82E81"><enum>(i)</enum><header>In general</header><text>The term <term>aggregate invested capital</term> means, with respect to any taxable year, the average daily amount of invested capital of the
partnership for such taxable year.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H1C7AEBDE8A0E453F85733655577C791E"><enum>(ii)</enum><header>Invested capital</header><text>The term <term>invested capital</term> means, with respect to any partnership as of any day, the total cumulative value, determined at
the time of contribution, of all money or other property contributed to
the partnership on or before such day.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H2E5D151A48FF49409A8F2FA49B285A2C"><enum>(iii)</enum><header>Reduction for liquidation of partnership interests</header><text>The invested capital of a partnership shall be reduced by the aggregate amount distributed in
liquidation of interests in the partnership.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="HD9A4594DB8A4438091BAEDFC2874A14C"><enum>(iv)</enum><header>Treatment of certain indebtedness as invested capital</header><text>The following amounts shall be treated as invested capital:</text>
<subclause commented="no" display-inline="no-display-inline" id="H9E1459A0B32241398F0D65E98272E081"><enum>(I)</enum><header>Partner loans</header><text>The aggregate value (determined as of the time of the loan) of money or other property which a
partner loans to the partnership.</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="H6D8D005DF62D4B209D2D450ACBD5F6B1"><enum>(II)</enum><header>Indebtedness eligible to share in equity of the partnership</header><text>The face amount of any convertible debt of the partnership or any debt obligation providing equity
participation in the partnership.</text>
</subclause></clause></subparagraph><subparagraph id="HB2EDDC797DA64C0E8BADABD6AEF40099"><enum>(E)</enum><header>Specified capital contribution</header>
<clause id="HD4228B81716749FFBBD60F715704F241"><enum>(i)</enum><header>In general</header><text>The term <quote>specified capital contribution</quote> means, with respect to any applicable partnership interest for any taxable year, the average daily
amount of contributed capital with respect to such interest for such year.</text>
</clause><clause id="H92BC222308864237BCF8AECDEBD26561"><enum>(ii)</enum><header>Contributed capital</header><text>The term <quote>contributed capital</quote> means, with respect to applicable partnership interest as of any day, the excess (if any) of—</text>
<subclause id="H5D403B473C1649B7B2FBF090EC0EFBB8"><enum>(I)</enum><text>the total cumulative value, determined at the time of contribution, of all money or other property
contributed by the partner to the partnership with respect to such
interest as of such day, over</text>
</subclause><subclause id="HD2845940EC5E460786EBA7072A1BEFA0"><enum>(II)</enum><text>the total cumulative value, determined at the time of distribution, of all money or other property
distributed by the partnership to the partner with respect to such
interest as of such day.</text>
</subclause></clause><clause id="H4557BD5F08F34C58A3E8D548DFDB2827"><enum>(iii)</enum><header>Treatment of related party borrowings</header><text display-inline="yes-display-inline">Any amount borrowed directly or indirectly from the partnership or any other partner of the
partnership or any person related to such other partner or such
partnership shall not be taken into account under this subparagraph. For
purposes of the preceding sentence, a person shall be treated as related
to another person if the relationship between such persons would be
described in section 267(b) or 707(b) if such sections and section 267(f)
were applied by substituting <quote>10 percent</quote> for <quote>50 percent</quote> each place it appears.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HCF038B4462E7463398DAEC41915F0D78"><enum>(F)</enum><header>Multiple interests</header><text>If at any time during a taxable year a taxpayer holds directly or indirectly more than 1 applicable
partnership interest in a single partnership, such interests shall be
treated as 1 applicable partnership interest for purposes of applying this
paragraph.</text>
</subparagraph></paragraph><paragraph id="H5F896D22A974488481FCC39CEE0717A5"><enum>(3)</enum><header>Net ordinary income</header><text>For purposes of this subsection, the net ordinary income with respect to applicable partnership
interests for any taxable year is the excess (if any) of—</text>
<subparagraph id="HBBC9BCF8062244DF9CDB3958A751AA68"><enum>(A)</enum><text>the taxpayer’s distributive share of items of income and gain under section 702 with respect to
applicable partnership interests for such taxable year (determined without
regard to any items of gain taken into account in determining net capital
gain under subsection (b)(1)), over</text>
</subparagraph><subparagraph id="H186563E0149842CBA8E9F5D02C602F97"><enum>(B)</enum><text display-inline="yes-display-inline">the taxpayer’s distributive share of items of deduction and loss under section 702 with respect to
such interests for such taxable year (determined without regard to any
items of loss taken into account in determining net capital gain under
subsection (b)(1)).</text>
</subparagraph></paragraph></subsection><subsection id="H8289E03612174A8E99C5ADBD9CF12E86"><enum>(d)</enum><header>Applicable partnership interest</header><text>For purposes of this section—</text>
<paragraph id="H7B8799BC601343648CADA32E41CC8733"><enum>(1)</enum><header>In general</header><text>The term <term>applicable partnership interest</term> means any interest in a partnership which, directly or indirectly, is transferred to (or is held
by) the taxpayer in connection with the performance of services by the
taxpayer, or any other person, in any applicable trade or business.</text>
</paragraph><paragraph id="HE60E1E99E85B47DF9DDF6470EDF20989"><enum>(2)</enum><header>Applicable trade or business</header>
<subparagraph id="H8BB5B4A2A0E94B389D7CC8E9F65C17CB"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>applicable trade or business</quote> means any trade or business conducted on a regular, continuous, and substantial basis which,
regardless of whether the activities are conducted in one or more
entities, consists, in whole or in part, of—</text>
<clause id="H3AFFB9401846497AB17E92A86E4DE486"><enum>(i)</enum><text>raising or returning capital,</text>
</clause><clause id="H74355823DBC14B159CF37EF24FFCD761"><enum>(ii)</enum><text>investing in (or disposing of) trades or businesses (or identifying trades or businesses for such
investing or disposition), and</text>
</clause><clause id="H3219FD17DCD046049F0D09FEFC9207F3"><enum>(iii)</enum><text>developing such trades or businesses.</text>
</clause></subparagraph><subparagraph id="H2DC1F4ED5C764F4F9F0280425AADF2F0"><enum>(B)</enum><header>Treatment of research and experimentation activities</header><text>Any activity involving research or experimentation (within the meaning of section 469(c)(4)) shall
be treated as a trade or business for purposes of clauses (ii) and (iii)
of subparagraph (A).</text>
</subparagraph></paragraph></subsection><subsection id="H7A4C860AC5D04B58A6EB5091AF2DDD6F"><enum>(e)</enum><header>Transfer of applicable partnership interest to related person</header>
<paragraph id="H83A29298735C4CEE910728E9275EFC04"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">If a taxpayer transfers any applicable partnership interest, directly or indirectly, to a person
related to the taxpayer, the taxpayer shall include in gross income (as
ordinary income) so much of the taxpayer’s recharacterization account
balance for such taxable year as is allocable to such interest (determined
in such manner as the Secretary may provide and reduced by any amount
treated as ordinary income under subsection (a) with respect to the
transfer of such interest).</text>
</paragraph><paragraph id="H1EE14BBD42EC45BC867D466660067BB9"><enum>(2)</enum><header>Related person</header><text>For purposes of this paragraph, a person is related to the taxpayer if—</text>
<subparagraph id="H3FC00D24CE8847E5B4019B4A7D14B0A3"><enum>(A)</enum><text>the person is a member of the taxpayer’s family within the meaning of section 318(a)(1), or</text>
</subparagraph><subparagraph id="HF219EBE677CD440088A1D4512D89C7EF"><enum>(B)</enum><text>the person performed a service within the current calendar year or the preceding three calendar
years in any applicable trade or business in which or for which the
taxpayer performed a service.</text>
</subparagraph></paragraph></subsection><subsection id="HC94AE0BE5BA14099A7B404FFE9D61449"><enum>(f)</enum><header>Reporting by entity of taxpayer’s annual recharacterization amount</header><text display-inline="yes-display-inline">A partnership shall report to the Secretary, and include with the information required to be
furnished under section 6031(b) to each partner, the amount of the
partner’s annual recharacterization amount for the taxable year, if any. A
similar rule applies to any entity that receives a report of an annual
recharacterization amount for the taxable year.</text>
</subsection><subsection id="HD087C2B559DB4BF890E84AB7D41546E1"><enum>(g)</enum><header>Regulations</header><text>The Secretary shall issue such regulations or other guidance as necessary to carry out this
section, including regulations—</text>
<paragraph id="H26328B55F5A3471E8065374163A11834"><enum>(1)</enum><text>to prevent the abuse of the purposes of this section, including through—</text>
<subparagraph id="H252617D12B3D44E38B5C1C352C4FFB11"><enum>(A)</enum><text>the allocation of income to tax indifferent parties, or</text>
</subparagraph><subparagraph id="H84E32D78F1A74D0DA000304956E82ECD"><enum>(B)</enum><text>a reduction in the invested capital of the partnership (including attempts to undervalue
contributed or loaned property),</text>
</subparagraph></paragraph><paragraph id="H093267DD7FB6409C9CDEDF9F3CFF885C"><enum>(2)</enum><text>which provide that partnership interests shall not fail to be treated as transferred or held in
connection with the performance of services merely because the taxpayer
also made contributions to the partnership,</text>
</paragraph><paragraph id="H02587968F8684429910D667D502D8668"><enum>(3)</enum><text>which provide for the application of this section in cases where the taxpayer has more than 1
applicable interest in a partnership, and</text>
</paragraph><paragraph id="H20D1165A78034ADBADA397DDB55AE19A"><enum>(4)</enum><text>which provide for the application of this section in cases of tiered structures of entities.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H9EC91C55EB2F40268A40914F09425C12"><enum>(b)</enum><header>Coordination with section 83</header><text>Subsection (e) of section 83 is amended by striking <quote>or</quote> at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting <quote>, or</quote>, and by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H4D273D807FF64B06BEA82827D6E24107" style="OLC">
<paragraph id="H1BB74B2F44DA49AF80BFD67BBC09C98A"><enum>(6)</enum><text>a transfer of a partnership interest to which section 1061 applies.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H71D07BF2D5AF481CA5F5329DA1D5A9D6"><enum>(c)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for part IV of subchapter O of chapter 1 is amended by striking the item
relating to 1061 and inserting the following new items:</text>
<quoted-block display-inline="no-display-inline" id="HDA8589100E6C40C08413E9E71949D78F" style="OLC">
<toc container-level="quoted-block-container" idref="H1BAE4CC0FB0E4077B0FBE1A0FCD2E176" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H7B4C9CFC83A74C4E962C5772E3B4D807" level="section">Sec. 1061. Partnership interests held in connection with performance of services.</toc-entry>
<toc-entry level="section">Sec. 1062. Cross references.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="H132CE65572B94199AADCFEA1D73736C2"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H34001FC029794323BE4CCFC5309421D1"><enum>3622.</enum><header>Partnership audits and adjustments</header>
<subsection id="H1A82FCE641ED4C23833EB37DD1890E6E"><enum>(a)</enum><header>Repeal of TEFRA partnership audit rules</header><text display-inline="yes-display-inline">Chapter 63 is amended by striking subchapter C (and by striking the item relating to such
subchapter in the table of subchapters for such chapter).</text>
</subsection><subsection id="HB8B307701D4347B8A7CC7F2EB2431C0D"><enum>(b)</enum><header>Repeal of electing large partnership rules</header>
<paragraph id="HFE9B20A2364B4659AB2BB9D01ED870F3"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter K of chapter 1 is amended by striking part IV (and by striking the item relating to such
part in the table of parts for such subchapter).</text>
</paragraph><paragraph id="H2C0B93A7586249378C799DB443796F3E"><enum>(2)</enum><header>Assessment rules relating to electing large partnerships</header><text>Chapter 63 is amended by striking subchapter D (and by striking the item relating to such
subchapter in the table of subchapters for such chapter).</text>
</paragraph><paragraph id="H820BAB6010454DBB8453CF81DEA19915"><enum>(3)</enum><header>Effective date</header><text>The amendments made by this section shall apply to returns filed after December 31, 2014.</text>
</paragraph></subsection><subsection id="H9370C302208B4D689EF32035E7286B6B"><enum>(c)</enum><header>Partnership audit reform</header>
<paragraph id="HF59726A8CD9943CD80B48575BDA9DB99"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 63, as amended by the preceding provisions of this Act, is amended by inserting after
subchapter B the following new subchapter:</text>
<quoted-block display-inline="no-display-inline" id="HE49B79A7491446B3A17B92FC7CE62A91" style="OLC">
<subchapter id="H735CACA0072D42C59BBCDED970E0056C"><enum>C</enum><header>Treatment of partnerships</header>
<toc container-level="subchapter-container" idref="H735CACA0072D42C59BBCDED970E0056C" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HAE008E3A0E6B4DA883B2F2EE6A48A705" level="part">Part I—In general</toc-entry>
<toc-entry idref="HC73C1F7240A64C04942D749824E851F3" level="part">Part II—Partnership adjustments</toc-entry>
<toc-entry idref="HEA09EE3C0CD74415B2F55EFD68AFCB32" level="part">Part III—Procedure</toc-entry>
<toc-entry idref="H8FD33F68F7CD40EF8986A9D7E7D904DD" level="part">Part IV—Definitions and special rules</toc-entry></toc>
<part id="HAE008E3A0E6B4DA883B2F2EE6A48A705"><enum>I</enum><header>In general</header>
<toc container-level="part-container" idref="HAE008E3A0E6B4DA883B2F2EE6A48A705" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HEBB69ED8F3A34435AB8FC9A86E019A89" level="section">Sec. 6221. Determination at partnership level.</toc-entry>
<toc-entry idref="HF7F42E3C154142F2AE0AE59C0869A282" level="section">Sec. 6222. Partner’s return must be consistent with partnership return.</toc-entry>
<toc-entry idref="H726D28CCC96D4EAEB85B61C2CAEA0B22" level="section">Sec. 6223. Designation of partnership representative.</toc-entry></toc>
<section id="HEBB69ED8F3A34435AB8FC9A86E019A89"><enum>6221.</enum><header>Determination at partnership level</header>
<subsection id="HFC8C000427C24869A33D3FF767956FC0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Items of income, gain, loss, deduction, or credit of a partnership for a partnership taxable year
(and any partner’s distributive share thereof) shall be audited, any tax
attributable thereto shall be assessed and collected, and the
applicability of any penalty, addition to tax, or additional amount which
relates to an adjustment to any such item or share shall be determined, at
the partnership level pursuant to this subchapter.</text>
</subsection><subsection display-inline="no-display-inline" id="HF9A3835EE0E64DAFAD04578713A103C7"><enum>(b)</enum><header>Election out for certain partnerships with 100 or fewer partners</header><text display-inline="yes-display-inline">This subchapter shall not apply with respect to any partnership for any taxable year if—</text>
<paragraph id="H7ABA3BDD7AA344F3A4338BB434B050F2"><enum>(1)</enum><text display-inline="yes-display-inline">the partnership elects the application of this subsection for such taxable year,</text>
</paragraph><paragraph id="HF141132A5DE74835B3F733CD2435E2B5"><enum>(2)</enum><text>the partnership has 100 or fewer partners on the last day of such taxable year,</text>
</paragraph><paragraph id="H22F50508990D4B3AAC040399CBDBF0AF"><enum>(3)</enum><text>each of the partners of such partnership is an individual, a C corporation (other than a real
estate investment trust or a regulated investment company), any foreign
entity that would be treated as a C corporation were it domestic, or an
estate of a deceased partner,</text>
</paragraph><paragraph id="H60E267CFF78544D7A70DCFB7EAF5D58E"><enum>(4)</enum><text display-inline="yes-display-inline">the election—</text>
<subparagraph id="H5744A5F7AFE648E186566486895ED3F0"><enum>(A)</enum><text>is made with a timely filed return for such taxable year, and</text>
</subparagraph><subparagraph id="H30AFE5F0DB2F49BC867A4CC81E419429"><enum>(B)</enum><text>includes (in the manner prescribed by the Secretary) a disclosure of the name and taxpayer
identification number of each partner of such partnership, and</text>
</subparagraph></paragraph><paragraph id="H56BC90D20CB44AD5BD6F6D20A9E8F9A0"><enum>(5)</enum><text>the partnership notifies each such partner of such election in the manner prescribed by the
Secretary.</text></paragraph><continuation-text continuation-text-level="subsection">For purposes of paragraph (4)(B), the Secretary may provide for alternative identification of any
foreign partners.</continuation-text></subsection></section><section id="HF7F42E3C154142F2AE0AE59C0869A282"><enum>6222.</enum><header>Partner’s return must be consistent with partnership return</header>
<subsection id="H610436059DA34F27879E7093BE4985BB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">A partner of any partnership shall, on the partner’s return, treat each item of income, gain, loss,
deduction, or credit attributable to such partnership in a manner which is
consistent with the treatment of such income, gain, loss, deduction, or
credit on the partnership return.</text>
</subsection><subsection id="H866577E3640C4295AF28C475BEFE9485"><enum>(b)</enum><header>Underpayment due to inconsistent treatment assessed as math error</header><text display-inline="yes-display-inline">Any underpayment of tax by a partner by reason of failing to comply with the requirements of
subsection (a) shall be assessed and collected in the same manner as if
such underpayment were on account of a mathematical or clerical error
appearing on the partner’s return. Paragraph (2) of section 6213(b) shall
not apply to any assessment of an underpayment referred to in the
preceding sentence.</text>
</subsection><subsection id="H11659B14642A4562B2AF75DF2F6CBF67"><enum>(c)</enum><header>Addition to tax for failure To comply with section</header><text>For addition to tax in the case of partner’s disregard of the requirements of this section, see
part II of subchapter A of chapter 68.</text>
</subsection></section><section id="H726D28CCC96D4EAEB85B61C2CAEA0B22"><enum>6223.</enum><header>Partners bound by actions of partnership</header>
<subsection id="H149EAF8D2EC044F48B8166CEAB2E566E"><enum>(a)</enum><header>Designation of partner</header><text display-inline="yes-display-inline">Each partnership shall designate (in the manner prescribed by the Secretary) a partner (or other
person) as the partnership representative who shall have the sole
authority to act on behalf of the partnership under this subchapter. In
any case in which such a designation is not in effect, the Secretary may
select any partner as the partnership representative.</text>
</subsection><subsection id="H6FAB4FDD473D42FC9B4E13463E6A989D"><enum>(b)</enum><header>Binding effect</header><text display-inline="yes-display-inline">A partnership and all partners of such partnership shall be bound—</text>
<paragraph id="H8CC9B1FD91F14FF291DFC60A7D31EE57"><enum>(1)</enum><text>by actions taken under this subchapter by the partnership, and</text>
</paragraph><paragraph id="H0064E569863649E8962887549D8694FD"><enum>(2)</enum><text>by any decision in a proceeding brought under this subchapter.</text>
</paragraph></subsection></section></part><part id="HC73C1F7240A64C04942D749824E851F3"><enum>II</enum><header>Partnership adjustments</header>
<toc container-level="part-container" idref="HC73C1F7240A64C04942D749824E851F3" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H89298499D18E46E681CDB66AB7411E33" level="section">Sec. 6225. Partnership adjustment by Secretary.</toc-entry>
<toc-entry idref="H985247F20C924BB6A9498FE95436DBF7" level="section">Sec. 6226. Administrative adjustment request by partnership.</toc-entry></toc>
<section id="H89298499D18E46E681CDB66AB7411E33"><enum>6225.</enum><header>Partnership adjustment by Secretary</header>
<subsection id="H65C4B5C073CF44ACB7010191CB69E413"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any adjustment by the Secretary in the amount of any item of income, gain, loss,
deduction, or credit of a partnership, or any partner’s distributive share
thereof—</text>
<paragraph id="H5ED20B6EA3AB45999554E88ADA2917FD"><enum>(1)</enum><text>the partnership shall pay any imputed underpayment with respect to such adjustment in the
adjustment year as provided in section 6232, and</text>
</paragraph><paragraph id="H9776A8023F424CFE8E019796BDDECBB1"><enum>(2)</enum><text>any imputed overpayment shall be taken into account by the partnership in the adjustment year as a
reduction in non-separately stated income or an increase in non-separately
stated loss (whichever is appropriate) under section 702(a)(8).</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="HD544536C648B4B2BA06AB4AAB05C311E"><enum>(b)</enum><header>Determination of imputed underpayments and overpayments</header><text display-inline="yes-display-inline">For purposes of this subchapter—</text>
<paragraph id="HB843AFF17A954BCB862A088A087CF805"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in subsection (c), any imputed underpayment or imputed overpayment with respect
to any partnership adjustment for any reviewed year shall be determined—</text>
<subparagraph id="H62948F3D45614ED2BEA70237FBF0617F"><enum>(A)</enum><text>by netting all adjustments of items of income, gain, loss, or deduction and multiplying such net
amount by the highest rate of tax in effect for the reviewed year under
section 1 or 11,</text>
</subparagraph><subparagraph id="HBC8D7BB2DA574BFA9D6B407E9620050E"><enum>(B)</enum><text>by treating any net increase or decrease in loss under subparagraph (A) as a decrease or increase,
respectively, in income, and</text>
</subparagraph><subparagraph id="HD266CFBDF771425CA82AB35E2A42DA9E"><enum>(C)</enum><text>by taking into account any adjustments to items of credit as an increase or decrease, as the case
may be, in the amount determined under subparagraph (A).</text>
</subparagraph></paragraph><paragraph id="H4A57B39195B6483B9673B040B966E4B5"><enum>(2)</enum><header>Adjustments to distributive shares of partners not netted</header><text>In the case of any adjustment which reallocates the distributive share of any item from one partner
to another, such adjustment shall be taken into account under paragraph
(1) by disregarding—</text>
<subparagraph id="H8C99825DF1314656BF3473E1B3C2B708"><enum>(A)</enum><text display-inline="yes-display-inline">any decrease in any item of income or gain, and</text>
</subparagraph><subparagraph id="HBCCC9845D8EE4594BD90D03F06089615"><enum>(B)</enum><text>any increase in any item of deduction, loss, or credit.</text>
</subparagraph></paragraph></subsection><subsection id="H7FF374CADB4E4E1390F8ECE2833F17A0"><enum>(c)</enum><header>Modification of imputed underpayments</header>
<paragraph id="H58CB8D309D604D36937D95CDA0202415"><enum>(1)</enum><header>Method in general</header><text>The Secretary shall establish procedures under which the imputed underpayment amount may be
modified consistent with the requirements of this subsection.</text>
</paragraph><paragraph id="HF7CE0F9AC9AF4C658A618938150288E8"><enum>(2)</enum><header>Amended returns of partners</header><text>Such procedures shall provide that if—</text>
<subparagraph id="HD5246072ED334CB48EE2882795B1FA2C"><enum>(A)</enum><text>one or more partners file returns for the taxable year of the partners which includes the end of
the reviewed year of the partnership,</text>
</subparagraph><subparagraph id="HFB6D1861AACC4B80B55CB619DE2061F0"><enum>(B)</enum><text>such returns take into account all adjustments under subsection (a) properly allocable to such
partners (and for any other taxable year with respect to which any tax
attribute is affected by reason of such adjustments), and</text>
</subparagraph><subparagraph id="HAA72FB5F9F9D4A579350457F82750666"><enum>(C)</enum><text>payment of any tax due is included with such return,</text></subparagraph><continuation-text continuation-text-level="paragraph">then the imputed underpayment amount shall be determined without regard to the portion of the
adjustments so taken into account.</continuation-text></paragraph><paragraph id="HC64F78F0510E4D369967F642612AA2FC"><enum>(3)</enum><header>Reallocation of distributive share</header><text>In the case of any adjustment which reallocates the distributive share of any item from one partner
to another, paragraph (2) shall apply only if returns are filed by all
partners affected by such adjustment.</text>
</paragraph><paragraph id="H69C1A7DF00824736ACC48F75B6EFD5C4"><enum>(4)</enum><header>Year and day for submission to Secretary</header><text>Anything required to be submitted pursuant to paragraph (1) shall be submitted to the Secretary not
later than the close the 180-day period beginning on the date on which the
notice of a proposed partnership adjustment is mailed under section 6231
unless such period is extended with the consent of the Secretary.</text>
</paragraph><paragraph id="H4281675406F246078A2892E940CAB8F0"><enum>(5)</enum><header>Decision of Secretary</header><text>Any modification of the imputed underpayment amount under this subsection shall be made only upon
approval of such modification by the Secretary.</text>
</paragraph></subsection><subsection id="HF5AFD82343E648B7A857985395560F99"><enum>(d)</enum><header>Definitions and special rule</header><text>For purposes of this subchapter—</text>
<paragraph commented="no" id="HB96D28C77793471CB1089F1A245F0419"><enum>(1)</enum><header>Reviewed year</header><text>The term <quote>reviewed year</quote> means the partnership taxable year to which the item being adjusted relates.</text>
</paragraph><paragraph id="H0487649C611C46C683329ED4E1247EED"><enum>(2)</enum><header>Adjustment year</header><text>The term <quote>adjustment year</quote> means the partnership taxable year in which—</text>
<subparagraph commented="no" id="H11A7336A6FC04E5AA2170C4B89D1B7F3"><enum>(A)</enum><text>in the case of an adjustment pursuant to the decision of a court in a proceeding brought under
section 6234, such decision becomes final,</text>
</subparagraph><subparagraph commented="no" id="H50E4179B8DC2433298F54576C443D2D5"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of an administrative adjustment request under section 6226, such administrative
adjustment request is made, or</text>
</subparagraph><subparagraph id="HBA6B5816CE594087B10423B97E634B54"><enum>(C)</enum><text>in any other case, notice of the final partnership adjustment is mailed under section 6231.</text>
</subparagraph></paragraph></subsection></section><section display-inline="no-display-inline" id="H985247F20C924BB6A9498FE95436DBF7" section-type="subsequent-section"><enum>6226.</enum><header>Administrative adjustment request by partnership</header>
<subsection id="H6CD1007D04684967A56A340D4ED44A7B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">A partnership may file a request for an administrative adjustment in the amount of any item of
income, gain, loss, deduction, or credit of the partnership for any
partnership taxable year, but only to the extent such adjustment results
in an imputed underpayment.</text>
</subsection><subsection id="H68A90D9265E449E2A6DEBBC3618F1EBF"><enum>(b)</enum><header>Adjustment</header><text display-inline="yes-display-inline">Any adjustment under subsection (a) shall be determined and taken into account by the partnership
under rules similar to the rules of section 6225 (other than subsection
(c) thereof) for the partnership taxable year in which the administrative
adjustment request is made.</text>
</subsection><subsection id="HD2DF73505E4F45E3BA45B0921A798798"><enum>(c)</enum><header>Period of limitations</header><text>A partnership may not file such a request—</text>
<paragraph id="HCA6CE9AED2FC4A20A36812A5981DDBC3"><enum>(1)</enum><text>more than 3 years after the later of—</text>
<subparagraph id="H8F592989E64E4D4EA48C9893C3FFDC21"><enum>(A)</enum><text>the date on which the partnership return for such year is filed, or</text>
</subparagraph><subparagraph id="HBDEB258D130C4754ADC6FE189664CC1F"><enum>(B)</enum><text>the last day for filing the partnership return for such year (determined without regard to
extensions), and</text>
</subparagraph></paragraph><paragraph id="H5D210881E99043F9A479CE7AE7C40E20"><enum>(2)</enum><text>after any notice of an administrative proceeding with respect to the taxable year is mailed under
section 6231.</text>
</paragraph></subsection></section></part><part id="HEA09EE3C0CD74415B2F55EFD68AFCB32"><enum>III</enum><header>Procedure</header>
<toc container-level="part-container" idref="HEA09EE3C0CD74415B2F55EFD68AFCB32" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H7549ED8EB7634BBE80E11898A8BE172D" level="section">Sec. 6231. Notice of proceedings and adjustment.</toc-entry>
<toc-entry idref="HFA337889D214422B9D90FDB109125994" level="section">Sec. 6232. Assessment, collection, and payment.</toc-entry>
<toc-entry idref="HCCAB73702084443BA121B621322EA324" level="section">Sec. 6233. Penalties and interest.</toc-entry>
<toc-entry idref="H2EB30812BB964B278028FC1A1AD3E7B4" level="section">Sec. 6234. Judicial review of partnership adjustment.</toc-entry>
<toc-entry idref="H0BF719F4498B4C69805CD866E5AD2161" level="section">Sec. 6235. Period of limitations on making adjustments.</toc-entry></toc>
<section id="H7549ED8EB7634BBE80E11898A8BE172D"><enum>6231.</enum><header>Notice of proceedings and adjustment</header>
<subsection id="HD16DCC2077374E64A20C91FBD0ED4080"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">The Secretary shall mail to the partnership and the partnership representative—</text>
<paragraph id="HBBD9CF058F8041FB814421A7CA301F4F"><enum>(1)</enum><text display-inline="yes-display-inline">notice of any administrative proceeding initiated at the partnership level with respect to an
adjustment of any item of income, gain, loss, deduction, or credit of a
partnership for a partnership taxable year, or any partner’s distributive
share thereof,</text>
</paragraph><paragraph id="HBBADCD6758B64C85A082A7211430BB64"><enum>(2)</enum><text>notice of any proposed partnership adjustment resulting from such proceeding, and</text>
</paragraph><paragraph id="H4A0ECC6959154584873CCB940B20EAD6"><enum>(3)</enum><text>notice of any final partnership adjustment resulting from such proceeding.</text></paragraph><continuation-text continuation-text-level="subsection">Any notice of a final partnership adjustment shall not be mailed earlier than 180 days after the
date on which the notice of the proposed partnership adjustment is mailed.
Such notices shall be sufficient if mailed to the last known address of
the partnership representative or the partnership (even if the partnership
has terminated its existence). The first sentence shall apply to any
proceeding with respect to an administrative adjustment request filed by a
partnership under section 6226.</continuation-text></subsection><subsection id="HAF01FCFD5F404C9BA3CD53480D7DFEDD"><enum>(b)</enum><header>Further notices restricted</header><text>If the Secretary mails a notice of a final partnership adjustment to any partnership for any
partnership taxable year and the partnership files a petition under
section 6234 with respect to such notice, in the absence of a showing of
fraud, malfeasance, or misrepresentation of a material fact, the Secretary
shall not mail another such notice to such partnership with respect to
such taxable year.</text>
</subsection><subsection id="H9E63D18F9B264546B4D705EA31F3363A"><enum>(c)</enum><header>Authority To rescind notice with partnership consent</header><text>The Secretary may, with the consent of the partnership, rescind any notice of a partnership
adjustment mailed to such partnership. Any notice so rescinded shall not
be treated as a notice of a partnership adjustment for purposes of this
subchapter, and the taxpayer shall have no right to bring a proceeding
under section 6234 with respect to such notice.</text>
</subsection></section><section display-inline="no-display-inline" id="HFA337889D214422B9D90FDB109125994" section-type="subsequent-section"><enum>6232.</enum><header>Assessment, collection, and payment</header>
<subsection id="H3C48CE61D2D9472991C57227B25E7FF4"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Any imputed underpayment—</text>
<paragraph id="H506E23B4CACE470E99E54DED7FE43CA8"><enum>(1)</enum><text>shall be assessed and collected in the same manner as if it were a tax imposed for the adjustment
year by subtitle A, and</text>
</paragraph><paragraph id="H82BEFF910D084EAB94DB7453213E50F6"><enum>(2)</enum><text>shall be paid on or before the return due date for the adjustment year.</text>
</paragraph></subsection><subsection id="H9899E79D1AEF4BBB816E7CAB32EA7D6D"><enum>(b)</enum><header>Limitation on assessment</header><text display-inline="yes-display-inline">Except as otherwise provided in this chapter, no assessment of a deficiency may be made (and no
levy or proceeding in any court for the collection of any amount resulting
from such adjustment may be made, begun or prosecuted) before—</text>
<paragraph id="HC504BDF0799246328D84379BA457E6FF"><enum>(1)</enum><text>the close of the 90th day after the day on which a notice of a final partnership adjustment was
mailed, and</text>
</paragraph><paragraph id="H8B5FDF1485E3434E9140B2C6B0B843E4"><enum>(2)</enum><text>if a petition is filed under section 6234 with respect to such notice, the decision of the court
has become final.</text>
</paragraph></subsection><subsection id="H43E47EC8A6124CAD98CF5C141E5B3E32"><enum>(c)</enum><header>Premature action may be enjoined</header><text>Notwithstanding section 7421(a), any action which violates subsection (b) may be enjoined in the
proper court, including the Tax Court. The Tax Court shall have no
jurisdiction to enjoin any action under this subsection unless a timely
petition has been filed under section 6234 and then only in respect of the
adjustments that are the subject of such petition.</text>
</subsection><subsection id="H18D43A373D7F4B4FA700F10BEA9C1B76"><enum>(d)</enum><header>Exceptions to restrictions on adjustments</header>
<paragraph id="H6B34032712A846B4B836D0255DDF1EA1"><enum>(1)</enum><header>Adjustments arising out of math or clerical errors</header>
<subparagraph id="HA1FBA0D497024CC99679712ED0A87A04"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">If the partnership is notified that, on account of a mathematical or clerical error appearing on
the partnership return, an adjustment to a partnership item is required,
rules similar to the rules of paragraphs (1) and (2) of section 6213(b)
shall apply to such adjustment.</text>
</subparagraph><subparagraph id="HAA0556F54A2142A5883524257E8DD4D0"><enum>(B)</enum><header>Special rule</header><text>If a partnership is a partner in another partnership, any adjustment on account of such
partnership’s failure to comply with the requirements of section 6222(a)
with respect to its interest in such other partnership shall be treated as
an adjustment referred to in subparagraph (A), except that paragraph (2)
of section 6213(b) shall not apply to such adjustment.</text>
</subparagraph></paragraph><paragraph id="H10AA4094CB664CB3A0F7174712F9573C"><enum>(2)</enum><header>Partnership may waive restrictions</header><text>The partnership may at any time (whether or not any notice of partnership adjustment has been
issued), by a signed notice in writing filed with the Secretary, waive the
restrictions provided in subsection (b) on the making of any partnership
adjustment.</text>
</paragraph></subsection><subsection id="HFE4B236A7D6B44D5A9CD69E4133F3BC9"><enum>(e)</enum><header>Limit where no proceeding begun</header><text>If no proceeding under section 6234 is begun with respect to any notice of a final partnership
adjustment during the 90-day period described in subsection (b) thereof,
the amount for which the partnership is liable under section 6225 shall
not exceed the amount determined in accordance with such notice.</text>
</subsection></section><section id="HCCAB73702084443BA121B621322EA324"><enum>6233.</enum><header>Penalties and interest</header>
<subsection id="H577CF5B1E6AD432F82C0B9A55BCD1358"><enum>(a)</enum><header>Penalties and interest determined from reviewed year</header>
<paragraph id="H786929953B194414B628E3B47955AE6D"><enum>(1)</enum><header>In general</header><text>In the case of an imputed underpayment with respect to a partnership adjustment for a reviewed
year, the partnership—</text>
<subparagraph id="H57647501394744DB8D2436FC1C492E13"><enum>(A)</enum><text display-inline="yes-display-inline">shall pay to the Secretary interest computed under paragraph (2), and</text>
</subparagraph><subparagraph id="H4079B6CF8A2146378170536BA3A33872"><enum>(B)</enum><text>shall be liable for any penalty, addition to tax, or additional amount as provided in paragraph
(3).</text>
</subparagraph></paragraph><paragraph id="H77C8D4B61B56480B898E447BDFCA9EF9"><enum>(2)</enum><header>Determination of amount of interest</header><text display-inline="yes-display-inline">The interest computed under this paragraph with respect to any partnership adjustment is the
interest which would be determined under chapter 67—</text>
<subparagraph id="H4A43F067DF68448E9F1942812B80D9FD"><enum>(A)</enum><text display-inline="yes-display-inline">on the imputed underpayment determined with respect to such adjustment,</text>
</subparagraph><subparagraph id="H4CE029CE6BF649FF8654720BB3D38A39"><enum>(B)</enum><text display-inline="yes-display-inline">for the period beginning on the day after the return due date for the reviewed year and ending on
the return due date for the adjustment year (or, if earlier, the date
payment of the imputed underpayment is made).</text></subparagraph><continuation-text continuation-text-level="paragraph">Proper adjustments in the amount determined under the preceding sentence shall be made for
adjustments required for partnership taxable years after the reviewed year
and before the adjustment year by reason of such partnership adjustment.</continuation-text></paragraph><paragraph id="H2614AB40348C4A7D8CFCBEDD22657D98"><enum>(3)</enum><header>Penalties</header><text display-inline="yes-display-inline">A partnership shall be liable for any penalty, addition to tax, or additional amount for which it
would have been liable if such partnership had been an individual subject
to tax under chapter 1 for the reviewed year and the imputed underpayment
were an actual underpayment (or understatement) for such year.</text>
</paragraph></subsection><subsection id="H5950DF71E35A485895EDC990DA7D41E3"><enum>(b)</enum><header>Interest and penalties with respect to adjustment year return</header>
<paragraph id="HE25CE1533C3F464BA28CD9395CF6E48E"><enum>(1)</enum><header>In general</header><text>In the case of any failure to pay an imputed underpayment on the date prescribed therefor, the
partnership shall be liable—</text>
<subparagraph id="H900F00B46392492DB0102E3325278A31"><enum>(A)</enum><text display-inline="yes-display-inline">for interest as determined under paragraph (2), and</text>
</subparagraph><subparagraph id="HB942DADC783545E599A0B6C51F7F50C9"><enum>(B)</enum><text>for any penalty, addition to tax, or additional amount as determined under paragraph (3).</text>
</subparagraph></paragraph><paragraph id="H5DE5F6D642AF4E6884D35F1C6DFF403F"><enum>(2)</enum><header>Interest</header><text display-inline="yes-display-inline">Interest determined under this paragraph is the interest that would be determined by treating the
imputed underpayment as an underpayment of tax imposed in the adjustment
year.</text>
</paragraph><paragraph id="H46595BEA7E8F47E5AFA4550B4BC4BCCA"><enum>(3)</enum><header>Penalties</header><text display-inline="yes-display-inline">Penalties, additions to tax, or additional amounts determined under this paragraph are the
penalties, additions to tax, or additional amounts that would be
determined—</text>
<subparagraph id="HBA5A496930B04464B111C6B325F80E2C"><enum>(A)</enum><text display-inline="yes-display-inline">by applying section 6651(a)(2) to such failure to pay.</text>
</subparagraph><subparagraph id="H3A3F27BFC65B46B697957C9DE2FBA57E"><enum>(B)</enum><text>by treating the imputed underpayment as an underpayment of tax for purposes of part II of
subchapter A of chapter 68.</text>
</subparagraph></paragraph></subsection></section><section display-inline="no-display-inline" id="H2EB30812BB964B278028FC1A1AD3E7B4" section-type="subsequent-section"><enum>6234.</enum><header>Judicial review of partnership adjustment</header>
<subsection id="HE4C03A2C7BD24DCFB52112BC7D206A10"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Within 90 days after the date on which a notice of a final partnership adjustment is mailed under
section 6231 with respect to any partnership taxable year, the partnership
may file a petition for a readjustment for such taxable year with—</text>
<paragraph id="H7968071074D346DA8F173DF9BD40EC14"><enum>(1)</enum><text>the Tax Court,</text>
</paragraph><paragraph id="H64BF80B372CD497A865B03A3255E73B3"><enum>(2)</enum><text>the district court of the United States for the district in which the partnership’s principal place
of business is located, or</text>
</paragraph><paragraph id="H6D5E6DB40C7F4D9DBAE85FDD46DC7C6B"><enum>(3)</enum><text display-inline="yes-display-inline">the Claims Court.</text>
</paragraph></subsection><subsection id="HEAE89758ACDC473FB0C6D55EB7C980F5"><enum>(b)</enum><header>Jurisdictional requirement for bringing action in district court or Claims Court</header>
<paragraph id="H0FC4919D231249B4B2E3C89909529E25"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">A readjustment petition under this section may be filed in a district court of the United States or
the Claims Court only if the partnership filing the petition deposits with
the Secretary, on or before the date the petition is filed, the amount of
the imputed underpayment (as of the date of the filing of the petition) if
the partnership adjustment was made as provided by the notice of final
partnership adjustment. The court may by order provide that the
jurisdictional requirements of this paragraph are satisfied where there
has been a good faith attempt to satisfy such requirement and any
shortfall of the amount required to be deposited is timely corrected.</text>
</paragraph><paragraph id="H8B7F60B1BDC34AAB839D11B43E730A75"><enum>(2)</enum><header>Interest payable</header><text>Any amount deposited under paragraph (1), while deposited, shall not be treated as a payment of tax
for purposes of this title (other than chapter 67).</text>
</paragraph></subsection><subsection id="HD4D557100F7B4EC98802706A06711403"><enum>(c)</enum><header>Scope of judicial review</header><text>A court with which a petition is filed in accordance with this section shall have jurisdiction to
determine all items of income, gain, loss, deduction, or credit of the
partnership for the partnership taxable year to which the notice of final
partnership adjustment relates, the proper allocation of such items among
the partners, and the applicability of any penalty, addition to tax, or
additional amount for which the partnership may be liable under this
subchapter.</text>
</subsection><subsection id="HB43078A1D4FE45C99BF03AB5139FE12C"><enum>(d)</enum><header>Determination of court reviewable</header><text>Any determination by a court under this section shall have the force and effect of a decision of
the Tax Court or a final judgment or decree of the district court or the
Claims Court, as the case may be, and shall be reviewable as such. The
date of any such determination shall be treated as being the date of the
court’s order entering the decision.</text>
</subsection><subsection id="H5B2B3414485C4D3B88E5DED3E08150DA"><enum>(e)</enum><header>Effect of decision dismissing action</header><text>If an action brought under this section is dismissed other than by reason of a rescission under
section 6231(c), the decision of the court dismissing the action shall be
considered as its decision that the notice of final partnership adjustment
is correct, and an appropriate order shall be entered in the records of
the court.</text>
</subsection></section><section display-inline="no-display-inline" id="H0BF719F4498B4C69805CD866E5AD2161" section-type="subsequent-section"><enum>6235.</enum><header>Period of limitations on making adjustments</header>
<subsection id="HDB2E6B4F2A5647FB963CF7F31C72B16F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this section, no adjustment under this subpart for any partnership
taxable year may be made after the date which is 3 years after the latest
of—</text>
<paragraph id="H6C2FC2072D17406D805317C129F30554"><enum>(1)</enum><text>the date on which the partnership return for such taxable year was filed,</text>
</paragraph><paragraph id="HD5E3429C788441CBB9CF86AA767D7D2D"><enum>(2)</enum><text>the return due date for the taxable year, or</text>
</paragraph><paragraph id="H516AEE2F26264A8BA347785321650631"><enum>(3)</enum><text>the date on which the partnership filed an administrative adjustment request with respect to such
year under section 6226.</text>
</paragraph></subsection><subsection id="HF55B758F2C8C49079CB427D898270B5A"><enum>(b)</enum><header>Extension by agreement</header><text>The period described in subsection (a) (including an extension period under this subsection) may
be extended by an agreement entered into by the Secretary and the
partnership before the expiration of such period.</text>
</subsection><subsection id="H0A21C66C8AC7440F9E266EA9F95CA5B9"><enum>(c)</enum><header>Special rule in case of fraud, etc</header>
<paragraph id="H2A3D83343FD0446BA6CF5C729C1A1438"><enum>(1)</enum><header>False return</header><text display-inline="yes-display-inline">In the case of a false or fraudulent partnership return with intent to evade tax, the adjustment
may be made at any time.</text>
</paragraph><paragraph id="H21CCFFBDF82541AF9E5546C9BC55EC41"><enum>(2)</enum><header>Substantial omission of income</header><text display-inline="yes-display-inline">If any partnership omits from gross income an amount properly includible therein and such amount is
described in section 6501(e)(1)(A), subsection (a) shall be applied by
substituting <quote>6 years</quote> for <quote>3 years</quote>.</text>
</paragraph><paragraph id="H3A8620AC06B7409CB20DB4C4E9182573"><enum>(3)</enum><header>No return</header><text>In the case of a failure by a partnership to file a return for any taxable year, the adjustment may
be made at any time.</text>
</paragraph><paragraph id="H645BDFD247934C11A8583CE86467BA79"><enum>(4)</enum><header>Return filed by Secretary</header><text>For purposes of this section, a return executed by the Secretary under subsection (b) of section
6020 on behalf of the partnership shall not be treated as a return of the
partnership.</text>
</paragraph></subsection><subsection id="H58B8476ABB7D4F2291BEB0574A08AE12"><enum>(d)</enum><header>Suspension when Secretary mails notice of adjustment</header><text>If notice of a final partnership adjustment with respect to any taxable year is mailed under
section 6231, the running of the period specified in subsection (a) (as
modified by the other provisions of this section) shall be suspended—</text>
<paragraph id="H71FBB73337B34222A5BDA8BD93476CC0"><enum>(1)</enum><text>for the period during which an action may be brought under section 6234 (and, if a petition is
filed under such section with respect to such notice, until the decision
of the court becomes final), and</text>
</paragraph><paragraph id="H841B04254DD04B779E3AF43268563EC1"><enum>(2)</enum><text>for 1 year thereafter.</text>
</paragraph></subsection></section></part><part id="H8FD33F68F7CD40EF8986A9D7E7D904DD"><enum>IV</enum><header>Definitions and special rules</header>
<toc container-level="part-container" idref="H8FD33F68F7CD40EF8986A9D7E7D904DD" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H87C0A0A6C98E4A0083D4FD1CCA3C6D10" level="section">Sec. 6241. Definitions and special rules.</toc-entry></toc>
<section display-inline="no-display-inline" id="H87C0A0A6C98E4A0083D4FD1CCA3C6D10" section-type="subsequent-section"><enum>6241.</enum><header>Definitions and special rules</header>
<subsection id="H937442C8BE2E46B4B3656306BF00BAD6"><enum>(a)</enum><header>Definitions and special rules</header><text display-inline="yes-display-inline">For purposes of this subchapter—</text>
<paragraph id="H9A5E40709E56404EA1D833DBAF58EB0C"><enum>(1)</enum><header>Partnership</header><text display-inline="yes-display-inline">The term <quote>partnership</quote> means any partnership required to file a return under section 6031(a).</text>
</paragraph><paragraph id="H9CEA39DFE79448538007787F716054E6"><enum>(2)</enum><header>Partner</header><text>The term <quote>partner</quote> means—</text>
<subparagraph id="H17AABEF4790B4A03A9B3A79B8827B656"><enum>(A)</enum><text>a partner in the partnership, and</text>
</subparagraph><subparagraph id="HAF4652AD07744A90A79A8A27B8521827"><enum>(B)</enum><text>any other person whose income tax liability under subtitle A is determined in whole or in part by
taking into account directly or indirectly income, gain, deduction, or
loss of the partnership.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="H925B8C84C06048EF9B4D6A932CCD2A41"><enum>(b)</enum><header>Partnership adjustment</header><text display-inline="yes-display-inline">The term <quote>partnership adjustment</quote> means any adjustment in the amount of any item of income, gain, loss, deduction, or credit of a
partnership, or any partner’s distributive share thereof.</text>
</subsection><subsection commented="no" id="H98875DF3D6994B92A6A88C0F3A09AA32"><enum>(c)</enum><header>Return due date</header><text>The term <quote>return due date</quote> means, with respect to the taxable year, the date prescribed for filing the partnership return for
such taxable year (determined without regard to extensions).</text>
</subsection><subsection id="HBFFC378954D14015B54A42544BCBA02A"><enum>(d)</enum><header>Joint and several liability</header>
<paragraph id="H387BB50B628747418B7B3C2A7E240547"><enum>(1)</enum><header>In general</header><text>The partnership and any partner of the partnership shall be jointly and severally liable for any
imputed underpayment and any penalty, addition to tax, or additional
amount attributable thereto.</text>
</paragraph><paragraph id="HEE3575D06C164DAD8CAC99357FA5C840"><enum>(2)</enum><header>Period for assessment of partners</header><text display-inline="yes-display-inline">The period for assessment of an imputed underpayment with respect to a partner of a partnership
shall not expire earlier than 3 years after the date on which an
assessment of such imputed underpayment was made with respect to the
partnership.</text>
</paragraph><paragraph id="H069D27F7DA854B1DAA83BDB9319142CD"><enum>(3)</enum><header>Determining partners</header><text>A person shall be treated as partner of the partnership if such person is a partner of such
partnership at any time during the reviewed or adjustment year.</text>
</paragraph></subsection><subsection id="H1E529651E8D24FB4839EF8EC55D231A4"><enum>(e)</enum><header>Payments nondeductible</header><text>No deduction shall be allowed under subtitle A for any payment required to be made by a partnership
under this subchapter.</text>
</subsection><subsection id="H1EAA89D76ABC4AF492D8124ECE26FDFF"><enum>(f)</enum><header>Special rule for deductions, losses, and credits of foreign partnerships</header><text display-inline="yes-display-inline">Except to the extent otherwise provided in regulations, in the case of any partnership the
partnership representative of which resides outside the United States or
the books of which are maintained outside the United States, no deduction,
loss, or credit shall be allowable to any partner unless section 6031 is
complied with for the partnership’s taxable year in which such deduction,
loss, or credit arose at such time as the Secretary prescribes by
regulations.</text>
</subsection><subsection id="H309112BB9BA04A4DA737F052F47E6E2F"><enum>(g)</enum><header>Partnerships having principal place of business outside United States</header><text display-inline="yes-display-inline">For purposes of sections 6234, a principal place of business located outside the United States
shall be treated as located in the District of Columbia.</text>
</subsection><subsection id="HCE1F62EDDDC64AD491B8F4E949477AD2"><enum>(h)</enum><header>Partnerships in cases under title 11 of United States Code</header>
<paragraph id="H26364A8D0C5E45BCAEB6E96A32E07364"><enum>(1)</enum><header>Suspension of period of limitations on making adjustment, assessment, or collection</header><text display-inline="yes-display-inline">The running of any period of limitations provided in this subchapter on making a partnership
adjustment (or provided by section 6501 or 6502 on the assessment or
collection of any imputed underpayment determined under this subchapter)
shall, in a case under title 11 of the United States Code, be suspended
during the period during which the Secretary is prohibited by reason of
such case from making the adjustment (or assessment or collection) and—</text>
<subparagraph id="H3ABAFFE054E7486AAEE802A3AE8668DE"><enum>(A)</enum><text display-inline="yes-display-inline">for adjustment or assessment, 60 days thereafter, and</text>
</subparagraph><subparagraph id="H55F3BC06258243929DB644B53E4F8A8B"><enum>(B)</enum><text display-inline="yes-display-inline">for collection, 6 months thereafter.</text></subparagraph><continuation-text continuation-text-level="paragraph">A rule similar to the rule of section 6213(f)(2) shall apply for purposes of section 6232(b).</continuation-text></paragraph><paragraph id="H3FAF8538470F47179ABFBA226978B6C1"><enum>(2)</enum><header>Suspension of period of limitation for filing for judicial review</header><text display-inline="yes-display-inline">The running of the period specified in section 6234 shall, in a case under title 11 of the United
States Code, be suspended during the period during which the partnership
is prohibited by reason of such case from filing a petition under section
6234 and for 60 days thereafter.</text></paragraph></subsection></section></part></subchapter><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HC3B3D0646109423DA1074F03D09D2CE1"><enum>(2)</enum><header>Clerical amendment</header><text>The table of subchapters for chapter 63 is amended by inserting after the item relating to
subchapter B the following new items:</text>
<quoted-block display-inline="no-display-inline" id="H7BEF0A06EFD44E278DD79BB13134F144" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="subchapter">Subchapter C. Treatment of partnerships.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HF05F629F6E3944D595C0EF48F41DAE97"><enum>(d)</enum><header>Conforming amendments</header>
<paragraph id="HFF52FA310C884B65B9193C0C0CCB65DB"><enum>(1)</enum><text>Section 6422 is amended by striking paragraph (12).</text>
</paragraph><paragraph id="HE9CDAD8D7B5341AFBDC5D77781CC19A3"><enum>(2)</enum><text>Section 6501(n) is amended by striking paragraphs (2) and (3) and by striking <quote><header-in-text level="subsection" style="OLC">Cross references</header-in-text></quote> and all that follows through <quote>For period of limitations</quote> and inserting <quote><header-in-text level="subsection" style="OLC">Cross reference.—</header-in-text>For period of limitations</quote>.</text>
</paragraph><paragraph id="H5E1BE996EF3D4828AE6FB604F607BE83"><enum>(3)</enum><text>Section 6503(a)(1) is amended by striking <quote>(or section 6229</quote> and all that follows through <quote>of section 6230(a))</quote>.</text>
</paragraph><paragraph id="H8B45058ACD964B01A8FA28810D391721"><enum>(4)</enum><text>Section 6504 is amended by striking paragraph (11).</text>
</paragraph><paragraph id="H72CC33E20D854C6E8AA45A2D67FF515A"><enum>(5)</enum><text>Section 6511 is amended by striking subsection (g).</text>
</paragraph><paragraph id="H81667D860A9B4F55A0D29EF13354C577"><enum>(6)</enum><text>Section 6512(b)(3) is amended by striking the second sentence.</text>
</paragraph><paragraph id="HFCC78354D49A40BEB195FEBD514AF88A"><enum>(7)</enum><text>Section 6515 is amended by striking paragraph (6).</text>
</paragraph><paragraph id="HC7EBCD1B8C4142358A486B0B7DCDD991"><enum>(8)</enum><text display-inline="yes-display-inline">Section 6601(c) is amended by striking the last sentence.</text>
</paragraph><paragraph id="H163C5D553FCD4D3DA388D126A55DE1B4"><enum>(9)</enum><text>Section 7421(a) is amended by striking <quote>6225(b), 6246(b)</quote> and inserting <quote>6232(c)</quote>.</text>
</paragraph><paragraph id="H6B8DFD124AD444A68B552E0E760F7175"><enum>(10)</enum><text>Section 7422 is amended by striking subsection (h).</text>
</paragraph><paragraph id="HC465ECA143D74A3FB3AEA24AE549C135"><enum>(11)</enum><text>Section 7459(c) is amended by striking <quote>section 6226</quote> and all that follows through <quote>or 6252</quote> and inserting <quote>section 6234</quote>.</text>
</paragraph><paragraph id="HD574D41C2CD54D0EA71A8B98DD5C7867"><enum>(12)</enum><text>Section 7482(b)(1) is amended—</text>
<subparagraph id="H390CC54D4C414BAFA3B9910946245841"><enum>(A)</enum><text>in subparagraph (E), by striking <quote>section 6226, 6228, 6247, or 6252</quote> and inserting <quote>section 6234</quote>,</text>
</subparagraph><subparagraph id="HDFE01C2F565C4FE68E57299A56826AB8"><enum>(B)</enum><text>by striking subparagraph (F), by striking <quote>or</quote> at the end of subparagraph (E) and inserting a period, and by inserting <quote>or</quote> at the end of subparagraph (D), and</text>
</subparagraph><subparagraph id="H1CC0B53FF1D543E7AEAE8CDA58803364"><enum>(C)</enum><text>in the last sentence, by striking <quote>section 6226, 6228(a), or 6234(c)</quote> and inserting <quote>section 6234</quote>.</text>
</subparagraph></paragraph><paragraph id="H6BDBC519A9E54389A6C41955DE08161F"><enum>(13)</enum><text>Section 7485(b) is amended by striking <quote>section 6226, 6228(a), 6247, or 6252</quote> and inserting <quote>section 6234</quote>.</text>
</paragraph></subsection><subsection id="H31857779FA5844E7BDE995D2073B5080"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to returns filed for partnership taxable years
ending after December 31, 2014, except that a partnership may elect (at
such time and in such form and manner as the Secretary of the Treasury may
prescribe) for such amendments to apply to any return of the partnership
filed for partnership taxable years ending after the date of the enactment
of this Act and before January 1, 2015.</text>
</subsection></section></part><part id="H1E75B5E2BEF842FB9F465350F15E0828"><enum>3</enum><header>REITs and RICs</header>
<section id="HC79BA9FDB6834C1090EF4B4A4606D2D9"><enum>3631.</enum><header>Prevention of tax-free spinoffs involving REITs</header>
<subsection id="HC91BD8B68A5D48C0B9801EB04EF97BCA"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 355 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H1EE53738109048E39CB987635AAF9379" style="OLC">
<subsection id="HB43F00684E66409A955A822C6511C63E"><enum>(h)</enum><header>Section not To apply to distributions involving real estate investment trusts</header><text display-inline="yes-display-inline">This section (and so much of section 356 as relates to this section) shall not apply to any
distribution if either the distributing corporation or controlled
corporation is a real estate investment trust.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBF6CF77A166F4F758DA72E996D404561"><enum>(b)</enum><header>Prevention of REIT election following tax-Free spin off</header><text>Section 856(c) is amended by redesignating paragraph (8) as paragraph (9) and by inserting after
paragraph (7) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HD0E4D64F3CFF4645BA8DDC0DF89C1F3A" style="OLC">
<paragraph id="HFB7BEC9C9D554E178CC22F2512C50FE4"><enum>(8)</enum><header>Election after tax-free reorganization</header><text display-inline="yes-display-inline">If a corporation was a distributing corporation or a controlled corporation with respect to any
distribution to which section 355 applied, such corporation (and any
successor corporation) shall not be eligible to make any election under
subsection (c)(1) for any taxable year prior to the 10th taxable year
which begins after the taxable year in which such distribution was made.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H64BBA98618FD4BFBA99AFE16EF672E9A"><enum>(c)</enum><header>Effective date</header>
<paragraph id="HE97157B67C274FC7B3F8957F85868CEE"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendments made by this section shall apply to
distributions on or after February 26, 2014.</text>
</paragraph><paragraph id="HA1516D907EFE4CE8922FDCAA0107DCBC"><enum>(2)</enum><header>Transition rule</header><text>The amendments made by this section shall not apply to any distribution made pursuant to an
agreement which was binding on February 26, 2014, and at all times
thereafter.</text>
</paragraph></subsection></section><section id="H775E1BD668F046738A3AEBB15D5E33D8"><enum>3632.</enum><header>Extension of period for prevention of REIT election following revocation or termination</header>
<subsection id="HC8B2E56E091E4514A00AF1CF133F4A03"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 856(g)(3) is amended by striking <quote>fifth</quote> and inserting <quote>10th</quote>.</text>
</subsection><subsection id="H670B3A3C378C440CA27531D95AB81C95"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to terminations and revocations after December 31,
2014.</text>
</subsection></section><section id="HFA7CD90BB788492F9D584031C2697C79"><enum>3633.</enum><header>Certain short-life property not treated as real property for purposes of REIT provisions</header>
<subsection id="H5CA9F8A42ACE450CAFC560C1B53E2E37"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 856(c)(5) is amended by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HC961D12ECCBC4C4081CB23E1352A0717" style="OLC">
<subparagraph id="H850DCDEF332C4ABF93F62D4C6E5A63F0"><enum>(L)</enum><header>Real property</header><text display-inline="yes-display-inline">The term <quote>real property</quote> shall not include any tangible property with a class life of less than 27.5 years. For purposes of
the preceding sentence, class life of tangible property for any taxable
year shall be the greater of—</text>
<clause id="H65B831E5CD71471B80E57C74BBBD9AEF"><enum>(i)</enum><text>the class life of such property in the hands of the real estate investment trust, or</text>
</clause><clause id="H9AA3CAF4C6754058BE877CF15488AC06"><enum>(ii)</enum><text>the class life which would be applicable to such property if such property was placed in service in
the taxable year.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HCDB09D26262347F38E176DE07B2FEE0F"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2016.</text>
</subsection></section><section id="H6A2F5ABB19CC4E9BB90BD7D5EED20DF9"><enum>3634.</enum><header>Repeal of special rules for timber held by REITs</header>
<subsection id="H39B5A7330196456FADD716065D01A551"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 856(c)(5)(L), as added by this Act, is amended by inserting <quote>timber or</quote> after <quote>shall not include</quote>.</text>
</subsection><subsection id="HAD8371222E3D4867B599A7F630098EC1"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H5CDFA46C2DCB48DBAC6995343201D6F5"><enum>(1)</enum><text display-inline="yes-display-inline">Section 856(c)(2) is amended by inserting <quote>and</quote> at the end of subparagraph (G), by striking <quote>and</quote> at the end of subparagraph (H), and by striking subparagraph (I).</text>
</paragraph><paragraph id="H175EDBFA72AC41D9B35597ECDC4598E0"><enum>(2)</enum><text>Section 856(c)(5), as amended by the preceding provisions of this Act, is amended by striking
subparagraphs (H) and (I) and by redesignating subparagraphs (J), (K), and
(L) as subparagraphs (H), (I) and (J), respectively.</text>
</paragraph><paragraph id="HCA70AD7C589049179DE4729B59C4CC5D"><enum>(3)</enum><text>Section 856(c), as amended by the preceding provisions of this Act, is amended by striking
paragraph (9).</text>
</paragraph><paragraph id="H510A059E0D4F4ADD900D9D7FA37FB85B"><enum>(4)</enum><text>Section 857(b)(6) is amended by striking subparagraphs (D), (G), and (H), and by redesignating
subparagraphs (E) and (F) as subparagraphs (D) and (E), respectively.</text>
</paragraph><paragraph id="H8695452F9A69426C9FFAC277FDE92CB2"><enum>(5)</enum><text>Section 857(b)(6)(D), as redesignated by paragraph (4), is amended by striking <quote>subparagraphs (C) and (D)</quote> and inserting <quote>subparagraph (C)</quote>.</text>
</paragraph><paragraph id="HE4B87DC78F684EFA98DC0B3E94C1D899"><enum>(6)</enum><text>Section 857(b)(6)(E), as redesignated by paragraph (4), is amended—</text>
<subparagraph id="H5BC18785FA5E42F0B20D1F5A5F5DD730"><enum>(A)</enum><text>by striking <quote>subparagraph (C) or (D)</quote> and inserting <quote>subparagraph (C)</quote>, and</text>
</subparagraph><subparagraph id="H575F31D97D3A4D18882675738FE964E7"><enum>(B)</enum><text>by striking <quote>subparagraphs (C), (D), and (E)</quote> and inserting <quote>subparagraphs (C) and (D)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="HE0550BC9881B4B92876EBD8839D35455"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2016.</text>
</subsection></section><section id="HEF44BDB346CE4244900ADB4B71905C20"><enum>3635.</enum><header>Limitation on fixed percentage rent and interest exceptions for REIT income tests</header>
<subsection id="H93F6767C134E4861A6323C794851AB49"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 856 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HAE8C9B4D502A49A0B3A9B1516A0B9301" style="OLC">
<subsection id="H824481E5C591436389E0B1D2F7674B98"><enum>(o)</enum><header>Limitation on fixed percentage rent and interest exceptions</header>
<paragraph id="H37AA5F992C4B4639A6CC7262CECD3121"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">If the fixed percentage rent and interest income received or accrued by a real estate investment
trust from a single C corporation (other than a taxable REIT subsidiary of
such real estate investment trust) for any taxable year exceeds either—</text>
<subparagraph id="HB0DF034456E549CC9E6D04B63ED80D1F"><enum>(A)</enum><text>25 percent of the fixed percentage rent income received or accrued by such real estate investment
trust for such taxable year, or</text>
</subparagraph><subparagraph id="H682748BC8C2A42AB85973BE511ED3A35"><enum>(B)</enum><text>25 percent of the fixed percentage interest income received or accrued by such real estate
investment trust for such taxable year,</text></subparagraph><continuation-text continuation-text-level="paragraph">then, notwithstanding subsection (d)(2), none of the fixed percentage rent income received or
accrued from such corporation which is attributable to leases entered into
after December 31, 2014, shall be treated as rents from real property and,
notwithstanding subsection (f), none of the fixed percentage interest
income received or accrued from such corporation which is attributable to
debt instruments acquired after December 31, 2014, shall be treated as
interest.</continuation-text></paragraph><paragraph id="H6887CE9E5FA049ED9120B267FCE55CF5"><enum>(2)</enum><header>Fixed percentage rent and interest income</header><text>For purposes of this subsection—</text>
<subparagraph id="HDFA0796FCB704DFFB36440A729489E44"><enum>(A)</enum><header>Fixed percentage rent and interest income</header><text>The term <quote>fixed percentage rent and interest income</quote> means the sum of the fixed percentage rent income plus the fixed percentage interest income.</text>
</subparagraph><subparagraph id="H5D297040CAD44C5BBBA92A60FBD6D3BD"><enum>(B)</enum><header>Fixed percentage rent income</header><text>The term <quote>fixed percentage rent income</quote> means amounts described in subsection (d)(2)(A) which are based on a fixed percentage or
percentages of receipts or sales.</text>
</subparagraph><subparagraph id="H27C5BDCE23D849F9A33BD1E14CC808DD"><enum>(C)</enum><header>Fixed percentage interest income</header><text>The term <quote>fixed percentage interest income</quote> means amounts described in subsection (f)(1) which are based on a fixed percentage or percentages
of receipts or sales.</text>
</subparagraph></paragraph><paragraph id="H7C2BC27678964BA88FB4C8155A28E6AC"><enum>(3)</enum><header>Aggregation rule</header><text>Members of the same affiliated group (as defined in section 1504, applied by substituting <quote>50 percent</quote> for <quote>80 percent</quote> each place it appears therein) shall be treated as 1 corporation for purposes of paragraph (1).</text>
</paragraph><paragraph id="HF7B56DA43CFD4478AC1EC24482B61693"><enum>(4)</enum><header>Treatment of modifications</header><text>For purposes of paragraph (1), any material modification (including any extension of the term) of a
lease or debt instrument shall be treated as a new lease or debt
instrument, as the case may be, entered into on the date of such
modification.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H663F28A90C844470ABE3826B40452640"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years ending after December 31, 2014.</text>
</subsection></section><section id="H6F9620B350EB42CBA746FF0F89064AE5"><enum>3636.</enum><header>Repeal of preferential dividend rule for publicly offered REITs</header>
<subsection id="HA195C45483B441A49470A85DD3140351"><enum>(a)</enum><header>In general</header><text>Paragraph (1) of section 562(c), as amended by the preceding provisions of this Act, is amended by
inserting <quote>or a publicly offered REIT</quote> after <quote>a publicly offered regulated investment company</quote>.</text>
</subsection><subsection id="H1533739202F943CB87DD3202279E5CB2"><enum>(b)</enum><header>Publicly offered REIT</header><text>Subsection (c) of section 562, as so amended, is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H6AB076784761400690A7A8A38F7AB604" style="OLC">
<paragraph id="H3FCD264FB1D8405AB1E336D26C29362C"><enum>(3)</enum><header>Publicly offered REIT</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>publicly offered REIT</quote> means a real estate investment trust which is required to file annual and periodic reports with
the Securities and Exchange Commission under the Securities Exchange Act
of 1934.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H4A978F8276A24B26B35A5E833AD46D11"><enum>(c)</enum><header>Effective date</header><text>The amendment made by this section shall apply to distributions in taxable years beginning after
December 31, 2014.</text>
</subsection></section><section commented="no" id="HBE34C2FB287444C8BF04AD079D204D54"><enum>3637.</enum><header>Authority for alternative remedies to address certain REIT distribution failures</header>
<subsection commented="no" id="H3A5AEC3592ED481E97BD996A25989C8D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (e) of section 562 is amended—</text>
<paragraph id="H45747EB8EFE64DCCB798537CD67A2289"><enum>(1)</enum><text>by striking <quote>In the case of a real estate investment trust</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H2FBD808CC33841448C2D9326CFDE2CB9" style="OLC">
<paragraph id="HEF78F1BC5A644BFC91B27AF49508D98E"><enum>(1)</enum><header>Determination of earnings and profits for purposes of dividends paid deduction</header><text display-inline="yes-display-inline">In the case of a real estate investment trust</text></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</paragraph><paragraph id="HD5C882FD204B4FD8818F2EE8C6461E2C"><enum>(2)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H2462BC16AF444F108A6D89EE6E2ACA07" style="OLC">
<paragraph id="HBAD96754C24E4536A117AA276D1C6281"><enum>(2)</enum><header>Authority to provide alternative remedies for certain failures</header><text>In the case of a failure of a distribution by a real estate investment trust to comply with the
requirements of subsection (c), the Secretary may provide an appropriate
remedy to cure such failure in lieu of not considering the distribution to
be a dividend for purposes of computing the dividends paid deduction if—</text>
<subparagraph id="H1ECF453DA9DA4368A8C306A7069B2577"><enum>(A)</enum><text>the Secretary determines that such failure is inadvertent or is due to reasonable cause and not due
to willful neglect, or</text>
</subparagraph><subparagraph id="H156F3804B4194E85B2AE5814C01B6513"><enum>(B)</enum><text>such failure is of a type of failure which the Secretary has identified for purposes of this
paragraph as being described in subparagraph (A).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" id="H9F36AFFBF9DA45029D645D7E0579D22D"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to distributions in taxable years beginning after
December 31, 2014.</text>
</subsection></section><section id="H1C25CE83BFAB4F349F459F9ABD5E8368"><enum>3638.</enum><header>Limitations on designation of dividends by REITs</header>
<subsection id="H657493DC34074E50A75FF2974F55263C"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 857 is amended by redesignating subsection (g) as subsection (h) and by inserting after
subsection (f) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HE00658EF8149462C92A7CFE45626E93A" style="OLC">
<subsection id="HC7EA8EE36B9D4D31BF16063BD0AAE54C"><enum>(g)</enum><header>Limitations on designation of dividends</header>
<paragraph id="H7AC11BD3A54C42628E2B756824158DFA"><enum>(1)</enum><header>Overall limitation</header><text display-inline="yes-display-inline">The aggregate amount of dividends designated by a real estate investment trust under subsections
(b)(3)(C) and (c)(2)(A) with respect to any taxable year may not exceed
the dividends paid by such trust with respect to such year. For purposes
of the preceding sentence, dividends paid after the close of the taxable
year described in section 858 shall be treated as paid with respect to
such year.</text>
</paragraph><paragraph id="H3B0A7D545FE14D03AF0A849F8667B2B7"><enum>(2)</enum><header>Proportionality</header><text display-inline="yes-display-inline">The Secretary may prescribe regulations or other guidance requiring the proportionality of the
designation of particular types of dividends among shares or beneficial
interests of a real estate investment trust.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H6F8C4BB4BBAF4F41B002A780DE9C70DE"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to distributions in taxable years beginning after
December 31, 2014.</text>
</subsection></section><section id="HD401C86798764CCBA043EA814CD57B91"><enum>3639.</enum><header>Non-REIT earnings and profits required to be distributed by REIT in cash</header>
<subsection id="H129C7EA8866D4ECF967B11F4345D94BE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 857, as amended by the preceding provisions of this Act, is amended by redesignating
subsection (h) as subsection (i) and by inserting after subsection (g) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H9D5DF16959B74C3681A9EE0AC66D0AFD" style="OLC">
<subsection id="H1E41E7905FDE4D47AE806B78B36E2A5A"><enum>(h)</enum><header>Determination of earnings and profits accumulated in non-REIT years</header>
<paragraph id="H7B0377DE76384E958FD86FC81E4C38C0"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of subsection (a)(2)(B), distributions during the transition period shall be taken
into account in determining accumulated earning and profits only if such
distributions are made in cash.</text>
</paragraph><paragraph id="HD88B79286D984A20BD65253D1582EF7F"><enum>(2)</enum><header>Transition period</header><text>For purposes of this subsection, the term <quote>transition period</quote> means the period of taxable years beginning with the last taxable year (other than a short taxable
year) which was a non-REIT year (as defined in subsection (a)) and ending
with the first taxable year to which the provisions of this part apply.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HFB8C6E04D7594B48B72796AD52AE6AED"><enum>(b)</enum><header>Conforming amendment</header><text>Section 857(a)(2)(B) is amended by inserting <quote>(determined as provided in subsection (h))</quote> before the period at the end.</text>
</subsection><subsection id="H00218CF9852E4B8D96FE9D137BC1E199"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to distributions made on or after February 26,
2014.</text>
</subsection></section><section display-inline="no-display-inline" id="H1BCE3331B5704DC9A7B92C462E6F73B0" section-type="subsequent-section"><enum>3640.</enum><header>Debt instruments of publicly offered REITs and mortgages treated as real estate assets</header>
<subsection id="H9D63B14F99BE4FAF814061FE2633E276"><enum>(a)</enum><header>Debt instruments of publicly offered REITs treated as real estate assets</header>
<paragraph id="H8A2AB03CF12F4AB58250EED6843701DE"><enum>(1)</enum><header>In general</header><text>Subparagraph (B) of section 856(c)(5) is amended—</text>
<subparagraph id="H9A5468E1948D4164BC92442D8131A4A2"><enum>(A)</enum><text>by striking <quote>and shares</quote> and inserting <quote>, shares</quote>, and</text>
</subparagraph><subparagraph id="HE36A61519823443B9D9DF6AFBBC67764"><enum>(B)</enum><text>by inserting <quote>, and debt instruments issued by publicly offered REITs</quote> before the period at the end of the first sentence.</text>
</subparagraph></paragraph><paragraph id="HF4F170EFF8A84937B43BC996737CC573"><enum>(2)</enum><header>Income from nonqualified debt instruments of publicly offered REITs not qualified for purposes of
satisfying the 75 percent gross income test</header><text display-inline="yes-display-inline">Subparagraph (H) of section 856(c)(3) is amended by inserting <quote>(other than a nonqualified publicly offered REIT debt instrument)</quote> after <quote>real estate asset</quote>.</text>
</paragraph><paragraph commented="no" id="H3D79169065544304A1CDB67A56DC6B04"><enum>(3)</enum><header>25 percent asset limitation on holding of nonqualified debt instruments of publicly offered REITs</header><text>Subparagraph (B) of section 856(c)(4) is amended by redesignating clause (iii) as clause (iv) and
by inserting after clause (ii) the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="H12B7FA68517F4C3FAB8629DD765E5988" style="OLC">
<clause commented="no" id="H8DADDEF8BA4447B6A00645EFA11EBAC5"><enum>(iii)</enum><text display-inline="yes-display-inline">not more than 25 percent of the value of its total assets is represented by nonqualified publicly
offered REIT debt instruments, and</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H5E97163B446E4CBFBFD5692C6DDE7DD1"><enum>(4)</enum><header>Definitions related to debt instruments of publicly offered REITs</header><text>Paragraph (5) of section 856(c), as amended by the preceding provisions of this Act, is amended by
adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H1AF1D504642245F69CFDB7BD55A992D2" style="OLC">
<subparagraph commented="no" id="H1D3529455F1A43739AC1FD913E842A9A"><enum>(K)</enum><header>Definitions related to debt instruments of publicly offered REITs</header>
<clause commented="no" id="H52765C986502416D8E7B7557979AD5EE"><enum>(i)</enum><header>Publicly offered REIT</header><text>The term <quote>publicly offered REIT</quote> has the meaning given such term by section 562(c)(3).</text>
</clause><clause commented="no" id="HEEC0A6F512BA46F799ED754769F4F7A7"><enum>(ii)</enum><header>Nonqualified publicly offered REIT debt instrument</header><text>The term <quote>nonqualified publicly offered REIT debt instrument</quote> means any real estate asset which would cease to be a real estate asset if subparagraph (B) were
applied without regard to the reference to <quote>debt instruments issued by publicly offered REITs</quote>.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H79D6098D4E934C1CB0913E696B52F117"><enum>(b)</enum><header>Interests in mortgages on interests in real property treated as real estate assets</header><text>Subparagraph (B) of section 856(c)(5) is amended by inserting <quote>or on interests in real property</quote> after <quote>interests in mortgages on real property</quote>.</text>
</subsection><subsection id="HC36A6C5E23D34C5DA6B8604FC7939949"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H1430FAC33C3641E585E61847297688B7"><enum>3641.</enum><header>Asset and income test clarification regarding ancillary personal property</header>
<subsection id="HEC60EC231CD9422181CCBAB53E3C4C66"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (c) of section 856 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H908366627EC644CFAE3133F3B8592B35" style="OLC">
<paragraph id="HB95A712768DA4F938C89434EED8444B5"><enum>(9)</enum><header>Special rules for certain personal property which is ancillary to real property</header>
<subparagraph id="H6F712B59BA9949DAA6730E3E61502873"><enum>(A)</enum><header>Certain personal property leased in connection with real property</header><text display-inline="yes-display-inline">Personal property shall be treated as a real estate asset for purposes of paragraph (4)(A) to the
extent that rents attributable to such personal property are treated as
rents from real property under subsection (d)(1)(C).</text>
</subparagraph><subparagraph id="H5021D30CD1DC483581015226FEE9AC1A"><enum>(B)</enum><header>Certain personal property mortgaged in connection with real property</header><text display-inline="yes-display-inline">In the case of an obligation secured by a mortgage on both real property and personal property, if
the fair market value of such personal property does not exceed 15 percent
of the total fair market value of all such property, such personal
property shall be treated as real property for purposes of applying
paragraphs (3)(B) and (4)(A). For purposes of the preceding sentence, the
fair market value of all such property shall be determined in the same
manner as the fair market value of real property is determined for
purposes of apportioning interest income between real property and
personal property under paragraph (3)(B).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H1DE02ADB4AE143898EC3FE2AE060623F"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section commented="no" id="H46AB54ED737A4BD09321C3ACC94583E4"><enum>3642.</enum><header>Hedging provisions</header>
<subsection commented="no" id="H225988FD3CE44A619367CA6A4FEB4612"><enum>(a)</enum><header>Modification To permit the termination of a hedging transaction using an additional hedging
instrument</header><text display-inline="yes-display-inline">Subparagraph (G) of section 856(c)(5) is amended by striking <quote>and</quote> at the end of clause (i), by striking the period at the end of clause (ii) and inserting <quote>, and</quote>, and by adding at the end the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="H138C17792C284E3DAD23C601B812AD86" style="OLC">
<clause id="H42EDFAE884654A5AB53C69A080BB4EF1"><enum>(iii)</enum><text>if—</text>
<subclause id="H505B9D8A0F634BA0A83877312FB8A635"><enum>(I)</enum><text>a real estate investment trust enters into one or more positions described in clause (i) with
respect to indebtedness described in clause (i) or one or more positions
described in clause (ii) with respect to property which generates income
or gain described in paragraph (2) or (3),</text>
</subclause><subclause id="HFCEA67CE4E1B483FB866E98FE1F7BD8D"><enum>(II)</enum><text>any portion of such indebtedness is extinguished or any portion of such property is disposed of,
and</text>
</subclause><subclause id="H4B92EF546ADE4E04B030D417C60EF20C"><enum>(III)</enum><text>in connection with such extinguishment or disposition, such trust enters into one or more
transactions which would be hedging transactions described in subparagraph
(B) or (C) of section 1221(b)(2) with respect to any position referred to
in subclause (I) if such position were ordinary property,</text></subclause><continuation-text continuation-text-level="clause">any income of such trust from any position referred to in subclause (I) and from any transaction
referred to in subclause (III) (including gain from the termination of any
such position or transaction) shall not constitute gross income under
paragraphs (2) and (3) to the extent that such transaction hedges such
position.</continuation-text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HCC53D93017864948B6328536674F3B07"><enum>(b)</enum><header>Identification requirements</header>
<paragraph id="H19191A7A991E4D34B94C16B00995AB3F"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraph (G) of section 856(c)(5), as amended by subsection (a), is amended by striking <quote>and</quote> at the end of clause (ii), by striking the period at the end of clause (iii) and inserting <quote>, and</quote>, and by adding at the end the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="H8AD9CCD0A64840519E58253B174538A5" style="OLC">
<clause id="H81350366E89047529209EBAAF0A3CE38"><enum>(iv)</enum><text display-inline="yes-display-inline">clauses (i), (ii), and (iii) shall not apply with respect to any transaction unless such
transaction satisfies the identification requirement described in section
1221(b)(3)(A) (determined after taking into account any curative
provisions provided under the regulations referred to therein).</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H83E70C57E4EF4E1BADB74D53EF848AEE"><enum>(2)</enum><header>Conforming amendments</header><text>Subparagraph (G) of section 856(c)(5) is amended—</text>
<subparagraph commented="no" id="H77B080A6561E47FAA8FA5E82537E79D3"><enum>(A)</enum><text>by striking <quote>which is clearly identified pursuant to section 1221(a)(7)</quote> in clause (i), and</text>
</subparagraph><subparagraph commented="no" id="H74B65EE400A44F6A8B1E7DCC5852502A"><enum>(B)</enum><text>by striking <quote>, but only if such transaction is clearly identified as such before the close of the day on which
it was acquired, originated, or entered into (or such other time as the
Secretary may prescribe)</quote> in clause (ii).</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="H72170320A6FD4346999B6021922997D3"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HE7C69D00015F464C8DBED5868F7B9611"><enum>3643.</enum><header>Modification of REIT earnings and profits calculation to avoid duplicate taxation</header>
<subsection id="H7064581099A54E00B32C68F5CDCB4D59"><enum>(a)</enum><header>Earnings and profits not increased by amounts allowed in computing taxable income in prior years</header>
<paragraph id="HC8255E27C45E4AA4A3550CA95EE02CFC"><enum>(1)</enum><header>In general</header><text>Paragraph (1) of section 857(d) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H93E3758F1BF2483EBF842E86A073ADB5" style="OLC">
<paragraph id="H1BC503C97205408E801845993F79ED5D"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">The earnings and profits of a real estate investment trust for any taxable year (but not its
accumulated earnings) shall not be reduced by any amount which—</text>
<subparagraph id="HB14F6ACB358C460B881BC52D1768458F"><enum>(A)</enum><text>is not allowable in computing its taxable income for such taxable year, and</text>
</subparagraph><subparagraph id="H90FA04D39F514B3C98F59141FC68058D"><enum>(B)</enum><text>was not allowable in computing its taxable income for any prior taxable year.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HCA26E06AD27345859F25A3B0D365CB68"><enum>(2)</enum><header>Exception for purposes of determining dividends paid deduction</header><text>Paragraph (1) of section 562(e), as amended by the preceding provisions of this Act, is amended—</text>
<subparagraph id="H6353935AF4DB4ACE9157476C6ADF2AC1"><enum>(A)</enum><text>by striking <quote>deduction, the earnings</quote> and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="H72ED00C7E9684099B253F88AB2045FE5" style="OLC"><text>deduction—</text><subparagraph id="HCC778A9D5CC3463A8C3D1AF8776670CC"><enum>(A)</enum><text display-inline="yes-display-inline">the earnings</text></subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H19DAD8EAC080427387B8A36FC2EEE881"><enum>(B)</enum><text display-inline="yes-display-inline">by striking the period at the end and inserting <quote>, and</quote>, and</text>
</subparagraph><subparagraph id="H039889DDA8874DD2AAE7EF133FFCDBE4"><enum>(C)</enum><text>by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HFD9511C282724C1B8E12FF44EA24DA09" style="OLC">
<subparagraph id="H1288B3B2E14E4846BEA2FB09C0E66BE3"><enum>(B)</enum><text display-inline="yes-display-inline">section 857(d)(1) shall be applied without regard to subparagraph (B) thereof.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H076F2D1E8A834A98B6E469EADDC49137"><enum>(3)</enum><header>Conforming amendments</header><text display-inline="yes-display-inline">Subsection (d) of section 857 is amended by adding at the end the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="HCF332C16D8DE4C58B74C376B2C2656DB" style="OLC">
<paragraph id="H752301E41FA24B11B3DF6DE0DCE68421"><enum>(4)</enum><header>Real estate investment trust</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>real estate investment trust</quote> includes a domestic corporation, trust, or association which is a real estate investment trust
determined without regard to the requirements of subsection (a).</text>
</paragraph><paragraph id="H20F96657FE1A474883E02AA07EAB63AB"><enum>(5)</enum><header>Special rules for determining earnings and profits for purposes of the deduction for dividends paid</header><text>For special rules for determining the earnings and profits of a real estate investment trust for
purposes of the deduction for dividends paid, see section 562(e)(1).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" id="H11BB073FFE5140EBAB4AC18CA07719DE"><enum>(b)</enum><header>Treatment of gain on sales of real property</header><text display-inline="yes-display-inline">Subparagraph (A) of section 562(e)(1), as amended by the preceding provisions of this Act, is
amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H7109F83CC47A430AA99066AEA6851BA9" style="OLC">
<subparagraph id="H248629286784420D910FC08F5D789197"><enum>(A)</enum><text display-inline="yes-display-inline">the earnings and profits of such trust for any taxable year (but not its accumulated earnings)
shall be increased by the amount of gain (if any) on the sale or exchange
of real property which is taken into account in determining the taxable
income of such trust for such taxable year (and not otherwise taken into
account in determining such earnings and profits), and</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA81D86E237D74F009122E4B21F7C1986"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HFD46E10D64CC4D7CBB605C2E359D821F"><enum>3644.</enum><header>Reduction in percentage limitation on assets of REIT which may be taxable REIT subsidiaries</header>
<subsection id="HB6F365BCD6A14E989E78C4651B5C70A7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 856(c)(4)(B)(ii) is amended by striking <quote>25 percent</quote> and inserting <quote>20 percent</quote>.</text>
</subsection><subsection id="HB2932507ED3A4555A99C7B07F17750DE"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2016.</text>
</subsection></section><section id="HB04B28987BF3450985583E6EFDAF5DAE"><enum>3645.</enum><header>Treatment of certain services provided by taxable REIT subsidiaries</header>
<subsection id="HD5591F71A87B44819249F7902D12FD78"><enum>(a)</enum><header>Taxable REIT subsidiaries treated in same manner as independent contractors for certain purposes</header>
<paragraph id="H7265AF175621472C81FED48BBDAE0628"><enum>(1)</enum><header>Marketing and development expenses under rental property safe harbor</header><text display-inline="yes-display-inline">Clause (v) of section 857(b)(6)(C) is amended by inserting <quote>or by a taxable REIT subsidiary</quote> before the period at the end.</text>
</paragraph><paragraph id="H868C2E32A4F1475C880BCB8100BC7966"><enum>(2)</enum><header>Foreclosure property grace period</header><text display-inline="yes-display-inline">Subparagraph (C) of section 856(e)(4) is amended by inserting <quote>or through a taxable REIT subsidiary</quote> after <quote>receive any income</quote>.</text>
</paragraph></subsection><subsection commented="no" id="HA0E28D436B194AF1A2931231976B4CB4"><enum>(b)</enum><header>Tax on redetermined TRS service income</header>
<paragraph id="H24E39BBD144345DDB949CA808BC82454"><enum>(1)</enum><header>In general</header><text>Subparagraph (A) of section 857(b)(7) is amended by striking <quote>and excess interest</quote> and inserting <quote>excess interest, and redetermined TRS service income</quote>.</text>
</paragraph><paragraph id="H232FFE9039AA4379BA7D310CC6746763"><enum>(2)</enum><header>Redetermined TRS service income</header><text>Paragraph (7) of section 857(b) is amended by redesignating subparagraphs (E) and (F) as
subparagraphs (F) and (G), respectively, and inserting after subparagraph
(D) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HA91672EBB7324BF8B9344D6A27647A91" style="OLC">
<subparagraph id="H0AAE6BCC80DC4657A8AD6415DC355F3B"><enum>(E)</enum><header>Redetermined TRS service income</header>
<clause id="HAA7B351FBC664561B2E7FCB1BF7AA440"><enum>(i)</enum><header>In general</header><text>The term <quote>redetermined TRS service income</quote> means gross income of a taxable REIT subsidiary of a real estate investment trust attributable to
services provided to, or on behalf of, such trust (less deductions
properly allocable thereto) to the extent the amount of such income (less
such deductions) would (but for subparagraph (F)) be increased on
distribution, apportionment, or allocation under section 482.</text>
</clause><clause id="H8CB6957271F04E6DB379AABA7C7D3607"><enum>(ii)</enum><header>Coordination with redetermined rents</header><text>Clause (i) shall not apply with respect to gross income attributable to services furnished or
rendered to a tenant of the real estate investment trust (or to deductions
properly allocable thereto).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HE25CDF024C674E1EA71F872BFD2D140B"><enum>(3)</enum><header>Conforming amendments</header><text>Subparagraphs (B)(i) and (C) of section 857(b)(7) are each amended by striking <quote>subparagraph (E)</quote> and inserting <quote>subparagraph (F)</quote>.</text>
</paragraph></subsection><subsection id="H5BD521AC280840BBA063557175B773CA"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H88B15D0098E9416A94C8542B613B03EA"><enum>3646.</enum><header>Study relating to taxable REIT subsidiaries</header><text display-inline="no-display-inline">The Secretary of the Treasury (or the Secretary’s designee) shall, biannually—</text>
<paragraph id="H4E7E03777CB34C518198C799C0AEF7CA"><enum>(1)</enum><text>conduct a study to determine—</text>
<subparagraph id="H720EC1EB090F4B849BFFE034DFA31415"><enum>(A)</enum><text>how many taxable REIT subsidiaries are in existence and the aggregate amount of taxes paid by such
subsidiaries, and</text>
</subparagraph><subparagraph commented="no" id="H03BB0FE665A342708B6C9E1DDCFA0F37"><enum>(B)</enum><text>the amount by which transactions between a REIT and a taxable REIT subsidiary reduce taxable income
of the taxable REIT subsidiary (whether or not such transactions are
conducted at arms length), and</text>
</subparagraph></paragraph><paragraph id="H78093CB6A15148DEAE56AADB5E1CF7D9"><enum>(2)</enum><text display-inline="yes-display-inline">submit a report to the Committee on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate describing the results of such study.</text>
</paragraph></section><section id="HF1817532847E455AABE884FADFFCA927"><enum>3647.</enum><header>C corporation election to become, or transfer assets to, a RIC or REIT</header>
<subsection id="HFE1B0C0ED37044778FAC6980FD0DBBC2"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part IV of subchapter O of chapter 1, as amended by the preceding provisions of this Act, is
amended by redesignating section 1062 as section 1063 and by inserting
after section 1061 the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HD24EB9BFBC224E17AD1D59DF6E1D091A" style="OLC">
<section id="H904921E160A345FBAAAE87C1DFFE2D26"><enum>1062.</enum><header>Recognition of gain or loss upon C corporation election to become, or transfer assets to, a
regulated investment company or a real estate investment trust</header>
<subsection id="H3E09B5924F7445D9B74AD6B830AE0B59"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">If a C corporation elects to become a regulated investment company or a real estate investment
trust for a taxable year, such corporation shall recognize gain or loss as
if all its assets were sold by such corporation at their fair market value
immediately before the close of the last taxable year before such
corporation becomes a regulated investment company or real estate
investment trust (as the case may be).</text>
</subsection><subsection id="H05906DE2CDC844CFA144EE5594741626"><enum>(b)</enum><header>Application to transfers of assets</header><text display-inline="yes-display-inline">In the case of a C corporation which transfers to a regulated investment company or a real estate
investment trust one or more assets the basis of which is determined (in
whole or in part) by reference to the basis of such asset or assets in the
hands of the C corporation, such corporation shall recognize gain or loss
as if such assets were sold by such corporation at their fair market value
as of the end of the day before the day of the transfer.</text>
</subsection><subsection id="H9F414E79ACC24EC681A491995C9C7875"><enum>(c)</enum><header>Nonapplication to net loss</header><text display-inline="yes-display-inline">Subsections (a) and (b) shall not apply if their application would result in the recognition of a
net loss. For purposes of the preceding sentence, the term <quote>net loss</quote> means the excess of aggregate losses over aggregate gains (including items of income) without
regard to character.</text>
</subsection><subsection id="HAD3F4ECBCC94412EBB6744B9945E1987"><enum>(d)</enum><header>Basis adjustment</header><text>If any asset is treated as sold under subsection (a) or (b), the basis of such asset immediately
after such deemed sale shall be equal to the fair market value of such
asset as determined under such subsection.</text>
</subsection><subsection id="H7FE1E93C10A9434EA57249DDB371C8E4"><enum>(e)</enum><header>C corporation</header><text>For purposes of this section, the term <quote>C corporation</quote> does not include a regulated investment company or a real estate investment trust.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HDB3A7126C42C461EB83B85857A01A997"><enum>(b)</enum><header>Clerical amendment</header><text>The table of sections for part IV of subchapter O of chapter 1 is amended by redesignating the item
relating to section 1062 as an item relating to section 1063 and by
inserting after the item relating to section 1061 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H2C9A6E5D59B74A29962A281F9260A134" style="OLC">
<toc container-level="quoted-block-container" idref="HD24EB9BFBC224E17AD1D59DF6E1D091A" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H904921E160A345FBAAAE87C1DFFE2D26" level="section">Sec. 1062. Recognition of gain or loss upon C corporation election to become, or transfer assets
to, a regulated investment company or a real estate investment trust.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HAAE42C5FA6224AE2ACD0AEA8F0217A11"><enum>(c)</enum><header>Effective date</header><text>The amendment made by this section shall apply to elections and transfers on or after February 26,
2014.</text>
</subsection></section><section id="H9FBE499ED5154B188AA6ABE9B837DAD8"><enum>3648.</enum><header>Interests in RICs and REITs not excluded from definition of United States real property interests</header>
<subsection id="H24B8A642A286414485EC0A8182284203"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 897(c)(1)(B) is amended by striking <quote>and</quote> at the end of clause (i), by striking the period at the end of clause (ii)(II) and inserting <quote>, and</quote>, and by adding at the end the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="H5A9926D6F21E4987973F083D64DD2713" style="OLC">
<clause id="H3B8E8B7E3E2949BEA414532F581A94C3"><enum>(iii)</enum><text display-inline="yes-display-inline">neither such corporation nor any predecessor of such corporation was a regulated investment company
or a real estate investment company at any time during the period
described in subparagraph (A)(ii).</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBB1E42369F1F4C8D88DA2718F1320421"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to dispositions after December 31, 2014.</text>
</subsection></section><section id="HBDCDE8B50A8749D79B4969F9B8FCCB06"><enum>3649.</enum><header>Dividends derived from RICs and REITs ineligible for deduction for United States source portion of
dividends from certain foreign corporations</header>
<subsection id="H445D831E4F924E269853E27D84585621"><enum>(a)</enum><header>In general</header><text>Section 245(a) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HCA8B1CB19FD44B4687DAA5FCC3984F5E" style="OLC">
<paragraph id="HB4F59023390F4CA7B5BF30B3174FF184"><enum>(12)</enum><header>Dividends derived from RICs and REITs ineligible for deduction</header><text display-inline="yes-display-inline">Regulated investment companies and real estate investment trusts shall not be treated as domestic
corporations for purposes of paragraph (5)(B).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection display-inline="no-display-inline" id="HB9470E4F00964A098C22E6F81191A088"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to dividends received from regulated investment
companies and real estate investment trusts on or after February 26, 2014.</text>
</subsection></section></part><part id="H15B45CE4E8B44B40BC0B851ADE3AB4EA"><enum>4</enum><header>Personal holding companies</header>
<section id="H587C24A0708E4EB38AD8FDBE23EEB251"><enum>3661.</enum><header>Exclusion of dividends from controlled foreign corporations from the definition of personal holding
company income for purposes of the personal holding company rules</header>
<subsection id="H92F968A4B6F24F3295268855D2C54628"><enum>(a)</enum><header>In general</header><text>Paragraph (1) of section 543(a) is amended—</text>
<paragraph id="H011D870523CE41D4BDCA0FA54EC5D37E"><enum>(1)</enum><text>by redesignating subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively, and</text>
</paragraph><paragraph id="HC8574C50734441E584A8C495A687769A"><enum>(2)</enum><text>by inserting after subparagraph (B) the following:</text>
<quoted-block display-inline="no-display-inline" id="H196ECCB772E243BC8A19B167ADCF4806" style="OLC">
<subparagraph id="HEBA8238B0FD54887970A5F54D1510664"><enum>(C)</enum><text display-inline="yes-display-inline">dividends received by a United States shareholder (as defined in section 951(b)) from a controlled
foreign corporation (as defined in section 957(a)),</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HA05E38A241CA4E1A8A3E7C58CC68050C"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this Act shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></part></subtitle><subtitle id="H0676BC38241F485AB8F6834AA1A22FAA"><enum>H</enum><header>Taxation of foreign persons</header>
<section id="H1CA476503EE04EEF92BBE183D8BE27F5" section-type="subsequent-section"><enum>3701.</enum><header>Prevention of avoidance of tax through reinsurance with non-taxed affiliates</header>
<subsection commented="no" display-inline="no-display-inline" id="HC12CB816CB354A1191361EC8675BA884"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Part III of subchapter L of chapter 1 is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HCE1FC04D1EC64E9E9C11B884DFE075DC" style="OLC">
<section id="HFBF898C21EB347F794256EF975979F04"><enum>849.</enum><header>Special rules for reinsurance of non-life contracts with non-taxed affiliates</header>
<subsection id="H020F57548D9B4F5686F70A0DDE63B87D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">The taxable income under section 831(a) or the life insurance company taxable income under section
801(b) (as the case may be) of an insurance company shall be determined by
not taking into account—</text>
<paragraph id="H0C7FE57CC2A54E7F96926B6CC64D0055"><enum>(1)</enum><text>any non-taxed reinsurance premium,</text>
</paragraph><paragraph id="H35B0C754257B41FA8B435E8EAAC2791F"><enum>(2)</enum><text display-inline="yes-display-inline">any additional amount paid by such insurance company with respect to the reinsurance for which such
non-taxed reinsurance premium is paid, to the extent such additional
amount is properly allocable to such non-taxed reinsurance premium, and</text>
</paragraph><paragraph id="H513E532CFB134EF286F477763521032E"><enum>(3)</enum><text display-inline="yes-display-inline">any return premium, ceding commission, reinsurance recovered, or other amount received by such
insurance company with respect to the reinsurance for which such non-taxed
reinsurance premium is paid, to the extent such return premium, ceding
commission, reinsurance recovered, or other amount is properly allocable
to such non-taxed reinsurance premium.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H89FDF62DDFEC445DBB13838FA7BE0329"><enum>(b)</enum><header display-inline="yes-display-inline">Non-Taxed reinsurance premiums</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H3268E84861D94D54BB1BED4A75E0E2A0"><enum>(1)</enum><header>In general</header><text>The term <term>non-taxed reinsurance premium</term> means any reinsurance premium paid directly or indirectly to an affiliated corporation with
respect to reinsurance of risks (other than excepted risks), to the extent
that the income attributable to the premium is not subject to tax under
this subtitle (either as the income of the affiliated corporation or as
amounts included in gross income by a United States shareholder under
section 951).</text>
</paragraph><paragraph id="H1706C38B35DC4B579686082A447D12B2"><enum>(2)</enum><header>Excepted risks</header><text>The term <quote>excepted risks</quote> means any risk with respect to which reserves described in section 816(b)(1) are established.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H427D9EF3F0C34E96A2426FFF552FF3B7"><enum>(c)</enum><header display-inline="yes-display-inline">Affiliated corporations</header><text display-inline="yes-display-inline">For purposes of this section, a corporation shall be treated as affiliated with an insurance
company if both corporations would be members of the same controlled group
of corporations (as defined in section 1563(a)) if section 1563 were
applied—</text>
<paragraph id="HBE86C950A715491783025E95C8DED7F5"><enum>(1)</enum><text>by substituting <quote>at least 50 percent</quote> for <quote>at least 80 percent</quote> each place it appears in subsection (a)(1), and</text>
</paragraph><paragraph id="H01A1A6BDF235479090E6B47D26038D02"><enum>(2)</enum><text>without regard to subsections (a)(4), (b)(2)(C), (b)(2)(D), and (e)(3)(C).</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HEF995D7BA21B4C6F996D056FE25C3B4E"><enum>(d)</enum><header display-inline="yes-display-inline">Election To treat reinsurance income as effectively connected</header>
<paragraph commented="no" display-inline="no-display-inline" id="H7065D67B8EC14E9CA8156237DE6AAF43"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">A specified affiliated corporation may elect for any taxable year to treat specified reinsurance
income as—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HF317AF2B2FAD4733B54DB804B3DB17D6"><enum>(A)</enum><text display-inline="yes-display-inline">income effectively connected with the conduct of a trade or business in the United States, and</text>
</subparagraph><subparagraph id="H65AB01F13F0640358E80E2D8645818B3"><enum>(B)</enum><text>for purposes of any treaty between the United States and any foreign country, income attributable
to a permanent establishment in the United States.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="HD720A9018EDA4164BEA16584B5DA7326"><enum>(2)</enum><header display-inline="yes-display-inline">Effect of election</header><text display-inline="yes-display-inline">In the case of any specified reinsurance income with respect to which the election under this
subsection applies—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HC5A28CC601C94FEAA6FD033D3057C567"><enum>(A)</enum><header display-inline="yes-display-inline">Deduction allowed for reinsurance premiums</header><text display-inline="yes-display-inline">For exemption from subsection (a), see definition of non-taxed reinsurance premiums in subsection
(b).</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HD75EE301350049A08C27A9DF79DA913B"><enum>(B)</enum><header display-inline="yes-display-inline">Exception from excise tax</header><text display-inline="yes-display-inline">The tax imposed by section 4371 shall not apply with respect to any income treated as effectively
connected with the conduct of a trade or business in the United States
under paragraph (1).</text>
</subparagraph><subparagraph id="H7A2CE8FC71BE4DF59C914D070EA13977"><enum>(C)</enum><header>Taxation under this subchapter</header><text>Such income shall be subject to tax under this subchapter to the same extent and in the same manner
as if such income were the income of a domestic insurance company.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HEB83540C6655417D8FB7E22B7608FC2F"><enum>(D)</enum><header display-inline="yes-display-inline">Coordination with foreign tax credit provisions</header><text display-inline="yes-display-inline">For purposes of subpart A of part III of subchapter N and sections 78 and 960—</text>
<clause commented="no" display-inline="no-display-inline" id="H26E5A4BFCEC74C8588943707454C2AA4"><enum>(i)</enum><text display-inline="yes-display-inline">such specified reinsurance income shall be treated as derived from sources without the United
States, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H367E33C0AF444BE6BAF3B519FB2B2FAB"><enum>(ii)</enum><text display-inline="yes-display-inline">subsections (a), (b), and (c) of section 904, and section 960, shall be applied separately with
respect to each item of such income.</text></clause><continuation-text commented="no" continuation-text-level="subparagraph">The Secretary may issue regulations or other guidance which provide that related items of specified
reinsurance income may be aggregated for purposes of applying clause (ii).</continuation-text></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H61DE1D53A24D49BE868CC5E803D310BF"><enum>(3)</enum><header display-inline="yes-display-inline">Specified affiliated corporation</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <term>specified affiliated corporation</term> means any affiliated corporation which is a foreign corporation and which meets such requirements
as the Secretary shall prescribe to ensure that tax on the specified
reinsurance income of such corporation is properly determined and paid.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H66B4974B12794E868093E5A925300F9C"><enum>(4)</enum><header display-inline="yes-display-inline">Specified reinsurance income</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <term>specified reinsurance income</term> means all income of a specified affiliated corporation which is attributable to reinsurance with
respect to which subsection (a) would (but for the election under this
subsection) apply.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HC98C63304DCF44F5BCF97400C77306D0"><enum>(5)</enum><header display-inline="yes-display-inline">Rules related to election</header><text display-inline="yes-display-inline">Any election under paragraph (1) shall—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H0AAE95BB4F344A5294DE523A2EA06604"><enum>(A)</enum><text display-inline="yes-display-inline">be made at such time and in such form and manner as the Secretary may provide, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H93B0A829777145B0B99862A125D6DA53"><enum>(B)</enum><text display-inline="yes-display-inline">apply for the taxable year for which made and all subsequent taxable years unless revoked with the
consent of the Secretary.</text>
</subparagraph></paragraph></subsection><subsection id="HDFCC5D20D40249ECA0B0CC665633D1E5"><enum>(e)</enum><header>Exception for amounts subject to foreign tax</header><text display-inline="yes-display-inline">An amount shall not be treated as described in paragraph (1), (2), or (3) of subsection (a) if the
taxpayer demonstrates to the satisfaction of the Secretary that such
amount was subject to an effective rate of income tax imposed by a foreign
country which is not less than 100 percent of the maximum rate of tax
specified in section 11.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HA1F5264F405E4047BBC63CD901576952"><enum>(f)</enum><header display-inline="yes-display-inline">Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such regulations or other guidance as may be appropriate to carry
out, or to prevent the avoidance of the purposes of, this section,
including regulations or other guidance which provide for the application
of this section to alternative reinsurance transactions, fronting
transactions, conduit and reciprocal transactions, and any economically
equivalent transactions.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF00508056D124E578D9C1C1673FF71CA"><enum>(b)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for part III of subchapter L of chapter 1 is amended by adding at the end the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="H87C9A3DC857743AB87F6863C221E16DA" style="OLC">
<toc container-level="quoted-block-container" idref="HCE1FC04D1EC64E9E9C11B884DFE075DC" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HFBF898C21EB347F794256EF975979F04" level="section">Sec. 849. Special rules for reinsurance of non-life contracts with non-taxed affiliates.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HE2368FFD47C247F09459FAD2883FD1CB"><enum>(c)</enum><header display-inline="yes-display-inline">Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H9EB29C0A0400458AB6934D4FA0DC75D3"><enum>3702.</enum><header>Taxation of passenger cruise gross income of foreign corporations and nonresident alien individuals</header>
<subsection id="HBCA286111DFB473CB454B15103596428"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 882 is amended by redesignating subsection (f) as subsection (g) and by inserting after
subsection (e) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H1E645AD35A9845D6B01535EF52243A7D" style="OLC">
<subsection id="H154C77678681432E85781A796A1AAB57"><enum>(f)</enum><header>Treatment of passenger cruise gross income</header>
<paragraph id="H9F96180F78E14DC795FA175D411F9665"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this title, the effectively connected passenger cruise gross income of a foreign
corporation shall be treated as gross income which is effectively
connected with the conduct of a trade or business in the United States.</text>
</paragraph><paragraph id="H44661AE9005C440C83710DFEEDFFDD77"><enum>(2)</enum><header>Effectively connected passenger cruise gross income</header><text>For purposes of this subsection, the term <quote>effectively connected passenger cruise gross income</quote> means, with respect to the operation of any ship in a covered voyage, the United States
territorial waters percentage of the gross income (determined without
regard to section 883(a)(1)) derived from such operation, including any
amount received with respect to the provision of any on- or off-board
activities, services, or sales, with respect to passengers incidental to
such operation (or with respect to any agreement with any person with
respect to the provision of any such activities, services, or sales).</text>
</paragraph><paragraph id="H2898759E9345407BAEC55C98BA349A10"><enum>(3)</enum><header>United States territorial waters percentage</header><text>For purposes of this subsection—</text>
<subparagraph id="HB39F28AE6ED24F55A3877F5EDE0DC655"><enum>(A)</enum><header>In general</header><text>The term <quote>United States territorial waters percentage</quote> means, with respect to the operation of any ship in any covered voyage, the ratio (expressed as a
percentage) of—</text>
<clause id="H080E576B304B420F984863EC70083C4A"><enum>(i)</enum><text>the number of days during such voyage such ship was operated in the territorial waters of the
United States, divided by</text>
</clause><clause id="H84899CD03CB247CFAB99991D7F2C918D"><enum>(ii)</enum><text>the total number of days of such voyage.</text>
</clause></subparagraph><subparagraph id="H3C5B19FAEA11402998580D38D8359C1C"><enum>(B)</enum><header>Calendar day rule</header><text>If a ship—</text>
<clause id="HEA44C7615F1C42A688B3F5C68D54BAF7"><enum>(i)</enum><text>is operated in a covered voyage, or</text>
</clause><clause id="HC624CF05234E459694D941D890853BD1"><enum>(ii)</enum><text>is operated in the territorial waters of the United States during a covered voyage,</text></clause><continuation-text continuation-text-level="subparagraph">for any portion of a calendar day, such ship shall be treated as having operated in a covered
voyage, or as having operated in such territorial waters, respectively,
for the entirety of such day.</continuation-text></subparagraph><subparagraph id="H344E6C508D754B76A6D60FA7190F1101"><enum>(C)</enum><header>Territorial waters</header><text>The territorial waters of the United States shall be treated as consisting of those waters which
are—</text>
<clause id="HF7EADF664CAF4FA4BD4C2FBBFD52EA51"><enum>(i)</enum><text>within the international boundary line between the United States and any contiguous foreign
country, or</text>
</clause><clause id="H4FF7A4C9C4304032BABAADE2BCF9EE68"><enum>(ii)</enum><text>within 12 nautical miles from low tide on the coastline of the United States.</text>
</clause></subparagraph></paragraph><paragraph id="H90CB98B62C2B45F487820290FB3EDC5C"><enum>(4)</enum><header>Covered voyage</header><text>For purposes of this subsection—</text>
<subparagraph id="H4814E914FA1A4B24B1F228202A9FCAAF"><enum>(A)</enum><header>In general</header><text>The term <quote>covered voyage</quote> has the meaning given such term by section 4472(1).</text>
</subparagraph><subparagraph id="H3CE1CB452CD849D9BC919A20C7C496EA"><enum>(B)</enum><header>Anti-abuse rule</header><text>Except as otherwise provided by the Secretary, if passengers embark a ship in the United States and
more than 10 percent of such passengers disembark in the United States,
the operation of such ship at all times between such events shall be
treated as a covered voyage. Nothing in the preceding sentence shall
preclude any operation of a ship (including any operation of a ship before
or after such events) which would otherwise be treated as part of a
covered voyage from being so treated.</text>
</subparagraph></paragraph><paragraph id="H9E620582CDF7428DB709C16A28D6238E"><enum>(5)</enum><header>Treatment of otherwise effectively connected income</header><text>Gross income which would, without regard to this subsection, be gross income which is effectively
connected with the conduct of a trade or business in the United States—</text>
<subparagraph id="HF20A4FA8FA48478B85B635FF45CC57C6"><enum>(A)</enum><text>shall be so treated, and</text>
</subparagraph><subparagraph id="HB3D796B43CF64BEDB66ADDA0042E6D97"><enum>(B)</enum><text>shall not be taken into account as gross income under paragraph (2).</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H27CC839269F645AA8279CD5933C6E25E"><enum>(b)</enum><header>Application to nonresident alien individuals</header><text display-inline="yes-display-inline">Section 871 is amended by redesignating subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H904E5CAB39C943FFAFC5817429580B4B" style="OLC">
<subsection id="HBF7A1790924142AA9A350B33C5D455F2"><enum>(n)</enum><header>Treatment of passenger cruise gross income</header>
<paragraph id="H4331BB2137874F779EEAB03B2D6101AB"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this title, the effectively connected passenger cruise gross income of a
nonresident alien individual shall be treated as gross income which is
effectively connected with the conduct of a trade or business in the
United States.</text>
</paragraph><paragraph id="HFCB9ABC92B86485D9ED9D08AA9723C86"><enum>(2)</enum><header>Definitions and special rules</header><text>For purposes of this subsection—</text>
<subparagraph id="HC13BC01F1AD24FF18CFF467D0F97F485"><enum>(A)</enum><header>Definitions</header><text>Terms used in this subsection which are also used in section 882(f) shall have the same meaning as
when used in such section, except that section 882(f)(2) shall be applied
by substituting <quote>section 872(b)(1)</quote> for <quote>section 883(a)(1)</quote>.</text>
</subparagraph><subparagraph id="H4F9EBD7DE5034D14B8B4B8B1EF3D2FC6"><enum>(B)</enum><header>Treatment of otherwise effectively connected income</header><text>Rules similar to the rules of section 882(f)(5) shall apply for purposes of this subsection.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HADDFEDF9386C4908B1915AEF3BB97ECC"><enum>(c)</enum><header>Coordination with reciprocal exemptions for shipping income</header>
<paragraph id="H9186643EDDD04E12818309A518F3B4C0"><enum>(1)</enum><header>In general</header><text>Section 883(a)(1) is amended by striking <quote>Gross income</quote> and inserting <quote>Except as provided in section 882(f), gross income</quote>.</text>
</paragraph><paragraph id="H5330E4822BD448D2980FDDC11E4D4A29"><enum>(2)</enum><header>Nonresident alien individuals</header><text>Section 872(b)(1) is amended by striking <quote>Gross income</quote> and inserting <quote>Except as provided in section 871(n), gross income</quote>.</text>
</paragraph></subsection><subsection id="H6A802FA677204D5DA364247BECC7295C"><enum>(d)</enum><header>Coordination with tax on gross transportation income</header><text>Section 887(b)(4) is amended by adding at the end the following new flush text:</text>
<quoted-block display-inline="no-display-inline" id="HB823909BDAF84F0EB47085871045A7E3" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="paragraph">The preceding sentence shall not apply to any United States source gross transportation income
which is effectively connected passenger cruise gross income (within the
meaning of section 871(n) or 882(f)).</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H6AD49B0DEC234195BBC2989CE62AB7E8"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H58AFC7F7C6014A6EBF3C8373B119D084"><enum>3703.</enum><header>Restriction on insurance business exception to passive foreign investment company rules</header>
<subsection id="HE139E96D287D4A4C9B4D98E21F4AF788"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 1297(b)(2)(B) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HFAE92EF2536E4332B1740BCE8EF5D47C" style="OLC">
<subparagraph id="H4C0E2B5DF9164BC3A4EE491A4669B4C6"><enum>(B)</enum><text display-inline="yes-display-inline">derived in the active conduct of an insurance business by a corporation if—</text>
<clause id="H1B59034A0B614E9BBF9300A366D2E00E"><enum>(i)</enum><text>such corporation would be subject to tax under subchapter L if such corporation were a domestic
corporation,</text>
</clause><clause id="H1BD7D504499E4BA6ACD6599910F61C6F"><enum>(ii)</enum><text>more than 50 percent of such corporation’s gross receipts for the taxable year consist of premiums,
and</text>
</clause><clause id="HB9CD43E5D5B74D00AAB4B0B9F378EF91"><enum>(iii)</enum><text display-inline="yes-display-inline">the applicable insurance liabilities of such corporation constitute more than 35 percent of its
total assets as reported on the corporation’s applicable financial
statement for the year with which or in which the taxable year ends,</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD11037C8F5164E95BCA76BE982E0387C"><enum>(b)</enum><header>Applicable insurance liabilities; applicable financial statement</header>
<paragraph id="HACE844A11F70477196CFBDEB420523E6"><enum>(1)</enum><header>In general</header><text>Section 1297(b) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H88DA81599BE341CFACD09C1BC9EC7956" style="OLC">
<paragraph id="H2332CD0961EF45FD8EB436BEB12F0AD7"><enum>(3)</enum><header>Definitions</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="HAE59EF8FC9774FDE8441150EE2A2CD16"><enum>(A)</enum><header>Applicable insurance liabilities</header><text display-inline="yes-display-inline">The term <quote>applicable insurance liabilities</quote> means, with respect to any life or property and casualty insurance business—</text>
<clause id="H42DAAA4C20094E9BB6ECA2B1F2F9E00F"><enum>(i)</enum><text>loss and loss adjustment expenses,</text>
</clause><clause id="H0D89A79279584ED298BE5159C087ED83"><enum>(ii)</enum><text>unearned premiums, and</text>
</clause><clause id="HFB32F5AA635F4A69B3E4537E5CEF6116"><enum>(iii)</enum><text>reserves (other than deficiency or contingency reserves) for life and health insurance risks and
life and health insurance claims with respect to contracts providing
coverage for mortality or morbidity risks (not to exceed the amount of
such reserve that is required to be reported to the home country insurance
regulatory body).</text>
</clause></subparagraph><subparagraph id="H8DDBCDCCDDC24C1B8315B99BBC729827"><enum>(B)</enum><header>Applicable financial statement</header><text>The term <quote>applicable financial statement</quote> means a statement for financial reporting purposes which—</text>
<clause id="H0E020ACD23684F1D9FF39C0FCA9AC0D6"><enum>(i)</enum><text>is made on the basis of generally accepted accounting principles,</text>
</clause><clause id="H9081EE098E8A4F0298C71A3B9F77ED4B"><enum>(ii)</enum><text>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</text>
</clause><clause id="H97D026A66DBB404D89B45F4663F164B8"><enum>(iii)</enum><text>except as otherwise provided by the Secretary in regulations, is the annual statement which is
required to be filed with the home country insurance regulatory body, but
only if there is no statement which meets the requirements of clause (i)
or (ii).</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H057486A1404845EA98BD6635A45BC32D"><enum>(2)</enum><header>Conforming amendment</header><text>Section 1297(b) is amended—</text>
<subparagraph id="H86D0F9531E1D4B1DBD4731446BE2584E"><enum>(A)</enum><text>by striking the last sentence in paragraph (2) thereof, and</text>
</subparagraph><subparagraph id="HD07504998BBB49C68B027D4B4980BB7D"><enum>(B)</enum><text>by adding at the end of paragraph (3) thereof (as added by paragraph (1)), the following new
subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HB41A9E170EA743528E4C844C73DEF3B9" style="OLC">
<subparagraph id="HCA91804D61634599AA218549EA1807F2"><enum>(C)</enum><header>Related person</header><text display-inline="yes-display-inline">The term <quote>related person</quote> has the meaning given such term by section 954(d)(3) determined by substituting <quote>foreign corporation</quote> for <quote>controlled foreign corporation</quote> each place it appears therein.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="H44EE2C816CAB4D92908CEEDE8EB592AE"><enum>(c)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HB795C94AEA704D1CA19779AA780E64A8"><enum>3704.</enum><header>Modification of limitation on earnings stripping</header>
<subsection id="HAE962C35A55145B7B94A11C75F2FD463"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 163(j)(2)(B)(i)(II) is amended by striking <quote>50 percent</quote> and inserting <quote>40 percent</quote>.</text>
</subsection><subsection id="H930632DBADD04AD6A7042B47F6F5E315"><enum>(b)</enum><header>No new excess limitation carryforwards</header><text>Section 163(j)(2)(B)(ii) is amended by striking <quote>for any taxable year</quote> and inserting <quote>for any taxable year beginning before January 1, 2015</quote>.</text>
</subsection><subsection id="HA4E1D476317B4ACAB2C9BB36FAE6A94B"><enum>(c)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section display-inline="no-display-inline" id="H1B4BDA51CEE8433D96D431B59423F009"><enum>3705.</enum><header>Limitation on treaty benefits for certain deductible payments</header>
<subsection id="HB8E6A8E880A94B62AEF34D19A7293F52"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/894">Section 894</external-xref> of the Internal Revenue Code of 1986 (relating to income affected by treaty) is amended
by adding at the end the following new subsection:</text>
<quoted-block id="HBC534C17EC71485BBC8EA7F01DA7D296">
<subsection id="HA1FCFE15E89E4E328EC393E08D8DCF3A"><enum>(d)</enum><header>Limitation on treaty benefits for certain deductible payments</header>
<paragraph id="H8D9FD5256565466C9F3BDEA50EBF83FB"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">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.</text>
</paragraph><paragraph id="HFBED0343112E4D68ACC68573C9F1426C"><enum>(2)</enum><header>Deductible related-party payment</header><text>For purposes of this subsection, the term <term>deductible related-party payment</term> 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.</text>
</paragraph><paragraph id="HA4E18901ACFD4CBA9AAB4EE9197A94A6"><enum>(3)</enum><header>Foreign controlled group of entities</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="HA69BA7BC309B43B7A5C93EC1D9B17242"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <term>foreign controlled group of entities</term> means a controlled group of entities the common parent of which is a foreign corporation.</text>
</subparagraph><subparagraph id="H21092C06FC8E41529E5FD3D149199801"><enum>(B)</enum><header>Controlled group of entities</header><text display-inline="yes-display-inline">The term <term>controlled group of entities</term> means a controlled group of corporations as defined in section 1563(a)(1), except that—</text>
<clause id="H37C9F2024A1E4AA7A5F5AAAB469DE30E"><enum>(i)</enum><text><quote>more than 50 percent</quote> shall be substituted for <quote>at least 80 percent</quote> each place it appears therein, and</text>
</clause><clause id="H98E620B369724251850AB7C76931992C"><enum>(ii)</enum><text>the determination shall be made without regard to subsections (a)(4) and (b)(2) of section 1563.</text></clause><continuation-text continuation-text-level="subparagraph">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).</continuation-text></subparagraph></paragraph><paragraph id="HAE542122521042C38326D5776F21CE2D"><enum>(4)</enum><header>Foreign parent corporation</header><text>For purposes of this subsection, the term <term>foreign parent corporation</term> 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).</text>
</paragraph><paragraph id="H64F43E95EF7F4D85B514CADAF7DCBFBC"><enum>(5)</enum><header>Regulations</header><text>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—</text>
<subparagraph id="H0A2E4843F85F4610AE96356E123E16C5"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="H95ACA6C09E0D4FCCAC2DA946776A20F1"><enum>(B)</enum><text>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.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H7B4F1E41B5BF4861B454BFE4A15C787F"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to payments made after the date of the enactment of
this Act.</text>
</subsection></section></subtitle><subtitle id="H89A75E09E8C145CD90BC00939559E516"><enum>I</enum><header>Provisions related to compensation</header>
<part id="H1F4947C4B99245B4AEB737D54EA87634"><enum>1</enum><header>Executive compensation</header>
<section display-inline="no-display-inline" id="H0F6955ED516A432B991F53B6181EE7FA"><enum>3801.</enum><header>Nonqualified deferred compensation</header>
<subsection id="HDEE614F7281E4C6C93DA82415BE6583F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart A of part I of subchapter D of chapter 1 is amended by adding at the end the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="HDA4EB585BE96461CACF4ABE6BF5397FC" style="OLC">
<section id="HB3662CF7B2374BBD9EE97AF35347F3C7"><enum>409B.</enum><header>Nonqualified deferred compensation</header>
<subsection id="H02C915007BB84A3F867B2386F13F168A"><enum>(a)</enum><header>In general</header><text>Any compensation which is deferred under a nonqualified deferred compensation plan shall be
includible in gross income when there is no substantial risk of forfeiture
of the rights to such compensation.</text>
</subsection><subsection id="H56BC044623414AA2ABD4CC023987A727"><enum>(b)</enum><header>Definitions</header><text>For purposes of this section—</text>
<paragraph id="H7AC9E08EEE8E4E4B9286AC4068482BC8"><enum>(1)</enum><header>Substantial risk of forfeiture</header><text>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
individual.</text>
</paragraph><paragraph id="H1EB5B1FC0671466D9C0832AAA2FDA471"><enum>(2)</enum><header>Nonqualified deferred compensation plan</header><text>For purposes of this section:</text>
<subparagraph id="H2177746D81434FD28AA296587AA398AA"><enum>(A)</enum><header>Nonqualified deferred compensation plan</header><text>The term <quote>nonqualified deferred compensation plan</quote> means any plan that provides for the deferral of compensation, other than—</text>
<clause id="H5E2FD7E252294872BD600E1ED755AF1A"><enum>(i)</enum><text>a qualified employer plan,</text>
</clause><clause id="H3ED62BB1851344DC89CED8570E5C47EB"><enum>(ii)</enum><text>any bona fide vacation leave, sick leave, compensatory time, disability pay, or death benefit plan,
and</text>
</clause><clause id="H4D78EBE0290A4C7DB5B4942541E54119"><enum>(iii)</enum><text>any other plan or arrangement designated by the Secretary consistent with the purposes of this
section.</text>
</clause></subparagraph><subparagraph id="H7030E7CAC2374A0285D1896B14A2827A"><enum>(B)</enum><header>Equity-based compensation</header><text>The term <quote>nonqualified deferred compensation plan</quote> shall include any plan that provides a right to compensation based on the appreciation in value of
a specified number of equity units of the service recipient or stock
options.</text>
</subparagraph></paragraph><paragraph id="H06CC1F830CA145BE80FDDF5F600A4E31"><enum>(3)</enum><header>Qualified employer plan</header><text>The term <quote>qualified employer plan</quote> means any plan, contract, pension, account, or trust described in 408(p)(2)(D)(ii).</text>
</paragraph><paragraph id="HF28884547E9144B18A71377662076841"><enum>(4)</enum><header>Plan includes arrangements, etc</header><text>The term <quote>plan</quote> includes any agreement or arrangement, including an agreement or arrangement that includes one
person.</text>
</paragraph><paragraph id="HAD51CFBD4D584759B29CE2ABAA8DDB26"><enum>(5)</enum><header>Exception</header><text>Compensation shall not be treated as deferred for purposes of this section if the service provider
receives payment of such compensation not later than 6 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.</text>
</paragraph><paragraph id="HCE267341A59F4E27A43264508FD13515"><enum>(6)</enum><header>Treatment of earnings</header><text>References to deferred compensation shall be treated as including references to income (whether
actual or notional) attributable to such compensation or such income.</text>
</paragraph><paragraph id="HEC4E086482CD4B2EAF5A7E3C930F36D5"><enum>(7)</enum><header>Aggregation rules</header><text>Except as provided by the Secretary, rules similar to the rules of subsections (b) and (c) of
section 414 shall apply.</text>
</paragraph></subsection><subsection id="HEFB5D71D9F884D398F5D31C6FAF5EEDA"><enum>(c)</enum><header>No inference on earlier income inclusion or requirement of later inclusion</header><text>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.</text>
</subsection><subsection id="HD3942191CF2C442B875342E068D65733"><enum>(d)</enum><header>Regulations</header><text>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.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H12EA9773A905407180B011ADC490016E"><enum>(b)</enum><header>Termination of certain other nonqualified deferred compensation rules</header>
<paragraph id="HE1E1A5973803420B99453402908BF5BD"><enum>(1)</enum><header>Nonqualified deferred compensation</header>
<subparagraph id="HF7727770BC984CB8AAB10F86165C510E"><enum>(A)</enum><header>In general</header><text>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).</text>
</subparagraph><subparagraph id="HBEB5DB3C166E457CB7DA97D227E43236"><enum>(B)</enum><header>Conforming amendments</header>
<clause id="H8A2F2A4353D640B1B1464BCA0CC24D4C"><enum>(i)</enum><text>Section 26(b)(2) is amended by striking subparagraph (V).</text>
</clause><clause id="H6B87B67A1E3741B182D834DE947D615B"><enum>(ii)</enum><text>Section 3401(a) is amended by striking the flush sentence at the end.</text>
</clause><clause id="H3DC955B583DB4CA98E75D1AE772C46F5"><enum>(iii)</enum><text>Section 6041 is amended by striking subsection (g).</text>
</clause><clause id="H36C1FB915A91448FA593EBCC3C55C6DB"><enum>(iv)</enum><text>Section 6051(a), as amended by the preceding provisions of this Act, is amended by striking
paragraph (12), by inserting <quote>and</quote> at the end of paragraph (11), and by redesignating paragraph (13) as paragraph (12).</text>
</clause></subparagraph></paragraph><paragraph id="H707B8BA79A20488BA2C64E09FC7F105F"><enum>(2)</enum><header><enum-in-header>457(b)</enum-in-header> plans of tax exempt organizations</header><text>Section 457 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H4DCDF762B69F4971ADBDDF0692CD14EC" style="OLC">
<subsection id="H32C6039C51774F8788C51F7FA4F0F960"><enum>(h)</enum><header>Termination of certain plans</header>
<paragraph id="HE3E20C9CFFCE4188B8C5AB17F31BC0C4"><enum>(1)</enum><header>Tax-exempt organization plans</header><text>This section shall not apply to amounts deferred which are attributable to services performed after
December 31, 2014, under a plan maintained by an employer described in
subsection (e)(1)(B).</text>
</paragraph><paragraph id="H009A0F2AC184419F8BC401E9F4EFB3BF"><enum>(2)</enum><header>Ineligible deferred compensation plans</header><text>Subsection (f) shall not apply to amounts deferred which are attributable to services performed
after December 31, 2014.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H338758FFC4DD4206B1B2FE3C3DB3C479"><enum>(3)</enum><header>Nonqualified deferred compensation from certain tax indifferent parties</header>
<subparagraph id="HA1DF1B8F53A7491D88F486FAFE8215E8"><enum>(A)</enum><header>In general</header><text>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).</text>
</subparagraph><subparagraph id="H9063F58827AC49888317595B9362A3EB"><enum>(B)</enum><header>Conforming amendment</header><text>Section 26(b)(2) is amended by striking subparagraph (X).</text>
</subparagraph></paragraph></subsection><subsection id="H16100CB9361D473897EA98C7CB72435B"><enum>(c)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for part I of subchapter D of chapter 1 is amended by adding at the end the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="H608CDC891F8B4F1FA5E709A2D9EDEED7" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 409B. Nonqualified deferred compensation.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HEE95E23011DB43B58478768C73BD1C66"><enum>(d)</enum><header>Effective date</header>
<paragraph id="HFEBCF2814C9B4AA398C2C8EA902CBB4C"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as otherwise provided in this subsection, the amendments made by this section shall apply to
amounts which are attributable to services performed after December 31,
2014.</text>
</paragraph><paragraph id="HEF9DDA019C6547C8BD956B6A019E5EF0"><enum>(2)</enum><header>Application to existing deferrals</header><text display-inline="yes-display-inline">In the case of any amount deferred to which the amendments made by this section do no apply solely
by reason of the fact that the amount is attributable to services
performed before January 1, 2015, to the extent such amount is not
includible in gross income in a taxable year beginning before 2023, such
amounts shall be includible in gross income in the later of—</text>
<subparagraph id="HBDB301667C0C414BB818F196FF2AF87D"><enum>(A)</enum><text display-inline="yes-display-inline">the last taxable year beginning before 2023, or</text>
</subparagraph><subparagraph id="H72C5A4FA899349C08C5513AFB6F88C94"><enum>(B)</enum><text>the taxable year in which there is no substantial risk of forfeiture of the rights to such
compensation (determined in the same manner as determined for purposes of
<external-xref legal-doc="usc" parsable-cite="usc/26/409B">section 409B</external-xref> of the Internal Revenue Code of 1986, as added by this
section).</text>
</subparagraph></paragraph><paragraph id="HC6A02245813F4046A0C89EFDC77F7844"><enum>(3)</enum><header>Accelerated payments</header><text display-inline="yes-display-inline">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, 2014, may, without violating the requirements of
<external-xref legal-doc="usc" parsable-cite="usc/26/409A">section 409A</external-xref> 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.</text>
</paragraph><paragraph id="H4538DC3D4E204E82A67AC5DDACD8256A"><enum>(4)</enum><header>Certain back-to-back arrangements</header><text>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, 2014, 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.</text>
</paragraph><paragraph id="H846FC2E29F1E47359DAE3FE8C8EE1FFB"><enum>(5)</enum><header>Accelerated payment not treated as material modification</header><text>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 <external-xref legal-doc="usc" parsable-cite="usc/26/409A">section 409A</external-xref> of the Internal Revenue Code of 1986.</text>
</paragraph></subsection></section><section id="HD41CDA4A98114714AFA8F2D0C20C0F1A" section-type="subsequent-section"><enum>3802.</enum><header>Modification of limitation on excessive employee remuneration</header>
<subsection id="H8F645D743D4E4741B8C5AFE682F96417"><enum>(a)</enum><header>Repeal of performance-Based compensation and commission exceptions for limitation on excessive
employee remuneration</header>
<paragraph id="H7171BDC82F4C438A988A837A2AF6B799"><enum>(1)</enum><header>In general</header><text>Paragraph (4) of section 162(m) 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.</text>
</paragraph><paragraph id="HD89F38C20E11488F9D720758AC536D66"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="H5B27130133EB4E88B319E840E6E09F9A"><enum>(A)</enum><text>Paragraphs (5)(E) and (6)(D) of section 162(m) are each amended by striking <quote>subparagraphs (B), (C), and (D)</quote> and inserting <quote>subparagraph (B)</quote>.</text>
</subparagraph><subparagraph id="HBC50E03CB54C43C5ADC57DD733F3C85B"><enum>(B)</enum><text>Paragraphs (5)(G) and (6)(G) of section 162(m) are each amended by striking <quote>(F) and (G)</quote> and inserting <quote>(D) and (E)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H11BE029FF891447F98E49F819072CA79"><enum>(b)</enum><header>Modification of definition of covered employees</header><text>Paragraph (3) of section 162(m) is amended—</text>
<paragraph id="H413809C2962948DEA41D416703634B6D"><enum>(1)</enum><text>in subparagraph (A), by striking <quote>as of the close of the taxable year, such employee is the chief executive officer of the taxpayer
or is</quote> and inserting <quote>such employee is the chief executive officer or the chief financial officer of the taxpayer at any
time during the taxable year, or was</quote>,</text>
</paragraph><paragraph id="HA0FCB9D922984B03A548D048E8E022EE"><enum>(2)</enum><text>in subparagraph (B)—</text>
<subparagraph id="HC603264A8A4446C9B618F6313744866A"><enum>(A)</enum><text>by striking <quote>4</quote> and inserting <quote>3</quote>, and</text>
</subparagraph><subparagraph id="H66C6CBC9F5E043D6A39655413F93B2BB"><enum>(B)</enum><text>by striking <quote>(other than the chief executive officer)</quote> and inserting <quote>(other than any individual described in subparagraph (A))</quote>, and</text>
</subparagraph></paragraph><paragraph id="HD1CA939CB3D2462D9654904583FF387D"><enum>(3)</enum><text>by striking <quote>or</quote> at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and
inserting <quote>, or</quote>, and by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="H42042D7550B84155B15099EFDD70DE02" style="OLC">
<subparagraph id="HE12B8AF6D5DE45EFBF39AB3140948E63"><enum>(C)</enum><text display-inline="yes-display-inline">was a covered employee of the taxpayer (or any predecessor) for any preceding taxable year
beginning after December 31, 2013.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H09FA144197FD4561AA5C64C649918072"><enum>(c)</enum><header>Special rule for remuneration paid to beneficiaries, etc</header><text>Paragraph (4) of section 162(m), as amended by subsection (a), is amended by adding at the end the
following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H8D01F9BF7EF84B5DAA569B8AF98590AF" style="OLC">
<subparagraph id="H63F22CE7CF9C4F198799579BD04283EA"><enum>(F)</enum><header>Special rule for remuneration paid to beneficiaries, etc</header><text display-inline="yes-display-inline">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.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H7832E51469AE45BB8E9DB82E9C91CB31"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H7724413B6755472C837A3535B22BE11E"><enum>3803.</enum><header>Excise tax on excess tax-exempt organization executive compensation</header>
<subsection id="H1FB9048ADECC4199B0B25F36CE484BE2"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter D of chapter 42 is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H83EC38581186422F8450EF75E3F91333" style="OLC">
<section id="H9213AFF267604AB39CFFCCCE16DB3E7D"><enum>4960.</enum><header>Tax on excess tax-exempt organization executive compensation</header>
<subsection id="HCD76678BBEC747FB95DF1DEF2532B7C1"><enum>(a)</enum><header>Tax imposed</header><text display-inline="yes-display-inline">There is hereby imposed a tax equal to 25 percent of the sum of—</text>
<paragraph id="HD4D2AB076C68485D8EEDDDBB48594076"><enum>(1)</enum><text>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</text>
</paragraph><paragraph id="H8859524815F64B94A1F2282A96FDCCDB"><enum>(2)</enum><text>any excess parachute payment paid by such an organization to any covered employee.</text>
</paragraph></subsection><subsection id="H12C53571770A498A985A2C27936C712E"><enum>(b)</enum><header>Liability for tax</header><text display-inline="yes-display-inline">The employer shall be liable for the tax imposed under subsection (a).</text>
</subsection><subsection id="H0E24098A5A5A41B9BD77A131FF313B66"><enum>(c)</enum><header>Definitions and special rules</header><text>For purposes of this section—</text>
<paragraph display-inline="no-display-inline" id="H3993699742A04A9996BC6F26993DC3BE"><enum>(1)</enum><header>Applicable tax-exempt organization</header><text>The term <quote>applicable tax-exempt organization</quote> means any organization that for the taxable year—</text>
<subparagraph id="H97E8D6BCD1614F4E946A8EAEF113591C"><enum>(A)</enum><text>is exempt from taxation under section 501(a),</text>
</subparagraph><subparagraph id="HE29CD3AC377C4AACA7FAF75CA4206D09"><enum>(B)</enum><text>is a farmers’ cooperative organization described in section 521(b)(1), or</text>
</subparagraph><subparagraph id="HD1503FEF61F8427B985C1742AB956C65"><enum>(C)</enum><text display-inline="yes-display-inline">has income excluded from taxation under section 115(1).</text>
</subparagraph></paragraph><paragraph id="H0B24C36C347A4457B1FE01CDEA7D4627"><enum>(2)</enum><header>Covered employee</header><text>For purposes of this section, the term <quote>covered employee</quote> means any employee (including any former employee) of an applicable tax-exempt organization if the
employee—</text>
<subparagraph id="H0E95C752603E42319B2A69403E87574F"><enum>(A)</enum><text>is one of the 5 highest compensated employees of the organization for the taxable year, or</text>
</subparagraph><subparagraph id="H7A92BFB0740049AE8104C58BA83EB870"><enum>(B)</enum><text>was a covered employee of the organization (or any predecessor) for any preceding taxable year
beginning after December 31, 2013.</text>
</subparagraph></paragraph><paragraph id="HA5A60156F89A4EC0AA3DC51ACCD8B4CC"><enum>(3)</enum><header>Remuneration</header><text>For purposes of this section, the term <quote>remuneration</quote> 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)).</text>
</paragraph><paragraph id="H6B7AABD9E2FB40EF9700E62AF4782CB5"><enum>(4)</enum><header>Remuneration from related organizations</header>
<subparagraph id="HFFD6AAC81A514F38AB7CB89A399165F9"><enum>(A)</enum><header>In general</header><text>Remuneration of a covered employee 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.</text>
</subparagraph><subparagraph id="H866CE694F4664423A559441BEE3FB828"><enum>(B)</enum><header>Related organizations</header><text>A person or governmental entity shall be treated as related to an applicable tax-exempt
organization if such person or governmental entity—</text>
<clause id="H974803AB3CB042AB8EA1836F65D8786A"><enum>(i)</enum><text>controls, or is controlled by, the organization,</text>
</clause><clause id="H586D9B8E497146128017060A8F2C7ED5"><enum>(ii)</enum><text>is controlled by one or more persons that control the organization,</text>
</clause><clause id="H94987BCDE5224472B4CE02CA6BA9866C"><enum>(iii)</enum><text>is a supported organization (as defined in section 509(f)(2)) during the taxable year with respect
to the organization,</text>
</clause><clause id="H0B47B49904AA48CE84F2A2C55DC6E96A"><enum>(iv)</enum><text>is a supporting organization described in section 509(a)(3) during the taxable year with respect to
the organization, or</text>
</clause><clause id="HA1177FAF40AF47A4ADC82DC967A4C81E"><enum>(v)</enum><text display-inline="yes-display-inline">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.</text>
</clause></subparagraph><subparagraph id="HF4AD2277AF594A8A8F584D3EEB04D60E"><enum>(C)</enum><header>Liability for tax</header><text>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—</text>
<clause display-inline="no-display-inline" id="H007163CDABF24AB0890ED6401CE2D00A"><enum>(i)</enum><text>the amount of remuneration paid by such employer with respect to such employee, bears to</text>
</clause><clause display-inline="no-display-inline" id="H0F79DA9509C1476E9CA047F1E39EA48C"><enum>(ii)</enum><text>the amount of remuneration paid by all such employers to such employee.</text>
</clause></subparagraph></paragraph><paragraph id="H1AAA0F03E3114C33B8C2B6841E0FC29D"><enum>(5)</enum><header>Excess parachute payment</header><text display-inline="yes-display-inline">For purposes determining the tax imposed by subsection (a)(2)—</text>
<subparagraph id="HB382D3BC48B843F68FE9A94152729907"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <quote>excess parachute payment</quote> means an amount equal to the excess of any parachute payment over the portion of the base amount
allocated to such payment.</text>
</subparagraph><subparagraph id="HA3C9C74F171740C8998B59E513F552A2"><enum>(B)</enum><header>Parachute payment</header><text>The term <quote>parachute payment</quote> means any payment in the nature of compensation to (or for the benefit of) a covered employee if—</text>
<clause id="H0AF7D81A863E420DA76C2349B7E082AC"><enum>(i)</enum><text>such payment is contingent on such employee’s separation from employment with the employer, and</text>
</clause><clause id="HA0D60EADC8E24A5AB8502DA304125EA9"><enum>(ii)</enum><text>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.</text></clause><continuation-text continuation-text-level="subparagraph">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).</continuation-text></subparagraph><subparagraph id="HC25E23CB982B470B8676787963B4C54C"><enum>(C)</enum><header>Base amount</header><text>Rules similar to the rules of 280G(b)(3) shall apply for purposes of determining the base amount.</text>
</subparagraph><subparagraph id="H5E3051BAF6E7480EBF1653992F85581E"><enum>(D)</enum><header>Property transfers; present value</header><text>Rules similar to the rules of paragraphs (3) and (4) of section 280G(d) shall apply.</text>
</subparagraph></paragraph><paragraph commented="no" id="H4EDA09944BA6412B84D57106D0F3C2BB"><enum>(6)</enum><header>Coordination with deduction limitation</header><text>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.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD5F9D85AC877472E972970869B847556"><enum>(b)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for subchapter D of chapter 42 is amended by adding at the end the following
new item:</text>
<quoted-block display-inline="no-display-inline" id="H3E9D4582F2E44630A7E01995A36D26A2" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 4960. Tax on excess exempt organization executive compensation.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H157A5DE847E74314A8343FC2234F91DE"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H42B1F62C0FAD46E0BEEADF00BF2C76FC"><enum>3804.</enum><header>Denial of deduction as research expenditure for stock transferred pursuant to an incentive stock
option</header>
<subsection id="H111B80273A5E4F19A812E8E73416AFC5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (2) of section 421(a) is amended by striking <quote>under section 162 (relating to trade or business expenses)</quote>.</text>
</subsection><subsection id="H1F8C821DE2DD4EE7AD4163CE61538773"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to stock transferred on or after February 26, 2014.</text>
</subsection></section></part><part id="H5418F95875374AB4BB0EB57C4E309D16"><enum>2</enum><header>Worker classification</header>
<section id="H7EEA126FF7B44D3D9A9E4E31F989B79C"><enum>3811.</enum><header>Determination of worker classification</header>
<subsection id="HCBA96534AACF41CCA582E41A3F3AC922"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 79, as amended by the preceding provisions of this Act, is amended by adding at the end the
following new section:</text>
<quoted-block display-inline="no-display-inline" id="H3B4CC926D40E4914AB1243DCAA19BC3B" style="OLC">
<section id="HAA3D5AC388D34B24A8DB3049C639FA9B"><enum>7707.</enum><header>Determination of worker classification</header>
<subsection id="HFADE57A6FC454C2DA930F5D3C99D70BF"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this title (and notwithstanding any provision of this title not contained in this
section to the contrary), if the requirements of subsections (b), (c), and
(d) are met with respect to any service performed by a service provider,
then with respect to such service—</text>
<paragraph id="H079D7D1D632542489D2CF3BBD80216AD"><enum>(1)</enum><text>the service provider shall not be treated as an employee,</text>
</paragraph><paragraph id="H7C7996D167EC4475A672F7FBA75F6F5C"><enum>(2)</enum><text>the service recipient shall not be treated as an employer,</text>
</paragraph><paragraph id="H27EA309D323344B39670BEC4F7C66E0C"><enum>(3)</enum><text>any payor shall not be treated as an employer, and</text>
</paragraph><paragraph id="HBACB6AB5080247859C0EAEC8AA2A4884"><enum>(4)</enum><text>the compensation paid or received for such service shall not be treated as paid or received with
respect to employment.</text>
</paragraph></subsection><subsection id="H8F24A5739530404D9D4C4AEB83EBFB7B"><enum>(b)</enum><header>General service provider requirements</header>
<paragraph id="H44A17CC5A8AE462595F6CEE5FB830976"><enum>(1)</enum><header>In general</header><text>The requirements of this subsection are met with respect to any service if the service provider
either—</text>
<subparagraph id="H18A8527796EE474493E7E5A7665F345A"><enum>(A)</enum><text>meets the requirements of paragraph (2) with respect to such service, or</text>
</subparagraph><subparagraph id="HF2E1E42723C4408DB0454C0D24CF16C5"><enum>(B)</enum><text>in the case a service provider engaged in the trade or business of selling (or soliciting the sale
of) goods or services, meets the requirements of paragraph (3) with
respect to such service.</text>
</subparagraph></paragraph><paragraph id="HA7EE8B94808745E3BC5E5F209CE5AFFB"><enum>(2)</enum><header>General requirements</header><text display-inline="yes-display-inline">The requirements of this paragraph are met with respect to any service if the service provider, in
connection with performing the service—</text>
<subparagraph id="H8232BAA09A274B0D873A147D30E65121"><enum>(A)</enum><text>incurs significant unreimbursed expenses,</text>
</subparagraph><subparagraph id="HB5AA226E77AE45ABB9B88F44CB14B335"><enum>(B)</enum><text>agrees to perform the service for a particular amount of time, to achieve a specific result, or to
complete a specific task,</text>
</subparagraph><subparagraph id="H43509FF04E154AF2984D8B6FB1EAD704"><enum>(C)</enum><text>is primarily compensated on a basis not tied to the number of hours worked, and</text>
</subparagraph><subparagraph id="HEE5EB50A7BFF4ECC8137E760936469EB"><enum>(D)</enum><text>at least one of the following:</text>
<clause id="HE58360D1319D47B59E79E35F334D1735"><enum>(i)</enum><text>has a significant investment in assets or training,</text>
</clause><clause id="HFC32D31AC18A4AECAC3A96EE95668E41"><enum>(ii)</enum><text>is not required to perform services exclusively for the service recipient, or</text>
</clause><clause id="HF46693E1FCCF4FF589001C60C42F24F5"><enum>(iii)</enum><text>has not performed services for the service recipient as an employee during the 1-year period ending
with the date of the commencement of services under the contract described
in subsection (d).</text>
</clause></subparagraph></paragraph><paragraph id="H9CCCA5B77CEE4EECA0B709FBC9AB3EED"><enum>(3)</enum><header>Alternative requirements with respect to sales persons</header><text>In the case of a service provider engaged in the trade or business of selling (or soliciting the
sale of) goods or services, the requirements of this paragraph are met
with respect to any service provided in the ordinary course of such trade
or business if—</text>
<subparagraph id="HEB77D9C4AF194B839CCF3C4582D3B931"><enum>(A)</enum><text>the service provider is compensated primarily on a commission basis, and</text>
</subparagraph><subparagraph id="H9FD021DE557B49179C860259C6C790B8"><enum>(B)</enum><text display-inline="yes-display-inline">substantially all the compensation for such service is directly related to sales of goods or
services rather than to the number of hours worked.</text>
</subparagraph></paragraph></subsection><subsection id="H93AFB7146A3F4C71BCB413E5A0DC846C"><enum>(c)</enum><header>Place of business or own equipment requirement</header><text>The requirement of this subsection is met with respect to any service if the service provider—</text>
<paragraph id="HB7C62031D715480A8E54E567CF9FE6A4"><enum>(1)</enum><text>has a principal place of business,</text>
</paragraph><paragraph id="H9A18D345C1D446B0AC8338B0B1EA246C"><enum>(2)</enum><text>does not primarily provide the service in the service recipient’s place of business,</text>
</paragraph><paragraph id="H1E9F57461CA044559309034F0882D95D"><enum>(3)</enum><text>pays a fair market rent for use of the service recipient’s place of business, or</text>
</paragraph><paragraph commented="no" id="HC3F6A5823D0B4A2DA1BB97E3ADECFE6E"><enum>(4)</enum><text>provides the service primarily using equipment supplied by the service provider.</text>
</paragraph></subsection><subsection id="HEA5A8CFE37FF48F595C70C6B9BCEA3F9"><enum>(d)</enum><header>Written contract requirement</header><text>The requirements of this subsection are met with respect to any service if such service is
performed pursuant to a written contract between the service provider and
the service recipient (or payor) which meets the following requirements:</text>
<paragraph id="H4E20A1162DBF438592C4DA24A2724F8F"><enum>(1)</enum><text>The contract includes each of the following:</text>
<subparagraph id="HDB155515C1EA428285A7EB0E1D0EBB3C"><enum>(A)</enum><text>The service provider’s name, taxpayer identification number, and address.</text>
</subparagraph><subparagraph id="HDF15C08995CE4E868B2D0F53C14F6277"><enum>(B)</enum><text>A statement that the service provider will not be treated as an employee with respect to the
services provided pursuant to the contract for purposes of this title.</text>
</subparagraph><subparagraph id="HAC5892028495407191BEA4FDCF66C5A0"><enum>(C)</enum><text>A statement that the service recipient (or the payor) will withhold upon and report to the Internal
Revenue Service the compensation payable pursuant to the contract
consistent with the requirements of this title.</text>
</subparagraph><subparagraph id="H6341AE1934A44247B413F4A1F940EA93"><enum>(D)</enum><text>A statement that the service provider is responsible for payment of Federal, State, and local
taxes, including self-employment taxes, on compensation payable pursuant
to the contract.</text>
</subparagraph><subparagraph id="HDEC1A6389F71462CB920CED22ED033C3"><enum>(E)</enum><text>A statement that the contract is intended to be considered a contract described in this subsection.</text>
</subparagraph></paragraph><paragraph id="H69160B8E66BF48CE8770957158D98909"><enum>(2)</enum><text>The term of the contract does not exceed 1 year. The preceding sentence shall not prevent one or
more subsequent written renewals of the contract from satisfying the
requirements of this subsection if the term of each such renewal does not
exceed 1 year and if the information required under paragraph (1)(A) is
updated in connection with each such renewal.</text>
</paragraph><paragraph id="H5D67FBFF1D8E4C5BB68228A9B1B9B7F1"><enum>(3)</enum><text>The contract (or renewal) is signed by both the service recipient (or payor) and the service
provider not later than the date on which the aggregate payments made by
the service recipient to the service provider exceeds $600 for the year
covered by the contract (or renewal).</text>
</paragraph></subsection><subsection id="HC35252157FDB41E5BB31369DDA9EA986"><enum>(e)</enum><header>Reporting requirements</header><text display-inline="yes-display-inline">If any service recipient or payor fails to meet the applicable reporting requirements of section
6041(a) or 6041A(a) for any taxable year with respect to any service
provider, this section shall not apply for purposes of making any
determination with respect to the liability of such service recipient or
payor for any tax with respect to such service provider for such period.
For purposes of the preceding sentence, such reporting requirements shall
be treated as met if the failure to satisfy such requirements is due to
reasonable cause and not willful neglect.</text>
</subsection><subsection id="HD3602DADE52F470CBBE7BA12B6FC06D8"><enum>(f)</enum><header>Exception for services provided by owner</header><text>This section shall not apply with respect to any service provided by a service provider to a
service recipient if the service provider owns any interest in the service
recipient or any payor with respect to the service provided. The preceding
sentence shall not apply in the case of a service recipient the stock of
which is regularly traded on an established securities market.</text>
</subsection><subsection commented="no" id="HD3FEF7746D4E469CBDD777A092A1E945"><enum>(g)</enum><header>Exception for services not received in course of a trade or business</header><text>This section shall not apply with respect to any service unless such service is performed in the
ordinary course of a trade or business of the service recipient.</text>
</subsection><subsection id="H448C137E85084228A68769FCC195A01F"><enum>(h)</enum><header>Limitation on reclassification by Secretary</header><text>For purposes of this title—</text>
<paragraph id="H2036FDCABD6F428CB67F0A277D1D86F2"><enum>(1)</enum><header>Effect of reclassification on recipients and payors</header><text display-inline="yes-display-inline">A determination by the Secretary that a service recipient or a payor should have treated a service
provider as an employee shall be effective with respect to the service
recipient or payor no earlier than the notice date if—</text>
<subparagraph id="HBCEEEA16721547EE8668F4505C0B1702"><enum>(A)</enum><text>the service recipient or the payor entered into a written contract with the service provider which
meets the requirements of subsection (d),</text>
</subparagraph><subparagraph id="H69A8EE52B0F1447EBDBAF4A6B6BE33A1"><enum>(B)</enum><text>the service recipient or the payor satisfied the applicable reporting requirements of section
6041(a) or 6041A(a) for all relevant taxable years with respect to the
service provider,</text>
</subparagraph><subparagraph id="H702073E9E1624809B07BDC18C4576B60"><enum>(C)</enum><text>the service recipient or the payor collected and paid over all applicable taxes imposed under
subtitle C for all relevant taxable years with respect to the service
provider,</text>
</subparagraph><subparagraph id="H9B5CB47A8AF24EADB277089FEB48E6D5"><enum>(D)</enum><text>the service recipient or the payor demonstrates a reasonable basis for having determined that the
service provider should not be treated as an employee under this section
and that such determination was made in good faith.</text>
</subparagraph></paragraph><paragraph id="HE17F36A77ABF4964AD270648303B7468"><enum>(2)</enum><header>Effect of reclassification on service providers</header><text display-inline="yes-display-inline">A determination by the Secretary that a service provider should have been treated as an employee
shall be effective with respect to the service provider no earlier than
the notice date if—</text>
<subparagraph id="HDEF41496FC8F463596C41DCD0EBEF4D1"><enum>(A)</enum><text display-inline="yes-display-inline">the service provider entered into a written contract with the service recipient or payor which
meets the requirements of subsection (d),</text>
</subparagraph><subparagraph id="HBC24264540274EC391EDABC7A46D2DE6"><enum>(B)</enum><text>the service provider satisfied the applicable reporting requirements of sections 6012(a) and 6017
for all relevant taxable years with respect to the service recipient or
payor, and</text>
</subparagraph><subparagraph id="H6F1B8F30CEF541028C023C72F286525C"><enum>(C)</enum><text>the service provider demonstrates a reasonable basis for determining that the service provider is
not an employee under this section and that such determination was made in
good faith.</text>
</subparagraph></paragraph><paragraph id="HC1F639DE1E1A46A284086613BBE15BCC"><enum>(3)</enum><header>Notice date</header><text>For purposes of this subsection, the term <quote>notice date</quote> means the 30th day after the earliest of—</text>
<subparagraph id="H9862ECB7D99243279947A4A9646C99BD"><enum>(A)</enum><text>the date on which the first letter of proposed deficiency which allows the service provider, the
service recipient, or the payor an opportunity for administrative review
in the Internal Revenue Service Office of Appeals is sent,</text>
</subparagraph><subparagraph id="HB5020456B34246A3B87D07FB6A40FB32"><enum>(B)</enum><text>the date on which a deficiency notice under section 6212 is sent, or</text>
</subparagraph><subparagraph id="HEDF502CAEC694C6A9A3F25CC419D8386"><enum>(C)</enum><text>the date on which a notice of determination under section 7436(b)(2) is sent.</text>
</subparagraph></paragraph><paragraph id="H83E4BB7AFFB040A6B7E7490E655EAED0"><enum>(4)</enum><header>Reasonable cause exception</header><text>The requirements of paragraphs (1)(B) and (2)(B) shall be treated as met if the failure to satisfy
such requirements is due to reasonable cause and not willful neglect.</text>
</paragraph><paragraph id="H22E3E90E6D7F482E89E458AF38A90468"><enum>(5)</enum><header>No restriction on administrative or judicial review</header><text>Nothing in this subsection shall be construed as limiting any provision of law which provides an
opportunity for administrative or judicial review of a determination by
the Secretary.</text>
</paragraph></subsection><subsection id="H833781C3FD924203941907A9ED907DC7"><enum>(i)</enum><header>Definitions</header><text>For purposes of this section—</text>
<paragraph id="H46E47CB402304628B2B2C9C0B13D2C15"><enum>(1)</enum><header>Service provider</header>
<subparagraph id="H450AF5CCB866434789E1839AAF30610C"><enum>(A)</enum><header>In general</header><text>The term <quote>service provider</quote> means any qualified person who performs service for another person.</text>
</subparagraph><subparagraph id="HF694CCF6D48B4B468FE8546BCFAA639C"><enum>(B)</enum><header>Qualified person</header><text>The term <quote>qualified person</quote> means—</text>
<clause id="HAB79237E7618454E8FD6034691964D71"><enum>(i)</enum><text>any natural person, and</text>
</clause><clause commented="no" id="HCDDD41014C6245E78E0EBE4A74FAB0A1"><enum>(ii)</enum><text>any entity if any of the services referred to in subparagraph (A) are performed by one or more
natural persons who directly own interests in such entity.</text>
</clause></subparagraph></paragraph><paragraph id="HF93B039943554A06A066F38C4A64472C"><enum>(2)</enum><header>Service recipient</header><text>The term <quote>service recipient</quote> means the person for whom the service provider performs such service.</text>
</paragraph><paragraph id="H9BE70C3F302C4638876126C9E1E704FB"><enum>(3)</enum><header>Payor</header><text>The term <quote>payor</quote> means any person who pays the service provider for performing such service.</text>
</paragraph></subsection><subsection id="HA9A3501E29D74375A8271D82B578B47A"><enum>(j)</enum><header>Regulations</header><text>Notwithstanding section 530(d) of the Revenue Act of 1978, the Secretary shall issue such
regulations as the Secretary determines are necessary to carry out the
purposes of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H5C059C44685042D2821206C41428E45C"><enum>(b)</enum><header>Withholding by payor in case of certain persons classified as not employees</header><text>Section 3402 is amended by redesignating subsection (s) as subsection (t) and inserting after
subsection (r) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H08F88DA59C5C48D2A3D3FBEAB4CD2C1C" style="OLC">
<subsection id="H1366CCA2E9024D8C84BB3D8EF114F699"><enum>(s)</enum><header>Extension of withholding to payments to certain persons classified as not employees</header>
<paragraph id="HA6A08EB882FC4D30B7950D82D0707E54"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this chapter and so much of subtitle F as relates to this chapter, compensation
paid pursuant to a contract described in section 7707(d) shall be treated
as if it were a payment of wages by an employer to an employee.</text>
</paragraph><paragraph id="HF46A22A6DFF44995A5E3DB76A08CBD7E"><enum>(2)</enum><header>Amount withheld</header><text>Except as otherwise provided under subsection (i), the amount to be deducted and withheld pursuant
to paragraph (1) with respect to compensation paid pursuant to any such
contract during any calendar year shall be an amount equal to 5 percent of
so much of the amount of such compensation as does not exceed $10,000.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBA0D6B805601428DA61AE30D61941959"><enum>(c)</enum><header>Reporting</header><text>Section 6041A is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H3BB7A2ED7CE749A5978E8D4441F680F4" style="OLC">
<subsection id="H98CD2DFD25E6445F98AE746CA5F91C2F"><enum>(g)</enum><header>Special rules for certain persons classified as not employees</header><text display-inline="yes-display-inline">In the case of any service recipient required to make a return under subsection (a) with respect to
compensation to which section 7707(a) applies—</text>
<paragraph id="HB81879AA7866411BA2548CBC07046DDC"><enum>(1)</enum><text>such return shall include—</text>
<subparagraph id="H3CB24AB3CC9048A0A694B27DDE3998EE"><enum>(A)</enum><text>the aggregate amount of such compensation paid to each person whose name is required to be included
on such return,</text>
</subparagraph><subparagraph id="HB46B8C8F2BF440519E1746EB32E164DF"><enum>(B)</enum><text>the aggregate amount deducted and withheld under section 3402(s) with respect to such compensation,
and</text>
</subparagraph><subparagraph id="H6A12481CE314415D98682A69CAC96D30"><enum>(C)</enum><text>an indication of whether a copy of the contract described in section 7707(d) is on file with the
service recipient or payor, and</text>
</subparagraph></paragraph><paragraph id="HE2CC61F938DC48659D6491B8DD0B65D9"><enum>(2)</enum><text>the statement required to be furnished under subsection (e) shall include the information described
in paragraph (1) with respect to the service provider to whom such
statement is furnished.</text></paragraph><continuation-text continuation-text-level="subsection">Terms used in this subsection which are also used in section 7707 shall have the same meaning as
when used in such section.</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF85BD2707A5E4763816351463AB8AE1F"><enum>(d)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for chapter 79, as amended by the preceding provisions of this Act, is
amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H41E071A630C1487EA1BBD6B1491252E0" style="OLC">
<toc container-level="quoted-block-container" idref="H3B4CC926D40E4914AB1243DCAA19BC3B" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HAA3D5AC388D34B24A8DB3049C639FA9B" level="section">Sec. 7707. Determination of worker classification.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HB7A23EBDF63A4579BED87DDC8D78BEFC"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to services performed after December 31, 2014 (and
to payments made for such services after such date).</text>
</subsection></section></part></subtitle><subtitle id="H74B1613EBBD947E58D31CC669022FDAF"><enum>J</enum><header>Zones and Short-Term Regional Benefits</header>
<section id="HCFDF6BB7FD764B7BA8FCC5B756F515D4"><enum>3821.</enum><header>Repeal of provisions relating to Empowerment Zones and Enterprise Communities</header>
<subsection id="HCCDD26E909414CE5AEB3CBB987462EA3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 1 is amended by striking subchapter U (and by striking the item relating to such subchapter
in the table of subchapters for such chapter).</text>
</subsection><subsection id="H642CE64013DF4B369540A7D062BCCD5E"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H7AF2E9737DA742478555CD4C08B40BD2"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HA5AFEBB817E943E796B9852DB5DEE68D"><enum>(A)</enum><text>Section 38(b) is amended by striking paragraph (9).</text>
</subparagraph><subparagraph id="H36A119C1567D4BA89078F61FFBA5E918" indent="up1"><enum>(B)</enum><text>Section 280C(a) is amended by striking <quote>1396(a),</quote>.</text>
</subparagraph></paragraph><paragraph id="H7C08E11B92D84CF09E4FA57D17EBAD30"><enum>(2)</enum><text>Section 179(e) is amended by striking paragraph (3) and by redesignating paragraph (4) as paragraph
(3).</text>
</paragraph><paragraph display-inline="no-display-inline" id="H165B4A1F6A184C5BB34FE4BB5242054A"><enum>(3)</enum><text display-inline="yes-display-inline">Section 1202(a)(2)(A) is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>section 1397C(b)</quote>.</text>
</paragraph></subsection><subsection id="H5F676542D54A4BADA3A93A7B53DB482B"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H2D4D30B564D143BC8DA6542ACC0CDB42"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in this subsection, the amendment made by this section shall take
effect on the date of the enactment of this Act.</text>
</paragraph><paragraph id="H9557E98B3F8C43D1962F81CE37348974"><enum>(2)</enum><header>Rollovers</header><text>So much of subsection (a) as relates to the repeal of section 1397B of the Internal Revenue Code of
1986 shall apply to sales after the date of the enactment of this Act.</text>
</paragraph><paragraph id="H0294F954C9644BFA822FF6B24F733358"><enum>(3)</enum><header>Savings provision</header><text>The amendments made by this section shall not apply to obligations described in section 1394 of the
Internal Revenue Code of 1986 (as in effect before its repeal) which were
issued before January 1, 2014.</text>
</paragraph></subsection></section><section id="H83988FB31E174A5EB628C5875B3853D4"><enum>3822.</enum><header>Repeal of DC Zone provisions</header>
<subsection id="H600CE15AE9CD4AC7A00E6BDE6017BB77"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 1 is amended by striking subchapter W (and by striking the item relating to such subchapter
in the table of subchapters for such chapter).</text>
</subsection><subsection id="H2F788B1448C64600B7F1C01334A24370"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HF98ADAA4BDB14C9BB9CB6E63FA10F339"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H327BE22709E644E3A415E249FDD7CCC7"><enum>(A)</enum><text display-inline="yes-display-inline">Section 1202(a)(2)(B) is amended by inserting <quote>(as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>)</quote> after <quote>1400B(b)</quote>.</text>
</subparagraph></paragraph><paragraph id="HAA5134B96D754335BF8FA3496699714E"><enum>(2)</enum><text display-inline="yes-display-inline">Section 25(e)(1)(C) is amended by striking <quote>sections 23, 25D, and 1400C</quote> and inserting <quote>section 23</quote>.</text>
</paragraph><paragraph id="H19604D2475E34C2DAD93956DB3264021"><enum>(3)</enum><text>Section 1016(a) is amended by striking paragraph (27).</text>
</paragraph></subsection><subsection id="H83D90968AEAB48DAA19828F724841C4D"><enum>(c)</enum><header>Effective date</header>
<paragraph id="HF9EBFA8DAEB74B5CA48C80D2B6D6BAA8"><enum>(1)</enum><header>In general</header><text>Except as otherwise provided in paragraph (2), the amendments made by this section shall take
effect on the date of the enactment of this Act.</text>
</paragraph><paragraph id="HAF41943285F445F59650C18031791002"><enum>(2)</enum><header>Savings provision</header><text>The amendments made by this section shall not apply to—</text>
<subparagraph id="HFC1C7A36C2804967A5C096E842C6D76E"><enum>(A)</enum><text>in the case of the repeal of <external-xref legal-doc="usc" parsable-cite="usc/26/1400A">section 1400A</external-xref> of the Internal Revenue Code of 1986, obligations
described in section 1394 of such Code (as in effect before its repeal)
which were issued before January 1, 2012,</text>
</subparagraph><subparagraph id="H1B6AB3E15CB8474CB7520FCD2F4EF77A"><enum>(B)</enum><text>in the case of the repeal of section 1400B of such Code, DC Zone assets (as defined in such
section, as in effect before its repeal) which were acquired by the
taxpayer before January 1, 2012, and</text>
</subparagraph><subparagraph id="HCC7B8E636A184AD2B99A0249F7B117C0"><enum>(C)</enum><text>in the case of the repeal of section 1400C of such Code, principal residences acquired before
January 1, 2012.</text>
</subparagraph></paragraph></subsection></section><section id="HEFB0CA21C95240889E021F4F5FADF7B1"><enum>3823.</enum><header>Repeal of provisions relating to renewal communities</header>
<subsection id="H79E8975EEC654A109973DE3D2BCEBC34"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 1 is amended by striking subchapter X (and by striking the item relating to such subchapter
in the table of subchapters for such chapter).</text>
</subsection><subsection id="H8CE8EF7403914E8C86F2EDAD51B9148E"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HB28967DE6728427895367A9DA32067A7"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HC0D24745626E463EB41976C8EAE55439"><enum>(A)</enum><text>Section 469(i)(3), as amended by the preceding provisions of this Act, is amended by striking
subparagraph (C) and by redesignating subparagraphs (D), (E), and (F) as
subparagraphs (B), (C), and (D).</text>
</subparagraph><subparagraph id="H68EFECE4089E4E88A61F13B86C91631F" indent="up1"><enum>(B)</enum><text>Section 469(i)(3)(C), as so redesignated, is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H0B800D903D1F4AD79738F3ED7A11FB5A" style="OLC">
<subparagraph id="H89E2F50694614F618B109327CC5CB895"><enum>(C)</enum><header>Ordering rule</header><text display-inline="yes-display-inline">If subparagraph (B) applies for a taxable year, paragraph (1) shall be applied—</text>
<clause id="HF52EC02CD15F4CB896E7FBC4FE7582AC"><enum>(i)</enum><text>first to the portion of the passive activity loss to which such subparagraph does not apply, and</text>
</clause><clause id="HBB06FC1C93BA43AD8354FA69AC5DC0A9"><enum>(ii)</enum><text>then to the portion of such loss to which such subparagraph does apply.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H1A2A797E585940B3A56436002CBA4428" indent="up1"><enum>(C)</enum><text display-inline="yes-display-inline">Section 469(i)(6)(B), as amended by the preceding provisions of this Act, is amended—</text>
<clause id="H1CF3C73F4F344C4FA0E9C3EE685F5761"><enum>(i)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">commercial revitalization deduction</header-in-text></quote> in the heading,</text>
</clause><clause id="HE3383634459C4B7EAB50B40B13121BB7"><enum>(ii)</enum><text>by striking <quote>in the case of—</quote> and all that follows through <quote>any credit</quote> in clause (i),</text>
</clause><clause id="H5D31EAA68C5342A6BF5B4BBE892C0239"><enum>(iii)</enum><text>by striking <quote>year, or</quote> in clause (i) and inserting <quote>year.</quote>, and</text>
</clause><clause id="HFAEA0D7A68ED4008997A6DB1A69D86F9"><enum>(iv)</enum><text>by striking clause (iii).</text>
</clause></subparagraph></paragraph></subsection><subsection id="H30D0F6BE8C804CE2830B619AFB1322DF"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H54BB1FA1436546F7BBAFF2AE7FB5DDE2"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in paragraph (2), the amendments made by this section shall take effect on the
date of the enactment of this Act.</text>
</paragraph><paragraph id="HFEBD8252FD7E40D4903304566D836DB4"><enum>(2)</enum><header>Savings provision</header><text>The amendments made by this section shall not apply to—</text>
<subparagraph id="H27D63BDDE52A4C21AEAAD68BAB072639"><enum>(A)</enum><text>in the case of the repeal of <external-xref legal-doc="usc" parsable-cite="usc/26/1400F">section 1400F</external-xref> of the Internal Revenue Code of 1986, qualified
community assets (as defined in such section, as in effect before its
repeal) which were acquired by the taxpayer before January 1, 2010,</text>
</subparagraph><subparagraph id="H4D1FD01B411740F888F4DFC97BE1EFD2"><enum>(B)</enum><text>in the case of the repeal section 1400H of such Code, wages paid or incurred before January 1,
2010,</text>
</subparagraph><subparagraph id="HB904E2C5753D4F09B480C35846426F95"><enum>(C)</enum><text>in the case of the repeal of section 1400I of such Code, qualified revitalization buildings (as
defined in such section, as in effect before its repeal) which were placed
in service before January 1, 2010, and</text>
</subparagraph><subparagraph id="HD397BAC0D6A246889C9EEF8DDBB48C53"><enum>(D)</enum><text>in the case of the repeal of section 1400J of such Code, property acquired before January 1, 2010.</text>
</subparagraph></paragraph></subsection></section><section id="H775D1EF3876F4C669ED4DF6A07596FC9"><enum>3824.</enum><header>Repeal of various short-term regional benefits</header>
<subsection id="H4CE5246B024447E8BFA7178BA492F7EB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 1 is amended by striking subchapter Y (and by striking the item relating to such subchapter
in the table of subchapters for such chapter).</text>
</subsection><subsection id="H1CB46F9802954A458BF2477DF1C9B021"><enum>(b)</enum><header>Conforming amendments</header><text display-inline="yes-display-inline">Section 38(b) is amended by striking paragraphs (27), (28), (29) and (30).</text>
</subsection><subsection id="HD53C26B5D8624C3E8A167A802C694939"><enum>(c)</enum><header>Effective dates</header>
<paragraph id="HA9D5A026C22D4DE58CB075ADEEFD54D5"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall take effect on the
date of the enactment of this Act.</text>
</paragraph><paragraph id="H7FCD692AD3FE482C89909B6100335504"><enum>(2)</enum><header>Savings provision</header><text>The amendments made by this section shall not apply to—</text>
<subparagraph id="HFF0D0CF16D31482484D014DC921C2425"><enum>(A)</enum><text>in the case of the repeal of <external-xref legal-doc="usc" parsable-cite="usc/26/1400L">section 1400L(a)</external-xref> of the Internal Revenue Code of 1986, qualified wages
(as defined in such section, as in effect before its repeal) which were
paid or incurred before January 1, 2004,</text>
</subparagraph><subparagraph id="HA8FD9349BBC14A66A87F0220B067FCD9"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of the repeal of subsections (b) and (f) of section 1400L of such Code, qualified New
York Liberty Zone property (as defined in section 1400L(b) of such Code,
as in effect before its repeal) placed in service before January 1, 2010,</text>
</subparagraph><subparagraph id="H565386253FBF4257941FA5967F92123B"><enum>(C)</enum><text display-inline="yes-display-inline">in the case of the repeal of section 1400L(c) of such Code, qualified New York Liberty Zone
leasehold improvement property (as defined in such section, as in effect
before its repeal) placed in service before January 1, 2007,</text>
</subparagraph><subparagraph id="HAE98C4183D494DBAA539EE0E6C758587"><enum>(D)</enum><text display-inline="yes-display-inline">in the case of the repeal of section 1400L(d) of such Code, qualified New York Liberty bonds (as
defined in such section, as in effect before its repeal) issued before
January 1, 2014,</text>
</subparagraph><subparagraph id="HF7973E821A8E431BA3CB724E47622650"><enum>(E)</enum><text>in the case of the repeal of section 1400L(e) of such Code, advanced refundings before January 1,
2006,</text>
</subparagraph><subparagraph id="HE9196D8CD7844540A2137D53DE28D4D5"><enum>(F)</enum><text>in the case of the repeal of section 1400L(g) of such Code, property which is compulsorily or
involuntarily converted as a result of the terrorist attacks on September
11, 2001,</text>
</subparagraph><subparagraph id="H9D865CC8B41D443AB425E326FD97FCDE"><enum>(G)</enum><text>in the case of the repeal of section 1400N(a) of such Code, obligations issued before January 1,
2012,</text>
</subparagraph><subparagraph id="HCD75630857C24D7D9DDE381A83BA6617"><enum>(H)</enum><text>in the case of the repeal of section 1400N(b) of such Code, advanced refundings before January 1,
2011,</text>
</subparagraph><subparagraph id="H1F6798632E8646FA9485DE0A893A6250"><enum>(I)</enum><text>in the case of the repeal of section 1400N(d) of such Code, property placed in service before
January 1, 2012,</text>
</subparagraph><subparagraph id="HC38597E3632342ACABFB39A6F043F66F"><enum>(J)</enum><text>in the case of the repeal of section 1400N(e) of such Code, property placed in service before
January 1, 2009,</text>
</subparagraph><subparagraph id="H91AA5FC2F273459DB57261BFEB231163"><enum>(K)</enum><text display-inline="yes-display-inline">in the case of the repeal of subsections (f) and (g) of section 1400N of such Code, amounts paid or
incurred before January 1, 2008,</text>
</subparagraph><subparagraph id="H7D9761B88F2B490ABE6223F49D4B6910"><enum>(L)</enum><text display-inline="yes-display-inline">in the case of the repeal of section 1400N(h) of such Code, amounts paid or incurred before January
1, 2012,</text>
</subparagraph><subparagraph id="H8294CD4D443F452BAB4B91F3DAE96B84"><enum>(M)</enum><text>in the case of the repeal of section 1400N(l) of such Code, bonds issued before January 1, 2007,</text>
</subparagraph><subparagraph id="H040F763174A74928A01CF24A45D7CEB9"><enum>(N)</enum><text>in the case of the repeal of section 1400Q(a) of such Code, distributions before January 1, 2007,</text>
</subparagraph><subparagraph id="H5B002142EF16448B87C46DC955CA1672"><enum>(O)</enum><text>in the case of the repeal of section 1400Q(b) of such Code, contributions before March 1, 2006,</text>
</subparagraph><subparagraph id="H93EE766076364145A331A4B4353C01DE"><enum>(P)</enum><text>in the case of the repeal of section 1400Q(c) of such Code, loans made before January 1, 2007,</text>
</subparagraph><subparagraph id="H0569BE50131540B9AB1F98917AA64BF5"><enum>(Q)</enum><text>in the case of the repeal of section 1400R of such Code, wages paid or incurred before January 1,
2006,</text>
</subparagraph><subparagraph id="H47C0C5000B1C4FF6ADD44E4C80CC308C"><enum>(R)</enum><text>in the case of the repeal of section 1400S(a) of such Code, contributions paid before January 1,
2006,</text>
</subparagraph><subparagraph id="HD489EDB225504E8F8CA271148955E73B"><enum>(S)</enum><text>in the case of the repeal of section 1400T of such Code, financing provided before January 1, 2011,
and</text>
</subparagraph><subparagraph id="H07BC9BB07E204935838FBBD8A64B4DCB"><enum>(T)</enum><text>in the case of the repeal of part III of subchapter Y of chapter 1 of such Code, obligations issued
before January 1, 2011.</text>
</subparagraph></paragraph></subsection></section></subtitle><enum>IV</enum><header>Participation exemption system for the taxation of foreign income</header>
<subtitle id="H965B29F8B6B94502BEB0CE21AC235022"><enum>A</enum><header>Establishment of exemption system</header>
<section id="H760D0F9202FD40C58A254FA71CE89975" section-type="subsequent-section"><enum>4001.</enum><header>Deduction for dividends received by domestic corporations from certain foreign corporations</header>
<subsection id="HADF1DE5BDEC54FF3A98EF062D00F2C89"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VIII of subchapter B of chapter 1 is amended by inserting after section 245 the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="H09C00E3A63F94EE9A04A7FD0922A32F9" style="OLC">
<section id="H54CACB4295124650BF173719DD35C255"><enum>245A.</enum><header>Dividends received by domestic corporations from certain foreign corporations</header>
<subsection id="HD8960BBDF0184FE2A8A8DA05E308932B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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 95 percent of the foreign-source portion of such dividend.</text>
</subsection><subsection id="H226E74D1735347B59FEB54830494C3CD"><enum>(b)</enum><header>Specified 10-Percent owned foreign corporation</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>specified 10-percent owned foreign corporation</quote> means any foreign corporation if any domestic corporation owns directly, or indirectly through a
chain of ownership described under section 958(a), 10 percent or more of
the voting stock of such foreign corporation.</text>
</subsection><subsection id="H355277FC0F89462EAD664229E3423F3A"><enum>(c)</enum><header>Foreign-Source portion</header><text>For purposes of this section—</text>
<paragraph id="H348C60725B574F79B748B5387DDE8B70"><enum>(1)</enum><header>In general</header><text>The foreign-source portion of any dividend is an amount which bears the same ratio to such
dividends as—</text>
<subparagraph id="H8A8AFF1B6D9441DEA75ACABF72D7F1D4"><enum>(A)</enum><text>the post-1986 undistributed foreign earnings, bears to</text>
</subparagraph><subparagraph id="HFC23115700224AB391FA93547A7408A0"><enum>(B)</enum><text>the total post-1986 undistributed earnings.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HBEA08D8E13F944DA806D2DE34508B506"><enum>(2)</enum><header>Post-1986 undistributed earnings</header><text display-inline="yes-display-inline">The term <quote>post-1986 undistributed earnings</quote> 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—</text>
<subparagraph id="HB85DC7B1DA614F218A4C4FDE3357F0F9"><enum>(A)</enum><text>as of the close of the taxable year of the specified 10-percent owned foreign corporation in which
the dividend is distributed, and</text>
</subparagraph><subparagraph id="HF1C8D323FE3242DA994D23178543EBF5"><enum>(B)</enum><text>without diminution by reason of dividends distributed during such taxable year.</text>
</subparagraph></paragraph><paragraph id="HB75BE2192E274C6BAA47E6E7EFC4B080"><enum>(3)</enum><header>Post-1986 undistributed foreign earnings</header><text>The term <quote>post-1986 undistributed foreign earnings</quote> means the portion of the post-1986 undistributed earnings which is attributable to neither—</text>
<subparagraph id="HD1D7F018365D4B0FB5C827FD19196C71"><enum>(A)</enum><text>income described in subparagraph (A) of section 245(a)(5), nor</text>
</subparagraph><subparagraph id="H79B1EF9373D146B9AB19437CE12A64F2"><enum>(B)</enum><text>dividends described in subparagraph (B) of such section (determined without regard to section
245(a)(12)).</text>
</subparagraph></paragraph><paragraph id="HDB37D1706B34418A9DB58FBD94ADC047"><enum>(4)</enum><header>Treatment of distributions from earnings before 1987</header>
<subparagraph id="HFAD9DC134BED41379B7B0E3A1C24C27E"><enum>(A)</enum><header>In general</header><text>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—</text>
<clause id="H0A406FE28F984023B1E8892D4C2921E9"><enum>(i)</enum><text>paragraphs (1), (2), and (3) shall be applied without regard to the phrase <quote>post-1986</quote> each place it appears, and</text>
</clause><clause id="HED9CB71011D8434EBE2BD1FF0B9B95CC"><enum>(ii)</enum><text>paragraph (2) shall be applied without regard to the phrase <quote>in taxable years beginning after December 31, 1986</quote>.</text>
</clause></subparagraph><subparagraph id="H52A82664319745D299D966E180052A84"><enum>(B)</enum><header>Dividends paid first out of post-1986 earnings</header><text>Dividends shall be treated as paid out of post-1986 undistributed earnings to the extent thereof.</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="HB73E5948239E4BF2990194C54173000F"><enum>(d)</enum><header>Disallowance of foreign tax credit, etc</header>
<paragraph id="HBAF7A5EB84E9437685385B68DF578855"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">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.</text>
</paragraph><paragraph id="H69C0DBE72C3842749D99781D71974C82"><enum>(2)</enum><header>Denial of deduction</header><text>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).</text>
</paragraph></subsection><subsection id="H9AB035F4DE1B44B4A5408A6155BF3798"><enum>(e)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate
to carry out the provisions of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H13A7B17F5B6B46E894AEA6CFEE583B3A"><enum>(b)</enum><header>Application of holding period requirement</header><text display-inline="yes-display-inline">Subsection (c) of section 246 is amended—</text>
<paragraph id="HAA5619939B2A4150A25A5F01B2265DC7"><enum>(1)</enum><text>by striking <quote>or 245</quote> in paragraph (1) and inserting <quote>245, or 245A</quote>, and</text>
</paragraph><paragraph id="HD543B1FD767D407C9A6F2AD2405504D1"><enum>(2)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H386BE3E705584BD99D8AF73022077D0F" style="OLC">
<paragraph id="H4CCF87BACFED49E9B97C5644AC1EC89C"><enum>(5)</enum><header>Special rules for foreign source portion of dividends received from specified 10-percent owned
foreign corporations</header>
<subparagraph id="H0BA795CA34B946738367086D441C7C09"><enum>(A)</enum><header>6-month holding period requirement</header><text display-inline="yes-display-inline">For purposes of section 245A—</text>
<clause id="HB969B03B65754BA9A863552FD27EFC24"><enum>(i)</enum><text>paragraph (1)(A) shall be applied—</text>
<subclause id="HBDABB57051074F678785988B9EF13C5A"><enum>(I)</enum><text>by substituting <quote>180 days</quote> for <quote>45 days</quote>each place it appears, and</text>
</subclause><subclause id="H9214A665D3E041C6A71880DB64C26CD3"><enum>(II)</enum><text>by substituting <quote>361-day period</quote> for <quote>91-day period</quote>, and</text>
</subclause></clause><clause id="H4EB0EBF7CEFF4B0183A164D16CF57ABC"><enum>(ii)</enum><text display-inline="yes-display-inline">paragraph (2) shall not apply.</text>
</clause></subparagraph><subparagraph commented="no" id="H724663F4795B490DBE7EF8819F29F088"><enum>(B)</enum><header>Status must be maintained during holding period</header><text>For purposes of section 245A, the holding period requirement of this subsection shall be treated as
met only if—</text>
<clause commented="no" id="H4872E7B883174ED7A480429693D60508"><enum>(i)</enum><text>the specified 10-percent owned corporation referred to in section 245A(a) is a specified 10-percent
owned corporation at all times during such period, and</text>
</clause><clause commented="no" id="HDBBB210F2911439B88ED30A595D3A196"><enum>(ii)</enum><text>the taxpayer is a United States shareholder with respect to such specified 10-percent owned
corporation at all times during such period.</text></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H8CF4AFF0D5D44F95B3F58494DB73F938"><enum>(c)</enum><header>Application of rules generally applicable to deductions for dividends received</header>
<paragraph id="H97FAAC7000C54511A11FBD413065A287"><enum>(1)</enum><header>Treatment of dividends from certain corporations</header><text display-inline="yes-display-inline">Paragraph (1) of section 246(a) is amended by striking <quote>and 245</quote> and inserting <quote>245, and 245A</quote>.</text>
</paragraph><paragraph commented="no" id="HB9A05B09CA614D23B77B40874677E546"><enum>(2)</enum><header>Assets generating tax-exempt portion of dividend not taken into account in allocating and
apportioning deductible expenses</header><text>Paragraph (3) of section 864(e) is amended by striking <quote>or 245(a)</quote> and inserting <quote>, 245(a), or 245A</quote>.</text>
</paragraph><paragraph id="HC691D35D09D549C69356A5B79EE6071E"><enum>(3)</enum><header>Coordination with section 1059</header><text>Subparagraph (B) of section 1059(b)(2) is amended by striking <quote>or 245</quote> and inserting <quote>245, or 245A</quote>.</text>
</paragraph></subsection><subsection id="HADEBA91173794750890EEAF21983A428"><enum>(d)</enum><header>Coordination with foreign tax credit limitation</header><text>Subsection (b) of section 904, as amended by the preceding provisions of this Act, is amended by
redesignating paragraph (2) as paragraph (1) and by adding at the end the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HFC5431FA198F4B3DB7C6F5662EF889FA" style="OLC">
<paragraph id="H78CA930BB3544B34BF97E6DDE4615F8F"><enum>(2)</enum><header>Treatment of dividends for which deduction is allowed under section 245A</header><text display-inline="yes-display-inline">For purposes of subsection (a), in the case of a domestic corporation which is a United States
shareholder with respect to a specified 10-percent owned foreign
corporation, such domestic corporation’s taxable income from sources
without the United States shall be determined without regard to—</text>
<subparagraph id="H1761CE071644410CA5815AE070C637D6"><enum>(A)</enum><text>the foreign-source portion of any dividend received from such foreign corporation, and</text>
</subparagraph><subparagraph id="H94240DA822A34F8F896C953F8F04DBF1"><enum>(B)</enum><text>any deductions properly allocable to such portion.</text></subparagraph><continuation-text continuation-text-level="paragraph">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.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H4D461F5671124A26B3A97A4BC75BA978"><enum>(e)</enum><header>Conforming amendments</header>
<paragraph id="HF0D720AD4CCF4851BDC735EFECF80007"><enum>(1)</enum><text>Paragraph (4) of section 245(a) is amended by striking <quote>section 902(c)(1)</quote> and inserting <quote>section 245A(c)(2)</quote>.</text>
</paragraph><paragraph id="H4B31B3E4614747549751AFB3BD381CBC"><enum>(2)</enum><text>Subsection (b) of section 951 is amended by striking <quote>subpart</quote> and inserting <quote>title</quote>.</text>
</paragraph><paragraph id="H0A3B41B48B114F27AD064082C8423D36"><enum>(3)</enum><text>Subsection (a) of section 957 is amended by striking <quote>subpart</quote> in the matter preceding paragraph (1) and inserting <quote>title</quote>.</text>
</paragraph><paragraph id="HBF88EC9AAD6045119A31293691E8F6FA"><enum>(4)</enum><text>The table of sections for part VIII of subchapter B of chapter 1 is amended by inserting after the
item relating to section 245 the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H7A26B534E65A4BED97D06FB96ACBF4D1" style="OLC">
<toc container-level="quoted-block-container" idref="H09C00E3A63F94EE9A04A7FD0922A32F9" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H54CACB4295124650BF173719DD35C255" level="section">Sec. 245A. Dividends received by domestic corporations from certain foreign corporations.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection display-inline="no-display-inline" id="HDCDE5B7BCC174DE488FF5C8C72957D53"><enum>(f)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2014, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</subsection></section><section id="HE77B95EE14764B3D95A3B4036CF78F4F"><enum>4002.</enum><header>Limitation on losses with respect to specified 10-percent owned foreign corporations</header>
<subsection id="HBE622D7C95014DFBB2A04E59E36120FD"><enum>(a)</enum><header>Basis in specified 10-Percent owned foreign corporation reduced by nontaxed portion of dividend for
purposes of determining loss</header>
<paragraph id="H45679B967AF647CCA4833963215653A9"><enum>(1)</enum><header>In general</header><text>Section 961 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H751CD117972445B5A2BDA821340F30E0" style="OLC">
<subsection id="HC5D2185DDF7249A58939886052CC5C5F"><enum>(d)</enum><header>Basis in specified 10-Percent owned foreign corporation reduced by nontaxed portion of dividend for
purposes of determining loss</header><text>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 in such taxable year or any subsequent
taxable year, the basis of such domestic corporation in the stock of such
foreign corporation shall be reduced by the amount of any deduction
allowable to such domestic corporation under section 245A with respect to
such stock.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H1EBCB3FB5BE64BA1ABCB5D6845FDEE50"><enum>(2)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to dividends received in taxable years beginning
after December 31, 2014.</text>
</paragraph></subsection><subsection id="H6EEC7FCD26D649DB996D25964DCBD336"><enum>(b)</enum><header>Treatment of foreign branch losses transferred to specified 10-Percent owned foreign corporations</header>
<paragraph id="H2DCC65A82AF5452EA595BDB49FF1981C"><enum>(1)</enum><header>In general</header><text>Part II of subchapter B of chapter 1, as amended by the preceding provisions of this Act, is
amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="HBCD69A93A55A493EAB270BBAEDFF1377" style="OLC">
<section id="HFEC51F6C5E594B66B9D9142ADDF057A7"><enum>92.</enum><header>Certain foreign branch losses transferred to specified 10-percent owned foreign corporations</header>
<subsection id="H8524B7FD638D464AA1371CEEDE92D0BC"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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.</text>
</subsection><subsection id="HB3FC3A037A36410AAF359E16924625D9"><enum>(b)</enum><header>Limitation and carryforward based on foreign-Source dividends received</header>
<paragraph id="H6D64B7F49225409B9495CCE4A411E692"><enum>(1)</enum><header>In general</header><text>The amount included in the gross income of the taxpayer under subsection (a) for any taxable year
shall not exceed the amount allowed as a deduction under section 245A for
such taxable year (taking into account dividends received from all
specified 10-percent owned foreign corporations with respect to which the
taxpayer is a United States shareholder).</text>
</paragraph><paragraph id="HCD2EFBB731D7430FB6DFEC7207646E3C"><enum>(2)</enum><header>Amounts not included carried forward</header><text>Any amount not included in gross income for any taxable year by reason of paragraph (1) shall,
subject to the application of paragraph (1) to the succeeding taxable
year, be included in gross income for the succeeding taxable year.</text>
</paragraph></subsection><subsection id="HEB47DB9C0C82476DB1F67CFCF1F84C3E"><enum>(c)</enum><header>Transferred loss amount</header><text>For purposes of this section, the term <quote>transferred loss amount</quote> means, with respect to any transfer of substantially all of the assets of a foreign branch, the
excess (if any) of—</text>
<paragraph id="HD066254F0DF54415A13D8ED557A68B5C"><enum>(1)</enum><text>the sum of losses—</text>
<subparagraph id="H3F35DC7DCDD24018BF4B94F7E6468F14"><enum>(A)</enum><text>which were incurred by the foreign branch after December 31, 2014, and before the transfer, and</text>
</subparagraph><subparagraph id="H9DF9BAE48FFF48D8A789CA3179DCAAAB"><enum>(B)</enum><text>with respect to which a deduction was allowed to the taxpayer, over</text>
</subparagraph></paragraph><paragraph id="H13FE268F56204BE09C3FF0B051C3486C"><enum>(2)</enum><text>the sum of—</text>
<subparagraph id="H261847E00EED4289B9D53EB6B8B6D13E"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="H852BE918BA534DCBA96C17E4900E275C"><enum>(B)</enum><text display-inline="yes-display-inline">any amount which is recognized under section 904(f)(3) on account of the transfer.</text>
</subparagraph></paragraph></subsection><subsection id="HA71585E0A5A7446DB3D35A4E12C2613C"><enum>(d)</enum><header>Reduction for recognized gains</header>
<paragraph id="H7685175CB82B4480978E1594AF95DC8E"><enum>(1)</enum><header>In general</header><text>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)).</text>
</paragraph><paragraph id="H2565D74920744A7CAFF9C5416897CC5A"><enum>(2)</enum><header>Coordination with recognition under section 367</header><text>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—</text>
<subparagraph id="HA384390375C14A87901C851547C0C2B7"><enum>(A)</enum><text display-inline="yes-display-inline">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</text>
</subparagraph><subparagraph id="HD3751216020A40018E67AC9343201EED"><enum>(B)</enum><text>the amount of gain recognized under section 367(a)(3)(C) with respect to such transfer.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="HC42356A3F014453D9FE47B6B795DA53E"><enum>(e)</enum><header>Source of income</header><text>Amounts included in gross income under this section shall be treated as derived from sources within
the United States.</text>
</subsection><subsection id="H0B745A96BB494CDA846E2CF432BE240E"><enum>(f)</enum><header>Basis adjustments</header><text display-inline="yes-display-inline">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.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H0C2ACF80817E49209AD6D036DD8130D5"><enum>(2)</enum><header>Amounts recognized under section 367 on transfer of foreign branch with previously deducted losses
treated as United States source</header><text>Subparagraph (C) of section 367(a)(3) is amended by striking <quote>outside</quote> in the last sentence and inserting <quote>within</quote>.</text>
</paragraph><paragraph id="H67F4FF66365A4930BA8372C45C3FDBE8"><enum>(3)</enum><header>Clerical amendment</header><text>The table of subparts for such part, as amended by the preceding provisions of this Act, is amended
by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H1D239D39E7454DB3AB4E2DCA99210739" style="OLC">
<toc container-level="quoted-block-container" idref="HBCD69A93A55A493EAB270BBAEDFF1377" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HFEC51F6C5E594B66B9D9142ADDF057A7" level="section">Sec. 92. Certain foreign branch losses transferred to specified 10-percent owned foreign
corporations.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H916CC21A2F05464C8F23EE985D567189"><enum>(4)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to transfers after December 31, 2014.</text>
</paragraph></subsection></section><section id="H23BCF20ED96D41659CF317A42DD2915D"><enum>4003.</enum><header>Treatment of deferred foreign income upon transition to participation exemption system of taxation</header>
<subsection id="H2AA92EA3934B42D5A1C8259FFC501618"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 965 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H320321CD091349DF9600F2853521A9DF" style="OLC">
<section id="HBFF2F153C7C74CB79DB007C5726DD61B"><enum>965.</enum><header>Treatment of deferred foreign income upon transition to participation exemption system of taxation</header>
<subsection id="HAEA95853A8754D2081E822F08FF76720"><enum>(a)</enum><header>Treatment of deferred foreign income as subpart F income</header><text display-inline="yes-display-inline">In the case of the last taxable year of a deferred foreign income corporation which begins before
January 1, 2015, the subpart F income of such foreign corporation (as
otherwise determined for such taxable year under section 952) shall be
increased by the accumulated post-1986 deferred foreign income of such
corporation determined as of the close of such taxable year.</text>
</subsection><subsection id="HFC73E5B2760343B881BFCCF03C05DFF2"><enum>(b)</enum><header>Reduction in amounts included in gross income of United States shareholders of specified foreign
corporations with deficits in earnings and profits</header>
<paragraph id="H7BCA20A701034D9CAABFA7ED8120CDA1"><enum>(1)</enum><header>In general</header><text>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.</text>
</paragraph><paragraph id="HBF7C6C44753144D0834474B491FEC926"><enum>(2)</enum><header>Allocation of aggregate foreign E&P deficit</header><text display-inline="yes-display-inline">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—</text>
<subparagraph id="H19E5D71C4A384C3ABFBB81DEA1986F89"><enum>(A)</enum><text>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</text>
</subparagraph><subparagraph id="HAF900C7DC0514F0CADB27812B28CEA5F"><enum>(B)</enum><text>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.</text>
</subparagraph></paragraph><paragraph id="H66F6D2EC036241FE8D44C7796C4F3F71"><enum>(3)</enum><header>Definitions related to E&P deficits</header><text>For purposes of this subsection—</text>
<subparagraph id="H1FBCCA664F634D3086CD5415D500BC8C"><enum>(A)</enum><header>Aggregate foreign E&P deficit</header><text>The term <quote>aggregate foreign E&P deficit</quote> 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.</text>
</subparagraph><subparagraph id="HD33928F086814F1AB44B46EC6A86F808"><enum>(B)</enum><header>E&P deficit foreign corporation</header><text>The term <quote>E&P deficit foreign corporation</quote> means, with respect to any taxpayer, any specified foreign corporation with respect to which such
taxpayer is a United States shareholder, if—</text>
<clause id="H0AB3D43B5B0B48B49F1632D93E44356D"><enum>(i)</enum><text>such specified foreign corporation has a deficit in post-1986 earnings and profits, and</text>
</clause><clause id="H7114A9E5E58A419E88804EFF552EC77D"><enum>(ii)</enum><text>as of February 26, 2014—</text>
<subclause id="HD3250B513D4F43B8A1555EF30348DEBD"><enum>(I)</enum><text>such corporation was a specified foreign corporation, and</text>
</subclause><subclause id="HA55917DCE3684CF59A82B141FD9BFB07"><enum>(II)</enum><text>such taxpayer was a United States shareholder of such corporation.</text>
</subclause></clause></subparagraph><subparagraph id="H9470509D4F4644D69D3E786F1A8D3505"><enum>(C)</enum><header>Specified E&P deficit</header><text>The term <quote>specified E&P deficit</quote> means, with respect to any E&P deficit foreign corporation, the amount of the deficit referred to in subparagraph (B).</text>
</subparagraph></paragraph></subsection><subsection id="H3F7757CC726F42A4BFB0CC99B03E86BE"><enum>(c)</enum><header>Application of participation exemption to included income</header>
<paragraph id="H1C965D7ED22345A4AEE23C1E6968A633"><enum>(1)</enum><header>In general</header><text>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—</text>
<subparagraph id="HBB2CFA2210044210972EC605C986E028"><enum>(A)</enum><text>90 percent of the excess (if any) of—</text>
<clause id="H89815D8EAB334F4AB96BFBAF488C3203"><enum>(i)</enum><text>the amount so included as gross income, over</text>
</clause><clause id="H2241ABBEBCD044B4AD039A6855BE8610"><enum>(ii)</enum><text>the amount of such United States shareholder’s aggregate foreign cash position, plus</text>
</clause></subparagraph><subparagraph id="HA8CD02F2CA614732A8D36773AB3B60C5"><enum>(B)</enum><text>75 percent of so much of the amount described in subparagraph (A)(ii) as does not exceed the amount
described in subparagraph (A)(i).</text>
</subparagraph></paragraph><paragraph id="HE21C50B8C3784DFEA40B0C4DE9C8E8E3"><enum>(2)</enum><header>Aggregate foreign cash position</header><text>For purposes of this subsection—</text>
<subparagraph id="HF4EEEF0C1CC74B67B164A6486E36C079"><enum>(A)</enum><header>In general</header><text>The term <quote>aggregate foreign cash position</quote> means, with respect to any United States shareholder, the greater of—</text>
<clause id="H4AF4CC6810CB443CB3F571A8863FEFD4"><enum>(i)</enum><text display-inline="yes-display-inline">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 the close of the last taxable year of such specified foreign
corporation which begins before January 1, 2015, or</text>
</clause><clause id="HC6233F3C3F2E4645BAF7D15BCF697104"><enum>(ii)</enum><text>one half of the sum of—</text>
<subclause id="H350A012341214A089ACC85EA346208A6"><enum>(I)</enum><text>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 February 26, 2014,
plus</text>
</subclause><subclause id="H1FC3C18209EC45A98ADE6DDFD0846D6E"><enum>(II)</enum><text>the aggregate described in clause (i) determined as of the close of the taxable year of each such
specified foreign corporation which precedes the taxable year referred to
in subclause (I).</text>
</subclause></clause></subparagraph><subparagraph id="HB23BA176C05C4AEFA08FC97FB5610ABC"><enum>(B)</enum><header>Cash position</header><text>For purposes of this paragraph, the cash position of any specified foreign corporation is the sum
of—</text>
<clause id="H37642FACC8CC42B98F7A49680DA65888"><enum>(i)</enum><text>cash and foreign currency held by such foreign corporation,</text>
</clause><clause id="H583EDBBDE9FD4BA9A59468F6607CE602"><enum>(ii)</enum><text>the net accounts receivable of such foreign corporation, plus</text>
</clause><clause id="HDE22A5DBD3244808BE017ED2C2B54EF0"><enum>(iii)</enum><text>the fair market value of the following assets held by such corporation:</text>
<subclause id="H56D0F15DBEC84895A6244D9675A3B9F9"><enum>(I)</enum><text>Actively traded personal property for which there is an established financial market.</text>
</subclause><subclause id="H2AF99C3D926746C1877DD47EC97F8869"><enum>(II)</enum><text>Commercial paper, certificates of deposit, the securities of the Federal government and of any
State or foreign government</text>
</subclause><subclause id="H68F76A61A8604BB297CA8B79CF9C3C56"><enum>(III)</enum><text>Any obligation with a term of less than one year.</text>
</subclause><subclause id="HB9F5680ED5A84410A3CA3DBCABE9A6A5"><enum>(IV)</enum><text>Any asset which the Secretary identifies as being economically equivalent to any asset described in
this subparagraph.</text>
</subclause></clause></subparagraph><subparagraph id="HDC69107BFC2D46669AFC46C92DD14BF6"><enum>(C)</enum><header>Net accounts receivable</header><text>For purposes of this paragraph, the term <quote>net accounts receivable</quote> means, with respect to any specified foreign corporation, the excess (if any) of—</text>
<clause id="H9B2CDD6F90014DFAB84034A76A259528"><enum>(i)</enum><text>such corporation’s accounts receivable, over</text>
</clause><clause id="H7CF5EC476B3246D6B633B7E487934B3D"><enum>(ii)</enum><text>such corporation’s accounts payable (determined consistent with the rules of section 461).</text>
</clause></subparagraph><subparagraph id="H627527273B7B48FBB8D45E9C4920EA70"><enum>(D)</enum><header>Prevention of double counting</header><text>Cash positions of a specified foreign corporation described in clause (ii) or (iii)(III) of
subparagraph (B) shall not be taken into account by a United States
shareholder under subparagraph (A) to the extent that such United States
shareholder demonstrates to the satisfaction of the Secretary that such
amount is so taken into account by such United States shareholder with
respect to another specified foreign corporation.</text>
</subparagraph><subparagraph id="H6DB38142ECEB4A7EA0F443C761613A63"><enum>(E)</enum><header>Cash positions of foreign pass-thru entities taken into account</header><text>Any foreign entity which would be a specified foreign corporation of a United States shareholder if
such entity were a corporation shall be treated as a specified foreign
corporation of such United States shareholder for purposes of determining
such United States shareholder’s aggregate foreign cash position.</text>
</subparagraph><subparagraph id="HEC0DA5E41D274FFB9CFFF0A2C65D91A9"><enum>(F)</enum><header>Anti-abuse</header><text>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.</text>
</subparagraph></paragraph></subsection><subsection id="H8753110EEA7A40848ADE5AAA21F53D74"><enum>(d)</enum><header>Deferred foreign income corporation; accumulated post-1986 deferred foreign income</header><text>For purposes of this section—</text>
<paragraph id="H3A82FD1B55F34DF99914A251F7A580DE"><enum>(1)</enum><header>Deferred foreign income corporation</header><text>The term <quote>deferred foreign income corporation</quote> means, with respect to any United States shareholder, any specified foreign corporation of such
United States shareholder which has accumulated post-1986 deferred foreign
income (as of the close of the taxable year referred to in subsection (a))
greater than zero.</text>
</paragraph><paragraph id="H9E46DBA0BD4647498450936AD5D73FA4"><enum>(2)</enum><header>Accumulated post-1986 deferred foreign income</header><text>The term <quote>accumulated post-1986 deferred foreign income</quote> means the post-1986 earnings and profits except to the extent such earnings—</text>
<subparagraph id="H7106F93481EE496B87C85AE2DA806C27"><enum>(A)</enum><text>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,</text>
</subparagraph><subparagraph id="H4E750CB27F414F19957DD12B2F8C82F1"><enum>(B)</enum><text>if distributed, would—</text>
<clause id="H6CF4070FE1DA496DAEE73BCBDCAF2367"><enum>(i)</enum><text>in the case of a controlled foreign corporation, be excluded from the gross income of a United
States shareholder under section 959, or</text>
</clause><clause id="HF9C9F20118794A09B596AAA5417F6566"><enum>(ii)</enum><text>in the case of any passive foreign investment company (as defined in section 1297) other than a
controlled foreign corporation, be treated as a distribution which is not
a dividend, or</text>
</clause></subparagraph><subparagraph id="H62508FA7CD2E463BA76FD5B5E3EBE8FE"><enum>(C)</enum><text>in the case of any passive foreign investment company (as so defined), is properly attributable to
an unreversed inclusion of a United States person under section 1296.</text></subparagraph><continuation-text continuation-text-level="paragraph">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)(i) is such shareholders were United States shareholders.
Such regulations or other guidance may provide a similar rule for purposes
of subparagraph (B)(ii) and (C).</continuation-text></paragraph><paragraph id="HA8B72A5AE6D541B292A82F43AF8C4B2F"><enum>(3)</enum><header>Post-1986 earnings and profits</header><text display-inline="yes-display-inline">The term <quote>post-1986 earnings and profits</quote> 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—</text>
<subparagraph id="H5460C5B1CB414835B7601177EA0542E4"><enum>(A)</enum><text>as of the close the taxable year referred to in subsection (a), and</text>
</subparagraph><subparagraph id="HB93A2FA5FEE048DFB863289F69436D2B"><enum>(B)</enum><text display-inline="yes-display-inline">without diminution by reason of dividends distributed during such taxable year.</text>
</subparagraph></paragraph></subsection><subsection id="H8E6254E4CBCD4FDAA7679CC4E9BD53E1"><enum>(e)</enum><header>Specified foreign corporation</header>
<paragraph id="H70F96A71E7764E9A91299D06F67821F0"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>specified foreign corporation</quote> means—</text>
<subparagraph id="H91E56C44B16C496EB4B742B913B9B7BF"><enum>(A)</enum><text>any controlled foreign corporation, and</text>
</subparagraph><subparagraph id="H194CB2ECA2B8427D947C0F3131129350"><enum>(B)</enum><text>any section 902 corporation (as defined in section 909(d)(5) as in effect before the date of the
enactment of the <short-title>Tax Reform Act of 2014</short-title>).</text>
</subparagraph></paragraph><paragraph id="H0234DECEE4EB4D30AA7521412E5BB559"><enum>(2)</enum><header>Application to section 902 corporations</header><text>For purposes of section 951, a section 902 corporation (as so defined) 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)).</text>
</paragraph></subsection><subsection id="HDAE2FA48279746C785E3D5D84BC5DAB8"><enum>(f)</enum><header>Determinations of pro rata share</header><text display-inline="yes-display-inline">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).</text>
</subsection><subsection display-inline="no-display-inline" id="HEFE6BDD8125C472CBC07C95EA1E5B9C6"><enum>(g)</enum><header>Disallowance of foreign tax credit, etc</header>
<paragraph id="H7294D0FA47B248A5BD4E562C74420972"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">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.</text>
</paragraph><paragraph id="HF2C62B78EE4A4E1A8B41366370932DA0"><enum>(2)</enum><header>Applicable percentage</header><text>For purposes of this subsection, the term <quote>applicable percentage</quote> means the amount (expressed as a percentage) equal to the sum of—</text>
<subparagraph id="HC1089B2BFC0F4118B7A6E82F99681DBE"><enum>(A)</enum><text>0.9 multiplied by the ratio of—</text>
<clause id="H8F9F63844B484D9BB70862DB3D538317"><enum>(i)</enum><text>the excess to which subsection (c)(1)(A) applies, divided by</text>
</clause><clause id="H902EC00AB0464B86BD8BA2A69D8B36D2"><enum>(ii)</enum><text>the sum of such excess plus the amount to which subsection (c)(1)(B) applies, plus</text>
</clause></subparagraph><subparagraph id="HE232A79AD9FA4404BAFF703C6A3D6744"><enum>(B)</enum><text>0.75 multiplied by the ratio of—</text>
<clause id="HFE83382453F74EC0BFFE3E1E12C6DE2A"><enum>(i)</enum><text display-inline="yes-display-inline">the amount to which subsection (c)(1)(B) applies, divided by</text>
</clause><clause id="HBF06CBF6EEAB42D6836C2BAC277164ED"><enum>(ii)</enum><text>the sum described in subparagraph (A)(ii).</text>
</clause></subparagraph></paragraph><paragraph id="HC1C5481E059C481AA5547F76DEBFB40A"><enum>(3)</enum><header>Denial of deduction</header><text display-inline="yes-display-inline">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).</text>
</paragraph><paragraph id="H3F9A8D2576044B9B929A4517CC865958"><enum>(4)</enum><header>Coordination with section 78</header><text display-inline="yes-display-inline">Section 78 shall not apply to any tax for which credit is not allowable under section 901 by reason
of paragraph (1).</text>
</paragraph></subsection><subsection id="H59F2643AB77F4E909E6FF0FC463EF5C4"><enum>(h)</enum><header>Election To pay liability in installments</header>
<paragraph id="HC44B4561119445D689394EB5E00F0BE8"><enum>(1)</enum><header>In general</header><text>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 installments of the following amounts:</text>
<subparagraph id="H8EE58DCD2EF94F97A8613B431760EC0D"><enum>(A)</enum><text>8 percent of the net tax liability in the case of each of the first 5 of such installments,</text>
</subparagraph><subparagraph id="H4ABEA968513F4276996B3CBBC18A2F98"><enum>(B)</enum><text>15 percent of the net tax liability in the case of the 6th such installment,</text>
</subparagraph><subparagraph id="HFA6BD3BD9D8E47A388B4BC5999B1941F"><enum>(C)</enum><text>20 percent of the net tax liability in the case of the 7th such installment, and</text>
</subparagraph><subparagraph id="H84036D0C423247F7B0BF3C2698D0E4B9"><enum>(D)</enum><text>25 percent of the net tax liability in the case of the 8th such installment.</text>
</subparagraph></paragraph><paragraph id="H0F144212322F451EBA6CB9D69E8BBD54"><enum>(2)</enum><header>Date for payment of installments</header><text>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 (b) 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.</text>
</paragraph><paragraph id="H1C400F6E738842B7BC1FC07F573F134A"><enum>(3)</enum><header>Acceleration of payment</header><text>If there is an addition to tax for failure to pay timely assessed with respect to 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.</text>
</paragraph><paragraph id="H4D5C20471932415C8691219FFF5A15F7"><enum>(4)</enum><header>Proration of deficiency to installments</header><text display-inline="yes-display-inline">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.</text>
</paragraph><paragraph id="H3080EEE57E204C2EAC4DAB47FC18B444"><enum>(5)</enum><header>Election</header><text>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.</text>
</paragraph><paragraph id="HB6602A1E6A5348FA91575A0E96469768"><enum>(6)</enum><header>Net tax liability under this section</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph id="H72C6D637F5D34E5C87909C8BE10369B4"><enum>(A)</enum><header>In general</header><text>The net tax liability under this section with respect to any United States shareholder is the
excess (if any) of—</text>
<clause id="HE3B78BC4B0C14DB8BA2D7690529B0067"><enum>(i)</enum><text>such taxpayer’s net income tax for the taxable year described in subsection (a), over</text>
</clause><clause id="H175BF5197CA1496DACC29DC5633A4592"><enum>(ii)</enum><text>such taxpayer’s net income tax for such taxable year determined without regard to this section.</text>
</clause></subparagraph><subparagraph id="H28D47CA85FBA4FB795B38BAD32D1B0D8"><enum>(B)</enum><header>Net income tax</header><text>The term <quote>net income tax</quote> means the regular tax liability reduced by the credits allowed under subparts A, B, and D of part
IV of subchapter A.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="HD0D6A206A6FC417B8E4A5012171A0E93"><enum>(i)</enum><header>Special rules for S corporation shareholders</header>
<paragraph commented="no" id="HE93E02728A874E1588880F9A1636DD25"><enum>(1)</enum><header>In general</header><text>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.</text>
</paragraph><paragraph commented="no" id="H14CB45A99E67408EA0988DDC65B87A3D"><enum>(2)</enum><header>Triggering event</header>
<subparagraph commented="no" id="HA436BDA6D9884D06B2EA2637D622E460"><enum>(A)</enum><header>In general</header><text>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:</text>
<clause commented="no" id="H6FF138DF32B6468ABBF2CA4745DDE0DF"><enum>(i)</enum><text>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).</text>
</clause><clause commented="no" id="H5DE93AC4B6D049C1B20C584B955598AE"><enum>(ii)</enum><text display-inline="yes-display-inline">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.</text>
</clause><clause commented="no" id="H66F9DD42128746A2BEAB230CD491BFB9"><enum>(iii)</enum><text display-inline="yes-display-inline">A transfer of any share of stock in such S corporation by the taxpayer (including by reason of
death, or otherwise).</text>
</clause></subparagraph><subparagraph commented="no" id="HB99BA14AFB2A4F9F8AFABA979A8F0144"><enum>(B)</enum><header>Partial transfers of stock</header><text>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.</text>
</subparagraph><subparagraph commented="no" id="HDC29261D18034EC3AFD4073B8A6F9B3B"><enum>(C)</enum><header>Transfer of liability</header><text>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.</text>
</subparagraph></paragraph><paragraph commented="no" id="H99B51AC4522F46C2A6F08D108B20B6D4"><enum>(3)</enum><header>Net tax liability</header><text>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.</text>
</paragraph><paragraph commented="no" id="HAF61D87903F94E469A734E4D66CB4252"><enum>(4)</enum><header>Election to pay deferred liability in installments</header><text display-inline="yes-display-inline">In the case of a taxpayer which elects to defer payment under paragraph (1), subsection (h) shall
be applied—</text>
<subparagraph commented="no" id="H51405780F21147CCAD893DD2632186AB"><enum>(A)</enum><text>separately with respect to the liability to which such election applies,</text>
</subparagraph><subparagraph commented="no" id="H0685A0F13C2F40438DC8093F78DCCB55"><enum>(B)</enum><text display-inline="yes-display-inline">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,</text>
</subparagraph><subparagraph commented="no" id="HF7A24E685EBA496B859D57E5FF4A076E"><enum>(C)</enum><text display-inline="yes-display-inline">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</text>
</subparagraph><subparagraph commented="no" id="HD212368695EC4765A9685791F50A26D8"><enum>(D)</enum><text>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.</text>
</subparagraph></paragraph><paragraph commented="no" id="HB241A4A3B2EF4F2DBBED6DAF18572332"><enum>(5)</enum><header>Joint and several liability of S corporation</header><text display-inline="yes-display-inline">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.</text>
</paragraph><paragraph id="HAC2F59C1D5954236B197B6B883A67066"><enum>(6)</enum><header>Extension of limitation on collection</header><text>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.</text>
</paragraph><paragraph commented="no" id="H96E88A437B7D491FB27BCC0C8BD26D58"><enum>(7)</enum><header>Election</header><text>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.</text>
</paragraph></subsection><subsection id="H6B529D225DE44F33B299178E63312BF3"><enum>(j)</enum><header>Inclusion of deferred foreign income under this section not To trigger recapture of overall foreign
loss</header><text>For purposes of section 904(f)(1), 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 shall be determined without regard to
this section.</text>
</subsection><subsection id="H5A1A267198994713AED368B4419A8E95"><enum>(k)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate
to carry out the provisions of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H242E3F90255546A2934312D0B377B9F4"><enum>(b)</enum><header>Dedication of revenues to highway trust fund</header>
<paragraph id="HDB6C3A5C3B114F8BA486FE1C06B33F92"><enum>(1)</enum><header>In general</header><text>Section 9503(f) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after
paragraph (4) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H7DD911682BAF43D987A16C240121D6C5" style="OLC">
<paragraph id="HD766A57DC0964CA38D5D359974D70F49"><enum>(5)</enum><header>Appropriation to trust fund of net tax liabilities received under section 965</header>
<subparagraph id="H8FF8A3247ADB4ED380443E05E5143754"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Out of money in the Treasury not otherwise appropriated, there are hereby appropriated to the
Highway Trust Fund amounts equivalent to the aggregate net tax liabilities
under section 965 (as defined in such section) received in the Treasury.</text>
</subparagraph><subparagraph id="HAA8AFED53AF5422D9B05EA3CA1F83A7C"><enum>(B)</enum><header>Monthly transfers based on estimates</header><text>For rule providing for the monthly transfer of amounts appropriated under subparagraph (A) based on
estimates of the Secretary, see section 9601.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HAA19EFC9613D4BCF82507513FCE1364D"><enum>(2)</enum><header>Transfers to Mass Transit Account</header><text>Section 9503(e)(2) is amended by striking <quote>the mass transit portion</quote> and inserting <quote>, 20 percent of the amounts appropriated to the Highway Trust Fund under subsection (f)(5), and the
mass transit portion</quote>.</text>
</paragraph></subsection><subsection id="HD0FD6216114C40D49DC2B85AD673E2C3"><enum>(c)</enum><header>Clerical amendment</header><text>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:</text>
<quoted-block display-inline="no-display-inline" id="HE9B6427CECBA49CAA768A9116365625E" style="OLC">
<toc container-level="quoted-block-container" idref="H320321CD091349DF9600F2853521A9DF" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HBFF2F153C7C74CB79DB007C5726DD61B" level="section">Sec. 965. Treatment of deferred foreign income upon transition to participation exemption system of
taxation.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="H7BF0E3CD352443CBB95C8FA6DE498207"><enum>4004.</enum><header>Look-thru rule for related controlled foreign corporations made permanent</header>
<subsection id="HB4115EAB5FFC4D9D88E04889D8324613"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (6) of section 954(c) is amended by striking subparagraph (C).</text>
</subsection><subsection display-inline="no-display-inline" id="H849E57DE96B84F9384CCAA11484B0A63"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2013, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</subsection></section></subtitle><subtitle id="HD4E11BD9B39F4EA3A55F58D05757026D"><enum>B</enum><header>Modifications related to foreign tax credit system</header>
<section commented="no" id="HB3C9BB74B0F84FC7821A22B261005867"><enum>4101.</enum><header>Repeal of section 902 indirect foreign tax credits; determination of section 960 credit on current
year basis</header>
<subsection commented="no" id="H5C3B576A691B48EC9F2C435430A6D82D"><enum>(a)</enum><header>Repeal of section 902 indirect foreign tax credits</header><text display-inline="yes-display-inline">Subpart A of part III of subchapter N of chapter 1 is amended by striking section 902.</text>
</subsection><subsection id="H7841ECEC20834AE880E1341CB263D1F9"><enum>(b)</enum><header>Determination of section 960 credit on current year basis</header><text display-inline="yes-display-inline">Section 960 is amended—</text>
<paragraph id="HD6472D54C3B04D7696113062D457C308"><enum>(1)</enum><text>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:</text>
<quoted-block display-inline="no-display-inline" id="HAB70B822E67F4EE58442980F4A28E6FF" style="OLC">
<section commented="no" id="H670F8B8BCB20428C85F5510FBA4E77B5"><enum>960.</enum><header>Deemed paid credit for subpart F inclusions</header>
<subsection id="HFE72631745434AF3A8C589E579D3FA8B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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 the item of income so included.</text>
</subsection><subsection id="H6035AA0C33FA4171835395137F3EFC84"><enum>(b)</enum><header>Special rules for distributions from previously taxed earnings and profits</header><text display-inline="yes-display-inline">For purposes of this subpart—</text>
<paragraph id="H2E40B24E68014B34A98D716B81ECFAED"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">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—</text>
<subparagraph id="HED4F809548304D4C9D04DB3E81455F04"><enum>(A)</enum><text>are properly attributable to such portion, and</text>
</subparagraph><subparagraph id="HBDDC9EBCC7124551B5F2F8BC9FCF083C"><enum>(B)</enum><text>have not been deemed to have to been paid by such domestic corporation under this section for any
prior taxable year.</text>
</subparagraph></paragraph><paragraph id="HA07D0834CAC84794B3C9E41A87BBB537"><enum>(2)</enum><header>Tiered controlled foreign corporations</header><text>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—</text>
<subparagraph id="H1111FED60A79402DA6F697F1820AF878"><enum>(A)</enum><text>are properly attributable to such portion, and</text>
</subparagraph><subparagraph id="H44314186E0714ED09178E995B7571A19"><enum>(B)</enum><text>have not been deemed to have been paid by a domestic corporation under this section for any prior
taxable year.</text></subparagraph></paragraph></subsection></section><after-quoted-block>,</after-quoted-block></quoted-block>
</paragraph><paragraph id="H72CEA8D7BB4E4E41AE1356588871BB07"><enum>(2)</enum><text>and by adding after subsection (c) (as so redesignated) the following new subsections:</text>
<quoted-block display-inline="no-display-inline" id="H4C6AE77343E2412190818A7540445AA8" style="OLC">
<subsection commented="no" id="HB2CAFC5477D24896AA84BB6EE78459E1"><enum>(d)</enum><header>Foreign income taxes</header><text>The term <quote>foreign income taxes</quote> means any income, war profits, or excess profits taxes paid or accrued to any foreign country or
possession of the United States.</text>
</subsection><subsection commented="no" id="H898DB3893F834C1282E5E09B0EA4CABA"><enum>(e)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary shall provide such regulations as may be necessary or appropriate to carry out the
provisions of this section.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H33DB93132CEC488786D718D19D798E59"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H050F81192B18492A8F455373039F104F"><enum>(1)</enum><text>Section 78 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HFA4AA9F671CC43EAB9E146318BC62C39" style="OLC">
<section id="H28F4DDD62ADB4BF18964994EC3F8B12A"><enum>78.</enum><header>Gross up for deemed paid foreign tax credit</header><text display-inline="no-display-inline">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 section 960
(relating to deemed paid credit for subpart F inclusions) for such taxable
year shall be treated for purposes of this title (other than section 960)
as an item of income required to be included in the gross income of such
domestic corporation under section 951(a).</text></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H35B8153BCA3C476C812B3FA17CB1AE98"><enum>(2)</enum><text>Section 245(a)(10) is amended by striking <quote>902,</quote>.</text>
</paragraph><paragraph id="H929E9406A05844FF9BB2064F36AB3AB4"><enum>(3)</enum><text>Sections 535(b)(1) and 545(b)(1) are each amended by striking <quote>section 902(a) or 960(a)(1)</quote> and inserting <quote>section 960</quote>.</text>
</paragraph><paragraph id="HD57CA3E7A567471EA079C5FF020319A5"><enum>(4)</enum><text>Paragraph (1) of section 814(f) is amended—</text>
<subparagraph id="HB38BE05D22404450AAF0348338527C9E"><enum>(A)</enum><text>by striking subparagraph (B), and</text>
</subparagraph><subparagraph id="HF0E625EA0AAB4100A09590E31E7A7852"><enum>(B)</enum><text>by striking all that precedes <quote>No income</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="HFF791F31D8234C15B7784836B53ABE93" style="OLC">
<paragraph id="H011281B70C33429292B97E7D148E4B59"><enum>(1)</enum><header>Treatment of foreign taxes</header></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H122557A8992A4CCBB65D2F3E37E2329A"><enum>(5)</enum><text>Subparagraph (B) of section 864(h)(1) is amended by striking <quote>902,</quote>.</text>
</paragraph><paragraph id="H56B6B9B5E0974A8E97224E23D3546031"><enum>(6)</enum><text>Subsection (a) of section 901 is amended by striking <quote>sections 902 and 960</quote> and inserting <quote>section 960</quote>.</text>
</paragraph><paragraph id="H6CB6C40F6F694B2E8F49AEBE1D4F7B7E"><enum>(7)</enum><text>Paragraph (2) of section 901(e) is amended by striking <quote>but is not limited to—</quote> and all that follows through <quote>that portion</quote> and inserting <quote>but is not limited to that portion</quote>.</text>
</paragraph><paragraph id="HF51918D44FF44FF58AC828193C0CA508"><enum>(8)</enum><text>Subsection (f) of section 901 is amended by striking <quote>sections 902 and 960</quote> and inserting <quote>section 960</quote>.</text>
</paragraph><paragraph id="HF49A111CB1164FC79D56A09F75866BD7"><enum>(9)</enum><text>Subparagraph (A) of section 901(j)(1) is amended by striking <quote>902 or</quote>.</text>
</paragraph><paragraph id="HD04DDB606300411FA359652822FCF067"><enum>(10)</enum><text>Subparagraph (B) of section 901(j)(1) is amended by striking <quote>sections 902 and 960</quote> and inserting <quote>section 960</quote>.</text>
</paragraph><paragraph id="HED700CD43FB74823902B78B2A8B2AAD7"><enum>(11)</enum><text>Paragraph (2) of section 901(k) is amended by striking <quote>902,</quote>.</text>
</paragraph><paragraph id="H23D553DD9E0C400A8E33D4EC89938DB1"><enum>(12)</enum><text>Paragraph (6) of section 901(k) is amended by striking <quote>902 or</quote>.</text>
</paragraph><paragraph id="HDD21C670CE1A44A69EB2A7E39017149F"><enum>(13)</enum><text>Subparagraph (A) of section 904(h)(10) is amended by striking <quote>sections 902, 907, and 960</quote> and inserting <quote>sections 907 and 960</quote>.</text>
</paragraph><paragraph id="HC87AE1D3195343BDB1309E69EBAA093C"><enum>(14)</enum><text>Section 904 is amended by striking subsection (k).</text>
</paragraph><paragraph id="HD3C0BA67E3C64ADB98A0FA4BE50E9501"><enum>(15)</enum><text>Paragraph (1) of section 905(c) is amended by striking the last sentence.</text>
</paragraph><paragraph id="H1A38C55A3E884C35ACB0DF362B671077"><enum>(16)</enum><text>Subclause (I) of section 905(c)(2)(B)(i) is amended by striking <quote>section 902 or</quote>.</text>
</paragraph><paragraph id="H3EABCE8F855A4042B309EA611327F417"><enum>(17)</enum><text>Subsection (a) of section 906 is amended by striking <quote>(or deemed, under section 902, paid or accrued during the taxable year)</quote>.</text>
</paragraph><paragraph id="H90C1DE4181DF472496C4943CE7B2DBC2"><enum>(18)</enum><text>Subsection (b) of section 906 is amended by striking paragraphs (4) and (5).</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H359268B8A5974FB8A21AD7AECFD3AF2F"><enum>(19)</enum><text>Subparagraph (B) of section 907(b)(2) is amended by striking <quote>902 or</quote>.</text>
</paragraph><paragraph commented="no" id="HA23BC2E9B0EA456A9A0A5D4B27E5422D"><enum>(20)</enum><text>Paragraph (3) of section 907(c) is amended—</text>
<subparagraph commented="no" id="H9E33FF39945B4203986A2BC4359D302B"><enum>(A)</enum><text>by striking subparagraph (A) and redesignating subparagraphs (B) and (C) as subparagraphs (A) and
(B), respectively, and</text>
</subparagraph><subparagraph commented="no" id="HC602E14094D74F69BD3C4F4EA792CE94"><enum>(B)</enum><text>by striking <quote>section 960(a)</quote> in subparagraph (A) (as so redesignated) and inserting <quote>section 960</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H267DE89D92554C6DA2EF967976E5FC9D"><enum>(21)</enum><text>Paragraph (5) of section 907(c) is amended by striking <quote>902 or</quote>.</text>
</paragraph><paragraph commented="no" id="H971299559C3F42B1B518D2FAF00972B3"><enum>(22)</enum><text>Clause (i) of section 907(f)(2)(B) is amended by striking <quote>902 or</quote>.</text>
</paragraph><paragraph id="HC60A078019924A0F9214E600B3294CC3"><enum>(23)</enum><text>Subsection (a) of section 908 is amended by striking <quote>902 or</quote>.</text>
</paragraph><paragraph commented="no" id="H411721F103CE4097A4B3F5DD36B4A7EF"><enum>(24)</enum><text>Subsection (b) of section 909 is amended—</text>
<subparagraph id="H7E98AC6AD2D24CB2AAE7DB19721E9A6E"><enum>(A)</enum><text>by striking <quote>section 902 corporation</quote> in the matter preceding paragraph (1) and inserting <quote>specified 10-percent owned foreign corporation</quote>,</text>
</subparagraph><subparagraph id="H11F61916B4B24345B86E1F693CC5F078"><enum>(B)</enum><text>by striking <quote>902 or</quote> in paragraph (1),</text>
</subparagraph><subparagraph id="H3E58C1EA1CD2492DBAFFA036CABE1CD7"><enum>(C)</enum><text>by striking <quote>by such section 902 corporation</quote> and all that follows in the matter following paragraph (2) and inserting <quote>by such specified 10-percent owned foreign corporation or a domestic corporation which is a United
States shareholder with respect to such specified 10-percent owned foreign
corporation.</quote>, and</text>
</subparagraph><subparagraph id="H5251E54FF5324DF7BABA70268516498F"><enum>(D)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">section 902 corporations</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text level="subsection" style="OLC">specified 10-percent owned foreign corporations</header-in-text></quote>.</text>
</subparagraph></paragraph><paragraph id="H79378EFE49314BB097F47503A2EE37F5"><enum>(25)</enum><text>Subsection (d) of section 909 is amended by striking paragraph (5).</text>
</paragraph><paragraph commented="no" id="HB983FF0C97BC4FC98CAEE31AD5CD1788"><enum>(26)</enum><text>Paragraph (1) of section 958(a) is amended by striking <quote>960(a)(1)</quote> and inserting <quote>960</quote>.</text>
</paragraph><paragraph id="H2F697E147E0C49F884F1A5E8F89C8F38"><enum>(27)</enum><text>Subsection (d) of section 959 is amended by striking <quote>Except as provided in section 960(a)(3), any</quote> and inserting <quote>Any</quote>.</text>
</paragraph><paragraph id="H1B6A1F7ECF724634A6CC6FA69F417DA9"><enum>(28)</enum><text>Subsection (e) of section 959 is amended by striking <quote>and section 960(b)</quote>.</text>
</paragraph><paragraph id="H228F6B2E4A8F4F37A2ADA75930ACCDBD"><enum>(29)</enum><text>Subparagraph (A) of section 1291(g)(2) is amended by striking <quote>any distribution—</quote> and all that follows through <quote>but only if</quote> and inserting <quote>any distribution, any withholding tax imposed with respect to such distribution, but only if</quote>.</text>
</paragraph><paragraph id="H7D2171BA21AE47AFB4480A557C48FD0D"><enum>(30)</enum><text display-inline="yes-display-inline">Section 1293 is amended by striking subsection (f).</text>
</paragraph><paragraph id="H1BC4D91C31694994BE8C88BF72D384C9"><enum>(31)</enum><text>Subparagraph (B) of section 6038(c)(1) is amended by striking <quote>sections 902 (relating to foreign tax credit for corporate stockholder in foreign corporation) and
960 (relating to special rules for foreign tax credit)</quote> and inserting <quote>section 960</quote>.</text>
</paragraph><paragraph id="H545FBC8AA36648DFB0C72FAFDE901DA7"><enum>(32)</enum><text>Paragraph (4) of section 6038(c) is amended by striking subparagraph (C).</text>
</paragraph><paragraph id="H6A413EF9C7DE41A5B22268B5E151559F"><enum>(33)</enum><text display-inline="yes-display-inline">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.</text>
</paragraph><paragraph id="H5E9E765DA0D74FC7AD323BD97B168A79"><enum>(34)</enum><text display-inline="yes-display-inline">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:</text>
<quoted-block display-inline="no-display-inline" id="H52224FFDEDED492892E01299BA58FB29" style="OLC">
<toc container-level="quoted-block-container" idref="HAB70B822E67F4EE58442980F4A28E6FF" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H670F8B8BCB20428C85F5510FBA4E77B5" level="section">Sec. 960. Deemed paid credit for subpart F inclusions.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HB61A17DA9B084556B8E4AB7EC247B54F"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2014, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</subsection></section><section commented="no" id="H763C4E0F3FD3477289D7F16F8D5B61EB"><enum>4102.</enum><header>Foreign tax credit limitation applied by allocating only directly allocable deductions to foreign
source income</header>
<subsection commented="no" id="HF870B37768A54889A6007BD2B3D75322"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (b) of section 904, as amended by the preceding provisions of this Act, is amended by
adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H69AB49A3FC3B4407934D6F645BC070A2" style="OLC">
<paragraph commented="no" id="H2D2674CBBD7E48CC84E9D03AFDA351F9"><enum>(3)</enum><header>Deductions allocable to foreign source income only if directly allocable</header><text display-inline="yes-display-inline">For purposes of subsection (a), the taxpayer’s taxable income from sources without the United
States shall be determined by allocating deductions to such income only if
such deductions are directly allocable to such income.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HF512B2FCC572456B90274F5C8B90919A"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2014, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</subsection></section><section id="HF73BEE972D4542A49C4E6307AD11C3AC"><enum>4103.</enum><header>Passive category income expanded to include other mobile income</header>
<subsection id="H0CA93F4D5F3A410F951BAEB87326E5F3"><enum>(a)</enum><header>Treatment of foreign base company intangible income and foreign base company sales income as mobile
category income</header><text>Clause (i) of section 904(d)(2)(A) is amended by striking <quote>and specified passive category income</quote> and inserting <quote>specified passive category income, foreign base company sales income (as defined in section
954(d)), and foreign base company intangible income (as defined in section
954(f))</quote>.</text>
</subsection><subsection id="HE990D56C409D4827BF57FE9AF024B38E"><enum>(b)</enum><header>Repeal of special rules treating financial services income as general category income</header><text>Paragraph (2) of section 904(d) is amended by striking subparagraphs (C) and (D) and by
redesignating subparagraphs (E) through (K) as subparagraphs (C) through
(I), respectively.</text>
</subsection><subsection commented="no" id="H1B6C94EA69A540CF9F408848E543F14E"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H15998B14748E40A4A6BDB1F001E88378"><enum>(1)</enum><header>Relating to references to passive income</header>
<subparagraph id="H09C081B683894C628CA3769CBBB6A143"><enum>(A)</enum><text>Section 904(d)(1)(A) is amended by striking <quote>passive category income</quote> and inserting <quote>mobile category income</quote>.</text>
</subparagraph><subparagraph id="H22E9786269EC4179A232B798B6D7FFB7"><enum>(B)</enum><text>Section 904(d)(2)(A)(i), as amended by subsection (a), is amended—</text>
<clause id="H004D2A3928E743E7B359E4D35316CE1D"><enum>(i)</enum><text>by striking <quote><header-in-text level="clause" style="OLC">Passive category income</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text level="clause" style="OLC">Mobile category income</header-in-text></quote>,</text>
</clause><clause id="HE5608028B8FC47B3937005EB32E0F147"><enum>(ii)</enum><text>by striking <quote>passive category income</quote> and inserting <quote>mobile category income</quote>,</text>
</clause><clause id="H569222029B324BE5ACAB328C858558EB"><enum>(iii)</enum><text>by striking <quote>passive income</quote> and inserting <quote>mobile income</quote>, and</text>
</clause><clause id="H5D68737BE7AD45B58FA8BB2FB393DDA9"><enum>(iv)</enum><text>by striking <quote>specified passive category income</quote> and inserting <quote>specified mobile category income</quote>.</text>
</clause></subparagraph><subparagraph id="HC34248B7D92A498292EA5E72932C2703"><enum>(C)</enum><text>Section 904(d)(2)(A)(ii) is amended by striking <quote>passive category income</quote> and inserting <quote>mobile category income</quote>.</text>
</subparagraph><subparagraph id="H26635E48A2834055B9232A6FB055A9B2"><enum>(D)</enum><text>Section 904(d)(2)(B) is amended—</text>
<clause id="HAA6BFC3DE810436BA4B9F111C141A6FD"><enum>(i)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">Passive income</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text level="subparagraph" style="OLC">Mobile income</header-in-text></quote>,</text>
</clause><clause id="H71BC3DF94A1E45F7BD3A58A4DD11F870"><enum>(ii)</enum><text>by striking <quote>passive income</quote> in clauses (i), (ii), and (iii) and inserting <quote>mobile income</quote>,</text>
</clause><clause id="H1A3CAC7D2591403BB7DD80D67DDDA9EF"><enum>(iii)</enum><text>by striking <quote><header-in-text level="clause" style="OLC">Specified passive category income</header-in-text></quote> in the heading of clause (iv) and inserting <quote><header-in-text level="clause" style="OLC">Specified mobile category income</header-in-text></quote>, and</text>
</clause><clause id="H419B6A874DC440BFAB946D035063BBF3"><enum>(iv)</enum><text>by striking <quote>specified passive category income</quote> in clause (iv) and inserting <quote>specified mobile category income</quote>.</text>
</clause></subparagraph><subparagraph id="H289125512F6A48E9B4D4D70B0B269048"><enum>(E)</enum><text>Section 904(d)(2)(D), as redesignated by subsection (b), is amended by striking <quote>passive income</quote> and inserting <quote>mobile income</quote>.</text>
</subparagraph><subparagraph id="HBADEB5E15420439EB775C28B9C5B2A60"><enum>(F)</enum><text>Section 904(d)(3)(A) is amended by striking <quote>passive category income</quote> and inserting <quote>mobile category income</quote>.</text>
</subparagraph><subparagraph id="H9E1968CB0C8D41B183CC8EAC393A5C78"><enum>(G)</enum><text>Section 904(d)(3)(B) is amended by striking <quote>passive category income</quote> both places it appears and inserting <quote>mobile category income</quote>.</text>
</subparagraph><subparagraph id="H05634E1932E34385BDC83EA57837D8FD"><enum>(H)</enum><text display-inline="yes-display-inline">Section 904(d)(3)(C) is amended by striking <quote>passive category income</quote> both places it appears and inserting <quote>mobile category income</quote>.</text>
</subparagraph><subparagraph id="H94D73387D16145359A5939204D74D697"><enum>(I)</enum><text display-inline="yes-display-inline">Section 904(d)(3)(D) is amended by striking <quote>passive category income</quote> both places it appears and inserting <quote>mobile category income</quote>.</text>
</subparagraph><subparagraph id="HA997464038A641D5AC27BEE2A81B1C1F"><enum>(J)</enum><text>Section 904(d)(3)(E) is amended—</text>
<clause id="H727E9D95D31C4FADBC3A0B40E9A5D8E5"><enum>(i)</enum><text display-inline="yes-display-inline">by striking <quote>passive category income</quote> both places it appears and inserting <quote>mobile category income</quote>, and</text>
</clause><clause id="H84B6897A997640F0BBB2A6030B47825A"><enum>(ii)</enum><text>by striking <quote>passive income</quote> and inserting <quote>mobile income</quote>.</text>
</clause></subparagraph><subparagraph id="HDF5F576AEB7C4A6C9244E407413D3A29"><enum>(K)</enum><text display-inline="yes-display-inline">Section 904(d)(3)(F) is amended by striking <quote>passive category income</quote> both places it appears and inserting <quote>mobile category income</quote>.</text>
</subparagraph></paragraph><paragraph id="HD71C2ED20E5E4D9CA6BDF0C559B3C180"><enum>(2)</enum><header>Other conforming amendments</header>
<subparagraph commented="no" id="H8FFC9FCF394D407FBFCBD73C2F8EAB47"><enum>(A)</enum><text>Subparagraph (B) of section 864(f)(5) is amended by inserting <quote>(as in effect before its repeal)</quote> after <quote>section 904(d)(2)(D)(ii)</quote>.</text>
</subparagraph><subparagraph commented="no" id="HD261069E05124A76B1A75A242473DE84"><enum>(B)</enum><text>Subparagraph (B) of section 954(c)(2) is amended by striking <quote>section 904(d)(2)(G)</quote> and inserting <quote>section 904(d)(2)(E)</quote>.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H059DCE462A8B4CBE9E68E4789B6FEE25"><enum>(d)</enum><header>Effective date</header>
<paragraph id="H2D32C85533A4489E9E5D2E7A14FD9B47"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2014, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</paragraph><paragraph id="H85AF481B13524BA5A5B425661C826D0E"><enum>(2)</enum><header>Treatment of carryforwards and carrybacks</header><text display-inline="yes-display-inline">For purposes of <external-xref legal-doc="usc" parsable-cite="usc/26/904">section 904</external-xref> of the Internal Revenue Code of 1986—</text>
<subparagraph id="H83F0FC45306E4D55A57054D538FDC00C"><enum>(A)</enum><text>the amendments made by this section shall apply to any taxes carried from any taxable year
beginning before January 1, 2015, to any taxable year beginning on or
after such date, and</text>
</subparagraph><subparagraph id="H9CAA279D15404E3DA1D9078915461C51"><enum>(B)</enum><text>the Secretary of the Treasury, or his designee, may by regulations provide for the allocation of
any carryback of taxes with respect to income from a taxable year
beginning on or after January 1, 2015, to a taxable year beginning before
such date for purposes of allocating such income among the separate
categories in effect under section 904(d) for the taxable year to which
carried.</text>
</subparagraph></paragraph></subsection></section><section id="H398F5854C091412CAD8321D06006AD17"><enum>4104.</enum><header>Source of income from sales of inventory determined solely on basis of production activities</header>
<subsection id="H129713B040B84B138A3796BCCDA17C66"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (b) of section 863 is amended by adding at the end the following: <quote>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.</quote>.</text>
</subsection><subsection id="H443FD10C0F7C495083709947107B8E0B"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="H919122EE1F6A44AFA111342E37E70D70"><enum>C</enum><header>Rules related to passive and mobile income</header>
<part id="HE2232EBFE27E4AC2B91EB8481F59ACA2"><enum>1</enum><header>Modification of subpart F provisions</header>
<section commented="no" id="HADAA328ED46F48598EF8114A992685E2"><enum>4201.</enum><header>Subpart F income to only include low-taxed foreign income</header>
<subsection id="H2461267F8F124924BAA40846955FA31D"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (a) of section 954 is amended—</text>
<paragraph id="H61AEBFE2C39C4ADD8AC5A6B01308076D"><enum>(1)</enum><text>by redesignating paragraphs (1), (2), (3), and (5) as subparagraphs (A) through (D), respectively,</text>
</paragraph><paragraph id="H75425DD6479D43B38801EE46F9EE1D73"><enum>(2)</enum><text>by striking <quote>For purposes of </quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="HED829628D487408FB589DFC19BE8446C" style="OLC">
<paragraph id="HF88E5F8D125246828C33F1A41C9CEBAA"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of</text></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</paragraph><paragraph id="H9BD5B5C0DAFC4E4D9CF20A3B3CB809A5"><enum>(3)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H6A727A4BCB3F43A18A3391FF94DB3E00" style="OLC">
<paragraph id="H6F7A176620474F6C8D88120D5D8D8181"><enum>(2)</enum><header>Application only to foreign base company income subject to a low foreign effective rate of tax</header>
<subparagraph id="H83964C14DD4E4D398DC8CF4AF167541B"><enum>(A)</enum><header>In general</header><text>Foreign base company income shall only include items of income received by a controlled foreign
corporation which are subject to an effective rate of income tax imposed
by a foreign country which is less than 100 percent of the maximum rate of
tax specified in section 11.</text>
</subparagraph><subparagraph id="H7E7BBB9598164408BDE596DD98AFE196"><enum>(B)</enum><header>Application to foreign base company income subject to reduced domestic rate of tax</header>
<clause id="H9081473CAE2B413692D9B1BDC9044B17"><enum>(i)</enum><header>Foreign base company sales income</header><text>In the case of foreign base company sales income, subparagraph (A) shall be applied by substituting <quote>50 percent</quote> for <quote>100 percent</quote>.</text>
</clause><clause id="HA6C53FCBE7434ED1887D3F1267694542"><enum>(ii)</enum><header>Foreign base company intangible income</header><text>In the case of foreign base company intangible income, subparagraph (A) shall be applied—</text>
<subclause id="H00D9B78DD07F4DB8909DA51803AD597A"><enum>(I)</enum><text>by substituting <quote>the applicable percentage of the foreign percentage (determined under section 250(c) with respect
to the controlled foreign corporation)</quote> for <quote>100 percent</quote>, and</text>
</subclause><subclause id="H281292CAE72E458DBC9D0C82E4185F3F"><enum>(II)</enum><text>by treating the foreign base company intangible income as a single item of income.</text>
</subclause></clause><clause id="H403F45F50B294423957DF25E8972B189"><enum>(iii)</enum><header>Applicable percentage</header><text>For purposes of clause (ii)(I), the term <quote>applicable percentage</quote> means, with respect to any taxable year of a controlled foreign corporation, the percentage
determined in accordance with the following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="1" frame="topbot" line-rules="hor-ver" rowsep="0" rule-weights="4.4.4.0.0.0" table-template-name="Generic: 2 text, 1st longer" table-type="">
<tgroup cols="2" grid-typeface="1.1" no-carding="1" rowsep="0" thead-tbody-ldg-size="10.10.12"><colspec coldef="txt" colname="column1" colwidth="217pts" min-data-value="200" rowsep="0"></colspec><colspec coldef="txt-no-ldr" colname="column2" colsep="1" colwidth="108pts" min-data-value="100"></colspec><thead>
<row><entry align="center" colname="column1" morerows="0" namest="column1" rowsep="1">In the case of any taxable year beginning in:</entry><entry align="center" colname="column2" morerows="0" namest="column2" rowsep="1">The applicable percentage is:</entry></row></thead>
<tbody>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2015</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">45 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2016</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">48 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2017</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">52 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2018</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">56 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2019 or thereafter</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">60 percent.</entry></row></tbody></tgroup></table></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HAAAB3140282B468CB5D4A269861CC8D0"><enum>(b)</enum><header>Insurance income</header><text>Subsection (a) of section 953 is amended by redesignating paragraph (2) as paragraph (3) and by
inserting after paragraph (1) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H0A704BDCD1C64FDEBB5E5D641F959C52" style="OLC">
<paragraph id="HE42921F996EF41CBAC03BDC5A6CF57CB"><enum>(2)</enum><header>Application only to insurance income subject to a low foreign effective rate of tax</header><text display-inline="yes-display-inline">Insurance income shall only include items of income received by a controlled foreign corporation
which are subject to an effective rate of income tax imposed by a foreign
country which is less than the maximum rate of tax specified in section
11.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H2922E995518D46159D964CA732E2E7F7"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H4F7E445C29DE41EC8BA52461C8874E10"><enum>(1)</enum><text display-inline="yes-display-inline">Section 954(b)(3)(B) is amended by striking <quote>paragraphs (4) and (5)</quote> and inserting <quote>subsection (a)(2), section 953(a)(2), and paragraph (5)</quote></text>
</paragraph><paragraph id="HFFBC544141DD4161AC02F32F4ADD7D82"><enum>(2)</enum><text>Section 954(b) is amended by striking paragraph (4).</text>
</paragraph><paragraph id="HB1E597BA9CB94EEE8BA2D32A2DAB413E"><enum>(3)</enum><text>Section 954(c)(1) is amended by striking <quote>subsection (a)(1)</quote> and inserting <quote>this section</quote>.</text>
</paragraph><paragraph id="H2B01C26C9192470488FD5F527797ED26"><enum>(4)</enum><text>Section 954(d)(1) is amended by striking <quote>subsection (a)(2)</quote> and inserting <quote>this section</quote>.</text>
</paragraph><paragraph id="HA4BCFE80252847A88E503A972B5E64F7"><enum>(5)</enum><text>Section 954(e)(1) is amended by striking <quote>subsection (a)(3)</quote> and inserting <quote>this section</quote>.</text>
</paragraph></subsection><subsection id="HE76C52575CD7419CAD8349B4594A0B18"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2014, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</subsection></section><section id="H962985FB36B1422990F6A9CB085C01B4"><enum>4202.</enum><header>Foreign base company sales income</header>
<subsection id="H198136B53F2E4FA1BBE2F2557C117515"><enum>(a)</enum><header>50-Percent exclusion for low-Taxed foreign base company sales income</header>
<paragraph id="HC56C3170876443C1B003977D6C7AF446"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraph (B) of section 954(a)(1), as amended by the preceding provisions of this Act, is
amended by inserting <quote>50 percent of</quote> before <quote>the foreign base company sales income</quote>.</text>
</paragraph><paragraph id="H3D3E7CEB53B14058916399A2C50B4A9D"><enum>(2)</enum><header>Preservation of deemed paid foreign tax credit on low-taxed foreign base company income</header><text>Section 960, as amended by this Act, is amended by redesignating subsection (c) as subsection (d)
and by inserting after subsection (b) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HE6F52BC6866849DFBFA8FCD85D4BBF9E" style="OLC">
<subsection id="H3E61A1FF88F14602AA37C3A4AF408755"><enum>(c)</enum><header>Deemed paid credit determined without regard to certain exclusions from subpart F income</header><text display-inline="yes-display-inline">Solely for purposes of subsection (a), section 954(a)(1)(B) shall be applied by substituting <quote>100 percent</quote> for <quote>50 percent</quote> in determining amounts included under section 951(a)(1).</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H406C08192AD44EBA80B7EC4F173B6380"><enum>(b)</enum><header>Exception from foreign base company sales income for foreign corporations eligible for benefits
under comprehensive income tax treaties</header><text display-inline="yes-display-inline">Section 954(d) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H4C400CB94D904565860B7CBDCAAE5C57" style="OLC">
<paragraph id="H1619299F6B9A4022B416D7DABDEC03E9"><enum>(5)</enum><header>Exception for foreign corporations eligible for benefits under comprehensive income tax treaties</header><text display-inline="yes-display-inline">No portion of the gross income of a controlled foreign corporation shall be treated as foreign base
company sales income if such controlled foreign corporation is eligible as
a qualified resident for all of the benefits provided under a
comprehensive income tax treaty with the United States.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H1CED20919AAC40F29738B34155CDFDC4"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2014, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</subsection></section><section id="HB91C062900834A0CBAB029B1D4FACC5F"><enum>4203.</enum><header>Inflation adjustment of de minimis exception for foreign base company income</header>
<subsection id="H4A0418E46D35433BABA5EBAD7D58DABD"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (3) of section 954(b) is amended by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H643887B0E48E4A6EB42316726F9AABBA" style="OLC">
<subparagraph id="HD994478BF3CD410A84FCDC946FBEDBFB"><enum>(D)</enum><header>Inflation adjustment</header><text>In the case of any taxable year beginning after 2015, the dollar amount in subparagraph (A)(ii)
shall be increased by an amount equal to—</text>
<clause id="H1721B002704444CFA557E3C9A09DE8B5"><enum>(i)</enum><text>such dollar amount, multiplied by</text>
</clause><clause id="H5F9A39EDB2024566A5B2B97DE1F3897F"><enum>(ii)</enum><text>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 <quote>calendar year 2014</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text></clause><continuation-text continuation-text-level="subparagraph">Any increase determined under the preceding sentence shall be rounded to the nearest multiple of
$50,000.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H4BC785D65D0541BAAF86302DD732C537"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2014, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</subsection></section><section id="HBCD9223A608240BD9CE01E4F46F529C4"><enum>4204.</enum><header>Active financing exception extended with limitation for low-taxed foreign income</header>
<subsection id="H85910A40A8E2435992545DDC1087315F"><enum>(a)</enum><header>Extension of active financing exception</header>
<paragraph id="H080329F110DC4B0E8AD72164F7A899B3"><enum>(1)</enum><header>In general</header><text>Paragraph (9) of section 954(h) is amended by striking <quote>January 1, 2014</quote> and inserting <quote>January 1, 2019</quote>.</text>
</paragraph><paragraph id="H911DE11C9AEF4AF7A0B7E822843205B0"><enum>(2)</enum><header>Exempt insurance income</header><text>Paragraph (10) of section 953(e) is amended—</text>
<subparagraph id="HA4AE599B8AE24441A877C7649E7EA41B"><enum>(A)</enum><text>by striking <quote>January 1, 2014</quote> and inserting <quote>January 1, 2019</quote>, and</text>
</subparagraph><subparagraph id="H12573D8A1CA84CBEA8CD7D937070075E"><enum>(B)</enum><text>by striking <quote>December 31, 2013</quote> and inserting <quote>December 31, 2018</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H20ACC291643941FAA9E36C4A8F8BE884"><enum>(b)</enum><header>Limitation for low-Taxed foreign income</header>
<paragraph id="H0315D9784FC646E482B28681AC22219A"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of section 954(h) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H6F026AE6903149CF8A8971912DDA0EFE" style="OLC">
<paragraph id="H9640819C6B5A4516A405A2EE18EBB3A8"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of subsection (c)(1), in the case of an eligible controlled foreign corporation,
foreign personal holding company income shall not include—</text>
<subparagraph id="HF36EEB7EFA574A8B8512A1C7D2FB86EC"><enum>(A)</enum><text display-inline="yes-display-inline">qualified banking or financing income which is subject to an effective rate of income tax imposed
by a foreign country which is at least 50 percent of the maximum rate of
tax specified in section 11, and</text>
</subparagraph><subparagraph id="H79EC7E17AB474BF2BF6B25C6B10A8FCF"><enum>(B)</enum><text>50 percent of any other qualified banking or financing income of such eligible controlled foreign
corporation.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H137DABF634764EBE946600B4285FC8D4"><enum>(2)</enum><header>Insurance business income</header><text>Paragraph (1) of section 954(i) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HD15DFE1176494BDCA9067C5E6F8500EE" style="OLC">
<paragraph id="HF6AB5D9678F849DEB4F54365C7543624"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of subsection (c)(1), in the case of a qualifying insurance company, foreign personal
holding company income shall not include—</text>
<subparagraph id="H19A6EB172625425EB66D7D9CE32D1140"><enum>(A)</enum><text display-inline="yes-display-inline">any qualified insurance income which is subject to an effective rate of income tax imposed by a
foreign country which is at least 50 percent of the maximum rate of tax
specified in section 11, and</text>
</subparagraph><subparagraph id="H3311EF6BE36244B8A74798DA6667EF71"><enum>(B)</enum><text>50 percent of any other qualified insurance income of such qualifying insurance company.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HAF1619C9AD7C4774A4BB96D2C465D734"><enum>(3)</enum><header>Preservation of deemed paid foreign tax credit on high-taxed foreign income</header><text>Subsection (c) of section 960, as amended by the preceding provisions of this Act, is amended by
striking <quote>Solely for purposes of subsection (a)</quote> and all that following and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="H8491EB4D15FA4854B563E233B2DFAAA1" style="OLC"><text>Solely for purposes of subsection (a)—</text><paragraph id="H2FE458F1E532464FBF1919A67B1B5F1E"><enum>(1)</enum><text display-inline="yes-display-inline">section 954(a)(1)(B) shall be applied by substituting <quote>100 percent</quote> for <quote>50 percent</quote>, and</text>
</paragraph><paragraph id="H7CE0966D82AD4EC798807CFE11A9CC72"><enum>(2)</enum><text>the exclusions under subsections (h)(1)(B) and (i)(1)(B) of section 954 shall not apply,</text>
</paragraph><quoted-block-continuation-text quoted-block-continuation-text-level="subsection">in determining amounts included under section 951(a)(1).</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H07940109C43742D6891031FE2109E11B"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2013, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</subsection></section><section commented="no" id="HBC0910F250BA4673975F6FE66E646586"><enum>4205.</enum><header>Repeal of inclusion based on withdrawal of previously excluded subpart F income from qualified
investment</header>
<subsection id="HB24479AEA25E4CAE8AF945D40D05AD7D"><enum>(a)</enum><header>In general</header><text>Subpart F of part III of subchapter N of chapter 1 is amended by striking section 955.</text>
</subsection><subsection id="H66ABDC8F81BB45FD858D07423886619F"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H1F151D1CCBAD48308BF34916322692FC"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="HE731CB0E709E4A6DB4338DDA59985FCC"><enum>(A)</enum><text>Subparagraph (A) of section 951(a)(1), as amended by this Act, is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H8659915224D245E4AA4EB7B87DBF5804" style="OLC">
<subparagraph id="H7C7B9CD9C6B543DDA70C984798B20BE0"><enum>(A)</enum><text display-inline="yes-display-inline">his pro rata share (determined under paragraph (2)) of the corporation’s subpart F income for such
year, and</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HD726C89B4AB94DFF8EC97258BDF2778B" indent="up1"><enum>(B)</enum><text>Paragraph (3) of section 851(b) is amended by striking <quote>section 951(a)(1)(A)(i)</quote> in the flush language at the end and inserting <quote>section 951(a)(1)(A)</quote>.</text>
</subparagraph><subparagraph id="HB14C6CDD48BE4EBDB968A8BACF8323DA" indent="up1"><enum>(C)</enum><text>Clause (i) of section 952(c)(1)(B) is amended by striking <quote>section 951(a)(1)(A)(i)</quote> and inserting <quote>section 951(a)(1)(A)</quote>.</text>
</subparagraph><subparagraph id="HD2D42D304DE14828902AFC6FF6068DD3" indent="up1"><enum>(D)</enum><text>Subparagraph (C) of section 953(c)(1) is amended by striking <quote>section 951(a)(1)(A)(i)</quote> and inserting <quote>section 951(a)(1)(A)</quote>.</text>
</subparagraph></paragraph><paragraph id="H6F6A0A1A276F41DC918E0FBBAC1A681C"><enum>(2)</enum><text>Subsection (a) of section 951 is amended by striking paragraph (3).</text>
</paragraph><paragraph id="H0A647A1F171047A2A50855E479E090EB"><enum>(3)</enum><text>Subclause (II) of section 953(d)(4)(B)(iv) is amended by striking <quote>or amounts referred to in clause (ii) or (iii) of section 951(a)(1)(A)</quote>.</text>
</paragraph><paragraph id="HD01BAA3782D44B73BEE5B060C7B7378A"><enum>(4)</enum><text>Subsection (b) of section 964 is amended by striking <quote>, 955,</quote>.</text>
</paragraph><paragraph id="H68586E70EDCF43D9BA877AE7D095169A"><enum>(5)</enum><text>Section 970 is amended by striking subsection (b).</text>
</paragraph><paragraph id="HCF938DDE7F0546D9B02D44CFF0AD5F15"><enum>(6)</enum><text display-inline="yes-display-inline">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.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HC1BB7181B4114CF288967BD512626CE5"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years of foreign corporations beginning
after December 31, 2014, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</subsection></section></part><part id="H94CD6E92582B490BA5BA7CF92702EC10"><enum>2</enum><header>Prevention of base erosion</header>
<section display-inline="no-display-inline" id="HFF57C8521DA14CD9BA2885BE0DF35F9C" section-type="subsequent-section"><enum>4211.</enum><header>Foreign intangible income subject to taxation at reduced rate; intangible income treated as subpart
F income</header>
<subsection id="HBE7B86614F024BF39BE25487ADEC9179"><enum>(a)</enum><header>Foreign base company intangible income treated as subpart F income</header>
<paragraph id="H31F9DD3BE9AD439A8F85CFFE6E65DB7B"><enum>(1)</enum><header>Treatment as subpart F income</header><text display-inline="yes-display-inline">Paragraph (1) of section 954(a), as amended by the preceding provisions of this Act, is amended by
redesignating subparagraph (D) as subparagraph (E) and by inserting after
subparagraph (C) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HBA8D91A7FD774C4EB847A729BAED58CD" style="OLC">
<subparagraph id="HCDBAE9E814134E92BB83080B25CA8AAE"><enum>(D)</enum><text display-inline="yes-display-inline">the foreign base company intangible income for the taxable year (determined under subsection (f)
and reduced as provided in subsection (b)(5)), and</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H61A7B321C1C84CD3BE5ECDB3A0AC44AE"><enum>(2)</enum><header>Foreign base company intangible income defined</header><text display-inline="yes-display-inline">Section 954 of such Code is amended by inserting after subsection (e) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H983B3F673D494AA3B337D611BA5F54EE" style="OLC">
<subsection id="HE08315262A3F47138E1C1A831C0D5870"><enum>(f)</enum><header>Foreign base company intangible income</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H0F564C7FBB824F9FB6D59B8D9C1D9208"><enum>(1)</enum><header>In general</header><text>The term <quote>foreign base company intangible income</quote> means, with respect to any corporation for any taxable year, the excess of—</text>
<subparagraph id="HD7D0352536C64D23A3A404BE567FDB5C"><enum>(A)</enum><text>so much of the adjusted gross income of the corporation as exceeds 10 percent of the corporation’s
qualified business asset investment, over</text>
</subparagraph><subparagraph id="HF7F6CA0750DB415C8FD3B9BCB1D99B9C"><enum>(B)</enum><text display-inline="yes-display-inline">the applicable percentage of such corporation’s foreign personal holding company income, foreign
base company sales income, foreign base company services income, and
foreign base company oil related income.</text>
</subparagraph></paragraph><paragraph id="HD40BA9475A134DCEB1B913AC8F01F0F4"><enum>(2)</enum><header>Applicable percentage</header><text>For purposes of paragraph (1), the term <quote>applicable percentage</quote> means, with respect to any corporation for any taxable year, the ratio (expressed as a percentage)
of—</text>
<subparagraph id="HABB2EB1EC32A490A9E6999CC242575B1"><enum>(A)</enum><text>the excess described in paragraph (1)(A), divided by</text>
</subparagraph><subparagraph id="HD5306F01E06D488FAF4B88C3019D0568"><enum>(B)</enum><text>the adjusted gross income of the corporation.</text>
</subparagraph></paragraph><paragraph id="H18273BE448FE4F60BCED8B82DCEBB5E5"><enum>(3)</enum><header>Qualified business asset investment</header>
<subparagraph id="H448349E41C844A5F9B9D136132D047A5"><enum>(A)</enum><header>In general</header><text>The term <quote>qualified business asset investment</quote> means, with respect to any corporation for any taxable year, 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—</text>
<clause id="H8FE3B5916BEF4FA4A5C3030C33A3213A"><enum>(i)</enum><text>used in a trade or business of the corporation, and</text>
</clause><clause id="H2A8BD9BA8DC449E99A3FB9FCF751430E"><enum>(ii)</enum><text>of a type with respect to which a deduction is allowable under section 168.</text>
</clause></subparagraph><subparagraph id="H4D1DAB84159D4376BBD3227B844E0F7B"><enum>(B)</enum><header>Determination of adjusted basis</header><text display-inline="yes-display-inline">For purposes of subparagraph (A), 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.</text>
</subparagraph><subparagraph id="H48B391CC80ED4192940376C820A810A7"><enum>(C)</enum><header>Regulations</header><text>The Secretary shall issue such regulations or other guidance as the Secretary determines
appropriate to prevent the avoidance of the purposes of this paragraph,
including regulations or other guidance which provide for the treatment of
property if—</text>
<clause id="HB53A75AA3581479A84C99C7FBB8FDA0E"><enum>(i)</enum><text>such property is transferred, or held, temporarily, or</text>
</clause><clause id="HA962B9DEAC104E9896C1C59E0EA55224"><enum>(ii)</enum><text>the avoidance of the purposes of this paragraph is a factor in the transfer or holding of such
property.</text>
</clause></subparagraph></paragraph><paragraph commented="no" id="HCC712E2568C14F2EAB39A0E32025BCC6"><enum>(4)</enum><header>Adjusted gross income; specified tangible property</header><text display-inline="yes-display-inline">For purposes of this subsection—</text>
<subparagraph commented="no" id="HDD3F6D7AA71847338CBF829C768FF85F"><enum>(A)</enum><header>Adjusted gross income</header>
<clause commented="no" id="H159FB7A967994205A93FD829C5CF0640"><enum>(i)</enum><header>In general</header><text>The term <quote>adjusted gross income</quote> means, with respect to any corporation, the gross income of such corporation reduced by such
corporation’s commodities gross income.</text>
</clause><clause commented="no" id="H72EFD9E7FB1742F9BDFCF1C6DCF03F4A"><enum>(ii)</enum><header>Commodities gross income</header><text>The term <quote>commodities gross income</quote> means, with respect to any corporation, the gross income of such corporation which is derived from
commodities which are produced or extracted by such corporation.</text>
</clause></subparagraph><subparagraph commented="no" id="H1EA986A59352477AA26EEAFF75BE5B43"><enum>(B)</enum><header>Specified tangible property</header><text>The term <quote>specified tangible property</quote> means any tangible property unless such property is used in the production of commodities gross
income. In the case of property which is used in the production of
commodities gross income and other gross income, such property shall be
treated as specified tangible property in the same proportion that the
adjusted gross income produced with respect to such property bears to the
total gross income produced with respect to such property.</text>
</subparagraph><subparagraph commented="no" id="H92BCF2CF3BA342A3B830F4F4093957ED"><enum>(C)</enum><header>Commodity</header><text>The term <quote>commodity</quote> means any commodity described in section 475(e)(2).</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H2291E6B7AB2144258B5A5CFC616964A1"><enum>(3)</enum><header>Application only to foreign base company intangible income subject to a low foreign effective rate
of tax</header><text>Paragraph (2) of section 954(a), as amended by preceding provisions of this Act, is amended by
inserting <quote>or foreign base company intangible income</quote> after <quote>foreign base company sales income</quote>.</text>
</paragraph><paragraph id="HEF5E724DB48040DEAB4DEF291A175846"><enum>(4)</enum><header>Conforming amendment</header><text>Paragraph (5) of section 954(b) is amended by inserting <quote>the foreign base company intangible income,</quote> before <quote>and the foreign base company oil related income</quote>.</text>
</paragraph></subsection><subsection id="HCA343B34700844B9A1A057B174879E00"><enum>(b)</enum><header>Deduction for foreign intangible income</header>
<paragraph id="HCA82F6B7A9C94416A338197DAE72297C"><enum>(1)</enum><header>In general</header><text>Part VIII of subchapter B of chapter 1 is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H3F9CC1437CC94AE1A388A069BF0833E8" style="OLC">
<section id="H33A6641D5F23403CBB6E1E8E02FAEFE4"><enum>250.</enum><header>Foreign intangible income</header>
<subsection id="HA2BDF40E16954CDBA41DEC70BDEB573B"><enum>(a)</enum><header>In general</header><text>In the case of a domestic corporation for any taxable year, there shall be allowed as a deduction
an amount equal to the applicable percentage of the lesser of—</text>
<paragraph id="HE91B3E790FF5429BB76CC04913FA1CC3"><enum>(1)</enum><text>the sum of—</text>
<subparagraph id="H0DD152707F6D4E8F912FD9CEEF5C5A3A"><enum>(A)</enum><text>the foreign percentage multiplied by the net imputed intangible income of such domestic corporation
for such taxable year, plus</text>
</subparagraph><subparagraph id="H081D7757F08B40F7BF1505039B5571D0"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of a domestic corporation which is a United States shareholder with respect to any
controlled foreign corporation, the foreign percentage (determined with
respect to such controlled foreign corporation) multiplied by any foreign
base company intangible income (as defined in section 954(f)) of such
controlled foreign corporation which is included in the gross income of
such domestic corporation under section 951 for such taxable year, or</text>
</subparagraph></paragraph><paragraph id="H9E5CA564A5594F0287A3CEEE9BBA087B"><enum>(2)</enum><text>taxable income of such domestic corporation (determined without regard to this section) for the
taxable year.</text>
</paragraph></subsection><subsection id="H7EF4FE169DCA4D1B8955586C1BD070F5"><enum>(b)</enum><header>Net imputed intangible income</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>net imputed intangible income</quote> means the excess of—</text>
<paragraph id="H5505B26B7A62456599234A789C4472F0"><enum>(1)</enum><text>the excess described in section 954(f)(1)(A), over</text>
</paragraph><paragraph id="H11FDF8FC5C7644D0A0BB55BCC42A56D7"><enum>(2)</enum><text>the deductions properly allocable to the amount described in paragraph (1).</text>
</paragraph></subsection><subsection id="H6ABBA775AEA5442A8FA6B10CA4F4ED8D"><enum>(c)</enum><header>Foreign percentage</header><text>For purposes of this section—</text>
<paragraph id="HA9BF488AF8AA48748C978E2682B1386A"><enum>(1)</enum><header>In general</header><text>The term <quote>foreign percentage</quote> means, with respect to any corporation for any taxable year, the ratio (expressed as a percentage)
of—</text>
<subparagraph id="H4996872FC5DF4FF4A6097EA59A25DE63"><enum>(A)</enum><text>the foreign-derived adjusted gross income of such corporation for such taxable year, over</text>
</subparagraph><subparagraph id="H3E809B155E3343D79C2BC6941F4BDAF3"><enum>(B)</enum><text display-inline="yes-display-inline">the adjusted gross income of such corporation for such taxable year.</text>
</subparagraph></paragraph><paragraph id="HC80869495BA3447C9298F066AF5912EF"><enum>(2)</enum><header>Foreign-derived adjusted gross income</header>
<subparagraph id="H2D302730AE8C4CABB7AC669E0E57B9AF"><enum>(A)</enum><header>In general</header><text>The term <quote>foreign-derived adjusted gross income</quote> means, with respect to any corporation for any taxable year, any adjusted gross income of such
corporation which is derived in connection with—</text>
<clause display-inline="no-display-inline" id="HA888D5FF5FFF4F9BA50E6596E012D433"><enum>(i)</enum><text>property which is sold for use, consumption, or disposition outside the United States, or</text>
</clause><clause id="H51601DA89D224C9E8BDAB602453E3922"><enum>(ii)</enum><text>services provided with respect to persons or property located outside the United States.</text>
</clause></subparagraph><subparagraph id="H485649696EA24D148037B19A4B5FF877"><enum>(B)</enum><header>Special rules</header>
<clause id="H6166907064034669BD26466EF3CD381A"><enum>(i)</enum><header>Ultimate disposition</header><text>Property shall not be treated as sold for use, consumption, or disposition outside the United
States if the taxpayer knew, or had reason to know, that such property
would be ultimately sold for use, consumption, or disposition in the
United States.</text>
</clause><clause id="HFB846367E4344BD8BAEC4DA617A79711"><enum>(ii)</enum><header>Sales to related parties</header><text>If property is sold to a related party, such sale shall not be treated as for use, consumption or
disposition outside the United States unless—</text>
<subclause id="HF6ACB8A1257B4F0683935029E8884F5D"><enum>(I)</enum><text>such property is ultimately sold for use, consumption or disposition outside the United States, or</text>
</subclause><subclause id="HF19B8640557F46C9B61B01B4DB1ACC9B"><enum>(II)</enum><text>such property is resold to an unrelated party outside the United States and no related party knew
or had reason to know that such property would be ultimately sold for use,
consumption, or disposition in the United States.</text>
</subclause></clause><clause id="HEB8DBCBCDDB64AADA70BCB13F95E7909"><enum>(iii)</enum><header>Application to services</header><text>Rules similar to the rules of clauses (i) and (ii) shall apply with respect to services described
in subparagraph (A)(ii).</text>
</clause></subparagraph><subparagraph id="H3CF0303A27C64AF88D511A49388E8A83"><enum>(C)</enum><header>Related party</header><text>For purposes of this paragraph, the term <quote>related party</quote> means any member of an affiliated group as defined in section 1504(a), determined—</text>
<clause id="HC7A1B5576CD9447E9C2F50C1044A0C24"><enum>(i)</enum><text>by substituting <quote>more than 50 percent</quote> for <quote>at least 80 percent</quote> each place it appears, and</text>
</clause><clause id="H73DED9149FE34105AD8872043DFBA14D"><enum>(ii)</enum><text>without regard to paragraphs (2) and (3) of section 1504(b).</text></clause><continuation-text continuation-text-level="subparagraph">Any person (other than a corporation) shall be treated as a member of such group if such person is
controlled by members of such group (including any entity treated as a
member of such group by reason of this sentence) or controls any such
member. For purposes of the preceding sentence, control shall be
determined under the rules of section 954(d)(3).</continuation-text></subparagraph></paragraph><paragraph id="HAB7D47C1538C45AF80B68611750EE678"><enum>(3)</enum><header>Adjusted gross income</header><text>The term <quote>adjusted gross income</quote> has the meaning given such term by section 954(f)(4).</text>
</paragraph></subsection><subsection id="H19F3D8EB6AE44BCCB2D66A30AF9A2C49"><enum>(d)</enum><header>Applicable percentage</header><text>For purposes of this section, the term <quote>applicable percentage</quote> means, with respect to any taxable year of the domestic corporation referred to in subsection (a),
the percentage determined in accordance with the following table:</text>
<table align-to-level="section" blank-lines-before="1" colsep="1" frame="topbot" line-rules="hor-ver" rowsep="0" rule-weights="4.4.4.0.0.0" table-template-name="Generic: 2 text, 1st longer" table-type="">
<tgroup cols="2" grid-typeface="1.1" no-carding="1" rowsep="0" thead-tbody-ldg-size="10.10.12"><colspec coldef="txt" colname="column1" colwidth="217pts" min-data-value="200" rowsep="0"></colspec><colspec coldef="txt-no-ldr" colname="column2" colsep="1" colwidth="108pts" min-data-value="100"></colspec><thead>
<row><entry align="center" colname="column1" morerows="0" namest="column1" rowsep="1">In the case of any taxable year beginning in:</entry><entry align="center" colname="column2" morerows="0" namest="column2" rowsep="1">The applicable percentage is:</entry></row></thead>
<tbody>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2015</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">55 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2016</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">52 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2017</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">48 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2018</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">44 percent</entry></row>
<row><entry align="left" colname="column1" leader-modify="force-ldr" rowsep="0" stub-definition="txt-ldr" stub-hierarchy="1">2019 or thereafter</entry><entry align="left" colname="column2" leader-modify="clr-ldr" rowsep="0">40 percent.</entry></row></tbody></tgroup></table>
</subsection><subsection id="H32AB8FC45C4745DFA32D3F03174FA343"><enum>(e)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate
to carry out the provisions of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph display-inline="no-display-inline" id="H6FE054247F3141619DCFEF46D2D54D3E"><enum>(2)</enum><header>Conforming amendments</header>
<subparagraph id="H1AC0D55B789C46D391B043FF9EBD31BE"><enum>(A)</enum><text>Clause (i) of section 163(j)(6)(A), as amended by the preceding provisions of this Act, is amended
by striking <quote>and</quote> at the end of subclause (II) and by adding at the end the following new subclause:</text>
<quoted-block display-inline="no-display-inline" id="HE4666B6BECD64DF0B5B61DE836602C8B" style="OLC">
<subclause id="HCA9D5641BCFB458F85A9F658DB342479"><enum>(IV)</enum><text display-inline="yes-display-inline">any deduction allowable under section 250, and</text></subclause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H9006E4F25A8F45B7A1856ABDA0642CAC"><enum>(B)</enum><text>Subparagraph (C) of section 170(b)(2) is amended by striking <quote>and</quote> at the end of clause (iv), by redesignating clause (v) as clause (vi), and by inserting after
clause (iv) the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="H2642702214864B74ACDD022E7BF84FED" style="OLC">
<clause id="HAFF8B18ED1DA479484A551DB678780EF"><enum>(v)</enum><text display-inline="yes-display-inline">section 250, and</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H39664CED57F547849177D059E2E5D4A4"><enum>(C)</enum><text>Subsection (d) of section 172, as amended by the preceding provisions of this Act, is amended by
adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H00AA40BCE8D6478EA2AEBDA871BED5AF" style="OLC">
<paragraph id="H5C26AB9B305E467EA2126EE35D72011B"><enum>(7)</enum><header>Deduction for foreign intangible income</header><text display-inline="yes-display-inline">The deduction under section 250 shall not be allowed.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H05C534A8AE0F47708EFFE44C3BE8B5AF"><enum>(D)</enum><text>Paragraph (1) of section 246(b) is amended by striking <quote>and 247</quote> and inserting <quote>247, and 250</quote>.</text>
</subparagraph><subparagraph id="HB8F6C87D0FEE415F97ED8BBB96F115BB"><enum>(E)</enum><text>Clause (iii) of section 469(i)(3)(D), as amended by the preceding provisions of this Act, is
amended by striking <quote>and 222</quote> and inserting <quote>222, and 250</quote>.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HBA397ABD9C2D4D53BF484788090F963A"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H2407F89ADF9B4672829EE4610391E0AA"><enum>(1)</enum><header>Treatment as subpart F income</header><text>The amendments made by subsection (a) shall apply to taxable years of foreign corporations
beginning after December 31, 2014, and to taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end.</text>
</paragraph><paragraph id="H4962937506CF4FDB9AB0A002ECB75068"><enum>(2)</enum><header>Deduction for foreign intangible income</header><text>The amendments made by subsection (b) shall apply to taxable years beginning after December 31,
2014.</text>
</paragraph></subsection></section><section display-inline="no-display-inline" id="HD30C7587A09246E3BC0CBA09354280D2" section-type="subsequent-section"><enum>4212.</enum><header>Denial of deduction for interest expense of United States shareholders which are members of
worldwide affiliated groups with excess domestic indebtedness</header>
<subsection id="HFD47F1723B4841758B4B31A161AAB92E"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 163 is amended by redesignating subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H770DDF396FF7497F900A3B997F2FFE83" style="OLC">
<subsection id="HE8F99833DEFD4BCEA9D2AB56B8281AE5"><enum>(n)</enum><header>Disallowance of deduction for interest expense of United States shareholders which are members of
worldwide affiliated groups with excess domestic indebtedness</header>
<paragraph id="H67DAFB5824C04C9DA8B6C616BEB5ED7A"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any domestic corporation which is a United States shareholder (as defined in section
951(b)) with respect to any foreign corporation both of which are members
of the same worldwide affiliated group, the deduction allowed under this
chapter for interest paid or accrued by such domestic corporation during
the taxable year shall be reduced by the lesser of—</text>
<subparagraph id="H2EC09E3FD8F247B1A1EAE9971E130075"><enum>(A)</enum><text>the product of—</text>
<clause id="HE6984B2779DE493A958C5C1A3909F050"><enum>(i)</enum><text>the net interest expense of such domestic corporation, multiplied by</text>
</clause><clause id="H3B5A1D6ED9874AECA41D3D447AE777A8"><enum>(ii)</enum><text>the debt-to-equity differential percentage of such worldwide affiliated group, or</text>
</clause></subparagraph><subparagraph id="H42240CF30B274CE0B710809027BFEEB7"><enum>(B)</enum><text>the excess (if any) of—</text>
<clause id="H577D823C216E49AF98F7F5E257AB7210"><enum>(i)</enum><text>such net interest expense, over</text>
</clause><clause id="H846938BD5AFE44039F1CD6F09F41D795"><enum>(ii)</enum><text>40 percent of the adjusted taxable income (as defined in subsection (j)(6)(A)) of such domestic
corporation.</text>
</clause></subparagraph></paragraph><paragraph id="H48C13FC2BF534CA2B7BCA2F9673DA39E"><enum>(2)</enum><header>Carryforward</header><text>Any amount disallowed under paragraph (1) for any taxable year shall be treated as interest paid or
accrued in the succeeding taxable year (and shall not be treated as
disqualified interest for purposes of applying subsection (j)).</text>
</paragraph><paragraph id="H4C1D5EC8ECA34E7F96DD411269DAC57B"><enum>(3)</enum><header>Debt-to-equity differential percentage</header>
<subparagraph id="HC84BFCA8CC7D4648884B7D7C4438A34D"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>debt-to-equity differential percentage</quote> means, with respect to any worldwide affiliated group, the percentage which the excess domestic
indebtedness of such group bears to the total indebtedness of the domestic
corporations which are members of such group.</text>
</subparagraph><subparagraph id="H423805046F05439EB5E55F5211FBF6F5"><enum>(B)</enum><header>Excess domestic indebtedness</header><text>For purposes of subparagraph (A), the term <quote>excess domestic indebtedness</quote> means, with respect to any worldwide affiliated group, the excess (if any) of—</text>
<clause id="H73CD761549A3414C9F1473919BDA01DB"><enum>(i)</enum><text>the total indebtedness of the domestic corporations which are members of such group, over</text>
</clause><clause id="H33A1C5D57E8B4A1FB70161F211AC4BFA"><enum>(ii)</enum><text>110 percent of the amount which the total indebtedness of such domestic corporations would be if
the ratio of such indebtedness to the total equity of such domestic
corporations equaled the ratio which—</text>
<subclause id="H2F4258B593B14D95B8BEF1F7D5C91B38"><enum>(I)</enum><text>the total indebtedness of such group, bears to</text>
</subclause><subclause id="HA67DB72BFBD54640BFE39F63A79F0C76"><enum>(II)</enum><text>the total equity of such group.</text>
</subclause></clause></subparagraph><subparagraph id="H77AB7AD489DF4181BD6765DE15130227"><enum>(C)</enum><header>Total equity</header><text>For purposes of subparagraph (B), the term <quote>total equity</quote> means, with respect to one or more corporations, the excess (if any) of—</text>
<clause id="HA58AB3A0E934452C99B67010A630CA0F"><enum>(i)</enum><text>the money and all other assets of such corporations, over</text>
</clause><clause id="HA63B3FEACD2C4411BA8A666B3F67918D"><enum>(ii)</enum><text>the total indebtedness of such corporations.</text>
</clause></subparagraph><subparagraph id="H93EFA649F4BA4B3EB9AD18C226A190FC"><enum>(D)</enum><header>Special rules for determining debt and equity</header><text>For purposes of this paragraph—</text>
<clause id="H93FA50B927994972A053C4ECA92AF765"><enum>(i)</enum><header>Application of certain general rules</header><text display-inline="yes-display-inline">Rules similar to the rules of clauses (i), (ii), and (iii) of subsection (j)(2)(C) shall apply.</text>
</clause><clause id="H431342E614D14C199A740978EEC61920"><enum>(ii)</enum><header>Intragroup debt and equity interests disregarded</header><text>The total indebtedness, and the assets, of any group of corporations shall be determined by
treating all members of such group as one corporation.</text>
</clause><clause id="H1C928045B4334829A20DF4CE328B6A66"><enum>(iii)</enum><header>Determination of assets of domestic group</header><text>The assets of the domestic corporations which are members of any worldwide affiliated group shall
be determined by disregarding any interest held by any such domestic
corporation in any foreign corporation which is a member of such group.</text>
</clause></subparagraph></paragraph><paragraph id="H7C6259509DDC4140AEF186442A374D7C"><enum>(4)</enum><header>Other definitions</header><text>For purposes of this subsection—</text>
<subparagraph id="HAF648A97770846E6AA999411E35561F2"><enum>(A)</enum><header>Worldwide affiliated group</header><text>The term <quote>worldwide affiliated group</quote> has the meaning which would be given such term by section 864(f)(1)(C) if section 1504(a) were
applied by substituting <quote>more than 50 percent</quote> for <quote>at least 80 percent</quote> each place it appears.</text>
</subparagraph><subparagraph id="H13484F5FF0564628B81FCD993A60C262"><enum>(B)</enum><header>Net interest expense</header><text>The term <quote>net interest expense</quote> has the meaning given such term by subsection (j)(6)(B).</text>
</subparagraph></paragraph><paragraph id="HAF22A2E26BE64F11B8A670551D20E72B"><enum>(5)</enum><header>Treatment of affiliated group</header><text>For purposes of this subsection, all members of the same affiliated group (within the meaning of
section 1504(a) applied by substituting <quote>more than 50 percent</quote> for <quote>at least 80 percent</quote> each place it appears) shall be treated as 1 taxpayer.</text>
</paragraph><paragraph id="HAF06DCDAB69C4CE7BCFDFDDD0623E8AE"><enum>(6)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such regulations or other guidance as may be appropriate to carry out
the purposes of this subsection, including regulations or other guidance—</text>
<subparagraph id="H009FB5B8BAA34370962F69623C647171"><enum>(A)</enum><text>to prevent the avoidance of the purposes of this subsection,</text>
</subparagraph><subparagraph id="HC42A98EF83E04751B399FA63309A2D42"><enum>(B)</enum><text>providing such adjustments in the case of corporations which are members of an affiliated group as
may be appropriate to carry out the purposes of this subsection,</text>
</subparagraph><subparagraph id="HE3ED13F7DF134FC0B605511BE239D659"><enum>(C)</enum><text>providing for the coordination of this subsection with section 884, and</text>
</subparagraph><subparagraph id="H8BC3DFCE84E34055BABD0BE4894B6618"><enum>(D)</enum><text>providing for the reallocation of shares of partnership indebtedness, or distributive shares of the
partnership’s interest income or interest expense.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H86B8EE82F15544E6AFE1A96446C11EFD"><enum>(b)</enum><header>Coordination with limitation on related party indebtedness</header><text>Paragraph (1) of section 163(j) is amended by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H80BAD7D4BD6E4E07AAB37E4D4498D75B" style="OLC">
<subparagraph id="HB1158AD4EA2C4F63910918781E5AAA7C"><enum>(C)</enum><header>Coordination with limitation on excess domestic indebtedness</header><text display-inline="yes-display-inline">The amount disallowed under subparagraph (A) with respect to any corporation for any taxable year
shall be reduced by any amount disallowed under subsection (n)(1) with
respect to such corporation for such taxable year.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0898C5538F5944738AC4C7B8BC87C31D"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></part></subtitle><enum>V</enum><header>Tax Exempt Entities</header>
<subtitle id="H66153F69288C4FDE8A592064CC798859"><enum>A</enum><header>Unrelated Business Income Tax</header>
<section id="H9920E71D1C214C54A96F56E0CFFC0023"><enum>5001.</enum><header>Clarification of unrelated business income tax treatment of entities treated as exempt from
taxation under section <enum-in-header>501(a)</enum-in-header></header>
<subsection id="H38C0122D140D404EBC93A1D0A1F9A6B5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraph (A) of section 511(a)(2) is amended by adding at the end the following: <quote>For purposes of the preceding sentence, an organization 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.</quote>.</text>
</subsection><subsection id="H35353B0E72E54E63AD718B92F2E79D31"><enum>(b)</enum><header>Clerical amendment</header><text>The heading for subparagraph (A) of section 511(a)(2) is amended to read as follows: <quote><header-in-text level="subparagraph" style="OLC">Organizations exempt from taxation by reason of section <enum-in-header>501(a).</enum-in-header></header-in-text></quote></text>
</subsection><subsection id="HE616CDADD4164834A3AB683107649918"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H25BCF636DF4346CFA36FC24C5EE883C0"><enum>5002.</enum><header>Name and logo royalties treated as unrelated business taxable income</header>
<subsection id="HE894B1BC0C684C2FA90935510FB230A5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 513 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HD6A873475492488F8B53063ACE399982" style="OLC">
<subsection id="H1951EF934B5A44DFA92F9040D23D71B7"><enum>(k)</enum><header>Name and logo royalties</header><text display-inline="yes-display-inline">Any sale or licensing by an organization of any name or logo of the organization (including any
trademark or copyright relating to such name or logo) shall be treated as
an unrelated trade or business regularly carried on by such organization.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H9E5775C874724DA2A1A5B1370B441CEF"><enum>(b)</enum><header>Calculation of unrelated business taxable income</header><text>Subsection (b) of section 512 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HCB2D624E0B464987AB51FA76B2CB3045" style="OLC">
<paragraph id="HEE0E70D069DF43F89401D8F921D12A9B"><enum>(20)</enum><header>Special rule for name and logo royalties</header><text display-inline="yes-display-inline">Notwithstanding paragraph (1), (2), (3), or (5), any income derived from any sale or licensing
described in section 513(k) shall be included as an item of gross income
derived from an unrelated trade or business.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H6F475FAE3DE248148B110EC7E9505DE7"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H601409844D0B4090A1616C57BC40EC9B"><enum>5003.</enum><header>Unrelated business taxable income separately computed for each trade or business activity</header>
<subsection id="HF9E6789028144CC5BEBE4C2CD16C7BD8"><enum>(a)</enum><header>In general</header><text>Subsection (a) of section 512 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H2D6227A9A6364E5889D7CBADD1C4607E" style="OLC">
<paragraph id="H9B75FB9F9673455FAFEBAA64729C8B86"><enum>(6)</enum><header>Special rule for organization with more than 1 unrelated trade or business</header><text display-inline="yes-display-inline">In the case of any organization with more than 1 unrelated trade or business—</text>
<subparagraph id="H8282313AD28D46298E5DAC80BF99952C"><enum>(A)</enum><text>unrelated business taxable income shall be computed separately with respect to each such trade or
business and without regard to subsection (b)(12),</text>
</subparagraph><subparagraph id="H1EC8E36812714DF7AC1609FB71E55494"><enum>(B)</enum><text>the unrelated business taxable income of such organization shall be the sum of the unrelated
business taxable income so computed with respect to each such trade or
business, less a specific deduction under subsection (b)(12), and</text>
</subparagraph><subparagraph commented="no" id="H5FE4A5579D9F460A91B129E48EF969B2"><enum>(C)</enum><text>for purposes of subparagraph (B), unrelated business taxable income with respect to any such trade
or business shall not be less than zero, and</text>
</subparagraph><subparagraph id="H3060F45197534CD9A7BA5F3BEC104029"><enum>(D)</enum><text>the net operating loss deduction shall only be allowed with respect to the trade or business from
which the net operating loss arose.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HDE3CC05E0A1B42FCB6BE08F9F8547F60"><enum>(b)</enum><header>Effective date</header>
<paragraph id="H00D633BFCB024FFAA949C5B72EBC39A5"><enum>(1)</enum><header>In general</header><text>Except to the extent provided in paragraph (2), the amendment made by this section shall apply to
taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="H6FC3CBE1AC14425E8BD6E6640484477F"><enum>(2)</enum><header>Net operating losses</header>
<subparagraph id="HDDEC1239F8ED4750B24B9494F02B2F6C"><enum>(A)</enum><header>Certain carryovers</header><text>In the case of any net operating loss arising in a taxable year beginning before January 1, 2015,
that is carried over to a taxable year beginning on or after such date,
<external-xref legal-doc="usc" parsable-cite="usc/26/512">section 512(a)(6)(D)</external-xref> of the Internal Revenue Code of 1986, as added by
this Act, shall not apply.</text>
</subparagraph><subparagraph id="HEACC4147A69B41E1B17AC08697271876"><enum>(B)</enum><header>Certain carrybacks</header><text display-inline="yes-display-inline">In the case of any net operating loss arising in a taxable year beginning after December 31, 2014,
and carried back to any taxable year beginning on or before such date, in
computing unrelated business taxable income of an organization under
section 512(a) of such Code for the taxable year, the net operating loss
deduction shall be allowed only with respect to the trade or business from
which the net operating loss arose.</text>
</subparagraph></paragraph></subsection></section><section id="HDADCF8D164874E618165D1F30DD1F162"><enum>5004.</enum><header>Exclusion of research income limited to publicly available research</header>
<subsection id="H354695E1EEF84318BE97EB72F01F6404"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (9) of section 512(b) is amended by striking <quote>from research</quote> and inserting <quote>from such research</quote>.</text>
</subsection><subsection id="HE1F4245196914B85B13E4C8BA5D95A39"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H37C0C3A10D3943FF88C68478457817C3"><enum>5005.</enum><header>Parity of charitable contribution limitation between trusts and corporations</header>
<subsection id="HB2C5FDEFAA9E45278E70B9632AC0A0EE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (11) of section 512(b) is amended by striking the second sentence and inserting the
following: <quote>The deduction allowed by this paragraph shall not exceed 10 percent of the unrelated business
taxable income computed without the benefit of this paragraph.</quote></text>
</subsection><subsection id="H8A8D6AB3D9DF43EB8C305194193391F3"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H7425585E6745446BA404EA5A7FD6CFD3"><enum>5006.</enum><header>Increased specific deduction</header>
<subsection id="H919988837E5640B88953A9B374A0E5FE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (12) of section 512(b) is amended by striking <quote>$1,000</quote> each place it appears and inserting <quote>$10,000</quote>.</text>
</subsection><subsection id="H213C6A437EA249479F90142560CEF655"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HF7C23EC997524B089DF0991E83C3A451"><enum>5007.</enum><header>Repeal of exclusion of gain or loss from disposition of distressed property</header>
<subsection id="HD95305CCF5EB4CFA9BDF0BE20CC6410F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (b) of section 512 is amended by striking paragraph (16).</text>
</subsection><subsection id="H0B372D80DECF44358AFC1A537C3BCF28"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to property acquired after December 31, 2014.</text>
</subsection></section><section id="H55F3DAC7CA534E938BF5535DBB08DDB5"><enum>5008.</enum><header>Qualified sponsorship payments</header>
<subsection id="H51941AA46882426F9F60CFCA77910978"><enum>(a)</enum><header>Repeal of use or acknowledgment of product lines for qualified sponsorship payments</header><text display-inline="yes-display-inline">Subparagraphs (A) and (B)(ii)(I) of section 513(i)(2) are each amended by striking <quote>(or product lines)</quote>.</text>
</subsection><subsection id="H574B7DDCC8724B00864AE07315AD8F07"><enum>(b)</enum><header>Use or acknowledgment limited in case of certain events</header><text>Subparagraph (B) of section 513(i)(2) is amended by adding at the end the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="H0BB37B387C8B482E9DEFACA7CE263D81" style="OLC">
<clause id="H869D05022C70401EB38A0FB264738344"><enum>(iii)</enum><header>Use or acknowledgment limited in case of certain events</header><text display-inline="yes-display-inline">In the case of an event with respect to which an organization receives an aggregate amount of
qualified sponsorship payments greater than $25,000, a payment shall not
be treated as a qualified sponsorship payment for purposes of paragraph
(1) unless the use or acknowledgment of the sponsor’s name or logo appears
with, and in substantially the same manner as, the names of a significant
portion of other donors to the organization. For purposes of the preceding
sentence, whether a number of donors is a significant portion shall be
determined based on the total number of donors and the total contributed
with respect to the event, but in no event shall fewer than 2 other donors
be treated as a significant portion of other donors.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H40CB7B733FA94C22B406AADFB24A5B45"><enum>(c)</enum><header>Clerical amendment</header><text>The heading for clause (ii) of section 513(i)(2)(B) is amended to read as follows: <quote><header-in-text level="clause" style="OLC">Periodicals and qualified convention and trade show activities.</header-in-text></quote>.</text>
</subsection><subsection id="H2130ACF5CDF1489E948DE43B043268EF"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="H106705B69CC740F09B1579878BD754A2"><enum>B</enum><header>Penalties</header>
<section id="H610A82EF60DE44CF9E6ED8C6FDC7AAEF"><enum>5101.</enum><header>Increase in information return penalties</header>
<subsection id="H10BD6FE5F73D47588216EA527334E747"><enum>(a)</enum><header>Failure To file return</header>
<paragraph id="H486D084A570F4EACB141347008F4C441"><enum>(1)</enum><header>Organization</header><text display-inline="yes-display-inline">Subparagraph (A) of section 6652(c)(1) is amended—</text>
<subparagraph commented="no" id="HBE74E6507F5749A58F97F957EADEFE60"><enum>(A)</enum><text>by striking <quote>$20</quote> each place it appears and inserting <quote>$40</quote>, and</text>
</subparagraph><subparagraph id="H26C31CCE54E140EC94FEC7F3EA6D9D5E"><enum>(B)</enum><text>by striking <quote>$100</quote> and inserting <quote>$200</quote>.</text>
</subparagraph></paragraph><paragraph id="H8E71FD5C9D7D4651AE5F47592A144042"><enum>(2)</enum><header>Managers</header><text>Clause (ii) of section 6652(c)(1)(B) is amended by striking <quote>$10</quote> and inserting <quote>$20</quote>.</text>
</paragraph></subsection><subsection id="H694D1C0DB62D469D84736C56FF4A6D79"><enum>(b)</enum><header>Failure To make returns, reports, and applications available for public inspection</header><text display-inline="yes-display-inline">Subparagraphs (C) and (D) of section 6652(c)(1) are each amended by striking <quote>$20</quote> and inserting <quote>$40</quote>.</text>
</subsection><subsection id="H80CAFF29473A4CA3AC23EE27A2013525"><enum>(c)</enum><header>Failure To file returns under section <enum-in-header>6034</enum-in-header> or <enum-in-header>6043</enum-in-header></header><text>Paragraph (2) of section 6652(c) is amended—</text>
<paragraph id="H9C1C03741DD74CDFB48D13724E5D49CB"><enum>(1)</enum><text>by striking <quote>$10</quote> each place it appears in subparagraphs (A) and (B) and inserting <quote>$20</quote>, and</text>
</paragraph><paragraph id="H13C14843EE89417F8B42561AC564D29E"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>substituting <quote>$100</quote> for <quote>$20</quote>,</quote> in subparagraph (C)(ii) and inserting <quote>substituting <quote>$200</quote> for <quote>$40</quote>,</quote>.</text>
</paragraph></subsection><subsection id="H5DDB7BA5C22044008A3B21563F64B132"><enum>(d)</enum><header>Failure To file disclosure under section <enum-in-header>6033(a)(2)</enum-in-header></header>
<paragraph id="HED82E220AF484001A1E7F4FA6C1BDB0B"><enum>(1)</enum><header>Organization</header><text>Subparagraph (A) of section 6652(c)(3) is amended by striking <quote>$100</quote> and inserting <quote>$200</quote>.</text>
</paragraph><paragraph id="HA35E4C5DBA864CE082F3C749D3F0A915"><enum>(2)</enum><header>Managers</header><text>Subparagraph (B) of section 6652(c)(3) is amended by striking <quote>$100</quote> and inserting <quote>$200</quote>.</text>
</paragraph></subsection><subsection id="HB4D0B238718A44618ACAA862CBDFFC8E"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply with respect to information returns required to be
filed on or after January 1, 2015.</text>
</subsection></section><section id="H2856213766B24D639BE421AACB176085"><enum>5102.</enum><header>Manager-level accuracy-related penalty on underpayment of unrelated business income tax</header>
<subsection id="H7E28113D735F4A83BBC99A4F30D5DAED"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 6662 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H18D7F18A24FD42298E60DF78C0AD29EB" style="OLC">
<subsection id="HE48B5988F6364863BDF2293307D54E6D"><enum>(k)</enum><header>Manager-Level penalty for substantial underpayment of unrelated business income tax</header>
<paragraph id="HEF71BD57DB6E4802BD972FD768225547"><enum>(1)</enum><header>In general</header><text>In the case of any substantial underpayment of income tax which is attributable to the tax imposed
by section 511 on the unrelated business taxable income of an organization
for the taxable year, there is hereby imposed a tax with respect to such
organization an amount equal to 5 percent of such underpayment to which
the underpayment relates. Such tax shall be paid by any manager of the
organization.</text>
</paragraph><paragraph id="H6D814113002F46219B9084F8453F9D91"><enum>(2)</enum><header>Manager</header><text>For purposes of this subsection, the term <quote>manager</quote> means any officer, director, trustee, employee, or other individual who is under a duty to perform
an act in respect of which the underpayment relates.</text>
</paragraph><paragraph id="H7859FEF211C440C6B247B8FE50890D85"><enum>(3)</enum><header>Joint and several liability</header><text>If more than one person is liable under paragraph (1) with respect to an underpayment, all such
persons shall be jointly and severally liable under such paragraph with
respect to such underpayment</text>
</paragraph><paragraph id="HA2CEBC43287A43C69CF72475E3417A37"><enum>(4)</enum><header>Limit</header><text>With respect to any substantial underpayment of income tax for a taxable year, the maximum amount
of the tax added by paragraph (1) shall not exceed $20,000.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H35E36CA7DB0E4C40A948E7082545D3AA"><enum>(b)</enum><header>Reportable transactions</header><text>Section 6662A is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HC2DFBFBB6A36411592E7A5912F29CD00" style="OLC">
<subsection id="HF77C5060493C43758B2DE21882076750"><enum>(f)</enum><header>Manager-Level penalty in case of unrelated business income tax</header>
<paragraph id="H11D3A83D083D471FA2A502D9FB765CCD"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of any portion of a reportable transaction understatement of the tax imposed by section
511 to which this section applies, there is hereby imposed a tax in an
amount equal to 10 percent of such portion of the underpayment to which
the reportable transaction understatement occurs. Such tax shall be paid
by any manager of the organization.</text>
</paragraph><paragraph id="H4C67F92D3DD84DB18801D824CA1E34A9"><enum>(2)</enum><header>Manager</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>manager</quote> means any officer, director, trustee, employee, or other individual who is under a duty to perform
an act in respect of which such understatement occurs.</text>
</paragraph><paragraph id="H9BAA268334B142F9A3EB150E7D595EF8"><enum>(3)</enum><header>Joint and several liability</header><text>If more than one person is liable under paragraph (1) with respect to an understatement, all such
persons shall be jointly and severally liable under such paragraph with
respect to such understatement.</text>
</paragraph><paragraph id="HDD8DB23128684C7A809DB7EF2B765176"><enum>(4)</enum><header>Limit</header><text>With respect to any understatement of tax to which this section applies, the maximum amount of the
tax added by paragraph (1) shall not exceed $40,000</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HEF6383A716C54EC29F9283F976AD69A1"><enum>(c)</enum><header>Coordination</header><text>Section 6662 is amended—</text>
<paragraph id="H915FCD96A8D04FDB8F65611340675AA7"><enum>(1)</enum><text>by striking the flush matter at the end of subsection (b), and</text>
</paragraph><paragraph id="H75449FF72415412A8F7139ED214F8144"><enum>(2)</enum><text>by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HB78E1A4349B04C78B272B1583089AE2E" style="OLC">
<subsection id="H6DBB09F093C04DA1B1B08C528627A1DA"><enum>(l)</enum><header>Coordination with other penalties</header><text display-inline="yes-display-inline">This section shall not apply to any portion of an underpayment on which a penalty is imposed under
section 6663. Except as provided in paragraph (1) or (2)(B) of section
6662A(e), this section shall not apply to the portion of any underpayment
which is attributable to a reportable transaction understatement on which
a penalty is imposed under section 6662A.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H3392BB235D964914A9DD7F614E55CF34"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="HD21BD4829A5B4B268C847F8C2375125A"><enum>C</enum><header>Excise Taxes</header>
<section id="HBDB1DCF8FC884796BA3FEA097DFE7913"><enum>5201.</enum><header>Modification of intermediate sanctions</header>
<subsection id="H1787CE236A0F44F0B8DD71823BFCAA65"><enum>(a)</enum><header>Organization level tax</header><text display-inline="yes-display-inline">Subsection (a) of section 4958 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HABFF814E88B245BFB1B65F8C4798F55F" style="OLC">
<paragraph id="HCC84AF2DD2594C74B42A3A11A6AC4437"><enum>(3)</enum><header>On the organization</header><text display-inline="yes-display-inline">In any case in which a tax is imposed by paragraph (1), there is hereby imposed on the organization
a tax equal to 10 percent of the excess benefit.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H06A118D1D5FE4C0FA823D981C5480195"><enum>(b)</enum><header>Minimum standards of organization due diligence</header><text>Subsection (d) of section 4958 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HCDB52617BB864398ACDE594FB1FA556A" style="OLC">
<paragraph id="H9FE80133458E427A84771FC409C58BA6"><enum>(3)</enum><header>Minimum standards of organization due diligence</header>
<subparagraph id="H6F3255D5498548C89562EDDD6C63625E"><enum>(A)</enum><header>In general</header><text>Subsection (a)(3) shall not apply to a transaction, if—</text>
<clause id="H7F94E6127BB9400DA62AEA7C0A092B40"><enum>(i)</enum><text>the organization establishes that the minimum standards of due diligence described in subparagraph
(B) were met with respect to the transaction, or</text>
</clause><clause id="H4867D11420A94166AAF046BFB0A03D5D"><enum>(ii)</enum><text display-inline="yes-display-inline">the organization establishes to the satisfaction of the Secretary that such other reasonable
procedures were used to ensure that no excess benefit was provided.</text>
</clause></subparagraph><subparagraph id="H7E0D166CB774479FBB6F33343B640565"><enum>(B)</enum><header>Minimum standards</header><text>An organization shall be treated as satisfying the minimum standards of due diligence described in
this subparagraph with respect to any transaction, if—</text>
<clause id="HB188991E829147998DB61A9563A3493E"><enum>(i)</enum><text>the transaction was approved in advance by an authorized body of the organization composed entirely
of individuals who did not have a conflict of interest with respect to the
transaction,</text>
</clause><clause id="HF39BDF39EC7B4B6F926431056D8AF4AD"><enum>(ii)</enum><text>the authorized body obtained and relied upon appropriate data as to comparability prior to approval
of the transaction, and</text>
</clause><clause id="H692F6315DA5743C88052D215A74691DA"><enum>(iii)</enum><text>the authorizing body adequately and concurrently documented the basis for approving the
transaction.</text>
</clause></subparagraph><subparagraph id="H36F5260D5E6D4FCCA758EA71A6840BF9"><enum>(C)</enum><header>No presumption as to reasonableness</header><text display-inline="yes-display-inline">Meeting the requirements of clause (i) or (ii) of subparagraph (A) with respect to a transaction
shall not give rise to a presumption of reasonableness for purposes of the
taxes imposed by paragraphs (1) or (2) of subsection (a) and shall not, by
itself, support a conclusion that a manager did not act knowingly for
purposes of subsection (a)(2).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0C0F2A2983844473A4A503EBA461D173"><enum>(c)</enum><header>Repeal of exception for manager reliance on professional advice</header><text>Section 4958 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H43821C750B274CE2A7EEE0E1F946E9B0" style="OLC">
<subsection id="HCD75A707106843518A5EA2CCD7E213B8"><enum>(g)</enum><header>No safe harbor for reliance on professional advice</header><text display-inline="yes-display-inline">An organization manager’s reliance on a written opinion of a professional with respect to elements
of a transaction within the professional’s expertise shall not, by itself,
preclude the manager from being treated as participating in the
transaction knowingly.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HA21A3F437AF145F888B173DB0963637B"><enum>(d)</enum><header>Athletic coaches and investment managers treated as disqualified persons</header>
<paragraph commented="no" id="H7954F909059842139398251285E4482F"><enum>(1)</enum><header>Athletic coaches</header>
<subparagraph id="H7F8D0C445726430DBF920FDC65642D76"><enum>(A)</enum><header>In general</header><text>Paragraph (1) of section 4958(f) is amended by striking <quote>and</quote> at the end of subparagraph (E), by striking the period at the end of subparagraph (F) and
inserting <quote>, and</quote>, and by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H760EE2F30CF344AF979CB8C982FF794E" style="OLC">
<subparagraph id="H00F475764129484FBFB0367EAAD3B7C2"><enum>(G)</enum><text display-inline="yes-display-inline">any person who performs services as an athletic coach for the organization.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H4B603214F0674EE1AC73389B1B63691C"><enum>(B)</enum><header>Family members</header><text>Subparagraph (B) of section 4958(f)(1) is amended by inserting <quote>or (G)</quote> after <quote>subparagraph (A)</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H564CCA69BB244448B4DE1A12B08C544C"><enum>(2)</enum><header>Investment advisors</header>
<subparagraph commented="no" id="HA5029115F48340D097C604CC019DB777"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraph (F) of section 4958(f)(1) is amended—</text>
<clause commented="no" id="H5CBDF3EBB132482C9997DB704CA52E14"><enum>(i)</enum><text>by striking <quote>which involves a sponsoring organization (as defined in section 4966(d)(1)),</quote>, and</text>
</clause><clause commented="no" id="H67EF2264EBD0442AB03D1C164CF53CDB"><enum>(ii)</enum><text>by striking <quote>such sponsoring organization (as so defined)</quote> and inserting <quote>the organization</quote>.</text>
</clause></subparagraph><subparagraph commented="no" id="H52F9FBFC85804C9E894CC9316D87067C"><enum>(B)</enum><header>Investment advisor definition</header><text>Subparagraph (B) of section 4958(f)(8) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HEE972767E97447B89AABF9B0282B73B7" style="OLC">
<subparagraph id="HBE157C9BFE714883B493F9BDB1A6F6B6"><enum>(B)</enum><header>Investment advisor defined</header><text display-inline="yes-display-inline">For purposes of subparagraph (A), the term <quote>investment advisor</quote> means—</text>
<clause id="HC9BEFC45D80044CF93B6545BC51F00E1"><enum>(i)</enum><text>with respect to any organization, any person who is compensated by such organization and is
primarily responsible for managing the investment of, or providing
investment advice with respect to, assets of such organization, and</text>
</clause><clause id="HE748EED076FA467FB08158D06ECC2882"><enum>(ii)</enum><text display-inline="yes-display-inline">with respect to any sponsoring organization (as defined in section 4966(d)(1)), any person (other
than an employee of such organization) compensated by such organization
for managing the investment of, or providing investment advice with
respect to, assets maintained in donor advised funds (as defined in
section 4966(d)(2)) owned by such organization.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="HDCB19E5AD86942528EC324E04F9F9DC2"><enum>(e)</enum><header>Application to unions and trade associations</header><text>Paragraph (1) of section 4958(e) is amended by inserting <quote>(5), (6),</quote> after <quote>(4),</quote>.</text>
</subsection><subsection id="H17759D24F10D4DFC9157F370FE12F40C"><enum>(f)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HB35DC4BD38C047729077DEDF06876CF6"><enum>5202.</enum><header>Modification of taxes on self-dealing</header>
<subsection id="H05BBDC57762C4B7ABB0E118815C0E0D6"><enum>(a)</enum><header>Organization level tax</header><text display-inline="yes-display-inline">Subsection (a) of section 4941 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H84F19AE45102454EB2A794EEBF9CE656" style="OLC">
<paragraph id="H4EAABB289D7E4AE489E7C1FF4235D192"><enum>(3)</enum><header>On the foundation</header><text display-inline="yes-display-inline">In any case in which a tax is imposed by paragraph (1), there is hereby imposed on the foundation a
tax equal to 2.5 percent (10 percent in the case payment of compensation)
of the amount involved with respect to the act of self-dealing for each
year (or part thereof) in the taxable period.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HEB0EC9B0A99442348C827DD2411DC4E9"><enum>(b)</enum><header>Repeal of exception for manager reliance on advice from counsel</header><text>Section 4941 is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HCB3EA9364BE7463D9A756EBFA4D9D49D" style="OLC">
<subsection id="H1192D4F1BEF94C0BBF2327C3072D3145"><enum>(f)</enum><header>No safe harbor for reliance on advice of counsel</header><text display-inline="yes-display-inline">A foundation manager’s reliance on a written legal opinion by legal counsel that an act is not an
act of self-dealing shall not, by itself, preclude the manager from being
treated as participating in the act knowingly.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H8AE189C3B105478DBE64650721F47D3F"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H9B5876E866294B0EB7A10F6D0DB1BE1A"><enum>5203.</enum><header>Excise tax on failure to distribute within 5 years contribution to donor advised fund</header>
<subsection id="H19CC1F3DFE914FD68FC8DAAD8C2362A5"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter G of chapter 42 is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H33EC9912B8154E1896F23C0566E22FC4" style="OLC">
<section id="H66E854BF57DC42D9ACC473DFF4241689"><enum>4968.</enum><header>Failure to distribute contributions within 5 years</header>
<subsection id="H382BC7158A3B40E6A402C4D70C125259"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a contribution which is held in a donor advised fund, there is hereby imposed a tax
equal to 20 percent of so much of the portion of such contribution as has
not been distributed by the sponsoring organization in an eligible
distribution before the beginning of the 6th (or succeeding) taxable year
beginning after the taxable year during which such contribution was made.
The tax imposed by this subsection shall be paid by such sponsoring
organization.</text>
</subsection><subsection id="H9EF257E1178A4736B1AD96C2810A82A9"><enum>(b)</enum><header>Treatment of distributions</header><text>For purposes of this section—</text>
<paragraph id="H5D416AE03D474E2D9A2525A9BF10CE40"><enum>(1)</enum><header>Eligible distribution</header><text>The term <quote>eligible distribution</quote> means any distribution to an organization described in section 170(b)(1)(A) (other than an
organization described in section 509(a)(3) or any fund or account
described in section 4966(d)(2).</text>
</paragraph><paragraph id="H5128DFA2795E4505B4BEFE32CBE6B32D"><enum>(2)</enum><header>Accounting</header><text>Distributions shall be treated as made from contributions (and any earnings attributable thereto)
on a first-in, first-out basis.</text></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H296F2C3018B84B369B8C879CBFCA7DB2"><enum>(b)</enum><header>Conforming amendment</header><text>The table of sections for subchapter G of chapter 42 is amended by adding at the end the following
new item:</text>
<quoted-block display-inline="no-display-inline" id="HBE7BC55C9B35411D8119FD6D26922304" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 4968. Failure to distribute contributions within 5 years.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF11F14237A3C494C9E0CB09ED499613D"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H000F10A4967A4932A146E871CC745B6E"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall apply to
contributions made after December 31, 2014.</text>
</paragraph><paragraph id="H8C66D631CD924E9E9C1578958D8DB8CF"><enum>(2)</enum><header>Transition rule</header><text>In the case of any contribution—</text>
<subparagraph id="H5516AB9145DB471AAB9FC742D9A65DBA"><enum>(A)</enum><text>which was made before January 1, 2015, and</text>
</subparagraph><subparagraph id="HCAE0DA80E7FD489A83582A479681F9A1"><enum>(B)</enum><text>any portion of which (including any earnings attributable thereto) is held in a donor advised fund
on such date,</text></subparagraph><continuation-text continuation-text-level="paragraph">such portion shall be treated as contributed on such date.</continuation-text></paragraph></subsection></section><section id="H7F17C7C8AD1F4BD98D2AD44AB8011B49"><enum>5204.</enum><header>Simplification of excise tax on private foundation investment income</header>
<subsection id="H1E76B2F90FAD46E7B61606434D7C57F9"><enum>(a)</enum><header>Rate reduction</header><text display-inline="yes-display-inline">Subsection (a) of section 4940 is amended by striking <quote>2 percent</quote> and inserting <quote>1 percent</quote>.</text>
</subsection><subsection id="H7E858076CAFE45A9B381CBD764F279EC"><enum>(b)</enum><header>Repeal of special rules for certain private foundations</header><text>Section 4940 is amended by striking subsections (d) and (e).</text>
</subsection><subsection commented="no" id="H3A4D43C86B8C430B9C8D77FD0CB49987"><enum>(c)</enum><header>Conforming amendment</header><text>Section 4945(d)(4)(A) is amended by striking clause (iii) and by inserting <quote>or</quote> at the end of clause (i).</text>
</subsection><subsection id="H93C932537D95482A80BB8F1E95F4A136"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="H48D8BB05755F4149896D7ADCCF602DFC"><enum>5205.</enum><header>Repeal of exception for private operating foundation failure to distribute income</header>
<subsection id="HDBAC7054A2814E78B02DB54ED03400F0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (a) of section 4942 is amended—</text>
<paragraph id="H6B755F9EDEAD4B65BF1BD3F9EEAB462F"><enum>(1)</enum><text>by striking <quote>a private foundation—</quote> and all that follows through <quote>(2) to the extent</quote> and inserting <quote>a private foundation to the extent</quote>, and</text>
</paragraph><paragraph id="H32BBB9FE383B40788F9D092C1851541E"><enum>(2)</enum><text display-inline="yes-display-inline">by redesignating subparagraphs (A), (B), (C), and (D) as paragraphs (1), (2), (3), and (4),
respectively, and by moving such paragraphs, as so redesignated, two ems
to the left.</text>
</paragraph></subsection><subsection id="H80DCEA6F413544278BCB44871DC91CC2"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HCE7ACCC4273B46C085B44F217D291D55"><enum>(1)</enum><text display-inline="yes-display-inline">Section 4942(j) is amended by striking paragraphs (3), (4), and (5).</text>
</paragraph><paragraph id="H00849E4C7FEF4C2BB332DB1F6F4D18C6"><enum>(2)</enum><text>Section 170(b)(1)(F)(i) is amended by striking <quote>(as defined in section 4942(j)(3))</quote>,</text>
</paragraph><paragraph id="H6DFFEA187D1442508A1223C8274F0D3C"><enum>(3)</enum><text>Section 170(b)(1) is amended by adding at the end the following new subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="H7CF8410930BD4F8EA76420025098990F" style="OLC">
<subparagraph id="H5697354B512D4934AD8BAA646162FDFB"><enum>(H)</enum><header>Private operating foundation</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <quote>private operating foundation</quote> means any organization—</text>
<clause id="H9937285DD04C4D76902A7538A557F5E7"><enum>(i)</enum><text display-inline="yes-display-inline">which makes qualifying distributions (within the meaning of paragraph (1) or (2) of section
4942(g)) directly for the active conduct of the activities constituting
the purpose or function for which it is organized and operated equal to
substantially all of the lesser of—</text>
<subclause id="H2C3F615A05F24A979FAF12D0C1217BB2"><enum>(I)</enum><text display-inline="yes-display-inline">its adjusted net income (as defined in subsection section 4942(f)), or</text>
</subclause><subclause id="HDF7ABB5EE8404D4584C0D928D01F1998"><enum>(II)</enum><text>its minimum investment return, and</text>
</subclause></clause><clause id="H592F65E58C004BED9B8B66565EC27291"><enum>(ii)</enum>
<subclause commented="no" display-inline="yes-display-inline" id="HDF6C6FEB5B0C45F58137CCE39200C35C"><enum>(I)</enum><text>substantially more than half of the assets of which are devoted directly to such activities or to
functionally related businesses, or to both, or are stock of a corporation
which is controlled by the foundation and substantially all of the assets
of which are so devoted,</text>
</subclause><subclause id="H76DF2CEBB08E4DABBAE893AEFD0D59E2" indent="up1"><enum>(II)</enum><text display-inline="yes-display-inline">which normally makes qualifying distributions (within the meaning of paragraph (1) or (2) of
section 4942(g)) directly for the active conduct of the activities
constituting the purpose or function for which it is organized and
operated in an amount not less than two-thirds of its minimum investment
return (as defined in section 4942(e)), or</text>
</subclause><subclause id="H2E7CADCBCEF94D72A1F1B72C5D4DBF18" indent="up1"><enum>(III)</enum><text display-inline="yes-display-inline">substantially all of the support (other than gross investment income as defined in section 509(e))
of which is normally received from the general public and from 5 or more
exempt organizations which are not described in section 4946(a)(1)(H) with
respect to each other or the recipient foundation; not more than 25
percent of the support (other than gross investment income) of which is
normally received from any one such exempt organization; and not more than
half of the support of which is normally received from gross investment
income.</text></subclause></clause><continuation-text continuation-text-level="subparagraph">Notwithstanding the provisions of clause (i), if the qualifying distributions (within the meaning
of paragraph (1) or (2) of section 4942(g)) of an organization for the
taxable year exceed the minimum investment return for the taxable year,
subclause (II) of clause (i) shall not apply unless substantially all of
such qualifying distributions are made directly for the active conduct of
the activities constituting the purpose or function for which it is
organized and operated.</continuation-text></subparagraph><subparagraph id="H6246CECC50434F76B2BFEF82F5C13F58"><enum>(I)</enum><header>Functionally related business</header><text>For purposes of subparagraph (H), the term <quote>functionally related business</quote> means—</text>
<clause id="H7B0B98302F014768BAF17ED00F316C19"><enum>(i)</enum><text display-inline="yes-display-inline">a trade or business which is not an unrelated trade or business (as defined in section 513), or</text>
</clause><clause id="H5AC18CBB99FF432A9485C05E288EA1A1"><enum>(ii)</enum><text display-inline="yes-display-inline">an activity which is carried on within a larger aggregate of similar activities or within a larger
complex of other endeavors which is related (aside from the need of the
organization for income or funds or the use it makes of the profits
derived) to the exempt purposes of the organization.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HEA67726B6D57487EBC1A4E9FA27FC0DF"><enum>(4)</enum><text>Section 170(e)(3)(A) is amended by striking <quote>as defined in section 4942(j)(3)</quote> and inserting <quote>as defined in subsection (b)(1)(H)</quote>.</text>
</paragraph><paragraph id="HA36A7D73C23E45749AD1FF9ED521C637"><enum>(5)</enum><text>Section 150(b)(3)(F), as redesignated by this Act, is amended—</text>
<subparagraph id="H0CDDF311C13C49F2B8D9002BD90CEAE5"><enum>(A)</enum><text>by striking <quote>4942 (relating to the excise tax on a failure to distribute income) and</quote>,</text>
</subparagraph><subparagraph id="H5C3D4E702A584B159E4CE7825D6FF0BC"><enum>(B)</enum><text>by striking <quote>section 4942(j)(4)</quote> and inserting <quote>section 170(b)(1)(I)</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" id="H60CBC90537524B95AD1126845233DAD2"><enum>(6)</enum><text>Section 2055(e)(4)(D) is amended by striking <quote>section 4942(j)(3)</quote> and inserting <quote>section 170(b)(1)(H)</quote>.</text>
</paragraph><paragraph commented="no" id="H9FD7F461FEAE40918F15BDF95476A2E2"><enum>(7)</enum><text>Section 2503(g)(2)(B) is amended by striking <quote>section 4942(j)(3)</quote> and inserting <quote>section 170(b)(1)(H)</quote>.</text>
</paragraph><paragraph id="H9405F572126B4F50803A11617A74C784"><enum>(8)</enum><text>Section 4942(g)(1)(A) is amended by striking <quote>which is not an operating foundation (as defined in subsection (j)(3))</quote>.</text>
</paragraph><paragraph id="H0E978A52DEF24C8CBF40950ED1DA2974"><enum>(9)</enum><text>Section 4942(g)(3)(A) is amended by striking <quote>which is not an operating foundation</quote>.</text>
</paragraph><paragraph id="H605CF7D7EA784E118F506D65F3A4F6CC"><enum>(10)</enum><text>Section 4942(g)(4)(A) is amended by striking <quote>which is not an operating foundation</quote>.</text>
</paragraph><paragraph id="HF5464C7B23E64503A551C375DFB804E5"><enum>(11)</enum><text>Section 4943(d)(3)(A) is amended by striking <quote>section 4942(j)(4)</quote> and inserting <quote>section 170(b)(1)(I)</quote>.</text>
</paragraph><paragraph id="H06A5BE440E3F42CFBDC2B12CCB7ABE09"><enum>(12)</enum><text>Section 6110(l)(2)(A) is amended by striking <quote>section 4942(j)(3)</quote> and inserting <quote>section 170(b)(1)(H)</quote>.</text>
</paragraph><paragraph id="HCAD1BF3D7B7E48CDB57072F1C422DB25"><enum>(13)</enum><text>Section 7428(a)(1)(C) is amended by striking <quote>section 4942(j)(3)</quote> and inserting <quote>section 170(b)(1)(H)</quote>.</text>
</paragraph></subsection><subsection id="H74A41AF0E20941ACAE7E00D4A85DA7ED"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section commented="no" id="H0DD32FB9124A400FB9FDE7EC8B5B3CDB"><enum>5206.</enum><header>Excise tax based on investment income of private colleges and universities</header>
<subsection commented="no" id="HE5640AC58A8243508018AE758B79B30C"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 42 is amended by adding at the end the following new subchapter:</text>
<quoted-block display-inline="no-display-inline" id="HEEA042D230CA45CBB1B37D41AD894A53" style="OLC">
<subchapter commented="no" id="HA804104D10B34F73974FECB09548B037"><enum>H</enum><header>Excise tax based on investment income of private colleges and universities</header>
<toc container-level="subchapter-container" idref="HA804104D10B34F73974FECB09548B037" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H8CD6565D37BF4B128486CD821C95AA4A" level="section">Sec. 4969. Excise tax based on investment income of private colleges and universities.</toc-entry></toc>
<section commented="no" id="H8CD6565D37BF4B128486CD821C95AA4A"><enum>4969.</enum><header>Excise tax based on investment income of private colleges and universities</header>
<subsection commented="no" id="HF99FCAF7374A47329DD725E874E25AF5"><enum>(a)</enum><header>Tax imposed</header><text display-inline="yes-display-inline">There is hereby imposed on each applicable educational institution for the taxable year a tax equal
to 1 percent of the net investment income of such institution for the
taxable year.</text>
</subsection><subsection commented="no" id="H8A6062E199A74FFF807C7A2B0C935A04"><enum>(b)</enum><header>Applicable educational institution</header><text display-inline="yes-display-inline">For purposes of this subchapter—</text>
<paragraph commented="no" id="H80E77C00EDF042BE85D434A748070710"><enum>(1)</enum><header>In general</header><text>The term <quote>applicable educational institution</quote> means an eligible educational institution (as defined in section 25A(e)(3))—</text>
<subparagraph commented="no" id="H5EED99D5A575453CBEE2EA68C5C4C5B5"><enum>(A)</enum><text display-inline="yes-display-inline">which is not described in the first sentence of section 511(a)(2)(B) (relating to State colleges
and universities), and</text>
</subparagraph><subparagraph commented="no" id="HC3FA9957ED8B44869258F953872D9CF9"><enum>(B)</enum><text>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 (or held for use) directly in
carrying out the institution’s exempt purpose) is at least $100,000 per
student of the institution.</text>
</subparagraph></paragraph><paragraph commented="no" id="H8DCB5BD3C1F94ED399F56292F9F3A583"><enum>(2)</enum><header>Students</header><text>For purposes of paragraph (1)(B), 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).</text>
</paragraph></subsection><subsection commented="no" id="H8EA79E40BE424444B51675B36DE9DE69"><enum>(c)</enum><header>Net investment income</header><text>For purposes of this section, net investment income shall be determined under rules similar to the
rules of section 4940(c).</text></subsection></section></subchapter><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HAD2884AC78E7490CAE0FF96F0E4755C6"><enum>(b)</enum><header>Clerical amendment</header><text>The table of subchapters for chapter 42 is amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="HA2647AB4A693416E8514079A155DAFD1" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="subchapter">Subchapter H—Excise tax based on investment income of private colleges and universities</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H8D6C8D43D10743EA972F858CB58D6865"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="H36B08511B46C4388B23467B89F46190F"><enum>D</enum><header>Requirements for Organizations Exempt From Tax</header>
<section id="HD4C49723BED3403591277533C46061A4"><enum>5301.</enum><header>Repeal of tax-exempt status for professional sports leagues</header>
<subsection id="H8C8C3F2FDF5F4B5495B97589E460A826"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (6) of section 501(c) is amended—</text>
<paragraph id="HB2D313FC38614D88BD78A2F3635B5048"><enum>(1)</enum><text>by striking <quote>, boards of trade, or professional</quote> and all that follows through <quote>players)</quote> and inserting <quote>, or boards of trade</quote>, and</text>
</paragraph><paragraph id="H12843959952B4E9BB10D68C17F293564"><enum>(2)</enum><text>by adding at the end the following: <quote>This paragraph shall not apply to any professional sports league (whether or not administering a
pension fund for players).</quote>.</text>
</paragraph></subsection><subsection id="H8E82E0F98B2946B48E9741A3807E3131"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection></section><section id="HF9F74CE9554D41178650810B4B0CF73A"><enum>5302.</enum><header>Repeal of exemption from tax for certain insurance companies and co-op health insurance issuers</header>
<subsection id="HB1FF4C5189F74C24895A3A75E8E5B29A"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 501(c) is amended by striking paragraphs (15) and (29).</text>
</subsection><subsection id="HC9A14F5477E14AE59184B1D8BA1BFF65"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H8FA935BF0BA940BF85CF6D17FC13A0AB"><enum>(1)</enum><text display-inline="yes-display-inline">Section 831(d), as amended by the preceding provisions of this Act, is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H51CD8FEC584E4E73841888B0F8A8660F" style="OLC">
<subsection id="H1E1B6C2F001C4189B10A3555BE6148E3"><enum>(d)</enum><header>Cross reference</header><text display-inline="yes-display-inline">For taxation of foreign corporations carrying on an insurance business within the United States,
see section 842.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H977503208E8E4465B8FE68B543211167"><enum>(2)</enum><text display-inline="yes-display-inline">Section 4958(e)(1) is amended by striking <quote>(4), or (29)</quote> and inserting <quote>or (4)</quote>.</text>
</paragraph><paragraph id="H2515119211614B5AA6146B8593CEF583"><enum>(3)</enum><text>Section 6033 is amended by striking subsection (m) and redesignating subsection (n) as subsection
(m).</text>
</paragraph></subsection><subsection id="H3A477F471F9040708824028B47EFDA8B"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to taxable years beginning after December 31, 2014.</text>
</subsection><subsection id="H6ED181CE468C48938589D5BB55B769B7"><enum>(d)</enum><header>Transition rules</header><text>In the case of any organization described in paragraph (15) or (29) of section 501(c) of the
Internal Revenue Code of 1986 (as in effect immediately before the
enactment of this Act)—</text>
<paragraph id="H1D24A2F81A2D49D0BACD18C89C1054F8"><enum>(1)</enum><text>no adjustment shall be made under section 481 (or any other provision) of the Internal Revenue Code
of 1986 on account of a change in its method of accounting for its 1st
taxable year beginning after December 31, 2014, and</text>
</paragraph><paragraph id="H9D7565991A8F42898AC4C4DE409C5B40"><enum>(2)</enum><text>for purposes of determining gain or loss, the adjusted basis of any asset held on the 1st day of
such taxable year shall be treated as equal to its fair market value as of
such day.</text>
</paragraph></subsection></section><section id="H135BE03B9BEF40468334093127E2B37A"><enum>5303.</enum><header>In-State requirement for workmen’s compensation insurance organization</header>
<subsection id="HA95317F8889A454099EEADF4B054D069"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Clause (ii) of section 501(c)(27)(B) is amended by inserting before the comma at the end the
following: <quote>, and must not offer any other insurance</quote>.</text>
</subsection><subsection id="HB5199124D5764E3BA50AC4EB7D9063E8"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to insurance policies issued, and renewals, after
December 31, 2014.</text>
</subsection></section><section id="HF83B556088314BBEA249C25E305AA9C7"><enum>5304.</enum><header>Repeal of Type II and Type III supporting organizations</header>
<subsection id="H26BE96BA3CDB42A49F0B7A96E9F324E3"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraph (B) of section 509(a)(3) is amended—</text>
<paragraph id="HF40ABE4CBAED4835ADD339BECC5FFFEC"><enum>(1)</enum><text>by inserting <quote>and</quote> at the end of clause (i),</text>
</paragraph><paragraph id="HA3C37A069D1E44CDB23EECBFD8212190"><enum>(2)</enum><text>by striking clauses (ii) and (iii), and</text>
</paragraph><paragraph id="H779FB30319A74D728B5E47D147DCD685"><enum>(3)</enum><text>by striking <quote>is—</quote> and all that follows through <quote>operated, supervised, or controlled</quote> and inserting <quote>is operated, supervised, or controlled</quote>.</text>
</paragraph></subsection><subsection id="HA3729DEF8D0844D58A738BDC840B3308"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HAC04CDD61A0747DFB2778285CC9F81FC"><enum>(1)</enum><text display-inline="yes-display-inline">Section 170(f)(18)(A) is amended by striking <quote>is not—</quote> and all that follows through <quote>, and</quote> and inserting the following: <quote>is not described in paragraph (3), (4), or (5) of subsection (c), and</quote>.</text>
</paragraph><paragraph id="H2774EE60A9CC4585BB766D469B112835"><enum>(2)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H8B17D991305044AD96AB4182688DEF5C"><enum>(A)</enum>
<clause commented="no" display-inline="yes-display-inline" id="HA0B288F8E74A4CD5A31B189FA6FFD772"><enum>(i)</enum><text>Section 509(f) is amended by striking paragraph (1) and by redesignating paragraphs (2) and (3) as
paragraphs (1) and (2), respectively.</text>
</clause><clause id="H3FCB7FDBF7AC4857BDFFB9CCCB4F6318" indent="up2"><enum>(ii)</enum><text>Section 4942(g)(4)(A)(ii)(I) is amended by striking <quote>section 509(f)(3)</quote> and inserting <quote>section 509(f)(2)</quote>.</text>
</clause><clause id="H6F0685313A444445B51B28C7A64F3A9F" indent="up2"><enum>(iii)</enum><text>Section 4958(c)(3)(C)(ii)(II) is amended by striking <quote>section 509(f)(3)</quote> and inserting <quote>section 509(f)(2)</quote>.</text>
</clause><clause id="H3B5388E11D8C43F296BE8610B7E201B0" indent="up2"><enum>(iv)</enum><text>Section 4966(d)(4)(A)(ii)(I) is amended by striking <quote>section 509(f)(3)</quote> and inserting <quote>section 509(f)(2)</quote>.</text>
</clause></subparagraph><subparagraph id="H63019E0E399446BAAF646FE791D77480" indent="up1"><enum>(B)</enum><text>Section 509(f)(1)(A), as so redesignated, is amended by striking <quote>shall not be considered to be—</quote> and all that follows through <quote>if such organization</quote> and inserting the following: <quote>shall not be considered to be operated, supervised, or controlled by any organization described in
paragraph (1) or (2) of subsection (a), if such organization</quote>.</text>
</subparagraph></paragraph><paragraph id="H8779DEB6027B44F78F7FCB5B57CBD6F6"><enum>(3)</enum><text>Section 2055(e)(5)(A) is amended by striking <quote>is not—</quote> and all that follows through <quote>, and</quote> and inserting the following: <quote>is not described in paragraph (3) or (4) of subsection (a), and</quote>.</text>
</paragraph><paragraph id="HF06CC924F0C14345846A9EA34934A1DA"><enum>(4)</enum><text>Section 2522(c)(5)(A) is amended by striking <quote>is not—</quote> and all that follows through <quote>, and</quote> and inserting the following: <quote>is not described in paragraph (3) or (4) of subsection (a), and</quote>.</text>
</paragraph><paragraph display-inline="no-display-inline" id="HB758C7DDBA66489089EF2084CC026A4F"><enum>(5)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H2D67A1236BDE416A86B98B7B57488172"><enum>(A)</enum><text>Section 4942(g)(4)(A), as amended by the preceding provision of this Act, is amended—</text>
<clause id="H45EC640B8903419488BA7DD1E102C943"><enum>(i)</enum><text>by redesignating subclauses (I) and (II) of clause (ii) as clauses (i) and (ii), respectively, and
moving such redesignated clauses 2 ems to the left,</text>
</clause><clause id="H8DEEE8616C084E82BB0F3D0D9AB16056"><enum>(ii)</enum><text>by striking <quote>paid by a private foundation to—</quote> and all that follows through <quote>any organization which</quote> and inserting the following: <quote>paid by a private foundation to any organization which</quote>, and</text>
</clause><clause id="H681FD4A9D58D42C5A5F697DCBFC020D5"><enum>(iii)</enum><text>by striking <quote>subparagraph (B) or (C)</quote> and inserting <quote>subparagraph (B)</quote>.</text>
</clause></subparagraph><subparagraph id="HC2732B1C4A4F46BDBE881B0B7EAC7C04" indent="up1"><enum>(B)</enum><text>Section 4942(g)(4)(B) is amended—</text>
<clause id="H0EA499D765DB43A983395D76C6D070CA"><enum>(i)</enum><text>by striking clause (ii),</text>
</clause><clause id="HF137B482428B41E780A368290F9F93BF"><enum>(ii)</enum><text>by striking <quote>section 509(a), or</quote> and inserting <quote>section 509(a).</quote>,</text>
</clause><clause id="H4D688588151046EA9BEABF4D406F9999"><enum>(iii)</enum><text>by striking <quote>and is—</quote> and all that follows through <quote>operated, supervised, or controlled by</quote> and inserting the following: <quote>and is operated, supervised, or controlled by</quote>, and</text>
</clause><clause id="H730D3F8AA8364800B895855F2C420689"><enum>(iv)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">Type I and type II</header-in-text></quote> in the heading thereof.</text>
</clause></subparagraph><subparagraph id="H71A3569034D94833BD8DC7F82A690683" indent="up1"><enum>(C)</enum><text>Section 4942(g)(4) is amended by striking subparagraph (C).</text>
</subparagraph><subparagraph id="HC7C7C388B73644069F702049FC112E15" indent="up1"><enum>(D)</enum><text>Section 4945(d)(4)(A)(ii) is amended by striking <quote>clause (i) or (ii) of section 4942(g)(4)(A)</quote> and inserting <quote>section 4942(g)(4)(A)</quote>.</text>
</subparagraph></paragraph><paragraph id="HFF7BA6C4AD074D2C811F8A0051308D39"><enum>(6)</enum><text>Section 4943 is amended by striking subsection (f).</text>
</paragraph><paragraph id="H49E5145E6E404928933A643A01F93BAB"><enum>(7)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H1B3140460CA3438D9B345AA4EC55203A"><enum>(A)</enum><text>Section 4966(d)(4)(A), as amended by this Act, is amended—</text>
<clause id="H07F81B681AAE404996F0B38C416567AF"><enum>(i)</enum><text>by redesignating subclauses (I) and (II) of clause (ii) as clauses (i) and (ii), respectively, and
moving such redesignated clauses 2 ems to the left,</text>
</clause><clause id="HC6136FE65F0E4FB7A5BEA8A793379282"><enum>(ii)</enum><text>by striking <quote>with respect to any distribution—</quote> and all that follows through <quote>any organization which</quote> and inserting the following: <quote>with respect to any distribution, any organization which</quote>, and</text>
</clause><clause id="HC49E62CB8DF7407DB2146A218CCF24FF"><enum>(iii)</enum><text>by striking <quote>subparagraph (B) or (C)</quote> and inserting <quote>subparagraph (B)</quote>.</text>
</clause></subparagraph><subparagraph id="H0E18034B66894913BBF41DEF977DFFF3" indent="up1"><enum>(B)</enum><text>Section 4966(d)(4)(B) is amended—</text>
<clause id="H5AEE3F3ECC274CC4B67A09FBF165E791"><enum>(i)</enum><text>by striking clause (ii),</text>
</clause><clause id="HDDB9129627FC482392F909D55C6FA7F0"><enum>(ii)</enum><text>by striking <quote>section 509(a), or</quote> and inserting <quote>section 509(a).</quote>,</text>
</clause><clause id="H46DBBE57EE7F4FCABA8257D783BBE620"><enum>(iii)</enum><text>by striking <quote>and is—</quote> and all that follows through <quote>operated, supervised, or controlled by</quote> and inserting the following: <quote>and is operated, supervised, or controlled by</quote>, and</text>
</clause><clause id="H20A645FBF1B44514800E4A6B20E47119"><enum>(iv)</enum><text>by striking <quote><header-in-text level="subparagraph" style="OLC">Type I and type II</header-in-text></quote> in the heading thereof.</text>
</clause></subparagraph><subparagraph id="H8CC3B73A227E43F191D466B57A36038B" indent="up1"><enum>(C)</enum><text>Section 4966(d)(4) is amended by striking subparagraph (C).</text>
</subparagraph></paragraph><paragraph id="H1B2E9A5ED87C453E9045C5DE840E36E6"><enum>(8)</enum><text>Section 6033(l) is amended by inserting <quote>and</quote> at the end of paragraph (1), by striking paragraph (2), and by redesignating paragraph (3) as
paragraph (2).</text>
</paragraph></subsection><subsection id="H782C0384E27A4281B433CE919365B880"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H3C460030332341049230FAE41D74F043"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in paragraph (2), the amendments made by this section shall take effect on the
date of the enactment of this Act.</text>
</paragraph><paragraph id="HDD4A76FD67104823892615D3F1B5E36C"><enum>(2)</enum><header>Delay for current supporting organizations</header><text>In the case of an organization which, as of the date of the enactment of this Act, meets the
requirements of subparagraphs (A) and (C) of section 509(a)(3) of the
Internal Revenue Code of 1986 and is—</text>
<subparagraph id="H8D878D1B7D0F45128A4C23CBBF44A210"><enum>(A)</enum><text>supervised or controlled in connection with one or more organizations described in paragraph (1) or
(2) of section 509(a) of such Code, or</text>
</subparagraph><subparagraph id="H0871C70126A8482EA8EAC1DCDF57D23C"><enum>(B)</enum><text>is operated in connection with one or more such organizations,</text></subparagraph><continuation-text continuation-text-level="paragraph">the amendments made by this section shall apply to taxable years beginning after December 31, 2015.</continuation-text></paragraph></subsection></section></subtitle><enum>VI</enum><header>Tax administration and compliance</header>
<subtitle id="HF09472DC23BD47EEA70A96F0D249BA56"><enum>A</enum><header>IRS Investigation-Related Reforms</header>
<section id="HA3C6DA68AC444975B91B8621FCBD4865"><enum>6001.</enum><header>Organizations required to notify Secretary of intent to operate as <enum-in-header>501(c)(4)</enum-in-header></header>
<subsection id="HC15487D90B5E45D3AC1AF3D1E1A12656"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part I of subchapter F of chapter 1 is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H11D9F4A78C364B54AB44170E40B3AA33" style="OLC">
<section id="H6CC8B108A4294E2BAEE6C1F0365EB6BC"><enum>506.</enum><header>Organizations required to notify Secretary of intent to operate as <enum-in-header>501(c)(4)</enum-in-header></header>
<subsection id="HC1FEF89B264F47BC97308E699A946109"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">An organization described in section 501(c)(4) shall, not later than 60 days after the organization
is established, notify the Secretary (in such manner as the Secretary
shall by regulation prescribe) that it is operating as such.</text>
</subsection><subsection id="H187C6651E1844BE988D7FB994E893BB2"><enum>(b)</enum><header>Contents of notice</header><text>The notice required under subsection (a) shall include the following information:</text>
<paragraph id="H4ACB8111300447958C5AEA7B79953AE2"><enum>(1)</enum><text>The name, address, and taxpayer identification number of the organization.</text>
</paragraph><paragraph id="HF7F4922AA15D40C596A6749A26A8C0D7"><enum>(2)</enum><text>The date on which, and the State under the laws of which, the organization was organized.</text>
</paragraph><paragraph id="HBB31AF8764BB45D1BB7F5B4FB571684D"><enum>(3)</enum><text>A statement of the purpose of the organization.</text>
</paragraph></subsection><subsection id="H295BFC6F46B74C16840854E4F5337C4B"><enum>(c)</enum><header>Acknowledgment of receipt</header><text>Not later than 60 days after receipt of such a notice, the Secretary shall send to the organization
an acknowledgment of such receipt.</text>
</subsection><subsection id="H3221081F417D461DB6E8A3EE8AB76DE9"><enum>(d)</enum><header>Extension for reasonable cause</header><text>The Secretary may, for reasonable cause, extend the 60-day period described in subsection (a).</text>
</subsection><subsection id="H6D3814A8BCF747139415D7FCC135428C"><enum>(e)</enum><header>User fee</header><text>The Secretary shall impose a reasonable user fee for submission of the notice under subsection (a).</text>
</subsection><subsection id="H5999488D54634F7A92AE0FFCAC2AA635"><enum>(f)</enum><header>Request for determination</header><text display-inline="yes-display-inline">Upon request by an organization to be treated as an organization described in section 501(c)(4),
the Secretary may issue a determination with respect to such treatment.
Such request shall be treated for purposes of section 6104 as an
application for exemption from taxation under section 501(a).</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBC7AE70974A443E0B9FAF166BF1A143A"><enum>(b)</enum><header>Supporting information with first return</header><text>Paragraph (1) of section 6033(f) is amended—</text>
<paragraph id="H41518F53213041B8B1A7D2EDA3936964"><enum>(1)</enum><text>by striking the period at the end and inserting <quote>, and</quote>,</text>
</paragraph><paragraph id="HB5748E8D09C9434E81537DFFD86E8E2C"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>include on the return required under subsection (a) the information</quote> and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="HCE3AEA73E8F54E188FB12C3BFE4471C5" style="OLC"><text>include on the return required under subsection (a)—</text><paragraph id="HE31D6FC0247F425A98C03A0B83615B83"><enum>(1)</enum><text display-inline="yes-display-inline">the information</text></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</paragraph><paragraph id="HB7A1DB0D278E418C8B052507E4C3A751"><enum>(3)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H8013E0AF937B46CF91A8EFC33A1A1685" style="OLC">
<paragraph id="HFA026F98C2B94E5887DA80E019DB5B86"><enum>(2)</enum><text display-inline="yes-display-inline">in the case of the first such return filed by such an organization after submitting a notice to the
Secretary under section 506(a), such information as the Secretary shall by
regulation require in support of the organization’s treatment as an
organization described in section 501(c)(4).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H7647FACC7EFD47879C57254B99543EAB"><enum>(c)</enum><header>Failure To file initial notification</header><text>Subsection (c) of section 6652 is amended by redesignating paragraphs (4) and (5) as paragraphs (5)
and (6), respectively, and by inserting after paragraph (3) the following
new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H022F8EFB7136467CA18B215D590AE329" style="OLC">
<paragraph id="H0723D3576A0F4786AB69D69F06BD897B"><enum>(4)</enum><header>Notices under section <enum-in-header>506</enum-in-header></header>
<subparagraph id="H2673E42B86494175BDA211330B992D6B"><enum>(A)</enum><header>Penalty on organization</header><text display-inline="yes-display-inline">In the case of a failure to submit a notice required under section 506(a) (relating to
organizations required to notify Secretary of intent to operate as
501(c)(4)) on the date and in the manner prescribed therefor, there shall
be paid by the organization failing to so submit $20 for each day during
which such failure continues, but the total amount imposed under this
subparagraph on any organization for failure to submit any one notice
shall not exceed $5,000.</text>
</subparagraph><subparagraph id="H6EC8DECF6DEA411E887520BAB384F526"><enum>(B)</enum><header>Managers</header><text display-inline="yes-display-inline">The Secretary may make written demand on an organization subject to penalty under subparagraph (A)
specifying in such demand a reasonable future date by which the notice
shall be submitted for purposes of this subparagraph. If such notice is
not submitted on or before such date, there shall be paid by the person
failing to so submit $20 for each day after the expiration of the time
specified in the written demand during which such failure continues, but
the total amount imposed under this subparagraph on all persons for
failure to submit any one notice shall not exceed $5,000.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD6DC5AFEC03C49F4B4A66DEB9630D5BA"><enum>(d)</enum><header>Clerical amendment</header><text display-inline="yes-display-inline">The table of sections for part I of subchapter F of chapter 1 is amended by adding at the end the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="HEDEB165B35FF495C9928E12818626484" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 506. Organizations required to notify Secretary of intent to operate as <enum-in-header>501(c)(4)</enum-in-header>.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0768C40F25474372AAA4931F88FF8298"><enum>(e)</enum><header>Effective date</header>
<paragraph id="H1DE19B1834B840AC83168F5FE35FAF30"><enum>(1)</enum><header>In general</header><text>The amendments made by this section shall apply to organizations which are described in section
501(c)(4) of the Internal Revenue Code of 1986 and organized after
December 31, 2014.</text>
</paragraph><paragraph id="H03D1847314FB4285B902451C60CD8EBC"><enum>(2)</enum><header>Certain existing organizations</header><text>In the case of any other organization described in section 501(c)(4) of such Code, the amendments
made by this section shall apply to such organization only if, on or
before the date of the enactment of this Act—</text>
<subparagraph id="H6F60CB10171D4BC6B3AEED6BFB042F26"><enum>(A)</enum><text>such organization has not applied for a written determination of recognition as an organization
described in section 501(c)(4) of such Code, and</text>
</subparagraph><subparagraph id="H1EDA36E6D4704FA3B0E03E413C80B303"><enum>(B)</enum><text>such organization has not filed at least one annual return or notice required under subsection
(a)(1) or (i) (as the case may be) of section 6033 of such Code.</text></subparagraph><continuation-text continuation-text-level="paragraph">In the case of any organization to which the amendments made by this section apply by reason of the
preceding sentence, such organization shall submit the notice required by
section 506(a) of such Code, as added by this Act, not later than 180 days
after the date of the enactment of this Act.</continuation-text></paragraph></subsection></section><section id="HC86559FC05D3472D88900327A7CAE4BE" section-type="subsequent-section"><enum>6002.</enum><header>Declaratory judgments for <enum-in-header>501(c)(4)</enum-in-header> organizations</header>
<subsection id="H5F2F84666CA04FF192991F5C50E17212"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (1) of section 7428(a) is amended by striking <quote>or</quote> at the end of subparagraph (C) and by inserting after subparagraph (D) the following new
subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H9D6787404F8F4AA5861E5A1CC7DB95AD" style="OLC">
<subparagraph id="H11A1B75A4C624C72B4B9FB5AFC7F966D"><enum>(E)</enum><text display-inline="yes-display-inline">with respect to the initial classification or continuing classification of an organization
described in section 501(c)(4) which is exempt from tax under section
501(a), or</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H054BE2363DE14B8484FB3582733C307A"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to pleadings filed after the date of the enactment
of this Act.</text>
</subsection></section><section id="HF6F1091E840B475E95A3D2799EC2E3A4"><enum>6003.</enum><header>Restriction on donation reporting for certain <enum-in-header>501(c)(4)</enum-in-header> organizations</header>
<subsection id="H984F486C0CDA4C72AD35C95C7666B9F1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (f) of section 6033, as amended by this Act, is amended—</text>
<paragraph id="HF66740AD945C43528A82B29EA00B4B8A"><enum>(1)</enum><text>by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, and by moving
such subparagraphs 2 ems to the right,</text>
</paragraph><paragraph id="H65136AAC848542E19CEF501E0FCC4D28"><enum>(2)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">in section <enum-in-header>501(c)(4).—</enum-in-header></header-in-text>Every organization</quote> and inserting the following:</text>
<quoted-block display-inline="yes-display-inline" id="HB65CFEBEDA6D49E0A61B510C80892ABA" style="OLC"><text><header-in-text level="subsection" style="OLC">in section <enum-in-header>501(c)(4).—</enum-in-header></header-in-text></text><paragraph id="H3F045247AD024CFDB4FF6D260BA5B376"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Every organization</text></paragraph><after-quoted-block>, and</after-quoted-block></quoted-block>
</paragraph><paragraph id="H4B9F6003165E46DF8A8B3880181940A2"><enum>(3)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H6BA651F6CCB447A69E8215738885BF42" style="OLC">
<paragraph id="H63CBE323B1A94115988FEA5B464DE9FD"><enum>(2)</enum><header>Restriction on donation reporting</header><text display-inline="yes-display-inline">In the case of any such organization, information relating to contributions and gifts may only be
required to be included on a return required under subsection (a) if the
contribution or gift is made by an officer or director of the organization
(or an individual having powers or responsibilities similar to those of
officers or directors) or any covered employee (as defined in section
4960(c)(2)) of the organization.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HC324CC7EDFF349A58D880CE08FF93131"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to returns for taxable years beginning after
December 31, 2013.</text>
</subsection></section><section id="HD0F06B0019CE4D8AA0327D3768E2FD26"><enum>6004.</enum><header>Mandatory electronic filing for annual returns of exempt organizations</header>
<subsection id="HFE3F1CA176BB41EF99D8021CCFCC212F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 6033, as amended by the preceding provisions of this Act, is amended by redesignating
subsection (m) as subsection (n) and by inserting after subsection (l) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H65C51F71BDFF4C3689B124B4F2AB7DE5" style="OLC">
<subsection id="HF682D65F57B34F7E91DF97A19C20D6AB"><enum>(m)</enum><header>Mandatory electronic filing</header><text display-inline="yes-display-inline">Any organization required to file a return under this section shall file such return in electronic
form.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H5DC4368138854BCDBE873498056717B8"><enum>(b)</enum><header>Inspection of electronically filed annual returns</header><text>Subsection (b) of section 6104 is amended by adding at the end the following: <quote>Any annual return required to be filed electronically under section 6033(m) shall be made available
by the Secretary to the public in machine readable format as soon as
practicable.</quote>.</text>
</subsection><subsection id="H3317D3886A80429FBED054524E0A1C25"><enum>(c)</enum><header>Effective date</header>
<paragraph id="H9101753F08AD4B1C9A1D726F440177C8"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Except as provided in paragraph (2), the amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</paragraph><paragraph id="H090DCE2651964483AC0429347F83890B"><enum>(2)</enum><header>Transitional relief</header>
<subparagraph id="HB664FEAA295B471B93D6D7DD8C3E7776"><enum>(A)</enum><header>Small organizations</header>
<clause id="HAB210BAD896643F798591DB1D3E05EC7"><enum>(i)</enum><header>In general</header><text>In the case of any small organizations, or any other organizations for which the Secretary
determines the application of the amendments made by subsection (a) would
cause undue burden without a delay, the Secretary may delay the
application of such amendments, but not later than taxable years beginning
2 years after the date of the enactment of this Act.</text>
</clause><clause id="H3559524CB92A4BB1865BEEC37575AA5A"><enum>(ii)</enum><header>Small organization</header><text>For purposes of clause (i), the term <quote>small organization</quote> means any organization—</text>
<subclause id="H9EAD103A3A9F45D7A209637DCC9C5F19"><enum>(I)</enum><text>the gross receipts of which for the taxable year are less than $200,000, and</text>
</subclause><subclause id="HD49CB455FFC746ACA2B025560235CB5D"><enum>(II)</enum><text>the aggregate gross assets of which at the end of the taxable year are less than $500,000.</text>
</subclause></clause></subparagraph><subparagraph id="H8DA4B7279F6542C4B0BEB76CA9805551"><enum>(B)</enum><header>Organizations filing form 990–T</header><text display-inline="yes-display-inline">In the case of any organization described in <external-xref legal-doc="usc" parsable-cite="usc/26/511">section 511(a)(2)</external-xref> of the Internal Revenue Code of 1986
which is subject to the tax imposed by section 511(a)(1) of such Code on
its unrelated business taxable income, or any organization required to
file a return under section 6033 of such Code and include information
under subsection (e) thereof, the Secretary may delay the application of
the amendments made by this section, but not later than taxable years
beginning 2 years after the date of the enactment of this Act.</text>
</subparagraph></paragraph></subsection></section><section id="H9EF6E7411849494F855D7AC84C40D553"><enum>6005.</enum><header>Duty to ensure that IRS employees are familiar with and act in accord with certain taxpayer rights</header><text display-inline="no-display-inline">Section 7803(a) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after
paragraph (2) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H9309D7FE550F429EA6D8CAB2B64878A1" style="OLC">
<paragraph id="HDEC2C27C97F94861BDEECF8E51643310"><enum>(3)</enum><header>Execution of Duties in Accord with Taxpayer Rights</header><text display-inline="yes-display-inline">In discharging his duties, the Commissioner shall ensure that employees of the Internal Revenue
Service are familiar with and act in accord with taxpayer rights as
afforded by other provisions of this title, including—</text>
<subparagraph id="HEB896B5641A44CB1B75E2C91B7AAF674"><enum>(A)</enum><text>the right to be informed,</text>
</subparagraph><subparagraph id="HEFBCD5203EF94993919A702EDF7E6952"><enum>(B)</enum><text>the right to be assisted,</text>
</subparagraph><subparagraph id="H8E0DF69FCB134739B5C80EF73DF61F1D"><enum>(C)</enum><text>the right to be heard,</text>
</subparagraph><subparagraph id="HB7380D53635842319A935979AA162C8C"><enum>(D)</enum><text>the right to pay no more than the correct amount of tax,</text>
</subparagraph><subparagraph id="HAE214B717E5741628F558703BD333CE5"><enum>(E)</enum><text>the right of appeal,</text>
</subparagraph><subparagraph id="HACA2DE45656F422581458724F1CEE592"><enum>(F)</enum><text>the right to certainty,</text>
</subparagraph><subparagraph id="H0427953A68B84564B6616D44853AD968"><enum>(G)</enum><text>the right to privacy,</text>
</subparagraph><subparagraph id="H511508A5B4C5444DBC874F69AB18B8DA"><enum>(H)</enum><text>the right to confidentiality,</text>
</subparagraph><subparagraph id="H3227F101E24C40A9B6A096333B82ABF2"><enum>(I)</enum><text>the right to representation, and</text>
</subparagraph><subparagraph id="H7BECD0F19C004AEAB24663C66085EEAE"><enum>(J)</enum><text>the right to a fair and just tax system.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="H74FB350208D949D4A5BB3E605F5548A2"><enum>6006.</enum><header>Termination of employment of IRS employees for taking official actions for political purposes</header><text display-inline="no-display-inline">Paragraph (10) of section 1203(b) of the Internal Revenue Service Restructuring and Reform Act of
1998 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H298197A92C794DFDAADA743D8E7CE797" style="OLC">
<paragraph id="H09BD4FC8353646518CA144DE95BF34C1"><enum>(10)</enum><text display-inline="yes-display-inline">performing, delaying, or failing to perform (or threatening to perform, delay, or fail to perform)
any official action (including any audit) with respect to a taxpayer for
purpose of extracting personal gain or benefit or for a political purpose.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="H064E494FF669486DA179E17BE4B41C21"><enum>6007.</enum><header>Release of information regarding the status of certain investigations</header>
<subsection id="H139E74CD060043DEAA69E9F310F9703E"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (e) of section 6103 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H56F7AF4569434E68ABD92F380F54532D" style="OLC">
<paragraph id="HAA248F1EFFBA4B8CB07B081EB2A85A31"><enum>(11)</enum><header>Disclosure of information regarding status of investigation of violation of this section</header><text display-inline="yes-display-inline">In the case of a person who provides to the Secretary information indicating a violation of section
7213, 7213A, or 7214 with respect to any return or return information of
such person, the Secretary may disclose to such person (or such person’s
designee)—</text>
<subparagraph id="HB1862FD97F0349FDAED4CD592FC6F851"><enum>(A)</enum><text>whether an investigation based on the person’s provision of such information has been initiated and
whether it is open or closed,</text>
</subparagraph><subparagraph id="H7E572704FF174AF5877BCFD49596138B"><enum>(B)</enum><text>whether any such investigation substantiated such a violation by any individual, and</text>
</subparagraph><subparagraph id="H1810F390A1B04AAFB11CA5426FEA998C"><enum>(C)</enum><text>whether any action has been taken with respect to such individual (including whether a referral has
been made for prosecution of such individual).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H4ED2BC606F5D4271B81839206939C86E"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall take effect on the date of the enactment of this Act.</text>
</subsection></section><section id="HE6A0B54EBED54E968B7C6CEB662D099C"><enum>6008.</enum><header>Review of IRS examination selection procedures</header>
<subsection id="H6C8A84161C674180A141BF78F6F99BAB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">The Comptroller General of the United States shall conduct a study of each Internal Revenue Service
operating division to assess the process used for determining how
enforcement cases are selected and processed. Such study shall include a
review of the following:</text>
<paragraph id="HC81C2E4839E446AC85F39D95FA44DE80"><enum>(1)</enum><text display-inline="yes-display-inline">The standards each such operating division has established for enforcement case selection
(including any automated or discretionary selection processes) and case
work, and whether such standards meet the objectives of impartiality,
objectivity, compliance, and minimizing taxpayer burden.</text>
</paragraph><paragraph id="H85F4DE0503464610AC44BFFA523CB453"><enum>(2)</enum><text display-inline="yes-display-inline">The extent to which any cases are initiated by referrals or complaints from inside or outside of
the operating division (including from outside of the Internal Revenue
Service).</text>
</paragraph><paragraph id="H1CCF92F5264340E28DACAAD5C1511237"><enum>(3)</enum><text display-inline="yes-display-inline">The Internal Revenue Service controls (including management reviews and regular updates) for
assuring that its standards for enforcement cases (and handling of
referrals and complaints) in each operating division are sufficient for
achieving the objectives described in paragraph (1).</text>
</paragraph><paragraph id="H549EC12958A045738CFD42C1C5425139"><enum>(4)</enum><text display-inline="yes-display-inline">The Internal Revenue Service controls (including training, monitoring, and quality assessments) for
assuring that its standards are adhered to by all division personnel and
the effectiveness of such controls.</text>
</paragraph><paragraph id="HA8EA9952D7CE42A7939C36A163F4A596"><enum>(5)</enum><text display-inline="yes-display-inline">Whether the existing standards and controls provide reasonable assurance that each division’s
enforcement processes meet the Internal Revenue Service objectives of
impartiality, objectivity, compliance, and minimizing taxpayer burden.</text>
</paragraph></subsection><subsection id="HFC8DB5EBBAB048909E3DD9BBA2B8F772"><enum>(b)</enum><header>Initial report</header><text display-inline="yes-display-inline">Not later than 1 year after the date of the enactment of this section, the Comptroller General
shall submit to the Committee on Ways and Means of the House of
Representatives, the Committee on Finance of the Senate, and the Secretary
of the Treasury a report on the results of such study. Such report shall
include such recommendations as the Comptroller General may deem
advisable.</text>
</subsection><subsection id="H23E7A323B7E64A658EE69EDFD5F36F69"><enum>(c)</enum><header>Follow-Up on recommendations</header><text display-inline="yes-display-inline">Not later than 180 days after a report is submitted with respect to an operating division under
subsection (b), the Comptroller General shall conduct a follow-up study,
and submit to the Committee on Ways and Means of the House of
Representatives, the Committee on Finance of the Senate, and the Secretary
of the Treasury a report, on whether any recommendations to improve case
selection and case work processes have been implemented and are working as
intended.</text>
</subsection><subsection id="H76856FD87C8F406D93FBEA84F6EBE949"><enum>(d)</enum><header>Continuing case management studies and reports</header>
<paragraph id="H27292530D9E3441F82DD9F8896F39E47"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">After a report is submitted under subsection (b), the Comptroller General shall conduct follow-up
studies and reports in the same manner as provided in subsections (a) and
(b) with respect to each operating division of the Internal Revenue
Service and shall include in such study and report a review of whether any
previous recommendations to improve case selection and case work processes
have been implemented and are working as intended.</text>
</paragraph><paragraph id="H72468C020CC54217B587A40DB9D07505"><enum>(2)</enum><header>Frequency</header><text>Each such report with respect to an operating division shall be submitted not later than 4 years
after the date the most recent report was submitted with respect to such
operating division under subsection (b) or this subsection. The
Comptroller General shall submit no fewer than 1 such report each year.</text>
</paragraph></subsection></section><section id="HF0AC1EFDFA1F4412A694C936B5FEBA20" section-type="subsequent-section"><enum>6009.</enum><header>IRS employees prohibited from using personal email accounts for official business</header><text display-inline="no-display-inline">No officer or employee of the Internal Revenue Service may use a personal email account to conduct
any official business of the Government.</text>
</section><section id="H0DE8EA2B66A74D4384EA9E6D8F72AD61"><enum>6010.</enum><header>Moratorium on IRS conferences</header><text display-inline="no-display-inline">The Internal Revenue Service shall not hold any conference until the Treasury Inspector General for
Tax Administration submits a report to Congress—</text>
<paragraph id="HAA9BF93AD26F4D2F88723BACA2510ECE"><enum>(1)</enum><text>certifying that the Internal Revenue Service has implemented all of the recommendations set out in
such Inspector General’s report titled <term>Review of the August 2010 Small Business/Self-Employed Division’s Conference in Anaheim, California</term>, and</text>
</paragraph><paragraph id="HD95F62E6F19D4BDBB59643F5B4752B61"><enum>(2)</enum><text>describing such implementation.</text>
</paragraph></section><section id="HBE19706BE9CB478A89A024D6498297D7" section-type="subsequent-section"><enum>6011.</enum><header>Applicable standard for determinations of whether an organization is operated exclusively for the
promotion of social welfare</header>
<subsection id="H3300C217502E4477900479EE70CA5C21"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">The standard and definitions as in effect on January 1, 2010, which are used to determine whether
an organization is operated exclusively for the promotion of social
welfare for purposes of section 501(c)(4) of the Internal Revenue Code of
1986 shall apply for purposes of determining the status of organizations
under <external-xref legal-doc="usc" parsable-cite="usc/26/501">section 501(c)(4)</external-xref> of the Internal Revenue Code of 1986 after the
date of the enactment of this Act.</text>
</subsection><subsection id="H09B9095F798C4977A01F668F40E4DB1E"><enum>(b)</enum><header>Prohibition on modification of standard</header><text>The Secretary of the Treasury may not (nor may any delegate of such Secretary) issue, revise, or
finalize any regulation (including the proposed regulations published at
78 Fed. Reg. 71535 (November 29, 2013)), revenue ruling, or other guidance
not limited to a particular taxpayer relating to the standard and
definitions specified in subsection (a).</text>
</subsection><subsection id="H3093CB7E7E3D475AB004455F0A9A9128"><enum>(c)</enum><header>Application to organizations</header><text>Except as provided in subsection (d), this section shall apply with respect to any organization
claiming tax exempt status under section 501(c)(4) of the Internal Revenue
Code of 1986 which was created on, before, or after the date of the
enactment of this Act.</text>
</subsection><subsection id="H1EFB1FAD24184D158F6D3F52EB06D8C9"><enum>(d)</enum><header>Sunset</header><text>This section shall not apply after the one-year period beginning on the date of the enactment of
this Act.</text>
</subsection></section></subtitle><subtitle id="H301BF4061CB445B5A4CB06BDF3A1E1B6"><enum>B</enum><header>Taxpayer Protection and Service Reforms</header>
<section id="H120B7CA834A84D6C9DF45D6B7FB3994A"><enum>6101.</enum><header>Extension of IRS authority to require truncated Social Security numbers on Form W–2</header>
<subsection id="HCFD3737A850A489D942EFC0C73EDD014"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (2) of section 6051(a) is amended by striking <quote>his social security number</quote> and inserting <quote>an identifying number for the employee</quote>.</text>
</subsection><subsection id="H6BB46C7BEA6C43E7AF400EBFBA5FA195"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendment made by this section shall take effect on the date of the enactment of this Act.</text>
</subsection></section><section id="H5CCA6EFFF7B54B33B283070B29066BEF"><enum>6102.</enum><header>Free electronic filing</header>
<subsection id="HA8D3060C57774A27A2DB496B31EAEB0C"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">The Secretary of the Treasury shall, in cooperation with the private sector technology industry,
maintain a program that provides free individual income tax preparation
and electronic filing services to low-income taxpayers and elderly
taxpayers.</text>
</subsection><subsection id="HC0839E5103B4408F8EDFDAB90B445215"><enum>(b)</enum><header>Requirements of program</header><text>The Secretary shall by regulation or other guidance prescribe with respect to the program—</text>
<paragraph id="H8A707BB1EEE44D3B8BA554672F7B5813"><enum>(1)</enum><text>the qualifications, selection process, and contract term for businesses participating in the
program,</text>
</paragraph><paragraph id="H28F18ED456F249EEAD290F45387AF3F9"><enum>(2)</enum><text>a process for periodic review of businesses participating in the program,</text>
</paragraph><paragraph id="H1F112D0D18C74FFDA4AB098EE139D4F5"><enum>(3)</enum><text>procedures for terminating business participation in the program for failure to comply with any
program requirements, and</text>
</paragraph><paragraph id="HA75FE39F8FB844E5993B419E7BF8BEF1"><enum>(4)</enum><text>such other procedures as the Secretary determines are necessary or appropriate to carry out the
purposes of the program.</text>
</paragraph></subsection><subsection id="HEEBC3E68F237471696279856E2D26401"><enum>(c)</enum><header>Free File program</header><text display-inline="yes-display-inline">The Internal Revenue Service Free File program, as set forth in the notice published in the Federal
Register on November 4, 2002 (67 Fed. Reg. 67247), shall be treated as
meeting the requirements of subsection (a).</text>
</subsection></section><section id="H57734D4E1B0A4C4FBBAC188A9FACECB9"><enum>6103.</enum><header>Pre-populated returns prohibited</header><text display-inline="no-display-inline">Except to the extent provided in section 6014, 6020, or 6201(d) of the Internal Revenue Code of
1986, the Secretary of the Treasury shall not provide to any person a
proposed final return or statement for use by such person to satisfy a
filing or reporting requirement under such Code.</text>
</section><section id="HC8612B5882FD48A3B47F18811DDD76E8"><enum>6104.</enum><header>Form 1040SR for seniors</header>
<subsection id="H0EA06018483B480B9DBA24170D7048E4"><enum>(a)</enum><header>In general</header><text>The Secretary of the Treasury (or the Secretary’s delegate) shall make available a form, to be
known as <quote>Form 1040SR</quote>, for use by individuals to file the return of tax imposed by chapter 1 of the Internal Revenue
Code of 1986. Such form shall be as similar as practicable to Form 1040EZ,
except that—</text>
<paragraph id="H07E975E472AA48B787B6FC5C0F503CBE"><enum>(1)</enum><text>the form shall be available to individuals who have attained age 65 as of the close of the taxable
year,</text>
</paragraph><paragraph id="H8238CEEF47354691A20742E33EED0595"><enum>(2)</enum><text>the form may be used even if income for the taxable year includes—</text>
<subparagraph id="H7C8C9ACA8B22475A8F2EC0A0EE5DF6B0"><enum>(A)</enum><text>social security benefits (as defined in <external-xref legal-doc="usc" parsable-cite="usc/26/86">section 86(d)</external-xref> of the Internal Revenue Code of 1986),</text>
</subparagraph><subparagraph id="H6805CD699332416092E207F7261E7512"><enum>(B)</enum><text>distributions from qualified retirement plans (as defined in section 4974(c) of such Code),
annuities or other such deferred payment arrangements,</text>
</subparagraph><subparagraph id="HDE40557B43B4409193262B8E3B821EB1"><enum>(C)</enum><text>interest and dividends, or</text>
</subparagraph><subparagraph id="H769340C7950B4819A3853F7C9074D4DC"><enum>(D)</enum><text>capital gains and losses taken into account in determining the deduction for adjusted net capital
gain under section 169 of such Code, and</text>
</subparagraph></paragraph><paragraph id="HA751069227244D0BAFDD16AFD7730BB3"><enum>(3)</enum><text>the form shall be available without regard to the amount of any item of taxable income or the total
amount of taxable income for the taxable year.</text>
</paragraph></subsection><subsection id="H702AB33426C74C168EA7EBE218E02D04"><enum>(b)</enum><header>Effective date</header><text>The form required by subsection (a) shall be made available for taxable years beginning after
December 31, 2014.</text>
</subsection></section><section id="H69966AC1A736458487A4C7A0B3DFFF41"><enum>6105.</enum><header>Increased refund and credit threshold for Joint Committee on Taxation review of C corporation
return</header>
<subsection id="HDF7F531451E14DF0BEAC0DB635AEB9FB"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsections (a) and (b) of section 6405 are each amended by inserting <quote>($5,000,000 in the case of a C corporation)</quote> after <quote>$2,000,000</quote>.</text>
</subsection><subsection id="H4AA679C724C942C285C43F8D993BEB67"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall take effect on the date of the enactment of this Act,
except that such amendment shall not apply with respect to any refund or
credit with respect to a report that has been made before such date under
<external-xref legal-doc="usc" parsable-cite="usc/26/6405">section 6405</external-xref> of the Internal Revenue Code of 1986.</text>
</subsection></section></subtitle><subtitle id="H5820196E71FB485E8C0ACA7BA4CDD654"><enum>C</enum><header>Tax return due date simplification</header>
<section id="H1A4E9D7E6F19421A9761AEA5E8E47643" section-type="subsequent-section"><enum>6201.</enum><header>Due dates for returns of partnerships, S corporations, and C corporations</header>
<subsection id="H686C4EB1603C41F299A56B267C8767F9"><enum>(a)</enum><header>Partnerships and S corporations</header>
<paragraph id="H340597D9AE924189B252E7A10B4244DB"><enum>(1)</enum><header>In general</header><text>So much of subsection (b) of 6072 as precedes the second sentence thereof is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H8642A95B259049688A5761D40C39B955" style="OLC">
<subsection id="H161AE330AB0747B9AB65F73B8B58ED91"><enum>(b)</enum><header>Returns of partnerships and S corporations</header><text>Returns of partnerships under section 6031 and returns of S corporations under sections 6012 and
6037 made on the basis of the calendar year shall be filed on or before
the 15th day of March following the close of the calendar year, and such
returns made on the basis of a fiscal year shall be filed on or before the
15th day of the third month following the close of the fiscal year.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HFFE447007FE8428994B75C85D1E65973"><enum>(2)</enum><header>Conforming amendment</header><text display-inline="yes-display-inline">Section 6072(a) is amended by striking <quote>6017, or 6031</quote> and inserting <quote>or 6017</quote>.</text>
</paragraph></subsection><subsection id="HD693BB0B0A45410194E95F3AB9D0EB60"><enum>(b)</enum><header>Conforming amendments relating to C corporation due date of 15th day of fourth month following
taxable year</header>
<paragraph id="HBFA64BA05458417D81359D3C2D185145"><enum>(1)</enum><text>Section 170(a)(3)(B), as redesignated by the preceding provisions of this Act, is amended by
striking <quote>third month</quote> and inserting <quote>fourth month</quote>.</text>
</paragraph><paragraph id="H2B3EAB45E7EB4DD596D8F84B90213312"><enum>(2)</enum><text>Section 563 is amended by striking <quote>third month</quote> each place it appears and inserting <quote>fourth month</quote>.</text>
</paragraph><paragraph id="HE23053AA093048539411A7F152D24409"><enum>(3)</enum><text>Section 1354(d)(1)(B)(i) is amended by striking <quote>3d month</quote> and inserting <quote>4th month</quote>.</text>
</paragraph><paragraph id="H720D6F4557C04CAAA138BF707A960AB3"><enum>(4)</enum><text>Subsection (a) and (c) of section 6167 are each amended by striking <quote>third month</quote> and inserting <quote>fourth month</quote>.</text>
</paragraph><paragraph id="H9503FAED986C4B59AB66F83309573E41"><enum>(5)</enum><text>Section 6425(a)(1) is amended by striking <quote>third month</quote> and inserting <quote>fourth month</quote>.</text>
</paragraph><paragraph id="HA767085463C7442D802A879493AB51AE"><enum>(6)</enum><text>Subsections (b)(2)(A), (g)(3), and (h)(1) of section 6655 are each amended by striking <quote>3rd month</quote> and inserting <quote>4th month</quote>.</text>
</paragraph></subsection><subsection id="H45E0947609374E739955D9596C91084D"><enum>(c)</enum><header>Effective dates</header>
<paragraph id="H0AD118E156F64C09BB31A5A7711AF4D4"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall apply to returns for
taxable years beginning after December 31, 2014.</text>
</paragraph><paragraph id="H300C4D1706B74AAD8529B6BDA7C25189"><enum>(2)</enum><header>Special rule for c corporations with fiscal years ending on June 30</header><text>In the case of any C corporation with a fiscal year ending on June 30, the amendments made by this
section shall not apply to any taxable year beginning in 2022.</text>
</paragraph></subsection></section><section id="HC553FFF2F1D343368F55B59AD3E44CD9"><enum>6202.</enum><header>Modification of due dates by regulation</header><text display-inline="no-display-inline">In the case of returns for taxable years beginning after December 31, 2014, the Secretary of the
Treasury, or the Secretary's designee, shall modify appropriate
regulations to provide as follows:</text>
<paragraph id="H6F4BBFD3E2C242EFB00AA82CF6081084"><enum>(1)</enum><text>The maximum extension for the returns of partnerships filing Form 1065 shall be a 6-month period
ending on September 15 for calendar year taxpayers.</text>
</paragraph><paragraph id="HBDBD44B38D194EAD990158C11C6D2019"><enum>(2)</enum><text>The maximum extension for the returns of trusts filing Form 1041 shall be a 5½-month period ending
on September 30 for calendar year taxpayers.</text>
</paragraph><paragraph id="H9743193DF73D4CA3A5336F87B72A5C6D"><enum>(3)</enum><text>The maximum extension for the returns of employee benefit plans filing Form 5500 shall be an
automatic 3½-month period ending on November 15 for calendar year plans.</text>
</paragraph><paragraph id="H0CCCF03DEC9D430EAA20615B505E664B"><enum>(4)</enum><text>The maximum extension for the returns of organizations exempt from income tax filing Form 990 shall
be an automatic 6-month period ending on November 15 for calendar year
filers.</text>
</paragraph><paragraph id="H07B17866B22F4AEFB71153F860053736"><enum>(5)</enum><text>The due date of Form 3520–A (relating to the Annual Information Return of Foreign Trust with a
United States Owner) for calendar year filers shall be April 15 with a
maximum extension for a 6-month period ending on October 15.</text>
</paragraph><paragraph id="HF0F83B59F5314E0883CA2BC5B7A77B78"><enum>(6)</enum><text>The due date of Form TD F 90–22.1 (relating to Report of Foreign Bank and Financial Accounts) shall
be April 15 with a maximum extension for a 6-month period ending on
October 15 and with provision for an extension under rules similar to the
rules in Treas. Reg. section 1.6081–5. For any taxpayer required to file
such Form for the first time, any penalty for failure to timely request
for, or file, an extension, may be waived by the Secretary.</text>
</paragraph></section><section id="H38025C35DBB64953990E6B1C6D718EC9"><enum>6203.</enum><header>Corporations permitted statutory automatic 6-month extension of income tax returns</header>
<subsection id="H9DF12CC5286A4960BADBD403B58745EF"><enum>(a)</enum><header>In general</header><text>Section 6081(b) is amended by striking <quote>3 months</quote> and inserting <quote>6 months</quote>.</text>
</subsection><subsection id="H26BECC2AF15A4F6CAC6A588A6B19FD50"><enum>(b)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to returns for taxable years beginning after
December 31, 2014.</text>
</subsection></section></subtitle><subtitle id="HB3E6C00A18D24570BCAA74ED744482C9"><enum>D</enum><header>Compliance Reforms</header>
<section id="H1A4B25E2A43A4EC1969250E4C1112722"><enum>6301.</enum><header>Penalty for failure to file</header>
<subsection id="HC90E4F93FB2F4E40817A55EC0EFE6CB7"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 6651(a) is amended by striking <quote>$135</quote> in the flush material at the end and inserting <quote>$400</quote>.</text>
</subsection><subsection id="H32F2E9A2BB214B008CC8DE78AF621F0D"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to returns the due date for the filing of which
(including extension) is after December 31, 2014.</text>
</subsection></section><section id="HDD0B34EA464545E58BBC68A3501DA56A"><enum>6302.</enum><header>Penalty for failure to file correct information returns and provide payee statements</header>
<subsection commented="no" display-inline="no-display-inline" id="HF03B8617BEAA4BAB9D0F2B3A4028DB00"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 6721(a)(1) is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="H8339C42AFD2A4961AF5461EF5F695114"><enum>(1)</enum><text display-inline="yes-display-inline">by striking <quote>$100</quote> and inserting <quote>$250</quote>, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H6EEAB33A88F44BE1B6B89476C1E809F9"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>$1,500,000</quote> and inserting <quote>$3,000,000</quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="H27FA3D639C494A699C998C87DD024A06"><enum>(b)</enum><header display-inline="yes-display-inline">Reduction where correction in specified period</header>
<paragraph commented="no" display-inline="no-display-inline" id="H50BD9F1547184F04BAF50BE0E828CEC8"><enum>(1)</enum><header display-inline="yes-display-inline">Correction within 30 days</header><text display-inline="yes-display-inline">Section 6721(b)(1) is amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H7EA546121F0F4EB4AA1CFC2489EFF43B"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>$30</quote> and inserting <quote>$50</quote>,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HFFB68F1955C444BBAB4D7545CA4AD078"><enum>(B)</enum><text display-inline="yes-display-inline">by striking <quote>$100</quote> and inserting <quote>$250</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HECB6F7898ABC46BFA9732C5D8962A862"><enum>(C)</enum><text display-inline="yes-display-inline">by striking <quote>$250,000</quote> and inserting <quote>$500,000</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H6AAE1A90F71F4CFE9E6BCA39EA39AB2F"><enum>(2)</enum><header display-inline="yes-display-inline">Failures corrected on or before August 1</header><text display-inline="yes-display-inline">Section 6721(b)(2) is amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H35BE2F655F914064B2CBEBF1FBAFC9E5"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>$60</quote> and inserting <quote>$100</quote>,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H70C044CDE4CC4E00A02321A82388672D"><enum>(B)</enum><text display-inline="yes-display-inline">by striking <quote>$100</quote> (prior to amendment by subparagraph (A)) and inserting <quote>$250</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HDFE99678055B46DBB87BC5D5545DEAE6"><enum>(C)</enum><text display-inline="yes-display-inline">by striking <quote>$500,000</quote> and inserting <quote>$1,500,000</quote>.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HD0815BEBD639487781721A7248BC5010"><enum>(c)</enum><header display-inline="yes-display-inline">Lower limitation for persons with gross receipts of not more than $5,000,000</header><text display-inline="yes-display-inline">Section 6721(d)(1) is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="HC693BE25FD904681AA209D0BF9DA83A8"><enum>(1)</enum><text display-inline="yes-display-inline">in subparagraph (A)—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HCEEC796049AB4C0E902FDA0C143E089C"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>$500,000</quote> and inserting <quote>$1,000,000</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H9EE93E96C5554EF6A06FD1C964AF6DFD"><enum>(B)</enum><text display-inline="yes-display-inline">by striking <quote>$1,500,000</quote> and inserting <quote>$3,000,000</quote>,</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="HA9E438D10FA140819C2CE27EF0103256"><enum>(2)</enum><text display-inline="yes-display-inline">in subparagraph (B)—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H306ECE2C35C743A9B52E8DC7DACB2CAC"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>$75,000</quote> and inserting <quote>$175,000</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H5C98CA712FA043A2B8C0ADE075672A4E"><enum>(B)</enum><text display-inline="yes-display-inline">by striking <quote>$250,000</quote> and inserting <quote>$500,000</quote>, and</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H0A499DF197E246D18181583F756E48BD"><enum>(3)</enum><text display-inline="yes-display-inline">in subparagraph (C)—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H5C309E81EBF74B8A9E053E5B81A022D6"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>$200,000</quote> and inserting <quote>$500,000</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HA003E118E47943BAA72D90120EE56E3C"><enum>(B)</enum><text display-inline="yes-display-inline">by striking <quote>$500,000</quote> (prior to amendment by subparagraph (A)) and inserting <quote>$1,500,000</quote>.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HC18425E0F8464311853907A37197E312"><enum>(d)</enum><header display-inline="yes-display-inline">Penalty in case of intentional disregard</header><text display-inline="yes-display-inline">Section 6721(e) is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="H6C67C1942B6045B589FA70D8080E835C"><enum>(1)</enum><text display-inline="yes-display-inline">by striking <quote>$250</quote> in paragraph (2) and inserting <quote>$500</quote>, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="HD313DD29C1F649DDB9122B8EA3BC0F61"><enum>(2)</enum><text display-inline="yes-display-inline">by striking <quote>$1,500,000</quote> in paragraph (3)(A) and inserting <quote>$3,000,000</quote>.</text>
</paragraph></subsection><subsection id="H91D95D5BE8BD4064A72CD3E548F335CC"><enum>(e)</enum><header>Failure To furnish correct payee statements</header>
<paragraph commented="no" display-inline="no-display-inline" id="H914A24CCFC6446A1925E3400CFA15D7D"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">Section 6722(a)(1) is amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H84E083549701439F8DE0B615BBE36E48"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>$100</quote> and inserting <quote>$250</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H67F664D44E0040C28BB8003BED48061D"><enum>(B)</enum><text display-inline="yes-display-inline">by striking <quote>$1,500,000</quote> and inserting <quote>$3,000,000</quote>.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H4E5113F4A9C84DBFA9437EFBB34D06A9"><enum>(2)</enum><header display-inline="yes-display-inline">Reduction where correction in specified period</header>
<subparagraph commented="no" display-inline="no-display-inline" id="H21586754A08D4F19A99F566B04DFFE20"><enum>(A)</enum><header display-inline="yes-display-inline">Correction within 30 days</header><text display-inline="yes-display-inline">Section 6722(b)(1) is amended—</text>
<clause commented="no" display-inline="no-display-inline" id="HCA0C678924294A86A1EDBC4E40C44038"><enum>(i)</enum><text display-inline="yes-display-inline">by striking <quote>$30</quote> and inserting <quote>$50</quote>,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="HE93B6F8256504A3DA891219AE9D8158F"><enum>(ii)</enum><text display-inline="yes-display-inline">by striking <quote>$100</quote> and inserting <quote>$250</quote>, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="HECEB2082AB904B28B7D59F67AFE6DEA7"><enum>(iii)</enum><text display-inline="yes-display-inline">by striking <quote>$250,000</quote> and inserting <quote>$500,000</quote>.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H7ADF86D9995A45A699FAA458A3FC7B7F"><enum>(B)</enum><header display-inline="yes-display-inline">Failures corrected on or before August 1</header><text display-inline="yes-display-inline">Section 6722(b)(2) is amended—</text>
<clause commented="no" display-inline="no-display-inline" id="HD684B76896594719893EFB50AC18D36D"><enum>(i)</enum><text display-inline="yes-display-inline">by striking <quote>$60</quote> and inserting <quote>$100</quote>,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="HA682E8A909954105A25477B4BB0EC0DE"><enum>(ii)</enum><text display-inline="yes-display-inline">by striking <quote>$100</quote> (prior to amendment by clause (i)) and inserting <quote>$250</quote>, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="HE4204988750A4276A0FD2992F3AEAD83"><enum>(iii)</enum><text display-inline="yes-display-inline">by striking <quote>$500,000</quote> and inserting <quote>$1,500,000</quote>.</text>
</clause></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H09CD0AF1A98948D29CCC7CFB45D751E9"><enum>(3)</enum><header display-inline="yes-display-inline">Lower limitation for persons with gross receipts of not more than $5,000,000</header><text display-inline="yes-display-inline">Section 6722(d)(1) is amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="H800CA6627EDE49AA89BAD61353723EFF"><enum>(A)</enum><text display-inline="yes-display-inline">in subparagraph (A)—</text>
<clause commented="no" display-inline="no-display-inline" id="HD8753043B9924310A328D0B1FC41D76E"><enum>(i)</enum><text display-inline="yes-display-inline">by striking <quote>$500,000</quote> and inserting <quote>$1,000,000</quote>, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H2ABC94EAB6F0464DB6D674F6B86D3F03"><enum>(ii)</enum><text display-inline="yes-display-inline">by striking <quote>$1,500,000</quote> and inserting <quote>$3,000,000</quote>,</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HAEFF9E12CAF84F85A83F0016FF4BB7A5"><enum>(B)</enum><text display-inline="yes-display-inline">in subparagraph (B)—</text>
<clause commented="no" display-inline="no-display-inline" id="HD3028A345C154783927B9464ADF61CAC"><enum>(i)</enum><text display-inline="yes-display-inline">by striking <quote>$75,000</quote> and inserting <quote>$175,000</quote>, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H0EB302B532694182ABAED7F4E1C6A794"><enum>(ii)</enum><text display-inline="yes-display-inline">by striking <quote>$250,000</quote> and inserting <quote>$500,000</quote>, and</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H5AC301E26C794B99954B5CD48581C3D5"><enum>(C)</enum><text display-inline="yes-display-inline">in subparagraph (C)—</text>
<clause commented="no" display-inline="no-display-inline" id="HB1EFCF76618F40BCB5BBF20AD6F0C677"><enum>(i)</enum><text display-inline="yes-display-inline">by striking <quote>$200,000</quote> and inserting <quote>$500,000</quote>, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="H8E7B76828E664E89B8E25A31A1EA6297"><enum>(ii)</enum><text display-inline="yes-display-inline">by striking <quote>$500,000</quote> (prior to amendment by subparagraph (A)) and inserting <quote>$1,500,000</quote>.</text>
</clause></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="HF2534AD2AE3D4F589B2DDED522CC1E19"><enum>(4)</enum><header display-inline="yes-display-inline">Penalty in case of intentional disregard</header><text display-inline="yes-display-inline">Section 6722(e) is amended—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="HB52475B4173C46F8B333DF99B069B547"><enum>(A)</enum><text display-inline="yes-display-inline">by striking <quote>$250</quote> in paragraph (2) and inserting <quote>$500</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H0FA12413D4EF417C8C9F279743674D45"><enum>(B)</enum><text display-inline="yes-display-inline">by striking <quote>$1,500,000</quote> in paragraph (3)(A) and inserting <quote>$3,000,000</quote>.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="HFA98D3A2395B4A80BB454331820C1428"><enum>(f)</enum><header display-inline="yes-display-inline">Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply with respect to returns and statements required to
be filed after December 31, 2014.</text>
</subsection></section><section id="H6424297AF2BF40E493C99F38D1D09894"><enum>6303.</enum><header>Clarification of 6-year statute of limitations in case of overstatement of basis</header>
<subsection id="HBC0AD278125A421ABFEA488CBD919CF0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subparagraph (B) of section 6501(e)(1) is amended—</text>
<paragraph id="H51E9CAAE2AC1490AB446473FC6F1693C"><enum>(1)</enum><text>by striking <quote>and</quote> at the end of clause (i), by redesignating clause (ii) as clause (iii), and by inserting after
clause (i) the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="H9A491F38ACA04403B40645628AEDFA53" style="OLC">
<clause id="HF9AE5451B2704FD699C57E10B339E15E"><enum>(ii)</enum><text display-inline="yes-display-inline">An understatement of gross income by reason of an overstatement of unrecovered cost or other basis
is an omission from gross income; and</text></clause><after-quoted-block>, and</after-quoted-block></quoted-block>
</paragraph><paragraph id="H2419774F7B374D7C9E535878D173964E"><enum>(2)</enum><text>by inserting <quote>(other than in the case of an overstatement of unrecovered cost or other basis)</quote> in clause (iii) (as so redesignated) after <quote>In determining the amount omitted from gross income</quote>.</text>
</paragraph></subsection><subsection id="H402F291B6ED146B9A9E0EBA062772F3C"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to—</text>
<paragraph id="H76C21873E13949DF9D944AAA1874ECD9"><enum>(1)</enum><text>returns filed after the date of the enactment of this Act, and</text>
</paragraph><paragraph id="H2DE6034C5D9944CE9A297F0F1998BBFA"><enum>(2)</enum><text>returns filed on or before such date if the period specified in section 6501 of the Internal
Revenue Code of 1986 (determined without regard to such amendments) for
assessment of the taxes with respect to which such return relates has not
expired as of such date.</text>
</paragraph></subsection></section><section commented="no" id="H71D2FCE2649B4C789DE98C3ABE6F7D82"><enum>6304.</enum><header>Reform of rules related to qualified tax collection contracts</header>
<subsection commented="no" id="H63E9A31B81DE4FB393F17FE3B005AD1C"><enum>(a)</enum><header>Requirement To collect certain inactive tax receivables under qualified tax collection contracts</header><text display-inline="yes-display-inline">Section 6306 is amended by redesignating subsections (c) through (f) as subsections (d) through
(g), respectively, and by inserting after subsection (b) the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="H9F4A0ECC0C954DCC8595BEF52F843B29" style="OLC">
<subsection commented="no" id="H034AE8A51AA543CC82FE4CC1500C90C4"><enum>(c)</enum><header>Collection of inactive tax receivables</header>
<paragraph commented="no" id="H5B1E5406A988450984CE7FBD3BAC3BC8"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Notwithstanding any other provision of law, the Secretary shall enter into one or more qualified
tax collection contracts for the collection of all outstanding inactive
tax receivables.</text>
</paragraph><paragraph commented="no" id="H20BAEB2FD0004BCDB51997737F6ED9F3"><enum>(2)</enum><header>Inactive tax receivables</header><text>For purposes of this section—</text>
<subparagraph commented="no" id="HE7490835594241ACB757A4412B197062"><enum>(A)</enum><header>In general</header><text>The term <quote>inactive tax receivable</quote> means any tax receivable if—</text>
<clause commented="no" id="H5BD16AA25FFB4D4CBD6D445D43B23C77"><enum>(i)</enum><text>at any time after assessment, the Internal Revenue Service removes such receivable from the active
inventory for lack of resources or inability to locate the taxpayer,</text>
</clause><clause commented="no" id="H306CBCC460F54441B1C5B206DB4E8A39"><enum>(ii)</enum><text>more than <fraction>1/3</fraction> of the period of the applicable statute of limitation has lapsed and no employee of the Internal
Revenue Service has been assigned such receivable for collection, or</text>
</clause><clause commented="no" id="HBC0CDB46DD4B449C9041255755AA0F26"><enum>(iii)</enum><text>in the case of a receivable which has been assigned for collection, more than 365 days have passed
without interaction with the taxpayer or a third party for purposes of
furthering the collection of such receivable.</text>
</clause></subparagraph><subparagraph commented="no" id="H65F2D4AD10334146823DD4F3549E5C13"><enum>(B)</enum><header>Tax receivable</header><text>The term <quote>tax receivable</quote> means any outstanding assessment which the Internal Revenue Service includes in potentially
collectible inventory.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HE57703F65C3B474E9CAC9B4AE52BE13D"><enum>(b)</enum><header>Certain tax receivables not eligible for collection under qualified tax collection contracts</header><text>Section 6306, as amended by subsection (a), is amended by redesignating subsections (d) through (g)
as subsections (e) through (h), respectively, and by inserting after
subsection (c) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H9BA1D55144D1435ABA7D5307254CA9D7" style="OLC">
<subsection commented="no" id="HF9E0664A32C04687AF5154E838D380FB"><enum>(d)</enum><header>Certain tax receivables not eligible for collection under qualified tax collections contracts</header><text display-inline="yes-display-inline">A tax receivable shall not be eligible for collection pursuant to a qualified tax collection
contract if such receivable—</text>
<paragraph commented="no" id="H0219996E938D4E25AE25839E6E9392AB"><enum>(1)</enum><text>is subject to a pending or active offer-in-compromise or installment agreement,</text>
</paragraph><paragraph commented="no" id="HFE6B0251A4014C8596F76F4FF58FC8AF"><enum>(2)</enum><text>is classified as an innocent spouse case,</text>
</paragraph><paragraph commented="no" id="HE8F98D4B7CCB4956BC7B54F129260002"><enum>(3)</enum><text>involves a taxpayer identified by the Secretary as being—</text>
<subparagraph commented="no" id="HAF197688593442EFB299B56A2D869E4E"><enum>(A)</enum><text>deceased,</text>
</subparagraph><subparagraph commented="no" id="H142FCA866BDD4987B787FE7883C2F249"><enum>(B)</enum><text>under the age of 18,</text>
</subparagraph><subparagraph commented="no" id="HA52FD781B6A44830B35B2CE05C6D1B81"><enum>(C)</enum><text>in a designated combat zone, or</text>
</subparagraph><subparagraph commented="no" id="HA3B1C8BA9C65433E8AF22C721AC3AF6B"><enum>(D)</enum><text>a victim of identity theft,</text>
</subparagraph></paragraph><paragraph commented="no" id="H0C1D211315E94331BFD4A783E3BBB243"><enum>(4)</enum><text>is currently under examination, litigation, criminal investigation, or levy, or</text>
</paragraph><paragraph commented="no" id="H2E7D082251F344B18F2EC6AA777CB97E"><enum>(5)</enum><text>is currently subject to a proper exercise of a right of appeal under this title.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="H6D4D22A9129B4636A89721CBACAC7F24"><enum>(c)</enum><header>Contracting priority</header><text>Section 6306, as amended by the preceding provisions of this section, is amended by redesignating
subsection (h) as subsection (i) and by inserting after subsection (g) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HA6B5DCC685CA4C4AB74382B612C9300C" style="OLC">
<subsection commented="no" id="H4E6F7F1A5CA142EE828EAC62BF560E69"><enum>(h)</enum><header>Contracting priority</header><text display-inline="yes-display-inline">In contracting for the services of any person under this section, the Secretary shall give priority
to private collection contractors and debt collection centers on the
schedule required under <external-xref legal-doc="usc" parsable-cite="usc/31/3711">section 3711(g)</external-xref> of title 31, United States Code,
to the extent such private collection contractors and debt collection
centers are appropriate to carry out the purposes of this section.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HEE49D075968D496BA01C7B4530E9963B"><enum>(d)</enum><header>Disclosure of return information</header><text>Section 6103(k) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H2BD41226C6E2481B86EE3D00209637AF" style="OLC">
<paragraph commented="no" id="H37E6EFC8E99141B2915B95D2757BFFC2"><enum>(11)</enum><header>Qualified tax collection contractors</header><text display-inline="yes-display-inline">Persons providing services pursuant to a qualified tax collection contract under section 6306 may,
if speaking to a person who has identified himself or herself as having
the name of the taxpayer to which a tax receivable (within the meaning of
such section) relates, identify themselves as contractors of the Internal
Revenue Service and disclose the business name of the contractor, and the
nature, subject, and reason for the contact. Disclosures under this
paragraph shall be made only in such situations and under such conditions
as have been approved by the Secretary.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HA4A121B29AA14FB180E6D83C1D452B62"><enum>(e)</enum><header>Taxpayers affected by federally declared disasters</header><text>Section 6306, as amended by the preceding provisions of this section, is amended by redesignating
subsection (i) as subsection (j) and by inserting after subsection (h) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HF44D9072315143B7B1EA161B9A0CB277" style="OLC">
<subsection commented="no" id="HB6FF0A2E0D04463182E21CDEDBFA6664"><enum>(i)</enum><header>Taxpayers in Presidentially declared disaster areas</header><text display-inline="yes-display-inline">The Secretary may prescribe procedures under which a taxpayer determined to be affected by a
federally declared disaster (as defined by section 165(i)(5)) may request—</text>
<paragraph commented="no" id="H6A0D85C679A74C6789AF3BADD07C0103"><enum>(1)</enum><text>relief from immediate collection measures by contractors under this section, and</text>
</paragraph><paragraph commented="no" id="HA83509271C4C41EF9DFE361F60103EC8"><enum>(2)</enum><text>a return of the inactive tax receivable to the Internal Revenue Service for collection.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HA386C415277B42D3BCBBEB9FC54DA916"><enum>(f)</enum><header>Report to Congress</header>
<paragraph commented="no" id="HCAFE7890AB914FBD9153F4CE52DD8278"><enum>(1)</enum><header>In general</header><text>Section 6306, as amended by the preceding provisions of this section, is amended by redesignating
subsection (j) as subsection (k) and by inserting after subsection (i) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HF18C0138EA61406CB4FF68E270CBE339" style="OLC">
<subsection commented="no" id="H7638B1F97F75450E821CAC879D97CE7A"><enum>(j)</enum><header>Report to Congress</header><text display-inline="yes-display-inline">Not later than 90 days after each fiscal year ending on September 30, the Secretary shall submit to
the Committee on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate a report with respect to qualified tax
collection contracts under this section which shall include—</text>
<paragraph commented="no" id="H34F8189C671F44FAA1FC8B4FA805CAE7"><enum>(1)</enum><text>annually (with respect to each such fiscal year beginning with the first such fiscal year ending
after the date of the enactment of this subsection)—</text>
<subparagraph commented="no" id="H2F75243511C5482A8ED1126777FC316A"><enum>(A)</enum><text display-inline="yes-display-inline">the total number and amount of tax receivables provided to each contractor for collection under
this section,</text>
</subparagraph><subparagraph commented="no" id="HA84AEA2035654CF08475F72FBF0ADD9E"><enum>(B)</enum><text>the total amounts collected (and amounts of installment agreements entered into under subsection
(b)(1)(B)) with respect to each contractor and the collection costs
incurred (directly and indirectly) by the Internal Revenue Service with
respect to such amounts,</text>
</subparagraph><subparagraph commented="no" id="HC096AA84C59B40A988BDF15EF5B2E9F0"><enum>(C)</enum><text>the impact of such contracts on the total number and amount of unpaid assessments, and on the
number and amount of assessments collected by Internal Revenue Service
personnel after initial contact by a contractor,</text>
</subparagraph><subparagraph commented="no" id="H21827758D1AE4D078A4C354D77630E68"><enum>(D)</enum><text>the amount of fees retained by the Secretary under subsection (e) and a description of the use of
such funds, and</text>
</subparagraph><subparagraph commented="no" id="H3E53570E5F654D7BB2B501FC59D0075C"><enum>(E)</enum><text>a disclosure safeguard report in a form similar to that required under section 6103(p)(5), and</text>
</subparagraph></paragraph><paragraph commented="no" id="HC6F5D53C8C0243C9BD687B29BC33603A"><enum>(2)</enum><text>biannually (beginning with the second report submitted under this subsection)—</text>
<subparagraph commented="no" id="H7C73BC687B1B439DA4649C5D4E26A819"><enum>(A)</enum><text display-inline="yes-display-inline">an independent evaluation of contractor performance; and</text>
</subparagraph><subparagraph commented="no" id="H64229429D85C4E3E936BA6453A424536"><enum>(B)</enum><text>a measurement plan that includes a comparison of the best practices used by the private collectors
to the collection techniques used by the Internal Revenue Service and
mechanisms to identify and capture information on successful collection
techniques used by the contractors that could be adopted by the Internal
Revenue Service.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H079095487D0A4E28AD7F4B95C89561FE"><enum>(2)</enum><header>Repeal of existing reporting requirements with respect to qualified tax collection contracts</header><text>Section 881 of the American Jobs Creation Act of 2004 is amended by striking subsection (e).</text>
</paragraph></subsection><subsection commented="no" id="HC74BB6A63F1342AB9DFFE0B96202A8E4"><enum>(g)</enum><header>Effective dates</header>
<paragraph commented="no" id="HF81F589CA6C94C19914BC930C535C97A"><enum>(1)</enum><header>In general</header><text>The amendments made by subsections (a) and (b) shall apply to tax receivables identified by the
Secretary after the date of the enactment of this Act.</text>
</paragraph><paragraph commented="no" id="H22099FD079C4486FB72F9A8EA741C723"><enum>(2)</enum><header>Contracting priority</header><text>The amendments made by subsection (c) shall apply to contracts and agreements entered into after
the date of the enactment of this Act.</text>
</paragraph><paragraph commented="no" id="H78C9A30C58E04C1AAC811B53B879ADD1"><enum>(3)</enum><header>Disclosures</header><text>The amendments made by subsection (d) shall apply to disclosures made after the date of the
enactment of this Act.</text>
</paragraph><paragraph commented="no" id="H5880880D6D19412CACD4892EAD6C9988"><enum>(4)</enum><header>Procedures; Report to Congress</header><text>The amendments made by subsections (e) and (f) shall take effect on the date of the enactment of
this Act.</text>
</paragraph></subsection></section><section id="H180836214A6144EFBEA42477FE2BFDBB" section-type="subsequent-section"><enum>6305.</enum><header>100 percent continuous levy on payments to Medicare providers and suppliers</header>
<subsection id="HFC38FA6218F74D2AB0F4805DEB089EBF"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (3) of section 6331(h) is amended by striking the period at the end and inserting <quote>, or to a Medicare provider or supplier under title XVIII of the Social Security Act.</quote>.</text>
</subsection><subsection id="HF6B85329A9B7427AA53265593249CBCF"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to levies issued after the date of the enactment of
this Act.</text>
</subsection></section><section id="H00E50A18861246D7A9BF99FE312CABAC"><enum>6306.</enum><header>Treatment of refundable credits for purposes of certain penalties</header>
<subsection id="HBA1CED80DA2E4D0DB5D0C2B13FA4AF7F"><enum>(a)</enum><header>Application of underpayment penalties</header><text display-inline="yes-display-inline">Section 6664(a) is amended by adding at the end the following: <quote>A rule similar to the rule of section 6211(b)(4) shall apply for purposes of this subsection.</quote>.</text>
</subsection><subsection id="H8241DCC76AFC43D385459A5B3FA7C26E"><enum>(b)</enum><header>Penalty for erroneous claim of credit made applicable to earned income credit</header><text>Section 6676(a) is amended by striking <quote>(other than a claim for a refund or credit relating to the earned income credit under section 32)</quote>.</text>
</subsection><subsection id="H1B9C69005A9A46D18190FE89EDCB12BD"><enum>(c)</enum><header>Effective dates</header>
<paragraph id="H15572FFAE2774AD99FA26D11E10DFDA3"><enum>(1)</enum><header>Underpayment penalties</header><text>The amendment made by subsection (a) shall apply to—</text>
<subparagraph id="HD72130FCA68D43E49A08225AFA9F4B70"><enum>(A)</enum><text>returns filed after February 26, 2014, and</text>
</subparagraph><subparagraph id="H1AE77D763CBC436CB06F205EF802B823"><enum>(B)</enum><text>returns filed on or before such date if the period specified in section 6501 of the Internal
Revenue Code of 1986 for assessment of the taxes with respect to which
such return relates has not expired as of such date.</text>
</subparagraph></paragraph><paragraph id="HB321C57C3E5B43F28EBD87D2D60ED834"><enum>(2)</enum><header>Penalty for erroneous claim of credit</header><text display-inline="yes-display-inline">The amendment made by subsection (b) shall apply to claims filed after February 26, 2014.</text>
</paragraph></subsection></section></subtitle><enum>VII</enum><header>Excise taxes</header>
<section display-inline="no-display-inline" id="H284FD88DF51343028F544EC6D836114D"><enum>7001.</enum><header>Repeal of medical device excise tax</header>
<subsection id="HD0D70627C83D42D094A437000ADCBD29"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 32 is amended by striking subchapter E.</text>
</subsection><subsection id="H926CBF7E05814B22AB85407C4A90FE7B"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H42A2F5C293F74AB58D450FFFF7D3407F"><enum>(1)</enum><text>Subsection (a) of section 4221 is amended by striking the last sentence.</text>
</paragraph><paragraph id="HA1F63CEE374348119D1152126F5BB83B"><enum>(2)</enum><text>Paragraph (2) of section 6416(b) is amended by striking the last sentence.</text>
</paragraph></subsection><subsection id="H10FC4460055F4220BEF169F8E359164D"><enum>(c)</enum><header>Clerical amendment</header><text>The table of subchapters for chapter 32 is amended by striking the item relating to subchapter E.</text>
</subsection><subsection id="H832D1EF4F5CC498C880C98B321936431"><enum>(d)</enum><header>Effective date</header><text>The amendments made by this section shall apply to sales after the date of the enactment of this
Act.</text>
</subsection></section><section id="H30FB21CDE8824737854067127FADE9F6"><enum>7002.</enum><header>Modifications relating to oil spill liability trust fund</header>
<subsection id="HB78879750C4C4BA88A727CA12E7178A9"><enum>(a)</enum><header>Extension of Oil Spill Liability Trust Fund financing rate</header><text>Paragraph (2) of section 4611(f) is amended by striking <quote>December 31, 2017</quote> and inserting <quote>December 31, 2023</quote>.</text>
</subsection><subsection id="HA178499E69A44BEEB0740815AFB99680"><enum>(b)</enum><header>Application with respect to bitumen and bituminous mixtures and shale oil</header><text>Paragraph (1) of section 4612(a) is amended to read as follows:</text>
<quoted-block id="HBA0150D075A7480184A5CB7E5880EB4E" style="OLC">
<paragraph id="HDF9E4EECF2864FD98B77A86E6B566881"><enum>(1)</enum><header>Crude oil</header><text>The term <quote>crude oil</quote> includes crude oil condensates, natural gasoline, any bitumen or bituminous mixture, any oil
derived from a bitumen or bituminous mixture, shale oil, and any oil
derived from kerogen-bearing sources.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H0445FD33904C4711A80A60AA212185D9"><enum>(c)</enum><header>Conforming amendment</header><text>Paragraph (2) of section 4612(a) is amended by striking <quote>from a well located</quote>.</text>
</subsection><subsection id="H315F64FCE6854458A654E661230CD4B5"><enum>(d)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to oil and petroleum products received or entered
during calendar quarters beginning more than 60 days after the date of the
enactment of this Act.</text>
</subsection></section><section id="H3E5304BF459B4C34ADEE20C0D0B888CD"><enum>7003.</enum><header>Modification relating to inland waterways trust fund financing rate</header>
<subsection id="H4036093FE03B4079A47A28AAFEC680BC"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 4042(b)(2)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H5B4260A5F9D4420EA849153E2E41C874" style="OLC">
<subparagraph id="H09E7E1AC03ED4F01BDA91AD448985AB6"><enum>(A)</enum><text display-inline="yes-display-inline">The Inland Waterways Trust Fund financing rate is 26 cents per gallon.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H8E25E23B747B4829812FB3A3CFEAE468"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to fuel used after December 31, 2014.</text>
</subsection></section><section id="H968FCB2969C845C79D117D07E09559A1"><enum>7004.</enum><header>Excise tax on systemically important financial institutions</header>
<subsection id="HAA439CE9972B4CB59061D55E82A731D1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 36 is amended by adding at the end the following new subchapter:</text>
<quoted-block display-inline="no-display-inline" id="HF6F3837F46B64CA08B0A4B2C46A7DE6E" style="OLC">
<subchapter id="H3A6B9A4A880A42A0BD23FF0F01788464"><enum>E</enum><header>Tax on systemically important financial institutions</header>
<toc container-level="subchapter-container" idref="H3A6B9A4A880A42A0BD23FF0F01788464" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H9014AC4B1C9042E087A96A4E8C20B3FB" level="section">Sec. 4491. Tax on systemically important financial institutions.</toc-entry></toc>
<section id="H9014AC4B1C9042E087A96A4E8C20B3FB"><enum>4491.</enum><header>Tax on systemically important financial institutions</header>
<subsection id="H78BDD8DED8BF4982AE574587FC422F1F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">There is hereby imposed a tax on the excess total consolidated assets of any systemically important
financial institution on the close of each calendar quarter.</text>
</subsection><subsection id="HC33078BFD81F46E08A87E2A882A99297"><enum>(b)</enum><header>Amount of tax</header><text>The rate of tax imposed by subsection (a) is 0.035 percent of such excess total consolidated
assets.</text>
</subsection><subsection id="HD238129CC3124B24BDECBBCCCEDE6519"><enum>(c)</enum><header>By whom paid</header><text>The tax imposed by subsection (a) shall be paid by the systemically important financial
institution.</text>
</subsection><subsection id="H0FD42428DF9B40B2B1F7A7C58AE0E5E9"><enum>(d)</enum><header>Due date</header><text>The tax imposed by subsection (a) for a calendar quarter shall be due on the first day of the third
month beginning after the close of such quarter.</text>
</subsection><subsection id="H21A33EA4C36047ACA988B78213C3AA2C"><enum>(e)</enum><header>Systemically important financial institution</header><text display-inline="yes-display-inline">For purposes of this section, the term <quote>systemically important financial institution</quote> means any person subject to section 165 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act.</text>
</subsection><subsection id="H0078C580836349168026E5136164112F"><enum>(f)</enum><header>Excess total consolidated assets</header><text>For purposes of this section, the term <quote>excess total consolidated assets</quote> means the excess of—</text>
<paragraph id="HB088B90F23F947309E3790175CFB0A9E"><enum>(1)</enum><text display-inline="yes-display-inline">total consolidated assets (within the meaning of section 165 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act), over</text>
</paragraph><paragraph id="H4B89C8375C6D4602A19D4DE22BC0EB32"><enum>(2)</enum><text>$500,000,000,000.</text>
</paragraph></subsection><subsection id="H0B82DCE95B0A41078A00F4E6DA652DF0"><enum>(g)</enum><header>Adjustment of dollar amount</header>
<paragraph id="H524316061CCA41ACA51438919013F3EE"><enum>(1)</enum><header>In general</header><text>In the case of any calendar year beginning after 2015, there shall be substituted for the dollar
amount in subsection (f)(2) a dollar amount which bears the same ratio to
such amount (determined without regard to this subsection) as—</text>
<subparagraph id="H0A4EE0CB62024A6FB7B0226869E567AB"><enum>(A)</enum><text>the GDP for the preceding calendar year, bears to</text>
</subparagraph><subparagraph id="H26B6B8E7166B4A309ED4EDDB0F6DEED8"><enum>(B)</enum><text>the GDP for 2014.</text></subparagraph><continuation-text continuation-text-level="paragraph">Any dollar amount determined under this paragraph for substitution in subsection (f)(2) which is
not a multiple of $1,000,000,000 shall be rounded to the nearest multiple
of $1,000,000,000.</continuation-text></paragraph><paragraph id="HDB51B597EDAA4324A2BC47ADEA66B341"><enum>(2)</enum><header>GDP</header><text>For purposes of this subsection, the GDP for any calendar year means the latest estimate of the
gross domestic product published by the Department of Commerce for the
preceding calendar year.</text>
</paragraph></subsection><subsection id="H3B5C7AE69AD44E0496E13A356A5BFB9E"><enum>(h)</enum><header>Treatment of certain references</header><text display-inline="yes-display-inline">Any reference in this section to any provision of the Dodd-Frank Wall Street Reform and Consumer
Protection Act shall be treated as a reference to such provision as in
effect on the date of the enactment of this section.</text></subsection></section></subchapter><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HAE8434CDACBC4D738920CF2C366F8710"><enum>(b)</enum><header>Clerical amendment</header><text>The table of subchapters for chapter 36 is amended by adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="H96E1E2F4A3EA49299C1711AF8E08E929" style="OLC">
<toc container-level="quoted-block-container" idref="HF6F3837F46B64CA08B0A4B2C46A7DE6E" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H3A6B9A4A880A42A0BD23FF0F01788464" level="subchapter">Subchapter E. Tax on systemically important financial institutions.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H44B8972AA32C435A98778E36C004DFD7"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to calendar quarters beginning after December 31,
2014.</text>
</subsection></section><section id="H802C6505BE8B4B19B1F1E05132A19E21" section-type="subsequent-section"><enum>7005.</enum><header>Clarification of orphan drug exception to annual fee on branded prescription pharmaceutical
manufacturers and importers</header>
<subsection commented="no" id="H850F32F949214DC7B1E791D0A701D345"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Paragraph (3) of section 9008(e) of the Patient Protection and Affordable Care Act (Public Law
111–148) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H36859BD83AE346929BA1862E87D1CB36" style="OLC">
<paragraph commented="no" id="H939728818A6E4B23AE5F0A0F56C2C246"><enum>(3)</enum><header>Exclusion of orphan drug sales</header>
<subparagraph commented="no" id="H21722207172541EE8FE493DF10B00E1F"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">The term <term>branded prescription drug sales</term> shall not include sales of any drug or biological product—</text>
<clause commented="no" id="HF58DC277B2414B75B79408AB278BEE83"><enum>(i)</enum><text>with respect to which a credit was allowed for any taxable year under section 45C of the Internal
Revenue Code of 1986 (as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>); or</text>
</clause><clause commented="no" id="H53724B7396F545FDBD7247DE6725734A"><enum>(ii)</enum><text>which is approved or licensed by the Food and Drug Administration for marketing solely for one or
more rare diseases or conditions.</text>
</clause></subparagraph><subparagraph commented="no" id="H59578A2DE5BC427A89C9DFB14CC63739"><enum>(B)</enum><header>Limitation</header><text>Subparagraph (A) shall not apply with respect to any drug or biological product after the date on
which the drug or biological product is approved or licensed by the Food
and Drug Administration for marketing for any indication other than the
treatment of a rare disease or condition.</text>
</subparagraph><subparagraph commented="no" id="HED0C7FE5D00A499A852A008C8C74AAA5"><enum>(C)</enum><header>Rare disease or condition</header>
<clause id="H355178B6E66A44F78231A5425759B143"><enum>(i)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this paragraph, the term <term>rare disease or condition</term> means any disease or condition which—</text>
<subclause id="H7C3D604D9A4B45C0BD2EF7067F493721"><enum>(I)</enum><text>affects less than 200,000 persons in the United States, or</text>
</subclause><subclause id="H104ACF3E449B4B3BAE7EF29D67FBEBAB"><enum>(II)</enum><text>affects more than 200,000 persons in the United States but for which there is no reasonable
expectation that the cost of developing and making available in the United
States a drug or biological product for such disease or condition will be
recovered from sales in the United States of such drug or biological
product.</text>
</subclause></clause><clause id="HFD9F0CA46422412EB1684E4FC2D4FC53"><enum>(ii)</enum><header>Time of determination</header><text display-inline="yes-display-inline">Determinations under the preceding sentence with respect to any drug or biological product shall be
made on the basis of the facts and circumstances as of—</text>
<subclause id="H346B1B0994924DD092174E281E8E0E6C"><enum>(I)</enum><text display-inline="yes-display-inline">in the case a drug or biological product that has been designated under section 526 of the Federal
Food, Drug, and Cosmetic Act for a particular indication, the date of such
designation, and</text>
</subclause><subclause id="H81A2D09F2B6B445491C27D0CA7C92686"><enum>(II)</enum><text>in any other case, the date such drug or biological product is approved or licensed by the Food and
Drug Administration for marketing for the treatment of the disease or
condition referred to in clause (i).</text></subclause></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H28D44B4DE92444F98F8268EA9F6EDE02"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to fees imposed under section 9008(a)(1) of the
Patient Protection and Affordable Care Act with annual payment dates after
2013.</text>
</subsection></section><enum>VIII</enum><header>Deadwood and technical provisions</header>
<subtitle id="H422D6196C6EC4A7F8140FA4A8BD1A766"><enum>A</enum><header>Repeal of Deadwood</header>
<section id="H0CC4BE1920034B0AB63F69BDD278323B"><enum>8001.</enum><header>Repeal of Puerto Rico economic activity credit</header><text display-inline="no-display-inline">Subpart B of part IV of subchapter A of chapter 1 is amended by striking section 30A (and by
striking the item relating to such section in the table of sections of
such subpart).</text>
</section><section id="HF0F70BFC0DF64697ADA2D760EA98EF54"><enum>8002.</enum><header>Repeal of making work pay credit</header>
<subsection id="H57A83B10DC904DE4991A4096493A4393"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart C of part IV of subchapter A of chapter 1 is amended by striking section 36A (and by
striking the item relating to such section in the table of sections of
such subpart).</text>
</subsection><subsection id="HA82F678F76644F68AA1ABDBDF3FB66ED"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HB6D0BEDA13C54B4D80547F58756F69A1"><enum>(1)</enum><text>Section 6211(b)(4)(A) is amended by striking <quote>36A,</quote>.</text>
</paragraph><paragraph id="HC6E45F4B03984A2CA047E8A1BEC42224"><enum>(2)</enum><text display-inline="yes-display-inline">Section 6213(g)(2) is amended by striking subparagraph (N).</text>
</paragraph></subsection></section><section id="H1609803816E74D36BEDD2589A5DA6CDF"><enum>8003.</enum><header>General business credit</header><text display-inline="no-display-inline">Subsection (d) of section 38 is amended by striking paragraph (3).</text>
</section><section id="H472E5957E671406DAF1BEF25A2DDFF1A"><enum>8004.</enum><header>Environmental tax</header>
<subsection commented="no" display-inline="no-display-inline" id="H02A935AAC06C4C50AA9783D56E72D3D0"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter A of chapter 1 is amended by striking part VII (and the table of parts for such chapter
is amended by striking the item relating to part VII).</text>
</subsection><subsection id="HF3319AE1C4424944AC1FCDEB83CE7603"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph commented="no" id="HC52F889AA3FA4C94AA67CE13EFCDA95B"><enum>(1)</enum><text>Section 26(b)(2) is amended by striking subparagraph (B).</text>
</paragraph><paragraph commented="no" id="HCF4F46277CFA44C5AE4B58ABD04A3D3D"><enum>(2)</enum><text>Section 164(a) is amended by striking paragraph (5).</text>
</paragraph><paragraph commented="no" id="H51138F5F19084338B031FD7C45E0FE4F"><enum>(3)</enum><text>Section 275(a) is amended by striking the last sentence.</text>
</paragraph><paragraph commented="no" id="HC5109565E40C428D8BA80B0000537B43"><enum>(4)</enum><text>Section 882(a)(1) is amended by striking <quote>59A,</quote>.</text>
</paragraph><paragraph commented="no" id="H3BDA332AFBFB43F7B97E4ED21621E18D"><enum>(5)</enum><text>Section 6425(c)(1)(A), as amended by the preceding provisions of this Act, is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H7621F1D5F142416FB03F413F9ADED7F5" style="OLC">
<subparagraph id="HA00FC7B4A53C4E0CA2C7539B8391DC63"><enum>(A)</enum><text display-inline="yes-display-inline">the tax imposed by section 11 or 1201(a), or subchapter L of chapter 1, whichever is applicable,
over</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H28CAC23C1B304CEEA99A2A0E21BE7785"><enum>(6)</enum><text>Section 6655(g)(1)(A), as amended by the preceding provisions of this Act, is amended by adding <quote>plus</quote> at the end of clause (i) and by striking clause (ii).</text>
</paragraph></subsection></section><section id="H99697042BDCE4E2AA908EBE57EAA32D9"><enum>8005.</enum><header>Annuities; certain proceeds of endowment and life insurance contracts</header><text display-inline="no-display-inline">Section 72 is amended—</text>
<paragraph id="H1D660DA1FDE8490F8D99A0BCE960A46A"><enum>(1)</enum><text>in subsection (c)(4) by striking <quote>; except that if such date was before January 1, 1954, then the annuity starting date is January 1,
1954</quote>, and</text>
</paragraph><paragraph id="HDA75A2481EEC407091C0EA9D3F300773"><enum>(2)</enum><text>in subsection (g)(3) by striking <quote>January 1, 1954, or</quote> and <quote>, whichever is later</quote>.</text>
</paragraph></section><section id="H3AD6E0C666D94F31B5BC10B36680EC28"><enum>8006.</enum><header>Unemployment compensation</header><text display-inline="no-display-inline">Section 85 is amended by striking subsection (c).</text>
</section><section id="HBB2E2569F0E5426A916F36948390C084"><enum>8007.</enum><header>Flexible spending arrangements</header><text display-inline="no-display-inline">Section 106(c)(1) is amended by striking <quote>Effective on and after January 1, 1997, gross</quote> and inserting <quote>Gross</quote>.</text>
</section><section id="H4D1E8ACAB6F24467A123E41A82B07271"><enum>8008.</enum><header>Certain combat zone compensation of members of the armed forces</header><text display-inline="no-display-inline">Subsection (c) of section 112 is amended—</text>
<paragraph id="H94820D0FF04946A4B69AEB449F1D3D0C"><enum>(1)</enum><text>by striking <quote>(after June 24, 1950)</quote> in paragraph (2), and</text>
</paragraph><paragraph id="H2F61A80C9FDD479F9DFA6F0007A45C0B"><enum>(2)</enum><text>striking <quote>such zone;</quote> and all that follows in paragraph (3) and inserting <quote>such zone.</quote>.</text>
</paragraph></section><section id="HCDBBCCA2BE0C4F3EA394D9ED7330B237"><enum>8009.</enum><header>Qualified group legal services plans</header>
<subsection id="HC0E55A3112684DF9ADB255C1F078E185"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part III of subchapter B of chapter 1 is amended by striking section 120 (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H7066C36CBD074A36BEF874EC28B79315"><enum>(b)</enum><header>Tax-Exemption of group legal services plans</header><text>Section 501(c) is amended by striking paragraph (20).</text>
</subsection><subsection id="HA1DD7434CFAA47DF9EDACDE99216E73A"><enum>(c)</enum><header>Conforming amendments</header>
<paragraph id="H373C7DB416F545C59B2A6F51BE9BC35F"><enum>(1)</enum><text>Section 414(n)(3)(C) is amended by striking <quote>120,</quote>.</text>
</paragraph><paragraph id="HB7431A77893A44F6B0773F45B5ADCB56"><enum>(2)</enum><text display-inline="yes-display-inline">Section 414(t)(2) is amended by striking <quote>120,</quote>.</text>
</paragraph><paragraph id="H620811D99073473B84DFAB4E00FD67B5"><enum>(3)</enum><text>Section 3121(a) is amended by striking paragraph (17).</text>
</paragraph><paragraph id="HFB79DD4922E8466982FFF7D9C63FB7E9"><enum>(4)</enum><text>Section 3231(e) is amended by striking paragraph (7).</text>
</paragraph><paragraph id="H24CF3348C1B3436D9237827D89CFA494"><enum>(5)</enum><text>Section 3306(b) is amended by striking paragraph (12).</text>
</paragraph><paragraph id="HF7E94F1670E441869AF0B99CE0B0FA02"><enum>(6)</enum><text display-inline="yes-display-inline">Section 6039D(d)(1) is amended by striking <quote>120,</quote>.</text>
</paragraph><paragraph id="H17FC10790DF3428EBD449DA8E8694361"><enum>(7)</enum><text>Section 209(a)(14) of the Social Security Act is amended—</text>
<subparagraph id="H7646A7F536434C278494E284006190F0"><enum>(A)</enum><text>by striking subparagraph (B), and</text>
</subparagraph><subparagraph id="HECCAA59C1BA64322B4C1BC1D80C15776"><enum>(B)</enum><text>by striking <quote>(14)(A)</quote> and inserting <quote>(14)</quote>.</text>
</subparagraph></paragraph></subsection></section><section id="HF82429BC72B54AD492A0BF55F8E883BB"><enum>8010.</enum><header>Certain reduced uniformed services retirement pay</header><text display-inline="no-display-inline">Section 122(b)(1) is amended by striking <quote>after December 31, 1965,</quote>.</text>
</section><section id="H581F22DADFEF4822A8CF80316409EA87"><enum>8011.</enum><header>Great plains conservation program</header><text display-inline="no-display-inline">Section 126(a) is amended by striking paragraph (6) and by redesignating paragraphs (7),(8), (9),
and (10) as paragraphs (6), (7), (8), and (9), respectively.</text>
</section><section id="H1D7CF0C7EB3C43C6ACFA5426B6D4BC2B"><enum>8012.</enum><header>State legislators’ travel expenses away from home</header><text display-inline="no-display-inline">Paragraph (4) of section 162(h) is amended by striking <quote>For taxable years beginning after December 31, 1980, this</quote> and inserting <quote>This</quote>.</text>
</section><section id="H66CE19AEB44042AB934073CFC96687CB"><enum>8013.</enum><header>Treble damage payments under the antitrust law</header><text display-inline="no-display-inline">Section 162(g) is amended by striking the last sentence.</text>
</section><section id="H4253E5639D4B4604907C5C327911D7A5"><enum>8014.</enum><header>Phase-in of limitation on investment interest</header><text display-inline="no-display-inline">Section 163(d) is amended by striking paragraph (6).</text>
</section><section id="H88A45D9C7CA042479D29EE33DF330A44"><enum>8015.</enum><header>Charitable, etc., contributions and gifts</header><text display-inline="no-display-inline">Section 170 is amended by striking subsection (k).</text>
</section><section id="H4D44976E8FAB4985A1427B8AF088C3C4"><enum>8016.</enum><header>Amortizable bond premium</header>
<subsection id="H9617A8945F8A4650B937C3BBC41DD577"><enum>(a)</enum><header>In general</header><text>Subparagraph (B) of section 171(b)(1) is amended to read as follows:</text>
<quoted-block id="H68C95227C566484891F2B6D02C998E29" style="OLC">
<subparagraph id="HD7CC78BB35B64CDBBC6D4532DC3E63CE"><enum>(B)</enum>
<clause commented="no" display-inline="yes-display-inline" id="HB4EBABB483444001B377062792BDC2FC"><enum>(i)</enum><text>with reference to the amount payable on maturity (or if it results in a smaller amortizable bond
premium attributable to the period before the call date, with reference to
the amount payable on the earlier call date), in the case of a bond
described in subsection (a)(1), and</text>
</clause><clause id="HB7CFD62CFF7148A7B7B758E29ACE327B" indent="up1"><enum>(ii)</enum><text>with reference to the amount payable on maturity or on an earlier call date, in the case of a bond
described in subsection (a)(2).</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H3A1D99B417674EEEAA8AB19BFC9A38FF"><enum>(b)</enum><header>Conforming amendments</header><text>Paragraphs (2)(B) and (3)(B) of section 171(b) are each amended by striking <quote>paragraph (1)(B)(ii)</quote> and inserting <quote>paragraph (1)(B)(i)</quote>.</text>
</subsection></section><section id="HA0A3458BCF8C42B8A1D5CBB61692AFD9"><enum>8017.</enum><header>Repeal of deduction for clean-fuel vehicles and certain refueling property</header>
<subsection id="H4A79C31FDA1E488997329D5E541CBFB6"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 179A (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H80729D2C10D04A6F9F565B61BECDA83E"><enum>(b)</enum><header>Conforming amendment</header>
<paragraph id="H2ED0584280244559BA5103683C83940B"><enum>(1)</enum><text>Section 62(a) is amended by striking paragraph (14).</text>
</paragraph><paragraph id="HDD1B047ACC444281B68D1199AF713F7B"><enum>(2)</enum><text>Section 280F(a)(1) is amended by striking subparagraph (C).</text>
</paragraph><paragraph id="H95300C6EFBE942759238A573E8EB7391"><enum>(3)</enum><text>Section 312(k)(3), as amended by this Act, is amended by striking <quote>, 179A</quote> each place it appears.</text>
</paragraph><paragraph id="H8BBE7D37482D46709093907130D96BA3"><enum>(4)</enum><text>Section 1016(a) is amended by striking paragraph (24).</text>
</paragraph></subsection><subsection id="H8951EBB00CA6440E9B9F7D8EBEC0D7E6"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this section shall apply to property placed in service after December 31,
2005.</text>
</subsection></section><section id="H0BC81E085EE4490EA0579B00602AFD1E"><enum>8018.</enum><header>Repeal of deduction for capital costs incurred in complying with environmental protection agency
sulfur regulations</header>
<subsection id="H19CA889AA2444AB589F062A2B7469776"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Part VI of subchapter B of chapter 1 is amended by striking section 179B (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H0F348087BCE8479A8839C326DADD5212"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HA05D642A83504A6FB9E2050D3789182F"><enum>(1)</enum><text>Section 312(k)(3), as amended by this Act, is amended by striking <quote>, 179B</quote> each place it appears.</text>
</paragraph><paragraph id="H684C7F8545F04D27A7BF14FEE86C8B3A"><enum>(2)</enum><text>Section 1016(a) is amended by striking paragraph (30).</text>
</paragraph></subsection><subsection commented="no" id="H8A0F85F175E4451784CCC88E0AECA9B6"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to amounts paid or incurred after December 31,
2009.</text>
</subsection></section><section id="HB10BBE9A9E4645AC81E4163E724DEF3D"><enum>8019.</enum><header>Activities not engaged in for profit</header><text display-inline="no-display-inline">Section 183(e)(1) is amended by striking the last sentence.</text>
</section><section id="H407CC2BC03CB43069E382FC052A2A5AB"><enum>8020.</enum><header>Dividends received on certain preferred stock; and dividends paid on certain preferred stock of
public utilities</header>
<subsection id="HA77B3467A2E14132B5E2425A7CBE38EF"><enum>(a)</enum><header>In general</header><text>Sections 244 and 247 are hereby repealed, and the table of sections for part VIII of subchapter B
of chapter 1 is amended by striking the items relating to sections 244 and
247.</text>
</subsection><subsection id="H11FE19FADD984DD9899EE408EF64EFDA"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HC3A3F7700E1B45D39857D882828CA644"><enum>(1)</enum><text>Paragraph (5) of section 172(d) is amended to read as follows:</text>
<quoted-block id="H420D465C514E4C8385A3B0D6A14779F3" style="OLC">
<paragraph id="HDF31330572384471BB78838DABC576F0"><enum>(5)</enum><header>Computation of deduction for dividends received</header><text>The deductions allowed by section 243 (relating to dividends received by corporations) and 245
(relating to dividends received from certain foreign corporations) shall
be computed without regard to section 246(b) (relating to limitation on
aggregate amount of deductions).</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HB18570230CCB4C448110A952FD3B394E"><enum>(2)</enum><text>Paragraph (1) of section 243(c) is amended to read as follows:</text>
<quoted-block id="HD6DD853123EE40ADBA2FF6DE2AC42CEA" style="OLC">
<paragraph id="H7169301A17314616BAE0F18E482FCA5C"><enum>(1)</enum><header>In general</header><text>In the case of any dividend received from a 20-percent owned corporation, subsection (a)(1) shall
be applied by substituting <quote>80 percent</quote> for <quote>70 percent</quote></text></paragraph><after-quoted-block>.’’.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H356B0C03F499416B8FA1D7AAF685CF01"><enum>(3)</enum><text>Section 243(d) is amended by striking paragraph (4).</text>
</paragraph><paragraph id="H4CF47298206B452FB693FC00BAF51A2E"><enum>(4)</enum><text>Section 246 is amended—</text>
<subparagraph id="H13C7890A989F41DB98AF1A5FC9869D5F"><enum>(A)</enum><text>by striking <quote>, 244,</quote> in subsection (a)(1),</text>
</subparagraph><subparagraph id="H6053EEB21C4F46E3BFF408EB9F07944B"><enum>(B)</enum><text>in subsection (b)(1)—</text>
<clause id="HC053340CA66449B2A2BD7BC072EE5089"><enum>(i)</enum><text>by striking <quote>sections 243(a)(1), 244(a),</quote> the first place it appears and inserting <quote>section 243(a)(1)</quote>,</text>
</clause><clause id="H92CA290E43E4413FBF53B3AE374AA148"><enum>(ii)</enum><text>by striking <quote>244(a),</quote> the second place it appears, and</text>
</clause><clause id="HBAE1CB881B524F1BB066D71CEA6EA743"><enum>(iii)</enum><text>by striking <quote>subsection (a) or (b) of section 245, and 247,</quote> and inserting <quote>and subsection (a) or (b) of section 245,</quote>, and</text>
</clause></subparagraph><subparagraph id="H6FF412C22E174D0983E889BDF4EDE90A"><enum>(C)</enum><text>by striking <quote>, 244,</quote> in subsection (c)(1).</text>
</subparagraph></paragraph><paragraph id="HEE5F6A0891B146789A058D67BB648EBA"><enum>(5)</enum><text>Section 246A is amended by striking <quote>, 244,</quote> both places it appears in subsections (a) and (e).</text>
</paragraph><paragraph id="HE0A32D7F83E44A4DB21C7E8C6BDAFE50"><enum>(6)</enum><text display-inline="yes-display-inline">Sections 263(g)(2)(B)(iii), 277(a), 301(e)(2), 469(e)(4), 512(a)(3)(A), 805(a)(4)(A), (C), and (D),
805(b)(4) (as redesignated by this Act), 832(b)(5)(B)(ii), (D)(i), and
(D)(ii)(I), 833(b)(3)(E), and 1059(b)(2)(B) are each amended by striking <quote>, 244,</quote> each place it appears.</text>
</paragraph><paragraph id="H787281E85E554DD591C7325905EDEDD4"><enum>(7)</enum><text>Section 805(a)(4)(B) is amended by striking <quote>, 244(a),</quote> each place it appears.</text>
</paragraph><paragraph id="H62A85B7CE2274B11835FA7479011927C"><enum>(8)</enum><text>Section 810(c)(2)(B) is amended by striking <quote>244 (relating to dividends on certain preferred stock of public utilities),</quote>.</text>
</paragraph><paragraph id="H3A3FC2DECBC941AEB25B090B6F2A77F7"><enum>(9)</enum><text>Section 1244(c)(2)(C) is amended by striking <quote>244,</quote>.</text>
</paragraph></subsection></section><section id="H160690E0727D423F9B9E58C342596366"><enum>8021.</enum><header>Acquisitions made to evade or avoid income tax</header><text display-inline="no-display-inline">Paragraphs (1) and (2) of section 269(a) are each amended by striking <quote>or acquired on or after October 8, 1940,</quote>.</text>
</section><section id="H779F5E14DDF34715853A250B2C98F666"><enum>8022.</enum><header>Distributions of property</header><text display-inline="no-display-inline">Paragraph (3) of section 301(c) is amended to read as follows:</text>
<quoted-block id="H5BDC0114A66E42C39F6E922089AC5882" style="OLC">
<paragraph id="H7986D167770C46619A9224A7DC01BFBD"><enum>(3)</enum><header>Amounts in excess of basis</header><text>That portion of the distribution which is not a dividend, to the extent that it exceeds the
adjusted basis of the stock, shall be treated as gain from the sale or
exchange of property.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="H391B78EC49944D2BA22D098CF557E63C"><enum>8023.</enum><header>Effect on earnings and profits</header><text display-inline="no-display-inline">Subsection (d) of section 312 is amended by striking paragraph (2) and redesignating paragraph (3)
as paragraph (2).</text>
</section><section id="HF4D40F651EF044049C8B7F2628463496"><enum>8024.</enum><header>Basis to corporations</header><text display-inline="no-display-inline">Section 362(a) is amended by striking <quote>on or after June 22, 1954,</quote>.</text>
</section><section id="HDDDC5C2710FD4744B24634D0BC713A0E"><enum>8025.</enum><header>Tax credit employee stock ownership plans</header><text display-inline="no-display-inline">Section 409 is amended by striking subsection (q).</text>
</section><section id="HC29431F9FBC74C7B8A73529D185662CB"><enum>8026.</enum><header>Employee stock purchase plans</header><text display-inline="no-display-inline">Section 423(a) is amended by striking <quote>after December 31, 1963</quote>.</text>
</section><section id="H830F9606D21343F1AB76130CEA70FFA7"><enum>8027.</enum><header>Transition rules</header>
<subsection id="H73CEA37E309843CC9A4176B728E60C8F"><enum>(a)</enum><text>Paragraph (5) of section 430(c) is amended by striking subparagraph (B) and by striking <quote><header-in-text level="subparagraph" style="OLC"><enum-in-header>(A)</enum-in-header> In general.—</header-in-text></quote>.</text>
</subsection><subsection id="H1BDE7C0FEE414A0FBA2CFC2F9C727106"><enum>(b)</enum><text>Paragraph (2) of section 430(h) is amended by striking subparagraph (G).</text>
</subsection><subsection id="H6A278404F43142FE9DB25DC6BD70BC79"><enum>(c)</enum><text display-inline="yes-display-inline">Paragraph (3) of section 436(j) is amended by striking subparagraphs (B) and (C) and by striking <quote><header-in-text level="subparagraph" style="OLC"><enum-in-header>(A)</enum-in-header> In general.—</header-in-text></quote></text>
</subsection><subsection id="HF2819CAAE0824F9B8B5CE663BC2D969C"><enum>(d)</enum><text>Section 436 is amended by striking subsection (m).</text>
</subsection></section><section id="H6F0751C85D794439BDCFDEBA369DD92D"><enum>8028.</enum><header>Limitation on deductions for certain farming</header>
<subsection id="H1409F6626F7844F7A5A75D20328910AB"><enum>(a)</enum><header>In general</header><text>Section 464 is amended by striking <quote>any farming syndicate (as defined in subsection (c))</quote> both places it appears in subsections (a) and (b) and inserting <quote>any taxpayer to whom subsection (d) applies</quote>.</text>
</subsection><subsection display-inline="no-display-inline" id="HB898DD4AE5E44DCE9C2DB97701ADD3A3"><enum>(b)</enum><header>Farming syndicate</header>
<paragraph commented="no" display-inline="no-display-inline" id="H1856B6D711654EF28DBC644BFC0CA99A"><enum>(1)</enum><text>Subsection (c) of section 464 is hereby moved to the end of section 461 and redesignated as
subsection (j).</text>
</paragraph><paragraph id="H0EE58819F84B411296C44EC4B2E086B1"><enum>(2)</enum><text>Such subsection (j) is amended—</text>
<subparagraph id="HFCA38736562A4973B9C3092544FE29A5"><enum>(A)</enum><text>by striking <quote>For purposes of this section</quote> in paragraph (1) and inserting <quote>For purposes of subsection (i)(4)</quote>, and</text>
</subparagraph><subparagraph id="H7F40D2C8E28D4F0E80BA27B9DE380537"><enum>(B)</enum><text>by adding at the end the following new paragraphs:</text>
<quoted-block id="H223F4E8074664BB3BB71406859E84ABB" style="OLC">
<paragraph id="H472BCE6D5300487ABF6C65CAE429B4BC"><enum>(3)</enum><header>Farming</header><text>For purposes of this subsection, the term <quote>farming</quote> has the meaning given to such term by section 464(e).</text>
</paragraph><paragraph id="HA64A043BE75B4F589779846E158AC9C8"><enum>(4)</enum><header>Limited entrepreneur</header><text>For purposes of this subsection, the term <quote>limited entrepreneur</quote> means a person who—</text>
<subparagraph id="HB0BC11F0265847649C46763827031AA5"><enum>(A)</enum><text>has an interest in an enterprise other than as a limited partner, and</text>
</subparagraph><subparagraph id="H01FDCAC7D31043168129FB79FA53E55D"><enum>(B)</enum><text>does not actively participate in the management of such enterprise.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HD1702AFBAC744090B5CAD3E86E0BCE47"><enum>(C)</enum><text>Paragraph (4) of section 461(i) is amended by striking <quote>section 464(c)</quote> and inserting <quote>subsection (j)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="H2AA91A61DB2D4FC1A5AD05DBDC256EA7"><enum>(c)</enum><text>Section 464 is amended—</text>
<paragraph id="H71A27D52F51A4B6B9556DFE48A412712"><enum>(1)</enum><text>by striking subsections (e) and (g) and redesignating subsections (d) and (f) as subsections (c)
and (d), respectively, and</text>
</paragraph><paragraph id="H7ED6148C3A434F5CB010460E88EDB892"><enum>(2)</enum><text>by inserting after subsection (d) the following new subsection:</text>
<quoted-block id="HD94BC2C3F70D41B3B4B691EBA5E9E3B2" style="OLC">
<subsection id="HECD9D7E7895C4D75913AC949316B322C"><enum>(e)</enum><header>Farming</header><text>For purposes of this section, the term <quote>farming</quote> means the cultivation of land or the raising or harvesting of any agricultural or horticultural
commodity including the raising, shearing, feeding, caring for, training,
and management of animals. For purposes of the preceding sentence, trees
(other than trees bearing fruit or nuts) shall not be treated as an
agricultural or horticultural commodity.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HCC4626C7668143AAB47FA6C32468F5D7"><enum>(d)</enum><text>Subsection (d) of section 464 of such Code, as redesignated by subsection (c), is amended—</text>
<paragraph id="H9350AE93861C4B648DCE6545E108197E"><enum>(1)</enum><text>by striking paragraph (1) and redesignating paragraphs (2), (3), and (4) as paragraphs (1), (2),
and (3), respectively, and</text>
</paragraph><paragraph id="H20AEC90F316C4883A5186FD1721D70C5"><enum>(2)</enum><text>by striking <quote><header-in-text level="subsection" style="OLC">SUBSECTIONS (a) AND (b) TO APPLY TO</header-in-text></quote> in the subsection heading.</text>
</paragraph></subsection><subsection commented="no" id="H1A6BA445012C4E318F1309FE35DC66B6"><enum>(e)</enum><text>Subparagraph (A) of section 58(a)(2) is amended by striking <quote>section 464(c)</quote> and inserting <quote>section 461(j)</quote>.</text>
</subsection></section><section id="H7FEA4942992B4EDB96BE775CDF85E8E8"><enum>8029.</enum><header>Deductions limited to amount at risk</header><text display-inline="no-display-inline">Paragraph (3) of section 465(c) is amended by striking <quote>In the case of taxable years beginning after December 31, 1978, this</quote> and inserting <quote>This</quote>.</text>
</section><section id="HDF0AB3E56A9A495CBB3BA009550A7D4E"><enum>8030.</enum><header>Passive activity losses and credits limited</header><text display-inline="no-display-inline">Section 469 is amended by striking subsection (m).</text>
</section><section id="HEEBBAA2983394F3587F14BE06F819406"><enum>8031.</enum><header>Adjustments required by changes in method of accounting</header><text display-inline="no-display-inline">Section 481(b)(3) is amended by striking subparagraph (C).</text>
</section><section id="H0CE545752E20449BB2151662EE1BD0E0"><enum>8032.</enum><header>Exemption from tax on corporations, certain trusts, etc</header><text display-inline="no-display-inline">Section 501 is amended by striking subsection (s).</text>
</section><section id="HE1237228BAA74ED8AB9AB5AACD6C575A"><enum>8033.</enum><header>Requirements for exemption</header>
<subsection id="H92B26F4823BC4773A525962C1847188C"><enum>(a)</enum><text>Section 503(a)(1) is amended to read as follows:</text>
<quoted-block id="HF7ED7EACD75B4A418B4B32549915514D" style="OLC">
<paragraph id="H6F95EB6D5C8D47398754493D331942A8"><enum>(1)</enum><header>General rule</header><text>An organization described in paragraph (17) or (18) of section 501(c) or described in section
401(a) and referred to in section 4975(g)(2) or (3) shall not be exempt
from taxation under section 501(a) if it has engaged in a prohibited
transaction.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBB56C05D8FCC440CB4F56334DD81F92C"><enum>(b)</enum><text>Paragraph (2) of section 503(a) is amended by striking <quote>described in section 501(c)(17) or (18) or paragraph (a)(1)(B)</quote> and inserting <quote>described in paragraph (1)</quote>.</text>
</subsection><subsection id="H0DA5052547E24932A1938CCA92F6BB56"><enum>(c)</enum><text>Subsection (c) of section 503 is amended by striking <quote>described in section 501(c)(17) or (18) or subsection (a)(1)(B)</quote> and inserting <quote>described in subsection (a)(1)</quote>.</text>
</subsection></section><section display-inline="no-display-inline" id="H673FA3BDDCBF43C29E3D65575A73DF76"><enum>8034.</enum><header>Repeal of special treatment for religious broadcasting company</header>
<subsection id="H38CDEB9CF0F74188821D44BB9BDC3F96"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (b) of section 512 is amended by striking paragraph (15).</text>
</subsection><subsection id="HAFE59BA455B64C0BA3270445FDC74C8F"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after the date of the
enactment of this Act.</text>
</subsection></section><section id="H590045B93CB743948DE7D444BB7EF5D1"><enum>8035.</enum><header>Repeal of exclusion of gain or loss from disposition of brownfield property</header>
<subsection id="H935BE9152F1E49F0B0B39904AFDB3ED6"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subsection (b) of section 512 is amended by striking paragraph (19).</text>
</subsection><subsection id="HD93B3119C2D142B384F68F613A491F10"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to property acquired after December 31, 2009.</text>
</subsection></section><section id="HFAE098AD2B6F4CCAA1B7CF7DA23C9F54"><enum>8036.</enum><header>Accumulated taxable income</header><text display-inline="no-display-inline">Paragraph (1) of section 535(b) and paragraph (1) of section 545(b) are each amended by striking <quote>section 531</quote> and all that follows and inserting <quote>section 531 or the personal holding company tax imposed by section 541.</quote>.</text>
</section><section id="H68F54EBBF8F248E595A2BC3771EB68B0"><enum>8037.</enum><header>Certain provisions related to depletion</header>
<subsection id="H9803291C68264631A9BCD6109D89D085"><enum>(a)</enum><text>Section 614(b)(3) (before being redesignated by title III) is amended by striking subparagraph (C).</text>
</subsection><subsection id="H42CE3A9B0ECE4CEDA32CB70B15CA0329"><enum>(b)</enum><text display-inline="yes-display-inline">Section 614(b)(4) (before being redesignated by title III) is amended by striking <quote>whichever of the following taxable years is the later: The first taxable year beginning after
December 31, 1963, or</quote>.</text>
</subsection><subsection id="H6B445FF3BACC4F758E84A3DD8DDF477D"><enum>(c)</enum><text display-inline="yes-display-inline">Section 614(b) (before being redesignated by title III) is amended by striking paragraph (5).</text>
</subsection></section><section id="H2E8D5D4CB94041158CCB0F742C027D54"><enum>8038.</enum><header>Amounts received by surviving annuitant under joint and survivor annuity contract</header><text display-inline="no-display-inline">Subparagraph (A) of section 691(d)(1) is amended by striking <quote>after December 31, 1953, and</quote>.</text>
</section><section id="HB6BA9068F61146C592BF3F1D52310B7F"><enum>8039.</enum><header>Income taxes of members of armed forces on death</header><text display-inline="no-display-inline">Section 692(a)(1) is amended by striking <quote>after June 24, 1950</quote>.</text>
</section><section id="H5A02D9C477F24FE3A8B610A66FD22655"><enum>8040.</enum><header>Special rules for computing reserves</header><text display-inline="no-display-inline">Paragraph (7) of section 807(e) is amended by striking subparagraph (B) and redesignating
subparagraph (C) as subparagraph (B).</text>
</section><section id="HA8DB4A88CB1F426686FFCDE344CAD8FF"><enum>8041.</enum><header>Insurance company taxable income</header>
<subsection id="HD6813D1A8B644D69A2185DD9DBD95361"><enum>(a)</enum><text>Section 832(e) is amended by striking <quote>of taxable years beginning after December 31, 1966,</quote>.</text>
</subsection><subsection id="H9D62D69A24784DDABF648786B8DA5A52"><enum>(b)</enum><text>Section 832(e)(6) is amended by striking <quote>In the case of any taxable year beginning after December 31, 1970, the</quote> and inserting <quote>The</quote>.</text>
</subsection></section><section id="H816DB435C2CB46AF92E2E315D2BEEBD8"><enum>8042.</enum><header>Capitalization of certain policy acquisition expenses</header><text display-inline="no-display-inline">Section 848 (as amended by title II) is amended by striking subsection (i).</text>
</section><section id="H806A6E7E5A6147A7964726EFEE98F1C9"><enum>8043.</enum><header>Repeal of provision on expatriation to avoid tax</header>
<subsection id="H5548EF3965C8430F9300DB5187405804"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart A of part II of subchapter N of chapter 1 is amended by striking section 877 (and by
striking the item relating to such section in the table of sections for
such subpart).</text>
</subsection><subsection id="H83C6563713AE40F3BC2D3D0B58AA43A4"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HCD13924C58024A68958AC813FE6B9A8D"><enum>(1)</enum><text>Section 2(d) is amended by striking <quote>or 877</quote>.</text>
</paragraph><paragraph id="HCC87645866DF48B68675E060856AC348"><enum>(2)</enum><text>Section 121 is amended by striking subsection (e).</text>
</paragraph><paragraph id="HE07D14DAAF014C1DB3C899D06B28FB8B"><enum>(3)</enum><text>Section 865(j)(3) is amended by inserting <quote>as in effect before its repeal</quote> after <quote>section 877</quote>.</text>
</paragraph><paragraph id="HFD3E4403E76F46B38A367D1CBF266857"><enum>(4)</enum><text>Paragraph (2) of section 871(o) (as amended by this Act) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H78625FB8CED5493BA1566DC2B22FE78C" style="OLC">
<paragraph id="HADF14C5E94D44802852713DABB9F188C"><enum>(2)</enum><text display-inline="yes-display-inline">For taxation of covered expatriates, see section 877A.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H6C0C53CDF7F34FA2BCC773E0DFA8A75B"><enum>(5)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H75AFF87D7C034043AECC8EA87EC44764"><enum>(A)</enum><text>Section 877A(g)(1)(A) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H19C318CC53744659B0BBFB42DBA9FAB5" style="OLC">
<subparagraph commented="no" id="H55E25103EBB0499E9F57C2FF6754B699"><enum>(A)</enum><header>In general</header><text>The term <quote>covered expatriate</quote> means any expatriate if—</text>
<clause commented="no" id="HA001722DD8904052A5D8D0E2C96ABC14"><enum>(i)</enum><text display-inline="yes-display-inline">the average annual net income tax of such individual for the period of 5 taxable years ending
before the date of the loss of United States citizenship is greater than
$124,000,</text>
</clause><clause commented="no" id="HE0933A9B5E734A338265ACB74C9BA829"><enum>(ii)</enum><text>the net worth of the individual as of such date is $2,000,000 or more, or</text>
</clause><clause commented="no" id="HBB18B586AD0D4325AB46D4A155A785D9"><enum>(iii)</enum><text>such individual fails to certify under penalty of perjury that he has met the requirements of this
title for the 5 preceding taxable years or fails to submit such evidence
of such compliance as the Secretary may require.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H17187E20928F44BBA27BDB80350B7918" indent="up1"><enum>(B)</enum><text>Section 877A(g)(1)(B) is amended by striking <quote>shall not be treated as meeting the requirements of subparagraph (A) or (B) of section 877(a)(2)</quote> and inserting <quote>shall not be treated as described in clause (i) or (ii) of subparagraph (A)</quote>.</text>
</subparagraph><subparagraph id="H2D4B8B5A5B1E4E4787F7E639A5A14DB0" indent="up1"><enum>(C)</enum><text>Section 877A(g)(1) is amended by redesignating subparagraph (C) as subparagraph (D) and inserting
after subparagraph (B) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H513D4A6E06D54DC4928B33AB577F03BC" style="OLC">
<subparagraph id="H1E9B56C3A6B34EEAB0B7156EB290CF28"><enum>(C)</enum><header>Net income tax</header><text>For purposes of subparagraph (A), the term <quote>net income tax</quote> means the regular tax liability reduced by the credits allowed under subparts A, B, and D of part
IV of subchapter A.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HA6D2CBF7AFE24C8094B8025EFA3E3D17" indent="up1"><enum>(D)</enum><text>Section 877A(g)(1), as amended by subparagraph (C), is amended by adding at the end the following
new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HE5AAC4CF50994A6DACBE82774B8B567A" style="OLC">
<subparagraph id="H7AA83E9DAAC248EBA0C58E07BEF00559"><enum>(E)</enum><header>Inflation adjustment</header><text display-inline="yes-display-inline">In the case of the loss of United States citizenship in any calendar year after 2007, the dollar
amount in subparagraph (A)(i) shall be increased by an amount equal to—</text>
<clause id="H2DFACDD4EFF9411D95C1EBB538DD9741"><enum>(i)</enum><text>such dollar amount, multiplied by</text>
</clause><clause id="H54559E3D88244F9084E1103F1411F3CC"><enum>(ii)</enum><text>the cost-of-living adjustment determined under section 1(c)(2)(A) for the calendar year in which
such loss of United States citizenship occurs determined by substituting <quote>calendar year 2003</quote> for <quote>calendar year 2012</quote> in clause (ii) thereof.</text></clause><continuation-text continuation-text-level="subparagraph">Any increase determined under the preceding sentence shall be rounded to the nearest multiple of
$1,000.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H70E4AC15304C448AB2EB55A4DEB2DA16" indent="up1"><enum>(E)</enum><text>Section 877A(g)(5) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H01F0271135F64C568CA0CE5AA4E3838A" style="OLC">
<paragraph id="H323446723EEB4E839288A3D85CEBB885"><enum>(5)</enum><header>Long-term resident</header><text display-inline="yes-display-inline">The term <quote>long-term resident</quote> means any individual (other than a citizen of the United States) who is a lawful permanent
resident of the United States in at least 8 taxable years during the
period of 15 taxable years ending with the taxable year during which the
event described in subparagraph (A) or (B) of paragraph (2) occurs. For
purposes of the preceding sentence, an individual shall not be treated as
a lawful permanent resident for any taxable year if such individual is
treated as a resident of a foreign country for the taxable year under the
provisions of a tax treaty between the United States and the foreign
country and does not waive the benefits of such treaty applicable to
residents of the foreign country.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H94845985E0A04539A259CBD24E53A929"><enum>(6)</enum><text>Section 894(b) is amended by striking the last sentence.</text>
</paragraph><paragraph id="HAC4374E1D712469FA51103C312A3A514"><enum>(7)</enum><text>Section 2107 is amended by striking subsection (e).</text>
</paragraph><paragraph commented="no" id="H6050103E73344472A5E32C259EE4C828"><enum>(8)</enum><text>Section 2501(a) is amended by striking paragraphs (3) and (5) and by redesignating paragraph (4) as
paragraph (3).</text>
</paragraph><paragraph id="H54B041BA9AA849A49D1BB8423929B28D"><enum>(9)</enum><text>Section 3405(e)(13)(B) is amended by striking <quote>that such person is not—</quote> and all that follows and inserting <quote>that such person is not a United States citizen or a resident alien of the United States.</quote>.</text>
</paragraph><paragraph id="HF2D6F55F649F44039754A4DD69C5F3BA"><enum>(10)</enum><text>Section 6039G(a) is amended by striking <quote>section 877(b) or 877A</quote> and inserting <quote>section 877A</quote>.</text>
</paragraph><paragraph id="H692A76DCC5A44007800C4336C5C6B6A8"><enum>(11)</enum><text>Section 6039G(d) is amended by striking <quote>section 877(a) or 877A</quote> and inserting <quote>section 877A</quote>.</text>
</paragraph><paragraph id="H3ECCE5C4904249C48543BF07DD79D8C0"><enum>(12)</enum><text>Section 7701(b) is amended by striking paragraph (10) and by redesignating paragraph (11) as
paragraph (10).</text>
</paragraph></subsection><subsection id="HF2BE90D075F3452BB9A1ECEF46F03785"><enum>(c)</enum><header>Effective date</header><text display-inline="yes-display-inline">The amendments made by this subsection shall apply to individuals whose expatriation date (as
defined in <external-xref legal-doc="usc" parsable-cite="usc/26/877A">section 877A(g)(3)</external-xref> of the Internal Revenue Code of 1986) is on
or after June 17, 2008.</text>
</subsection></section><section id="H8EC6D58604CE4F50B7215959407D91E8"><enum>8044.</enum><header>Repeal of certain transition rules on income from sources without United States</header>
<subsection id="H53DFB3FBD4EF443FA93BC4937ADDD5A0"><enum>(a)</enum><header>Limitation on credit</header><text>Paragraph (2) of section 904(d) is amended by striking subparagraph (J).</text>
</subsection><subsection id="HC6D3444D7DEC436498F231FA0C35A0DC"><enum>(b)</enum><header>Foreign earned income</header><text>Clause (i) of section 911(b)(2)(D) is amended to read as follows:</text>
<quoted-block id="H1E2EAA199A484033825BCC3AEA501638" style="OLC">
<clause id="H25535FCFB1BF475F9AF81DA1A8A89C60"><enum>(i)</enum><header>In general</header><text>The exclusion amount for any calendar year is $80,000.</text></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="H57766C1282D24ABABB67FFB232186E2E"><enum>8045.</enum><header>Repeal of Puerto Rico and possession tax credit</header>
<subsection id="H08D98C7A1DF94DEA9CC8ED3F1171E22B"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subpart D of part III of subchapter N of chapter 1 is amended by striking section 936 (and by
striking the item relating to such section in the table of sections of
such subpart).</text>
</subsection><subsection id="H5890B1784CF14EEBBDC1EF8D7C7254E6"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H11FE51B35567414C9229DE241448F887"><enum>(1)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H2B7DA13FE4D945F39187D0DA0F093A6F"><enum>(A)</enum><text>Section 27 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H4BFCC20C8F6346D69D7C7130D194A331" style="OLC">
<section id="HD3C22A9E748D44AF9375FD76AB21274B"><enum>27.</enum><header>Taxes of foreign countries and possessions of the United States</header><text display-inline="no-display-inline">The amount of taxes imposed by foreign countries and possessions of the United States shall be
allowed as a credit against the tax imposed by this chapter to the extent
provided in section 901.</text></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HDD77782961C54B12AB61644F5DF284C5" indent="up1"><enum>(B)</enum><text>The item relating to section 27 in the table of sections for subpart B of part IV of subchapter A
of chapter 1 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H796DA575C74545F0A7073DE8DF5D14DE" style="OLC">
<toc container-level="quoted-block-container" idref="H4BFCC20C8F6346D69D7C7130D194A331" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HD3C22A9E748D44AF9375FD76AB21274B" level="section">Sec. 27. Taxes of foreign countries and possessions of the United States.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H92B01C33219D4E8695F7E002E59BAC53"><enum>(2)</enum><text>Section 243(b)(1)(B) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H90A9C9CAAD6B4EFF947952CE2D9166BB" style="OLC">
<subparagraph id="HE26DA790CD5B4B1D94A68762BDDFB633"><enum>(B)</enum><text display-inline="yes-display-inline">if such dividend is distributed out of the earnings and profits of a taxable year of the
distributing corporation which ends after December 31, 1963, and on each
day of which the distributing corporation and the corporation receiving
the dividend were members of such affiliated group.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HA0E8E2375A844EA5BAC1250750979E54"><enum>(3)</enum><text>Section 246 is amended by striking subsection (e).</text>
</paragraph><paragraph id="HBCB2DA038FB44C5A86B00E2DCCB4C703"><enum>(4)</enum><text>Section 338(h)(6)(B)(i) is amended by striking <quote>, a DISC, or a corporation to which an election under section 936 applies</quote> and inserting <quote>or a DISC</quote>.</text>
</paragraph><paragraph id="HA151886368B441359566B3B4854540BC"><enum>(5)</enum><text>Section 861(a)(2) is amended—</text>
<subparagraph id="H7A46253ED42546A49B1904650125343A"><enum>(A)</enum><text>by striking subparagraph (A) and by redesignating subparagraphs (B), (C), and (D) as subparagraphs
(A), (B), and (C), respectively, and</text>
</subparagraph><subparagraph id="H69DEFA5CD34147398623518ED71F8D89"><enum>(B)</enum><text>by striking <quote>subparagraph (B)</quote> each place it appears and inserting <quote>subparagraph (A)</quote>.</text>
</subparagraph></paragraph><paragraph id="HDA5AFFDC49174D888D056DECED980C83"><enum>(6)</enum><text>Section 864(d)(5) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H29FDA2B88FD7495F949B7666B82BB937" style="OLC">
<paragraph id="H497B9618F5DE4F268CE4A01900F24919"><enum>(5)</enum><header>Certain provisions not to apply</header><text display-inline="yes-display-inline">The following provisions shall not apply to any amount treated as interest under paragraph (1) or
(6):</text>
<subparagraph id="HF435036C5C384C81A3F36AC624D0125A"><enum>(A)</enum><text display-inline="yes-display-inline">Section 904(d)(2)(B)(iii)(I) (relating to exceptions for export financing interest).</text>
</subparagraph><subparagraph id="H754F5EE344164D35A00DCF96FB584ABB"><enum>(B)</enum><text>Subparagraph (A) of section 954(b)(3) (relating to exception where foreign base company income is
less than 5 percent or $1,000,000).</text>
</subparagraph><subparagraph id="H183097045A754145BCD1A2C2341E0809"><enum>(C)</enum><text>Subparagraph (B) of section 954(c)(2) (relating to certain export financing).</text>
</subparagraph><subparagraph id="HF171C003D3DE441E890554A1881D16D5"><enum>(D)</enum><text>Clause (i) of section 954(c)(3)(A) (relating to certain income received from related persons).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H53F31B8A1AD640F6BC09AFC3DB253C2D"><enum>(7)</enum><text>Section 865(j)(3) is amended by striking <quote>, 933, and 936</quote> and inserting <quote>and 933</quote>.</text>
</paragraph><paragraph id="H779136E6CF734AF499FB1F3719936719"><enum>(8)</enum><text>Section 901(g)(2) is amended by inserting <quote>(as in effect before its repeal)</quote> after <quote>936</quote>.</text>
</paragraph><paragraph id="HCEC26BE3F10648FC9C0A6CC8064B265E"><enum>(9)</enum><text>Section 904(b) is amended by striking paragraph (4).</text>
</paragraph><paragraph id="H7F019572A6994BD18EE7F39BA4BD2D1B"><enum>(10)</enum><text>Section 1202(e)(4) is amended by striking subparagraph (B) and by redesignating subparagraphs (C)
and (D) as subparagraphs (B) and (C), respectively.</text>
</paragraph><paragraph id="H1AA54CFF69414ED9A3B6FD4B23C22C4E"><enum>(11)</enum><text display-inline="yes-display-inline">Section 1361(b)(2) is amended by adding <quote>or</quote> at the end of subparagraph (B), by striking subparagraph (C), and by redesignating subparagraph
(D) as subparagraph (C).</text>
</paragraph><paragraph id="H2E3ECE37C387489198C8ACF5FBF128BE"><enum>(12)</enum><text>Section 1504(b) is amended by striking paragraph (4).</text>
</paragraph><paragraph id="H6A315673CBE54040BC2E5BBB4EC59E81"><enum>(13)</enum><text>Section 6091(b)(2)(B) is amended by striking clause (ii) and by redesignating clauses (iii) and
(iv) as clauses (ii) and (iii), respectively.</text>
</paragraph><paragraph id="H692F054DAC094220BBF1ABC9931E18C3"><enum>(14)</enum><text>Section 6654(d)(2)(D) is amended—</text>
<subparagraph id="HD8A39D0D36944CFA8A7E716DA45057BD"><enum>(A)</enum><text>by striking <quote>936(h) or</quote> in clause (i), and</text>
</subparagraph><subparagraph id="H8447EE475E864F7A9AE57541BD9FD907"><enum>(B)</enum><text>by striking “<header-in-text level="subparagraph" style="OLC">and section <enum-in-header>936</enum-in-header></header-in-text>” in the heading.</text>
</subparagraph></paragraph><paragraph id="H0BC77EC6CE72446BA217799F6B0AF2F9"><enum>(15)</enum><text>Section 6655(e)(4) is amended—</text>
<subparagraph id="HFA7684E708C5450D8F7A7F0D412DC37E"><enum>(A)</enum><text>by striking <quote>936(h) or</quote> in subparagraph (A), and</text>
</subparagraph><subparagraph id="HC1F0E2B5785D446CA21D296248C383F0"><enum>(B)</enum><text>by striking “<header-in-text level="subparagraph" style="OLC">and section <enum-in-header>936</enum-in-header></header-in-text>” in the heading.</text>
</subparagraph></paragraph><paragraph id="HA13245463F00432A979AEEE47856D393"><enum>(16)</enum>
<subparagraph commented="no" display-inline="yes-display-inline" id="H5EDFBA51D9ED41C88331FD3AF9205574"><enum>(A)</enum><text>Section 367(d) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H9344E216B1C34256A8C3582CDDABEBC6" style="OLC">
<paragraph id="H6DC7F821CE3A458CAD5607723D18AFDF"><enum>(4)</enum><header>Intangible property</header><text display-inline="yes-display-inline">For purposes of this subsection, the term <quote>intangible property</quote> means any—</text>
<subparagraph id="HE5205F0B8679451BAAE0C01EF9770FA6"><enum>(A)</enum><text>patent, invention, formula, process, design, pattern, or know-how,</text>
</subparagraph><subparagraph id="H42FAFD8E463C46F28A89E3B18C74A6D6"><enum>(B)</enum><text>copyright, literary, musical, or artistic composition,</text>
</subparagraph><subparagraph id="H402F21D340DC424BAF2A058C264726E0"><enum>(C)</enum><text>trademark, trade name, or brand name,</text>
</subparagraph><subparagraph id="HEF3243F32DD74A33B560E9685D5853B8"><enum>(D)</enum><text>franchise, license, or contract,</text>
</subparagraph><subparagraph id="H30EAA747AC9B4D37A4BDC94D1F633B77"><enum>(E)</enum><text>method, program, system, procedure, campaign, survey, study, forecast, estimate, customer list, or
technical data, or</text>
</subparagraph><subparagraph id="H267DC02A6C9F46099ABA9DE2AD717630"><enum>(F)</enum><text>any similar item,</text></subparagraph><continuation-text continuation-text-level="paragraph">which has substantial value independent of the services of any individual.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H33EBBF2ED92A42E4B497C18AA6091BDA" indent="up1"><enum>(B)</enum><text>Section 367(a)(3)(B)(iv) is amended by striking <quote>section 936(h)(3)(B)</quote> and inserting <quote>subsection (d)(4)</quote>.</text>
</subparagraph><subparagraph id="H280F8CD4E584422C80D06399B273382D" indent="up1"><enum>(C)</enum><text>Sections 482 and 1298(e)(2)(A) are each amended by striking <quote>section 936(h)(4)(B)</quote> and inserting <quote>section 367(d)(4)</quote>.</text>
</subparagraph></paragraph></subsection></section><section id="H809BE9BA43824C7B9154A9CD28EB40BE"><enum>8046.</enum><header>Basis of property acquired from decedent</header><text display-inline="no-display-inline">Section 1014 is amended—</text>
<paragraph id="H4240FC79010047DC95A6E3372CC8ED21"><enum>(1)</enum><text>by striking <quote>either</quote> and by striking <quote>or section 811(j) of the Internal Revenue Code of 1939 where the decedent died after October 21,
1942</quote> in subsection (a)(2), and</text>
</paragraph><paragraph id="HF7FAF5F3A5CE4C678FE21AD7A5CC72D7"><enum>(2)</enum><text>by striking paragraphs (7) and (8) of subsection (b).</text>
</paragraph></section><section id="HE8C7CA7A9B98490EA39AC1B5C648D686"><enum>8047.</enum><header>Property on which lessee has made improvements</header><text display-inline="no-display-inline">Section 1019 is amended by striking the last sentence.</text>
</section><section id="H3F45B030E9F444C8A36F4E6FD522AC6D"><enum>8048.</enum><header>Involuntary conversion</header><text display-inline="no-display-inline">Section 1033 is amended by striking subsection (j) and by redesignating subsection (k) as
subsection (j).</text>
</section><section id="HBF9645768D21449E99D6BFB2A6262902"><enum>8049.</enum><header>Property acquired during affiliation</header><text display-inline="no-display-inline">Section 1051 is hereby repealed, and the table of sections for part IV of subchapter O of chapter 1
is amended by striking the item relating to section 1051.</text>
</section><section id="HA45DBB6B56554358B8BAB0C935CE6B11"><enum>8050.</enum><header>Repeal of special holding period rules for certain commodity futures transactions</header><text display-inline="no-display-inline">Section 1222 is amended by striking the last sentence.</text>
</section><section id="HEC162C576075446295BE1A90D6509EDE"><enum>8051.</enum><header>Holding period of property</header>
<subsection commented="no" id="H3EDCCFBF4F0D453DB0530560544DA520"><enum>(a)</enum><text>Paragraph (1) of section 1223 is amended by striking <quote>, in the case of such exchanges after March 1, 1954,</quote>.</text>
</subsection><subsection id="H0578DFFEEFA8432190740D45293983AB"><enum>(b)</enum><text>Paragraph (4) of section 1223 is amended by striking <quote>(or under so much of section 1052(c) as refers to section 113(a)(23) of the Internal Revenue Code
of 1939)</quote>.</text>
</subsection><subsection id="HF2F1197530D5463F9ACB8B8A43A474A6"><enum>(c)</enum><text>Paragraph (6) of section 1223 is repealed.</text>
</subsection><subsection id="H9EBCDED1A4FB490393A275B64CBD6317"><enum>(d)</enum><text>Paragraph (8) of section 1223 is repealed.</text>
</subsection></section><section id="H2883DC94A29A4546B40C848312E4FCE8"><enum>8052.</enum><header>Property used in the trade or business and involuntary conversions</header><text display-inline="no-display-inline">Subparagraph (A) of section 1231(c)(2) is amended by striking <quote>beginning after December 31, 1981</quote>.</text>
</section><section id="H8479DB12C3024C36BC1D1DD1C533507D"><enum>8053.</enum><header>Sale of patents</header><text display-inline="no-display-inline">Subsection (a) of section 1249 is amended by striking <quote>after December 31, 1962,</quote>.</text>
</section><section id="H64067967502D41A2876515D8C4DD6F9D"><enum>8054.</enum><header>Gain from disposition of farmland</header>
<subsection id="HCD7CD3B92251460DADFBF2E66AE1E11F"><enum>(a)</enum><text display-inline="yes-display-inline">Paragraph (1) of section 1252(a), as amended by the preceding provisions of this Act, is amended—</text>
<paragraph id="H916A91B676D84F2D81F1899C75F6AFCC"><enum>(1)</enum><text>by striking <quote>beginning after December 31, 1969</quote> in the matter preceding subparagraph (A), and</text>
</paragraph><paragraph id="HAEFD1076D21F4E67A2C45F4B1832F80F"><enum>(2)</enum><text>by amending subparagraph (A) to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H0190A0171C6840CF8E44252D6B9662AB" style="OLC">
<subparagraph id="H52E08EAC920E450CA2F3F3AB7B43C340"><enum>(A)</enum><text display-inline="yes-display-inline">the applicable percentage of the aggregate deductions allowed under section 175 (as in effect
before its repeal by the <short-title>Tax Reform Act of 2014</short-title>) with respect to the farmland, or</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H4D55FE5042014D479A16EB1BF24E70B2"><enum>(b)</enum><text>Paragraph (2) of section 1252(a) is amended by striking <quote>sections 175</quote> and all that follows and inserting <quote>section 175 (as in effect before its repeal by the <short-title>Tax Reform Act of 2014</short-title>).</quote>.</text>
</subsection></section><section id="HAD202BAEAED64A5A88B656516271D0E7"><enum>8055.</enum><header>Transition rules related to the treatment of amounts received on retirement or sale or exchange of
debt instruments</header>
<subsection id="H80CB4D553E144657840B4D2C4C59D100"><enum>(a)</enum><text display-inline="yes-display-inline">Section 1271 is amended by striking subsection (c).</text>
</subsection><subsection id="H95A5AC2E314B48AA83C9A5A805C18D11"><enum>(b)</enum><text>Section 1271(a)(2)(B) is amended by striking <quote>(and paragraph (2) of subsection (c))</quote>.</text>
</subsection></section><section id="H67FD3F9DF838437492550D690A81B77C"><enum>8056.</enum><header>Certain rules with respect to debt instruments issued before July 2, 1982</header>
<subsection id="H03363D4121A54DAE84087B15183A227B"><enum>(a)</enum><text display-inline="yes-display-inline">Section 1272 is amended by striking subsection (b).</text>
</subsection><subsection id="H34DA59D91B1547DFB725906E028FE6D0"><enum>(b)</enum><text display-inline="yes-display-inline">Section 163(j)(2)(C)(ii) is amended by striking <quote>or (b)(4)</quote>.</text>
</subsection><subsection id="H69C2CC5E748848C2B5D599D54D30541F"><enum>(c)</enum><text>Section 1271(a)(2)(A)(ii) is amended by striking <quote>subsection (a)(7) or (b)(4) of section 1272</quote> and inserting <quote>section 1272(a)(7)</quote>.</text>
</subsection><subsection id="H9C10363A396A434CBE8ABB78A72640DF"><enum>(d)</enum><text>Section 1271(b)(1) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HF2316B422F914EFC8BF3A2E36DCE5C13" style="OLC">
<paragraph id="HDE44F99F5E1E4AAFB87DE7CEE7889817"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">This section shall not apply to any obligation issued by a natural person before June 9, 1997.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H929F25E8C1024EF6A7FCE17C12AAC460"><enum>(e)</enum><text>Section 1279(a)(4)(A)(ii), as amended by the preceding provisions of this Act, is amended by
striking <quote>or (b)(4)</quote>.</text>
</subsection><subsection id="H386730B7CF344DA98131F341CB2EA5A6"><enum>(f)</enum><text>The amendments made by this section shall apply to debt instruments issued after July 1, 1982.</text>
</subsection></section><section id="HFB76E182E29A41D3939096BB820E014A"><enum>8057.</enum><header>Certain rules with respect to stripped bonds purchased before July 2, 1982</header>
<subsection id="HC0AD95D311C74CEA815A96E38810D63C"><enum>(a)</enum><text display-inline="yes-display-inline">Section 1286 is amended by striking subsection (c).</text>
</subsection><subsection id="H7CDEC059B59C478997B4A50BBD21DD07"><enum>(b)</enum><text>Section 1286(e)(5) is amended by striking the last sentence.</text>
</subsection><subsection id="H189AB2B839CE4177A410766F5050E957"><enum>(c)</enum><text>Subsections (a) and (b) of section 1286 are each amended by striking <quote>after July 1, 1982,</quote>.</text>
</subsection><subsection id="H378E8F67C6A14D92A88EDB217A0DE73A"><enum>(d)</enum><text>The amendments made by this section shall apply to bonds and coupons purchased after July 1, 1982.</text>
</subsection></section><section id="HFE0C1DF4C27847B398A37E0ACB6232E7"><enum>8058.</enum><header>Amount and method of adjustment</header><text display-inline="no-display-inline">Section 1314 is amended by striking subsection (d) and by redesignating subsection (e) as
subsection (d).</text>
</section><section id="HB4DEAC7A398C4E81A9B39ECFEBCEBD08"><enum>8059.</enum><header>Old-age, survivors, and disability insurance</header><text display-inline="no-display-inline">Subsection (a) of section 1401 is amended by striking <quote>the following percent</quote> and all that follows and inserting <quote>12.4 percent of the amount of the self-employment income for such taxable year.</quote>.</text>
</section><section id="H7C1F778B2A394D95B883BBED760B401B"><enum>8060.</enum><header>Hospital insurance</header><text display-inline="no-display-inline">Paragraph (1) of section 1401(b) is amended by striking <quote>the following percent</quote>and all that follows and inserting <quote>2.9 percent of the amount of the self-employment income for such taxable year.</quote>.</text>
</section><section id="H5226503F826447CE9BEF23839E211C8C"><enum>8061.</enum><header>Ministers, members of religious orders, and christian science practitioners</header><text display-inline="no-display-inline">Paragraph (3) of section 1402(e) is amended by striking <quote>whichever of the following dates is later: (A)</quote> and by striking <quote>; or (B)</quote> and all that follows and inserting a period.</text>
</section><section id="HF3C0BA4CEB0B49F2944BA1CE74FCD010"><enum>8062.</enum><header>Affiliated group defined</header><text display-inline="no-display-inline">Subparagraph (A) of section 1504(a)(3) is amended by striking <quote>for a taxable year which includes any period after December 31, 1984</quote> in clause (i) and by striking <quote>in a taxable year beginning after December 31, 1984</quote> in clause (ii).</text>
</section><section id="H4D4EEE5BA3CF49B0BFBF20EE912E9743"><enum>8063.</enum><header>Credit for state death taxes</header>
<subsection id="H57290FA641374978B73DF27FB7864A7B"><enum>(a)</enum><text>Part II of subchapter A of chapter 11 is amended by striking section 2011 (and by striking the item
relating to such section in the table of sections for such subpart).</text>
</subsection><subsection id="H35277D476F5C4618ACAAFC6B8A0DF76F"><enum>(b)</enum><text>Subchapter A of chapter 13 is amended by striking section 2604 (and by striking the item relating
to such section in the table of sections for such subpart).</text>
</subsection></section><section id="H568226A4E6B5402AA8791A414D4D38C0"><enum>8064.</enum><header>Family-owned business interest</header><text display-inline="no-display-inline">Part IV of subchapter A of chapter 11 is amended by striking section 2057 (and by striking the item
relating to such section in the table of sections for such part).</text>
</section><section id="HE412FFBD7E1947A69043D128A608053F"><enum>8065.</enum><header>Property within the united states</header><text display-inline="no-display-inline">Subsection (c) of section 2104 is amended by striking <quote>With respect to estates of decedents dying after December 31, 1969, deposits</quote> and inserting <quote>Deposits</quote>.</text>
</section><section id="HA157ED56A9FA48BFA3455EAD9F70A094"><enum>8066.</enum><header>Repeal of deadwood provisions relating to employment taxes</header>
<subsection id="H30FEA8326ADC4D23A9408680AB04558E"><enum>(a)</enum><header>Tax on employees</header><text>Subsection (a) of section 3101 is amended by striking <quote>the following percentages</quote> and all that follows and inserting <quote>6.2 percent of the wages (as defined in section 3121(a)) received by him with respect to employment
(as defined in section 3121(b)).</quote>.</text>
</subsection><subsection id="H5C24F3B770204B1DBA20643BB04B4606"><enum>(b)</enum><header>Tax on employers</header>
<paragraph id="HC13D4E2ACA3F43BDBEB0A7FA1C5AC51A"><enum>(1)</enum><text>Subsection (a) of section 3111 is amended by striking <quote>the following percentages</quote> and all that follows and inserting <quote>6.2 percent of the wages (as defined in section 3121(a)) paid by him with respect to employment (as
defined in section 3121(b)).</quote></text>
</paragraph><paragraph id="H796A8FF9BB7541E59E341DA40F4E4559"><enum>(2)</enum><text>Subsection (b) of section 3111 is amended by striking <quote>the following percentages</quote> and all that follows and inserting <quote>1.45 percent of the wages (as defined in section 3121(a)) paid by him with respect to employment
(as defined in section 3121(b)).</quote></text>
</paragraph><paragraph id="H3453FD3713F34C8CA1485F42534FB8F4"><enum>(3)</enum><text>Section 3111 is amended by striking subsection (d) and redesignating subsection (e) as subsection
(d).</text>
</paragraph></subsection><subsection id="HD621B597027944EFB58D478D96E0DBF4"><enum>(c)</enum><header>Tier 2 tax on employees</header><text>Subsection (b) of section 3201 is amended to read as follows:</text>
<quoted-block id="HF5B8671377A24FACB6CDE469A17DD9F7" style="OLC">
<subsection id="H86398B81C6C242DBAEF85D66B009981B"><enum>(b)</enum><header>Tier 2 tax</header><text>In addition to other taxes, there is hereby imposed on the income of each employee a tax equal to
the percentage determined under section 3241 for any calendar year of the
compensation received during such calendar year by such employee for
services rendered by such employee.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H605B96AE8ADF4E6892EF674135E19C15"><enum>(d)</enum><header>Rate of Tier 2 tax on employee representatives</header><text>Subsection (b) of section 3211 is amended to read as follows:</text>
<quoted-block id="H08F54089282E4200AF161E2DFA19D37D" style="OLC">
<subsection id="H7787038A76FF49578DB5365E46D7A5B4"><enum>(b)</enum><header>Tier 2 tax</header><text>In addition to other taxes, there is hereby imposed on the income of each employee representative a
tax equal to the percentage determined under section 3241 for any calendar
year of the compensation received during such calendar year by such
employee representative for services rendered by such employee
representative.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H026877F8EB4C44148B49BB28A68446A6"><enum>(e)</enum><header>Tier 2 tax on employers</header>
<paragraph id="H970BB693E34D403C905FE6CBCAAC58A0"><enum>(1)</enum><text>Subsection (b) of section 3221 is amended to read as follows:</text>
<quoted-block id="H00B62AF341074C1888CF488438A2B66D" style="OLC">
<subsection id="H9B9E392312884FB4A875524AA99DF5C6"><enum>(b)</enum><header>Tier 2 tax</header><text>In addition to other taxes, there is hereby imposed on the income of each employer a tax equal to
the percentage determined under section 3241 for any calendar year of the
compensation paid during such calendar year by such employer for services
rendered for such employer.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" id="H7EF9324DF5BD4B29A256F9E7C3295BC1"><enum>(2)</enum><text>Section 3221 is amended by striking subsection (d) and redesignating subsection (e) as subsection
(d).</text>
</paragraph></subsection><subsection commented="no" id="H5F9E6C271BE149058B33CC8C26615FCD"><enum>(f)</enum><header>Employee under Railroad Retirement System</header><text>Subsection (b) of section 3231 is amended by is amended by striking <quote>; except</quote> and all that follows and inserting a period.</text>
</subsection><subsection id="H48207983E3F54AC2814C49C0C0C752C2"><enum>(g)</enum><header>Definition of wages</header>
<paragraph id="H566C6215899943B1B4D53DAA3C05B757"><enum>(1)</enum><text>Section 3121(b) is amended by striking paragraph (17).</text>
</paragraph><paragraph id="H1B003D06E5124D6B9A8DE10649A79903"><enum>(2)</enum><text>Section 210(a) of the Social Security Act is amended by striking paragraph (17).</text>
</paragraph></subsection><subsection id="H979E9B599B7A4DB49AF9759FEDB3A729"><enum>(h)</enum><header>Credits against unemployment tax</header>
<paragraph id="H70F133F72B8848CEAF351F1B12D43F99"><enum>(1)</enum><text>Paragraph (4) of section 3302(f) is amended—</text>
<subparagraph id="H7B1B6361328E42FEA525267303914E44"><enum>(A)</enum><text>by striking <quote>subsection—</quote> and all that follows through <quote> (A) in general—The</quote> and inserting <quote>subsection, the</quote>,</text>
</subparagraph><subparagraph commented="no" id="H14F994F6E2864444A1BE7653ED77368C"><enum>(B)</enum><text>by striking subparagraph (B),</text>
</subparagraph><subparagraph commented="no" id="HAFB30F69451F4E76B47E0C54C9070183"><enum>(C)</enum><text>by redesignating clauses (i) and(ii) as subparagraphs (A) and (B), respectively, and</text>
</subparagraph><subparagraph commented="no" id="H993D1B0E4070415D862F3458833382A7"><enum>(D)</enum><text>by moving the text of such subparagraphs (as so redesignated) 2 ems to the left.</text>
</subparagraph></paragraph><paragraph id="H976BD6FA9EB846C6B25CEE6E9D7245F2"><enum>(2)</enum><text>Paragraph (5) of section 3302(f) is amended by striking subparagraph (D) and by redesignating
subparagraph (E) as subparagraph (D).</text>
</paragraph></subsection><subsection id="H0B2D914426644BEDB4DC0CAAC780DA52"><enum>(i)</enum><header>Domestic service employment taxes</header><text>Section 3510(b) is amended by striking paragraph (4).</text>
</subsection></section><section id="H0EE8747B28F84C5C937F671A4E5917A0"><enum>8067.</enum><header>Luxury passenger automobiles</header>
<subsection id="H49E3F1D6788C431E8F067AE986C8E26F"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Chapter 31 is amended by striking subchapter A (and by striking the item relating to such
subchapter in the table of sections for such chapter).</text>
</subsection><subsection id="H51ADD51959634FC6BDC7958A341147EF"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="H736DB4F9368F43C49A008754100C3BD4"><enum>(1)</enum><text>Section 4293 is amended by striking <quote>subchapter A of chapter 31,</quote>.</text>
</paragraph><paragraph id="HBF1BB7F0B33A477C9CCBA178722904B9"><enum>(2)</enum><text>Section 4221 is amended—</text>
<subparagraph id="HBA064C8A536F4B53B3E873A25B26F149"><enum>(A)</enum><text>in subsections (a) and (d)(1), by striking <quote>subchapter A or</quote> and inserting <quote>subchapter</quote>,</text>
</subparagraph><subparagraph id="HDAA6F873EC4845DB8BF8B1BF5BBBB9F1"><enum>(B)</enum><text>in subsection (a), by striking <quote>In the case of taxes imposed by subchapter A of chapter 31, paragraphs (1), (3), (4), and (5) shall
not apply.</quote>, and</text>
</subparagraph><subparagraph id="H9E8C86CA10024642933CC0C83111F0D3"><enum>(C)</enum><text>in subsection (c), by striking <quote>4001(c), 4001(d)</quote>.</text>
</subparagraph></paragraph><paragraph id="H9B5CD23BA8CA4B40A030E39A31361DA1"><enum>(3)</enum><text display-inline="yes-display-inline">Section 4222 is amended by striking <quote>4001(c), 4001(d),</quote>.</text>
</paragraph></subsection></section><section id="H2913EC2E4FBE4619A735EEFD3E95CB79"><enum>8068.</enum><header>Transportation by air</header><text display-inline="no-display-inline">Section 4261(e) is amended—</text>
<paragraph id="H11F4AB0BA77E4C4985D9684F67E8562A"><enum>(1)</enum><text>in paragraph (1) by striking subparagraph (C), and</text>
</paragraph><paragraph id="H3F2AD4EE27C34DB8A2546171E7766292"><enum>(2)</enum><text>by striking paragraph (5).</text>
</paragraph></section><section id="H9996BE4055ED48E4B284FBBBBA511E43"><enum>8069.</enum><header>Taxes on failure to distribute income</header>
<subsection id="H7A10BF930B624914B07B5409277970A1"><enum>(a)</enum><text>Paragraph (2) of section 4942(f) is amended by striking the semicolon at the end of subparagraph
(B) and inserting <quote>, and</quote>, by striking <quote>; and</quote> at the end of subparagraph (C) and inserting a period, and by striking subparagraph (D).</text>
</subsection><subsection id="H3519B42F56A845CCAE5B1F8346C17DC3"><enum>(b)</enum><text>Subsection (g) of section 4942 (as amended by this Act) is amended—</text>
<paragraph id="H71637223B6D244EC88A78D23B967B59E"><enum>(1)</enum><text>by striking <quote>For all taxable years beginning on or after January 1, 1975, subject</quote> in paragraph (2)(A) and inserting <quote>Subject</quote>, and</text>
</paragraph><paragraph id="HAE156345509C4C33895A7C8E18227A0D"><enum>(2)</enum><text>by striking paragraph (4).</text>
</paragraph></subsection><subsection id="HC6D10D1E8F774263BBD7B0E3BADDAA50"><enum>(c)</enum><text>Section 4942(i)(2) is amended by striking <quote>beginning after December 31, 1969, and</quote>.</text>
</subsection></section><section id="HAA9B3286317C4A0687F0F98FA5F5981C"><enum>8070.</enum><header>Taxes on taxable expenditures</header><text display-inline="no-display-inline">Section 4945(f) is amended by striking <quote>(excluding therefrom any preceding taxable year which begins before January 1, 1970)</quote>.</text>
</section><section id="HA498DE27458048A590317EDB6B2C1C45"><enum>8071.</enum><header>Definitions and special rules</header><text display-inline="no-display-inline">Section 4682 is amended by striking subsection (h).</text>
</section><section id="H39A7C93808EC42C98D899FBA476E90B9"><enum>8072.</enum><header>Returns</header><text display-inline="no-display-inline">Subsection (a) of section 6039D is amended by striking <quote>beginning after December 31, 1984,</quote>.</text>
</section><section id="HDF335F448F3A41578E82654D2838A4F2"><enum>8073.</enum><header>Information returns</header><text display-inline="no-display-inline">Subsection (c) of section 6060 is amended by striking <quote>year</quote> and all that follows and inserting <quote>year.</quote>.</text>
</section><section id="H2C986FC44E26452DB833AD897F69B101"><enum>8074.</enum><header>Abatements</header><text display-inline="no-display-inline">Section 6404(f) is amended by striking paragraph (3).</text>
</section><section id="HBFE9D5B312644664BCA6DB7CAF32182C"><enum>8075.</enum><header>Failure by corporation to pay estimated income tax</header><text display-inline="no-display-inline">Clause (i) of section 6655(g)(4)(A) is amended by striking <quote>(or the corresponding provisions of prior law)</quote>.</text>
</section><section id="H4C4A8599E3C747F2923043347A42C71A"><enum>8076.</enum><header>Repeal of 2008 recovery rebates</header>
<subsection id="H3CFC228B1A3849B59539405506F1909C"><enum>(a)</enum><header>In general</header><text>Subchapter B of chapter 65 is amended by striking section 6428 (and by striking the item relating
to such section in the table of sections for such subchapter).</text>
</subsection><subsection id="HEAACE889F8AB40BF9ACC58B9289F5C4A"><enum>(b)</enum><header>Conforming amendments</header>
<paragraph id="HE4FE0B6A2B044E7D92EB541364DC17C5"><enum>(1)</enum><text display-inline="yes-display-inline">Section 6211(b)(4)(A) is amended by striking <quote>6428,</quote>.</text>
</paragraph><paragraph id="H16628EA35F804F82977226E200829839"><enum>(2)</enum><text>Section 6213(g)(2)(L) is amended by striking <quote>32, or 6428</quote> and inserting <quote>or 32</quote>.</text>
</paragraph><paragraph id="HCE385F6948744AB3985EB3A90BC84FDF"><enum>(3)</enum><text>Paragraph (2) of <external-xref legal-doc="usc" parsable-cite="usc/31/1324">section 1324(b)</external-xref> of title 31, United States Code, is amended by striking <quote>or 6428</quote>.</text>
</paragraph></subsection></section><section id="H1BCB4DAFEF6249DDB366058991583AF4"><enum>8077.</enum><header>Repeal of advance payment of portion of increased child credit for 2003</header><text display-inline="no-display-inline">Subchapter B of chapter 65 is amended by striking section 6429 (and by striking the item relating
to such section in the table of sections for such subchapter).</text>
</section><section id="H476C0BF52A334EE8B94E3B60EE567FD4"><enum>8078.</enum><header>Repeal of provisions related to COBRA premium assistance</header>
<subsection id="H1A9A77C139F249CFAF592B84E74E12BE"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Subchapter B of chapter 65 is amended by striking section 6432 (and by striking the item relating
to such section in the table of sections for such subchapter).</text>
</subsection><subsection id="H508422C948424E948FEE9C6E18DD69BF"><enum>(b)</enum><header>Notification requirement</header><text>Part I of subchapter B of chapter 68 is amended by striking section 6720C (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection><subsection id="H949DDD959FD64FF0818FE22FE7687736"><enum>(c)</enum><header>Exclusion from gross income</header><text>Part III of subchapter B of chapter 1 is amended by striking section 139C (and by striking the item
relating to such section in the table of sections for such part).</text>
</subsection></section><section id="HE38EAB66D1CC48F0993470DAD89CFE3D"><enum>8079.</enum><header>Retirement</header><text display-inline="no-display-inline">Section 7447(i)(3)(B)(ii) is amended by striking <quote>at 4 percent per annum to December 31, 1947, and at 3 percent per annum thereafter</quote>, and inserting <quote>at 3 percent per annum</quote>.</text>
</section><section id="H6DB1F79E49A043B8AC92A8884C6A2165"><enum>8080.</enum><header>Annuities to surviving spouses and dependent children of judges</header>
<subsection id="H618471F0950649159F3299020C80F90E"><enum>(a)</enum><text>Paragraph (2) of section 7448(a) is amended by striking <quote>or under section 1106 of the Internal Revenue Code of 1939</quote> and by striking <quote>or pursuant to section 1106(d) of the Internal Revenue Code of 1939</quote>.</text>
</subsection><subsection id="HB806EB2033E448ACAF6884B70E491C8B"><enum>(b)</enum><text>Subsection (g) of section 7448 is amended by striking <quote>or other than pursuant to section 1106 of the Internal Revenue Code of 1939</quote>.</text>
</subsection><subsection id="HFAB937FCDE0A435A9C428C7719009B11"><enum>(c)</enum><text>Subsections (g), (j)(1), and (j)(2) of section 7448 are each amended by striking <quote>at 4 percent per annum to December 31, 1947, and at 3 percent per annum thereafter</quote> and inserting <quote>at 3 percent per annum</quote>.</text>
</subsection></section><section id="HF33D648CB8334669BC3E08D25472D208"><enum>8081.</enum><header>Merchant marine capital construction funds</header><text display-inline="no-display-inline">Paragraph (4) of section 7518(g) is amended by striking <quote>any nonqualified withdrawal</quote> and all that follows through <quote>shall be determined</quote> and inserting <quote>any nonqualified withdrawal shall be determined</quote>.</text>
</section><section id="H704D8B904A4E40FEB96916E0436C2533"><enum>8082.</enum><header>Valuation tables</header>
<subsection id="H93A0D2159C734E3F8F00D9B772DBBFBC"><enum>(a)</enum><text>Subsection (c) of section 7520 is amended by striking paragraph (2) and by redesignating paragraph
(3) as paragraph (2).</text>
</subsection><subsection id="H807D4E5C9AE142CEA80947522F484CE0"><enum>(b)</enum><text>Paragraph (2) of section 7520(c) of such Code, as so redesignated, is amended—</text>
<paragraph id="H430D7260572644C2838C02B3F6EC7527"><enum>(1)</enum><text>by striking <quote>Not later than December 31, 1989, the</quote> and inserting <quote>The</quote>, and</text>
</paragraph><paragraph id="H9283414F996A4983942B895BEC829FF6"><enum>(2)</enum><text>by striking <quote>thereafter</quote> in the last sentence thereof.</text>
</paragraph></subsection></section><section id="HBBB2995625E84882BB362C11B8FF7B5B"><enum>8083.</enum><header>Definition of employee</header><text display-inline="no-display-inline">Section 7701(a)(20) is amended by striking <quote>chapter 21</quote> and all that follows and inserting <quote>chapter 21.</quote>.</text>
</section><section id="H98FEEEFCB93E4916AD1DF83D8B3736D4"><enum>8084.</enum><header>Effective date</header>
<subsection id="H15D6F9C6DF0440D385774208DDDA200B"><enum>(a)</enum><header>General Rule</header><text display-inline="yes-display-inline">Except as otherwise provided in subsection (b) of this section and the preceding sections of this
subtitle, the amendments made by this subtitle shall take effect on the
date of enactment of this Act.</text>
</subsection><subsection id="H1ACAC6A7CB8E4B919A3F12D5AF0555E9"><enum>(b)</enum><header>Savings provision</header><text>If—</text>
<paragraph id="HBBCC25A2EC7640368A87483375343643"><enum>(1)</enum><text>any provision amended or repealed by the amendments made by this subtitle applied to—</text>
<subparagraph id="HF45206DC1E67425B8DF6F4CBBE09E47C"><enum>(A)</enum><text>any transaction occurring before the date of the enactment of this Act,</text>
</subparagraph><subparagraph id="H93843D8EA63C40C5A518369FC67716F8"><enum>(B)</enum><text>any property acquired before such date of enactment, or</text>
</subparagraph><subparagraph id="HEEA6ECA315A541A8B3DE44A7B1AEF1F8"><enum>(C)</enum><text>any item of income, loss, deduction, or credit taken into account before such date of enactment,
and</text>
</subparagraph></paragraph><paragraph id="H98CCB1F6FF984D2BBA6D88F3ABDE693D"><enum>(2)</enum><text>the treatment of such transaction, property, or item under such provision would (without regard to
the amendments or repeals made by this subtitle) affect the liability for
tax for periods ending after such date of enactment,</text></paragraph><continuation-text continuation-text-level="subsection">nothing in the amendments or repeals made by this subtitle shall be construed to affect the
treatment of such transaction, property, or item for purposes of
determining liability for tax for periods ending after such date of
enactment.</continuation-text></subsection></section></subtitle><subtitle id="H800C5889F2D74CBB9B76BAE08000B813"><enum>B</enum><header>Conforming Amendments Related to Multiple Sections</header>
<section id="H84930A52F71A40CEA511CBF3F3A16CF0"><enum>8101.</enum><header>Conforming amendments related to multiple sections</header>
<subsection id="H4AEBE6CD8C864F31804015729CD37DE1"><enum>(a)</enum><header>General business credit</header><text>Section 38(b), as amended by the preceding provisions of this Act, is amended—</text>
<paragraph id="HE3293851AD88440796F25804932D9F2E"><enum>(1)</enum><text>by redesignating paragraphs (4), (5), (7), (8), (13), (20), and (33) as paragraphs (3), (4), (5),
(6), (7), (8), and (9), respectively,</text>
</paragraph><paragraph id="HF4488B93D4574A52B894E36C361BB504"><enum>(2)</enum><text>by adding <quote>plus</quote> at the end of paragraph (8) (as so redesignated), and</text>
</paragraph><paragraph id="H973BEE5CC413473CB576B79FFFABFDCB"><enum>(3)</enum><text>by striking the comma at the end of paragraph (9) (as so redesignated) and inserting a period.</text>
</paragraph></subsection><subsection id="H0B4D629AF18D4BEA95AAD45955B1DF6D"><enum>(b)</enum><header>Adjustments to basis</header><text display-inline="yes-display-inline">Section 1016(a), as amended by the preceding provisions of this Act, is amended—</text>
<paragraph id="HFFB7B8EEB7ED459CAB942F32B17D1231"><enum>(1)</enum><text>by striking the last two sentences of paragraph (2),</text>
</paragraph><paragraph id="HE97F19F1B51145FC8A28CB9CD31F7DC4"><enum>(2)</enum><text>in paragraph (4) by striking <quote>(not including</quote> and all that follows through <quote>1921)</quote>,</text>
</paragraph><paragraph id="H64C4DAEB05E54668890FD9D0550EDC04"><enum>(3)</enum><text>by striking paragraph (12),</text>
</paragraph><paragraph id="H23271D6B84A343F0909D85278787169E"><enum>(4)</enum><text>by redesignating paragraphs (11), (14), (16), (17), (18), (21), (23), (26), (38), and (39) as
paragraphs (9), (10), (11), (12), (13), (14), (15), (16), (17), and (18),
respectively, and</text>
</paragraph><paragraph id="HC99E2F1B403D44B3A2D4FBF4FE9E9D9E"><enum>(5)</enum><text>by adding <quote>and</quote> at the end of paragraph (17) (as so redesignated).</text>
</paragraph></subsection><subsection id="HDCAAEFF5786E418EA22DEDC2EA86A85D"><enum>(c)</enum><header>Holding period of property</header><text>Section 1223, as amended by the preceding provisions of this Act, is amended by redesignating
paragraphs (9), (10), (11), (12), and (15) as paragraphs (6), (7), (8),
(9) and (10), respectively.</text>
</subsection><subsection id="H81242CC48627477B8033621E0BD3184E"><enum>(d)</enum><header>Corporate preference items</header>
<paragraph id="HA5EE56D885524D0F9A71C77A162DFF35"><enum>(1)</enum><header>In general</header><text>Subchapter B of chapter 1, as amended by this Act, is amended by striking part XI (and by striking
the item relating to such part from the table of parts for such
subchapter).</text>
</paragraph><paragraph id="HF56412B6BB0C4C1E8B19A05227E36410"><enum>(2)</enum><header>Preservation of special rule for treatment of intangible drilling costs</header><text>Section 263(c) is amended—</text>
<subparagraph id="H629F09E3C9354DEBA37731C7F8429FAD"><enum>(A)</enum><text>by striking all that precedes <quote>and except as provided in subsection (i)</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H4A264E349F3843B1B18D181CE49C4EC9" style="OLC">
<subsection id="HE7AF97B318504BDB9B493776D6BEB171"><enum>(c)</enum><header>Intangible drilling and development costs in the case of oil and gas wells and geothermal wells</header>
<paragraph id="H7ECFD34851C643598A4F08EC0A2BB308"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">Notwithstanding subsection (a),</text></paragraph></subsection><after-quoted-block>, and </after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H04B7361644BF4EE186AB3D18B3E8BA45"><enum>(B)</enum><text>by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HFF71E72B180844528E4B0C61676F021C" style="OLC">
<paragraph id="H98DC1D9AFB004C6FBA3613C66CCAE1B1"><enum>(2)</enum><header>Reduction for integrated oil companies</header>
<subparagraph id="H601E56C038684F0ABF2AEDEC8C405B75"><enum>(A)</enum><header>In general</header><text>In the case of a corporation which is an integrated oil company, the amount allowable as a
deduction for any taxable year (determined without regard to this
paragraph) under paragraph (1) shall be reduced by 30 percent.</text>
</subparagraph><subparagraph id="H4CE59776A7E44BBE8FAFBA676E7F34C9"><enum>(B)</enum><header>Amortization of disallowed amounts</header><text display-inline="yes-display-inline">The amount not allowable as a deduction under paragraph (1) for any taxable year by reason of
subparagraph (A) shall be allowable as a deduction ratably over the
60-month period beginning with the month in which the costs are paid or
incurred.</text>
</subparagraph><subparagraph id="H49106C532F744BAC8BFE30718D96CAC4"><enum>(C)</enum><header> Dispositions</header><text>For purposes of section 1254, any deduction under subparagraph (B) shall be treated as a deduction
allowable under paragraph (1).</text>
</subparagraph><subparagraph id="H01519C1E0BB54E4F8A005335F35B8D65"><enum>(D)</enum><header>Integrated oil company</header><text>For purposes of this paragraph, the term <quote>integrated oil company</quote> means, with respect to any taxable year, any producer of crude oil to whom subsection (c) of
section 613A does not apply by reason of paragraph (2) or (4) of section
613A(d) (as such provisions were in effect before their repeal by the <short-title>Tax Reform Act of 2014</short-title>).</text>
</subparagraph><subparagraph id="HEB95CDB0CAC54ADC9008F117DE86BBA9"><enum>(E)</enum><header>Coordination with cost depletion</header><text>The portion of the adjusted basis of any property which is attributable to amounts to which
subparagraph (A) applied shall not be taken into account for purposes of
determining depletion under section 611.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H5EE8D5C1BD00413687E0E7DFA7F10BDF"><enum>(3)</enum><header>Preservation of limitation on certain interest on indebtedness of financial institutions</header>
<subparagraph id="HDBE0BC2103B14047A515441430C70ECA"><enum>(A)</enum><header>In general</header><text>Section 163 is amended by redesignating subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H28EE2123B89741228D40CB0697E8BC3A" style="OLC">
<subsection id="H8647E81374E04E08A01C7B706174F0A8"><enum>(n)</enum><header>Limitation on certain interest on indebtedness of financial institutions</header>
<paragraph id="HAB17E7298C294645B73BAE37ADB413DD"><enum>(1)</enum><header>In general</header><text display-inline="yes-display-inline">For purposes of this subtitle, in the case of a corporation, the amount allowable as a deduction
under this chapter (determined without regard to this subsection) with
respect to the amount described in paragraph (2) shall be reduced by 20
percent.</text>
</paragraph><paragraph id="H3912CB1517F747C7A96BE6EBDA9E7474"><enum>(2)</enum><header>Interest on debt to carry tax-exempt obligations acquired after December 31, 1982, and before
August 8, 1986</header>
<subparagraph id="H79A8327EDA714D608A5FCE75CB61A0B6"><enum>(A)</enum><header>In general</header><text display-inline="yes-display-inline">In the case of a financial institution which is a bank (as defined in section 585(a)(2)), the
amount described in this paragraph is the amount of interest on
indebtedness incurred or continued to purchase or carry obligations
acquired after December 31, 1982, and before August 8, 1986, the interest
on which is exempt from taxes for the taxable year, to the extent that a
deduction would (but for this paragraph or section 265(b)) be allowable
with respect to such interest for such taxable year.</text>
</subparagraph><subparagraph id="H225F65FE6227473EB994FF043BF9FBF8"><enum>(B)</enum><header>Determination of interest allocable to indebtedness on tax-exempt obligations</header><text display-inline="yes-display-inline">Unless the taxpayer (under regulations prescribed by the Secretary) establishes otherwise, the
amount determined under subparagraph (A) shall be an amount which bears
the same ratio to the aggregate amount allowable (determined without
regard to this section and section 265(b)) to the taxpayer as a deduction
for interest for the taxable year as—</text>
<clause id="HF20FF0396F204C1795A3EB8A42BF8FE5"><enum>(i)</enum><text>the taxpayer’s average adjusted basis (within the meaning of section 1016) of obligations described
in subparagraph (A), bears to</text>
</clause><clause id="H5D755CF90BBA42589C460C9E719643DD"><enum>(ii)</enum><text>such average adjusted basis for all assets of the taxpayer.</text>
</clause></subparagraph><subparagraph id="HE9D02CC473B14351821DAA5B8626C0AE"><enum>(C)</enum><header>Interest</header><text>For purposes of this paragraph, the term <quote>interest</quote> includes amounts (whether or not designated as interest) paid in respect of deposits, investment
certificates, or withdrawable or repurchasable shares.</text>
</subparagraph><subparagraph id="H2A8F702E78F54906B442528314748879"><enum>(D)</enum><header>Application of subparagraph to certain obligations issued after August 7, 1986</header><text>For application of this subparagraph to certain obligations issued after August 7, 1986, see
section 265(b)(3) (as in effect before the enactment of the <short-title>Tax Reform Act of 2014</short-title>). That portion of any obligation not taken into account under paragraph (2)(A) of section 265(b)
(as so in effect) by reason of paragraph (7) of such section shall be
treated for purposes of this section as having been acquired on August 7,
1986.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HB6245E5D4DAC4A4EB40B6475B409E5B6"><enum>(B)</enum><header>Conforming amendments</header>
<clause id="H8CC6211172444508A21125FD643268AB"><enum>(i)</enum><text>Section 1277(c) is amended by striking <quote>section 291(e)(1)(B)(ii)</quote> and inserting <quote>section 163(n)(2)(B)</quote>.</text>
</clause><clause id="H355A7E2FFACE4663858CF96289CD9813"><enum>(ii)</enum><text>Section 1363(b)(3), as amended by the preceding provisions of this Act, is amended by striking <quote>section 291</quote> and inserting <quote>section 163(n)</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="H2C8F8E1D5A394276B5423F77F5265D20"><enum>(4)</enum><header>Effective date</header><text>Except as otherwise provided in this Act with respect to amendments made to section 291 of the
Internal Revenue Code of 1986, the amendments made this subsection shall
apply to taxable years beginning after December 31, 2014.</text>
</paragraph></subsection></section></subtitle>